UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2002
[ ] 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: 000-32367
Texas Gulftex Energy Corporation 75-2882140
- ----- -------------------------- ----------
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
223 E. FM 1382, Suite 12720, Cedar Hill, Texas, 75104 75104
- ----------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(972) 293-2424
--------------
(Registrant's telephone number, including area code)
1330 Post Oak Boulevard, Four Oaks Place, Suite 1600, Houston, Texas
---------------------------------------------------------------------
(Former name or former address, if changed since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of January 31, 2002, there were
28,063,649 shares of the issuer's $.001 par value common stock issued and
outstanding.
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the last 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 No X
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
SHOPATHOMEKIDS.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JANUARY 31, 2002
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
BALANCE SHEETS
January 31, July 31,
2002 2001
-------------------- ------------------
ASSETS (Unaudited)
-----
Current assets
--------------
Cash and cash equivalents $ 391 $ 1,263
Property and equipment, net of accumulated
depreciation of $9,350 and $7,100 12,967 15,217
-------------------- ------------------
Total assets $ 13,358 $ 16,480
==================== ==================
LIABILITIES AND STOCKHOLDER'S DEFICIT
-------------------------------------
Current Liabilities
-------------------
Accrued expense $ 1,850 $ 5,000
Accrued interest 23,625 22,125
Notes payable 7,000 7,000
Advance from officer 5,525 600
-------------------- ------------------
Total current liabilities 38,000 34,725
Notes payable, less current portion 30,000 30,000
-------------------- ------------------
Total liabilities 68,000 64,725
-------------------- ------------------
STOCKHOLDERS' DEFICIT
---------------------
Preferred stock, $0.001 par value;
50,000,000 shares authorized, no shares
issued and outstanding - -
Common stock, $0.001 par value;
100,000,000 shares authorized,
28,063,649 and 8,504,300 shares issued and outstanding 28,063 8,504
Additional paid in capital 9,725 28,084
Deficit accumulated during
the development stage (92,430) (84,833)
-------------------- ------------------
Total stockholders' deficit (54,642) (48,245)
-------------------- ------------------
Total liabilities and stockholders' deficit $ 13,358 $ 16,480
==================== ==================
The accompanying notes are an integral part of these financial statements.
2
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
October 31,
Three Months Ended Six Months Ended 1999
January 31, January 31, (Inception)to
--------------------------------- --------------------------------- January 31,
2002 2001 2002 2001 2002
--------------- --------------- ---------------- --------------- ----------------
Revenue $ - $ - $ - $ - $ -
Website development - - - - 4,330
Marketing, general and administrative 2,184 351 3,847 3,702 53,750
Interest expense 750 3,433 1,500 6,208 25,000
Depreciation expense 1,125 1,125 2,250 2,250 9,350
--------------- --------------- ---------------- --------------- ----------------
Loss from operations before income taxes (4,059) (4,909) (7,597) (12,160) (92,430)
Income tax expense - - - - -
--------------- --------------- ---------------- --------------- ----------------
Net loss $ (4,059) $ (4,909) (7,597) (12,160) (92,430)
=============== =============== ================ =============== ================
Net loss per share - basic and diluted $ - $ - $ - $ - $ -
=============== =============== ================ =============== ================
Weighted average shares outstanding 28,063,649 26,191,188 28,046,982 26,191,188 26,823,962
=============== =============== ================ =============== ================
The accompanying notes are an integral part of these financial statements.
