U.S. Securities and Exchange Commission
Washington, D.C. 20549
Amendment 1
to
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, 2001
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 November 14, 2001, there were 9,714,241 shares of voting stock of the
registrant issued and outstanding.
Part I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CLEMENTS GOLDEN PHOENIX
ENTERPRISES, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
C O N T E N T S
Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheet F-1
Statements of Operations F-2
Statements of Cash Flows F-3
Notes to Condensed Consolidated Financial Statements F-4
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2001
ASSETS
================================================================================
CURRENT ASSETS
Cash and cash equivalents $3,184
Accounts receivable 2,191
Loans and accrued interest receivable from former
officer, net of allowance of $121,326 -
Prepaid expenses 11,515
- --------------------------------------------------------------------------------
Total current assets 16,890
PROPERTY AND EQUIPMENT, NET 18,438
OTHER ASSETS 760
- --------------------------------------------------------------------------------
TOTAL ASSETS $36,088
================================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
================================================================================
CURRENT LIABILITIES
Accounts payable $474,270
Accrued expenses 187,271
Accrued interest payable - stockholders 392,029
Convertible notes 500,000
Loans payable-shareholders 1,216,348
Total current liabilities 2,769,918
- --------------------------------------------------------------------------------
DEFICIENCY IN ASSETS
Common stock, $.001 par value; 12,500,000 shares authorized;
9,714,201, shares issued and outstanding 9,714
Additional paid-in capital 4,068,811
Accumulated deficit (6,812,355)
Total deficiency in assets (2,733,830)
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $36,088
================================================================================
See accompanying notes
F-1
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
Three Months Ended Six Months Ended
September 30, September 30,
----------------------------------------------------------------
2001 2000 2001 2000
==============================================================================================================================
REVENUE $15,957 $ - $23,263 $104,057
COST OF GOODS SOLD 14,633 93,853 40,427 179,083
- ---------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 1,324 (93,853) (17,164) (75,026)
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Consulting fees 7,999 341,217 154,594 424,226
Market research and development - 108,148 - 319,156
Professional fees 17,148 19,581 48,340 40,747
Salaries 60,058 95,628 138,370 193,658
Selling, general and administrative 52,911 75,952 166,856 157,108
Total operating expenses 138,116 640,526 508,160 1,134,895
- ---------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE OTHER INCOME (EXPENSE) (136,792) (734,379) (525,324) (1,209,921)
- ---------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 2 1,702 2 4,566
Interest expense (57,365) (43,669) (121,631) (85,872)
- ---------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (57,363) (41,967) (121,629) (81,306)
- ---------------------------------------------------------------------------------------------------------------------------
NET LOSS ($194,155) ($776,346) ($646,953) ($1,291,227)
===========================================================================================================================
NET LOSS PER COMMON SHARE - BASIC AND
DILUTED ($0.02) ($0.13) ($0.08) ($0.23)
- ---------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 8,668,005 5,765,669 7,949,091 5,609,254
===========================================================================================================================
See accompanying notes.
F-2
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
Six Months Six Months
Ended Ended
September 30, 2001 September 30, 2000
========================================================== ====================== ======================
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($646,953) ($1,291,227)
- ---------------------------------------------------------- ---------------------- ----------------------
Adjustment to reconcile net loss to net cash used in
operating activities:
7,353 9,590
Depreciation 4,083
Loss on disposition of transportation equipment
Changes in operating assets and liabilities: 3,309 (29,507)
Account receivable 20,401 27,753
Inventory - (13,831)
Note receivable - (3,314)
Interest receivable (3,872) (187)
Prepaid expenses 48,147 83,041
Prepaid consulting fees 240,108 (32,310)
Accounts payable 81,574 (12,634)
Accrued expenses 401,103 28,601
Total adjustments (245,850) (1,262,626)
Net cash used in operating activities
- ---------------------------------------------------------- ---------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (45,349)
Proceeds from disposition of transportation equipment 61,750 -
- ---------------------------------------------------------- ---------------------- ----------------------
Net cash provided by (used in) investing activities 61,750 (45,349)
- ---------------------------------------------------------- ---------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings - 26,461
Principal payments of long-term debt (52,689) -
Proceeds from convertible notes payable - 100,000
Proceeds from stockholder loans 118,470 -
Principal repayments of stockholder loans (10,555) 25,863
Accrued interest payable 119,271 78,060
Proceeds from issuance of common stock - 840,000
Net cash provided by financing activities 174,497 1,070,384
- ---------------------------------------------------------- ---------------------- ----------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,603) (237,591)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 12,787 240,451
- ---------------------------------------------------------- ---------------------- ----------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $3,184 $2,860
========================================================== ====================== ======================
Supplemental Disclosure:
- ---------------------------------------------------------- ---------------------- ----------------------
Cash paid for interest $2,360 $7,812
========================================================== ====================== ======================
See accompanying notes.
