UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 2002
OR
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)
Commission File No.000-32695
Amaru, Inc.
------------------------
(Name of Small Business Issuer in its Charter)
Nevada 88-0490089
-------------------------------- -------------------------------------
State or other jurisdiction I.R.S. Employer Identification Number
of incorporation or organization
610 Newport Center Drive, Suite 1400, Newport Beach, CA 92660
------------------------------------------------------- --------
Address of principal executive office Zip Code
Issuer's telephone number: (949) 760-6832
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
Common Stock, $0.001 Par Value
------------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required by Section 13 or 15(d)
of the Exchange Act during the past 12 months, and (2) has been subject to such
filing requirements for the past ninety (90) days.
Yes [X] No [ ]
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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Company's revenues for Fiscal Year ended December 31, 2002 were $0.00.
As of December 31, 2002, 1,957,500 shares of Common Stock were outstanding and
there was no trading market for the Common Stock. The Number of shares held by
non-affiliates was 157,500 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
Item 1. Description of Business.
-----------------------
Amaru, Inc. (the "Company") was incorporated under the laws of the
state of Nevada in September, 1999. The Company's corporate offices are located
at 610 Newport Center Dr., Suite 1400, Newport Beach, California 92660;
telephone (949) 760-6832. The Company was organized for the purposes of creating
a corporate vehicle to locate and acquire an operating business entity which
management believes is a suitable acquisition candidate. The Company has been in
the developmental stage since inception and has no operating history other than
organizational matters.
The Company has no operating business. The Company does not intend to
develop its own operating business but instead will seek to effect a merger (a
"Merger") with a corporation which owns an operating business and wishes to
undertake a Merger for its own corporate purposes (a "Merger Target"), generally
related to achieving liquidity for its stockholders. The primary activity of the
Company currently involves seeking a Merger Target. The Company is currently in
negotiations with respect to the terms and conditions of the potential merger
with a private company. The Company may effect a Merger with a Merger Target
which may be financially unstable or in its early stages of development or
growth.
The Board of Directors has elected to begin implementing the Company's
principal business purpose, described below under "Item 6, Plan of Operation."
As such, the Company can be defined as a "shell" company, whose sole purpose at
this time is to locate a Merger Target and consummate a Merger.
In addition, Sahra M. Partida serves as the sole director and officer
of four other companies (identified in Part III, Item 9 below) that contemplate
the same business activities as the Company and thus compete directly with the
Company. As a result, there may be a conflict of interest with respect to
prospective Merger Targets and presenting the corporate opportunity to the
Company. In general, officers and directors of a corporation incorporated under
the laws of the State of Nevada are required to present certain business
opportunities to such corporation. As a result of Ms. Partida's business
associations with multiple companies she will have conflicting interests.
Therefore, the Company has agreed that with respect to conflicts of interest
amongst these companies related to the allocation of opportunities to negotiate
and Merge with Merger Targets, the Company will waive any conflict or claim
related to Ms. Partida's fiduciary duty. Ms.Partida and the Company have no
formal plan relating to the allocation of or Merger opportunities between the
Company and the four other companies, and thus there can be no assurance that
any Merger opportunity shall be presented to the Company, as opposed to the
our other Companies.
The proposed business activities described herein classify the Company
as a "blank check" or "blind pool" entity. Many states have enacted statutes,
rules, and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not currently
anticipate that any market for its Common Stock will develop until such time, if
any, as the Company has successfully implemented its business plan and completed
a Merger.
THERE CAN BE NO ASSURANCES GIVEN THAT THE COMPANY WILL BE ABLE TO
SUCCESSFULLY LOCATE A MERGER TARGET OR CONSUMMATE A MERGER. STATUTES,
REGULATIONS, RULES AND THE POSITIONS OF REGULATORY AUTHORITIES HAVE BEEN
BECOMING MORE ADVERSE AND RESTRICTIVE TOWARD SUCH MERGERS AND TOWARD "BLIND
POOL" ENTITIES SUCH AS THE COMPANY.
Item 2. Description of Property
-----------------------
The Company neither owns nor leases any real property at this time.
Pursuant to an oral agreement with Ms. Iwona Alami, the Company's majority
stockholder and legal counsel, the Company utilizes and will continue to utilize
the office space of such firm as its principal executive office. Such office is
located at 610 Newport Center Drive, Suite #1400, Newport Beach, California
92660 telephone number (949) 760-6832, facsimile: (949) 760-6815.
The Company has not invested in any real property at this time nor does
the Company intend to do so. The Company has no formal policy with respect to
investments in real estate or investments with persons primarily engaged in real
estate activities.
