FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year Commission file
ended June 30, 1998. No. 33-17679-D
-------------- -----------
PIERCE INTERNATIONAL, INC.
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1067694
------------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer ID.)
incorporation or organization)
6746 South Revere Parkway, Suite 130, Englewood, CO 80112
---------------------------------------------------------
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303)-792-0719
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of June 30, 1998, 7,225,703 shares were outstanding and the aggregate
market value of stock held by non-affiliates of the Registrant computed by
reference to the average bid and asked price was $0.
Documents incorporated by reference: NONE.
This Form 10-K consists of 28 pages.
Exhibits are indexed on page 12.
1
<PAGE>
PART I
Item 1. Business.
- -----------------
History and Organization
- ------------------------
Pierce International, Inc. (The "Company") was organized under the laws of
the State of Colorado on July 22, 1987, for the purpose of creating a corporate
vehicle to acquire business opportunities.
In February, 1988 the Company completed a public offering of 40,000,000
shares of its no par value common stock at an offering price of $.01 per share.
The net proceeds to the Company from the initial offering were approximately
$332,900.
Currently, the Company is concentrating its business efforts in two areas:
1. Natural Resources
2. Industrial Development
Natural Resources
- -----------------
The Company owns an interest in the Como Property through its 100% owned
subsidiary, Como, Inc. Como consists of gold and gravel mining leases on a
property situated approximately 50 miles southwest of Denver, Colorado, near
Como, Colorado in Park County. The Company had sold the property to a subsidiary
under a stock purchase agreement, however, the subsidiary defaulted on the
agreement and the Company reclaimed the property as of June 11, 1996. The
Company continues to carry $200,000 in debt related to the original purchase of
the Como Leases. This $200,000 will be paid from the net profits generated by
the property. Further, a shareholder is entitled to 10% of net profits received
by the Company on this project.
Industrial Development
- ----------------------
Easiwall (Strawboard)
---------------------
On May 23, 1994, the Company agreed to purchase a used strawboard factory
for $50,000. A payment of $10,000 was paid at execution, and the balance of
$40,000 was paid in a series of payments, with the final payment being made
September 30, 1994. This equipment was part of an operation in Yuba City,
California. The Company has an agreement with Stramit Industries Ltd. of Yaxley,
England, who will refurbish the equipment and supervise the proper installation
of the equipment at a site yet to be determined. The equipment has an estimated
market value of $1,300,000.
The machine produces a product known internationally as "strawboard". The
Company's trade marked names for its products are "Easiboard" and "Easiwall".
The product has a history of more than 40 years use by the building industry. A
number of the plants are currently operating worldwide. However, there is no
such operating manufacturing plant in the United States. The technology includes
the use of wheatstraw in a compressed state to produce building panels.
2
<PAGE>
The Company is engaged in marketing factories, technical expertise, and
exclusive sales of the product. Although no deals have yet been completed, the
Company has had serious negotiations with several rural communities who are
interested in financing a factory in their area.
Easiboard is a solid, versatile domestic partitioning system ideally suited to
the needs of today's contractor. The system is simple to install and replaces
the use of timber and studwork in residential and commercial applications. It
offers cost benefits and provides excellent sound and thermal insulation
properties in all types of dwellings. It is also a fire retardant. According to
building contractors and building specialty products professionals, Easiboard
may very well replace drywall, wood studs and in some instances, plywood. More
importantly, Easiboard's primary component is straw, an ever-renewing, largely
wasted agricultural by-product.
The Company is also entering into a relationship with Stramit Industries
Ltd. to introduce even more technological applications for Easiboard and to
provide for technological changes in the equipment. Details regarding this
agreement will be forthcoming.
Employees
- ---------
The Company and its subsidiaries do not currently have any employees. All
services are provided by various individuals on a consulting basis.
Competition
- -----------
The Company and its subsidiaries compete against many significantly larger
enterprises with respect to their business activities. Nearly all such entities
have significantly greater financial resources, technical expertise and
managerial capabilities than the Company and its subsidiaries, and,
consequently, the Company and its subsidiaries are at a competitive
disadvantage.
Item 2. Properties.
- -------------------
The Company leases its office space which consists of approximately 600
square feet from a non-affiliated party. The office is located at 6746 South
Revere Parkway, Suite 130, Englewood, Colorado, USA. The lease is for two years
beginning June, 1998. Current rent is $832.50 per month.
