-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IZQ1D4BcjuwiU0lW2KjgxDeF+j9n5B8drahHYWlKLMVUkGQ5UE7mCViXgoCOsw9f e68Ahz8pYyFu43Tmu7Ah7A== 0001005477-02-001680.txt : 20020416 0001005477-02-001680.hdr.sgml : 20020416 ACCESSION NUMBER: 0001005477-02-001680 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWN PARTNERS INC CENTRAL INDEX KEY: 0000811036 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 880222660 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-11986-LA FILM NUMBER: 02612512 BUSINESS ADDRESS: STREET 1: 21800 OXNARD STREET STREET 2: SUITE 440 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 8185986780 MAIL ADDRESS: STREET 1: 21800 OXNARD STREET STREET 2: SUITE 440 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 FORMER COMPANY: FORMER CONFORMED NAME: ED PHILLS INC DATE OF NAME CHANGE: 19920903 FORMER COMPANY: FORMER CONFORMED NAME: VEGAS VENTURES INC DATE OF NAME CHANGE: 19960905 FORMER COMPANY: FORMER CONFORMED NAME: TELEMALL COMMUNICATIONS INC/NV DATE OF NAME CHANGE: 19960905 FORMER COMPANY: FORMER CONFORMED NAME: STEINS HOLDINGS INC /NV/ DATE OF NAME CHANGE: 20000308 10KSB 1 d02-37152.txt FORM 10KSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (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, 2001 |_| 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: 33-11986-LA ----------- CROWN PARTNERS, INC. (Exact name of Registrant as specified in its charter) Nevada 91-2008803 ------ ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 21800 Oxnard Street Suite 440, Woodland Hills CA 91367 ------------------------------------------------------ (Address of principal executive offices)(Zip Code) Company's telephone number, including area code: (818) 598-6780 -------------- Securities registered pursuant to Section 12(b) of the Act: None. Name of each exchange on which registered: None. Securities registered pursuant to Section 12(g) 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 preceding 12 months (or such shorter period of 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 to Item 405 of Regulation S-B contained in this form, and if no disclosure will be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. |_| The number of shares outstanding of the Company's $.001 Par Value Common Stock, as of December 31, 2001 were 7,068,714. The aggregate number of shares of the voting stock held by non-affiliates on April 12, 2002 was 690,302. The market value of these shares, computed by reference to the market closing price on April 12, 2002 was $448,696. For the purposes of the foregoing calculation only, all directors and executive officers of the registrant have been deemed affiliates. DOCUMENTS INCORPORATED BY REFERENCE: None. 1 PART I ITEM 1. BUSINESS A) General Crown Partners, Inc. (the "Company"), formerly known as "Stein's Holdings, Inc." has been involved in several different businesses. In early 1999, its Board of Directors entered into negotiations to acquire Multi-Source Capital, Ltd. ("MSC"), a Colorado corporation. As a condition to completing that acquisition, the Company's shareholders approved a 200-to-1 reverse stock split and changed the Company's name to "Stein's Holdings, Inc." MSC was a company engaged in web design, through a wholly owned subsidiary, 20/20 Web Design, Inc., import/export, business consulting and related services. Also, MSC had entered into an agreement with College Connection, Inc. dba Stein's Bakery, Inc. ("Bakery") in Lewisville, Texas to acquire its bakery operations. MSC assigned that contract to the Company as part of its acquisition. MSC also transferred assets, consisting mostly of cash and securities, to the Company in exchange for the issuance of 4,247,754 shares of the Company's stock to the MSC shareholders. The Bakery filed for protection under the US Bankruptcy Code in 2000 and certain monies that the Company and the Company's subsidiary, 20/20 Web Design, Inc., advanced to the Bakery were written off due to the bankruptcy. B) Narrative Description of Business At the present time, the Company is utilizing its limited capital to fund its operations as it seeks business opportunities. In November, 2001, the Company acquired Sanitec(TM) Services of Hawaii, Inc. ("SSH"), a privately held Hawaiian corporation, developed to engage in medical waste collection and treatment in Honolulu, Hawaii. The Company issued 1,333,334 shares of its common stock to the shareholder of SSH and SSH became a wholly owned subsidiary of the Company. The Company borrowed in excess of $30,000 to pay past obligations of SSH during the year ended December 31, 2001. The Company anticipates either borrowing money or raising capital during fiscal 2002 to fund SSH's operations. The Company has two subsidiaries of which it is the majority shareholder: 20/20 Web Design, Inc. ("20/20 Web") and Universal Services & Acquisitions, Inc. ("USV"), which it acquired in October, 2000. The Company owns 80% of 20/20 Web Design, Inc. ("20/20 Web"), a Nevada corporation traded on the Electronic Bulletin Board under "TWBD." 20/20 Web established a subsidiary, Stein's Cake Box ("Cake Box"), a Nevada corporation, to engage in business with certain retail convenience stores in Texas through leasing production facilities through the Bakery. 20/20 Web lent $195,000 to Cake Box to fund its acquisition of these contracts from the Bakery. Since the transaction was not consummated, the money was to be repaid to 20/20 Web. However, given the bankruptcy of the Bakery, it is unlikely that 20/20 Web will ever be repaid anything. In February, 2001, 20/20 Web entered into a letter of intent to acquire BentleyTel.com, Inc. ("BentleyTel"), a Nevada corporation. This transaction was not completed and the Company is seeking merger candidates for 20/20 Web. The Company owns 90% of the issued and outstanding shares of Universal Services & Acquisitions, Inc., a Colorado corporation. USV is a dormant shell company. The Company, in exchange for agreeing to pay all the costs required to make USV 2 a reporting company, which required the Company to pay all the legal and accounting expenses necessary to bring USV current, received 90% of the issued and outstanding shares of USV. The Company has been bringing USV current in its reporting obligations and anticipates locating a suitable merger candidate for USV in the future. USV entered into an agreement in September, 2001 with Universal Medical Alliance ("UMA"), a Nevada corporation, wherein the two companies were to merge and USV changed its name to Universal Medical Alliance Corp. The shareholder of UMA paid $60,000 of the fee of $400,000 owed to the Company but that shareholder has requested the return of the $60,000 and cancellation of the merger agreement and has filed suit against the Company. In June, 2001, the Company borrowed $93,750 which loan was secured by shares of 20/20 Web stock. The Company was unable to pay the loan back and the shares were transferred to the lender. The lender has filed suit against the Company seeking repayment of amounts its alleges are still due it. As of December 31, 2001, the Company had no employees. SSH had one employee as of December 31, 2001. Item 2. Properties. The Company presently shares office space with a related entity and its attorney. The Company's portion of the rent is approximately $1,500 and the lease expires in November, 2002. The Company anticipates that this space is sufficient for the near future. SSH sub-leases warehouse space in Hawaii at a rent of approximately $9,100 per month and the sub-lease expires in 2005 with an option to extend it for an additional seven years. The Company anticipates that this space is sufficient for the near future. Item 3. Legal Proceedings. The Company has been named as a defendant in an action in the Circuit Court of Lake County, Illinois dated December 17, 2001 brought by Mammoth Corporation against the Company. This action arises out of the default of a loan made by Mammoth to the Company which was secured by stock of 20/20 Web. Mammoth is seeking repayment of the loan and interest in an amount to be determined. The Company was named as a defendant in an action in the Superior Court of Los Angeles County, California dated March 21, 2002 brought by Invinity Systems Corporation and Universal Medical Alliance against the Company. This action arises out of the sale of USV to the plaintiffs and seeks the return of the deposit made to the Company in connection with this transaction as well as punitive and other damages. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Market for Registrant's Common Equity and Related Shareholder Matters. The Company's common stock has been traded on the OTC Electronic Bulletin Board since Spring, 1996 under the symbol "TELM," since April, 1999, under the symbol "SNHS" and since January, 2002, under the symbol "CRWP". The following table reflects the high and low quarterly bid prices for 2001. This information was provided to the Company by the National Association of Securities Dealers, Inc. (the "NASD") and the Internet. These quotations reflect inter-dealer prices, without retail mark-up or mark-down or commissions. These quotations may not 3 necessarily reflect actual transactions. - -------------------------------------------------------------------------------- Period High Bid Low Bid - -------------------------------------------------------------------------------- 1st Qtr 2001 .375 .25 - -------------------------------------------------------------------------------- 2nd Qtr 2001 .375 .25 - -------------------------------------------------------------------------------- 3rd Qtr 2001 .375 .25 - -------------------------------------------------------------------------------- 4th Qtr 2001 .25 3.65 - -------------------------------------------------------------------------------- As of December 31, 2001, the Company had 7,068,714 shares of its common stock issued and outstanding, of which 690,302 were held by non-affiliates. The Company's CUSIP number is 85847R108. The Company has authorized a total of 50,000,000 shares of common stock, par value $.001. The Company has authorized a total of 10,000,000 shares of preferred stock, par value $10.00 and presently has no shares of preferred stock issued and outstanding. The Company estimates that it has in excess of 300 total shareholders as of April 12, 2002. Item 6. Management's Discussion and Analysis or Plan of Operation. FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE When used in this Form 10-KSB, the words "anticipated", "estimate", "expect", and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions including the possibility that the Company's will fail to generate projected revenues. