U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the
SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from to
Commission File No. 000-24885
FAR EAST VENTURES, INC.
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(Name of Small Business Issuer in its Charter)
Nevada 88-0378451
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(State or other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
8725 N. W. 18th Terrace, Penthouse Suite, Miami, FL 33172
(Address of principal executive offices)
(305) 629-8400
(Issuer's telephone number)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity. As of November 20, 2000 - 12,200,000 shares of Common Stock
FAR EAST VENTURES, INC.
Index
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of September 30, 2000 2
Condensed Consolidated Statements of Operations for
the three months ended September 30, 2000 and 1999 3
Condensed Consolidated Statements of Operations for
the nine months ended September 30, 2000 and 1999
and from inception March 6, 1998 to September 30, 2000 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 2000 and 1999
and from inception March 6, 1998 to September 30, 2000 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Change in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
Part III. EXHIBITS
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FAR EAST VENTURES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
ASSETS
ASSETS
FURNITURE AND EQUIPMENT, net 8,145
---------------
TOTAL ASSETS $ 8,145
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 32,423
Line of credit - Stockholder 947,049
---------------
Total current liabilities 979,472
---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 50,000,000 shares
authorized,12,200,000 shares issued and outstanding 12,200
Additional paid-in capital 7,813,392
Unearned compensation (3,272,299)
Deficit accumulated during development stage (5,524,620)
----------------
Total stockholders' equity ( 971,327)
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,145
===============
See the accompanying notes to the consolidated financial statements.
2
FAR EAST VENTURES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
2000 1999
--------------- ---------------
REVENUE $ - $ -
COST OF REVENUE - -
--------------- ---------------
GROSS PROFIT - -
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,307,222 -
--------------- ---------------
LOSS BEFORE INCOME TAXES (2,307,222) -
INCOME TAXES - -
--------------- ---------------
NET LOSS $ (2,307,222) $ -
================ ===============
BASIC AND DILUTED LOSS PER SHARE $ (0.19) $ (0.00)
=============== ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC AND DILUTED 11,317,582 4,500,000
=============== ===============
See the accompanying notes to the consolidated financial statements.
3
FAR EAST VENTURES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
From Inception
March 6, 1998 For the Nine Months Ended
to September September 30,
30, 2000 2000 1999
--------------- ------------- --------------
REVENUE $ - $ - $ -
COST OF REVENUE - - -
---------------- ------------- ---------------
GROSS PROFIT - - -
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,524,620 5,513,620 -
---------------- ------------- ---------------
LOSS BEFORE INCOME TAXES (5,524,620) (5,513,620) -
INCOME TAXES - - -
--------------- ------------- ---------------
NET LOSS $ (5,524,620) $ (5,513,620) $ -
================ ============== ===============
BASIC AND DILUTED LOSS PER SHARE $ (0.90) $ (0.52) $ (0.00)
================ ============= ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC AND DILUTED 6,146,006 10,626,277 4,500,000
================ ============= ===============
See the accompanying notes to the consolidated financial statements.
4
FAR EAST VENTURES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From Inception
March 6, 1998 For the Nine Months Ended
to September September 30,
30, 2000 2000 1999
---------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,524,620) $ (5,513,620) $ -
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation expense 770 770 -
(Increase) decrease in:
Prepaid expenses 4,552,293 4,552,293 -
Other assets - - -
Increase (decrease) in:
Accounts payable and accrued expenses 22,423 22,423 -
---------------- ------------- --------------
Net cash used in operating activities (949,134) (938,134) -
---------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (8,915) (8,915) -
---------------- ------------- --------------
Net cash used in investing activities (8,915) (8,915) -
---------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from line of credit - stockholder 958,049 947,049 -
---------------- ------------- --------------
Net cash provided by financing activities 958,049 947,049 -
---------------- ------------- --------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS - - -
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD - - -
---------------- ------------- --------------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ - $ - $ -
================ ============= ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
During the nine months ended September 30, 2000 and 1999, the Company paid no
income taxes and no interest.
See the accompanying notes to the consolidated financial statements.
5
FAR EAST VENTURES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited Consolidated Financial Statements have been prepared by Far East
Ventures, Inc. (the "Company"), pursuant to the rules and regulations of the
Securities and Exchange Commission. The information furnished herein reflects
all adjustments (consisting of normal recurring accruals and adjustments) which
are, in the opinion of management, necessary to fairly present the operating
results for the respective periods. Certain information and footnote disclosures
normally present in annual consolidated financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The results of the nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the full year ending December 31, 2000.
