SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2002
Commission File number 000-32201
Lummi Development, Inc.
(Name of Small Business Issuer in its Charter)
5 Husband Place, Coldstream, BC V1B 2V7 Canada
(Address of Principal Executive Offices including Zip Code)
(250) 503-1592
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
There were 5,254,370 shares of Common stock outstanding as of June 30, 2002.
ITEM 1. FINANCIAL STATEMENTS
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Balance Sheets
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, December 31,
2002 2001
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 11 $ 121
-------- --------
TOTAL CURRENT ASSETS 11 121
-------- --------
TOTAL ASSETS $ 11 $ 121
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable $ -- $ 3,317
-------- --------
TOTAL CURRENT LIABILITIES -- 3,317
-------- --------
TOTAL LIABILITIES -- 3,317
STOCKHOLDERS' EQUITY
Preferred stock, ($.0001 par value 20,000,000
shares authorized; none issued and outstanding.) -- --
Common stock, ($.0001 par value 80,000,000
shares authorized; 5,254,370 and 5,207,000 shares
issued and outstanding as of June 30, 2002 and
December 31, 2001, respectively.) 526 521
Paid-in capital 25,911 21,179
Deficit accumulated during development stage (26,426) (24,896)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 11 (3,196)
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 11 $ 121
======== ========
See Notes to Financial Statements
2
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Statement of Operations
- --------------------------------------------------------------------------------
January 19, 1999
Six Months Six Months Three Months Three Months (inception)
Ended Ended Ended Ended through
June 30, June 30, June 30, June 30, June 30,
2002 2001 2002 2001 2002
----------- ----------- ----------- ----------- -----------
REVENUES
Revenues $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES -- -- -- -- --
GENERAL & ADMINISTRATIVE EXPENSES 1,530 1,544 1,500 336 26,426
----------- ----------- ----------- ----------- -----------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 1,530 1,544 1,500 336 26,426
----------- ----------- ----------- ----------- -----------
NET LOSS $ (1,530) $ (1,544) $ (1,500) $ (336) $ (26,426)
=========== =========== =========== =========== ===========
BASIC LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,207,262 5,207,000 5,207,521 5,207,000
=========== =========== =========== ===========
See Notes to Financial Statements
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LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
From January 19, 1999 (inception) through June 30, 2002
- --------------------------------------------------------------------------------
Deficit
Accumulated
Common Additional During
Common Stock Paid-in Development
Shares Amount Capital Stage Total
--------- --------- --------- --------- ---------
Issued for cash on January 19, 1999 5,000,000 $ 500 $ 500 $ -- $ 1,000
Issued from sale of private placement
(Note #1) April 7,1 1999 207,000 21 20,679 -- 20,700
Net loss, January 19, 1999 (inception)
to December 31, 1999 (12,604) (12,604)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1999 5,207,000 521 21,179 (12,604) 9,096
========= ========= ========= ========= =========
Net loss, January 1, 2000 to
December 31, 2000 (8,281) (8,281)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 2000 5,207,000 521 21,179 (20,885) 815
========= ========= ========= ========= =========
Net loss, January 1, 2001 to
December 31, 2001 (4,011) (4,011)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 2001 5,207,000 521 21,179 (24,896) (3,196)
========= ========= ========= ========= =========
Issued to cover loans payable on
June 30, 2002 @ .10 per share 47,370 5 4,732 4,737
Net loss, January 1, 2002 to
June 30, 2002 (1,530) (1,530)
--------- --------- --------- --------- ---------
BALANCE, JUNE 30, 2002 5,254,370 $ 526 $ 25,911 $ (26,426) $ 11
========= ========= ========= ========= =========
See Notes to Financial Statements
4
LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Statements of Cash Flows
- --------------------------------------------------------------------------------
January 19, 1999
Six Months Six Months Three Months Three Months (inception)
Ended Ended Ended Ended through
June 30, June 30, June 30, June 30, June 30,
2002 2001 2002 2001 2002
-------- -------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,530) $ (1,544) $ (1,500) $ (336) $(26,426)
Increase (decrease) in accounts payable -- 105 -- -- --
Increase (decrease) in loans payable (3,317) -- (3,317) -- --
-------- -------- -------- -------- --------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (4,847) (1,439) (4,817) (336) (26,426)
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES -- -- -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock 5 -- 5 -- 526
Additional paid-in capital 4,732 -- 4,732 -- 25,911
-------- -------- -------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 4,737 -- 4,737 -- 26,437
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH (110) (1,439) (80) (336) 11
CASH AT BEGINNING OF PERIOD 121 1,520 91 417 --
-------- -------- -------- -------- --------
CASH AT END OF PERIOD $ 11 $ 81 $ 11 $ 81 $ 11
======== ======== ======== ======== ========
See Notes to Financial Statements
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LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
As of June 30, 2002
NOTE 1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized January 19, 1999, under the laws of the state of
Delaware, as Lummi Development, Inc. The Company has limited operations and in
accordance with SFAS # 7, the Company is considered a development stage company.