3
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Item 3. Legal Proceedings.
- --------------------------
The Company is not engaged in any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
No matter was submitted during the forth quarter of the fiscal year covered
by this report to a vote of security holders.
4
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------------------------------------------------------------------------------
(a) Principal Market or Markets. The Company's stock is traded on the OTC
bulletin board under the symbol PRCI. Trading resumed September 18, 1997. High
and low bid prices for the last three quarters are as follows:
BID
Quarter Ended: High Low
------------- ---- ---
December 30, 1997 $0.03 $0.01
March 31, 1998 $0.12 $0.08
June 30, 1998 $0.22 $0.12
(b) Approximate Number of Holders of Common Stock. The number of beneficial
holders of the Company's no par value common stock at June 30, 1998 was
approximately 317.
(c) Dividends. Holders of common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No dividends
have been paid with respect to the Company's common stock and no dividends are
anticipated to be paid in the foreseeable future.
Item 6. Selected Financial Data.
- --------------------------------
The following table sets forth certain selected financial data with respect
to the Company.
<TABLE>
<CAPTION>
Balance Sheet Data: At June 30,
-------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets 506,504 564,849 570,562 584,041 599,737
Long Term Debt 200,000 200,000 200,000 200,000 200,000
Working Capital (337,684) (315,755) (217,311) (220,578) (171,729)
Total Liabilities 550,128 527,130 446,429 453,130 594,441
Stockholder's Equity (43,624) 37,719 124,133 130,911 (298,017)
Deferred Revenue 0 0 0 0 66,187
Statement of Operations Data: For the year ended June 30,
---------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Revenues 134,865 135,410 245,947 210,357 271,366
Net Earnings (Loss) (101,283) (106,414) (6,778) 52,465 167,322
Net Earnings (Loss)
Per Common Share (0.015) (0.017) (0.001) 0.009 0.012
</TABLE>
5
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation of the Year Ended June 30, 1998.
Introduction
- ------------
The Company is concentrating on its two major industries, natural resources
and industrial development. The Company is making a concentrated effort to sell
strawboard equipment, and to presell strawboard.
Liquidity
- ---------
At June 30, 1998, the Company has cash of $286. For the year ended June 30,
1998, the Company used cash of $10,560, resulting from a use of cash in
operating activities of $33,096 offset by advances from officers of $22,532.
The Company's future liquidity needs are dependent upon the Company's
ability to generate positive cash flow from operations, to borrow funds or to
complete additional equity offerings or a combination of the above. There can be
no assurance that financing will be available to the Company or that the Company
will otherwise find sources to meet its cashflow requirements.
Results of Operations
- ---------------------
For the years ended June 30, 1998 and 1997, the Company sustained net
losses of $101,283 and $106,414 , respectively. The Company's revenues related
to the sale of strawboard equipment were $43,211 for the year ended June 30,
1998 and $115,000 for the year ended June 30, 1997. Management is confident that
future marketing will have a positive impact on revenues.
Year 2000
- ---------
At its current level of operations, the Company is not dependent upon
computer programs as the Company employs outside vendors to process its
accounting information. The Company will take the necessary steps to engage an
outside vendor whose computer programs are year 2000 compliant. The Company
expects that costs to comply will be born substantially by the outside vendors
and that its costs will not be significant, if any.
Item 8. Financial Statements and Supplemental Data.
- ---------------------------------------------------
The Financial statements and schedules are set forth on pages F-1 through
F-13 hereto.
6
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------------
On August 26, 1997, the Company dismissed its independent accountant, Doran
Peck, C.P.A. P.C., and engaged independent accountant, Spicer, Jeffries & Co.
The former accountant issued a report that was modified as to uncertainty (Going
Concern). The decision to change independent accountants was approved by the
board of directors. There was not any disagreement with the former accountant on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures.
7
<PAGE>
PART III
Item 10. Directors and Executive Officer of the Registrant.
- -----------------------------------------------------------
The Directors and Officers of the Company are as follows:
Name Age Position
---- --- --------
Pierce D. Parker 71 Director, Chairman of the Board, and
President
Nancy A. Cooper 39 Director, Vice President and Secretary
Mark S. Cooper 39 Director
Dr. Parker should be considered a "parent and organizer" of the Company (as
such term is defined by Rule 405 under the Securities Act of 1933), in as much
as he has taken significant initiative in founding and organizing the business
of the Company and because of his control position in the Company. Dr. Parker
devotes full time to the operations of the Company. Ms. Cooper devotes only a
limited amount of time to the Company on an as-needed basis.
