SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x/] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required] For the Fiscal Year Ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ______________ to ______________.
Commission File No. 33-55378-NY
TRIANGLE IMAGING GROUP, INC.
(Name of small business issuer in its charter)
Florida 59-2493183
(State or other jurisdiction of incorporation or organization)
(IRS Employer I.D. Number)
12 South Penataquit Avenue, Bay Shore, New York 11706
(Address of Principal Executive Offices) ( Zip Code)
Registrant's Telephone Number, Include Area Code: (516) 666-6890
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class of Each Exchange On Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 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 ninety (90) days.
Yes x No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ x/ ]
The issuer's revenues for its most recent fiscal year were $0.
As of June 30, 1996, 3,757,166 shares of common stock of the Registrant
were outstanding. As of such date, the aggregate market value of the common
stock held by non-affiliates, based on the lack of a trading market in such
securities, was approximately $0.
DOCUMENTS INCORPORATED BY REFERENCE
No annual reports to security holders, proxy or information statements, or
prospectuses filed pursuant to Rule 424(b) or (c) have been incorporated by
reference in this report.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Triangle Imaging Group, Inc. (the Company), formerly known as The Triangle
Group, Inc., formerly Benefit Performances of America, Inc. ("Benefit") was
incorporated under the laws of the State of Florida on December 12, 1984.
Benefit was formed for the purpose of the promotion of concerts, shows, musical
events and/or other entertainment productions in association with charities and
other fund raising charitable organizations.
In April of 1988, Benefit discontinued its prior operations and commenced
discussions with The Triangle Group, Inc. ("Old Triangle"). On August 18, 1988,
the parties agreed in principal to the terms pursuant to which benefit would
acquire Old Triangle subject to the satisfaction of a number of conditions. On
September 14, 1988, following approval by the shareholders of Old Triangle and
the tender of 100% of the outstanding shares of Old Triangle, the acquisition of
Old Triangle was consummated and the Company assumed the operations of Old
Triangle. On November 18, 1988, Benefit amended its Articles of Incorporation
changing its name from Benefit Performances of America, Inc. to The Triangle
Group, Inc.
From 1988 until 1992, the Company, through Old Triangle and various
operating subsidiaries, provided data processing consulting and software
development services. During 1992, the Company abandoned the operations of each
of its operating subsidiaries and management of the remaining public shell set
out to identify attractive businesses with which to merge or to acquire.
Subsequent to 1993, management of the Company agreed to step down and to
convert the majority of the shares held by such persons to a new management
group. Since 1992, the Company's operations have been limited to the search for
potential merger or acquisition candidates.
During 1994 a new management group took over operations of the Company and
have been attempting to locate a suitable acquisition or merger candidate to
enhance shareholder value.
In March 1995, the Company was introduced to Mr. Lloyd Eisenhower,
President of Pegasus Technologies, Inc. Pegasus claimed to control a new
substantial imaging technology for the inspection of aircraft. This technology
was used by the U. S. Air Force and was being modified for commercial aircraft.
The technology has world wide implications for public safety. The Company
purchased this technology by issuing a controlling interest in the Company to
Pegasus and Mr. Eisenhower who ran the Company from April of 1995 through
September of 1995.
In April of 1995, the Company had a 1:10 reverse split of its shares.
In May of 1995, the Company changed its name from The Triangle Group, Inc.
to Triangle Imaging Group, Inc. to reflect its newly acquired technology.
During September of 1995, the Company was informed by outside sources that
Pegasus and Eisenhower did not, indeed, control this technology. The Company's
previous Board of Directors demanded that Eisenhower and Pegasus prove their
control or ownership of this imaging technology or the Board would demand a
recision of the entire agreement and cancel all of the shares issued.
<PAGE>
Eisenhower did not contest the recision and agreed to it in a prepared
document dated August 31, 1995.
The Board of Directors of the Company canceled all of the shares issued to
Eisenhower and to a stock promotion company hired by him, known as American
Public Companies, Inc. This cancellation totaled in excess of 12 million shares.
All of these shares have been returned to the Transfer Agent. Additionally,
another 3.4 million restricted shares were canceled by the Board of Directors of
the Company and accepted by the transfer agent after a letter was received by
the owners requesting that the shares be canceled.
