UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: December 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to __________
Commission file number: 0-49618
Crest View Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0462761
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 West Horizon Ridge Parkway - Suite 202
Henderson, Nevada 89012
(Address of principal executive offices)
(702) 614-1750
(Issuer's telephone number)
Not Applicable
(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: There were a total of 8,032,924
shares of the registrant's common stock, par value $.001 per share, outstanding
as of February 18, 2003.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Crest View Inc.
Quarterly Report on Form 10-QSB
Quarter Ended December 31, 2002
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets at December 31, 2002 (Unaudited) and June 30, 2002........................... 3
Consolidated Statements of Operations for the Cumulative Period During the Development Stage
(January 20, 2000 to December 31, 2002) and for the Three Months Ended December 31, 2002 and
2001 (Unaudited)....................................................................................... 4
Consolidated Statements of Cash Flows for the Cumulative Period During the Development Stage
(January 20, 2000 to December 31, 2002) and for the Three Months Ended December 31, 2002 and
2001 (Unaudited)....................................................................................... 5
Notes to Consolidated Financial Statements............................................................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation.......................................... 9
Item 3. Controls and Procedures............................................................................ 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................. 15
Item 2. Changes in Securities.............................................................................. 15
Item 3. Defaults Upon Senior Securities.................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................................................ 15
Item 5. Other Information.................................................................................. 15
Item 6. Exhibits and Reports on Form 8-K................................................................... 15
SIGNATURES.................................................................................................. 16
CERTIFICATIONS.............................................................................................. 17
EXHIBIT INDEX............................................................................................... 19
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Crest View Inc.
(A Development Stage Company)
Consolidated Balance Sheets
December 31, June 30,
2002 2002
----------- --------
(Unaudited)
- ASSETS -
CURRENT ASSETS:
Cash $ 3,970 $ 1,833
----------- -----------
Total current assets 3,970 1,833
----------- -----------
OTHER ASSETS:
Investment in real estate (Note 2) 1,148,348 1,140,311
Deferred expenses (Note 4) 43,200 86,400
----------- -----------
1,191,548 1,226,711
----------- -----------
$ 1,195,518 $ 1,228,544
=========== ===========
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accrued expenses $ 31,833 $ 25,518
Current portion of long-term debt 154,500 125,000
----------- -----------
Total current liabilities 186,333 150,518
----------- -----------
LONG-TERM DEBT (Note 3) 62,500 125,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Note 4):
Preferred stock, $.001 par value; 8,000,000 shares authorized,
none issued -- --
Common stock, $.001 par value; 40,000,000 shares authorized, 8,032,924
and 7,823,270 shares issued and outstanding in December and June
2002, respectively 8,033 7,823
Additional paid-in capital 1,281,292 1,179,659
Deficit accumulated during the development stage (342,640) (234,456)
----------- -----------
946,685 953,026
----------- -----------
$ 1,195,518 $ 1,228,544
=========== ===========
The accompanying notes are an integral part of these financial statements.
