<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended March 31, 1996
Commission file No. 0-18139
CREATIVE RESOURCES, INC.
(Name of small business issuer in its charter)
NEVADA 22-2798898
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26 MILL PLAIN ROAD, SUITE B
DANBURY, CT 06811
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (203) 778-5002
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share.
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended March 31, 1996 were: None.
The aggregate market value of the Issuer's voting stock held by non-
affiliates (25,495,693 shares), based on the average of the high bid and low ask
prices of such stock ($.003), as of May 17, 1996, reported to the Issuer was:
$76,487
COMMON STOCK OUTSTANDING AS OF MAY 17, 1996: 34,483,110 SHARES.
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CREATIVE RESOURCES, INC.
1996 ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
PART I......................................................... 3
Item 1 Description of Business........................ 3
Item 2 Description of Property........................ 4
Item 3 Legal Proceedings.............................. 4
Item 4 Submission of Matters to a Vote of Security
Holders........................................ 5
PART II........................................................ 5
Item 5 Market for Common Equity and Related
Stockholder Matters............................ 5
Item 6 Management's Discussion and Analysis or
Plan of Operations............................. 6
Item 7 Financial Statements........................... F-1
Item 8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure......... 8
PART III....................................................... 8
Item 9 Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act............................ 8
Item 10 Executive Compensation......................... 9
Item 11 Security Ownership of Certain Beneficial
Owners and Management.......................... 11
Item 12 Certain Relationships and Related
Transactions................................... 11
PART IV........................................................ 14
Item 13 Exhibits and Reports on Form 8-K............... 14
SIGNATURES..................................................... 17
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PART I
ITEM 1: DESCRIPTION OF BUSINESS
GENERAL
Creative Resources, Inc. ("CRI" or "the Company") was organized under the
laws of the State of Nevada on April 15, 1987. CRI is a holding company which
currently does not have any operating businesses.
RECENT DEVELOPMENTS
In March 1995, the Company agreed to dispose of its subsidiary Medical
Resources Corporation ("MRC"), its subsidiary Medical Marketing Inc. ("New MMI")
and its subsidiaries Portable Health Services Corporation ("PHSC") and Long Term
Care Physicians, Inc. ("LTCP"). Accordingly, these subsidiaries are classified
as discontinued operations and the Company's financial statements have been
reclassified for all periods presented.
On June 8, 1995, the Company entered into a definitive agreement for the
disposition of MRC and its subsidiaries. Under the provisions of the agreement
with, among others, Messrs. Leslie A. Matthews and John S. Parkey, former
officers or directors of either the Company or its subsidiaries, the Company
transferred all of its common stock in MRC and, in consideration therefore,
received $660,800 in cash and $100,200 in long-term obligations of New MMI and
PHSC. Pursuant to the agreement, Messrs. Matthews and Parkey, together with
Paul I. Gaumnitz, surrendered for cancellation 26,500,000 shares of the
Company's common stock, representing 43% of the then outstanding shares, all
946.433 outstanding shares of the Company's Series B preferred stock ("Series B
Preferred Stock") and all of their options to purchase the Company's common
stock. In connection with the June 8 disposition, the Company exchanged
releases with MRC, its subsidiaries and its management which released the
Company from all liabilities, losses and claims, whether known or unknown, based
on conduct or events prior to June 8, 1995.
In April 1996, a judgment was entered against the Company in the Birbara
-------
action. See Item 3: "Legal Proceedings".
The Company currently has one employee. The Company is seeking to acquire
or merge with a viable business. There can be no assurance, however, that the
Company will acquire such a business or, if it does, that such acquisition will
result in profitable operations for the Company in the future.
FORMER OPERATING SUBSIDIARIES
In March 1993, the Company organized MRC, a holding company, to provide
basic medical services and specialty medical products to patients in nursing
homes and other extended health care settings in selected markets in the United
States.
In September 1993, a subsidiary of MRC acquired 100% of the issued and
outstanding common stock (the "MMI Acquisition") of Medical Marketing, Inc.
("MMI") and its affiliate Medical Marketing of Tampa, Inc. (collectively with
MMI, "Medical Marketing") for $3.4 million in securities and a payment in fiscal
1996 dependent on the fiscal 1995 pre-tax income of a subsidiary of MRC.
Medical Marketing distributes and markets specialty medical products
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used primarily for the routine care of elderly patients in nursing homes.
Pursuant to the MMI Acquisition, the Company issued to the selling shareholders,
who are now former officers and directors of either the Company or MRC,
25,000,000 shares of its common stock, 946.433 shares of its Series B 8%
Preferred Stock and approximately $804,000 in five-year promissory notes issued
by a subsidiary of MRC, with payments commencing November 30, 1994. The Company
repaid approximately $302,000 of the principal amount of the promissory notes on
the date of the acquisition.
In December 1993, the Company organized LTCP and in January 1994 LTCP
acquired the assets and business of the Nursing Home Division of Professional
Eye Care, Inc. ("PEC") for $200,000 in cash. PEC provides optometric services to
nursing home patients in the metropolitan Kansas City area.
In March 1994, a subsidiary of MRC acquired the assets and the business of
Portable Health Services, Inc. and its subsidiary Portable Health Services of
Oklahoma, Inc. (collectively "PHS") and assumed certain liabilities for $852,000
(the "PHS Acquisition"). Pursuant to the PHS Acquisition, a subsidiary of MRC
issued three-year promissory notes totaling $553,638, allowed the seller to
retain certain cash and receivables, and issued 20,000 shares of common stock of
MRC. PHS provides mobile diagnostic services to nursing home patients and other
long-term care providers located in the Kansas City metropolitan area, Topeka,
Kansas and Tulsa, Oklahoma.
ITEM 2: DESCRIPTION OF PROPERTY
The Company's executive office is located at 26 Mill Plain Road, Suite B,
Danbury, CT 06811 where it shares space, rent free, with an unrelated party.
The Company believes this space is adequate and suitable for its existing
operations.
ITEM 3: LEGAL PROCEEDINGS
The Company, a present officer and director, and a former officer and
director have been named as co-defendants in a civil action captioned Birbara
-------
and Massad v. Locke, et al. (May 1990). This proceeding is pending in the
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United States District Court for the District of Massachusetts, Central
Division. The action was commenced by two investors in equipment managed by the
Company's former subsidiary, Technology Finance Group, Inc. ("TFG"), a computer
leasing and asset management business, and seeks damages allegedly arising from
the sale of certain equipment in which the investments were made. The complaint
in the action alleges causes of action for common law fraud, breach of contract,
conversion and treble damages under Massachusetts' "unfair and deceptive
business practices" act (the "Massachusetts Act"). The complaint seeks monetary
damages in the amount of $340,000. On May 8-10, 1995, all matters, with the
exception of the claims under the Massachusetts Act, were tried before the Court
and jury. The jury denied all claims except for an award of $250,000 for breach
of contract against all defendants. In April 1996, the Court dismissed the
Massachusetts Act claims and affirmed the $250,000 award plus accrued interest
for a total judgment of $427,945 against all defendants. An appeal has been
filed with respect to such affirmance and is expected to be heard this Fall.