There is no family relationship between any director or executive officer
except: Ms. Cooper is the daughter of Pierce D. Parker and the spouse of Mark
Cooper.
Pierce D. Parker
- ----------------
Dr. Parker has served as the President, Treasurer and as a Director of the
Company since its inception on August 10, 1987. Dr. Parker became Vice-President
and Chairman of the Board on August 15, 1988. He continues as Chairman of the
Board and has been President of the Company since April 1, 1990. In addition, he
has served as President and Director of Pierce International Discovery, Inc.
since its inception April, 1989. From October, 1988 until March, 1992, Dr.
Parker was President, Treasurer and a Director of Pierce International Gold,
Inc., a publicly-held company which was a majority-owned subsidiary of Pierce
International, Inc., and held certain gold and silver mineral rights. Since his
retirement in May, 1986 as President of AMAX Exploration, Inc. and Chief
Geologist of AMAX, Inc., Dr. Parker has been consulting for the natural
resources industry under the name Parker Consulting Services, Inc. His
consulting clients include AMAX, Inc. and several small mining groups. Dr.
Parker was employed by AMAX, Inc. for over 26 years prior to his retirement. His
first 13 years with AMAX, Inc. included positions as Geologist, Project Manager,
Regional Manager, and Manager of Technical and Coordinating Services. From 1972
until 1978, he served as Chief Geologist, AMAX Exploration, Inc. From 1978 until
1982, he served as Senior Vice President, AMAX Exploration, Inc. and Chief
Geologist, AMAX, Inc. From 1982 until May, 1986, he served as President of AMAX
Exploration, Inc. and Chief Geologist of AMAX, Inc. As President of AMAX
Exploration, Inc., he was in charge of evaluations and recommendations for major
8
<PAGE>
mining projects, and was responsible for monitoring and approving ore reserves
throughout the world. Dr. Parker received a Bachelor of Science Degree with
Honors in Geological Engineering and Mining Engineering in 1951 from Montana
College of Mineral Science and Technology, Butte, Montana. He received his
Masters of Science Degree (Magna Cum Laude) in Geology from the University of
Wisconsin in 1956 and his PH.D. (Magna Cum Laude) in Geology from that same
university in 1960. Dr. Parker has authored several technical publications and
given numerous talks and seminars in the natural resources and minerals
economics area.
Mark S. Cooper
- --------------
Mr. Cooper has served as Vice President and Director of the Company since
January, 1990. He obtained his real estate license in the state of Colorado in
1993. Currently, he is President of an unrelated real estate company. Mr. Cooper
was a professional football player in the National Football League from 1983
through the 1989 season. From 1987 to 1989, he played for the Tampa Bay
Buccaneers. From 1983 to 1987 he played for the Denver Broncos. He received a
Bachelor of Science Degree in Communications from the University of Miami in
1983.
Nancy A. Cooper
- ---------------
Ms. Cooper began working for Pierce Financial (then MRG Financial) in
November of 1987. Ms. Cooper was a full time employee of the company until
August 15, 1991. She is currently employed as a Regional Sales Manager for
Health Script. Ms. Cooper oversees the sales and marketing of Health Script's
product lines in the midwest and central regions of the U.S. Ms. Cooper received
her Bachelor of Science degree with a major in Human Resources from Colorado
State University. She is available to work for the Company on a consulting
basis.
All directors of the Company will hold office until the next annual meeting
of the shareholders and until their successors have been elected and qualified.
The Officers of the Company are elected by the Board of Directors at the
first meeting after each annual meeting of the shareholders, and hold office
until their death, or until they shall resign or have been removed from office.
Item 11. Executive Compensation
- -------------------------------
Remuneration
- ------------
None of the Company's Officers and Directors currently receives a salary
from the Company or its subsidiaries. They may receive fees for consulting work;
however, none have received fees in excess of $60,000 per year.
9
<PAGE>
Although Directors do not receive compensation for their services as
Directors, they may be reimbursed for expenses incurred in attending Board
meetings.
