UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 033-01289-D
Chapeau, Inc.
(Exact name of small business issuer as specified in charter)
Utah 87-0431831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 West Broadway, Suite 501
Salt Lake City, Utah 84101
(Address of principal executive offices) (Zip Code)
(801) 323-0329
(Issuer's Telephone number, including area code)
N/A
(Former name, former address, and former fiscal
year, if changed since last report)
Check whether the issuer (1) has 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 11, 2000, the Issuer had 8,500,000 shares of its common stock,
par value $0.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes / / No /X/
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Chapeau, Inc. (the "Company"), has included the balance sheets of the
Company as of March 31, 2000 (unaudited), and June 30, 1999 (the end of the
Company's most recently completed fiscal year), and unaudited statements of
operations for the three and nine months ended March 31, 2000 and 1999, and
unaudited statements of cash flows for the nine months ended March 31, 2000 and
1999, together with unaudited condensed notes thereto. In the opinion of
management of the Company, the financial statements reflect all adjustments, all
of which are normal recurring adjustments, necessary to fairly present the
financial condition, results of operations, and cash flows of the Company for
the interim periods presented. The financial statements included in this report
on Form 10-QSB should be read in conjunction with the audited financial
statements of the Company and the notes thereto included in the annual report of
the Company on Form 10-KSB for the year ended June 30, 1999.
CHAPEAU, INC.
(A Development Stage Company)
Balance Sheets
March 31, 2000 June 30, 1999
-------------- -------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 987,607 $ 160
----------- ----------
Total Current Assets 987,607 160
----------- ----------
Total Assets $ 987,607 $ 160
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 4,951 $ 517
Notes payable - related party - 10,000
Accrued interest - related party - 534
Reserve for discontinued operations - 11,754
----------- ----------
Total Current Liabilities 4,951 22,805
----------- ----------
Stockholders' Equity (Deficit)
Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; none issued and outstanding - -
Common stock, $0.001 par value; 325,000,000 shares
authorized; 8,500,000 shares and 12,320,049 shares
issued and outstanding at March 31, 2000 (unaudited),
and June 30, 1999, respectively 8,500 12,320
Additional paid-in capital 1,238,158 230,451
Deficit accumulated during the development stage (264,002) (265,416)
----------- ----------
Total Stockholders' Equity (Deficit) 982,656 (22,645)
----------- ----------
Total Liabilities and Stockholders' Equity (Deficit) $ 987,607 $ 160
=========== ==========
See the accompanying notes to the condensed financial statements.
CHAPEAU, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From Inception
on September 19,
Three Months Ended Nine Months Ended 1985, through
March 31, March 31, March 31,
----------------------- ------------------------ ----------------
2000 1999 2000 1999 2000
----------- ----------- ------------ ----------- ----------------
Revenues $ - $ - $ - $ - $ -
Expenses 8,321 - 10,340 - 10,340
----------- ----------- ------------ ----------- -----------
Loss from continuing operations (8,321) - (10,340) - (10,340)
Loss from discontinued operations - (2,821) - (6,061) (265,416)
----------- ----------- ------------ ----------- -----------
Loss before extraordinary items (8,321) (2,821) (10,340) (6,061) (275,756)
Extinguishment of debt 11,754 - 11,754 - 11,754
----------- ----------- ------------ ----------- -----------
Net income (loss) $ 3,433 $ (2.821) $ 1,414 $ (6,061) $ (264,002)
=========== =========== ============ =========== ===========
Basic income (loss) per common
share $ 0.00 $ (0.00) $ 0.00 $ (0.00) $ (0.21)
=========== =========== ============ =========== ===========
Basic weighted average
outstanding shares 8,786,062 1,320,049 11,150,621 1,320,049 1,250,329
=========== =========== ============ =========== ===========
See the accompanying notes to the condensed financial statements.
