[OBJECT OMITTED]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 0-23026
RAPTOR INVESTMENTS, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 22-3261564
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2855 N. University Drive, #320
Coral Springs, Florida 33065
--------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (954) 346-5799
--------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON STOCK
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this Form, and no disclosure will be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. Yes X No
The issuer's revenues for the fiscal year ended December 31, 2001 were $71,348.
As of April 11, 2002, there were 43,887,681 shares of Common Stock outstanding.
Based on the average high and low bid prices of the Common Stock on April 11,
2002, the approximate aggregate market value of Common Stock held by
non-affiliates was $ 1,057,008 (1).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2001 Definitive Proxy Statement, which statement
was filed on December 3, 2001, are incorporated by reference in Part III hereof.
Certain exhibits are incorporated by reference to the Registrant's Registration
Statement on Form SB-2 and the amendments thereto, and the Registrant's Annual
Reports on Form 10-KSB for the fiscal years ended December 31, 1995, December
31, 1996, December 31, 1997, December 31, 1998, December 31, 1999 and December
31, 2000 as listed in response to Item 13(a)(2).
Transitional Small Business Disclosure Format (check one): Yes __ No X
(1) The aggregate dollar value of the voting stock set forth equals the number
of shares of the Company's Common Stock outstanding, reduced by the amount of
Common Stock held by officers, directors and shareholders owning in excess of
10% of the Company's Common Stock, multiplied by the average of the high and low
bid prices for the Company's Common Stock on April 11, 2002. The information
provided shall in no way be construed as an admission that any officer, director
or 10% stockholder in the Company may or may not be deemed an affiliate of the
Company, or that he/it is the beneficial owner of the shares reported as being
held by him/it, and any such inference is hereby disclaimed. The information
provided herein is included solely for record keeping purposes of the Securities
and Exchange Commission.
PART I
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
When used in this Annual Report, the words or phrases will likely result, are
expected to, will continue, is anticipated, estimate, projected, intends to or
similar expressions are intended to identify forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including but not
limited to the Company's history of losses and cash flow deficit; lack of
liquidity; volatility of market price of common stock and warrants; possible
adverse effect of penny stock rules and liquidity of the Company's securities;
dividend policy; and control by directors and executive officers, that could
cause the Company's actual results to differ materially from historical earnings
and those presently anticipated or projected. Such factors, which are discussed
in Risk Factors, Business and Management's Discussion and Analysis of Financial
Condition and Results of Operations and the notes to consolidated financial
statements, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods expressed in the
Annual Report. As a result, potential investors are cautioned not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. See Risk Factors Business and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
GENERAL
For a discussion of certain factors, which should be considered in evaluating
the Company and its business, see Risk Factors.
Raptor Investments, Inc., formerly Paramark Enterprises, Inc., (the Company), a
Florida corporation, was originally formed in December 1985 , under the name
T.J. Cinnamons, Inc., as a franchiser of specialty retail bakeries. Previous
management acquired the Company from its founders in 1992, sold the retail
bakeries and franchise system in 1996 to Triarc Restaurant Group, and
subsequently developed the Company into a wholesale manufacturer and distributor
of specialty bakery products. The majority of the wholesale bakery operations
were sold to Rich Products Manufacturing Group in December 2000 with the
remaining assets sold to Brooks Street Companies, Inc. in October 2000. In
August 2001, the Company completed the sale of 500,000 shares of the Company's
common stock in a privately negotiated transaction for a purchase price of
$30,000. The shares were sold to a group of investors. Pursuant to the
transaction, the former officers and directors resigned and were replaced by the
investors. In December 2001, the Company entered into agreements to acquire LBI
Properties, Inc., a development stage real estate holding company, and LBI E Web
Communities, Inc., an internet-related holding company. The acquisition of these
companies was closed on January 8, 2002. These companies were held by the
current management prior to their acquisition by the Company. In October 2001
the Company changed its name to Raptor Investments, Inc. and changed its trading
symbol to RAPT. The Company's Common Stock is publicly traded on the OTC
Bulletin Board under the symbol RAPT.
-2-
Triarc Restaurant Group Transactions. In 1996, the Company sold the T.J.
Cinnamons trade name and other intellectual property to Triarc Restaurant Group
(Triarc) in consideration for (i) a purchase price of $3,540,000, (ii)
additional contingent payments of up to $5.5 million, and (iii) a 99 year
royalty free license agreement to sell T.J. Cinnamons branded products through
wholesale channels of distribution.
In 1998, the Company restructured its agreements with Triarc whereby the Company
terminated the 1996 purchase and license agreements with Triarc in consideration
for payments aggregating $4 million of which $3 million was paid at closing and
$1 million was tendered in the form of a non interest bearing promissory note
payable over a period of 24 months.
Rich Products Transaction. In December 2000, the Company entered into an asset
purchase agreement with Rich Products Manufacturing Corporation (Rich Products)
through which the Company sold to Rich Products a majority of the assets
comprising its bakery operations in El Cajon, California. The Rich Products
agreement provided for a purchase price aggregating $2,182,750 inclusive of a
payment for inventory. The aggregate purchase price will be paid as follows:
$193,950 on October 16, 2000, $1,000,000 on December 15, 2000, and $1,000,000
payable in semiannual installments over a period of four (4) years. Rich
Products is also assuming approximately $285,000 in equipment lease related
debt.
Brooks Street Transaction. In October 2000, the Company also entered into an
asset purchase and sale agreement with Brooks Street Companies, Inc. (Brooks
Street), pursuant to which the Company sold the remainder of its bakery
operations to Brooks Street. The Brooks Street agreement provided for a purchase
price in the form of the assumption by Brooks Street of approximately $70,000 in
equipment lease related debt, the purchase of inventory by Brooks Street in the
amount of $12,500 and the agreement by Brooks Street to make royalty payments to
the Company, over a period of four (4) years, equal to 5% of net sales of
pull-apart cakes to existing customers of the Company plus 1 1/2% of net sales
of pull-apart cakes to new customers of Brooks Street.
The foregoing summaries of the Rich Products Agreement and the Brooks Street
Agreement are only a brief description of the agreements and are qualified in
their entirety by the detailed provisions of the agreements which were filed as
exhibits to the Company's Current Report on Form 8-K filed on October 18, 2000,
and are incorporated herein by reference.
The Lovito Transaction. In August 2001, the Company completed the sale of
500,000 shares of the Company's common stock in a privately negotiated
transaction for a purchase price of $30,000 to investors, Paul, Matthew and Marc
Lovito (the "Lovitos"). Pursuant to the Agreement, on September 22, 2001, the
Company's current officers and directors, Charles Loccisano, Alan Gottlich,
Philip Friedman and Paul Begun, resigned and were replaced by the Lovitos on the
board. In addition, on September 26, 2001, Paul Lovito became the Chairman,
President and Chief Executive Officer replacing Alan Gottlich and Charles
Loccisano. Marc Lovito became Vice President and Secretary replacing Alan
Gottlich, and Matthew Lovito became the Company's Treasurer and Chief Financial
Officer replacing Alan Gottlich. The purchase price is being held in an escrow
account, with Alan S.Gottlich and Charles Loccisano acting as trustees and
signatories, with such funds to be released to the Company upon satisfaction of
the escrow obligations, which include the satisfaction of the Company's
outstanding obligations and the completion of the stock repurchase (described
below), if required. The Agreement also provides that within 12 months after the
completion of the stock sale transaction, the Lovitos shall cause the Company to
make an offer to all holders of the outstanding shares of the Company's common
stock to repurchase their shares at a price of $0.20 per share through a tender
offer provided the market bid price of the Company's common stock is not greater
than $0.20 per share for any consecutive 30-day period during the one-year
period following the closing of the previously described stock sale transaction.
As a result, no assurance can be given that the repurchase will be commenced or
that the repurchase will occur on the terms described herein. If the foregoing
offer to shareholders is required and the Lovitos do not fulfill their
obligations in connection therewith, the Agreement provides that the Lovitos
shall take all actions necessary to add four new members to the Board selected
by Messrs. Loccisano and Gottlich. The Agreement also provides that each of
Messrs. Loccisano and Gottlich has the right to require the Lovitos to purchase
or the Company to repurchase up to one-half of their Paramark shares (the
"Loccisano/Gottlich Sale Offer") on the 60th day after the earlier of: (i) the
completion of a 30 consecutive trading day period where the Company's common
stock had a bid price of $0.20 per share or higher during the one year period
following the consummation of the Stock Sale Transaction; or (ii) the completion
of the Company's repurchase, described above. The purchase price paid by the
Company or the Lovitos for the Loccisano and Gottlich shares will be $0.20 per
share. At August 20, 2001, Messrs. Gottlich and Loccisano beneficially owned
1,431,924 and 187,339 shares, respectively, of the Company's common stock. The
proposed payments to Messrs. Gottlich and Loccisano upon the sale of their
shares are subject to a guarantee agreement entered into between the Lovitos and
Messrs. Gottlich and Loccisano. Under the terms of the Lovito Guarantee
Agreement, the Lovitos, jointly and severally, guarantee the fulfillment of the
obligations defined in the Lovito Guarantee. Under the terms of the Agreement,
Messrs. Gottlich and Loccisano agreed not to tender any shares during the
Company's repurchase, if commenced. In addition, under the terms of the
agreement, Messrs. Gottlich and Loccisano agreed not to tender any shares during
the Company's repurchase, if commenced or otherwise sell their shares except
pursuant to the Loccisano/Gottlich Sale Offer for a specified period. In
consideration of this restriction, the Lovitos agreed to pay Messrs. Loccisano
and Gottlich an aggregate fee of $66,000 payable in 12 monthly installments. The
Agreement provides for the establishment of an escrow account which shall be
used to fund certain expenses of the Company existing prior to the stock sale
transaction including, amounts due to Messrs Loccisano and Gottlich pursuant to
their employment agreements, director and officer insurance premiums and
outstanding trade obligations and legal fees of the Company and Messrs.