Incentive Stock Option Plan
- ---------------------------
On August 10, 1987, the Company adopted an Incentive Stock Option Plan (the
"Plan") under which options granted are intended to qualify as "incentive stock
options" under Section 422A of the Internal Revenue code of 1954, as amended
(the "Code"). Pursuant to the Plan, options to purchase up to 400,000 shares of
the Company's Common Stock may be granted to employees of the Company. The Plan
is administered by the Board of Directors which is empowered to determine the
terms and conditions of each option, subject to the limitation that the exercise
price cannot be less than the market value of the Common Stock on date of the
grant (110% of the market value in the case of options granted to an employee
who owns 10% or more of the Company's outstanding Common Stock) and no option
can have a term in excess of 10 years (5 years in the case of options granted to
employees who own 10% or more of the company's Common Stock).
As of the date of this report, no options have been granted under this
Plan.
10
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
The following table sets forth, as of June 30, 1998, the stock ownership of
each person known by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock, each director individually and all Directors
and Officers of the Company as a group. Each person has sole voting and
investment power with respect to the shares shown.
Percent of Class
Name and Address Amount of Currently
of Beneficial Owner Beneficial Ownership Outstanding
- ------------------- -------------------- ----------------
Pierce D. Parker 2,146,400 (1) 29.70%
13041 N. Travois Trail
Parker, Co 80134
Nancy A. Cooper 397,550 (2) 5.50%
19754 E. Euclid Dr.
Aurora, CO 80016
Mark S. Cooper 195,550 (3) 2.71%
19754 E. Euclid Dr.
Aurora, CO 80016
Progressive Media Group 400,000 5.53%
6746 S. Revere Parkway, #130
Englewood, CO 80012
All Directors and Officers as
a Group (3 Persons) 2,739,500 (1)(2)(3) 37.91%
1) Includes 1,520,000 shares owned directly by Dr. Parker, and 626,400 shares
owned by Parker Consulting Services (Dr. Parker is the primary
shareholder).
2) Includes 57,550 shares owned directly by Nancy A. Cooper and 340,000 owned
by Nancy Cooper As Custodian for Michael Parker Cooper.
3) Includes 15,550 shares owned by Cooper International Consulting (Mr. Cooper
is the primary shareholder).
11
<PAGE>
Item 13. Certain Relationships and Related Transactions.
- ---------------------------------------------------------
The Company continues to owe Pierce D. Parker/Parker Consulting Services,
an officer and director, $264,612 from advances made over a period of time. In
addition, the Company owes $200,000 to Parker Consulting Services Profit Sharing
Plan for amounts directly related to the Como property. See the business
description under the heading, "Natural Resources".
Item 14. Exhibits, Financial Statement Schedules, and Reports, on Form 8-K.
- ---------------------------------------------------------------------------
(a)1. The financial statements filed as a part of this 10-K are as follows:
- ---------------------------------------------------------------------------
Page
Independent Auditor's Report F-1, F-2
Balance Sheets, June 30, 1998 and 1997. F-3
Statements of Operations, for the years ended June 30, 1998,
1997, and 1996. F-4
Statements of Changes in Stockholders' Equity (Deficit), for the
years ended June 30, 1998, 1997, and 1996. F-5
Statements of Cash Flows, for the years ended June 30, 1998,
1997 and 1996. F-6 to F-7
Notes to Financial Statements F-8 to F-11
(a)2. Financial Statement Schedules:
Independent Auditor's Report on Additional Information F-12
Schedule V - Property and Equipment F-13
Schedule VI - Accumulated Depreciation on Property and Equipment F-14
All other schedules have been omitted because they are inapplicable, not
required or the information is included elsewhere in the financial statements or
notes thereto.
(a)3. The exhibits required by Item 601 of Regulation S-K are as follows:
Description Location
----------- --------
(3) Articles of Incorporation and Bylaws--incorporated by reference from
Form S-18 effective with the Commission on January 20, 1988 (SEC File No.
33-17679-D).
(11) Statement Re: computation of per share earnings
(16) Letter regarding change in certifying accountants
12
<PAGE>
Supplemental Information to be Furnished With Reports filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
- --------------------------------------------------------------------------------
No annual report or proxy material has been sent to security holders. If
any annual report or proxy material is furnished to security holders subsequent
to this filing, copies of such material will be furnished to the commission when
they are sent to shareholders.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Pierce International, Inc.
