-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Co9AoSeQ2WToxKuizeXQ0Q+hcMoFq34a/uSYGQQ3GPtDhJcVCEP1G4ocwGVaddhV zCJUqkahMcyNPHeDbEn8Yg== 0001016193-99-000026.txt : 19990222 0001016193-99-000026.hdr.sgml : 19990222 ACCESSION NUMBER: 0001016193-99-000026 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19990219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC ALLIANCE CORP /UT/ CENTRAL INDEX KEY: 0000801904 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] IRS NUMBER: 870445849 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-08732-D FILM NUMBER: 99545894 BUSINESS ADDRESS: STREET 1: 1661 LAKEVIEW CIRCLE CITY: OGDEN STATE: UT ZIP: 84403 BUSINESS PHONE: 8013993632 MAIL ADDRESS: STREET 1: 1661 LAKEVIEW CIRCLE CITY: OGDEN STATE: UT ZIP: 84403 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC SYNDICATION INC DATE OF NAME CHANGE: 19941216 FORMER COMPANY: FORMER CONFORMED NAME: KAISER RESEARCH INC DATE OF NAME CHANGE: 19920703 10QSB 1 QUARTER U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM 10-QSB ------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 33-78910-C ------------ PACIFIC ALLIANCE CORPORATION (Name of Small Business Issuer as specified in its charter) Delaware 87-044584-9 ---------- ------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization identification No.) 1661 Lakeview Circle, Ogden, UT 84403 (Address of principal executive offices) Registrant's telephone no., including area code: (801) 399-3632 N/A Former name, former address, and former fiscal year, if changed since last report. Securities registered pursuant to Section 12(b) of the Exchange Act: None Securities registered pursuant to Section 12(g) of the Exchange Act: None Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 No X. Common Stock outstanding at December 12, 1998 - 8,853,208 shares of $.001 par value Common Stock. DOCUMENTS INCORPORATED BY REFERENCE: NONE - ------------------------------------------------------------------------------ 1 FORM 10-QSB FINANCIAL STATEMENTS AND SCHEDULES PACIFIC ALLIANCE CORPORATION. For the Quarter ended June 30, 1998 The following financial statements and schedules of the registrant are submitted herewith: PART I - FINANCIAL INFORMATION Page of Form 10-QSB Item 1Financial Statements: Balance Sheet--June 30, 1998 3 Statements of Operations--for the three and six months ended June 30, 1998 and June 30, 1997 4 Statements of Cash Flows--for the six months ended June 30, 1998 and June 30, 1997 5 Notes to Financial Statements 6 Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Page Item 1. Legal Proceedings 15 Item 2. Changes in the Securities 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Results of Votes of Security Holders 15 Item 5. Other Information 15 Item 6(a). Exhibits 15 Item 6(b). Reports on Form 8-K 15 2 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS ASSETS June 30, 1999 December 31, 1997 ---------------------------------------- CURRENT ASSETS Cash $ -0- $ 180 Investments -0- 7,812 --------------------------------------- TOTAL CURRENT ASSETS -0- 7,992 --------------------------------------- TOTAL ASSETS $ -0- $ 7,992 ======================================= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Bank overdraft $ 126 $ -0- Accrued expenses 13.813 11,610 Advances from officer, note 7 19,115 5,500 Current portion of tax liabilities, note 2 34,235 49,915 Notes payable, note 4 30,000 -0- ------------------------------------- TOTAL CURRENT LIABILITIES 97,289 67,025 ------------------------------------ LONG TERM LIABILITIES Tax liabilities, note 2 222,587 307,442 ---------------------------------- TOTAL LIABILITIES 319,876 374,467 ---------------------------------- COMMITMENTS & CONTINGENCIES, note 6 STOCKHOLDERS' DEFICIT Common stock, par value $.001, 30,000,000 shares authorized, 8,853,208 shares issued and outstanding, note 5 422,254 421,958 Additional paid in capital 2,028,909 1,948,047 Accumulated deficit prior to the development stage (2,632,447) (2,632,447) Accumulated deficit during the development stage (138,592) (104,033) ---------------------------------- TOTAL STOCKHOLDERS' DEFICIT (319,876) (366,475) ---------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -0- $ 7,992 ======================================= 3 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS
