U.S. 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: March 31, 2003
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________________________
Commission File No. 0-27137
Florida 65-0509296
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3135 S.W. Mapp Road
P.O. Box 268, Palm City, FL 34991
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number (561) 287-5958
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange
on which registered
None
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Securities registered under Section 12(g) of the Exchange Act:
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 Fax: (561) 659-5371
Check 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[_]
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
State registrant's revenues for its most recent fiscal year. $0.
Of the 11,714,241 shares of voting stock of the registrant issued and outstanding as of March 31, 2003, 6,180,823 shares were held by non-affiliates. The aggregate market value of the voting stock held by non-affiliates as of March 31, 2003 was $247,232.92.
PART I
Item 1. Description of Business
(a) Business Development
Atlas Resources International, Inc. f/k/a Clements Golden Phoenix Enterprises, Inc. (the "Company" or "ARII") is incorporated in the State of Florida. The Company was originally incorporated as Lucid Concepts, Inc. on July 15, 1994. It changed its name in connection with a share exchange between the Company and Clements Citrus Sales of Florida, Inc. n/k/a GlobeFruits, Inc., a Florida corporation ("GF") on December 31, 1999 (the "Agreement"). May 13, 2003, the Company changed its name to its current name to better reflect its intended course of business. The Company's common stock is presently quoted on the Over the Counter Bulletin Board. Its executive offices are presently located at 3135 S.W. Mapp Road, P.O. Box 268, Palm City, FL 34991. Its telephone number is (561) 287-5958 and its facsimile number is (561) 287-9776.
The Company is filing this Form 10-KSB in compliance with the effectiveness of its filing on Form 10-SB.
The Company was formed with the contemplated purpose to manufacture and market imported products from China in the United States and elsewhere. The business concept and plan was based upon information obtained by the incorporator several years before while working in China. The incorporator was unable to obtain the cooperation and assistance of the Chinese and investors to implement the proposed plan. After development of a business plan and efforts to develop the business failed, all such efforts were abandoned. In December 1999, at the time it acquired GF as a wholly-owned subsidiary, its purpose changed to GF's initial purpose of citrus exportation.
The Company relied upon Section 4(2) of the Securities Act of 1933, as amended (the "Act") and Rule 506 of Regulation D promulgated thereunder ("Rule 506") for several transactions
regarding the issuance of its unregistered securities. In each instance, such reliance was based upon the fact that (i) the issuance of the shares did not involve a public offering, (ii) there were no more than thirty-five (35) investors (excluding "accredited investors"), (iii) each investor who was not an accredited investor either alone or with his purchaser representative(s) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes immediately prior to making any sale that such purchaser comes within this description, (iv) the offers and sales were made in compliance with Rules 501 and 502, (v) the securities were subject to Rule 144 limitations on resale and (vi) each of the parties was a sophisticated purchaser and had full access to the information on the Company necessary to make an informed investment decision by virtue of the due diligence conducted by the purchaser or available to the purchaser prior to the transaction (the "506 Exemption").
The Company relied upon Section 517.061(11) of the Florida Statutes for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based upon the fact that (i) sales of the
shares of common stock were not made to more than thirty- five (35) persons;
(ii) neither the offer nor the sale of any of the shares was accomplished by the
publication of any advertisement; (iii) all purchasers either had a preexisting
personal or business relationship with one (1) or more of the executive officers
of the Company or, by reason of their business or financial experience, could be
reasonably assumed to have the capacity to protect their own interests in
connection with the transaction; (iv) each purchaser represented that he was
purchasing for his own account and not with a view to or for sale in connection
with any distribution of the shares; and (v) prior to sale, each purchaser had
reasonable access to or was furnished all material books and records of the
Company, all material contracts and documents relating to the proposed
transaction, and had an opportunity to question the executive officers of the
Company. Pursuant to Rule 3E-500.005, in offerings made under Section
517.061(11) of the Florida Statutes, an offering memorandum is not required;
however each purchaser (or his representative) must be provided with or given
reasonable access to full and fair disclosure of material information. An issuer
is deemed to be satisfied if such purchaser or his representative has been given
access to all material books and records of the issuer; all material contracts
and documents relating to the proposed transaction; and an opportunity to
question the appropriate executive officer. In the regard, the Company supplied
such information and management was available for such questioning (the "Florida
Exemption").
In December 2002, the Company issued 1,000,000 shares of its restricted common stock valued at $70,000, to Joseph Rizzuti, the Company's current Chairman, in exchange for a partial release from debt and cancellation of loans previously made to the Company in that amount. For such offering, the Company relied upon the 506 Exemption and the Florida Exemption.
Also in December 2002, the Company issued 500,000 shares of its restricted common stock to Donald Mintmire, the Company's legal counsel, in exchange for a release from debt for legal services in the amount of $35,000. For such offering, the Company relied upon the 506 Exemption and the Florida Exemption.
In March 2003, the Company issued 500,000 shares of its restricted common stock to Freeman Perry pursuant to a resolution of the Board of Directors dated January 8, 2003. The shares were issued for consulting and advisory services performed on behalf of the Company valued at $35,000. For such offering, the Company relied upon the 506 Exemption.
See (b) "Business of Registrant" immediately below for a description of the Company's business.
(b) Business of Registrant
General
The Company was formed in July 1994 and had little or no operations until December 1999, when it acquired GlobeFruits, Inc. f/k/a Clements Citrus Sales of Florida, Inc. The Company's initial market development has been in the citrus industry. From its earlier days of successfully shipping Florida Grapefruit to Italy in the 1980's, a market with similarly difficult trade barriers at the time, the Company has effectively broken down the agricultural trade barriers with China and is actively developing this new market.
History
Atlas Resources International, Inc. trades on the Over The Counter Bulletin Board and is quoted under the symbol ALRE. Atlas is headquartered in Stuart, FL, in the heart of the famed Indian River citrus growing region, which is generally considered to produce some of the best tasting oranges and orange juice in the world. GlobeFruits has spent the last three years favorably organizing and developing a pathway into opening the Chinese citrus market. GlobeFruits has played an integral part in actively promoting citrus products to the Chinese market, which had traditionally been closed to the U.S. GlobeFruits is now actively developing this new export market.
In 2000, the United States Congress passed legislation for Permanent Normal Trade Relations (PNTR) with the Peoples Republic of China; and President Clinton signed the PNTR bill into law. The advantages to the normalization of the trade between our two countries are numerous. Standing out among these advantages id the expected dramatic reduction in import tariffs placed on agricultural products including citrus fruit and juice products from the U.S. over the next few years.
Present
The company has laid off all employees and curtailed all operating expenditures except for essential filing requirements until additional funding is obtained. Upon funding, implementing the original business plan with updated marketing data on the China market will resume. In addition, the company will seek joint ventures and acquisitions to grow revenues and access new markets both domestically and internationally. Due to the lack of funding, the company has not been able to continue its marketing and distribution agreements with its existing distributors.
The original business plan of shipping fresh Florida grapefruit to China and then introducing additional citrus products once a market presence had been established, was changed as a result of an extensive trip to China in April 1998. It was during that trip, that GF management began to realize that the lucrative market for frozen concentrate 100% orange juice in China had yet to be developed.
Although test marketing and sampling had been ongoing for a couple years, GF frozen concentrate products made their official introduction into the Chinese marketplace at HOFEX '99, the Hong Kong Trade Show, in May of 1999. Over 45 vendors were invited as the Company's guests to the presentation and open forum. All invitees had tasted the Company's product line of Florida Valencia Oranges, Ruby Red Grapefruit and Frozen Concentrate Orange Juice prior to the show and had expressed a strong interest in carrying the Company's products. This forum allowed the Company's management to personally demonstrate the Company's products and poll the participants' reactions. The results were overwhelmingly positive. The Company also determined that there was no other 100% pure frozen concentrate orange juice in a ready to mix can on the Chinese market.
Business Strategy
The Company's business strategy, which is dependent upon its continuing to have sufficient cash flow from operations and/or obtaining sufficient additional financing with which to enhance the commercialization of existing and future products, is to be the "First to Market" in providing a high quality, 100% pure, frozen concentrate orange juice. Although the Chinese market is potentially large enough to accept total world production of orange juice and fresh citrus, the corporate strategy has been and still remains simply to be the first into the Chinese market with the best branded frozen concentrate orange juice. By entering the fruit juice market during its infancy, the Company is presented with an opportunity to set frozen concentrate as the benchmark for taste in the citrus market. The Company's orange juice has been developed particular to Chinese taste preferences.
