U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL USINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
CAPITAL DEVELOPMENT GROUP, INC.
-------------------------------
(Name of Small Business Issuer in Its Charter
Oregon 33-1113777
- - ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation organization) Identification no.)
4129 Main Street, Suite 100A, Riverside, CA 92501-3625
- - ------------------------------------------- ----------
(Address of Principal Executive offices) (Zip Code)
(909) 276-0873
---------------------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- ------------------------------
Common Stock NASDAQ OTC BBS
------------ --------------
Securities to be Registered under Section 12(g) of the Act:
----------------------------------------
(Title of Class)
----------------------------------------
(Title of Class)
<PAGE>
PART I
Forward-Looking Statements. This Registration Statement includes
"forward-looking statements" as defined in Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and we will assert the
safe harbor for such statements as contained in that statute. Forward looking
statements contained in this registration statement are based on our beliefs and
assumptions and on information currently available to us. Forward-looking
statements include statements in which words such as "expect, " "anticipate,"
"intend," "plan," "believe," "estimate," "consider," or similar expressions are
used.
You should not construe any forward-looking statement as a guarantee of future
performance. These statements inherently involve risks, uncertainties and
assumptions. Our future results and stockholder values will differ from those
expressed in these forward-looking statements, and those variations may be
material and adverse. Many of the factors that will affect these results and
values are beyond our ability to control or predict. In addition, we do not have
any intention or obligation to update forward-looking statements after this
registration statement becomes effective, even if new information, future events
or other circumstances have caused statements expressed in this registration
statement to become incorrect or misleading.
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Capital Development Group, Inc. ("CDG" or the "Registrant") is an
Oregon corporation incorporated on May 19, 1993. Its authorized capital
consists of 25,000,000 shares of common stock, of which 7,159,058
shares were issued and outstanding as of the effective date of this
Registration Statement (the "Effective Date"), and 1,000,000 shares of
preferred stock, of which no shares were issued and outstanding as of
the Effective Date. Shares of CDG common stock have traded on the
Nasdaq Stock Market - OTC Bulletin since September 1994 under the
symbol "CDVG."
CDG has never been the subject of a bankruptcy, receivership, or any
similar proceeding. However, in late 1998 and early 1999, we resolved
and settled claims with a majority of our creditors, in which the
aggregate value of the resolved claims was reduced from approximately
$460,000 to approximately $15,000 plus 144,600 shares of our common
stock. We were unable to locate creditors holding claims totaling, in
the aggregate, approximately $90,000 (with no individual claim larger
than $20,000). To our best knowledge, none of these latter creditors
have actively pursued their claims since 1995, and none have contacted
us since early 1996. Therefore, we do not plan to pursue the creditors
or pay any claims they might assert. Except as described above, we have
not been involved in any material reclassifications, mergers,
consolidations, or purchases or sales of significant amounts of assets
not in the ordinary course of business.
(b) Business of Issuer
CDG was formed to purchase medical accounts receivables ("MARs") from
healthcare providers at a discount and to collect the MARs from payers,
primarily including third party healthcare insurers and managed care
organizations. We also may accept engagement as a collection manager to
collect MARs on behalf of healthcare providers.
CDG owns a proprietary, custom software package called Administrator I
to track and collect each MAR. Although we have not yet purchased any
MARs, we have tested Administrator I successfully on MARs owned by
third parties. Moreover, we granted a non-exclusive license of
Administrator I to Medcap, Inc. in 1994, and Medcap used Administrator
I successfully in 1994 and 1995. We also have received a licensing
commitment (described below) from Vahl Software Group ("VSG") for
<PAGE>
Administrator II, which is a new software package that is functionally
similar to Administrator I but, we believe, will be more flexible and
easier to use. VSG is an assumed business name of Michael Vahl, the
majority owner and President of CDG, and the person from whom we
originally licensed our rights to Administrator I in 1994. The license
agreement for Administrator II will require us to pay VSG a royalty of
$0.25 (twenty-five cents) for each MAR we process through Administrator
II.
We plan to market our concepts and services to healthcare providers
interested in selling MARs or hiring a collection manager for their
MARs. We also expect to attract a diverse portfolio of MARs by
acquiring receivables from a variety of healthcare providers, including
physician groups, ancillary service providers, hospitals, and other
providers. We plan to contact healthcare providers by paying
commissions to independent brokers for locating providers with whom we
ultimately contract to provide collection services. We have contacted a
number of brokers who have relationships with healthcare providers, but
we have not yet reached agreement with any brokers regarding brokerage
services or commissions. CDG anticipates entering into the necessary
relationships during calendar year 1999. To promote our diversification
strategy, we hope to enter into agreements with a large number of
brokers, thereby minimizing dependence on any individual broker.
The price at which we purchase the MARs from providers is based on our
assessment of the amount of time and expertise needed to collect the
MARs. The typical discounted purchase price ranges from 95% to 99.5% of
the amount of the MARs, and payment is made only for MARS that are
ultimately collected. During our formative stage, we plan to obtain the
funds to purchase MARs by raising private equity funds, and upon
receipt of adequate equity investment, by obtaining a substantial line
of credit.
CDG owns a copyright for Administrator I, but holds no patents,
trademarks, franchises, concessions or labor contracts. We have issued
two non-exclusive, perpetual, irrevocable licenses of its Administrator
I software, the first to Medcap, Inc. (located in Portland, Oregon) in
1994, and the second to Aries Financial Group (also located in
Portland, Oregon) in 1997.
Neither license will generate any further revenue to CDG.
Based on research performed by Mr. Vahl, healthcare claims are
currently in excess of $1,000,000,000 dollars. Of that amount,
approximately 60% is available to be factored. A number of large claims
processors will compete with CDG for contracts, including at least one
firm that processes in excess of $1 billion in claims annually. Several
other large firms, as well as more than 100 other enterprises, also
process significant numbers of claims.
Moreover, very few third party billing firms provide only factoring
arrangements for the healthcare providers. In addition to claims
administration, we intend to develop our business plan to permit us to
provide consulting services including software and general business
consulting. While these services are not now available, and while we
cannot assure investors we will ultimately provide those services, we
believe that our service-oriented approach to claims administration
will distinguish us from our competitors.