Dated: November 20, 1998 BY: /s/ Pierce D. Parker
-------------------------
Pierce D. Parker, President
Pursuant to the requirements of the Securities Act of 1934, 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 Capacity
--------- --------
/s/ Pierce D. Parker
- ---------------------------- Chairman of the Board, President and
Pierce D. Parker Director (Chief Executive Officer, and
Principal Financial and Accounting Officer)
November 20, 1998
- ------------------
Date
/s/ Nancy A. Cooper
- ---------------------------- Vice President, Secretary and Director
Nancy A. Cooper
November 20, 1998
- ------------------
Date
/s/ Mark S. Cooper
- ---------------------------- Vice President and Director
Mark S. Cooper
November 20, 1998
- ------------------
Date
14
<PAGE>
PIERCE INTERNATIONAL, INC.
CONTENTS
--------
Page
Independent Auditors' Reports F-1 - F-2
Balance Sheets, June 30, 1998 and 1997 F-3
Statements of Operations - Years ende
June 30, 1998, 1997 and 1996 F-4
Statements of Changes in Stockholders' Equity (Deficit) -
Years ended June 30, 1998, 1997 and 1996 F-5
Statements of Cash Flows - Years ended June 30, 1998,
1997 and 1996 F-6 - F-7
Notes to Financial Statements F-8 - F-11
Independent Auditors' Report on Supplemental Information F-12
Schedule V - Property and Equipment F-13
Schedule VI - Accumulated Depreciation and
Amortization of Property and Equipment F-14
All other schedules have been omitted because they are inapplicable, not
required or the information is included elsewhere in the financial statements or
notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors
Pierce International, Inc.
We have audited the balance sheets of Pierce International, Inc. as of June 30,
1998 and 1997, and the statements of operations, changes in stockholders' equity
(deficit) and cash flows of Pierce International, Inc. for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on the test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pierce International, Inc. as
of June 30, 1998 and 1997, and the results of its operations and cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
SPICER, JEFFRIES & CO.
Denver, Colorado
September 25, 1998
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and Directors
Pierce International, Inc.
We have audited the statement of operations, changes in stockholders' equity and
cash flows of Pierce International, Inc. for the year ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of the operations and cash flows of Pierce
International, Inc. for the year ended June 30, 1996 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
DORAN PECK, C.P.A., P.C.
Denver, Colorado
October 12, 1996
F-2
<PAGE>
PIERCE INTERNATIONAL, INC.
BALANCE SHEETS
June 30,
--------------------
ASSETS 1998 1997
CURRENT ASSETS: ------ -------- --------
Cash $ 286 $ 10 846
Investments 158 162
Other 12 000 367
-------- --------
Total current assets 12 444 11,375
-------- --------
PROPERTY AND EQUIPMENT (Note 1):
Undeveloped mineral property (Note 2) 434 918 434 918
Furniture and equipment 7 705 7 705
Strawboard equipment (Note 3) 57 120 57 120
-------- --------
499 743 499 743
Less accumulated depreciation and amortization (6 557) (5 674)
-------- --------
Net property and equipment 493 186 494 069
-------- --------
OTHER ASSETS 874 59 405
-------- --------
$506 504 $564 849
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 85 516 $ 85 050
Advances and accrued expenses from
officers/directors/stockholders (Note 4) 264 612 242 080
-------- --------
Total current liabilities 350 128 327 130
-------- --------
NOTE PAYABLE (Note 6) 200 000 200 000
-------- --------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 7 and 8):
Preferred stock, no par value; 400,000
shares authorized; 80,000 shares
issued and outstanding 20 000 20 000
Common stock, no par value; 30,000,000
shares authorized; 7,225,703 and
6,380,703 shares issued and outstanding
as of June 30, 1998 and June 30, 1997,
respectively 864 482 844 542
Accumulated deficit (928 106) (826 823)
-------- --------
Total stockholders' equity (deficit) (43 624) 37 719
-------- --------
$506 504 $564 849
======== ========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
PIERCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
Year ended June 30,
1998 1997 1996
---------- ---------- ---------
REVENUE:
Sales $ 43 211 $ 115 000 $ 205 144
Cost of goods sold 3 332 70 121 64 685
---------- ---------- ---------
GROSS MARGIN 39 879 44 879 140 459
---------- ---------- ---------
EXPENSES:
Administrative 43 776 22 859 58 654
Bad debt reserve -- 81 702 162 200
Outside services -- 12 050 36 300
Advertising and promotion 5 326 300 4 310
Professional fees 126 368 39 106 --
Occupancy and equipment costs 13 261 11 208 --