The second part of the Company's business strategy is to take advantage of growing health consciousness of the Chinese consumer. In China, there is an increasing awareness of health and nutritional issues. Publications, web-sites and organizations promoting good health are becoming increasingly common. Many earlier generations of the single child policy are overweight due to "spoiling" and over consumption of food. This trend is changing as Chinese families are becoming more aware of the health benefits of a proper diet. Government ministries are getting involved with sports, health and education and have begun publicly promoting healthy living and good nutrition. The Company's juices are being promoted as a nutritious health beverage. The Company's advertising and marketing will stress the health benefits of the citrus products including Vitamin C and Folic Acid and the benefits they provide against colds/flu, viruses and cancer. Presently there are no products being marketed this way in China.
The Company will take advantage of the Chinese consumer's affinity for American products. Distributors are looking for quality American products to carry. The current fruit juice market is fragmented and underdeveloped, and the opportunity is ripe for an American, high quality juice product to exploit.
A final advantage of the Company's frozen concentrate orange juice is the packaging. Packaging in the twelve (12) ounce can is a considerable benefit to average Chinese consumers that typically carry their groceries long distances, either on their backs or via bicycle. They are lightweight and their small size makes them convenient to carry in backpacks or bicycle baskets.
In the event that the Company achieves a strong foothold in the Chinese marketplace, the Company intends to introduce other quality products into the market through its already established distribution channels. These other products are expected to include cranberry sauce, frozen concentrate cranberry juice, frozen concentrate red grapefruit juice, frozen concentrate grape and frozen concentrate apple juice. These varieties are expected to be labeled with and promoted as the Company's brands to capitalize on the favorable reputation..
The Company's revenues for the fiscal year ended March 31, 2003 were $0 and it is therefore dependent upon its capital raising activities. Revenues from sales are recognized in the period in which sales are made. The Company's gross profit margin will be determined in part by its ability to estimate and control direct costs of production and shipping and its ability to incorporate such costs in the price charged to its distributors.
Marketing
The following discussion of the Chinese citrus industry, as it relates to the Company's objectives, is of course pertinent only if the Company is successful in maintaining sufficient cash
flow from operations and/or obtaining sufficient debt and/or equity financing to commercialize its existing products, to add additional key personnel where needed, and to supplement new product development. In addition, the Company must be able to generate significant profits from operations and/or additional financing to continue expanding the business and/or to fund the anticipated growth, assuming the Company's proposed expanded business is successful. There can be no assurance such financing can be obtained or that the Company's proposed expanded business will be successful.
There are more than 1.24 billion consumers in China and that number is growing. Approximately ninety-six percent (96%) of these consumers have never been exposed to real orange juice, either in fresh or frozen concentrate form. In fact, what is being portrayed as orange juice in the market place is typically less than ten percent (10%) juice. Refrigerators are becoming common household appliances along major eastern coastal cities. Many households now have distilled water dispensers, an indication that the Chinese people are becoming increasingly more health conscious. Chilled, drinkable, filtered water has also become widely available to the average Chinese consumer. These two (2) trends provide the Company the opportunity to provide and supply orange juice in frozen concentrate form. Although in most major cities today, the majority of families now have refrigeration, this was not the case even five (5) to ten (10) years ago. The Chinese consumer now has the capability to mix the frozen concentrate to their liking. The Company's test marketing has proven the strong demand for a quality juice product. By marketing the Company's orange juice not only as a one hundred percent (100%) juice product, but also as a health food, the Company expects to hit multiple areas of increasing demand by the Chinese consumer.
The Chinese culture continues to change, as trade between China and the rest of the world continues to thrive. Chinese consumer tastes are evolving, due to increased exposure to Western Media. Utilizing a higher disposable income, the Chinese consumer has shown a willingness to spend more on costly, or luxury goods, especially those that add to their quality of life. One (1) piece of evidence of this has been the incredibly early success of the Tang product. Tang opened the market to Coca Cola and other successes. Now juice is becoming increasingly popular, as it becomes more available to the Chinese consumer. The health benefits of orange juice alone, as well as its great taste, make it desirable to two (2) sections of Chinese society. The first is the Chinese burgeoning middle class, which stress an importance on the "yuppie" healthy lifestyle. The second is the average Chinese family consumer, which is due in large part to the policy of "one (1) child" for families in metropolitan cities. That one (1) child typically has six (6) people caring for their health [two (2) parents, four (4) grandparents]. In Chinese culture, it is the mother who typically does the food shopping and the grandparents who determine the discretionary purchases. Simply put, the health of the one (1) child is extremely important.
To gauge the size of the potential market, the Company focused only on families living in major cities, particularly along the coast, due to the fact that most have refrigerators. This number however does not take into consideration the vast institutional market in China, i.e., schools, businesses, hospitals, airlines and train lines, commuters and tourists. The size of the market for fresh fruit is considerably larger, because there is no need for refrigeration. According to the Vice President of Corporate Communications for Sunkist Growers, the Chinese market should reach $500 million in sales of oranges alone, within the first five (5) years.
Orange production in China is widely fragmented and primarily services local populations. Orange groves in China have never been fully developed and cultivated as they have in other parts of the world. It would take many years, and huge amounts of capital, for the Chinese domestic production to get out of the developmental stage. Due to the poor condition of the road system in the countryside where these groves are located, the orange crop is only cultivated in small quantities for local consumption in the surrounding small villages. Very limited amounts actually leave the region. The infrastructure necessary for the development and support of large production
capabilities for crops such as oranges, is still in its infancy. Everything from paved roadways, water support systems and soil enrichment processes would be needed. The Company's management has toured and inspected many of the sites in China where oranges are grown.
Oranges are very popular with Chinese consumers, as is witnessed by the fact that in 1996 there were approximately U.S. $159.7 MM in orange sales in Hong Kong alone. In fact, U.S. oranges accounted for sixty-six and seven tenths percent (66.7%) of Hong Kong's orange market in 1996, and 85.6% in 1997. U.S. oranges hold ninety-seven percent (97%) and ninety-five percent (95%) of the Taiwan market as well. The majority of Valencia Oranges that have entered the Chinese market are from California and have been shipped into Hong Kong and re-exported through Guangzhou. As the PRC continues to take steps to open its markets to fall in line with world trade practices, it continues to close the avenues for illegal imports. The demand for oranges alone in the PRC is projected to reach approximately $500 MM in the next three (3) years.
There is no Chinese domestic production of grapefruit of any type. The United States produces more grapefruit than all the other grapefruit producing nations combined. Indian River grapefruit is world renowned.
Currently, ready to mix Florida citrus orange juice ("FCOJ") is not readily available in many foreign countries and China is no exception. There is a very limited amount of frozen concentrate juice product of any type servicing the Chinese marketplace currently. For orange juice products that are currently being offered, the product is shipped in bulk to allow the receivers to mix and package themselves in China. While this method is cheaper for the foreign production facilities, it often presents potential problems for the consumer. Instead of mixing the product to a three (3) to one (1) ratio for the best taste and color, some facilities mix the product five (5) to one (1) or more, thinking that they will gain more product for sale. The production facilities were thinning out the bulk product with additional water and then adding beta-carotene for color and sugar for taste. The bottled product looked horrible and had little taste. The end result is that the taste and appearance of the product turn off the consumer and they will not come back to it. This is the case in the China market.
Fresh orange juice is provided in the high end hotels and some small shopping markets in many of the major cities in China. The cost of a glass of fresh orange juice is typically prohibitive to the vast majority of the populace. The target market for fresh orange juice has been the very high end market, mostly foreigners and tourists or the very wealthy Chinese. Presently, the average Chinese consumer has access to affordable tea products, sodas, beer and alcohol, although fruit juice is not available in most small stores and is not a common beverage. Currently, there is no commodity in the Chinese marketplace identical to our frozen concentrate orange juice. However, there are several products of orange flavored drinks or orange juice with additives that can be considered competitors. Orange juice products that are currently being offered are typically shipped in bulk to allow the receivers to mix and reconstitute themselves in China, where it is typically thinned out the bulk product with additional water and then add beta-carotene for color and sugar for taste.
Market Demand
The Chinese people like oranges. In developing an estimate for the demand by population of the Peoples Republic of China, the Company has taken into consideration the demand for both fresh citrus products, as well as orange juice, in both Hong Kong and Taiwan. In Hong Kong, oranges are the single largest imported fruit by value and were valued at greater than U.S. $159.7 million in 1996. Hong Kong has the highest rate of orange consumption in the world. This is no doubt due in large part to the fact that it is the major port for illegally re-exporting oranges to the
rest of China. In 1996, U.S. oranges accounted for 66.7% of Hong Kong's orange market and in 1997 accounted for 85.6% of the orange market. In Taiwan in 1996 and 1997, U.S. oranges accounted for 97% and 95% of the total orange market respectively. From these figures, the Company has been able to determine that there has been a considerable demand that continues to increase for U.S. oranges in the regions where Chinese consumers are able to purchase the product.
