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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999 Commission File No. 0-29627
PSA, INC.
(Name of small business issuer in its charter)
Nevada 33-0630397
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9800 Sepulveda Boulevard, Suite 810
Los Angeles, California 90045
(Address of principal executive offices)
Issuer's telephone number: 310/258-0500
Canticle Corporation
(Former name of issuer)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X ; No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best or registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year: $ 0
At March 31, 2000 there were 5,695,307 outstanding shares of registrant's common
stock held by non-affiliates, with a market value of $76,886,644 based on a
closing bid quotation on the OTC Bulletin Board on that date of $13.50 per
share.
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 and 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ; No ___ Not applicable
At March 31, 2000, a total of 32,657,030 shares of registrant's common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes ; No X
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PSA, INC.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
ACQUISITION OF CANTICLE CORPORATION
Pursuant to an Agreement and Plan of Reorganization (the "Acquisition
Agreement", PSA, Inc. ("PSA or the Company") acquired all the outstanding
shares of common stock of Canticle Corporation ("Canticle"), a Delaware
corporation, from the shareholder thereof in an exchange for an aggregate of
56,000 shares of common stock of PSA (the "Acquisition"). As a result, Canticle
became a wholly-owned subsidiary of PSA. The Acquisition was effective on
February 18, 2000 and was intended to qualify as a reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended. Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission, PSA
became the successor issuer to Canticle for reporting purposes under the
Securities Exchange Act of 1934.
Canticle Corporation was incorporated on June 7, 1999, under the laws of
the State of Delaware to engage in any lawful corporate undertaking, including,
but not limited to, selected mergers and acquisitions. It has been in the
developmental stage since its inception.
On June 17, 1999, Canticle voluntarily filed a registration statement on
Form 10-SB with the Securities and Exchange Commission to become a reporting
company under the Securities Exchange Act of 1934. Canticle's Form 10-SB became
automatically effective 60 days after its filing.
The consideration exchanged pursuant to the Acquisition was negotiated
between Canticle and PSA. In evaluating the Acquisition, Canticle used criteria
such as the value of the assets of PSA, PSA's ability to compete in the
information technology market, the increased use of the Internet as a sales and
marketing means, PSA's then current and anticipated business operations, PSA's
business reputation in the Internet venture capital community, and PSA's
management's experience and business plan. In evaluating Canticle as a candidate
for the proposed Acquisition, PSA placed a primary emphasis on Canticle's status
as a reporting company under Section 12(g) of the Securities Exchange Act of
1934, as amended, and Canticle's facilitation of PSA's becoming a reporting
company under the Act.
PSA had 31,500,235 shares of common stock issued and outstanding prior to
the Acquisition and 31,556,235 shares issued and outstanding following the
Acquisition.
A copy of the Acquisition Agreement was filed as an exhibit to the
Current Report on Form 8-K filed with the Securities and Exchange Commission on
February 18, 2000.
The Acquisition occurred after December 31, 1999, and as of December 31,
1999 Canticle Corporation was the reporting company.
CANTICLE CORPORATION
At December 31, 1999, Canticle had no operating history nor any revenues
or earnings from operations. Canticle had no significant assets and no financial
resources. Management of Canticle had agreed to pay all expenses incurred by it
until a business combination was effected without any expectation of repayment
to it by Canticle.
In 1999, Canticle sought to locate and negotiate with a business entity
for the combination of that target company with it. Canticle was formed to
provide a method for a foreign or domestic private company to become a reporting
("public") company with a class of registered securities. As of December 31,
1999, Canticle could not be sure it could enter into a business combination, the
terms of any business combination, or the nature of any target company. The
Acquisition of Canticle by PSA was effected in February, 2000.
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PSA, INC.
PSA is a publicly-held company that was incorporated in the state of
Nevada in 1985. Formerly known as American Telecommunications Standard
International, Inc. ("ASAT"), the Company completed its merger with PSA, Inc., a
California corporation, in April, 1998.
The Company is a holding company for entities comprising its proposed
broad-based global travel and transportation services network that will include
global electronic commerce ("E-Commerce"), international tour services, air
transportation, and Internet television broadcast via "Spectrum Broadband
Access."
The Company owns and operates two majority-owned and one wholly-owned
subsidiaries: PSA Internet, Inc., PSAZZ Air, Inc., and Royal International
Tours, Inc., respectively. In addition, PSA Internet, Inc. owns 80% of
PSAZZ.COM.
The Company has no affiliation with the former Pacific Southwest
Airlines, PSA Airlines or USAirways, which acquired PSA Airlines in 1998.
Through PSA Internet, Inc., one of its majority-owned subsidiaries, the
Company intends to build a comprehensive Internet portal located at
http://WWW.PSAZZ.COM. This site is intended to provide a full range of traveling
services and is designed to capture a share of the online travel business. In
its efforts to enhance its Web site capabilities, the Company intends to utilize
currently available Internet broad-based distribution travel software. Webmaster
Zone One, which has developed several large Web sites, is in final stages of
this site's development and another Web designer company, DATALEX, is currently
constructing the site's booking engine. The site will also feature broadband
convergence to create a comprehensive database enabling prospective travelers to
search for travel intelligence, travel specials, news, music, sporting and
industry related events. The Company has entered into a business alliance with
an Internet company, Intervu, Inc., whereby the Company is entitled to the use
of Intervu, Inc.'s patented streaming media technology in exchange for an
initial cash fee and variable additional fees based on size and volume of
programming hosting.
The Company has limited finances and requires additional funding in order
to accomplish its growth objectives and marketing of its products and services.
There is no assurance that the Company will be able to secure any or all funding
necessary for its future growth and expansion. There is also no assurance that
even if the Company manages to obtain adequate funding to complete any
contemplated acquisition, such acquisition will succeed in enhancing the
Company's business and will not ultimately have an adverse effect on the
Company's business and operations.
SUBSIDIARIES
PSA INTERNET, INC., ("PSA Internet") incorporated in the state of Nevada
on October 1, 1999, is a majority-owned subsidiary of the Company created to
develop, own and operate the Company's exclusive Internet brand, PSAZZ.COM, and
to acquire and develop Internet related entities. The Company owns 80% and David
Walsh, the Chairman and Chief Executive Officer of the Company, owns 20% of the
outstanding common stock of this subsidiary. PSA Internet is a development stage
company.
PSAZZ.COM, INC., ("PSAZZ.COM"), was incorporated in the State of Nevada
on April 5, 1999, as a majority- owned subsidiary of PSA Internet to develop and
operate the Company's exclusive Internet brand. PSA Internet owns 80% and David
Walsh, the Chairman and Chief Executive Officer of the Company, owns 20% of the
outstanding common stock of this subsidiary. PSAZZ.COM is a development stage
company.
PSAZZ AIR, INC. ("PSAZZ"), incorporated in the State of California on May
27, 1994, is a 80%-owned subsidiary of the Company. PSAZZ completed a private
placement of 873,649 shares of its common stock to approximately 92 shareholders
for aggregate gross proceeds of $2,820,223 on June 21, 1996. At about the same
time, PSAZZ obtained a Federal Aviation Administration Part 121 Air Carrier
Certificate for Supplemental Cargo Operations. PSAZZ conducted only limited
cargo operations during that summer and, because of continued inactivity,
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surrendered its Air Carrier Certificate to the FAA two years later. Currently
inactive, PSAZZ plans to commence scheduled passenger service if it is able to
obtain the substantial financing and regulatory approval that this will require.
The Company has no immediate plans to activate PSAZZ.
ROYAL INTERNATIONAL TOURS, INC. ("Royal"), a California corporation
incorporated in 1980, was acquired as a wholly-owned subsidiary of the Company
as of March 14, 2000. Royal is a travel tour operator with an office in Los
Angeles, California, specializing in tours for European visitors to the United
States.
EMPLOYEES
The Company and its subsidiaries currently employ approximately 40
employees, none of which are subject to collective bargaining agreements.
Approximately 25 individuals are retained to perform management functions for
the Company under engagement agreements or consultant contracts.
TRADEMARKS AND LICENSES
Three trademark applications have been approved and notices of
allowance have been issued. PSA intends to file applications for additional
marks in connection with a variety of goods and services to be offered by the
Company and its affiliates.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently leases approximately 6,000 square feet of office
space at its business address at a monthly rental rate of $6,505, subject to
annual adjustment. Its lease term expires in February, 2004. Royal leases
approximately3200 square feet of office space for $3,367 per month, subject to
annual adjustment.
The Company expects to lease approximately 7,500 to 10,000 square feet
of operating facilities for PSAZZ.COM in the future on terms to be determined.
