==============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-78910-C
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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 May 15, 2000 - 10,414,033 shares of $.001 par value
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
==============================================================================
<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
PACIFIC ALLIANCE CORPORATION.
For the Quarter ended March 31, 2000
The following financial statements and schedules of the registrant are
submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-QSB
Item 1. Financial Statements:
Balance Sheet--March 31, 2000 and December 31, 1999 3
Statements of Operations--for the three months
ended March 31, 2000 and March 31, 1999 4
Statements of Cash Flows--for the three months
ended March 31, 2000 and March 31, 1999 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 16
Item 2. Changes in the Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Results of Votes of Security Holders 16
Item 5. Other Information 16
Item 6(a). Exhibits 16
Item 6(b). Reports on Form 8-K 16
2
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Stockholders of
Pacific Alliance Corporation
We have reviewed the accompanying balance sheets of Pacific Alliance
Corporation (a Delaware corporation in the Development Stage) as of March 31,
2000 and December 31, 1999, and the statements of operations and cash flows for
the three months ended March 31, 2000 and 1999 and the period from inception of
the development stage (December 21, 1995) through March 31, 2000, and the
statements of stockholder's deficit for the period from inception of the
development stage (December 21, 1995) through March 31, 2000, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of Pacific
Alliance Corporation.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
As discussed in note 1, certain conditions indicate that the Company may
be unable to continue as a going concern. The accompanying financial statements
do not include any adjustments to the financial statements that might be
necessary should the Company be unable to continue as a going concern.
Rose, Snyder & Jacobs
A Corporation of Certified Public Accountants
Encino, California
April 26, 2000
3
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
-----------------------------
CURRENT ASSETS
Cash $ 887 $ 2
-----------------------------
TOTAL ASSETS $ 887 $ 2
==============================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accrued expenses $ 33,025 $ 48,694
Advance from officer, note 6 132,082 110,013
Management compensation liability, note 5 3,682 99,083
Current portion of tax liabilities, note 2 71,379 61,014
Notes payable, note 4 30,000 30,000
-----------------------------
TOTAL CURRENT LIABILITIES 270,168 348,804
LONG TERM LIABILITIES
Tax liabilities, note 2 180,309 191,076
-----------------------------
TOTAL LIABILITIES 450,477 539,880
STOCKHOLDERS' DEFICIT
Common stock, par value $.001,
30,000,000 shares authorized, 10,414,033
and 8,853,208 shares issued and outstanding,
note 5 423,814 422,254
Additional paid in capital 2,168,431 2,028,909
Accumulated deficit prior to the development stage (2,632,447) (2,632,447)
Accumulated deficit during the development stage (409,388) (358,594)
-----------------------------
TOTAL STOCKHOLDERS' DEFICIT (449,590) (539,878)
-----------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 887 $ 2
==============================
See accompanying Independent Accountants' Review Report and Notes to
Financial Statements.
4
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From Inception
of the
Development
Stage
Three Months Three Months December 21,
ended ended 1995, Through
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
SALES $ - $ - $ -
GROSS MARGIN - - -
OPERATING EXPENSES - - -
OTHER INCOME (EXPENSES)
Professional fees (9,585) (6,699) (75,189)
Management compensation, note 5 (30,683) (11,576) (129,765)
Other expenses (5,024) (275) (10,755)
Taxes - - (26,000)
Interest expense (5,502) (5,576) (76,534)
Gain (loss) on investments - - (6,844)
---------------- --------------- --------------
LOSS BEFORE
REORGANIZATION ITEMS (50,794) (24,126) (325,087)
REORGANIZATION ITEMS
Administrative and legal fees - - (84,301)
---------------- --------------- ---------------
NET LOSS $ (50,794) (24,126) (409,388)
================ =============== ===============
BASIC NET LOSS PER SHARE
Loss before reorganization item $ (0.01) $ (0.00)
Reorganization items (0.00) (0.00)
---------------- ---------------
NET LOSS $ (0.01) $ (0.00)
================ ===============
WEIGHTED AVERAGE
NUMBER OF SHARES 9,343,352 8,853,208
================ ===============
See accompanying Independent Accountants' Review Report and Notes to
Financial Statements.
