SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended – September 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Guideline Capital, Inc.
(Exact name of registrant as it appears in its charter)
000-32127
Commission File Number)
NEVADA | 86-1004672 |
1607 N.E. 41st Avenue, Portland, Oregon 97232
(Address of Principal Executive Office)
(800) 482-5316
Registrant's telephone number, including area code
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (b) of the Act: Class A Common Stock $0.001 Par Value
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No
At the end of the quarter ending September 30, 2003 there were 39,250,000 issued and outstanding shares of the registrants common stock.
There is no active market for the registrant's securities.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GUIDELINE CAPITAL, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
September 30, 2003 | December 31, 2002 | |
Assets | ||
Current assets – Cash | $ 864 | $ - |
Marketing rights | 100,000 | - |
$ 100,864 | $ - | |
LIABILITIES AND NET CAPITAL DEFICIENCY | ||
Current liabilities - accounts payable | $ 106,340 | $ - |
Payable to related parties | 6,600 | - |
Net capital deficiency: | ||
Common stock; $.001 par value; authorized 50,000,000 shares; issued and outstanding 39,250,000 |
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Additional paid-in capital | 53,637 | 10,250 |
Deficit accumulated during development stage | (104,963) | (55,236) |
Net capital deficiency | (12,076) | - |
| $ 101,864 | $ - |
See accompanying notes.
GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Consolidated Statement of Operations
Three months ended | Nine months ended | ||||
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| Cumulative activity during development stage August 17, 2000 (inception) through | |
Operating Expenses | $ 28,576 | $ 1,250 | $ 49,727 | $ 1,250 | $ 104,963 |
Net loss from operations | (28,576) | (1,250) | (49,727)) | (1,250) | (104,963)) |
Provision for income taxes | - | - | - | - | - |
Net loss | $(28,576) | $ (1,250) | $(49,727)) | $ (1,250) | $(104,963) |
Net loss per share | $ (.001) | $ (.000) | $ (.003) | $ (.000) | $ (.008) |
See accompany notes.
GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Consolidated Statement of Cash Flows
Three months ended | Nine months ended | ||||
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| Cumulative activity during development stage August 17, 2000 (inception) through | |
Cash flows from operating activities: | |||||
Net loss | $(28,578) | $ 1,250 | $(49,727)) | $ (1,250) | $(75,387) |
Adjustment to reconcile net loss to net cash provided by operating activities: | |||||
Shares issued in exchange for services | - | - | 10,000 | - | 61,250 |
Shares issued in exchange for subsidiaries | 18,000 | - | 1,000 | - | |
Increase in accounts payable | (6,340) | 1,250 | 6,340 | 1,250 | - |
(4,236) | - | (14,387) | - | (14,137) | |
Cash flows from financing activities – | |||||
Advances from, or expenses paid on behalf of the Company directly by, related parties |
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Net change in cash | 864 | - | 864 | - | |
Cash at beginning of period | - | - | - | - | - |
Cash at end of period | $ 864 | $ - | $ 864 | $ - | $ 864 |
Supplemental schedule of non-cash investing and financing activities: | |||||
Common stock issued in exchange for services | $ 10,000 | - | $ 10,000 | $ - | $ 61,250 |
Common stock exchanged for subsidiaries | $ 18,000 | $ - | $ 19,000 | $ - | $ 19,000 |
See accompanying notes.
GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Notes to Consolidated Financial Statements
September 30, 2003
1. Summary of Significant Accounting Policies
Company: Guideline Capital, Inc. (“Guideline” or collectively the “Company”), was incorporated under the laws of the State of Nevada on August 17, 2000. The Company is currently involved with seeking a company or companies that it can acquire or with whom it can merge.
Basis of consolidation: The consolidated financial statements include the accounts of Guideline and its 100% owned subsidiaries On Guard Systems, Inc. (“On Guard”) since its acquisition on June 23, 2003 and The Arches Group, Inc. (the “Arches Group”) since its acquisition on July 24, 2003. All intercompany accounts and transactions have been eliminated.
Development stage enterprise: Since inception, the Company has not commenced any formal business operations. The Company is considered to be in the development stage and therefore has adopted the accounting and reporting standards of Statement of Financial Accounting Standards No. 7, “Accounting and Reporting by Development Stage Enterprises”.
