<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-17432
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ORANGE COUNTY VENTURES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-3915600
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(State or other jurisdiction of (I.R.S. Employer Identifi-
incorporation or organization) cation Number)
17922 Sky Park Circle Drive, Suite A, Irvine, California 92714
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(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 660-7972
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X YES NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Estimated aggregate market value of the voting stock held by nonaffiliates
of the registrant: 0, or negligible (See Item 3, Legal Proceedings).
At February 28, 1997, the Registrant had 9,800,250 shares of its common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Part IV incorporates by reference
certain exhibits filed with the Registrant's Registration Statement on Form S-18
(No. 33-25085-LA).
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
Orange County Ventures, Inc. (the "Company") is a Delaware corporation
formed on January 18, 1988, as successor to Auto Chek Smog Laboratories, Inc., a
California corporation, which was incorporated on May 2, 1984, and which changed
its name to Auto Convenience Centers of America, Inc. on March 13, 1986. In May
1995, the Company changed its name from Auto Chek Centers, Inc. The securities
of the Company are listed on the Vancouver Stock Exchange. On July 12, 1995, a
Cease Trade Order was issued by British Columbia Securities Commission for
failure to file the required reports.
On August 16, 1994, the Company filed for protection under Chapter 11 of
the United States Bankruptcy Act. On April 17, 1995, the Plan of Reorganization
("Plan") was confirmed and the order was entered on May 5, 1995. Pursuant to
the Plan, all of the outstanding stock of the Company's operating subsidiary,
ACC Motor Club, Inc., was cancelled and in exchange for a $200,000 cash
contribution to the Company, Richard G. Fuchs, President and Director ("Plan
Proponent") was issued 100% of the newly issued and outstanding common stock of
ACC Motor Club, Inc. After May 5, 1995, the business of ACC Motor Club, Inc.
was operated by the Plan Proponent for his sole benefit. To implement the Plan,
the Company used all of its available funds to satisfy claims of its creditors.
As of May 5, 1995, the Company no longer has any operations.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Until May 5, 1995, the Company competed in one industry segment which was
motor vehicle emissions testing and certification as well as vehicle transfer,
registration and renewal services. As a result of the implementation of the
Plan, the Company no longer has any operations or operating assets.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
After May 5, 1995, the Company had no employees and no operations.
ITEM 2. PROPERTIES
The Company's principal executive offices are located on Sky Park Circle
Drive at the Airport Business Center in Irvine, California. The Company
currently occupies approximately 100 square feet on a month-to-month oral rent
free sublease. The Company does not pay any rent to ACC Motor Club, Inc. which
is the lessee of the premises.
All of the leases and buildings were transferred with the cancellation and
reissuance of the stock of ACC Motor Club, Inc. to the Plan Proponent pursuant
to the Plan.
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ITEM 3. LEGAL PROCEEDINGS
On August 16, 1994, the Company filed a petition for reorganization under
Chapter 11 of the Federal Bankruptcy Act. The Company was assigned two case
numbers (SA94-18348LR and SA94-18349LR). On April 17, 1995, the Company's Plan
was confirmed and the order was entered on May 5, 1995. Under the Plan, all the
Company's assets were transferred to its subsidiary, and all the common stock of
the subsidiary were cancelled and reissued to Richard G. Fuchs, President and
Director in exchange for $200,000 which was disbursed to the Company's
creditors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION.
The Company's common stock, par value $.01 per share (the "Common Stock"),
was initially listed on the Vancouver Stock Exchange ("VSE") on December 6,
1988. The Common Stock was registered on a Form S-18 Registration Statement
which became effective on December 14, 1988 (File No. 33-25085-LA). Prior to
December 6, 1988, there had been no public market for the Common Stock. The
Company's Common Stock was thinly traded in the over-the-counter market and
reported in the "pink sheets" in the United States, however, there is no
established public trading market in the United States and reliable high and low
bid quotations for the United States market are not available. The nominal
volume of the trading and price do not reflect any significant market.
Until March 1996 the Company's Common Stock was traded on the VSE.
However, the Company failed to file all the necessary VSE reports in a timely
manner. On July 12, 1995 a Cease Trade Order was issued by the British Columbia
Securities Commission. The last trade for the Company's Common Stock was at
$.0018 in May 1996. The Company believes there is no current market for the
stock.
(b) HOLDERS.
