<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
FORM 8-K-A2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
April 29, 1999
--------------
Date of Report
(Date of Earliest Event Reported)
FIRST TARGET ACQUISITION, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-23905 87-0447497
------ ------- ----------
(State or other juris- (Commission File No.) (IRS Employer
diction of incorporation) I.D. No.)
210 West Fourth Street, Suite 101
East Stroudsburg, Pennsylvania 18301
(Address of Principal Executive Offices)
570-420-0318
Registrant's Telephone Number
3255 South 8820 West
Magna, Utah 84044
-----------------
(Former Name and Address of Principal Executive Offices)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired.
COOPERATIVE IMAGES, INC.
AND ELECTIVE INVESTMENTS, INC.
COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Cooperative Images, Inc. and Elective Investments, Inc.
East Stroudsburg, Pennsylvania
We have audited the accompanying combined balance sheet of Cooperative Images,
Inc. and Elective Investments, Inc. ("the Company") as of December 31, 1998
and the related combined statements of operations, accumulated deficit and
cash flows for the year then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our
audit. The combined financial statements of the Company as of December 31,
1997, and for the year then ended, were audited by other auditors whose report
dated September 9, 1998 except for Note 7 as to which the date is June 16,
1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1998 and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, certain conditions
indicate that the Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
LAZAR LEVINE & FELIX LLP
New York, New York
June 17, 1999
<PAGE>
<TABLE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
- ASSETS -
1998 1997
______ ______
<S> <C> <C>
Cash $ 202,340 $ 47,232
Accounts receivable, net of allowance of
$10,465 and $-0- for 1998 and 1997,
respectively (Note 10) 204,690 17,478
Notes receivable, net of allowance for uncollectible
notes of $1,907,135 and $300,000 for 1998 and 1997,
respectively (Notes 4 and 5) 6,297,833 1,749,006
Interest receivable 81,447 38,628
Loan receivable, shareholder (Note 11) 14,000 -
Prepaid expenses and other assets 232,075 6,543
Property and equipment - net (Notes 6, 8 and 10) 413,556 166,894
$ 7,445,941 $ 2,025,781
- LIABILITIES AND SHAREHOLDERS' DEFICIT -
Notes payable (Note 7) $ 205,500 $ -
Lines-of-credit payable (Note 4) 8,146,363 2,140,555
Accounts payable 482,751 157,292
Accrued expenses (Note 7) 291,188 498,326
Capital lease obligations (Note 8) 100,619 -
Payroll and payroll taxes payable 122,927 104,807
Provisions for recourse obligation (Note 5) 130,879 140,000
Notes payable - shareholders (Note 10) 338,650 138,650
Other liabilities (Note 12) 1,772,068 28,990
11,590,945 3,208,620
COMMITMENTS AND CONTINGENCIES (Notes 4, 7 and 9)
SHAREHOLDERS' (DEFICIT):
Common stock:
Cooperative Images, Inc., no par; authorized
1,000 shares, issued and outstanding 206 shares
for 1998 and 202 shares for 1997 150,506 150,506
Elective Investments, Inc., no par; authorized
1,000 shares, issued and outstanding 206 shares
for 1998 and 202 shares for 1997 150,506 150,506
Accumulated deficit (4,446,016)1,483,851)
(4,145,004)1,182,839)
$ 7,445,941 $2,025,781
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<TABLE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
REVENUE:
Marketing fees $ 3,599,051 $ 2,470,155
Gain on sale of notes receivable 609,037 -
Interest from patient financing 1,334,988 136,457
Other 70,704 3,964
TOTAL REVENUE 5,613,780 2,610,576
SALES AND MARKETING EXPENSES:
Media, advertising and promotion 2,624,005 1,064,004
Payroll and payroll taxes 1,302,324 764,304
Telephone 366,194 158,442
Credit reporting services 222,670 82,431
Other 193,079 154,531
TOTAL SALES AND MARKETING EXPENSES 4,708,272 2,223,712
GENERAL AND ADMINISTRATIVE EXPENSES:
Rent and utilities 94,136 57,821
Payroll and payroll taxes 1,055,055 396,534
Professional and consulting 597,409 355,716
Other 557,306 293,595
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 2,303,906 1,103,666
OTHER EXPENSES:
Interest 1,242,057 53,920
Bad debts 321,710 541,534
TOTAL OTHER EXPENSES 1,563,767 595,454
TOTAL EXPENSES 8,575,945 3,922,832
NET LOSS (2,962,165) $(1,312,256)
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
COMBINED STATEMENTS OF ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
______________
<C> <C>
ACCUMULATED DEFICIT, BEGINNING OF YEAR $(1,483,851) $(171,595)
Net loss (2,962,165) (1,312,256)
ACCUMULATED DEFICIT, END OF YEAR $(4,446,016)$(1,483,851)
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
_______________
<C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,962,165) $(1,312,256)
Adjustments to reconcile net income to net
cash (used)by operating activities:
Depreciation 55,294 23,273
Bad debts 321,710 541,534
Changes in assets and liabilities:
(Increase) in accounts and interest receivable (240,496) (186,438)
(Increase) in other assets (239,532) (6,543)
Increase (decrease) in accounts payable 325,459 (50,109)
