ANNUAL REPORT 12/31/02
[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, 2002.
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.
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(Exact name of registrant as specified in its charter)
Florida 22-3261564
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 NW 13th Street
Pompano Beach, Florida 33069
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (954) 346-5799
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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, 2002 were $
5,129,759.
As of December 31, 2002, there were 48,887,681 shares of Common Stock
outstanding. Based on the average high and low bid prices of the Common Stock on
December 31, 2002, the approximate aggregate market value of Common Stock held
by non-affiliates was $ 467,102.(1)
DOCUMENTS INCORPORATED BY REFERENCE
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, December 31,
2000 and December 31, 2001 as listed in response to Item 13(a)(2).
Transitional Small Business Disclosure Format (check one): Yes No X
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(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 December 31, 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 7, 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.
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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.
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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.
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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 7, 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 7, 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.
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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 J&B Wholesale Produce, Inc. transaction. Effective July 2, 2002 Raptor
acquired 100% of the issued and outstanding stock of J&B Wholesale Produce,
Inc., from Gennaro Mugnano, in exchange for $2,325,000., as described in the 8-K
document filed with the SEC on July 2, 2002. Raptor and J&B borrowed $2,825,000.
from Gelpid Associates, LLC, a Florida Limited Liability Company, in order to
complete the acquisition. A true and correct copy of the Stock Purchase
Agreement is included in the 8-K filing and is incorporated herein by reference.
The loan to Raptor by Gelpid Associates LLC was personally guaranteed by the
President of Raptor, Mr. Paul Lovito. J&B is engaged in the wholesale produce
industry. Pursuant to the Stock Purchase Agreement, Raptor acquired 1000 shares
of J&B common Stock, par value $0.01, and J&B became a wholly-owned subsidiary
of Raptor. J&B was incorporated in Florida as a for-profit corporation on May
16, 1994. The loan from Gelpid Associates is evidenced by a note, which has a
term of three years and bears interest at the rate of LIBOR plus ten percent per
annum. The minimum monthly payment due under the note is accrued interest only.
There is no prepayment penalty under the note. The note is secured by the
machinery, equipment, furniture, fixtures, inventory, accounts receivable, works
in progress, motor vehicles, and computer hardware and software of J&B. Raptor
has received an additional loan commitment from Gelpid in the amount of
$800,000. With which Raptor intends to (1) close on the purchase of the cold
storage warehouse housing J&B located in Pompano Beach, Florida in the amount of
approximately $400,000., and (2) utilize approximately $400,000. to expand J&B
into a retail seller of fruits, vegatables, dairy products and prepared foods.
The foregoing summaries of the Lovitos Agreement, the LBI Properties, Inc.
Agreement, the LBI E Web Agreement, the J&B Wholesale Produce, Inc. 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) and the Form 8-K filed on July 2,
2003 (J&B transaction) are incorporated herein by reference.
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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,
2002, the Company's net operating loss on a going concern basis was $1,305,618.
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.
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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. The company has an obligation to
pay dividends on it's preferred stock, Class A, as noted below. In June 2002,
the Company issued 15 shares of its Preferred Stock, Class A in exchange for
$90,000. Each share of Preferred Stock, Class A bears an annual dividend of
$12,000., payable quarterly, and is convertible into so many shares of the
Common stock of the company as equal one half of one percent of the total issued
and outstanding common stock at the time of conversion, however no share of
Preferred Stock shall convert into more than 375,000 common shares.
The management of the company will not pay a dividend on the common stock until
and unless the dividends payable on the preferred stock are current.
(e) Control by Directors and Executive Officers. The directors, executive
officers and their affiliates own approximately 69% 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.
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ITEM 2. PROPERTIES
The corporate offices of Raptor Investments, Inc. are in Pompano Beach, Florida,
and consist of approximately 2000 square feet of office space located within the
cold storage facility of J&B Wholesale Produce, Inc. The office space is
currently provided by J&B at a cost of $6,500 on a month to month basis.
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. However, subsequent to
the jury verdict a dispute arose between the Company and its insurers concerning
the payment of legal fees relating to the successful defense of the action.
Insurors have paid $682,000. in legal fees, there remains due and payable
$468,000. The company and the insurers have entered into a tentative settlement
on the balance but said settlement has not yet been paid.
In May of 2002, the Company (through LBI Group, Inc.) was named as a Defendant
in a Civil Action brought by John Lary in the Circuit Court of Madison County,
Alabama. The suit alleged a violation under the Telephone Consumer Protection
Act of 1991, in that the Company, in concert with other individuals and
corporations, is alleged to have delivered an unsolicited facsimile
communication to one person. The management of the Company deems the amount in
controversy to be not material to the business of the Company.
The Company has received certain written claims brought by Alan Gottlich and
Charles Loccisano related to the "Lovito Transaction" which is fully described
above. These claims include (a) breach of a tender offer obligation; (b) breach
of an obligation to purchase and register Company shares belonging to the
claimants; (c) breach of obligations to pay certain transactional and consulting
fees; (d) breach of obligation to pay certain insurance premiums; and (e) breach
of contractual restrictions on the dilution of the claimant's shares owned. The
Company is in settlement negotiations concerning these alleged claims. The
material impact of these claims on the Company are unknown at this time.
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, 2001 and December 31, 2002. These prices
reflect inter-dealer prices and do not include retail mark-ups, markdowns or
commissions, and do not necessarily represent actual transactions.