Competition
The Company faces competition from large, well-established companies with considerably greater financial, marketing, sales and technical resources than those available to the Company. Additionally, many of the Company's present and potential competitors have capabilities that may allow such competitors to offer its products at prices which may compete with the Company's products. The Company's products could be made uneconomical by the introduction of new products, changes affecting the cost of packaging and shipping, or marketing or pricing actions by one or more of the Company's competitors. The Company's business, financial condition or results of operations could be materially adversely affected by one or more of such developments. There can be no assurance that the Company will be able to compete successfully against current or future competitors or that competition will not have an material adverse effect on the Company's business, financial condition or results of operations.
The industry for orange juice and orange drinks currently available in the Chinese market is very fragmented with no company controlling a large market share or market lead outside of their home region or district. The vast majority of these orange products in the market contain very limited amounts of juice. However, it is not uncommon to see small stands in the large superstores with people squeezing juice from oranges.
Domestic
Great Lakes ("Da Hu")
Great Lakes is a small family owned Chinese company based out of Tianjin. Great Lakes provides pre-mixed orange, grapefruit, apple and apple cherry juices. Although typically no additives are added, their orange and grapefruit juices tend to be watered down. Great Lakes has been active in the Chinese Marketplace since 1993. Its products are sold in both one (1) liter and two (2) liter size containers. This product has been very expensive for the distributors, resulting in several distributors looking for other suppliers.
Strengths Local company Established in the Chinese market for 8 years. Distribution chain well established. |
Weaknesses
- Small company
- Local distribution
- Less expensive than Dole
Beijing Fresh Juice Company
Beijing Fresh Juice Company is a Chinese Company which provides juice products to the local Beijing market. Its current product line consists of grapefruit and tomato juices. Beijing Fresh
Juice Company has been active in the Beijing market for a limited time.
Strengths
Active in the Beijing market.
Weaknesses
- Products are not very popular.
- Limited distribution
TianJin Chengbao Orange Juice Company
TianJin Chengbao Orange Juice Company is a Chinese Company which provides juice to the local market of TianJin. TianJin Chengbao has only been active in the Chinese Marketplace for the past few years. The product is expensive for distributors, resulting in dissatisfaction and the search for replacement suppliers. TianJin Chengbao Orange Juice Company sells Orange Juice, Pineapple Juice and Apple Juice to the Holiday Inn Crown Plaza Zheng Zhou.
Strengths
Products are produced locally.
Weaknesses
- Products are not very popular.
- Very limited distribution.
- Brand name is not well known.
Foreign
Tropicana
Tropicana has been active in the Chinese Marketplace for several years. Tropicana products are sold primarily in upscale hotels and restaurants which cater to the wealthy elite, tourists and business travelers. Current products include fresh orange juice, apple juice and papaya juice not from concentrate. Tropicana is not active in the frozen concentrate market. Tropicana maintains two offices in China: one in Hong Kong and one in Beihai, Guangxi. Tropicana's Asia-Pacific division has a major production facility in China, where it is developing 8,000 acres of orange groves for its fresh product. Tropicana's products are expensive to both the wholesale distributor and to the consumer and are not readily available to even the new "Middle Class".
Strengths
Financial strength of company, as well as strength of parent company, Pepsi Co. Fresh orange juice, apple juice and papaya juice only. Served in most four and five star hotels. Very strong representation and proliferation throughout the Chinese high-end marketplace.
Established presence in China.
Developing orange groves and a production facility in China.
Weaknesses
- Provides juice only, thereby limiting its exposure.
- Expensive.
Has been viewed as "dumping" inferior quality on the market and has had difficulty with distributors as a result.
Dole
Dole has been in the Chinese market since 1994, but has only a limited presence currently. Dole sells only pre-mixed juice beverages. Fifty-five (55) gallon containers of frozen concentrate citrus juice are sent to the joint venture co-packing facility in Huizhou, Guangdong Province. Once it arrives, it is "pre-mixed" adding coloring, flavoring and pasteurized a second time. Dole products currently sold in China are orange juice, apple juice, pineapple juice, pineapple banana and orchard peach. Dole produces its pineapple juice in China.
Strengths
- Financial strength of company.
- Distribution Channels in China are established through Tropicana.
Weaknesses
- Provides juice only, thereby limiting brand name exposure.
- Expensive to the consumer.
- Large size of pre-mixed bottle difficult to carry for the average Chinese
consumer.
- Watered down during pre-mixing and inconsistent quality.
- 2nd Pasteurization destroys much of the flavor.
Minute Maid
Minute Maid has been active in the Chinese marketplace since the mid 1990's. Coca-Cola, the parent company of Minute Maid, has had enormous success at developing consumer demand for its product among the Chinese consumers. Minute Maid products are only being served in pre- mixed, "ready to drink" bottles.
Strengths
- Financial strength of parent company, Coca Cola.
- Ability to draw upon Coca-Cola's experience in successfully penetrating and
developing the Chinese marketplace.
- Access to Coca-Cola's distributors and other business relationships.
- Successful past history of frozen concentrate products in the U.S. market.
- Expensive.
- Due to co-packing in China, the quality level of the "pre-mixed" orange
juice is often inconsistent.
- 2nd Pasteurization during "pre-mixing" stage destroys much of the flavor.
- Large size of pre-mixed bottle difficult to carry for the average Chinese
consumer.
- Provides juice only, thereby limiting brand name exposure.
Sunkist
Uses the brand name of "Xin Qishi" in China. Sunkist has been exporting fresh oranges to the Chinese marketplace for a few years. They have sold oranges to buyers in Hong Kong, which has retained its favorable trade position, even through the transition to Chinese ownership. The buyers in Hong Kong illegally re-export the oranges to other parts of China. Sunkist also provides its orange soda to the Chinese marketplace.
Strengths
- Brand name recognition.
- Financial strength of company.
- Developed distribution channels for its soda.
Weaknesses
Due to the ban on agricultural imports, Sunkist did not export directly into the Peoples Republic of China, only to Hong Kong. The buyers in Hong Kong then exported them into China. Several Chinese government officials were jailed at the end of 1999 for allowing cross-border traffic of agricultural products.
- Sunkist oranges' juice content and flavor is less than the Florida
Valencia.
- Provide fresh oranges only, thereby limiting brand exposure.
Sources and Availability of Raw Materials
The materials and equipment needed to produce Florida citrus are widely available from numerous third parties for rent or for sale. The citrus is then packaged by a third party independent contractor and shipped to mainland China to be distributed by one (1) of the Company's distributors. No shortage of materials is expected in the foreseeable future.
Research and Development
The Company believes that research and development is an important factor in its future growth. Although, the citrus growing and exportation industry is not closely linked to technological advances, it occasionally produces new ways to raise and harvest crops, resulting in disease and pest resistant product, which stays fresh for a longer period of time. Therefore, the Company must continually invest in the technology to provide the best quality product to the public and to effectively compete with other companies in the industry. No assurance can be made that the Company will have sufficient funds to purchase technological advances as they become available.
Additionally, due to the rapid advance rate at which technology advances, the Company's equipment may be outdated quickly, preventing or impeding the Company from realizing its full potential profits.
Patents, Copyrights and Trademarks
The Company intends to protect its original intellectual property with patents, copyrights and/or trademarks as appropriate.
In May 2000, the Company filed an application with the United States Patent & Trademark Office ("USPTO") and China to trademark the name "Clements" in International classes thirty-one (31) (fresh fruit) and thirty-two (32) (fruit juices).
Governmental Regulation
The Chinese Market has been one which has been traditionally closed to the Western world, due to substantial trade barriers put in place by the Chinese Government. Following the successful transfer of Hong Kong back to the Peoples Republic of China in 1998, a decision was made by senior government officials in Beijing to allow more Western goods into the country. Beijing also relaxed its hold on state run television and allowed western programming, with its commercials. The Chinese consumers are now exposed to the cultures of the western world, including the fitness craze and healthy eating trends.
The Company is one of the first United States businesses to legally export fresh citrus to the Chinese market. Until March 22, 2000, there has been a ban in China on agricultural imports from the United States. Some companies had been illegally exporting their products to Hong Kong, where they were re-exported to the rest of China. However, the Chinese government has been recently focused on cracking down on individuals involved in these illicit activities. At the end of 1999, several local Chinese politicians were arrested for permitting illegal imports of produce into China. This provides a significant advantage for fruit that is legally imported into China.
