UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-50212
BAS CONSULTING, INC.
--------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 81-0592184
--------------------------------------------- -------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
5675B Baldwin Court
Norcross, GA 30071
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(Address of principal Executive Offices) (Zip Code)
Issuer's Telephone Number: 770-378-4180
Securities registered under Section 12(g) of the Act: Common Stock par value
$.001 per share
Securities registered under Section 12(b) of the Act: None
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period 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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form and will not 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]
State Issuer's revenues for its most recent year: $6,500 as of December 31,
2004.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of March 31, 2005 is 10,453,850 shares, all of one class, $.001 par
value per share. Of this number, 899,850 shares were held by non-affiliates of
the Registrant1.
The Company's common stock has not traded on the OTCBB or elsewhere and,
accordingly, there is no aggregate "market value" to be indicated for such
shares. The "value" of the 899,850 shares held by non-affiliates, based upon the
book value as of December 31, 2004 is $-0-.
*Affiliates for the purpose of this item refers to the Registrant's officers and
directors and/or any persons or firms (excluding those brokerage firms and/or
clearing houses and/or depository companies holding Registrant's securities as
record holders only for their respective clienteles' beneficial interest) owing
5% or more of the Registrant's common stock, both of record and beneficially.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes__________No_________ NOT APPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are herewith incorporated by reference: NONE
Transitional Small Business Disclosure Format
[ ] Yes [ ] No
________________________________________________________________________________
1 One Hundred Fifty Thousand (150,000) shares of our common stock is owned by
the wife of the Issuer's President, who, solely for purposes of this 10-KSB, is
being considered an affiliate, notwithstanding the fact that her husband, the
Issuer's President, disclaims any beneficial interest in or control over the
150,000 shares of our common stock owned by his wife, except as may be
attributed to him by Operation of Law.
2
PART I
Item 1. DESCRIPTION OF BUSINESS
BAS Consulting, Inc. was incorporated in the state of Nevada on December 18,
2002 to be a consulting firm. Our mission is to provide consulting services to:
o Technology, service and manufacturing companies,
o Business development companies, and
o Financial services companies and others considering investments in
technology companies.
We will not assist clients in raising or soliciting capital or conducting any
negotiations with potential funding sources for financing, but will be available
in our role as a consulting firm, to discuss structuring concepts to the extent
permitted, so long as same does not involve activities whereby we would be
required to register with the Commission as a broker/dealer. Accordingly, we
will not effect any transaction in, or induce, or attempt to induce the purchase
or sale of any securities (unless otherwise exempt under the '34 Exchange Act)
for the account of others. We will not engage in the business of buying and
selling securities for our own account through a broker or otherwise.
Additionally, we do not intend to raise or find capital for issuers of
securities.
We commenced operations and entered into certain engagement agreements to be
performed entirely by our founder. These engagements have since been cancelled
due to the fact that the manner of compensation which we might have otherwise
received was contingent upon certain events (including closings of transactions
between un-affiliated third-parties introduced to each other by us) which would
necessitate our registering with the Commission as a broker/dealer.
Strategy
We will use our founder/president's contact base to identify clients. Our
president, who is currently our sole employee, has more than 30 years of
experience in senior positions involved with providing solutions or guidance to
technology and manufacturing issues. Throughout his career, he has specialized
in applying scientific and analytic techniques to help business enterprises
increase their profitability and value. Much of his work has been to define, or
redefine, how a business is structured, and often to design, integrate and
install automated systems that increase the value of a business by producing
substantial increases in productivity. In many cases, achieving targeted goals
required major financial, organizational and cultural changes within the client
organization. This experience has provided him with a wide range of contacts in
the investment banking, science and technology communities. We will approach
these contacts in order to obtain potential client referrals. Our method of
contact will be in person, by telephone and through mailings. Our approach will
be:
Technology and manufacturing companies
We intend to advise principals and management concerning the utility of existing
or planned technology and products and assist them in devising effective and
efficient manufacturing and distribution models. We will also be available to
assist companies in making decisions about research and development
alternatives.
We will work with and engage independent consultants to:
o Prepare or assist in the preparation of business plans; and
o Assess technology and markets.
Initially, the independent consultants will be individuals or groups with whom
our president is familiar or with whom our president has undertaken projects in
the past. If we obtain significant numbers of engagements, we anticipate
increasing our base of consultants. The purpose of using outside consultants is
to have access to skilled professionals on an "as needed" basis without
incurring fixed costs. As part of our services, we will also provide clients
with advice on making their business more interesting or attractive to
investors. Our target market will be small and medium sized companies that have
limited resources and need to decide how to allocate those resources among
potential projects. We will also work with companies that need to become more
efficient by introducing automated manufacturing processes.
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Business Development Companies
We will market our services to business development companies to perform due
diligence and management services in connection with potential and actual
portfolio companies. These services will include assessing the technologies of
the target companies as well as assisting in establishing managerial and control
systems.
Our founder is also a co-founder of a recently established business development
company.
Financial firms
We will market our services to financial firms primarily by being available to
assist those firms in planning or performing due diligence procedures. Many
potential investors, venture capital organizations and others consider
investment opportunities in areas where they lack the technical knowledge to
assess or even understand the underlying technology of the proposed investee. We
will assist those companies to develop a cost effective program to verify,
confirm, assess and evaluate the technology or business of prospective
acquirees, investees or undertakings.
We plan to operate domestically and will market our services through other
professional service firms, principally local and regional accounting,
consulting and law firms. We anticipate working with young private companies, as
well as small public companies, that lack the resources to obtain services from
older more established firms and which have little or no access to venture
capital. We will attempt to negotiate fixed minimum fees for engagements as well
as non-contingent hourly fees for services rendered, but will not undertake
engagements whereby the fee is based upon contingencies (such as closings). We
anticipate that our typical engagements with technology or manufacturing
companies will be for terms of six to eighteen months and will seek renewals
wherever possible. Due diligence engagements will typically be for terms of a
month or less. However, engagements with business development companies may be
for longer periods of time and entail due diligence projects involving more than
one entity.
We are contacting our base of contacts to seek client engagements. We do not
believe that we need funding to operate at the current level of activity because
we do not have a capital intensive business plan and can also use independent
contractors to assist in many projects. We will use funding, if obtained, to
cover the salary of our president and to pay for marketing materials and
proposal efforts. We may seek venture or private capital in the future but have
not done so to date. Such funding, which would probably not exceed $100,000
will, if obtained, be used to pay salaries and for the production of marketing
materials. However, we have commenced operations and solicited engagements even
though no funding has been obtained. The private capital will be sought from
former business associates of our president or private investors referred to us
by those associates. If a market for our shares ever develops, of which there
can be no assurances, we will use shares of our common stock to compensate
employees/consultants wherever possible. To date, we have not sought any funding
source and have not authorized any person or entity to seek out funding on our
behalf.
Competition in our industry is intense and most of our competitors have greater
financial and other resources than we do. Competition will come from a wide
variety of consulting and engineering service firms. We intend to compete based
on the reputation and contacts of our founder and the creative and practical
approach to services that we offer.
