<PAGE>
U.S. 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
For the transition period from to
----------- ----------
Commission File Number: 0-24690
------------
CLARION HOUSE, INC.
----------------------------------------------------------
(Name of small business issuer in its charter)
Nevada 91-1407411
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 North Roselle Road, Suite 1030, Schaumburg, Illinois 60195
---------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (847) 490-5977
--------------------
Securities registered under Section 12(b) of the Exchange Act: None
-------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
-----------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[X]
State issuer's revenues for its most recent fiscal year. $3,264,022.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. $1,845,924 (based upon
the average bid and asked price as of September 24, 1998).
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. As of August 27, 1998,
9,933,657 shares of common stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
1
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company was originally incorporated in Nevada as KAR VENTURES on
March 17, 1988. The Company changed its name to Clarion House, Inc. (a Nevada
corporation) on January 28, 1991 when it acquired, in a reverse acquisition, the
publishing business conducted by Clarion House, Inc. (a Georgia corporation).
The Company's publishing activities, which never progressed beyond the
development stage, consisted of two books distributed primarily through direct
sales to the public through mailings and advertising. The Company's publishing
business ceased active operations by 1992 due to lack of financing and was
terminated in March of 1993 when the Company transferred to its former principal
shareholder, Wallis Wood, in redemption of 148,000 shares of common stock, all
of the issued and outstanding capital stock of its wholly-owned subsidiary,
Clarion House, Inc., a Georgia corporation ("Clarion-Georgia"). The value of the
stock of Clarion-Georgia was deemed of negligible value due to cessation of
operations. Mr. Wood is no longer an affiliate of the Company, but remains a
less than 1% shareholder.
On September 20, 1993, the Company acquired Insecta Sales, Inc., a
Florida corporation ("Insecta") pursuant to an Agreement and Plan of
Reorganization ("Plan") between the Company, Insecta and Gaelic Investments,
Inc., a Bahamian corporation ("Gaelic"). Under the Plan (i) the Company acquired
100% of the issued and outstanding capital stock of Insecta; (ii) the Company
issued Gaelic, the sole shareholder of Insecta, 1,040,000 shares of the
Company's common stock; and (iii) Gaelic granted Insecta an exclusive worldwide
license to use the insecticidal coating technology and the Insecta trademark
owned by Gaelic.
Following consummation of the Plan, the Company, through Insecta,
engaged in the distribution of Insecta(R) products to the consumer, industrial,
commercial and agricultural markets primarily in the United States. The Company
never achieved sufficient revenues to support its operations. As a result, the
Company lost its license rights to the insecticidal coating technology and the
Insecta(R) trademark in December 1995 due to the non-payment of royalties.
As of December 31, 1995, the Company had no active operations.
On April 22, 1996, the Company entered into an Agreement and Plan of
Reorganization and Corporate Separation (the "Reorganization") with exchanging
stockholders of the Company. Pursuant to the Reorganization which was not
actually consummated until December 1997, the exchanging stockholders exchanged
all of their Company common stock (an aggregate of 800,000) for all of the
issued and outstanding common stock of Insecta Sales & Research, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company. The Company
had no active operations during 1997.
2
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company had no real property interests during fiscal 1997.
ITEM 3. LEGAL PROCEEDINGS
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
3
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
-------------------
The Company's common stock, $.01 par value per share (the "Common
Stock"), is traded in the over-the-counter market, however, there is no
established public trading market and reliable high and low bid quotations are
not available. The nominal volume of the trading and price do not reflect any
significant market. All references to Common Stock in this report reflect the
April 1996 one-for-five reverse split.
(b) Holders.
--------
As of August 27, 1998, there were approximately 118 record holders of
the Common Stock. The Company believes that a significant number of its
beneficial owners are holding their Common Stock in "street name."
(c) Dividends.
----------
The Company has never declared or paid any cash dividends on its Common
Stock and does not intend to declare or pay any cash dividend in the foreseeable
future.
4
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: The statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations are forward-looking in time and
involve risks and uncertainties, including the risks associated with plans, the
effect of changing economic conditions, availability of sufficient working
capital, market acceptance, unanticipated delays in product development, and
other factors detailed elsewhere in this report.
GENERAL
From mid-1995 to December 31, 1997, the Company had no active
operations. On December 31, 1997, the Company consummated the acquisition of
Clarion Plastics, Inc., formerly known as Triangle Plastics, Inc., an Ohio
corporation ("Clarion Plastics"). As a result of the acquisition, the Company
became a holding company for one wholly-owned operating subsidiary. Clarion
Plastics is a manufacturer of injection molded thermoplastics.
The Company's pro forma results of operations for the fiscal year ended
December 31, 1997, including the revenues of Clarion Plastics as if such
acquisition occurred on January 1, 1997, were $3,264,022 with a net loss of
$795,298. As of December 31, 1997, the Company had a deficit in its working
capital of $166,392.
