SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2003
[ ] 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: 0-29049
Silverado Financial, Inc.
--------------------------------------------------------------------------------
(formerly Rhombic Corporation)
(Exact name of Registrant as specified in its charter)
Nevada 86-0824125
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1475 S. Bascom Avenue, Suite 210
Campbell, CA 95008
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 371-2301
--------------------------
(Registrant's telephone number, including area code)
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 [X] No [ ]
As of June 30, 2003, 12,720,884 shares of the registrant's common stock, $0.01
par value per share, were issued and outstanding.
1
SILVERADO FINANCIAL, INC.
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 2003 .......................... 3
Consolidated Statements of Operation for the six months
and three months ended June 30, 2003 and 2002 ........................... 4
Consolidated Statements of Changes in Stockholders' Equity for
the six months and three months ended June 30, 2003 and 2002 ............ 5
Consolidated Statements of Cash Flow for the six months and
three months ended June 30, 2003 and 2002 ........................... 6 - 7
Notes to Financial Statements ........................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................... 10
Item 3. Controls and Procedures ............................................. 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................................... 14
Item 2. Changes in Securities ............................................... 14
Item 3. Defaults Upon Senior Securities ..................................... 15
Item 4. Submissions of Matters to a Vote of Security Holders ................ 15
Item 5. Other Information ................................................... 15
Item 6. Exhibits and Reports on Form 8-K ................................... 15
Signatures .................................................................. 15
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SILVERADO FINANCIAL, INC.
(formerly Rhombic Corporation)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2003
(unaudited)
ASSETS
------
CURRENT ASSETS
Cash $ 1,529
Receivables 14,377
Marketable securities held for sale 17,775
-------------------------
Total Current Assets 33,681
OTHER ASSETS
Intellectual property 1,398,020
Furniture, fixtures & equipment-net 131,446
Other 6,900
-------------------------
Total assets $1,570,047
=========================
LIABILITIES
CURRENT -----------
Accounts Payable $ 141,115
Accrued interest 14,583
Due to affiliates 45,000
-------------------------
200,698
OTHER LIABILITIES
Convertible notes payable 26,000
Note payable 278,500
-------------------------
Total liabilities 505,198
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
5,000,000 shares authorized, none issued
Common stock, $.001 par value, 20,000,000 shares 12,721
authorized, 12,720,884 issued and outstanding
Additional paid-in capital 10,097,246
(Deficit) accumulated during the development stage (9,045,118)
-------------------------
Total stockholders' equity 1,064,849
-------------------------
Total liabilities and stockholders' equity $1,570,047
=========================
See accompanying notes to these consolidated financial statements.
3
SILVERADO FINANCIAL, INC.
(formerly Rhombic Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATION
(unaudited)
Cumulative from
For the 6 months ended For the 3 months ended Nov. 21, 1994
June 30,2003 June 30,2002 June 30,2003 June 30,2002 June 30,2003
------------------------------- ----------------------------------------------------------
Revenues
Commission & processing revenue $17,825 $0 $17,825 $0 $17,825
Cost of sales (9,181) 0 (9,181) 0 (9,181)
--------------------------------------------------------------------------------------------
Gross profit 8,644 0 8,644 0 8,644
--------------------------------------------------------------------------------------------
Operating expenses
Research and development 0 (9,183) 0 (9,183) 688,563
Impairment on intellectual property 0 0 0 0 2,168,038
Consulting 171,418 0 50,118 0 3,416,542
General and administrative 236,648 39,080 169,987 (2,912) 2,698,303
Depreciation 4,729 0 4,570 0 4,729
------------------------------------------------------------------ -----------------------
Total operating expenses 412,795 29,897 224,675 (12,095) 8,976,175
------------------------------------------------------------------ -----------------------
Other Income and Expense
Interest income 9 9 6,963
Interest (expense) (12,294) (120) (6,226) (120) (19,114)
------------------------------------------------------------------ -----------------------
Total non-operating income (12,285) (120) (6,217) (120) (12,151)
------------------------------------------------------------------ -----------------------
Net (Loss) from operations (416,436) (30,017) (222,248) 11,975 (8,979,682)
Other revenues and expenses
(Loss) gain on sale of investments (6,201) 0 153 0 (78,665)
Licensing revenue from
intellectual property 0 0 0 0 13,229
------------------------------------------------------------------ -----------------------
Net (Loss) ($422,637) ($30,017) ($222,095) $11,975 ($9,045,118)
================================================================== =======================
Net (Loss) per share:
Basic and Diluted ($0.04) ($0.00) ($0.02) $0.00
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic & Diluted 11,178,875 28,704,241 11,356,524 28,711,360
=============================== ================================
See accompanying notes to these consolidated financial statements.