No assurances can be given that our competitive strategy will be successful.
4
Employees
On December 31, 2004, we had one employee, B. Alva Schoomer, who is not
currently serving in a fulltime capacity. Dr. Schoomer devotes the amount of
time to us that he feels is necessary to perform any engagements obtained and to
seek new ones. We will seek to engage independent contractors known to our
founder to the extent that we need skills that our founder does not posses or
additional assistance to complete a project. No assurances can be given that
such independent contractors will be available when needed on terms acceptable
to us.
Item 2. DESCRIPTION OF PROPERTY
We currently operate out of office space located at 5675B Baldwin Court,
Norcross, GA 30071 which is provided to us by our founder at no cost which
serves as our principal address.
Item 3. LEGAL PROCEEDINGS
We are not involved in any litigation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Part II
Item 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER - PURCHASES OF EQUITY SECURITIES
The Company became subject to Securities Exchange Act Reporting Requirements as
of May 13, 2003.
There is no current market for the shares of our common stock. No symbol has
been assigned for our securities, and our securities have not been listed or
quoted on any Exchange to date. There can be no assurance that a liquid market
will develop in the foreseeable future. Transfer of our common stock may also be
restricted under the securities or blue sky laws of certain states and foreign
jurisdictions. Consequently, investors may not be able to liquidate their
investments and should be prepared to hold the common stock for an indefinite
period of time.
We have never paid any cash dividends on shares of our common sock and do not
anticipate that we will pay dividends in the foreseeable future. We intend to
apply any earnings to fund the development of our business. The purchase of
shares of common stock is inappropriate for investors seeking current or near
term income.
As of the close of business on December 31, 2004, there were 35 stockholders of
record of our common stock, and 10,453,850 shares were issued and outstanding.
Since inception, in December 2002 through December 31, 2003, the Company issued
an aggregate of 9,000,000 unregistered shares of common stock to 3 individuals
for $9,000 in services. No cash consideration was paid. The 3 individuals
consisted of the Company's President (8,800,000 shares), his wife (150,000
shares) and a Director (50,000 shares).
During March 2004, we issued an aggregate of 56,000 restricted shares (at par
value $.001) to 23 persons.
No underwriter participated in the above-referenced transactions and no
underwriting discounts or commissions were paid to anyone.
The foregoing issuances of securities were effectuated in reliance upon
exemption from registration provided by Section 4(2) under the Securities Act of
1933 as amended.
Additionally, during March 2004 and in accordance with our 2002 Non-Statutory
Stock Option Plan (as approved by our Board of Directors on December 31, 2002)
and in accordance with our Form S-8 Registration Statement as filed with the SEC
on February 10, 2004 (SEC File No.: 333-112672), we issued an aggregate of
1,397,850 shares of our common stock to 12 persons who previously received and
subsequently exercised options to purchase shares of our common stock at $.01
per share. Included in such 1,397,850 shares are 500,000 shares issued to our
President, B. Alva Schoomer and 50,000 shares issued to our Director, Stanley
Priskie. These two individuals are "affiliates" of our Company. In accordance
5
with our Prospectus filed as an exhibit to our Form S-8 Registration Statement,
and in particular, the Section thereof entitled "Restriction on Resale of Common
Stock" shares acquired under the Stock Option Plan by affiliates may only be
resold pursuant to registration requirements of the Act, Rule 144 or another
applicable exemption therefrom.
The Company has never repurchased any of its equity securities.
Rule 144 Sales
Of the 10,453,850 outstanding shares of common stock at March 31, 2005 held by
present stockholders, 9,056,000 are "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for a prescribed period may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed 1.0% of a company's outstanding common stock The alternative average
weekly trading volume during the four calendar weeks prior to the sale is not
available to Company shareholders being that the OTCBB is not an "automated
quotation system" and, accordingly, market based volume limitations are not
available for securities quoted only over the OTCBB. As a result of revisions to
Rule 144 which became effective on or about April 29, 1997, there is no limit on
the amount of restricted securities that may be sold by a non-affiliate (i.e., a
stockholder who is not an officer, director or control person of the Company)
after the restricted securities have been held by the owner for a period of two
years. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registrations of shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop. Of the 9,056,000 restricted shares of
common stock, 9,000,000 shares were issued in December 2002 (with the balance
issued in March 2004) and, accordingly, became available for re-sale pursuant to
Rule 144 in December 2003 provided that the Company is current with respect to
its 1934 Act reporting requirements.
Blue Sky Considerations
Because the securities that were registered through the filing of a Form 10-SB
have not been registered for resale under the blue sky laws of any state, the
holders of such shares and persons who desire to purchase them in any trading
market that might develop in the future, should be aware that there may be
significant state blue-sky law restrictions upon the ability of investors to
sell the securities and of purchasers to purchase the securities. Accordingly,
investors should consider any secondary market for the Company's securities to
be a limited one.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain matters discussed in this annual report on Form 10-KSB are
forward-looking statements. Such forward-looking statements contained in this
annual report involve risks and uncertainties, including statements as to:
o our future operating results,
o our business prospects,
o our contractual arrangements and relationships with third parties,
o the dependence of our future success on the general economy and its
impact on the industries in which we may be involved,
o the adequacy of our cash resources and working capital, and
o other factors identified in our filings with the SEC, press releases
and other public communications.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as we "believe," "anticipate,"
"expect," "estimate" or words of similar meaning. Similarly, statements that
describe our future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks and
uncertainties which are described in close proximity to such statements and
which could cause actual results to differ materially from those anticipated as
of the date of this Form 10-KSB. Shareholders, potential investors and other
readers are urged to consider these factors in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements included herein are only made as of
the date of this report and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
6
Operations
BAS, incorporated in Nevada in 2002, has not yet generated significant amounts
of revenue, is considered a development stage company as defined by Statement of
Financial Accounting Standards No. 7. During its development stage, BAS has
developed and refined its basic business plan and strategy and commenced making
business contacts and seeking clients. BAS generated its initial revenue in the
quarter ended September 30, 2003. BAS had begun soliciting and signing
engagements and performing work during the six months ended June 30, 2003. In
July 2003, BAS had entered into engagement agreements that contained
contingencies or milestones which may have required BAS to register with the SEC
as a broker/dealer.
One agreement contained milestones the first of which was achieved in July 2003
resulting in the receipt of revenue and cash in the amount of $12,500.Such
agreement dated July 14, 2003 provided for the Company acting as a finder with
respect to certain transactions relating to financings (i.e., introducing firms
to an unaffiliated third-party that would make an equity investment in the firm
introduced). The finder's fee (transaction-based compensation) was equal to five
(5%) percent of the financing conducted as a result of the Company's
introduction. Accordingly, compensation to us was contingent upon closing,
(i.e., receipt of financing). This Agreement has been cancelled although the
Company did not participate in any negotiations relating to the financings.
