U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-QSB
------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-78910-C
------------
PACIFIC ALLIANCE CORPORATION
(Name of Small Business Issuer as specified in its charter)
Delaware 87-044584-9
---------- -------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
1661 Lakeview Circle, Ogden, UT 84403
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 399-3632
N/A
Former name, former address, and former fiscal year, if
changed since last report.
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes No X.
Common Stock outstanding at December 12, 1998 - 8,853,208 shares of $.001 par
value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
- ------------------------------------------------------------------------------
1
<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
PACIFIC ALLIANCE CORPORATION.
For the Quarter ended June 30, 1998
The following financial statements and schedules of the registrant are
submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-QSB
Item 1Financial Statements:
Balance Sheet--June 30, 1998 3
Statements of Operations--for the three and six months
ended June 30, 1998 and June 30, 1997 4
Statements of Cash Flows--for the six months
ended June 30, 1998 and June 30, 1997 5
Notes to Financial Statements 6
Item 2Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 15
Item 2. Changes in the Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Results of Votes of Security Holders 15
Item 5. Other Information 15
Item 6(a). Exhibits 15
Item 6(b). Reports on Form 8-K 15
2
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
June 30, 1999 December 31, 1997
----------------------------------------
CURRENT ASSETS
Cash $ -0- $ 180
Investments -0- 7,812
---------------------------------------
TOTAL CURRENT ASSETS -0- 7,992
---------------------------------------
TOTAL ASSETS $ -0- $ 7,992
=======================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Bank overdraft $ 126 $ -0-
Accrued expenses 13.813 11,610
Advances from officer, note 7 19,115 5,500
Current portion of tax liabilities,
note 2 34,235 49,915
Notes payable, note 4 30,000 -0-
-------------------------------------
TOTAL CURRENT LIABILITIES 97,289 67,025
------------------------------------
LONG TERM LIABILITIES
Tax liabilities, note 2 222,587 307,442
----------------------------------
TOTAL LIABILITIES 319,876 374,467
----------------------------------
COMMITMENTS & CONTINGENCIES, note 6
STOCKHOLDERS' DEFICIT
Common stock, par value $.001,
30,000,000 shares authorized,
8,853,208 shares issued and
outstanding, note 5 422,254 421,958
Additional paid in capital 2,028,909 1,948,047
Accumulated deficit prior to the
development stage (2,632,447) (2,632,447)
Accumulated deficit during the
development stage (138,592) (104,033)
----------------------------------
TOTAL STOCKHOLDERS' DEFICIT (319,876) (366,475)
----------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ -0- $ 7,992
=======================================
3
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
Quarter Six Months Quarter Six Months of the Development
Ended Ended Ended Ended Stage, December
June June June June 21, 1995, Through
30, 1998 30, 1998 30, 1997 30, 1997 June 30, 1998
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES $ -0- $ -0- $ -0- $ -0- $ -0-
GROSS MARGIN -0- -0- -0- -0- -0-
OPERATING EXPENSES -0- -0- -0- -0- -0-
OTHER EXPENSES
Professional fees (10,087) (18,688) -0- -0- (18,688)
Other expenses (520) (830) -0- -0- (830)
Interest expense (6,506) (16,045) -0- -0- (27,929)
Gain (loss) on investments -0- 1,004 -0- -0- (6,844)
---------------------------------------------------------------------------
LOSS BEFORE
REORGANIZATION ITEMS (17,113) (34,559) -0- -0- (54,291)
---------------------------------------------------------------------------
REORGANIZATION ITEMS
Administration and legal fees -0- -0- (3,956) (8,080) (84,301)
---------------------------------------------------------------------------
NET LOSS $ (17,113) $(34,559) $ (3,956) $ (8,080) $ (138,592)
============================================================================
BASIC LOSS PER SHARE
Loss before reorganization
items $ (.00) $ (.00) $ (.00) $ (.00)
Reorganization items (.00) (.00) (.00) (.00)
----------------------------------------------------
BASIC NET LOSS
PER SHARE $ (.00) $ (.00) $ (.00) $ (.00)
=====================================================
WEIGHTED AVERAGE NUMBER
OF SHARES 8,567,327 8,562,257 2,691,940 5,278,153
======================================================
</TABLE>
4
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception of
the Development
Six Months Six Months Stage, December
Ended Ended 21, 1995, Through
June 30, 1998 June 30, 1997 June 30, 1998
--------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (34,559) $ (8,080) $ (138,592)
Adjustment to reconcile net loss to net cash
used in operating activities:
(Gain) loss on investments (1,004) -0- 6,844
Change in assets and liabilities
Decrease in accounts receivable -0- 35,167 95,841
Increase in accrued expenses 3,283 -0- 14,893
Decrease in tax liabilities (20,457) -0- (43,797)
--------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (52,737) 27,087 (64,811)
--------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments -0- -0- (30,180)
Proceeds from sale of investments 8,816 -0- 23,336
