SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 2000
Commission File No. 0000-29157
Casterbridge Management, Inc.
A Nevada corporation 88-0348153
(I.R.S. Employer Identification Number)
2102 N. Donner Ave., Tucson, Arizona 85749
Registrant's telephone number, including area code:
(520) 577-1516
Check whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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. [X]Yes [ ] No
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date:
Class Outstanding as of May 1, 2000
$.001 Par Value Common Stock 1,000,000 SHARES
PART I
This Report may contain certain "forward-looking" statements
as such term is defined in the Private Securities Litigation
Reform Act of 1995 or by the Securities and Exchange
Commission in its rules, regulations and/or releases, which
represent our expectations or beliefs, including but not
limited to, statements concerning our operations, economic
performance, financial condition, growth and acquisition
strategies, investments, and future operational plans. For
this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-
looking statements. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," "might," or
"continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-
looking statements. These statements by their nature
involve substantial risks and uncertainties, certain of
which are beyond our control, and actual results may differ
materially depending on a variety of important facts,
including but not limited to those risk factors discussed
herein below.
Item 1. FINANCIAL STATEMENTS.
INDEPENDENT ACCOUNTANT'S REPORT
Casterbridge Management, Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheets of
Casterbridge Management, Inc. (a development stage company)
as of March 31, 2000, and the related statements of
operations, and cash flows for the three month period then
ended. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the
financial statement taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
financial statements for them to be in conformity with
generally accepted accounting principles.
Respectfully submitted
/s/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
May 11, 2000
CASTERBRIDGE MANAGEMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31 December 31
2000 1999
Assets: $ - $ -
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ - $ -
Total Liabilities $ - $ -
Shareholders' Equity:
Common Stock, Par Value $.001
Authorized 100,000,000 shares
Issued 1,000,000 shares at March 31, 2000
and December 31, 1999 1,000 1,000
Paid-In Capital 1,265 335
Retained Deficit (1,200) (1,200)
Deficit Accumulated During the
Development State (1,065) (135)
Total Stockholders' Equity $ - $ -
Total Liabilities and
Shareholders' Equity $ - $ -
See accompanying notes and accountants' report.
CASTERBRIDGE MANAGEMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
since October
20, 1999
For the three months ended inception of
ended March 31, development
2000 1999 stage
Revenues $ - $ - $ -
Expenses
General & Administrative 930 - 1,065
Net Loss $(930) $ - $(1,065)
Basic & Diluted loss per share
$ - $ -
See accompanying notes and accountants' report.
CASTERBRIDGE MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative
Since October 20
1999
For the three months ended Inception of
ended March 31, Development
2000 1999 Stage
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $(930) $ - $(1,065)
Increase (Decrease) in
Accounts Payable - - (200)
Net Cash Used in
Operating activities - - (1,265)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net Cash provided by
Investing activities - - -
CASH FLOWS FROM
FINANCING ACTIVITIES:
Capital contributed
By shareholder 930 - 1,265
Net Cash provided by
Financing activities 930 - 1,265
Net (Decrease) in
Cash and Cash Equivalents - - -
Cash and Cash Equivalents
At Beginning of Period - - -
Cash and Cash Equivalents
At End of Period $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ - $ - $285
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AN
FINANCING ACTIVIITES: None
See accompanying notes and accountants' report.
CASTERBRIDGE MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
This summary of accounting policies for Casterbridge
Management, Inc. is presented to assist in
understanding the Company's financial statements. The
accounting policies conform to generally accepted
accounting principles and have been consistently
applied in the preparation of the financial statements.
The unaudited financial statements as of March 31, 2000
and for the three months then ended reflect, in the
opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly
state the financial position and results of operations
for the three months. Operating results for interim
periods are not necessarily indicative of the results
which can be expected for full years.
Organization and Basis of Presentation
The Company was incorporated under the laws of the
State of Nevada on November 6, 1995. The Company
ceased all operating activities during the period from
November 6, 1995 to October 20, 1999 and was considered
dormant. Since October 20, 1999, the Company is in the
development stage, and has not commenced planned
principal operations.
Nature of Business
The company has no products or services as of March 31,
2000. The Company was organized as a vehicle to seek
merger or acquisition candidates. The Company intends
to acquire interests in various business opportunities,
which in the opinion of management will provide a
profit to the Company
Cash and Cash Equivalents
For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents to the extent the funds are not being
held for investment purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles required
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.