The Company has generated revenues from the sale of Clarion Plastics
products. The Company expects to increase its revenues in the near future as it
acquires or establishes additional businesses which are compatible with those of
Clarion Plastics. The Company also expects to incur substantial administrative
expenses in the future.
The Company is seeking to raise additional funds to meet its working
capital needs through the sale of its securities. However, there is no assurance
that the Company will be able to obtain sufficient additional funds when needed,
or that such funds, if available, will be obtainable on terms satisfactory to
the Company.
During the next twelve months, the Company anticipates incurring
approximately $6,500,000 in expenditures for the acquisition of capital
equipment
No meaningful comparison can be made to the fiscal year ended December
31, 1996 in that during that period the Company had operations. Activities for
1995 are similarly non-comparable.
5
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
CLARION HOUSE, INC. AND SUBSIDIARY
- CONTENTS -
PAGE NUMBER
-----------
Independent Auditors' Report 7
Financial Statements:
Consolidated Balance Sheet 8
Consolidated Statement of Operations 9
Consolidated Statement of Changes in Stockholder's Deficit 10
Consolidated Statement of Cash Flows 11-12
Notes to Consolidated Financial Statements 13-30
6
<PAGE>
December 31, 1997
Independent Auditors' Report
----------------------------
To the Board of Directors
Clarion House, Inc. and Subsidiary
Schaumburg, Illinois
We have audited the accompanying consolidated balance sheet of CLARION HOUSE,
INC. AND SUBSIDIARY (A NEVADA CORPORATION) as of December 31, 1997, and the
related consolidated statements of operations, changes in stockholder's deficit,
and cash flows for the year 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 audit.
Except as discussed in the following paragraph, 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.
We did not observe the taking of the physical inventories taken as of December
31, 1996 since that date was prior to our initial engagement as auditors for the
Company. We were unable to satisfy ourselves about inventory quantities by means
of other auditing procedures.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to observe the physical
inventory taken as of December 31, 1996, the financial statements referred to in
the first paragraph present fairly, in all material respects, the financial
position of CLARION HOUSE INC. AND SUBSIDIARY (A NEVADA CORPORATION) as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
PERRIN, FORDREE & COMPANY, P.C.
/s/ Perrin, Fordree & Company
April 16, 1998
7
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 10,265
Accounts receivable - trade, less
allowance of $3,580 for doubtful
accounts 327,768
Inventories 259,663
Refundable federal tax 1,048
--------------
Total current assets 598,744
PROPERTY AND EQUIPMENT - At cost:
Machinery and equipment $ 1,253,121
Vehicles 25,955
Furniture and fixtures 47,359
Leasehold improvements 17,021
--------------
1,343,456
Less accumulated depreciation 919,267 424,189
--------------
OTHER ASSETS:
Deposits 1,000
Deferred tax asset 35,200
Goodwill 230,849
--------------
$ 1,289,982
==============
LIABILITIES AND STOCKHOLDER'S DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Line-of-credit $ 213,728
Current portion of long-term debt 90,443
Current portion of obligations
under capital leases 17,379
Accounts payable - trade 398,423
Accrued expenses:
Payroll and taxes $ 23,903
Vacation 6,120
Interest 1,503
Workers' compensation 4,629
Other 5,670 41,825
--------------
Officers' loan 3,338
--------------
Total current liabilities 765,136
DEFERRED TAX LIABILITY 1,300
LONG-TERM DEBT 419,391
OBLIGATIONS UNDER CAPITAL LEASES 51,211
--------------
1,237,038
STOCKHOLDER'S DEFICIT:
Common stock - .01 par value:
Authorized - 10,000,000 shares
Outstanding - 5,465,000 shares
Issued - 5,165,000 shares 51,650
Additional paid-in capital 1,512,661
Accumulated deficit (1,511,367) 52,944
-------------- --------------
$ 1,289,982
==============
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
CLARION HOUSE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
SALES $ 3,264,022 $ 121,190
COST OF SALES 3,011,991 117,797
-------------- --------------
GROSS PROFIT 252,031 3,393
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,091,673 468,128
-------------- --------------
LOSS FROM OPERATIONS (839,642) (464,735)
OTHER OPERATING INCOME (EXPENSE):
Interest income (expense) (74,301) 673
Forgiveness of debt 6,472 -
Gain on sale of assets 247 -
-------------- --------------
(67,582) 673
-------------- --------------
LOSS BEFORE INCOME TAXES (907,224) (464,062)
DEFERRED INCOME TAX BENEFIT 13,948 -
-------------- --------------
CONSOLIDATED NET LOSS (893,276) (464,062)
PREACQUISITION SUBSIDIARY LOSS 97,978 -
-------------- --------------
NET LOSS $ (795,298) (464,062)
