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 July 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]
Nortia Capital Partners, Inc.
Form 10-QSB Index
July 31, 2004
Page
Part I: Financial Information................................... 2
Item 1. Financial Statements............................... 2
Balance Sheet at July 31, 2004 (Unaudited)............... 3
Statement of Operations For the Three
Months Ended July 31, 2004 And 2003
(Unaudited).............................................. 4
Statement Of Cash Flows For the Three
Months Ended July 31, 2004 And 2003
(Unaudited).............................................. 5
Notes To Financial Statements (Unaudited)................ 6
Item 2. Management's Plan of Operation..................... 15
Item 3. Controls and Procedures............................ 23
Part II: Other Information.................................... 24
Item 1. Legal Proceedings.................................. 24
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds................................ 24
Item 3. Defaults Upon Senior Securities.................... 24
Item 4. Submission of Matters to a Vote of Security
Holders ........................................... 24
Item 5. Other Information.................................. 24
Item 6. Exhibits........................................... 25
Signatures...................................................... 26
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 July 31, 2004
ASSETS
------
Current Assets
Cash $ 1,321
-----------
Total Current Assets 1,321
===========
Other Assets
Accounts receivable, net of $74,301 allowance 72,000
Investment in affiliate - non-current:
Available-for-sale securities
Equities at fair market value 36,000
-----------
Total Investment in affiliate - non-current 36,000
-----------
Total Other Assets 108,000
-----------
Total Assets 109,321
===========
LIABILITIES
-----------
Current Liabilities
Accounts payable 19,000
Due to related party 613
Accrued expenses 27,673
Debentures 250,000
-----------
Total Current Liabilities 297,286
===========
STOCKHOLDERS' DEFICIENCY
------------------------
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
Common stock issuable, 3,435,000 shares 3,435
Additional paid in capital 178,881
Accumulated deficit (12,398)
Deficit accumulated during development stage (316,453)
Accumulated other comprehensive loss (43,706)
-----------
Total Stockholders' Deficiency (187,965)
===========
Total Liabilities and Stockholders' Equity $ 109,321
===========
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
Period from
May 1, 2003
Three Months Ended (Inception of
July 31, Development Stage)
2004 2003 to July 31, 2004
---------- ---------- ------------------
Revenues $ 60,000 $ - $ 206,301
Operating Expenses
General and administrative 35,888 2,078 111,022
Provision for accounts receivable 74,301 - 74,301
Consulting 6,150 - 6,150
Compensation 1,000 - 187,799
Directors fees 150 - 12,150
Professional 500 10,000 20,500
---------- ---------- ------------------
Total Operating Expenses 117,989 12,078 411,922
---------- ---------- ------------------
Income (Loss) from Operations (57,989) (12,078) (205,621)
Other Income (Expense)
Interest expense (6,302) (183) (17,749)
Loss on sale of available for
sale securities (64,738) - (64,738)
Other than temporary loss on
available for sale securities (24,000) - (24,000)
Interest income 40 - 51
---------- ---------- ------------------
Total Other Income (Expense) (94,999) (183) (106,435)
Net loss Before Income Taxes $ (152,989) $ (12,261) $ (312,056)
========== ========== ==================
Income tax expense - - (4,397)
---------- ---------- ------------------
Net loss $ (152,989) $ (12,261) $ (316,453)
========== ========== ==================
Comprehensive Loss
Unrealized losses on available
for sale securities (182,758) - (43,706)
---------- ---------- ------------------
Total Comprehensive Loss $ (335,746) $ (12,261) $ (360,159)
========== ========== ==================
Net Loss Per Share
- Basic and Diluted $ (0.03) $ (0.01) $ (0.12)
========== ========== ==================
Weighted Average Shares 5,098,944 2,275,000 2,980,066
========== ========== ==================
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
Period from
May 1, 2003
Three Months Ended (Inception of
July 31, Development Stage)
2004 2003 to July 31, 2004
---------- ---------- ------------------
Cash Flows From Operating Activities:
Net loss $ (152,989) $ (12,261) $ (316,453)
Adjustments to reconcile net loss to net
cash used in operations:
Debentures issued for legal services - - 5,000
Loss on sale of available for sale
securities 64,738 - 64,738
Other than temporary loss on available
for sale securities 24,000 - 24,000
Transfer of available for sale securities
for consulting services 2,100 - 2,100
Provision for accounts receivable 74,301 - 74,301
Common stock issuable for compensation 1,000 - 161,000
Common stock issuable for directors fees 150 - 12,150
Common stock issuable for consulting services 4,050 - 4,050