Loss per Share
The reconciliations of the numerators and
denominators of the basic loss per share computations
are as follows:
Per-Share
Income Shares Amount
(Numerator) (Denominator)
For the three months ended March 31, 2000:
Basic Loss per Share
Loss to common shareholders
$ (930) 1,000,000 $ -
For the three months ended March 31, 1999:
Basic Loss per Share
Loss to common shareholders
$ - 1,000,000 $ -
The effect of outstanding common stock equivalents
would be anti-dilutive for March 31, 2000 and 1999 and
are thus not considered.
Reclassification
Certain reclassifications have been made in the 2000
and 1999 financial statements to conform with the March
31, 2000 presentation.
NOTE 2 - INCOME TAXES
As of March 31, 2000, the Company had a net operating
loss carryforward for income tax reporting purposes of
approximately $1,900 that may be offset against future
taxable income through 2011. Current tax laws limit
the amount of loss available to be offset against
future income when a substantial change in ownership
occurs. Therefore, the amount available to offset
future taxable income will be limited. No tax benefit
has been reported in the financial statements, because
the Company believes there is a 50% or greater chance
the carryforwards will expire unused. Accordingly, the
potential tax benefits of the loss carryforwards are
offset by a valuation allowance of the same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as
is common with a development stage company, the Company
has had recurring losses during its development stage.
NOTE 4 - COMMITMENTS
As of March 31, 2000 all activities of the Company have
been conducted by corporate officers from either their
homes or business offices. Currently, there are no
outstanding debts owed by the Company for the use of
these facilities and there are no commitments for
future use of the facilitates.
NOTE 5 - STOCK SPLIT
On October 20, 1999 the Board of Directors authorized
1,000 to 1 stock split, changes the authorized number
of shares to 100,000,000 shares and the par value to
$.001 for the Company's common stock. As a result of
the split, 999,000 shares were issued. All references
in the accompanying financial statements to the number
of common stock and per-share amounts for 1999 and 1998
have been restated to reflect the stock split.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
DESCRIPTION OF BUSINESS.
Since its formation on November 6, 1995, CASTERBRIDGE
MANAGEMENT, INC., a Nevada corporation (the "Company"), has
not engaged in any operations other than organizational
matters. It was formed specifically to be a "blank check"
or "clean public shell" corporation, for the purpose of
either merging with or acquiring an operating company with
operating history and assets. The Company is a "clean
public shell" because it has not commenced operational
activities, and has no debt liabilities. The Company has
not been involved in any litigation nor has it had any prior
regulatory problems or business failures. We believe that a
strong attraction of the Company as a merger partner or
acquisition vehicle will be its status as a reporting public
company without any history of prior business failures,
litigation or prior regulatory problems.
The executive offices of the Company are located at 2102
North Donner Avenue, Tucson, Arizona 85749. Its telephone
number is (520) 577-1516. The President, Secretary and sole
director of the Company is Daniel L. Hodges.
Mr. Hodges was not the original incorporator of the Company.
Mr. Hodges retained the services of a registered agent to
incorporate or provide already incorporated Nevada and
Wyoming companies. Subsequent to incorporation, the
original incorporator resigned as director and Mr. Hodges
was appointed as sole officer and director of the Company.
Mr. Hodges continues to be the sole officer and director of
the Company and majority shareholder.
As the sole director, Mr. Hodges has commenced
implementation of the Company's principal business purpose,
which is to seek merger or acquisition candidates. The
Company intends to seek to acquire assets or shares of an
entity actively engaged in business that generates revenues,
in exchange for its securities. The Company has not
selected any company as an acquisition or merger candidate
and does not intend to limit itself to any particular field
or industry, but does, in its sole discretion, retain the
right to do so. The Company's plans are in the conceptual
stage only. There is no relationship between the particular
name of the Company and the Company's intended business
plan. If successful in completing a merger or acquisition,
the Company expects that it would change its name to reflect
the marketing goals of the business combination.
Competition
The Company is an insignificant participant that competes
among firms which engage in business combinations with, or
financing of, development stage enterprises. There are many
established management and financial consulting companies
and venture capital firms which have significantly greater
financial and personnel resources, technical expertise and
experience than the Company in this field. In view of the
Company's limited financial resources and management
availability, the Company continues to be at a significant
competitive disadvantage.