1
Item 3. Legal Proceedings
-----------------
We are not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matter was submitted to a vote of stockholders in the fourth quarter
of 2002.
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters
------------------------------------------------------------------
NO PUBLIC MARKET
The Company's Common Stock is currently not traded on any public
trading market. Management does not currently anticipate that any market for its
Common Stock will develop until such time, if any, as the Company has
successfully implemented its business plan and completed a Merger.
The authorized capital stock of the Company consists of 25,000,000
shares, of which 20,000,000 shares have been designated Common Stock, $0.001 par
value, and 5,000,000 shares of Preferred Stock, $0.001 par value. At December
31, 2002, there were 1,957,500 shares of Common Stock outstanding and held of
record by 32 stockholders.
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation
of a Merger. The payment of dividends after consummating any such Merger, if
any, will be contingent upon the Company's revenues and earnings, if any,
capital requirements, and general financial condition subsequent to consummation
of a Merger. The payment of any dividends subsequent to a Merger will be within
the discretion of the Company's then Board of Directors and may be subject to
restrictions under the terms of any debt or other financing arrangements that
the Company may enter into in the future. The Company presently intends to
retain all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
In September, 1999, Liliana Partida and Iwona Alami, the Company's
founders and majority shareholders acquired 900,000 shares of Common Stock each
for the consideration of $900 each in connection with the formation of the
Company. Liliana Partida paid for the shares issued to her in cash; Iwona Alami
rendered legal services to the Company as consideration for the shares issued to
her. The shares were issued without registration in reliance upon the exemption
provided by Section 4(2) of the Securities Act.
Commencing May 1, 2000, and ending August 20, 2000, the Company
conducted an offering of its Common Stock (the "Private Placement"), in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act and Regulation D (Rule 506) promulgated under the Securities Act. The
Company offered on a "best efforts" basis directly and through its officers and
directors and through broker-dealers who are members of the National Association
of Securities Dealers, Inc., a maximum of 150,000 shares of Common Stock at an
offering price of $0.03 per share, to investors who were "accredited investors"
as defined in the Securities Act. An aggregate of 152,500 shares of Common Stock
were sold in the Private Placement to a total of 29 accredited investors for
gross proceeds of $4,575 (the maximum offering was increased by the Company). In
August, 2000, the Company issued 5,000 shares of its Common Stock for paralegal
services rendered to the Company.
The Company is one of the following six companies in which investors in
the Private Placement were required to make an equal investment: New Pacific,
Inc., Corniche Corporation, ForSale.com, Inc., Rio Ventures, Inc., and
Allonline.com.
2
Item 6. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Plan of Operation
Statements contained in this Plan of Operation of this Annual Report on
Form 10-KSB include "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which could cause the actual results of the Company, performance
(financial or operating) or achievements expressed or implied by such
forward-looking statements not to occur or be realized. Such forward-looking
statements generally are based upon the Company's best estimates of future
results, general merger and acquisition activity in the marketplace, performance
or achievement, current conditions and the most recent results of operations.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "will," "project," "expect," "believe," "estimate,"
"anticipate," "intends," "continue", "potential," "opportunity" or similar
terms, variations of those terms or the negative of those terms or other
variations of those terms or comparable words or expressions. (See the "RISK
FACTORS" section below for a description of certain of the known risks and
uncertainties of the Company.)
General
Our plan is to seek, investigate, and if such investigation warrants,
consummate a merger or other business combination, purchase of assets or other
strategic transaction (i.e. Merger) with a corporation, partnership, limited
liability company or other business entity (a "Merger Target") desiring the
perceived advantages of becoming a publicly reporting and publicly held
corporation. At this time, we have no binding agreement to enter into a Merger
with any specific business or company, although we are in negotiations with a
private company. We will not restrict our search to any specific business,
industry, or geographical location, and may participate in business ventures of
virtually any kind or nature. Discussion of proposed plan of operation and
Mergers under this caption and throughout this Annual Report is purposefully
general and is not meant to restrict our virtually unlimited discretion to
search for and enter into potential business opportunities. While we maintain as
low an overhead as possible, we also have no capital to dispose of.
Our auditors have included an explanatory paragraph in their report for
the year ended December 31, 2002, indicating that certain conditions raise
substantial doubt regarding our ability to continue as a going concern. The
financial statements included in this Form 10-KSB do not include any adjustment
to asset values or recorded amounts of liability that might be necessary in the
event we are unable to continue as a going concern. If we are in fact unable to
continue as a going concern, shareholders may lose their entire investment in
our common stock.
