U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended July 31, 2002.
The Vermont Witch Hazel Company
------------------------------
(Exact name of Registrant
as specified in charter)
Vermont 333-42036 95-4502724
(State or other jurisdiction (Commission (I.R.S. Employee
of incorporation) File Number) Identification No.)
2591 Dallas Parkway, Suite 102
Frisco, TX 75034
(Address of principal executive offices)
Registrant's telephone number, including area code: 469-633-0100
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock, par value $.00
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant'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 [X]
The Registrant's revenues for its most recent fiscal year were: $10,572.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and ask price of such common equity, as of August 23,
2002 was $868,350.00.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Plan of Operation
Our current business plan is to seek, investigate, and, if warranted,
acquire one or more properties or businesses, and to pursue other related
activities intended to enhance our stockholder's value for their investment in
our common stock. The acquisition of a business entity may be made by purchase
of stock, merger, exchange of stock, or purchase of assets. We have nominal
capital, and it is unlikely that we will be able to take advantage of more than
one such business opportunity. We intend to seek opportunities demonstrating the
potential of long-term growth as opposed to short-term earnings. We can give no
assurance that we will be successful in finding or acquiring any business
entity, or that any acquisition that occurs will be on terms that are favorable
to us or our stockholders.
We have in the past engaged in preliminary negotiations with the
principals of small business enterprises, but have been unable to obtain any
agreements or commitments from such parties.
We do not propose to restrict our search for investment opportunities
to any particular geographical area or industry, and may, therefore, engage in
essentially any business, to the extent of our limited resources. This includes
industries such as service, finance, natural resources, manufacturing, high
technology, product development, medical, communications and others. Our
management's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors, including our ability to raise capital from
private investors in the future.
Investigation and Selection of Business Opportunities
Our management believes that various types of potential merger or
acquisition candidates might find a business combination with us to be
attractive. These include acquisition candidates (1) desiring to create a public
market for their shares in order to enhance liquidity for their current
stockholders, (2) which have long-term plans for raising capital through the
public sale of securities and which believe that the possible prior existence of
a public market for their securities would be beneficial, (3) which plan to
acquire additional assets through issuance of securities rather than for cash,
and which believe that the possibility of development of a public market for
their securities will be of assistance in that process. Acquisition candidates
that have a need for an immediate cash infusion are not likely to find a
potential business combination with us to be an attractive alternative.
The analysis of business opportunities will be undertaken by or under
the supervision of our president, Kevin Halter, Jr. We anticipate that he will
consider, among other things, the following factors in the analysis of business
opportunities:
o Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
o His perception of how any particular business opportunity will
be received by the investment community and by our stockholders;
o Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a
2
significant prospect in the foreseeable future of becoming sufficient
to enable our securities to qualify for listing on an exchange or on a
national automated securities quotation system, such as NASDAQ SmallCap
Market;
o Capital requirements and anticipated availability of required
funds, to be provided through the private sale of additional
securities;
o The extent to which the business opportunity can be advanced;
o 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;
o Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
o The cost of our participation as compared to the perceived
tangible and intangible values and potential; and
o The accessibility of required management expertise, personnel,
raw materials, services, professional assistance, and other required
items as such factors relate to the target company.
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. Potential investors must
recognize that, because of our lack of capital for investigation and our lack of
management for business analysis, we may not discover or adequately evaluate
adverse facts about the target company, its business and management.
We are unable to predict when we may be able to acquire a business
entity. We expect, however, that the analysis of specific proposals and the
selection of a business opportunity may take several months or more.
Possible Business Transactions
We can not predict the manner in which we may participate in a business
transaction with an acquisition target. Specific business opportunities will be
reviewed as well as the respective needs and desires of our stockholders and,
upon the basis of that review and our relative negotiating strength, the legal
structure or method deemed by management to be suitable will be selected. Such
structure may include, but may not be limited to, leases, purchase and sale
agreements, licenses, joint ventures and other contractual arrangements. We may
act directly or indirectly through an interest in a partnership, corporation or
other form of organization. Implementing such structure may require our merger,
consolidation or reorganization with other corporations or other forms of
business organization, and although it is likely, we can give no assurance that
we would be the surviving entity. In addition, our present management and
stockholders most likely will not have control of a majority of the voting
shares of the company following a reorganization transaction. As part of such a
transaction, our current officers and directors may resign and new officers and
directors may be appointed without any vote by stockholders.
