UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: December 31, 2001
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________ to __________
Commission file number: 0-49618
Crest View Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0462761
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 West Horizon Ridge Parkway - Suite 202
Henderson, Nevada 89012
(Address of principal executive offices)
(702) 614-1750
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, 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 practicable date: There were a total of 8,032,924
shares of the registrant's common stock, par value $.001 per share, outstanding
as of October 1, 2002.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
Crest View Inc.
Quarterly Report on Form 10-QSB
Quarter Ended December 31, 2001
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets at December 31, 2001 (Unaudited) and
June 30, 2001 ......................................................... 3
Consolidated Statements of Operations for the Cumulative Period
During the Development Stage (January 20, 2000 to December 31,
2001) and for the Three and Six Months Ended December 31, 2001
and 2000 (Unaudited) .................................................. 4
Consolidated Statements of Cash Flows for the Cumulative Period
During the Development Stage (January 20, 2000 to December 31,
2001) and for the Six Months Ended December 31, 2001 and 2000
(Unaudited) ........................................................... 5
Notes to Consolidated Financial Statements .............................. 6
Item 2. Management's Discussion and Analysis or Plan of Operation ......... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 13
Item 2. Changes in Securities ............................................. 13
Item 3. Defaults Upon Senior Securities ................................... 13
Item 4. Submission of Matters to a Vote of Security Holders ............... 13
Item 5. Other Information ................................................. 13
Item 6. Exhibits and Reports on Form 8-K .................................. 13
Signatures ................................................................ 14
Certifications ............................................................ 15
Exhibit Index ............................................................. 17
- 2 -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Crest View Inc.
(A Development Stage Company)
Consolidated Balance Sheets
December 31, June 30,
2001 2001
------------ --------
(Unaudited)
- ASSETS -
CURRENT ASSETS:
Cash $ 81,987 $ 31,841
--------- --------
Total current assets 81,987 31,841
--------- --------
OTHER ASSETS:
Investment in real estate (Note 2) 756,465 --
Deferred expenses 129,600 --
--------- --------
886,065 --
--------- --------
$ 968,052 $ 31,841
========= ========
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accrued expenses $ 27,227 $ 7,000
--------- --------
Total current liabilities 27,227 7,000
--------- --------
LONG-TERM DEBT (Note 3) 840,765 --
--------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Note 4):
Preferred stock, $.001 par value; 8,000,000 shares authorized,
none issued -- --
Common stock, $.001 par value; 40,000,000 shares authorized, 5,828,924 and
5,483,324 shares issued and outstanding at December 31, 2001 and June 30,
2001, respectively 5,829 5,483
Additional paid-in capital 213,941 41,579
Deficit accumulated during the development stage (119,710) (22,221)
--------- --------
100,060 24,841
--------- --------
$ 968,052 $ 31,841
========= ========
See accompanying notes.
- 3 -
Crest View Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Cumulative
During the
Development
Stage (January Three Months Ended Six Months Ended
20, 2000 to December 31, December 31,
December ----------------------------- -----------------------------
31, 2001) 2001 2000 2001 2000
-------------- ----------- ----------- ----------- -----------
REVENUES $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Compensation 36,000 14,400 -- 36,000 --
Filing fees 6,606 -- -- 1,300 4,771
Professional fees 38,300 10,250 -- 27,300 6,000
Other expenses 10,815 4,464 45 5,462 1,908
Rent expense 7,200 6,000 -- 7,200 --
Interest expense 20,789 16,982 165 20,227 222
----------- ----------- ----------- ----------- -----------
119,710 52,096 210 97,489 12,901
----------- ----------- ----------- ----------- -----------
NET LOSS $ (119,710) $ (52,096) $ (210) $ (97,489) $ (12,901)
=========== =========== =========== =========== ===========
LOSS PER SHARE:
Basic and diluted $ (.03) $ (.01) $ -- $ (.02) $ --
=========== =========== =========== =========== ===========
Weighted average number of common
shares outstanding 3,489,243 5,828,924 3,000,000 5,828,924 3,000,000
=========== =========== =========== =========== ===========
See accompanying notes.