From Inception Quarter Six Months Quarter Six Months of the Development Ended Ended Ended Ended Stage, December June June June June 21, 1995, Through 30, 1998 30, 1998 30, 1997 30, 1997 June 30, 1998 ------------------------------------------------------------------------- SALES $ -0- $ -0- $ -0- $ -0- $ -0- GROSS MARGIN -0- -0- -0- -0- -0- OPERATING EXPENSES -0- -0- -0- -0- -0- OTHER EXPENSES Professional fees (10,087) (18,688) -0- -0- (18,688) Other expenses (520) (830) -0- -0- (830) Interest expense (6,506) (16,045) -0- -0- (27,929) Gain (loss) on investments -0- 1,004 -0- -0- (6,844) --------------------------------------------------------------------------- LOSS BEFORE REORGANIZATION ITEMS (17,113) (34,559) -0- -0- (54,291) --------------------------------------------------------------------------- REORGANIZATION ITEMS Administration and legal fees -0- -0- (3,956) (8,080) (84,301) --------------------------------------------------------------------------- NET LOSS $ (17,113) $(34,559) $ (3,956) $ (8,080) $ (138,592) ============================================================================ BASIC LOSS PER SHARE Loss before reorganization items $ (.00) $ (.00) $ (.00) $ (.00) Reorganization items (.00) (.00) (.00) (.00) ---------------------------------------------------- BASIC NET LOSS PER SHARE $ (.00) $ (.00) $ (.00) $ (.00) ===================================================== WEIGHTED AVERAGE NUMBER OF SHARES 8,567,327 8,562,257 2,691,940 5,278,153 ======================================================
4 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
From Inception of the Development Six Months Six Months Stage, December Ended Ended 21, 1995, Through June 30, 1998 June 30, 1997 June 30, 1998 -------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (34,559) $ (8,080) $ (138,592) Adjustment to reconcile net loss to net cash used in operating activities: (Gain) loss on investments (1,004) -0- 6,844 Change in assets and liabilities Decrease in accounts receivable -0- 35,167 95,841 Increase in accrued expenses 3,283 -0- 14,893 Decrease in tax liabilities (20,457) -0- (43,797) -------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (52,737) 27,087 (64,811) -------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments -0- -0- (30,180) Proceeds from sale of investments 8,816 -0- 23,336 -------------------------------------------------------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 8,816 -0- (6,844) --------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank overdraft 126 -0- (2,460) Proceeds from notes payable 30,000 -0- 30,000 Advance from officer 13,615 -0- 19,115 Proceeds from issuance of common stock -0- 25,000 25,000 -------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 43,741 25,000 71,655 -------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH (180) 52,087 -0- CASH AT BEGINNING OF PERIOD 180 123 -0- ---------------------------------------------------------------- CASH AT END OF PERIOD $ -0- $ 52,210 $ -0- =================================================================== Supplementary disclosures: Interest paid in cash $ 14,768 $ -0- $ 26,652 ===============================================================
5 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Going Concern Pacific Alliance Corporation (the "Company") was formerly Pacific Syndication, Inc. Pacific Syndication, Inc. was originally incorporated in December 1991 under the laws of the State of Delaware. It also became a California corporation in 1991. Pacific Syndication, Inc. was engaged in the business of videotape duplication, standard conversion and delivery of television programming. In 1994, Pacific Syndication, Inc. merged with Kaiser Research, Inc. The Company filed a petition for Chapter 11 under the Bankruptcy Code in June 1995. The debtor in possession kept operating until December 21, 1995, when all the assets, except cash and accounts receivable, were sold to a third party, Starcom. The purchaser assumed all post-petition liabilities and all obligations collateralized by the assets acquired (see note 6). In 1997, a reorganization plan was approved by the Bankruptcy Court, and the remaining creditors of all liabilities subject to compromise, excluding tax claims, were issued 1,458,005 shares of the Company's common stock in March 1998, which corresponds to one share for every dollar of indebtedness. Each share of common stock issued was also accompanied by an A warrant and a B warrant (see note 5). The IRS portion of tax liabilities is payable in cash by quarterly installments of $11,602 (see note 2). Repayment of other taxes is still being negotiated. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the June 30, 1998 financial statements, the Company did not generate any revenue, and has a net capital deficiency. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. For the quarter and six months ended June 30, 1998, the Company funded its disbursements using loans from an officer and other shareholders. The financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company is no longer operating, and will attempt to locate a new business (operating company), and offer itself as a merger vehicle for a company that may desire to go public through a merger rather than through its own public stock offering. Cash Flows For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. 