U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended: September 30, 1998
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-730
PENN-PACIFIC CORPORATION
(Name of small business issuer in its charter)
Delaware 95-3227748
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3539 Ocean View Blvd., Glendale, CA 91208
(Address of principal executive offices)(Zip code)
Issuer's telephone number (818) 957-1414
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock Par Value $.10
(Title of Class)
1
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing required for the past 90 days. Yes No X
Total pages: 12
Exhibit Index Page: 11
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: None
To the best knowledge and belief of management there has been no trading,
therefore the aggregate market value is not known.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
None
Transitional Small Business Disclosure Format (check one): Yes NO X
2
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business........................................ 4
Item 2. Description of Property........................................ 4
Item 3. Legal Proceedings.............................................. 4
Item 4. Submission of Matters to a Vote of Security Holders............ 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters....... 5
Item 6. Management's Discussion and Analysis or Plan of Operations..... 6
Item 7. Financial Statements........................................... 8
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 8
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.............. 8
Item 10. Executive Compensation......................................... 9
Item 11. Security Ownership of Certain Beneficial Owners and Management. 9
Item 12. Certain Relationships and Related Transactions................. 10
Item 13. Exhibits and Reports on form 8-K............................... 11
3
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PART I
ITEM I DESCRIPTION OF BUSINESS
General
The Company intends to acquire interests in various business opportunities,
which in the opinion of management will provide a profit to the Company.
History
The Company was incorporated under the laws of the state of Delaware on May
18, 1971. From 1979 to 1991 the primary business of Penn Pacific and its
subsidiaries was the acquisition, exploration, development, production and
operation of oil and gas properties. Penn Pacific has been inactive since 1991.
The Company filed a voluntary petition of reorganization under Chapter 11 of the
United States Bankruptcy Code on January 27, 1994. On January 13, 1997, the
Company emerged from bankruptcy pursuant to a final decree of the United States
Bankruptcy Court for the Northern District of Oklahoma. The Company is in the
development stage since January 13, 1997 and has not commenced planned principal
operations.
ITEM 2 DESCRIPTION OF PROPERTY
The Company at this time has no properties. As of September 30, 1998 and
1997 all activities of the Company have been conducted by corporate officers
from either their homes or business offices. Currently, there are no outstanding
debts owed by the company for the use of these facilities and there are no
commitments for future use of the facilities.
ITEM 3 LEGAL PROCEEDINGS
The Company is not presently involved in any legal proceedings.
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ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No Matters were submitted to a vote of security holders during the last
quarter of the fiscal year ended September 31, 1998
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The stock is traded on the Internet with the trading symbol "PENNC". The
following high and low bid information was provided by NIPHIX Investments Inc.
The quotations provided reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
1998 HIGH BID LOW BID
(To the best knowledge of
management, there was no
trading of shares for fiscal
1998 and 1997.)
The number of shareholders of record of the Company's common stock as of
May 14, 1999 was approximately 6607.
The Company has not paid any cash dividends to date and does not anticipate
paying dividends in the foreseeable future. It is the present intention of
management to utilize all available funds for the development of the Company's
business.
Recent Sales of Unregistered Securities.
The Company over the past three years has sold 3,750,000 shares of common
stock. The stock was not sold through an underwriter and was not sold through a
public offer. A summary of the transactions follows:
5
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Common Stock
------------------------
Shares Amount
---------- ----------
November 11, 1995 shares issued
to an officer/director for services at
$0.10 per share $ 200,000 $ 20,000
October 1, 1996 shares issued
to officers/directors for services at
$0.10 per share 2,850,000 285,000
December 19, 1996 shares issued
to officers/directors for promissory notes at
$0.10 per share 500,000 50,000
April 17, 1997 shares issued
to officers/directors for cash at
$0.01 per share 200,000 2,000
Total $3,750,000 $ 357,000
These sales are exempt under Regulation D Rule 506 of the Securities Act of
1933.
ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
Plan of Operations
The planned operations of the company during the next twelve months
are as follows:
The Company intends to seek an acquisition of a larger and potentially more
profitable business. The Company intends to focus on opportunities to acquire
new products or technologies in development as well as those currently planned,
including a complete operating business that has demonstrated long-term growth
potential, strong marketing presence, and the basis for continuing
profitability. The Company has not identified any specific target or possible
acquisition. As the Company pursues its acquisition program, it will incur costs
for ongoing general and administrative expenses as well as for identifying,
investigating, and negotiating a possible acquisition.
