Nevada
|
87-0460247
|
(State
of other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Page
|
|||
Part I
|
|||
Item 1:
|
Business
|
4
|
|
Item 1A:
|
Risk
Factors
|
7
|
|
Item 2:
|
Properties
|
31
|
|
Item 3:
|
Legal
proceedings
|
31
|
|
Item 4:
|
Submission
of Matters to a Vote of Security Holders
|
31
|
|
Part II
|
|||
Item 5:
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
32
|
|
Item 6:
|
Selected
Financial Data
|
33
|
|
Item 7:
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
34
|
|
Item 7A:
|
Quantitative
and Qualitative Disclosures about Market Risk
|
47
|
|
Item 8:
|
Financial
Statements and Supplementary Data
|
48
|
|
Item 9:
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
72
|
|
Item 9A(T):
|
Controls
and Procedures
|
72
|
|
Item 9B:
|
Other
Information
|
73
|
|
Part III
|
|||
Item 10:
|
Directors,
Executive Officers and Corporate Governance
|
74
|
|
Item 11:
|
Executive
Compensation
|
76
|
|
Item 12:
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
79
|
|
Item 13:
|
Certain
Relationships and Related Transactions and Director
Independence
|
81
|
|
Item 14:
|
Principal
Accountant Fees and Services
|
81
|
|
Part IV
|
|||
Item 15:
|
Exhibits
and Financial Statement Schedules
|
82
|
|
Signatures
|
83
|
ITEM
1:
|
BUSINESS
|
|
·
|
Profitability
|
|
·
|
Predictable
and Sustainable Returns
|
|
·
|
Margin
of Safety
|
|
·
|
Strong
Future Prospects
|
|
·
|
Reputable
Management
|
ITEM
1A:
|
RISK
FACTORS
|
|
·
|
significant
volatility in the market price and trading volume of securities of
business development companies or other companies in the investment
industry, which are not necessarily related to the operating performance
of these companies;
|
|
·
|
changes
in regulatory policies or tax guidelines, particularly with respect to
RICs or business development
companies;
|
|
·
|
our
common stock is unlikely to be followed by any market analysts, and there
may be few institutions acting as market makers for the common stock which
can adversely affect its price;
|
|
·
|
loss
of or inability to qualify for RIC status or BDC
status;
|
|
·
|
changes
in earnings or variations in operating
results;
|
|
·
|
changes
in the value of our portfolio of
investments;
|
|
·
|
any
shortfall in revenue or net income or any increase in losses from levels
expected by investors or securities
analysts;
|
|
·
|
departure
of one or more of the Company’s key
personnel;
|
|
·
|
operating
performance of companies comparable to
us;
|
|
·
|
potential
legal and regulatory matters;
|
|
·
|
changes
in prevailing interest rates;
|
|
·
|
general
economic trends and other external factors;
and
|
|
·
|
loss
of a major funding source.
|
|
·
|
Our
ability to pay dividends would be restricted if our asset coverage ratio
were not at least 200% and any amounts that we use to service our
indebtedness would not be available for dividends to our common
stockholders.
|
|
·
|
It
is likely that any debt we incur will be governed by an indenture or other
instrument containing covenants restricting our operating
flexibility.
|
|
·
|
The
Company and you will bear the cost of issuing and servicing our senior
securities.
|
|
·
|
Any
convertible or exchangeable securities that we issue in the future may
have rights, preferences and privileges more favorable than those of our
common stock.
|
|
·
|
these
companies may have limited financial resources and may be unable to meet
their obligations under their securities that we hold, which may be
accompanied by a deterioration in the value of their equity securities or
of any collateral with respect to debt securities and a reduction in the
likelihood of us realizing on any guarantees we may have obtained in
connection with our
investment;
|
|
·
|
they
may have shorter operating histories, narrower product lines and smaller
market shares than larger businesses, which tend to render them more
vulnerable to competitors' actions and market conditions, as well as
general economic downturns;
|
|
·
|
because
many of these companies are privately held companies, public information
is generally not available about these companies. As a result, we will
depend on the ability of our investment adviser to obtain adequate
information to evaluate these companies in making investment decisions. If
our investment adviser is unable to uncover all material information about
these companies, it may not make a fully informed investment decision, and
we may lose money on our
investments;
|
|
·
|
they
are more likely to depend on the management talents and efforts of a small
group of persons; therefore, the death, disability, resignation or
termination of one or more of these persons could have a material adverse
impact on our portfolio company and, in turn, on
us;
|
|
·
|
companies
operating at a loss or with substantial variations in operating results
from period to period, with the need for, but generally limited ability to
provide for internally, substantial additional capital to support
expansion or to achieve or maintain a competitive
position;
|
|
·
|
these
companies may face intense competition, including competition from
companies with greater financial resources, more extensive development,
manufacturing, marketing, and service capabilities, and larger number of
qualified managerial and technical personnel;
and
|
|
·
|
they
may have less predictable operating results, may from time to time be
parties to litigation, may be engaged in changing businesses with products
subject to a risk of obsolescence and may require substantial additional
capital to support their operations, finance expansion or maintain their
competitive position. In addition, our executive officers, directors and
our investment adviser could, in the ordinary course of business, be named
as defendants in litigation arising from our investments in the portfolio
companies.
