UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark one)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2010
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
Commission File Number: 000-28453
Eight Dragons Company
(Exact Name of Registrant as Specified in Its Charter)
Nevada 75-2610236
(State of Incorporation) (I.R.S. Employer ID Number)
211 West Wall Street, Midland, Texas 79701-4556
(Address of Principal Executive Offices)
(432) 682-1761
(Registrant's Telephone Number)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.0001 par value
Indicate by check mark if the registrant is a well known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
Indicate by check mark whether the registrant has (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 the Company was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post files). Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act): Yes [X] No[ ]
The aggregate market value of voting and non-voting common equity held by
non-affiliates as of January 25, 2011 was approximately $12,900 based upon
71,700 shares held by non-affiliates and a closing market price of $0.18 per
share on January 25, 2011, as reported at www.bigcharts.com.
As of January 25, 2011, there were 362,200 shares of Common Stock issued and
outstanding.
EIGHT DRAGONS CORPORATION
INDEX TO CONTENTS
Page
Number
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PART I
Item 1 Business 3
Item 1A Risk Factors 8
Item 1B Unresolved Staff Comments 11
Item 2 Properties 12
Item 3 Legal Proceedings 12
Item 4 (Removed and Reserved) 12
PART II
Item 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 12
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 7A Quantitative and Qualitative Disclosures About Market Risk 19
Item 8 Financial Statements and Supplementary Data 19
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 19
Item 9A Controls and Procedures 19
Item 9B Other Information 20
PART III
Item 10 Directors, Executive Officers and Corporate Governance 20
Item 11 Executive Compensation 23
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 24
Item 13 Certain Relationships and Related Transactions, and Director
Independence 25
Item 14 Principal Accounting Fees and Services 26
PART IV
Item 15 Exhibits, Financial Statement Schedules 26
SIGNATURES 38
2
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; fluctuations and difficulty in
forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified
personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-K and investors are cautioned
not to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
result of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments.
PART I
ITEM 1 - BUSINESS
GENERAL
Eight Dragons Company (Company), formerly known as Tahoe Pacific Corporation,
Pacific Holdings, Inc. and Ameri-First Financial Group, respectively, was
incorporated in the State of Nevada on September 27, 1996.
On October 24, 2007, the Company changed its state of incorporation from
Delaware to Nevada by means of a merger with and into Eight Dragons Company, a
Nevada corporation formed on September 26, 2007 solely for the purpose of
effecting the reincorporation. The merger was consummated through an exchange of
100 shares in the Nevada corporation for each share then issued and outstanding
in the Delaware corporation. The Articles of Incorporation and Bylaws of the
Nevada corporation are the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation modified the Company's capital
structure to allow for the issuance of up to 50,000,000 shares of $0.0001 par
value common stock and up to 10,000,000 shares of $0.0001 par value preferred
stock.
For periods prior to 2000, the Company participated in numerous unsuccessful
ventures and corporate name changes, as have been disclosed and discussed in
greater detail in previous Annual Report(s) on Form 10-K and/or Form 10-KSB
which were filed with the U. S. Securities and Exchange Commission.
Since 2000, the Company has had no operations, significant assets or
liabilities.
Currently, the Company has no known exposures to any current or proposed climate
change legislation which could negatively impact the Company's operations or
require capital expenditures to become compliant.
CURRENT STATUS
The Company's current business plan is to locate and combine with an existing,
privately-held company which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. However, the
Company does not intend to combine with a private company which may be deemed to
be an investment company subject to the Investment Company Act of 1940. A
combination may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets or any other form which will result
in the combined enterprise's becoming a publicly-held corporation.
The Company's equity securities are currently traded on either the Bulletin
Board or the Pink Sheets under the ticker symbol "EDRG".
Since the disposition of all operating assets and operations in 2000, the
Company may be referred to as a reporting shell corporation. Shell corporations
have zero or nominal assets and typically no stated or contingent liabilities.
Private companies wishing to become publicly trading may wish to merge with a
shell (a reverse merger or reverse acquisition) whereby the shareholders of the
private company become the majority of the shareholders of the combined company.
3
The private company may purchase for cash all or a portion of the common shares
of the shell corporation from its major stockholders. Typically, the Board and
officers of the private company become the new Board and officers of the
combined Company and often the name of the private company becomes the name of
the combined entity.
The Company has very limited capital, and it is unlikely that the Company will
be able to take advantage of more than one such business opportunity. The
Company intends to seek opportunities demonstrating the potential of long-term
growth as opposed to short-term earnings. However, at the present time, the
Company has not identified any business opportunity that it plans to pursue, nor
has the Company reached any agreement or definitive understanding with any
person concerning an acquisition.
It is anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
with corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses that they represent have a general
interest in considering a merger or acquisition with a blind pool or blank check
or shell entity. No direct discussions regarding the possibility of merger are
expected to occur until after the effective date of this registration statement.
No assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given the limited funds that are
expected to be available for acquisitions. Furthermore, no assurance can be
given that any acquisition, which does occur, will be on terms that are
favorable to the Company or its current stockholders.
The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become public corporations. In addition these enterprises
may wish to satisfy, either currently or in the reasonably near future, the
minimum tangible asset requirement in order to qualify shares for trading on
NASDAQ or on an exchange such as the American Stock Exchange. The Company
anticipates that the business opportunities presented to it will (i) either be
in the process of formation, or be recently organized with limited operating
history or a history of losses attributable to under-capitalization or other
factors; (ii) experiencing financial or operating difficulties; (iii) be in need
of funds to develop new products or services or to expand into a new market, or
have plans for rapid expansion through acquisition of competing businesses; (iv)
or other similar characteristics. The Company intends to concentrate its
acquisition efforts on properties or businesses that it believes to be
undervalued or that it believes may realize a substantial benefit from being
publicly owned. Given the above factors, investors should expect that any
acquisition candidate may have little or no operating history, or a history of
losses or low profitability.
The Company does not propose to restrict its search for investment opportunities
to any particular geographical area or industry, and may, therefore, engage in
essentially any business, to the extent of its limited resources. This include
industries such as service, finance, natural resources, manufacturing, high
technology, product development, medical, communications and others. The
Company's discretion in the selection of business opportunities is unrestricted,
subject to the availability of such opportunities, economic conditions, and
other factors.
As a consequence of this registration of its securities, any entity, which has
an interest in being acquired by, or merging into the Company, is expected to be
an entity that desires to become a public Company and establish a public trading
market for its securities. In connection with such a merger or acquisition, it
is highly likely that an amount of stock constituting control of the Company
would either be issued by the Company or be purchased from the current principal
stockholders of the Company by the acquiring entity or its affiliates. If stock
is purchased from the current principal stockholders, the transaction is likely
to result in substantial gains to the current principal stockholders relative to
their purchase price for such stock. In the Company's judgment, none of the
officers and directors would thereby become an underwriter within the meaning of
the Section 2(11) of the Securities Act of 1933, as amended (Securities Act) as
long as the transaction is a private transaction rather than a public
distribution of securities. The sale of a controlling interest by certain
principal shareholders of the Company would occur at a time when minority
stockholders are unable to sell their shares because of the lack of a public
market for such shares.
Depending upon the nature of the transaction, the current officers and directors
of the Company may resign their management and board positions with the Company
in connection with a change of control or acquisition of a business opportunity.
In the event of such a resignation, the Company's current management would
thereafter have no control over the conduct of the Company's business.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plan, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it will enter into a merger or acquisition
transaction with any business with which its officers or directors are currently
affiliated. Should the Company determine in the future, contrary to the forgoing
4
expectations, that a transaction with an affiliate would be in the best
interests of the Company and its stockholders, the Company is, in general,
permitted by Nevada law to enter into a transaction if: The material facts as to
the relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the Board of Directors, and the Board
in good faith authorizes, approves or ratifies the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or the material facts
as to the relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically authorized, approved or
ratified in good faith by vote of the stockholders; or the contract or
transaction is fair as to the Company as of the time it is authorized, approved
or ratified, by the Board of Directors or the stockholders.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other Company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the business opportunity will derive from becoming a publicly held entity, and
numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of a
variety of factors, including, but not limited to, the possible need to expand
substantially, shift marketing approaches, change product emphasis, change or
substantially augment management, raise capital and the like.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to the acquisition of one business opportunity because of
the Company's limited financing. This lack of diversification will not permit
the Company to offset potential losses from one business opportunity against
profits from another, and should be considered an adverse factor affecting any
decision to purchase the Company's securities.
Certain types of business acquisition transactions may be completed without any
requirement that the Company first submit the transaction to the stockholders
for their approval. In the event the proposed transaction is structured in such
a fashion that stockholder approval is not required, holders of the Company's
securities (other than principal stockholders holding a controlling interest)
should not anticipate that they will be provided with financial statements or
any other documentation prior to the completion of the transaction. Other types
of transactions require prior approval of the stockholders.
In the event a proposed business combination or business acquisition transaction
is structured in such a fashion that prior stockholder approval is necessary,
the Company will be required to prepare a Proxy or Information Statement
describing the proposed transaction, file it with the Securities and Exchange
Commission for review and approval, and mail a copy of it to all Company
stockholders prior to holding a stockholders meeting for purposes of voting on
the proposal. Minority shareholders that do not vote in favor of a proposed
transaction will then have the right, in the event the transaction is approved
by the required number of stockholders, to exercise statutory dissenter's rights
and elect to be paid the fair value of their shares.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officers and directors, none of whom are
professional business analysts. Although there are no current plans to do so,
Company management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and might pay a finder's
fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or the total amount of fees
that may be paid. However, because of the limited resources of the Company, it
is likely that any such fee the Company agrees to pay would be paid in stock and
not in cash.