3
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Common Stock Additional Accumulated
------------------------------ Paid-in During Development
Shares Amount Capital Stage Total
-------------- ------------- --------------- ------------------ ----------------
Balance, October 27, 1999 - $ - $ - $ - $ -
Issuance of founders shares,
November 20, 1999 8,140,000 8,140 (8,140) - -
Contribution of fixed assets - - 13,400 - 13,400
Sale of shares, November 20, 1999 49,500 49 4,077 - 4,126
Issuance of shares for interest,
November 20, 1999 16,500 17 1,358 - 1,375
Issuance of shares for services,
November 20, 1999 44,000 44 3,623 - 3,667
Issuance of shares for services,
June 14, 2000 168,300 168 13,852 - 14,020
Net loss - - - (22,992) (22,992)
-------------- ------------- --------------- ------------------ ----------------
Balance, July 31, 2000 8,418,300 8,418 28,170 (22,992) 13,596
Sale of shares, May 2001 86,000 86 21,414 - 21,500
Costs of offering - - (21,500) - (21,500)
Net loss - - - (61,841) (61,841)
-------------- ------------- --------------- ------------------ ----------------
Balance, July 31, 2001 8,504,300 8,504 28,084 (84,833) (48,245)
Cancellation of shares (unaudited) (7,147,500) (7,148) 7,148 - -
Stock split 20.61:1 (unaudited) 26,606,849 26,607 (26,607) - -
Issuance of shares for services,
September 10, 2001 (unaudited) 100,000 100 1,100 - 1,200
Net loss (unaudited) - - - (7,597) (7,597)
-------------- ------------- --------------- ------------------ ----------------
Balance, January 31, 2002 (unaudited) 28,063,649 $ 28,063 $ 9,725 $ (92,430) $ (54,642)
============== ============= =============== ================== ================
The accompanying notes are integral part of these financial statements.
4
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Six Months Ended October 27, 1999
January 31, (inception) to
----------------------------------------- January 31,
2002 2001 2002
------------------ ------------------- -------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net loss $ (7,597) $ (12,160) $ (92,430)
Adjustments to reconcile net loss to net cash used
by operating activities:
Expenses paid by stockholder - - 2,626
Depreciation 2,250 2,250 9,350
Common stock issued for services 1,200 - 4,867
Write-off of offering costs - - 12,520
(Decrease) Increase in accrued expense (3,150) - 1,850
Increase in accrued interest 1,500 6,208 25,000
------------------ ------------------- -------------------
Net cash used in operating activities (5,797) (3,702) (36,217)
------------------ ------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Purchase of equipment - (4,897) (8,917)
------------------ ------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Repayment of notes payable - - (3,000)
Proceeds from notes payable - - 40,000
Advance from officer 4,925 - 5,525
Increase in deferred offering costs - - (20,000)
Sale of common stock - - 23,000
------------------ ------------------- -------------------
Net cash provided by financing activities 4,925 - 45,525
------------------ ------------------- -------------------
Net (decrease) increase in cash and cash equivalents (872) (8,599) 391
CASH AND CASH EQUIVALENTS
- Beginning of period 1,263 8,881 -
------------------ ------------------- -------------------
CASH AND CASH EQUIVALENTS
- End of period $ 391 $ 282 $ 391
================== =================== ===================
SUPPLEMENTAL INFORMATION:
During the initial period October 21, 1999 to January 31, 2002, the
Company paid no cash for interest or income taxes.
The accompanying notes are an integral part of these financial statements.
5
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
-----------------------------
The accompanying unaudited interim financial statements have been
prepared by the Company, in accordance with generally accepted accounting
principles pursuant to Regulation S-B of the Securities and Exchanges
Commission. Certain information and footnote disclosures normally
included in audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Accordingly, these interim financial statements should be read in
conjunction with the Company's financial statements and related notes as
contained in Form 10-KSB for the year ended July 31, 2001. In the opinion
of management, the interim financial statements reflect all adjustments,
including normal recurring adjustments, necessary for fair presentation
of the interim periods presented. The results of operations for the six
months ended January 31, 2002 are not necessarily indicative of results
of operations to be expected for the full year.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has
no established source of revenue and has limited capital resources. These
factors raise substantial doubt about the Company's ability to continue
as a going concern. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability
and classification of recorded asset amount, or amounts and
classification of liabilities that might be necessary should the Company
be unable to continue in existence. It is management's objective to seek
additional capital through a merger with an existing operating company.
Earnings Per Share
------------------
The Company calculates earnings per share in accordance with SFAS No.
