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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) For the fiscal year ended: June 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934 (NO FEE REQUIRED)
For the transition period from ________ to ________.
Commission file number 33-12613-NY
CELESTIAL VENTURES CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 22-2814206
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(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
382 Route 59, Section 310, Monsey, New York 10952
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 369-0132
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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Common Stock, no par value None
Preferred Stock, no par value None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant has: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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. X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant June 30, 1997, based on the average bid and
asked price on such date, was approximately $4,679,508.
Number of shares of Common Stock outstanding as of June 30, 1997: 1,247,869.
Number of shares of Preferred Stock outstanding as of July 30, 1997: 258,853.
No annual reports to security holders, proxy or information statements, or
prospectuses filed pursuant. Rule 424(b) or (c) have been incorporated by
reference in this report.
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When used in this Annual Report on Form 10-KSB, the words "estimate", "project",
"intend", "expect" and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial position. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial position to differ materially. Such factors are
described in detail elsewhere under "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
PART I
Item I. Business
Celestial Ventures Corporation, a Nevada corporation (the "Company"),
was incorporated on January 28, 1987. The Company's initial business was the
acquisition of real estate and real estate development. Since 1993, the Company
has primarily been engaged in the acquisition of businesses, divisions of
businesses or the assets of businesses that the Company's management identified
as having significant potential for business success. These businesses have
included valve coating and direct mail subsidiaries in the past. As of June 30,
1997, all of the operating divisions of the Company have been sold. The Company
is no longer involved in real estate investment or development. The Company
currently employees two persons neither of which are full time.
Direct Mail Business Acquisitions
On August 29, 1995, the Company purchased, effective as of July 1,
1995, all of the issued and outstanding common stock of Success Direct, Inc., a
New Jersey corporation, a mail order business products company ("Success"), for
total consideration of 1,000,000 restricted shares of common stock of the
Company. The principal stockholder of Success, Mr. Irwin Schneidmill, became the
President of the Company on August 1, 1995. 415,000 of such shares were paid to
Mr. Irwin Schneidmill who was the 41.5% owner of the capital stock of Success.
See "Certain Relationships and Related Transactions."
Simultaneously with the acquisition of Success, Success assigned to the
Company its rights under an agreement to purchase certain business assets from
Re-Prod, Inc., including the name "Remarkable Products", and the Company
consummated the transaction with Re-Prod, Inc. The assets purchased from
Re-Prod, Inc. are related to the direct mail industry. See "Certain
Relationships and Related Transactions".
In connection with the acquisition of certain assets of Re-Prod, Inc.,
the Company paid total consideration consisting of the following; (i) $315,000
in cash, (ii) a promissory note in the amount of $250,000 payment of which was
guaranteed by Mr. Schneidmill and Mr. John Formicola, a shareholder of the
Company, and (iii) 750,000 shares of the common stock of the Company as to which
Mr. Schneidmill and Mr. Formicola have agreed to pay the difference between the
actual and estimated market price of the shares on a future date. See "Certain
Relationships and Related Transactions".
From August to December, 1995, the Company operated Success as a wholly
owned subsidiary under the tradename Remarkable Products. On December 7, 1995,
Success changed its corporate name to Remarkable Office Products, Inc.
("Remarkable"), but has continued to use the tradename Remarkable Products.
Remarkable was incorporated in the State of New Jersey in September, 1994 and
from its
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inception through its acquisition by the Company in 1995 has been engaged in the
distribution of office products.
The Company, through its wholly-owned subsidiary, Remarkable, sold
specialized office products featuring time management and organizational tools
to small and medium-sized businesses nationwide through innovative, aggressive
direct marketing catalogs and programs. Remarkable's products include dry erase
boards and calendars with markers which can be wiped clean after use and
re-used. Remarkable also specializes in calendars and laminated products such as
large geographic wall maps, and federal law posters which many businesses are
required to post in the workplace (e.g., minimum wage posters, equal opportunity
and sexual harassment notices).
Disposition of Direct Mail Business.
On November 21, 1996, the Company, effective October 1, 1996, sold all
of the issued and outstanding capital stock (the "Shares") of Remarkable to
Dynamic Products Corp. (the "Dynamic"), for $1,406,250.00. The assets of
Remarkable included equipment, inventory, and accounts receivable. The
consideration paid to the Company was as follows: (i) repayment of intercompany
balance due to Remarkable as of November 20, 1996 of $106,450.85; (ii) payment
on November 21, 1996, of $43,539.15 in cash; (iii) a promissory note for
$450,000.00 due February 21, 1997, payment of which was extended until March 21,
1997; and (iv) assumption of certain liabilities of the Registrant totaling
$806,250.00. The Company realized a gain of $431,512 on the sale. The purchase
price of Remarkable was determined in the manner of an arms length transaction.
The principles followed by the parties in determining the consideration were as
follows: Shares of Remarkable were valued at book value, and the repayment of
intercompany balance on November 20, 1996, the cash payment on November 21,
1996, the note payable due on March 21, 1997, and the assumption of certain
liabilities of the Company were each calculated at cash value. An officer,
director, and stockholder of the Purchaser is also the President, director and
stockholder of the Company. See "Certain Relationships and Related
Transactions." The transaction was unanimously approved and ratified by the
Company's Board of Directors in accordance with Nevada corporate law.
Pursuant to an agreement dated June 20, 1997, the Company agreed to
transfer to Mr. John L. Patten, a significant shareholder of the Company, its
rights under the remaining past due $300,000 subordinated note receivable from
the Purchaser in exchange for Mr. Patten's assumption of the Company's
obligations for the U.S. Powder Coaters, Inc. note payable of $170,000 to R.M.
Engineering. See "Certain Relationships and Related Transactions." To date, R.M.
Engineering has not released the Company from its obligation under the note
payable; accordingly, the liability remains recorded at June 30, 1997. See
"Notes to Consolidated Financials." The transaction was unanimously approved and
ratified by the Registrant's Board of Directors in accordance with Nevada
corporate law.
Medical Device Production Acquisitions
In September, 1995, the Company executed a letter of intent to purchase
all of the issued and outstanding stock of Nexim Corp., a Nevada Corporation,
("Nexim"), 100% of which is owned by Mr. Andrew Jaloza who became a director of
the Company in January, 1996. Upon the execution of the letter of intent, the
Company paid Mr. Jaloza $100,000 as a down payment for the purchase of Nexim.
Nexim owns a technology known as Medphone, a medical device product. The Company
also invested, approximately, an additional $62,000 toward development of this
product. Nexim has had no revenues and is not an operating company. In April,
1996, the Company decided not to pursue the acquisition of Nexim. The ultimate
recovery of the invested funds is uncertain. During the year ended June 30,
1996, the Company wrote off its entire investment in this venture, which is
included in general and administrative expenses.
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Valve Company Acquisitions
Pursuant to an Agreement and Plan of Reorganization dated August 12,
1993, the Company acquired all of the issued and outstanding common stock of
Valves International, Inc. ("VII"), an Oklahoma corporation, in exchange for
850,000 shares of the Company's restricted common stock. As a result of this
reorganization, the Company also acquired Central Valve Services, Inc., Alloy
Valves International, Inc., Valves International, Inc., and CVC International,
Inc., which were wholly owned subsidiaries of VII. VII and its subsidiaries were
operating companies engaged in the business of valve manufacturing and sales in
both Oklahoma and Texas.
Powder Coating Operations
On October 31, 1993, the Company acquired U.S. Powder Coaters, Inc., a
corporation whose principal business consisted of treating and coating metal and
non-metal materials, in exchange for 300,000 shares of the Company's common
stock. In 1993 the Company also acquired Gulf Coast Powder Coatings, Inc. As
part of the Company's reorganization, the Company discontinued operations of
U.S. Powder Coatings, Inc. in June 1994 and management renegotiated a 50%
reduction of its debt related to its acquisition.
Disposition of Valve and Powder Coating Operations
On August 31, 1995, effective as of April 30, 1995, the Company entered
into a purchase agreement whereby it sold all of its wholly owned subsidiaries
with the exception of U.S. Powder Coatings, Inc. to Turkey DeLite International,
Inc., a Nevada Corporation, (d/b/a ATCO Corporation) ("Purchaser" or "Turkey
DeLite") for $1,900,000 in cash, promissory notes and common stock. Turkey
DeLite's principal executive officer, Mr. Bob J. Sudderth, also served as the
Chairman of the Board of Directors of the Company. See "Certain Relationships
and Related Transactions". The subsidiaries referred to herein include Valves
International, Inc., Central Valve Services, Inc., Alloy Valve International,
Inc. and Gulf Coast Powder Coatings, Inc. The sales price consisted of a
combination of 1,550,000 shares of the Purchaser's common stock, a $200,000
promissory note due and the payment of $150,000 contingent upon the successful
completion of a stock offering by the Purchaser. The assets of U.S. Powder
Coatings, Inc. are still owned by the Company although the subsidiary is
inactive.