--------------------------------------------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 8,816 -0- (6,844)
---------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft 126 -0- (2,460)
Proceeds from notes payable 30,000 -0- 30,000
Advance from officer 13,615 -0- 19,115
Proceeds from issuance of common stock -0- 25,000 25,000
--------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 43,741 25,000 71,655
--------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (180) 52,087 -0-
CASH AT BEGINNING OF PERIOD 180 123 -0-
----------------------------------------------------------------
CASH AT END OF PERIOD $ -0- $ 52,210 $ -0-
===================================================================
Supplementary disclosures:
Interest paid in cash $ 14,768 $ -0- $ 26,652
===============================================================
</TABLE>
5
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Going Concern
Pacific Alliance Corporation (the "Company") was formerly Pacific
Syndication, Inc. Pacific Syndication, Inc. was originally incorporated in
December 1991 under the laws of the State of Delaware. It also became a
California corporation in 1991. Pacific Syndication, Inc. was engaged in the
business of videotape duplication, standard conversion and delivery of
television programming. In 1994, Pacific Syndication, Inc. merged with Kaiser
Research, Inc.
The Company filed a petition for Chapter 11 under the Bankruptcy Code in
June 1995. The debtor in possession kept operating until December 21, 1995, when
all the assets, except cash and accounts receivable, were sold to a third party,
Starcom. The purchaser assumed all post-petition liabilities and all obligations
collateralized by the assets acquired (see note 6).
In 1997, a reorganization plan was approved by the Bankruptcy Court, and
the remaining creditors of all liabilities subject to compromise, excluding tax
claims, were issued 1,458,005 shares of the Company's common stock in March
1998, which corresponds to one share for every dollar of indebtedness. Each
share of common stock issued was also accompanied by an A warrant and a B
warrant (see note 5). The IRS portion of tax liabilities is payable in cash by
quarterly installments of $11,602 (see note 2). Repayment of other taxes is
still being negotiated.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the June 30, 1998
financial statements, the Company did not generate any revenue, and has a net
capital deficiency. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period of time.
For the quarter and six months ended June 30, 1998, the Company funded its
disbursements using loans from an officer and other shareholders.
The financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company is no longer operating, and will attempt to locate a new
business (operating company), and offer itself as a merger vehicle for a company
that may desire to go public through a merger rather than through its own public
stock offering.
Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to be
cash equivalents.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
6
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Statement of Financial Accounting Standards No. 128
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128 for the calculation of earnings per share. This SFAS was issued in
February 1997, and supercedes APB Opinion No. 15 previously applied by the
Company. SFAS No. 128 dictates the calculation of basic earnings (loss) per
share and diluted earnings (loss) per share. The Company's diluted loss per
share is the same as the basic loss per share for the quarters and six months
ended June 30, 1998 and 1997.
2. TAX LIABILITIES
The Company owes back taxes to the IRS, California EDD, California State
Board of Equalization and other agencies. The IRS portion of tax liabilities,
$145,988, bears interest at 9%, and is payable quarterly in payments of $11,602,
maturing in January 2002. During the six months ending June 30, 1998, the tax
liabilities were reduced by $80,078 due to the transfer of a personal tax refund
from a former officer of the Company (note 5). Other tax claim repayment
schedules have not yet been set.
Scheduled maturities of the IRS liability are as follows:
Twelve Months
Ending
June 30:
-------------------
1999 $ 34,235
2000 37,469
2001 41,007
2002 33,277
-------------
$ 145,988
=============
Interest paid during the quarter and six months ended June 30, 1998 on the
IRS liability totaled $5,942 and $14,768, respectively. Interest paid during the
quarter and six months ended June 30, 1997 totaled $0.
3. INCOME TAXES
The Company has loss carryforwards available to offset future taxable
income. The total loss carryforwards at June 30, 1998 are estimated at
approximately $35,000 and expire on December 31, 2013. Loss carryforwards are
limited in accordance with the rules of change in ownership. No deferred tax
benefit is recognized since future profits are indeterminable.
7
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
4. NOTES PAYABLE
During the six months ended June 1998, the Company contracted notes payable
with minority shareholders for a total of $30,000. These notes bear interest at
10% and mature between January through May 1999. Stock options were issued with
respect to these notes payable (see note 5).