128, "Earnings Per Share", which requires presentation of basic earnings
per share ("BEPS") and diluted earnings per share ("DEPS"). The
computation of BEPS is computed by dividing income available to common
stockholders by the weighted average number of outstanding common shares
during the period. DEPS gives effect to all dilutive potential common
shares outstanding during the period. The computation of DEPS does not
assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings. As of October 30, 2001,
the Company has no securities that would effect loss per share if they
were to be dilutive.
During the quarter ended October 31, 2001, the Company effected a 20.61
for 1 stock split. All prior period earnings per share data has been
retroactively restated to reflect this split.
6
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2002
NOTE 2 - NOTES PAYABLE
The Company is obligated under two notes payable, as follows:
o $10,000 pursuant to a note dated October 28, 1999.
The Company will pay $10,000 interest if the note is
paid within 18 months; if repaid after 18 months, the
Company will pay interest of $20,000. The Company
repaid $3,000 of principal in June 2001. The full
$20,000 of interest expense has been accrued in the
financial statements.
o $30,000 pursuant to a note dated June 5, 2000. The
note bears interest at 10% per year and is due on
June 5, 2002.
NOTE 3 - NON-CASH FINANCIAL ACTIVITIES
During the three month period ended October 31, 2001, 100,000
shares of common stock, valued at $1,200, were issued as a
payment for services.
NOTE 4 - COMMON STOCK
In connection with the proposed acquisition described in Note
5, four stockholders returned a total of 7,147,500 pre-split
shares to treasury. The stockholders retained 871,500 pre-split
shares (17,961,615 post-split) which they have agreed to sell
to the shareholder of the proposed acquisition described in
Note 5. These shares have not yet been transferred.
NOTE 5 - GULFTEX ACQUISITION AND RELATED MATTERS
The Transaction
---------------
Pursuant to a Share Exchange Agreement (the "Agreement"),
Shopathomekids.com, Inc., a Texas corporation (the "Registrant"),
was to have acquired 100% of the outstanding shares of common
stock ("Common Stock") of GulfTex Energy Corporation ("GulfTex"),
a private Texas corporation, in exchange for 1 share of
Registrant's common stock. The exchange would have resulted in
GulfTex becoming Registrant's wholly-owned subsidiary. At or
around the same time, the then officers and directors of
Registrant resigned and Mr. Marc Duchesne and Jackson Chung Wai
Wong were appointed as Registrant's officers and directors. On
September 19, 2001, the Registrant filed a Certificate of Merger
(the "Certificate") with the Secretary of State of Texas. The
Registrant changed its name to GulfTex Energy Corporation.
Recently, the former (now current) management of Registrant became
aware that GulfTex breached several provisions of the Agreement.
The Registrant's management is also in the process of trying to
determine why Registrant's former management (i.e., Messrs.
Duchesne and Wong) did not file certain reports required by the
Securities and Exchange Commission, including, but not limited to,
Registrant's 10QSB for October 31, 2001. The Registrant is in the
process of reviewing its options regarding the transaction.
7
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2002
NOTE 5 - GULFTEX ACQUISITION AND RELATED MATTERS (Continued)
The Transaction (continued)
----------------------------
On or about November 15, 2001, the Registrant filed a Form 10KSB.
The 10KSB reported that Mr. Duchesne was to acquire 17,343,645
shares of Registrant's common stock, which would have comprised
62.02% of Registrant's issued and outstanding shares of common
stock. Under the terms of the Share Purchase Agreement, Mr.
Duchesne was to purchase those shares from the Registrant's former
officers and directors, Lewis Prowse II, Larry Ballard, Tarja
Mees, and Romie Krickbaum. The shares were held in escrow pending
completion of the Share Purchase Agreement, which was to have
occurred on or before November 19, 2001. However, Mr. Duchesne
breached the Share Purchase Agreements. As a result of that
breach, the transaction was not completed and the shares were
never transferred to Mr. Duchesne.