Regulation And Taxation
The Company intends to structure a merger or acquisition in
such a manner as to minimize federal and state tax
consequences to the Company and to any target company.
Patents
The Company owns no patents and no Internet domain names.
Employees
The Company has no full-time or part-time employees. Mr.
Hodges, the sole officer and director of the Company, has
agreed to allocate a nominal portion of his time to the
activities of the Company without compensation.
Legal Proceedings
The Company is not subject to any pending litigation, legal
proceedings or claims.
Risk Factors
The Company's business is subject to numerous risk factors,
including the following:
THE COMPANY HAS ONLY ONE DIRECTOR AND ONE OFFICER.
The Company's president and sole officer is Daniel L.
Hodges. Mr. Hodges is the sole director and the majority
shareholder. Because management consists of only Mr.
Hodges, the Company does not benefit from multiple judgments
that a greater number of directors or officers would
provide. The Company must rely completely on the judgment
of its sole officer and director when selecting a target
company. The decision to enter into a business combination
will likely be made without detailed feasibility studies,
independent analysis, market surveys or similar information
which, if the Company had more funds available to it, would
be desirable. Mr. Hodges anticipates devoting only a
nominal amount of time per month to the business of the
Company. Mr. Hodges has not entered into a written
employment agreement with the Company and he is not expected
to do so. The Company has not obtained key man life
insurance on Mr. Hodges. The loss of the services of Mr.
Hodges would adversely affect development of the Company's
business and its likelihood of continuing operations.
THE COMPANY HAS NO OPERATING HISTORY, NO REVENUE, MINIMAL
ASSETS AND OPERATES AT A LOSS.
The Company has no operating history or any revenues or
earnings from operations. The Company has no significant
assets or financial resources. The Company has operated at
a loss to date and will, in all likelihood, continue to have
operating expenses without corresponding revenues, at least
until the consummation of a business combination. As of
March 31, 2000, the Company had incurred expenses of less
than $5,000 since incorporation. Mr. Hodges has paid these
expenses and he has no expectation or agreement with the
Company for reimbursement for those expenses. There is no
assurance that the Company will ever be profitable.
MR. HODGES MAY HAVE CONFLICTS OF INTEREST WITH THE COMPANY.
The terms of any future business combination involving the
Company may include such terms as Mr. Hodges' remaining a
director or officer of the Company following the business
combination. However, the terms of a business combination
may provide for a payment by cash, securities or otherwise
to Mr. Hodges for the purchase or retirement of all or part
of his common stock of the Company by a target company or
for services rendered incident to or following a business
combination. Mr. Hodges would directly benefit from such
employment or payment. These benefits may influence Mr.
Hodges' choice of a target company. In addition, the
Articles of Incorporation of the Company provide that the
Company indemnify its officers and/or directors for
liabilities, which can include liabilities arising under the
securities laws. Therefore, assets of the Company could be
used or attached to satisfy any liabilities subject to such
indemnification.
In addition, Mr. Hodges has participated or is currently
participating in other blank check companies that may
compete directly with the Company. Additional conflicts of
interest and non-arm's length transactions may also arise in
the future. As of the date of this prospectus, Mr. Hodges
has been or currently is involved with 130 shell companies,
approximately 110 of which are or will be seeking business
opportunities for mergers or acquisitions. Consequently,
there are potential inherent conflicts of interest in Mr.
Hodges' acting as officer and director of the Company.
Conflicts could also arise if the Company were to enter into
any business combination with a company in which Mr. Hodges
is involved. This type of business transaction is not an
arm's-length transaction because of Mr. Hodges' potential
involvement with both parties. While there is no policy
prohibiting such a transaction, the Company currently does
not intend to engage in a business combination of this type.
Many states, including Nevada where the Company is
incorporated, have enacted laws to address breaches of
fiduciary duties of management when conflicts of interest
become problematic. You should note that shareholders'
pursuit of remedies under state laws can be prohibitively
expensive and time consuming.
THE COMPANY'S PROPOSED OPERATIONS ARE SPECULATIVE.
