===============================================================================
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 June 30, 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 August 13, 2000 - 10,703,083 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 June 30, 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--June 30, 2000 and December 31, 1999 4
Statements of Operations--for the three and six months
ended June 30, 2000 and June 30, 1999 5
Statements of Cash Flows--for the six months
ended June 30, 2000 and June 30, 1999 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 18
Item 2. Changes in the Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Results of Votes of Security Holders 18
Item 5. Other Information 18
Item 6(a). Exhibits 18
Item 6(b). Reports on Form 8-K 18
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 June 30,
2000 and December 31, 1999, and the statements of operations for the three
months and six months ended June 30, 2000 and the period from inception of the
development stage (December 21, 1995) through June 30, 2000, the statements of
cash flows for the six months ended June 30, 2000, and the statements of
stockholder's deficit for the period from inception of the development stage
(December 21, 1995) through June 30, 2000. These financial statements are the
responsibility of the management of Pacific Alliance Corporation.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. 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.
The June 30, 1999 statements of operations and cash flows were compiled by
us and our report thereon, dated August 13, 1999, stated we did not audit or
review those financial statements and, accordingly, express no opinion or other
form of assurance on them.
Rose, Snyder & Jacobs
A Corporation of Certified Public Accountants
Encino, California
July 13, 2000
3
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS June 30, December 31,
2000 1999
------------------------------
CURRENT ASSETS
Cash $ 39,064 $ 2
------------------------------
TOTAL ASSETS $ 39,064 $ 2
==============================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accrued expenses $ 39,676 $ 48,694
Advance from officer, note 6 162,182 110,013
Management compensation liability, note 5 - 99,083
Current portion of tax liabilities, note 2 59,121 61,014
Notes payable, note 4 80,000 30,000
------------------------------
TOTAL CURRENT LIABILITIES 340,979 348,804
LONG TERM LIABILITIES
Tax liabilities, note 2 169,708 191,076
------------------------------
TOTAL LIABILITIES 510,687 539,880
------------------------------
STOCKHOLDERS' DEFICIT
Common stock, par value $.001,
30,000,000 shares authorized, 10,703,083
shares issued and outstanding,
(8,853,208 at December 31, 1999), note 5 424,104 422,254
Additional paid in capital 2,197,047 2,028,909
Accumulated deficit prior to the development stage (2,632,447) (2,632,447)
Accumulated deficit during the development stage (460,327) (358,594)
------------------------------
TOTAL STOCKHOLDERS' DEFICIT (471,623) (539,878)
------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 39,064 $ 2
==============================
Prepared without audit.
See accompanying Independent Accountants' Review Report and Notes to
Financial Statements.
4
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
of the
Development
Three Six Three Stage,
Months Months Months Six Months December 21,
ended ended ended ended 1995, Through
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999 June 30, 2000
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES $ - $ - $ - $ - $ - -
GROSS MARGIN - - - - -
OPERATING EXPENSES - - - - -
OTHER INCOME (EXPENSES)
Professional fees (34,155) (43,740) (8,835) (15,534) (109,344)
Management compensation,
note 5 (10,222) (40,905) (13,373) (24,949) (139,987)
Other expenses (268) (5,292) (76) (351) (11,023)
Taxes - - - - (26,000)
Interest expense (6,294) (11,796) (5,664) (11,240) (82,828)
Gain (loss) on investments - - - - (6,844)
------------------------------------------------------------------------------
LOSS BEFORE
REORGANIZATION ITEMS (50,939) (101,733) (27,948) (52,074) (376,026)
REORGANIZATION ITEMS
Administrative and legal fees - - - - (84,301)
------------------------------------------------------------------------------
NET LOSS $ (50,939) $(101,733) $ (27,948) $ (52,074) $ (460,327)
==============================================================================
BASIC NET LOSS PER SHARE
Loss before reorganization
items $ (0.00) $ (0.01) $ (0.00) $ (0.01)
Reorganization items (0.00) (0.00) (0.00) (0.00)
------------------------------------------------------------
NET LOSS $ (0.00) $ (0.01) $ (0.00) $ (0.01)
============================================================
WEIGHTED AVERAGE
NUMBER OF SHARES 10,495,224 9,927,864 8,853,208 8,853,208
============================================================
</TABLE>
Prepared without audit - 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>
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)
-----------------------------------------------------------------------------------------
Balance at
December 31, 1998 8,853,208 422,254 2,028,909 (2,632,447) (238,624) (419,908)
Net loss - - - - (52,074) (52,074)
-----------------------------------------------------------------------------------------
Balance at
June 30, 1999 8,853,208 422,254 2,028,909 (2,632,447) (290,698) (471,982)
Net loss - - - - (67,896) (67,896)
-----------------------------------------------------------------------------------------
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)
Issuance of common
stock, note 5 289,050 290 28,616 - - 28,906
Net loss - - - - (50,939) (50,939)
-----------------------------------------------------------------------------------------
Balance at
June 30, 2000 10,703,083 $ 424,104 $2,197,047 $(2,632,447) $ (460,327) $ (471,623)
=========================================================================================
</TABLE>
Prepared without audit - See accompanying Independent Accountants' Review Report
and Notes to Financial Statements.
