SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: November 12, 1998 (Date of Earliest Event Reported: September 1, 1998) RIGL CORPORATION _____________________________________________________________________________ (Exact name of registrant as specified in its charter) Nevada 0-24217 85-0206668 _______________ ______________ _____________ (State or other jurisdiction (Commission File No.) (IRS Employer I.D. No.) of incorporation) 7501 North 16th Street, Suite 200, Phoenix, Arizona 85020 _____________________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (602) 906-1924 _____________________________________________________________________________ (Former name or former address, if changed since last report.) ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS A. Financial Statements of Business Acquired The financial statements of Medical Resource Systems, Inc. as of September 30, 1997 and for the two years then ended, together with the audit report of Singer Lewak Greenbaum & Goldstein LLP dated October 2, 1998 is attached as Exhibit A. B. Pro Forma Financial Information Pro forma financial schedules are attached hereto as Exhibit B. C. Exhibits Exhibit A - Medical Resource Systems, Inc. audited balance sheets as of September 30, 1997 and 1996, and the related statements of operations, shareholders' equity, and cash flows for the years then ended. Exhibit B - Pro forma financial schedules: Pro forma combining operating statement for the nine months ended June 30, 1998. Pro forma combining balance sheet as of June 30, 1998. Pro forma combining operating statement for the year ended September 30, 1997 Pro forma combining balance sheet as of September 30, 1997 Pro forma combining operating statement for the year ended September 30, 1996 Pro forma combining balance sheet as of September 30, 1996 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. September 12, 1998 RIGL CORPORATION /s/ John A. Williams __________________ John A. Williams, Chief Financial Officer Exhibit "A" MEDICAL RESOURCE SYSTEMS, INC. FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996 MEDICAL RESOURCE SYSTEMS, INC. CONTENTS September 30, 1997 ___________________________________________________________________________ Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1 FINANCIAL STATEMENTS Balance Sheets 2 Statements of Operations 3 Statements of Shareholders' Equity 4 Statements of Cash Flows 5 Notes to Financial Statements 6 - 10 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Shareholders Medical Resource Systems, Inc. We have audited the accompanying balance sheets of Medical Resource Systems, Inc. as of September 30, 1997 and 1996, and the related statements of operations, shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 financial position of Medical Resource Systems, Inc. as of September 30, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. SINGER LEWAK GREENBAUM & GOLDSTEIN LLP Los Angeles, California October 2, 1998 MEDICAL RESOURCE SYSTEMS, INC. BALANCE SHEETS September 30, ___________________________________________________________________________ ASSETS 1997 1996 ________ ________ CURRENT ASSETS Accounts receivable $ 23,122 $ 25,483 Prepaid expenses 3,735 5,516 ________ ________ Total current assets 26,857 30,999 EQUIPMENT, net of accumulated depreciation of $23,332 and $20,974, respectively 7,104 14,875 OTHER ASSETS Deposits 2,426 10,000 ________ ________ Total assets $ 36,387 $ 55,874 ________ ________ ________ ________ LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Book overdraft $ 2,893 $ 12,217 Accounts payable and accrued liabilities 25,061 35,258 Notes payable 20,000 20,000 ________ ________ Total current liabilities 47,954 67,475 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICITS Common stock, $1 par value 100 shares authorized, issued, and outstanding 100 100 Accumulated deficit (11,667) (11,701) ________ ________ Total shareholders' deficit (11,567) (11,601) ________ ________ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 36,387 $ 55,874 ________ ________ ________ ________ The accompanying notes are an integral part of these financial statements. MEDICAL RESOURCE SYSTEMS, INC. STATEMENTS OF OPERATIONS For the Years Ended September 30, ___________________________________________________________________________ 1997 1996 ________ ________ SALES $ 753,329 $ 726,111 ________ ________ OPERATING EXPENSES Administrative salaries 527,288 534,726 