UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
Commission file Number: 000-26517
EASTERN MANAGEMENT CORP.
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0204682
(I.R.S. Employer Identification Number)
Suite 1500
885 West Georgia Street
Vancouver, British Columbia
V6C 3E8
(Address of principal executive offices)
(604)687-0717
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 500,000 common shares as at
June 30, 2001
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
EASTERN MANAGEMENT CORP.
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 2001 and March 31, 2001
Consolidated Statements of Operations for the periods ended
June 30, 2001 and June 30, 2000
Consolidated Statements of Cash Flows for
the periods ended June 30, 2001 and June 20,
2000
Consolidated Statements of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
Item 2 Plan of Operation
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8K
SIGNATURES
2
EASTERN MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2001
3
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
===============================================================================================================================
June 30, March 31,
2001 2001
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS $ - $ -
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 9,121 $ 7,171
-------------- ---------------
STOCKHOLDERS' EQUITY
Capital stock (Note 4)
Authorized
100,000,000 common shares with a par value of $0.0001
Issued and outstanding
March 31, 2001 - 500,000 common shares
June 30, 2001 - 500,000 common shares 50 50
Additional paid-in capital 22,445 17,613
Deficit accumulated during the development stage (31,616) (24,834)
-------------- ---------------
(9,121) (7,171)
-------------- ---------------
Total liabilities and stockholders' equity $ - $ -
===============================================================================================================================
On behalf of the Board:
/s/Jason John
- ---------------------------
Jason John, Director
The accompanying notes are an integral part of these financial statements.
4
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
===============================================================================================================================
Cumulative
Amounts
From Inception
on July 23, Three Month Three Month
1997 to Period Ended Period Ended
March 31, June 30, June 30,
2001 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Office and miscellaneous $ 50 $ - $ -
Professional fees 30,366 6,782 2,650
Transfer agent and filing fees 1,200 - -
---------------- ---------------- ---------------
LOSS FOR THE PERIOD $ 31,616 $ 6,782 $ 2,650
===============================================================================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.01)
===============================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 500,000 500,000
===============================================================================================================================
The accompanying notes are an integral part of these financial statements.
5
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
===============================================================================================================================
Cumulative
Amounts
From Inception
on July 23, Three Month Three Month
1997 to Period Ended Period Ended
March 31, June 30, June 30,
2001 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (31,616) $ (6,782) $ (2,650)
Items not affecting cash:
Stock issued for services 50 -
Expenses paid by related party on behalf of Company 22,445 4,832 -
Change in non-cash working capital items
Increase in accounts payable 9,121 1,950 2,650
---------------- ---------------- ----------------
Net cash used in operating activities - - -
---------------- ---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities - - -
---------------- ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities - - -
---------------- ---------------- ---------------
CHANGE IN CASH POSITION DURING THE PERIOD - - -
CASH POSITION, BEGINNING OF THE PERIOD - - -
---------------- ---------------- ---------------
CASH POSITION, END OF THE PERIOD $ - $ - $ -
===============================================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
Cash paid for income taxes $ - $ - $ -
Cash paid for interest $ - $ - $ -
===============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING, AND
FINANCING ACTIVITIES:
Common shares issued for services $ 50 $ - $ -
Expenses paid by related party on behalf of Company 22,445 $ 4,832 -
===============================================================================================================================
The accompanying notes are an integral part of these financial statements.
6
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
===============================================================================================================================
Deficit
Accumulated
During
Common Stock Additional the Total
--------------------------------- Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 23, 1997 - $ - $ - $ - $ -
Capital stock issued for services 500,000 50 - - 50
Loss for the period - - - (50) (50)
-------------- -------------- -------------- -------------- --------------
BALANCE, MARCH 31, 1998 AND 1999 500,000 50 - (50) -
Shareholder capital contribution - - 8,052 - 8,052
Loss for the year - - - (8,052) (8,052)
-------------- -------------- -------------- -------------- --------------
BALANCE, MARCH 31, 2000 500,000 50 8,052 (8,102) -
Shareholder capital contribution - - 9,561 - 9,561
Loss for the year - - - (16,732) (16,732)
-------------- -------------- -------------- -------------- --------------
BALANCE, MARCH 31, 2001 500,000 50 17,613 (24,834) (7,171)
Shareholder capital contribution - - 4,832 - 4,832
Loss for the period - - - (6,782) (6,782)
-------------- -------------- -------------- -------------- --------------
BALANCE, JUNE 30, 2001 500,000 $ 50 $ 22,445 $ (31,616) $ (9,121)
===============================================================================================================================
The accompanying notes are an integral part of these financial statements.