The remaining two consulting engagements involved:
a) An agreement, dated May 16, 2003, whereby we were engaged as the
exclusive representative with respect to a client's desired
acquisition of a publicly tradable corporate entity. In that regard,
we had agreed to search for and identify two or three prospective
acquisition candidates and to perform such due diligence as deemed
necessary with respect thereto. The client had agreed to pay us a fee
of $57,500 upon closing of an acquisition with a corporate entity
initially identified by us, i.e., compensation was contingent upon
closing. The Contract has been cancelled.
b) An agreement dated June 2, 2003 to assist a client with respect to its
overall corporate strategy of introducing timesharing to the cruise
ship industry. A fee of $50,000 was due and payable upon the
successful completion of the engagement. We intended to commence work
on this contract in late July 2003. Since compensation was contingent
upon closing, this Contract has been cancelled.
The Company will not enter any future agreements that call for a finders fee
or other similar compensation.
Because BAS does not wish to register with the SEC as a broker/dealer, it
decided to cancel those agreements heretofore entered into and referred to
above, due, in part, to the contingent nature of any compensation which it might
receive under those agreements. We have indicated elsewhere herein that we will
not assist clients in raising or soliciting capital or conducting any
negotiations with potential funding sources for financing, but will be available
in our role as a consulting firm, to discuss structuring concepts to the extent
permitted, so long as these procedures do not involve activities whereby we
would be required to register with the SEC as a broker/dealer. Accordingly, we
will not effect any transaction in, or induce, or attempt to induce the purchase
or sale of any securities (unless otherwise exempt under the '34 Exchange Act)
for the account of others, nor will we engage in the business of buying and
selling securities for our own account through a broker or otherwise.
Additionally, we do not intend to raise or find capital for issuers of
securities.
Accordingly, we will attempt to negotiate fixed minimum (or otherwise) fees for
engagements, as well as non-contingent hourly fees for services rendered, but
will not undertake engagements whereby the fee is based upon contingencies such
as transaction closings.
The extent of our operations over the next 12 months will be determined by:
o The number of client engagements that can be obtained that are either
short-term in nature or provide for progress billing, and
o Our ability to negotiate non-cash compensation to satisfy commitments.
We cannot predict what our level of activity will be over the next 12 months
because we do not know how many, if any, client engagements we will be able to
obtain. We performed a small engagement during the fourth quarter of 2004 and
realized revenue of $6,500 thereon.
7
We will not incur any cash obligations that we cannot satisfy with known
resources of which there are currently none except as hereinafter indicated. Our
founder will provide his services at no cost and will advance a limited amount
of funds to cover costs incurred. All of these advances will be treated as loans
and will be repaid if and when we have the financial resources to do so. These
costs will include the costs of seeking engagements, professional services and
incidentals. If we obtained funding of $50,000, such funds would be used to
cover initial needs for salaries, travel and advertising costs, including
printed marketing materials and a basic website. We believe that this amount
would cover at least 12 months of costs.
If we are unable to obtain financing, we will seek engagements (non-contingent
consulting contracts) through approaching the business contacts of our founder
directly rather than through other marketing strategies. By doing so, we will
not incur significant cash requirements in the process. Liquidity
Liquidity
BAS does not have any credit facilities or other commitments for debt or equity.
No assurances can be given that advances when needed will be available. BAS has
begun seeking engagements. We do not believe that we need funding to cover
initial operations because we do not have a capital intensive business plan and
can also use independent contractors to assist in many projects. We will use
funding, if obtained, to cover the salary of our founder and to pay for
marketing materials and proposal efforts. We currently have no formal salary
arrangements with Dr. Schoomer. While no definitive annual salary or length of
employment has been determined to date, we anticipate providing a minimum annual
salary of $50,000 to be accrued and paid out of revenues, if any. No salary will
be earned or accrued until initial revenue commences. No formal written
arrangements will be made until we have either obtained financing or client
engagements, however, under no circumstances will the first year's base salary
exceed $100,000. To meet commitments in the future, we will have to obtain
client engagements in sufficient number and at sufficient levels of
profitability to generate cash to meet obligations. There does not currently
appear to be any other viable source of long-term financing except that
management may consider various sources of debt and/or equity financing if same
can be obtained on terms deemed reasonable to management.
Recent Accounting Pronouncements
No new pronouncement issued by the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or the Securities and
Exchange Commission is expected to have a material impact on BAS' financial
position or reported results of operations.
Seasonality
We do not yet have a basis to determine whether our consulting business will be
seasonal.
Risk Factors
BAS is a development stage company with a very limited operating history and
anticipated losses.
BAS was incorporated in the state of Nevada on December 18, 2002 and has
relatively small levels of revenue and virtually no assets. A substantial
portion of our activities has involved developing a business plan. Therefore, we
have insufficient operating history upon which an evaluation of our future
performance and prospects can be made. BAS' future prospects must be considered
in light of the risks, expenses, delays, problems and difficulties frequently
encountered in the establishment of a new business. An investor in BAS' common
stock must consider the risks and difficulties frequently encountered by early
stage companies operating in new and competitive markets. These risks include:
o competition from entities that are much more established and have
greater financial and technical resources than do we;
o need to develop infrastructure;
o ability to access and obtain capital when required; and
o dependence upon key personnel.
8
BAS cannot be certain that our business strategy will be successful or that we
will ever be able to commence significant revenue generating activities.
Furthermore, BAS believes that it is probable that we will incur operating
losses and negative cash flow for the foreseeable future.
BAS has virtually no financial resources, and its auditors' report states that
there is substantial doubt about its ability to continue as a going concern.
BAS has virtually no financial resources and an operating loss accumulated
during the development stage of $88,693 at December 31, 2004. Our auditors state
in their opinion on BAS' financial statements that this lack of resources causes
substantial doubt about BAS' ability to continue as a going concern. No
assurances can be given that BAS will generate sufficient revenue or obtain
necessary financing to continue as a going concern.
BAS will need financing which may not be available.
BAS has not established a source of equity or debt financing. BAS will require
financing to establish its consulting services business and implement its
strategic plan. There can be no assurance that financing will be available or
found. If BAS is unable to obtain financing, it may not be able to commence
revenue producing activities.
If we are unable to obtain financing or if the financing we do obtain is
insufficient to cover any operating losses we may incur, we may substantially
curtail or terminate our operations or seek other business opportunities through
strategic alliances, acquisitions or other arrangements that may dilute the
interests of existing stockholders.
Shareholders' interests may be diluted significantly through our efforts to
obtain financing and satisfy obligations.
We have no committed source of financing. Wherever possible, we will attempt to
use non-cash consideration to satisfy obligations. In many instances, we believe
that the non-cash consideration will consist of shares of our stock. In
addition, if a trading market develops for our common stock, we will attempt to
raise capital by selling shares of our common stock, possibly at a discount to
market. These actions will result in dilution of the ownership interests of
existing shareholders, and that dilution may be material.
BAS' board of directors is authorized to issue substantial additional shares of
stock, which would dilute the ownership of purchasers of common stock.
BAS is authorized to issue up to 24,000,000 shares of common stock, par value
$.001 per share. BAS' board of directors also has authority, without action or
vote of the shareholders, to issue all or part of the authorized but un-issued
shares. Any such issuance will dilute the percentage ownership of shareholders
and may further dilute the book value of the common stock. Such issuances may
also serve to enhance existing management's ability to maintain control of the
company.
