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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, 1997
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 2B
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 $0.01 per share.
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended March 31, 1997 were: None.
The aggregate market value of the Issuer's voting stock held by non-
affiliates (25,995,693 shares), based on the average of the high bid and low ask
prices of such stock ($.001), as of May 16, 1997, reported to the Issuer was:
$25,996.
COMMON STOCK OUTSTANDING AS OF MAY 16, 1997: 34,983,110 SHARES.
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CREATIVE RESOURCES, INC.
1997 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.................................... 4
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................................. 7
PART III................................................... 7
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance With
Section 16(a) of the Exchange Act.......... 7
Item 10. Executive Compensation..................... 8
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 10
Item 12. Certain Relationships and Related
Transactions............................... 11
Item 13. Exhibits and Reports on Form 8-K........... 13
SIGNATURES................................................. 16
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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.
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 therefor,
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.
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 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
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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.
The Company's plan is to acquire or merge with a viable business. There can
be no assurance that the Company will be successful in achieving its plan or
will continue in operation. The Company's plan is being implemented by its sole
officer, who is currently serving without regular cash compensation. See Item
10: "Executive Compensation".
ITEM 2: DESCRIPTION OF PROPERTY
The Company's executive office is located at 26 Mill Plain Road, Suite 2B,
Danbury, CT 06811 where it shares space, rent free, with a related 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, a present director and former
officer, and a former director have been named as co-defendants in a civil
action, commenced in June 1997 in the Connecticut Superior Court for the
Judicial District of Stamford/Norwalk, captioned GICC Capital Corp. v.
---------------------
Technology Finance Group, Inc. et al. The action was commenced by a creditor of
- ------------------------------------
the Company's former subsidiary, Technology Finance Group, Inc. ("TFG"), a
computer leasing and asset management business. The complaint alleges, among
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 state law for fraudulent conveyance, unfair trade practices, and
theft. The complaint seeks recovery of the unpaid balance of $407,000 of a
promissory note issued by TFG, with interest accruing from December 1992, and
actual, treble, and punitive damages. The Company believes it and each
individual has various substantive defenses against such claims and will
vigorously defend the action.
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 this legal proceeding.
Management believes that the foregoing claim is without merit and will not
result in a material liability to the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
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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, 1996 and March
31, 1997, as reported to the Company, is as follows:
<TABLE>
<CAPTION>
Bid Prices
----------
High Low
---- ---
1995
----
<S> <C> <C>
Second Quarter $ .03 $ .01
Third Quarter .02 .001
Fourth Quarter .01 .001
1996
----
First Quarter .002 .001
Second Quarter .001 .001
Third Quarter .001 .001
Fourth Quarter $.001 $.001
1997
----
First Quarter None None
Second Quarter (through May 16, 1997) None None
</TABLE>
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 16, 1997 the closing prices for common stock in the over-
the-counter market were none bid and $.03 asked.
As of May 16, 1997, the Company had 942 holders of record of its common
stock.
The Company has not paid any dividends on account of its common stock for
the last fiscal year. No dividends were paid and $25,200 were in arrears with
respect to the Company's 8% convertible preferred stock ("Series A Preferred
Stock") as of March 31, 1997. 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 Stock. 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 therefor, 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.
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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 fiscal year ended March 31, 1997.
Income, which consists of capital gain, management fees, interest and other
miscellaneous income, was $10,067 for the year ended March 31, 1997 and $162,807
for the year ended March 31, 1996. The decrease in 1997 was primarily
attributable to a decrease in management fee income to $519 in 1997 from $60,000
in 1996 and a decrease in gain on sale of an investment to $0 in 1997 from
$86,381 in 1996. 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 $299,944 for the year ended March 31, 1997 and $437,309 for the
year ended March 31, 1996. The decrease for 1997 was primarily attributable to a
decrease in professional services expenses of 48% from $282,462 in 1996 to
$147,645 in 1997.