It is likely that we will acquire our participation in a business
transaction through the issuance of our common stock or other securities.
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 "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the issuance to the stockholders of the
acquired company of a controlling interest (usually 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
3
transaction is structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, our
current stockholders will retain in the aggregate 20% or less of the issued and
outstanding shares. This could result in substantial additional dilution in the
equity of our stockholders 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 of our company by our president,
director and principal stockholder. Additionally, upon a business combination
with an operating company, we will be required to report the transaction to the
Commission on a Current Report on Form 8-K with disclosure as required pursuant
to a registration statement on Form 10-SB. This could result in additional
expense to us as well as delaying the consummation of an acquisition.
Our History
The Vermont Witch Hazel Company was incorporated on August 3, 1994 in the State
of Vermont. On October 4, 1994 it was renamed Vermont Witch Hazel Co. and on
September 16, 1996 it was renamed The Vermont Witch Hazel Company. On November
1, 1994 the Company registered to conduct business in the State of California.
For over seven years, the Company created and marketed skin care and pet care
products. The Company manufactured and distributed a line of witch hazel based
natural, hypoallergenic soaps, cleansers and other skin aids for people who
prefer natural and environmentally friendly products.
Effective December 3, 2001, the Company transferred all its net assets and
business to its wholly owned subsidiary, The Vermont Witch Hazel Co., LLC, a
California limited liability company which had been formed in October 2001.
Also, the Company's board of directors declared a dividend of all of the
Company's interest in the LLC to be distributed to the Company's shareholders of
record on December 10, 2001. Each shareholder received one member unit in the
LLC for each share of common stock held of record by the shareholder.
On December 27, 2001 pursuant to a stock purchase agreement dated December 27,
2001, Kevin Halter Jr. purchased 6,027,000 shares of the Company's common stock
from Deborah Duffy representing approximately 51% of the Company's issued and
outstanding shares of common stock. Simultaneously with the purchase, the
current officers and directors of the Registrant resigned and the following
three persons were elected to replace them: Kevin. Halter Jr. President and
Director, Kevin B. Halter Secretary, Treasurer & Director and Pam Halter, a
Director. Deborah Duffy, Rachel Braun and Peter C. Cullen the directors of the
Company resigned their respective positions and the following three persons were
elected to replace them: Kevin Halter Jr., Kevin B. Halter and Pam Halter
Employees
We have no employees. Our officers and directors and principal
shareholders receive no compensation, and none is being accrued. They devotes
only as much of his time to our business as necessary.
ITEM 2. DESCRIPTION OF PROPERTY.
We currently maintain an office at no cost at 2591 Dallas Parkway,
Suite 102, Frisco, TX 75034, which is the office address of Kevin Halter, Jr.,
our president. We do not believe that we will need to maintain an office
4
elsewhere at anytime in the foreseeable future in order to develop and implement
our business plan. Our telephone number is 469-633-0100 and our fax number is
(469) 633-0088.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
None of our directors, officers or affiliates, and no owner of record
or beneficial owner of more than 5% of our securities or any associate of any of
our directors, officers or security holders is a party adverse to us or has a
material interest adverse to us in reference to pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our security holders during the
fourth quarter of the fiscal year which ended July 31, 2002.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
Our common stock is traded on the OTC Bulletin Board under the symbol
"VWHZ" since December 7, 2001. The price range of our common stock for the
respective quarters were as follows:
High Bid Low Bid
Dec 31, 2001 $0.40 $0.12
March 31, 2002 $0.34 $0.15
June 30, 2002 $0.35 $0.15
The prices reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transaction.
HOLDERS
As of August 23, 2002, there were 77 record holders of the Company's Common
Stock.
DIVIDENDS
---------
The Company does not anticipate paying any cash Dividends on its Common Stock in
the foreseeable future.
Shares Eligible For Future Sale
We currently have 11,817,250 shares of common stock outstanding of
which 5,789,000 shares are freely tradable on the OTC Bulletin Board and
6,028,250 shares of our common stock owned by Kevin Halter, Jr., our President,
a director and our principle shareholder, are deemed "restricted securities," as
5
that term is defined under Rule 144 promulgated under the Securities Act.
Subject to the applicable affiliate rules and volume and holding period
limitations of Rule 144, 1,250 of Mr. Halter's shares are currently eligible for
sale under Rule 144 and 6,027,000 shares will be eligible for sale under Rule
144 after December 27. 2002.