============== ==============
NET LOSS PER SHARE $ (.20) $ -
============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,913,480 -
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
CLARION HOUSE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE - December 31, 1996 $ 15,229 $ 922,894 $ (657,274) $ 280,849
NET LOSS - 1997 - - (795,298) (795,298)
SPIN-OFF OF INSECTA SALES, INC. (8,000) 75,047 (58,795) 8,252
ISSUANCE OF COMMON STOCK
FOR SERVICES RENDERED 14,642 131,784 - 146,426
ISSUANCE OF COMMON STOCK
RELATING TO EMPLOYMENT
AGREEMENTS 1,000 24,000 - 25,000
ISSUANCE OF COMMON STOCK
VIA CANCELLATION OF NOTES
PAYABLE 9,579 63,136 - 72,715
PURCHASE OF TRIANGLE PLASTICS,
INC. COMMON STOCK 2,500 60,000 - 62,500
ISSUANCE OF COMMON STOCK
TO COMPANY FOUNDERS FOR
SERVICES RENDERED 11,000 99,000 - 110,000
COMMON STOCK SOLD IN
PRIVATE PLACEMENT 5,700 136,800 - 142,500
-------------- -------------- -------------- --------------
BALANCE - December 31, 1997 $ 51,650 $ 1,512,661 $ (1,511,367) $ 52,944
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
CLARION HOUSE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 3,556,665 $ 7,087
Cash paid to suppliers and employees (3,912,152) (116,380)
Interest received (paid) (74,301) -
Net miscellaneous 248 91,193
-------------- --------------
Net cash to operating activities $ (429,540) $ (18,100)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash purchases of equipment (53,966) -
Spin-off of subsidiary 8,252 -
Acquisition of subsidiary (62,500) -
-------------- --------------
Net cash to investing activities (108,214) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line-of-credit 14,384 17,000
Borrowings from long-term debt 575,836 -
Payments on long-term debt (620,794) -
Payment of obligations under
capital leases (16,481) -
Common stock issued 559,141 -
-------------- --------------
Net cash from financing activities 512,086 17,000
-------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (25,668) (1,100)
CASH AND CASH EQUIVALENTS:
BALANCE - January 1 35,933 1,119
-------------- --------------
BALANCE - December 31 $ 10,265 $ 19
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
RECONCILIATION OF NET LOSS TO NET CASH TO OPERATING ACTIVITIES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996
---- ----
NET LOSS $ (795,298) $ -
Adjustments:
Depreciation and amortization $ 140,074 $ 8,445
Gain on sale of fixed assets (247) -
Preacquisition subsidiary net loss (97,978) -
Changes in operating assets and liabilities
which increase (decrease) cash flow:
Accounts receivable 292,642 7,087
Inventories (40,377) 33,347
Prepaid expenses 223 15,357
Increase in refundable federal tax (1,048) -
Deferred tax asset (14,200) -
Accounts payable and accrued expenses 98,193 (77,471)
Deposits (10,324) -
Officers loan payable (2,500) -
Deferred tax liability 1,300 -
-------------- --------------
NET CASH TO OPERATING ACTIVITIES $ (429,540) $ (18,100)
============== ==============
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This summary of significant accounting policies of Clarion House,
Inc. and Subsidiary is presented to assist in understanding the
Company's financial statements. The financial statements and
notes are representations of the Company's management which is
responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the
financial statements.
PRINCIPLES OF CONSOLIDATION
---------------------------
At the close of business on December 31, 1997, Clarion House,
Inc. purchased all of the outstanding common stock of Triangle
Plastics, Inc. Upon consummation of this transaction, the former
sole stockholder of Triangle Plastics, Inc. became the holder of
a minority share of the common stock of the Company. Accordingly,
the transaction has been accounted for as a purchase of Triangle
Plastics, Inc. by Clarion House, Inc. as of December 31, 1997.
The accompanying consolidated financial statements include the
results of operations of Clarion House, Inc. and Triangle
Plastics, Inc. for the year ended December 31, 1997. All
significant intercompany activities between Clarion House, Inc.
and its wholly-owned subsidiary have been eliminated in
consolidation.
BUSINESS ACTIVITY
-----------------
Clarion House, Inc. is a holding company.
Triangle Plastics, Inc (the Subsidiary) was incorporated in Ohio
during 1984. The Subsidiary manufactures a variety of plastic
items to various industries.
FINANCIAL STATEMENT PRESENTATION
--------------------------------
The financial statements of Clarion House, Inc. as of the year
ended December 31, 1996 were unavailable and have not been
generated. However, the Company had no significant operations
during the year. Thus, the exclusion of those financial
statements have no significant effect.
13
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less.
INVENTORIES
-----------
Inventories are valued on the first-in, first-out method based on
the lower of cost or market.
