SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
Harter Financial, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)
New York 11-2534507
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
Box 338, Village Road, New Vernon, New Jersey 07976
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (973) 734-0100
Securities to be registered under to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
- ------------------- ------------------------------
Not Applicable Not Applicable
- ------------------- -------------------------
Securities to be Registered under to Section 12(g) of the Act:
Common Stock $.01 Par Value
----------------------------
(Title of Class)
<PAGE>
PART I
Item 1. Description of Business.
General
Harter Financial, Inc., a New York corporation (the "Company"), has
three primary business focuses: (i) acquiring operating businesses; (ii)
investing in and providing managerial assistance to start-up and early
stage development companies, and (iii) providing diversified consulting
services relating to mergers and acquisitions, financing and
reorganization. Additionally, the Company has a non-operating, wholly-
owned, subsidiary Planner's Financial, Inc. ("Planners"). Prior to the
events discussed below, the Company was known as Wolf Financial Group,
Inc. ("W. Group").
Company History
The Company was incorporated in New York on May 23, 1979 as Wright
Laboratories, Inc. ("Wright"). In December 1985, the Company acquired
all of the capital stock of F.N. Wolf & Co., Inc ("FNW") a privately held
New York corporation organized in June of 1982. By a vote of its
shareholders the Company's name was changed from Wright to Wolf Financial
Group, Inc. at the time of the acquisition.
Bankruptcy Reorganization
As a result of heavy losses and various legal proceedings pending W.
Group and its wholly-owned subsidiary FNW filed voluntary petitions for
relief under Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code") on August 24, 1994 (the "Filing Date"). On October
23, 1996, a reorganized W. Group emerged from protection under Chapter 11
of the Unites States Bankruptcy Code of 1986 pursuant to a confirmed plan
of reorganization (the "Plan"). Pending confirmation of the plan of
reorganization the Company carried out limited business activities
including issuing bridge loans to certain unrelated third parties. On
November 6, 1996, by order of the United States Bankruptcy Court (the
"Court"), W. Group changed its name to Harter Financial, Inc. The New
York State Banking Department approved the name change on April 11, 1997.
Prior to the Filing Date, W. Group's wholly owned subsidiary FNW was
a broker-dealer registered with the Securities and Exchange Commission
("SEC") and the National Association of Securities Dealers ("NASD").
Pursuant to the Plan, FNW was dissolved and its assets were folded
into the reorganized W. Group. The Effective Date of the Plan, pursuant
to the Court's order, was January 16, 1997 (the "Effective Date").
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Plan of Reorganization
Under the Plan, the claims of the principal creditors of W. Group
and FNW have been settled in accordance with the following
classifications:
(i) Class 1, consisting of all secured claims are to receive
their collateral and any unsecured portion of such claim, if any, will
be treated as an allowed Class 3 claim. W. Group and FNW believe
that there are no claims with valid security interests; and
(ii) Class 2, consisting of all pre-petition claims entitled to
priority pursuant to Section 507 of the Bankruptcy Code, other than
priority tax claims, are to receive up to $2,000 of their claims as
priority claims pursuant to section 507(a)(3) of the Bankruptcy
Code; and;
(iii) Class 3 consisting of all general unsecured claims, other
than insider claims, indemnity claims and securities claims are to
receive shares of common stock in the reorganized Company at the
rate of one (1) share for every dollar of claim; and
(iv) Class 4 consisting of all securities Claims (claims stemming
from various legal actions) except the SEC's claim are to receive in
total a cash payment of $500,000 and common stock in the reorganized
Company equal to the number of shares of common stock issued to
Class 3 (i.e. 1,605,784 shares); and
(v) Class 5 consisting of the claims of the SEC received a cash
payment of $1,000,000; and
(vi) Class 6 consisting of all indemnity claims are to receive
a pro rata distribution of 100,000 shares of common stock in the
reorganized Company; and
(vii) Class 7 consists of W. Group's equity interests. W. Group's
then existing equity interests were canceled pursuant to the Plan,
and holders of such interests did not receive any payments under the
Plan; and
(viii) Allowed administrative expenses are to be paid in full; and
(ix) The Internal Revenue Service in payment of its Priority Tax
claims is to receive a cash distribution of $200,000.
In accordance with the terms of the Plan 5,594,315 shares of the
Company's common stock was issued to the Plan funder (as defined in the
Company's Plan of Reorganization previously filed with the SEC, the "Plan
Funder") and to Joshua J. Angel.
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Description of Business - Present Capital Investments
The Company is presently in the process of seeking out suitable
businesses to acquire and operate. In the interim, while the Company
seeks out other potential acquisitions, the Company is temporarily
investing its capital in various bridge loans and other investments.
Set forth below is information concerning the Company's present
principal investments ("Principal Investments"), two of which are
publicly-held. Information concerning the publicly held companies has
been derived from their respective SEC filings. Information concerning
the privately - held companies has been obtained from those Principal
Investments. For further information concerning the Company's
investments, including acquisition dates, purchase prices and valuation
at October 23, 1996 and March 31, 1997, see Notes to Financial Statements
included herein.
The Company does not maintain specific policies to guide its
acquisition and investment choices. Rather, the Company presently
reviews potential acquisition or investment opportunities and seeks to
identify and select what it believes are the best among them.
Acquisition of or direct investments in businesses with operating
histories that are unprofitable or marginally profitable, that have
negative net worth or that are involved in bankruptcy or similar
reorganization proceedings may be made. Such acquisitions or investments
are expected to involve businesses which management believes to have
turnaround potential through the infusion of additional working capital
and a strengthened management team. These businesses require significant
managerial assistance and the Company's investment therein are generally
high risk and speculative in nature. The Company seeks to attract
potential managers who have established track records of turning around
troubled businesses. The Company attempts to locate qualified managers
on a need only basis. To date, a significant portion of the Company's
investments have been of this nature.
The Company may in the future make additional debt and equity
investments in its Principal Investments ("Additional Investments") in
order to protect or enhance its initial investment. The Company,
together with other investors, may make direct or Additional Investments
in a number of other situations, including attempts to rehabilitate
insolvent or bankrupt companies, and/or acquire privately-held companies.
The substantial financial and management commitment typically attendant
to an investment, mandates that only a few new investments be made in any
one year.
The Company expects that it may, from time to time, make direct
investments in publicly-traded securities of relatively small, emerging
companies that management believes may have long-term growth
possibilities.
1. Autoparts Warehouse, Inc. An investor group, of which the
Company is a member, formed Autoparts Warehouse for the specific purpose
of purchasing substantially all of the assets of Warehouse Auto Centers,
Inc., for $375,000 in cash in connection with a proceeding
4
<PAGE>
conducted in the United States Bankruptcy Court Western District of New
York (Case No. 95-21279). The asset purchase was concluded on August 28,
1996. Those assets formed the base upon which Autoparts Warehouse began
to operate.
In August 1996, the Company acquired 24% of the issued and
outstanding common stock in Autoparts Warehouse for $90,000. As of July
10, 1997 the Company had a 32% equity interest in Autoparts Warehouse.
Prior to March 31, 1997 the Company loaned $215,000 ($135,000 on
8/28/96 at 8%, $30,000 on 1/2/97 at 8% and $20,000 on 2/26/97 at 8%) to
Autoparts Warehouse for working capital. From April 1, 1997 to the date
of the filing of this Registration Statement the Company loaned an
additional $57,245 ($41,175 on 4/1/97 at 12% and $16,170 on 5/30/97 at
8%) to Autoparts Warehouse for working capital. In addition to the
working capital loans the Company purchased from an unrelated party who
wished to liquidate his Autoparts Warehouse loan portfolio before its
maturity date, at a substantial discount, an additional $47,000 of
Autoparts Warehouse loans all at an interest rate of 8%. All of the
loans which have been made to Autoparts Warehouse are demand notes. To
date, no demand for the payment of principal or interest has been made by
the Company.
In addition to the loans enumerated above the Company loaned $25,000
at an interest rate of 8% to a principal of Autoparts Warehouse's on
August 28, 1996. As of the date of this filing the loan remains
outstanding.
Autoparts Warehouse is a privately held auto-parts retailer and
service center located in Rochester, New York. It operates a warehouse
superstore auto parts accessory and service center offering a selection
of quality, brand name, automotive products at discount prices, primarily
to do-it-yourself customers and professional mechanics and installers.
Currently Autoparts Warehouse is engaged in the process of raising
private bridge loan financing. If the financing is completed
successfully, of which there can be no assurance, Autoparts Warehouse has
indicated that it anticipates expanding its operations to include
additional locations in the Rochester area.