Income from discontinued operations of $572,635 in 1997 included a non-cash
elimination of a loss provision of $530,162. Loss from discontinued operations
was $22,574 in 1996.
In reviewing Management's Discussion and Analysis, 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.
IMPACT OF INFLATION
The Company believes its operations are not significantly affected by
inflation.
PLAN OF OPERATION
The Company is presently meeting its working capital requirements from its
cash balances which were $68,549 at March 31, 1997. Although there can be no
assurance, the Company believes it has sufficient financial resources to sustain
its operations for the next six months. The Company must raise additional funds
or execute its business plan in order to continue operations.
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 disposed of or discontinued all significant operations. 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. There can
be no assurance that the Company will be successful in achieving its plan or
will continue in operation. The Company's plan is being implemented by its sole
officer, who is currently serving without regular cash compensation. See Item
10: "Executive Compensation".
The Company currently has no existing lines of credit or other sources of
financing.
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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 as of May 16, 1997:
Name Age Position
---- --- --------
Dennis R. Williamson 54 President, Chief Executive Officer
and Director
Charles R. Bliss, Jr. 49 Director
Gordon Locke 58 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.
The business experience of the Company's directors and executive officer is
as follows:
Charles R. Bliss, Jr. was elected a director of the Company in February
1997. He has been President of C.R. Bliss & Co., P.C., a certified public
accounting firm, since September 1991. His practice specializes in corporate
accounting matters and complex tax matters. Prior to forming his own practice,
he was a partner in a regional accounting firm. From 1970 through 1980, Mr.
Bliss held positions at Peat, Marwick, Mitchell & Co. and Coopers and Lybrand.
He is a graduate of Williams College and attended The New York University School
of Business Administration. Mr. Bliss is a member of the AICPA, CSCPA and
NJSCPA.
Gordon Locke was elected a director of the Company in February 1997 and has
been the Company's General Counsel since January 1989. He has been engaged in
the private practice of law since June 1991, and specializes in corporate and
commercial matters and complex commercial litigation. Mr. Locke is a graduate
of New York University's College of
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Engineering, its School of Law, and its Graduate School of Law. He is also a
member of the New York State Bar.
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. He majored in physics at the University
of Chicago.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Messrs. Bliss and Locke were elected directors of the Company in February 1997.
They filed their Forms 3 with the Securities and Exchange Commission (the
"Commission") in May 1997. These Forms 3 should have been filed with the
Commission in March 1997.
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, 1997.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
NAME AND FISCAL
PRINCIPAL POSITION YEAR SALARY
------------------ ---- ------
Dennis R. Williamson 1997 $ 85,650 (1)
President & Chief
Executive Officer 1996 $102,500 (2)
1995 $171,000 (3)
(1) Cash compensation paid was $ 30,500 and $55,150 was accrued.
(2) Cash compensation paid was $ 35,625 and $66,875 was accrued.
(3) Cash compensation paid was $135,375 and $35,625 was accrued.
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, 1997.
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EMPLOYMENT AGREEMENT
In February 1997, the Company amended a five-year employment agreement it
entered into with Mr. Williamson in September 1993 (the "Employment Agreement").
Mr. Williamson's initial base salary was $150,000 under the Employment
Agreement. The amended Employment Agreement further provides that (i) the term
of employment will continue until terminated by three years written notice,
(ii) the base salary for the executive increases 10% on April 1 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 percent 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 regular 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 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 16, 1997, 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 1998.
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
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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 16, 1997, options to purchase 10,000,000 shares of common stock
were issued and outstanding to three directors under the 1993 Plan. The options
expire in 1998 and 2001.
COMPENSATION OF DIRECTORS
The Company paid a total of $500 to each independent director as
compensation for their services during fiscal 1997. Independent directors are
paid $1,000 for each meeting of the Board of Directors or Committee of the Board
of Directors attended in person and $500 for each meeting by telephone.