Under Rule 144, and subject to satisfaction of certain other
conditions, a person, including an affiliate of the our company (or persons
whose shares are aggregated into such affiliate), who has owned restricted
shares of common stock beneficially for at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of one percent of the total number of outstanding shares of the same
class or the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale. A person who has not been an affiliate of our
company for at least the three months immediately preceding the sale and who has
beneficially owned shares of our common stock for at least two years is entitled
to sell such shares under Rule 144(k) without regard to any of the limitations
described above.
The possibility that substantial amounts of our common stock may be
sold in the public market in the future may adversely affect the prevailing
market price for our common stock and could impair our ability in the future to
raise capital through the sale of our equity securities.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Securities
Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report. This discussion contains forward-looking statements that involve risks
and uncertainties.
PLAN OF OPERATION
Our present plan of operations for the next twelve months is to seek to
complete a merger or acquisition transaction with a small- or medium-sized
operating enterprise which may allow our stockholders an opportunity to achieve
appreciative value for their investment in our common stock. In selecting a
potential merger or acquisition candidate, our management will consider many
factors, including, but not limited to, potential for growth and profitability,
quality and experience of management, capital requirements, and the ability of
the acquired company to qualify its shares for trading on NASDAQ SmallCap Market
or on a national exchange.
The types of business enterprises that we believe might find a business
combination with us to be attractive include (1) candidates desiring to create a
public market for their shares to enhance liquidity for current stockholders,
(2) acquisition candidates which have long-term plans for raising capital
through the public sale of securities and believe that the possible prior
existence of a public market for their securities would be beneficial, (3)
foreign companies desiring to obtain access to U.S. customers and U.S. capital
markets, and (4) acquisition candidates which plan to acquire additional assets
through issuance of securities rather than for cash.
6
We have engaged in preliminary negotiations with principals of small
business enterprises but have been unable to obtain any agreements or
commitments from such parties. We are also unable to predict when we may effect
a business opportunity. We have not established any deadline for completion of a
transaction, and anticipate that the process could continue throughout the next
twelve months.
Our balance sheet at July 31, 2002 reflects current assets of $0 and
current liabilities in the amount of $0. Accordingly, we may be required to
raise additional funds from private investors, or our principal stockholder may
be required to advance funds, in order to pay our current liabilities and to
satisfy our cash requirements for the next twelve months.
The Company was incorporated in August of 1994 and began manufacturing all
natural skin care products in 1995. We manufactured and marketed 14 all natural
skin care products and 4 all natural pet care products., all of which contain
witch hazel as a base ingredient. Originally, we marketed our products only to
health food stores. Our first three years in business were moderately successful
showing average gross incomes for fiscal years 1996, 1997 and 1998 of
approximately $250,000.
Because we were dealing with a very small percent of the market, natural food
and health stores, we felt we were limiting our income capabilities and decided
to change our marketing strategy to focus on Internet sales and mass market.
This decision required our changing all our labels which we estimated would cost
us $150,000. We knew our income would drop substantially while we were making
the transition from natural health and food stores to mass market chains, and
that we would need capital to maintain overhead during the transition period.
The Company decided to raise the money with a public offering. The offering was
approved by the Securities & Exchange Commission and we became effective on
February 15, 2001. The offering was closed May 14, 2001 when we began
negotiating with Dickinson Brands regarding a license agreement and/or a merger.
Dickinson Brands is the largest witch hazel manufacturer in the United States,
and had expressed a desire to license our brand and formulas for sale in the
natural market place. At a meeting held in Las Vegas in July, 2001, the owner of
Dickinson Brands also suggested a possible buyout or merger and requested
projections through 2004. However no agreement was ever reached.
The Company was also approached regarding entering into a business combination
with an ongoing business, Swabplus. Swapblus manufactures a delivery system for
make-up removal, first aid, nail polish remover, cuticle conditioning, etc., and
felt the two companies could complement each other. After careful consideration
by management, this avenue was deemed to not be of benefit to the Company and no
negotiations were initiated. September 11, 2001 the World Trade Center was
destroyed and the market for penny stocks virtually disappeared.
On October 17, 2001 the Company filed Articles of Organization for The Vermont
Witch Hazel Co., LLC., which the board of directors felt would be of more
benefit as an entity for the shareholders than a corporation. On November 7,
2001 the board of directors of The Vermont Witch Hazel Company adopted a
resolution to transfer all assets and liabilities from the Corporation into the
LLC in exchange for 100% of the outstanding membership interest in the LLC, and
to declare a 100% dividend of the LLC to each shareholder of record. The board
of directors unanimously voted to distribute the dividend on December 10, 2001.