-3-
Crest View Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Cumulative
During the
Development
Stage (January Three Months Ended Six Months Ended
20, 2000 to December 31, December 31,
December --------------------------- ------------------------
31, 2002) 2002 2001 2002 2001
----------- -------------- ----------- ----------- -----------
REVENUES $ -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Compensation 108,000 18,000 18,000 36,000 36,000
Filing fees 15,159 1,774 -- 3,374 1,300
Professional fees 124,493 28,743 10,250 43,381 27,300
Other expenses 30,840 6,578 3,264 10,516 5,462
Rent expense 21,600 3,600 3,600 7,200 7,200
Interest expense 42,548 3,797 16,982 7,713 20,227
---------- ---------- ---------- ---------- ----------
342,640 62,492 52,096 108,184 97,489
---------- ---------- ---------- ---------- ----------
NET LOSS $ (342,640) $ (62,492) $ (52,096) $ (108,184) $ (97,489)
========== ========== ========== ========== ==========
LOSS PER SHARE:
Basic and diluted $ (.07) $ (.01) $ (.01) $ (.01) $ (.02)
========== ========== ========== ========== ==========
Weighted average number of
common shares outstanding 4,706,610 8,032,924 5,828,924 7,997,505 5,828,924
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
Crest View Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Cumulative During the For the Six Months Ended
Development Stage December 31,
(January 20, 2000 to ----------------------------------
December 31, 2002) 2002 2001
----------------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (342,640) $ (108,184) $ (97,489)
Adjustments to reconcile net loss to net cash used by
operating activities:
Interest 34,972 -- --
Compensatory stock 52,000 2,000 --
Amortization of deferred compensation 129,600 43,200 36,000
Changes in assets and liabilities:
Increase in accounts payable and accrued expenses 28,914 3,396 30,496
----------- ----------- -----------
Net cash utilized by operating activities (97,154) (59,588) (30,993)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate (898,348) (8,037) (469,100)
----------- ----------- -----------
Net cash utilized by investing activities (898,348) (8,037) (469,100)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of loans (62,500) (62,500) --
Proceeds from long-term debt 1,042,942 130,677 572,100
Sale of common stock and warrants 19,030 1,585 --
----------- ----------- -----------
Net cash provided by financing activities 999,472 69,762 572,100
----------- ----------- -----------
Net increase in cash and cash equivalents 3,970 2,137 72,007
Cash and cash equivalents at beginning of period -- 1,833 31,841
----------- ----------- -----------
Cash and cash equivalents at end of period $ 3,970 $ 3,970 $ 103,848
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
Crest View, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY:
Crest View Inc. (the "Company") was organized in the state of Nevada on January
20, 2000. The Company was formed to serve as a vehicle to raise capital to
acquire a business and, as of June 30, 2001, was considered a "blank check"
company inasmuch as the Company was not generating revenues, did not own an
operating business and had no specific business plan other than to engage in a
merger or acquisition with an unidentified company or companies. The Company's
efforts, through June 30, 2001, were limited to organizational activities. In
July 2001, the Company established a business plan to develop a vacation and
tourist destination featuring an "eco-resort," wellness center and cultural
exhibits, on the Honduran island of Guanaja. The Company currently has no
employees except for its two executive officers and had no material assets prior
to the acquisition of real estate in September 2001. Administrative services are
currently being provided by an entity controlled by the two executive officers
of the Company.
The Company is considered as being in the development stage, from its inception,
in accordance with Statement of Financial Accounting Standards No. 7, since
planned operations have not yet begun. As shown in the accompanying financial
statements, the Company has not generated any revenues to date, and has incurred
cumulative expenses of $342,640.
The Company has purchased two parcels of real estate through a 99% owned
subsidiary. In September 2001, the Company acquired all of the outstanding
shares of Plan Grande Group, S.A., an entity owning an additional parcel of real
estate, thereby making this entity a wholly owned subsidiary. See also Note 2.
The consolidated balance sheet as of December 31, 2002, the consolidated
statements of operations for the three and six-month periods ended December 31,
2002 and the consolidated statements of cash flows for the six-month periods
ended December 31, 2002 and 2001 have been prepared by the Company without
audit. In the opinion of management, the accompanying consolidated financial
statements referred to above contain all necessary adjustments, consisting of
normal accruals and recurring entries only, which are necessary to present
fairly the Company's results for the interim periods being presented.
The accounting policies followed by the Company are set forth in Note 2 to the
Company's financial statements for the year ended June 30, 2002 included in the
Company's annual report on Form 10-KSB. Specific reference is made to such
financial statements and the notes to such financial statements, since certain
information and footnote disclosures normally included in financial statements
in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted from this report.
The results of operations for the three and six-month periods ended December 31,
2002 and 2001 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - INVESTMENT IN REAL ESTATE:
In connection with the plans to develop a vacation and tourist resort (see Note
1), since July 1, 2001 and through June 30, 2002, the Company, through newly
formed Honduran subsidiaries, has acquired real property parcels on the island
of Guanaja.
The real property includes (i) one parcel of land, of approximately 18 acres to
be used for the resort, which was acquired at a total cost (including closing
costs) of approximately $425,000; (ii) one parcel of land (approximately
-6-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
3.5 acres) at another site at a cost of approximately $45,000 and (iii) one
parcel of land (approximately 19.2 acres) at a cost of $300,000, of which
$50,000 was paid at closing and the remainder to be paid in 4 equal installments
(see Note 3).
