UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
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(Mark one)
X Annual Report Under Section 13 or 15(d) of The Securities Exchange Act
------- of 1934
For the annual period ended April 30, 2003
Transition Report Under Section 13 or 15(d) of The Securities Exchange
------- Act of 1934
For the transition period from
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Commission File Number: 0-9483
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Tomahawk Industries, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 95-3502207
(State of incorporation) (IRS Employer ID Number)
211 West Wall Street, Midland, Texas 79701
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(Address of principal executive offices)
(915) 682-1761 (Issuer's
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telephone number)
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Securities registered under Section 12 (b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock $.001 par value
Check whether the issuer has (1) filed all reports required to be files 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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended April 30, 2003, was $-0-.
As of May 9, 2003, the aggregate market value of the Company's common Stock held
by nonaffiliates (approximately 16,637,228 shares) was $183,009, based on a
$0.011 best bid.
As of May 15, 2003, there were 56,637,228 shares of Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format : Yes No X
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TABLE OF CONTENTS
Page
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Part I
Item 1. Description of Business 3
Item 2. Description of Property 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
Item 5. Market for Company's Common Stock and Related
Stockholders Matters 12
Item 6. Management's Discussion and Analysis or Plan of Operation 13
Item 7. Index to Financial Statements F-1
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 15
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 15
Item 10. Executive Compensation 16
Item 11. Security Ownership of Certain Beneficial Owners and Management 16
Item 12. Certain Relationships and Related Transactions 17
Item 13. Exhibits and Reports on 8-K 17
Item 14. Controls and Procedures 17
Signatures 18
Certifications pursuant to Sarbanes-Oxley Act of 2002 19
2
Caution Regarding Forward-Looking Information
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Certain statements contained in this quarterly 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; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-KSB 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 - Description of Business
Tomahawk Industries, Inc., formerly Tomahawk Oil and Minerals, Inc., ("the
Company") was incorporated under the laws of Nevada on May 13, 1980 and filed a
Form S-2 on September 19, 1980. From inception through 1988 the Company was
engaged in oil and gas exploration. Beginning in 1984, the Company entered the
business of installing energy recovery and energy savings devices through a then
wholly-owned subsidiary. In July 1987, the Company filed for protection under
Chapter 11 of the U.S. Bankruptcy Code and operated as debtor-in-possession. The
petition for bankruptcy protection was denied and the Company ceased all
operations and abandoned all net assets remaining by April 30, 1988.
Accordingly, the Company has effectively had no operations, assets or
liabilities since its fiscal year ending April 30, 1988.
On August 2, 2002, the Company announced, in a Current Report on Form 8-K, that
it had entered into an Agreement and Plan of Reorganization, (Reorganization
Agreement) which sets forth the terms and conditions of a proposed reverse
merger business combination transaction between the Company and Cryotherm, Inc.
(a privately-owned Delaware corporation) (CRYO). The consummation of the
Reorganization Agreement was subject to various conditions, including the
approval by the CRYO stockholders, the receipt of required regulatory approvals,
where appropriate and applicable, and the completion of due diligence by all
parties to the proposed transaction. During November 2002, the parties to this
proposed agreement agreed to terminate the proposed Reorganization Agreement.
The Company intends to continue in it's compliance with the periodic reporting
requirements of the Securities Exchange Act of 1934 and to seek to complete a
business acquisition transaction.
The Company may be referred to as a shell corporation and once trading on the
NASD Bulletin Board, a trading and 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) whereby the shareholders of the private
Company become the majority of the shareholders of the combined Company. 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 Company.
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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.
Prior to the effective date of this registration statement, 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. (See Investigation
and Selection of Business Opportunities). 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 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
(See Form of Acquisition, below, and Risk Factors, The Company, Lack of
Continuity of Management). 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
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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
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 (See Management). 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,
5
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, 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 (See Risk Factors The Company Regulations of
Penny Stocks).
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,
6
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. (See Risk Factors Regulation of Penny Stocks)
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.
7
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,
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.
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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.
Risk Factors
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Conflicts of Interest. Certain conflicts of interest exist between the Company
and its officers and directors. They have other business interests to which they
currently devote attention, and are expected to continue to do so. As a result,
conflicts of interest may arise that can be resolved only through their exercise
of judgement in a manner which is consistent with their fiduciary duties to the
Company. (See Management, Conflicts of Interest.)
