UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2001
-----------------
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 033-01289-D
-----------
Chapeau, Inc.
-------------
(Exact name of small business issuer as specified in charter)
Utah 87-0431831
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Greg Street
Sparks , Nevada 89431
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(916) 780-6764
--------------
(Issuer's Telephone number, including area code)
9525 Windrose Lane, Granite Bay, CA 95746
--------------------------------------------
(Former name, former address, and former fiscal
year, if changed since last report)
Check whether the issuer (1) has 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
------ ------
As of April 4, 2002, the Issuer had 12,420,950 shares of its common stock,
par value $0.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
------ ------
1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Chapeau, Inc. (the "Company"), has included the unaudited condensed
consolidated balance sheets of the Company as of December 31, 2001, and June 30,
2001 (the end of the Company's most recently completed fiscal year), and
unaudited condensed consolidated statements of operations for the three and six
months ended December 31, 2001 and 2000, and for the period from February 3,
2000 (date of inception of the development stage), to December 31, 2001, and
unaudited condensed consolidated statements cash flows for the six months ended
December 31, 2001 and 2000, and for the period from February 3, 2000 (date of
inception of the development stage), through December 31, 2001, together with
unaudited condensed notes thereto. In the opinion of management of the Company,
the financial statements reflect all adjustments, all of which are normal
recurring adjustments, necessary to fairly present the consolidated financial
condition, results of operations, and cash flows of the Company for the interim
periods presented. The financial statements included in this report on Form 10-
QSB should be read in conjunction with the audited financial statements of the
Company and the notes thereto for the year ended June 30, 2001, included in the
annual report of the Company on Form 10-KSB.
2
CHAPEAU, INC. AND SUBSIDIARY
dba BLUEPOINT ENERGY PRODUCTS, INC.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
2001 2001
---------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 36,395 $ 108,610
Note receivable 70,326 108,301
Inventories and related deposits 262,878 233,010
Other current assets 24,927 28,159
---------- ----------
Total Current Assets 394,526 478,080
Property and Equipment, net
of accumulated depreciation of $5,019
and $461 36,483 8,008
Intangible Assets, net of accumulated
amortization of $88,052 and $24,654 381,929 445,327
Other Assets 15,086 21,567
---------- ----------
Total Assets $ 828,024 $ 952,982
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 201,477 $ 121,680
Accrued liabilities 235,921 65,852
Convertible promissory notes, less
unamortized discount 526,470 51,635
---------- ----------
Total Current Liabilities 963,868 239,167
---------- ----------
Stockholders' Equity (Deficit)
Preferred Stock, $0.001 par value;
5,000,000 shares authorized; none
issued and outstanding - -
Common stock, $0.001 par value;
325,000,000 shares authorized;
12,000,000 shares issued and outstanding 12,000 12,000
Additional paid-in capital 2,200,582 1,959,658
Deficit accumulated prior to date of
inception of the development stage (259,373) (259,373)
Deficit accumulated from date of
inception of the development stage (2,089,053) (998,470)
---------- -----------
Total Stockholders' Equity (Deficit) (135,844) 713,815
---------- -----------
Total Liabilities and Stockholders'
Equity (Deficit) $ 828,024 $ 952,982
========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
CHAPEAU, INC. AND SUBSIDIARY
dba BLUEPOINT ENERGY PRODUCTS, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION)
For the period
from February 3,
2000 (date of
For the Three Months For the Six Months inception of the
Ended Ended development
December 31, December 31, stage) through
---------------------- ----------------------- December 31,
2001 2000 2001 2000 2001
---------- ---------- ----------- ---------- -----------
General and administra-
tive expenses $ 284,260 $ 8,129 $ 602,223 $ 39,160 $ 1,028,802
Research and
development expense 86,242 - 227,658 - 440,661
In-process research
and development
acquired - - - - 376,624
---------- ---------- ----------- ---------- -----------
Loss From Operations (370,502) (8,129) (829,881) (39,160) (1,846,087)