High Low
-----------------
Quarters Ending:
----------------
March 31, 2001 ...................... $.10 $.035
June 30, 2001 ....................... .12 .03
September 30, 2001 .................. .15 .09
December 31, 2001 ................... .12 .07
Quarters Ending:
----------------
March 31, 2002 ...................... $.29 $.02
June 30, 2002 ....................... .33 .06
September 30, 2002 .................. .24 .01
December 31, 2002 ................... .05 .01
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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, the position of the
company as regards it's obligations to the preferred shareholders, 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, 2001, and 2002:
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.
-10-
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.
6. In June 2002, the Company issued 15 shares of its Preferred Stock, Class A in
exchange for $90,000. Each share of Preferred Stock, Class A bears an annual
dividend of $12,000., payable quarterly, and is convertible into so many shares
of the Common stock of the company as equal one half of one percent of the total
issued and outstanding common stock at the time of conversion, however no share
of Preferred Stock shall convert into more than 375,000 common shares.
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.
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 primary operations are centered in the J&B Wholesale Produce, Inc.
wholly-owned subsidiary. J&B is a regional provider of produce to restaurants in
Miami-Dade, Broward, Palm Beach, Martin and Monroe counties in southeast
Florida. Management expects 2003 gross sales in the J&B unit of $12 million.
The company continues, on a limited basis, to pursue a variety of long-term
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.
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.
-11-
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 is operational. The other 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, 2002 were $ 5,076,789, from
$71,348. in revenues for 2001. This increase in revenues was a result of the
Acquisition of J&B Wholesale Produce, Inc.
Our operating loss was $ 1,305,618 in 2002.
The Company's increase in revenues and reduction in net loss are a direct result
of its acquisition of J&B.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2002, the Company had a stockholder's deficit of $ 8,963,072.
As of December 2002 the Company also incurred losses of $ 1,395,618. The Company
plans to decrease this deficit and reduce losses by continuing to grow its
wholesale Produce business in the J&B subsidiary, and in 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.
-12-
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 three fiscal years ended December 31, 2002, 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. 34 Chairman, President ,Chief 2001
Executive Officer
and Director
------------------------------------------------------------------------------
Matthew J. Lovito 30 Chief Financial Officer, 2001
Treasurer and Director
------------------------------------------------------------------------------
Marc A. Lovito 27 Vice President and 2001
Director
------------------------------------------------------------------------------
Don A. Paradiso, Esq. 45 Director 2003
==============================================================================
-13-
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.
Don A. Paradiso was elected as a Director of the company in 2003. Mr. Paradiso
has been a member of the State Bar of New York since 1983 and of Florida since
1993. Mr. Paradiso was Special Assistant United States Attorney for the Eastern
District of New York from 1983 until 1987. From 1987 until 1989, he was counsel
to Xerox Corporation. From 1989 until 1991, he was counsel to Globe Security
Systems. From 1992 until 1994, Mr. Paradiso was counsel to the National Workers
Compensation Insurance Reinsurance Pools. In 1994 he founded the law firm of Don
A. Paradiso, P.A. and is actively engaged in the practice of law in Pompano
Beach, Florida. Mr. Paradiso received a B.A. from Wake Forest University in 1979
and a J.D. from Pepperdine University School of Law in 1982.
-14-
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, 2002, 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, 2002, 2001 and 2000. 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, 2002 $36,350. $0 $0 -0-
Chairman, President and
Chief Executive Officer
Matthew Lovito, 2002 $32,200. $0 $0 -0-
Chief Financial Officer
and Treasurer
Marc Lovito, 2002 $32,200. $0 $0 -0-
Vice President
-15-
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The company granted 2,500,000 options to purchase one share per option of the
company's common stock at the exercise price of $0.10 per share to Mr. Jose
Caraballo on February 14, 2002. The options were granted pursuant to a
consulting services agreement between Mr. Caraballo and the company dated
February 14, 2002.
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 December 31, 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.
-16-
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 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.
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.
-17-
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.
-18-
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
-19-
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 7, 2002.
-20-
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 7, 2002.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
RAPTOR INVESTMENTS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2002
RAPTOR INVESTMENTS, INC.
AND SUBSIDIARIES
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2002
PAGE 3 STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002
(CONSOLIDATED) AND 2001 (COMBINED)
PAGES 4 - 5 STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE
YEARS ENDED DECEMBER 31, 2002 (CONSOLIDATED) AND 2001 (COMBINED)
PAGE 6 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002
(CONSOLIDATED) AND 2001 (COMBINED)
PAGES 7 - 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Raptor Investments, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Raptor
Investments, Inc. and subsidiaries as of December 31, 2002 and the related
statements of operations, changes in stockholders' equity (deficiency) and cash
flows for the two years ended December 31, 2002 (consolidated) and 2001
(combined). 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 audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the consolidated financial position of Raptor Investments,
Inc. and subsidiaries as of December 31, 2002 and the results of their
operations and their cash flows for the two years ended December 31, 2002
(consolidated) and 2001 (combined), 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 15 to the
financial statements, the Company has a net loss of $1,305,618, a negative cash
flow from operations of $301,707, a working capital deficiency of $204,442 and a
stockholders' deficiency of $746,419. These factors raise substantial doubt
about its ability to continue as a going concern. Management's plans concerning
this matter are also described in Note 15. The accompanying financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
April 11, 2003
1
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
ASSETS
CURRENT ASSETS
Cash $ 9,377
Restricted cash 355,635
Investments, net 1,000
Accounts receivable, net 951,126
Inventories 138,589
Due from shareholder 16,470
Other current assets 13,976
-----------------
Total Current Assets 1,486,173
-----------------
PROPERTY AND EQUIPMENT, NET 1,125,767
-----------------
OTHER ASSETS
Deposits 2,525
Goodwill 1,111,077
Option to purchase building 500,000
-----------------
Total Other Assets 1,613,602
-----------------
TOTAL ASSETS $ 4,225,542
------------
=================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Cash overdraft $ 27,328
Accounts payable 1,342,387
Accrued interest 54,405
Loans payable - related parties 150,125
Capital leases - current portion 116,370
-----------------
Total Current Liabilities 1,690,615
-----------------
LONG-TERM LIABILITIES
Line of credit 2,825,000
Capital leases - non-current 456,346
-----------------
Total Long-Term Liabilities 3,281,346
-----------------
TOTAL LIABILITIES 4,971,961
-----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.01 par value, 5,000,000 shares authorized
Series A Preferred stock, 15 shares authorized, 15 shares
issued and outstanding 1
Common stock, $.01 par value, 100,000,000 shares
authorized, 48,887,681 shares issued and outstanding 488,878
Additional paid-in capital 9,542,870
Subscription receivable (178,700)
Other comprehensive loss (6,885)
Note receivable - stockholder (1,580,404)
Treasury stock (49,107)
Accumulated deficit (8,963,072)
-----------------
Total Stockholders' Deficiency (746,419)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 4,225,542
---------------------------------------------- ================
See accompanying notes to consolidated financial statements.
