UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
Commission file Number: 000-27235
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CONSUMER MARKETING CORP.
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(Exact name of small business issuer as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
98-0204680
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(I.R.S. Employer Identification Number)
Suite 810
1708 Dolphin Avenue
Kelowna, British Columbia, V1Y 9S4
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(Address of principal executive offices)
(250)868-8177
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(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 500,000 common shares as at
March 31, 2002
Transitional Small Business Disclosure Format (check one): Yes [] No [X]
CONSUMER MARKETING CORPORATION
Index to Financial Statements
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Condensed balance sheet, March 31, 2002 (unaudited) ....................... 3
Condensed statements of operations for the three months
and nine months ended March 31, 2002 and 2001 (unaudited) ............ 4
Condensed statements of cash flows for the nine months
ended March 31, 2002 and 2001 (unaudited) ............................ 5
Notes to condensed financial statements (unaudited) ....................... 6
Item 2 Plan of Operation ............................................. 7
PART II. OTHER INFORMATION
Item 1 Legal Proceedings ............................................. 11
Item 2 Changes in Securities ......................................... 11
Item 3 Defaults Upon Senior Securities ............................... 11
Item 4 Submission of Matters to a Vote of Security Holders ........... 11
Item 5 Other Information ............................................. 12
Item 6 Exhibits and Reports on Form 8K ............................... 12
SIGNATURES ................................................................ 12
CONSUMER MARKETING CORPORATION
CONDENSED BALANCE SHEET
(Unaudited)
March 31, 2002
ASSETS
TOTAL ASSETS $ --
========
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Accounts payable ........................................... $ 33,285
Accrued liabilities ........................................ 500
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TOTAL LIABILITIES 33,785
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SHAREHOLDERS' DEFICIT:
Common stock ............................................... 50
Additional paid-in capital (Note B) ........................ 27,778
Retained deficit ........................................... (61,613)
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TOTAL SHAREHOLDERS' DEFICIT (33,785)
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$ --
========
On behalf of the Board:
/s/Devinder Randhawa /s/Robert Hemmerling
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Devinder Randhawa, Director Robert Hemmerling, Director
See accompanying notes to condensed financial statements
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CONSUMER MARKETING CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
General and administrative expenses $ 1,790 $ 5,709 $ 4,895 $ 22,257
--------- --------- --------- ---------
LOSS FROM OPERATIONS (1,790) (5,709) (4,895) (22,257)
--------- --------- --------- ---------
INCOME TAXES (Note C) ................................ -- -- -- --
--------- --------- --------- ---------
NET LOSS $ (1,790) $ (5,709) $ (4,895) $ (22,257)
========= ========= ========= =========
BASIC AND DILUTED
LOSS PER COMMON SHARE ........................... $ (0.00) $ (0.01) $ (0.01) $ (0.04)
========= ========= ========= =========
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING ....................... 500,000 500,000 500,000 500,000
========= ========= ========= =========
See accompanying notes to condensed financial statements
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CONSUMER MARKETING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
-------------------
2002 2001
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Net cash used in operating activities .................. $(5,395) $(4,079)
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Cash flows from financing activities:
Third party expenses paid by affiliate on
behalf of the company, recorded as
additional-paid-in capital ..................... 5,395 4,079
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Net cash provided by financing activities .............. 5,395 4,079
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Net change in cash ... -- --
Cash, beginning of period .............................. -- --
------- -------
Cash, end of period ... $ -- $ --
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period
for:
Interest ....................................... $ -- $ --
======= =======
Income taxes ................................... $ -- $ --
======= =======
See accompanying notes to condensed financial statements
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CONSUMER MARKETING CORPORATION
Notes to Condensed Financial Statements
(Unaudited)
NOTE A: BASIS OF PRESENTATION
The condensed financial statements presented herein have been prepared by the
Company in accordance with the accounting policies in its audited financial
statements for the year ended June 30, 2001 as filed in its Form 10-KSB and
should be read in conjunction with the notes thereto. The Company is a "blank
check" company with the purpose to evaluate, structure and complete a merger
with, or acquisition of, a privately owned corporation.