Because we have not actively engaged in business during the past three
years, we have no employees. Our president, Mr. Michael P. Vahl,
receives no salary or other benefits, but bills us for his services at
the rate of $100 per hour. At present, we owe Mr. Vahl approximately
$50,000 for accrued hourly billings and expenses.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Plan of Operation
In recent months, our president, Mike Vahl, and one of our significant
shareholders, Gordon Root, have satisfied our cash requirements by
lending funds to us in exchange for demand promissory notes.
<PAGE>
Generally, these notes have amounted to less than $1,000 per month.
Messrs. Vahl and Root have indicated a willingness to continue lending
essential funds to us until we complete a financing and acquisition
plan for our initial MARs, and until we begin to receive cash flow from
those MARs. However, neither Mr. Vahl nor Mr. Root is obligated to
continue lending money to us, nor is either of them prohibited from
demanding payment for outstanding loans at any time.
During the third quarter of 1999, we plan to finalize our license
agreement with VSG for Administrator II. Although various terms of the
license agreement are yet to be negotiated, we have received a firm
commitment from VSG for a non-exclusive, royalty based license that
will require CDG to pay VSG a royalty of $0.25 (twenty-five cents) for
each MAR processed through Administrator II.
In order to process MARs, we must acquire various computer hardware
components. Initially, we plan to limit our hardware purchases to an
application server, a DSL connection to the Internet, two workstations,
and the related peripherals. If we acquire additional MARs, it may
become necessary to expand our equipment base to include additional
workstations and data storage. We also plan to acquire miscellaneous
office furniture and equipment to outfit our planned administrative
offices.
Additionally, we will be required to hire full time employees to
implement our MAR collection and claims management. We anticipate
hiring 2-3 employees in 1999 and another 3-5 employees in 2000.
(b) Management's Discussion and Analysis of Financial Condition and Results
of Operations
During the past four years, our directors and officers have been
working to correct problems arising from a major fraud committed
against CDG. The fraud involved $3,500,000 in counterfeit certificates
of deposit that were issued to CDG in exchange for significant equity
and cash. The fraud left CDG in a tenuous financial position that we
have sought diligently to correct. The only revenue we generated during
the past four years was a license fee from Aries Financial Group in the
amount of $100,000. We used these funds, in large part, to reach
accords with most of our creditors, all of whom were due monies for
products or services provided prior to March 1995. While we now have an
accumulated deficit of $2,082,259 and negative shareholder equity in
the amount of $40,618, we believe we have substantially reduced the
likelihood of material claims by our creditors and that our financial
condition is more stable than in the months immediately following the
fraud.
We used a portion of the funds from the license to Aries Financial
Group to fund litigation against the perpetrators of the fraud. We were
successful in obtaining a judgment in the litigation, including
judicial declarations that the 3,875,000 shares issued to the
perpetrators of the fraud are void for lack of consideration. As a
result, the number of shares of outstanding CDG common stock was
reduced by more than 38%. We also were awarded monetary damages against
the perpetrators, but the prospect of financial recovery is remote.
Mr. Vahl, CDG's president, has indicated a willingness to continue to
loan money to CDG until we become operational and profitable, but he is
under no obligation to do so, and he may therefore withdraw his lending
commitment at any time. Assuming that Mr. Vahl continues to provide
necessary capital, we expect to become operational in the second half
of 1999.
Prior to that time, we expect to:
1) License Administrator II from VSG.
2) Line up a network of brokers to provide a steady stream of MARs.
3) Secure a line of credit or alternative financing arrangement
necessary to purchase MARs or secure MARs management agreements.
<PAGE>
4) Start operations.
In light of the significant delays in the payment of healthcare
receivables, we believe that healthcare providers remain anxious to
liquidate their claims in exchange for immediate payment. The state of
the healthcare industry is such that medical insurers are delaying
payments to the healthcare providers by 60 to 90 days or more, which
often creates significant cash flow difficulties for the providers.
However, a number of uncertainties may have an effect on our business,
financial conditions and operations, and those effects may be material
and adverse. These uncertainties include the following.
We will require additional funding to commence operations.
We currently have no cash reserves and have accumulated significant
liabilities. If we do not receive additional capital during the second
half of 1999, we will be unable to implement our business plan and we
will not generate revenues sufficient to satisfy our existing
liabilities. The result is that our stock price could fluctuate
significantly and could become valueless.
We may be subject to claims by creditors for claims arising before
1995.
We have searched for and reached accord with what we believe to be most
of our creditors. However, we believe other creditors exist and that
some of them may have claims that have not lapsed or been extinguished
by statutes of limitation or similar legal principles. Some of these
creditors may later bring claims against us for amounts owed or claimed
to be owed from prior obligations. If one or more of these claims is
significant in comparison to our operations, we may be forced into a
bankruptcy or similar proceeding. Such an event would affect our
operations, business and financial condition materially and adversely.
We may be unable to continue borrowing money from Messrs. Vahl and
Root, and one or both of them may call our outstanding obligations.
We recently have met our current expenses by borrowing money from two
of our controlling shareholders, Messrs. Mike Vahl and Gordon Root, in
exchange for demand promissory notes. We anticipate continuing to fund
our necessary expenses by borrowing additional funds from these
individuals until we acquire MARs and begin to generate revenues
sufficient to satisfy our current obligations. However, neither Mr.
Vahl nor Mr. Root is subject to a binding obligation to lend additional
funds to CDG, and there can be no assurance that either of them will
continue to do so. If we fail to obtain the necessary capital by
borrowing money from these individuals or from other sources, our
business, financial condition and operation will be affected materially
and adversely.
Additionally, we owe substantial sums of money to both Mr. Vahl and Mr.
Root, under terms that require payment on demand. If either or both of
them should demand repayment of all or a portion of the loans before we
generate sufficient revenues to fund these payments, such a demand
would have a material adverse effect on our business, operations and
financial condition.
We are entering into a market that currently is experiencing
significant competition.
The market for medical billing services and related entities currently
is served by a substantial number of businesses, including both medical
practice management companies and billing and collection services. Many
entities with which we will compete are substantially better funded and
have gathered significant market share. Moreover, some of these
enterprises have significant cash reserves and can better fund
shortfalls in collections that might have a more pronounced impact on
companies such as
<PAGE>
ours. Some of these companies also have greater experience and/or more
efficient collection methods than we might develop. If we fail to
compete effectively with businesses that provide similar services, our
business operations and financial condition will be affected materially
and adversely.