Form 8-K
--------
On October 2, 2001, Registrant filed a Form 8-K describing the
Agreement and explaining the nature of GulfTex's business. During
that time, Messrs. Duchesne and Wong were the sole officers and
directors. As GulfTex's audited financial statements were not
attached to the original Form 8-K, Registrant was required to file
an amendment to the Form 8-K on or before December 3, 2001, and
attach the audited financial statements. Messrs. Duchesne and Wong
never filed the amended Form 8-K.
Appointment and Resignation of Officers and Directors
-----------------------------------------------------
On February 11, 2002, Messrs. Duchesne and Wong appointed Romie J.
Krickbaum, Lewis Prouse II, Tarja Mees and Larry Ballard
(Registrant's former management prior to the GulfTex transaction)
to Registrant's Board of Directors. Messrs. Prouse and Ballard
were later appointed as Registrant's officers.
On or about February 11, 2002, Mr. Marc Duchesne and Mr. Jackson
Chung Wai Wong resigned their positions as Registrant's officers
and directors. Other than explaining that they were resigning as
officers and directors of Registrant, neither Mr. Duchesne nor Mr.
Wong provided any other explanation as to why they resigned.
On November 15, 2001, Registrant filed a Form 10K-SB that the
Board of Directors approved the appointment of Graham Hammond,
Bill Wood, Merritt Douglas Woodring and Stanley Spinks as
directors of the Registrant. Mr. Woodring was also purportedly
appointed as Registrant's Vice-President and Mr. Spinks as
Treasurer. The former management (now current) has been notified
by Registrant's corporate counsel, that those individuals never
accepted the appointments, and as such, these individuals never
held these positions. Registrant has not been able to
independently either confirm or deny such information.
8
SHOPATHOMEKIDS.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2002
NOTE 5 - GULFTEX ACQUISITION AND RELATED MATTERS
Change of Corporate Address
---------------------------
The Registrant has changed its corporate address to 223 E. FM
1382, Suite 12720 Cedar Hill, Texas, 75104.
Legal Proceedings
-----------------
On or about February 5, 2002, certain parties, including
Registrant, Romie J. Krickbaum, Lewis Prouse II, Tarja Mees and
Larry Ballard were sued in the United States District Court for
the Northern District of Georgia, Atlanta Division. Registrant is
named in the counts for: Violation of the Securities Act of 1933;
Violation of the 1934 Exchange Act; Violation of the Georgia
Securities Act; Breach of Fiduciary Duty; Federal and Georgia RICO
violations; and Common Law Fraud. Registrant's management has been
sued for: Violation of the 1934 Exchange Act; Violation of Federal
and Georgia RICO; and Common Law Fraud. Registrant and its current
management plan to vigorously defend the lawsuit as they believe
that neither Registrant nor its current management have any
liability to the plaintiffs named in that lawsuit for several
reasons, including, but not limited to, all the transactions which
form the basis for the lawsuit occurred before the transaction
between Registrant and GulfTex.
Financial Information
---------------------
Due to the uncertainty resulting from the transacting described
above, including the failure to file audited financial statements
of GulfTex, there is substantial doubt as to the completion of the
transaction. Therefore, the financial statements presented in this
form 10-QSB include the accounts of the Registrant only, and do
not include any assets, liabilities, revenue or expenses of
GulfTex. Registrant's management is attempting to determine
whether GulfTex ever owned any assets and/or whether there are any
undisclosed GulfTex liabilities. Registrant's management intends
to file an amended 10QSB to reflect any additional assets or
undisclosed liabilities.
9
Item 2. Plan of Operation
- ----------------------------
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
As discussed within the Form 8-K filed by Registrant on March 6, 2002, the
management and Board of Directors of Registrant which controlled Registrant
prior to the contemplated merger transaction with GulfTex Energy Corporation, a
private Texas corporation ("GulfTex"), has recently been reappointed and the
management and the Board of Directors which controlled Registrant since the
contemplated GulfTex merger has resigned. Registrant's management is in the
process of attempting to determine whether certain assets, as represented by
GulfTex and its former management, exist or ever existed. The management is also
attempting to determine if there were any undisclosed liabilities. Registrant's
management does not believe that it will conduct business related to oil and gas
properties as represented by Registrant's ex-management.