Additionally, 500,000 shares of the Company's stock was issued to Lloyd
Eisenhower as agent for ECI Corporation. The Board of Directors has determined
that these shares had been issued without proper authorization for a previous
debt incurred by Pegasus Technologies and Eisenhower. The Board of Directors of
the Company canceled these shares, however, they appear to be lost and if an
affidavit of loss is not received from Eisenhower, legal action will be
instituted for the judicial cancellation of such shares. The loss affidavit,
however, is expected shortly.
PROPOSED BUSINESS OF COMPANY
GENERAL: The Company's current plan of operations is to seek and acquire
domestic and foreign business opportunities, and may participate in more than
one or two such business opportunities. The Company presently has several
merger/acquisition/joint venture/licensing candidates under consideration, but
until the consummation of such, the Company will continue to seek other business
opportunities.
The Company does not propose to limit its business opportunities to firms
which have achieved any predetermined stages of development. Accordingly, the
Company will also investigate firms which are developing companies and in need
of additional funds for expansion, development and/or marketing. The Company
also seeks businesses either experiencing financial or operating difficulties,
in need of limited capital or merely desirous of establishing a public trading
market for its common stock.
The Company does not propose to restrict its search for investment
opportunities to any industry, and may, therefore, engage in essentially any
business to the extent of its limited resources. This includes, among others,
industries such as service, natural resources, manufacturing, hi- technology,
product development, medical, insurance, communications, real estate, furniture
and the food industry.
Potential Acquisitions, Spin-Offs and Other Transactions: In order to
maximize value and profit potential for the Company's shareholders, pending the
consummation of a merger or acquisition, the Company may merge with, or acquire,
other attractive businesses seeking to create a public market in their
securities. The securities received by the Company in the merger of its
subsidiaries with such operating companies will be partially distributed to the
shareholders of the Company pursuant to a registration statement, with the
effect that a public market in the securities is created and the shareholders of
the Company receive shares in an operating company.the securities is created and
the shareholders of the Company receive shares in an operating company.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's executive offices consisted of 450 square feet located in Bay
Shore, New York. Such space was provided free of rent by Omnicap Corp., an
affiliated company, through March of 1994 and commencing April 1, 1994 was being
subleased from Omnicap on a month-to- month basis for $500 per month. The lease
expired on February 1, 1995 and both Omnicap and the Company moved to 12 South
Penataquit Avenue, Bay Shore, New York 11706. Omnicap is subleasing space and
sharing secretarial services with the Company at a rate of $1,000 per month.
Management believes that the Company's existing executive office space is
adequate to support operations for the foreseeable future, until an acquisition
or merger is consummated.
ITEM 3. LEGAL PROCEEDINGS
On December 13, 1988, Medical Literature Review, Inc. ("MLR") and two of
its officers commenced an action in the Supreme Court of New York, County of
Suffolk, against the Triangle Group, Inc. and certain former officers and
affiliates of the Company. This matter involves a claim by MLR and two it its
shareholders that Old Triangle breached a contract entered into in March 1987
between Old Triangle and MLR, which MLR interprets to have obligated Old
Triangle to assume payment of all of MLR's debts and to pay MLR $10,000 per
month for 36 months, in return for which MLR would be acquired by Old Triangle
as a wholly-owned subsidiary. The complaint and bill of particulars served by
the plaintiffs discloses that plaintiffs claim $2,000,000 in damages, including
approximately $791,000 in obligations that MLR defaulted on after Old Triangle
allegedly breached the agreement.
The Company's answer in this litigation includes denials of all material
allegations, defenses of the statute of frauds, ultra vires and termination of
the contract pleaded by plaintiffs by a second, later agreement, and
counterclaims against the plaintiffs alleging, inter alia, fraud, breach of
contract and prima facie tort. The Company seeks damages of $500,000 against
each plaintiff and cancellation of 29,081 shares of stock issued by the Company
to MLR. See "Management's Discussion and Analysis".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders through
the solicitation of proxies, or otherwise, during the fourth quarter of the
Company's fiscal year ended December 31, 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market.
The Company has never declared or paid any cash dividend on its Common
Stock and does not expect to declare or pay any such dividend in the foreseeable
future.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The operations of the Company have historically been conducted by its
various operating subsidiaries. Due to continuing losses from operations, the
Company discontinued the operations of all subsidiaries during 1992. The
Company's financial statements for 1994 and 1995 reflect only the operations of
Triangle Imaging Group, Inc. and not those of its various subsidiaries.
