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ITEM 7.   FINANCIAL STATEMENTS

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

THE BOARD OF PPJ ENTERPRISE

We have audited the accompanying consolidated balance sheet of PPJ Enterprise and Subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders equity and cash flows for the periods 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 audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PPJ Enterprise and Subsidiaries at December 31, 2007 and 2006, and the results of its’ consolidated operations and its’ consolidated stockholders equity and consolidated cash flows for the periods then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management's plan in regard to these matters is described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Gruber & Company, LLC Saint Louis, Missouri

November 15, 2008

 

 

 

 

 

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PPJ Enterprise and Subsidiaries

Consolidated Balance Sheets

 

			December 31,
			2007				2006
Assets
Property & Equipment, Net			$	-			$	41,156
Software Development Costs				-				38,978
Other				-				3,650
Total Assets			$	-			$	83,784
Liabilities & Stockholders' (Deficit)
Current Liabilities
	Accounts Payable and Accrued Expenses		$	1,977,851			$	1,652,796
	Accrued Officer Compensation			937,665				337,665
	Lines of Credit			100,415				96,418
	Derivative Liability			1,460,962				1,738,482
	Lease Liability			18,938				18,938
	Notes Payable			508,500				-
	Convertible Secured Note			1,300,000				1,300,000
	Total Current Liabilities			6,304,331				5,144,299
Commitments & Contingencies				-				-
Stockholders' Equity (Deficit)
	Preferred Stock-Class B, $0.001 par value, 100,000,000 shares
	authorized; no shares issued and outstanding.			-				-
	Common Stock, $0.001 par value, 1,500,000,000 shares
	authorized; 428,226 and 85,200 shares issued and outstanding, respectively.			428				85
	Additional Paid-in Capital			2,535,156				1,543,739
	Stock Subscriptions (Receivable) Payable			75,750				67,250
	Accumulated Deficit			(8,915,665	)			(6,671,589	)
	Total Stockholders' (Deficit)			(6,304,331	)			(5,060,515	)
Total Liabilities & Stockholders' (Deficit)			$	-			$	83,784

 

The accompanying notes are an integral part of these financial statements.

 

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PPJ Enterprise and Subsidiaries

Consolidated Statements of Operations

 

		For the Twelve Months Ended
		December 31,
		2007				2006
Other Income (Expense)
Change in Fair Value of Derivative		$	277,520			$	381,684
Beneficial Conversion Feature Expense			-				(1,756,828	)
Interest Expense and Financing Costs			(247,898	)			(444,345	)
Total Other  Income (Expense)			29,622				(1,819,489	)
Provision for Income Taxes			-				(2,400	)
Net Income (Loss) Before Discontinued Operations			29,622				(1,821,889	)
Loss from Discontinued Operations
Loss from Disposal of Assets of Discontinued Operations			(35,957	)			-
Loss from Discontinued Operations			(2,237,741	)			(1,175,695	)
Total Loss from Discontinued Operations			(2,273,698	)			(1,175,695	)
Net Income (Loss)		$	(2,244,076	)		$	(2,997,584	)
Net Income per Share
Basic		$	(8.74	)		$	(35.24	)
Diluted		$	(8.74	)		$	(35.24	)
Number of Shares Used in Per Share Calculations
Basic			256,713				85,050
Diluted			256,713				85,050

 

The accompanying notes are an integral part of these financial statements.

 

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PPJ Enterprise and Subsidiaries

Consolidated Statements of Stockholders' Equity (Deficit)

 

		Common Stock
		Number of Shares			Par Value ($0.001) Amount				Additional Paid-In-Capital				Prepaid Consulting				Subscriptions (Receivable) Payable				Accumulated Deficit				Total Stockholders' Equity (Deficit)
Balance at December 31, 2005		84,900			$	85			$	1,543,727			$	(51,611	)		$	28,500			$	(3,674,005	)		$	(2,153,304	)
Common Stock Issued to Consultants for Services		300				-				12				51,611				-				-				51,623
Common Shares to be Issued to Directors for Services		-				-				-				-				38,750				-				38,750
Net Loss		-				-				-				-				-				(2,997,584	)			(2,997,584	)
Balance at December 31, 2006		85,200			$	85			$	1,543,739			$	-			$	67,250			$	(6,671,589	)		$	(5,060,515	)
Common Stock Issued to Consultants for Services		302,076				302				876,798				-				-				-				877,100
Common Shares to be Issued to Directors for Services		40,950				41				114,619				-				8,500				-				123,160
Net Loss		-				-				-				-				-				(2,244,076	)			(2,244,076	)
Balance at December 31, 2007		428,226			$	428			$	2,535,156			$	-			$	75,750			$	(8,915,665	)		$	(6,304,331	)

 

The accompanying notes are an integral part of these financial statements.

