SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported) : December 31, 2002
Commission File No. 0-24370
ECOLOGICAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-0611748
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1464 East Vineyard Court, Salt Lake City, UT 84106
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(Address of principal executive offices)
801-509-8866
---------------------------------
(Issuer telephone number)
Item 2. Acquisition of Disposition of Assets.
On December 31, 2002, Ecological Services, Inc. (the "Company") acquired
all of the common shares of Stanford Capital International Ltd. ("Stanford") a
Hong Kong company in exchange for 10,000 shares of the Company's common stock.
As a result of this acquisition Messrs. Jacob Nguyen, KM Wong and Sonny K. Hung
were added to the Company's Board of Directors and Mr. Kevin Monson resigned.
The business of Stanford consists of providing financial and corporate
communication services to small and medium sized enterprises located in the
Greater China Region who are listed on exchanges in the Pacific Rim, including
the U.S.
Prior to the acquisition of Stanford, the Company had no operations other
than to seek an entity to acquire or with which to merge.
Item 5. Other Events.
As a result fo the acquisition of Stanford, the Company's shareholders
approved amendments to the Company's Articles of Incorporation to (1) change the
name of the Company to Stanford Capital, Inc. and to increase its authorized
common shares from 20,000,000 shares $.001 par value to 50,000,000 shares $.001
par value.
Item 7. Financial Statements and Exhibits.
a) Financial Statements of Stanford Capital International Limited
b) Proforma Financial information
c) Exhibits:
2.1 Exchange Agreement by and between Ecological Services, Inc. and
Stanford Capital International Limited dated December 31, 2002.
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECOLOGICAL SERVICES, INC.
December 31, 2002 /s/ Kevin Monson
----------------------------------
By: Kevin Monson
Chief Executive Officer
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of Stanford Capital International
Limited
We have audited the accompanying balance sheets of Stanford Capital
International Limited as of March 31, 2002, 2001 and 2000, and the related
statements of income, stockholders' equity and cash flow for each of the three
years in the period ended March 31, 2002, 2001 and 2000, all expressed in Hong
Kong dollars. These financial statements are the responsibility of the Company's
management. Our responsibility is to express and opinion on these financial
statements based on our audits.
We conducted our audit in accordance with auditing standards generally
acceptable in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, of evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statement present fairly, in all material
respects, the financial position of Stanford Capital International Limited as of
March 31, 2002, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended March 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America.
Ho, Sneddon, Chui,
Certified Public Accountants Limited
Hong Kong
June 28, 2002
STANFORD CAPITAL INTERNATIONAL LIMITED
STATEMENT OF INCOME
Year ended March 31
-------------------------------------------------------
2002 2002 2001 2000
US$ HK$ HK$ HK$
Net sales 5,921 45,889 6,000 364,613
============ =========== ============ ============
Gross profit 5,921 45,889 6,000 364,613
Selling, general and
administrative expenses 9,089 70,441 21,526 362,014
------------ ----------- ------------ ------------
(Loss)/Income before
income taxes (3,168) (24,552) (15,526) 2,599
Income taxes expense -- -- -- 1,655
------------ ----------- ------------ ------------
Net (loss)/income (3,168) (24,552) (15,526) 944
============ =========== ============ ============
Basic and fully diluted
(loss)/earnings per
common share (0.32) (2.46) (1.55) 0.09
============ =========== ============ ============
Weighted average number
of shares of common
stock outstanding :
-basic and fully diluted 10,000 10,000 10,000 10,000
============ =========== ============ ============
See accompanying notes to the financial statements.