Rent and occupancy expenses 53,317 48,468 Other operating expenses 171,181 154,606 ________ ________ Total operating expenses 751,786 737,800 ________ ________ INCOME (LOSS) FROM OPERATIONS 1,543 (11,689) ________ ________ OTHER INCOME (EXPENSE) Interest income - 521 Interest expense (1,636) - Gain on sale of asset 177 - ________ ________ Total other income (expense) (1,459) 521 INCOME (LOSS) FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES 84 (11,168) PROVISION FOR INCOME TAXES 50 55 ________ ________ NET INCOME (LOSS) $ 34 $ (11,223) ________ ________ ________ ________ BASIC EARNINGS (LOSS) PER SHARE $ 0.34 $ (112.23) WEIGHTED-AVERAGE SHARES OUTSTANDING 100 100 ________ ________ ________ ________ The accompanying notes are an integral part of these financial statements. MEDICAL RESOURCE SYSTEMS, INC. STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended September 30, ___________________________________________________________________________ Common Stock Accumulated Shares Amount Deficit Total ________ ________ ________ _______ BALANCE September 30, 1995 100 $ 100 $ (478) $ (378) NET LOSS (11,223) (11,223) ________ ________ ________ _______ BALANCE September 30, 1996 100 100 (11,701) (11,601) NET INCOME 34 34 ________ ________ ________ _______ BALANCE September 30, 1997 100 $ 100 $(11,667) $(11,567) ________ ________ ________ _______ The accompanying notes are an integral part of these financial statements. MEDICAL RESOURCE SYSTEMS, INC. STATEMENTS OF CASH FLOWS For the Years Ended September 30, ___________________________________________________________________________ 1997 1996 ________ ________ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 34 $ (11,223) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation 7,148 2,439 Gain on disposal of equipment (177) - (Increase) decrease in Accounts receivable 2,361 (1,171) Prepaid expenses 1,781 - Deposits 7,574 (10,000) Increase (decrease) in Accounts payable and accrued liabilities (10,197) 11,196 ________ ________ Net cash provided by (used in) operating activities 8,524 (8,759) ________ ________ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equipment 800 - Purchases of equipment - (4,742) ________ ________ Net cash provided by (used in) investing activities 800 (4,742) ________ ________ Net increase (decrease) in cash and cash equivalents 9,324 (13,501) CASH AND CASH EQUIVALENTS (BOOK OVERDRAFT), BEGINNING OF YEAR (12,217) 1,284 BOOK OVERDRAFT, END OF YEAR $ (2,893) $ (12,217) ________ ________ ________ ________ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 1,636 $ - ________ ________ ________ ________ Income taxes paid $ 50 $ 55 ________ ________ ________ ________ The accompanying notes are an integral part of these financial statements. MEDICAL RESOURCE SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS September 30, 1997 ___________________________________________________________________________ NOTE 1 - ORGANIZATION Medical Resource Systems, Inc. (the "Company") is an Arizona corporation, founded on June 11, 1993. The Company operates primarily in Phoenix, Arizona. Its primary sources of revenue are derived from the processing of billing and collection services for physicians and physician groups. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents _________________________ For purposes of the statements of cash flows, the Company considers all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents. Fair Value of Financial Instruments ___________________________________ For certain of the Company's financial instruments including cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Equipment _________ Equipment is stated at cost. Depreciation is generally provided using accelerated methods. The estimated useful lives of the related assets are three to five years. Depreciation expense for the years ended September 30, 1997 and 1996 was $7,148 and $2,439, respectively. Estimates _________ In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses included in the determination of net earnings during the reporting period. Actual results could differ from those estimates. Risk Concentrations ___________________ Substantially all of the Company's revenues are generated from two customers located in Phoenix, Arizona. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes ____________ The Company accounts for income taxes under the asset and liability method of accounting. Under this method, 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. 