 

 

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PPJ Enterprise and Subsidiaries

Consolidated Statements of Cash Flows

		For the Twelve Months Ended
		December 31,
		2007				2006
Cash Flows from Operating Activities
Net Income (Loss)		$	(2,244,076	)		$	(2,997,584	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock Based Compensation			1,000,260				90,373
Depreciation & Amortization			93,111				118,459
Beneficial Conversion Feature Expense			-				1,756,828
Change in Fair Value of Derivative			(277,520	)			381,684
Loss from Disposal of Assets of Discontinued Operations			35,957				-
Changes in operating assets and liabilities:
Accounts Receivable			(29	)			-
Accounts Payable and Accrued Expenses			325,055				576,378
Accrued Officer Compensation			600,000				(20,725	)
Net Cash Used in Operating Activities			(467,242	)			(94,587	)
Cash Flows from Investing Activities
Purchase of Property and Equipment			(6,277	)			(7,290	)
Software Development Costs			(38,978	)			-
Net Cash Used in Investing Activities			(45,255	)			(7,290	)
Cash Flows from Financing Activities
Lines of Credit			3,997				(17,274	)
Payments on Capital Leases			-				(6,300	)
Net Proceeds from Notes Payable			508,500				(177,672	)
Net Cash Provided by Financing Activities			512,497				(201,246	)
Net Increase (Decrease) in Cash			-				(303,123	)
Cash Beginning of Period			-				303,123
Cash End of Year		$	-			$	-
Supplemental Disclosure of Cash Flow Information:
Cash Paid during the period for interest		$	-			$	-
Cash Paid during the period for income taxes			-				1,700

The accompanying notes are an integral part of these financial statements.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Note 1 – Organization, Business & Operations

 

History

 

The Company was incorporated in the State of Nevada on May 2, 2000, as Winfield Capital Group, Inc. On June 6, 2001, the Company filed a Certificate of Amendment to its Articles of Incorporation to affect a name change to "Winfield Financial Group, Inc." On April 23, 2004, the Company acquired 100% of the equity interest of Healthcare Business Services Groups, Inc. ("Healthcare"). As part of the same transaction, the Company acquired 100% of the equity interest of AutoMed Software Corp. ("AutoMed") and Silver Shadow Properties, LLC ("Silver Shadow") on May 7, 2004. Prior to the Acquisition (defined below), the Company was a business broker, primarily representing sellers and offering its clients' businesses for sale. As a result of the acquisition, the Company changed its business focus to medical billing. On January 7, 2005, the Company filed a Certificate of Amendment to its Articles of Incorporation, with the Nevada Secretary of State and changed its name to "Healthcare Business Services Groups, Inc."

 

 On April 23, 2004, the Company acquired 100% of the issued and outstanding shares of Healthcare Business Services Groups, Inc., a Delaware corporation ("Healthcare"). As part of the same transaction on May 7, 2004, the Company acquired 100% of the issued and outstanding shares of AutoMed Software Corp., a Nevada corporation ("AutoMed"), and 100% of the membership interests of Silver Shadow Properties, LLC, a Nevada single member limited liability company ("Silver Shadow"). The transactions are collectively referred to herein as the "Acquisition." The Company acquired Healthcare, AutoMed, and Silver Shadow from Chandana Basu, the sole owner, in exchange for 25,150,000 newly issued treasury shares of the Company's Common Stock. As a result of the Acquisition, the Company has changed its business focus. The term "Company" shall include a reference to Healthcare Business Services Groups, Inc. (the "Company").

 

The merger of the Company with Healthcare Business Services Groups Inc., has been accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of Healthcare Business Services Groups Inc. obtained control of the consolidated entity. Accordingly, the merger of the two companies has been recorded as a recapitalization of the Healthcare Business Services Groups Inc., with Healthcare Business Services Groups Inc.  being treated as the continuing entity. The continuing company has retained December 31 as its fiscal year end.