The Company, a present officer and director, two former officers and
directors, a former director and a former officer have been named as co-
defendants in a civil action, commenced in the United States District Court for
the District of Connecticut, captioned GICC Capital Corp. v. Technology Finance
----------------------------------------
Group, Inc. et al. (September 1991). The complaint alleges, among
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other things, that the defendants caused certain assets of TFG to be diverted to
the Company resulting in the insolvency of TFG. The complaint alleges causes of
action under RICO and state law and seeks recovery for the unpaid balance of a
$537,000 promissory note issued by TFG, which amount could be trebled under the
RICO claims, and exemplary damages. In October 1991, defendants filed a motion
to dismiss the complaint. The District Court accepted the recommendation of a
United States Magistrate Judge that the action be dismissed. A final judgement
was entered in favor of all defendants in August 1993. Plaintiff appealed the
dismissal of the RICO and state law claims to the United States Court of Appeals
for the Second Circuit, and that Court reversed the finding of the District
Court. In August 1994, the defendants moved to dismiss on different grounds
than previously briefed and, in January 1995, the District Court again granted
their motion. Plaintiffs again appealed to the Second Circuit and after
argument the dismissal of the case was affirmed by decision and order dated
October 1995. Plaintiff moved for rehearing and rearguing en banc which were
denied. In April 1996, the plaintiff petitioned the United States Supreme Court
for a writ of certiorari. Defendants have filed an opposition brief. In June
1996, the United States Supreme Court denied the plaintiff's petition.
The Company has agreed to indemnify its current and former directors and
officers, to the extent available under applicable law, against any losses or
liabilities arising out of their service with the Company, including any losses
or liabilities arising out of these legal proceedings.
The Company has made a provision for these legal proceedings and believes
that no material liability, in excess of the amount provided, will result from
the outcome of these proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter and its price is
quoted on the NASDAQ Bulletin Board under the symbol "CRRE". The range of bid
prices for each quarter within the fiscal years ended March 31, 1995 and March
31, 1996, as reported to the Company, is as follows:
<TABLE>
<CAPTION>
Bid Prices
----------
High Low
---- ----
<S> <C> <C>
1994
----
Second Quarter .13 .05
Third Quarter .07 .01
Fourth Quarter .06 .01
1995
----
First Quarter .07 .01
Second Quarter .03 .01
Third Quarter .02 .001
Fourth Quarter .01 .001
1996
----
First Quarter .002 .001
Second Quarter (through May 17, 1996) .001 .001
</TABLE>
5
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The high and low bid prices reflect interdealer prices but not all retail
markup, markdown or commissions, and do not necessarily represent actual
transactions. On May 17, 1996 the closing prices for common stock in the over-
the-counter market were $.001 bid and $.005 asked.
As of May 17, 1996, the Company believes it had in excess of 1,000 holders
of its common stock.
The Company has not declared or paid any dividends on account of its common
stock or its 8% Series B Preferred Stock for the last fiscal year. Dividends
of $8,400 were paid and $8,400 were in arrears with respect to the Company's 8%
convertible preferred stock ("Series A Preferred Stock") as of March 31, 1996.
Pursuant to the disposition of MRC and its subsidiaries, all of the Series B
Preferred Stock was redeemed.
No dividends may be paid on account of the Company's common stock at any
time when there is an arrearage in the payment of dividends on the Company's
Series A Preferred. In addition, pursuant to certain contractual obligations
between the Company and a former officer and director, the Company is prohibited
from declaring or paying any cash dividends on its common stock until the
Company's obligations under a settlement agreement have been paid, satisfied, or
waived. See Item 12: "Certain Transactions-TFF Acquisition and Minsky
Settlement".
The payment of future cash dividends, if any, would be made only from assets
legally available therefore, and would generally depend on the Company's
financial condition, results of operations, current and anticipated capital
requirements, plans for expansion, restrictions under any credit and debt
instruments or other contractual arrangements, and other factors deemed relevant
by the Company's Board of Directors in its sole discretion.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
INTRODUCTION
The Company had no significant business activities and no continuing
operations during the period from April 1 to September 1, 1993. In September
1993, the Company completed the MMI Acquisition, in January 1994 it acquired the
assets and business of PEC and in March 1994 it acquired the assets and business
of PHS.
On June 8, 1995, the Company entered into a definitive agreement for the
disposition of MRC and its subsidiaries. Under the provisions of the agreement
with, among others, Messrs. Leslie A. Matthews and John S. Parkey, former
officers or directors of either the Company or its subsidiaries, the Company
transferred all of its common stock in MRC and, in consideration therefore,
received $660,800 in cash and $100,200 in long-term obligations of New MMI and
PHSC. Pursuant to the June 8th agreement, Messrs. Matthews and Parkey, together
with Paul I. Gaumnitz, surrendered for cancellation 26,500,000 shares of the
Company's common stock, representing 43% of the then outstanding shares, all
946.433 outstanding shares of the Company's Series B Preferred Stock and all of
their options to purchase the Company's common stock. In connection with the
June 8 disposition, the Company exchanged releases with MRC, its subsidiaries
and its management which released the Company from all liabilities, losses and
claims, whether known or unknown, based on conduct or events prior to June 8,
1995.
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In reviewing Management's Discussion and Analysis of Financial Condition and
Results of Operations, reference is made to the consolidated financial
statements and notes thereto, included under Item 7 - "Financial Statements" in
this Annual Report on Form 10-KSB.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Income, which consists of interest and dividend income, management fee
income and gain on sale of investment, was $162,807 for the year ended March 31,
1996 and $95,375 for the year ended March 31, 1995. The increase in 1996 was
primarily attributable to the gain on sale of investment. Income from
management fees and gain on sale of investment are not expected to recur.
Expenses, which consist of general and administrative, salaries and
interest, were $437,309 for the year ended March 31, 1996 and $371,525 for the
year ended March 31, 1995. The increase for 1996 was primarily attributable to
an increase in professional services expenses.
IMPACT OF INFLATION
The Company believes its operations are not significantly affected by
inflation.
LIQUIDITY AND FUTURE OUTLOOK
The Company is presently meeting its working capital requirements from its
cash balances and collections of its receivables. For the year ended March 31,
1996 the Company received approximately $660,000 in cash related to the June 8
disposition. Although there can be no assurance, the Company believes it has
sufficient financial resources to sustain its operations for the next twelve
months, provided the judgment against the Company in the Birbara action is not
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enforced. See Item 3: "Legal Proceedings".
The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered losses and
has a judgement and a claim asserted against it. The report of the Company's
independent auditors to the board of directors states that "These conditions
raise substantial doubt as to the Company's ability to continue as a going
concern".
The Company's plan is to acquire or merge with a viable business and defend
or resolve legal proceedings against it. There can be no assurance that the
Company will be successful in achieving any objectives of its plan. The
Company's plan is being implemented by its sole officer and director, who is
currently serving without regular cash compensation. See Item 10: "Executive
Compensation".
The Company is currently involved in two legal proceedings for which it has
made a provision. The Company believes that no material liability, in excess of
the amount provided, will occur as a result of the outcome of these proceedings.