7
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 2001
================================================================================
1. ORGANIZATION OF THE COMPANY
The Company was incorporated on July 23, 1997 under the laws of Nevada
to engage in any lawful business or activity for which corporations may
be organized under the laws of the State of Nevada.
The Company entered the development stage in accordance with Statement
of Financial Accounting Standards No. 7 on July 23, 1997. The Company
is a "Blank Check" company which plans to search for a suitable
business to merge with or acquire. Operations since incorporation
consisted primarily of obtaining capital contributions by the initial
investors and activities regarding the registration of the offering
with the Securities and Exchange Commission.
In the opinion of management, the accompanying financial statements
contain all adjustments necessary (consisting only of normal recurring
accruals) to present fairly the financial information contained
therein. These statements do not include all disclosures required by
generally accepted accounting principles and should be read in
conjunction with the audited financial statements of the Company for
the year ended March 31, 2001. The results of operations for the period
ended June 30, 2001 are not necessarily indicative of the results to be
expected for the year ending March 31, 2002.
2. 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. The
Company's management plans on advancing funds on an as needed basis and
in the longer term, revenues from the operations of the merger or
acquisition candidate, if found. The Company's ability to continue as a
going concern is dependent on these additional management advances,
and, ultimately, upon achieving profitable operations through a merger
or acquisition candidate.
3. SIGNIFICANT ACCOUNTING POLICIES
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 amount of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the year. Actual results could differ from these
estimates.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"). Under SFAS 128, basic and diluted earnings per
share are to be presented. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted
average number of common shares outstanding in the period. Diluted
earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive
common shares.
8
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 2001
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of accounts payable. Unless
otherwise noted, it is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes". A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss
carryforwards. Deferred tax expenses (benefit) result from the net
change during the year of deferred tax 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. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total
stockholders' equity as of June 30, 2001.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, the FASB issued SFAS
137 to defer the effective date of SFAS 133 to fiscal quarters of
fiscal years beginning after June 15, 1999. In June 2000, the FASB
issued SFAS No. 138, which is a significant amendment to SFAS 133. The
Company does not anticipate that the adoption of these statements will
have a significant impact on its financial statements.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
9
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 2001
================================================================================
4. CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of common stock, with a par value of $0.0001 per share. All shares of
common stock have equal voting rights and, when validly issued and
outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no
pre-emptive, subscription, conversion or redemption rights and may be
issued only as fully paid and non-assessable shares. Holders of the
common stock are entitled to share pro-rata in dividends and
distributions with respect to the common stock, as may be declared by
the Board of Directors out of funds legally available.
On July 18, 1997, the Company issued 500,000 shares of common stock for
services at a deemed value of $50.
Proposed public offering of common stock
The Company has commenced with a "Blank Check" offering subject to Rule
419 of the Securities Act of 1933, as amended, for 500,000 common
shares to be sold at a price of $0.10 per share.
Rule 419 requirements
Rule 419 requires that offering proceeds, after deduction for
underwriting commissions, underwriting expenses and deal allowances
issued, be deposited into an escrow or trust account (the "Deposited
Funds" and "Deposited Securities", respectively) governed by an
agreement which contains certain terms and provisions specified by the
Rule. Under Rule 419, the Deposited Funds and Deposited Securities will
be released to the company and to the investors, respectively, only
after the company has met the following three basic conditions. First,
the company must execute an agreement(s) for an acquisition(s) meeting
certain prescribed criteria. Second, the company must file a
post-effective amendment to the registration statement that includes
the terms of a reconfirmation offer that must contain conditions
prescribed by the rules. The post-effective amendment must also contain
information regarding the acquisition candidate(s) and its
business(es), including audited financial statements. The agreement(s)
must include, as a condition precedent to their consummation, a
requirement that the number of investors representing 80% of the
maximum proceeds must elect to reconfirm their investments. Third, the
company must conduct the reconfirmation offer and satisfy all of the
prescribed conditions, including the condition that investors
representing 80% of the Deposited Funds must elect to remain investors.
