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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB A1
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
Progressive Asset Management, Inc.
(Name of Small Business Issuer in its charter)
California 90- 804853
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1814 Franklin Street, Suite 710, Oakland, CA 94612
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (510) 834-3722
Securities to be registered pursuant to Section 12(b) of the Act. NONE
Securities to be registered pursuant to Section 12(g) of the Act.
1,631,626 shares of Common Stock
Common stock
(Title of Class)
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TABLE OF CONTENTS
<TABLE>
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Page
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Cover Page 1
Table of Contents 2
PART I 3
PART II 15
PART F/S 20
PART III 21
</TABLE>
PART I
The Issuer has elected to follow Form 10-SB, Disclosure Alternative 2.
ITEM 6. DESCRIPTION OF BUSINESS
(a) Narrative Description of Business.
(1) Business of Progressive Asset Management, Inc. ("PAM").
(i) PAM Provides Securities Brokerage and Advisory Services.
(A) Introduction. PAM was incorporated in California July 14, 1987. It is
registered as a broker-dealer with the NASD and as an investment adviser with
the State of California. PAM is a member of SIPC and the MSRB. PAM significantly
restructured the manner in which it provides services to the public in 1999.
This restructuring is described in section (B) below.
(B) PAM Provides Its Services Principally Through Financial West Group, Inc.,
("FWG"). Prior to 1999, PAM had its corporate office in Oakland, California, an
office in New York, NY, and offered its services through several other
independent offices operated by persons who were registered representatives of
PAM. In March 1999, PAM entered into an agreement with FWG and Paradox Holdings,
Inc. ("Paradox"). FWG is a wholly-owned subsidiary of Paradox. FWG is a
broker-dealer, registered with the NASD, with 60 offices and approximately 300
registered representatives. FWG is an NASD, SIPC, and MSRB member. FWG is also
registered as a investment adviser with the State of California. FWG has applied
for registration as an investment adviser with the Securities and Exchange
Commission. Financial transactions are processed through Correspondent Services
Corporation ("CSC"), a wholly owned, fully guaranteed subsidiary of PaineWebber,
Inc.
Under the agreement among the parties, PAM transferred all of its
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customer accounts and its registered representatives to FWG. PAM assists FWG in
recruiting additional registered representatives who are interested in promoting
socially-responsible investing. Four persons remain registered representatives
with PAM as well as becoming registered representatives of FWG. (For purposes of
convenience, persons registered through FWG are referred to as "employees"
although many are classified as "independent contractors" under federal or state
law.)
For purposes of marketing and convenience, the employees of FWG who concentrate
on socially responsible investing and use the services of PAM, are referred to
as the "PAM Network" so that it is clear to the investor that the services of
PAM are utilized to achieve the goals of the client to have a portfolio that
meets the client's social responsibility goals. Because of the requirements of
the NASD and the California Department of Corporations, all signage,
correspondence and agreements state that all transactions are conducted through
FWG. Consequently, the PAM Network serves as the socially responsible investment
arm of FWG, with PAM providing participants in the PAM Network with state of the
art socially responsible investment services - social screening, shareholder
advocacy, and information on community investing.
As an ongoing relationship, PAM receives a portion of the gross commission
income generated by the FWG registered representatives who are designated as
members of the PAM Network, but no portion of the gross commission generated by
FWG registered representatives who are not members of the PAM Network.
The gross commission generated by FWG registered representatives who are members
of the PAM Network is shared between the registered representatives who earn the
commissions, FWG, and PAM. According to the agreement among the parties, FWG
receives 5% of the commission. PAM receives what remains after the portions of
the commission due to the registered representative and the portion due to FWG
have been subtracted. Therefore, the exact amount PAM will receive on any one
transaction depends on the amount of compensation the individual registered
representative is entitled to receive. The amount a registered representative is
entitled to receive is negotiated between FWG and the registered representative
and is not made public. However, for purposes of illustration, a registered
representative commonly receives approximately 85% of the gross commissions, FWG
receives 5%, and this results in PAM receiving 10% of the gross commission.
As part of the agreement among the parties, Paradox has purchased a minority
equity stake in PAM equal to 40% of the voting power of all the outstanding
stock of PAM. Paradox cannot purchase any additional shares of PAM until January
2, 2002. The NASD approved the March 1999 agreement among the parties in late
June 1999, and
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the purchase of PAM shares by Paradox was completed in early July 1999. The
March 1999 agreement among the parties is attached as Exhibit 12(a).
As a further incentive for entering into the relationship with FWG, PAM receives
an additional 2.75% of the gross commissions generated by FWG registered
representatives who are members of the PAM Network over and above the basic
amount. This additional payment will cease once FWG has paid PAM a total of
$875,000. For purposes of illustration, again, a registered representative
commonly receives approximately 85% of the gross commissions, FWG receives 2.25%
(5% minus 2.75%), and this results in PAM receiving 12.75% of the gross
commission.
Current Commission Commission Structure after
Structure (%) PAM receives $875,000 (%)
Registered
Representative 85 85
FWG 2.25 5
PAM 2.75 10
In addition, PAM receives 5% of the gross amount of the asset-based fee that FWG
as a registered investment advisor receives from clients of FWG registered
representatives who are not members of the PAM Network for a product called
Socially Screened Portfolios for which PAM provides social screening. Members of
the PAM Network receive a 5% discount on this product from FWG and PAM receives
no fee from the use of this product by PAM Network registered representatives.
Since PAM does not receive a portion of all of the income FWG generates from its
securities brokerage and advisory business, FWG's revenues in the past give no
guidance to the amount of revenues that will be generated under the agreement
between PAM and FWG.
Association with FWG provides PAM with a much stronger technology platform,
enhanced back office capacity, and significantly expanded registered
representative recruitment opportunities. FWG handles licensing and transactions
for the registered representatives affiliated with the PAM Network. Linking with
PAM gives FWG access to the field of socially-responsible investing. Through
FWG, the PAM Network offers a complete range of investment services for any
portfolio, large or small including:
* Access to all major markets and types of investments.
* Socially responsible mutual funds and retirement plans.
* Identification of socially responsible investment managers.
* Social screening, shareholder advocacy, and community investments.
* Offices in California, Iowa, Maryland, Massachusetts, Michigan, New Hampshire,
New York, and Oregon.
* No-load socially responsible mutual funds through Charles Schwab & Co., Inc.,
on an advisory-fee basis.
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(C) PAM's Services to the Public Emphasize Socially-Responsible Investing.
(I) Socially-Responsible Investing PAM was created to provide securities
brokerage and advisory services to persons who seek to engage in
"socially-responsible investing." This term means that a person's investments
reflect that person's social concerns. PAM starts from the premise that
corporations that combine positive financial and social performance make the
best long-term investments. Businesses that do not follow what PAM believes are
socially and environmentally responsible practices tend to have greater
liabilities and charges. Examples of such businesses are heavy industries and
utilities that pollute air and ground water and tobacco manufacturers, because
they are subject to charges against earnings from the burdens of regulatory
compliance, litigation, fines, strikes, and boycotts.
Socially-responsible investing can be achieved in three ways:
*Social Screening.
*Shareholder Activism.
*Community Investing.
PAM conducts its own proprietary research which it provides to PAM Network
registered representatives and to registered investment advisers to use in
creating model portfolios based on social and environmental concerns of most
persons concerned with socially-responsible investing. Social screens frequently
requested include structuring a portfolio that meets the goals of a client in
these areas:
* Environment.
* Employee relations.
* Quality of products and services.
* Nuclear weapons or nuclear power.
* Tobacco, alcohol, or gambling.
* Relations with repressive regimes.
Customized screens are also developed according to registered representatives'
and registered investment advisers' specifications based on clients' specific
needs.
(II) Shareholder Advocacy and Community Investments. PAM provides support to PAM
Network registered representatives to assist their clients realizing their
social objectives through the strategies of shareholder advocacy and community
investing. Through shareholder advocacy, clients use their ownership of the
stock of a company to pursue change in the company's social or environmental
performance. PAM works with the Interfaith Center for Corporate Responsibility
and other advocates of corporate responsibility to:
* Engage in dialogue with company officials.
* Introduce or co-sponsor social shareholder resolutions.
* Build shareholder advocacy networks and wage shareholder
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campaigns.
PAM also works to provide community investing to enable the clients of PAM
Network registered representatives to invest in companies that have a high
community impact. PAM has served as the placement agent for investments that
promote:
* Economic development in inner city and rural poverty areas in the United
States.
* Sustainable development in the developing world.
* Low income housing.
* Energy self-reliance and alternative energy production.
PAM has joined with the Calvert Social Investment Foundation to create PAM
Community Investments. PAM Community Investments are offered by Information
Guide through FWG. By using this national program, investors can direct capital
to community development loan funds that help low-income families and
neighborhoods work their way out of poverty.
(III) Investment Services Provided Through the PAM Network. Registered
representatives in the PAM Network, serving as the socially-responsible division
of FWG, offers a wide variety of services and investments for any size
portfolio, including:
* Mutual funds--full range of socially responsible mutual funds.
* Stocks--access to all major markets and exchanges.
* Bonds--municipal, government agency, corporate, and convertible bonds.
* Insurance.
* Financial and estate planning.
* Retirement planning for individuals and businesses.