 

Healthcare was a medical billing service provider that for over fifteen years had assisted various health care providers to successfully enhance their billing function.

 

On July 13, 2007 the Company's Board of Director approved a resolution to discontinue all of its billing effective June 30, 2007. The accompanying financial statements have been reclassified accordingly and presented as discontinued operations. The Company's other three subsidiaries Silver Shadow, AutoMed and Alta Vista are dormant companies and are also reclassified as part of discontinued operations.

 

Name Change

 

A Certificate of Amendment to the Articles of Incorporation to change the registrant’s name to PPJ Enterprise which amendment became effective on March 20, 2008. As a result of the name change, the Company’s trading symbol changed from “HBSV” to “PPJE”.

 

Bankruptcy Proceedings

 

On June 26, 2008 Healthcare Business Services Groups, Inc.(“HBSGI”), a Delaware Company, a subsidiary of PPJ Enterprise (“PPJE”), filed for Chapter 7 Bankruptcy protection due to lawsuits by its former clients and loss of major clients and revenue. HBSGI closed its Upland office on June 30, 2007.

 

Authorized Shares and Reverse Stock Split

 

An amendment to the Registrant’s Articles of Incorporation to increase the authorized shares to 1,500,000,000 shares of common stock, to reauthorize the par value of $.001 per share of common stock, and to authorize additional 95,000,000 shares of preferred stock making it a total of 100,000,000 with a par value of $.001 per share of preferred stock that became effective March 20, 2008; and 300,000,000 Free Trading shares also were registered with Nevada Secretary of State on March 20, 2008.

 

On March 20, 2008, the Board of Directors approved an Amendment for a 1:400 reverse stock split. All references in the financial statements to the number of shares outstanding, per share amounts, and stock options data of the Company’s common stock have been restated to reflect the effect of the reverse stock split for all periods presented.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Note 2 - Going Concern and Management's Plans

 

The accompanying consolidated financial statements have been prepared in conformity with generally accepted   accounting principles which contemplate continuation of the company as a going concern. However, as of December 31, 2007, the Company has an stockholders’ deficit of $6,304,331 and an accumulated deficit of $8,915,665. In addition, the Company has no assets and on June 26, 2008 the Company filed for Chapter 7 Bankruptcy protection for Healthcare Business Services Groups, Inc .(“HBSGI”), a Delaware Company and subsidiary of PPJ Enterprise (“PPJE”). These and other factors raise substantial doubt about the Company's ability to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital and achieve profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Note 3 - Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, AutoMed Software Corp., and Silver Shadow Properties, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation. The acquisition of Healthcare Business Services Groups Inc. on May 7, 2004, has been accounted for as a purchase and treated as a reverse acquisition.

 

Cash and Cash Equivalents

 

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.

 

Inventories

 

Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs. Costs included in inventory primarily include finished spirit product and packaging.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates

 

Property & Equipment

 

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over useful lives of 3 to 10 years. The cost of assets sold or retired and the related amounts of accumulated depreciation are removed from the accounts in the year of disposal. Any resulting gain or loss is reflected in current operations. Assets held under capital leases are recorded at the lesser of the present value of the future minimum lease payments or the fair value of the leased property. Expenditures for maintenance and repairs are charged to operations as incurred.

 

Impairment of Long-Lived Assets

 

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.

 

Basic and Diluted Net Income per Share

 

Basic earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock warrants and convertible notes. Diluted earnings per share is calculated using the weighted-average number of common shares outstanding during the period after consideration of the dilutive effect of stock warrants and convertible notes.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Stock-Based Compensation

 

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment. This pronouncement amends SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires that companies account for awards of equity instruments issued to employees under the fair value method of accounting and recognize such amounts in their statements of operations. Under SFAS No. 123(R), we are required to measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of SFAS 123(R) and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Common stock issued to non-employees in exchange for services is accounted for based on the fair value of the services received.

 

Fair Value of Financial Instruments

 

Statement of financial accounting standard No. 107, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

 

Revenue Recognition

 

The Company's revenue recognition policies are in compliance with Staff accounting bulletin SAB 104.  All revenue is recognized when persuasive evidence of an arrangement exists, the service or sale is complete, the price is fixed or determinable and collectibility is reasonably assured.  Revenue is derived from collections of medical billing services.  Revenue is recognized when the collection process is complete which occurs when the money is collected and recognized on a net basis.

