SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Amendment No. 1 to
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 6, 2000
FOUNTAIN COLONY VENTURES, INC.
(Exact name of registrant as specified in its charter)
Colorado 33-27230 95-4734398
(State of (Commission (I.R.S. Employer
Incorporation) File Number) Identification No.)
27 Hyakunin-cho, Higashi-ku, Nagoya, Aichi Prefecture, Japan
(Address of principal executive offices)
011-81-52-937-8840
(Registrant's telephone number, including area code)
1621 Altivo Way, Los Angeles, California 90026
(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant.
- -----------------------------------------------
On April 6, 2000, Fountain Colony Ventures, Inc., a Colorado corporation
("Fountain Colony"), Green Medical Company, Ltd., a Japanese corporation
("Green Medical") and Mr. Katumori Hayashi consummated a stock for stock
exchange (collectively referred to as the "Reorganization") as described below
in this report. See "Item 2. -- Acquisition or Disposition of Assets." In
connection with the Reorganization, Mr. Katumori Hayashi transferred ownership
of one hundred percent of all the issued and outstanding shares of capital
stock of Green Medical to Fountain Colony in exchange for being issued
21,420,000 shares of the common stock, $0.001 par value, of Fountain Colony.
Mr. Hayashi then transferred ownership of 2,142,000 of the shares of Fountain
Colony common stock to Top Dog, LLC, a Nevada limited liability company. As a
result, Mr. Katumori Hayashi now owns 19,278,000 shares, or approximately
74.04%, of the issued and outstanding shares of Fountain Colony common stock.
Top Dog, LLC now owns 2,142,000 shares, or approximately 8.23%, of the issued
and outstanding shares of Fountain Colony common stock.
The Agreement and Plan of Reorganization, as amended, provides that in the
event Fountain Colony fails to meet the financial requirements for an initial
listing as a NASDAQ SmallCap company on or before June 30, 2000, that
5,000,000 shares issued to Katumori Hayashi in connection with the
Reorganization are to be returned to Fountain Colony to be canceled or held as
treasury shares, without payment of any further consideration.
The following table sets forth certain information with respect to the
beneficial ownership of Fountain Colony Common Stock, by: (a) each person
known by Fountain Colony to beneficially own more than 5% of the Fountain
Colony common stock, (b) each director of Fountain Colony, (c) all directors
and executive officers of Fountain Colony, as a group, as of April 6, 2000:
AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK(1)
- ------------------------- ------------------ -----------------
Katumori Hayashi ........ 19,278,000 74.04%
Top Dog, LLC ............ 2,142,000 8.23%
Patrick C. Brooks........ 1,386,000 5.32%
Satomi Hayashi........... 0 0%
Masahiko Takeda ......... 0 0%
All Executive Officers
and Directors of Fountain
Colony as a group, 3 persons 19,278,000 74.04%
2
As part of the Reorganization, Patrick C. Brooks resigned as the sole director
and officer of Fountain Colony, and the management of Green Medical was
appointed as the new management of Fountain Colony. Katumori Hayashi, Satomi
Hayashi and Masahiko Takeda are the new directors of Fountain Colony.
Katumori Hayashi is the chairman of the board of directors, president and
chief executive officer of Fountain Colony. Satomi Hayashi is the secretary
of Green Medical. Masahiko Takeda is the treasurer of Fountain Colony.
Satomi Hayashi is the wife of Katumori Hayashi.
Item 2. Acquisition or Disposition of Assets.
- ----------------------------------------------
On April 6, 2000, Fountain Colony, Green Medical, and Mr. Katumori Hayashi
consummated the Reorganization. In connection with the Reorganization, Mr.
Katumori Hayashi transferred ownership of one hundred percent of all the
issued and outstanding shares of capital stock of Green Medical to Fountain
Colony in exchange for being issued 21,420,000 shares of the common stock,
$0.001 par value, of Fountain Colony. Mr. Hayashi then transferred ownership
of 2,142,000 of the shares of Fountain Colony common stock to Top Dog, LLC, a
Nevada limited liability company.
The Agreement and Plan of Reorganization, as amended, provides that in the
event Fountain Colony fails to meet the financial requirements for an initial
listing as a NASDAQ SmallCap company on or before June 30, 2000, that
5,000,000 shares issued to Katumori Hayashi in connection with the
Reorganization are to be returned to Fountain Colony to be canceled or held as
treasury shares, without payment of any further consideration.