4
SILVERADO FINANCIAL, INC.
(formerly Rhombic Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
June 30, 2003
(Unaudited)
Net
(Deficit) Unrealized
Accumulated Holding loss
Common Stock Additional During on available
--------------------------- Paid-In Development for sale
Shares Amount Capital Stage securities Total
------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 2001 28,697,042 $28,697 $8,452,629 ($8,219,508) ($7,476) $254,342
Shares issued for services 1,302,958 1,303 53,895 55,198
Net loss for quarter ended June 30, 2002 (30,016) (30,016)
------------- ------------- ------------- ------------- ------------- -------------
30,000,000 $30,000 $8,506,524 ($8,249,524) ($7,476) $279,524
============= ============= ============= ============= ============= =============
Balance at December 31, 2002 10,400,000 $10,400 $9,616,027 ($8,622,481) $7,399 $1,011,345
Shares issued for services 364,785 365 86,135 86,500
Net unrealized holding (loss) on
securities available held for sale (7,399) (7,399)
Shares issued for payables 335,004 $335 $124,640 124,975
Shares issued for services 725,216 725 111,294 112,019
Shares issued for Realty Capital 729,452 730 126,924 127,654
Shares issued for debt 228,372 228 48,848 49,076
Shares issued for rounding 55 0
Cancellation of shares from sale of intellectual 0
property (62,000) (62) (16,622) (16,684)
Net unrealized holding (loss) on 0
securities available held for sale 0
Net loss for quarter ended June 30, 2003 (422,637) (422,637)
------------- ------------- ------------- ------------- ------------- -------------
$ 12,720,884 $ 12,721 $10,097,246 $(9,045,118) $ 0 $ 1,064,849
============= ============= ============= ============= ============= =============
See accompanying notes to these consolidated financial statements.
5
SILVERADO FINANCIAL, INC.
(formerly Rhombic Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
June 30, 2003
(Unaudited)
For the six months ended For the three months ended Cumulative from
June 30, June 30, November 21, 1994
--------------------------- -------------------------- (Inception ) to
2003 2002 2003 2002 June 30, 2003
------------- ------------- ------------- -------------------------------
OPERATING ACTIVITIES
Net (loss) income for the period ($422,637) $(30,017) ($222,095) $ 11,975 ($9,045,118)
Adjustments to reconcile net
cash used by operations:
Depreciation expense 4,729 4,570 4,729
Write down on intellectual property and patents 0 2,086,837
Loss (gain) on sale of marketable securities 6,201 (153) 78,665
Rockford shares issued for services 0 32,275
Common stock issued for services 198,519 55,198 112,019 55,198 2,174,201
Common stock issued for payables and debt 174,051 174,051 174,051
Common stock issued for Financial Software Inc. 0 1,089,903
Common stock issued for Realty Capital Corporation 127,654 127,654 127,654
Fair value of options granted 0 2,082,113
(Increase)/decrease in accounts receivable (1,750) 17,427 (14,377)
(Increase)/decrease in prepaid expenses 0 300 0
(Increase)/decrease in furniture, fixtures & equipment (134,271) (134,271) (134,271)
(Increase)/decrease in other assets 0 (8,803)
Increase/(decrease) in accounts payable 33,206 3,784 (93,403) (5,517) 142,214
Increase/(decrease) in accrued interest 11,491 5,425 14,583
Increase/(decrease) in due to affiliates (10,000) (21,263) 3,000 (51,374) 45,000
Increase/(decrease) in convertible notes payable 0 0 26,000
Increase/(decrease) in note payable 3,500 3,500 278,500
------------- ------------- ------------- -------------------------------
Net Cash (Used) by Operating Activities (9,307) 8,002 (2,276) 10,282 (845,844)
FINANCING ACTIVITIES
Proceeds from private placements 1,347,830
Proceeds from exercise of stock options 1,006,750
Proceeds from conversion of debenture 200,000
------------- ------------- ------------- -------------------------------
Cash provided from financing activities 0 0 0 0 2,554,580
------------- ------------- ------------- -------------------------------
6
CONSOLIDATED STATEMENTS OF CASH FLOW - Continued
INVESTING ACTIVITIES
Cost of patents (168,430)
Proceeds from sale of marketable securities 10,275 2,854 103,774
Acquisition of software system (1,398,020)
Investment in Rockford Technologies (207,756)
Investment in marketable securities (36,775)
------------- ------------- ------------- -------------------------------