We may seek a Merger with an entity which only recently commenced
operations, or a developing company in need of additional funds to expand into
new products or markets or seeking to develop a new product or service, or an
established business which may be experiencing financial or operating
difficulties and needs additional capital which is perceived to be easier to
raise by a public company. Indeed, our most common merger candidates are often
companies that lack the ability to conduct an IPO, or whose business industry is
not well received by the investment banking community. In some instances, a
Merger may involve entering into a transaction with a corporation which does not
need substantial additional cash but which desires to establish a public trading
market for its common stock. We may purchase assets and establish wholly-owned
subsidiaries in various businesses or purchase existing businesses as
subsidiaries.
3
Selecting a Merger Target will be complex and involve a high degree of
risk. Because of general economic conditions, rapid technological advances being
made in some industries, and shortages of available capital, management believes
that there are numerous entities seeking the benefits of being a publicly-traded
corporation. Many potential Merger Targets are in industries that have
essentially not presented well in the conventional IPO market, regardless of
their financial success, and suffer from low initial valuations. The perceived
benefits of being a publicly traded corporation may include facilitating or
improving the terms on which additional equity financing may be sought,
providing liquidity (subject to restrictions of applicable statutes and
regulations) for the principals of a business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes and regulations) for
all stockholders, and other items. Potential Merger Targets may exist in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such Merger Targets
extremely difficult and complex.
We believe we can offer owners of Merger Targets the opportunity to
acquire a controlling ownership interest in a public company at substantially
less cost than is required to conduct an initial public offering. Nevertheless,
we have not conducted any specific market research and we are not aware of
statistical data which would support the perceived benefits of a Merger or
acquisition transaction for the owners of a Merger Target.
We also believe that finding a suitable Merger Target willing to enter
into a Merger with us may depend on the existence of a public trading market for
our Common Stock. There is presently no public trading market for the Company's
Common Stock and there is no assurance that one can be developed.
We will not restrict our search to any specific kind of Merger Target,
and we may merge with an entity which is in its preliminary or development
stage, which is already in operation, or in essentially any stage of its
corporate life. It is impossible to predict at this time the status of any
business in which we may become engaged, in that such business may need to seek
additional capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which we may offer. However, we do not intend to
obtain funds in one or more private placements to finance the operation of any
acquired business opportunity until such time as we have successfully
consummated such a Merger, if ever.
Selection and Evaluation of Merger Targets
Our management, which currently consists of Ms. Partida, will have
complete discretion and flexibility in identifying and selecting a prospective
Merger Target with the assistance of our legal counsel or other consultants, as
we may deem necessary. In connection with its evaluation of a prospective Merger
Target, management anticipates that it will conduct a due diligence review which
will encompass, among other things, meeting with incumbent management and
inspection of facilities, as well as a review of financial, legal and other
information which will be made available to us.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the nature of the
specific acquisition. Likewise, the Merger Target after the merger will be
subject to similar rules. Consequently, we will only be able to effect a Merger
with a prospective Merger Target that has available audited financial statements
or has financial statements which can be audited. If after a Merger the Company
fails to comply with these rules, the stockholders may be adversely affected
because we may not be able to file registration statements or raise capital
until satisfactory audits are obtained.
4
The time and costs required to select and evaluate a Merger Target
(including conducting a due diligence review) and to structure and consummate
the Merger (including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws) cannot presently be ascertained with any degree of certainty. Ms. Partida,
our current executive officer and sole director intends to devote only a small
portion of her time to our affairs and, accordingly, consummation of a Merger
may require a greater period of time than if our management devoted his full
time to our affairs. We have engaged third party consultants to assist us in the
evaluation and due diligence review of potential Merger Targets. These third
party consultants have agreed to be paid only in securities of the Company, but
we have not issued any such securities to them at this time. We may be required
to hire new consultants and/or pay such persons cash or other securities of the
Company to carry out our business plan.
We will seek potential Merger Targets from all known sources and
anticipate that various prospective Merger Targets will be brought to our
attention from various non-affiliated sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other members
of the financial community and affiliated sources, including, possibly, our
executive officer, director and his affiliates. While we have not yet
ascertained how, if at all, we will advertise and promote our company, we may
elect to publish advertisements in financial or trade publications seeking
potential business acquisitions. Such an advertisement may only be made pursuant
to an exemption under the Securities Act. While we do not presently anticipate
engaging the services of professional firms that specialize in finding business
acquisitions on any formal basis, we may engage such firms in the future, in
which event we may pay a finder's fee or other compensation. In no event,
however, will we pay a finder's fee or commission to our current officer and
director or any entity with which he is affiliated for such service. Moreover,
in no event shall we issue any of our securities to any officer, director or
affiliate of the Company, or any of their respective affiliates or associates,
in connection with activities designed to locate a Merger Target.