Through FWG, PAM Network Registered Representatives provide additional financial
consulting services to institutions and individuals with larger investment
portfolios. These services include assistance in and investment plan design and
implementation, such as:
* Defining financial objectives and social goals.
* Asset allocation.
* Assessment of portfolio performance.
* Investment manager evaluation, search, and selection advice.
* Ongoing social screening.
* Regular performance monitoring.
* Shareholder advocacy.
* Custodial services.
These services are supported by PAM through the PAM Network. In addition to
providing these services through the PAM Network, on occasion PAM directly
provides clients ongoing social screening and shareholder advocacy services.
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(IV) The Client Base Includes Large and Small Investors. Since any investor,
large or small, can have a portfolio structured to be socially-responsible,
persons who use the services of the PAM Network can have an account as small as
$1,000. The average size of an account is approximately $100,000, with 80% of
the accounts under $500,000. Clients include individuals, unions, religious
organizations, and non-profit organizations. The largest client utilizing the
services of FWG registered representatives in the PAM Network is a religious
organization, but which has been responsible for less than 7% of PAM's gross
revenue in fiscal years 1999 and 2000.
Through its relationship with FWG, PAM receives compensation on certain
transactions on a per-trade basis as a broker-dealer, and receives compensation
for advisory services, as an investment adviser. PAM also generates fees
separately from its relationship with FWG principally from "social screening."
The income from brokerage transactions through FWG equal approximately 69% of
PAM's gross revenues, and the income from investment advisory fees through FWG
equal approximately 30% of PAM's gross revenues. The investment advisory fees
generated separate from FWG equal approximately 1% of PAM's gross revenues.
Because PAM's business was significantly restructured in the first half of 1999,
this break-down of the sources of PAM's income is based on the period July 1999
through March 2000. PAM no longer acts as an underwriter for any offerings.
(ii) Status of New Products or Services. PAM established in the last quarter of
1999 a relationship to assist Trainer Wortham & Company, Inc. ("Trainer
Wortham") to offer socially-screened management of short-term funds of cities
and other institutional investors. Trainer Wortham is registered with the SEC as
an investment adviser and has over $4.4 billion in management. It is the
investment management subsidiary of First Republic Bankcorp, a regional bank
with its headquarters in San Francisco, CA. Under the arrangement with Trainer
Wortham, PAM will be responsible for socially-screening investments and
marketing this service while Trainer Wortham manages the investments, making the
investment decisions. For its services, PAM receives a portion of the advisory
fees charged by Trainer Wortham. The amount of the advisory fees that PAM
receives is 10% of the total management fee with respect to all funds invested
by Trainer Wortham on behalf of clients using PAM's screening services.
Separately, for each investor referred to Trainer Wortham by PAM, PAM will
receive a percentage of the total management fee Trainer Wortham receives from
that client. During the first 12 months, the amount will be 25%; for the second
12 months, 20%; for the third 12 months, 15%; for the fourth 12 months, 10%; and
for the fifth 12 months and each month thereafter, 5%.
(iii) Estimated Amount Spent on Research. Less than $20,000 has
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been spent on company-sponsored research to develop new products or services
during the last two years and no money has been spent on customer-sponsored
research to develop new products or services.
(iv) Number of Employees. PAM has two full-time employees and five part-time
employees for a total of seven employees, including four who are registered
representatives with FWG. Peter Camejo, Eric Leenson, Cathy Cartier, remain as
registered principals of PAM. Staff in the offices of the 10 affiliates of the
PAM Network are employees of the independent contractor offices which make up
the PAM Network.
(v) Environmental Expenditures. PAM discharges no material into the environment
and requires no environmental control facilities. Therefore there have been no
expenditures and no effects or expected effects from compliance with federal,
state, and local provisions regulating discharge of materials into the
environment or from environmental control facilities.
(2) Future Financial Performance.
(i) Distinctive or special characteristics of the financial services industry,
which may have a material impact upon Progressive Asset Management's financial
performance, include:
* Changes in technology. The advent of internet trading, direct consumer access
to ever-increasing quantities of research information and lower commission rates
are having a significant impact on the securities industry. Such changes have
pushed down the profit-margins on transaction-based fees, especially those
charged on the internet. Furthermore, the increased usage of the internet for
trading requires all securities brokerage firms to consider offering such a
service. The availability of free or low-cost advice through print, television
and the internet have increased the pressure on profit-margins for offering
advice.
* Shifts in financial services compensation from transaction-based commissions,
to asset-based fee structures. This may result in short-term decline in revenue
from certain accounts through fiscal year 2002 as the basis of compensation is
gradually converted. All registered representatives may not be able to make the
transition to earning sufficient income under this basis of compensation and
thus may leave the industry.
* Rapid growth of socially responsible investment up 82% to $2.16 trillion with
screened portfolios up 183% to $1.49 trillion, according to the 1999 SRI Trends
Report of the Social Investment Forum, the professional association of socially
responsible investment professionals. One of the reasons for the rapid growth of
socially responsible investing is the positive financial performance of socially
responsible investment. For example, through May 2000 both the Domini Social
Index and the Citizens Index have outperformed the S&P 500 in 1999 and since
inception, which was in May of 1990 for the Domini Social Index and March of
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1995 for the Citizens Index. The rapid growth of socially responsible investment
is both positive, in that the market for the services of PAM and the PAM Network
is expanding, and also negative in that competition within that market is also
increasing. The number of individual socially responsible investment
practitioners is growing and some of the major brokerage houses are adding
socially responsible investment divisions. Larger firms may have an advantage in
recruiting registered representatives, including the possibility of recruiting
from FWG and the PAM Network because they offer significant bonuses.
*The trading of PAM's common stock will remain on the NASD Bulletin Board.
Because trading on the Bulletin Board is extremely light in comparison with
trading on the NASDAQ or trading on an exchange, trading of PAM's stock will
remain illiquid, thus limiting the ability to trade its stock.
(ii) Impact of the Earth Trade settlement. The settlement of the claims with the
Earth Trade noteholders has removed a cloud on the future operations of PAM, and
terminated what could have resulted in a series of arbitrations and court cases
that PAM's legal counsel estimated would have cost PAM in excess of $100,000 in
attorneys' fees. Furthermore, under the terms of the settlement, PAM will be
able to extend the payments over approximately 10 years without the payment of
any interest.
On the other hand, the Earth Trade settlement did require the initial payments
of $119,000 over 2-1/2 years, and will require annual payments equal to 1% of
PAM's gross revenues. These funds would have been available to meet the
obligations of PAM or expand PAM's operations. However, because of the amount of
legal fees facing PAM in relation to Earth Trade, the settlement overall has
improved the liquidity of PAM.
(b) Segment Data. Progressive Asset Management, Inc. does not segment data in
its financial statement.
ITEM 7. DESCRIPTION OF PROPERTY
PAM's corporate office is located at 1814 Franklin Street, Suite 710, Oakland,
CA 94612. The premises occupy approximately 1974 square feet, at a rental of
$3,277.38 per month. The lease terminates January 11, 2001, and there are no
escalation provisions to increase the rent before that date. PAM is currently in
negotiations with the landlord to continue renting the current office space or
comparable space in the same building. However, the office space requirements
for PAM's corporate office are so modest, its precise location in the San
Francisco Bay area is not a material consideration.
Progressive Asset Management Housing, Inc., a California corporation, is a
wholly-owned subsidiary of PAM. It is a general
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partner along with Rental Housing, Inc., the managing general partner, of
Magnolia Apartment Associates Limited Partnership, an Idaho limited partnership.
The limited partnership owns two apartment complexes in the Boise, Idaho area.
The units in these two apartment complexes are leased to low-income families.
The limited partnership will dissolve December 31, 2021, unless earlier
terminated under limited circumstances as provided in the limited partnership
agreement. While Progressive Asset Management Housing, Inc., was instrumental in
the organization of the limited partnership and acquisition of the apartment
complexes in 1991 and retains a .50% partnership interest, it has never been
involved in the operation of the limited partnership or the apartment complexes.
Other than its position as a general partner of Magnolia Apartment Associates
Limited Partnership, Progressive Asset Management Housing, Inc., is not a
general partner nor a manager of any other real estate investments. These real
estate investments generate less than $7000 per year income to PAM.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
The members of the board of directors of PAM are elected at the annual meeting
of shareholders and serve until the next annual meeting of shareholders or until
their successors are elected. The most recent annual meeting was held January
28, 2000.
(a) Names, Ages, and Experience of Directors and Executive Officers.
Peter Camejo, Chair of the Board and Chief Executive Officer of PAM. Peter
Camejo has served as CEO and Board member since PAM's inception in 1987. Before
co-founding PAM, he was an investment broker at Merrill Lynch and Prudential
Bache. Mr. Camejo has, in addition to his Series 7 General Securities license, a
Series 24 General Principal license, a Series 4 Options license, and a Series 3
Commodities license.
Active in the environmental movement, Mr. Camejo has served as a member of the
Board of Directors of EarthShare and the Chair of the Council for Responsible
Public Investment. He is also a member of the Board of the Contra Costa County
Employee Retirement Association. Mr. Camejo, originally from Venezuela, is a
naturalized U.S. citizen. He is 60 years old, married and has two children.
Catherine Cartier, Secretary, Chief Administrative Officer and Director. Ms.
