UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 2005
Transition Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
- --------------------------------------------------------------------------------
Commission File Number: 000-49649
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Donar Enterprises, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 23-3083371
- ------------------------ ------------------------
(State of incorporation) (IRS Employer ID Number)
12890 Hilltop Road, Argyle, TX 76226
------------------------------------
(Address of principal executive offices)
(972) 233-0300
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(Issuer's telephone number)
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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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: May 4, 2005: 928,964
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
Donar Enterprises, Inc.
Form 10-QSB for the Quarter ended March 31, 2005
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 12
Item 3 Controls and Procedures 14
Part II - Other Information
Item 1 Legal Proceedings 15
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 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 15
Signatures 15
2
Part 1
Item 1 - Financial Statements
Donar Enterprises, Inc.
(a development stage company)
Balance Sheets
March 31, 2005 and 2004
(Unaudited)
March 31, March 31,
2005 2004
--------- ---------
ASSETS
Current Assets
Cash on hand and in bank $ -- $ 55,009
Accounts receivable - trade,
net of allowance for doubtful accounts of $-0- -- 2,385
--------- ---------
Total current assets -- 57,394
--------- ---------
Total Assets $ -- $ 57,394
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable - trade $ -- $ 1,350
Advances from officer/shareholder 23,268 7,309
Accrued officer compensation -- 85,000
--------- ---------
Total current liabilities 23,268 93,659
--------- ---------
Commitments and contingencies
Stockholders' Equity (Deficit)
Preferred stock - $0.001 par value
20,000,000 shares authorized
None issued and outstanding -- --
Common stock - $0.001 par value
100,000,000 shares authorized
928,964 and 570,600 shares
issued and outstanding, respectively 929 571
Additional paid-in capital 477,923 371,602
Deficit accumulated during the development stage (502,120) (408,438)
--------- ---------
Total Stockholders' Equity (Deficit) (23,268) (36,265)
--------- ---------
Total Liabilities and Stockholders' Equity $ -- $ 57,394
========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
Donar Enterprises, Inc.
(a development stage company)
Statements of Operations and Comprehensive Loss
Three months ended March 31, 2005 and 2004 and
Period from May 25, 2001 (date of inception) through March 31, 2005
(Unaudited)
Period from
May 25, 2001
Three months Three months (date of inception)
ended ended through
March 31, 2005 March 31, 2004 March 31, 2005
------------------- ------------------- -------------------
Revenues $ -- $ 2,385 $ 24,778
------------------- ------------------- -------------------
Operating expenses
General and administrative costs 23,268 37,697 527,300
------------------- ------------------- -------------------
Loss from Operations (23,268) (35,312) (502,522)
Other Income (Expense)
Interest income -- 48 402
------------------- ------------------- -------------------
Loss before provision for income taxes (23,268) (35,264) (502,120)
Provision for Income Taxes -- -- --
------------------- ------------------- -------------------
Net Loss (23,268) (35,264) (502,120)
Other comprehensive income -- -- --
------------------- ------------------- -------------------
Comprehensive Loss $ (23,268) $ (35,264) $ (502,120)
=================== =================== ===================
Net loss per weighted-average share
of common stock outstanding,
computed on Net Loss
- basic and fully diluted $ (0.03) $ (0.05) $ (0.79)
=================== =================== ===================
Weighted-average number of shares
of common stock outstanding -
basic and fully diluted 928,964 722,960 639,056
=================== =================== ===================
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
Donar Enterprises, Inc.