STANFORD CAPITAL INTERNATIONAL LIMITED
BALANCE SHEETS
March 31
---------------------------------------------------------
2002 2002 2001 2000
US$ HK$ HK$ HK$
CURRENT ASSETS
Cash and cash equivalents 123 951 6,003 33,215
Accounts receivable -- -- -- 86,161
Prepaid tax -- -- 1,655 --
Prepaid expenses 129 1,000 -- --
----------- ------------ ------------- -------------
TOTAL CURRENT ASSETS 252 1,951 7,658 119,376
- - - -
----------- ------------ ------------- -------------
TOTAL ASSETS 252 1,951 7,658 119,376
=========== ============ ============= =============
CURRENT LIABILITIES
Accrued expenses 774 6,000 6,000 6,000
Taxes payable -- -- -- 1,655
Amount due to a director 1,817 14,085 6,240 100,777
----------- ------------ ------------- -------------
TOTAL CURRENT LIABILITIES 2,592 20,085 12,240 108,432
STOCKHOLDER LOANS 1,419 11,000 -- --
- - - -
STOCKHOLDERS' EQUITY
Common stock of par value
HK$1
-authorized, issued and
outstanding
10,000 shares 1,290 10,000 10,000 10,000
Retained(losses)/earnings (5,050) (39,134) (14,582) 944
----------- ------------ ------------- -------------
TOTAL STOCKHOLDERS' EQUITY (3,759) (29,134) (4,582) 10,944
- - - -
----------- ------------ ------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 252 1,951 7,658 119,376
=========== ============ ============= =============
STANFORD CAPITAL INTERNATIONAL LIMITED
STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common stock Retained stockholders'
Shares Amount earnings equity
HK$ HK$ HK$
Balance at January 8, 1999 10,000 10,000 -- 10,000
Net income 944 944
----------------- ----------------
Balance at March 31, 2000 10,000 10,000 944 10,944
Net loss (15,526) (15,526)
----------------- ----------------
Balance at March 31, 2001 10,000 10,000 (14,582) (4,582)
Net loss (24,552) (24,552)
----------------- ----------------
Balance at March 31, 2002 10,000 10,000 (39,134) (29,134)
============ ============== ================= ================
US$ 1,290 US$ (3,759)
See accompanying notes to the financial statements
STANFORD CAPITAL INTERNATIONAL LIMITED
STATEMENTS OF CASH FLOWS
Year ended March 31
-----------------------------------------------------------
2002 2002 2001 2000
US$ HK$ HK HK$
Cash flow from operating activities
Net(loss)/income (3,168) (24,552) (15,526) 944
Adjustments to reconcile net
income to net cash provided by
operating activities
Changes in operating assets
and liabilities
Prepaid tax -- -- (1,655) --
Prepaid expenses (129) (1,000) -- --
Accounts receivable -- -- 86,161 (86,161)
Accrued expenses -- -- -- 6,000
Taxes payable 214 1,655 (1,655) 1,655
----------- ------------- ------------- --------------
Net cash (used) provided by
operating activities (3,083) (23,897) 67,325 (77,562)
Net cash (used) provided by
financing activities
Increase/(Decrease) in
amount due to director 1,012 7,845 (94,537) 100,777
Increase in loan from
stockholders 1,419 11,000 -- --
----------- ------------- ------------- --------------
Net (decrease)/increase
in cash and cash equivalents (652) (5,052) (27,212) 23,215
Cash and cash equivalents at
beginning of year 775 6,003 33,215 10,000
----------- ------------- ------------- --------------
Cash and cash equivalents at
the end of year 123 951 6,003 33,215
=========== ============= ============= ==============
Supplementary disclosures of cash
flow information
Cash paid during the year for:
Income taxes paid (214) (1,655) 1,655 --
=========== ============= ============= ==============
See accompanying notes to the financial statements
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
Activities and organization
Stanford Capital International Limited (the "Company" was incorporated in
the Hong Kong Special Administrative Region of the Peoples Republic of
China ("Hong Kong") on January 8, 1999.
The principal activities of the Company comprise the provision of financial
consultancy services. The selling and administrative activities are
performed in Hong Kong.
Business risks
Due to the nature of the business in which the Company operates,
substantially all of the sales are generated from one-off contracts of
short duration. Thus the Company's ability to operate depends on being able
to obtain new contracts.
