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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Period Ended
March 31, 2002 Commission File No. 0-18399
FOUNTAIN PHARMACEUTICALS, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 62-1386759
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(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
505 South Westland Avenue, Suite D, Tampa, Florida 33606
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (813) 248-0089
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Former name, former address and former fiscal year,
if changed since last report: N/A
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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 a 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 [ ]
The number of shares outstanding of the Registrant's Class A Common Stock, $.001
par value, as of May 17, 2002 was 5,875,796.
The number of shares outstanding of the Registrant's Class B Common Stock, $.001
par value, as of May 17, 2002 was 104,505.
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Balance Sheet as of March 31, 2002 3
Statement of Operations for the three and six month periods
ended March 31, 2002 and March 31, 2001 4
Statement of Changes in Stockholders' Deficit
for the period from September 30, 2001 through March 31, 2002 5
Statement of Cash Flows for the six month periods ended
March 31, 2002 and March 31, 2001 6
Notes to the financial statements 7
2
FOUNTAIN PHARMACEUTICALS, INC.
BALANCE SHEET
MARCH 31, 2002
ASSETS
Current assets:
Cash $ 68,315
---------------
Total assets $ 68,315
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
6% Convertible Debenture $ 100,000
---------------
Total liabilities 100,000
---------------
Stockholders' deficit:
Series A preferred stock, par value $.001, 2,000,000 shares
authorized, issued and outstanding (liquidation preference
$2,498,000 in excess of par 2,000
Common stock, par value $.001, 50,000,000 shares authorized
5,875,796 shars issued and outstanding 5,876
Class B common stock, par value $.001, 50,000,000 shares
authorized, 104,505 shares issued and outstanding 105
Additional paid-in capital 17,270,506
Accumulated deficit (17,310,172)
---------------
Total stockholders' deficit (31,685)
---------------
Total liabilities and stockholders' deficit $ 68,315
===============
See Notes to Financial Statements.
3
FOUNTAIN PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED MARCH 31, 2002 AND 2001
Three Months Ended Six Months Ended
--------------------------------- ---------------------------------
12/31/2001 12/31/2000 3/31/2002 3/31/2001
--------------- --------------- --------------- ---------------
Revenue $ - $ 190,250 $ - $ 382,261
Cost of sales - 20,836 - 51,555
--------------- --------------- --------------- ---------------
Gross profit - 169,414 - 330,706
--------------- --------------- --------------- ---------------
Operating expenses
Research & development - 62,758 - 130,008
General & administrative expenses 38,764 100,100 52,844 191,886
Selling expenses - 139,952 - 299,357
Depreciation & amortization - 14,389 - 28,802
--------------- --------------- --------------- ---------------
Total operating expenses 38,764 317,199 52,844 650,053
--------------- --------------- --------------- ---------------
Loss before other income (expenses) (38,764) (147,785) (52,844) (319,347)
Other income (expenses)
Interest income - 6,452 - 6,765
Interest expense - (77,763) (22,667) (160,806)
Other - 3,615 - 3,993
--------------- --------------- --------------- ---------------
Total other income (expense) - (67,696) (22,667) (150,048)
--------------- --------------- --------------- ---------------
Loss before extraordinary item (38,764) (215,481) (75,511) (469,395)
Gain on extinguishment of debt
(no applicable income taxes) - - 1,477,401 -
--------------- --------------- --------------- ---------------
Net income (loss) $ (38,764) $ (215,481) $ 1,401,890 $ (469,395)
=============== =============== =============== ===============
Basic net income (loss) per share:
Loss before extraordinary item $ (0.01) $ (0.09) $ (0.02) $ (0.20)
Extraordinary gain 0.00 0.00 0.35 0.00
--------------- --------------- --------------- ---------------
Net income (loss) ($0.01) ($0.09) $0.33 ($0.20)
=============== =============== =============== ===============
Diluted net income (loss) per share:
Loss before extraordinary item $ (0.01) $ (0.09) $ (0.01) $ (0.20)
Extraordinary gain 0.00 0.00 0.27 0.00
--------------- --------------- --------------- ---------------
Net income (loss) $ (0.01) $ (0.09) $ 0.26 $ (0.20)
=============== =============== =============== ===============
Weighted average:
Basic number of shares outstanding 5,980,301 2,380,301 4,180,301 2,380,301
=============== =============== =============== ===============
Diluted number of shares outstanding 5,980,301 2,380,301 5,446,704 2,380,301
=============== =============== =============== ===============
See Notes to Financial Statements.