As of June 30, 1997, all of the operating divisions of the Company have
been sold.
Item 2. Properties
The Company maintains its corporate headquarters at 382 Route 59,
Section 310, Monsey, New York, 10952. This facility is currently leased by
Remarkable Office Products, Inc. which expires on October 31, 1998 and provides
for an option to renew for two successive five-year periods. Although there is
no formal sublease agreement between the Company and Remarkable, the Company has
agreed to reimburse Remarkable for any use of the space by the Company as well
as for the use of Remarkable's personnel. Any future payments made by the
Company to Remarkable for this obligation will be determined by the fair market
value for the use of the space and personnel as if determined in an arms length
transaction.
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Item 3 Legal Proceedings
Celestial Ventures Corporation vs. Re-Prod, Inc. et. al., Case No. 96 Civ. 1274,
United States District Court for the Southern District of New York.
The Company filed on February 21, 1996 a complaint against Re-Prod,
Inc. and its stockholder Jacob Lahav in United States District Court for the
Southern District of New York, White Plains, New York Case Number 96 civ. 1274,
which sought a modification of the purchase price of the assets of Re-Prod, Inc.
The Company contends that certain assets, including accounts receivable, which
the Company purchased from Re-Prod, Inc. did not exist at the time of the
acquisition. As a result the Company suspended payments under a $250,000 payable
to Re-Prod, Inc. and did not honor other terms of the acquisition.
On August 29, 1995 the Company purchased, as of July 1, 1995, all of
the issued and outstanding common stock of Success Direct, Inc., a mail order
business products company ("Success"). Mr. Irwin Schneidmill, who owned 41.5% of
Success, became the President and Chief Executive Officer of the Company on
August 1, 1995. Simultaneously with the acquisition of Success, Success assigned
to the Company its agreement to purchase certain business assets from Re-Prod,
Inc., including the name Remarkable Products, and the Company consummated the
transaction with Re-Prod, Inc. The assets purchased from Re-Prod, Inc. are
related to the direct mail industry.
In connection with the acquisition of the certain assets of Re-Prod,
Inc., Mr. Schneidmill and Mr. John Formicola, a stockholder of the Company, had
personally guaranteed the payment by the Company of a $250,000 promissory note
payable to Re-Prod, Inc., which represents part of the consideration paid by the
Company to acquire the assets of Re-Prod, Inc. This note bears interest at 9%
per annum and is to be paid monthly by the Company in varying amounts by
applying the income received from renting its mailing list on a monthly basis.
On November 20, 1995, the Company contends the principal amount remaining under
the note was $210,127.53.
As part of the consideration for the acquisition, Re-Prod, Inc., also
received 750,000 shares of the restricted common stock of the Company. The
Agreement provided that Mr. Schneidmill would personally guarantee 375,000 of
such 750,000 shares payment of any difference between $393,750 ($1.05 per share)
and the fair market value of the shares on January 1, 1996. The value of the
common stock at February 1, 1996 was approximately $78,750. The Company and Mr.
Schneidmill and Formicola personally, have also executed a "Put Option
Agreement", whereby Re-Prod, Inc. can put these 375,000 shares to the Company as
of January 1, 1996 and demand payment of $393,750. Such demand was made on
January 31, 1996. Furthermore, Mr. Schneidmill and Mr. Formicola guaranteed
payment of the difference between $412,500 and the market value of the remaining
375,000 shares (25,000 shares, adjusted to reflect a 1 for 15 share reverse
stock split, effective May 3, 1996) of the Company's common stock held by
Re-Prod, Inc. on July 1, 1996. The shares having a guaranteed value at July 1,
1996 are subject to an identical Put Option Agreement.
The Company, together with Mr. Schneidmill and Mr. Formicola have
contended that the assets purchased from Re-Prod, Inc. were not as represented
in the purchase agreement, and are seeking a renegotiation of the consideration
paid for those assets, including a renegotiation of their personal guarantees.
The Company has agreed to indemnify Mr. Schneidmill and Mr. Formicola against
any liability resulting form these guarantees.
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On March 14, 1996, Re-Prod, Inc. and Jacob Lahav filed a counter claim
against the Company alleging specific performance on the $250,000 promissory
note, fraud and conversion, breach of contract and securities fraud and against
Mr. Irwin Schneidmill and John Formicola for the enforcement of certain
financial guarantees as well as for common law fraud, securities fraud and fraud
and conversion. The total dollar amount claimed, approximately $1,050,000,
exclusive of interest equals the amount of the original purchase price of
Re-prod, Inc. The Company and Mr. Schneidmill are vigorously defending these
claims against them and is pursuing its claims against Re-Prod, Inc. and Mr.
Lahav.
On November 12, 1996, parties entered into, and the District Court
approved by order, a Stipulation of Settlement ("Settlement") of all claims and
counter claims. As a condition to entering into the Settlement, prior to its
execution, the Company paid to Re-Prod, Inc. the $6,039.55 balance of an escrow
account to be provided for in the purchase agreement. Under the Settlement, the
Company agreed to pay to Re-Prod, Inc. a balance of the purchase price of
$400,000, of which all has been paid. The Company must make additional payments
to Re-Prod, Inc. on September 1, 1997 of $300,000 plus that amount equal to one
half of the excess (if any) of the closing value of Re-Prod, Inc.'s shares of
the Company's common stock (based upon the mean between the bid/asked price) on
September 1, 1997 over $300,000 (payable upon the tender of Re-Prod, Inc.'s
certificates). (As a result of its May 1996 1 for 15 stock split, the Company
issued to Re-Prod, Inc., certificates for 50,000 new shares in exchange for its
existing certificate for 750,000 pre-split shares of common stock.) Under the
Settlement, the counter claim against Mr. Formicola was dismissed, and Mr. John
L. Patten, a stockholder of the Company, was named as an additional guarantor.
Mr. Schneidmill and Mr. Patten have unconditionally guaranteed the prompt and
full payment and performance of all of the Company's obligation under the
Settlement. Mr. Patten has since agreed to assume the obligation and hold the
Company harmless against the payment due to Re-Prod, Inc. on September 1, 1997
of $300,000 plus that amount equal to one half of the excess (if any) of the
closing value of the 50,000 shares of the Company's common stock as described
above. Mr. Patten has demonstrated to the Company's satisfaction his financial
ability to assume such obligation. In consideration of this as well as other
assumptions of various liabilities of the Company as well as for other services
rendered to the Company, the Company issued 93,316 shares of common stock to Mr.
Patten in June, 1997. See "Litigation" and Related Party Transactions".
Under the purchase agreement, the Company granted Re-Prod, Inc. a
security interest in certain of the Company's assets. The Settlement provides
that Re-Prod, Inc. will subordinate its security interest to that of any third
party which lends the Company funds to repay its obligations to Re-Prod, Inc.
under the Settlement. Except as provided above, the rights and obligations of
the parties under the purchase agreement remain unchanged until fully performed.
In the event Re-Prod, Inc. alleges that the Company is in default in making any
payment due or performing any obligation required under the Settlement, Re-Prod,
Inc. will have the right (upon ten days written notice) to apply to the Court
for entry of judgment against the Company, and Messers. Schneidmill and Patten,
jointly and severally, for $1,100,000, less any sums previously paid to Re-Prod,
Inc. under the Settlement if Re-Prod, Inc. certifies to the Court that the
Company is in default and has received notice thereof, and such alleged default
has remained uncured for ten days; the Court can enter judgment against the
Company. Upon full satisfaction by the Company of its obligations under the
Settlement and the Asset Purchase Agreement, Re-Prod, Inc.'s counterclaim will
be dismissed with prejudice and the Company and Messers. Formicola, Patten and
Schneidmill will be released from all claims under the Re-Prod, Inc.
counterclaim.
Johnson vs. Central Valve Services, Inc., et. al., No. 96-42066, In the District
Court of Harris County, Texas, 80th Judicial District.
The Plaintiffs' First Amended Original Petition was served upon
Celestial (one of many defendants) on April 23, 1997. The Plaintiffs allege that
they were injured as a result of certain
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misrepresentations made by Tony Heuermann (a Texas investment manager
unconnected to Celestial) which induced the Plaintiffs into investing monies
into Celestial and its wholly owned subsidiary, Central Valve Services, Inc.