|
|
·
|
since
these debt investments will be primarily made in the form of unsecured or
wrap-loans, the liens on the collateral, if any, will be subordinated to
those of the senior secured debt of the portfolio companies, if
any. As a result, we may not be able to control remedies with
respect to the collateral;
|
|
·
|
the
collateral may not be valuable enough to satisfy all of the obligations
under our secured loan, particularly after giving effect to the repayment
of secured debt of the portfolio company that ranks senior to our
loan;
|
|
·
|
bankruptcy
laws may limit our ability to realize value from the collateral and may
delay the realization process;
|
|
·
|
our
rights in the collateral may be adversely affected by the failure to
perfect security interests in the
collateral;
|
|
·
|
how
effectively the collateral would be liquidated and the value received
could be impaired or impeded by the need to obtain regulatory and
contractual consents; and
|
|
·
|
by
its nature, some or all of the collateral may be illiquid and may have no
readily ascertainable market value. The liquidity and value of the
collateral could be impaired as a result of changing economic conditions,
competition, and other factors, including the availability of suitable
buyers.
|
|
·
|
that
a broker or dealer approve a person's account for transactions
in penny stocks; and
|
|
·
|
the
broker or dealer receive from the investor a written agreement
to the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
|
|
·
|
obtain
financial information and investment experience objectives of the person;
and
|
|
·
|
make
a reasonable determination that the transactions in
penny stocks are suitable for that person and the
person has sufficient
knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny
stocks.
|
|
·
|
sets forth the basis
on which the broker or dealer made
the suitability determination; and
|
|
·
|
that
the broker or dealer received a signed, written agreement from
the investor prior to the
transaction.
|
ITEM
2:
|
PROPERTIES
|
ITEM
3:
|
LEGAL
PROCEEDINGS
|
ITEM
4:
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
ITEM
5:
|
MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
QUARTER
ENDED
|
CLOSING
|
HIGH
|
LOW
|
|||||||||
December
31, 2007
|
.23 | .25 | .09 | |||||||||
March
31, 2008
|
.04 | .25 | .04 | |||||||||
June
30, 2008
|
.04 | .07 | .03 | |||||||||
September
30, 2008
|
.04 | .06 | .02 | |||||||||
December
31, 2006
|
2.97 | 27.50 | 2.97 | |||||||||
March
31, 2007
|
1.32 | 6.60 | 1.10 | |||||||||
June
30, 2007
|
.10 | .90 | .10 | |||||||||
September
30, 2007
|
.12 | .35 | .08 |
ITEM
6:
|
SELECTED
FINANCIAL DATA
|
2008
|
2007
|
2006
|
||||||||||
Statements
of Operations Data:
|
||||||||||||
Income
from operations
|
$ | 64,402 | $ | 318 | $ | - | ||||||
Expenses
**
|
226,039 | 44,054 | 404,668 | |||||||||
Net
loss from operations
|
(161,637 | ) | (43,736 | ) | (404,668 | ) | ||||||
Net
realized and unrealized gains (losses)
|
97,970 | (50,000 | ) | - | ||||||||
Preferred
dividends
|
(162,780 | ) |
|
|||||||||
Net
decrease in net assets from operations
|
$ | (226,447 | ) | $ | (93,736 | ) | $ | (404,668 | ) | |||
Net
decrease in net assets from operations
|
||||||||||||
per
share, basic and diluted
|
$ | (0.0059 | ) | $ | (0.0342 | ) | $ | (4.0867 | ) | |||
Weighted
average shares, basic and diluted
|
38,155,238 | 2,739,989 | 99,020 |
2008
|
2007
|
2006
|
||||||||||
Statements
of Net Assets (Liabilities) Data:
|
||||||||||||
Investments
at fair value
|
$ | 944,345 | $ | 114,500 | $ | - | ||||||
Investments
at cost
|
901,375 | 164,500 | - | |||||||||
Cash
and cash equivalents
|
10,570 | 8,350 | - | |||||||||
Total
assets
|
1,012,885 | 123,169 | - | |||||||||
Total
liabilities
|
(42,005 | ) | (37,151 | ) | (37,946 | ) | ||||||
Total
preferred stock at liquidation value
|
- | (271,300 | ) | (271,300 | ) | |||||||
Net
assets (liabilities)
|
$ | 970,880 | $ | (185,282 | ) | $ | (309,246 | ) | ||||
Net
asset (liability) value per share
|
$ | 0.0192 | $ | (0.0291 | ) | $ | (3.1231 | ) | ||||
Common
stock outstanding at year end
|
50,592,487 | 6,375,821 | 99,020 |
ITEM
7:
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
·
|
public
and private companies,
|
|
·
|
investment
bankers,
|
|
·
|
attorneys,
|
|
·
|
accountants,
|
|
·
|
consultants,
and
|
|
·
|
commercial
bankers.
|
|
·
|
purchase
and sell real estate or interests in real estate in connection with the
orderly liquidation of investments, or in connection with foreclosure on
collateral;
|
|
·
|
own
the securities of companies that are in the business of buying, selling or
developing real estate; or
|
|
·
|
finance
the purchase of real estate by our portfolio
companies.
