SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2001
Commission File number 000-32295
Lummi Development, Inc.
(Name of Small Business Issuer in its Charter)
7255 Meadowlark Road, Vernon, British Columbia, Canada V1B3R6
(Address of Principal Executive Offices including Zip Code)
(250) 542-3069
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if changed
since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
There were 5,207,000 shares of Common stock outstanding as of march 31, 2001.
ITEM 1. FINANCIAL STATEMENTS
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Balance Sheets
As of March 31, 2001 and 2000
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2001 2000
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 417 $ 7,750
-------- --------
TOTAL CURRENT ASSETS 417 7,750
-------- --------
TOTAL ASSETS $ 417 $ 7,750
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 810 $ 50
-------- --------
TOTAL CURRENT LIABILITIES 810 50
-------- --------
TOTAL LIABILITIES 810 50
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value authorized
(20,000,000 shares authorized; none
issued and outstanding.) 0 0
Common stock $.0001 par value authorized
(80,000,000 shares authorized; 5,207,000
shares issued and outstanding at March 31,
2001 and 2000, respectively.) 521 521
Additional paid-in capital 21,179 21,179
Deficit accumulated during development stage (22,093) (14,000)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (393) 7,700
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 417 $ 7,750
======== ========
See Accompanying Notes to Accountant's Review Report
2
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Statements of Operations
JANUARY 19, 1999
THREE MONTHS THREE MONTHS (INCEPTION)
ENDED ENDED THROUGH
MARCH 31, MARCH 31, MARCH 31,
2001 2000 2001
----------- ----------- -----------
REVENUES
Revenues $ 0 $ 0 $ 0
----------- ----------- -----------
TOTAL REVENUES 0 0 0
GENERAL & ADMINISTRATIVE EXPENSES 1,208 1,396 22,093
----------- ----------- -----------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 1,208 1,396 22,093
----------- ----------- -----------
NET LOSS $ (1,208) $ (1,396) $ (22,093)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.0002) $ (0.0003)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 5,207,000 5,207,000
=========== ===========
See Accompanying Notes to Accountant's Review Report
3
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
From January 19, 1999 (inception) through March 31, 2001
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ------ ------- -------- ---------
Issued for cash on January 19, 1999 5,000,000 $ 500 $ 0 $ 0 $ 500
Issued from sale of private placement
(Note #1) April 7,1 1999 207,000 21 21,179 0 21,200
Net loss, January 19, 1999 (inception)
to December 31, 1999 (12,604) (12,604)
---------- ----- -------- -------- ---------
BALANCE, DECEMBER 31, 1999 5,207,000 521 21,179 (12,604) 9,096
========== ===== ======== ======== =========
Net loss, January 1, 2000 to
December 31, 2000 (8,281) (8,281)
---------- ----- -------- -------- ---------
BALANCE, DECEMBER 31, 2000 5,207,000 521 21,179 (20,885) 815
========== ===== ======== ======== =========
Net loss, January 1, 2001 to
March 31, 2001 (1,208) (1,208)
---------- ----- -------- -------- ---------
BALANCE, MARCH 31, 2001 5,207,000 $ 521 $ 21,179 $(22,093) $ (393)
========== ===== ======== ======== =========
See Accompanying Notes to Accountant's Review Report
4
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Statements of Cash Flows
JANUARY 19, 1999
THREE MONTHS THREE MONTHS (INCEPTION)
ENDED ENDED THROUGH
MARCH 31, MARCH 31, MARCH 31,
2001 2000 2001
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Operating loss $ (1,208) $ (1,396) $(22,093)
Increase in accounts payable 105 50 810
-------- -------- --------
NET CASH (USED) BY OPERATING ACTIVITIES (1,103) (1,346) (21,283)
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock 0 0 521
Additional paid-in capital 0 0 21,179
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 0 0 21,700
-------- -------- --------
NET (DECREASE)/INCREASE IN CASH (1,103) (1,346) 417
CASH AT BEGINNING OF PERIOD 1,520 9,096 0
-------- -------- --------
CASH AT END OF PERIOD $ 417 $ 7,750 $ 417
======== ======== ========
SEE ACCOMPANYING NOTES TO ACCOUNTANT'S REVIEW REPORT
5
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months Ended March 31, 2001
NOTE 1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized January 19, 1999, under the laws of the state of
Delaware, as Lummi Development, Inc. The Company has no operations and in
accordance with SFAS # 7, the Company is considered a development stage company.
