U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended: September 30, 2000
Commission file no.: 0-27137
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC.
------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Florida 65-0509296
- ------------------------------------ --------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
3135 S.W. Mapp Road
P.O. Box 268, Palm City, FL 34991
- ------------------------------------------ --------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 287-5958
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
- ----------------------------------- --------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
--------------------------------------------------------
(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
Indicate by 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
--- ---
As of September 30, 2000, there were 14,249,382 shares of voting stock
of the registrant issued and outstanding.
Part I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
TABLE OF CONTENTS
Accountants' Review Report
Financial Statements PAGE
Balance Sheet-Consolidated..............................................F-2
Statement of Operations-Consolidated....................................F-4
Statement of Changes in Stockholders' Equity-Consolidated...............F-5
Statement of Cash Flows-Consolidated....................................F-6
Notes to Financial Statements...........................................F-7
Clements Golden Phoenix Enterprises, Inc.
BALANCE SHEET-CONSOLIDATED
September 30, 2000 and March 31, 2000
September 30, 2000 March 30, 2000
ASSETS
Current Assets
Cash and Equivalents $ 2,860 $ 240,451
Account Receivable 29,507 -0-
Loan Receivable-Shareholder 80,566 66,735
Interest Receivable-Shareholder 13,182 9,868
Retainers - Consulting & Marketing 19,959 103,000
Inventory Frozen Concentrate -0- 27,753
Display Items 8,899 8,899
------------- -------------
Total Current Assets 154,973 456,706
Fixed Assets
Vehicle 88,827 45,353
Equipment 27,491 25,616
Less accumulated depreciation ( 15,550) ( 5,959)
------------- -------------
Total Fixed Assets 100,768 65,010
Other Assets
Other assets 20,027 19,840
------------- -------------
Total Other Assets 20,027 19,840
------------- -------------
TOTAL ASSETS $ 275,768 $ 541,556
============= =============
See accompanying notes and accountants'report.
F-2
Clements Golden Phoenix Enterprises, Inc.
BALANCE SHEET-CONSOLIDATED
September 30, 2000 and March 31, 2000
LIABILITIES AND STOCKHOLDER'S EQUITY
September 30, 2000 March 31, 2000
Current Liabilities
Account Payable $ 96,776 $ 129,086
Accrued Payroll 9,375 -0-
Payroll Taxes Payable -0- 20,772
Health Insurance Payable -0- 1,237
Accrued Interest Payable 181,839 103,779
Convertible Notes 225,000 125,000
Subscription Payable -0- 3,100
Loan Payable-Shareholders 1,320,135 1,294,273
Current Portion Long Term Debt 23,534 11,766
------------- -------------
Total Current Liabilities 1,856,659 1,689,013
Long Term Liabilities
Note Payable Lincoln Navigator 41,156 26,463
Stockholders' Equity
Common Stock, $.001 par value, 50,000,000
shares authorized and 14,249,382 outstanding
September 30, 2000 5,410,000 outstanding
March 31,2000 14,249 5,410
Paid in capital in excess of par value 2,924,184 2,089,923
Retained Earnings ( 4,560,480) ( 3,269,253)
------------- -------------
Total Stockholder's Equity ( 1,622,047) (1,173,920)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 275,768 $ 541,556
============= =============
See accompanying notes and accountants'
report.
F-3
Clements Golden Phoenix Enterprises, Inc.
STATEMENT OF OPERATIONS-CONSOLIDATED
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000
AND FOR SHORT YEAR ENDED MARCH 31, 2000
Three Months Six Months Short year end
September 30, 2000 September 30, 2000 March 31, 2000
------------------ ------------------ ---------------
REVENUE
Sale Fruit & Juice $ -0- $ 104,057 $ -0-
------------------ ------------------ ---------------
Total Revenue -0- 104,057 -0-
PURCHASES
Purchases Fruit 51,190 106,892 172
Shipping, Packaging, Storage 40,363 68,891 97,702
Contract Labor 2,300 3,300 500
------------------ ------------------ ---------------
Total Purchases 93,853 179,083 98,374
------------------ ------------------ ---------------
Gross Profit Margin ( 93,853) ( 75,026) ( 98,374)
GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative 60,117 119,376 60,253
Consulting Fees 341,217 424,226 -0-
Depreciation 4,795 9,590 2,137
Interest Expense 43,669 85,872 41,236
Insurance 6,539 13,919 8,015
Legal & Accounting Fees 19,581 40,747 34,178
Market Research & Development 108,148 319,156 531,220
Salaries 95,628 193,658 97,785
Tax-Payroll 4,501 12,196 8,570
Tax-Other -0- 2,027 73
------------------ ------------------ ---------------
Total Administrative Expenses 684,195 1,220,767 783,467
------------------ ------------------ ---------------
Net Loss Before Other Income ( 778,048) (1,295,793) ( 881,841)
------------------ ------------------ ---------------
OTHER INCOME
Interest Income 1,702 4,566 1,756
------------------ ------------------ ---------------
Net Loss $ ( 776,346) $ ( 1,291,227) $ ( 880,085)
================== ================== ===============
See accompanying notes and accountants' report.
