10QSB 1 v024508.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2005 OR |_| TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934 From the transition period from ___________ to ____________. Commission File Number 33-11986-LA CROWN PARTNERS, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 91-2008803 -------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 27430 Riverside Lane, Valencia CA 91354 --------------------------------------- (Address of principal executive offices) (661) 287-3772 --------------------------- (Issuer's telephone number) N/A -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes |X| No |_| As of June 30, 2005 there were 19,462,293 shares of Common Stock of the issuer outstanding. CROWN PARTNERS, INC. CONSOLIDATED BALANCE SHEET June 30, 2005 (Unaudited) ASSETS Current assets Cash $ 183 Securities 237,600 ----------- Total Assets $ 237,783 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable and accrued expenses $ 579,147 Advances 315,634 Margin trading account 140,343 ----------- Total current liabilities 1,035,124 ----------- STOCKHOLDERS' DEFICIT: 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, 19,462,293 shares issued and outstanding 19,462 Additional paid in capital 7,742,183 Accumulated deficit (8,558,986) ----------- Total Stockholders' Deficit (797,341) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 237,783 =========== See accompanying notes to financial statements CROWN PARTNERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three and Six Months Ended June 30, 2005 and 2004 (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Revenues $ 17,330 $ 20,845 $ 36,181 $ 52,430 Costs and Expenses: General and administrative 46,575 1,619,319 172,983 3,707,198 Interest expense 6,578 1,535 13,156 7,785 ------------ ------------ ------------ ------------ Operating loss (35,823) (1,600,369) (149,958) (3,662,553) Interest income 294 9 294 20,007 Realized loss on securities (7,613) -- (7,613) -- Unrealized loss on securities (10,630) (7,006) (10,630) (7,006) Forgiveness of debt 32,650 -- 32,650 19,206 ------------ ------------ ------------ ------------ Net loss $ (21,122) $ (1,607,366) $ (135,257) $ (3,630,346) ============ ============ ============ ============ Net loss per share: Net loss basic and diluted $ (0.00) $ (0.08) $ (0.00) $ (0.22) ============ ============ ============ ============ Weighted average shares outstanding: Basic and diluted 19,462,293 19,462,293 19,462,293 16,523,392 ============ ============ ============ ============
See accompanying notes to financial statements CROWN PARTNERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2005 and 2004 (Unaudited)
2005 2004 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (135,257) $(3,630,346) Adjustments to reconcile net deficit to cash used by operating activities: Depreciation and amortization 26,245 15,422 Forgiveness of debt (32,650) (19,206) Realized loss on investments 7,613 -- Unrealized loss on investments 10,630 -- Common stock for services -- 3,501,376 Net change in: Advances to related party -- (375) Accounts payable and accrued expenses 58,841 (68,096) Accounts payable related parties 36,521 (250) ----------- ----------- CASH FLOWS USED IN OPERATING ACTIVITIES (28,057) (201,475) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures 178,690 (2,354) Investment in trading securities (255,843) (289,003) ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITES (115,500) (291,357) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the sale of stock -- 380,000 Proceeds from notes payable -- 130,520 Proceeds (payments) on advances (42,274) (14,279) ----------- ----------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES (42,274) 496,241 ----------- ----------- NET INCREASE (DECREASE) IN CASH (185,831) 3,409 Cash, beginning of period 186,014 502 ----------- ----------- Cash, end of period $ 183 $ 3,911 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ -- $ -- Income taxes paid $ -- $ -- NONCASH TRANSACTION: Conversion of advances for common stock $ -- $ --
See accompanying notes to financial statements CROWN PARTNERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim financial statements of Crown Partners, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2004 as reported in Form 10-KSB, have been omitted. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Securities and Investments The Company applies the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115), regarding marketable securities. The Company invests in securities that are intended to be bought and held principally for the purpose of selling them in the near term, and as a result, classifies such investments as trading securities. Trading securities are recorded at fair value on the balance sheet with changes in fair value being reflected as unrealized gains or losses in the current period. In addition, and in accordance with the provisions of SFAS 115, the Company also classifies the cash flows from purchases, sales, and maturities of trading securities as cash flows from operating activities. The Company determines the amount of realized and unrealized gain and losses attributable to specific investments utilizing the specific identification methodology. NOTE 3 - COMMON STOCK In the first quarter of 2004, Crown issued 3,800,000 shares of common stock for $380,000 or $0.10 per share. In the first quarter of 2004, Crown issued 6,780,000 shares of common stock for services. The stock was valued at $2,034,000 or $0.30 per share. In February 2004 Crown issued 75,000 shares of common stock as relief of $36,456 worth of debt. The stock was valued at $17,250 resulting in a Forgiveness of Debt gain of $19,206. In June 2004, Micro Bio-Medical Waste Systems, Inc. (a majority subsidiary of Crown Partner's, Inc.) issued 13,975,000 shares of common stock for services. The shares were valued at $1,467,376 and recorded as an increase to Additional Paid in Capital on the parent's books. NOTE 4 - RECENT DEVELOPMENT On May 1, 2005, the landlord evicted Sanitec Services of Hawaii from its plant in Honolulu for past due rent. At the same time, the landlord locked the premises and has kept Sanitec from entering the premises, retrieving any property located there and keeping Sanitec from accessing and operating its machine. Sanitec is working to resolve this problem but if it cannot, it faces the loss of the machine used to process waste which would result in Sanitec having to cease operating completely. NOTE 5 - SUBSEQUENT EVENT Crown approved the creation of a new Directors, Advisors and Consultants Stock Plan. The plan is effective August 1, 2005 with 2,000,000 shares allocated to the plan. