U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2004
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File number 0-26843
Nortia Capital Partners, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0913582
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(IRS Employer Identification No.)
400 Hampton View Court, Alpharetta, Georgia 30004
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(Address of principal executive offices)
(770) 777-6795
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(Issuer's telephone number)
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(Former name, former address, and former fiscal year, if changed
since last report)
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: As of October 4, 2004, there were approximately 5,725,000
shares of common stock, $0.001 par value, issued and outstanding.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
BF ACQUISITION GROUP I, INC.
Form 10-QSB Index
January 31, 2004
Page
Part I: Financial Information................................... 2
Item 1. Financial Statements............................... 2
Balance Sheet at January 31, 2004 (Unaudited)............ 3
Statement of Operations For the Three and Nine
Months Ended January 31, 2004 And 2003
(Unaudited).............................................. 4
Statement Of Cash Flows For the Nine
Months Ended January 31, 2004 And 2003
(Unaudited).............................................. 5
Notes To Financial Statements (Unaudited)................ 6
Item 2. Management's Plan of Operation..................... 14
Item 3. Controls and Procedures............................ 23
Part II: Other Information.................................... 23
Item 1. Legal Proceedings.................................. 23
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds................................ 23
Item 3. Defaults Upon Senior Securities.................... 23
Item 4. Submission of Matters to a Vote of Security
Holders ........................................... 23
Item 5. Other Information.................................. 23
Item 6. Exhibits........................................... 24
Signatures...................................................... 25
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
2
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Balance Sheet
At January 31, 2004
(Unuadited)
ASSETS
------
Current Assets
Cash $ 72,549
Accounts receivable 26,301
Investments - current:
Available-for-sale securities
Equities at fair market value 215,000
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Total Investments - current 215,000
-------------
Total Current Assets 313,850
=============
Investments - non-current:
Available-for-sale securities
Equities at fair market value 645,000
-------------
Total Investments - non-current 645,000
-------------
Total Assets 958,850
=============
LIABILITIES
-----------
Current Liabilities
Accounts payable 6,000
Due to related party 1,113
Accrued expenses 6,589
Debentures 227,000
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Total Current Liabilities 240,702
=============
STOCKHOLDERS' EQUITY
--------------------
Preferred stock, Series B, $0.001 par value,
5,000,000 shares authorized, none issued and
outstanding $ -
Common stock, $0.001 par value, 50,000,000 shares
authorized 2,275,000 shares issued and outstanding 2,275
Additional paid in capital 5,116
Accumulated deficit (12,398)
Deficit accumulated during development stage (1,845)
Accumulated other comprehensive income 725,000
-------------
Total Stockholders' Equity 718,148
=============
Total Liabilities and Stockholders' Equity $ 958,850
=============
See accompanying notes to financial statements.
3
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Statements of Operations
(Unaudited)
Period from
May 1, 2003
Three Months Ended Nine Months Ended (Inception of
January 31, January 31, Development Stage)
2004 2003 2004 2003 to January 31, 2004
---------- ---------- ---------- ---------- -------------------
Revenues $ 60,000 $ - $ 86,301 $ - $ 86,301
Operating Expenses
General and administrative 23,817 - 62,810 - 62,810
Professional 10,000 - 20,000 - 20,000
---------- ---------- ---------- ---------- -------------------
Total Operating Expenses 33,817 - 82,810 - 82,810
Income (Loss) from Operations 26,183 - 3,491 - 3,491
Other Expense
Interest expense, net 4,271 - 5,336 - 5,336
---------- ---------- ---------- ---------- -------------------
Total Other Expense 4,271 - 5,336 - 5,336
---------- ---------- ---------- ---------- -------------------
Net Income (Loss) $ 21,912 $ - $ (1,845) $ - $ (1,845)
========== ========== ========== ========== ===================
Comprehensive Income
Unrealized gains on
available-for-sale securities 725,000 - 725,000 - 725,000
---------- ---------- ---------- ---------- -------------------
Total Comprehensive Income (Loss) $ 746,912 $ - $ 723,155 $ - $ 723,155
========== ========== ========== ========== ===================
Net Loss Per Share
- Basic and Diluted $ 0.01 $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========== ========== ========== ========== ===================
Weighted Average Shares 2,275,000 825,000 2,275,000 825,000 2,275,000
========== ========== ========== ========== ===================
See accompanying notes to financial statements.
4
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
Period from
May 1, 2003
Nine Months Ended (Inception of
January 31, Development Stage)
2004 2003 to January 31, 2004
---------- ---------- -------------------
Cash Flows From Operating Activities:
Net loss $ (1,845) $ - $ (1,845)
Adjustments to reconcile net loss to net cash
used in operations:
Debentures issued for legal services 5,000 - 5,000
Changes in operating assets and liabilities:
Increase in accounts receivable (86,301) - (86,301)
Decrease in prepaid expenses 540 - 540
Increase in accounts payable 6,000 - 6,000
Increase in due to related party 1,113 - 1,113
Increase in accrued expenses 1,042 - 1,042
---------- ---------- -------------------
Net Cash Used In Operating Activities (74,451) - (74,451)
---------- ---------- -------------------
Cash Flows From Investing Activities:
---------- ---------- -------------------
Net Cash Used In Investing Activities - - -
---------- ---------- -------------------
Cash Flows From Financing Activities:
Proceeds from issuance of debebtures 147,000 - 147,000
---------- ---------- -------------------
Net Cash Provided By Financing Activities 147,000 - 147,000
---------- ---------- -------------------
Net Increase in Cash 72,549 - 72,549
Cash at Beginning of Period - - -
---------- ---------- -------------------
Cash at End of Period $ 72,549 $ - $ 72,549
========== ========== ===================
Cash interest paid $ - $ - $ -
========== ========== ===================
Supplemental Disclosure of Non-Cash Transactions:
Debentures issued for available-for-sale
securities $ 75,000 $ - $ -
Exchange of accounts receivable for
available-for-sale securities 60,000 - 60,000
Unrealized gains on available-for-sale securities 725,000 - 725,000
See accompanying notes to financial statements.