F-3
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Consolidation
The condensed consolidated financial statements include the accounts of Clements
Golden Phoenix Enterprises, Inc. and its wholly owned subsidiary, Clements
Citrus Sales of Florida, Inc. (collectively "the Company"). All significant
intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-QSB for quarterly reports under section 13 or 15(d) of the Securities
Exchange Act of 1934. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
month periods ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the year ending March 31, 2002. For further
information, refer to the Company's audited financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended March 31, 2001.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net Income (Loss) Per Share
The Company applies Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (FAS 128) which requires dual presentation of net income
per share; Basic and Diluted. Basic earnings (loss) per share is computed using
the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per share is computed using the weighted average number
of common shares outstanding during the period adjusted for incremental shares
attributed to outstanding options to purchase shares of common stock.
Outstanding stock equivalents were not considered in the calculation for periods
in which the Company sustained a loss as their effect would have been
anti-dilutive.
F-4
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications
Certain amounts in the financial statements for the three and six month periods
ended September 30, 2000 have been reclassified to conform with the September
30, 2001 financial statement presentation. Such reclassifications had no effect
on reported net income.
NOTE 3. GOING CONCERN CONSIDERATIONS
During the fiscal year ended March 31, 2001 and continuing in 2002, the Company
experienced, and continues to experience, certain cash flow problems and has,
from time to time, experienced difficulties meeting its obligations as they
become due. As reflected in the condensed consolidated financial statements, the
Company has incurred net losses of approximately $194,155 and $646,953 for the
three and six months ended September 30, 2001 and 2000, respectively, and as of
September 30, 2001, the Company's consolidated financial position reflects a
working capital deficiency of approximately $2,753,000. Management's plans with
regard to these matters encompass the following actions:
Liquidity
Financing from Third Party Sources
In the fiscal year ended March 31, 2002 the Company plans to continue its equity
fundraising efforts and is in the process of completing a private placement
under which the Company is attempting to raise $3,000,000 in exchange for shares
of the Company's common stock.
Financing from Private Loans
The Company plans to continue accepting private loans, including convertible
loans, to fund operations until such time as working capital is adequate.
Profitability
1. Business Plan
The Company has formulated, and is in the process of implementing, a strategic
plan focussed on business development in terms of increased revenues and reduced
operating expenses. The key elements of the plan include the following:
* Focus operations globally as opposed to limiting the Company's markets to
the Asian territories
* Implement a distribution strategy utilizing strategic alliances with major
global food companies in addition to existing distributors
* Shift marketing and market research expenses burden from the Company to
local distributors
F-5
NOTE 3. GOING CONCERN CONSIDERATIONS (Continued)
2. Improvement in Operational Costs
Management continues its efforts to manage costs and operating expenses, so as
to improve gross margins and profitability.
NOTE 4. LOANS AND ACCRUED INTEREST RECEIVABLE FROM FORMER OFFICER
Loans and accrued interest receivable from former officer is comprised of funds
disbursed to or on behalf of a former officer for various personal expenditures.
In July 2000, the Company began withholding from the former officer's wages to
pay back the loans. The loans bear interest at 8 1/2% per annum. During April
2001, the officer was terminated and management believes there is significant
uncertainty regarding recoverability. Accordingly, the loans and related accrued
interest have been fully reserved at September 30, 2001.
NOTE 5. CONVERTIBLE NOTES PAYABLE
At September 30, 2001, convertible notes payable consisted of the following:
* $100,000 note to a stockholder dated March 1, 2000. Interest accrues at a
rate of 12% per annum on the unpaid principal balance and is due quarterly.