Otherwise, in analyzing potential business opportunities, Company management
anticipates that it will consider, among other things, the following factors:
* Potential for growth and profitability indicated by new technology,
anticipated market expansion, or new products;
* The Company's perception of how any particular business opportunity
will be received by the investment community and by the Company's
stockholders;
* Whether, following the business combination, the financial condition
of the business opportunity would be, or would have a significant
prospect in the foreseeable future of becoming, sufficient to enable
the securities of the Company to qualify for listing on an exchange or
on a national automated securities quotation system, such as NASDAQ,
5
so as to permit the trading of such securities to be exempt from the
requirements of Rule 15g-9 adopted by the Securities and Exchange
Commission.
* Capital requirements and anticipated availability of required funds,
to be provided by the Company or from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
* The extent to which the business opportunity can be advanced;
* Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the
industry as a whole;
* Strength and diversity of existing management or management prospects
that are scheduled for recruitment;
* The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
* The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required
items.
In regard to the possibility that the shares of the Company would qualify for
listing on NASDAQ, the current standards for initial listing include, among
other requirements, that the Company (1) have net tangible assets of at least
$4.0 million, or a market capitalization of $50.0 million, or net income of not
less that $0.75 million in its latest fiscal year or in two of the last three
fiscal years; (2) have a public float (i.e., shares that are not held by any
officer, director or 10% stockholder) of at least 1.0 million shares; (3) have a
minimum bid price of at least $4.00; (4) have at least 300 round lot
stockholders (i.e., stockholders who own not less than 100 shares); and (5) have
an operating history of at least one year or have a market capitalization of at
least $50.0 million. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection of a
business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials regarding the
business opportunity containing as much relevant information as possible,
including, but not limited to, such items as a description of products, services
and Company history; management resumes; financial information; available
projections, with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents, trademarks,
or service marks, or rights thereto; present and proposed forms of compensation
to management; a description of transactions between such Company and its
affiliates during the relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements; audited financial statements, or
if they are not available, unaudited financial statements, together with
reasonable assurance that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 60 days following
completion of a merger or acquisition transaction; and the like.
As part of the Company's investigation, the Company's executive officers and
directors may meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be available
for consideration by the Company could be limited by the impact of Securities
and Exchange Commission regulations regarding purchase and sale of penny stocks.
The regulations would affect, and possibly impair, any market that might develop
in the Company's securities until such time as they qualify for listing on
NASDAQ or on an exchange which would make them exempt from applicability of the
penny stock regulations.
6
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current stockholders,
acquisition candidates which have long-term plans for raising capital through
public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates, which have a need for an immediate cash infusion, are
not likely to find a potential business combination with the Company to be an
attractive alternative.
FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may participate in a
business opportunity. Specific business opportunities will be reviewed as well
as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of the review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders of the
Company most likely will not have control of a majority of the voting stock of
the Company following a merger or reorganization transaction. As part of such a
transaction, the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "B" tax free reorganization under
the Internal Revenue Code of 1986 as amended, depends upon the issuance to the
stockholders of the acquired Company of a controlling interest (i.e., 80% or
more) of the common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other a tax free provisions provided under the Internal
Revenue Code, the Company's current stockholders would retain in the aggregate
20% or less of the total issued and outstanding shares. This could result in
substantial additional dilution in the equity of those who were stockholders of
the Company prior to such reorganization. Any such issuance of additional shares
might also be done simultaneously with a sale or transfer of shares representing
a controlling interest in the Company by the current officers, directors and
principal stockholders.
It is anticipated that any new securities issued in any reorganization would be
issued in reliance upon one or more exemptions from registration under
applicable federal and state securities laws to the extent that such exemptions
are available. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either at the
time the transaction is consummated or under certain conditions at specified
times thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that might develop in the Company's
securities may have a depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its principal
stockholders will enter into a letter of intent with the management, principals
or owners of a prospective business opportunity prior to signing a binding
agreement. Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind any of the parties to consummate the transaction.
Execution of a letter of intent will by no means indicate that consummation of
an acquisition is probable. Neither the Company nor any of the other parties to
the letter of intent will be bound to consummate the acquisition unless and
until a definitive agreement is executed. Even after a definitive agreement is
executed, it is possible that the acquisition would not be consummated should
any party elect to exercise any right provided in the agreement to terminate it
on specific grounds.
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs incurred in the related investigation would not be recoverable. Moreover,
7
because many providers of goods and services require compensation at the time or
soon after the goods and services are provided, the inability of the Company to
pay until an indeterminate future time may make it impossible to produce goods
and services.
INVESTMENT COMPANY ACT AND OTHER REGULATION
The Company may participate in a business opportunity by purchasing, trading or
selling the securities of such business. The Company does not, however, intend
to engage primarily in such activities. Specifically, the Company intends to
conduct its activities so as to avoid being classified as an investment Company
under the Investment Company Act of 1940 (the Investment Act), and therefore to
avoid application of the costly and restrictive registration and other
provisions of the Investment Act, and the regulations promulgated thereunder.
The Company's plan of business may involve changes in its capital structure,
management, control and business, especially if it consummates the
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment Company securities.
Since the Company will not register as an investment Company, stockholders will
not be afforded these protections.
COMPETITION
The Company expects to encounter substantial competition in its efforts to
locate attractive business combination opportunities. The competition may in
part come from business development companies, venture capital partnerships and
corporations, small investment companies, brokerage firms, and the like. Some of
these types of organizations are likely to be in a better position than the
Company to obtain access to attractive business acquisition candidates either
because they have greater experience, resources and managerial capabilities than
the Company, because they are able to offer immediate access to limited amounts
of cash, or for a variety of other reasons. The Company also will experience
competition from other public companies with similar business purposes, some of
which may also have funds available for use by an acquisition candidate.
EMPLOYEES
The Company currently has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not anticipate a
need to engage any full-time employees so long as it is seeking and evaluating
business opportunities. The need for employees and their availability will be
addressed in connection with the decision whether or not to acquire or
participate in specific business opportunities.
ITEM 1A - RISK FACTORS
The Company's business and plan of operation is subject to numerous risk
factors, including, but not limited to, the following:
LIMITED OPERATING HISTORY MAKES POTENTIAL DIFFICULT TO ASSESS
The Company has limited financial resources and no operating activities. The
Company will, in all likelihood, continue to sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This will most likely result in the Company incurring a net
operating loss which will increase continuously until the Company can consummate
a business combination with a target company. There is no assurance that the
Company can identify such a target company and consummate such a business
combination.
THERE IS NO AGREEMENT FOR A BUSINESS COMBINATION AND NO MINIMUM REQUIREMENTS FOR
A BUSINESS COMBINATION
The Company has no current arrangement, agreement or understanding with respect
to engaging in a business combination with a specific entity. There can be no
assurance that the Company will be successful in identifying and evaluating
suitable business opportunities or in concluding a business combination. No
particular industry or specific business within an industry has been selected
for a target company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net worth or other
criteria which it will require a target company to have achieved, or without
which the Company would not consider a business combination with such business
entity. Accordingly, the Company may enter into a business combination with a
business entity having no significant operating history, losses, limited or no
potential for immediate earnings, limited assets, negative net worth or other
negative characteristics. There is no assurance that the Company will be able to
negotiate a business combination on terms favorable to the Company.
8
NO ASSURANCE OF SUCCESS OR PROFITABILITY
There is no assurance that the Company will acquire a favorable business
opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's outstanding shares will be increased
thereby.
TYPE OF BUSINESS ACQUIRED
The business to be acquired may wish to avoid effecting its own public offering
and the accompanying expense, delays, and uncertainties. Because of the
Company's limited capital, it is more likely than not that any acquisition by
the Company will involve other parties whose primary interest is the acquisition
of control of a publicly traded Company. Moreover, any business opportunity
acquired may be currently unprofitable or present other negative factors.
EFFECT OF CLIMATE CHANGE LEGISLATION
Any currently proposed or to-be-proposed-in-the-future legislation concerning
climate change activities, business operations related thereto or a publicly
perceived risk associated with climate change could, potentially, negatively
impact the Company's efforts to identify an appropriate target company which may
wish to enter into a business combination transaction with the Company.
LACK OF DIVERSIFICATION
Because of the limited financial resources that the Company has, it is unlikely
that the Company will be able to diversify its acquisitions or operations. The
Company's probable inability to diversify its activities into more than one area
will subject the Company to economic fluctuations within a particular business
or industry and therefore increase the risks associated with the Company's
operations.
DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT
Because management consists of only one person, while seeking a business
combination, Glenn A. Little, the President of the Company, will be the only
person responsible in conducting the day-to-day operations of the Company. The
Company does not benefit from multiple judgments that a greater number of
directors or officers would provide, and the Company will rely completely on the
judgment of its one officer and director when selecting a target company. Mr.
Little anticipates devoting only a limited amount of time per month to the
business of the Company. Mr. Little has not entered into a written employment
agreement with the Company and he is not expected to do so. The Company does not
anticipate obtaining key man life insurance on Mr. Little. The loss of the
services of Mr. Little would adversely affect development of the Company's
business and its likelihood of continuing operations.
CONFLICTS OF INTEREST
The Company's sole officer and director has other business interests to which he
currently devotes attention, and is expected to continue to do so. As a result,
conflicts of interest may arise that can be resolved only through their exercise
of judgment in a manner which is consistent with his fiduciary duties to the
Company.
It is anticipated that the Company's principal stockholder may actively
negotiate or otherwise consent to the purchase of a portion of their common
stock as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's principal stockholder may consider
his own personal pecuniary benefit rather than the best interest of other
Company stockholders. Depending upon the nature of a proposed transaction,
Company stockholders other than the principal stockholder may not be afforded
the opportunity to approve or consent to a particular transaction.