(Decrease) increase in accrued expenses (207,138) 498,326
Increase in payroll and payroll taxes payable 18,120 74,655
Increase in other liabilities 1,733,957 27,730
Net cash (used) in operating activities (1,194,791) (389,828)
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable purchased (6,836,669) (2,680,354)
Proceeds from collection of notes receivable 1,976,597 665,313
Acquisition of fixed assets (241,557) (152,993)
Net cash (used) in investing activities (5,101,629) (2,168,034)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on lines-of-credit 6,005,808 2,140,555
Borrowing from shareholders 200,000 100,000
Borrowing of other debt 383,198 -
Repayment of notes payable (137,478) -
Issuance of common stock - 300,012
Net cash provided by financing activities 6,451,528 2,540,567
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 155,108 (17,295)
Cash and cash equivalents, beginning of year 47,232 64,527
CASH AND CASH EQUIVALENTS, END OF YEAR $ 202,340 $ 47,232
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,192,558 $ 53,920
Acquisition of equipment in exchange for
capital leases and notes payable $ 60,399 -
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS:
Cooperative Images, Inc., (CII) was incorporated in New Jersey on
December 5, 1994 and is in the business of direct response marketing through
radio, television and the Internet. After it pre-screens patients interested
in cosmetic surgery for creditworthiness, CII refers the patients generated
from its marketing programs to participating surgeons who pay CII a monthly
marketing fee.
Elective Investments, Inc., (EII) was incorporated in Pennsylvania
on November 26, 1996. EII prepares financing packages for creditworthy
patients of surgeons. A substantial portion of the resulting receivables
between the surgeons and the patients are purchased by EII from the surgeons.
It also pre-screens patients interested in cosmetic surgery for
creditworthiness for surgeons who generate their own patients separately from
CII's marketing programs.
See Note 3(a) as regards combined financial statements.
NOTE 2 - GOING CONCERN UNCERTAINTY:
The accompanying combined financial statements have been prepared
on a going concern basis which contemplates the realization of assets and
liquidation of liabilities in the ordinary course of business. During the
year ended December 31, 1998 the Company incurred significant losses, which
increased the accumulated deficit. While the Company's cash increased by
$155,108 during 1998, the Company's liabilities exceeded it's assets by
$4,145,004. In addition, the Company was not in compliance with certain of
the restrictive covenants for its lines-of-credit and was in default on one of
its notes payable. The combined financial statements do not include any
adjustments that may be necessary if the Company is unable to continue as a
going concern. Should certain unforseen negative events occur, such as the
loss of funding for loan purchases by a lender or accelerated payment terms
for loan covenant violations, existing capital constraints may limit the
ability of the Company to pay its obligations timely to vendors and lenders
and lead to possible loss of services or funding.
The Company has started to mitigate these concerns, in part, by
completing a reverse merger and an agreement and plan of reorganization to
become a public entity, which management believes will enable the Company to
issue a private placement memorandum to raise additional capital. In
addition, as a public entity, the Company converted $1,538,000 of obligations
to equity. The Company plans to use a portion of the additional capital to
further develop its website and purchase additional websites. The websites
will enhance the Company's ability to implement its strategy to expand it's
target market, while reducing its costs per patient lead. Furthermore, a
company controlled by three of the Company's shareholders has also agreed to
convert $300,000 of debt obligations to equity. In addition, the three
shareholders agreed to make available an aggregate of 1,166,667 shares in the
new public entity at a significant discount as an incentive for potential
investors in a private placement. The Company has also signed an agreement
with a finance company to provide an additional source of funding for loan
purchases and is seeking a contract with a media company to exchange media
credits for an equity interest in the Company, primarily to lower the cost of
future media costs (Note 12).
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) Principles of Combination:
The combined financial statements include the accounts of
Cooperative Images, Inc., and Elective Investments, Inc. (together, the
Company). Both companies are owned by the same shareholders. All significant
intercompany accounts and transactions have been eliminated.
Due to the nature of the majority of the Company's business,
financing elective surgery, the balance sheet is reflected on an unclassified
basis. Accordingly, current assets and current liabilities are not reflected
separately on the face of the balance sheets.