As of February 28, 1997, there were approximately 175 record holders of the
Common Stock. The Company believes that a large number of its beneficial owners
are holding their Common Stock in "street name."
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(c) DIVIDENDS.
The Company has never declared or paid any cash dividends on its Common
Stock and does not intend to declare or pay any cash dividend in the foreseeable
future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information was abstracted from the
financial statements and notes thereto included elsewhere in this Form 10-K and
from previously published financial information of the Company not appearing
herein. Comparisons to previous years should not be made since as of May 6,
1995 the Company no longer has any revenue producing operations.
YEAR ENDED DECEMBER 31
----------------------
BALANCE SHEET DATA 1996 1995 1994
---- ---- ----
Working Capital $ 4,667 $ (1,409) $ 85,185
Total Assets 11,965 363 835,684
Long Term Obligations 0 0 0
Stockholders Equity (deficit) (4,667) (1,409) (278,512)
OPERATING STATEMENT DATA
Net Revenues 25,000 751,415 2,004,326
Operating Costs 0 545,389 1,619,898
General and Administrative 28,258 137,140 324,787
Other Income (expense) 0 0 303,979
Income (loss) before Reorganization Items (3,258) 68,886 (244,338)
Reorganization Items:
Professional Fees 0 64,595 53,720
Loss on Transfer of Assets 0 0 93,731
Loss on Sale of Assets 0 524,654 0
Income from Debt Forgiveness 0 (787,446) 0
Total Reorganization Items 0 (198,217) 147,451
Net Income (loss) (3,258) 267,103 (391,789)
Net Income (loss) per share .00 .04 (.07)
Weighted average shares outstanding 9,800,250 6,466,917 5,800,250
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Until May 5, 1995, the Company had both revenues and expenses from its
operating subsidiary ACC Motor club, Inc. These revenues and expenses are
reflected in column (2) figures. All cash flow for the period of January 1, 995
through May 5, 1995 were used for the benefit of the creditor's under the
Chapter 11 proceedings.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the years ended December 31, 1996 compared to the year ended December 31,
1995:
LIQUIDITY AND CAPITAL RESOURCES
As a result of the conclusion of the Chapter 11 Plan, all of the operating
assets of the Company were transferred to the Plan Proponent and all of the
Company's cash was used to satisfy claims of creditors and costs of
administration. The Company's only sources of liquidity were a non-refundable
advance of $25,000 paid by a proposed merger candidate and $10,000 paid by ACC
Motor Club, Inc. for the purchase of capital stock on October 30, 1995. The
capital stock will be redeemed for $10,000 if the merger is consummated. ACC
does not intend to advance any additional funds and there can be no assurances
that any other source of working capital will be available to the Company in the
future.
RESULTS OF OPERATIONS
As of May 6, 1995, the Company no longer had any revenue producing
operations. Since May 6, 1995, the Company has incurred accounting expenses
associated with preparation of financial statements, legal expenses in
connection with proposed reorganizations with operating companies, transfer
agent fees and other general and administrative costs of maintaining the shell
corporation for eventual sale. The expenses incurred in the fiscal year ended
December 31, 1996 for such activities was approximately $28,000.
No meaningful comparison can be made to 1995 in that during the period
August 16, 1994 until May 6, 1995 the Company operated for the benefit of
creditors during the pendency of the Chapter 11 bankruptcy proceeding.
Activities for 1994 are similarly non-comparable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ORANGE COUNTY VENTURES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Independent Auditors Report....................................................7
Consolidated Balance Sheets as of December 31, 1996 and 1995...................9
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994............................................10
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994......................................11
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994............................................12
Notes to Consolidated Financial Statements....................................14
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[Letterhead]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Orange County
Ventures, Inc. (Formerly, Auto Chek Centers, Inc.):
We have audited the accompanying consolidated balance sheets of Orange
County Ventures, Inc. (formerly, Auto Chek Centers, Inc.) and its subsidiary
(the Company) as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of Orange County Ventures, Inc. (formerly Auto
Chek Centers, Inc.) as of December 31, 1994, were audited by other auditors
whose report, dated July 18, 1995, expressed an unqualified opinion on those
consolidated statements.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the 1996 and 1995 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Orange
County Ventures, Inc. (formerly, Auto Chek Centers, Inc.) and its subsidiary at
December 31, 1996 and 1995, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
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<PAGE>
As discussed in Note 1 to the consolidated financial statements , the Company's
Plan of Reorganization was confirmed by the U.S. Bankruptcy Court on
May 5, 1995. As part of the Plan of Reorganization, the Company sold the
outstanding common stock of its wholly owned subsidiary which conducted
substantially all of the Company's operations. Accordingly, as of May 5, 1995,
the Company has no operations. As discussed in Note 7 to the consolidated
financial statements, on December 5, 1996, the Company signed a letter of
intent to merge with another company subject to the terms of the agreement and
approval of the stockholders of both companies.
