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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended October 31, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to __________
Commission File Number 0-24641
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PPI CAPITAL GROUP, INC.
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(Exact name of registrant as specified in charter)
UTAH 87-0401453
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State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization
1661 Lakeview Circle, Ogden, Utah 84403
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (801) 399-3632
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Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
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Securities registered pursuant to section 12(g) of the Act:
Common Stock, par value $0.001
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(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. (1) Yes [X]
No [ ] (2) Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $-0-
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State the aggregate market value of the voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days:
Based on the average bid and asked prices of the common stock at March 8,
2000, of $.03125 share, the market value of shares held by nonaffiliates would
be $19,402.
As of March 7, 2000, the Registrant had 1,869,081 shares of common stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
part of the form 10-KSB (e.g., part I, part II, etc.) into which the document
is incorporated: (1) Any annual report to security holders; (2) Any proxy or
other information statement; and (3) Any prospectus filed pursuant to rule
424(b) or (c) under the Securities Act of 1933: NONE
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS
Business in General
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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 has voluntarily filed a 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 the registration statement on Form 10SB the Registrant is obligated to
file with the Commission certain interim and periodic reports including this
annual report.
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
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.
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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 December 31, 1999, represented $82,640 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
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.
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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.
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
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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.
Registrant is 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
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.
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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.
ITEM 2. DESCRIPTION OF PROPERTIES
See "Facilities" under Item 1. above.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of shareholders of the Company during the
fourth quarter of the fiscal year ended October 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The table on the following page sets forth, for the respective periods
indicated, the prices for the Company's common stock in the over-the-counter
market as reported by the NASD's OTC Bulletin Board. The Company's common
stock was cleared for quotations on the OTCBB in January 2000 under the symbol
"PPIK". The bid prices represent inter-dealer quotations, without adjustments
for retail mark-ups, mark-downs or commissions and may not necessarily
represent actual transactions.
High Bid Low Bid
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Fiscal Year Ended October 31, 1999
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First, Second, Third, and Fourth Quarter N/A N/A
Fiscal Year Ended June 30, 1998
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First, Second, Third and Fourth Quarter N/A N/A
Fiscal Year Ended June 30, 1997
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First, Second, Third and Fourth Quarter N/A N/A
At March 7, 2000, the Company's Common Stock was quoted on the OTC Bulletin
Board at a bid and asked price of $0.00 and $0.03125, respectively.
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Since its inception, the Company has not paid any dividends on its Common
Stock, and the Company does not anticipate that it will pay dividends in the
foreseeable future. At March 7, 2000, the Company had approximately 130
shareholders of record based on information provided by the Company's transfer
agent.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Regarding Forward-looking Statements
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This report may contain "forward-looking" statements. The Company is
including this cautionary statement for the express purpose of availing itself
of the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include, but are not
limited to: (a) projections of revenues, capital expenditures, growth,
prospects, dividends, capital structure and other financial matters; (b)
statements of plans and objectives of the Company or its management or Board
of Directors; (c) statements of future economic performance; (d) statements of
assumptions underlying other statements and statements about the Company and
its business relating to the future; and (e) any statements using the words
"anticipate," "expect," "may," "project," "intend" or similar expressions.
Year 2000 Disclosure
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The Company has worked to resolve the potential impact of the year 2000 on the
ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. The Company utilizes a minimum
number of computer programs in its operations. The Company's costs of
addressing this issue have not had a material adverse impact on the Company's
financial position.
Plan of Operation
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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 October 31,
1999, the master promissory note incorporated $76,942 in principle and $5,698
in 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.
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
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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
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 7. FINANCIAL STATEMENTS
The financial statements of the Company are set forth immediately following
the signature page to this form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no disagreements with its certified public accountants
with respect to accounting practices or procedures or financial disclosure.
See ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<PAGE>
<PAGE> 13
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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 40, 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 39, 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 45, 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
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.)
<PAGE> 14
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.
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").
<PAGE> 15
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".
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
<PAGE> 16
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.
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.
<PAGE>
<PAGE> 17
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
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".
<PAGE>
<PAGE> 18
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- -------------------------------------------------
The Company believes that under the SEC's rules for reporting of securities
transactions by directors and executive officers, all required reports have
been timely filed.