Autoparts Warehouse operates in a highly competitive environment.
Its principal competitors are national and regional chains carrying
automotive parts and accessories and offering automotive services, most
of which have substantially greater marketing, financial, administrative
and other resources than Autoparts Warehouse.
Spencer J. Angel, President of the Company, currently acts as the
Secretary/Treasurer of Autoparts Warehouse.
2. FCI Food Group, Inc. FCI Food Group, Inc ("FCI"), is a
privately held company engaged in the fast food industry. FCI has three
distinct food category franchises that it presently operates and
franchises to independent operators. FCI predominantly focuses on
placing its operations and its franchised operations in the food courts
of high volume shopping
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malls. FCI owns and franchises fast food restaurants throughout the
United States, Puerto Rico and the Middle East.
In November 1996, the Company loaned FCI $100,000 in exchange for a
FCI promissory note for working capital. That note was subsequently
exchanged with a replacement promissory note issued from International
Financial Partners, Inc., a related FCI entity.
3. Medical Laser Technologies, Inc. Medical Laser Technologies,
Inc. ("MLTI") is a publicly held medical imaging technology company.
MLTI's wholly owned subsidiary Fidelity Medical, Inc. ("Fidelity")
develops and markets systems for the electronic processing, storage,
review and retrieval of X-ray images generated during certain medical
procedures, particularly cardiac angiography/angioplasty and
radiographic/fluoroscopic examinations.
In November 1995, the Company loaned $90,000 to MLTI and Fidelity
for working capital (the "MLTI/Fidelity Loan"). In addition to the note
in the principal amount of $90,000, the Company received 115,000 shares
of MLTI stock.
MLTI's common stock is listed on the NASDAQ Bulletin Board and is
traded under the symbol MLTI.
On June 23, 1997 the Company and other un related investors entered
into a Stock Purchase Agreement with MLTI to purchase up to a maximum of
16,666,667 shares of MLTI stock at a per share price of three Cents
($.03) per share. As of the date of the filing of this Registration
Statement the Company had purchased 3,166,667 shares under the Stock
Purchase Agreement and owned approximately 3,491,667 shares of MLTI's
issued and outstanding common stock.
On August 7, 1997 the Company notified MLTI and Fidelity that they
had defaulted on the MLTI/Fidelity Loan. Accordingly, the Company
commenced the process of foreclosing on its perfected security interest
in the shares of Fidelity, MLTI's wholly owned subsidiary. While no
litigation has commenced with respect to the events described above the
Company anticipates that litigation will be commenced challenging its
asserted ownership. At this time the Company is unable to determine the
outcome of any possible litigation that may arise. Additionally, the
Company is unable to determine whether it will be able to maintain
Fidelity as an operating subsidiary.
4. Pan American World Airways, Inc. The Company was one of the
original investors in the Blank Check Book company that purchased the Pam
Am trademark in the Pan Am bankruptcy proceeding. Pan American World
Airways, Inc. ("PanAm"), a unit of Pan Am Corp., is a mid-sized national
carrier that offers low fare service to major American cities.
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PanAm's common stock is listed on the American Stock Exchange and is
traded under the symbol PAA. The Company currently has approximately
60,000 shares of PanAm's common stock.
5. Ivax Corporation Ivax Corporation ("Ivax") is a publicly-held
holding company with subsidiaries engaged primarily in the research,
development, manufacturer and marketing of health care products,
including generic and branded pharmaceuticals, intravenous solutions and
related products, and in vitro diagnostics.
Ivax's common stock is listed on the American Stock Exchange and is
traded under the symbol IVX. The Company has approximately 30,000 shares
of Ivax's issued and outstanding common Stock.
Regulation
Because the Company might be deemed to be engaged in the business of
investing, owning, holding or trading in securities and therefore be
subject to the provisions of the Investment Company Act of 1940 (the
"1940 Act"), it is currently relying on the exemption provided by Rule
3a-2 under the 1940 Act. Rule 3a-2 provided that a company shall be
deemed not to be engaged in the business of investing, owning, holding or
trading in securities during a period of time not to exceed one (1) year
if the company has a bona fide intent to be engaged primarily, as soon as
reasonably possible, in a business other than that of investing, owning,
holding or trading. In accordance with rule 3a-2, the company's Board of
Directors has adopted a resolution evidencing such intention. The
Company expects to be primarily engaged in the business operation
discussed earlier in this Section in the reasonably foreseeable future.
Competition
Numerous companies and individuals are engaged in the venture
capital business and such business is intensely competitive. Many of the
competitors have significantly greater experience, resources and
managerial capabilities than the Company and are therefore in a better
position than the Company to obtain access to and to consummate
attractive venture capital investments.
Employees
General. As of July 11, 1997, the Company employed six people on a
full time basis.
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Item 2. Management's Discussion and Analysis of Plan of Operations.
Selected Financial Information of the Company
Prior to the filing of its voluntary petition the Company was
current with all of its SEC filings. The Company's last filings of
current financial information were its 10-K for the fiscal year ending
June 30, 1993 and its 10-Q for the period ending March 31, 1993. After
the filing of its voluntary petition, however, the Company did not remain
current with its SEC filings.
The selected financial data presented below is for the two year period
ended June 30, 1996 and the nine month periods ended March 31, 1996, July
1, 1996 to October 22, 1996 and October 23, 1996 to March 31, 1997. The
information for the years ended June 30, 1995 and June 30, 1996 is
derived from the Company's audited financial statements. The information
for the nine month periods ended March 31, 1996 and March 31, 1997 is
derived from the Company's unaudited financial statements. The data
should be read in conjunction with the financial statements, related
notes and other financial information of the Company for such periods
included elsewhere in this Registration Statement.
The financial information below takes into account the effects of
fresh-start accounting in accordance with Statement Of Position 90-7 of
the American Institute of Certified Public Accountants. Pursuant to SOP
90-7 if the reorganization value of the assets of the emerging entity
immediately before the date of confirmation is less than the total of all
post-petition liabilities and allowed claims, and if holders of existing
voting shares immediately before confirmation receive less than 50
percent of the voting shares of the emerging entity, the entity should
adopt fresh-start reporting upon its emergence from Chapter 11. Adopting
fresh-start reporting results in a new reporting entity with no beginning
retained earnings or deficit. Accordingly, all financial statements for
any period prior to October 23, 1996, are periods prior to the
implementation of fresh-start reporting, and are not comparable to
financial statements for periods after the implementation of fresh-start
reporting. The financial information contained herein is not indicative
of future operating results or financial position of the Company.
(INTENTIONALLY LEFT BLANK)
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Selected Financial Information of the Company
The following selected financial data for the two year period ended
June 30, 1996 and for the period from July 1, 1996 to October 22, 1996
and October 23, 1996 to March 31, 1997 and for the nine month period
ended March 31, 1996 is derived from the audited and unaudited financial
statements of the Company. The data should be read in conjunction with
the financial statements, related notes and other financial information
of the Company included elsewhere in this Registration Statement.
<TABLE>
<CAPTION>
July 1, October 23, Nine
1996 1996 Months
to to Ended
October 22 March 31, March 31
Year Ended June 30, 1996 1997 1996
1996 1995 (Unaudited) (Unaudited) (Unaudited)
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Interest Income $ 76,24 $ 2,083 $ 8,375 $ 27,616 $ 28,016
Continuing
operating
expenses (685,777) (643,097) (220,889) (396,265) (516,713)
Realized and
unrealized gain
(loss) Marketable
securities 556,816 (170,431)
Reorganization items -
expenses
(Note F) (298,266) (701,196) (246,908) 241,731)
--------- ----------- ----------- ---------- ----------
Income (loss) before
discontinued
operations
and extraordinary
item (907,797) (1,342,210) 97,394 (539,080) (730,428)
Income (loss) from
discontinued
operations 62,702 2,376,146 (42,460) 62,509
---------- ---------- ----------- ----------- ----------
Income (loss) before
extraordinary
item (845,095) 1,033,936 54,934 (539,080) (667,919)
Extraordinary item:
Forgiveness of
debt 13,066,541
---------- ---------- ----------- ---------- ----------
Net Income (Loss) $(845,095) $1,033,936 $13,121,475 $(539,080) $(667,919)
========== ========== =========== ========== ==========
Net Loss Per
Common Share $ (0.06)
==========
Weighted Average
Number of
Common Shares
Outstanding 8,905,883
==========
</TABLE>
<TABLE>
<CAPTION>
June 30, March 31,
1996 1997
(Unaudited)
Balance Sheet Data:
<S> <C> <C>
Total Assets $3,080,886 $2,730,843
Total liabilities 15,421,239 1,971,231
Shareholders'
equity
(deficiency) ( 12,340,353) 759,612
============= ==========
</TABLE>
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Results of Operations
The Company's Plan of Reorganization was confirmed on October
23, 1996. In accordance with the requirements of fresh-start
accounting, pursuant to Statement of Position 90-7, the results for
the period of October 23, 1996 to March 31, 1997 (the "Period") have
been prepared under a new basis of accounting and therefore are not
necessarily comparable to the nine (9) month period ended March 31,
1996.