The terms of the Reorganization were negotiated on an arm's length basis
through Green Medical, Mr. Hayashi and their representatives, and by Fountain
Colony's former president, Patrick C. Brooks.
Green Medical owns and operates 25 pharmacies in Japan, most of which are
located in or near Nagoya, Japan. Two pharmacies are located in Tokyo, Japan.
Fountain Colony intends to continue to operate the 25 pharmacies in Japan
through its wholly-owned subsidiary, Green Medical.
Item 4. Changes in Registrant's Certifying Accountant.
- --------------------------------------------------------
Effective April 11, 2000, Fountain Colony dismissed Gerald R. Perlstein as the
independent accountant previously engaged by Fountain Colony to audit the
financial statements of Fountain Colony.
3
Gerald R. Perlstein previously audited the balance sheet of Fountain Colony as
of September 30, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the year ended September 30, 1999. Gerald R.
Perlstein has not issued an adverse opinion or a disclaimer of opinion, nor
has any report during the past year been qualified or modified as to
uncertainty, audit scope, or accounting principles.
During Fountain Colony's most recent fiscal year, and any subsequent interim
period preceding the dismissal of Gerald R. Perlstein, there were no
disagreements with Gerald R. Perlstein on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
During Fountain Colony's most recent fiscal year and any subsequent interim
period preceding this change in certified accountants,
(A) Gerald R. Perlstein did not advise Fountain Colony that the
internal controls necessary for Fountain Colony to develop reliable financial
statements do not exist;
(B) Gerald R. Perlstein did not advise Fountain Colony that
information had come to the accountant's attention that led it to no longer be
able to rely on management's representations, or that made it unwilling to be
associated with the financial statements prepared by management;
(C) Gerald R. Perlstein did not advise Fountain Colony of the
need to expand significantly the scope of its audit, or that information had
come to the accountant's attention during said time period that if further
investigated, may: (i) materially impact the fairness or reliability of
either: a previously issued audit report or the underlying financial
statements, or the financial statements issued or to be issued covering the
fiscal period(s) subsequent to the date of the most recent financial
statements covered by an audit report (including information that may prevent
it from rendering an unqualified audit report on those financial statements),
or (ii) cause it to be unwilling to rely on management's representations or be
associated with Fountain Colony's financial statements; or
(D) Gerald R. Perlstein did not advise Fountain Colony that
information had come to the accountant's attention that it had concluded
materially impacted the fairness or reliability of either (i) a previously
issued audit
4
report or the underlying financial statements, or (ii) the financial
statements issued or to be issued covering the fiscal period(s) subsequent to
the date of the most recent financial statements covered by an audit report
(including information that, unless resolved to the accountant's satisfaction,
would prevent it from rendering an unqualified audit report on those financial
statements).
The decision to change accountants was recommended and approved by Fountain
Colony's board of directors, who decided to use Green Medical's existing
auditors as the new auditing firm for Fountain Colony.
On April 11, 2000, Fountain Colony engaged Jones, Jensen & Company, LLC as the
new independent accountant engaged as the principal accountant to audit
Fountain Colony's financial statements. During Fountain Colony's two most
recent fiscal years, and any subsequent interim period prior to engaging
Jones, Jensen & Company, LLC, neither Fountain Colony nor someone on its
behalf consulted Jones, Jensen & Company, LLC regarding (i) either: the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
Fountain Colony's financial statements; or (ii) any matter which was either
the subject of a disagreement (there were no disagreements as stated above) or
a reportable event (as described in Item 304(a)(1)(V) of Regulation S-K).
Item 7. Financial Statements and Exhibits.
- -------------------------------------------
(a) Financial statements of businesses acquired - Audited balance sheet of
Green Medical Company, Ltd. as of June 30, 1999, and audited related
statements of operations, comprehensive income (loss), stockholders' equity
(deficit), and cash flows for the years ended June 30, 1999 and 1998.
(b) Pro forma financial information - Consolidated proforma financial
statements as of June 30, 1999 and summary of assumptions and disclosures
(c) Exhibits
Exhibit No. Exhibit Description
- ---------- --------------------
2.1 Agreement and Plan of Reorganization dated January 19, 2000, by and
among Fountain Colony, Green Medical and Katumori Hayashi.
2.2 Amendment to Agreement and Plan of Reorganization dated January 27,
2000, by and among Fountain Colony, Green Medical and Katumori
Hayashi.
5
2.3 Second Amendment to Agreement and Plan of Reorganization dated March
23, 2000, by and among Fountain Colony, Green Medical and Katumori
Hayashi.