|
|
·
|
sell
securities short except with regard to managing the risks associated with
publicly-traded securities issued by our portfolio
companies;
|
|
·
|
purchase
securities on margin (except to the extent that we may purchase securities
with borrowed money); or
|
|
·
|
engage
in the purchase or sale of commodities or commodity contracts, including
futures contracts except where necessary in working out distressed
loans.
|
|
·
|
patents
or trade secrets with respect to owning or manufacturing its products,
and
|
|
·
|
a
demonstrable and sustainable marketing advantage over its
competition.
|
|
·
|
an
initial public offering,
|
|
·
|
a
private sale of our equity interest to a third
party,
|
|
·
|
a
merger or an acquisition of the portfolio company,
or
|
|
·
|
a
purchase of our equity position by the portfolio company or one of its
stockholders.
|
|
·
|
“piggyback"
registration rights, which will permit us under certain circumstances, to
include some or all of the securities owned by us in a registration
statement filed by the eligible portfolio company,
or
|
|
·
|
in
some circumstances, "demand" registration rights permitting us under
certain circumstances, to require the eligible portfolio company to
register the securities under the 1933 Act, in some cases at our
expense. We will generally negotiate net issuance
provisions in the warrants, which will allow us to receive upon exercise
of the warrants without payment of any cash a net amount of shares
determined by the increase in the value of the issuer's stock above the
exercise price stated in the
warrant.
|
|
·
|
accounts
receivable,
|
|
·
|
inventory,
and
|
|
·
|
equipment,
|
|
·
|
intellectual
property,
|
|
·
|
customer
lists,
|
|
·
|
networks,
and
|
|
·
|
databases.
|
|
·
|
company
and technology assessments,
|
|
·
|
existing
management team,
|
|
·
|
market
analysis,
|
|
·
|
competitive
analysis,
|
|
·
|
evaluation
of management, risk analysis and transaction
size,
|
|
·
|
pricing,
and
|
|
·
|
structure
analysis.
|
|
·
|
Interviews
with management and significant shareholders, including any financial or
strategic sponsor;
|
|
·
|
Review
of financing history;
|
|
·
|
Review
of management's track record with respect
to:
|
|
o
|
product
development and marketing,
|
|
o
|
mergers
and acquisitions,
|
|
o
|
alliances,
|
|
o
|
collaborations,
and
|
|
o
|
research
and development outsourcing and other strategic
activities;
|
|
·
|
Assessment
of competition; and
|
|
·
|
Review
of exit strategies.
|
|
·
|
Evaluation
of future financing needs and
plans;
|
|
·
|
Detailed
analysis of financial performance;
|
|
·
|
Development
of pro forma financial projections;
and
|
|
·
|
Review
of assets and liabilities, including contingent liabilities, if any, and
legal and regulatory risks.
|
|
·
|
Evaluation
of intellectual property position;
|
|
·
|
Review
of existing customer or similar agreements and
arrangements;
|
|
·
|
Analysis
of core technology;
|
|
·
|
Assessment
of collaborations;
|
|
·
|
Review
of sales and marketing procedures;
and
|
|
·
|
Assessment
of market and growth potential.
|
|
·
|
Assessment
of business development success, including product development,
financings, profitability and the portfolio company's overall adherence to
its business plan;
|
|
·
|
Periodic
and regular contact with portfolio company management to discuss financial
position, requirements and
accomplishments;
|
|
·
|
Periodic
and regular formal update interviews with portfolio company management
and, if appropriate, the financial or strategic
sponsor;
|
|
·
|
Attendance
at and participation in board meetings;
and
|
|
·
|
Review
of monthly and quarterly financial statements and financial projections
for portfolio companies.
|
|
·
|
monitoring
the operations of our portfolio
companies,
|
|
·
|
participating
in their board and management
meetings,
|
|
·
|
consulting
with and advising their officers,
and
|
|
·
|
providing
other organizational and financial
guidance.