Effect of Probable Governmental Regulation on the Business
The United States Congress approved legislation for Permanent Normal Trade Relations (PNTR) with the People's Republic of China. The advantages of normalization of trade between our two countries are numerous. Standing out among these advantages is the fact that the 36% tariff currently placed on certain agricultural products from the US will be reduced to roughly 12% over the next few years.
Citrus products and food products in general may be subject to extensive regulation by the Chinese government, in some case by state and local laws and by foreign laws and international treaties. The Company's products must conform to a variety of domestic and international requirements. In order for the Company to sell its products in a jurisdiction, it must obtain regulatory approval and comply with different regulations in each jurisdiction. The delays inherent in this governmental approval process may cause the cancellation, postponement or rescheduling of the purchase by the Company's customers, which in turn may have a material adverse effect on the sale of such products by the Company to such customers. The failure to comply with current or future regulations or changes in the interpretation of existing regulations could result in the suspension or cessation of product sales. Such regulations or such changes in interpretation could require the Company to modify its products and incur substantial costs to comply with such time- consuming regulations and changes.
The regulatory environment in which the Company operates is subject to change. Regulatory changes, which are affected by political, economic and technical factors, could significantly impact the Company's operations by restricting development efforts by the Company and its customers, making current products unacceptable or increasing the opportunity for additional competition. Any such regulatory changes could have a material adverse effect on the Company's business, financial condition and results of operations. The Company might deem it necessary or advisable to alter or modify its products to operate in compliance with such regulations. Such modifications could be extremely expensive and, especially if subject to regulatory review and approval, time-consuming.
Cost of Research and Development
For fiscal year 2003, the Company expended no measurable amount on research and development efforts. At the current time, none of the costs associates with research and development are borne directly by the customer; however there is no guarantee that such costs will not be borne by customers in the future and, at the current time, the Company does not know the extent to which such costs will be borne by the customer, if at all.
Cost and Effects of Compliance with Environmental Laws
The Company's business is not subject to regulation under the state and Federal laws regarding environmental protection and hazardous substances control. The Company is unaware of any bills currently pending in Congress which could change the application of such laws so that they would affect the Company.
Employees and Consultants
At March 31, 2003, the Company employed one (1) person, Joseph Rizzuti. Mr. Rizzuti, the Company's current Chairman, is not represented by a labor union for purposes of collective bargaining. The Company considers its relation with Mr. Rizzuti to be excellent. The Company has significantly scaled back its operations due to financial constraints.
In May 2003, the Company hired Antonia Doria to be its President and Chief Executive Officer.
Item 2. Description of Property
The Company maintains its executive offices at 3135 Southwest Mapp Road, P.O. Box 268, Palm City, FL 34991. Its telephone number is (561) 287-5958 and its facsimile number is (561) 287-9776.
The Company now operates only from its executive offices, which it shares with Beacon Accounting, owned by the Company's current Chairman.
The Company owns no real property and its personal property consists of an automobile, computer equipment, furniture and fixtures, with an original cost of $117,912.
Item 3. Legal Proceedings
Former officers and directors of the Company have been subpoenaed as witnesses to testify before the Grand Jury in Fort Pierce, FL. No target of the investigation has been named, nor have any indictments been handed down. The investigation is ongoing.
In September 2002, Graceland Fruit, Inc. sued GlobeFruits, Inc., the Company's wholly owned subsidiary and obtained a final judgment in the amount of $20,284.01, which judgment accrues interest at a rate of nine percent per annum.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the Company's shareholders, through the solicitation of proxies or otherwise from the Company's inception to the close of the 2002 fiscal year ended March 31, 2003, covered by this report.
Item 5. Market for Common Equity and Related Stockholder Matters.
Shares of the Company's common stock are quoted on the Over the Counter Bulletin Board ("OTCBB").
The shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Trading in the shares is subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the Company's common stock and may affect the ability of shareholders to sell their shares.
As of March 31, 2003, there were approximately 193 holders of record of the Company's common stock.
As of March 31, 2003, the Company had 11,714,241 shares of its common stock issued and outstanding, 9,580,392 of which were restricted Rule 144 shares and 2,133,849 of which were free-trading. Of the Rule 144 shares, 3,504,251 have been held by affiliates of the Company for more than one (1) year.
Dividend Policy
The Company has never paid or declared any dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis
The Company was formed with the contemplated purpose to manufacture and market imported products from China in the United States and elsewhere. The business concept and plan was based upon information obtained by the incorporator several years before while working in China. The incorporator was unable to obtain the cooperation and assistance of the Chinese and investors to implement the proposed plan. After development of a business plan and efforts to develop the business failed, all such efforts were abandoned. In December 1999, at the time it acquired GF as a wholly-owned subsidiary, its purpose changed to GF's initial purpose of citrus exportation.
The Company was still in the development stage until December 1999 when the Share Exchange took place between GF and the Company and is still emerging from that stage. For the fiscal year ended March 31, 2003, the Company generated $0 revenues and had a net loss of $(403,505)_. Due to the Company's limited operating history and limited resources, among other factors, there can be no assurance that profitability or significant revenues on a quarterly or annual basis will occur in the future.
In May 2000, the Company shipped its first citrus products directly to mainland China. The Company has since shipped five (5) containers of frozen concentrate orange juice and fresh oranges to China.
Since contracting with its first two (2) distributors and upon being granted permits to ship citrus directly to mainland China, the Company has significantly paired down operations in an effort to cut expenses. It has laid off all of its employees including virtually all of its upper level management due to lack of working capital. Its ability to continue as a going concern is questionable.
Results of Operations - For the Year Ended March 31, 2003 and For the Year Ended March 2002.
Revenues
Revenues for the twelve (12) month period ended March 31, 2003 and March 31, 2002 were $0 and $132,921.
Operating Expenses
Total Operating Expenses for the year ended March 31, 2003 and March 31, 2002 were $255,508 and $958,308, respectively. Net loss was $403,505 and $1,172,858 respectively.
Assets and Liabilities
Assets were $10,543 as of March 31, 2003, and $43,901 as of March 31, 2002. As of March 31, 2003, assets consisted primarily of property and equipment in the amount of $10,343. Liabilities were $2,660,136 and $2,439,989 as of March 31, 2003 and March 31, 2002 respectively. Both as of March 31, 2003 and as of March 31, 2002, liabilities consisted primarily of loans and interest payable to shareholders, investors and/or employees of the Company as well as accounts payable.
Stockholders' Equity
Stockholders' equity was $(2,649,593) as of March 31, 2003 and $(2,396,088) as of March 31, 2002.
Financial Condition, Liquidity and Capital Resources
At March 31, 2003 the Company had cash and cash equivalents of $200 as compared to $48 at March 31, 2002.
The Company may raise additional capital through private and/or public sales of securities in the future but has no definite commitments at this time.
Forward-Looking Statements
This Form 10-KSB includes "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. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10_KSB which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), demand for the Company's products and services, expansion and growth of the Company's business and operations, and other such matters are forward_looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, general economic market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company. Consequently, all of the forward_looking statements made in this Form 10_KSB are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations.
Item 7. Financial Statements
The Company's financial statements have been examined to the extent indicated in their reports by DoRocco & Dombrow Financial Corporation and have been prepared in accordance with generally accepted accounting principles and pursuant to Regulation S-B as promulgated by the Securities and Exchange Commission and are included herein, on Page F-1 hereof in response to Part F/S of this Form 10-KSB.
Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
The Company has used the firm of DoRocco & Dombrow Financial Corporation since August 2002. Their address is 3601 West Commercial Boulevard, Suite 39, Fort Lauderdale, FL 33309. Prior to that time, the Company had engaged the firm of Kaufman Rossin & Co., P.A. since December 2000. Their address is 2699 South Bayshore Drive, Miami, FL 33133. Prior to that time, the Company had engaged the firm of Joan Staley C.P.A., P.A. as its independent auditor until it resigned in December 2000. The resignations were not due to any disagreement with the Company on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
TABLE OF CONTENTS
Independent Auditors' Report F-1 Consolidated Financial Statements Balance Sheet F-2 Statements of Operations F-3 Statements of Changes in Stockholders' Deficiency F-4 Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 |
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Atlas Resources International, Inc.