The success of the Company's proposed plan of operation will
depend to a great extent on the operations, financial
condition and management of the not-yet-identified target
company. While business combinations with entities having
established operating histories are preferred, we cannot
guarantee that the Company will be successful in locating
candidates meeting such criteria. In the event the Company
does complete a business combination, the success of the
Company's operations will be dependent upon the management
of the target company and numerous other factors beyond the
Company's control. There is no assurance that the Company
can identify a target company and consummate a business
combination.
THE PURCHASE OF PENNY STOCKS CAN BE RISKY.
In the event that a public trading market develops for the
Company's shares following a business combination, such
securities may be classified as a "penny stock" depending
upon their market price and the manner in which they are
traded. Section 3(a)(51) of the Securities Exchange Act of
1934 defines a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of
less than $5.00 per share and is not admitted for quotation
and does not trade on the Nasdaq Stock Market or on a
national securities exchange. For any transaction involving
a penny stock, unless exempt, the rules require delivery by
the broker of a document to investors stating the risks of
investment in penny stocks, the possible lack of liquidity,
commissions to be paid, current quotations and investors'
rights and remedies, a special suitability inquiry, regular
reporting to the investor and other requirements. Prices
for penny stocks are often not available and investors are
often unable to sell such stock. Thus an investor may lose
his entire investment in a penny stock and consequently
should be cautious of any purchase of penny stocks.
THERE IS A SCARCITY OF, AND SIGNIFICANT COMPETITION FOR,
BUSINESS OPPORTUNITIES AND COMBINATIONS.
The Company is and will continue to be an insignificant
participant in the business of seeking mergers with and
acquisitions of business entities. A large number of
established and well-financed companies, including venture
capital firms, are active in mergers and acquisitions of
companies which may be merger or acquisition target
candidates for the Company. Nearly all of these other
participants have greater financial resources, technical
expertise and managerial capabilities than the Company.
Consequently, the Company will be at a competitive
disadvantage in identifying possible business opportunities
and successfully completing a business combination.
Moreover, the Company will also compete with numerous other
small public companies in seeking merger or acquisition
candidates.
CURRENTLY, THERE IS NO AGREEMENT FOR A BUSINESS COMBINATION
WITH THE COMPANY AND NO MINIMUM REQUIREMENTS FOR A BUSINESS
COMBINATION.
The Company has no current arrangement, agreement or
understanding with respect to engaging in a business
combination with any specific entity. We cannot guarantee
that the Company will be successful in identifying and
evaluating any suitable business opportunities or in
concluding a business combination. We have not selected any
particular industry or specific business within an industry
as a potential target company. The Company has not
established any criteria, including a specific length of
operating history or a specified level of earnings, assets,
and/or net worth, which it will require a target company to
have achieved, or without which the Company would not
consider a business combination with such business entity.
Accordingly, the Company may enter into a business
combination with a business entity having no significant
operating history, losses, limited or no potential for
immediate earnings, limited assets, negative net worth or
other negative characteristics. We cannot guarantee you
that the Company will be able to negotiate a business
combination on terms favorable to the Company.
WE MAY BE DELAYED OR PRECLUDED FROM AN ACQUISITION BY
REPORTING REQUIREMENTS.
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Company is required to provide
certain information about significant acquisitions including
audited financial statements of the acquired company. These
audited financial statements must be furnished within 75
days following the effective date of a business combination.
The target company will have the obligation for obtaining
audited financial statements. The additional time and costs
for some potential target companies to prepare financial
statements may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by the
Company. Acquisition prospects that do not have, or are
unable to obtain, the required audited statements may not be
appropriate for acquisition so long as the reporting
requirements of the Exchange Act are applicable.
Notwithstanding a target company's agreement to obtain
audited financial statements within the required time frame,
these audited financials may not be available to the Company
at the time of effecting a business combination. In cases
where audited financials are unavailable, the Company will
have to rely upon unaudited information that has not been
verified by outside auditors in making its decision to
engage in a transaction with the business entity. This risk
increases the prospect that a business combination with such
a business entity might prove to be an unfavorable one for
the Company.
WE LACK MARKET RESEARCH AND MARKETING ORGANIZATION.
The Company has not conducted, and others have not made
available to the Company, market research indicating that
demand exists for the transactions we contemplate. Even in
the event demand exists for a transaction of the type
contemplated by the Company, there is no assurance the
Company will be successful in completing any such business
combination.