PROPERTY AND EQUIPMENT
----------------------
Improvements and equipment are carried at cost. Major
replacements and refurbishings are charged to the property
accounts while replacements, maintenance and repairs which do not
improve or extend the life of the respective assets are expensed
currently.
DEPRECIATION
------------
Depreciation is calculated by use of the straight-line and
accelerated cost recovery methods over useful lives of 5 to 10
years.
INCOME TAXES
------------
Deferred income taxes are reported using the liability method.
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities 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.
14
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 2 - INVENTORIES:
The various components of inventories are summarized as follows:
Work in process $ 11,423
Packaging material 2,715
Raw material 123,762
Repair parts 31,652
Finished goods 90,111
----------
$ 259,663
==========
NOTE 3 - LINE OF CREDIT:
At December 31, 1996, the Company had drawn $213,728 under
lines-of-credit agreements with a bank. The agreements allow
maximum borrowings of $275,000 at December 31, 1997. Interest is
either at prime-based or quoted rate. At December 31, 1997
interest on borrowings was 9.25%. The line-of-credit is secured
by accounts receivable, inventory and equipment.
NOTE 4 - LONG-TERM DEBT:
Long-term debt consists of the following:
Note payable - bank, in monthly installments
of $8,108, plus interest at 9.75% per annum.
The note is secured by all accounts receivable,
inventory and equipment. Note is due
September 2002. $ 365,160
Note payable- bank, in monthly installments of
$634, at variable interest not to exceed 25%
per annum. Interest at December 31, 1997 was
9.50%. The note is secured by equipment.
Note is due August 2002. 28,504
15
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 4 - LONG-TERM DEBT - CONTINUED:
Note payable in monthly installments of
$2,995 at interest of 9.00% per annum. The
note is secured by all accounts receivable, inventory
and equipment. Note is due October 2001 116,170
----------
509,834
Less current portion of long-term debt 90,443
----------
Long-term debt $ 419,391
==========
Maturities of long-term debt are as follows:
Year ending December 31:
1998 $ 90,443
1999 104,612
2000 114,836
2001 120,049
2002 79,894
----------
$ 509,834
==========
NOTE 5 - LEASES:
The Company leases a building on a month to month basis. Under
the leasing arrangements the Company pays $6,500 per month. Total
rental expense under the operating lease was $78,000 during 1997.
The Company also leases equipment under operating leases. Future
minimum lease payments required under the leases are as follows:
1998 $ 35,520
1999 29,600
----------
Total minimum lease payments $ 65,120
==========
The Company also leases property under capital leases expiring in
years through 2001. The assets and liabilities under capital
leases are recorded at the lower of the minimum lease payments or
the fair value of the equipment.
16
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 5 - LEASES - CONTINUED:
Minimum lease payments under capital leases are as follows:
1998 $ 17,379
1999 19,016
2000 20,808
2001 11,387
----------
Total minimum lease payments 68,590
Less current portion 17,379
----------
$ 51,211
==========
NOTE 6 - FEDERAL INCOME TAX:
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (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 financial statement and tax
basis 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 effect 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 income reported for
financial statement purposes which differs from income reported
for tax purposes principally because of the methods of
recognizing depreciation expense. Deferred income taxes have been
provided for timing differences.
TRIANGLE PLASTICS, INC.
-----------------------
The Company's total deferred tax assets, deferred tax
liabilities, and deferred tax asset valuation allowances at
December 31, 1997 are as follows:
Total deferred tax assets $ 35,200
Less valuation allowance -
----------
Total deferred tax assets (current) $ 35,200
==========
Total deferred tax liabilities (noncurrent) $ 1,300
==========
17
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 6 - FEDERAL INCOME TAX - CONTINUED:
The deferred tax assets have been recorded based on accrued
vacation and a net operating loss carryforward.
The deferred tax liability is based on the book-tax depreciation
difference. Management does not deem a valuation allowance
necessary due to expected profits in future years.
For tax return purposes, the Company has approximately $234,000
of net operating loss carryforwards as of December 31, 1997,
which expire in the year 2012.
The federal income tax benefit was calculated as follows for
December 31, 1997:
Deferred tax provision $ (12,900)
Refundable federal tax (1,048)
----------
$ (13,948)
==========
CLARION HOUSE, INC.
-------------------
The Company's total deferred tax asset relating to net operating
loss carryforwards as of December 31, 1997 are as follows:
Total deferred tax asset $ 377,000
Less valuation allowance (377,000)
-----------
Total deferred tax asset $ -
===========
Future profits are not reasonably expected to be generated.
Therefore, a valuation allowance has been recorded. For tax
return purposes, the Company has approximately $1,110,000 of net
operating loss carryforwards as of December 31, 1997 which expire
in the year 2012.