/s/ Donald R. Sterner
February 14, 1997
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
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Current assets:
Cash $11,965 $363
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Total $11,965 $363
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1996 1995
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Current liabilities:
Accounts payable $15,432 $1,772
Accrued liabilities 1,200
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Total current liabilities 16,632 1,772
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Commitments and contingencies (Note 4)
Stockholders' equity (deficit) (Notes 5 and 7):
Common stock, $.01 par value;
authorized, 10,000,000 shares; issued
and outstanding, 9,800,250 shares at
December 31, 1996 and 1995 68,002 68,002
Paid - in capital 2,362,508 2,362,508
Accumulated deficit (2,435,177) (2,431,919)
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Total stockholders' equity (deficit) (4,667) (1,409)
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Total $11,965 $363
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See accompanying notes to consolidated financial statements
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<PAGE>
ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
----------- ------------ -----------
Discontinued operations as of
May 5, 1995 (Note 1):
Net revenues (Note 2) $25,000 $751,415 $2,004,326
----------- ----------- -----------
Costs and expenses:
Operating costs (Note 3) 545,389 1,619,898
General and administrative 28,258 137,140 324,787
----------- ----------- -----------
Total costs and expenses 28,258 682,529 1,944,685
----------- ----------- -----------
Other (income) expense:
Legal judgment (Note 4) 273,255
Interest expense, net 30,724
----------- ----------- -----------
Total other (income) expense 303,979
----------- ----------- -----------
Income (loss) before reorganization
items (3,258) 68,886 (244,338)
----------- ----------- -----------
Reorganization items (Note 1):
Professional fees 64,595 53,720
Loss on transfer of assets 93,731
Loss on sale of assets 524,654
Income from debt forgiveness (787,466)
----------- ----------- -----------
Total reorganization items (net) 0 (198,217) 147,451
----------- ----------- -----------
Net income (loss) (Note 6) ($3,258) $267,103 ($391,789)
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per share (Note 2) $0.00 $0.04 ($0.07)
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares
outstanding (Note 2) 9,800,250 6,466,917 5,800,250
----------- ----------- -----------
----------- ----------- -----------
See accompanying notes to consolidated financial statements
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<PAGE>
ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Number of
Common shares Common Paid - in Accumulated
Outstanding Stock Capital Deficit Total
------------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 5,800,250 $58,002 $2,362,508 ($2,307,233) $113,277
Net loss (391,789) (391,789)
------------- ---------- ----------- ------------ -----------
Balance at December 31, 1994 5,800,250 58,002 2,362,508 (2,699,022) (278,512)
Common stock issuance (Note 5) 4,000,000 10,000 10,000
Net income 267,103 267,103
-------------- --------- ----------- ------------ -----------
Balance at December 31, 1995 9,800,250 68,002 2,362,508 (2,431,919) (1,409)
Net loss (3,258) (3,258)
-------------- --------- ----------- ------------ -----------
Balance at December 31, 1996 9,800,250 $68,002 $2,362,508 ($2,435,177) ($4,667)
-------------- --------- ----------- ------------ -----------
-------------- --------- ----------- ------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) from discontinued
operations ($3,258) $267,103 ($391,789)
Adjustments to reconcile net income
(loss) to net cash provided by
discontinued operations:
Depreciation and amortization 30,661 173,479
Loss on disposal of property and
equipment 674,654 93,731
Income from debt forgiveness (1,014,312)
Changes in operating assets and
liabilities:
Prepaid expenses and other assets (9,742) (17,128)
Smog certificate inventory 149 (1,331)
Accounts payable 13,660 (4,628) 32,796
Accrued compensation (30,164) 20,226
Accrued liabilities 1,200 (39,216) 291,687
----------- ----------- -----------
Net cash provided by discontinued
operations 11,602 (125,495) 201,671
----------- ----------- -----------
Cash flows from investing activities:
Deposits and other assets 4,118
----------- ----------- -----------
Net cash provided by investing activities 4,118
----------- ----------- -----------
Continued
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<PAGE>
ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common
stock 10,000
Repayment of notes payable to
stockholders (15,690)
Repayment of notes payable (24,104) (14,307)
Principal payments on line of credit
from stockholder (70,000)
----------- ----------- -----------
Net cash used in financing activities (14,104) (99,997)
----------- ----------- -----------
Net increase (decrease) in cash 11,602 (139,599) 105,792
Cash at beginning of year 363 139,962 34,170
----------- ----------- -----------
Cash at end of year $11,965 $363 $139,962
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosure of cash flow
information:
Interest paid $34,904
----------- ----------- -----------
----------- ----------- -----------
Income taxes paid $800 $1,600 $1,600
----------- ----------- -----------
----------- ----------- -----------
Supplemental schedule of noncash
investing and financing activities:
During 1994, the Company transferred to the lessor of the land underlying
one of the Company's sites, the building and leasehold improvements in such
site with a carrying value of $93,731 in exchange for the modification of the
leases and related terms.