ITEM 3. DESCRIPTION OF PROPERTY
The Registrant does not currently own or lease any real property. While
we anticipate leasing up to 1,000 square feet office space in
Riverside, California to conduct our operations, there can be no
assurance that adequate space can be obtained on terms and conditions
that will be acceptable to the Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Class Name and Address of Beneficial Owner Amount Owned % Class
- - ----- ------------------------------------ ------------ -------
Common Michael P. Vahl 5,084,635 71.51%
7126 Stanhope Lane
Riverside, CA 92506
Common Gordon C. Root 1,105,500 15.44%
2413 Remington Dr.
West Linn, OR 97068
All officers and directors as a
group (one individual) 5,084,635 71.51%
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Michael P. Vahl, age 41, is the President, Secretary and sole director of CDG.
Mr. Vahl is compensated on an hourly basis as an independent contractor for his
activities on behalf of CDG. CDG has no other employees. Mr. Vahl has been with
the Registrant since its inception in 1993. From its inception until January
1996, he was the Executive Vice president and Chief Operating Officer. In
January of 1996, he became the Registrant's President and Chief Executive
Officer. Since 1988, Mr. Vahl has also owned and operated The Vahl Software
Group, a sole proprietorship that provides software development and consulting
services. Mr. Vahl is not an officer or director of any other entities, and has
never been involved in any bankruptcies or criminal matters.
ITEM 6. EXECUTIVE COMPENSATION
Michael P. Vahl is the President of CDG, but he currently receives no salary or
other benefits. He bills CDG on an hourly basis of $100 per hour for time he
spends on behalf of CDG. In the last three years, CDG has paid the following
amounts to Mr. Vahl: 1996 - $0, 1997 - $0, 1998 - $17,300. CDG currently is
indebted to him for approximately $45,000 in loans and unpaid services. In
addition, in December 1996, CDG issued 151,542 shares of preferred stock to Mr.
Vahl in exchange for unpaid salary and accrued benefits of $530,396 that dated
from 1992. This preferred stock was converted to 497,946 shares of CDG common
stock in December 1998.
If we are successful at implementing our operational plan in 1999, we expect to
pay Mr. Vahl additional consulting fees, but we will not pay salary or benefits
to him until we generate cash flow from MAR administration.
CDG has not established and does not anticipate establishing any benefit plans,
option plans or other forms of alternative compensation.
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1996, CDG issued 151,542 shares of preferred stock to our President,
Michael P. Vahl, in return for unpaid salary and accrued benefits of $530,396
that dated from 1992. Mr. Vahl, as the sole director of CDG, independently
approved this transaction by making the determination that the conversion would
benefit CDG by reducing the debt on CDG's balance sheet.
In December 1998, Mr. Gordon Root loaned CDG $20,000 to facilitate the payment
of creditors and provide short-term working capital. The loan is a demand loan
which Mr. Root may call at any time, and Mr. Root is not obligated to loan any
additional funds to CDG.
Mr. Vahl has also advanced approximately $15,000 to CDG as loans to pay current
operating expenses, and he may, but is not required to, continue to do so until
CDG becomes operational and profitable. These advances are reflected in the
accrued salary and expense obligations described under "Executive Compensation"
above. CDG may borrow additional funds from Mr. Vahl during the remainder of
1999, but Mr. Vahl is not obligated to make such loans. These loans, if made,
will be payable on demand.
Mr. Vahl also is the sole owner of VSG, a software enterprise that has committed
to license the Administrator II software to CDG. If the license is consummated,
VSG will receive a transaction-based royalty of $0.25 for each transaction
processed using Administrator II. CDG believes this fee is reasonable and
reflects arms' length consideration and terms.
ITEM 8. DESCRIPTION OF SECURITIES
The Registrant's authorized capital consists of 25,000,000 shares of common
stock, of which 7,159,058 shares were issued and outstanding as of the effective
date of this Registration Statement, and 1,000,000 shares of preferred stock, of
which no shares are issued and outstanding as of the effective date of this
Registration Statement. No rights or preferences had been established for the
preferred stock, nor has any series of preferred stock been designated.
Holders of common stock are entitled to one vote per share at all meetings of
stockholders. In the event of liquidation, dissolution or winding up of the
Registrant, holders of common stock are entitled to receive, on a prorata basis,
all of the assets of the Registrant remaining after satisfaction of all
liabilities and payment of any preferential liquidation rights to preferred
stockholders.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
(a) Market Information
The common stock of Capital Development Group, Inc. is currently traded on the
NASDAQ Bulletin Board under the symbol CDVG. The stock has traded sporadically,
the most recent reported trade being on April 21, 1999. Over the most recent 52
week period has traded in a range of $0.0625 (low) and $0.75 (high) per share.
<PAGE>
Approximately 225,643 of the Registrant's shares are held in street name. The
remaining shares of common stock are held by approximately 52 individual
shareholders of record. We have not paid dividends on our common stock and do
not anticipate paying dividends in the future.
ITEM 2. LEGAL PROCEEDINGS
The Registrant is not currently involved in any legal proceedings.
ITEM 3. CHANGES WITH AND DISAGREEMENTS WITH ACCOUNTANTS
We engaged the accounting firm of Porter & Co. in December of 1998 to audit our
financial records for the fiscal years ending December 31, 1997 and 1998. Prior
to that time we did not have an auditing firm, and we have never dismissed an
auditor or had an auditor resign or stand for reelection because of a dispute
over accounting practices, financial statement disclosure, or auditing scope or
procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
No unregistered securities have been sold in the past three years, except to
three creditors of CDG: Mr. William Struthers, Mr. Dave Novak and Mr. Ron
Peterson. Each of these individuals accepted common stock in exchange for debt,
at a conversion rate of $.50 per share. CDG received no proceeds from the
conversion. All of these debts arose prior to 1996. The sale of stock to these
creditors in exchange for debt relief was exempt from registration requirements
under Section 4(2) of the Securities Act of 1933.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Articles of Incorporation, effective May 19, 1993, as amended
on January 25, 1994, provide for limitation of liability for officers and
directors by requiring that no director have any personal liability to the
Registrant or its shareholders for money damages other than (1) breaches of the
director's duty of loyalty to the Registrant; (2) acts or omissions not in good
faith or involving intentional misconduct or knowing violation of law; (3)
unlawful distributions; (4) transactions resulting in an improper personal
benefit to the director; or (5) acts or omissions occurring prior to the date of
incorporation.