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. A valuation allowance is required when it is less likely than not that the Company will be able to realize all or a portion of its deferred tax assets. Earnings per Share __________________ During the year ended September 30, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings per share are not presented for 1997 and 1996 because there are no common stock equivalents. Recently Issued Accounting Pronouncements _________________________________________ The Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income," which is effective for financial statements with fiscal years beginning after December 15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company does not expect adoption of SFAS No. 130 to have a material impact, if any, on its financial position or results of operations. The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," effective for fiscal years beginning after December 15, 1997. SFAS No. 131 requires a company to report certain information about its operating segments including factors used to identify the reportable segments and types of products and services from which each reportable segment derives its revenues. The Company does not anticipate any material change in the manner that it reports its segment information under this new pronouncement. NOTE 3 - ACCOUNTS RECEIVABLE Accounts receivable consist primarily of amounts due from one customer related to services provided for physician billing. The Company has not recorded an allowance for doubtful accounts and believes receivables are fully collectible. NOTE 4 - NOTES PAYABLE Notes payable at September 30 consisted of the following: 1997 1996 ________ ________ Demand note dated May 31, 1993 to a former shareholder in the corporation. The note bears interest at 8%. $ 13,000 $ 13,000 Demand note dated June 30, 1993 to a former shareholder in the corporation. The note bears interest at 8%. 7,000 7,000 ________ ________ Total $ 20,000 $ 20,000 ________ ________ ________ ________ NOTE 5 - COMMITMENTS AND CONTINGENCIES Leases ______ The Company has entered into certain non-cancelable operating leases for its corporate office and for computer equipment. . Future minimum rental commitments under these lease agreements with initial or remaining terms of one year or more at September 30, 1997 are as follows: Year Ending September 30, _____________ 1998 $ 90,000 1999 54,000 2000 7,000 ________ Total $ 151,000 Rent expense was $47,624 and $42,781 for the years ended September 30, 1997 and 1996, respectively. The Company has also entered into a verbal subleasing agreement. The rent is $1,375 per month on a month-to-month basis. Total rent collected was $16,500 for the year ended September 30, 1997. Litigation __________ The Company may become involved in various lawsuits arising from the normal course of business. Management believes that any such lawsuits which may arise would have an immaterial impact on the financial condition of the Company. NOTE 6 - INCOME TAXES Significant components of the provision for income taxes based on income for the years ended September 30 are as follows: 1997 1996 ________ ________ Current Federal $ - $ 5 State 50 50 ________ ________ 50 55 ________ ________ Deferred Federal - - State - - ________ ________ Provision for income taxes $ 50 $ 55 ________ ________ ________ ________ NOTE 6 - INCOME TAXES (Continued) A reconciliation of the provision for (benefit from) income tax expense with the expected income tax computed by applying the federal statutory income tax rate to income before provision for income taxes for the years ended September 30 is as follows: 1997 1996 ________ ________ Income tax provision computed at federal statutory tax rate 34.0% 34.0% Change in deferred income tax valuation reserve (214.0) (39.0) State taxes, net of federal benefit 5.0 5.0 Permanent differences and other 235.0 (1.0) _________ ________ Total 60.0% (1.0)% ________ ________ ________ ________ As of September 30, 1997, the Company had federal and state net operating loss carryforwards of approximately $13,179 and $21,242, respectively, which expire through 2012 and 2007, respectively. Significant components of the Company's deferred tax assets and liabilities for federal and state income taxes as of September 30, 1997 and 1996 consisted of the following: 1997 1996 ________ ________ Deferred tax