SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACTS OF 1934
For Fiscal Year Ended May 31, 1997 Commission File No. 0-17597
CONCAP, INC.
(Formerly known as Continental Capital Resources, Inc.)
Name of Registrant as Specified in its Charter)
TEXAS 76-0252296
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
586 EAST WOOLBRIGHT ROAD, SUITE 466, BOYNTON BEACH, FL 33435
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (561) 265-3221
CONCAP, Inc. was formerly known as CONTINENTAL CAPITAL RESOURCES,
INC.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
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 ninety days.
Yes X No
The number of shares of registrant's Common Stock, $.003 par
value, outstanding as of May 31, 1997 as 50,815,488 shares.
No annual reports to security holders, proxy or information
statements, or prospectuses filed pursuant to Rule 424(b) or (c)
have been incorporated by reference.
The aggregate market value of the voting stock held by
nonaffiliates of the registrant as of May 31, 1997 was
approximately $100,000.
<PAGE>
CONCAP, INC.
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
ITEM 2. PROPERTY
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
<PAGE>
PART I
ITEM 1. BUSINESS
General
Concap, Inc. (the "Company") was organized under the laws of
the State of Texas on June 17, 1988. The Company was qualified
in the State of Florida on August 29, 1990. The Company was
formerly known as Continental Capital Resources, Inc. The
Company was formed for the purpose of creating a vehicle to
obtain capital to take advantage of domestic and foreign business
opportunities which may have potential for profit.
In November of 1988, the Company completed a public offering
(the "Offering") of 10,000 Units, each Unit consisting of one
thousand (1,000) shares of Common Stock, one thousand (1,000)
Class A Warrants and one thousand (1,000) Class B Warrants, at a
price of $75.00 per Unit or a total of $622,853 after offering
costs of $127,147. Since completion of the Offering, the
Company, through its officers and directors, has been involved in
the search for, and negotiations with, potential merger or
acquisition candidates.
Plan of Operation
General The Company's plan of operations is to seek,
investigate, and if warranted, acquire domestic and foreign
business opportunities, or participate in more than one or two
such business opportunities. The Company intends to seek long-
term growth potential as opposed to short-term earnings. The
Company presently has several potential merger/acquisition/spin-
off candidates under consideration, but until the consummation of
a merger or acquisition, the Company will continue to seek
business opportunities to acquire. (See "Potential Acquisitions,
Spin-off and Other Transactions".
The Company does not propose to limit its business
opportunities to firms which have achieved any predetermined
stage of development. Accordingly, the Company will investigate
firms which are developing companies in need of additional funds
for expansion into new products or markets, are seeking to
develop a new product or service, are established businesses
either experiencing financial or operating difficulties in need
of limited capital or merely desirous of establishing a public
trading market for its common stock, among others. The Company
intends to maintain its principal place of business in the United
States, even if it elects to participate in a foreign business
opportunity.
The Company does not propose to restrict its search for
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investment opportunities to any industry, and may, therefore,
engage in essentially any business to the extent of its limited
resources. This includes, among others, industries such as
service, natural resources, manufacturing, high technology,
product development, medical and communications, real estate,
furniture and restaurants.
The Company anticipates that the selection of a business
opportunity in which to participate will be complex and extremely
risky. Because of, among other things, rapid technological
advances being made in some industries and shortages of available
capital, and depressed conditions in other industries, management
believes that there are numerous firms seeking even the limited
additional capital which the Company has and/or the benefits of a
publicly traded corporation. Such perceived benefits of a
publicly traded corporation may include facilitating or improving
the terms upon which additional equity financing may be sought,
providing liquidity for estate planning needs of principal
shareholders, providing incentive stock options or similar
benefits to key employees, providing liquidity for all
shareholders and other factors.
It is anticipated that both domestic and foreign business
opportunities will be available to the Company from various
sources, including its officers and directors, professional
advisors such as attorneys and accountants, securities broker-
dealers, venture capitalists, members of the financial community
and others who may present unsolicited proposals. No plans,
understandings, agreements or commitments with any individual
exist for such persons to act as a finder of opportunities for
the Company, and officers and directors of the Company, and their
respective affiliates, however, a finder may or may not receive
some form of compensation for arranging, making an introduction
or taking any other action in connection with any transaction in
which the Company may participate. In the event of a merger or
acquisition, it likely that the Company will repurchase a
substantial number of shares held by Carl H. Canter and enter
into a multi-year consulting agreement with Mr. Canter.
