UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER 0-27323
HARBOUR FRONT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0429812
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
(Registrant's address and telephone number of principal executive offices
and principal place of business)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title 196,533,894 Shares Outstanding as of April 11, 2003
Common Stock, par value $.001
As of April 14, 2003, the aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the closing price on that date, was
approximately $1,640,000.
HARBOUR FRONT HOLDINGS, INC.
FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 2001
Table of Contents
PART I
Item 1. BUSINESS 4
Item 2. PROPERTIES 7
Item 3. LEGAL PROCEEDINGS 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 8
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
Item 7. FINANCIAL STATEMENTS 14
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 14
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 15
Item 10. EXECUTIVE COMPENSATION 17
Item 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 17
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
Item 13. EXHIBITS AND REPORTS ON FORM 8-K 18
Item 14. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES 18
PART I
CAUTIONARY STATEMENT. Statements contained herein that are not based on
historical fact, including without limitation, statements containing the words
"believes," "may," "will," "estimate," "continue," "anticipates," "intends,"
"expects" and words of similar import, constitute "forward-looking statements."
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results, events or developments to be
materially different from any future results, events or developments expressed
or implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions, both nationally
and in the regions in which Harbour Front Holdings, Inc. ("us" or "Harbour")
operates; competition; changes in our business strategy or development plans;
our ability to attract capital for development; the ability to attract and
retain qualified personnel; existing governmental regulations and changes in, or
the failure to comply with, governmental regulations; liability and other claims
asserted against us; and other factors referenced in our filings with the
Securities and Exchange Commission.
GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
SUCH FORWARD-LOOKING STATEMENTS.
We disclaim any obligation to update information concerning any such factors or
to publicly announce the result of any revisions to any of the forward-looking
statements contained in this report to reflect future results, events or
developments.
ITEM 1: BUSINESS
GENERAL
Overview and History
Harbour Front Holdings, Inc. ("Harbour" or the "Company"), a Nevada corporation
incorporated on May 28, 1999, as Finders Keepers, Inc. ("Finders Keepers") with
a principal business objective to provide unclaimed property location services
to the public and to leading corporations. Finders Keepers sought to assist
clients in obtaining information regarding lost or forgotten estates, unclaimed
assets and/or financial belongings anywhere within the United States. Finders
Keepers attempted to locate assets that escheated to the state or to the federal
government or governmental agencies. These assets included monies derived from
uncashed checks, dormant savings and checking accounts, lost or forgotten stocks
and dividends, unclaimed certificates of deposit ("CDs"), forgotten safe deposit
boxes and various other unclaimed assets. Finders Keepers then tried to locate
the rightful owners or an entitled beneficiary. Upon locating the entitled
person or entity, Finders Keepers completed the necessary paperwork to have
these assets released for a "finders fee".
In December 2001, The Bauer Partnership, Inc., a Delaware corporation ("Bauer
Delaware") entered into a reverse merger with Finders Keepers whereby Finders
Keepers issued 31,030,800 shares of its common stock for 100% of the issued and
outstanding shares of Bauer Delaware. Bauer Delaware became a wholly-owned
subsidiary of Finders Keepers which changed its name to The Bauer Partnership,
Inc. The Company changed its name to Harbour Front Holdings, Inc. in January
2003.
From March 2001 through December 2001, Bauer Delaware was engaged in providing
investment banking services to United States publicly traded companies seeking
financing in the range of $5 million to $20 million who were unable to secure
large underwriters or who wished to attract a global span of investors to their
corporations. Harbour introduced and evaluated the potential success and
placement of these corporations and their securities. Bauer Delaware introduced
its client companies to small to medium brokerage firms who had a wide client
base, fund managers, private pension funds, small to mid-sized banks and
insurance companies. In connection with the introduction of its client
companies to various financing sources, Bauer Delaware and/or the Company or one
of its subsidiaries received warrants to purchase shares of the client companies
as well as a percentage of any fees raised by the client companies through an
introduction by Bauer Delaware.
Our operations have resulted in limited revenues to date. During fiscal year
2001, the Company entered into investment banking agreements with several NASDAQ
listed companies and with several OTC Bulletin Board companies to introduce
these companies to possible financing sources. In connection with these
agreements the Company received warrants to purchase shares of stock in such
companies as well as a percentage of any funds raised through an introduction of
the Company. In connection with the investment banking agreements, the Company
typically facilitated a road show whereby the client companies met with
potential financing sources in Europe, Asia and the Middle East. Some of the
client companies are still in discussions with financing sources introduced by
the Company and the Company may receive cash compensation in the future from
such introductions.
In December 2001, Bauer Delaware changed its business strategy to specialize in
acquiring cash flow positive commercial real estate assets on a global basis.
The Company's strategy was to utilize its listed equity to acquire existing
hotel and commercial real estate assets to add significant increases in revenue
and net asset value to its financial position. Bauer Delaware believed it would
fill a unique position in the market place by offering the ability to structure
and finance sophisticated transactions in various geographies worldwide.
Windjammer Resort & Spa
In January 2002, the Company and one of its wholly-owned subsidiaries entered
into a Share and Asset Purchase Agreement to acquire the Windjammer Resort & Spa
in St. Lucia, British West Indies. The acquisition price was $30,000,000 and was
comprised of $18 million in cash and $12,000,000 in the form of a convertible
debenture bearing interest at 8% per year which was convertible into Company
common stock at $1.80 per share based on specified criteria in the agreement.
In connection with this agreement, the Company made non-refundable payments of
$200,000 towards the purchase price and owed $17.8 million by May 1, 2002,
unless the Company was granted an extension. The Company was unable to obtain
the necessary financing and lost its non-refundable payment of $200,000.
Loan Agreement with Ocean Strategic Holdings Ltd. and Turbo International Ltd.
In March 2002, the Company entered into a loan agreement with Ocean Strategic
Holdings Ltd. and Turbo International Ltd. whereby the Company received a 90 day
loan of $500,000 based on the following: (1) $150,000 upon execution and
delivery of the loan agreement, less $10,000 to be paid to the lenders'
attorneys; (2) $50,000 upon the lenders' and/or the Company's receipt of all of
the transaction documents duly executed and delivered pursuant to the loan
agreement, less $5,000 to be paid to the lenders' attorneys; (3) 100,000 upon
the Company's filing of its annual report on Form 10-K for the year ended
December 31, 2001 and amendment to its current report on Form 8-K dated December
5, 2001 containing all of the financial statements to be filed in connection
there with, less any expenses to be paid to lenders' attorneys; and (4) $200,000
upon the lenders receipt of a copy of a written loan commitment to the Company
from a reputable lending institution approved by the lenders, which approval
shall not be unreasonably withheld, for no less than $18,000,000, less $5,000 to
be paid to lenders' attorneys. The Company was unable to receive a loan
commitment in the amount of $18,000,000 and received an aggregate of $240,000 in
connection with this loan.
In connection with the loan agreement, the lenders received a 10% interest in
the outstanding stock of The Bauer Windjammer Resort and Spa (Bahamas) Ltd., a
wholly-owned subsidiary of Bauer Capital Management, Limited which is a
wholly-owned subsidiary of the Company. In addition, the lenders received an
aggregate of three year redeemable warrants to purchase 3,000,000 shares,
subject to adjustment as provided in the agreement, at an exercise price of $.20
per share. Ronald J. Bauer, our chief executive officer, pledged 17,312,500
shares of Company common stock held in the name of Fleming Financial Holdings,
Ltd. pursuant to a pledge and security agreement. In the event the loan is not
repaid in its entirety within 120 days from the date the loan agreement was
executed, the loans may be converted into 50,000,000 shares of Company common
stock which may result in a change of control of the Company. The lenders have
the right to loan up to $500,000 in four separate transactions under
substantially the same terms and conditions as the loan agreement. In addition,
the lenders have a first right of refusal to provide financing to the Company in
future financings.