Loccisano and Gottlich resulting from the Pensabene litigation. The obligations
of the Company under the Agreement are also secured by an Agreement between the
-3-
Lovitos and Messrs. Loccisano and Gottlich which provides that Messrs. Loccisano
and Gottlich may designate four new board members if the Lovitos fail to fulfill
their obligations under the Agreement and the Lovitos agree to take all
corporate action necessary to add such individuals to the board. As part of
these transactions, the Lovitos agreed to enter into consulting agreements with
each of Messrs. Gottlich and Loccisano which require Messrs. Loccisano and
Gottlich to consult with the Lovitos on the operations of a public company and
related matters in exchange for the payment of $24,000 payable in 12 equal
monthly installments. Pursuant to the terms of the Agreement, the Lovitos also
agreed to take action to cause the Company to register the Loccisano and
Gottlich shares for resale pursuant to the applicable requirements of the SEC.
The Agreement also provides that the Company's obligations to Messrs. Loccisano
and Gottlich pursuant to their employment agreements shall be secured by the
assignment of payments from the Rich Products Asset Purchase Agreement. As a
result of the Company entering into the above-described Agreement, the Board of
Directors unanimously approved the termination of the proposed Plan of
Liquidation previously approved by stockholders at the Company's Annual Meeting
held on December 15, 2000, effective upon the consummation of the share purchase
transaction.
The Company will seek to become a diversified holding company with a primary
focus on providing corporate financial consulting services to various business
entities and the acquisition, management, sale and lease of real estate. The
Company will also seek to enhance shareholder value through the acquisition of
various private companies.
Plan of Liquidation. The Company's shareholders approved a plan of liquidation
on December 15, 2000 pursuant to which the Company would distribute all
remaining net proceeds from the Rich Products transaction and the Brooks Street
transaction to its shareholders over a period of four (4) years . As a result of
the Company entering into the above-described Agreement with the Lovitos (See
"Lovito Transaction"), the Board of Directors unanimously approved the
termination of the proposed Plan of Liquidation previously approved by
stockholders at the Company's Annual Meeting held on December 15, 2000,
effective upon the consummation of the share purchase transaction.
LBI Properties, Inc. Transaction. In December 2001, the Company entered into an
Acquisition Agreement with LBI Properties, Inc., a Florida corporation, and the
shareholders of LBI Properties. The shareholders of LBI Properties include the
Company's Chairman, President and CEO Paul F. Lovito,Jr., the Company's CFO and
Treasurer Matthew J. Lovito and the Company's Vice President and Director Marc
A. Lovito, officers and directors of the Company. Pursuant to the Acquisition
Agreement, the Company effected the stock exchange at the rate of 1:5. The
Company acquired all of the issued and outstanding shares of the Common Stock of
LBI Properties in exchange for the issuance of 19,974,298 shares of the Common
Stock of the Company to be delivered to the LBI Properties shareholders on a
pro-rata basis. This acquisition closed on January 8, 2002. LBI Properties is an
early stage real estate holding company. LBI Properties currently owns a
residential lot in Cape Coral, Florida, and has identified two additional
residential lots that it intends to acquire in the near future. In addition to
the foregoing, LBI Properties is seeking acquisitions in the following areas:
income producing commercial and residential properties, residential development
projects, leisure and destination properties, and real estate service
operations.
LBI E Web Communities, Inc. Transaction. In December 2001, the Company entered
into a Stock Acquisition Agreement with the Company's Chairman, President and
CEO Paul F. Lovito, Jr., the Company's CFO and Treasurer Matthew J. Lovito,
Company's Vice President and Director Marc A. Lovito, Darrin Lovito and LBI
Capital Partners, L.P., a limited partnership in which the Company's Chairman,
President and CEO is a general partner, as shareholders of LBI E Web
Communities, Inc., a Florida corporation. Pursuant to the Stock Agreement, the
Company effected the stock exchange at the rate of 1:3. The Company acquired all
of the issued and outstanding shares of the Common Stock of LBI E Web in
exchange for the issuance of 19,800,000 shares of the Common Stock of the
Company to be delivered to the LBI E Web shareholders on a pro-rata basis. This
acquisition closed on January 8, 2002. LBI E Web is an Internet related holding
company that currently owns the following five domain names:
FinanceItOnTheWeb.com (a financial services directory site), Brassbulls.com (a
public relations and financial information site), MyEnumber.com (an online
address book and one stop Rolodex), Homewaiter.com (a food delivery and
information site), and Mimesaro.com (a Spanish food delivery and information
site). Brassbulls.com and MyEnumber.com websites are in the final phases of
construction while the development of the other listed websites will commence
shortly. LBI E Web plans to create a network of self-developed websites covering
a diverse universe of subjects.
Raptor Merger Transaction. In December 2001., current management and the
majority shareholders approved and effected a corporate reorganization, the
principal feature of which was to transfer the Company's legal domicile from
Delaware to Florida pursuant to an Agreement and Plan of Merger between the
Company and its wholly-owned subsidiary, Raptor Investments, Inc., a Florida
corporation, wherein the Florida corporation was the surviving corporation.
The foregoing summaries of the Lovitos Agreement, the LBI Properties, Inc.
Agreement, the LBI E Web Agreement and the Raptor Merger are only a brief
description of the agreements and are qualified in their entirety by the
detailed provisions of the agreements which were filed as exhibits to the
Company's Current Report on Form 8-K filed on August 23, 2001 (Lovitos
Transaction), Schedule 14C filed on December 3, 2001(Raptor Merger) and Form 8-K
filed on January 7, 2002 (LBI Properties, Inc. and LBI E Web Communities, Inc.
Transaction) are incorporated herein by reference.
-4-
Risk Factors
In addition to the other information in this report, the following information
should be considered carefully by investors in evaluating the Company and its
business.
(a) History of Operating Losses; Operating Cash Flow Deficit. The Company has
had net operating losses since 1988. For the fiscal year ended December 31,
2001, the Company's net operating loss on a going concern basis was $560,478.
The Company has been and is currently experiencing an operating cash flow
deficit primarily because its current expenses exceed its current revenues.
There can be no assurance that the Company will achieve profitable operations
and a positive cash flow. See Management's Discussion and Analysis of Financial
Conditions and Results of Operations.
(b) Lack of Liquidity; Volatility of Market Price of Common Stock. The Common
Stock of the Company was delisted from the Nasdaq SmallCap Market on January 7,
1998 and is presently quoted and traded on the OTC Bulletin Board. As a result,
the purchaser of the Company's securities may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of the Common Stock.
Consequently, there can be no assurance that an active and liquid market for the
Common Stock or the uniform quotation of prices for the Common Stock can be
sustained. The market price for the Company's Common Stock may also be
significantly affected by such factors as the introduction of new products by
the Company or its competitors. Additionally, in recent years, the stock market
has experienced a high level of price and volume volatility, and market prices
for many companies, particularly small and emerging growth companies, the
securities of which trade in the over-the-counter market, have experienced wide
price fluctuations not necessarily related to the operating performance of such
companies. The market price and liquidity of the Company's Common Stock may also
be significantly affected by the general business condition of the Company.
As a result of the delisting of the Company's securities from the Nasdaq
SmallCap Market, sales of the Company's securities are within the scope of
Securities and Exchange Commission rules that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other that
their established customers and accredited investors (generally institutions
with assets in excess of $5,000,000 or individuals with a net worth in excess of
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouses). For transactions covered by that rule, the broker-dealer
must make a special suitability determination with respect to each purchaser,
and receive the purchaser's written agreement to the transaction prior to the
sale. Consequently, the rule may affect the ability of broker-dealers to sell
the Company's securities and also may affect the ability of current shareholders
to sell their securities in the secondary market. There can be no assurance that
trading of the Company's securities will not be adversely affected by the
Company's failure to comply with these or other regulations that could adversely
effect the market for such securities.
(c) Effect of Penny Stock Rules on Liquidity for the Company's Securities. The
Securities and Exchange Commission (the Commission) regulations define a penny
stock to be an equity security not registered on a national securities exchange,
or for which quotation information is disseminated on the Nasdaq SmallCap Market
that has a market price (as therein defined) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exemptions. For
any transaction involving a penny stock, unless exempt, the rules require
delivery, prior to a transaction in a penny stock, of a disclosure schedule
prepared by the Commission relating to the penny stock market. Disclosure is
also required to be made about commissions payable to both the broker-dealer and
the registered representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
The foregoing required penny stock restrictions apply to the Company's
securities if such securities continue to be listed on the OTC Bulletin Board,
and have certain price and volume information provided on a current and
continuing basis or meet certain minimum net tangible assets or average return
criteria. In any event, even if the Company's securities were exempt from such
restrictions, the Company would remain subject to Section 15(b)(6) of the
Securities Exchange Act of 1934, as amended, which gives the Commission the
authority to prohibit any person that is engaged in unlawful conduct while
participating in a distribution of a penny stock from associating with a
broker-dealer or participating in a distribution of a penny stock, if the
Commission finds that such a restriction would be in the public interest. Since
the Company's securities are subject to the rules on penny stocks, the market
liquidity for the Company's securities could be materially and adversely
affected. Any disruption in the liquid market of the Company's Common Stock
could limit the Company's access to the equity markets in the future, and could
have a materially adverse effect on the Company's business, financial conditions
and results of operations.
(d) Dividend Policy. To date, the Company has not paid any dividends on its
Common Stock. The Board of Directors does not anticipate declaring any cash
dividends on its Common Stock in the foreseeable future. Future dividends, if
any, will be dependent upon the results of operations and financial condition of
the Company, tax considerations, industry standards, economic conditions,
general business practices and other factors.