Selection of Opportunity
Prior to considering participation in a business
opportunity, the Company intends to request that it be provided
with written material, video tapes, etc. regarding the business
opportunity containing such items as a description of product,
service and company history; management resumes; financial
information; available projections with related assumptions upon
which they are based; an explanation of proprietary products and
services; evidence of existing patents, trademarks or service
marks or rights thereto; present and proposed forms of
compensation to management; a description of transactions between
the Company and its affiliates during relevant prior periods a
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description of present and required facilities; an analysis of
risks and competitive conditions; a financial plan of operation
and estimated capital requirements; audited financial statements;
and other information deemed relevant. As part of the Company's
"due diligence" investigation, officers and directors intend to
meet personally with management and key personnel, 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
financial resources and management expertise.
The analysis of new business opportunities will be
undertaken by or under the supervision of the officers and
directors, none of whom is a professional business analyst or has
any previous training or experience in business analysis, who
intend to consider the following kinds of factors, none of which
will be controlling.
A. Potential for growth indicated by new technology,
anticipated market expansion or new products;
B. Competitive position as compared to other firms of
similar size and experience within the industry segment
as well as within the industry as a whole.
C. Strength and diversity of management, either in place
or scheduled for recruitment;
D. Capital requirements and anticipated availability of
required funds to be provided by the Company or from
operations through the sale of additional securities,
through joint ventures or similar arrangements or from
sources;
E. The cost of participation by the Company as compared to
the perceived tangible and intangible values and
potentials;
F. The extent to which the business opportunity can be
advanced;
G. The accessibility of required management expertise,
personnel, raw materials, services, professional
assistance and other required items; and
H. Other relevant factors.
As potentially available business opportunities are expected
to be in different industries and at various stages of
development, the task of comparative investigation and analysis
of such business opportunities will be extremely difficult and
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complex. Potential investors must recognize that due to the
Company's limited capital available for investigation and
management's limited experience in business analysis the Company
many not discover or adequately evaluate adverse facts about the
opportunity to be acquired.
To a large extent, a decision to participate in a specific
business opportunity may be made upon management's analysis of
the quality of the other firm's management and personnel, the
anticipated acceptability of new products or marketing concepts,
the merit of technological changes, and numerous other factors
which are difficult, if not impossible to analyze through the
application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific firm may
not necessarily be indicative of the potential for the future
because of the requirement to substantially shift marketing
approaches, obtain additional capital, change product emphasis,
change or substantially augment management, or make other
changes. Because of the lack of training or experience of
management, the Company will be dependent upon the owners and/or
promoters of the business opportunity to identify such problems
and to implement, or be primarily responsible for the
implementation of required changes. Because the Company may
participate in a business opportunity with a newly organized firm
or with a firm which is entering a new phase of growth, it should
be emphasized that the Company will incur further risks since
management in many instances will not have proven its abilities
or effectiveness, the eventual market for such firm's products or
services will likely not be established, and the profitability of
the firm will be unproved, uncertain, and unpredictable.
In seeking business opportunities, management's decision
will not be controlled by an attempt to time anticipated
enthusiasm in the securities market for a specific industry,
management group or product or service industry, although such
factors may influence management significantly. However,
management will attempt to base its decisions upon the objective
of seeking long-term capital appreciation in real value of the
Company and will consider current income only a minor factor in
such decisions, although no assurance can be given.
It is anticipated the Company will not be able to diversify,
but will essentially be limited to one or possibly two ventures
because of the Company's limited financing. This lace of
diversification is unlikely to permit the Company to offset
potential losses from one business opportunity against profits
from another, and should be considered an adverse factor
affecting any decision to purchase the Company's securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact on the public
investors pursuant to the authority of the Company's Board of
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Directors, without submitting the proposal to the shareholders
for their consideration absent a requirement of state law to do
so.
The Company is unable to predict when it may participate in
a business opportunity. It expects, however, that the analysis
of specific proposals and the selection of a business opportunity
may take several months or more.
Forms of Acquisition It is impossible to predict the manner
in which the Company may participate in a business opportunity.