Results of Company Operations for the Fiscal Years Ended June
30, 1996 and 1995.
The Company had income from discontinued operations of $62,702
for the year ended June 30, 1996 compared to $2,376,146 for the year
ended June 30, 1995. The income for the year ended June 30, 1995 was
derived primarily from the sale of assets including securities,
options and warrants held by the Company at the time of the
Bankruptcy Filing. The major portion of such income was from the
conversion of warrants into shares of Wireless Telecommunications,
Inc., and the subsequent sale of that position. For the year ended
June 30, 1996 the Company had $298,266 in reorganization expense
items compared to $701,196 for the year ended June 30, 1995.
Included in the reorganization expense category were bankruptcy,
legal and other professional fees.
For the year ended June 30, 1996 the Company had interest income
from bridge loans and investments in the amount of $76,246 compared
to $2,083 for the year ended June 30, 1995. For the year ended June
30, 1996 the Company incurred continued operating expenses for rent,
salaries and other operating items in the amount of $685,777 compared
to $643,097 for the year ended June 30, 1995. For the year ended
June 30, 1996, the Company had a net loss of $845,095 compared to net
income of $1,033,936 for the year ended June 30, 1995.
Results of Company Operations for the Period Ended March 31,
1997.
During the period from July 1, 1996 to October 22, 1996, the
Company had realized and unrealized gains on marketable securities of
$556,816, continuing operating expenses of $220,889 consisting of
salary and related office expenses and reorganization expenses
pertaining to the Bankruptcy of $246,908 resulting in income before
the extraordinary item of $97,394. The Company had a loss from
discontinued operations of $42,460 for the period. For the period
ended October 22, 1996 an extraordinary item in the amount of
$13,066,541 was recorded for Forgiveness of Debt pursuant to the Plan
of Reorganization.
For the period of October 23, 1996 to March 31, 1997, the
Company had income in the amount of $27,616 from interest on loans
and investments. Additionally, during this period, the Company also
had an unrealized loss on marketable securities in the amount of
$170,431, and continued operating expenses in the amount of $396,265
consisting of salary and related office expenses which resulted in a
net loss for this period of $539,080 or $.06 per share.
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For the nine month period ended March 31, 1996, the Company had
interest income of $28,016, income from discontinued operations of
$62,509 operating expenses of $516,713 and reorganization expenses of
$241,731 resulting in a net loss of $667,919.
Liquidity and Capital Resources.
A substantial portion of the Company's assets are liquid
consisting mainly of cash and cash equivalents, receivables from
brokerage accounts, and marketable securities. As the Company is in
the process of satisfying its Chapter 11 reorganization obligations,
its liquid assets will decrease from time to time. At this time the
Company estimates that it has approximately $1,000,000 in remaining
Chapter 11 reorganization obligations.
On June 30, 1996 cash, cash equivalents and marketable
securities totaled $2,350,342 or 76% of total assets compared to
$1,948,041 or 71% of total assets on March 31, 1997. It should be
noted that all references to the period of October 23, 1996 to March
31, 1997 are for general comparison purposes only. This period
contains unaudited financials which have been prepared pursuant to
fresh-start accounting requirements in accordance with Statement Of
Position 90-7 and are not comparable to financial statements for
periods prior to the implementation of fresh-start reporting.
The Company will from time to time make loans and investments in
public and non-public companies, and may also receive as a result of
those loans securities, options, and/or warrants that are not readily
marketable. On June 30, 1996 such loans totaled $237,500 or 8% of
total assets as compared to $400,000 on March 31, 1997 or 15% of
total assets. The value of the Company's securities that were not
readily marketable on June 30, 1996, $401,575 or 13% of total assets
decreased to $200 on March 31, 1997. This resulted, primarily, from
the reclassification and increase in market value of an investment in
a non-public company which subsequently began trading publicly.
Therefore, the value of marketable securities increased from $18,512
or less than 1% of total assets to $883,281 or 32% of total assets on
March 31, 1997.
Furniture, fixtures and equipment of $60,628 decreased to $3,674
on March 31, 1997 as a result of depreciation and disposal of assets
that were no longer used in the Company's operation. The receivable
from the Plan Funder, in the amount of $300,000, was received by the
Company on May 19, 1997.
In conjunction with the Confirmation Order certain pre-petition
liabilities were discharged or revalued. On June 30, 1996 pre-
petition liabilities that were subject to compromise totaled
$15,190,681. Post-petition liabilities in the amount of $219,507
increased to $1,971,231 primarily reflecting the liabilities payable
in accordance with the provisions of the Plan of Reorganization.
The Company believes that it has sufficient capital to meet its
obligations under the Plan
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<PAGE>
of Reorganization. Additionally, the Company believes that it has
sufficient capital to acquire an operating business. The ability of
the company to meet its future objectives, however, is subject to the
viability of the Principal Investments. There can be no assurance
that the Company will be successful in its attempts, if any, to raise
additional funds. The Company has no material commitments for
capital expenditures.
Item 3. Description of Property.
The Company's principal executive office is maintained at The
Barn Building, Village Road, New Vernon, New Jersey. The Company
currently pays approximately $3,400 per month in rent and associated
costs for such offices pursuant to a lease which expired in July
1997. The Company has been offer a new two (2) year lease at a rent
of $3,600 per month. The Company, however, as of the date of this
filing has not executed said lease.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of July 10, 1997, (i) the
number of shares of Common Stock beneficially owned by (x) owners of
more than five percent (5%) of the outstanding Common Stock who are
known to the Company, and (y) the Directors and certain executive
officers of the Company, individually, and the officer and Directors
of the Company, as a group, and (iii) the percentage of ownership of
the outstanding Common Stock represented by such shares. All share
numbers are provided based upon information supplied to management of
the Company. To the best of managements knowledge all of the persons
named in the table has sole voting and investment power with respect
to all shares shown as beneficially owned by such person, except as
otherwise set forth in the notes to the tables.
(INTENTIONALLY LEFT BLANK)
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No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner (1) Owned of Class
- ------------------------- ------------- ----------
Joshua J. Angel (2) 4,278,525 48.0%
9 East 79th Street
New York, New York 10021
Class 4 Security Claimants (3) 1,605,784 18.0%
c/o Wolf, Popper, Ross,
Wolf & Jones Esq.
845 Third Avenue
New York, New York 10022
Spencer J. Angel 1,315,790 14.8%
181 East 73rd Street
New York, New York 10021
Bolzano Investments, Inc 1,030,278 11.6%
c/o Platzer, Fineberg & Swergold
150 East 52nd Street
New York, New York 10022
Officers and Directors, as a
group (4) 5,594,315 62.8%
___________________
1. Beneficial ownership, as reported in the above table, has been
determined in accordance with Rule 13d-3 under the 1934 Act. Unless
otherwise indicated, beneficial ownership includes both sole voting
and sole dispositive power.
2. Includes 3,947,368 shares owned of record by Rita Angel, his wife
for which Mr. Angel disclaims any beneficial interest.
3. These shares were issued to Class 4 in settlement of claims
against the estates of W. Group and FNW. The firm of Wolf Popper is
holding the shares on behalf of the class members. An agreement has
been reached with Wolf Popper whereby Joshua J. Angel or his assigns
will purchase these shares from Class 4 for $100,000. No specific
date has been set for the conclusion of this transaction.
4. Such group consists of the two persons listed in Item 5 below.
Ownership by Management
The following table sets forth, as of July 10, 1997, the
beneficial ownership of the
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Common Stock of the Company of (i) each director (including the Named
Executives) of the Company, and (ii) all directors and executive
officers of the Company as a group (based upon information furnished
by such persons). Under the rules of the Commission, a person is
deemed to be a beneficial owner of a security if he has or shares the
power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. Accordingly,
more than one person may be deemed to be a beneficial owner of the
same securities. A person is also deemed to be a beneficial owner of
any securities of which that person has the right to acquire
beneficial ownership within 60 days.
No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner (1) Owned (2) of Class
Joshua J. Angel(3) 4,278,525 48.0%
Spencer J. Angel 1,315,790 14.8%
All directors and executive
officers as a group (2 people)
- ------------------
(1) The business address, for purposes hereof, of all of the
Company's directors and executive officers is in care of the Company.
