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As filed with the Securities and Exchange Commission on July 20, 1999
Registration No. 0-25449
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
PPI CAPITAL GROUP, INC.
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(Name of Small Business Issuer in its Charter)
Utah 87-0401453
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1661 Lakeview Circle, Ogden, Utah 84403
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 399-3632
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
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Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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(Title of Class)
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PPI CAPITAL GROUP, INC
FORM 10-SB
TABLE OF CONTENTS
PART 1 Page
Item 1. Description of Business ..................................... 3
Item 2. Management's Discussion and Analysis or Plan of Operation ... 10
Item 3. Description of Property...................................... 12
Item 4. Security Ownership of Certain Beneficial Owners
and Management.............................................. 13
Item 5. Directors, Executive Officers, Promoters
and Control Persons......................................... 14
Item 6. Executive Compensation....................................... 19
Item 7. Certain Relationships and Related Transactions............... 20
Item 8. Description of Securities.................................... 21
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters................. 22
Item 2. Legal Proceedings............................................ 23
Item 3. Changes in and Disagreements with Accountants................ 23
Item 4. Recent Sales of Unregistered Securities...................... 23
Item 5. Indemnification of Directors and Officers.................... 23
PART F/S
Financial Statements......................................... 25
PART III
Item 1. Signatures................................................... 38
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Corporate History
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(a) Past Business Activities
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The Registrant was incorporated on October 28, 1983, under the name
Destiny Express, Incorporated ("Destiny"), in the state of Utah. Destiny
underwent a name change in November 1985 to Psychological Health Care, Inc.
("PHCI"). PHCI was in the business of contracting for and providing
psychological services and counseling to employees of corporations and in
presenting seminars and training sessions on numerous subjects. PHCI
discontinued all operations effective September 30, 1987.
On March 13, 1989, PHCI acquired the 1,000,000 issued and outstanding
shares of common stock of Pain Prevention, Inc., an Illinois corporation, in a
reverse merger transaction in exchange for 37,031,250 shares of the PHCI's
common stock. Pain Prevention, Inc. (Illinois), had been in the business of
developing and marketing of a dental device, i.e., a battery powered
transcutaneous electrical nerve stimulation wave generator, with related
apparatuses for certain dental applications.
The Board of Directors and stockholders of PHCI also approved the change
of the PHCI's name to Pain Prevention, Inc. (henceforth "Registrant"), and an
increase in the authorized shares from 50,000,000 to 200,000,000 shares of
common stock, par value $0.001 par value.
By the end of 1989, Pain Prevention, Inc. (Illinois) discontinued all
operations. Neither Pain Prevention, Inc. (Illinois) nor the Registrant have
had any subsequent operations.
In June 1997, the Registrant entered into an Agreement and Plan of
Reorganization and Corporation Separation (the "Agreement")to transfer
3,200,000 issued and outstanding shares of common stock in Pain Prevention,
Inc. (Illinois) to Meridian Enterprises, Inc., a Delaware corporation, in
consideration for the assumption by Meridian Enterprises, Inc., of any and all
obligations owing to Ronald J. Stauber, Inc., a law corporation, for legal
services performed in relation to the Agreement. At the time of the
Agreement, the total issued and outstanding shares of Pain Prevention, Inc.
(Illinois) consisted of 4,000,000 shares of common stock par value $0.00175,
owned by two shareholders, Meridian Enterprises, Inc., and the Registrant. The
Agreement was entered into by and between the Registrant, Gregory Jess
Halpern, its controlling shareholder, and Meridian Enterprises, Inc. The
obligations owing were those of Pain Prevention, Inc. (Illinois) and not those
of the Registrant.
In November, 1997, Pain Prevention, Inc. (Illinois), changed its name to
PPI Capital Corp., and its state of domicile from Illinois to Utah. On
November 15, 1997, the Registrant distributed the balance of 800,000 shares of
Pain Prevention, Inc. (Illinois)(now "PPI Capital Corp.") common stock to its
shareholders pro rata. The business purpose for the common stock distribution
was to eliminate from the Registrant the minimal assets and contingent
liabilities, if any, of Pain Prevention, Inc. (Illinois). Because the
Registrant had no interest or intention of pursuing any business purpose
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through PPI Capital Corp., the board of directors felt it was in the best
interest of the Registrant and its shareholders to distribute its remaining
shares directly to its shareholders, Any benefit from any subsequent
operations of PPI Capital Corp. will go directly to the shareholders. As
indicated in the Agreement, Gregory Jess Halpern waived the right to receive
any distribution owed to him.
In May 1998, Gregory Jess Halpern sold 12,980,831 shares of the
Registrant's common stock, which amount represented approximately 75.47% of
the total 17,198,707 issued and outstanding shares, to Mark Scharmann for
$40,000. In connection with the sale of controlling interest, Mr. Halpern
resigned as an officer and director, and Karen Stefanczyik and Earl Kohn
resigned as directors. Mark Sharmann was appointed President and Director,
Dave Knudson was appointed Vice-President and Director, and Dan Price was
appointed Secretary and Director.
The new Board proposed a recapitalization that provided a 10 for 1
reverse split of the issued and outstanding shares, and a name change to PPI
Capital Group, Inc. The reorganization was proposed to reduce the number of
outstanding shares in order to make the Registrant more attractive as a
potential merger or acquisition candidate. The name change was implemented to
make the Registrant's name more generic and less representative of its former
business operations.
The proposals were approved in a special shareholders meeting on June 1,
1998. After giving effect to the reverse split, there were approximately
1,719,870 shares of the Registrant's common stock issued and outstanding. At
present, PPI Capital Group, Inc. has no affiliation with PPI Capital Corp.
(b) Current Business Activities
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Since discontinuing operations the Registrant has been a "shell" company
and its business purpose has been to locate and consummated a merger or
acquisition with a private entity. The purposed business activities described
herein classify as a "blank check" company. Therefore, the Registrant faces
all the risks interest in any new business, together with those risks
specifically inherent in the search for an acquisition of business
opportunities.
Since the change in control in May 1998, the Registrant has been seeking
potential business acquisition or opportunities to enter in an effort to
commence business operations. The Registrant does not propose to restrict its
search for a business opportunity to any particular industry or
geographical area and may, therefore, engage in essentially any business in
any industry. The Registrant has unrestricted discretion in seeking and
participating in a business opportunity, subject to the availability of such
opportunities, economic conditions, and other factors.
The selection of a business opportunity in which to participate is
complex and risky. Additionally, as the Registrant has only limited resources,
it may be difficult to find good opportunities. There can be no assurance
that the Registrant will be able to identify and acquire any business
opportunity which will ultimately prove to be beneficial to the Registrant and
its shareholders. The Registrant will select any potential business
opportunity based on management's business judgment.
The activities of the Registrant are subject to several significant risks
which arise primarily as a result of the fact that the Registrant has no
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specific business and may acquire or participate in a business opportunity
based on the decision of management which potentially could act without the
consent, vote, or approval of the Registrant's shareholders. The risks faced
by the Registrant are further increased as a result of its lack of resources
and its inability to provide a prospective business opportunity with
significant capital.
In May 1998, the directors determined that the Registrant should
become active in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
Registrant then began to consider and investigate potential business
opportunities. Because of the Registrant's current status having no assets
and no recent operating history, in the event the Registrant does successfully
acquire or merge with an operating business opportunity, it is likely that the
Registrant's present shareholders will experience substantial dilution and
there will be a probable change in control of the Registrant.
The Registrant is voluntarily filing its registration statement on Form
10SB in order to make information concerning itself more readily available to
the public. Management believes that being a reporting company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), could
provide a prospective merger or acquisition candidate with additional
information concerning the Registrant. In addition, management believes that
this might make the Registrant more attractive to an operating business
opportunity as a potential business combination candidate. As a result of
filing its registration statement, the Registrant is obligated to file with
the Commission certain interim and periodic reports including an annual report
containing audited financial statements. The Registrant intends to continue
to voluntarily file these periodic reports under the Exchange Act even if its
obligation to file such reports is suspended under applicable provisions of
the Exchange Act.
Any target acquisition or merger candidate of the Registrant will become
subject to the same reporting requirements as the Registrant upon consummation
of any such business combination. Thus, in the event that the Registrant
successfully completes an acquisition or merger with another operating
business, the resulting combined business must provide audited financial
statements for at least the two most recent fiscal years or, in the event that
the combined operating business has been in business less than two years,
audited financial statements will be required from the period of inception of
the target acquisition or merger candidate.
Sources of Business Opportunities
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The Registrant intends to use various sources in its search for potential
business opportunities including its officers and directors, consultants,
special advisors, securities broker-dealers, venture capitalists, members of
the financial community and others who may present management with unsolicited
proposals. Because of the Registrant's lack of capital, it may not be able to
retain on a fee basis professional firms specializing in business acquisitions
and reorganizations. Rather, the Registrant will most likely have to rely on
outside sources, not otherwise associated with the Registrant, that will
accept their compensation only after the Registrant has finalized a successful
acquisition or merger. To date, the Registrant has not engaged nor entered
into any discussions, negotiations, agreements nor understandings regarding
retention of any consultant to assist the Registrant in its search for
business opportunities, nor is management presently in a position to actively
seek or retain any prospective consultants for these purposes.
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The Registrant does not intend to restrict its search to any specific
kind of industry or business. The Registrant may investigate and ultimately
acquire a venture that is in its preliminary or development stage, is already
in operation, or in various stages of its corporate existence and development.
Management cannot predict at this time the status or nature of any venture in
which the Registrant may participate. A potential venture might need
additional capital or merely desire to have its shares publicly traded. The
most likely scenario for a possible business arrangement would involve the
acquisition of, or merger with, an operating business that does not need
additional capital, but which merely desires to establish a public trading
market for its shares. Management believes that the Registrant could provide a
potential public vehicle for a private entity interested in becoming a
publicly held corporation without the time and expense typically associated
with an initial public offering.