We have made payments to Ocean Strategic Holdings Ltd. and Turbo International
Ltd. of approximately $190,000 to date, but we owe an additional $60,000 plus
interest and penalties. We are currently late with respect to principal,
interest and penalty payments. If we do not repay these amounts under
acceptable terms to Ocean Strategic Holdings and Turbo International, the
operations of the Company will likely be discontinued and current management
will likely be removed from office.
Various Letters of Intent and Transactions
The Company entered into a variety of letters of intent throughout the year
ended December 31, 2002, most of which did not result in the execution of
definitive agreements.
In June 2002, the Company through a subsidiary, entered into a letter of intent
with Flint River Farms Limited to acquire 600 acres of land. This agreement was
never finalized.
The Company, through one of its subsidiaries, negotiated to construct 31 luxury
villas at Tryall Club in Montego Bay, Jamaica. This transaction was never
finalized.
In November 2002, the Company entered into an agreement with Tropical Resources
SA of Panama to develop and market a reforestation project. The Company formed
a wholly-owned subsidiary Bauer Forestry Corp. to manage the new development
project and to market the forest land. Bauer Forestry is entitled to receive
20% of all sales originated through its introduction. The website address
of www.panama-forest.com is fully operational. There have been
inquiries but no sales to date.
In December 2002, the Company acquired a 33.3% of F3 Fitness, LLC, the owner of
a nutritional supplement. After entering into this agreement, F3 Fitness had a
change in ownership of the remaining 66.7% membership interest. The Company has
established a web site, paid for the establishment of a call center, and paid
for a marketing campaign. Pursuant to the agreement, the Company was going to
issue 1,000,000 shares of its common stock and pay $200,000 for marketing
services over a six month period. Various things were supposed to happen which
have not occurred to date and the Company does not feel that it should issue the
shares. The registrant continues to run the web site. The call center has been
put on hold and F3 Fitness is relying exclusively on Internet sales. Although
F3 Fitness has begun generating revenues, it has become clear that the revenue
and earnings projections that the Company previously expected to receive from
this relationship will not be met. On April 7, 2003, Jerome J.C Ferez, the
manager of F3 Fitness resigned. The Company does not believe the resignation of
Mr. Ferez will have a material impact on the operations of F3 Fitness.
In December 2002, the Company acquired 33.3% of Caviar Universe LLC, a company
selling gourmet products online. The Company established a web-site and a call
center and paid for a marketing campaign. As Caviar Universe LLC is a start-up
company, it has only recently begun to generate revenues. The call center has
been put on hold and Caviar Universe is relying exclusively on Internet sales.
It has become evident that the revenue and earnings projections that the Company
previously expected to receive from this relationship will not be met.
In December 2002, the Company announced that it had acquired $30,000,000 in
non-performing debt. As of this date, EH&P Investments AG has only acquired
$6,000,000 in non-performing debt and the Company has yielded no revenues from
such non-performing debt. The Company had agreed to issue 10,000,000 shares of
its common stock in consideration for the $30,000,000 in non-performing debt.
The Company does not expect to issue any shares of common stock and does not
expect to generate any revenues from this relationship. It has become clear
that the earning projections previously believed to result from this
relationship will not be met.
The Company entered into a letter of intent to acquire 100% of Wimbledon Unreal
Grass. This agreement was never finalized as the Company chose not to proceed
with the transaction. Therefore, the registrant will not receive any economic
benefit from Wimbledon Unreal Grass.
In January 2003, the Company and Urbani Holdings, Inc. agreed to enter into a
Joint Venture agreement to form "da Rosario LLC" to market gourmet products
under the brand name "da Rosario." The companies expect to establish a web site
to sell the gourmet products with the Company providing the following services
to the joint venture: (1) marketing, (2) financing the design, hosting and
maintenance of the "da Rosario" web site, (3) establishing of joint merchant
account and (4) financing of a call center for the initial launch period. The
agreement calls for a 40% membership interest for the Company and a 60%
membership interest for Urbani Holdings, Inc. Urbani Holdings has had
significant revenues from its operations. It is expected that the web site will
be operational in the second quarter of 2003. The Company previously stated
revenue expectations in a press release dated January 31, 2003, which revenues
may be overstated as this will be a newly formed joint venture relating to
Internet sales.
ITEM 2. PROPERTIES
We have use of an office at 300 Park Avenue, Suite 1700, New York, New York for
$1,000.00 per month on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS
In January 2003, Zaven Yaralian filed suit against the Company, Ronald J. Bauer
and Jacques Fischer in the State of South Carolina, County of Beaufort, in the
Circuit Court, Case No. 03-CP-7-81. Zaven Yaralian entered into a consulting
agreement with the Company to serve as its President and executed a subscription
agreement for the purchase of 2,000,000 shares of common stock in installments
of $50,000 for 400,000 shares of common stock. Pursuant to the consulting
agreement, Mr. Yaralian was to receive $10,000 per month for the first three
months of the agreement and then receive $20,000 per month. The Company issued
Mr. Yaralian 400,000 shares in consideration for $50,000, and paid Mr. Yaralian
$10,000 for the first month of services to be preformed pursuant to the terms of
the consulting agreement. Mr. Yaralian's primary cause of action is breach of
contract and he is seeking damages pursuant to the consulting agreement. Due to
Mr. Yaralian's failure to provide services, the Company does not believe it has
any obligations and it is vigorously defending this claim.
In February 2003, a lawsuit for breach of contract for attorneys fees was filed
styled as Richard O. Weed vs. Harbour Front Holdings, Inc., The Bauer
Partnership, Inc., The Bauer Partnership, Ltd., Ronald J. Bauer, and DOES 1
through 25 in the Superior Court of the State of California in Orange County,
Case No. 03CC03810. Mr. Weed is seeking damages of $41,239.06, plus interest and
attorneys fees. The Company does not believe it owes Mr. Weed for services
performed in the amount of $41,239.06. The Company has retained counsel and is
vigorously defending this claim.
In February 2003, a lawsuit for damages based on fraud and securities violations
was filed styled as Richard O. Weed vs. Harbour Front Holdings, Inc., The Bauer
Partnership, Inc., The Bauer Partnership, Ltd., Ronald J. Bauer, David M. Loev,
F. Bryson Farrill, Jacques Fischer, Joseph T. Bauer, Ed Tobin, Geoffrey Button,
Kevin Wallace, Pacific Stock Transfer Company, Malone & Bailey, PLLC and DOES 1
through 25 in the Superior Court of the State of California in Orange County,
Case No. 0300003887. Mr. Weed is the owner of 150,000 shares of the Company's
common stock and he alleges that the market value of his shares has dropped
dramatically. Mr. Weed alleges a violation of Section 16(b) of the Securities
Exchange Act of 1934 seeking short-swing profits from Ronald J. Bauer. Mr. Weed
also seeks damages for a hot check in the amount of $4,310. Mr. Weed is seeking
$1,123,500 for his first cause of action, return of short swing profits for his
second cause of action, and $4,310 on his third cause of action. Mr. Weed is
also seeking prejudgment interest, costs and reasonable attorneys fees. The
Company has retained counsel and is vigorously defending these causes of action.