See accompanying notes to consolidated financial statements
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 1 - GENERAL AND BASIS OF PRESENTATION
GENERAL
Orange County Ventures, Inc. (formerly, Auto Chek Centers, Inc.), a Delaware
corporation, and its wholly owned subsidiary ( collectively referred to as the
"Company") provided motor vehicle emission testing and computerized motor
vehicle registration services through six company-owned service centers in
Southern Califirnia. Operations were discontinued on May 5, 1995.
BANKRUPTCY FILING
On August 16, 1994, the Company filed a voluntary petition of reorganization
with the U.S. Bankruptcy Court in the Central District of California (the
Bankruptcy Court) for protection under Chapter 11 of Title 11 of the U.S.
Bankruptcy Code (the Bankruptcy Code). The Company was subsequently authorized
to conduct its business operations as a debtor-in-possession subject to the
jurisdiction of the Bankruptcy Court.
Under Chapter 11 of the Bankruptcy Code, certain claims against the Company
in existence prior to the filing of the petition for relief under the federal
bankruptcy laws are stayed while the Company continues operations as a debtor-
in-possession. Claims secured against the Company's assets (secured claims)
also are stayed, although the holders of such claims have the right to move
the Bankruptcy Court for relief from the stay.
Continued
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 1 - GENERAL AND BASIS OF PRESENTATION - CONTINUED
PLAN OF REORGANIZATION AND DISCONTINUED OPERATIONS
On May 5, 1995, the Company's Plan of Reorganization (the Plan) was confirmed
by the Bankruptcy Court. The Plan included, among other things, the following
provisions:
(a) All of the outstanding common stock of the Company's wholly -
owned subsidiary, ACC Motor Club, Inc., all other assets of
the Company and all of the principal operations of the Company
were sold to two officers and one employee of the Company
in exchange for $200,000 in cash. The purchasers also
assumed all liabilities of the Company as of that date.
(b) All operating leases for sites and equipment were assumed
by the purchasers.
(c) The Company changed its name to Orange County Ventures, Inc.
(d) The proceeds from the sale of the subsidiary were used to
satisfy the Company's obligations for pre-petition and post-
petition liabilities.
Accordingly, subsequent to May 5, 1995, the Company no longer has any
operations. The consolidated financial statements for all years presented
reflect the Company's former business as discontinued operations. The
Company intends to seek a merger with another company.
Continued
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 1 - GENERAL AND BASIS OF PRESENTATION - CONTINUED
BASIS OF PRESENTATION
The consolidated financial statements are stated in conformity with accounting
principles generally accepted in the United States of America. There would
be no material differences affecting the consolidated financial statements had
they been presented in conformity with accounting principals generally accepted
in Canada. The rate of exchange of one U. S. dollar for an equivalent amount
of Canadian currency at December 31, 1994 was $1.40.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Orange County
Ventures, Inc. (formerly, Auto Chek Centers, Inc.) and its wholly owned
subsidiary. All significant intercompany accounts have been eliminated in
consolidation.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over the
estimated useful lives of the related assets, generally five to ten years.