5
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS DEFICIT
<TABLE>
<CAPTION>
Accumulated Accumulated
Shares of Additional Deficit Prior Deficit After
Common Common Paid-in to December December
Stock Stock Capital 21, 1995 21, 1995 Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 21, 1995 12,594,422 $ 415,500 $ 471,500 $ (2,632,447) $ - $(1,745,447)
Reverse split 1-for-6,
note 5 (10,495,297) - - - - -
Conversion of trade
accounts payable, note 5 1,458,005 1,458 1,456,547 - - 1,458,005
Issuance of
common stock, note 5 5,216,000 5,216 20,864 - - 26,080
Issuance of common
stock for IRS claim
reduction, note 5 80,078 80 79,998 - - 80,078
Activity from
December 21, 1995
through December
31, 1998 - - - - (238,624) (238,624)
Net loss - - - - (24,126) (24,126)
---------------------------------------------------------------------------------------
Balance at
March 31, 1999 8,853,208 422,254 2,028,909 (2,632,447) (262,750) (444,034)
Net loss - - - - (95,844) (95,844)
---------------------------------------------------------------------------------------
Balance at
December 31, 1999 8,853,208 422,254 2,028,909 (2,632,447) (358,594) (539,878)
Issuance of common
stock, note 5 1,560,825 1,560 139,522 - - 141,082
Net loss - - - - (50,794) (50,794)
---------------------------------------------------------------------------------------
Balance at March 31, 2000 10,414,033 $ 423,814 $2,168,431 $(2,632,447) $ (409,388) $ (449,590)
=======================================================================================
See accompanying Independent Accountants' Review Report and Notes to Financial Statements.
</TABLE>
6
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
of the
Development
Stage
Three months Three months December 21,
ended ended 1995, Through
March 31, 2000 March 31, 1999 March 31, 2000
----------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (50,794) $ (24,126) $ (409,388)
Adjustments to reconcile net loss to net cash
used in operating activities:
(Gain) loss on investments - - 6,844
Change in assets and liabilities
Decrease in accounts receivable - - 95,841
Increase (decrease) in accrued expenses (2,901) 8,150 46,873
Increase in management compensation liability 30,681 11,576 129,764
Decrease in tax liabilities (402) - (48,931)
----------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES: (23,416) (4,400) (178,997)
----------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments - - (30,180)
Proceeds from sale of investments - - 23,336
----------------------------------------------------
NET CASH USED IN
INVESTING ACTIVITIES - - (6,844)
----------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - (12,529) (2,586)
Proceeds from notes payable - - 30,000
Advance from officer 24,301 17,150 134,314
Proceeds from issuance of common stock - - 25,000
----------------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 24,301 4,621 186,728
----------------------------------------------------
NET INCREASE IN CASH 885 221 887
CASH AT BEGINNING OF PERIOD 2 - -
----------------------------------------------------
CASH AT END OF PERIOD $ 887 $ 221 $ 887
====================================================
Supplementary disclosures:
Interest paid in cash $ 4,598 $ - $ 48,816
====================================================
</TABLE>
See accompanying Independent Accountants' Review Report
and Notes to Financial Statements.
7
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Going Concern
Pacific Alliance Corporation (the "Company"), whose name was changed from
Pacific Syndication, Inc. in 1997, 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
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.
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 realizations of assets and the satisfaction of
liabilities in the normal course of business. As shown in the March 31, 2000
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 ended March 31, 2000, the Company funded its disbursements using
loans from an officer.
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 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.
See accompanying Independent Accountants' Review Report
8
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments approximate fair
value.
Statement of Financial Accounting Standards No. 128
The Company adopted Statement of Financial Standards ("SFAS") No. 128 for the
calculation of earnings per share. This SFAS was issued in February 1997, and
supersedes 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 three months ended March 31, 2000 and 1999.
2. TAX LIABILITIES
The Company owes back taxes to the IRS, California EDD, California State Board
of Equalization and other tax authorities. The IRS portion of tax liabilities,
$115,257, bears interest at 9%, and is payable quarterly in payments of $11,602,
maturing in January 2002. During the year ending December 31, 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
March 31:
---------------
2001 $71,379
2002 43,878
----------------
$115,257
Interest paid during the three months ended March 31, 2000 and 1999 on the IRS
liability totaled $4,598 and $0, respectively.
See accompanying Independent Accountants' Review Report
9
<PAGE>
3. INCOME TAXES
The Company has loss carryforwards available to offset future taxable income.
The total loss carryforwards at March 31, 2000 are estimated at approximately
$400,000 and expire between 2013 and 2020. Loss carryforwards are limited in
accordance with the rules of change in ownership. No deferred tax benefit is
recognized since future profits are indeterminable.
4. NOTES PAYABLE
During the year ended December 31, 1998, the Company contracted notes payable
with minority shareholders for a total of $30,000. These notes bear interest at
10% and have no maturity date. 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 5,000 January 27, 2001
January 30, 1998 10,000 January 30, 2001
May 1, 1998 10,000 May 1, 2001
May 5, 1998 5,000 May 5, 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
See accompanying Independent Accountants' Review Report
10
<PAGE>
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.
On February 29, 2000, the Company issued 300,000 shares of common stock for
repayment of $15,000 of an officer loan. The shares were valued at $.005 per
share.