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. RESULTS OF OPERATIONS In 1999, the Company began operations after two years of being inactive/dormant. The Company appointed new management after its acquisition of MSC and rented office space. In 1999, the Company lent $37,500 to the Bakery, whose sole officer and director was Randy Sutton, former President of the Company. The Bakery failed to repay the loan when due in September, 2000 and subsequently filed bankruptcy. In addition, the Company's subsidiary, 20/20 Web, lent $195,000 to Stein's Cake Box ("Cake Box"), a Nevada corporation which was formed by 20/20 Web to acquire certain contracts owned by the Bakery. That loan has also not been paid and has been written off. For the year ended December 31, 2001, the Company realized a loss of ($34,146) on its trading of securities and earned interest of $1,453 for net revenues of ($32,693). For the year ended December 31, 2000, the Company had revenues of $104,749 which was composed of gains on trading securities of $98,287 and dividends and interest of $6,462. The costs and expenses for the year ended December 31, 2001 totaled $593,968 which consisted of general and administrative expenses of approximately $591,000 and interest expense of approximately $3,000. The expenses for the year ended December 31, 2000 consisted primarily of general and administrative expenses of approximately $520,000 and interest expense of approximately $18,000. The Company's net loss from continuing operations before income taxes for the year ended December 31, 2001 was ($626,661) compared to a net loss of ($433,242) for the year ended December 31, 2000. After recognizing a provision for income taxes of $157,900 for the year ended December 31, 20001 and a tax benefit of ($79,100) for the year ended December 31, 2001, the Company's net loss from continuing operations were ($784,561) and ($354,142), respectively. For the year ended December 31, 2000, the Company recognized a loss of ($195,657) from its discontinued operations due to the loss of its investment, through its subsidiary 20/20 Web Design, Inc., in the proposed bakery operation. The net losses from all operations, continuing and discontinued, for the periods ended December 31, 2001 and 2000 were ($784,561) and ($549,799), respectively. The net loss per share for the periods ended December 31, 2001 and 2000 was ($.16) and ($.12), respectively. At December 31, 2001, shareholder equity totaled $123,415 compared to shareholder equity of $173,762 at December 31, 2000. This decrease in shareholder equity is due primarily to the Company's loss on investments and the costs of operating itself and its subsidiaries. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2001, the Company had current assets of approximately $49,000 which consisted of a note receivable from a related entity of approximately $36,000, cash of approximately $5,200, trading securities of approximately $3,500 and prepaid assets of $4,000. The current liabilities of the Company at December 31, 2001 were approximately $389,000 which consisted of approximately $212,000 in trade account payables, notes payable of approximately $148,000 and accounts payable to a related entity of approximately $29,000. 4 At December 31, 2000, the Company had current assets of approximately $315,000 which consisted of trading securities of approximately $140,000, deferred tax asset of approximately $159,000, a note receivable of $16,000 and cash of approximately $300. The current liabilities of the Company at December 31, 2000 consisted of approximately $93,000 in accounts payable, margin account payable of approximately $68,000 and a note payable of $20,000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company was dependent upon revenues realized from trading securities for its own account during the year ended December 31, 2000. Due to the present and ongoing instability in the financial markets, the Company experienced substantial losses in its trading activities. The Company continues to seek a business opportunity that will allow it to generate revenues to fund its operations but has not suitable candidates under review at the present time. The Company will continue to seek suitable merger candidates for its subsidiaries which should also result in revenues for the Company if merger are consummated. The Company does not have adequate working capital for its current operations and will need additional working capital in 2002. NEED FOR ADDITIONAL FINANCING The Company believes that its existing capital will not be sufficient to meet the Company's cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended, for itself and its subsidiaries. The Company is seeking to locate other potential acquisitions for its subsidiaries. No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any funds will be available to the Company to allow it to cover its expenses. The Company might seek to compensate providers of services by issuances of stock in lieu of cash. The Company's balance sheet as of December 31, 2001 reflects limited assets and limited liabilities. Further, there exists no agreements or understandings with regard to loan agreements by or with the Officers, Directors, principals, affiliates or shareholders of the Company. Effect of Inflation Inflation did not have any significant effect on the operations of the Company during the year ended December 31, 2001. Further, inflation is not expected to have any significant effect on future operations of the Company. Item 7. Financial Statements. Financial statements are audited and included herein beginning on Exhibit 1, page 1 and are incorporated herein by this reference. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There were no disagreements with accountants on accounting and financial disclosure during the relevant period. In February, 2002, the Company changed auditors, appointing Malone & Bailey PLLC as its auditors, replacing Moffitt and 5 Company which had resigned. Part III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. Identification of Directors and Executive Officers of the Company The following table sets forth the names and ages of all directors and executive officers of the Company and all persons nominated or chosen to become a director, indicating all positions and offices with the Company held by each such person and the period during which he has served as a director: The principal executive officers and directors of the Company are as follows: Name Position Term(s) of Office - ---- -------- ----------------- Charles Smith Director, CEO, CFO May 15, 2000 to the present Mehrdad Alborz Director June, 2001 to the present Vincent Hussain Director February 1, 2002 to the present Family Relationships. There are no family relationships between any of the officers and directors. Business Experience. The following is a brief account of the business experience during at the least the last five years of the directors and executive officers, indicating their principal occupations and employment during that period, and the names and principal businesses of the organizations in which such occupations and employment were carried out. CHARLES SMITH. Mr. Smith graduated from Boston University, Boston, Massachusetts in 1979 and since that time has been a Certified Public Accountant involved in all phases of business, including the audit of companies and tax matters. He is a consultant to various companies ranging from an art distribution company to a junior resource company which is developing a gold property in Sinaloa State, Mexico. Mr. Smith has significant experience in accounting and securities matters. Mr. Smith's business affiliations during the last five years are as follow: Chairman - Dynacap Group, Ltd. - a consulting and management firm - 1992 to the present; Sole proprietor as a Certified Public Accountant - 1983 to the present; Sole officer and Director - MC Cambridge, Inc. - a financial consulting firm - 1997 to present; Sole officer and director - Asset Servicing Corporation - a leasing company - 1998 to present; Chief Financial Officer and Director - Electrical Generation Technology Corporation - April 2000 to present. Mr. Smith is presently CEO and CFO of 20/20 Web Design, Inc., a company in which the Company is the majority shareholder and which trades on the OTC Electronic Bulletin Board under the symbol "TWBD." MEHRDAD ALBORZ. Mr. Alborz has been an attorney in private practice for the last four years. Prior to being an attorney, Mr. Alborz was chief financial officer of Ravissant Corporation in Pasadena, California were he increased the company's revenues from $500,000 to $1,000,000. Mr. Alborz had similar success while 6 employed at Micro Tree Systems. Mr. Alborz received his Juris Doctor from West Los Angeles School of Law and his Bachelor of Science in Computer Science and Automation Engineering, with a minor in Math, from California State University at Northridge. Mr. Alborz is an officer and director of 20/20 Web Design, Inc., a subsidiary of the Company and a publicly traded company on the OTC Electronic Bulletin Board under "TWBD." VINCENT HUSSAIN. Mr. Hussain retired from Hallmark-Avnet in 1998 after working there for approximately 40 years. Mr. Hussain is a and director of 20/20 Web Design, Inc., a subsidiary of the Company and a publicly traded company on the OTC Electronic Bulletin Board under "TWBD." Identification of Certain Significant Employees. The Company does not employ any persons who make or are expected to make significant contributions to the business of the Company. CONFLICTS OF INTEREST The Officers and Directors of the