UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 2006
Commission File No. 0-23965
ENTHRUST FINANCIAL SERVICES, INC.
----------------
(Name of Small Business Issuer in its Charter)
Delaware 84-1374481
------------------------------ ------------------------------
State or other jurisdiction of I.R.S. Employer Identification
incorporation or organization Number
47 School Avenue
Chatham, New Jersey 07928
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Address of principal executive office Zip Code
Issuer's telephone number: (973) 635-4047
ENTRUST FINANCIAL SERVICES, INC.
(Former name, former address and former fiscal year,
if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT
COMMON STOCK, $0.001 PAR VALUE
------------------------------
(Title of Class)
Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. | |
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No | |
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No | |
For the year ended December 31, 2006, the issuer had no revenues.
As of February 5, 2007, 2,057,771 shares of the issuer's common stock
were outstanding. The aggregate market value of the common stock of the issuer
held by non-affiliates of the issuer (based upon the closing price on the Nasdaq
OTC Bulletin Board of $0.51 on February 5, 2007) was approximately $76,821.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format (Check One): Yes | | No |X|
ENTHRUST FINANCIAL SERVICES, INC.
FORM 10-KSB
PART I
Item 1. Business...................................................................................2
Item 2. Properties................................................................................10
Item 3. Legal Proceedings.........................................................................11
Item 4. Submission of Matters to a Vote of Security Holders.......................................11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters..................................11
Item 6. Plan of Operation.........................................................................12
Item 7. Financial Statements......................................................................14
Item 8. Change in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................................................14
Item 8A. Controls And Procedures...................................................................15
Item 8B. Other Information.........................................................................15
PART III
Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance With Section 16(a) of the Exchange Act.............................15
Item 10. Executive Compensation....................................................................17
Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters...............................................................17
Item 12. Certain Relationships and Related Transactions, and Director Independence.................18
Item 13. Exhibits..................................................................................19
Item 14. Principal Accountant Fees and Services....................................................19
FORWARD LOOKING STATEMENT INFORMATION
CERTAIN STATEMENTS MADE IN THIS ANNUAL REPORT ON FORM 10-KSB ARE
"FORWARD-LOOKING STATEMENTS" REGARDING THE PLANS AND OBJECTIVES OF MANAGEMENT
FOR FUTURE OPERATIONS. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE
OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT EXPECTATIONS
THAT INVOLVE NUMEROUS RISKS AND UNCERTAINTIES. OUR PLANS AND OBJECTIVES ARE
BASED, IN PART, ON ASSUMPTIONS INVOLVING JUDGMENTS WITH RESPECT TO, AMONG OTHER
THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS AND FUTURE BUSINESS
DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND
MANY OF WHICH ARE BEYOND OUR CONTROL. ALTHOUGH WE BELIEVE THAT OUR ASSUMPTIONS
UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS
COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT WILL PROVE TO BE ACCURATE. IN
LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING
STATEMENTS INCLUDED HEREIN PARTICULARLY IN VIEW OF THE CURRENT STATE OF OUR
OPERATIONS, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A
STATEMENT BY US OR ANY OTHER PERSON THAT OUR OBJECTIVES AND PLANS WILL BE
ACHIEVED. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE
NOT LIMITED TO, THE FACTORS SET FORTH HEREIN UNDER THE HEADINGS "BUSINESS,"
"PLAN OF OPERATION" AND "RISK FACTORS". WE UNDERTAKE NO OBLIGATION TO REVISE OR
UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON.
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PART I
ITEM 1. BUSINESS.
We were organized on November 8, 1996 under the laws of the State of Colorado
initially as "Centennial Banc Share Corporation". We subsequently changed our
name to "Entrust Financial Services, Inc." on April 6, 2001 ("Entrust
Colorado"). On December 4, 2006, Entrust Colorado's Board of Directors approved
the merger of Entrust Colorado with and into Enthrust Financial Services, Inc.
("EFS" or the "Company"), a corporation organized on December 20, 2006 under the
laws of the State of Delaware solely for the purpose of the merger.
Effective January 11, 2007, Entrust Colorado was merged with and into EFS which
became the surviving corporation (the "Delaware Merger"). Every issued and
outstanding share of Entrust Colorado common stock was automatically exchanged
into one share of EFS common stock and our current authorized capital structure
consists of 100,000,000 shares of common stock, par value $0.001 per share, and
1,000,000 shares of blank check preferred stock, par value $0.001 per share. In
conjunction with the Delaware Merger, our name changed to Enthrust Financial
Services, Inc.
Effective September 18, 2006, Entrust Colorado completed a one-for twenty eight
reverse split of its issued and outstanding shares of common stock. As a result,
the number of issued and outstanding shares of Entrust Colorado common stock was
reduced from 57,612,295 to 2,057,771 shares (the "Reverse Split"). Unless
otherwise stated, all share and per share information in the financial
statements and description below is presented as if the Reverse Split and
Delaware Merger took place at the beginning of all periods presented.
We were initially formed for the purpose of developing and maintaining a
mortgage brokerage business. In April 1999, we acquired Entrust Mortgage, Inc.,
a mortgage banking business which became our wholly-owned subsidiary and was our
primary business until July 31, 2005 ("Entrust Mortgage"). Entrust Mortgage
engaged primarily in the origination and wholesale purchase of non-conforming
residential mortgage loans in thirty-eight states.
On July 31, 2005, Entrust Mortgage was sold to BBSB, LLC in exchange for the
cancellation of all obligations owed by us and Entrust Mortgage to BBSB and the
assumption of certain of our third party obligations (the "Entrust Mortgage
Sale").
The Company's stockholders did not receive any consideration in the Entrust
Mortgage Sale, but stockholders of record on July 25, 2005, received a one time
aggregate dividend from the Entrust Stock Sale (as described below) of $400,000,
or approximately $0.153 per share (pre-split) The remaining $100,000 of the
consideration paid by the Entrust Stock Purchasers (as described below) was used
to satisfy or reserve for the Company's liabilities and to pay the expenses
related to the Entrust Stock Sale. As of August 6, 2005, the Company's
headquarters was relocated to Chatham, New Jersey.
2
Following the Entrust Mortgage Sale, we had no operations. Since August 1, 2005,
the Company's purpose has been to serve as a vehicle to acquire an operating
business and is currently considered a "shell" company inasmuch as the Company
is not generating revenues, does not own an operating business, and has no
specific plan other than to engage in a merger or acquisition transaction with a
yet-to-be identified company or business. The Company has no employees and no
material assets.
On August 5, 2005, pursuant to a Common Stock Purchase Agreement entered into on
May 12, 2005, the Company sold, in a private placement transaction, 1,767,858
shares of its common stock to R&R Biotech Partners, LLC and Moyo Partners, LLC
(the "Entrust Stock Purchasers") in exchange for aggregate gross proceeds to the
Company of $500,000 (the "Entrust Stock Sale"). Effective upon the closing of
the Entrust Stock Sale, Arnold P. Kling joined the Company as its president and
sole director and Kirk M. Warshaw joined the Company as its chief financial
officer and secretary.
Because of the foregoing circumstances, all of our activities that occurred
prior to July 31, 2005 have been accounted for as Discontinued Operations. As
such, all of the prior activity has been shown in our financial statements as
one line item that is labeled "Income (Loss) from Discontinued Operations, net
of taxes." Our activities since July 31, 2005 are shown in the income statement
under the section labeled "Loss from Continuing Operations." These amounts are
for expenses incurred since July 31, 2005 and are of the nature we expect to
incur in the future, whereas the Income (loss) from Discontinued Operations are
from activities we are no longer engaged in.
We currently have no definitive agreements or understandings with any
prospective business combination candidates and there are no assurances that we
will find a suitable business with which to combine. The implementation of our
business objectives is wholly contingent upon a business combination and/or the
sale of our securities. We intend to utilize the proceeds of any offering, any
sales of equity securities or debt securities, bank and other borrowings or a
combination of those sources to effect a business combination with a target
business which we believe has significant growth potential. While we may, under
certain circumstances, seek to effect business combinations with more than one
target business, unless additional financing is obtained, we will not have
sufficient proceeds remaining after an initial business combination to undertake
additional business combinations.