Leasehold improvements are amortized over the shorter of their useful lives
or the life of the lease. Depreciation and amortization are computed using the
straight-line method.
REVENUE RECOGNITION
Testing and registration service revenue is recognized when such service is
rendered. Substantially all revenues are derived from testing services.
Continued
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for
Income Taxes. This statement requires recognition of deferred tax liabilities
and assets for the future consequences of events that have been recognized
in the Company's consolidated financial statements or tax returns. Measurement
of deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting basis and the tax
basis of the Company's assets and liabilities result in deferred tax assets,
SFAS No. 109 requires evaluation of the probability of realization of the future
benefits indicated by such assets. A valuation allowance related to a deferred
tax asset is recorded when it is more likely than not that some portion or all
of the deferred tax asset will not be realized.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed based on the weighted average
number of common shares outstanding. Outstanding warrants and options are
antidilutive for all years presented and, accordingly, are not included in the
net loss per share computations.
NOTE 3 - RELATED PARTY TRANSACTIONS
LEASES FROM STOCKHOLDERS AND AFFILIATES
The Company leases from stockholders or entities affiliated with stockholders
certain sites on which the Company has constructed and operates smog
testing centers (see Notes 1 and 4).
Continued
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company leases its corporate offices, smog testing centers and certain
equipment under noncancellable operating leases, which expire on various
dates through 2009. Certain of the smog testing centers are constructed and
operated on sites which are leased from stockholders or entities affiliated
with the stockholders. The monthly lease obligation for the Company's sites
is equal to the greater of the fixed minimum lease payments or payments based
upon a percentage of monthly gross receipts. On May 5, 1995, the purchaser of
ACC Motor Club assumed such leases (see Note 1).
Total rent expense charged to operations for the years ended December 31,
1995, and 1994 was $121,755, and $380,552, respectively, of which $69,400,
and $219,173, respectively, was paid to related parties. Contingent rentals
were insignificant during the periods presented.
LITIGATION
The Company was a defendant in a lawsuit whereby the plaintiff was seeking
recovery of past and future rents in excess of $400,000 relating to the lease
premises which the Company abandoned during 1991. During 1994, the court
awarded the plaintiff damages in the amount of $273,254, which were included
in liabilities subject to compromise in the bankruptcy reorganization.
NOTE 5 - COMMON STOCK ISSUANCE, WARRANTS AND STOCK OPTIONS
COMMON STOCK TRANSACTION
On October 30, 1995, the Company issued 4,000,000 shares of common stock
of the Company to the purchaser of ACC Motor Club, Inc. (the former wholly-
owned subsidiary of the Company) at an issuance price of $.0025 pre share
for a total consideration of $10,000. The stock issuance was conditioned upon
the agreement that the shares would be redeemed by the Company at the
issuance price upon the merger of Orange County Ventures, Inc. with
another company.
Continued
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 5 - COMMON STOCK ISSUANCE, WARRANTS AND STOCK
OPTIONS - CONTINUED
WARRANTS AND STOCK OPTIONS
Effective January 1, 1994, options were granted to an officer and to two
employees of the Company to purchase a total of 125,000 shares of the
Company's common stock at $.15 Canadian per share (equivalent to $.11 U.S.
per share at December 31, 1994), exercisable for a period of ten years. At
the date of issuance, the exercise price of the options approximated the fair
value of the underlying shares. None of the options had been exercised as
of December 31, 1995. All previously issued options and warrants expired
during 1993.
NOTE 6 - INCOME TAXES
There was no income tax provisions, other than state minimum taxes of $800 and
$1,600 for the years ended December 31, 1996, 1995, and 1994 as a result of the
losses from operations. Income tax expense differed from the expected income
tax benefit by applying the statutory federal tax rate primarily as a result of
the change in the beginning-of-the-year balance of the valuation allowance
for deferred tax assets allocated to income tax benefit.
The tax effects of temporary differences that give rise to significant portions
of the deferred taxes at December 31, 1996 is presented below:
Deferred tax assets:
Net operating loss carryforward $822,000
Less valuation allowance (822,000)
------------
Net deferred tax $0
------------
------------
Continued
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ORANGE COUNTY VENTURES, INC.
(Formerly, Auto Chek Centers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 6 - INCOME TAXES - CONTINUED
At December 31, 1996, the Company had net operating loss carryforwards for
federal and state income tax purposes of $2,300,000 and $817,000, respectively,
which expire through the year 2009.