It is anticipated that the Company's principal shareholders 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 shareholders may consider
their own personal pecuniary benefit rather than the best interest of other
Company shareholders. Depending upon the nature of a proposed transaction,
Company shareholders other than the principal shareholders 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 shareholders. However, 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
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.
Regulation of Penny Stocks. The Company's securities, when available for trading
will be subject to a Securities and Exchange Commission rule that impose special
sales practice requirements upon broker-dealers who sell such securities to
persons other than established customers or accredited investors. For purpose of
the rule, the phrase accredited investor means, in general terms, institutions
with assets in excess of $5,000,000, or individuals having a net worth in excess
of $1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker dealer must make special suitability determination for the
purchaser and receive the purchasers written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of broker-dealers
ability of broker-dealers to sell the Company's securities and ability of also
may affect the ability of purchasers of the Company's securities to sell such
securities in any market that might develop therefor.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate penny stocks. Such rules include Rule 3a51-1 under the
Securities Act of 1933, an Rules 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and
15g- 7 under the Securities Exchange Act of 1934, as amended. Because the
securities of the Company may constitute penny stocks within the meaning of the
rules, the rules would apply to the Company and to its securities. The rules may
further affect the ability of the Company's shareholders to sell their shares in
any public market, which might develop.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years form 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)
9
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 form being established with respect to the
Company's securities.
No Operating History. The Company has no operating history, revenues from
operations or assets. The Company faces all of the risks of a new business and
the special risks inherent in the investigation, acquisition, or involvement in
a new business opportunity. The Company must be regarded as a new or start-up
venture with all of the unforeseen costs, expenses, problems, and difficulties
to which such ventures are subject.
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.
Possible Business Not Identified and Highly Risky. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity. As a result, it is only able to make general disclosures concerning
the risks and hazards of acquiring a business opportunity, rather than providing
disclosure with respect to specific risks and hazards relating to a particular
business opportunity. As a general matter, prospective investors can expect any
potential business opportunity to be quite risky.
Type of Business Acquired. The type of business to be acquired may be one that
desires to avoid effecting its own public offering an the accompanying expense,
delays, uncertainties, and federal and state requirements which purport to
protect investors. 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.
Impracticability of Exhaustive Investigation. The Company's limited funds and
lack of full-time management will make it impracticable to conduct a complete
and exhaustive investigation and analysis of a business opportunity before the
Company commits its capital or other resources thereto. Management decisions,
therefore, will likely be made without detailed feasibility studies, independent
analysis, market surveys and the like which, if the Company had more funds
available to it, would be desirable. The Company will be particularly dependent
in making decisions upon information provided by the promoter, owner, sponsor,
or others associated with the business opportunity seeking the Company's
participation. A significant portion of the Company's available funds may be
expended for investigative expenses and other expenses related to preliminary
aspects of completing an acquisition transaction, whether or not any business
opportunity investigated is eventually acquired.
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.
Need for Audited Financial Statements. The Company will require audited
financial statements from any business that it proposes to acquire. Since the
Company will be subject to the reporting provisions of the Securities Exchange
Act of 1934, as amended (the Exchange Act), it will be required to include
audited financial statements in its periodical reports for any existing business
it may acquire. In addition, the lack of audited financial statements would
prevent the securities of the Company from becoming eligible for listing on
NASDAQ, the automated quotation system sponsored by the Association of
Securities Dealers, Inc., or on any existing stock exchange. Moreover, the lack
of such financial statements is likely to discourage broker-dealers from
becoming or continuing to serve as market makers in the securities of the
Company. Finally, without audited financial statements, the Company would almost
certainly be unable to offer securities under a registration statement pursuant
to the Securities Act of 1933, and the ability of the Company to raise capital
would be significantly limited. Consequently, acquisitions prospects that do not
have, or are unable to provide reasonable assurances that they will be able to
obtain, the required audited statements would not be considered by the Company
to be appropriate for acquisition.
10
Other Regulation. An acquisition made by the Company may be of a business that
is subject to regulation or licensing by federal, state, or local authorities.
Compliance with such regulations and licensing can be expected to be a time-
consuming, expensive process and may limit other investment opportunities of the
Company.
Dependence upon Management; Limited Participation of Management. The Company
will be entirely dependant upon the experience of its officers and directors in
seeking, investigating, and acquiring a business and in making decisions
regarding the Company's operations. It is possible that, from time to time, the
inability of such persons to devote their full time attention to the Because
investors will not be able to evaluate the merits of possible future business
acquisitions by the Company, they should critically assess the information
concerning the Company's officers and directors. (See Management.)