(2) Unless otherwise noted, the Company believes that all persons in
the table have sole voting and disposition power with respect to all
shares of Common Stock beneficially owned by them.
(3) Includes 3,947,368 shares owned of record by Rita Angel, his
wife for which Mr. Angel disclaims any beneficial interest.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following is a list (along with certain biographical
information) of the executive officers and directors of the Company.
All directors of the Company are serving a current term of office
which continues until the next annul meeting of stockholders, and all
officers are serving a current term of office which continues until
the next annual meeting of directors:
Year of
Election as
Name and Age Director Position
(As of 6/10/97)
Joshua J. Angel (61) 1994 Chairman of the Board and
Chief Executive Officer
Spencer J. Angel (31) 1996 President and Treasurer
Joshua J. Angel has been Chairman and Chief Executive Officer of the
Company since August 1994, and was principally responsible for its
successful reorganization. Mr. Angel has been a practicing attorney
for over 35 years, and enjoy's a national reputation as an expert in
corporate
14
<PAGE>
reorganizations. Currently Mr. Angel does not act as a Director of
any other public company. Mr. Angel is the father of Spencer J.
Angel.
Spencer J. Angel has been President and Treasurer of the Company
since October 16, 1996. Mr. Angel serves as Secretary, Treasurer
and Director of Autoparts Warehouse, Inc. From December 1994 through
August 1996 Mr. Angel was President of 5 East 41 Check Cashing Corp.
a company engaged in the payroll service business. Mr. Angel sold
his interest in this business in August 1996. From July 1994 to
December 1994 Mr. Angel was a consultant to Zion Financial Group,
Inc. a venture capital company. From November 1991 to July 1994 Mr.
Angel was an associate with Platzer, Fineberg & Swergold, a law firm
specializing in bankruptcy related matters. Mr. Angel graduated from
Hofstra Law School in June 1991.
Item 6. Executive Compensation.
Summary Compensation Table
The following table sets forth information for the fiscal years
ended June 30, 1995 and June 30, 1996, and for the nine months ended
March 31, 1997, representing compensation earned by the executive
officers of the Company.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Awards
--------------------- -----------------
Year Other
Name and Principal Ending Annual
Position 6/30/97 Salary Bonus Compensation Options
- ----------------------- ------- ------ ----- ------------- ------
<S> <C> <C> <C> <C> <C>
Joshua J. Angel 1995 $0.00 0 0 0
Chairman and Chief 1996 $0.00 0* 0 0
Executive Officer 1997 $0.00 0 0 0
Spencer J. Angel 1996 $52,000 0 0 0
President, Treasurer 1997 $52,000 0 0 0
</TABLE>
* In connection with his efforts to reorganize the Company, the
Confirmation Order of October 23, 1996 required the Company to issue
331,157 of its share to Mr. Angel. Pursuant to the Plan, Mr. Angel
received "Stock equal to 10% of the shares of [Stock] issued to
Classes 3, 4 and 6...", in consideration for the services rendered to
the Company without charge, during the chapter 11 period as well as
his agreement to act as Plan Funder.
Options, Annuities and Plans
The Company does not have any annuity, retirement, pension,
deferred or incentive compensation plans, stock option plans or
arrangements under which any executive officer is entitled to
benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation
are paid.
15
<PAGE>
Compensation of Directors
The Company does not compensate its directors for their
services. The Company, however, may institute some procedure in the
future by which their directors may receive a nominal compensation
for their services.
Employment Arrangements
The Company has not entered into and does not intend to enter
into any employment agreements in the near future.
Item 7. Certain Relationships and Related Transactions.
Mr. Joshua J. Angel, Chief Executive Officer of the Company, is
the father of Spencer J. Angel, President and Treasurer of the
Company. No agreement has been entered into between Mr. Joshua Angel
and Mr. Spencer Angel with respect to the voting of the Common Stock
beneficially owned by either party.
Item 8. Description of Securities.
General
The summary of the terms of the Common Stock set forth below
contains all the material terms of the Common Stock, including those
contained in the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and the By-Laws of the Company
(the "By-Laws"), however, such summary does not purport to be
complete and is subject to and qualified in its entirety by reference
to the Certificate of Incorporation and the By-Laws.
The Certificate of Incorporation provides that the Company may
issue up to 30,000,000 shares of Common Stock with a $.01 par value
per share. There are no options, warrants or other derivative
securities which are currently issued or otherwise outstanding .
All Common Stock issued and outstanding is duly authorized,
fully paid and nonassessable. Holders of Common Stock are entitled
to receive dividends if, and when authorized and declared by the
Board of Directors of the Company out of assets legally available
therefore and to share ratably in the assets of the Company legally
available for distribution to its stockholders in the event of its
liquidation, dissolution or winding up after payment of, or adequate
provisions for, all known debts and liabilities of the Company.
Each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of shareholders,
including the election of directors. There is no cumulative voting
in the election of directors, which means that the holders of a
majority of the outstanding shares of Common Stock, or less if a duly
convened stockholder meeting is held, can elect all of
16
<PAGE>
the directors then standing for election.
Holders of Common Stock have no conversion, sinking fund,
redemption, or preferential rights to subscribe for any securities of
the Company.
Shares of Common Stock have equal dividend, distribution,
liquidation and other rights, and have no preference, exchange or,
except as expressly required by New York law, appraisal rights.
Pursuant to New York law, a corporation generally cannot
dissolve, amend its certificate of incorporation or merge, unless
approved by the affirmative vote of stockholders holding at least a
majority of the shares entitled to vote on the matter unless a
greater percentage is set forth in the corporation's articles of
incorporation. The Certificate Of Incorporation does not provide for
a greater percentage in such situation.
Effect of Reorganization on the Common Stock
Pursuant to the Plan, any interest represented by any of the
equity securities issued by Wolf Group prior to the Filing Date were
canceled and new shares of common stock in the reorganized Company
were to be issued.
The Common Stock being issued under the Plan will be fully paid
and non-assessable. Holders of Common Stock are entitled to receive
dividends if, when and as declared by the Company's Board of
Directors, out of funds legally available therefore, subject to any
superior rights of holders of the Company's preferred stock. Upon
liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in assets available for
distribution, subject to any superior rights.
Holders of Common Stock are entitled to one vote per share with
respect to all matters submitted to a vote of the stockholders. The
Certificate of Incorporation and bylaws contain no restriction on the
repurchase or redemption of the Common Stock. Holders of Common
Stock have no preemptive rights.
Changes in Control
As further set forth hereinabove in Item 1 the Plan provided for
the reservation or issuance of shares of Common Stock as follows: (i)
1,605,784 shares of Common Stock to the Class 3 general unsecured
creditors ("Class 3"); (ii) 1,605,784 shares of Common Stock to the
Class 4 securities law claimants ("Class 4"); 100,000 shares to the
Class 6 indemnity claim holders; and (iii) 5,594,315 shares to
certain investors.
As provided by the Plan, each member of Classes 3, 4 and 6 are
entitled to receive as of the Effective Date of the Plan such claim
holders' pro. rata portion of the shares of Common
17
<PAGE>
Stock to be issued in satisfaction of their Class' Claims. As of the
date of this Registration Statement a majority of the shares listed
above have been issued.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters.
As of July 10, 1997, there were approximately 120 holders of
record of the Company's Common Stock with 8,905,883 shares of Common
Stock outstanding. Additionally, the Company has determine that as
at July 10, 1997 no beneficial owner's Common Stock is being held in
"street" name.
The common stock of the W. Group, which traded previously on
the NASDAQ Stock Market until February 24, 1994 is not currently
traded on any national securities exchange. W. Group's shares,
however, continued to trade during the bankruptcy reorganization
through the pink sheets.
Bid Price Bid Price
Quarter Ended High Low
June 30, 1994 $.56 $.07
September 30, 1994 $.15 $.01
December 31, 1994 $.01 $.005
March 31, 1995 $.02 $.005
June 30, 1995 $.03 $.02
September 30, 1995 $.02 $.02
December 31, 1995 $.02 $.005
March 31, 1996 $.005 $.001
June 30, 1996 $.001 $.001
September 30, 1996 $.001 $.001
December 31, 1996 $.001 $.001
March 31, 1997 $.001 $.001
Pursuant to the Plan W. Group's shares were canceled and the new
shares of Harter Financial were issued to creditors and the Plan
Funder. Harter's shares do not currently trade on any national
securities exchange or on any over the counter market.