4
FOUNTAIN PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM SEPTEMBER 30, 2001 THROUGH MARCH 31, 2002
Class B
Preferred Stock Common Stock Common Stock Additional
------------------ ------------------- ----------------- Paid-in Accumulated
Shares Amount Shares Amount Shares Amount Capital Deficit Total
--------- ------- --------- -------- --------- ------- ----------- ------------ -----------
Balance, September 30, 2001 2,000,000 $2,000 2,375,796 $2,376 4,505 $ 5 $17,094,106 $(18,712,062) $(1,613,575)
Issuance of stock - - 3,500,000 3,500 100,000 100 176,400 180,000
Net income for the quarter - - - - - - - 1,440,654 1,440,654
--------- ------ --------- ------ ------- ---- ----------- ------------ ---------
Balances, December 31, 2001 2,000,000 2,000 5,875,796 5,876 104,505 105 17,270,506 (17,271,408) 7,079
Net loss for the quarter - - - - - - - (38,764) (38,764)
--------- ------ --------- ------ ------- ---- ----------- ------------ ---------
Balances, March 31, 2002 2,000,000 $2,000 5,875,796 $5,876 104,505 $105 $17,270,506 $(17,310,172) $ (31,685)
========= ====== ========= ====== ======= ==== =========== ============ =========
See Notes to Financial Statements.
5
FOUNTAIN PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2002 AND 2001
Six Months Ended March 31,
-----------------------------------------
2002 2001
------------------ ------------------
Cash flows from operating activities:
Net income (loss) $ 1,401,890 $ (469,395)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Gain on extinguishment of debt (1,477,401) -
Gain on sale of furniture and equipment - (250)
Depreciation expense - 23,912
Amortization expense - 4,890
Increase (decrease) in cash due to changes in
Accounts receivable - 1,585
Inventory - 40,487
Prepaid expenses and other assets 3,659 4,207
Accounts payable and other accrued expenses (143,166) 139,860
----------------- -----------------
Net cash flows from operating activities (215,018) (254,704)
----------------- -----------------
Cash flows from investing activities:
Patent costs incurred - (6,055)
Proceeds from sale of furniture and equipment - 250
----------------- -----------------
Net cash flows from investing activities - (5,805)
----------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of 6% convertible debenture 100,000 -
Proceeds from sale of common stock 180,000 -
Officer and director loans - 235,500
Repayment of note payable, bank - (31,609)
----------------- -----------------
Net cash flows from financing activities 280,000 203,891
----------------- -----------------
Change in cash 64,982 (56,618)
Cash, beginning of period 3,333 88,687
----------------- -----------------
Cash, end of period $ 68,315 $ 32,069
================= =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ 1,788
================= =================
See Notes to Financial Statements.
6
FOUNTAIN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
1. Unaudited interim financial statements
The interim financial statements of Fountain Pharmaceuticals, Inc. (the
"Company") which are included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB. In the opinion of management, these interim financial
statements include all the necessary adjustments to fairly present the
results of the interim periods, and all such adjustments are of a
normal recurring nature. The interim financial statements should be
read in conjunction with the audited financial statements for the two
years ended September 30, 2001 included in the Company's Annual Report
on Form 10-KSB for the year then ended. The report of the Company's
independent auditors for the year ended September 30, 2001 contains an
explanatory paragraph as to the substantial doubt of the Company's
ability to continue as a going concern. No adjustments have been made
to the accompanying financial statements to give effect to this
uncertainty.
The interim results reflected in the accompanying financial statements
are not indicative of the results of operations for a full fiscal year.