Management changed the manner in which it presents the Company's operating
results and cash flows during the quarter ended December 31, 2001. Management no
longer considers the Company in the development stage as defined by the FASB
Statement of Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises." As a result, cumulative operating results and cash flow
information is no longer presented in the financial statements. This change does
not affect the Company's operating results or financial position. Accordingly,
no pro forma financial information is necessary. Historical information has been
revised in conformity with current practice.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
NOTE B: RELATED PARTY TRANSACTIONS
The Company does not maintain a checking account. An affiliate, RD Capital, has
assumed the responsibility to pay certain obligations on behalf of the Company.
The payments are accounted for as contributed capital in the accompanying
condensed financial statements. During the nine months ended March 31, 2002 and
2001, R.D. Capital made payments to vendors totaling $5,395 and $4,079,
respectively, on behalf of the Company.
Through March 31, 2002, R.D. Capital has contributed capital totaling $27,778.
NOTE C: INCOME TAXES
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the periods shown on the condensed financial
statements resulting in a deferred tax asset, which was fully allowed for,
therefore the net benefit and expense result in $-0- income taxes.
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PLAN OF OPERATIONS
The following discussion of the plan of operations of the Company should be read
in conjunction with the financial statements and the related notes thereto
included elsewhere in this quarterly report for the nine months ended March 31,
2002. This quarterly report contains certain forward-looking statements and the
Company's future operation results could differ materially from those discussed
herein.
We intend to seek to acquire assets or shares of an entity actively engaged in a
business that generates revenues, in exchange for its securities. We have not
identified a particular acquisition target and have not entered into any
negotiations regarding an acquisition. As soon as this registration statement
becomes effective under Section 12 of the '34 Act, we intend to contact
investment bankers, corporate financial analysts, attorneys and other investment
industry professionals through various media. None of our officers, directors,
promoters or affiliates have engaged in any preliminary contact or discussions
with any representative of any other company regarding the possibility of an
acquisition or merger with us as of the date of this registration statement.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing how the transaction is structured, the
Company's Board of Directors expects that it will provide our shareholders with
complete disclosure documentation concerning a potential business opportunity
and the structure of the proposed business combination prior to consummation.
Disclosure is expected to be in the form of a proxy or information statement, in
addition to the post-effective amendment.
While any disclosure must include audited financial statements of the target
entity, we cannot assure you that such audited financial statements will be
available. As part of the negotiation process, the Board of Directors does
intend to obtain certain assurances of value, including statements of assets and
liabilities, material contracts, accounts receivable statements, or other
indicia of the target entity's condition prior to consummating a transaction,
with further assurances that an audited statement would be provided prior to
execution of a merger or acquisition agreement. Closing documents will include
representations that the value of the assets transferred will not materially
differ from the representations included in the closing documents, or the
transaction will be voidable.
Due to our intent to remain a shell corporation until a merger or acquisition
candidate is identified, it is anticipated that its cash requirements shall be
minimal, and that all necessary capital, to the extent required, will be
provided by the directors or officers. We do not anticipate that we will have to
raise capital in the next twelve months. We also do not expect to acquire any
plant or significant equipment.
We have not, and do not intend to enter into, any arrangement, agreement or
understanding with non-management shareholders allowing non-management
shareholders to directly or indirectly participate in or influence our
management of the Company. Management currently holds 100% of our stock. As a
result, management is in a position to elect a majority of the directors and to
control our affairs.
We have no full time employees. Our President and Secretary have agreed to
allocate a portion of their time to our activities, without compensation. These
officers anticipate that our business plan can be implemented by their devoting
approximately five (5) hours each per month to our business affairs and,
consequently, conflicts of interest may arise with respect to their limited time
commitment. We do not expect any significant changes in the number of employees.
See "Management."
Our officers and directors may become involved with other companies who have a
business purpose similar to ours. As a result, potential conflicts of interest
may arise in the future. If a conflict does arise and an officer or director is
presented with business opportunities under circumstances where there may be a
doubt as to whether the opportunity should belong to the Company or another
"blank check" company they are affiliated with, they will disclose the
opportunity to all the companies. If a situation arises where more than one
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company desires to merge with or acquire that target company and the principals
of the proposed target company have no preference as to which company will merge
with or acquire the target company, the company that first filed a registration
statement with the Securities and Exchange Commission will be entitled to
proceed with the proposed transaction.
See "Risk Factors - Affiliation With Other "Blank Check" Companies."