Cartier joined PAM at its inception in 1987 and has served as a Board member and
Corporate Secretary since 1994.
Prior to joining PAM she worked for Lehman Brothers and Prudential Bache. Ms.
Cartier earned a BA from St. Mary's College and holds her Series 7 General
Securities license, Series 24 General Principal license, Series 53 Municipal
Principal license.
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Ms. Cartier is 50 years old.
Eric Leenson, President, Chief Financial Officer and Director. Eric Leenson has
been a member of the Board since 1989. He has been CFO since 1990 and President
since 1992. In his positions, he is responsible for the day-to-day oversight of
the firm's operations. He is also responsible for its financial accounting and
reporting. He holds a Series 7 General Securities license, a Series 24 General
Principal license, and a Series 4 Options license.
Mr. Leenson left his position as a financial consultant at Merrill Lynch to join
PAM in October 1987. Prior to joining Merrill Lynch, he was co-founder and long
time Managing Director of La Pena Cultural center in Berkeley, CA. Mr. Leenson
is 51 years old.
Peggy Saika, Director. Ms. Saika has been a member of the Board since 1995. Ms.
Saika is the Executive Director of the Asian Pacific Environmental Network in
Oakland, CA. From 1983 to 1991 she was the Executive Director of the Asian Law
Caucus. Prior to that, she helped create and direct non-profit organizations in
Sacramento, CA and New York City.
Ms. Saika was appointed to the National Environmental Justice Advisory Council
of the US Environmental Protection Agency. She was also appointed by Secretary
Donna Shelala to the Advisory Council of the National Institute of Environmental
Health Sciences, and elected to the Board of Directors of the Wellness
Foundation. Ms. Saika is 52 years old.
Kalman Stein, Director. Mr. Stein has been a director since 1997. Mr. Stein has
been the President of EarthShare since its inception in 1989. EarthShare now
represents more than 40 leading national environmental and conservation
organizations, and has raised more than $60 million for its member agencies
during its first eight years of operation. In addition Mr. Stein is a founder of
the Council of Foundations and has served as Chair of that organization.
Mr. Stein's business experience includes management consulting with the United
Research Company, founding Kalman Stein Associates, a management consulting firm
in Berkeley, CA and establishing and managing the Strong Foundation for
Environmental Values. He was also the Executive Director of the Environmental
Federation of California for many years. Mr. Stein is 47 years old.
Michael S. Wyman, Director. Mr. Wyman is a Board member of PAM, serving in his
second term. Mr. Wyman is a graduate of Pomona College, class of 1972 and
Hastings College of Law, class of 1981. He is member in good standing of the
California State Bar.
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Mr. Wyman has worked as a lettuce picker, dishwasher, writer, editor, corporate
director, and CEO of It's Electric!, an electric car dealership. Before his
involvement with It's Electric, he was a private investor in the field of
socially responsible investing. Earlier he held the positions of editor,
associate director, and director for the Center for Democracy in the Americas in
Washington, D.C. Prior to his tenure at the Center, Mr. Wyman was an attorney in
private practice. Mr. Wyman is 49 years old.
Nina Lau-Branson, Director. Nina Lau-Branson is serving her first term on the
Board. After receiving her MBA in Finance from the University of Wisconsin, Ms.
Lau-Branson was employed by Price Waterhouse Coopers. As the first Corporate
Controller for Wind River Systems in Alameda, CA, Ms. Lau-Branson was an
integral part of the team that brought PAM public. During her tenure with Wind
River Systems they grew to a company with over $50 million in revenues and
operations in over ten countries. Ms. Lau-Branson lives in Oakland, California
and is 44 years old.
Joseph Sturdivant, Director. Mr. Sturdivant is serving his first term on the
Board. Mr. Sturdivant has served as Senior Vice President with Paine Webber Inc.
in San Francisco CA since 1989. Prior to joining Paine Webber he was a Senior
Vice President with Merrill Lynch Inc. Mr. Sturdivant received a BA in
government and economics from the University of Arkansas and an MA in
international business from the University of Southern California. He currently
makes his home in Jackson Hole, WY and is 56 years old.
Gene Valentine, Director. Gene Valentine is serving his first full one-year term
on the Board. He joined the Board in June 1998. Mr. Valentine is Chairman of the
Board and Chief Executive Officer of FWG. Mr. Valentine has a BS degree from
Bethany College and also attended the University of Vienna. Mr. Valentine is
also the President and Founder of Second Byte Foundation which provides
computers to at-risk children. Mr. Valentine is 50 years old.
Edward L. Price, Director. Mr. Price is serving his first term. Mr. Price is
Director and Chief Administrative Officer of FWG. Mr. Price has a BA from the
U.S. Naval Academy and a MBA from the University of California, Berkeley.
Previously a CPA with Touche Ross, Mr. Price joined FWG in 1998. Mr. Price is 49
years old.
James Nixon, Senior Vice President for Social Research and Sustainable
Development. Mr. Nixon joined PAM in 1988 and coordinates social screening,
shareholder advocacy, community investments, and media relations. Mr. Nixon is
also Chair of the Board of Directors of Sustainable Systems, Inc., a
specializing in business incubators and regional development strategies. Mr.
Nixon is 59 years old.
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(b) Family Relationships. No director, person nominated to be a director,
executive officer, or significant employee have family relationships with any
other director, executive officer, or significant employee.
(c) Business Experience. The business experience of each director, executive
officer, and significant employee is described under (a) above.
(d) Involvement in Certain Legal Proceedings. No director, person nominated to
be a director or executive officer of PAM has been in the last five years
involved in any action under the Bankruptcy Act, any state insolvency law, or
convicted in a criminal proceeding (excluding traffic violations and other minor
offenses).
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
(a) Aggregate Annual Remuneration.
<TABLE>
<CAPTION>
Name Capacities in which Aggregate
Remuneration Was Received Remuneration
<S> <C> <C>
Peter Camejo Chair, CEO, Broker $99,559
Eric Leenson President, CFO, Broker $98,211
Catherine Corporate Secretary,
Cartier Operations Manager $43,032
</TABLE>
This information was prepared on a cash basis.
(b) Future Remuneration. Peter Camejo will receive $15,000 per year in salary.
Eric Leenson will receive $30,000 per year in salary. Catherine Cartier will
receive $15,000 per year in salary. Subsequent to the strategic alliance with
FWG each of these corporate officers is a registered representative with FWG and
receives commission income through Financial West Group, but that income is not
generated through Progressive Asset Management, Inc.
ITEM 10. SECURITY OWNERSHIP
(a) Principal Holders of Voting Securities.
<TABLE>
<CAPTION>
Title Name Amount of Percent of
of Class and Address Shares Class
<S> <C> <C> <C>
Common Shares Peter Camejo
Camejo Group
1470 Maria Lane #101
Walnut Creek, CA 94596 360,718 22.1
Common Shares Eric Leenson
Leenson and Associates
1814 Franklin Street
Oakland, Ca 94612 78,358 4.8
</TABLE>
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<TABLE>
<CAPTION>
Title Name Amount of Percent of
of Class and Address Shares Class
<S> <C> <C> <C>
Common Shares Catherine Cartier
Camejo Group
1470 Maria Lane #101
Walnut Creek, CA 94596 41,000 2.51
Common Shares All Officers
and Directors 561,342 34
Series B Paradox Holdings, Inc.
Preferred 2663 Townsgate Rd.
Shares Westlake Village, CA 91361 25,000 100
</TABLE>
The Series B Preferred Shares, held by Paradox Holdings, Inc., when combined
with the common stock, has voting power equal to 40% of the total shares that
can be cast. Consequently, the following is the voting power of the following
persons when factoring in the voting power of the Series B Preferred Shares:
Peter Camejo 13.47% ; Eric Leenson 2.92%, Catherine Cartier 1.53%; and all
Officers and Directors, 20.96%. Under the Standstill Agreement between PAM and
Paradox, until January 1, 2002, neither party can take steps to change the
relative voting power of Paradox. A copy of this agreement is attached as
Exhibit 6(b).
(b) Other Holders of 10% Voting Securities. None.
(c) Certain holders of Non-Voting Securities.
<TABLE>
<CAPTION>
Title Name Amount of Percent of
of Class and Address Shares Class
<S> <C> <C> <C>
Preferred A Lakshmima Inc. 17,272
18.2%Shares 36 Rosebery Ave.
Ottawa, ON K1S 1W2
</TABLE>
(d) Options, warrants, and rights. None of the persons listed in item (a) above,
hold any options, warrants, or rights.
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Peter Camejo, Chair of the Board of Directors and Chief Executive Officer has
entered into an agreement whereby certain holders of notes of Earth Trade, Inc.,
in which PAM held an interest, may exchange such notes for shares of PAM held by
Mr. Camejo. The notes are payable by PAM. This transaction is explained in more
detail under "PART II, Item 5. Recent Sales of Unregistered Securities (b)
Securities Being Offered, Shares issued in settlement with creditors of Earth
Trade, Inc."
ITEM 12. SECURITIES BEING OFFERED
There are 1,631,626 shares of common stock issued and a total of 5,000,000 are
authorized. Holders of the common stock are
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entitled to one vote for each share held by them of record on the books of PAM
in all matters to be voted on by the stockholders. Holders of the common stock
are entitled to receive such dividends as may be declared from time to time by
the Board out of funds legally available. The shares of common stock are
non-assessable.