BAS is and will be heavily dependent on the services of Dr. B. Alva Schoomer.
BAS' business strategy is completely dependent upon the knowledge and business
contacts of Dr. B. Alva Schoomer, its president. If BAS were to lose the
services of Dr. Schoomer, it is unlikely that we would be able to implement our
business plan even if some financing is obtained.
BAS will need to engage and retain qualified employees and consultants to
implement its strategy.
Dr. Schoomer will devote approximately 10 to 20% of his time to BAS. He will
devote additional percentages of his time if we obtain financing or receive
sufficient levels of client engagements that require his time. BAS will have to
locate, engage and retain qualified and experienced professionals to undertake
its plan. If it is unable to attract experienced industry professionals, it is
unlikely that it will be able to generate a material amount of revenue. No
assurances can be given that it will be able to locate, engage or retain
qualified industry professionals.
The trading price of BAS common stock is likely to be subject to significant
fluctuations if trading develops at all.
There can be no assurance as to the prices at which BAS common stock will trade,
if any trading market develops at all. Until BAS common stock is fully
distributed and an orderly market develops in BAS common stock, if ever, the
price at which such stock trades may fluctuate significantly and may be lower or
higher than the price that would be expected for a fully distributed issue.
Prices for BAS common stock will be determined in the marketplace and may be
9
influenced by many factors, including:
o the depth and liquidity of the market for BAS common stock,
o developments affecting the business of BAS generally and the impact of
those factors referred to herein in particular,
o investor perception of BAS, and
o general economic and market conditions.
No assurance can be given that an orderly trading market or any trading market
will ever develop for our stock.
BAS common stock has no prior trading market or liquidity, and there can be no
assurances that any trading market will develop.
Prior to the date of this Form 10-KSB, there has not been any established
trading market for BAS common stock. If we reach a point where we have a
sufficient number of shareholders, of which there can be no assurances,
application may be made by a broker/dealer to quote the shares of our common
stock on the OTCBB or a similar quotation service, although no assurances can be
given as to the timing of that application or the likelihood of it being
accepted. If the application is accepted, BAS cannot predict the extent to which
investor interest in our Company will lead to the development of an active,
liquid trading market. Active trading markets generally result in lower price
volatility and more efficient execution of buy and sell orders for investors.
In addition, BAS' 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. Either of these factors could adversely affect the liquidity and
trading price of our common stock. Also, the stock market in general has
experienced extreme price and volume volatility that has especially affected the
market prices of securities of many companies. At times, this volatility has
been unrelated to the operating performance of particular companies. These broad
market and industry fluctuations may adversely affect any trading price for our
common stock, regardless of BAS' actual operating performance.
We may face damage to our professional reputation or legal liability if our
future clients are not satisfied with our services.
As a professional services firm, we will depend to a large extent on our future
relationships with our clients and our goal and intent to establish a reputation
for high-caliber professional services and integrity to attract and retain
clients. As a result, if a client is not satisfied with our services or products
it may be more damaging in our business than in other businesses. Moreover, if
we fail to meet our contractual obligations, we could be subject to legal
liability or loss of client relationships. Our contracts will typically include
provisions to limit our exposure to legal claims relating to our services and
the applications we develop, but these provisions may not protect us or may not
be enforceable in all cases. Accordingly, no assurances can be given that we
will obtain and retain clients in the foreseeable future.
Our future engagements with clients may not be profitable.
When making proposals for engagements, we plan to estimate the costs and timing
for completing the projects. These estimates will reflect our best judgment
regarding the efficiencies of our methodologies and professionals as we plan to
deploy them on projects. Any increased or unexpected costs or unanticipated
delays in connection with the performance of these engagements, including delays
caused by factors outside our control, could make these contracts less
profitable or unprofitable, which would have an adverse effect on our profit
margin.
In addition, as consultants, a client will typically retain us on an
engagement-by-engagement basis, rather than under long-term contracts, and a
substantial majority of our contracts and engagements may be terminated by the
client with short notice and without significant penalty. Furthermore, because
large client projects involve multiple engagements or stages, there is a risk
that a client may choose not to retain us for additional stages of a project or
that a client will cancel or delay additional planned engagements. These
terminations, cancellations or delays could result from factors unrelated to our
work product or the progress of the project, but could be related to business or
financial conditions of the client or the economy generally. When contracts are
terminated, we lose the associated revenues and we may not be able to eliminate
associated costs in a timely manner.
10
In certain instances, we will consider accepting equity securities of our client
in satisfaction of our fee. These clients will often be small and have illiquid
markets for their securities. As a result we may be unable to sell the shares or
convert them to a more liquid asset.
The consulting and information technology markets are highly competitive, and we
may not be able to compete effectively.
The management consulting and services markets in which we operate include a
large number of participants and are highly competitive. Our primary potential
competitors, if we are successful in bidding for potential client engagements,
will include consulting and engineering services firms. There are no assurances
that we will be able to compete in this marketplace in the foreseeable future if
at all.
For all of the foregoing reasons and others set forth herein, an investment in
the Company's securities in any market which may develop in the future involves
a high degree of risk. Any person considering an investment in such securities
should be aware of these and other risk factors set forth in this Form 10-KSB.
Item 7. FINANCIAL STATEMENTS
The financial statements filed as part of this Annual Report on Form 10-KSB are
set forth starting on page 24.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
Item 8A. CONTROLS AND PROCEDURES
Our founder currently serves as both our chief executive officer and chief
financial officer (collectively, the "Certifying Officer") and is responsible
for establishing and maintaining disclosure controls and procedures for us. He
has concluded (based upon his evaluation of these controls and procedures as of
a date within 90 days of the filing of this report) that our disclosure controls
and procedures are effective to ensure that information required to be disclosed
by us in this report is accumulated and communicated to management, including
our principal executive officers as appropriate, to allow timely decisions
regarding required disclosure.
The Certifying Officer also has indicated that there were no significant changes
in our internal controls or other factors that could significantly affect such
controls subsequent to the date of his evaluation, and there were no corrective
actions with regard to significant deficiencies and material weaknesses.
Item 8B. OTHER INFORMATION
No event occurred during the fourth quarter of 2004 that would have required
disclosure in a report on Form 8-K.
11
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers and directors are as follows:
Name Age Title
................................................................................
B. Alva Schoomer 71 Director, President, CEO and
Chairman
................................................................................
Stanley Priskie 74 Director
................................................................................
B. Alva Schoomer - Founded us in 2002. Dr. Schoomer has been an independent
consultant since 1988 working on projects and engagements that are similar to
those that BAS plans to seek. Prior to 1988, Dr. Schoomer held executive
positions with W.P. Carey & Co., Inc., Innovation Investors (a partnership
underwritten by Shearson Lehman, RAC Information Systems, Inc., Greenwich
Research Associates, A. G. Becker & Co., and the American Stock Exchange. Dr.
Schoomer, who holds a Ph.D. in chemistry and physics from the California
Institute of Technology, is also president of Innocap, Inc., a development stage
business development company.
