UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECUIRITES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
Collision King. Inc.
- - --------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 73-1284771
- - ------------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation organization)
One Prodigy Way, McAlester, OK 74502
- - ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (918) 423-4538
---------------
Securities to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
Common OTC NASDAO
Securities to be registered pursuant to Section 12(g) of the Act.
<PAGE>
THE COMPANY
No. 1
- - -----
Exact Corporate Name: Collision King, Inc. (The "Company")
State and date of incorporation: Nevada. The Company was incorporated
in Nevada on September 6, 1900 as "Aberdeen Mining and Exploration
Company." On May 28, 1987, the Issuer changed its name to "Public
Service Corporation." On August 31, 1993 the Issuer changed its name
to Prodigy Advanced Repair Technology Corp. On July 21, 1997, the
Issuer amended its article of incorporation to reflect its present
name. Street address of principal office: Collision King, Inc., One
prodigy Way, McAlester, OK 74501 Company Telphone Number:
918-423-4538, Fax 918-423-4580 Fiscal Year: December 31 Person(s) to
contact at Company with respect to report: Lavell Chisum,
President/Director, One Prodigy Way, McAlester, OK 74501. Telephone
Number: 918-423-4538
BUSINESS AND PROPERTIES
No. 3
- - -----
With respect to the business of the Company and its properties:
(a) Describe in detail what business the Company does and proposes to do,
including what product or goods are or will be produced or services
that are or will be rendered.
The Company manufactures and sells automobile collision repair
machines (Real Liner 80-17 and RealLiner 88-20) used byt
collision repair facilities to straighten the frames and align
the bodies of collision damaged vehicles. The patented machines
uses state of the art 1990's technology to improve on a 1960's
technology device previously invented by the Issuer's president,
F. Lavell Chisum.
As of the date of this report, the Company has delivered over one
hundred fifty machines.
(b) Describe how these products or services are to be produced or rendered
and how and when the Company intends to carry out its activities. If
the Company plans to offer a new product(s), state the present stage
of development, including whether or not a working protype(s) is in
existence. Indicate if completion of development of the product would
require a material amount of the resources of the Company, and the
estimated amount. If the Company is or is expected to be dependent
upon on or a limited number of suppliers for essential raw materials,
energy or other items, describe. Describe any major existing supply
contracts. NONE.
The Company manufactures a machine originally conceived,
designed, invented and patented by F. Lavell Chisum in the 1970's
1
<PAGE>
that could not only straighten the frames of automobiles twisted
in collisions, but also straighten the "uni-body" cars emerging
in the 1970's. The device holds the body of a care in multiple
places and pulls the frame or body in a compound motion, opposite
of the collision damage. The enhanced version of the machine
manufactured by the Company utilized integrated systems
technology to manage an adjustable care lift and four-post
measuring and holding device which allows operation by one
techinician, creating more flexibility, efficiency, and
productivity. A single heavy duty hydraulic pump accomplishes the
multiple pulling while the technician simutaneously monitors the
three-dimensional measuring pointers beneath the vehicle to
determine correct alignment for length,width,height and
structural dimensions. The RealLiner series meets most insurance
companies criteria for frame/body realignment. The criterias are:
(1) a sourceof frame/body dimensions, including unibody
dimensions, for the types of vehicles repaired. (2) a hoist,rack
or bench to elevate the vehicle for under-body damage inspection
and diagnosis. (3) a four-point anchoring system capable of
holding the vehicle in a stationary position during structural
body pulls, suitable for the types of vehicles to be repaired
(e.gl pinch weld clamps for use with unibody vehicles). (4) the
equipement and capability to remove and reinstall suspension,
engine and drive train components when necessary for repairs. (5)
evidence of ongoing training for all management and technical
personnel.
No. 4
- - -----
If the company was not profitable during its fiscal year, list below
in chronoligicl order the events which in management's opinion must or
should occur or the milestones which in management's opinion the
Company must or should reach in order for the Company to become
profitable, and indicate the expected manner of occurence or the
expected method by which the Company will achieve the milestones.
[need to provide the method to be used in achieving milestones].
Events or Milestones are not applicable unless the Company
receives significant debt or equity financing.
OFFERING PRICE FACTORS
If the securities offered are common stock or are exercisable for or converible
into common stock, the following factors may be relevant to the price at which
the securities are being offered.N/A
No. 11
- - ------
Indicate whether the Company is having or anticipates having within
the next 12 months any cash flow or liquidity problems and whether or
not it is in default or in breach of any note, loan, lease or other
indebtedness or financing arrangement requiring the Company to make
payments.
2
<PAGE>
As of December 31, 1998, the Company had total liabilities of
$1,444,822 and total stockholder's deficiency of $14,664. The Company
is currently unable to satisfy its obligations to its creditors, some
of which have a right to commence actions against the Company.
Indicate if a significant amount of the Company's trade payables have not been
paid within the stated trade term.
The Company is currently unable to satisfy its oblications to its
trade creditors, some of which have a right to commence actions
against the Company.
State whether the Company is subject to any unsatisfied judgments, liens or
settlement obligations and the amounts thereof.
Indicate the Company's plans to resolve any such problems.
The ability of the Company to satisfy its obligations to its creditors
will be dependent upon its ability to raise debt and/or equity funding
and its furture performance which is subject to many factors,
including factors beyond the Company's control.
DESCRIPTION OF SECURITIES
No. 14
- - ------
The securities being offered hereby are:
No. 15
- - ------
These securities have : No Cumulative voting rights.
No. 16
- - ------
Are the securities convertible? N/A
No. 17
- - ------
(a) if securities are notes or other types of debt securities: N/A.
(Description of Securities) (17) (a) (1) What is the interest rate?
N/A. If interest rate is variable or multiple rates, describe: N/A. If
serial maturity dates, describe:N/A. Is therea trust endenture?N/A.
Are the securities callable or subject to redemption? No. Are the
securities collateralized by real or personal property? No.
How much currently outstanding indebtedness of the Company is senior
to the securities in right of payment of interest or principal? N/A.