6 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Statement of Financial Accounting Standards No. 128 The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128 for the calculation of earnings per share. This SFAS was issued in February 1997, and supercedes APB Opinion No. 15 previously applied by the Company. SFAS No. 128 dictates the calculation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company's diluted loss per share is the same as the basic loss per share for the quarters and six months ended June 30, 1998 and 1997. 2. TAX LIABILITIES The Company owes back taxes to the IRS, California EDD, California State Board of Equalization and other agencies. The IRS portion of tax liabilities, $145,988, bears interest at 9%, and is payable quarterly in payments of $11,602, maturing in January 2002. During the six months ending June 30, 1998, the tax liabilities were reduced by $80,078 due to the transfer of a personal tax refund from a former officer of the Company (note 5). Other tax claim repayment schedules have not yet been set. Scheduled maturities of the IRS liability are as follows: Twelve Months Ending June 30: ------------------- 1999 $ 34,235 2000 37,469 2001 41,007 2002 33,277 ------------- $ 145,988 ============= Interest paid during the quarter and six months ended June 30, 1998 on the IRS liability totaled $5,942 and $14,768, respectively. Interest paid during the quarter and six months ended June 30, 1997 totaled $0. 3. INCOME TAXES The Company has loss carryforwards available to offset future taxable income. The total loss carryforwards at June 30, 1998 are estimated at approximately $35,000 and expire on December 31, 2013. Loss carryforwards are limited in accordance with the rules of change in ownership. No deferred tax benefit is recognized since future profits are indeterminable. 7 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 4. NOTES PAYABLE During the six months ended June 1998, the Company contracted notes payable with minority shareholders for a total of $30,000. These notes bear interest at 10% and mature between January through May 1999. Stock options were issued with respect to these notes payable (see note 5). 5. COMMON STOCK AND WARRANTS On May 28, 1997, a reorganization plan was approved by the Bankruptcy Court. As a result, existing shares of the Company were reverse split 1-for-6 and pre-bankruptcy creditors were issued 1,458,005 shares of Company's common stock. On November 13, 1997, an additional 5,000,000 shares of common stock were issued (after reverse split) to an officer of the Company in return for proceeds of $25,000 ($.005 per share). In accordance with the reorganization plan, the pre-bankruptcy creditors were also issued 1,458,005 class "A" warrants and 1,458,005 class "B" warrants. A class "A" warrant allows the purchase of a share of common stock at an exercise price of $2.50 per share, and the warrant must be exercised before June 8, 2000. A class "B" warrant allows the purchase of a share of common stock at an exercise price of $5.00 per share, and the warrant must be exercised before June 8, 2002. In May and June 1998, the Company issued 16,000 and 200,000 shares of common stock, respectively, for professional services received from non-related individuals. These shares were valued at $0.005 per share. Options to purchase 30,000 shares of common stock of the Company at the price of $2.50 per share for a period of three years have been issued to bearers of promissory notes (note 4) as follows: Date of Issuance Number of Shares Expiration Date ---------------- ---------------- --------------- January 27, 1998 10,000 January 27, 2001 January 30, 1998 5,00 January 30, 2001 May 1, 1998 10,000 May 1, 2001 May 5, 1998 5,00 May 1, 2001 In June 1998, the IRS applied a personal tax refund from a former officer of the Company against the Company's tax liability, reducing it by $80,078. In accordance with an agreement between the management and the former officer, 80,078 shares of common stock were issued to the former officer in exchange for the loss of his personal tax refund. 8 PACIFIC ALLIANCE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 6. COMMITMENTS & CONTINGENCIES In1995, the Company filed a lawsuit against Donald Palmer alleging breach of contract and other claims. The case was filed in Los Angeles County, California. The Company sought damages in the approximate amount of $1,000,000. The defendant filed a counter claim against the Company for breach of contract and is seeking past due rent and other damages. As of December 31, 1997, past due rent claimed by the defendant was approximately $150,000. The defendant also seeks damages in the amount of $75,000 pursuant to a stock purchase agreement. The Company is unable to predict the outcome of this litigation. The Company has assigned its position in this matter to another entity. The Company does not believe this litigation will have any material impact on its future operations or financial position. 