Dividends
The Company has paid no cash dividend since its inception and it
is unlikely that any cash dividend will be paid in the future. The
declaration in the future of any cash or stock dividend will be at
the discretion of the Board of Directors depending upon the earnings,
capital
18
<PAGE>
requirements and financial position of the Company, general economic
conditions and other pertinent factors. The Company has never made,
nor adopted any policies with respect to, in-kind distributions, and
has no present intention of adopting any such policies or of making
any such distributions.
Item 2. Legal Proceedings.
In connection with its activities as a broker-dealer, the
Company was a defendant (along with the Company's previous president)
in various civil actions and a administrative proceeding brought by
the SEC alleging violations of various sections of the anti-fraud
provisions of the federal securities laws. Additionally the Company
and certain of its previous officers were the subject of NASD
proceedings alleging violations of certain Exchange Act rules and
NASD rules which resulted in an adverse ruling against the Company
and certain of the Company's previous officers. The Company appealed
the ruling and as a result of a consent decree no longer operates as
a broker-dealer.
The Bureau of securities for the State of New Jersey (the
"Bureau") filed an administrative complaint against the Company and
certain of its officers alleging violations of certain provisions of
New Jersey securities laws. Pursuant to a settlement with the
Bureau, the registration of the Company as a broker-dealer in the
State of New Jersey was revoked and the State of New Jersey was paid
a monetary penalty of $5,000.
The Company was a defendant in multiple class action lawsuits
alleging among other things violations of various sections of the
anti-fraud provisions of the federal securities laws. Claims under
the class action lawsuits aggregated in excess of $100 million.
The Company was also a party to a number of other litigations,
arbitrations, investigations and inquiries which arose in the
ordinary course of business.
As a result of the various legal proceedings pending against W.
Group and its wholly owned subsidiary FNW filed a voluntary petition
for reorganization under Chapter 11 of Title 11 of the United States
Code was filed on August 24, 1994. A Second Amended Joint Plan of
Reorganization, dated July 2, 1996, was confirmed by order of the
United States Bankruptcy Court for the Southern District of New York
and entered on October 23, 1996.
Pursuant to the Plan, FNW was dissolved and its assets were
absorbed into the reorganized W. Group. The Effective Date of the
Plan, pursuant to the Confirmation Order, was January 16, 1997.
An Order of the United States Bankruptcy Court for the Southern
District of New York was entered on November 6, 1996, modifying the
Confirmation Order solely with respect to the name of the reorganized
W. Group. Pursuant to the November Order the name of the
reorganized W. Group was changed to Harter Financial, Inc., a New
York Corporation. The New
19
<PAGE>
York State Banking Department approved the name change on April 11,
1997.
As of the date of this filing there were no legal proceedings to
which the Company or its subsidiary is a party or of which any of
their property is subject.
Item 3. Changes in and Disagreements With Accountants.
Prior to the filing of W. Group's petition for reorganization
under Chapter 11 of Title 11 of the United States Code Ernst & Young,
LLP. ("Ernst & Young") was engaged as the principal accountant to
audit W. Group's financial statement. The last audit that Ernst &
Young performed for W. Group was for the fiscal year ending June
1993.
As of the filing date, August 24, 1994, Ernst & Young was a
creditor of the W. Group estate. Ernst & Young has not performed any
audits for W. Group subsequent to audit for the fiscal year ending
June 1993.
In connection with the audits of the W. Group's financial
statements for each of the two fiscal years ended June 30, 1993, and
in the subsequent interim period through December 31, 1993, there
were no disagreements with Ernst & Young on any matters of accounting
principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of
Ernst & Young would have caused Ernst & Young to make reference to
the matter in their report. From the period of December 31, 1993
until January 31, 1997 Ernst & Young did not perform any work for W.
Group. There were no disagreements with Ernst & Young, during the
December 31, 1993 to January 31, 1997 period, on any matters of
accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the
satisfaction of Ernst & Young would have caused Ernst & Young to make
reference to the matter in their report.
Ernst & Young has provided a letter addressed to the Commission
stating that it agrees with the statements contained in proceeding
paragraph.
Pursuant to an Order of the Bankruptcy Court for the Southern
District of New York, entered June 27, 1995, W. Group was authorized
to employ and appoint the firm of Richard A. Eisner & Company, LLP as
their auditors. Richard A. Eisner & Company, LLP has agreed to
continue to perform the audit for the reorganized Harter Financial
and has agreed to stand for re-election for the audit of the fiscal
year ending June 1997.
Item 4. Recent Sales of Unregistered Securities.
In the past three years the Company has not sold any securities
which were not registered under the Securities Act.
20
<PAGE>
Item 5. Indemnification of Directors and Officers.
For time periods after the Filing Date, the Company's By-Laws
include a provision that obligates the Company to indemnify to the
fullest extent not prohibited by law any person who was or is party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), by reason of the
fact that such person is or was a director, officer or employee of
the company or a constituent corporation absorbed in a consolidation
or merger, or is or was serving at the request of the company or a
constituent corporation absorbed in a consolidation or a merger, as
a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or is or was a director or
officer of the company serving at its request as an administrator,
trustee or other fiduciary of one or more of the employee benefit
plans of the company or other enterprise, against expenses (including
attorneys' fees), liability and loss actually and reasonably incurred
or suffered by such person in connection with such Proceeding,
whether or not the indemnified liability arises from any threatened,
pending or completed Proceeding by or in the right of the company,
except to the extent that (i) such person is not otherwise
indemnified and (ii) such indemnification is not prohibited by
applicable law.
(INTENTIONALLY LEFT BLANK)
21
<PAGE>
PART F/S
Financial Statements and Supplementary Data
See Financial Statements of the Registrant Commencing on Page F-
1 herein.
Financial Statements and Exhibits
Harter Financial, Inc.
Report on Audit of Financial Statements
for the Years Ended June 30, 1995 and June 30, 1996
And for the Nine Months Ended March 31, 1997
Table of Contents
PAGE
Report of Independent Accountants F-1
Financial Statements:
Consolidated Balance Sheets as at
June 30, 1996 and March 31, 1997 F-2
Consolidated Statement of Operations
For the Years Ended June 30, 1996
And June 30, 1995, for the Periods Ended
October 22, 1996 and March 31, 1997 and
For the Nine Months Ended March 31, 1996 F-3
Consolidated Statement of Stockholder's
Equity (Capital Deficiency) for the Years
Ended June 30, 1996 and June 30, 1995
and March 31, 1997 F-4
Consolidated Statement of Cash Flows
For the Years Ended June 30, 1996,
And June 30, 1995, for the Periods Ended
October 22, 1996 and March 31, 1997 and
For the Nine Months Ended March 31, 1996 F-5
Notes to Financial Statements F-7
22
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibits Page
2 Plan of Reorganization dated July 2, 1996,
as confirmed by the Bankruptcy Court. *
3(i) Articles of Incorporation of Harter Financial,
Inc., as amended. *
3(ii) Bylaws of Harter Financial, Inc. *
16 Letter to Ernst & Young, LLP. in accordance with
Regulation S-K, Item 304(a)(3) dated January 31,
1997 and letter from Ernst & Young, LLP. dated
June 3, 1997 regarding change in certifying
accountant. *
99 Order authorizing the retention of Richard
A. Eisner & Co., LLP. as auditors dated
June 27, 1995. *
99 Form of specimen certificate for Harter
Financial, Inc.'s common stock, $0.01 par value. *
* Previously filed with the Securities and Exchange Commission as an Exhibit.
23
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
HARTER FINANCIAL, INC.
(Registrant)
By: /s/ Spencer J. Angel
-------------------------------
Dated : August 13, 1997 Spencer J. Angel
Its: President and Treasurer
24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Harter Financial, Inc.
New Vernon, NJ
We have audited the accompanying consolidated balance sheets of Harter
Financial, Inc. (formerly Wolf Financial Group, Inc.) and subsidiaries as at
June 30, 1996 and the related consolidated statements of operations, capital
deficiency and cash flows for each of the years ended June 30, 1996 and
June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the consolidated financial position of Harter
Financial, Inc. and subsidiaries at June 30, 1996, and the consolidated results
of their operations and their consolidated cash flows for each of the years
ended June 30, 1996 and June 30, 1995 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Harter Financial, Inc. will continue as a going concern; such
consolidated financial statements are not significantly different than would
have resulted from applying liquidation basis accounting. As discussed in Note
A to the consolidated financial statements, Harter Financial, Inc. and one of
its subsidiaries filed voluntary petitions seeking reorganization under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code") on August 24,
1994. In October 1996, the Company's plan of reorganization was confirmed.
The Company's continuation as a going concern is contingent upon its ability to
attain profitable operations.