A common reason for a target company to enter into a merger with a shell company
is the desire to establish a public trading market for its shares. Such a
company would hope to avoid the perceived adverse consequences of undertaking a
public offering itself, such as the time delays and significant expenses
incurred to comply with the various federal and state securities law that
regulate initial public offerings.
As a result of our limited resources, unless and until additional financing is
obtained we expect to have sufficient proceeds to effect only a single business
combination. Accordingly, the prospects for our success will be entirely
dependent upon the future performance of a single business. Unlike certain
entities that have the resources to consummate several business combinations or
entities operating in multiple industries or
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multiple segments of a single industry, we do not expect to have the resources
to diversify our operations or benefit from the possible spreading of risks or
offsetting of losses. A target business may be dependent upon the development or
market acceptance of a single or limited number of products, processes or
services, in which case there will be an even higher risk that the target
business will not prove to be commercially viable.
Our two officers are only required to devote a small portion of their time (less
than 10%) to our affairs, and on a part-time or as-needed basis. Our officers
may be entitled to receive compensation from a target company they identify or
provide services to in connection with a business combination. We expect to use
outside consultants, advisors, attorneys and accountants as necessary. We do not
anticipate hiring any full-time employees so long as we are seeking and
evaluating business opportunities.
We do not expect our present management to play any managerial role for us
following a business combination. Although we intend to scrutinize closely the
management of a prospective target business in connection with our evaluation of
a business combination with a target business, our assessment of management may
be incorrect.
In evaluating a prospective target business, we will consider several factors,
including the following:
- experience and skill of management and availability of additional
personnel of the target business;
- costs associated with effecting the business combination;
- equity interest retained by our stockholders in the merged entity;
- growth potential of the target business;
- capital requirements of the target business;
- capital available to the target business;
- stage of development of the target business;
- proprietary features and degree of intellectual property or other
protection of the target business;
- the financial statements of the target business; and
- the regulatory environment in which the target business operates.
The foregoing criteria are not intended to be exhaustive and any evaluation
relating to the merits of a particular target business will be based, to the
extent relevant, on the above factors, as well as other considerations we deem
relevant. In connection with our evaluation of a prospective target business, we
anticipate that we will conduct a due
4
diligence review which will encompass, among other things, meeting with
incumbent management as well as a review of financial, legal and other
information.
The time and costs required to select and evaluate a target business (including
conducting a due diligence review) and to structure and consummate the business
combination (including negotiating and documenting relevant agreements and
preparing requisite documents for filing pursuant to applicable corporate and
securities laws) cannot be determined at this time. Our president intends to
devote only a very small portion of his time to our affairs, and, accordingly,
the consummation of a business combination may require a longer time than if he
devoted his full time to our affairs. However, he will devote such time as he
deems reasonably necessary to carry out our business and affairs. The amount of
time devoted to our business and affairs may vary significantly depending upon,
among other things, whether we have identified a target business or are engaged
in active negotiation of a business combination.
We anticipate that various prospective target businesses will be brought to our
attention from various sources, including securities broker-dealers, investment
bankers, venture capitalists, bankers and other members of the financial
community, including, possibly, our officers and affiliates.
As a general rule, federal and state tax laws and regulations have a significant
impact upon the structuring of business combinations. We will evaluate the
possible tax consequences of any prospective business combination and will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to our company, the target business and our stockholders. There
can be no assurance that the Internal Revenue Service or relevant state tax
authorities will ultimately assent to our tax treatment of a particular
consummated business combination. To the extent the Internal Revenue Service or
any relevant state tax authorities ultimately prevail in recharacterizing the
tax treatment of a business combination, there may be adverse tax consequences
to our company, the target business, and our stockholders.
We may acquire a company or business by purchasing the securities of such
company or business. However, we do not intend to engage primarily in such
activities. Specifically, we intend to conduct our activities so as to avoid
being classified as an "investment company" under the Investment Company Act of
1940, as amended (the "Investment Company Act") and therefore avoid application
of the costly and restrictive registration and other provisions of the
Investment Company Act and the regulations promulgated thereunder.
Section 3(a) of the Investment Company Act excepts from the definition of an
"investment company" an entity which does not engage primarily in the business
of investing, reinvesting or trading in securities, or which does not engage in
the business of investing, owning, holding or trading "investment securities"
(defined as "all securities other than government securities or securities of
majority-owned subsidiaries") the value of which exceed 40% of the value of its
total assets (excluding government securities, cash or cash items). We intend to
operate any business in the future in a manner which will result in the
availability of this exception from the definition of an investment
5
company. Consequently, our acquisition of a company or business through the
purchase and sale of investment securities will be limited. Although we intend
to act to avoid classification as an investment company, the provisions of the
Investment Company Act are extremely complex and it is possible that we may be
classified as an inadvertent investment company. We intend to vigorously resist
classification as an investment company, and to take advantage of any exemptions
or exceptions from application of the Investment Company Act, which allows an
entity a one-time option during any three-year period to claim an exemption as a
"transient" investment company. The necessity of asserting any such resistance,
or making any claim of exemption, could be time consuming and costly, or even
prohibitive, given our limited resources.
Various impediments to a business combination may arise, such as appraisal
rights afforded the stockholders of a target business under the laws of its
state of organization. This may prove to be deterrent to a particular
combination.
EMPLOYEES
We have no employees since August 2005.
RISK FACTORS
WE HAVE NO OPERATING HISTORY OR BASIS FOR EVALUATING PROSPECTS.
Since August 2005, we have had no operating business or plans to develop one. We
are currently seeking to enter into a merger or business combination with
another company. Our president, Arnold Kling, was appointed in August 2005 and
has had limited time to evaluate merger prospects and, accordingly, only a
limited basis upon which to evaluate our prospects for achieving our intended
business objectives. To date, our efforts have been limited to meeting
regulatory requirements and searching for a Merger Target.
WE HAVE LIMITED RESOURCES AND NO REVENUES FROM OPERATIONS, AND WILL NEED
ADDITIONAL FINANCING IN ORDER TO EXECUTE ANY BUSINESS PLAN; OUR AUDITORS HAVE
EXPRESSED DOUBT AS TO OUR ABILITY TO CONTINUE BUSINESS AS A GOING CONCERN.
We have limited resources, no revenues from operations since the Entrust Stock
Sale and our cash on hand may not be sufficient to satisfy our cash requirements
during the next twelve months. In addition, as of December 31, 2006 we had
negative working capital and do not expect to achieve any revenues (other than
insignificant investment income) until, at the earliest, the consummation of a
merger and we cannot ascertain our capital requirements until such time. Further
limiting our abilities to achieve revenues, in order to avoid status as an
"Investment Company" under the Investment Company Act of 1940,
6
we can only invest our funds prior to a merger in limited investments which do
not invoke Investment Company status. There can be no assurance that
determinations ultimately made by us will permit us to achieve our business
objectives. Our auditors have included an explanatory paragraph in their report
for the year ended December 31, 2006, indicating that certain conditions raise
substantial doubt regarding our ability to continue as a going concern. The
financial statements included in this Form 10-KSB do not include any adjustment
to asset values or recorded amounts of liability that might be necessary in the
event we are unable to continue as a going concern. If we are in fact unable to
continue as a going concern, stockholders may lose their entire investment in
our common stock.
WE WILL BE ABLE TO EFFECT AT MOST ONE MERGER, AND THUS MAY NOT HAVE A
DIVERSIFIED BUSINESS.
Our resources are limited and we will most likely have the ability to effect
only a single merger. This probable lack of diversification will subject us to
numerous economic, competitive and regulatory developments, any or all of which
may have a material adverse impact upon the particular industry in which we may
operate subsequent to the consummation of a merger. We will become dependent
upon the development or market acceptance of a single or limited number of
products, processes or services.
WE DEPEND SUBSTANTIALLY UPON A SINGLE EXECUTIVE OFFICER AND DIRECTOR TO MAKE ALL
MANAGEMENT DECISIONS.
Our ability to effect a merger will be dependent upon the efforts of our
president and sole director, Arnold Kling. Notwithstanding the importance of Mr.