Interest income 1,418 15,014 3,200 30,281 72,571
Interest expense (8,143) - (8,143) - (8,143)
Interest expense from
amortization of
discount on convertible
promissory notes (104,571) - (255,759) - (307,394)
---------- ---------- ------------ --------- -----------
Net Income (Loss) $ (481,798) $ 6,885 $(1,090,583) $ (8,879) $(2,089,053)
---------- ---------- ----------- ---------- -----------
Basic and Diluted
Income (Loss)
Per Common Share $ (0.04) $ 0.00 $ (0.09) $ (0.00)
========== ========== =========== ==========
Basic and Diluted
Weighted-Average
Common Shares
Outstanding 12,000,000 8,500,000 12,000,000 8,500,000
========== ========== =========== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
CHAPEAU, INC. AND SUBSIDIARY
dba BLUEPOINT ENERGY PRODUCTS, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the period
from February 3,
For the Six Months 2000 (date of
Ended inception of
December 31, the development
-------------------------- stage) through
2001 2000 2001
----------- ----------- -----------
Cash Flows From Operating Activities
Net loss $(1,090,583) $ (8,879) $(2,089,053)
Adjustments to reconcile net
loss to net cash used
in operating activities:
Write-off of in-process
research and development
acquired - - 376,624
Amortization of discount
on convertible promissory notes 255,759 - 307,394
Depreciation and amortization 67,821 - 92,936
Interest income accrued on
advances to specialized - - (5,348)
Changes in assets and
liabilities:
Inventories and related
deposits (29,868) - (262,878)
Other current assets 3,232 (283) (21,760)
Other assets 6,481 - (15,086)
Accounts payable 79,797 (3,626) 185,726
Accrued liabilities 170,069 (100) 228,404
----------- ----------- -----------
Net Cash Used In Operating
Activities (537,292) (12,888) (1,203,041)
Cash Flows From Investing ----------- ----------- -----------
Activities
Issuance of note receivable - (200,000) (200,000)
Collection of note receivable 37,975 - 129,674
Advances paid to Specialized
prior to acquisition - - (397,464)
Cash acquired in acquisition
of Specialized, net of
acquisition costs paid - - 97,018
Purchase of property and
equipment (32,898) - (37,077)
----------- ------------ -----------
Net Cash Provided By (Used In)
Investing Activities 5,077 (200,000) (407,849)
Cash Flows From Financing Activities
Proceeds from issuance of common
stock, net of offering costs - - 987,285
Proceeds from issuance of
convertible promissory notes
and related beneficial
conversion feature 352,078 - 422,578
Proceeds from issuance
of warrants and common stock
related to convertible
promissory notes 107,922 - 237,422
Net Cash Provided By Investing ----------- ----------- -----------
Activities 460,000 - 1,647,285
----------- ----------- -----------
Net Increase (Decrease) In Cash
And Cash Equivalents (72,215) (212,888) 36,395
Cash And Cash Equivalents
At Beginning Of Period 108,610 989,555 -
----------- ----------- -----------
Cash And Cash Equivalents At
End Of Period $ 36,395 $ 776,667 $ 36,395
=========== =========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
CHAPEAU, INC. AND SUBSIDIARY
dba BLUEPOINT ENERGY PRODUCTS, INC.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(A) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Chapeau, Inc. and subsidiary (the "Company"), have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, these financial statements do not include all of the information
and disclosures required by accounting principles generally accepted in the
United States of America for complete financial statements. These financial
statements should be read in conjunction with the annual financial statements
and the notes thereto for the year ended June 30, 2001 and for the period from
February 3, 2000 (date of inception of the development stage) through June 30,
2001, included in the Company's annual report on Form 10-KSB. In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to fairly present the Company's consolidated financial
position as of December 31, 2001, its consolidated results of operations for the
three months ended December 31, 2001and 2000, and its consolidated results of
operations and cash flows for the six months ended December 31, 2001 and 2000,
and for the period from February 3, 2000 (date of inception of the development
stage), through December 31, 2001. The results of operations for the three
months and six months ended December 31, 2001, may not be indicative of the
results that may be expected for the year ending June 30, 2002.
(B) Organization and Nature of Operations
Chapeau was organized under the laws of the State of Utah on September 19, 1985.