Company will devote only a small portion of their time to the affairs of the Company, estimated to be no more than approximately 5 hours per month. There will be occasions when the time requirements of the Company's business conflict with the demands of their other business and investment activities. Such conflicts may require that the Company attempt to employ additional personnel. There is no assurance that the services of such persons will be available or that they can be obtained upon terms favorable to the Company. There is no procedure in place which would allow the Officers and Directors to resolve potential conflicts in an arms-length fashion. Accordingly, they will be required to use their discretion to resolve them in a manner which they consider appropriate. The Company's Officers and Directors may actively negotiate or otherwise consent to the purchase of a portion of their common stock as a condition to, or in connection with, a proposed merger or acquisition transaction. It is anticipated that a substantial premium over the initial cost of such shares may be paid by the purchaser in conjunction with any sale of shares by the Company's Officers and Directors which is made as a condition to, or in connection with, a proposed merger or acquisition transaction. The fact that a substantial premium may be paid to the Company's Officers and Directors to acquire their shares creates a potential conflict of interest for them in satisfying their fiduciary duties to the Company and its other shareholders. Even though such a sale could result in a substantial profit to them, they would be legally required to make the decision based upon the best interests of the Company and the Company's other shareholders, rather than their own personal pecuniary benefit. Item 10. Executive Compensation. During fiscal 2001, and as of the date of the filing of this report, none of the Company's officers were paid any compensation by the Company. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meeting of the Board of Directors. The Company has no material bonus or profit-sharing plans pursuant to which cash 7 or non-cash compensation is or may be paid to the Company's directors or executive officers. The Company has no compensatory plan or arrangements, including payments to be received from the Company, with respect to any executive officer or director, where such plan or arrangement would result in any compensation or remuneration being paid resulting from the resignation, retirement or any other termination of such executive officer's employment or from a change-in-control of the Company or a change in such executive officer's responsibilities following a change-in-control and the amount, including all periodic payments or installments where the value of such compensation or remuneration exceeds $100,000 per executive officer. During the last completed fiscal year, no funds were set aside or accrued by the Company to provide pension, retirement or similar benefits for Directors or Executive Officers. The Company has no written employment agreements. Termination of Employment and Change of Control Arrangement. Except as noted herein, the Company has no compensatory plan or arrangements, including payments to be received from the Company, with respect to any individual names above from the latest or next preceding fiscal year, if such plan or arrangement results or will result from the resignation, retirement or any other termination of such individual's employment with the Company, or from a change in control of the Company or a change in the individual's responsibilities following a change in control. Section 16(a) Beneficial Ownership Reporting Compliance. During the year ended December 31, 2001, the following persons were officers, directors and more than ten-percent shareholders of the Company's common stock: Name Position Filed Reports - ---- Myles O'Dwyer Director No James Smith Director Yes Tisa Capital Corp. Shareholder Yes Charles Smith Director, CEO, CFO No Mary Reindinger Director, Secretary No Mehrdad Alborz Director No Compensation Pursuant to Plans. Other than disclosed above, the Company has no plan pursuant to which cash or non-cash compensation was paid or distributed during the last fiscal year, or is proposed to be paid or distributed in the future, to the individuals and group described in this item. Item 11. Security Ownership of Certain Beneficial Owners and Management. There were 7,068,714 shares of the Company's common stock issued and outstanding on December 31, 2001. No preferred shares were issued and outstanding at December 31, 2001. The following tabulates holdings of shares of the Company by each person who, subject to the above, at the date of this Report, holds or owns or is known by Management to own beneficially more than five percent (5%) of the Common Shares of the Company and, in addition, by all directors and officers of the Company individually and as a group. 8 Amount Name and Address of of Common Shares Beneficial Owner Currently Owned Percent - ---------------- --------------- ------- Charles Smith (1) 0 0.00 21800 Oxnard Street #440 Woodland Hills CA 91367 Tisa Capital Corp. 3,170,116 44.85 21800 Oxnard Street #440 Woodland Hills CA 91367 Mehrdad Alborz 0 0.00 21800 Oxnard Street #440 Woodland Hills CA 91367 Vincent Hussain 43,795 0.62 21800 Oxnard Street #440 Woodland Hills CA 91367 Sanitec USA National, Inc. 1,333,334 18.86 21800 Oxnard Street #440 Woodland Hills CA 91367 Phoenix Consulting Services 1,333,334 18.86 21800 Oxnard Street #440 Woodland Hills CA 91367 All directors and officers as a group (3) 43,795 0.62 - ---------- (1) Denotes officer and/or director. Changes in Control. There are no arrangements known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change of control of the Company. Item 12. Certain Relationships and Related Transactions. The Company shares office space with its attorney and with a related entity. It provides office space to its subsidiary, 20/20 Web Design, Inc., of which it owns 80%, at no charge. The Company's portion of the rent is approximately $1,500 per month and the lease runs through November, 2002. Item 13. Exhibits and Reports on Form 8-K. (a) Financial Statements and Schedules The following financial statements and schedules are filed as part of this report: Independent Auditors Report dated March 29, 2002 Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statement of Changes in Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report dated January 10, 2001 9 Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statement of Changes in Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements List of Exhibits The following exhibits are filed with this report. Financial Statements for the Year Ended December 31, 2001 Financial Statements for the Year Ended December 31, 2000 (b) There was a Report filed on Form 8-K during the fourth quarter of the Company's fiscal year ended December 31, 2001 concerning the Company's acquisition of SSH. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. April 12, 2002 CROWN PARTNERS, INC. /s/ Charles Smith ---------------------------------------- Charles Smith, CEO, CFO, Director April 12, 2002 /s/ Mehrdad Alborz ---------------------------------------- Mehrdad Alborz, Director April 12, 2002 /s/ Vincent Hussain ---------------------------------------- Vincent Hussain, Director 10 STEIN'S HOLDINGS, INC. CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 TABLE OF CONTENTS Page No. -------- INDEPENDENT AUDITORS' REPORT ......................................... 1 FINANCIAL STATEMENTS Consolidated Balance Sheets.................................... 2 Consolidated Statements of Operations.......................... 3 Consolidated Statement of Stockholders' Equity................. 4 Consolidated Statements of Cash Flows.......................... 5 - 6 Notes to Consolidated Financial Statements..................... 7 - 17 INDEPENDENT AUDITORS' REPORT To the Board of Directors Crown Partner's, Inc. (formerly Stein's Holding, Inc.) Woodland Hills, California We have audited the accompanying consolidated balance sheet of Crown Partner's, Inc. (formerly Stein's Holding, Inc.) as of December 31, 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crown Partner's, Inc. (formerly Stein's Holdings, Inc.) as of December 31, 2001, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Malone & Bailey, PLLC Houston, Texas www.malone-bailey.com March 29, 2002 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Stein's Holding, Inc. and Subsidiary Woodland Hills, California We have audited the accompanying statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of Crown's operations and its cash flows for the year then ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Moffitt & Company, P.C. Scottsdale, Arizona January 11, 2001 CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED BALANCE SHEET December 31, 2001 ASSETS Current assets: Cash $ 5,232 Trading securities 3,546 Notes receivable - related entity 35,811 Prepaid assets 4,000 ----------- Total current assets 48,589 Property and equipment, net 422,536 Goodwill, net of accumulated amortization 23,289 Deposits 17,703 ----------- $ 512,117 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable: Trade $ 211,600 Related entity 29,154 Notes payable 147,948 ----------- Total current liabilities 388,702 ----------- STOCKHOLDERS' EQUITY: Convertible preferred stock, $10 par value, 10,000,000 shares authorized, no shares issued and outstanding -- Common stock, $.001 par value, 50,000,000 shares authorized, 7,068,714 shares issued and outstanding 7,069 Additional paid in capital 3,655,551 Accumulated deficit (3,539,205) ----------- Total Stockholders' Equity 123,415 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 512,117 =========== See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31,