Certain reclassifications have been made to the 1997 financial
statements to conform to the presentation used in 1998.
On January 25, 1999, subsequent to the balance sheet date,
Cooperative Images, Inc. changed its name to thatlook.com.Inc. by filing an
amendment to its certificate of incorporation. In April 1999, Elective
Investments, Inc. became a wholly-owned subsidiary when all its shareholders
contributed their respective shares of capital stock to thatlook.com, Inc.
(2) Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions for the reporting period and as of the financial statement
date. These estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities and the reported
amounts of revenues and expenses. Actual results could differ from these
estimates.
(3) Concentration of Credit Risks:
The Company's accounts receivable are from numerous surgeons and
are not concentrated in any specific geographic region. However, for notes
receivable, the primary concentration of credit risk relates to loans
purchased from surgeons whose patients may not be able to obtain traditional
bank financing.
The Company maintains cash with various banks. At times such
amounts may exceed the FDIC federally insured limits. The Company limits the
credit exposure with any one financial institution by periodically reviewing
the financial statements of the institution and believes that no significant
concentration of credit risk exists with respect to cash.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(4) Notes Receivable:
Notes receivable are purchased from cosmetic surgeons at a
discount to the remaining principal balance. The discount is credited to the
allowance for uncollectible notes receivable. Additional amounts added to the
allowance for uncollectible notes receivable are charged to expense. Interest
income from financing is accrued, but stops accruing when a patient's payments
are delinquent 60 or more days. Notes receivable are written off when
patient's payments are delinquent 180 days.
(5) Property and Equipment:
Owned property and equipment is valued at cost. Depreciation is
provided on the straight-line method at rates based on the estimated useful
lives of individual assets or classes of assets. Improvements to leased
properties or fixtures are amortized over their estimated useful lives or
lease period, whichever is shorter.
Leased property meeting certain criteria are capitalized. The
assets and liabilities under capital leases are recorded at the lower of the
present value of the minimum lease payments or the fair value of the asset.
Depreciation of capitalized leased assets is computed on the straight-line
method over the lower of the term of the leases or their estimated productive
lives.
Normal repairs and maintenance are expensed as incurred.
Expenditures which materially increase values, change capacities or extend
useful lives are capitalized. Replacements are capitalized and the property
and equipment accounts are relieved of the items being replaced. The related
costs and accumulated depreciation of disposed assets are eliminated and any
gain or loss on disposition is included in income.
(6) Income Taxes:
Both CII and EII each elected under Internal Revenue Code Section
1362(a) to be taxed as a small business corporation (S Corporation) whereby
income is taxed directly to the shareholders. CII has also elected S status
for state purposes. (See Note 12 concerning the termination of S corporation
status due to the recapitalization).
(7) Cash and Cash Equivalents:
For the purpose of cash flow reporting, cash and cash equivalents
include cash, money market funds, government securities, and certificates of
deposit with maturities of three months or less.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(8) Media, Advertising and Promotion:
Costs incurred for producing and communicating advertising are
generally expensed as incurred, except for production costs and some costs of
direct-response advertising. Commercials are expensed when aired.
Production costs are expensed the first time the advertising takes place.
Direct-response advertising costs for customers who could be shown to have
responded specifically to the advertising and result in probable future
benefits are reported as assets. Direct-response advertising costs are
amortized over the estimated period of benefits. For the years ended December
31, 1998 and 1997, advertising costs aggregated $2,624,005 and $1,064,004,
respectively.
(9) Valuation of Long Lived Assets:
The Company's policy is to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company establishes guidelines for
determining fair value based on future net cash flows for the use of the
assets and for the measurement of an impairment loss. Any impairment loss is
recorded in the period in which the recognition criteria are first applied and
met.
(10) Statement of Comprehensive Income:
SFAS 130 "Reporting Comprehensive Income" is effective for years
beginning after December 15, 1997. This statement prescribes standards for
reporting other comprehensive income and its components. Since the Company
currently does not have any items of other comprehensive income, a statement
of comprehensive income is not yet required.