The Company is in the business of selling marine safety kits and related marine
accessories.
On January 19, 1999, the Company issued 5,000,000 shares of its $0.0001 par
value common stock for cash of $1,000.00.
On April 7, 1999, the Company completed a public offering that was offered
without registration under the securities Act of 1933, as amended (The "Act"),
in reliance upon the exemption from registration afforded by sections 4(2) and
3(b) of Securities Act and Regulation D, Rule 504 promulgated thereunder. The
Company sold 207,000 shares of common stock at a price of $0.10 per share for a
total amount raised of $20,700.00.
On June 30, 2002, the Company issued 47,370 shares of its $0.0001 par value
common stock to cover its loans payable of $4,737.00.
As of June 30, 2002 the Company had 5,254,370 shares of common stock
outstanding.
NOTE 2. ACCOUNTING POLICIES AND PROCEDURES
A. BASIS OF ACCOUNTING
The financial statements have been prepared using the accrual basis of
accounting. Under the accrual basis of accounting, revenues are recorded as
earned and expenses are recorded at the time liabilities are incurred. The
Company has adopted a June 30, year-end.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires 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.
C. CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
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LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
As of June 30, 2002
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
D. INCOME TAXES
Income taxes are provided in accordance with Statement of Financial accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
E. BASIC EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective January 19, 1999 (inception).
Basic net loss per share amounts is computed by dividing the net income by the
weighted average number of common shares outstanding. Diluted earnings per share
are the same as basic earnings per share due to the lack of dilutive items in
the Company.
NOTE 3. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of
common stock or preferred stock.
NOTE 4. GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. Without realization of additional capital, it would be unlikely for
the company to continue as a going concern. It is management's plan to seek
additional capital through the sale of its securities through private
placements.
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LUMMI DEVELOPMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
As of June 30, 2002
NOTE 5. INCOME TAXES
June 30, December 31,
2002 2001
------- -------
Deferred tax assets:
Net operating tax carryforward $ 3,964 $ 3,734
Other 0 0
------- -------
Gross deferred tax assets 3,964 3,734
Valuation allowance (3,964) (3,734)
------- -------
Net deferred tax assets $ 0 $ 0
======= =======
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and carryforwards
are expected to be available to reduce taxable income. As the achievement of
required future taxable income is uncertain, the Company recorded a valuation
allowance.
NOTE 6. SCHEDULE OF NET OPERATING LOSSES
1999 Net Operating Loss $ (12,604)
2000 Net Operating Loss (8,281)
2001 Net Operating Loss (4,011)
2002 Net Operating Loss (2nd. Qtr.) (1,530)
---------
Net Operating Loss $ (26,426)
=========
As of June 30, 2002, the Company has a net operating loss carryforward of
approximately $26,426, which will expire 20 years from the date the loss was
incurred.
NOTE 7. RELATED PARTY TRANSACTION
The Company neither owns, nor leases any real or personal property. A director
provides warehouse and office services without charge. Such costs are immaterial
to the financial statements and, accordingly, have not been reflected therein.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity become available, such persons
may face a conflict in selecting between the Company and their other business
interests. The Company has not formulated a policy for resolution of such
conflicts.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CERTAIN FORWARD-LOOKING INFORMATION
Information provided in this Quarterly report on Form 10QSB may contain
forward-looking statements within the meaning of Section 21E or Securities
Exchange Act of 1934 that are not historical facts and information. These
statements represent the company's expectations or beliefs, including, but not
limited to, statements concerning future and operating results, statements
concerning industry performance, the Company's operations, economic performance,
financial conditions, margins and growth in sales of the Company's products,
capital expenditures, financing needs, as well as assumptions related to the
forgoing. For this purpose, any statements contained in this Quarterly Report
that are not statement of historical fact may be deemed to be forward-looking
and involve various risks and uncertainties that could cause actual results and
outcomes for future periods to differ materially from any forward-looking
statement or views expressed herein. The Company's financial performance and the
forward-looking statements contained herein are further qualified by other risks
including those set forth from time to time in the documents filed by the
Company with the Securities and Exchange Commission, including the company's
most recent Form 10SB.