16.1 Letter regarding resignation of certifying accountant.
6
GREEN MEDICAL COMPANY, LTD.
FINANCIAL STATEMENTS
JUNE 30, 1999
7
C O N T E N T S
Independent Auditors' Report............................................ 3
Balance Sheet........................................................... 4
Statements of Operations................................................ 6
Statements of Comprehensive Income (Loss)............................... 7
Statements of Stockholders' Equity (Deficit)............................ 8
Statements of Cash Flows................................................ 9
Notes to the Financial Statement........................................10
8
JONES, JENSEN & COMPANY, LLC
Certified Public Accountants and Consultants
50 South Main Street, Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Green Medical Company, Ltd.
Nagoya, Japan
We have audited the accompanying balance sheet of Green Medical Company, Ltd.
as of June, 30 1999 and the related statements of operations, comprehensive
income (loss), stockholders' equity (deficit), and cash flows for the years
ended June 30, 1999 and 1998. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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 Green Medical Company, Ltd.
as of June 30, 1999 and the results of its operations and its cash flows for
the years ended June 30, 1999 and 1998 in conformity with generally accepted
accounting principles.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
February 28, 2000
9
GREEN MEDICAL COMPANY, LTD.
Balance Sheet
June 30, 1999
ASSETS
CURRENT ASSETS
Cash $ 143,131
Accounts receivable, net (Note 2) 1,286,562
Other receivables 31,171
Inventory (Note 2) 736,613
Prepaid expenses 44,519
Notes receivable, current (Note 5) 14,412
Marketable securities (Note 6) 90,284
----------------
Total Current Assets 2,346,692
----------------
PROPERTY AND EQUIPMENT (NET) (Notes 2 and 4) 3,221,221
----------------
OTHER ASSETS
Notes receivable (Note 5) 44,273
Investments (Note 7) 160,051
Lease deposits 232,997
Other assets 156,453
----------------
Total Other Assets 593,774
----------------
TOTAL ASSETS $ 6,161,687
================
The accompanying notes are an integral part of these financial statements.
F4
10
GREEN MEDICAL COMPANY, LTD.
Balance Sheet (Continued)
June 30, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 1,757,010
Accounts payable, related parties (Note 3) 417,022
Accrued expenses 301,086
Accrued taxes and penalties payable (Note 8) 2,187,538
Lease deposits 28,428
Notes payable, current portion (Note 9) 656,011
--------------
Total Current Liabilities 5,347,095
--------------
LONG-TERM LIABILITIES
Notes payable (Note 9) 2,200,154
--------------
Total Long-Term Liabilities 2,200,154
--------------
Total Liabilities 7,547,249
--------------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value, 240 shares
authorized, 200 shares issued and outstanding 87,474
Other comprehensive income (loss) (283,082)
Accumulated deficit (1,189,954)
--------------
Total Stockholders' Equity (Deficit) (1,385,562)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 6,161,687
==============
The accompanying notes are an integral part of these financial statements.
F5
11
GREEN MEDICAL COMPANY, LTD.
Statements of Operations
Years ended June 30,
1999 1998
-------------- --------------
REVENUE
Net sales $ 8,332,319 $ 6,619,195
Cost of goods sold 4,598,931 3,574,184
-------------- --------------
Gross Profit 3,733,388 3,045,011
-------------- --------------
EXPENSES
General and administrative 3,640,687 2,687,780
Depreciation 213,282 69,036
-------------- --------------
Total Expenses 3,853,969 2,756,816
-------------- --------------
INCOME (LOSS) FROM OPERATIONS (120,581) 288,195
-------------- --------------
OTHER INCOME (EXPENSE)
Interest and dividend income 217 4,131
Miscellaneous income 69,504 39,704
Interest expense (138,738) (34,527)
Miscellaneous expense (42,722) (9,620)
Unrealized loss on investments (Note 6) (113,901) (34,719)
Loss on disposition of asset - (2,697)
-------------- --------------
Total Other Income (Expense) (225,640) (37,728)
-------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (346,221) 250,467
Income tax expense - (102,510)
-------------- --------------
NET INCOME (LOSS) $ (346,221) $ 147,957
============== ==============
BASIC INCOME (LOSS) PER SHARE $ (1,731.11) $ 739.79
============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 200 200
============== ==============
The accompanying notes are an integral part of these financial statements.
F6
12
GREEN MEDICAL COMPANY, LTD.
