U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10SB
Amendment #1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Global - Chase Industries, Inc.
(Name of Small Business Issuer in its charter)
Minnesota 41-1853444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
320 East Main Street
Anoka, Minnesota 55303
(Address of principal executive office) (Zip Code)
Issuer's telephone number (612) 241-1668
Securities to be registered under Section 12(g) of the Act:
Common Shares
A Warrants
B Warrants
Charles Clayton
527 Marquette
Minneapolis, Minnesota 55402
(612) 338-3738
(Agent for Service)
ITEM 1. DESCRIPTION OF BUSINESS
Global-Chase Industries, Inc. was formed in Minnesota in 1996 on
January 3 as W.N. and Associates, Inc. The name was changed on July 2, 1996.
The Company did no business between January 3, 1996 and July 2, 1996.
At about that time the present line of business was being considered and it
seemed appropriate to change the name to the present name, and the Articles of
Incorporation were amended. This was not the result of any bankruptcy
proceedings, reorganization or change in control.
The company purchased an inventory of wildlife art from Rochkes, Inc.
on July 20, 1996. Rochkes, Inc. is a wholesaler of paintings and art work. The
decision to purchase the art work started with Mr. Larvinson, the Secretary and
a Director of the Company, and was based on the premises that they could be sold
for more than the purchase price. The purchase was for $4,500,000.
The purchase consisted of 90,000 sets of wild bird pictures. Each set
consists of two pictures. The pictures are lithographs, signed by the artist,
R.L. "Bob" Kothenbuetel, and numbered. Mr. Kothenbuetel is an artist in the
State of Washington and was selected as the Washington State Ducks Unlimited
Artist of the year in 1982, and the year before one of his paintings was chosen
for the Washington State Upland Bird Stamp.
The pictures are all 8" X 10.5" in size, and there are 7 different sets
of two each. They may be sold as is, or are suitable for matting, framing,
velluming and glass, as the customer may desire. All sales to this time have
been "as is."
All of the sales that have been made at this time have been to
wholesalers/distributors of this type of art, for sale in North and South Dakota
and in Minnesota. The sales have been for $87.50 per set. The company has no
intention to confine itself to sales to wholesalers/distributors, but will also
seek other sales.
The company has a lease on a building that has all of the equipment and
material for building frames, so if it sells an order that requires the pictures
to be framed it will be able to build the frames for them. Management of the
company is skilled in wood working, and has agreed to do the work on a part
time, as required basis.
The inventory was purchased under a contract with terms as follows:
During the first twelve (12) months of the Note, there shall be no
principal or interest payable; interest will begin to accrue beginning
in the thirteenth month at eight percent per year. Interest will be
paid annually after 12 months. Starting with the thirty-first month,
there shall be payments of $100,000 per month which will be applied
first toward interest then toward principal. The entire balance of the
Note will be due and payable on July 20, 2001.
It is agreed that Seller may choose to exercise an option to convert
all or a portion of the Note into a stock option of Global-Chase
Industries, Inc., upon terms which will be determined between the
parties at any time during the first eight months of this Note. For
this option, Seller agrees that it will grant Buyer an Eighteen month
extension upon terms that are acceptable to Seller.
Management of the Company does not intend that the conversion of any of
the debt of the note will result in any change of control of the Company. The
note provides that the terms of any conversion must be by agreement of the
parties and the Company will not agree to any change of control.
The Company feels that it has sufficient capital at this time, and has
no plans to raise money by a private placement of restricted stock, a public
offering or a Regulation S offering. The Company recognizees that conditions may
change, but it has no present plans to raise any money. The Company also has no
plans to seek a loan, there are no agreements or understandings for any loan. In
the event it needs funds it may seek a loan, but there are no plans for one at
this time.
This form 10-SB has been filed on a voluntary basis. The Company is not
in need of funds and would like to register its stock.
ITEM 2. PLAN OF OPERATION
The company is in the business of wholesale sales of art works,
including the final product of finishing the product such as framing.
The thrust of the business of the company is to develop a wholesale
market of which pictures are either framed/matted/vellumed/glassed or sized and
sold to other businesses that will reuse them in many different delivered forms.