Stanley Priskie - Became a director in January 2003. Mr. Priskie, a former CPA,
is now Chairman, President and CEO of EXA International, Inc., a public company.
He has served as Secretary/Treasurer and Director of that company since April
1994. Since 1981, he had been a consultant to Konigsberg Wolf & Co, P.C., a
public accounting firm. Mr. Priskie was licensed to practice in Florida and New
York prior to his retirement from practice in 1993. Since 1990, he has been a
consultant to the Board of Directors of Eden Park Management, a company that
owns and operates nursing homes. Mr. Priskie received a degree in Accounting
from Pace University.
Board of Directors
All directors hold office until the completion of their term of office, which is
not longer than three years, or until their successors have been elected. All
officers are appointed annually by the board of directors and, subject to
existing employment agreements, serve at the discretion of the board. Currently,
directors receive no compensation for their roles as directors.
Committees of the Board of Directors
Concurrent with having sufficient members and resources, the BAS board of
directors will establish an audit committee and a compensation committee. The
audit committee will review the results and scope of the audit and other
services provided by the independent auditors and review and evaluate the system
of internal controls. The compensation committee will manage the stock option
plan and review and recommend compensation arrangements for the officers. No
final determination has yet been made as to the memberships of these committees
or when we will have sufficient members to establish committees.
All directors will be reimbursed by BAS for any expenses incurred in attending
directors' meetings provided that BAS has the resources to pay these fees. BAS
will consider applying for officers and directors liability insurance at such
time when it has the resources to do so.
Stock Option Plan
Pursuant to the December 31, 2002 board of directors approval and subsequent
stockholder approval, BAS adopted its 2002 Non-Statutory Stock Option Plan (the
"Plan") whereby it reserved for issuance up to 1,500,000 shares of its common
stock. The Company filed (on February 10, 2004) a Registration Statement on Form
S-8 (SEC File No.: 333-112672) registering those 1,500,000 shares of common
stock underlying the options issuable in the Plan.
As previously indicated, our board of directors, on December 31, 2002, adopted
the Plan so as to provide a long-term incentive for employees, non-employee
directors, consultants, attorneys and advisors of the Company and its
subsidiaries, if any. The board of directors believes that the Company's policy
of granting stock options to such persons will continue to provide it with a
critical advantage in attracting and retaining qualified candidates. In
addition, the Plan is intended to provide the Company with maximum flexibility
12
to compensate plan participants. It is expected that such flexibility will be an
integral part of the Company's policy to encourage employees, non-employee
directors, consultants, attorneys and advisors to focus on the long-term growth
of stockholder value. The board of directors believes that important advantages
to the Company are gained by an option program such as the Plan which includes
incentives for motivating employees of the Company, while at the same time
promoting a closer identity of interest between employees, non-employee
directors, consultants, attorneys and advisors on the one hand, and the
stockholders on the other.
The principal terms of the Plan are summarized below, however it is not intended
to be a complete description thereof and such summary is qualified in its
entirety by the actual text of the Plan filed as an exhibit to our
above-referenced S-8 Registration Statement.
Summary Description of the BAS Consulting, Inc. 2002 Non-Statutory Stock Option
Plan
The purpose of the Plan is to provide directors, officers and employees of,
consultants, attorneys and advisors to the Company and its subsidiaries with
additional incentives by increasing their ownership interest in the Company.
Directors, officers and other employees of the Company and its subsidiaries are
eligible to participate in the Plan. Options in the form of Non-Statutory Stock
Options ("NSO") may also be granted to directors who are not employed by the
Company and consultants, attorneys and advisors to the Company providing
valuable services to the Company and its subsidiaries. In addition, individuals
who have agreed to become an employee of, director of or an attorney, consultant
or advisor to the Company and/or its subsidiaries are eligible for option
grants, conditional in each case on actual employment, directorship or attorney,
advisor and/or consultant status. The Plan provides for the issuance of NSO's
only, which are not intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code, as amended.
The board of directors of the Company or a compensation committee (once
established) will administer the Plan with the discretion generally to determine
the terms of any option grant, including the number of option shares, exercise
price, term, vesting schedule and the post-termination exercise period.
Notwithstanding this discretion :
(i) the term of any option may not exceed 10 years, and
(ii) an option will terminate as follows:
a) if such termination is on account of termination of employment
for any reason other than death, without cause, such options
shall terminate one year thereafter;
b) if such termination is on account of death, such options shall
terminate 15 months thereafter; and
c) if such termination is for cause (as determined by the board of
directors and/or compensation committee), such options shall
terminate immediately.
Unless otherwise determined by the board of directors or compensation committee,
the exercise price per share of common stock subject to an option shall be equal
to no less than 10% of the fair market value of the common stock on the date
such option is granted. No NSO shall be assignable or otherwise transferable
except by will or the laws of descent and distribution or except as permitted in
accordance with SEC Release No.33-7646 as effective April 7, 1999.
The Plan may be amended, altered, suspended, discontinued or terminated by the
board of directors without further stockholder approval, unless such approval is
required by law or regulation or under the rules of the stock exchange or
automated quotation system on which the common stock is then listed or quoted.
Thus, stockholder approval will not necessarily be required for amendments which
might increase the cost of the Plan or broaden eligibility except that no
amendment or alteration to the Plan shall be made without the approval of
stockholders which would:
13
i. Decrease the NSO price (except as provided in paragraph 9 of the Plan)
or change the classes of persons eligible to participate in the Plan,
or
ii. extend the NSO period, or
iii. materially increase the benefits accruing to Plan participants, or
iv. materially modify Plan participation eligibility requirements, or
v. extend the expiration date of the Plan.
Unless otherwise indicated the Plan will remain in effect until terminated by
the board of directors.
A summary of stock option activity follows:
Options Granted Exercise price
------------------ ----------------
Granted and outstanding at
December 31, 2002 650,000 $ .01
Granted in 2003 - -
Exercised in 2003 - -
------------------ ----------------
Options outstanding at
December 31, 2003 (1) 650,000 $ .01
Granted in 2004 747,850 $ .01
Exercised in 2004 (1) (1,397,850) $ .01
------------------ ----------------
Balance outstanding at
December 31, 2004 - $-
================== ================
(1) 500,000 of these options were granted to our president.
All of 1,397,850 options were exercised during the first quarter of 2004 in
consideration for cash and credit again outstanding bills ($7,479) and for
services rendered ($6,500).
Conflicts of Interest
None of our key personnel is required to commit full time to our affairs and,
accordingly, these individuals may have conflicts of interest in allocating
management time among their various business activities. In the course of their
other business activities, certain key personnel may become aware of investment
and business opportunities which may be appropriate for presentation to us, as
well as the other entities with which they are affiliated. As such, they may
have conflicts of interest in determining to which entity a particular business
opportunity should be presented.
Each officer and director is, so long as he is officer or director, subject to
the restriction that all opportunities contemplated by our plan of operation
that come to his attention, either in the performance of his duties or in any
other manner, will be considered opportunities of, and be made available to us
and the companies that he is affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the officer or director.
If we or the companies to which the officer or director is affiliated each
desire to take advantage of an opportunity, then the applicable officer or
director would abstain from negotiating and voting upon the opportunity.