(a development stage company)
Statements of Cash Flows
Three months ended March 31, 2005 and 2004 and
Period from May 25, 2001 (date of inception) through March 31, 2005
(Unaudited)
Period from
May 25, 2001
Three months Three months (date of inception)
ended ended through
March 31, 2005 March 31, 2004 March 31, 2005
------------------- ------------------- -------------------
Cash Flows from Operating Activities
Net loss for the period $ (23,268) $ (35,264) $ (502,120)
Adjustments to reconcile net loss
to net cash provided by
operating activities
Depreciation and amortization -- -- --
Common stock issued for
Services -- 16,040 334,373
Salaries, wages and bonuses -- -- 86,350
Operating expenses -- -- 297
(Increase) Decrease in
Accounts receivable - trade -- (1,508) --
Increase (Decrease) in
Accounts payable -- -- --
Other accrued liabilities -- -- --
Accrued officers compensation -- 21,250 --
------------------- ------------------- -------------------
Net cash used in operating activities (23,268) 518 (81,100)
------------------- ------------------- -------------------
Cash Flows from Investing Activities -- -- --
------------------- ------------------- -------------------
Cash Flows from Financing Activities
Proceeds from sale of common stock -- -- 37,800
Cash contributed to support operations -- -- 13,020
Advances from shareholder/officer 23,268 297 30,280
------------------- ------------------- -------------------
Net cash provided by financing activities 23,268 297 81,100
------------------- ------------------- -------------------
Increase in Cash -- 815 --
Cash at beginning of period -- 54,194 --
------------------- ------------------- -------------------
Cash at end of period $ -- $ 55,009 $ --
=================== =================== ===================
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid during the period $ -- $ -- $ --
=================== =================== ===================
Income taxes paid during the period $ -- $ -- $ --
=================== =================== ===================
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
5
Donar Enterprises, Inc.
(a development stage company)
Notes to Financial Statements
NOTE A - Organization and Description of Business
Donar Enterprises, Inc. (Company) was incorporated on May 25, 2001 in accordance
with the Laws of the State of Delaware.
The Company's initial business plan was to provide the conversion and filing of
various documents prepared in accordance with either the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, for small to
mid-sized public companies with the U.S. Securities and Exchange Commission
(SEC) electronically through EDGAR, the SEC's Electronic Data Gathering,
Analysis, and Retrieval system. The Company has never been affiliated with the
SEC in any manner.
On February 27, 2002, the Company's Registration Statement on Form SB-2 (SEC
File No. 333-68702), registering 2,000,000 pre-reverse split shares to be sold
at a price of $0.05 per share, was declared effective. Between July and December
2002, the Company sold an aggregate 656,000 pre-reverse split shares of stock
under this Registration Statement.
The Company has been in the development stage since its formation and has been
unable to become profitable within any segment of its initial business plan.
In June 2004 and December 2004, respectively, the Company experienced separate
changes in control and abandoned its business plan related to providing
electronic filing services for small to mid-sized public companies and began a
search to seek a suitable reverse acquisition candidate through acquisition,
merger or other suitable business combination method.
Note B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
a year-end of December 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented
Note C - Going Concern Uncertainty
Donar Enterprises, Inc. (Company) was originally incorporated in 2001 for the
purpose of providing the conversion and filing of various documents prepared in
accordance with either the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, for small to mid-sized public companies with
the SEC electronically through EDGAR, the SEC's Electronic Data Gathering,
Analysis, and Retrieval system. The Company has never been affiliated with the
SEC in any manner.
6
Donar Enterprises, Inc.
(a development stage company)
Notes to Financial Statements - Continued
NOTE C - Going Concern Uncertainty
The Company's current principal business activity is to seek a suitable reverse
acquisition candidate through acquisition, merger or other suitable business
combination method.
The Company has been in the development stage since its formation and has been
unable to become profitable within any segment of its initial business plan.
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.
The Company anticipates future sales of equity securities to facilitate either
the consummation of a business combination transaction or to raise working
capital to support and preserve the integrity of the corporate entity. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
If no additional operating capital is received during the next twelve months,
the Company will be forced to rely on existing cash in the bank and upon
additional funds loaned by management and/or significant stockholders to
preserve the integrity of the corporate entity at this time. In the event, the
Company is unable to acquire advances from management and/or significant
stockholders, the Company's ongoing operations would be negatively impacted.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach its goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
Note D - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At March 31, 2005 and 2004, respectively, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
7
Donar Enterprises, Inc.
(a development stage company)
Notes to Financial Statements - Continued
Note D - Summary of Significant Accounting Policies - Continued
2. Income Taxes - continued
------------
As of March 31, 2005 and 2004, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods as a result of a change in
control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
3. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common shareholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
At March 31, 2005, and subsequent thereto, the Company's issued and
outstanding warrants, options and convertible debt are considered
antidilutive due to the Company's net operating loss position. At March 31,
2004, the Company's had no outstanding stock warrants, options or
convertible securities which could be considered as dilutive for purposes
of the loss per share calculation.