asset Net operating loss carryforwards $ 5,179 $ 8,346 Valuation allowance (5,179) (8,346) ________ ________ NET DEFERRED TAX ASSET $ - $ - ________ ________ ________ ________ During the year ended September 30, 1997, the Company did not utilize its federal net operating loss carryforwards. NOTE 7 - SUBSEQUENT EVENTS As of September 1, 1998, 100% of the Company's common stock was purchased by RIGL Medical Systems, Inc. in exchange for stock. On May 31, 1998, the board of directors approved a compensation plan for one of its officers for one year at $110,000. Exhibit B. - Pro Forma Financial Information The following unaudited pro forma financial statements give effect to the merger of RIGL Corporation ("RIGL") and Medical Resource Systems, Inc. ("MRS") to be accounted for as a pooling of interests. The unaudited pro forma balance sheets presents the combined financial position of RIGL and MRS as of June 30, 1998, September 30, 1997 and September 30, 1996 assuming that the merger had occurred as of October 1, 1995. Such pro forma information is based upon the historical balance sheet data of RIGL and MRS as of those dates. The unaudited pro forma statement of operations gives effect to the merger of RIGL and MRS by combining the results of operations of RIGL for the two years ended September 30, 1997 and the nine months ended June 30, 1998 with the results of operations of MRS for the two years ended September 30, 1997 and the nine months ended June 30, 1998, respectively, on a pooling of interests basis. The unaudited pro forma condensed consolidated financial data does not reflect any synergies expected to be realized after the MRS acquisition (because their realization cannot be assured). THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS OR FINANCIAL POSITION THAT WOULD HAVE OCCURRED HAD THE MRS ACQUISITION DESCRIBED HEREIN BEEN CONSUMMATED AT THE DATES INDICATED, NOR IS IT NECESSARILY INDICATIVE OF THE FUTURE OPERATING RESULTS OR FINANCIAL POSITION OF THE COMPANY FOLLOWING THE MRS ACQUISITION. These unaudited pro formal financial statements should be read in conjunction with the historical financial statements of RIGL and MRS. STATEMENT OF OPERATIONS: (UNAUDITED) NINE MONTHS ENDED JUNE 30, 1998 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ REVENUE Collection fees $ 523,333 $ 523,333 Corporate revenue $ 72,856 72,856 Royalty income 264 264 ________ ________ _________ ________ Total revenue 73,120 523,333 596,453 Direct expense - - - ________ ________ _________ ________ GROSS PROFIT 73,120 523,333 596,453 General & administrative expense 1,497,050 473,695 1,970,745 Depreciation & amortization expense 51,515 1,426 52,941 ________ ________ _________ ________ NET OPERATING INCOME (LOSS) (1,475,445) 48,212 (1,427,233) OTHER INCOME (EXPENSE) Interest income 62,416 62,416 Interest expense (1,626) (1,626) ________ ________ _________ ________ INCOME (LOSS) BEFORE INCOME TAXES (1,413,029) 46,586 (1,366,443) Provision for income taxes 1,716 - 1,716 ________ ________ _________ ________ NET INCOME(LOSS) $ (1,414,745) $ 46,586 $ $(1,368,159) ________ ________ _________ ________ ________ ________ _________ ________ Net income (loss per share basic $ (0.12) ________ ________ Weighted average shares outstanding 11,238,967 ________ ________ Note 1 - Net income (loss) per share amounts are based on the average number of common shares of the combined companies outstanding during each period. Shares of MRS have been adjusted to the equivalent shares of RIGL. BALANCE SHEET : (UNAUDITED) JUNE 30, 1998 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ CURRENT ASSETS Cash $ 2,021,399 $ 45,119 $ 2,066,518 Accounts receivable 1,050 23,122 24,172 Other receivables 8,811 8,811 ________ ________ _________ ________ Total current assets 2,031,260 68,241 2,099,501 PROPERTY AND EQUIPMENT 184,116 25,981 210,097 Less accumulated depreciation (47,595) (20,302) (67,897) ________ ________ _________ ________ Net property and equipment 136,521 5,679 142,200 OTHER ASSETS Shareholder loans, net 68,000 68,000 Other interest bearing loans 40,000 40,000 Proprietary technology - - Technology rights 438,875 438,875 Deposits 60,706 6,161 66,867 Organization costs 1,560 1,560 ________ ________ _________ ________ Total other assets 609,141 6,161 615,302 Less accumulated amortization (546) (546) ________ ________ _________ ________ Net other assets 608,595 6,161 614,756 ________ ________ _________ ________ TOTAL ASSETS $ 2,776,376 $ 80,081 $ $ 2,856,457 ________ ________ _________ ________ ________ ________ _________ ________ BALANCE SHEET (UNAUDITED) JUNE 30, 1998 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ CURRENT LIABILITIES Notes payable $ - $ 20,000 $ 20,000 Accounts payable 72,373 5,061 77,434 Accrued expense 12,000 20,000 32,000 Shareholder loans 2,460 2,460 ________ ________ _________ ________ Total current liabilities 86,833 45,061 131,894 COMMITMENTS STOCKHOLDERS' EQUITY Preferred stock 1,761 1,761 Additional paid in capital 1,759,599 1,759,599 Subscriptions receivable (1,761,360) (1,761,360) ________ ________ _________ ________ Total preferred stock - - ________ ________ _________ ________ Common stock 12,953 100 13,053 Additional paid-in capital 6,042,423 6,042,423 Subscriptions receivable - - ________ ________ _________ ________ Total common stock 6,055,376 100 6,055,476 ________ ________ _________ ________ Treasury stock (69,822) (69,822) Accumulated deficit (3,296,011) 34,920 (3,261,091) ________ ________ _________ ________ Total stockholder's equity 2,689,543 35,020 2,724,563 ________ ________ _________ ________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,776,376 $ 80,081 $ $ 2,856,457 ________ ________ _________ ________ ________ ________ _________ ________ Note 1 - The pro forma balance sheet gives effect to the merger of RIGL and MRS by combining the respective balance sheets of the two companies at June 30, 1998, on a pooling of interests basis. STATEMENT OF OPERATIONS: (UNAUDITED) YEAR ENDED SEPTEMBER 30, 1997 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ REVENUE Collection fees $ 753,506 $ 753,506 Corporate revenue $ 35,450 35,450 Royalty income 1,092 1,092 ________ ________ _________ ________ Total Revenue 36,542 753,506 790,048 Direct expense 10,542 - 10,542 ________ ________ _________ ________ GROSS PROFIT 26,000 753,506 779,506 General & administrative expense 1,358,403 744,638 2,103,041 Depreciation & amortization expense 16,626 7,148 23,774 ________ ________ _________ ________ NET OPERATING INCOME (LOSS) (1,349,029) 1,720 (1,347,309) OTHER INCOME (EXPENSE) Interest income 17,975 17,975 Interest expense (1,636) (1,636) ________ ________ _________ ________ INCOME (LOSS) BEFORE INCOME TAXES (1,331,054) 84 (1,330,970) Provision for income taxes - 50 50 ________ ________ _________ ________ NET INCOME (LOSS) $ (1,331,054) $ 34 $ $(1,331,020) ________ ________ _________ ________ ________ ________ _________ ________ Net income (loss) per share basic $ (0.18) ________ ________ Weighted average shares outstanding 7,396,680 ________ ________ Note 1 - Net income (loss) per share amounts are based on the average number of common shares of the combined companies outstanding during each period. Shares of MRS have been adjusted to the equivalent shares of RIGL. BALANCE SHEET: (UNAUDITED) SEPTEMBER 30, 1997 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ CURRENT ASSETS Cash $ 841,702 $ (2,893) $ 838,809 Accounts receivable 23,122 23,122 Other receivables 5,342 5,342 ________ ________ _________ ________ Total current assets 847,044 20,229 867,273 PROPERTY AND EQUIPMENT 87,510 30,437 117,947 Less accumulated depreciation (15,814) (23,332) (39,146) ________ ________ _________ ________ Net property and equipment 71,696 7,105 78,801 OTHER ASSETS Shareholder loans, net 105,841 105,841 Other interest bearing loans 70,000 70,000 Proprietary technology 13,000 13,000 Technology rights 10,000 10,000 Deposits 790 6,161 6,951 Organization costs 1,560 1,560 ________ ________ _________ ________ Total other assets 201,191 6,161 207,352 Less accumulated amortization (812) (812) ________ ________ _________ ________ Net other assets 200,379 6,161 206,540 ________ ________ _________ ________ TOTAL ASSETS $ 1,119,119 $ 33,495 $ $ 1,152,614 ________ ________ _________ ________ ________ ________ _________ ________ BALANCE SHEET: (UNAUDITED) SEPTEMBER 30, 1997 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ CURRENT LIABILITIES Notes payable $ - $ 20,000 $ 20,000 Accounts payable 4,708 5,061 9,769 Accrued expenses 22,715 20,000 42,715 Shareholder loans 5,103 5,103 ________ ________ _________ ________ Total current liabilities 32,526 45,061 77,587 COMMITMENTS STOCKHOLDERS' EQUITY Preferred stock 3,000 3,000 Additional paid-in capital 2,934,500 2,934,500 Subscriptions receivable (638,400) (638,400) ________ ________ _________ ________ STOCKHOLDERS' EQUITY Total preferred stock 