SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20786
ALBARA CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1076959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
610 South Frazier
Conroe, Texas, 77301 (409) 539-2992
(Address of principal executive offices) (Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, no
par value
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes No X (2) Yes X No
------ -------- -------- -------
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: December 31, 1998 -
$0.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices of such stock, as of a
specified date within the past 60 days: $120,000 based on 1,003,483 shares held
by non-affiliates and a price of $0.12 per share, which is the average of the
bid and ask price listed on the Bulletin Board for a share of stock on May 16,
1999. As of May 16, 1999, 1,461,503 shares of common stock, no par value,
were outstanding.
Documents incorporated by reference: A description of "Documents Incorporated by
Reference" is contained in Item 13 of this report.
<PAGE>
TABLE OF CONTENTS
PART I
- -------
ITEM 1. DESCRIPTION OF BUSINESS
ITEM 2. DESCRIPTION OF PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
PART II
- --------
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. FINANCIAL STATEMENTS
ITEM 8. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
PART III
- ---------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16 (a) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
PART IV
- --------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE>
PART I
------
ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------
Albara Corporation
------------------
Albara Corporation is a Colorado corporation organized in January, 1988.
In 1996 and in 1997, Albara Corporation, through its operating subsidiaries,
Micro Business Solutions, Inc., d/b/a "Hardware That Fits", and Software
Technologies, Inc., d/b/a "Helix Technologies", marketed laser printer
consumables and developed, published and marketed software for the Apple
Macintosh microcomputer (the "Macintosh") which is manufactured by Apple
Computer, Inc. ("Apple"). Marketing of its products was performed via direct
response marketing, authorized dealers and value-added resellers. Direct
response marketing is a segment of the retail business where sales are solicited
via advertising and direct mailings supplemented by telephone communications
with little or no face-to-face contact between the seller and the buyer.
During 1996 and 1997, the Company's marketing was directed to users of the
Macintosh. The Company's sales were made primarily to domestic customers and
were generated principally through direct response mail campaigns. The Company
sold to individuals, businesses of all sizes, governmental entities and academic
institutions.
In December 1997, due to diminishing sales, the Company sold its Helix
technology to an independent third party, The Chip Merchant, and discontinued
all of its remaining operations. The Company sold its Helix technology along
with related trademarks and for the sum of $120,000. On December 31, 1997, the
Company disposed of its two operating subsidiaries to the President of the
Company, Mr. Real Provencher. The transaction was a non-cash transaction
resulting in transferring $245,000 in assets and $334,000 in liabilities to Mr.
Provencher for a net increase to the Company's stockholder equity of $89,000,
the amount by which such liabilities exceeded such assets. In addition, in
early January 1998, one of the Company's former operating subsidiaries now owned
by Mr. Provencher paid the Company $120,000 from the proceeds of the sale of
Helix technology in satisfaction of its outstanding liability to the Company.
Since January 1998, the Company has been a development stage company and no
longer has operations of any kind.
<PAGE>
Hardware That Fits
------------------
General Information
- --------------------
In 1996 and 1997, Micro Business Solutions, Inc. operated under the
licensed trade name "Hardware That Fits" and sold consumables (i.e., toner and
developer) for RealTech laser printers through the direct response market to
consumers. The operations of Hardware That Fits were discontinued on December,
31, 1997, due diminishing sales and the subsidiary was disposed of at that time
as described above.
Reorganization of Hardware That Fits
- ----------------------------------------
On August 25, 1993, due to an ongoing dispute with Dataproducts Corporation
("Dataproducts"), Hardware That Fits filed a voluntary Chapter 11 petition
seeking protection under the U.S. Bankruptcy Laws via an ongoing business
reorganization. The petition was filed in the United States Bankruptcy Court
for the Southern District of Texas and was identified by case number
93-46428-H2-11. The bankruptcy filing did not affect either the Company or it's
other operating subsidiary, Helix Technologies, which continued to operate
outside of bankruptcy.
On June 3, 1994, Hardware That Fits submitted an amended Plan of
Reorganization (the "Plan") to the Bankruptcy Court. Substantially all of the
liabilities incurred prior to the petition filing date, August 25, 1993, were
either discharged or were exchanged for 100,000 shares of common stock in the
Company. On August 16, 1994, the Bankruptcy Court approved and confirmed the
Plan. This action by the court resulted in Hardware That Fits' emergence from
bankruptcy effective September 15, 1994.
Marketing
- ---------
During 1992 and the first half of 1993, Hardware That Fits sold over 5,000
RealTech laser printers. Marketing efforts in 1996 and 1997 were confined to
selling those established customers the printer consumables (i.e., toner and
developer) they would need for their RealTech printers. By late 1996 and into
1997, very few of these printers were still in service resulting in little
ongoing demand for consumables.
<PAGE>
Competitors to Hardware That Fits
- -------------------------------------
Numerous competitors both large and small including office supply stores
and large mailorder suppliers existed in competition to Hardware That Fits any
of which have significantly greater capital resources than the Company.
Helix Technologies
------------------
General Information
- --------------------
Software Technologies, Inc., the Company's other operating subsidiary,
operating under the trade name "Helix Technologies", developed, published and
marketed proprietary computer software for the Macintosh. In March 1992, Helix
Technologies acquired the Helix technology and other associated assets from
Odesta Corporation. The Helix technology has been in development since 1982 and
was introduced in 1984 as the first database product for use with the Macintosh.
Helix Technologies marketed one product, Helix Express, using the Helix
technology. Helix Express is a relational database development environment for
the Macintosh. Utilizing Helix Express, database applications could be
programmed ranging from simple applications such as a Christmas card list or
recipe file list to complex fully integrated multi-user business applications.
The Helix technology along with related trademarks and copyrights were sold
to an independent third party, The Chip Merchant, in December, 1997. After the
completion of that sale the subsidiary was disposed of as described above.
Marketing
- ---------
Helix Technologies primarily relied on direct response mail campaigns
targeted to existing customers of its products. The bulk of its revenues were
generated from sales of Helix Express upgrades made to existing customers. In
addition, Helix Technologies maintained business relationships with product
distributors in Europe and Australia. All of its products sold to international
distributors are, in turn, resold to local dealers in those countries. This form
of distribution is widely utilized by companies that publish proprietary
software.
Competitors to Helix Technologies
- ------------------------------------
Helix Technologies had several significant competitors in the Macintosh
database field: Claris (a subsidiary of Apple), whose Filemaker Pro is the
recognized market leader in terms of units sold, followed by Acius, with Fourth
Dimension, and Microsoft with its Foxbase product.
<PAGE>
Employees
- ---------
During 1998, the only employees of the Company were its Officers.
ITEM 2. DESCRIPTION OF PROPERTIES
---------------------------------
The principal offices of the Company are located at 610 South Frazier,
Conroe, Texas 77301. The Company purchased this property in December 1990.
The property consists of an 0.84 acre tract of land improved with a warehouse
and retail building containing approximately 19,800 square feet. The mortgage
payable collateralized by this real estate has a principal balance of $208,445
at December 31, 1996, bears interest at 9% and is payable in monthly
installments of about $4,750 through April, 2001. In the opinion of the
Company's officers and directors (the "Management"), this property is adequately
insured. The federal tax basis for this property is $740,437 based on cost plus
improvements with a life of 31 years claimed utilizing straight line
depreciation. The annual realty taxes total approximately $9,200.
This property was sold in November, 1998. The Company currently occupies
approximately 1,400 square feet on a month-to-month basis at this same location.
No other offices are maintained by the Company. The Company does not own or
lease any other real property and has no intention of doing so in the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
-------------------------
Suit was filed by The Chip Merchant against the Company, the Company's
President, Mr. Provencher, and the Company's former subsidiary, Software
Technologies, Inc., in September, 1998, in the 359th District Court of
Montgomery County, Texas, for unspecified damages alleging that certain items
sold to The Chip Merchant in December, 1997, were never delivered. This lawsuit
was withdrawn by The Chip Merchant in May, 1999.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
NONE.