Results of Operations
The Company's operations during 1995 consisted of the Pegasus technology
transfer and its recision, and the addressing of a lawsuit with MLR that has
been outstanding since 1988. The lawsuit is currently ready for trial and it is
anticipated that the trial will begin in early July of 1996. Management is
confident of a favorable outcome if it goes to trial.
The Company had no operations and no operating revenues during 1995.
General operating expenses of the Company totaled $65,915 in 1995 as compared to
$39,821 in 1994. The Company reported non-cash imputed compensation expense
connected with common stock issued for services of $437,250 in 1995 as compared
to $0 in 1994. As a result, the Company reported a loss from operations of
$503,165 in 1995 as compared to $39,821 in 1994.
The Company does not anticipate realizing any significant revenues or
conducting any material operations unless and until the Company consummates an
acquisition or merger with an operating business at which time the Company's
operating results are expected to reflect those of the business acquired or
merged with. Until such time, the Company expects to incur certain ongoing
expenses in connection with its search for a suitable merger or acquisition
candidate.
Liquidity and Capital Resources
At December 31, 1995 the Company had cash assets and liabilities consisting
of certain accrued expenses and stockholder loans payable. The Company was also
subject to a contingency relating to its ongoing litigation with MLR. Such
contingency has been pending since 1988, however the Company believes that such
suit is without merit. If the Company were to be found liable in such suit, the
Company would incur a liability which it presently has no means of satisfying.
See "Legal Proceedings".
In addition to having minimal assets at December 31, 1995 which would be
inadequate to satisfy any potential judgement in favor of MLR, the Company had
minimal assets with which to fund any potential acquisitions. During 1995, new
management of the Company infused certain limited funds into the Company in
order to facilitate the search for an acquisition candidate and the payment of
certain professional fees and other expenses. While management of the Company
has provided operating capital during 1995, there is no obligation or guarantee
on their part to continue to fund operations and the search for an acquisition
candidate. Further, if the Company is successful in identifying an acquisition
candidate, it is likely that the Company will be required to spend significant
sums to consummate such an acquisition and/or provide additional capital for
such an acquired business. The Company presently has no known source for any
such financing should such become necessary.
<PAGE>
Impact of Inflation
Inflation has not been a major factor in the Company's business since
inception. There can be no assurances that this will continue if and when the
Company completes an acquisition or merger.
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Deficit in Assets F-5
Statement of Cash Flow F-6
Notes to Financial Statements F-7-9
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
Information Regarding Present Directors and Executive Officers
The following table sets forth certain information concerning the Company's
current directors and executive officers:
Name Age Position
Vito A. Bellezza 58 President, Chief Executive Officer,
Chairman and Director
Peter J. Bellezza 61 Director
Franz A. Fideli 73 Director
Officers and directors are elected on an annual basis. The present terms
for each director will expire at the next annual meeting of shareholders or at
such time as a successor is duly elected. Officers serve at the discretion of
the Board of Directors. Vito Bellezza and Peter Bellezza are brothers. Except
for the foregoing, there are no family relationships between any of the officers
or directors.
The following is a biographical summary of the business experience of the
directors and executive officers of the Company.
Vito A. Bellezza. Mr. Bellezza has served as President, Chief Executive
Officer and Chairman of the Company since 1994. Mr. Bellezza has served as
President of Omnicap Corp., a merchant banking firm, since June of 1993.
Additionally, since 1981, Mr. Bellezza has served as a President of
Wealthmasters, a financial planning firm, Mr. Bellezza has served as a licensed
sales executive for US Life Equity Sales from 1980 to 1995 and currently for
Redstone Securities, and since 1967, Mr. Bellezza has served as a sales
representative of New York Life Insurance Co.
Peter J. Bellezza. Mr. Bellezza has served as a Director of the Company
since 1994. Prior to joining the Company, Mr. Bellezza served as President of
Alpha Systems, Inc., a manufacturer and marketer of high vacun valves, from 1968
to 1992.
Franz A. Fideli. Mr. Fideli has served as a director of the Company since
1994. Mr. Fideli has served as President and owner of Fideli Associates
Consulting, a heating, ventilation and air conditioning firm, since 1985.