However, there can be no assurance of this. Any settlement of the legal
proceedings against the Company will, in all likelihood, significantly reduce
the Company's assets and directly adversely affect its liquidity. For example,
the Company does not currently have sufficient assets to post a surety bond with
the Court to prevent the plaintiffs in the Birbara proceeding from enforcing
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their judgement against the assets of the Company. In addition, the amount of
the judgement exceeds the amount of the total assets of the Company. See Item
3: "Legal Proceedings".
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The Company currently has no existing lines of credit or other sources of
financing.
ITEM 7: FINANCIAL STATEMENTS
Consolidated Financial Statements of the Company are located at the end of
this Annual Report, beginning on Page F-1.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no such changes or disagreements.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth information concerning the directors,
executive officers, and key employees of the Company:
Name Age Position
---- --- --------
Dennis R. Williamson 53 President, Chief Executive Officer
and Director
All directors are elected to hold office until the next annual meeting of
stockholders of CRI or until their successors have been elected and qualified.
Executive officers are appointed by and serve at the discretion of the Board of
Directors.
CRI's Articles of Incorporation (the "Articles") require that three
directors serve on its Board. Leslie A. Matthews resigned as a director of CRI
on June 8, 1995 and there are currently two vacancies on CRI's Board of
Directors. CRI is evaluating its alternatives to either comply with or amend
its Articles.
The business experience of the Company's only director and executive officer
is as follows:
Dennis R. Williamson was elected President and a Director of the Company in
January 1989. He was a principal of Prime Grieb & Co. Limited, a financial
intermediary headquartered in London, England from 1985 to 1988. Prior to 1985,
for more than seven years, he was employed in various capacities by American
Express Bank in its offices in London, Athens and Bahrain. In addition, Mr.
Williamson was a Vice President of The First National Bank of Chicago, in
London, from 1972 to 1974. Mr. Williamson majored in physics at the University
of Chicago.
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ITEM 10: EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for
services paid or owed to the Chief Executive Officer and other executive
officers of the Company whose total annual salary and bonus exceeded $100,000
(the "Named Officers") for the year ended March 31, 1996.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
NAME AND
PRINCIPAL POSITION SALARY
------------------ ------
Dennis R. Williamson $102,500
President & Chief
Executive Officer
The Company did not grant, and none of the Named Officers exercised, any
stock options or free standing stock appreciation rights during the year ended
March 31, 1996.
EMPLOYMENT AGREEMENT
In September 1993, the Company entered into a five-year employment agreement
with Mr. Williamson (the "Employment Agreement"). Mr. Williamson's initial base
salary was $150,000 under the Employment Agreement. The Employment Agreement
further provides that (i) it expires on August 31, 1998, (ii) the base salary
for the executive increases 10% on April first of each year, (iii) the executive
receives a car allowance of $500 per month, (iv) if the executive is terminated
without cause, the Company will pay severance equal to one year of his then base
salary, (v) upon death of the executive, his estate will receive a payment equal
to six months of his then base salary, (vi) the executive agrees that he will
devote at least ninety per cent of his full time efforts to the Company and
(vii) the executive will not compete with the Company for a period of five years
after the termination of employment for any reason.
Mr. Williamson has not received compensation since March 1995, however, the
Company is accruing his unpaid compensation.
STOCK OPTION PLANS
1988 Option Plan. The Company's 1988 Stock Option Plan (the "1988 Plan")
-----------------
was adopted by the Board of Directors and approved by its stockholders in
December 1988. The Plan is administered by a committee of members of the
Company's Board of Directors (the "Committee"). The Committee is authorized to
issue incentive and/or non-qualified stock options to key employees, officers
and directors of the Company and its subsidiaries. Under the 1988 Plan,
15,000,000 shares of common stock are reserved for issuance upon the exercise of
stock options. The 1988 Plan authorizes the Committee to determine the
optionees, the times when the optionees shall receive options, whether the
options shall be incentive or non-qualified, the number of shares subject to
each option, the term of each option, the date(s) each option may
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be exercised in part or in installments and, if in installments, the number of
shares subject to each installment, the date each installment may be exercised,
the term of each such installment and, the form of payment upon exercise.
The Committee is authorized to determine the exercise price of the options;
provided, however, that the exercise price for all options shall be at least
fair market value on the date of the grant (and at least 110% of fair market
value on the date of grant for optionees owning, or deemed to own, more than
10% of the Company's combined voting power of all classes of stock).
Under the 1988 Plan, options that have vested may be exercised at any time
within three months after the termination of the optionee's employment with the
Company or any of its subsidiaries, or by its estate within one year after the
optionee's demise, but not later than the expiration of the option.
As of May 17, 1996, options to purchase 2,000,000 shares of common stock
were issued and outstanding to one executive under the 1988 Plan. The options
expire in 1997.
1993 Option Plan. The Company's 1993 Stock Option Plan (the "1993 Plan")
-----------------
was adopted by the Company's Board of Directors in December 1993 and was
ratified by a majority of the Company's shareholders in June 1995. The 1993
Plan is administered by a stock option committee of not less than two members of
the Company's Board of Directors (the "1993 Committee"). The 1993 Committee is
authorized to issue incentive and/or non-qualified five year options to key
employees, officers, and directors of the Company and its subsidiaries to
purchase up to 20,000,000 shares of the Company's common stock provided that the
options may not be exercised by any optionee in any calendar year, to the extent
that all options exercised by such optionee would exceed $100,000 in such
calendar year. The 1993 Plan gives the 1993 Committee the same authorization
that the 1988 Plan gives the Committee.
The exercise price shall be determined by the 1993 Committee provided that
the exercise price for all options shall be at least 110% of fair market value
on the date of grant.
Options that have vested under the 1993 Plan may be exercised at any time
within 60 days after the termination of the optionee's employment with the
Company or any of its subsidiaries, or by its estate within one year after the
optionee's demise, but not later than the expiration of the option.
As of May 17, 1996, options to purchase 6,000,000 shares of common stock
were issued and outstanding to one executive under the 1993 Plan. The options
expire in 1998.
COMPENSATION OF DIRECTORS
No compensation was paid to directors for their services during fiscal 1996.
Director expenses related to attending meetings of the Board of Directors are
reimbursed by the Company.
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ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of May 17, 1996, the beneficial ownership of
the Company's outstanding equity securities by (i) any person who is known to
the Company to be the beneficial owner of more than five percent of any class of
the Company's voting securities, (ii) all directors, (iii) each of the Named
Officers, and (iv) all directors and officers of the Company (as a group).
Holders of the Series A Preferred Stock are not entitled to vote, other than as
provided in the Company's Articles or by-laws.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- -------------- ------------------- ------------------ --------
<S> <C> <C> <C>
Common Dennis R. Williamson 15,987,417 (1) 38.5
26 Mill Plain Rd. Suite B
Series A Preferred (2) Danbury, CT 06811 200,000 95.2
Common All directors and 15,987,417 38.5
executives officers as a
Series A Preferred (2) group (total of 1) 200,000 95.2
Common Glenn Smith 2,250,000 6.5
2013 Edinburg Ave.
Cardiff by the Sea, CA 92007
</TABLE>
(1) Includes 5,000,000 shares that may be acquired, within 60 days from May 17,
1996, by exercising options granted under the 1988 Plan and the 1993 Plan,
and 2,000,000 shares that may be acquired, within 60 days from May 17,
1996, upon conversion of 200,000 shares of Series A Preferred Stock.