F-4
Clements Golden Phoenix Enterprises, Inc.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY-CONSOLIDATED
SEPTEMBER 30, 2000 and MARCH 31, 2000
COMMON ADDITIONAL RETAINED
STOCK PAID IN CAPITAL EARNINGS TOTAL
Balance December 31, 1999 $ 5,000 $ 856,629 $ (2,389,167) $(1,527,538)
Net Loss ( 880,086) ( 880,086)
Sale of Stock 410 410
Additional Paid in Capital 1,233,294 1,233,294
-------- ----------- ------------- ------------
Balance March 31, 2000 5,410 2,089,923 ( 3,269,253) (1,173,920)
Net Loss ( 1,291,227) (1,291,227)
Sale of Stock 8,839 834,261 0 843,100
-------- ----------- ------------ ------------
Balance September 30, 2000 $ 14,249 $2,924,184 $(4,560,480) $(1,622,047)
======== ========== ============ ============
See accompanying notes and accountants' report.
F-5
Clements Golden Phoenix Enterprises, Inc.
STATEMENT OF CASH FLOWS-CONSOLIDATED
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000
AND SHORT YEAR ENDED MARCH 31, 2000
Three months Six Months Short Year Ended
September 30, 2000 September 30, 2000 March 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ ( 776,346) $ (1,291,227) $ (880,085)
Adjustments to reconcile net income to net
Cash provided by operating activities
(Increase) decrease in:
Depreciation 4,795 9,590 2,137
Account Receivable 45,360 (29,507) -0-
Due from Golden Phoenix -0- -0- 36
Inventory-Frozen Concentrate 27,753 27,753 2,965
Note Receivable ( 145) (13,831) ( 14,440)
Interest Receivable ( 1,625) ( 3,314) ( 1,239)
Marketing Materials -0- ( 187) -0-
Retainers Consulting - Marketing 92,486 83,041 ( 103,000)
Increase (Decrease ) in:
Account Payable ( 48,060) ( 32,310) ( 45,410)
Payroll Taxes Payable -0- ( 20,772) 17,775
Health Insurance Payable -0- ( 1,237) 1,237
Accrued Payroll 9,375 9,375 -0-
Accrued Interest payable 41,560 78,060 ( 34,616)
------------ -------------- -------------
NET CASH USED BY OPERATING ACTIVITIES ( 604,847) ( 1,184,566) ( 1,054,640)
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment -0- ( 45,349) ( 58,312)
------------ -------------- -------------
NET CASH USED BY INVESTING ACTIVITIES -0- ( 45,349) ( 58,312)
CASH FLOWS FROM FINANCING ACTIVITIES
Convertible Note 100,000 100,000 125,000
Subscription Payable -0- -0- 3,100
Loan Payable Navigator ( 6,788) 26,461 38,229
Loan Payable-Shareholders 150,598 25,863 ( 57,125)
Common Stock 8,786 8,786 410
Additional Paid in Capital 315,214 831,214 1,233,294
------------ -------------- -------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 567,810 992,324 1,342,908
------------ -------------- -------------
NET INCREASE ( DECREASE )
IN CASH ( 37,037) ( 237,591) 229,956
CASH AT BEGINNING OF YEAR 39,897 240,451 10,495
------------ -------------- -------------
CASH AT END OF YEAR $ 2,860 $ 2,860 $ 240,451
============ ============== =============
Supplemental information
Interest expense March, 2000 $ 41,236
Interest expense September, 2000 $ 85,872
See accompanying notes and accountants' report.