Mr. Weed received the 150,000 shares of stock in consideration for services
performed and the Company believes that it will settle this claim for a
substantially reduced amount.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security holders, through the solicitation of proxies
or otherwise.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded in the Over-the-counter market and is quoted on the
electronic Bulletin Board under the symbol "HBRF", traded under the symbol
"BUER" from January 2002 to January 2003 and traded under the symbol "FDKP"
until the last quarter of 2001. Our common stock was cleared for trading on the
OTCBB on March 3, 2000 and began formal trading on March 7, 2000. The following
table sets forth the high and low price for our common stock on the OTCBB. The
following table represents the range of the high and low bid prices of our stock
as reported by the NASDAQ Trading and Market Services for each fiscal quarter
for the last two fiscal years ending December 31, 2001 and 2002, respectively.
These quotations represent prices between dealers, may not include retail
markups, markdowns, or commissions, and may not necessarily represent actual
transactions.
Year Quarter High Low
2001 First Quarter $5.00 $1.649
Second Quarter $5.997 $1.4999
Third Quarter $3.00 $1.0649
Fourth Quarter $3.00 $1.10
2002 First Quarter $7.50 $1.35
Second Quarter $2.85 $.90
Third Quarter $1.20 $.80
Fourth Quarter $1.05 $.04
HOLDERS
As of April 11, 2003 there were 92 stockholders of record of our common stock.
DIVIDEND POLICY
We have not paid cash dividends on our common stock and do not intend to pay any
cash dividends in the foreseeable future.
We have authorized a total of 200,000,000 shares of our common stock, $0.001 par
value per share. As of April 11, 2003, we had a total of 196,533,894 shares of
our common stock issued and outstanding. We have also authorized 25,000,000
shares of preferred stock, $.001 par value, but none of them are issued and
outstanding. Management controls approximately 12% of our outstanding shares.
Dividends
We have not declared dividends on our common stock and do not anticipate paying
dividends on our common stock in the foreseeable future.
Private Equity Transactions.
On May 31, 1999, the Company issued 70,000,000 shares of its $0.001 par value
common stock for cash of $8,510 to its one director.
On September 2, 1999, the Company completed an offering that was registered with
the State of Nevada pursuant to NRS 90.490 and was exempt from federal
registration pursuant to a Regulation D, Rule 504 of the Securities Act of 1933,
as amended. The Company sold 8,908,200 shares of its $0.001 par value common
stock at a price of $0.10 per share for total cash of $63,630. In addition, the
Company issued 1,972,712 shares of its $0.001 par value common stock for
services valued at $0.10 per share for a total of $14,091.
On March 24, 2000, the Company effected a 2-for-1 stock split of its $0.001 par
value common stock, increasing the number of shares issued and outstanding from
5,777,208 shares to 11,554,416 shares.
On July 27, 2000 the Company's Board of Directors approved a 7 for 1 forward
stock split of its common shares. The Company's Certificate of Incorporation has
been amended to increase the authorized capital stock of the Company to
200,000,000 shares, all of which will be common stock. The record date for the
forward split was Monday, August 7, 2000 with a distribution date of August 9,
2000.
In December 2001, the Company issued 31,030,800 shares of its common stock for
100% of the common stock of The Bauer Partnership, Inc., a Delaware corporation.
We believe the transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act as the transaction was non-recurring and all of the United
States shareholders were accredited investors.
In December 2001, the Company issued 750,000 shares of its common stock to
several individuals and an entity in consideration for services rendered in
connection with the Company's reorganization. We believe the transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act, as the
recipients had sufficient knowledge and experience in financial and business
matters, and since the transactions were non-recurring and privately negotiated.
In December 2001, the Company issued 5,000,000 shares of its common stock to
several entities in consideration for consulting services rendered. We believe
the transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act, as the recipients had sufficient knowledge and experience in
financial and business matters, and since the transactions were non-recurring
and privately negotiated.
In March 2002, we issued 53,000,000 shares of common stock as collateral to
Ocean Strategic Holdings and Turbo International in connection with a loan
agreement. We believe the transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act, as the recipients had sufficient knowledge
and experience in financial and business matters, and since the transactions
were non-recurring and privately negotiated.
In April 2002, the Company issued 200,000 shares of its common stock to two
entities in consideration for consulting services rendered. We believe the
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act, as the recipients had sufficient knowledge and experience in
financial and business matters, and since the transactions were non-recurring
and privately negotiated.
In May 2002, the Company issued 500,000 shares of common stock to an individual
in consideration for $80,000. We believe the transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act, as the recipient
had sufficient knowledge and experience in financial and business matters, and
since the transaction was non-recurring and privately negotiated.
In May 2002, we issued an aggregate of 1,066,667 shares of common stock to
Fleming Financial Holdings, of which Ronald J. Bauer is the beneficial owner,
and to Ronald J. Bauer in consideration for the conversion of $320,000 of debt
into equity. We believe the transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act, as the recipients had sufficient knowledge
and experience in financial and business matters, and since the transactions
were non-recurring and privately negotiated.
In July 2002, the Company issued 400,000 shares of common stock to an individual
in consideration for $50,000. We believe the transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act, as the recipient
had sufficient knowledge and experience in financial and business matters, and
since the transaction was non-recurring and privately negotiated.
In July 2002, the Company issued 25,000 shares of common stock to an entity in
consideration for consulting services rendered. We believe the transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act, as the
recipient had sufficient knowledge and experience in financial and business
matters, and since the transaction was non-recurring and privately negotiated.
In August 2002, we issued 68,000 shares of common stock to an individual in
connection with services rendered to the Company. We believe the transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act, as the
recipient had sufficient knowledge and experience in financial and business
matters, and since the transaction was non-recurring and privately negotiated.
In August 2002, we issued an aggregate of 5,000,000 shares of common stock to
three individuals in consideration for $250,000. We believe the transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act, as the
recipients had sufficient knowledge and experience in financial and business
matters, and since the transactions were non-recurring and privately negotiated.
In December 2002, we issued an individual and an entity an aggregate of 700,000
shares of common stock in consideration for consulting services rendered. We
believe the transaction was exempt from registration pursuant to Section 4(2) of
the Securities Act, as the recipients had sufficient knowledge and experience in
financial and business matters, and since the transactions were non-recurring
and privately negotiated.
In February 2003, we issued an aggregate of 10,000,000 shares of our common
stock to three entities in consideration for $200,000. We believe the
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act, as the recipients had sufficient knowledge and experience in
financial and business matters, and since the transactions were non-recurring
and privately negotiated.
In February 2003, the Company issued Ronald J. Bauer 3,300,000 shares of Company
common stock in consideration for the payment of accrued salary of $60,000. We
believe the transaction was exempt from registration pursuant to Section 4(2) of
the Securities Act, as the recipient had sufficient knowledge and experience in
financial and business matters, and since the transaction was non-recurring and
privately negotiated.
In February 2003, the Company issued 27,500,000 shares of Company common stock
to Dr. Jacques Fischer in consideration for forgiveness of a loan in the amount
of $500,000. We believe the transaction was exempt from registration pursuant
to Section 4(2) of the Securities Act, as the recipient had sufficient knowledge
and experience in financial and business matters, and since the transaction was
non-recurring and privately negotiated.
In February 2003, the Company issued 1,000,000 shares of Company common stock to
an entity in consideration for services rendered. We believe the transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act, as the
recipient had sufficient knowledge and experience in financial and business
matters, and since the transaction was non-recurring and privately negotiated.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT. Statements contained or incorporated by reference in this
document that are not based on historical fact are "forward-looking statements".
Forward-looking statements may be identified by use of forward-looking
terminology such as "believe", "intends", "may", "will", "expects", "estimate",
"anticipate", "continue", or similar terms, variations of those terms or the
negative of those terms.
Overview
The Company's business strategy is to utilize its common stock to acquire
existing hotel and commercial real estate assets. The Company did not implement
this business strategy until December 31, 2001. Prior thereto, the Company was
engaged in providing investment banking services to United States publicly
traded companies seeking financing in the range of $5 million to $20 million.