Interim reporting: The Company’s year-end for accounting and tax purposes is December 31. The accompanying unaudited interim financial statements have been prepared by the Company, in accordance with U.S. generally accepted accounting principles pursuant to Regulation S-B of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. Accordingly, these interim financial statements should be read in conjunction with the Company’s financial statements and related notes as contained in U.S. Securities and Exchange Commission Form 10-KSB for the year ended December 31, 2002. In the opinion of Management, the accompanying financial statements as of September 30, 2003 and for the three and nine months ended September 30, 2003 and 2002 contain all adjustments, consisting of only normal recurring adjustments, except as noted elsewhere in the notes to the financial statements, necessary to present fairly its financial position, results of its operations and cash flows. The results of operations for the three and nine months ended September 30, 2003 and 2002 are not necessarily indicative of the results to be expected for the full year.
Impairment of long-lived assets: The Company assesses the recoverability of long-lived assets by determining whether the amortization of the asset’s balance over its remaining life can be recovered through projected undiscounted future cash flows. The amount of impairment, if any, is measured based on fair value and charged to operations in the period in which the impairment is determined by management.
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GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Notes to Consolidated Financial Statements
September 30, 2003
1. Summary of Significant Accounting Policies (continued)
Stock based compensation: The Company accounts for stock based compensation under Statement of Financial Accounting Standards No. 123 (“SFAS 123”). SFAS 123 defines a fair value based method of accounting for stock based compensation. However, SFAS 123 allows an entity to continue to measure compensation cost related to stock and stock options issued to employees using the intrinsic method of accounting prescribed by Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”. Entities electing to remain with the accounting method of APB 25 must make pro forma disclosures of net income and earnings per share, as if the fair value method of accounting defined in SFAS 123 had been applied. The Company has elected to account for its stock based compensation to employees under APB 25.
Income taxes: The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under SFAS 109, income taxes are provided on the liability method whereby deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases and reported amounts of assets and liabilities. Deferred tax assets and liabilities are computed using enacted tax rates expected to apply to taxable income in the periods in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for certain deferred tax assets, if it is more likely than not that the Company will not realize tax assets through future operations.
Net loss per share: Net loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the period. The weighted average number of shares outstanding was 34,554,348 for the three months ended September 30, 2003; 18,722,527 for the nine months ended September 30, 2003; 10,250,000 for the three and nine months ended September 30, 2002; and 13,005,836 for the cumulative period from August 17, 2000 (inception) through September 30, 2003.
Reporting comprehensive income: The Company reports and displays comprehensive income and its components as separate amounts in the consolidated financial statements. Comprehensive income includes all changes in equity during a period that results from recognized transactions and other economic events other than transactions with owners. There were no comprehensive income components to report for the three and nine months ended September 30, 2003 and 2002 or for the cumulative period from August 17, 2000 (inception) through September 30, 2003.
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GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Notes to Consolidated Financial Statements
September 30, 2003
1. Summary of Significant Accounting Policies (continued)
Segment Reporting: The Company will begin to report information about operating segments and related disclosures about products and services, geographic areas and major customers under Statement of Financial Accounting Standards No. 131 (SFAS 131), “Disclosures about Segments of an Enterprise and Related Information” when operations begin. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance.
Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. Business combinations
On June 23, 2003, Guideline acquired On Guard Systems, Inc. in a business combination accounted for as a reverse merger. The assets and liabilities of On Guard have been recorded at their net book value. On Guard is entering into an agreement with a third party to acquire an interest in security equipment. On Guard will provide state-of-the art commercial and industrial security systems worldwide.
Guideline exchanged 1,000,000 shares of its common stock plus $100,000 to be paid for all of the outstanding shares of common stock of On Guard. Management of the Company estimated the value of the shares issued for On Guard at $1,000 ($.001 per share), which represented the par value of Guideline’s common stock.
On July 24, 2003, Guideline acquired The Arches Group, Inc. (the “Arches Group”) in a business combination to be accounted for as a reverse merger. Arches Group owns 49% of Mar-Paul, Inc., a company who has certain marketing rights for proprietary electric energy products. Arches Group will perform marketing services under the license agreement.
Guideline exchanged 18,000,000 shares of its common stock for all of the outstanding shares of common stock of Arches Group. Management of the Company estimated the value of the shares issued for Arches Group at $18,000 ($.001 per share), which represented the par value of Guideline’s common stock.
Also under the exchange agreement, Guideline has the right to purchase for $10,000,000 a second license for marketing electric energy products.
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GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Notes to Consolidated Financial Statements
September 30, 2003
2. Business combinations (continued)
On Guard and the Arches Group has not yet commenced any formal operations and had no tangible assets as of the date of their acquisitions. Accordingly, the entire purchase prices were allocated to the marketing rights in the accompanying consolidated balance sheets. A pro forma summary of consolidated financial position and results of operations as if On Guard and the Arches Group had been acquired as of the beginning of the periods reported would not be meaningful.