<PAGE>
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
--------------------------------------------
STOCKHOLDER MATTERS
-------------------
During the 1996 through 1998 period, the Company's common stock traded on
the over-the-counter market and was quoted in the National Quotation Bureau,
Inc.'s "Pink Sheets" and "Bulletin Board". The range of high and low bid
quotations for the Common Stock for the two most recently completed fiscal years
and the current fiscal year are provided below. The volume of trading in the
Company's Common Stock has been limited and the bid prices as reported may not
be indicative of the value of the Common Stock or of the existence of an active
trading market. These over-the-counter market quotations reflect inter-dealer
prices without retail markup, markdown or commissions and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
1997 Fiscal Year High Bid Low Bid
- ---------------- -------- --------
<S> <C> <C>
First Quarter $ 0.18 $0.09
Second Quarter $ 0.18 $0.09
Third Quarter $ 0.18 $0.09
Fourth Quarter $ 0.09 $0.01
1998 Fiscal Year
- ----------------
First Quarter $ 0.01 $0.01
Second Quarter $ 0.01 $0.01
Third Quarter $ 0.01 $0.01
Fourth Quarter $ 0.05 $0.04
1999 Fiscal Year
- ----------------
First Quarter $ 0.09 $0.04
</TABLE>
On May 16, 1999, the reported bid for the Company's Common Stock was $0.10.
The number of record holders of the Company's Common Stock on May 16, 1999, was
183.
<PAGE>
The Company has never paid dividends with respect to the Common Stock and
currently does not have any plans to pay cash dividends in the future. There
are no contractual restrictions on the Company's present or future ability to
pay dividends. Future dividend policy is subject to the discretion of the Board
of Directors and is dependent upon a number of factors, including future
earnings, capital requirements and the financial condition of the Company. The
payment of future dividends will also be restricted to the extent of $20,000 in
liquidation preference inuring to the benefit of the holders of the Company's
Series F Preferred Stock. The Colorado Corporation Code provides that a
corporation may not pay dividends if the payment would reduce the remaining net
assets of the corporation below the corporation's stated capital plus amounts
constituting a liquidation preference to other security holders.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
The following discussion should be read in conjunction with the Financial
Statements and related notes thereto included elsewhere in this Form 10-KSB. The
operations discussed below were discontinued in December, 1997, and the
subsidiaries conducting these operations were disposed of at that time. The
Company has not conducted business operations of any kind since the disposition
of these operating subsidiaries. The following discussion covers operations as
conducted in 1997 and 1996, but they do not in anyway represent current
operations of the Company nor should they be assumed indicative of the future
prospects of the Company. Since December 31, 1997, the Company has been a
development stage company with no operations.
1997 Compared to 1996: Results of Operations
- ------------------------ -----------------------
Revenues: Total revenues for the year ended December 31, 1997, decreased
$464,000 from $1,147,000 to $683,000, a 40% decrease compared to 1996. Hardware
That Fits services customers that purchased RealTech Laser Printers in 1991 and
1992. The decrease in revenues is primarily due to an erosion of this customer
base as these printers are retired or replaced. Helix Technologies' revenues
also decreased when compared to 1996 due to an erosion of their existing
customer base.
Gross profit: Gross profit for the year ended December 31, 1997, decreased
$376,000, from $1,008,000 to $632,000, a decrease of 37% compared to 1996. The
gross profit margin (i.e. gross profit as a percentage of revenues) for the year
ended December 31, 1997, increased to 93% as compared to 1996 levels of 88%.
This improvement was primarily due to a change in the mix of products sold with
proportionately more software sold in 1997 than in 1996.
<PAGE>
General and administrative expenses: General and administrative expenses
for the year ended December 31, 1997, decreased $468,000, from $1,404,000 to
$936,000, a 33% decrease compared to 1996. Hardware That Fits reduced personnel
costs substantially from 1996 to 1997 as its work force was reduced from two
full-time employees in the first quarter of 1996 to one in the first quarter of
1997. Helix Technologies reduced its work force from 10 employees at the end of
1996 to 2 employees in the third quarter of 1997, thereby reducing its personnel
expenses accordingly. Other expenses were reduced primarily due to the lower
business volume and smaller employee base.
Net Income/Loss: Net loss for the year ended December 31, 1997, was
$324,000 as compared to net loss of $302,000 in 1996.
Liquidity and Capital Resources
- ----------------------------------
Since inception, the Company has suffered from limited availability of
working capital. Bank lines of credit have been limited and in some instances
have required the personal guaranty of the Company's President, Mr. Provencher.
The Company has relied on a variety of sources to expand its business
operations, including the issuance of Common Stock and Preferred Stock, trade
credit agreements, "floor plan" credit arrangements for the purchase of
inventory, and the acquisition of property and equipment using a combination of
cash, preferred stock and a mortgage payable over ten years. During the period
1996 through 1998, the Company has not had access to any external sources of
working capital and has relied on the sale of assets to provide its limited
working capital. The balance of working capital requirements have been met by
internally generated cash flows.
In July 1992, Hardware That Fits and Helix Technologies entered into two
separate telephone system lease agreements. The leases entered into by
Hardware That Fits and Helix Technologies are presented in the accompanying
financial statements as capital leases and had an outstanding balance at
December 31, 1996, of approximately $54,000. Although Helix Technologies did
fulfill its lease obligation and eventually exercised its purchase option in
1996, Hardware That Fits made no payments on its capital lease in 1996. In 1997
Hardware That Fits reached a settlement with the leasing company providing for a
nominal payment in exchange for a full release of all liens by the leasing
company.
<PAGE>
On April 16, 1993, the Company entered into a loan transaction with Barbara
A. Provencher, Secretary and Director of the Company. The Company borrowed
$150,000 bearing interest at prime rate plus 2% (i.e., 8% per annum in 1997).
The Company agreed to make monthly principal and interest installment payments
of $12,500 with a final payment of the remaining principal and interest due on
October 15, 1993. The Company repaid this obligation in full in early 1999. At
December 31, 1996, 1997 and 1998, the note payable had a balance of
approximately $22,000, $29,000 and $3,000, respectively.
On December 31, 1997, the Company sold its Helix technology along with
related trademarks and copyrights to an independent third party, The Chip
Merchant for the sum of $120,000. After the completion of that sale the
subsidiary was disposed of. The cash from the sale of Helix technology was paid
to the Company in early January, 1998 (see below).
On December 31, 1997, the Company disposed of its two operating subsidiaries to
the President of the Company, Mr. Real Provencher. The transaction was a
non-cash transaction resulting in transferring $245,000 in assets and $334,000
in liabilities to Mr. Provencher for a net increase to the Company's stockholder
equity of $89,000. In addition, in early January 1998, one of the Company's
former operating subsidiaries now owned by Mr. Provencher, paid the Company
$120,000 from the proceeds of the sale of Helix technology in satisfaction of
its outstanding liability to the Company.
In November 1998, the Company sold its land and building for the sum of $401,000
net of certain selling expenses. After repayment of the outstanding mortgage
balance and taxes of $177,000, this transaction provided the Company $216,000 of
cash.
As of December 31, 1996, 1997 and 1998, the Company had net tax loss
carryforwards of approximately $281,000, $194,000 and $528,000 respectively
which begin to expire in 2008. (See Note D in the Financial Statements and
related notes included elsewhere in this Form 10-KSB for additional information
about the Company's tax position).
Plan of Operation
- -------------------
The Company does not currently have any external sources of working
capital. Management has not entered into any commitments for research and
development or for capital expenditures. However, the limited working capital
availability of the company will suffice to cover general and administrative
expenses excluding salaries for its officers for approximately one year. No
additional employees are expected in the foreseeable future.
<PAGE>
While the Company has not engaged in any business activities since December
1997, Management believes that it may be possible to recover some value for the
stockholders by restructuring the Company to effect a business combination
transaction with a suitable privately-held company that has both business
history and operating assets.
Management believes the Company will offer owners of a suitable
privately-held company the opportunity to acquire a controlling interest in a
public company at substantially less cost than would otherwise be required to
conduct an initial public offering. Nevertheless, Management is not aware of any
empirical statistical data that would independently confirm or quantify
Management's beliefs concerning the perceived value of a merger or acquisition
transaction for the owners of a suitable privately-held company. The owners of
any existing business selected for a business combination with the Company will
incur significant costs and expenses, including the costs of preparing the
required business combination agreements and related documents, the costs of
preparing a Current Report on Form 8-K describing the business combination
transaction and the costs of preparing the documentation associated with any
future reporting under the Securities Act.
The Company expects to initiate a search for a suitable privately-held
company in 1999. If successful, this type of business combination is often
referred to as a "blind pool" because stockholders will not ordinarily have an
opportunity to analyze the various business opportunities presented to the
Company, or to approve or disprove the terms of any business combination
transaction that may be negotiated by Management on behalf of the Company.
