SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
Form 10-QSB
---------------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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 [000-30264]
--------------------------------
Acola Corp.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3177042
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
250 Riverside Drive Ste 51
New York, NY 10025
(Address of principal executive offices including zip code)
-----------------------------------
Registrant's telephone number, including area code:
(212) 666-3399
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
- ---- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of March 31, 2003.
Class Outstanding at May 14, 2003
----- -----------------------------
Common Stock,Class A,
$0.001 Par Value 39,755,050
Common Stock,Class B,
$0.001 Par Value 2,000,000
ACOLA CORP. AND SUBSIDIARIES
Table of Contents
PAGE
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2003 (unaudited) and June 30, 2002
(audited) 3
Condensed Consolidated Statements of Operations
(unaudited) -Three and Nine Months Ended March 31, 2003
and 2002 4
Condensed Consolidated Statement of Changes in
Stockholders' Equity (unaudited) -
Nine Months ended March 31, 2003 5
Condensed Consolidated Statements of Cash Flows
(unaudited) -Nine Months ended March 31, 2003 and
2002 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Item 3. Controls and Procedures 13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security
Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports 16
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2003 June 30, 2002
(Unaudited) (Audited)
------------ -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 799 $ 179
Prepaid Expenses 4,750 -
Receivables - Related Party 14,000 -
---------- -----------
19,549 179
PROPERTY AND EQUIPMENT - Net 274 -
OZELLE PHARMACEUTICALS INC. COMMON STOCK - 1
INTANGIBLE ASSETS - Net 10 10
---------- -------
TOTAL ASSETS $ 19,833 $ 190
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,223 $ 138,467
Note Payable - Shareholder and other - 31,606
Due to former Director - 5,613
Note due to former Director - 46,107
---------- ----------
TOTAL CURRENT LIABILITIES 2,223 221,793
---------- ----------
Contingent liability
STOCKHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK; $.001 par value,
5,000,000 shares authorized;
and no shares issued and outstanding - -
COMMON STOCK CLASS A; $.001 par
value; 100,000,000 shares authorized;
39,755,050 and 34,805,050 shares issued
and outstanding 39,755 34,805
COMMON STOCK CLASS B; $.001
par value; 2,000,000 shares authorized;
2,000,000 shares issued and outstanding 2,000 2,000
ADDITIONAL PAID-IN CAPITAL 3,566,176 3,373,173
ACCUMULATED DEFICIT (3,590,321) (3,631,581)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 17,610 (221,603)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 19,833 $ 190
====== =======
See accompanying notes.
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------
2003 2002 2003 2002
------- ------- -------- --------
EXPENSES
Professional fees $ 4,023 $ 26,200 $ 8,740 $ 49,762
Selling and marketing - - - 16,066
Management fee - - - 14,351
General and admin-
istrative expenses 8,525 11,762 23,709 142,935
-------- -------- --------- ---------
12,548 37,962 32,449 223,115
--------- -------- --------- ---------
LOSS FROM
OPERATIONS (12,548) (37,962) (32,449) (223,115)
-------- --------- -------- ---------
OTHER INCOME (EXPENSE)
Gain on sale of asset - - 59,999 -
Debt forgiveness - - 8,710 116,138
Settlement 5,000 10,300 5,000 10,300
INTEREST INCOME - - - 492
LOSS ON WRITEOFF
OF ASSETS - (100,909) - (100,909)
-------- --------- --------- --------
TOTAL OTHER INCOME
(EXPENSE) 5,000 (90,608) 73,709 26,021
-------- --------- -------- --------
NET INCOME (LOSS) $ (7,548) $(128,571) $ 41,260 $(197,094)
======= ====== ======= ========
BASIC AND DILUTED LOSS
PER SHARE OF
COMMON STOCK $ NIL $ NIL $ NIL $ (0.01)
====== ======== ====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Class A 39,087,634 34,805,050 36,326,781 18,176,432
Class B 2,000,000 2,000,000 2,000,000 1,245,421
========== ======= ======== =========
See accompanying notes.