(2) Series A Preferred Stock has a redemption value of $1.00 per share and is
convertible into 10 shares of common stock for each share of Series A
Preferred Stock.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DISPOSITION OF MEDICAL RESOURCES CORPORATION
On June 8, 1995, the Company entered into a definitive agreement for the
disposition of MRC and its subsidiaries. Under the provisions of the agreement
with, among others, Messrs. Leslie A. Matthews and John S. Parkey, former
officers or directors of either the Company or its subsidiaries, the Company
transferred all of its common stock in MRC and, in consideration therefore,
received $660,800 in cash and $100,200 in long-term obligations of New MMI and
PHSC. Pursuant to the agreement, Messrs. Matthews and Parkey, together with
Paul I. Gaumnitz, surrendered for cancellation 26,500,000 shares of the
Company's common stock, representing 43% of the then outstanding shares, all
946.433 outstanding shares of the Company's Series B Preferred Stock and all of
their options to purchase the Company's common stock. In connection with the
June 8th disposition, the Company exchanged releases with MRC, its subsidiaries
and its management which released the Company from all liabilities, losses and
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claims, whether known or unknown, based on conduct or events prior to June 8,
1995. See Item 1: "Description of Business".
ACQUISITION OF MEDICAL MARKETING
In September 1993, the Company acquired Medical Marketing by merger with a
subsidiary of MRC (the "Merger"). Pursuant to the MMI Acquisition, the Company
issued to the selling stockholders, who are now former officers and directors of
either the Company or MRC, 25,000,000 shares of its common stock, 946.433
shares of its Series B Preferred Stock, and approximately $804,000 in five-year
promissory notes with payments commencing November 30, 1994. The Company repaid
approximately $302,000 of the principal amount of the promissory notes on the
date of the acquisition. In connection with the Merger, Messrs. Matthews and
Parkey (a former director of the Company and the Executive Vice President of
MRC, respectively) received 15,000,000 and 10,000,000 shares of the Company's
common stock, 567.9 and 378.6 shares of Series B Preferred Stock and $180,130
and $321,427 of 6% secured five-year promissory notes with payments commencing
on November 30, 1994, respectively.
In addition, the Company agreed with the former owners of MMI (Messrs.
Matthews and Parkey) to raise not less than $1,000,000 of capital or working
capital by not later than November 30, 1994. In the event that at least
$1,000,000 of capital or working capital was not raised by November 30, 1994,
Messrs. Matthews and Parkey, jointly, had the option to unwind the Merger.
Subsequent to March 31, 1994, Messrs. Matthews and Parkey waived their right to
unwind the Merger.
With the completion of the disposition of MRC and its subsidiaries by the
Company on June 8, 1995, the Company has no further obligations in relation to
the Merger. See Item 1: "Description of Business - Recent Developments".
LEASE OF OFFICE AND WAREHOUSE
In connection with the Merger, a subsidiary of MRC entered into a lease for
office and warehouse space at 3030 Gillham Road in Kansas City, Missouri with
Gillham Road Real Estate, Inc. ("GRRE"). Mr. Matthews, a former director of the
Company, is the sole stockholder of GRRE. The annual rent under the lease was
$100,000 and the lease expires in August 1996. In April 1994, the lease was
amended and the annual rental was increased to $130,000. The increase was due
to the acquisition of PHS, which occupied space in the same building and for
additional space that was required by the expansion of MRC's business.
During the fiscal years ended March 31, 1995, MMI paid $130,000 in rent
under the lease. The Company believes that the terms of the lease were no less
favorable than could be obtained from an unaffiliated party. However, the
Company did not conduct an independent study as to the value of real estate in
the area.
With the completion of the disposition of MRC and its subsidiaries by the
Company on June 8, 1995, the Company has no further obligations in relation to
this lease.
ACQUISITION OF PHS
In March 1994, a subsidiary of MRC acquired the assets and business of PHS,
and assumed certain liabilities, for $852,000. In connection with this
acquisition, the sellers received
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6% three-year promissory notes totaling $276,819, non-interest bearing three-
year promissory notes totaling $276,819, and 20,000 shares of common stock of
MRC pursuant to non-compete agreements. In addition, the sellers were allowed
to retain cash and receivables of PHS totaling $442,008. Mr. Matthews, a former
director of the Company, is a stockholder of the seller. The stock was valued
at five dollars per share for a total of $100,000. Mr. Matthews, a former
director of the Company, received 5,000 shares of the 20,000 shares issued.
With the completion of the disposition of MRC and its subsidiaries by the
Company on June 8, 1995, the Company has no further obligations in relation to
this acquisition.
TFF ACQUISITION AND MINSKY SETTLEMENT
In January 1989, the Company acquired 100% of the outstanding capital stock
of TFF, Inc., a holding company whose subsidiary was Technology Finance Group,
Inc. ("TFG"), a computer leasing and asset management business. The
consideration for the acquisition was the issuance of 20,400,000 shares of the
Company's common stock to four individuals including Dennis R. Williamson, the
Company's President and director, and Jerry Minsky, TFG's President. Messrs.
Williamson and Minsky each received 8,160,000 shares of the Company's common
stock in the acquisition and both purchased $200,000 of the Company's Series A
Preferred Stock, simultaneously with the acquisition. Upon consummation of the
TFF acquisition, Mr. Minsky became the Chairman of the Board and Chief Executive
Officer of CRI.
In June 1989, Mr. Minsky resigned as Chairman of the Board and Chief
Executive Officer of the Company in connection with the settlement of a series
of disputes concerning Mr. Minsky and the Company with respect to liabilities
for sales taxes and claims from investors in equipment trusts (the
"Settlement"). Pursuant to the Settlement, the Company agreed to indemnify Mr.
Minsky against any liabilities arising from sales taxes and claims from
investors in equipment trusts. Mr. Williamson pledged 920,000 shares of common
stock and 37,500 shares of Series A Preferred Stock to secure CRI's obligation
under such indemnity agreement. CRI has also agreed with Mr. Minsky that it will
not declare or pay any cash dividends on its common stock until CRI's indemnity
obligations have been paid, satisfied, or waived. To date, no claims have been
made against CRI or, to CRI's knowledge, Mr. Minsky in connection with the
circumstances surrounding the dispute.
13
<PAGE>
PART IV
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
---------
2. Plan of purchase, sale, reorganization, arrangement, liquidation or
succession.
2.1 Disposition Agreement dated June 8, 1995, effective March 31, 1995, by
and among the Company, MRC, MRC's subsidiaries, Leslie A. Matthews, John
S. Parkey and certain officers and shareholders of MRC and its
subsidiaries. (Incorporated herein by reference to the Company's Current
Report on Form 8-K dated June 21, 1995).
2.2 Agreement and Plan of Merger among CRI, MRC, MAT Inc., Leslie A. Matthews
and John S. Parkey as of September 1, 1993. (Incorporated herein by
reference to the Company's Current Report on Form 8-K dated September 1,
1993).