Director expenses related to attending meetings of the Board of Directors are
reimbursed by the Company.
In December 1996, CRI granted options, pursuant to the 1993 Plan, to two
independent directors to purchase, in the aggregate, up to 4,000,000 shares of
CRI's common stock at an exercise price of $.01 per share through December 2001.
The options vest over a three year period at 8.3% on the first day of January,
April, July and October of each year. No options have been exercised.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of May 16, 1997, 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 of Incorporation or by-laws.
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NAME AND ADDRESS NUMBER OF SHARES PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------ -------------------- ------------------- --------
Common Dennis R. Williamson 17,787,417 (1) 39.9
26 Mill Plain Rd. Suite 2B
Series A Preferred (2) Danbury, CT 06811 200,000 95.2
Common Charles R. Bliss Jr. 433,334 (3) 1.0
26 Mill Plain Rd. Suite 2B
Danbury, CT 06811
Common Gordon Locke 658,334 (4) 1.5
74 Sheldrake Place
Series A Preferred (2) New Rochelle, NY 10804 10,000 4.8
Common All directors and 18,879,085 42.4
executives officers as a
Series A Preferred (2) group (total of 3) 210,000 100.0
Common Glenn Smith 2,250,000 5.1
2013 Edinburg Ave.
Cardiff by the Sea, CA 92007
(1) Includes 6,800,000 shares that may be issued, within 60 days from May 16,
1997, by exercising options granted under the 1988 Plan and the 1993 Plan,
and 2,000,000 shares that may be issued 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.
(3) Includes 333,334 shares that may be issued, within 60 days from May 16,
1997 by exercising options granted under the 1993 Plan.
(4) Includes 333,334 shares that may be issued, within 60 days from May 16,
1997, by exercising options granted under the 1993 Plan and 100,000 shares
that may be acquired upon conversion of 10,000 shares of Series A Preferred
Stock.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEPENDENT DIRECTORS
Charles R. Bliss, Jr., a director of the Company, is the president of C.R.
Bliss & Co., P.C. The Company paid C.R. Bliss & Co., P.C. $39,275 in the year
ended March 31, 1997 for accounting and tax advice services. C.R. Bliss & Co.,
P.C. provides office space for the Company, rent free.
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The Company paid Gordon Locke, a director of the Company, $8,869 in the year
ended March 31, 1997 for legal services.
The Company pays Messrs. Bliss and Locke for their services as independent
directors. See Item 10: "Compensation of Directors".
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.
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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.
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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).
10.11 Amendment dated February 5, 1997 of the Employment Agreement
between Creative Resources, Inc. and Dennis R. Williamson.*
14
<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 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. None.
*Filed with this Annual Report on Form 10-KSB for the fiscal year ended March
31, 1997.
15
<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 30, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
President and Director
/s/ Dennis R. Williamson (Principal Executive,
- ------------------------ Accounting and Financial
Dennis R. Williamson Officer) June 30, 1997
/s/ Charles R. Bliss, Jr.