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED MARCH 31, 2003
(Unaudited)
Class A Class B Additional
Common Common Paid-In Accumulated Total
Stock Stock Capital Deficit
------ ------ ---------- ----------- --------
BALANCE
AT JUNE
30,2002 $34,805 $2,000 $3,373,173 $(3,631,581) $(221,603)
Release of
Related party
Debt - - 166,953 - 166,953
New issue 4,950 26,050 31,000
Net income for
the nine
months ended
March 31,
2003 - - - 41,260 41,260
BALANCE AT
MARCH ------ -------- ---------- ----------- ---------
31,2003 $39,755 $2,000 $3,566,176 $(3,590,321) $17,610
====== ==== ========= ========= ========
See accompanying notes
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
---------------------
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income(loss) $41,260 $(197,094)
Adjustments to reconcile net
income(loss) to net cash
used in operating activities
Depreciation and amortization 23 -
Debt forgiveness income not
providing cash - (116,138)
Loss on writeoff of assets - 100,909
Changes in assets and liabilities:
Related party receivables (14,000) 3,100
Prepaid expenses (4,750) 21,000
Accounts payable and accrued
expenses (136,243) 96,795
Due to Former Director (5,614) -
Note due to Former Director (46,107) -
--------- ---------
Net cash used in
operating activities (165,431) (91,428)
---------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Investment in Website - (30,581)
Purchase of computer hardware
and software (297) -
Investment in Ozelle Pharmaceuticals,
Inc. Common Stock 1 (200,000)
Investment in trademark - (1,400)
Investment in MegaChain.com Ltd
acquistion - (280,000)
--------- -----------
Net cash used by investing
activities (296) (511,981)
------ ---------
CASH FLOW FROM FINANCING
ACTIVITIES
Issuance of Capital Stock 4,950 494,623
Additional Paid in Capital 193,003 -
Note payable - shareholder and
other loans (31,606) -
Short term loans - 62,184
--------- -----------
Net cash provided by financing
activities 166,347 556,807
EFFECT OF EXCHANGE RATES ON CASH - 11,900
--------- ---------
NET INCREASE (DECREASE) IN CASH 620 (34,702)
CASH - BEGINNING OF PERIOD 179 37,126
----- ---------
CASH - END OF PERIOD $ 799 $ 2,424
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Accounts payable and accrued expenses
extinguishments not requiring cash $180,662 $ 257,070
Investment in Website acquired through
accounts payable 76,294
See accompanying notes.
ACOLA CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - INTERIM PERIODS
The unaudited information has been prepared on the same basis as the
annual financial statements and, in the opinion of the Company's
management, reflects normal recurring adjustments necessary for a
fair presentation of the information for the periods presented.
Certain information and footnote disclosures, normally included
in financial statements prepared in accordance with generally
accepted accounting principles, have been omitted. These financial
statements should be read in conjunction with the financial
statements and notes for the year ended June 30, 2002, included
in the Form 10-KSB.
The results of operations for the three and nine month periods ended
March 31, 2003 and 2002 are not necessarily indicative of
operating results for the full year.
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Acola Corp.
(the "Company") and its wholly owned subsidiaries. All material
intercompany balances and intercompany transactions have been eliminated.
Any comparisons of operations included on the Statement of Operations
for the three and nine months ended March 31, 2003 versus the three
and nine months ended March 31, 2002 are not relevant as the Company
is not engaged in business operations at this time.