Kling, we have not entered into any employment agreement or other understanding
with Mr. Kling concerning compensation or obtained any "key man" life insurance
on his life. The loss of the services of Mr. Kling will have a material adverse
effect on our business objectives and prospects for success. We will rely upon
the expertise of Mr. Kling to effect a merger or business combination and do not
anticipate that we will hire additional personnel for that purpose.
THERE MAY BE CONFLICTS OF INTEREST BETWEEN OUR MANAGEMENT AND OUR NON-MANAGEMENT
STOCKHOLDERS.
Conflicts of interest create the risk that management may have an incentive to
act adversely to the interests of other investors. Our officers may be entitled
to receive compensation from a target company they identify or provide services
to in connection with a business combination. A conflict of interest may arise
between our management's personal pecuniary interest and its fiduciary duty to
our stockholders. Further, our management's own pecuniary interest may at some
point compromise its fiduciary duty to our stockholders. In addition, Mr. Kling
and Mr. Warshaw, our officers and sole director, are currently involved with
other blank check offerings and conflicts in the pursuit of business
combinations with such other blank check companies with which they
7
and affiliates of our majority stockholder are, and may in the future be
affiliated with, may arise. If we and the other blank check companies that our
officers and directors are affiliated with desire to take advantage of the same
opportunity, then those officers and directors that are affiliated with both
companies would abstain from voting upon the opportunity. Further, Rodman &
Renshaw, LLC, a registered broker-dealer and affiliate of our majority
stockholder, may act as investment banker, placement agent or financial
consultant to us or as an acquisition target in connection with a potential
business combination transaction and may receive a fee for such services. We
cannot assure you that conflicts of interest among us, our management, Rodman &
Renshaw, LLC and our stockholders will not develop.
THERE IS COMPETITION FOR THOSE PRIVATE COMPANIES SUITABLE FOR A MERGER
TRANSACTION OF THE TYPE CONTEMPLATED BY MANAGEMENT.
We are in a highly competitive market for a small number of business
opportunities which could reduce the likelihood of consummating a successful
business combination. We are and will continue to be an insignificant
participant in the business of seeking mergers with, joint ventures with and
acquisitions of small private and public entities. A large number of established
and well-financed entities, including small public companies and venture capital
firms, are active in mergers and acquisitions of companies that may be desirable
target candidates for us. Nearly all these entities have significantly greater
financial resources, technical expertise and managerial capabilities than we do;
consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination. These
competitive factors may reduce the likelihood of our identifying and
consummating a successful business combination.
FUTURE SUCCESS IS HIGHLY DEPENDENT ON THE ABILITY OF MANAGEMENT TO LOCATE AND
ATTRACT A SUITABLE ACQUISITION.
The nature of our operations is highly speculative. The success of our plan of
operation will depend to a great extent on the operations, financial condition
and management of the identified business opportunity. While management intends
to seek business combination(s) with entities having established operating
histories, we cannot assure you that we will be successful in locating
candidates meeting that criterion. In the event we complete a business
combination, the success of our operations may be dependent upon management of
the successor firm or venture partner firm and numerous other factors beyond our
control.
8
WE HAVE NO EXISTING AGREEMENT FOR A BUSINESS COMBINATION OR OTHER TRANSACTION.
We have no agreement with respect to engaging in a merger with, joint venture
with or acquisition of, a private or public entity. No assurances can be given
that we will successfully identify and evaluate suitable business opportunities
or that we will conclude a business combination. Management has not identified
any particular industry or specific business within an industry for evaluation.
We cannot guarantee that we will be able to negotiate a business combination on
favorable terms, and there is consequently a risk that funds allocated to the
purchase of our shares will not be invested in a company with active business
operations.
MANAGEMENT WILL CHANGE UPON THE CONSUMMATION OF A MERGER.
After the closing of a merger or business combination, it is likely our current
management will not retain any control or managerial responsibilities. Upon such
event, Mr. Kling and Mr. Warshaw intend to resign their positions with us.
CURRENT STOCKHOLDERS WILL BE IMMEDIATELY AND SUBSTANTIALLY DILUTED UPON A MERGER
OR BUSINESS COMBINATION.
Our charter authorized the issuance of 100,000,000 shares of common stock. There
are currently 97,942,229 authorized but unissued shares of common stock
available for issuance. To the extent that additional shares of our common stock
are issued in connection with a merger or business combination, our stockholders
could experience significant dilution of their respective ownership interests.
Furthermore, the issuance of a substantial number of shares of common stock may
adversely affect prevailing market prices, if any, for the common stock and
could impair our ability to raise additional capital through the sale of equity
securities.
CONTROL BY EXISTING STOCKHOLDER.
R&R Biotech Partners, LLC beneficially owns approximately 69% of the outstanding
shares of our common stock. As a result, this stockholder is able to exercise
significant control over matters requiring stockholder approval, including the
election of directors, and the approval of mergers, consolidations and sales of
all or substantially all of our assets.
9
OUR COMMON STOCK IS A "PENNY STOCK" WHICH MAY RESTRICT THE ABILITY OF
STOCKHOLDERS TO SELL OUR COMMON STOCK IN THE SECONDARY MARKET.
The U.S. Securities and Exchange Commission ("SEC") has adopted regulations
which generally define "penny stock" to be an equity security that has a market
price, as defined, of less than $5.00 per share, or an exercise price of less
than $5.00 per share, subject to certain exceptions, including an exception of
an equity security that is quoted on a national securities exchange. Our common
stock is not now quoted on a national exchange but is traded on Nasdaq's OTC
Bulletin Board ("OTCBB"). Thus, they are subject to rules that impose additional
sales practice requirements on broker-dealers who sell these securities. For
example, the broker-dealer must make a special suitability determination for the
purchaser of such securities and have received the purchaser's written consent
to the transactions prior to the purchase. Additionally, the rules require the
delivery, prior to the transaction, of a disclosure schedule prepared by the SEC
relating to the penny stock market. The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered underwriter,
and current quotations for the securities, and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, among other requirements, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks. The
"penny stock" rules, may restrict the ability of our stockholders to sell our
common stock in the secondary market.
OUR COMMON STOCK HAS BEEN THINLY TRADED, LIQUIDITY IS LIMITED, AND WE MAY BE
UNABLE TO OBTAIN LISTING OF OUR COMMON STOCK ON A MORE LIQUID MARKET.
Our common stock is quoted on the OTCBB, which provides significantly less
liquidity than a securities exchange (such as the American or New York Stock
Exchange) or an automated quotation system (such as the Nasdaq Global Market or
the Nasdaq Capital Market). There is uncertainty that our common stock will ever
be accepted for a listing on an automated quotation system or a securities
exchange.
There is currently a limited volume of trading in our common stock, and on many
days there has been no trading activity at all. The purchasers of shares of our
common stock may find it difficult to resell their shares at prices quoted in
the market or at all.
ITEM 2. PROPERTIES.
Since August 6, 2005, our principal offices are located at 47 School Avenue,
Chatham, New Jersey which are owned by an affiliated company of Kirk Warshaw,
our chief financial officer and secretary. We occupy our principal offices on a
month to month basis for no rent. We do not own or intend to invest in any real
property.
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ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Reference is made to the Current Report on Form 8-K that we filed with the SEC
on January 22, 2007, which we incorporate herein by reference, for the
information responsive to this Item 4.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRINCIPAL MARKET OR MARKETS
Our common stock is traded on Nasdaq's Over-The-Counter Bulletin Board ("OTCBB")
market under the symbol "EFSV". The following table sets forth, for the periods
indicated and as reported on the OTCBB, the high and low bid prices for our
common stock. The quotations reflect inter-dealer prices without retail mark-up
or commission and may not represent actual transactions.
BID PRICE
HIGH LOW
---- ---
2006
----
First Quarter $6.33 $1.67
Second Quarter $6.00 $3.33
Third Quarter* $3.67 $0.51
Fourth Quarter $1.01 $0.51
2005
----
First Quarter $22.40 $1.40
Second Quarter $9.52 $2.52
Third Quarter $7.56 $3.08
Fourth Quarter $3.64 $1.68
---------------------
*A 1 for 28 reverse-split was effected on September 18, 2006 (the "Reverse
Split"). All prices prior to the Reverse Split have been adjusted as if the
Reverse Split had occurred at the beginning of the first quarter of 2005.