-5-
(e) Control by Directors and Executive Officers. The directors, executive
officers and their affiliates own approximately 75.92% of the Company's
outstanding Common Stock and, therefore, are in a position to elect all of the
Company's directors who, in turn, elect all of the Company's executive officers.
Members of management, if acting in concert, will have sufficient voting power
to control the outcome of all corporate matters submitted to the vote of
shareholders, including the election of directors, changes in the size and
composition of the Board of Directors, mergers, tender offers, and open-market
purchase programs that could give shareholders of the Company the opportunity to
realize a premium over the then-prevailing market price for their shares. In
addition, the concentration of ownership in several members of management could
have the effect of delaying or preventing a change in control of the Company and
may effect the market price of the Company's common stock.
ITEM 2. PROPERTIES
The corporate offices of Raptor Investments, Inc. are in Coral Springs, Florida,
and consist of approximately 3000 square feet of office space. The office space
is currently provided by an affiliated corporation at a cost of $0.
ITEM 3. LEGAL PROCEEDINGS
In November 1998, the Company filed a civil action against Sweet Goods LLC, Gary
Kleinman and Robert Statman (the Defendants) in the Superior Court of New
Jersey. The claim is for the collection of invoices aggregating approximately
$115,000 representing the value of certain baked goods delivered to the
Defendants. On July 12, 2000 the Company obtained a judgment against Sweet Goods
LLC, Gary Kleinman and Robert Statman. The Company is currently pursuing
collection activities against the Defendants, however one of the defendants Gary
Kleinman has filed a voluntary petition for bankruptcy.
In 2000, the Company received discrimination and wrongful termination claims
brought by two separate employees (Vargas and DeSantiago) employed at the
Company's bakery facility in El Cajon, California. These claims are currently
pending in the California Department of Fair Employment and Housing. The Company
has fully responded to all requests for information and has formally denied
liability. The investigation regarding these claims is currently pending.
In January 2001, the Company and certain of its officers were named as a
defendant in a civil action filed by Pensabene International, Inc. (the
Plaintiff) in the Superior Court for the State of California. The claim is for
damages for misappropriation of trade secrets, trade libel, breach of
confidentiality, breach of fiduciary duty, tortuous interference with economic
relations, breach of contract, common law palming off, unfair business practices
and a violation of state antitrust laws. This action arose resulted from the
Company's employment of Kandy Konn, a former employee and consultant of the
Plaintiff. On February 8, 2002 the Company and certain of its officers received
a jury verdict in favor of all defendants on all claims.
In addition, the Company from time to time has been involved in routine
litigation, including litigation with various vendors and creditors. None of
these litigation matters in which the Company has been involved is material to
its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's Common Stock is currently traded on the OTC Bulletin Board (OTC)
under the symbol RAPT. Prior to November 1, 2001, the Company's Common Stock was
traded on the OTC Bulletin Board (OTC) under the symbol TJCI.
The following table sets forth, for the periods indicated, the range of high and
low bid prices of the Common Stock as reported by OTC Bulletin Board for the
twelve months ended December 31, 2000 and December 31, 2001. These prices
reflect inter-dealer prices and do not include retail mark-ups, markdowns or
commissions, and do not necessarily represent actual transactions.
-6-
High Low
--------------------------
Quarters Ending:
----------------
March 31, 2000 ...................... $.50 $.1875
June 30, 2000 ....................... .3125 .125
September 30, 2000 .................. .125 .08
December 31, 2000 ................... .08 .0625
Quarters Ending:
----------------
March 31, 2001 ...................... $.10 $ .035
June 30, 2001 ....................... .12 .03
September 30, 2001 .................. .15 .09
December 31, 2001 ................... .12 .07
The approximate number of stockholders of the Common Stock of record at December
31, 2001 was approximately 76, not including beneficial owners whose shares are
held by banks, brokers and other nominees, which was estimated to be 385 at
December 31, 2001.
The Company has not paid any dividends in the past. Declaration of dividends in
the future will remain within the discretion of the Company's Board of
Directors. Future dividends, if any, will be dependent upon the results of
operations and financial condition of the Company, tax considerations, industry
standards, economic conditions, general business practices and other factors.
SALES OF UNREGISTERED SECURITIES
The following sales of unregistered securities occurred during the Company's
fiscal years ended December 31, 1999, 2000 and 2001:
1. In 1999, the Company authorized the issuance of 19,500 shares of the
Company's Common Stock to Gelt Financial Corporation. These shares were issued
without an underwriter or placement agent in consideration for providing the
Company with a working capital line of credit. The exemption from registration
for the issuance was claimed pursuant to Section 4(2) of the Securities Act of
1933, as amended, in reliance upon the fact that such sale did not involve a
public offering.
2. In 2000, the Company authorized the issuance of 50,000 shares of the
Company's Common Stock to Charles Loccisano, the Company's Chairman and Chief
Executive Officer. These shares were issued without an underwriter or placement
agent in consideration for providing the Company with a loan in the amount of
$150,000. The exemption from registration for the issuance was claimed pursuant
to Section 4(2) of the Securities Act of 1933, as amended, in reliance upon the
fact that such sale did not involve a public offering.
3. In 2000, the Company authorized the issuance of 150,000 shares of the
Company's Common Stock to Charles Loccisano, the Company's Chairman and Chief
Executive Officer. These shares were issued without an underwriter or placement
agent in consideration for providing the Company with a working line of credit
in the amount of $150,000. The exemption from registration for the issuance was
claimed pursuant to Section 4(2) of the Securities Act of 1933, as amended, in
reliance upon the fact that such sale did not involve a public offering.
4. In 2000, the Company authorized the issuance of 20,000 shares of the
Company's Common Stock to Gelt Financial Corporation. These shares were issued
without an underwriter or placement agent in consideration for providing the
Company with a working capital line of credit. The exemption from registration
for the issuance was claimed pursuant to Section 4(2) of the Securities Act of
1933, as amended, in reliance upon the fact that such sale did not involve a
public offering.
5. In 2001, the Company sold 500,000 shares of the Company's Common Stock to
Paul Lovito, Matthew Lovito and Marc Lovito for a total of $30,000. These shares
were sold without an underwriter or placement agent. The exemption from
registration for the issuance was claimed pursuant to Section 4(2) of the
Securities Act of 1933, as amended, in reliance upon the fact that such sale did
not involve a public offering.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
Except for historical information contained herein, certain statements herein
are forward-looking statements that are made pursuant to the safe harbor
provisions of the private securities litigation reform act of 1995.
-7-
Forward-looking statements involve estimates of the Company's financial
position, business strategy and other plans and objectives future operations.
Although the Company believes that these expectations are reasonable, there can
be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will have
the expected effects on its business or operations.
PLAN OF OPERATION
The Company's operations for 2001 consisted of "winding down" the Company's
previous operations. In September of 2001 the Company changed management and the
focus of the Company's operations. During 2001 the Company pursued business
consulting contracts from publicly traded and privately held companies. The
Company plans to provide consultation in various areas including: mergers and
acquisitions; venture capital; public relations; restructuring and financing. As
of December 2001 the Company had been unable to secure any contracts. The
Company plans to market its services to publicly traded and privately held
companies through referrals and advertising in various business publications.
In addition to its consulting services, the Company plans to develop the Company
into a holding company through the acquisition of various business operations.
In March 2002 the Company entered into a Letter of Intent to acquire a wholesale
produce distribution company. The Company is currently seeking capital to
complete this acquisition and to date has been unable to procure financing. Due
to the Company's lack of capital, there can be no assurances that it will be
able to complete the acquisition of the wholesale produce distribution company.
In December 2001, the Company entered into an agreement to acquire LBI
Properties, Inc. LBI Properties is an early stage real estate holding company.
LBI Properties currently owns a residential lot in Cape Coral, Florida, and has
identified two additional residential lots that it intends to acquire in the
near future. In addition to the foregoing, LBI Properties is seeking
acquisitions in the following areas: income producing commercial and residential
properties, residential development projects, leisure and destination
properties, and real estate service operations. The Company plans to fund the
acquisition of real estate through mortgage financing, seller financing and the
issuance of its stock.
In addition to the agreement to acquire LBI Properties, the Company entered into
an agreement in December 2001 to acquire LBI E Web Communities, Inc. LBI E Web
is an Internet related holding company that currently owns the following five
domain names: FinanceItOnTheWeb.com (a financial services directory site),
Brassbulls.com (a public relations and financial information site),
MyEnumber.com (an online address book and one stop Rolodex), Homewaiter.com (a
food delivery and information site), and Mimesaro.com (a Spanish food delivery
and information site). Brassbulls.com and MyEnumber.com websites are in the
final phases of construction while the development of the other listed websites
will commence shortly. LBI E Web plans to create a network of self-developed
websites covering a diverse universe of subjects. The development of these
websites is currently being funded by the Company's Chairman, President and CEO
until such time as the Company is able to secure adequate capital.
RESULTS OF OPERATIONS.
From inception to December 2000, the Company was engaged in the wholesale bakery
business. In December 2000, the Company entered into an asset purchase agreement
with Rich Products Manufacturing Corporation (Rich Products) through which the
Company sold to Rich Products a majority of the assets comprising its bakery
operations in El Cajon, California. The Rich Products agreement provided for a
purchase price aggregating $2,182,750 inclusive of a payment for inventory. The
aggregate purchase price will be paid as follows: $193,950 on October 16, 2000,
$1,000,000 on December 15, 2000, and $1,000,000 payable in semiannual
installments over a period of four (4) years. Rich Products is also assuming
approximately $285,000 in equipment lease related debt.
Since December 2000, the Company has been "unwinding" the previous operations,
defending any outstanding litigation and resolving any outstanding debts.