5
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
Note 1 Basis of Presentation
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The accompanying unaudited consolidated financial statements have
been prepared in accordance with accounting principles generally
accepted in the United States of America of America and the rules
and regulations of the United States of America Securities and
Exchange Commission for interim consolidated financial
information. Accordingly, they do not include all the
information and footnotes necessary for a comprehensive
presentation of consolidated financial position and results of
operations.
It is management's opinion, however, that all material
adjustments (consisting of normal recurring adjustments and
certain non-recurring adjustments) have been made which are
necessary for a fair financial statement presentation. The
results for the interim period are not necessarily indicative of
the results to be expected for the year.
For further information, refer to the audited financial
statements and footnotes of the Company for the year ending April
30, 2003 included in the Company's Form 10-KSB.
Note 2 Nature of Operations and Summary of Significant
Accounting Policies
- --------------------------------------------------------
Nature of Operations
Nortia Capital Partners, Inc. (f/k/a BF Acquisition Group I,
Inc.) ("Nortia", "the Company", "we", "us") is a publicly held
company that during the period covered by this report is in the
development stage since it has not generated significant revenue
and not implemented its business plan.
We were organized as BF Acquisition Group I, Inc. under the laws
of the State of Florida on April 15, 1999, as a "shell" company
with plans to seek business partners or acquisition candidates.
Due to capital constraints, however, we were unable to continue
with our business plan. In March 2001, we ultimately ceased our
business activities and became dormant through May 2003, whereby
we incurred only minimal administrative expenses.
During June 2003, we engaged present management, began to raise
additional capital, and initiated activities to re-establish our
business. During our fiscal quarterly period ending July 31,
2003, we re-entered the development stage. During the
development stage, we have raised additional capital and
commenced preparations to implement our business plan.
Prior to the issuance of this Form 10-QSB, we have not filed in a
timely manner our required reports with the Securities and
Exchange Commission ("SEC") for the quarterly periods ended July
31, 2003, October 31, 2003, January 31, 2004, July 31, 2004 and
the annual report on form 10-KSB for the period ended April 30,
2004. No provision has been recorded in the accompanying
financial statements for the cost of actions, if any, that may be
taken by the SEC against the Company for its non-compliance
during this period (See Note 5 - Commitments and Contingencies).
Effective August 2, 2004, the Company changed its name to Nortia
Capital Partners, Inc.
6
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
In September 2004, our Company issued Company Common Stock
certificates to respective shareholders representing 3,330,000
shares of previously authorized but unissued shares of our Common
Stock (See Note 9 - Subsequent Events).
Significant Accounting Policies
Accounting Estimates
When preparing financial statements in conformity with U.S. GAAP, our
management must make estimates based on future events which affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities as of the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could
differ from these estimates. Significant estimates in the accompanying
financial statements include the evaluation of a beneficial conversion
feature for debentures, valuation of the fair value of financial
instruments and the recognition of deferred tax assets and liabilities.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with a
maturity date of three months or less when purchased.
Beneficial Conversion Feature in Debentures
In accordance with EITF Issue 98-5, as amended by EITF 00-27, we
must evaluate the potential effect of any beneficial conversion
terms related to convertible instruments such as convertible debt or
convertible preferred stock. The Company has issued several
debentures and a beneficial conversion may exist if the holder, upon
conversion, may receive instruments that exceed the value of the
convertible instrument. Valuation of the benefit is determined
based upon various factors including the valuation of equity
instruments, such as warrants, that may have been issued with the
convertible instruments, conversion terms, value of the instruments
to which the convertible instrument is convertible, etc.
Accordingly, the ultimate value of the beneficial feature is
considered an estimate due to the partially subjective nature of
valuation techniques.
Fair Value of Financial Instruments
We define the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction
between willing parties. The carrying value of accounts payable and
accrued liabilities approximates fair value because of the short
maturity of those instruments. The estimated fair value of our other
obligations is estimated based on the current rates offered to us
for similar maturities. Based on prevailing interest rates and the
short-term maturity of all of our indebtedness, management believes
that the fair value of our obligations approximates book value at
January 31, 2004.
Revenue Recognition
The Company recognizes revenues in accordance with the guidance in
the Securities and Exchange Commission Staff Accounting Bulletin
104. Revenue is recognized when persuasive evidence of an
arrangement exists, as services are provided over the term of a
service contract, and when collection of the fixed or determinable
selling price is reasonable assured. The Company follows EITF 00-8
7
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
"Accounting by a Grantee for an Equity Instrument to be Received in
Conjunction with Providing Goods or Services" when determining the
measurement date to value securities received for services.
Income Taxes
Income taxes are accounted for under the asset and liability method
of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes ("SFAS 109")." Under SFAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Concentration
All revenue for the three and nine months ended January 31, 2004 and
accounts receivable at January 31, 2004 are derived from one
customer.
Comprehensive Income
Comprehensive income includes net income (loss) as currently
reported by the Company adjusted for other comprehensive income.