In September 2001, the Company acquired 1,250 shares (100%) of the outstanding
stock of Plan Grande Group, S.A., ("PGG"), a Honduran corporation. The sole
asset of PGG is real property, approximately 16 acres of undeveloped land,
located on the island of Guanaja. As consideration for the acquisition of these
shares, the Company issued a promissory note payable to the seller in the
principal amount of $268,665. In March 2002, the principal amount of this note,
plus interest accrued of $7,685, was satisfied through the issuance of 552,700
shares of Company common stock.
None of the above properties are presently insured.
NOTE 3 - LONG-TERM DEBT:
As of June 30, 2002, long-term debt consisted of a 6% note payable regarding the
acquisition of real estate (see Note 2), due in four semi-annual payments of
$62,500 plus interest. The first installment was paid in August 2002 with loans
received from an affiliated company. During the six-month period ended December
31, 2002, the Company received an additional $29,500 in loans from related
parties. These loans bear interest at an annual rate of 7% and are due one year
from date of receipt.
NOTE 4 - STOCKHOLDERS' EQUITY:
As of June 30, 2000, the Company had issued an aggregate of 3,000,000 units at a
price of $.001 per unit, with each unit consisting of one share of common stock
and one-third (1/3) Class A Redeemable Common Stock Purchase Warrant, for cash
proceeds of $3,000. The holder of each full Class A warrant entitles the holder
to purchase one share of common stock and one Class B Redeemable Common Stock
Purchase Warrant at a price of $6.00 per share. Each full Class B warrant
entitles its holder to purchase one share of common stock at a price of $9.00
per share.
During the year ended June 2001, the Company issued 2,423,324 shares of common
shares to effect the repayment of loans (plus accrued interest) aggregating
$14,062 due to an officer of the Company and also issued 60,000 shares of its
common stock for cash proceeds of $30,000.
In July 2001, the Company issued an aggregate of 288,000 shares of its common
stock, valued at $144,000, to two of its officers. This issuance was in
consideration for entering into employment agreements for a 2-year period. The
Company also issued 57,600 shares of common stock to an affiliated entity in
full satisfaction of its rent obligation under a two-year lease agreement for
aggregate rent of $28,800.
On February 11, 2002, the Securities and Exchange Commission declared effective,
the registration statement filed on Form SB-2 in connection with the Company's
initial public offering ("IPO"). The Company registered and offered for sale,
2,100,000 units (each unit consisting of one share of common stock and one-third
(1/3) Class A Redeemable Common Stock Purchase Warrant) at a per unit price of
$.50, 1,200,000 units minimum and 2,100,000 units maximum, basis.
-7-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
As of June 30, 2002, the Company completed the sale of 1,894,346 units pursuant
to the IPO. Payment of $933,175 was effected through the reduction of
outstanding debt to the purchasers of $898,765 and interest accrued of $34,410.
In addition, the Company received cash proceeds of $13,998 and incurred expenses
aggregating $29,553 in connection with the sale of the units through June 30,
2002. The Company also issued 100,000 shares in lieu of cash payment for
professional services rendered.
On August 7, 2002, the Company received a loan from an affiliate in the amount
of $101,177. On August 9, 2002, in connection with the successful completion of
the IPO, the affiliate converted this loan into 202,354 units in the IPO and the
Company received net cash proceeds of $1,585 from the sale of the remaining
3,300 units sold in the IPO.
On September 18, 2002, the Company issued 4,000 shares of its common stock
pursuant to a consulting services agreement under which the consultant agreed to
provide financial reporting assistance to the Company, valued at $2,000.
-8-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
Item 2. Management's Discussion and Analysis or Plan of Operation.
Throughout this report on Form 10-QSB, the terms "we," "us," "our" and "our
company" refers to Crest View Inc. and, unless the context indicates otherwise,
our subsidiaries on a consolidated basis.