The Company was engaged in the operation of sports clothing stores but was
unsuccessful and closed its final store in May 1989. The Company was dormant
from May 1989 until February 3, 2000 when two principal shareholders of the
Company (the "Selling Shareholders") and the Company entered into a Stock
Purchase Agreement with a group of investors (the "Purchasers").
Under the terms of the Stock Purchase Agreement, the Selling Shareholders
converted notes payable and accrued interest totaling $16,602 into capital of
the Company with no additional shares being issued, the Purchasers acquired
5,000,000 shares of common stock from the Selling Shareholders by a cash payment
of $300,000, or $0.06 per share, and the Selling Shareholders and one of the
Purchasers returned 7,820,049 shares of common stock to the Company for
cancellation for no consideration. No stated or unstated rights were given in
exchange for the cancellation of the common stock. No gain or loss was
recognized in connection with the conversion of the notes payable and accrued
interest to capital. The former board of directors and officers resigned and a
new board of directors and new officers were appointed by the Purchasers.
As a result of the reorganization, the Company was reactivated on February 3,
2000 as a development stage company. The development stage activities of the
Company have included raising capital, acquisition of Specialized Energy
Products, Inc. ("Specialized"), and research, development and marketing
activities relating to Specialized's packaged co-generation and power generation
system for sale to the electrical power market.
(C) Basic and Diluted Income (Loss) Per Share
Basic income (loss) per share amounts are computed by dividing net income (loss)
by the weighted-average number of common shares outstanding during each period.
Diluted income (loss) per share amounts are computed assuming the issuance of
common stock for potentially dilutive common stock equivalents. Antidilutive
outstanding stock options, warrants and convertible promissory notes have been
excluded from the diluted income (loss) per share calculations. None of the
total options or warrants to acquire 4,540,000 shares of common stock
outstanding at December 31, 2001, or the common shares issuable upon conversion
of $660,000 of promissory notes were included in the computations of diluted
income (loss) per share.
6
(D) Convertible Promissory Notes and Warrants
During the quarter ended September 30, 2001, the Company issued $135,000 of 0%
convertible promissory notes and warrants to purchase 540,000 shares of common
stock for net proceeds of $135,000. The promissory notes may be converted at the
option of the holders at any time from the date issued into common stock at
$0.25 per share. As an alternative to conversion, the principal balance is
payable at maturity and the note holders are entitled to receive one share of
common stock for each $3 of principal outstanding at that date. The promissory
notes are secured by all of the assets of the Company and mature 120 days after
issuance.
The warrants to purchase common stock are exercisable at the lesser of $0.25 per
share or 85% of the average of the closing prices of the common stock for the 30
trading days immediately preceding the date of exercise. The warrants expire
120 days from the date of issuance. The fair value of the warrants was $52,990
($0.098 per share) on the dates issued, which was determined using the Black-
Scholes Option-Pricing model with the following weighted-average assumptions:
risk-free interest rate of 3.4%, expected dividend yield of 0%, expected
volatility of 186%, and expected lives of 120 days.
The proceeds from the notes and warrants were allocated to the financial
instruments issued based upon their relative fair values and resulted in
allocating $97,691 to the convertible promissory notes and $37,309 to the
warrants. The market value of the Company's stock on the days the promissory
notes were issued ranged from $0.22 to $0.39 per share. In accordance with the
Emerging Issues Task Force ("EITF") Issue No. 98-5, "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios," and EITF Issue No. 00-27, "Application of Issue No. 98-5 to
Certain Convertible Instruments," the Company determined that the convertible
note holders had received a beneficial conversion feature on the dates the notes
were issued. The intrinsic value of the beneficial conversion feature was
$14,464. The allocation of the proceeds to the beneficial conversion feature and
to the warrants resulted in the Company recognizing a discount of $51,773 on the
promissory notes. The discount was amortized as interest expense over the term
of the promissory notes.