Consequently, the Company's potential success will be heavily dependent on the
efforts and abilities of its officers and directors, who will have virtually
unlimited discretion in searching for, negotiating and entering into a business
combination transaction. Management has had limited experience in effecting
these type of business combinations. Although Management believes the Company
will be able to enter into a business combination within 12 months, there can be
no assurance as to how much time will elapse before a business combination is
effected, if ever. The Company will not restrict its search to any specific
business, industry or geographical location, and the Company may participate in
a business venture of virtually any kind or nature.
Management anticipates that the selection of a business opportunity for the
Company will be complex and extremely risky, because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital. Management believes there are numerous
privately-held companies seeking the perceived benefits of a publicly traded
corporation. Such perceived benefits may include facilitating debt financing or
improving the terms on which additional equity may be sought, providing
liquidity for the principals of the business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
liquidity for all stockholders and other factors.
<PAGE>
Potential opportunities may occur in many different industries and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Management anticipates that the Company will be able to participate
in only one business venture. This lack of diversification should be considered
a substantial inherent risk because it will not permit the Company to offset
potential losses from one venture against gains from another. Moreover, due to
the Company's lack of any meaningful financial, managerial or other resources,
Management believes the Company will not be viewed as a suitable business
combination partner for either developing companies or established businesses
that are in need of substantial additional capital.
Acquisition Opportunities
- --------------------------
In implementing a particular business combination transaction, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business. After the consummation of a
business combination transaction, it is likely that the present stockholders of
the Company will only own a small minority interest in the combined companies.
In addition, as part of the terms of the acquisition transaction, all of the
Company's officers and directors will ordinarily resign and be replaced by new
officers and directors without vote of the stockholders. Management does not
intend to obtain the approval of the stockholders prior to consummating any
acquisition other than a statutory merger that requires a stockholder vote.
It is anticipated that any securities issued in a business combination
transaction will be issued in reliance on exemptions from registration under
applicable Federal and state securities laws. In some circumstances, however, as
a negotiated element of a business combination, the Company may agree to
register such securities either at the time the transaction is consummated or at
some specified time thereafter. The issuance of substantial additional
securities and their potential sale into any trading market that may develop may
have a depressive effect on such market. While the actual terms of a transaction
to which the Company may be a party cannot be predicted, it may be expected that
the parties to the business transaction will find it desirable to avoid the
creation of a taxable event and thereby structure the acquisition in a so called
"tax free" reorganization under Sections 368 or 351 of the Internal Revenue Code
of 1986, as amended (the "Code"). In order to obtain tax free treatment under
the Code, it may be necessary for the owners of the acquired business to own 80%
or more of the voting stock of the surviving entity. In such event the
stockholders of the Company would retain less than 20% of the combined
companies, which could result in significant dilution in the equity of such
stockholders. The Company intends to structure any business combination
transaction in such manner as to minimize federal and state tax consequences to
the Company and any target company.
<PAGE>
As part of the Company's investigation of potential business opportunities,
Management may visit and inspect material facilities, obtain independent
analysis or verification of certain information provided, check references of
management and key personnel, and take other reasonable investigative measures,
to the extent of the Company's limited resources and Management's limited
expertise. The manner in which the Company participates in an opportunity will
depend on the nature of the opportunity, the respective needs and desires of the
Company and other parties, and the relative negotiating strength of the Company
and such other management.
With respect to any business combination negotiations, Management will
ordinarily focus on the percentage of the Company which target company
stockholders would acquire in exchange for their ownership interest in the
target company. Depending upon, among other things, the target company's assets
and liabilities, the Company's current stockholders will in all likelihood only
own a small minority interest in the combined companies upon completion of the
business combination transaction. Any business combination effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's current stockholders.
Upon completion of a business combination transaction, there can be no
assurance that the combined companies will have sufficient funds to undertake
any significant development, marketing and manufacturing activities.
Accordingly, the combined companies may be required to either seek additional
debt or equity financing or obtain funding from third parties, in exchange for
which the combined companies might be required to issue a substantial equity
position. There is no assurance that the combined companies will be able to
obtain additional financing on terms acceptable to the combined companies.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity the costs
incurred in the related investigation would not be recoverable. Furthermore,
even if an agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result in the loss
to the Company of the related costs incurred.
<PAGE>
<TABLE>
<CAPTION>
ITEM 7. INDEX TO FINANCIAL STATEMENTS
Page
<S> <C>
Independent Auditors' Report F-2
Balance Sheet as of December 31, 1997 F-3
Consolidated Statements of Operations for the
years ended December 31, 1997 and 1996 F-5
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1997 and 1996 F-7
Consolidated Statements of Cash Flows for the
years ended December 31, 1997 and 1996 F-9
Notes to Consolidated Financial Statements F-11
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
Albara Corporation
We have audited the accompanying balance sheet of Albara Corporation as of
December 31, 1997, and the related consolidated statements of operations,
changes in stockholders' equity, and of cash flows for the years ended December
31, 1997 and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether these financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Albara Corporation
as of December 31, 1997, and the results of its operations and its cash flows
for the years ended December 31, 1997 and 1996, in conformity with generally
accepted accounting principles.
THOMAS LEGER & CO. L.L.P.
Houston, Texas
March 3, 1999
F-2
<PAGE>
ALBARA CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
-----------------------
ASSETS
------
<S> <C>
1997
--------
CURRENT ASSETS
Cash $ 1,684
Account receivable 120,000
--------
Total current assets 121,684
--------
LAND AND BUILDING (NOTE B)
Land 52,900
Building 740,437
--------
Total land and building 793,337
--------
Less accumulated depreciation 357,209
--------
Land and building, net 436,128
--------
TOTAL ASSETS $557,812
--------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
-----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
1997
------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 65,213
Accrued expenses 84,022
Notes payable to stockholder/director (Note B) 29,174
Mortgage payable (Note B) 205,258
------------
Total current liabilities 383,667
------------
STOCKHOLDERS' EQUITY (NoteC)
Preferred stock, convertible no par value -
Series C, 185 shares authorized and issued -
Series F, 250 shares authorized, 195 shares issued 14,625
Common stock, no par value, 6,666,667 shares
authorized, 1,461,503 shares issued 3,913,788
Accumulated deficit (3,754,268)
------------
Total stockholders' equity 174,145
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 557,812
------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
1997 1996
---------- -----------
<S> <C> <C>
REVENUES $ 683,319 $1,146,750
COST OF SALES 50,940 138,778
---------- -----------
GROSS PROFIT 632,379 1,007,972
---------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Marketing and advertising 36,729 124,869
Personnel 362,453 554,353
Delivery, net of amounts collected 5,626 10,957
Depreciation and amortization 308,476 445,542
Other (Note G) 222,547 268,759
---------- -----------
Total general and administrative expenses 935,831 1,404,480
---------- -----------
(LOSS) FROM OPERATIONS (303,452) (396,508)
---------- -----------
Interest expense (22,050) (22,430)
Loss on sale of equipment (12,139) -
Other 13,822 108,252
---------- -----------
Total other income (expense) (20,367) 85,822
---------- -----------
NET (LOSS) BEFORE REORGANIZATION ITEMS,
FEDERAL INCOME TAX BENEFIT (323,819) (310,686)
---------- -----------
REORGANIZATION GAIN
Professional fee - (1,658)
Gain from collection of preference claims - 9,971
---------- -----------
Total reorganization gain - 8,313
---------- -----------
NET (LOSS) (323,819) (302,373)
FEDERAL INCOME TAX (Note D) - -
---------- -----------
NET (LOSS) $(323,819) $ (302,373)
---------- -----------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
-----------------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE (NOTE C)
Basic $ (0.22) $ (0.21)
=========== ===========
Diluted $ (0.22) $ (0.21)
=========== ===========
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING
Basic 1,461,503 1,461,503
Diluted 1,481,003 1,481,003
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------------------------------------------
ACCUMULATED
COMMON STOCK PREFERRED EARNINGS TOTAL
NOTES SHARES AMOUNT STOCK DEFICIT) EQUITY