Statements of Comprehensive Income (Loss)
Year ended June 30,
1999 1998
-------------- --------------
NET INCOME (LOSS) $ (346,221) $ 147,957
-------------- --------------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency adjustments (539,490) 233,393
-------------- --------------
Total Other Comprehensive Income (Loss) (539,490) 233,393
-------------- --------------
NET COMPREHENSIVE INCOME (LOSS) $ (885,711) $ 381,350
============== ==============
The accompanying notes are an integral part of these financial statements.
F7
13
GREEN MEDICAL COMPANY, LTD.
Statements of Stockholders Equity (Deficit)
Other
Common Stock Comprehensive Accumulated
Shares Amount Income Deficit
---------- ----------- ------------- ------------
Balance, June 30, 1997 200 $ 87,474 $ 23,015 $ (991,690)
Foreign currency adjustment - - 233,393 -
Net income for the year ended
June 30, 1998 - - - 147,957
---------- ----------- ------------- ------------
Balance, June 30, 1998 200 87,474 256,408 (843,733)
Foreign currency adjustment - - (539,490) -
Net loss for the year ended
June 30, 1999 - - - (346,221)
---------- ----------- ------------- ------------
Balance, June 30, 1999 200 $ 87,474 $ (283,082) $(1,189,954)
========== =========== ============= ============
The accompanying notes are an integral part of these financial statements.
F8
14
GREEN MEDICAL COMPANY, LTD.
Statements of Cash Flows
Years Ended June 30,
1999 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (346,221) $ 147,957
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation 213,282 69,036
Foreign currency adjustment (539,490) 233,393
Unrealized loss on investments 113,901 34,719
Loss on disposition of asset - 2,697
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (544,141) 176,914
(Increase) decrease in accounts receivable-related - (81,520)
(Increase) decrease in other receivables (31,171) -
(Increase) decrease in prepaid expenses (22,343) 2,580
(Increase) decrease in deposits (132,060) 12,559
(Increase) decrease in inventory (441,737) 67,595
(Increase) decrease in other assets (60,125) (58,695)
Increase (decrease) in accounts payable 977,580 (580,336)
Increase (decrease) in accrued expenses and
accrued taxes and penalties 727,913 (14,817)
Increase (decrease) in lease deposits 22,680 (2,147)
Increase (decrease) in accounts payable-related (479,101) 379,719
------------- -------------
Net Cash Provided(Used) by Operating Activities (541,033) 389,654
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (22,325) (3,420)
Payment on notes receivable 4,216 29,515
Purchase of fixed assets (187,340) (1,637,576)
------------- -------------
Net Cash (Used) by Investing Activities (205,449) (1,611,481)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 1,772,550 1,632,217
Payment on notes payable (909,938) (462,933)
------------- -------------
Net Cash Provided(Used) by Financing Activities 862,612 1,169,284
------------- -------------
NET INCREASE (DECREASE) IN CASH 116,130 (52,543)
CASH AT BEGINNING OF YEAR 27,001 79,544
------------- -------------
CASH AT END OF YEAR $ 143,131 $ 27,001
============= =============
CASH PAID FOR:
Interest $ 138,738 $ 34,527
Income taxes $ - $ 102,510
The accompanying notes are an integral part of these financial statements.
F9
15
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Green Medical Company, Ltd. (the Company), headquartered in Nagoya,
Japan, was incorporated on November 12, 1986. The Company operates a chain of
pharmacies in Nagoya and the surrounding regions in Japan. The Company sells
primarily prescription drugs to private individuals, but does offer a small
selection of over-the-counter products. The Company receives payment for all
of its prescription sales from government insurance agencies.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements are as follows:
a. Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting. The Company has elected a June 30 year end.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
c. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts
of $15,738 at June 30, 1999.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingencies and reported revenues and expenses. Actual
results could differ from those estimates.
e. Basic Income (Loss) Per Share
The computation of basic income (loss) per share of common stock is based
on the weighted average number of shares issued and outstanding during the
period of the financial statements as follows:
June 30,
1999 1998
------------- -------------
Numerator - income (loss) $ (346,221) $ 147,957
Denominator - weighted average number of
shares outstanding 200 200
------------- -------------
Income (loss) per share $ (1,731.11) $ 739.79
============= =============
F 10
16
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Inventory
Inventory consists primarily of prescription and over-the-counter
medications, and are stated at the lower of cost or market value using the
average cost method.
g. Property and Equipment
Property and equipment are recorded at cost. Major additions and
improvements are capitalized. Minor replacements, maintenance and repairs
that do not increase the useful life of the assets are expensed as incurred.