6
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
of the
Development
Stage,
Six months Six months December 21,
ended ended 1995, Through
June 30, 2000 June 30, 1999 June 30, 2000
----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (101,733) $ (52,074) $ (460,327)
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 in accrued expenses 18,750 14,651 68,524
Increase in management compensation liability 40,905 24,949 139,988
Decrease in tax liabilities (23,261) (6,002) (71,790)
----------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES: (65,339) (18,476) (220,920)
----------------------------------------------
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 50,000 - 80,000
Advance from officer 54,401 31,150 164,414
Proceeds from issuance of common stock - - 25,000
----------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 104,401 18,621 266,828
----------------------------------------------
NET INCREASE IN CASH 39,062 145 39,064
CASH AT BEGINNING OF PERIOD 2 - -
----------------------------------------------
CASH AT END OF PERIOD $ 39,064 $ 145 39,064
==============================================
Supplementary disclosures:
Interest paid in cash $ 14,239 $ - $ 58,457
==============================================
</TABLE>
Prepared without audit.
See accompanying Independent Accountants' Review Report and Notes to Financial
Statements.
7
<PAGE>
PACIFIC ALLIANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
June 30, 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 June 30, 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 June 30, 2000, the
Company funded its disbursements using loans from minority 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 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 note 7).
Prepared without audit.
See accompanying Independent Accountants' Review Report
8
<PAGE>
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 and six
months ended June 30, 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, $92,398, 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:
Scheduled maturities of the IRS liability are as follows:
Twelve Months Ending
June 30:
2001 $59,121
2002 33,277
----------------
$92,398
Interest paid during the three months ended June 30, 2000 and 1999 on the IRS
liability totaled $9,641 and $0, respectively.
Prepared without audit.
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 June 30, 2000 are estimated at
approximately $450,000 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).
On June 14, 2000, the Company contracted a note payable with a minority
shareholder for $50,000. The note bears interest at 1% per month and is
due August 13, 2000. Stock options were issued with respect to this note
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 55,000 shares of common stock of the Company have been
issued to bearers of promissory notes (note 4) as follows:
Date of Issuance Number of Shares Expiration Date Price Per Share
-------------------------------------------------------------------------------
January 27, 1998 5,000 January 27, 2001 $ 2.50
January 30, 1998 10,000 January 30, 2001 $ 2.50
May 1, 1998 10,000 May 1, 2001 $ 2.50
May 5, 1998 5,000 May 5, 2001 $ 2.50
June 14, 2000 25,000 June 14, 2001 $ 0.50
Prepared without audit.
See accompanying Independent Accountants' Review Report
10
<PAGE>
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.
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 quarters ended
June 30, 2000 and March 31, 2000, the Company issued 139,050 and 1,260,825
shares, respectively, with respect to management compensation. At June 30,
2000, the Company had no accrued management compensation liability for
which shares of common stock have not yet been issued.
On May 23, 2000, the Company issued 150,000 shares of common stock for
full payment of consulting services rendered to the Company to date.
6. RELATED PARTY
An officer of the Company advanced $30,100 and $22,068 to the Company
during the quarters ended June 30, 2000 and March 31, 2000, respectively,
and $14,000 and $17,150 during the quarters ended June 30, 1999 and March
31, 1999, respectively. These advances bear interest at 10% and have no
maturity date. The balance of advances was $162,182 at June 30, 2000 and
$110,013 at December 31, 1999.
7. SUBSEQUENT EVENTS
On May 14, 2000, the officers of Pacific Alliance entered into an
agreement for a merger transaction between DrBenefits.com and the Company.
Upon the completion of the proposed merger transaction, the Company will
issue shares of its common stock for all shares of DrBenefits.com. The
Company will also change its name to DrBenefits.com.
Prepared without audit.
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 programming to television
12
<PAGE>
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:
I. 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
14
<PAGE>
2. The Company completed its audited financial statements for the years
ended December 31, 1996, 1997, 1998 and 1999.
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 June 30, 2000 were $39,064 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 June 30, 2000 were $510,687.
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.
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The Company had a net loss of $101,733 for the six months ended June 30, 2000.
This compares to a net loss of $52,074 for the six months ended June 30, 1999.
The Company had a net loss of $50,939 for the three months ended June 30, 2000.
This compares to a net loss of $27,948 for the three months ended June 30, 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 3, 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.
As of March 31, 2000, the Company owed compensation to management in the
amount of $3,682.50. As payment in full for such compensation liability, on May
23, 2000, the Company issued 36,825 shares of its common stock as payment in
full for such compensation liability.
From April 1, 2000 to June 30, 2000, the Company incurred compensation
expenses to its management in the total amount of $10,222.50. On June 30, 2000,
102,225 shares of common stock were issued to management as payment in full of
such compensation expenses.
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
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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.
Dr.Benefits.com Transaction
On May 11, 2000. the Company entered into an agreement to acquire
Dr.Benefits.com, Inc. in a reverse merger transaction. The acquisition is
subject to several conditions including shareholder approval.
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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, 2000.
Item 5. Other Information.
Item 6(a). Exhibits. None
Item 6(b). Reports on Form 8-K. A form 8-K dated May 14, 2000 was filed
May 19, 2000 in connection the Company's execution of an Agreement
and Plan of Reorganization. Such Agreement relates to the
Company's proposed acquisition of Dr. Benefits, Inc.
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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: August 13, 2000 PACIFIC ALLIANCE CORPORATION .
By /s/ Mark A. Scharmann
----------------------------------------
Mark A. Scharmann
President/Principal Executive Officer
By /s/ David Knudson
----------------------------------------
David Knudson
Principal Financial Officer
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