<PAGE>
PART F/S
PORTER & COMPANY
Certified Public Accountant
3585 Maple Street, Suite 244
Ventura, California 93003
(805) 650-5090 ? FAX (805) 650-0511
Member 72-875 Fred Waring Drive, #A Gary A. Porter, CPA
American Institute of CPA's Palm Desert, California 92260
California Society of CPA's (800) 304-6700 R. Michelle Pope, CPA
To the Shareholders and Board of Directors of
Capital Development Group, Inc.
Report of the Independent Public Accountant
I have audited the accompanying balance sheets of Capital Development
Group, Inc., (the Company) an Oregon corporation, as of December 31, 1998 and
1997 and the related statements of income, shareholders' equity and cash flows
for the years then ended as listed in the table of contents. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the general purpose financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that my
audits provide a reasonable basis for my opinion.
In my opinion, the accompanying financial statements referred to in the
first paragraph above present fairly, in all material respects, the financial
position of Capital Development Group, Inc. as of December 31, 1998 and 1997,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Porter & Company
March 30, 1999
<PAGE>
<TABLE>
<CAPTION>
Capital Development Group, Inc.
Balance Sheets
December 31, 1998 and 1997
1998 1997
ASSETS
Current Assets
<S> <C> <C>
Cash (Note 1) $ 20,000 $ 39,164
Other Assets - 2,287
------------ ------------
Total Current Assets 20,000 41,451
------------ ------------
Total Assets $ 20,000 $ 41,451
============ ============
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable(Notes 1 and 5) $ 9,888 $ 396,657
Accrued Liabilities(Note 2) 30,730 17,395
------------ ------------
Total Current Liabilities 40,618 414,052
Long-Term Liabilities
Accounts Payable Long-Term (Note 2) - 56,300
Note Payable (Note 4) 20,000 -
------------ ------------
Total Long-Term Liabilities 20,000 56,300
------------ ------------
Total Liabilities 60,618 470,352
------------ ------------
Stockholders Equity
Redeemable convertible preferred stock with $.0001 par value
Third Series; 1,000,000 shares authorized; 0 and 256,865
issued and outstanding (Note 3) - 26
Common Stock at $.0001 par value 30,000,000 shares authorized;
6,989,500 and 6,131,700 shared issued and outstanding (Note 3) 699 613
Additional Paid in Capital 2,040,942 1,728,358
Accumulated Deficit (2,082,259) (2,157,898)
------------ ------------
Total Stockholders Equity (40,618) (428,901)
------------ ------------
Total Liabilities and Equity $ 20,000 $ 41,451
============ ============
</TABLE>
See Accountant's Report
The Notes to Financial Statements Are An Integral Part of This Statement
Page 2 of 7
<PAGE>
<TABLE>
<CAPTION>
Capital Development Group, Inc.
Statements of Income
For the Years Ended December 31, 1998 and 1997
1998 1997
REVENUES
<S> <C> <C>
Software License Sales $ - $ 100,000
------------ ------------
OPERATING EXPENSES
Management Fees 24,050 13,850
Outside Services - 2,000
Professional Fees 14,093 9,542
Other Administrative 4,642 4,259
------------ ------------
Total Operating Expenses 42,785 29,651
------------ ------------
Net Income (Loss) from Operations (42,785) 70,349
Extraordinary Gain on Restructuring of Debt (Note 5) 382,683 -
------------ ------------
Net Income $ 339,898 $ 70,349
Earnings Per Share on Income (Loss) from Operations $ (0.01) $ 0.01
Earnings Per Share on Extraordinary Gain $ 0.06 $ -
Earnings Per Share on Net Income $ 0.05 $ 0.01
Average number of shares outstanding 6,388,565 6,388,565
</TABLE>
See Accountant's Report
The Notes to Financial Statements Are An Integral Part of This Statement
Page 3 of 7
<PAGE>
<TABLE>
<CAPTION>
Capital Development Group, Inc.
Statements of Shareholders' Equity
For the Years Ended December 31, 1998 and 1997
Preferred Additional
Stock Common Paid in Accumulated
Total Series C Stock Capital Deficit
---------------- ---------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 $ (499,250) $ 26 $ 613 $ 1,728,358 $(2,228,247)
Net Income at December 31, 1997 70,349 - - - 70,349
---------------- ---------------- --------------- ----------------- -----------------
Balances at December 31, 1997 (428,901) 26 613 1,728,358 (2,157,898)
Net Income at December 31, 1998 339,898 - - - 339,898
Conversion of accrued dividends
to common stock - - 26 264,233 (264,259)
Conversion of preferred series C
stock into common stock - (26) 46 (20) -
Conversion of accounts payable
to common stock 48,385 14 48,371
---------------- ---------------- --------------- ----------------- -----------------
Balances at December 31, 1998 $ (40,618) $ - $ 699 $ 2,040,942 $(2,082,259)
================ ================ =============== ================= =================
</TABLE>
See Accountant's Report
The Notes to Financial Statements Are An Integral Part of This Statement
Page 4 of 7
<PAGE>
Capital Development Group, Inc.