2
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
(Consolidated) (Combined)
-------------------------- -----------------------
REVENUE
Sales $ 5,076,759 $ -
Consulting income 53,000 -
Interest - 70,001
Royalty - 1,347
--------------------------
Total Revenue 5,129,759 71,348
-------------------------- -----------------------
COST OF GOODS SOLD 3,931,640 -
-------------------------- -----------------------
GROSS PROFIT 1,198,119 71,348
-------------------------- -----------------------
OPERATING EXPENSES
Selling expense 269,723 -
Professional fees 942,705 176,750
Other general and administrative 1,160,278 501,819
-------------------------- -----------------------
Total Operating Expenses 2,372,706 678,569
-------------------------- -----------------------
LOSS FROM OPERATIONS (1,174,587) (607,221)
-------------------------- -----------------------
OTHER INCOME (EXPENSE)
Loss on settlement of note receivable (13,901) -
Interest expense (261,034) (1,800)
Interest income 143,904 -
-------------------------- -----------------------
Total Other Income (Expense) (131,031) (1,800)
-------------------------- -----------------------
NET LOSS $ (1,305,618) $ (609,021)
-------- ========================== =======================
LOSS PER SHARE
Net loss
Preferred stock dividends 90,000 -
-------------------------- -----------------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (1,395,618) $ (609,021)
----------------------------------------- ========================== =======================
LOSS PER SHARE - BASIC AND DILUTED $ (0.03) $ (0.01)
========================== =======================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 47,328,777 43,642,476
========================== =======================
See accompanying notes to consolidated financial statements.
3
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 2002 (CONSOLIDATED) AND 2001 (COMBINED)
Preferred Stock Common Stock
Shares Amount Shares Amount
---------------- ---------------- ------------------ ----------------
Balance January 1, 2001 - $ - 41,587,681 $ 415,878
Issuance of common stock for cash - - 500,000 5,000
Issuance of common stock for cash - - 1,800,000 18,000
Cash received on note receivable,
net of interest income - - - -
Net loss, 2001 - - - -
---------- ---------- ---------- ----------
Balance, December 31, 2001 - - 43,887,681 438,878
Issuance of common stock for services - - 2,000,000 20,000
Issuance of preferred stock for cash 15 1 - -
Issuance of options for services - - - -
Exercise of options - - 3,000,000 30,000
Cash received on note receivable,
net of interest income - - - -
Other comprehensive loss - - - -
Net loss, 2002 - - - -
Total comprehensive loss - - - -
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 2002 15 $ 1 48,887,681 $ 488,878
========== ========== ========== ==========
Subscription Additional Paid-In Note Receivable
Receivable Capital Stockholder
------------------ ------------------- -------------------
Balance January 1, 2001 $ (185,200) 8,775,739 $(1,700,000)
Issuance of common stock for cash - 25,000 -
Issuance of common stock for cash - (12,000) -
Cash received on note receivable,
net of interest income - - 249,000
Net loss, 2001 - - -
----------- ----------- -----------
Balance, December 31, 2001 (185,200) 8,788,739 (1,451,000)
Issuance of common stock for services - 180,000 -
Issuance of preferred stock for cash - 89,999 -
Issuance of options for services - 364,132 -
Exercise of options 6,500 120,000 -
Cash received on note receivable,
net of interest income - - (129,404)
Other comprehensive loss - - -
Net loss, 2002 - - -
Total comprehensive loss - - -
----------- ----------- -----------
BALANCE, DECEMBER 31, 2002 $ (178,700) $ 9,542,870 $(1,580,404)
=========== =========== ===========
See accompanying notes to consolidated financial statements.
