UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- -----------
Commission File Number 000-32189
CHALLEDON, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0472608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1037 East 3300 South #203, Salt Lake City, Utah 84106
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 467-6715
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for 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
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 2001
----- --------------------------------
Common Stock, $.001 par value 1,412,000
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TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..................................................................... 3
Balance Sheets -- March 31, 2000 and December 31, 1999.............................. 4
Statements of Operations -- three months ended March 31, 2001
and 2000.......................................................................... 5
Statements of Stockholders' Equity (Deficit)........................................ 6
Statements of Cash Flows -- three months ended March 31, 2001
and 2000.......................................................................... 9
Notes to Financial Statements ...................................................... 10
Item 2. Management's Discussion and Analysis and Results of Operations........................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................ 14
Item 2. Changes In Securities and Use of Proceeds................................................ 14
Item 3. Defaults Upon Senior Securities.......................................................... 14
Item 4. Submission of Matters to a Vote of Securities Holders.................................... 14
Item 5. Other Information........................................................................ 15
Item 6. Exhibits and Reports on Form 8-K......................................................... 15
SIGNATURES............................................................................... 15
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PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period ended March
31, 2001, have been prepared by the Company.
CHALLEDON, INC.
(A Development State Company)
FINANCIAL STATEMENTS
March 31, 2001 and December 31, 2000
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CHALLEDON, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
2001 2000
------------------ ------------------
(Unaudited)
CURRENT ASSETS
Cash $ 113 $ 1,943
------------------ ------------------
Total Current Assets 113 1,943
------------------ ------------------
TOTAL ASSETS $ 113 $ 1,943
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 2,023 $ 862
Due to related party (Note 4) 1,070 470
Taxes payable 1,100 1,100
------------------ ------------------
Total Current Liabilities 4,193 2,432
------------------ ------------------
TOTAL LIABILITIES 4,193 2,432
------------------ ------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000 shares authorized
of $0.001 par value, 1,412,000 shares issued
and outstanding 1,412 1,412
Additional paid-in capital 1,412 1,412
Deficit accumulated during the development stage (6,904) (3,313)
------------------ ------------------
Total Stockholders' Equity (Deficit) (4,080) (489)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 113 $ 1,943
================== ==================
-4-
CHALLEDON, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the May 24,
Three Months Ended 1990 Through
March 31, March 31,
--------------------------------------
2001 2000 2001
------------------ ------------------ ------------------
REVENUES $ - $ - $ -
EXPENSES
General and administrative 3,591 - 6,904
------------------ ------------------ ------------------
Total Expenses 3,591 - 6,904
------------------ ------------------ ------------------
LOSS FROM OPERATIONS (3,591) - (6,904)
------------------ ------------------ ------------------
NET INCOME (LOSS) $ (3,591) $ - $ (6,904)
================== ================== ==================
BASIC INCOME (LOSS) PER SHARE $ (0.00) $ 0.00
================== ==================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 1,412,000 1,412,000
================== ==================
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Subscriptions Development
------------------------------
Shares Amount Capital Receivable Stage
------------- -------------- -------------- --------------- ---------------
Balance at inception on
May 24, 1990 - $ - $ - $ - $ -
Net loss for the period ended
December 31, 1990 - - - - (174)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1990 - - - - (174)
Common stock issued on
subscription at $0.002 per
share - September 27, 1991 350,000 350 350 (700) -
Net loss for the year ended
December 31, 1991 - - - - (115)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1991 350,000 350 350 (700) (289)
Net loss for the year ended
December 31, 1992 - - - - (120)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1992 350,000 350 350 (700) (409)
Common stock issued on
subscription at $0.002 per
share, September 24, 1993 350,000 350 350 (700) -
Net loss for the year ended
December 31, 1993 - - - - (115)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1993 700,000 700 700 (1,400) (524)
Common stock issued on
subscription at $0.002 per
share, February 11, 1994 350,000 350 350 (700) -
Common stock issued for
services at $0.002 per share,
September 30, 1994 2,500 3 2 - -
Net loss for the year ended
December 31, 1994 - - - - (115)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1994 1,052,500 $ 1,053 $ 1,052 $ (2,100) $ (639)
------------- -------------- -------------- --------------- ---------------
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Subscriptions Development
------------------------------
Shares Amount Capital Receivable Stage
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1994 1,052,500 $ 1,053 $ 1,052 $ (2,100) $ (639)
Common stock issued for
services at $0.002 per share,
September 29, 1995 4,500 4 5 - -
Net loss for the year ended
December 31, 1995 - - - - (115)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1995 1,057,000 1,057 1,057 (2,100) (754)
Common stock issued on
subscription at $0.002 per
share, May 17, 1996 350,000 350 350 (700) -
Common stock issued for
