UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission file number: 33-27230
FOUNTAIN COLONY HOLDING CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4723110
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1621 Altivo Way, Los Angeles, California 90026
----------------------------------------------
(Address of principal executive offices)
(818) 980-0929
--------------
(Issuer's telephone number, including area code)
Securities registered under Section 12(g) of the Exchange Act
None
----
Title of each 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 twelve months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X
Transitional Small Business Disclosure Format (Check one): Yes No X
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. _____
State the issuer's revenues for its most recent fiscal year. None
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant.
There is no market for the registrant's voting stock
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Date: September 30, 1997
Common Stock, par value $0.001 per share. Shares outstanding 900,000
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
FORM 10--KSB
SEPTEMBER 30, 1997
INDEX
Page
Part 1
Item 1 Description of Business 3
Item 2 Description of Property 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Part II
Item 5 Market for Common Equity and Related Stockholder Matters 9
Item 6 Plan of Operation 9
Item 7 Financial Statements 10
Item 8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 11
Part III
Item 9 Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act 11
Item 10 Executive Compensation 11
Item 11 Security Ownership of Certain Beneficial Owners
and Management 12
Item 12 Certain Relationships and Related Transactions. 12
Part IV
Item 13 Exhibits and Reports 13
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) and (b) Business Development and Business of Issuer
General
- -------
Fountain Colony Holding Corporation (the "Company"), is a Delaware
corporation organized on May 6, 1988. In May 1989, the Company sold 10,000 Units
of Common Stock in an Initial Public Offering, pursuant to a Registration
Statement on Form S-18 filed with the United States Securities and Exchange
Commission. The Company's stated business purpose was to "...seek potential
business ventures which in the opinion of Management will provide a profit to
the Company."
On August 31, 1990, the Company entered into an agreement whereby the
Company acquired Pursuit Capital Corporation, ("PCC") a Florida corporation, for
a consideration of 10,260,000 shares of the Company's Common Stock. At the date
of that transaction, PCC's principal assets consisted of cash and cash
equivalents of $138,577.
On December 7, 1990, the Company organized a wholly-owned subsidiary,
Pursuit Venture Corporation ("PVC") a Delaware corporation. PVC issued 270,000
"units" to its parent company for a consideration of $5,000. Each unit consisted
of one share of common stock, par value $0.0001 and a warrant. The warrant
entitled its holder to purchase one share of PVC common stock. The warrants have
since expired unexercised. Additionally, the Company loaned PVC $30,000. This
loan has since been written off.
The Company organized PVC for the express purpose of distributing the units
to the Company's shareholders in order to create a publicly-owned "blank-check"
company. During May 1992, the Company distributed 257,844 units (and cash of
$1,216 in lieu of units in certain instances) to the Company's stockholders
based on their respective pro-rata ownership of the Company. Since the stock
distribution in 1992, the Company conducted only nominal operations until new
management was appointed in August 1997.
The Company proposes to seek, investigate and participate in a business
combination. Such a combination is expected to take the form of a merger,
consolidation, asset acquisition or some other form of combination which
Management believes offers potential long-term growth. The Company does not
intend to become involved in any business which would require it to register as
a securities broker-dealer under the Securities Exchange Act of 1934, as an
investment advisor under the Investment Advisor' Act of 1940; or as an
investment company under the Investment Company Act of 1940. Except as set forth
herein under BUSINESS - Forms of Combination, Management's discretion is
otherwise unrestricted and it may participate in any business which may, in the
opinion of Management, meet the business objectives discussed herein. (See
"BUSINESS.")
Management believes that business opportunities will become available to
the Company due primarily to its status as a publicly-held company, and its
flexibility in structuring and participating in business opportunities. The
Company has no agreement or understanding to acquire or participate in any
business opportunity, nor does it currently have any opportunity under
investigation. Decisions as to which business opportunity to pursue will be made
by Management of the Company, which will in all probability act without the
consent, vote, or approval of the Company's stockholders. (See "BUSINESS".)
3
<PAGE>
The Company's offices are located at 1621 Altivo Way, Los Angeles,
California 90026. Its telephone number is (818) 980-0929 and telecopier number
is (818) 980-8746.
Business Plan
- -------------
The Company is a "shell" corporation which proposes to engage in the active
search for a business combination or merger opportunity which, in the opinion of
Management, will enhance stockholder value.