7. RELATED PARTY An officer of the Company advanced $13,615 to the Company during the six months ended June 30, 1998. These advances bear interest at 10% and have no maturity date. The balance of advances is $19,115 at June 30, 1998. 9 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Pacific Alliance Corporation (the "Company") is a Delaware corporation which is currently inactive. The Company was previously engaged in the business of distributing television programming. On June 23, 1995, the Company filed for protection under Chapter 11 of the United States Bankruptcy Code (Case No. BK. No. SV 95-14737 KL). On May 28, 1997 (the "Confirmation Date"), the United States Bankruptcy Court for the Central District of California Confirmed the Company's Modified Plan of Reorganization (the "Plan") and First Amended Disclosure Statement (the "Disclosure Statement"). The Effective Date of the Plan was June 8, 1998. Although the Company's Chapter 11 Plan of Reorganization has been confirmed by the Bankruptcy Court, the Company continues to operate under the jurisdiction of the Court. The Company's current business plan calls for it to locate and acquire an operating company. History The Company was organized on April 22, 1986 under the laws of the State of Utah under the name of Kaiser Research, Inc. On December 2, 1994, the Company changed its domicile from the State of Utah to the State of Delaware through a reincorporation merger. In order to effect the reincorporation merger, the Company formed a wholly-owned subsidiary under Delaware law under the name of PACSYND, Inc. After the change of the Company's domicile, it acquired a privately held corporation ("Private PSI") in a merger transaction, and in connection therewith, the Company's name was changed to Pacific Syndication, Inc. After the acquisition of Private PSI in December 1994, and prior to its filing of a Petition under Chapter 11, the Company was engaged in the business of transmitting television programming to television stations and others via satellite or land deliveries on behalf of production companies, syndicators and other distributors of television programming. Although the Private PSI was not the survivor of the Merger, and did not exist after the Merger, pursuant to the accounting requirements of the Securities and Exchange Commission the Merger was treated as a "reverse merger" and, solely for accounting purposes, Private PSI was deemed to be the survivor. Private PSI was formed under the laws of the State of Delaware in November 1991. Private PSI was formed to engage in the business of providing a variety of television industry related services to its clients. Such services included, but were not limited to, video tape duplication, standards conversion and delivery of television programming by way of conventional carriers (such as UPS, Airborne and Federal Express) and by satellite or fiber optic transmission. Private PSI provided its clients (primarily television producers, programmers and syndicators) with several related but different services, including distribution of syndicated programming to television stations, program mastering and standards conversion, infomercial customization and delivery, master tape and film storage, library distribution services and video integration and delivery services. Private PSI developed its own tape tracking and vault library management system and a system for infomercial customization and voice-over integration. 10 From its inception, Private PSI was undercapitalized. It funded its initial operations through the factoring of its accounts receivable. The Company was unable to commence operations in the television programming services business and ultimately, substantially all of its assets were sold and it discontinued its operations. Chapter 11 Plan of Reorganization On June 23, 1995, the Company filed a Petition under Chapter 11 of the U.S. Bankruptcy Code. As of December 1995, the Company had sold most of its assets, reduced its debt and terminated its operations. By that date, there was no trading market in the Company's securities. In 1996, Troika Capital, Inc. ("Troika"), a Utah corporation, agreed to assist the Company in developing a Plan of Reorganization which would provide the Company, its shareholders and creditors with at least a possibility of recouping all or some of their investment in the Company or the debts owed to them by the Company. Troika is a privately-owned Utah corporation which has been involved in various company formations, mergers and