Introductory Comment - Forward-Looking Statements
Statements contained in this report include "forward-looking statements" within
the meaning of such term in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
involve known and unknown risks, uncertainties and other factors, which could
cause actual financial or operating results, performances or achievements
expressed or implied by such forward-looking statements not to occur or be
realized. Such forward-looking statements generally are based on our best
estimates of future results, performances or achievements, predicated upon
current conditions and the most recent results of the companies involved and
their respective industries. Forward-looking statements may be identified by the
use of forward-looking terminology such as "may," "can," "will," "could,"
"should," "project," "expect," "plan," "predict," "believe," "estimate," "aim,"
"anticipate," "intend," "continue," "potential," "opportunity" or similar terms,
variations of those terms or the negative of those terms or other variations of
those terms or comparable words or expressions.
Potential risks and uncertainties include, among other things, such factors as:
o the expenses, difficulties and delays frequently encountered in connection
with the formation and initial operations of a new and unproven business;
o our ability to incur debt without becoming too highly leveraged;
o our ability to secure refinancing of our indebtedness, when required, on
acceptable terms;
o general economic conditions in the United States and elsewhere, as well as
the economic conditions affecting the resort industry in which we operate;
o the effects of terrorists activities and the threat of such activities on
our target eco-resort customers;
o our dependence on officers and directors who have no experience in the
management and marketing of an eco-resort;
o the competitive environment within the resort industry;
o our ability to raise additional capital, if and as needed, including our
ability to keep in effect the registration of our securities in order to
permit the exercise of outstanding warrants;
o the cost-effectiveness of our real property acquisitions on the Honduran
island of Guanaja;
o local, national and international political and regulatory matters
affecting the resort industry in general and our planned activities to
develop an eco-resort on the Honduran island of Guanaja;
o the timing and costs involved in obtaining regulatory approvals, if ever,
and our ability to comply with regulatory requirements;
o the timing of future revenues from our commercial activities; and
o the other risks detailed in this Quarterly Report on Form 10-QSB and, from
time to time, in our other filings with the Securities and Exchange
Commission.
Readers are urged to carefully review and consider the various disclosures made
by us in this Form 10-QSB and our other filings with the SEC. These reports and
filings attempt to advise interested parties of the risks and factors that may
affect our business, financial condition and results of operations and
prospects. The forward-looking statements made in this Form 10-QSB speak only as
of the date of this Form 10-QSB and we disclaim any obligation to
-9-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
provide updates, revisions or amendments to any forward-looking statements to
reflect changes in our expectations or future events.
Liquidity and Capital Resources
We are currently in the development stage and all our activities from inception
to date were related to our formation, preparation of our business model,
arranging and planning financing and the acquisition and preliminary development
of real property. Our ability to commence business operations is contingent upon
obtaining adequate financial resources through the sale of equity securities,
loans and otherwise.
We have financed our operations to date through the sale of our securities to
and loans from, primarily, our officers and directors and their family members,
affiliates and friends. Almost all of the outstanding amounts due under these
loans were used by the lenders as the consideration for their purchases of an
aggregate of 2,068,704 units sold in our initial public offering.
From inception through December 31, 2002, net cash used to fund operating
activities totaled approximately $97,000, net cash utilized by investing
activities totaled $898,000 and net cash provided by financing activities
totaled $999,000.