ITEM 3. LEGAL PROCEEDINGS
PSA and its subsidiaries are currently involved in the following legal
proceedings:
DUPONT V. PACIFIC SOUTHWEST AIRLINES, INC., Superior Court of
California, San Diego County Case No. 719562. Ths case was filed in May, 1997
against PSA, Inc. and several officers and directors of the Company, alleging
fraud in the issuance of securities of PSAZZ Air, Inc. Plaintiff Thomas Halder
has been dismissed as plaintiff per his request and replaced by substitute
plaintiff Michael DuPont. Plaintiff DuPont sought to have the case certified as
an investor class action, but the Court denied his request. Despite the notice
of the action from Mr. Dupont's counsel to the other shareholders, none has so
far joined this action. Thus, the case is at this time limited to Mr. DuPont's
individual claim pertaining his $75,000 investment. In November, 1999,the Court
abated the action and required Mr. DuPont to pursue his claim in arbitration. It
is the view of the Company's counsel that he will not proceed with the
arbitration.
HAWKINS V. PSA, INC. Superior Court of California, Los Angeles County
Case No. YC033477, filed October, 1998. Frankie Hawkins, a former majority owner
of PSAS, alleges breach of contract. Plaintiff seeks approximately $1 million in
additional consideration from PSA, PSAS and certain individual officers and
directors of the Company for the Company's purchase of her interest in PSAS in
June, 1998. She also seeks damages for breach of an employment contract. The
Company and Ms. Hawkins are currently in settlement negotiations relating to
this matter, but there is no assurance as to whether a settlement agreement will
be reached.
MEYER GROUP LTD. et al., V. DOUGLAS T. BEAVER, et al., Superior Court
of California, Orange County Case No. 775680. Third Amended Cross-complaint
filed June 23, 1998 by defendant Robert Thompson. The complaint does not name
the Company as a defendant. However, Robert Thompson filed a cross-complaint
against over thirty cross-defendants, one of which was American
Telecommunications Standards International, Inc. ("ASAT"), with which the
Company entered into a stock exchange agreement and plan of reorganization on
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March 13, 1998. Later, Mr. Thompson also added the Company as a cross-defendant.
Mr. Thompson alleges that he was fraudulently induced by ASAT and others to
invest money in that venture and in other ventures not related to the Company.
He seeks approximately $900,000 from all cross-defendants. The Company is
currently negotiating all claims by Mr. Thompson for an amount of approximately
$25,000. The Company believes that this action will be settled and will include
a "good faith" dismissal for past and future claims by all claimants. There is
no assurance as to whether a settlement agreement will be reached.
BONNER V. PSA, INC. District of Harris County, Texas, Case No. 99-39761
filed August, 1999. Plaintiff alleges a breach of contract seeking approximately
$20,000 plus 75,000 shares of PSA, Inc. The Company believes that this claim has
no merit because of a breach of contract and failure to perform by the
plaintiff. This case is in preliminary stages.
FORMER MANAGEMENT OF ASAT. PSA entered into a stock exchange agreement
and plan of reorganization on March 13, 1998 with American Telecommunications
Standards International, Inc., ("ASAT") which has subsequently changed its name
to PSA, Inc. The transaction was entered into by the Walsh Family Trust based on
representations by former management that ASAT had no litigation, no material
contracts, no liabilities and a positive stockholders equity. On August 2, 1999,
the Securities and Exchange Commission filed a complaint in Federal District
Court against fifteen individuals and entities, among which were former
management of ASAT, for their roles in a fraudulent offering and market
manipulation of the stock of the Company. Neither the Company, its subsidiaries
or any of their current management were named in the complaint.
There are no substantial or material pending or threatened legal
proceedings to which the Company is a party, except for the above-described
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During 1999, there were no actions brought before the securityholders
of the Company or of Canticle Corporation except for on March 12, 1999, the
Company's Board of Directors declared and a majority vote of the shareholders
approved a 200% stock dividend for shareholders of record on May 14, 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) GENERAL. As of December 31, 2000 there was no trading market for
the Canticle common stock. Canticle has an authorized capitalization of
100,000,000 shares of common stock of which 5,000,000 were issued as of December
31, 1999 and 20,000,000 shares of preferred stock of which none were issued.
PSA has an authorized capitalization of 75,000,000 shares of common
stock, $.001 par value per share, of which 31,556,235 shares have been issued
and outstanding. No preferred stock has been authorized.
(b) MARKET INFORMATION. The common stock of PSA is traded in the
over-the-counter ("OTC") market and quoted through the NASD OTC Bulletin Board
under the symbol "PSAX." The market for OTC common stock is often characterized
by low volume and broad price and volume volatility. PSA cannot give any
assurance that a stable trading market will develop for its stock or that an
active trading market will be sustained. Moreover, the trading price of PSA's
common stock could be subject to wide fluctuations due to such factors as
quarterly variations in operating results, competition, announcements of new
products by PSA or its competitors, product enhancements by PSA or its
competitors, regulatory changes, differences in actual results from those
expected by investors and analysts, changes in financial estimates by securities
analysts, and other events or factors.
The Company had been a non-reporting publicly traded company with
certain of its securities exempt from registration under the Securities Act of
1933 pursuant to Rule 504 and Rule 506 of Regulation D of the General Rules and
Regulations of the Securities and Exchange Commission. The NASD Stock Market
implemented a change in its rules requiring all companies trading securities on
the NASD OTC Bulletin Board to become reporting companies under the Securities
Exchange Act of 1934.
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PSA acquired all the outstanding shares of Canticle to become
successor issuer to it in order to comply with the Eligibility Rule for the OTC
Bulletin Board.
The market price of PSA's common stock over the 52 weeks prior to the
Acquisition ranged from .625 to 16.75. On February 17, 2000, the high was 14.375
and the low 13.250 with a volume of 30,100 shares.
HOLDERS
As of March 31, 2000, PSA had 32,657,030 shares of common stock
outstanding held by approximately 648 shareholders of record.
DIVIDENDS
PSA has never declared or paid cash dividends on its common stock and
anticipates that future earnings, if any, will be retained for development of
its business.
ITEM 6. PLAN OF OPERATION
CURRENT OPERATIONS
PSA's current operations consist of business activities of its
wholly-owned subsidiary, Royal and the launch of its Internet portal at
HTTP://WWW.PSAZZ.COM. As of September 30, 1999, Royal had revenues of $5,597,235
with an operating loss of $36,593.
BUSINESS PLAN
According to PSA's business model, it will focus on its
portal-for-travelers concept, with an intention of positioning itself as a
resource and distributor for business travel products and services on the
Internet. Management believes that the specialized approach to marketing and
promoting its services will have major advantages for the Company for several
reasons including that (i) specialization may translate into brand recognition,
(ii) in-depth travel services may mean convenience for busy professionals and
small business executives, (iii) focused demographics may give online
advertisers efficient targeting, and (iv) the one-stop shopping advantage of the
portal may generate user traffic
PSA intends to establish a technological development program in
customer interactive promotions, reservations, program planning and tracking. It
intends to expand this program internally on a continuous basis, as well as
externally through strategic acquisitions and alliances. PSA intends to search
and acquire Internet and non-Internet entities that fit its acquisition
portfolio criteria to complement its own proprietary products and services and
extend its content offerings.
No assurance can be given that PSA will be able to effect any aspects
of its business plan or to maintain the operations that it has currently
established. PSA will need additional capital either through financing or
through operations to meet its business goals. There is no assurance that PSA
can reverse its operating losses or that it can raise additional capital to
allow it to expand its planned Internet operations.
MARKETING
PSA intends to pursue a segmentation strategy that gives priority to
providing its products and services to those communities and their affinity
groups that are the heaviest users of the Internet and travel services. PSA
expects to take advantage of the shared demographics of affinity groups by
creating travel packages customized to their interests. Positioned as
"Traveltainment," these packages will be driven by sports and commercial events
or international business or trade conferences.
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PSA expects that its revenues, if any, will be derived from travel
purchases by customers on the PSAZZ.COM Web site, other E-Commerce transactions,
advertising with its out-sourced product and service providers, subscription
services, sponsorships, licensing, referral fees and from its operating
subsidiaries.
ITEM 7. FINANCIAL STATEMENTS
The financial statements for the year ended December 31, 1999 for
Canticle Corporation are attached hereto.
The financial statements for PSA, Inc. at December 31, 1999 and for the
years ended December 31, 1998 and 1999 are attached hereto.
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
AND FOR THE PERIOD FROM JUNE 4, 1999 (INCEPTION)
TO DECEMBER 31, 1999
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEET AS OF DECEMBER 31, 1999
PAGE 3 - STATEMENT OF OPERATIONS FOR THE PERIOD FROM
JUNE 4, 1999 (INCEPTION) TO DECEMBER 31, 1999
PAGE 4 - STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JUNE 4, 1999 (INCEPTION)
TO DECEMBER 31, 1999
PAGE 5 - STATEMENT OF CASH FLOWS FOR THE PERIOD FROM
JUNE 4, 1999 (INCEPTION) TO DECEMBER 31, 1999
PAGES 6 8 - NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Canticle Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Canticle Corporation (a
development stage company) as of December 31, 1999 and the related statements of
operations, changes in stockholder's equity and cash flows for the period from
June 4, 1999 (inception) to December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
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 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 audit provides 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 Canticle Corporation (a development
stage company) as of December 31, 1999, and the results of its operations and
its cash flows for the period from June 4, 1999 (inception) to December 31, 1999
in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 5 to the accompanying financial statements, on
February 18, 2000, the Company completed a transaction resulting in it being
acquired by PSA, Inc.