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Company's last three completed
fiscal years to the Company's chief executive officer and each of its other
executive officers that received compensation in excess of $100,000 during
such period (as determined at October 31, 1999, the end of the Company's last
completed fiscal year):
<TABLE>
<CAPTION> Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Other Restricted
Name and Annual Stock Options LTIP All other
Principal Position Year Salary Bonus($) Compensation Awards /SARs Payout Compensation
- ------------------ ---- ------ -------- ------------ ------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark Scharmann 1999 $ -0- -0- -0- -0- -0- -0- -0-
President and CEO 1998 $ -0- -0- -0- -0- -0- -0- -0-
1997 $ -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-
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, 1999, 1998
and 1997, nor at any time during 1999, 1998 or 1997. 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.
Options/SAR Grants in Last Fiscal Year
- --------------------------------------
None.
Bonuses and Deferred Compensation
- ---------------------------------
None.
<PAGE> 19
Compensation Pursuant to Plans
- ------------------------------
None.
Pension Table
- -------------
Not Applicable.
Other Compensation
- ------------------
None.
Bonuses and Deferred Compensation
- ---------------------------------
None.
ITEM 11. 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 1,869,081 shares of the Registrant's
common stock outstanding at March 7, 2000, 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
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 and Directors
- ----------------------
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> 20
ITEM 12. 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, 1999 The loans are unsecured,
bear interest at a rate of 10% per annum and have no maturity date. At
October 31, 1999 the balance of principal of $76,942 and accrued interest of
$5,698.
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
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.
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> 21
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.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1)FINANCIAL STATEMENTS. The following financial statements are included
in this report:
Title of Document Page
- ----------------- ----
Independent Auditors' Report of Harold Y. Spector,
Certified Public Accountant 23
Balance Sheet as of October 31, 1999 24
Statements of Operations and Accumulated Deficit for the years ended
October 31, 1999 and 1998, and the period from Inception (October 28,
1983) to October 31, 1999 25
Statement of Stockholders' Equity (Deficit) for the period from
Inception (October 28, 1983) to October 31, 1999 26
Statements of Cash Flows for the years ended October 31, 1999 and 1998
and the period from Inception (October 28, 1983) to October 31, 1999 27
Notes to Financial Statements 28
(a)(2)FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedules are included as part of this report:
None.
(a)(3)EXHIBITS. The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
- ------- --------- ----------------- ------------
27 27 Financial Data Schedule This Filing
(b) Reports on Form 8-K. None.
<PAGE>
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
PPI CAPITAL GROUP, INC.
Date: March 8, 2000 By /S/ Mark A. Scharmann, President and
Director
Date: March 8, 2000 By /S/ David Knudson, Vice President and
Director
Date: March 8, 2000 By /S/ Dan O. Price, Secretary/Treasurer
and Director
<PAGE>
<PAGE> 23
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, 1999 and 1998, 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, 1999.