CHAPEAU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Preferred Stock Common Stock Additional During the
----------------------- ---------------- Paid-in Development
Shares Amount Shares Amount Capital Stage
------------- ------- ------- ------- ---------- -----------
At inception on September 19, 1985 - $ - - $ - $ - $ -
Common stock issued for cash at
$0.15 per share - - 100,000 100 14,900 -
Common stock issued for cash on
March 7, 1986, at $0.61 per share - - 268,153 268 163,632 -
Issuance of warrants to purchase
402,203 shares of common stock - - - - 40 -
Common stock issued for services
at approximately $0.04 per share - - 31,847 32 14,299 -
Common stock issued in acquisition
of Robert K. McIntosh &
Associates, Inc., in July, 1987 - - 40,000 40 9,460 -
Issuance of preferred stock
at $0.015 per share 1,000,000 1,000 - - 14,000 -
Issuance of common stock
at $0.019 per share - - 880,000 880 24,120 -
Shares issued in conjunction with a
15-for-1 reserve stock split - - 49 - - -
Conversion of preferred shares
to common stock (1,000,000) (1,000) 11,000,000 11,000 (10,000) -
Net loss from inception through
June 30, 1999 - - - - - (265,416)
------------- ------- ---------- ------- ---------- ----------
Balance, June 30, 1999 - - 12,320,049 12,320 230,451 (265,416)
Cancellation of stock (unaudited) - - (7,820,049) (7,820) 7,820 -
Conversion of related-party note
payable and accrued interest
to additional paid-in capital
(unaudited) - - - - 16,602 -
Common stock issued for cash at
$0.25 per share, less offering costs
(unaudited) - - 4,000,000 4,000 983,285 -
Net income for the nine months
ended March 31, 2000
(unaudited) - - - - - 1,414
------------- ------- --------- ------- ---------- ----------
Balance, March 31, 2000
(unaudited) - $ - 8,500,000 $ 8,500 $1,238,158 $(264,002)
============= ======= ========= ======= ========== ========+=
See the accompanying notes to the condensed financial statements.
CHAPEAU, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
Nine Months Ended From Inception on
March 31, September 19, 1985,
----------------------- Through March 31,
2000 1999 2000
----------- ----------- -------------------
Cash Flows from Operating Activities
Net income (loss) $ 1,414 $ (6,061) $ (264,002)
Adjustments to reconcile net income (loss)
to net cash used in operating activities
Common stock issued for services - - 14,331
Common stock issued for exchange of
assets - - 9,500
Extinguishment of debt (11,754) - (11,754)
Gain on settlement of debt - - (23,763)
Changes in assets and liabilities
Accounts payable and accrued expenses 4,949 (9,894) 41,517
----------- --------- -----------
Net Cash Used in Operating Activities (5,391) (15,955) (234,171)
----------- --------- -----------
Cash Flows from Investing Activities - - -
----------- --------- -----------
Cash Flows from Financing Activities
Issuance of common stock for cash 1,000,000 7,500 1,256,155
Stock offering costs (12,715) - (49,930)
Proceeds from notes payable (related
party) 5,553 10,000 15,553
----------- --------- -----------
Net Cash Provided by Financing Activities 992,838 17,500 1,221,778
----------- --------- -----------
Increase in Cash 987,447 1,545 987,607
Cash at Beginning of Period 160 246 -
----------- --------- -----------
Cash at End of Period $ 987,607 $ 1,791 $ 987,607
=========== ========= ===========
See the accompanying notes to the condensed financial statements.
CHAPEAU, INC.
(A Development State Company)
Condensed Notes to the Financial Statements
(A) Basis of Presentation
The accompanying unaudited financial statements of Chapeau, Inc. (the
"Company"), have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. Accordingly, these financial statements do not include all of the
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. These financial statements and
footnote disclosures should be read in conjunction with the audited financial
statements and the notes thereto included in the Company's annual report on Form
10-KSB for the year ended June 30, 1999. In the opinion of management, the
accompanying unaudited financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to fairly present the Company's
financial position as of March 31, 2000, its results of operations for the three
and nine months ended March 31, 2000 and 1999, and its cash flows for the nine
months ended March 31, 2000 and 1999. The results of operations for the three
months and nine months ended March 31, 2000, may not be indicative of the
results that may be expected for the year ending June 30, 2000.