financings. Mark A. Scharmann, the President of Troika, and now the President of the Company, and his affiliates, were shareholders of the Company and creditors of the Company at the time the Company commenced its bankruptcy proceeding. Mr. Scharmann was a founder of the Company in 1986 and was an original shareholder of the Company. At the time the Company acquired Private PSI, he resigned as an officer and director of the Company but remained a shareholder and later became a creditor of the Company. Many of the investors in the Company are friends and acquaintances of Mr. Scharmann. The Company believed that if it were to liquidate, there would be a total loss to creditors and shareholders. Because of his own equity and debt investment in the Company, and his relationship with other shareholders and creditors of the Company, Mr. Scharmann agreed, through Troika, to develop a business plan for the Company and to attempt to assist the Company in carrying out such plan. The Plan of Reorganization developed for the Company by Troika was essentially as follows: 1. Eliminate all non-tax liabilities of the Company through the conversion of debt into equity. 2. Replace the current officers and directors of the Company with new management. The new management includes the following: Mark Scharmann, Dan Price and David Knudson. 3. File all required Securities and Exchange Commission reports which may be necessary to bring the Debtor current in its filing requirements under Section 15(d) of the 1934 Act. File all SEC reports which become due in the future. 4. File any tax returns which are in arrears and file all required tax returns and reports which become due in the future. 5. Use existing cash of the Company to pay quarterly tax payments and for working capital. 11 6. Prepare and bring current, the financial statements of the Company 7. Attempt to raise additional cash to be used to fund quarterly tax payments and for working capital. 8. Locate a private-company which is seeking to become a public company by merging with the Company. 9. Assist the Company in completing any merger which is located and which the Board of Directors deems appropriate. 10. Assist the post-merged company with shareholder relations, financial public relations and with attempts to interest a broker-dealer in developing a public market for the Company's common stock so that the Company's shareholders (including creditors whose debt was converted into shares of the Company's common stock) may ultimately have a opportunity to liquidate their shares for value in market or in privately negotiated transactions. The Plan and Disclosure Statement was confirmed by the Bankruptcy Court on May 28, 1997. The Effective Date of the Plan was June 8, 1997. The Company continues to file monthly "Debtor in Possession Interim Statements" and "Debtor in Possession Operating Reports" with the the Office of the United States Trustee. Post Confirmation Date Activities Since the Confirmation of the Plan of Reorganization the following have occurred: 5. Pre-Confirmation Date non-tax debt in the amount of approximately $1,458,000 was converted into 1,458,005 shares of the Company common stock 6. The Company completed its audited financial statements for the years ended December 31, 1995, 1996 and 1997. 7. Tax liabilities to the Internal Revenue Service of approximately $269,093 had been reduced to $145,988.65 as June 30, 1998. 8. The Company effected a 1-for-6 reverse split of its issued and outstanding common stock in order to establish a more desirable capital structure for potential merger partners. 9. The Company changed its name to Pacific Alliance Corporation. 12 10. The Company obtained the preliminary agreement of a registered-broker to make a market in the Company's common stock. 11. The Company filed an application for approval of secondary trading in its common stock with the Division of Securities of the State of Utah. An Order Granting such application was issued by the Utah Division of Securities. 12. The Company prepared and filed a Form 10-KSB for the year ended December 31, 1997 and this 10-QSB. Financial Condition Total assets at June 30, 1998 was -0-. The Company's total liabilities as of June 30, 1998 were $319,876 It is likely that the Company will be required to raise additional capital in order to attract any potential acquisition partner but there can be no assurance that the Company will be able to raise any additional capital. It is also likely that any future acquisition will be made through the issuance of shares of the Company's common stock which will result in the dilution of the percentage ownership of the current shareholders. Results of Operations The Company has generated no revenues since the Confirmation Date of its Bankruptcy Reorganization. The Company will