Management believes that business opportunities will become available to
the Company due primarily to its status as a publicly-held company, and its
flexibility in structuring and participating in business opportunities. The
proposed corporate structure of the Company has not been the subject of a
feasibility study or market research nor is Management aware of statistical data
which would support the perceived benefits of a merger or acquisition
transaction for target company stockholders. Therefore, there can be no
assurance that a market exists for such a corporate vehicle. At present, there
are no plans, agreements, understandings, or commitments to acquire or
participate in any business opportunity nor has the Company solicited, received
or considered any proposals regarding a possible combination or merger. Further,
there can be no assurance that the Company will be successful in locating a
suitable entity for a merger or that the Company will be able to consummate a
combination.
Forms of Combination
- --------------------
The manner in which the Company participates in a business opportunity is
predicated on the nature of the opportunity, the respective needs and desires of
the Company and the promoters of the combination, and the relative negotiating
strength of the Company and such promoters. It is likely that a combination will
take the form of a merger, consolidation, asset acquisition or some other form
of combination. The "target" entities may include private companies,
partnerships, or sole proprietorships.
In transacting a combination, a significant amount of additional shares of
the Company's Common Stock may be issued. The Company is authorized to issue
1,250,000 shares of Common Stock of which 900,000 shares are issued and
outstanding. The Company therefore has only 350,000 shares which may be issued
in consideration of a business acquisition. At such time as the Company
considers a proposal to effectuate a business combination, it will, in all
likelihood, reverse split its stock to enable a large percentage of the Company
to be acquired by the owners of the business opportunity, if the circumstances
of the transaction so dictate. In such an event, present Management and current
stockholders may not have control of a majority of the voting shares of the
Company. Further, as part of such a transaction, all or a majority of the
Company's Management may be requested to relinquish their positions and new
directors and officers may be appointed without a vote by stockholders.
Moreover, no assurance can be given as to the experience or qualifications of
such persons either in the operation of the activities of the Company or in the
operation of the business, asset or property being combined.
The Company does not propose to restrict its search for combination
opportunities to any particular industry, and may, therefore, engage in
essentially any business. Management contemplates that the Company will seek to
merge with or acquire a target company with either assets or earnings, or both.
The Company has not established a specific level of earnings or assets below
which it would not consider a merger or acquisition with a target company.
4
<PAGE>
The Company intends to obtain, if possible, audited financial statements
for the entity which it acquires. It is expected that audited financials will
help Management to understand the financial position of the company it acquires
and will also help the Company in complying with the financial reporting
requirements of the Securities Exchange Act of 1934, if the acquisition would
fall within the ambit of such law.
It is anticipated that business opportunities will become available to the
Company from various sources, including its Officers and Directors, professional
advisors such as attorneys and accountants, securities broker-dealers, venture
capitalists, members of the financial community, and others who may present
unsolicited proposals. The Company has no plans, understandings, agreements, or
commitments with any individuals other than its Officers and Directors to act as
finders of opportunities for the Company.
Plan of Acquisition
- -------------------
The Officers and Directors of the Company will undertake the analysis of
business opportunities. Management will have unrestricted flexibility in
seeking, analyzing and participating in business opportunities. In its efforts,
Management intends to follow a systematic approach to identify its most suitable
acquisition candidates.
Management intends to concentrate on identifying any number of preliminary
prospects which may be brought to its attention through present associations or
unsolicited. Management will then apply certain broad criteria to the
preliminary prospects. Essentially, this will entail a determination by
Management whether or not the prospects are in an industry which appears
promising and whether or not the prospects themselves have potential within
their own industries.
During this initial screening process, Management will ask and receive
answers to questions framed to provide appropriate threshold information,
depending upon the nature of the prospect's business. Such evaluation is not
expected to be an in-depth analysis of the target company's operations, although
it will encompass a look at most, if not all, of the same areas to be examined
once if and when a target company is selected for an in-depth review. For
example, at this stage, Management may look at a prospect's unaudited balance
sheet. However, when a prospect is selected for an in-depth review, Management
will review the prospect's audited financial statements. Nevertheless,
Management anticipates this evaluation will entail a broad overview of the
business of the target company and should allow a significant percentage of
preliminary prospects to be eliminated from further consideration.
Management will conduct an in depth analysis of five major areas of concern
with respect to the target company as follows:
1. Managerial and Financial Stability. Management will review audited
financial statements of the target company and will also research the background
of each director and member of management of the target company in order to
discern whether the stability of the target company is such that further
negotiations are warranted.