Evaluation
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Once the Registrant has identified a particular entity as a potential
acquisition or merger candidate, management will seek to determine whether
acquisition or merger is warranted or whether further investigation is
necessary. Such determination will generally be based on management's
knowledge and experience, or with the assistance of outside advisors and
consultants evaluating the preliminary information available to them.
Management may elect to engage outside independent consultants to perform
preliminary analysis of potential business opportunities. However, because of
the Registrant's lack of capital it may not have the necessary funds for a
complete and exhaustive investigation of any particular opportunity.
In evaluating such potential business opportunities, the Registrant will
consider, to the extent relevant to the specific opportunity, several factors
including potential benefits to the Registrant and its shareholders; working
capital, financial requirements and availability of additional financing;
history of operation, if any; nature of present and expected competition;
quality and experience of management; need for further research, development
or exploration; potential for growth and expansion; potential for profits; and
other factors deemed relevant to the specific opportunity.
Because the Registrant has not located or identified any specific
business opportunity as of the date hereof, there are certain unidentified
risks that cannot be adequately expressed prior to the identification of a
specific business opportunity. There can be no assurance following
consummation of any acquisition or merger that the business venture will
develop into a going concern or, if the business is already operating, that it
will continue to operate successfully. Many of the potential business
opportunities available to the Registrant may involve new and untested
products, processes or market strategies which may not ultimately prove
successful.
Form of Potential Acquisition or Merger
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Presently, the Registrant cannot predict the manner in which it might
participate in a prospective business opportunity. Each separate potential
opportunity will be reviewed and, upon the basis of that review, a suitable
legal structure or method of participation will be chosen. The particular
manner in which the Registrant participates in a specific business opportunity
will depend upon the nature of that opportunity, the respective needs and
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desires of the Registrant and management of the opportunity, and the relative
negotiating strength of the parties involved. Actual participation in a
business venture may take the form of an asset purchase, lease, joint venture,
license, partnership, stock purchase, reorganization, merger or consolidation.
The Registrant may act directly or indirectly through an interest in a
partnership, corporation, or other form of organization, however, the
Registrant does not intend to participate in opportunities through the
purchase of minority stock positions.
Because of the Registrant's current status and recent inactive status for
the prior 10 years, and its concomitant lack of assets or relevant
operating history, it is likely that any potential merger or acquisition with
another operating business will require substantial dilution of the
Registrant's existing shareholders. There will probably be a change in
control of the Registrant, with the incoming owners of the targeted merger or
acquisition candidate taking over control of the Registrant. Management has
not established any guidelines as to the amount of control it will offer to
prospective business opportunity candidates, since this issue will depend to a
large degree on the economic strength and desirability of each candidate, and
corresponding relative bargaining power of the parties. However, management
will endeavor to negotiate the best possible terms for the benefit of the
Registrant's shareholders as the case arises.
Management does not have any plans to borrow funds to compensate any
persons, consultants, promoters, or affiliates in conjunction with its efforts
to find and acquire or merge with another business opportunity. Management
does not have any plans to borrow funds to pay compensation to any prospective
business opportunity, or shareholders, management, creditors, or other
potential parties to the acquisition or merger. In either case, it is
unlikely that the Registrant would be able to borrow significant funds for
such purposes from any conventional lending sources. In all probability, a
public sale of the Registrant's securities would also be unfeasible, and
management does not contemplate any form of new public offering at this time.
There are no arrangements, agreements or understandings between non-
management shareholders and management under which non-management shareholders
may directly or indirectly participate in or influence the management of the
Company's affairs. There are no arrangements, agreements or understandings
under which non-management shareholders will exercise their voting rights to
continue to elect the current directors to the Company's Board of Directors.
On May 1, 1999, the Company entered into a Master Promissory Note with
Mark A. Scharmann, the Company's President, CEO and majority shareholder, to
loan the Company up to $120,000. The Master Promissory Note superseded other
notes payable to Mr. Scharmann, which at April 30, 1999, represented $61,055
in principal and accrued interest. The Master Promissory Note bears interest
at 10% per annum and, at the election of Mr. Scharmann, may be converted to
shares of the Company's common stock at a rate of one share for each $0.01 of
outstanding principal and interest.
Outside of the Master Promissory Note with Mr. Scharmann, in the event
that the Registrant does need to raise additional capital, it would most
likely have to rely on the private sale of its securities or loans from its
other officers and directors. Except for the Master Promissory Note, there
are no preliminary agreements or understandings between the Company and its
officers and directors or affiliates or lending institutions with respect to
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any such loan agreements, nor has the Company identified the criteria that it
may use in determining whether to seek such loans. Any funds borrowed by the
Company through the Master Promissory Note or any other loan source would not
be utilized by the Company to make payments to the Company's promoters,
management, or their affiliates or associates, except for the reimbursement of
expenses paid on behalf of the Company, upon presentation to the company of
appropriate invoices or other documentation evidencing such payments.
Any private sale of securities would be limited to persons exempt under
the Commission's Regulation D or other rule or provision for exemption, if any
applies. However, no private sales are contemplated by the Registrant's
management at this time, and, except for the possible conversion of debt under
the Master Promissory Note by Mr. Scharmann, there are no plans, proposals,
arrangements or understandings with respect to the sale or issuances of
additional securities by the Company prior to the location of an acquisition
or merger candidate. If a private sale of the Registrant's securities is
deemed appropriate in the future, management will endeavor to acquire funds on
the best terms available to the Registrant. However, there can be no
assurance that the Registrant will be able to obtain additional funding when
and if needed, or that such funding, if available, can be obtained on terms
reasonable or acceptable to the Registrant. The Registrant does not
anticipate using Regulation S promulgated under the Securities Act of 1933 to
raise any funds any time within the next year, subject only to its potential
applicability after consummation of a merger or acquisition.
Although not presently anticipated by management, there is a remote
possibility that the Registrant might sell its securities to its management or
affiliates.
In the event of a successful acquisition or merger, a finder's fee, in
the form of cash or securities of the Registrant, may be paid to persons
instrumental in facilitating the transaction. The Registrant has not
established any criteria or limits for the determination of a finder's fee,
although most likely an appropriate finder's fee will be negotiated between
the parties, including the potential business opportunity candidate, based
upon economic considerations and reasonable value as estimated and mutually
agreed at that time. A finder's fee would only be payable upon completion of
the proposed acquisition or merger in the normal case, and management does not
contemplate any other arrangement at this time. Management has not actively
undertaken a search for, nor retention of, any finder's fee arrangement with
any person. It is possible that a potential merger or acquisition candidate
would have its own finder's fee arrangement, or other similar business
brokerage or investment banking arrangement, whereupon the terms may be
governed by a preexisting contract; in such case, the Registrant may be
limited in its ability to affect the terms of compensation, but most likely
the terms would be disclosed and subject to approval pursuant to submission of
the proposed transaction to a vote of the Registrant's shareholders.
Management cannot predict any other terms of a finder's fee arrangement at
this time. It would be unlikely that a finder's fee payable to an affiliate
of the Registrant would be proposed because of the potential conflict of
interest issues. If such a fee arrangement was proposed, independent
management and directors would negotiate the best terms available to the
Registrant so as not to compromise the fiduciary duties of the affiliate in
the proposed transaction, and the Registrant would require that the proposed
arrangement would be submitted to the shareholders for prior ratification in
an appropriate manner.
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Management does not contemplate that the Registrant would acquire or
merge with a business entity in which any affiliates of the Registrant have an
interest and no present potential for such a merger or acquisition exists.
Any such related party transaction, however remote, would be submitted for
approval by an independent quorum of the Board of Directors and the proposed
transaction would be submitted to the shareholders for prior ratification in
an appropriate manner. If such an opportunity arose, however, the Registrant
would not seek to obtain an independent appraisal of the value of the business
or company with which the related party transaction was contemplated. In that
circumstance, management's ability to effectively evaluate such a non-arms
length transaction might be compromised, and any remedy available to
dissenting shareholders in such a transaction would most likely be
prohibitively expensive and time consuming. None of the Registrant's
managers, directors, or other affiliated parties have had any contact,
discussions, or other understandings regarding any particular business
opportunity at this time, regardless of any potential conflict of interest
issues. Accordingly, the potential conflict of interest is merely a remote
theoretical possibility at this time.
Rights of Shareholders
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It is presently anticipated by management that prior to consummating a
possible acquisition or merger, the Registrant will seek to have the
transaction ratified by shareholders in the appropriate manner. Most likely,
this would require a general or special shareholder's meeting called for such
purpose. Section 16-10a-704 of the Utah Revised Business Corporation Act
provides that any action which may be taken at any annual or special meeting
of the shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall be signed by the holder of the outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
However, a shareholder's meeting is normally the most expeditious
procedure, wherein all shareholder's would be entitled to vote in person or by
proxy. Because following the effective date of this registration statement
the Registrant will be subject to Section 14 of the Exchange Act, the
Registrant intends to send notice to the shareholders requesting their
approval of the terms of the proposed transaction. In the notice of such a
shareholder's meeting and proxy statement, the Registrant will provide
shareholders complete disclosure documentation concerning the potential
acquisition of merger candidate, including audited financial statements and
business information about the target as required under Section 14.
None of the Registrant's officers, directors and promoters, their
affiliates or associates have had any preliminary contact or discussions with
any representatives of the owners of any business or company, and there are no
present plans, proposals, arrangements or understandings with any
representatives of the owners of any business or company regarding the
possibility of an acquisition or merger.