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APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
As of January 30, 2007, we had a total of 2,057,771 shares of common stock
issued and outstanding. The number of holders of record of our common stock at
that date was 252.
DIVIDENDS
Holders of common stock are entitled to receive such dividends as may be
declared by our Board of Directors. Other than the special dividend paid to
stockholders of record on July 25, 2005 in connection with the Entrust Mortgage
Sale, no dividends were declared or paid during the periods reported herein, nor
do we anticipate paying dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. PLAN OF OPERATION.
STATEMENTS CONTAINED IN THIS PLAN OF OPERATION OF THIS ANNUAL REPORT ON FORM
10-KSB INCLUDE "FORWARD-LOOKING STATEMENTS". FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE OUR
ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS NOT TO OCCUR OR BE REALIZED. SUCH
FORWARD-LOOKING STATEMENTS GENERALLY ARE BASED UPON OUR BEST ESTIMATES OF FUTURE
RESULTS, GENERAL MERGER AND ACQUISITION ACTIVITY IN THE MARKETPLACE, PERFORMANCE
OR ACHIEVEMENT, CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "MAY," "WILL," "PROJECT," "EXPECT," "BELIEVE," "ESTIMATE,"
"ANTICIPATE," "INTENDS," "CONTINUE," "POTENTIAL," "OPPORTUNITY" OR SIMILAR
TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS OR OTHER
VARIATIONS OF THOSE TERMS OR COMPARABLE WORDS OR EXPRESSIONS.
GENERAL
Our plan is to seek, investigate, and consummate a merger or other business
combination, purchase of assets or other strategic transaction (i.e. a merger)
with a corporation, partnership, limited liability company or other business
entity (a "Merger Target") desiring to become a publicly reporting and publicly
held corporation. We have no operating business, and conduct minimal operations
necessary to meet regulatory requirements. Our ability to commence any
operations is contingent upon obtaining adequate financial resources.
We are not currently engaged in any business activities that provide cash flow.
The costs of investigating and analyzing business combinations for the next 12
months and beyond such time will be paid with money in our treasury.
12
During the next twelve months we anticipate incurring costs related to:
(i) filing reports pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); and
(ii) consummating a transaction with a Merger Target.
We believe we will be able to meet these costs through use of funds in our
treasury and additional amounts, as necessary, to be loaned to or invested in us
by our stockholders, management or other investors.
We may consider a business which has recently commenced operations, is a
developing company in need of additional funds for expansion into new products
or markets, is seeking to develop a new product or service, or is an established
business which may be experiencing financial or operating difficulties and is in
need of additional capital. In the alternative, a business combination may
involve the acquisition of, or merger with, a company which does not need
substantial additional capital, but which desires to establish a public trading
market for its shares, while avoiding, among other things, the time delays,
significant expense, and loss of voting control which may occur in a public
offering.
In August 2005, following the Entrust Stock Sale, Arnold P. Kling joined us as
our president and sole director and Kirk M. Warshaw joined us as our chief
financial officer and secretary. Messrs. Kling and Warshaw are only required to
devote a small portion of their time (less than 10%) to our affairs on a
part-time or as-needed basis. No cash compensation will be paid to any officer
or director in their capacities as such. We do not anticipate hiring any
full-time employees as long as we are seeking and evaluating business
opportunities.
Since the Entrust Stock Sale we have not incurred any material costs or expenses
other than those associated with our minimal operations necessary to meet
regulatory requirements. As of December 31, 2006 we had cash on hand of $16,867.
Since we have no revenue or plans to generate any revenue, if our expenses
exceed our cash currently on hand we will be dependent upon loans to fund
expenses incurred in excess of our cash.
EQUIPMENT AND EMPLOYEES
As of December 31, 2006, we have no operating business, no equipment, or
employees. We do not intend to develop our own operating business but instead
plan to merge with another operating company.
CONTINUING OPERATIONAL EXPENSES FOR THE DEVELOPMENT STAGE PERIOD FROM AUGUST 1,
2005 TO DECEMBER 31, 2006 AND THE YEARS ENDED DECEMBER 31, 2006 AND 2005
13
As noted, all activity associated with Entrust Mortgage and its sale which
occurred prior to July 31, 2005 has been accounted for as Discontinued
Operations and, as such, is not evaluated in this report as it has little
relevance to our future operations.
The operating expenses of $56,798 for the year ended December 31, 2006 and the
cumulative operating expenses of $101,375 for the developmental period from
August 1, 2005 to December 31, 2006 (the "Development Period") resulted
primarily from accounting/auditing, legal and general administrative expenses.
Operating expenses from continuing activities for the year ended December 31,
2006 were $56,798 as compared to $130,520 for the year ended December 31, 2005.
These expenses consist primarily of the legal, accounting, general
administrative and filing related expenses incurred to prepare and file with the
SEC the reports required of us by the Exchange Act and are of a continuing and
recurring nature.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2006, we had current assets totaling $16,687 in cash and a
working capital deficit of $6,867.
Net cash used in our continuing operating activities during the development
period from August 1, 2005 to December 31, 2006 was $55,641. During the years
ended December 31, 2005 and 2006, we had no revenues. As a result, cash on hand
decreased by $26,141 during the developmental period ended December 31, 2006 to
$16,867.
Going Concern
Our financial statements have been prepared assuming that we will continue as a
going concern. We had a working capital deficit at year end and do not expect to
achieve any revenues (other than insignificant investment income) until the
consummation of a merger and we cannot ascertain our capital requirements until
such time. As such, there is doubt about our ability to continue as a going
concern. The financial statements of the Company do not include any adjustments
that might be necessary should the Company be unable to continue as a going
concern.
ITEM 7. FINANCIAL STATEMENTS.
See the index to Financial Statements below, beginning on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On February 4, 2006, we dismissed Richey May & Co., LLP ("Richey May") as our
independent registered accountant and engaged Lazar Levine & Felix LLP. There
were
14
no disagreements, adverse opinions or disclaimer of opinion by Richey May at the
time of the change.
ITEM 8A. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Management, with the
participation of our president and the chief financial officer, carried out an
evaluation of the effectiveness of our "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")
Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this
report (the "Evaluation Date"). Based upon that evaluation, the president and
the chief financial officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act (i) is recorded, processed, summarized and reported, within the
time periods specified in the SEC's rules and forms and (ii) is accumulated and
communicated to our management, including our president and chief financial
officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. There were no changes in
our internal controls over financial reporting that occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth information concerning our officers and sole
director as of January 30, 2007:
NAME AGE TITLE
------- ----- ------
Arnold P. Kling 48 President and sole director
Kirk M. Warshaw 48 Chief financial officer and secretary
ARNOLD P. KLING. Mr. Kling has served as a director and our president since
August, 2005. Mr. Kling is currently a Managing Director of GH Venture Partners,
LLC, a private equity and merchant banking boutique for which he also served as
a Managing Director and General Counsel from 1995 to 1999. From 1999 through
August 2005, Mr. Kling was the president of Adelphia Holdings, LLC, a
merchant-banking firm, as well as the managing member of several private
investment funds. From 1993 to 1995 he was a
15
senior executive and General Counsel of Buckeye Communications, Inc., a Nasdaq
listed licensing and multimedia company. From 1990 through 1993, Mr. Kling was
an associate and partner in the corporate and financial services department of
Tannenbaum, Helpern, Syracuse & Hirschtritt LLP, a mid-size New York law firm.
Mr. Kling received a Bachelor of Science degree from New York University in
International Business in 1980 and a Juris Doctor degree from Benjamin Cardozo
School of Law in 1983. Mr. Kling currently serves as a director and president of
Twin Lakes Delaware, Inc., R&R Acquisition III, Inc., R&R Acquisition V, Inc.,
R&R Acquisition VI, Inc., R&R Acquisition VII, Inc. and R&R Acquisition VIII,
Inc., R&R Acquisition, Inc., IX, and R&R Acquisition, Inc., X, (each a publicly
reporting, non-trading company), and 24 Holdings, Inc. (OTCBB:TWFH).