/S/ TABB, CONIGLIARO & McGANN, P.C.
New York, New York
April 13, 2000
1
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1999
ASSETS
Cash $ 500
-----------
TOTAL ASSETS $ 500
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES $ -
----------
STOCKHOLDER'S EQUITY
Preferred Stock, $.0001 par value, 20 million
shares authorized, zero issued and outstanding -
Common Stock, $.0001 par value, 100 million
shares authorized, 5,000,000 issued
and outstanding 500
Additional paid-in capital 4,830
Deficit accumulated during development stage (4,830)
----------
Total Stockholder's Equity 500
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 500
==========
See accompanying notes to financial statements.
2
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 4, 1999 (INCEPTION)
TO DECEMBER 31, 1999
Income $ -
-----------
Expenses
Executive services contributed by president 3,500
Organization expense 580
Professional fees 750
-----------
Total expenses 4,830
-----------
NET LOSS $ (4,830)
===========
See accompanying notes to financial statements.
3
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JUNE 4, 1999 (INCEPTION)
TO DECEMBER 31, 1999
Deficit
Additional Accumulated
Common Paid-In During Devel-
Stock Capital opment Stage Total
-------- ---------- ------------- -------
Common stock issuance $ 500 $ - $ - $ 500
Fair value of services
and expenses contributed - 4,830 - 4,830
Net loss for the period
ended December 31, 1999 - - (4,830) (4,830)
--------- --------- --------- --------
BALANCE AT DECEMBER 31, 1999 $ 500 $ 4,830 $ (4,830) $ 500
========= ========= ========= ========
See accompanying notes to financial statements.
4
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 4, 1999 (INCEPTION)
TO DECEMBER 31, 1999
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (4,830)
Adjustment to reconcile net loss
to net cash used by operating activities:
Capitalized services and expenses 4,830
-----------
Net cash used in operating activities -
-----------
CASH FLOWS FROM INVESTING ACTIVITIES -
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 500
-----------
Net cash provided by financing activities 500
-----------
INCREASE IN CASH AND CASH EQUIVALENTS 500
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -
-----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 500
===========
See accompanying notes to financial statements.
5
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Canticle Corporation (a development stage company) ("the Company") was
incorporated in Delaware on December 31, 1999 to serve as a vehicle to
effect a merger, exchange of capital stock, asset acquisition or other
business combination with a domestic or foreign private business. At
December 31, 1999, the Company had not yet commenced any formal business
operations, and all activity to date relates to the Company's formation
and proposed fund raising. The Company's fiscal year end is December 31.
The Company's ability to commence operations is contingent upon its
ability to identify a prospective target business and raise the capital it
will require through the issuance of equity securities, debt securities,
bank borrowings or a combination thereof.
Pursuant to an agreement and plan of reorganization effective February 18,
2000, all of the Company's outstanding shares of common stock was acquired
by PSA, Inc., a Nevada corporation (Note 5). As a result of this
transaction, the Company became a wholly-owned subsidiary of PSA, Inc.
(Note 5).
B. Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
C. Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
6
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
D. Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("Statement 109"). Under Statement 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109,
the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
There were no current or deferred income tax expense or benefits due to
the Company not having any material operations for the period ending
December 31, 1999.
NOTE 2 - STOCKHOLDER'S EQUITY
A. Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock at
$.0001 par value, with such designations, voting and other rights and
preferences as may be determined from time to time by the Board of
Directors.
B. Common Stock
The Company is authorized to issue 100,000,000 shares of common stock at
$.0001 par value. The Company issued 5,000,000 shares of its common stock
to TPG Capital Corporation pursuant to Rule 506 for an aggregate
consideration of $500.
7
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CANTICLE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 2 - STOCKHOLDER'S EQUITY (CONT'D)
C. Additional Paid-In Capital
Additional paid-in capital at December 31, 1999 represents the fair value
of services contributed to the Company by its president and the
amount of organization and professional costs incurred by TPG Capital
on behalf of the Company. (See Note 3)
NOTE 3 - AGREEMENT
On December 31, 1999, the Company signed an agreement with TPG Capital
Corporation (TPG), a related entity (See Note 4). The Agreement calls for
TPG to provide the following services, without reimbursement from the
Company, until the Company enters into a business combination as described
in Note 1A:
1. Preparation and filing of required documents with the
Securities and Exchange Commission.
2. Location and review of potential target companies.
3. Payment of all corporate, organizational, and other costs
incurred by the Company.
NOTE 4 - RELATED PARTIES
Legal counsel to the Company is a firm owned by a director of the
Company who also owns a controlling interest in the outstanding stock
of TPG Capital Corporation. (See Note 3)
NOTE 5 - SUBSEQUENT EVENT
Pursuant to an agreement and plan of reorganization, effective February
18, 2000, all of the Company's outstanding shares of common stock was
acquired by PSA, Inc., a Nevada corporation, trading in the
over-the-counter market and quoted through the NASD OTC bulletin board
under the symbol "PSAX", in exchange for the shareholders of the Company
receiving $200,000, plus 56,000 shares of PSA, Inc. common stock, subject
to a reset provision in the event the value of such stock is less than
$500,000 as of February 18, 2001. As a result of this transaction,
effective February 18, 2000, the Company has become a wholly-owned
subsidiary of PSA, Inc. The transaction is intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
8
<PAGE>
PSA, INC.
---------
FINANCIAL REPORT
----------------
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1999
--------------------------
<PAGE>
PSA, INC.
INDEX TO CONSOLIDATED FINANCIAL REPORT
Page Nos.
---------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
CONSOLIDATED BALANCE SHEET 2
At December 31, 1999
CONSOLIDATED STATEMENTS OF OPERATIONS 3
For the Years Ended December 31, 1998 and 1999
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY 4 - 5
For the Years Ended December 31, 1998 and 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
For the Years Ended December 31, 1998 and 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 - 25
<PAGE>
To the Shareholders
PSA, Inc.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
We have audited the accompanying consolidated balance sheets of PSA, Inc. and
its subsidiaries (the "Company") as of December 31, 1999, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the years ended December 31, 1998 and 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PSA,
Inc. and subsidiaries as of December 31, 1999, and the consolidated results of
their operations and their cash flows for the years ended December 31, 1998 and
1999 in conformity with generally accepted accounting principles.
As discussed in Note 7 to the consolidated financial statements, the Company has
losses from continuing operations in 1998 and 1999, and has no revenues from its
continuing operations. Management's plans in regard to these matters are
described in Note 1.
As more fully described in Note 7, the Company is a defendant in various
lawsuits alleging breach of contract and other matters. It is not possible to
predict at this time whether the ultimate awards or settlement will exceed the
amount currently provided for by the Company.
TABB, CONIGLIARO & McGANN, P.C.
New York, NY
April 13, 2000
<PAGE>
<TABLE>
PSA, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1999
<CAPTION>
A S S E T S
-----------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,183,289
Marketable securities 1,685,378
--------------
TOTAL ASSETS $ 2,868,667
==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 2,831,997
Due to officer 25,191
Net current liabilities of discontinued operations 803,813
--------------
TOTAL CURRENT LIABILITIES 3,661,001
--------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 6, 7 and 9)
STOCKHOLDERS' DEFICIENCY:
Common stock, par value $.001 per share;
authorized 75,000,000 shares; issued and outstanding
30,349,225 shares 30,814
Additional paid-in capital 14,056,972
Unearned compensation (1,335,937)
Accumulated deficit (13,823,433)
Accumulated other comprehensive income 279,250
--------------
TOTAL STOCKHOLDERS' DEFICIENCY (792,334)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 2,868,667
==============
The accompanying notes are an integral part of these financial statements.
2
</TABLE>
<PAGE>
<TABLE>
PSA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the Years Ended
December 31,
------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
REVENUES - NET $ - $ -
-------------- --------------
OPERATING EXPENSE:
Selling, general and administrative 1,536,182 1,974,385
Compensatory element of stock issuances
pursuant to consulting and other agreements 540,860 940,526
-------------- --------------
TOTAL OPERATING EXPENSE 2,077,042 2,914,911
-------------- --------------
OPERATING LOSS (2,077,042) (2,914,911)
OTHER EXPENSE:
Issuance of common shares in settlement of
dispute with principal shareholder - (3,975,000)
-------------- --------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (2,077,042) (6,889,911)
PROVISION FOR INCOME TAXES - -
-------------- --------------
LOSS FROM CONTINUING OPERATIONS (2,077,042) (6,889,911)
LOSS FROM DISCONTINUED OPERATIONS, Net of
income taxes of $-0- and $-0-, respectively (458,279) (721,315)
-------------- --------------
NET LOSS $ (2,535,321) $ (7,611,226)
============== ==============
BASIC AND DILUTED NET LOSS PER SHARE:
From continuing operations (1.01) (.34)
From discontinued operations (.22) (.04)
-------------- --------------
NET LOSS PER SHARE $ (1.23) $ (.38)
============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 2,064,187 20,301,167
============== ==============
The accompanying notes are an integral part of these financial statements.