not generate any revenues, if ever, until and unless it merges with an operating company or raises additional capital for its own operations. There can be no assurance that either of such events will happen. The Company had a net loss of $34,559 for the six months ended June 30, 1998 compared to $8,080 for the six months ended June 30, 1997. Plan of Operation The Company's current business plan is to serve as a vehicle for the acquisition of, or the merger or consolidation with another company (a "Target Business"). The Company intends to utilize its limited current assets, equity securities, debt securities, borrowings or a combination thereof in effecting a Business Combination with a Target Business which the Company believes has significant growth potential. The Company's efforts in identifying a prospective Target Business are expected to emphasize businesses primarily located in the United States; however, the Company reserves the right to acquire a Target Business located primarily elsewhere. While the Company may, under certain circumstances, seek to effect Business Combinations with more than one Target Business, as a result of its limited resources the Company will, in all likelihood, have the ability to effect only a single Business Combination. The Company may effect a Business Combination with a Target Business which may be financially unstable or in its early stages of development or growth. To the extent the Company 13 effects a Business Combination with a financially unstable company or an entity in its early stage of development or growth (including entities without established records of revenue or income), the Company will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, to the extent that the Company effects a Business Combination with an entity in an industry characterized by a high level of risk, the Company will become subject to the currently unascertainable risks of that industry. An extremely high level of risk frequently characterizes certain industries which experience rapid growth. Although management will endeavor to evaluate the risks inherent in a particular industry or Target Business, there can be no assurance that the Company will properly ascertain or assess all risks. The Company will not effect any merger unless it first obtains approval from its shareholders. In connection with obtaining shareholder approval of a proposed merger, the Company will distribute a Proxy, Notice of Meeting of Stockholders and Proxy Statement which contains information about the proposed acquisition transaction. Such information will likely include audited financial statements and other financial information about the acquisition target which meets the requirements of Form 8-K as promulgated under the Securities Exchange of 1934, as amended, resumes of potential new management, description of potential risk factors which shareholders should consider in connection with their voting on the proposed acquisition and a description of the business operations of the acquisition target. Troika and its affiliate will vote all of their shares of the Company's common stock for or against any merger proposal in the same ratio which the shares owned by other shareholders are voted. This will permit other shareholders to be able to effectively determine whether the Company acquires any particular Operating Company. The merger will be effected only if a majority of the other shareholders attending the meeting of shareholders in person and/or by proxy, vote in favor of such proposed merger. The shares of Troika and its affiliates will be included for purposes of determining whether a quorum of shareholders is present at the meeting. 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Item 2. Changes in the Rights of the Company's Security Holders. None. Item 3. Defaults by the Company on its Senior Securities. None. Item 4. Submission of Matters to Vote of Security Holders. No matter was submitted to a vote of the Company's security holders for the quarter ended June 30, 1998. Item 5. Other Information. Item 6(a). Exhibits. None Item 6(b). Reports on Form 8-K. None filed. 15 SIGNATURE In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: February 18, 1999 PACIFIC ALLIANCE CORPORATION . By /S/ Mark A. Scharmann Mark A. Scharmann President/Principal Executive Officer By /s/ David Knudson David Knudson Principal Financial Office 16 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTS FROM PACIFIC ALLIANCE CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIRIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 0 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 1 0 0 0 0 0 0 0 0 0 97,289 0 0 0 422,254 (742,130) 0 0 0 0 0 10,607 0 6,506 (17,113) 0 (17,113) 0 0 0 (17,113) 0 0
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