Revenues
For the year ended December 31, 2002, the Company had $0 in revenues. For the
period from March 23, 2001 (inception) through December 31, 2001, the Company
had revenues of $148,164 from the receipt of warrants in connection with
investment banking services. The decrease in revenues is due to the Company's
lack of operations.
Costs and Expenses
For the year ended December 31, 2002, the Company's costs and expenses were
$2,878,515, a decrease of $1,843,556 from the period from March 23, 2001
(inception) through December 31, 2001. The Company's salaries and benefits
decreased from $764,258 for the period from March 23, 2001 (inception) through
December 31, 2001 to $169,500 for the year ended December 31, 2002. Rent
decreased from $227,316 for the period from March 23, 2001 (inception) through
December 31, 2001 to $21,000 for the year ended December 31, 2002. Other general
and administrative expenses were $3,719,824 for the period from March 23, 2001
(inception) through December 31, 2001 as compared to $2,688,015 for the year
ended December 31, 2002. Other general and administrative expenses includes
payment of professional fees, issuance of stock to consultants, travel, and
entertainment and printing costs.
Loss from Operations
The Company had a loss from operations of $2,878,515 for the year ended December
31, 2002, as compared to a loss from operations of $4,620,874 for the period
from March 23, 2001 (inception) through December 31, 2001.
Net Loss Per Share
The Company had a net loss per share of $.06 for the year ended December 31,
2002, as compared to a net loss of $.15 per share for the period from March 23,
2001 (inception) through December 31, 2001.
Liquidity and Capital Resources
For the year ended December 31, 2002 the Company produced $0 in revenues. For
the year ended December 31, 2001, the Company did not generate cash flow from
its operations which exceeding operating costs. As a result, the Company will
require additional working capital to develop its business until the Company
either achieves a level of revenues adequate to generate sufficient cash flows
from operations or obtains additional financing necessary to support its working
capital requirements.
During 2002, the Company raised $380,000 from the issuance of 5,900,000 shares
of stock. During 2002, the Company issued 1,066,667 shares of common stock in
consideration for debt conversion of $522,500. At December 31, 2002, the
Company had shareholder advances of $407,552. Between July and November 2001,
the Company raised $669,100 from the sale of 1,098,800 shares of common stock.
The Company borrowed $1,006,500 from various individuals, an entity and
a financial institution during 2001. These loans bear interest ranging from
3.875% to 12% and all of these amounts remain outstanding. In 2001, the Company
also received an advance from Ronald J. Bauer, the Company's Chief Executive
Officer, in the amount of $27,135.
As of December 31, 2002, the Company did not have any assets as of December 31,
2002, and had a working capital deficit of 1,424,198. As of December 31, 2001,
the Company had cash of $3,882, accounts receivable of $5,845, a VAT refund of
$168,823 and a working capital deficit of $1,835,519.
The Company is taking steps to raise equity capital or to borrow additional
funds. There can be no assurance that any new capital will be available to the
Company or that adequate funds for the Company's operations, whether from the
Company's revenues, financial markets, or other arrangements will be available
when needed or on terms satisfactory to the Company. The Company has no further
commitments from officers, directors or affiliates to provide funding. The
failure of the Company to obtain adequate additional financing may require the
Company to delay, curtail or scale back some or all of its operations. Any
additional financing may involve dilution to the Company's then-existing
shareholders. The Company is also identifying merger and/or acquisition
candidates and as of April 16, 2003, the Company has not identified such a
candidate. Ronald J. Bauer, the Company's Chief Executive Officer has been
advancing the Company capital since December 2002, but he has no commitment to
do so.
Risk Factors.
Failure to Repay Loan May Result in Change of Control. If we are unable to repay
the loan due to Ocean Strategic Holdings Ltd. and Turbo International Ltd., the
loans are automatically converted into 50,000,000 shares of our common stock
resulting in a change of control. We have made payments to Ocean Strategic
Holdings Ltd. and Turbo International Ltd. of approximately $190,000 to date,
but we owe an additional $60,000 plus interest and penalties. We are currently
late with respect to principal, interest and penalty payments. If we do not
repay these amounts under acceptable terms to Ocean Strategic Holdings and Turbo
International, the operations of the Company will likely be discontinued and
current management will likely be removed from office.
Dependence Upon External Financing. It is imperative that we raise capital to
stay in business. If we are unable to obtain debt and/or equity financing upon
terms that our management deems sufficiently favorable, or at all, it would have
a materially adverse impact upon our ability to pursue our business strategy and
maintain our current operations.
Risk That We May Be Forced Into Bankruptcy. In the event the Company is unable
to raise additional capital or find a merger partner or acquisition candidate,
the Company may be forced to seek bankruptcy protection.
Reliance on Key Management. Our success is highly dependent upon the continued
services of Ronald J. Bauer, our CEO, who has been the primary person
responsible for the direction of the Company. If Mr. Bauer were to leave us, it
could have a materially adverse effect upon our business and operations. Mr.
Bauer's employment agreement has expired and Mr. Bauer is no longer receiving a
salary from the Company. As such, Mr. Bauer is seeking to provide consulting
services to other businesses and entities.
Risk that the Securities and Exchange Commission Takes the Position that the
Company is Deficient in its Filings. The Company received a comment letter from
the SEC relating to the Company's compliance with the applicable disclosure
requirements. The Company responded to the SEC's comments and filed a report on
Form 8-K on March 10, 2003 updating and correcting previous disclosures. In the
event the SEC is not satisfied that the Company is current in its filings, this
may result in increased expenses to the Company as well as other potential
liabilities.
Risk that We Are Unable to Issue Additional Shares. We are authorized to issue
200,000,000 shares of common stock. As of April 11, 2003, we had 196,533,894
shares of common stock outstanding. If we are unable to obtain majority
stockholder vote, we will be unable to amend our articles of incorporation to
increase the number of authorized shares or affect a reverse stock split and
reauthorize the number of shares of common stock that can be issued. If we are
unable to increase our number of authorized shares, we will not be able to issue
common stock for additional capital, merger or acquisition candidates, or for
consulting services. In the event the Company is unable to obtain shareholder
approval, this will likely have a significant impact on the Company.
Our Auditors Have Expressed Substantial Doubt About Our Ability to Continue As a
Going Concern. Malone & Bailey, PLLC, in their independent auditors' report,
have expressed "substantial doubt" as to our ability to continue as a going
concern based on operating losses we have incurred since inception. Our
financial statements do not include any adjustments that might result from the
outcome of that uncertainty. The going concern qualification is also described
in Note 2 of the notes to our financial statements.
ITEM 7: FINANCIAL STATEMENTS
The audited financial statements, together with the independent accountants
report thereon of Malone & Bailey, PLLC appears herein. See financial statements
beginning on pages F-1 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 12, 2002, the client-auditor relationship between The Bauer
Partnership, Inc., formerly Finders Keepers (the "Company") and Bierwolf, Nilson
& Associates ("Bierwolf") ceased as Bierwolf was dismissed as the Company's
auditor.
To the knowledge of the Company's current Board of Directors, Bierwolf's report
of the financial statements of the Registrant for the period from April 2001
through June 2001 and any related interim period did not contain any adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
During the review of the Company's financial statements for the period from
April 2001 through June 2001 and any subsequent interim period through the date
of dismissal, Bierwolf did not have any disagreements with the Company on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
On August 13, 2001, the Registrant changed accountants from Stark Tinter
Associates LLC to Bierwolf, Nilson & Associates.
The Company decided not to reappoint Stark Tinter & Associates, LLC as its
independent accountant.