(B) Change in Executive Management
On February 3, 2000, the three directors of the Company resigned and Howard S.
Landa, Terrell W. Smith, and Mickey Hale were appointed as their successors.
Howard S. Landa was also appointed as the new Chief Executive Officer of the
Company and Andrew C. Bebbington was appointed as Chief Financial Officer.
Mr. Landa and other members of management purchased a controlling interest in
the Company from its two former principal shareholders. As part of the
transaction, the number of shares issued and outstanding was reduced from
12,320,049 to 4,500,000 shares. Additionally, the two former principal
shareholders agreed to pay all accounts payable outstanding as of February 2,
2000, except those included in Reserve for Discontinued Operations, and
converted the notes payable and accrued interest due to them into contributed
capital. New management, together with a principal shareholder, holds 3,960,000
of the outstanding shares, or approximately 46%, of the Company after completion
of the private placement discussed in Note C.
(C) Private Placement
In the quarter ended March 31, 2000, the Company completed a private placement
of 4,000,000 shares of common stock at $0.25 per share. The net proceeds to the
Company, after associated offering costs, were approximately $987,000.
(D) Extinguishment of Debt
Two judgments had been entered against the Company from prior operations. The
amount of the judgments, including accrued interest were recorded at $11,754.
The judgments have expired resulting in the extinguishment of the debt, which
has been recorded as an extraordinary item.
(E) Income (Loss) Per Common Share
Basic income (loss) per common share is composed of the following:
From Inception
Three Months Ended Nine Months Ended on September 19,
March 31, March 31, 1985, through
------------------ ----------------- March 31,
2000 1999 2000 1999 2000
------- ------- ------- ------- ----------------
Continuing operations $(0.00) $ 0.00 $(0.00) $ 0.00 $(0.01)
======= ======= ======= ======= =======
Discontinued operations $ 0.00 $(0.00) $ 0.00 $(0.00) $(0.21)
======= ======= ======= ======= =======
Extraordinary item $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.01
======= ======= ======= ======= =======
Net income (loss) $ 0.00 $(0.00) $ 0.00 $(0.00) $(0.21)
======= ======= ======= ======= =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Recent Events
Control and management of the Company changed on February 3, 2000, as
reported on the Company's current report on Form 8-K as of that date. Readers
are referred to that report for additional information.
General
The Company was organized under the laws of the State of Utah on September
19, 1985, to provide a capital resource fund to be used to participate in
business opportunities. The Company completed a public offering of its common
stock in March of 1986. The Company received net proceeds from the public
offering of $163,900, after deducting underwriters' compensation and other costs
of the offering totaling $37,215.
On May 13, 1987, the Company entered into an agreement with Pro Image, Inc.
for the purchase of licenses to open up to eighteen (18) Pro Image stores. In
1987, the Company acquired Robert K. McIntosh, Inc., a closely held corporation
which owned a Pro Image franchise. In exchange for all of the stock of Robert
K. McIntosh, Inc., the Company issued 40,000 shares of its common stock and the
shareholders of Robert K. McIntosh, Inc., Robert K. McIntosh and Robert
McDonald, became members of the Company's board of directors. In December 1987,
the Company also entered an agreement with Dave Carver to purchase a Pro Image
store in Long Beach, California.
The Company used the proceeds of its public offering and all additional
funds it borrowed or raised to fund the Company's efforts in starting and
purchasing Pro Image stores. However, the Company's efforts to become a
franchisee of Pro Image stores ultimately proved unsuccessful and the Company
ceased all activity related to the Pro Image stores.
Subsequently, the Company investigated several other business
opportunities, but did not consummate any transaction. The Company presently
has no operations other than minimal operations necessary to maintain its
corporate status.