3
<PAGE>
How much indebtedness shares in right of payment on an equivalent
(pari passu) basis? N/A
How much indebtedness is junior (subordinated) to the securities? N/A
(b) if notes or other types of debt securities are being offered and the
Company had earnings during its last fiscal year, show the ratio of
earnings to fixed charges on an actual and proforma basis for that
fiscal year. "Earnings" means pretax income from continuing operations
plus fixed charges and capitalized interest. "Fixed charges" means
interest (including capitalized interest), amortization of debt
discout, premium and expense, preferred stock dividend requirements of
majority owned subsidiary, and such portion of rental expense as can
be demonstrated) to be representative of the interest factor in the
particular case. The proforma ratio of earnings to fixed charges
should include incremental interest expense as a result of the
offering of the notes or other debt securities. N/A.
(Description of securities) (17) (b) Last Fiscal Year "
Earnings"/"Fixed Charges"=Actual; Pro Forma Minimum Maximum. If no
earnings show "Fixed Charges" only: N/A. Note: Care should be
exercised in interpreting the significance of the ratio of earnings to
fixed charges as ameasure of the "coverage" of debt service, as the
existence of earnings does not necessarily mean that the company's
liquidity at any given time will permit payment of debt sevice
requirements to be timely made. See Question No.11. .
No. 18
- - ------
If the securities are Preference or Preferred Stock: N/A. Are unpaid
dividends cumulative?N/A. Are securities callable? N/A.
Note: Attach to this Offering Circular copies or a summary of the
charter, bylaw or contractual provisions or document that gives rise
to the rights of holders of Preferred or Preference Stock, notes or
other securites being offered. N/A.
No. 19
- - ------
If securities are capital stock of any type, indicate restrictions on
dividends under loan or other financing arrangements or otherwise:
Under the terms of the SBA loan, the company is not allowed to
declare or pay dividends. Therefore, these are restrictions on
dividends under loan or other financing arrangements. See audit
report.
No. 20
- - ------
Current amount of assets available for payment of dividends if deficit
must be first made up, show deficit in parenthesis: None. See audit
report.
4
<PAGE>
DIVIDEND, DISTRIBUTIONS AND REDEMPTIONS
No. 28
- - ------
If the Company has within the last five years paid dividends, made
distributions upon its Stock or redeemed any securities, explain how
much and when: None.
OFFICERS AND KEY PERSONNEL OF THE COMPANY
No. 29
- - ------
Chief executive Officer:
Title: President & Director, Name : F. Lavell Chisum
Age: 73
Office Street Address:
COLLISION KING, INC., ONE PRODIGY WAY, MCALESTER, OK 74501
Telephone No.: 918-423-4538 Name of employers, titles and dates of
positions held during past five years within an Indication of job
responsibilities. Education (degrees, schools, and dates):
Background- President of Company or predecessor 1993 to 1997, and
President 1998 to date, Director 1993 to date. Mr. Chisum has
haver 50 years experience in in the collision repair industry,
from collision repair technician and repair specialist to owner
of numerous repair facilities. Mr. Chisum was the inventor and
patent holder of the E-Z Liner Body & Frame Alignment System
which revolutionized the collision repair industry and has
recorded total sales to date of about $400 million. After
founding Chisum Products Company in 1970, he began the original
manufacturer of the E-Z Liner. Mr. Chisum then sold his company
to Chief Automotive Systems in 1972 and simultaneously licensed
the patent to Chief. Mr. Chisum, past Oklahoma Bar Association's
Inventor of the Year, holds a total of approximatley 25 patents.
His patented designs have revolutionized the technology, methods
and productivity of the collision repair industry. He is
respected for is inventions and for his participation in and
support of the collision repair industry. Mr. Chisum also founded
Collision Centers International (CCI), the first public
corporation owned by individual collsion repair shops in the U.S.
and Canada. He conceived using a property and casualty insurance
company to upgrade the quality of colllision repair of the
public. He also founded Collision Automotive Repair Services,
Inc. (CARS), the fist cooperative of body shop owners. Vetran of
the U.S. Navy, he served from 1944 to 1945 as a Seaman Secon
Class. Education: Elementary schools in Texas and Oklahoma. In
addtion to his Experience, he has attened marketing, promotion,
and training seminars.
Also a Director of the Company. Yes. Indicate amount of time spent on
Company matters If less than full time: Full time.
5
<PAGE>
No. 30
- - ------
Acting Chief Operating Officer:
Name: F. Lavell Chisum
See Paragraph 29 above.
No. 31
- - ------
Chief Financial Officer: F. Lavell Chisum
No. 32
- - ------
Other Key Personnel: None.
DIRECTORS OF THE COMPANY
No. 33
- - ------
Number of Directors: 5.
If Directors are not elected annually, or are elected under voting
Trust or other for arrangement, explain: N/A
No. 34
- - ------
Information concerning outside or other Directors(i.e. those not
described above):
(a) Name: Charles W. Kusche, III; Age: 44;
Title: CEO Wall Street Capital Group, Inc.;
Office Street Address: 67 Wall St., NY, NY 10005;
Telephone No.: 212-344-6100
Name of employers, titles and dates of position held during past five
years with an Indication of job responsibilities.
Chairman, Wall Street Capital Group, Inc.
Education (degrees, schools, and dates): BA, 1976
Mr. Kusche was named as Respondent in a NASD arbitration Case No.
91-03851, in which claiment alleged usuitability, churning,
misrepresentation, and breach of fiduciary duty, & c.Claiment awarded
compensatory restitution of $70,000. There was no finding of
wrongdoing.
(b) Name: John Marchione; Age: 47;
Title: President, Wall Street Capital Group, Inc.;
Office Street Address: 67 Wall St., NY, NY 10005;
Telephone No.: 221-344-6100
Name of employers, titles and dates of positions held during past five
years within an indication of job responsibilities. Wall Street
Capital Group, Inc.
Education (degrees, schools and dates): BS, Business Management,
LaSalle University, Before 1987.
6
<PAGE>
(c) Name: Mark Sansom; Age: 39;
Title: Mark Sansom;
Office Street Address: 4061 S. Powers Circle, Salt Lake City, UT 84124
Telephone No.: 801-272-8722.
Name of employers, titles and dates of position held during past five
years with an Indication of job responsibilities: Merges and
acquisitions, buying and selling stocks. He was past owner of Desert
Mountain Securities, '91 to 7/93, and NASD memeber.
Education (degrees, schools and dates): University of Utah, pre 1987.