From inception through December 31, 2002, our sole source of cash and capital
has been from the following transactions:
o in January 2000, we sold and issued to an affiliate of our chief executive
officer 2,960,000 shares of our common stock and warrants to purchase
986,667 additional shares of our common stock for total cash proceeds of
$2,960;
o in January 2000, we sold and issued to our outside counsel 40,000 shares
of our common stock and warrants to purchase 13,333 additional shares of
our common stock for total cash proceeds of $40;
o between August 2000 and February 2001, we borrowed an aggregate of $13,500
from our chief executive officer, all of which was converted into equity
in April and June 2001;
o in April 2001, we issued to an affiliate of our chief executive officer
2,400,000 shares of our common stock and warrants to purchase 800,000
additional shares of our common stock in satisfaction of certain of our
obligations to him totaling $2,400;
o in June 2001, we issued to our president 23,324 shares of our common stock
in satisfaction of certain of our obligations to him totaling $11,662;
o in June 2001, we sold and issued to our chief executive officer 60,000
shares of our common stock for total cash proceeds of $30,000;
o in July 2001, we borrowed $72,300 from Falcon Financial Group LLC, an
affiliate of our chief executive officer and vice president and which also
is our sub-lessor, and issued to Falcon a promissory note in the principal
amount of $72,300, bearing interest at the rate of 7% per annum, which
note was satisfied in connection with the affiliate's participation in our
initial public offering, as more fully discussed below;
o in July 2001, we issued to Falcon 57,600 shares of our common stock in
satisfaction of our sublease rent obligations to this affiliate totaling
$28,800;
o in July 2001, we borrowed a total of $400,800 from family members and
affiliates of our chief executive officer and issued to these family
members and affiliates promissory notes in the aggregate principal amount
of $400,800, bearing interest at the rate of 7% per annum and due in June
2003, which notes were satisfied in connection with the family members'
and affiliates' participation in our IPO;
-10-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
o in September 2001, we acquired real property in Honduras by issuing a
promissory note, in the principal amount of $268,665 due in June 2003,
to the seller of this property, which note was satisfied in connection
with the real property owner's participation in our IPO;
o in October 2001, we borrowed $5,000 from an affiliate of our chief
executive officer and, in connection with such borrowings, issued a 7%
promissory note in the principal amount of $5,000 due in June 2003,
which note was satisfied in connection with the affiliate's
participation in our IPO;
o from December 2001 through February 2002, we borrowed an aggregate of
$112,000 from an affiliate of the spouse of our president and chief
executive officer, and, in connection with such borrowings, we issued
7% promissory notes in the aggregate principal amount of $112,000,
which notes were satisfied in connection with the affiliate's
participation in our IPO;
o from February through April 2002, we received additional loans from
affiliates aggregating $40,000 and, in connection with such loans,
issued 7% promissory notes in the aggregate principal amount of $40,000
due in June 2003, which notes were satisfied in connection with the
affiliates' participation in our IPO;
o in July 2002, we borrowed $7,500 from an affiliate of our president and
chief executive officer, and, in connection with such borrowing, we
issued a 7% promissory note, due July 2004, in the principal amount of
$7,500;
o in August 2002, we borrowed $101,177 from an affiliate of our executive
officers, and, in connection with such borrowing, we issued a 7%
promissory note in the principal amount of $101,177, which note was
satisfied in connection with the affiliate's participation in our IPO;
o in October 2002, we borrowed $10,000 from an affiliate of our president
and chief executive officer, and, in connection with such borrowing, we
issued a 7% promissory note in the principal amount of $10,000; and
o in November 2002, we borrowed $12,000 from an affiliate of our
president and chief executive officer, and, in connection with such
borrowing, we issued a 7% promissory note in the principal amount of
$12,000.
Almost all of the funds raised through the borrowings specified above have been
used by us in connection with (a) our acquisition of properties on the Honduran
Bay Island of Guanaja, (b) refurbishing work on a building located on one of our
acquired properties, (c) our making the initial $50,000 down payment in
connection with our January 2002 purchase of a parcel of real property in
Honduras and to pay closing costs incurred in connection with such purchase. In
connection with the January 2002 purchase, we issued to the sellers of the
parcel a promissory note in the principal amount of $250,000, representing the
balance of the purchase price. This note is payable in four semi-annual
installments with a final maturity in December 2004, of which the first
installment was paid in August 2002.
On February 11, 2002, the Securities and Exchange Commission declared effective
our registration statement on Form SB-2 in connection with our initial public
offering. We offered for sale 2,100,000 units (each unit consisting of one share
of our common stock and one-third (1/3) of a Class A Warrant) in our IPO, at a
per unit price of $.50, on a 1,200,000 units minimum and 2,100,000 units maximum
basis. We offered to our debt holders who received our 7% promissory notes as
specified above, the opportunity to participate in our IPO through the reduction
in the outstanding amounts due under these notes in lieu of paying cash for the
units being offered for sale. We completed the sale of 2.1 million units
pursuant to the IPO in August 2002. Payment of the purchase price for these
units, aggregating $1.05 million, was effected through the reduction of our
outstanding debt, including accrued interest, to the purchasers of 2,068,704
units and by cash payments by the purchasers of 31,296 units.
We expect to continue to incur expenses relating to:
o the possible purchase of additional real property on Guanaja;
-11-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
o repayment of debt incurred in connection with our prior acquisitions of
real property on Guanaja;
o the development of these properties for cash and notes; and
o the payment of general and administrative expenses and our general
working capital needs.