- 4 -
Crest View Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Cumulative
During the
Development
Stage
(January 20, Six Months Ended
2000 to December 31,
December ------------------------
31, 2001) 2001 2000
------------ --------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(119,710) $ (97,489) $(12,901)
Adjustment to reconcile net loss to net cash used
by operating activities:
Amortization of deferred expenses 43,200 43,200 --
Interest 562 -- --
Changes in assets and liabilities:
Accrued expenses 27,227 20,227 (278)
--------- --------- --------
Net cash used by operating activities (48,721) (34,062) (13,179)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate (487,800) (487,800) --
--------- --------- --------
Net cash used by investing activities (487,800) (487,800) --
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 572,100 572,100 --
Proceeds from officers' loans 13,500 -- 11,000
Sale of equity units 33,000 -- --
Offering expenses (92) (92) --
--------- --------- --------
Net cash provided by financing activities 618,508 572,008 11,000
--------- --------- --------
Net increase (decrease) in cash and cash equivalents 81,987 50,146 (2,179)
Cash and cash equivalents - beginning of period -- 31,841 2,900
--------- --------- --------
Cash and cash equivalents - end of period $ 81,987 $ 81,987 $ 721
========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
(1) During the period ended December 31, 2001, the Company acquired real
estate and issued a promissory note to effect payment in the amount of
$270,865.
See accompanying notes.
- 5 -
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY:
Crest View Inc. (the "Company") was organized in the state of Nevada on January
20, 2000. The Company was formed to serve as a vehicle to raise capital to
acquire a business and, as of June 30, 2001, was considered a "blank check"
company inasmuch as the Company was not generating revenues and did not own an
operating business. The Company currently has no employees except for its two
executive officers and had no material assets prior to the acquisition of real
estate in September 2001. Administrative services are currently being provided
by an entity controlled by the two executive officers of the Company. The
Company's efforts, through June 30, 2001, were limited to organizational
activities. In July 2001, the Company established a business plan to develop a
vacation and tourist destination, featuring an "eco-resort," wellness center and
cultural exhibits, on the Honduran island of Guanaja (see Note 2).
The Company is considered as being in the development stage since its inception,
in accordance with Statement of Financial Accounting Standards No. 7, and its
fiscal year end is June 30. As shown in the accompanying financial statements,
the Company has not generated any revenues to date, and has incurred net
cumulative expenses of $119,710.
During the quarter ended September 30, 2001, the Company formed a wholly owned
subsidiary, Crest View, Investments S.A., through which the Company purchased
two parcels of real estate (see Note 2). The Company also acquired all of the
outstanding shares of Plan Grande Group, S.A., an entity owning an additional
parcel of real estate, thereby making this entity a wholly owned subsidiary (see
Note 2). All inter-company transactions and balances have been eliminated upon
consolidation.
The consolidated balance sheet as of December 31, 2001, the consolidated
statements of operations for the three and six month periods ended December 31,
2001 and 2000 and the consolidated statements of cash flows for the six month
periods ended December 31, 2001 and 2000 have been prepared by the Company
without audit. In the opinion of management, the accompanying consolidated
financial statements referred to above contain all necessary adjustments,
consisting of normal accruals and recurring entries only, which are necessary to
present fairly the Company's results for the interim periods being presented.
The accounting policies followed by the Company are set forth in Note 2 to the
Company's financial statements for the year ended June 30, 2001 included in its
offering prospectus, which is incorporated by reference. Specific reference is
made to this report for a description of the Company's securities and the notes
to financial statements included therein, since certain information and footnote
disclosures normally included in financial statements in accordance with
accounting principles generally accepted in the United States of America have
been condensed or omitted from this report.