Specific business opportunities will be reviewed as well as the
respective needs and desires of the Company and the promoters of
the opportunity and, upon the basis of that review and the
relative negotiating strength of the Company and such promoters,
the legal structure and method deemed by management to be
suitable will be selected. Such structure may in included, but
is not limited to, leases, purchase and sales agreements,
licenses, joint ventures and other contractual agreements. The
Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation
or reorganization of the Company with other corporations or forms
of business organization, and there is no assurance the Company
would be the surviving entity. In addition, the present
management and the shareholders of the Company purchasing
securities in this offering may not have control of a majority of
the voting shares of the Company following a reorganization
transaction. As part of such a transaction, all or a majority of
the Company's directors may resign and new directors may be
appointed without any vote by shareholders.
It is anticipated that there may be domestic and foreign
firms with a business opportunity to be presented to the Company
which will be interested primarily in the fact that its Common
Stock is publicly traded, rather than the amount of its limited
capital, because they desire to obtain the benefits of a publicly
held corporation.
Firms with a business opportunity which seek the Company's
participation in attempting to consolidate their operations
through a reorganization, asset acquisition, or some other form
such as a joint venture, operating arrangement, securities
exchange or consolidation, may desire to do so to avoid what such
firms may deem to be adverse consequences of themselves
undertakings public offering, as distinguished from reorganizing
with an existing public corporation such as the Company. Such
adverse factors may include time delays encountered in obtaining
clearances required prior to the offer and sale of securities,
the requirement that public shareholders have a substantial share
of voting control of the combined firm which may be smaller
following a reorganization or asset acquisition than would be
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permitted under the requirement that the public shareholders
obtain sufficient shares so that the tangible net book value of
the shares will not be diluted by more than a specified
percentage, as well as other conditions or requirements imposed
by various state laws. Financing may be provided to a company
that otherwise might be prohibited from, or would at least
encounter difficulty in obtaining, public financing due to
certain requirements imposed by states concerning the merits of
the ultimate recipient of the company's funds or the background
of such company's management, control persons and affiliates.
These requirements generally have the stated purpose of
protecting public shareholders so that the participation in a
business opportunity by a investment in the Company may have the
effect of depriving persons purchasing securities in this
offering from such purported projections.
It is likely that the Company will acquire its participation
in a business opportunity through the issuance of Common Stock or
other securities in the Company. Although the terms of any such
transaction cannot be predicted, in the event the transaction
were structured to take advantage of being a so-called "tax-free"
reorganization under Section 368(a)(1) of the Internal Revenue
Code, as amended, there could be a substantial dilution to the
equity of those who were shareholders of the Company prior to
such reorganization.
It is anticipated that any securities issued in any such
reorganization would be issued in reliance upon exemptions from
registration under applicable federal and state securities laws.
In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities
either as the time the transaction is consummated or, under
certain conditions, at specified times thereafter. The issuance
of substantial additional securities and their potential sales
into any trading market which may develop in the Company's
securities may have a depressive effect on such market.
The Company intends to participate in a business opportunity
only after the negotiation and execution of a written agreement.
Although the terms of such agreement cannot be predicted,
generally such an agreement would require specific
representations and warranties by all of the parties thereto,
specify certain events of default, detail the terms of closing
and the conditions which must be satisfied by each of the parties
thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon
default and include miscellaneous other terms.
It is anticipated that the investigation of specific
business opportunities and the negotiation, drafting and
execution of relevant agreements, disclosure documents and other
documents will require substantial management time and attention
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and substantial costs for accountants, attorneys and others. If
a decision is made to participate in a specific business
opportunity, the costs theretofore 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.
The Investment Company Act of 1940 The Company may
participate in a business or opportunity by purchasing, trading
or selling the securities of such business. However, the Company
does not intend to engage primarily in such activities.
Specifically, the Company intends to conduct its activities so as
to avoid being classified as an "Investment Company" under the
Investment Company Act of 1940 (the "1940 Act") and therefore
avoid application of the costly and restrictive registration and
other provisions of the 1940 Act and the regulations promulgated
thereunder.
Section 3(a) of the 1940 Act excepts from the definition of
an "Investment Company" an entity which does not engage primarily
in the business of investing, reinvesting, or trading in
securities or which does not engage in the business of investing,
owning, holding or trading "investment securities" (defined as
"all securities other than government securities or securities of
majority-owned subsidiaries) the value of which exceeds 40% of
the value of its total assets (excluding government securities,
cash or cash items. The Company intends to implement its
exception plan in a manner which will result in the availability
of this exception from the definition of "investment company."
Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment
securities will be limited. Although the Company intends to
vigorously resist classification as an investment company, and to
take advantage of any exemptions or exceptions form applications
of the 1940 Act, which allows an entity a one-time option during
any three-year period to claim an exemption as a "transient"
investment company. The necessity of asserting any such
resistance, or making any claim of exemption could be time
consuming and costly, or even prohibitive, given the Company's
limited resources.
The Company's plan of business may involve changes in its
capital structure, management, control and business, especially
if it consummates a reorganization as discussed above. Each of
these areas are regulated by the 1940 Act, which regulation has
the purported purpose of protecting purchasers of investment
company securities. Since the Company does not intend to
register as an investment company, purchasers of the Company's
securities will not be afforded the purported protection.
Should the Company be classified as an investment company
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under the 1940 Act the Company reserves the right to solicit
shareholder approval for a plan of liquidation.
Competition Due to the general impact on existing business
of continued shortages of capital relative to the need to expand
or otherwise take advantage of an improving economy, the Company
expects to encounter substantial competition in its efforts to
locate attractive opportunities for the development companies,
"blind pools", ventures capital partnerships and corporations,
venture capital affiliates of large industrial and financial
companies, small business investment companies and wealthy
individuals. Many of these entities will have significantly
greater experience, resources and managerial capabilities than
the Company and will therefore be in a better position than the
Company to obtain access to attractive business opportunities.
Employees The Company is a development stage company and
currently has no employees other than its officers and clerical
personnel. Its officers are expected to continue to devote only
a minor portion of their time to the accounts as necessary and
does not anticipate a need to engage any full-time employees
other than clerical personnel so long as it is seeking and
evaluating business opportunities. The need for employees and
their availability will be addressed in connection with the
decision whether or not to acquire or participate in a specific
business opportunity.
Potential Acquisitions, Spin-Offs and other Transactions In
order to maximize value and profit potential for the Company's
shareholders, pending the consummation of a merger or
acquisition, the Company determined to create one or more shell
subsidiaries to merge with attractive businesses seeking to
create a public market in their securities. The securities
received by the Company in the merger of its subsidiaries with
such operating companies are distributed to the shareholders of
the Company pursuant to a registration statement with the effect
that a public market in the securities is created and the
shareholders of the Company receive shares in an operating
company.
ITEM 2. PROPERTIES
Pending the completion of an acquisition of a business
opportunity, the Company's books and records are located at, and
its principal offices are maintained at 586 East Woolbright Road,
Suite 466 Boynton Beach, Florida, 33435, telephone number, (561)
265-3221 which are provided by an affiliate of the Company's
President, Carl Canter for $200.00 per month. The Company moved
its offices to this address on April 1, 1997. It is anticipated
that the Company's offices will be relocated upon completion of
an acquisition to a location yet to be determined based upon the
nature and location of the acquired business.
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ITEM 3. LEGAL PROCEEDINGS
The Company knows of no litigation, present, threatened or
contemplated or unsatisfied against the Company or any of its
officers or any proceedings to which the Company or its officers
or director are parties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of the fiscal year covered by
this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market
The Company's common stock is traded in the over-the-counter
market. Because the Company's primary initial market maker,
Profile Investments Corporation, terminated its operations in
April of 1989, no established public trading market has since
developed. Accordingly, no range of high and low bid prices is
set out.
Holders
As of May 23, 1997, there were approximately 262 holders of
record of the common stock of the Company based on the transfer
agent's records.
Dividends
The Company has paid no cash dividends to date and does not
expect to pay any dividends in the foreseeable future.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
FISCAL YEAR ENDED MAY 31,
1995 1996 1997
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues $ 0 $ 0 $ 0
Operating expenses ( 36,200) ( 36,094) ( 36,000)
Operating income (loss) ( 36,200) ( 36,094) ( 36,000)
Net Income (loss) ( 36,200) ( 36,094) ( 36,000)
Earnings (loss) per share $ - $ - $ -
BALANCE SHEET DATA:
Cash $ 0 $ 0 $ 0
Total assets $ 94 $ 0 $ 0
Total liabilities 130,355 166,355 202,355
Stockholders equity (130,355) (166,355) (202,355)
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
During the period from June 17, 1988 (inception) to May, 31,
1989, the Company's operations consisted of carrying out its
initial public offering and commencing the search for a potential
merger or acquisition candidate. The Company successfully
completed its public offering in November of 1988 and has since
been involved in the search for a merger or acquisition
candidate.