F-6
Clements Golden Phoenix Enterprises, Inc.
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary Of Significant Accounting Policies:
Nature of Operations
The company operates as a Florida corporation with a goal to developing the
China market which has just been open to the United States citrus industry. It
has been working toward this end by committing to pursue the proven protocols of
Chinese relations and negotiating successfully to send Florida citrus into
China. The company is pursuing these goals by acquiring the help of leading
consultants in this field. The company is following the consultants lead in this
endeavor.
The company has shipped fresh citrus from the current citrus season and in the
next citrus season will continue to ship fresh fruit. In addition, the company
will continue to develop their Brand name of citrus concentrate juices to China
and Southeast Asia. The market has the potential to be one of the largest in the
world.
Clements Golden Phoenix Enterprises, Inc. acquired Clements Citrus Sales of
Florida, Inc. on December 31, 1999. The company became a wholly owned subsidiary
of Clements Golden Phoenix Enterprises, Inc. Clements Citrus Sales of Florida,
Inc. was incorporated in the State of Florida on August 5, 1997.
Fixed Assets
Fixed assets are carried at cost. Depreciation of equipment is provided using
the straight-line method. The rate is based on a useful life ranging from 3 to
10 years. Depreciation taken for the three months and six months ended September
30, 2000, is $4,795 and $9,590 respectively. The short year ended March 31,
2000, is $ 2,137.
Income Taxes
Clements Golden Phoenix Enterprises, Inc., is a C corporation and Clements
Citrus Sales of Florida, Inc. has applied to the Internal Revenue Service to
rescind the S election, Clements Citrus Sales of Florida, Inc., had made a
previous election to be an S corporation. No provision for taxes have been made
in these financial statements due to the losses incurred in opening China and
Southeast Asia markets.
F-7
Clements Golden Phoenix Enterprises, Inc.
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued)
Going Concern
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses for the three months and six months
ended September 30, 2000 and the short year ended March 31, 2000. It has not
established revenues sufficient to cover operating costs and to allow it to
continue as a going concern. Management has secured a private placement of its
stock so that it will be able to continue as a going concern. Management also
plans for a follow-up offering in a secondary market in the near term. In the
event such efforts are unsuccessful, contingent plans have been arranged to
provide that the current shareholders of the Company have expressed an interest
in additional funding if necessary to continue the Company as a going concern.
Cash
Cash is being held in a checking and savings account, except for a petty cash
fund. The bank savings account pays interest at approximately 2.5 % per annum.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Basis of Consolidation
The consolidated financial statements include the accounts of Clements Citrus
Sales of Florida, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Inventory-Frozen Concentrate
The inventory of frozen orange juice concentrate that can be shipped to China in
refrigerated containers has all been shipped for trade shows and sales. A small
amount that was not of the high quality for export is used for advertising
layouts.
Note 2 - Loan Receivable Shareholder
Loan receivable shareholder is made up of funds disbursed to Henry T. Clements
for various personal expenditures. The corporation is to be reimbursed for this
expenditure. The corporation began in July to withhold from Mr. Clements wages
to pay back the loan.
F-8
Clements Golden Phoenix Enterprises, Inc.
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
Note 3 - Marketing Material
Marketing Materials is made up of items and designs of corporate logo and
trade-marks that will be used in marketing the citrus and concentrate juices in
China.
Note 4 - Accrued Interest Payable
Interest was accrued on the Loans Payable - Rizzuti, Loeffelbein, Sellian,
Samartine, and Ludlum for the three months and six months ended September 30,
2000, and the short year ended March 31, 2000. The interest was calculated at
12% percent per annum and is payable on a semi-annual basis. Payment of interest
is to be made when funds are available. The interest may be paid from stock
subscription funds.
Note 5 - Loan Payable Navigators
The company purchased a 2000 Lincoln Navigator with a note for $38,229, payable
in installment payments of $1,200 per month. The loan is for three years with an
interest rate of 7.99% per annum the payments will be $ 11,996 for 2000, $14,395
for 2001, $14,395 for 2002, and $2,325 for 2003. In April of 2000, a second
Lincoln Navigator was purchased with an installment loan of $ 43,111, payable in
three years with an interest rate of 7.99% per annum. The payments are $1,200
per month. The payments due in 2000 are $ 9,599, 2001 payments are $14,398, 2002
are $14,398, and 2003 are $4,715.