Such businesses that will reuse them are hotels, large office complexes,
hospitals, and businesses as well as numerous others. Businesses that will use
for resale are retail shops, variety outlets, custom framing business and others
that will have need for a retail-type market.
The sales of the Company to date have been in the local area, North and
South Dakota and Minnesota. The Company is pursuing sales in other parts of the
country, and has no intent to limit itself to local sales.
The Company will also seek to purchase inventories of other art work if
it can be located at a favorable price. The current inventory was purchased at a
price of approximately $50.00 per set, and is being sold at approximately $87.50
per set. If other inventories can be found it will negotiate for the purchase of
them.
The Company has made its agreements for the purchase of the inventory
and the lease of the offices and shop on the basis that it will have few funds
to begin with, and more funds later as sales progress. As a result there are no
payments for the first 4 months of the lease, and no payments for the first year
for the inventory.
ITEM 3. DESCRIPTION OF PROPERTY
The company owns no property at this time. The company leases a
facility of 1,500 square feet at RR3, Elk River, Minnesota 55330. The company
has a 36 month lease that includes all the equipment on the premises. The
company has a 4 month front end no charge to its lease and a progressive lease
increase of $1,000.00 every 8 to 12 months starting at $3,850.00 a month. There
is approximately $12,000.00 in miscellaneous raw materials (building lumber,
miscellaneous wood supplies for company use in its framing, etc.) on the
premises that can be purchased and used from the lessor. It will be billed
quarterly and inventoried yearly and then adjusted (the purchased materials).
Prices are to be based on the Minneapolis, Minnesota wholesale market.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is no stock held by management at this time and there is no
ownership that exceeds 5% of the company outstanding common stock at this time.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the company, with a brief
description are as follows:
Name Age Position
- ---- --- --------
Robert Severson 42 CEO and a Director
Gary Larvinson 50 Secretary/Treasurer and a Director
Norman Olson 51 Director
Robert Severson, age 42, CEO and a Director. Mr. Severson has been the
sole proprietor of R. C. Drywall from 1990 to the present time.
Gary Larvinson, age 50, Secretary/Treasurer and a Director. Mr.
Larvinson has been the proprietor of "A Place for Everything," a furniture
business in Elk River, Minnesota for more than the past five years. Mr.
Larvinson was the Secretary and a Director of North American Resorts, Inc., a
public company, from November 1994 to September, 1996 when he resigned.
Norman Olson, age 50, a Director. Mr. Olson is the sole proprietor of
Olson Construction, and has been for more than the past five years.
ITEM 6. EXECUTIVE COMPENSATION
There is no employee that was paid as much as $60,000 per year as
salary. There is no contract for the payment of a salary to any employee. There
are no employment agreements. This may be a risk in the event that any of the
employees, or management should leave the Company; however, the Company feels
that it would be able to replace that person in the event this should happen.
All employees are part-time, this includes the management. There are
eight part-time employees at this time, which includes management. Management
has agreed to help, as needed, until the business requires full time employees.
The company has agreed to pay part time employees $8.00 per hour when they work.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 8. LEGAL PROCEEDINGS
None
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The company's common stock has not traded at this time.
There are 60 holders of the common stock of the Company. There have
never been any dividends, cash or otherwise, paid on the common shares of the
Company.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
There was a Form D for a Rule (504) offering in Minnesota filed in
September, 1996. The offering was for $50,000 and was sold to 22 persons, 12
accredited and 10 non-accredited.
Name Date Shares Cost
Wallace Norman 7/96 900,000 $2,250
David Paul 7/96 900,000 $2,250
Jon Loder 7/96 900,000 $2,250
James Thomas 7/96 900,000 $2,250
Art Price 7/96 850,000 $2,125
Michael H. Lenneman 7/96 850,000 $2,125
Gary W. Burmeister 7/96 850,000 $2,125
Francy Gleason 7/96 980,000 $2,450
Timothy Harvey 8/96 980,000 $2,450
James Smerdon 8/96 980,000 $2,450
Robert Van Hoef 8/96 980,000 $2,450
Albert Peterson 8/96 980,000 $2,450
Virgil W. Michaelis 8/96 950,000 $2,375
Brian L. Jansen 8/96 950,000 $2,375
Marshall Newland 8/96 900,000 $2,250
Charles E. Generoux 8/96 900,000 $2,250
Neil Knop 8/96 800,000 $2,000
Dora M. Hanson 8/96 800,000 $2,000
Mike Moinichen 8/96 750,000 $1,875
Tom Hammre 8/96 950,000 $2,375
Rick Carpenter 8/96 975,000 $2,437.50
Mike Praught 8/96 975,000 $2,437.50
There was no underwriter on the sales of any of the securities, and no
commissions were paid. All sales were for cash.