(d Name: Charles Sulkala; Age: 55;
Office Street Address: 3430 Washington Street , Boston, MA 02130. (B)
Telephone No: 617-522-5040.
Name of employers, titles and dates of positions held during past five
years with an indication of job responsibilities. President, Acme Body
and Paint Co., Inc. before 1993 to date. Seminars on proper business
management for collision industry. Recognized with awards from
autobody industry: Massachusetts Autobody Association Man of Year
1986: Society of Collsiion Repair Specialists (SCRS) Achievement
Award; Body Shop Magazine Collision Executive of the Year; Industry
Aware Hall of Eagles; I-CAR Founders Award - Inter-Industry Conference
on Auto Colllision Repair; Past Chairman of CIC - Collisiion Industry
Conference; Past Chairman elect of I-CAR; Past Chairman of finance and
audit commitee of I-CAR; Past Chairman of I-CAR of Canada; Past
Chairman of SCRS - Society of Collision Repair Specialists; Past
Chairman Massachusetts Auto Body; Past President Massachusetts
Jaycees.
Education (degrees, schools and dates): BS in accounting , Bentley
College, 1970. Addtional studies at Northeastern Universtiy.
No. 35
- - ------
(a) Have any of the officers or directors ever worked for or managed a
company (including a seperate subsidiary or division of a larger
enterprise) in the same business as the Company? Yes Explain: The
President has decades of experience in the automotive repair industry.
[See the discussion on the industry, the patent license, and Chisum's
information] Director Sulkula has supervised operations of large
collsion repair facility in Boston.
(b) If any of the officers, directors or other key personnel have ever
worked for or managed a company in the same busniness or industry as
the Company or in a related business or industry, describe what
precautions, if any, (including the obtaining of releases or consents
from prior employers) have been taken to preclude claims by prior
employers for conversion or theft of trade secrets, know-how or other
proprietary information.
No releases or consent from prior employers have been requested or
obtained.
7
<PAGE>
The president has been self entrepreneur in obtaining his experience.
[See the discussion on the industry, the patent license and Chisum's
information.]
Director Sulkula is a company owner.
(c) If the Company has never conducted operations or is otherwise in the
development stage, indicate whether any of the officers or directors
has evere managed any other company in the start-up or development
stage and describe the circumstances, including relevant dates. N/A
(d) If any of the Company's personnel are not employees but are
consultants or other independent contractors, state the details of
their engagement by the Company.
In 1998, Wall Street Capital Group had a financial consulting
contract with the Company. The terms were for a monthly retainer
of $5,000 and other fees for as needed consulting and for
specified duties. The contract terminated as of April 1998 nunc
pro tunc October 1998.
(e) If the Company has key man life insurance policies on any of its
officers, directors of key personnel, explain, including the names of
the person insured, the amount of insurance, whether the insurance
proceeds are payable to the Company and whether there are arrangements
that requrie the proceeds to be used to redeem securities or pay
benefits to the estate of the insured person or a surviving spouse.
From time to time, the Company has term life insurance for F.
Lavell Chisum, which will be used to pay off the SBA loan of
between $200,000 and $300,000 and the balance of Mr. Chisum's
spouse. The policy is not in effect as of November 15, 1998.
No. 36
- - ------
If a petition under the Bankruptcy Act or any State insolvency law was
filed by or against the Company or its officers, directros or other key
persons, or a receiver, fiscal agent or similar officer was appointed
by a court for the business or property of any such person, or any
partnership in which any of such persons was a general partner at or
within the past five years, set forth below the name of such persons,
and the nature and date of such actions. None.
Note: After reviewing the information concerning the background of the
Company's officers, directors and other key personnel, potential
investor should consider whether or not these persons have adequate
background and experience to develop and operate this company and to
make it successful. In this regard, the experience and ability of
management are often considered the most significant factors in the
success of a business.
8
<PAGE>
PRINCIPAL STOCKHOLDERS
No. 37
- - ------
Principal Owners of the Company (those who benefically own directly or
indirectly 10% or more of the common and preferred stock presently
outstanding) starting with the largest common stockholder. Include
separatley all common stock issuable upon conversion of the
convertible securities (identifying them by asterisk) and show average
price per share as if conversion has occured. Indicate by footnote if
the price paid was for a consideration other than a cash and the
nature of any such consideration.
i)Class of Shares: Common Stock
Average Price Per Share: Approximatley $0.05
No. Of Shares Now Held: 1,961,944
%of Total: 35.4
Name: F. Lavell Chisum
Office Street Address: Colllision King, Inc. One Prodigy Way,
McAlester, OK 74501 Telephone No. : 918-423-4538 Principal Occupation:
Invester
ii) Class of Shares: Common Stock
Average Price Per Share: Approximatley $1
No. Of Shares Now Held: 1,188,430
% of Total: 21.4
No. Of shares After Offering if All Securities Sold: 1,188,430 % of
Total : 20.4
Name: Al-Awadi, Farid
Office Street Address: Dahia Abdullah AL-Salem, Bin Abbas Street,
Block #2, House #22, Kuwait
Telephone No.: 011-965-256-4014
Principal Occupation: Inventor
No. 38
- - ------
Number of shares beneficially owned by officers and directors as a
group: 2,786,800.
Before offering: Shares (%of 50.3 total outstanding)
MANAGEMENT RELATIONSHIPS, TRANSACTIONS AND REMUNERATION
No. 39
- - ------
(a) If any of the officers, directors, key personnel or principal
stockholders are related by blood or marriage, please describe. N/A
10
<PAGE>
(b) If the Company has made loans to or is doing busniness with any of its
officers, directors, key personnel or 10% stockholders, or any of
their relatives (or any entity controlled directly or indirectly by
any such persons) within the last two years, or proposes to do so
within the furture, explain: (This includes sales or lease of goods,
property or services to or from the Company, employment or stock
purchase contracts, etc.) State the principal terms of any significant
loans, agreements, leases, financing or other arrangements.
1. The General Counsel has a retainer agreement.
2. WSCG consulting. Messres. Kusche and Marchione, both Directors, are
principles with Wall Street Capital Group, Inc. (Herein WSCG). WSCG
has a Financial advisor agreement with the company and receives $5,000
per month, and a percentage of the capital it obtains for use by the
company. The Agreement was terminated as of April 1998 nunc pro tunc
October 1998.