 

License Revenue - The Company recognizes revenue from license contracts when a non-cancelable, non-contingent license agreement has been signed, the software product has been delivered, no uncertainties exist surrounding product acceptance, fees from the agreement are fixed and determinable and collection is probable.  Any revenues from software arrangements with multiple elements are allocated to each element of the arrangement based on the relative fair values using specific objective evidence as defined in the SOPs.  If no such objective evidence exists, revenues from the arrangements are not recognized until the entire arrangement is completed and accepted by the customer.  Once the amount of the revenue for each element is determined, the Company recognizes revenues as each element is completed and accepted by the customer.  For arrangements that require significant production, modification or customization of software, the entire arrangement is accounted for by the percentage of completion method, in conformity with Accounting Research Bulletin ("ARB") No. 45 and SOP 81-1.

 

Services Revenue - Revenue from consulting services is recognized as the services are performed for time-and-materials contracts and contract accounting is utilized for fixed-price contracts.  Revenue from training and development services is recognized as the services are performed.  Revenue from maintenance agreements is recognized ratably over the term of the maintenance agreement, which in most instances is one year.

 

Allowance for Doubtful Accounts

 

We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.

 

Advertising

 

The Company expenses advertising costs as incurred. The Company incurred no advertising costs for the years ended December 31, 2007 and 2006.

 

Income Taxes

 

The Company accounts for income taxes using the liability method as required by Statement of Financial Accounting Standards ("FASB") No. 109, Accounting for Income Taxes ("SFAS 109"). Under this method, deferred tax assets and liabilities are determined based on differences between their financial reporting and tax basis of assets and liabilities. The Company was not required to provide for a provision for income taxes for the periods ended December 31, 2007 and 2006, as a result of net operating losses incurred during the periods. As of December 31, 2007, the Company has available approximately $6,900,000 of net operating losses ("NOL") available for income tax purposes that may be carried forward to offset future taxable income, if any. These carryforwards expire in various years through 2026. At December 31, 2007 and 2006, the Company has deferred tax assets of approximately $3,600,000 and $2,700,000 relating to the Company's net operating losses, respectively. The Company's deferred tax asset has been fully reserved by a valuation allowance since realization of its benefit is uncertain. The Company's ability to utilize its NOL carryforwards may be subject to an annual limitation in future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

The provision for income taxes using the federal and state tax rates as compared to the Company's effective tax rate is summarized as follows:

 

		December 31,
		2007				2006
Statutory Federal Tax (Benefit) Rate			-34	%			-34	%
Statutory State Tax (Benefit) Rate			-6	%			-6	%
Effective Tax (Benefit) Rate			-40	%			-40	%
Valuation Allowance			40	%			40	%
Effective Income Tax			0	%			0	%

 

Significant components of the Company's deferred tax assets at December 31, 2007 and 2006, are as follows:

 

		December 31,
		2007				2006
Net Operating Loss Carryforward		$	3,551,109			$	2,657,294
Valuation Allowance			(3,551,109	)			(2,657,294	)
Net Deferred Tax Asset		$	-			$	-

 

Research and Development Costs

 

Expenditures for research & development are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established. The Company incurred no research and development costs for the years ended December 31, 2007 and 2006.

 

Reclassifications

 

Certain items in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current period’s presentation. These reclassifications have no effect on the previously reported income (loss).

 

Recently Issued Accounting Pronouncements

 

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (FAS 141(R)). This Statement provides greater consistency in the accounting and financial reporting of business combinations. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the nature and financial effect of the business combination. FAS 141(R) is effective for fiscal years beginning after December 15, 2008. We will adopt FAS 141(R) no later than the first quarter of fiscal 2010 and are currently assessing the impact the adoption will have on our financial position and results of operations.

 

In December 2007, the FASB issued SFAS No. 160. Noncontrolling Interests in Consolidated Financial Statements (FAS 160). This Statement amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. FAS 160 is effective for fiscal years beginning after December 15, 2008. We will adopt FAS 160 no later than the first quarter of fiscal 2010 and are currently assessing the impact the adoption will have on our financial position and results of operations.

 

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities , which permits entities to choose to measure at fair value eligible financial instruments and certain other items that are not currently required to be measured at fair value. This statement requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 no later than the first quarter of fiscal 2009. We are currently assessing the impact the adoption of SFAS No. 159 will have on our financial position and results of operations.