As reflected in the accompanying financial statements, the Company has
minimal working capital, almost no cash, no revenues, and no ongoing
operations to generate cash, working capital or profits. The Company
and its predecessor MegaChain.com Ltd. has accumulated approximately
$3.6 million of losses which may continue in the future. Because of
these and other matters, it is highly unlikely that the Company will be
able to raise additional debt or equity capital in amounts necessary to
remain in business. Consequently, unless it can negotiate a merger with
a viable business, it is very probable that the Company will not be able
to remain in business. The amounts reflected on the accompanying
balance sheet do not include any adjustments to reflect the Company's
inability to remain in business. Generally however, when a business is
unable to remain a going concern, assets are liquidated for a very small
percentage of the amounts reflected on its balance sheet. At this time,
the Company does not possess adequate assets to return to its
shareholders their capital investments.
NOTE 3 - MANAGEMENT PLANS
On October 16, 2002, Messrs. Robert B. Dillon, Samuel M. Skipper, and
Michael G. Wirtz and other shareholders of the Company settled disputes
with Donald E. Baxter, MD by transferring approximately 82% of the
outstanding Common Stock, and 97% of the votes, of the Company to
Global Investment Alliance Inc. ("Global"). Dr. Baxter owns a majority
of the shares of Global. Dr. Baxter, James N. Baxter and Hon. Jerry W.
Baxter were elected as Directors of the Company and Dr. Baxter became
Chairman of the Board and James Baxter became President of the
Company. Dr. Baxter, an orthopedic surgeon and sports physician, James
Baxter, an investment banker and securities attorney, and Jerry Baxter,
a Judge in Superior Court of Fulton County Georgia, are brothers. On
December 17, 2002 Richard A. Evans, MD, a cancer specialist, board
certified surgeon and author, was elected a Director of the Company.
As part of the settlement, Messrs. Dillon, Skipper and Wirtz and other
shareholders forgave all claims against the Company.
After this change of control, new management negotiated compromises with
various creditors and settled the AMS Web Design lawsuit and the lawsuit
filed by two former consultants. Dr. Baxter provided working capital to
the Company by agreeing to pay $60,000 to buy the Company's restricted
stock in Ozelle Pharmaceuticals, Inc. which had been written down to a
value of $1.00 by previous management. Thus the Company has progressed
from being deeply insolvent to its current condition with a small
positive net worth.
On January 10, 2003 an amended Form S-8 was filed by the Company
registering up to 5,194,950 shares of the Company's Common Stock, Class A
($.001 par value)valued at $77,924 for issuance to Directors and
consultants pursuant to the Company's Directors and Employees Stock Award
Plan. Following the January 14, 2003 issuance of 4,950,000 shares of the
Company's Class A Common Stock to Directors and consultants, the
Company's accounts payable liability was substantially reduced. The
Company's Directors receive no cash compensation.
The Company intends to seek merger or acquisition candidates and to
pursue other new business initiatives for the benefit of all of the
Company's shareholders. Although there is no assurance that the Company
will succeed management believes that its chances have been increased
by the elimination of most of the Company's liabilities. The Company
is reviewing a few potential merger candidates, but no specific merger
or acquisition has been agreed and there can be no assurance that a
transaction will be consummated.
Going Concern Considerations
The accompanying financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. The Company has suffered recurring losses from operations of
approximately $3.6 million and at March 31, 2003 has minimal working
capital and cash of only $799. These factors, among others, strongly
suggest the Company will not remain in business or continue as a going
concern, unless it can negotiate a merger. At this time, the Company
does not have adequate cash, working capital or capacity to borrow or
raise additional equity capital with which to remain in business.
The balance sheet does not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts
and classifications of liabilities that might be necessary in the event
the Company cannot continue in existence.
Although prior management attempted to secure an exclusive
distributorship in Mexico for Anvizole(TM), it was unable to secure
adequate capital to make necessary initial royalty payments, so the
Company lost the distributorship. Therefore, the Company will
probably need to negotiate a merger with a viable other business in
order to continue in business.
NOTE 4 - INTANGIBLE ASSETS
The company's only intangible asset is the Company's trademark.