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has very limited funds, and such funds, may not be adequate to take
advantage of any available business opportunities. Even if the Company's
currently available funds prove to be sufficient to pay for its operations until
it is able to acquire an interest in, or complete a transaction with, a business
opportunity, such funds will clearly not be sufficient to enable it to exploit
the opportunity. Thus, the ultimate success of the Company will depend, in part,
upon its availability to raise additional capital. In the event that the Company
requires modest amounts of additional capital to fund its operations until it is
able to complete a business acquisition or transaction, such funds, are expected
to be provided by the principal stockholder. The Company has not investigated
the availability, source, or terms that might govern the acquisition of the
additional capital which is expected to be required in order to exploit a
business opportunity, and will not do so until it has determined the level of
need for such additional financing. There is no assurance that additional
capital will be available from any source or, if available, that it can be
9
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.
DEPENDENCE UPON OUTSIDE ADVISORS
To supplement the business experience of its officer and director, the Company
may be required to employ accountants, technical experts, appraisers, attorneys,
or other consultants or advisors. The selection of any such advisors will be
made by the Company's officer, without any input by stockholders. Furthermore,
it is anticipated that such persons may be engaged on an as needed basis without
a continuing fiduciary or other obligation to the Company. In the event the
officer of the Company considers it necessary to hire outside advisors, he may
elect to hire persons who are affiliates, if those affiliates are able to
provide the required services.
REGULATION OF PENNY STOCKS
The Commission has adopted a number of rules to regulate "penny stocks." Such
rules include Rule 3a51-1 and Rules 15g-1 through 15g-9 under the Exchange Act.
Because the securities of the Company may constitute "penny stocks" within the
meaning of the rules (as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
largely traded on the OTC Bulletin Board or the "Pink Sheets", the rules would
apply to the Company and to its securities. The Commission has adopted Rule
15g-9 which established sales practice requirements for certain low price
securities. Unless the transaction is exempt, it shall be unlawful for a broker
or dealer to sell a penny stock to, or to effect the purchase of a penny stock
by, any person unless prior to the transaction: (i) the broker or dealer has
approved the person's account for transactions in penny stock pursuant to this
rule and (ii) the broker or dealer has received from the person a written
agreement to the transaction setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stock, the broker or dealer must: (a) obtain from the
person information concerning the person's financial situation, investment
experience, and investment objectives; (b) reasonably determine that
transactions in penny stock are suitable for that person, and that the person
has sufficient knowledge and experience in financial matters that the person
reasonably may be expected to be capable of evaluating the risks of transactions
in penny stock; (c) deliver to the person a written statement setting forth the
basis on which the broker or dealer made the determination (i) stating in a
highlighted format that it is unlawful for the broker or dealer to affect a
transaction in penny stock unless the broker or dealer has received, prior to
the transaction, a written agreement to the transaction from the person; and
(ii) stating in a highlighted format immediately preceding the customer
signature line that (iii) the broker or dealer is required to provide the person
with the written statement; and (iv) the person should not sign and return the
written statement to the broker or dealer if it does not accurately reflect the
person's financial situation, investment experience, and investment objectives;
and (d) receive from the person a manually signed and dated copy of the written
statement. It is also required that disclosure be made as to the risks of
investing in penny stock and the commissions payable to the broker-dealer, as
well as current price quotations and the remedies and rights available in cases
of fraud in penny stock transactions. Statements, on a monthly basis, must be
sent to the investor listing recent prices for the Penny Stock and information
on the limited market. Stockholders should be aware that, according to
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
THERE MAY BE A SCARCITY OF AND/OR SIGNIFICANT COMPETITION FOR BUSINESS
OPPORTUNITIES AND COMBINATIONS
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
compete in seeking merger or acquisition candidates with other public shell
companies, some of which may also have funds available for use by an acquisition
candidate.
10
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION
Pursuant to the requirements of Section 13 of the Exchange Act, the Company is
required to provide certain information about significant acquisitions including
audited financial statements of the acquired company. Obtaining audited
financial statements are the economic responsibility of the target company. The
additional time and costs that may be incurred by some potential target
companies to prepare such financial statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by the
Company. Acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Exchange Act are applicable. Notwithstanding a
target company's agreement to obtain audited financial statements within the
required time frame, such audited financials may not be available to the Company
at the time of effecting a business combination. In cases where audited
financials are unavailable, the Company will have to rely upon unaudited
information that has not been verified by outside auditors in making its
decision to engage in a transaction with the business entity. This risk
increases the prospect that a business combination with such a business entity
might prove to be an unfavorable one for the Company.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION
The Company has neither conducted, nor have others made available to it, market
research indicating that demand exists for the transactions contemplated by the
Company. In the event demand exists for a transaction of the type contemplated
by the Company, there is no assurance the Company will be successful in
completing any such business combination.
PROBABLE CHANGE IN CONTROL OF THE COMPANY AND/OR MANAGEMENT
In conjunction with completion of a business acquisition, it is anticipated that
the Company will issue an amount of the Company's authorized but unissued common
stock that represents the greater majority of the voting power and equity of the
Company, which will, in all likelihood, result in stockholders of a target
company obtaining a controlling interest in the Company. The resulting change in
control of the Company will likely result in removal of the present officer and
director of the Company and a corresponding reduction in or elimination of his
participation in the future affairs of the Company.
POSSIBLE DILUTION OF VALUE OF SHARES UPON BUSINESS COMBINATION
A business combination normally will involve the issuance of a significant
number of additional shares. Depending upon the value of the assets acquired in
such business combination, the per share value of the Company's common stock may
increase or decrease, perhaps significantly.
ADDITIONAL RISKS--DOING BUSINESS IN A FOREIGN COUNTRY
The Company may effectuate a business combination with a merger target whose
business operations or even headquarters, place of formation or primary place of
business are located outside the United States of America. In such event, the
Company may face the significant additional risks associated with doing business
in that country. In addition to the language barriers, different presentations
of financial information, different business practices, and other cultural
differences and barriers that may make it difficult to evaluate such a merger
target, ongoing business risks result from the international political
situation, uncertain legal systems and applications of law, prejudice against
foreigners, corrupt practices, uncertain economic policies and potential
political and economic instability that may be exacerbated in various foreign
countries.
TAXATION
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination that the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes, which may have an adverse effect on both parties to the
transaction.
ITEM 1B - UNRESOLVED STAFF COMMENTS
None
11
ITEM 2 - PROPERTIES
The Company currently maintains a mailing address at 211 West Wall Street,
Midland, Texas 79701. The Company's telephone number there is (432) 682-1761.
Other than this mailing address, the Company does not currently maintain any
other office facilities, and does not anticipate the need for maintaining office
facilities at any time in the foreseeable future. The Company pays no rent or
other fees for the use of the mailing address as these offices are used
virtually full- time by other businesses of the Company's sole officer and
director.
It is likely that the Company will not establish an office until it has
completed a business acquisition transaction, but it is not possible to predict
what arrangements will actually be made with respect to future office
facilities.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
ITEM 4 - [REMOVED AND RESERVED]
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's securities are eligible for trading on the OTC Bulletin Board
under the Commission's Rule 15c2-11, Subsection (a)(5). The Company's trading
symbol is EDRG. As of the date of this report, there have been limited and
sporadic trades of the Company's securities.
As of January 25, 2011, there were a total of 362,200 shares of our common stock
held by approximately 276 stockholders of record and approximately 280
stockholders whose positions were held in brokerage accounts. There are no
shares of our preferred stock outstanding at the date of this report.
The following table sets forth the quarterly average high and low closing bid
prices per share for the Common Stock:
High Low
---- ---
Fiscal year ended December 31, 2009
Quarter ended March 31, 2009 $1.10 $0.22
Quarter ended June 30, 2009 $0.25 $0.22
Quarter ended September 30, 2009 $1.01 $0.11
Quarter ended December 31, 2009 $0.14 $0.12
Fiscal year ended December 31, 2010
Quarter ended March 31, 2010 $0.14 $0.14
Quarter ended June 30, 2010 $0.14 $0.07
Quarter ended September 30, 2010 $0.07 $0.07
Quarter ended December 31, 2010 $0.15 $0.07
The source for the high and low closing bids quotations was www.bigcharts.com
and may not represent actual transactions and have not been adjusted for stock
dividends or splits. The reported closing price of the Company's common stock,
based on the last reported trade on January 6, 2011 at $0.15 per share.
Additionally, there were only approximately 15 trades involving the Company's
stock during Calendar 2010.
12
COMMON STOCK
Our authorized capital stock consists of 100,000,000 shares of $0.0001 par value
common stock and 50,000,000 shares of $0.0001 par value preferred stock. Each
share of common stock entitles a stockholder to one vote on all matters upon
which stockholders are permitted to vote. No stockholder has any preemptive
right or other similar right to purchase or subscribe for any additional
securities issued by us, and no stockholder has any right to convert the common
stock into other securities. No shares of common stock are subject to redemption
or any sinking fund provisions. All the outstanding shares of our common stock
are fully paid and non-assessable. Subject to the rights of the holders of the
preferred stock, if any, our stockholders of common stock are entitled to
dividends when, as and if declared by our board from funds legally available
therefore and, upon liquidation, to a pro-rata share in any distribution to
stockholders. We do not anticipate declaring or paying any cash dividends on our
common stock in the foreseeable future.
PREFERRED STOCK
The Company is also authorized to issue up to 50,000,000 shares of $0.0001 par
value Preferred Stock and no shares are issued and outstanding as of the date of
this Report.