2. Industry Status. Management will research the potential of the target
company's industry. The concern here is whether the industry is in a growth,
stagnant or declining stage.
3. Production of Product. If the target company is a manufacturer,
Management will review whether it has the necessary resources or access to the
necessary resources and supplies to produce a quality product in a timely
manner.
5
<PAGE>
4. Acceptance and Potential of Product. Management will review the
acceptance of the target company's product in the market place. Management will
also determine whether or not there is potential for the product to be workable
and to fulfill its intended purpose.
5. Development of Target Company. Management will review the target
company's state of development (examples: start-up stage, established company,
etc.).
The foregoing is an outline of the areas of concern which most often arise
and merit careful scrutiny by Management. Because of the possible varieties of
target companies which may come to the attention of Management, additional
factors will most likely be considered in any given analysis. Also, the
procedures used in such a review are expected to vary depending upon the target
company being analyzed. Management may select a target company for further
negotiations even though the target may not receive a favorable evaluation in
one or more of the five primary areas of concern.
Management expects to enter into further negotiations with various target
company managements following successful conclusion of the initial financial and
evaluation studies. Negotiations with target company management will be expected
to focus on the percentage of the Company which target company stockholders
would acquire in exchange for their shareholdings in the target company.
Depending upon, among other things, the target company's assets and liabilities.
The Company's stockholders will, in all likelihood, hold a lesser
percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilutive effect on the percentage of shares held by the Company's
stockholders.
Management does not intend to force an active participation in the affairs
of the acquired company. However, Management will evaluate any opportunity
offered for such participation if such participation was a necessary ingredient
of a merger. It is not the intention of Management to seek such participation.
Management will in all likelihood be requested to relinquish any voting control
it may exercise prior to a merger to the present management of the business
which is acquired.
Current Management would clearly not control the surviving company
following such a dilution and will not be in a position to demand an active
participation and therefore would not participate unless invited to do so.
The final stage of any merger or acquisition to be effected by the Company
will require the Company to retain the services of counsel and a qualified
accounting firm in order to properly effect the merger or acquisition. The
Company may be expected to incur significant legal fees and accounting costs
during the final stages of a merger or acquisition. Management intends to retain
legal and accounting services only on an as-needed basis in the latter stages of
a proposed merger or acquisition.
The interest of Management is to increase stockholder value. If successful
all the stockholders, including Management, will benefit. Management's objective
is to issue restricted shares of the Company to acquire a private company which
is a going concern. If Management is requested to sell a portion of its shares,
give away a portion of its shares or cancel a portion of its shares to obtain
such a merger, then Management will face a conflict of interest. Presently,
Management has no plan on how to deal with this conflict and believes no general
plan can be formulated at this time; this may adversely affect the Company's
ability to successfully conclude a subsequent merger or acquisition. Conflict
resolutions will otherwise be handled on a case-by-case basis. If the conflict
cannot be resolved, litigation could therefore occur, which would likely damage
the Company's prospects.
6
<PAGE>
There are no corporate policies, board resolutions or bylaws which deal
with conflicts of interest with respect to the sale of shares of the company's
shares by Management and none are anticipated to be placed into effect.
Management cannot commit at this time as to whether a stockholder will have
the right to vote to complete a merger/acquisition as the nature of the
transaction, and the needs of the candidate will dictate the legal requirements
of the transaction.
In connection with the acquisition of a private business, the Company may
not obtain an independent appraisal of the value of the acquired business. Such
omission by the Company could result in overvaluation or other related errors
which then could adversely effect the price paid by the Company for the private
business. It is probable that an existing stockholder's future share values
would be adversely effected by factors including but not limited to excess
dilution, reduced dividends, if any, and a lack of market for shares.
Should a stockholder wish to challenge the Company in Court to reverse a
merger or otherwise assert damages against the Company's Management for neglect
of fiduciary duties in the construction of a merger or acquisition, the legal
remedy available to that stockholder under state corporate law will most likely
be prohibitively expensive and time consuming.
The Company has in effect no bylaws understandings, agreements or
resolutions which prevent related party transactions. Such bylaws or resolutions
could be changed by Management initiative. No such changes are presently being
considered.
There are no present plans, proposals, or arrangements to sell or issue
additional shares of the Company prior to an acquisition or a merger.