Other comprehensive income for the Company consists of unrealized
gains related to the Company's equity securities accounted for as
available-for-sale with changes in fair value recorded through
stockholders' equity
3. GOING CONCERN
As reflected in the accompanying financial statements, the Company
has a net loss of $1,845 and net cash used in operations of $74,451
for the nine months ended January 31, 2004, and a deficit
accumulated during the development stage of $1,845 at January 31,
2004. Additionally, the Company is in default of $37,500 of
Debentures as of August 31, 2004 (see Note 9 - Subsequent Events).
During the nine months ended January 31, 2004, the Company recorded
other comprehensive income of $725,000, comprised of unrealized
gains on available-for-sale securities. However, as discussed in
Note 7 - Subsequent Events, this temporary gain for the period ended
January 31, 2004 would be significantly lower based upon the current
stock price of the securities comprising this gain. Subsequently, in
June and July of 2004, we transferred 7,500 and sold 97,500 shares,
representing all of the available-for-sale securities-current at
April 30, 2004. As a result, the Company received $14,405 of
proceeds and will recognize a $64,738 loss on the sale of the
securities (See Note 9 - Subsequent Events).
8
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
The ability of the Company to continue as a going concern is
dependent on the Company's ability to further implement its business
plan, raise capital, and generate revenues. The financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
We expect to derive our revenues through direct investments into
private companies, start-up companies, and through the opportunities
provided by turnaround companies. We also intend to invest in the
commercial real estate market. Additionally, we will provide fee
based business expertise through in-house consultants and contract
consultants. To date, our planned principal operations have not yet
commenced, and management is devoting most of its efforts to general
business planning, raising capital, and developing business
opportunities.
The time required for us to become profitable from operations is
highly uncertain, and we cannot assure you that we will achieve or
sustain operating profitability or generate sufficient cash flow to
meet our planned capital expenditures, working capital and debt
service requirements. If required, our ability to obtain additional
financing from other sources also depends on many factors beyond our
control, including the state of the capital markets and the
prospects for our business. The necessary additional financing may
not be available to us or may be available only on terms that would
result in further dilution to the current owners of our common
stock.
We cannot assure you that we will generate sufficient cash flow from
operations or obtain additional financing to meet scheduled debt
payments and financial covenants. If we fail to make any required
payment under the agreements and related documents governing our
indebtedness or fail to comply with the financial and operating
covenants contained in them, we would be in default. The financial
statements do not include any adjustments to reflect the possible
effects on recoverability and classification of assets or the
amounts and classification of liabilities which may result from the
inability of the Company to continue as a going concern.
4. INVESTMENTS
The following is a summary of the investments in available-for-sale
securities classified as current assets at January 31, 2004:
Available-for-Sale Gross Gross Estimated Fair
Securities: Cost Unrealized Gains Unrealized Losses Value
- ------------------ ------- ---------------- ----------------- --------------
Equity securities $75,000 $140,000 $ 0 $ 215,000
======= ======== === =========
In November 2003, we issued $75,000 of debentures in exchange for
100,000 shares of freely trading common stock in the same publicly
held company discussed above. In accordance with FAS 115, we
recorded the 100,000 shares of common stock as "available-for-sale"
securities, a current asset and the resulting $140,000 unrealized
gain has been classified as a separate component of stockholders'
equity - accumulated other comprehensive income.
9
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
The following is a summary of the investments in available-for-sale
securities classified as non-current assets at January 31, 2004:
Available-for-Sale Gross Gross Estimated Fair
Securities: Cost Unrealized Gains Unrealized Losses Value
- ------------------ ------- ---------------- ----------------- --------------
Equity securities $60,000 $585,000 $ 0 $ 645,000
======= ======== === =========
In September 2003, we entered into a consulting contract with a
publicly traded company (See Note 5 - Debentures and Note 9 -
Subsequent Events). We are providing consulting services to this
company in exchange for $240,000 to be paid to us in the form of one
million two hundred thousand (1,200,000) restricted shares of their
common stock, valued at $0.20 per share. The term of the consulting
agreement is for twelve (12) months and the common stock will be
earned and payable on a quarterly basis. In January 2004, we
received three hundred thousand (300,000) shares as compensation for
services and have accounted for $86,301 of consulting fees earned
during the nine months ended January 31, 2004 as revenue, pro-rata
over the contract term in accordance with EITF 00-8 "Accounting by a
Grantee for an Equity Instrument to be Received in conjunction with
Providing Goods or Services". In accordance with FAS 115
"Accounting for Certain Investments in Debt and Equity Securities",
we recorded the restricted shares as "available-for-sale"
securities, a non-current asset and the resulting unrealized gain of
$585,000 has been classified as a separate component of
stockholders' equity - accumulated other comprehensive income.
5. DEBENTURES
From May 2003 through January of 2004, we received $147,000 of cash
proceeds from the issuance of debentures to several parties (See
Note 9 - Subsequent Events). The debenture terms are interest at
ten percent (10%) per annum, payable in twelve (12) months from the
date of the debenture and include a five percent (5%) penalty for
any event of default. Additionally, the debenture holders may be
granted the option of converting the debenture into common stock of
the Company at an exchange rate of twenty-five cents ($0.25) per
share.
We have evaluated the debenture to determine if a beneficial
conversion feature exists in accordance with EITF 98-5, as amended
by EITF 0027. We have determined that the debentures are not a
convertible instrument in that the potential conversion feature
outlined in the debentures is not binding.