Note 6 - Loan Payable-Rizzuti, Loeffelbein, Sellian, Samartine, Ludlum
The shareholders have loaned the company money for advancement of the
development of the Chinese citrus market. The promissory notes are with a stated
interest rate of 12% per annum. The principal are due and payable on demand. The
interest will be paid when the corporation has income.
Note 7 - Convertible Note
Clements Golden Phoenix Enterprises, Inc., has entered into three convertible
notes, one for $31,250 with Bassuener Cranberry Corporation, and one for $93,750
with Ranger Cranberry Company, LLC, these notes were entered into on January 13,
2000. The third note for $100,000 with Philip Taurisiano was entered into on
August 14, 2000. The stated interest rate is 12% per annum. Interest is due
quarterly on the unpaid principal balance. The unpaid principal may be converted
into shares of the restricted common stock of the company at the option of the
payee on or beforeJanuary 13, 2003. If not converted it shall be due in the form
of a " balloon payment" on the maturity date. On October 17, 2000, Bassuener
Cranberry
F-9
Clements Golden Phoenix Enterprises, Inc.
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
Note 7 - Convertible Note-continued
Corporation made the election to convert there note and unpaid interest into the
company'srestricted common stock. The number of shares transferred was 44,228.
Also, on October 17, 2000, Ranger Cranberry Company, LLC, made the election to
convert their note and unpaid interest into the company's restricted common
stock. The number of shares transferred was 132,684.
Note 8 - Leasing Arrangements
The company leased 1,950 square feet of office space June 1, 1999, for one year
with a renewal for an additional term of two years. The minimum annual rent is
$22,800 plus sales tax. The company is responsible for repair and upkeep of the
office. The utilities are additional cost. The company did not pay rent per the
agreement for the first months the office was open. Monthly rental from January
1, 2000, to May 31, 2000, will be $2,200 per month plus sales tax. The renewal
in May was in like terms for an additional two years.
Note 9 - Stock Split
The company authorized a stock split at a ratio of two for one for shareholders
of record August 25, 2000, to take effect September 1, 2000. Distribution was
effective August 31, 2000. The total shares issued and outstanding following the
split is 14,247,582 shares.
Note 10 - Consulting Agreement
September 15, 2000 the company entered into a two year consulting agreement
with Condor Consulting, LLC. The company has agreed to the scope of service
which included marketing and brand awareness, promotions and event planning,
government and public relations. Condor Consulting, LLC, has agreed to provide
advise and consultation to the Asian Markets on the promotion of Florida grown
citrus products. A retainer of $100,000 will be paid the first month of the
agreement. The agreement also provides for a revenue sharing equal to five (5%)
of gross revenues derived from the sale of citrus products by the company to any
purchaser operating in the Asian Markets.
Note 11 - Subsequent Events
The corporation on October 6, 2000, authorized a stock split at a ratio of two
for one for shareholders of record on September 29, 2000. The distribution
effective at the close of business October 6, 2000.
F-10
Item 2. Management's Discussion and Analysis or Plan of Operation
General
In August 2000, the Board of Directors of Clements Golden Phoenix
Enterprises, Inc., a Florida corporation (the "Issuer" or the "Company")
approved a forward split of the Company's Common Stock at a ratio of two (2)
shares for each one (1) share of Common Stock issued and outstanding. The
forward split took effect on September 1, 2000 for holders of record on August
25, 2000, with distribution effective August 31, 2000. Additional share
certificates were issued by the Company's transfer agent to effect the split.
In August 2000, the Company issued an additional 1,350,000 shares to the
original owners of Clements Citrus Sales of Florida, Inc., a Florida corporation
which is the Company's wholly owned subsidiary ("CCSF") pro rata. The issuance
was to remedy an error in calculation made at the time of the share exchange
agreement conducted in December 1999. As part of such issuance, Joseph Rizzuti,
the Company's current Chairman and Chief Operating Officer received 500,000
shares, Edward Sellian, a beneficial owner of more than ten percent (10%) of the
Company's Common Stock received 300,000 shares. Bonnie K. Ludlum, the Company's
current Secretary and Director received 75,000 shares. John Samartine, a current
Director of the Company received 75,000 shares. Henry "Skip" Clements, the
Company's current Chief Executive Officer and a Director received 225,000
shares. For such offering, the Company relied upon Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), Rule 506 of Regulation D
promulgated thereunder ("Rule 506") and Section 517.061(11) of the Florida Code.