In the event of liquidation, dissolution or winding up of PAM, shares of common
stock share ratably in all assets remaining after payment of liabilities, and
after payment of preferences to the Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock. The Series A Preferred Stock is entitled
to an amount equal to $7.00 per share, and no more, before any payment shall be
made or any assets distributed to the holders of any other class or series of
stock. An amount equal to $1.00 per Series B Preferred Stock, plus an amount
equal to any dividends on those Series B Preferred Stock declared and unpaid on
the date of that distribution, and no more, shall be made before any payment
shall be made or any assets distributed to the holders of PAM's Common Shares.
There are 109,512 outstanding stock options held by current and former employees
and directors of PAM. Each outstanding stock option is currently exercisable and
one share of common stock of PAM is issuable for each stock option. The options
are not transferable without the consent of PAM. The expiration date and
exercise price (that, is the price at which the common stock can be purchased)
for the common stock depends on what year the stock was issued. The following is
a summary of the number of options outstanding. (Options expire as of December
31 of the year of expiration.)
<TABLE>
<CAPTION>
NUMBER OF OPTIONS EXERCISE PRICE ($) EXPIRATION DATE (Year)
<S> <C> <C>
13,657 1.00 2000
6,000 1.00 2001
3,227 2.00 2001
63,628 1.00 2002
4,500 2.00 2002
14,500 1.00 2003
1,500 0.24 2003
1,000 0.24 2004
1,500 0.49 2005
</TABLE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT=S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS
(a) Market Information.
PAM's common stock has been reported on the OTCBB under the symbol PAMI since
1997 and the following are the highs and lows
15
<PAGE> 16
reported on the OTCBB for the periods listed.
<TABLE>
<CAPTION>
Quarter High Low
<S> <C> <C>
July-September 1997 NA NA
October-December 1997 1.125 .50
January-March 1998 .5625 .25
April-June 1998 .5625 .34375
July-September 1998 .7500 .21875
October-December 1998 .3750 .12500
January-March 1999 .50 .15625
April-June 1999 .43750 .24
July-September 1999 .68750 .375
October-December 1999 .50 .40925
</TABLE>
Trading on the OTCBB has been suspended pending the filing of the Form 10-SB.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions. Market makers who posted
bids or offers during the period listed above are Herzog, Heine, Geduld, Inc.,
Wien Securities Corp., Hill, Thompson, Magid & Co., Sherwood, Sharpe Capital,
Inc., Citadel Securities Corp., and Paragon Capital Corporation.
(b) Holders of Common Stock. The number of holders of common stock are 145.
(c) Dividends. Declaration of dividends on common stock is subject to the
discretion of the Board and will depend upon a number of factors, including the
future earnings, capital requirements and financial condition of PAM. In
December 1995, PAM declared a common stock dividend of one share for each 20
shares of common stock held as of March 1, 1995. PAM has not declared any cash
dividends on its Common Stock in the past and does not anticipate declaring
dividends in any form in the near future.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened against PAM, except the
following. Rita Maran v. PAM and Peter Camejo, NASD Arbitration, Case No.
99-00017. Claimant has alleged breach of fiduciary duty, negligence and breach
of contract relating to investments made in claimant's securities account.
Claimant is seeking approximately $45,000 in actual losses and lost interest of
approximately $35,000. PAM has denied the allegations and no date has been set
for hearing of this matter.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in or disagreements with accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
16
<PAGE> 17
(a) Warrants issued to shareholders holding Series A Cumulative Convertible
Preferred Stock. In December 1995, PAM authorized 200,000 common stock warrants
to those persons who were holders of shareholders of Series A Cumulative
Convertible Preferred Stock on December 31, 1991, and common shareholders on
March 1, 1995. Each warrant enabled the holder to purchase one share of common
stock for $1.00 until December 31, 1996, $1.50 in 1997, and $2.00 in 1998. Of
the 185,000 warrants issued, 35,000 during the fiscal year ending June 30, 1997,
were exercised and none were exercised after that date. The warrants expired on
December 31, 1998. All shares of this Series A Cumulative Convertible Preferred
Stock have been redeemed and this series has been eliminated. A total of 49
persons received these warrants.
The warrants and shares were issued pursuant to Section 4(2) of the Securities
Act of 1933. The recipients of the warrants were shareholders of PAM since at
least December 31, 1995, received quarterly and annual reports from PAM, and had
access to the principals of PAM for any further information. These warrants were
issued without the recipients paying additional compensation to PAM. They were
issued by PAM because at the time of issuance, the management of PAM believed
the return on investment as of that date had not met the expectations of
management or the investors.
(b) Series A Convertible Preferred Stock and Common Stock issued to 43 creditors
of Earth Trade, Inc. Earth Trade, Inc., was incorporated in 1992 to promote
sustainable development by marketing both organic and conventional food products
from farm cooperatives in the developing world. Principally as a result of
continuing losses, the shareholders of Earth Trade voted in May 1997 to
voluntarily dissolve and liquidate Earth Trade=s net assets.
In April 1997, the Board of Directors, with consideration to PAM's mission and
standards of social responsibility, its thirty percent ownership of Earth Trade
and its role as placement agent for commercial paper issued by Earth Trade,
offered a settlement agreement to the Earth Trade noteholders. Under the
agreement, in exchange for their residual Earth Trade debt and a general release
of liability, the note holders could receive either preferred shares of PAM with
a stated value of $7 or PAM common shares with a stated value of $5. The
settlement agreement was accepted by all but three of the Earth Trade
noteholders in January 1998.
During the year ended June 30, 1998, PAM completed the first closing under the
settlement agreement pursuant to which common and Series A Preferred Shares were
issued equivalent to 70% of the principal expected to be owed. The remaining 30%
were issued following the final liquidation of Earth Trade and payments to the
note holders in June 1999.
17
<PAGE> 18
In February, 1999, the shareholders approved an additional settlement with the
three remaining Earth Trade noteholders who had not agreed to the first
settlement. Under this second agreement, in exchange for their residual Earth
Trade debt and a general release of liability, the remaining Earth Trade note
holders were entitled to receive a total of $380,000, payable in one installment
of $186,000 upon approval of the settlement agreement, and the remainder in
annual installments and future maximum installments of $50,000 until paid in
full. Of the settlement amount, approximately $83,000 was provided from the
final liquidation of Earth Trade. The exact amount of future payments will
depend upon various factors, including NASD net capital requirements and PAM's
gross revenues.
The three remaining noteholders, may elect to exchange their debt for shares of
PAM held by PAM's chairman, Mr. Peter Camejo. Outstanding amounts owed to the
remaining noteholders will be subordinated debt of PAM. Outstanding amounts, if
any, owed to Mr. Camejo as a result of any exchange of debt for stock are
further subordinated to debt owed the remaining noteholders.
The Series A convertible preferred shares issued during the years ended June 30,
1998 and 1999, in connection with the Earth Trade settlement, do not pay
dividends, are non-voting, and are convertible share for share into common stock
at the option of the holder after two years or automatically upon the occurrence
of certain events.
PAM did not receive cash in exchange for issuance of the preferred and common
stock to the Earth Trade note holders. Nor, did PAM receive any "discharge" of
any debt for the issuance of this stock to the note holders because PAM had no
legal obligation for those notes and the notes had never been carried on PAM=s
books as debt. Rather, the transaction constituted a "settlement" of litigation
between the parties.
The preferred shares are subject to mandatory redemption annually each November
1. The redemption price is $7 per share. The amount to be redeemed is based on
1% of PAM's revenues for its prior fiscal year. The amount to be redeemed may be
reduced to the extent that the redemption would cause PAM to fail to meet its
net capital requirement under the Securities and Exchange Act of 1934. The
preferred shares have a preference in liquidation of $7 per share aggregating
$664,153 at June 30, 1999 (1998 - $576,716).
These shares were issued pursuant to a non-public offering under Section 4(2) of
the Securities Act of 1933. The offers and sales were limited solely to those
persons who held Earth Trade notes, all persons who received any shares of PAM
stock received disclosure documents and executed subscription agreements and
settlement agreements that reviewed by legal counsel representing
18
<PAGE> 19
the plaintiffs in the various actions.
(c) Incentive Stock Option Plan.
In December 1995, PAM adopted a stock option and incentive plan that allows for
the issuance of up to 200,000 shares of common stock. A copy of the plan is
attached as Exhibit 6(a). The plan provides for the award of stock options,
employee stock purchases and restricted stock grants. Of the shares awarded, all
were immediately vested and are subject to a holding period restriction of up to
two years from the date of grant.
The award of additional stock options, vesting, exercise prices and other option
terms are determined by the Board. Options have been granted to employee and
non-employee Board members for the purchase of common shares. The exercise
prices have not been less than the fair market value of the stock as determined
by the Board of Directors at the date of grant. The options expire at various
dates during the years 1997 to 2002. Of the options granted, all were
exercisable at June 30, 1999. The number of shares issued under the stock option
plan is set out in Note 8 to the Consolidated Financial Statements for year
ending June 30, 1999, included under PART F/S. The value of any stock options
are determined by taking the average of the high and low of the common stock
during the final calendar quarter of the year as reported on the OTCBB. The
shares were issued pursuant to Section 4(2) of the Securities Act of 1933.
