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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[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 September 30, 1999
Commission File Number 1-11454-03
Peachtree FiberOptics, Inc.
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(Exact name of small business issuer
as specified in its charter)
Delaware 58-1974423
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3300 PGA Blvd., Suite 810
Palm Beach Gardens, Florida 33410
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (305) 374-0282
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 [ ]
Number of shares of Peachtree FiberOptics, Inc. Common Stock, $0.01 par value,
issued and outstanding as of September 30, 1999: 1,235,000
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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PEACHTREE FIBEROPTICS, INC.
INDEX
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PAGE
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PART 1. FINANCIAL INFORMATION
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 September 30, 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
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PEACHTREE FIBEROPTICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF DEFICIENCY IN NET ASSETS
AVAILABLE IN LIQUIDATION
(LIQUIDATION BASIS)
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September 30, December 31,
1999 1998
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(Unaudited)
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Assets
Cash $ 250,184 $ 499
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Total Assets $ 250,184 $ 499
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Liabilities
Accounts payable $ 0 $ 0
Accrued expenses 37,221 21,579
Lease obligations 0 0
Managing agent fee 112,500 775,000
Note Payable to
Related Party 11,332 6,000
Notes Payable 61,333 56,000
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Total liabilities $ 222,386 $ 858,579
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Net deficiency in net assets available in liquidation $ 27,798 $ (858,080)
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Stockholders' deficiency in net assets
Common stock, $.01 par value; 20,000,000 shares authorized, 1,235,000 and
18,149 shares issued and outstanding September 30, 1999 and December 31,
1998, respectively $ 12,350 $ 0
Additional paid-in capital $ 5,420,093 $ 3,536,710
Unearned compensation (70,666) 0
Accumulated deficit $(5,333,979) $(4,394,790)
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Net stockholders' excess (deficiency) in net assets $ 27,798 $ (858,080)
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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 SEPTEMBER 30, 1999
(UNAUDITED)
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Deficiency in net assets available in
liquidation at January 1, 1999 $(858,080)
Changes in net assets available in liquidation attributed to:
Compensation Expense (797,119)
General and administrative expenses (29,597)
Managing Agent Fee (112,500)
Capital Contributions 2,974
Issuance of Stock to Consultants and Director 867,786
Unearned Compensation (70,666)
Stock Purchase 250,000
Conversion of Accrued Managing Agent Fee to Equity 775,000
---------
Excess in net assets available in liquidation at September 30, 1999 $ 27,798
=========
</TABLE>
SEE ACCOMPANYING NOTES.
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PEACHTREE FIBEROPTICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 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 September 30, 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 September 30, 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
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.
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.
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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 1,455 and 360 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 $2.23 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 350,000 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 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 33,696 shares
of the Company's common stock.
On July 13, 1999, Genesis converted the balance of $700,000 into 314,489 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 of $112,500 for the first,
second, third, fourth, fifth and part of the sixth year fee, less amounts
converted to common stock.
Mr. Sidney Levine has served as the Company's sole director since 1993. No
board of director fees, meeting fees or fees of any kind or nature have been
paid to Mr. Levine since 1993 in light of the fact that the Company did not
have the capital. From time to time since 1993 Mr. Levine has also provided
consulting services and business advice without any compensation or expense
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reimbursement. In recognition, of his service to the Company, the Company
agreed on July 16, 1999, to pay to Mr. Levine 343,666 unregistered shares of
its common stock. As such, the Company recognized $364,286 in compensation
expense.
In consideration for legal services performed by the law firm of Atlas Perlman
Trop and Borkson through September 30, 1999, the Company also agreed on July 16,
1999 to pay 50,000 unregistered shares of its common stock to its partners. As
such, the Company recognized $53,000 in compensation expense.
On July 21, 1999 the Company announced that it has entered into discussions
with vFinance.com (www.vfinance.com) to merge into the Company. vFinance.com is
one of the Internet's leading business development vertical portal or "vortal"
attracting approximately 1.5 million "hits" per month representing over 25,000
monthly visitors from at least 50 countries.
vFinance.com is a "new-media" enterprise focused on providing business
development tools, information, products and services to assist entrepreneurs
and executives of small and medium sized enterprises to organize and grow their
business. The site is typically listed by search engines in the top five for
relevant content (in many cases #1). The site has over 350 links to related
sites such as Microsoft Network, Dow Jones, and SNAP to name a few. The
combination of relevant content and ease of use has resulted in the site having
over 50,000 user sessions each month growing on a monthly rate of 15% with the
average user session length in excess of nine minutes.
The Company believes that this merger opportunity would enable the Company to
build one of the world's leading "business development" vertical portals and be
positioned as a "new-media" enterprise leveraging the "convergence" of digital
information to execute its business strategy.
On July 27, 1999 the Company also announced that it has entered into
discussions with Union Atlantic LC, a 4 year old management consulting firm
that is a pioneer in "strategic outsourcing", to merge into the Company.
Strategic outsourcing is a methodology by which public and private small to
medium sized enterprises can cost effectively access the same management and
financial resources that large companies typically have in-house, for the
purpose of expediting corporate development. The firm's focus is on technology.
Union Atlantic LC is currently affiliated with vFinance.com. Moreover, the
Company's Managing Agent, Leoanrd J. Sokolow, is also President and a major
shareholder in vFinance.com and Union Atlantic LC.