Pursuant to our Articles of Incorporation, our board has the authority, without
further stockholder approval, to provide for the issuance of up to 50 million
shares of our preferred stock in one or more series and to determine the
dividend rights, conversion rights, voting rights, rights in terms of
redemption, liquidation preferences, the number of shares constituting any such
series and the designation of such series. Our Board has the power to afford
preferences, powers and rights (including voting rights) to the holders of any
preferred stock preferences, such rights and preferences being senior to the
rights of holders of common stock. No shares of our preferred stock are
currently outstanding. Although we have no present intention to issue any shares
of preferred stock, the issuance of shares of preferred stock, or the issuance
of rights to purchase such shares, may have the effect of delaying, deferring or
preventing a change in control of our company.
RESTRICTED SECURITIES
We currently have 300,000 outstanding shares which may be deemed restricted
securities as defined in Rule 144. We do not intend to issue any securities
prior to consummating a reverse merger transaction. The securities we issue in a
merger transaction will most likely be restricted securities.
Generally, restricted securities can be resold under Rule 144 once they have
been held for the required statutory period, provided that the securities
satisfies the current public information requirements of the Rule.
DIVIDENDS
Dividends, if any, will be contingent upon the Company's revenues and earnings,
if any, and capital requirements and financial conditions. The payment of
dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, and
accordingly the Board of Directors does not anticipate declaring any dividends
prior to a business combination.
TRANSFER AGENT
Our independent stock transfer agent is Securities Transfer Corporation, located
in Frisco, Texas. The mailing address and telephone number are: 2591 Dallas
Parkway, Suite 102, Frisco, Texas 75034; (469) 633-0101.
RECENT SALES OF UNREGISTERED SECURITIES
None.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders with an annual report for each
fiscal year ending December 31 containing financial statements audited by its
registered independent public accounting firm. In the event the Company enters
into a business combination with another Company, it is the present intention of
management to continue furnishing annual reports to stockholders. Additionally,
the Company may, in its sole discretion, issue unaudited quarterly or other
interim reports to its stockholders when it deems appropriate. The Company
intends to maintain compliance with the periodic reporting requirements of the
Exchange Act.
13
ITEM 6 - SELECTED FINANCIAL DATA
Not applicable
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(1) CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; fluctuations and difficulty in
forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified
personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-K and investors are cautioned
not to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
result of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments.
(2) GENERAL
Eight Dragons Company (Company), formerly known as Tahoe Pacific Corporation,
Pacific Holdings, Inc. and Ameri-First Financial Group, respectively, was
incorporated in the State of Nevada on September 27, 1996. On October 24, 2007,
the Company changed its state of incorporation from Delaware to Nevada by means
of a merger with and into Eight Dragons Company, a Nevada corporation formed on
September 26, 2007 solely for the purpose of effecting the reincorporation.
For periods prior to 2000, the Company participated in numerous unsuccessful
ventures and corporate name changes, as discussed in greater detail in previous
filings with the U. S. Securities and Exchange Commission. Since 2000, the
Company has had no operations, significant assets or liabilities.
The Company's current principal business activity is to seek a suitable reverse
acquisition candidate through acquisition, merger or other suitable business
combination method.
(3) RESULTS OF OPERATIONS
The Company had no revenue for either of the years ended December 31, 2010 or
2009, respectively.
General and administrative expenses for each of the years ended December 31,
2010 and 2009 were approximately $11,000 and $11,000, respectively. These
expenses were directly related to the maintenance of the corporate entity and
the preparation and filing of periodic reports pursuant to the Exchange Act. It
is anticipated that future expenditure levels will increase as the Company
intends to fully comply with it's periodic reporting requirements. Earnings per
share for the respective years ended December 31, 2010 and 2009 were $(0.25) and
$(0.25) based on the weighted-average shares issued and outstanding at the end
of each respective period.
It is anticipated that future expenditure levels will remain in line relatively
consistent until such time that the Company completes a business combination
transaction. Upon completion of a business combination transaction, it is
anticipated that the Company's expenses will increase significantly.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Exchange Act unless and until such time that the
Company begins meaningful operations.
14
(4) PLAN OF BUSINESS
GENERAL
The Company's current purpose is to seek, investigate and, if such investigation
warrants, merge or acquire an interest in business opportunities presented to it
by persons or companies who or which desire to seek the perceived advantages of
a Exchange Act registered corporation. As of the date of this registration
statement, the Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition, and neither the
Company's officer and director nor any promoter and affiliate has engaged in any
negotiations with any representatives of the owners of any business or company
regarding the possibility of a merger or acquisition between the Company and
such other company.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
MANAGEMENT
The Company is a shell corporation, and currently has no full-time employees.
Glenn A. Little is the Company's sole officer, director, and controlling
stockholder. All references herein to management of the Company are to Mr.
Little. Mr. Little, as president of the Company, has agreed to allocate a
limited portion of his time to the activities of the Company without
compensation. Potential conflicts may arise with respect to the limited time
commitment by Mr. Little and the potential demands of the Company's activities.
The amount of time spent by Mr. Little on the activities of the Company is not
predictable. Such time may vary widely from an extensive amount when reviewing a
target company to an essentially quiet time when activities of management focus
elsewhere, or some amount in between. It is impossible to predict with any
precision the exact amount of time Mr. Little will actually be required to spend
to locate a suitable target company. Mr. Little estimates that the business plan
of the Company can be implemented by devoting less than 4 hours per month but
such figure cannot be stated with precision.
SEARCH FOR BUSINESS OPPORTUNITIES
The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become reporting corporations and which are able to
provide audited financial statements. The Company does not propose to restrict
its search for investment opportunities to any particular geographical area or
industry, and may, therefore, engage in essentially any business, to the extent
of its limited resources. The Company's discretion in the selection of business
opportunities is unrestricted, subject to the availability of such
opportunities, economic conditions, and other factors. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity, and no assurance can be given that any acquisition, which does
occur, will be on terms that are favorable to the Company or its current
stockholders.
The Company may merge with a company that has retained one or more consultants
or outside advisors. In that situation, the Company expects that the business
opportunity will compensate the consultant or outside advisor. As of the date of
this filing, there have been no discussions, agreements or understandings with
any party regarding the possibility of a merger or acquisition between the
Company and such other company. Consequently, the Company is unable to predict
how the amount of such compensation would be calculated at this time.
The Company will not restrict its search to any specific kind of firm, but may
acquire a venture, which is in its preliminary or development stage, one which
is already in operation, or in a more mature stage of its corporate existence.
The acquired business may need to seek additional capital, may desire to have
its shares publicly traded, or may seek other perceived advantages which the
Company may offer. The Company does not intend to obtain funds to finance the
operation of any acquired business opportunity until such time as the Company
has successfully consummated the merger or acquisition transaction. There are no
loan arrangements or arrangements for any financing whatsoever relating to any
business opportunities.
15
EVALUATION OF BUSINESS OPPORTUNITIES
The analysis of business opportunities will be under the supervision of the
Company's sole officer and director, who is not a professional business analyst.
In analyzing prospective business opportunities, management will consider such
matters as available technical, financial and managerial resources; working
capital and other financial requirements; history of operations, if any;
prospects for the future; nature of present and expected competition; the
quality and experience of management services which may be available and the
depth of that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable, but which then may be
anticipated to impact the proposed activities of the Company; the potential for
growth or expansion; the potential for profit; the perceived public recognition
or acceptance of products, services, or trades; name identification; and other
relevant factors. In many instances, it is anticipated that the historical
operations of a specific business opportunity may not necessarily be indicative
of the potential for the future because of a variety of factors, including, but
not limited to, the possible need to expand substantially, shift marketing
approaches, change product emphasis, change or substantially augment management,
raise capital and the like. To the extent possible, the Company intends to
utilize written reports and personal investigation to evaluate the above
factors. Prior to making a decision to participate in a business opportunity,
the Company will generally request that it be provided with written materials
regarding the business opportunity containing as much relevant information as
possible, including, but not limited to, such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or service marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during the relevant periods; a description of present
and required facilities;, an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available at that time, unaudited
financial statements, together with reasonable assurance that audited financial
statements would be able to be produced within a required period of time; and
the like.
The Company is currently subject to the reporting requirements of the Exchange
Act. Under the Exchange Act, any merger or acquisition candidate will become
subject to the same reporting requirements of the Exchange Act as the Company
following consummation of any merger or acquisition. Thus, in the event the
Company successfully completes the acquisition of or merger with an operating
business entity, that business entity must provide audited financial statements
for at least two most recent fiscal years or, in the event the business entity
has been in business for less than two years, audited financial statements will
be required from the period of inception. Acquisition candidates that do not
have or are unable to obtain the required audited statements will not be
considered appropriate for acquisition.
Management believes that various types of potential merger or acquisition
candidates might find a business combination with the Company to be attractive.
These include acquisition candidates desiring to create a public market for
their shares in order to enhance liquidity for current stockholders, acquisition
candidates which have long-term plans for raising capital through public sale of
securities and believe that the possible prior existence of a public market for
their securities would be beneficial, and acquisition candidates which plan to
acquire additional assets through issuance of securities rather than for cash,
and believe that the possibility of development of a public market for their
securities will be of assistance in that process. Acquisition candidates, who
have a need for an immediate cash infusion, are not likely to find a potential
business combination with the Company to be an attractive alternative.
Nevertheless, the Company has not conducted market research and is not aware of
statistical data which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity. The Company is
unable to predict when it may participate in a business opportunity. It expects,
however, that the analysis of specific proposals and the selection of a business
opportunity may take several months or more. There can also be no assurances
that we are able to successfully pursue a business opportunity. In that event,
there is a substantial risk to the Company that failure to complete a business
combination will significantly restrict its business operation and force
management to cease operations and liquidate the Company.
(5) LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2010 and 2009, respectively, the Company had working capital of
$(1,148,000) and $(1,056,000), respectively.