Revenues for the fiscal year ended December 31, 2001 decreased to $71,348, from
$5,454,685 in revenues for 2000. This decrease in revenues was a result of the
sale of the majority of the Company's assets to Rich Products in December 2000.
Our operating loss decreased to $560,478 in 2001 as compared to $1,169,003 in
2000 as a result of a decrease in selling, general and administrative expenses
from $1,916,631 for 2000 to $142,234 in 2001.
The Company's decrease in revenues and net loss are a direct result of its sale
of its assets and bakery operations to Rich Products in December 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, the Company had a stockholder's deficit of $162,450. As
of December 2001 the Company also incurred losses of $560,478. The Company plans
to decrease this deficit and reduce losses by retaining business consulting
clients in the private and public sector. In addition, the Company plans to seek
the acquisition of income producing assets in exchange for its securities.
-8-
The Company currently has very restricted liquidity. As a result of the sale of
the Company's assets to Rich Products, the Company has a note receivable of
$684,951. This note is currently being used to defend pending litigations,
settle past debts and to satisfy former management's employment agreements.
Unless and until the Company successfully obtains consulting clients and/or
acquires revenue producing assets, it will use its equity and the resources of
its CEO, Paul Lovito, to finance its operations. However, no assurances can be
provided that the Company will be successful in acquiring assets, whether
revenue-producing or otherwise, or that Mr. Lovito will continue to assist in
financing the Company's operations.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 13(a)(1) in Part IV.
ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On March 4, 2002 the Company dismissed Amper, Politziner & Mattia ("AP&M)") as
its independent auditors. Such dismissal was approved by the Company's Board of
Directors. AP&M's report upon the Company's financial statements for its fiscal
years ended December 31, 2000 and 1999 did not contain an adverse opinion or a
disclaimer of opinion, nor was such report qualified or modified as to audit
scope or accounting principles. The report was prepared assuming that the
Company will continue as a going concern. During the Company's fiscal years
ended December 31, 2000 and 1999 to the date of AP&M's dismissal (the "Interim
Period"): (i) there were no disagreements (of the nature contemplated by Item
304 (a) (1) (iv) of Regulation S-K ("Disagreements") between the Company and
AP & M; and (ii) there were no reportable events of the nature contemplated by
Item 304(a) (2) (i) - (ii) of Regulation S-K.
On March 6, 2002 the Company engaged Weinberg & Co. ("WC") as its independent
public accountants for the Company's fiscal year ended December 31, 2001. During
the Company's two fiscal years ended December 31, 2000, the Interim Period and
the Second Interim Period, the Company did not consult with WC with respect to
any of the matters contemplated by Item 304 (a) (2) (i) - (ii) of Regulation
S-K.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company's executive officers and directors are as follows:
==============================================================================
Name Age Position with the Company Director Since
------------------------------------------------------------------------------
Paul F. Lovito Jr. 33 Chairman, President ,Chief 2001
Executive Officer
and Director
------------------------------------------------------------------------------
Matthew J. Lovito 29 Chief Financial Officer, 2001
Treasurer and Director
------------------------------------------------------------------------------
Marc A. Lovito 26 Vice President and 2001
Director
------------------------------------------------------------------------------
==============================================================================
-9-
Paul F. Lovito Jr. has been the Chairman, President, Chief Executive Officer and
Director of the Company since September 2001. Mr. Lovito has been President and
Chairman of LBI Group, Inc., a business consulting company, since June 1994. Mr.
Lovito is Chairman and Chief Executive Officer of LBI Properties, Inc., a
development stage real estate holding company, a position he has held since
February 1998. He also serves as Chairman of LBI E Web Communities, Inc., an
internet holding company, a position he had held since June 2000. Mr. Lovito has
been the Chairman and President of LBI Asset Management, LP, a Delaware
partnership, which provides management, services to the related companies, a
position he had held since July 1998. Mr. Lovito is also the general partner in
LBI Capital Partners, LP, a hedge fund, a position he has held since July 1998.
All of the foregoing entities are located in Coral Springs, Florida.
Matthew J. Lovito has been the Chief Financial Officer, Treasurer and Director
of the Company since September 2001. He has been a Vice President with LBI
Group, Inc. since June 1994. In addition, Mr. Lovito is a Vice President of LBI
Properties, Inc. and LBI E Web Communities, Inc., positions he has held since
February 1998 and June 2000. Mr. Lovito is also a partner in LBI Asset
Management LP and LBI Capital Partners LP, positions he has held since July
1998.
Marc A. Lovito has been a Vice President and Director of the Company since
September 2001. He has been a Vice President with LBI Group, Inc., since June
1994. Mr. Lovito is President of LBI Properties, Inc., a position he has held
since February 1998, and Vice President of LBI E Web Communities, Inc. Mr.
Lovito is also a partner in LBI Asset Management LP and LBI Capital Partners LP,
positions he has held since July 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act (Section 16(a)) requires the Company's
directors, executive officers, and persons who own more than 10% of a registered
class of the company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than 10%
stockholders are required by the SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the fiscal year ended December 31, 2001, all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total annual compensation paid or accrued by
the Company for services in all capacities for the Chief Executive Officer and
each other officer who made in excess of $100,000 (salary plus bonuses) (the
Named Officers) for the fiscal years ended December 31, 2001, 2000 and 1999. No
other executive officers of the Company who were serving as such at the end of
such fiscal years received salary and bonus in excess of $100,000.
Long Term Compensation Awards
Annual Compensation Other
Name and Principal Annual Securities
Position Year Salary Bonus Comp.(1) Underlying Options
Paul Lovito, 2001 $0 $0 $0 -0-
Chairman, President and
Chief Executive Officer
Matthew Lovito, 2001 $0 $0 $0 -0-
Chief Financial Officer
and Treasurer
Marc Lovito, 2001 $0 $0 $0 -0-
Vice President
Charles Loccisano, 2001 $ 17,917 $0 $ 1,000 (1) -0-
Former Chairman, and Chief 2000 237,070 (2) 0 12,000 -0-
Executive Officer 1999 193,678 0 12,000 -0-
Alan Gottlich, 2001 $ 12,798 $0 $ 1,000 (1) -0-
Former President and Chief 2000 168,305 (3) 0 9,000 -0-
Financial Officer 1999 138,342 0 9,000 -0-
(1) These amounts represent reimbursable automobile expenses.
(2) $49,091 of this amount represents salary accruals from 1999 paid
during 2000.
(3) $3,173 of this amount represents salary accruals from 1999 paid
during 2000.
-10-
STOCK OPTION GRANTS IN LAST FISCAL YEAR
No options were granted under the Company's option plan during the year ended
December 31, 2001.
TERMINATION OF EMPLOYMENT AGREEMENTS
In October 1997, the Company entered into an employment agreement with Charles
Loccisano, the Company's Former Chairman, Chief Executive Officer and Director,
which employment agreements current term expires on October 1, 2003, and
requires severance payments in the event of termination without cause equal to
two times Mr. Loccisano's base salary plus one-half of the aggregate bonuses
paid over the previous three fiscal years. In September 2000, the Board of
Directors approved the termination of Mr. Loccisano's Employment Agreement as of
January 31, 2001 upon terms providing Mr. Loccisano compensation equal to
one-half the contractual obligations under the employment agreement, or $276,622
(the contractual obligation in the employment agreement is $553,244) to be paid
in equal quarterly installments over a period of four years. These payments will
be paid out of the proceeds received from the Rich Products Transaction.
In October 1997, the Company also entered into an employment agreement with Alan
Gottlich , the Company's Former President, Chief Financial Officer and Director,
which employment agreements current term expires on October 1, 2003, and
requires severance payments in the event of termination without cause equal to
two times Mr. Gottlich's base salary plus one-half of the aggregate bonuses paid
over the previous three fiscal years. In September 2000, the Board of Directors
approved the termination of Mr. Gottlich's Employment Agreement as of January
31, 2001 upon terms providing Mr. Gottlich compensation equal to one-half the
contractual obligations under the employment agreement, or $188,224 (the
contractual obligation in the employment agreement is $376,447) to be paid in
equal quarterly installments over a period of four years. These payments will be
paid out of the proceeds received from the Rich Products Transaction.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 11, 2002 as to the
beneficial ownership of Common Stock (including shares which may be acquired
within sixty days pursuant to stock options) of each director of the Company and
the executive officers of the Company listed in the Summary Compensation Table
below, all directors and executive officers as a group and persons known by the
Company to beneficially own more than 5% of the Common Stock. Except as set
forth below, no person beneficially owns more than 5% of the Common Stock.
Number of Shares
Name and Address of of Common Stock Percent
Beneficial Owner (1) Beneficially Owned (2) Beneficially Owned
-------------------- ---------------------- ------------------
Paul Lovito (1) 27,959,600 63.71%
LBI Capital Partners, LP 7,900,000 18.00%
LBI Holdings, Inc. 3,420,000 7.79%
Matthew Lovito (2) 2,780,000 6.33%
Marc Lovito (3) 2,578,000 5.87%
Darrin Lovito 2,402,000 5.47%
All directors and executive
officers as a group (3 persons) 33,317,600 75.92%
(1) Includes 23,600 shares held by Mr. Lovito's daughter, 6,000 shares
held by a partnership in which Mr. Lovito is a general partner with
sole voting and dispositive power over the Raptor shares, 3,420,000
shares held by LBI Holdings, Inc., a corporation wholly owned by Mr.
Lovito, and 7,900,000 shares held by LBI Capital Partners, LP, a
limited partnership in which Mr. Lovito is a general partner with
sole voting and dispositive power over the Raptor shares. Mr. Lovito
expressly disclaims beneficial ownership of shares held by his
brothers.
(2) Mr. Lovito expressly disclaims beneficial ownership of shares held by
his brothers.