Stuart, Florida
We have audited the accompanying consolidated balance sheet of Atlas Resources International, Inc. and Subsidiary (the "Company") as of March 31, 2003 and the related consolidated statements of operations, change in stockholders' deficiency and cash flows for the years ended March 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has sustained operating losses and negative cash flows from operations, has a working capital deficiency of approximately $2,660,000 and has experienced difficulties meeting its obligations as they become due. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DiRocco & Dombrow, P.A. Ft. Lauderdale, Florida August 13, 2003 |
ATLAS RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 2003
================================================================================
CURRENT ASSETS
Cash $ 200
Accounts receivable, net of allowance of $110,404 respectively -
Loans and accrued interest receivable from former officer, net of
allowance of $121,326 -
Total current assets 200
-------------------
PROPERTY AND EQUIPMENT, NET 10,343
-------------------
TOTAL ASSETS $ 10,543
===================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 593,674
Accrued expenses 412,972
Accrued interest payable - stockholders 472,242
Convertible notes payable 500,000
Loans payable -- stockholders 681,248
TOTAL LIABILITIES 2,660,136
-------------------
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value; 50,000,000 shares authorized;
12,764,201 shares issued and outstanding 12,764
Additional paid-in capital 5,079,408
Accumulated deficit (7,741,765)
TOTAL STOCKHOLDERS' DEFICIENCY (2,649,593)
-------------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 10,543
===================
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The accompanying notes are an integral part of the financial statements
ATLAS RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 2003 AND 2002
================================================================================
2003 2002
===================== =====================
REVENUE $ - $ 132,921
COST OF GOODS SOLD - 132,465
--------------------- ---------------------
GROSS PROFIT (LOSS) - 456
--------------------- ---------------------
OPERATING EXPENSES
Bad debts - trade 28,160 82,244
Consulting fees 30,000 220,689
Market research and development - 60,235
Professional fees 91,581 84,575
Salaries 67,500 300,255
Selling, general and administrative 23,267 210,310
Loss on settlement of accounts payable 15,000 -
Total operating expenses 255,508 958,308
--------------------- ---------------------
LOSS BEFORE OTHER INCOME (EXPENSE) (255,508) (957,852)
--------------------- ---------------------
OTHER INCOME (EXPENSE)
Interest income - 7
Interest expense (147,997) (215,013)
Total other income (expense) (147,997) (215,006)
--------------------- ---------------------
NET LOSS (403,505) $ (1,172,858)
===================== =====================
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.04) $ (0.14)
===================== =====================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 11,313,652 8,837,415
===================== =====================
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The accompanying notes are an integral part of the financial statements
ATLAS RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
YEAR ENDED MARCH 31, 2003 AND 2002
Common Stock Additional Accumulated
Shares Par Value Paid-In Capital Deficit Total
============== ============= ================= =============== =============
Balances, April 1, 2001 7,214,201 $ 7,214 $ 3,571,311 $ (6,165,402) $ (2,586,877)
Common stock issued for compensation 1,050,000 1,050 61,950 - 63,000
Common stock issued in connection with
conversion of loans 2,500,000 2,500 497,500 - 500,000
Warrants issued for consulting services - - 17,094 - 17,094
Settlement of stockholder loan payable - - 783,553 - 783,553
Net loss - - - (1,172,858) (1,172,858)
-------------- ------------- ----------------- --------------- -------------
Balances, March 31, 2002 10,764,201 10,764 4,931,408 (7,338,260) (2,396,088)
Common stock issued in repayment of
loans payable 1,000,000 1,000 69,000 - 70,000
Common stock issued in repayment of
accounts payable 500,000 500 49,500 - 50,000
Common stock issued for services 500,000 500 29,500 - 30,000
Net loss - - - (403,505) (403,505)
-------------- ------------- ----------------- --------------- -------------
Balances, March 31, 2003 12,764,201 $ 12,764 $ 5,079,408 $ (7,741,765) $ (2,649,593)
============== ============= ================= =============== =============
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The accompanying notes are an integral part of the financial statements
ATLAS RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 2003 AND 2002
2003 2002
=================== ====================
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (403,505) $ (1,172,858)
------------------- --------------------
Adjustment to reconcile net loss to net cash (used in) operating activities:
Depreciation 5,350 10,098
Bad debt expense 28,160 82,244
Common stock issued for services 30,000 -
Common stock issued for compensation - 63,000
Warrants issued for consulting services - 17,094
Loss on settlement of accounts payable 15,000
Loss on disposition of transportation equipment - 4,083
Changes in operating assets and liabilities:
Accounts receivable - (104,904)
Prepaid consulting fees - 48,147
Prepaid expenses - 7,643
Inventory - 20,401
Accounts payable 83,890 310,622
Accrued interest payable 147,050 210,987
Accrued expenses 94,207 213,068
Total adjustments 403,657 882,483
------------------- --------------------
Net cash used in operating activities 152 (290,375)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of transportation equipment - 61,750
Decrease in other assets - 760
Net cash provided by investing activities - 62,510
------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt - (52,689)
Proceeds from stockholder loans - 290,870
Principal repayments of stockholder loans - (23,055)
Net cash provided by financing activities - 215,126
------------------- --------------------
DECREASE IN CASH AND CASH EQUIVALENTS 152 (12,739)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 48 12,787
------------------- --------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 200 $ 48
=================== ====================
Supplemental Disclosure:
Cash paid for interest $ - $ 4,026
Cash paid for taxes $ - $ -
=================== ====================
Supplemental Disclosure of Non-Cash Activities:
Issued stock for services $ 100,000 $ -
Issued stock to repay accounts payable $ 50,000 $ -
Common stock issued in connection with conversion of debt and accrued interest $ - $ (783,553)
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The accompanying notes are an integral part of the financial statements
ATLAS RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
Organization and Capitalization
In May of 2003 the parent company changed it's name to Atlas Resources International, Inc. formerly known as Clements Golden Phoenix Enterprises, Inc. (the Parent) acquired all of the outstanding shares of common stock of Globefruits, Inc. (the Subsidiary) on March 31, 2000.
Consolidation
The consolidated financial statements include the accounts of the Parent and the Subsidiary (the Company). All significant inter company balances and transactions have been eliminated in consolidation.
Nature of Operations
The Company operates as a Florida corporation with a goal of developing the China market, which has recently been opened to the United States citrus industry. It has been working toward this end by committing to pursue the proven protocols of Chinese relations and negotiating successfully to send Florida citrus into China. The Company is pursuing these goals by acquiring the help of leading consultants in this field.
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers short-term, highly liquid investments with purchased maturities of three months or less to be cash and cash equivalents.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major betterments and additions are charged to the asset accounts, while replacements, repairs and maintenance which do not extend the lives of the respective assets are charged to expense currently. Depreciation of equipment is computed using the straight-line method. The rate is based on the estimated useful life of the assets ranging from 5 to 7 years.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" requires that the Company disclose estimated fair values for its financial instruments. The following methods and assumptions were used by the Company in estimating the fair values of each class of financial instruments disclosed herein:
Cash and cash equivalents - The carrying amount approximates fair value because of the short maturity of those instruments.
Loans and notes payable, long-term debt - The fair value of loans and notes payable and long-term debt are estimated using discounted cash flows analyses based on the Company's incremental borrowing rates for similar types of borrowing arrangements. At March 31, 2003, the fair values approximate the carrying values.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued To Employees" (APB No. 25), and related interpretations, in accounting for its employee stock options and warrants rather than the alternative fair value accounting allowed by SFAS No. 123, "Accounting For Stock-Based Compensation". APB No. 25 provides that the compensation expense relative to the Company's employee stock options and warrants is measured based on the intrinsic value of the stock option. SFAS No. 123 requires companies that continue to follow APB No. 25 to provide a pro-forma disclosure of the impact of applying the fair value method of SFAS No. 123.
Income Taxes
The Company accounts for income taxes using SFAS No. 109, "Accounting for Income Taxes", which requires recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Net Income (Loss) Per Share
The Company applies Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128) which requires dual presentation of net income per share; Basic and Diluted. Basic earnings (loss) per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period adjusted for incremental shares attributed to outstanding options and warrants to purchase shares of common stock.
The Company's has issued warrants for 655,000 shares of common stock that are excluded from the Company's diluted computation, as their effect would be anti-dilutive.
Recent Accounting Pronouncements
In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133 (an amendment of FASB Statement No. 133). Under the provisions of this statement, the effective date of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"), is deferred to fiscal years beginning after June 15, 2001. The Company has determined that the impact of adopting SFAS No. 133 will not be material to its consolidated financial statements.
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, ("SAB 101") issued by the Securities and Exchange Commission, became effective beginning the third quarter of the Company's fiscal year ended March 31, 2003. SAB 101 had no material impact on the Company's revenue recognition policies.
During 2003, and continuing in 2002, the Company experienced, and continues to experience, certain cash flow problems and has, from time to time, experienced difficulties meeting its obligations as they become due. As reflected in the consolidated financial statements, the Company has incurred net losses of approximately $393,505 year ended March 31, 2003, and as of March 31, 2003, the Company's consolidated financial position reflects a working capital deficiency of approximately $2,660,000. Management's plans with regard to these matters encompass the following actions:
Liquidity
1. Financing from Third Party Sources
In the fiscal year ended March 31, 2003, the Company plans to continue its equity fundraising efforts.