The registrant believes that all transactions were transactions not
involving any public offering within the meaning of Section 4(2) of the
Securities Act of 1933, since (a) each of the transactions involved the offering
of such securities to a substantially limited number of persons; (b) each person
took the securities as an investment for his own account and not with a view to
distribution; (c) each person had access to information equivalent to that which
would be included in a registration statement on the applicable form under the
Act; (d) each person had knowledge and experience in business and financial
matters to understand the merits and risk of the investment; therefore no
registration statement need be in effect prior to such issuances.
ITEM 11. DESCRIPTION OF SECURITIES
The Company has authorized 700,000,000 shares of common stock, no par
value. Each holder of common stock has one vote per share on all matters voted
upon by the shareholders. The voting rights are noncumulative so that
shareholders holding more than 50% of the outstanding shares on common stock are
able to elect all members of the Board of Directors. There are no preemptive
rights or other rights of subscription.
Each share of common stock is entitled to participate equally in
dividends as and when declared by the Board of Directors of the Company out of
funds legally available, and is entitled to participate equally in the
distribution of assets in the event of liquidation. All shares, when issued and
fully paid, are nonassessable and are not subject to redemption or conversion
and have no conversion rights.
There are 20,000,000 A Warrants and 20,000,00 B Warrants outstanding.
The A Warrants are exercisable for 36 months from July 2, 1996 into common stock
of the Company at an exercise price of $.10 per share. The B Warrants are
exercisable for 36 months from July 2, 1996 into common stock of the Company at
an exercise price of $.20 per share. Both the A Warrants and the B Warrants are
callable by the Company, upon 30 days written notice, at a price of $.01 per
warrant.
There was an offering of shares of the Company that began in July, 1996
and ended in August, 1996. The offering was for 20,000,000 Units; each unit
included one share of common stock, one A Warrant and one B Warrant, each Unit
was priced at $.0025. The total dollar amount raised was $50,000, which was for
working capital of the Company.
Risk Factor - Penny Stock Regulation. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules adopted by the Securities and Exchange Commission. Penny stock
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq system, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's securities become subject to the penny stock
rules, investors in this offering may find it more difficult to sell their
securities.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Minnesota Statutes, Section 302A.521, contain an extensive
indemnification provision which requires mandatory indemnification by a
corporation of any officer, director and affiliated person who was or is a
party, or who is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a member, director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a member, director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, and against judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted, or failed to act, in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In some
instances a court must approve such indemnification.
ITEM 13. FINANCIAL STATEMENTS
Please see the attached Financial Statements.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Please see the attached Financial Statements
(b) Exhibits:
2.1 Articles of Incorporation, amendments and bylaws
2.2 Warrant Agreement
6.1 Agreement with Rochkes, Inc. and promissory note
6.2 Lease
10 Opinion of counsel
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: Global - Chase Industries, Inc.
____/s/___________________________
Robert Severson, President
____/s/___________________________
Gary Larvinson, Treasurer
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
FINANCIAL STATEMENTS
FROM JANUARY 3, 1996 (DATE OF INCEPTION) TO APRIL 30, 1996
AND THE SIX MONTHS ENDED OCTOBER 31, 1996
GARY A. LaPALME, C.P.A.
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
CONTENTS
FROM JANUARY 3, 1996 (DATE OF INCEPTION) TO APRIL 30, 1996
and THE SIX MONTHS ENDED OCTOBER 31, 1996
Page
----
Independent Auditor's Report 2
Financial Statements
Balance Sheets 3
Statements of Earnings 4
Statements of Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7-9
To the Stockholders and Board of Directors
GLOBAL-CHASE INDUSTRIES, INC.