3. Mr. Al-Awadi has a frame machine distribution license for certain
countries in the middle east.
(c) if any of the Company's officers, directors, key personnel or 10%
stockholders has guaranteed or co-signed any othe Company's bank debt
or other obligations, including any indebtedness to be retired from
the proceeds of this offering, explain and state the amounts involved.
The President has guanteed SBA loan, and legal fees (between
$200,000 and $300,000.)
No. 40
- - ------
(a) List all remuneration by the Company to Officers, Directors and key
peronnel for the Last fiscal year:
(c) If any employment agreements exist or a contemplated. NONE
No. 41
- - ------
(a) Number of shares subject to issuance under presently outstanding stock
purchase Agreements, stock options, warrants or rights: 3,064,510
shares (34.4% of total shares to be outstanding after the completion
of the offering if all securities sold, assuming exercise of options
and conversion of convertible securities).
Indicate which have been approved by shareholders.
These agreements were ratified in July , 1998, by written consent
signed by stock holders holding at least majority of voting
power.
State the expiration dates, exercise prices and other basic terms for
these securities:
Principal stockholders have 1,750,000 warrants to purchase an
adjustable number shares, currently 3,064,510, of common stock
pursuant to Warrant Agreements at adjustable prices ranging from
about $.55 cents to $3.48 per share until the year 2002.
10
<PAGE>
(b) Number of common shares subject to issuance under existing stock
purchase or option plans but not yet covered by outstanding purchase
agreements, options or warrants:None
(c) Describe the extent to which future stock purchase agreements, stock
options, warrants or rights must be approved by shareholders.
Neither the by-laws nor the articles of incorporation of the
company require stockholder approval for stock purchase
agreements, stock options, warrants or rights.
No. 42
- - ------
If the business is highly dependent on the services of certain key
personnel, describe any arrangements to assure that these persons will
remain with the Company and not compete upon termintation:
The President owns investment stock, whose valure depends, in
part upon the successful service.
There are no non-competition agreements or employment agreements,
other than those mentioned previously.
Note: After reviewing the above, potential investors should consider
whether or not the compensation to management and other key personnel
directly or indirectly, is reasonable in view of the present stage of
the Company's development.
LITIGATION
No. 43
- - ------
Describe any past, pending or threatened litigation or administrative
action which has had may have a material effect upon the Company;s
business, finanicl condition, or operations, including any litigation
or action involving the Company's officers, directors other key
personnel. State the names of the principal parties, the nature and
current status of the matters, and amounts involved.
Case #1 SUMMARY OF LITIGATION
On January 15,1998, Collision Centers International, Inc. ("CCI")
and certain Former CCI Stockholders ("Plaintiifs"), who exchanged
their shares of CCI Stock for shares of Collision King, Inc.
("Collsion King") common stock in an October 1996 stock purchase
transaction ("Stock Purchase") filed a lawsuit against Collision
King in the United States District Court for the Northern
11
<PAGE>
Dicstricts of Oklahoma (the "Lawsuit"), as case number 98 CV 40
BU (J) and Was styled : Collision Centers International Inc. a
Utah corporation, et al v. Collision King, Inc. formerly known as
Prodigy A.R.T. Corp. A Nevada Corporation. Plaintiffs alleged
that in connection with the Stock Purchase, Collision King made
material misstatements and omissions to Plaintiffs relating to,
inter alia, Collision King's financial position in violation of
Section 10(b) of the 1934 Act and Rule 10b-5 promulgated
thereunder and in violation of Oklahoma securities laws.
Plaintiffs further alleged that Collision King violated Oklahoma
securities laws because the Stock Purchase was neither registered
under the Oklahoma Securities Act nor exempt therefrom.
Plaintiffs sought an injunction, rescession of the Stock Purchase
and other damages. About October 1998, the District Court case
was administrativley closed. For a complete and thorogh
description of all matters discussed in this matter see the
documents and pleadings filed in the case. All of the docurments
filed in this matter are incorporated by reference. Copies may be
obtained form the clerk of the U.S. Districts Court, Tulsa,
Oklahoma.
On May 15, 1998, the administrator of the States of Oklahoma
Department of Securities opened an investigation as file number
ODS 98-195. This investigation was closed without action in
August 24, 1999. Copies may be obtained from the Oklahoma
Department of Securities, The First National Center, 120 North
Robinson, Suite 860, Oklahom City, Oklahoma 73102.
On May 20, 1998, Plaintiffs filed a Statement of Claim with the
American Arbitration Association as Arbitration No.71 180
0021798, 1750 Two Galleria Tower, 13455 Noel Road, Dallas Tx
75240-6636, in which Plaintiffs asserted substantially the same
claims set forth in their First Amended Complaint and the
Amendment thereto. On June 22, 1998, Collsion King filed an
Answering Statement and Counterclaim with the American
Arbitratiron Association in which Collision King denied
Plaintiffs allegations and asserted affirmative defenses. During
settlement negotiations, Collision King dismissed its
counterclaims without prejudice. For a complete and thorough
description of all matters discussed in this matter see the
docurments filed in the case. All the documents filed in this
matter are incorporated by reference. Copies may be obtained from
the case manager of the American Arbitration Assocaition.
Nevertheless, by December 31, 1998, Collsiion King was unable to
continue the arbitration proceeding due to lack of resources.
Therefore, a settlement proposal rescinding the stock pruchase
agreement was negotiated and is pending as of this date with
mutual releases by all participants. If the settlement closes,
Collision King will completely divest itself of any CCI stock
ownership an will not participate in any management of CCI. The
rescission was approved by the Directors and Shareholders as
being in the best interests of the business of the Company. The
settlerment will close the arbitration matter.
12
<PAGE>
Case #2
On February 9, 1998, a John T'Sou Auto Diagnosis Center, Inc.,
filed a lawsuit against Collision King in state court in
Pittsburg County, Oklahoma. The petition seeks damages for breach
of contract, injunctive and declaratory relief arising from a
distributors license for the frame machine. Plaintiff claims
exclusive distribution tights to most of Asia and Europe. Special
damages are under ten thousand dollars, with a request to enforce
a license. The case was pending as of December 31, 1998. The case
was dismissed with prejudice about August, 1999.