2. Financing from Private Loans
The Company plans to continue accepting private loans, including convertible loans, to fund operations until working capital is adequate.
Profitability
1. Business Plan
The Company has formulated, and is in the process of implementing, a strategic plan focused on business development in terms of increased revenues and reduced operating expenses. The key elements of the plan include the following:
o Focus operations globally as opposed to limiting the Company's markets to the Asian territories
o Implement a distribution strategy utilizing strategic alliances with major global food companies in addition to existing distributors
o Shift marketing and market research expenses burden from the Company to local distributors
2. Improvement in Operational Costs
Management continues its efforts to manage costs and operating expenses, so as to improve gross margins and profitability.
Property and equipment at March 31, 2003 consisted of the following:
Office equipment 25,437
Furniture and fixtures 3,649
------------------------------------- ---------------
Less accumulated depreciation 18,743
------------------------------------- ---------------
10,343
------------------------------------- ---------------
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Depreciation expense for the years ended March 31, 2003 and 2002 was $5,350 and $10,098, respectively.
Loans and accrued interest receivable from former officer is comprised of funds disbursed to or on behalf of a former officer for various personal expenditures. In July 2000, the Company began withholding from the former officer's wages to pay back the loans. The loans bear interest at 8 1/2% per annum. During April 2001, the officer was terminated and management believes there is significant uncertainty regarding recoverability. Accordingly, the loans and related accrued interest have been fully reserved as of March 31, 2003 and 2002.
At March 31, 2003, convertible notes payable consisted of the following:
o $100,000 note to a stockholder dated March 1, 2000. Interest accrues at a rate of 12% per annum on the unpaid principal balance and is due quarterly. The unpaid principal and accrued interest could be converted into shares of the restricted common stock of the company at the option of the payee on or before March 1, 2001. If not converted, the unpaid principal and accrued interest would be due on March 1, 2001. The note has matured and is due on demand.
o $150,000 note to a stockholder dated October 19, 2000. Interest accrues at a rate of 12% per annum on the unpaid principal balance and is due quarterly. The unpaid principal and accrued interest could be converted into shares of the restricted common stock of the company at the option of the payee on or before October 19, 2001. If not converted, the unpaid principal and accrued interest would be due on October 19, 2001. The note has matured and is due on demand.
o $250,000 note to a stockholder dated December 11, 2000. Interest accrues at a rate of 11% per annum on the unpaid principal balance and was due on April 10, 2001. The unpaid principal and accrued interest may be converted into shares of the restricted common stock of the company at the option of the payee on or before April 10, 2001. As the note was not converted, the unpaid principal and accrued interest was due on April 10, 2001. However, the Company received an extension of the due date of the principal and accrued interest until October 10, 2001. In connection with this note, the Company issued the note holder 6,250 shares of the Company's restricted common stock and warrants to purchase 6,250 additional shares of the Company's restricted common stock. The note has matured and is due on demand.
Certain stockholders have advanced funds to the Company for working capital purposes. These advances are evidenced by promissory notes with stated interest rates of 12% per annum. The principal and accrued interest are payable on demand.
During the years ended March 31, 2003 and 2002, loans payable aggregating $70,000 and $500,000, respectively were converted into 1,000,000 and 2,500,000 shares, respectively of restricted common stock.
During the years ended March 31, 2003 and 2002, an officer of the Company advanced approximately $0 and $213,000 for working capital, of which approximately $15,000 were repaid prior to March 31, 2002. Additionally, three companies related by common management paid operating expenses of
approximately $7,000 and $79,000 on behalf of the Company during the years ended March 31, 2003 and 2002, respectively, of which approximately $11,000 was repaid prior to March 31, 2002, with approximately $49,000 of the remaining balance included in shareholder loans payable at March 31, 2003 and the remainder of $31,000 included in accounts payable at March 31, 2003.
Stock Issued in Reverse Merger
In August 2001 and February 2002, the Company issued an additional 1,350,000 and 200,000 shares, respectively, to the original owners of the Company's wholly owned subsidiary in order to remedy an error in calculation made at the time of the share exchange agreement consummated in December 1999.
Stock Splits
The company authorized stock splits at a ratio of two-for-one for stockholders of record on August 25, 2001 and September 29, 2001 and a reverse stock split at a ratio of one-for-four for stockholders of record on March 2, 2002. All stock information has been adjusted to give retroactive effect to these stock splits.
In February 2001 the Company issued warrants granting an employee the right to purchase 800,000 shares of common stock at $0.50 per share. The Company accounted for this issuance under APB opinion 25, and accordingly did not charge an expense to operations. The warrants expired in February 2003.
In July 2001, the Company issued warrants granting an employee the right to purchase 30,000 shares of common stock at $0.20 per share. The Company accounted for this issuance under APB opinion 25, and accordingly did not charge an expense to operations. The warrants have no expiration date.
In September 2001, the Company issued warrants granting an employee the right to purchase 250,000 shares of common stock at $0.25 per share. The Company accounted for this issuance under APB opinion 25, and accordingly did not charge an expense to operations. The warrants have no expiration date.
In October 2001, the Company issued warrants granting a director of the Company the right to purchase 125,000 shares of common stock at $0.20 per share. The Company accounted for this issuance under APB opinion 25, and accordingly did not charge an expense to operations. The warrants expire in October 2006.
In July 2002, the Company issued warrants granting an employee the right to purchase 250,000 shares of common stock at $0.25 per share. The Company
accounted for this issuance under APB opinion 25, and accordingly did not charge an expense to operations. The warrants have no expiration date.
A summary of warrant activity for 2003 and 2002 is as follows:
Weighted-Average Warrants Weighted-Average
Number Warrants Exercise Price Exercisable Exercise Price
--------------- ---------------- ----------- ----------------
Outstanding,
April 1, 2001 800,000 $0.50 800,000 $0.50
Granted 405,000 $0.23
Outstanding,
March 31, 2002 1,205,000 $0.41 1,205,000 $0.41
Granted 250,000 $0.25
Expired (800,000) $0.50
Outstanding,
March 31, 2003 655,000 $0.24 655,000 $0.24
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At March 31, 2003, the range of warrant prices for shares under warrants and the weighted-average remaining contractual life is as follows:
Warrants Outstanding Warrants Exercisable
---------------------------------------------------- ------------------------------
Range of Number of
Warrant Weighted-Average Weighted-Average Remaining Weighted-Average
Exercise Price Number Warrants Exercise Price Contractual Life Warrants Exercise Price
-------------- --------------- ---------------- ---------------- --------- ----------------
$0.20 155,000 $0.20 N/A 155,000 $0.20
$0.25 500,000 $0.25 N/A 500,000 $0.25
655,000 655,000
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The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for options and warrants issued to employees. Compensation cost for stock options and warrants is measured as the market price of the Company's common stock at the date of grant, or agreement in principle to grant the option or warrant, if earlier, over the amount the recipient must pay to acquire the common stock.
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation", requires the Company to provide pro forma information regarding net income and earnings per share as if compensation cost for the Company's employee stock options and warrants has been determined in accordance with the fair value based method prescribed in SFAS 123.
The Company estimates the fair value of each stock option and warrant at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in fiscal years 2003 and 2002: no dividend yield; an expected life of three to five years; 60% expected volatility and a 5% risk free interest rate.
The option and warrant valuation model was developed for use in estimating the fair value of traded options and warrants, which have no vesting restrictions and are fully transferable. In addition, valuation models require the input of highly subjective assumptions including the expected price volatility. Since the Company's stock options and warrants have characteristics significantly different from those of traded options and warrants, and since variations in the subjective input assumptions can materially affect the fair value estimate, the actual results can vary significantly from estimated results.
The following table illustrates the effect on net loss and loss per share if the fair value based method had been applied to all outstanding and unvested awards in each period.
Year Ended March 31,
2003 2002
--------------- ----------------
Net loss, as reported $ (403,505) $ (1,172,828)
Deduct: Total stock-based employee
Compensation expense determined
under fair value based method for
all awards, net of related tax effects (14,621) (46,832)
Pro forma net loss $ (418,126) $ (1,219,660)
Loss per share:
Basic and diluted - as reported $ (0.04) $ (0.14)
Basic and diluted - pro forma $ (0.04) $ (0.14)
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July 24, 2001 - The Company issued 1,250,000 shares of restricted common stock in repayment of loans payable to a stockholder and officer of the Company. The stock was valued at the fair market value at the date of issuance of $0.20 per share or $250,000.
August 22, 2001 - The Company issued 1,250,000 shares of restricted common stock in repayment of loans payable to a stockholder and officer of the Company. The stock was valued at the fair market value at the date of issuance of $0.20 per share or $250,000.
