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Strategies & Market Trends : Castpro - Fraud In The Making?

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To: jl-demeyer who wrote (7)7/22/2003 10:59:47 PM
From: StockDung   of 24
 
ITEM 1. LEGAL PROCEEDINGS

The landlord of the building where the corporate office was located filed a Complaint against the Company for the unpaid rental payments and overvalued stock security paid for prepaid rent. The Company filed a response with the court denying all allegations. The case is currently scheduled for a mediation hearing and, if the case cannot be resolved through mediation by late June, it will be scheduled for trial. Management intends to do everything possible to settle the case out of court and has already issued and delivered stock toward satisfaction of the claim for the overvalued stock as per the agreement the Company has with the plaintiff. The unpaid rent liability has been accrued in the financial statements.

On August 19, 2002, a lawsuit initiated by Simon G. Talbot and Corey K. Quinn, former officers and directors of the Company, against the Company, Adam Anthony, Robert McNeill and Kevin Quinn was settled out of court. Under the terms of the settlement the lawsuit will be dismissed by the plaintiffs in exchange for $75,000 in cash or free trading stock owned by the president of the Company, payment to be made at the request of the plaintiffs, but in no case will payment be due prior to January 1, 2003.

On August 22, 2002, Woltjen Law Firm, PLLC sued the Company, Adam Anthony, Doug Mondo, Steve Aquavia, David Nelson and Robert McNeill. The plaintiff alleges that it was fraudulently induced by the Company to provide legal services by false promises of payment and that the Company is in breach of contract. The Company has answered the complaint denying the allegations and is currently in negotiations with the plaintiff to settle the matter.

On December 31, 2002, a Chapter 7 Bankruptcy petition was filed for PTS, TV, Inc. (Prime Time Media Solutions) in the United States Bankruptcy Court, Central District of California, Case Number ND02-13854-RR. The initial Meeting of Creditors is set for February 3rd, 2003.

On November 6, 2002, a Chapter 7 Bankruptcy petition was filed for CastPro.com, LLC in the United States Bankruptcy Court, Central District of California, Case Number ND02-13313-RR.

Prior to its bankruptcy filing, CastPro had been in negotiation with the Internal Revenue Service (IRS) regarding unpaid employment tax deposits, penalties, and interest for the tax year 2000 and first and second quarters of 2001. In January of 2003, the IRS notified Thaon that the Company has been assessed $30,000 in connection with these unpaid taxes. No collection activity has yet taken place and the Company intended to put in place a payment plan to address the liability at which time the IRS makes notice of collection proceedings. In addition, prior to the bankruptcy filing, CastPro was notified by the Employment Development Department of the State of California (EDD) that unpaid employment taxes, penalties, and interest are owed. No legal proceedings, liens, or attachments have been made or notification of any additional action has been received by or assessed to Thaon in connection with this matter. The full amount of the liability was recorded in the financial statements for the year 2001. CastPro made all employment tax deposits for all subsequent quarters. To the best knowledge of management, there are no other litigation matters pending or threatened against the Company or its subsidiaries.

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