Depreciation of property and equipment is determined using the straight-line
method over the expected useful lives of the assets as follows:
Description Useful Life
-------------- --------------
Buildings 22 - 58 years
Annex and fixtures 8 - 15 years
Computers, furniture & equipment 3 - 15 years
Structures 10 - 15 years
Vehicles 2 - 6 years
h. Concentrations of Risk
Foreign Currency Translation
----------------------------
The Company's functional currency is the Japanese Yen. Since the
Company's financial statements must be translated into U.S. dollars, major
changes in the currency exchange rate between the Japanese yen and the U.S.
dollar may have a significant impact on the operations of the Company.
Although the Company does not anticipate the currency exchange rate to be
significantly different over the next 12 months, no such assurances can be
given.
Accounts Receivable
-------------------
Credit losses, if any, have been provided for in the financial statements
and are based on management's expectations. The Company's accounts receivable
are subject to potential concentrations of credit risk. The Company does not
believe that it is subject to any unusual, or significant risks in the normal
course of its business.
i. Revenue Recognition
The Company's revenue is created primarily from the sale of prescription
and over-the-counter medications through it's retail pharmacies. Revenue is
recognized when the product is delivered to the customer.
j. Advertising
The Company charges advertising costs to expense as incurred.
F 11
17
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" and
Statement of Financial Accounting Standards No. 129 "Disclosures of
Information About an Entity's Capital Structure." SFAS No. 128 provides a
different method of calculating earnings per share than was previously used in
accordance with APB Opinion No. 15, "Earnings Per Share." SFAS No. 128
provides for the calculation of "Basic" and "Dilutive" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution of securities that could share in the earnings of an
entity, similar to fully diluted earnings per share. SFAS No. 129 establishes
standards for disclosing information about an entity's capital structure.
SFAS No. 128 and SFAS No. 129 are effective for financial statements issued
for periods ending after December 15, 1997. Their implementation did not have
a material effect on the financial statements.
The Financial Accounting Standards Board has also issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 130 establishes standards
for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes
in equity except those resulting from investments by owners and distributions
to owners. Among other disclosures, SFAS No. 130 requires that all items that
are required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that displays
with the same prominence as other financial statements. SFAS No. 131
supersedes SFAS No. 14 "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards on the way that public
companies report financial information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It
also establishes standards for disclosure regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of a company about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Their implementation did not have a material
effect on the financial statements.
l. Provision for Taxes
The provision for income taxes charged to operations for the years ended
June 30, 1999 and 1998 was $-0- and $102,510, respectively. These amounts are
based on income tax rates applicable in the country of Japan and have been
converted to U.S. dollars.
F 12
18
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
m. Statement of Cash Flows
For the Company's operations, the functional currency has been determined
to be the local currency. Accordingly, assets and liabilities are translated
at year-end exchange rates, and operating statement items are translated at
average exchange rates prevailing during the year. The resultant cumulative
translation adjustments to the assets and liabilities are recorded as a
separate component of stockholders' equity. Exchange adjustments resulting
from foreign currency transactions are included in the determination of net
income (loss). Such amounts are immaterial for all periods presented.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's operations are
calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statement of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheet.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company, from time-to-time lends money to, or borrows money from,
related parties in an effort to provide funding for various business
activities, sometimes on a revolving basis.
At June 30, 1999, the Company owed $417,022 to certain officers,
directors or affiliated businesses. The amounts are non-interest bearing,
unsecured and due on demand.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30, 1999:
Building $ 802,626
Annex and fixtures 669,244
Computers, furniture and equipment 304,170
Structures 21,206
Vehicles 180,793
Land 1,609,621
--------------
3,587,660
Accumulated depreciation (366,439)
--------------
Net property and equipment $ 3,221,221
==============
Depreciation expense for the years ended June 30, 1999 and 1998 was
$213,282 and $69,036, respectively.
F 13
19
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 5 - NOTES RECEIVABLE
Notes receivable at June 30, 1999 are as follows:
Note receivable from an individual, non-interest
bearing, payable in monthly installments of $166
through June 2007, unsecured. $ 16,235
Note receivable from an individual, non-interest
bearing, payable in monthly installments of $1,035
through December 2002, unsecured. 42,450
-------------
58,685
Less current maturities (14,412)
-------------
Long-term notes receivable $ 44,273
=============
No interest was imputed on the notes receivable because it would be
immaterial.