(d) Series B Convertible Preferred Stock issued to Paradox Holdings, Inc.
Under PART I, ITEM 6, DESCRIPTION OF BUSINESS, is described the operating
provisions of the agreement between PAM and FWG entered into in March 1999.
Under this same agreement, Paradox Holdings, Inc. ("Paradox Holdings") received
25,000 shares of PAM's Series B Convertible Preferred Stock, subject to approval
by the NASD of this arrangement, which approval was given in June 1999. No other
person can be issued these shares.
The Series B Convertible Preferred Stock can be converted to PAM's common stock,
and the ratio of exchange is such that Paradox Holdings will hold an amount
equal to 40% of the voting power of the common stock after the conversion. In
addition, the Series B Convertible Preferred Stock has voting rights equal to
40% of the total shares eligible to be voted as well as all other rights of the
common stock, including dividend rights. Paradox Holdings is a California
corporation with its principal place of business and its legal council located
in California. All discussions and negotiations between the parties occurred in
California. Consequently, the shares were issued pursuant to the exemption for
intrastate offerings under Section 3(a)(11) of the Securities Act of 1933, in
compliance with California
19
<PAGE> 20
Corporations Code section 25102(f).
Contemporaneously with the agreement between FWG and PAM, PAM and Paradox
Holdings entered into a separate "Standstill" Agreement under which the parties
agreed not to alter before January 1, 2002, the ownership ratio between the
parties in PAM. The Standstill Agreement is attached as Exhibit 6(b).
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As provided under the California Corporations Code, and Article III, Section 12
of PAM's bylaws, PAM is empowered to indemnify directors and officers of PAM.
However, the power to indemnify does not include any indemnification of any
breach of duty to PAM or its shareholders. This restriction on indemnification
is set out in sections 204 and 317 of the California Corporations Code.
PART F/S
FINANCIAL STATEMENTS
20
<PAGE> 21
PROGRESSIVE ASSET MANAGEMENT, INC.
Consolidated Financial Statements
and
Supplemental Information
Years ended June 30, 1999 and 1998
with
Reports of Independent Auditors
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Financial Statements
Report of Independent Auditors F-1
Consolidated Statement of Financial Condition F-2-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7-16
Supplemental Information
Report of Independent Auditors on
Supplemental Information F-17
Statement of Changes in Liabilities
Subordinated to Claims of General Creditors F-18
Computation of Net Capital under Rule 15c3-1 of the
Securities and Exchange Commission F-19
Reconciliation Pursuant to Rule 17a-5(d)(4) F-20
Computation for Determination of Reserve
Requirements F-21
Information Relating to
Possession or Control Requirements F-21
Reconciliation With Respect to Methods of
Consolidation F-22
Report of Independent Auditors on Internal
Accounting Control Required by SEC Rule 17a-5 F-23-24
</TABLE>
i
<PAGE> 22
Report of Independent Auditors
Board of Directors
Progressive Asset Management, Inc.
We have audited the accompanying consolidated statement of financial condition
of Progressive Asset Management, Inc. as of June 30, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Progressive Asset
Management, Inc. as of June 30, 1999 and 1998, and the results of its operations
and cash flows for the years then ended, in conformity with generally accepted
accounting principles.
MARKLE STUCKEY HARDESTY & BOTT
Markle Stuckey Hardesty & Bott
Larkspur, California
July 22, 1999
F-1
<PAGE> 23
PROGRESSIVE ASSET MANAGEMENT, INC.
Consolidated Statement of Financial Condition
June 30, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 422,354 $ 573,078
Deposits with clearing broker -- 227,409
Commissions and other receivables 89,824 89,761
Short-term investments 12,489 --
Employee advances 25,229 19,967
Prepaid expenses 15,462 93,731
----------- -----------
Total current assets 565,358 1,003,946
Deposits 13,048 --
Property and equipment, at cost
Furniture 10,600 102,687
Office equipment 10,473 318,700
Leasehold improvements -- 39,889
----------- -----------
21,073 461,276
Less accumulated depreciation and amortization (10,732) (327,426)
----------- -----------
Net property and equipment 10,341 133,850
Investment in and advances to
affiliated companies 16,592 66,592
Organization costs, net of accumulated
amortization 4,740 6,116
----------- -----------
Total assets $ 610,079 $ 1,210,504
=========== ===========
</TABLE>
See accompanying notes.
F-2
<PAGE> 24
PROGRESSIVE ASSET MANAGEMENT, INC.
Consolidated Statement of Financial Condition
June 30, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current liabilities
Accounts payable $ 22,400 $ 33,957
Commissions payable 11,103 122,762
Accrued liabilities -- 16,513
Payable to clearing broker -- 2,787
----------- -----------
Total current liabilities 33,503 176,019
Liability - Earth Trade settlement -- 41,800
Subordinated liability - Earth Trade settlement 194,000 --
Commitments and contingencies
Preferred stock, $7 par value; 200,000
shares authorized, 92,156 shares
issued and outstanding (1998 - 82,388) 64,510 57,672
Stockholders' equity
Common stock, no par value; 5,000,000
shares authorized, 1,631,626 shares
issued and outstanding
(1998 - 1,614,059) 1,490,180 1,484,146
Accumulated deficit (1,172,114) (549,133)
----------- -----------
Total stockholders' equity 318,066 935,013
----------- -----------
Total liabilities and stockholders' equity $ 610,079 $ 1,210,504
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 25
PROGRESSIVE ASSET MANAGEMENT, INC.
Consolidated Statement of Operations
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues
Commissions $ 2,762,324 $ 3,468,961
Investment and advisory fees 72,233 75,117
Investment banking fees 19,150 24,867
Interest and dividend income 21,468 29,725
Other brokerage income 30,731 34,697
----------- -----------
Total revenues 2,905,906 3,633,367
Costs and expenses
Commissions 1,966,764 1,738,632
Security clearing charges 137,203 372,452
Employee compensation and benefits 383,947 468,004
Communications 92,849 174,241
Promotional costs 12,253 46,818
Occupancy 102,124 189,207
Regulatory 47,524 33,424
Professional fees 121,752 138,089
Office expenses 14,128 25,693
Charitable contributions 3,650 3,650
Administrative and other 265,521 381,106
Loss on disposal of assets 60,657 0
Depreciation and amortization 61,279 52,838
----------- -----------
Total costs and expenses 3,269,651 3,624,154
----------- -----------
Income before income taxes
and extraordinary loss (363,745) 9,213
Taxes on income 1,600 2,400
----------- -----------
Income before extraordinary loss (365,345) 6,813
Extraordinary loss 240,621 139,363
----------- -----------
Net income (loss) $ (605,966) $ (132,550)
----------- -----------
Net income (loss) per share
Basic
Income (loss) before
extraordinary loss $ (0.21) $ 0.01
Extraordinary loss (0.14) (0.09)
Net income (loss) $ (0.35) $ (0.08)
Shares used to compute per share amounts 1,711,476 1,602,447
----------- -----------
Fully diluted
Income (loss) before
extraordinary loss $ (0.21) $ 0.01
Extraordinary loss (0.14) (0.09)
----------- -----------
Net income (loss) $ (0.35) $ (0.08)
----------- -----------
Shares used to compute
per share amounts 1,711,476 1,602,447
----------- -----------
</TABLE>
See accompanying notes.
F-4
<PAGE> 26
PROGRESSIVE ASSET MANAGEMENT, INC.
Consolidated Statement of Stockholders' Equity
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Total
Preferred stock Common stock stock-
---------------------------- ---------------------------- Accumulated holders'
Shares Amount Shares Amount deficit equity
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances,
June 30, 1997 -- $ 1,533,162 $ 1,444,255 $ (416,583) $ 1,027,672
Issuance of common and
preferred stock in
Earth Trade settlement 82,388 57,672 79,785 39,891 -- 39,891
Adjustment to issued shares -- -- 1,112 -- -- --
Net loss (132,550) (132,550)
----------- ----------- ----------- ----------- ----------- -----------
Balances,
June 30, 1998 82,388 57,672 1,614,059 1,484,146 (549,133) 935,013
Redemption of
preferred stock (2,723) (1,006) -- -- (17,155) (17,155)
Issuance of common and
preferred stock in
Earth Trade settlement 12,491 8,744 12,067 6,034 140 6,174
Issuance of common stock -- -- 5,500 -- -- --
Net loss -- -- -- -- (605,966) (605,966)
----------- ----------- ----------- ----------- ----------- -----------
Balances,
June 30, 1999 92,156 $ 64,510 1,631,626 $ 1,490,180 $(1,172,114) $ 318,066
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 27
PROGRESSIVE ASSET MANAGEMENT, INC.