NOTE 5 - NOTES PAYABLE
As of March 31, 2003, the Company has no notes payable. All three
notes payable outstanding as of June 30, 2002, including all accrued
interest, have been forgiven.
NOTE 6 - LEGAL PROCEEDINGS
In August 2000 the Company received a letter from an attorney
advising that there is an Order for Entry of Default Judgment in
the District Court of Boulder, Colorado against a predecessor of the
Company in favor of two alleged former employees of Northern Lights
Software, Ltd. (a subsidiary of the Company) dated March 10, 1998
in the total amount of $74,887. The judgment was apparently for
alleged unpaid wages. Pursuant to an Agreement and Plan of
Reorganization dated February 15, 1999, a former director of the
Company had personally warranted that there were no undisclosed
liabilities in the Company and had indemnified the Company against
such claims. He stated that he believed that claimants were actually
employees of Northern Lights Software (New York) Ltd., a subsidiary
of Northern Lights Software, Ltd. (Delaware), a predecessor of the
Company. The Company accepted $10,300 from the former director in
exchange for releasing his indemnification of the Company. The
Company believes that the Colorado lawsuit was brought against the
wrong corporation and that the default judgment was erroneously
issued in violation of Colorado statutes, as interpreted by the
Colorado Supreme Court. Based upon a review of the record in the
case, management believes that it would be an error for any court
to enforce the default judgment, and the Company plans to mount a
vigorous defense against any effort to enforce the judgment against
the Company.
On or about March 18, 2003, the Company settled the $26,000 lawsuit
brought against the Company by two consultants in the 127th Civil
District Court of Harris County, Texas. The Company previously
accrued a total amount of $10,000 for these claims. The settlement
was for a lower amount.
On or about about December 12, 2002, the Company settled the $113,313
contract lawsuit brought against the Company in the 164th Judicial
District Court of Harris County, Texas by AMS Web Design. The
Company had previously accrued an amount in excess of the actual
settlement amount as a potential liability for this dispute, and
the excess has been transferred to additional paid-in capital
following the settlement.
On October 16, 2002 the Company, Robert B. Dillon, Samuel M. Skipper,
Michael G. Wirtz and certain other former shareholders of the Company
settled disputes (most recently disclosed in the Company's annual
report on Form 10-KSB) with Donald E. Baxter, M.D., a shareholder
and consultant to the Company pursuant to a Settlement Agreement
executed on October 14, 2002. Pursuant to the settlement all parties
released any and all claims against the Company. Also 28,523,400
shares, or 82.0%, of the outstanding Class A Common Stock of the
Company and 2,000,000 shares, or 100% of the outstanding Class B
Common Stock of the Company were transferred to Global Investment
Alliance Inc. ("Global"). Dr. Baxter owns a majority of the
common stock of Global. Messrs. Dillon and Skipper, who previously
owned a majority of the voting Common Stock of the Company, now own
no shares of the Company's Common Stock. At the closing, Messrs.
Wirtz and Dillon resigned as Chairman and President and as the only
directors of the Company. Donald E. Baxter, M.D. was appointed as
Chairman of the Board of Directors, James N. Baxter was appointed
President and Chief Executive Officer and a Director, and Hon. Jerry
W.Baxter was appointed a Director. Dr. Baxter, James Baxter and
Jerry Baxter are brothers. Donald and James Baxter now control
approximately 86% of the Company's Common Stock and 97% of the votes.
On or about March 14, 2003 the Company's statutory agent in Delaware
received a letter from an attorney threatening to file a lawsuit
on his own behalf against the Company and certain former Company
officers in the District Court for the County of Ramsey, State
of Minnesota under the federal Telephone Consumer Protection Act of
1991 ("TCPA") and Minnesota statutes regulating certain unsolicited
facsimile transmissions (47 U.S.C. Sec. 227(b)(3)(B) and Minn. Stat.