KIRK M. WARSHAW. Mr. Warshaw has served as our chief financial officer and
secretary since August, 2005. Mr. Warshaw is a financial professional who, since
1990, has provided clients in a multitude of different industries with advice on
accounting, corporate finance, and general business matters. Prior to starting
his own consulting firm, from 1983 to 1990, he held the various titles of
controller, chief financial officer, president, and chief executive officer at
three separate financial institutions in New Jersey. From 1980 through 1983, Mr.
Warshaw was a Senior Accountant at the public accounting firm of Deloitte,
Haskins & Sells. Mr. Warshaw is a 1980 graduate of Lehigh University and has
been a CPA in New Jersey since 1982. Mr. Warshaw is currently the chief
financial officer of Twin Lakes Delaware, Inc. R&R Acquisition III, Inc., R&R
Acquisition V, Inc., R&R Acquisition VI, Inc., R&R Acquisition VII, Inc., R&R
Acquisition VIII, Inc., R&R Acquisition, Inc., IX, and R&R Acquisition, Inc., X,
(each a publicly reporting, non-trading company), the chief financial officer
and a Director of 24 Holdings, Inc. (OTCBB:TWFH), a director of Empire Financial
Holding Company (AMEX:EFH), and a director of two privately owned entities.
Mr. Kling and Mr. Warshaw are not required to commit their full time to our
business affairs and they will not devote a substantial amount of time to our
business affairs.
COMPENSATION AND AUDIT COMMITTEES
As we only have one board member and given our limited operations, we do not
have separate or independent audit or compensation committees. Our Board of
Directors has determined that it does not have an "audit committee financial
expert," as that term is defined in Item 401(e) of Regulation S-B. In addition,
we have not adopted any procedures by which our stockholders may recommend
nominees to our board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers
and persons who beneficially own more than ten percent of our common stock
(collectively, the "Reporting Persons") to report their ownership of and
transactions in our common stock to the SEC. Copies of these reports are also
required to be supplied to us. To our knowledge, during the fiscal year ending
December 31, 2006 the Reporting Persons complied with all applicable Section
16(a) reporting requirements.
16
CODE OF ETHICS
We have not adopted a Code of Ethics given our limited operations. We expect
that our Board of Directors following a merger or other acquisition transaction
will adopt a Code of Ethics.
ITEM 10. EXECUTIVE COMPENSATION.
Arnold Kling and Kirk Warshaw are our sole officers and Arnold Kling is our sole
director. Neither receives any regular compensation for their services rendered
on our behalf. Since the Entrust Stock Sale we have paid no cash compensation to
our officers or directors. On November 1, 2005, our Board of Directors
authorized the issuance of 69,643 shares of our common stock to each of Mr.
Kling and Mr. Warshaw for services they provided to us. Each stock grant was
determined to be worth $7,800 and the expense was recognized in the 2005
financial statements. Neither Mr. Kling nor Mr. Warshaw received any
compensation during the year ended December 31, 2006. No officer or director is
required to make any specific amount or percentage of his business time
available to us.
While we do not presently anticipate engaging the services of professional firms
that specialize in finding business acquisitions on any formal basis, we may
engage such firms in the future, in which event we may be required to pay a
finder's fee or other compensation. In no event, however, will we pay a finder's
fee or commission to any of our officers and directors or any entity with which
an officer or director is affiliated. We do not have any incentive or stock
option plan in effect.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of January 30, 2007
regarding the number and percentage of common stock (being our only voting
securities) beneficially owned by each officer and director, each person
(including any "group" as that term is used in Section 13(d)(3) of the Exchange
Act) known by us to own 5% or more of our common stock, and all officers and
directors as a group.
Amount and Nature of Percentage of
Name (1) Beneficial Ownership (1) Shares Owned
-------- ------------------------ -------------
R&R Biotech Partners, LLC 1,414,286 68.7%
1270 Avenue of the Americas - 16th Floor
New York, NY 10020
Attention: Thomas Pinou, CFO
17
Moyo Partners, LLC (2) 353,571 17.2%
c/o Arnold P. Kling
712 Fifth Avenue - 11th Floor
New York, NY 10019
Arnold P. Kling (3) 423,214 20.6%
712 Fifth Avenue - 11th Floor
New York, NY 10019
Kirk M. Warshaw (4) 69,643 3.4%
47 School Avenue
Chatham, NJ 07928
All Officers and Directors as a Group 492,857 24.0%
(2 persons)
----------------------------
(1) Unless otherwise indicated, the company has been advised that all
individuals or entities listed have the sole power to vote and dispose of the
number of shares set forth opposite their names. For purposes of computing the
number and percentage of shares beneficially owned by a security holder, any
shares which such person has the right to acquire within 60 days from January
30, 2007 are deemed to be outstanding, but those shares are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
security holder.
(2) Arnold P. Kling, our president and our sole director, controls Moyo
Partners, LLC and therefore is the beneficial owner of the shares held by this
entity.
(3) Includes all the shares held by Moyo Partners, LLC.
(4) Mr. Warshaw is our chief financial officer and secretary.
We currently do not maintain any equity compensation plans.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
None.
18
ITEM 13. EXHIBITS.
EXHIBIT
NO. DESCRIPTION
--- -----------
2.1 Agreement and Plan of Merger between Entrust Financial
Services, Inc. and Enthrust Financial Services, Inc.(1)
2.2 Statement of Merger filed with the Colorado Secretary of
State(1)
2.3 Certificate of Merger filed with the Delaware Secretary
of State(1)
3.1 Certificate of Incorporation of Enthrust Financial
Services, Inc.(1)
3.2 Bylaws of Enthrust Financial Services, Inc.(1)
31.1 Certification of the President pursuant to section 302 of
the Sarbanes-Oxley Act of 2002*
31.2 Certification of the Chief Financial Officer pursuant to
section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification of the President pursuant to section 906 of
the Sarbanes-Oxley Act of 2002*
32.2 Certification of the Chief Financial Officer pursuant to
section 906 of the Sarbanes-Oxley Act of 2002*
-------
* Filed with this report
(1) Filed as an exhibit to the Current Report on Form 8-K filed on January 22,
2007 and incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
We paid audit and financial statement review fees totaling $8,000 and $5,000,
respectively to Lazar Levine & Felix LLP, our independent registered public
accounting firm for the years ended December 31, 2006 and 2005, respectively.
AUDIT-RELATED FEES
None.
TAX FEES
We paid tax preparation fees totaling $1,000 to Lazar Levine & Felix LLP, our
current independent registered public accounting firm for each of the years
ended December 31, 2006 and 2005, respectively.
ALL OTHER FEES
None.
19
AUDIT COMMITTEE POLICIES AND PROCEDURES
We do not currently have a standing audit committee. The above services were
approved by our Board of Directors.
20
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.
ENTHRUST FINANCIAL SERVICES, INC.
Date: February 7, 2007
By: /s/ Arnold P. Kling
-----------------------
Arnold P. Kling, President
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 on the
dates indicated.
Date: February 7, 2007
By: /s/ Arnold P. Kling
-----------------------
Arnold P. Kling, President, Sole Director
(Principal Executive Officer)
Date: February 7, 2007
By: /s/ Kirk M. Warshaw
------------------------------
Kirk M. Warshaw, Chief Financial Officer
(Principal Financial and Accounting Officer)
21
ENTHRUST FINANCIAL SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
Report of Independent Registered Public Accounting Firm F-2.
Financial Statements:
Balance Sheets as of December 31, 2006 and 2005 F-3.
Statements of Operations for the Development Stage Period (August 1,
2005 to December 31, 2006) and the Years Ended December 31, 2006 and
2005
F-4.
Statement of Stockholders' Equity (Deficit)for the Years Ended December
31, 2006 and 2005, including the Development Stage Period (August 1,
2005 to December 31, 2006)
F-5.
Statements of Cash Flows for the Development Stage (August 1, 2005
to December 31, 2006) and the Years Ended December 31, 2006 and 2005 F-6.
Notes to Financial Statements F-7.
F - 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders
Enthrust Financial Services, Inc.