Note E - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
Note F - Loans from Shareholder/Officer
As of December 31, 2003, the Company and it's then-controlling shareholder,
William Tay, agreed that additional funds may be necessary in the future to
support the corporate entity. As of April 22, 2004, Mr. Tay was owed
approximately$7,012, which was repaid on April 22, 2004 as a component of the
issuance of an aggregate 1,846,180 shares of restricted, unregistered common
stock.
8
Donar Enterprises, Inc.
(a development stage company)
Notes to Financial Statements - Continued
Note F - Advances from Shareholder - Continued
During the first quarter of 2005, the Company's controlling shareholder, Timothy
P. Halter, advanced the Company approximately $23,000 to support operations and
provide working capital. These advances are due upon demand and are non-interest
bearing.
Note G - Income Taxes
The components of income tax (benefit) expense for each of the three month
periods ended March 31, 2005 and 2004 and for the period from May 25, 2001 (date
of inception) through March 31, 2005:
Period from
May 25, 2001
Three months Three months (date of inception)
ended ended through
March 31, 2005 March 31, 2004 March 31, 2005
------------------- ------------------- -------------------
Federal:
Current $ -- $ -- $ --
Deferred -- -- --
------------------- ------------------- -------------------
-- -- --
------------------- ------------------- -------------------
State:
Current -- -- --
Deferred -- -- --
------------------- ------------------- -------------------
-- -- --
------------------- ------------------- -------------------
Total $ -- $ -- $ --
=================== =================== ===================
As a result of the July 2004 and December 2004 changes in control the Company
has a nominal net operating loss carryforward for income tax purposes. The
amount and availability of any net operating loss carryforwards may be subject
to limitations set forth by the Internal Revenue Code. Factors such as the
number of shares ultimately issued within a three year look-back period; whether
there is a deemed more than 50 percent change in control; the applicable
long-term tax exempt bond rate; continuity of historical business; and
subsequent income of the Company all enter into the annual computation of
allowable annual utilization of the carryforwards.
The Company's income tax expense (benefit) for each of the three month periods
ended March 31, 2005 and 2004 and for the period from May 25, 2001 (date of
inception) through March 31, 2005:
Period from
May 25, 2001
Three months Three months (date of inception)
ended ended through
March 31, 2005 March 31, 2004 March 31, 2005
------------------- ------------------- -------------------
Statutory rate applied to
income before income taxes $ (7,900) $ (12,000) $ (171,000)
Increase (decrease) in income taxes resulting from:
State income taxes -- -- --
Other, including reserve for deferred tax
asset and application of net operating loss
carryforward 7,900 12,000 171,000
------------------- ------------------- -------------------
Income tax expense $ -- $ -- $ --
=================== =================== ===================
9
Donar Enterprises, Inc.
(a development stage company)
Notes to Financial Statements - Continued
Note G - Income Taxes - Continued
Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs and statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
basis of assets and liabilities give rise to deferred tax assets and liabilities
as of March 31, 2005 and 2004, respectively:
March 31, March 31,
2005 2004
--------- ---------
Deferred tax assets
Net operating loss carryforwards $ 7,900 $ 139,000
Less valuation allowance (7,900) (139,000)
--------- ---------
Net Deferred Tax Asset $ -- $ --
========= =========
During each of the three month periods ended March 31, 2005 and 2004, the
reserve for the deferred current tax asset increased (decreased) by
approximately $7,900 and $12,000, respectively.
Note H - Common Stock Transactions
On February 21, 2005, by written consent in lieu of meeting, stockholders
representing 78.9% of the issued and outstanding shares of our common stock
approved a recommendation of our Board of Directors to effect a one share for
ten shares reverse stock split of our common stock, par value $.001 per share,
with all fractional shares rounded down to the nearest whole share. The reverse
split became effective on April 15, 2005. As a result of the reverse split, the
total number of issued and outstanding shares of our common stock decreased from
9,289,647 shares to 928,964 shares, after giving effect to rounding for
fractional shares. In the reverse split calculation, all fractional shares were
rounded down to the nearest whole share. Holders of less than ten shares, prior
to the reverse split, shall receive $0.30 per share as compensation. The effect
of this action is reflected in the Company's financial statements as of the
first day of the first period.