2. Issuance of Stock and Extraordinary Gain on Extinguishment of Debt:
On December 31, 2001, Park Street Acquisition Corporation (Park
Street), a Florida corporation, acquired 3,500,000 shares of the
Company's Class A common stock and 100,000 shares of Class B common
stock from the Company for $180,000. The proceeds of this sale were
utilized to pay all of the Company's outstanding liabilities at
December 31, 2001. Simultaneously, Park Street acquired 2,000,000
shares of Class A Preferred Stock from Fountain Holdings, LLC
("Holdings") and all Common Stock Purchase Warrants ( the "Warrants")
in the name of Holdings to purchase shares of the Company's Class A
Common Stock. The aggregate purchase price paid to Holdings was
$20,000, allocated $8,000 towards the purchase of the Preferred Stock
and $12,000 towards the purchase of the warrants. As a result of these
transactions, Park Street became the "control person" of Fountain
Pharmaceuticals, Inc ("Fountain") as that term is defined in the
Securities Act of 1933, as amended. In connection with these
transactions, the Board of Directors of the Company nominated Brendon
K. Rennert to the Board of Directors and all former officers and
directors delivered their letters of resignation to the Company. Mr.
Rennert was named CEO, President and Secretary of the Company.
In connection with the acquisitions by Park Street, the related party
unsecured lender released and discharged the Company from its
obligations due pursuant to the unsecured line of credit, and from any
other debt or obligation owing himself or related entities by the
Company. As a result the Company has recognized an extraordinary gain
of $1,477,401 for the extinguishment of the debt and related accrued
interest.
Subsequent to closing, Park Street and the Company agreed to retire the
Warrants. In May 2002, Park Street also agreed to return the Preferred
Stock to the Company, at which time, no Preferred Stock will be issued
and outstanding.
7
FOUNTAIN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
3. Management's plans regarding operations and subsequent events:
As discussed in further detail in the Company's Annual Report on Form
10-KSB and its first quarter report on Form 10-QSB, the Company
suspended operations in July 2001. Operations subsequent to that,
consisting only of expenses necessary to maintain the public shell,
have primarily been funded through related party borrowings
(subsequently forgiven) through December 31, 2001, the issuance of
common stock discussed in Note 2, and $100,000 generated through the
issuance of debentures. On February 20, 2002 the Company issued a 6%
Subordinated Convertible Debenture due May 31, 2002 in the principal
amount of $100,000 through the issuance of debentures. On February 20,
2002 the Company issued a 6% Subordinated Convertible Debenture due May
31, 2002 in the principal amount of $100,000. This Debenture is
convertible into the Company's common stock at $1.00 per share.
Since the Company no longer has assets except the Company's public
shell, it no longer has the ability to generate revenue; therefore, the
Company is not in the position to continue as a going concern.
The Company's Board of Directors is currently pursuing candidates with
potential business interest with which to merge. The Company has
reached an agreement to acquire all of the issued and outstanding
shares of SiriCOMM, Inc. As of the date hereof the Company has
5,980,301 shares of common stock outstanding, including 104,505 shares
of Class B common stock. In accordance with the terms of the agreement
with SiriCOMM, Inc., the Company is obligated to issue the equivalent
of 577,391,565 pre-split shares or 9,623,193 post-split shares to the
SiriCOMM shareholders. In addition, the Company has agreed to issue the
equivalent of 116,228,160 pre-split or 1,937,136 post-split shares to
retire $500,000 of convertible debentures issued by SiriCOMM.
Accordingly, after the effective date of the amendment and the closing
with SiriCOMM, the new combined entity will have approximately
11,660,003 shares of common stock issued and outstanding. The
shareholders and debenture holders of SiriCOMM will own 99% of the
Company upon the consummation of the transaction. There can be no
assurance that any such transactions will be successfully completed by
the Company.
8
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Background
Fountain Pharmaceuticals, Inc. (the "Company"), incorporated in the
State of Delaware on March 23, 1989, was organized to develop and commercialize
certain proprietary compound encapsulation technologies for use in health care,
agricultural, veterinary and consumer market items using technologies developed
privately and assigned to the Company. These technologies involved development
of man-made spheres composed of soybean lipids that were engineered to entrap
pharmaceuticals or other biologically active molecules within the membranes of
the soybean lipids, hence a compound delivery encapsulation system known as
"Solvent Dilution Micro Carriers" ("SDMC's"). The SDMC's were principally
intended for use in connection with dermal applications, solubilization of
compounds, parenteral and oral formulations and non-pressurized aerosol
preparations. The Company developed a number of proprietary products utilizing
its SDMC technologies. These included non-regulated consumer goods and
dermatologic products consisting of sunscreens, lotions and moisturizers.