On August 1, 2002, the Company issued a $740,000 note to Wilkerson Consulting,
Inc. (Wilkerson) as compensation to replace a guarantee related to a former
officer's debt. This note was unsecured and bore interest at 6% on unpaid
principal and 10% on matured unpaid principal. The note was payable on demand,
or if no demand was made, the entire principal amount and all accrued interest
was due and payable on July 31, 2006. On January 18, 2005, the Company and
Wilkerson entered into a Debt and Stock Purchase Agreement with Glenn A. Little
(Little) pursuant to which Little agreed to purchase the $740,000 in outstanding
debt against the Company and to purchase certain common stock of the Company
owned by Wilkerson for total cash consideration of $60,000. The note matured on
July 31, 2006 and no demand for payment has been made by Mr. Little.
16
The Company and its controlling stockholder and sole officer, Glenn A. Little,
have acknowledged that outside funds are necessary to support the corporate
entity and comply with the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended. Accordingly, Mr. Little agreed to lend the
Company up to $50,000 with a maturity period not to exceed two (2) years from
the initial funding date at an interest rate of 6.0% per annum. In May 2005, Mr.
Little advanced approximately $50,000 under this agreement, with an initial
maturity date in May 2007. During 2007, this agreement was modified to extend
the credit limit to $75,000 and the maturity date was extended to December 31,
2008. Through December 31, 2010 and 2009, an aggregate $110,050 and $101,050
have been advanced under this agreement. This note matured on December 31, 2008
and no demand for payment has been made by Mr. Little.
The following table is a summary of the notes payable to the Company's
controlling shareholder as of December 31, 2010 and 2009, respectively:
December 31, December 31,
2010 2009
-------- --------
Wilkerson note sold to Little $740,000 $740,000
Working capital note payable to Little 110,050 101,050
-------- --------
Total $850,050 $841,050
======== ========
There are no assurances that the Company will be able to either (1) consummate a
business combination transaction with a privately-owned business seeking to
become a public company; (2) if successful, achieve a level of revenues adequate
to generate sufficient cash flow from operations; or (3) obtain additional
financing through either private placement, public offerings and/or bank
financing necessary to support the Company's current working capital
requirements. To the extent that funds generated from any private placements,
public offerings and/or bank financing are insufficient to support the Company,
the Company will have to raise additional working capital. No assurance can be
given that additional financing will be available, or if available, will be on
terms acceptable to the Company. If adequate working capital is not available,
the Company may not renew its operations.
The Company's ultimate continued existence is dependent upon its ability to
generate sufficient cash flows from operations to support its daily operations
as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis.
The Company's articles of incorporation authorizes the issuance of up to
50,000,000 shares of preferred stock and 100,000,000 shares of common stock. The
Company's ability to issue preferred stock may limit the Company's ability to
obtain debt or equity financing as well as impede potential takeover of the
Company, which takeover may be in the best interest of stockholders. The
Company's ability to issue these authorized but unissued securities may also
negatively impact our ability to raise additional capital through the sale of
our debt or equity securities.
The Company anticipates future sales of equity securities to facilitate either
the consummation of a business combination transaction or to raise working
capital to support and preserve the integrity of the corporate entity. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
It is the belief of management and significant stockholders that they will
provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity. However, there is no legal obligation for
either management or significant stockholders to provide additional future
funding. Further, the Company is at the mercy of future economic trends and
business operations for the Company's majority stockholder to have the resources
available to support the Company. Should this pledge fail to provide financing,
the Company has not identified any alternative sources.
If no additional operating capital is received during the next twelve months,
the Company will be forced to rely on existing cash in the bank and upon
additional funds loaned by management and/or significant stockholders to
preserve the integrity of the corporate entity at this time. In the event, the
Company is unable to acquire advances from management and/or significant
stockholders, the Company's ongoing operations would be negatively impacted.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach our goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
The Company's Articles of Incorporation authorize the issuance of up to
50,000,000 shares of preferred stock and 100,000,000 shares of common stock. The
Company's ability to issue preferred stock may limit the Company's ability to
obtain debt or equity financing as well as impede potential takeover of the
Company, which takeover may be in the best interest of stockholders. The
17
Company's ability to issue these authorized but unissued securities may also
negatively impact our ability to raise additional capital through the sale of
our debt or equity securities.
In the event that insufficient working capital to maintain the corporate entity
and implement our business plan is not available, the Company's majority
stockholder intends to maintain the corporate status of the Company and provide
all necessary working capital support on the Company's behalf. However, no
formal commitments or arrangements to advance or loan funds to the Company or
repay any such advances or loans exist. There is no legal obligation for either
management or significant stockholders to provide additional future funding.
Further, the Company is at the mercy of future economic trends and business
operations for the Company's majority stockholder to have the resources
available to support the Company.
In such a restricted cash flow scenario, the Company would be unable to complete
its business plan steps, and would, instead, delay all cash intensive
activities. Without necessary cash flow, the Company may become dormant during
the next twelve months, or until such time as necessary funds could be raised in
the equity securities market.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach its goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
The Company's need for capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance that
the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no assurance
that sufficient funds will be available to the Company to allow it to cover the
expenses related to such activities.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.
(6) CRITICAL ACCOUNTING POLICIES
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
(GAAP). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
Our significant accounting policies are summarized in Note D of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
(7) EFFECT OF CLIMATE CHANGE LEGISLATION
The Company currently has no known or identified exposure to any current or
proposed climate change legislation which could negatively impact the Company's
operations or require capital expenditures to become compliant. Additionally,
any currently proposed or to-be-proposed-in-the-future legislation concerning
climate change activities, business operations related thereto or a publicly
perceived risk associated with climate change could, potentially, negatively
impact the Company's efforts to identify an appropriate target company which may
wish to enter into a business combination transaction with the Company.
18
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to financial risk, if any.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements begin on page F-1 of this document.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A - CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES. Our management, under the supervision and
with the participation of our Chief Executive and Financial Officer (Certifying
Officer), has evaluated the effectiveness of our disclosure controls and
procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of
the end of the period covered by this Annual Report. Disclosure controls and
procedures are controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Commission's rules and forms and include controls and
procedures designed to ensure that information we are required to disclose in
such reports is accumulated and communicated to management, including our
Certifying Officer, as appropriate, to allow timely decisions regarding required
disclosure. Based upon that evaluation, our Certifying Officer concluded that as
of such date, our disclosure controls and procedures were not effective to
ensure that the information required to be disclosed by us in our reports is
recorded, processed, summarized and reported within the time periods specified
by the SEC due to a weakness in our controls described below. However, our
Certifying Officer believes that the financial statements included in this
report fairly present, in all material respects, our financial condition,
results of operations and cash flows for the respective periods presented.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act.
Internal control over financial reporting is defined under the Exchange Act as a
process designed by, or under the supervision of, our Certifying Officer and
effected by our board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
-- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
-- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations
of our management and directors; and
-- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
19
Because of its inherent limitation, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluations of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate. Accordingly, even an effective
system of internal control over financial reporting will provide only reasonable
assurance with respect to financial statement preparation.
Management's assessment of the effectiveness of the Company's internal control
over financial reporting is as of the year ended December 31, 2010. We are
currently considered to be a shell company in as much as we have no current
operations, revenues or employees. Because we have only one officer and
director, the Company's internal controls are deficient for the following
reasons, (1) there are no entity level controls because there is only one person
serving in the dual capacity of sole officer and sole director, (2) there are no
segregation of duties as that same person approves, enters, and pays the
Company's bills, and (3) there is no separate audit committee. As a result, the
Company's internal controls have an inherent weakness which may increase the
risks of errors in financial reporting under current operations and accordingly
are deficient as evaluated against the criteria set forth in the Internal
Control - Integrated Framework issued by the committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation, our
management concluded that our internal controls over financial reporting were
not effective as of December 31, 2010.
This Annual Report does not include an attestation report of our registered
public accounting firm regarding our internal control over financial reporting,
pursuant to the current appropriate Laws and Regulations.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. There was no change in our
internal control over financial reporting that occurred during the quarter ended
December 31, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting which internal
controls will remain deficient until such time as the Company completes a merger
transaction or acquisition of an operating business at which time management
will be able to implement effective controls and procedures.
ITEM 9B - OTHER INFORMATION
Not applicable.
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Name Age Position Held and Tenure
---- --- ------------------------
Glenn A. Little 57 President, Chief Executive Officer Chief
Financial Officer and Director
The director named above will serve until the next annual meeting of the
Company's stockholders or until any successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's affairs on an
as needed basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely encompass less than four (4) hours per month. There are no agreements or
understandings for any officer or director to resign at the request of another
person, and none of the officers or directors are acting on behalf of, or will
act at the direction of, any other person.
BIOGRAPHICAL INFORMATION
GLENN A. LITTLE, age 57, has served as our sole officer and director since April
2004. Mr. Little is primarily responsible for implementing our business plan. He
is a graduate of The University of Florida, Gainesville (Bachelor of Science in
20
Business Administration) and the American Graduate School of International
Management (Master of Business Administration - International Management) and
was the principal of Little and Company Investment Securities (LITCO), a
registered Securities Broker/Dealer with an office in Midland, Texas from 1979
to 2010. Before founding LITCO, Mr. Little was a stockbroker with Howard, Weil,
Labouisse Friedrich in their New Orleans, Louisiana and Midland, Texas offices
and also worked for First National Bank of Commerce in New Orleans, Louisiana.
Mr. Little was appointed an Adjudicatory Official for the State Bar of Texas and
served in that capacity from 1997 through 2003.