Competition
- -----------
The Company will remain an insignificant participant among the firms which
engage in mergers with and acquisitions of privately-held entities. There are
many established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's lack of working capital resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to its competitors.
Regulation and Taxation
- -----------------------
The Company could be subject to regulation under the Investment Company Act
of 1940 in the event the Company obtains and continues to hold a minority
interest in a number of entities. However, Management intends to seek at most
one or two mergers or acquisitions and Management's plan of operation is based
on the Company obtaining a controlling interest in any merger or acquisition
target company and, accordingly, the Company may be required to discontinue any
prospective merger or acquisition of any company in which a controlling interest
will not be obtained.
The Company could also be required to register under the Investment Company
Act of 1940 in the event the Company comes within the definition of an
Investment Company contained in that Act due to its assets consisting
principally of shareholdings held in a number of subsidiaries. Management
intends to seek at most one or two mergers or acquisitions, which transactions
will result in the Company holding only majority interest in subsidiaries.
7
<PAGE>
Any securities which the Company acquires in exchange for its Common Stock
will be "restricted securities" within the meaning of the Securities Act of 1933
(the "1933 Act"). If the Company elected to resell such securities, such sale
could not proceed unless the Securities and Exchange Commission had declared a
Registration Statement effective or an exemption from registration was
available. Section 4(2) of the 1933 Act, which exempts sales of securities not
involving a public offering, would in all likelihood be available since it is
likely that any such sale would be a block sale to a private investor to raise
additional capital. Although Management's plan of operation does not contemplate
resale of securities acquired, in the event such a sale were necessary, the
Company would be required to comply with the provisions of the 1933 Act.
As a condition to a merger or acquisition, it is possible that the target
company's management may request registration of the Company's Common Stock to
be received by target company stockholders. In such event, the Company could
incur significant registration costs. Management intends to require the target
company to bear most, if not all, of the cost of any such registration.
Alternatively, the Company may issue "restricted securities" to a prospective
target company, which securities may be subsequently registered for sale or sold
in accordance with Rule 144 of the Securities Act of 1933.
The Company intends to structure a merger or acquisition in such a manner
as to minimize federal and state tax consequences to the Company and any target
company.
In the course of a merger or acquisition the Company may undertake, a
substantial amount of attention will be focused upon federal and state tax
consequences to both the Company and the target company. Presently, under the
provisions of federal and various state tax laws, a qualified reorganization
between business entities will generally result in tax-free treatment to the
parties of the reorganization. This generally requires the company to acquire at
least 80% of the combined voting power of the acquired company plus at least 80%
of the total number of shares of all other classes of stock in exchange for the
voting stock of the acquiring company.
While the Company expects to structure any merger or acquisition in a
manner which will minimize federal and state tax consequences to both the
Company and the target company, there is no assurance that such a business
combination will meet the statutory requirements of a re-organization or that
the parties will obtain the intended tax-free treatment upon a transfer of stock
or assets. A non-qualifying reorganization could result in the imposition of
both federal and state taxes which may have a substantial adverse effect on the
Company. Further, there is no assurance that federal and state tax laws may not
be amended in the foreseeable future to preclude the Company, as well as others,
from availing itself of the tax-free treatment presently afforded business
entities engaged in mergers and acquisitions.
As of the date hereof no arrangements for merger or acquisition have been
made.
Employees
- ---------
The Company is a development stage operation and currently has no employees
other than its sole Officer and Director. Current Management dose not intend to
devote its full-time efforts to the business of the Company. Current Management
is not compensated by the Company; however, it is anticipated that, upon
completion of an acquisition, the Company may engage full and part-time
employees which may include the Company's present management. The need for
employees and their availability will be addressed as circumstances warrant.
8
<PAGE>
Facilities
- ----------
The Company utilizes the offices of its sole Officer and Director, Patrick
C. Brooks, on a month-to-month basis at no charge. The services provided include
the usage of telephone, telecopier, computers, office fixtures and fittings, and
secretarial services. Management does not foresee the need for separate offices
until business circumstances dictate otherwise.
ITEM 2. DECSRIPTION OF PROPERTY
None
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not applicable - the Company's stock is not traded publicly and no
dividends have been paid.