March 29, 2002 - The Company issued 1,050,000 shares of restricted common stock to three related parties for services provided to the Company. The stock was valued at the fair market value at the date of issuance of $0.06 per share, or $63,000.
December 19, 2002 - The Company issued 1,000,000 shares of restricted common stock to a stockholder and officer of the Company in repayment of $70,000 of loans payable. The stock was valued at the fair market value at the date of issuance of $0.10 per share, or $100,000. A charge of $30,000 was recorded against additional paid in capital.
December 19, 2002 - The Company issued 500,000 shares of restricted common stock to its outside counsel in payment of legal fees of $35,000. The stock was valued at the fair market value at the date of issuance of $0.10 per share or $50,000. A loss on settlement of debt of $15,000 was recorded on this transaction.
January 8, 2003 - The Company issued 500,000 shares of restricted common stock to a third party for consulting services rendered. The stock was valued at the fair market value at the date of issuance of $0.06 per share or $30,000 and charged immediately to operations.
No income tax benefit has been reflected in the accompanying financial statements for the year ended March 31, 2003 due to the significant uncertainty that exists regarding the realization of deferred tax assets (see below).
The components of the deferred tax asset as of March 31, 2003 were approximately as follows:
Deferred income tax assets:
Net operating loss carryforwards $ 1,963,272
----------------------------------------- -----------------
Gross deferred tax asset 1,963,272
Valuation allowance (1,963,272)
$ -
----------------------------------------- -----------------
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As of March 31, 2003, the Company estimates that it has net operating loss carryforwards of approximately $5,166,500, which expire in various years through 2022. Sufficient uncertainty exists regarding the realization of these operating loss carryforwards, and, accordingly, a valuation allowance of $1,963,272 has been established.
The Company has been delinquent in the filing of various federal, state and local income and other tax returns. The ultimate determination of the Company's taxable income, including the amount and expiration dates of net operating loss
carryforwards, is subject to, among other things, certain restrictions as a result of the late filing of the various tax returns. The Company may also be subject to possible review and examination of such tax returns by the appropriate federal, state and local taxing authorities. Additional income taxes, including penalties for non-compliance and interest, if any that may be assessed will be charged to operations when determined.
Employment Agreement
On December 9, 2002, the Company entered into an employment agreement with its current president. The agreement, effective as of November 1, 2002, is for period of five years and provides for a base salary of $162,000 per year plus bonuses based upon the Company's performance. The base salary is subject to review every six months. In May 2003 the employment agreement was modified so that the president's base pay was increased to $169,000 and term of the agreement was extended by seven months.
Lease Agreement
In January 2002, the Company settled non-cancelable operating lease obligations for its office space that were scheduled to expire in May 2002.
Total rent expense for the years ended March 31, 2003 and 2002 was approximately $0 and $31,000, respectively.
In May 2003 the employment agreement was modified so that the president's base pay was increased to $169,000 and the term of the agreement was extended by seven months.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
(a) Set forth below are the names, ages, positions, with the Company and business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company Joseph Rizzuti 42 Chairman Antonio Doria 65 President and Chief Executive Officer |
All directors hold office until the next annual meeting of the Company's shareholders and until their successors have been elected and qualify. Officers serve at the pleasure of the Board of Directors. The officers and directors will devote such time and effort to the business and affairs of the Company as may be necessary to perform their responsibilities as executive officers and/or directors of the Company.
Family Relationships
None.
Business Experience
Joseph Rizzuti, age 42, received a degree in Business Administration with a major in Accounting from The State University of New York College at Brockport in 1983. Mr. Rizzuti is a public accountant and the Principal of Beacon Accounting Services, Inc. in Palm City, Florida. He has worked in accounting and as a financial consultant for fifteen (15) years. Additionally, Mr. Rizzuti is the former owner of an air freight company which specializes in overnight express delivery both domestically and internationally. His company was based out of Raleigh, North Carolina and within two (2) years increased shipment count by four hundred percent (400%). In 1996, Mr. Rizzuti joined Plastics Auxiliaries Magazine ("PAM") located in Tequesta, FL. PAM has become the largest plastics industry publication. After joining at its inception, he worked in various management positions at PAM where he eventually became CFO, and was responsible for positioning the company for a successful sale.
Mr. Rizzuti's responsibilities include the ongoing development of internal controls and organizational structure to facilitate and execute the day to day operations of the company. Mr. Rizzuti oversees the different operating divisions including the coordination of joint venture partners and the implementation of their products and services into the Company's distribution network throughout China.
Antonio Doria, age 65, earned a doctorate in business and law from Bari University in Italy in 1961. Mr. Doria is fluent in English, Spanish, French and Italian. Mr. Doria has worked for Globefern S.A. and Globefern USA, Inc. since 1986, first between 1986 and 1990 as Senior Vice-President and later between 1990 and 2001 as President. Prior to that time, Mr. Doria was President of Seven-Up International for South America and a Regional General Manager for the Coca-Cola Company in Eastern Europe.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
No Director, Officer, Beneficial Owner of more than ten percent (10%) of any class of equity securities of the Company failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years.
Item 10. Executive Compensation
Name and Post Year Annual Annual Annual LT Comp LT LTIP All
Comp Comp Comp Rest Stock Comp Payouts Other
Salary Bonus Other Options (1)
(1) ($)
------------------- ----- ------- ----- --------- ----------- --------- -------- ---------
Joseph Rizzuti, 1999 $0
Chairman
2000 $125,000
2001 $125,000
2002 $0
2003 $0
Antonio Doria, 1999 $0
President and
CEO 2000 $0
2001 $0
2002 $0
2003 $67,500 $3,670
Bonnie K. 1999 $0
Ludlum, former
Secretary, 2000 $0
Director
2001 $0
2002 $0
2003 $0
Anne-Marie 1999 $0
Ludlum, former
CFO 2000 $52,000
2001 $52,000
2002 $0
2003 $0
John Samartine, 1999 $0
former Director
2000 $0
2001 $0
2002 $0
36
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2003 $0
Samuel Sirkis, 1999 $0 125,000
former Director
2000 $75,000
2001 $75,000
2002 $0
2003 $0
Henry T. 1999 $0
"Skip"
Clements, 2000 $125,000
former Director
2001 $125,000
2002 $0
2003 $0
Gordon Hunt, 1999 $0
former Director
2000 $0
2001 $0
2002 $0
2003 $0
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(1) All other compensation includes certain health and life insurance benefits paid by the Company on behalf of its employees.
Compensation of Directors
The Company has no standard arrangements for compensating the directors of the Company for their attendance at meetings of the Board of Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 31, 2003, regarding the ownership of the Company's common stock by each shareholder known by the Company to be the beneficial owner of more than five percent (5%) of its outstanding shares of common stock, each director and all executive officers and directors as a group. Except as otherwise indicated, each of the shareholders has sole voting and investment power with respect to the share of common stock beneficially owned.
Name and Address of Title of Amount and Nature of Percent of Beneficial Owner Class Beneficial Owner Class -------------------------------------------------------------------------------- Joseph Rizzuti Common 4,004,167 34.2% Antonio Doria Common 0 0% All Executive Officers and Common 4,004,167 34.2% Directors as a Group (Two (2) persons) Dennis Joslin Company, LLC Common 1,529,251 13.1% ------------------- |
(1) The address for each of the above is c/o Atlas Resources International, Inc., 135 Southwest Mapp Road, P.O. Box 269, Palm City, FL 34991.
There are no arrangements which may result in the change of control of the Company.
Item 12. Certain Relationships and Related Transactions
In December 2002, the Company issued 1,000,000 shares of its restricted common stock valued at $70,000, to Joseph Rizzuti, the Company's sole officer and director, in exchange for a partial release from debt and cancellation of loans previously made to the Company in that amount. For such offering, the Company relied upon the 506 Exemption and the Florida Exemption.
Also in December 2002, the Company issued 500,000 shares of its restricted common stock to Donald Mintmire, the Company's legal counsel, in exchange for a release from debt for legal services in the amount of $35,000. For such offering, the Company relied upon the 506 Exemption and the Florida Exemption.
In March 2003, the Company issued 500,000 shares of its restricted common stock to Freeman Perry pursuant to a resolution of the Board of Directors dated January 8, 2003. The shares were issued for consulting and advisory services performed on behalf of the Company valued at $35,000. For such offering, the Company relied upon the 506 Exemption.
Item 13. Exhibits and Reports on Form 8-K.
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as described in the following index of exhibits, are incorporated herein by reference, as follows:
Exhibit No. Description
--------------------------------------------------------------
3.(i).1 [1] Articles of Incorporation of The Silk Road Renaissance Company filed July 5, 1994.