WE LIKELY WILL HAVE A CHANGE IN CONTROL AND MANAGEMENT
FOLLOWING A BUSINESS COMBINATION.
A business combination involving the issuance of the
Company's common stock will, in all likelihood, result in
shareholders of a target company obtaining a controlling
interest in the Company. As a condition of the business
combination agreement, Mr. Hodges may agree to sell or
transfer all or a portion of his common stock to provide the
target company with all or majority control of the Company.
The resulting change in control of the Company will occur
without your vote and will likely result in removal of Mr.
Hodges as the present sole officer and director of the
Company and a corresponding reduction in or elimination of
his participation in the future affairs of the Company.
A BUSINESS COMBINATION WILL POSSIBLY DILUTE THE VALUE OF THE
COMPANY'S SHARES.
A business combination normally will involve the issuance of
a significant number of additional shares of the Company's
common stock. Depending upon the value of the assets
acquired in the business combination, the per share value of
the Company's common stock may increase or decrease, perhaps
significantly.
THERE ARE STATE AND FEDERAL REGULATIONS WHICH MIGHT AFFECT
THE TRANSFERABILITY OF THE COMPANY'S SHARES.
The Company has not registered its shares for resale under
the securities or "blue sky" laws of any state and has no
plans to register or qualify its shares in any state.
Current shareholders, and persons who desire to purchase the
shares in any trading market that may develop in the future,
should be aware that there may be significant state
restrictions upon the ability of new investors to purchase
the securities.
Blue sky laws, regulations, orders, or interpretations place
limitations on offerings or sales of securities by "blank
check" companies, or in "blind-pool" offerings, or if such
securities represent "cheap stock" previously issued to
promoters or others. These limitations typically provide,
in the form of one or more of the following limitations,
that such securities are:
* not eligible for sale under exemption provisions
permitting sales without registration to accredited
investors or qualified purchasers;
* not eligible for the transactional exemption from
registration for nonissuer transactions by a registered
broker-dealer;
* not eligible for registration under the simplified
small corporate offering registration (SCOR) form
available in many states;
* not eligible for the "solicitations of interest"
exception to securities registration requirements
available in many states;
* required to be placed in escrow and the proceeds
received held in escrow subject to various limitations;
or
* not permitted to be registered or exempted from
registration, and thus not permitted to be sold in the
state under any circumstances.
Virtually all 50 states have adopted one or more of these
limitations, or other limitations or restrictions affecting
the sale or resale of stock of blank check companies, or
securities sold in "blind pool" offerings or "cheap stock"
issued to promoters or others. Specific limitations on
offerings by blank check companies (or companies meeting
such a definition, i.e., having no current business
operations and no specific business plan or purpose) have
been adopted in:
Alaska Nevada Tennessee
Arkansas New Mexico Texas
California Ohio Utah
Delaware Oklahoma Vermont
Florida Oregon Washington
Georgia Pennsylvania
Idaho Rhode Island
Indiana South Carolina
Nebraska South Dakota
The Company's selling efforts, and any secondary trading
market which may develop, may only be conducted in those
jurisdictions where an applicable exemption is available or
where the shares have been registered. The Company has no
current plan to register its shares in any state and does
not anticipate doing so until after the consummation of a
merger or acquisition, after which it will no longer be
classified as a blank check company. The Company has not
taken, and does not contemplate taking, any steps to ensure
compliance with state securities laws.
A BUSINESS COMBINATION MAY RESULT IN UNFAVORABLE TAXATION TO
THE COMPANY.
Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination the
Company may undertake. Currently, such transactions may be
structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business
combination so as to minimize the federal and state tax
consequences to both the Company and the target company.
However, there can be no assurance that such business
combination will meet the statutory requirements of a tax-
free reorganization or that the parties will obtain the
intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the
imposition of both federal and state taxes which may have an
adverse effect on both parties to the transaction and their
shareholders.
Plan Of Operations - General
The Company was organized for the purpose of creating a
corporate vehicle to seek, investigate and, if such
investigation warrants, acquire an interest in one or more
business opportunities presented to it by persons or firms
who or which desire to seek perceived advantages of a
publicly held corporation. At this time, the Company has no
plan, proposal, agreement, understanding or arrangement to
acquire or merge with any specific business or company, and
the Company has not identified any specific business or
company for investigation and evaluation. Mr. Hodges, the
Company's sole officer and director, has not had any
material discussions with any company with respect to the
acquisition of that company.