The unpaid principal and accrued interest could be converted into shares of
the restricted common stock of the company at the option of the payee on or
before March 1, 2001. If not converted, the unpaid principal and accrued
interest would be due on March 1, 2001. The note has matured and is due on
demand.
* $150,000 note to a stockholder dated October 19, 2000. Interest accrues at
a rate of 12% per annum on the unpaid principal balance and is due
quarterly. The unpaid principal and accrued interest could be converted
into shares of the restricted common stock of the company at the option of
the payee on or before October 19, 2001. If not converted, the unpaid
principal and accrued interest would be due on October 19, 2001. The note
has matured and is due on demand.
* $250,000 note to a stockholder dated December 11, 2000. Interest accrues at
a rate of 11% per annum on the unpaid principal balance and was due on
April 10, 2001. The unpaid principal and accrued interest may be converted
into shares of the restricted common stock of the company at the option of
the payee on or before April 10, 2001. As the note was not converted, the
unpaid principal and accrued interest was due on April 10, 2001. However,
the Company received an extension of the due date of the principal and
accrued interest until October 10, 2001. In connection with this note, the
Company issued the note holder 1,250 shares of the Company's restricted
common stock and warrants to purchase 6,250 additional shares of the
Company's restricted common stock. The note has matured and is due on
demand.
F-6
NOTE 6. LOANS PAYABLE - STOCKHOLDERS
Certain stockholders have advanced funds to the Company for working capital
purposes. These advances are evidenced by promissory notes with stated interest
rates of 12% per annum. The principal and accrued interest are payable on
demand.
During the three months ended September 30, 2001, loans payable aggregating
$500,000 were converted into 2,500,000 shares of restricted common stock.
NOTE 7. RELATED PARTIES
During the six months ended September 30, 2001, an officer of the Company
advanced approximately $74,000 for working capital, of which approximately
$15,000 was repaid prior to September 30, 2001. Additionally, three companies
controlled by the officer paid operating expenses of approximately $58,000 on
behalf of the Company during the six months ended September 30, 2001, of which
approximately $11,000 was repaid prior to September 30, 2001 and the remainder
is included in accounts payable at September 30, 2001.
NOTE 8. COMMITMENT AND CONTINGENCY
Employment Agreement
On September 26, 2001, the Company entered into an employment agreement with the
president of the Company effective July 1, 2001. The agreement is for a period
of two years at a salary of $75,000 per year plus certain bonuses based on the
Company's revenues. In connection with the agreement, the president received
options to purchase 500,000 shares of the Company's common stock, half of which
vest on September 28, 2001, with the remaining balance vesting on July 1, 2002.
The employee resigned in October 2001.
Litigation
In July 2001, a stockholder with demand notes payable totaling approximately
$755,000 in principal and accrued interest (the "Notes") provided the Company
with a written request for payment of all amounts outstanding pursuant to the
demand provisions of the Notes. At this time, the Company has been unable to
repay the Notes. Consequently, the stockholder has filed suit against the
Company alleging breach of contract and non-payment of the Notes. The outcome of
this action as well as the extent of the Company's liability cannot be
determined at this time. The balance of the Notes and the related accrued
interest due to the stockholder are recorded as current liabilities on the
Company's consolidated balance sheet.
F-7
NOTE 9. SUBSEQUENT EVENTS
Sales Commission Agreements
During July 2001, the Company entered into two sales commission agreements with
two companies ("Sales Agents") to sell the Company's product in Asia, Europe and
the Middle East. These agreements provide for commissions to the Sales Agents
ranging from 5% to 8% based on certain sales volumes.