On August 16, 1999, the Company entered into a one (1) year Consulting
Agreement with Stephen Krause and Timothy Mahoney ("Consultants") to assist the
Company in identifying viable candidates with which the Company may merge and
possible acquisition candidates. At the request of the Company, the Consultants
have agreed to assist in the management of any such candidates. In
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consideration for their services, the Company has agreed to pay 40,000
unregistered shares of the Company's common stock to Stephen Krause and 40,000
unregistered shares of the Company's common stock to Timothy Mahoney. In August
of 1999 40,000 of such unregistered shares were issued to Mr. Krause and 40,000
of such unregistered shares were issued to Mr. Mahoney. The value of these
grants totaled $84,800. The Company is amortizing this amount into expense over
the term of such Agreement. As of September 30, 1999, the Company has
recognized $14,134 in compensation expense. In addition to such shares the
Company shall be obligated to pay to Consultants a fee for M&A transactions
("M&A Fees") involving a company they introduced to or identified for the
Company. The formula for compensation shall be based on the Lehman Formula of:
5% of the first one million dollars in gross transaction
value; 4% of the next million dollars in gross transaction
value; 3% of the next million dollars in gross transaction
value; 2% of the next million dollars in gross transaction
value; and 1% of the balance in gross transaction value over
the first four million dollars.
Transaction value shall not include licensing, distribution or joint marketing
contracts. Fees under the M&A relationship will be paid in cash or restricted
common stock, at Peachtree's option. Mr. Mahoney is a major shareholder in
vFinance.com and Union Atlantic LC.
As of August 27, 1999, the Company entered into a one (1) year Consulting
Agreement with Stephen Krause ("Krause") in consideration of Krause's services
to the Company since 1998 and based on the Company's desire to continue to use
Krause's skills in connection with the pending acquisition of vFinance.com and
Union Atlantic LC. Krause shall continue to undertake marketing, administrative
and other executive duties to advance the corporate goals and interest of the
Company, vFinance.com and Union Atlantic LC. Krause will continue to develop
marketing programs for the provision of their services and financial products
and formulate distribution programs for their services and products. Krause will
also continue to assist in the development of their administrative
infrastructure, recruitment of key personnel and the arrangement of professional
consultants to the Company, vFinance.com and Union Atlantic LC. Krause has spent
and it is anticipated that Krause will continue to spend at least 40 hours per
month with respect to these activities. In recognition and consideration for
such services provided to the Company prior to August 27, 1999, the Company has
agreed to pay 345,000 unregistered shares of the Company's common stock to
Krause. Furthermore in consideration for his services rendered after August 27,
1999, Krause agrees to accept the M&A Fees earned pursuant to the August 16,
1999 Consulting Agreement. The Company recognized $365,700 in compensation
expense with respect to the payment of these shares to Mr. Krause.
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
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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. On
October 18, 1999 the holders of such notes agreed to convert such debt,
including all accrued and unpaid principal and interest, into 75,000
unregistered shares of common stock of the Company.
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.
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. All shares have be
retroactively restated to reflect such reverse stock split.
For an aggregate purchase price of $250,000, on September 27, 1999, the Company
entered into a Stock Purchase Agreement with River Rapids LTD. ("Buyer") to
sell to the Buyer (a) 100,000 shares of the Company's common stock; and (b) the
"Option", as described herein below.
The Option gives the Buyer the right to purchase all but not less than all of
the Option Shares, commencing on the "Funding", as defined herein below, and
terminating at 5:00 P.M. (Miami, Florida time) on September 27, 2002 (the
"Exercise Period"). The exercise price of the Option is (the "Option Exercise
Price") is a follows:
300,000 common shares of Seller at $3.00 per share;
300,000 common shares of Seller at $4.00 per share; and
300,000 common shares of Seller at $5.00 per share
For purposes of this Option, "Funding" shall be defined as the date upon which
Seller: (i) has sold substantially all its business or otherwise merged with or
been acquired by a third party; or (ii) has received on a cumulative basis net
proceeds (net of cash commissions) from the sale of its capital stock
(excluding the Shares purchased pursuant to Section 1.1) equal to or greater
than $5,000,000 including any capital transaction, or series of capital
transactions, from any source whatsoever. For purposes of this Option, the
merger of vFinance.com and/or Union Atlantic LC into the Company shall not be
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considered a "Funding". In the event there is no Funding by Seller within 90
days from September 27, 1999, the Exercise Period shall terminate immediately
and the Option shall be cancelled and shall be deemed null and void and of no
further force and effect. In order to exercise the Option, the Option Exercise
Price must be paid in full by wire transfer of immediately available funds to a
bank designated by the Seller during the Exercise Period.
NOTE 4. SUBSEQUENT EVENTS
None.
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 September 30, 1999 the net realizable value of the Company's assets were
approximately $250,184 and its total liabilities were approximately $222,386.
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
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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 September 30, 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.
(Registrant)
Date: November 17, 1999
By: /s/ Leonard J. Sokolow
--------------------------
LEONARD J. SOKOLOW
MANAGING AGENT
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 250,184
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 250,184
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 250,184
<CURRENT-LIABILITIES> 222,386
<BONDS> 0
0
0
<COMMON> 12,350
<OTHER-SE> 15,448
<TOTAL-LIABILITY-AND-EQUITY> 27,798
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 939,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 939,215
<INCOME-TAX> 0
<INCOME-CONTINUING> 939,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 939,215
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