5. COMMON STOCK AND WARRANTS
On May 28, 1997, a reorganization plan was approved by the Bankruptcy
Court. As a result, existing shares of the Company were reverse split 1-for-6
and pre-bankruptcy creditors were issued 1,458,005 shares of Company's common
stock. On November 13, 1997, an additional 5,000,000 shares of common stock were
issued (after reverse split) to an officer of the Company in return for proceeds
of $25,000 ($.005 per share).
In accordance with the reorganization plan, the pre-bankruptcy creditors
were also issued 1,458,005 class "A" warrants and 1,458,005 class "B" warrants.
A class "A" warrant allows the purchase of a share of common stock at an
exercise price of $2.50 per share, and the warrant must be exercised before June
8, 2000. A class "B" warrant allows the purchase of a share of common stock at
an exercise price of $5.00 per share, and the warrant must be exercised before
June 8, 2002.
In May and June 1998, the Company issued 16,000 and 200,000 shares of
common stock, respectively, for professional services received from non-related
individuals. These shares were valued at $0.005 per share.
Options to purchase 30,000 shares of common stock of the Company at the
price of $2.50 per share for a period of three years have been issued to bearers
of promissory notes (note 4) as follows:
Date of Issuance Number of Shares Expiration Date
---------------- ---------------- ---------------
January 27, 1998 10,000 January 27, 2001
January 30, 1998 5,00 January 30, 2001
May 1, 1998 10,000 May 1, 2001
May 5, 1998 5,00 May 1, 2001
In June 1998, the IRS applied a personal tax refund from a former officer
of the Company against the Company's tax liability, reducing it by $80,078. In
accordance with an agreement between the management and the former officer,
80,078 shares of common stock were issued to the former officer in exchange for
the loss of his personal tax refund.
8
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
6. COMMITMENTS & CONTINGENCIES
In1995, the Company filed a lawsuit against Donald Palmer alleging breach
of contract and other claims. The case was filed in Los Angeles County,
California. The Company sought damages in the approximate amount of $1,000,000.
The defendant filed a counter claim against the Company for breach of contract
and is seeking past due rent and other damages. As of December 31, 1997, past
due rent claimed by the defendant was approximately $150,000. The defendant also
seeks damages in the amount of $75,000 pursuant to a stock purchase agreement.
The Company is unable to predict the outcome of this litigation. The Company has
assigned its position in this matter to another entity. The Company does not
believe this litigation will have any material impact on its future operations
or financial position.
7. RELATED PARTY
An officer of the Company advanced $13,615 to the Company during the six
months ended June 30, 1998. These advances bear interest at 10% and have no
maturity date. The balance of advances is $19,115 at June 30, 1998.
9
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Pacific Alliance Corporation (the "Company") is a Delaware corporation
which is currently inactive. The Company was previously engaged in the business
of distributing television programming. On June 23, 1995, the Company filed for
protection under Chapter 11 of the United States Bankruptcy Code (Case No. BK.
No. SV 95-14737 KL). On May 28, 1997 (the "Confirmation Date"), the United
States Bankruptcy Court for the Central District of California Confirmed the
Company's Modified Plan of Reorganization (the "Plan") and First Amended
Disclosure Statement (the "Disclosure Statement"). The Effective Date of the
Plan was June 8, 1998. Although the Company's Chapter 11 Plan of Reorganization
has been confirmed by the Bankruptcy Court, the Company continues to operate
under the jurisdiction of the Court. The Company's current business plan calls
for it to locate and acquire an operating company.
History
The Company was organized on April 22, 1986 under the laws of the State of
Utah under the name of Kaiser Research, Inc. On December 2, 1994, the Company
changed its domicile from the State of Utah to the State of Delaware through a
reincorporation merger. In order to effect the reincorporation merger, the
Company formed a wholly-owned subsidiary under Delaware law under the name of
PACSYND, Inc. After the change of the Company's domicile, it acquired a
privately held corporation ("Private PSI") in a merger transaction, and in
connection therewith, the Company's name was changed to Pacific Syndication,
Inc.
After the acquisition of Private PSI in December 1994, and prior to its
filing of a Petition under Chapter 11, the Company was engaged in the business
of transmitting television programming to television stations and others via
satellite or land deliveries on behalf of production companies, syndicators and
other distributors of television programming. Although the Private PSI was not
the survivor of the Merger, and did not exist after the Merger, pursuant to the
accounting requirements of the Securities and Exchange Commission the Merger was
treated as a "reverse merger" and, solely for accounting purposes, Private PSI
was deemed to be the survivor.