F-8
Item 2. Management's Discussion and Analysis
General
Clements Golden Phoenix Enterprises, Inc., a Florida corporation ("CGPE"),
of which GlobeFruits, Inc. f/k/a Clements Citrus Sales of Florida, Inc., a
Florida corporation ("GF") is a wholly owned subsidiary (collectively the
"Company") relied upon Section 4(2) of the Securities Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D promulgated thereunder ("Rule 506") for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based upon the fact that (i) the issuance of
the shares did not involve a public offering, (ii) there were no more than
thirty-five (35) investors (excluding "accredited investors"), (iii) each
investor who was not an accredited investor either alone or with his purchaser
representative(s) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment, or the issuer reasonably believes immediately prior to making any
sale that such purchaser comes within this description, (iv) the offers and
sales were made in compliance with Rules 501 and 502, (v) the securities were
subject to Rule 144 limitations on resale and (vi) each of the parties was a
sophisticated purchaser and had full access to the information on the Company
necessary to make an informed investment decision by virtue of the due diligence
conducted by the purchaser or available to the purchaser prior to the
transaction (the "506 Exemption").
The Company relied upon Section 517.061(11) of the Florida Statutes for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based upon the fact that (i) sales of the
shares of common stock were not made to more than thirty-five (35) persons; (ii)
neither the offer 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 the regard, the Company supplied
such information and management was available for such questioning (the "Florida
Exemption").
In July 2001, Samuel P. Sirkis resigned as President, but remained a
Director of the Company. The Company's Board of Directors filled the vacant
positions of President and Chief Executive Officer with Antonio Doria.
12
In July, the Company's directors, pursuant to the Company's Bylaws,
increased the number of directors on the board of directors by one (1). They
appointed Antonio Doria to fill the vacancy until the next annual meeting of the
shareholders.
In July 2001, Joseph Rizzuti, the Company's current Chairman and Chief
Operating Officer converted $250,000 of debt owed to him by the Company to
1,250,000 shares of the Company's restricted common stock. For such offering,
the Company relied upon the 506 Exemption and the Florida Exemption.
In July 2001, the Company issued warrants to purchase 250,000, 250,000 and
250,000 shares of the Company's restricted common stock at a price of $0.25 per
share vesting July 24, 2001, September 28, 2001 and July 1, 2002 to Antonio
Doria, the Company's former President and Chief Executive Officer. The warrants
have no expiration date. For such offering, the Company relied upon the 506
Exemption and the Florida Exemption.
In July 2001, the Company entered into an agreement with Trade Link Group,
Inc. ("TGI"), whereby TGI would serve as the Company's non-exclusive distributor
in Saudi Arabia and Jordan. The initial trial period is until December 2001. TGI
is to receive a five percent (5%) commission on all sales.
In August 2001, the Company, its subsidiary and Henry T. Clements, the
Company's former Chief Executive Officer and a current Director of the Company
were named in a complaint filed by Edward M. Sellian alleging nonpayment of
$635,000 plus interest allegedly owed to him by GF and/or CGPE, and which Henry
T. Clements allegedly secured with all or some of the common stock owned by him
in the Company. The complaint was filed in the circuit court of the nineteenth
judicial district in and for Martin county, Florida. Since that time, the
Company has filed its answer and affirmative defenses and Henry T. Clements has
filed his answer, affirmative defenses, a cross claim against the Company for
fraudulent misrepresentation and common law indemnity and a demand for jury
trial. The Company has since answered the cross claim and asserted its defenses.
In September 2001, Joseph Rizzuti, the Company's current Chairman and Chief
Operating Officer loaned the Company $50,000, payable on demand. The note bears
interest at a rate of ten percent (10%) per annum and is convertible, in the
lender's sole discretion, to shares of the Company's restricted common stock at
a price of $0.20 per share. For such offering, the Company relied upon the 506
Exemption and the Florida Exemption.
In October 2001, the Company's wholly owned subsidiary changed its name
from Clements Citrus Sales of Florida, Inc. to GlobeFruits, Inc.
In October 2001, Anne-Marie Ludlum resigned as the Company's Chief
Financial Officer, Antonio Doria resigned as the Company's President, Chief
Executive Officer and as a Director, Marvin Burstein resigned as the Company's
Chief Financial Officer and Samuel P. Sirkis resigned as a Director. None
furnished the Registrant with a letter requesting that any matter be disclosed.
13
In November 2001, the Company entered into a contract with Paradise Water
and Juice Co., Inc. ("Paradise"), whereby the Company will act as the exclusive
supplier of Paradise for bottled water, flavored bottled water, fruit juices and
dried fruits. The term of the contract is for a period of three (3) years.
Paradise is to be paid a commission equal to ten percent (10%) of the gross
proceeds of all sales under the contract.