Competition
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Because the Registrant has not identified any potential acquisition or
merger candidate, it is unable to evaluate the type and extent of its likely
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competition. The Registrant is aware that there are several other public
companies with only nominal assets that are also searching for operating
businesses and other business opportunities as potential acquisition or merger
candidates. The Registrant will be in direct competition with these other
public companies in its search for business opportunities and, due to the
Registrant's lack of funds, it may be difficult to successfully compete with
these other companies.
Employees
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As of the date hereof, the Registrant does not have any employees and has
no plans for retaining employees until such time as the Registrant's business
warrants the expense, or until the Registrant successfully acquires or merges
with an operating business. The Registrant may find it necessary to
periodically hire part-time clerical help on an as-needed basis.
Facilities
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The Registrant is currently using as its principal place of business the
personal residence of its President and Director located in Ogden, Utah.
Although the Registrant has no written agreement and pays no rent for the use
of this facility, it is contemplated that at such future time as an
acquisition or merger transaction may be completed, the Registrant will secure
commercial office space from which it will conduct its business. Until such
an acquisition or merger, the Registrant lacks any basis for determining the
kinds of office space or other facilities necessary for its future business.
The Registrant has no current plans to secure such commercial office space.
It is also possible that a merger or acquisition candidate would have adequate
existing facilities upon completion of such a transaction, and the
Registrant's principal offices may be transferred to such existing facilities.
Year 2000 Computer Problem
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The Year 2000, or Y2K problem concerns potential failure of certain
computer software to correctly process information because of the software's
inability to calculate dates. The Registrant has no operations or current
equipment which might be affected by the Year 2000 computer glitch. The
Registrant will make every effort to determine the Y2K preparedness of any
potential merger or acquisition candidate.
Item 2. Management's Discussion and Analysis or Plan of Operation
Overview
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The Registrant is considered a development stage company with no assets
or capital and with no operations or income since approximately 1989. The
costs and expenses associated with the preparation and filing of this
registration statement and other operations of the Registrant have been paid
for by shareholders of the Registrant, specifically Mark A. Scharmann (see
Item 4, Security Ownership of Certain Beneficial Owners and Management). It is
anticipated that the Registrant will require only nominal capital to maintain
the corporate viability of the Registrant and necessary funds will most likely
be provided by the Registrant's existing shareholders or its officers and
directors in the immediate future.
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In May 1999, the Registrant entered into a master promissory note with
its President to loan the Registrant up to $120,000 for use as working
capital. The master promissory note bears interest and at 10% per annum and
supercedes previous notes issued by the Registrant to its President. At April
30, 1999, the master promissory note incorporated $61,055 in principle and
accrued interest. Other than the balance of funds available under master
promissory note the Registrant has no other financing means in place and
unless the Registrant is able to facilitate an acquisition of or merger with
an operating business or is able to obtain significant outside financing,
there is substantial doubt about the Registrant's ability to continue as a
going concern.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Registrant until such time as the
Registrant successfully completes an acquisition or merger. At that time,
management will evaluate the possible effects of inflation on the Registrant
as it relates to its business and operations following a successful
acquisition or merger.
Forward-Looking Statements
--------------------------
This Form 10-SB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 321E of
the Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-SB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things
as future capital expenditures (including the amount and nature thereof),
business strategy, expansion and growth of the Company's business and
operations, and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company
in light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual
results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general
economic market and business conditions; the business opportunities (or lack
thereof) that may be presented to and pursued by the Company; changes in laws
or regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this
Form 10-SB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or
operations.
Plan of Operation
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During the next twelve months, the Registrant's officers and directors
will contact business brokers, consultants, and other business professionals
in an effort to actively seek out and investigate possible business
opportunities with the intent to acquire or merge with one or more business
ventures. In its search for business opportunities, management will follow the
procedures outlined in Item 1 above. Because the Registrant lacks funds, it
may be necessary for the officers and directors to either advance funds to the
Registrant or to accrue expenses until such time as a successful business
<PAGE> 12
consolidation can be made. Management intends to hold expenses to a minimum
and to obtain services on a contingency basis when possible. The Registrant's
directors may receive compensation for services provided to the Company until
such time as an acquisition or merger can be accomplished. However, if the
Registrant engages outside advisors or consultants in its search for business
opportunities, it may be necessary for the Registrant to attempt to raise
additional funds. As of the date hereof, the Registrant has not made any
arrangements or definitive agreements to use outside advisors or consultants
or to raise any capital.
In the event the Registrant does need to raise capital most likely the
only method available to the Registrant would be the private sale of its
securities. It is unlikely that it could make a public sale of securities or
be able to borrow any significant sum from either a commercial or private
lender. There can be no assurance that the Registrant will be able to obtain
additional funding when and if needed, or that such funding, if available, can
be obtained on terms acceptable to the Registrant.
The Registrant does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is confident that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
ITEM 3. Description of Property
The Registrant does not own or control any material property. The
Registrant is currently using as its principal place of business the personal
residence of its President and Director located in Ogden, Utah. Although the
Registrant has no written agreement and pays no rent for the use of this
facility, it is contemplated that at such future time as an acquisition or
merger transaction may be completed, the Registrant will secure commercial
office space from which it will conduct its business. Until such an
acquisition or merger, the Registrant lacks any basis for determining the
kinds of office space or other facilities necessary for its future business.
The Registrant has no current plans to secure such commercial office space.
It is also possible that a merger or acquisition candidate would have adequate
existing facilities upon completion of such a transaction, and the
Registrant's principal offices may be transferred to such existing facilities.
<PAGE>
<PAGE> 13
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth the number of shares of the Registrant's
Common Stock, par value $0.001, held by each person who is believed to be
the beneficial owner of 5% or more of the 1,889,081 shares of the Registrant's
common stock outstanding at June 28, 1999, based on the Registrant's transfer
agent's list, and the names and number of shares held by each of the
Registrant's officers and directors and by all officers and directors as a
group.
Title of Name and Address Amount and Nature of Percent
Class Of Beneficial Owner Beneficial Ownership(1) of Class
- -------- ------------------- --------------------- --------
Common Scott Corry 100,000 Direct 5.35
2110 East 100 North
Layton, UT 84040
Common David Johnson 100,000 Direct 5.35
1649 Lakeview Way
Ogden, UT 84403
Common David Knudson 133 Direct 0.01
2331 East 1200 North
Layton, UT 84040
none Dan O. Price 0 N/A 0.00
7250 NE William Rogers Rd
Indianola, WA 98342
Common Mark A. Scharmann 1,048,082 Direct 56.07
1661 Lakeview Circle
Ogden, UT 84403
- --------------------------------
Officers, Directors and Nominees
Common Mark A. Scharmann, President
and Director -------See Above-------
Common David Knudson, Vice
President and Director -------See Above-------
Common Dan O. Price, Secretary/
Treasurer and Director -------See Above-------
All Officers, Directors, and
Nominees as a Group (3 Persons) 1,048,215 Direct 56.08
========= =====
(1) Each person has sole investment and sole voting power over the listed
shares.
<PAGE> 14
ITEM 5. Directors, Executive Officers, Promoters and Control Persons
The names of the Registrant's executive officers and directors and the
positions held by each of them are set forth below:
Name Position
- ---- --------
Mark A. Scharmann President and Director
David Knudson Vice President and Director
Dan O. Price Secretary/Treasurer and Director
The term of office of each director is one year and until his successor
is elected at the Registrant's annual shareholders' meeting and is qualified,
subject to removal by the shareholders. The term of office for each officer
is for one year and until a successor is elected at the annual meeting of the
board of directors and is qualified, subject to removal by the board of
directors.
There are no agreements or understandings for any officer or director to
resign at the request of another person and none of the officers and directors
are acting on behalf of or will act at the direction of another person. The
officers and directors of the Company are considered to be the only promoters
of the Company.
Biographical Information
Set forth below is certain biographical information with respect to each
of the Registrant's officers and directors.
Mark A. Scharmann, age 39, has been president of the Company since May
1998. Mr. Scharmann had been vice-president and a director of the Company
since February 1997. Since 1979, Mr. Scharmann has been the principal owner
of Troika Capital, Inc., Ogden, Utah, a financial consulting company. Mr.
Scharmann is also an officer, director and/or principal shareholder of other
companies that are development stage companies with no business operations and
are considered "blank check" or "shell" companies. (See Involvement in Blind
Pool, Blank Check Companies or Offerings and Item 7. Certain Relationships and
Related Transactions below.)
David Knudson, age 38, has been the vice-president of the Company since
May 1998. Mr. Knudson had been secretary/treasurer of the Company since
February 1997. From September 1994 to June 1996, Mr. Knudson was an adjunct
professor of Computer Information Systems at Weber State University, Ogden,
Utah. Since 1985, Mr. Knudson has been the principal of Twelve O Eight, a
business and computer consulting company, located in Layton, Utah. Mr. Knudson
is also an officer and director of other companies that are development stage
companies with no business operations and are considered "blank check" or
"shell" companies. (See Involvement in Blind Pool, Blank Check Companies or
Offerings and Item 7. Certain Relationships and Related Transactions below.)
Dan O. Price, age 44, has been secretary/treasurer and a director of the
Company since May 1998. Since February 1993, Mr. Price has served as vice-
president for corporate development of Troika Capital, Inc., Ogden, Utah, a
financial consulting company. Since October 1998, Mr. Price has also been
<PAGE> 15
working as an evaluator at Learning Technics, Kirkland, Washington. Mr. Price
is also an officer and director of other companies that are development stage
companies with no business operations and are considered "blank check" or
"shell" companies. (See Involvement in Blind Pool, Blank Check Companies or
Offerings and Item 7. Certain Relationships and Related Transactions below.)