Registrant's current focus is to attempt to discover the extent of any
misrepresentations, if any, that were made to Registrant and its management by
GulfTex and GulfTex's management. Registrant does intend to pursue its original
business plan of retailing products to young consumers eighteen years old or
younger via the Internet. The Registrant intends to use the Internet to market
products and provide customer service. The Registrant hopes to establish sales
of name brand toys, games, electronics, and software that target young
consumers. Young consumers will also be able to chat, send email, and play free
games online.
Given recent developments and the lawsuit pending in Georgia (as detailed
below), the Registrant cannot guaranty that it will be able to conduct business
as it did prior to the contemplated transaction with GulfTex. In fact, Note 1 of
the attached financial statements expresses our auditor's concern that without
realization of additional capital, there is substantial doubt about our ability
to continue as a going concern. If Registrant and its management are not able to
be dismissed from the lawsuit, Registrant will likely be forced to expend
significant sums on defending the lawsuit. There is no guaranty that Registrant
will be able to withstand long, expensive legal proceedings. The lawsuit in
Georgia could force Registrant to abandon its business plan altogether.
Moreover, the Georgia lawsuit will make it extremely difficult for Registrant to
raise funds to further its business plans.
10
For the six-month period ended January 31, 2002.
- ------------------------------------------------
Liquidity and Capital Resources. We had cash of $391 at January 31, 2002,
compared to cash of $1,263 as of July 31, 2001. Our total assets were $13,358 at
January 31, 2002, compared to total assets of $16,480 at July 31, 2001. At
January 31, 2002, property and equipment, net of accumulated depreciation,
represented $12,967 of our total assets.
Our total liabilities were $68,000 at January 31, 2002, compared to total
liabilities of $64,725 at July 31, 2001. Our liabilities at January 31, 2002
consisted primarily of accrued expenses of $1,850, accrued interest of $23,625,
notes payable of $37,000 and an advance from an officer in the amount of $1,100.
There were two notes payable, one in the amount of $10,000 and one in the amount
of $30,000, but we repaid $3,000 of the principal on the $10,000 note in June
2001. The full $20,000 of interest expense has been accrued in the financial
statements.
At January 31, 2002, our liabilities exceeded our assets by $54,642 compared to
July 31, 2001 when our liabilities exceeded our assets by $48,245.
Results of Operations.
Revenues. From inception to January 31, 2002, we had not earned any revenues. We
do not anticipate earning revenues for the foreseeable future. We plan to move
forward with our business plan. However, there is no guarantee that we will have
access to sufficient funding to finance our business plans. Moreover, if we are
forced to engage in long and expensive litigation in Georgia, our operating
results will suffer and such litigation will hinder our ability to further our
business plans.
Operating Expenses. For the six months ended January 31, 2002, our total
expenses were $7,597 compared to total expenses of $12,160 for the corresponding
period in 2001. Our expenses were greater during the 6 months ended January 31,
2001, due to increased interest expense. We expect our expenses to increase as
we attempt to further our business plan while defending the Georgia lawsuit
(described below). In particular, we expect our legal expenses to increase
significantly. There is no guaranty that we will be able to withstand expensive
legal proceedings. Such proceedings jeopardize our ability to continue as a
going concern. For the six months ended January 31, 2002, we experienced net
loss of $7,597, compared to a net loss of $12,160 for the corresponding period
in 2001. Given recent events, we expect our losses to continue to increase.
Our Plan of Operation for the Next Twelve Months. Given recent events, we will
ask our shareholders and Board of Directors to vote for a name change. We do not
believe that our current name "GulfTex Energy Corporation" represents our
current business focus. That focus will be on developing a website community
that will offer access to online video games and shopping, as well as chat rooms
that cater to both young kids and teenagers. We hope to form strategic
partnerships with wholesalers and distributors of brand name merchandise
including toys, games, and electronics that will enable us to sell to consumers
directly over the Internet.