For the years ended May 31, 1995, 1996 and 1997, the Company
had reported no operating revenues. The Company incurred
operating expenses of $36,200 for the year ended May 31, 1995,
$36,094 for the year ended May 31, 1996, and $36,000 for the year
ended May 31, 1997; which consisted generally of professional
fees, consulting fees, office expense, travel and telephone
expenses all relating to the search for, and negotiations with
potential merger or acquisition candidates and compliance with
certain reporting and other requirements associated with the
Company's status as a public company. Thus, the Company reported
an operating loss of $ 36,200 for the year ended May 31, 1995 as
compared to a loss of $36,094 for the year ended May 31, 1996,
and a loss of $36,000 for the year ended May 31, 1997. For the
years ended May 31, 1995, May 31, 1996, and May 31, 1997 the
Company reported no interest or administrative income. For
fiscal 1996 and 1997 the Company had no bad debts.
Liquidity and Capital Resources
The Company received net proceeds of approximately $622,853
in November of 1988 from the public offering of Units consisting
of common stock and Class A Warrants and Class B Warrants.
Subsequently, the Company has received an additional $44,204 from
the exercise of Warrants in fiscal 1989 and $29,190 in fiscal
1990. The remaining proceeds from the public and the exercise of
Warrants represents the primary source of liquidity for the
Company. According to the registration statement and Prospectus,
the Class A Warrants expired July 28, 1991 and the Class B
Warrants expired July 28, 1993.
Management believes that despite the Company's current
deficit cash balance, currently circumvented by accrual of
consulting fees due to Carl H. Canter, the Company's Chief
Executive Officer and President, and loans made from time to time
by him to the Company. There are potential merger or acquisition
candidates which could benefit by merging with or into a publicly
traded company. Such candidates have made inquiries and
Management is presently discussing options with one or more
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candidates. If an acquisition or merger is consummated,
Management plans for cash to be provided by operations of the
acquired or merged company. Management, as with every potential
candidate, reviews the cash requirements of all candidates,
methods of acquiring cash, cash flow timetables, etc. to insulate
the newly merged entity for a period of not less than one year
from insufficient cash on hand. However, until an acquisition or
merger is actually consummated, there can be no assurance as to
the ultimate capital requirements of the combined entity nor can
there be any assurance as to the period which the Company's cash
will sustain operations of the entity.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
Concap, Inc.
We have audited the accompanying balance sheets of Concap, Inc. (a
Development Stage Company), as of May 31, 1997, and 1996, and the
related statements of operations, stockholders' deficiency and cash
flows for the years ended May 31, 1997, 1996 and 1995, and for the
period June 17, 1988 (inception) to May 31, 1997. 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 did not audit the financial
statements of the Company for the period June 17, 1988 (inception)
to May 31, 1993. Those statements were audited by other auditors,
whose report has been furnished to us, and our opinion, insofar as
it relates to amounts included for that period, is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the 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 and
the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of the other
auditors, the financial statements referred to above present
fairly, in all material respects, the financial position of Concap,
Inc. (a Development Stage Company) as of May 31, 1997, and 1996,
and the results of its operations and its cash flows for the years
ended May 31, 1997, 1996 and 1995, and for the period from June 17,
1988 (inception) to May 31, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that Concap, Inc. will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company is dependent
upon a merger and exercise of warrants or obtaining other sources
of financing. These facts raise substantial doubt about the
Company's ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 1. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
RACHLIN COHEN & HOLTZ
Fort Lauderdale, Florida
August 14, 1997
END OF PAGE 1 OF FINANCIAL STATEMENTS
<TABLE>
CONCAP, INC.
(A Development Stage Company)
BALANCE SHEETS
MAY 31, 1997 AND 1996
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Property and equipment,
net of accumulated depreciation $ 0 $ 0
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
Current Liabilities:
Accounts payable $ 6,439 $ 6,439
Management fees due to related
party 194,716 158,716
Loan from stockholder 1,200 1,200
Total current liabilities 202,355 166,355
Stockholders' Deficiency:
Common stock,$.0001 par value;
authorized 5,000,000,000 shares;
issued and outstanding
50,815,488 shares 5,082 5,082
Additional paid-in capital 699,665 699,665
Deficit accumulated during
development stage (907,102) (871,102)
TOTAL STOCKHOLDERS' DEFICIENCY (202,355) (166,355)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 0 $ 0
</TABLE>
See notes to financial statements.