3.(i).2 [1] Articles of Amendment to Articles of Incorporation changing the name to Gillette
Industries Group, Inc. filed December 5, 1994.
3.(i).3 [4] Articles of Amendment to Articles of Incorporation changing the name to Lucid
Concepts, Inc. filed June 3, 1999.
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3.(i).4 [4] Articles of Amendment to Articles of Incorporation changing the name to Clements
Golden Phoenix Enterprises, Inc. filed January 4, 2000.
3.(ii).1 [1] Bylaws of the Company.
4.1 [4] Convertible Note between the Company and Bassuener Cranberry Corporation dated
January 13, 2000.
4.2 [4] Convertible Note between the Company and Ranger Cranberry Company, LLC dated
January 13, 2000.
4.3 [4] Convertible Note between the Company and Philip Taurisano dated March 1, 2000.
4.4 [6] Promissory Note by the Company in favor of Bonnie K. Ludlum dated September
28, 2000.
4.5 [9] Convertible Note by the Company in favor of Philip Taurisano dated October 19,
2000.
4.6 [10] Convertible Note by the Company in favor of James E. Groat dated December 11,
2000.
4.7 [10] Private Placement Memorandum dated June 18, 2001.
4.8 [12] Convertible Note in favor of Joseph Rizzuti dated September 30, 2001.
4.9 [12] Warrant in favor of Antonio Doria dated July 24, 2001.
4.10 [12] Warrant in favor of Antonio Doria dated September 28, 2001.
4.11 [12] Warrant in favor of Antonio Doria dated July 1, 2002.
10.1 [2] Share Exchange Agreement between the Company and Clements Citrus Sales of
Florida, Inc. dated December 31, 1999.
10.2 [4] Exclusive Distributorship Agreement between Clements Citrus Sales of Florida, Inc.
and Hongrun Trade Co., Ltd. dated September 29, 1999.
10.3 [4] Exclusive Distributorship Agreement between Clements Citrus Sales of Florida, Inc.
and Qinhuangdao RutherSoft dated May 16, 2000.
10.4 [4] Lease between Clements Citrus Sales of Florida, Inc. and Edward Sellian for the
premises located at 32C East Osceola Street, Stuart, FL 34996.
10.5 [5] Employment Agreement with Samuel P. Sirkis dated August 1, 2000.
10.6 [6] Consulting Contract between Clements Citrus Sales of Florida, Inc. and Condor
Consulting, LLC dated September 15, 2000.
10.7 [6] Sales and Marketing Contract between Clements Citrus Sales of Florida, Inc. and
Tianjin Hongrun Trading Co., Ltd. dated October 8, 2000.
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10.8 [9] Warrant to purchase 25,000 shares of the Company's Common Stock in favor of
James E. Groat dated December 11, 2000.
10.9 [9] Common Stock Purchase Agreement between the Company and Capital Consultants,
Inc. dated February 1, 2001.
10.10 [9] Registration Rights Agreement between the Company and Capital Consultants, Inc.
dated February 1, 2001.
10.11 [9] Amendment to Employment Agreement between the Company and Samuel P. Sirkis.
10.12 [9] Warrant to purchase 800,000 shares of the Company's Common Stock in favor of
Samuel P. Sirkis dated February 1, 2001.
10.13 [9] Warrant to purchase 100,000 shares of the Company's Common Stock in favor of
Condor Consulting, LLC dated September 15, 2000.
10.14 [9] Promissory Note by the Company in favor of Donald H. Sturm in the principal
amount of $100,000 dated February 7, 2001.
10.15 [10] Import Agency Contract between Clements Citrus Sales of Florida, Inc. and Golden
Wing Mau Enterprise Development Co. Ltd.
10.16 [11] Agreement between J. R. Rizzuti and Antonio Doria dated June 29, 2001.
10.17 [12] Letter agreement between the Company and Trade Link Group, Inc. dated July 19,
2001.
10.18 [12] Supply agreement between the Company and Paradise Water and Juice Co., Inc.
dated November 7, 2001.
16.1 [7] Letter on change of certifying accountant pursuant to Regulation SK, Section
304(a)(3)2.
16.2 [7] Letter from Joan R. Staley, CPA, P.A.
16.3 [8] Letter on change of certifying accountant pursuant to Regulation SK, Section
304(a)(3)2.
16.4 [8] Letter from Joan R. Staley, CPA, P.A.
99.1 [3] Board Resolution dated April 18, 2000 authorizing change in fiscal year of the
Company to March 31.
99.2 [3] Board Resolution dated April 18, 2000 authorizing change in fiscal year of Clements
Citrus Sales of Florida, Inc. to March 31.
31.
--------------------
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(* Filed herewith)
[1] Previously filed with the Company's Registration Statement on Form 10SB filed August 24, 1999.
[2] Previously filed with the Company's Current Report on Form 8-K filed January 12, 2000.
[3] Previously filed with the Company's Current Report on Form 8-K filed April 18, 2000.
[4] Previously filed with the Company's Annual Report on Form 10KSB filed July 12, 2000.
[5] Previously filed with the Company's Quarterly Report on Form 10QSB filed August 21, 2000.
[6] Previously filed with the Company's Quarterly Report on Form 10QSB filed November 14, 2000.
[7] Previously filed with the Company's Current Report on Form 8-K filed December 26, 2000.
[8] Previously filed with the Company's Current Report on Form 8-KA filed February 15, 2001.
[9] Previously filed with the Company's Quarterly Report on Form 10QSB filed February 20, 2001.
[10] Previously filed with the Company's Annual Report on Form 10KSB filed July 16, 2001.
[11] Previously filed with the Company's Quarterly Report on Form 10QSB filed August 20, 2001.
[12] Previously filed with the Company's Quarterly Report on Form 10QSB filed November 19, 2001.
(b) A report on Form 8-K was filed on January 12, 2000 reporting the Share Exchange conducted between the Company and Clements Citrus Sales of Florida, Inc. on December 31, 1999. An amended report on Form 8-KA was filed on February 28, 2000 which included the required financial statements of Clements Citrus Sales of Florida, Inc. Another report on Form 8-K was filed on April 18, 2000 changing the Company's fiscal year to March 31. A report on Form 8-K was filed on December 26, 2000 disclosing a change in the Registrant's Certifying Accountant. An amended Form 8-K was filed on February 15, 2001, which amended the report previously filed December 26, 2000, to include certain information requested by the Commission. A report on Form 8-K was filed on August 13, 2002 disclosing a change in the Registrant's Certifying Accountant.
Item 14. Controls and Procedures.
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer. Based upon that evaluation, the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Atlas Resources International, Inc.
(Registrant)
Date: August 14, 2003 By: /s/ Joseph Rizzuti
---------------------------------------
Joseph Rizzuti, Chairman
By: /s/ Antonio Doria
---------------------------------------
Antonio Doria, President and CEO
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Pursuant to the requirements of the Exchange Act, this report has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ Joseph Rizzuti Chairman August 14, 2003 ----------------------------- Joseph Rizzuti /s/ Antonio Doria President and CEO August 14, 2003 ----------------------------- Antonio Doria |
EXHIBIT 31.1
CERTIFICATIONS
I, Joseph Rizzuti, certify that:
1. I have reviewed this annual report on Form 10-KSB of Atlas Resources International, Inc.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-14 and 15d- 14) for the registrant and have:
(a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b.) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "evaluation date"); and
(c.) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a.) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
(b.) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls.
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: August14, 2003
By: /s/ Joseph Rizzuti
---------------------------------
Joseph Rizzuti
Chief Executive Officer (or equivalent thereof)
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EXHIBIT 31.2
I, Joseph Rizzuti, certify that:
1. I have reviewed this annual report on form 10-KSB of Atlas Resources International, Inc.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-14 and 15d- 14) for the registrant and have:
(a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b.) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "evaluation date"); and
(c.) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a.) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
(b.) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls.
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: August14, 2003
By: /s/ Joseph Rizzuti
---------------------------------
Joseph Rizzuti
Chief Financial Officer (or equivalent thereof)
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Atlas Resources International, Inc. (the "Company") on Form 10-KSB for the period ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph Rizzuti, Chief Executive Officer (or equivalent thereof) of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Joseph Rizzuti _________________________________________ Joseph Rizzuti Chief Executive Officer (or equivalent thereof) August 14, 2003 |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Atlas Resources International, Inc. (the "Company") on Form 10-KSB for the period ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph Rizzuti, Chief Financial Officer (or the equivalent thereof) of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Joseph Rizzuti ___________________________________________ Joseph Rizzuti Chief Financial Officer (or the equivalent thereof) August 14, 2003 |