Involvement in Blind Pool/Blank Check Companies or Offerings
- ------------------------------------------------------------
The Registrant's officers and directors have had experience as either
officers, directors, and/or shareholder of certain public companies, several
of which have been or may now be considered "blind pool, blank check"
companies. The list of such public companies and the positions held includes
the following:
Nightingale, Inc.
-----------------
Mr. Scharmann is a principal shareholder and Mr. Knudson is an officer
and director of Nightingale, Inc. ("Nightingale"), a company formed for the
purpose of investing in any and all types of assets, properties and
businesses. Nightingale issued 1,000,000 shares of its Common Stock to its
officers, directors and others for the aggregate sum of $20,600. On
September 28, 1988, the SEC granted effectiveness to a Registration
Statement on Form S-18, filed by Nightingale for an offering of 2,000,000
Units of Common Stock and Warrants at $.10 per Unit. Each Unit consisted of
one share of Common Stock, one Class "A" Common Stock Purchase Warrant and
one Class "B" Common Stock Purchase Warrant. The offering was a "blind pool"
or "blank check" offering. The offering was closed on October 6, 1989. All
2,000,000 Units offered were subscribed for and a total of $200,000 was
deposited into the an Escrow Account. The offering was registered for sale
in the State of Utah and therefore, Nightingale was and is required to
comply with Rule 164-11-1 as promulgated by the Utah Securities Division.
Such Rule prohibits the issuance of shares, the secondary trading of the
Nightingale's securities and the expenditure of more than 20 percent of
the net offering proceeds without first giving subscribers a rescission
offering in connection with an acquisition.
Since the close of its offering, Nightingale has been attempting to
locate potential business acquisitions. Nightingale is not currently a
party to any binding agreement to acquire or merge with any company. Rule
164-11-1, as promulgated by the Utah Securities Division, is applicable
to offerings in which eighty percent (80%) or more of the net offering
proceeds are not specifically allocated. Following the close of
offerings subject to Rule 164-11-1, a company subject to the Rule is required
to maintain a minimum of eighty percent (80%) of the net offering proceeds
in an escrow account until such time as it can specifically allocate
the use of proceeds. At such time as the offering proceeds can be
specifically allocated, the Company must file additional information with
the Utah Securities Division disclosing the use of proceeds and deliver such
information to the investors purchasing shares in the offering. Rule 164-11-1
also prohibits the issuance of securities, the delivery of stock
certificates or the secondary trading of the Company's stock until the
offering proceeds have been released to the Company subsequent to the
rescission offering. Nightingale files reports with the SEC pursuant to
sections 13 or 15(d) of the Exchange Act.
<PAGE> 16
Pacific Alliance Corporation
----------------------------
Mr. Scharmann, Mr. Price and Mr. Knudson are officers, directors and
shareholders of Pacific Alliance Corporation (the "Pacific") a Delaware
corporation which is currently inactive. Pacific was previously engaged in
the business of distributing television programming under the name Pacific
Syndication, Inc. On June 23, 1995, Pacific filed for protection under
Chapter 11 of the United States Bankruptcy Code (Case No. BK. No. SV
95-14737 KL). On May 28, 1997 (the "Confirmation Date"), the United
States Bankruptcy Court for the Central District of California Confirmed
the Company's Modified Plan of Reorganization (the "Plan") and First
Amended Disclosure Statement (the "Disclosure Statement"). The Effective
Date of the Plan was June 8, 1998. Although the Company's Chapter 11 Plan of
Reorganization has been confirmed by the Bankruptcy Court, Pacific
continues to operate under the jurisdiction of the Court. Pacific's current
business plan calls for it to locate and acquire an operating company.
Pacific was organized by Mr. Scharmann on April 22, 1986 under the laws
of the State of Utah under the name of Kaiser Research, Inc. ("Kaiser"). On
December 2, 1994, Kaiser changed its domicile from the State of Utah to the
State of Delaware through a reincorporation merger. In order to effect the
reincorporation merger, the Kaiser formed a wholly-owned subsidiary under
Delaware law under the name of PACSYND, Inc. After the change of the
Company's domicile, it acquired a privately held corporation ("Private
PSI") in a merger transaction, and in connection therewith, its name was
changed to Pacific Syndication, Inc. Mr. Scharmann resigned as an officer
and director in connection with the acquisition of Private PSI. Private PSI
was formed to engage in the business of providing a variety of television
industry related services to its clients. Such services included, but were not
limited to, video tape duplication, standards conversion and delivery of
television programming by way of conventional carriers (such as UPS,
Airborne and Federal Express) and by satellite or fiber optic
transmission. From its inception, Private PSI was undercapitalized. It
funded its initial operations through the factoring of its accounts
receivable. Pacific was unable to commence operations in the television
programming services business and ultimately, substantially all of its
assets were sold and it discontinued its operations.
In 1996, Troika Capital, Inc. ("Troika"), an entity controlled by Mr.
Scharmann, agreed to assist Pacific in developing a Plan of Reorganization
which would provide Pacific, its shareholders and creditors with at least
a possibility of recouping all or some of their investment in the
Pacific or the debts owed to them by Pacific. Mr. Scharmann, Mr. Price and
Mr. Knudson were shareholders of Pacific and creditors of Pacific at the time
Pacific commenced its bankruptcy proceeding. The Plan and Disclosure
Statement was confirmed by the Bankruptcy Court on May 28, 1997. The
Effective Date of the Plan was June 8, 1997. The Company continues to file
monthly "Debtor in Possession Interim Statements" and "Debtor in Possession
Operating Reports" with the Office of the United States Trustee. Pacific
files reports with the SEC pursuant to sections 13 or 15(d) of the Exchange
Act. Pacific has applied to the NASD for trading on the OTCBB under the
symbol "PALCQ".
<PAGE>
<PAGE> 17
Royal Oak Resources
-------------------
Mr. Scharmann was an officer, director and principal shareholder of Royal
Oak Resources ("Royal Oak"), a company formed for the purpose of investing in
oil, gas or other natural resource businesses. In March 1983, pursuant to
Section 3(a)(11) of the Securities Act, and the registration requirements of
the Utah Securities Division, Royal Oak sold 8,000,000 shares of Common Stock
to Utah residents for gross offering proceeds of $80,000. In June 1987, Royal
Oak entered into a joint venture agreement to purchase equipment for
processing natural gas liquids for resale. In December 1998, Royal Oak
determined that the joint venture could not be successful and the investment
was written off as a loss on investment. In November 1995, Royal Oak entered
into an acquisition agreement with Hitcom Corporation ("Hitcom") an
online/internet publisher of city-specific news and information resources
located in St. Louis, Missouri. Under the acquisition agreement Royal Oak
acquired all of the issued and outstanding shares of common stock of Hitcom in
exchange for 4,900,000 shares of Royal Oak common stock. In connection with
the acquisition, Royal Oak changed its name to Hitcom Corporation and Mr.
Scharmann resigned as an officer and director. Hitcom thereafter
reincorporated Delaware. Hitcom's common stock is quoted on the OTCBB under
the symbol "HICO".
Norvex, Inc.
------------
Mr. Scharmann was a principal shareholder and director in Norvex, Inc., a
former blind pool/blank check company now doing business as Capital Title
Group, Inc. ("Capital"), Scottsdate, Arizona. Capital's common stock is
quoted on the NASDAQ SmallCap under the symbol "CTGI". Capital acts as the
parent holding company of the following subsidiaries:
- -Capital Title Agency, Inc. ("Capital Title") is an Arizona corporation which
has operated under the authority of the State Banking Commission since
November 1, 1981. Capital Title is an independent title agency that
provides escrow services and, as an agent for four title insurance companies,
issues title insurance policies to the real estate industry in Maricopa,
Yavapai and Mohave Counties in Arizona.
- -New Century Title Company ("New Century"), a California corporation,
purchased a dormant escrow and title agency in San Diego, California and
began operations as an independent title agency in July 1998.
- -New Century Title Company of Northern California ("New Century of Northern
California") is a California corporation which acquired Northwestern
Consolidated Corporation ("Northwestern") and its subsidiaries in November
1998. Northwestern had operated as an independent title agency since 1959. New
Century of Northern California is an independent title agency that provides
escrow services and, as an agent for a title insurance company, issues title
insurance policies.
- -New Century Insurance Services, Inc., an Arizona corporation, was formed in
January 1998 as an independent property and casualty insurance agency.
<PAGE>
<PAGE> 18
Immunotechnology Corporation
----------------------------
Mr. Scharmann is an officer and director and Mr. Knudson is an officer of
Immunotechnology Corporation ("Immunotech"). Immunotech was incorporated on
November 30, 1989, in the state of Delaware. Immunotech's predecessor was LJC
Corporation, a Utah corporation, organized on November 8, 1984 ("LJC").
In April 1986, LJC, pursuant to a registration statement filed with the
SEC on form S-18, LJC sold 625,000 units, each unit consisting of one share of
common stock and A&B Warrants. The Units were sold at $0.20 per Unit for
gross offering proceeds of $125,000. On October 7, 1989, LJC acquired
ImmunoTechnology Laboratories, Inc., a Colorado corporation ("ITL"), by means
of a stock-for-stock exchange with the shareholder of ITL. As a result of
this transaction, ITL became a wholly owned subsidiary of LJC. On October 10,
1989, LJC changed its name to ImmunoTechnology Laboratories, Inc. ("ITL-UT").
At a special meeting of the shareholders of ITL-UT, the shareholders
approved a proposal to redomicile ITL-UT in the state of Delaware, by forming
a Delaware corporation and merging ITL-UT into the Delaware corporation, and
changing the its name to ImmunoTechnology Corporation. The merger was
effective on December 21, 1989. As a result of the merger, ITL-UT no longer
exists.
