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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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Commission File Number 1-11454-03
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Peachtree FiberOptics, Inc.
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(Exact name of small business issuer
as specified in its charter)
Delaware 58-1974423
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
701 Brickell Avenue, Suite 2000
Miami, Florida 33131
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (305) 374-0282
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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Number of shares of Peachtree FiberOptics, Inc. Common Stock, $0.01 par value,
issued and outstanding as of March 31, 1999: 9,877,830
Transitional Small Business Disclosure Format (check one):
Yes No X
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PEACHTREE FIBEROPTICS, INC.
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION PAGE
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<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed Statements of Deficiency in Net Assets
Available in Liquidation 3
Condensed Statements of Changes in Deficiency in Net
Assets Available in Liquidation for the three months
ended March 31, 1999 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Deficiency
in Net Assets Available in Liquidation
PART II. OTHER INFORMATION
SIGNATURES
</TABLE>
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PEACHTREE FIBEROPTICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF DEFICIENCY IN NET ASSETS
AVAILABLE IN LIQUIDATION
(LIQUIDATION BASIS)
<TABLE>
<CAPTION>
March 31, December 31, 1998
1999
(Unaudited)
<S> <C> <C>
Assets
Cash $ 470 $ 499
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Total Assets $ 470 $ 499
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Liabilities
Accounts Payable $ 0 $ 0
Accrued expenses 25,661 21,579
Lease obligations 0 0
Managing agent fee 737,500 775,000
Note Payable to Related
Party 6,000 6,000
Notes Payable 56,000 56,000
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Total liabilities $ 825,161 $ 858,579
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Net deficiency in net assets
available in liquidation $ (824,691) $ (858,080)
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Stockholders' deficiency in net
assets
Common stock, $.01 par value;
20,000,000 shares authorized,
3,225,000 and 9,877,830 shares $ 98,778 $ 32,250
issued and outstanding December
31, 1998 and March 31, 1999,
respectively $ 3,512,932 $ 3,504,460
Additional paid-in capital
Accumulated deficit $(4,436,401) $(4,394,790)
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Net stockholders'
deficiency in net assets $ (824,691) $ (858,080)
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</TABLE>
SEE ACCOMPANYING NOTES.
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PEACHTREE FIBEROPTICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF CHANGES IN DEFICIENCY IN
NET ASSETS AVAILABLE IN LIQUIDATION
PERIOD FROM JANUARY 1, 1999 THOUGH MARCH 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
Deficiency in net assets available in $ (858,080)
liquidation at January 1, 1999
Changes in net assets available in liquidation attributed to:
General and administrative expenses (4,111)
Managing Agent Fee (37,500)
Debt conversion to common stock 75,000
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Deficiency in net assets available in
liquidation at March 31, 1999 $ (824,691)
==========
</TABLE>
SEE ACCOMPANYING NOTES.
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PEACHTREE FIBEROPTICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1999
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the statement of deficiency in net
assets available in liquidation and changes in deficiency in net assets
available in liquidation at March 31, 1999 have been made. The statement of
deficiency in net assets available in liquidation and changes in deficiency in
net assets available in liquidation at March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999. For further information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the period
ending December 31, 1998 and to the Company's quarterly reports on Form 10-QSB.
NOTE 2. LIQUIDATION OF CERTAIN ASSETS
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On October 27, 1993 Genesis Partners, Inc. (the "Managing Agent") was granted
authority by the Company to act as exclusive manager of the Company and all of
its business interests. The Managing Agent commenced a liquidation of certain
assets of the Company shortly thereafter.
As a result of the Company's decision to liquidate certain assets, the Company
began using the liquidation basis of accounting for the period beginning
October 28, 1993. Therefore, for the period beginning October 28, 1993 assets
have been adjusted to net realizable values and liabilities adjusted to
settlement amounts plus estimated liquidation costs. As of December 31, 1998,
the net realizable value of the Company's assets was $499 and its total
liabilities were approximately $858,579.
On May 30, 1996, the Company executed an assignment agreement with VAI Patent
Management Corporation ("VAI") in the amount of $10,000. The agreement assigns
VAI the Company's title and interest in its U.S. registered patent and its
exclusive license agreement with Lightwave Technology, Inc. Under the terms of
the agreement the Company may receive an additional lump sum payment equal to
$15,000 if certain goals are met by the assignee within a 36 month period.
Effective December 31, 1998, the Company reduced, to zero, certain accounts
payable and accrued liabilities aggregating $194,000 that have been outstanding
since the Company adopted the liquidation basis of accounting on October 28,
1993. The Company has not been contacted by these vendors related to settling
these liabilities and therefore believes such amounts have been effectively
settled. Accordingly, the Company adjusted these liabilities to their net
realizable values.
On February 28, 1999, the Company entered into a non-binding letter of intent
to acquire all of the outstanding capital stock of a private company in the
home healthcare equipment and service industry in exchange for the Company's
outstanding stock. This transaction was terminated in May 1999.
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Management has completed the assessment of its Year 2000 issues and concluded
that the consequences of its Year 2000 issues will not have a material effect
on the Company's business, results of operations, or financial condition as
they are using the liquidation method of accounting and have no operations.