General Business Plan
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Our purpose is to seek, investigate and, if investigation warrants, acquire an
interest in business opportunities presented to it by persons or firms that
desire to seek the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business, industry,
or geographical location and we may participate in a business venture of
virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to restrict our discretion to search for
and enter into potential business opportunities. Management anticipates that it
may be able to participate in only one potential business venture because we
have nominal assets and limited financial resources. See the financial
statements at page F-1. This lack of diversification should be considered a
substantial risk to our shareholders because it will not permit us to offset
potential losses from one venture against gains from another.
We may seek a business opportunity with entities that have recently commenced
operations, or that wish to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes. We may acquire assets
and establish wholly owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity will be complex and
extremely risky. Due to general economic conditions, rapid technological
advances being made in some industries and shortages of available capital,
management believes that there are numerous firms seeking the perceived benefits
of a publicly registered corporation. The perceived benefits may include
facilitating or improving the terms for additional equity financing that may be
sought, providing liquidity for incentive stock options or similar benefits to
key employees, providing liquidity (subject to restrictions of applicable
statutes) for all shareholders and other factors. Potentially, available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of these business opportunities extremely difficult
and complex.
We have, and will continue to have, no capital to provide the owners of business
opportunities with any significant cash or other assets. However, management
believes we will be able to offer owners of acquisition candidates the
opportunity to acquire a controlling ownership interest in a publicly registered
company without incurring the cost and time required to conduct an initial
public offering. The owners of the business opportunities will, however, incur
significant legal and accounting costs in connection with acquisition of a
business opportunity, including the costs of preparing Form 8-K's, 10-KSB's, or
10-QSB's, agreements and related reports and documents. The '34 Act specifically
requires that any merger or acquisition candidate comply with all applicable
reporting requirements, which include providing audited financial statements to
be included within the numerous filings relevant to complying with the `34 Act.
Nevertheless, the officers and directors of the Company have not conducted
market research and are not aware of statistical data that would support the
perceived benefits of a merger or acquisition transaction for the owners of a
business opportunity.
The analysis of new business opportunities will be undertaken by our officers
and directors, none of whom is a professional business analyst. Management
intends to concentrate on identifying preliminary prospective business
opportunities that may be brought to our attention through present associations
of our officers and directors, or by our shareholders. In analysing prospective
business opportunities, management will consider:
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- - the available technical, financial and managerial resources;
- - working capital and other financial requirements;
- - history of operations, if any;
- - prospects for the future;
- - nature of present and expected competition;
- - the quality and experience of management services that may be available and
the depth of that management;
- - the potential for further research, development, or exploration;
- - specific risk factors not now foreseeable but could be anticipated to
impact our proposed activities;
- - the potential for growth or expansion;
- - the potential for profit;
- - the perceived public recognition of acceptance of products, services, or
trades;
- - name identification; and
- - other relevant factors.
Our officers and directors expect to meet personally with management and key
personnel of the business opportunity as part of their "due diligence"
investigation. To the extent possible, the Company intends to utilize written
reports and personal investigations to evaluate the above factors. We will not
acquire or merge with any company that cannot provide audited financial
statements within a reasonable period of time after closing of the proposed
transaction.
Our management, while probably not especially experienced in matters relating to
the prospective new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of our shareholders, in accomplishing
our business purposes. We do not anticipate that any outside consultants or
advisors, except for our legal counsel and accountants, will be utilized by us
to accomplish our business purposes. However, if we do retain an outside
consultant or advisor, any cash fee will be paid by the prospective
merger/acquisition candidate, as we have no cash assets. We have no contracts or
agreements with any outside consultants and none are contemplated.
We will not restrict our search for any specific kind of firms, and may acquire
a venture that is in its preliminary or development stage or is already
operating. We cannot predict at this time the status of any business in which we
may become engaged, because the business may need to seek additional capital,
may desire to have its shares publicly traded, or may seek other perceived
advantages that we may offer. Furthermore, we do not intend to seek capital to
finance the operation of any acquired business opportunity until we have
successfully consummated a merger or acquisition.
We anticipate that we will incur nominal expenses in the implementation of its
business plan. Because we have no capital to pay these anticipated expenses,
present management will pay these charges with their personal funds, as interest
free loans, for a minimum of twelve months from the date of this registration
statement. If additional funding is necessary, management and or shareholders
will continue to provide capital or arrange for additional outside funding.
However, the only opportunity that management has to have these loans repaid
will be from a prospective merger or acquisition candidate. Management has no
agreements with us that would impede or prevent consummation of a proposed
transaction. We cannot assure, however, that management will continue to provide
capital indefinitely if a merger candidate cannot be found. If a merger
candidate cannot be found in a reasonable period of time, management may be
required reconsider its business strategy, which could result in our
dissolution.