The timing and extent of our construction and development expenditures, as well
as acquisition of additional parcels of land, if any, will be dependent upon the
timing and success of our capital raising efforts.
We had outstanding $217,000 of loans as of December 31, 2002, including $154,500
classified as a current liability.
We may mortgage our real property and use the proceeds of such re-financings for
further development of the properties to the extent that such real property is
free of liens and encumbrances.
Our costs of developing our Naba Ah and Plan Grande properties over the next
twelve months are anticipated to be between $20,000 and $1.2 million. The timing
and extent of construction of the main buildings for our Naba Ah resort and Plan
Grande tourist destination, as well as acquisition of additional parcels of
land, will be dependent upon the timing and success of our funding efforts.
These development projects will include the following matters:
o Retention of advisors, such as architects, healers, shamans,
archeologists, advisors and historians, to insure harmony and
consistency between theme and historical fact and accepted theory and
to assist in the planning and planting of the herbal gardens at our
Naba Ah and Plan Grande properties. Through our vice president and
chief financial officer, John C. Francis, we have made contact with
architects, healers, shamans, archeologists and historians willing to
assist us in this matter, at a cost we estimate will not exceed $10,000
over the next twelve months, including travel and miscellaneous
expenses.
o Construction of the Naba Ah spiritual and wellness center, development
of our Plan Grande tourist destination and the planting of herbal
gardens at both the Naba Ah and Plan Grande properties, at an estimated
aggregate cost of $375,000.
We anticipate compensating any employees, consultants and other service
providers in the form of a combination of cash, debt and/or securities of our
company. We intend to utilize this method in order to minimize cash expenditures
prior to raising additional funding, if any, and/or the receipt of anticipated
revenues from our business operations. This method of compensation partially in
the form of our securities also will provide incentives to these employees,
consultants and other service providers that are directly linked to increases in
stockholder values that will inure to the benefit of all of our stockholders.
We expect to incur significant operating losses over each of the next several
years and expect cumulative losses to increase significantly as we implement our
business operations. We do not expect to receive revenues from operations until,
at the earliest, late in the calendar year 2003.
Our future liquidity and capital requirements will depend on numerous factors,
including, among others:
o our ability to raise additional funds, through equity and/or debt
offerings;
o the cost of acquisitions of additional properties on Guanaja;
o the timing and costs involved in obtaining regulatory approvals, if
ever, and complying with regulatory requirements;
o the timing of future revenues from our commercial activities; and
o our ability to successfully compete for customers for our commercial
operations.
-12-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
If our capital raising and other funding efforts do not result in our receipt of
funds sufficient to satisfy our spending plans, we will be required to revise
our business model and/or seek a joint venture business partner. We cannot give
any assurance that additional funding will become available when needed or that
the terms of such funding will not be on terms adverse to us and our
securityholders.
We are now subject to the reporting requirements of the Exchange Act and, in
accordance with these requirements, we will file reports, proxy statements and
other documentation with the SEC. We also intend to furnish our stockholders
with annual reports containing audited financial statements and other periodic
reports as we deem appropriate or as may be required by law. These reports,
proxy statements and other documentation will contain information concerning our
liquidity and capital resources. We do not anticipate seeking stockholder
approval of any change to our business plans or allocation of capital resources
in conducting our business operations, except as may be required by applicable
law.
Set forth below are some of the risks associated with our plan of operations.
o We have extremely limited resources. We have relied on loans from our
management and friends and family members of our management to fund a
significant portion of our activities to date. We cannot give any
assurance that additional loans will be available from these lenders or
any other source, or that such loans, if available, will be on terms
amenable to us. Our failure to obtain loans or other financing when
needed or on terms amenable to us would have a material adverse effect
on our business operations.
o We will be dependent upon one hotel resort and wellness spa. We
anticipate that our business operations initially will be limited to
our Naba Ah eco-resort and wellness spa. Significant adverse
differences between the actual operating results of these initial
operations and our anticipated results could have a material adverse
effect on us and impact our ability to fully implement our business
plans.