In conjunction with the above discussed reverse stock split, all share
references in the following paragraphs reflect the post-April 15, 2005 reverse
split action.
On May 25, 2001, in connection with the Company's formation and organization,
our the Company's then- President, William Tay, was issued 475,000 shares of
restricted, unregistered common stock as consideration for various
organizational expenses and for his first year of executive services.
On February 27, 2002, the Company's Registration Statement on Form SB-2 (SEC
File No. 333-68702), registering 200,000 shares to be sold at a post-reverse
split effective price of $0.50 per share, was declared effective. Between July
and December 2002, the Company sold an aggregate 65,600 shares of stock under
this Registration Statement.
On January 3, 2003, the Company issued an aggregate of 20,000 restricted shares
of common stock to U.S. Capital Partners, Inc., a financial services company
that provides investment banking and brokerage services, as compensation for
financial services to be provided by U.S. Capital Partners, Inc. to the Company.
The Company estimated the value of these services at $10,000. The issuance was
accomplished in reliance upon Section 4(2) of the Securities Act of 1933, as
amended, and is subject to the resale provisions of Rule 144 and may not be sold
or transferred without registration except in accordance with Rule 144.
Certificates representing the shares bear such a legend.
On June 27, 2003, the Company's Board of Directors authorized the issuance of
141,666 restricted, unregistered shares of common stock to William Tay for his
past services rendered aggregating $70,833.33 (or $0.50 per post- reverse split
share). These securities were sold under the exemptions from registration
provided by Section 4(2) of the Securities Act of 1933, as amended.
10
Donar Enterprises, Inc.
(a development stage company)
Notes to Financial Statements - Continued
Note H - Common Stock Transactions - Continued
In February 2003, the Company sold an aggregate 10,000 shares of common stock,
pursuant to the Registration Statement on Form SB-2, for cash proceeds of
approximately $5,000.
On March 10, 2004, the Company issued 32,080 shares of restricted, unregistered
common stock to Michael Tay, son of then-President and controlling shareholder,
William Tay, as compensation for various services provided to the Company. This
transaction was valued at approximately $16,040 (or $0.50 per reverse split
share). The Company relied upon the exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended, for this transaction.
On April 22, 2004, the Company issued an aggregate 184,618 shares of common
stock to William Tay as consideration of approximately $85,000 in accrued, but
unpaid, officer compensation, reimbursement of trade accounts payable paid by
Mr. Tay on behalf of the Company and in repayment of approximately $7,000 in
unsecured advances made to the Company for working capital. The Company relied
upon the exemptions provided by Section 4(2) of the Securities Act of 1933, as
amended, for this transaction.
Note I - Stock Warrant
As a result of the December 15, 2004 change in control and in consideration for
agreeing to serve as an officer and director of the Company, Timothy P. Halter
was granted a stock warrant to purchase up to 100,000 post-reverse split shares
of the Company's restricted, unregistered common stock at an effective price of
$0.60 per share, in reliance upon the exemption from registration set forth in
Section 4(2) of the Securities Act of 1933, as amended. Mr. Halter may exercise
the warrants, in whole or in part, at any time after the issuance of the
warrants and prior to the expiration of the warrants on December 15, 2007. Due
to the uncertainty related to the ultimate exercise for purchase of any shares
covered by this warrant, the Company did not assign any compensation expense
upon the issuance of this warrant.
The following table presents warrant activity through March 31, 2005:
Weighted
Average
Number of Exercise
Shares Price
--------- ---------
Balance at December 31, 2003 -- --
Issued 1,000,000 $0.06
Effect of April 15, 2005 reverse split (900,000) $0.54
Exercised --
---------
Balance at December 31, 2004 100,000 $0.60
Issued --
Exercised --
---------
Balance at March 31, 2005 100,000 $0.60
========= =====
Note J - Commitment
In March 2003, the Company executed an employment agreement with its
then-President and majority stockholder, William Tay. This agreement, which
originally was scheduled to expire January 1, 2006, required the payment of an
annual base compensation of $85,000 and various fringe benefits (as defined in
the agreement). Concurrent with the July 2004 change in control, this Agreement
was cancelled and the Company has no further performance requirements.