("Central"). The alleged investment includes payment for 25,343 (prior to the 1
for 15 reverse split) shares of Celestial common stock as well as numerous
promissory notes issued by Central in which Bob Sudderth (former President of
Celestial) also signed on behalf of the Company as Guarantor. The Plaintiffs
claim that these notes are in default and the shares are trading below the
promised value. Accordingly, the Plaintiffs now seek damages from Celestial (as
well as Central, Sudderth and Heuermann) to recoup those monies lost as a result
of these alleged false representations and violations of Texas Deceptive Trade
Practices Act in the amount of $62,092 plus interest, costs and punitive
damages.
Celestial has not yet appeared in the matter. The other parties to the
litigation have agreed to address this matter in non-binding mediation. Should
the parties fail to resolve this matter at that time, the court has
preliminarily scheduled a hearing for November 12, 1997.
Although Celestial has not yet appeared in the matter, John L. Patten,
a stockholder of the Company, pursuant to an agreement dated August 25, 1997,
has agreed to indemnify Celestial and hold it harmless for any costs incurred by
the Company or for any potential award or settlement that might arise in the
future. Mr. Patten has demonstrated to the Company's satisfaction his financial
ability to assume such obligation. In consideration of this as well as other
assumptions of various liabilities of the Company as well as for other services
rendered to the Company, the Company issued 93,316 shares of common stock to Mr.
Patten in June, 1997. See "Litigation" and Related Party Transactions".
Item 4 Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security holders for
the period covered by this Report.
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Company's common stock is currently traded on the NASDAQ Electronic
Bulletin Board under the symbol "CVNR", and has several market makers. The high
and low bid (price which a market maker is willing to pay for the shares)
quotations for the Company's Shares, as reported to the Company's management by
brokerage firms listed on the specified dates by the National Daily Quotation
System, Inc.'s "Pink Sheets" as making markets in the Company's securities are
listed in the following chart. These quotations are between dealers, do not
include retail mark-ups, mark-downs or other fees and commissions, and may not
represent actual transactions. On May 3, 1996, the Company adopted a 1 for 15
reverse stock split.
Date High Bid * Low Bid *
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Fiscal 1996
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September 30, 1995 $9.14 $8.45
December 31, 1995 $4.22 $3.75
March 31, 1996 $7.02 $5.62
June 30, 1996 $5.06 $5.06
Fiscal 1997
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September 30, 1996 $4.13 $3.31
December 31, 1996 $5.00 $4.25
March 31, 1997 $5.00 $3.75
June 30, 1997 $3.75 $3.00
*Prices reflect the 1 for 15 reverse stock split effective
May 3, 1996.
There were approximately 1,723 shareholders of record of the Company's
common stock on June 30, 1997.
The Company has not paid dividends on its Common Stock. The Company
intends to retain any future earnings to finance its growth.
Item 6. Management's Plan of Operation
The Company's financial condition at June 30, 1997 compared to June 30,
1996 changed dramatically. These changes occurred as a result of the sale of the
Company's Direct Mail subsidiary in November 1996.
Management believes that the sale of the operating subsidiary has had a
positive effect on the Company as it has positioned the Company to seek out new
acquisition candidates as it has done in the past.
For the year ended June 30, 1996 as well as previous years, the Company
has financed its working capital requirements, capital expenditures, and
acquisitions through cash flows generated from operations, debt, and sale of
common stock. Cash used in operations for the year ended June 30, 1997 was
$20,244 and cash used in operations for the year ended June 30, 1996 was
$577,253. Cash received from investing activities of $208,549 was comprised of
proceeds from the sale of subsidiary of $193,549 and returned deposits of
$15,000.
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During the last two fiscal years, the Company has made an effort to
dispose of all operating subsidiaries as well as to remove all non-de minimis
liabilities from the Company's financials in order to attract a single, large,
profitable, private company with which to potentially merge. On August 21, 1997,
the Company formally announced that it had entered into a letter of intent to
merge with a high performance materials company which fits the Company's
parameters for an acquisition candidate.
In order to secure the acquisition as well as provide future operating
revenue for the Company, Celestial has since received approximately $3,900,000
(and contemplates raising an additional $2,000,000) from prospective investors
in contemplation of an overseas private-placement of common stock, at a purchase
price of $3.00 per share. Of those amounts received, $3,600,000 has been
remitted to the enterprise with which the Company intends to merge in exchange
for promissory notes totaling $3,600,000 due December 30, 1997, bearing interest
and an annualized rate of seven percent (7%). The Company expects significant
growth in revenues and shareholder earnings as a result of this potential
acquisition and the related transactions.
Effects of Inflation
The impact of inflation on the Company's plan of operation has not been
significant.
Item 7. Financial Statements
The response to this Item is submitted as a separate section of this
report commencing on page F-1
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
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PART III
Item 9 Directors and Executive Officers of the Registrant
The current executive offices and directors of the Company are set
forth below:
Name Age Position
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Irwin Schneidmill 44 CEO, President, Chief Financial Officer
and Director(1)
Andrew L. Jaloza 37 Director(2)
James P. Lofland 45 Director(3)
Martin Ewenstein 62 Director(4)
Robert W. Trause 55 Director
Mark Wolchuck 45 Director
(1) Mr. Schneidmill was elected President, Chief Financial Officer, and
a Director of the Company on August 1, 1995.
(2) Mr. Jaloza resigned as Director of the Company effective October 7,
1996.
(3) Mr. Lofland resigned as Director of the Company effective October
7, 1996.
(4) Mr. Ewenstein resigned as Director of the Company effective
December 31, 1996.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Directors have received shares of the Company's common stock as remuneration for
their services as such and may be reimbursed for expenses incurred in connection
therewith, such as the cost of travel to Board meetings. Officers serve at the
pleasure of the Board of Directors until their successors have been elected and
have qualified.
Irwin Schneidmill has been the President, Chief Executive
Officer and the Director of the Company since August 1, 1995. From January 1991
to July 1993, Mr. Schneidmill had been a partner at Cataino & Schneidmill, CPAs,
a public accounting firm. From July 1993 to October 1994, Mr. Schneidmill had
been the sole stockholder of Irwin Schneidmill, P.C., a public accounting firm.
Mr. Schneidmill formed Success Direct, Inc., a New Jersey corporation in October
1995 and remains as the President of that Company. See "Certain Relationships
and Related Transactions".
Andrew L. Jaloza became a director of the Company in November
1995. For the last five years Mr. Jaloza has been a practicing attorney in New
York City. Mr. Jaloza is the sole shareholder of Nexim Corp., a corporation that
the Company had executed a letter of intent to purchase in September 1995. See
"Certain Relationships and Related Transactions". Mr. Jaloza resigned as
Director of the Company effective October 7, 1996.
James P. Lofland has been a director of the Company since
November of 1995. For the last five years he has owned and operated Lofland's
Restaurant in New York City. Mr. Lofland resigned as a Director of the Company
effective October 7, 1996.
Robert W. Trause has served as a Director since March 4, 1996.
He has twenty-five years of professional experience in administration,
management, marketing and sales within small to mid-size companies.
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Mr. Trause has served as a Professional Insurance Broker since 1991 with
Professional Insurance Associates, Inc., Carlsdadt, New Jersey, as well as a
consultant on employee benefits for Employer Solutions, Farmingdale, New York,
in 1990-1991. From 1988-1990 he was Senior Vice President of Administration for
J.T. Moran & Company, Incorporated, an investment banking firm where he directed
administration for the New York corporate headquarters and 26 branches (in
excess of 1000 employees).
Martin Ewenstein has served as a Director since March 4, 1996.
Mr. Ewenstein is Vice President of Yonmir Pearls, Inc., a privately held
importer of pearls. Prior to 1991, he was employed by the CBS for twenty (20)
years as a Corporate Planning Economist. Furthermore, Mr. Ewenstein has worked
as a book publisher, and a real estate entrepreneur. Mr. Ewenstein received a
Master of Economics degree from Columbia University. Mr. Ewenstein resigned as a
Director of the Company effective December 31, 1996.
Mark Wolchock has served as a Director since January 8, 1997.
He has also been employed as Regional Sales Manager for the Cannon Corporation,
a publicly held corporation from 1985 until 1991. Currently, Mr. Wolchock is
acting as Regional Sales Manager of Baxter Health Care, a public corporation and
President of Majestic Solutions Inc., a privately held corporation.
Item 10. Executive Compensation
Mr. Irwin Schneidmill became the President and Chief Executive
Officer of the Company in August, 1995 at an annual salary of $140,000 per
annum. In consideration of his employment by the Company, Mr. Schneidmill also
received and beneficially owns 66,665 options of the Company which are
immediately exercisable at $3.00 per share pursuant to a Stock Option
Certificate and Agreement dated September 15, 1995. The options expire in
September 1998. In addition, the Company pays $570 per month for the lease on
Mr. Schneidmill's car plus automobile insurance. Mr. Schneidmill has forgone
large portions of his salary and other benefits during fiscal years 1995, 1996
and 1997 in order to assist the Company in meeting its cash flow needs and to
support its capital expenditures. Mr. Schneidmill also participates in the
Company's group health insurance plan.