Basis of preparation
The financial statements of the Company have been prepared in accordance
with accounting principles generally accepted in the United States of
America ("U.S. GAAP").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits, interest
bearing savings accounts, and time certificates of deposit with an original
maturity of three months or less.
Revenue recognition
The Company recognizes revenue when the outcome of a transaction involving
the rendering of services can be estimated reliably by reference to the
stage of completion of the transaction at the balance sheet date and
collectibility for such sales is reasonable assured.
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income taxes
Deferred income taxes are provided using the asset and liability method.
Under this method, deferred income taxes are recognized for all significant
temporary differences and classified as current or non-current based upon
the classification of the related asset and liability in the financial
statements. A valuation allowance is provided to reduce the amount of
deferred tax assets if it is considered more likely than not that some
portion of, or all, the deferred tax asset will not be realized.
Net earnings per share ("EPS")
Basic EPS excludes dilution and is computed by dividing net income
attributable to common shareholders by the weighted average of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock (warrants to purchase common stock and common stock options) were
exercised or converted into common shares. EPS for all period presented
have been computed in accordance with Statement of Financial Accounting
Standard ("SFAS") No. 128 "Earning Per Share" issued by the Financial
Accounting Standards Board.
In 2000, 2001 and 2002 there were no outstanding securities or other
contracts to issue common stock.
Foreign currency translation
Revenues and expenses are translated at average exchange rate during the
year. Gains and losses from foreign currency transactions are included in
income.
Translation into United States Dollars
The financial statements of the Company are maintained and expressed in
Hong Kong dollars. The translation of Hong Kong dollar amounts into US
dollars are for convenience only and have been made at the rate of HK$7.75
to US$1, the approximate free rate of exchange at March 31, 2002. Such
translation should not be construed as representations that the Hong Kong
dollar amounts could be converted into US dollars, at that rate or any
other rate.
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Staff retirement plan costs
The Company's costs related to the staff retirement plans are charged to
the statement of income as incurred.
Use of estimates
The preparation of financial statement in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Comprehensive income
The Company reports comprehensive income in accordance with SFAS No.130,
"Reporting Comprehensive Income". Accumulated other comprehensive income
represents translation adjustments and is included in the stockholders'
equity section of the balance sheet.
3. INCOME TAXES
Income is subject to taxation only in Hong Kong.
The components of (loss) income before income taxes are as follows:
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Hong Kong (24,552) (15,526) 2,599
=========== =========== ==========
Hong Kong companies are subject to Hong Kong taxation on their activities
conducted in Hong Kong. Under the current Hong Kong laws dividends and
capital gains arising from realization of investments are not subject to
income taxes.
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
3. INCOME TAXES
The provision for income taxes consists of the following:
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Current tax:
Hong Kong -- -- 1,655
============ ========== ============
A reconciliation between the provision for income taxes computed by
applying the United States statutory tax rate to income before taxes and
the actual provision for income taxes is as follows:
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Applicable U.S. federal tax rate 34% 34% 34%
Provision for income taxes at the
applicable U.S. federal tax rate on
income for the year (8,347) (5,279) 884
Non-deductible expense -- -- 2,635
International rate difference 4,419 2,795 (1,864)
Valuation allowance for Loss c/f 3,928 2,484 --
------------ ------------- -------------
Hong Kong -- -- 1,655
============ ============= =============
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Deferred tax assets:
Operating loss c/f 6,412 2,484 --
Valuation allowance (6,412) (2,484) --
------------ ------------ -------------
Hong Kong -- -- --
============ ============ =============
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
3. INCOME TAXES
At March 31, 2002, the Company had tax loss carryforwards for Hong Kong tax
purposes, subject to the agreement of the Hong Kong Inland Revenue
Department, amounting to approximately HK$6,412, which have no expiration
date. Due to the uncertainty of the realization of these operating loss
carryforwards, the Company established a valuation allowance against these
carryforward benefits for their full amount.