The results of operations for the three and six month periods ended December 31,
2001 and 2000 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - INVESTMENT IN REAL ESTATE:
In connection with the plans to develop a vacation and tourist resort (see Note
1), since July 1, 2001 and through December 31, 2001, the Company has acquired
three parcels of real estate through Honduran subsidiaries and has entered into
negotiations to purchase two other parcels of land on the island of Guanaja.
- 6 -
Crest View Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2001
(Unaudited)
(Continued)
One parcel of land, of approximately 18 acres to be used for the resort, was
acquired at a total cost (including closing costs) of approximately $425,000.
The Company also acquired a parcel of land (approximately 3.5 acres) at another
site at a cost of approximately $45,000.
In September 2001, the Company acquired 1,250 shares (100%) of the outstanding
stock of Plan Grande Group, S.A. ("PGG"), a Honduran corporation. The sole asset
of PGG is real property, approximately 16 acres of undeveloped land, located on
the island of Guanaja. As consideration for the acquisition of these shares, the
Company issued a promissory note payable to the seller in the principal amount
of $268,665.
NOTE 3 - LONG-TERM DEBT:
As of December 31 2001, long-term debt consisted of the following:
6% note payable regarding stock acquisition
(see Note 2), due 2003 $268,665
7% unsecured notes payable, due June 30, 2003 572,100
--------
$840,765
========
NOTE 4 - STOCKHOLDERS' EQUITY:
As of June 30, 2000, the Company had issued an aggregate of 3,000,000 units at a
price of $.001 per unit, with each unit consisting of one share of common stock
and one-third (1/3) Class A Redeemable Common Stock Purchase Warrant, for cash
proceeds of $3,000. The holder of three units is entitled to exercise one Class
A Warrant to purchase one share of common stock and one Class B Redeemable
Common Stock Purchase Warrant at a price of $6.00 per share. One Class B Warrant
entitles the holder to purchase one share of common stock at a price of $9.00
per share.
During the year ended June 2001, the Company issued 2,423,324 shares of common
shares to effect the repayment of loans (plus accrued interest) aggregating
$14,062 due to an officer of the Company and also issued 60,000 shares of its
common stock for cash proceeds of $30,000.
In July 2001, the Company issued an aggregate of 288,000 shares of its common
stock to two of its officers. This issuance was in lieu of salaries of $144,000
to be earned by these officers over a two-year period commencing July 1, 2001,
pursuant to employment agreements entered into. The Company also issued 57,600
shares of common stock to an affiliated entity in full satisfaction of its rent
obligation under a two-year lease agreement for aggregate rent of $28,800.
On February 11, 2002, the Securities and Exchange Commission declared effective,
the registration statement filed on Form SB-2 in connection with the Company's
initial public offering (IPO). The Company registered and offered for sale,
2,100,000 units (each unit consisting of one share of common stock and one-third
(1/3) Class A Redeemable Common Stock Purchase Warrant) at a per unit price of
$.50, 1,200,000 units minimum and 2,100,000 units maximum, basis. In August
2002, subsequent to the balance sheet date, the IPO was successfully
consummated.
- 7 -
Item 2. Management's Discussion and Analysis or Plan of Operation.
Throughout this report on Form 10-QSB, the terms "we," "us," "our" and "our
company" refers to Crest View Inc. and, unless the context indicates otherwise,
our subsidiaries on a consolidated basis.
Introductory Comment - Forward-Looking Statements.
Statements contained in this report include "forward-looking statements" within
the meaning of such term in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
involve known and unknown risks, uncertainties and other factors which could
cause actual financial or operating results, performances or achievements
expressed or implied by such forward-looking statements not to occur or be
realized. Such forward-looking statements generally are based on our best
estimates of future results, performances or achievements, predicated upon
current conditions and the most recent results of the companies involved and
their respective industries. Forward-looking statements may be identified by the
use of forward-looking terminology such as "may," "can," "will," "could,"
"should," "project," "expect," "plan," "predict," "believe," "estimate," "aim,"
"anticipate," "intend," "continue," "potential," "opportunity" or similar terms,
variations of those terms or the negative of those terms or other variations of
those terms or comparable words or expressions.