Sec. 325E.395). The attorney claims that he is entitled to statutory
damages of $500, or $1,500 if the court finds a willful violation,
because he allegedly received a facsimile transmission ("fax") on
November 11, 2001 which gave a toll free number to call to be removed
from the distribution list, but did not give a mailing address for
that purpose. He further alleges that the fax was being used to
manipulate the Company's stock price. The alleged unlawful fax
purports to have been sent by "The Inve$tor's Report" on behalf of
a shareholder of the Company and expresses the opinion that the
Company's stock was a good buy at that time. It further states
that the author did not know whether his/her views were shared
by Acola Corp. management. The attorney claims that when he
could not find a telephone listing for "The Inve$tor's Report"
he assumed that the fax was sent by the Company, since its
name appeared in the fax. The Company's management at the
time of the alleged violation has disclaimed knowledge of or
responsibility for the alleged offending fax. The Company does
not know whether the fax was actually sent and, if so, who sent
it and has not done business in Minnesota. Accordingly the Company
has contacted the Minnesota Attorney General's office to alert them
to this situation and to offer full cooperation, if they would like
to investigate this matter, and has rejected the attorney's offer to
settle the case. No suit has been filed in court. If it is filed,
the Company plans to file a motion for dismissal for lack of personal
jurisdiction, and has sent a copy of such a motion to the attorney in
question.
Other than that stated above, to the best knowledge of the Officers
and Directors of the Company, neither the Company nor any of its
Officers or Directors is a party to any material legal proceeding
or litigation and such persons know of no other material legal
proceeding or litigation contemplated or threatened. Other than
that stated above, there are no judgments against the Company or
its Officers or Directors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Condensed Consolidated Financial Statements appearing
elsewhere in this report.
Overview
During the last few years, led by two previous management teams, the
Company has failed in a technology business and then in an
international pharmaceutical distribution business, resulting in
large losses and a large accumulated deficit. It has no current
operations. With enough working capital for about six months, the
Company has obtained releases of almost all of its liabilities and
has achieved a small positive net worth as of March 31, 2003.
It will need to obtain additional funds within the next twelve months.
It is a fully reporting company and has a well-respected Board of
Directors with broad experience and a wide network of contacts.
Because of the decline of the IPO (initial public offering) market,
some private companies are interested in becoming public through
a negotiated "reverse merger" with companies such as the Company.
In the opinion of management, the most crucial factor in whether
the Company will continue in business and achieve value for its
shareholders or go out of business is whether management will
succeed in identifying an attractive private company and
negotiating a merger on favorable terms. Although there is no
assurance that a transaction will be achieved, management is now
studying a few potential candidates.
Three and nine months ended March 31, 2003 and 2002
Revenue:
The Company did not earn any revenue during the three and nine month
periods ended March 31, 2003 and 2002.
Professional Fee Expenses:
Professional fee expenses for the three and nine months ended
March 31, 2003 were each $4,023 and $8,740, primarily to achieve
compliance with SEC filing requirements, a substantial decrease from
the $26,200 and $49,762 for the three and nine months ended March 31,
2002. This decrease was because the Company ceased business operations
during 2002.
Selling and Marketing Expenses:
Selling and Marketing expenses for the three and nine months ended
March 31, 2003 and the three months ended March 31, 2002 were $0,
a substantial decrease from the $16,066 expended in the nine months
ended March 31, 2002. The decrease is because the Company does not
currently have any product or service.
Management Fee Expenses:
Management fee expenses have been nil for the last six quarters because
the Company has no management contract.
General and Administrative Expenses:
General and administrative expenses for the three and nine months ended
March 31, 2003 were $8,525 and $23,709, a decrease of $3,237 and
$119,226, respectively, from the prior year periods. The decrease is
because the Company's current activities are limited to a spartan
program of restructuring the balance sheet, disposing of litigation
and searching for attractive merger candidates.