ITL was formed for the purpose of engaging in the business of operating a
medical test related laboratory. Immunotech's only business has been the
operation of ITL, whose operations were discontinued in 1992. Since
discontinuing the operations of ITL, Immunotech is now considered a "blind
pool/blank check" company and is seeking potential business acquisition or
opportunities to enter in an effort to commence business operations.
Immunotech has voluntarily filed a registration statement on Form 10SB and
currently is required to file reports under sections 13 or 15(d) of the
Exchange Act. Immunotech's common stock is traded on the OTCBB under the
symbol "ITRX".
Rexford, Inc.
-------------
Mr. Scharmann was until recently an officer, director, and controlling
shareholder of Rexford, Inc. ("Rexford"). Rexford was incorporated on
February 14, 1983, in the state of Utah under the name Chelsea Energy
Corporation. In connection with its formation, a total of 1,047,000 shares of
its common stock were issued to the founders of the Chelsea. Mr. Scharmann
was not a founder of Chelsea. In March 1985, Chelsea sold 3,000,000 shares of
its common stock in connection with a public offering at a price of $0.01 per
share. The public offering was registered with the Utah Securities Division
pursuant to Section 61-1-10, Utah Code Annotated, as amended. The offering
was exempt from federal registration pursuant to Regulation D, Rule 504,
promulgated under the Act. Chelsea was initially formed to provide
professional consulting services to local government units.
In April 1989, Chelsea formed California Cola Distributing Company, Inc.
("CCDCI")under the laws of the state of Delaware as a wholly-owned subsidiary.
In May 1989, Chelsea merged into its subsidiary, CCDCI, in connection with a
reincorporation merger. As a result of the reincorporation merger, Chelsea
changed its domicile to the state of Delaware from the state of Utah and
changed its name from Chelsea Energy Corporation to California Cola
Distributing Company, Inc. In October 1992, Chelsea effected a sale of its
<PAGE> 19
wholly-owned subsidiary, CCDCI to California Cola Group Incorporated, a
principal shareholder of the Company and changed the its name to Rexford, Inc.
In July 1998, Rexford voluntarily filed a registration statement on Form 10SB
with the SEC and currently is required to file reports under sections 13 or
15(d) of the Exchange Act.
On March 26, 1999, Rexford and Chicago Map Corporation ("CMC") entered
into an Agreement and Plan of Reorganization (the "Acquisition Agreement").
The Acquisition Agreement provides that the 15,000 shares of CMC Common Stock
held by the CMC Shareholders will be exchanged for 10,500,000 shares of
Rexford's Common Stock pro rata based on the CMC Shareholders' percentage
ownership of the CMC Common Stock. As a condition to the Acquisition
Agreement, Rexford will effect a 1-for-70 reverse stock split (the "Reverse
Split") of Rexford's Common Stock. The Reverse Split reduces Rexford's issued
and outstanding stock from 70,000,000 to 1,000,000 shares. After giving
effect to the Reverse Split and the issuance of 10,500,000 shares of Common
Stock issued to the CMC Shareholders in exchange for the 15,000 of CMC Common
Stock, the Rexford will have 11,500,000 shares issued and outstanding.
The Acquisition Agreement was approved by the shareholders of Rexford on
June 20, 1999. In connection with the Acquisition Agreement Mr. Scharmann
resigned as an officer and director of Rexford. Rexford changed its name to
Lexon Technologies, Inc. ("Lexon"). Lexon's common stock is quoted on the
OTCBB under the symbol "LXTI".
ITEM 6. EXECUTIVE COMPENSATION
The Registrant has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or directors.
Except as noted below, the Registrant has not paid any salaries or other
compensation to its officers, directors or employees for the years ended
October 31, 1998, 1997 and 1996, nor at any time during 1998, 1997 or 1996.
Further, the Registrant has not entered into an employment agreement with any
of its officers, directors or any other persons and no such agreements are
anticipated in the immediate future. During the fiscal year ended October 31,
1998, the Registrant paid Dan Price, its Secretary/Treasurer, $465.00 for book
keeping and other temporary services he provided. It is intended that the
Registrant's directors may not be compensated for services provided to the
Company until such time as an acquisition or merger can be accomplished. As of
the date hereof, no person has accrued any compensation from the Registrant,
other than converting funds advanced to the Company into shares of Common
Stock of the Company or accepting shares of the Common Stock of the Company as
reimbursement for funds advanced or expenses paid on behalf of the Company.
The payment of compensation to officers and directors and/or the
repayment of loans to officers, directors, affiliates or lending institutions
will not be a condition that any target company must agree to as a terms for
completing an acquisition or merger.
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Registrant's last three completed
fiscal years to the Registrant's or its principal subsidiaries chief executive
officer and each of its other executive officers that received compensation in
excess of $100,000 during such period (as determined at October 31, 1998, the
end of the Registrant's last completed fiscal year):
<PAGE> 20
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Other Restricted
Name and Annual Stock Options LTIP All other
Principal Position Year Salary Bonus($) Compensation Awards /SARs Payout Compensation
- ------------------ ---- ------ -------- ------------ ------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark Scharmann 1998 $ -0- -0- -0- -0- -0- -0- -0-
President and CEO 1997 $ -0- -0- -0- -0- -0- -0- -0-
1996 $ -0- -0- -0- -0- -0- -0- -0-
Gregory J. Halpern 1998 $ -0- -0- -0- -0- -0- -0- -0-
President and CEO 1997 $ -0- -0- -0- -0- -0- -0- -0-
1996 $ -0- -0- -0- -0- -0- -0- -0-
</TABLE>
Options/SAR Grants in Last Fiscal Year
None.
Bonuses and Deferred Compensation
None.
Compensation Pursuant to Plans
None.
Pension Table
Not Applicable.
Other Compensation
None.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mark A. Scharmann, an officer and director of the Company has loaned
money to the Company during the year ended October 31, 1998. The loans are
unsecured, bear interest at a rate of 10% per annum and have no maturity date.
At October 31, 1998, the balance of principal and accrued interest amounted to
$19,735.
Currently, the Registrant's officers and directors serve as officers and
directors of several "blind pool, blank check" or "shell" entities. The
Company's officers and directors will continue as officers and directors of
these entities, many of which utilize the same business address as the
Registrant. The Registrant's officers and directors intend to continue such
activities in the future. If a specific business opportunity should become
available, conflicts of interest may arise in the selection between the
Registrant and the other ventures of the officers and directors. Since no
policy has been formulated for the resolution of such potential conflicts, any
conflicts which arise will be settled on a case-by-case basis, and there is no
guarantee that such a conflict, unless satisfactorily settled, will not result
<PAGE> 21
in the Registrant's inability to participate in particular ventures. The
Registrant will be heavily dependent on its officers and directors for the
successful implementation of its business plan which is to seek out
acquisition candidates. Officers and directors are not required to devote any
specified amount or percentage of their business time to the Registrant's
affairs, and to the extent that they spend time, it will be only a minimum
amount seeking out acquisition candidates and performing necessary
administrational paperwork. Management anticipates that should an acceptable
acquisition be completed, present management will resign and new management
will assume control.
ITEM 8. DESCRIPTION OF SECURITIES
General
- -------
The Registrant is authorized to issue two hundred million shares of on e
class of capital stock, consisting of 200,000,000 shares of common stock, par
value $0.001 per share (the "Common Stock"). There are 1,869,081 shares of
Common Stock issued and outstanding as of January 14, 1999.
The holders of Common Stock are entitled to one vote per share on each
matter submitted to a vote at any meeting of shareholders. Shares of Common
Stock do not carry cumulative voting rights and, therefore, a majority of the
shares of outstanding Common Stock will be able to elect the entire board of
directors and, if they do so, minority shareholders would not be able to elect
any persons to the board of directors. The Registrant's bylaws provide that a
majority of the issued and outstanding shares of the Registrant constitutes a
quorum for shareholders' meetings, except with respect to certain matters for
which a greater percentage quorum is required by statute or the bylaws.
Shareholders of the Registrant have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common Stock is
not subject to redemption, call or assessment, and carries no subscription or
conversion rights. In the event of liquidation of the Registrant, the shares
of Common Stock are entitled to share equally in corporate assets after
satisfaction of all liabilities.
Holders of Common Stock are entitled to receive such dividends as the
board of directors may from time to time declare out of funds legally
available for the payment of dividends. The Registrant seeks growth and
expansion of its business through the reinvestment of profits, if any, and
does not anticipate that it will pay dividends in the foreseeable future.
Penny Stock
- -----------
The Company's common stock is considered a "penny stock." The Securities
and Exchange Commission regulations generally define a penny stock to be an
equity security that has a market price of less than $5.00 per share, subject
to certain exceptions. Such exceptions include any equity security listed on
NASDAQ or national securities exchange and any equity security issued by an
issuer that has (i) net tangible assets of at least $2,000,000, if such issuer
has been in continuous operation for three years, (ii) net tangible assets of
at least $5,000,000, if such issuer has been in continuous operation for less
than three years, or (iii) average annual revenue of at least $6,000,000, if
such issuer has been in continuous operation for less than three years.
<PAGE> 22
Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. The
impact of the regulations applicable to penny stocks on the Company's
securities is to reduce the market liquidity of the Company's securities by
limiting the ability of broker/dealers to trade the Company's securities and
the ability of purchasers of the Company's securities to sell their securities
in the secondary market. The low price of the Company's Common Stock also has
a negative effect on the amount and percentage of transaction costs paid by
individual shareholders and the potential ability of the Company to raise
additional capital by issuing additional shares. The primary reasons for
these effects include the internal policies of certain institutional investors
that prohibit the purchase of low-priced stocks, the fact that many brokerage
houses do not permit low-priced stocks to be used as collateral for margin
accounts or to be purchased on margin and certain brokerage house policies and
practices that tend to discourage individual brokers from dealing in low-
priced stocks.