|
2008
|
2007
|
|||||||
Market
value, beginning of year
|
$ | 114,500 | $ | - | ||||
Acquisition
of investments, for cash
|
442,375 | 164,500 | ||||||
Acquisition
of investments with common stock
|
344,500 | - | ||||||
Sale
of investments
|
(50,000 | ) | - | |||||
Unrealized
appreciation (depreciation)
|
92,970 | (50,000 | ) | |||||
Market
value, end of year
|
$ | 944,345 | $ | 114,500 |
ITEM
7A:
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
8:
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
49
|
Statements
of Net Assets (Liabilities) at September 30, 2008 and 2007
|
50
|
Statements
of Operations for the Years Ended September 30, 2008, 2007 and
2006
|
51
|
Statements
of Cash Flows for the Years Ended September 30, 2008, 2007 and
2006
|
52
|
Statements
of Changes in Net Assets (Liabilities) for the Years Ended September 30,
2008, 2007 and 2006
|
53
|
Schedules
of Investments at September 30, 2008 and 2007
|
54
|
Notes
to Financial Statements
|
56
|
Financial
Highlights for the Years Ended September 30, 2008, 2007 and
2006
|
71
|
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Non-affiliate
investments (cost: 2008 - $404,953, 2007 - $164,500)
|
$ | 575,923 | $ | 114,500 | ||||
Affiliate
investments (cost: 2008 - $496,422, 2007 - 0)
|
368,422 | - | ||||||
944,345 | 114,500 | |||||||
Cash
and cash equivalents
|
10,570 | 8,351 | ||||||
Accounts
receivable - portfolio companies
|
57,970 | 318 | ||||||
TOTAL
ASSETS
|
1,012,885 | 123,169 | ||||||
LIABILITIES
|
||||||||
Accounts
payable
|
21,839 | 6,039 | ||||||
Advance
from shareholder
|
20,000 | - | ||||||
Accrued
expenses
|
166 | 166 | ||||||
Total
current liabilities
|
42,005 | 6,205 | ||||||
Dividends
payable
|
- | 30,946 | ||||||
Preferred
stock: $0.001 par value; 12,500 shares authorized; 0 and
2713
|
||||||||
shares
issued and outstanding at September 30, 2008 and 2007,
|
||||||||
respectively;
liquidation preference $271,300 in 2007
|
- | 271,300 | ||||||
TOTAL
LIABILITIES
|
42,005 | 308,451 | ||||||
NET
ASSETS (LIABILITIES)
|
$ | 970,880 | $ | (185,282 | ) | |||
Commitments
and contingencies
|
||||||||
COMPOSITION
OF NET ASSETS (LIABILITIES)
|
||||||||
Common
stock: $0.001 par value; authorized 100,000,000 shares;
|
||||||||
issued
and outstanding 50,592,487 shares and 6,375,821 shares at
|
||||||||
September
30, 2008 and 2007, respectively
|
50,592 | 6,376 | ||||||
Additional
paid in capital
|
9,936,356 | 8,602,963 | ||||||
Stock
subscription receivable
|
- | (5,000 | ) | |||||
Accumulated
deficit:
|
||||||||
Accumulated
net operating loss
|
(9,064,038 | ) | (8,739,621 | ) | ||||
Net
realized gain (loss) on investments
|
5,000 | - | ||||||
Net
unrealized appreciation (depreciation) of investments
|
42,970 | (50,000 | ) | |||||
NET
ASSETS (LIABILITIES)
|
$ | 970,880 | $ | (185,282 | ) | |||
NET
ASSET (LIABILITY) VALUE PER SHARE
|
$ | 0.0192 | $ | (0.0291 | ) |
2008
|
2007
|
2006
|
||||||||||
Income
from operations:
|
||||||||||||
Management
income - non-affiliated portfolio companies
|
$ | 15,000 | $ | - | $ | - | ||||||
Management
income - affiliated portfolio companies
|
30,000 | - | - | |||||||||
Interest
income from non-affiliated portfolio companies
|
19,402 | 318 | - | |||||||||
64,402 | 318 | - | ||||||||||
Expenses:
|
||||||||||||
Salaries
and wages
|
43,000 | 3,000 | - | |||||||||
Legal
and accounting fees
|
143,940 | 24,250 | - | |||||||||
Director
fees
|
10,000 | - | - | |||||||||
Stock
transfer and Edgar filing
|
11,926 | 3,761 | - | |||||||||
Travel
and entertainment
|
5,131 | 4,758 | - | |||||||||
Other
general and administrative expense
|
12,042 | 750 | - | |||||||||
226,039 | 36,519 | - | ||||||||||
Loss
before income taxes
|
(161,637 | ) | (36,201 | ) | - | |||||||
Income
taxes
|
- | - | - | |||||||||
Net
loss from operations
|
(161,637 | ) | (36,201 | ) | - | |||||||
Net
realized and unrealized gains (losses) in
|
||||||||||||
non-controlled
non-affiliated investments:
|
||||||||||||
Net
realized gain (loss) on investment, net of income
|
||||||||||||
tax
benefit of $0
|
5,000 | - | - | |||||||||
Change
in unrealized appreciation (depreciation) of
|
||||||||||||
investments,
net of deferred tax expense of $0
|
92,970 | (50,000 | ) | - | ||||||||
Net
realized and unrealized gains (losses)
|
97,970 | (50,000 | ) | - | ||||||||
Net
decrease in net assets from continuing operations