ITEM 6. PLAN OF OPERATION
Commencing in August 1997, the Company resumed its efforts to identify
business opportunities consistent with its objectives. However, the Company's
ability to operate was significantly and adversely impacted by the absence of
operating funds. Against this background, the Company was unsuccessful in
identifying established and profitable operating companies which desired a
public listing through a "reverse-merger".
The Company intends to continue its efforts to achieve its stated
objectives. And, Management will continue to use all available resources in its
endeavor to successfully complete a business combination. However, in light of
the foregoing reasons, the Company's ability to continue to operate or achieve
its objectives at the current time is, at best, tenuous. In the absence of
operating funds, Management may find it necessary to liquidate the Company in
which event there will be a total loss of stockholder funds.
9
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
See Audited Financial Statements attached hereto.
THIS SPACE LEFT BLANK INTENTIONALLY
10
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996, AND 1995
Accountant's Report ..........................................................F1
Financial Statements
Balance Sheets -
Assets, Liabilities and Stockholders' Equity..............................F2
Income Statements ........................................................F3
Statement of Cash Flows ..................................................F4
Statements of Stockholders' Equity .......................................F5
Notes to Financial Statements ................................................F7
<PAGE>
ACCOUNTANT'S REPORT
To The Board of Directors and Stockholders
Fountain Colony Holding Corporation
I have audited the accompanying balance sheets of Fountain Colony Holding
Corporation (Formerly Argyle Funding, Incorporated) at September 30, 1997,
September 30, 1996 and September 30, 1995 and the related statements of income,
stockholders' equity and cash flows for the years then ended. 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 my 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 my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material aspects, the financial position of Fountain Colony Holding Corporation
at September 30, 1997, September 30, 1996 and September 30, 1995 and the results
of its operations, stockholders' equity and cash flows for the years then ended,
in conformity with generally accepted accounting principles.
/s/ Henry Schiffer
- ------------------
Henry Schiffer
Certified Public Accountant
F1
<PAGE>
<TABLE>
<CAPTION>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
BALANCE SHEETS
ASSETS
------
September 30,
--------------------------------
Current Assets: 1997 1996 1995
- --------------- ---- ---- ----
<S> <C> <C> <C>
Cash 0 0 0
-------- -------- --------
Total Current Assets 0 0 0
-------- -------- --------
Investment (note 1e and 2) 0 0 0
-------- -------- --------
Total Assets 0 0 0
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accrued expenses 5,000 30,000 25,000
-------- -------- --------
Total Liabilities 5,000 30,000 25,000
-------- -------- --------
Stockholders' Equity:
Preferred stock - 1,000,000 shares
Authorized; issued and outstanding
none; $.01 par value -- -- --
Common stock - 1,250,000 shares authorized;
issued and outstanding 900,000 shares at
September 30, 1997, 270,000 shares
at September 30, 1996 and 1995;
@ $.001 par value (Notes 3, 4, 7 and 8) 900 270 270
Paid in capital 232,677 203,307 203,307
Deficit accumulated during the
development stage (238,577) (233,577) (228,577)
-------- -------- --------
Total Stockholders' Equity (deficit) (5,000) (30,000) (25,000)
-------- -------- --------
Total Liabilities and Stockholders' Equity 0 0 0
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F2
</TABLE>
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
STATEMENTS OF OPERATIONS
September 30,
--------------------------------
1997 1996 1995
---- ---- ----
Operating Expenses:
Selling, G and A 5,000 5,000 5,000
-------- -------- --------
Total operating expenses 5,000 5,000 5,000
-------- -------- --------
Net (loss) (5,000) (5,000) (5,000)
======== ======== ========
Weighted number of shares outstanding: 322,500 270,000 270,000
======== ======== ========
Net (loss) per share (.02) (.02) (.02)
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F3
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
STATEMENTS OF CASH FLOWS
September 30,
----------------------------
1997 1996 1995
---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) for the year (5,000) (5,000) (5,000)
Adjustments to reconcile net income to net
cash provided by operating activities
Increase in accrued expenses 5,000 5,000 5,000
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 0 0 0
------ ------ ------
NET INCREASE (DECREASE) IN CASH 0 0 0
CASH BALANCE, BEGINNING OF PERIOD 0 0 0
------ ------ ------
CASH BALANCE, END OF PERIOD 0 0 0
====== ====== ======
The accompanying notes are an integral part of these financial statements.