Statements of Cash Flows
For the Years Ended December 31, 1998 and 1997
1998 1997
Cash Flows From Operating Activities:
- - -------------------------------------
Net Income $ 339,898 $ 70,349
------------ ------------
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
- - ---------------------------------------------
Payment of Common Stock for Accounts Payable (48,385) -
Write off Adjustment to Accounts Payable (382,683) -
------------ ------------
Change in Assets and Liabilities:
- - ---------------------------------
Change in Prepaid Expenses 2,287 (2,287)
Change in Deposits 175
Change in Accounts Payable (12,000) (38,291)
Change in Accrued Expenses 13,334 9,075
------------ ------------
Total Adjustments (427,447) (31,328)
Net Cash Provided (Used) By Operations (87,549) 39,021
------------ ------------
Cash Flows from Financing Activities:
- - -------------------------------------
Cash Flows from Financing Activities: - -
- - -------------------------------------
Proceeds from Notes Payable 20,000 -
Issuance of Common Stock 48,385 -
------------ ------------
Net Cash Provided (Used) by Financing Activities 68,385 -
Net Increase (Decrease) in Cash (19,164) 39,021
------------ ------------
Cash and Cash Equivalents at Beginning of Year 39,164 143
Cash and Cash Equivalents at End of Year (Note 1) $ 20,000 $ 39,164
============ ============
Supplementary Information:
- - --------------------------
Cash Paid for Income Taxes $ - $ -
============ ============
Cash Paid for Interest $ - $ -
============ ============
See Accountant's Report
The Notes to Financial Statements Are An Integral Part of This Statement
Page 5 of 7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Organizational Data:
- - --------------------
Capital Development Group, Inc. (the Company) was incorporated on May 19, 1993
as an Oregon corporation. The Company was organized to engage in the business of
purchasing healthcare receivable from hospitals and other healthcare
institutions at a discount and administering the collection process of such
receivables. The source of funding for such purchases will be its wholly owned
subsidiary, CDG Credit Corporation which has not yet commenced operations. The
Company has developed its own "Administrator One" software to monitor purchase
and collections of accounts receivable.
Accounting Method
- - -----------------
The Company maintains its books of account on the accrual basis of accounting.
Under this method of accounting, revenue is recognized when they are earned, or
billed, and expenses are recognized when goods or services are received, whether
paid or not.
Cash and Cash Equivalents
- - -------------------------
For purposes of the statement of cash flows, cash and cash equivalents include
cash on hand, funds on deposit with financial institutions, and investments with
original maturities of three months or less. The Company maintains an account in
trust with their attorney in Portland Oregon.
Property & Equipment:
- - ---------------------
Property and equipment owned by the Company are fully depreciated. The Company
does not anticipate that future cash flows will be generated from its property
and equipment. Therefore, property and equipment is considered impaired, with a
net value of zero, and is not reflected on the balance sheet. The original cost
of computer equipment and software development is $155,010. The Company has not
purchased any additional equipment for the years ended December 31, 1998 and
1997.
Income Taxes:
- - -------------
Income tax expense is based on pre-tax financial accounting income and includes
deferred taxes for the effects of timing differences between financial
accounting and taxable earnings. Tax credits are accounted for as a reduction of
tax expense in the years in which the credits reduce taxes payable.
The Company currently has net operating loss carry-forwards to future periods
for book and tax purposes of approximately $2,082,000 in 1998, and $2,158,000 in
1997. A deferred tax asset for the NOL carry forwards has not been recorded as
its realization in future periods is questionable at this time.
Earnings Per Share
- - ------------------
Earnings per share are computed based on net income and the weighted average
number of shares of stock outstanding during the year 1997 and 1998.
Estimates
- - ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
NOTE 2 - RELATED PARTY TRANSACTIONS:
The Company President who is also a 72% shareholder, provides management
services for a fee, and is also reimbursed for expenses incurred for Company
related activities. The company has been unable to compensate and reimburse the
President in a consistent manner, and has therefore recorded accrued liabilities
of $28,692 and $17,395 in 1998 and 1997 respectively. Total charges to the
Company for management and expenses are $28,692 and $18,097 in 1998 and 1997
respectively.
Long-term accounts payable in 1997 and the note payable in 1998 are also payable
to various shareholders and an investment consultant of the company. $44,300 of
the long-term accounts payable in 1997 were converted to 103,600 shares of
common stock at the end of 1998. The remaining $12,000 was paid in cash in 1998.
The terms of the note payable include annual interest payable at 8.5 %, and is
unsecured. The note is due December 31, 1999.
See Accountant's Report
Page 6 of 7
<PAGE>
NOTE 3 - PREFERRED STOCK AND COMMON STOCK ISSUANCES:
The Company has authorized third series preferred stock, none of which is issued
and outstanding at December 31, 1998.
The third series preferred stock has no voting rights, is entitled to a
preference to common shares of stock in liquidation and is convertible to one
share of common stock under certain conditions. The stated conversion price at
which the preferred stock could be converted to common stock is $2.40 per share,
or fraction thereof. The third series preferred stock had accumulated dividends
at the rate of 8.5% of the purchase price of the stock.
In 1998, common stock was issued in three separate occasions; All 256,865 shares
of third series preferred stock outstanding were completely converted to common
stock at a rate of 1.75 shares of common stock for each share of preferred stock
held.
In addition, all accrued dividends payable on the preferred stock were converted
into common stock at the rate if $1.00 per share, resulting in the issuance of
264,259 shares of stock issued in exchange for $264,259 dollars of preferred
dividends accrued, but never declared and paid.
The company also converted $44,300 in accounts payable to 103,600 shares of
common stock as part of its settlements with creditors.
Had these conversions of stock occurred at the beginning of the year, the per
share earnings would have been decreased by $.0006 on income before
extraordinary items, and $.0039 on net income.
NOTE 4 - LONG-TERM NOTES PAYABLE
At December 31, 1998 long-term notes payable consisted of a $20,000 demand note
payable to a stockholder of the Company. Interest accrues at a rate of 8.5% and
is due upon demand. The note is not secured by Company assets.
NOTE 5 - EXTRAORDINARY ITEMS AND COMMITMENTS AND CONTINGENCIES:
At December 31, 1998, the Company made a good faith effort with its creditors to
settle debts incurred in prior years. Creditors representing the majority of the
outstanding debt accepted the settlement, but several creditors did not respond.
In 1998, those liabilities to vendors that did not respond were written off and
recorded as an extraordinary gain on restructuring of debt. These vendors may
seek payment from the Company in the future, although the Company views this as
unlikely. Moreover, the Company will resist claims for past obligations by
raising defenses of estoppel and time limitation, among others.
See Accountant's Report
Page 7of 7
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit No. Item Name
2.1 Articles of Incorporation
2.2 Bylaws
10.1 Consent of Porter & Company, Auditors to the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
CAPITAL DEVELOPMENT GROUP, INC.