The Company will not restrict its search to any specific
business, industry or geographical location, and the Company
may participate in a business venture of virtually any kind
or nature. Our discussion of the proposed business of the
Company is purposefully general and is meant to demonstrate
the Company's virtually unlimited discretion to search for
and enter into potential business opportunities.
Sources Of Opportunities
The Company does not intend to actively seek out investors.
Rather, the Company seeks to merge with or acquire assets or
shares of an entity that is already actively engaged in a
business that generates revenues, in exchange for the
Company's common stock. Mr. Hodges expects that he will be
contacted by a number of target companies.
In addition, the Company anticipates that business
opportunities will be referred to it by various sources,
including Mr. Hodges, professional advisers, securities
broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited
proposals. The Company will seek a potential business
opportunity from all known sources, but will rely
principally on personal contacts of Mr. Hodges as well as
indirect associations between him and other business and
professional people. We cannot predict the number of
individuals or companies who may approach Mr. Hodges about
the Company.
The Company will not enter into a business combination with
a company in which Mr. Hodges or his affiliates or
associates has a current ownership interest. However, there
is no policy, corporate bylaw or shareholder resolution
prohibiting the Company from merging or acquiring a
business, asset or company in which any potential promoter,
affiliate or associate of the Company or Mr. Hodges has any
direct or indirect ownership.
The Company does not currently plan to engage professional
firms specializing in business acquisitions or
reorganizations; however the Company has not formulated any
policy regarding the use of consultants or outside advisors.
In addition, the Company has not, and does not intend to,
advertise in search of business opportunities. However, the
Company may, in the future, advertise and promote itself in
financial newspapers, magazines and on the Internet.
The Company may seek a business opportunity with a firm that
only recently commenced operations, or a developing company
in need of additional funds for expansion into new products
or markets, or an established company seeking a public
vehicle. In some instances, a business opportunity may
involve the acquisition or merger with a corporation which
does not need substantial additional cash but which desires
to establish a public trading market for its common stock.
The Company may purchase assets and establish wholly owned
subsidiaries in various businesses or purchase existing
businesses as subsidiaries.
The Company anticipates that its selection of a business
opportunity in which to participate may be complex and
extremely risky. Because of general economic conditions,
rapid technological advances being made in some industries
and shortages of available capital, Mr. Hodges believes that
there are numerous firms seeking the benefits of a publicly
traded corporation like the Company. The perceived benefits
of a publicly traded corporation may include facilitating or
improving the terms on which additional equity financing may
be sought, providing liquidity for the principals of a
business, creating a means for providing incentive stock
options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statues)
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 such business opportunities extremely difficult
and complex.
The Company has, and will continue to have, insufficient
capital with which to provide the owners of potential target
companies with any significant cash or other assets.
However, Mr. Hodges believes the Company will offer owners
of business opportunities the opportunity to acquire a
controlling ownership interest in a public company at
substantially less cost than is required to conduct an
initial public offering. The owners of the business
opportunities will, however, incur significant post-merger
or acquisition registration costs in the event they wish to
register a portion of their shares for subsequent sale. The
target company will also incur significant legal and
accounting costs in connection with the business combination
including the costs of preparing post-effective amendments,
Forms 8-K, agreements and related reports and documents.
However, Mr. Hodges has not conducted market research and is
not aware of statistical data that would support the
perceived benefits of a merger or acquisition transaction
for the owners of a business opportunity.
Evaluation Of Opportunities
The analysis of new business opportunities will be
undertaken by, or under the supervision of, Mr. Hodges, who
may not be considered a professional business analyst. Mr.
Hodges will be the key person in the search, review and
negotiation with potential acquisition or merger candidates.
While Mr. Hodges likely has no quantifiable experience in
the businesses of any particular target companies that may
be reviewed, he has experience in managing development stage
companies similar to the Company. Mr. Hodges will rely upon
his own efforts in accomplishing the business purposes of
the Company. Mr. Hodges is currently employed in other
positions and will devote only a nominal portion of his time
to the business affairs of the Company, until such time as
an acquisition has been determined to be highly favorable.