3
</TABLE>
<PAGE>
<TABLE>
PSA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Common Stock Paid-in
Per Share ------------------------------ Capital
Amount Shares Amount Par Value
-------------- -------------- -------------- --------------
(1)
<S> <C> <C> <C> <C>
Balance - December 31, 1997 1,469,319 $ 1,469 $ 1,843,341
Net loss
Shares issued in connection with
merger with ATSI, Inc. .001 361,160 361 -
Issuance of common stock 13.684 23,203 23 298,348
Issuance of common stock for services
rendered 4.167 163,800 164 682,336
Issuance of common stock 8.333 12,000 12 99,988
Issuance of common stock for services
rendered 4.167 240,000 240 999,760
Shares issued for services rendered 5.000 9,000 9 44,991
Shares issued for services rendered .333 75,000 75 24,925
Shares issued for services rendered 6.400 40,399 40 258,320
Issuance of common stock .251 103,449 104 25,896
-------------- -------------- --------------
Balance - December 31, 1998 2,497,330 2,497 4,277,905
============== ============== ==============
Accumulated
Other
Unearned Accumulated Compensation
Compensation Deficit Income Total
-------------- -------------- -------------- --------------
Balance - December 31, 1997 $ - $ (3,676,886) $ - $ (1,832,076)
Net loss (2,535,321) - (2,535,321)
Shares issued in connection with
merger with ATSI, Inc. - - - 361
Issuance of common stock - - - 298,371
Issuance of common stock for services
rendered - - - 682,500
Issuance of common stock - - - 100,000
Issuance of common stock for services
rendered - - - 1,000,000
Shares issued for services rendered - - - 45,000
Shares issued for services rendered - - - 25,000
Shares issued for services rendered - - - 258,360
Issuance of common stock - - - 26,000
-------------- -------------- -------------- --------------
Balance - December 31, 1998 - (6,212,207) - (1,931,805)
============== ============== ============== ==============
(1) Share amounts have been restated to reflect the one-for-fifty reverse stock split effective on
September 16, 1998 and the 200% stock dividend effective on May 14, 1999.
The accompanying notes are an integral part of these financial statements.
4
</TABLE>
<PAGE>
<TABLE>
PSA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEAR ENDED DECEMBER 31, 1999
<CAPTION>
Common Stock Paid-in
Per Share ------------------------------ Capital
Amount Shares Amount Par Value
-------------- -------------- -------------- --------------
(1)
<S> <C> <C> <C> <C>
Balance - December 31, 1998 2,497,330 $ 2,497 $ 4,277,905
Net loss Other comprehensive income:
Unrealized gain on marketable securities
Total Comprehensive Income
Shares issued for settlement - WF Trust .250 15,900,000 15,900 3,959,100
Issuance of common stock .333 15,000 15 4,985
Issuance of common stock for services rendered .211 4,710,000 4,710 990,290
Shares issued under employment contract .250 5,700,000 5,700 1,419,300
Shares issued for services rendered .250 55,000 55 13,695
Shares issued for services rendered 1.047 475,295 475 497,134
Issuance of common stock under Reg. S 2.294 1,462,294 1,462 2,894,563
Amortization of unearned compensation - - -
-------------- -------------- --------------
Balance - December 31, 1999 30,814,919 30,814 $ 14,056,972
============== ============== ==============
Accumulated
Other
Unearned Accumulated Compensation
Compensation Deficit Income Total
-------------- -------------- -------------- --------------
Balance - December 31, 1998 $ - $ (6,212,207) $ - $ (1,931,805)
Net loss (7,611,226) (7,611,226)
Other comprehensive income:
Unrealized gain on marketable securities 279,250 279,250
--------------
Total Comprehensive Income (7,331,976)
--------------
Shares issued for settlement - WF Trust - - - 3,975,000
Issuance of common stock - - - 5,000
Issuance of common stock for services rendered - - - 995,000
Shares issued under employment contract (1,425,000) - - -
Shares issued for services rendered - - - 13,750
Shares issued for services rendered - - - 497,609
Issuance of common stock under Reg. S - - - 2,896,025
Amortization of unearned compensation 89,063 - - 89,063
-------------- -------------- -------------- --------------
Balance - December 31, 1999 $ (1,335,937) $ (13,823,433) $ 279,250 $ (792,334)
============== ============== ============== ==============
(1) Share amounts have been restated to reflect the one-for-fifty reverse stock split effective
on September 16, 1998 and the 200% stock dividend effective on May 14, 1999.
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
<TABLE>
PSA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended
December 31,
------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,535,321) $ (7,611,226)
Adjustments to reconcile net loss to net cash
provided by operating activities from continuing
operations:
Loss from discontinued operations 458,279 721,315
Compensatory element of stock issuances 540,860 940,526
Common stock issued in settlement of claims by
Walsh Family Trust - 3,975,000
Accrued compensation 565,833 -
Amortization of unearned compensation - 89,063
Changes in assets and liabilities, net of effects from acquisitions:
Accounts payable and accrued liabilities 639,317 1,103,385
Due from officer (116,100) 141,291
-------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (447,132) (640,646)
-------------- --------------
CASH USED IN INVESTING ACTIVITIES:
Purchase of marketable securities - (1,406,128)
-------------- --------------
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of common stock 424,371 2,901,025
-------------- --------------
CASH FROM DISCONTINUED OPERATIONS 361 328,744
-------------- --------------
NET INCREASE (DECREASE) IN CASH (22,400) 1,182,995
CASH - BEGINNING 22,694 294
-------------- --------------
CASH - ENDING $ 294 $ 1,183,289
============== ==============
The accompanying notes are an integral part of these financial statements.
6
</TABLE>
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND CONTINUED OPERATIONS
PSA, Inc. (the "Company") was incorporated in the state of Nevada
in 1985. Formerly known as American Telecommunications Standard
International, Inc. ("ASAT"), the Company completed its merger
with PSA, Inc., a California corporation, in April 1998. In
connection with the merger, ASAT changed its name to the
Company's present name.
The Company is a holding company for entities comprising its
proposed broad-based global travel and transportation services
network that will include global electronic commerce
("E-Commerce"), international tour services, air transportation,
ground services and Internet television broadcast. The Company
intends to search and acquire Internet and non-Internet companies
that fit its acquisition portfolio criteria to complement its own
products and services and extend its content offering.
As of December 31, 1999, the Company owned and operated two
majority-owned and one wholly-owned subsidiaries, which are PSA
Internet, Inc., Pacific States Airline Services, Inc. ("PSAS"),
and PSAZZ Air, Inc. ("PSAZZ"), respectively. In addition, PSA
Internet, Inc. owns 80% of PSAZZ.com.
In conjunction with its business plan, during March of 2000, the
Company acquired 100% of the outstanding stock of two travel tour
operators for cash and shares of its common stock (see Note 9 -
Acquisition).
As discussed further in Note 9, on March 14, 2000, the Company
completed the sale of 100% of the issued and outstanding stock of
PSAS to John D. Williams, a member of the Board of Directors of
the Company. PSAS is an airport/airline service company providing
skycap services at various airports in the United States. The
sale will enable the Company to concentrate on its proposed
on-line travel services business. Accordingly, the Company has
accounted for the operations of PSAS as a discontinued
operations.
The Company has limited finances and requires additional funding
in order to accomplish its growth objectives and marketing of its
products and services. There is no assurance that the Company can
reverse its operating losses or that it can raise additional
capital to allow it to expand its planned Internet operations.
There is also no assurance that even if the Company manages to
obtain adequate funding to complete any contemplated acquisition,
such acquisition will succeed in enhancing the Company's business
7
<PAGE>
and will not ultimately have an adverse effect on the Company's
business and operations.
The Company funded its operations during 1998 and 1999 through
sales of its common stock resulting in net proceeds to the
Company of $424,371 in 1998 and $2,901,025 in 1999. The Company
raised an additional $8,200,000 through sales of its common stock
in 2000 (Note 9). Sales of common stock in 1998 and 1999 were
sold in private transactions in reliance on various exemptions
from the registration requirements of the Securities Act. The
Company is exploring other financing alternatives, including
private placements and public offerings.
8
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
PSA, Inc. and its majority and wholly-owned subsidiaries
(collectively the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
----------------
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities in the consolidated financial
statements and accompanying notes. Actual results could differ
from those estimates.