Mr. Little currently serves as an officer and director of Eight Dragons Company
and Truewest Corporation, both Nevada corporations and reporting shell
corporations filing periodic reports with the SEC. Each of the afore-referenced
companies is current in the filing of their periodic reports with the SEC. Mr.
Little will devote as much of his time to our business affairs as may be
necessary to implement our business plan.
Since 1988, Mr. Little has been successful in the reactivation of various
inactive public companies, similar to the Company, upon his acquisition of a
controlling position in each entity. As demonstrated by the following list of
companies which consummated reverse merger transactions during the past five (5)
years where Mr. Little held comparable titles and duties to those he holds in
the Company, we believe that Mr. Little possesses the attributes, experience,
and qualifications necessary to effect the Company's stated business plan.
Furthermore, given Mr. Little's abilities and the Company's limited financial
resources, the Company has determined that it is in its best interests for Mr.
Little to serve as both the Company's principal executive officer as well as
Chairman of the Board of Directors. Since Mr. Little serves as the Company's
sole director, there is no designated lead director, and therefore, any and all
risk oversight and risk management matters are the responsibility of Mr. Little.
Mr. Little is no longer a controlling shareholder, officer or director of any of
the below listed entities and his involvement terminated upon the fulfillment of
the respective plan of operation involving a business combination transaction
with a private entity wishing to become publicly owned. In most instances, when
a business combination was transacted with one of these companies, that entity
was required to file a current Report on Form 8-K describing the transaction. We
refer the reader to the respective Form 8-K, if filed, for any of the companies
listed below for detailed information concerning the business combination
entered into by that company.
Year combination
transaction
Entity File/CIK # occurred
------ ---------- --------
Tomahawk Industries, Inc. 318299 2004
Boulder Acquisitions, Inc. 721693 2004
Basic Empire Corporation 1166389 2004
Fast Eddie Racing Stables, Inc. 770461 2005
Parallel Technologies, Inc. 710846 2005
Las Vegas Resorts Corp. 808011 2005
United National Film Corporation 842694 2007
Jade Mountain Corporation 1165527 2007
8888 Acquisition Corporation 1376866 2010
It is specifically noted that the relative success or failure of any of these
entities subsequent to Mr. Little's involvement in them is not an indication of
the possibility of success or failure of the Company upon the completion of it's
current plan of operations. Additional information about these companies can be
researched at www.sec.gov.
INDEMNIFICATION OF OFFICERS AND DIRECTORS.
We have the authority under the Nevada General Corporation Law to indemnify our
directors and officers to the extent provided for in such statute. Set forth
below is a discussion of Nevada law regarding indemnification which we believe
discloses the material aspects of such law on this subject. The Nevada law
provides, in part, that a corporation may indemnify a director or officer or
other person who was, is or is threatened to be made a named defendant or
respondent in a proceeding because such person is or was a director, officer,
employee or agent of the corporation, if it is determined that such person:
* conducted himself in good faith;
* reasonably believed, in the case of conduct in his official capacity
as a director or officer of the corporation, that his conduct was in
the corporation's best interest and, in all other cases, that his
conduct was at least not opposed to the corporation's best interests;
and
21
* in the case of any criminal proceeding, had no reasonable cause to
believe that his conduct was unlawful.
A corporation may indemnify a person under the Nevada law against judgments,
penalties, including excise and similar taxes, fines, settlement, unreasonable
expenses actually incurred by the person in connection with the proceeding. If
the person is found liable to the corporation or is found liable on the basis
that personal benefit was improperly received by the person, the indemnification
is limited to reasonable expenses actually incurred by the person in connection
with the proceeding, and shall not be made in respect of any proceeding in which
the person shall have been found liable for willful or intentional misconduct in
the performance of his duty to the corporation. The corporation may also pay or
reimburse expenses incurred by a person in connection with his appearance as
witness or other participation in a proceeding at a time when he is not a named
defendant or respondent in the proceeding.
Our Articles of Incorporation provides that none of our directors shall be
personally liable to us or our stockholders for monetary damages for an act or
omission in such directors' capacity as a director; provided, however, that the
liability of such director is not limited to the extent that such director is
found liable for (a) a breach of the directors' duty of loyalty to us or our
stockholders, (b) an act or omission not in good faith that constitutes a breach
of duty of the director to us or an act or omission that involves intentional
misconduct or a knowing violation of the law, (c) a transaction from which the
director received an improper benefit, whether or not the benefit resulted from
an action taken within the scope of the director's office, or (d) an act or
omission for which the liability of the director is expressly provided under
Nevada law. Limitations on liability provided for in our Articles of
Incorporation do not restrict the availability of non-monetary remedies and do
not affect a director's responsibility under any other law, such as the federal
securities laws or state or federal environmental laws.
We believe that these provisions will assist us in attracting and retaining
qualified individuals to serve as executive officers and directors. The
inclusion of these provisions in our Articles of Incorporation may have the
effect of reducing a likelihood of derivative litigation against our directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of case, even though such an action,
if successful, might otherwise have benefitted us or our stockholders.
Our Bylaws provide that we will indemnify our directors to the fullest extent
provided by Nevada General Corporation Law and we may, if and to the extent
authorized by our board of directors, so indemnify our officers and other
persons whom we have the power to indemnify against liability, reasonable
expense or other matters.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by such director, officer,
or controlling person in connection with the securities being registered, we
will (unless in the opinion of our counsel the matter has been settled by
controlling precedent) submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors
and person who own more than 10% of our common stock to file reports regarding
ownership of and transactions in our securities with the Commission and to
provide us with copies of those filings. Based solely on our review of the
copies received by or a written representation from certain reporting persons we
believe that during fiscal year ended December 31, 2008, we believe that all
eligible persons are in compliance with the requirements of Section 16(a).
CONFLICTS OF INTEREST
The sole officer of the Company will not devote more than a small portion of his
time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of the
officer's other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
The officer, director and principal stockholder of the Company may actively
negotiate for the purchase of a portion of their common stock as a condition to,
or in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium may be paid by the purchaser in
conjunction with any sale of shares by the Company's officer, director and
principal stockholder made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be
22
paid to the Company's sole officer and director to acquire his shares creates a
conflict of interest for him and may compromise his state law fiduciary duties
to the Company's other stockholders. In making any such sale, the Company's sole
officer and director may consider his own personal pecuniary benefit rather than
the best interests of the Company and the Company's other stockholders, and the
other stockholders are not expected to be afforded the opportunity to approve or
consent to any particular buy-out transaction involving shares held by Company
management.
The Company has adopted a policy under which any consulting or finders fee that
may be paid to a third party for consulting services to assist management in
evaluating a prospective business opportunity would be paid in stock rather than
in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether, or in what amount, such
stock issuance might be made.
It is not currently anticipated that any salary, consulting fee, or finders fee
shall be paid to any of the Company's directors or executive officers, or to any
other affiliate of the Company except as described under Executive Compensation
above.
Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
INVOLVEMENT ON CERTAIN MATERIAL LEGAL PROCEEDINGS DURING THE PAST FIVE (5) YEARS
(1) No director, officer, significant employee or consultant has been
convicted in a criminal proceeding, exclusive of traffic violations or
is subject to any pending criminal proceeding.
(2) No bankruptcy petitions have been filed by or against any business or
property of any director, officer, significant employee or consultant
of the Company nor has any bankruptcy petition been filed against a
partnership or business association where these persons were general
partners or executive officers.
(3) No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise
limited from involvement in any type of business, securities or
banking activities.
(4) No director, officer or significant employee has been convicted of
violating a federal or state securities or commodities law.
CODE OF ETHICS
The Company has not adopted a code of ethics. Since the Company has no employees
and one person serving as both sole director and sole executive and financial
officer, a code of ethics would have no practical benefit due to the lack of any
meaningful reporting or accountability process.
ITEM 11 - EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
No officer or director has received any compensation from us. Until we
consummate a business combination, it is not anticipated that any officer or
director will receive compensation from us.
We have no stock option, retirement, pension, or profit-sharing programs for the
benefit of directors, officers or other employees.
Our board of directors appoints our executive officers to serve at the
discretion of the board. Glenn A. Little is our sole officer and director. Our
directors receive no compensation from us for serving on the board. Until we
consummate a business combination, we do not intend to reimburse our officers or
directors for travel and other expenses incurred in connection with attending
the board meetings or for conducting business activities.
23
EXECUTIVE COMPENSATION
Glenn A. Little has received no compensation from us nor have we accrued any
cash or non-cash compensation for his services since he was elected as an
officer and director. The current management and oversight of the Company
requires less than five (5) hours per month. As the Company's sole officer and
director is engaged in other full-time income producing activities, the
Company's sole officer or director has received any compensation from the
Company. In future periods, subsequent to the consummation of a business
combination transaction, the Company anticipates that it will pay compensation
to its officer(s) and/or director(s).
We do not have any employment or consulting agreements with any parties nor do
we have a stock option plan or other equity compensation plans.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary Bonus Awards Awards sation Earnings sation Totals
------------ ---- ------ ----- ------ ------ ------ -------- ------ ------
Glenn A.
Little,
Principal 2010 $0 $0 $0 $0 $0 $0 $0 $0
Executive 2009 $0 $0 $0 $0 $0 $0 $0 $0
Officer 2008 $0 $0 $0 $0 $0 $0 $0 $0
The Company has no other executive compensation issues which would require the
inclusion of other mandated table disclosures.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this Annual Report, the number
of shares of Common Stock owned of record and beneficially by executive
officers, directors and persons who hold 5% or more of the outstanding Common
Stock of the Company. Also included are the shares held by all executive
officers and directors as a group.