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 GF on December 31, 1999 (the "Agreement"). The Company's common stock is
currently quoted on the Over the Counter Bulletin Board under the symbol "CGPE".
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 GF as a wholly-owned subsidiary, its purpose changed to
GF's initial purpose of citrus exportation.
The Company was still in the development stage until December 1999 when the
Share Exchange took place between GF and the Company and is still emerging from
that stage. The Company has only recently begun shipping its citrus products to
China. For the three (3) months ended September 30, 2001, the Company generated
revenues in the amount of $6,957 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.
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
14
expand these areas and implement and improve such systems, procedures and
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 Three Months Ending September 30, 2001 and
September 30, 2000 and the Six Months ended September 30, 2001 and September 30,
2000
Financial Condition, Capital Resources and Liquidity
For the quarter ended September 30, 2001 and September 30, 2000, the
Company recorded $6,957 revenues and revenues in the amount of $0 respectively.
For the six (6) months ended September 30, 2001 and September 30, 2000, the
Company recorded revenues in the amount of $23,263 and $104,057 respectively.
The reason for the decrease in revenues is a decrease in sales activities.
For the quarter ended September 30, 2001 and September 30, 2000, the
Company had salary expenses of $19,058 and $95,628. The reason for the decrease
is a scale back in operations.
For the six (6) months ended September 30, 2001 and September 30, 2000, the
Company had salary expenses of $138,370 and $193,658.
For the quarter ended September 30, 2001, the Company had selling, general
and administrative expenses of $14,867. For the six (6) months ended September
30, 2001, the Company had selling, general and administrative expenses in the
approximate amount of $166,856.
For the quarter ended September 30, 2001 and September 30, 2000, the
Company paid consulting fees in the amount of $8,000 and $341,217 respectively.
This decrease of $333,217 was due primarily to decreased participation in trade
shows.
For the six (6) months ended September 30, 2001 and September 30, 2000, the
Company paid consulting fees in the amount of $154,595 and $424,226
respectively.
For the quarter ended September 30, 2001 and the quarter ended September
30, 2000, the Company had total operating expenses of $45,083 and $684,195
respectively.
For the six (6) months ended September 30, 2001 and September 30, 2000, the
Company had total operating expenses in the approximate amount of $508,161 and
$1,220,767 respectively. The reason for the decrease of $712,606, was because
the Company scaled back its operations.
15
Net Losses
For the quarter ended September 30, 2001 and the quarter ended September
30, 2000, the Company reported a net loss from operations of $59,702 and
$776,346 respectively.
For the six (6) months ended September 30, 2001 and the six (6) months
ended September 30, 2000, the Company reported a net loss from operations in the
amount of $646,954 and approximately $1,291,227.
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.
Employees
At September 30, 2001, the Company employed four (4) 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.
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 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
16
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.
In August 2001, the Company, its subsidiary and Henry T. Clements, the
Company's former Chief Executive Officer and a current Director of the Company
were named in a complaint filed by Edward M. Sellian alleging nonpayment of
$635,000 plus interest allegedly owed to him by GF and/or CGPE, and which Henry
T. Clements allegedly secured with all or some of the common stock owned by him
in the Company. The complaint was filed in the circuit court of the nineteenth
judicial district in and for Martin county, Florida. Since that time, the
Company has filed its answer and affirmative defenses and Henry T. Clements has
filed his answer, affirmative defenses, a cross claim against the Company for
fraudulent misrepresentation and common law indemnity and a demand for jury
trial. The Company has since answered the cross claim and asserted its defenses.
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, 2001,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
Item 5. Other Information
None.
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:
17
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 [6] Promissory Note by the Company in favor of Bonnie K. Ludlum dated September 28,
2000.
4.5 [9] Convertible Note by the Company in favor of Philip Taurisano dated October 19,
2000.
4.6 [10] Convertible Note by the Company in favor of James E. Groat dated December 11,
2000.
4.7 [10] Private Placement Memorandum dated June 18, 2001.
4.8 [12] Convertible Note in favor of Joseph Rizzuti dated September 30, 2001.
4.9 [12] Warrant in favor of Antonio Doria dated July 24, 2001.
