U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
OR
[ ] 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: 0-30489
YAAK RIVER RESOURCES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1097796
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2501 East Third Street, Casper, Wyoming 82609
-----------------------------------------------
(Address of principal executive offices)
(307) 235-0012
--------------------------------
(Issuer's telephone number)
Check whether the issuer (1) 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 ___
As of October 31, 2000, 64,808,857 shares of common stock, par value
$0.0001 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes___ No _X_
This Form 10-QSB consists of 13 pages. Exhibits are indexed at
page 6.
1
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Please see pages F-1 through F-6.
ITEM 2. MANAGEMENT'S DISCUSSSION AND ANALYSIS OR PLAN OF OPERATION.
Plan of Operations
The Company's plan of operations has two aspects.
Management intends to pursue both of those aspects on a concurrent
basis until such time as it appears that the Company has a strong
prospect of carrying one of the aspects to a successful conclusion.
First, management intends to seek out and pursue a
business combination with one or more existing private business
enterprises that may wish to take advantage of the Company's status
as a public corporation. At this time, management does not intend
to target any particular industry but, rather, intends to judge any
opportunity on its individual merits.
Second, management intends to seek opportunities to
develop the Company's unimproved real estate holdings in Teller
County, Colorado. See "Company Properties," below. Both the risks
and the potential rewards of this real-estate-development
possibility are substantial. See "Summary Description of Possible
Plan of Operations for the Company's Properties," below.
Management is unable at this time to predict which of
the two aspects of its current business plan will prove to be the
more attractive one as events unfold. A full assessment of the
needs and the potentials of the real-estate-development possibility,
in particular, has not yet been made. Management intends to begin
to make such an assessment in the near future.
Company Properties
In 1999, a real-estate development business
opportunity in Teller County, Colorado, was brought to management's
attention. The nucleus of the opportunity consisted of the
availability of 91 unimproved lots zoned for residential
development. The lots comprise a total of approximately 4.7 acres
of land. They are located in the scenic Pike's Peak region
approximately six miles by road from the historic mining town of
Cripple Creek, Colorado, and approximately 40 miles by highway from
the Colorado Springs metropolitan area.
The Company acquired the lots on September 25, 1999,
from Donald J. Smith of Casper, Wyoming. Mr. Smith was elected to
be a Director of the Company at the Company's 1999 Annual Meeting of
Shareholders held on December 18, and was then appointed by the
Board of Directors to serve as President of the Company. In
connection with the purchase, the Company's board of directors
deemed the lots to have a total fair market value of $162,000. The
purchase price was paid in the form of approximately 23,000,000
treasury shares of the Company's common stock. See Note 2 of Notes
to Financial Statements.
2
As stated above, the Company's board of director's
determined that the lots had a fair market value, at the time of
their acquisition by the Company, of $162,000. The lots were
acquired, however, from a person who, as a result of the
acquisition, became an affiliate of the Company. In such a
transaction, generally accepted accounting principles require that
the lots be carried on the Company's balance sheet not at their
market value or at their cost to the Company but, rather, at their
historical cost to the affiliate. The affiliate/seller, Donald J.
Smith, paid a total of $35,743 for the lots in 1992. Accordingly,
the asset value of the lots is carried on the Company's balance
sheet at that lower, historical figure. See Note 2 of Notes to
Financial Statements.
Summary Description of Possible Plan of Operations for the Company's
Properties
A. Economic Concept.
The economic theory that underlies the
real-estate-development aspect of the Company's business plan has
three bases.
The primary basis of the plan is found in the local
economy of Cripple Creek, Colorado. In 1991, limited-stakes gaming
became legal in three historical mining communities in Colorado.
Cripple Creek is one of the three. Subsequent to the legalization
of limited-stakes gaming, Cripple Creek has developed an active
casino business. This activity has created a demand for residential
housing, particularly among casino workers but also among service
workers in businesses, such as the food and beverage businesses,
that are supported by the casino trade. Management believes that
the supply of existing housing to meet this demand is very limited.
Two additional economic bases for the
real-estate-development aspect of the Company's business plan are of
lesser significance, but deserve nevertheless to be identified. The
first of these lies in the ongoing geographical expansion of the
Colorado Springs residential base.
The second additional basis lies in the local,
regional, national, and worldwide demand for second homes and
vacation homes in areas having attractive natural or historical
settings. Management believes that the sources of this demand
include (i) the strength of the U.S. economy, (ii) new
concentrations of wealth created by the success of the U.S. stock
markets in general, and by the phenomenon of tech-company stock
options and the like, (iii) substantial inter-generational wealth
transfers to the so-called baby-boomer generation, (iv) relatively
low interest rates, and (v) availability of the mortgage-interest
deduction. Management believes that the historical and natural
attractions of the Pike's Peak region, together with reasonable
proximity to the business and transportation hub of Colorado
Springs, form a base from which this demand can be exploited.