Lack of Continuity in Management. The Company does not have an employment
agreement with any of its officers or directors, and as a result, there is no
assurance that they will continue to manage the Company in the future. In
connection with acquisition of a business opportunity, it is likely the current
officers and directors of the Company may resign. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
Indemnification of Officers and Directors. The Company's By-Laws provide for the
indemnification of its, directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such persons promise to repay the Company therefor if
it is ultimately determined that any such person shall not have been entitled to
indemnification. This indemnification policy could result in substantial
expenditures by the Company, which it may be unable to recoup.
Dependence upon Outside Advisors. To supplement the business experience of its
officers and directors, 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 officers, without
any input by shareholders. 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 officers of the Company consider it
necessary to hire outside advisors, they may elect to hire persons who are
affiliates, if those affiliates are able to provide the required services.
Leveraged Transactions. There is a possibility that any acquisition of a
business opportunity by the Company may be leveraged, i.e. the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
Competition. The search for potentially profitable business opportunities is
intensely competitive. The Company expects to be at a disadvantage when
competing with many firms that have substantially greater financial and
management resources and capabilities than the Company. These competitive
conditions will exist in any industry in which the Company may become
interested.
No Foreseeable Dividends. The Company has not paid dividends on its Common Stock
and does not anticipate paying such dividends in the foreseeable future.
Loss of Control by Present Management and Stockholders. 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.
In conjunction with such a transaction, the Company's current Officers,
Directors, and principal shareholders could also sell all, or a portion, of
their controlling block of stock to the acquired Company's stockholders. Such a
transaction would result in a greatly reduced percentage of ownership of the
Company by its current shareholders. As a result, the acquired Company's
11
stockholders would control the Company, and it is likely that they would replace
the Company's management with persons who are unknown at this time.
No Public Market Exists. There is currently no public market for the Company's
common stock, and no assurance can be given that a market will develop or that a
shareholder will ever be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this Risk Factors section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchasers finds a broker
willing to effect a transaction in theses securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many leading institutions will not permit
the use of such securities as collateral for any loans.
Rule 144 Sales. Of the 56,637,228 presently outstanding shares of the Company's
stock, 40,000,000 shares are "restricted securities" within the meaning of Rule
144 under the Securities Act of 1933, as amended. As restricted shares, these
shares may be resold only pursuant to an effective registration statement or
under the requirements of Rule 144 or other applicable state securities law.
Rule 144 provides in essence that a person who has held restricted securities
for a prescribed period, may under certain conditions, sell every three months,
in brokerage transactions, a number of shares that does not exceed the greater
of 1.0% of a company's outstanding common stock or the average weekly trading
volume during the four calendar weeks prior to sale. There is no limit on the
amount of restricted securities that may be sold by a non-affiliate after the
restricted securities have been held by the owner, for a period of at least two
years. A sale under Rule 144, or under an other exemption from the Act, if
available, or pursuant to subsequent registrations of common stock of present
shareholders, may have a depressive effect upon the price of the Common Stock in
may market that may develop. The current owner of the 40,000,000 outstanding
shares of the common stock of the Company will have held these shares for a
period of more than two years in September 2003. Accordingly, such shares will
then be available for resale in accordance with the provisions of Rule 144.
Blue Sky Consideration. Because the securities registered hereunder have not
been registered for resale under the Blue Sky laws of any state, the holders of
such shares and persons who desire to purchase them in any trading market that
might develop in the future, should be aware, that there may be significant
state Blue Sky law restrictions upon the ability of investors to sell the
securities and of purchasers to purchase the securities. Accordingly, investors
should consider the secondary market for the Company's securities to be a
limited one.
Item 2 - Description of Property
The Company currently maintains a mailing address at 211 West Wall, Midland,
Texas 79701. The Company's telephone number there is (915) 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 President.
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 - Submission of Matters to a Vote of Security Holders
The Company has not submitted any matters to a vote of security holders during
the fourth quarter of Fiscal 2003.
12
Part II
Item 5 - Market for Company's Common Stock and Related Stockholder Matters
As of May 15, 2003, there were 56,637,228 shares of $0.001 par value common
stock (the "Common Stock") of the Company outstanding and owned by approximately
5,300 shareholders of record.