The Company is in the business of selling marine safety kits and related marine
accessories.
On January 19, 1999, the Company issued 5,000,000 shares of its $ 0.0001 par
value common stock for cash of $ 1,000.00.
On April 7, 1999, the Company completed a public offering that was offered
without registration under the securities Act of 1933, as amended (The "Act"),
in reliance upon the exemption from registration afforded by sections 4(2) and
3(b) of Securities Act and Regulation D, Rule 504 promulgated thereunder. The
Company sold 207,000 shares of common stock at a price of $ 0.10 per share for a
total amount raised of $ 20,700.00.
NOTE 2. ACCOUNTING POLICIES AND PROCEDURES
a. BASIS OF ACCOUNTING
The Company uses the accrual method of accounting.
b. BASIC LOSS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective January 19, 1999 (inception).
Basic net loss per share amounts is computed by dividing the net income by the
weighted average number of common shares outstanding. Diluted earnings per share
are the same as basic earnings per share due to the lack of dilutive items in
the Company.
6
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months Ended March 31, 2001
NOTE 2. ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
c. CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
d. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
e. INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
NOTE 3. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of
common stock or preferred stock.
NOTE 4. GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the company to
continue as a going concern. It is management's plan to seek additional capital
through the sale of its securities through private placements.
7
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months Ended March 31, 2001
NOTE 5. RELATED PARTY TRANSACTION
The Company neither owns, nor leases any real or personal property. A director
provides warehouse and office services without charge. Such costs are immaterial
to the financial statements and, accordingly, have not been reflected therein.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity become available, such persons
may face a conflict in selecting between the Company and their other business
interests. The Company has not formulated a policy for resolution of such
conflicts.
NOTE 6. INCOME TAXES
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
Deferred tax assets:
Net operating loss carryforwards $ 1,208 $ 1,396
------- -------
Other -0- -0-
Valuation allowance (1,208) (1,396)
------- -------
Net deferred tax assets $ -0- $ -0-
======= =======
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and carryforwards
are expected to be available to reduce taxable income. As the achievement of
required future taxable income is uncertain, the Company recorded a valuation
allowance.
NOTE 7. SCHEDULE OF NET OPERATING LOSSES
1999 Net Operating Loss $(12,604)
2000 Net Operating Loss (8,281)
2001 Net Operating Loss (1st. Qtr.) (1,208)
--------
Net Operating Loss $(22,093)
========
As of March 31, 2001, the Company has net operating loss carryforwards of
approximately $ 22,093, which will expire through 2019.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CERTAIN FORWARD-LOOKING INFORMAITON
Information provided in this Quarterly report on Form 10QSB may contain
forward-looking statements within the meaning of Section 21E or Securities
Exchange Act of 1934 that are not historical facts and information. These
statements represent the company's expectations or beliefs, including, but not
limited to, statements concerning future and operating results, statements
concerning industry performance, the Company's operations, economic performance,
financial conditions, margins and growth in sales of the Company's products,
capital expenditures, financing needs, as well as assumptions related to the
forgoing. For this purpose, any statements contained in this Quarterly Report
that are not statement of historical fact may be deemed to be forward-looking
and involve various risks and uncertainties that could cause actual results and
outcomes for future periods to differ materially from any forward-looking
statement or views expressed herein. The Company's financial performance and the
forward-looking statements contained herein are further qualified by other risks
including those set forth from time to time in the documents filed by the
Company with the Securities and Exchange Commission, including the company's
most recent Form 10SB.
CONDITION AND RESULTS OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 2001.
Revenues were -0- for the quarter ending March 31, 2001 and -0- for the same
quarter ending 2000.
Operating expenses were $1,208 for the quarter ended March 31, 2001 and $1,396
for the same quarter in 2000.
Total operating expenses since inception (January 19, 1999) through March 31,
2001 are $22,093.