Cash and Cash Equivalents
-------------------------
The Company considers all short-term highly liquid investments
with a maturity of three months or less when purchased to be cash
or cash equivalents.
Investment in Marketable Securities
-----------------------------------
The Company accounts for its investments using Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in debt and Equity Securities" ("SFAS No. 115"). This
standard requires that certain debt and equity securities be
adjusted to market value at the end of each accounting period.
Unrealized market value gains and losses are charged to earnings
if the securities are traded for short-term profit. Otherwise,
such unrealized gains and losses are charged or credited to
comprehensive income.
Management determines the proper classifications of investments
in obligations with fixed maturities and marketable equity
securities at the time of purchase and reevaluates such
designations as of each balance sheet date. At June 30, 1999, all
securities covered by SFAS No. 115 were designated as available
for sale. Accordingly, these securities are stated at fair value,
with unrealized gains and losses reported in comprehensive
income. Realized gains and losses on sales of investments, as
determined on a specific identification basis, are included in
the Consolidated Statement of Operations.
9
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
----------------------
Property and equipment are stated at cost and are depreciated
using the straight-line method over the estimated useful life of
five years. Depreciation expense from continuing operations for
the years ended December 31, 1998 and 1999 was $-0-. Depreciation
expense from discontinued operations for the years ended December
31, 1998 and 1999 approximated $2,308 and $2,396, respectively.
Impairment of Assets
--------------------
An impairment loss is recognized when expected future cash flows
are less than the asset's carrying value. Accordingly, when
indicators of impairment are present, the Company evaluates the
carrying value of property, plant and equipment and intangibles
in relation to the operating performance and future undiscounted
cash flows of the underlying business. The Company's policy is to
record an impairment loss when it is determined that the carrying
amount of the asset may not be recoverable.
Recognition of Income
---------------------
Income and direct expenses related to future travel sales are
recognized as revenue and expenses during the month of travel.
Advertising Expenses
--------------------
Advertising expenses are charged to operations when incurred.
Advertising expense for the years ended December 31, 1998 and
1999 approximated $42,941 and $37,274, respectively.
Income Taxes
------------
Deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amount and
tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to
reverse.
10
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation
------------------------
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company accounts for its stock-based
compensation arrangements pursuant to APB Opinion No. 25,
"Accounting for Stock Issued to Employees". In accordance with
the provisions of SFAS No. 123, the Company discloses the
proforma effects of accounting for these arrangements using the
minimum value method to determine fair value.
Stock Split and Stock Dividend
------------------------------
On September 8, 1998, the Board of Directors authorized, and a
majority vote of the shareholders approved, a one-for-fifty
reverse split of its issued and outstanding common stock as of
September 1, 1998 to be effective upon the filing date, September
16, 1998.
On March 12, 1999, the Board of Directors declared, and a
majority vote of the shareholders approved, a stock dividend for
issuance to each of the shareholders of the common stock who was
a shareholder of record on May 14, 1999, as a stock dividend, two
shares of restricted common stock for each outstanding share of
the common stock owned by each shareholder.
The accompanying consolidated financial statements, notes and
other references to share and per share data have been
retroactively restated to reflect the reverse stock split and
stock dividend for all periods presented.
Loss Per Share
--------------
Basic net loss per common share has been computed based on the
weighted average number of shares of common stock outstanding
during the periods presented, which were retroactively adjusted
to give recognition to the reverse stock split on September 16,
1998 and the stock dividend on May 14, 1999.
11
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
-----------------------------------
The financial statements include various estimated fair value
information at December 31, 1999, as required by Statement of
Financial Accounting Standards 107, "Disclosures about Fair Value
of Financial Instruments". Such information, which pertains to
the Company's financial instruments, is based on the requirements
set forth in that Statement and does not purport to represent the
aggregate net fair value to the Company.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and cash equivalents: The carrying amount approximates fair
value because of the short-term maturity of those instruments.
Investment in marketable securities: The fair value of
investments in marketable securities is based on quoted prices.
Receivables and payables: The carrying amounts approximates fair
value because of the short maturity of those instruments.
All of the Company's financial instruments are held for purposes
other than trading.
Impact of Recently Issued Accounting Standards
----------------------------------------------
Effective January 1, 1998, the Company adopted the provisions of
SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information". SFAS No. 131 establishes standards for the
way public enterprises report information about operating
segments in annual financial statements and requires those
enterprises to report selected information about operating
segments in interim financial reports issued to stockholders.
Adoption of SFAS No. 131 did not have a material effect on the
Company's financial position or results of operations.
Effective December 29, 1997, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 132, "Employers'
Disclosures About Pensions and Postretirement Benefits", which
standardizes the disclosure requirements for pensions and other
postretirement benefits. The Statement addresses disclosure only.
It does not address liability measurement or expense recognition.
There was no effect on financial position or results of
operations as a result of adopting SFAS No. 132.
12
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impact of Recently Issued Accounting Standards (Continued)
----------------------------------------------
In March 1998, the American Institute of Certified Public
Accountants issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", which
revises the accounting for software development costs and will
require the capitalization of certain costs. The adoption of SOP
98-1 did not have an effect on the Company's financial position
or results of operations.
Effective January 1, 1998, the Company adopted the provisions of
SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes standards for reporting comprehensive income, defined
as all changes in equity from non-owner sources. Adoption of SFAS
No. 130 did not have a material effect on the Company's financial
position or results of operations.
NOTE 3 - MARKETABLE SECURITIES
The following is a summary of marketable securities at December
31, 1999:
<TABLE>
<CAPTION>
Unrealized Fair
Holdings Market
Cost Gains Value
-------------- -------------- --------------
<S> <C> <C> <C>
Equity securities $ 1,406,128 $ 279,250 $ 1,685,378
============== ============== ==============
</TABLE>
The equity securities are maintained in an account at LGT Bank in
Liechtenstein.
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31, 1999
consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Accrued claims and litigation settlements $ 550,000
Accrued professional fees 1,045,137
Retained liabilities of discontinued operations 628,538
Other 608,322
--------------
$ 2,831,997
==============
</TABLE>
13
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES
The Company was not required to provide for a provision for
income taxes for the years ended December 31, 1998 and 1999 as a
result of net operating losses incurred during those years.
The components of deferred tax assets and liabilities at December
31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Assets:
Net operating loss carryforwards $ 3,346,000
Compensatory element of stock issuances 592,000
--------------
Total Gross Deferred Tax Assets 3,938,000
Less: Valuation allowance (3,938,000)
--------------
Net Deferred Tax Assets $ -
==============
</TABLE>
The net change during the year in the valuation allowance for
deferred tax assets was an increase of approximately $1,454,000.
As of December 31, 1999, the Company had available approximately
$8,365,000 of net operating losses ("NOL") for income tax
purposes that may be carried forward to offset future taxable
income, if any. The NOL carryforwards from December 31, 1997
expire during the year 2010 through 2013, and the December 31,
1998 and 1999 NOL expire in the years 2018 and 2019,
respectively. Pursuant to Section 382 of the Internal Revenue
Code, substantial restrictions are imposed on the utilization of
net operating loss carryforwards in the event of an ownership
change.
A reconciliation between the statutory federal income tax rate
(34%) and the Company's effective rate is as follows:
<TABLE>
<CAPTION>
1998 1999
-------------- --------------
<S> <C> <C>
Federal statutory rate (34.0)% (34.0)%
Non-deductible expenses and losses 1.0 16.0
Increase in valuation allowance 33.0 18.0
-------------- --------------
Effective rate - -
============== ==============
</TABLE>
14
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS' DEFICIENCY
The transactions discussed below have been retroactively restated
to reflect the one-for-fifty reverse stock split effected on
September 16, 1998 and the 200% stock dividend effective on May
14, 1999.
Common Stock Issuances
----------------------
On March 13, 1998, the Company entered into a stock exchange
agreement and plan of reorganization, whereby the Company
acquired PSA, Inc., a California corporation, which it
subsequently merged into the Company. Control of the corporation
shifted to the Walsh Family Trust, David E. Walsh, Trustee, and
the Company changed its name to the Company's current name. David
E. Walsh and other individuals replaced the existing officers and
directors. This transaction resulted in the issuance to the Walsh
Family Trust of 1,424,319 shares of the Company's common stock,
which, after issuance, was to have equaled 81.58% of the
outstanding common stock at the time of the reorganization. The
Walsh Family Trust owned 97% of the common stock of the acquired
California entity prior to the acquisition by the Company.
On March 20, 1998, the Board of Directors authorized an amendment
to the Articles of Incorporation of the Company to increase the
authorized number of shares of common stock from 30,000,000
shares to 75,000,000 shares with a $0.001 par value per share.
On May 20, 1998, the Board of Directors approved the issuance of
163,800 shares of unrestricted common stock to David E. Walsh in
consideration for his management services to the Company during
1997. On June 15, 1998, the Board of Directors approved 240,000
shares of restricted common stock to be issued to Mr. Walsh for
past services from May 1994 through May 1998, excluding calendar
year 1997.