During 2001, the Company filed a request for clearance of quotations on the OTC
Bulletin Board under SEC Rule 15c2-11, Subsection (a)(5) with NASD Regulation
Inc. A Clearance Letter was issued to Tomahawk Industries, Inc. in April 2001
and the Company's securities currently trade under the symbol "THMK". The
Company's first posted trade was conducted on May 3, 2001. The quoted market
prices of the Company's common stock on the NASDAQ Electronic Bulletin Board,
are as follows:
High Low
---- -----
Fiscal Year 2002 (May 1, 2001 - April 30, 2002)
First quarter (May 1, 2001 - July 31, 2001) $0.50 $0.25
Second quarter (August 1, 2001 - October 31, 2001) $0.08 $0.25
Third quarter (November 1, 2001 - January 31, 2002) no trading no trading
Fourth quarter (February 1, 2002 - April 30, 2002) no trading no trading
Fiscal Year 2003 (May 1, 2002 - April 30, 2003)
First quarter (May 1, 2002 - July 31, 2002) no trading no trading
Second quarter (August 1, 2002 - October 31, 2002) no trading no trading
Thirdquarter (November 1, 2002 - January 31, 2003) no trading no trading
Fourth quarter (February 1, 2003 - April 30, 2003) no trading no trading
Dividend policy
The Company has never paid or declared a cash dividend on its common stock. The
Board of Directors does not intend to declare or pay cash dividends in the
foreseeable future. It is the current policy to retain all earnings, if any, to
support future growth and expansion.
13
Recent Sales of Unregistered Securities
On September 25, 2001, the Company sold 15,000,000 shares of restricted,
unregistered common stock at $0.001 per share for gross proceeds of $15,000,
pursuant to a private placement memorandum to Little & Company Investment
Securities, Inc., an entity owned by Glenn A. Little, the Company's President
and Chief Executive Officer. These funds were used to support the working
capital needs of the Company. The Company relied upon Section 4(2) of The
Securities Act of 1933, as amended, for an exemption from registration on these
shares.
On September 25, 2001, the Company converted the $25,000 in advances from Glenn
A. Little, the Company's President and Chief Executive Officer into 25,000,000
shares of restricted, unregistered common stock at $0.001 per share, pursuant to
a private placement memorandum. These funds were used to settle outstanding
trade accounts payable and provide working capital for the Company. The Company
relied upon Section 4(2) of The Securities Act of 1933, as amended, for an
exemption from registration on these shares.
Item 6 - Management's Discussion and Analysis or Plan of Operation
The Company had no operating revenue during the years ended April 30, 2003 and
2002, respectively.
General and administrative expenses for the years ended April 30, 2003 and 2002
were approximately $250 and $16,600, respectively. These costs were related to
the revitalization of the corporate entity in order that it's filings under the
Securities Act of 1934 could be brought current and maintained and that the
Company would be capable of attracting a suitable business combination partner.
The Company received interest income of approximately $-0- and $16 during the
Fiscal Years ended April 30, 2003 and 2002, respectively, as a result of
invested working capital funds.
Net (loss) for the years ended April 30, 2003 and 2002, respectively, was
approximately $(250) and $(16,600). Earnings per weighted-average share of
common stock outstanding was approximately $-0- and $-0- per share.
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 Securities Exchange Act of 1934 unless and until
such time that the Company's operating subsidiary begins meaningful operations.
At April 30, 2003 and 2002, respectively, the Company had working capital of
approximately $600 and $800, respectively.
It is the intent of management and significant stockholders to 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.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
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.
Plan of Business
General
The Company intends 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
14
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.
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.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal shareholders or general
partners:
1) will not have been convicted of securities fraud, mail fraud, tax
fraud, embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
15
Liquidity and Capital Resources
The Company, for all practical purposes, remains dormant and has experienced no
significant change in liquidity or capital resources or stockholders equity.
Management has no plans or commitments for capital requirements in the
foreseeable future.
It is the intent of management and significant stockholders to provide
sufficient working capital to preserve the integrity of the corporate entity,
however, there are no commitments to provide additional funds have been made by
management or other stockholders, and the Company has no 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 any additional funds will
be available to the Company to allow it to cover its expenses. Notwithstanding
the forgoing, to the extent that additional funds are required, the Company
anticipates receiving such funds in the form of advancements from current
shareholders without issuance of additional shares or other securities, or
through the private placement of restricted securities rather than through a
public offering. The Company does not currently contemplate making a Regulation
S offering.
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. For information as to the
Company's policy in regard to payment for consulting services, see Certain
Relationships and Transactions.