Compliance with Section 16(a) of the Exchange Act
Not applicable.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The Company has paid no compensation to its current Chief Executive Officer
during the preceding three years and has paid no compensation exceeding $100,000
to any of its current officers during the preceding three years.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following tables sets forth, as of May 31, 1996 the number of shares of
the Company's Common Stock beneficially owned, or as to which there was a right
to acquire beneficial ownership within 60 days, by each beneficial owner known
to own more than five percent of the Company's Common Stock, by each director,
each executive officer and all directors, nominees for director and all
executive officers, directors and nominees for director as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Title of Percent
Beneficial Owner eficial Ownership (1) Class or Series of Class
<S> <C> <C> <C>
Vito A. Bellezza 1,411,150 (2) Common 53.3%
12 S. Penataquit Avenue
Bay Shore, NY 11706
Peter J. Bellezza 27,500 1.0%
4250 N. A1A, Apt. 506
N. Hutchinson Island, FL 33449
Franz Fideli 37,500 1.4%
820 Bird Bay Way
Venice, FL 34292
</TABLE>
(1) Unless noted otherwise, all shares indicated as beneficially owned are
held of record by, and the right to vote and transfer such shares lies with the
person indicated.
(2) Includes 385,500 shares held of record by Omnicap Corp., a corporation
controlled by Mr. Vito Bellezza. Excludes 13,500 shares held by the adult
children of Vito Bellezza, with respect to which Mr. Bellezza disclaims any
beneficial interest. Includes the voting rights to 29,000 shares of former
directors held by Mr. Bellezza.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995, the Company issued an aggregate of 1,162,500 shares of Common
Stock to various officers and directors of the Company as an inducement for
their services and certain contributions to the Company. Such shares were
contributions to the Company. Such shares were issued as follows: Vito Bellezza
- - 830,000 shares for $35,983 in debt cancellation; Omnicap Corp., a company
controlled by Mr. Bellezza - 280,000 shares for $7,038 in debt cancellation;
Peter Bellezza - 25,000 shares for service on the Board of Directors; Franz
Fideli - 25,000 shares for service on the Board of Directors; and Thomas Secreto
- - 25,000 shares for service on the Board of Directors. In connection with the
acquisition of certain shares from prior management of the Company, Vito
Bellezza loaned $24,000 to the Company. Such loan is a non-interest bearing loan
and is repayable on demand. Of the $30,000, $15,000 was contributed and loaned
by Omnicap and Vito Bellezza has been designated for the payment of potential
payroll tax liability of the Company's subsidiaries and former management. In
connection with the resignation of Marc Oppenheimer as an officer and director,
40,000 shares owned by him were returned to the Company for cancellation.
<PAGE>
Additionally, the Company sublets its executive offices from Omnicap Corp.
Such space was provided free of charge through March of 1994. For the period of
April 1994 through September 1995, the Company sublet such space for $500 per
month on a month to month basis. Effective October 1, 1995, the Company sublet
space and secretarial services from Omnicap Corp. at a rate of $1,000 per month.
As of December 31, 1995, all rents with respect to the Company's executive
offices had been accrued but not paid.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
<S> <C> <C>
3.1 Articles of Incorporation, as amended............... *
3.2 Bylaws, as amended............................................ *
4.1 Specimen Common Stock Certificate - incorporated. *
* Incorporated by reference pursuant to Exchange Act Rule 12b-23.
</TABLE>
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TRIANGLE IMAGING GROUP, INC.
BY:
Vito A. Bellezza
President
Dated: June ___, 1996
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
President, Chairman of the Board June___, 1996
Vito A. Bellezza and Chief Executive Officer (Principal
Executive Officer)
Peter J. Bellezza Director June ___, 1996
Franz Fideli Director June ___, 1996
<PAGE>
TRIANGLE IMAGING GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
Page
Number
INDEPENDENT AUDITORS' REPORT..............................................F-2
BALANCE SHEET............................................................ F-3
STATEMENT OF OPERATIONS...................................................F-4
STATEMENT OF CHANGES IN DEFICIT IN ASSETS................................ F-5
STATEMENT OF CASH FLOWS...................................................F-6
NOTES TO FINANCIAL STATEMENTS.............................................F-7-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Triangle Imaging Group, Inc.
We have audited the balance sheet of Triangle Imaging Group, Inc. as of
December 31, 1995 and the related statements of operations, changes in deficit
in assets and cash flows for the years ended December 31, 1995 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Triangle Imaging Group, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the years ended December 31, 1995 and 1994 in conformity with generally
accepted accounting principles.
Feldman Radin & Co., P.C.