B. Alternative Approaches to Development of
the New Properties
Management is in the early stages of evaluating the
tack it intends to take to exploit the Company's properties.
Critical issues as to financing, staffing, identification of
development partners or builders, and the like, have not advanced
beyond the discussion stage. As a result, management's intentions
with respect to the properties can be described only in outline
form. It is more likely than not that those intentions will undergo
considerable change in the near term.
3
Subject to those limitations, management currently
believes that possible business strategies include the following:
1. The Company could contract with, or
enter into a joint venture with, a
development firm to develop the entire
package of lots.
2. The Company could market the lots directly
to consumers through local, regional, or
national promotions.
3. The Company could "gin up" to be its own
prime contractor.
4. Instead of trying to develop the properties
as a whole, the Company could act as a custom
builder or a spec. builder for individual
lots, one by one.
Development might consist of stand-alone residences,
multi-unit housing, or mobile-home parks.
C. Financial Requirements of the Alternatives Listed
in B, above
The Company's properties are in an unimproved state.
The greatest initial cost associated with any of the options listed
above, therefore, would be that of installing streets and utilities.
Management estimates that the cost of such basic improvements would
be in the range of $4 million to $5 million. The Company's
properties lie many miles by mountain highway from the nearest
sources of building materials and equipment. As a result, the cost
of transportation would be a significant component of the overall
cost of basic improvements. Management believes that this cost is
among the factors that have inhibited other developers from
attempting to satisfy the sizeable, unmet demand for housing that
became obvious in Cripple Creek beginning in 1991.
Aside from capital required to meet the costs of
basic improvements, substantial capital would be required to
implement most of the alternatives listed in B, above. The Company
does not currently have sources for such capital, and there is no
certainty that such sources will become available in the future.
Management has held preliminary discussions with
possible conventional and venture-capital lenders. In those
discussions, the lenders have expressed a preference to offer
financing only with respect to the most desirable of the lots
contained in the new properties, and have insisted that the Company
subordinate its interest in the properties in favor of project
financing. In such circumstances, a failure of the project would
result in foreclosure on the project financing, and a consequent
loss by the Company of its interest in the properties. Management
does not believe a risk of this magnitude to be appropriate for a
public corporation and, therefore, determined not to consider such
subordination. The Company's unwillingness to subordinate its
interest in the properties to providers of project financing will
limit the Company's ability to obtain capital to develop the
properties.
4
D. Other Special Business Risks Associated
with the Company's Plan of Operations
In addition to the financial risks described in C,
above, the real-estate-development aspect of the Company's business
plan outlined in this section entails a high degree of business
risk. Among the risk factors are:
1. Interest rate increases, which are likely
to have a negative impact upon:
a. the availability of purchase financing to
potential buyers of improved or unimproved
properties of the Company; and
b. the availability of project financing to the
Company or its contractors.
2. Changes in tax laws that might result, for
example, in a loss or diminution of the
mortgage-interest deduction.
3. A downturn in the local or general U.S. economies,
thus depressing demand for developed or unimproved
properties.
4. Competition from other development projects,
both local and regional.
Special Note Regarding Forward-Looking Statements
Some of the statements in this Item 2 "Management's
Discussion and Analysis or Plan of Operation," and elsewhere in this
Report and in the Company's other periodic filings with the
Securities and Exchange Commission constitute forward-looking
statements. These statements involve known and unknown risks,
significant uncertainties, and other factors that may cause actual
results, levels of activity, performance, or achievements to be
materially different from any future results, levels of activity,
performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among other
things, those listed under "Other Special Business Risks Associated
with the Company's Plan of Operations" and elsewhere in this Report.
In some cases, one can identify forward-looking
statements by terminology such as "may," "will," "should," "could,"
"intends," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative
of such terms or other similar terminology.
The forward-looking statements herein are based on
current expectations that involve a number of risks and
uncertainties. Such forward-looking statements are based on
assumptions that the Company will obtain or have access to adequate
financing for each successive phase of its growth, that there will
be no material adverse competitive or technological change in
condition of the Company's business, that the Company's President
and other significant employees will remain employed as such by the
Company, and that there will be no material adverse change in the
Company's operations or business, or in governmental regulation
affecting the Company. The foregoing assumptions are based on
judgments with respect to, among other things, future economic,
competitive, and market conditions, and future business decisions,
all of which are difficult or impossible to predict accurately and
many of which are beyond the Company's control.
Although management believes that the expectations
reflected in the forward-looking statements are reasonable,
management cannot guarantee future results, levels of activity,
performance, or achievements. Moreover, neither management nor any
other person assumes responsibility for the accuracy and
completeness of such statements.