Common stock based revenue (60,000) - (206,301)
Changes in operating assets and liabilities: - -
Decrease in prepaid expenses - 540 540
Increase in accounts payable 14,000 12,458 19,000
Increase (decrease) in due to related party (500) 1,113 613
Increase (decrease) in accrued expenses 7,301 (5,363) 22,126
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Net Cash Used In Operating Activities (21,848) (3,514) (133,136)
---------- ---------- ------------------
Cash Flows From Investing Activities:
Purchase of available for sale securities - - (49,948)
Proceeds from sale of available for sale
securities 14,405 - 14,405
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Net Cash Provided By Investing Activities 14,405 - (35,543)
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Cash Flows From Financing Activities:
Proceeds from issuance of debentures - 11,500 170,000
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Net Cash Provided By Financing Activities - 11,500 170,000
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Net Decrease in Cash (7,443) 7,986 1,321
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Cash at Beginning of Period 8,764 - -
---------- ---------- ------------------
Cash at End of Period $ 1,321 $ 7,986 $ 1,321
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
Unrealized losses on available-for-sale
securities (182,758) - (43,706)
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
July 31, 2004
Note 1 Basis of Presentation
- ------------------------------
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, 2004
included in the Company's Form 10-KSB.
Note 2 Nature of Operations and Summary of Significant Accounting
Policies
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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 8 - Commitments and Contingencies).
Effective August 2, 2004, the Company changed its name to Nortia
Capital Partners, Inc (See Note 10 - Subsequent Events).
6
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 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 10 - 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, valuation of common stock for services 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.
Accounts Receivable
Accounts receivable result from the sale of the Company's services and
is reported at anticipated realizable value. The Company estimates its
allowance for doubtful accounts based on a specific identification basis
and additional allowances as needed based upon historical collections
experience. Accounts receivable is considered past due if payment has
not been received from the customer within thirty days and management
reviews the customer accounts on a routine basis to determine if an
account should be charged off.
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
July 31, 2004.
7
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
Stock-Based Compensation
The Company accounts for stock options issued to employees in
accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. As such, compensation cost is measured
on the date of grant as the excess of the current market price of
the underlying stock over the exercise price. Such compensation
amounts are amortized over the respective vesting periods of the
option grant. The Company adopted the disclosure provisions of SFAS
No. 123 "Accounting for Stock-Based Compensation," and SFAS No. 148
"Accounting for Stock Based Compensation - Transition and
Disclosure," which permits entities to provide pro forma net income
(loss) and pro forma earnings (loss) per share disclosures for
employee stock option grants as if the fair-valued based method
defined in SFAS No. 123 had been applied.
The Company accounts for stock options or warrants issued to non-
employees for goods or services in accordance with the fair value
method of SFAS 123. Under this method, the Company records an
expense equal to the fair value of the options or warrants issued.
The fair value is computed using an options pricing model. At July
31, 2004, the Company had no stock options or warrants outstanding.
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
"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.
Loss per Common Share
Basic earnings per share are computed only on the weighted average
number of common shares outstanding during the respective periods.
There were no additional common stock equivalents or other items to
adjust the numerator or denominator in the EPS computations.
Comprehensive Loss
Comprehensive loss includes net loss as currently reported by the
Company adjusted for other comprehensive losses. Other comprehensive
losses for the Company consists of unrealized losses related to the
Company's equity securities accounted for as available-for-sale with
changes in fair value recorded through stockholders' equity
8
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
Concentration
All revenue for the three months ended July 31, 2004 and accounts
receivable at July 31, 2004 are derived from one customer.