Pending Matters:
In 1998, the Company demanded that a former public relations
vendor, Stockplayer.com, a New York company, return unearned
consideration as recovery for part performance of a contract. The
matter is in its earliest stages and it is impossible to predict
the outcome at this time. The amount is controversy is under five
percent of the present outstanding shares of the company, and
under three percent of the shares after exercise of warrants.
MISCELLANEOUS FACTORS
No. 45
- - ------
Describe any other material factors, either adverse for favorable
that will or could affect the Company or its business (for
example, discuss any defaults under major contracts, any breach
of bylaw provisions, etc.) Or which are necessary to make any
other misleading or imcomplete.
By year end 1998, the Company was unable to meet cash financial
commitments. At that time , the Company transferred its
operations to MCI and agreed to purchase MCI if certain
conditions could be satisfied. MTI is to pay the McAlester
manufacturing Expenses: rent, utilities, labor, taxes, SBA,
insurance (about $38K per month). For these expenses MTI uses the
location and equipement to build and sell RealLiners ( and return
the revenue to pay the expenses) and its own mineral processing
machines. The deal is for CKNG to acquire MTI upon payment of
note and stock. The promissory note cancels if paid off, upon
eviction, foreclosure, shut down or failure to pay expenses.
Collision King's interest in MTI's assets are mortgaged to cover
the $250K note. The employement contract with MTI President (Sam
Cooper) is with MTI. Collision King's board of directories and
General Council has no oversight of MTI, but Collision King's
President is 1 of 3 directors of MTI. The agreement is pending.
If the Constitions are satisfied, the Company will not make or
market the RealLiner or acquire business in the automotive reapir
industry. The Company will change its operations to making and
marketing products in the pearlite industry.
At the annual meeting in 1999, the shareholders voted to b)
ratify such contracts, including the complete diverstiture of
stock, if approved by the directors, as are necessary to end the
arbitration of the Stock Purchase agreement by and among Prodigy
Advanced Repair Technology Corp. and selling Stockholders of
Collision Centers International, Inc.; c) ratify the transaction
13
<PAGE>
with MCI of December 1998: d) ratify all actions, obligations,
and contracts incurred by the officers and directors, since the
last annual meeting; e) approve the acquisition, by the company,
or such other purchasers as may come forward before the next
annual meeting, of none, some, any or all of the company, for
such a price or terms as the company or buyers are willing to pay
and the sellers are willing to sell, by any means, including
redemption or tender offer, on the open market, or by private
acquisitiion: f) propose the reorganization of the company, as is
required by business judgment, to restore some financial
stability.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT FACTORS
No. 47
- - ------
If the Company's financial statements show losses from operations,
explain the causes underlying these losses and what steps the Company
has taken or is taking to address these causes.
The Company in a 12 month period, ending October31, 1996,
delivered 45 Machines. CKNG had sales over $1,426,000 and
operating expenses of over $1,551,000 showing a net loss of about
$(125,100). 1996 showed a increase in sales and improvement in
operating margin. In October 1996, CKNG obtained new management.
For the 14 months form late October 1996 to mid January 1998,
sales dropped and the company delivered only 17 machines with
sales of $707,000 but operating expenses continued at about
$1,447,000, so our net loss was about $(734,000). (These numbers
are unaudited). To reverese this trend, management has changed.
No. 48
- - ------
Describe any trends in the Company's historical operating results.
Indicate any changes now occuring in the underlying economics of the
industry or the Company's business which, in the opinion of
Management, will have a significant impact (either favorable adverse)
upon the Company's results of operations within the next 12 months,
and give a rough estimate of the probable extent of the impact, if
possible.
See previous discussions about the industry.
No. 49
- - ------
If the Company sells a product or product and has had significant
sales during its last fiscal year, state the existing gross margin
(net sales less cost of such sales as presented in accordance with
generally accepted accounting principle) as a percentage of sales for
the last fiscal year.
See Audit.
14
<PAGE>
What is the anticipated gross margin for the next year of operations?
See Audit.
If this is expected to change, explain. Also, if reasonable current
gross margin figures are available for the industry, indicate these
figures and the source or sources from which they are obtained. N/A
No. 50
- - ------
Foreign sales as a percent of total sales for the last fiscal year:
None.
Domestic government sales as a percent of total domestic sales for
last fiscal year.
None.
Explain the nature of these sales, including any anticipated changes:
None.
10SB Part II
Item 1. Market Price of and Dividends on Registrant's Common Equity
and Related Stockholder Matters.
Item 201.a) 1) The principal markets are: NASDAQ Bulletin Board. ii)
the high and low bid for each quarter within the last 2 fiscal years
and interim period.
1st quarter 1997, High Bid $4.5000 Low Bid $3.6250
2nd quarter 1997, High Bid $2.7500 Low Bid $2.2500
3rd quarter 1997, High Bid $4.4375 Low Bid $2.2500
4th quarter 1997, High Bid $3.1875 Low Bid $0.8125
1st quarter 1998, High Bid $0.6875 Low Bid $0.3125
2nd quarter 1998, High Bid $0.5000 Low Bid $0.3125
3rd quarter 1998, High Bid $0.2812 Low Bid $0.1562
4th quarter 1998, High Bid $0.1250 Low Bid $0.0625
1st quarter 1999, High Bid $0.0900 Low Bid $0.0700
2nd quarter 1999, High Bid $0.0700 Low Bid $0.0700
Source of Information: Edward Jones
15
<PAGE>
(B) The number of holders of each class of common is about 300.
(C) Dividends. 1) No dividends were declared for the last 2 fiscal years
and Subsequent period.
Item 2. Legal Proceedings. Not apply, Alternative 2 or 3 not used.
Item 3. There has been no change or disagreement with accountants during the
2 most recent fiscal years or later interim period.
Item 4. Recent Sales of Unregistered Securities. Give information within past
3 years.
(a) Date, title and amount of securities sold.
Oct 25, 1996 common stock, 293,505
Sep 30, 1996 common stock, 250,000
Apr 15, 1998 common stock, 2,365,173
(b) the class of persons receiving shares were 1) 5 creditors (including
directors and control persons); 2) 1 vendor in payment of services; 3)
about 5 dozen share holders of company acquistion by a stock purchase
contract; 4) employees; 5) other vendors
(c) For securities sold for cash: the total offering price ($2 per share)
and discounts and commissions:
None
For securities sold other than cash, describe the transaction, type
and amount of consideration received.