However, the officer or director may still take advantage of opportunities if we
should decline to do so. Except as set forth above, we have not adopted any
other conflict of interest policy in connection with these types of
transactions.
Item 10. EXECUTIVE COMPENSATION
No officer, director or employee has received compensation of $100,000, and no
director, officer or employee has a contract or commitment to receive annual
compensation in excess of $100,000. No cash compensation was paid to any officer
or employee in 2004 or 2003.
14
-----------------------------------------------------------------------------------------------------------------
Equity Compensation Plan Information
-----------------------------------------------------------------------------------------------------------------
Number of Number of securities
securities to be remaining available for
issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities reflected
warrants and rights warrants and rights in column (a)) and other
reflectedin column (a))
and other securities issued
Plan category (a) (b) (c)
-----------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders - - 102,150
-----------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders - - -
-----------------------------------------------------------------------------------------------------------------
Total - - 102,150
-----------------------------------------------------------------------------------------------------------------
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information known to us regarding
beneficial ownership of our common stock as of March 31, 2005 by:
o each person known or believed by us to own, directly or beneficially,
more than 5% of our common stock,
o each of our directors, and
o all of our officers and directors as a group.
Except as otherwise indicated, we believe that the beneficial owners of
the common stock listed below, based on information furnished by the owners,
have sole investment and voting power over to the shares.
15
Name and Address of Number of Shares
Beneficial Owner 2 Beneficially Owned 3 Percent of Class
---------------- ------------------ ----------------
................................................................................
B. Alva Schoomer 9,300,000 4 88.96%
................................................................................
Stanley Priskie 100,000 5 .96%
................................................................................
Officers and Directors
as a group ( 2 members) 9,400,000 5 89.92%
................................................................................
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
a. None, except as indicated in Part I, Item 2 as relates to our office
space; and
b. Except for the following issuance of shares and/or options, all since
converted into shares as a result of option exercise as follows:
Position with Number of
Name Issuer Shares Issued Date of Issuance
B. Alva Schoomer President 8,800,000 December 31, 2002
Stanley Priskie Director 50,000 December 31, 2002
B. Alva Schoomer President 500,000 6 March 31, 2004
Stanley Priskie Director 50,000 7 March 31, 2004
------------------------
2 The address for each person is 5675B Baldwin Court, Norcross, GA 30071
3 Unless otherwise indicated, the Company believes that all persons named
in the table have sole voting and investment power with respect to all shares of
the Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities which may be acquired by such person within 60
days from the date indicated above upon the exercise of options, warrants or
convertible securities.
4 Excludes 150,000 shares held by Gail D. Morris-Schoomer, the wife of B.
Alva Schoomer by virtue of the fact that Mr. Schoomer disclaims any beneficial
interest in or control over those 150,000 shares of Company common stock owned
by his wife except as may be attributed to him by Operation of Law.
5 Excludes 4,000 shares held by four (4) relatives of Stanley Priskie
(including 1,000 shares owned by his wife) in that Mr. Priskie disclaims any
beneficial ownership in or control over those 4,000 shares except as may be
attributed to him by Operation of Law.
6/7 These shares were issued as a result of exercise of options granted on
December 31, 2002.
16
PART IV
Item 13. EXHIBITS
a. Exhibits
31.1 Certification of Chief Executive Officer and Chief Financial
Officer
32.1 Certification of Chief Executive Officer and Chief Financial
Officer
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
All fees paid or payable ($7,740 in each period) to our principal
accounting firm relate to assurance-related services.
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
/s/ B. Alva Schoomer
---------------------------
B. ALVA SCHOOMER
Title: President and CFO
Date: April 19, 2005
/s/ Stanley Priskie
---------------------------
STANLEY PRISKIE
Title: Director
Date: April 19, 2005
17
FINANCIAL STATEMENTS
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.....................F-1
BALANCE SHEET...............................................................F-2
STATEMENTS OF OPERATIONS....................................................F-3
STATEMENT OF STOCKHOLDERS' DEFICIT..........................................F-4
STATEMENTS OF CASH FLOWS....................................................F-5
NOTES TO FINANCIAL STATEMENTS...............................................F-6
i
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
BAS Consulting, Inc.
(A Development Stage Company)
Norcross, GA
We have audited the accompanying balance sheet of BAS Consulting, Inc. (a
development stage company) as of December 31, 2004 and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2004 and 2003 and the cumulative period from December 18, 2002 (inception) to
December 31, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BAS Consulting, Inc. (a
development stage company) as of December 31, 2004 and the results of its
operations and its cash flows for the years ended December 31, 2004 and 2003 and
and the cumulative period from December 18, 2002 (inception) to
December 31, 2004 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company is a development stage company with, among other things,
no significant operating revenues to date which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Sherb & Co., LLP
-----------------------
Sherb & Co., LLP
April 12, 2005
New York, NY
F-1
BAS CONSULTING, INC.
Balance Sheet
December 31, 2004
(A Development Stage Company)
ASSETS
CURRENT ASSETS:
Cash $ -
----------------
Total Current Assets -
----------------
TOTAL ASSETS $ -
================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 33,000
----------------
Total Current Liabilities 33,000
----------------
STOCKHOLDERS' DEFICIT:
Preferred stock at $0.001 par value; 1,000,000 shares
authorized, -0- outstanding -
Common stock at $0.001 par value; authorized 24,000,000
shares; 10,453,850 shares issued and outstanding 10,454
Additional paid-in capital 45,239
Deficit accumulated in the development stage (88,693)
----------------
Stockholders' Deficit (33,000)
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -
================
The accompanying notes are an integral part of these financial statements.
F-2
BAS CONSULTING, INC.
Statements of Operations
(A Development Stage Company)
For the Years Ended December 31, 2004 and 2003 and the Cumulative Period
From December 18, 2002 (inception) to December 31, 2004
Cumulative From
December 18, 2002
(inception) to
December 31,
2004 2003 2004
-------------- --------------- ----------------
Revenue $ 6,500 $ 18,000 $ 24,500
General and administrative 69,193 35,000 113,193
-------------- --------------- ---------------
Net loss (62,693) $ (17,000) $ (88,693)
============= =============== ===============
Basic and diluted
loss per share $(.01) $ (.00) $(.01)
============= =============== ===============
Weighted average number of
common shares outstanding 10,090,388 9,000,000 9,519,356
============= =============== ===============
The accompanying notes are an integral part of these financial statements.
F-3
BAS CONSULTING INC.
(A Development Stage Company)
Statement of Stockholders' Deficit
Common Stock Deficit
Accumulated
Additional During the
Paid-in Development
Shares Amount Capital Stage Total
------------- ------------- ------------- --------------- --------------
Balance, January 1, 2003 9,000,000 $ 9,000 $ - $ (9,000) $(9,000)
Net loss for the year ended
December 31, 2003 - - - (17,000) (17,000)
------------- ------------- ------------- --------------- --------------
Balance, December 31, 2003 9,000,000 9,000 - (26,000) (26,000)
Exercise of stock options 1,397,850 1,398 12,581 - -
Issuance of stock options - - 29,914 - -
Sale of shares of common stock 56,000 56 2,744 - -
Net loss for the year ended
December 31, 2004 - - - (62,693) -
------------- ------------- ------------- --------------- --------------
Balance, December 31, 2004 10,453,850 $ 10,454 $ 45,239 $ (88,693) $(33,000)
============= ============= ============= =============== ==============
The accompanying notes are an integral part of these financial statements.