5
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Exhibit No. Description Location
----------- ----------- ---------
27 Financial Data Schedule
6
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 10, 2000 YAAK RIVER RESOURCES, INC.
By: /s/ Donald J. Smith
--------------------------
Donald J. Smith, President (Principal
Executive Officer)
By: /s/ James K. Sandison
-----------------------------
James K. Sandison, Secretary and
Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
7
YAAK RIVER RESOURCES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Yaak River Resources, Inc.
Casper, Wyoming
We have reviewed the accompanying balance sheet of Yaak River Resources, Inc.
as of September 30, 2000 and the related statements of operations for the three
month and nine month periods ended September 30, 2000 and 1999, and the cash
flows for the nine months ended Setember 30, 2000 included in the accompanying
Securities and Exchange Commission Form 10-Q for the period ended
September 30, 2000. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than
an audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for the year
then ended (not presented herein). In our report dated March 6, 2000, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as
of September 30, 2000 is fairly stated in all material respects in relation
to the balance sheet from which it has been derived.
Michael Johnson & Co., LLC.
Denver, Colorado
October 31, 2000
F-1
YAAK RIVER RESOURCES, INC.
(A Development Stage Company)
Balance Sheet
(Unaudited)
September 30, December 31,
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 13,738 $ -
Investment - Properties 35,743 35,743
--------- ---------
Total current assets 49,481 35,743
--------- ---------
OTHER ASSETS
Organizational Costs - Net of Amortization - -
--------- ---------
Total Other Assets - -
--------- ---------
TOTAL ASSETS $ 49,481 35,743
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 25 $ 2,000
Advance from (YRML) Purchase, 1.5 Units - -
Shareholder Loans - 22,000
-------- --------
Total current liabilities 25 24,000
-------- --------
STOCKHOLDERS' EQUITY
Series A Common Stock, par value $.0001 per share;
250,000,000 Shares, Issued and outstanding -
64,808,857 and 56,666,000 respectively 6,480 5,666
Series B Common Stock, par value $.0001 per share;
Authorized 250,000,000 Shares, Issued
and outstanding, None - -
Capital paid in excess of par value 360,849 304,663
Deficit accumulated
during the development stage (317,873) (298,586)
---------- --------
TOTAL STOCKHOLDERS' EQUITY 49,456 11,743
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 49,481 $ 35,743
========= ========
See accompanying independent accountant's review report and notes to
financial statements.
F-2
Yaak River Resources, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine For the June 10, 1988
Month Period Year Ended (Inception)
Ended September December 31, thru September
30, 2000 1999 30, 2000
------------ ------------ ------------
REVENUE $ - $ - $ -
EXPENSES
Amortization - - 1,500
Bank Charge 10 56 545
Legal & Accounting 10,731 5,562 69,635
Director Fees - - 800
Office Expense - 382 7,843
Stock Fees & Other Costs 147 65 10,219
Administration/Consulting 8,399 9,139 133,389
Mining Assessments & Fees - - 75,479
Bad Debt - - 6,250
Rent/Telephone - - 12,213
-------- -------- ---------
Total Expenses 19,287 15,204 317,873
-------- -------- ---------
NET LOSS ACCUMULATED DURING
THE DEVELOPMENT STAGE $ (19,287) $ (15,204) $ (317,873)
======== ======== =========
* - NET LOSS PER COMMON SHARE
IS LESS THAN $.0002 $ * $ *
======== ========
Weighted average number of
common shares outstanding 61,333,234 56,666,000
========== ==========
See accompanying independent accountant's review report and notes to
financial statements.
F-3
Yaak River Resources, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine For the June 10, 1988
Month Period Year Ended (Inception) thru
Ended September December 31, September 30,
30, 2000 1999 2000
------------ ---------- -------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss Accumulated During
The Development Stage $ (19,287) $ (15,204) $ (317,873)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Amortization and Depreciation - - 1,500
Organization Costs - - (1,500)
Stock Issued for Services 7,000 - 8,800
(Decrease) Increase in
Accounts Payable (1,975) (104,772) 25
Decrease(Increase) in
Accounts Receivable - - -
(Decrease) Increase in
Loans to Shareholder - (7,406) 22,000
------- -------- -------
Net cash flows used in
operating activities (14,262) (127,382) (287,048)
------- -------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES
Exchange of properties - net - 147,167 147,167
Investment Purchase - - (305,410)
------- ------- ---------
Net cash used in
investing activities - 147,167 (158,243)
------- ------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Loan from LP Investors - (20,000) -
Proceeds from Long-Term Debt - 167,500
Payment of Long-Term Debt - - (45,000)
Issuance of common stock 28,000 - 336,529
--------- -------- ---------
Net cash flows provided by
financing activities 28,000 (20,000) 459,029
--------- -------- ---------
Net Increase (Decrease)
in cash 13,738 (215) 13,738
Cash at beginning of period - 215 -
----------- --------- -----------
Cash at end of period $ 13,738 $ - $ 13,738
=========== ============ =============
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the period
For interest $ - $ - $ -
========== ========== ===========
Cash paid during the period
For income taxes $ - $ - $ -
========== ========== ===========
Noncash Investing and financing activities:
In 1999, the Company exchanged properties with a book value of $182,910 to a
related party in payment of liabilities of $147,167 and land with book value
of $35,743
In 2000, the company issued 3,142,857 to cancel loan of $22,000
See accompanying independent accountant's review report and notes to financial
statements.