services at $0.002 per share,
September 27, 1996 2,500 2 3 - -
Net loss for the year ended
December 31, 1996 - - - - (110)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1996 1,409,500 1,409 1,410 (2,800) (864)
Common stock issued for
services at $0.001 per share,
September 26, 1997 2,500 3 2 - -
Performance on stock
subscriptions - - - 2,800 -
Net loss for the year ended
December 31, 1997 - - - - (110)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1997 1,412,000 1,412 1,412 - (974)
Net loss for the year ended
December 31, 1998 - - - - (110)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1998 1,412,000 1,412 1,412 - (1,084)
Net loss for the year ended
December 31, 1999 - - - - (110)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1999 1,412,000 $ 1,412 $ 1,412 $ - $ (1,194)
------------- -------------- -------------- --------------- ---------------
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Subscriptions Development
------------------------------
Shares Amount Capital Receivable Stage
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 1999 1,412,000 $ 1,412 $ 1,412 $ - $ (1,194)
Net loss for the year ended
December 31, 2000 - - - - (2,119)
------------- -------------- -------------- --------------- ---------------
Balance at
December 31, 2000 1,412,000 1,412 1,412 - (3,313)
Net loss for the three months
ended March 31, 2001
(unaudited) - - - - (3,591)
------------- -------------- -------------- --------------- ---------------
Balance, March 31, 2001
(unaudited) 1,412,000 $ 1,412 $ 1,412 $ - $ (6,904)
============= ============== ============== =============== ===============
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CHALLEDON, INC.
A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the May 24,
Three Months Ended 1990 Through
March 31, March 31,
---------------------------------
2001 2000 2001
--------------- --------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (3,591) $ - $ (6,904)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Common stock issued for services - - 24
Changes in operating assets and liabilities:
Increase in due to related party 600 - 1,070
Increase in accounts payable 1,161 - 2,023
Increase in accrued expenses - - 1,100
--------------- --------------- ----------------
Net Cash provided (Used) by Operating Activities (1,830) - (2,687)
--------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
--------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash - - 2,800
--------------- --------------- ----------------
Net Cash Provided by Financing Activities - - 2,800
--------------- --------------- ----------------
NET INCREASE (DECREASE) IN CASH (1,830) - 113
CASH AT BEGINNING OF PERIOD 1,943 1,943 -
--------------- --------------- ---------------
CASH AT END OF PERIOD $ 113 $ 1,943 $ 113
=============== =============== ================
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Common stock issued for services $ - $ - $ 24
-9-
CHALLEDON, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2001 and December 31, 2000
NOTE 1 - NATURE OF ORGANIZATION
The financial statements presented are those of Challedon, Inc. (a
development stage company) (the Company). The Company was
organized under the laws of the State of Utah on May 24, 1990. the
Company was organized to seek potential business opportunities or
merge with an existing operating company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
b. Basic Loss Per Share
The computation of basic loss per share of common stock is based
on the weighted average number of shares outstanding during the
period of the financial statements (see Note 5).
c. 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.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
e. Revenue Recognition Policy
The Company will develop its revenue recognition policies when
planned principal operations commence.
f. Income Taxes
As of March 31, 2001, the Company had a net operating loss
carryforward for federal income tax purposes of $6,900 that may be
used in future years to offset taxable income. The net operating
loss carryforward will expire in 2020. The tax benefit of the
cumulative carryforwards has been offset by a valuation allowance
of the same amount.
-10-
CHALLEDON, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2001 and December 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for
a fair presentation. Such adjustments are of a normal recurring
nature.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not
yet established an ongoing source of revenues sufficient to cover
its operating costs and allow it to continue as a going concern.
The ability of the Company to continue as a going concern is
dependent on the Company obtaining adequate capital to fund
operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease
operations.
In order to continue as a going concern, develop a reliable source
of revenues, and achieve a profitable level of operations the
Company will need, among other things, additional capital
resources. Management's plans to continue as a going concern
include raising additional capital through sales of common stock.
However, management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans
described in the preceding paragraph and eventually secure other
sources of financing and attain profitable operations. The
accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company's president has paid out-of-pocket expenses through
March 31, 2001 totaling $1,070. The amount is unsecured,
non-interest bearing and is due on demand.
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CHALLEDON, INC.
(A Development Stage Company)
Note to the Financial Statements
March 31, 2001 and December 31, 2000
NOTE 5 - BASIC LOSS PER SHARE
The following is an illustration of the reconciliation of the
numerators and denominators of the basic loss per share
calculation:
For the
Three Months Ended
March 31,
---------------------------------
2001 2000
--------------- ----------------
Income (loss) (numerator) $ (3,591) $ -
Weighted average shares outstanding (denominator) 1,412,000 1,412,000
--------------- ----------------
Basic loss per share $ (0.00) $ 0.00
=============== ================
The computation of basic earnings per share of common stock is
based on the weighted standard average number of shares
outstanding during the period of the financial statements.