F4
<PAGE>
<TABLE>
<CAPTION>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
STATEMENT OF SHAREHOLDERS' EQUITY
INCEPTION TO SEPTEMBER 30, 1997
Common Shares Paid In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
May 6, 1988 to Sept
30, 1988 (101) (101)
Sale of common stock
Feb 16, 1989 520,000 520 4,480 5,000
Oct. 1, 1998 to Sept
30, 1989 120,000 120 59,880 60,000
Net (loss) Oct. 1, 1988
to Sept. 30, 1989 (16,390) (16,390)
Net (loss) Oct. 1, 1989
to Sept. 30, 1990 (38,667) (38,667)
----------- ----------- ----------- ----------- -----------
Balance Sept. 30, 1990 640,000 640 64,360 (55,158) 9,842
Surrender of shares by
Shareholder (100,000) (100) 100 0
Issuance of common stock
for acquisition of Pursuit
Capital Corporation 10,260,000 10,260 128,317 138,577
October 25, 1990
December 17, 1990
40:1 reverse stock split (10,530,000) (10,530) 10,530 0
Net (loss) Oct. 1, 1990
to Sept. 30, 1991 (26,205) (26,205)
----------- ----------- ----------- ----------- -----------
Balance Sept. 30, 1991 270,000 270 203,307 (81,363) 122,214
Cash dividend in lieu
of stock of Pursuit Ventures (1,216) (1,216)
Net (loss) Oct. 1, 1991
to Sept. 30, 1992 (127,076) (127,076)
----------- ----------- ----------- ----------- -----------
Balance Sept. 30, 1992 270,000 270 203,307 (209,655) (6,078)
The accompanying notes are an integral part of these financial statements.
F5
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
STATEMENT OF SHAREHOLDERS' EQUITY
INCEPTION TO SEPTEMBER 30, 1997
Common Shares Paid In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
Balance Sept. 30, 1992 270,000 270 203,307 (209,655) (6,078)
Net (loss) Oct. 1, 1992
to Sept. 30, 1993 (7,960) (7,960)
-------- -------- -------- -------- --------
Balance Sept. 30, 1993 270,000 270 203,307 (215,615) (14,038)
Net (loss) Oct. 1, 1993
to Sept. 30, 1994 (5,962) (5,962)
-------- -------- -------- -------- --------
Balance Sept.30, 1994 270,000 270 203,307 (223,577) (20,000)
Net (loss) Oct. 1, 1994
to Sept. 30, 1995 (5,000) (5,000)
-------- -------- -------- -------- --------
Balance Sept. 30, 1995 270,000 270 203,307 (228,577) (25,000)
Net (loss) Oct. 1, 1995
to Sept. 30, 1996 (5,000) (5,000)
-------- -------- -------- -------- --------
Balance Sept. 30, 1996 270,000 270 203,307 (233,577) (30,000)
Issuance of common stock
for payment of liabilities 630,000 630 29,370 30,000
Note 8
Net (loss) Oct. 1, 1996
to Sept. 30, 1997 (5,000) (5,000)
-------- -------- -------- -------- --------
Balance Sept. 30, 1997 900,000 900 232,677 (238,577) (5,000)
======== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F6
</TABLE>
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996, AND 1995
Note 1 Summary of Significant Accounting Policies
- -------------------------------------------------
This summary of significant accounting policies of Fountain Colony Holding
Corporation is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation
of the financial statements.
(a) Organization and Business Activities:
The Company was incorporated on May 6, 1988 under the laws of the
State of Delaware under the name Argyle Funding, Incorporated. The
Company changed its name to Fountain Colony Holding Corporation
effective January 2, 1991.
The Company's business purpose is to seek out business opportunities,
including acquisitions, that the Board of Directors, in its
discretion, believes to be good opportunities.
(b) Depreciation:
Depreciation is provided by the straight-line method at rated
calculated to amortize cost over the estimated useful lives of
respective assets. Upon sale or retirement of the respective assets,
the related cost and accumulated depreciation are eliminated from the
accounts, and gains or losses are reflected in income. Repair and
maintenance expenditures, not anticipated to extend original asset
lives, are charged to income as incurred.
(c) Fiscal Year:
The Company operates on a September 30 fiscal year end.
(d) Basis of Operation:
The Company prepares its financial statements and federal income taxes
on the accrual basis of accounting.
(e) Principles of previously reported Consolidation of financial
statements:
The accompanying financial statements include the accounts of Fountain
Colony Holding Corporation and previous subsidiaries as listed below.