4
Treasury Stock
Shares Amount
----------------- -------------------
Balance January 1, 2001 3,040,800 $ (49,107)
Issuance of common stock for cash - -
Issuance of common stock for cash - -
Cash received on note receivable, net of interest
income - -
Net loss, 2001 - -
---------- ----------
Balance, December 31, 2001 3,040,800 (49,107)
Issuance of common stock for services - -
Issuance of preferred stock for cash - -
Issuance of options for services - -
Exercise of options - -
Cash received on note receivable, net of interest
income -
Other comprehensive loss - -
Net loss, 2002 - -
Total comprehensive loss - -
---------- ----------
BALANCE, DECEMBER 31, 2002 3,040,800 $ (49,107)
========== ==========
Other Comprehensive Accumulated
Loss Deficit Total
---------------------- -------------------- -------------------
Balance January 1, 2001 - $(7,048,433) $ 208,877
Issuance of common stock for cash - - 30,000
Issuance of common stock for cash - - 6,000
Cash received on note receivable, net of interest
income - - 249,000
Net loss, 2001 - (609,021) (609,021)
----------- ----------- -----------
Balance, December 31, 2001 - (7,657,454) $ (115,144)
Issuance of common stock for services - - 200,000
Issuance of preferred stock for cash - - 90,000
Issuance of options for services - - 364,132
Exercise of options - - 156,500
Cash received on note receivable, net of interest
income - - (129,404)
Other comprehensive loss (6,885) - (6,885)
Net loss, 2002 - (1,305,618) (1,305,618)
Total comprehensive loss - - (1,312,503)
----------- ----------- -----------
BALANCE, DECEMBER 31, 2002 $ (6,885) $(8,963,072) $ (746,419)
------------------------------------------------- =========== =========== ===========
See accompanying notes to consolidated financial statements.
5
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
(Consolidated) (Combined)
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,305,618) $ (609,021)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Allowance for doubtful accounts 18,387 --
Depreciation 45,793 --
Common stock and options issued for services 564,132 --
Interest income accrued (143,904) --
Contract receivable settlement 13,901 --
(Increase) decrease in:
Accounts receivable (339,431) 32,781
Inventories (51,106) --
Royalty receivable 29,280 (29,280)
Other current assets (7,006) 58,681
Increase (decrease) in:
Accounts payable 792,132 (59,754)
Accrued interest expense 54,405 --
Cash overdraft 27,328 --
----------- -----------
Net Cash Used In Operating Activities (301,707) (606,593)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities (7,885) --
Purchase of property and equipment (6,800)
Restricted cash (355,635) --
Building purchase option (500,000) --
Acquisition of subsidiary (2,325,000) --
Proceeds from notes receivable 277,320 140,049
Due from stockholder 1,400 (17,870)
----------- -----------
Net Cash Provided By (Used In) Investing Activities (2,909,800) 115,379
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 2,825,000 --
Proceeds from notes receivable - stockholder 14,500 249,000
Proceeds from loan payable - related party 100,000 100,000
Proceeds from loan payable - former officers (13,442) 9,400
Payments on capital leases (56,808)
Proceeds from sale of common and preferred stock 246,500 94,801
----------- -----------
Net Cash Provided By Financing Activities 3,115,750 453,201
----------- -----------
NET DECREASE IN CASH (95,757) (38,013)
CASH - BEGINNING OF YEAR 105,134 143,147
----------- -----------
CASH - END OF YEAR $ 9,377 $ 105,134
-----------
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ 206,629 --
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property acquired under capital lease $ 68,553 $ --
=========== ===========
Exchange of contract receivable for accrual expenses $ 393,730 $ --
=========== ===========
See accompanying notes to consolidated financial statements.
6
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) ORGANIZATION AND NATURE OF OPERATIONS
Raptor Investments, Inc. formerly Paramark Enterprises, Inc. (Delaware), a
Delaware corporation was merged with and into Raptor Investments, Inc., a
Florida corporation on December 24, 2002. Upon completion of the merger, the
Delaware corporation ceased existence as of the date of the merger and Raptor
Investments, Inc. became the reporting entity.
Effective January 7, 2002, Raptor Investments, Inc. acquired LBI Properties,
Inc. and LBI Eweb Communities, Inc. by issuing 19,974,298 and 19,800,000 shares,
respectively of its common stock for all of the outstanding common stock of LBI
Properties, Inc. and LBI Eweb Communities, Inc., respectively. LBI Properties,
Inc. operations include acquiring, managing and developing real estate
properties. LBI Eweb Communities, Inc. operates various information websites for
investors. The merger has been accounted for as a business combination of
entities under common control because all of the entities had common ownership
interests, and accordingly, the consolidated financial statements have been
prepared to include the combined results of operations, financial position and
cash flows of Raptor Investments, Inc. and its subsidiaries for all the period
presented (See Note 6(A)).
On July 2, 2002, Raptor Investments, Inc. acquired 100% of the issued and
outstanding common stock of J&B Produce, Inc. in exchange for cash of
$2,325,000. The acquisition was recorded under the purchase method of
accounting. J&B Produce, Inc.'s operations consist of produce sales to
restaurants in South Florida (See Note 7(B)).
(B) PRINCIPLES OF CONSOLIDATION AND COMBINATION
The 2001 financial statements include the accounts of Raptor Investments, Inc.
and its affiliated companies LBI Properties, Inc. and LBI EWeb Communities, Inc.
All intercompany accounts have been eliminated in the combination.
The 2002 financial statements include the accounts of Raptor Investments, Inc.
and its wholly owned subsidiaries LBI Properties, Inc. and LBI EWeb Communities,
Inc. and J&B Produce, Inc. (from July 2, 2002, date of acquisition). All
intercompany accounts have been eliminated in the consolidation.
Raptor Investments, Inc. and its subsidiaries LBI Properties, Inc., LBI EWeb
Communities, Inc. and J&B Produce, Inc. are hereafter referred to as the
"Company".
7
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(C) 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.
(D) CASH
The Company maintains cash at financial institutions.
(E) MARKETABLE SECURITIES
The Company's marketable securities are comprised of equity securities, all
classified as available-for-sale. These investments are carried at their fair
value of $1,000 based upon the quoted market prices of those investments as of
December 31, 2002. At December 31, 2002, unrealized losses of $6,885 are
included in stockholders' equity as other comprehensive loss.
(F) INVENTORY
Inventory consists of purchased produce, fruit and vegetables and is valued at
the lower of cost or market. Cost is determined using the first-in, first-out
(FIFO) method.