Cash (used) in investment activities 10,275 0 2,854 0 (1,707,207)
------------- ------------- ------------- -------------------------------
Increase (decrease) in cash 968 8,002 578 10,282 1,529
Cash at beginning of period 561 9,100 951 6,820
------------- ------------- ------------- -------------------------------
Cash at end of period $ 1,529 $ 17,102 $1,529 $ 17,102 $ 1,529
============= ============= =============================================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Cancellation of 62,000 common shares in sale of
intellectual property and Rockford shares $(16,684) $0 $0 $0 $(16,684)
============= ============= =============================================
Issuance of common stock for licensing agreements
and intellectual property $0 $0 $0 $0 $2,005,350
============= ============= =============================================
See accompanying notes to these consolidated financial statements.
7
SILVERADO FINANCIAL, INC.
(formerly Rhombic Corporation)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
The unaudited financial statements included herein were prepared from the
records of the Company in accordance with Generally Accepted Accounting
Principles. These financial statements reflect all adjustments which are, in the
opinion of management, necessary to provide a fair statement of the results of
operations and financial position for the interim periods. Such financial
statements generally conform to the presentation reflected in the Company's
Forms 10-QSB and 10-KSB filed under its previous name of Rhombic Corporation
with the Securities and Exchange Commission for the year ended December 31,
2002. The current interim period reported herein should be read in conjunction
with the Company's Form 10-KSB subject to independent audit at the end of the
year.
A majority of the shareholders of record on February 10, 2003 voted to amend the
Articles of Incorporation of the Registrant to change the name of the Company to
Silverado Financial, Inc. and to change the authorized common shares to
100,000,000 and the authorized preferred shares to 5,000,000 as described in an
information statement filed on Form 14C with the Securities and Exchange
Commission on February 11, 2003. The Registrant filed with the Secretary of
State of Nevada a Certificate of Amended Articles of Incorporation on March 21,
2003.
At the beginning of business on April 29, 2003 the Company changed its trading
name and trading symbol to "SLVO" on the OTCBB and decreased the number of
issued and outstanding shares of common stock by issuing one new share for each
five shares held. This action was done in conjunction with the shareholder
approval of February 10, 2003 to amend the Articles of Incorporation.
On May 9, 2003, in a non-arms length transaction with John E. Hartman, the
company's president, the company issued 729,452 shares of restricted common
stock at a purchase price of $0.175 per share, which was based on the prior five
days average trading price, in exchange for all of the outstanding shares of
Realty Capital Corporation. The purchase price of Realty Capital Corporation was
$127,654 and was the net asset value of Realty Capital Corporation, as
determined by an independent, third party valuation. The shares were issued
under Section 4(2) of the 1933 Securities Act.
As shown in the accompanying financial statements, the Company had a net loss of
$222,095 for the three months ended June 30, 2003. It has incurred an
accumulated deficit of $9,045,118 and has a deficit in working capital of
approximately $167,017 as of June 30, 2003. The ability of the Company to
continue as a going concern is dependent on obtaining additional capital and
financing and operating at a profitable level. The Company intends to seek
additional capital either through debt or equity offerings, or a combination
thereof, and to seek acquisitions which will generate sales volume with
operating margins sufficient to achieve profitability. The financial statements
do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern. The independent auditor's report on the
financial statements for the year ended December 31, 2002 expressed substantial
doubt about the ability of the Company to continue as a going-concern. The
results of operations for the period ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2003.