(11) Segment Reporting:
In June 1997, the Financial Accounting Standards Board also issued
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," which establishes the standards for the manner in which public
enterprises are required to report financial and descriptive information about
their operating segments. The statement defines operating segments as
components of an enterprise for which separate financial information is
available and evaluated regularly as a means of assessing segment performance
and allocating resources to segments. A measure of profit or loss, total
assets, and other related information are required to be disclosed for each
operating segment. In addition, this statement requires the annual disclosure
of information concerning revenues derived from the enterprise's products or
services, countries in which it earns revenue or holds assets, and major
customers. The statement is also effective for fiscal years beginning after
December 15, 1997. The adoption of SFAS No. 131 did not affect the
corporation's results of operations or financial position for the year ended
December 31, 1998 since it was not a public entity, but, will require
additional disclosure for the year ending December 31, 1999.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(l2) Impact of the Year 2000 Issue:
The year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
computer programs that have date sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could potentially
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in other similar normal business
activities. The Company is in the process of upgrading its computer software
to increase operational efficiencies and information analysis in order to
ensure, to the extent practicable, that the new systems properly utilize dates
beyond December 31, 1999.
NOTE 4 - LINES-OF-CREDIT:
The Company utilized two lines-of-credit to fund notes receivable
purchases during 1998.
Line-of-credit with a finance company permitting maximum
borrowings of $6,000,000, due on demand, which was increased to $8,000,000 in
August 1998, with interest payable at an annual rate of 20%. Borrowings were
advanced at 95% of the present value of the remaining payments on the notes
receivable. Five percent of the amount advanced is retained in a hold back
account by the lender. Repayment terms generally require repayment using the
average remaining term of the notes receivable that represent the collateral
for the line-of-credit. At December 31, 1998, the Company was not in
compliance with certain of the restrictive covenants of this agreement and has
obtained a waiver there of through June 7, 1999. Amounts outstanding under
this line-of-credit for the years ended December 31, 1998 and 1997 were
$7,355,384 and $2,259,475, respectively, net of the hold back of $462,019 and
$118,920, respectively.
Line-of-credit with a bank obtained in July 1998 permitting
maximum borrowings of $1,275,000, due on demand, with interest payable at the
bank's base rate (8% at December 31, 1998) plus 4%, totaling an annual rate of
12% at December 31, 1998. Borrowings were advanced at 65% of the scheduled
loan payments over the life of the note receivable. Repayment terms require
that patients' payments are applied to the line-of-credit and accrued interest
to reduce the line-of-credit consistent with the reduction in the value of the
collateral. The amounts owed on the line-of-credit may not exceed 65% of
future scheduled patients' payments. Accounts greater then 60 days past due
are excluded by the bank from the collateral base. Subsequent to December
31, 1998, the Company was not in compliance with certain of the restrictive
covenants and received a waiver through June 14, 1999. Amounts outstanding
under this line-of-credit for the years ended December 31, 1998 and 1997 were
$1,252,998 and $0, respectively.
Both lines-of-credits are collateralized by notes receivable and
are guaranteed by the Company's principal shareholder.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 5 - NOTES RECEIVABLE:
Notes receivable are purchased generally at 50% and 80% of the
face amount of the note, bear interest at 15% to 25% per annum, are generally
receivable over 24 to 48 months and are not collateralized. Scheduled
repayments on the notes are:
1999 $ 4,156,863
2000 3,555,209
2001 2,547,677
2002 752,271
2003 (and thereafter) 276,586
11,288,606
Less:
Interest 3,083,638
Allowance for uncollectible notes 1,907,135
$ 6,297,833
Although these are the scheduled collections, these amounts are not
necessarily indicative of the actual cash flows based upon past experience.
During 1997, the Company sold notes receivable of approximately $650,000
to a finance company subject to limited recourse, and provided an estimated
recourse obligation of $38,465 and $140,000 at December 31, 1998 and 1997,
respectively. During 1998, the Company sold additional loans receivable of
$2,498,051 to a separate finance company subject to limited recourse, and
provided an additional estimated recourse obligation of $92,414 at December
31, 1998., The estimated recourse obligation to both finance companies
aggregated $130,879 and $140,000 at December 31, 1998 and 1997, respectively.
NOTE 6 - PROPERTY AND EQUIPMENT, NET:
At December 31, property and equipment was comprised of the following:
1998 1997
Furniture and fixtures $ 58,026 $ 33,189
Equipment 86,578 54,469
Computer equipment 340,145 106,555
Leasehold improvements 11,420 -
496,169 194,213
Less accumulated depreciation 82,613 27,319
Property and Equipment, net $413,556 $166,894
Depreciation for the years ended December 31, 1998 and 1997 aggregated
$55,294 and $23,273, respectively.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 7 - NOTE PAYABLE:
On May 5, 1998, the Company entered into an agreement with a
teleservices company to borrow $200,000 with a 15% annual interest rate,
payable in full on November 30, 1998. The note was delivered by the payee to
provide inbound teleservices as defined. At December 31, 1998 the balance
due on the note was $180,000. The note is personally guaranteed by the
principal shareholder of the Company. At December 31, 1998, the Company was
in default under this note and the payee has instituted a lawsuit for
repayment of the balance plus interest. The Company has countersued claiming
inadequate performance in providing inbound teleservices. A judgment in the
amount of $202,550 plus accrued interest has been entered against the Company
for outstanding principal payments, interest and teleservices invoices. The
difference between the $180,000 principal balance and $202,550 judgement and
additional accrued interest has been recorded as a liability by the Company
and is included in accrued expenses in the financial statements.