During the three months ended March 31, 2001, management selected a supplier to
manufacture nylon bags for the marine safety kits to the specifications required
and at a price that was within budgeted amounts. After extensive research,
management determined that only one type of bag would be manufactured. Also, an
agreement was reached with a local printing firm for decal design and coloring
for the nylon bags as well as brochure production for advertising purposes. Kit
components were purchased and tested for reliability, and production procedures
were streamlined to minimize assembly costs. To date, no sales have been made of
the marine safety kits nor have any sales of the company's securities through
private placements been made.
RISK FACTORS
1. LIMITED HISTORY OF OPERATIONS
The Company was incorporated under the laws of the state of Delaware on
January 19, 1999 and has had limited operations to date. Therefore, the Company
must be considered in the early development stages of embarking upon a new
venture. The Company has had no revenues to date. The Company's business and
prospects must be considered in light of the risk, expense, and difficulties
frequently encountered by companies in an early stage of development.
Prospective investors should be aware of the difficulties encountered by such
new enterprises, as the Company faces all the risks inherent in any new
business, including: competition, the absence both of an operating history and
profitability and the need for additional working capital. The likelihood of the
success of the Company must be considered in light of the problems and expenses
that are frequently encountered in connection with the operation of a new
business and the competitive environment in which the Company will be operating.
9
2. NEED FOR ADDITIONAL WORKING CAPITAL - CONTINUATION OF GOING CONCERN NOT
ASSURED.
As of March 31, 2001, the Company had working capital of $417 and faces the
need for substantial additional working capital in the near future. The capital
needs of the company are greater than currently anticipated, and the Company
will be required to seek other sources of financing. No assurance can be given
that the company will be able to organize debt or equity financing, or that if
available, it will be available on terms and conditions satisfactory to
management and might dilute current shareholders. The Company has no commitments
for any additional debt or equity financing and there can be no assurance that
any such commitments will be obtained on favorable terms, if at all.
3. THE COMPANY HAS NO SIGNIFICANT HISTORY OF OPERATIONS AND EXPECT OPERATING
LOSSES IN THE FORESEEABLE FUTURE.
The Company expects to incur operating losses for the foreseeable future and if
the Company ever has operating profits, it may not be able to sustain them.
Expenses will increase as the Company builds an infrastructure to implement its
business model. The Company plans to hire additional employees and lease
warehouse space as the need arises. In addition, Company plans to significantly
increase its operating expenses to:
- - cost of manufacturing marine safety kits;
- - seek suppliers for contents of marine safety kits;
- - locating wholesale distributors to sell marine safety kits to wholesale
supplier's lines to marinas, boat manufacturers and dealers and to retail
outlets, such as sporting goods or other outlets where marine products are
sold.
- - develop its web-site for Internet sales of marine safety kits.
Expenses may also increase due to the potential effect of goodwill amortization
and other charges resulting from future partnerships and/or alliances, if any.
If any of these and other expenses are not accompanied by increased revenue, the
Company's operating losses will be even greater than anticipated.
4. THE PROGRESS AND OVERALL SUCCESS FOR THE COMPANY IS SUBSTANTIALLY DEPENDENT
UPON THE ABILITIES OF THE CURRENT OFFICER AND DIRECTOR OF THE COMPANY.
The Company's performance and operating results are substantially dependent
upon the continued service and performance of its officer and director. The loss
of the services of the Company's key employee or the inability to attract and
retain the necessary technical, sales and other personnel, would likely limit
the chances of success and have a negative effect upon the Company's business,
financial condition, operating results and cash flow. In addition, the
concentrated ownership of the sole officer and director has over the Company,
may have a material adverse effect on future business progress. Futhermore, the
current officer and director is involved with other employment other than that
of the company, which may take time from developing the business of the Company
and effect the overall success.
5. COMPETITION
The market for the production and distribution of marine safety kits is
highly competitive. The Company competes with larger manufacturing companies and
recreational boat dealers who provide marine accessories including safety kits
to consumers. Our competitors have greater financial, marketing, distribution
and technical resources. Our success will be dependent on our ability to compete
with these and any other competitors on the quality of our products and their
cost effectiveness. There is no assurance that we will be successful in that
competition.