18
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 7 - STOCK OPTIONS:
On December 31, 1997, the Company granted the following stock
options to various persons in key management positions:
NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
50,000 $ .824 March 31, 1999
150,000 1.00 March 31, 1998
100,000 1.00 March 31, 1999
The fair value of each option granted based on the Black-Scholes
Model as of the grant date is negligible. Therefore, no
compensation expense has been recorded. The following assumptions
were made in estimating fair value:
Risk-free interest rate 5.5% and 5.64%
Expected life 1.25 and 2.25 years
Expected volatility 20%
Dividend yield 0%
NOTE 8 - EMPLOYEE BENEFIT PLAN:
The Company maintains a retirement plan for its employees
governed under Section 401(k) of the Internal Revenue Code. The
Plan requires the Company to make certain minimum contributions
and permits additional discretionary contributions. Expense for
1997 amounted to $5,173.
NOTE 9 - MAJOR CUSTOMER:
During 1997, the Company lost a major customer, sales to which
exceeded 20% of the Company's revenues. Revenues from sales to
this customer were approximately $1,861,000 and $613,000 for the
years ended December 31, 1997 and 1996, respectively. The Company
had an accounts receivable balance from this customer of
approximately $509,000 and $290,000 as of December 31, 1997 and
1996, respectively. This customer also provided 20% of the
Company's supplies.
The financial impact of the above is undetermined.
19
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 10 - SPIN-OFF OF SUBSIDIARY:
Effective December 18, 1997, the Company spun off its
subsidiary Insecta- Sales, Inc. The transaction was
accomplished by delivering the stock of Insecta-Sales, Inc. to
the holders of 1,000,000 post-split shares of common stock of
Clarion House, Inc.
NOTE 11 - BUSINESS ACQUISITION:
On December 31, 1997, Clarion House, Inc. acquired the common
stock of Triangle Plastics, Inc. Clarion House, Inc. issued
250,000 shares of its $.01 par value common stock at $.25 per
share ($62,500 total purchase price) in exchange for all of the
outstanding common stock of Triangle Plastics, Inc. The
acquisition was recorded using the purchase method of accounting
and has been reflected in the accompanying consolidated financial
statements accordingly. Goodwill amounting to $230,849 has been
recorded during the elimination process and will be amortized
over 15 years beginning January 1, 1998.
The financial statements of Triangle Plastics, Inc. for the two
years immediately preceding the transaction are shown in Notes
13 and 14. No proforma consolidated financial information for
the year ended December 31, 1996 has been presented because
Clarion House, Inc. had no significant operations at the time
of the purchase.
NOTE 12 - SUBSEQUENT EVENT:
Subsequent to December 31, 1997, the name of the Subsidiary was
changed to Clarion Plastics Technologies, Inc.
20
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 13 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1997:
TRIANGLE PLASTICS, INC.
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 10,265
Accounts receivable - trade, less allowance of
$3,580 for doubtful
accounts 327,768
Inventories 259,663
Refundable federal tax 1,048
--------------
Total current assets 598,744
PROPERTY AND EQUIPMENT - At cost:
Machinery and equipment $ 1,253,121
Vehicles 25,955
Furniture and fixtures 47,359
Leasehold improvements 17,021
--------------
1,343,456
Less accumulated depreciation 919,267 424,189
--------------
OTHER ASSETS:
Deposits 1,000
Deferred tax asset 35,200
--------------
$ 1,059,133
==============
LIABILITIES AND STOCKHOLDER'S DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Line-of-credit $ 213,728
Current portion of long-term debt 90,443
Current portion of obligations
under capital leases 17,379
Accounts payable - trade 388,867
Accrued expenses:
Payroll and taxes $ 23,903
Vacation 6,120
Interest 1,503
Workers' compensation 4,629
Other 5,670 41,825
--------------
Officers' loan 3,338
--------------
Total current liabilities 755,580
DEFERRED TAX LIABILITY 1,300
LONG-TERM DEBT 419,391
OBLIGATIONS UNDER CAPITAL LEASES 51,211
--------------
Total liabilities 1,227,482
STOCKHOLDER'S DEFICIT:
Common stock - no par value:
Authorized - 500 shares
Issued and outstanding - 49 shares 125
Additional paid-in capital 2,125
Accumulated deficit (170,599) (168,349)
-------------- -------------
$ 1,059,133
=============
21
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 13 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1997 - CONTINUED:
TRIANGLE PLASTICS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
SALES $ 3,264,022 100.0%
COST OF SALES 3,011,991 92.3
-------------- -------
GROSS PROFIT 252,031 7.7
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 289,903 8.9
-------------- -------
LOSS FROM OPERATIONS (37,872) (1.2)
OTHER OPERATING INCOME (EXPENSE):
Interest expense (74,301) (2.3)
Gain on sale of assets 247 -
-------------- -------
(74,054) (2.3)
-------------- -------
LOSS BEFORE INCOME TAXES (111,926) (3.5)
DEFERRED INCOME TAX BENEFIT 13,948 .4
-------------- -------
NET LOSS $ (97,978) (3.1)%
============== =======
NET LOSS PER SHARE $ 1,999.55
==============
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 49
==============
22
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 13 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1997 - CONTINUED:
<TABLE>
TRIANGLE PLASTICS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE - December 31, 1996 $ 125 $ 2,125 $ (72,621) $ (70,371)
NET LOSS - 1997 - - (97,978) (97,978)
-------------- -------------- -------------- --------------
BALANCE - December 31, 1997 $ 125 $ 2,125 $ (170,599) $ (168,349)
============== ============== ============== ==============
</TABLE>
23
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 13 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1997 - CONTINUED:
TRIANGLE PLASTICS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 3,139,990
Cash paid to suppliers and employees (3,063,280)
Interest paid (74,301)
Net miscellaneous 248
--------------
Net cash from operating activities $ 2,657
CASH FLOWS FROM INVESTING ACTIVITIES -
Cash purchases of equipment (53,966)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line-of-credit 14,384
Borrowings from long-term debt 575,836
Payments on long-term debt (548,079)
Payment of obligations under
capital leases (16,481)
--------------
Net cash from financing activities 25,660
--------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (25,649)
CASH AND CASH EQUIVALENTS:
BALANCE - January 1 35,914
--------------
BALANCE - December 31 $ 10,265
==============
24
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 13 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1997 - CONTINUED:
TRIANGLE PLASTICS, INC.