The financial statements reported on by Stark Tinter & Associates LLC were not
subject to an adverse or qualified opinion, or a disclaimer of opinion and were
not modified as to uncertainty, audit scope or accounting principles during the
past two fiscal years, and the interim periods through August 13, 2001 except
that the opinion for the year ended December 31, 2000 contained a going concern
paragraph;
The decision to change accountants was approved by the Registrant's Board of
Directors; and
There were no disagreements related to accounting principles or practices
auditing scope or procedure during the past two fiscal years and the interim
period through August 13, 2001.
On February 6, 2002, the Registrant engaged Malone & Bailey PLLC as its
independent accountants for the fiscal year ended December 31, 2001. During the
most recent fiscal year and any subsequent interim period prior to engaging
Malone & Bailey, the Company did not consult with Malone & Bailey regarding
either (i) the application of accounting principals to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on the Company's financial statements; or (ii) any matter that was
either the subject matter of a disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions) or a reportable event (as defined
in Item 304(a)(1)(v) of Regulation S-K). Malone & Bailey, PLLC has reviewed the
disclosure required by Item 304(a) before it was filed with the Commission and
has been provided an opportunity to furnish the Company with a letter addressed
to the Commission containing any new information, clarification of the Company's
expression of its views, or the respects in which it does not agree with the
statements made by the Company in response to Item 304(a). Malone & Bailey PLLC
did not furnish a letter to the Commission.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the directors and executive officers of Bauer
are set forth below. Biographical information for each of these persons is also
presented below. Our executive officers are appointed by our Board of Directors
and serve at its discretion.
Directors and Officers.
Name Age Position Held
---- --- --------------
Ronald J. Bauer 28 Chief Executive Officer and Director
RONALD J. BAUER, CHIEF EXECUTIVE OFFICER, FOUNDER AND DIRECTOR - Mr. Bauer is
the Chief Executive Officer and founder of the Company and is responsible for
the management of the Company. Mr. Bauer has over 6 years experience in
financial services. He has been involved aggressively in the structuring of
sophisticated financial transactions. He has planned creative debt and equity
structures for private and public companies.
In January 2003, Dr. Jacques Fischer, Joseph T. Bauer and F. Bryson Farrill
Resigned as Company directors.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company'
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater
than ten-percent stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. During the fiscal
year ended December 31, 2002, the Company does not believe its officers,
directors and greater then ten percent beneficial owners complied with all
Section 16(a) filing requirements.
ITEM 10. EXECUTIVE COMPENSATION
The following table is a summary of annual compensation paid to the Company's
executives during the two fiscal years ended December 31, 2002 and December 31,
2001.
Name and Principal Other Annual
Position at 12/31/02 Year Salary Bonus Allowance
----------------------- ---- --------------------- ------- ---------
Ronald J. Bauer 2002 $150,000 $50,000
Chief Executive Officer 2001 139,715 None $55,000
Our directors are reimbursed for reasonable expenses incurred in connection with
attendance at meetings of the Board and of Committees of the Board; however,
they do not receive any additional compensation for their services as directors.
Accordingly, it may be necessary for us to compensate newly appointed directors
in order to attract a quality governance team. At this time the Company has not
identified any specific individuals or candidates nor has it entered into any
negotiations or activities in this regard.
EMPLOYMENT AGREEMENTS
None.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 11, 2003, information regarding the
beneficial ownership of shares of Common Stock by each person known by us to own
five percent or more of the outstanding shares of Common Stock, by each of our
Officers, by each of our Directors, and by our Officers and Directors as a
group. On April 11, 2003 there were 196,533,894 shares issued and outstanding
of record.
Name and Address of Shares of Percentage as of
Beneficial Owners Common Stock April 11, 2002
------------------------------------- ------------- -----------------
Ronald J. Bauer (1)(2) 24,179,167 12.3%
Dr. Jacques Fischer(1) 31,750,000 16.2%
Ocean Strategic Holdings Ltd. (3) 63,281,250 32.2%
All Executive Officers and Directors
As a group (1 person) 24,179,167 12.3%
* Less than one percent
(1) The business address of each individual is the same as the address of the Company's
principal executive offices.
(2) Includes 20,279,167 shares held of record by Fleming Financial Holdings Ltd., of which
Ronald J. Bauer is the beneficial owner.
(3) Includes 15,581,250 shares held of record by Fleming Financial Holdings, Ltd. Turbo
International Ltd. has a security interest on 1,731,250 shares held of record by Fleming Financial
Holdings, Ltd.
ITEM 12. CERTAIN PARTIES AND RELATED TRANSACTIONS.
In January 2001, Ronald J. Bauer, the Company's Chief Executive Officer,
loaned the Company $180,000 bearing interest at 8% which was converted into
600,000 shares of Company common stock in May 2002.
In April 2001, Ronald J. Bauer, our Chief Executive Officer, loaned the
Company $140,000 through Fleming Financial, a company of which Ronald J. Bauer
is the beneficial owner. The loan bore interest at 8% and was converted into
466,667 shares of Company common stock in May 2002.
In May and June 2001, Dr. Jacques Fischer, our Chief Operating Officer,
loaned the Company an aggregate of $250,000 which loans bear interest at rates
ranging from 10-12%. These loans are due upon demand.
In December 2001 and January 2002, one of our employees and shareholders
loaned the Company an aggregate of $144,000. One of the loans was due in
February 2002 and provides for a penalty payment of up to $50,000. The other
loan is secured by 300,000 shares of Company common stock.
During the year ended December 31, 2001, Ronald J. Bauer, the Company's
Chief Executive Officer, advanced the Company $27,135.
During the year ended December 31, 2001, the Company received a note
payable from a financial institution in the amount of $300,000 secured by assets
of officers and directors of the Company bearing interest at 3.875%.
In January 2002, Dr. Jacques Fischer, our Chief Operating Officer, loaned
the Company $160,000 bearing interest at 8%. The loan is due upon demand.
In May 2002, we issued Fleming Financial Holdings and Ronald J. Bauer an
aggregate of 1,066,667 shares of Company common stock in consideration for debt
forgiveness of $320,000.
In October 2002, we issued Fleming Financial Holdings, Ltd., a company of
which Ronald J. Bauer is the beneficial owner, 1,000,000 shares of stock
pursuant to an S-8 registration statement in consideration for employment
services of $60,000.
In February 2003, Fleming Financial Holdings, Ltd., a company of which
Ronald J. Bauer is the beneficial owner, paid the Company $50,000 for the
issuance of 2,500,000 shares of common stock.
In February 2003, the Company issued Ronald J. Bauer 3,300,000 shares of
Company common stock in consideration for the payment of accrued salary of
$60,000.
In February 2003, the Company issued 27,500,000 shares of Company common
stock to Dr. Jacques Fischer in consideration for forgiveness of a loan in the
amount of $500,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
3.1(1) Amended and Restated Articles of Incorporation
3.2(1) Amended Bylaws
3.3(3) Certificate of Amendment
10.1(2) Employment Agreement with Ronald J. Bauer
10.2(2) Employment Agreement with Kevin Wallace
10.3(2) Share and Asset Purchase Agreement with Windjammer Bahamas
(1992) Limited
10.4(2) Schedule 2.8 to Share and Asset Purchase Agreement
10.5(2) Loan Agreement with Ocean Strategic Holdings Ltd., and Turbo
International Ltd.
21.1* Subsidiaries of the Registrant
99.1* Certification of Principal Executive Officer Pursuant to U.S.C.
Section 1350
* Filed herein
(1) Previously filed with Form 8-K filed on December 13, 2001.
(2) Previously filed with Form 10-KSB filed on April 10, 2002.
(3) Previously filed with Form 8-K filed on January 27, 2003.