In November 2003, we issued $75,000 of debentures in exchange for
100,000 shares of freely trading common stock in a publicly held
company (see Note 4 - Investments)
10
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
In January 2004, we issued a $5,000 debenture to a third party for
legal services. We accounted for the issuance as legal expense in
the accompanying statement of operations.
At January 31, 2004, we had $227,000 of debentures outstanding (See
Note 9 - Subsequent Events).
6. STOCKHOLDERS' DEFICIENCY
Capital Structure
We are authorized to issue up to 50,000,000 shares of our common
stock, $0.001 par value per share, of which 2,275,000 were issued
and outstanding at January 31, 2004. The holders of the common
stock do not have any preemptive right to subscribe for, or
purchase, any shares of any class of stock.
We are authorized to issue up to 5,000,000 shares of our preferred
stock, $0.001 par value per share, of which none were issued and
outstanding at January 31, 2004. Our preferred stock is commonly
referred as a "blank check preferred stock" as the Board of
Directors is authorized to establish the number of shares to be
included in each class or series and the preferences, limitations
and relative rights of each class or series, which may include a
conversion feature into common stock.
There was no change in our ownership structure for the quarterly
period ended January 31, 2004 (See Note 9 - Subsequent Events).
7. COMMITMENTS AND CONTINGENCIES
From time to time we may become subject to proceedings, lawsuits and
other claims in the ordinary course of business including
proceedings related to environmental and other matters. Such
matters are subject to many uncertainties, and outcomes are not
predictable with assurance.
As described in Note 2, we did not file any of the reports with the
SEC as required of SEC registrants. No provision has been made in
the accompanying financial statements for the cost of actions, if
any, that may be taken by the SEC against the Company for its non-
compliance during this period.
8. RELATED PARTY TRANSACTIONS
At April 30, 2003, we had an accounts payable in the amount of
$3,113 to a shareholder/director who directly paid certain expenses
of the Company and these were non-interest bearing and do not have
any repayment terms. During the three months ended July 31, 2003, we
repaid $2,000 of these advances and at January 31, 2004, $1,113 is
included in due to related party on the accompanying balance sheet.
See Note 9 - Subsequent Events for other related party transactions.
11
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
9. SUBSEQUENT EVENTS
From February through March 2004, we received $22,000 of cash
proceeds from the issuance of debentures. As of April 30, 2004, we
had $250,000 of debentures outstanding.
In March 2004, we appointed a new Chief Financial Officer ("CFO")
and a director of the Company. The CFO will be compensated in the
form of one million (1,000,000) shares of Common Stock of the
Company. Additionally, the CFO will be compensated one hundred
fifty thousand (150,000) shares of Common Stock of the Company for
director services. In total, one million one hundred fifty thousand
(1,150,000) shares of Common Stock were granted to the CFO and will
be valued at on the grant date and expenses immediately as
compensation expense as there was no formal employment agreement or
stated term.
In March 2004, we granted one million (1,000,000) shares of Common
Stock of the Company to our President as a bonus for his services as
the President of the Company. The shares are valued on the grant
date and recognized as compensation expense.
In May 2004, we entered into a consulting agreement with a third
party whereby the consultant will provide corporate business
development and consulting services for us. The term of the
agreement is twenty-four (24) months and consultant will receive a
total of two hundred forty thousand (240,000) shares of the Common
Stock of the Company. One hundred twenty thousand (120,000) shares
were granted upon the execution of the agreement and the remaining
shares will be earned at the rate of 5,000 shares monthly and issued
on a quarterly basis.
In May 2004, we transferred 7,500 of our available-for-sale
securities to a third party for payment of public relations services
for another publicly held company, the company mentioned previously
that we have an investment in and a consulting agreement with. The
fair market value of the stock on the transfer date was $0.28 per
share or $2,100 and the Company will record this amount as general
and administration expense and record a $3,525 loss on the disposal
of the securities.
In June 2004, we appointed our then President as the Chief Executive
Officer and the Chairman of the Board.
In June 2004, we appointed a new President and a director of the
Company. The President will be compensated in the form of one
million (1,000,000) shares of Common Stock of the Company.
Additionally, the President will be compensated one hundred fifty
thousand (150,000) shares of Common Stock of the Company for
director services. In total, one million one hundred fifty thousand
(1,150,000) shares of Common Stock were granted to the President in
June 2004 and valued on the grant date to be recognized immediately
as compensation expense as there was no formal employment agreement
or stated term.
In June and July of 2004, we sold 97,500 shares representing all of
the remaining available-for-sale securities-current at April 30,
2004. As a result, the Company received $14,405 of proceeds and
will recognize a $61,213 loss on the sale of the securities.
In July 2004, our Chief Executive Officer and Chairman of the Board,
was elected President and a director of another publicly held
company, the company mentioned previously that we have an investment
in and a consulting agreement with. Additionally, our President and
a director was also elected Chief Executive Officer and a director
of this other publicly held company, thereby making this investment,
an investment in affiliate commencing July 2004.
12
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
January 31, 2004
As of August 31, 2004, $37,500 of the Debentures discussed
previously are in default as the term was for one (1) year. The
debenture provisions include a penalty of five percent (5%) for any
default that occurs and this would total $1,875. The Company is in
discussions with the debenture holders concerning the default.
On August 2, 2004, the Company amended its Articles of Incorporation
officially changing the name of the Company from BF Acquisition
Group I, Inc. to Nortia Capital Partners, Inc.
In August and September of 2004, we received $180,000 of proceeds
from the issuance of Debentures.
In September 2004, our Company issued Company Common Stock
certificates to respective shareholders representing 3,330,000
shares of previously authorized but unissued shares of our Common
Stock.