STATEMENT OF CASH FLOWS - CONTINUED
YEAR ENDED DECEMBER 31, 1997
RECONCILIATION OF NET LOSS TO NET CASH FROM OPERATING ACTIVITIES
----------------------------------------------------------------
NET LOSS $ (97,978)
Adjustments:
Depreciation $ 138,754
Gain on sale of fixed assets (247)
Changes in operating assets and liabilities
which increase (decrease) cash flow:
Accounts receivable (124,033)
Inventories (40,377)
Prepaid expenses 223
Increase in refundable federal tax (1,048)
Deferred tax asset (14,200)
Accounts payable and accrued expenses 153,087
Deposits (10,324)
Officers loan payable (2,500)
Deferred tax liability 1,300 100,635
-------------- --------------
NET CASH FROM OPERATING ACTIVITIES $ 2,657
==============
25
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 14 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996:
TRIANGLE PLASTICS, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 35,915
Accounts receivable - trade, less allowance
of $110,000 for doubtful accounts 193,258
Inventories 219,286
Deferred income tax asset 21,000
Prepaid expenses 848
--------------
Total current assets 470,307
PROPERTY AND EQUIPMENT - At cost:
Machinery and equipment $ 1,215,787
Vehicles 25,955
Furniture and fixtures 30,727
Leasehold improvements 17,021
--------------
1,289,490
Less accumulated depreciation 789,756 499,734
--------------
OTHER ASSETS -
Deposits 1,000
--------------
$ 971,041
==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Line-of-credit $ 107,113
Current portion of long-term debt 94,987
Current portion of obligations
under capital leases 16,480
Accounts payable - trade 194,481
Accrued expenses:
Payroll and taxes $ 25,820
Vacation 5,565
Interest 1,638
Workers' compensation 24,962
Other 16,617 74,602
--------------
Officers' loan 5,838
--------------
Total current liabilities 493,501
LONG-TERM DEBT 479,321
OBLIGATIONS UNDER CAPITAL LEASES 68,590
--------------
1,041,412
STOCKHOLDERS' DEFICIT:
Common stock - no par value:
Authorized - 500 shares
Issued and outstanding -
49 shares 125
Additional paid-in capital 2,125
Accumulated deficit (72,621) (70,371)
-------------- --------------
$ 971,041
==============
26
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 14 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996 - CONTINUED:
TRIANGLE PLASTICS, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
SALES $3,036,548 100.0%
COST OF SALES 2,539,133 83.6
-------------- -------
GROSS PROFIT 497,415 16.4
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 385,340 12.7
-------------- -------
PROFIT FROM OPERATIONS 112,075 3.7
OTHER OPERATING EXPENSE:
Interest (70,658) (2.3)
Loss on sale of assets (2,050) (.1)
-------------- -------
(72,708) (2.4)
-------------- -------
INCOME BEFORE INCOME TAXES 39,367 1.3
INCOME TAXES:
Federal:
Deferred (3,000) (.1)
Current 5,000 .2
-------------- -------
2,000 .1
-------------- -------
NET INCOME $ 37,367 1.2%
============== =======
NET INCOME PER SHARE $ 762.59
==============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 49
==============
27
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 14 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996 - CONTINUED:
<TABLE>
TRIANGLE PLASTICS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE - December 31, 1995 $ 125 $ 2,125 $ (109,988) $ (107,738)
NET INCOME - 1996 - - 37,367 37,367
-------------- -------------- -------------- --------------
BALANCE - December 31, 1996 $ 125 $ 2,125 $ (72,621) $ (70,371)
============== ============== ============== ==============
</TABLE>
28
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 14 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996 - CONTINUED:
TRIANGLE PLASTICS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 3,014,183
Cash paid to suppliers and employees (2,866,173)
Interest paid (70,658)
Income taxes paid (5,001)
--------------
Net cash from operating activities $ 72,351
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of equipment (162,034)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from line-of-credit 80,626
Payments to line-of-credit (33,500)
Borrowings from long-term debt 144,300
Payments to long-term debt (76,082)
Net payment to obligations under
capital leases (10,318)
--------------
Net cash from financing activities 105,026
--------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,343
CASH AND CASH EQUIVALENTS:
Balance - January 1 20,572
--------------
Balance- December 31 $ 35,915
==============
SCHEDULE OF NON-CASH INVESTING
------------------------------
EQUIPMENT PURCHASE UNDER CAPITAL LEASE $ 95,388
==============
29
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE 14 - TRIANGLE PLASTICS, INC. FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996 - CONTINUED:
TRIANGLE PLASTICS, INC.