----- --------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance, December 31, 1995 1,384,836 $3,583,836 $ 255,837 $(3,128,077) $ 711,596
Net consolidated (loss) - - - (302,373) (302,373)
Issuance of restricted common stock to
officers/employees as a bonus 7,500 - - - -
Issuance of common stock in conversion
of preferred stock 69,167 241,212 (241,212) - -
--------- ---------- ---------- ------------ ----------
Consolidated Balance, December 31, 1996 1,461,503 3,825,048 14,625 (3,430,450) 409,223
Net consolidated (loss) - - - (323,818) (323,818)
Disposition of subsidiaries - 88,740 - - 88,740
--------- ---------- ---------- ------------ ----------
Balance, December 31, 1997 1,461,503 $3,913,788 $ 14,625 $(3,754,268) $ 174,145
========= ========== ========== ============ ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
-------------------------------------------------------------
PREFERRED STOCK
SERIES C SERIES E SERIES F
NOTES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----- ------ ------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance,
December 31, 1995 C 185 $ - 50 $ 239,337 220 $16,500
------ ------- ------- ---------- ------- --------
Cancellation of Series E and
Issuanace of common stock - - - (50) (239,337) - -
Canncellation of Series F and
Issuance of common stock - - - - - (25) (1,875)
------ ------- ------- ---------- ------- --------
Consolidated Balance
December 31, 1997 and 1996 C 185 $ - - $ - 195 $14,625
------ ------- ------- ---------- ------- --------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(323,818) $(302,373)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 308,476 445,542
Write-off of equipment 12,139 -
Changes in operating working capital 79,595 (44,764)
---------- ----------
Total adjustments 400,210 400,778
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 76,392 98,405
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Addition to property and equipment - (3,097)
Product master development costs - (150,570)
Other - (2,191)
Disposition of subsidiaries (net) (88,740) -
Net activity of subsidiaries (18,546) -
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (107,286) (155,858)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from certificate of deposit - 5,000
Proceeds from short-term and long-term borrowings 3,952 4,869
Repayments of short-term and long-term debt - (36,442)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES 3,952 (26,573)
---------- ----------
NET INCREASE (DECREASE) IN CASH DURING THE YEARS (26,942) (84,026)
Cash beginning of year 28,626 112,652
---------- ----------
Cash end of year $ 1,684 $ 28,626
---------- ----------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
1997 1996
-------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN CASH FLOW FROM CHANGES
IN OPERATING WORKING CAPITAL
Accounts receivable $ 36,440 $ 86,939
Inventory - (24,445)
Accounts payable 19,365 (14,082)
Accrued expenses 23,790 (93,176)
-------- ---------
CHANGES IN OPERATING WORKING CAPITAL $ 79,595 $(44,764)
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during period for interest $ 22,050 $ 20,562
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Accounts receivable - affiliate $120,000
Change in common stock on disposition of subsidiaries $ 88,740
Revision of accrued expenses $108,252
SUPPLEMENTAL SCHEDULE OF NET CASH USED BY
REORGANIZATION ITEMS
Professional fees paid for services rendered in
connection with Chapter 11 reorganization $ 1,658
Gain from collection of preference claims (9,971)
---------
$ (8,313)
=========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-10
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY AND NATURE OF BUSINESS
- ----------------------------------
Albara Corporation and its operating subsidiaries (collectively, the Company)
markets laser printer consumables and develops, publishes and markets software
for the Apple Macintosh microcomputer (the Macintosh), which is manufactured by
Apple Computer, Inc. The laser printer consumables and software are sold via
direct response marketing, authorized dealers and value added resellers. The
Company had two operating subsidiaries, Micro Business Solutions, Inc. (MBSI)
and Software Technologies, Inc. (STI). MBSI does business and advertises under
the trade name "Hardware That Fits. "STI does business and advertises under the
trade name "Helix Technologies." The subsidiaries were disposed of on December
31, 1997 in a non-monetary transaction with Real Provencher, President of the
Albara Corporation.
PRINCIPLES OF CONSOLIDATION
- -----------------------------
The consolidated financial statements include the accounts of the Company.
Significant intercompany accounts and transactions have been eliminated.
Certain 1996 amounts have been reclassified to permit comparison to 1997.
USE OF ESTIMATES
- ------------------
The presentation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions that
affect the reported amounts of asset 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 estimated.
PRODUCT MASTER DEVELOPMENT COSTS
- -----------------------------------
For 1997 and prior, costs of internally developed software are expensed until
the technological feasibility of the software has been established. Thereafter,
all software development costs are capitalized and subsequently reported at the
lower of unamortized cost or net realizable value. The annual amortization is
the greater of the amounts determined from the following methods: the ratio of
current gross revenue to current and future gross revenue; and the straight-line
method over the products' remaining estimated useful lives. Amortization
expense is recorded in depreciation and amortization in the accompanying
financial statements.
F-11
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE A -NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
LAND AND BUILDING
- -------------------
The building is stated at cost less accumulated depreciation, which is computed
using the straight-line method over 31 years. Property and equipment for 1997
and prior was depreciated over lives ranging from 5-7 years. Expenditures for
major acquisitions and improvements are capitalized while expenditures for
maintenance and repairs are charged to operations. The cost of assets sold or
retired and any related accumulated depreciation are eliminated from the
accounts, and any resulting gain or loss is included in operations. All
remaining property was disposed of in 1998.
INCOME TAXES
- -------------
The Company has adopted SFAS No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. The difference between the financial statement and tax bases
of assets and liabilities is determined annually. Deferred income tax assets
and liabilities are computed for those differences that have future tax
consequences using the currently enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income. Valuation
allowances are established, if necessary, to reduce the deferred tax asset to
the amount that will more likely than not be realized. Income tax expense is
the current tax payable or refundable for the period plus or minus the net
change in the deferred tax assets and liabilities.
See Note D for additional information about the Company's tax position.
REVENUE RECOGNITION
- --------------------
Revenue is recognized when the product is shipped to the customer. The Company
has no significant remaining obligations to its customers following the date of
shipment. Refunds are allowed on some items within thirty days of the shipment
date of the product, and the revenue amounts presented in the accompanying
consolidated financial statements are net of all refunds made during the period.
F-12
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE A -NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
CONCENTRATIONS OF CREDIT RISK
- --------------------------------
The Company maintains its cash accounts in a bank. The cash balance is insured
by the FDIC up to $100,000. At December 31, 1997 the Company did not have any
deposits in excess of $100,000 in a bank.
The Company sold its products to businesses and individuals throughout the
United States, Europe and Australia. Sales are made using major credit cards,
or through the extension of credit to the Company's most credit-worthy
customers. The Company maintains adequate reserves for potential credit losses,
and such losses, which have been minimal, have been within Management's
estimates.
STATEMENT OF CASH FLOWS
- --------------------------
The Company recorded an account receivable from affiliate of $120,000 on the
disposition of one of its subsidiaries on December 31, 1997. The receivable was
paid-in-full in 1998.
Other net assets of $125,281 and liabilities of $334,021 were also disposed of
in the transaction. The net of the aforementioned amount is $88,740.
The Company considers all cash investments with maturities of three months or
less to be cash equivalents.
NOTE B - NOTES PAYABLE
Notes payable to stockholder/director in the amount of $29,174 at December 31,
1997 is the balance due on a note in the original amount of $150,000 due on
demand, payable at $12,500 per month, including interest, at a local bank's
prime plus 2%. If payment was not demanded, the maturity date was October,
1993, which was extended to April, 1994. The note calls for accelerated
payments and additional interest if the note is in default. Interest has been
accrued at the rate of 8% for the year 1997. Payments were made on the note
during 1998.
The mortgage payable in the amount of $205,258 is collateralized by real estate
and bears interest at 9%. The Company entered into an agreement during 1996 to
pay interest only. The mortgage was paid in 1998.
F-13
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE C - CAPITAL STRUCTURE
The Company is authorized to issue any class of stock, including 6,666,667 of
Common Stock, no par value, and up to 10,000,000 shares of preferred stock, no
par value, in one or more series. In establishing a preferred stock series, the
Board of Directors shall assign it a distinctive designation so as to
distinguish it from the shares of all other series and classes, shall fix the
number of shares in each series, and the preferences, rights and restrictions
thereof
The Company has issued six series of preferred stock, designated sequentially as
Series A through Series F. All shares of Series A, Series B, Series D and
Series E Preferred Stock that were issued have been redeemed and canceled by the
Company and are no longer outstanding. The following is a description of the
relative rights and privileges of the series of Preferred Stock that were
outstanding during 1997.