Potential risks and uncertainties include, among other things, such factors as:
o the expenses, difficulties and delays frequently encountered in connection
with the formation and initial operations of a new and unproven business;
o our ability to incur debt without becoming too highly leveraged;
o our ability to secure refinancing of our indebtedness, when required, on
acceptable terms;
o general economic conditions in the United States and elsewhere, as well as
the economic conditions affecting the resort industry in which we operate;
o the effects of terrorists activities and the threat of such activities on
our target eco-resort customers;
o our dependence on officers and directors who have no experience in the
management and marketing of an eco-resort;
o the competitive environment within the resort industry;
o our ability to raise additional capital, if and as needed, including our
ability to keep in effect the registration of our securities in order to
permit the exercise of outstanding warrants;
o the cost-effectiveness of our real property acquisitions on the Honduran
island of Guanaja;
o local, national and international political and regulatory matters
affecting the resort industry in general and our planned activities to
develop an eco-resort on the Honduran island of Guanaja;
o the timing and costs involved in obtaining regulatory approvals, if ever,
and our ability to comply with regulatory requirements;
o the timing of future revenues from our commercial activities; and
o the other risks detailed in this Quarterly Report on Form 10-QSB and, from
time to time, in our other filings with the Securities and Exchange
Commission.
Readers are urged to carefully review and consider the various disclosures made
by us in this Form 10-QSB and our other filings with the SEC. These reports and
filings attempt to advise interested parties of the risks and factors that may
affect our business, financial condition and results of operations and
prospects. The forward-looking statements made in this Form 10-QSB speak only as
of the date of the financial statements and we disclaim any obligation to
provide updates, revisions or amendments to any forward-looking statements to
reflect changes in our expectations or future events.
Liquidity and Capital Resources
We are currently in the development stage and all our activities from inception
through December 31, 2001 were related to our formation, preparation of our
business model, arranging and planning financing and the acquisition and
preliminary development of real property. Our ability to commence business
operations is contingent upon obtaining adequate financial resources through the
sale of equity securities, loans and otherwise.
- 8 -
We have financed our operations to date through the sale of our securities to
and loans from, primarily, our officers and directors and their family members
and affiliates.
From inception through December 31, 2001, net cash used to fund operating
activities totaled approximately $49,000, net cash utilized by investing
activities totaled $488,000 and net cash provided by financing activities
totaled $619,000.
From inception through December 31, 2001, our sole source of cash and capital
has been from the following transactions:
o In January 2000, we sold and issued to an affiliate of our chief executive
officer 2,960,000 shares of our common stock and warrants to purchase
986,667 additional shares of our common stock for total cash proceeds of
$2,960;
o In January 2000, we sold and issued to our outside counsel 40,000 shares
of our common stock and warrants to purchase 13,333 additional shares of
our common stock for total cash proceeds of $40;
o Between August 2000 and February 2001, we borrowed an aggregate of $13,500
from our chief executive officer, all of which was converted into equity
in April and June 2001;
o In April 2001, we issued to an affiliate of our chief executive officer
2,400,000 shares of our common stock and warrants to purchase 800,000
additional shares of our common stock in satisfaction of certain of our
obligations to him totaling $2,400;
o In June 2001, we issued to our president 23,324 shares of our common stock
in satisfaction of certain of our obligations to him totaling $11,662;
o In June 2001, we sold and issued to our chief executive officer 60,000
shares of our common stock for total cash proceeds of $30,000;
o In July 2001, we borrowed $72,300 from Falcon Financial Group LLC, an
affiliate of our chief executive officer and vice president and which also
is our sub-lessor, and issued to Falcon a promissory note in the principal
amount of $72,300, bearing interest at the rate of 7% per annum and due in
June 2003;
o In July 2001, we issued to Falcon 57,600 shares of our common stock in
satisfaction of our sublease rent obligations to this affiliate totaling
$28,800;
o In July 2001, we borrowed a total of $400,800 from family members and
affiliates of our chief executive officer and issued to these family
members and affiliates promissory notes in the aggregate principal amount
of $400,800, bearing interest at the rate of 7% per annum and due in June
2003;
o In September 2001, we acquired real property in Honduras by issuing a
promissory note, in the principal amount of $268,665 due in June 2003, to
the seller of this property;
o In October 2001, we borrowed $5,000 from an affiliate of our chief
executive officer and issued a 7% promissory note due in June 2003; and
o In December 2001, we borrowed a total of $94,000 from family members and
affiliates of our chief executive officer and others and issued to these
lenders promissory notes in the aggregate principal amount of $94,000,
bearing interest at the rate of 7% per year and due in June 2003.