Shares Beneficially Owned (1)
-------------------------------------
Name and address (2) Number of Shares Percentage (3)
---------------- ---------------- --------------
Glenn A. Little 290,500 80.2%
211 West Wall
Midland, Texas 79701
All Directors and 290,500 80.2%
Executive Officers (1 person)
----------
(1) On December 31, 2010, there were 362,200 shares of our common stock
outstanding and no shares of preferred stock issued and outstanding. We
have no outstanding stock options or warrants.
(2) Under applicable Commission rules, a person is deemed the "beneficial
owner" of a security with regard to which the person directly or
indirectly, has or shares (a) the voting power, which includes the power to
vote or direct the voting of the security, or (b) the investment power,
which includes the power to dispose, or direct the disposition, of the
security, in each case irrespective of the person's economic interest in
the security. Under Commission rules, a person is deemed to beneficially
own securities which the person has the right to acquire within 60 days
through the exercise of any option or warrant or through the conversion of
another security.
(3) In determining the percent of voting stock owned by a person on December
31, 2010 (a) the numerator is the number of shares of common stock
beneficially owned by the person, including shares the beneficial ownership
of which may be acquired within 60 days upon the exercise of options or
warrants or conversion of convertible securities, and (b) the denominator
is the total of (i) the 362,200 shares of common stock outstanding on
December 31, 2008, and (ii) any shares of common stock which the person has
the right to acquire within 60 days upon the exercise of options or
24
warrants or conversion of convertible securities. Neither the numerator nor
the denominator includes shares which may be issued upon the exercise of
any other options or warrants or the conversion of any other convertible
securities.
CHANGES IN CONTROL
There are currently no arrangements which may result in a change in control of
the Company.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The Company currently maintains a mailing address at 211 West Wall Street,
Midland, Texas 79701. The Company's telephone number there is (432) 682-1761.
Other than this mailing address, the Company does not currently maintain any
other office facilities, and does not anticipate the need for maintaining office
facilities at any time in the foreseeable future. The Company pays no rent or
other fees for the use of the mailing address as these offices are used
virtually full- time by other businesses of the Company's sole officer and
director.
CONFLICTS OF INTEREST
The sole officer of the Company will not devote more than a small portion of his
time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of the
officer's other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
The officer, director and principal stockholder of the Company may actively
negotiate for the purchase of a portion of their common stock as a condition to,
or in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium may be paid by the purchaser in
conjunction with any sale of shares by the Company's officer, director and
principal stockholder made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be
paid to the Company's sole officer and director to acquire his shares creates a
conflict of interest for him and may compromise his state law fiduciary duties
to the Company's other stockholders. In making any such sale, the Company's sole
officer and director may consider his own personal pecuniary benefit rather than
the best interests of the Company and the Company's other stockholders, and the
other stockholders are not expected to be afforded the opportunity to approve or
consent to any particular buy-out transaction involving shares held by Company
management.
The Company may adopt a policy under which any consulting or finders fee that
may be owed to a third party for services to assist management in evaluating a
prospective business opportunity could be paid in stock rather than in cash. Any
such issuance of stock would be made on an ad hoc basis. Accordingly, the
Company is unable to predict whether, or in what amount, such stock issuance
might be made.
It is not currently anticipated that any salary, consulting fee, or finders fee
shall be paid to any of the Company's directors or executive officers, or to any
other affiliate of the Company except as described under Executive Compensation
above.
Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
DIRECTOR INDEPENDENCE
Pursuant to the Company's current structure of having a sole director, who is
also the Company's sole officer and controlling shareholder, the Company has no
independent directors, as defined in Rule 4200 (a) (15) of the NASDAQ
Marketplace Rules.
25
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
The Company paid or accrued the following fees in each of the prior two fiscal
years to its principal accountant, S. W. Hatfield, CPA of Dallas, Texas:
Year ended Year ended
December 31, December 31,
2010 2009
------ ------
1. Audit fees $5,713 $6,950
1. Audit-related fees -- --
2. Tax fees 235 800
3. All other fees -- --
------ ------
Totals $5,948 $7,750
====== ======
We have considered whether the provision of any non-audit services, currently or
in the future, is compatible with S. W. Hatfield, CPA maintaining its
independence and have determined that these services do not compromise their
independence.
Financial Information System Design and Implementation: S. W. Hatfield, CPA did
not charge the Company any fees for financial information system design and
implementation fees.
The Company has no formal audit committee. However, the entire Board of
Directors (Board) is the Company's defacto audit committee. In discharging its
oversight responsibility as to the audit process, the Board obtained from the
independent auditors a formal written statement describing all relationships
between the auditors and the Company that might bear on the auditors'
independence as required by the appropriate Professional Standards issued by the
Public Company Accounting Oversight Board, the U. S. Securities and Exchange
Commission and/or the American Institute of Certified Public Accountants. The
Board discussed with the auditors any relationships that may impact their
objectivity and independence, including fees for non-audit services, and
satisfied itself as to the auditors' independence. The Board also discussed with
management, the internal auditors and the independent auditors the quality and
adequacy of the Company's internal controls.
The Company's principal accountant, S. W. Hatfield, CPA, did not engage any
other persons or firms other than the principal accountant's full-time,
permanent employees.
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
Number
------
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
(Financial statements follow on next page)
26
EIGHT DRAGONS COMPANY
CONTENTS
Page
----
REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM F-2
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 2010 and 2009 F-3
Statements of Operations and Comprehensive Loss
for the years ended December 31, 2010 and 2009 F-4
Statement of Changes in Shareholders' Equity
for the years ended December 31, 2010 and 2009 F-5
Statements of Cash Flows
for the years ended December 31, 2010 and 2009 F-6
Notes to Financial Statements F-7
F-1
REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Eight Dragons Company
We have audited the accompanying balance sheets of Eight Dragons Company (a
Nevada corporation) as of December 31, 2010 and 2009 and the related statements
of operations and comprehensive loss, changes in shareholders' equity (deficit)
and cash flows for the each of the two years ended December 31, 2010 and 2009,
respectively. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Marketing Acquisition
Corporation as of December 31, 2010 and 2009 and the results of its operations
and its cash flows for the each of the two years ended December 31, 2010 and
2009, respectively, in conformity with generally accepted accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note C to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note C. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
/s/ S. W. Hatfield, CPA
-----------------------------------
S. W. HATFIELD, CPA
Dallas, Texas
January 26, 2011
F-2
EIGHT DRAGONS COMPANY
BALANCE SHEETS
December 31, 2010 and 2009
December 31, December 31,
2010 2009
------------ ------------
ASSETS
CURRENT ASSETS
Cash on hand and in bank $ 208 $ 1,934
------------ ------------
TOTAL CURRENT ASSETS 208 1,934
------------ ------------
TOTAL ASSETS $ 208 $ 1,934
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ -- $ --
Notes payable to controlling stockholder 850,050 841,050
Accrued interest payable to controlling stockholder 297,976 217,570
------------ ------------
TOTAL CURRENT LIABILITIES 1,148,326 1,058,620
------------ ------------
LONG-TERM LIABILITIES -- --
------------ ------------
TOTAL LIABILITIES 1,148,326 1,058,620
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock - $0.0001 par value
50,000,000 shares authorized
None issued and outstanding -- --
Common stock - $0.0001 par value
100,000,000 shares authorized
362,200 shares issued and outstanding, respectively 36 36
Additional paid-in capital 31,690,302 31,690,302
Accumulated deficit (32,838,456) (32,747,024)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,148,118) (1,056,686)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 208 $ 1,934
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
EIGHT DRAGONS COMPANY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Years ended December 31, 2010 and 2009
Year ended Year ended
December 31, December 31,
2010 2009
-------- --------
REVENUES $ -- $ --
-------- --------
EXPENSES
General and administrative expenses 11,026 10,995
-------- --------
INCOME (LOSS) FROM OPERATIONS (11,026) (10,995)
OTHER INCOME (EXPENSE)
Interest expense (80,406) (79,887)
Interest income -- 7
-------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (91,432) (90,865)
PROVISION FOR INCOME TAXES -- --
-------- --------
NET LOSS (91,432) (90,865)
OTHER COMPREHENSIVE INCOME -- --
-------- --------
COMPREHENSIVE LOSS $(91,432) $(90,865)
======== ========
Earnings per share of common stock outstanding computed
on net loss - basic and fully diluted $ (0.25) $ (0.25)
======== ========
Weighted-average number of shares outstanding -
basic and fully diluted 362,200 362,200
======== ========
The accompanying notes are an integral part of these financial statements.
F-4
EIGHT DRAGONS COMPANY
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 2010 and 2009
Common Stock Additional
---------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
BALANCES AT JANUARY 1, 2009 362,200 $ 36 $ 31,690,302 $(32,656,159) $ (965,821)
Net loss for the year -- -- -- (90,865) (90,865)
-------- ------- ------------ ------------ ------------
BALANCES AT DECEMBER 31, 2009 362,200 36 31,690,302 (32,747,024) (1,056,686)
Net loss for the year -- -- -- (91,432) (91,432)
-------- ------- ------------ ------------ ------------
BALANCES AT DECEMBER 31, 2010 362,200 $ 36 $ 31,690,302 $(32,838,456) $ (1,148,118)
======== ======= ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
EIGHT DRAGONS COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31, 2010 and 2009
Year ended Year ended
December 31, December 31,
2010 2009
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $(91,432) $(90,865)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization -- --
Increase (Decrease) in
Accounts payable - trade 300 --
Accrued interest payable 80,406 79,877
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (10,726) (10,988)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock -- --
Proceeds from loan from stockholder/officer 9,000 8,000
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,000 8,000
-------- --------
INCREASE (DECREASE) IN CASH (1,726) (2,988)
Cash at beginning of period 1,934 4,922
-------- --------
CASH AT END OF PERIOD $ 208 $ 1,934
======== ========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID
Interest paid for the year $ -- $ --
======== ========
Income taxes paid for the year $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements.