In analyzing prospective Merger Targets, management may consider, among
other factors, such matters as;
o the available technical, financial and managerial resources;
o working capital and other financial requirements;
o the current Wall Street and other market and analyst's
valuations of similarly situated companies;
o history of operation, if any;
o prospects for the future;
o present and expected competition;
o the quality and experience of management services which may be
available and the depth of that management;
o the potential for further research, development or
exploration;
o specific risk factors not now foreseeable but which then may
be anticipated to impact the proposed activities of the
company;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition or acceptance of products,
services or trades; and
o name recognition.
5
Merger opportunities in which we may participate will present certain
risks, many of which cannot be adequately identified prior to selecting a
specific opportunity. Our stockholders must, therefore, depend on management to
identify and evaluate such risks. The investigation of specific Merger
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 Merger
opportunity the cost therefore incurred in the related investigation would not
be recoverable. To help offset this and minimize expense we have employed
several consultants, who have received stock compensation only, to perform due
diligence and assist us in evaluating Merger Targets. Furthermore, even if an
agreement is reached for the participation in a specific Merger opportunity, the
failure to consummate that transaction may result in our loss of the related
costs incurred.
There can be no assurance that we will find a suitable Merger Target.
If no such Merger Target is found, no return on an investment in our securities
will be realized, and there will not, most likely, be a market for the Company's
stock.
Consultants Retained To Assist In Mergers
In order to assist us in reviewing and evaluating Merger Targets, we
have retained certain consultants. These consultants agreed to receive only
securities of the Company as compensation and may be reimbursed for certain out
of pocket expenses incurred at our request. We have not issued any securities
yet in connection with such services. We may be required to retain additional
consultants for cash consideration if the need should arise, and we will be
limited, by cash on hand in doing so.
Structuring of a Merger
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of Mergers. We will evaluate the
possible tax consequences of any prospective Merger and will endeavor to
structure a Merger so as to achieve the most favorable tax treatment to us, the
Merger Target and our respective stockholders. There can be no assurance that
the Internal Revenue Service or relevant state tax authorities will ultimately
assent to our tax treatment of a particular consummated Merger. To the extent
the Internal Revenue Service or any relevant state tax authorities ultimately
prevail in recharacterizing the tax treatment of a Merger, there may be adverse
tax consequences to us, the Merger Target and our respective stockholders. Tax
considerations as well as other relevant factors will be evaluated in
determining the precise structure of a particular Merger.
We may utilize available cash and equity securities in effecting a
Merger. Although we have no commitments as of this date to issue any shares of
Common Stock or options or warrants, except for additional securities that we
will issue for certain professional services, other than those already issued in
the offering of our common stock pursuant to Regulation D promulgated under the
Securities Act of 1933 (the "Private Placement"), we will likely issue a
substantial number of additional shares in connection with the consummation of a
Merger, probably in most cases equal to nine or more times the amount held by
our stockholders prior to the Merger. This will leave current stockholders with
approximately 10% or less of the post-Merger company. We also may decide to
issue preferred stock, with rights, voting privileges, liquidation and dividend
preferences that are senior to the Common Stock, in connection with a Merger or
obtaining financing therefore, although we have no present plans to do so. We
may have to effect reverse stock splits prior to or immediately after any
Merger. To the extent that such additional shares are issued, dilution to the
interests of our stockholders will occur. Additionally, in connection with a
Merger, a change in control will occur which may affect, among other things, our
ability to utilize net operating loss carry-forwards, if any.
6
We may need to borrow funds to effect a Merger. However, our limited
resources and lack of operating history may make it difficult to do so. The
amount and nature of our borrowings will depend on numerous considerations,
including our capital requirements, potential lenders' evaluation of our ability
to meet debt service on borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. We have no
arrangements with any bank or financial institution to secure financing and
there can be no assurance that such arrangements if required or otherwise
sought, would be available on terms commercially acceptable or otherwise in our
best interests. Our inability to borrow funds required to effect or facilitate a
Merger, or to provide funds for an additional infusion of capital into a Merger
Target, may have a material adverse effect on our financial condition and future
prospects, including our ability to effect a Merger. To the extent that debt
financing ultimately proves to be available, any borrowings may subject us to
various risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Merger Target may have already incurred debt financing
and, therefore, we will assume all the risks inherent thereto.
Merger Target
We are, and may continue to be, subject to intense competition in the
business of seeking a Merger with a Merger Target. Such competition is from
other entities having business strategies similar to ours. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Mergers
directly or through affiliates. Many of these competitors possess greater
financial, technical, human and other resources than us and there can be no
assurance that we will have the ability to compete successfully. Our financial
resources will be limited in comparison to those of many of our competitors.