NOTE 2 - UNEARNED COMPENSATION
In accordance with Staff Accounting Bulletin 4-E, prepaid consulting fees is
shown as a deduction from equity.
NOTE 3 - LOSS PER SHARE
In 1997, the Financial Accounting Standard Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No.
128 replaced the previously reported primary and fully diluted loss per share
with basic and diluted loss per share. Unlike primary loss per share, basic loss
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted loss per share is very similar to the previously reported
fully diluted loss per share. Basic loss per share is computed using the
weighted-average number of common shares outstanding during the period. Common
equivalent shares are excluded from the computation if their effect is
anti-dilutive. There are no common stock equivalents.
NOTE 4 - CONSULTING AGREEMENTS
In January 2000, the Company issued to R.R.P., L.L.C., an unrelated third party,
and 300,000 shares of the Company's common stock in accordance with a one year
consulting agreement. The shares have been valued in accordance with FASB No.
123 "Accounting for Stock-Based Compensation" at $1,274,880 based on the fair
market value of the Company's common stock on the date of issuance of the
shares.
In January 2000, the Company has committed to enter into a one-year consulting
agreement with the owner ("Consultant") of a company, which is a stockholder of
the Company. The agreement is for an investor and public relations services to
be rendered by the Consultant over a twelve-month period. For the services
rendered, the Consultant will receive 500,000 shares of the Company's common
stock. The shares have been valued in accordance with FASB No. 123 "Accounting
for Stock-Based Compensation" at $2,062,500 based on the fair market value of
the Company's common stock on the date of issuance of the shares.
6
FAR EAST VENTURES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 4 - CONSULTING AGREEMENTS (continued)
In January 2000, the Company engaged Chanin Capital Partners, LLC ("CCP") and
its affiliates to act as exclusive financial advisor and/or agent to the Company
in connection with acquisitions. CCP has agreed to initiate a private placement
of up to $100,000,000, on best efforts, of senior secured debt, senior
subordinated notes or equity. For these services CCP will be paid a one-time
advisory fee of $25,000 and a commission, based on percentage of funding, for
any private placement financing.
In March 2000, the Company issued to Alan Burkun, an unrelated third party,
900,000 shares of the Company's common stock in accordance with a consulting
agreement. The shares have been valued in accordance with FASB No. 123
"Accounting for Stock-Based Compensation" at $3,037,500 based on the fair market
value of the Company's common stock on the date of issuance of the shares.
In March 2000, the Company issued to J.B. Marc & Associates, an unrelated third
party, and 900,000 shares of the Company's common stock in accordance with a
consulting agreement. The shares have been valued in accordance with FASB No.
123 "Accounting for Stock-Based Compensation" at $1,237,500 based on the fair
market value of the Company's common stock on the date of issuance of the
shares.
In December 1999, Churchill Resources, Inc. ("CRI") engaged Crary Onthank and
O'Neil LLC ("COO"), who have agreed to initiate a private placement of up to
$6,000,000, on best efforts, of senior secured debt, senior subordinated notes
or equity. The funds will be used for CRI's acquisition of the operating assets
of Orangeville Raceway, Ltd. For these services, COO will be paid a one-time
advisory fee of 25,000 shares of the Company's common stock and a commission,
based on percentage of funding, for any private placement financing.
In August 2000 the Company entered into an agreement with Shawn A. Becker to
provide consulting services to the Company for a period of 12 months. In
consideration for these services, the Company issued Mr. Becker 800,000 shares
of the Company's common stock. The shares have been valued in accordance with
FASB No. 123 "Accounting for Stock-Based Compensation" at $350,000 based on the
fair market value of the Company's common stock on the date of issuance of the
shares.
NOTE 5 - ACQUISTIONS
In January 2000, the Company completed an acquisition of CRI. The Company issued
4,500,000 shares of its common stock for all of the issued and outstanding
common stock of CRI. After the acquisition, CRI will have a majority ownership
of the Company. Since CRI will be the controlling stockholder, CRI will be the
successor by merger to the Company. Therefore, the acquisition will be accounted
for as a recapitalization of CRI and the historical and continuing financial
statement presentation will be that of the legal subsidiary, CRI, not the legal
parent, the Company. Due to the Company's lack of business activity prior to the
merger, no excess cost over fair value of net assets acquired will be recorded.