Following several years of continued developmental efforts, the Company was able
to secure patents on several aspects of its technologies in the United States
and Europe and initiate certain marketing programs.
As a result of significant increases in marketing costs associated with
the expansion of existing product lines and the introduction of new products
during fiscal year ended September 30, 1998, which were not offset by sales
revenues during the period, the Company substantially utilized its working
capital resources. In order to provide working capital, the Company entered into
a secured credit arrangement ("Secured Credit Agreement") with Mr. Schuchert as
of December 31, 1998. The credit agreement provided for a two-year line of
credit of up to $1,500,000 subject to the Company satisfying certain agreed upon
quarterly operating budget guidelines.
As a result of additional costs associated with the development and
marketing of two new product lines during fiscal year ended September 30, 1999,
the Company fully utilized the $1,500,000 line of credit. During fiscal years
ended September 30, 2000 and 2001, Mr. Schuchert made additional unsecured
advances to the Company, the terms of which were never memorialized in writing.
The Company continued to incur losses and had a working capital deficit
at June 21, 2001. Through June 21, 2001 these losses had been principally funded
through sales of preferred stock ($2,500,000) to an entity controlled by the
Company's then current Chairman of the Board (Mr. Joseph S. Schuchert, Jr.) and
advances of $2,716,500 from Mr. Schuchert which included a secured line of
credit of $1,500,000 ("Secured Credit Agreement"). On June 21, 2001, Mr.
Schuchert notified the Company that it was in default under the Secured Credit
Agreement dated December 31, 1998. Mr. Schuchert requested immediate payment of
the $1,500,000 principal and accrued interest due under the Secured Credit
Agreement and, in the event such payments were not forthcoming on or before July
2, 2001, notice was given that Mr. Schuchert would take action to take
possession of the Company's assets and other collateral as defined in the
Secured Credit Agreement.
9
As the Company was not in a financial position to make the required
payment, the Company's Board of Directors voted on June 28, 2001 to comply with
the agreement and transfer the assets of the Company at the close of business on
July 6, 2001 to Mr. Schuchert. As a result, the secured debt was satisfied
through this transfer of assets, although the unsecured facility remained
outstanding. On December 31, 2001, in connection with the sale by affiliates of
Mr. Schuchert of all securities in the Company, Mr. Schuchert released and
discharged the Company from all of its obligations due him and Fountain
Holdings. As of December 31, 2001, the outstanding principal balance due Mr.
Schuchert was $1,256,809 plus estimated accrued interest of $225,000,
As the Company had no significant assets subsequent to July 6, 2001, it
no longer had the ability to generate revenue to pay its unsecured liabilities;
therefore, the Company was not in the position to continue as a going concern.
Accordingly, the Company's Board of Directors suspended operations. Through
December 30, 2001, the Company's Board of Director's retained only one employee,
the Interim Chief Financial Officer/Director of Finance and Administration, who
assisted in the transfer of assets to Mr. Schuchert.
On December 31, 2001, Park Street Acquisition Corporation, a Florida
corporation, acquired 3,500,000 shares of the Company's Class A common stock,
100,000 shares of Class B common stock from the Company for $180,000. The
proceeds of this sale were utilized to pay all of the Company's outstanding
liabilities at December 31, 2001. Simultaneously, Park Street acquired 2,000,000
shares of Class A Preferred Stock from Fountain Holdings, LLC.
As a result of these transactions, Park Street became the "control
person" of Fountain Pharmaceuticals, as that term is defined in the Securities
Act of 1933, as amended. In connection with these transactions, the Board of
Directors of the Company nominated Brendon K. Rennert to the Board of Directors
and all former officers and directors delivered their letters of resignation to
the Company. Mr. Rennert was named CEO, President and Secretary of the Company.
Anticipated Merger
The Company has negotiated a Securities Exchange Agreement with the
shareholders of SiriCOMM, Inc., pursuant to which the Company will issue the
equivalent of 577,391,565 shares of its common stock to the SiriCOMM
shareholders. Additionally, pursuant to the Securities Exchange Agreement, the
Company has agreed to issue the equivalent of 116,228,160 shares of its common
stock to retire $500,000 of convertible debentures issued by SiriCOMM, Inc.