On October 27, 1993 the Company agreed to pay the Managing Agent $150,000 per
year and issue Leonard J. Sokolow, the sole stockholder of the Managing Agent,
10% of the Company's outstanding common stock on a fully diluted basis. Payment
of such compensation is contingent upon the Company obtaining sufficient
capital through a private placement or a public offering and/or the completion
of a merger or acquisition. Pursuant to such agreement, on February 28, 1994,
and February 15, 1995, the Company issued Mr. Sokolow 287,288 and 71,044
shares, respectively, of the Company's Common Stock. This agreement was to have
expired on October 26, 1995 but was extended for an additional three years and
was to have expired on October 26, 1998. This agreement has been extended again
until October 26, 1999. As of December 31, 1998 Management fees totaling
$775,000 had been accrued by the Company and are due and payable by the Company
to Genesis Partners, Inc. ("Genesis"). (See "Managing Agent Compensation"). The
Company determined that in order to attract any viable financing and/or merger
or acquisition opportunities it would need to satisfy such outstanding fees
payable to Genesis without requiring any cash consideration. As a consequence,
on March 18, 1999 the Company entered into a Debt Conversion Agreement with
Genesis and Mr. Sokolow. The Debt Conversion Agreement provides that Genesis
can covert in whole part $.011273398 of such accrued fees for one share of
common stock of the Company (the "Conversion Ratio") up to a maximum of
$775,000 in accrued fees resulting in a maximum of 68,745,910 common shares of
the Company to be issued to Genesis upon full conversion of such $775,000 in
accrued fees. Genesis further agreed that, immediately preceding a merger,
acquisition or financing by or of the Company ("Reorganization Event"), any and
all accrued fees not then converted shall be automatically converted ("Full
Conversion") in its entirety pursuant to the Conversion Ratio. Genesis and Mr.
Sokolow also agreed to forgive, release and forever discharge the Company for
any and all other debt that the Company has incurred or may incur to Mr.
Sokolow and/or Genesis. Furthermore, immediately preceding a Reorganization
Event and after the Full Conversion, Sokolow and Genesis
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have agreed to cancel the Management Agreement and forever forgive, release and
forever discharge the Company from any and all obligations or fees which may be
due under such Management Agreement. Upon execution of the Debt Conversion
Agreement on March 18, 1999, Genesis converted $75,000 of the accrued fees
pursuant to the Conversion Ratio into 6,652,830 shares of the Company's common
stock. As of the date of this report no cash compensation has been paid to the
Managing Agent and the Company has accrued as an outstanding obligation to the
Managing Agent $737,500 for the first, second, third, fourth, fifth and part of
the sixth year fee, less amounts converted to common stock.
NOTE 3. BRIDGE FINANCING
On May 15, 1995, the Company obtained bridge financing in the aggregate amount
of $50,000 from two investors, less a 10% fee paid to JW Charles Securities,
Inc. for arranging the transaction. The Company used approximately $16,000 of
the proceeds from this financing to pay professional fees and applied the
remainder of the proceeds to meet operating expenses. In exchange for such
financing, the Company issued a promissory note in the principal amount of
$25,000 each to the two investors. Such notes bear interest at a rate of 10%
per annum and became due upon the earlier of November 15, 1995 or the closing
date of a firm commitment underwritten secondary public offering of the
Company's securities. Such notes are currently in default and remain unpaid. No
agreement, understanding or arrangement presently exists with respect to any
secondary public offering.
In October 1998 and May 1999, Mr. Sokolow and another investor each provided
$6,000 and $5,332 bridge loans to the Company. The Company used these proceeds
to pay professional fees and operating expenses. In exchange for such
financing, the Company issued and/or has agreed to issue promissory notes in
the principal amount of $6,000 and $5,332 each to Mr. Sokolow and the investor.
Such notes will bear interest at the rate of 10% per annum and are due and
payable upon the merger of the Company with, or acquisition of, another company
or business.
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The Company's Board of Directors and majority stockholder on March 18, 1999,
approved and recommended that the Certificate of Incorporation be amended in
order to effectuate a 1 for 197.44092 reverse stock split. The proposed
amendment became effective in April 1999 upon the filing of the amendment with
the Secretary of State of the State of Delaware.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF DEFICIENCY IN NET ASSETS
AVAILABLE IN LIQUIDATION:
As a result of the Company's decision to liquidate certain assets, the Company
began using the liquidation basis of accounting for the period beginning
October 28, 1993. Therefore, for the period beginning October 28, 1993 assets
have been adjusted to settlement amounts plus estimated liquidation costs. As
of March 31, 1999 the net realizable value of the Company's assets were
approximately $470 and its total liabilities were approximately $825,161.
Therefore, it is highly unlikely that there will be any funds available for
disbursement to unsecured creditors.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter ended March 31, 1999.
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SIGNATURES
Pursuant to the Requirements 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.
Peachtree FiberOptics, Inc.
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(Registrant)
Date: May 20, 1998
By: /s/ Leonard J. Sokolow
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LEONARD J. SOKOLOW
MANAGING AGENT
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 470
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 470
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 470
<CURRENT-LIABILITIES> 825,161
<BONDS> 0
0
0
<COMMON> 98,778
<OTHER-SE> 3,512,932
<TOTAL-LIABILITY-AND-EQUITY> (4,436,401)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (41,611)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (41,611)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,611)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