3. GOING CONCERN
As reflected in the accompanying financial statements, the Company
has a net loss of $152,989 and net cash used in operations of
$21,848 for the three months ended July 31, 2004, a working capital
deficiency of $295,965, a stockholders' deficiency of $187,965 and a
deficit accumulated during the development stage of $316,453 at July
31, 2004. Additionally, at August 31, 2004, the Company is in
default of $37,500 of Debentures (See Note 10 - Subsequent Events).
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.
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 plan on generating future 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.
We obtained $170,000 of proceeds from the issuance of Debentures for
the twelve months ended April 30, 2004 and in August and September
2004, we have received another $180,000 of proceeds from the
issuance of Debentures (See Note 10 - Subsequent Events). We will
utilize those funds to cover our current obligations. Additionally,
we determined that it was necessary to raise additional capital to
carry out the Company's business plan and the Company anticipates
9
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
the issuance of up to $1,000,000 of the Company's common stock. We
are planning on obtaining additional cash proceeds in the next
twelve months from the issuance of securities to be determined.
As a result of the above items, we believe that we will have
sufficient operating cash to meet are required expenditures for the
next twelve months.
4. ACCOUNTS RECEIVABLE
Accounts receivable at July 31, 2004 represents the value of
securities due for services and is classified as non-current in that
the securities are classified as non-current (See Note 2 - Revenue
Recognition). Additionally, the Company has recorded a valuation
allowance of $74,301 at July 31, 2004 reflecting the impairment in
value for the underlying securities making up the balance (See Note
5 - Investments).
5. INVESTMENTS
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 below. In accordance with FAS 115
"Accounting for Certain Investments in Debt and Equity Securities",
we recorded the 100,000 shares of common stock as "available-for-
sale" securities, a current asset and the resulting $5,000
unrealized gain at April 30, 2004 was classified as a separate
component of stockholders' equity - accumulated other comprehensive
income.
In April 2004, we purchased 5,000 shares of freely trading common
stock for $6,243 in the same publicly held company as discussed
above. In accordance with FAS 115, we recorded the 5,000 shares of
common stock as "available-for-sale" securities, a current asset and
the resulting $2,243 unrealized loss at April 30, 2004 was
classified as a separate component of stockholders' equity -
accumulated other comprehensive income.
In May 2004, we transferred 7,500 of these shares 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 recorded this amount as consulting expense and recorded a
$3,525 loss on the disposal of the securities.
In June and July of 2004, we sold the remaining 97,500 shares and
received $14,405 of proceeds and recognized a $64,738 loss on the
sale of the securities. As a result of the transfer and sale of the
above securities, we have reversed the above mentioned $5,000
unrealized gain and $2,243 unrealized loss that were recorded at
April 30, 2004.
The following is a summary of the investments in available-for-sale
securities classified as a non-current asset at July 31, 2004:
Available-for-Sale Gross Gross Estimated Fair
Securities: Cost Unrealized Gains Unrealized Losses Value
- ------------------ ------- ---------------- ----------------- --------------
Equity securities $79,706 $ 0 $43,706 $36,000
======= === ======= =======
10
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
In September 2003, we entered into a consulting contract with a
publicly traded company (See Note 6 - Debentures). 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 payable on a quarterly basis.
In January 2004, we received three hundred thousand (300,000) shares
as compensation for services and have accounted for $60,000 of
consulting fees earned during the three months ended July 31, 2004
and have earned $206,301 of consulting fees from the inception of
the contract. We have recorded the fees 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" based on the $0.20 fair value on the
contract date. In accordance with FAS 115, we recorded the
restricted shares as "available-for-sale" securities, a non-current
asset and the resulting unrealized gain of $180,000 at April 30,
2004 was classified as a separate component of stockholders' equity
- - accumulated other comprehensive income.