In order to consummate the acquisition of SiriCOMM, Inc. the Company
has mailed an Information Statement to its shareholders in connection with a
proposed action by written consent to authorize and approve an amendment and
restatement of the Company's Certificate of Incorporation which:
10
o changes the name of the Company to "SiriCOMM, Inc.";
o combines the outstanding shares of common stock into a single
class of common stock;
o reverse splits the outstanding shares of the Company's common
stock one-for-sixty ("Reverse Split");
o decreases the par value of the Company's common stock
resulting from the Reverse Split form $.06 to $.001;
o increases the number of shares of common stock the Company is
authorized to issued from 916,667 to 50,000,000; and
o increases the number of shares of preferred stock, $.001 par
value, the Company is authorized to issue from 2,000,000 to
5,000,000.
In response to comments from the Securities and Exchange Commission
("SEC"), the Company has elected to postpone taking the corporate actions
described above. The Company intends to refile a revised Preliminary Information
Statement on Schedule 14C as soon as possible instituting these actions and
completing the acquisition of SiriCOMM, but the corporate actions will not be
taken until the SEC completes its review process of the amended 14C filing and
until 20 days after a Definitive Information Statement is filed with the SEC and
mailed to our shareholders.
Based upon the 5,980,301 shares of common stock (including the shares
of Class B common stock) outstanding on the Record Date (April 12, 2002), the
Reverse Split would decrease the outstanding shares of common stock by 98.3% or
to approximately 99,672 shares. Upon the completion of the acquisition of
SiriCOMM, there will be approximately 11,660,003 shares of post-split common
stock issued and outstanding. In addition, at closing, Mr. Rennert will resign
as the Company's sole officer and director and SiriCOMM appointees will be
appointed as officers and directors of the Company.
SiriCOMM, Inc. is a broadband wireless service provider serving the
marine and highway transportation industries. SiriCOMM has integrated multiple
technologies including satellite communications, the Internet (and intranets),
wireless networking and productivity enhancing software. SiriCOMM's patent
pending network architecture enables subscribers to transmit data at speeds 20
to 100 times faster than other wireless solutions. Moreover, SiriCOMM's unique
software solutions leverage this ultra high-speed data network to deliver
significant cost reduction and productivity improvement opportunities to users.
From its central hub server co-located at the satellite teleport,
SiriCOMM receives and transmits data on a "point to broadcast" high-speed
network between multiple wireless local area networks installed in strategic
locations. For a flat, low monthly fee, subscribers have access to a suite of
productively software, the Internet, e-mail, proprietary company intranet
information, etc. The network supports multiple user devices to include
802.11b-compatible PalmOS(TM) wireless handheld devices from the most mobile
subscribers.
11
Results of Operations
Three Months ended March 31, 2002 compared with the Three Months ended
March 31, 2001
During the three months ended March 31, 2002, the Company had no
revenues compared to revenues of $190,250 for the three months ended March 31,
2001. The Company's lack of revenues for the quarter ended March 31, 2002 was a
result of the transfer of the Company's assets to Mr. Schuchert as of July 6,
2001 and resultant suspension of the Company's operations on that date. The
Company had a net loss of $38,764 for the quarter ended March 31, 2002 compared
to a net loss of $215,481 for the quarter ended March 31, 2001. This decrease in
losses is directly attributable to the Company's decision to suspend operations
on July 6, 2001.
During the quarter ended March 31, 2002, the Company incurred operating
expenses of $38,764, representing a decrease of $278,435 or approximately 88%
over operating expenses of $317,199 for the prior quarter ending March 31, 2001.
This decrease in operating expenses was primarily due to reduction in personnel,
legal fees, clinical research studies, and sales and marketing expenses, coupled
with the suspension of operations in July 2001.
During the quarter ended March 31, 2002, the Company incurred no
interest expense compared to an interest expense of $77,763 for the prior
quarter ending March 31, 2001. This decrease in interest expense is associated
with the forgiveness of the secured and unsecured lines of credit provided to
the Company by Mr. Schuchert. (See "Liquidity and Capital Resources.")