Almost all of the funds raised through the borrowings specified above have been
used by us in connection with (a) our acquisition of properties on the Honduran
Bay Island of Guanaja, (b) refurbishing work on a building located on one of our
acquired properties, (c) our making the initial $50,000 down payment in
connection with our January 2002 purchase of a parcel of real property in
Honduras and to pay closing costs incurred in connection with such purchase. In
connection with the January 2002 purchase, we issued to the sellers of the
parcel a promissory note in the principal amount of $250,000, representing the
balance of the purchase price. This note is payable in four semi- annual
installments with a final maturity in December 2004, of which the first
installment was paid in August 2002.
As of December 31, 2001, we were in the process of registering with the
Securities and Exchange Commission for sale pursuant to the Securities Act of
1933, and as our initial public offering, a total of 2.1 million units of our
securities. The SEC declared the registration statement effective on February
11, 2002. These units were offered at $.50 per unit. Each of the units consists
of one share of our common stock and one-third (1/3) of one class A redeemable
warrant. Each class A warrant entitles its holder to purchase one share of our
common stock and one class B redeemable warrant. The class A warrants are
exercisable for four years from the effective date of the registration
statement, subject to earlier redemption, at an exercise price of $6.00 per
share. Each class B warrant
- 9 -
entitles its holder to purchase one share of our common stock. The class B
warrants are exercisable for five years from the effective date of the
registration statement, subject to earlier redemption, at an exercise price of
$9.00 per share. We successfully completed the IPO in August 2002. The debt,
including accrued interest, evidenced by each of the promissory notes referred
to above as our sole sources of cash and capital outstanding as of the
commencement of the IPO were cancelled in connection with the respective
holders' participation in the IPO.
We expect to continue to incur expenses relating to:
o The purchase of additional real property on Guanaja, repayment of debt
incurred in connection with our prior acquisitions of real property on
Guanaja and the development of these properties for cash and notes, and
o The payment of general and administrative expenses and our general working
capital needs.
The timing and extent of our construction and development expenditures, as well
as acquisition of additional parcels of land, will be dependent upon the timing
and success of our capital raising efforts.
We may mortgage our real property and use the proceeds of such re-financings for
further development of the properties to the extent that such real property is
free of liens and encumbrances.
Our costs of developing our Naba Ah and Plan Grande properties over the next
twelve months are anticipated to be between $20,000 and $1.2 million. The timing
and extent of construction of the main buildings for our Naba Ah resort and Plan
Grande tourist destination, as well as acquisition of additional parcels of
land, will be dependent upon the timing and success of our capital raising
efforts. These development projects will include the following matters:
o Retain advisors, such as architects, healers, shamans, archeologists,
advisors and historians, to insure harmony and consistency between theme
and historical fact and accepted theory and to assist in the planning and
planting of the herbal gardens at our Naba Ah and Plan Grande properties.
Through our vice president and chief financial officer, John C. Francis,
we have made contact with architects, healers, shamans, archeologists and
historians willing to assist us in this matter, at a cost we estimate will
not exceed $10,000 over the next twelve months, including travel and
miscellaneous expenses.
o Construction of the Naba Ah spiritual and wellness center, development of
our Plan Grande tourist destination and the planting of herbal gardens at
both the Naba Ah and Plan Grande properties, at an estimated aggregate
cost of $375,000.