This inherent competitive limitation may compel us to select certain less
attractive Merger prospects. There can be no assurance that such prospects will
permit us to achieve our stated business objectives.
Equipment and Employees
We have no operating business and thus no equipment and no employees
other than our president, who does not receive a salary. We do not expect to
acquire any equipment or employees. We do not intend to develop our own
operating business but instead hope to effect a Merger with a Merger Target.
Expenses for Year Ended December 31, 2002
Net cash used in operating activities for the twelve months ended
December 31, 2002 was $653 compared to $376 for the twelve months
ended December 31, 2001. Net cash provided from financing activities for the
twelve months ended December 31, 2002 was $657 compared to $0 for the twelve
months ended December 31, 2001. During the twelve months ended December 31,
2002, the Company had no revenues and did not have any sources or uses of cash
outside of its operating activities.
The expenses of $7,544 for the twelve months ended
December 31, 2002 and $3,663 for the twelve months ended December 31, 2001
resulted primarily from accounting/auditing, legal and general administrative
expenses relating to the Company's quarterly and annual filings with the
Commission. As discussed above, the Company will incur substantial expenses,
including expenses for professional and other consulting services, when it seeks
to negotiate and enter into a Merger. There is no assurance that the Company
will have sufficient funds to locate a Merger Target or to consummate a Merger.
7
Item 7. Financial Statements
--------------------
See the Consolidated Financial Statements and related Report of
Independent Certified Public Accountants included herewith as pages F-1 through
F-9.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Amaru, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of Amaru, Inc. (a Nevada
corporation) as of December 31, 2002, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended and cumulative from
inception (September 1, 1999) through December 31, 2002. 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 audit. The financial statements of Amaru, Inc. as of December 31, 2001 were
audited by other auditors, whose report dated May 3, 2002 expressed an
unqualified opinion on those financial statements.
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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amaru, Inc. as of December 31,
2002 and the results of its operations and cash flows for the year then ended
and cumulative from inception through December 31, 2002, 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 notes to the financial
statements, the Company has been in the development stage since its inception,
sustained losses and has used capital raised through the issuance of stock to
fund activities, which raises substantial doubt as to its ability to continue as
a going concern. Management plans concerning these matters are also described in
the notes to financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Mendoza
Berger & Company, LLP
Irvine, California
December 2, 2003
F-1
AMARU, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------
ASSETS
Current assets
Cash held in trust account $ 4 $ --
Account receivable from shareholder -- 67
------------ ------------
Total assets $ 4 $ 67
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,961 $ 3,137
Shareholder loans 657 --
------------ ------------
Total current liabilities 10,618 3,137
Shareholders' equity
Preferred stock (par value $0.001) 5,000,000 shares
authorized none issued
Common stock (par value $0.001) 20,000,000 shares
authorized; 1,957,500 shares issued and outstanding
at December 31, 2002 and December 31, 2001, respectively 1,958 1,958
Paid in capital 4,342 4,342
Deficit accumulated during development stage (16,914) (9,370)
------------ ------------
Total shareholders' equity (deficit) (10,614) (3,070)
------------ ------------
Total liabilities and shareholders' equity $ 4 $ 67
============ ============
The accompanying notes to financial statements are an integral part of these statements
F-2
AMARU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
CUMULATIVE FROM INCEPTION SEPTEMBER 1, 1999 TO DECEMBER 31, 2002
CUMULATIVE FROM
INCEPTION
FOR THE YEAR FOR THE YEAR SEPTEMBER 1,
ENDED ENDED 1999 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2001 2002
------------ ------------ ------------
Income $ -- $ -- $ --
Accounting fees 440 820 2,260
Legal fees 6,000 1,550 11,640
Corporate registration fees 1,104 1,293 3,014
------------ ------------ ------------
Total expenses 7,544 3,663 16,914
------------ ------------ ------------
Loss before income taxes (7,544) (3,663) (16,914)
Income taxes -- -- --
------------ ------------ ------------
Net loss $ (7,544) $ (3,663) $ (16,914)
============ ============ ============
Net loss per share $ (0.004) $ (0.002)
============ ============
Weighted average number of common shares
outstanding 1,957,500 1,957,500
============ ============
The accompanying notes to financial statements are an integral part of these statements
F-3
AMARU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
CUMULATIVE FROM INCEPTION SEPTEMBER 1, 1999 TO DECEMBER 31, 2002
CUMULATIVE FROM
INCEPTION
FOR THE YEAR FOR THE YEAR SEPTEMBER 1,
ENDED ENDED 1999 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2001 2002