The following table discloses for the fiscal years ended
December 31, 1995, June 30, 1996 and 1997, individual compensation information
relating to the chief executive officer of the Company and the executive
officers of the company who earned in excess of $100,000 during 1997 (the "Named
Executive Officers").
10
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Name and Salary Bonus Other Annual Restricted Options LTIP All Other
Principal Position Compensation Stock Awards /SARS Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
($)/(1) ($) ($) ($) ($) ($)
Irwin Schneidmill
Chief Executive Officer &
President (2)
1997 140,000 0 - 0 0 0 0
1996 140,000 0 - 0 0 0 0
1995 45,000 0 - 0 0 0 0
</TABLE>
(1) Mr. Schneidmill has forgone large portions of his salary and other
benefits during fiscal years 1995, 1996 and 1997 in order to assist the
Company in meeting its cash flow needs and to support its capital
expenditures. The amounts reported above for fiscal year 1995 were paid to
Mr. Schneidmill by Success Direct, Inc. which was a wholly owned
subsidiary of the Company, but during 1994 and 1995 was owned by a
corporation not related to the Company. However, because the financial
results of the Company have been consolidated with those of Success
Direct, Inc. retroactively to July 1994 by reason of common ownership,
compensation and other benefits paid to Mr. Schneidmill by Success Direct,
Inc. have been included in the above table.
(2) Mr. Schneidmill became President and Chief Executive Officer of the
Company in August, 1995.
Option/SAR Grants In Last Fiscal Year
No option grants were made during 1997 to the Executive officers.
Aggregated Option/SAR Exercises In Last fiscal Year and F/Y End
Option/SAR Values
The following table sets forth information with respect to option exercises and
fiscal year-end option values for the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Value Options/SARs in-the-money Options/SARs at
On Acquired Realized at FY-End FY-End (1)
Name Exercise (%) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ --- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Irwin Schneidmill 0 - 66,665/0 (2) $0.00/0
</TABLE>
- --------------
(1) Based upon the bid price of the Company's Common Stock on June 30, 1997 of
$3.00.
(2) 66,665, adjusted to reflect a 1 for 15 share reverse stock split,
effective May, 1996.
(3) No stock appreciation rights ("SAR") were granted in 1996-1997.
Employment and Consulting Agreements
Mr. Schneidmill has entered into a five-year employment
agreement dated March 1, 1996 with the Company to act as President and Chief
Executive Officer; which provides for an initial annual base salary of $140,000.
Mr. Schneidmill has forgone large portions of his compensation and other
benefits from the Company during fiscal years 1995, 1996 and 1997 in order to
assist the Company in meeting its cash flow needs and to support its capital
expenditures. Under the employment agreement, Mr. Schneidmill also receives
disability insurance, hospitalization, major medical, vacation and other
employee benefits, reimbursement of reasonable business expenses incurred on
behalf of the Company, and use of Company-owned vehicles.
11
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of June 30, 1997, the record and
beneficial ownership of Common Stock of the Company by each officer and
director, all officers and directors as a group, and each person known to the
Company to own beneficially or of record five percent or more of the outstanding
shares of the Company:
Number of Percentage
Shares Owned of Shares
Name and Address Beneficially(1)(3) Outstanding
- ---------------- ------------------ -----------
Irwin Schneidmill(2) 94,339 7.56%
20 Roble Road
Suffern, NY 10901
John L. Patten 103,316 8.28%
5 Saddle Hill Road
Far Hills, NJ 07931
Performance Capital Corp.(4) 120,983 9.70%
345 Kinderkamack Road, Suite F
Westwood, NJ 07065
Cathy Santo ** 3,334 0.00%
Robert Trause ** 15,000 0.01%
Mark Wolchock ** 2,500 0.00%
Officers and directors 115,173 9.23%
as a group (2 persons)(2) **
- ---------------------
** Unless otherwise specified, the address of each named person is c/o 382
Route 59, Section 310, Monsey, NY 10952.
(1) Shares of Common Stock which are not outstanding but which a person has
the right to acquire within sixty days pursuant to outstanding options are
deemed outstanding for the purpose of computing such person's ownership of
Common Stock owned by such person, but are not deemed to be outstanding
for the purpose of computing number of shares or the percentage of Common
Stock owned by any other person.
(2) Includes 66,665 shares issuable upon exercise of currently exercisable
options (adjusted to reflect the Company's May 1996 1 for 15 share reverse
stock split). See "Executive Compensation."
(3) Does not include 258,853 of Preferred Stock of the Company which is
currently exercisable into Common Stock.
(4) By virtue of his positions as Chief Executive Officer and President of
Performance Capital Corp., Mr. Formicola may be deemed to have voting and
investment power with respect to, and therefore may be deemed beneficial
owner of, Performance Capital Corp.'s ownership of the Company.
12
<PAGE>
Item 12. Certain Relationships and Related Transactions
On August 29, 1995 the Company purchased, as of July 1, 1995, all of
the issued and outstanding common stock of Success Direct, Inc., a mail order
business products company ("Success"). The principal stockholder of Success, Mr.
Irwin Schneidmill who owned 41.5% of Success, became the President and Chief
Executive Officer of the Company on August 1, 1995.
Simultaneously with the acquisition of Success, Success assigned to the
Company its agreement to purchase certain business assets from Re-Prod, Inc.,
including the name Remarkable Products, and the Company consummated the
transaction with Re-Prod, Inc. The assets purchased from Re-Prod, Inc. are
related to the direct mail industry.
In connection with the above, the Company paid to Mr. Schneidmill
415,000 shares (27,667, post-split) of the restricted common stock of the
Company. Additionally, in connection with the acquisition of certain assets of
Re-Prod, Inc., Mr. Schneidmill and Mr. John Formicola a stockholder of the
Company, have personally guaranteed the payment by the Company of a $250,000
promissory note payable to Re-Prod, Inc. This note bares interest at 9% per
annum and is to be paid monthly by the Company in varying amounts by applying
the income received from renting its mailing list on a monthly basis. On
November 20, 1995, the Company contends there was $210,127.53 principal amount
remaining under the note.
As part of the acquisition, Re-Prod, Inc., also received 750,000 shares
(50,000 shares, post-split) of the restricted common stock of the Company.
375,000 (25,000, post-split) of such 750,000 were personally guaranteed by Mr.
Schneidmill to have a market value of $393,750 ($1.05 per share) on January 1,
1996. The value of the common stock at February 1, 1996 was approximately
$78,750. The Company and Mr. Schneidmill and Formicola personally, have also
executed a "Put Option Agreement", whereby Re-Prod, Inc. can put these 375,000
(25,000, post-split) shares to the Company as of January 1, 1996 and demand
payment of $393,750. Such demand was made on January 31, 1996. Furthermore, Mr.
Schneidmill and Mr. Formicola have guaranteed that the remaining 375,000
(25,000, post-split) shares of the Company's common stock held by Re-Prod, Inc.
will have a market value of $412,500 on July 1, 1996. The shares having a
guaranteed value at July 1, 1996 are subject to an identical Put Option
Agreement.
The Company, together with Mr. Schneidmill and Mr. Formicola have
contended that the assets purchased from Re-Prod, Inc. were not as represented
in the purchase agreement and are seeking a renegotiation of the consideration
paid for those assets, including a renegotiation of their personal guarantees.
See "Litigation".
The Company has agreed to indemnify Mr. Schneidmill and Mr. Formicola
against any liability resulting from these guarantees.
On November 21, 1996, the Company, effective October 1, 1996, sold all
of the issued and outstanding capital stock (the "Shares") of Remarkable to
Dynamic Products Corp. (the "Dynamic"), for $1,406,250.00. The assets of
Remarkable included equipment, inventory, and accounts receivable. The
consideration paid to the Company was as follows: (i) repayment of intercompany
balance due to Remarkable as of November 20, 1996 of $106,450.85; (ii) payment
on November 21, 1996, of $43,539.15 in cash; (iii) a promissory note for
$450,000.00 due February 21, 1997, payment of which was extended until March 21,
1997; and (iv) assumption of certain liabilities of the Registrant totaling
$806,250.00. The Company realized a gain of $431,512 on the sale. The purchase
price of Remarkable was determined in the manner of an arms length transaction.