We anticipate compensating any employees, consultants and other service
providers in the form of a combination of cash, debt and/or securities of our
company. We intend to utilize this method in order to minimize cash expenditures
prior to raising additional funding, if any, and/or the receipt of anticipated
revenues from our business operations. This method of compensation partially in
the form of our securities also will provide incentives to these employees,
consultants and other service providers that are directly linked to increases in
stockholder values that will inure to the benefit of all of our stockholders.
We expect to incur significant operating losses over each of the next several
years and expect cumulative losses to increase significantly as we implement our
business operations. We do not expect to receive revenues from operations until,
at the earliest, January 2003.
We believe that existing cash and cash equivalents, together with the net
proceeds of the IPO, will be sufficient to finance our proposed operations for
at least twelve months following the effective date of the registration
statement of our IPO. Our future liquidity and capital requirements, however,
will depend on numerous factors, including, among others:
o our ability to raise additional funds, through equity and/or debt
offerings;
o the cost of acquisitions of additional properties on Guanaja;
o the timing and costs involved in obtaining regulatory approvals, if ever,
and complying with regulatory requirements;
o the timing of future revenues from our commercial activities; and
- 10 -
o our ability to successfully compete for customers for our commercial
operations.
If the proceeds of the IPO, together with other available funds, are not
sufficient to satisfy our spending plans, we will be required to revise our
business model, seek a joint venture business partner and/or seek additional
funding through borrowings and/or additional sales of our securities. We can
give no assurance that additional funding will become available when needed or
that the terms of such funding will not be on terms adverse to us and our
securityholders.
We are now subject to the reporting requirements of the Exchange Act and, in
accordance with these requirements, we will file reports, proxy statements and
other documentation with the SEC. We also intend to furnish our stockholders
with annual reports containing audited financial statements and other periodic
reports as we deem appropriate or as may be required by law. These reports,
proxy statements and other documentation will contain information concerning our
liquidity and capital resources. We do not anticipate seeking stockholder
approval of any change to our business plans or allocation of capital resources
in conducting our business operations, except as may be required by applicable
law.
Among the risks associated with our plan of operations are the following:
o We have extremely limited resources. We have relied on loans from our
management and friends and family members of our management to fund a
significant portion of our activities to date. We do not expect to receive
any additional loans from these lenders in the future. We cannot give any
assurance that additional loans will be available from any source or that
such loans, if available, will be on terms amenable to us. Our failure to
obtain loans or other financing when needed or on terms amenable to us
would have a material adverse effect on our business operations.
o We will be dependent upon one hotel resort and wellness spa. We anticipate
that our business operations initially will be limited to our Naba Ah
eco-resort and wellness spa. Significant adverse differences between the
actual operating results of these initial operations and our anticipated
results could have a material adverse effect on us and impact our ability
to fully implement our business plans.
o We will incur significant development risks. While our policies with
respect to development of our resort hotel, wellness spa and cultural
center are intended to limit some of the risks associated with these
activities, any new project development is subject to a number of risks,
including that:
o temporary or construction financing may not be available on
favorable terms, if at all;
o construction costs may exceed original estimates;
o occupancy rates may not be at anticipated levels;
o permanent financing may not be available upon completion of
construction; and
o construction may not be completed on schedule.
o We are subject to risks associated with uninsured and underinsured losses.
We intend to maintain comprehensive insurance on each of our properties,
including liability, employee dishonesty and building casualty coverage.
We anticipate the types and amounts of coverage, including coverage limits
and deductibility provisions, to be customary for similar properties.