In accordance with EITF 03-01 "The Meaning of Other Than Temporary
Impairment and its Application to Certain Investments", we have
evaluated the underlying securities that the original cost of $0.20
had a fair market value of $2.15 in January 2004, but the fair
market value had been reduced to $0.12 per share as of July 31,
2004, or less than the $.20 cost. We have also evaluated the
Company that issued the shares which is a development stage company,
has a stockholders' deficiency and an accumulated deficit. As a
result of our analysis, the fair market value at July 31, 2004 is
$36,000 and we believe that the impairment is other than temporary
and have reversed the $180,000 previously recorded unrealized gain
discussed above and recorded a $24,000 other than temporary
impairment loss at July 31, 2004.
Additionally, in July 2004, our Chief Executive Officer and Chairman
of the Board, was elected President and a Director of the Company
discussed above that we own the securities in. As a result, we have
classified the securities as an Investment in Affiliate at July 31,
2004.
In April 2004, we acquired 2,587,983 shares for a purchase price of
$43,706 representing approximately 11% of a publicly held company
that emerged from bankruptcy under Chapter Eleven (11) of the
federal bankruptcy code. There is no active trading market for the
shares and the company is in the process of developing its primary
product to offer to the market but has not achieved this progress as
of the date of the accompanying financial statements. Accordingly,
the Company has recorded an unrealized loss for the entire $43,706
which is classified as a separate component of stockholders' equity
- - accumulated other comprehensive loss.
The following represents information about securities held with loss
positions as of July 31, 2004:
Securities in loss
positions less than Aggregate Aggregate
12 months: Unrealized Losses Fair Value
- ------------------- ----------------- ----------
Equity securities $ 43,705 $ 0
======== ===
6. DEBENTURES
From May 2003 through March of 2004, we received $170,000 of cash
proceeds from the issuance of debentures to several parties. The
11
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
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 5 - Investments).
In January 2004, we issued a $5,000 debenture to a third party for
legal services and accounted for the issuance as legal expense.
At July 31, 2004, we had $250,000 of debentures outstanding (see
Note 10 - Subsequent Events). As of August 31, 2004, $37,500 of
the Debentures discussed previously is 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.
7. 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 July 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 July 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.
In March 2004, we granted 2,150,000 shares of our common stock for
compensation and board fees to two individuals. There is no active
trading market for the Company's common stock and we analyzed
several methodologies to determine the value per share for the stock
issuance. As a result of our research, we determined that the
appropriate methodology was to utilize the net asset value of the
Company immediately preceding the issuance of the shares and
determined that the valuation was $0.08 per share, valued at on the
grant date and expensed immediately as $160,000 of compensation
expense and $12,000 of directors fees as there was no formal
employment agreement or stated term. At July 31, 2004, the shares
were not issued and have been recorded as Common Stock Issuable in
the accompanying Balance Sheet.
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
12
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
Stock of the Company. One hundred twenty thousand (120,000) shares
were granted and vested 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. As of July 31, 2004, an additional
fifteen thousand (15,000) were granted and vested, thus making the
total shares vested one hundred thirty five thousand (135,000) at
July 31, 2004. As mentioned above, there is no active trading
market for the Company's common stock and we analyzed several
methodologies to determine the value per share for the stock
issuance. As a result of our research, we determined that the
appropriate methodology was to utilize the net asset value of the
Company immediately preceding the issuance of the shares and
determined that the valuation was $0.03 per share, thus valued at
the issuance date at $4,050. Due to the immaterial amount of the
valuation, the Company has elected to expense the entire $4,050 in
the accompanying statement of operations rather than recognize the
amount evenly over the agreement term. The remaining shares will be
valued at each quarterly issuance measurement date and such value
recognized as expense over the quarterly measurement period. At July
31, 2004, the shares were not issued and have been recorded as
Common Stock Issuable in the accompanying Balance Sheet.