SERIES C CONVERTIBLE PREFERRED STOCK
- ----------------------------------------
The holder of 185 shares of Series C convertible preferred stock (Real
Provencher) has the right to 6,407 votes per share. The 185 shares of Series C
convertible preferred stock is convertible into approximately 1,185,000 of the
Company's common stock at the option of the holder upon occurrence of certain
events including change in control of the Company. The Company has reserved
approximately 1,185,000 shares of its common stock for the possible conversion.
SERIES F CONVERTIBLE PREFERRED STOCK
- ----------------------------------------
Under the terms of a private placement debt agreement, the Company issued 195
shares of Series F convertible preferred stock. The preferred stock was
ascribed a $14,625 value and considered a debt issue cost and has been amortized
to operations. The special rights of the Series F preferred stock are:
- - Holders are entitled to receive dividends on a pro rata basis with holders
of the Company's common stock.
- - Holders are entitled to a preference of $100 per share on any liquidation
of the Company, and shall share pro rata with the holders of the Company's
common stock in any remaining amounts distributed.
- - Holders have the option to convert each share into 100 shares of the
Company's common stock after August 31, 1993.
F-14
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE C - CAPITAL STRUCTURE CONTINUED
STOCK WARRANTS
- ---------------
The Company has granted an aggregate of 36,684 shares of its no par value common
stock to be issued upon exercise of warrants issued as compensation for services
to a former non-employee directors, and for other matters described below. See
Note F for description of the stock warrants issued to the former non-employee
directors.
Following is a summary of the stock warrants activity for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
1997
-------------
<S> <C>
Outstanding at beginning of period $ 40,018
Granted -
Reissued -
Exercised -
Canceled (3,334)
-------------
Outstanding at end of period 36,684
=============
Exercisable 36,684
=============
Price per share $.50 to 3.60
=============
</TABLE>
The Company applies the Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for stock option and warrants. Accordingly, no
compensation cost has been recognized for the stock option agreements. No stock
options were granted during the year. If any had been granted, compensation
cost would have been determined based upon the fair value at the grant dates for
awards under those plans consistent with the method of FASB Statement 123, and
pro forma information presented.
EARNINGS PER SHARE OF COMMON STOCK
- ---------------------------------------
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
became effective in the fourth quarter of 1997 and requires two presentations of
earnings per share - "basic" and "diluted". Basic earnings per share is
computed by dividing income available to common stockholders (the numerator) by
the weighted-average number of common shares (the denominator) for the period.
The computation of diluted earnings per share is similar to basic earnings per
share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potentially
dilutive common shares had been issued.
The numerator in calculating both basic and diluted earnings per share for each
year is reported net income. The denominator is based on the weighted-average
number of common shares.
F-15
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE C - CAPITAL STRUCTURE CONTINUED
The difference between basic and diluted weighted-average common shares results
from the assumption that dilutive preferred stock outstanding were exercised.
NOTE D - FEDERAL INCOME TAXES
Because of tax losses, the Company did not pay any federal income tax.
Reconciliation of the statutory federal income tax with the income tax provision
follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Income taxes computed at statutory
rates $(110,898) $(102,807)
Increase (decrease) in valuation
allowance:
Parent and subsidiaries - 102,807
Disposition of subsidiaries 107,406 -
Parent company 3,492 -
---------- ----------
Taxes on income $ - $ -
========== ==========
</TABLE>
The Company's deferred tax position reflects the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting. Significant
components of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------
<S> <C>
DEFERRED TAX LIABILITIES:
Tax over book depreciation $ (11,094)
-------------------
Total deferred tax liabilities (11,094)
-------------------
DEFERRED TAX ASSETS:
Net operating loss carryforward 65,828
Write-down of long-term assets 105,297
Valuation allowance (160,031)
-------------------
Total deferred tax asset 11,094
-------------------
Net deferred tax asset $ -
===================
</TABLE>
F-16
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE D - FEDERAL INCOME TAXES CONTINUED
Deferred income tax benefit resulted from the following differences:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Product master development costs $ - $(69,166)
Depreciation 2,544 310
Reduction of deferred tax asset and
liabilities resulting from disposition
of subsidiaries 352,901 -
Increase in utilization of net operating
Loss (6,036) (33,951)
Increase (decrease) valuation allowances:
Parent and subsidiaries - 102,807
Disposition of subsidiaries (352,901) -
Parent company 3,492 -
---------- ---------
Total deferred tax expense $ - $ -
========== =========
</TABLE>
As of December 31, 1997, the Company has tax loss carryforwards of about
$194,000 which start expiring in 2008.
NOTE E - LEASE AGREEMENTS
The Company leases equipment and certain office facilities under lease
obligations.
OPERATING LEASES - Rent expense for the office facilities and equipment under
- -----------------
operating leases referred to above amounted to about $20,000 and $41,000 for the
years ended December 31, 1997 and 1996.
NOTE F - RELATED PARTY TRANSACTIONS
Discussed below are related-party transactions not included in other notes to
the financial statements.
One of the subsidiaries disposed of has a license agreement with Mr. Provencher
through July, 1999 covering the license of the trade names "Software That Fits"
and "Software and Hardware that Fits". The license fee is paid to Mr.
Provencher at the rate of $1,000 per month.
F-17
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE F - RELATED PARTY TRANSACTIONS CONTINUED
As part of his compensation, Mr. Kenneth Shapiro, as a former non-employee
director, received two warrants in which he is fully vested to purchase 3,334
shares per warrant of the Company's common stock at a price of $3.60 per share.
Each warrant has been issued for time in service for the years 1991 through
1993. One warrant will expire each year in 1997 and 1998.
As part of his compensation, Mr. Robert Vallis, as a former non-employee
director, had received various warrants. On January 30, 1995 all of Mr. Vallis'
previous warrants were canceled and two warrants were issued to purchase 23,350
shares of the Company's common stock at a price of $.50 per share with a vesting
date of January 30, 1995 and expiring in 2005. In addition, he received two
warrants for 5,000 shares each to purchase the Company's common stock at $.50
per share. These warrants were issued for time in service as a non-employee
director in each of the years 1995 through 1996. Each warrant will become fully
vested on the last day of that calendar year, will become immediately
exercisable on the first business day of the following year, and will expire ten
years after becoming vested.
Mr. Vallis term as a director expired in 1996, as a result, all warrants which
had been previously issued for future services expired.
NOTE G - COMPOSITION OF CERTAIN ACCOUNT GROUPINGS
The composition of general and administrative expenses-other is set out below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Telephone costs $ 19,000 $ 36,000
Professional fees 19,000 21,000
Rent 20,000 38,000
Insurance 32,000 27,000
Credit card expense 9,000 18,000
Other 123,547 128,759
-------- --------
$222,547 $268,759
======== ========
</TABLE>
F-18
<PAGE>
ALBARA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE H - PROCEEDING UNDER CHAPTER 11
On August 25, 1993, a wholly-owned subsidiary, MBSI, (the "Debtor") filed a
petition for relief under Chapter 11 of the federal bankruptcy laws in the
United States Bankruptcy Court for the Southern District of Texas.
On August 16, 1994 the Bankruptcy Court approved and confirmed a Plan of
Reorganization ("Plan") which was submitted for consideration by MBSI on June 3,
1994. This action by the court resulted in MBSI's emergence from bankruptcy
effective September 15, 1994. The bankruptcy court issued its Final Decree
January 16, 1998.
NOTE I - DISPOSITION OF SUBSIDIARIES
On December 31, 1997, Albara Corporation ("Albara") disposed of its two
subsidiaries in a non-monetary transaction with Real Provencher, President of
Albara. At the date of disposition, the subsidiaries had net assets of
$245,281, liabilities of $334,021 and sales of $683,319. The 1997 statement of
operations reflects the entire year's operation of the two subsidiaries. The
transaction resulted in a net increase to equity of $88,740.
F-19
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
------------------------------------------
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
---------------------------------------------------
NONE.
<PAGE>
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
------------------------------------------------------------
PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
-----------------------------------------------------------
Executive Officers and Directors
- -----------------------------------
<TABLE>
<CAPTION>
Name Age Position with the Company Since
- --------------------- --- -------------------------------- ---------
<S> <C> <C> <C>
Barbara A. Provencher 41 Secretary and Director Nov. 1988
Real Provencher 46 President, Chief Executive Nov. 1988
Officer, Chief Financial Officer,
Director
</TABLE>
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 Company's shareholders, and hold
office until their successors are elected and shall have qualified, or until
resignation or removal from office.