The facts relied upon the by the Company to make the federal exemption
available include the following: (i) the aggregate offering price for the
offering of the shares of Common Stock did not exceed $5,000,000, less the
aggregate offering price for all securities sold within the twelve months before
the start of and during the offering of the shares in reliance on any exemption
under Section 3(b) of, or in violation of Section 5(a) of the Act; (ii) no
general solicitation or advertising was conducted by the Company in connection
with the offering of any of the shares; (iii) there were no more than 35
purchasers from the Issuer in the offering; (iv) the purchasers were all
accredited investors and the books and records of the Company were available and
reviewed by each investor; and, (v) the required number of manually executed
originals and true copies of Form D were duly and timely filed with the U.S.
Securities and Exchange Commission.
Since the August 2000 filing of the quarterly report for the fiscal quarter
ended June 30, 2000, the Company has sold 35,800 shares of its Common Stock to
four (4) investors. John Samartine, a Director of the Company, is the beneficial
owner of 14,000 of such shares. For such offering the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
The facts relied upon to make the Florida exemption available include the
following: (i) sales of the shares of Common Stock were not made to more than 35
persons; (ii) neither the offer
4
nor the sale of any of the shares was accomplished by the publication of any
advertisement; (iii) all purchasers either had a preexisting personal or
business relationship with one (1) or more of the executive officers of the
Company or, by reason of their business or financial experience, could be
reasonably assumed to have the capacity to protect their own interests in
connection with the transaction; (iv) each purchaser represented that he was
purchasing for his own account and not with a view to or for sale in connection
with any distribution of the shares; and (v) prior to sale, each purchaser had
reasonable access to or was furnished all material books and records of the
Company, all material contracts and documents relating to the proposed
transaction, and had an opportunity to question the executive officers of the
Company. Pursuant to Rule 3E-500.005, in offerings made under Section
517.061(11) of the Florida Statutes, an offering memorandum is not required;
however each purchaser (or his representative) must be provided with or given
reasonable access to full and fair disclosure of material information. An issuer
is deemed to be satisfied if such purchaser or his representative has been given
access to all material books and records of the issuer; all material contracts
and documents relating to the proposed transaction; and an opportunity to
question the appropriate executive officer. In that regard, the Company supplied
such information and was available for such questioning.
In September 2000, CCSF entered into a consulting agreement with Condor
Consulting LLC ("Condor"). Condor provides consulting in connection with certain
import/export activities undertaken by CCSF. Condor is CCSF's exclusive
consultant in the People's Republic of China, Republic of China, Japan, Republic
of the Phillippines, Republic of Singapore, Malaysia, Kingdom of Thailand,
Republic of Indonesia, Socialist Republic of Vietnam, Kingdom of Cambodia, Union
of Burma, Lao People's Democratic Republic, Republic of India, Islamic Republic
of Pakistan, People's Republic of Bangladesh, Commonwealth of Australia and New
Zealand. CCCSF must pay Condor its hourly rates which range between $75 and
$300. CCSF must also pay Condor a monthly retainer in the amount of $100,000,
which shall be applied to such hourly fees and which unused amount shall
rollover to subsequent months. In the event CCSF terminates the contract prior
to its second anniversary, it must pay Condor $100,000 times the number of
remaining months. Additionally, CCSF must pay to Condor an amount equal to five
percent (5%) of its gross revenues derived from the sale of citrus products in
the areas under contract. CCSF also granted Condor a warrant to purchase 100,000
shares of the Common Stock of the Company at an exercise price of $2.00 per
share. Such warrants have no expiration date. The warrants carry full demand
registration rights. The term of the agreement is for a period of two (2) years.
In September 2000, the Company executed a promissory note in favor of
Bonnie K. Ludlum, the Company's current Secretary and a Director in the
principal amount of $50,000. The note has a term of thirty (30) days and bears
interest at a rate of ten percent (10%) per annum. For such offering, the
Company relied upon Section 4(2) of the Act, Rule 506 and Section 517.061(11) of
the Florida Code.