In June 2004, we granted 1,150,000 shares of our common stock for
compensation and board fees to our new President. There is no
active trading market for the Company's common stock and we analyzed
several methodologies to determine the value per share for the stock
issuance. As a result of our research, we determined that the
appropriate methodology was to utilize the net asset value of the
Company immediately preceding the issuance of the shares. However,
based upon this analysis, the net asset value was a negative number
and could not be utilized. The Company has determined that a
nominal value should be utilized and the valuation is $0.001 per
share, valued at on the grant date and expensed immediately as
$1,000 of compensation expense and $150 of directors fees as there
was no formal employment agreement or stated term. At July 31,
2004, the shares were not issued and have been recorded as Common
Stock Issuable in the accompanying Balance Sheet.
8. 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.
We currently do not have a lease and we are not paying rent for our
office space. It is being provided to the Company by an
officer/director free of charge (See Note 9 - Related Party
Transactions). Usage of this office space and the related value is
de minimis. Therefore, no expense has been recorded in the
accompanying Financial Statements. We expect we will have to lease
more substantial office in the near future and that the cost of the
space may be material to our operations.
13
Nortia Capital Partners, Inc.
(f/k/a BF Acquisition Group I, Inc.)
(A Development Stage Company)
Notes to Financial Statements
July 31, 2004
The Company has not filed required payroll tax reports with
applicable state and federal authorities as required. Accordingly,
the Company may be subject to penalties and fines and no adjustment
has been made in the accompanying Financial Statements for this
uncertainty.
9. 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 twelve months ended April 30, 2004,
resulting in a balance due of $1,113 at April 30, 2004 and during
the three months ended July 31, 2004, we repaid $500 of these
advances. At July 31, 2004, the balance outstanding is $613 and is
included in due to related party on the accompanying balance sheet.
We currently do not have a lease and we are not paying rent on our
space. It is being provided to the Company by an officer/director
free of charge (See Note 8 - Commitments and Contingencies).
10. SUBSEQUENT EVENTS
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.
As of August 31, 2004, $37,500 of the Debentures discussed
previously is 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.
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.
14
Item 2. Management's Discussion and Analysis or Plan of
Operation.
Overview
The following discussion "Management's Discussion and
Analysis or 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
Discussion and Analysis or 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 engaged 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,
15
our planned principal BDC operations have not yet commenced, and
management is devoting most of its efforts to general business
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, 2004 and April 30, 2003, 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 July 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.
As reflected in the accompanying financial statements, the
Company has a net loss of $152,989 and net cash used in
operations of $21,848 for the three months ended July 31, 2004, a
working capital deficiency of $295,695, a stockholders'
deficiency of $187,965 and a deficit accumulated during the
development stage of $316,453 at July 31, 2004. Additionally, at
August 31, 2004, the Company is in default of $37,500 of
Debentures.
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
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.
16
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
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.
As of August 31, 2004, $37,500 of the Debentures discussed
previously is 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.
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 July 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, 2004 and April 30, 2003,
include an explanatory paragraph in addition to their audit
opinion stating that our recurring losses from operations, cash
used in operations, $37,500 of our debentures being in default as
17
of August 31, 2004 and being in the development stage with
minimal 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.
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.
VALUATION OF 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 their fair 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.
VALUATION OF NON-CASH ISSUANCES OF COMMON STOCK
The Company issued common stock in non-cash transactions
during the three months ended July 31, 2004. There is no active
trading market for the Company's common stock and we analyzed
several methodologies to determine the value per share for the
stock issuance. As a result of our research, we determined that
the appropriate methodology was to utilize the net asset value of
the Company immediately preceding the issuance of the shares.
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS AND LIABILITIES
In assessing the recoverability of deferred tax assets and
liabilities, management considers whether it is more likely than
not that some portion or all of the deferred tax assets and
liabilities will be realized.