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, 1999 and 1998, 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, 1999, 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 6 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 6. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/S/ Harold Y. Spector
Pasadena, CA
February 28, 2000
<PAGE>
<PAGE> 24
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
October 31, 1999 and 1998
ASSETS
1999 1998
---------- ----------
Current Assets
Cash $ 245 $ 1,250
---------- ----------
Fixed Assets 0 0
---------- ----------
Other Assets 0 0
---------- ----------
TOTAL ASSETS $ 245 $ 1,250
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 3,384 $ 600
Accrued Interest 5,698 286
---------- ----------
Total Current Liabilities 9,082 886
---------- ----------
Long-term Liabilities Officers' Loans 76,942 19,735
---------- ----------
Total Liabilities 86,024 20,621
---------- ----------
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 (155,871) (89,463)
---------- ----------
Total stockholders' Equity (Deficit) (85,779) (19,371)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 245 $ 1,250
========== ==========
The auditor's report and accompanying notes are an integral part of the
financial statements
<PAGE>
<PAGE> 25
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICITS
For the years ended October 31,1999 and 1998
and the period from Inception October 28, 1983 to October 31, 1999
Inception
Oct. 28, 1983
October 31, to
1999 1998 Oct. 31, 1999
---------- ---------- ----------
REVENUE $ 0 $ 0 $ 66,249
---------- ---------- ----------
COST AND OPERATING EXPENSES 60,996 19,085 237,518
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (60,996) (19,085) (171,269)
OTHER INCOME (EXPENSES)
Other Income 0 0 1,250
Interest Expenses (5,412) (286) (5,698)
---------- ---------- ----------
Total Other Income (Expenses) (5,412) (286) (4,448)
---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES (66,408) (19,371) (175,717)
PROVISION FOR INCOME TAXES 0 0 0
---------- ---------- ----------
NET (LOSS) BEFORE EXTRAORDINARY ITEM (66,408) (19,371) (175,717)
EXTRAORDINARY ITEM - LIQUIDATION 0 0 81,209
---------- ---------- ----------
NET INCOME (LOSS) (66,408) (19,371) (94,508)
ACCUMULATED DEFICITS
BEGINNING OF PERIOD(S) (89,463) (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) $ (155,871) $ (89,463) $ (155,871)
========== ========== ==========
NET LOSS PER SHARE $ (.03) $ (.01) $ (0.05)
========== ========== ==========
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> 26
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, 1999
</TABLE>
<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)
Net Loss for the period (66,408) (66,408)
------------ ------------ ------------ ------------- ------------
Balance at October 31, 1999 1,869,081 $ 1,869 $ 68,223 $ (155,871) $ (85,779)
============ ============ ============ ============= ============
</TABLE>
The auditor's report and accompanying notes are an integral part of the
financial statements
<PAGE>
<PAGE> 27
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, 1999
Inception
Oct. 28, 1983
October 31, to
1999 1998 Oct. 31, 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (66,408) $ (19,371) $ (94,508)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Extraordinary item - Liquidation 0 0 (81,209)
Increase in Accounts Payable 2,784 600 3,384
Increase in Accrued Interest 5,412 286 5,698
---------- ---------- ----------
Net cash (used) by
operating activities (58,212) (18,485) (166,635)
---------- ---------- ----------
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 57,207 19,735 76,942
---------- ---------- ----------
Net cash provided by
financing activities 57,207 19,735 123,817
---------- ---------- ----------
NET INCREASE IN CASH (1,005) 1,250 245
CASH AT BEGINNING OF PERIOD(S) 1,250 0 0
---------- ---------- ----------
CASH AT END OF PERIOD(S) $ 245 $ 1,250 245
========== ========== ==========
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> 28
PPI CAPITAL GROUP, INC.
(FKA PAIN PREVENTION, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the years ended October 31,1999 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 October 31, 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. "Accounting For Income Taxes" (SFAS No.
109). SFAS No. 109 requires a company to recognize deferred tax liabilities
and assets for the expected future income tax consequences of events that have
been recognized in the Company's financial statements. Under this method,
deferred tax assets and liabilities are determined based on temporary
differences between the financial carrying amounts and the tax bases of assets
and liabilities using the enacted tax rates in effect in the years in which
the temporary differences are expected to reverse.
<PAGE> 29
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 3 - NOTE PAYABLE-RELATED PARTY
The Company had unsecured notes payable to an officer/stockholder. As of
October 31, 1999 and 1998, the outstanding balance was $76,942 and $19,735,
respectively. The accrued interest on the note was $5,698 and $286,
respectively. The borrowings are due on demand and bear interest at ten
percent per annum.
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 - PROVISION FOR INCOME TAXES
No provision for income taxes was provided in the accompanying statement of
operations. As of October 31, 1999, the Company had approximately $85,779 net
operating loss carryforward to reduce future taxable income. To the extent not
utilized, the NOL carryforward will begin to expire in 2013.
NOTE 6 - 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 $155,871 since
inception, and as of October 31, 1999, the Company has a working deficiency of
$8,837 and net worth deficit of $85,779. 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 245
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 245
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 245
<CURRENT-LIABILITIES> 9,082
<BONDS> 0
0
0
<COMMON> 70,092
<OTHER-SE> (155,871)
<TOTAL-LIABILITY-AND-EQUITY> 245
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 60,996
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,412
<INCOME-PRETAX> (66,408)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,408)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