A. Financial Statements
INDEPENDENT AUDITORS' REPORT F-1
BALANCE SHEET AS OF DECEMBER 31, 2002 F-2
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002 AND
THE PERIOD FROM MARCH 23, 2001
(INCEPTION) THROUGH DECEMBER 31, 2001 F-3
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 23, 2001
(INCEPTION) THROUGH DECEMBER 31, 2002 F-4
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
FOR THE PERIOD FROM MARCH 23, 2001
(INCEPTION) THROUGH DECEMBER 31, 2002 F-5
NOTES TO FINANCIAL STATEMENTS F-6
B. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
On January 27, 2003, the registrant filed a report on Form 8-K stating
that it had changed its name from The Bauer Partnership, Inc. to Harbour
Front Holdings, Inc. and changed its stock symbol from BUER to HBRF.
On March 10, 2003, the registrant filed a report on Form 8-K updating and
correcting pervious disclosures regarding profit and revenue forecasts; F3
Fitness, LLC; Caviar Universe LLC; non-performing debt; and Wimbledon Unreal
Grass.
ITEM 14. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our Chief Executive
Officer, after evaluating the effectiveness of the Company's "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-14 and 15-d-14(c) as of a date (the "Evaluation Date") within 90 days
before the filing date of this quarterly report, has Concluded that as of the
Evaluation Date, our disclosure controls and procedures were adequate and
designed to ensure that material information relating to us would be made known.
(b) Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could significantly
affect our disclosure controls and procedures subsequent to the Evaluation Date.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HARBOUR FRONT HOLDINGS, INC.
By: /s/ Ronald J. Bauer
----------------------
Ronald J. Bauer
Chief Executive Officer
Dated: April 18, 2003
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and or
the duties indicated.
Signature Title Date
--------- ----- ----
/s/ Ronald J. Bauer Chief Executive Officer April 18, 2003
------------------- and Director
Ronald J. Bauer
Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Harbour Front Holdings, Inc. (formerly The Bauer Partnership, Inc.)
New York, New York
We have audited the accompanying consolidated balance sheet of Harbour Front
Holdings, Inc. (formerly The Bauer Partnership, Inc.) as of December 31, 2002,
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for the year ended December 31, 2002 and for the period from
March 23, 2001 (inception) through December 31, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Harbour Front
Holdings, Inc. (formerly The Bauer Partnership, Inc.) as of December 31, 2002,
and the results of its operations and its cash flows for the year then ended and
from March 23, 2001 (Inception) through December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has incurred losses from
March 23, 2001 (inception) through December 31, 2002 totaling $7,592,689 and at
December 31, 2002 had a capital deficit of $1,424,198. The Company will require
additional working capital to develop its business until the Company either (1)
achieves a level of revenues adequate to generate sufficient cash flows from
operations; or (2) obtains additional financing necessary to support its working
capital requirements. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to this matter are also described in Note 2. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Malone & Bailey, PLLC
Houston, Texas
www.malone-bailey.com
April 14, 2003
HARBOUR FRONT HOLDINGS, INC.
(FORMERLY THE BAUER PARTNERSHIP, INC.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
ASSETS
Assets $ -
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 235,434
Accrued interest 50,212
Shareholders advances 407,552
Convertible note payable 60,000
Notes payable - related parties 673,000
------------
Total current liabilities 1,424,198
------------
Commitments
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 25,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.001 par value, 200,000,000 shares
authorized, 69,276,961 shares issued and outstanding 69,278
Additional paid in capital 6,097,213
Accumulated deficit (7,592,689)
------------
Total Stockholders' Deficit (1,424,198)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -
============
See accompanying summary of accounting policies and
notes to consolidated financial statements.
HARBOUR FRONT HOLDINGS, INC.
(FORMERLY THE BAUER PARTNERSHIP, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Inception
Year ended Through
December 31, December 31,
2002 2001
-------------- ------------
Revenues $ - $ 148,164
Cost and Expenses:
Salaries and benefits 169,500 764,258
Rent 21,000 227,316
Other general and administrative 2,688,015 3,719,824
Depreciation and amortization - 10,673
-------------- ------------
2,878,515 4,722,071
-------------- ------------
Loss from operations (2,878,515) (4,573,907)
Interest expense (93,300) (46,967)
-------------- ------------
-------------- ------------
Net loss $(2,971,815) $(4,620,874)
============== =============
Net loss per share:
Net loss basic and diluted $(0.06) $(0.15)
============== =============
Weighted average shares outstanding:
Basic and diluted 45,937,075 31,560,347
============== =============
See accompanying summary of accounting policies and
notes to consolidated financial statements.
HARBOUR FRONT HOLDINGS, INC.
(FORMERLY THE BAUER PARTNERSHIP, INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MARCH 23, 2001 (INCEPTION) THROUGH DECEMBER 31, 2002
Additional
Common stock paid in Accumulated
Shares Amount capital deficit Total
---------- ------- ----------- ------------ ------------
Issuance of common to
founders 28,600,000 $28,600 $ - $ - $ 28,600
---------- ------- ----------- ------------ ------------
Issuance of common stock
for legal and consulting
services 900,000 900 8,100 - 9,000
Issuance of common stock
for cash 1,595,521 1,596 667,504 - 669,100
Issuance of common stock
for Finder's Keepers, Inc.
and recapitalization 4,064,206 4,064 (4,064) - -
Issuance of common stock
for consulting services 5,000,000 5,000 2,095,000 - 2,100,000
Net loss - - - (4,620,874) (4,620,874)
---------- ------- ----------- ------------ ------------
Balance,
December 31, 2001 40,159,727 40,160 2,766,540 (4,620,874) (1,814,174)
Issuance of common stock
for legal and consulting
services 22,150,567 22,151 2,435,140 - 2,457,291
Issuance of common stock
for cash 5,900,000 5,900 374,100 - 380,000
Issuance of common stock
for debt 1,066,667 1,067 521,433 - 522,500
Net loss - - - (2,971,815) (2,971,815)
---------- ------- ----------- ------------ ------------
Balance,
December 31, 2002 69,276,961 $69,278 $6,097,213 $(7,592,689) $(1,424,198)
========== ======= =========== ============ ============
See accompanying summary of accounting policies and
notes to consolidated financial statements.
HARBOUR FRONT HOLDINGS, INC.
(FORMERLY THE BAUER PARTNERSHIP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,971,815) $(4,620,874)
Adjustments to reconcile net deficit to cash used by
operating activities:
Depreciation and amortization - 10,673
Common stock for services 2,457,291 2,137,600
Net change in:
Accounts receivable 5,845 (5,845)
Investments 33,806 (33,806)
Foreign tax refund claims 168,823 (168,823)
Bank overdraft (45,900) 45,900
Accounts payable and accrued expenses (536,424) 966,338
------------ ------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES (888,374) (1,668,837)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (122,923) (32,018)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 380,000 669,100
Shareholder advances 380,417 27,135
Proceeds from notes payable 246,998 1,008,502
------------ ------------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES 1,007,415 1,704,737
------------ ------------
NET INCREASE (DECREASE) IN CASH (3,882) 3,882
Cash, beginning of period 3,882 -
------------ ------------
Cash, end of period $ - $ 3,882
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ - $ -
Income taxes paid $ - $ -
See accompanying summary of accounting policies and
notes to consolidated financial statements.
HARBOUR FRONT HOLDINGS, INC.
(FORMERLY THE BAUER PARTNERSHIP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
Nature of business
Harbour Front Holdings, Inc. (formerly The Bauer Partnership, Inc.) ("Harbour")
was incorporated in March 2001 in Delaware. In October 2001, Harbour entered
into an Exchange Agreement that was accounted for as a reverse merger with
Finder's Keepers, Inc. ("Finder's), a Nevada corporation. For accounting
purposes this has been treated as an acquisition of Finder's and as a
recapitalization of Harbour.