13
Item 2. Management's Plan of Operation.
Overview
The following discussion "Management's Plan of Operation"
contains forward-looking statements. The words "anticipate,"
"believe," "expect," "plan," "intend," "estimate," "project,"
"will," "could," "may" and similar expressions are intended to
identify forward-looking statements. Such statements reflect our
current views with respect to future events and financial
performance and involve risks and uncertainties. Should one or
more risks or uncertainties occur, or should underlying
assumptions prove incorrect, actual results may vary materially
and adversely from those anticipated, believed, expected,
planned, intended, estimated, projected or otherwise indicated.
We caution you not to place undue reliance on these forward-
looking statements, which we have made as of the date of this
Quarterly Report on Form 10-QSB.
The following is qualified by reference to, and should be read in
conjunction with our financial statements ("Financial
Statements"), and the notes thereto, included elsewhere in this
Form 10-QSB, as well as the discussion hereunder "Management's
Plan of Operation".
Plan Of Operation
Effective August 2, 2004, Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.) ("Nortia", the "Company",
"we", "us") changed its name from BF Acquisition Group I, Inc. to
Nortia Capital Partners, Inc.
Our Company was initially organized as a "shell" company,
with plans to seek business partners or acquisition candidates;
however, due to capital constraints, we were unable to continue
with our business plan. In March 2001, we ultimately ceased our
business activities and became dormant through May 2003, whereby
we incurred only minimal administrative expenses. During June
2003, we brought in present management, raised additional
capital, and initiated activities to re-establish our business.
Prior to the issuance of this Form 10-QSB, we have not filed
in a timely manner our required reports with the Securities and
Exchange Commission ("SEC") for the quarterly periods ended July
31, 2003, October 31, 2003, January 31, 2004, July 31, 2004 and
the annual report on form 10-KSB for the period ended April 30,
2004. No provision has been recorded in the accompanying
financial statements for the cost of actions, if any, that may be
taken by the SEC against the Company for its non-compliance
during this period.
During our fiscal quarterly period ending July 31, 2003, we
re-entered the development stage. At that time present management
raised capital and commenced preparations to register our Company
as a "Business Development Company" ("BDC") with the Securities
and Exchange Commission whereby we will be regulated pursuant to
the requirements of the Investment Company Act of 1940. As of the
date hereof, we have not yet registered as a BDC. As a BDC, we
expect to derive our revenues through direct investments into
private companies, start-up companies, and through the
opportunities provided by turn around companies. We also intend
to invest in the commercial and residential real estate market.
Additionally, we will provide fee based business expertise
through in-house consultants and contract consultants. To date,
our planned principal BDC operations have not yet commenced, and
management is devoting most of its efforts to general business
14
planning, raising capital, and developing business opportunities.
As described above, we were dormant for a period of time due
to the lack of capital. We incurred a loss from operations, and
presently do not have sufficient revenues to cover our incurred
expenses. Our management recognizes that we must generate
additional resources to enable us to pay our obligations as they
come due, and that we must ultimately implement our BDC business
plan and achieve profitable operations. We cannot assure you
that we will be successful in any of these activities. Should
any of these events not occur, our financial condition will be
materially adversely affected.
Presently, our Company expects to meet its current capital
requirements for the next twelve months pursuant to a combination
of third party loans made to our Company and from revenues
derived from the commencement of our business operations.
OVERVIEW OF COMPANY.
Since its inception, the Company has suffered recurring losses
from operations and has been dependent on existing stockholders
and new investors to provide the cash resources to sustain its
operations. We have had and could have losses, deficits and
deficiencies in liquidity, which could impair our ability to
continue as a going concern. Our independent auditors have
indicated, in their audit opinion for the year ended April 30,
2003 and April 30, 2002, that certain factors raise substantial
doubt about our ability to continue as a going concern and these
continuing factors are discussed in note 3 to our accompanying
January 31, 2004 interim financial statements. Since its
inception, the Company has suffered recurring losses from
operations and has been dependent on existing stockholders and
new investors to provide the cash resources to sustain its
operations.
We have continually incurred net losses and this has resulted in
an accumulated deficit and stockholders' deficiency at January
31, 2004. We had a net loss of $1,845 and net cash used in
operations of $74,451 for the nine months ended January 31, 2004,
and a deficit accumulated during the development stage of $1,845
at January 31, 2004. Additionally, the Company is in default of
$37,500 of Debentures as of August 31, 2004. During the six
months ended January 31, 2004, the Company recorded other
comprehensive income of $725,000, comprised of unrealized gains
on available-for-sale securities. However, this temporary gain
for the period ended January 31, 2004 would be significantly
lower based upon the current stock price of the securities
comprising this gain. Subsequently, in June and July of 2004, we
transferred 7,500 and sold 97,500 shares, representing all of the
available-for-sale securities-current at April 30, 2004. As a
result, the Company received $14,405 of proceeds and will
recognize a $64,738 loss on the sale of the securities.
The Company is in the development stage and the ability to
continue as a going concern is dependent on the Company's ability
to further implement its business plan, raise capital, and
generate revenues. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern
The time required for us to become profitable is highly
uncertain, and we cannot assure you that we will achieve or
sustain profitability or generate sufficient cash flow from
operations to meet our planned capital expenditures, working
capital and debt service requirements. If required, our ability
to obtain additional financing from other sources also depends on
many factors beyond our control, including the state of the
15
capital markets and the prospects for our business. The necessary
additional financing may not be available to us or may be
available only on terms that would result in further dilution to
the current owners of our common stock.