Chatham, New Jersey
We have audited the accompanying balance sheets of Enthrust Financial Services,
Inc. (a development stage company and formerly known as Entrust Financial
Services, Inc.), as of December 31, 2006 and 2005 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended and the statements of operations, stockholders' equity (deficit), and cash
flows for the development stage period August 1, 2005 to December 31, 2006.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Enthrust Financial Services,
Inc. (a development stage company) as of December 31, 2006 and 2005, and the
results of its operations and its cash flows for the years then ended and for
the development stage period August 1, 2005 to December 31, 2006, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has been in the development stage since
inception. The Company's lack of financial resources and liquidity raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to this matter are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/LAZAR LEVINE & FELIX LLP
---------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
February 2, 2007
F - 2
ENTHRUST FINANCIAL SERVICES, INC
(A Development Stage Company)
BALANCE SHEETS
DECEMBER 31 DECEMBER 31
ASSETS 2006 2005
--------------------------
Cash $ 16,867 $ 34,673
----------- -----------
TOTAL ASSETS $ 16,867 $ 34,673
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Accounts Payable & accrued expenses $ 23,734 $ 14,242
----------- -----------
Total liabilities 23,734 14,242
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; $0.001 par value, 1,000,000
authorized, none issued -- --
Common stock, $.001 par value; 100,000,000 shares
authorized, 2,057,771 shares issued and outstanding 2,058 2,058
Additional paid-in capital 8,154,998 8,125,498
Accumulated deficit (8,062,548) (8,062,548)
Deficit accumulated during the development period (101,375) (44,577)
----------- -----------
Total stockholders' equity (deficit) (6,867) 20,431
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 16,867 $ 34,673
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 3
ENTHRUST FINANCIAL SERVICES, INC
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative During
the Development
Stage Year Ended
August 1, 2005 to December 31,
December 31, 2006 2006 2005
----------------- ---------------------------
REVENUES $ -- $ -- $ --
----------- ---------------------------
Expenses
Compensation expense 15,600 -- 15,600
Professional fees 71,029 46,364 91,192
Filing and stockholder expense 14,218 9,923 23,711
Other expenses 528 511 17
----------- ---------------------------
Total expenses 101,375 56,798 130,520
----------- ---------------------------
Net loss from continuing operations (101,375) (56,798) (130,520)
Income from discontinued operations, net of taxes -- -- 119,960
----------- ---------------------------
Net loss $ (101,375) $ (56,798) $ (10,560)
=========== ===========================
Basic and diluted loss per share
from continuing operations $ (0.03) $ (0.16)
Basic and diluted earnings per share
from discontinued operations $ -- $ 0.15
---------------------------
Basic and diluted loss per share $ (0.03) $ (0.01)
---------------------------
Basic and diluted weighted average
shares outstanding 2,057,771 803,461
===========================
The accompanying notes are an integral part of these financial statements.
F - 4
ENTHRUST FINANCIAL SERVICES, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Deficit
Accumulated
Common Stock Additional Retained During the Total
------------------------------- Paid-in Earnings Development Stockholders'
Shares Amount Capital (Deficit) Stage Deficiency
-----------------------------------------------------------------------------------------
Balance at December 31, 2004 93,484 $ 94 $ 7,605,462 $(7,696,565) $ -- $ (91,009)
Sale of common stock for cash 1,767,858 1,768 498,232 500,000
Dividend paid -- -- -- (400,000) -- (400,000)
Issuance of compensatory shares for fair
value of services 196,429 196 21,804 -- -- 22,000
Net loss for year ended December 31, 2005 -- -- -- 34,017 (44,577) (10,560)
-----------------------------------------------------------------------------------------
Balance at December 31, 2005 2,057,771 2,058 8,125,498 (8,062,548) (44,577) 20,431
Additional paid-in-capital contributions -- -- 29,500 -- 29,500
Net loss for year ended December 31, 2006 -- -- -- -- (56,798) (56,798)
-----------------------------------------------------------------------------------------
Balance at December 31, 2006 2,057,771 $ 2,058 $ 8,154,998 $(8,062,548) $ (101,375) $ (6,867)
=========================================================================================
The accompanying notes are an integral part of these financial statements.
F - 5
ENTHRUST FINANCIAL SERVICES, INC
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative During
the Development
Stage Year Ended
August 1, 2005 to December 31,
December 31, 2006 2006 2005
----------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (101,375) $ (56,798) $ (10,560)
Adjustments to reconcile net loss to net cash (used)
provided by operating activities:
Gain on sale of discontinued operations -- -- (382,729)
Depreciation -- -- 146,177
Compensatory shares 22,000 -- 22,000
(Increase) decrease in:
Accounts receivable -- -- (37,287)
Mortgage loans held for sale -- -- 19,613,277
Prepaid expenses and other assets -- -- (9,828)
Increase (decrease) in:
Accounts payable and accrued expenses 23,734 9,492 --
Accrued other expenses -- -- (157,494)
-----------------------------------------------------------------
Net cash (used) provided by operating activities (55,641) (47,306) 19,183,556
-----------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of property & equipment -- -- (16,050)
Decrease in restricted cash -- -- 2,805
-----------------------------------------------------------------
Net cash used by investing activities -- -- (13,245)
-----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments, warehouse lines of credit -- -- (19,534,785)
Repayment of long-term debt -- -- (761,570)
Proceeds from sale of stock -- -- 500,000
Payment of dividend -- -- (400,000)
Repayments, capital lease obligations -- -- (40,438)
Additional paid-in-capital contributions 29,500 29,500 --
-----------------------------------------------------------------
Net cash provided (used) by financing activities 29,500 29,500 (20,236,793)
-----------------------------------------------------------------
Decrease in cash (26,141) (17,806) (1,066,482)
Cash, at beginning of period 43,008 34,673 1,101,155
-----------------------------------------------------------------
Cash, at end of period $ 16,867 $ 16,867 $ 34,673
=================================================================
SUPPLEMENTAL INFORMATION
Cash Paid for Income Taxes $ -- $ -- $ --
Cash Paid for Interest $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements.
F - 6
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 1 - DESCRIPTION OF COMPANY:
We were organized on November 8, 1996 under the laws of the State of Colorado
initially as "Centennial Banc Share Corporation". We subsequently changed our
name to "Entrust Financial Services, Inc." on April 6, 2001 ("Entrust
Colorado"). On December 4, 2006, Entrust Colorado's Board of Directors approved
the merger of Entrust Colorado with and into Enthrust Financial Services, Inc.
("EFS" or the "Company"), a corporation organized on December 20, 2006 under the
laws of the State of Delaware solely for the purpose of the merger.
Effective January 11, 2007, Entrust Colorado was merged with and into EFS which
became the surviving corporation (the "Delaware Merger"). Every issued and
outstanding share of Entrust Colorado common stock was automatically exchanged
into one share of EFS common stock and our current authorized capital structure
consists of 100,000,000 shares of common stock, par value $0.001 per share, and
1,000,000 shares of blank check preferred stock, par value $0.001 per share. In
conjunction with the Delaware Merger, our name changed to Enthrust Financial
Services, Inc.
Effective September 18, 2006, Entrust Colorado completed a one-for twenty eight
reverse split of its issued and outstanding shares of common stock. As a result,
the number of issued and outstanding shares of Entrust Colorado common stock was
reduced from 57,612,295 to 2,057,771 shares (the "Reverse Split").
Unless otherwise stated, all share and per share information in the financial
statements and description below is presented as if the Reverse Split and
Delaware Merger took place at the beginning of all periods presented.
We were initially formed for the purpose of developing and maintaining a
mortgage brokerage business. In April 1999, we acquired Entrust Mortgage, Inc.,
a mortgage banking business which became our wholly-owned subsidiary and was our
primary business until July 31, 2005 ("Entrust Mortgage"). Entrust Mortgage
engaged primarily in the origination and wholesale purchase of non-conforming
residential mortgage loans in thirty-eight states.
On July 31, 2005, Entrust Mortgage was sold to BBSB, LLC in exchange for the
cancellation of all obligations owed by us and Entrust Mortgage to BBSB and the
assumption of certain of our third party obligations (the "Entrust Mortgage
Sale").