F-6
EIGHT DRAGONS COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2010 and 2009
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Eight Dragons Company (Company), formerly known as Tahoe Pacific Corporation,
Pacific Holdings, Inc. and Ameri-First Financial Group, respectively, was
incorporated in the State of Nevada on September 27, 1996.
On October 24, 2007, the Company changed its state of incorporation from
Delaware to Nevada by means of a merger with and into Eight Dragons Company, a
Nevada corporation formed on September 26, 2007 solely for the purpose of
effecting the reincorporation. The merger was consummated through an exchange of
100 shares in the Nevada corporation for each share then issued and outstanding
in the Delaware corporation. The Articles of Incorporation and Bylaws of the
Nevada corporation are the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation modified the Company's capital
structure to allow for the issuance of up to 50,000,000 shares of $0.0001 par
value common stock and up to 10,000,000 shares of $0.0001 par value preferred
stock.
For periods prior to 2000, the Company participated in numerous unsuccessful
ventures and corporate name changes, as discussed in greater detail in previous
filings with the U. S. Securities and Exchange Commission. Since 2000, the
Company has had no operations, significant assets or liabilities.
The Company's current business plan is to locate and combine with an existing,
privately-held company which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
NOTE B - PREPARATION OF FINANCIAL STATEMENTS
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
a year-end of December 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented.
NOTE C - GOING CONCERN UNCERTAINTY
The Company has no significant assets or operating activity as of September 30,
2009.
There are no assurances that the Company will be able to either (1) consummate a
business combination transaction with a privately-owned business seeking to
become a public company; (2) if successful, achieve a level of revenues adequate
to generate sufficient cash flow from operations; or (3) obtain additional
financing through either private placement, public offerings and/or bank
financing necessary to support the Company's current working capital
requirements. To the extent that funds generated from any private placements,
public offerings and/or bank financing are insufficient to support the Company,
the Company will have to raise additional working capital. No assurance can be
given that additional financing will be available, or if available, will be on
terms acceptable to the Company. If adequate working capital is not available,
the Company may not renew its operations.
F-7
EIGHT DRAGONS COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2010 and 2009
NOTE C - GOING CONCERN UNCERTAINTY - CONTINUED
The Company's ultimate continued existence is dependent upon its ability to
generate sufficient cash flows from operations to support its daily operations
as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis.
The Company's articles of incorporation authorizes the issuance of up to
50,000,000 shares of preferred stock and 100,000,000 shares of common stock. The
Company's ability to issue preferred stock may limit the Company's ability to
obtain debt or equity financing as well as impede potential takeover of the
Company, which takeover may be in the best interest of stockholders. The
Company's ability to issue these authorized but unissued securities may also
negatively impact our ability to raise additional capital through the sale of
our debt or equity securities.
The Company anticipates future sales of equity securities to facilitate either
the consummation of a business combination transaction or to raise working
capital to support and preserve the integrity of the corporate entity. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
It is the belief of management and significant stockholders that they will
provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity. However, there is no legal obligation for
either management or significant stockholders to provide additional future
funding. Further, the Company is at the mercy of future economic trends and
business operations for the Company's majority stockholder to have the resources
available to support the Company. Should this pledge fail to provide financing,
the Company has not identified any alternative sources.
If no additional operating capital is received during the next twelve months,
the Company will be forced to rely on existing cash in the bank and upon
additional funds loaned by management and/or significant stockholders to
preserve the integrity of the corporate entity at this time. In the event, the
Company is unable to acquire advances from management and/or significant
stockholders, the Company's ongoing operations would be negatively impacted.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach our goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. CASH AND CASH EQUIVALENTS
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. INCOME TAXES
The Company files income tax returns in the United States of America and
may file, as applicable and appropriate, various state(s). With few
exceptions, the Company is no longer subject to U.S. federal, state and
local, as applicable, income tax examinations by regulatory taxing
authorities for years before 2005. The Company does not anticipate any
examinations of returns filed since 2005.
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 2010 and 2009, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences generally represent differences in the recognition of
assets and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
F-8
EIGHT DRAGONS COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2010 and 2009
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
2. INCOME TAXES - CONTINUED
The Company has adopted the provisions required by the Income Taxes topic
of the FASB Accounting Standards Codification. The Codification Topic
requires the recognition of potential liabilities as a result of
management's acceptance of potentially uncertain positions for income tax
treatment on a "more-likely-than-not" probability of an assessment upon
examination by a respective taxing authority. As a result of the
implementation of Codification's Income Tax Topic, the Company did not
incur any liability for unrecognized tax benefits.
3. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
At December 31, 2010 and 2009, and subsequent thereto, the Company had no
outstanding common stock equivalents.
4. RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flows.
NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
F-9
EIGHT DRAGONS COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2010 and 2009
NOTE F - NOTES PAYABLE TO STOCKHOLDER
On August 1, 2002, the Company issued a $740,000 note to Wilkerson Consulting,
Inc. (Wilkerson) as compensation to replace a guarantee related to a former
officer's debt. This note was unsecured and bore interest at 6% on unpaid
principal and 10% on matured unpaid principal. The note was payable on demand,
or if no demand was made, the entire principal amount and all accrued interest
was due and payable on July 31, 2006. On January 18, 2005, the Company and
Wilkerson entered into a Debt and Stock Purchase Agreement with Glenn A. Little
(Little) pursuant to which Little agreed to purchase the $740,000 in outstanding
debt against the Company and to purchase certain common stock of the Company
owned by Wilkerson for total cash consideration of $60,000. The note matured on
July 31, 2006 and no demand for payment has been made by Mr. Little.
The Company and its controlling stockholder and sole officer, Glenn A. Little,
have acknowledged that outside funds are necessary to support the corporate
entity and comply with the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended. Accordingly, Mr. Little agreed to lend the
Company up to $50,000 with a maturity period not to exceed two (2) years from
the initial funding date at an interest rate of 6.0% per annum. In May 2005, Mr.
Little advanced approximately $50,000 under this agreement, with an initial
maturity date in May 2007. During 2007, this agreement was modified to extend
the credit limit to $75,000 and the maturity date was extended to December 31,
2008. Through December 31, 2010 and 2009, an aggregate $110,050 and $101,050
have been advanced under this agreement. This note matured on December 31, 2008
and no demand for payment has been made by Mr. Little. It is the intent of Mr.
Little and the Company to extend the maturity date of this note to a future
date.
The following table is a summary of the notes payable to the Company's
controlling shareholder as of December 31, 2010 and 2009, respectively:
December 31, December 31,
2010 2009
-------- --------
Wilkerson note sold to Little $740,000 $740,000
Working capital note payable to Little 110,050 101,050
-------- --------
Total $850,050 $841,050
======== ========
NOTE G - INCOME TAXES
The components of income tax (benefit) expense for each of the years ended
December 31, 2010 and 2009, are as follows:
Year ended Year ended
December 31, December 31,
2010 2009
------ ------
Federal:
Current $ -- $ --
Deferred -- --
------ ------
-- --
------ ------
State:
Current -- --
Deferred -- --
------ ------
-- --
------ ------
Total $ -- $ --
====== ======
F-10
EIGHT DRAGONS COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2010 and 2009
NOTE G - INCOME TAXES - CONTINUED
As a result of a 2005 change in control, the Company has a net operating loss
carryforward of approximately $500,000 for Federal income tax purposes. The
amount and availability of any future net operating loss carryforwards may be
subject to limitations set forth by the Internal Revenue Code. Factors such as
the number of shares ultimately issued within a three year look-back period;
whether there is a deemed more than 50 percent change in control; the applicable
long-term tax exempt bond rate; continuity of historical business; and
subsequent income of the Company all enter into the annual computation of
allowable annual utilization of the carryforwards.
The Company's income tax expense (benefit) for each of the years ended December
31, 2010 and 2009, respectively, differed from the statutory federal rate of 34
percent as follows:
Year ended Year ended
December 31, December 31,
2010 2009
-------- --------
Statutory rate applied to income before income taxes $(31,000) $(31,000)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for deferred tax asset
and application of net operating loss carryforward 31,000 31,000
-------- --------
Income tax expense $ -- $ --
======== ========
Temporary differences, which consist principally of net operating loss
carryforwards, statutory deferrals of expenses for organizational costs and
statutory differences in the depreciable lives for property and equipment,
between the financial statement carrying amounts and tax bases of assets and
liabilities give rise to deferred tax assets and/or liabilities, as appropriate.
As of December 31, 2010 and 2009, respectively, the deferred tax asset is as
follows:
December 31, December 31,
2010 2009
-------- --------
Deferred tax assets
Net operating loss carryforwards $185,000 $154,000
Less valuation allowance (185,000) (154,000)
-------- --------
Net Deferred Tax Asset $ -- $ --
======== ========
During the years ended December 31, 2010 and 2009, respectively, the valuation
allowance for the deferred tax asset increased by approximately $31,000 and
$31,000.
NOTE H - SUBSEQUENT EVENTS
Management has evaluated all activity of the Company through January 26, 2011
(the issue date of the financial statements) and concluded that no subsequent
events have occurred that would require recognition in the financial statements
or disclosure in the notes to financial statements.
(Signatures follow on next page)
F-11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EIGHT DRAGONS COMPANY
Dated: January 27, 2011 /s/ Glenn A. Little
---------------------------------------
Glenn A. Little
President, Chief Executive Officer
Chief Financial Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates as indicated.
Dated: January 27, 2011 /s/ Glenn A. Little
---------------------------------------
Glenn A. Little
President, Chief Executive Officer
Chief Financial Officer and Director
38