The Company's long-term viability as a going concern is dependent
on certain key factors, as follows:
- The Company's ability to continue to obtain sources of
outside financing to support near term operations and to allow
the Company to continue to make investments
- The Company's ability to increase profitability and sustain
a cash flow level that will ensure support for continuing
operations.
RECENT DEVELOPMENTS
From February through March 2004, we received $22,000 of cash
proceeds from the issuance of debentures. As of April 30, 2004,
we had $250,000 of debentures outstanding.
In March 2004, we appointed a new Chief Financial Officer ("CFO")
and a director of the Company. The CFO will be compensated in
the form of one million (1,000,000) shares of Common Stock of the
Company. Additionally, the CFO will be compensated one hundred
fifty thousand (150,000) shares of Common Stock of the Company
for director services. In total, one million one hundred fifty
thousand (1,150,000) shares of Common Stock were granted to the
CFO and valued on the grant date to be recognized immediately as
compensation expense as there was no formal employment agreement
or stated term.
In March 2004, we granted one million (1,000,000) shares of
Common Stock of the Company to our President as a bonus for his
services as the President of the Company. The shares are valued
on the grant date and recognized as compensation expense.
In May 2004, we entered into a consulting agreement with a third
party whereby the consultant will provide corporate business
development and consulting services for us. The term of the
agreement is twenty-four (24) months and consultant will receive
a total of two hundred forty thousand (240,000) shares of the
Common Stock of the Company. One hundred twenty thousand
(120,000) shares were granted upon the execution of the agreement
and the remaining shares will be earned at the rate of 5,000
shares monthly and issued on a quarterly basis.
In June 2004, we appointed our then President as the Chief
Executive Officer and the Chairman of the Board.
In June 2004, we appointed a new President and a director of the
Company. The President will be compensated in the form of one
million (1,000,000) shares of Common Stock of the Company.
Additionally, the President will be compensated one hundred fifty
thousand (150,000) shares of Common Stock of the Company for
director services. In total, one million one hundred fifty
thousand (1,150,000) shares of Common Stock were granted to the
President in June 2004 and valued on the grant date to be
recognized immediately as compensation expense as there was no
formal employment agreement or stated term.
In July 2004, our Chief Executive Officer and Chairman of the
Board, was elected President and a director of another publicly
held company, the company mentioned previously that we have an
16
investment in and a consulting agreement with. Additionally, our
President and a director was also elected Chief Executive Officer
and a director of this other publicly held company, thereby
making this investment, an investment in affiliate commencing
July 2004.
As of August 31, 2004, $37,500 of the Debentures discussed
previously are in default as the term was for one (1) year. The
debenture provisions include a penalty of five percent (5%) for
any default that occurs and this would total $1,875. The Company
is in discussions with the debenture holders concerning the
default.
On August 2, 2004, the Company amended its Articles of
Incorporation officially changing the name of the Company from BF
Acquisition Group I, Inc. to Nortia Capital Partners, Inc.
In August and September of 2004, we received $180,000 of proceeds
from the issuance of Debentures.
In September 2004, our Company issued Company Common Stock
certificates to respective shareholders representing 3,330,000
shares of previously authorized but unissued shares of our Common
Stock.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The methods, estimates and judgment we use in applying our most
critical accounting policies have a significant impact on the
results we report in our financial statements. The Securities
and Exchange Commission has defined the most critical accounting
policies as the ones that are most important to the portrayal of
our financial condition and results, and require us to make our
most difficult and subjective judgments, often as a result of the
need to make estimates of matters that are inherently uncertain.
Based upon this definition, our most critical estimates include
going concern, the evaluation of the beneficial conversion
feature in debentures and investments in available-for-sale
securities. We also have other key accounting estimates and
policies, but we believe that these other policies either do not
generally require us to make estimates and judgments that are as
difficult or as subjective, or it is less likely that they would
have a material impact on our reported results of operations for
a given period. For additional information see Note 3 "Summary
of Significant Accounting Policies" in the notes to our unaudited
financial statements contained in our quarterly report on Form 10-
QSB for the quarterly period ended January 31, 2004. Although we
believe that our estimates and assumptions are reasonable, they
are based upon information presently available. Actual results
may differ significantly from these estimates.
GOING CONCERN
The independent auditors' reports to our financial statements for
the year ended April 30, 2003 and April 30, 2002, include an
emphasis paragraph in addition to their audit opinion stating
that our recurring losses from operations and lack of revenues
raise substantial doubt about our ability to continue as a going
concern. Our financial statements do not include any adjustments
to reflect the possible effects on recoverability and
classification of assets or the amounts and classification of
liabilities that may result from our inability to continue as a
going concern.
17
EVALUATION OF BENEFICIAL CONVERSION FEATURE IN DEBENTURES
In accordance with EITF Issue 98-5, as amended by EITF 00-27, we
must evaluate the potential effect of any beneficial conversion
terms related to convertible instruments such as convertible debt
or convertible preferred stock. The Company has issued several
debentures and a beneficial conversion may exist if the holder,
upon conversion, may receive instruments that exceed the value of
the convertible instrument. Valuation of the benefit is
determined based upon various factors including the valuation of
equity instruments, such as warrants, that may have been issued
with the convertible instruments, conversion terms, value of the
instruments to which the convertible instrument is convertible,
etc. Accordingly, the ultimate value of the beneficial feature
is considered an estimate due to the partially subjective nature
of valuation techniques.
INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
Investments in available-for-sale securities are accounted for in
accordance with FAS 115 "Accounting for Certain Investments in
Debt and Equity Securities". Per FAS 115, the securities are
stated at the lower of cost and market value and any difference
between cost and market value is recorded as an unrealized gain
or loss classified as a separate component of stockholders'
equity - accumulated other comprehensive income.
18
RESULTS OF OPERATIONS
Financial Analysis of the Three and Nine Months Ended
January 31, 2004
- -----------------------------------------------------
Three Months Ended Nine Months Ended
January 31, January 31,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Revenues $ 60,000 $ - $ 86,301 $ -
Operating Expenses
General and administrative 23,817 - 62,810 -
Professional 10,000 20,000 -
---------- ---------- ---------- ----------
Total Operating Expenses 33,817 - 82,810 -
---------- ---------- ---------- ----------
Income (Loss) from Operations 4,217 - 3,491 -
Other Expense
Interest expense, net 4,271 - 5,336 -
---------- ---------- ---------- ----------
Total Other Expense 4,271 - 5,336 -
---------- ---------- ---------- ----------
Net Income (Loss) $ 21,912 $ - $ (1,845) $ -
Comprehensive Income
Unrealized gains on
available-for-sale securities 725,000 - 725,000 -
---------- ---------- ---------- ----------
Total Comprehensive Income
(Loss) $ 746,912 $ - $ 723,155 $ -
========== ========== ========== ==========
Revenues:
- --------
Revenues increased $60,000, or 100% to $60,000 for the three
months ended January 31, 2004 from zero for the three months
ended January 31, 2003 and increased $86,301, or 100% to $86,301
for the nine months ended January 31, 2004 from zero for the nine
months ended January 31, 2003. The increase in revenues for both
the three and nine months ended January 31, 2004 was due to a
consulting contract with a publicly held company where we are
providing consulting services and both the $60,000 and $86,301
represents the earned revenue from the contract.
Operating Expenses:
- ------------------
Operating expenses increased $33,817, or 100% to $33,817 for the
three months ended January 31, 2004 from zero for the three
months ended January 31, 2003 and increased $82,810, or 100% to
$82,810 for the nine months ended January 31, 2004 from zero for
the nine months ended January 31, 2003. The increase was
primarily the result of the Company entering the development
stage effective April 1, 2003 as compared to being dormant for
the comparable period during the three and nine months ended
January 31, 2003.
19
Other Expense:
- -------------
Other expense increased $4,271, or 100% to $4,271 for the three
months ended January 31, 2004 from zero for the three months
ended January 31, 2003 and increased $5,336, or 100% to $5,336
for the nine months ended January 31, 2004 from zero for the nine
months ended January 31, 2003. The increase is from interest
expense on debentures issued during the nine months ended January
31, 2004 as compared to none during the comparable period in
2003.
Comprehensive Income:
- --------------------
Comprehensive income increased $725,000, or 100% to $725,000 for
the three months ended January 31, 2004 from zero for the three
months ended January 31, 2003 and increased $725,000, or 100% to
$725,000 for the nine months ended January 31, 2004 from zero for
the nine months ended January 31, 2003. The increase in
comprehensive income for both the three and nine months ended
January 31, 2004 was due to unrealized gains on available-for-
sale securities.
Liquidity and Capital Resources
Cash was $72,549 at January 31, 2004 as compared to zero at April
30, 2003, and positive working capital was $73,148 at January 31,
2004 as compared to a working capital deficit of $5,007 at April
30, 2003. The increase in cash was primarily the result of the
Company receiving $147,000 of proceeds from the issuance of
debentures during the nine months ended January 31, 2004. The
increase in the positive working capital from a deficit at April
30, 2003 was primarily the result of an increase in available-for-
sale securities.
Operating Activities: Net cash used in operating activities was
$74,451 for the nine months ended January 31, 2004 while there
were no cash operating activities for the nine months ended
January 31, 2003. The increase in cash used in operations
resulted primarily due to the fact of an $86,301 increase in
accounts receivable from a consulting contract.
Investing Activities: There were no investing cash flow
activities during either the three or nine months ended January
31, 2004 or January 31, 2003.
Financing Activities: Cash flows provided by financing
activities was $147,000 for the nine months ended January 31,
2004 while there were no cash financing activities for the nine
months ended January 31, 2003. The increase in cash provided by
financing activities was due to $147,000 of cash proceeds
received by the Company from the issuance of debentures.
SHORT-TERM DEBT
Our short-term debt at January 31, 2004 consisted of the
following:
Debentures:
- ----------
$227,000 Debentures, dated May 2003 through January 2004,
bearing interest at 10% per annum and due in 12 months $ 227,000
=========
From May 2003 through January of 2004, we received $147,000 of
cash proceeds from the issuance of debentures to several parties.
The debenture terms are interest at ten percent (10%) per annum,
20
payable in twelve (12) months from the date of the debenture and
include a five percent (5%) penalty for any event of default. As
previously discussed, we anticipate filing to become a BDC in the
near future. Upon SEC acceptance of our BDC election, the
debenture holders may be granted the option of converting the
debenture into common stock of the Company at an exchange rate of
twenty-five cents ($0.25) per share.
In November 2003, we issued $75,000 of debentures in exchange for
100,000 shares of freely trading common stock in a publicly held
company.
In January 2004, we issued a $5,000 debenture to a third party
for legal services. We accounted for the issuance as legal
expense in the accompanying statement of operations.
At January 31, 2004, we had $227,000 of debentures outstanding.