Item 7 - Index to Financial Statements
The required financial statements begin on page F-1 of this document.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The directors and executive officers serving the Company are as follows:
Name Age Position Held and Tenure
---- --- ------------------------
Glenn A. Little 50 President, Director
Matthew Blair 45 Secretary, Treasurer Director
The directors named above will serve until the next annual meeting of the
Company's stockholders or until their 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 will fall within the range of five to ten 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.
16
Biographical Information
Glenn A. Little, is a graduate of The University of Florida, Gainesville
(Bachelor of Science in Business Administration) and the American Graduate
School of International Management (MBA - International Management) and has been
the principal of Little and Company Investment Securities (LITCO), a Securities
Broker/Dealer with offices in Midland, Texas since 1979. Mr. Little currently
serves as an officer of other inactive public corporations having the same
business purpose as the Company.
Before founding LITCO Mr. Little was a stockbroker with Howard, Weil, Labouisse
Friedrich in New Orleans and Midland and worked for the First National Bank of
Commerce in New Orleans, Louisiana.
Matthew Blair was formerly a solo practitioner of law in Midland, Texas and is
presently a Title IV-D Master in Midland County Texas. Before opening his
practice he served in the Legal Department of the Federal Deposit Insurance
Corporation (FDIC), Midland, Texas where he gained exposure to corporate
structures and debt workouts. His employment before the FDIC appointment was
with Texas American Energy and Exxon Corporation. Mr. Blair received a Bachelor
of Arts in Government from The University of Texas at Austin (1975) and Juris
Doctor from Texas Tech University School of Law (1979).He is licensed in every
state court in Texas, United States District Court (Texas) and in The United
States Supreme Court.
Conflicts of Interest
None of the officers of the Company will devote more than a 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 officers
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 officers, directors and principal shareholders 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 officers, directors and
principal shareholders 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 members of Company management to acquire their shares creates a conflict
of interest for them and may compromise their state law fiduciary duties to the
Company's other shareholders. In making any such sale, members of Company
management may consider their own personal pecuniary benefit rather than the
best interests of the Company and the Company's other shareholders, and the
other shareholders are not expected to be afforded the opportunity to approve or
consent to any particular buy-out transaction involving shares held by members
of 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.
17
Item 10 - Executive Compensation
Currently, management of the Company requires less than five (5) hours per
month. Accordingly, no officer or director has received any compensation from
the Company. Until the Company acquires additional capital, it is not
anticipated that any officer or director will receive compensation from the
Company other than reimbursement for out-of-pocket expenses incurred on behalf
of the Company. See Certain Relationships and Related Transactions.
The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.
Item 11 - Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this Registration Statement,
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.
% of Class
Name and address Number of Shares Beneficially Owned
---------------- ---------------- ------------------
Glenn A. Little 40,000,000 70.62%
211 West Wall Street
Midland, Texas 79701
Matthew Blair 0 0.00%
200 West Wall Street
Suite 104
Midland, Texas 79701
All Directors and 40,000,000 70.62%
Executive Officers (2 persons)
Item 12 - Certain Relationships and Related Transactions
On September 25, 2001, the Company sold 15,000,000 shares of restricted,
unregistered common stock at $0.001 per share for gross proceeds of $15,000,
pursuant to a private placement memorandum to Little & Company Investment
Securities, Inc., an entity owned by Glenn A. Little, the Company's President
and Chief Executive Officer. These funds were used to support the working
capital needs of the Company. The Company relied upon Section 4(2) of The
Securities Act of 1933, as amended, for an exemption from registration on these
shares.
On September 25, 2001, the Company converted the $25,000 in advances from Glenn
A. Little, the Company's President and Chief Executive Officer into 25,000,000
shares of restricted, unregistered common stock at $0.001 per share, pursuant to
a private placement memorandum. These funds were used to settle outstanding
trade accounts payable and provide working capital for the Company. The Company
relied upon Section 4(2) of The Securities Act of 1933, as amended, for an
exemption from registration on these shares.
Item 13 - Exhibits and Reports on Form 8-K
Exhibits
--------
99.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
Reports on Form 8-K
-------------------
None
18
Item 14 - Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's
President, Chief Executive Officer and Chief Financial Officer. Based upon that
evaluation, the Company's President, Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective. There have been no significant changes in the Company's internal
controls or in other factors, which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.
19
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
Tomahawk Industries, Inc.