Other Income:
Other income for the three and nine months ended March 31, 2003 was
$5,000 and $73,709, an increase of $95,608 and $47,688 over the prior
year periods. The increases were primarily because of the one-time
profit on the sale of the Ozelle stock in the nine months ended
March 31, 2003 and a $100,909 writeoff of assets in the three months
ended March 31, 2002.
Description of Property:
The Company maintains its principal place of business
at 250 Riverside Drive, Suite 51, New York, NY 10025.
ITEM 3. Controls and Procedures
Evaluation of disclosure controls and procedures. Within 90 days prior
to the date of this report, the Company carried out an evaluation,
under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that
the Company's disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934
(the "Exchange Act")) are effective to ensure that information
required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized
and reported to the Company's management within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Changes in internal controls. Subsequent to the date of their
evaluation, there were no significant changes in the Company's
internal controls or in other factors that could significantly affect
the Company's disclosure controls and procedures, and there were no
corrective actions with regard to significant deficiencies and
material weaknesses based on such evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In August 2000 the Company received a letter from an attorney
advising that there is an Order for Entry of Default Judgment in
the District Court of Boulder, Colorado against a predecessor of the
Company in favor of two alleged former employees of Northern Lights
Software, Ltd. (a subsidiary of the Company) dated March 10, 1998
in the total amount of $74,887. The judgment was apparently for
alleged unpaid wages. Pursuant to an Agreement and Plan of
Reorganization dated February 15, 1999, a former director of the
Company had personally warranted that there were no undisclosed
liabilities in the Company and had indemnified the Company against
such claims. He stated that he believed that claimants were actually
employees of Northern Lights Software (New York) Ltd., a subsidiary
of Northern Lights Software, Ltd. (Delaware), a predecessor of the
Company. The Company accepted $10,300 from the former director in
exchange for releasing his indemnification of the Company. The
Company believes that the Colorado lawsuit was brought against the
wrong corporation and that the default judgment was erroneously
issued in violation of Colorado statutes, as interpreted by the
Colorado Supreme Court. Based upon a review of the record in the
case, management believes that it would be an error for any court
to enforce the default judgment, and the Company plans to mount a
vigorous defense against any effort to enforce the judgment against
the Company.
On or about March 18, 2003, the Company settled the $26,000 lawsuit
brought against the Company by two consultants in the 127th Civil
District Court of Harris County, Texas. The Company previously
accrued a total amount of $10,000 for these claims. The settlement
was for a lower amount.
On or about about December 12, 2002, the Company settled the $113,313
contract lawsuit brought against the Company in the 164th Judicial
District Court of Harris County, Texas by AMS Web Design. The
Company had previously accrued an amount in excess of the actual
settlement amount as a potential liability for this dispute, and
the excess has been transferred to additional paid-in capital
following the settlement.
On October 16, 2002 the Company, Robert B. Dillon, Samuel M. Skipper,
Michael G. Wirtz and certain other former shareholders of the Company
settled disputes (most recently disclosed in the Company's annual
report on Form 10-KSB) with Donald E. Baxter, M.D., a shareholder
and consultant to the Company pursuant to a Settlement Agreement
executed on October 14, 2002. Pursuant to the settlement all parties
released any and all claims against the Company. Also 28,523,400
shares, or 82.0%, of the outstanding Class A Common Stock of the
Company and 2,000,000 shares, or 100% of the outstanding Class B
Common Stock of the Company were transferred to Global Investment
Alliance Inc. ("Global"). Dr. Baxter owns a majority of the
common stock of Global. Messrs. Dillon and Skipper, who previously
owned a majority of the voting Common Stock of the Company, now own
no shares of the Company's Common Stock. At the closing, Messrs.
Wirtz and Dillon resigned as Chairman and President and as the only
directors of the Company. Donald E. Baxter, M.D. was appointed as
Chairman of the Board of Directors, James N. Baxter was appointed
President and Chief Executive Officer and a Director, and Hon. Jerry
W.Baxter was appointed a Director. Dr. Baxter, James Baxter and
Jerry Baxter are brothers. Donald and James Baxter now control
approximately 86% of the Company's Common Stock and 97% of the votes.