The principles followed by the parties in determining the consideration were as
follows: Shares of Remarkable were valued at book value, and the repayment of
intercompany balance on November 20, 1996, the cash payment on November 21,
1996, the note payable due on March 21, 1997, and the assumption of certain
liabilities of the
13
<PAGE>
Company were each calculated at cash value. An officer, director, and
stockholder of the Purchaser is also the President, director and stockholder of
the Company. The transaction was unanimously approved and ratified by the
Company's Board of Directors in accordance with Nevada corporate law.
Pursuant to an agreement dated June 20, 1997, the Company agreed to
transfer to Mr. John L. Patten, a significant shareholder of the Company, its
rights under the remaining past due $300,000 subordinated note receivable from
the Purchaser in exchange for Mr. Patten's assumption of the Company's
obligations for the U.S. Powder Coaters, Inc. note payable of $170,000 to R.M.
Engineering. To date, R.M. Engineering has not released the Company from its
obligation under the note payable; accordingly, the liability remains recorded
at June 30, 1997. See "Notes to Consolidated Financials." The transaction was
unanimously approved and ratified by the Registrant's Board of Directors in
accordance with Nevada corporate law.
In consideration of Mr. Patten having assumed various liabilities of
the Company, indemnifying the Company in certain litigation matters as well as
for other services rendered to the Company, the Company issued 93,316 shares of
common stock to Mr. Patten in June, 1997. See "Litigation."
Performance Capital Corporation which is partially owned by Mr. John
Formicola had lent Success $250,000 prior to its acquisition by the Company in
the form of five promissory notes in the amount of $50,000 each dated December
15, 1994 and January 15, February 15, March 15 and April 15, 1995. Each bearing
interest at the rate of 10% per annum. Performance Capital Corporation had owned
of the outstanding common stock 41.5% of Success at that time. The Company
assumed that debt upon the acquisition of Success and paid to Performance
Capital Corporation 415,000 shares of common stock of the Company. The terms of
that debt are as follows: all interest is to accrue through 1995 and payments on
interest are to commence February 1, 1996 and accrued interest shall be paid in
six equal monthly installments. Payments on principal are to commence February
1, 1997 and shall be paid monthly, together with interest, for 60 months.
Subsequent to the acquisition of Success by the Company, Mr. Formicola and or
Performance Capital have lent the Company an aggregate of approximately $205,000
for working capital purposes. This $205,000 is subject to an 11% demand
promissory note date August 1, 1995.
On August 31, 1995, the Company entered into a purchase agreement
whereby it sold all of its wholly owned subsidiaries with the exception of U.S.
Powder Coatings, Inc. to ATCO Corporation ("Turkey DeLite" or "Purchaser") for
$1,900,000 in cash, promissory notes and common stock. Turkey DeLite's principal
executive officer, Mr. Bob J. Sudderth, is also the Chairman of the Board of
Directors of the Company. The subsidiaries referred to herein include Valves
International, Inc., Central Valve Services, Inc., Alloy Valve International,
Inc. and Gulf Coast Powder Coatings, Inc. The sales price consisted of a
combination of 1,550,000 shares of common stock of the Purchaser, issuance of a
$150,000 promissory note and the payment of $200,000 contingent upon the
successful completion of a stock offering by the Purchaser. Currently, the
Company's largest asset is its shareholdings of Turkey DeLite.
Mr. Sudderth had sold certain equipment and facilities to Central Valve
Services, Inc., which had been a subsidiary of the Company at the time of such
sale. Mr. Sudderth is owed approximately $600,000 from Central Valve Services,
Inc. as a result of such sale. The Company is not liable for such debt.
In September, 1995, the Company executed a letter of intent to purchase
all of the issued and outstanding stock of Nexim Corp., a Nevada Corporation,
("Nexim"), 100% of which is owned by Mr. Andrew Jaloza who became a director of
the Company in January, 1996. Upon the execution of the letter of intent, the
Company paid Mr. Jaloza $100,000 as a down payment for the purchase of Nexim.
Nexim owns a technology known as Medphone, a medical device product. The Company
also invested, approximately, an additional $62,000 toward development of this
product. Nexim has had no revenues and is not an operating company. In April,
1996, the Company decided not to pursue the acquisition of Nexim. The ultimate
recovery of the invested funds is uncertain. During the year ended June 30,
1996, the Company wrote off its entire investment in this venture,
14
<PAGE>
which is included in general and administrative expenses.
Richard Greene, the Company's former President and legal counsel
received 100,000 shares of the Company's common stock in full payment of legal
services previously rendered to the Company. These shares were registered for
Mr. Greene pursuant to a Form S-8 filed with the Securities and Exchange
Commission on September 18, 1995.
15
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-B).
Exhibit
Numbers Description
------- -----------
* 3(a) - Certificate of Incorporation of the Company
* 3(b) - Bylaws of the Company
** 4(a) - Form of Common Stock Certificate
** 10(a) - Purchase Agreement between the Company and Gulf Coast
Powder Coatings, Inc., and ATCO Corporation for the
purchase of Gulf Coast Powder Coatings, Inc. by ATCO
Corporation dated August 31, 1995.
** 10(b) - Purchase Agreement between the Company and Valves
International, Inc., Central Valve Services, Inc,
Alloy Valve International, Inc. (d/b/a CVC
International and/or T.J. Lingle International)
(collectively, the "Subsidiaries") and ATCO
Corporation for the purchase of the Subsidiaries by
ATCO Corporation, dated August 31, 1995.
** 10(c) - Purchase Agreement between Success Direct, Inc.,
Irwin Schneidmill, Performance Capital Corporation,
Martin Ewenstein, Brian Ugles, John Ecke and Cathy
Santo ("Sellers") and the Company, for the purchase
by the Company of Success Direct, Inc.
** 10(d) - Assignment of contract between Success Direct, Inc.
and the Company for the rights to purchase assets of
Re-Prod, Inc., dated August 31, 1995.
** 10(e) - Purchase Agreement between the Company and Re-Prod
Inc., for the purchase of certain assets of Re-Prod,
Inc., dated August 31, 1995.
*** 10(f) - Promissory Note in the principal amount of $205,000
bearing interest at 11% per annum between the Company
as borrower and Performance Corporation as lender,
dated August 1, 1995.
*** 10(g) - Promissory Notes dated December 15, 1994 through
April 15, 1995 in the aggregate amount of $250,000
($50,000) bearing interest at 10% per annum between
Success Direct, Inc. as borrower and Performance
Capital Corporation as lender.
*** 10(h) - Employment Agreement between Irwin Schneidmill and
the Company dated March 1, 1996.
*** 10(i) - Supply contracts between the Company and V.W.
Eimicke, Ltd. each dated September 6th, 1990.
16
<PAGE>
*** 10(j) - Indemnity Agreement between the Company and Irwin
Schneidmill and John Formicola, indemnifying them
against liabilities arising from the acquisition of
assets of Re-Prod, Inc.
- Subsidiaries of the Company
*** 10(k) - Stock Option Certificate and Agreement between the
Company and Irwin Schneidmill dated September 15,
1995.
10(l) - Assumption Agreement between John Patten and the
Company for the R. M. Engineering note and the
Dynamic subordinated note.
10(m) - Indemnification Agreement between John Patten and the
Company for the Johnson vs. Central Valve Services,
Inc., et al., litigation.
(b) Reports on Form 8-K - The Registrant did not file any reports on Form
8-K during the last quarter of the fiscal year ended June 30, 1997.
* Incorporated by reference to the Company's Registration Statement on
Form S-8 dated September 18, 1995.
** Incorporated by reference to the Company's Report on Form 8-K dated
August 31, 1995.
*** Incorporated by reference to the Company's Report on Form 10-KSB for
the period ended June 30, 1995.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CELESTIAL VENTURES CORPORATION
By: /s/ IRWIN SCHNEIDMILL
----------------------------
Irwin Schneidmill
President, Chief Executive, and
Financial Officer and a Director
Dated: October 1, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons, which include the
Chief Executive Officer, the Chief Financial Officer and a majority of the Board
of Directors, on behalf of the Registrant and in the capacities and on the dates
indicated:
Name Title Date
- ---- ----- ----
/s/ Irwin Schneidmill President Chief Executive October 1, 1997
- ---------------------- and Financial Officer, and
Irwin Schneidmill a Director (Principal
Executive and Financial Officer)
/s/Robert Trause Director October 1, 1997
- ----------------------
Robert Trause
/s/Mark Wolchock Director October 1, 1997
- ----------------------
Mark Wolchock
18
<PAGE>
CELESTIAL VENTURES CORPORATION
AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 1996 and 1996
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders
Celestial Ventures Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Celestial
Ventures Corporation and Subsidiaries as of June 30, 1997, and the related
consolidated statements of operations, stockholders' (deficit), and cash flows
for the years ended June 30, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Celestial Ventures
Corporation and Subsidiaries as of June 30, 1997, and the results of its
operations and its cash flows for the years ended June 30, 1997 and 1996 in
conformity with generally accepted accounting principles.