A letter to NASDAQ was sent November 28, 2001 advising them of the board's
decision, pursuant to Rule 10b-17.
7
RESULTS OF OPERATIONS
REVENUES
For the twelve months ended July 31, 2002 the company had sales of $10,572,
which is a $33,273 decrease from sales for the twelve months ended July 31,
2001. This resulted from the transfer all assets and liabilities from the
Corporation into the LLC and the resulting cessation of active business
operations in December 2001.
COST OF SALES
For the twelve months ended July 31, 2002, the company had cost of sales of
$4,151, which is a decrease of $10,318 from cost of sales for the twelve months
ended July 31, 2001. This resulted from the transfer all assets and liabilities
from the Corporation into the LLC and the resulting cessation of active business
operations in December 2001.
GENERAL AND ADMINISTRATIVE EXPENSES
For the twelve months period ended July 31, 2002, selling, general and
administrative expenses decreased to $50,659 from $113,402 for the comparable
period ended July 31, 2002, for a decrease of $62,743. This resulted from the
transfer all assets and liabilities from the Corporation into the LLC and the
resulting cessation of active business operations in December 2001.
NET LOSS
For the twelve months period ended July 31, 2002, we had a net loss of $44,238
versus a loss of $121,393 for the comparable period ended July 31, 2001, a
decrease of $77,155. This resulted from the transfer all assets and liabilities
from the Corporation into the LLC and the resulting cessation of active business
operations in December 2001.
Our Liquidity and Capital Resources
The Company is fully dependent on either future sales of securities or upon its
current management and/or advances or loans from significant stockholders or
corporate officers to provide sufficient working capital to preserve the
integrity of the corporate entity.
There is no assurance that the Company will be able to obtain additional funding
through the sales of additional securities or, that such funding, if available,
will be obtained on terms favorable to or affordable by the Company.
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.
8
ITEM 7. FINANCIAL STATEMENTS.
See following pages.
9
THE VERMONT WITCH HAZEL COMPANY
FINANCIAL STATEMENTS
For the Years Ended July 31, 2002 and 2001
with Independent Auditor's Report
10
THE VERMONT WITCH HAZEL COMPANY
FINANCIAL STATEMENTS
For The Years Ended July 31, 2002 and 2001
Independent Auditor's Report..................................................12
Financial Statements:
Balance Sheets................................................................13
Statements of Operations......................................................14
Statement of Stockholders' Equity (Deficit)...................................15
Statements of Cash Flows......................................................16
Notes to Financial Statements..............................................17-21
11
INDEPENDENT AUDITORS' REPORT
Board of Directors
THE VERMONT WITCH HAZEL COMPANY
Frisco, Texas
I have audited the accompanying balance sheets of THE VERMONT WITCH HAZEL
COMPANY as of July 31, 2002 and 2001, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of THE VERMONT WITCH HAZEL COMPANY as
of July 31, 2002 and 2001, and the results of its operations, stockholders'
equity and cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has no viable operations or assets and is
dependent upon significant stockholders to provide sufficient working capital to
maintain the integrity of the corporate entity. Management's plans in regard to
these matters are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
/s/ Gerald R. Perlstein
-----------------------
Los Angeles, California
August 20, 2002
12
THE VERMONT WITCH HAZEL COMPANY
BALANCE SHEETS
ASSETS
July 31, 2002 July 31, 2001
------------- -------------
Current Assets:
Cash $ 0 $ 96
Accounts receivable 0 557
Inventory 0 85,692
------------- -------------
Total current assets 0 86,345
Fixed Assets:
Land and building 0 6,141
Furniture and equipment 0 6,141
------------- -------------
Less: accumulated depreciation 0 0
------------- -------------
Total Assets 0 86,345
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable 0 19,194
Accrued liabilities 0 13,113
Advances due stockholders 0 9,800
------------- -------------
Total current liabilities 0 42,107
Commitments and Contingencies:
Stockholders' Equity (Deficit)
Preferred stock - no par value
Authorized 1,000,000 shares
Issued and outstanding - none
Common stock - no par value
Authorized 75,000,000 shares
Issued and outstanding - 11,817,250 shares
in 2002 and 2001 668,042 668,042
Retained deficit (668,042) (623,804)
------------- -------------
Total Stockholders' Equity 0 44,238
------------- -------------
Total Liabilities and Stockholders' Equity $ 0 $ 86,345
============= =============
The accompanying notes are an integral part of these statements.