4.10 [12] Warrant in favor of Antonio Doria dated September 28, 2001.
4.11 [12] Warrant in favor of Antonio Doria dated July 1, 2002.
10.1 [2] Share Exchange Agreement between the Company and Clements Citrus Sales of
Florida, Inc. dated December 31, 1999.
18
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.
10.5 [5] Employment Agreement with Samuel P. Sirkis dated August 1, 2000.
10.6 [6] Consulting Contract between Clements Citrus Sales of Florida, Inc. and Condor
Consulting, LLC dated September 15, 2000.
10.7 [6] Sales and Marketing Contract between Clements Citrus Sales of Florida, Inc. and
Tianjin Hongrun Trading Co., Ltd. dated October 8, 2000.
10.8 [9] Warrant to purchase 25,000 shares of the Company's Common Stock in favor of
James E. Groat dated December 11, 2000.
10.9 [9] Common Stock Purchase Agreement between the Company and Capital Consultants,
Inc. dated February 1, 2001.
10.10 [9] Registration Rights Agreement between the Company and Capital Consultants, Inc.
dated February 1, 2001.
10.11 [9] Amendment to Employment Agreement between the Company and Samuel P. Sirkis.
10.12 [9] Warrant to purchase 800,000 shares of the Company's Common Stock in favor of
Samuel P. Sirkis dated February 1, 2001.
10.13 [9] Warrant to purchase 100,000 shares of the Company's Common Stock in favor of
Condor Consulting, LLC dated September 15, 2000.
10.14 [9] Promissory Note by the Company in favor of Donald H. Sturm in the principal
amount of $100,000 dated February 7, 2001.
10.15 [10] Import Agency Contract between Clements Citrus Sales of Florida, Inc. and Golden
Wing Mau Enterprise Development Co. Ltd.
10.16 [11] Agreement between J. R. Ruzzuti and Antonio Doria dated June 29, 2001.
10.17 [12] Letter agreement between the Company and Trade Link Group, Inc. dated July 19,
2001.
19
10.18 [12] Supply agreement between the Company and Paradise Water and Juice Co., Inc.
dated November 7, 2001.
16.1 [7] Letter on change of certifying accountant pursuant to Regulation SK, Section
304(a)(3)2.
16.2 [7] Letter from Joan R. Staley, CPA, P.A.
16.3 [8] Letter on change of certifying accountant pursuant to Regulation SK, Section
304(a)(3)2.
16.4 [8] Letter from Joan R. Staley, CPA, P.A.
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 Registration Statement on Form 10SB
filed August 24, 1999.
[2] Previously filed with the Company's Current 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 Annual Report on Form 10KSB filed July
12, 2000.
[5] Previously filed with the Company's Quarterly Report on Form 10QSB filed
August 21, 2000.
[6] Previously filed with the Company's Quarterly Report on Form 10QSB filed
November 14, 2000.
[7] Previously filed with the Company's Current Report on Form 8-K filed
December 26, 2000.
[8] Previously filed with the Company's Current Report on Form 8-KA filed
February 15, 2001.
[9] Previously filed with the Company's Quarterly Report on Form 10QSB filed
February 20, 2001.
[10] Previously filed with the Company's Annual Report on Form 10KSB filed July
16, 2001.
20
[11] Previously filed with the Company's Quarterly Report on Form 10QSB filed
August 20, 2001.
[12] Previously filed with the Company's Quarterly Report on Form 10QSB filed
November 19, 2001.
(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. A report on Form 8-K was filed
on December 26, 2000 disclosing a change in the Registrant's Certifying
Accountant. Lastly, an amended Form 8-K was filed on February 15, 2001, which
amended the report previously filed December 26, 2000, to include certain
information requested by the Commission.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CLEMENTS GOLDEN PHOENIX ENTERPRISES, INC.
(Registrant)
Date November 21, 2001 By: /s/ Joseph Rizzuti
------------------------------------------------
Joseph Rizzuti, Chairman and COO
By: /s/ Bonnie K. Ludlum
------------------------------------------------
Bonnie K. Ludlum, Secretary and Director
By: /s/ John Samartine
------------------------------------------------
John Samartine, Director
By: /s/ James Groat
------------------------------------------------
James Groat, Director
21