2001 2000 ----------- ----------- Gains (losses) on trading securities $ (34,146) $ 98,287 Dividends, interest and other 1,453 6,462 ----------- ----------- Total (32,693) 104,749 Costs and Expenses: General and administrative 591,299 520,160 Interest expense 2,669 17,831 ----------- ----------- 593,968 537,991 ----------- ----------- Net loss before income taxes and discontinued operations: (626,661) (433,242) Provision (benefit) for income taxes 157,900 (79,100) ----------- ----------- Loss before discontinued operations (784,561) (354,142) Discontinued operations: Loss on liquidation of investment in Stein's Cake Box, Inc. -- (195,657) Loss from continuing operations of Stein's Cake Box, Inc. -- -- ----------- ----------- -- (195,657) ----------- ----------- Net loss before minority interest (784,561) (549,799) Minority interest in loss of subsidiaries -- 38,948 ----------- ----------- Net loss $ (784,561) $ (510,851) =========== =========== Net loss per share: Net loss basic and diluted $ (0.16) $ (0.12) =========== =========== Weighted average shares outstanding: Basic and diluted 4,923,700 4,401,166 =========== ===========
See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 2001
Common stock Additional --------------------- paid in Accumulated Shares Amount capital deficit Total --------- ------ ---------- ----------- --------- Balance, December 31, 1999 4,401,166 $4,401 $2,924,005 $(2,243,793) $ 684,613 Net loss -- -- -- (510,851) (510,851) --------- ------ ---------- ----------- --------- Balance, December 31, 2000 4,401,166 4,401 2,924,005 (2,754,644) 173,762 Issuance of common stock for services 1,334,214 1,335 319,545 -- 320,880 Issuance of common stock in connection with acquisition 1,333,334 1,333 412,001 -- 413,334 Net loss -- -- -- (784,561) (784,561) --------- ------ ---------- ----------- --------- Balance, December 31, 2001 7,068,714 $7,069 $3,655,551 $(3,539,205) $ 123,415 ========= ====== ========== =========== =========
See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(784,561) $(510,851) Adjustments to reconcile net deficit to cash used by operating activities: Depreciation and amortization 14,044 4,483 Minority interest in loss of subsidiary -- (38,948) Loss on investment in subsidiary -- 195,656 Common stock for services 320,880 -- Net change in: Trading securities 136,366 253,975 Accounts receivable -- 28,136 Prepaid assets (21,703) 507 Accounts payable 133,200 87,906 Accrued expenses -- 443 Deferred income taxes 157,900 (44,190) --------- --------- CASH FLOWS USED IN OPERATING ACTIVITIES (43,875) (22,882) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment (2,649) (2,751) Changes in loans receivable (20,238) 22,927 Acquisition of subsidiary -- (63,074) --------- --------- CASH FLOWS USED IN INVESTING ACTIVITIES (22,887) (42,898) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on margin accounts payable (67,938) 67,938 Proceeds (payments) on notes payable 139,603 (5,000) --------- --------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 71,665 62,938 --------- --------- NET INCREASE (DECREASE) IN CASH 4,903 (2,842) Cash, beg. of period 329 3,171 --------- --------- Cash, end of period $ 5,232 $ 329 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ -- $ 15,831 Income taxes paid $ -- $ -- NONCASH TRANSACTION: Acquisition of subsidiary for common stock $ 413,334 $ -- See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Crown Partners', Inc. (formerly Stein's Holdings, Inc.), a Nevada corporation, was incorporated on November 3, 1986. The Company was originally incorporated as Ed Phills, Inc. and its name was changed to Vegas Ventures, Inc., Telemall Communications, Inc. and subsequently to Stein's Holdings, Inc. The Company was a development stage company until 1999, when it acquired the following companies and became an active company: Multi-Source Capital Ltd. - Merged into Stein's Holdings, Inc. in May 1999. 20/20 Web Design, Inc. - The Company acquired 80% ownership in this company in March 1999. In September 2000, the Company acquired 90% ownership in Universal Services and Acquisitions, Inc. In November 2001, the Company acquired 100% of Sanitec Services of Hawaii, Inc. Nature of Business Crown Partners', Inc. (formerly Stein's Holdings, Inc.) main activities and sources of income are derived from daily trading in the stock markets. 20/20 Web Design, Inc. and Universal Services and Acquisitions, Inc. are in the business of managing and acquiring subsidiary companies. Sanitec Services of Hawaii, Inc.("Sanitec") processes medical waste. Currently, Sanitec has not begun operations. Principles of Consolidation The December 31, 2001 consolidated financial statements include the accounts of the Company's majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company's consolidated financial statements include the results of operations from the respective dates of acquisition through divestiture or December 31, 2001, as applicable. Trading Securities The Company has adopted Statement of Financial Accounting Standards No. 115. This statement requires that trading securities be recorded as follows: A. Balance sheet - recorded at fair market value as a current asset. B. Unrealized holding gains and losses - included in the statement of income as current earnings. C. Dividends and interest income - included in the statement of income as current earnings. D. Cash flows from purchase, sales, and maturities of trading securities shall be classified as cash flows from operating activities. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income. The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets: Computer hardware 5 years Computer software 3 years Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. Income Taxes The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Crown records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. Recent Accounting Pronouncements Crown does not expect the adoption of recently issued accounting pronouncements to have a significant impact on Crown's results of operations, financial position or cash flow. Compensated Absences Employees of the corporation are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The accrued vacation pay during each period presented is considered immaterial and accordingly, no liability has been recorded in the accompanying financial statements. Net Loss Per Share Basic earnings (loss) per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. NOTE 2 - Financial Condition And Going Concern For the years ended December 31, 2001 and 2000, the Company incurred losses totaling $784,561 and $510,851, respectively, and at December 31, 2001 had a capital deficit of $340,113. Because of these recurring losses, the Company will require additional working capital to develop and/or renew its business operations. The Company intends to raise additional working capital either through private placements, public offerings and/or bank financing. The Company is also identifying merger and/or acquisition candidates. As of March 29, 2002, no acquisition or merger agreements have been closed. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company's working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available the Company may not renew its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. NOTE 3 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The Company estimates that the fair value of all financial instruments at December 31, 2001 and 2000, as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. NOTE 4 - NOTE RECEIVABLE The Company has a note receivable due from a related entity. The note is non-interest bearing and is due upon demand. NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment consist of the following: 2001 2000 Medical waste equipment $415,983 $ -- Computer equipment 18,377 18,377 -------- ------- 434,360 18,377 Less accumulated depreciation 11,824 9,424 -------- ------- $422,536 $ 8,953 ======== ======= The depreciation expense for the years ended December 31, 2001 and 2000 was $2,400 and $4,263, respectively. NOTE 5 - GOODWILL Goodwill represents the excess of the purchase price of Universal Services and Acquisitions, Inc. over the fair value of the Company's net assets and is being amortized on a straight-line basis over three years. The Company recorded $11,644 of amortization for the year ended December 31, 2001. NOTE 6 - NOTES PAYABLE The notes payable are unsecured, bearing interest at 10% and are due upon demand. NOTE 7 - INCOME TAXES Temporary differences that give rise to the deferred tax assets or liabilities at December 31, 2001 and 2000 are as follows: Deferred tax asset Net operating loss carryforward 723,000 Deferred tax liabilities (6,000) --------- 717,000 Valuation allowance (717,000) --------- Net deferred tax asset $ -- ========= The provision (benefit) for income taxes for the years ended December 31, 2001 and 2000 consists of the following: 2001 2000 --------- -------- Federal Current $ -- $ -- Deferred 157,900 (79,100) --------- -------- $ 157,900 $(79,100) ========= ======== A reconciliation of income tax expense (benefit) using the statutory federal income tax rate of 34% to the actual income tax expense (benefit) for the years ended December 31, 2001 and 2000 is as follows: 2001 2000 --------- --------- Federal tax expense (benefit at statutory rate $(213,065) $ -- Tax refund on net operating loss carryforward -- (79,100) Change in valuation allowance 213,065 -- --------- --------- $ -- $ (79,100) ========= ========= The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,125,000 at December 31, 2001, and will expire in the years 2002 through 2021. NOTE 8 - RENT The Company rents its facilities on a month to month basis from an affiliated company. The rent expense for the years ended December 31, 2001 and 2000 was $33,686 and $43,404, respectively. NOTE 9 - ACQUISITIONS In November 2001, the Company acquired 100% of the outstanding capital stock Sanitec Services of Hawaii, Inc. for 1,333,334 shares of common stock The transaction was accounted for as a purchases. The common stock has been valued at $0.31 per share, the estimated fair value at the date of issuance. Sanitec has equipment which is used to process medical waste. The purchase price was allocated to the acquired assets and liabilities based upon an estimate of fair values at the date of acquisition. The financial results and operations of Sanitec have been included in the