(G) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets from three to thirty nine years.
(H) LONG-LIVED ASSETS, GOODWILL AND INTANGIBLE ASSETS
In accordance with SFAS 142 and 144, long-lived assets, goodwill and certain
identifiable intangible assets held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. For purposes of evaluating
the recoverability of long-lived assets, goodwill and intangible assets, the
recoverability test is performed using undiscounted net cash flows related to
the long-lived assets.
8
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(I) 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.
(J) STOCK-BASED COMPENSATION
In accordance with Statement of Financial Accounting Standards No. 123 ("SFAS
No. 123"), the Company has elected to account for stock options issued to
employees under Accounting Principles Board Opinion No. 25 ("APB Opinion No.
25") and related interpretations.
(K) REVENUE RECOGNITION AND DEFERRED REVENUE
The Company recognizes revenue at the time of delivery and acceptance of produce
products by the customers. The Company recognizes revenue from service contracts
over the life of the services. The Company recognizes royalty income upon
receipt.
(L) 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 accounts receivable, accounts payable and
accrued liabilities, approximates fair value due to the relatively short period
to maturity for these instruments.
(M) BUSINESS SEGMENTS
The Company's operations are classified into two reportable segments, Produce
and Other.
9
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(N) EARNINGS (LOSS) PER SHARE
Net loss per common share for the period ended December 31, 2002 and 2001 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". The effect of
common stock equivalents was not used since the effect was antidilutive.
(O) NEW ACCOUNTING PRONOUNCEMENTS
In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS
145 rescinds the provisions of SFAS No. 4 that requires companies to classify
certain gains and losses from debt extinguishments as extraordinary items,
eliminates the provisions of SFAS No. 44 regarding transition to the Motor
Carrier Act of 1980 and amends the provisions of SFAS No. 13 to require that
certain lease modifications be treated as sale leaseback transactions. The
provisions of SFAS 145 related to classification of debt extinguishments are
effective for fiscal years beginning after May 15, 2002. Earlier application is
encouraged.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Restructuring
Costs." SFAS 146 applies to costs associated with an exit activity (including
restructuring) or with a disposal of long-lived assets. Those activities can
include eliminating or reducing product lines, terminating employees and
contracts and relocating plant facilities or personnel. Under SFAS 146, the
Company will record a liability for a cost associated with an exit or disposal
activity when that liability is incurred and can be measured at fair value. SFAS
146 will require the Company to disclose information about its exit and disposal
activities, the related costs, and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an exit
activity is initiated and in any subsequent period until the activity is
completed. SFAS 146 is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption encouraged. Under SFAS
146, a company cannot restate its previously issued financial statements and the
new statement grandfathers the accounting for liabilities that a company had
previously recorded under Emerging Issues Task Force Issue 94-3.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Restructuring
Costs." SFAS 146 applies to costs associated with an exit activity (including
restructuring) or with a disposal of long-lived assets. Those activities can
include eliminating or reducing product lines, terminating employees and
contracts and relocating plant facilities or personnel. Under SFAS 146, the
Company will record a liability for a cost associated with an exit or disposal
activity when that liability is incurred and can be measured at fair value. SFAS
146 will require the Company to disclose information about its exit and disposal
activities, the related costs, and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an exit
activity is initiated and in any subsequent period until the activity is
completed. SFAS 146 is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption encouraged. Under SFAS
146, a company cannot restate its previously issued financial statements and the
new statement grandfathers the accounting for liabilities that a company had
previously recorded under Emerging Issues Task Force Issue 94-3.
10
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
In October 2002, the FASB issued Statement No. 147 ("SFAS 147"), "Acquisitions
of Certain Financial Institutions." SFAS 147 addresses financial accounting and
reporting for the acquisition of all or part of a financial institution, except
for a transaction between two or more mutual enterprises. SFAS 147 also provides
guidance on the accounting for the impairment or disposal of acquired long-term
customer relationship intangible assets of financial institutions, including
those acquired in transactions between two or more mutual enterprises. These
provisions of the statement will be effective for acquisitions on or after
October 1, 2002.
In December 2002, the Financial Accounting Standards Board issued Statement No.
148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an
amendment of FASB Statement No. 123," ("SFAS 148"). SFAS 148 amends FASB
Statement No. 123, "Accounting for Stock Based Compensation" ("SFAS 123") and
provides alternative methods for accounting for a change by registrants to the
fair value method of accounting for stock-based compensation. Additionally, SFAS
148 amends the disclosure requirements of SFAS 123 to require disclosure in the
significant accounting policy footnote of both annual and interim financial
statements of the method of accounting for stock based-compensation and the
related pro forma disclosures when the intrinsic value method continues to be
used. The statement is effective for fiscal years beginning after December 15,
2002, and disclosures are effective for the first fiscal quarter beginning after
December 15, 2002.
The adoption of these pronouncements will not have a material effect on the
Company's financial position or results of operations.
NOTE 2 ACCOUNTS RECEIVABLE
Accounts receivable as of December 31, 2002 consisted of the following:
Accounts receivable $ 970,536
Less allowance for doubtful accounts (19,410)
---------------
$ 951,126
===============
11
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
The Company maintains an allowance for doubtful accounts based on management's
analysis of historical customer collections and risk. For the years ended
December 31, 2002 and 2001, the Company recorded a provision for doubtful
accounts of $18,387 and $0, respectively.