4. STAFF RETIREMENT PLAN
According to the Mandatory Provident Fund ("MPF") legislation regulated by
the Mandatory Provident Fund Scheme Authority in Hong Kong, with effect
from December 1, 2000, the Company is required to participate in an MPF
scheme operated by approved trustees in Hong Kong and to make contributions
for its eligible employees. The contribution borne by the Company are
calculated at 5% of the salaries and wages (monthly contribution is limited
to 5% of HK$20,000 for each eligible employee) as calculated under the MPF
legislation. No contributions were made for the years ended March 31, 2002
and March 31, 2001.
5. COMMITMENTS AND CONTINGENCIES
As at March 31, 2002 the Company had no commitments or contingencies
outstanding.
6. RELATED PARTY TRANSACTIONS
The amount due to a director is unsecured, interest free and bears no fixed
term of repayment.
The stockholder loans are unsecured, interest free and bears no fixed term
of repayment.
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Amount due to a director 14,085 6,240 100,777
Stockholder loans 11,000 -- --
=========== =========== ============
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
7. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Due to the nature of the financial consulting business, the Company does
not generate substantial repeat business from existing customers. Further,
the Company's sales are generated from small number of contracts resulting
in sales to any one customer exceeding 10% or more of sales for the years
ended March 31, 2002, 2001 and 2000.
Percentage of accounts receivable
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Five largest receivable balances -- -- 100%
========== ========= ==========
The Company is not aware of any financial difficulties being experienced by
its major customers.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.107,
"Disclosure about Fair Value of Financial Instruments". The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. The estimates
presented herein are not necessarily indicative of amounts that the Company
could realize in a current market exchange.
9. SEGMENT INFORMATION
The Company has adopted SFAS NO.131, "Disclosure about Segments of an
Enterprise and Related information", which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products and services, geographic areas and major
customers. SFAS No.131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance.
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
9. SEGMENT INFORMATION
For the periods being reported, the Company only carried out financial
consulting business and, consequently no breakdown by segment is considered
necessary.
All of the Company's sales were coordinated through the Hong Kong office
and an analysis of location of contract is as follows:
Year ended March 31
2002 2001 2000
HK$ HK$ HK$
Net sales:
Hong Kong 24,000 -- 358,613
Other than Hong Kong 21,889 6,000 6,000
========= ========== ==========
The Company operates only in one geographic area and all of its assets are
located in Hong Kong.
10. QUARTERLY DATA
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
HK$ HK$ HK$ HK$
2002
Net sales 37,950 -- 7,939 --
Gross profit 37,950 -- 7,939 --
Operating(loss)/profit 33,450 (13,761) (3,861) (40,380)
Net(loss)/income 33,450 (13,761) (3,861) (40,380)
Basic and fully diluted
(loss)/earnings per
common share 3 (1) (0) (4)
2001
Net sales -- -- -- 6,000
Gross profit -- -- -- 6,000
Operating(loss)/profit (7,290) (1,468) (2,295) (4,473)
Net(loss)/income (7,290) (1,468) (2,295) (4,473)
Basic and fully diluted
(loss)/earnings per
common share (0.73) (0.15) (0.23) (0.45)
STANFORD CAPITAL INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
10. QUARTERLY DATA
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
HK$ HK$ HK$ HK$
2000
Net sales 100,000 110,000 98,000 56,613
Gross profit 100,000 110,000 98,000 56,613
Operating(loss)/profit 81,426 85,048 96,031 (261,561)
Net(loss)/income 81,426 85,048 96,031 (261,561)
Basic and fully diluted
(loss)/earnings per