The Company's stockholders did not receive any consideration in the Entrust
Mortgage Sale, but stockholders of record on July 25, 2005, received a one time
aggregate dividend from the Entrust Stock Sale (as described below) of $400,000,
or approximately $0.153 per share (pre-split) The remaining $100,000 of the
consideration paid by the Entrust Stock Purchasers (as described below) was used
to satisfy or reserve for the Company's
F - 7
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 1 - DESCRIPTION OF COMPANY (Continued):
liabilities and to pay the expenses related to the Entrust Stock Sale. As of
August 6, 2005, the Company's headquarters was relocated to Chatham, New Jersey.
Following the Entrust Mortgage Sale, we had no operations. Since August 1, 2005,
the Company's purpose has been to serve as a vehicle to acquire an operating
business and is currently considered a "shell" company inasmuch as the Company
is not generating revenues, does not own an operating business, and has no
specific plan other than to engage in a merger or acquisition transaction with a
yet-to-be identified company or business. The Company has no employees and no
material assets.
Accordingly, the Company is considered to be a development stage entity
beginning on August 1, 2005.
Due to the Company's lack of financial resources and accumulated deficit, there
is doubt about its ability to continue as a going concern. The Company is
seeking to acquire a business and is currently considered a "blank check"
company in as much as the Company is not generating revenues, does not own an
operating business and has no specific business plan other than to engage in a
merger or acquisition transaction with a yet-to-be identified company or
business. The Company has no employees and no material assets. Administrative
services are currently being provided by an entity controlled by an officer of
the Company at no charge.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). Outlined below are
those policies considered particularly significant.
(a) USE OF ESTIMATES:
In preparing financial statements in accordance with GAAP, management makes
certain estimates and assumptions, where applicable, that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. While actual
results could differ from those estimates, management does not expect such
variances, if any, to have a material effect on the financial statements.
F - 8
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(b) STATEMENTS OF CASH FLOWS:
For purposes of the statements of cash flows the Company considers all highly
liquid investments purchased with a remaining maturity of three months or less
to be cash equivalents.
(c) EARNINGS (LOSS) PER SHARE:
Basic earnings (loss) per share has been computed on the basis of the weighted
average number of common shares outstanding during each period presented
according to the provisions of SFAS No. 128 "EARNINGS PER SHARE". Diluted
earnings (loss) per share has not been presented separately as the effect of the
common stock purchase options (140,000) outstanding, on such calculation, would
have been anti-dilutive. Such securities could potentially dilute basic earnings
per share in the future.
(d) INCOME TAXES:
The asset and liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for operating
loss and tax credit carry forwards and for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the results of operations in the period
that includes the enactment date. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets unless it is more likely than not
that such assets will be realized.
(e) STOCK OPTIONS:
Effective January 1, 2006, the Company has accounted for stock options in
accordance with the recognition and measurement provisions of Statement of
Financial Accounting Standards ("FAS") No. 123 (revised 2004), Share-Based
Payment ("FAS 123(R)"), which replaces FAS No. 123, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board Opinion ("APB") No. 25,
Accounting for Stock Issued to Employees, and related interpretations. FAS 123
(R) requires compensation costs related to share-based payment transactions,
including employee stock options, to be recognized in the financial statements.
In addition, the Company adheres to the guidance set forth within Securities and
Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 107, which
provides the Staff's views regarding the interaction between FAS No.
F - 9
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(e) STOCK OPTIONS (Continued):
123(R) and certain SEC rules and regulations and provides interpretations with
respect to the valuation of share-based payments for public companies.
Prior to January 1, 2006, the Company accounted for similar transactions in
accordance with APB No. 25 which employed the intrinsic value method of
measuring compensation cost. Accordingly, compensation expense was not
recognized for fixed stock options if the exercise price of the option equaled
or exceeded the fair value of the underlying stock at the grant date.
While FAS No. 123 encouraged recognition of the fair value of all stock-based
awards on the date of grant as expense over the vesting period, companies were
permitted to continue to apply the intrinsic value-based method of accounting
prescribed by APB No. 25 and disclose certain pro-forma amounts as if the fair
value approach of FAS No. 123 had been applied. In December 2002, FAS No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment
of FAS No. 123, was issued, which, in addition to providing alternative methods
of transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation, required more prominent pro-forma disclosures
in both the annual and interim financial statements. The Company complied with
these disclosure requirements for all applicable periods prior to January 1,
2006.
In adopting FAS 123(R), the Company applied the modified prospective approach to
transition. Under the modified prospective approach, the provisions of FAS
123(R) are to be applied to new awards and to outstanding awards modified,
repurchased, or cancelled after the required effective date. Additionally,
compensation cost for the portion of awards for which the requisite service has
not been rendered that are outstanding as of the required effective date shall
be recognized as the requisite service is rendered on or after the required
effective date. The compensation cost for that portion of awards shall be based
on the grant-date fair value of those awards as calculated for either
recognition or pro-forma disclosures under FAS 123.
F - 10
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(e) STOCK OPTIONS (Continued):
Pro Forma Information under SFAS No. 123 for Periods Prior to Adoption of FAS
123 (R):
The following table illustrates the effect on net income(loss) and
earnings(loss) per share as if the fair value recognition provisions of FAS No.
123 had been applied to all outstanding and unvested awards in the prior year
comparable period.
2005
Net loss to common stockholders as reported $(10,560)
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects 4,700
--------
Pro forma Net Loss $(15,260)
========
Basic and diluted net loss per share:
As reported $(0.00)
Pro forma $(0.01)
The fair value of each option grant was estimated on the date of the grant using
the Black-Scholes option-pricing model with the following approximate
weighted-average assumptions for the year ended December 31, 2005: expected
volatility of 127%; average risk-free interest rate of 1.12%; and expected lives
of 3 years.
F - 11
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(f) NEW ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY:
FASB 157 - Fair Value Measurements
In September 2006, the Financial Accounting Standard Board issued a standard
that provides enhanced guidance for using fair value to measure assets and
liabilities. The standard applies whenever other standards require (or permit)
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair value in any new circumstances.
This Statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. Earlier application is encouraged, provided that the reporting entity has
not yet issued financial statements for that fiscal year, including financial
statements for an interim period within that fiscal year.
SEC Staff Accounting Bulletin 107 - Implementation Guidance for FASB 123 (R)
The staff believes the guidance in the SAB will assist issuers in their initial
implementation of Statement 123R and enhance the information received by
investors and other users of financial statements, thereby assisting them in
making investment and other decisions. This SAB includes interpretive guidance
related to share-based payment transactions with non-employees, the transition
from nonpublic to public entity status, valuation methods (including assumptions
such as expected volatility and expected term), the accounting for certain
redeemable financials instruments issued under share-based payment arrangements,
the classification of compensation expense, non-GAAP financial measures,
first-time adoption of Statement 123R in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting
for income tax effects of share-based payment arrangements upon adoption of
Statement 123R and disclosures of MD&A subsequent to adoption of Statement 123R.
SEC Staff Accounting Bulletin 108 - Considering the Effects of Prior Year
Misstatements when Qualifying Misstatements in Current Year Financial Statements
In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements." SAB 108 was issued in order
to eliminate the diversity of practice surrounding how public companies quantify
financial statement misstatements.
F - 12
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(f) NEW ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY (continued):
Traditionally, there have been two widely-recognized methods for quantifying the
effects of financial statement misstatements: the "roll-over" method and the
"iron curtain" method. The roll-over method focuses primarily on the impact of a
misstatement on the income statement--including the reversing effect of prior
year misstatements--but its use can lead to the accumulation of misstatements in
the balance sheet. The iron-curtain method, on the other hand, focuses primarily
on the effect of correcting the period-end balance sheet with less emphasis on
the reversing effects of prior year errors on the income statement.
In SAB 108, the SEC staff established an approach that requires quantification
of financial statement misstatements based on the effects of the misstatements
on each of the company's financial statements and the related financial
statement disclosures. This model is commonly referred to as a "dual approach"
because it requires quantification of errors under both the iron curtain and the
roll-over methods. SAB 108 permits existing public companies to initially apply
its provisions either by (i) restating prior financial statements as if the
"dual approach" had always been used or (ii) recording the cumulative effect of
initially applying the "dual approach" as adjustments to the carrying values of
assets and liabilities as of January 1, 2006 with an offsetting adjustment
recorded to the opening balance of retained earnings.