Company's consolidated financial statements since the effective date of acquisition. The purchase price of the acquisition of the acquisition has been allocated as follows: Fair Value Purchase consideration $ 413,334 Medical waste equipment 415,983 Prepaid assets and deposits 21,703 Accounts payable (24,352) --------- Fair value of net assets acquired $ 413,334 ========= On September 30, 2000, the Company completed its acquisition of Universal Services and Acquisitions, Inc. (Universal). Universal is in the business of managing and acquiring subsidiary companies. The acquisition was recorded under the purchase method of accounting, included the purchase of 20,092,500 shares of stock for $29,000 plus assumed liabilities. A portion of the purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair market value at the date of acquisition with the balance allocated to goodwill. Pro forma statements of operations reflecting this acquisition are not shown as such disclosure is not material. The following presents the unaudited pro forma results of operations of the Company for the year ended December 31, 2000, as if the acquisitions of had occurred on January 1, 2000: For the years ended December 31, ------------------------- 2001 2000 --------- --------- (unaudited) Pro forma revenues $ (32,693) $ 104,749 Pro forma operating loss (761,867) (724,651) Pro forma net loss (919,767) (802,260) Pro forma basic and diluted loss per share $ (0.15) $ (0.14) The information is not necessarily indicative of the results of operations and financial position of the Company as they may be in the future or as they might have been had the business combinations been consummated as of January 1, 2000. NOTE 10 DISCONTINUED OPERATIONS In February 2000, Crown's investment in Stein's Cake Box, Inc. ("Stein's Cake Box") was discontinued. The investment was written off as worthless. Stein's was in the business of selling bakery products to retail establishments in the Dallas Texas metropolitan area. Stein's Cake Box revenue for the year ended December 31, 2000 was $28,136. Net loss from operations was $34,910, net of income tax benefit of $0 for the year ended December 31, 2000. There are no remaining assets of Stein's Cake Box as of December 31, 2000. NOTE 11 CONTINGENCY The Company is contingently liable on a $25,000 guarantee on Stein's Bakery lease. Since Stein's Bakery filed for bankruptcy protection, it is not known if the guarantee will be assessed against the Company. As of December 31, 2001, the Company has not accrued any liability for this contingency. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Stein's Holdings, Inc. We have audited the accompanying consolidated balance sheets of Stein's Holdings, Inc. (A Nevada Corporation) as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. 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 generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Stein's Holdings, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Moffitt & Company, P.C. Scottsdale, Arizona January 10, 2001 STEIN'S HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 ASSETS 2000 1999 -------- ---------- CURRENT ASSETS Cash and cash equivalents $ 329 $ 3,171 Trading securities 139,912 393,887 Accounts receivable 0 28,136 Loans and notes receivable Related entities 15,573 37,500 Other 0 1,000 Deferred tax asset 159,000 120,087 Prepaid insurance 0 507 -------- ---------- TOTAL CURRENT ASSETS 314,814 584,288 PROPERTY AND EQUIPMENT 8,953 490,669 OTHER ASSETS Goodwill 34,933 0 -------- ---------- TOTAL ASSETS $358,700 $1,074,957 ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999 ----------- ----------- CURRENT LIABILITIES Accounts payable Trade $ 93,300 $ 5,394 Related entity 0 312,468 Accrued liabilities and payroll taxes 2,600 2,157 Margin accounts payable 67,938 0 Note payable 20,000 25,000 Corporation income taxes payable 0 4,949 ----------- ----------- TOTAL CURRENT LIABILITIES 183,838 349,968 ----------- ----------- LONG-TERM LIABILITIES Deferred income tax payable 1,100 1,428 ----------- ----------- MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 0 38,948 ----------- ----------- CONTINGENCY -- -- STOCKHOLDERS' EQUITY Convertible preferred stock Authorized 10,000,000 shares, par value $10 per share Issued and outstanding -0- shares 0 0 Common stock Authorized 50,000,000 shares, par value $.001 per share Issued and outstanding - 4,401,166 shares 4,401 4,401 Paid in capital in excess of par value of stock 2,924,005 2,924,005 Retained earnings (deficit) (2,754,644) (2,243,793) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 173,762 684,613 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 358,700 $ 1,074,957 =========== ===========
See Accompanying Notes and Independent Auditors' Report. 2 STEIN'S HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Restated 2000 1999 ----------- ----------- REVENUES Gains (losses) on trading securities $ 98,287 $ (37,180) Website design 0 2,500 Dividends, interest and other 6,462 3,127 ----------- ----------- TOTAL REVENUES (DEFICIT) 104,749 (31,553) ----------- ----------- COSTS AND EXPENSES General and administrative expenses 520,160 345,977 Interest expense 17,831 1,532 ----------- ----------- TOTAL COSTS AND EXPENSES 537,991 347,509 ----------- ----------- (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (BENEFIT) (433,242) (379,062) PROVISIONS FOR INCOME TAXES (BENEFIT) (79,100) (130,215) ----------- ----------- (LOSS) FROM CONTINUING OPERATIONS (354,142) (248,847) ----------- ----------- DISCONTINUED OPERATIONS Loss on liquidation of investment in Stein's Cake Box, Inc. (195,657) 0 Income on investment in Stein's Cake Box, Inc., less applicable income taxes 0 526 ----------- ----------- TOTAL DISCONTINUED OPERATIONS (195,657) 526 ----------- ----------- (LOSS) BEFORE MINORITY INTEREST (549,799) (248,321) MINORITY INTEREST IN (LOSS) OF SUBSIDIARIES 38,948 6,982 ----------- ----------- NET (LOSS) $ (510,851) $ (241,339) =========== =========== NET (LOSS) PER COMMON SHARE Basic and diluted: Continuing operations $ (.08) $ (.06) Discontinued operations (.04) .00 ----------- ----------- Total $ (.12) $ (.06) =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic and diluted 4,401,166 4,369,218 =========== ===========
See Accompanying Notes and Independent Auditors' Report. 3 STEIN'S HOLDINGS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Deficit Paid in Accumulated Convertible Preferred Stock Common Stock Capital in Retained During --------------------------- -------------------- Excess of Earnings Development Shares Amount Shares Amount Par Value (Deficit) Stage BALANCE, JANUARY 1, 1999 510,000 $ 5,100,000 44,376 $ 44 $1,189,154 $ 0 $(1,507,386) -------- ----------- --------- ------ ---------- ----------- ----------- TRANSFER OF DEFICIT ACCUMU- LATED DURING THE DEVELOP- MENT STAGE TO RETAINED EARNINGS 0 0 0 0 0 (1,507,386) 1,507,386 CANCELLATION OF PREFERRED STOCK (510,000) (5,100,000) 0 0 290,687 0 0 ISSUANCE OF COMMON STOCK FOR SERVICES, AT PAR VALUE 0 0 62,500 62 0 0 0 PRIVATE PLACEMENT OF STOCK THROUGH SUBSIDIARY COMPANIES 0 0 0 0 227,140 (461,428) 0 MERGER WITH 20/20 WEB DESIGN, INC 0 0 0 0 455,952 (33,640) 0 ISSUANCE OF COMMON STOCK FOR MERGER OF MULTI- SOURCE CAPITAL LTD 0 0 4,247,754 4,248 560,986 0 0 ISSUANCE OF COMMON STOCK FOR CASH 0 0 18,610 19 92,981 0 0 RENT 0 0 15,926 16 95,127 0 0 ACCOUNTS PAYABLE 0 0 12,000 12 11,978 0 0 NET (LOSS) FOR THE YEAR ENDED DECEMBER 31, 1999 0 0 0 0 0 (241,339) 0 -------- ----------- --------- ------ ---------- ----------- ----------- BALANCE, DECEMBER 31, 1999 0 0 4,401,166 4,401 2,924,005 (2,243,793) 0 NET (LOSS) FOR THE YEAR ENDED DECEMBER 31, 2000 0 0 0 0 0 (502,451) 0 -------- ----------- --------- ------ ---------- ----------- ----------- BALANCE, DECEMBER 31, 2000 0 $ 0 4,401,166 $4,401 $2,924,005 $(2,746,244) $ 0 ======== =========== ========= ====== ========== =========== ===========
See Accompanying Notes and Independent Auditors' Report. 4 STEIN'S HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $(510,851) $(241,339) Adjustments to reconcile net (loss) to net cash (used) by operating activities: Depreciation and amortization 4,483 3,692 Minority interest in (loss) of subsidiary (38,948) (6,982) Loss on investment in subsidiary 195,657 0 Common stock issued for services and rent 0 76,217 Deferred tax assets (38,913) (120,087) Changes in operating assets and liabilities: Trading securities 253,975 176,639 Accounts receivable 28,136 (28,136) Prepaid insurance 507 (507) Accounts payable 87,906 32,184 Accrued liabilities and payroll taxes 443 960 Corporation income taxes payable (5,277) (10,128) --------- --------- NET CASH (USED) BY OPERATING ACTIVITIES (22,882) (117,487) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,751) (202,469) Changes in loans receivable 22,927 (38,500) Acquisition of subsidiary (63,074) 0 --------- --------- NET CASH (USED) BY INVESTING ACTIVITIES (42,898) (240,969) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on margin accounts payable 67,938 0 Proceeds from issuance of common stock 0 320,140 Repayment of note payable (5,000) 0 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 62,938 320,140 --------- --------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS (2,842) (38,316) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,171 41,487 --------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 329 $ 3,171 ========= =========
See Accompanying Notes and Independent Auditors' Report. 5 STEIN'S HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999 ------- -------- SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION Interest paid $15,831 $ 1,532 ======= ======== Taxes paid $ 0 $ 0 ======= ======== NON CASH INVESTING AND FINANCING ACTIVITIES Related party payable for acquisition of property and equipment $ 0 $285,204 ======= ======== Issuance of common stock for services and rent $ 0 $ 76,217 ======= ======== Cancellation of preferred stock $ 0 $290,687 ======= ========