On April 14, 1998, the Company signed a demand note for $50,000 that
bears interest at 20% per annum. Minimum payments of $3,500 and accrued
interest are payable monthly with a $4,500 balloon payment due on July 1,
1999. The balance at December 31, 1999 was $25,500
The balances payable at December 31, 1998 were as follows:
Note payable - due November 30, 1998 $180,000
Note payable - due July 1, 1999 25,500
$205,500
NOTE 8 - OBLIGATIONS UNDER CAPITAL LEASES:
During the year December 31, 1998, the Company obtained property and
equipment under capital leases maturing from 1999 through 2002 which are
collateralized by the underlying property and equipment. The assets and
liabilities under capital leases are recorded at the lower of the present
values of the minimum lease payments or the fair values of the assets. The
assets are included in property and equipment.
As of December 31, 1998 minimum future lease payments under these
capital leases are:
Year ending December 31,
1999 $ 51,139
2000 44,029
2001 21,623
2002 5,521
Total 122,312
Less: amounts representing interest 21,693
Net minimum lease payments $100,619
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
Brokers Fees:
The Company has agreed to pay a broker's fee of 1/2% on all advances
received on loan sales or amounts advanced from lines-of-credit for loan
purchases. In addition, the Company has agreed to pay an additional 1% to a
principal shareholder for guarantee fees (see Note 11).
Operating Leases:
The Company leases under short and long-term operating leases, including
office and equipment leases. Minimum future lease payments over the next five
years are as follows:
Office Space Equipment Total
1999 $103,840 $ 3,307 $107,147
2000 - 3,307 3,307
2001 - 3,307 3,307
2002 - 551 551
Total $103,840 $10,472 $114,312
Rent expense for the years ended December 31, 1998 and 1997
aggregated $94,136 and $57,821, respectively.
Management agreement:
The Company has a management consulting agreement with an entity
in which the Company's principal shareholder is a principal. The agreement
requires monthly payments of $7,833 through December 31, 2000. Consulting
fees for the years ended December 31, 1998 and 1997 aggregated $94,000 and
$94,000, respectively.
Contingencies:
The Company is party to several pending legal proceedings and
claims. Although the outcome of such items cannot be determined with
certainty, the Company's general counsel and management are of the opinion
that provisions made for potential losses are adequate and any further
liabilities and costs should not have a material adverse effect on the
Company's results of operations or financial position.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 10 - NOTES PAYABLE - SHAREHOLDERS:
The balance payable at December 31, was as follows:
1998 1997
Senior promissory notes payable - due May 1, 2000 $300,000 $100,000
Demand note payable 38,650 38,650
$338,650 $138,650
Senior Promissory Notes Payable:
The notes bear interest at 12% per annum with interest payable
quarterly, and are payable to a company controlled by three shareholders. The
principal balance is due May 1, 2000. The notes are senior in right of
payment of all other indebtedness of the Company, except for wages to
employees, taxes, receivable financing subject to limitations, and officers
salaries subject to limitations. The notes are collateralized by a security
interest in accounts receivable, property and equipment, and general
intangibles. The Company's principal shareholder has personally guaranteed
$150,000 of the Company's obligation under the notes. In June 1999, the three
shareholders agreed to convert the notes to equity (Note 12).
Demand Note Payable:
The Demand note bears interest at 12% per annum with interest
payable quarterly, and is payable to the Company's principal shareholder. The
note is unsecured. The principal balance is due December 31, 1999. In May
1999 this note was also converted to equity (Note 12)
NOTE 11 - RELATED PARTY TRANSACTIONS:
The Company incurred management fees and other related costs to
certain officers and shareholders or to entities in which certain officers and
shareholders are principals of $196,600 and $178,909 in 1998 and 1997,
respectively. The management fees are primarily for marketing consulting
services based upon a four-year contract expiring December 31, 2000. The
management fees paid to a company controlled by three shareholders are for
assisting with special projects and specific management decisions ( Note 12).
Management fees payable were $28,103 and $9,390 at December 31, 1998 and 1997.