Dated: May 15, 2003 /s/ Glenn A. Little
------------ ---------------------
Glenn A. Little
President, Director
Chief Executive Officer and
Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: May 15, 2003 /s/ Glenn A. Little
------------ ---------------------
Glenn A. Little
Director, President,
Chief Executive Officer and
Chief Financial Officer
Date: May 15, 2003 /s/ Matthew Blair
------------ ---------------------
Matthew Blair
Director
20
Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Tomahawk Industries, Inc. (Registrant)
on Form 10-KSB for the year ended April 30, 2003, as filed with the Securities
and Exchange Commission, on the date hereof, I, Glenn A. Little, Chief Executive
and Financial Officer of the Registrant, certify to the best of my knowledge,
that:
4) I have reviewed this Annual Report on Form 10-KSB of Tomahawk Industries,
Inc. for the year ended April 30, 2003.
5) Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
6) Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual Report;
7) The registrant's other certifying officers, if any, and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
8) The Registrant's other certifying officers, if any, and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
9) The Registrant's other certifying officers, if any, and I have indicated in
this Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
/s/ Glenn A. Little Dated: May 15, 2003
------------------- ------------
Glenn A. Little
Chief Executive and
Chief Financial Officer
21
Tomahawk Industries, Inc.
Contents
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets
as of April 30, 2003 and 2002 F-3
Statements of Operations and Comprehensive Income (Loss)
for the years ended April 30, 2003 and 2002 F-4
Statement of Changes in Shareholders' Equity (Deficit)
for the years ended April 30, 2003 and 2002 F-5
Statements of Cash Flows
for the years ended April 30, 2003 and 2002 F-6
Notes to Financial Statements F-7
F-1
S. W. HATFIELD, CPA certified public accountants
Member: Texas Society of Certified Public Accountants
Press Club of Dallas
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Tomahawk Industries, Inc.
We have audited the accompanying balance sheets of Tomahawk Industries, Inc. (a
Nevada corporation) as of April 30, 2003 and 2002 and the related statements of
operations and comprehensive loss, changes in shareholders' equity and cash
flows for the each of the two years then ended. 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 audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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 Tomahawk Industries, Inc. as of
April 30, 2003 and 2002 and the results of its operations and cash flows for the
each of the two years then ended, in conformity with 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. W. HATFIELD, CPA
Dallas, Texas
May 8, 2003
Use our past to assist your future sm
(secure mailing address) (overnight delivery/shipping address)
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 SWHCPA@aol.com
F-2
Tomahawk Industries, Inc.
Balance Sheets
April 30, 2003 and 2002
April 30, April 30,
2003 2002
----------- -----------
ASSETS
------
Current assets
Cash on hand and in bank $ 594 $ 844
----------- -----------
Total current assets 594 844
----------- -----------
Total Assets $ 594 $ 844
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Current liabilities
Accounts payable - trade $ -- $ --
Advances from shareholder -- --
----------- -----------
Total current liabilities -- --
----------- -----------
Commitments and contingencies
Shareholders' equity
Common stock - $0.001 par value
200,000,000 shares authorized
56,637,228 shares issued and outstanding, respectively 56,637 56,637
Additional paid-in capital 5,443,447 5,443,447
Accumulated deficit (5,499,490) (5,499,240)
----------- -----------
Total Shareholders' Equity 594 844
----------- -----------
Total Liabilities and Shareholders' Equity $ 594 $ 844
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
Tomahawk Industries, Inc.
Statements of Operations and Comprehensive Loss
Years ended April 30, 2003 and 2002
Year ended Year ended
April 30, April 30,
2003 2002
------------ ------------
Revenues $ -- $ --
------------ ------------
Expenses
General and administrative expenses (250) (16,590)
------------ ------------
Total operating expenses (250) (16,590)
------------ ------------
Income (Loss) from operations (250) (16,590)
Other Income (Expense)
Interest income -- 16
------------ ------------
Income (Loss) before provision for income taxes (250) (16,574)
Provision for income taxes -- --
------------ ------------
Net Income (Loss) (250) (16,574)
Other Comprehensive Income -- --
------------ ------------
Comprehensive Income (Loss) $ (250) $ (16,574)
============ ============
Earnings per share of common stock
outstanding computed on net income
(loss), principally from discontinued
operations - basic and fully diluted nil nil
============ ============
Weighted-average number of shares
outstanding - basic and fully diluted 56,637,228 40,543,220
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
Tomahawk Industries, Inc.