Statement of Cash Flows
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $(605,966) $(132,550)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities
Depreciation and amortization 61,279 52,838
Change in deposits with clearing broker 227,409 167,854
Change in trading securities -- 33,519
Change in commissions and other receivables (63) 22,099
Change in other current assets 59,959 34,815
Change in short-term investments (12,489) --
Change in accounts payable
and accrued liabilities (142,516) (74,227)
Loss on disposal of assets 60,657 --
Change in Earth Trade settlement liability 152,200 139,363
--------- ---------
Net cash provided (used) by operating activities (199,530) 243,711
Cash flows from investing activities
Purchase of furniture and equipment -- (21,194)
Proceeds from sale of furniture and equipment 3,089
Change to note receivable -- 16,667
Investment in and advances to affiliates, net 50,000 38,500
--------- ---------
Net cash provided (used) by investing activities 53,089 33,973
Cash flows from financing activities
Issuance of common stock 6,034 --
Issuance of preferred stock 8,744 --
Redemption of preferred stock (19,061) --
Reduction in note payable -- (51,750)
--------- ---------
Net cash provided (used) by financing activities (4,283) (51,750)
--------- ---------
Net increase (decrease) in cash (150,724) 225,934
Cash and cash equivalents,
Beginning of year 573,078 347,144
--------- ---------
End of year $ 422,354 $ 573,078
========= =========
Supplemental disclosures of cash flow Information
Cash paid during the year for income taxes $ 1,600 $ 2,400
========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 28
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 1 Summary of significant accounting policies
Basis of presentation
Progressive Asset Management, Inc., (the Company) was incorporated in California
in 1987, and registered as a broker-dealer under the Securities and Exchange Act
of 1934. Through May 1999, the Company was a full-service investment firm
specializing in socially responsible investing. As more fully discussed in Note
12, in May 1999 the Company entered into an agreement transferring all customer
accounts and relationships with client representatives to another broker-dealer.
The Company remains registered as a broker-dealer and will continue to provide
research and referrals in consideration for commission based fees.
In its policies, practices and programs, the Company is committed to providing
its clients with the highest quality financial products and investment services
and to operating as a strong, positive force for social justice and
environmental protection. The Company's principal office is in Oakland,
California.
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, none of which had significant activity during the
years ended June 30, 1999 or 1998. Progressive Asset Management Housing, Inc.
has assisted in the sale and structuring of housing limited partnerships. Until
its dissolution on June 30, 1998, Progressive Asset Management Futures, Inc.
engaged in certain limited futures trading activities. All intercompany balances
and transactions have been eliminated in the accompanying consolidated financial
presentation.
The Company clears all trades with a clearing broker on a fully disclosed basis.
Accordingly, the Company claims exemption from Securities Exchange Commission
Rule 15c3-3 because it does not carry customer funds or handle customer
securities.
Security transactions and commissions
Security transactions and related commission revenue and expense are recorded on
a settlement date basis. Net commission revenue on unsettled transactions at
year-end is not significant.
F-7
<PAGE> 29
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 1 - Summary of significant accounting policies (continued)
Depreciation and amortization
Depreciation of property and equipment is computed using accelerated methods
over useful lives of 3 to 7 years. Leasehold improvements are amortized over the
term of the related lease.
Cash and cash equivalents
For purposes of the accompanying statement of cash flows, cash and cash
equivalents consist of amounts on deposit with a commercial bank and with a
financial institution, all available on demand. The carrying amount of such cash
equivalents approximates fair value due to the short-term nature of these
instruments.
Earnings per share
Earnings per share is based on the weighted average number of common and common
stock equivalent shares outstanding during the year. The computation of fully
diluted net loss per share was antidilutive in each of the periods presented
and, accordingly, the amounts reported for primary and fully diluted loss are
the same.
Organization costs
Organization costs are amortized by the straight-line method over a five-year
period.
Estimated fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires the disclosure of the fair value of
financial instruments, including assets and liabilities recognized on the
Statement of Financial Condition. Management estimates that the aggregate net
fair value of financial instruments recognized on the Statement of Financial
Condition (including receivables, payables and accrued expenses) approximates
their carrying value, as such financial instruments are short-term in nature,
bear interest at current market rates or are subject to repricing.
Income taxes
The Company has adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" which requires
recognition of deferred tax liabilities and assets for the
expected future tax
F-8
<PAGE> 30
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 1 - Summary of significant accounting policies (continued)
Income taxes (continued)
consequences of events that are included in the financial statements and tax
returns in different periods. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. At June 30, 1999 and
1998, there were no significant deferred tax assets or liabilities.
Advertising costs
Costs incurred for producing and communicating advertising are expensed when
incurred.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principle requires management to make estimates and assumptions that
effect the amounts reported in the financial statements and accompanying notes.
Although these estimates are based on management's knowledge of current events
and actions it may undertake in the future, they may ultimately differ from
actual results.
Note 2 - Extraordinary loss
Earth Trade, Inc. (Earth Trade) was organized in 1992 to promote sustainable
development by marketing both organic and conventional food products from farm
cooperatives in the developing world. In previous years, the Company acted as a
sales agent in connection with the placement of certain Earth Trade debt and
equity securities. Principally as a result of continuing losses, the
shareholders of Earth Trade voted in May 1997 to voluntarily dissolve and
liquidate Earth Trade's net assets. In April 1997, the Board of Directors, with
consideration of the Company's mission and standards of moral and social
responsibility, its thirty percent ownership of Earth Trade and its role as
placement agent for commercial paper issued by Earth Trade, offered a settlement
agreement to the Earth Trade noteholders. Under the agreement, in exchange for
their residual Earth Trade debt and a general release of liability, the note
holders could receive either preferred shares of the Company with a stated value
of $7 or Company common shares with a stated value of $5. The settlement
agreement was accepted by substantially all of the Earth Trade note
F-9
<PAGE> 31
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 2 Extraordinary loss (continued)
holders in January 1998.
During the year ended June 30, 1998, the Company completed the first closing
under the settlement agreement pursuant to which common and preferred shares
were issued equivalent to 70% of the principal expected to be owed. The closing
of the remaining 30% took place following the final liquidation of Earth Trade
and payments to the note holders in June, 1999.
In February, 1999, the shareholders approved an additional settlement with
certain remaining Earth Trade note holders. Under the agreement, in exchange for
their residual Earth Trade debt and a general release of liability, the note
holders are entitled to receive a total of $380,000, payable in one installment
of $186,000 upon approval of the settlement agreement, and the remainder in
annual installments, with a maximum of $75,000 due before September 30, 1999,
and future maximum installments of $50,000 until paid in full. Of the settlement
amount, approximately $83,000 was provided from the final liquidation of Earth
Trade. The exact amount of future payments will depend upon various factors,
including NASD net capital requirements and the Company's gross revenues. The
remaining noteholders, after the initial installment of $186,000 is paid, may
elect to exchange their debt for shares of the Company held by the Company's
chairman. Outstanding amounts owed to the remaining noteholders will be
subordinated debt of the Company. Outstanding amounts, if any, owed to the
Company's chairman as a result of any exchange of debt for stock are further
subordinated to debt owed the remaining noteholders.
Prior to the settlement agreement, the Company had no debt or other obligations
to Earth Trade or its share or note holders and, accordingly, the settlement
agreement is not an extinguishment of debt. Management has determined that the
settlement is a transaction both unusual in nature and infrequent and, as a
result, has classified the resulting loss as extraordinary in the accompanying
statement of operations.
Note 3 Taxes on income
The Company's income tax provision for the years ended June 30, 1999 and 1998
consisted of minimum state franchise taxes.
At June 30, 1999, the Company has a carryforward of unused tax credits related
to low-income housing of approximately $49,000 from several partnerships in
which the Company has invested or received participating interests.
F-10
<PAGE> 32
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 3 - Taxes on income (continued)
At June 30, 1999, the Company had available net operating loss carryforwards to
reduce future federal taxes on income of approximately $890,000. The
carryforwards expire in the years ending June 30, 2012, 2013 and 2019, if not
utilized. At June 30, 1999, the Company had available net operating loss
carryforwards from the State of California of approximately $360,000. These net
operating loss carryforwards are available to offset future taxable income in
California through the years ending June 30, 2002, 2003 and 2004.
Under certain 1986 Tax Reform Act provisions, the availability of the Company's
operating loss carryforward is subject to limitation if there has been a change
in ownership of more than 50 percent of the Company's stock.
Note 4 - Market risk and credit risk
In the normal course of its business, the Company enters into financial
transactions where it is exposed to potential loss due to changes in market
conditions (market risk) or failure of the other party to perform (credit risk).
Additionally, pursuant to the terms of the agreement between the Company and its
clearing broker, the clearing broker has the right to charge the Company for
losses that result from a counterparty's failure to fulfill its obligations. The
Company's policy is to continuously monitor its exposure to market and credit
risk through the use of a variety of reporting and control procedures. In
addition, the Company has a policy of reviewing the credit standing of each
broker-dealer with which it conducts business.
At June 30, 1999 and 1998, the Company maintained deposit balances at a
commercial bank in excess of federally insured amounts. Amounts on deposit with
a financial institution were not federally insured.
Deposits and commissions receivable from clearing broker and net securities
owned in the accompanying balance sheet are due or held by a single clearing
broker.
F-11
<PAGE> 33
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 5 - Commitments
The company leases its office and operating facilities under operating leases.
Rent expense was $102,124 for the year ended June 30, 1999 (1998 - $189,207). At
June 30, 1999, remaining future minimum rental payments for the Company's
Oakland office facility was as follows for the years ending
<TABLE>
<S> <C>
2000 2001
$ 39,867 $ 20,324
</TABLE>
The Company's remaining commitment for its New York office is approximately
$29,000 for the year ending June 30, 2000.