On March 10, 1999, as consideration for executing a settlement
and mutual release agreement, the Board of Directors approved the
issuance of 15,900,000 shares of common stock to the Walsh Family
Trust to correct inequities created by undisclosed liabilities
and undisclosed stock transaction implemented by former
management and/or their agents before the March 13, 1998
acquisition. The stock was also issued in consideration for
subsequent unauthorized stock transactions by this former
management, which were not disclosed to current management, and
in consideration for the Walsh Family Trust not rescinding the
business combination between the California entity and the
Company.
On March 15, 1999, the Board of Directors approved the issuance
of 4,635,000 shares of unrestricted common stock valued at
$970,000 to David E. Walsh, as consideration for compensation of
his management services to the Company for past services from
June 1998 through May 1999.
15
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS' DEFICIENCY (Continued)
Common Stock Issuances (Continued)
----------------------
On September 15, 1999, the Board of Directors approved the
issuance of 5,700,000 shares of restricted common stock valued at
$1,425,000 to David Walsh, pursuant to a five-year employment
agreement.
Regulation S Offering
---------------------
On October 1, 1999, pursuant to Rule 902 of Regulation S of the
Securities Act of 1933, as amended, the Company offered to sell a
maximum of $20,000,000 of shares of common stock of the Company
at the purchase price per share of 90% of the closing bid as
quoted on the NASD OTC Bulletin Board on the date of purchase or
$2.00 per share, whichever was greater, to selected institutional
and individual investors. The minimum purchase was $25,000,
subject to the Company's right to accept less. Through December
31, 1999, 1,462,294 shares have been sold yielding $2,896,025 in
proceeds, net of commissions. Per share price varied from $2.00
to $10.50. Additional shares of common stock have been sold under
this offering during the period January 1, 2000 through March 31,
2000 (Note 9). The Company intends to use the net proceeds of
this offering of its common stock to fund future acquisitions and
for working capital. There is no assurance that the Company will
be able to sell any additional shares of its common stock in the
course of this offering.
In connection with this offering, the Company entered into an
exclusive agreement with a placement agent to solicit offers from
individuals to purchase shares. As consideration, the Company is
obligated to pay the placement agent a commission equal to 7% of
the gross proceeds of the offering.
16
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Litigation and Claims
---------------------
PSA, Inc.:
---------
As of December 31, 1999, the Company was subject to the following
litigation claims:
During May 1997, a suit was filed by Thomas Halder against the
Company and several officers and directors of the Company in the
Superior Court of California, San Diego County Case No. 719562,
alleging fraud in the issuance of securities of PSAZZ, a
subsidiary of the Company. Plaintiff Thomas Halder, has been
dismissed as plaintiff per his request and replaced by substitute
plaintiff Michael Dupont. Plaintiff Dupont sought to have the
case certified as an investor class action, but the Court denied
his request. Despite the notice, none has so far joined this
action. Thus, the case is, at this time, limited to Mr. Dupont's
individual claim pertaining his $75,000 investment. In November
1999, the Court abated the action and required Mr. Dupont to
pursue his claim in arbitration, pursuant to his subscription
agreement, if he chooses to pursue the matter. If he should, the
Company will defend this case vigorously.
During October 1998, a suit was filed by F. Hawkins and H.
Hawkins against the Company in the Superior Court of California,
Los Angeles County, Case No. YC033477. Plaintiff F. Hawkins seeks
approximately $1 million in additional consideration from the
Company, Pacific States Airline Services, Inc. ("PSAS"), a
subsidiary of the Company, and certain individual officers and
directors for the Company's purchase of her interest in PSAS in
June 1998. Plaintiff H. Hawkins seeks damages for breach of an
employment contract. The Company and Ms. Hawkins are currently in
settlement negotiations relating to this matter, but there is no
assurance as to whether a settlement agreement will be reached.
17
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Litigation and Claims (Continued)
---------------------
PSA, Inc.: (Continued)
---------
Meyer Group Ltd., et al., v. Douglas T. Beaver, et al. Superior
Court of California, Orange County, Case No. 775680, Third
Amended Cross-Complaint filed June 23, 1998 by defendant Robert
E. Thompson. The complaint in this action does not name the
Company as a defendant. However, individual defendant Robert E.
Thompson filed a cross-complaint against over thirty
cross-defendants, one of which is American Telecommunications
Standards International, Inc. ("ASAT"), with whom the Company
entered into a stock exchange agreement and plan of
reorganization on March 13, 1998. Later, Mr. Thompson also added
the Company as a Roe cross-defendant. Briefly, Mr. Thompson
alleges that he was fraudulently induced by ASAT and others to
invest money in that venture and in other ventures not related to
the Company. Mr. Thompson seeks approximately $900,000 from all
the cross-defendants. The Company is currently in negotiations to
settle all claims with Mr. Thompson for an amount anticipated to
be approximately $25,000. The Company believes that this action
will be settled and will include a "good faith" dismissal for
past and future claims by all claimants. There is no assurance as
to whether a settlement agreement will be reached.
During August, 1999, a suit was filed by Jan Bonner against the
Company in the District Court of Harris County, Texas, Case No.
99-39761. Bonner alleges a breach of contract, seeking
approximately $20,000, plus 75,000 shares in the Company. The
Company believes that this claim has no merit because of a breach
of contract and failure to perform by the plaintiff. The case is
in preliminary stages.
The Company entered into a stock exchange agreement and plan of
reorganization on March 13, 1998 with American Telecommunications
Standards International, Inc. ("ASAT"), which has subsequently
changed its name to PSA, Inc. The transaction was entered into by
the Walsh Family Trust based on representations by former
management that ASAT had no litigation, no material contracts, no
liabilities and a positive stockholders' equity. On August 2,
1999, the Securities and Exchange Commission filed a complaint in
Federal District Court against fifteen individuals and entities,
among which were former management of ASAT, for their roles in a
fraudulent offering and market manipulation of the stock of the
Company. Neither the Company, its subsidiaries or any of their
current management were named in the complaint.
18
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Litigation and Claims (Continued)
---------------------
PSA, Inc.: (Continued)
---------
During 1999, a suit was filed by FNG & Associates, Inc. against
the Company in the Superior Court of California, County of Los
Angeles, Case No. BC224041 for compensatory damages of not less
than $1,272,000 subject to proof at the time of trial, plus
punitive damages, according to proof and attorneys' fees.
However, discovery has not yet commenced. The Company is
vigorously defending this claim.
The Company has received a demand from a lawyer purporting to
represent a Richard Okoturo, claiming that he is owed $27,100,
plus 100,000 shares of the Company's stock for services rendered.
The Company is investigating the claim. If appropriate, it will
attempt to negotiate it. If negotiation is unsuccessful, it will
vigorously defend the claim.
Pacific States Airline Services, Inc. (PSAS):
--------------------------------------------
During 1999, a suit was filed by James Winford against PSAS in
the Superior Court of California, San Francisco County, Case No.
30201. Mr. Winford alleges that he was wrongfully terminated from
PSAS and seeks damages of $25,000, plus a daily penalty, alleged
to be $87,000 at the time of the complaint. The case is in
preliminary stages. The Company is vigorously defending this
claim.
During June 1995, a suit was filed by Phyllis Emerson against
PSAS in the Superior Court of California, County of Oakland, Case
No. 753384-4. This case has been reduced to judgement, on which
plaintiff claims approximately $128,000 remains unpaid. The
Company, nevertheless, contends that the judgement was improperly
perfected, is attempting to negotiate a lesser payment and/or
payment terms and, if unsuccessful in that attempt, will
challenge the enforceability of the judgement.
During May 1999, a suit was filed by Douglas Lloyd and Joseph
Alibo against PSAS in the Superior Court of California, Fresno
County, Case No. 611044-9. There is an unpaid judgement in this
employment discrimination case of approximately $21,900. The
Company is attempting to negotiate a lesser payment.
19
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Litigation and Claims (Continued)
---------------------
PSAZZ Air, Inc. (PSAZZ):
-----------------------
A suit was filed by the Trustee for Air 21 Bankruptcy Estate
against PSAZZ in the U.S. Bankruptcy Court, Eastern District of
California, Case No. 97-10084-B-7. During September 1999, this
case has been reduced to judgement of approximately $46,000. The
Company is attempting to negotiate a lesser amount and/or payment
terms.
The Company and its subsidiaries are also involved in a number of
smaller litigations and claims the Company has interposed answers
in all cases, except where an answer is not yet due. The Company
has established provisions for most of the liabilities
represented by these smaller claims, and where provisions have
not been established, management believes it will prevail on the
merits and intends to vigorously contest the claims. Based on its
past experience dealing with such claims, the Company anticipates
it will be able to settle most of these smaller litigations with
provisions to pay over periods of time, which are manageable for
the Company.