In addition, the Company incurred guarantee fee obligations to a principal
shareholder of $103,182 and $22,595 during 1998 and 1997, respectively for
personally guaranteeing the Company's lines-of-credit. Guarantee fees payable
were $22,947 and $7,462 at December 31, 1998 and 1997 (Note 9). Included in
interest expense for the year ended December 31, 1998 and 1997 was $34,500 and
$1,000, respectively representing interest paid to an affiliated entity of
certain shareholders related to monies lent to the Company (Note 10).
The Company is owed $14,000 from one its shareholders. The note
bears interest at 13% and is payable upon demand.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 12 - SUBSEQUENT EVENTS:
Demand Notes:
On March 13, 1999, the principal shareholder loaned $25,000
to the Company. The note is payable on demand and calls for interest at the
rate of 13% per annum. On the same date, another shareholder loaned the
Company $25,000 with the same terms as above. Additionally, on April 7, 1999,
an entity owned by the principal shareholder of the Company, loaned $170,000
to the Company. The note is payable on demand and calls for interest at the
rate of 13% per annum.
Recapitalization:
On April 29, 1999, the Company completed a reverse merger with a
public entity, whereby a 100% interest in the Company was acquired by First
Target Acquisition, Inc. (FTA), a Nevada corporation, in exchange for
9,990,000 "restricted" shares of FTA. The Company, which is the surviving
entity, became a wholly owned subsidiary of FTA. The reverse merger was
accounted for as a recapitalization. Prior to the reverse merger FTA had been
dormant and operationally inactive for many years.
After the reverse merger, FTA converted debt of two creditors in
the total principal amount of $1,538,000 into unregistered and restricted
shares of FTA's common stock. The number of shares issued to the first
subscribing creditor was calculated using $3,000,000 (representing two times
the total outstanding principal amount of $1,500,000 owed to that creditor)
divided by the average closing bid price of FTA's common stock on the OTC
Bulletin Board of the National Association of Securities Dealers, Inc., over
the 10 trading days following the closing of the Plan. At December 31, 1998
the amount due this creditor was approximately $1,571,000 and is included in
other liabilities. The second creditor, a principal shareholder, was issued
a number of shares equal to $49,400 (representing 1.3 times the total
outstanding principal amount of $38,000 owed to that creditor) divided by the
average closing bid price of FTA's common stock on the OTC Bulletin Board over
the 10 days following the closing of the Plan. The average closing bid price
was $6.55, and as a result, 458,032 shares were issued to satisfy the
$1,500,000 debt and 7,541 shares were issued to satisfy the $38,000 debt.
After the above recapitalization, but prior to the issuance of the
shares to the two creditors there were approximately 11,100,000 shares of FTA
issued and outstanding. After the debt conversion there were 11,565,573
shares issued and outstanding.
As a result of the recapitalization, the Company is no longer an S
corporation (see Note 3a).
Partial Shareholders' Buyout/Conversion of Debt:
In June 1999, a company controlled by three shareholders entered
into an agreement to convert outstanding notes of $300,000 into 231,696 shares
of FTA's common stock. In addition, this affiliated company and it's three
shareholders also agreed , as part of a proposed private placement memorandum
for FTA, to make available 1,166,667 shares at a significant discount to
substantial purchasers of FTA's common stock. Substantial purchasers are
defined in the proposed private placement memorandum as purchasers of at least
200,000 shares through the private placement. The three shareholders also
agreed to terminate their management agreement as of the date of these
agreements.
<PAGE>
COOPERATIVE IMAGES, INC. AND
ELECTIVE INVESTMENTS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 12 - SUBSEQUENT EVENTS (Continued):
Agreement with Additional Finance Company:
The Company signed an agreement with an additional finance company
to sell up to $2 million per month of notes receivable purchased from surgeons
to the finance company immediately after the notes are purchased from
surgeons. The term of the agreement is 90 days, and at the option of the
finance company extendable for additional 90 day periods for up to one year.
Also, the finance company agreed, to pay the Company for a three year period a
referral fee for introducing the finance company to a breast implant
manufacturer to provide patient financing for the manu- facturer's surgeons.
The fee represents a percentage of all patients' notes receivable purchased by
the finance company. Both agreements are subject to final approval by the
breast implant manufacturer.
(b) Pro Forma Financial Information.
FIRST TARGET ACQUISITION, INC AND SUBSIDIARIES
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma financial statements have been prepared
based upon certain pro forma adjustments to the historical financial
statements of First Target Acquisition, Inc. (FTA) and Subsidiaries
(collectively called the Company). The pro forma financial statements should
be read in conjunction with the notes thereto and the historical financial
statements of the Company.