During the quarter ended December 31, 2001, the Company issued $325,000 of 10%
convertible promissory notes, of which $75,000 is with the Chairman of the Board
of Directors of the Company, and warrants to purchase 1,300,000 shares of common
stock for net proceeds of $325,000. In connection with these notes, the
Company also agreed to issue 107,250 shares of common stock of the Company to
the note holders as additional consideration in the form of a "success fee" for
these new notes. The promissory notes may be converted at the option of the
holders at any time from the date issued into common stock at $0.25 per share.
The promissory notes are secured by all of the assets of the Company and mature
180 days after issuance. The warrants to purchase common stock are exercisable
at the lesser of $0.25 per share or 85% of the average of the closing prices of
the common stock for the 30 trading days immediately preceding the date of
exercise. The market value of the Company's stock on the days the promissory
notes were issued ranged from $0.13 to $0.25 per share. Consequently, there was
no intrinsic value related to the beneficial conversion feature of the notes.
During the quarter ended December 31, 2001, four promissory notes (totalling
$210,000) that were issued during May, June and July 2001 matured. In
accordance with the provision of the notes, the Company has, subsequent to
December 31, 2001, issued 70,000 shares of common stock to the note holders
pursuant to the alternative conversion rights in the notes. These notes were
neither paid by the Company in accordance with the terms of the notes nor were
the notes converted into common stock by the note holders. In February 2002,
the Company has entered into forebearance agreements with each of these note
holders, to be effective as of the original due dates (in October 2001) of the
notes, whereby a) the due dates of notes were extended to May 2002, b) the notes
commenced bearing interest at 10% per annum from the original due dates of the
notes, c) the expiration dates of the associated warrants to acquire 840,000
shares of common stock were extended to May 2002, and d) the Company agreed to
issue 111,300 shares of common stock as additional consideration to the note
holders. In connection with the forbearance agreements, the Company paid accrued
interest on the related notes through December 31, 2001, but has failed to make
the required monthly interest payments subsequent thereto. The Company
accounted for these transactions under the forebearance agreements as a troubled
debt restructuring with no gain or loss recognized from these transactions.
The total fair value of the new and extended warrants was $174,392 ($0.081 per
share) on the dates the warrants were issued or extended. The fair value of the
warrants was determined using the Black-Scholes Option-Pricing model with the
7
following weighted-average assumptions: risk-free interest rate of 2.0%,
expected dividend yield of 0%, expected volatility of 179%, and expected lives
of 194 days.
The proceeds from the new notes and related warrants and stock were allocated to
the financial instruments issued based upon their relative fair values and
resulted in allocating $254,387 to the convertible promissory notes and $70,613
to the warrants and stock. Furthermore, an additional discount of $118,538,
equal to the fair value on the dates of the forbearance agreements of the
additional stock to be issued and warrants to be extended, was recorded against
the extended promissory notes. The total discount of $189,151 for the quarter
ended December 31, 2001 is being amortized as interest expense over the term of
the new promissory notes or over the extended term of the notes subject to the
forebearance agreements, which ever applies. Information regarding notes
payable for the six months ended December 31, 2001 is as follows:
Unamortized Promissory
Promissory Discount on Notes, Less
Notes, Promissory Unamortized
Gross Notes Discount
----------- ----------- -----------
Balance at June 30, 2001 $ 200,000 $ (148,365) $ 51,635
Issuance of new notes 460,000 (122,386) 337,614
Extension of existing
notes - (118,538) (118,538)
Amortization of discount - 255,759 255,759
----------- ----------- -----------
Balance at December 31,
2001 $ 660,000 $ (133,530) $ 526,470
=========== =========== ===========
Subsequent to December 31, 2001, the Company has issued additional convertible
promissory notes in the aggregate amount of $150,000 during the quarter ended
March 31, 2002. These notes are due 180 days after issuance, bear interest at
10% per annum, and are secured by all of the assets of the Company. In
association with these new notes, the Company issued warrants to acquire an
aggregate of 600,000 shares of common stock at an exercise price of the lower of
$0.25 per share or 85% of the average of the closing prices for the 30 trading
days immediately preceding the date of exercise. Additionally, the Company
agreed to issue 49,500 shares of common stock of the Company to the note holders
as a "success fee" for these new notes.