common share 8.14 8.50 9.60 (26.16)
STANFORD CAPITAL INTERNATIONAL LIMITED
Balance Sheets
As at September 30, 2002
March 31, 2002
US$ HK$ HK$
CURRENT ASSETS
Cash and cash equivalents 3,368 26,272 951
Account receivables
Prepaid Expenses 385 3,000 1,000
TOTAL CURRENT ASSETS 3,753 29,272 -
-------- -------- -------
TOTAL ASSETS 29,272 1,951
======== ======== =======
CURRENT LIABILITIES
Accrued expenses 4,615 36,000 6,000
Amount due to a director 1,549 12,085 14,085
-------- -------- -------
TOTAL CURRENT LIABILITIES 6,165 48,085 20,085
-------- -------- -------
STOCKHOLDER LOANS 1,410 11,000 11,000
-------- --------
STOCKHOLDERS' EQUITY
Common stock of par value HK$1
authorised, issued and outstanding
10,000 shares 1,282 10,000 10,000
Retained (losses)/earnings (5,104) (39,813) (39,134)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY (3,822) (29,813) 29,134
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 3,753 29,272 1,951
-------- -------- --------
STANFORD CAPITAL INTERNATIONAL LIMITED
STATEMENT OF INCOME
For the period from April 1, 2002 to September 30, 2002
US$ HK$
----- -----
Net Sales 12,124 94,571
Cost of Sales (7,565) (59,010)
Gross Profits 4,559 35,561
Selling, General and
Administrative expenses (4,646) (36,240)
Net loss (87) (679)
========= ==========
Basic and fully diluted
loss per common share 0.01 0.06
========= ==========
Weighted average number of shares
of common stock outstanding:
basic and fully diluted 10,000 10,000
========= ==========
STANFORD CAPITAL INTERNATIONAL LIMITED
STATEMENTS OF CASH FLOWS
For the period from April 1, 2002 to September 30, 2002
US$ HK$
Cash flow from operating activities
Net Loss (87) (679)
Adjustments to reconcile net loss to
Net cash provided by operating activities
Change in operating assets and liabilities
Prepaid Expenses (256) (2,000)
Acounts Receivables 0 0
Accrued expenses 3,846 30,000
Tax Payable 0 0
------- --------
Net cash (used)/ provided by operating activities 3,503 27,321
Net cash (used) provided by financing activities
Increase/(Decease) in amount
due to director (256) (2,000)
Increase in loan from stockholders 0 0
------- --------
Net (decrease)/ increase in cash and cash equivalents 3,246 25,321
Cash and cash equivalents at beginning of year 122 951
Cash and cash equivalents at the end of year 3,368 26,272
======= ========
ECOLOGICAL SERVICES, INC. AND
STANFORD CAPITAL INTERNATIONAL LIMITED
PROFORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 2002
Ecological Stanford ProForma ProForma
Services, Inc. Capital Adjustments
Limited
----------------- --------------- --------------- ----------------
Net Sales - $ 5,945 $ 5,945
Cost of Goods Sold - - -
----------------- --------------- ----------------
Gross Profit - 5,945 5,945
Selling, General & Administrative $6,416 9,089 15,505
Expense
----------------- --------------- ----------------
Net Loss $(6,416) $(3,168) - $ (9,584)
================= =============== ================
Net Loss Per Share $(.01) $(.32) - $(.01)
================= =============== ================
Weighted Average Number of Common 18,498,240 10,000 - $ 18,508,240
Shares Outstanding
================= =============== ================
ECOLOGICAL SERVICES, INC. AND
STANFORD CAPITAL INTERNATIONAL LIMITED
PROFORMA COMBINED STATEMENTS OF OPERATIONS
SIX-MONTHS ENDED SEPTEMBER 30, 2002
Ecological Stanford ProForma ProForma
Services, Inc. Capital Adjustments
Limited
------------------ --------------- ---------------- -----------------
Net Sales - $12,124 $ 12,124
Cost of Goods Sold - 7,565 7,565
------------------ --------------- -----------------
Gross Profit - 4,559 4,559
Selling, General & Administrative $24,463 4,646 29,109
Expense
------------------ --------------- -----------------
Net Loss $(24,463) $(87) - $ (25,550)
================== =============== =================
Net Loss Per Share $(.01) $(.01) - $(.01)
================== =============== =================
Weighted Average Number of Common 19,984,625 10,000 - $ 19,994,625
Shares Outstanding
================== =============== =================