Results of Operations - The Company filed a voluntary petition of reorganization
under Chapter 11 of the United States Bankruptcy Code on January 27, 1994. On
January 13, 1997, the Company emerged from bankruptcy pursuant to a final decree
of the United States Bankruptcy Court for the Northern District of Oklahoma. The
Company is in the development stage since January 13, 1997 and has not commenced
planned principal operations.
Liquidity and Capital Resources - The Company requires working capital
principally to fund its current operating expenses for which the Company has
relied on short-term borrowings and the issuance of restricted common stock.
There are no formal commitments from banks or other lending
6
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sources for lines of credit or similar short-term borrowings, but the Company
has been able to borrow any additional working capital that has been required.
From time to time in the past, required short-term borrowings have been obtained
from a principal shareholder or other related entities.
Cash flows. Operating activities used cash of $7,000 for 1997 to pay
Chapter 11 administrative fees. Financing activities provided cash of $7,000 for
1997 from the sale of the Company's restricted stock and issuance of notes
payable to stockholders..
In order to complete any acquisition, the Company may be required to
supplement its available cash and other liquid assets with proceeds from
borrowings, the sale of additional securities, including the private placement
of restricted stock and/or a public offering, or other sources. There can be no
assurance that any such required additional funding will be available or
favorable to the Company.
Because management controls 47.68 % of voting rights, management may
actively negotiate or otherwise consent to the purchase of any portion of their
common stock as a condition to or in connection with a proposed merger or
acquisition. Furthermore, management could consent or approve any particular
stock buy-out transaction without shareholder approval. In the event that an
appropriate merger candidate is located, the Company may need to pay cash
finder's fees or may issue securities (debt or equity) as a finders's fee.
Finder's fees or other acquisition related compensation may be paid to officers,
directors, promoters or their affiliates. Any such finder's fee paid to an
officer, director, promoter, or affiliate may present a conflict of interest
because of the non-arms length nature of such transaction. There are no such
negotiations in progress or contemplated.
There are no arrangements or understandings between non-management
shareholders and management under which non-management shareholders may directly
or indirectly participate in or influence the management of the Company's
affairs.
The Company may be required to supplement its available cash and other
liquid assets with proceeds from borrowing, the sale of additional securities,
or other sources. There can be no assurance that any such required additional
funding will be available or, if available, that it can be obtained on terms
favorable to the Company.
Year 2000 Compliance
The Company has made an effort to insure that the software components of
its information and billing systems are Year 2000 compliant. Management has
confirmed that all of such systems are Year 2000 compliant. Upon such
confirmation, management believes that, after January 1, 2000, the Company will
be able to accurately track and bill for its services and products. At the same
time, it is likely that the operations of a number of the Company's vendors rely
on software that is not Year 2000 compliant.
7
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ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are included
beginning immediately following the signature page to this report. See Item 13
for a list of the financial statements and financial statement schedules
included.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company and
its accountants on any matter of accounting principles, practices or financial
statements disclosure.
PART III
ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT
Directors and Executive Officers.
Director's Name Age Office Term of Office
James O'Brien 61 President and CEO/Director February 23, 1998
Rose Fischer 45 Secretary/Treasurer/Director February 23, 1998
Robert Dresser 70 Director January 1, 1999
Business Experience
James O'Brien, CEO/President, founded Optimum Source International Ltd., during
the past five years Mr. O'Brien developed software, established trade and
countertrade exchanges for Optimum Source International, Ltd.
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Rose Fischer, Secretary/Treasurer/Director, with an associate degree in
accounting, has been Director and Operations Facilitator for Optimum Source
International, Ltd. ("OSI") for the past two years, which includes finalization
and implementation of all electronic commerce. Prior to OSI, Ms. Fischer's
experience was as a financial consultant with a privately held firm since 1985.
Robert Dresser, Director, a former newspaper executive, Mr. Dresser's tenure of
the past 32 plus years directing the Stockbrokers Society int the leading
organization that assists public corporations enhancing their visibility in the
financial and investment community.
Compliance With Reporting Requirements.
Based upon a review of Forms 3, 4, and 5 furnished to the Company during or
with respect to the preceding fiscal year and written representations from
certain reporting persons, the Company is not aware of any failure by any
reporting person to make timely filings of those forms as required by Section
16(a) of the Securities Exchange Act of 1934.