See Accompanying Notes and Independent Auditors' Report. 6 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Stein's Holdings, Inc., a Nevada corporation, was incorporated on November 3, 1986. The Company was originally incorporated as Ed Phills, Inc. and its name was changed to Vegas Ventures, Inc., Telemall Communications, Inc. and subsequently to Stein's Holdings, Inc. The Company was a development stage company until 1999, when it acquired the following companies and became an active company: Multi-Source Capital Ltd. - Merged into Stein's Holdings, Inc. in May 1999. 20/20 Web Design, Inc. - The Company acquired 80% ownership in this company in March 1999. Stein's Cake Box, Inc. - Became a wholly owned subsidiary of 20/20 Web Design, Inc. in December 1999. In September 2000, the Company acquired 90% ownership in Universal Services and Acquisitions, Inc. Nature of Business Stein's Holdings, Inc. main activities and sources of income are derived from daily trading in the stock markets. 20/20 Web Design, Inc. and Universal Services and Acquisitions, Inc. are in the business of managing and acquiring subsidiary companies. Stein's Cake Box, Inc. sold bakery products to retail establishments in the Dallas, Texas, metropolitan area. It ceased operations in January 2000. Principles of Consolidation The December 31, 2000 consolidated financial statements include the accounts of Stein's Holdings, Inc. and its 80% owned subsidiary, 20/20 Web Design, Inc. and 90% owned subsidiary, Universal Services and Acquisitions, Inc. The December 31, 1999 consolidated financial statements include the accounts of Stein's Holdings, Inc. and its 80% owned subsidiary, 20/20 Web Design, Inc. and its 100% owned subsidiary, Stein's Cake Box, Inc. All material inter-company accounts and transactions have been eliminated. Methods of Accounting The Companies have adopted the accrual method of accounting. In addition, Stein's Holdings, Inc. records the sale of trading securities on the "trade date". See Accompanying Notes and Independent Auditors' Report. 7 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Trading Securities The Company has adopted Statement of Financial Accounting Standards No. 115. This statement requires that trading securities be recorded as follows: A. Balance sheet - recorded at fair market value as a current asset. B. Unrealized holding gains and losses - included in the statement of income as current earnings. C. Dividends and interest income - included in the statement of income as current earnings. D. Cash flows from purchase, sales, and maturities of trading securities shall be classified as cash flows from operating activities. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income. The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets: Computer hardware 5 years Computer software 3 years Accounting Estimates Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently See Accompanying Notes and Independent Auditors' Report. 8 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes (Continued) enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Compensated Absences Employees of the corporation are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The accrued vacation pay during each period presented is considered immaterial and accordingly, no liability has been recorded in the accompanying financial statements. Net Loss Per Share The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. NOTE 2 DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The Company estimates that the fair value of all financial instruments at December 31, 2000 and 1999, as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgement is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. NOTE 3 NOTE RECEIVABLE The loan to College Connection, Inc., DBA Stein's Bakery, was dated September 9, 1999 and required monthly interest payments of $344 and a balloon payment of principal and interest on September 1, 2000. Stein's Bakery filed for Bankruptcy protection and the Company did not receive its required payments. The Company wrote off the loan as uncollectible. See Accompanying Notes and Independent Auditors' Report. 9 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 4 PROPERTY AND EQUIPMENT Property and equipment consist of the following: 2000 1999 -------- -------- Computer hardware $ 13,592 $ 10,841 Computer software 4,785 4,785 Construction in process 0 480,204 -------- -------- 18,377 495,830 Less accumulated depreciation 9,424 5,161 -------- -------- Total property and equipment $ 8,953 $490,669 ======== ======== The depreciation expense for the years ended December 31, 2000 and 1999 was $4,263 and $3,634, respectively. NOTE 5 GOODWILL Goodwill represents the excess of the purchase price of Universal Services and Acquisitions, Inc. over the fair value of the Company's net assets and is being amortized on a straight-line basis over forty years. The Company recorded $220 of amortization for the year ended December 31, 2000. NOTE 6 NOTE PAYABLE The note payable is unsecured, bears interest at 10% and is due on demand. NOTE 7 INCOME TAXES
2000 1999 --------- --------- (Loss) from continuing operations before income taxes $(628,899) $(379,062) --------- --------- The provision for income taxes is estimated as follows: Currently payable or (benefit) $ 0 $ 0 --------- --------- Deferred payable or (benefit) (79,100) (130,215) --------- ---------
A reconciliation of the provision for income taxes compared with the amounts at the U.S. Federal statutory rate was as follows: See Accompanying Notes and Independent Auditors' Report. 10 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 7 INCOME TAXES (CONTINUED)
2000 1999 --------- --------- Tax refund at U.S. Federal statutory income tax rate $ 0 $ 0 Tax refund on net operating loss carryforward (79,100) (130,215) --------- --------- $ (79,100) $(130,215) ========= ========= Deferred income tax asset and liabilities reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws The net deferred tax asset is: $ 159,000 $ 120,087 ========= ========= The net deferred liability is: $ 1,100 $ 6,377 ========= =========
Temporary differences that give use to deferred tax assets and liabilities included the following: Deferred Tax ---------------------- Assets Liabilities ------ ----------- Net operating loss $318,000 $ 0 Property and equipment related 0 6,377 -------- --------- 318,000 $ 6,377 ========= Less valuation allowance 159,000 -------- Total deferred taxes $159,000 ======== Balance, Beginning of year $120,050 $ 495,121 Less adjustments due to merger 0 (63,876) Current year reduction due to managements' estimate of future profits due to mergers and new subsidiary 0 (311,195) Addition for year 38,950 0 -------- --------- Balance, end of year $159,000 $ 120,050 ======== ========= NOTE 8 TAX CARRYFORWARDS The corporations have the following net operating loss carryforwards: Amount Expiration Date ---------- --------------- $ 163 2001 3,128 2002 See Accompanying Notes and Independent Auditors' Report. 11 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 8 TAX CARRYFORWARDS (CONTINUED) Amount Expiration Date ---------- --------------- $ 17,910 2003 9,297 2004 500 2005 4,363 2006 59,049 2007 281,412 2011 94,200 2018 431,342 2019 597,000 2020 ---------- $1,498,364 ========== NOTE 9 CONVERTIBLE PREFERRED STOCK The Company canceled the outstanding preferred stock in exchange for the mutual funds and inventory that the Company owned at December 31, 1998. NOTE 10 CONVERTIBLE PREFERRED STOCK PREFERENCES No rights or preferences have been assigned to the preferred stock except for the convertible privilege. NOTE 11 INTEREST The Company incurred interest expense for the years ended December 31, 2000 and 1999 of $17,831 and $1,532, respectively. NOTE 12 RENT The Company rents its facilities on a month to month basis from an affiliated company. The rent expense for the years ended December 31, 2000 and 1999 was $43,404 and $40,490, respectively. NOTE 13 ACQUISITION OF 20/20 WEB DESIGN, INC. On March 30, 1999, Trump Oil Corporation completed a merger with 20/20 Web Design, Inc. by exchanging 8,620,000 shares of Section 144 restricted common stock for 100% of the outstanding shares of 20/20 Design, Inc. See Accompanying Notes and Independent Auditors' Report. 12 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 13 ACQUISITION OF 20/20 WEB DESIGN, INC. (CONTINUED) The merger has been accounted for as a pooling of interest and the Company recorded the merger as follows: Increase in common stock 8,620,000 shares @ .001(cent)par value $8,620 Decrease in paid-in capital 8,620 After the merger, the Company changed its name to 20/20 Web Design, Inc. The following unaudited information presents certain income statement data of the separate companies for the periods preceding the merger: 1999 1998 -------- --------- Net sales Trump Oil Corporation $ 2,500 $ 0 20/20 Web Design, Inc. 0 0 Net (loss) Trump Oil Corporation (20,000) (359,441) 20/20 Web Design, Inc. 0 0 There were no material transactions between Trump Oil Corporation and 20/20 Web Design, Inc. prior to the merger. The effects of conforming 20/20 Web Design, Inc.'s accounting policies to those of Trump Oil Corporation were not material. After the merger, 20/20 Web Design, Inc. became an 80% subsidiary of Stein's Holdings, Inc. NOTE 14 BUSINESS COMBINATION - MULTI-SOURCE CAPITAL LTD. In May 1999, the Company completed a merger with Multi-Source Capital Ltd. by exchanging 4,247,754 shares of Section 144 restricted common stock for 100% of the outstanding shares of Multi-Source Capital Ltd. The merger has been accounted for as a pooling of interest and the Company recorded the merger as follows: Book value of net assets received of $565,234 for 4,247,754 shares of .001(cent) par value shares. The following unaudited information presents certain income statement data of the separate companies for the period preceding the merger: See Accompanying Notes and Independent Auditors' Report. 