 

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) . SFAS No. 158 requires company plan sponsors to display the net over or under-funded position of a defined benefit postretirement plan as an asset or liability, with any unrecognized prior service costs, transition obligations or actuarial gains/losses reported as a component of other comprehensive income in shareholders’ equity. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. We adopted the recognition provisions of SFAS No. 158 as of the end of fiscal 2007. The adoption of SFAS No. 158 did not have an effect on the Company’s financial position or results of operations.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles, clarifies the definition of fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the application of SFAS No. 157 may change current practice for some entities. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We will adopt SFAS No. 157 in the first quarter of fiscal 2009. We are currently assessing the impact that the adoption of SFAS No. 157 will have on our financial position and results of operations.

 

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48). This interpretation clarifies the application of SFAS No. 109, Accounting for Income Taxes , by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, but earlier adoption is permitted. The Company is in the process of evaluating the impact of the application of the Interpretation to its financial statements.

 

Note 4 – Discontinued Operations

 

On July 13, 2007 the Company's Board of Director approved a resolution to discontinue all of its billing function (the principal activity of the Company) effective June 30, 2007. The accompanying financial statements have been reclassified accordingly and presented as discontinued operations. The Company's other three subsidiaries; Silver Shadow, AutoMed and Alta Vista, are dormant companies and are also reclassified as part of discontinued operations.

 

		For the Twelve Months Ended
		December 31,
Net Revenue		$	678,277			$	1,011,644
Operating Expenses			2,916,018				2,187,339
Loss from Discontinued Operations			(2,237,741	)			(1,175,695	)

 

Note 5 - Property and Equipment

 

As of December 31, 2007 and 2006, property and equipment is comprised of the following:

 

		December 31,
		2007				2006
Office and Computer Equipment			-				124,964
Furniture & Equipment			-				89,869
Less: Accumulated Depreciation			-				(173,677	)
Net Property & Equipment		$	-			$	41,156
Depreciation Expense		$	93,111			$	30,133
			-				41,156

 

During the years ended December 31, 2007 and 2006, the Company recorded depreciation expense of $15,155 and $30,133, respectively.

 

Note 6 – Software Development Costs

 

The Company is accounting for computer software technology costs under the Capitalization criteria of Statement of Position 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use."

 

Expenditures for maintenance and repairs are expensed when incurred; additions, renewals and betterments are capitalized.  Amortization is computed using the straight-line method over the estimated useful life of the asset.  Amortization begins from the date when the software becomes operational.  The website became operational July 1, 2004.  The Company amortized $38,978 and $ 88,326 in the accompanying financial statements at December 31, 2007 and 2006, respectively. The balance at December 31, 2007 amounts was $0.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Note 7– Accounts Payable and Accrued Expenses

 

As of December 31, 2007 and 2006, accounts payable and accrued expenses consist of the following:

 

		December 31,
		2007				2006
Trade Payable		$	404,395			$	597,687
Payable to Clients			1,127,004				591,609
Litigation Accrual			50,000				325,000
Accrued Interest			264,634				35,819
Income Tax Payable			60,000				8,655
Accrued Payroll & Taxes			12,777				12,627
Accrued Vacation			13,114				13,111
Other Accrued Expenses			45,927				68,288
Total Accounts Payable and Accrued Expenses		$	1,977,851			$	1,652,796

Note 8 – Accrued Officer Compensation

 

The Company has an employment agreement with Chandana Basu, our Chief Executive Officer and Treasurer. The Agreement was executed on April 1, 2004 and can not be terminated. It shall remain in existence until Ms. Basu retires or assigns her position to others. It provides for a monthly base salary of $5,000 per month and a bonus of 25% of our gross receipts payable monthly with a minimum bonus of $45,000 per month. It also includes reimbursement of all reasonable expenses. It provides for the issuance of a minimum of 1,000,000 shares annually as per amendment of employment agreement in October 2005.

 

As of December 31, 2007 and 2006, accrued officer compensation totaled $937,665 and $337,665, respectively.

 

Note 9 – Lines of Credit

 

The Company has two revolving lines of credit from two financial institutions for $50,000 and $100,000.  The credit lines are unsecured and bear an annual interest rate of 10.75% and 16.24%, respectively.  The credit lines are personally guaranteed by the CEO of the Company.  The Company has borrowed $18,065 and $82,350 from the credit lines as of December 31, 2007.