2.3 Asset Purchase Agreement dated as of March 1, 1994 by and among PHS
Acquisition Corp., Ventura Incorporated and Mobile Diagnostic Services
Corporation. (Incorporated herein by reference to the Company's Current
Report on Form 8-K dated April 6, 1994).
2.4 Asset Purchase Agreement dated as of March 1, 1994 by and among Portable
Health Services of Oklahoma, Inc., Ventura Incorporated and Mobile
Diagnostic Services Corporation. (Incorporated herein by reference to the
Company's Current Report on Form 8-K dated April 6, 1994).
2.5 Plan of Reorganization dated as of January 1, 1992 by and among the
Company, Blue Chip Computerware, Inc. and Gary and Barbara Droutman.
(Incorporated herein by reference to the Company's Current Report on Form
8-K dated February 13, 1992).
2.6 Plan of Reorganization dated as of January 1, 1992 by and among the
Company, Blue Chip Computerware, Inc. and certain shareholders of the
Technical Services Group, Inc. (Incorporated herein by reference to the
Company's Current Report on Form 8-K dated February 13, 1992).
3. Articles of incorporation and by-laws.
3.1 Articles of incorporation, as amended, of the Company. (Incorporated
herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, as amended).
3.2 By-laws of the Company. (Incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1990, as amended).
4. Instruments defining the rights of security holders, including
indentures. None.
14
<PAGE>
9. Voting trust agreement and amendments. None.
10. Material contracts.
10.1 Settlement Agreement dated June 1989 between Jerry Minsky and the
Company. (Incorporated herein by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1990, as amended).
10.2 Severance Agreement dated May 31, 1991 between the Company and Gordon
Locke. (Incorporated herein by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1991).
10.3 Agreement dated June 11, 1992 by and among the Company, Blue Chip
Computerware, Inc., Droutman Enterprises, Inc., and The Technical
Services Group, Inc. (Incorporated herein by reference to the Company's
Current Report on Form 8-K dated June 22, 1992).
10.4 The Company's 1988 Stock Option Plan. (Incorporated herein by reference
to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1990, as amended).
10.5 The Company's 1993 Employee Stock Option Plan. (Incorporated herein by
reference to the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1994, as amended).
10.6 Non-Competition Agreement dated as of March 1, 1994 between MRC and its
subsidiaries and Ventura Incorporated. (Incorporated herein by reference
to the Company's Current Report on Form 8-K dated April 6, 1994).
10.7 Escrow Agreement dated as of September 1, 1993 by and among the Company,
MRC, MAT, Inc., Leslie Matthews, John S. Parkey and Gordon Locke, Esq.,
as Escrow Agent. (Incorporated herein by reference to the Company's
Current Report on Form 8-K dated September 1, 1993).
10.8 Employment Agreement dated as of September 1, 1993, as amended, between
MAT, Inc. and Leslie A. Matthews. (Incorporated herein by reference to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1994, as amended).
10.9 Employment Agreement dated as of September 1, 1993, as amended, between
MAT, Inc. and John S. Parkey. (Incorporated herein by reference to the
Company's Annual Report on Form 10-KSB for the fiscal year ended March
31, 1994, as amended).
10.10 Employment Agreement dated as of September 1, 1993, as amended, between
Creative Resources, Inc. and Dennis R. Williamson. (Incorporated herein
by reference to the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1994, as amended).
15
<PAGE>
11. Statement re: computation of per share earnings. The computation can be
determined clearly from the material contained in the financial
statements to the Company's Annual Report on Form 10-KSB.
13. Annual report to security holders for the last fiscal year, Form 10-QSB
or quarterly report to security holders. None.
16. Letter on change in certifying accountant. None.
18. Letter on change in accounting principles. None.
21. Subsidiaries of the small business issuer.
21.1 Apple Leasing Company, Inc. (Delaware)
21.2 Columbia Capital Corporation (Illinois)
21.3 Trans-Atlantic Licensing Company, Inc. (Nevada)
22. Published report regarding matters submitted to vote of security holders.
None.
23. Consents of experts and counsel. None.
24. Power of attorney. None.
27. Financial Data Schedule.
28. Information from reports furnished to state insurance regulatory
authorities. None.
99. Additional Exhibits. None.
(b) Current Reports on Form 8-K.
----------------------------
1. Current Report on Form 8-K dated April 11, 1996 (Item 5).
16
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Creative Resources, Inc.
(Registrant)
By: /s/ Dennis R. Williamson
------------------------
Dennis R. Williamson
President
June 26, 1996
In accordance with the Exchange Act, this report has been signed below by the
following person on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
President and Director
(Principal Executive,
/s/ Dennis R. Williamson Accounting and Financial
- ------------------------
Dennis R. Williamson Officer)
June 26, 1996
17
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Contents
- -------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheet F-3
Statements of operations F-4
Statements of changes in stockholders' equity (deficit) F-5
Statements of cash flows F-6
Notes to consolidated financial statements F-7 - F-16
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Creative Resources, Inc.
Danbury, Connecticut
We have audited the accompanying consolidated balance sheet of Creative
Resources, Inc. and subsidiaries as of March 31, 1996 and the related
consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for each of the two years in the period then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Creative
Resources, Inc. and subsidiaries as of March 31, 1996 and the results of
their operations and their cash flows for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
The financial statements referred to above have been prepared assuming that
the Company will continue as a going concern. As discussed in Notes 6 and
10(a) to the financial statements, the Company has suffered losses and has
claims asserted against it relating to its discontinued operations. These
conditions raise substantial doubt as to the Company's ability to continue as
a going concern. Management's plan in regard to these matters is described
in Note 1(a). The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
BDO Seidman, LLP
Valhalla, New York
May 6, 1996, except
for Note 10(a) which is
as of June 26, 1996
F-2
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
March 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT:
Cash and cash equivalents (Notes 1(c) and (d)) $ 399,405
Notes receivable 3,256
- ----------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 402,661
PROPERTY AND EQUIPMENT, NET (NOTES 1(e) AND 4) 4,761
- ----------------------------------------------------------------------------------------------
$ 407,422
- ----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 138,371
Accrued compensation 202,500
Liabilities from discontinued operations (Notes 1(h) and 6) 550,911
Current maturities of capital lease obligations (Note 5) 2,893
- ----------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 894,675
CAPITAL LEASE OBLIGATIONS, LESS CURRENT MATURITIES (NOTE 5) 3,129
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 897,804
- ----------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 5, 6, 8 AND 10)
STOCKHOLDERS' DEFICIT (NOTES 6, 7 AND 8):
Preferred stock, $1 par value, 500,000 shares authorized:
Series A, 210,000 shares issued and outstanding 210,000
Series B, none issued and outstanding -
Common stock, $.01 par value, 100,000,000 shares authorized,
34,483,110 issued and outstanding 344,831
Additional paid-in capital 753,600
Deficit (1,798,813)
- ----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (490,382)
- ----------------------------------------------------------------------------------------------
$ 407,422
- ----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Years ended March 31, 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME:
Interest and dividend income $ 16,426 $ 42,410
Other (Note 3) 146,381 52,965
- -----------------------------------------------------------------------------------------------
162,807 95,375
- -----------------------------------------------------------------------------------------------
EXPENSE:
General and administrative expenses 436,546 351,354
Interest expense 763 20,171
- -----------------------------------------------------------------------------------------------