ITEM 10 EXECUTIVE COMPENSATION
There has been no executive compensation.
ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of record
or who was known by the Company to own beneficially more than 5% of the
18,939,054 shares of issued and outstanding Common Stock, including options to
acquire stock of the Company as of May 28, 1998 and information as to the
ownership of the Company's Stock by each of its directors and executive officers
and by the directors and executive officers as a group. Except as otherwise
indicated, all shares are owned directly, and the persons named in the table
have sole voting and investment power with respect to shares shown as
beneficially owned by them.
9
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# of
Name and Address Nature of Shares
of Beneficial Owners Ownership Owned Percent
Directors
Principal Shareholders
John Allison Common 71,500 7.51
Alpha Beta LLC Common 90,945 9.56
Celex-Nevada Common 97,750 10.27
Wayne H. Creasy Common 66,063 6.94
Edwin K. Hiseroot Common 45,250 4.75
George White Common 70,500 7.41
------- -----
Total 442,008 46.44
Directors and Executive Officers
James O'Brien Common 11,860 1.247
All Executive Officers and
Directors as a Group (3
persons) Direct 679,514 47.68%
Options None None %
Total 679,514 47.68%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 various officers and directors loaned the Company $5,000. The
notes are payable on demand plus interest. During 1998 the note holders agreed
to accept 10,000 pre split shares of common stock in exchange for the debt. The
balance due as of September 30, 1998 is $-0-.
As of September 30, 1998 and 1997 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
10
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ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements Page
Report of Robison, Hill & Co., Independent Certified Public Accountants.....F-1
Balance Sheets
September 30, 1998, and 1997...............................................F-2
Statements of Operations
For the Years Ended September 30, 1998, and 1997..........................F-3
Statements of Changes in Stockholders' Equity
For the Years Ended September 30, 1998, and 1997..........................F-4
Statements of Cash Flows
For the Years Ended September 30, 1998, and 1997..........................F-5
Notes to Financial Statements
September 30, 1998 and 1997................................................F-6
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Title of Document
3.01 Articles of Incorporation and Bylaws of the registrant(1)
3.02 Amendments to Article IV and IX of the Articles of Incorporation of the
Registrant, as filed with the Delaware Secretary of State on October 5,
1988(1)
4 Instruments defining the rights of security holders (Certificate of
Designation of Preferences of Series C preferred Stock), as filed with the
Delaware Secretary of State on October 5, 1988(1)
Other
23.01 Consent of Accountants(1)
(1) Incorporated by Reference
(b) No reports on Form 8-K were filed.
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
PENN-PACIFIC CORPORATION
Dated: May 21, 1999 By /S/ James O'Brien
---------------------------------------
James O'Brien
President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 21st day of May 1999.
Signatures Title
/S/ James O'Brien
James O'Brien President, C.E.O., Director
(Principal Executive, Financial
and Accounting Officer)
/S/ Rose Fischer
Rose Fischer Secretary, Treasurer and Director
/S/ Robert Dresser
Robert Dresser Director
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INDEPENDENT AUDITOR'S REPORT
Board of Directors
Penn Pacific Corporation
Glendale, California
Board Members:
We have audited the accompanying balance sheets of Penn Pacific Corporation
(a development Stage Company), as of September 30, 1998 and 1997, and the
related statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. 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 referred to above present fairly,
in all material respects, the financial position of Penn Pacific Corporation (a
development Stage Company), as of December 31, 1998 and 1997 and the results of
its operations, and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Respectfully submitted,
\s\ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
May 14, 1999
F - 1
<PAGE>
<TABLE>
<CAPTION>
PENN PACIFIC CORPORATION
(A Development Stage Company)
BALANCE SHEETS
September 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS ............................................. $ -- $ --
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable ................................. $ 11,523 $ --
Accrued expenses ................................. 11,757 9,036
Notes payable - stockholders ..................... -- 5,000
------------ ------------
Total Liabilities ........................ 23,280 14,036
------------ ------------
Stockholders' Equity
Preferred stock (par value $1.00), 50,000,000 shares
authorized, no shares issued at September 30, 1998
and 1997 ......................................... -- --
Common stock to be issued .......................... 8,154 4,967
Common stock (par value $.10), 100,000,000 shares
authorized, 951,082 shares issued and outstanding
September 30, 1998 and 1997 ...................... 95,108 95,108
Capital in excess of par value ..................... 35,686,105 35,683,105
Retained deficit ................................... (35,735,361) (35,735,361)
Deficit accumulated during development stage ....... (77,286) (61,855)
------------ ------------
Total Stockholders' Equity ............... (23,280) (14,036)
------------ ------------