(Registrant)
By: /s/ Michael P. Vahl
-------------------------------
Name: Michael P. Vahl
Title: President and Secretary
Date: July 23, 1999
Exhibit 2.1
Submit the original and [SEAL] SECRETARY OF STATE THIS SPACE FOR OFFICE
one true copy to Corporation Division - Business Registry USE ONLY
255 Capitol Street NE, Suite 151
Registry Number Salem, OR 97310-1327 Filed
346997-85 (503) 986-2200 Facsimile (503) 378-4381 Jan 25 1994
Secretary of State
ARTICLES OF AMENDMENT
By Incorporators, Directors or Shareholders
PLEASE TYPE OR PRINT LEGIBLY IN BLACK INK
1. Name of the corporation prior to amendment:
Capital Development Group, Inc.
-------------------------------
2. State the article number(s) and set forth the article(s) as it is amended
to read or attach a separate sheet. See attached.
3. The amendment(s) was adopted on January 6 1994 (If more than one amendment
was adopted, identify the date of adoption of each amendment.)
Check the appropriate statement: [ ] Shareholder action was required to
adopt the amendment(s). The vote was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------------
Class or series Number of shares Number of votes Number of votes Number of votes
of shares outstanding entitled to be cast cast for cast against
- - ---------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] Shareholder action was not required to adopt the
amendment(s). The amendment(s) was adopted by the board of
directors without shareholder action.
[X] The corporation has not issued any shares of stock. Shareholder
action was not required to adopt the amendment(s). The
amendment(s) was adopted by the incorporators or by the board
of directors.
Execution: Richard T. Borst Incorporator
Signature Printed name Title
Person to contact about this filing: Richard T. Borst (503) 224-6440
Name Daytime
phone number
MAKE CHECKS PAYABLE TO THE CORPORATION DIVISION OR INCLUDE YOUR VISA OR
MASTERCARD NUMBER AND EXPIRATION DATE _____-_____-_____-_____ ___/___ SUBMIT
THE COMPLETED FORM AND FEE TO THE ABOVE ADDRESS OR FAX TO (503) 378-4381.
112(11/93)
<PAGE>
Article III of the Articles of Incorporation of Capital Development Group,
Inc. is amended to read as follows:
ARTICLE III
The aggregate number of shares which the Corporation shall
have authority to issue is (a) thirty million (30,000,000) shares of
Common Stock, par value $.0001, and (b) one million (1,000,000)
shares of Preferred Stock, par value $.0001. The Preferred Stock
shall be issuable in series, each of which may vary, as determined by
the Board of Directors, as to the designation and number of shares in
such series, voting rights, dividend entitlement and rate, redemption
terms and prices, the voluntary and involuntary liquidation
preferences and conversion rights, if any of the aforesaid shall
apply.
<PAGE>
ARTICLES OF INCORPORATION
OF
CAPITAL DEVELOPMENT GROUP, INC.
The undersigned person of the age of eighteen (18) years or more,
acting as incorporator under the Oregon Business Corporation Act, adopts the
following Articles of Incorporation.
ARTICLE I.
The name of this Corporation is Capital Development Group, Inc. and its
duration shall be perpetual.
ARTICLE II.
The purpose for which this Corporation is organized is to engage in any lawful
activity for which corporations may be organized under the Oregon Business
Corporation Act.
ARTICLE III.
The aggregate number of shares which the Corporation shall have
authority to issue is three million (3,000,000) shares of Class A voting common
stock with no par value and ten million (10,000,000) shares of Class B nonvoting
common stock with no par value.
ARTICLE IV.
The address of the initial registered office of the Corporation is 851
S.W. Sixth Avenue, Suite 1500, Portland, Oregon 97204, and the name of its
initial registered agent at such address is Richard T. Borst. Any notices
required by the Oregon Business Corporation Act-to be sent to the Corporation
may be sent to the registered agent at the above address until the principal
office of the Corporation has been designated in an annual report.
ARTICLE V.
The name and address of the incorporator are:
Richard T. Borst
851 S.W. Sixth Avenue, Suite 1500
Portland, Oregon 97204
ARTICLE VI.
A director shall have no personal liability to the Corporation or its
stockholders for monetary damages for conduct as a director except for:
<PAGE>
1. Any breach of the director's duty of loyalty to the Corporation
or its stockholders;
2. Acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
3. Any unlawful distribution under Oregon law; or
4. Any transaction from which the director derived an improper
personal benefit; and
5. Any act or omission occurring prior to the date that this
Article becomes effective.
I, the undersigned incorporator, declare under penalty of perjury that
I have examined the foregoing and to the best of my knowledge and belief, it is
true, correct and complete.
EFFECTIVE the 15th day of May, 1993.
-----------------------------------------
Richard T. Borst
<PAGE>
STATE OF OREGON
Office of the Secretary of State Corporation Division
I, Janet Sullivan, Director of the Corporation Division,
DO HEREBY CERTIFY:
CAPITAL DEVELOPMENT GROUP, INC.
was
incorporated
under the Oregon
Business Corporation Act
on
May 19,1993
and is active on the records of the Corporation
Division as of the date of this certificate.
[SEAL] Janet Sullivan
Director
By__________________________
Date: January 6, 1995
Exhibit 2.1
BYLAWS
OF
CAPITAL DEVELOPMENT GROUP, INC.
AMENDED JANUARY 6,1994
ARTICLE I
OFFICES
Section 1. The Corporation's registered office shall be located at 851
SW Sixth Avenue, Suite 1500, Portland, Oregon 97204.
Section 2. The Corporation may also have offices at other locations
either within or without the state of Oregon, as the Board of Directors may from
time to time determine or as the business of the Corporation may require.
ARTICLE 11
MEETINGS OF SHAREHOLDERS
Section 1. Meetings of the shareholders shall be held at the office of
the Corporation or at such other place as shall be determined by the Board of
Directors.
Section 2. An annual meeting of the shareholders shall be held for the
purpose of electing directors and the transaction of such other business as may
come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the state of Oregon, such meeting shall be held on the next
succeeding business day.
Section 3. Special meetings of the shareholders, for any purpose or
purposes. unless otherwise prescribed by statute, may be called by the Chief
Executive Officer of the Corporation or by the Board of Directors, and shall be
called by the Chief Executive Officer at the request of the holders of not less
than one-tenth (1/10) of all outstanding shares of the Corporation entitled to
vote at the meeting.