We have evaluated the debentures to determine if a beneficial
conversion feature exists in accordance with EITF 98-5, as
amended by EITF 0027. We have determined that the debentures are
not a convertible instrument in that the potential conversion
feature outlined in the debentures is not binding.
Equity Financing
None
Liquidity
To continue with our business plan, we will require additional
short-term working capital We cannot assure you that that we will
obtain sufficient proceeds, if any, and borrowings under any
interim financing we are able to secure will be sufficient to
meet our projected cash flow needs.
Our ability to obtain additional financing depends on many
factors beyond our control, including the state of the capital
markets, the market price of our common stock, the prospects for
our business and the approval by our stockholders of an amendment
to our certificate of incorporation increasing the number of
shares of common stock we are authorized to issue. The necessary
additional financing may not be available to us or may be
available only on terms that would result in further dilution to
the current owners of our common stock. Failure to obtain
commitments for financing would have a material adverse effect on
our business, results of operations and financial condition. If
the financing we require to sustain our working capital needs is
unavailable or insufficient or we do not receive the necessary
financing, we may be unable to continue as a going concern.
21
Contractual Obligations and Commercial Commitments
The following table highlights, as of January 31, 2004, our
contractual obligations and commitments by type and period:
Payments Due by Period
----------------------
Less than After
Contractual Obligations Total 1 year 1-3 years 4-5 years 5 years
- ----------------------- -------- --------- --------- --------- ---------
Short-Term Debt:
- ---------------
Debentures $ 227,000 $ 227,000 $ - $ - $ -
--------- ---------- --------- --------- ---------
Total Short-Term Debt $ 227,000 $ 227,000 $ - $ - $ -
========= ========== ========= ========= =========
Recent Accounting Developments
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN
46), "Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51," which as an interpretation defines
when and who consolidates a "variable interest entity," or
"VIE." This new consolidation model applies to entities (i)
where the equity investors (if any) do not have a controlling
financial interest, or (ii) whose equity investment at risk is
insufficient to finance that entity's activities without
receiving additional subordinated financial support from other
parties and requires additional disclosures for all enterprises
involved with the VIE. FIN 46 is effective during 2003 depending
on when the VIE is created. We do not believe that the adoption
of FIN 46 will have a significant impact on our financial
position and results of operations.
In May 2003, the FASB issued SFAS No. 149; Amendment of Statement
133 on Derivative Instruments and Hedging Activities ("SFAS 149")
which provides for certain changes in the accounting treatment of
derivative contracts. SFAS 149 is effective for contracts
entered into or modified after June 30, 2003, except for certain
provisions that relate to SFAS No. 133 Implementation Issues that
have been effective for fiscal quarters that began prior to June
15, 2003, which should continue to be applied in accordance with
their respective effective dates. The guidance should be applied
prospectively. The adoption of SFAS 149 did not have a material
impact on the Company's financial position, results of operations
or liquidity.
In May 2003, the Financial Accounting Standards Board issued SFAS
No. 150 (SFAS 150), "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity." It
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. This standard is effective for financial
instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of FAS 150
did not have a significant impact on our financial position and
results of operations.
2004 OUTLOOK
The ability to invest further will be heavily dependent on
securing additional capital from investors or debt. There is no
assurance that additional equity or debt financing will be
available on terms acceptable to Management.
22
Item 3. Controls and Procedures.
As of the date this report is filed, an evaluation was
performed under the supervision and with the participation of the
Company's principal executive officers and financial officers of
the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the
end of the period covered by this report. Prior to that period,
our Company experienced significant capital constraints, and we
ultimately ceased our business activities and became dormant
through May 2003. During the period covered by this report, our
Company was unable to comply with its Exchange Act reporting
requirements because no accounting work was completed, no
financial statements were prepared, and no audits were obtained.
The evaluation revealed to the Company's principal executive
officers and financial officers that, as a result of those
circumstances, the design and operation of the Company's
disclosure controls and procedures were not effective as of the
end of the period covered by this report.
As of the date this report is filed, our Company's new
principal executive officers and financial officers have made
significant changes in the Company's internal controls and in
other factors that could significantly affect internal controls
subsequent to the date of the above-described evaluation period.
In particular, the Company has adopted an independent audit
committee, has committed funds for legal and accounting work and
the preparation of financial statements and audits, and has
brought the Company out of its dormant period as of May 2003, all
of which enables our Company's principal executive officers and
financial officers to maintain our Company as current pursuant to
its Exchange Act reporting obligations and provide our Company
with an effective design and operation of disclosure controls and
procedures.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits
Exhibit No. Description of Exhibit
- ----------- ----------------------
(4)
4.1 Debenture Agreement. (Incorporated by reference to
Company's Form 10-QSB for the quarterly period ended
July 31, 2003 filed October 4, 2004.)
(31)
31.1 Certification of the Chief Executive Officer of Nortia
Capital Partners, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer of Nortia
Capital Partners, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32)
32.1 Certification of the Chief Executive Officer of Nortia
Capital Partners, Inc. pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer of Nortia
Capital Partners, Inc. pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NORTIA CAPITAL PARTNERS, INC.
Registrant
By:/s/William Bosso
-----------------------------------------
William Bosso, Chief Executive Officer
Dated: October 8, 2004
By:/s/William Boss
-----------------------------------------
William Bosso, Chief Executive Officer
Dated: October 8, 2004
By:/s/Matthew T. Henninger
-----------------------------------------
Matthew T. Henninger, President
Dated: October 8, 2004
By:/s/Harrysen Mittler
-----------------------------------------
Harrysen Mittler, Chief Financial Officer
Dated: October 8, 2004
24