RAICH ENDE MALTER LERNER & CO.
East Meadow, New York
September 18, 1997
F-2
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Current assets
Cash $ 6,435
Other receivable 5,000
--------------
Total Assets $ 11,435
==============
Liabilities and Stockholders' (Deficit)
Current Liabilities
Accrued professional fees $ 14,729
Other accrued expenses 1,625
--------------
16,354
Other Liabilities
Net liabilities of discontinued operations 170,000
--------------
Total Liabilities 186,354
--------------
Stockholders' (Deficit)
Convertible Preferred Stock - $.001 par value; authorized
50,000,000 shares, issued and outstanding 258,853
shares 259
Common Stock - $.001 par value; authorized 50,000,000
shares, issued and outstanding 1,247,869 shares 1,248
Additional paid-in capital 5,239,938
Accumulated (deficit) (5,416,364)
--------------
Total Stockholders' (Deficit) (174,919)
--------------
Total Liabilities and Stockholders' (Deficit) $ 11,435
==============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
June 30,
------------------------------
1997 1996
=========== ===========
<S> <C> <C>
Sales $ - $ -
Cost of Sales - -
----------- -----------
Gross Profit - -
----------- -----------
Operating (Income) and Expenses
General and administrative 316,940 449,490
Other expense 320,074 -
Other income (5,000) (11,219)
----------- -----------
632,014 438,271
----------- -----------
(Loss) from Continuing Operations (632,014) (438,271)
Discontinued Operations - (loss) from operations of
discontinued subsidiaries - net of taxes (13,375) (12,869)
----------- -----------
(Loss) before Extraordinary Item (645,389) (451,140)
Extraordinary Item - gain on sale of subsidiary -
net of taxes 431,512 -
----------- -----------
Net (Loss) $ (213,877) $ (451,140)
=========== ===========
Weighted Average Common Shares Outstanding 1,140,741 878,239
=========== ===========
(Loss) Per Share from Continuing Operations $ (.55) $ (.50)
=========== ===========
(Loss) Per Share before Extraordinary Item $ (.57) $ (.51)
=========== ===========
Net (Loss) Per Share $ (.19) $ (.51)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' (Deficit)
For the Years Ended June 30, 1997 and 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
------------------------- --------------------------
Shares Amount Shares Amount
=======================================================
<S> <C> <C> <C> <C>
Balance - July 1, 1995 889,426 $ 889 660,391 $ 660
Stock issued for cash - - 194,500 194
Stock issued for legal services
rendered - - 13,333 13
Debt conversions to stock - - 99,983 100
Conversions of preferred stock (617,573) (617) 40,421 41
Net (loss) - - - -
Acquisition of Success Direct
(Pooling) - - 66,667 67
Issuance of shares in reverse split - - 891 1
----------- -------- ------------ --------
Balance - June 30, 1996 271,853 272 1,076,186 1,076
Stock issued for director's fees - - 17,500 18
Stock issued for financing fee - - 10,000 10
Stock issued for loan guarantees - - 93,316 93
Reclass of redeemable common
stock - - 50,000 50
Conversion of preferred stock (13,000) (13) 867 1
Net (loss) - - - -
----------- -------- ------------ --------
Balance - June 30, 1997 258,853 $ 259 1,247,869 $ 1,248
=========== ======== ============ ========
<CAPTION>
Additional
Paid-In Accumulated
Capital (Deficit) Total
====================================================
<S> <C> <C> <C>
Balance - July 1, 1995 $ 4,165,447 $ (4,467,286) $ (300,290)
Stock issued for cash 365,707 - 365,901
Stock issued for legal services
rendered 49,987 - 50,000
Debt conversions to stock 234,858 - 234,958
Conversions of preferred stock 576 - -
Net (loss) - (451,140) (451,140)
Acquisition of Success Direct
(Pooling) 933 (284,061) (283,061)
Issuance of shares in reverse split (10) - (9)
------------- -------------- ------------
Balance - June 30, 1996 4,817,498 (5,202,487) (383,641)
Stock issued for director's fees 60,007 - 60,025
Stock issued for financing fee 42,490 - 42,500
Stock issued for loan guarantees 319,981 - 320,074
Reclass of redeemable common
stock (50) - -
Conversion of preferred stock 12 - -
Net (loss) - (213,877) (213,877)
------------- -------------- ------------
Balance - June 30, 1997 $ 5,239,938 $ (5,416,364) $ (174,919)
============= ============== ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows Page 1 of 2
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
June 30,
------------------------------
1997 1996
==============================
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) $ (213,877) $ (451,140)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
(Gain) on sale of subsidiary (731,512) -
Loss from discontinued operations 13,375 12,869
(Increase) decrease in:
Other receivables (5,000) -
Increase (decrease) in:
Accounts payable (5,726) (49,095)
Accrued expenses (3,271) 19,625
Accretion on redeemable common stock - 56,250
Transfer of notes receivable 300,000 -
Expenses paid through the issuance of common stock 422,599 63,147
------------ --------------
Net cash used in continuing operations (223,412) (348,344)
Net cash provided by (used for) discontinued operations 21,298 (229,009)
------------ --------------
(202,114) (577,353)
------------ --------------
Cash Flows from Financing Activities
Proceeds from issuance of common stock - 365,901
Proceeds of loans from stockholders - 25,000
Proceeds of long-term debt - 197,100
------------ --------------
- 588,001
------------ --------------
Cash Flows from Investing Activities
Deposits returned (paid) 15,000 (14,210)
Proceeds from sale of subsidiary 193,549 -
------------ --------------
208,549 (14,210)
------------ --------------
Net Increase (Decrease) in Cash 6,435 (3,562)
Cash - beginning of period - 3,562
------------ --------------
Cash - end of period $ 6,435 $ -
============ ==============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows Page 2 of 2
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
June 30,
----------------------------
1997 1996
============================
<S> <C> <C>
Supplemental Disclosures
Cash paid for:
Interest $ - $ 6,612
============ ============
Non-cash investing and financing transactions:
Acquisition of subsidiary through issuance of
common stock $ - $ 1,000
============ ============
Issuance of redeemable common stock and
debt in acquisition of subsidiary $ - $ 1,000,000
============ ============
Stockholder loans converted to common stock $ - $ 25,000
============ ============
Long-term debt converted to common stock $ - $ 234,598
============ ============
Common stock issued for services rendered $ 102,525 $ 50,000
============ ============
Note received upon sale of subsidiary $ 450,000 $ -
============ ============
Common stock issued for debt guarantees and
other services $ 320,074 $ -
============ ============
Intercompany payable extinguished through sale
of subsidiary $ 106,451 $ -
============ ============
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended June 30, 1997 and 1996
- -------------------------------------------------------------------------------
1 - Business and Summary of Significant Accounting Policies
Celestial Ventures Corporation ("CVC") was organized under the laws of
the State of Nevada on January 28, 1987. CVC purchased a wholly-owned
subsidiary on July 1, 1995, Success Direct, Inc., which is in the
business of Business to Business direct mail marketing in the United
States and Canada. In December, 1995, the corporate name of Success
Direct, Inc. was changed to Remarkable Office Products, Inc. Effective
October 1, 1996, CVC sold Remarkable to Dynamic Products Corp. ("DPC").
As of June 30, 1997, all of the operating divisions of the Company have
been sold.
Significant accounting policies follow:
a. Principles of Consolidation - The consolidated financial statements
include the accounts of CVC and its subsidiaries (the "Company")
after elimination of intercompany accounts and transactions.
b. Income Taxes - Current income taxes are based on the taxable income
for the year, as measured by the current year's tax returns.
Deferred income taxes arise primarily due to various temporary
differences between financial and income tax reporting. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
c. Reverse Stock Split - On May 3, 1996, the Company effected a
1-for-15 reverse stock split which has been reflected in these
financial statements.
d. Earnings Per Share - Earnings per share is computed by dividing the
net loss by the weighted average number of shares outstanding
during the year. Common stock equivalents have not been included in
the earnings-per-share computation because of their anti-dilutive
effect.
e. Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
f. Reclassifications - Various accounts in the prior year financial
statements have been reclassified for comparative purposes to
conform with the presentation in the current year's financial
statements. These reclassifications had no impact on the results of
operations.