18
RESULTS OF OPERATIONS
Financial Analysis of the Three Months Ended July 31, 2004 and 2003
- -------------------------------------------------------------------
Three Months Ended
July 31,
2004 2003
---------- ----------
Revenues $ 60,000 $ -
Operating Expenses
General and administrative 35,888 2,078
Provision for accounts receivable 74,301 -
Consulting 6,150 -
Compensation 1,000 -
Directors fees 150 -
Professional 500 10,000
---------- ----------
Total Operating Expenses 117,989 12,078
---------- ----------
Income (Loss) from Operations (57,989) (12,078)
Other Income (Expense)
Interest expense (6,302) (183)
Loss on sale of available for sale securities (64,748) -
Other than temporary loss on available
for sale securities (24,000) -
Interest income 40 -
---------- ----------
Total Other Income (Expense) (94,999) (183)
---------- ----------
Net loss Before Income Taxes $ (152,989) $ (12,261)
========== ==========
Income tax expense - -
---------- ----------
Net loss $ (152,989) $ (12,261)
========== ==========
Comprehensive Loss
Unrealized losses on available for sale
securities (182,758) -
---------- ----------
Total Comprehensive Loss $ (335,746) $ (12,261)
========== ==========
Revenues:
- --------
Revenues increased $60,000, or 100% to $60,000 for the three
months ended July 31, 2004 from zero for the three months ended
July 31, 2003. The increase in revenue for the three months
ended July 31, 2004 was due to a consulting contract with a
publicly held company where we are providing consulting services
and the $60,000 represents the earned revenue from the contract.
19
Operating Expenses:
- ------------------
Operating expenses increased $105,911, or 1,932% to $117,989
for the three months ended July 31, 2004 from $12,078 for the
three months ended July 31, 2003. The increase was primarily the
result of the Company entering the development stage effective
May 1, 2003 as compared to being dormant for the comparable
period during the three months ended July 31, 2003 and a $74,301
valuation allowance for accounts receivable to reflect a decrease
in value for the underlying securities making up the receivable
balance.
Other Expense:
- -------------
Other expense increased $94,816, or 3,643% to $94,999 for
the three months ended July 31, 2004 from $183 for the three
months ended July 31, 2003. The increase is primarily from a
$64,738 loss on the sale of available for sale securities, a
$24,000 other than temporary impairment loss for available for
sale securities and a $6,119 increase in interest expense on
debentures.
Comprehensive Loss:
- ------------------
Comprehensive loss increased $182,758, or 100% to $182,758
for the three months ended July 31, 2004 from zero for the three
months ended July 31, 2003. The increase in comprehensive loss
for the three months ended July 31, 2004 was due to the reversal
of previously recorded unrealized gains on available-for-sale
securities. $180,000 of the amount was from the reversal of
previously recorded unrealized gains that the Company has
determined that the fair market value decrease is other than
temporary. The remaining $2,758 is for the reversal of
previously recorded unrealized gains, net of unrealized losses
for available for sale securities that were either sold or
transferred during the three months ended July 31, 2004.
Liquidity and Capital Resources
Cash was $1,321 at July 31, 2004 as compared to $8,764 at
April 30, 2004, and working capital deficit was $295,965 at July
31, 2004 as compared to a working capital deficit of $183,720 at
April 30, 2004. The increase in the working capital deficit at
July 31, 2004 was primarily the result of the transfer and sale
of all available for sale securities that were classified as a
current asset at April 30, 2004 and the other than temporary
impairment of available for sale securities classified as a non-
current asset.
Operating Activities: Net cash used in operating activities was
- --------------------
$21,848 for the three months ended July 31, 2004 compared to
$3,514 for the three months ended July 31, 2003. The increase in
cash used in operations resulted primarily due to the fact of the
increased operating loss and an $60,000 increase in contract
based revenue from a consulting contract, offset by a $64,738
increase from the loss on sale of available for sale securities
and a $24,000 other than temporary impairment loss on available
for sale securities.
Investing Activities: Cash flows provided by investing
- ----------------------
activities were $14,405 for the three months ended July 31, 2004
as compared to zero at July 31, 2003. The increase was due to
proceeds received from the sale of available for sale securities.