We hope to try and form strategic alliances with other Internet portals that
target young consumers. We will strive to build brand awareness. We will
continue the previously started development of our online credit card, which
will be controlled by parents, grandparents, or friends. Those online credit
cards will enable young consumers to use a credit card to purchase products we
plan to put on our proposed website. We do not know when the credit card system
will go online. Until our credit card system is operational, we hope to complete
our website development which we hope will allow customers to purchase products
through the traditional method of placing the credit card information in a
standardized form. We are not prepared to accept customer orders as of yet as we
have not completed the development of our website nor have we entered into
agreements to purchase products for our proposed website.
11
We hope to commence testing of our website. Our website is currently under
construction. We hope to hire website developers to complete the development of
our website. Prior to the contemplated transaction with GulfTex, we had
conducted several test runs of the entire system, performed site analysis and
transaction analysis. At this time we are unsure of whether we will be able to
conduct a full launch of our website in the near future. There is no guaranty
that we will ever be able to complete our website. As discussed above, our
resources will be strained by the Georgia litigation, at least initially.
To effectuate our business plan during the next twelve months, we must complete
the development of our website and enter into agreements with certain product
and service providers. However, we may not be able to expand our operations
effectively. In fact, we do not anticipate earning any revenues in the near
future. The lack of revenues could harm our ability to expand our operations.
In order to further our business plans, we will need to raise capital through
public or private financing as well as borrowings and other sources. We cannot
guaranty that additional funding will be available on favorable terms, if at
all. It is unlikely that we will be able to raise funding through the sale of
our stock if we remain a defendant in the Georgia action. If adequate funds are
not available, then our ability to continue our operations will be adversely
affected.
We are not currently conducting any research and development activities. We do
anticipate continuing the development of our proposed website. We do not
anticipate hiring any employees or purchasing any equipment.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
- ---------------------------
On or about February 5, 2002, certain parties, including Registrant and
Registrant's current management and Board of Directors, Romie J. Krickbaum,
Lewis Prouse II, Tarja Mees and Larry Ballard were sued in the United States
District Court for the Northern District of Georgia, Atlanta Division.
Registrant is named in the counts for: Violation of the Securities Act of 1933;
Violation of the 1934 Exchange Act; Violation of the Georgia Securities Act;
Breach of Fiduciary Duty; Federal and Georgia RICO violations; and Common Law
Fraud. Registrant's management has been sued for: Violation of the 1934 Exchange
Act; Violation of Federal and Georgia RICO; and Common Law Fraud. Plaintiffs'
claims amount to an allegation that, along with other defendants, Registrant and
its officers and directors were involved in a scheme to defraud Plaintiffs out
of certain funds.
Registrant and its current management plan to vigorously defend the lawsuit as
they believe that neither Registrant nor its current management have any
liability to the plaintiffs named in that lawsuit for several reasons,
including, but not limited to, neither Registrant nor its current officers and
directors were involved in the transactions which form the basis for the
lawsuit. Registrant and its officers and directors have secured counsel in
Georgia to defend the lawsuit.
Item 2. Changes in Securities.
- ------------------------------
None.
Item 3. Defaults Upon Senior Securities
- -----------------------------------------
None.
Item 4. Submission of Matters to Vote of Security Holders
- -----------------------------------------------------------
None.
Item 5. Other Information
- --------------------------
None.
12
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
On March 6, 2002, Registrant filed a Form 8-K which detailed the recent change
in Registrant's management and Board of Directors, the Georgia lawsuit as
described in Item 1 above and the merger transaction with GulfTex Energy
Corporation, a Texas private corporation. That Form 8-K is incorporated herein
by this reference as though fully set forth herein.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GulfTex Energy Corporation,
a Texas corporation
March 19, 2002 By: /s/ Lewis Prouse, II
------------------------------
Lewis Prouse, II
Its: President and a Director