STATEMENT OF CASH FLOWS - CONTINUED
YEAR ENDED DECEMBER 31, 1996
RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
------------------------------------------------------------------
NET INCOME $ 37,367
Adjustments:
Depreciation $ 126,152
Gain on sale of fixed assets 2,048 128,200
--------------
Changes in assets and liabilities:
Increase in accounts receivable (22,365)
Increase in inventories (4,694)
Decrease in prepaid expenses 23,769
Decrease in accounts payable and
accrued expenses (91,783)
Increase in deferred income taxes (3,000)
Decrease in deposits 10,695
Increase in officer loan (5,838) (93,216)
-------------- --------------
NET CASH FROM OPERATING ACTIVITIES $ 72,351
==============
30
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a) Identify Directors and Executive Officers.
------------------------------------------
The directors and executive officers of the Company are as follows:
Positions
Name Age and Offices
- ---- --- -----------
Troy D. Wiseman 32 Chairman, Chief Executive Officer,
and Director
Brian C. Manoogian 49 Director
R. Townley Rose, Jr. 44 Executive Vice President and
Director
Robert C. Copple 44 Vice President - Finance
TROY D. WISEMAN has been the Chairman and a Director of the Company since
February 1998 and chief Executive Officer since April 1998. Mr. Wiseman is the
principal founder and president of Invest L'Inc., a company specializing in
providing financial consulting services and bridge financing to emerging growth
companies preparing for an initial public offering. Mr. Wiseman also serves as
the Manager of Invest L'Inc. Bridge Fund, LLC, a privately held investment fund
which provides short term financing to both privately and publicly held
companies. Mr. Wiseman is founder and President of Apportum Consulting Corp., a
New York based business consulting firm currently specializing in assisting
micro-cap companies in "going public" through reverse mergers. Mr. Wiseman was
co-founder of CAMI'Z Inc., a publicly traded retail company where he served as a
member of the Board of Directors and held various executive officer positions
including Vice President, Chief Operating Officer, Chief Financial Officer and
Secretary from 1987 to 1994. In 1994, CAMI'Z Inc. acquired Chauvin
International, Ltd. by merger and became B.U.M. International, Inc.
31
<PAGE>
BRIAN C. MANOOGIAN has been a Director of the Company since November 1997. From
November 1997 to July 1998 he also served as President. Prior to joining the
Company, Mr. Manoogian practiced corporate and business law for over 20 years in
Michigan. Mr. Manoogian began his legal career as the Assistant Corporate
Counsel of Masco Corporation, a position he held for three years; and has been a
partner in small and medium size law firms. Mr. Manoogian received a Bachelors
degree from the University of Michigan and a Juris Doctor from the Detroit
College of Law.
R. TOWNLEY ROSE, JR. has been a Director of the Company since February 1998 and
Executive Vice President since April 1998. Mr. Rose has over 26 years of
experience as a sales representative in plastics and metal fabrication in
numerous industries, with specialization in the heavy duty truck market.
ROBERT C. COPPLE has been the Vice President - Finance of the Company since
December 1997. From May 1992 to December 1997, Mr. Copple was the Division
Controller for the Plastics Division of Plastech (formerly Bryan Custom
Plastics, a division of United Screw & Bolt Corporation). Prior to joining
Plastech in 1992, Mr. Copple was the Diversified Products Controller for
Aeroequip-Vickers (formerly Trinova Corporation). Mr. Copple began his career as
a Certified Public Accountant with a firm located in Elkhart, Indiana. Mr.
Copple has sixteen years of experience in the plastics industry.
Directors serve terms of one year or until their successors are duly
elected and qualified.
(b) Identify Significant Employees.
-------------------------------
Inapplicable.
(c) Family Relationships.