The facts relied upon to make the Florida exemption available include the
following: (i) sales of the shares of Common Stock were not made to more than 35
persons; (ii) neither the offer nor the sale of any of the shares was
accomplished by the publication of any advertisement; (iii) all
5
purchasers either had a preexisting personal or business relationship with one
(1) or more of the executive officers of the Company or, by reason of their
business or financial experience, could be reasonably assumed to have the
capacity to protect their own interests in connection with the transaction; (iv)
each purchaser represented that he was purchasing for his own account and not
with a view to or for sale in connection with any distribution of the shares;
and (v) prior to sale, each purchaser had reasonable access to or was furnished
all material books and records of the Company, all material contracts and
documents relating to the proposed transaction, and had an opportunity to
question the executive officers of the Company. Pursuant to Rule 3E-500.005, in
offerings made under Section 517.061(11) of the Florida Statutes, an offering
memorandum is not required; however each purchaser (or his representative) must
be provided with or given reasonable access to full and fair disclosure of
material information. An issuer is deemed to be satisfied if such purchaser or
his representative has been given access to all material books and records of
the issuer; all material contracts and documents relating to the proposed
transaction; and an opportunity to question the appropriate executive officer.
In that regard, the Company supplied such information and was available for such
questioning.
In September 2000, the Company's Board of Directors approved a forward
split of the Company's Common Stock at a ratio of two (2) shares for each one
(1) share of Common Stock issued and outstanding. The forward split took effect
on October 6, 2000 for holders of record on September 29, 2000, with
distribution effective October 6, 2000. Additional share certificates were
issued by the Company's transfer agent to effect the split.
In October 2000, Ranger Cranberry Company sent a notice of conversion
pursuant to a convertible note dated January 13, 2000 in the principal amount of
$93,750. Interest in the amount of $5,763.70 was also converted to shares of the
Company's restricted Common Stock. The conversion price, which was adjusted to
account for the two splits of the Company's Common Stock, was $0.75. The total
number of shares to be issued is therefore 132,684, which have yet to be issued.
For such offering, the Company relied upon Section 4(2) of the Act, Rule 506 and
Section 551.29(2) of the Wisconsin Code.
The facts relied upon to make the Wisconsin Exemption include the
following: The Company filed a notice consisting of a completed Form D as
prescribed by Rule 503 of Regulation D under the Securities Act of 1933. This
form was signed by the Company, was filed not later than fifteen (15) days after
the first sale, and was accompanied by an appropriate fee.
In October 2000, CCSF, renewed its contract with Tianjin Hongrun Trading
Co. Ltd., a Chinese company ("Hongrun"). CCSF appointed Hongrun its exclusive
distributor of its Clements Brand Frozen Concentrated Fruit Juices in Tianjin,
Dalian, Shenyang, Chongqing, Wuhan and Taiyuan and its non-exclusive distributor
in Beijing. In exchange for the appointment, Hongrun agreed to purchase certain
minimum quantities of the frozen concentrate from CCSF. The contract term is for
a period of one (1) year.
6
Discussion and Analysis
The Company is incorporated in the State of Florida. The Company was
originally incorporated as Lucid Concepts, Inc. on July 15, 1994. It changed its
name to the current name in connection with a share exchange between the Company
and CCSF on December 31, 1999 (the "Agreement"). The Company's Common Stock is
currently quoted on the Over the Counter Bulletin Board under the symbol "CPHX".
Its executive offices are presently located at 3135 S.W. Mapp Road, P.O. Box
268, Palm City, FL 34991. Its telephone number is (561) 287-5958 and its
facsimile number is (561) 287-9776.
The Company was formed with the contemplated purpose to manufacture and
market imported products from China in the United States and elsewhere. The
business concept and plan was based upon information obtained by the
incorporator several years before while working in China. The incorporator was
unable to obtain the cooperation and assistance of the Chinese and investors to
implement the proposed plan. After development of a business plan and efforts to
develop the business failed, all such efforts were abandoned. In December 1999,
at the time it acquired CCSF as a wholly-owned subsidiary, its purpose changed
to CCSF's initial purpose of citrus exportation.
The Company was still in the development stage until December 1999 when the
Share Exchange took place between CCSF and the Company and is still emerging
from that stage. The Company has only recently begun shipping its citrus
products to China. From the date of the Agreement in December 1999 through
September 30, 2000, the Company generated revenues in the amount of $104,057
from the sale of fruit and juice. Due to the Company's limited operating history
and limited resources, among other factors, there can be no assurance that
profitability or significant revenues on a quarterly or annual basis will occur
in the future.