437,309 371,525
- -----------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS BEFORE (274,502) (276,150)
INCOME TAXES
TAXES ON INCOME (NOTES 1(f) AND 9) - -
- -----------------------------------------------------------------------------------------------
NET LOSS FROM CONTINUING OPERATIONS (274,502) (276,150)
LOSS FROM DISCONTINUED OPERATIONS (NOTES 1(h) AND 6) (22,574) (1,360,700)
- -----------------------------------------------------------------------------------------------
NET LOSS $ (297,076) $(1,636,850)
- -----------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE (NOTES 1(g) AND 6):
Loss from continuing operations $(.01) $ -
Loss from discontinued operations - (.03)
- -----------------------------------------------------------------------------------------------
NET LOSS $(.01) $(.03)
- -----------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 39,492,699 60,962,836
OUTSTANDING (NOTE 1(g))
- -----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Series A Series B
Preferred Preferred Additional
Stock Stock Common Stock Paid-in
---------------- ------------------- ------------------- Capital
(Excess
Shares Amount Shares Amount Shares Amount Distributions)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 210.000 $210,000 946.433 $ 946,433 60,930,306 $ 609,303 $(1,405,408)
Preferred stock dividends - - - - - - -
Sale of common stock - - - - 52,804 528 9,472
Net loss - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1995 210.000 210,000 946.433 946,433 60,983,110 609,831 (1,395,936)
Disposition of subsidiary - - (946.433) (946,433) (26,500,000) (265,000) 2,149,536
Preferred stock dividends - - - - - - -
Net loss - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 210.000 $210,000 - $ - 34,483,110 $ 344,831 $ 753,600
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total
Retained Stockholders'
Earnings Equity
(Deficit) (Deficit)
- ------------------------------------------------------
<S> <C> <C>
Balance at March 31, 1994 $ 205,175 $ 565,503
Preferred stock dividends (61,662) (61,662)
Sale of common stock - 10,000
Net loss (1,636,850) (1,636,850)
- --------------------------------------------------------
Balance at March 31, 1995 (1,493,337) (1,123,009)
Disposition of subsidiary - 938,103
Preferred stock dividends (8,400) (8,400)
Net loss (297,076) (297,076)
- --------------------------------------------------------
Balance at March 31, 1996 $(1,798,813) $ (490,382)
- --------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Years ended March 31, 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Reconciliation of net loss to net cash used
by operating activities:
Net loss $(297,076) $(1,636,850)
- -------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 2,305 197,561
Loss on sale of business segment 3,827 -
Gain on sale of investment (86,381) -
Changes in assets and liabilities:
Due from affiliate - 216,900
Accounts receivable, trade 74 (28,492)
Inventories - 19,461
Income taxes receivable - (5,000)
Other assets 2,040 (29,397)
Accounts payable and accrued expenses 114,130 311,730
Income taxes payable - (60,700)
Liabilities from discontinued operations (83,151) 501,544
Unearned revenue - (20,000)
- -------------------------------------------------------------------------------------
Total adjustments (47,156) 1,103,607
- -------------------------------------------------------------------------------------
NET CASH USED BY OPERATING
ACTIVITIES (344,232) (533,243)
- -------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in marketable securities - 6,482
Purchases of property and equipment (212) (180,112)
Payments received on notes and other receivables - 10,529
Advances to officers, affiliates and others, net - (93,120)
Acquisition of businesses - (99,557)
Proceeds from sale of investment 90,000 -
Proceeds from disposition of business segment 661,590 -
- -------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 751,378 (355,778)
- -------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (8,400) (61,662)
Net proceeds under line of credit agreement - 700,000
Proceeds from private placement - 10,000
Principal payments on long-term debt (2,619) (71,675)
Note payable - 58,862
Due to related party - 38,192
- -------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES (11,019) 673,717
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 396,127 (215,304)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF THE PERIOD 3,278 218,582
- -------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, AT THE END OF THE PERIOD $ 399,405 $ 3,278
- -------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. SUMMARY OF (a) Description of Business
SIGNIFICANT
ACCOUNTING POLICIES Creative Resources, Inc. ("CRI") and subsidiaries, collectively,
(the "Company") has disposed of or discontinued all significant
operations. It is presently meeting its working capital
requirements through its cash balances and collections of its
receivables.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company has suffered losses and has a judgment and a claim
asserted against it (Note 10). As a result, these matters raise
substantial doubt as to the Company's ability to continue as a
going concern. The Company's plan is to acquire or merge with
a viable business and defend or resolve legal proceedings against
it. There can be no assurance that the Company will be successful
in achieving any objective of its plan. The financial statements do
not include any adjustment that might result from the outcome of
this uncertainty.
(b)Consolidated Financial Statements
The consolidated financial statements include the accounts of
Creative Resources, Inc. and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been
eliminated.
(c)Cash Equivalents
The Company considers all short-term investments with an
original maturity of three months or less to be cash equivalents.
(d)Credit Risk
The Company has cash deposits with banks which may
occasionally be in excess of federally insured limits.
(e) Property, Equipment and Depreciation
Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the
following estimated useful lives:
-------------------------------------------------------------
Furniture and fixtures 5 years
Equipment 5 years
Leased computer equipment 5 years
-------------------------------------------------------------
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(f)Income Taxes
No provision for income taxes has been made for the years ended
March 31, 1996 and 1995 due to net losses. Deferred taxes, if
any, are provided on the differences between the financial
reporting and income tax bases of assets and liabilities based upon
statutory tax rates enacted for future periods.
(g)Earnings Per Share
Earnings per share is computed by dividing net income, reduced
by paid and cumulative unpaid preferred stock dividends, by the
weighted average number of shares of common stock outstanding
during each period. The weighted average number of shares of
common stock outstanding does not include stock options
authorized under the stock option plans as they are not dilutive.
(h)Discontinued Operations
In March 1995, the Company agreed to dispose of its subsidiary
Medical Resources Corporation ("MRC"), its subsidiary Medical
Marketing Inc. and its subsidiaries Portable Health Services
Corporation ("PHSC") and Long Term Care Physicians, Inc.
("LTCP").
On June 8, 1995, the Company entered into a definitive agreement
for the disposition of MRC and its subsidiaries. The net loss and
liabilities from discontinued operations relate to these subsidiaries
and to previously discontinued businesses.
(i)Use of Significant Estimates in Preparation of Financial Statements
The preparation of financial statements 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 date of the financial statements, and the reported
amounts of and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. The most significant estimate
in the Company's balance sheet is the determination of the liability
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
for discontinued operations which is provided based upon
estimates for the costs to dispose of discontinued operations.
Although management's estimates are not expected to change in
the near term, the costs the Company will ultimately incur could
differ from the amounts recorded.
(j)Financial Instruments
The carrying amounts of financial instruments including cash,
notes receivable and accounts payable approximated fair value as
of March 31, 1996 because of the relatively short maturity of
these instruments. The carrying value of long-term debt,
including current portion, approximated fair value as of March 31,
1996 based upon quoted market prices for similar debt.