NOTE 6 - MARKETABLE SECURITIES
Marketable securities at June 30, 1999 are classified and disclosed as
trading securities under the requirements of SFAS No. 115. Under such
statement, the Company's securities are required to be reflected at fair
market value as follows:
Unrealized
Fair Gain
Cost Value (Loss)
------------- ------------ -------------
$ 204,185 $ 90,284 $ (113,901)
============= ============ =============
Any realized or unrealized gains are reported in the statement of
operations.
NOTE 7 - INVESTMENTS
The following investments were held by the Company as of June 30, 1999:
Membership investments in two golf clubs and a
night club, recorded at cost. $ 158,527
Other miscellaneous investments 1,524
--------------
Total Investments $ 160,051
==============
NOTE 8 - ACCRUED TAXES AND PENALTIES PAYABLE
At June 30, 1999, the Company owed a total of $2,187,538 in accrued
taxes, penalties and interest to the various governmental agencies in Japan
(see Note 11). This liability is the result of a tax assessment from the
Japanese government whereby the government disallowed certain expenditures of
the Company from 1993 to 1998. The amount is broken out as follows:
Federal, state and local taxes $ 1,821,237
Additional interest and penalties 366,301
----------------
Total $ 2,187,538
================
F 14
20
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 9 - NOTES PAYABLE
Notes payable as of June 30, 1999 are as follows:
Note payable to a bank in monthly installments of $6,900 plus
2.93% interest, matures in March 2025, secured by a credit
guarantee. $ 358,950
Note payable to a bank in monthly installments of $4,829 plus
2.3% interest, matures in May 2008, secured by a credit
guarantee. 517,030
Note payable to a bank in monthly installments of $3,446 plus
2.1% interest, matures in May 2005, secured by a credit
guarantee. 245,109
Note payable to a bank in monthly installments of $2,410 plus
3.2% interest, matures in May 2008, secured by a credit
guarantee. 258,569
Note payable to a bank in monthly installments of $1,375 plus
3.2% interest, matures in May 2008, secured by a credit
guarantee. 147,784
Note payable to a bank in monthly installments of $1,135
plus interest at 2.5%, matures in February 2007, unsecured. 105,293
Note payable to a bank in monthly installments of $1,789
plus interest at 2.3%, matures in October 2007, unsecured. 179,574
Note payable to a bank in monthly installments of $2,071
plus interest at 2.5%, matures in September 2004, unsecured. 130,456
Notes payable to a leasing company in monthly installments
of $11,717 plus interest at 2.9%, matures through February
2003, unsecured. 195,931
Notes payable to a leasing company in monthly installments
of $3,573 plus interest at 2.8%, matures through February
2003, unsecured. 150,019
Notes payable to a leasing company in monthly installments
of $2,537 plus interest at 2.2%, matures through September
2004, unsecured. 158,295
Other miscellaneous notes payable to various banks,
interest ranging from 1.93% to 4.2% per annum,
principal due through January 2012, unsecured. 409,155
------------
2,856,165
Less current portion (656,011)
------------
Long-term portion $ 2,200,154
============
F 15
21
GREEN MEDICAL COMPANY, LTD.
Notes to the Financial Statements
June 30, 1999
NOTE 9 - NOTES PAYABLE (Continued)
Maturities of notes payable over the next five years are as follows:
2000 $ 612,751
2001 466,726
2002 454,012
2003 414,614
2004 286,327
Thereafter 621,735
--------------
Total long-term notes payable $ 2,856,165
==============
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Lease Agreement
---------------
The Company has signed operating leases for some of its retail pharmacy
spaces located in and around Nagoya, Japan. These operating leases expire
through 2019. The lease requirements are:
2000 $ 428,110
2001 370,758
2002 200,027
2003 109,942
2004 109,942
Thereafter 574,175
-------------
$ 1,792,954
=============
Rent expense for 1999 and 1998 was $369,956 and 289,529, respectively.
NOTE 11 - SUBSEQUENT EVENTS
Subsequent to the balance sheet date, the Company's majority shareholder
paid the accrued taxes and penalties payable shown on the balance sheet as
$2,187,538 at June 30, 1999. This amount will be recorded as contributed
capital on the Company's books.
F 16
22
FOUNTAIN COLONY VENTURES, INC.
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
June 30, 1999
23
C O N T E N T S
Consolidated Proforma Balance Sheet....................................... 3
Consolidated Statement of Operations.......................................5
Summary of Assumptions and Disclosures.................................... 6
24
FOUNTAIN COLONY VENTURES, INC.