------------ ------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) $ (7,544) $ (3,663) $ (16,914)
Adjustment to reconcile net (loss) to net cash
Shares issued for legal and filing services -- 150 1,050
(Increase) decrease in operating assets-
accounts receivable 67 -- --
Increase (decrease) in operating liabilities-
accounts payable 6,824 3,137 9,961
------------ ------------ ------------
Cash flow from operating activities (653) (376) (5,903)
CASH PROVIDED FROM FINANCING ACTIVITIES
Shareholder loans 657 -- 657
Proceeds from sale of stock -- -- 5,250
------------ ------------ ------------
Total provide from financing activities 657 -- 5,907
Cash flow from all activities 4 (376) 4
Cash balance at beginning of period -- 376 --
------------ ------------ ------------
Cash balance at end of year $ 4 $ -- $ 4
============ ============ ============
The accompanying notes to financial statements are an integral part of these statements
F-4
AMARU, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION SEPTEMBER 1, 1999 TO DECEMBER 31, 2002
Common Stock Deficit
--------------------------------------- accumulated Total
Additional during Stockholders'
Number of Par value Paid-in development Equity
shares $(0.001) capital stage (deficit)
----------- ----------- ----------- ----------- -----------
Common stock issued for cash at par
value September 1, 1999 900,000 $ 900 $ -- $ -- $ 900
Common stock issued for legal services
at par value September 1, 1999
900,000 900 -- -- 900
Net (loss) during period
(1,982) (1,982)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 1,800,000 1,800 -- (1,982) (182)
Common stock issued for cash $0.03
per share 152,500 153 4,197 -- 4,350
Net (loss) (3,725) (3,755)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2000 1,952,500 1,953 4,197 (5,707) 443
Shares issued for filing services of
$150 January 1, 2001 valued at $0.03
per share 5,000 5 145 -- 150
Net loss (3,663) (3,663)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2001 1,957,500 1,958 4,342 (9,370) (3,070)
Net loss (7,544) (7,544)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2002 1,957,500 $ 1,958 $ 4,342 $ (16,914) $ (10,614)
=========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements
F-5
AMARU, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FOR THE PERIOD FROM INCEPTION SEPTEMBER 1, 1999 TO DECEMBER 31, 2002
GENERAL
Amaru, Inc. ("the Company") is a Nevada corporation incorporated
September 1, 1999. The Company is in the development stage and its
intent is to operate as a capital market access corporation and to
acquire one or more existing businesses through merger or acquisition.
The Company has had no business activity to date.
The accompanying financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United
States of America, contemplates the continuation of the Company as a
going concern. However, the Company has been in the development stage
since its inception (January 1, 1999), sustained losses and has used
capital raised through the issuance of stock to fund activities.
Continuation of the Company as a going concern is contingent upon
establishing and achieving profitable operations. Such operations will
require management to secure additional financing for the Company in
the form of debt or equity.
Management believes that actions currently being taken to revise the
Company's funding requirements will allow the Company to continue its
development stage operations. However, there is no assurance that the
necessary funds will be realized by securing debt or through stock
offerings.
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is expensing all start up expenses in accordance with AICPA
Statements of Position 98-5.
The Company uses the asset and liability method of accounting for
income taxes. The Company has not recorded the tax benefit of the net
operating loss carry-forward since realization is not certain.
Earnings per share is computed using the weighted average number of
common shares outstanding.
RELATED PARTY TRANSACTIONS
The officers and directors of the Company receive no compensation for
Company activity and the Company has reflected no expense in the
statement of operations.
The Company has no rented office space but uses the offices of one of
the shareholders at no cost to the Company.
The loan from shareholder bears no interest and is due on demand.
EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of
common shares outstanding. The Company has no shares that are dilutive.
F-6
INCOME TAXES
The components of the deferred tax asset is as follows:
December 31, December 31,
2002 2001
------------ ------------
Deferred tax assets:
Net operating loss carry-forward $ 5,700 $ 3,180
Valuation allowance $ (5,700) $ (3,180)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
The Company had available approximately $16,900 and $9,350 of unused
Federal net operating loss carry-forwards at December 31, 2002 and
2001, respectively, that may be applied against future taxable income.
These net operating loss carry-forwards expire for Federal purposes in
2022. There is no assurance that the Company will realize the benefit
of the net operating loss carry-forwards.
SFAS No. 109 requires a valuation allowance to be recorded when it is
more likely than not that some or all of the deferred tax assets will
not be realized. At December 31, 2002 and 2001, valuations for the full
amount of the net deferred tax asset were established due to the
uncertainties as to the amount of the taxable income that would be
generated in future years.