---------------------
Inapplicable.
(d) Involvement in Certain Legal Proceedings.
----------------------------------------
Inapplicable.
(e) Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
No person was subject to Section 16 of the Exchange Act with respect to
the Company and failed to file a report required by Section 16(a) on a timely
basis during the most recent fiscal year.
32
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
None of the Company's officer's received compensation in excess of
$100,000 during the fiscal year ended December 31, 1997. Prior to becoming the
Company's President in November 1997, Brian C. Manoogian received a restricted
stock grant as founder's shares valued at $35,000 during the fiscal year ended
December 31, 1997. In addition, Mr. Manoogian received options to purchase
150,000 shares of the Company's Common Stock at an exercise price of $0.25 per
share. During the fiscal year ended December 31, 1997, the Company issued
options to purchase 50,000 shares of Company Common Stock to Robert Copple, the
Vice President - Finance of the Company. However, during the fiscal year ended
December 31, 1997 no options or stock appreciation rights were exercised by, nor
any long term incentive plan awards made to, any named executive officer.
COMPENSATION PURSUANT TO PLANS. During the fiscal year ended December
31, 1997 there were no options or stock appreciation rights exercised by, nor
any long term incentive plan awards made to, any named executive officer.
COMPENSATION OF DIRECTORS. Directors of the Company are not compensated
for any services provided as a
director.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS.
Inapplicable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership.
-------------------
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of August 27, 1998 by: (i) each
person who is known to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each of the Company's directors, executive officers and
nominees for director; and (iii) all directors and officers of the Company as a
group. Unless otherwise indicated below, the person or persons named have sole
voting and dispositive power.
Shareholder Shares Percent
- ----------- ------ -------
Troy D. Wiseman (1) 1,858,029 18.7%
Brian C. Manoogian 950,000 9.6%
R. Townley Rose, Jr. 1,200,000 12.1%
Robert C. Copple (2) 145,000 1.5%
Bryan Cressey 1,000,000 10.1%
Terence M. Graunke 1,000,000 10.1%
Robert J. Skandalaris(3) 1,424,255 14.3%
All directors and executive
officers as a group (4 persons) 4,153,029 41.8%
33
<PAGE>
(1) Includes 799,444 shares held by Invest L'Inc. Bridge fund, LLC, a private
investment fund for which Mr. Wiseman acts as Manager and holds an equity
interest; 116,000 shares held by Apportum Consulting Corp., an entity of which
Mr. Wiseman is an officer, director and the sole shareholder; 874,255 shares
held by Mr. Wiseman's family trust; 20,000 shares held as custodian for Mr.
Wiseman's children and 48,330 shares held by Invest L'Inc., an entity of which
Mr. Wiseman is an officer, director and the sole shareholder.
(2) Includes 50,000 shares held in escrow pending satisfaction of certain
earnings conditions pursuant to Mr. Copple's employment agreement with the
Company.
(3) Includes 250,000 shares held as custodian for Mr. Skandalaris' children and
874,255 shares held by Invest L'Inc. Bridge Fund, LLC, a private investment fund
in which Mr. Skandalaris holds an equity interest.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Inapplicable
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and index of exhibits.
-------------------------------
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Sample Stock Certificate
(b) Reports on Form 8-K.
--------------------
Inapplicable.
34
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CLARION HOUSE, INC.
Dated: September 30, 1998 By: /S/ Troy D. Wiseman
-------------------------
Troy D. Wiseman,
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ Troy D. Wiseman
- ------------------------------ Chief Executive Officer September 30, 1998
Troy D. Wiseman Chairman of the Board of
Directors
/S/ Brian C. Manoogian
- ------------------------------ Director September 30, 1998
Brian C. Manoogian
/S/ R. Townley Rose Jr.
- ------------------------------ Executive Vice President September 30, 1998
R. Townley Rose, Jr. and Director
/S/ Robert C. Copple
- ------------------------------ Vice President - Finance September 30, 1998
Robert C. Copple
35
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10265
<SECURITIES> 0
<RECEIVABLES> 327768
<ALLOWANCES> 0
<INVENTORY> 259663
<CURRENT-ASSETS> 598744
<PP&E> 1343456
<DEPRECIATION> 919267
<TOTAL-ASSETS> 1289982
<CURRENT-LIABILITIES> 765136
<BONDS> 0
0
0
<COMMON> 51650
<OTHER-SE> 1294
<TOTAL-LIABILITY-AND-EQUITY> 1289982
<SALES> 3264022
<TOTAL-REVENUES> 3264022
<CGS> 3011991
<TOTAL-COSTS> 4103664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74301
<INCOME-PRETAX> (907224)
<INCOME-TAX> 0
<INCOME-CONTINUING> (893276)
<DISCONTINUED> 0
<EXTRAORDINARY> 97978
<CHANGES> 0
<NET-INCOME> (795298)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