Due to the change in ownership provision of the Tax Reform Act of 1986, net
operating loss carryforwards for federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net
operating loss carryforwards may be limited as to use in future years.
NOTE 7 - MERGER AND REORGANIZATION
On December 5, 1996, the Company signed a letter of intent to merge with
another company pursuant to a tax free exchange through a plan of
reorganization in accordance with Section 351 of the Internal Revenue Code.
Under the Plan of Reorganization, the 4,000,000 shares of common stock issued
by the Company during 1995 would be repurchased by the Company at the
issuance price and canceled, and the remaining 5,800,250 shares outstanding
would be reverse split (1) new share for (5.8) old shares resulting in
1,000,000 shares issued and outstanding. The Company would then acquire all of
the issued and outstanding shares of the other company in exchange for 9,000,000
shares of the common stock of the Company. The effect of this merger is that
the present stockholders of the Company would have a 10% ownership interest
in the merged company. The Plan of Reorganization and Merger is subject to
the approval of the stockholders of both companies.
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) and (b) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The directors and executive officers of the Company are as follows:
Positions Director Term
Name Age and Offices Expires (1)
- - ---- --- ----------- -------------
Richard G. Fuchs 71 President, CEO, CFO 1998
and Chairman of the
Board
John E. Wilson 50 Vice President, 1997
Secretary and Director
James Paul 58 Director 1996
(1) Officers are elected to one year terms. Directors serve for three year
terms. Due to the staggered terms of directors, the initial terms of any
new directors, in the event the Board is expanded, may be less than three
years. Since the stockholders and the Company's business currently are
centered principally in the State of California, Section 2115 of the
California Corporations Code (the "Code") requires the Company to comply
with the provisions of Section 301 of the Code prescribing annual elections
for directors.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.
Other than those officers set forth above, no other persons are expected to
make significant contributions to the business of the Company.
(d) FAMILY RELATIONSHIPS.
Inapplicable.
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<PAGE>
(e) BUSINESS EXPERIENCE.
RICHARD G. FUCHS, PRESIDENT, CEO, CFO, AND CHAIRMAN OF THE BOARD
Mr. Fuchs joined the Company as President and Chief Executive Officer on
November 1, 1987. Until 1987, he served as President and Chief Executive
Officer of The Enterprise Companies located in Wheeling, Illinois, a worldwide
trade and industrial paint manufacturer. His career with The Enterprise
Companies, from 1961 to 1987, included responsibilities as National Sales
Manager, Executive Vice President and Divisional President. In 1987, he did
private management consulting for two manufacturers of consumer products (Adam's
Brush, a Brooklyn, New York, paint and brush roller manufacturer, and Altra
Corporation, a Chicago, Illinois, plastic container manufacturer), positioning
them to successfully sell their respective products to retail chain outlets.
Mr. Fuchs has been a director of the Company since March 1988.
JOHN E. WILSON, VICE PRESIDENT, SECRETARY AND DIRECTOR
Mr. Wilson was a co-founder of the Company in 1983 and acted as President
and director from May 1984 until November 1987, except for the period of August
1986 to October 1986, when Fred Molnar acted as President. Richard G. Fuchs
joined the Company as President in November 1987 and Mr. Wilson became Vice
President. Mr. Wilson became Secretary of the Company in 1988 and a director in
February 1990. From December 1976 to June 1984, he owned and operated a
successful automobile repair company, "Auto Tech," located in Redondo Beach,
California. Auto Tech was sold in 1984. Between 1984 and 1995, Mr. Wilson
devoted full time to the development of the Company.
JAMES PAUL, DIRECTOR
Mr. Paul is a partner in the Los Angeles law firm of Fulwider, Patton,
Lee & Utecht, specializing in litigation of patent trademarks and copyright
matters. He has extensive automotive experience, government contracting,
licensing of technology and negotiation of development agreements between
corporations. Mr. Paul has been with this firm since 1986.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
Inapplicable.
(g) COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
No person was subject to Section 16 of the Exchange Act with respect to the
Company and failed to file a report required by Section 16(a) on a timely basis
during the most recent fiscal year.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
No person received any compensation for services rendered to the Company
during the fiscal year ended December 31, 1996.