Consolidated Proforma Balance Sheet
June 30, 1999
(Unaudited)
ASSETS
------
Proforma
Fountain Green Adjustments Adjusted
Colony Medical Increase Proforma
Ventures, Inc. Company, Ltd. (Decrease) Consolidated
-------------- ------------- ------------ -------------
CURRENT ASSETS
Cash $ - $ 143,131 $ 2,512,083 $ 2,655,214
Receivable, net - 1,332,145 - 1,332,145
Marketable securities - 90,284 - 90,284
Prepaid expenses - 44,519 - 44,519
Inventory - 736,613 159,082 895,695
-------------- ------------- ------------ -------------
Total Current Assets - 2,346,692 2,671,165 5,017,857
-------------- ------------- ------------ -------------
FIXED ASSETS, NET - 3,221,221 - 3,221,221
-------------- ------------- ------------ -------------
OTHER ASSETS
Organizational costs 3,180 - (3,180) -
Intercompany loans - 549,501 - 549,501
Notes receivable - 44,273 - 44,273
-------------- ------------- ------------ -------------
Total Other Assets 3,180 593,774 (3,180) 593,774
-------------- ------------- ------------ -------------
TOTAL ASSETS $ 3,180 $ 6,161,687 $ 2,667,985 $ 8,832,852
============== ============= ============ =============
See Summary of Assumptions and Disclosures.
F 3
25
FOUNTAIN COLONY VENTURES, INC.
Consolidated Proforma Balance Sheet
June 30, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Proforma
Fountain Green Adjustments Adjusted
colony Medical Increase Proforma
Ventures, Inc. Company, Ltd. (Decrease) Consolidated
-------------- ------------- ------------ -------------
CURRENT LIABILITIES
Accounts payable $ - $ 2,174,032 $ 3,000 $ 2,177,032
Accrued expenses - 2,517,052 (2,187,538) 329,514
Payable-stockholders 26,100 - (26,100) -
Notes payable - 656,011 - 656,011
-------------- ------------- ------------ -------------
Total Current Liabilities 26,100 5,347,095 (2,210,638) 3,162,557
-------------- ------------- ------------ -------------
LONG-TERM DEBT
Notes payable-less current portion - 2,200,154 - 2,200,154
-------------- ------------- ------------ -------------
Total Long-Term Debt - 2,200,154 - 2,200,154
-------------- ------------- ------------ -------------
TOTAL LIABILITIES 26,100 7,547,249 (2,210,638) 5,362,711
-------------- ------------- ------------ -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000
shares authorized of $0.001
par value, 26,037,361 shares
issued and outstanding 900 - 25,137 26,037
Additional paid-in capital 232,677 87,474 4,596,989 4,917,140
Other comprehensive income (loss) - (283,082) - (283,082)
Accumulated deficit (256,497) (1,189,954) 256,497 (1,189,954)
-------------- ------------- ------------ -------------
Total Stockholders' Equity
(deficit) (22,920) (1,385,562) 4,878,623 3,470,141
-------------- ------------- ------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY (DEFICIT) $ 3,180 $ 6,161,687 $ 2,667,985 $ 8,832,852
============== ============= ============ =============
See Summary of Assumptions and Disclosures.
F 4
26
FOUNTAIN COLONY VENTURES, INC.
Consolidated Proforma Statement of Operations
June 30, 1999
(Unaudited)
Proforma
Fountain Green Adjustments Adjusted
Colony Medical Increase Proforma
Ventures, Inc. Company, Ltd. (Decrease) Consolidated
-------------- ------------- ------------ -------------
REVENUES $ - $ 8,332,319 $ - $ 8,332,319
COST OF SALES - 4,598,931 - 4,598,931
-------------- ------------- ------------ -------------
GROSS PROFIT - 3,733,388 - 3,733,388
-------------- ------------- ------------ -------------
OPERATING EXPENSES
Depreciation and amortization - 213,282 - 213,282
General and administrative 12,920 3,640,687 - 3,653,607
-------------- ------------- ------------ -------------
Total Operating Expenses 12,920 3,853,969 - 3,866,889
-------------- ------------- ------------ -------------
OPERATING (LOSS) INCOME (12,920) (120,581) - (133,501)
-------------- ------------- ------------ -------------
OTHER INCOME (EXPENSES)
Other income - 69,721 - 69,721
Other expense - (295,361) - (295,361)
-------------- ------------- ------------ -------------
Total Other Income (Expenses) - (225,640) - (225,640)
-------------- ------------- ------------ -------------
LOSS BEFORE INCOME TAXES (12,920) (346,221) - (359,141)
INCOME TAXES - - - -
-------------- ------------- ------------ -------------
NET (LOSS) INCOME $ (12,920) $ (346,221) $ - $ (359,141)
============== ============= ============ =============
See Summary of Assumptions and Disclosures.