8
MARKETABLE SECURITIES AVAILALE FOR SALE
The Company has the following investments at June 30, 2003:
June 30, 2003
-------------------------
Estimated
Cost Fair Value
---- ----------
AVAILABLE FOR SALE SECURITIES
Showintel Networks, Inc. $17,775 $17,775
------- -------
Totals $17,775 $17,775
======= =======
Statements of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities, ("SFAS 115") requires that all
applicable investments be classified as trading securities, available for sale
securities or held to maturity securities. The Company did not have any
investments classified as trading securities or held-to-maturity securities. The
statement further requires that available for sale securities be reported at
fair value, with unrealized gains and losses excluded from earnings but reported
in a separate component of shareholders' equity (net of the effect of income
taxes) until they are sold. At the time of sale, any gains or losses will be
recognized as a component of operating results.
During the second quarter of 2003, the Company sold 30,000 shares of Showintel
Networks, Inc. and all Rockford Technologies, Inc. shares and recorded a net
gain of $153.
At June 30, 2003, the estimated fair value of the 197,500 shares of Showintel
Networks, Inc. held by the Company was estimated based on the quoted trading
price of the security at June 30, 2003. The value of the Showintel Networks,
Inc. common stock is recorded at its fair market value as of June 30, 2003.
STOCKHOLDERS' EQUITY
During the prior quarter ended March 31, 2003 the company issued 364,785 for
services.
On May 9, 2003, in a non-arms length transaction with John E. Hartman, the
company's president, the company issued 729,452 shares of restricted common
stock at a purchase price of $0.175 per share, which was based on the prior five
days average trading price, in exchange for all of the outstanding shares of
Realty Capital Corporation. The purchase price of Realty Capital Corporation was
$127,654 and was the net asset value of Realty Capital Corporation, as
determined by an independent, third party valuation. The shares were issued
under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, in a non-arms length transaction with
Robert George Krushnisky, a director of the company, the company received 62,000
shares of its own common stock together with cancellation of an outstanding debt
in the amount of $1,100 in exchange for all of the scientific intellectual
property assets acquired prior to the acquisition of FSI in November of 2002 as
well as all shares of Rockford Technology held for sale by the company.
During the quarter ended June 30, 2003, in a non-arms length transaction with
Ilya "Sean" Radetich, a director of the company, the company issued 228,372
9
shares of restricted common stock in cancellation of outstanding debt in the
amount of $49,076 at $0.215 per share which was based on the prior five days
average trading price at the time of issuance. The shares were issued under
Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 111,577 restricted
common shares to the officers of the Company for accrued compensation of
$30,000. The shares were issued under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 4,444 restricted
common shares to two directors of the Company at a deemed value of $3,000 as
compensation for the attendance of six board meetings held during the quarter.
The shares were issued under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 300,000 restricted
common shares to an individual for investor relations services valued at
$60,000. The shares were issued under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 223,427 unrestricted
shares under its S-8 2003 Employees and Compensation Plan to various individuals
at a deemed value of $94,975 for various consulting services rendered during the
prior quarter ended March 31, 2003 relating to matters of corporate governance,
software consulting, legal and other services.
During the quarter ended June 30, 2003, the Company issued 420,772 unrestricted
shares to two consultants under its S-8 2003 Employees and Compensation Plan at
a deemed value of $49,019 for various consulting services rendered during the
current quarter ended June, 2003 relating to matters of corporate governance,
software consulting, legal and other services.