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Acquisition of Opportunities
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In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. It may also acquire stock or
assets of an existing business. On the consummation of a transaction, it is
probable that our present management and shareholders will no longer be in
control. In addition, our directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
shareholders. Furthermore, management may negotiate or consent to the purchase
of all or a portion of our stock. Any terms of sale of the shares presently held
by officers and/or directors will be also afforded to all other shareholders on
similar terms and conditions. Any and all sales will only be made in compliance
with the securities laws of the United States and any applicable state.
While the actual terms of a transaction that management may not be a party to
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In that event, the shareholders of the Company would retain 20% or less
of the issued and outstanding shares of the surviving entity, which would result
in significant dilution in the equity of the shareholders.
As part of the "due diligence" investigation, our officers and directors will
meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis of verification of certain
information provided, check references of management and key personnel, and take
other reasonable investigative measures to the extent of our limited financial
resources and management expertise. How we will participate in an opportunity
will depend on the nature of the opportunity, the respective needs and desires
of the parties, the management of the target company and our relative
negotiation strength.
With respect to any merger or acquisition, negotiations with target company
management are expected to focus on the percentage of our Company that the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, our shareholders will probably hold a
substantially lesser percentage ownership interest following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a company with substantial assets. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our then shareholders.
We will participate in a business opportunity only after the negotiation and
execution of appropriate written agreements. Although we cannot predict the
terms of the agreements, generally the agreements will require some specific
representations and warranties by all of the parties, will specify certain
events of default, will detail the terms of closing and the conditions that must
be satisfied by each of the parties prior to and after the closing, will outline
the manner of bearing costs, including costs associated with our attorneys and
accountants, will set forth remedies on default and will include miscellaneous
other terms.
As stated previously, we will not acquire or merge with any entity that cannot
provide independent audited financial statements concurrent with the closing of
the proposed transaction. We are subject to the reporting requirements of the
`34 Act. Included in these requirements is our affirmative duty to file
independent audited financial statements as part of its Form 8-K to be filed
with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as our audited financial statements included in our annual
report on Form 10-K (or 10-KSB, as applicable) and quarterly reports on Form
10-Q (or 10-QSB, as applicable). If the audited financial statements are not
10
available at closing, or if the audited financial statements provided do not
conform to the representations made by the candidate to be acquired in the
closing documents, the closing documents will provide that the proposed
transaction will be voidable at the discretion of our present management. If the
transaction is voided, the agreement will also contain a provision providing for
the acquisition entity to reimburse us for all costs associated with the
proposed transaction.
Competition
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We will remain an insignificant participant among the firms that engage in the
acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we do. In view of our combined
extremely limited financial resources and limited management availability, we
will continue to be at a significant competitive disadvantage compared to our
competitors.
"CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical matters,
the matters discussed in this Form 10-QSB are forward-looking statements based
on current expectations and involve risks and uncertainties. Forward-looking
statements include, but are not limited to, statements under the following
heading: "Managements Discussion And Analysis Or Plan Of Operations" the timing
and expected profitable results of sales and the need for no additional
financing.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3 DEFAULTS UPON SENIOR SECURITIES
None
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) We held an annual general meeting on February 22, 2002.
(b) Mr. Devinder Randhawa and Mr. Robert Hemmerling were re-elected
the directors of our company.
(c) The first matter which was voted on at our annual general meeting
was the election of directors. 500,000 votes received were cast
for and zero votes were received against the election of Mr.
Devinder Randhawa and Mr. Robert Hemmerling as directors of the
Company.
The second matter which was voted on at our annual general
meeting was the election of auditors. 500,000 votes received were
cast for and zero votes were received against the election of
Cordovano & Harvey as our auditors for the fiscal year ending
June 30, 2002.
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The third matter which was voted on at our annual general meeting
was the election of outside counsel. 500,000 votes received were
cast for and zero votes were received against the election of
Gerald R. Tuskey, Personal Law Corporation as our outside counsel
for the fiscal year ending June 30, 2002.
(d) Not applicable.
Item 5 OTHER INFORMATION
None
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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.
CONSUMER MARKETING CORP.
Dated: May 3, 2002 Per: /s/Dev Randhawa
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Dev Randhawa, President, C.F.O. and Director
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