- -------------------------
Charles R. Bliss, Jr. Director June 30, 1997
/s/ Gordon Locke
- ----------------
Gordon Locke Director June 30, 1997
16
<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-13
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, 1997 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, 1997 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 1(i) and 4 to
the financial statements, the Company has suffered losses and has disposed of or
discontinued all significant 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 19, 1997
F-2
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
March 31,
1997
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 1(c) and (d)) $ 68,549
Notes receivable 2,236
-----------
TOTAL CURRENT ASSETS 70,785
Furniture, fixtures and equipment, net (Notes 1(e) and 2) 4,477
-----------
$ 75,262
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 12,107
Dividends payable 25,200
Accrued compensation 257,650
Current maturities of capital lease obligations (Note 3) 3,129
-----------
TOTAL CURRENT LIABILITIES 298,086
-----------
TOTAL LIABILITIES 298,086
-----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 9)
STOCKHOLDERS' DEFICIT (Notes 5 and 6):
Preferred stock, $1 par value, 500,000 shares authorized:
Series A, 8% cumulative convertible preferred stock,
$1 redemption value, 210,000 shares issued and outstanding 210,000
Common stock, $.01 par value, 100,000,000 shares authorized,
34,983,110 shares issued and outstanding 349,831
Additional paid-in capital 758,600
Deficit (1,541,255)
-----------
TOTAL STOCKHOLDERS' DEFICIT (222,824)
$ 75,262
===========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Income
Interest and dividend income $ 8,748 $ 16,426
Other income 1,319 146,381
--------- ---------
10,067 162,807
Expense
General and administrative expenses 299,565 436,546
Interest expense 379 763
--------- ---------
299,944 437,309
Net loss from continuing operations (289,877) (274,502)
Income (loss) from discontinued operations (Notes 1(i) and 4) 572,635 (22,574)
--------- ---------
NET INCOME (LOSS) $ 282,758 $(297,076)
========= =========
Earnings (loss) per common share (Notes 1(h) and 4):
Loss from continuing operations $ (.01) $ (.01)
========= =========
Income from discontinued operations $ .02 $ -
========= =========
Net income (loss) $ .01 $ (.01)
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 1(h)) 34,491,329 39,492,699
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN
SERIES A SERIES B CAPITAL
PREFERRED PREFERRED COMMON (EXCESS
STOCK STOCK STOCK DISTRIBUTIONS)
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
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
Stock issued for services - - - - 500,000 5,000 5,000
Preferred stock dividends - - - - - - -
Net income - - - - - - -
--------- --------- ------------- ------------- ----------- ---------- ------------
Balance at March 31, 1997 210,000 $210,000 - $ - 34,983,110 $ 349,831 $ 758,600
========= ========= ============= ============= =========== ========== ============
TOTAL
RETAINED STOCKHOLDERS'
EARNINGS EQUITY
(DEFICIT) (DEFICIT)
<S> <C> <C>
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)
Stock issued for services - 10,000
Preferred stock dividends (25,200) (25,200)
Net income 282,758 282,758
----------- -----------
Balance at March 31, 1997 $(1,541,255) $ (222,824)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended
March 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 282,758 $(297,076)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization 1,654 2,305
Loss on sale of business segment - 3,827
Gain on sale of investment - (86,381)
Elimination of loss provision (530,162) -
Stock issued for services 10,000 -
Loss on disposal of equipment 726 -
Changes in assets and liabilities:
Accounts receivable - 74
Other assets - 2,040
Accounts payable and accrued expenses (126,264) 47,255
Accrued compensation 55,150 66,875
Liabilities from discontinued operations (20,749) (83,151)
--------- ---------
Net cash used in
operating activities (326,887) (344,232)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection of notes receivable 1,020 -
Purchase of equipment (2,096) (212)
Proceeds from sale of investment - 90,000
Disposition of business segment - 661,590
--------- ---------
Net cash (used in) provided
by investing activities (1,076) 751,378
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - (8,400)
Repayments of long-term debt (2,893) (2,619)
--------- ---------
Net cash used in
financing activities (2,893) (11,019)
--------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (330,856) 396,127
CASH AND CASH EQUIVALENTS at beginning of period 399,405 3,278
--------- ---------
CASH AND CASH EQUIVALENTS at end of period $ 68,549 $ 399,405
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<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.
The accompanying financial statements have been
prepared assuming that the Company will continue as
a going concern. The Company has suffered losses
and has disposed of or discontinued all significant
operations. 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. 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
adjustments 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 estimated useful lives of primarily
five years.