In addition, since broker's commissions on low-priced stocks represent a
higher percentage of the stock price than commissions on higher pried stocks,
the current low share price of the Common Stock results in individual
shareholders paying transaction costs that are a higher percentage o their
total share value than would be the case if the Company's share price were
substantially higher.
PART II
ITEM 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
The Registrant's common stock is not listed for publication of quotations
and, to the best of the Registrant's knowledge, its common stock has not
received a symbol from the NASD for publication of quotations.
Since its inception, the Registrant has not paid any dividends on its
Common Stock, and the Registrant does not anticipate that it will pay
dividends in the foreseeable future.
As of June 28, 1999, there were 1,889,081 shares of common stock
outstanding held by approximately 129 stockholders of record, as reported by
the Registrant's transfer agent.
Neither the Registrant nor anyone acting on its behalf will take
affirmative steps to request or encourage any broker-dealer to act as a market
maker for the Company's securities. There have not been any preliminary
discussions or understandings between the Company (or anyone acting on its
behalf) and any market maker regarding the participation of any such market
maker in the future trading market (if any) for the Company's securities. The
Registrant does not know if such efforts will ever be undertaken, or when
(whether before or after an acquisition or merger), how and by whom. There
are no plans, proposals, arrangements or understandings with any person with
regard to the development of a trading market in any of the Company's
securities.
No member of management or any other shareholder of the Company has
executed or provided the Company with any type of "lock-up" letter relating to
or restricting their ability to sell their shares prior to such time as the
Company has successfully consummated a merger or acquisition and the Company
is no longer considered to be a "blank check" company.
<PAGE> 23
Blue Sky Considerations
- -----------------------
Any future transfer or resale of the Registrant's common stock in
secondary markets will be subject, in addition to Federal securities laws, to
the "Blue Sky" laws of each state in which such transfer or resale occurs.
Because the Registrant's business activities are considered to be those of a
"blank check, blind pool", "dormant" or "shell" company, it is possible that
shareholders of the Registrant residing in states the limit or prohibit the
use of exemptions for resale of securities of "blank check, blind pool",
"dorman" or "shell" companies may not be able to resell their shares of the
Registrant's common stock until such time as the Registrant has completed a
merger or acquisition and/or the appropriate resale exemption becomes
available. Certain states, including Connecticut, Idaho, Washington, Indiana,
Minnesota, Oregon, South Dakota, and Utah limit or prohibit the use of their
transactional exemption to "blind-pool, blank check", "dormant" or "shell"
companies. Therefore shareholders of the Registrant residing in those states
will be prohibited from reselling their shares until such time as an exemption
for resale is available or the shareholder is no longer subject to the laws of
the applicable jurisdiction. The Registrant's transfer agent has been
instructed to reject any transfers from those states, until the transfer agent
has been provided with an opinion of counsel that the shares have been
registered or that an appropriate exemption is available.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings and no such
action by or against it, to the best of its knowledge, has been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Registrant has not changed nor had any disagreements with its
independent certified accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In May 1999, the Registrant issued 20,000 shares of the Company's
restricted common stock, valued at $0.01 per share, to Gregory Halpern, a
former officer, director, and principal shareholder, as reimbursement of
approximately $200 in expenses incurred by Mr. Halpern for the benefit of the
Company. The shares were issued without registration in reliance on the
exemption from registration provided by section 4(2) of the Securities Act.
The Registrant has not issued any other unregistered securities within
the past three years.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 16-10a-901 through 909 of the Utah Revised Business Corporation Act
provides in relevant parts as follows:
(1) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
<PAGE> 24
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or on
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the feet that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only
to the extent that the court in which such action or suit was brought shall
determine on application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in 1) or (2) of this subsection, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(4) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of such
a person.
The foregoing discussion of indemnification merely summarizes certain
aspects of indemnification provisions and is limited by reference to the above
discussed sections of the Utah Revised Business Corporation Act.
The Registrant's certificate of incorporation and bylaws provide that the
Registrant "may indemnify" to the full extent of its power to do so, all
directors, officers, employees, and/or agents. It is anticipated that the
Registrant will indemnify its officers and directors to the full extent
permitted by the above-quoted statute.
<PAGE> 25
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to officers and directors of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
is aware that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
PART F/S
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The unaudited financial statements include the accounts of the
Registrant and include all adjustments (consisting of normal recurring items)
which are, in the opinion of management, necessary to present fairly the
financial position as of April 30, 1999 and the results of operations and
changes in financial position for the three and six months ended April 30,
1999 and 1998, and cumulative amounts since inception.
The Company's financial statements for the fiscal years ended October 31,
1998, and 1997, have been examined to the extent indicated in their
reports by Harold Y. Spector, a corporation of certified public accountants,
and have been prepared in accordance with generally accepted accounting
principles and are attached hereto and incorporated herein by this reference.
<PAGE>
<PAGE> 26
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
April 30, 1999 and 1998
(UNAUDITED)
ASSETS
1999 1998
---------- ----------
Current Assets
Cash $ 597 $ 0
---------- ----------
Fixed Assets 0 0
---------- ----------
Other Assets 0 0
---------- ----------
TOTAL ASSETS $ 597 $ 0
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---------- ----------
Current Liabilities
Accrued Interest $ 2,164 $ 0
---------- ----------
Long-term Liabilities Officers' Loans 58,891 0
---------- ----------
Total Liabilities 61,055 0
---------- ----------
Stockholders' Equity:
Common stock, $.001 par value; authorized
200,000,000 shares; 1,869,081 shares
issued and outstanding 1,869 1,869
Capital Paid in Excess of Par Value 68,223 68,223
Accumulated deficit during the
development stage (130,550) (70,092)
---------- ----------
Total stockholders' Equity (Deficit) (60,458) 0
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 597 $ 0
========== ==========
See accountant's report and accompanying notes
<PAGE>
<PAGE> 27
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1999 AND 1998,
AND THE PERIOD FROM INCEPTION OCTOBER 28, 1983 TO APRIL 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Inception
Three Months ended Six Months ended Oct. 28, 1983
April 30, April 30, to
1999 1998 1999 1998 Apr. 30, 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0 $ 66,249
---------- ---------- ---------- ---------- ----------
COST AND OPERATING EXPENSES 16,830 0 39,209 0 215,731
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (16,830) 0 (39,209) 0 (149,482)
---------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSES)
Other Income 0 0 0 0 1,250
Interest Expenses (1,203) 0 (1,878) 0 (2,164)
---------- ---------- ---------- ---------- ----------
Total Other Income (Expenses) (1,203) 0 (1,878) 0 (914)
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES (18,033) 0 (41,087) 0 (150,396)
PROVISION FOR INCOME TAXES 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
NET (LOSS) BEFORE EXTRAORDINARY ITEM (18,033) 0 (41,087) 0 (150,396)
EXTRAORDINARY ITEM - LIQUIDATION 0 0 0 0 81,209
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) (18,033) 0 (41,087) 0 (69,187)
ACCUMULATED DEFICITS
BEGINNING OF PERIOD(S) (112,517) (70,092) (89,463) (70,092) 0
Adjustments -
Acquisition of Subsidiary 0 0 0 0 (38,146)
Issuance of stocks in lieu of salaries,
services and consultants 0 0 0 0 (23,217)
---------- ---------- ---------- ---------- ----------
ENDING OF PERIOD(S) $ (130,550) $ (70,092) $ (130,550) $ (70,092) $ (130,550)
========== ========== ========== ========== ==========
NET LOSS PER SHARE $ (.01) $ (.00) $ (.02) $ (.00)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,869,081 1,869,081 1,869,081 1,869,081
========== ========== ========== ==========
</TABLE>
See accountant's report and accompanying notes
<PAGE>
<PAGE> 28
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND 1998,
AND THE PERIOD FROM INCEPTION OCTOBER 28, 1983 TO APRIL 30, 1999
(UNAUDITED)
Inception
Oct. 28, 1983
April 30, to
1999 1998 Apr. 30, 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (41,087) $ 0 $ (69,187)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Extraordinary item - Liquidation 0 0 (81,209)
Increase in Accounts Payable (600) 0 0
Increase in Accrued Interest 1,878 0 2,164
---------- ---------- ----------
Net cash (used) by
operating activities (39,809) 0 (148,232)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Subsidiary 0 0 (38,146)
Liquidation of PPLI 0 0 81,209
---------- ---------- ----------
Net cash provided by
investing activities 0 0 43,063
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of common stocks 0 0 46,875
Net Proceeds from Officers' Loan 39,156 0 58,891
---------- ---------- ----------
Net cash provided by
financing activities 39,156 0 105,766
---------- ---------- ----------
NET INCREASE IN CASH (653) 0 597
CASH AT BEGINNING OF PERIOD(S) 1,250 0 0
---------- ---------- ----------
CASH AT END OF PERIOD(S) $ 597 $ 0 $ 597
========== ========== ==========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 0 $ 0 $ 0
========== ========== ==========
Taxes paid $ 0 $ 0 $ 0
========== ========== ==========
See accountant's report and accompanying notes
<PAGE>
<PAGE> 29
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Six Months ended April 30, 1999 and 1998
NOTE 1 - GENERAL
PPI Capital Group, Inc., formerly known as Pain Prevention, Inc., (the
"Company") was incorporated under the laws of the state of Utah on October
28, 1983. The Company elected the fiscal year ended on October 31st.
The Company had been engaged in the business of contracting for the providing
psychological services and counseling to employees of corporations. Effective
November 30, 1989, the Company discontinued all operations. Presently, the
Company has no operations.