From March 2001 through December 2001, Harbour was engaged in providing
investment banking services to United States publicly traded companies seeking
financing in the range of $5 million to $20 million who were unable to secure
large underwriters or who wished to attract a global span of investors to their
corporations. In December 2001, Harbour changed its business strategy to
specialize in acquiring cash flow positive commercial real estate assets on a
global basis. Harbour's strategy is to utilize its listed equity to acquire
existing hotel and commercial real estate assets to add significant increases in
revenue and net asset value to its financial position.
Principles Of Consolidation
The consolidated financial statements include the accounts of Harbour and its
wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the balance sheet. Actual results could differ from
those estimates.
Cash Equivalents
Cash equivalents include highly liquid, temporary cash investments having
original maturity dates of three months or less. For reporting purposes, such
cash equivalents are stated at cost plus accrued interest which approximates
fair value.
Investments
Harbour holds minority equity investments in companies. Harbour accounts for
these minority investments under the cost method. Certain investments carry
restrictions on immediate disposition. Investments in public companies with
restrictions of less than one year are classified as available-for-sale and are
adjusted to their fair market value with unrealized gains and losses, net of
tax, recorded as a component of accumulated other comprehensive income. Upon
disposition of these investments, the specific identification method is used to
determine the cost basis in computing realized gains or losses, which are
reported in other income and expense. Declines in value that are judged to be
other than temporary are reported in other income and expense.
Revenue Recognition
Revenues are recorded as services are performed. Investment banking revenue
includes gains, losses, and fees, net of syndicate expenses, arising from
offerings in which Harbour acts as an agent. Revenues from investment banking
services include warrants that are received upon the execution of an agreement.
Harbour receives additional compensation in cash and warrants upon the sale of
the company stock.
Foreign Currency
Harbour's foreign subsidiaries have the U.S. dollar designated as their
functional currency. Financial statements of these foreign subsidiaries are
remeasured to U.S. dollars for consolidation purposes using current rates of
exchange for monetary assets and liabilities and historical rates of exchange
for nonmonetary assets and related elements of expense. Revenue and other
expense elements are remeasured at rates that approximate the rates in effect on
the transaction dates. Remeasurement gains and losses are included in other
income and expense.
Long-lived Assets
Property and equipment are stated at cost less accumulated depreciation. Major
renewals and improvements are capitalized; minor replacements, maintenance and
repairs are charged to current operations. Depreciation is computed by applying
the straight-line method over the estimated useful lives of each asset. Harbour
performs reviews for the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Income Taxes
The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. Harbour records a valuation allowance to
reduce the deferred tax assets to the amount that is more likely than not to be
realized.
Earnings Per Common Share
Basic and diluted net loss per share excludes dilution and is computed by
dividing net loss by the weighted average number of common shares outstanding
for the period presented
Recent Accounting Pronouncements
Harbour does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Harbour's results of
operations, financial position or cash flows.
NOTE 2 - FINANCIAL CONDITION AND GOING CONCERN
Harbour has incurred losses totaling $7,592,689 through December 31, 2002 had a
capital deficit of $1,424,198. Because of these losses, Harbour will require
additional working capital to develop business operations.
Harbour intends to raise additional working capital either through private
placements, public offerings and/or bank financing. Harbour is also identifying
merger and/or acquisition candidates. As of April 14, 2003, no acquisition or
merger agreements have been closed.
There are no assurances that Harbour will be able to either (1) achieve a level
of revenues adequate to generate sufficient cash flow from operations; or (2)
obtain additional financing through either private placement, public offerings
and/or bank financing necessary to support the Harbour's working capital
requirements. To the extent that funds generated from any private placements,
public offerings and/or bank financing are insufficient, Harbour will have to
raise additional working capital. No assurance can be given that additional
financing will be available, or if available, will be on terms acceptable to
Harbour. If adequate working capital is not available Harbour may not continue
with its operations.
These conditions raise substantial doubt about Harbour's ability to continue as
a going concern. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
NOTE 3 - REVERSE MERGER
On October 5, 2001, Harbour entered into an Exchange Agreement with Finder's.
In December 2001, the Exchange Agreement became effective (the Exchange). Under
the Exchange, Harbour became a wholly owned subsidiary of Finder's, with
Finder's changing its name to Harbour. Pursuant to the Exchange, all of the
outstanding common shares of Finder's were exchanged for 4,064,206 shares of
Harbour. The transaction was regarded as a reverse merger whereby Harbour was
considered to be the accounting acquirer as it retained control of Finder's
after the Exchange. Certain shareholders of Finder's agreed to cancel 10,000
shares of redeemable preferred stock in connection with the Exchange. Harbour
also paid $300,000 in connection with this transaction. The fee is included in
other general and administrative expense during 2001.
Since Finder's balance sheet is insignificant, a pro-forma consolidated balance
sheet is not presented here.
NOTE 4 - INCOME TAXES
Harbour has incurred net losses and, therefore, has no tax liability. The net
deferred tax asset generated by the loss carry-forward has been fully reserved.
The cumulative net operating loss carry-forward is approximately $4,000,000 at
December 31, 2002, and will expire in the years from 2021 to 2022.
Deferred income taxes consist of the following at December 31:
2002 2001
---- ----
Long-term:
Deferred tax assets $ 1,360,000 $ 1,190,000
Valuation allowance (1,360,000) (1,190,000)
----------- -----------
$ - $ -
=========== ===========
NOTE 5 - SHAREHOLDER ADVANCES
Harbour has received advances from a shareholder totaling $407,552 as of
December 31, 2002. In March 2003, the advances were converted into common stock
and into a note payable for $350,000 bearing interest at 8%. The note is
unsecured and is due March 2004.
-------------
NOTE 6 - NOTES PAYABLE
In March 2002, Harbour entered into a loan agreement with Ocean Strategic
Holdings Ltd. and Turbo International Ltd. whereby Harbour received a 90 day
loan for $500,000 based on the following: (1) $150,000 upon execution and
delivery of the loan agreement, less $10,000 to be paid to the lenders'
attorneys; (2) $50,000 upon the lenders' and/or Harbour's receipt of all of the
transaction documents duly executed and delivered pursuant to the loan
agreement, less $5,000 to be paid to the lenders' attorneys; (3) 100,000 upon
Harbour's filing of its annual report on Form 10-KSB for the year ended December
31, 2001 and amendment to its report on Form 8-K dated December 5, 2001
containing all of the financial statements to be filed in connection there with,
less any expenses to be paid to lenders' attorneys; and (4) $200,000 upon the
lenders receipt of a copy of a written loan commitment to Harbour from a
reputable lending institution approved by the lenders, which approval shall not
be unreasonably withheld, for no less than $18,000,000, less $5,000 to be paid
to lenders' attorneys. Harbour was unable to receive a loan commitment in the
amount of $18,000,000 and received an aggregate of $240,000 in connection with
this loan.
In connection with the loan agreement, the lenders received a 10% interest in
the outstanding stock of The Bauer Windjammer Resort and Spa (Bahamas) Ltd., a
wholly-owned subsidiary of Bauer Capital Management, Limited which is a
wholly-owned subsidiary of Harbour. In addition, the lenders received an
aggregate of three year redeemable warrants to purchase 3,000,000 shares,
subject to adjustment as provided in the agreement, at an exercise price of $.20
per share. Ronald J. Bauer, Harbour's chief executive officer, pledged
17,312,500 shares of Harbour common stock held in the name of Fleming Financial
Holdings, Ltd. pursuant to a pledge and security agreement. In the event the
loan is not repaid in its entirety within 120 days from the date the loan
agreement was executed, the loans may be converted into 53,000,000 shares of
Harbour's common stock which might result in a change of control of Harbour.