END OF PAGE 2 OF FINANCIAL STATEMENTS
<TABLE>
CONCAP, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<CAPTION>
06/17/88
Year Ended Year Ended Year Ended (Inception)to
05/31/97 05/31/96 05/31/95 05/31/97
<S> <C> <C> <C> <C>
Operating Revenues $ 0 $ 0 $ 0 $ 40,500
Amortization and Depreciation 0 94 200 1,993
Operating Expenses 36,000 36,000 36,000 583,874
TOTAL EXPENSES 36,000 36,094 36,200 585,867
Operating Loss (36,000) (36,094) (36,200) (545,367)
Other Income (Loss):
Interest, net 0 0 0 18,729
Other 0 0 0 64,504
Loss on disposition 0 0 0 (968)
Loss from permanent decline in
value of investment 0 0 0 (50,000)
Bad debts 0 0 0 (394,000)
TOTAL OTHER INCOME/LOSS 0 0 0 (361,735)
Net Loss $ (36,000) $ (36,094) $ (36,200) $(907,102)
Loss Per Share $ 0 $ 0 $ 0
Average Shares Outstanding 50,815,488 50,815,488 50,815,488
</TABLE>
See notes to financial statements
END OF PAGE 3 OF FINANCIAL STATEMENTS
<TABLE>
CONCAP, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<CAPTION>
Inception
Year Ended Year Ended Year Ended at 06/17/88
05/31/97 05/31/96 05/31/95 05/31/97
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net Loss $ (36,000) $ (36,094) $ (36,200) $(907,102)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Depreciation and
amortization 0 94 200 1,993
Loss on disposition 0 0 0 968
Permanent decline in
value of investment 0 0 0 50,000
Increase in management
fees due to related party 36,000 36,000 36,000 194,716
Increase in accounts payable 0 0 0 6,439
Net cash used by operating
activities 0 0 0 (652,986)
Cash Flows From Investing
Activities:
Organization costs 0 0 0 (1,000)
Equipment sales 0 0 0 32
Equipment purchase 0 0 0 (993)
Stock purchase 0 0 0 (50,000)
Net cash used by investing
activities 0 0 0 (51,961)
Cash Flows From Financing
Activities:
Issuance of stock 0 0 0 757,500
Offering costs 0 0 0 (127,147)
Issuance of stock - warrants 0 0 0 73,394
Loan from stockholder 0 0 0 1,200
Net cash provided by financing
activities 0 0 0 704,947
Increase in Cash 0 0 0 0
Cash, Beginning 0 0 0 0
Cash, Ending $ 0 $ 0 $ 0 $ 0
</TABLE>
Non-cash disclosures:
During the year ended May 31, 1989, 400,000 shares of stock were issued
in exchange for services.
See notes to financial statements.
END OF PAGE 4 OF THE FINANCIAL STATEMENTS
<TABLE>
CONCAP, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
JUNE 17, 1988 (INCEPTION) THROUGH MAY 31, 1997
<CAPTION>
Deficit
Accumulated
COMMON STOCK Additional During
Number of Paid-In Development
Shares Par Value Capital Stage Total
<S> <C> <C> <C> <C> <C>
Inception (June 17, 1988) 0 $ 0 $ 0 $ 0 $ 0
Shares issued for services 400,000 40 960 0 1,000
Shares issued for cash:
Founders 39,600,000 3,960 3,540 0 7,500
Public offering 10,000,000 1,000 749,000 0 750,000
Offering costs 0 0 (127,147) 0 (127,147)
Exercise of warrants 491,160 49 44,155 0 44,204
Net loss 0 0 0 (450,981) (450,981)
Balance at May 31, 1989 50,491,160 5,049 670,508 (450,981) 224,576
Exercise of warrants 324,328 33 29,157 0 29,190
Net loss 0 0 0 (58,143) (58,143)
Balance at May 31, 1990 50,815,488 5,082 699,665 (509,124) 195,623
Net loss 0 0 0 (71,488) (71,488)
Balance at May 31, 1991 50,815,488 5,082 699,665 (580,612) 124,135
Net loss 0 0 0 (77,113) (77,113)
Balance at May 31, 1992 50,815,488 5,082 699,665 (657,725) 47,022
Net loss 0 0 0 (104,285) (104,285)
Balance at May 31, 1993 50,815,488 5,082 699,665 (762,010) (57,263)
Net loss 0 0 0 (36,798) (36,798)
Balance at May 31, 1994 50,815,488 5,082 699,665 (798,808) (94,061)
Net loss 0 0 0 (36,200) (36,200)
Balance at May 31, 1995 50,815,488 5,082 699,665 (835,008) (130,261)
Net loss 0 0 0 (36,094) (36,094)
Balance at May 31, 1996 50,815,488 5,082 699,665 (871,102) (166,355)
Net loss 0 0 0 (36,000) (36,000)
Balance at May 31, 1997 50,815,488 $ 5,082 $ 699,665 $(907,102) $(202,355)
</TABLE>
See notes to financial statements.