Private PSI was formed under the laws of the State of Delaware in November
1991. Private PSI was formed to engage in the business of providing a variety of
television industry related services to its clients. Such services included, but
were not limited to, video tape duplication, standards conversion and delivery
of television programming by way of conventional carriers (such as UPS, Airborne
and Federal Express) and by satellite or fiber optic transmission.
Private PSI provided its clients (primarily television producers,
programmers and syndicators) with several related but different services,
including distribution of syndicated programming to television stations, program
mastering and standards conversion, infomercial customization and delivery,
master tape and film storage, library distribution services and video
integration and delivery services. Private PSI developed its own tape tracking
and vault library management system and a system for infomercial customization
and voice-over integration.
10
<PAGE>
From its inception, Private PSI was undercapitalized. It funded its
initial operations through the factoring of its accounts receivable. The Company
was unable to commence operations in the television programming services
business and ultimately, substantially all of its assets were sold and it
discontinued its operations.
Chapter 11 Plan of Reorganization
On June 23, 1995, the Company filed a Petition under Chapter 11 of the
U.S. Bankruptcy Code. As of December 1995, the Company had sold most of its
assets, reduced its debt and terminated its operations. By that date, there was
no trading market in the Company's securities. In 1996, Troika Capital, Inc.
("Troika"), a Utah corporation, agreed to assist the Company in developing a
Plan of Reorganization which would provide the Company, its shareholders and
creditors with at least a possibility of recouping all or some of their
investment in the Company or the debts owed to them by the Company. Troika is a
privately-owned Utah corporation which has been involved in various company
formations, mergers and financings.
Mark A. Scharmann, the President of Troika, and now the President of the
Company, and his affiliates, were shareholders of the Company and creditors of
the Company at the time the Company commenced its bankruptcy proceeding. Mr.
Scharmann was a founder of the Company in 1986 and was an original shareholder
of the Company. At the time the Company acquired Private PSI, he resigned as an
officer and director of the Company but remained a shareholder and later became
a creditor of the Company. Many of the investors in the Company are friends and
acquaintances of Mr. Scharmann. The Company believed that if it were to
liquidate, there would be a total loss to creditors and shareholders. Because of
his own equity and debt investment in the Company, and his relationship with
other shareholders and creditors of the Company, Mr. Scharmann agreed, through
Troika, to develop a business plan for the Company and to attempt to assist the
Company in carrying out such plan.
The Plan of Reorganization developed for the Company by Troika was
essentially as follows:
1. Eliminate all non-tax liabilities of the Company through the
conversion of debt into equity.
2. Replace the current officers and directors of the Company with new
management. The new management includes the following: Mark
Scharmann, Dan Price and David Knudson.
3. File all required Securities and Exchange Commission reports which
may be necessary to bring the Debtor current in its filing
requirements under Section 15(d) of the 1934 Act. File all SEC
reports which become due in the future.
4. File any tax returns which are in arrears and file all required tax
returns and reports which become due in the future.
5. Use existing cash of the Company to pay quarterly tax payments and
for working capital.
11
<PAGE>
6. Prepare and bring current, the financial statements of the Company
7. Attempt to raise additional cash to be used to fund quarterly tax
payments and for working capital.
8. Locate a private-company which is seeking to become a public company
by merging with the Company.
9. Assist the Company in completing any merger which is located and
which the Board of Directors deems appropriate.
10. Assist the post-merged company with shareholder relations, financial
public relations and with attempts to interest a broker-dealer in
developing a public market for the Company's common stock so that
the Company's shareholders (including creditors whose debt was
converted into shares of the Company's common stock) may ultimately
have a opportunity to liquidate their shares for value in market or
in privately negotiated transactions.
The Plan and Disclosure Statement was confirmed by the Bankruptcy Court on
May 28, 1997. The Effective Date of the Plan was June 8, 1997. The Company
continues to file monthly "Debtor in Possession Interim Statements" and "Debtor
in Possession Operating Reports" with the the Office of the United States
Trustee.
Post Confirmation Date Activities
Since the Confirmation of the Plan of Reorganization the following have
occurred:
5. Pre-Confirmation Date non-tax debt in the amount of approximately
$1,458,000 was converted into 1,458,005 shares of the Company common
stock
6. The Company completed its audited financial statements for the years
ended December 31, 1995, 1996 and 1997.
7. Tax liabilities to the Internal Revenue Service of approximately
$269,093 had been reduced to $145,988.65 as June 30, 1998.