Stock purchase and exchange of company acquisitiion; consideration
received was about 74% of common stock in acquried company.
Vendor for public relation services; consideration was in form of
interviews and media listings.
Cancellation of indebtedness; consideration received was in form of
cancelled debt.
(d) Sections of Securities Act for exemption:
No section for stock purchase and exchange.
Section 4(2) for "transactions by an issurer not involving any
public offering."
These are creditors who have access to information about the company
and are directly managing the business, as a "sophisticated investor."
16
<PAGE>
They agree not to resell or distribute the shares and they will be so
legened. In additiion , the private offering did not have any form of
public solicitation or general advertising or commission paid.
Section 504. Total issues under $1 milliion during 12 months.
Reg. S. Issued to oversees purchaser. They agreed not to resell
or distribute the shares and they were so legended. In addition,
the priveate offering did not have any form of public
solicitation or general advertising or commission paid.
Item 5. Indemnifaction of Directors and Officers. The by-laws state:
3.10 Liability . No person shall be liable to the Company for any loss
for damage suffered by it on account of any action taken or omitted to
be taken by him as a director or officer at the rquest of the Company,
in good faith, if such person (a) exercised and used the same degree
of care and skill as a prudent man would have exercised or used under
the circumstances in the conduct of his own affaris, or (b) took or
omitted to take such action in relience upon advice of councel for the
Company or upon statements made or information reasonable grounds to
believe. The forgoing shall not be exclusive of other rights and
defenses to which he may be entitled as a matter of law.
Nevada Revised Statues 78.300 limits directors liability to willful or
grossly negligent wrongful declaration of distributions.
Registration
Colllision King, Inc.
/s/ F. Lavell Chisum
------------------------
F. Lavell Chisum
President/ CEO
Date: October 12, 1999
<PAGE>
CONTENTS
Independent Auditors' Report...........................................F-1
Balance Sheets.........................................................F-2
Statements of Operations...............................................F-3
Statement of Stockholders' Equity......................................F-4
Statements of Cash Flows...............................................F-5
Notes to Financial Statements..........................................F-6
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Collision King, Inc.
We have audited the accompanying balance sheet of Collision King, Inc. as of
December 31, 1998, and the related statements of operations, stockholders'
equity, and cash flows for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of Collision King, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Collision King, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
years ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 10, the Company
incurred net losses of $1,537,389 in 1998 and $643,158 in 1997 and used $233,145
in 1997 of cash in operating activities, substantially depleting its cash
reserves. Those factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/S/ TULLIUS TAYLOR SARTAIN & SARTAIN LLP
- - -----------------------------------------
TULLIUS TAYLOR SARTAIN & SARTAIN LLP
Tulsa, Oklahoma
September 9, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
COLLISION KING, INC.
BALANCE SHEETS
December 31, 1998 and June 30, 1999
December 31, 1998 June 30, 1999
(unaudited)
--------------------------------
<S> <C> <C>
Assets
Current assets:
Accounts receivable $ 36,513 $ -
Inventory 131,409 131,409
--------------------------
Total current assets 167,922 131,409
Property and equipment, net 123,486 95,211
Investment in Collision Centers International, Inc. 1,137,533 1,137,533
Other assets 1,216 56
--------------------------
Total assets $ 1,430,157 $ 1,364,209
--------------------------
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 848,823 $ 728,305
Accounts payable - related party 259,956 314,139
Accrued liabilities 63,286 40,131
Debt due within one year 272,757 247,022
--------------------------
Total current liabilities 1,444,822 1,329,597
Stockholders' equity
Preferred stock, 100,000,000 shares authorized, par
value, $.001; none issued - -
Common stock, 23,076,923 shares authorized, par
value, $.013; 5,244,292 shares at December 31 and
5,577,292 shares at June 30
68,176 72,505
Additional paid-in capital 4,559,535 4,685,625
Accumulated deficit (4,642,375) (4,723,518)
--------------------------
Total stockholders' equity (14,664) 34,612
--------------------------
Total liabilities and stockholders' equity $ 1,430,158 $ 1,364,209
==========================
</TABLE>
See notes to financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
COLLISION KING, INC.
STATEMENTS OF OPERATIONS
Years ended December 31, 1998 and 1997
and six month periods ended June 30, 1999 and 1998 (unaudited)
December 31, December 31, June 30, 1999 June 30, 1998
1998 1997 (unaudited) (unaudited)
------------------- -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Revenue:
Net manufacturing sales $ 428,726 $ 639,974 $ - $ 177,864
Expenses:
Cost of manufacturing sales 653,224 756,253 - 304,289
General and administrative 1,183,572 315,550 44,500 351,782
Selling 35,912 80,811 - 35,912
Depreciation and amortization 58,774 99,999 28,275 28,274
------------------- -------------------- ----------------- ------------------
1,931,482 1,252,613 72,775 720,257
------------------- -------------------- ----------------- ------------------
Operating loss (1,502,756) (612,639) (72,775) (542,393)
Other income (expense):
Interest income - 2,740 - -
Interest expense (34,633) (34,598) (8,368) (14,762)
Other, net - 1,339 - -
------------------- -------------------- ----------------- ------------------
Net loss $ (1,537,389) $ (643,158) $ (81,143) $ (557,155)
=================== ==================== ================= ==================
Basic loss per share $ (0.35) $ (0.20) $ (0.15) $ (0.14)
=================== ==================== ================= ==================
Average shares outstanding 4,426,828 $ 639,974 5,438,542 3,953,550
=================== ==================== ================= ==================
</TABLE>
See notes to financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
COLLISION KING, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1998 and 1997
Six month period ended June 30, 1999 (unaudited)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 2,811,958 $ 36,556 $ 4,255,410 $ (2,461,828) $ 1,830,138
Stock issued 12,666 164 36,535 - 36,699
Warrants exercised 354,499 4,609 (4,609) - -
Net loss - - - (643,158) (643,158)
-----------------------------------------------------------------------------
Balance, December 31, 1997 3,179,123 41,329 4,287,336 (3,104,986) 1,223,679
Stock issued for royalty obligation 1,500,000 19,500 55,500 - 75,000
Stock issued for services 565,169 7,347 216,699 - 224,046
Net loss - - - (1,537,389) (1,537,389)
-----------------------------------------------------------------------------
Balance, December 31, 1998 5,244,292 68,176 4,559,535 (4,642,375) (14,664)
Stock issued 333,000 4,329 126,090 - 130,419
Net loss - - - (81,143) (81,143)
=============================================================================
Balance, June 30, 1999 (unaudited) 5,577,292 $ 72,505 $4,685,625 $ (4,723,518) $ 34,612
=============================================================================
</TABLE>
See notes to financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
COLLISION KING, INC.