END OF PAGE 5 OF FINANCIAL STATEMENTS.
<PAGE>
BEGINNING OF NOTES ATTACHED TO FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Enterprise
Concap, Inc. (the "Company"), was incorporated under the laws
of the State of Texas on June 17, 1988. The Company was
formerly known as Continental Capital Resources, Inc. The
Company was organized primarily for the purpose of raising
capital to take advantage of potential business
opportunities. Accordingly, the Company is considered to be
in the development stage as of May 31, 1997 and the
accompanying financial statements represent those of a
development stage enterprise.
Basis of Presentation
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles
which contemplate the continuance of the Company as a going
concern. The Company's continued existence is dependent on
management's ability to negotiate a merger to raise
additional capital. Management is currently seeking an
appropriate merger, but has not identified a specific
candidate. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The
financial statements do not include any adjustments that may
be necessary if the Company is unable to continue as a going
concern.
Organization Costs
Organization costs have been capitalized and were amortized
on a straight-line basis over a five year period commencing
with the date of organization of the Corporation. The
organization costs are fully amortized as of May 31, 1996.
Property and Equipment
Property and equipment are recorded at cost and are being
depreciated using the straight-line method over the
estimated useful lives of the assets. The property and
equipment are fully depreciated as of May 31, 1996.
Loss per Share
Per share information is computed based on the weighted
average number of common shares outstanding during the
periods presented.
Page 6.<PAGE>
END OF PAGE 6 OF FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2.RELATED PARTY TRANSACTIONS
The Company has a verbal agreement with a business
consulting company controlled by the Company's major
stockholder, which provides for certain consulting fees
related to managing the Company's operations. The fee
for each of the years ended May 31, 1997, 1996 and 1995 was
$36,000. As of May 31, 1997 and 1996, $194,716 and
$158,716, respectively, of these management fees were
accrued and unpaid.
NOTE 3.PROPERTY AND EQUIPMENT
1997 1996
Equipment $993 $993
Less accumulated depreciation 993 993
TOTAL $ 0 $ 0
NOTE 4.INCOME TAXES
The Company has loss carryforwards of approximately $870,000 that
may be offset against future taxable income. These carryforwards
expire in varying amounts and at varying dates from May 31, 2004
to May 31, 2011.
The deferred tax asset resulting from such loss carryforwards has
been fully offset by a valuation allowance of approximately
$295,000 in accordance with the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes.
Page 7.
END OF FINANCIAL STATEMENTS
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides information concerning the
executive officers and directors of the Company each of whom has
occupied such positions since June, 1988. All directors hold
office until the next annual meeting of shareholders or until
their successors have been elected and qualified. All officers
hold office at the discretion of the Board of Directors.