During the quarter ended June 30, 2003, the company issued 55 shares for
purposes of fractional share adjustments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION,
STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE
STRATEGIES THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS",
"BELIEVES", OR SIMILAR LANGUAGE. SUCH FORWARD-LOOKING STATEMENTS INCLUDE, BUT
ARE NOT LIMITED TO, THE SEEKING OF REVENUE PRODUCING ACQUISITIONS, THE
DEVELOPMENT PLANS FOR THE TECHNOLOGIES OF THE COMPANY, TRENDS IN THE RESULTS OF
THE COMPANY'S DEVELOPMENT, ANTICIPATED DEVELOPMENT PLANS, OPERATING EXPENSES AND
THE COMPANY'S ANTICIPATED CAPITAL REQUIREMENTS AND CAPITAL RESOURCES. THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS, UNCERTAINTIES AND OTHER FACTORS. ALL
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION
AVAILABLE TO THE COMPANY ON THE DATE HEREOF AND SPEAK ONLY AS OF THE DATE
HEREOF. THE FACTORS DISCUSSED BELOW UNDER "FORWARD-LOOKING STATEMENTS" AND
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-QSB ARE AMONG THOSE FACTORS THAT
IN SOME CASES HAVE AFFECTED THE COMPANY'S RESULTS AND COULD CAUSE THE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS. IN ADDITION, THE FOLLOWING DISCUSSION IS INTENDED TO PROVIDE AN
ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND PLAN OF OPERATION AND SHOULD
BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND THE NOTES
THERETO.
10
GENERAL:
Since its inception during 1994 as Rhombic Corporation, the Company has been in
the development stage and its efforts have been primarily focused on the
acquisition of the rights to innovative technologies that could ultimately be
developed into numerous applications. During the years of 1999 through 2001 it
began to focus on the research and development of its portfolio of acquired
technologies and to develop specific applications in order to make them
commercially marketable. The business strategy of the Company was to develop a
specific application from a technology, then commence or contract for a
marketing effort for the developed application that would generate sales.
In 2002 the Company concluded that it could not raise capital to pursue its
planned efforts for its scientific technology and began seeking potential
acquisition candidates. During the fourth quarter of 2002 the Company appointed
John Hartman as Chief Executive Officer and director and Sean Radetich as a
director.
On November 11, 2002, the board of directors of the Registrant approved the
issuance of 22,000,000 restricted shares of its common stock for the acquisition
of all of the issued and outstanding shares of Financial Software, Inc. ("FSI").
The transaction was closed on November 19, 2002. The value of the consideration
in the exchange was determined at arms length by FSI and the registrant. FSI was
in the financial services technology and publishing industry.
A majority of the shareholders of record on February 10, 2003 voted to amend the
Articles of Incorporation of the Registrant to change the name of the Company to
Silverado Financial, Inc. and to change the authorized common shares to
100,000,000 and the authorized preferred shares to 5,000,000 as described in an
information statement filed on Form 14C with the Securities and Exchange
Commission on February 11, 2003. The Registrant filed with the Secretary of
State of Nevada a Certificate of Amended Articles of Incorporation on March 21,
2003.
It is the intention of Silverado Financial, Inc. "Silverado" to become a
multifaceted technology and real estate services company. To achieve its new
business plan, Rhombic will acquire or modify its current software technology to
target the real estate lending markets and to serve as a parent to companies
that would provide financial publishing, mortgage brokerage and mortgage banking
real estate services to customers through a developed software application.
Silverado is currently considering the acquisition of firms or the establishment
of business lines in the mortgage brokerage, investment advisory, insurance
brokerage and commercial and residential mortgage banking sectors.
On May 9, 2003, in a non-arms length transaction with John E. Hartman, the
company's president, the company issued 729,452 shares of restricted common
stock at a purchase price of $0.175 per share, which was based on the prior five
days average trading price, in exchange for all of the outstanding shares of
Realty Capital Corporation. The purchase price of Realty Capital Corporation was
$127,654 and was the net asset value of Realty Capital Corporation, as
determined by an independent, third party valuation. The shares were issued
under Section 4(2) of the 1933 Securities Act.
The competition in the technology proliferation and transfer market is highly
intense and is based on product and technology recognition and acceptance,
novelty and marketability of an invention, price, and sales expertise. The new
management of the Company is reviewing its intellectual property and patents and
considering seeing potential buyers.
11
The Company does not have any employees and uses consultants for matters
pertaining to coordinating technology development and administration. The
Company may hire employees during the next twelve months depending upon its
success in developing prototype applications for sale and financing more
development.
RESULTS OF OPERATIONS:
Comparison of Quarter Ended June 30, 2003 and 2002
The Company generated revenues of $17,825 from operations during the second
quarter of 2003. This marks the first time the company has generated any
revenues since inception. Management's objective during the second quarter of
2003 was to acquire an operating company, to begin generating revenue and to
continue to reform its capital structure to attract investment capital and
attract potential acquisitions.