Certified Public Accountants
New York, New York
June 12, 1996
F-2
<PAGE>
TRIANGLE IMAGING GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
ASSETS:
Cash $ 1,371
===============
LIABILITIES AND DEFICIT IN ASSETS
CURRENT LIABILITIES:
Accrued expenses $ 32,211
Due to stockholders 15,000
---------------
47,211
CONTINGENCIES
DEFICIT IN ASSETS:
Preferred stock, no par,
authorized 1,000,000 shares: 100,000 shares
issued and outstanding 10,000
Common stock, $.0007 par value,
authorized 100,000,000 shares: 3,492,166 issued
and outstanding 2,445
Paid-in capital 1,481,774
Accumulated deficit (1,527,944)
Treasury stock - at cost (12,115)
-------------
TOTAL DEFICIT IN ASSETS (45,840)
-------------
1,371
=============
See notes to financial statements.
F-3
<PAGE>
TRIANGLE IMAGING GROUP, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1995 1994
---------------- ---------------
<S> <C> <C>
REVENUES $ - $ -
---------------- ---------------
EXPENSES:
Non-cash imputed compensation expense 437,250 -
Operating 65,915 39,821
---------------- ---------------
503,165 39,821
---------------- ---------------
NET LOSS $ (503,165) $ (39,821)
================ ===============
NET LOSS PER SHARE $ (0.26) $ (0.06)
================ ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 1,958,168 704,792
================ ===============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
TRIANGLE IMAGING GROUP, INC.
STATEMENT OF CHANGES IN DEFICIT IN ASSETS
DECEMBER 31, 1993 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Preferred Stock Common Stock Paid-In Accumulated Treasury Deficit
---------------------- ----------------------
Shares Amount Shares Amount Capital Deficit Stock In Assets
---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - December 31, 1993 - $ - 544,166 $ 381 $ 996,692 $ (984,958) $ (12,115) $ -
Shares sold - - 125,500 88 4,912 - - 5,000
Shares issued for services - - 62,500 44 1,831 - - 1,875
Shares forfeited and retired - - (40,000) (28) 28 - - -
Net loss - - - - - (39,821) - (39,821)
---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
BALANCE - December 31, 1994 - - 692,166 485 1,003,463 (1,024,779) (12,115) (32,946)
Shares sold 100,000 10,000 10,000
Shares issued for services - - 1,800,000 1,260 435,990 - - 437,250
Shares issued for cancellation of debt - - 1,000,000 700 42,321 - - 43,021
Net loss - - - - (503,165) - (503,165)
---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
BALANCE - December 31, 1995 100,000 $ 10,000 $3,492,166 $ 2,445 $1,481,774 $(1,527,944) $ (12,115) $ (45,840)
========== ========== ========== ========== ========== =========== ========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
TRIANGLE IMAGING GROUP, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (503,165) $ (39,821)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Shares issued for services 437,250 1,875
Changes in liabilities:
Increase in accrued expenses 14,965 17,246
------------- ------------
CASH USED BY OPERATING ACTIVITIES (50,950) (20,700)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares issued for cancellation of debt 43,021 -
Proceeds from sale of shares 10,000 5,000
Decrease in due to shareholder (700) 15,700
------------- ------------
CASH PROVIDED BY FINANCING ACTIVITIES 52,321 20,700
------------- ------------
NET INCREASE IN CASH 1,371 -
CASH - BEGINNING OF YEAR - -
CASH - END OF YEAR $ 1,371 $ -
------------- ------------
</TABLE>
See note to financial statements.
F-6
<PAGE>
TRIANGLE IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The operations of the Company have historically been conducted by its
various operating subsidiaries. Due to continuing losses from operations, the
Company discontinued the operations of all subsidiaries during 1992. The
Company's financial statements for 1995 and 1994 reflect only the operations of
Triangle Imaging Group, Inc., and not those of its subsidiaries.
b. Earnings Per Share
Earnings per share are computed on the basis of the weighted average number
of common shares and common stock equivalents outstanding during the respective
periods. Per share amounts give effect to all recapitalizations.