CONDITION AND RESULTS OF OPERATIONS.
THREE MONTHS ENDED June 30, 2002.
Revenues were -0- for the quarter ending June 30, 2002 and -0- for the same
quarter ending 2001.
Operating expenses were $1,500 for the quarter ended June 30, 2002 and $336
for the same quarter in 2001.
Total operating expenses since inception (January 19, 1999) through June
30, 2002 are $26,426.
During the three months ended June 30, 2002, further market research was
performed and it was determined that the company would need a cash injection in
order to begin manufacturing the Safety Kits for sale to boat manufacturers and
retail outlets. Due to the severity of the economic downturn in both the United
States and Western Canada, it is felt that this is not a good time to begin
raising monies at this time.
RISK FACTORS
1. LIMITED HISTORY OF OPERATIONS
The Company was incorporated under the laws of the state of Delaware on
January 19, 1999 and has had limited operations to date. Therefore, the Company
must be considered in the early development stages of embarking upon a new
venture. The Company has had no revenues to date. The Company's business and
prospects must be considered in light of the risk, expense, and difficulties
frequently encountered by companies in an early stage of development.
Prospective investors should be aware of the difficulties encountered by such
new enterprises, as the Company faces all the risks inherent in any new
business, including: competition, the absence both of an operating history and
profitability and the need for additional working capital. The likelihood of the
success of the Company must be considered in light of the problems and expenses
that are frequently encountered in connection with the operation of a new
business and the competitive environment in which the Company will be operating.
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2. NEED FOR ADDITIONAL WORKING CAPITAL - CONTINUATION OF GOING CONCERN
NOT ASSURED.
As of June 30, 2002, the Company had working capital of $11 and faces the
need for substantial additional working capital in the near future. The capital
needs of the company are greater than currently anticipated, and due to the
severity of the economic downturn in both the United States and Western Canada,
it is felt that this is not a good time to begin raising monies at this time. No
assurance can be given that the company will be able to organize debt or equity
financing, or that if available, it will be available on terms and conditions
satisfactory to management and might dilute current shareholders. The Company
has no commitments for any additional debt or equity financing and there can be
no assurance that any such commitments will be obtained on favorable terms, if
at all.
3. THE COMPANY HAS NO SIGNIFICANT HISTORY OF OPERATIONS AND EXPECTS OPERATING
LOSSES IN THE FORESEEABLE FUTURE.
The Company expects to incur operating losses for the foreseeable future
and if the Company ever has operating profits, it may not be able to sustain
them. Expenses will increase as the Company builds an infrastructure to
implement its business model. The economic downturn appears to be worsening, and
it may take until the fall of 2002 before any stabilization or potential upturn
in the economy can be expected. It is felt that it would not be prudent at this
time to go into production. Mr. Stannell however performed market research and
found that the Safety Kits still have considerable potential in the wholesale
and retail markets.
Expenses may also increase due to the potential effect of goodwill
amortization and other charges resulting from future partnerships and/or
alliances, if any. If any of these and other expenses are not accompanied by
increased revenue, the Company's operating losses will be even greater than
anticipated.
4. THE PROGRESS AND OVERALL SUCCESS FOR THE COMPANY IS SUBSTANTIALLY DEPENDENT
UPON THE ABILITIES OF THE CURRENT OFFICER AND DIRECTOR OF THE COMPANY.
The Company's performance and operating results are substantially dependent
upon the continued service and performance of its officer and director. The loss
of the services of the Company's key employee or the inability to attract and
retain the necessary technical, sales and other personnel, would likely limit
the chances of success and have a negative effect upon the Company's business,
financial condition, operating results and cash flow. In addition, the
concentrated ownership of the sole officer and director has over the Company,
may have a material adverse effect on future business progress. Furthermore, the
current officer and director is involved with other employment other than that
of the company, which may take time from developing the business of the Company
and effect the overall success.
5. COMPETITION
The market for the production and distribution of marine safety kits is
highly competitive. The Company competes with larger manufacturing companies and
recreational boat dealers who provide marine accessories including safety kits
to consumers. Our competitors have greater financial, marketing, distribution
and technical resources. Our success will be dependent on our ability to compete
with these and any other competitors on the quality of our products and their
cost effectiveness. There is no assurance that we will be successful in that
competition.
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6. LACK OF CASH DIVIDENDS
The Company has not paid any cash dividends on its Common Shares to date
and there are no plans for paying cash dividends in the foreseeable future.