Also, subsequent to December 31, 2001, two promissory notes (totalling $125,000)
that were issued during the quarter ended September 30, 2001 matured. In
accordance with the provisions of these notes, the Company has issued 41,650
shares of common stock to the note holders pursuant to the alternative
conversion rights in the notes. These notes were neither paid by the Company in
accordance with the terms of the notes nor were the notes converted into common
stock by the note holders. These notes were in default and the Company has
entered into forebearance agreements with each of these note holders whereby a)
the due dates of notes were extended to May 2002, b) the notes commenced bearing
interest at 10% per annum from the original due dates of the notes, c) the
expiration dates of the associated warrants to acquire 500,000 shares of common
stock were extended to May 2002, and d) the Company agreed to issue 41,250
shares of common stock as additional consideration to the note holders. For
accounting purposes, the Company will account for these transactions under the
foreberance agreements as a troubled debt restructuring with no gain or loss
recognized from these transactions. The fair value (as of the dates of the
forbearance agreements) of the equity instruments issued, granted, or extended
under the forebearance agreements will be accounted for as additional discount
to the extended promissory notes and amortized as interest expense over the
extended term of the promissory notes.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Forward Looking Statements
This report and other information made publicly available by the Company
from time to time may contain certain forward looking statements and other
information relating to the Company and its business that are based on the
beliefs of management of the Company and assumptions made concerning information
then currently available to management. Such statements reflect the views of
management of the Company at the time they are made and may not be accurate
descriptions of the future. The discussion of future events, including the
business prospects of the Company, is subject to the material risks listed below
and based on assumptions made by management. These risks include the viability
of the planned market penetration that the Company intends to make as a result
of the Specialized merger, the ability of the Company to identify and negotiate
transactions that provide the potential for future shareholder value, the
ability of the Company to attract the necessary additional capital to permit it
to take advantage of opportunities with which it is presented, and the ability
of the Company to generate sufficient revenue such that it can support its
current cost structure and planned future operations. Should one or more of
these or other risks materialize or if the underlying assumptions of management
prove incorrect, actual results of the Company may vary materially from those
described in the forward looking statements. The Company does not intend to
update these forward looking statements, except as may occur in the regular
course of its periodic reporting obligations.
Overview
Managerial control of the Company was transferred to a new board of
directors in February 2001. Prior to that time, former management had
maintained the Company in good standing and had been seeking an investment or
merger opportunity. After the managerial change, the Company acquired
Specialized Energy Products, Inc. (Specialized) on April 11, 2001. Prior to its
acquisition, the Company had advanced Specialized $397,464 and Specialized had
commenced the development of a prototype power generation system. Subsequent to
its acquisition of Specialized, the Company has continued the development of
this power generation system.
Operations
The Company has been in the development stage since February 3, 2000 and
has had no sales through December 31, 2001, or subsequent thereto. Prior to the
change in managerial control, the expenses of the Company were not significant
and were composed of general and administrative expenses principally for travel
and professional fees. The Company has incurred general and administrative
expenses in the amount of $1,028,802, and research and development costs of
$440,661 for the period from February 3, 2000 (date of inception of the
development stage) to December 31, 2001, principally since February 2001.
General and administrative expenses principally consist of compensation to
management and the board of directors, legal fees, and consulting services.
Research and development expenses principally consist of employee compensation,
prototype materials, and outside service costs.
At December 31, 2001, the Company had current assets of $394,526 and
current liabilities of $963,868 resulting in a working capital deficit of
$569,342. Current assets principally consist of inventories and deposits toward
the purchase of inventories. Inventories and related deposits principally
represent amounts paid towards engines and related generators for the first ten
systems to be assembled. Current assets also include a note receivable from
another corporation which was originally issued in the amount of $200,000 and
was originally due April 4, 2001, but is currently in default. The note bears
interest at the rate of 8% per annum and is guaranteed by an individual. The
debtor has made principal payments of $129,674 through December 31, 2001.
Management of the Company believes that the note will be collected in full,
either from the debtor or from the guarantor.