7
FAR EAST VENTURES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
NOTE 5 - ACQUISTIONS, continued
In January 2000, the Company, formerly CRI, executed an asset purchase agreement
and paid an initial deposit of $100,000 to purchase the operating assets of
Orangeville Raceway, Ltd. The asset purchase agreement closing is contingent
upon regulatory approval from the British Columbia Racing Authority.
On August 28, 2000, the Company entered into a Restated Stock Transfer and
Exchange Agreement to purchase all the issued and outstanding shares of stock of
Sophisticated Communications, Inc., a Florida corporation ("SCI"), for
12,400,000 restricted shares of the Company's common stock with represents
approximately 50% of the then issued and outstanding shares of the Company's
common stock. SCI is in the communications business including prepaid phone
cards. The closing of this transaction will occur until the completion of the
audit of the financial statements of SCI and the satisfactory completion of
other matter. The Company expects this transaction to close by the end of 2000.
8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
The following discussion and analysis should be read in conjunction with
our consolidated financial statements and related footnotes for the year ended
December 31, 1999 included in our Annual Report on Form 10-KSB. The discussion
of results, causes and trends should not be construed to imply any conclusion
that such results or trends will necessarily continue in the future.
OVERVIEW
Our initial focus after acquiring Churchill Resources, Inc. was to develop
a management team and a corporate identity. Business offices were leased in Las
Vegas, Nevada and management was secured, including a Chief Executive Officer
and Chief Financial Officer who were knowledgeable in the gaming and horse
racing industries.
We also focused on the development of what was to be our core business,
horse racing and gaming. To that end we entered into an agreement to purchase
the Fraser Downs Raceway assets in Surrey, British Columbia, Canada. We also
signed a letter of intent to purchase the Sandown Raceway assets on Vancouver
Island, British Columbia.
We, since our inception, have incurred net losses of $5,524,620. We may be
unable to continue in existence unless we are able to arrange financing to fund
our acquisitions and our new business strategy. We have not yet generated any
revenues and are still considered in the development stage.
PLAN OF OPERATION
In August 2000, we changed our corporate focus from that of acquiring
gaming and horse racing establishments to acquiring telecommunication companies.
On August 28, 2000 we entered into a Restated Stock Transfer and Exchange
Agreement with Sophisticated Communication, Inc. ("SCI"). As a result of pending
acquisition, we have reorganized the board of directors and management team to
focus on the telecommunications industry. This reorganization resulted in the
removal of certain board members and our recently hired Chief Executive Officer
and Chief Financial Officer. We have also withdrawn our agreements to purchase
Fraser Downs Raceway and Sandowns Raceway.
At the closing of this transaction with is to occur by the end of 2000, we
will issue 12,400,000 shares of our common stock to the former shareholder of
SCI which represents approximately 50% of our issued and outstanding common
stock. SCI is a telecommunications company based in Florida that distributes
prepaid calling cards in 42 states through approximately 50,000 locations. Cards
are sold in increments of $5, $10 and $20.
9
FORWARD LOOKING STATEMENTS
This report contains certain 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. Stockholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of us complete acquisition of telecommunication
companies and execute our business plan. Although we believe the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the forward-looking statements contained in the report will prove to be
accurate.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change 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
Not applicable
Item 5. Other Information
Not applicable
10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
On September 7, 2000, the Company filed a Current Report on Form 8-K that
announced the following:
1 On August 28, 2000, the Company entered into a Restated Stock Transfer
and Exchange Agreement to purchase all the issued and outstanding
shares of stock of Sophisticated Communications, Inc., a Florida
corporation ("SCI"), for 12,400,000 restricted shares of the Company's
common stock with represents approximately 50% of the then issued and
outstanding shares of the Company's common stock.
2 Shareholders in early August elected Allen Burditt and Warren Davis
Directors of the Company. On August 11, 2000 the shareholders removed
Fred Bilawey and Darrell Mills as officers and directors of Company.
On September 1, 2000 the shareholders elected Michael S. Fletcher,
Sean Fletcher and Joel Velazquez as Directors. On that date, Allen
Burditt resigned as Director and CEO and Warren Davis resigned as
Director and officer. As of September 1, 2000, Michael S. Fletcher is
Chairman of the Board and Chief Executive Officer. Sean Fletcher is
Secretary and Joel Velazquez is Chief Financial officer of Company.
Darrell Mills, who was terminated as an officer and director of
Registrant on August 11, 2000, has contested his termination.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FAR EAST VENTURES, INC.
By: /s/ Michael S. Fletcher
---------------------------
Michael S. Fletcher
Chairman of the Board
Date: November 20, 2000
11