Summary of Experience and Responsibilities
- ----------------------------------------------
Real Provencher - Mr. Provencher has served as President, Chief Executive
-----------------
Officer, Chief Financial Officer and Director of the Company since November
1988, of Hardware That Fits since August 1989 and of Helix Technologies since
March 1992. In addition to his responsibilities as President, Mr. Provencher
owns and operates a franchise called "The Alternative Board" specializing in
small business consulting and CEO coaching. Mr. Provencher possesses a Master
of Management Science degree from Stevens Institute of Technology, as well as
Bachelor and Master degrees in Civil Engineering from Tufts University.
Barbara A. Provencher - Ms. Provencher was elected as a director of the
-----------------------
Company in November 1988 and has been employed as a sales manager by the
Company's subsidiary, Hardware That Fits, from August 1989 through March, 1995.
Since 1995, Ms. Provencher has owned and operated a privately held company
called "Rolisher & Associates, Inc." which specialized in direct marketing of
services to consumers on a national basis. Ms. Provencher is the wife of Mr.
Provencher.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
-------------------------------
The following tables set forth the compensation paid to the Chief Executive
Officer of the Company and the President of the Company's subsidiary for fiscal
years 1996, 1997, and 1998. There were no other executive officers of the
Company that received in excess of $100,000 in cash compensation.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long-Term
Compensation
Annual Compensation (Awards)
-------------------------- --------
Name and Other Annual(1) Stock All Other
Principal Position Year Salary Bonus Compensation Options Compensation
- -------------------- --------------- -------- --------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real Provencher 1998 $120,000 0 - 0 -
Chief Executive 1997 120,000 0 - 0 -
Officer 1996 120,000 0 - 0 -
Robert Shumate(2) 1996 106,000 0 - 0 -
President, Helix
Technologies
<FN>
(1) Excludes perquisites and other benefits, unless the aggregate amount of such compensation
is the lessor of $50,000 or 10% of the total of annual salary and bonus reported for the named
executive officer.
(2) Mr. Shumate resigned from the Company in August, 1997.
</TABLE>
License Agreement
- ------------------
In July 1989, the Company entered into a license agreement with Mr.
Provencher, President of the Company, covering the license of the tradenames
"Software That Fits", "Hardware That Fits" and "Software and Hardware That Fits"
by the Company during a ten year period for the sum of $120,000 to be paid
monthly at the rate of $1,000 per month. In 1996, and 1997, Mr. Provencher was
paid $12,000 per year in connection with this license agreement. This cash
license fee was in addition to the compensation shown above. This liability was
retained by the Company's former subsidiary when it was disposed of on December
31, 1997. Therefore, no payment was made by the Company to Mr. Provencher in
1998 in connection with this obligation.
<PAGE>
Accrued and unpaid Compensation
- ----------------------------------
At December 31, 1996, 1997 and 1998, the unpaid but accrued balance
associated with salaries, bonus and vacation was approximately $51,000, $75,000
and $142,000 respectively.
Employment Agreement
- ---------------------
In July 1995, the Board of Directors approved a three year employment
agreement (the "Employment Agreement") with Mr. Provencher to act as its
President and Chief Executive Officer which includes a base salary of $120,000
per year. The Employment Agreement also provides Mr. Provencher with, among
other items, an automobile allowance, disability insurance, life insurance and
major medical insurance. Although this employment agreement has expired, the
Company continues to operate as if the agreement had been extended indefinitely.
As a condition to entering into the Employment Agreement, the Company
agreed to revise the conversion provisions of the Preferred Convertible Series C
stock that is exclusively held by Mr. Provencher. Each share of Series C stock
is convertible into 6,407 shares of common stock of the Company at the option of
the holder conditioned on: (a) the Company achieving certain profitability
targets; or (b) the Company disposing of substantially all of its assets; or (c)
a change of control of the Company. In return, Mr. Provencher agreed to forfeit
all stock options which had been previously awarded to him by the Company (i.e.,
approximately 83,500).
Deferred Compensation Plan
- ----------------------------
On July 1, 1995, the Company adopted a Deferred Compensation Plan. The
purpose of the Plan is to provide a means by which certain key employees may
elect to defer receipt of designated percentages or amounts of their
compensation and to provide a means for certain other deferrals of compensation.
The Plan is intended to be a plan which is unfunded within the meaning of
Sections 201(2) and 301(a)(3) of the ERISA Act of 1974. In 1996, 1997 and 1998,
Mr. Provencher elected to defer $12,000 per year of the compensation shown above
pursuant to this plan.
<PAGE>
Incentive Stock Option Plan
- ------------------------------
On February 26, 1988, 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 1986, as
amended (the "Code"). The Plan was further modified by vote of the Company's
shareholders at the annual Company shareholder's meeting which was held on June
3, 1989. Pursuant to the modified Plan, options to purchase up to 166,667
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 an employee who owns 10% or more of the Company's
outstanding Common Stock).
None of the options granted under this plan have ever been exercised.
Furthermore, all outstanding option grants under this plan expired in 1997.
Non-employee Director Compensation
- ------------------------------------
One of the Company's directors in 1996, Mr. Robert Vallis, was not an
employee of the Company. Mr. Vallis' term as a director expired in July, 1996.
On January 30, 1995, as part of his compensation, Mr. Vallis was issued
three warrants to purchase 15,000 shares in the aggregate of the Company's
common stock at a price of $0.50 per share. These three warrants have been
issued for time in service in each of three successive years: 1995, 1996 and
1997. Each such warrant became fully vested on the last day of its respective
calendar year, became immediately exercisable on the first business day of the
following year, and would expire ten years after becoming vested. Since Mr.
Vallis' term as a director expired in July, 1996, warrants for service in 1997
were automatically terminated upon the completion of Mr. Vallis' term in 1996.
Indemnification and Limitation of Liability
- -----------------------------------------------
The Company's Articles of Incorporation include provisions which eliminate
or limit the personal liability of the Company's directors except in situations
when a director shall be liable for (i) a breach of Section 7-5-114 of the
Colorado Corporation Code, including liability for improper dividends or
distributions; (ii) a breach of loyalty; (iii) failure to act in good faith;
(iv) intentional misconduct or knowing violation of the law; or (v) obtaining an
improper personal benefit. In addition, the Articles of Incorporation allow
for the indemnification of any director or officer to the fullest extent
permitted by the Colorado Corporation Code as in effect at the time of the
conduct of such person.
<PAGE>
In addition to the general indemnification provisions discussed above, the
Company's employment agreement with Mr. Provencher includes an indemnification
provision in which the Company agrees to indemnify, defend and hold harmless Mr.
Provencher against and in respect to any and all claims, actions, demands,
judgments, losses, costs, expenses, liabilities and penalties connected,
directly or indirectly with any personal guaranty entered into or executed by
Mr. Provencher guaranteeing indebtedness or obligations of the Company or its
subsidiaries.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
-------------------------------------------------
OWNERS AND MANAGEMENT
---------------------
The following tables and footnotes set forth information, as of May 16,
1999, with respect to the beneficial ownership and voting control of the
Company's equity securities by (i) all directors individually, (ii) all officers
and directors as a group, (iii) each of the named executive officers and (iv)
each person known by the Company to be a beneficial owner of more than five
percent of any class of voting equity stock of the Company. The following
shareholders have sole voting and investment power with respect to the shares,
unless indicated otherwise.
Beneficial Ownership
- ---------------------
<TABLE>
<CAPTION>
PREFERRED
STOCK
COMMON STOCK Series C
--------------- ---------------
Name and address # of % of # of % of
of beneficial owner(1) shares Class shares Class
- ------------------------- ------- ------- ------ -------
<S> <C> <C> <C> <C>
Barbara A. Provencher (3) 0 0 0 0
610 South Frazier
Conroe, Texas 77301
Real Provencher (2) 458,020 31% 185 100%(a)
610 South Frazier
Conroe, Texas 77301
All Executive Officers 458,020 31%(a) 185 100%(a)
and Directors as a
Group (2 persons)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Voting Control
- ---------------------------
Percent of Total Votes in
Number of Votes in Matters Matters Submitted to
Name Submitted to Shareholders Shareholders
- --------------------------- --------------------------- -------------------------
<S> <C> <C>
Real Provencher 1,643,315 (a) 62%
Barbara A. Provencher 0 0
All Executive Officers and
Directors as a Group 1,643,315 (a) 62%
(2 persons)
<FN>
(a) Each share of Series C Convertible Preferred Stock has the right to 6,407
votes, in all matters that come before the shareholders. Mr. Provencher is the
owner of all of the issued and outstanding shares of Series C Convertible
Preferred Stock.