13 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 14 BUSINESS COMBINATION - MULTI-SOURCE CAPITAL LTD. (CONTINUED) Stein's Multi-Source Holdings, Inc. Capital Ltd. -------------- ------------ Net sales $0 $(203,741) Net (loss) 0 278,596 There were no material transactions between the companies prior to the merger. The effects of conforming Multi-Source Capital Ltd.'s accounting policies to those of Stein's Holdings, Inc. were not material. NOTE 15 BUSINESS COMBINATION - UNIVERSAL SERVICES AND ACQUISITIONS, INC. On September 30, 2000, the company completed its acquisition of Universal Services and Acquisitions, Inc. (Universal). Universal is in the business of managing and acquiring subsidiary companies. The acquisition, recorded under the purchase method of accounting, included the purchase of 20,092,500 shares of stock for $29,000 plus assumed liabilities. A portion of the purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair market value at the date of acquisition with the balance allocated to goodwill. The following unaudited pro forma summary presents information as if Universal had been acquired as of the beginning of Stein's Holding, Inc. years 2000, 1999 and 1998. The pro forma amounts include certain adjustments, primarily to recognize amortization, and do not reflect any benefits from economies which might be achieved from combining operations. The pro forma information does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined companies: Nine Months Ended 1999 1998 September 30, 2000 --------- ----- ------------------ Revenues $ (3,417) $ 0 $ 171,318 Net income (loss) after Amortization of goodwill (242,219) (880) (356,958) Earnings (loss) per share Basic and diluted $ (.06) $(.00) $ (.08) NOTE 16 STOCK OPTIONS The Company does not have any stock options outstanding at December 31, 2000. See Accompanying Notes and Independent Auditors' Report. 14 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 17 LOSS ON WORTHLESS SUBSIDIARY Management believes the investment in Stein's Cake Box Inc, is uncollectible and therefore elected to write-off the $195,657 investment as uncollectible. NOTE 18 ECONOMIC DEPENDENCY AT DECEMBER 31, 1999 Sales 98.3% of the Stein Cake Box, Inc's sales were to one customer. Cost of Goods Sold Stein Cake Box, Inc. purchased all of its baked goods from one supplier, Stein's Bakery. NOTE 19 SEGMENT REPORTING At December 31, 2000, the Company had two reportable segments: Stein's Holdings, Inc. - Trading securities. 20/20 Web Design, Inc. and Universal Services and Acquisitions, Inc. - management of subsidiary company operations. The Company evaluates segment performance based on income from operations. All inter-company transactions between segments have been eliminated. Segment results for the year ended December 31, 2000 are as follows: 20/20 Web Design, Inc. Stein's and Universal Services Holdings, Inc. and Acquisitions, Inc. -------------- ---------------------- Net revenues $ 98,287 $ 0 (Loss) from continuing operations (313,059) (236,740) Assets 358,641 59 A reconciliation from the segment information to the consolidated balances for (loss) from operations and assets is set forth below: Segment (loss) from operations $(549,799) Consolidated (loss) from continuing operations (549,799) Segment assets 358,700 Consolidated total assets 358,700 See Accompanying Notes and Independent Auditors' Report. 15 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 19 SEGMENT REPORTING (CONTINUED) At December 31, 1999, the Company had three reportable segments: Stein's Holdings, Inc. - Trading securities. 20/20 Web Design, Inc. - Web design and management of subsidiary company operations. Stein Cake Box, Inc. - Sales of bakery products. Segment results for 1999 are as follows: Stein's 20/20 Web Stein's Cake Holdings, Inc. Design, Inc. Box, Inc. -------------- ------------ ------------ Net sales $ (34,053) $ 2,500 $ 28,136 Income (loss) from operations (206,429) (35,437) 527 Assets 566,343 137 508,477 Capital expenditures 15,626 0 480,204 A reconciliation from the segment information to the consolidated balances for income (loss) from operations and assets is set forth below: Segment (loss) from operations $ (248,847) Consolidated (loss) from operations (248,847) Segment assets 1,074,957 Consolidated total assets 1,074,957 NOTE 20 DISCONTINUED OPERATIONS APB 30, paragraph 13, requires that an entity restate prior year financial statements to disclose the results of subsequent discontinued operations. The investment in Stein's Cake Box, Inc. was discontinued and the 1999 statement of operations was restated to segregate the income from discontinued operations from continued operations. See Accompanying Notes and Independent Auditors' Report. 16 STEIN'S HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 20 DISCONTINUED OPERATIONS (CONTINUED) The following information is presented for the discontinued operations: a. Segment discontinued - subsidiary corporation, Stein's Cake Box, Inc. b. Discontinued date - February 29, 2000 c. Manner of disposal - investment written-off as worthless d. Remaining assets and liabilities - none at February 29, 2000 e. Income or loss from February 29, 2000 to December 31, 2000 - none f. Proceeds from disposal of assets - none NOTE 21 COMPUTATION OF EARNINGS PER SHARE Restated 2000 1999 ----------- ----------- From continuing operations Net (loss) from continuing operations $ (354,142) $ (248,847) ----------- ----------- Weighted average number of common Shares outstanding 4,401,166 4,401,166 (Loss) per share $ (.08) $ (.06) From discontinued operations Net (loss) from discontinuing operations $ (195,657) $ 526 ----------- ----------- Weighted average number of common Shares outstanding 4,401,166 4,401,166 (Loss) per share $ (.04) $ .00 NOTE 22 CONTINGENCY The Company is contingently liable on a $25,000 guarantee on Stein's Bakery lease. Since Stein's Bakery filed for bankruptcy protection, it is not know if the guarantee will be assessed against the Company. As of December 31, 2000, the Company has not accrued any liability for this contingency. NOTE 23 RESTATEMENT OF COMMON STOCK In 1999, the Company effected a 200- to- 1 reverse stock split. The stock split has been retroactively recorded in the financial statement as if it occurred at the date of inception. See Accompanying Notes and Independent Auditors' Report. 17 INDEPENDENT AUDITORS' REPORT To the Board of Directors Crown Partner's, Inc. (formerly Stein's Holding, Inc.) Woodland Hills, California We have audited the accompanying consolidated balance sheet of Crown Partner's, Inc. (formerly Stein's Holding, Inc.) as of December 31, 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crown Partner's, Inc. (formerly Stein's Holdings, Inc.) as of December 31, 2001, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Malone & Bailey, PLLC Houston, Texas www.malone-bailey.com March 29, 2002 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Stein's Holding, Inc. and Subsidiary Woodland Hills, California We have audited the accompanying statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of Crown's operations and its cash flows for the year then ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Moffitt & Company, P.C. Scottsdale, Arizona January 11, 2001 CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED BALANCE SHEET December 31, 2001 ASSETS Current assets: Cash $ 5,232 Trading securities 3,546 Notes receivable - related entity 35,811 Prepaid assets 4,000 ----------- Total current assets 48,589 Property and equipment, net 422,536 Goodwill, net of accumulated amortization 23,289 Deposits 17,703 ----------- $ 512,117 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable: Trade $ 211,600 Related entity 29,154 Notes payable 147,948 ----------- Total current liabilities 388,702 ----------- STOCKHOLDERS' EQUITY: Convertible preferred stock, $10 par value, 10,000,000 shares authorized, no shares issued and outstanding -- Common stock, $.001 par value, 50,000,000 shares authorized, 7,068,714 shares issued and outstanding 7,069 Additional paid in capital 3,655,551 Accumulated deficit (3,539,205) ----------- Total Stockholders' Equity 123,415 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 512,117 =========== See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31,
2001 2000 ----------- ----------- Gains (losses) on trading securities $ (34,146) $ 98,287 Dividends, interest and other 1,453 6,462 ----------- ----------- Total (32,693) 104,749 Costs and Expenses: General and administrative 591,299 520,160 Interest expense 2,669 17,831 ----------- ----------- 593,968 537,991 ----------- ----------- Net loss before income taxes and discontinued operations: (626,661) (433,242) Provision (benefit) for income taxes 157,900 (79,100) ----------- ----------- Loss before discontinued operations (784,561) (354,142) Discontinued operations: Loss on liquidation of investment in Stein's Cake Box, Inc. -- (195,657) Loss from continuing operations of Stein's Cake Box, Inc. -- -- ----------- ----------- -- (195,657) ----------- ----------- ----------- ----------- Net loss before minority interest (784,561) (549,799) Minority interest in loss of subsidiaries -- 38,948 ----------- ----------- Net loss $ (784,561) $ (510,851) =========== =========== Net loss per share: ----------- ----------- Net loss basic and diluted $ (0.16) $ (0.12) =========== =========== Weighted average shares outstanding: Basic and diluted 4,923,700 4,401,166 =========== ===========
See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 2001
Common stock Additional --------------------- paid in Accumulated Shares Amount capital deficit Total --------- ------ ---------- ----------- --------- Balance, December 31, 1999 4,401,166 $4,401 $2,924,005 $(2,243,793) $ 684,613 Net loss -- -- -- (510,851) (510,851) --------- ------ ---------- ----------- --------- Balance, December 31, 2000 4,401,166 4,401 2,924,005 (2,754,644) 173,762 Issuance of common stock for services 1,334,214 1,335 319,545 -- 320,880 Issuance of common stock in connection with acquisition 1,333,334 1,333 412,001 -- 413,334 Net loss -- -- -- (784,561) (784,561) --------- ------ ---------- ----------- --------- Balance, December 31, 2001 7,068,714 $7,069 $3,655,551 $(3,539,205) $ 123,415 ========= ====== ========== =========== =========