All significant inter company balances and transactions have been
eliminated.
F7
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996, AND 1995
(e) Principles of Consolidation: (continued)
a. Pursuit Capital Corporation was acquired on October 25, 1990 for
10,260,000 shares of common stock (retroactively reflected at
255,500 shares after the 40 for 1 reverse stock split). The
acquired Company was in the business of venture capital
activities. Pursuit Capital was voluntarily dissolved by the
Company effective August 5, 1994.
b. Pursuit Venture Corporation was formed on December 7, 1990 as a
wholly owned subsidiary of Fountain Colony Holding Corporation.
The Company purchased 270,000 shares with a par value of $.001
and paid $5,000 for the stock. Pursuit Venture was a wholly owned
subsidiary through September 30, 1991. In 1992 the Company
distributed 257,844 shares of the common stock of Pursuit Venture
Corporation to the existing shareholders of the Company and the
Company carries the investment in Pursuit Venture remaining held
stock of 12,156 shares at $0.
c. Effective September 30, 1995 the Company has no consolidating
subsidiaries as Pursuit Capital was voluntarily dissolved and
substantially all the shares of Pursuit Venture Corporation have
been distributed.
Note 2 Capitalization of the Company
- ------------------------------------
On February 16, 1989, the Company issued 520,000 shares of common stock for
a total consideration of $5,000. These shares were restricted securities
under Rule 144 of the Securities Act of 1933. As such, these shares were
not available to be sold or traded for a period of two years which ended on
February 16, 1991.
Note 3 Public Offering
- ----------------------
The Company filed a Form S-18 public offering with the Securities and
Exchange Commission. The Company sold 10,000 units at a price of $6.00 per
unit. Each unit consists of 12 shares of its publicly registered common
stock, 12 Class A redeemable common stock warrants, 12 Class B redeemable
common stock purchase warrants and 12 Class C redeemable common stock
purchase warrants. As of September 30, 1989 all 10,000 units (120,000
shares) were sold and the gross proceeds of the offering, $60,000, were
received by the Company.
Note 4 Acquisition and Formation of Subsidiary
- ----------------------------------------------
Pursuit Capital Corporation was acquired on October 25, 1990 for 10,260,000
shares of common stock (retroactively reflected at 255,500 shares after the
40 for 1 reverse stock split). The Company was acquired under the purchase
method of accounting. The sole asset of the Company reflected as of the
date of acquisition was cash and certificates of deposit totaling $138,577.
F8
<PAGE>
FOUNTAIN COLONY HOLDING CORPORATION
(Formerly Argyle Funding, Incorporated)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996, AND 1995
Note 4 Acquisition and Formation of Subsidiary (continued):
- -----------------------------------------------------------
Pursuit Venture Corporation was formed on December 7, 1990. The initial
capitalization of Pursuit Venture was based on the issuance of 270,000
shares of common stock to the Company for a purchase price of $5,000. The
Company then loaned the newly formed subsidiary $30,000. This $30,000 was
spent by the subsidiary and accordingly was reflected in the consolidated
financials as operating expenses of the Company in fiscal 1991. However, in
1992 the Company distributed 257,844 of Pursuit Venture's common stock that
terminated the parent company-subsidiary relationship.
Note 5 Income Taxes
- -------------------
At September 30, 1997, the Company has a federal operating loss
carryforward of $238,577 for financial accounting and federal income tax
purposes. Utilization of the net operating loss in any taxable year during
the carryforward period may be subject to an annual limitation due to the
ownership change limitations imposed by the tax law.
The net operating losses will expire at various dates commencing in the
year 2004 through 2009.
The deferred tax asset consists of the future benefit of net operating loss
carryforwards. A valuation allowance limits the recognition of the benefit
of deferred tax assets until realization is reasonable assured by future
profitability.
The following is a summary of deferred taxes:
Deferred asset $ 76,000
Valuation allowance (76,000)
--------
0
========
Note 6 Options & Warrants
- -------------------------
The Company has not adopted a stock option plan and there are no
outstanding warrants.
Note 7 Dividend Policy
- ----------------------
The Company has not yet adopted a policy regarding dividends. However, as a
result of the stock distribution of Pursuit Venture Corporation to
shareholders of the Company, cash in the amount of $1,216 was distributed
as a dividend in lieu of the stock of Pursuit Venture at the option of the
shareholders in fiscal year 1992.