8. The Company effected a 1-for-6 reverse split of its issued and
outstanding common stock in order to establish a more desirable
capital structure for potential merger partners.
9. The Company changed its name to Pacific Alliance Corporation.
12
<PAGE>
10. The Company obtained the preliminary agreement of a
registered-broker to make a market in the Company's common stock.
11. The Company filed an application for approval of secondary trading
in its common stock with the Division of Securities of the State of
Utah. An Order Granting such application was issued by the Utah
Division of Securities.
12. The Company prepared and filed a Form 10-KSB for the year ended
December 31, 1997 and this 10-QSB.
Financial Condition
Total assets at June 30, 1998 was -0-.
The Company's total liabilities as of June 30, 1998 were $319,876
It is likely that the Company will be required to raise additional capital
in order to attract any potential acquisition partner but there can be no
assurance that the Company will be able to raise any additional capital. It is
also likely that any future acquisition will be made through the issuance of
shares of the Company's common stock which will result in the dilution of the
percentage ownership of the current shareholders.
Results of Operations
The Company has generated no revenues since the Confirmation Date of its
Bankruptcy Reorganization. The Company will not generate any revenues, if ever,
until and unless it merges with an operating company or raises additional
capital for its own operations. There can be no assurance that either of such
events will happen.
The Company had a net loss of $34,559 for the six months ended June 30,
1998 compared to $8,080 for the six months ended June 30, 1997.
Plan of Operation
The Company's current business plan is to serve as a vehicle for the
acquisition of, or the merger or consolidation with another company (a "Target
Business"). The Company intends to utilize its limited current assets, equity
securities, debt securities, borrowings or a combination thereof in effecting a
Business Combination with a Target Business which the Company believes has
significant growth potential. The Company's efforts in identifying a prospective
Target Business are expected to emphasize businesses primarily located in the
United States; however, the Company reserves the right to acquire a Target
Business located primarily elsewhere. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than one Target
Business, as a result of its limited resources the Company will, in all
likelihood, have the ability to effect only a single Business Combination.
The Company may effect a Business Combination with a Target Business which
may be financially unstable or in its early stages of development or growth. To
the extent the Company
13
<PAGE>
effects a Business Combination with a financially unstable company or an entity
in its early stage of development or growth (including entities without
established records of revenue or income), the Company will become subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, to the
extent that the Company effects a Business Combination with an entity in an
industry characterized by a high level of risk, the Company will become subject
to the currently unascertainable risks of that industry. An extremely high level
of risk frequently characterizes certain industries which experience rapid
growth. Although management will endeavor to evaluate the risks inherent in a
particular industry or Target Business, there can be no assurance that the
Company will properly ascertain or assess all risks.
The Company will not effect any merger unless it first obtains approval
from its shareholders. In connection with obtaining shareholder approval of a
proposed merger, the Company will distribute a Proxy, Notice of Meeting of
Stockholders and Proxy Statement which contains information about the proposed
acquisition transaction. Such information will likely include audited financial
statements and other financial information about the acquisition target which
meets the requirements of Form 8-K as promulgated under the Securities Exchange
of 1934, as amended, resumes of potential new management, description of
potential risk factors which shareholders should consider in connection with
their voting on the proposed acquisition and a description of the business
operations of the acquisition target.
Troika and its affiliate will vote all of their shares of the Company's
common stock for or against any merger proposal in the same ratio which the
shares owned by other shareholders are voted. This will permit other
shareholders to be able to effectively determine whether the Company acquires
any particular Operating Company. The merger will be effected only if a majority
of the other shareholders attending the meeting of shareholders in person and/or
by proxy, vote in favor of such proposed merger. The shares of Troika and its
affiliates will be included for purposes of determining whether a quorum of
shareholders is present at the meeting.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in the Rights of the Company's Security Holders. None.
Item 3. Defaults by the Company on its Senior Securities. None.
Item 4. Submission of Matters to Vote of Security Holders. No matter was
submitted to a vote of the Company's security holders for the
quarter ended June 30, 1998.
Item 5. Other Information.
Item 6(a). Exhibits. None
Item 6(b). Reports on Form 8-K. None filed.
15
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Company has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: February 18, 1999 PACIFIC ALLIANCE CORPORATION .
By /S/ Mark A. Scharmann
Mark A. Scharmann
President/Principal Executive Officer
By /s/ David Knudson
David Knudson
Principal Financial Office
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTS FROM
PACIFIC ALLIANCE CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIRIFED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 97,289
<BONDS> 0
0
0
<COMMON> 422,254
<OTHER-SE> (742,130)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,607
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