13
THE VERMONT WITCH HAZEL COMPANY
STATEMENTS OF OPERATIONS
For The Years Ended July 31, 2002 and 2001
July 31, 2002 July 31, 2001
------------- -------------
Sales $ 10,572 $ 43,845
Cost of sales:
Cost of sales 4,151 14,469
Write-off of obsolete merchandise 0 37,367
------------- -------------
4,151 51,836
------------- -------------
Gross profit (loss) 6,421 (7,991)
Selling, general and administrative expenses (50,659) (113,402)
------------- -------------
Net loss (44,238) (121,393)
Other Comprehensive income 0 0
------------- -------------
Comprehensive loss $ (44,238) $ (121,393)
============= =============
Weighted average number of common shares
outstanding: 11,817,250 1,945,636
------------- -------------
Net loss per common share $ (0.037) $ (0.06)
============= =============
The accompanying notes are an integral part of these statements.
14
THE VERMONT WITCH HAZEL COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For The Years Ended July 31, 2002 and 2001
Total
Common Stock Accumulated Stockholders'
Shares Amount Deficit Equity (Deficit)
---------------- ---------------- ---------------- ----------------
Balance July 31, 2000 1,149,850 $ 604,292 $ (502,411) $ 101,881
Issuance of common shares for cash 11,375 22,750 22,750
Issuance of common shares for
Services 11,000 22,000 22,000
Issuance of common shares upon
Conversion of demand notes 9,500 19,000 19,000
Net loss for period (121,393)
Ten for one forward stock split 10,635,525
---------------- ---------------- ---------------- ----------------
Balance July 31, 2001 11,817,250 668,042 (623,804) 44,238
Net loss for period (44,238) (44,238)
---------------- ---------------- ---------------- ----------------
Balance July 31, 2002 11,817,250 $ 668,042 $ (668,042) $ 0
================ ================ ================ ================
The accompanying notes are an integral part of these statements.
15
THE VERMONT WITCH HAZEL COMPANY
STATEMENTS OF CASH FLOW
For The Years Ended July 31, 2002 and 2001
July 31, 2002 July 31, 2001
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the periods $ (44,238) $ (121,393)
Adjustments to reconcile net loss to net cash
used by operating activities:
Issuance of stock for services 0 22,000
(Increase)/Decrease in accounts receivable 557 976
(Increase)/Decrease in inventory 85,692 44,696
Increase/(Decrease) in accounts payable (19,194) 3
Increase/(Decrease) in accrued liabilities (13,113) 12,496
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES 9,704 (41,222)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
None
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 22,750
Proceeds from borrowings 21,250 11,800
Repayment of borrowings (31,050) 0
------------- -------------
Net cash provided by financing activities (9,800) 34,550
------------- -------------
NET INCREASE (DECREASED) IN CASH (96) (6,672)
CASH BALANCE, BEGINNING OF PERIOD 96 6,768
------------- -------------
CASH BALANCE, END OF PERIOD $ 0 $ 96
============= =============
The accompanying notes are an integral part of these statements.
16
THE VERMONT WITCH HAZEL COMPANY
NOTES TO FINANCIAL STATEMENTS
For The Years Ended July 31, 2002 and 2001
1. NATURE OF BUSINESS
------------------
The Vermont Witch Hazel Company was incorporated in the State of Vermont on
August 3, 1994 as Witch Hazel Company. On October 4, 1994 it was renamed
Vermont Witch Hazel Co. and on September 16, 1996 it was renamed The
Vermont Witch Hazel Company. On November 1, 1994 the Company registered to
conduct business in the State of California.
For over seven years, the Company created and marketed skin care and pet
care products. The Company manufactured and distributed a line of witch
hazel based natural, hypoallergenic soaps, cleansers and other skin aids
for people who prefer natural and environmentally friendly products.
During October, 2001, the Company created a separate entity known as The
Vermont Witch Hazel Co. LLC, a California limited liability company (The
"LLC") which the Company held as a wholly-owned subsidiary.
On November 7, 2001 the Company's board of directors approved the transfer
of all assets and liabilities of the Company into "The LLC" for 100% of the
outstanding membership interest in "The LLC." This became effective on
December 3, 2001.