|
(63,667 | ) | (86,201 | ) | - | |||||||
Discontinued
operations:
|
||||||||||||
Loss
from discontinued operations, net of deferred tax
|
||||||||||||
tax
expense of $0
|
- | (7,535 | ) | (404,668 | ) | |||||||
Available
to common shareholders
|
(63,667 | ) | (93,736 | ) | (404,668 | ) | ||||||
Preferred
dividends
|
162,780 | - | - | |||||||||
Net
decrease in net assets from operations
|
$ | (226,447 | ) | $ | (93,736 | ) | $ | (404,668 | ) | |||
Net
decrease in net assets per share, basic and diluted:
|
||||||||||||
Continuing
operations
|
$ | (0.0059 | ) | $ | (0.0315 | ) | $ | - | ||||
Discontinued
operations
|
- | (0.0028 | ) | (4.0867 | ) | |||||||
Net
decrease in net assets per share
|
$ | (0.0059 | ) | $ | (0.0342 | ) | $ | (4.0867 | ) | |||
Weighted
average shares outstanding
|
38,155,238 | 2,739,989 | 99,020 |
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
decrease in net assets from operations
|
$ | (226,447 | ) | $ | (93,736 | ) | $ | (404,668 | ) | |||
Net
decrease in net assets from discontinued operations
|
- | (7,535 | ) | (404,668 | ) | |||||||
Net
decrease in net assets from continuing operations
|
(226,447 | ) | (86,201 | ) | - | |||||||
Adjustments
to reconcile net decrease in net assets
|
||||||||||||
from
operations to net cash used in operating
|
||||||||||||
activities:
|
||||||||||||
Change
in unrealized depreciation of investments
|
(92,970 | ) | 50,000 | - | ||||||||
Purchase
of investments
|
(442,374 | ) | (164,500 | ) | - | |||||||
Proceeds
from sale of investment
|
55,000 | - | - | |||||||||
Gain
on sale of investment
|
(5,000 | ) | - | - | ||||||||
Increase
in accounts receivable - portfolio companies
|
(57,652 | ) | (318 | ) | - | |||||||
Preferred
dividends declared
|
162,780 | - | - | |||||||||
Increase
in accounts payable and accrued expenses
|
15,799 | 314 | - | |||||||||
Net
cash used in operating activities
|
(590,864 | ) | (200,705 | ) | - | |||||||
Cash
flows from investing activities:
|
||||||||||||
Cash
from discontinued operations
|
- | 1,356 | - | |||||||||
Net
cash used by investing activities
|
- | 1,356 | - | |||||||||
Cash
flows from financing activities:
|
||||||||||||
Collection
of stock subscription receivable
|
5,000 | - | - | |||||||||
Loan
from stockholder
|
20,000 | - | - | |||||||||
Payment
of preferred dividends
|
(67,500 | ) | - | - | ||||||||
Proceeds
from sale of common stock
|
635,583 | 207,700 | - | |||||||||
Net
cash provided by financing activities
|
593,083 | 207,700 | - | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
2,219 | 8,351 | - | |||||||||
Cash
and cash equivalents, beginning of year
|
8,351 | - | - | |||||||||
Cash
and cash equivalents, end of year
|
$ | 10,570 | $ | 8,351 | $ | - | ||||||
Supplemental
cash flow information:
|
||||||||||||
Cash
paid for interest and income taxes:
|
- | |||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
- | - | - | |||||||||
Non-cash
investing and financing activities:
|
||||||||||||
Investments
acquired for common stock
|
344,500 | - | - | |||||||||
Common
stock exchanged for preferred stock and accrued
|
||||||||||||
dividends
|
397,526 | - | - |
2008
|
2007
|
2006
|
||||||||||
Changes
in net assets from operations:
|
||||||||||||
Net
loss from continuing operations
|
$ | (324,417 | ) | $ | (36,201 | ) | $ | - | ||||
Net
loss from discontinued operations
|
- | (7,535 | ) | (404,668 | ) | |||||||
Net
realized gain (loss) on sale of investments, net
|
5,000 | - | - | |||||||||
Change
in net unrealized appreciation (depreciation)
|
||||||||||||
of
investments, net
|
92,970 | (50,000 | ) | - | ||||||||
Net
decrease in net assets from operations
|
(226,447 | ) | (93,736 | ) | (404,668 | ) | ||||||
Capital
stock transactions
|
||||||||||||
Common
stock issued for cash
|
635,583 | 207,700 | - | |||||||||
Common
stock issued for cash - discontinued operations
|
- | 10,000 | - | |||||||||
Common
stock issued for investments
|
344,500 | - | - | |||||||||
Common
stock issued for preferred stock and
|
||||||||||||
accumulated
dividends
|
397,526 | - | - | |||||||||
Collection
of stock subscription receivable
|
5,000 | - | - | |||||||||
Liabilities
forgiven by the former officers and
|
||||||||||||
shareholders
|
- | - | 709,181 | |||||||||
Legal
expenses contributed by the former CEO of the
|
||||||||||||
Company
|
- | - | 26,840 | |||||||||