(3) Mr. Lovito expressly disclaims beneficial ownership of shares held by
his brothers.
-11-
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
POLICY FOR RELATED PARTY TRANSACTIONS
The Company believes that all transactions with officers, directors, or
affiliates to date are on terms no less favorable than those available from
unaffiliated third parties.
In August 2000, Charles Loccisano, the Company's Former Chairman and Chief
Executive Officer, provided the Company with a loan of $150,000. The loan
provided for a term of one year and provided for interest in the amount of 5%
per annum. The Company granted Mr. Loccisano 50,000 unregistered shares of
common stock as additional consideration for providing this loan. This loan was
repaid in full out of the proceeds of a loan with Gelt Financial Corporation in
September 2000.
In September 2000, Charles Loccisano, the Company's Former Chairman and Chief
Executive Officer, provided the Company with a credit line in the amount of
$150,000. The credit line provided for a term of one year and provided for
interest in the amount of 5% per annum. The Company granted Mr. Loccisano
150,000 unregistered shares of common stock as additional consideration for
providing this loan. The terms of this credit line provide that the balance of
this loan ($75,000 as of September 31, 2000) will be repaid in full out of the
proceeds of the Rich Products Transaction. This loan has been repaid in full
from the proceeds of the Rich Products Transaction.
CONSULTING AGREEMENTS ARISING OUT OF THE RICH PRODUCTS TRANSACTION
Pursuant to the terms of the Rich Products Asset Purchase Agreement, Charles N.
Loccisano, the Former Chairman, Chief Executive Officer and Director of the
Company, entered into a consulting agreement with Rich Products requiring Mr.
Loccisano to be available to render consulting services as needed by Rich
Products for a period of four (4) years following the Closing. The compensation
to Mr. Loccisano pursuant to this agreement is $50,000 per annum for a period of
four (4) years.
Pursuant to the terms of the Rich Products Asset Purchase Agreement, Alan S.
Gottlich, the Former President, Chief Financial Officer and Director of the
Company, entered into a consulting agreement with Rich Products requiring Mr.
Gottlich to be available to render consulting services as needed by Rich
Products for a period of four (4) years following the Closing. The compensation
to Mr. Gottlich pursuant to this agreement is $30,000 per annum for a period of
four (4) years.
TERMINATION OF EMPLOYMENT AGREEMENTS
Prior to, and unrelated to the Transactions, the Company entered into an
employment agreement with Charles Loccisano, the Company's Former Chairman,
Chief Executive Officer and Director dated October 1, 1997, which employment
agreements current term expires on October 1, 2003, and requires severance
payments in the event of termination without cause equal to two times Mr.
Loccisano's base salary plus one-half of the aggregate bonuses paid over the
previous three fiscal years. In September 2000, the Board of Directors approved
the termination of Mr. Loccisano's Employment Agreement as of January 31, 2001
upon terms providing Mr. Loccisano compensation equal to one-half the
contractual obligations under the employment agreement, or $276,622 (the
contractual obligation in the employment agreement is $553,244) to be paid in
equal quarterly installments over a period of four years. These payments will be
paid out of the proceeds received from the Rich Products Transaction.
Prior to, and unrelated to the Transactions, the Company also entered into an
employment agreement with Alan Gottlich , the Company's Former President, Chief
Financial Officer and Director dated October 1, 1997, which employment
agreements current term expires on October 1, 2003, and requires severance
payments in the event of termination without cause equal to two times Mr.
Gottlich's base salary plus one-half of the aggregate bonuses paid over the
previous three fiscal years. In September 2000, the Board of Directors approved
the termination of Mr. Gottlich's Employment Agreement as of January 31, 2001
upon terms providing Mr. Gottlich compensation equal to one-half the contractual
obligations under the employment agreement, or $188,224 (the contractual
obligation in the employment agreement is $376,447) to be paid in equal
quarterly installments over a period of four years. These payments will be paid
out of the proceeds received from the Rich Products Transaction.
-12-
THE LOVITO TRANSACTION
In August 2001, the Company completed the sale of 500,000 shares of the
Company's common stock in a privately negotiated transaction for a purchase
price of $30,000 to investors, Paul, Matthew and Marc Lovito (the "Lovitos").
Pursuant to the Agreement, on September 22, 2001, the Company's current officers
and directors, Charles Loccisano, Alan Gottlich, Philip Friedman and Paul Begun,
resigned and were replaced by the Lovitos on the board. In addition, on
September 26, 2001, Paul Lovito became the Chairman, President and Chief
Executive Officer replacing Alan Gottlich and Charles Loccisano. Marc Lovito
became Vice President and Secretary replacing Alan Gottlich, and Matthew Lovito
became the Company's Treasurer and Chief Financial Officer replacing Alan
Gottlich. The purchase price is being held in an escrow account, with Alan
S.Gottlich and Charles Loccisano acting as trustees and signatories, with such
funds to be released to the Company upon satisfaction of the escrow obligations,
which include the satisfaction of the Company's outstanding obligations and the
completion of the stock repurchase (described below), if required. The Agreement
also provides that within 12 months after the completion of the stock sale
transaction, the Lovitos shall cause the Company to make an offer to all holders
of the outstanding shares of the Company's common stock to repurchase their
shares at a price of $0.20 per share through a tender offer provided the market
bid price of the Company's common stock is not greater than $0.20 per share for
any consecutive 30 day period during the one year period following the closing
of the previously described stock sale transaction. As a result, no assurance
can be given that the repurchase will be commenced or that the repurchase will
occur on the terms described herein. If the foregoing offer to shareholders is
required and the Lovitos do not fulfill their obligations in connection
therewith, the Agreement provides that the Lovitos shall take all actions
necessary to add four new members to the Board selected by Messrs. Loccisano and
Gottlich. The Agreement also provides that each of Messrs. Loccisano and
Gottlich has the right to require the Lovitos to purchase or the Company to
repurchase up to one-half of their Paramark shares (the "Loccisano/Gottlich Sale
Offer") on the 60th day after the earlier of: (i) the completion of a 30
consecutive trading day period where the Company's common stock had a bid price
of $0.20 per share or higher during the one year period following the
consummation of the Stock Sale Transaction; or (ii) the completion of the
Company's repurchase, described above. The purchase price paid by the Company or
the Lovitos for the Loccisano and Gottlich shares will be $0.20 per share. At
August 20, 2001, Messrs. Gottlich and Loccisano beneficially owned 1,431,924 and
187,339 shares, respectively, of the Company's common stock. The proposed
payments to Messrs. Gottlich and Loccisano upon the sale of their shares are
subject to a guarantee agreement entered into between the Lovitos and Messrs.
Gottlich and Loccisano. Under the terms of the Lovito Guarantee Agreement, the
Lovitos, jointly and severally, guarantee the fulfillment of the obligations
defined in the Lovito Guarantee. Under the terms of the Agreement, Messrs.
Gottlich and Loccisano agreed not to tender any shares during the Company's
repurchase, if commenced. In addition, under the terms of the agreement, Messrs.
Gottlich and Loccisano agreed not to tender any shares during the Company's
repurchase, if commenced or otherwise sell their shares except pursuant to the
Loccisano/Gottlich Sale Offer for a specified period. In consideration of this
restriction, the Lovitos agreed to pay Messrs. Loccisano and Gottlich an
aggregate fee of $66,000 payable in 12 monthly installments. The Agreement
provides for the establishment of an escrow account which shall be used to fund
certain expenses of the Company existing prior to the stock sale transaction
including, amounts due to Messrs Loccisano and Gottlich pursuant to their
employment agreements, director and officer insurance premiums and outstanding
trade obligations and legal fees of the Company and Messrs. Loccisano and
Gottlich resulting from the Pensabene litigation. The obligations of the Company
under the Agreement are also secured by an Agreement between the Lovitos and
Messrs. Loccisano and Gottlich which provides that Messrs. Loccisano and
Gottlich may designate four new board members if the Lovitos fail to fulfill
their obligations under the Agreement and the Lovitos agree to take all
corporate action necessary to add such individuals to the board. As part of
these transactions, the Lovitos agreed to enter into consulting agreements with
each of Messrs. Gottlich and Loccisano which require Messrs. Loccisano and
Gottlich to consult with the Lovitos on the operations of a public company and
related matters in exchange for the payment of $24,000 payable in 12 equal
monthly installments. Pursuant to the terms of the Agreement, the Lovitos also
agreed to take action to cause the Company to register the Loccisano and
Gottlich shares for resale pursuant to the applicable requirements of the SEC.
The Agreement also provides that the Company's obligations to Messrs. Loccisano
and Gottlich pursuant to their employment agreements shall be secured by the
assignment of payments from the Rich Products Asset Purchase Agreement. As a
result of the Company entering into the above-described Agreement, the Board of
Directors unanimously approved the termination of the proposed Plan of
Liquidation previously approved by stockholders at the Company's Annual Meeting
held on December 15, 2000, effective upon the consummation of the share purchase
transaction.
LBI PROPERTIES, INC. TRANSACTION
In December 2001, the Company entered into an Acquisition Agreement with LBI
Properties, Inc., a Florida corporation, and the shareholders of LBI Properties.
The shareholders of LBI Properties include the Company's Chairman, President and
CEO Paul F. Lovito,Jr., the Company's CFO and Treasurer Matthew J. Lovito and
the Company's Vice President and Director Marc A. Lovito, officers and directors
of the Company. Pursuant to the Acquisition Agreement, the Company effected the
stock exchange at the rate of 1:5. The Company acquired all of the issued and
outstanding shares of the Common Stock of LBI Properties in exchange for the
issuance of 19,974,298 shares of the Common Stock of the Company to be delivered
to the LBI Properties shareholders on a pro-rata basis. This acquisition closed
on January 8, 2002.