Total Liabilities and Stockholders' Equity $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 2
<PAGE>
<TABLE>
<CAPTION>
PENN PACIFIC CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
Cumulative
Since
For the Year Ended Inception of
September 30, Development
--------------------------
1998 1997 Stage
----------- ----------- -----------
<S> <C> <C> <C>
Revenues ..................................... $ -- $ -- $ --
----------- ----------- -----------
Expenses
Selling, general and administrative expenses 14,020 3,669 17,689
----------- ----------- -----------
Operating Loss ............................... (14,020) (3,669) (17,689)
Other income (expense):
Interest expense .......................... 1,411 50,000 51,411
Reorganization items:
Administrative fees ....................... -- 8,186 8,186
----------- ----------- -----------
Loss before taxes ............................ (15,431) (61,855) (77,286)
Income taxes ................................. -- -- --
----------- ----------- -----------
Net Loss .............................. $ (15,431) $ (61,855) $ (77,286)
=========== =========== ===========
Per Share Amounts
Net Income (Loss) ............................ $ (0.01) $ (0.06)
=========== ===========
Weighted Average Shares Outstanding .......... 1,032,619 1,000,759
</TABLE>
The accompanying nots are an integral part of these financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
PENN PACIFIC CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Common Stock Accumulated
Preferred To be Issued Common Excess of Accumulated During
Stock Shares Amount Shares Amount Par value Deficit Stage
--------- --------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance October 1, 1996 as
originally reported .......... -- 3,263,128 $ 326,313 15,389,053 $ 1,538,905 $ 33,807,923 $(35,735,361) $ --
Retroactive adjustment for 1
for 20 reverse stock split
February 23, 1998 ............ -- (3,099,970) (309,997) (14,615,471) (1,461,547) 1,893,182 -- --
-- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Restated Balance October 1,
1996 ......................... -- 163,158 16,316 773,582 77,358 35,701,105 (35,735,361) --
Issuance of stock ............ -- (142,500) (14,250) 142,500 14,250 -- -- --
Issuance of stock for cash ... -- -- -- 35,000 3,500 (18,000) -- --
Stock to be issued in exchange
for debt (bankruptcy claims) . -- 29,019 2,901 -- -- -- -- --
Net Loss ..................... -- -- -- -- -- -- -- (61,855)
-- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Balance September 30, 1997 ... -- 49,677 4,967 951,082 95,108 35,683,105 (35,735,361) (61,855)
Stock to be issued in exchange
for debt ..................... -- 31,860 3,187 3,000
Net Loss ..................... -- -- -- -- -- -- -- (15,431)
-- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Balance September 30, 1998 ... -- 81,537 $ 8,154 951,082 $ 95,108 $ 35,686,105 $(35,735,361) $ (77,286)
== ========== ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 4
<PAGE>
<TABLE>
<CAPTION>
PENN PACIFIC CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative
Since
For the Year Ended Inception of
September 30, Development
----------------------
1998 1997 Stage
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Cash paid to suppliers and employees ........... $ -- $ -- $ --
--------- --------- ---------
Net cash used by operating activities before
reorganization items ..................... -- -- --
--------- --------- ---------
Reorganization Items:
Chapter 11 administrative fees ............... -- (7,000) (7,000)
--------- --------- ---------
Net cash used in operating activities ...... -- (7,000) (7,000)
--------- --------- ---------
Cash Flows from Investing Activities: ............ -- -- --
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from common stock ..................... -- 2,000 2,000
Issuance of notes payable-stockholders ......... -- 5,000 5,000
--------- --------- ---------
Net cash provided by financing activities .. -- 7,000 7,000
--------- --------- ---------
Net change in cash and cash equivalents .......... -- -- --
Cash and cash equivalents at beginning of year ... -- -- --
--------- --------- ---------
Cash and cash equivalents at end of year ......... $ -- $ -- $ --
========= ========= =========
Reconciliation of Net Loss to Net Cash
Used in Operating Activities:
Net loss ......................................... $ (15,431) $ (61,855) $ (77,286)
Adjustments used to reconcile net loss to Net
cash used in operating activities:
Common stock issued for expenses ................. 6,187 108,039 114,226
Increase in accounts payable ..................... 11,523 -- 11,523
Increase accrued expenses ........................ 2,721 4,854 7,575
Decrease in notes payable - stockholders ......... (5,000) -- (5,000)
Decrease in liabilities not subject to
compromise:
Administrative fees .......................... -- (52,181) (52,181)
Decrease in liabilities subject to compromise:
Priority claims .............................. -- (4,277) (4,277)
Unsecured non-priority claims ................ -- (1,580) (1,580)
--------- --------- ---------
Net cash used in operating activities ............ $ -- $ (7,000) $ (7,000)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 5
<PAGE>
PENN PACIFIC CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies for Penn Pacific Corporation is
presented to assist in understanding the Company' financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the state of Delaware on May
18, 1971. From 1979 to 1991 the primary business of Penn Pacific and its
subsidiaries was the acquisition, exploration, development, production and
operation of oil and gas properties. Penn Pacific has been inactive since 1991.