(1) The Company currently has two series of Preferred Stock: Series C, and
Series F Convertible Preferred Stock. The shares of Series F Convertible
Preferred Stock do not have any voting rights. None of the issued and
outstanding shares of Series F Convertible Preferred Stock are owned or
beneficially held by a director, officer or person known by the Company to be a
beneficial owner of more than five percent of any class of equity stock of the
Company as of the date of this annual report.
(2) The amounts of Common Stock listed do not include shares of Common Stock to
be received upon conversion of the Series C Convertible Preferred Stock. The
terms and conditions of the Series C Convertible Preferred Stock is set forth in
the Notes to Financials.
(3) Ms. Provencher owns, as community property, one half of the shares of stock
set forth beside the name of her husband, Mr. Provencher, and may be deemed the
beneficial owner of such shares.
</TABLE>
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
In July 1989, the Company entered into a license agreement with Mr.
Provencher, President of the Company, covering the license of the tradenames
"Software That Fits", "Hardware That Fits" and "Software and Hardware That Fits"
by the Company during a ten year period for the sum of $120,000 to be paid
monthly at the rate of $1,000 per month. In 1996, and 1997, Mr. Provencher was
paid $12,000 per year in connection with this license agreement.
On April 16, 1993, the Company entered into a loan transaction with Barbara
A. Provencher, Secretary and Director of the Company. The Company borrowed
$150,000 bearing interest at prime rate plus 2% (i.e., 8% per annum in 1995).
The Company agreed to make monthly principal and interest installment payments
of $12,500 with a final payment of the remaining principal and interest due on
October 15, 1993. The Company repaid this obligation in full in early 1999. At
December 31, 1996, 1997 and 1998, the note payable had a balance of
approximately $22,000, $29,000 and $3,000.
On December 31, 1997, the Company disposed of its two operating
subsidiaries to the President of the Company, Mr. Real Provencher. The
transaction was a non-cash transaction resulting in transferring $245,000 in
assets and $334,000 in liabilities to Mr. Provencher for a net increase to the
Company's stockholder equity of $89,000, the amount by which such liabilities
exceeded such assets. In addition, in early January 1998, one of the Company's
former operating subsidiaries now owned by Mr. Provencher paid the Company
$120,000 in satisfaction of an outstanding liability to the Company.
<PAGE>
PART IV
-------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Financial Statements and Financial Statement schedules See Index
to Financial Statements at page F-1, Item 7 of this Report.
(b) Exhibits.
<TABLE>
<CAPTION>
Exhibit No.
- ------------
<C> <S>
1.1 Underwriting Agreement (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
2.1 MBSI's Plan of Reorganization as confirmed (incorporated herein by
reference to Albara's 1994 Annual Report on Form 10-KSB).
2.2 MBSI's Disclosure Statement (incorporated herein by reference to Albara's
1994 Annual Report on Form 10-KSB).
2.3 MBSI's Final Decree Statement (incorporated herein by reference to Albara's
1996 Annual Report on Form 10-KSB).
3.1 Articles of Incorporation and Bylaws (incorporated herein by reference to
Albara's 1989 Form S-18 Registration Statement).
3.2 Articles of Amendment to the Articles of Incorporation, as filed with the
Colorado Secretary of State on December 31, 1990 (incorporated herein by
reference to Albara's Registration Statement No. 33-53708 on Form S-1 dated
January 12, 1993).
3.3 Articles of Amendment to the Articles of Incorporation, as filed with the
Colorado Secretary of State on September 4, 1991 (incorporated herein by
reference to Albara's Registration Statement No. 33-53708 on Form S-1 dated
January 12, 1993).
<PAGE>
3.4 Statement Establishing Series of Preferred Stock, and designating Series A
and Series B Convertible Preferred Stock, as filed with the Colorado
Secretary of State on November 7, 1988 (incorporated herein by reference to
Albara's Registration Statement No. 33-53708 on Form S-1 dated January 12,
1993).
3.5 Statement Establishing Series of Preferred Stock and designating Series D
Convertible Redeemable Preferred Stock, as filed with the Colorado
Secretary of State on May 18, 1989 (incorporated herein by reference to
Albara's Registration Statement No. 33-53708 on Form S-1 dated January 12,
1993).
3.6 Statement Establishing Series of Preferred Stock, and designating Series C
Convertible Redeemable Preferred Stock, as filed with the Colorado
Secretary of State on February 6, 1990 (incorporated herein by reference to
Albara's Registration Statement No. 33-53708 on Form S-1 dated January 12,
1993).
3.7 Statement Establishing Series of Preferred Stock, and designating Series E
Convertible Preferred Stock, as filed with the Colorado Secretary of State
on November 21, 1990 (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
3.8 Statement Establishing Series of Preferred Stock, and designating Series F
Convertible Preferred Stock, as filed with the Colorado Secretary of State
August 27, 1992 (incorporated herein by reference to Albara's Registration
Statement No. 33-53708 on Form S-1 dated January 12, 1993).
3.9 Certificate of Correction, as filed with the Colorado Secretary of State on
September 11, 1992 (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
4.5 Warrant Agreements Issued to Non-Employee Directors on January 30, 1995
(incorporated herein by reference to Albara's 94 Annual Report on Form
10-K).
4.6 Warrant Agreements Issued to Non-Employee Directors on April 4, 1993
(incorporated herein by reference to Albara's 1995 Annual Report on Form
10-KSB).
<PAGE>
10.1 Incentive Stock Option Plan (incorporated herein by reference to Albara's
1988 Form S-18 Registration Statement).
10.2 Employment Agreement with Mr. Provencher (incorporated herein by reference
to Albara's Registration Statement No. 33-53708 on Form S-1 dated January
12, 1993).
10.3 First Amendment to Employment Agreement with Mr. Provencher (incorporated
herein by reference to Albara's Registration Statement No. 33-53708 on Form
S-1 dated January 12, 1993).
10.4 Tradename License Agreement (incorporated herein by reference to Albara's
Post-Effective Amendment No. 2 to the Form S-18 Registration Statement).
10.10 WilTel Communications Systems, Inc. telephone lease agreement with
NorthCon Technologies, Inc. (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
10.11 WilTel Communications System, Inc. telephone lease agreement with Micro
Business Solutions, Inc. (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
10.12 Mutual Release Agreement between Dataproducts Corporation, Micro Business
Solutions, Inc, Albara Corporation and Real Provencher, Individual
(incorporated herein by reference to Albara's 1994 Annual Report on Form
10-KSB).
10.13 Order approving compromise of claims between Micro Business Solutions,
Inc. and Capetronic Computer U.S.A. [HK], Inc. (incorporated herein by
reference to Albara's 1994 Annual Report on Form 10-KSB).
10.14 Employment Agreement with Mr. Provencher dated July 1, 1995 (incorporated
herein by reference to Albara's 1995 Annual Report on Form 10-KSB).
10.15 Deferred Compensation Plan (incorporated herein by reference to Albara's
1995 Annual Report on Form 10-KSB).
<PAGE>
10.16 Split-Dollar Agreement with Mr. Real Provencher dated July 1, 1995
(incorporated herein by reference to Albara's 1995 Annual Report on Form
10-KSB).
10.17 Split-Dollar Agreement with Ms. Barbara A. Provencher dated July 1, 1995
(incorporated herein by reference to Albara's 1995 Annual Report on Form
10-KSB).
10.18 Earnest Money Contract covering sale of land and building located at 610
South Frazier, Conroe, TX 77301 (incorporated herein by reference to
Albara's 1996 Annual Report on Form 10-KSB).
10.19 Asset Purchase Agreement covering the sale of Helix technology to The Chip
Merchant (incorporated herein by reference to Albara's 1996 Annual Report
on Form 10-KSB).
16.1 Letter regarding change in Certifying Accountant (incorporated herein by
reference to Albara's Registration Statement No. 33-53708 on Form S-1 dated
January 12, 1993).
22 *Subsidiaries of the Company.
28.4 Promissory Note payable to the Company from MBSI (incorporated herein by
reference to Albara's 1989 Annual Report on Form 10-K).
28.15 Real Estate Lien Note payable to Fred A. Grams and wife, Alberta Betty
Grams from the Company (incorporated herein by reference to Albara's 1990
Annual Report on Form 10-K).