New York, New York
January 2, 1997
With respect to subscription receivable,
May 19, 1997
F-1
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
A S S E T S 1996 1997
___________ __________ __________
(Unaudited)
<S> <C> <C>
Cash and cash equivalents (Note C[5]) $ 2,326,708 $1,064,760
Receivable from clearing brokers 5,122
Securities owned, at market value (Note C[3]) 18,512 883,281
Securities not readily marketable, at
estimated fair value (Note C[3]):
Equity securities 401,575 200
Debt securities 237,500 400,000
Furniture, fixtures, equipment and
leasehold improvements at cost (less
accumulated depreciation and
amortization of $852,363 in 1996 and
$100,750 in 1997) (Notes C[4] and D) 60,628 3,674
Subscription receivable (collected
May 19, 1997) 300,000
Other assets 30,841 78,928
____________ ___________
T O T A L $ 3,080,886 $2,730,843
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
(CAPITAL DEFICIENCY)
Current liabilities:
Post-petition liabilities:
Accounts payable and accrued expenses $ 219,507 $1,971,231
Deferred revenue 8,656
____________ ___________
Total current liabilities 228,163 1,971,231
Pre-petition liabilities (Notes C[1] and E):
Not subject to compromise 2,395
Subject to compromise 15,190,681
____________
15,193,076
____________ ___________
Total liabilities 15,421,239 1,971,231
____________ ___________
Commitments and contingencies
(Notes B and J)
Stockholder's equity (capital deficiency)
(Notes A, B and I):
Common stock - $0.01 par value;
authorized 15,000,000 shares, 6,738,300
shares issued and outstanding at 6/30 1996
and 8,905,883 at 3/31 1997 67,383 89,059
Additional paid-in capital 7,079,899 1,209,633
Accumulated deficit (19,487,635) (539,080)
____________ ___________
Total stockholder's equity (capital
deficiency) (12,340,353) 759,612
____________ ___________
T O T A L $ 3,080,886 $2,730,843
============ ===========
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-2
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
October
July 1, 23, Nine
1996 1996 Months
Year Ended June 30, to to Ended
_____________________ October 22 March 31, March 31,
1996 1995 1996 1997 1996
_________ __________ __________ __________ _________
Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Interest income $ 76,246 $ 2,083 $ 8,375 $ 27,616 $ 28,016
Continuing operating
expenses (685,777) (643,097) (220,889) (396,265) (516,713)
Realized and
unrealized gain (loss)
on marketable
and not readily
marketable
securities 556,816 (170,431)
Reorganization items
- - expenses (Note F) (298,266) (701,196) (246,908) (241,731)
---------- ---------- ---------- --------- ---------
Income (loss) before
discontinued
operations and
extraordinary item (907,797) (1,342,210) 97,394 (539,080) (730,428)
Income (loss)
from discontinued
operations
(Note G) 62,702 2,376,146 (42,460) 62,509
_________ __________ __________ _________ _________
Income (loss) before
extraordinary item (845,095) 1,033,936 54,934 (539,080) (667,919)
Extraordinary item:
Forgiveness of
debt 13,066,541
__________ __________ ___________ __________ _________
NET INCOME (LOSS) $(845,095) $1,033,936 $13,121,475 $(539,080) $(667,919)
========== ========== =========== ========== ==========
NET LOSS PER COMMON
SHARE (Note C[8]) $(.06)
======
Weighted average
number of common
shares outstanding 8,905,883
==========
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-3
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
Common Stock
Par Value $0.01
---------------------
Number
of Shares Retained
Issued Additional Earnings
and Paid-in (Accumulated
Outstanding Amount Capital Deficit) Total
----------- ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at July
1, 1994 6,738,300 $ 67,383 $ 7,079,899 $(19,676,476) $(12,529,194)
Net income for
the year ended
June 30, 1995 1,033,936 1,033,936
_________ ________ _________ ____________ ____________
Balance at June
30, 1995 6,738,300 67,383 7,079,899 (18,642,540) (11,495,258)
Net (loss) for
the year ended
June 30, 1996 (845,095) (845,095)
_________ ________ __________ ____________ ____________
Balance at June
30, 1996 6,738,30 67,383 7,079,899 (19,487,635) (12,340,353)
Net income for
the period July
1, 1996 to
October 22, 1996
(unaudited) 13,121,475 13,121,475
Chapter 11 Reor-
ganization can-
cellation of old
stock (including
sale of 5,263,158
shares of common
stock to plan
funder for sub-
scription
receivable of
$300,000) (6,738,300) (67,383) (6,298,777) 6,366,160 - 0 -
Issuance of stock
in Chapter 11
Reorganization 8,905,883 89,059 428,511 517,570
_________ _______ _________ ____________ ____________
Balance at
October 22, 1996
(unaudited) 8,905,883 89,059 1,209,633 - 0 - 1,298,692
Net (loss) for
the period
October 23, 1996
to March 31,
(Unaudited) (539,080) (539,080)
_________ ________ _________ ____________ ____________
BALANCE -
MARCH 31, 1997
(Unaudited) 8,905,883 $ 89,059 $ 1,209,633 $ (539,080) $ 759,612
========== ======== =========== ============ ============
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-4
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
October
July 1, 23, Nine
1996 1996 Months
Year Ended June 30, to to Ended
_____________________ October 22 March 31, March 31,
1996 1995 1996 1997 1996
_________ __________ __________ __________ _________
Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Cash flows from
operating
activities:
Net (loss) income $ (845,095) $1,247,936 $13,121,475 $ (539,080) $ (667,919)
Adjustments to
reconcile net
(loss) income
to net cash
provided by
(used in)
operating
activities:
Depreciation
and
amortization 44,287 10,006 4,285 33,216
Deferred interest
income (39,719)
Forgiveness of
debt (13,066,541)
Changes in operating
assets and liabilities:
Due to/from
clearing
brokers (net) 2,151,199 (710,411) 5,122 2,156,321
Securities not
readily market-
able, at
estimated fair
value (353,000) 266,800 401,375 425,765 198,399
Securities owned,
at market value
(net) 552,331 495,470 (1,290,534)
Income taxes
receivable/payable
(net) 243,645
Other assets (3,170) 122,947 (41,212) (6,875) 2,457
Securities sold,
but not yet
purchased (net) (153,709)
Accounts payable
and accrued
expenses:
Pre-petition (6,731) 555,913
Post-petition 66,239 150,318 116,949 (282,846) 21,583
__________ __________ ___________ __________ __________
Net cash provided
by (used in)
continuing
operations 1,566,341 2,218,909 (743,360) (398,751) 1,744,057
Net cash (used in)
provided by
discontinued
operations (1,482,746) 42,663
__________ __________ ___________ _________ __________
Net cash
provided by
(used in)
operating
activities 1,566,341 736,163 (700,697) (398,751) 1,744,057
__________ __________ ___________ _________ __________
Cash flows from investing activities:
Decrease (increase)
in investments in
debt securities 12,500 (250,000) (12,500) (150,000) 12,500
Additions to fixed
assets (1,617)
Proceeds from sale
of fixed assets
due to Chapter 11
proceedings 80,000
__________ ________ ___________ _________ __________
Net cash provided
by (used in)
investing
activities 12,500 (171,617) (12,500) (150,000) 12,500
__________ _________ ___________ _________ __________
F-5
<PAGE>
NET INCREASE
(DECREASE) IN
CASH AND CASH
EQUIVALENTS 1,578,841 564,546 (713,197) (548,751) 1,756,557
Cash and cash
equivalents at
beginning of
period 747,867 183,321 2,326,708 1,613,511 747,867
__________ _________ ___________ __________ __________
CASH AND CASH
EQUIVALENTS AT END
OF PERIOD $2,326,708 $747,867 $1,613,511 $1,064,760 $2,504,424
========== ========= ========== ========== ==========
Supplemental disclosures
of cash flow
information:
Cash paid during
the period for:
Interest $ 3,543 $ 2,650
Income taxes $ 12,914 $ 12,810
Details of operat-
ing cash receipts
and payments
resulting from
reorganization:
Interest received
on cash accumu-
lated because of
the Chapter 11
proceedings 140,562 46,265 29,782 114,776
Professional fees
paid for services
rendered in
connection with
the Chapter 11
proceedings 251,927 107,566 251,927
See Note B for
discussion of plan of
reorganization and
forgiveness of debt
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-6
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE A) - Basis of Presentation:
Wolf Financial Group, Inc. ("WFG") and its wholly owned subsidiary,
F.N. Wolf & Co., Inc. ("FNW"), filed voluntary petitions seeking reorganization
under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code")
on August 24, 1994. Prior to the filing, FNW discontinued its operations
(effective June 30, 1994) as a registered broker and dealer in securities under
the Securities Exchange Act of 1934. WFG's other wholly owned subsidiary,
Planner's Insurance Agency, Inc. ("Planner's"), has limited activities.