The accompanying pro forma balance sheet has been presented as if the
acquisition described below occurred at March 31, 1999. The accompanying pro
forma statements of operations have been prepared as if the acquisition
occurred at the beginning of the three-month period ended March 31, 1999 and
at the beginning of the twelve-month period ended December 31, 1998. These
pro forma consolidated statements of operations do not purport to be
indicative of future results or of the results which would actually have been
obtained had the pro forma transactions been completed as of the beginning of
the three-month period ended March 31, 1999 and at the beginning of the
twelve-month period ended December 31, 1998.
The pro forma transaction (see Notes to pro forma consolidated financial
statements) is as follows:
Effective April 29, 1999 FTA acquired 100% of the outstanding securities of a
New Jersey corporation, thatlook.com, in exchange for 9,990,0000 restricted
shares of FTA through a reverse merger. thatlook.com which is the surviving
operating entity, became a wholly owned subsidiary of FTA. The reverse merger
was accounted for as a recapitalization.
<PAGE>
FIRST TARGET ACQUISITION, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31,1999
(UNAUDITED)
[NOTE: DUE TO THE HORIZONTAL SPACE LIMITATIONS ASSOCIATED WITH FILING THIS
DOCUMENT ELECTRONICALLY, THE COLUMNS CONTAINING HISTORICAL AND PRO FORMA
INFORMATION, WHICH WOULD NORMALLY APPEAR SIDE BY SIDE ON THE PAGE, HAVE BEEN
REFORMATTED; THE PRO FORMA FINANCIAL INFORMATION IS NOW LOCATED DIRECTLY UNDER
THE HISTORICAL INFORMATION.]
Historical .
----------
thatlook.com
FTA and Subs.
--- ---------
ASSETS-
Cash $ 220,569
Accounts Receivable, net allowance
of $38,465 143,690
Notes receivable, net of allowance for
uncollectible notes of $1,878,858 5,825,748
Interest receivable 81,447
Loan receivable, shareholder 14,000
Prepaid expenses and other assets 297,977
Property and equipment-net - 390,729
- 6,974,160
- -LIABILITIES AND SHAREHOLDERS'DEFICIT-
Notes payable 195,000
Lines-of-credit payable 7,578,783
Accounts payable 20,809 543,670
Accrued expenses 463,611
Capital lease obligations 90,096
Payroll and payroll taxes payable 71,981
Provisions for recourse obligation 170,889
Notes payable - shareholders 388,650
Other liabilities 1,887,023
20,809 11,389,703
SHAREHOLDERS' (DEFICIT):
Common Stock 323 301,012
Additional paid-in-capital 312,351 0
Retained deficit (333,483) (4,716,555)
(20,809) (4,415,543)
$ 0 $ 6,974,160
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST TARGET ACQUISITION, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31,1999
(UNAUDITED)
Pro Forma
Adjustments Pro Forma
Debit Credit Consolidated
----- ------ ------------
ASSETS-
Cash $ 220,569
Accounts Receivable, net allowance
of $38,465 143,690
Notes receivable, net of allowance for
uncollectible notes of $1,878,858 5,825,748
Interest receivable 81,447
Loan receivable, shareholder 14,000
Prepaid expenses and other assets 297,977
Property and equipment-net 390,729
6,974,160
- -LIABILITIES AND SHAREHOLDERS'DEFICIT-
Notes payable 195,000
Lines-of-credit payable 7,578,783
Accounts payable 140,000(b) 704,479
Accrued expenses 463,611
Capital lease obligations 90,096
Payroll and payroll taxes payable 71,981
Provisions for recourse obligation 170,889
Notes payable - shareholders 338,000(c) 50,650
Other liabilities 1,500,000(d) 387,023
9,712,512
SHAREHOLDERS' (DEFICIT):
Common Stock 290,235(a) 239(c) 11,797
458(d)
Additional paid-in-capital 140,000(b) 290,235(a) 2,299,889
337,761(c)
1,499,542(d)
Retained deficit (5,050,038)
(2,738,352)
2,267,538 $2,267,538 $6,974,160
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST TARGET ACQUISITION, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999
(UNAUDITED)
Historical
----------
thatlook.com
FTA and Subs.