2,299,100 2,299,100 ________ ________ _________ ________ Common stock 6,537 100 6,637 Additional paid-in capital 663,023 663,023 Subscriptions receivable (800) (800) ________ ________ _________ ________ Total common stock 668,760 100 668,860 ________ ________ _________ ________ Accumulated deficit (1,881,267) (11,666) (1,892,933) ________ ________ _________ ________ Total stockholders' equity 1,086,593 (11,566) 1,075,027 ________ ________ _________ ________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,119,119 $ 33,495 $ $ 1,152,614 ________ ________ _________ ________ ________ ________ _________ ________ Note 1 - The pro forma balance sheet gives effect to the merger of RIGL and MRS by combining the respective balance sheets of the two companies at September 30, 1997 on a pooling of interests basis. STATEMENT OF OPERATIONS: (UNAUDITED) YEAR ENDED SEPTEMBER 30, 1996 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ REVENUE Collection fees $ 726,111 $ 726,111 Corporate revenue Royalty income $ 1,341 1,341 ________ ________ _________ ________ Total revenue 1,341 726,111 727,452 Direct expense 680 680 ________ ________ _________ ________ GROSS PROFIT 661 726,111 726,772 General & administrative expense 218,148 735,361 953,509 Depreciation & amortization expense 2,439 2,439 ________ ________ _________ ________ NET OPERATING INCOME (LOSS) (217,487) (11,689) (229,176) OTHER INCOME (EXPENSE) Interest income 521 521 Interest expense ________ ________ _________ ________ INCOME (LOSS) BEFORE INCOME TAXES (217,487) (11,168) (228,655) Provision for income taxes 55 55 ________ ________ _________ ________ NET INCOME (LOSS) $ (217,487) $ (11,223) $ $ (228,710) ________ ________ _________ ________ ________ ________ _________ ________ net income (loss) per share $ (0.16) ________ ________ Weighted average shares outstanding 1,474,293 ________ ________ Note 1 - Net income (loss) per share amounts are based on the average number of common shares of the combined companies outstanding during each period. Shares of MRS have been adjusted to the equivalent shares of RIGL. BALANCE SHEET: (UNAUDITED) SEPTEMBER 30, 1996 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ CURRENT ASSETS Cash $ 9,345 $ 9,345 Accounts receivable $ 25,483 25,483 Other receivables 1,781 1,781 ________ ________ _________ ________ Total current assets 9,345 27,264 36,609 PROPERTY AND EQUIPMENT 35,849 35,849 Less accumulated depreciation (20,974) (20,974) ________ ________ _________ ________ Net property and equipment 14,875 14,875 OTHER ASSETS Shareholder loans, net Other interest bearing loans Proprietary technology 13,000 13,000 Technology rights Deposits 13,735 13,735 Organization costs ________ ________ _________ ________ Total other assets 13,000 13,735 26,735 Less accumulated amortization ________ ________ _________ ________ Net other assets 13,000 13,735 26,735 ________ ________ _________ ________ TOTAL ASSETS $ 22,345 $ 55,874 $ $ 78,219 ________ ________ _________ ________ ________ ________ _________ ________ BALANCE SHEET: (UNAUDITED) SEPTEMBER 30, 1996 _____________________________________________________________________________ PRO FORMA RIGL MRS ADJUSTMENTS COMBINED ________ ________ _________ ________ CURRENT LIABILITIES Notes payable $ 20,000 $ 20,000 Accounts payable 17,475 17,475 Accrued expense 30,000 30,000 Shareholder loans $ 100 100 ________ ________ _________ ________ Total current liabilities 100 67,475 67,575 COMMITMENTS STOCKHOLDERS' EQUITY Preferred stock 3,000 3,000 Additional paid-in capital 2,997,000 2,997,000 Subscriptions receivable (2,965,000) (2,965,000) ________ ________ _________ ________ Total preferred stock 35,000 35,000 ________ ________ _________ ________ Common stock 6,013 100 6,113 Additional paid-in capital 534,915 534,915 Subscriptions receivable (3,470) (3,470) ________ ________ _________ ________ Total common stock 537,458 100 537,558 ________ ________ _________ ________ Accumulated deficit (550,213) (11,701) (561,914) ________ ________ _________ ________ Total stockholders' equity 22,245 (11,601) 10,644 ________ ________ _________ ________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,345 $ 55,874 $ $ 78,219 ________ ________ _________ ________ ________ ________ _________ ________ Note 1 - The pro forma balance sheet gives effect to the merger of RIGL and MRS by combining the respective balance sheets of the two companies at September 30, 1996 on a pooling of interests basis.