FIN 48 - Accounting for Uncertainty in Income Taxes
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES--AN
INTERPRETATION OF FASB STATEMENT NO. 109 (FIN 48), which provides clarification
related to the process associated with accounting for uncertain tax positions
recognized in consolidated financial statements. FIN 48 prescribes a
more-likely-than-not threshold for financial statement recognition and
measurement of a tax position taken, or expected to be taken, in a tax return.
FIN 48 also provides guidance related to, among other things, classification,
accounting for interest and penalties associated with tax positions, and
disclosure requirements. We are required to adopt FIN 48 on November 1, 2007,
although early adoption is permitted.
F - 13
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(f) NEW ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY (continued):
FSP FAS 123(R)-5, Amendment of FASB Staff Position FAS 123(R)-1
FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that
instruments that were originally issued as employee compensation and then
modified, and that modification is made to the terms of the instrument solely to
reflect an equity restructuring that occurs when the holders are no longer
employees, then no change in the recognition or the measurement (due to a change
in classification) of those instruments will result if both of the following
conditions are met: (a). There is no increase in fair value of the award (or the
ratio of intrinsic value to the exercise price of the award is preserved, that
is, the holder is made whole), or the antidilution provision is not added to the
terms of the award in contemplation of an equity restructuring; and (b). All
holders of the same class of equity instruments (for example, stock options) are
treated in the same manner. The provisions in this FSP shall be applied in the
first reporting period beginning after the date the FSP is posted to the FASB
website. We will evaluate whether the adoption will have any impact on your
financial statements.
F - 14
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 3 - DISCONTINUED OPERATIONS:
On July 31, 2005, Entrust Mortgage, a wholly owned subsidiary, was sold in
exchange for the cancellation of all obligations owed by Entrust Mortgage to the
acquirer and the assumption of certain of Entrust Mortgage's third party
obligations by the acquirer ("the Entrust Mortgage Sale"). Following the Entrust
Mortgage Sale, we had no operations.
Effective with the filing of our Form 10-QSB for the quarter ended September 30,
2005, we have accounted for the Entrust Mortgage Sale and the related operations
as discontinued operations per SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets."
Because the liabilities assumed by the acquirer utilized in the operation of
Entrust Mortgage exceeded the assets, a net gain of $382,729 resulted from the
Entrust Mortgage Sale. This gain on sale coupled with a loss for the period from
the discontinued operations of $262,769 results in income from discontinued
operations net of taxes of $119,960 for the year ended December 31, 2005.
NOTE 4 - STOCKHOLDERS' EQUITY:
On July 26, 2005, at a special meeting of the shareholders, the Company's
shareholders ratified and approved the amendment of the Articles of
Incorporation of the Company to increase the authorized shares of common stock
("Common Stock") from 50,000,000 to 100,000,000 shares.
On August 5, 2005, Arnold P. Kling and R&R Biotech Partners, LLC purchased
1,767,858 shares (49,500,000 pre-reverse split shares - see below) of our Common
Stock in exchange for aggregate gross proceeds of $500,000. Mr. Kling
subsequently assigned his interests under the Purchase Agreement to Moyo
Partners, LLC ("Moyo") an entity which Mr. Kling controls.
On November 1, 2005, a total of 196,429 shares (5,500,000 pre-reverse split
shares) of our Common Stock were authorized for issuance to three individuals
who provided services to the Company. We issued 69,643 shares (1,950,000
pre-reverse split shares) to each of Arnold Kling and Kirk Warshaw for their
services as the Company's president and chief financial officer, respectively,
and 57,143 shares (1,600,000 pre-reverse split shares) to MBA Investors, Ltd.,
an affiliated company of Thomas Pierson, a consultant, for services rendered.
Messrs. Kling and Warshaw's services were valued at $7,800 each and Mr.
Pierson's services at $6,400.
F - 15
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 4 - STOCKHOLDERS' EQUITY (Continued):
On September 18, 2006, the Company effected a one-for-twenty eight reverse split
of its issued and outstanding shares of Common Stock. As a result, as of that
date, the number of issued and outstanding shares of Common Stock was reduced
from 57,612,295 to 2,057,771 shares. As of September 30, 2006, the Company had
100,000,000 shares of Common Stock authorized of which 2,057,771 shares of
Common Stock were issued and outstanding. This reverse stock split has been
reflected in the financial statements retroactively to the earliest period
presented.
During June and November, 2006, a shareholder contributed $15,000 and $14,500,
respectively, to the Company as additional paid-in-capital.
Effective January 11, 2007, Entrust Colorado was merged with and into EFS which
became the surviving corporation. Every issued and outstanding share of Entrust
Colorado was automatically exchanged into one (1) share of EFS (the "Delaware
Merger"), and our current capital structure consists of total authorized capital
stock of 101,000,000 shares of which 100,000,000 shares are common stock, par
value $0.001 per share, and 1,000,000 shares are preferred stock, par value
$0.001 per share. In conjunction with the Delaware Merger, we changed our name
to Enthrust Financial Services, Inc. As of December 31, 2006, there were
2,057,771 shares of common stock and no shares of preferred stock issued and
outstanding. All shares of common stock currently outstanding are validly
issued, fully paid, and non-assessable.
NOTE 5 - STOCK OPTIONS AND WARRANTS:
The following information is provided regarding stock options granted by the
Company:
WEIGHTED AVERAGE
SHARES SUBJECT TO EXERCISE PRICE PER
OUTSTANDING OPTIONS SHARE
December 31, 2004 150,000 $35.84
Granted --
Exercised/Cancelled (50,000) $56.00
--------
December 31, 2005 100,000 $15.40
Granted --
Cancelled (100,000) $15.40
--------
December 31, 2006 -0-
===
F - 16
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 6 - INCOME TAXES:
2006 2005
----------- -----------
Deferred tax assets and liabilities consist of the
following:
Deferred tax assets:
Net operating loss carry forwards $ 1,556,000 $ 1,530,000
Less valuation allowance (1,556,000) (1,530,000)
----------- -----------
$ -- $ --
=========== ===========
At December 31, 2006, the Company had approximately $3,990,000 of net operating
loss carry forwards ("NOL's") available which expires in various years beginning
in 2016. The benefits of these NOL's may be reduced in the future if the Company
is successful in establishing a new business.
NOTE 7 - SUBSEQUENT EVENT:
On January 11, 2007 (the "Effective Date"), Entrust Colorado reincorporated in
the State of Delaware by merger (the "Merger") with and into Enthrust Financial
Services, Inc., a corporation organized by Entrust Colorado under the laws of
the State of Delaware ("Enthrust"). On the Effective Date, in accordance with
the applicable provisions of the Colorado Revised Statutes and the Delaware
General Corporate Laws, Entrust Colorado consummated the Merger and Enthrust
became the surviving entity, the officers, directors and stockholders of Entrust
became the officers, directors and stockholders of Enthrust without any change
in their position(s) or beneficial ownership in Entrust Colorado. In addition to
the aforesaid changes, on the Effective Date, Entrust Colorado trading symbol on
NASDAQ's Over- The- Counter Bulletin Board was changed to "EFSV".
In connection with the Merger, Entrust Colorado filed a Definitive Information
Statement on Schedule 14C (the "Information Statement") with the U.S. Securities
and Exchange Commission on December 20, 2006 and mailed a copy of that
Information Statement to its stockholders on December 22, 2006.
F - 17
ENTHRUST FINANCIAL SERVICES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 7 - SUBSEQUENT EVENT (Continued):
Pursuant to the Information Statement, we anticipated that the Merger would be
with a corporation organized under the laws of the State of Delaware with the
same name. However, subsequent to the filing of the Information Statement we
were informed by the Division of Corporations of the State of Delaware that the
State's Banking Commissioner would not approve our continued use of "Entrust" in
the State of Delaware. In view of that, we changed the name of the surviving
corporation to "Enthrust Financial Services, Inc." prior to the consummation of
the Merger.
F - 18