F-4
Yaak River Resources, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
(Unaudited)
Deficit
Capital Paid Accum. During
Common In Excess of the Development
# of Shares Stock Par Value Stage Totals
----------- ------ ------------ --------------- ------
June 10, 1988
(Inception) - $ - $ - $ - $ -
Issuance of common
Stock: January 6,
1989 (for services) 10,000,000 1,000 500 - 1,500
January 6, 1989)
(for cash) 5,000,000 500 - - 500
November 27, 1989
(Public offering) 2,266,000 266 12,353 - 12,619
Net Loss - - - (3,765) (3,765)
---------- ----- ------- -------- ------
Balance-
December 31, 1989 17,666,000 1,766 12,853 (3,765) 10,854
Net Loss - - - (10,129)(10,129)
---------- ----- ------- -------- ------
Balance-
December 31, 1990 17,666,000 1,766 12,853 (13,894) 725
Net Loss - - - (300) (300)
---------- ----- ------- -------- ------
Balance-
December 31, 1991 17,666,000 1,766 12,853 (14,194) 425
Issuance of common
Stock: January 10,
1992 (for assets
YRML) 30,000,000 3,000 134,910 - 137,910
Net Loss - - - (47,589)(47,589)
---------- ----- ------- -------- ------
Balance-
December 31, 1992 47,666,000 4,766 147,763 (61,783) 90,746
Issuance of common
Stock:
June 30, 1993
(for cash) 6,000,000 600 149,400 - 150,000
June 30, 1993
(for services) 3,000,000 300 - - 300
Net Loss - - - (54,951)(54,951)
---------- ----- ------- -------- ------
Balance-
December 31, 1993 56,666,000 5,666 297,163 (116,734) 186,095
Net Loss - - - (26,293) (26,293)
---------- ----- ------- -------- ------
Balance-
December 31, 1994 56,666,000 5,666 297,163 (143,027) 159,802
Net Loss - - - (17,764) (17,764)
---------- ----- ------- -------- ------
Balance-
December 31, 1995 56,666,000 5,666 297,163 (160,791) 142,038
Net Loss - - 7,500 (19,842) (12,342)
---------- ----- ------- -------- ------
Balance-
December 31, 1996 56,666,000 5,666 304,663 (180,633) 129,696
Net Loss - - - (24,037) (24,037)
---------- ----- ------- -------- ------
Balance-
December 31, 1997 56,666,000 5,666 304,663 (204,670) 105,659
Net Loss - - - (78,712) (78,712)
---------- ----- ------- -------- ------
Balance-
December 31, 1998 56,666,000 5,666 304,663 (283,382) 26,947
Net Loss - - - (15,204) (15,204)
------- ------ ---------- -------- ------
Balance - December 31,
1999 56,666,000 5,666 304,663 (298,586) 11,743
------- ------ ---------- -------- ------
Issuance of common
Stock for cash:
March 28, 2000 3,000,000 300 20,700 - 21,000
Issuance of common
Stock for cash:
September 13, 2000 1,000,000 100 6,900 - 7,000
Issuance of common
Stock for services: 1,000,000 100 6,900 - 7,000
Issuance of common
Stock for debt: 3,142,857 314 21,686 - 22,000
Net loss for nine
month period - - - (19,287) (19,287)
------- ------ ---------- -------- ------
Balance - September
30, 2000 64,808,857 $6,480 $360,849 $(317,873) $49,456
========== ====== ======== ======== ======
See accompanying independent accountant's review report and notes to financial
statements
F-5
YAAK RIVER RESOURCES, INC.
(A Development Stage Company)
Notes to Financial Statements
1. Presentation of Interim Information
In the opinion of the management of Yaak River Resources, Inc., the
accompanying unaudited financial statements include all normal
adjustments considered necessary to present fairly the financial
position as of September 30, 2000, and the results of operations for the
three months and nine months ended September 30, 2000 and 1999, and cash
flows for the nine months ended September 30, 2000. Interim results are
not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in the
Company's audited financial statements and notes for the fiscal year
ended December 31, 1999.
F-6