However, there are certain types of losses, generally of a catastrophic
nature, such as hurricanes, earthquakes and floods, that may be
uninsurable or not economically insurable. Should an uninsured loss or a
loss in excess of insured limits occur, we could lose our investment in
the affected operations, as well as the anticipated future revenues from
those operations, while remaining obligated for any mortgage indebtedness
or other financial obligations related to those operations.
o We will have risks associated with real estate financing. We expect to
finance some, if not all, of our real estate acquisitions and construction
costs through debt financing. In doing so, we will be subject to the risks
normally associated with debt financing, including the risks that:
o our cash flow will be insufficient to meet required payments of
principal and interest;
o we will not be able to refinance indebtedness at maturity;
- 11 -
o that the terms of any such refinancing will not be as favorable as
the terms of the existing indebtedness;
o that necessary capital expenditures for such purposes as renovations
and other improvements cannot be financed on favorable terms, if at
all, due to the terms of the debt financing;
o the potential for a forced sale of properties at potentially
distressed prices; and
o an increase in interest rates would increase the amount payable
under variable rate debt.
o If we do not raise sufficient capital and/or generate sufficient positive
cash flow to fund renovations and capital improvements, we may not be able
to remain competitive. Hotel properties require continuing renovation and
capital improvements, including periodic refurbishment and replacement of
furniture, fixtures and equipment, to remain competitive. The funding of
these expenditures will be dependent on our available capital, revenues
and cash flow. If available capital, revenues and cash flow are
insufficient, our competitive position may suffer which could result in
our being forced to limit or curtail business operations.
- 12 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We currently are not a party to any legal proceedings.
Item 2. Changes in Securities.
By written consent, dated as of October 15, 2001, our stockholders approved an
amendment to our articles of incorporation to more specifically vest authority
in our board of directors to prescribe the classes, series and number of each
class or series of our preferred stock and the voting powers, designations,
preferences, limitations, restrictions and relative rights of each class or
series of our preferred stock. The amendment to our articles of incorporation
was filed with the appropriate authorities of the State of Nevada on November
27, 2001.
Item 3. Defaults on Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
By written consent, dated as of October 15, 2001, our stockholders approved an
amendment to our articles of incorporation to more specifically vest authority
in our board of directors to prescribe the classes, series and number of each
class or series of our preferred stock and the voting powers, designations,
preferences, limitations, restrictions and relative rights of each class or
series of our preferred stock.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Set forth below is a list of the exhibits to this Quarterly Report on Form
10-QSB.
Exhibit
Number Description
- ------- -----------
3.1 Composite of Articles of Incorporation, as amended to date.*
99.1 Certification of Johnny R. Thomas pursuant to 18
U.S.C.ss.1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of John C. Francis pursuant to 18 U.S.C.ss.1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002.
- ----------
* Incorporated by reference. See Exhibit Index commencing on page 17.
(b) Reports on Form 8-K.
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: October 8, 2002 Crest View Inc.
By: /s/ Johnny R. Thomas
-------------------------------------
Johnny R. Thomas
President and Chief Executive Officer
(Duly Authorized Officer)
By: /s/ John C. Francis
-------------------------------------
John C. Francis
Vice President and Chief Financial
Officer
(Principal Financial and Accounting
Officer)
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CERTIFICATION
I, Johnny R. Thomas, President and Chief Executive Officer of Crest View
Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Crest View Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
Quarterly Report.
Date: October 8, 2002
/s/ Johnny R. Thomas
------------------------------------
Johnny R. Thomas
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CERTIFICATION
I, John C. Francis, Vice President and Chief Financial Officer of Crest
View Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Crest View Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
Quarterly Report.
Date: October 8, 2002
/s/ John C. Francis
------------------------------------
John C. Francis
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Crest View Inc.
Quarterly Report on Form 10-QSB
Quarter Ended December 31, 2001
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Composite of Articles of Incorporation, as amended to date.
(Incorporated by reference to exhibit 3.1 of Amendment No. 3
to our Registration Statement on Form SB-2 (Commission file
number: 333-45780), filed with the Securities and Exchange
Commission on January 7, 2002).
99.1 Certification of Johnny R. Thomas pursuant to 18
U.S.C.ss.1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of John C. Francis pursuant to 18 U.S.C.ss.1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002.
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