Available
for sale securities
|
- | - | (74,470 | ) | ||||||||
Net
increase in net assets from stock transactions
|
1,382,609 | 217,700 | 661,551 | |||||||||
Net
increase (decrease) in net assets
|
1,156,162 | 123,964 | 256,883 | |||||||||
Net
assets (liabilities) at beginning of year
|
(185,282 | ) | (309,246 | ) | (566,129 | ) | ||||||
Net
assets (liabilities) at end of year
|
$ | 970,880 | $ | (185,282 | ) | $ | (309,246 | ) |
Percent
|
||||||||||||||||
Shares/
|
Quarter
|
Original
|
Fair
|
Net
|
||||||||||||
Interest
|
Acquired
|
Cost
|
Value
|
Assets
|
||||||||||||
UNAFFILIATED
PORTFOLIO INVESTMENTS
|
||||||||||||||||
NON-INCOME
PRODUCING INVESTMENTS
|
||||||||||||||||
750,000 |
Mar-07
|
EffTec
International, Inc. (Pink Sheets:EFFI);
|
$ | 125,000 | $ | 16,500 | 2 | % | ||||||||
Jun-07
|
EffTec
has developed an Internet-based chiller
|
|||||||||||||||
tool
which it is installing and selling to its customer
|
||||||||||||||||
base
|
||||||||||||||||
500 |
Jul-08
|
Alt
Energy, Inc. (private) oil and gas development and
|
||||||||||||||
production
company
|
24,500 | 24,500 | 3 | % | ||||||||||||
150,000 |
Jul-08
|
North
American Energy Resources, Inc. (OTCBB:NAEN)
|
||||||||||||||
Oil
and gas development and production company
|
35,529 | 315,000 | 32 | % | ||||||||||||
185,029 | 356,000 | 37 | % | |||||||||||||
LOAN
INVESTMENTS
|
||||||||||||||||
Loan
|
Sep-07
|
Line
of credit with EffTec International, Inc. with
|
51,500 | 51,500 | 5 | % | ||||||||||
Dec-07
|
interest
at 12%; due September 30, 2008; EffTec has
|
|||||||||||||||
developed
and sells an Internet-based chiller tool
|
||||||||||||||||
Loan
|
Dec-07
|
Line
of credit with ZATSO, LLC (private) with interest
|
||||||||||||||
at
6%; due September 30, 2009; Zatso is an Internet
|
||||||||||||||||
based
game developer
|
168,423 | 168,423 | 17 | % | ||||||||||||
219,923 | 219,923 | 22 | % | |||||||||||||
Total
unaffiliated portfolio investments
|
404,952 | 575,923 | 59 | % | ||||||||||||
AFFILIATED
PORTFOLIO INVESTMENTS
|
||||||||||||||||
Dec-07
|
Ultimate
Social Network, Inc. (private); Ultimate owns
|
|||||||||||||||
The
Ultimate College Model contest website. The
|
||||||||||||||||
contest
allows men and women enrolled in college to
|
||||||||||||||||
post
their pictures and enter a weekly modeling
|
||||||||||||||||
contest. Members
participate by rating contestants.
|
||||||||||||||||
60,000 [60%] |
Stock
investment
|
320,000 | 192,000 | 20 | % | |||||||||||
Loan
|
6%
line-of-credit due September 30, 2009
|
176,422 | 176,422 | 18 | % | |||||||||||
Total
affiliated portfolio investments
|
496,422 | 368,422 | 38 | % | ||||||||||||
Total
investments at September 30, 2008
|
$ | 901,374 | 944,345 | 97 | % | |||||||||||
Cash
and other assets, less liabilities
|
26,535 | 3 | % | |||||||||||||
Net
assets at September 30, 2008
|
$ | 970,880 | 100 | % |
Percent
|
||||||||||||||||
Shares/
|
Quarter
|
Original
|
Fair
|
Net
|
||||||||||||
Interest
|
Acquired
|
Cost
|
Value
|
Assets
|
||||||||||||
NON-INCOME
PRODUCING INVESTMENTS
|
||||||||||||||||
750,000 |
Mar-07
|
EffTec
International, Inc. (Pink Sheets:EFFI);
|
$ | 125,000 | $ | 75,000 | 87 | % | ||||||||
Jun-07
|
EffTec
has developed an Internet-based chiller
|
|||||||||||||||
tool
which it is installing and selling to its customer
|
||||||||||||||||
base
|
||||||||||||||||
125,000 | 75,000 | 87 | % | |||||||||||||
LOAN
INVESTMENTS
|
||||||||||||||||
Loan
|
Sep-07
|
Line
of credit with Signature Energy, Inc. (prrivate)
|
14,500 | 14,500 | 17 | % | ||||||||||
with
interest at 8%; due August 2008; Signature is an
|
||||||||||||||||
oil
and gas development and production company
|
||||||||||||||||
Loan
|
Sep-07
|
Line
of credit with EffTec International, Inc. with
|
25,000 | 25,000 | 29 | % | ||||||||||
interest
at 8%; due August 2008; EffTec has
|
||||||||||||||||
developed
and sells an Internet-based chiller tool
|
||||||||||||||||
39,500 | 39,500 | 46 | % | |||||||||||||
Total
investments at September 30, 2007
|
$ | 164,500 | 114,500 | 133 | % | |||||||||||
Cash
and other assets, less liabilities
|
(28,482 | ) | -33 | % | ||||||||||||
Net
assets at September 30, 2007
|
$ | 86,018 | 100 | % |
1.
|
NATURE
OF BUSINESS
|
|
a.
|
ORGANIZATION
|
|
b.
|
GOING
CONCERN
|
|
c.
|
INVESTMENT
COMPANY
|
|
·
|
Cash;
|
|
·
|
Cash
equivalents;
|
|
·
|
U.S.