Statement of Changes in Shareholders' Equity (Deficit)
Years ended April 30, 2003 and 2002
Common Stock Additional
------------------------- paid-in Accumulated
Shares Amount capital deficit Total
----------- ----------- ----------- ----------- -----------
Balances at
May 1, 2001 16,637,228 $ 16,637 $ 5,443,447 $(5,482,666) $ (22,582)
Issuance of common stock
Cash 15,000,000 15,000 -- -- 15,000
Conversion of
Shareholder debt 25,000,000 25,000 -- -- 25,000
Net loss for the year -- -- -- (16,574) (16,574)
----------- ----------- ----------- ----------- -----------
Balances at
April 30, 2002 56,637,228 56,637 5,443,447 (5,499,240) 844
Net loss for the year -- -- -- (250) (250)
----------- ----------- ----------- ----------- -----------
Balances at
April 30, 2003 56,637,228 $ 56,637 $ 5,443,447 $(5,499,490) $ 594
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
Tomahawk Industries, Inc.
Statements of Cash Flows
Years ended April 30, 2003 and 2002
Year ended Year ended
April 30, April 30,
2003 2002
---------- ----------
Cash Flows from Operating Activities
Net income (loss) for the period $ (250) $ (16,574)
Adjustments to reconcile net loss
to net cash provided by operating activities
Increase (Decrease) in Accounts payable - trade -- --
---------- ----------
Net cash used in operating activities (250) (16,574)
---------- ----------
Cash Flows from Investing Activities -- --
---------- ----------
Cash Flows from Financing Activities
Proceeds from sale of common stock -- 15,000
---------- ----------
Net cash provided by financing activities -- 15,000
---------- ----------
Increase (Decrease) in Cash (250) (1,574)
Cash at beginning of period 844 2,418
---------- ----------
Cash at end of period $ 594 $ 844
========== ==========
Supplemental Disclosure of Interest and Income Taxes Paid
Interest paid for the year $ -- $ --
========== ==========
Income taxes paid for the year $ -- $ --
========== ==========
Supplemental Disclosure of Non-Cash
Investing and Financing Activities
Related party debt settled with common stock $ -- $ 25,000
========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
Tomahawk Industries, Inc.
Notes to Financial Statements
Note A - Organization and Description of Business
Tomahawk Industries, Inc. (Company) was incorporated under the laws of the State
of Nevada on May 13, 1980. From its inception through 1988, the Company was
engaged in oil and gas exploration. Beginning in 1984, the Company entered the
business of installing energy recovery and energy saving devices through a then
wholly-owned subsidiary.
In July 1987, the Company filed for protection under Chapter 11 of the U. S.
Bankruptcy Code and operated as a debtor- in-possession. Subsequent thereto, the
petition for bankruptcy protection was denied and the Company ceased all
business operations, liquidated its former subsidiary and abandoned all net
assets remaining by April 30, 1988.
The Company has effectively had no operations, assets or liabilities since its
fiscal year ended April 30, 1998.
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 April 30.
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
In July 1987, the Company filed for protection under Chapter 11 of the U. S.
Bankruptcy Code and operated as a debtor- in-possession. Subsequent thereto, the
petition for bankruptcy protection was denied and the Company ceased all
business operations and abandoned all net assets remaining by April 30, 1988.
The Company has effectively had no operations, assets or liabilities since its
fiscal year ended April 30, 1998.
The Company's 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.
F-7
Tomahawk Industries, Inc.
Notes to Financial Statements - Continued
Note C - Going Concern Uncertainty - Continued
On August 2, 2002, the Company announced, in a Current Report on Form 8-K, that
it had entered into an Agreement and Plan of Reorganization, (Reorganization
Agreement) which sets forth the terms and conditions of a proposed reverse
merger business combination transaction between the Company and Cryotherm, Inc.
(a privately-owned Delaware corporation) (CRYO). Pursuant to the Reorganization
Agreement, CRYO's shareholders will exchange 100% of the outstanding shares of
CRYO for 25,000,000 newly issued, post reverse shares of Tomahawk. As a result
of this tentative transaction, CRYO would have become a wholly-owned subsidiary
of Tomahawk.
Consummation of the Reorganization Agreement was subject to various conditions,
including the approval by the CRYO stockholders, the receipt of required
regulatory approvals, where appropriate and applicable, and the completion of
due diligence by all parties to the proposed transaction. During November 2002,
the parties to this proposed agreement agreed to terminate the proposed
Reorganization Agreement.