Reconciliation of the differences between the statutory tax rate and
the effective income tax rate is as follows:
December 31, December 31,
2002 2001
------------ ------------
Statutory federal tax (benefit) rate (34.0)% (34.0)%
Valuation allowance 34.0% 34.0%
------------ ------------
Effective income tax rate 0.00% 0.00%
============ ============
F-7
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
---------------------------------------------------------------
The Board of Directors of the Company approved the engagement of
Mendoza, Berger & Co. LLP. ("MB") on November 17, 2003 to serve as the Company's
independent public auditor and to conduct the audit of the Company's financial
statements for the fiscal year 2003. The decision resulted from the fact that
William D. Lindberg, the Company's previous auditor resigned for personal
reasons.
The audit reports provided by the Company's previous auditor, William D.
Lindberg, C.P.A., for the previous fiscal years did not contain any adverse
opinion or disclaimer of opinion nor was any report modified as to uncertainty,
audit scope or accounting principles. There have been no past disagreements
between the Company and William D. Lindberg, C.P.A., on any matter of accounting
principles or practices, financial statement disclosure or auditing, scope or
procedure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
-------------------------------------------------------------
The following table sets forth information concerning the sole director
and executive officer of the Company:
Name Age Title
---- --- ------
Sahra Partida 27 President, Secretary, Treasurer and Director
SAHRA PARTIDA, is the director and officer of the Company. Ms.
Partida has had six years experience in accounting, sales, marketing and
secretarial corporate services. For the last 5 years, Ms. Partida has been
employed in various administrative, sales and accounting positions at Physicians
Group (1996-97); Apogee Sound (1997-98); Radian (1999-00) and Passione, Inc.
(2000-present). Ms. Partida is a niece of Liliana Partida, the majority
shareholder of the Company.
The Company currently has no employees.
The following chart summarizes certain information concerning the blank
check companies with which Ms. Partida is or has been a director and which have
filed or intend to file a registration statement with the SEC, as of this date.
COMPANY NAME
SEC FILE NUMBER STATE 10SB FILE DATE
--------------- ----- --------------
New Pacific, Inc. Nevada May 3, 2001 *
ForSale.com, Inc. Nevada May 3, 2001
Corniche Corporation Nevada May 3, 2001
Allonline.com Nevada May 3, 2001
Rio Ventures, Inc. Nevada May 3, 2001
* Ms. Partida resigned as an officer and director of that company in January,
2002.
Ms. Partida is not required to commit her full time to the affairs of
the Company and it is likely that they will not devote a substantial amount of
time to the affairs of the Company. She will have conflicts of interest in
allocating management time among various business activities. As a result, the
consummation of a Merger may require a greater period of time than if the
Company's management devoted their full time to the Company's affairs. However,
Ms. Partida will devote such time as he deems reasonably necessary to carry out
the business and affairs of the Company, including the evaluation of potential
Merger Targets and the negotiation and consummation of a Merger and, as a
result, the amount of time devoted to the business and affairs of the Company
may vary significantly depending upon, among other things, whether the Company
has identified a Merger Target or is engaged in active negotiation and
consummation of a Merger.
Item 10. Executive Compensation
----------------------
Sahra Partida is the sole officer and director of the Company. She did
not receive any compensation for her services as the director and/or officer of
the Company in fiscal years 2000 and 2001. In August, 2000, the Company issued
5,000 shares of common stock for cash to Ms. Byman, prior officer and director.
While the Company does not presently anticipate engaging the services
of professional firms that specialize in finding business acquisitions on any
formal basis, the Company may engage such firms in the future, in which event
the Company may pay a finder's fee or other compensation. In no event, however,
will the Company pay a finder's fee or commission to any officer and director of
the Company or any entity with which he is affiliated for such service.
Moreover, in no event shall the Company issue any of its securities to any
officer, director or promoter of the Company, or any of their respective
affiliates or associates, in connection with activities designed to locate a
Merger Target. The Company does not have any incentive or stock option plan in
effect.
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table presents certain information regarding beneficial
ownership of the Company's common stock as of December 31,2002. A certain
beneficial owner is defined as: (i) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of common stock, (ii)
each director and executive officer of the Company, and (iii) all directors and
executive officers as a group. Unless otherwise indicated, each person in the
table has sole voting and investment power as to the shares shown.