Lease rental 11 205 -- --
---------- ---------- ---------
Total expenses 199 936 167 225 261 464
---------- ---------- ---------
NET OPERATING LOSS (160 057) (122 346) (121 005)
Other income (Note 4) 91 411 20 410 40 803
Foreign exchange gain (loss) 243 -- (184)
Loss on investment -- -- (381 695
Gain on asset claim (Note 2) -- -- 434 918
Gain on disposition of assets -- -- 20 385
Other expenses (32 880) (4 478) --
---------- ---------- ---------
NET (LOSS) $ (101 283) $ (106 414) $ (6 778)
========== ========== =========
NET (LOSS) PER COMMON SHARE $ (.015) $ (0.017) $ (0.001)
========== ========== =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6 861 120 6 319 165 5 980 703
========== ========== =========
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
PIERCE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
Preferred Stock Common Stock
--------------- ------------ Accumulated
Shares Amount Shares Amount Deficit
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
BALANCES, JUNE 30, 1995 -- $ -- 149 517 572 $844 542 $(713 631)
25 for 1 Reverse split
March 13, 1996 -- -- (143 536 869) -- --
Net loss -- -- -- -- (6 778)
------ ------- ------------ -------- ----------
BALANCES, JUNE 30, 1996 -- -- 5 980 703 844 542 (720 409)
Issuance of 80,000 shares of
preferred stock 80 000 20 000 -- -- --
Issuance of 400,000 shares of
common stock in lieu of services -- -- 400 000 -- --
Net loss -- -- -- -- (106 414)
------ ------- ------------ -------- ----------
BALANCES, JUNE 30, 1997 80 000 20 000 6 380 703 844 542 (826 823)
Issuance of 845,000 shares of
common stock in lieu of services -- -- 845 000 19 940 --
Net loss -- -- -- -- (101 283)
------ ------- ------------ -------- ----------
BALANCES, JUNE 30, 1998 80 000 $20 000 7 225 703 $864 482 $ (928 106)
====== ======= ============ ======== ==========
The accompanying notes are an integral part of these statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIERCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,
1998 1997 1996
--------- --------- --------
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(101 283) $(106 414) $(6 778)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 883 883 883
Issuance of common stock in lieu of services 7 940 -- --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
and other assets 58 898 (12 913) (20 199)
Decrease (increase) in related party
receivable -- -- 110 002
(Decrease) increase in accounts payable
and accrued expenses 466 69 270 10 242
Gain on sale of investments -- -- (455 303)
--------- ---------- --------
Net cash used in operating activities (33 096) (49,174) (361 153)
--------- ---------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Increase in investments 4 15 585 391 417
Investment in Strawboard -- -- (1 125)
--------- ---------- --------
Net cash provided by investing
activities 4 15 585 390 292
--------- ---------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances (payments) from (to)
officers/directors/stockholders 22 532 11 431 (16 943)
Issuance of preferred stock -- 20 000 --
--------- ---------- --------
Net cash provided by (used in)
financing activities 22 532 31 431 (16 943)
--------- ---------- --------
NET (DECREASE) INCREASE
IN CASH (10 560) (2 158) 12 196
CASH, at beginning of year 10 846 13 004 808
--------- ---------- --------
CASH, at end of year $ 286 $ 10 846 $ 13 004
========= ========== ========
F-6
</TABLE>
<PAGE>
PIERCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(Concluded)
FOR THE YEAR ENDED JUNE 30,
1998 1997 1996
------- ------- -------
SUPPLEMENTAL DISCLOSURE
OF CASH-FLOW INFORMATION:
Cash paid for interest $ 5 142 $ -- $ --
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Issuance of common stock for
future services $12 000 $ -- $ --
======= ======= =======
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
PIERCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated under the laws of the State of Colorado on July 22,
1987, for the purpose of obtaining capital to seek potentially profitable
business opportunities. Currently, Pierce International, Inc. (PI) has business
interest in two industries, natural resources and industrial development.
Net income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. Common stock equivalents were
not considered (for losses only), as their effect would be antidilutive.
The Company states property and equipment at cost. Depreciation is being
provided by the straight-line method over estimated useful lives of three to
five years. All costs related to the acquisition (including associated legal and
other costs) of the mineral properties have been capitalized. These costs will
be amortized by the units-of-production method of accounting based upon
estimated recoverable reserves.