F-4
BAS CONSULTING, INC.
Statements of Cash Flows
(A Development Stage Company)
For the Years Ended December 31, 2004 and 2003 andthe Cumulative Period From
December 18, 2002 (inception) to December 31, 2004
Cumulative From
December 18, 2002
(inception) to
2004 2003 December 31, 2004
--------------- --------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (62,693) $ (17,000) $ (88,693)
Non-cash services received - 9,000
Compensation associated with issuance
of stock options
43,893 - 43,893
Increase in accrued expenses 16,000 17,000 33,000
--------------- --------------- ---------------
Net Cash (Used) by Operating Activities (2,800) - (2,800)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common stock 2,800 - 2,800
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
- - -
--------------- --------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS: - - -
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - - -
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$ - $ - $ -
=============== =============== ===============
SUPPLEMENTAL SCHEDULE OF CASH FLOW
ACTIVITIES:
Cash Paid For:
Interest $ - $ - $ -
=============== =============== ===============
Income taxes $ - $ - $ -
=============== =============== ===============
The accompanying notes are an integral part of these financial statements.
F-5
BAS CONSULTING, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
BAS Consulting, Inc. (the "Company") was incorporated under the laws of
the State of Nevada on December 18, 2002 (inception). The Company, which has not
yet generated significant amounts of revenue, will operate as a consulting firm.
The Company is considered a development stage company as defined by Statement of
Financial Accounting Standards No. 7. During its development stage, the Company
has developed and refined its basic business plan and strategy and commenced
making business contacts and seeking clients.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a year
ending on December 31.
b. Provision for Taxes
At December 31, 2004, the Company had net operating loss
carry-forwards for Federal income tax purposes of $58,779 that
may be offset against future taxable income through 2024. No tax
benefit has been reported with respect to these net operating
loss carryforwards in the accompanying financial statements
because the Company believes that realization is not likely.
Accordingly, the potential tax benefits of the net loss
carryforwards are fully offset by a valuation allowance.
The loss for financial reporting purposes for the year ended
December 31, 2004 differs from the loss for Federal income tax
purposes as follows:
F-6
Year Ended December 31,
2004 2003
------------------------ ------------------------
Loss for financial reporting purposes $ (62,693)$ (17,000)
Expenses associated with the issuance of stock
options that are not deductible for Federal
income taxes 29,914 -
------------------------ ------------------------
Loss for Federal income tax purposes $ (32,779)$ (17,000)
======================== ========================
The income tax benefit differs from the amount computed at the federal statutory
rates of approximately 38% applied to the taxable loss of $32,779 as follows:
Year Ended December 31,
2004 2003
------------------------ ------------------------
Income tax benefit at statutory rate $ 12,456 9,880
Change in valuation allowance (12,456) (9,880)
------------------------ ------------------------
$ - $ -
======================== ========================
Deferred tax assets (liabilities) at December 31, 2004 are comprised of the
following:
Net operating loss carryforwards $ 22,336
Allowance (22,336)
------------------------
Net $ -
========================
If substantial changes in the Company's ownership should occur,
there would be an annual limitation of the amount of net
operating loss carryforwards that could be utilized by the
Company.
c. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
d. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
e. Basic Loss Per Common Share
Basic loss per common share has been calculated based on the
weighted average number of shares outstanding during the period
after giving retroactive effect to stock splits.
F-7
f. Recently Issued Accounting Standards
In March 2004, the Financial Accounting Standards Board
published an Exposure Draft Share-Based Payment, an Amendment of
FASB Statements No. 123 and 95. The proposed change in
accounting would replace existing requirements under SFAS 123,
Accounting for Stock-Based Compensation, and APB Opinion No 25,
Accounting for Stock Issued to Employees. Under this proposal,
all forms of share-based payments to employees, including
employee stock options, would be treated the same as other forms
of compensation by recognizing the related cost in the income
statement. The expense of the award would generally be measured
at fair value at the grant date. Current accounting guidance
requires that the expense relating to so-called fixed plan
employee stock options only be disclosed in the footnotes to the
financial statements. The comment period for the exposure draft
ends June 30, 2004.
In November 2004 the FASB issued SFAS No. 151, Inventory Costs,
an amendment of ARB No. 43, Chapter 4. SFAS No. 151 amends the
guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify
the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and spoilage. This statement requires
that those items be recognized as current period charges
regardless of whether they meet the criterion of "so abnormal"
which was the criterion specified in ARB No. 43. In addition,
this Statement requires that allocation of fixed production
overheads to the cost of production be based on normal capacity
of the production facilities. This pronouncement is effective
for the Company beginning October 1, 2005. Adoption of this
standard is not expected to have a material impact on the
Company.
In December 2004, the FASB issued FASB SFAS No. 123 (revised
2004), Share-Based Payment, which is a revision of SFAS No. 123,
Accounting for Stock-Based Compensation . SFAS No. 123(R)
supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees , and amends SFAS No. 95, Statement of Cash Flows.
Generally, the approach in SFAS No. 123(R) is similar to the
approach described in SFAS No. 123. However, SFAS No. 123(R)
requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no
longer an alternative. The new standard will be effective for
the Company in the first interim or annual reporting period
beginning after December 15, 2005. The Company has not yet
assessed the impact of adopting this new standard.
F-8
In December 2004, the FASB issued SFAS No. 153, Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29,
Accounting for Nonmonetary Transactions. The amendments made by
SFAS No. 153 are based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of
the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance.
Previously, Opinion No. 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or
an equivalent interest in the same or similar productive asset
should be based on the recorded amount of the asset
relinquished. The new standard will be effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after June
15, 2005. The Company has not yet assessed the impact of
adopting this new standard.
g. Revenue Recognition
The Company recognizes revenue on consulting engagements when
work has been performed and the project completed
satisfactorily. The Company does not undertake contingency
contracts wherein income is linked to the completion of
activities performed or completed by others.
h. Stock Options and Warrants
As permitted by Statement of Financial Accounting Standards No.
123 Accounting for Stock based Compensation ("SFAS No. 123"),
the Company has elected to measure and record compensation cost
relative to employee stock option and warrant costs in
accordance with Accounting Principles Board ("APB") Opinion 25,
Accounting for Stock Issued to Employees, and related
Interpretations and will make pro forma disclosures of net
income and earnings per share as if the fair value method of
valuing stock options and warrants had been applied. Under APB
Opinion 25. compensation cost is recognized for stock options
and warrants granted to employees when the option or warrant
price is less than the market price of the underlying common
stock on the date of grant. In addition, the Company will
provide pro forma disclosure of stock-based compensation, as
measured under the fair value requirements of SFAS No. 123,
Accounting for Stock-Based Compensation. These pro forma
disclosures will be provided as required under SFAS No 148,
Accounting for Stock-Based Compensation Transition and
Disclosure.