-12-
Item 2. Management's Discussion and Analysis or Plan of Operations
The following information should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Form 10-QSB.
Challedon, Inc. (the "Company") is a development stage company with
minimal assets or capital and no significant operations or income since its
inception.
Management believes that the Company requires only nominal capital to
maintain the Company's corporate viability. Necessary funds will most likely be
provided by the Company's officers and directors in the immediate future.
However, unless the Company is able to facilitate an acquisition of or merger
with an operating business, or is able to obtain significant outside financing,
there is substantial doubt about its ability to continue as a going concern.
Certain costs and expenses associated with the Company's operations and
the preparation and filing of its registration statement on Form 10-SB in
December 2000, have been paid for by advances from a shareholder of the Company.
It is anticipated that future expenses will be handled in a similar manner.
At March 31, 2001 and December 31, 2000, the Company had total assets
consisting of cash of $113 and $1,943, respectively. Total liabilities at March
31, 2001 and December 31, 2000 were $4,193 and $2,432, respectively, consisting
of accounts payable, payable to a related party and taxes payable. The payable
to a related party represents $1,070 advanced by the Company's President. The
amount is unsecured, non-interest bearing and is due on demand.
The Company has not had significant operations or revenues since its
inception. For the three months ended March 31, 2001, the Company's total
expenses were $3,591 compared to $-0- for the same 1999 period. The expenses are
associated with the filing of the Company's registration statement in 2000 and
expenses related to professional fees.
No revenues are anticipated prior to the Company consummating an
acquisition or merger agreement and, during this period of time, the Company
anticipates its expenses to be relatively level.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company until such time as the Company
successfully completes an acquisition or merger. At that time, management will
evaluate the possible effects of inflation on the Company related to it business
and operations following a successful acquisition or merger.
Plan of Operation
During the next 12 months, the Company will actively seek out and
investigate possible business opportunities with the intent to acquire or merge
with one or more business ventures. Because the Company lacks funds, it may be
necessary for the officers and directors to either advance funds to the Company
or to accrue expenses until such time as a successful business consolidation can
be made. Management intends to hold expenses to a minimum and to obtain services
on a contingency basis when possible. Further, the Company's directors will
defer any compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity provide their
remuneration. In the event the Company engages outside advisors or consultants
in its search for business opportunities, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does need to raise
capital, most likely the only method available to the Company would be the
private sale of its securities.
-13-
Because of the nature of the Company as a development stage company, it
is unlikely that it could make a public sale of securities or be able to borrow
any significant sum from either a commercial or private lender. There can be no
assurance that the Company will be able to obtain additional funding when and if
needed, or that such funding, if available, can be obtained on terms acceptable
to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is confident that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
Net Operating Loss
The Company has accumulated approximately $6,900 of net operating loss
carryforwards as of March 31, 2001, which may be offset against taxable income
and income taxes through 2020. The use of these losses to reduce future income
taxes will depend on the generation of sufficient taxable income prior to the
expiration of the net operating loss carryforwards. In the event of certain
changes in control of the Company, there will be an annual limitation on the
amount of net operating loss carryforwards which can be used. No tax benefit has
been reported in the financial statements for the year ended December 31, 2000
or three month period ended March 31, 2001 because there is a 50% or greater
chance that the carryforward will not be used. Accordingly, the potential tax
benefit of the loss carryforward is offset by a valuation allowance of the same
amount.
Risk Factors and Cautionary Statements
This report contains certain forward-looking statements. The Company
wishes to advise readers that actual results may differ substantially from such
forward-looking statements. Forward- looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements, including, but not limited to, the
following: the ability of the Company search for appropriate business
opportunities and subsequently acquire or merge with such entity, to meet its
cash and working capital needs, the ability of the Company to maintain its
existence as a viable entity, and other risks detailed in the Company's periodic
report filings with the Securities and Exchange Commission.
PART II
Item 1. Legal Proceedings
There are presently no other material pending legal proceedings to
which the Company is a party or to which any of its property is subject and, to
the best of its knowledge, no such actions against the Company are contemplated
or threatened.
Item 2. Changes In Securities and Use of Proceeds
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
-14-
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended March 31, 2001.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHALLEDON, INC.
Date: May 14, 2001 By: /S/ JAMES E. GLAVAS
----------------------
James E. Glavas
President, C.E.O. and Director
Date: May 14, 2001 By: /S/ GUY H. IVINS
-----------------
Guy H. Ivins
Secretary/Treasurer, and Director
(Principal Accounting Officer)
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