The Company adopted the provisions of SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in its financial
statements for the year ended June 30, 1997. The adoption of SFAS 121 had no
material effect on the Company's financial statements. The Company reviews its
long-lived assets for impairment to determine if the carrying amount of the
asset is recoverable.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the 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 accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations and realization of assets and
satisfaction of liabilities in the normal course of business. The continuation
of the Company as a going concern is dependent upon the company raising
additional capital, and attaining and maintaining profitable operations. The
Company has suffered recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern.
Cash and cash equivalents for purposes of the statements of cash flows includes
highly liquid investments with a maturity of three months or less at the date of
acquisition.
NOTE 2 - UNDEVELOPED MINERAL PROPERTY
On June 11, 1996, PI reclaimed the "Como" property from Pierce International
Discovery, Inc. (PIDI). PIDI, a 17.24% owned subsidiary, failed to comply with
the stock purchase agreement. Como consists of gold and gravel mining leases on
property situated approximately 50 miles southwest of Denver, Colorado, near
Como, Colorado in Park County.
F-8
<PAGE>
PIERCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(continued)
NOTE 3 - STRAWBOARD EQUIPMENT
The Company purchased strawboard equipment for $57,120. This equipment is seen
as an investment and the Company intends to resell the equipment.
NOTE 4 - RELATED PARTY TRANSACTIONS
As of June 30, 1998, advances include $201,612 due Pierce D. Parker, officer and
director, or his company Parker Consulting Services, and $63,000 is accrued
consulting fees due Pierce D. Parker. For the year ended June 30, 1998, other
income includes $72,000 in management fees from Pierce International Discovery,
Inc.
NOTE 5 - COMMITMENTS
The Company leases office space from an unrelated party under a noncancellable
operating lease expiring in 2001.
At June 30, 1998, aggregate minimum future rental commitments under the
Company's leases with initial or remaining terms in excess of one year are as
follows:
June 30, Amount
-------- ------
1999 $10 073
2000 10 573
2001 9 158
-------
Total $29 804
=======
Total rent expense for the years ended June 30, 1998 and 1997 was approximately
$9,900 and $10,089 respectively.
NOTE 6 - NOTE PAYABLE
As of June 30, 1998, PI had the following long term note payable:
PCS Profit Sharing Plan $200,000
PI is obligated to pay $200,000 to Parker Consulting Services Profit Sharing
Plan, owned by Pierce D. Parker, for funds it advanced for the purpose of
funding the Como project. This debt is to be paid from net profits generated by
the Como property.
F-9
<PAGE>
PIERCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(continued)
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
As of June 30, 1998, PI had 7,225,703 common shares issued and outstanding.
There are 30,000,000 shares authorized. A reverse split of 1 for 25 shares was
approved on March 13, 1996.
The Company issued 80,000 shares of Series I convertible preferred stock. The
stock was issued in conjunction with a private placement conducted by the
Company. There are 400,000 shares of preferred stock authorized and may be
determined by the Board of Directors as to dividend rights, dividend rate,
conversion rights, voting rights, redemption rights and terms, liquidation
preferences, the number of shares constituting the series and the designation of
each series.
The Series I Convertible Preferred stockholders are entitled to dividends when
and as declared by the Company's Board of Directors from funds which are legally
available. The Series I Preferred Stock is convertible at any time into an
identical number shares of the Company's Common Stock. Holders of the Series I
Convertible Preferred Stock are entitled to one vote per share on all matters
submitted to a vote of the Company's stockholders. Series I Convertible
preferred stock does not have preemptive rights and it is not redeemable.
NOTE 8 - INCENTIVE STOCK OPTION PLAN
On August 10, 1987, the Company adopted an Incentive Stock Option Plan (the
"Plan") under which options granted are intended to qualify as "incentive stock
options" under Section 422A of the Internal Revenue Code of 1954, as amended
(the "code"). Pursuant to the Plan, options to purchase up to 400,000 shares of
the Company's Common Stock may be granted to employees of the Company. The Plan
is administered by the Board of Directors which is empowered to determine the
terms and conditions of each option, subject to the limitation that the exercise
price cannot be less than the market value of the Common Stock on the date of
the grant (110% of the market value in the case of options granted to an
employee who owns 10% or more of the Company's outstanding Common Stock) and no
option can have a term in excess of 10 years (5 years in the case of options
granted to employees who own 10% or more of the Company's Common Stock).