Name Age Title
Carl H. Canter 57 President and Director
Carl H. Canter
Carl H. Canter is and has been the President and a Director
of the Company since its inception. He also served as the
President and a Director of TransAmerica Enterprises, Inc., a
"blind pool" corporation from its inception in April, 1988 until
its merger with Sea Venture Cruises, Inc., a luxury cruise line
company in February of 1989, at which time he resigned as
President and subsequently resigned as a Director. Mr. Canter
also served as President and a Director of Benefit Performances
of America, Inc., a publicly held company involved in charity
fund raising until it acquired The Triangle Group, Inc., a
Delaware corporation involved in computer software development
and service in September of 1988, at which time the Company
changed its' name to, and assumed the operations of, The Triangle
Group, Inc. and Mr. Canter resigned as President and subsequently
resigned as a Director. Additionally, Mr Canter has served as
the President and a Director of C Square Ventures, Inc. and
American Business Mergers, Inc., both "Blind Pool" companies,
formed in November of 1988 and January of 1989, respectively; the
stock of which was registered with the Securities and Exchange
Commission and sold to the general public. C Square Ventures,
Inc. has not made an acquisition or merger to date. American
Business Mergers, Inc. merged with Baker Productions, Inc., a
company involved in the development and marketing of interactive
video products and Mr. Canter resigned as President in August of
1989. Since October of 1990, Mr. Canter has served a Chief
Executive Officer and Director of Photees, Inc., a company co-
22
<PAGE>
founded by Mr. Canter which is involved in the production,
marketing and sales of textile transfer products and services.
Photees, Inc. merged with Traiana, Inc. an Italian import and
export company with real estate holding in Sienna, Italy, with
ownership in an Italian furniture manufacturing plant among other
diversified holdings in September of 1993. For the past seven
years, Mr. Canter has also served a President of The Canter
Corporation which provides consulting services to businesses. In
1985, Mr. Canter founded Auto Lease of America, Inc., which was
subsequently sold to Mr. William Grey in 1990. Since 1963, Mr.
Canter has owned various companies which have been involved in
real estate investments and development, nurseries, health food
restaurants chain and a product development company which
developed and marketed an escape device for high rise buildings.
Mr. Canter is a 1960 graduate of Boston University with a
bachelor of science degree in Engineering.
23
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
No officer or director has received compensation in excess
of $60,000 for the fiscal year ended May 31, 1997, nor is the
Company obligated to pay any officer or director compensation in
excess of $60,000 per year. No member of the Board of Directors
has received or is entitled to receive compensation for
attendance at Board of Directors meetings nor has any officer
received any compensation in such capacity since inception.
During fiscal 1997, the Company accrued $36,000 in
consulting fees to The Canter Corporation, a business consulting
company controlled by Carl H. Canter, President of the Company,
combined with the accrued fees for 1996 payable to The Canter
Corporation in the amount of $36,000, and the accrued fees for
1995 and 1994 in the amount of $36,000 for each year due to the
Canter Corporation. Accrued fees totalling $21,250 for the
fiscal year ended 1991 have been relinquished and subsequently
dropped from the Company's financials. There are no assurances
these fees will be paid.
Upon consummation of a merger or acquisition, the Company
will, in all likelihood, enter into employment contracts with key
employees of the acquired company. Additionally, based on prior
companies controlled by Carl H. Canter, it is likely that, in
connection with any merger or acquisition, the Company will
reduce the holdings of Carl H. Canter by means of a stock
repurchase at a price ranging from $100,000 to $200,000 and may
enter into a consulting agreement with Mr. Canter providing for
payments ranging from $3,000 to $4,000 per month. However, until
a merger or acquisition is ultimately consummated, it cannot be
determined with certainty whether any of the above compensation
arrangements will, in fact, be made or the terms of such
agreements.
24
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding
the number and percentage of Common Stock (being the Company's
only voting securities) beneficially owned by each officer and
director, each person (including and "group " as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934)
known by the Company to own five percent (5%) or more of the
Common Stock of the Company and all officers and directors as a
group, as of May 31, 1996:
Amount and Nature of Percent of
Beneficial Ownership (1) Class (2)
Carl H. Canter 39,100,000 76.95%
5111-C North Ocean Blvd
Ocean Ridge, Fl 33435
All Officers and Directors 39,100,000 76.95%
(1) The Company has been advised that all individuals listed
have the sole power to vote and dispose of the number of shares
set forth opposite their respective names.
(2) Does not give effect to an aggregate of up to 31,000,000
shares of Common Stock previously reserved, but now expired for
issuance upon exercise of the Warrants and the Underwriter's
Warrants.
In the event of a merger or acquisition, it is likely that
management of the merged or acquired company will assume control
of the Company both in terms of shareholdings and management
positions.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Acts
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CONCAP, INC.
Date: By:
CARL H. CANTER, President
26