Section 4. Written or printed notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose, or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the date of the meeting, by or at the direction of
the officer or person calling the meeting, to each shareholder at his address as
it appears on the Corporation's records.
Section 5. The holders of a majority of the outstanding shares,
represented either in person or by proxy, shall constitute a quorum at all
shareholders' meetings for the transaction of business. If a quorum is not
present or represented at any shareholders' meeting, the shareholders present in
person or represented by proxy, shall have the power, without notice other than
an announcement at the meeting, to adjourn the meeting from time to time until a
quorum shall be present or represented. At any adjourned meeting in which a
quorum is present or represented, any business may be transacted which might
have been transacted at the original meeting.
Section 6. When there is a quorum at any meeting. the vote of a
majority of the shares represented shall decide any question brought before the
meeting, unless the laws of the state of Oregon impose a different requirement.
<PAGE>
Section 7. Each outstanding share shall be entitled to one vote on each
matter submitted to a vote at a meeting of the shareholders. A shareholder may
vote either in person or by a proxy appointed in writing by the shareholder or
by his duly authorized attorney-in- fact, No proxy shall be valid after eleven
(11) months from the date of its execution, unless otherwise provided in the
proxy.
ARTICLE III
DIRECTORS
Section 1. The number of directors of the Corporation shall be not less
than one nor more than five, who shall be elected at the annual meeting of the
shareholders. Directors need not be residents of the state of Oregon or
shareholders of the Corporation.
Section 2. The business and affairs of the Corporation shall be managed
by the Board of Directors.
Section 3. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term, of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors shall be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose.
Section 4. Meetings of the Board of Directors, regular or special, may
be held either within or without the state of Oregon.
Section 5. The regular annual meeting of the Board of Directors shall
be held immediately following the annual meeting of the shareholders.
Section 6. Special meetings of the Board of Directors may be called by
or at the request of the Chief Executive Officer, or any one director. The
person or per-sons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the state of Oregon, as the place
for holding any special meeting of the Board of Directors called by them.
Section 7. Notice of any special meeting shall be given at least two
(2) days prior thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with first class postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of. any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting,
Section 8. A majority of the total number of directors shall constitute
a quorum for the transaction of business at a meeting of the Board of Directors.
The act of the majority of the directors present at a meeting attended by a
quorum shall be the act of the Board of Directors.
<PAGE>
ARTICLE IV
INFORMAL ACTION BY DIRECTORS OR SHAREHOLDERS
Section 1. Whenever, under the provisions of the Oregon Business
Corporation Act or of these Bylaws, notice is required to be given to any
director or shareholder, it shall not be construed to mean only personal notice,
but such notice may be given in writing and mailed, postage prepaid, to a
director or shareholder, at his address that appears on the Corporation's
records. The notice shall be deemed to be given at the time when it is deposited
in the United States mail.
Section 2. Whenever any notice is required to be given to any
shareholder or director under the provisions of the Oregon Business Corporation
Act or by these Bylaws, a waiver signed at any time by the person entitled to
this notice shall be deemed equivalent to the giving of this notice. Attendance
at a meeting shall constitute a waiver of notice of the meeting, except where an
individual attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully convened.
Section 3. Any action required by the Oregon Business Corporation Act
to be taken at a meeting of the directors or shareholders, or any other action
which may be taken at such a meeting, may be taken without a meeting if all of
the directors or shareholders entitled to vote on the question consent 'in
writing to the action.
ARTICLE V
OFFICERS
Section 1. The principal officers of the Corporation shall consist of a
Chief Executive Officer, a President, one or more Vice Presidents (if deemed
appropriate), a Secretary and a Treasurer (if deemed appropriate), each of whom
shall be elected by the Board of Directors. The Corporation may also have a
Chairman of the Board of Directors, and such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors. The Board of Directors may delegate the power of appointment and
removal, and the power to fix the compensation of such other officers and
assistant officers, agents, and employees to any officer of the Corporation. Any
two or more offices may be held by the same person.
Section 2. The Board of Directors at its annual meeting shall choose a
Chief Executive Officer, a President, one or more Vice Presidents (if deemed
appropriate), a Secretary and a Treasurer (if deemed appropriate), none of whom
need be a member of the Board of Directors.
Section 3. The Board of Directors may elect or appoint other agents and
officers. The salaries, the term of office, the duties and the authority of all
officers of the Corporation shall be fixed by the Board of Directors.
Section 4. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation will be served.
If the office of any of the officers becomes vacant for any reason, the vacancy
shall be filled by the Board of Directors.
CHIEF EXECUTIVE OFFICER
Section 5. The Chief Executive Officer shall preside at all meetings of
the shareholders and Board of Directors; he shall have general and active
management of the business of the Corporation; and he shall supervise the
execution of all orders and resolutions of the Board of Directors.
<PAGE>
Section 6. The Chief Executive Officer shall normally execute all
documents except when the law or when the Board of Directors requires or
authorizes another agent to execute a document.
PRESIDENT
Section 7. The President shall perform such duties as prescribed by the
Board of Directors.
VICE PRESIDENT
Section 8. In the absence or disability of the Chief Executive Officer
or President, the Vice Presidents, in the order of their rank as fixed by the
Board of Directors, shall perform the duties and exercise the powers of the
Chief Executive Officer or President as necessary. Each Vice President shall
perform such other duties as the Board of Directors shall prescribe.
SECRETARY
Section 9. The Secretary shall attend all sessions of the shareholders
and Board of Directors and record the minutes of all proceedings in a book to be
kept for that purpose, and shall perform similar duties for any committee when
required. He shall give, or cause to be given, notice of all meetings to the
shareholders and members of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or President, who shall
supervise the Secretary. If no Treasurer is elected, the Secretary shall perform
the duties of the Treasurer as set forth below.
TREASURER
Section 10. The Treasurer shall have the custody of the corporate funds
and securities, shall keep full and accurate accounts of receipts and
disbursements in the corporate books, and shall deposit all monies and other
valuables in the name and to the credit of the Corporation, in the depositories
designated by the Board of Directors.