</TABLE>
F-7
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
(f) Stock-Based Compensation
Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation,"
encourages, but does not require companies to
record compensation cost for stock-based employee
compensation plans at fair value. The Company has
chosen to continue to account for stock-based
compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations. Accordingly,
compensation cost for stock options is measured as
the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over
the amount an employee must pay to acquire the
stock. Compensation cost for stock appreciation
rights and performance equity units is recorded
annually based on the quoted market price of the
Company's stock at the end of the period. Refer to
Note 5.
(g) Income Taxes
No provision for income taxes has been made for the
years ended March 31, 1997 and 1996 due to net
losses for income tax purposes. 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.
(h) 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.
In February 1997, the Financial Accounting
Standards Board issued FAS 128 "Earnings per Share"
which specifies the computation, presentation and
disclosure requirements for earnings per share. The
statement is effective for interim and annual
periods ending after December 15, 1997. The
adoption of this standard is not expected to have a
material effect on the Company's financial
statements.
</TABLE>
F-8
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
(i) 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 income (loss) from
discontinued operations relate to these
subsidiaries and to previously discontinued
businesses.
(j) 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.
(k) Financial Instruments
The carrying amounts of financial instruments
including cash, notes receivable, accounts payable
and dividends payable approximated fair value as of
March 31, 1997 because of the relatively short
maturity of these instruments.
2. PROPERTY AND Property and equipment consist of:
EQUIPMENT
March 31, 1997
--------------------------------------------------------
Furniture, fixtures and equipment $ 6,321
Computer equipment 4,180
--------------------------------------------------------
10,501
Less accumulated depreciation (6,024)
--------------------------------------------------------
$ 4,477
--------------------------------------------------------
</TABLE>
F-9
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
3. 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,
---------------------------------------------------
1998 $3,408
--------------------------------------------------
Total minimum lease payments 3,408
Less imputed interest (279)
--------------------------------------------------
Present value of minimum lease payments $3,129
--------------------------------------------------
4. DISCONTINUED On June 8, 1995, the Company entered into a
OPERATIONS definitive agreement for the disposition of its
subsidiary MRC, its subsidiary Medical Marketing,
Inc. and its subsidiaries PHSC and LTCP. The
results of their operations and previously
discontinued businesses have been included in
discontinued operations for the periods presented.
Long term receivables of $41,605 and $48,079 were
collected and recognized as income from
discontinued operations for the years ended March
31, 1997 and 1996 respectively. In 1997, income
from discontinued operations included a non-cash
elimination of a loss provision of $530,162.
5. 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 CRI'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 CRI's common stock at an
exercise price of $.05 per share through December
31, 1997. In October 1996, the exercise price of
the options was reset at $.01 per share, equivalent
to at least 110% of the fair market value at that
date, and the exercise date was extended to
December 31, 1998. The weighted average exercise
price was $.01 and $.05 per share as of March 31,
1997 and 1996 respectively. No options have been
exercised.
</TABLE>
F-10
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 CRI'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.
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 CRI'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 day of January and July
of each year. On June 8, 1995, 6,000,000 options
which were granted to three former officers were
cancelled in connection with the MRC disposition.
In October 1996, the exercise price of the
6,000,000 options then outstanding was reset at
$.01 per share, equivalent to at least 110% of the
fair market value at that date. The weighted
average exercise price was $.01 and $.08 per share
as of March 31, 1997 and 1996.
In December 1996, CRI granted options, pursuant to
the 1993 Plan, to two independent directors to
purchase, in the aggregate, up to 4,000,000 shares
of CRI's common stock at an exercise price of $.01
per share through December 2001. The options vest
over a three year period at 8.3% on the first day
of January, April, July and October of each year.
The options are considered to have minimal value
and were not recorded. No options have been
exercised.
Proforma information regarding net income and
earnings per share as required with the fair value-
based method prescribed in FASB Statement 123
"Accounting for Stock-Based Compensation" has not
been presented since amounts are not considered to
be material.
6. 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. No dividends
were paid and $25,200 were declared and in arrears
on the Series A as of March 31, 1997.
</TABLE>
F-11
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Series B
Series B has a redemptive 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.