Options and warrants issued to individuals other than employees
or directors will be accounted for in accordance with SFAS
No.123 which requires recognition of compensation expense for
grants of stock, stock options, and other equity instruments
over the vesting periods of such grants, based on the estimated
grant-date fair values of those grants.
NOTE 3 -GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern that contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The Company has not established revenues sufficient to cover its
operating costs to allow it to continue as a going concern. The Company will
engage in very limited activities without incurring material liabilities that
must be satisfied in cash until a source of funding is secured. The Company will
offer noncash consideration and seek equity lines as a means of financing its
operations. If the Company is unable to obtain revenue producing contracts or
financing or if the revenue or financing it does obtain is insufficient to cover
any operating losses it may incur, it may substantially curtail or terminate its
operations or seek other business opportunities through strategic alliances,
acquisitions or other arrangements that may dilute the interests of existing
stockholders.
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NOTE 4 -SHAREHOLDERS' DEFICIT
On December 18, 2002, the Board of Directors issued 9,000,000 shares of
common stock for $9,000 in services to the founding shareholders of the Company.
These services included the payment of approximately $5,500 in professional fees
on behalf of the Company. The preparation of documents and similar founding
activities was considered to have a value of at least $3,500. In February 2004,
the Company sold 56,000 shares of common stock for $.05 per share or an
aggregate of $2,800.
Preferred Stock
The Company's certificate of incorporation authorizes the issuance of
1,000,000 shares of preferred stock with designations, rights and preferences
determined from time to time by its board of directors. Accordingly, the
Company's board of directors is empowered, without stockholder approval, to
issue shares of preferred stock with voting, liquidation, conversion, or other
rights that could adversely affect the rights of the holders of the common
stock. The Board of Directors is authorized to determine:
o the number of shares and the designation of the series;
o whether to pay dividends on the series and, if so, the dividend rate,
whether dividends will be cumulative and, if so, from which date or
dates, and the relative rights of priority of payment of dividends on
shares of the series;
o whether the series will have voting rights in addition to the voting
rights provided by law and, if so, the terms of the voting rights;
o whether the series will be convertible into or exchangeable for shares
of any other class or series of stock and, if so, the terms and
conditions of conversion or exchange;
o whether or not the shares of the series will be redeemable and, if so,
the dates, terms and conditions of redemption and whether there will
be a sinking fund for the redemption of that series and, if so, the
terms and amount of the sinking fund; and
o the rights of the shares of the series in the event of our voluntary
or involuntary liquidation, dissolution or winding up and the relative
rights or priority, if any, of payment of shares of the series.
At December 31, 2004, the Company had no shares of preferred stock
issued and outstanding.
Common Stock
The holders of the Company's common stock:
o Have equal ratable rights to dividends from funds legally available
for payment of dividends when, as and if declared by the board of
directors;
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o Are entitled to share ratably in all of the assets available for
distribution to holders of common stock upon liquidation, dissolution
or winding up of our affairs;
o Do not have preemptive, subscription or conversion rights, or
redemption or access to any sinking fund; and
o Are entitled to one noncumulative vote per share on all matters
submitted to stockholders for a vote at any meeting of stockholders.
Stock Option Plan
Pursuant to a December 31, 2002 Board of Directors approval and
subsequent stockholder approval, the Company adopted its 2002 Non-Statutory
Stock Option Plan (the "Plan") whereby it reserved for issuance up to 1,500,000
shares of its common stock. The purpose of the Plan is to provide directors,
officers and employees of, consultants, attorneys and advisors to the Company
and its subsidiaries with additional incentives by increasing their ownership
interest in the Company. Directors, officers and other employees of the Company
and its subsidiaries are eligible to participate in the Plan. Options in the
form of Non-Statutory Stock Options ("NSO") may also be granted to directors who
are not employed by the Company and consultants, attorneys and advisors to the
Company providing valuable services to the Company and its subsidiaries. In
addition, individuals who have agreed to become an employee of, director of or
an attorney, consultant or advisor to the Company and/or its subsidiaries are
eligible for option grants, conditional in each case on actual employment,
directorship or attorney, advisor and/or consultant status. The Plan provides
for the issuance of NSO's only, which are not intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code,
as amended.
The Board of Directors of the Company or a Compensation Committee (once
established) will administer the Plan with the discretion generally to determine
the terms of any option grant, including the number of option shares, exercise
price, term, vesting schedule and the post-termination exercise period.
Notwithstanding this discretion (i) the term of any option may not exceed 10
years and (ii) an option will terminate as follows: (a) if such termination is
on account of termination of employment for any reason other than death, without
cause, such options shall terminate one year thereafter; (b) if such termination
is on account of death, such options shall terminate 15 months thereafter; and
(c) if such termination is for cause (as determined by the Board of Directors
and/or Compensation Committee), such options shall terminate immediately. Unless
otherwise determined by the Board of Directors or Compensation Committee, the
exercise price per share of common stock subject to an option shall be equal to
no less than 10% of the fair market value of the common stock on the date such
option is granted. No NSO shall be assignable or otherwise transferable except
by will or the laws of descent and distribution or except as permitted in
accordance with SEC Release No.33-7646 as effective April 7, 1999.
The Plan may be amended, altered, suspended, discontinued or terminated
by the Board of Directors without further stockholder approval, unless such
approval is required by law or regulation or under the rules of the stock
exchange or automated quotation system on which the common stock is then listed
or quoted. Thus, stockholder approval will not necessarily be required for
amendments which might increase the cost of the Plan or broaden eligibility
except that no amendment or alteration to the Plan shall be made without the
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approval of stockholders which would (a) increase the total number of shares
reserved for the purposes of the Plan or decrease the NSO price (except as
provided in paragraph 9 of the Plan) or change the classes of persons eligible
to participate in the Plan or (b) extend the NSO period or (c) materially
increase the benefits accruing to Plan participants or (d) materially modify
Plan participation eligibility requirements or (e) extend the expiration date of
the Plan. Unless otherwise indicated the Plan will remain in effect until
terminated by the Board of Directors.
A summary of stock option activity follows:
Options Granted Exercise price
----------------------------- -----------------------------
Granted and outstanding at
December 31, 2002 650,000 $ .01
Granted in 2003 - -
Exercised in 2003 - -
----------------------------- -----------------------------
Options outstanding at
December 31, 2003 (1) 650,000 $ .01
Granted in 2004 747,850 $ .01
Exercised in 2004 (1) (1,397,850) $ .01
----------------------------- -----------------------------
Balance outstanding at
December 31, 2004 -0- -
============================= =============================
(1) 500,000 of these options were held by the Company's president.
All of 1,397,850 options were exercised during the first quarter of 2004 in
consideration for cash and credit again outstanding bills ($7,479) and for
services rendered ($6,500).
The Company recorded expenses of $29,914 in connection with the
issuance of the 747,850 options calculated as the difference between the fair
market value ($.05 based on the sale of shares during the period) and the
exercise price of the options ($.01).
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