During the second quarter of 2003 the Company incurred $169,987 in general and
administrative expenses which was comprised of accrued compensation expense of
$40,000 to its officers and $129,987 of office expenses and out of pocket costs
involved with the restating the Company's capital structure.
The Company incurred $50,118 in consulting fees.
During the second quarter of 2003, the Company sold 30,000 shares of Showintel
Networks, Inc. and all of its shares of Rockford Technologies, Inc and recorded
a net gain of $153.
LIQUIDITY AND CAPITAL RESOURCES:
At June 30, 2002 the Company had $17,102 in cash and $31,612 in current
payables. At June 30, 2003 the Company had approximately $1,529 in cash, $14,377
in receivables, $and $17,775 in marketable securities and approximately $200,698
in current payables.
During the second quarter of 2003, the Company sold shares of Showintel
Networks, Inc. and Rockford Technologies, Inc. and received $2,854in cash which
was used added to its general funds.
The Company decreased its accounts payable by $93,403 due to accrued
compensation expense of $40,000 to its officers and approximately $53,403 in
consulting fees.
The Company incurred $6,226 of interest expense on its debt of $304,500 of which
$5,425 was incurred for the software of FSI and $801 was related to loans for
cash in a private placement from accredited investors.
On October 11, 2002, the Company began a private placement to accredited
investors for $250,000. The terms of the offering are a 10% annual interest
bearing note that can be converted by the holder into restricted common shares
at $.40 with a warrant to buy an equal amount of shares at $.45. The term of the
note is one-year from the subscription date and the registrant has the right to
extend the note for an additional year. The term of the warrant is for three
years from the subscription date. As August 1, 2003 the company has subscribed
$26,000 under this private placement. The company has paid $1,600 in commissions
in connection with the subscriptions and has received $24,400 in net proceeds.
However, there is no assurance that it will be able to generate capital
sufficient to meet these long-term needs. If it can't meet these requirements,
it may not be able to continue as a going concern.
12
The Company believes that it has sufficient capital and resources to support
operations for the next twelve months. It anticipates that the capital
requirements for the balance of the period ending December 31, 2003 will require
that additional cash be raised from external sources. It believes that this
requirement will be met by cash equity investments.
SUBSEQUENT EVENTS:
None.
FORWARD LOOKING STATEMENTS:
Certain statements made in this report on Form 10-QSB are "forward looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements of the
Company to be materially different from any future results implied by such
forward looking statements. Although the Company believes that the expectations
reflected in such forward looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the forward looking statements. Certain factors that might cause such a
difference might include: the failure of the registrants efforts to secure
additional equity capital, the inability to successfully execute the revised
business plan, the success or failure to implement the management to operate
possible acquisitions profitably, and the registrant's planned marketing, public
relations and promotional campaigns.
RISK FACTORS:
The Company continues to be subject to a number of risk factors, including the
uncertainty of developing a commercial application for its intellectual
property, the ability of management to successfully acquire and manage revenue
generating operating companies profitably, the need for additional funds,
competition, technological obsolescence and the difficulties faced by
development stage companies in general.
ITEM 3: CONTROLS AND PROCEDURES
a) Disclosure controls and procedures. Within 90 days before filing this
report, an evaluation was performed under the supervision and with the
participation of the Company's management, including the CEO and CFO, of
the effectiveness of the design and operation of its disclosure controls
and procedures. Based on that evaluation, the Company's management,
including the CEO and CFO, concluded that the Company's disclosure controls
and procedures were effective as of the date of the evaluation.
(b) Internal controls. Since the date of the evaluation described above, there
have not been any significant changes in the Company's internal accounting
controls or in other factors that could significantly affect those
controls.
13
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company. The Company is unaware of
any proceedings contemplated against it.
ITEM 2. CHANGES IN SECURITIES
During the prior quarter ended March 31, 2003 the company issued 364,785 for
services.