Concentrations of Credit Risk
-----------------------------
Financial instruments, which potentially subject the Company to
concentrations of credit risk, are primarily cash and cash
equivalents. As of December 31, 1999, cash and cash equivalents
include $1,156,665 in money funds and certificates of deposits
maintained at the LGT Bank in Liechenstein. Such funds are
uninsured.
Leases
------
The Company currently leases approximately 6,000 square feet of
office space at its business address at a monthly rental rate of
$6,505, subject to annual adjustment. Its lease term expires in
February 2004.
Employment Contract
-------------------
David E. Walsh, Chairman, Chief Executive Officer and President,
receives a salary of $350,000 per annum. Mr. Walsh is eligible
for incentive compensation payable in cash and stock options as
determined by the Board of Directors, pursuant to a five-year
employment agreement, effective on September 30, 1999.
20
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Litigation and Claims (Continued)
---------------------
Employment Contract (Continued)
-------------------
Pursuant to the employment agreement, Mr. Walsh received
5,700,000 shares of common stock as additional consideration
valued at $1,425,000. The value is being charged to operations
over the five-year period of the agreement, of which $89,603 is
charged to operations for 1999.
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
During the years ended December 31, 1998 and 1999, with respect
to its continuing operations, the Company paid $-0- for interest
and income taxes. Interest expense related to the Company's
discontinued operations was $50,151 and $98,060 for the years
ended December 31, 1998 and 1999, respectively.
Non-Cash Transactions
---------------------
During the year ended December 31, 1998:
a. Common stock issued to David Walsh in settlement of liability
for prior year's compensation aggregating $682,500.
b. Common stock issued to David Walsh in settlement of liability
for current and prior year's compensation aggregating $212,500
and $787,500, respectively.
c. Common stock issued for services rendered aggregating
$328,360.
During the year ended December 31, 1999:
a. Common stock issued in settlement of claims by Walsh Family
Trust aggregating $3,975,000.
b. Common stock issued in settlement of current and prior year's
compensation aggregating $404,167 and $565,833, respectively.
c. Common stock issued for services rendered aggregating
$536,359.
21
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENTS
Reorganization
--------------
Pursuant to an Agreement and Plan of Reorganization, effective
February 18, 2000, the Company acquired all the outstanding
shares of common stock of Canticle Corporation, a Delaware
corporation, from the shareholders thereof, in an exchange for
$200,000 in cash and 56,000 shares of common stock of the
Company. Additional shares of common stock may be issuable to the
shareholder of Canticle in the event that the value of the 56,000
shares as of February 18, 2001 is less than $500,000. As a result
of this transaction, Canticle has become a wholly-owned
subsidiary of PSA effective on February 18, 2000. The acquisition
is intended to qualify as a reorganization within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
Stock Issuances
---------------
During the period January 1, 2000 through March 31, 2000, the
Company issued approximately 3,000,000 shares of common stock for
a consideration approximating $8,200,000, pursuant to Rule 902 of
Regulation S of the Securities Act of 1933, as amended.
Acquisitions
------------
On March 14, 2000, the Company completed the acquisition of 100%
of the issued and outstanding stock of Royal International Tours,
Inc. ("Royal"), a travel tour operator, specializing in tours for
European visitors to the United States. Royal's office is located
in Los Angeles, California. Pursuant to the terms of the
Acquisition Agreement, the former shareholders of Royal received
78,370 shares of restricted common stock of the Company and cash
of $350,000.
On March 15, 2000, the Company completed the acquisition of 100%
of the issued and outstanding stock of Travel Treasures, Inc.
("Travel"), a travel tour operator. Travel is a California
corporation currently located in Los Angeles, California.
Pursuant to the terms of the Acquisition Agreement, the former
shareholders of Royal received $30,000.
22
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENTS (Continued)
Discontinued Operations
-----------------------
On March 14, 2000, the Company completed the sale of 100% of the
issued and outstanding stock of PSAS, a wholly-owned subsidiary
of the Company. PSAS is an airport/airline services company
providing skycap services at various airports in the United
States. The purchaser of PSAS was John B. Williams, a member of
the board of directors of the Company.
Pursuant to the terms of the agreement, the Company is entitled
to receive $425,000 to be paid in seventeen (17) equal quarterly
installments of $25,000, such commencing with and contingent on
net profits of PSAS for each subsequent quarter exceeding
$25,000. There is no assurance that the Company will receive any
of these payments, since they are contingent on PSAS becoming
profitable. PSAS has incurred operating losses, since the Company
acquired it in 1978. In addition, the Company shall provide
funding to PSAS in an amount sufficient to meet PSAS' obligations
through April 30, 2000. Such funds advanced by the Company shall
be reimbursed to PSA as supplemental payments subsequent to the
payment of the $425,000 and based on the same contingent payment
formula.
23
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENTS (Continued)
Discontinued Operations (Continued)
-----------------------
The results of operations for PSAS for the respective periods
presented are reported as a component of discontinued operations
in the consolidated statements of operations. The following
reflects the condensed balance sheet of PSAS as of December 31,
1999 and the summarized results of operations for the years
ending December 31, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
1999
--------------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 965
Trade receivables, less allowance for
doubtful accounts 170,875
--------------
TOTAL CURRENT ASSETS 171,840
PROPERTY AND EQUIPMENT - NET 34,796
--------------
TOTAL ASSETS $ 206,636
==============
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $ 839,165
Loans payable 171,284
--------------
TOTAL CURRENT LIABILITIES 1,010,449
--------------
NET LIABILITIES $ 803,813
==============
</TABLE>
24
<PAGE>
PSA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENTS (Continued)
Discontinued Operations (Continued)
-----------------------
Summarized results of operations of PSAS for the years ending
December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
REVENUE $ 2,028,988 $ 1,550,980
============== ==============
OPERATING EXPENSES $ 2,487,267 $ 2,272,295
============== ==============
LOSS FROM DISCONTINUED OPERATIONS $ (458,279) $ (721,315)
============== ==============
</TABLE>
25
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
As of December 31, 1999, the officers and directors of Canticle
Corporation were:
Name Age Position
- ---- --- --------
James M. Cassidy 64 President, Secretary, Director
As of December 31, 1999, there were no agreements or understandings for
the officer or director to resign at the request of another person and the
above-named officer and director was not acting on behalf of or at the direction
of any other person.
The sole officer and director of Canticle resigned effective upon
completion of the Acquisition. Upon the resignation of the sole officer and
director of Canticle the following persons were appointed to the respective
offices of the Company:
Name Age Title
- ---- --- -----
David E. Walsh 50 Chairman, Chief Executive Officer, President,
Director
Michael Handelman 40 Chief Financial Officer
Manju Seeram 25 Secretary
John J. Fitzpatrick 53 Director
Eric Carlson 49 Director
DAVID E. WALSH. Chairman, Chief Executive Officer, President and
Director of the Company. From 1994 to present, Mr. Walsh has devoted his efforts
to the formation of the Company and its subsidiaries. From 1992 to 1993, Mr.
Walsh was affiliated with Merrill Lynch in their Institutional Client Services
Group. From 1983 to 1992, Mr. Walsh operated Walsh Holding Company, a
diversified real estate development, construction and financing organization.
Mr. Walsh is a commissioned officer in the United States Naval Reserve. Mr.
Walsh received a Bachelor of Philosophy degree from Northwestern University,
Evanston, Illinois.
<PAGE>
MICHAEL HANDELMAN. Chief Financial Officer of the Company. Mr.
Handelman has been the Chief Financial Officer of the Company since January,
2000. From July, 1996 to July, 1999, Mr. Handelman was the Vice President and
Chief Financial Officer of Jane International Inc., a publicly held manufacturer
of functional children's products. From October, 1993 to June, 1996, Mr.
Handelman was Vice President and Chief Financial Officer of LAK Acquisition
Corporation which owned the Los Angeles Kings hockey franchise. Prior to that
Mr. Handelman spent twelve years in various positions in public accounting. Mr.
Handelman graduated from Brooklyn College with a Bachelors degree in Accounting.
MANJU SEERAM. Secretary of the Company. From March 2000 to the
present, Ms. Seeram has served as Secretary of the Company. From 1997 through
the present, Ms. Seeram has been employed by the Company as Executive Assistant
to the President. Prior to joining the Company, Ms. Seeram was a student at West
Los Angeles College from which she graduated in 1997.
JOHN J. FITZPATRICK. Director of the Company. Since 1992, Mr.
Fitzpatrick has been employed as Vice President of Business Development and
Government Sales by Dupont Flooring Systems, a division of Dupont, Inc. and its
predecessor companies. From 1982 to 1992, he has been employed by Karastan
Bigelow, a division of Fieldcrest Cannon, Inc. as manager of government sales
and national accounts. Mr. Fitzpatrick is a retired Captain in the United States
Naval Reserve where his last active duty assignment was to serve as Deputy
Reserve Intelligence Area Commander for Manpower Management in Washington, D.C.