2. FORMER ACQUISITIONS Formation of MRC and MAT
CRI formed a wholly owned subsidiary, MRC, which also formed a
wholly owned subsidiary, MAT, Inc. ("MAT") to facilitate the
acquisitions of Medical Marketing, Inc. ("MMI") and Medical
Marketing, Inc. of Tampa ("CMI"). Prior to these acquisitions, CRI and
its subsidiaries were considered to be inactive companies for financial
reporting purposes. Accordingly, the acquisition described in the next
paragraph was, for accounting purposes, considered a reverse
acquisition.
Acquisition of MMI and CMI
In September 1993, CRI acquired MMI and CMI by merger with and
into MAT (the "Merger"). Pursuant to the acquisitions, CRI issued to
the selling shareholders, who are now former officers and directors of
either the Company or MRC, 25,000,000 shares of its common stock,
946.433 shares of its Series B Preferred Stock, and approximately
$804,000 in five-year promissory notes with payments commencing
November 30, 1994 ("Seller Notes"). CRI repaid approximately
$302,000 of the principal amount of the promissory notes on the date of
the acquisition leaving a balance outstanding of $501,557. In connection
with the Merger, Messrs. Matthews and Parkey, (a former director of
CRI and the Executive Vice President of MRC, respectively) received
15,000,000 and 10,000,000 shares of CRI's common stock, 567.9 and
378.6 shares of Series B preferred stock ("Series B") and $180,130 and
$321,427 of 6% secured five-year promissory notes with payments
commencing on November 30, 1994, respectively.
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
This acquisition was accounted for as 1) a merger of MMI and CMI,
accounted for in a manner similar to a pooling of interest, since these
companies were under common control, 2) a recapitalization of the
newly combined company MAT, which included a distribution of debt
and preferred stock to its stockholders and 3) a purchase by MAT of
CRI, with the net tangible assets of CRI recorded at their historical
values.
The Seller Notes were secured by a security interest in all of MAT's
assets and were guaranteed by MRC. MRC pledged all of the common
stock of MAT as security for its guarantee.
LTCP's Acquisition of PECI
In January 1994, LTCP acquired the assets and business of the Nursing
Home Division of Professional Eye Care, Inc. ("PECI") in an
acquisition accounted for as a purchase. The purchase price was
$200,000 in cash. Assets acquired included accounts receivable,
inventory and equipment recorded at fair value, totalling $58,590. The
excess was allocated to goodwill to be amortized over ten years. In
connection with the purchase, the owner of PECI, entered into a three
year employment agreement to manage the optometric business of
LTCP.
PHSC's Acquisition of PHS
In March 1994, PHSC acquired certain assets and liabilities and the
business of PHS Acquisition Corp., and Portable Health Services of
Oklahoma, Inc, (together "PHS") in acquisitions accounted for using the
purchase method. The purchase price was approximately $752,000. In
connection with the acquisitions, MRC entered into a ten year non-
compete agreement of which 20,000 shares of MRC stock was issued.
The stock was valued at five dollars per share for a total of $100,000.
Each of these acquisitions were disposed of on June 8, 1995 (Note 6).
3. INVESTMENT AND In December 1992, CRI entered into a loan agreement, whereby it
LOAN PAYABLE borrowed, on a non-recourse basis, approximately 404,000 pounds
sterling from a foreign company. The loan bears interest at 10% per
annum and was due in December 1994. The proceeds from the loan
were utilized to purchase 894,000 shares of stock in a foreign
corporation as prescribed in the loan agreement. The interest on the
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
loan was to be paid only from dividends or other distributions received
in respect to the investment, or any proceeds from the sale of the
investment. The Company, at its option, had the right of offset to satisfy
the loan and any accrued interest by transferring the investment to the
lender.
On April 1, 1995, the Company sold its investment and satisfied the loan
payable. Based on this transaction, the Company recognized a gain of
$86,381. This amount was included in other income for the year ended
March 31, 1996.
4. PROPERTY AND Property and equipment consist of:
EQUIPMENT
March 31, 1996
---------------------------------------------------------------------------------
Furniture and fixtures $ 4,533
Equipment 4,138
Leased computer equipment 3,968
---------------------------------------------------------------------------------
12,639
Less accumulated depreciation (7,878)
---------------------------------------------------------------------------------
$ 4,761
---------------------------------------------------------------------------------
5. CAPITAL LEASES The total minimum future lease payments and present value of the
minimum lease payments for computer equipment under capital lease are
as follows:
Year Ended March 31,
---------------------------------------------------------------------------------
1997 $ 3,717
1998 3,408
---------------------------------------------------------------------------------
Total minimum lease payments 7,125
Less imputed interest (1,103)
---------------------------------------------------------------------------------
Present value of minimum lease payments $ 6,022
---------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6. DISCONTINUED On June 8, 1995, the Company entered into a definitive agreement for
OPERATIONS the disposition of its subsidiary MRC, its subsidiary Medical Marketing,
Inc. and its subsidiaries PHSC and LTCP. The results of their
operations have been included in discontinued operations for the periods
presented.
Under the provisions of the agreement with, among others, Messrs.
Leslie A. Matthews and John S. Parkey, former officers and directors
of either CRI or its subsidiaries, CRI transferred all of its common stock
in MRC and, in consideration thereof, received $660,800 in cash and
$100,200 in long-term obligations. Messrs. Matthews and Parkey,
together with Paul I. Gaumnitz, surrendered for cancellation 26,500,000
shares of CRI's common stock, representing 43% of the then outstanding
shares, all 946.433 outstanding shares of CRI's Series B preferred stock
and all of their options to purchase CRI's common stock. The surrender
of the shares resulted in an increase in equity of approximately $938,000
primarily due to distributions which were not paid. In connection with
the disposition, the Company exchanged releases with MRC, its
subsidiaries and its management which released the Company from all
liabilities, losses and claims, whether known or unknown, based on
conduct or events prior to June 8, 1995.
The Company will recognize the $100,200 in long-term receivables as
income as the cash is received. For the year ended March 31, 1996,
$48,079 in long-term receivables were collected and recognized as
income.
The Company currently has one employee. The Company is seeking to
acquire or merge with a viable business. There can be no assurance the
Company will acquire such a business or, if it does, that such acquisition
will result in profitable operations for the Company in the future.
The Company's other former businesses were software distribution and
leasing equipment. Ongoing litigation in relation thereto, more fully
explained in Note 10, has resulted in a jury award against the Company.
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
At March 31, 1996, the liability from discontinued operations related to
estimated costs associated with pending legal proceedings related to
discontinued operations. For the year ended March 31, 1996, the loss
from discontinued operations primarily related to legal expenses
associated with the discontinued operations offset by the collection of the
long-term receivables. For the year ended March 31, 1995, the loss
from discontinued operations related to the net operating activity of
MRC and legal expenses associated with the discontinued operations.
There was no loss on the disposal of MRC and its subsidiaries. The
Company expects to settle all liabilities related to discontinued operations
during fiscal 1997.