Note 8 Issuance of Stock
- ------------------------
Effective August 28, 1997, the Company issued 630,000 shares of common
stock as consideration for the payment of liabilities totaling $30,000 as
of the fiscal year ended September 30, 1996. Of the share issuance, 330,000
shares were issued to an officer/director in consideration for satisfying
$15,000 of those liabilities and 300,000 shares were issued to other
parties in consideration for satisfying $15,000 of those liabilities.
F9
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PRMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF EXCHANGE ACT
MANAGEMENT
The following sets forth information concerning the Directors and Officers
of the Company:
Name Age Positions
---- --- ---------
Patrick C. Brooks 51 Director, President, Chief Financial
Officer and Secretary
The following sets forth certain biographical information pertaining to the
Directors and Officers of the Company:
Patrick C. Brooks
- -----------------
Mr. Brooks was the Company's founder and served as its President and a
Director from inception in May 1988 to August 1990. He was appointed sole
Officer and Director in August 1997.
Since 1988 Mr. Brooks has served as President of Home Indemnity
Incorporated, a company he founded. Formerly, he served as Chairman and
President of Bio-Dental Technologies Corporation, a publicly-held company traded
on the NASDAQ Stock Exchange. Additionally, he served as joint principal and
owner of Thunderbird Securities Corporation and Meridian Securities, Inc., both
companies being securities-broker dealers licensed by the Securities and
Exchange Commission and the N.A.S.D.
From 1987 to 1990, Mr. Brooks was the promoter and sponsor of three
publicly-held Business Investment Companies. In the fifteen years prior to 1987
he served in the casualty insurance industry in successively advancing
underwriting positions with major European and American insurance companies.
Since August 1997, Mr. Brooks has served of President and Director of Pursuit
Venture Corporation, a publicly-held "shell".
ITEM 10. EXECUTIVE COMPENSATION
None of the Company's present executive officers are compensated by the
Company.
11
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding ownership of the
Company's Common Stock by each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock, by each director and by
each executive officer of the Company. All shares are held beneficially and of
record, and each recorded stockholder has sole voting, investment and
dispositive power.
Shares Percentage of
Beneficially Shares
Name Owned Owned
- ---- ----- -----
Patrick C. Brooks (1) 330,000 36.7
Directors and Officers as a Group 330,000 36.7
(1) Director and/or Officer of the Company
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As at September 30, 1996, the Company had accrued liabilities of $30,000.
In August 1997, the Company issued 330,000 shares of its Common Stock to Mr.
Patrick C. Brooks, its sole Officer and Director, as consideration for
satisfying $15,000 of those liabilities. This transaction was not conducted at
arm's length.
The Company does not compensate its Officers and Directors. However, the
Company's Officers and Directors may, after an acquisition transaction has been
competed, be compensated for services rendered thereafter should same be desired
by the Company. In such event, a conflict of interest may arise as to the type
and amount of compensation to be paid. A conflict of interest may also arise as
Officers and Directors offer business opportunities to the Company or assist the
Company in the selection
of a business opportunity.
The Company has established the following procedures which may be followed
in the resolution of any future conflict of interest between the Company and any
of its officers, directors, or stockholders:
1. No officer, director, or stockholder shall have any duty or
responsibility to make any business opportunity, investment
opportunity or transaction available to the Company;
2. The existence of a conflict of interest shall be disclosed to the
Board of Directors;
3. The Board of Directors, with the interested Director being counted for
purposes of the establishment of a quorum, but abstaining from voting
on all matters in which he has an interest, shall approve
transactions;
4. Conflicts of interest shall not be required to be submitted to
stockholders for approval nor shall notice be required to be given to
the stockholder; and
5. No independent studies, reports or opinions shall be required in
connection with the resolution of a conflict of interest; however,
should the Board of Directors, in the exercise of its sole discretion,
determine to obtain an independent study, report or opinion, the Board
of Directors shall be entitled to solely rely thereon. In addition to
the foregoing, the law of the state of Delaware permits additional
procedures which may be followed by the Company in resolving any
conflict of interest.
12
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereto
duly authorized.
FOUNTAIN COLONY HOLDING CORPORATION
/s/ Patrick C. Brooks
---------------------
Patrick C. Brooks
Director, President and Secretary
Date: December 16, 1997
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 5,000
<BONDS> 0
0
0
<COMMON> 232,677
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,000)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