On November 20, 2001 the Company's board of directors declared of 100%
dividend of "The LLC", to be distributed, on or before December 31, 2001,
to each shareholder of record as of December 10, 2001. The dividend was
paid at a rate of one member unit of "The LLC" for each outstanding share
of common stock of the Company.
On December 3, 2001 a "Sale of Asset Agreement" was executed by which "The
LLC" purchased the assets and assumed the liabilities of the Company for
which it distributed 100% of its membership interests to the Company. Since
December 3, 2001 the Company has been inactive.
On December 27, 2001 the majority shareholder, as well as most of the
remaining shareholders of the now assetless Company agreed to sell their
stock to other individuals at approximately $0.02 per share and to reinvest
their proceeds into "The LLC".
The new Management, located in Frisco, Texas, is currently exploring
various avenues to acquire and/or merge the Company with an existing
business.
The Company is fully dependent either on future sales of securities or upon
its current management and/or advances or loans from significant
stockholders or corporate officers to provide sufficient working capital to
preserve the integrity of the corporate entity.
17
THE VERMONT WITCH HAZEL COMPANY
NOTES TO FINANCIAL STATEMENTS continued
For The Years Ended July 31, 2002 and 2001
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
--------------------------------------------
A. Property and Equipment:
----------------------
Furniture and equipment are stated at cost. The assets are depreciated
using the straight-line method over their estimated useful lives. It
is the policy of the Company to capitalize significant improvements
and to expense repairs and maintenance.
Depreciation expense for the years ended July 31, 2002 and 2001 was:
none.
B. Loss Per Share:
--------------
Loss per share of common stock is computed using the weighted number
of common shares outstanding during the periods shown. Common stock
equivalents are not included in the determination of the weighted
average number of shares outstanding, as they would be antidilutive.
C. Impairments of Long Lived Assets
--------------------------------
The Company evaluates its long-lived assets by measuring the carrying
amount of the assets against the estimated undiscounted future cash
flows associated with them. If such evaluations indicate the future
undiscounted cash flows of certain long-lived assets are not
sufficient to recover the carrying value of such assets; the assets
are adjusted to their fair values. No adjustment to the carrying
values of the assets has been made.
D. Statement of Cash Flows
-----------------------
Supplemental disclosure of cash flow information is as follows:
Cash paid during the period August 1, 2001 to July 31, 2002 was as
follows:
Interest 0
Income and franchise taxes $1,200
E. Use of Estimates:
----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect reported amounts of assets and
liabilities at the date of the financial statements, and revenues and
expenses during the reporting period. Actual results could differ from
estimates and assumptions made.
18
THE VERMONT WITCH HAZEL COMPANY
NOTES TO FINANCIAL STATEMENTS continued
For The Years Ended July 31, 2002 and 2001
F. Inventory:
---------
Inventory is stated at lower of cost (first-in, first-out method) or
market.
G. Revenue Recognition:
-------------------
The Company recognizes revenue from the sale of its products at the
date of sale. The buyer has the right to return the merchandise;
however, the returns have been remote and insignificant, and all of
the conditions of FAS-48 are met, thereby precluding an accrual of a
loss contingency under FAS-5.
H. Fiscal Year and Basis of Operation:
----------------------------------
The Company operates on a fiscal year ending July 31. The Company
prepares its financial statements and Federal and State income tax
returns on an accrual basis.
I. Management Representation
-------------------------
The financial statements and notes are representation of the Company's
management, which is responsible for their integrity and objectivity.
They include all adjustments deemed necessary in order to make the
financial statements not misleading. Management represents that these
financial statements conform to general accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
3. ADVANCES DUE STOCKHOLDERS
-------------------------
During the fiscal year ending July 31, 2001 and for the period ended
October 31, 2001, stockholders advanced funds for working capital of $9,800
and $1,250, respectively. The company agreed to pay interest of 8% interest
per annum. The advances and accrued interest of $553 were repaid during
December, 2001.
4. NOTES PAYABLE
-------------
During the period August-October 2001, an individual advanced the Company
$20,000 to be used for working capital. The Company issued a note bearing
no interest for the first year and 7% thereafter. The note was repaid
during December 2001.
19
THE VERMONT WITCH HAZEL COMPANY
NOTES TO FINANCIAL STATEMENTS continued
For The Years Ended July 31, 2002 and 2001
5. CAPITAL STRUCTURE
-----------------
Upon incorporation the Company was authorized to issue 100 shares of common
stock. On July 24, 1995 the corporation amended its Articles of
Incorporation to authorize the issuance of two classes of stock, common and
preferred. The authorized common stock was increased to 1,000,000 shares,
and the authorized preferred stock is 100,000 shares. Each type retains no
par value.
