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, 1998
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 No.)
Identification
Incorporation or Organization)
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, 1998 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, 1998 was
approximately $100,000.
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
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
2
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; financialinformation; available
projections with related assumptions uponwhich 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
3
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
4
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
5
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
6
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
7
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
8
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.
9
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.
10
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, 1998, 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,
1996 1997 1998
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues $ 0 $ 0 $ 0
Operating expenses ( 36,094) ( 36,000) ( 36,000)
Operating income (loss) ( 36,094) ( 36,000) ( 36,000)
Net Income (loss) ( 36,094) ( 36,000) ( 36,000)
Earnings (loss) per share $ - $ - $ -
BALANCE SHEET DATA:
Cash $ 0 $ 0 $ 0
Total assets $ 0 $ 0 $ 0
Total liabilities 166,355 202,355 238,355
Stockholders equity (166,355) (202,355) (238,355)
</TABLE>
11
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, 1996, 1997 and 1998, the
Company had reported no operating revenues. The Company
incurred operating expenses of $36,094 for the year ended
May 31, 1996, and $36,000 for the year ended May 31, 1997,
and $36,000 for the year ended May 31, 1998; 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 $ 36,094 for the year ended May 31, 1996
as compared to a loss of $36,000 for the year ended May 31,
1997, and a loss of $36,000 for the year ended May 31, 1998.
For the years ended May 31, 1996, May 31, 1997, and May 31,
1998 the Company reported no interest or administrative
income. For fiscal 1997 and 1998 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
12
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.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
14
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, 1998, and
1997, and the related statements of operations,
stockholders' deficiency and cash flows for the years ended
May 31, 1998, 1997 and 1996, and for the period June 17,
1988 (inception) to May 31, 1998. 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, 1998, and 1997, and the results of its operations
and its cash flows for the years ended May 31, 1998, 1997
and 1996, and for the period from June 17, 1988 (inception)
to May 31, 1998, 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
May 31, 1998
END OF PAGE 1 OF FINANCIAL STATEMENTS
<TABLE>
CONCAP, INC.
(A Development Stage Company)
BALANCE SHEETS
MAY 31, 1998 AND 1997
<CAPTION>
ASSETS 1998 1997
<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 230,716 194,716
Loan from stockholder 1,200 1,200
Total current liabilities 238,355 202,355
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 (943,102) (907,102)
TOTAL STOCKHOLDERS' DEFICIENCY (238,355) (202,355)
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
05/31/98 05/31/97 05/31/96 05/31/98
<S> <C> <C> <C> <C>
Operating Revenues $ 0 $ 0 $ 0 $ 40,500
Amortization and
Depreciation 0 0 94 1,993
Operating Expenses 36,000 36,000 36,000 619,874
TOTAL EXPENSES 36,000 36,000 36,094 621,867
Operating Loss (36,000) (36,000) (36,094) (581,367)
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) $ (36,000) $ (36,094) $(943,102)
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
05/31/98 05/31/97 05/31/96 05/31/98
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net Loss $ (36,000) $ (36,000) $ (36,094) $(943,102)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation and
amortization 0 0 94 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 36,000 230,716
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, 1998
<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 at
(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)
Net loss (36,000) (36,000)
Balance at
May 31, 1998 50,815,488 $ 5,082 $699,665 $(943,102) $(238,355)
</TABLE>
See notes to financial statements.
END OF PAGE 5 OF FINANCIAL STATEMENTS.
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, 1998 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
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.
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, 1998, 1997 and 1996 was
$36,000. As of May 31, 1998 and 1997, $203,716 and
$194,716, 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 $943,000 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,
2012.
The deferred tax asset resulting from such loss
carryforwards has been fully offset by a valuation allowance
of approximately $348,000 in accordance with the provisions
of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes.
Page 7.
END OF FINANCIAL STATEMENTS
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 60 President and Director
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
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
ITEM 11. EXECUTIVE COMPENSATION
No officer or director has received compensation in
excess of $60,000 for the fiscal year ended May 31, 1998,
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 1998, 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 1997
payable to The Canter Corporation in the amount of $36,000,
and the accrued fees for 1996 and 1995 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
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
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