--- ---------
REVENUE:
Marketing fees $ 894,589
Gain on sale of notes receivable 328,659
Interest from patient financing 367,024
Other 44,558
TOTAL REVENUE 1,634,830
SALES AND MARKETING EXPENSES
Media, advertising and promotion 344,486
Payroll and payroll taxes 288,665
Telephone 57,435
Credit reporting services 51,474
Other 18,326
TOTAL SALES AND MARKETING EXPENSES 760,386
GENERAL AND ADMINISTRATIVE EXPENSES
Rent and utilities 26,702
Payroll and payroll taxes 295,084
Professional and consulting 98,065
Other 14,327 166,446
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 14,327 586,297
OTHER EXPENSES:
Interest 475,699
Bad debts 82,987
TOTAL OTHER EXPENSES 558,686
TOTAL EXPENSES 14,327 1,905,369
NET LOSS $(14,327) $(270,539)
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
FIRST TARGET ACQUISITION, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31,1999
(UNAUDITED)
Pro Forma
Adjustments Pro Forma
Debit Credit Consolidated
----- ------ ------------
REVENUE:
Marketing fees $ 894,589
Gain on sale of notes receivable 328,659
Interest from patient financing 367,024
Other 44,558
TOTAL REVENUE 1,634,830
SALES AND MARKETING EXPENSES
Media, advertising and promotion 344,486
Payroll and payroll taxes 288,665
Telephone 57,435
Credit reporting services 51,474
Other 18,326
TOTAL SALES AND MARKETING EXPENSES 760,386
GENERAL AND ADMINISTRATIVE EXPENSES
Rent and utilities 26,702
Payroll and payroll taxes 295,084
Professional and consulting $9,000(e) 89,065
Other 180,773
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 591,624
OTHER EXPENSES:
Interest 58,487(f) 408,212
9,000(g)
Bad debts 82,987
TOTAL OTHER EXPENSES 491,199
TOTAL EXPENSES 1,843,209
NET LOSS $76,487 $(208,379)
BASIC LOSS PER SHARE $0.02
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,797,269
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST TARGET ACQUISITION, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
Historical
----------
thatlook.com
FTA and Subs
--- --------
REVENUE:
Marketing fees $ 3,599,051
Gain on sale of notes receivable 609,037
Interest from patient financing 1,334,988
Other 70,704
TOTAL REVENUE 5,613,780
SALES AND MARKETING EXPENSES
Media, advertising and promotion 2,624,005
Payroll and payroll taxes 1,302,324
Telephone 366,194
Credit reporting services 222,670
Other 193,079
TOTAL SALES AND MARKETING EXPENSES 4,708,272
GENERAL AND ADMINISTRATIVE EXPENSES
Rent and utilities 94,136
Payroll and payroll taxes 1,055,055
Professional and consulting 597,409
Other 11,656 557,306
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 11,656 2,303,906
OTHER EXPENSES:
Interest 1,242,057
Bad debts 321,710
TOTAL OTHER EXPENSES 1,563,767
TOTAL EXPENSES 11,656 8,575,945
NET LOSS $(11,656) $(2,962,165)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST TARGET ACQUISITION, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
Pro Forma
Adjustments Pro Forma
Debit Credit Consolidated
----- ------ ------------
REVENUE:
Marketing fees $ 3,599,051
Gain on sale of notes receivable 609,037
Interest from patient financing 1,334,988
Other 70,704
TOTAL REVENUE 5,613,780
SALES AND MARKETING EXPENSES
Media, advertising and promotion 2,624,005
Payroll and payroll taxes 1,302,324
Telephone 366,194
Credit reporting services 222,670
Other 193,079
TOTAL SALES AND MARKETING EXPENSES 4,708,272
GENERAL AND ADMINISTRATIVE EXPENSES
Rent and utilities 94,136
Payroll and payroll taxes 1,055,055
Professional and consulting $36,000(e) 561,409
Other 568,962
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 2,279,562
OTHER EXPENSES:
Interest 36,000(g) 1,206,057
Bad debts 321,710
TOTAL OTHER EXPENSES 1,527,767
TOTAL EXPENSES 8,515,601
NET LOSS $72,000 $(2,901,821)
BASIC LOSS PER SHARE $0.25
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,797,269
<PAGE>
FIRST TARGET ACQUISITION, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and December 31, 1998
(UNAUDITED)
Note (a) - Reflects recapitalization associated with reverse merger.
Note (b) - Reflects acquisition costs associated with reverse merger
and a reduction of equity for those costs.
Note (c) - Reflects the conversion of $338,000 of shareholders' notes
payable for 239,237 shares by a principal shareholder and a
company controlled by three shareholders.
Note (d) - Reflects the conversion of $1,500,000 of debt to equity for
458,032 shares by a vendor.
Note (e) - Reflects the termination of a management agreement with a
company controlled by three shareholders as part of a
partial buyout agreement.
Note (f) - Reflects elimination of interest costs related to
conversion of debt to equity by a vendor.
Note (g) - Reflects elimination of interest costs related to a partial
shareholder buyout agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
FIRST TARGET ACQUISITION, INC.
Date: 7-14-99 By: /s/ Gerard A. Powell
--------- --------------------------------------
Gerard A. Powell
President and Director
</TABLE>