11
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution Regarding Forward-Looking Information
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; changes in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) General
Donar Enterprises, Inc. (Company) was incorporated on May 21, 2001 in accordance
with the Laws of the State of Delaware.
The Company's initial business plan was to provide the conversion and filing of
various documents prepared in accordance with either the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, for small to
mid-sized public companies with the U.S. Securities and Exchange Commission
(SEC) electronically through EDGAR, the SEC's Electronic Data Gathering,
Analysis, and Retrieval system. The Company has never been affiliated with the
SEC in any manner.
On February 27, 2002, the Company's Registration Statement on Form SB-2 (SEC
File No. 333-68702), registering 2,000,000 shares to be sold at a price of $0.05
per share, was declared effective. Between July and December 2002, the Company
sold an aggregate 656,000 shares of stock under this Registration Statement.
The Company has been in the development stage since its formation and has been
unable to become profitable within any segment of its initial business plan.
In June 2004 and December 2004, respectively, the Company experienced separate
changes in control and abandoned its business plan related to providing
electronic filing services for small to mid-sized public companies and began a
search to seek a suitable reverse acquisition candidate through acquisition,
merger or other suitable business combination method.
(3) Results of Operations
The Company had no revenue for the three month period ended March 31, 2005.
During the three month period ended March 31, 2004, the Company realized
revenues of approximately $2,400 for services provided to the former business
activity of providing EDGAR filing services for other third-party companies
filing reports with the Securities Exchange Act of 1934, as amended. ('34 Act).
General and administrative expenses for the three month periods ended March 31,
2005 were approximately $23,000 and $38,000, respectively. These costs relate to
the maintenance of the Company and compliance with the filing requirements of
the '34 Act. Earnings per share for the respective three month periods ended
March 31, 2005 and 2004, on the adjusted post-reverse split weighted-average
shares issued and outstanding, was approximately $(0.03) and $(0.05),
respectively.
12
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Securities Exchange Act of 1934 unless and until
such time that the Company's operating subsidiary begins meaningful operations.
At March 31, 2005 and 2004, respectively, the Company had working capital of
approximately $(23,288) and $(36,265), respectively.
It is the belief of management and significant stockholders that sufficient
working capital necessary to support and preserve the integrity of the corporate
entity will be present. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for working capital may change dramatically as a result of
any business acquisition or combination transaction. There can be no assurance
that the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
Plan of Business
General
The Company intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, the Company does
not intend to combine with a private company which may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal shareholders or general
partners:
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(1) will not have been convicted of securities fraud, mail fraud, tax
fraud, embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
(3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
(4) Liquidity and Capital Resources
During the first quarter of 2005, the Company's controlling stockholder, Timothy
P. Halter, advanced the Company approximately $23,000 to support operations and
provide working capital. These advances are due upon demand and are non-interest
bearing.
It is the belief of management and significant stockholders that sufficient
working capital necessary to support and preserve the integrity of the corporate
entity will be present. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no assurance
that sufficient funds will be available to the Company to allow it to cover the
expenses related to such activities.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.
Item 3 - Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's
President, Chief Executive and Chief Financial Officer. Based upon that
evaluation, the Company's President, Chief Executive and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.
There have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
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Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
On February 21, 2005, by written consent in lieu of meeting, stockholders
representing 78.9% of the issued and outstanding shares of our common stock
approved a recommendation of our Board of Directors to effect a one share for
ten shares reverse stock split of our common stock, par value $.001 per share,
with all fractional shares rounded down to the nearest whole share. The reverse
split became effective on April 15, 2005. As a result of the reverse split, the
total number of issued and outstanding shares of our common stock decreased from
9,289,647 shares to 928,964 shares, after giving effect to rounding for
fractional shares. In the reverse split calculation, all fractional shares were
rounded down to the nearest whole share. Holders of less than ten shares, prior
to the reverse split, shall receive $0.30 per share as compensation. The effect
of this action is reflected in the Company's financial statements as of the
first day of the first period.
Item 5 - Other Information
See Item 4.
Item 6 - Exhibits
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
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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. Donar Enterprises, Inc.
Dated: May 9, 2005 /s/ Timothy P. Halter
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Timothy P. Halter
President, Chief Executive Officer
Chief Financial Officer and Director
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