NOTE 3 CONTRACT RECEIVABLE
On December 15, 2001, 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, 2001,
$1,000,000 on December 15, 2001 and $1,000,000 payable in semiannual
installments over a period of four years. During 2002, the Company settled the
contract receivable for one payment of $671,050. The Company recorded a loss on
the settlement of $13,901. Rich Products, Inc. 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)). During 2002, the Company has not received
any royalty payments and is in negotiations to settle the outstanding amount
under the agreement.
NOTE 4 INVENTORIES
Inventories (net) at December 31, 2002 consist of the following:
Produce, fruits and vegetables $ 138,589
------------
$ 138,589
============
12
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2002 consisted of the
following:
Capitalized lease assets $ 867,527
Land 4,400
Computer and office equipment 120,962
Office furniture 2,757
Leasehold improvements 381,053
Vehicles 78,972
---------------
1,455,671
Less accumulated depreciation (329,904)
---------------
$ 1,125,767
===============
Depreciation expense for the year ended December 31, 2002 was $45,793.
Accumulated depreciation on capitalized lease assets totaled $119,604 at
December 31, 2002.
NOTE 6 NOTE RECEIVABLE - STOCKHOLDER
During 2000, the Company sold an oil and gas lease for a note receivable of
$1,700,000 with interest at 10% per annum, is unsecured and due on demand. Also
during 2000, the Company assigned its rights under the agreement to its
President on the same terms. During 2002 and 2001, the Company received payments
of $14,500 and $249,000, respectively. At December 31, 2002, the balance was
$1,436,500 and accrued interest receivable was $143,904. These amounts are
included as a reduction of stockholders' equity at December 31, 2002.
NOTE 7 BUSINESS COMBINATIONS
(A) ACQUISITION OF REAL ESTATE AND INTERNET MARKETING COMPANIES
Effective January 7, 2002, the Company acquired LBI Properties, Inc. and LBI
Eweb Communities, Inc. by issuing 19,974,298 and 19,800,000 common shares of the
Company's stock for all of the outstanding common stock of LBI Properties, Inc.
and LBI Eweb Communities, Inc., respectively. The merger has been accounted for
as a business combination of entities under common control because all of the
entities had common ownership interests, and accordingly, the financial
statements have been prepared to include the combined results of operations,
financial position and cash flows of the Company and these subsidiaries for all
the period presented.
13
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(B) ACQUISITION OF PRODUCE COMPANY
On June 21, 2002, Raptor Investments, Inc. ("Raptor") entered into a stock
purchase agreement to acquire J&B Wholesale produce, Inc. ("J&B"). Under the
terms of the agreement, which closed July 2, 2002, Raptor acquired all the
issued and outstanding common stock of J&B in exchange for cash of $2,325,000.
Contemporaneously, Raptor entered into a one-year lease of the cold storage
facility and executive offices occupied by J&B at $6,500 per month and paid
$500,000 for a one-year option to purchase the facility at a sale price of
$875,000. When the option is exercised, the option price of $500,000 will be
credited toward the sale price (See Note 16).
The J&B acquisition was recorded under the purchase method of accounting and
accordingly, the results of operations and cash flows of J&B from the
acquisition date of July 2, 2002 are included in the accompanying consolidated
financial statements. The purchase price of $2,325,000 was allocated to the
assets acquired and liabilities assumed based on the fair market values at the
date of acquisition. The fair market value of assets acquired and liabilities
assumed is summarized as follows:
Current assets $ 701,262
Property and equipment 1,069,807
Other assets 3,825
Goodwill 1,111,077
Capital lease payable (560,971)
----------------
$ 2,325,000
================
The following unaudited pro forma financial information for the Company gives
effect to the J&B acquisition as if it occurred on January 1, 2002. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which actually would have
resulted had the acquisition occurred on the date indicated, or which may result
in the future.
Net revenue $ 10,594,993
Net loss $ (887,780)
Net loss per share - basic and diluted $ (0.02)
Shares used in per calculation - basic and diluted 47,328,777
NOTE 8 LINE OF CREDIT
In order to effectuate the purchase of J&B and an option to purchase a building
(Note 7), the Company entered into an agreement and signed a promissory note for
a line of credit in the amount of $2,825,000, which shall cap at $2,000,000 when
the principal balance is reduced to that amount. The note is due and payable in
July 2005, but may be extended at the option of the Company if, on the original
14
maturity date, the principal balance is equal to or less than $1,500,000. The
note bears interest at the rate of LIBOR (1.38% at December 31, 2002) plus 10%
per annum payable monthly. The agreement also requires that the principal amount
owed on the note be reduced by the greater of (1) $250,000 per annum commencing
after the first full calendar year following execution of the note, or (2) 50%
of J&B's net operating earnings per fiscal quarter commencing with the first
full fiscal quarter following execution of the note. The note is secured by the
assets of J&B Produce and a personal guarantee of the President.
NOTE 9 LOAN PAYABLE - RELATED PARTY
During 2002 a related party loaned the Company $100,000. The loan bears interest
at 16.8%, is unsecured and due on demand.
During 2002, two former stockholders converted accounts payable and accrued
expenses to loans payable. The loans are non-interest bearing, secured by the
funds held in escrow and will be paid upon the final settlement of outstanding
professional fees. The balance at December 31, 2002 is $46,683.
During 2001, a related party loaned the Company $8,000. The loan is non-interest
bearing and due on demand. The balance at December 31, 2002 is $1,442.
NOTE 10 CONTINGENCIES AND COMMITMENTS
(A) LAWSUITS
The Company is involved in various unresolved legal actions and administrative
claims related to the prior operations and management of the Company. The
Company has accrued $468,000 in legal fees at December 31, 2002 related to these
legal matters. The Company is currently in negotiations with an insurance
company to recover a portion of this amount. In addition, the Company's legal
counsel is currently holding approximately $243,000 of funds for settlement of
the outstanding liabilities.