 

Note 10 – Notes Payable

 

The Company has 7 unsecured promissory notes with 5 individuals totaling $508,500.  These notes accrue interest between 8% and 25% annualized and are all due on or before December 31, 2008.  As of the audit date, the Company is in default on 5 of these notes totaling $468,500.

 

Note 11 - Convertible Secured Note and Securities Purchase Agreement

 

On June 27, 2006, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (collectively, the "Investors"). Under the terms of the Securities Purchase Agreement, the Investors purchased an aggregate of (i) $2,000,000 in callable convertible secured notes (the "Notes") and (ii) warrants to purchase 125,000 reverse split shares of our common stock (the "Warrants").

Pursuant to the Securities Purchase Agreement, the Investors purchased the Notes and Warrants in three trenches as set forth below:

 

·	At closing, on July 1, 2006 ("Closing"), the Investors purchased Notes aggregating $700,000 and warrants to purchase 43,750  shares based on the prorate shares of our common stock;

·	On August 8, 2006 the investors purchased Notes aggregating $600,000 and warrants to purchase 37,500 shares based on the prorate shares of our common stock.

·	Upon effectiveness of the Registration Statement, the Investors will purchase Notes aggregating $700,000. The Company has withdrawn the third trench as the Registration Statement was not effective to bring more funds into the Company.

 

The Notes carry an interest rate of 6% and a maturity date of June 27, 2009. The notes are convertible into common shares at the Applicable Percentage of the average of the lowest three (3) trading prices for our shares of common stock during the twenty (20) trading day period prior to conversion. The "Applicable Percentage" means 50%; provided, however, that the Applicable Percentage shall be increased to (i) 55% in the event that a Registration Statement is filed within thirty days of the closing and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from the Closing.

 

The Company has an option to prepay the Notes in the event that no event of default exists, there are a sufficient number of shares available for conversion of the Notes and the market price is at or below $.05 per share. In addition, in the event that the average daily price of the common stock, as reported by the reporting service, for each day of the month ending on any determination date is below $.05, the Company may prepay a portion of the outstanding principal amount of the Notes equal to 101% of the principal amount hereof divided by thirty-six (36) plus one month's interest. Exercise of this option will stay all conversions for the following month. The full principal amount of the Notes is due upon default under the terms of Notes. In addition, the Company has granted the investors a security interest in substantially all of its assets and intellectual property as well as registration rights.

The Company has received the $ 1,300,000 through December 31, 2007.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Note 12 – Derivative Liability

 

Concurrent with the issuance of the $1,300,000 note detailed in Note 11, the Company issued to the Investors seven year warrants to purchase 81,250, post reverse split shares, of common stock at an exercise price of $28.00.

 

The Investors have contractually agreed to restrict their ability to convert the Notes and exercise the Warrants and receive shares of the Company's common stock such that the number of shares of the Company's common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of the Company's common stock.

 

The fair value of the share purchase warrants for the period December 31, 2007, was in the amount of $1,460,962, which was determined using the Black-Scholes option value model with the following assumptions:

 

·	Expected life 5.6 years

·	Volatility  98%

·	Dividend yield  0%

·	Risk free rate 3.5%

 

Note 13 - Stockholders’ Equity

 

Authorized Shares

 

An amendment to the Registrant’s Articles of Incorporation to increase the authorized shares to 1,500,000,000 shares of common stock, to reauthorize the par value of $.001 per share of common stock, and to authorize additional 95,000,000 shares of preferred stock making it a total of 100,000,000 with a par value of $.001 per share of preferred stock that became effective March 20, 2008; and 300,000,000 Free Trading shares also were registered with Nevada Secretary of State on March 20, 2008.

 

Reverse Stock Split

 

On March 20, 2008, the Board of Directors approved an Amendment for a 1:400 reverse stock split. . All references in the financial statements to the number of shares outstanding, per share amounts, and stock options data of the Company’s common stock have been restated to reflect the effect of the reverse stock split for all periods presented.