In 1997, the Company changed management and sold shares of its Common and
Preferred Stock to two individuals in order to raise capital to cover past
obligations and to provide for basic ongoing corporate obligations. Until
recently, these two individuals were the controlling shareholders of the
Company.
Results of Operations
The Company has no current operations or revenue. The Company has only
incidental ongoing expenses primarily associated with maintaining its corporate
status. For the three and nine month periods ended March 31, 2000, the
Company's expenses were $8,321 and $10,340, respectively, compared to $2,821 and
$6,061 for the three and nine month periods ended March 31, 1999, respectively.
Liquidity and Capital Resources
As of March 31, 2000, the Company had cash of $987,607 and liabilities of
$4,951, resulting in working capital of $982,656.
During the quarter ended March 31, 2000, the Company completed a private
placement of 4,000,000 shares of common stock resulting in net proceeds to the
Company of approximately $987,000. The offering was made to provide funding to
the Company to permit it to search for a business opportunity and to provide the
Company with sufficient capital to potentially make it an attractive merger
candidate.
Management of the Company believes that the current cash balance is
sufficient to meet its existing commitments for the fiscal year.
ITEM 5. OTHER INFORMATION
On May 6, 2000, the board of directors of the Company authorized a change
in the independent accountants of the Company from Jones, Jensen & Company to
Hansen Barnett & Maxwell.
The report of Jones, Jensen & Company on the Company's financial statements
as of June 30, 1999, and the two years then ended did not contain an adverse
opinion, or a disclaimer of opinion, nor was its report qualified or modified as
to uncertainty, audit scope, or accounting principles, other than a limitation
as to the presentation of the financials on a going concern basis at a time that
the Company was a development stage company with no operating capital. During
the engagement of Jones, Jensen & Company, there were no disagreements on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which disagreements, if not resolved to the
satisfaction of Jones, Jensen & Company, would have caused the Company to make
reference to the subject matter of the disagreements in connection with its
reports.
The Company was not advised by Jones, Jensen & Company that internal
controls necessary for the Company to develop reliable financial statements did
not exist nor that any information had come to its attention that led it to no
longer be able to rely on management's representations or that made it unwilling
to be associated with the financial statements prepared by management. The
Company was not advised by Jones, Jensen & Company of the need to expand
significantly the scope of the Company's audit. Jones, Jensen & Company has not
advised the Company that any information has come to its attention that Jones,
Jensen & Company concluded would materially impact the fairness or reliability
of either (i) a previously issued audit report or the underlying financial
statements; or (ii) any financial statements issued or to be issued subsequent
to the most recent audit report. The Company provided its former auditors,
Jones, Jensen & Company with a copy of the foregoing disclosures. The Company
has filed a letter from the former auditors concurring with the foregoing
statements as an exhibit to this report on Form 10-QSB.
Neither the Company nor anyone acting on its behalf consulted Hansen
Barnett & Maxwell prior to its appointment regarding the application of
accounting principles to a specific completed or contemplated transaction, the
type of audit opinion, or other accounting advice that was considered by the
Company in reaching a decision as to an accounting, auditing, or financial
reporting issue. The Company requested that Hansen Barnett & Maxwell review the
foregoing disclosure and provided it with an opportunity to furnish the Company
with a letter containing any new information, clarification of its views, or
respects in which it disagreed with the Company's disclosure. Hansen Barnett &
Maxwell indicated that it was unnecessary to provide such a letter.
The Company and its current auditors have not disagreed on any items of
accounting treatment or financial disclosure.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document
- ------- --------- -----------------------------------
1 16 Letter from Jones, Jensen & Company
Reports on Form 8-K
During the quarter ended March 31, 2000, the Company filed a current report
on Form 8-K dated February 3, 2000, reporting the changes in control and
management of the Company.
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.
CHAPEAU, INC.
Dated: May 12, 2000 By /s/ Andrew C. Bebbington
Andrew C. Bebbington,
Chief Financial Officer
(Principal Financial and
Accounting Officer)