o We will incur significant development risks. While our policies with
respect to development of our resort hotel, wellness spa and cultural
center are intended to limit some of the risks associated with these
activities, any new project development is subject to a number of
risks, including that:
o temporary or construction financing may not be available on
favorable terms, if at all;
o construction costs may exceed original estimates;
o occupancy rates may not be at anticipated levels;
o permanent financing may not be available upon completion of
construction; and
o construction may not be completed on schedule.
o We are subject to risks associated with uninsured and underinsured
losses. We intend to maintain comprehensive insurance on each of our
properties, including liability, employee dishonesty and building
casualty coverage, once we commence operations. We anticipate the types
and amounts of coverage, including coverage limits and deductibility
provisions, to be customary for similar properties. However, there are
certain types of losses, generally of a catastrophic nature, such as
hurricanes, earthquakes and floods, that may be uninsurable or not
economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose our investment in the affected
operations, as well as the anticipated future revenues from those
operations, while remaining obligated for any mortgage indebtedness or
other financial obligations related to those operations.
-13-
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Continued)
o We will have risks associated with real estate financing. We expect to
finance some, if not all, of our real estate acquisitions and
construction costs through debt financing. In doing so, we will be
subject to the risks normally associated with debt financing, including
the risks that:
o our cash flow will be insufficient to meet required payments
of principal and interest;
o we will not be able to refinance indebtedness at maturity;
o that the terms of any such refinancing will not be as
favorable as the terms of the existing indebtedness;
o that necessary capital expenditures for such purposes as
renovations and other improvements cannot be financed on
favorable terms, if at all, due to the terms of the debt
financing;
o the potential for a forced sale of properties at potentially
distressed prices; and
o an increase in interest rates would increase the amount
payable under variable rate debt.
o If we do not raise sufficient capital and/or generate sufficient
positive cash flow to fund renovations and capital improvements, we
may not be able to remain competitive. Hotel properties require
continuing renovation and capital improvements, including periodic
refurbishment and replacement of furniture, fixtures and equipment, to
remain competitive. The funding of these expenditures will be dependent
on our available capital, revenues and cash flow. If available
capital, revenues and cash flow are insufficient, our competitive
position may suffer which could result in our being forced to limit or
curtail business operations.
Item 3. Controls and Procedures.
An evaluation was performed, as of December 31, 2002, under the supervision and
with the participation of our management, including our President and Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on such
evaluation, our management has concluded that our disclosure controls and
procedures were effective as of December 31, 2002. There have been no
significant changes in our internal controls or in other factors that could
significantly affect our internal controls subsequent to December 31, 2002.
-14-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We currently are not a party to any legal proceedings.
Item 2. Changes in Securities.
None.
Item 3. Defaults on Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Set forth below is a list of the exhibits to this Quarterly Report on Form
10-QSB.
Exhibit
Number Description
------- -----------
99.1 Certification of Johnny R. Thomas pursuant to 18 U.S.C. 'SS'1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of John C. Francis pursuant to 18 U.S.C. 'SS'1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
None.
-15-
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.
Dated: February 18, 2003 Crest View Inc.
By: /s/ Johnny R. Thomas
--------------------------------------------
Johnny R. Thomas
President and Chief Executive Officer
(Duly Authorized Officer)
By: /s/ John C. Francis
---------------------------------------------
John C. Francis
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
-16-
CERTIFICATION
I, Johnny R. Thomas, President and Chief Executive Officer of Crest
View Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Crest View
Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this Quarterly Report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Quarterly Report (the "Evaluation
Date"); and
(c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: February 18, 2003
/s/ Johnny R. Thomas
----------------------------
Johnny R. Thomas
-17-
CERTIFICATION
I, John C. Francis, Vice-President and Chief Financial Officer of Crest
View Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Crest View
Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this Quarterly Report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Quarterly Report (the "Evaluation
Date"); and
(c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: February 18, 2003
/s/ John C. Francis
--------------------------------
John C. Francis
-18-
Crest View Inc.
Quarterly Report on Form 10-QSB
Quarter Ended December 31, 2002
EXHIBIT INDEX
Exhibit
Number Description
- -------- -----------
99.1 Certification of Johnny R. Thomas pursuant to 18 U.S.C. 'SS'1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 Certification of John C. Francis pursuant to 18 U.S.C. 'SS'1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002.
-19-
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as...................................'SS'