-13-
LBI E WEB COMMUNITIES, INC. TRANSACTION
In December 2001, the Company entered into a Stock Acquisition Agreement with
the Company's Chairman, President and CEO Paul F. Lovito, Jr., the Company's CFO
and Treasurer Matthew J. Lovito, Company's Vice President and Director Marc A.
Lovito, Darrin Lovito and LBI Capital Partners, L.P., a limited partnership in
which the Company's Chairman, President and CEO is a general partner, as
shareholders of LBI E Web Communities, Inc., a Florida corporation. Pursuant to
the Stock Agreement, the Company effected the stock exchange at the rate of 1:3.
The Company acquired all of the issued and outstanding shares of the Common
Stock of LBI E Web in exchange for the issuance of 19,800,000 shares of the
Common Stock of the Company to be delivered to the LBI E Web shareholders on a
pro-rata basis. This acquisition closed on January 8, 2002.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE
(a) Documents filed as part of this report.
1. Financial Statements
Independent Auditor's Report F-1
Financial Statements Subsequent to Adoption of
Plan of Liquidation F-2 - F-3
Financial Statements Prior to Adoption of
Plan of Liquidation F-4 - F-5
Consolidated Statements of Cash Flows F-6
Consolidated Statement of Stockholders' Equity F-7
Notes to Consolidated Financial Statements F-8 - F-13
-14-
RAPTOR INVESTMENTS, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
RAPTOR INVESTMENTS, INC.
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2 BALANCE SHEET AS OF DECEMBER 31, 2001
PAGE 3 STATEMENT OF NET ASSETS IN LIQUIDATION DECEMBER 31, 2000
PAGE 4 STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
PAGE 5 STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD FROM
OCTOBER 1, 2000 TO DECEMBER 31, 2000
PAGE 6 CONSOLIDATED STATEMENT OF OPERATIONS (GOING CONCERN BASIS),
FOR THE PERIOD FROM JANUARY 1, 2000 TO SEPTEMBER 30, 2000
PAGE 7 STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE YEAR
ENDED DECEMBER 31, 2001
PAGE 8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001
PAGE 9 CONSOLIDATED STATEMENT OF CASH FLOWS (GOING CONCERN BASIS),
FOR THE PERIOD FROM JANUARY 1, 2000 TO SEPTEMBER 30, 2000
PAGES 10 - 15 NOTES TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Raptor Investments, Inc.
We have audited the accompanying balance sheet of Raptor Investments, Inc. as of
December 31, 2001 and the related statements of operations, changes in
stockholders' deficiency and cash flows for the year ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Raptor Investments, Inc. as of
December 31, 2001 and the results of its operations and its cash flows for the
year ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company had a net loss from current operations of
$560,478, a negative cash flow from operations of $325,912, a working capital
deficiency of $611,050 and a stockholders' deficiency of $162,450. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plan in regards to these matters is also described in Note
7. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
April 8, 2002
1
RAPTOR INVESTMENTS, INC.
BALANCE SHEET
DECEMBER 31, 2001
ASSETS
CURRENT ASSETS
Cash $ 3,871
Royalty receivable, net 29,280
Accounts receivable 14,733
Contract receivable - current portion 236,351
Exchange agreement 3,870
-----------
Total Current Assets 288,105
OTHER ASSET
Contract receivable 448,600
-----------
TOTAL ASSETS $ 736,705
===========
LIABILITIES AND STOCKHOLDERS' DEFICENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 891,155
Loan payable - related party 8,000
-----------
Total Current Liabilities 899,155
-----------
STOCKHOLDERS' DEFICENCY
Preferred stock, $.01 par value,
5,000,000 shares authorized, none issued
Common stock, $.01 par value, 100,000,000
shares authorized, 4,113,383 shares issued
and outstanding 41,135
Additional paid-in capital 6,873,982
Treasury stock (39,107)
Accumulated deficit (7,038,460)
-----------
Total Stockholders' Deficiency (162,450)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICENCY $ 736,705
===========
See accompanying notes to financial statements.
2
PARAMARK ENTERPRISES, INC.
(FORMERLY T. J. CINNAMONS, INC.)
AND SUBSIDIARY
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 2000
ASSETS
Cash $ 151,734
Accounts receivable 47,114
Other assets 58,676
Contract receivable 825,000
----------
1,082,524
LIABILITIES
Accounts payable and accrued expenses 714,496
----------
NET ASSETS IN LIQUIDATION $ 368,028
=========
See accompanying notes to financial statements.
3
RAPTOR INVESTMENTS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
REVENUE
Interest $ 70,001
Royalty 1,347
-----------
Total Revenue 71,348
-----------
OPERATING EXPENSES
Professional fees 489,592
Other general and administrative 142,234
-----------
Total Operating Expenses 631,826
-----------
NET LOSS $ (560,478)
===========
Net loss per common share - basic and diluted $ (0.14)
===========
Weighted average number of common shares outstanding -
basic and diluted 3,868,178
==========
See accompanying notes to financial statements.
4
PARAMARK ENTERPRISES, INC.
(FORMERLY T. J. CINNAMONS, INC.)
AND SUBSIDIARY
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS)
FOR THE PERIOD FROM OCTOBER 1, 2000 AND TO DECEMBER 31, 2000
Stockholders deficit September 30, 2000
(going concern, historical cost basis of accounting) $ (136,646)
-----------
Gain on sale of net assets on December 19, 2000 1,220,084
Loss from activities during the "wind down" period
from October 1, 2000 through December 31, 2000 (825,890)
Interest and other income 110,480
-----------
Increase in assets 504,674
-----------
Net assets in liquidation at December 31, 2000 $ 368,028
===========
Number of common shares outstanding 3,613,383
===========
Net assets in liquidation per common share $ .10
===========
See accompanying notes to financial statements.
5
PARAMARK ENTERPRISES, INC.
(FORMERLY T. J. CINNAMONS, INC.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
Period From January 1,
2000 To
September 30, 2000
----------------------
REVENUE $ 5,454,685
Cost of goods sold 4,650,957
-----------
GROSS MARGIN 803,728
Selling, general and administrative expenses 1,916,631
-----------
Loss from operations (1,112,903)
Other income (expense)
Other income 52,118
Interest expense, net (108,218)
-----------
NET LOSS $(1,169,003)
===========
Basic and diluted loss per share $ (.34)
===========
Weighted-average common shares outstanding -
basic and diluted 3,405,471
===========
See accompanying notes to financial statements.
6
RAPTOR INVESTMENTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEAR ENDED DECEMBER 31, 2001
Common Stock Additional Treasury Stock
Paid-In Accumulated
Shares Amount Capital Shares Amount Deficit Total
----------------------------------------------------------------------------------------------
Balance January 1, 2001 3,613,383 $ 36,135 $ 6,848,982 40,800 $ (39,107) $(6,477,982) $ 368,028
Issuance of common stock for cash 500,000 5,000 25,000 -- -- -- 30,000
Net loss for the year ended
December 31, 2001 -- -- -- -- -- (560,478) (560,478)
---------- ----------- ----------- --------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 2001 4,113,383 $ 41,135 $ 6,873,982 40,800 $ (39,107) $(7,038,460) $ (162,450)
========== =========== =========== ========= =========== =========== ===========
See accompanying notes to financial statements.
7
RAPTOR INVESTMENTS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(560,478)
Adjustments to reconcile net loss to
net cash used in operating activities:
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 3,101
Other current assets 58,676
Exchange agreement (3,870)
Increase (decrease) in:
Accounts payable 176,659
---------
Net Cash Used In Operating Activities (325,912)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from contract receivable 140,049
---------
Net Cash Provided By Investing Activities 140,049
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable - related party 8,000
Proceeds from sale of common stock 30,000
---------
Net Cash Provided By Financing Activities 38,000
---------
NET DECREASE IN CASH (147,863)
CASH - BEGINNING OF YEAR 151,734
---------
CASH - END OF YEAR $ 3,871
=========
See accompanying notes to financial statements.
8
PARAMARK ENTERPRISES, INC.
(FORMERLY T. J. CINNAMONS, INC.)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(GOING CONCERN BASIS)
Period From January 1,
2000 To
September 30, 2000
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,169,003)
Adjustment to reconcile net loss to
net cash from operating activities
Depreciation and amortization 151,392
Non-cash interest expense 29,149
Provision for doubtful accounts --
Provision for inventory obsolescence 62,908
Gain from forgiveness of debt (52,118)
(Increase) decrease in
Accounts receivable (269,388)
Inventories (25,805)
Prepaid expenses and other current assets 49,866
Increase (decrease) in
Accounts payable and accrued expenses 508,920
-----------
Net Cash Used In Operating Activities $ (714,079)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (207,264)
Proceeds from note receivable 375,000
-----------
Net Cash Provided By Investing Activities 167,736
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from financing 434,185
Principal payments of notes payable (49,233)
-----------
Net Cash Provided By Financing Activities 384,952
-----------
NET DECREASE IN CASH (161,391)
CASH - BEGINNING OF PERIOD 195,977
-----------
CASH - END OF PERIOD $ 34,586
===========
See accompanying notes to financial statements.
9
RAPTOR INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) ORGANIZATION
Raptor Investments, Inc. formerly Paramark Enterprises, Inc.
(Delaware), a Delaware corporation was merged with and into Raptor
Investments, Inc., a Florida corporation (the "Company") on December
24, 2001. Upon completion of the merger, the Delaware corporation
ceased existence as of the date of the merger and the Company became
the reporting entity.
(B) BASIS OF PRESENTATION
In 2001, as a result of the merger, the Company's plan of liquidation
was abandoned and their financial statements as of and for the year
ended December 31, 2001 have been presented on the accrual basis in
conformity with accounting principles generally accepted in the United
States of America (See Note 7 for going concern uncertainty).