In May 2000, the Company shipped its first citrus products directly to
mainland China. The Company plans to make several additional shipments to its
two (2) distributors (Hongrun and Ruthersoft) by the end of 2000.
Since contracting with its first two (2) distributors and upon being
granted permits to ship citrus directly to mainland China, the Company has begun
to make preparations for a period of growth, which may require it to
significantly increase the scale of its operations. This increase will include
the hiring of additional personnel in all functional areas and will result in
significantly higher operating expenses. The increase in operating expenses is
expected to be matched by a concurrent increase in revenues. However, the
Company's net loss may continue even if revenues increase and operating expenses
may still continue to increase. Expansion of the Company's operations may cause
a significant strain on the Company's management, financial and other resources.
The Company's ability to manage recent and any possible future growth, should it
occur, will depend upon a significant expansion of its accounting and other
internal management systems and the implementation and subsequent improvement of
a variety of systems, procedures and controls. There can be no assurance that
significant problems in these areas will not occur. Any failure to expand these
areas and implement and improve such systems, procedures and
7
controls in an efficient manner at a pace consistent with the Company's business
could have a material adverse effect on the Company's business, financial
condition and results of operations. As a result of such expected expansion and
the anticipated increase in its operating expenses, as well as the difficulty in
forecasting revenue levels, the Company expects to continue to experience
significant fluctuations in its revenues, costs and gross margins, and therefore
its results of operations.
Results of Operations -For the Six Months Ending September 30, 2000 and the
Short Year Ending March 31, 2000
Financial Condition, Capital Resources and Liquidity
For the short year ended March 31, 2000 and the six (6) months ended
September 30, 2000, the Company recorded no revenues and revenues in the amount
of $104,057 respectively. For the short year ended March 31, 2000 and the six
(6) months ended September 30, 2000, the Company had salary expenses of $97,785
and $193,658. This comparative increase was due to an increase in the number of
personnel employed by the Company, specifically, the hiring of Mr. Samuel P.
Sirkis as the Company's President.
For the short year ended March 31, 2000 and the six (6) months ended
September 30, 2000, the Company had market research and development expenses of
$531,220 and $319,156 respectively.
For the short year ended March 31, 2000 and the six (6) months ended
September 30, 2000, the Company paid consulting fees in the amount of $0 and
$424,226 respectively. This increase was due primarily to the consulting fees
paid to Condor, the Company's liaison with Mainland China.
For the short year ended March 31, 2000 and the six (6) months ended
September 30, 2000, the Company had total administrative expenses of $783,467
and $1,220,767.
Net Losses
For the short year ended March 31, 2000 and the six (6) months ended
September 30, 2000, the Company reported a net loss from operations of $880,085
and $1,291,227 respectively.
The ability of the Company to continue as a going concern is dependent upon
increasing sales and obtaining additional capital and financing. The Company is
currently seeking financing to allow it to begin its planned operations.
8
Employees
At September 30, 2000, the Company employed five (5) persons. None of these
employees are represented by a labor union for purposes of collective
bargaining. The Company considers its relations with its employees to be
excellent. The Company plans to employ additional personnel as needed upon
product rollout to accommodate fulfillment needs.
Research and Development Plans
The Company believes that research and development is an important factor
in its future growth. Although, the citrus growing and exportation industry is
not closely linked to technological advances, it occasionally produces new ways
to raise and harvest crops, resulting in disease and pest resistant product,
which stays fresh for a longer period of time. Therefore, the Company must
continually invest in the technology to provide the best quality product to the
public and to effectively compete with other companies in the industry. No
assurance can be made that the Company will have sufficient funds to purchase
technological advances as they become available. Additionally, due to the rapid
advance rate at which technology advances, the Company's equipment may be
outdated quickly, preventing or impeding the Company from realizing its full
potential profits.
In late Spring 2001, the Company is planning to begin construction of a
citrus packing and processing center to be located in Stuart, FL, the heart of
Indian River Region. This facility will act as a showpiece for Clements Citrus
products to the Company's Chinese and domestic customers. The center should
consist of a state of the art, completely computer controlled, fresh citrus
packing facility, a facility for the manufacture and production of frozen
concentrate orange juice, as well as other frozen juices, a freezer facility, a
research center and an office facility. By having these facilities located on
one site, the entire program can be closely managed and controlled. It would
also insure against supply interruption and a total dependence on outside
suppliers.