The Company is considered a development stage company as defined under
Financial Accounting Standards Board Statement No. 7.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company uses the accrual basis of accounting for financial reporting, in
accordance with generally accepted accounting principles.
Use of Estimates
- ----------------
The preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that directly affect the results of reported
assets, liabilities, revenues and expenses. Actual results may differ from
these estimates.
Statement of Cash Flows
- -----------------------
The Company prepares its statements of cash flows using the indirect method
as defined under Financial Accounting Standards Board Statement No. 95. For
purposes of the statements of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
Revenue Recognition
- -------------------
The Company did not conduct any business operations since March 31, 1989, and
consequently, has not generated any operating revenue.
Fixed Assets
- ------------
As of April 30, 1999, the Company does not maintain or control any fixed
assets.
Income Taxes
- ------------
The Company accounts income taxes in accordance with Financial Accounting
standards Board Statement No. 109.
NOTE 3 - NOTE PAYABLE-RELATED PARTY
The Company had unsecured notes payable to an officer/stockholder. As of
April 30, 1999, the outstanding balance was $58,891 plus accrued interest of
$2,164. The borrowing are due on demand and bear interest at ten percent per
annum.
<PAGE> 30
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (continued)
For the Six Months ended April 30,1999 and 1998
NOTE 4 - GOING CONCERN
The accompanying financial statements are presented on the basis that the
Company will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business over a reasonable length of time. As shown in the
accompanying financial statements, the Company has incurred net losses of
$130,550 since inception, and as of April 30, 1999, the Company has a net
worth deficit $60,458. Furthermore, the Company has not generated sufficient
revenue to cover its operation costs.
Management intends to seek, investigate, and, if warranted, effect a business
combination with an existing, unidentified privately held company or entity,
in the interim, it has committed to meeting the Company's minimal operating
expenses. The Company continued existence depends on its ability to meet its
financing requirements and success of its future operations. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
NOTE 5 - YEAR 2000
The year 2000 issue concerns the ability of data sensitive software to
properly recognize the year 2000 in calculating and processing computer
system information. The Company has no hardware or software. The Company is
silent as to this issue.
<PAGE>
<PAGE> 31
Harold Y. Spector
Certified Public Accountant
80 South Lake Avenue, Suite 723
Pasadena, California 91101
Independent Auditor's Report
To the Board of Directors and Stockholders of PPI Capital Group, Inc.
I have audited the accompanying balance sheets of PPI Capital Group, Inc., a
Utah corporation in the development stage, (FKA Pain Prevention, Inc.) as of
October 31, 1998 and 1997, and the related statements of operations and
accumulated deficit, stockholders' equity, and cash flows for the years then
ended and for the period from Inception October 28, 1983 to October 31, 1998.
These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted this audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audit provided a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial positions of PPI Capital Group, Inc.
as of October 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended and for the period from Inception October
28, 1983 to October 31, 1998, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered significant operating losses
since inception and has a net capital deficiency, which raises substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters also are described in Note 7. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/S/ Harold Y. Spector
Pasadena, CA
February 17, 1999
[Except for Notes 6 and 7, as to which the date is June 2, 1999]
<PAGE>
<PAGE> 32
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
October 31, 1998 and 1997
ASSETS
1998 1997
---------- ----------
Current Assets
Cash $ 1,250 $ 0
---------- ----------
Fixed Assets 0 0
---------- ----------
Other Assets 0 0
---------- ----------
TOTAL ASSETS $ 1,250 $ 0
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
---------- ----------
Current Liabilities
Accounts payable $ 600 $ 0
Accrued Interest 286 0
---------- ----------
Total Current Liabilities 886 0
---------- ----------
Long-term Liabilities Officers' Loans 19,735 0
---------- ----------
Total Liabilities 20,621 0
---------- ----------
Stockholders' deficit:
Common stock $.001 par value; authorized
200,000,000 shares; 1,869,081 shares
issued and outstanding 1,869 1,869
Capital Paid in Excess of Par Value 68,223 68,223
Accumulated deficit during the
development stage (89,463) (70,092)
---------- ----------
Total stockholders' Equity (Deficit) (19,371) 0
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,250 $ 0
========== ==========
The auditor's report and accompanying notes are an integral part of the
financial statements
<PAGE>
<PAGE> 33
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICITS
For the years ended October 31,1998 and 1997,
and the period from Inception October 28, 1983 to October 31, 1998
Inception
Oct. 28, 1983
October 31, to
1998 1997 Oct. 31, 1998
---------- ---------- ----------
REVENUE $ 0 $ 0 $ 66,249
---------- ---------- ----------
COST AND OPERATING EXPENSES 19,085 0 176,522
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (19,085) 0 (110,273)
OTHER INCOME (EXPENSES)
Other Income 0 0 1,250
Interest Expenses (286) 0 (286)
---------- ---------- ----------
Total Other Income (Expenses) (286) 0 964
---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES (19,371) 0 (109,309)
PROVISION FOR INCOME TAXES 0 0 0
---------- ---------- ----------
NET (LOSS) BEFORE EXTRAORDINARY ITEM (19,371) 0 (109,309)
EXTRAORDINARY ITEM - LIQUIDATION 0 0 81,209
---------- ---------- ----------
NET INCOME (LOSS) (19,371) 0 (28,100)
ACCUMULATED DEFICITS
BEGINNING OF PERIOD(S) (70,092) (70,092) 0
Adjustments -
Acquisition of Subsidiary 0 0 (38,146)
Issuance of stocks in lieu of salaries,
services and consultants 0 0 (23,217)
---------- ---------- ----------
ENDING OF PERIOD(S) $ (89,463) $ (70,092) $ (89,463)
========== ========== ==========
NET LOSS PER SHARE $ (.01) $ (.00)
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,869,081 1,869,081
========== ==========
The auditor's report and accompanying notes are an integral part of the
financial statements
<PAGE>
<PAGE> 34
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the period from Inception October 28, 1983 to October 31, 1998
<TABLE>
<CAPTION>
Paid
Common in Accumulated
Shares Stock Capital Deficit Total
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at Inception October 28, 1983 0 $ 0 $ 0 $ 0 $ 0
Original issuance of common stocks 7,500,000 7,500 25,487 (41,602) (8,615)
Capital Contributed 15,000 15,000
Issuance of common stocks for Pain
Prevention, Inc. (Illinois corporation) 37,031,250 37,031 (37,031) 0
Issuance of common stocks for
commission fee 2,343,750 2,344 2,344
Paid-in Capital adjustment (3,456) 3,456 0
Net Loss during the period (89,938) (89,938)
------------ ------------ ------------ ------------- ------------
Balance at March 31, 1989 46,875,000 $ 46,875 $ 0 $ (128,084) $ (81,209)
Reverse stock split 1 to 3.75 (34,375,000)
Issuance of stocks in lieu of salaries,
services and consultants 6,191,271 23,217 (23,217) 0
Liquidation of PPLI 81,209 81,209
Net Loss from Mar. 31, 1989 to
October 31, 1996 0 0
------------ ------------ ------------ ------------- ------------
Balance at October 31, 1996 18,691,271 $ 70,092 $ 0 $ (70,092) $ 0
Net loss for the period 0 0
------------ ------------ ------------ ------------- ------------
Balance at October 31, 1997 18,691,271 $ 70,092 $ 0 $ (70,092) $ 0
Reduce par value to $.0001 (68,223) 68,223 0
Reverse stock split 1-for-10 (16,822,190) 0
Net Loss for the period (19,371) (19,371)
------------ ------------ ------------ ------------- ------------
Balance at October 31, 1998 1,869,081 $ 1,869 $ 68,223 $ (89,463) $ (19,371)
============ ============ ============ ============= ============
</TABLE>
The auditor's report and accompanying notes are an integral part of the
financial statements
<PAGE>
<PAGE> 35
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the years ended October 31,1998 and 1997,
and the period from Inception October 28, 1983 to October 31, 1998
Inception
Oct. 28, 1983
October 31, to
1998 1997 Oct. 31, 1998
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (19,371) $ 0 $ (28,100)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Extraordinary item - Liquidation 0 0 (81,209)
Increase in Accounts Payable 600 0 600
Increase in Accrued Interest 286 0 286
---------- ---------- ----------
Net cash (used) by
operating activities (18,485) 0 (108,423)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Subsidiary 0 0 (38,146)
Liquidation of PPLI 0 0 81,209
---------- ---------- ----------
Net cash provided by
investing activities 0 0 43,063
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of common stocks 0 0 46,875
Net Proceeds from Officers' Loan 19,735 0 19,735
---------- ---------- ----------
Net cash provided by
financing activities 19,735 0 66,610
---------- ---------- ----------
NET INCREASE IN CASH 1,250 0 1,250
CASH AT BEGINNING OF PERIOD(S) 0 0 0
---------- ---------- ----------
CASH AT END OF PERIOD(S) $ 1,250 $ 0 $ 1,250
========== ========== ==========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 0 $ 0 $ 0
========== ========== ==========
Taxes paid $ 0 $ 0 $ 0
========== ========== ==========
NONCASH TRANSACTIONS INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock in lieu of salaries, services and consultants
of $23,217
The auditor's report and accompanying notes are an integral part of the
financial statements
<PAGE>
<PAGE> 36
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the years ended October 31,1998 and 1997
NOTE 1 - GENERAL
PPI Capital Group, Inc., formerly known as Pain Prevention, Inc., (the
"Company") was incorporated under the laws of the state of Utah on October 28,
1983. The Company elected the fiscal year ended on October 31st.
The Company had been engaged in the business of contracting for the providing
psychological services and counseling to employees of corporations. Effective
November 30, 1989, the Company discontinued all operations. Presently, the
Company has no operations.