Government securities; or
|
|
·
|
High-quality
debt investments maturing in one year or less from the date of
investment.
|
|
·
|
Does
not have a class of securities registered on an exchange or included in
the Federal Reserve Board’s over-the-counter margin
list;
|
|
·
|
Is
actively controlled by a BDC and has an affiliate of a BDC on its board of
directors; or
|
|
·
|
Meets
such other criteria as may be established by the
SEC.
|
|
·
|
Total
amount of the Company's actual investment. This amount shall include all
loans, purchase price of securities and fair value of securities given at
the time of exchange;
|
|
·
|
Total
revenues for the preceding twelve
months;
|
|
·
|
Earnings
before interest, taxes and
depreciation;
|
|
·
|
Estimate
of likely sale price of investment;
|
|
·
|
Net
assets of investment; and
|
|
·
|
Likelihood
of investment generating positive returns (going
concern).
|
|
·
|
Where
no or limited revenues or earnings are present, then the value shall be
the greater of net assets, estimated sales price, or total cost for each
investment;
|
|
·
|
Where
revenues and/or earnings are present, then the value shall be the greater
of one-times (1x) revenues or three-times (3x) earnings, plus the greater
of the net assets of the investment or the total amount of the actual
investment; or
|
|
·
|
Under
both scenarios, the value of the investment shall be adjusted down if
there is a reasonable expectation that the Company will not be able to
recoup the investment or if there is reasonable doubt about the
investment’s ability to continue as a going
concern.
|
2007
|
2006
|
|||||||
Revenues
|
$ | - | $ | - | ||||
Net
loss from operations
|
$ | (7,535 | ) | $ | (404,668 | ) | ||
Net
loss per share, basic and diluted
|
$ | (0.0028 | ) | $ | (4.0867 | ) |
2008
|
2007
|
2006
|
||||||||||
Computed
"expected" income tax (benefit)
|
$ | (21,600 | ) | $ | (31,900 | ) | $ | (138,300 | ) | |||
State
income taxes, net of federal benefit
|
(2,300 | ) | (3,400 | ) | (14,800 | ) | ||||||
Travel
and entertainment
|
- | 100 | - | |||||||||
Available
for sale securities
|
- | - | 44,900 | |||||||||
Valuation
allowance
|
23,900 | 35,200 | 108,200 | |||||||||
$ | - | $ | - | $ | - |
2008
|
2007
|
|||||||
Net
operating loss carryforwards
|
$ | 828,500 | $ | 771,400 | ||||
Capital
loss carryforwards
|
6,100 | 176,600 | ||||||
Investments
|
(16,200 | ) | 17,000 | |||||
Total
deferred tax assets
|
818,400 | 965,000 | ||||||
Valuation
allowance
|
(818,400 | ) | (965,000 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
7.
|
COMPOSITION
OF NET ASSETS LIABILITIES - STOCKHOLDERS’ EQUITY
(DEFICIT)
|
8.
|
RELATED
PARTY TRANSACTIONS
|
9.
|
EMPLOYEE
INCENTIVE STOCK OPTION AGREEMENTS
|
2007
|
2007
|
2006
|
||||||||||
PER
SHARE INFORMATION
|
||||||||||||
Net
asset value, beginning of year
|
$ | (0.0291 | ) | $ | (3.1231 | ) | $ | (5.7173 | ) | |||
Net
decrease from operations (a)
|
(0.0085 | ) | (0.0160 | ) | (4.0867 | ) | ||||||
Liabilities
forgiven by former officer and
|
||||||||||||
shareholders
|
- | - | 7.4331 | |||||||||
Net
change in realized gain (loss) and unrealized
|
||||||||||||
appreciation
(depreciation) of investments, net
|
0.0026 | (0.0182 | ) | - | ||||||||
Net
increase from stock transactions
|
0.0542 | 3.1282 | (0.7522 | ) | ||||||||
Net
asset value, end of year
|
$ | 0.0192 | $ | (0.0291 | ) | $ | (3.1231 | ) | ||||
Per
share market value:
|
||||||||||||
Beginning
of period
|
$ | 0.12 | $ | 4.44 | $ | 1.78 | ||||||
End
of period
|
$ | 0.04 | $ | 0.12 | $ | 4.44 | ||||||
Investment
return, based on market prices
|
||||||||||||
at
end of period
|
-67 | % | -97 | % | 149 | % | ||||||
RATIOS/SUPPLEMENTAL
DATA
|
||||||||||||
Net
assets, end of year
|
970,880 | (185,282 | ) | (309,246 | ) | |||||||
Average
net assets
|
545,806 | (206,030 | ) | (677,729 | ) | |||||||
Annualized
ratio of expenses to average net assets
|
41 | % | -18 | % |
(b)
|
|||||||
Annualized
ratio of net decrease in net assets
|
||||||||||||
from
operations to average net assets
|
-41 | % | 45 | % |
(b)
|
|||||||
Common
stock outstanding at end of year
|
50,592,487 | 6,375,821 | 99,020 | |||||||||
Weighted
average shares outstanding during year
|
38,155,238 | 2,739,989 | 99,020 |
ITEM
9:
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
10:
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE
REGISTRANT
|
NAME
|
AGE
|
POSITION
|
||
M.E.
“Hank” Durschlag
|
45
|
President,
CEO and Director since March 30, 2007
|
||
Ross
E. Silvey
|
79
|
Independent
Director since March 30, 2007
|
||
Erik
S. Phillips
|
38
|
Independent
Director since December
2007
|
ITEM
11:
|
EXECUTIVE
COMPENSATION
|
a.
|
Summary
Compensation Table
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Total
|
||||||||||
M.E.