As of the date of this report, no options have been granted under this Plan.
F-10
<PAGE>
PIERCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(concluded)
NOTE 9 - INCOME TAXES
At June 30, 1998, the Company has available to reduce future taxable income, a
net operating loss carryforward of approximately $760,000 which expires in the
years 2003 through 2013.
This net operating loss carryforward may result in future income tax benefits;
however, because realization is uncertain at this time, a valuation reserve in
the same amount has been established. Significant components of the Company's
deferred tax liabilities and assets as of June 30, 1998 and 1997 are as follows:
1998 1997
----------- ----------
Deferred tax liabilities $ - $ -
=========== ==========
Deferred tax assets
Net operating loss carry forwards 283 500 247 500
Valuation allowance for
deferred tax assets (283 500) (247 500)
----------- ----------
$ - $ -
=========== ==========
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS 107 requires disclosure of the fair value of financial instruments, both
assets and liabilities recognized and not recognized in the statement of
financial position, for which it is practicable to estimate fair value. The
carrying amounts of current assets and current liabilities approximate fair
value.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
To the Stockholders and Directors
Pierce International, Inc.
Our report on our audit of the basic financial statements of Pierce
International, Inc. for the years ended June 30, 1998 and 1997 appears on Page
F-1. The audit was made for the purpose of forming an opinion on the basic
financial statements, taken as a whole. The accompanying supplementary schedules
are presented for purposes of additional analysis and are not a required part of
the basic financial statements taken as a whole.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's ability to continue in existence is
dependent upon their obtaining additional equity capital and ultimately
attaining and maintaining profitable operations. The Company has suffered
recurring losses from operations that raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
SPICER, JEFFRIES & CO.
Denver, Colorado
September 25, 1998
F-12
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V
PIERCE INTERNATIONAL, INC.
PROPERTY AND EQUIPMENT
----------------------
Beginning Additions Other changes add
Classification balances at cost Retirements (deduct)-describe Ending balances
-------------- -------- ------- ---------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1998
Mineral properties $ 434 918 $ -- $ -- $ -- $ 434 918
Furniture and equipment 7 705 -- -- -- 7 705
Strawboard equipment 57 120 -- -- -- 57 120
Leased equipment -- $ -- $ -- $ -- $ --
---------- --------- --------- --------- ----------
$ 499 743 $ -- $ -- $ -- $ 499 743
========== ========= ========= ========= ==========
Year ended June 30, 1997
Mineral properties $ 434 918 $ -- $ -- $ -- $ 434 918
Furniture and equipment 7 705 -- -- -- 7 705
Strawboard equipment 57 120 -- -- -- 57 120
Leased equipment -- -- -- -- --
---------- --------- --------- --------- ----------
$ 499,743 $ -- $ -- $ -- $ 499 743
========== ========= ========= ========= ==========
F-13
<PAGE>
SCHEDULE VI
PIERCE INTERNATIONAL, INC.
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
-------------------------
Beginning Additions Other changes add
Classification balances at cost Retirements (deduct)-describe Ending balances
-------------- -------- ------- ----------- ----------------- ---------------
Year ended June 30, 1998
Mineral properties $ -- $ -- $ -- $ -- $ --
Furniture and equipment 5 674 883 -- -- 6 557
Leased equipment -- -- -- -- --
-------- -------- -------- -------- --------
$ 5 674 $ 883 $ -- $ -- $ 6 557
======== ======== ======== ======== ========
Year Ended June 30, 1997
Mineral properties $ -- $ -- $ -- $ -- $ --
Furniture and equipment 4 791 883 -- -- 5 674
Leased equipment -- -- -- -- --
-------- -------- -------- -------- --------
$ 4 791 $ 883 $ -- $ -- $ 5 674
======== ======== ======== ======== ========
F-14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 286
<SECURITIES> 158
<RECEIVABLES> 12,874
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 499,743
<DEPRECIATION> 6,557
<TOTAL-ASSETS> 506,504
<CURRENT-LIABILITIES> 550,128
<BONDS> 0
0
20,000
<COMMON> 864,482
<OTHER-SE> (928,106)
<TOTAL-LIABILITY-AND-EQUITY> 506,504
<SALES> 43,211
<TOTAL-REVENUES> 43,211
<CGS> 3,332
<TOTAL-COSTS> 3,332
<OTHER-EXPENSES> 227,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,375
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 91,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,283)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