7. INVESTMENT AND In December 1992, CRI entered into a loan
LOAN PAYABLE agreement, whereby it 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 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.
8. TAXES ON INCOME No provision for income taxes has been provided
for the years ended March 31, 1997 and 1996 due to
net taxable losses. The Company has net operating
loss carryovers of approximately $4,000,000 for
federal income tax purposes which expire through
2012. In addition, the Company has deferred tax
assets relating to deferred compensation and other
accruals that are not currently deductible for
income tax purposes. The Company recorded a 100%
valuation allowance against the net deferred tax
asset of approximately $1,800,000 and $1,900,000 at
March 31, 1997 and 1996 respectively.
9. COMMITMENT AND (a) Legal Proceeding
CONTINGENCIES
The Company has a legal proceeding 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 this legal proceeding.
The Company believes that no material liability
will result from the outcome of this proceeding.
The proceeding may be summarized as follows:
</TABLE>
F-12
<PAGE>
Creative Resources, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The Company, a present officer and director, a
present director and former officer, and a former
director have been named as co-defendants in a
civil action, commenced in June 1997 in the
Connecticut Superior Court for the Judicial
District of Stamford/Norwalk, captioned GICC
----
Capital Corp. v. Technology Finance Group, Inc. et
--------------------------------------------------
al. The action was commenced by a creditor of the
--
Company's former subsidiary, Technology Finance
Group, Inc. ("TFG"), a computer leasing and asset
management business. The complaint alleges, among
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 state law for
fraudulent conveyance, unfair trade practices, and
theft. The complaint seeks recovery of the unpaid
balance of $407,000 of a promissory note issued by
TFG, with interest accruing from December 1992, and
actual, treble, and punitive damages. The Company
believes it and each individual has various
substantive defenses against such claims and will
vigorously defend the action.
(b) Employment Agreement
The Company has an employment agreement with an
executive dated September 1, 1993 and amended in
February 1997 which provides for an annual base
salary, which is increased by 10% annually on April
1 ($199,650 for the year ended March 31, 1997), and
a severance pay equal to one year's salary. The
agreement may be terminated by three years written
notice from the Company or two months written
notice from the executive. The executive has
voluntarily reduced the compensation by $120,000
for the year ended March 31, 1997.
(c) 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. To date, no claims have
been made against the Company under this indemnity.
10. RELATED PARTY The Company paid two of its directors $39,275 and
TRANSACTIONS $8,869 respectively for accounting and legal
services during the year ended March 31, 1997.
</TABLE>
F-13
<PAGE>
Exhibit 10.11
February 5, 1997
Dennis R. Williamson
5265 Toscana Way, Apt. 221
San Diego, CA 92122-5306
Dear Mr. Williamson,
We confirm our agreement amending the Employment Agreement dated as of
September 1, 1993 between us, as follows:
1. Paragraph 6 is amended to provide the term of your employment shall continue
until it is terminated by us upon not less than three (3) years prior written
notice to the other, except as otherwise expressly provided in the Employment
Agreement.
2. Your Base Salary shall increase by ten percent for each successive twelve
month period (April 1 though March 31).
3. The Employment Agreement, as amended, shall be construed and interpreted in
accordance with the laws of the State of New York, without regard of the laws of
conflicts of law. You and we each consent to the jurisdiction and venue of the
courts of the State of New York in any action to enforce your or our rights
under or pursuant to said employment agreement.
The Employment Agreement remains in full force and effect in accordance
with all of the terms, provisions and conditions, except as herein specifically
amended.
Please confirm the above correctly sets forth our agreement by signing and
returning the above copy of this letter.
Very truly yours,
Agreed: Creative Resources, Inc.
by /s/ Charles R. Bliss
----------------------------
Charles R. Bliss, CPA
Director
/s/ Dennis R. Williamson
- ----------------------------
Dennis R. Williamson
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0
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