Six Months ended March 31, 2002 compared with the Six Months ended
March 31, 2001
During the six months ended March 31, 2002 the Company had no revenues
compared to revenues of $382,261 for the six months ended March 31, 2001. The
Company's lack of revenues for the six months ended March 31, 2002 was a result
of the transfer of the Company's assets to Mr. Schuchert as of July 6, 2001 and
resultant suspension of the Company's operations on that date. The Company had a
net income of $1,401,890 for the six months ended March 31, 2002 compared to a
net loss of $469,395 for the six months ended March 31, 2001. This increase of
$1,871,285 is primarily a result of the forgiveness of debt by a related party
($1,477,401) partially offset by losses resulting from the Company's decision to
suspend operations as of July 6, 2001.
During the six months ended March 31, 2002 the Company incurred
operating expenses of $52,844, representing a decrease of $597,209 or 92% over
operating expenses of $650,053 for the six months ending March 31, 2001. This
decrease in operating expenses was primarily due to reduction in personnel,
legal fees, clinical research studies, and sales and marketing expenses coupled
with the suspension of operations in July 2001.
12
During the six months ended March 31, 2002, the Company incurred
interest expense of $22,667, an 86% decrease over interest expense of $160,806
for the prior six months ending March 31, 2001. This decrease in interest
expense is associated with the forgiveness of the secured and unsecured lines of
credit provided to the Company by Mr. Schuchert. (See "Liquidity and Capital
Resources")
Liquidity and Capital Resources
In order to provide working capital, the Company entered into a secured
credit arrangement with Mr. Schuchert as of December 31, 1998. The Secured
Credit Agreement provided for a secured line of credit of up to $1,500,000,
which was due on December 31, 2000, 180 days from written demand of Mr.
Schuchert as lender, or upon an event of default under the agreement. The
facility was secured by all of the assets of the Company (subject to any
existing liens). Additional funds were advanced in 1999, 2000, and 2001 on an
unsecured basis.
On June 21, 2001, Mr. Schuchert notified the Company that it was in
default under the Secured Credit Agreement dated December 31, 1998. Mr.
Schuchert requested immediate payment of the $1,500,000 principal and accrued
interest due and, in the event such payments were not forthcoming Mr. Schuchert
would take action to take possession of the Company's assets and other
collateral as defined in the Secured Credit Agreement. As the Company was not in
a financial position to make the required payment, the Company's Board of
Directors voted on June 28, 2001 to comply with the agreement and transfer the
assets of the Company at the close of business on July 6, 2001 to Mr. Schuchert.
As a result, the secured debt was satisfied through this transfer of assets,
although the unsecured facility remained outstanding.
As the Company had no significant assets subsequent to July 6, 2001, it
no longer had the ability to generate revenue to pay its unsecured liabilities;
therefore, the Company was not in the position to continue as a going concern.
Accordingly, the Company's Board of Directors suspended operations.
On December 31, 2001, Park Street acquired 3,500,000 shares of the
Company's Class A Common Stock and 100,000 shares of Class B Common Stock from
the Company for $180,000. The proceeds of this sale were utilized to pay all of
the Company's outstanding liabilities at December 31, 2001. Simultaneously, Park
Street acquired 2,000,000 shares of Class A Preferred Stock from Fountain
Holdings, LLC.
As a result of these transactions, Park Street became the "control
person" of the Company, as that term is defined in the Securities Act of 1933,
as amended. In connection with these transactions, the Board of Directors of the
Company nominated Brendon K. Rennert to the Board of Directors and all former
officers and directors delivered their letters of resignation to the Company.
Mr. Rennert was named CEO, President and Secretary of the Company.
As of December 31, 2001, in connection with the secured line of credit,
Mr. Schuchert was entitled to purchase an aggregate of 2,993,395 shares of the
Company's Common Stock upon exercise of warrants. Mr. Schuchert sold these
warrants to Park Street for $12,000. Simultaneously therewith, the Company and
Park Street agreed to retire these warrants.
13
In connection with the acquisitions by Park Street, Mr. Schuchert
released and discharged the Company from its obligations due to him pursuant to
the credit agreement dated as of December 31, 1998, and from any other debt or
obligation owed Mr. Schuchert or his affiliates by the Company.