28.22 Promissory Note payable to Barbara Provencher from the Company
(incorporated herein by reference to Albara's 1993 Annual Report on Form
10-KSB).
28.23 Promissory Note payable to the Company from STI (incorporated herein by
reference to Albara's 1994 Annual Report on Form 10-KSB).
<FN>
* Filed herewith.
</TABLE>
(c) Reports on Form 8-K.
NONE
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Albara Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALBARA CORPORATION
By: /S/ Real Provencher
---------------------
Real Provencher
President
DATE: June 3, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Albara Corporation
and in the capacities and on the date indicated.
President, Chief
/S/ Real Provencher Executive Officer
- --------------------- and Director June 3, 1999
Real Provencher
Secretary
/S/ Barbara A. Provencher and Director June 3, 1999
- --------------------------------
Barbara A. Provencher
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit No.
- ------------
<C> <S>
1.1 Underwriting Agreement (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
2.1 MBSI's Plan of Reorganization as confirmed (incorporated herein by
reference to Albara's 1994 Annual Report on Form 10-KSB).
2.2 MBSI's Disclosure Statement (incorporated herein by reference to Albara's
1994 Annual Report on Form 10-KSB).
2.3 MBSI's Final Decree Statement (incorporated herein by reference to Albara's
1996 Annual Report on Form 10-KSB).
3.1 Articles of Incorporation and Bylaws (incorporated herein by reference to
Albara's 1989 Form S-18 Registration Statement).
3.2 Articles of Amendment to the Articles of Incorporation, as filed with the
Colorado Secretary of State on December 31, 1990 (incorporated herein by
reference to Albara's Registration Statement No. 33-53708 on Form S-1 dated
January 12, 1993).
3.3 Articles of Amendment to the Articles of Incorporation, as filed with the
Colorado Secretary of State on September 4, 1991 (incorporated herein by
reference to Albara's Registration Statement No. 33-53708 on Form S-1 dated
January 12, 1993).
<PAGE>
3.4 Statement Establishing Series of Preferred Stock, and designating Series A
and Series B Convertible Preferred Stock, as filed with the Colorado
Secretary of State on November 7, 1988 (incorporated herein by reference to
Albara's Registration Statement No. 33-53708 on Form S-1 dated January 12,
1993).
3.5 Statement Establishing Series of Preferred Stock and designating Series D
Convertible Redeemable Preferred Stock, as filed with the Colorado
Secretary of State on May 18, 1989 (incorporated herein by reference to
Albara's Registration Statement No. 33-53708 on Form S-1 dated January 12,
1993).
3.6 Statement Establishing Series of Preferred Stock, and designating Series C
Convertible Redeemable Preferred Stock, as filed with the Colorado
Secretary of State on February 6, 1990 (incorporated herein by reference to
Albara's Registration Statement No. 33-53708 on Form S-1 dated January 12,
1993).
3.7 Statement Establishing Series of Preferred Stock, and designating Series E
Convertible Preferred Stock, as filed with the Colorado Secretary of State
on November 21, 1990 (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
3.8 Statement Establishing Series of Preferred Stock, and designating Series F
Convertible Preferred Stock, as filed with the Colorado Secretary of State
August 27, 1992 (incorporated herein by reference to Albara's Registration
Statement No. 33-53708 on Form S-1 dated January 12, 1993).
3.9 Certificate of Correction, as filed with the Colorado Secretary of State on
September 11, 1992 (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
4.5 Warrant Agreements Issued to Non-Employee Directors on January 30, 1995
(incorporated herein by reference to Albara's 94 Annual Report on Form
10-K).
4.6 Warrant Agreements Issued to Non-Employee Directors on April 4, 1993
(incorporated herein by reference to Albara's 1995 Annual Report on Form
10-KSB).
<PAGE>
10.1 Incentive Stock Option Plan (incorporated herein by reference to Albara's
1988 Form S-18 Registration Statement).
10.2 Employment Agreement with Mr. Provencher (incorporated herein by reference
to Albara's Registration Statement No. 33-53708 on Form S-1 dated January
12, 1993).
10.3 First Amendment to Employment Agreement with Mr. Provencher (incorporated
herein by reference to Albara's Registration Statement No. 33-53708 on Form
S-1 dated January 12, 1993).
10.4 Tradename License Agreement (incorporated herein by reference to Albara's
Post-Effective Amendment No. 2 to the Form S-18 Registration Statement).
10.10 WilTel Communications Systems, Inc. telephone lease agreement with
NorthCon Technologies, Inc. (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
10.11 WilTel Communications System, Inc. telephone lease agreement with Micro
Business Solutions, Inc. (incorporated herein by reference to Albara's
Registration Statement No. 33-53708 on Form S-1 dated January 12, 1993).
10.12 Mutual Release Agreement between Dataproducts Corporation, Micro Business
Solutions, Inc, Albara Corporation and Real Provencher, Individual
(incorporated herein by reference to Albara's 1994 Annual Report on Form
10-KSB).
10.13 Order approving compromise of claims between Micro Business Solutions,
Inc. and Capetronic Computer U.S.A. [HK], Inc. (incorporated herein by
reference to Albara's 1994 Annual Report on Form 10-KSB).
10.14 Employment Agreement with Mr. Provencher dated July 1, 1995 (incorporated
herein by reference to Albara's 1995 Annual Report on Form 10-KSB).
10.15 Deferred Compensation Plan (incorporated herein by reference to Albara's
1995 Annual Report on Form 10-KSB).
<PAGE>
10.16 Split-Dollar Agreement with Mr. Real Provencher dated July 1, 1995
(incorporated herein by reference to Albara's 1995 Annual Report on Form
10-KSB).
10.17 Split-Dollar Agreement with Ms. Barbara A. Provencher dated July 1, 1995
(incorporated herein by reference to Albara's 1995 Annual Report on Form
10-KSB).
10.18 Earnest Money Contract covering sale of land and building located at 610
South Frazier, Conroe, TX 77301 (incorporated herein by reference to
Albara's 1996 Annual Report on Form 10-KSB).
10.19 Asset Purchase Agreement covering the sale of Helix technology to The Chip
Merchant (incorporated herein by reference to Albara's 1996 Annual Report
on Form 10-KSB).
16.1 Letter regarding change in Certifying Accountant (incorporated herein by
reference to Albara's Registration Statement No. 33-53708 on Form S-1 dated
January 12, 1993).
22 *Subsidiaries of the Company.
28.4 Promissory Note payable to the Company from MBSI (incorporated herein by
reference to Albara's 1989 Annual Report on Form 10-K).
28.15 Real Estate Lien Note payable to Fred A. Grams and wife, Alberta Betty
Grams from the Company (incorporated herein by reference to Albara's 1990
Annual Report on Form 10-K).
28.22 Promissory Note payable to Barbara Provencher from the Company
(incorporated herein by reference to Albara's 1993 Annual Report on Form
10-KSB).
28.23 Promissory Note payable to the Company from STI (incorporated herein by
reference to Albara's 1994 Annual Report on Form 10-KSB).
<FN>
* Filed herewith.
</TABLE>
<PAGE>
Exhibit 22
----------
SUBSIDIARIES OF THE COMPANY
MICRO BUSINESS SOLUTIONS, INC.
A Nevada corporation
d/b/a MBSI
d/b/a Software and Hardware That Fits
d/b/a Software That Fits
d/b/a Hardware That Fits
d/b/a MBSI Leasing
610 South Frazier
Conroe, Texas 77301
(409) 539-3959
800-972-3018
SOFTWARE TECHNOLOGIES, INC.
A Nevada corporation
d/b/a Helix Technologies
In 1996:
744 Pinecrest Drive
Prospect Heights, IL 60070
(708) 465-0242
800-364-4354
In 1997:
610 South Frazier
Conroe, Texas 77301
(409) 760-2400
800-364-4354
NOTE: On December 31, 1997, the Company disposed of its two operating
subsidiaries.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 120
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122
<PP&E> 793
<DEPRECIATION> 357
<TOTAL-ASSETS> 558
<CURRENT-LIABILITIES> 384
<BONDS> 0
<COMMON> 3914
15
0
<OTHER-SE> (3755)
<TOTAL-LIABILITY-AND-EQUITY> 558
<SALES> 683
<TOTAL-REVENUES> 683
<CGS> 51
<TOTAL-COSTS> 51
<OTHER-EXPENSES> 934
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> (324)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 683
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (324)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
<PAGE>
</TABLE>