COMPENSATION PURSUANT TO PLANS. There were no grants or awards of stocks
options or stock appreciation rights to any named executive officer during the
fiscal year ended December 31, 1996. In addition, during the fiscal year ended
December 31, there were no options or stock appreciation rights exercised by,
nor any long term incentive plan awards made to, any named executive officer.
COMPENSATION OF DIRECTORS. Directors of the Company are not compensated
for any services provided as a director.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS.
Inapplicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) and (b) SECURITY OWNERSHIP.
The following table presents, as of February 28, 1997, the ownership of
common Stock by: (i) each person known by the Company to be the beneficial owner
of more than five percent of the 9,800,250 issued and outstanding shares of
Common Stock; (ii) each director of the Company; and (iii) all directors and
officers of the Company as a group:
Name and Address Amount and Nature of Percentage of
of Beneficial Owner Beneficial Ownership Stock
- - ------------------- -------------------- -------------
Richard G. Fuchs 1,041,916 17.9
3499-3E Bahia Blanca W.
Laguna Hills, California
John E. Wilson 155,155 2.6
613 Island View
Seal Beach, California
Auto Chek Centers, Inc. 4,000,000 40.8
17922 Sky Park Circle, Suite A
Irvine, California 92714
All directors and executive 5,197,071 53.0
officers as a group (3 persons)
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<PAGE>
(c) CHANGE IN CONTROL.
See Item 1(a) - General Development of Business.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 3 - Legal Proceedings, and Item 1 - General Development of
Business.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) LIST OF EXHIBITS FILED AS A PART OF THIS REPORT.
*3.1 Certificate of Incorporation of the Company, filed as Exhibit 3.1
to the Company's Registration Statement on Form S-18 (No.
33-25085-LA), effective December 14, 1988 and incorporated herein
by this reference.
*3.2 Bylaws of the Company, filed as Exhibit 3.2 to the Registration
Statement on Form S-18 (No. 33-25085-LA), effective December 14,
1988, and incorporated herein by this reference.
*10.4 CVR Software License and maintenance Agreement, filed as Exhibit
10.5 to the Company's Registration Statement on Form S-18 (No.
33-25085-LA), effective December 14, 1988, and incorporated herein
by this reference.
*10.6 Ground Lease for West Los Angeles Center dated July 2, 1984 and
Amendment dated April 30, 1986 between the Company and Kramerson
Ltd., a California Limited Partnership, filed as Exhibit 10.7 to
the Company's Registration Statement on Form S-18 (No.
33-25085-LA), effective December 14, 1988, and incorporated herein
by this reference.
*10.7 Ground Lease for Fullerton Center dated January 15, 1986 and
Amendment thereto dated May 12, 1985 between the Company and Snyder
Investment Trust, filed as Exhibit 10.8 to the Company's
Registration Statement on Form S-18 (No. 33-25085-LA), effective
December 14, 1988, and incorporated herein by this reference.
*10.8 Standard Industrial Lease for Stanton Center dated June 20, 1986,
between the Company and Michael K. Daskalakis, M.D., filed as
Exhibit 10.9 to the Company's Registration Statement on Form S-18
(No. 33-25085-LA), effective December 14, 1988, and incorporated
herein by this reference.
-24-
<PAGE>
*10.9 Ground Lease for the Hollywood Center dated January 1, 1988,
between the Company and W.G.K., Inc., a California corporation,
filed as Exhibit 10.10 to the Company's Registration Statement on
Form S-18 (No. 33-25085-LA), effective December 14, 1988, and
incorporated herein by this reference.
*10.10 Ground Lease for the Covina Center dated June 30, 1988, between the
Company and Abrose Wehner, filed as Exhibit 10.11 to the Company's
Registration Statement on Form S-18 (No. 33-25085-LA), effective
December 14, 1988, and incorporated herein by this reference.
*10.11 Ground Lease for the Manhattan Beach Center dated December 7, 1988,
between the Company and L.J. McEntyre and C.M. McEntyre, filed as
Exhibit 10.13 to the Company's Registration Statement on Form S-18
(No. 33-25085-LA), effective December 14, 1988, and incorporated
herein by this reference.
*10.13 Commitment Letter dated December 14, 1989, by and between Lawrence
Goodman and Auto Chek Centers, Inc., and Loan Agreement dated
December 16, 1989, by and between Lawrence Goodman and Auto Chek
Centers, Inc., filed as Exhibit 10.12 to the Company's 1989 Annual
Report on Form 10-K and incorporated herein by this reference.