The Company is considered a development stage company as defined under
Financial Accounting Standards Board Statement No. 7.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company uses the accrual basis of accounting for financial reporting, in
accordance with generally accepted accounting principles.
Use of Estimates
- ----------------
The preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that directly affect the results of reported assets,
liabilities, revenues and expenses. Actual results may differ from these
estimates.
Statement of Cash Flows
- -----------------------
The Company prepares its statements of cash flows using the indirect method as
defined under Financial Accounting Standards Board Statement No. 95. For
purposes of the statements of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
Revenue Recognition
- -------------------
The Company did not conduct any business operations since March 31, 1989, and
consequently, has not generated any operating revenue.
Fixed Assets
- ------------
As of October 31, 1998, the Company does not maintain or control any fixed
assets.
Income Taxes
- ------------
The Company accounts income taxes in accordance with Financial Accounting
standards Board Statement No. 109.
NOTE 3 - NOTE PAYABLE-RELATED PARTY
The Company had unsecured notes payable to an officer/stockholder in the
amount of $19,735. The borrowing are due on demand and bear interest at ten
percent per annum.
<PAGE> 37
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (continued)
For the years ended October 31,1998 and 1997
NOTE 4 - REVERSE STOCK SPLIT
In 1998, the Board of Directors amended its article of incorporation to reduce
the par value of its common stock to $.0001. Subsequently, they authorized a
reverse 1-for-10 stock split, thereby decreasing the number of issued and
outstanding shares to 1,869,127 and increasing the par value of each share to
$.001.
NOTE 5 - SPIN-OFF SUBSIDIARY
On June 30, 1997, the Company entered into an agreement to transfer 80% of the
common stock of its subsidiary, PPI Capital Corp ("PPI") to a third party. PPI
was originally acquired March 13, 1989 with the exchange of 37,031,250 shares
of Company common stock for 100% of the issued and outstanding stock of PPI.
The remaining 20% stock of PPI were distributed, pro rata, to the shareholders
of the Company.
PPI was inactive and had no operations in 1997.
NOTE 6 - LIQUIDATION
In 1988, PPI (the subsidiary) acquired certain assets of Pain Prevention Lab,
Inc. ("PPLI"), an affiliate related through common ownership, including
inventories, patents and trademarks, distributor agreements, and furniture and
equipment. The purchases, in the amount of $354,651, was funded by a note
payable to PPLI accruing interest at 9%
PPLI subsequently filed a voluntary petition for liquidation under Chapter 7
of the Federal Bankruptcy Code. All assets and liabilities accrued as of
March 31, 1989 were liquidated.
NOTE 7 - GOING CONCERN
The accompanying financial statements are presented on the basis that the
Company will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time. As shown in the accompanying
financial statements, the Company has incurred net losses of $89,463 since
inception, and as of October 31, 1998, the Company has a net worth deficit of
$19,371. Furthermore, the Company has not generated sufficient revenue to
cover its operation costs.
Management intends to seek, investigate, and, if warranted, effect a business
combination with an existing, unidentified privately held company or entity,
in the interim, it has committed to meeting the Company's minimal operating
expenses. The Company continued existence depends on its ability to meet its
financing requirements and success of its future operations. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
NOTE 7 - YEAR 2000
The year 2000 issue concerns the ability of data sensitive software to
properly recognize the year 2000 in calculating and processing computer system
information. The Company has no hardware or software. The Company is silent as
to this issue.
<PAGE> 38
PART III
ITEM 1. INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this Form
10SB pursuant to Item 601 of Regulation SB.
Exhibit No. SEC Ref. No. Title of Document
- ----------- ------------ -----------------
1 10.1 Master Promissory Note
ITEM 2. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PPI Capital Group, Inc.
[Registrant]
Dated: July 20, 1999 By:/S/Mark A. Scharmann, President and
Director
<PAGE> 1
MASTER PROMISSORY NOTE
FOR VALUE RECEIVED, PPI CAPITAL GROUP, INC, a Utah corporation
("Borrower"), promises to pay to MARK A. SCHARMANN, an individual ("Lender"),
or order, the principal amount set forth on Schedule A (and any amendments
thereto), with interest on the unpaid principal balance at ten percent (10%)
per annum (the "Obligation").
1. Master Note Agreement.
- --------------------------
This Note shall constitute a "Master Note" under which Lender may make
periodic advances to Borrower as set forth on Schedule A (and any amendments
thereto). Borrower agrees that the records of Lender shall serve as prima
facia evidence as to the unpaid and funded principal balance of this Note, in
the event that it should become necessary for Lender to (a) commence an
appropriate action seeking to collect the unpaid principal funded balance of
this Note and interests, costs, and attorney's fees in any court of competent
jurisdiction or (b) elect to convert all or a portion of the Obligation to
equity securities of the Borrower at a rate determined by as set forth in
paragraph 2(d) below.
2. Interest, Term and Payment.
- -------------------------------
The principal shall bear interest on the balance at 10% per annum from
and after the date thereof until satisfied in full. The Obligation, is due
and payable as follows:
(a) The Obligation is due on demand, unless modified by Lender pursuant
to written notice thereof or such other agreement as may be entered into
between Lender and Borrower with respect thereto;
(b) Borrower may, but is not obligated to, make periodic payments in part
or full payment of the Obligation.
(c) The entire amount of the Obligation will be due immediately upon the
expiration of the notice of default given to Borrower from Lender in the event
of default by Borrower as hereinafter provided.
(d) Notwithstanding the forgoing, at the election of Lender the Borrower
may satisfy its entire obligation for the payment of the principal hereunder
by the issuance and delivery of one or more shares of Common Stock of the
Borrower at the rate of one share of common stock par value $0.001 for every
$0.01 of outstanding principal and accrued interest of the Note.
3. Application of Payments.
- ----------------------------
Unless applicable law provides otherwise, all payments received by Lender
shall be applied by Lender first in payment of interest payable, next to the
principal.
4. Events of Default.
- ----------------------
Upon the occurrence and during the continuance of any one or more of the
events hereinafter enumerated, Lender may forthwith or at any time thereafter
during the continuance of any such event, by notice in writing to Borrower,
declare the unpaid balance of the principal and interest then accrued to be
immediately due and payable, and the principal and interest shall become and
shall be immediately due and payable without presentation, demand, protest,
notice of protest, or other notice of dishonor, all of which are hereby
expressly waived by Borrower, such events being as follows:
<PAGE>
<PAGE> 2
(a) Default in the payment of the principal and interest or any portion
thereof when the same shall become due and payable, whether at maturity as
therein expressed, by acceleration, or otherwise, unless cured within fifteen
(15) days after notice thereof by the Lender to Borrower;
(b) Borrower shall file a voluntary petition in bankruptcy or a voluntary
petition seeking reorganization, or shall file an answer admitting the
jurisdiction of the court and any material allegations of an involuntary
petition filed pursuant to any act of Congress relating to bankruptcy or to
any act purporting to be amendatory thereof, or shall be adjudicated bankrupt,
or shall make an assignment for the benefit of creditors, or shall apply for
or consent to the appointment of any receiver or trustee for Borrower, or of
all or any substantial portion of its property, or Borrower shall make an
assignment to an agent authorized to liquidate any substantial part of its
assets; or
(c) An order shall be entered pursuant to any act of Congress relating to
bankruptcy or to any act purporting to be amendatory thereof approving an
involuntary petition seeking reorganization of Borrower, or an order of any
court shall be entered appointing any receiver or trustee of or for Borrower,
or any receiver or trustee of all or any substantial portion of the property
of Borrower, or a writ or warrant of attachment or any similar process shall
be issued by any court against all or any substantial portion of the property
of Borrower, and such order approving a petition seeking reorganization or
appointing a receiver or trustee is not vacated or stayed, or such writ,
warrant of attachment, or similar process is not released or bonded within 60
days after its entry or levy.
5. Procedure on Default.
- -------------------------
Upon the occurrence of an event of default, and at any time thereafter,
Lender may elect to declare the entire Obligation immediately due and payable.
In the event of default in the payment of said Obligation when due or declared
due, after expiration of notice of default, Lender shall have all the rights
and remedies of a secured party and shall be entitled to avail itself of all
such other rights and remedies that may now or hereafter exist at law or in
equity for the collection of the Obligation and the enforcement of the
covenants herein and the foreclosure of the security interest created hereby
and resort to any remedy provided hereunder or provided by the Utah Uniform
Commercial Code, or by any other law of the state of Utah.
6. Waivers and Assent to Extension, Indulgence, or Release.
- ------------------------------------------------------------
Borrower hereby waives presentment, demand, notice, protest, notice of
protest, or enforcement of this Note, assents to any extensions or
postponements of the time of payment or any other indulgence and to the
addition or release of any other party or person primarily or secondarily
liable. None of the rights and remedies of the Lender hereunder are to be
waived or affected by failure or delay to exercise them. All remedies
conferred on Lender under this Note shall be cumulative and none is exclusive.
Such remedies may be exercised concurrently or consecutively at Lender's
option.
7. Attorneys' Fees.
- --------------------
If this Note is placed with an attorney for collection, or if suit be
instituted for collection, or if any other remedy permitted by law is pursued
by Lender, because of any default in the terms and conditions herein, then in
such event, the undersigned agrees to pay reasonable attorneys' fees, costs,
and other expenses incurred by Lender in so doing.
<PAGE> 3
8. Governing Law.
- ------------------
This Note shall be governed by and construed and enforced in accordance
with the laws of the state of Utah.
BORROWER:
PPI CAPITAL GROUP, INC.
DATE: May 1, 1999 By:/S/ David Knudson
Its Duly Authorized Officer
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<NAME> PPI CAPITAL GROUP, INC.
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<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> APR-30-1999
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0
0
<COMMON> 70,092
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