For the period through September 30, 2000, Paramark Enterprises, Inc
financial statements were prepared on a going concern basis. As a
result of the sale of substantially all of Paramark Enterprises, Inc
(Delaware) assets to Rich Products and Brooks Street (See Note 2) and
the plan of complete liquidation and dissolution, the Delaware company
changed its basis of accounting from the going concern basis to the
liquidation basis in accordance with generally accepted accounting
principles, effective October 1, 2000. This basis of accounting is
considered appropriate when, among other things, liquidation of a
company appears imminent and the net realizable value of its assets are
reasonably determinable. Consequently, assets had been valued at
estimated net realizable value and liabilities were presented at their
estimated settlement amounts for the period from October 1, 2000 to
December 31, 2000.
(C) PRINCIPLES OF CONSOLIDATION
In 2000, consolidated financial statements for the period ended
September 30, 2000 include the accounts of Paramark Enterprises, Inc.
(Delaware) and its wholly owned subsidiary Starbake Brands, Inc., after
elimination of all significant intercompany balances and transactions.
The 2001 financial statements are not consolidated due to the
dissolution of Paramark Enterprises, Inc on December 24, 2001 see Note
1(A), and consist solely of Raptor Investment, Inc.
10
RAPTOR INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
(D) USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
(E) CASH AND CASH EQUIVALENTS
For purposes of the cash flow statements, the Company considers all
highly liquid investments with original maturities of three months or
less at the time of purchase to be cash equivalents.
(F) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires disclosures of
information about the fair value of certain financial instruments for
which it is practicable to estimate the value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction
between willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company's contract, royalty and accounts
receivable, accounts payable and accrued liabilities, approximates fair
value due to the relatively short period to maturity for these
instruments.
(G) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(H) EARNINGS (LOSS) PER SHARE
Net loss per common share for the period ended December 31, 2000 is
required to be computed based on the weighted average common stock and
dilutive common stock equivalents outstanding during the year as
defined by Statement of Financial Accounting Standards, No. 128;
"Earnings Per Share".
11
RAPTOR INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
(I) NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued several
new Statements of Financial Accounting Standards. Statement No. 141,
"Business Combinations" supersedes APB Opinion 16 and various related
pronouncements. Pursuant to the new guidance in Statement No. 141, all
business combinations must be accounted for under the purchase method
of accounting; the pooling-of-interests method is no longer permitted.
SFAS 141 also establishes new rules concerning the recognition of
goodwill and other intangible assets arising in a purchase business
combination and requires disclosure of more information concerning a
business combination in the period in which it is completed. This
statement is generally effective for business combinations initiated on
or after July 1, 2001.
Statement No. 142, "Goodwill and Other Intangible Assets" supercedes
APB Opinion 17 and related interpretations. Statement No. 142
establishes new rules on accounting for the acquisition of intangible
assets not acquired in a business combination and the manner in which
goodwill and all other intangibles should be accounted for subsequent
to their initial recognition in a business combination accounted for
under SFAS No. 141. Under SFAS No. 142, intangible assets should be
recorded at fair value. Intangible assets with finite useful lives
should be amortized over such period and those with indefinite lives
should not be amortized. All intangible assets being amortized as well
as those that are not, are both subject to review for potential
impairment under SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS
No. 142 also requires that goodwill arising in a business combination
should not be amortized but is subject to impairment testing at the
reporting unit level to which the goodwill was assigned to at the date
of the business combination.
SFAS No. 142 is effective for fiscal years beginning after December 15,
2001 and must be applied as of the beginning of such year to all
goodwill and other intangible assets that have already been recorded in
the balance sheet as of the first day in which SFAS No. 142 is
initially applied, regardless of when such assets were acquired.
Goodwill acquired in a business combination whose acquisition date is
on or after July 1, 2001, should not be amortized, but should be
reviewed for impairment pursuant to SFAS No. 121, even though SFAS No.
142 has not yet been adopted. However, previously acquired goodwill
should continue to be amortized until SFAS No. 142 is first adopted.
Statement No. 143 "Accounting for Asset Retirement Obligations"
establishes standards for the initial measurement and subsequent
accounting for obligations associated with the sale, abandonment, or
other type of disposal of long-lived tangible assets arising from the
acquisition, construction, or development and/or normal operation of
such assets. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002, with earlier application encouraged.
The adoption of these pronouncements will not have a material effect on
the Company's financial position or results of operations.
12
RAPTOR INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 CONTRACT RECEIVABLE
On December 15, 2000, Paramark Enterprises, Inc (Delaware) consummated
an asset purchase agreement with Rich Products, pursuant to which
Paramark Enterprises, Inc (Delaware) sold its bakery operations located
in El Cajon, California representing a majority of their operating
assets. The agreement provided for a purchase price aggregating
$2,193,950 inclusive of a payment for inventory. The aggregate purchase
price was paid as follows: $193,950 on October 16, 2000, $1,000,000 on
December 15, 2000 and $1,000,000 payable in semiannual installments
over a period of four years. The note was $684,951 as of December 31,
2001 stated at fair value. The Purchaser also assumed approximately
$285,000 in equipment lease related debt.
By a separate agreement Paramark Enterprises, Inc. sold the remainder
of their assets to Brooks Street. The agreement provided for contingent
royalty payments to Paramark Enterprises, Inc., over a period of four
years, equal to 5% of net sales of pull-apart cakes to existing
customers of the Company plus 1 1/2% of net sales of pull-apart cakes
to new customers of Brooks Street. Paramark Enterprises, Inc recognized
royalty income of $1,347 under this agreement during 2001. The
agreement also provided for the assumption of equipment lease related
debt and the purchase of inventory.
Under the above agreements, both parties agreed to pay amounts owed
into an escrow account which was established to ensure the payment of
the account payables on Paramark Enterprises, Inc. books as at the
merger date (See Note 1(A)).
NOTE 3 EQUITY
During August 2001, the Company sold 500,000 shares of common stock to
investors for cash of $30,000.
NOTE 4 INCOME TAXES
Income tax expense (benefit) for the period ended December 31, 2001 is
summarized as follows:
Current:
Federal $ -
State -
Deferred - Federal and State -
-------------
Income tax expense (benefit) $ -
=============
13
RAPTOR INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
The Company's tax expense differs from the "expected" tax expense for
the period ended December 31, 2001 as follows:
U.S. Federal income tax benefit $ (191,000)
Effect on net operating loss carryforward 191,000
-------------
$ -
=============
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 2001
are as follows:
Deferred tax assets:
Net operating loss carryforward $ 191,000
-------------
Total gross deferred tax assets 191,000
Less valuation allowance (191,000)
-------------
Net deferred tax assets $ -
=============
At December 31, 2001, the Company had a net operating loss carryforward
of approximately $191,000 for U.S. Federal income tax purposes
available to offset future taxable income expiring in 2021.
NOTE 5 LOAN PAYABLE - RELATED PARTY
During 2001, a related party loaned the Company $8,000. The loan is
non-interest bearing and due on demand.
NOTE 6 CONTINGENCIES
In 2000, Paramark Enterprises, Inc (Delaware) received discrimination
and wrongful termination claims brought by two separate employees
employed at the Company's bakery facility in El Cajon, California.
These claims are currently pending in the California Department of Fair
Employment and Housing. The Company has fully responded to all requests
for information and has formally denied liability. The investigation
regarding these claims is currently pending.
In January 2001, Paramark Enterprises, Inc (Delaware) and certain of
its officers were named as a defendant in a civil action filed by a
company (the "Plaintiff") in the Superior Court for the State of
California. The claim is for damages for misappropriation of trade
secrets, trade libel, breach of confidentiality, breach of fiduciary
duty, tortuous interference with economic relations, breach of
contract, common law palming off, unfair business practices and a
violation of state antitrust laws. This action resulted from Paramark
Enterprises, Inc employment of a former employee and consultant of the
Plaintiff. On February 8, 2002, the Company and certain of its officers
received a jury verdict in favor of all defendants on all claims.
14
RAPTOR INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 7 GOING CONCERN
As shown in the accompanying consolidated financial statements, the
Company incurred a net loss of $560,478 from operations, a negative
cash flow from operations of $325,912, a working capital deficiency of
$611,050 and a stockholders' deficiency of $162,450. These factors
raise substantial doubt about the Company's ability to continue as a
going concern.
Management's plan for the Company in regards to these matters is to
seek to become a diversified holding company with a primary focus on
providing corporate financial consulting services to various business
entities and the acquisition, management, sale and lease of real
estate. The Company will also seek to enhance shareholder value through
the acquisition of various private companies.
NOTE 8 SUBSEQUENT EVENTS
(A) ACQUISITION OF LBI PROPERTIES, INC. TRANSACTION
On January 8, 2002 the Company acquired 100% of a company owned by
certain officers and directors for 19,974,298 shares.
(B) ACQUISITION OF LBI E WEB COMMUNITIES, INC.
On January 8, 2002 the Company acquired 100% of a company owned by
certain officers and directors for 19,800,000 shares.
15
2. Exhibits
1.1 * ................ Underwriting Agreement with Paragon
Capital Corporation
2.1 * ................ Certificate of Ownership and Merger
regarding the merger of Signature
Acquisition Corp. with and into T.J.
Cinnamons, Inc.
2.2 * ................ Certificate of Ownership and Merger
regarding the merger of Signature Foods,
Inc. with and into T.J. Cinnamons, Inc.
2.3 *** ................ Purchase Agreement between the Registrant
and Triarc Restaurant Group
2.4 *** ................ Amended and Restated Agreement dated August
22, 2001 among Paramark Enterprises, Inc.,
the Lovitos, Charles N. Loccisano, and Alan
Gottlich (including unconditional guarantee
of payment by the Lovitos and Form of
Consulting Agreement with each of Messrs.