*10.14 Ground Lease for the Santa Ana Center dated October 31, 1989
between the Company and the Fishman Family Trust, filed as Exhibit
10.13 to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1990, and incorporated herein by this reference
*10.15 Ground Lease for the San Diego Center dated April 4, 1990, between
the Company and Dixieline Lumber Company, a Delaware corporation,
filed as Exhibit 10.14 to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1990, and incorporated herein
by this reference.
*10.16 Ground Lease for the La Jolla Center dated April 25, 1990 between
the Company and VTL, Inc., a Nevada corporation, filed as Exhibit
10.15 to the Company's quarterly Report on Form 10-Q for the period
ended June 30, 1990, and incorporated herein by this reference.
*10.17 Ground Lease for the Torrance Center dated July 9, 1990, between
the Company and Jiffy Lube International of Maryland, Inc., filed
as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1990, and incorporated herein by
this reference.
*10.18 Corporate Offices Sublease Agreement dated February 6, 1991 between
the Company and Morgan & Morgan, Inc., filed as Exhibit 10.18 to
the Company's 1990 Annual report on form 10-K and incorporated
herein by this reference.
-25-
<PAGE>
*10.19 Amendment to Ground Lease for Santa Ana Center dated May 17, 1990,
filed as Exhibit 10.19 to the Company's 1990 Annual Report on Form
10-K and incorporated herein by this reference.
*10.20 Note - Installment dated January 1, 1990 and General Security
Agreement dated December 9, 1987 for $500,000 loan from the Bank of
Montecito, filed as Exhibit 10.20 to the Company's 1990 Annual
report on Form 10-K and incorporated herein by this reference.
*10.22 Note - Installment dated August 20, 1990 and General Security
Agreement dated August 20, 1990 for $102,000 loan from The Bank of
Montecito, filed as Exhibit 10.22 to the Company's 1990 Annual
Report on Form 10-K and incorporated herein by this reference.
*10.23 Amendment to the Commitment Letter dated December 14, 1989 by and
between Lawrence Goodman and Auto Chek Centers, Inc. and Loan
Agreement dated December 16, 1989 by and between Lawrence Goodman
and Auto Chek Centers, Inc., filed as Exhibit 10.23 to the
Company's 1992 Annual Report on Form 10-K and incorporated herein
by this reference.
*10.24 Corporate Offices Lease Agreement dated August 13, 1993 between the
Company and Koll Management Services.
*22.1 Subsidiaries of the Company: ACC Motor Club (formerly Auto Chek
Smog Laboratories I, Inc.), a California corporation, dba ACC, Auto
Chek and Auto Convenience Centers.
*10.25 Rental agreement between WGK Inc. and Auto Chek Centers, Inc. dated
December 1, 1994.
*10.26 Notice of Hearing on Confirmation of Proposed Chapter 11 Plan, etc.
First Amended Plan of Reorganization.
*10.27 Stipulation for an Order Conditioning the Automatic Stay and order
Thereon between VW Credit and Auto Chek Centers, Inc.
*10.28 Amendment to Lease for the Fullerton Center dated November 17,
1995.
*10.29 Amendment to the Ground Lease for the Manhattan Beach Center dated
October 19, 1994.
*10.30 Amendment to the Ground Lease for the Santa Ana Center dated
January 5, 1995.
-26-
<PAGE>
*10.31 Plan of Reorganization.
*10.32 Findings of Fact and Conclusion of Law on Confirmation of Chapter
11 Plan; Order thereon.
*27.1 Financial Data Schedule for Form 10-K/A dated March 11, 1997
27.2 Financial Data Schedule for Form 10-K dated March 11, 1997
*Previously filed.
(b) REPORTS ON FORM 8-K.
Inapplicable.
-27-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ORANGE COUNTY VENTURES, INC.
Dated: March 11, 1997 By: /s/ RICHARD G. FUCHS
----------------------
Richard G. Fuchs, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
President, CEO, CFO
and Chairman of the
/s/ RICHARD G. FUCHS Board March 11, 1997
- - ----------------------------
Richard G. Fuchs
Vice President,
/s/ JOHN E. WILSON Secretary and Director March 11, 1997
- - ----------------------------
John E. Wilson
-28-
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