Section 11 The Treasurer shall disburse the funds of the Corporation
when proper to do so, and obtain receipts for the disbursements, and he shall
render to the President and Directors, at the regular meetings of the Board, or
whenever they may require, an account of all his transactions as Treasurer and
of the financial condition of the Corporation.
ARTICLE VI
CERTIFICATE FOR SHARES
Section 1. The shares of the Corporation shall be represented by
certificates signed by the Chief Executive Officer and Secretary.
Section 2. A now stock certificate shall be issued to the person
entitled to the certificate upon surrender to the Corporation or its transfer
agent of a stock certificate duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the old certificate shall be
cancelled and the transactions shall be recorded upon the books of the
Corporation.
Section 3. The Board of Directors may direct a new certificate to be
issued in place of any certificate previously issued by the Corporation and
which is alleged to have been lost or destroyed, if the person making the
allegations supplies the Corporation with an affidavit of the alleged facts.
When authorizing such issue of a new certificate. the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of the alleged lost or destroyed certificate, or his legal representative,
to advertise the same in a manner required by the Board of Directors and/or give
the Corporation an indemnity bond in an amount sufficient to indemnify the
Corporation against any claim that may be made against it with respect to the
certificate alleged to have been lost or destroyed.
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
All checks or demands for money and notes of the Corporation shall he
signed by the officer or officers or other person or persons that the Board of
Directors designate.
ARTICLE VIII
AMENDMENTS
The Bylaws of the Corporation may be altered, amended or repealed and
new Bylaws may be adopted by the affirmative vote of a majority of the directors
present at any duly and regularly ca1led and held meeting of the Board of
Directors.
ARTICLE IX
INDEMNITY OF DIRECTORS AND OFFICERS
In furtherance and not in limitation of the powers conferred by
statute:
Section 1. Authority to Indemnify.
(a) Subject to Section 4, the Corporation shall indemnify an
individual, who is made a party to a proceeding because the individual is or was
a director, against liability incurred in a proceeding if:
(i) The conduct of the individual was in good faith;
(ii) The individual reasonably believed that the
individual's conduct was in the best interests of the
Corporation, or at least not opposed to its best interest; and
(iii) In the case of any criminal proceeding, the
individual had no reasonable cause to believe the
individual's conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of paragraph (ii) of subsection (a) of this section.
(c) The termination of a proceeding by judgment, order, settlement
conviction or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(d) The Corporation may not indemnify a director under this section:
(i) In connection with the proceeding by or in the right of the
Corporation in which the director was adjudged liable to the Corporation; or
(ii) In connection with any other proceeding charging improper
personal benefit to the director in which the director was adjudged liable on
the basis that personal benefit. was improperly received by the director.
(e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
<PAGE>
Section 2. Advance for Expenses.
(a) Subject to Section 4, the Corporation shall pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(i) The director furnishes the Corporation a written affirmation of
the director's good faith belief that the director has met the standard of
conduct described in Section I of this Article; and
(ii) The director furnishes the Corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it is
ultimately determined that the director did not meet the standard of conduct.
(b) The undertaking required by paragraph (ii) of subsection (a) of
this section must be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability to
make repayment.
Section 3. Court ordered Indemnification. A director of the Corporation
who is a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent jurisdiction. On
receipt of an application, the com after giving any notice the court considers
necessary, may order indemnification if it determines:
(a) The director is entitled to indemnification under Section 7 of this
Article in which case the court shall also order the Corporation to pay the
director's reasonable expenses incurred to obtain court ordered indemnification;
or
(b) The director is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not the director met the
standard of conduct set forth in Section I of this Article or was adjudged
liable whether the liability is based on a judgment, settlement or proposed
settlement or otherwise.
Section 4. Determination and Authorization of Indemnification.
(a) The Corporation may not indemnify a director under Section I of
this Article unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible under the
circumstances because the director has met the standard of conduct set forth in
Section I of this Article.
(b) A determination that indemnification of a director is permissible
shall be made:
(i) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding-,
(ii) If a quorum cannot be obtained under paragraph (i) of this
subsection, by a majority vote of a committee duly designated by the Board of
Directors consisting solely of two or more directors not at the time parties to
the proceeding. However, il4wors who are parries to the proceeding may
participate in designation of the committee;
<PAGE>
(iii) By special legal counsel selected by the Board of Directors
or its committee in the manner prescribed in paragraph (i) or (ii) of this
subsection or, if a quorum of the Board of Directors cannot be obtained under
paragraph (i) of this subsection and a committee cannot be designated under
paragraph (ii) of this subsection, the special legal counsel shall be selected
by majority vote of the full Board of Directors, including directors who are
parties to the proceeding; or
(iv) By the shareholders.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under paragraph (ii)
of subsection (b) of this section to select counsel.
Section 5. Indemnification or Officers, Employees and Agents.
(a) An officer of this Corporation is entitled to mandatory
indemnification under Section 7 and is entitled to apply for court ordered
indemnification under Section 3 of this Article, in each case to the same extent
as a director under this Article.
(b) Subject to Section 4, the Corporation shall indemnify and advance
expenses under all other sections of this Article to an officer, employee or
agent of the Corporation to the same extent as to a director.
Section 6. Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual against liability asserted against or
incurred by the individual who is or was a director, officer, employee or agent
of the Corporation or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. The Corporation may purchase and maintain the insurance even if the
Corporation has no power to indemnify the individual against the same liability
under this Article.
Section 7. Mandatory Indemnification. Notwithstanding the foregoing,
the Corporation shall indemnify a director who is wholly successful on the
merits or otherwise in the defense of any proceeding to which the director was a
party because of being a director against reasonable expenses incurred by the
director in connection, with the proceeding.
Exhibit 10.1
July 23, 1999
Mike Vahl, President
Capital Development Group, Inc.
RE: Form 10 Registration Statement Filing with SEC
Dear r Vahl:
We hereby consent to the use in the registration statement on Form 10 of our
report dated March 30, 1999 relating to the financial statements of Capital
Development Group, Inc. for the dates and years ended December 31, 1998 and
1997.
We also consent to the references to this firm in certain places of such
registration statement as provided therein.
Sincerely,
/s/Porter & Company
Porter & Company