The Company filed a voluntary petition of reorganization under Chapter 11 of the
United States Bankruptcy Code on January 27, 1994. On January 13, 1997, the
Company emerged from bankruptcy pursuant to a final decree of the United States
Bankruptcy Court for the Northern District of Oklahoma. The Company is in the
development stage since January 13, 1997 and has not commenced planned principal
operations.
Nature of Business
The Company intends to acquire interests in various business opportunities,
which in the opinion of management will provide a profit to the Company.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with maturity of three months or less to be
cash equivalents to the extent the funds are not being held for investment
purposes.
Net Loss per Common Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary and
fully diluted EPS with basic and diluted EPS.
F - 6
<PAGE>
PENN PACIFIC CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (continued)
The effect of outstanding common stock equivalents are antidilutive for
1998 and 1997 and are thus not considered.
The reconciliations of the numerators and denominators of the basic EPS
computations are as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------- ----------------------------------
Number Loss Number Loss
of Per of Per
Loss Shares Share Loss Shares Share
(numerator) (denominator) (numerator) (denominator)
--------- ----------- -------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Loss to Common
Shareholders $ (15,431) 1,032,619 $ (0.01) $ (61,855) 1,000,759 $ (0.06)
========= =========== ======== ========= =========== ========
</TABLE>
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2 - INCOME TAXES
The Company has accumulated tax losses estimated at $16,000,000 expiring in
years 1999 through 2012. Current tax laws limit the amount of loss available to
be offset against future taxable income when a substantial change in ownership
occurs. The amount of net operating loss carryforward available to offset future
taxable income will be limited if there is a substantial change in ownership.
F - 7
<PAGE>
PENN PACIFIC CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(Continued)
NOTE 3 - DEVELOPMENT STAGE
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage.
NOTE 4 - COMMITMENTS
As of September 30, 1998 and 1997 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 5 - 1 FOR 20 STOCK SPLIT
On February 23, 1998 the Board of Directors approved a 1 for 20 reverse
stock split. The financial statements have been retroactively adjusted to
reflect the stock split as if it had happened effective on the earliest period
presented.
NOTE 6 - PETITION FOR RELIEF UNDER CHAPTER 11
On January 27, 1994, Penn Pacific Corporation (the Debtor) filed petitions
for relief under Chapter 11 of the federal bankruptcy laws in the United States
Federal Bankruptcy Court for the Northern District of Oklahoma. Under Chapter
11, certain claims against the Debtor in existence prior to the filing of the
petitions for relief under the federal bankruptcy laws are stayed while the
Debtor continues business operations as Debtor-in-possession. These claims are
reflected in the September 30, 1998 and 1997 balance sheets as "liabilities
subject to compromise." Additional claims (liabilities subject to compromise)
may arise subsequent to the filing date resulting from rejection of executory
contracts, including leases, and from the determination by the court (or agreed
to by parties in interest) of allowed claims for contingencies and other
disputed amounts. Claims secured against the Debtor's assets ("secured claims")
also are stayed, although the holders of such claims have the right to move the
court for relief from the stay. Secured claims are secured primarily by liens on
the Debtor's property, plant, and equipment. On January 13, 1997, the Company
emerged from bankruptcy pursuant to a final decree of the United States
Bankruptcy Court for the Northern District of Oklahoma.
F - 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF PENN-PACIFIC CORPORATION AS OF SEPTEMBER 30, 1998 AND THE
RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 23
<BONDS> 0
0
0
<COMMON> 95
<OTHER-SE> (118)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (15)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