9
Plans for Research and Development
The Company has finalized development of a prototype of its principal
Combined Heat and Power ("CHP") generation system. The CHP generation system
utilizes a Deutz Model 1015 natural gas reciprocating engine, is fully
functional and is in process of receiving UL Listing. The Company has developed
and is in the process of finalizing commercial application of it's exclusively
licensed and patented Hyrdrogen Reformation emission process utilizing the
Company's exclusive EGR (Exhaust Gas Recirculation) system. The Company
believes this emission process shall allow the BluePoint product line the
ability to meet and exceed the most stringent AQMD (Air Quality Management
District) standards in the domestic market while maintaining the characteristics
of "lean burn engine technology", thus producting high engine efficiencies and
longer engine life. The Company is in the process of finalizing an exclusive
supply agreement between the Company and Deutz AG. The Company is working with
Encorp Corporation for the development of various digital control systems to be
incorporated into the CHP generation system.
Dependent on its ability to obtain additional financing, the Company
anticipates the development of several different CHP generation systems over the
next twelve months, including a Deutz 300kW system and a 325kW system utilizing
a Cummins natural gas engine.
Liquidity and Sources of Financing
The Company is currently negotiating for the sale of its CHP generation
systems to several public utilities and other energy service companies.
Management anticipates that the Company will be able to partially finance its
operations from the proceeds from these sales, if realized. The Company is also
currently attempting to arrange additional bridge financing to increase working
capital. In addition, the Company is seeking to obtain financing from a private
placement of its common stock or other equity equivalent vehicles. To that end,
the company signed a non-binding financial advisory agreement in December 2001
with Bank of Oklahoma Securities Corp., Corporate Finance Group, which is a
wholly owned subsidiary of Bank of Oklahoma Financial Corp. The Company is
reliant upon the success of its efforts to obtain additional financing in order
to satisfy its cash requirements pursuant to its plan of operations. There is no
assurance that sales or additional financing will be realized.
Plan of Operations
The Company plans to focus sales and marketing of its CHP generation
systems in California initially, with plans to expand distribution to the
domestic United States and worldwide, particularly in Mexico. The Company shall
seek to form strategic partnerships with certain companies engaged in the
distribution of power generation products utilizing a number of technologies for
both domestic and international sales. The Company is currently in discussion
with such companies engaged in the distribution of power generation products for
distribution and purchase of the companies initial products. In addition, the
Southern Califorina Gas Company has agreed to sponsor by way of equity
investment in up to three "showcase centers" in their service territory to show
the "on-site" benefit to their customers of Distributed Generation and Co-
generation generally and the BluePoint Product specifically and exclusively at
this time.
If the Company achieves the financing necessary to pursue its plan of
operations for the next 12 months, it is anticipated that the Company shall need
to add approximately fifty additional employees during the onset of that period.
10
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Subsequent to September 30, 2001, all of the promissory notes (totalling
$335,000) that were issued during the quarters ended June 30 and September 30,
2001 matured. These notes were neither paid by the Company in accordance with
the terms of the notes nor were the notes converted into common stock by the
note holders. In February 2002, but effective as of the original maturity dates
of the various notes, the Company entered into forebearance agreements with each
of these note holders whereby a) the due dates of notes were extended to May
2002, b) the notes commenced bearing interest at 10% per annum from the original
due dates of the notes,
c) the expiration dates of the associated warrants to acquire 1,340,000 shares
were extended to May 2002, and
d) the Company agreed to issue 152,700 shares of common stock as additional
consideration to the note holders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document
------ -------- --------------------------------------------
10.1 10 Secured Convertible Promissory Note (Example)
10.2 10 Warrant Certificate for the Purchase of
Common Stock (Example)
10.3 10 Security Agreement (Example)
10.4 10 Subscription Agreement (Example)
10.5 10 Amendment and Forbearance Agreement Dated
January 8, 2002 (Example)
Reports on Form 8-K
During the quarter ended December 31, 2001, the Company did not file a
report on Form 8-K.
11
SIGNATURES
Pursuant to the requirements 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.
CHAPEAU, INC.
Dated: April 4, 2002 By /s/ Guy A. Archbold
--------------------------------
Guy A. Archbold, Director
(Chief Executive Officer)
(Chief Financial Officer)
12