On November 8, 1999 the Board of Directors agreed to increase the total
number of the Company's authorized common shares to 10,000,000 shares and
the authorized preferred shares to 1,000,000 shares. On February 20, 2000
the Articles of Incorporation were amended to reflect these increases.
On May 14, 2001 the Board of Directors agreed to increase the total number
of the Company's authorized common shares to 75,000,000 shares. It also
agreed to a ten for one forward stock split of the outstanding shares.
6. INCOME TAXES
------------
Income taxes are provided pursuant to SFAS NO. 109 Accounting for Income
Taxes. The statement requires the use of an asset and liability approach
for financial reporting for income taxes. If it is more likely than not
that some portion or all of a deferred tax asset will not be realized, a
valuation allowance is recognized. No tax benefit of the Company's net
operating loss carryforward has been recorded as it is more likely than not
that the carryforward will expire unused. Accordingly, the tax benefit of
the loss carryforward has been offset by a valuation allowance of the same
amount. Thus, the Company has not recorded an asset or liability in
accordance with SFAS No. 109.
The income tax expense incurred by the Company for the periods is
attributable to the California minimum tax incurred by corporations doing
business in California.
Due to a change in ownership effective December 3, 2001, net operation loss
carry forwards may be limited.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The Company has used market information for similar instruments and applied
judgment to estimate fair value of financial instruments. At July 31, 2002,
the fair value of cash, accounts receivable, notes payable and accounts
payable approximated carrying values because of the short-term nature of
these instruments.
20
THE VERMONT WITCH HAZEL COMPANY
NOTES TO FINANCIAL STATEMENTS continued
For The Years Ended July 31, 2002 and 2001
8. COMMITMENTS AND CONTINGENCIES
Leases:
------
For the period August 1 - December 3, 2001, the Company leased its main
office facilities from its major stockholder on a month to month basis of
$2,000. The Company leased its warehouse facilities on a month to month
basis, at a cost of $500 per month. Prior years rental expense reflect the
use of larger facilities. The Company currently maintains an office with
its majority stockholder at no cost.
Rent expense for the years ended July 31, 2002 and 2001 was $15,000 and
$16,875, respectively.
The Company is not presently involved in any litigation.
21
Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors and Executive Officers
The following persons are our current executive officers and directors:
Name Age Position
----------------- ----- ------------------------------------------------
Kevin Halter, Jr. 43 President, Chief Executive Officer, and Director
Kevin Halter 66 Chief Financial Officer, Secretary and Director
Pam Halter 47 Director
Kevin Halter, Jr., has served as President, Director and Chief Executive Officer
of the Company since December 27, 2001. Mr. Halter is a Director, Secretary and
Treasurer of Lucas Education Systems, Inc. since June 19, 2001. He is the
President of Securities Transfer Corporation, a stock transfer company
registered with the Securities and Exchange Commission, a position that he has
held since 1987. Mr. Halter has served as Vice President and Secretary of Halter
Capital Corporation, a privately held investment and consulting firm, since
1987. Mr. Halter has served as Vice President, Secretary and a director of
Millennia, Inc. and Digital Communications Technology Corporation since 1994.
Since 1998 he has also served as Vice President, Secretary, Treasurer and a
director of Millennia Tea Masters, Inc. He is the son Kevin B. Halter.
Kevin B. Halter, has served as Chief Financial Officer Secretary and a Director
of the Company since December 27, 2001. Mr. Halter has served as Chairman,
President, CEO and Director of the Lucas Education Systems, Inc. since June 19,
2001. Mr. Halter has served as Chairman of the Board and Chief Executive Officer
of Halter Capital Corporation, a privately held investment and consulting firm,
since 1987. He has served as Chairman of the Board and President of Millennia,
Inc. and Chairman of the Board of Digital Communications Technology Corporation
since 1994. He is also the Chairman of the Board and President of Millennia Tea
Masters, Inc. a position held since 1998. Mr. Halter is the father of Kevin
Halter, Jr.
Pam J. Halter has served as a Director of the Company since December 27, 2001.
Mrs. Halter has served as President, Secretary and sole Director of Doblique,
Inc. a public company involved in the horse racing business since March 2000.
Our board of directors is elected annually by our stockholders. Directors
receive no cash compensation for their services as directors, but are reimbursed
for expenses actually incurred in connection with attending meetings of the
board of directors.