He serves as Chairman of the Company's Executive Committee. Mr. Fitzpatrick
received a Bachelor in Science degree from the University of Dayton and a
Masters in Business Administration degree from St. Johns University.
ERIC CARLSON. Director of the Company. Mr. Carlson has been a Director
of the Company since February, 1999. Mr. Carlson has served as both a Director
and Corporate Officer for a number of corporations over the last 16 years. Mr.
Carlson has served in the United States Navy. He received a Bachelor of Arts
degree in Finance, with an emphasis in accounting, management and economics. In
addition, Mr. Carlson currently holds a number of professional licenses in the
area of investment and finance.
ITEM 10. EXECUTIVE COMPENSATION
David E. Walsh, Chairman, Chief Executive Officer, and President,
receives a salary of $350,000 per annum. Mr. Walsh is eligible for incentive
compensation payable in cash and stock options as determined by the Board of
Directors, pursuant to an employment agreement effective on September 30, 1999.
Michael Handelman, Chief Financial Officer, receives a salary of
$120,000 per annum.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information regarding the shareholdings
of PSA's current directors and executive officers and those persons or entities
who beneficially own more than 5% of its common stock (giving effect to the
exercise of any warrants held by each such person or entity which are currently
exercisable or may be exercised within 60 days of the date of this Annual
Report):
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Percent of
Common Stock Beneficially Common Stock
Name Owned (1) Beneficially Owned (2)
- ---- --------- ----------------------
<S> <C> <C>
Walsh Family Trust 17,324,319(2) 53.05%
9800 S. Sepulveda Blvd. #810
Los Angeles, California 90045
David E. Walsh 9,637,404 (2) 29.51%
Chairman, Chief Executive Officer,
Director
9800 S. Sepulveda Blvd. #810
Los Angeles, California 90045
Michael Handelman * *
Chief Financial Officer
9800 S. Sepulveda Blvd. #810
Los Angeles, California 90045
Manju Seeram * *
Secretary
9800 S. Sepulveda Blvd. #810
Los Angeles, California 90045
John J. Fitzpatrick * *
Director
9800 S. Sepulveda Blvd. #810
Los Angeles, California 90045
Eric Carlson * *
Director
9800 S. Sepulveda Blvd. #810
Los Angeles, California 90045
All Officers and Directors 26,961,723 82.56%
As a Group (5 persons)
</TABLE>
*Less than 1% of the outstanding shares.
(1) Percentages based upon 32,657,030 shares of the Company common stock
outstanding.
(2) Mr. Walsh may also be deemed to be the beneficial owner of stock owned
by the Walsh Family Trust.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF PSA
On March 13, 1998, PSA entered into a stock exchange agreement and
plan of reorganization, whereby the Company acquired PSA, Inc. a California
corporation, which it subsequently merged into the Company. Control of the
corporation shifted to the Walsh Family Trust, David E. Walsh, Trustee, and the
Company changed its name to the Company's current name. David E. Walsh and other
individuals replaced the existing officers and directors. This transaction
resulted in the issuance to the Walsh Family Trust of 23,738,657 shares of PSA's
common stock which, after issuance, was to have equaled 81.58% of the
outstanding common stock at the time of the reorganization. The Walsh Family
Trust owned 97% of the common stock of the acquired California entity prior to
the acquisition by the Company.
<PAGE>
On March 20, 1998 the Board of Directors (with Mr. Walsh abstaining)
authorized an amendment to the Articles of Incorporation of PSA to increase the
authorized number of shares of common stock from 30,000,000 shares to 75,000,000
shares with a $0.001 par value per share.
On May 20, 1998, the Board of Directors approved the issuance of
2,730,000 shares of unrestricted common stock to David E. Walsh in consideration
for his management services to PSA during 1997. On June 15, 1998, the Board of
Directors approved 4,000,000 shares of restricted common stock to be issued to
Mr. Walsh for past services from May, 1994 through May, 1998, excluding calendar
year 1997.
On June 29, 1998, the Board of Directors approved the final
acquisition of PSAS and the issuance of 500,000 shares of restricted common
stock to Frankie Hawkins and 250,000 shares of restricted common stock to Amy
Saxton in exchange for 100% of the issued and outstanding common stock of PSAS.
On September 8, 1998, the Board of Directors authorized and a vote of
the majority shareholders approved a one for fifty (1:50) reverse split of the
43,082,984 shares of issued and outstanding common stock as of September 1, 1998
to be effective upon the filing date, September 16, 1998, which resulted in
issued and outstanding common stock totaling of 861,660 shares.
On March 10, 1999, as consideration for executing a settlement and
mutual release agreement, the Board of Directors (with Mr. Walsh abstaining)
approved the issuance of 5,300,000 shares of common stock (pre-dividend) to the
Walsh Family Trust to correct inequities created by undisclosed liabilities and
undisclosed stock transactions implemented by former management and/or their
agents before the March 13, 1998 acquisition. The stock was also issued in
consideration for subsequent unauthorized stock transactions by this former
management, which were not disclosed to current management, and in consideration
for the Walsh Family Trust not rescinding the business combination between the
California entity and the Company.
On March 12, 1999, the Board of Directors (with Mr. Walsh abstaining)
and a vote of the majority shareholders approved declared a stock dividend and
approved for issuance to each of the shareholders of the common stock who was a
shareholder of record on May 14, 1999, as a stock dividend, two shares of
restricted common stock for each outstanding share of the common stock owned by
each shareholder.
On March 15, 1999, the Board of Directors (with Mr. Walsh abstaining)
approved the issuance of 1,545,000 shares of unrestricted common stock
(pre-dividend) to David E. Walsh as consideration for compensation for his
management services to the Company for past services from June, 1998 through
May, 1999.
On September 15, 1999, the Board of Directors (with Mr. Walsh
abstaining) approved the issuance of 5,733,130 shares of restricted common stock
of which 5,700,000 shares were to be issued to David Walsh pursuant to a
five-year employment agreement.
On March 14, 2000, the Board of Directors (with Mr. Williams, then a
member of the PSA board of directors, abstaining) approved the sale of all the
shares of PSAS to John D. Williams, then a director of the Company. Mr. Williams
subsequently resigned as a director of PSA.
On March 14, 2000, the Board of Directors approved the issuance of
78,370 shares of restricted common stock and payment of $350,000 to Richard
Sondheim in exchange for all the shares of Royal International Tours, Inc.
REGULATION S OFFERING
On October 1, 1999, pursuant to Rule 902 of Regulation S of the
Securities Act of 1933, as amended, PSA offered to sell a maximum of $20,000,000
of shares of its common stock at the purchase price per share of 90% of the
closing bid as quoted on the NASD OTC Bulletin Board on the date of purchase or
$2.00 per share, whichever was greater, to selected institutional and individual
investors. The minimum purchase was $25,000, subject to PSA's right to accept
less. Approximately 4,462,000 shares have been purchased yielding approximately
$11,096,000 in sale proceeds. Per share price varied from $2.00 to $10.50. This
offering is continuing. PSA intends to use the net proceeds of this private
placement of its common stock to fund some of its acquisitions and for working
capital. There is no assurance that PSA will be able to sell any additional
shares of its common stock in the course of this offering.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1. Agreement and Plan of Reorganization between PSA, Inc. and Canticle
Corporation filed as Exhibit to Form 8-K filed 2/18/00 (file no.
0-26413).
(b) No reports on Form 8-K were filed in the last quarter of the period
covered by this report, but a Form 8-K reflecting the Acquisition was
filed February 18, 2000 and a Form 8-K reflecting the sale of PSAS and
the acquisition of Royal International Tours, Inc. was filed March 24,
2000 (file no. 0-26413).
<PAGE>
SIGNATURES
In accordance with Section 13 of 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
PSA, INC.
By /S/ David E. Walsh
------------------------
David E. Walsh
President
By /S/ Michael Handelman
------------------------
Michael Handelman
Chief Financial Officer
Name Title Date
- ---- ----- ----
/S/ David E. Walsh Director April 13, 2000
- ------------------------
David E. Walsh
/S/ Robert E. Root Director April 13, 2000
- ------------------------
Robert E. Root
/S/ John J. Fitzpatrick Director April 13, 2000
- ------------------------
John J. Fitzpatrick
/S/ Eric Carlson Director April 13, 2000
- ------------------------
Eric Carlson
/S/ John D. Williams Director April 13, 2000
- ------------------------
John D. Williams
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,183
<SECURITIES> 1,686
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,869
<CURRENT-LIABILITIES> 3,661
<BONDS> 0
0
0
<COMMON> 31
<OTHER-SE> (823)
<TOTAL-LIABILITY-AND-EQUITY> 792
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,915
<OTHER-EXPENSES> 3,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,890)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,890)
<DISCONTINUED> (721)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,611)
<EPS-BASIC> (.38)
<EPS-DILUTED> (.38)
</TABLE>