Pursuant to the provisions of the modified joint plan of reorganization, Pacific
Alliance Corporation compensates its management on an hourly basis at $75 per
hour for the time actually devoted to the business of the Company. Payment for
services is made through issuance of shares of common stock until such time as
the Company's net worth reaches $350,000. According to the modified joint plan
of reorganization, the stock issued for services shall be valued at $0.10 per
share. During the quarter ended March 31, 2000, the Company issued 1,260,825
shares with respect to management compensation. At March 31, 2000, the Company
also accrued management compensation liability in the amount of $3,682, for
which shares of common stock have not yet been issued.
6. RELATED PARTY
An officer of the Company advanced $24,301 to the Company during the three
months ended March 31, 2000 and $17,150 during the quarter ended March 31, 1999.
These advances bear interest at 10% and have no maturity date. The balance of
advances is $132,082 at March 31, 2000 and $110,013 at December 31, 1999.
See accompanying Independent Accountants' Review Report
11
<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 September 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, 1997. On February 23, 2000, United States Bankruptcy Judge
Kathleen T. Lax entered a "Final Decree Order Pursuant to Bankruptcy Code
Section 350", and thereby issued a final decree closing the bankruptcy case. The
claim by the Internal Revenue Service was not discharged by the Final Decree
Order.
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
12
<PAGE>
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.
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.
13
<PAGE>
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.
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. Subsequent to the
Effective Date of the Plan, the Company filed monthly "Debtor in Possession
Interim Statements" and "Debtor in Possession Operating Reports" with the the
Office of the United States Trustee. On February 23, 2000, the Bankruptcy Court
Judge Kathleen T. Lax entered a Final Decree Order closing the Bankruptcy case
of the Company.
Post Confirmation Date Activities
Since the Confirmation of the Plan of Reorganization the following have
occurred:
1. 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
2. The Company completed its audited financial statements for the years
ended December 31, 1996, 1997, 1998 and 1999.
14
<PAGE>
3. Tax liabilities to the Internal Revenue Service of approximately
$269,093 had been reduced to $89,000 as of May 15, 2000.
4. 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.
5. The Company changed its name to Pacific Alliance Corporation.
6. The Company obtained the preliminary agreement of a
registered-broker to make a market in the Company's common stock.
7. 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.
8. The Company prepared and filed a Form 10-KSB for the years ended
December 31, 1997, 1998, and 1999 and all required Forms 10-QSB for
1999 calendar year.
Financial Condition
Total assets at March 31, 2000 were $887, all of which was cash. The
Company intends to use such cash to pay for various filing fees and professional
fees relating to its reporting obligations and to fund the costs which may arise
from seeking new business opportunities. As of December 31, 1999, the Company
had no cash and liabilities.
The Company's total liabilities as of March 31, 2000 were $450,447.
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.
15
<PAGE>
The Company had a net loss of $50,794 for the three months ended March 31,
2000. This compares to a net loss of $24,126 for the three months ended March
31, 1999.
The Company's Plan of Reorganization provided that the Company's
management would be compensated at the rate of $75 per hour in the form of
shares of the Company's common stock issued at $.10 per share. On March 2, 2000,
the Company issued the following number of shares to its management for services
rendered from 1998 through February 29, 2000.
Mark A. Scharmann 471,750
Dan Price 32,250
David Knudson 756,825
On February 29, 2000, Mark A. Scharmann, President of the Company
converted $15,000 in debt owed to him by the Company into 300,000 shares of the
Company's Common Stock.
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 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
16
<PAGE>
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.
Dr.Benefits.com Transaction
The Company has recently entered into an agreement to acquire
Dr.Benefits.com, Inc. in a reverse merger transaction. The acquisition is
subject to several conditions. The Company will file a Form 8-K providing
additional information about the transaction in the near future.
17
<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 March 31, 2000.
Item 5. Other Information.
Item 6(a). Exhibits. None
Item 6(b). Reports on Form 8-K. None filed.
18
<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: May 15, 2000 PACIFIC ALLIANCE CORPORATION .
By /s/ Mark A. Scharmann
-------------------------------------
Mark A. Scharmann
President/Principal Executive Officer
By /s/ David Knudson
-------------------------------------
David Knudson
Principal Financial Office
19
<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> 887
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 887
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 887
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 887
<CURRENT-LIABILITIES> 270,168
<BONDS> 0
0
0
<COMMON> 2,592,245
<OTHER-SE> (3,041,835)
<TOTAL-LIABILITY-AND-EQUITY> 887
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,502
<INCOME-PRETAX> (50,794)
<INCOME-TAX> 0
<INCOME-CONTINUING> (50,794)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,794)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
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