After that time, however, Mr. Hodges expects to spend full
time in investigating and closing any acquisition. In
addition, in the face of competing demands for his time, Mr.
Hodges may grant priority to his other positions rather than
to the Company.
For example, in analyzing prospective business
opportunities, Mr. Hodges will consider the following
matters:
* the available technical, financial and managerial
resources; working capital and other financial
requirements of the target;
* the target's history of operations, if any;
* the target's prospects for the future;
* the present and expected competition in the target's
industry;
* the quality and experience of management services
which may be available and the depth of that management
within the target;
* the potential for further research, development or
exploration in the target's industry;
* specific risk factors which may be anticipated to
impact the proposed activities of the Company;
* the potential for growth or expansion and profit;
* the perceived public recognition or acceptance of
products, services or trades of the target and the
industry and brand or name identification; and
* all other relevant factors.
Mr. Hodges and/or his legal and financial advisers intend to
meet personally with management and key personnel of the
firm sponsoring the business opportunity as part of their
investigation. To the extent possible, the Company intends
to utilize written reports and personal investigation to
evaluate the above factors. The Company will not acquire or
merge with any company for which audited financial
statements cannot be obtained.
Mr. Hodges is currently involved in promoting approximately
110 blank check companies, many of which have registered
their shares with the SEC under the Securities and Exchange
Act of 1934. All of these companies are in various stages
of searching for merger or acquisition opportunities, and
thus, there are potential inherent conflicts of interest in
Mr. Hodges' acting as officer and director of the Company
and these other companies. Insofar as he is engaged in
other business activities, Mr. Hodges anticipates he will
devote only a nominal amount of time to the Company's
affairs. In addition, Mr. Hodges may in the future become a
shareholder, officer or director of other companies that may
be formed for the purpose of engaging in business activities
similar to those conducted by the Company. Accordingly,
additional direct conflicts of interest may arise in the
future with respect to such other entities.
The Company does not currently have a right of first refusal
pertaining to opportunities that come to Mr. Hodges'
attention insofar as such opportunities may relate to the
Company's proposed business operations. Mr. Hodges will
consider merger and/or acquisition opportunities and intends
to make them available to the Company and the companies that
he is affiliated with on an equal basis and in his sole
discretion. The Company has not adopted any conflict of
interest policy with respect to these types of transactions.
If a situation arises in which more than one company with
which Mr. Hodges is involved desires to merge with or
acquire a specific target company and the principals of the
proposed target company have no preference as to which
company will merge 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.
Acquisition Of Opportunities
The Company does not intend to make any loans to any
prospective merger or acquisition candidates or unaffiliated
third parties. However, as is customary in the industry,
the Company may pay a finder's fee for persons locating and
introducing an acquisition prospect. In the event the
Company consummates a transaction with an entity introduced
by a finder, we may compensate the finder for the referral
in the form of a finder's fee. If a finder's fee is paid,
we anticipate that the finder's fee will be either in the
form of restricted common stock issued by the Company as
part of the terms of the proposed transaction, or in the
form of cash consideration. If the finder's fee is paid in
the form of common stock, the Board of Directors will
approve this issuance. If the finder's fee is in the form
of cash, the payment will have to be tendered by the
acquisition or merger candidate because the Company has
insufficient cash available to make any fee payment. If any
such fee is paid, it will be approved by the Company's Board
of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 5% of
the size of the transaction, based upon a sliding scale of
the dollar amount involved. These fees are typically in the
range of 5% on a $1,000,000 transaction ratably down to 1%
in a $4,000,000 transaction.
As part of any transaction, the acquired company may require
that Mr. Hodges or other shareholders of the Company sell
all or a portion of their shares to the acquired company, or
to the principals of the acquired company. The sales price
of these shares may be lower than the anticipated market
price of the Company's common stock at that time. The
Company's shareholders will not be provided the opportunity
to approve or consent to such sale.
Mr. Hodges may actively negotiate for the purchase of his
common stock as a condition to or in connection with a
proposed merger or acquisition transaction. Any terms of a
sale of Mr. Hodges' shares may not be afforded to other
shareholders of the Company. The opportunity to sell all or
a portion of his shares in connection with an acquisition
may influence Mr. Hodges' decision to enter into a specific
transaction. However, Mr. Hodges believes that since the
anticipated sales price will potentially be less than market
value, the potential of a stock sale will be a material
factor in any decision to enter a specific transaction.