10
6. LACK OF CASH DIVIDENDS
The Company has not paid any cash dividends on its Common Shares to date
and there are no plans for paying cash dividends in the foreseeable future.
Initial earnings that the company may realize, if any, will be retained to
finance the growth of the company. Any future dividends, of which there can be
no assurance, will be directly dependent upon earnings of the company, its
financial requirements and other factors.
7. PURCHASE OF INVENTORY; CAPTIAL RESOURCE REQUIREMENTS
The Company plans to purchase and assemble components of the marine safety
kits for distribution. In addition, the Company plans to develop its web-site
for Internet sales. Expenses needed to build an infrastructure to implement our
business model will depend upon a number of factors including the Company's
ability to raise sufficient capital. There are no assurances that the Company
can raise sufficient capital through debt or equity financing which might be
available to the Company on favorable terms or if at all and might dilute
current shareholders.
8. GROWTH AND ACQUISITION MAY STRAIN THE MANAGEMENT, OPERATION AND FINANCIAL
RESOURCES.
There can be no assurances that the proposed business model will be
adequate to support any future operations. In addition, there is a risk that the
Company may not be able to expand their operations at the same rate as market
demand may be created. If appropriate opportunities present themselves, the
Company intends to seek out business opportunities to expand their marine
accessories business. The process of integrating and acquiring any business may
result in operating difficulties and expenditures, which cannot be anticipated
and may absorb significant management attention that would otherwise be
available for further development of their existing business. Moreover, the
anticipated benefits of any acquisition may be realized. Any future acquisition
of other businesses, technologies, services or products might require the
Company to obtain additional equity or debt financing which might not be
available to the Company on favorable terms or at all and might dilute current
shareholders. Additionally, the Company may not be able to successfully
identify, negotiate or finance future acquisition or to integrate acquisition
with the current proposed business.
9. SHARES SUBJECT O RULE 144
On March 31, 2001, the Company had 5,000,000 Common Shares issued and
outstanding that have not been registered with the Commission or any state
securities agency and are currently restricted pursuant to Rule 144 promulgated
by the Commission under the 1933 Act. Rule 144 provides, in essence, that a
person holding restricted securities for one year from the date the securities
were purchased from he issuer, or an affiliate of the issuer, and fully paid,
may sell limited quantities of the securities to the public without
registration, provided there shall be certain public information with respect to
the issuer. Pursuant to Rule 144, securities held by non-affiliates for more
than two years may generally be sold without reference to the current public
information or broker transaction requirements, or the volume limitations. None
of the current outstanding restricted shares are available for resale pursuant
to Rule 144.
10. OTHER NON-PUBLIC SALES OF SECURITIES
As part of the Company's plan to raise additional working capital, the
Company may make a limited number of offers and sales of its Common Shares to
qualified investors in transactions that are exempt from registration under the
1933 Act. There can be no assurance the company will not make other offers of
its securities at different prices, when, in the Company's discretion, such
prices are deemed by the Company to be reasonable under the circumstances.
11. NO ASSURANCES OF LIQUIDITY
There is currently no public market for the Common Shares or any other
securities of the company and there can be no assurance that a trading market
will develop in the future.
11
12. WE FACE THE LOSS OF KEY PERSONNEL WHICH COULD ADVERSELY AFFECT PROPOSED
OPERATIONS
The Company's performance is greatly dependent on the performance of our
officer and director. The loss of the services of our officer/director could
harm our business and have a negative impact on our reputation for expertise in
the marine accessory industry.
13. THE COMPANY IS LARGELY CONTROLED BY MANAGEMENT
The Company's officer/director currently owns or controls a substantial
majority of its outstanding common stock and thereby continues to be able to
exercise voting control over the Company for the foreseeable future and will be
able to elect the entire Board of Directors. This management control could
prevent, or make more difficult, on-going business.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON 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.
None.
12
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Company has duly caused this disclosure statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
LUMMI DEVELOPMENT, INC.
Date: May 23, 2001 /s/ Gary Stannell
----------------------------------------
Gary Stannell
President
13