 

Common Stock

 

As of December 31, 2007, 428,226 common shares were issued and outstanding.  The holders of common stock, and of shares issuable upon exercise of any Warrants or Options, are entitled to equal dividends and distributions, per share, with respect to the common stock when, as and if declared by the Board of Directors from funds legally available therefore.  No holder of any shares of common stock has a pre-emptive right to subscribe for any securities of the Company nor is any common shares subject to redemption or convertible into other securities of the Company.  Upon liquidation, dissolution or winding up of the Company, and after payment of creditors and preferred stockholders, if any, the assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock.  All shares of common stock now outstanding are fully paid, validly issued and non-assessable.  Each share of common stock is entitled to one vote with respect to the election of any director or any other matter upon which shareholders are required or permitted to vote.  Holders of the Company's common stock do not have cumulative voting rights, so that the holders of more than 50% of the combined shares voting for the election of directors may elect all of the directors, if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any members to the Board of Directors.

 

During the year ended December 31, 2007, the Company issued 343,026 restricted common shares of which 302,076 shares were issued to Consultants for services totaling $877,100 and 40,950 shares were issue to Directors for services totaling $114,660. As of December 31, 2008, subscriptions payable totals $75,750.

 

During the year ended December 31, 2006, the Company issued 300 restricted common shares to Consultants for services totaling $51,623.

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Class B Preferred Stock

 

The Company's Articles of Incorporation (Articles") authorize the issuance of 100,000,000 shares of $0.001 par value Class B Preferred Stock.  No shares of Preferred Stock are currently issued and outstanding.  Under the Company's Articles, the Board of Directors has the power, without further action by the holders of the Common Stock, to designate the relative rights and preferences of the preferred stock, and issue the preferred stock in such one or more series as designated by the Board of Directors.  The designation of rights and preferences could include preferences as to liquidation, redemption and conversion rights, voting rights, dividends or other preferences, any of which may be dilutive of the interest of the holders of the Common Stock or the Preferred Stock of any other series.  The issuance of Preferred Stock may have the effect of delaying or preventing a change in control of the Company without further shareholder action and may adversely affect the rights and powers, including voting rights, of the holders of Common Stock.  In certain circumstances, the issuance of preferred stock could depress the market price of the Common Stock.

 

Note 14 – Related Party Transactions

 

The Company recorded $5,250 as officer compensation for 750,000 shares to be issued pursuant  to  the  employment  agreement.  The officer is entitled to 1,000,000 shares every year pursuant to the employment agreement.

 

During the year ended December 31, 2007, the Company issued 40,950 post reverse split restricted common shares to the following in consideration for services performed.

 

		Number of Shares
Directors (2)			375
*Director and Husband			7,500
CEO and Director			7,500
*Ex-Employee-Son			2,500
*Ex-Employee-Daughters (2)			7,500
*Ex-Employee-Son in Law			500
Ex Employees (8)			2,387
Contractors (6)			12,689
Total			40,950

 

*   The above are in relationship to the CEO and Director of the Company.

 

The Company recorded the 40,950 shares at the fair market value of $114,660 as compensation expense.

 

Note 15– Commitments & Contingencies

 

Leases

 

During the year ended December 31, 2007, the Company leased its corporate offices space in Upland, California under operating lease agreement.  The facility lease calls for a monthly rent of $3,387.

 

The Company is on a month to month lease and vacated the leased premises as of September 30, 2007. Currently, the Company is operating thru a marketing company in Nevada for collection only and there are no on going billing operations.

 

 

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PPJ Enterprise and Subsidiaries

Notes to Consolidated Financial Statements

 

 

Litigation

 

The Company is currently plaintiff to two and defendant to two law suits. The Company filed claims for non payment of fees by former clients due to clients diverted funds billed by company and did not pay Billing fees.

 

·

On July 12, 2004, Nimish Shah, M.D. d/b/a New Horizon Medical, Inc. ("New Horizon") initiated a lawsuit against the Company in the Superior Court of California, County of Los Angeles, Case No. VC 042695, styled New Horizon Medical, Inc. v. HBSGI, et al. In connection with arbitration, the Company has claimed against New Horizon the compensatory damages in the amount of $75,000 (subject to amendment), prejudgment interest, costs and attorneys' fees in an unspecified amount. New Horizon has not submitted a cross-complaint against the Company for the breach of contract alleging that there is substantial discrepancy between the amounts of bills provided by New Horizon to the Company, for the purpose of securing payment from various insurance companies, and the funds actually received from the Company. This matter was dismissed by arbitrator for non payment of arbitrator's fee.