Impact of the Year 2000 Issue
The Company did not experience any material impact to its operations as a
result of the Year 2000 calendar change. The Company does not anticipate any
material disruption in its operations as a result of any failure by the Company
to be in compliance.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), expansion
and growth of the Company's business and operations, and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future
9
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending September 30, 2000,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
Item 5. Other Information
None.
10
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated
herein by reference, as follows:
Exhibit No. Description
- ----------------------------------------------------------------------
3.(i).1 [1] Articles of Incorporation of The Silk Road Renaissance Company filed July 5, 1994.
3.(i).2 [1] Articles of Amendment to Articles of Incorporation changing the name to Gillette
Industries Group, Inc. filed December 5, 1994.
3.(i).3 [4] Articles of Amendment to Articles of Incorporation changing the name to Lucid
Concepts, Inc. filed June 3, 1999.
3.(i).4 [4] Articles of Amendment to Articles of Incorporation changing the name to Clements
Golden Phoenix Enterprises, Inc. filed January 4, 2000.
3.(ii).1 [1] Bylaws of the Company.
4.1 [4] Convertible Note between the Company and Bassuener Cranberry Corporation dated
January 13, 2000.
4.2 [4] Convertible Note between the Company and Ranger Cranberry Company, LLC
dated January 13, 2000.
4.3 [4] Convertible Note between the Company and Philip Taurisano dated March 1, 2000.
4.4 * Promissory Note by the Company in favor of Bonnie K. Ludlum dated September
28, 2000.
10.1 [2] Share Exchange Agreement between the Company and Clements Citrus Sales of
Florida, Inc. dated December 31, 1999.
10.2 [4] Exclusive Distributorship Agreement between Clements Citrus Sales of Florida, Inc.
and Hongrun Trade Co., Ltd. dated September 29, 1999.
10.3 [4] Exclusive Distributorship Agreement between Clements Citrus Sales of Florida, Inc.
and Qinhuangdao RutherSoft dated May 16, 2000.
10.4 [4] Lease between Clements Citrus Sales of Florida, Inc. and Edward Sellian for the
premises located at 32C East Osceola Street, Stuart, FL 34996.
11
10.5 [5] Employment Agreement with Samuel P. Sirkis dated August 1, 2000.
10.6 * Consulting Contract between Clements Citrus Sales of Florida, Inc. and Condor
Consulting, LLC dated September 15, 2000.
10.7 * Sales and Marketing Contract between Clements Citrus Sales of Florida, Inc. and
Tianjin Hongrun Trading Co., Ltd. dated October 8, 2000.
27.1 * Financial Data Schedule.
99.1 [3] Board Resolution dated April 18, 2000 authorizing change in fiscal year of the
Company to March 31.
99.2 [3] Board Resolution dated April 18, 2000 authorizing change in fiscal year of Clements
Citrus Sales of Florida, Inc. to March 31.
- ----------------
(* Filed herewith)
[1] Previously filed with the Company's Form 10SB filed August 24, 1999.
[2] Previously filed with the Company's report on Form 8-K filed January 12,
2000.
[3] Previously filed with the Company's Current Report on Form 8-K filed April
18, 2000.
[4] Previously filed with the Company's report on Form 10KSB filed July 12,
2000.
[5] Previously filed with the Company's report on Form 10QSB filed August 21,
2000.
(b) A report on Form 8-K was filed on January 12, 2000 reporting the Share
Exchange conducted between the Company and Clements Citrus Sales of Florida,
Inc. on December 31, 1999. An amended report on Form 8-KA was filed on February
28, 2000 which included the required financial statements of Clements Citrus
Sales of Florida, Inc. Another report on Form 8-K was filed on April 18, 2000
changing the Company's fiscal year to March 31.
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.
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC.
(Registrant)
Date: November 9, 2000 BY: /s/ Joseph R. Rizzuti
--------------------------------
Joseph R. Rizzuti, Chairman and
Chief Operating Officer
BY: /s/ Samuel Sirkis
--------------------------------
Samuel Sirkis, President and Director
BY: /s/ Henry "Skip" Clements
--------------------------------
Henry "Skip" Clements, Chief
Executive Officer and Director
BY: /s/ Bonnie K. Ludlum
--------------------------------
Bonnie K. Ludlum, Secretary and Director
BY: /s/ John Samartine
--------------------------------
John Samartine, Director