2. CONTINGENCIES
The Company is presently in litigation with Medical Literature Review (MLR)
and two of its shareholders. This matter involves a claim by MLR and two of its
shareholders that the Company breached a contract entered into in March 1987
between the Company and MLR, which MLR interprets to have obligated the Company
to assume payment of all of MLR's debts and to pay MLR $10,000 per month for 36
months, in return for which MLR would be acquired by the Company as a
wholly-owned subsidiary. The complaint and bill of particulars served by the
plaintiffs discloses that plaintiffs claim $2,000,000 in damages, including
approximately $791,000 in obligations that MLR defaulted on after the Company
allegedly breached the agreement. The Company's answer to this litigation
includes denials of all material allegations, defenses of the statute of frauds,
ultra vires and termination of the contract pleaded by plaintiffs by a second,
later agreement, and counterclaims against plaintiffs alleging, inter alia
fraud, breach of contract and prima facie tort. The Company seeks damages of
$500,000 against each plaintiff and cancellation of 29,080 shares of stock
issued by the Company to MLR.
The Company's legal counsel believes that, based on a review of all the
facts and final depositions of all parties involved, the plaintiffs will most
likely not meet their burden of proof to be victorious and that Triangle has a
more than likely chance of
F-7
<PAGE>
successfully prevailing in its defense and in winning its counterclaims.
The Company believes this suit is without merit and that the outcome of
this matter will not materially affect the Company's financial position.
3. INCOME TAXES
In 1992, the Company adopted the method of accounting for income taxes
pursuant to the Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" (SFAS 109). SFAS 109 requires the liability method of
computing income taxes and requires the recognition of deferred tax assets for
the expected future benefit to be derived for tax loss carryforwards. SFAS 109
also requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets.
As of December 31, 1995, the Company had total deferred tax assets of
$300,000, relating to tax loss carryforwards. At this time, the Company does not
believe it can reliably predict profitability beyond the current year.
Accordingly, the deferred tax asset has been reduced in its entirety by a
valuation allowance.
The following table presents a reconciliation of income tax (benefit)
computed at the statutory federal rates and the amount of income tax (benefit)
recorded on the financial statements:
1994 1995
------------ ------------
Tax (benefit) at statutory rate $(13,937) $ (176,108)
Permanent differences - 153,038
Tax benefit not recognized 13,937 23,070
$ - $ -
At December 31, 1995, the Company had net operating loss carryforwards for
tax purposes of approximately $1,100,000 which will expire in the years 2005
through 2008. These carryforwards are subject to limitations on annual
utilization because there are "equity structure shifts" or "owner shifts"
involving 5% stockholders (as these terms are defined in Section 382 of the
Internal Revenue Code), which have resulted in a more than 50% change in
ownership.
4. DUE TO STOCKHOLDERS
Amounts due to stockholders are non-interest bearing advances which are
repayable on demand.
F-8
<PAGE>
5. NON-CASH IMPUTED COMPENSATION EXPENSE
A total of 1,800,000 shares of common stock were issued for services during
the year ended December 31, 1995. Such shares have been valued at their
estimated fair market value on the date of issuance resulting in a non-cash
charge to income of $437,250.
6. RESCINDED ACQUISITION
The Company had entered into an agreement with Pegasus Technologies, Inc.
to acquire certain licenses related to aircraft inspection technology in
exchange for 90% of the Company's issued and outstanding common stock. The
Company subsequently learned that Pegasus did not own the rights to the
technologies, contrary to what it had claimed. Upon learning of this situation,
the Company exercised its rights and rescinded all aspects of this transaction.
7. REVERSE STOCK SPLIT
On April 7, 1995, the Company declared a one for ten reverse stock split.
All common share data has been restated to reflect this recapitalization.
8. NAME CHANGE
On April 13, 1995 the Company formerly known as The Triangle Group, Inc.
changed its name to Triangle Imaging Group, Inc.
9. WARRANTS
In May 1995, the Company issued a dividend in the form of common stock
warrants to each holder of common stock. An aggregate of 1,202,126 warrants were
issued and each warrant is convertible into one share of common stock at a price
of $5 expiring on August 1, 1996.
10. PREFERRED STOCK
During September 1995 the Company sold for $10,000, 100,000 shares of Class
A, no par value, convertible preferred stock to an individual who serves as its
Chairman and President. Each share is entitled to 50 votes and the holder of the
shares is entitled to elect a majority of the board of directors for a period of
three years. The shares do not pay any dividends and each share is convertible
into 10 shares of common stock.
F-9
<PAGE>
11. SHARES ISSUED TO CANCEL INDEBTEDNESS
In October 1995 the Company issued 1,000,000 shares of common stock to its
Chairman/President in exchange for the cancellation of indebtedness totaling
$43,021.
F-10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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