Gottlich and Loccisano)
-15-
2.5 *** ................ Stock Acquisition Agreement dated December
26, 2001, by and among the
Corporation on behalf of the
shareholders of Raptor Investments,
Inc., and Paul F. Lovito, Jr.,
Matthew J. Lovito, Marc A. Lovito,
Darrin Lovito and LBI Capital
Partners, L.P., as shareholders of
LBI E Web Communities, Inc., a
Florida corporation.
2.6 *** ................ Acquisition Agreement dated December 26,
2001, by and among the Corporation on
behalf of the shareholders of Raptor
Investments, Inc., and LBI
Properties, Inc., a Florida
corporation, on behalf of the
shareholders of LBI Properties, Inc.
2.7 **** ................ AGREEMENT AND PLAN OF MERGER, dated as of
December 5, 2001, between RAPTOR
INVESTMENTS, INC., a Delaware
corporation ("Raptor Delaware"), and
RAPTOR INVESTMENTS, INC., a Florida
corporation ("Raptor Florida"),
3.1 ................ Articles of Incorporation of the
Registrant
3.2 ................ By-Laws of Registrant
3.3 * ................ Restated Certificate of Incorporation of
Paramark Enterprises, Inc.
3.4 * ................ By-Laws of Paramark Enterprises, Inc.
9.1 * ................ Modification Agreement (the Modification
Agreement) among Signature Foods, Inc.,
The Charles N. Loccisano Irrevocable Trust
f/b/o Michael Loccisano, The Charles N.
Loccisano Irrevocable Trust f/b/o Marissa
Loccisano, The Ted H. Rice and Joyce
Rice Family Trust, U/T/I dated August
8, 1986, The Roger L. Cohen Trust
U/T/D/ dated January 26, 1984 and the
Kenneth D. Hill Revocable Trust U/T/I
dated march 29, 1989, Signature
Acquisition Corp., the Registrant,
Charles N. Loccisano and Alan S.
Gottlich relating to a Stock Purchase
Agreement (the Stock Purchase
Agreement) among them
9.2 * ................ Waiver of Default under the Modification
Agreement, as amended
9.3 * ................ Amendment to Stock Purchase Agreement
9.4 * ................ Stock Purchase Agreement
10.1 * ................ Trademark and Technology License and
Manufacturing Agreement (License
Agreement) by and between Signature
Acquisition Corp. and Pro Bakers Ltd.
-16-
10.1(a) * ................ Amendment to License Agreement
10.1(b) * ................ Second Amendment to License Agreement
10.1(c) ** ................ Termination of the License Agreement
10.2 * ................ 1993 Stock Option Plan
10.3 * ................ 1996 Amended and Restated Stock Option
Plan
10.4 * ................ Employment Agreement with Charles
Loccisano
10.5 * ................ Employment Agreement with Alan Gottlich
10.9 * ................ Lease regarding the Company's principal
executive offices
10.13 * ................ License agreement with Triarc Restaurant
Group
10.14 ** ................ Management Agreement with TJ Holding
Company, Inc.
10.15 ** ................ Lease regarding the Santa Ana bakery
facility
10.16 * ................ Lease regarding the El Cajon bakery
facility
10.17 *** ................ Agreement between and among TJ Holding
Company, Inc., Arby's, Inc., d/b/a Triarc
Restaurant Group and Paramark Enterprises,
Inc.
10.18 *** ................ Wholesale License Agreement between
Arby's, Inc., d/b/a Triarc Restaurant
Group and Paramark Enterprises, Inc.
10.20 *** ................ Asset Purchase Agreement dated October 9,
2000 by and between Rich Products
Manufacturing Corporation, Paramark
Enterprises, Inc. and Starbake, Inc., a
wholly owned subsidiary of Paramark
Enterprises, Inc.
10.21 *** ................ License Agreement dated October 9, 2000 by
and between Rich Products Manufacturing
Corporation, Paramark Enterprises, Inc.
and Starbake, Inc., a wholly owned
subsidiary of Paramark Enterprises, Inc.
10.22 *** ................ Consulting Agreement between Rich Products
Manufacturing Corporation and Charles
Loccisano
-17-
10.23 *** ................ Consulting Agreement between Rich Products
Manufacturing Corporation and Alan
Gottlich
10.24 *** ................ Consulting Agreement between Rich Products
Manufacturing Corporation and Wayne
Sorensen
10.25 *** ................ Assets Purchase and Sale Agreement dated
October 9, 2000 by and between Brooks
Street Baking Companies, Inc., Paramark
Enterprises, Inc. and Starbake, Inc., a
wholly owned subsidiary of Paramark
Enterprises, Inc.
16.1 ** ................ Letter from Goldstein Golub and Kessler,
the Registrant's former independent
accountant
16.2 ** ................ Letter from Arthur Andersen LLP
16.3*** ................ Letter from Amper, Politziner & Mattia P.A.
---------------------
* Incorporated by reference to the Company's Registration Statement on Form
SB-2 and the amendments thereto.
** Incorporated by reference from the Company's Annual Reports on Form 10-KSB
for the fiscal years ended December 31, 1998, 1997, 1996 and 1995.
*** Incorporated by reference from the Company's Current Reports on Form 8-K
dated June 18, 1996, July 9, 1998, October 18, 2000, December 22, 2000,
August 22,2001, January 7, 2002 and April 2, 2002.
(b) On August 22, 2001 the Company completed the sale of 500,000 shares
of the Company's common stock in a privately negotiated transaction for a
purchase price of $30,000 to investors, Paul, Matthew and Marc Lovito (the
"Lovitos"), pursuant to an Amended and Restated Agreement dated August 22, 2001
between the Company, the Lovitos, Charles N. Loccisano, the Chairman of the
Company, and Alan Gottlich, the President and Chief Financial Officer of the
Company (the "Agreement"). The purchase price will be held in an escrow account,
with Alan Gottlich and Charles Loccisano acting as trustees and signatories,
with such funds to be released to the Company upon satisfaction of the escrow
obligations, which include the satisfaction of the Company's outstanding
obligations and the completion of the stock repurchase (described below), if
required.
The Agreement also provides that within 12 months after the completion of
the stock sale transaction, the Lovitos shall cause Paramark to make an offer to
all holders of the outstanding shares of the Company's common stock to
repurchase their shares at a price of $0.20 per share through a tender offer
provided the market bid price of the Paramark common stock is not greater than
$0.20 per share for any consecutive 30 day period during the one year period
following the closing of the previously described stock sale transaction. As a
result, no assurance can be given that the repurchase will be commenced or that
the repurchase will occur on the terms described herein. If the foregoing offer
to shareholders is required and the Lovitos do not fulfill their obligations in
connection therewith, the Agreement provides that the Lovitos shall take all
actions necessary to resign from the board and will be replaced by four new
members selected by Messrs Loccisano and Gottlich.
-18-
(c) On December 26, 2001 Raptor Investments, Inc.("Raptor"),
entered into an Acquisition Agreement ("Acquisition Agreement") with LBI
Properties, Inc., a Florida corporation ("LBI Properties") and the shareholders
of LBI Properties. The shareholders of LBI Properties include Paul F. Lovito,
Jr., Matthew J. Lovito and Marc A. Lovito, officers and directors of Raptor.
Effective December 26, 2001, Raptor entered into a Stock Acquisition Agreement
("Stock Agreement") with Paul F. Lovito, Jr., Matthew J. Lovito, Marc A. Lovito,
Darrin Lovito and LBI Capital Partners, L.P., as shareholders of LBI E Web
Communities, Inc., a Florida corporation ("LBI E Web").
Pursuant to the Acquisition Agreement, Raptor effected the stock
exchange at the rate of 1:5. Raptor acquired all of the issued and outstanding
shares of the Common Stock of LBI Properties in exchange for the issuance of
19,974,298 shares of the Common Stock of Raptor to be delivered to the LBI
Properties shareholders on a pro-rata basis. This transaction closed on January
8, 2002.
Pursuant to the Stock Agreement, Raptor effected the stock exchange at
the rate of 1:3. Raptor acquired all of the issued and outstanding shares of the
Common Stock of LBI E Web in exchange for the issuance of 19,800,000 shares of
the Common Stock of Raptor to be delivered to the LBI E Web shareholders on a
pro-rata basis. This transaction closed on January 8,2002.
(d) On December 5, 2001 the Company effected a corporate
reorganization, the principal feature of which was to transfer the Company's
legal domicile from Delaware to Florida pursuant to an Agreement and Plan of
Merger between the Company and its wholly-owned subsidiary, Raptor Investments,
Inc., a Florida corporation, wherein the Florida corporation was the surviving
corporation.
-19-
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RAPTOR INVESTMENTS, INC.
BY: /S/ PAUL F. LOVITO JR.
-----------------------------------
PAUL F. LOVITO JR., CHAIRMAN
In accordance with the Exchange Act, this report has been signed by the
following person on behalf of the Company and in the capacities and on the dates
stated.
SIGNATURE TITLE(S) DATE
--------- -------- ---------------
/S/ PAUL F. LOVITO JR. CHAIRMAN, PRESIDENT, CHIEF APRIL 11, 2002
------------------------ EXECUTIVE OFFICER
PAUL F. LOVITO JR. AND DIRECTOR
(PRINCIPAL EXECUTIVE
OFFICER)
/S/ MATTHEW J. LOVITO CHIEF FINANCIAL OFFICER, APRIL 11, 2002
---------------------- TREASURER
MATTHEW J. LOVITO AND DIRECTOR
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/S/ MARC A. LOVITO VICE PRESIDENT AND DIRECTOR APRIL 11, 2002
----------------------
MARC A. LOVITO
-20-