UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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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 September 30, 2001
----------------------------- ------------------------------------
Common Stock, $.001 par value 1,412,000
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TABLE OF CONTENTS
Heading Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..................................................................... 3
Balance Sheets -- September 30, 2001 and December 31, 2000.......................... 4
Statements of Operations -- three and nine months ended September 30, 2001
and 2000.......................................................................... 5
Statements of Stockholders' Equity (Deficit)........................................ 6
Statements of Cash Flows -- nine months ended September 30, 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.................................... 15
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
September 30, 2001, have been prepared by the Company.
CHALLEDON, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
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CHALLEDON, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
------
September 30, December 31,
2001 2000
-------- --------
(Unaudited)
CURRENT ASSETS
Cash $ 161 $ 1,943
-------- --------
Total Current Assets 161 1,943
-------- --------
TOTAL ASSETS $ 161 $ 1,943
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 1,000 $ 862
Due to related party -- 470
Taxes payable 1,100 1,100
-------- --------
Total Current Liabilities 2,100 2,432
-------- --------
TOTAL LIABILITIES 2,100 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 14,601 8,912
Deficit accumulated during the development stage (17,952) (10,813)
-------- --------
Total Stockholders' Equity (Deficit) (1,939) (489)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 161 $ 1,943
======== ========
The accompanying notes are an integral part of these financial statements.
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
For the For the Inception on
Three Months Ended Nine Months Ended May 24,
September 30, September 30, 1990 Through
--------------------------------- -------------------------------- September 30,
2001 2000 2001 2000 2001
--------------- --------------- -------------- -------------- --------------
REVENUES $ -- $ -- $ -- $ -- $ --
EXPENSES
General and administrative 2,509 20 7,139 20 17,952
--------------- --------------- -------------- -------------- --------------
Total Expenses 2,509 20 7,139 20 17,952
--------------- --------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (2,509) (20) (7,139) (20) (17,952)
--------------- --------------- -------------- -------------- --------------
NET INCOME (LOSS) $ (2,509) $ (20) $ (7,139) $ (20) $ (17,952)
=============== =============== =============== ============== ==============
BASIC INCOME (LOSS)
PER SHARE $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ --
=============== =============== =============== ============== ==============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 1,412,000 1,412,000 1,412,000 1,412,000 $ --
=============== =============== =============== ============== ==============
The accompanying notes are an integral part of these financial statements.
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Common Stock Additional During the
--------------------- 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)
--------- --------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements.
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Common Stock Additional During the
--------------------- 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)
--------- --------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements.
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CHALLEDON, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-In Subscriptions Development
Shares Amount Capital Receivable Stage
--------- --------- --------- --------- ---------
Balance at
December 31, 1999 1,412,000 $ 1,412 $ 1,412 $ -- $ (1,194)
Contributed capital -- -- 7,500 -- --
Net loss for the year ended
December 31, 2000 -- -- -- -- (9,619)
--------- --------- --------- --------- ---------
Balance at
December 31, 2000 1,412,000 1,412 8,912 -- (10,813)
Contributed capital (unaudited) -- -- 5,689 -- --
Net loss for the nine months
ended September 30, 2001
(unaudited) -- -- -- -- (7,139)
--------- --------- --------- --------- ---------
Balance, September 30, 2001
(unaudited) 1,412,000 $ 1,412 $ 14,601 $ -- $ (17,952)
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
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CHALLEDON, INC.
A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
For the Inception on
Nine Months Ended May 24,
September 30, 1990 Through
-------------------- September 30,
2001 2000 2001
-------- -------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) $ (7,139) $ (20 $(17,952)
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 (decrease) in due to related party (470) -- --
Increase (decrease) in accounts payable 138 100 1,000
Increase in accrued expenses -- -- 1,100
-------- -------- --------
Net Cash provided (Used) by Operating Activities (7,471) 80 (15,828)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Contributed capital 5,689 -- 13,189
Common stock issued for cash -- -- 2,800
-------- -------- --------
Net Cash Provided by Financing Activities 5,689 -- 15,989
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (1,782) 80 161
CASH AT BEGINNING OF PERIOD 1,943 3,000 --
-------- -------- --------
CASH AT END OF PERIOD $ 161 $ 3,080 $ 161
======== ======== ========
CASH PAID FOR:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
SCHEDULE OF NON-CASH
FINANCING ACTIVITIES
Common stock issued for
services $ -- $ -- $ 24
The accompanying notes are an integral part of these financial statements.
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CHALLEDON, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2001 and December 31, 2000
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the
Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 30, 2001 and 2000 and for
all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It
is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 2000 audited financial
statements. The results of operations for periods ended September
30, 2001 and 2000 are not necessarily indicative of the operating
results for the full years.
NOTE 2 - 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.
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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 its corporate viability. Historically, operating funds have been
provided by the Company's officers and directors. 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, were paid for by advances
from a shareholder. It is anticipated that future expenses will be handled in a
similar manner. 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.
At September 30, 2001 and December 31, 2000, the Company had total
assets consisting of cash of $161 and $1,943, respectively. Total liabilities at
September 30, 2001 and December 31, 2000 were $2,100 and $2,432, respectively,
consisting primarily of accounts payable and taxes payable.
The Company has not had significant operations or revenues since its
inception. For the three and nine month periods ended September 30, 2001, the
Company's total expenses were $2,509 and $7,139, respectively, compared to $20
for each of the corresponding 2000 periods. The expenses are primarily
professional fees associated with preparation the Company's registration
statement and requisite financial statements and periodic and annual filings
with the Securities and Exchange Commission.
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 continue to 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.
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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 $15,400 of net operating loss
carryforwards as of September 30, 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 nine month period ended September 30, 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.
-12-
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
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 September 30, 2001.
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SIGNATURES
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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: November 13, 2001 By: /S/ JAMES E. GLAVAS
-----------------------------------------
James E. Glavas
President, C.E.O. and Director
Date: November 13, 2001 By: /S/ GUY H. IVINS
-----------------------------------------
Guy H. Ivins
Secretary/Treasurer, and Director
(Principal Accounting Officer)
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