During the three months ending March 31, 2002, the Company has financed
its operation primarily through the sale of convertible debentures. On February
20, 2002, the Company issued a 6% Subordinated Convertible Debenture due May 31,
2002 in the principal amount of $100,000. This Debenture is convertible into the
Company's common stock at $1.00 per share.
As of May 17, 2002, the Company remains a "shell" company. The Company
plans to complete the acquisition of SiriCOMM during June 2002. SiriCOMM is a
broadband wireless applications service provider servicing the marine and
highway transportation industries.
Forward Looking Statements. This report contains certain forward-looking
statements that are based on current expectations. In light of the important
factors that can materially affect results, including those set forth above and
elsewhere in this report, the inclusion of forward-looking information herein
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. The Company may
encounter competitive, technological, financial and business challenges making
it more difficult than expected to continue to market its products and services;
competitive conditions within the industry may change adversely; the Company may
be unable to retain existing key management personnel; the Company's forecasts
may not accurately anticipate market demand; and there may be other material
adverse changes in the Company's operations or business. Certain important
factors affecting the forward looking statements made herein include, but are
not limited to (i) accurately forecasting capital expenditures and (ii)
obtaining new sources of external financing. Assumptions relating to budgeting,
marketing, product development and other management decisions are subjective in
many respects and thus susceptible to interpretations and periodic revisions
based on actual experience and business developments, the impact of which may
cause the Company to alter its capital expenditure or other budgets, which may
in turn affect the Company's financial position and results of operations.
14
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) None
(d) Not Applicable
Item 3.: Defaults upon Senior Securities
None
Item 4.: Submission of Matters to a Vote of Security Holders
On or about April 25, 2002, the Company mailed an Information Statement
to its shareholders of record on April 12, 2002 in connection with the Company's
proposed acquisition of SiriCOMM. The Company's sole officer, director and
majority shareholder has, by written consent, authorized and approved:
o changing the name of the Company to "SiriCOMM, Inc.";
o combining the outstanding shares of common stock into a single
class of common stock;
o reverse splitting the outstanding shares of the Company's
common stock one-for-sixty ("Reverse Split");
o decreasing the par value of the Company's common stock
resulting from the Reverse Split form $.06 to $.001;
o increasing the number of shares of common stock the Company is
authorized to issued from 916,667 to 50,000,000;
o increasing the number of shares of preferred stock, $.001 par
value, the Company is authorized to issue from 2,000,000 to
5,000,000; and
o the adoption of the Company's 2002 Equity Incentive Plan.
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In response to comments from the Securities and Exchange Commission
("SEC"), the Company has elected to postpone taking the corporate actions
described above. The Company intends to refile a revised Preliminary Information
Statement on Schedule 14C as soon as possible instituting these actions and
completing the acquisition of SiriCOMM, but the corporate actions will not be
taken until the SEC completes its review process of the amended 14C filing and
until 20 days after a Definitive Information Statement is filed with the SEC and
mailed to our shareholders.
Item 5.: Other Information
As discussed above, the Company has reached an agreement to acquire all
of the issued and outstanding shares of SiriCOMM. As of the date hereof there
are 5,980,301 shares of common stock outstanding, including 104,505 shares of
Class B common stock. In accordance with the terms of the agreement with
SiriCOMM, the Company is obligated to issue the equivalent of 577,391,565
pre-split shares or 9,623,193 post-split shares to the SiriCOMM shareholders. In
addition, the Company has agreed to issue the equivalent of 116,228,160
pre-split or 1,937,136 post-split shares to retire $500,000 of convertible
debentures issued by SiriCOMM. Accordingly, after the effective date of the
amendment and the closing with SiriCOMM, the new combined entity will have
approximately 11,660,003 shares of common stock issued and outstanding. The
shareholders and debenture-holders of SiriCOMM will own 99% of the Company upon
the consummation of the transaction.
Item 6: Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
4.1 Form of 6% Subordinated Convertible Debenture due
May 31, 2002.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on January 11, 2002 to
report the Change of Control of the Company whereby Brendon K.
Rennert and Park Street Acquisition Corporation became
"control persons" of the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 17, 2002 FOUNTAIN PHARMACEUTICALS, INC.
By: /s/ Brendon K. Rennert
-----------------------------------------
Brendon K. Rennert, President and
Principal Executive and Financial Officer
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