Prior to the filing date, three outside directors were elected as a
majority of the board of WFG.
Pending confirmation of the Company's plan of reorganization, the
Company carried out limited business activities, including issuing bridge
loans to certain unrelated third parties. On October 23, 1996, the Bank-
ruptcy Court confirmed the amended joint plan of reorganization (the "Plan")
dated July 2, 1996 (see Note B). Under the amended joint plan of reorganiza-
tion, the focus of the business will be that of a quasi investment banker,
merchant banker and financial consultant to small and medium sized companies
seeking nonpublic bridge financings. The Company also intends to seek oppor-
tunities to acquire other operating companies. In accordance with Statement
of Position No. 90-7 ("SOP 90-7") of the American Institute of Certified Public
Accountants, WFG is required to account for the reorganization using fresh-
start reporting (see Note B). Accordingly, all financial statements for any
period prior to October 22, 1996, are periods prior to the implementation of
fresh-start reporting, and are not comparable to the financial statements for
periods after the implementation of fresh-start reporting. On November 6,
1996 by order of the United States Bankruptcy Court the Company changed its
name to Harter Financial, Inc. The Company's ability to continue as a going
concern is contingent upon its ability to attain profitable operations.
(NOTE B) - Joint Amended Plan of Reorganization:
On October 23, 1996 The Bankruptcy Court confirmed the Plan which
(continued)
F-7
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
provided for the following:
- Class 1 consists of secured claims of which there are none.
(NOTE B) - Joint Amended Plan of Reorganization: (continued)
- Class 2 consists of priority wage and tax claims. Class 2 creditors
holding claims of approximately $225,446 will be paid in full.
- Class 3 consists of all general unsecured claims, other than insider
claims, indemnity claims and securities claims. Class 3 creditors
holding claims of approximately $1,605,784 will receive one share of
common stock in the reorganized entity (the "New Stock") for each $1 in
claim. Accordingly, Class 3 creditors were issued 1,605,784 shares of
New Stock. As of the confirmation date, the value of each share of New
Stock was estimated in the Plan at approximately $.06.
- Class 4 consists of securities claims against the Company. Class 4
claims approximated $100 million (see Note I). Class 4 creditors will
receive cash of $500,000, the guaranteed minimum cash payment under the
Plan, and New Stock equal to the number of shares of New Stock issued
to holders of Class 3 claims (1,605,784 shares of New Stock).
- Class 5 consists of claims of the Securities and Exchange Commission
(the "SEC"). The SEC had a number of actions pending against the
Company asserting an aggregate liability of approximately $13 million,
for which the SEC received an allowed Class 5 claim of $8,814,235 (see
Note I). The SEC received cash of $1 million in settlement of its
claim.
- Class 6 claims consist of all insider and indemnity claims. Class 6
claims amounted to approximately $448,995. These claims will share pro
rata the distribution of 100,000 shares of New Stock.
In addition to the above claims the Company has agreed to pay, $200,000 to
the Internal Revenue Service in settlement of a disputed
(continued)
F-8
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
priority tax claim of up to $3,464,268 and approximately $2,395 was paid for
undisputed priority tax claims.
(continued)
F-9
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE B) - Joint Amended Plan of Reorganization: (continued)
The Plan also provided that on the effective date of the Plan, certain
individuals (the "Plan Funder") would purchase an aggregate of 5,263,158 shares
of New Stock for $300,000 ($.057 per share) and for the Company to issue
331,157 shares of New Stock (valued at $18,876), (to Joshua Angel) which
equaled 10% of the number of shares issued to the holders of Class 3, Class 4
and Class 6 claims in consideration for services rendered to the Company during
the Chapter 11 proceedings.
(continued)
F-10
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
(Unaudited as at March 31, 1997 and for the nine months
ended March 31, 1997 and March 31, 1996)
(NOTE B) - Joint Amended Plan of Reorganization: (continued)
WFG and subsidiaries accounted for the reorganization using fresh start
reporting. Accordingly, all assets and liabilities are restated to reflect their
reorganization value at the date of reorganization. The following table
("Plan of Reorganization Recovery Analysis") summarizes the adjustments
required to record the reorganization and the issuance of the various
securities in connection with the implementation of the Plan.
<TABLE>
<CAPTION>
Recovery
___________________________________________________________
Elimination Additional
of Debt Surviving Paid-in Common Stock Total Recovery
and Equity Debt Cash Capital % Value $ %
___________ _________ _________ __________ _____ ______ _______ ___
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Post-petition
liabilities $ 345,112 $326,236 8.7% $ 18,876 $ 345,112 100%
Claim/interest:
A/P & accrued
miscellaneous
not subj. to
comp. 2,395 2,395 2,395 100
Class 2 225,446 $ 225,446 225,446 100
Class 3 1,605,784 $(1,509,437) 44.3 96,347 96,347 6
Class 4 596,347 500,000 44.3 96,347 596,347 100
Class 5 8,814,235 (7,814,235) 1,000,000 1,000,000 11
Class 6 448,995 (442,995) 2.7 6,000 6,000 1
IRS Claim 3,464,268 (3,264,268) 200,000 200,000 6
Trade and other
miscellaneous
claims 35,606 (35,606) - 0 -
15,193,076
___________
Additional
paid-in
capital 7,079,899 (6,298,777) $781,122 781,122
Common
stockholder 67,383 (67,383) - 0 -
Deficit (19,432,701) 19,432,701 - 0 -
____________ ___________ ________ __________ ________ ______ ________ __________
Total $ 3,252,769 $ - 0 - $328,631 $1,925,448 $781,122 100.0% $217,570 $3,252,769
============ =========== ======== ========== ======== ====== ======== ==========
F-11
</TABLE>
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE C) - Summary of Significant Accounting Policies:
[1] Liabilities subject to compromise:
Liabilities subject to compromise includes obligations such as
various litigation claims notes payable, due to clearing brokers and trade
payables which were outstanding on the bankruptcy filing date and are subject
to compromise under the terms of the joint plan.
[2] Securities transactions:
Securities transactions and related revenues were recorded in the
financial statements on a settlement-date basis; however, all transactions were
reviewed and adjusted to a trade-date basis for significant changes.
[3] Security valuation:
Marketable securities owned by FNW are carried at market value, with
related changes in unrealized appreciation or depreciation reflected in net
income (loss)(continuing or discontinued operations as appropriate).
Securities not readily marketable held by FNW are carried at fair
value, as determined by management in good faith, with related changes in
unrealized appreciation or depreciation reflected in continuing net income
(loss).
[4] Furniture, fixtures, equipment and leasehold improvements:
Furniture, fixtures and equipment are recorded at cost and are
generally depreciated over a five to seven-year period using the straight-line
method. Leasehold improvements are amortized over the lesser of the economic
useful life of the improvement or the terms of the respective lease, using the
straight-line method.
[5] Cash and cash equivalents:
For purposes of the statements of cash flows and balance sheet, the
Company considers all highly liquid debt instruments with
F-12
(continued)
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
a maturity of three months or less when acquired that are not carried as
proprietary inventory to be cash equivalents.
(continued)
F-13
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE C) - Summary of Significant Accounting Policies: (continued)
[5] Cash and cash equivalents: (continued)
The Company maintains cash accounts in a bank insured by the Federal
Deposit Insurance Corporation (FDIC). The FDIC maximum insurable limit of cash
deposits is $100,000 per account. At June 30, 1996, the Company had cash in
this bank in excess of the FDIC limit totaling approximately $2,115,000.
[6] Principles of consolidation:
The consolidated financial statements include the accounts of Wolf
Financial Group and its wholly owned subsidiaries, F.N. Wolf & Co., Inc. and
Planner's Insurance Agency, Inc. All significant intercompany transactions and
accounts have been eliminated.
[7] Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
[8] Loss per share:
Loss per share for the period from October 23, 1996 to March 31,
1997 is computed based on the number of shares of common issued in connection
with the plan of reorganization, including the number of shares sold to the
plan funder.
Earnings (loss) per share data for the periods prior to October 22,
1996 is not presented as such financial statements were for periods prior to
the implementation of fresh-start reporting and are not comparable to
subsequent financial statements.