(B) CAPITAL LEASES
The Company leases delivery vehicles under non-cancelable capital lease
agreements. Future minimum lease payments under the capital leases are as
follows as of December 31, 2002:
15
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
YEAR Amount
---- ---------------
2003 $ 207,515
2004 183,504
2005 166,763
2006 142,838
Thereafter 156,188
---------------
856,808
Less: interest 284,092
---------------
572,716
Less: current portion 116,370
---------------
Capital lease obligations - non-current $ 456,346
===============
(C) OPERATING LEASES
The Company leases warehouse and office space under non-cancelable operating
leases expiring through 2003. Rental expense totaled approximately $128,000 and
$89,000 for the years ended December 31, 2002 and 2001, respectively (See Note
16(A)).
Future minimum lease payments and operating leases consist of the following:
2003 $ 128,000
(D) STOCK REPURCHASE
The Company entered into an agreement to repurchase certain outstanding shares
of common stock from two former officers and directors at a tender price of
$0.20 per share. The tender price offer is guaranteed by the Company's President
and Chief Financial Officer. The total shares owned by the former officers and
directors is approximately 1,691,000. As of the date of this report, the Company
is in default of the agreement.
NOTE 11 EQUITY
(A) SERIES A CONVERTIBLE PREFERRED STOCK
During 2002, the Company designated 15 shares of preferred stock as "Class A
Preferred" with the following preferences: annual dividend of $12,000 payable
quarterly; convertible in whole only into one half of one percent of the total
number of issued and outstanding common shares of the Company on the date of
conversion limited to a maximum conversion of 375,000 common shares.
16
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
During June 2002, the Company issued 15 shares of Class A Preferred stock for
cash of $90,000. As of April 11, 2003, the Company has not paid accrued
dividends of $90,000.
(B) COMMON STOCK ISSUED FOR SERVICES
During 2002, the Company issued 2,000,000 shares of Common stock for services to
a consultant having a fair value of $200,000.
(C) COMMON STOCK WARRANTS
During 2002, the Company issued 3,000,000 common stock warrants at an exercise
price of $0.05 to a consultant for services. The warrants expire in 2004. Using
the Black-Scholes model, the warrants were valued at $114,132 under the
following assumptions; no annual dividend, volatility of 242%, risk-free
interest rate of return of 3.0% and a term of 1 year. The warrants were
exercised in 2002 and the Company received cash proceeds of $150,000.
During 2002, the Company issued 2,500,000 common stock warrants at an exercise
price of $0.10 to a consultant for services. Using the Black-Scholes model, the
warrants were valued at $250,000 under the following assumptions; no annual
dividend, volatility of 242%, risk-free interest rate of return of 3.0% and a
term of 1 year.
NOTE 12 INCOME TAXES
Income tax expense (benefit) for the period ended December 31, 2002 and 2001 is
summarized as follows:
2002 2001
------------ ------------
Current:
Federal $ - $ -
State - -
Deferred - Federal and State - -
------------ ------------
Income tax expense (benefit) $ - $ -
============ ============
The Company's tax expense differs from the "expected" tax expense for
the period ended December 31, 2002 and 2001 as follows:
17
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
2002 2001
------------------ -------------------
U.S. Federal income tax benefit $ (442,975) $ (207,067)
Effect on net operating loss carryforward 442,975 207,067
------------------ -------------------
$ - $ -
================== ===================
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at December 31, 2002 and 2001 are as
follows:
2002 2001
---------------- -----------------
Deferred tax assets:
Net operating loss carryforward $ 3,046,500 $ 191,000
---------------- -----------------
Total gross deferred tax assets 3,046,500 191,000
Less valuation allowance (3,046,500) (191,000)
---------------- -----------------
Net deferred tax assets $ - $ -
================ =================
At December 31, 2002, the Company had a net operating loss carryforward
of approximately $8,960,000 for U.S. Federal income tax purposes
available to offset future taxable income expiring in 2022. The net
change in the valuation allowance during the year ended December 31,
2002 was an increase of $442,975.
NOTE 13 SEGMENT INFORMATION
The Company operates in two reportable business segments, Produce and
Other. The Company operates the produce segment through its wholly owned
subsidiary J&B Wholesale Produce, Inc. ("J&B"). J&B receives its
revenues from selling produce wholesale to restaurants and stores.
Raptor Investments, Inc., LBI Properties, Inc. and LBI Eweb Communities,
Inc. that operate in the Internet Marketing and Real Estate segments, do
not meet the quantitative thresholds for a separate reportable segment
and are therefore included in the Other segment category. The accounting
policies of the segments are the same as described in the summary of
significant accounting policies. The Company evaluates segment
performance based on income from operations. All intercompany
transactions between segments have been eliminated. As a result, the
components of operating loss for one segment may not be comparable to
another segment. The following is a summary of the Company's segment
information for the periods ended December 31:
18
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
2002 Produce Other Total
-------------------- --------------------- --------------------
Revenues $ 5,076,759 $ 53,000 $ 5,129,759
Segment profit (loss) (143,533) (1,162,085) (1,305,618)
Total assets 3,838,527 387,015 4,225,542
Additions to long-lived assets 2,325,000 - 2,325,000
Goodwill 1,111,077 - 1,111,077
Depreciation and amortization 45,793 - 45,793
2001 Produce Other Total
-------------------- --------------------- --------------------
Revenues $ - $ 71,348 $ 71,348
Segment profit (loss) - (609,021) (609,021)
Total assets - 892,408 892,408
Additions to long-lived assets - 6,800 6,800
Depreciation and amortization - - -
NOTE 14 RELATED PARTY TRANSACTIONS
LBI Properties, Inc. and LBI Eweb Communities, Inc. are beneficially owned by
the Board of Directors and their beneficiaries (See Notes 1 and 7(A)).