7. STOCK OPTION PLANS In December 1988, CRI adopted the 1988 Stock Option Plan (the "1988
Plan") under which options for up to 15,000,000 shares of common
stock can be granted as either incentive stock options or non-qualified
stock options. Options granted under the 1988 plan may not have terms
exceeding ten years (five years for qualified incentive stock options
granted to a holder of 10% or more of the Company's common stock)
and may not have an exercise price of less than 100% of the fair value
of the Company's common stock on the date of grant (110% for
qualified incentive stock options granted to holders of 10% or more of
the Company's common stock).
In December 1992, CRI granted an officer an option, pursuant to the
1988 Plan, to purchase up to 2,000,000 shares of the Company's
common stock at an exercise price of $.05 per share through December
31, 1997. No options have been exercised.
In December 1993, CRI adopted the 1993 Stock Option Plan (the "1993
Plan") under which options for up to 20,000,000 shares of common
stock can be granted as either incentive stock options or non-qualified
stock options. Options granted under the 1993 Plan may not have terms
exceeding five years and may not have an exercise price less than 110%
of the fair value of the Company's common stock on the date of the
grant. Options may not be exercised by any optionee in any calendar
year to the extent that all options exercised by such optionee exceed
$100,000.
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
In December 1993, CRI granted options, pursuant to the 1993 Plan, to
three officers, to purchase in the aggregate up to 12,000,000 shares of
the Company's common stock at an exercise price of $.08 per share
through December 1998. The options vest over the period at 10% on the
first calendar day of January and July of each year. No options have
been exercised. On June 8, 1995, 6,000,000 options which were
granted to three former officers were cancelled in connection with the
MRC disposition.
8. PREFERRED STOCK Series A
Series A, 8% Cumulative Convertible Preferred Stock ("Series A") has
a redemption value of $1.00 per share and is convertible into the
Company's common stock at the rate of ten common shares for each
share of Series A stock. The holders are entitled to receive, when and
as declared by the Board of Directors, dividends at the rate of 8% per
annum per share, cumulative, payable semi-annually. No dividends or
other distributions shall be paid on the Company's common stock at any
time the Company is in arrears in making payment of any dividends
payable on account of the Series A. The Company has declared and paid
$8,400 in dividends on the Series A during the year ended March 31,
1996 and as of March 31, 1996 the Company has $8,400 of dividends
in arrears.
Series B
Series B has a redemption value of $1,000.00 per share. The holders are
entitled to receive, when and as declared by the Board of Directors,
dividends at the rate of 8% per annum per share, cumulative, payable
semi-annually. No dividends or other distributions shall be paid on the
Company's common stock at any time the Company is in arrears in
making payment of any dividends payable on account of the Series B.
The Company has not declared or paid any dividends on the Series B
during the year ended March 31, 1996. All outstanding shares of the
Series B were cancelled on June 8, 1995 as part of the Company's
disposition of its subsidiary MRC.
9. TAXES ON INCOME No provision for income taxes has been provided for the years ended
March 31, 1996 and 1995 due to net losses. The Company has net
operating loss carryovers of approximately $4,000,000 for federal
income tax purposes which expire through 2011. The Company recorded
a 100% valuation allowance against the net deferred tax asset of
approximately $1,300,000.
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10. COMMITMENT AND (a) Legal proceedings
CONTINGENCIES
The Company has legal proceedings pending against it. The
Company has agreed to indemnify its current and former directors
and officers against any losses or liabilities arising out of their
service with the Company, including any losses or liabilities arising
out of these legal proceedings. The Company believes that no
material liability, in excess of the amount provided, will result from
the outcome of these proceedings. The proceedings may be
summarized as follows:
The Company, a present officer and director, and a former officer
and director have been named co-defendants in a civil action
captioned Birbara and Massad v. Locke, et al. (May, 1990). This
-----------------------------------
proceeding is pending in the United States District Court for the
District of Massachusetts, Central Division. The action was
commenced by two investors in equipment managed by the
Company's former subsidiary, Technology Finance Group, Inc.
("TFG"), a computer leasing and asset management business, and
seeks damages allegedly arising from the sale of certain equipment
in which the investments were made. The complaint in the action
alleges causes of action for common law fraud, breach of contract,
conversion and treble damages under Massachusetts' "unfair and
deceptive business practices" act (the "Massachusetts Act"). The
complaint seeks monetary damages in the amount of $340,000. On
May 8-10, 1995, all matters, with the exception of the claims under
the Massachusetts Act, were tried before the Court and jury. The
jury denied all claims except for an award of $250,000 for breach
of contract against all defendants. In April 1996, the Court
dismissed the Massachusetts Act claims and affirmed the $250,000
award plus accrued interest for a total judgment of $427,945 against
all defendants. An appeal has been filed with respect to such
affirmance and is expected to be heard this Fall.
The Company, a present officer and director, two former officers
and directors, a former director and a former officer have been
named as co-defendants in a civil action, commenced in the United
States District Court for the District of Connecticut captioned GICC
----
Capital Corp. v. Technology Finance Group, Inc. et al. (September,
------------------------------------------------------
1991). The complaint alleges, among other things, that the
defendants caused certain assets of TFG to be diverted to the
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Company resulting in the insolvency of TFG. The complaint alleges
causes of action under RICO and state law and seeks recovery for
the unpaid balance of a $537,000 promissory note issued by TFG,
which amount could be trebled under the RICO claims, and
exemplary damages. In October 1991, defendants filed a motion to
dismiss the complaint. The District Court accepted the
recommendation of a United States Magistrate Judge that the action
be dismissed. A final judgement was entered in favor of all
defendants in August 1993. Plaintiff appealed the dismissal of the
RICO and state law claims to the United States Court of Appeals
for the Second Circuit, and that Court reversed the finding of the
District Court. In August 1994, the defendants moved to dismiss
on different grounds than previously briefed and, in January 1995,
the District Court again granted their motion. Plaintiffs again
appealed to the Second Circuit and after argument the dismissal of
the case was affirmed by decision and order dated October 1995.
Plaintiff moved for rehearing and rearguing en banc which were
denied. In April 1996, the plaintiff petitioned the United States
Supreme Court for a writ of certiorari. Defendants have filed an
opposition brief. In June 1996, the United States Supreme Court
denied the plaintiff's petition.
Management believes that these matters will not have a material
adverse effect on the financial statements.
(b)Other
The Company, as part of a 1989 settlement with its former
Chairman and Chief Executive Officer, indemnified him against
liability for TFG's failure to remit certain sales tax claims and
failure to remit sums due equipment trust investors. No dividends
may be paid on the Company's common stock until these
obligations have been satisfied or otherwise provided for. No claims
have been made under this indemnity.
</TABLE>
F-16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 399,405
<SECURITIES> 0
<RECEIVABLES> 3,256
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 402,661
<PP&E> 12,639
<DEPRECIATION> 7,878
<TOTAL-ASSETS> 407,422
<CURRENT-LIABILITIES> 894,675
<BONDS> 0
0
210,000
<COMMON> 344,831
<OTHER-SE> (1,045,213)
<TOTAL-LIABILITY-AND-EQUITY> 407,422
<SALES> 0
<TOTAL-REVENUES> 162,807
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 763
<INCOME-PRETAX> (274,502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (274,502)
<DISCONTINUED> (22,574)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (297,076)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