F-14
(continued)
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE C) - Summary of Significant Accounting Policies: (continued)
[9] Unaudited interim financial statements:
In the opinion of management, the unaudited financial statements as
of March 31, 1997 and for the periods from July 1, 1996 to October 22, 1996 and
October 23, 1996 to March 31, 1997 and for the nine months ended March 31, 1996
are presented on a basis consistent with the audited financial statements and
reflect all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results thereof. The results of
operations for interim periods are not indicative of the results to be expected
for the entire year.
(NOTE D) - Furniture, Fixtures, Equipment and Leasehold Improvements:
Fixed assets consists of the following:
<TABLE>
<CAPTION>
June 30, March 31
1996 1997
-------- --------
<S> <C> <C>
Furniture and fixtures $ 837,044 $ 28,477
Automobile 75,947 75,947
--------- ----------
912,991 104,424
Less accumulated
depreciation and
amortization (852,363) (100,750)
---------- ----------
$ 60,628 $ 3,674
========== ==========
</TABLE>
(continued)
F-15
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE E) - Pre-Petition Liabilities:
Pre-petition liabilities (unsecured) consists of the following:
<TABLE>
<CAPTION>
June 30, 1996
__________________________
<S> <C> <C>
Not subject to compromise:
Priority tax claims $ 2,395
Subject to compromise:
Notes payable:
Note payable - Therapeutic Patch
Research N.V. [1] $ 1,000,000
Note payable - Anker Bank [2] 250,000
Other accounts payable and accrued
expenses (a) 13,940,681 15,190,681
___________ ___________
$15,193,076
===========
</TABLE>
(a) Pre-petition liabilities include an aggregate of $9,410,582
representing a class action securities litigation in excess of
$100,000,000 (recorded at the settlement amount of $596,347) and
an allowed claim of $8,814,235 related to certain SEC litiga-
tion which was ultimately settled for $1,000,000 (see Note I).
[1] Note payable - Therapeutic Patch Research N.V.:
The note payable, dated May 3, 1994, maturing on May 31, 1995 was
issued to Therapeutic Patch Research N.V. in the principal amount of $1,000,000
in exchange for 200,000 shares of Pharma Patch PLC. The note had a 10%
interest rate and was issued with 5-year warrants to acquire 1,000,000 shares
of WFG common stock at an exercise price of $.25 per share. The warrants were
estimated to have a minimal value. WFG defaulted on the note. Under the
bankruptcy proceeding, the warrants were cancelled and the note payable was
considered unsecured and was classified as a Class 3 liability which was
subject to compromise (see Note B).
(continued)
F-16
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE E) - Pre-Petition Liabilities: (continued)
[2] Note payable - Anker Bank:
The note payable, dated May 25, 1994, issued to Anker Bank in the
amount of $250,000, bearing interest at 10% was convertible into WFG common
stock at a rate of $1.00 principal amount for each share up to the maturity of
the note on May 31, 1996. In addition, WFG issued a warrant to Anker Bank to
purchase 250,000 shares of WFG common stock at an exercise price of $.25 per
share expiring on May 31, 1999. The warrants were estimated to have a minimal
value. Pursuant to the Plan, the warrants were cancelled. Anker Bank did not
file a claim under the plan of reorganization and thus is deemed to be barred
from filing a claim by operation of law.
(NOTE F) - Reorganization Items:
Reorganization items consist of expenses and other costs directly related
to the reorganization of the debtors since the Chapter 11 filing.
Reorganization items incurred are included in the consolidated statement of
operations and are summarized as follows:
<TABLE>
<CAPTION>
July 1, Nine
1996 Months
to Ended
October 22, March 31,
1996 1995 1996 1996
_________ ________ ________ _________
<S> <C> <C> <C> <C>
Legal notices $ 104,635 $ 21,731 $145,998 $ 95,080
Bankruptcy fees 11,000 7,750 4,250 9,500
Professional fees 323,193 712,980 126,442 251,927
Legal settlements 5,000
Interest (income) (140,562) (46,265) (29,782) (114,776)
_________ _________ _________ _________
$298,266 $701,196 $246,908 $241,731
========= ========= ========= =========
F-17
(continued)
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE G) - Discontinued Operations:
The Company has been involved in various civil and regulatory litigation in
connection with its brokerage operations. On June 30, 1994, the Company
determined to discontinue all operations in consideration of the litigation
discussed in Note I. In connection with the decision to discontinue the
operation, the Company recorded a charge of $12,538,854 consisting of a
provision for estimated losses on disposal of assets and a provision for
estimated losses through the expected time of discontinuance including
$8,814,235, as a Securities and Exchange Commission allowed claim; $3,464,268,
as an Internal Revenue Service tax claim, as discussed in Note B, and a
settlement amount of $500,000 and 1,605,784 shares of new stock valued at
$96,347 for various class action claims involving multiple creditors seeking
damages in excess of $100,000,000.
Results from discontinued operations are as follows:
</TABLE>
<TABLE>
<CAPTION>
July 1, Nine
1996 Months
Year Ended June 30, to Ended
___________________ October 22, March 31,
1996 1995 1996 1996
_________ ________ ________ _________
<S> <C> <C> <C> <C>
Revenues:
Commissions $34,118 $ 154,681 $ 203 $ 33,698
Trading and investment gains 4,115 2,240,215 3,314
Other 24,469 25,497
------- ---------- --------- --------
62,702 2,394,896 203 62,509
Expenses (interest) 18,750
------- ---------- --------- --------
Income before loss on disposal 62,702 2,376,146 203 62,509
Provision for loss on disposal
(no income tax benefit) (42,663)
------- ---------- --------- --------
Income (loss) from discontinued
operations $62,702 $2,376,146 $(42,460) $ 62,509
======= ========== ========= ========
</TABLE>
(continued)
F-18
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE H) - Income Taxes:
At June 30, 1996, the Company has accumulated substantial operating loss
carryforwards for federal income tax purposes. Such operating losses will be
reduced in the confirmation process. Based on the equity structure of
reorganized WFG, it is unlikely that the Company will be able to use such
carryforwards, if any, and a valuation allowance in the entire amount has been
provided.
(NOTE I) - Litigation and Regulatory Matters:
[1] Regulatory matters:
In connection with its discontinued activities as a broker-dealer,
the Company was a defendant (along with the Company's then president) in
various civil actions and an administrative proceeding brought by the SEC
alleging violations of various sections of the anti-fraud provisions of the
federal securities laws. Pursuant to the Plan, the SEC received $1 million on
account of its allowed Class 5 claim in the amount of $8,814,235.
Prior to the filing, the Company and certain of its officers were the
subject of NASD proceedings alleging violations of certain Exchange Act rules
and NASD rules which resulted in an adverse ruling against the Company and
certain of the officers. The Company appealed the NASD ruling. The Company no
longer operates as a broker-dealer.
The Bureau of Securities for the State of New Jersey (the "Bureau")
filed an administrative complaint against the Company and certain of its
officers alleging violations of certain provisions of New Jersey securities
laws. Pursuant to a settlement with the Bureau, the registration of the
Company as a broker-dealer in the State of New Jersey was revoked and the State
of New Jersey was paid a monetary penalty of $5,000.
(continued)
F-19
<PAGE>
HARTER FINANCIAL, INC. AND SUBSIDIARIES
(formerly Wolf Financial Group, Inc.)
(debtors-in-possession)
(Unaudited as at March 31, 1997 and for the periods from
July 1, 1996 to October 22, 1996 and October 23, 1996 to
March 31, 1997 and for the nine months ended
March 31, 1996)
(NOTE I) - Litigation and Regulatory Matters: (continued)
[2] Class action litigation:
The Company was a defendant in a class action lawsuit entitled In re
Hibbard Brown & Co. Securities Litigation, alleging among other things,
violations of various sections of the anti-fraud provisions of the federal
securities laws. The Company was also a defendant in a related class action
lawsuit captioned Jerry W. Kopp, Joe Basile and Norman C. Miller, individually
and on behalf of all other persons similarly situated v. F.N. Wolf & Company,
Inc., Wolf Financial Group, Inc., Franklin N. Wolf, et al. Claims under the
class action lawsuits, (together, the "Securities Claims") aggregated in excess
of $100 million. Under the Plan, plaintiffs in the Securities Claims (Class 4
claims) are to receive $500,000 (the guaranteed minimum under the Plan) and
1,605,784 shares of common stock, valued at $96,347, in the reorganized
company.
The Company was also a party to a number of other litigations,
arbitrations, investigations and inquiries which arose in the ordinary course
of business. Under the Plan, such matters may not be continued.
(NOTE J) - Lease Commitment:
The Company is obligated under an operating lease for its administrative
office premises expiring on August 31, 1997 at a monthly rental of $3,400.
F-20