·

In January 2004, Claimant Leonard J. Soloniuk, MD initiated an arbitration against HBSGI with the American Arbitration Association, Case No. 72 193 00102 04 TMS, styled Leonard J. Soloniuk, MD v. HBSGI. In a decision dated April 5, 2006, the arbitrator awarded HBSGI nothing against Soloniuk. The arbitrator further awarded Soloniuk $ 275,000 against the HBSGI as well as interest accruing from June 1, 2006, at the rate of ten percent per annum on the unpaid balance. The arbitrator further ordered HBSGI to reimburse Soloniuk costs in the amount of $ 1,875. Company argues that of this $275,000, $210,000 was already paid to Soloniuk since November 4, 2002, last date of payment were considered by arbitrator and therefore the judgment should be reduced accordingly. The Company can provide no assurances that it will be successful in this argument.

·

Company recently filed new legal actions against Soloniuk for fraud, deception, and intentional non disclosure of money received from HBSGI collection to the arbitration hearing to gain advantage. Company also filed an application of injunction to prevent Soloniuk to use HBSGI billing method. Hearing is set for May 10, 2007. Company is suing Solonuik for $750,000 plus cost of lawsuit.

·	On November 1, 2007 “Healthcare” filed law suit against Narinder Grewal, MD for unpaid fees and damages of $3,000,000 (case No. CIVRS706024.) Dr. Grewal filed a counter suit.

·

On September 20, 1999, Mohammad Tariq, MD was granted a default judgment in the District Court of Collin County, Texas, 380th Judicial District in the amount of $280,835.10, plus prejudgment and post-judgment interest against Healthcare Business Services Group, Inc., d/b/a/ Peacock Healthcare.  Kamran Ghadimi bought the Tariq judgment in April 28, 2006 and pursuing collection in California.  This matter was settled on November 8, 2006 for $185,000. The Company paid $140,000 out of $185,000 and making payments monthly for $3,000. As of filing this report company owes 15 months of payment equal to $45,000. Case was dismissed in 2007.

·	Healthcare filed a collection action against Frank Zondlo, and Zondlo also filed across-complaint against Healthcare.  The matter is now in the discovery and law and motion stage.

 

Bankruptcy Proceedings

 

On June 26, 2008 Healthcare Business Services Groups, Inc.(“HBSGI”), a Delaware Company, a subsidiary of PPJ Enterprise (“PPJE”), filed for Chapter 7 Bankruptcy protection. HBSGI has been over burdened with law suits by its former clients and loss of major clients and revenue. HBSGI closed its Upland office on June 30, 2007.

 

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. Other than the legal proceedings listed below, we are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. However, we may become involved in material legal proceedings in the future.

 

Note 16 - Subsequent Events

 

Name Change

 

A Certificate of Amendment to the Articles of Incorporation to change the registrant’s name to PPJ Enterprise which amendment became effective on March 20, 2008. As a result of the name change, the Company’s trading symbol changed from “HBSV” to “PPJE”.

 

Bankruptcy Proceedings

 

On June 26, 2008 Healthcare Business Services Groups, Inc.(“HBSGI”), a Delaware Company, a subsidiary of PPJ Enterprise (“PPJE”), filed for Chapter 7 Bankruptcy protection. HBSGI has been over burdened with law suits by its former clients and loss of major clients and revenue. HBSGI closed its Upland office on June 30, 2007.

 

Authorized Shares and Reverse Stock Split

 

An amendment to the Registrant’s Articles of Incorporation to increase the authorized shares to 1,500,000,000 shares of common stock, to reauthorize the par value of $.001 per share of common stock, and to authorize additional 95,000,000 shares of preferred stock making it a total of 100,000,000 with a par value of $.001 per share of preferred stock that became effective March 20, 2008; and 300,000,000 Free Trading shares also were registered with Nevada Secretary of State on March 20, 2008.

 

On March 20, 2008, the Board of Directors approved an Amendment for a 1:400 reverse stock split. . All references in the financial statements to the number of shares outstanding, per share amounts, and stock options data of the Company’s common stock have been restated to reflect the effect of the reverse stock split for all periods presented.

 

Equity

 

Subsequent to the year ended December 31, 2007, the Company issued 133,800,000 shares of common stock of which 100,000,000 was issued to an Officer for debt conversion, 29,800,000 shares were issued to non-affiliated individuals for services and 4,000,000 shares were issued for the conversion of debt.

 

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ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

We have had no disagreements with our independent accountants.

ITEM 8A.  CONTROLS AND PROCEDURES