3. Payable to related parties
Since inception related parties have paid expenses on behalf of the Company. The advances are non-interest bearing and due on demand; however, these individuals have agreed not to demand repayment until cash is available from a merger, capital stock exchange, asset acquisition, or other business combination, or from operations.
4. Common stock
On June 23, 2002, the Board of Directors authorized the issuance of an aggregate of 10,000,000 shares of common stock of the Company in exchange for professional services. Management of the Company estimated the value of the shares issued at $10,000 ($.001 per share), which represented the par value of Guideline’s common stock. The Company recorded professional fees expense totaling $10,000 during the nine months ended September 30, 2003 as a result of these grants.
5. Income taxes
Deferred income taxes consisted of the following:
September 30, | December 31, | |
Deferred tax asset – start-up and organizational costs | $ 35,700 | $ 21,200 |
Valuation allowance | (35,700) | (21,200) |
Net deferred income taxes | $ - | $ - |
As the Company has not yet commenced formal business operations, management has determined that the recovery of the start-up and organizational costs is uncertain. Accordingly, a valuation allowance equal to the net deferred tax asset amount has been recorded as of September 30, 2003 and December 31, 2002.
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GUIDELINE CAPITAL, INC.
(A Development State Enterprise)
Notes to Consolidated Financial Statements
September 30, 2003
5. Income taxes (continued)
Reconciliation of income taxes computed at the Federal statutory rate of 34% to the provision for income taxes is as follows:
Three months ended | Nine months ended | ||||
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| Cumulative activity during development stage August 17, 2000 (inception) through | |
Tax as statutory rates | $(9,700) | $ - | $(16,900) | $ - | $(24,900) |
Change in deferred tax valuation allowance |
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Provision for income taxes | $ - | $ - | $ - | $ - | $ - |
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Results of Operations
On July 24, 2003, the Registrant entered into an agreement with The Arches Group, Inc. pursuant to which the Registrant acquired 18,000,000 shares being 100% of the issued and outstanding shares of The Arches Group, Inc. and all of its rights in any agreements with Dr. Marius Paul, Anna Paul and Energy Supreme, LLC. and Mar-Paul, Inc. in exchange for 18,000,000 shares of Guideline Capital, Inc and the payment of Ten Million dollars cash, due upon Guideline Capital, Inc. entering into a second licensing agreement with Mar-Paul, Inc
The Arches Group, Inc is a private Oregon corporation which acquired 49% of Mar-Paul, Inc. and has negotiated certain rights with respect to marketing electric energy produced using proprietary technologies controlled by Dr. Marius Paul, Anna Paul, Energy Supreme, LLC and Mar-Paul, Inc.
On August 29, 2003, Guideline Capital, Inc. released The Arches Group, Inc. from all of its obligations to transfer any of its rights in any agreements with Dr. Marius Paul, Anna Paul, and Energy Supreme, LLC and Mar Paul to Guideline Capital, Inc. The purchase of 18,000,000 shares consisting of all issued and outstanding shares of the Arches Group, Inc. for 18,000,000 shares of common stock in Guideline Capital, Inc. on the 24th day of July, 2003, remains in effect.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of matters To a Vote of Security Holders
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports.
(a) EXHIBITS.
EXHIBIT NUMBER | DESCRIPTION | LOCATION |
3.1 | Articles of Incorporation | Incorporated by reference to 3.1 to the Registrant's Form 10-SB Registration |
3.2 | Bylaws | Incorporated by reference to 3.2 to the Registrant's Form 10-SB Registration |
REPORTS ON FORM 8-K.
Refer to Form 8-K filed on July 18, 2003, Form 8-K filed on August 11, 2003, Form 8-K/A filed on August 19, 2003, Form 8-K filed on September 30, 2003 and incorporated herein by this referenced.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunder duly authorized.
GUIDELINE CAPITAL, INC. | |
Dated: November 14, 2003 | By: /s/ Ernest J. Wesson |
I, Ernest J. Wesson, certify that:
1. I have reviewed this quarterly report on Form 10Q-SB of Guideline Capital, Inc;
2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or person performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial date and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there are significant changes in internal controls or other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: November 14, 2003 | By: /s/ Ernest J. Wesson |
Statement of Chief Executive Officer Regarding
Facts and Circumstances Relating to Exchange Act Filings
I, Ernest J. Wesson, state and certify as follows:
The financial statements filed with the report on Form 10-QSB for the period ended September 30, 2003 fully comply with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 and that the information contained in said periodic report fairly presents, in all material respects, the financial condition and results of operations of Guideline Capital, Inc.
This Statement is submitted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Dated: November 14, 2003 | By: /s/ Ernest J. Wesson |