This description of potential sales of Mr. Hodges' stock is
not based upon any corporate bylaw, shareholder or board
resolution, or contract or agreement. No other payments of
cash or property are expected to be received by Mr. Hodges
in connection with any acquisition.
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, reorganization, joint venture, franchise or
licensing agreement with the target corporation. The
Company may also purchase stock or assets of the existing
business. On the consummation of a transaction, it is
likely that the present management and shareholders of the
Company will not be in control of the Company. Mr. Hodges
may, as part of the terms of the acquisition transaction,
resign and be replaced by new officers and directors without
a vote of the Company's shareholders. Except as may be
required by state or federal securities law applicable to
the particular form of transfer, the Company does not intend
to provide its shareholders with any complete disclosure
documents, including a proxy statement and/or audited
financial statements, concerning an acquisition or merger
candidate and its business prior to the consummation of any
acquisition or merger transaction.
A potential target might insist that the Company issue the
target shares of the Company's common stock as part of the
business combination. We believe that any stock that the
Company might issue in any reorganization would be issued in
reliance on exemptions from registration under applicable
federal and state securities laws. In some circumstances,
however, as a negotiated element of this transaction, the
Company may agree to register the shares either at the time
the transaction is consummated, under certain conditions or
at specified time thereafter. The issuance of substantial
additional shares of stock and their potential sale into any
trading market in the Company's common stock may have a
dilutive and depressive effect on such trading market.
While the actual terms of a transaction to which the Company
may be a party cannot be predicted, we expect that the
parties to the business combination will want to avoid the
creation of a taxable event and structure the acquisition in
a so called "tax free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1986, as
amended. In order to obtain tax-free treatment, 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
this event, the shareholders of the Company, including past
and current investors, would retain less than 20% of the
issued and outstanding shares of the surviving entity, which
could result in significant dilution in the equity of such
shareholders.
The Company will not have sufficient funds (unless it is
able to raise funds in a private placement) to undertake any
significant development, marketing and manufacturing of any
products that it may acquire. The Company does not intend
to raise any funds, via private placement or otherwise,
prior to the effectiveness of a merger or acquisition. Upon
the merger or acquisition, the Company intends to obtain
funds in one or more private placements to finance the
operation of the acquired business. Persons purchasing
securities in these placements and other shareholders may
not have the opportunity to participate in the decision
relating to any acquisition. The Company's proposed
business is sometimes referred to as a blank check because
any investors will entrust their investment to the Company's
management before they have a chance to analyze any ultimate
use to which their money may be put. Accordingly, the
Company would probably be required to give up a substantial
portion of its interest in any acquired product. We cannot
assure you that the Company will be able either to obtain
additional financing or interest third parties in providing
funding for the further development, marketing and
manufacturing of any products acquired.
We believe that the investigation of specific business
opportunities and the negotiation, drafting and execution of
relevant agreements, disclosure documents and other
instruments will require substantial time, attention and
costs for accountants, attorneys and others. If the Company
and/or the target business decide not to participate in a
specific business opportunity, the costs incurred in the
related investigation would not be recoverable.
PART II
Item 1. LEGAL PROCEEDINGS.
Not Applicable.
Item 2. CHANGES IN SECURITIES.
Not Applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
There have been no matter submitted to a vote of security
holders for the period covered by this report.
Item 5. OTHER INFORMATION
Not Applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. Exhibits required to be attached by Item 601
of Regulation S-B are listed in the following index to
Exhibits.
Index to Exhibits.
Exhibit 1.* Articles of Incorporation.
Exhibit 2.* Amendment to Articles of Incorporation.
Exhibit 3.* Bylaws.
Exhibit 27 Financial Data Schedule
______
* Previously filed.
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the period covered by this Form 10-QSB.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Casterbridge Management, Inc.
DATE: May 22, 2000
Daniel L. Hodges, President and Director
On behalf of the Board of Directors.
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
and on the dates indicated.
Date: May 22, 2000 By:
/s/
Daniel L. Hodges, President, Secretary and Sole Director
CASTERBRIDGE MANAGEMENT, INC.