On May 9, 2003, in a non-arms length transaction with John E. Hartman, the
company's president, the company issued 729,452 shares of restricted common
stock at a purchase price of $0.175 per share, which was based on the prior five
days average trading price, in exchange for all of the outstanding shares of
Realty Capital Corporation. The purchase price of Realty Capital Corporation was
$127,654 and was the net asset value of Realty Capital Corporation, as
determined by an independent, third party valuation. The shares were issued
under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, in a non-arms length transaction with
Robert George Krushnisky, a director of the company, the company received 62,000
shares of its own common stock together with cancellation of an outstanding debt
in the amount of $1,100 in exchange for all of the scientific intellectual
property assets acquired prior to the acquisition of FSI in November of 2002 as
well as all shares of Rockford Technology held for sale by the company.
During the quarter ended June 30, 2003, in a non-arms length transaction with
Ilya "Sean" Radetich, a director of the company, the company issued 228,372
shares of restricted common stock in cancellation of outstanding debt in the
amount of $49,076 at $0.215 per share which was based on the prior five days
average trading price at the time of issuance. The shares were issued under
Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 111,577 restricted
common shares to the officers of the Company for accrued compensation of
$30,000. The shares were issued under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 4,444 restricted
common shares to two directors of the Company at a deemed value of $3,000 as
compensation for the attendance of six board meetings held during the quarter.
The shares were issued under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 300,000 restricted
common shares to an individual for investor relations services valued at
$60,000. The shares were issued under Section 4(2) of the 1933 Securities Act.
During the quarter ended June 30, 2003, the Company issued 223,427 unrestricted
shares under its S-8 2003 Employees and Compensation Plan to various individuals
at a deemed value of $94,975 for various consulting services rendered during the
prior quarter ended March 31, 2003 relating to matters of corporate governance,
software consulting, legal and other services.
During the quarter ended June 30, 2003, the Company issued 420,772 unrestricted
shares to two consultants under its S-8 2003 Employees and Compensation Plan at
a deemed value of $49,019 for various consulting services rendered during the
current quarter ended June, 2003 relating to matters of corporate governance,
software consulting, legal and other services.
14
During the quarter ended June 30, 2003, the company issued 55 shares for
purposes of fractional share adjustments.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Quarterly Certification of Chief Executive Officer pursuant to Section
302, of the Sarbanes-Oxley Act of 2002.
31.2 Quarterly Certification of Chief Financial Officer pursuant to Section
302, of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to the 18 U.S.C section 1353, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to the 18 U.S.C section 1353, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SILVERADO FINANCIAL, INC.
/s/ John E. Hartman
-------------------------------------
Date: August 19, 2003 By: John E. Hartman
President and Chief Executive Officer
/s/ Albert A. Golusin
-------------------------------------
Date: August 19, 2003 By: Albert A. Golusin
Chief Financial Officer
15
Exhibit 31.1
QUARTERLY CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Hartman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Silverado Financial,
Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officer 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 quarterly
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 quarterly report (the "Evaluation Date"); and
c. presented in this quarterly 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 officer 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; and
6. The registrant's other certifying officer and I have indicated in this
quarterly 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.
IN WITNESS WHEREOF, the undersigned has executed this certification as of the
19th day of August, 2003.
/s/ John Hartman
-----------------------------
Chief Executive Officer
16
Exhibit 31.2
QUARTERLY CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Albert Golusin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Silverado Financial,
Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officer 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 quarterly
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 quarterly report (the "Evaluation Date"); and
c. presented in this quarterly 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 officer 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; and
6. The registrant's other certifying officer and I have indicated in this
quarterly 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.
IN WITNESS WHEREOF, the undersigned has executed this certification as of the
19th day of August, 2003.
/s/ Albert Golusin
-----------------------------
Chief Financial Officer
17
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Rhombic Corporation (the "Company")
on Form 10-QSB for the period ending June 30, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, John Hartman,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
(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.
IN WITNESS WHEREOF, the undersigned has executed this certification as of the
19th day of August, 2003.
/s/ John Hartman
-----------------------------
Chief Executive Officer
18
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Silverado Financial, Inc. (the
"Company") on Form 10-QSB for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Albert
Golusin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
(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.
IN WITNESS WHEREOF, the undersigned has executed this certification as of the
19th day of August 2003.
/s/ Albert Golusin
-----------------------------
Chief Financial Office
19