The lenders have the right to loan up to $500,000 in four separate transactions
under substantially the same terms and conditions as the loan agreement. In
addition, the lenders have a first right of refusal to provide financing to
Harbour in future financings.
Harbour has made payments to Ocean Strategic Holdings Ltd. and Turbo
International Ltd. of approximately $190,000 to date, but owe $60,000 plus
interest and penalties. Harbour is currently delinquent with respect to
principal, interest and penalty payments. If Harbour does not repay these
amounts under acceptable terms to Ocean Strategic Holdings and Turbo
International, the operations of Harbour will likely be discontinued and current
management will likely be removed from office.
Harbour has a promissory note of $116,500 to an individual that is unsecured
with principal and interest due January 2003, bearing interest at 12%. The note
is past due at the date of this report.
Harbour has a promissory note of $50,000 to an individual that is unsecured. The
note is pas due as of December 31, 2002.
Harbour has a promissory note of $50,000 to an individual that is unsecured. The
note is past due as of December 31, 2002.
NOTE 7 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related parties consists of the following at December 31:
2002
--------
Promissory note to an officer and shareholder, secured by
300,000 shares of Harbour common stock, past due at
December 31, 2002 $ 14,000
Promissory note to a Director and shareholder, unsecured,
principal and interest due upon demand, bearing interest
at 10% 100,000
Promissory note to a Director and shareholder,
unsecured, principal and interest due upon demand, bearing
interest at 10% 150,000
Promissory note to a Director and shareholder, unsecured,
principal and interest due upon demand, bearing interest
at 10% 100,000
Promissory note to a Director and shareholder, unsecured,
principal and interest due upon demand, bearing interest
at 10% 37,000
Promissory note to a Director and shareholder, unsecured,
principal and interest due upon demand, bearing interest
at 10% 55,500
$456,500
========
NOTE 8 - SHAREHOLDERS DEFICIT
Common Stock:
Harbour is authorized to issue 200,000,000 common shares of stock at a par value
of $0.001 per share and 25,000,000 shares of $.001 par value preferred stock.
In March 2001, Harbour issued 28,600,000 shares of common stock to its founders
for services valued at $28,600 or the fair value of the services provided.
In April 2001, Harbour issued 900,000 shares for legal and consulting services
valued at $9,000 or the fair value of the services provided.
Between July and November 2001, Harbour issued 1,098,800 shares of common stock
for cash of $669,100.
In connection with the reverse merger (see Note 2), Harbour issued 4,064,206
shares of common stock.
In December 2001, Harbour issued 5,000,000 shares for consulting services valued
at $2,100,000 or the fair value of the services provided.
During 2002, Harbour issued 5,900,000 shares of common stock for cash of
$380,000.
During 2002, Harbour issued 22,150,567 shares of common stock for services
valued at the fair value of the services performed of $2,457,291.
During 2002, Harbour issued 1,066,667 shares of common stock for debt of
$522,500.
NOTE 9 - COMMITMENTS
Harbour leases its office facilities under a month to month operating lease for
$1,000 per month. Rent expense was $21,000 for the year ended December 31, 2002
and $227,316 for the period from March 23, 2001 (Inception) through December 31,
2001.
Effective April 2, 2001, Harbour entered into an employment agreement with
Ronald J. Bauer, its Chief Executive Officer, for two years at an annual salary
of $174,000 per year. In addition, Mr. Bauer receives $4,900 per month for a
residence in London as well as $4,900 per month for a car allowance, insurance
and gas. The agreement contains a severance clause for early termination in
which case Mr. Bauer will receive all remaining amounts due under the employment
agreement. Minimum amounts due under this employment agreement as $291,600 in
2002 and $72,900 in 2003.
In January 2003, Zaven Yaralian filed suit against Harbour, Ronald J. Bauer and
Jacques Fischer in the State of South Carolina, County of Beaufort, in the
Circuit Court, Case No. 03-CP-7-81. Zaven Yaralian entered into a consulting
agreement with Harbour to serve as its President and executed a subscription
agreement for the purchase of 2,000,000 shares of common stock in installments
of $50,000 for 400,000 shares of common stock. Pursuant to the consulting
agreement, Mr. Yaralian was to receive $10,000 per month for the first three
months of the agreement and then receive $20,000 per month. Harbour issued Mr.
Yaralian 400,000 shares in consideration for $50,000, and paid Mr. Yaralian
$10,000 for the first month of services to be preformed pursuant to the terms of
the consulting agreement. Mr. Yaralian's primary cause of action is breach of
contract and he is seeking damages pursuant to the consulting agreement. Due to
Mr. Yaralian's failure to provide services, Harbour does not believe it has any
obligations and it is vigorously defending this claim.
In February 2003, a lawsuit for breach of contract for attorneys fees was filed
styled as Richard O. Weed vs. Harbour Front Holdings, Inc., The Bauer
Partnership, Inc., The Bauer Partnership, Ltd., Ronald J. Bauer, and DOES 1
through 25 in the Superior Court of the State of California in Orange County,
Case No. 03CC03810. Mr. Weed is seeking damages of $41,239.06, plus interest and
attorneys fees. Harbour does not believe it owes Mr. Weed for services performed
in the amount of $41,239.06. Harbour has retained counsel and is vigorously
defending this claim.
In February 2003, a lawsuit for damages based on fraud and securities violations
was filed styled as Richard O. Weed vs. Harbour Front Holdings, Inc., The Bauer
Partnership, Inc., The Bauer Partnership, Ltd., Ronald J. Bauer, David M. Loev,
F. Bryson Farrill, Jacques Fischer, Joseph T. Bauer, Ed Tobin, Geoffrey Button,
Kevin Wallace, Pacific Stock Transfer Company, Malone & Bailey, PLLC and DOES 1
through 25 in the Superior Court of the State of California in Orange County,
Case No. 0300003887. Mr. Weed is the owner of 150,000 shares of Harbour's common
stock and he alleges that the market value of his shares has dropped
dramatically. Mr. Weed alleges a violation of Section 16(b) of the Securities
Exchange Act of 1934 seeking short-swing profits from Ronald J. Bauer. Mr. Weed
also seeks damages for a hot check in the amount of $4,310. Mr. Weed is seeking
$1,123,500 for his first cause of action, return of short swing profits for his
second cause of action, and $4,310 on his third cause of action. Mr. Weed is
also seeking prejudgment interest, costs and reasonable attorneys fees. Harbour
has retained counsel and is vigorously defending these causes of action. Mr.
Weed received the 150,000 shares of stock in consideration for services
performed and Harbour believes that it will settle this claim for a
substantially reduced amount.
NOTE 10 - SUBSEQUENT EVENTS
In March 2003, Harbour converted $442,500 of notes payable to a director and
$57,500 of advances to a director or $500,000 into 27,500,000 shares of common
stock.
In 2003 to date, Harbour issued 33,456,933 shares of common stock under various
agreements for consulting services.
In February 2003, Harbour sold 10,000,000 shares of common stock for $200,000.
In March 2003, Harbour issued 3,300,000 shares of its common stock to Ronald J.
Bauer, its former chief executive office for services performed.
The common shares outstanding after the above transactions are 143,533,894, not
including the 53,000,000 shares held in escrow securing the convertible note
payable.
During 2003, both the directors and the shareholders ratified the "2003 Stock
Option Plan". This plan has 18,000,000 shares of Harbour common stock reserved
for issuance. At December 31, 2002, no options have been granted pursuant to the
plan.
During 2003, all directors have resigned except for Ron Bauer. Harbour has
closed all of its bank accounts and is currently being funded by Mr. Ron Bauer.