See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(784,561) $(510,851) Adjustments to reconcile net deficit to cash used by operating activities: Depreciation and amortization 14,044 4,483 Minority interest in loss of subsidiary -- (38,948) Loss on investment in subsidiary -- 195,656 Common stock for services 320,880 -- Net change in: Trading securities 136,366 253,975 Accounts receivable -- 28,136 Prepaid assets (21,703) 507 Accounts payable 133,200 87,906 Accrued expenses -- 443 Deferred income taxes 157,900 (44,190) --------- --------- CASH FLOWS USED IN OPERATING ACTIVITIES (43,875) (22,882) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment (2,649) (2,751) Changes in loans receivable (20,238) 22,927 Acquisition of subsidiary -- (63,074) --------- --------- CASH FLOWS USED IN INVESTING ACTIVITIES (22,887) (42,898) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on margin accounts payable (67,938) 67,938 Proceeds (payments) on notes payable 139,603 (5,000) --------- --------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 71,665 62,938 --------- --------- NET INCREASE (DECREASE) IN CASH 4,903 (2,842) Cash, beg. of period 329 3,171 --------- --------- Cash, end of period $ 5,232 $ 329 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ -- $ 15,831 Income taxes paid $ -- $ -- NONCASH TRANSACTION: Acquisition of subsidiary for common stock $ 413,334 $ -- See accompanying summary of accounting policies and notes to consolidated financial statements. CROWN PARTNER'S, INC. (FORMERLY STEIN'S HOLDINGS, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Crown Partners', Inc. (formerly Stein's Holdings, Inc.), a Nevada corporation, was incorporated on November 3, 1986. The Company was originally incorporated as Ed Phills, Inc. and its name was changed to Vegas Ventures, Inc., Telemall Communications, Inc. and subsequently to Stein's Holdings, Inc. The Company was a development stage company until 1999, when it acquired the following companies and became an active company: Multi-Source Capital Ltd. - Merged into Stein's Holdings, Inc. in May 1999. 20/20 Web Design, Inc. - The Company acquired 80% ownership in this company in March 1999. In September 2000, the Company acquired 90% ownership in Universal Services and Acquisitions, Inc. In November 2001, the Company acquired 100% of Sanitec Services of Hawaii, Inc. Nature of Business Crown Partners', Inc. (formerly Stein's Holdings, Inc.) main activities and sources of income are derived from daily trading in the stock markets. 20/20 Web Design, Inc. and Universal Services and Acquisitions, Inc. are in the business of managing and acquiring subsidiary companies. Sanitec Services of Hawaii, Inc.("Sanitec") processes medical waste. Currently, Sanitec has not begun operations. Principles of Consolidation The December 31, 2001 consolidated financial statements include the accounts of the Company's majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company's consolidated financial statements include the results of operations from the respective dates of acquisition through divestiture or December 31, 2001, as applicable. Trading Securities The Company has adopted Statement of Financial Accounting Standards No. 115. This statement requires that trading securities be recorded as follows: A. Balance sheet - recorded at fair market value as a current asset. B. Unrealized holding gains and losses - included in the statement of income as current earnings. C. Dividends and interest income - included in the statement of income as current earnings. D. Cash flows from purchase, sales, and maturities of trading securities shall be classified as cash flows from operating activities. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income. The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets: Computer hardware 5 years Computer software 3 years Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. Income Taxes The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Crown records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. Recent Accounting Pronouncements Crown does not expect the adoption of recently issued accounting pronouncements to have a significant impact on Crown's results of operations, financial position or cash flow. Compensated Absences Employees of the corporation are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The accrued vacation pay during each period presented is considered immaterial and accordingly, no liability has been recorded in the accompanying financial statements. Net Loss Per Share Basic earnings (loss) per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. NOTE 2 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The Company estimates that the fair value of all financial instruments at December 31, 2001 and 2000, as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. NOTE 3 - NOTE RECEIVABLE The Company has a note receivable due from a related entity. The note is non-interest bearing and is due upon demand. NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consist of the following: 2001 2000 Medical waste equipment $415,983 $ -- Computer equipment 18,377 18,377 -------- ------- 434,360 18,377 Less accumulated depreciation 11,824 9,424 -------- ------- $422,536 $ 8,953 ======== ======= The depreciation expense for the years ended December 31, 2001 and 2000 was $2,400 and $4,263, respectively. NOTE 5 - GOODWILL Goodwill represents the excess of the purchase price of Universal Services and Acquisitions, Inc. over the fair value of the Company's net assets and is being amortized on a straight-line basis over three years. The Company recorded $11,644 of amortization for the year ended December 31, 2001. NOTE 6 - NOTES PAYABLE The notes payable are unsecured, bearing interest at 10% and are due upon demand. NOTE 7 - INCOME TAXES Temporary differences that give rise to the deferred tax assets or liabilities at December 31, 2001 and 2000 are as follows: Deferred tax asset Net operating loss carryforward 723,000 Deferred tax liabilities (6,000) --------- 717,000 Valuation allowance (717,000) --------- Net deferred tax asset $ -- ========= The provision (benefit) for income taxes for the years ended December 31, 2001 and 2000 consists of the following: 2001 2000 --------- -------- Federal Current $ -- $ -- Deferred 157,900 (79,100) --------- -------- $ 157,900 $(79,100) ========= ======== A reconciliation of income tax expense (benefit) using the statutory federal income tax rate of 34% to the actual income tax expense (benefit) for the years ended December 31, 2001 and 2000 is as follows: 2001 2000 --------- --------- Federal tax expense (benefit at statutory rate $(213,065) $ -- Tax refund on net operating loss carryforward -- (79,100) Change in valuation allowance 213,065 -- --------- --------- $ -- $ (79,100) ========= ========= The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,125,000 at December 31, 2001, and will expire in the years 2002 through 2021. NOTE 8 - RENT The Company rents its facilities on a month to month basis from an affiliated company. The rent expense for the years ended December 31, 2001 and 2000 was $33,686 and $43,404, respectively. NOTE 9 - ACQUISITIONS In November 2001, the Company acquired 100% of the outstanding capital stock Sanitec Services of Hawaii, Inc. for 1,333,334 shares of common stock The transaction was accounted for as a purchases. The common stock has been valued at $0.31 per share, the estimated fair value at the date of issuance. Sanitec has equipment which is used to process medical waste. The purchase price was allocated to the acquired assets and liabilities based upon an estimate of fair values at the date of acquisition. The financial results and operations of Sanitec have been included in the Company's consolidated financial statements since the effective date of acquisition. The purchase price of the acquisition of the acquisition has been allocated as follows: Fair Value Purchase consideration $ 413,334 Medical waste equipment 415,983 Prepaid assets and deposits 21,703 Accounts payable (24,352) --------- Fair value of net assets acquired $ 413,334 ========= On September 30, 2000, the Company completed its acquisition of Universal Services and Acquisitions, Inc. (Universal). Universal is in the business of managing and acquiring subsidiary companies. The acquisition was recorded under the purchase method of accounting, included the purchase of 20,092,500 shares of stock for $29,000 plus assumed liabilities. A portion of the purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair market value at the date of acquisition with the balance allocated to goodwill. Pro forma statements of operations reflecting this acquisition are not shown as such disclosure is not material. The following presents the unaudited pro forma results of operations of the Company for the year ended December 31, 2000, as if the acquisitions of had occurred on January 1, 2000: For the years ended December 31, ------------------------- 2001 2000 --------- --------- (unaudited) Pro forma revenues $ (32,693) $ 104,749 Pro forma operating loss (761,867) (724,651) Pro forma net loss (919,767) (802,260) Pro forma basic and diluted loss per share $ (0.15) $ (0.14) The information is not necessarily indicative of the results of operations and financial position of the Company as they may be in the future or as they might have been had the business combinations been consummated as of January 1, 2000. NOTE 10 DISCONTINUED OPERATIONS In February 2000, Crown's investment in Stein's Cake Box, Inc. ("Stein's Cake Box") was discontinued. The investment was written off as worthless. Stein's was in the business of selling bakery products to retail establishments in the Dallas Texas metropolitan area. Stein's Cake Box revenue for the year ended December 31, 2000 was $28,136. Net loss from operations was $34,910, net of income tax benefit of $0 for the year ended December 31, 2000. There are no remaining assets of Stein's Cake Box as of December 31, 2000. NOTE 11 CONTINGENCY The Company is contingently liable on a $25,000 guarantee on Stein's Bakery lease. Since Stein's Bakery filed for bankruptcy protection, it is not known if the guarantee will be assessed against the Company. As of December 31, 2001, the Company has not accrued any liability for this contingency. -----END PRIVACY-ENHANCED MESSAGE-----