STATEMENTS OF CASH FLOWS
Year ended December 31, 1997
December 31, December 31, June 30, 1999 June 30, 1998
1998 1997 (unaudited) (unaudited)
------------------- -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities
Net loss $ (1,537,389) $ (643,158) (81,143) $ (557,155)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 56,549 99,999 26,025 28,274
Noncash compensation expense 299,046 37,998 - -
Changes in assets and liabilities:
Accounts receivable 1,127 (23,618) 36,513 36,072
Inventory 339,741 218,672 - 135,896
Other assets 36,328 1,361 1,160 23,520
Accounts payable 869,835 104,728 66,335 387,939
Accrued liabilities (17,373) (29,127) (23,155) (29,100)
------------------- -------------------- ----------------- ------------------
Net cash used in operating activities (47,864) (233,145) 25,735 25,446
Cash flows from
investing activities
Purchase property and equipment - (28,194) - -
------------------- -------------------- ----------------- ------------------
Net cash used in investing activities - (28,194) - -
Cash flows from
financing activities
Principal payments on debt and notes
payable (50,588) (63,095) (25,735) (23,812)
Other - (1,299) - -
------------------- -------------------- ----------------- ------------------
Net cash used in financing activities (50,558) (64,394) (25,735) (23,812)
------------------- -------------------- ----------------- ------------------
Decrease in cash (2,724) (325,733) - 1,634
Cash, beginning of year 2,724 328,457 - 2,724
Cash, end of year $ - $ 2,724 $ - $ 4,358
=================== ==================== ================= ==================
</TABLE>
See notes to financial statements
F-5
<PAGE>
COLLISION KING, INC.
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
Note 1 - Summary of Significant Accounting Policies
Organization and business
In 1997, Prodigy Advanced Repair Technology Corp. ("Prodigy"), a Nevada
Corporation, changed its name to Collision King, Inc. ("Collision King").
Collision King is in the business of manufacturing and selling worldwide
automobile body and frame alignment machines, using patented technology licensed
to Collision King from a shareholder. Collision King's manufacturing facility is
located in McAlester, Oklahoma.
Collision King owns 74% of the outstanding common stock of Collision Centers
International, Inc. ("CCI"), a Utah corporation. (see Note 8.)
Principles of consolidation
The financial statements include the accounts of Collision King. The
consolidated financial position or operating results of CCI have not been
presented in the accompanying financial statements since Collision King does not
exercise sufficient control to permit consolidation, as discussed in Note 8.
Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements and disclosures in the
notes thereto. Actual results could differ from those estimates.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Depreciation
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from three to ten years.
F-6
<PAGE>
Advertising expense
Collision King expenses advertising costs when the advertisement occurs.
Advertising expense for the years ended December 31, 1998 and 1997 totaled
$108,419 and $59,054, respectively (see Note 7).
New accounting standards
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in 1998. The
Company has no comprehensive income items for the two years in the period ended
December 31, 1998. Therefore, net income equals comprehensive income. The
Company will adopt SFAS No. 133, "Accounting for Derivative Investments and
Hedging Activities" during 1999. Currently, the Company does not engage in
hedging activities or transactions involving derivatives.
<TABLE>
<CAPTION>
Note 2 - Inventory
Inventory consists of completed car body and frame alignment machines, material
and labor for machines in progress and raw materials as follows:
June 30, 1999
1998 (unaudited)
---------------------- -----------------------
<S> <C> <C>
Completed machines $ 11,213 $ 11,213
Machines in progress 99,370 99,370
Raw materials 20,826 20,826
---------------------- -----------------------
$ 131,409 $ 131,409
====================== =======================
Note 3 - Property and Equipment
Property and equipment are recorded at cost, and consist of the following:
June 30, 1999
1998 (unaudited)
---------------------- ----------------------
Machinery and equipment $429,830 $ 429,830
Furniture and fixtures 46,349 46,349
Transportation 26,215 26,215
---------------------- ----------------------
502,394 502,394
Less accumulated depreciation (378,908) (407,183)
---------------------- ----------------------
$ 123,486 $ 95,211
====================== ======================
</TABLE>
F-7
<PAGE>
Note 4 - Income Taxes
Collision King's net operating loss ("NOL") carryforward is approximately
$4,440,000 at December 31, 1998, expiring in varying amounts from 2008 to 2013.
No benefit has been recognized in the accompanying financial statements for
Collision King's NOL carryforwards because they do not meet the more probable
than not criteria of Statement of Financial Accounting Standards No. 109.
Note 5 - Related Parties
In March 1996, Collision King entered into an amended royalty agreement with a
shareholder for the right to use the patented technology for the manufacture of
auto body and frame alignment machines. The amended agreement provides for
royalty payments of 5% of sales, subject to an annual minimum royalty of $75,000
in 1997, $150,000 in 1998, and thereafter. As further consideration for the
license, the licensor received warrants to purchase 1,500,000 shares of
Collision King common stock for $.05 per share, exercisable beginning September
20, 1997, and extending for seven years thereafter. Royalty expense was $75,000
in 1997 and $150,000 in 1998.
In April 1998, the shareholder exercised the warrants in settlement of Collision
King's 1997 royalty payable of $75,000, included in accounts payable at December
31, 1997. Accounts payable at December 31, 1998 include $150,000 due to the
shareholder pursuant to the royalty agreement. In January 1999, the shareholders
canceled the technology license agreement.