On or about March 14, 2003 the Company's statutory agent in Delaware
received a letter from an attorney threatening to file a lawsuit
on his own behalf against the Company and certain former Company
officers in the District Court for the County of Ramsey, State
of Minnesota under the federal Telephone Consumer Protection Act of
1991 ("TCPA") and Minnesota statutes regulating certain unsolicited
facsimile transmissions (47 U.S.C. Sec. 227(b)(3)(B) and Minn. Stat.
Sec. 325E.395). The attorney claims that he is entitled to statutory
damages of $500, or $1,500 if the court finds a willful violation,
because he allegedly received a facsimile transmission ("fax") on
November 11, 2001 which gave a toll free number to call to be removed
from the distribution list, but did not give a mailing address for
that purpose. He further alleges that the fax was being used to
manipulate the Company's stock price. The alleged unlawful fax
purports to have been sent by "The Inve$tor's Report" on behalf of
a shareholder of the Company and expresses the opinion that the
Company's stock was a good buy at that time. It further states
that the author did not know whether his/her views were shared
by Acola Corp. management. The attorney claims that when he
could not find a telephone listing for "The Inve$tor's Report"
he assumed that the fax was sent by the Company, since its
name appeared in the fax. The Company's management at the
time of the alleged violation has disclaimed knowledge of or
responsibility for the alleged offending fax. The Company does
not know whether the fax was actually sent and, if so, who sent
it and has not done business in Minnesota. Accordingly the Company
has contacted the Minnesota Attorney General's office to alert them
to this situation and to offer full cooperation, if they would like
to investigate this matter, and has rejected the attorney's offer to
settle the case. No suit has been filed in court. If it is filed,
the Company plans to file a motion for dismissal for lack of personal
jurisdiction, and has sent a copy of such a motion to the attorney in
question.
Other than that stated above, to the best knowledge of the Officers
and Directors of the Company, neither the Company nor any of its
Officers or Directors is a party to any material legal proceeding
or litigation and such persons know of no other material legal
proceeding or litigation contemplated or threatened. Other than
that stated above, there are no judgments against the Company or
its Officers or Directors.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports
(a) Exhibits:
Exhibit
Number Description
1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
None
FORWARD-LOOKING STATEMENTS
The information in this Form 10-QSB includes "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, Section
21E of the Securities Exchange Act of 1934, and the Private Securities
Litigation Reform Act of 1995. Acola includes this statement for the
express purpose of availing itself of the protections of these safe
harbor provisions with respect to all of the forward-looking statements
Acola makes. The forward-looking statements in this Form 10-QSB reflect
Acola's current views with respect to possible future events and
financial performance. They are subject to certain risks and
uncertainties, including without limitation the absence of significant
revenues, financial resources, significant competition and those other
risks and uncertainties discussed herein that could cause Acola's actual
results to differ materially from its historical results or those that
Acola hopes to achieve. In this Form 10-QSB, the words, "anticipates,"
"plans," "believes," "expects," "intends," "future" and similar
expressions identify certain forward-looking statements. Please do not
place undue reliance on the forward-looking statements contained in this
Form 10-QSB. Acola undertakes no obligation to announce publicly
revisions Acola may make to these forward-looking statements to reflect
the effect of events or circumstances that may arise after the date of
this Form 10-QSB. All written and oral forward-looking statements made
subsequent to the date of this Form 10-QSB and attributable to Acola or
persons acting on its behalf are expressly qualified in their entirety
by this section.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ACOLA CORP.
By: /s/ James N. Baxter
-------------------------
Date: May 14, 2003 James N. Baxter
President
(Principal Executive Officer &
Principal Financial Officer)