The Company anticipates offering future sales of equity securities. 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.
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.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. 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.
The Company has a limited operating history, minimal cash on hand, no profit and
operates a business plan with inherent risk. Because of these factors, our
auditors have issued an audit opinion for the Company which includes a statement
describing our going concern status. This means, in our auditor's opinion,
substantial doubt about our ability to continue as a going concern exists at the
date of their opinion.
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, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
F-8
Tomahawk Industries, Inc.
Notes to Financial Statements - Continued
Note D - Summary of Significant Accounting Policies - Continued
2. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At April 30, 2003 and 2002, 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 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.
As of April 30, 2003 and 2002, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have
limited net operating loss carryforwards available to offset financial
statement or tax return taxable income in future periods in the event of a
change in control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
3. Income (Loss) per share
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock
outstanding. The calculation of fully diluted earnings (loss) per share
assumes the dilutive effect of the exercise of outstanding 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. As
of April 30, 2003 and 2002, respectively, the Company has no outstanding
stock warrants, options or convertible securities which could be considered
as dilutive for purposes of the loss per share calculation.
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.
Note F - Advances from Controlling Shareholder
On January 2, 2001, the Company's controlling shareholder loaned the Company
$25,000 to support operations, settle outstanding trade accounts payable and
provide working capital. The advance was repayable upon demand and is non-
interest bearing. On September 25, 2001, the shareholder executed a private
placement letter converting this advance into 25,000,000 shares of restricted,
unregistered common stock.
F-9
Tomahawk Industries, Inc.
Notes to Financial Statements - Continued
Note G - Common Stock Transactions
On September 25, 2001, the Company sold 15,000,000 shares of restricted,
unregistered common stock at $0.001 per share for gross proceeds of $15,000,
pursuant to a private placement memorandum to an entity owned by the Company's
President and Chief Executive Officer. These funds were used to support the
working capital needs of the Company. The Company relied upon Section 4(2) of
The Securities Act of 1933, as amended, for an exemption from registration on
these shares.
On September 25, 2001, the Company converted $25,000 in advances from the
Company's President and Chief Executive Officer into 25,000,000 shares of
restricted, unregistered common stock at $0.001 per share, pursuant to a private
placement memorandum. These funds were used to settle outstanding trade accounts
payable and provide working capital for the Company. The Company relied upon
Section 4(2) of The Securities Act of 1933, as amended, for an exemption from
registration on these shares.
Note H - Income Taxes
The components of income tax (benefit) expense for the years ended April 30,
2003 and 2002, respectively, are as follows:
Year ended Year ended
April 30, April 30,
2003 2002
---------- ----------
Federal:
Current $ -- $ --
Deferred -- --
---------- ----------
-- --
---------- ----------
State:
Current -- --
Deferred -- --
---------- ----------
-- --
---------- ----------
Total $ -- $ --
========== ==========
As of April 30, 2003, the Company has a net operating loss carryforward of
approximately $16,000 to offset future taxable income. Subject to current
regulations, this carryforward will begin to expire in 2021. The amount and
availability of the 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.
(Remainder of this page left blank intentionally)
F-10
Tomahawk Industries, Inc.
Notes to Financial Statements - Continued
Note H - Income Taxes - Continued
The Company's income tax expense (benefit) for the years ended April 30, 2003
and 2002, respectively, differed from the statutory federal rate of 34 percent
as follows:
Year ended Year ended
April 30, April 30,
2003 2002
---------- ----------
Statutory rate applied to income before income taxes $ (85) $ (5,635)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for deferred tax asset
and application of net operating loss carryforward (85) (5,635)
---------- ----------
Income tax expense $ -- $ --
========== ==========
Temporary differences, consisting primarily of 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 liabilities
as of April 30, 2003 and 2001, respectively:
April 30, April 30,
2003 2002
--------- ---------
Deferred tax assets
Net operating loss carryforwards $ 5,720 $ 5,635
Less valuation allowance (5,720) (5,635)
--------- ---------
Net Deferred Tax Asset $ -- $ --
========= =========
During the years ended April 30, 2003 and 2002, respectively, the reserve for
the deferred current tax asset increased (decreased) by approximately $85 and
$(1,958,565). The 2002 decrease was due to adjustments in the Company's net
operating loss carryforward due to a change in control involving more than 50
percentage points of the then issued and outstanding common stock.
F-11