F 5
27
FOUNTAIN COLONY VENTURES, INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization and Business Activities
The Company was incorporated on May 6, 1988 under the laws of the State
of Delaware under the name Argyle Funding, Incorporated. The Company changed
its name to Fountain Colony Holding Corporation effective January 2, 1991.
The Company changed its name to Fountain Colony Ventures, Inc., effective
February 19, 1999.
The Company's business purpose is to seek out business opportunities,
including acquisitions, and mergers which management believes offers long-term
growth potential.
Green Medical Company, Ltd. (The Company), headquartered in Nagoya,
Japan, was incorporated on November 12, 1986. The Company operates a chain of
pharmacies in Nagoya and the surrounding regions in Japan. The Company sells
primarily prescription drugs to private individuals, but does offer a small
selection of over-the-counter products. The Company receives payment for all
of its prescription sales from government insurance agencies.
The balance sheets of the Company and Green Medical are presented as of
June 30, 1999. The Company has a September 30 year end and Green Medical has a
June 30, year end. The statements of operations are presented for the
respective fiscal years as though the acquisition took place on July 1, 1998.
b. Recapitalization
Effective January 17, 2000, the Company completed a reorganization
agreement whereby the Company issued 21,420,000 shares of its common stock in
exchange for the entire ownership interest in Green Medical. The shares issued
by the Company represented approximately 85% of the total shares of the
Company's common stock issued and outstanding immediately following the
acquisition. The owners of Green Medical controlled the Company immediately
after the acquisition according the acquisition as accounted for as a
recapitalization of Green Medical with no adjustment to the carrying value of
the assets or liabilities of the acquired entity.
1. Record the acquisition of Green Medical Company, Ltd. through the
issuance of 21,420,000 shares of common stock:
Common stock $ (21,420)
Additional paid-in capital 21,420
----------
Total $ -
==========
F 6
28
FOUNTAIN COLONY VENTURES, INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
b. Recapitalization (continued)
2. Record the contribution of the inventory of Sun Green stores to
Fountain Colony Ventures, Inc. and the payment of income taxes, and penalties
by the controlling shareholder of Green Medical Company, Ltd.:
Accrued expenses $ 2,187,538
Inventory 159,082
Additional paid-in capital (2,346,620)
------------
Total $ -
============
3. Record the issuance of 837,361 shares of common stock for $2,512,083
cash at $3.00 per share of common stock
Cash $ 2,512,083
Common stock (837)
Additional paid-in capital (2,511,246)
------------
Total $ -
============
4. Record the estimated costs of the merger
Accounts payable $ (3,000)
Additional paid-in capital 3,000
------------
Total $ -
============
5. Eliminate the accumulated deficit of Fountain Colony Ventures, Inc.
and write off the organizational costs
Organizational costs $ (3,180)
Additional paid-in capital 259,677
Deficit accumulated during
the development stage (256,497)
------------
Total $ -
============
6. Record a 4.2 for 1 forward split of the shares of Fountain Colony
Ventures, Inc. prior to the acquisition of Green Medical, Inc. and the
forgiveness of $26,100 of shareholder debt
Common stock $ (2,880)
Shareholder shares 26,100
Additional paid in capital (23,220)
------------
Total $ -
============
F 7
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FOUNTAIN COLONY VENTURES, INC.
(Registrant)
Date: June 7, 2000 By: /s/ Katumori Hayashi
--------------------------
Katumori Hayashi
President, Chief Executive Officer
and Chairman of Board of Directors
7
30
EXHIBIT INDEX
Exhibit Page
No. Exhibit Description No.
- ------ ------------------- -----
2.1 Agreement and Plan of Reorganization *
dated January 19, 2000, by and among
Fountain Colony, Green Medical and
Katumori Hayashi.
2.2 Amendment to Agreement and Plan of *
Reorganization dated January 27,
2000, by and among Fountain Colony,
Green Medical and Katumori Hayashi.
2.3 Second Amendment to Agreement and *
Plan of Reorganization dated March
23, 2000, by and among Fountain
Colony, Green Medical and Katumori
Hayashi.
16.1 Letter regarding resignation of *
certifying accountant.
* All exhibits are incorporated by reference from the initial Current Report
on Form 8-K filed April 12, 2000.
31