We do not currently have an audit committee, a nominating committee or a
compensation committee.
Compliance With Section 16(a) of the Exchange Act.
To our best knowledge and belief, all current officers, directors and
principal shareholders have made and will make appropriate ownership reports.
22
ITEM 10. EXECUTIVE COMPENSATION.
None of our officers, directors or principal shareholders currently receives any
compensation nor are we accruing any compensation for their services. They not
received any compensation since their election as officers and directors in
December 2001. Until we acquire additional capital, it is not intended that any
officer or director will receive compensation from us other than reimbursement
for out-of-pocket expenses incurred on our behalf. We have 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 of these programs in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the beneficial ownership of our common stock
as of August 23, 2002, by (i) each person known by us to beneficially own 5% or
more of our outstanding common stock, (ii) each of our executive officers and
directors, and (iii) all of our executive officers and directors as a group.
Except as otherwise indicated, all shares are beneficially owned, and investment
and voting power is held by the persons named as owners.
Beneficial Ownership
--------------------------------------
No. of Shares %
------------------ ------------------
Kevin Halter, Jr. (1) 6,028,250 51.01%
Kevin Halter (1) 0 0
Pam Halter (1) 0 0
All officers and directors as
A group (3 persons) 6,028,250 51.01%
-----------------------
(1) 2591 Dallas Parkway, Ste 102, Frisco, Texas 75034.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Changes of Control
On December 27, 2001 pursuant to a stock purchase agreement dated December
27, 2001, Kevin Halter Jr. purchased 6,027,000 shares of the Company's common
stock from Deborah Duffy representing approximately 51% of the Company's issued
and outstanding shares of common stock. Simultaneously with the purchase, the
current officers and directors of the Registrant resigned and the following
23
three persons were elected to replace them: Kevin. Halter Jr. President and
Director, Kevin B. Halter Secretary, Treasurer & Director, Pam Halter, a
Director. Deborah Duffy, Rachel Braun and Peter C. Cullen the directors of the
Company resigned their respective positions and the following three persons were
elected to replace them: Kevin Halter Jr., Kevin B. Halter and Pam Halter
Conflicts of Interest
Our officers and directors will devote only a portion of their time to our
affairs. There will be occasions when the time requirements of our business
conflict with the demands of their other business and investment activities.
These conflicts may require that we attempt to employ additional personnel.
Although management has no current plans to cause us to do so, it is
possible that we may enter into an agreement with an acquisition candidate
requiring the sale of all or a portion of the common stock held by the our
current officers, directors or principal stockholders to the acquisition
candidate or principals thereof, or to other individuals or business entities,
or requiring some other form of payment to the our 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 our 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 us would be determined
entirely by the largely unforeseeable terms of a future agreement with an
unidentified business entity.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
a. The Exhibits listed below are filed as part of this Annual Report.
Exhibit No. Document
3.1 Articles of Incorporation (incorporated by reference to Exhibit No.
3.1 to Form 10-KSB filed with the Securities and Exchange
Commission on our behalf on September 13, 2001)
3.2 Bylaws (incorporated by reference to Exhibit No. 3.2 to Form 10-KSB
filed with the Securities and Exchange Commission on our behalf on
September 13, 2001)
4.2 Specimen Stock Certificate (Incorporated by reference to Form
10-KSB filed with the Securities and Exchange Commission on our
behalf on September 13, 2001)
10.1 Stock Purchase Agreement dated December 27, 2001. (Incorporated by
reference to Form 8-K dated December 31, 2001, filed with the
Securities and Exchange Commission on our behalf).
10.2 Sale of Assets Agreement dated December 3, 2001.
24
99.1 Certification Pursuant to 18.U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 of the
Chief Executive Office of the Corporation.
99.2 Certification Pursuant to 18.U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 of the
Chief Financial Office of the Corporation.
We filed no reports on Form 8-K during the last quarter of our fiscal year
ending July 31, 2002.
Signatures
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
THE VERMONT WITCH HAZEL COMPANY
By: /s/ KEVIN HALTER, JR.
-----------------------------
Kevin Halter, Jr.
President, Chief Executive Officer and Director
/s/ Kevin Halter, Sr.
-----------------------------
Kevin Halter, Sr.
Chief Financial Officer, Secretary and Director
/s/ Pam Halter
-----------------------------
Pam Halter
Director
Date: August 26, 2002
25