Note 6 Employee benefit plan
The Company has a 401(k) profit sharing plan for the benefit of employees. The
plan allows for both Company and employee elective contributions. Company
contributions to the plan are determined annually by the Board of Directors
subject to certain maximum amounts allowable under the Internal Revenue Code. No
Company contributions were made to the plan for the years ended June 30, 1999
and 1998.
Note 7 Preferred stock
The Series A convertible preferred shares issued during the years ended June 30,
1998 and 1999, in connection with the Earth Trade settlement (Note 2), do not
pay dividends, are non-voting, and are convertible share for share into common
stock at the option of the holder after two years or automatically upon the
occurrence of certain events. The preferred shares are subject to mandatory
redemption annually each November 1. The redemption price is $7 per share. The
amount to be redeemed will be based on 1% of the Company's revenues for its
prior fiscal year. The amount to be redeemed may be reduced to the extent that
the redemption would cause the Company to fail to meet its net capital
requirement under the Securities and Exchange Act of 1934. The preferred shares
have a preference in liquidation of $7 per share aggregating $664,153 at June
30, 1999 (1998 - $576,716).
On March 23, 1999, the Board of Directors amended the Articles of Incorporation
to cancel the Series A Preferred Stock, previously authorized at 25,000 shares.
F-12
<PAGE> 34
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 8- Common stock
In December 1995, the Company authorized 200,000 common stock warrants and on
December 31, 1991, issued 185,000 common stock warrants to shareholders of
conversion "A" stock, who were also common shareholders on March 1, 1995. Each
warrant enabled the holder to purchase one share of common stock for $1.00 until
December 31, 1996, $1.50 in 1997, and $2.00 in 1998. The warrants expired on
December 31, 1998. Of the warrants issued, no shares were exercised in the year
ended June 30, 1999 or 1998.
In December 1995, the Company adopted a stock option and incentive plan that
allows for the issuance of up to 200,000 shares of common stock. The plan
provides for the award of stock options, employee stock purchases and restricted
stock grants. Of the shares awarded, all were immediately vested and are subject
to a holding period restriction of up to two years from the date of grant.
The award of additional stock options, vesting, exercise prices and other option
terms are determined by the Board of Directors. Options have been granted to
employee and non-employee board members for the purchase of common shares. The
exercise prices have not been less than the fair market value of the stock as
determined by the Board of Directors at the date of grant. The options expire at
various dates during the years 1997 to 2002. Of the options granted, all were
exercisable at June 30, 1999.
The following is a summary of shares under the option arrangements
<TABLE>
<CAPTION>
Price Shares
----------- --------
<S> <C> <C>
Outstanding, June 30, 1997 $.85 - 2.20 72,581
Granted $ 1.00 45,128
Lapsed or cancelled --
--------
Outstanding, June 30, 1998 117,709
Granted $.85 - 2.20 2,500
Lapsed or cancelled (9,873)
--------
Outstanding, June 30, 1999 110,336
========
</TABLE>
F-13
<PAGE> 35
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 8- Common stock (continued)
The Company records its stock-based awards using the intrinsic value method of
accounting in accordance with Accounting Principles Board No. 25, "Accounting
for Stock Issued to Employees" and its related interpretations. Accordingly, no
compensation expense has been recognized in the accompanying financial
statements. Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation (SFAS 123)," requires the disclosure of pro forma net
income had the Company adopted the fair value method of accounting beginning
with its year ended June 30, 1998. Under SFAS 123, the fair value of stock-based
awards to employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely tradable,
fully transferable options without vesting restrictions, which significantly
differs from the Company's stock option awards. These models also require
subjective assumptions, including future stock price volatility and expected
time to exercise, which significantly affect the calculated values. The Company
has not completed the pro forma calculations to determine the fair value of its
option awards.
Note 9 - Net capital requirement
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities and
Exchange Act of 1934, the Company is required to maintain both minimum net
capital, as defined under such provisions, and a ratio of aggregate indebtedness
to net capital not to exceed 15 to 1. At June 30, 1999, the Company has net
capital of $392,486, which is $292,486 in excess of its required net capital of
$100,000. The Company's ratio of aggregate indebtedness to net capital was .0853
to 1.
Note 10 - Contingencies
The Company, in the ordinary course of business, is named in matters arising
from its activities as a broker/dealer. In the opinion of management, based upon
discussions with legal counsel, the resolution of these matters will not have a
material adverse effect on the financial condition of the Company.
F-14
<PAGE> 36
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 11 - Quarterly financial results (unaudited)
The Company's revenues and income (loss) before extraordinary item for the four
quarters in the years ended June 30, 1999 and 1998 were as follows
<TABLE>
<CAPTION>
Revenues Income (loss)
---------- -------------
<S> <C> <C>
Quarter ended:
September 30, 1998 $ 804,285 $ (45,691)
December 31, 1998 732,643 (187,622)
March 31, 1999 849,107 (94,894)
June 30, 1999 519,871 (37,138)
Quarter ended:
September 30, 1997 $ 897,125 $ (44,674)
December 31, 1997 836,813 (46,051)
March 31, 1998 955,207 49,115
June 30, 1998 944,222 48,423
</TABLE>
Note 12 Subsequent event
In May 1999 the Company entered into agreement with Paradox Holdings, Inc.,
parent of Financial West Investment Group, Inc. (FWG), in which the Company
transferred all of its customer accounts and relationships with client
representatives to FWG. FWG will receive gross commission income generated by
the transferred representatives. In consideration for the transfer, FWG will pay
the Company 2.5% of future gross commissions up to a total of $875,000. FWG will
retain 2.25% of gross commissions until the $875,000 is paid. After payment of
the $875,000 by FWG to the Company, FWG will retain 4.75% of gross commissions
and the Company will receive the net after commission payments are made to the
representatives.
The Company will record payments from FWG in connection with the transfer as
commission income. The Company recorded in revenues for the year ended June 30,
1999, $41,154 in commissions received from FWG since May 1, 1999. Of that
amount, $7,328 represents payment against the $875,000. Paradox Holdings, Inc.
("Paradox") has guaranteed payments to the Company by FWG, Inc.
F-15
<PAGE> 37
PROGRESSIVE ASSET MANAGEMENT, INC.
Notes to Consolidated Financial Statements
June 30, 1999
Note 12 Subsequent event (continued)
Paradox further agreed to acquire a minority 40% ownership interest in the
Company, to be represented by Class B preferred shares, for $25,000. Following
approval by the NASD in late June 1999, the Company received payment and issued
the Class B preferred shares in July 1999.
The agreement among FWG, Paradox and the Company, including the transfer of the
customer accounts and relationships was subject to the NASD approval and receipt
of the payment for the equity interest. Further, the Company had not recorded
an asset related to the customer accounts or relationships and, accordingly, the
consummation of the transaction in July 1999 as opposed to June 1999 had no
significant effect on operations.
F-16
<PAGE> 38
Report of Independent Auditors
on Supplemental Information
Board of Directors
Progressive Asset Management, Inc.
We have audited the consolidated financial statements of Progressive Asset
Management, Inc. for the year ended June 30, 1999, and have issued our report
thereon dated July 22, 1999. Our audit was made primarily for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
accompanying supplemental information presented hereinafter is presented for
purposes of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by Rule 17a-5 of
the Securities and Exchange Commission. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
MARKLE STUCKEY HARDESTY & BOTT
Markle Stuckey Hardesty & Bott
Larkspur, California
July 22, 1999
F-17
<PAGE> 39
PROGRESSIVE ASSET MANAGEMENT, INC.
Statement of Changes in Liabilities Subordinated to Claims
of General Creditors
Year ended June 30, 1999
<TABLE>
<S> <C>
Balance, beginning of year $ 0
Increase (decrease) 194,000
--------
Balance, end of year $194,000
========
</TABLE>
F-18
<PAGE> 40
PROGRESSIVE ASSET MANAGEMENT, INC.
Computation of Net Capital under Rule 15c3-1 of the
Securities and Exchange Commission
June 30, 1999
<TABLE>
<S> <C>
Aggregate indebtedness
Total liabilities $ 227,503
Less subordinated liabilities (194,000)
----------
Aggregate indebtedness $ 33,503
==========
Net capital
Stockholders' equity $ 382,576
Add subordinated liabilities 194,000
Deductions and/or charges
Accounts receivable 64,636
Employee advances 25,229
Prepaid expenses 15,462
Deposits 13,048
Property and equipment, net 10,341
Securities haircuts 5,773
Investment in and advances to affiliates 16,592
Net assets of consolidated subsidiary 33,009
----------
Net capital $ 392,486
==========
Net capital requirements/ratio
Minimum net capital requirements
(6-2/3% x aggregate indebtedness) $ 2,235
Minimum dollar net capital requirement $ 100,000
Net capital requirement $ 100,000
Excess net capital $ 292,486
Aggregate indebtedness to net capital .0853 to 1
</TABLE>
F-19
<PAGE> 41
PROGRESSIVE ASSET MANAGEMENT, INC.