Initial earnings that the company may realize, if any, will be retained to
finance the growth of the company. Any future dividends, of which there can be
no assurance, will be directly dependent upon earnings of the company, its
financial requirements and other factors.
7. PURCHASE OF INVENTORY; CAPITAL RESOURCE REQUIREMENTS
The economic downturn appears to be worsening, and it may take until the
fall of 2002 before any stabilization or potential upturn in the economy can be
expected. It is felt that it would not be prudent at this time to go into
production. Mr. Stannell however performed market research and found that the
Safety Kits still have considerable potential in the wholesale and retail
markets.
Safety Kits were shown to a large wholesaler in Vernon, British Columbia,
and considerable interest was shown in the product. Mr. Stannell felt that it
would be necessary to again determine if components of the Marine Safety Kit
could be purchased at lesser cost to the company. Mr. Stannell will re-price out
the component cost in the next quarter. The economic downturn has yet to abate,
and it is felt that it would not be prudent to proceed with any plans for
production at this time. The Company plans to purchase and assemble components
of the marine safety kits for distribution. In addition, the Company has
developed its web-site for Internet sales. Expenses needed to build an
infrastructure to implement our business model will depend upon a number of
factors including the Company's ability to raise sufficient capital. There are
no assurances that the Company can raise sufficient capital through debt or
equity financing which might be available to the Company on favorable terms or
if at all and might dilute current shareholders.
8. GROWTH AND ACQUISITION MAY STRAIN THE MANAGEMENT, OPERATION AND
FINANCIAL RESOURCES.
There can be no assurances that the proposed business model will be
adequate to support any future operations. In addition, there is a risk that the
Company may not be able to expand their operations at the same rate as market
demand may be created. If appropriate opportunities present themselves, the
Company intends to seek out business opportunities to expand their marine
accessories business. The process of integrating and acquiring any business may
result in operating difficulties and expenditures, which cannot be anticipated
and may absorb significant management attention that would otherwise be
available for further development of their existing business. Moreover, the
anticipated benefits of any acquisition may be realized. Any future acquisition
of other businesses, technologies, services or products might require the
Company to obtain additional equity or debt financing which might not be
available to the Company on favorable terms or at all and might dilute current
shareholders. Additionally, the Company may not be able to successfully
identify, negotiate or finance future acquisition or to integrate acquisition
with the current proposed business.
9. SHARES SUBJECT TO RULE 144
On June 30, 2002, the Company had 5,000,000 Common Shares issued and
outstanding that have not been registered with the Commission or any state
securities agency and are currently restricted pursuant to Rule 144 promulgated
by the Commission under the 1933 Act. Rule 144 provides, in essence, that a
person holding restricted securities for one year from the date the securities
were purchased from the issuer, or an affiliate of the issuer, and fully paid,
11
may sell limited quantities of the securities to the public without
registration, provided there shall be certain public information with respect to
the issuer. Pursuant to Rule 144, securities held by non-affiliates for more
than two years may generally be sold without reference to the current public
information or broker transaction requirements, or the volume limitations. None
of the current outstanding restricted shares are available for resale pursuant
to Rule 144.
10. OTHER NON-PUBLIC SALES OF SECURITIES
As part of the Company's plan to raise additional working capital, the
Company may make a limited number of offers and sales of its Common Shares to
qualified investors in transactions that are exempt from registration under the
1933 Act. There can be no assurance the Company will not make other offers of
its securities at different prices, when, in the Company's discretion, such
prices are deemed by the Company to be reasonable under the circumstances.
11. NO ASSURANCES OF LIQUIDITY
There is currently no public market for the Common Shares or any other
securities of the company and there can be no assurance that a trading market
will develop in the future.
12. WE FACE THE LOSS OF KEY PERSONNEL WHICH COULD ADVERSELY AFFECT PROPOSED
OPERATIONS
The Company's performance is greatly dependent on the performance of our
officer and director. The loss of the services of our officer/director could
harm our business and have a negative impact on our reputation for expertise in
the marine accessory industry.
13. THE COMPANY IS LARGELY CONTROLED BY MANAGEMENT
The Company's officer/director currently owns or controls a substantial
majority of its outstanding common stock and thereby continues to be able to
exercise voting control over the Company for the foreseeable future and will be
able to elect the entire Board of Directors. This management control could
prevent, or make more difficult, on-going business.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
Additional securities were issued in exchange for equity financing in the
amount of 47,370 common shares at a price of $.10 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this disclosure statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
LUMMI DEVELOPMENT, INC.
Date: August 6, 2002 /s/ Gary Stannell
------------------------------------
Gary Stannell
President
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