The post-effective amendment must also include the terms of the
reconfirmation offer mandated by Rule 419. The reconfirmation offer
must include certain prescribed conditions that must be satisfied
before the Deposited Funds and Deposited Securities can be released
from escrow. After the company submits a signed representation to the
escrow agent that the requirements of Rule 419 have been met and after
the acquisition(s) is consummated, the escrow agent can release the
Deposited Funds and Deposited Securities. Investors who do not
reconfirm their investments will receive the return of a pro-rata
portion thereof; and in the event investors representing less than 80%
of the Deposited Funds reconfirm their investments, the Deposited Funds
will be returned to the investors on a pro-rata basis.
10
EASTERN MANAGEMENT CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 2001
================================================================================
5. INCOME TAXES
The Company's total deferred tax asset is as follows:
====================================================================================================================
June 30, March 31,
2001 2001
--------------------------------------------------------------------------------------------------------------------
Tax benefit of net operating loss carryforward $ 4,743 $ 3,726
Valuation allowance (4,743) (3,726)
------------- -------------
$ - $ -
====================================================================================================================
The Company has a net operating loss carryforward of approximately
$31,616, which if not used, will begin to expire in 2017. The Company
has provided a full valuation allowance on the deferred tax asset
because of the uncertainty regarding realizability.
6. RELATED PARTY TRANSACTIONS
The Company does not maintain a checking account and all expenses
incurred by the Company are paid by an affiliate. For the three month
period ended June 30, 2001, the Company incurred $6,782 in professional
fees. The affiliate does not expect to be repaid for the expenses it
pays on behalf of the Company. Accordingly, as the expenses are paid,
they are classified as additional paid-in capital.
11
PLAN OF OPERATION
The following discussion of the plan of operations of the Company should be read
in conjunction with the financial statements and the related notes thereto
included elsewhere in this quarterly report for the three months ended June 30,
2001. This quarterly report contains certain forward-looking statements and the
Company's future operation results could differ materially from those discussed
herein.
Introduction
- ------------
We seek to acquire assets or shares of a business that generates revenues, in
exchange for our shares. When this registration statement becomes effective, our
President will attempt to find an acquisition candidate. Our President has not
engaged in any preliminary contact or discussions with any representative of any
other company regarding the possibility of an acquisition or merger as of the
date of this registration statement.
We will provide our shareholders with complete disclosure documentation
concerning potential business opportunities. Disclosure is expected to be in the
form of a proxy or information statement.
Our director intends to obtain certain assurances of value, including statements
of assets and liabilities, material contracts or accounts receivable statements
before closing a transaction.
We will remain a shell corporation until a merger or acquisition candidate is
identified. It is anticipated that our cash requirements will be minimal, and
that all necessary capital will be provided by the directors or officers. We do
not anticipate having to raise capital in the next twelve months. We do not
expect to acquire any plant or significant equipment.
We have not, and do not intend to enter into, any arrangement, agreement or
understanding with non-management shareholders allowing non-management
shareholders to directly or indirectly participate in or influence our
management of the Company.
We have no full time employees. Mr. Jason John is our only part time employee.
Mr. John has agreed to allocate a portion of his time to our activities, without
compensation. Mr. John anticipates that our business plan can be implemented by
him devoting approximately five (5) hours per month to our business affairs. We
do not expect any significant changes in the number of employees.
General Business Plan
- ---------------------
Our purpose is to acquire an interest in a business which seeks the perceived
advantages of an Exchange Act registered corporation. We will not restrict our
search to any specific business or industry. Management anticipates that it may
be able to participate in only one potential business venture because we have
nominal assets and limited financial resources.