Reconciliation Pursuant to Rule 17a-5(d)(4)
June 30, 1999
<TABLE>
<S> <C>
RECONCILIATION WITH COMPANY'S COMPUTATION
(Included in Part IIA of Form X-17A-5
as of June 30, 1999)
Net capital, as reported in Company's Part IIA
(Unaudited) FOCUS Report 332,000
Audit adjustments 60,486
---------
Net capital, as adjusted $ 392,486
=========
Aggregate indebtedness, as reported in Company's Part IIA
(Unaudited) FOCUS Report$ 197,702
Audit adjustments (164,199)
---------
Aggregate indebtedness, as adjusted $ 33,503
=========
</TABLE>
F-20
<PAGE> 42
PROGRESSIVE ASSET MANAGEMENT, INC.
Computation for Determination of Reserve Requirements
Under Rule 15c3-3 of the Securities and Exchange Commission
June 30, 1999
The computation for determination of the reserve requirements under Exhibit A of
Rule 15c3-3 of the Securities and Exchange Commission has not been prepared
because the exemption under Reg. Section 240, 15c3-3 (k)(i)(C) is met.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PROGRESSIVE ASSET MANAGEMENT, INC.
Information Relating to Possession or Control Requirements
Under Rule 15c3-3 of the Securities and Exchange Commission
June 30, 1999
A supplementary report pursuant to Rule 17a-5(d)(4) and the information relating
to possession or control requirements under Rule 15c3-3 are not required under
Rule 17a-5(e)(1)(i)(A) and Rule 15c3-3(k), respectively.
F-21
<PAGE> 43
PROGRESSIVE ASSET MANAGEMENT, INC.
Reconciliation With Respect to Methods of Consolidation
June 30, 1999
<TABLE>
<CAPTION>
Total
Total Total Stockholders'
Assets Liabilities Equity
--------- ----------- -------------
<S> <C> <C> <C>
Progressive Asset
Management, Inc. 553,244 $ 227,503 $ 325,741
Progressive Asset Management
Housing, Inc. 77,426 591 76,835
--------- --------- ---------
630,670 228,094 402,576
Intercompany
eliminations (20,591) (591) (20,000)
--------- --------- ---------
Consolidated amounts,
as reported herein $ 610,079 $ 227,503 $ 382,576
========= ========= =========
</TABLE>
Report of Independent Auditors on Internal
F-22
<PAGE> 44
Accounting Control Required by SEC Rule 17a-5
Board of Directors
Progressive Asset Management, Inc.
We have audited the consolidated financial statements of Progressive Asset
Management, Inc. for the year ended June 30, 1999, and have issued our report
thereon dated July 22, 1999. As part of our audit, we made a study and
evaluation of the Company's system of internal accounting control (internal
control structure) to the extent we considered necessary to evaluate the system
as required by generally accepted auditing standards. The purpose of our study
and evaluation, which included obtaining an understanding of the accounting
system, was to determine the nature, timing and extent of the auditing
procedures necessary for expressing an opinion on the financial statements.
We also made a study of the practices and procedures followed by the Company in
making the periodic computations of aggregate indebtedness and net capital under
rule 17a- 3(a)(11) and the procedures for determining compliance with the
exemptive provisions of rule 15c3-3. We did not review the practices and
procedures followed by the Company in making the quarterly securities
examinations, counts, verifications and comparisons, and the recordation of
differences required by rule 17a-13 or in complying with the requirements for
prompt payment for securities under section 8 of Regulation T of the Board of
Governors of the Federal Reserve System, because the Company does not carry
security accounts for customers or perform custodial functions relating to
customer securities.
The management of the Company is responsible for establishing and maintaining a
system of internal accounting control and the practices and
F-23
<PAGE> 45
procedures referred to in the preceding paragraph. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of control procedures and of the practices
and procedures referred to in the preceding paragraph and to assess whether
those practices and procedures can be expected to achieve the Commission's
above-mentioned objectives.
The objectives of a system and the practices and procedures are to provide
management with reasonable, but not absolute, assurance that assets for which
the Company has responsibility are safeguarded against loss from unauthorized
use or disposition, and that transactions are executed in accordance with
management's authorization and recorded properly to permit the preparation of
financial statements in accordance with generally accepted accounting
principles. Rule 17a-5(g) lists additional objectives of the practices and
procedures listed in the preceding paragraph.
Because of inherent limitations in any internal accounting control procedure or
the practices and procedures referred to above, errors or irregularities may
nevertheless occur and not be detected. Also, projection of any evaluation of
them to future periods is subject to the risk that they may become inadequate
because of changes in conditions or that the degree of compliance with them may
deteriorate. Our study and evaluation made for the limited purpose described in
the first paragraph would not necessarily disclose all material weaknesses in
the system. Accordingly, we do not express an opinion on the system of internal
accounting control of Progressive Asset Management, Inc. taken as a whole.
However, our study and evaluation disclosed no condition that we believed to be
a material weakness.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the
Commission to be adequate for its purposes in accordance with the Securities
Exchange Act of 1934 and related regulations, and that practices and procedures
that do not accomplish such objectives in all material respects indicate a
material inadequacy for such purposes. Based on this understanding and on our
study, we believe that the Company's practices and procedures were adequate at
June 30, 1999, to meet the Commission's objectives.
This report is intended solely for the use of management, the Securities and
Exchange Commission and the National Association of Securities Dealers and
should not be used for any other purpose.
MARKLE STUCKEY HARDESTY & BOTT
Markle Stuckey Hardesty & Bott
Larkspur, California
July 22, 1999
F-24
<PAGE> 46
PROGRESSIVE ASSET MANAGEMENT
CONSOLIDATED CONDENSED BALANCE SHEET
NINE MONTHS ENDING MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
ASSETS
Cash & Cash Equivalents $ 444,607 $ 443,072
Accounts Receivable $ 62,092 $ 238,746
Other Current Assets $ 61,485 $ 16,592
TOTAL CURRENT ASSETS $ 568,184 $ 698,410
Property & Equipment Net $ 13,106 $ 10,341
Other Assets $ 31,027 $ 119,228
TOTAL ASSETS $ 612,317 $ 827,979
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Debt $ 2,415 $ 0
Accounts Payable $ 33,457 $ 49,789
TOTAL CURRENT LIABILITIES $ 35,872 $ 49,789
Earth Trade Settlement
Liability $ 119,000 $ 119,000
TOTAL LIABILITIES $ 154,872 $ 168,789
Preferred Stock $ 63,086 $ 55,766
Stockholders' equity $ 394,359 $ 603,424
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 612,317 $ 827,979
</TABLE>
PROGRESSIVE ASSET MANAGEMENT, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
REVENUES
Commissions & Fees $ 398,000 $2,381,362
Interest & Dividends $ 15,135 $ 4,673
TOTAL REVENUES $ 413,135 $2,386,035
ADMINISTRATIVE & SELLING EXPENSES
Commissions $ 9,525 $1,369,873
Employees' Comp & Benefits $ 136,854 $1,077,043
Communications $ 1,423 $ 65,326
Promotional Costs $ 20,350 $ 16,296
Professional Fees $ 35,515 $ 42,954
Occupancy $ 19,217 $ 18,468
Regulatory $ 5,952 $ 16,081
Office Supplies $ 2,380 $ 5,739
Administrative & Other $ 86,394 $ 58,365
Depreciation & Amortization $ 3,583 $ 3,600
TOTAL ADMINISTRATIVE & SELLING EXPENSES $ 321,193 $2,673,745
NET INCOME $ 91,942 $ (287,710)
EARNING (LOSS) PER SHARES - BASIC $ 0.03 $ (0.18)
EARNING (LOSS) PER SHARES - FULLY DILUTED $ 0.03 $ (0.18)
SHARES USED TO COMPUTE PER SHARE AMOUNT 2,813,237 1,602,447
</TABLE>
F-25
<PAGE> 47
PROGRESSIVE ASSET MANAGEMENT, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 91,942 $ (287,710)
Adjustments to Net Income $ (13,508) $ (209,595)
Total From Operating Activities $ 78,434 $ (497,305)
INVESTING ACTIVITIES $ (4,000) $ 50,000
FINANCING ACTIVITIES $ (52,181) $ (4,000)
INCREASE (DECREASE)
IN CASH $ 22,253 $ (451,305)
CASH & CASH
EQUIVALENTS
Beginning of period $ 422,354 $ 573,078
End of period $ 444,607 $ 443,072
</TABLE>
Note 1 This is a condensed and consolidated financial summary which includes PAM
and its wholly-owned subsidiary, PAM Housing.
Note 2 Total number of shares as of December 31 1999 and 1998 is 2,810,793.
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with the requirements of Form 10-SB and Item 310 of
Regulation S-B, and in the opinion of management of PAM, include all normal
adjustments considered necessary to present fairly the financial position as of
December 31, 1999, and the six months ended December 31, 1999, and December 31,
1998. These results have been determined on the basis of generally accepted
accounting principals and practices and applied consistently with those used in
the preparation of PAM's audited consolidated financial statements and notes for
the year ended June 30, 1999.
F-26
<PAGE> 48
PART III
Exhibit 2 (a) Restated Articles of Incorporation
(b) Bylaws
Exhibit 6 (a) Stock Option Plan
(b) Standstill Agreement between PAM and Paradox Holdings
Exhibit 12 (a) Purchase Agreement Among Paradox Holdings, PAM and FWG,
Exhibit 27 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, who is duly authorized.
Progressive Asset Management, Inc.
Date: July 12, 2000 /s/ ERIC LEENSON
by Eric Leenson, President
21