Continued
F-8
<PAGE>
2 - Income Taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
recognized for financial reporting and the amounts recognized for
income tax purposes. The significant components of the deferred tax
asset are as follows:
June 30,
--------------------------
1997 1996
=========== ===========
Assets
Net operating loss carryforwards $ 306,000 $ 408,000
Less: Valuation allowance 306,000 408,000
----------- -----------
$ - $ -
=========== ===========
The net deferred tax asset continues to be fully offset by a valuation
allowance due to uncertainties surrounding the ultimate realization of
those assets. At June 30, 1997, approximately $900,000 of net operating
loss carryforwards, which expire in various periods through 2012, are
available to offset future taxable income. The valuation allowance
decreased by $302,000 as compared to June 30, 1996 due to utilization
of net operating loss carryforwards.
3 - Acquisition of Subsidiary and Name Change
Effective July 1, 1995, the Company consummated a business combination
with Success Direct, Inc. ("Success") a mail order products company.
The acquisition, which resulted in the Company's issuance of 66,667
shares (as adjusted for the subsequent reverse stock split by the
Company) of restricted common stock in exchange for all of the stock of
Success, was accounted for as a reverse acquisition. A reverse
acquisition is equivalent to the issuance of stock by the acquired
company for the net monetary assets of the acquirer, accompanied by a
recapitalization. The accounting for a reverse acquisition is similar
to that of a pooling of interest, as the historical cost basis of the
assets and liabilities is utilized and no goodwill is recorded. In
connection with this transaction, Success became a wholly-owned
subsidiary of the Company and the former principal stockholder of
Success became the president, chief executive officer, and a
stockholder of the Company.
In December, 1995, the corporate name of Success was changed to
Remarkable Office Products ("Remarkable"). Remarkable was sold to DPC
effective October 1, 1996 (see Note 5 for a description of the sale).
Continued
F-9
<PAGE>
4 - Acquisition of Certain Assets of Re-Prod, Inc. and Litigation
Settlement
In connection with the acquisition of Success, the Company was assigned
a contract to purchase certain assets of Re-Prod, Inc. for $1,315,000.
This acquisition, effective July 1, 1995, was accounted for as a
purchase.
The purchase price was paid as follows:
Cash $ 315,000
Note Payable 250,000
Redeemable Common Stock 750,000
-------------
$ 1,315,000
=============
Two of the Company's stockholders personally guaranteed the value of
the stock (through the issuance of put options) and the payment of the
note.
On February 21, 1996, the Company initiated a lawsuit against Re-Prod,
Inc., in Federal Court in the Southern District of New York, White
Plains, claiming a misrepresentation of the value of the assets
acquired. The Company stopped payments on the note payable and did not
honor the options. The liability recorded with regards to the note
payable and the guaranteed value of the redeemable common stock
amounted to $1,035,698 at June 30, 1996.
On March 14, 1996, Re-Prod, Inc. counter-claimed against the Company,
claiming, among other things, breach of contract, failure to pay on
promissory notes, and failure to honor guarantees.
On November 15, 1996, the Company and Re-Prod, Inc. entered into, and
the District Court approved by order, a Stipulation of Settlement
("Settlement") of all claims and counter claims. The Company paid to
Re-Prod, Inc. the $6,039 balance of an escrow account provided for in
the purchase agreement and $400,000. The Company was also required to
make additional payments to Re-Prod, Inc. on September 1, 1997 of
$300,000 plus the amount equal to one-half of the excess (if any) of
the closing value of Re-Prod, Inc.'s shares of the Company's common
stock (based upon the mean between the bid/asked price) at that date
over $300,000. (As a result of its May, 1996 1-for-15 stock split, the
Company issued to Re-Prod, Inc. certificates for 50,000 new shares in
exchange for its existing certificate for 750,000 pre-split shares of
common stock.) A stockholder and officer of the Company (the
"Guarantors") unconditionally guaranteed the prompt and full payment
and performance of all of the Company's obligations under the
Settlement.
Continued
F-10
<PAGE>
If the Company is in default on making any payment due or performing
any obligation required under the Settlement, Re-Prod, Inc. would have
the right to apply to the Court for entry of judgment against the
Company, and the Guarantors, jointly and severally, for $1,100,000 less
any sums previously paid to Re-Prod, Inc. under the Settlement. Upon
full satisfaction of the obligations under the Settlement and the Asset
Purchase Agreement, Re-Prod, Inc.'s counter claim will be dismissed.
Due to the uncertainty regarding the default provision, no gain or loss
was recorded in connection with this transaction. The liability of
$1,035,698, which was recorded as of June 30, 1996 in connection with
the Settlement, was assumed by DPC as part of its purchase of
Remarkable as disclosed in Note 5.
5 - Discontinued Operations, Sale of Subsidiary and
Related Party Transactions
On November 21, 1996, (effective October 1, 1996) the Company sold all
of the issued and outstanding capital stock of Remarkable to DPC, a
company under common management, for $1,406,250. The president and
chief executive officer of the Company is also the president, chief
executive officer and principal stockholder of DPC. In exchange for all
of the stock of Remarkable, the Company received from DPC $600,000,
payable in the form of a promissory note of $450,000 (of which $150,000
has been collected); a cash payment of $43,549 and forgiveness of the
recorded intercompany balance due from the Company to Remarkable of
$106,451; and assumption by DPC of certain liabilities of the Company
in the amount of $806,250. In connection with the disposal of this
wholly-owned subsidiary, the Company realized a gain of approximately
$731,512, calculated as the difference between the value received of
$1,406,250 and the net assets of $674,738 of Remarkable at October 1,
1996. On June 20, 1997, the Company entered into an agreement with John
Patten, a significant stockholder, whereby the Company transferred its
rights under the remaining past due $300,000 note receivable from DPC
in exchange for Mr. Patten's assumption of the Company's obligation for
the USPC note payable of $170,000 to R.M. Engineering discussed below.
To date, R.M. Engineering has not released the Company from its
obligation under the note payable; accordingly, the liability remains
recorded at June 30, 1997. The total gain calculated above has been
reduced by this transfer resulting in a net gain on sale of subsidiary
of $431,512. Since Remarkable was sold within two years of its
acquisition, which was accounted for similar to a pooling of interest,
the gain is shown as an extraordinary item. The prior period financial
statements have been restated to reflect the discontinued operations of
Remarkable.
In 1994, the Company discontinued the operations of its wholly-owned
subsidiary, U.S. Powder Coaters, Inc. ("USPC"), whose principal
business activity consisted of treating and coating metal and non-metal
materials. During the year ended June 30, 1996, the Company settled
certain outstanding payable obligations of USPC, resulting in the
recognition of a gain in the amount of $66,957.
Continued
F-11
<PAGE>
As of June 30, 1997 and 1996, the Company's aggregate net liabilities
relating to the discontinued operations of USPC amounted to $170,000
and $188,500, respectively, of which $170,000 represents a demand note
obligation due to R.M. Engineering relating to a previous equipment
purchase. The note is due on demand and bears interest at 4%. The
obligation to pay this note has been assumed by Mr. Patten, as
previously discussed.
During the years ended June 30, 1997 and 1996, the Company's results
from discontinued operations, excluding the gain on its disposal of
Remarkable, consisted of the following:
Remarkable OfficeU.S. Powder
Products, Inc. Coaters, Inc. Total
===============================================
1997
Income $ 205,192 $ - $ 205,192
Expenses 218,567 - 218,567
------------- ---------- -------------
$ (13,375) $ - $ (13,375)
============= ========== =============
1996
Income $ 1,071,338 $ 66,957 $ 1,138,295
Expenses 1,151,164 - 1,151,164
------------- ---------- -------------
$ (79,826) $ 66,957 $ (12,869)
============= ========== =============
In connection with his guarantees of various liabilities of the Company
and other services rendered, the Company issued 93,316 shares of common
stock to Mr. Patten in June, 1997. The related expense of $320,074 is
included in other expense.
In September, 1995, the Company executed a letter of intent to purchase
all of the issued and outstanding stock of Nexim Corp., a Nevada
Corporation, ("Nexim"), 100% of which is owned by Mr. Andrew Jaloza who
became a director of the Company in January, 1996. Upon the execution
of the letter of intent, the Company paid Mr. Jaloza $100,000 as a down
payment for the purchase of Nexim. Nexim owns a technology known as
Medphone, a medical device product. The Company also invested
approximately an additional $62,000 toward development of this product.
Nexim has had no revenues and is not an operating company. In April,
1996, the Company decided not to pursue the acquisition of Nexim. The
ultimate recovery of the invested funds is uncertain. During the year
ended June 30, 1996, the Company wrote off its entire investment in
this venture, which is included in general and administrative expenses.
Richard Greene, the Company's former president and legal counsel,
received 100,000 shares of the Company's common stock in full payment
of legal services previously rendered to the Company. These shares were
registered for Mr. Greene pursuant to a Form S-8 filed with the
Securities and Exchange Commission on September 18, 1995.