We may seek a business combination with companies that have recently commenced
operations. It is likely that any business we select will require additional
capital to expand into new products or markets.
We anticipate that the selection of a business opportunity will be complex and
extremely risky. Due to general economic conditions, rapid technological
advances and shortages of available capital, management believes there are
numerous firms seeking the perceived benefits of a publicly registered
corporation. Business opportunities may occur in different industries and at
various stages of development.
12
We currently have no capital to provide to the owners of business opportunities.
However, management believes we will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
publicly registered company without incurring the cost and time required to
conduct an initial public offering.
The analysis of new business opportunities will be undertaken by Mr. Jason John
who is not a professional business analyst. Management intends to concentrate on
identifying business opportunities that may be brought to our attention through
Mr. John's business associations. In analyzing prospective business
opportunities, management will consider:
* the available technical, financial and managerial resources;
* working capital and other financial requirements;
* history of operations, if any;
* prospects for the future;
* nature of present and expected competition;
* the quality and experience of management services that may
be available and the depth of that management;
* the potential for further research, development, or
exploration;
* specific risk factors which could be anticipated to impact
our proposed activities;
* the potential for growth or expansion;
* the potential for profit;
* the perceived public recognition of acceptance of products,
services, or trades;
* name identification; and
* other relevant factors.
We expect to meet personally with management and key personnel of the business
opportunity as part of our due diligence investigation. To the extent possible,
we intend to utilize written reports and personal investigations to evaluate
businesses. We will not acquire or merge with any company that cannot provide
audited financial statements within a reasonable period of time after closing of
the proposed transaction.
Our management will rely upon their own efforts and, to a much lesser extent,
the efforts of our shareholders, in accomplishing our business purposes. We do
not anticipate using outside consultants or advisors, except for legal counsel
and accountants. If we do retain an outside consultant or advisor, any cash fee
will be paid by the prospective merger/acquisition candidate, as we have no cash
assets.
We anticipate that we will incur nominal expenses in the implementation of our
business plan. Because we have no capital to pay these anticipated expenses,
present management will pay these charges with their personal funds, as interest
free loans. If additional funding is necessary, management and or shareholders
will continue to provide capital or arrange for additional outside funding. If a
merger candidate cannot be found within a reasonable period of time, management
will not continue to provide capital.
How Our Acquisition May be Structured
- -------------------------------------
To close our business acquisition, we may become a party to a merger,
consolidation, reorganization, joint venture, or licensing agreement with
another corporation or entity. We may also acquire stock or assets of an
existing business. On closing, it is probable that our present management and
shareholders will no longer be in control. In addition, our directors may, as
part of the terms of the acquisition transaction, resign and be replaced by new
directors without a vote of our shareholders. Management may negotiate or
consent to the purchase of all or a portion of our stock. Any terms of sale of
the shares presently held by officers and/or directors will be also afforded to
all other shareholders on similar terms
13
and conditions. All sales will be made in compliance with the securities laws of
the United States and any applicable state.
Management may visit material facilities, obtain independent verification of
information and check references of management and key personnel. We will
participate in a business opportunity only after the negotiation and signing of
appropriate written agreements.
Negotiations with target company management are expected to focus on the
percentage of our company that the target company shareholders will acquire. Our
percentage ownership in the combined company will likely be significantly lower
than our current ownership interest.
Competition
- -----------
We are an insignificant participant among the firms that engage in the
acquisition of business opportunities. There are many established venture
capital groups and financial concerns that have significantly greater financial
and personnel resources and technical expertise than we do. In view of our
extremely limited financial resources and limited management availability we
will continue to be at a significant competitive disadvantage.
"CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical matters,
the matters discussed in this Form 10-QSB are forward-looking statements based
on current expectations and involve risks and uncertainties. Forward-looking
statements include, but are not limited to, statements under the following
heading: "Managements Discussion And Analysis Or Plan Of Operations" the timing
and expected profitable results of sales and the need for no additional
financing.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
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
14
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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.
EASTERN MANAGEMENT CORP.
Dated: August 8, 2001 Per: /s/ Jason John
----------------------------------
Jason John, President and Director
15