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in the Company's filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements. 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 funds and used capital it raised on order to pay past and present obligations of SSH during the year ended December 31, 2004. The operations of SSH ceased in May, 2005. The Company has three subsidiaries of which it is the majority shareholder: Micro Bio-Medical Waste Systems, Inc. ("MBWS"), Universal Services & Acquisitions, Inc. ("USV"), and Sanitec Services Ltd. ("SSH") The Company owns 80% of MBWS, a Nevada corporation traded on the Electronic Bulletin Board under "MSWS" MBWS is currently seeking acquisition or merger candidates. In November, 2003 MBWS entered into an agreement with the Company to purchase the Company's wholly owned subsidiary, Sanitec Services Ltd., a Hawaii corporation. MBWS has not been able to pay the sum due to the Company and it is unlikely that this transaction will be completed. The Company owns 90% of the issued and outstanding shares of Universal Services & Acquisitions, Inc., a Colorado corporation. USV is a dormant shell company. Employees As of June 30, 2005, the Parent had no employees. SSH had one employee as of June 30, 2005. RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 2004 For the three months ended June 30, 2005, the Company realized a loss of ($38,339) on revenues of approximately $13,697 and general and administrative expenses of approximately $52,036. For the three months ended June 30, 2004, the Company realized a loss of approximately ($1,607,366) with revenues of approximately $20,500 and general, administrative and interest expenses of approximately $1,620,854. The expenses for the three months ended June 30, 2005 consisted primarily of general and administrative expenses of approximately $51,900 and interest expense of approximately $114. The costs and expenses for the three months ended June 30, 2004 totaled approximately $1,620,500 which consisted of general and administrative expenses of approximately $1,619,000 and interest expense of approximately $1,500. The net loss per share for the three month periods ended June 30, 2005 and 2004 were ($0.00) and ($0.08), respectively. The Company's net loss from continuing operations before income taxes for the six months ended June 30, 2005 was ($145,896) compared to a net loss of ($3,630,346) for the six months ended June 30, 2004. The net loss per share for the six month period ended June 30, 2005 and 2004 were ($0.00) and ($0.22), respectively. At June 30, 2005, shareholders' deficit totaled ($786,103). LIQUIDITY AND CAPITAL RESOURCES At June 30, 2005, the Company had negative working capital of approximately $786,000. At June 30, 2005, the Company had current assets of approximately $112,000 which consisted of cash. The current liabilities of the Company at June 30, 2005 were approximately $898,000 which consisted of approximately $570,000 in accounts payable and accounts payable to related parties of approximately $328,000. Crown will attempt to increase its operating liquidity by exploring the availability of outside debt and equity financing, to the extent that such funding is available under reasonable terms and conditions. In July, 2005, Crown received approximately $200,000 from the sale of its interest in National Healthcare Technology, Inc. which was used to pay the obligations of National Healthcare Technology, Inc. An additional $300,000 will be paid to Crown on or before October 1, 2005. There can be no assurances that these measures will result in an improvement in Crown's operations or liquidity. To the extent that Crown's operations or liquidity do not improve, Crown may be forced to reduce operations to a level consistent with its available working capital resources. Crown may also have to consider a formal or informal restructuring or reorganization. As a result of these factors, Crown's independent accountants have expressed substantial doubt about Crown's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that Crown will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not purport to represent the realizable or settlement values, and is nor include any adjustments that might result from the outcome of this uncertainty. 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 June 30, 2005 reflects limited assets and limited liabilities. Further, there exist no agreements or understandings with regard to loan agreements by or with the Officers, Directors, principals, affiliates or shareholders of the Company. ITEM 3. CONTROLS AND PROCEDURES We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures were adequate. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II Items No. 1, 2, 3, 4, 5 - Not Applicable. Item No. 6 - Exhibits and Reports on Form 8-K (a) No reports on Form 8-K were filed during the three months ended June 30, 2005. (b) Exhibits None SIGNATURES In accordance with the requirements 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. CROWN PARTNERS, INC. By /s/ Charles Smith -------------------------- Charles Smith, President, CFO Date: August 12, 2004