See Notes 6 and 9 for additional related party transactions.
NOTE 15 GOING CONCERN
As reflected in the accompanying financial statements, the Company has a net
loss of $1,305,618, a negative cash flow from operations of $301,707, a working
capital deficiency of $204,442 and a stockholders' deficiency of $746,419. These
factors raise substantial doubt about its ability to continue as a going
concern. The ability of the Company to continue as a going concern is dependent
on the Company's ability to raise additional funds and implement its business
plan. The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
Management's plan for the Company in regard to these matters is to continue to
grow the produce operations of the business through its J&B Produce subsidiary,
which management believes will provide the necessary revenue and earnings to
enhance shareholder value. Management intends to focus the business on
profitable core customers and reduce marginal costs by expanding its product
line and implementing stricter controls. The Company is also actively seeking to
refinance its long-term debt on terms more favorable to the Company. Management
believes that the actions presently taken to reduce operating costs, increase
revenue and obtain refinancing provide for the Company to operate as a going
concern.
19
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 16 SUBSEQUENT EVENTS
(A) NOTE PAYABLE
During 2003, the Company issued a note payable of $800,000 and received $400,000
for working capital and will use the remaining $400,000 to purchase the cold
storage facility. As of today, the Company has exercised its option to purchase
the cold storage facility. The Company intends to close on the facility during
the second quarter of 2003. The note is secured by the assets of J&B Produce,
Inc.
(B) COMMON STOCK WARRANTS
During 2003, the Company issued 1,500,000 common stock warrants at an exercise
price of $.05 to a consultant for services. Using the Black-Scholes model, the
warrants were valued at $167,150 using the following assumptions; no annual
dividend, volatility of 315%, risk-free interest rate of return of 3.0% and a
term of one year.
ITEM 14. DISCLOSURE
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the Company's periodic reports filed with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the periodic
reports filed under the Securities Exchange Act o1 9134 is accumulated and
communicated to management, including the Chief Executive Officer and Principal
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
Within the 90 days prior to the filing date of this Report, the Company
conducted under the supervision and with the participation of the Company's
Chief Executive Officer and Principal Financial Officer.
(B) EFFECTIVE DISCLOSURE CONTROLS
Based upon that evaluation, the Company's officers concluded that many of the
Company's disclosure controls and procedures are effective in gathering,
analyzing and disclosing information needed to satisfy the Company's disclosure
obligations under the Securities Exchange Act of 1934. For example, the
Company's internal controls, particularly the areas of payroll, control of cash
and accounts payable, are effective. In addition, the Company's Chief Executive
Officer and Chief Financial Officer meet on a regular basis to review and
evaluate the Company's financial position.
20
(C) WEAKNESSES IN DISCLOSURE CONTROLS
The Company's officers also identified several weaknesses in the Company's
disclosure controls. Such weaknesses, and the steps the Company plans to take
remedy the weaknesses, are discussed below.
1. The Company recorded a significant number of audit adjustments during the
fourth quarter, which were required to properly state the account balances at
December 31, 2002. Remedy: The Company will implement comprehensive closing
procedures, including an analysis of all balance sheet accounts and significant
income statement accounts.
2. The minutes of the Board of Directors' and stockholde4rs' meetings were not
always complete. Remedy: The Company will implement procedures to be more
comprehensive in the preparation of its minutes to include all important matters
that affect the Company's operations. The Company will take appropriate steps to
ensure that all minutes are properly approved and signed by the applicable
parties.
3. The Company drafted several agreements without consulting its legal counsel.
Therefore, some of the agreements had terms and provisions that either changed
the purpose of the agreement or undermined the purpose or intent of management.
Remedy: The Company will consult its legal counsel as to the legality of future
agreements and consult its auditors regarding the proper accounting treatment of
such agreements in order to preserve the purpose of the agreements and the
intent of management.
(D) CHANGE IN INTERNAL CONTROLS
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls since the most recent
evaluations of such controls. The Company intends to make extensive
improvements, as outlined above, to its disclosure controls.
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 May 2, 2003
------------------------ EXECUTIVE OFFICER
PAUL F. LOVITO JR. AND DIRECTOR
(PRINCIPAL EXECUTIVE
OFFICER)
/S/ MATTHEW J. LOVITO CHIEF FINANCIAL OFFICER, May 2, 2003
---------------------- TREASURER
MATTHEW J. LOVITO AND DIRECTOR
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/S/ MARC A. LOVITO VICE PRESIDENT AND DIRECTOR May 2, 2003
----------------------
MARC A. LOVITO
21
CERITIFCATIONS
I, NAME, certify that:
1. I have review this Annual Report on form 10KSB of Raptor Investments,
Inc.
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and of, the periods presented in
this Annual Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date with in 90 days prior to the filing date
of this Annual Report (the "Evaluation Date"); and
c. Presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 14, 2003
PAUL F. LOVITO JR.
------------------------
CHAIRMAN, PRESIDENT, CHIEF
EXECUTIVE OFFICER
AND DIRECTOR
CERITIFCATIONS
I, NAME, certify that:
1. I have review this Annual Report on form 10KSB of Raptor Investments,
Inc.
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and of, the periods presented in
this Annual Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report is
being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date with in 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and
c. Presented in this Annual Report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003
MATTHEW J. LOVITO
----------------------
CHIEF FINANCIAL OFFICER,
TREASURER AND DIRECTOR
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)