SHARES PERCENT
BENEFICIALLY OF CLASS
NAME OWNED OUTSTANDING
---------------------------------- ------------- -----------
Sahra Partida (1) 0 0%
President, Treasurer
Secretary and Director
Iwona Alami(1) 900,000 46%
Liliana Partida (1) 900,000 46%
Officers and Directors as 0 0
a Group (2 persons)
------------------------
* Less than 1%
(1) C/o Company's address: 610 Newport Center Drive, Suite#1400, Newport
Beach, California, 92660, telephone: (949) 760-6832, facsimile: (949)
760-6815.
Based on 1,957,500 shares of Common Stock outstanding as of December
31, 2002.
A Merger will, in all likelihood, result in stockholders of the Merger
Target obtaining a controlling interest in the Company. Any such Merger may
require management of the Company to sell, transfer or cancel all or a portion
of the Company's stock held by management, or cause Ms. Partida to resign or be
removed as executive officer and/or director and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
To this date, the Company has had no operating business and engaged in
no transactions in which Ms. Partida has had any direct or indirect material
interest. Should the Company engage in any such transaction in the future, Ms.
Partida's interest therein would arise only from her ownership of Common Stock
of the Company, if any, and would receive no extra or special benefit that was
not shared equally (pro rata) by all holders of Common Stock of the Company.
In addition to the Company, Ms. Partida serves as the director and
officer of other companies that contemplate the same business activities as the
Company and thus compete directly with the Company. Including the Company, these
companies are listed in Item 9 above. As a result, Ms. Partida will have a
conflict of interest with respect to prospective Merger Targets and presenting
the corporate opportunity to the Company. In general, officers and directors of
a corporation incorporated under the laws of the State of Nevada are required to
present certain business opportunities to such corporation, and the laws of the
state of Nevada further provide rights and remedies to shareholders in the event
such duty is breached. As a result of Ms. Partida's business associations with
multiple companies they will have conflicting interests. Therefore, the Company
has agreed that with respect to conflicts of interest amongst these companies
related to the allocation of opportunities to negotiate and Merge with Merger
Targets, the Company will waive any conflict or claim related to Ms. Partida's
fiduciary duty. However, the conflict should be mitigated by the fact that Ms.
Partida has the same ownership interest in each other company as she does in the
Company, and each company (including the Company) has identical stockholders, at
least initially. The conflict will be more significant should, at a later date,
these facts change.
Prior to their involvement with the Company, Ms. Partida has not been
involved in any "blind pool" or "blank check" offerings. Ms. Partida is
affiliated with four other companies engaged in business activities similar to
those to be conducted by the Company, and may in the future become affiliated
with more, and therefore may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. As described
above, officers and directors of a corporation incorporated under the laws of
the State of Nevada are required to present certain business opportunities to
such corporation. Accordingly, as a result of multiple business affiliations,
Ms. Partida may have similar legal obligations to present certain business
opportunities to multiple entities. There can be no assurance that any of the
foregoing conflicts will be resolved in favor of the Company.
Ms. Partida and the Company have no formal plan relating to the
allocation of business or Merger opportunities between the Company and the four
other companies, and thus there can be no assurance that any Merger opportunity
shall be presented to the Company, as opposed to the four other Companies.
Use of Office Space Leased by Our Management
We do not own or lease any real property at this time. Pursuant to an
oral agreement with The Law Offices of Iwona J. Alami, Esq., a firm controlled
by a stockholder, we utilize and will continue to utilize the office space and
related facilities of such firm as our principal executive office at no charge.
Item 13. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit Number Description
-------------- -----------
Exhibit Number Description
-------------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 Form of Subscription Agreement executed by investors in the
Private Placement*
31 Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act
32 Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act
--------------------------------
* Previously filed with the Securities and exchange Commission on Form 10-SB.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 2002.
ITEM 14. CONTROLS AND PROCEDURES
Our President and Treasurer/Chief Financial Officer (the "Certifying Officer")
is responsible for establishing and maintaining disclosure controls and
procedures and internal controls and procedures for financial reporting for the
Company. The Certifying Officer has designed such disclosure controls and
procedures and internal controls and procedures for financial reporting to
ensure that material information is made known to him, particularly during the
period in which this report was prepared. The Certifying Officer has evaluated
the effectiveness of the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting as of December 31, 2002
and believes that the Company's disclosure controls and procedures and internal
controls and procedures for financial reporting are effective based on the
required evaluation. There have been no significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Signatures
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Amaru, Inc.
By /s/ Sahra Partida
--------------------------------------------
Sahra Partida, President, Secretary and
Treasurer
Date:12/8/03
Pursuant to the requirements of 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.
By /s/ Sahra Partida
--------------------------------------------
Sahra Partida, President, Secretary and
Treasurer
Date: 12/8/03