Financing Activities: There were no cash flows from financing
- ---------------------
activities for the three months ended July 31, 2004 compared to
20
$11,500 of cash flows provided by financing activities during the
three months ended July 31, 2003. This was due to $11,500 of
cash proceeds received by the Company from the issuance of
debentures in 2003 as compared to zero in 2004.
SHORT-TERM DEBT
Our short-term debt at July 31, 2004 consisted of the following:
Debentures:
- ----------
$250,000 Debentures, dated May 2003 through March 2004,
bearing interest at 10% per annum and due in 12 months $250,000
========
From May 2003 through March of 2004, we received $170,000 of
cash proceeds from the issuance of debentures to several parties.
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. 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.
We have evaluated the debenture to determine if a beneficial
conversion feature exists in accordance with EITF 98-5, as
amended by EITF 00-27. 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.
In January 2004, we issued a $5,000 debenture to a third
party for legal services and accounted for the issuance as legal
expense.
At July 31, 2004, we had $250,000 of debentures outstanding.
As of August 31, 2004, $37,500 of the Debentures discussed
previously is 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.
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.
21
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.
We obtained $170,000 of proceeds from the issuance of
Debentures for the twelve months ended April 30, 2004 and in
August and September 2004; we have received another $180,000 of
proceeds from the issuance of Debentures. Additionally, we
determined that it was necessary to raise additional capital to
carry out the Company's business plan and the Company anticipates
the issuance of up to $1,000,000 of the Company's common stock.
We are planning on obtaining additional cash proceeds in the next
twelve months from the issuance of securities to be determined
and from anticipated returns from being a BDC.
As a result of the above items, we believe that we will have
sufficient operating cash to meet are required expenditures for
the next twelve months.
Contractual Obligations and Commercial Commitments
The following table highlights, as of July 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 $250,000 $ 250,000 $ - $ - $ -
-------- --------- --------- --------- ---------
Total Short-Term Debt $250,000 $ 250,000 $ - $ - $ -
======== ========= ========= ========= =========
As of August 31, 2004, $37,500 of the Debentures discussed
previously is 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.
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
22
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.
Item 3. Controls and Procedures.
As of the end of the period covered by this report, 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
23
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
In May 2004, we entered into a consulting agreement with a
third party consultant and authorized the issuance to that
consultant 120,000 shares of our Common Stock upon the execution
of the consulting agreement in exchange for business development
and consulting services. The term of the consulting agreement is
twenty-four (24) months and the consultant will receive an
additional 5,000 shares per month, issuable on a quarterly basis,
for a total of 240,000 shares of the Common Stock of the Company.
The Company relied on Section 4(2), Rule 506 of Regulation D and
Rule 701 of the Securities Act since the transaction did not
involve any public offering
In June 2004, we appointed our then President as the Chief
Executive Officer and the Chairman of the Board, and we appointed
a new President and a director of the Company. We authorized the
issuance to the new President one million (1,000,000) shares of
our Common Stock as compensation for serving as our President,
and one hundred fifty thousand (150,000) shares of our Common
Stock as compensation for serving as a Director. We have no
formal employment agreement between the Company and the new
President and there is no stated term for the new President. The
Company relied on Section 4(2), Rule 506 of Regulation D and Rule
701 of the Securities Act with respect to the issuance of these
shares since the transaction did not involve any public offering.
Item 3. Defaults upon Senior Securities
At July 31, 2004, we had $250,000 of debentures outstanding.
As of August 31, 2004, $37,500 of the Debentures 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.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
In July 2004, our Chief Executive Officer and Chairman of
the Board was elected President and a director of Global Life
Sciences, Inc., a publicly held company that we have an
24
investment in and a consulting agreement with. Additionally, our
President and a director was also elected Chief Executive Officer
and a director of this company, thereby making this investment,
an investment in affiliate commencing July 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.
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.)
(10)
10.1 Consulting Agreement dated May 7, 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.
(b) Reports on Form 8-K
Not Applicable
25
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
26