Continued
F-12
<PAGE>
6 - Litigation
On April 23, 1997, shareholders initiated a lawsuit against the
Company, among others, in the District Court of Harris County, Texas,
80th Judicial District, in the matter Johnson vs. Central Value
Services, Inc., et. al. (No. 96-42006). The plaintiffs allege that they
were injured as a result of certain misrepresentations made by their
investment manager (unconnected to the Company), which induced the
plaintiffs into investing monies into the Company and its wholly-owned
subsidiary, Central Value Services, Inc. ("Central"). The alleged
investment includes shares of common stock of the Company, as well as
numerous promissory notes issued by Central which were guaranteed by
the Company. Central was sold by the Company in 1995.
The Plaintiffs claim that the notes are in default and the shares are
trading below the promised value. Accordingly, the plaintiffs now seek
damages from the Company (as well as other named parties) to recoup
those monies lost as a result of these alleged false representations
and violations of the Texas Deceptive Trade Practices Act in the amount
of $62,000 plus interest, costs and punitive damages.
The Company has not yet appeared in the matter. The other parties to
the litigation have agreed to address this matter in non-binding
mediation. Should the parties fail to resolve this matter at that time,
the court has preliminarily scheduled a hearing for November 12, 1997.
Although the Company has not yet appeared in the matter, Mr. Patten,
pursuant to an agreement dated August 25, 1997, has agreed to indemnify
the Company and hold it harmless for any costs incurred by the Company
or for any potential award or settlement that might arise in the
future. In consideration of this, as well as other assumptions of
various liabilities of the Company, as well as for other services
rendered to the Company, the Company issued 93,316 shares of common
stock to Mr. Patten in June, 1997. (See Note 5). Accordingly, no
liability has been accrued regarding this matter.
7 - Warrants
As of June 30, 1997, the Company had the following warrants
outstanding:
<TABLE>
<CAPTION>
Price
Shares Per Share Expiration Date
==========================================
<S> <C> <C> <C>
Private placement warrants 240,000 $ 22.50 October 3, 1998
Stock warrants held by officer 66,665 3.00 September 15, 1998
Stock warrants held by stockholder 66,665 3.00 September 15, 1998
Stock warrants held by financing company 35,000 3.50 September 17, 1998
-------
408,330
=======
</TABLE>
All of the above shares and price per share reflect the 15-to-1 reverse
stock split on May 3, 1996.
Continued
F-13
<PAGE>
8 - Subsequent Events
On August 21, 1997, the Company announced that it had entered into a
letter of intent to merge with a privately-owned high performance
materials company.
The Company has received approximately $3.9 million through September
18, 1997 from prospective investors, in contemplation of the Company's
offering of additional shares of common stock at a purchase price of
$3.00 per share. Of the amount received, $3.6 million has been remitted
to the enterprise with which the Company intends to merge, in exchange
for two notes due December 30, 1997 totaling $3.6 million, bearing
interest at 7%.
F-14
<PAGE>
AGREEMENT
Agreement, made this 20th day of June, 1997, by and between Celestial
Ventures Corporation ("Celestial"), a Nevada corporation, with a principal place
of business located at 382 Route 59, Section #310, Monsey, New York and John
Patten ("Patten"), residing at 5 Saddle Hill Road, Far Hills, New Jersey.
WITNESSETH
WHEREAS, pursuant to a past transaction, Celestial has a liability in
the form of note payable to R.M. Engineering (the "R.M. Note") in which
Celestial is to make payments to R.M. Engineering, principal in the amount of
$170,000; and
WHEREAS, pursuant to a past transaction, Celestial has an asset in the
form of a note receivable from Dynamic Products Corp. (the "Dynamic Note") in
which Celestial is to receive payments from Dynamic Products Corp. in the
principal amount of $300,000; and
WHEREAS, Celestial wishes to assign its rights and obligations under
the R.M. Note as well as the Dynamic Note (collectively "the Notes") to John
Patten; and
WHEREAS, John Patten wishes to assume Celestial's rights and
obligations under the Notes from Celestial;
NOW, THEREFORE, for one dollar and other valuable consideration for the
mutual covenants and agreements herein contained, the parties hereto, intending
to be legally bound, agree as follows:
(1) Patten shall assume all of Celestial's obligations under the R.M.
Note.
(2) Celestial shall assign all of its rights under the Dynamic Note to
Patten.
(3) Patten shall indemnify Celestial and hold it harmless with respect
to all obligations to be performed by Celestial under the R.M.
Note.
(4) Patten shall have no right to look to Celestial, or to seek any
damages from Celestial, in consequence of any failure of Patten to
receive any benefit under the Dynamic Note.
(5) This Agreement together with the Notes contain the entire
understanding of the Parties with respect to the subject matter
hereof. This Agreement
<PAGE>
supersedes all prior agreements and understanding between the
parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Agreement has been duly executed and delivered
by the duly authorized officer of Celestial, as well as by John Patten
individually, as of the date first above written.
CELESTIAL VENTURES CORPORATION
By:
------------------------------
Irwin Schneidmill, President
By:
------------------------------
John Patten
2
<PAGE>
INDEMNIFICATION AGREEMENT
This Agreement, made this 25th day of August, 1997, by and between
Celestial Ventures Corporation ("Celestial"), a Nevada corporation, with a
principal place of business located at 382 Route 59, Section #310, Monsey, New
York and John Patten ("Patten"), residing at 5 Saddle Hill Road, Far Hills, New
Jersey.
WITNESSETH
WHEREAS, Celestial has been named as a Defendant in the matter of Janet
M. Johnson, et al. vs. Celestial Ventures Corporation, et al., No. 96-42066, In
the District Court of Harris County, Texas (hereinafter the "Texas Litigation");
and
WHEREAS, Patten wishes to indemnify and save harmless Celestial from
and against any and all liability loss, damages, interest, judgments and liens,
and any and all costs and expenses (including, but not limited to counsel fees
and disbursements) incurred by Celestial in connection with the Texas
Litigation; and
WHEREAS, Celestial wishes to be so indemnified;
NOW, THEREFORE, for one dollar and other valuable consideration for the
mutual covenants and agreements herein contained, the parties hereto, intending
to be legally bound, agree as follows:
1. Patten will pay on behalf of Celestial any amount which Celestial is, or
becomes, legally obligated to pay because of the claim or claims made
against it in the Texas Litigation. Patten will indemnify and save harmless
Celestial from and against any and all liability loss, damages, interest,
judgments and liens, and any and all costs and expenses (including, but not
limited to counsel fees and disbursements) incurred by Celestial in
connection with the Texas Litigation. The payments which Patten will be
obligated to make under this agreement shall include, without limitation,
damages, judgments, settlements and costs, including the cost of
investigation, and cost of defense of the action, claims or proceedings and
appeals therefrom, and cost of attachment or similar bonds; provided
however, that Patten shall not be obligated to pay fines or other
obligations of fees imposed by law or otherwise, which he is prohibited by
applicable law from paying as indemnity or for any other reason.
2. This Agreement contains the entire understanding of the Parties with respect
to the subject matter hereof. This Agreement supersedes all prior agreements
and understanding between the parties with respect to the subject matter
hereof.
3. This Agreement shall be binding upon all successors and assigns of Patten
and shall inure to the benefit of Celestial's successors and assigns
(including any transferer of all, or substantially all of its assets and any
successor by merger, or operation of law)
<PAGE>
4. This agreement shall be governed by and construed in accordance with New
York law.
5. If any provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever, (i) the validity, legality and
enforceability of the remaining provisions of this agreement (including
without limitation, all portions of any paragraphs of this agreement
containing any such provision held to be invalid, illegal or unenforceable,
that are not by themselves invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this agreement (including, without limitation,
all portions of any paragraph of this agreement containing any such
provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable shall be construed so as to
give effect to the intent of the parties that Patten indemnify Celestial to
the fullest enforceable extent.
IN WITNESS WHEREOF, the Agreement has been duly executed and delivered
by the duly authorized officer of Celestial, as well as by John Patten
individually, as of the date first above written.
CELESTIAL VENTURES CORPORATION
By:
------------------------------
Irwin Schneidmill, President
By:
------------------------------
John Patten
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,435
<SECURITIES> 0
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,435
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,435
<CURRENT-LIABILITIES> 16,354
<BONDS> 0
0
259
<COMMON> 1,248
<OTHER-SE> (5,416,364)
<TOTAL-LIABILITY-AND-EQUITY> 11,435
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 632,014
<LOSS-PROVISION> (632,014)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (13,375)
<EXTRAORDINARY> 431,512
<CHANGES> 0
<NET-INCOME> (213,877)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