“Hank” Durschlag
|
2008
|
$ | 19,500 |
None
|
$ | 19,500 | ||||||||
Chairman
of the Board,
|
2007
|
$ | 3,000 | N/A | $ | 3,000 | ||||||||
President,
CEO and CFO
|
2006
|
N/A | N/A | N/A | ||||||||||
Since
March 30, 2007
|
||||||||||||||
Michael
D. Pruitt
|
2008
|
N/A | N/A | N/A | ||||||||||
Chairman
of the Board,
|
2007
|
None
|
None
|
None
|
||||||||||
President,
CEO and CFO
|
2006
|
None
|
None
|
None
|
||||||||||
Since
September 22, 2006
|
||||||||||||||
Until
March 30, 2007
|
||||||||||||||
Herbert
Tabin
|
2008
|
N/A | N/A | N/A | ||||||||||
Chairman
of the Board
|
2007
|
N/A | N/A | N/A | ||||||||||
And
CEO from July 25,
|
2006
|
None
|
None
|
None
|
||||||||||
2000
until September
|
||||||||||||||
22, 2006 | ||||||||||||||
Marissa
Dermer
|
2008
|
N/A | N/A | N/A | ||||||||||
CFO
from September
|
2007
|
N/A | N/A | N/A | ||||||||||
2000
until September
|
2006
|
None
|
None
|
None
|
||||||||||
21, 2006 |
b.
|
Grants
of plan-based awards table
|
c.
|
Outstanding
equity awards at fiscal year-end
table
|
d.
|
Option
exercises and stock vested table
|
e.
|
Pension
benefits
|
f.
|
Nonqualified
defined contribution and other nonqualified deferred compensation
plans
|
g.
|
Potential
payments upon termination or
changes-in-control
|
h.
|
Compensation
of directors
|
Directors Fee
|
||||
Earned or Paid
|
||||
Name
|
In Cash ($)
|
|||
M.E.
“Hank” Durschlag
|
$ | - | ||
Ross
E. Silvey
|
10,000 | |||
Erik
S. Phillips
|
- |
i.
|
Compensation
committee interlocks and insider
participation
|
j.
|
Compensation
committee report
|
ITEM
12:
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
Name and Address of
|
Amount and Nature of
|
|||||||||
Title of Class
|
Beneficial Owner *
|
Beneficial Owner
|
% of Class
|
|||||||
Common
|
Adam Adler
|
4,000,000 | 7.91 | % | ||||||
Common
|
Avenel Financial Group, Inc.
|
2,580,000 | 5.10 | % |
Name and Address of
|
Amount and Nature of
|
|||||||||
Title of Class
|
Beneficial Owner
|
Beneficial Owner
|
% of Class
|
|||||||
Common
|
M.E. “Hank” Durschlag
|
1,000,000 | 1.98 | % | ||||||
Common
|
Ross E. Silvey
|
- | * | |||||||
Common
|
Erik S. Phillips
|
- | * | |||||||
Common
|
All officers and directors as a
|
1,000,000 | 1.98 | % | ||||||
Group (3 persons)
|
|
*
|
Less
than 1%.
|
ITEM
13:
|
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
|
ITEM
14:
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
ITEM
15:
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
|
(a)
|
The
following documents are filed as part of this
report:
|
|
1.
|
Financial
Statements – The following financial statements of Double Eagle Holdings,
Ltd. are contained in Item 8 of this Form
10-K:
|
|
·
|
Report
of Independent Registered Public
Accountant
|
|
·
|
Statements
of Net Assets (Liabilities) at September 30, 2008 and
2007
|
|
·
|
Statements
of Operations – For the years ended September 30, 2008, 2007 and
2006
|
|
·
|
Statements
of Cash Flows – For the years ended September 30, 2008, 2007 and
2006
|
|
·
|
Statements
of Changes in Net Assets (Liabilities) – For the years ended September 30,
2008, 2007 and 2006
|
|
·
|
Schedule
of Investments – At September 30, 2008 and
2007
|
|
·
|
Notes
to the Financial Statements
|
|
·
|
Financial
Highlights - For the years ended September 30, 2008, 2007 and
2006
|
|
2.
|
Financial
Statement Schedules were omitted, as they are not required or are not
applicable, or the required information is included in the Financial
Statements.
|
|
3.
|
Exhibits
– The following exhibits are filed with this report or are incorporated
herein by reference to a prior filing, in accordance with Rule 12b-32
under the Securities Exchange Act of
1934.
|
Exhibit
|
Description
|
|
31.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934, as amended, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
DOUBLE
EAGLE HOLDINGS, LTD.
|
||
By:
|
/s/
M.E. “Hank”
Durschlag
|
|
M.E.
“Hank” Durschlag, Chairman,
|
||
Chief
Executive Officer and
|
||
Chief
Financial Officer
|
Title (Capacity)
|
Signature
|
|||
December 29, 2008
|
Chairman, Chief Executive Officer
|
/s/ M.E. “Hank” Durschlag
|
||
and Chief Financial Officer
|
M.E. “Hank” Durschlag
|
|||
Director
|
/s/ Ross E. Silvey
|
|||
Ross E. Silvey
|
||||
December 29, 2008
|
Director
|
/s/ Erik S. Phillips
|
||
Erik S. Phillips
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