Collision King leases facilities from a company that is controlled by certain
stockholders and directors. Rental expense incurred under this lease is $89,000
in 1998 and 1997, and $44,500 in the six months ended June 30, 1999 and 1998,
respectively. Future minimum lease payments required under this agreement are as
follows:
1999 $ 89,002
2000 7,417
--------------------
$ 96,419
====================
Note 6 - Debt
Debt consists of a term note maturing in 2001 secured by all property and
equipment, inventory and accounts receivable. The note is personally guaranteed
for $100,000 by related parties. The note bears interest at New York prime rate
plus 2% (10.25% at December 31, 1998). Among other restrictions, the agreement
restricts the payment of dividends, purchase and retirement of treasury stock,
and the incurrence of additional debt. The note is in default since the Company
is behind in payment of principal and interest. As a result, the note is
callable and is classified as currently payable.
See notes to financial statements
F-8
<PAGE>
Note 7 - Stockholders' Equity
In January 1997, Collision King issued 12,666 shares to two employees as
compensation for services rendered. Collision King recognized compensation
expense for the stock issuance at the estimated fair value of the stock issued,
$37,998.
In October 1997, Collision King entered into an agreement with a public
relations firm to promote Collision King's stock on the Internet. The public
relations firm's fee for its services was 300,000 shares of Collision King
common stock. A stockholder paid the fee on Collision King's behalf. A
disagreement as to the performance of the public relations firm resulted in the
termination of Collision King's contract with the firm, and Collision King
unsuccessfully sought the return of the 300,000 shares. In April 1998, Collision
King reimbursed the stockholder for the 300,000 shares and charged $108,000
($.36 per share) to advertising expenses.
Under a 1996 private placement agreement, Collision King issued 1,250,000 shares
of common stock and warrants to purchase 1,500,000 shares of common stock
subject to the terms and conditions of the Common Stock Purchase Warrant
Agreements. The warrants are exercisable as follows:
<TABLE>
<CAPTION>
Number
of Exercise Exercise
Shares Price Date Condition
- - --------------- ----------- ------------------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
250,000 $1.00 Nov. 7, 1996 - Jan. 1, 2002 In the event Collision King completes a public offering of a
substantial portion of Collision King's equity capitalization.
250,000 $4.00 Jan. 1, 1997 - Jan. 1, 2002 None
500,000 $6.00 Jan. 1, 1998 - Jan. 1, 2003 In the event Collision King has entered into a distribution
agreement with the warrantholder or his designee to market
Collision King's product in certain agreed upon countries in the
Middle East.
125,000 $1.00 Jan. 1, 1997 - Jan. 1, 2002 None
125,000 $4.00 Jan. 1, 1997 - Jan. 1, 2002 None
250,000 $5.00 Jan. 1, 1997 - Jan. 1, 2002 None
</TABLE>
The Warrant Agreements provide that if Collision King issues additional shares
of common stock without consideration, or for a consideration per share less
than the greater of the current market price or the warrant exercise price then
in effect, then the warrant exercise price and the number of shares of common
stock issuable upon exercise of the warrants shall be adjusted. The computation
of these adjustments is set forth in the Warrant Agreements. Issuances of shares
disclosed in Notes 5 and 7 to the financial statements will result in such
adjustments.
F-9
<PAGE>
Subsequent to December 31, 1998, Collision King issued 333,000 shares of common
stock in settlement of various liabilities totaling $ 130,419 at December 31,
1998.
Note 8 - Investment in CCI
On October 25, 1996, Collision King acquired 74% of the outstanding common stock
of CCI by exchanging 293,505 shares of Collision King common stock for 8,840,512
shares of CCI common stock. CCI provides management services to Collision
Automotive Repair Services, Inc. ("CARS"), a Delaware corporation organized as a
cooperative. The cooperative members are automobile repair shops operating
throughout the United States.
The acquisition was accounted for as a purchase having a cost of $1,174,020 ($4
per share issued). After the acquisition, CCI's management team was hired to
also manage the business of Collision King. The CCI management team resigned
from its position with Collision King on January 7, 1998.
On January 15, 1998, CCI and certain of its former shareholders filed suit in
U.S. District Court claiming material misrepresentation and violation of certain
rules and regulations of the Securities and Exchange Commission in connection
with the acquisition and seeking rescission of the October 1996 share exchange.
The District Court granted a temporary injunction preventing Collision King from
exercising its rights of ownership control over CCI until the issues were
permanently resolved.
Collision King's investment in CCI is carried at $1,137,533 in the accompanying
balance sheet. This amount represents Collision King's cost of acquiring CCI,
adjusted for inter-company cash payments.
As of September 1, 1999, a settlement proposal rescinding the stock purchase
agreement was negotiated and is pending, with mutual releases by all
participants. If the settlement closes, Collision King will completely divest
itself of any CCI stock ownership. The rescission has been approved by the
Company's Directors and shareholders. No monetary damages were involved in
settling the lawsuit.
Note 9- Operating Agreement
In November 1998, Collision King entered into an agreement with Machinery
Technology International, Inc. ("MTI"), pursuant to which MTI assumed liability
for all operating expenses of Collision King's leased plant facility in exchange
for the right to use the facility and Collision King's manufacturing equipment
to manufacture its own equipment for sale. MTI also assumed the right to
manufacture and sell Collision King's auto body and frame alignment machines.
As part of the agreement, Collision King has the right, but not the obligation,
to acquire all of the outstanding common stock of MTI in exchange for 400,000
shares of Collision King's common stock and a note payable in the amount of
$250,000 plus interest at 7% per annum from November 1998.
F-10
<PAGE>
Note 10- Contingencies
As shown in the accompanying financial statements, the Company incurred a net
loss of $1,537,389 in 1998 and $643,158 in 1997, and used $233,145 in 1997 of
cash in operating activities, substantially depleting its cash reserves. Those
factors, create an uncertainty about the Company's ability to continue as a
going concern. Management plans to expand the Company's scope of operations
through acquisition of MTI (see Note 9) and other strategic business
acquisitions. Management plans to finance this expansion by private placement of
common stock for cash and sale of debt securities. As part of the plan to effect
these transactions, management intends to convert a substantial part of the
Company's accounts payable to common stock, and to substantially reduce the
number of shares outstanding to existing shareholders by having them contributed
back to the Company. The ability of the Company to continue as a going concern
is dependent on the success of management's plans. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
F-11