A Development Stage Company
Minneapolis, Minnesota
I have audited the accompanying balance sheet of GLOBAL-CHASE INDUSTRIES, INC.,
a development stage company as of APRIL 30, 1996 and OCTOBER 31, 1996 and the
related statements of earnings, stockholders' equity, and cash flows from
JANUARY 3, 1996 (date of inception) to APRIL 30, 1996 and the six months ended
OCTOBER 31, 1996. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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 the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of GLOBAL-CHASE INDUSTRIES, INC., a
development stage company as of APRIL 30, 1996 and OCTOBER 31, 1996 and the
results of its operations and its cash flows from JANUARY 3, 1996 (date of
inception) to APRIL 30, 1996 and the six months ended OCTOBER 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Gary A. LaPalme, C.P.A.
Gary A. LaPalme, C.P.A.
Certified Public Accountants
November 4, 1996
Minneapolis, Minnesota
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
BALANCE SHEETS
APRIL 30, 1996
OCTOBER 31, 1996
ASSETS
April 30, October 31,
1996 1996
--------- -----------
Current Assets
- --------------
Cash $ -- $ 95,000
Accounts receivable -- 185,000
Inventory -- 4,368,550
----------- -----------
Total Current Assets -- 4,648,550
----------- -----------
Other Assets
- --------------
Incorporation costs, net of
accumulated amortization
of $10 and $25 respectively 140 125
----------- -----------
TOTAL ASSETS $ 140 $ 4,648,675
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Current portion of long-term debt $ -- $ --
Accounts payable 150 17,739
Deferred income taxes payable -- 28,000
----------- -----------
Total Current Liabilities 150 45,739
----------- -----------
Long-Term Debt
- --------------
Note payable, net of portion included
in current liabilities -- 4,500,000
----------- -----------
Commitments and Contingencies -- --
- -----------------------------
Stockholders' Equity
- --------------------
Common stock, no par value,
100,000 authorized, -0- issued
and outstanding at April 30, 1996
and 700,000,000 authorized and
20,000,000 issued at October 31, 1996 -- 50,000
Contributed capital -- 80,303
Retained earnings (10) (27,367)
----------- -----------
Total Stockholders' Equity (10) 102,936
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 140 $ 4,648,675
=========== ===========
See Notes to Financial Statements
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF EARNINGS
FROM JANUARY 3, 1996 (DATE OF INCEPTION) TO APRIL 30, 1996
and THE SIX MONTHS ENDED OCTOBER 31, 1996
April 30, October 31,
1996 1996
--------- -----------
Sales $ -- $ 230,000
---------
Cost of Sales -- 135,054
- ------------- --------- ---------
Gross Profit -- 94,946
- ------------ --------- ---------
General and Administrative
Expenses
Interest expense -- 100,603
Rent expense -- 7,700
Legal fees -- 3,000
Secretarial services -- 2,796
Office expense -- 2,795
Meetings -- 1,200
Casual labor -- 938
Delivery -- 776
Telephone -- 677
Vehicle expense -- 525
Miscellaneous -- 502
Insurance -- 401
Utilities -- 375
Amortization of incorporation costs 10 15
--------- ---------
Total General and
Administrative Expenses 10 122,303
--------- ---------
Net Earnings Before Taxes on Income (10) (27,357)
---------
Taxes on Income -- --
- --------------- --------- ---------
Net Earnings $ (10) $ (27,357)
- ------------ ========= =========
Earnings Per Share
Primary $ -- $ (.11)
========= =========
Fully Diluted $ -- $ (.11)
========= =========
See Notes to Financial Statements
<TABLE>
<CAPTION>
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
FROM JANUARY 3, 1996 (DATE OF INCEPTION) TO APRIL 30, 1996
and THE SIX MONTHS ENDED OCTOBER 31, 1996
Common Stock Retained
Shares Amount Earnings Total
------ ------ -------- -----
<S> <C> <C> <C> <C>
BALANCES, JANUARY 3, 1996 -- $ -- $ -- $ --
Net income, from January 3,
1996 (date of inception)
to April 30, 1996 -- -- (10) (10)
---------- ---------- ---------- ----------
BALANCES, APRIL 30, 1996 -- -- (10) (10)
Net earnings, Six Months
Ended October 31, 1996 -- -- (27,357) (27,357)
Issuance of Stock 20,000,000 50,000 -- 50,000
Contributed capital -- 80,303 -- 80,303
---------- ---------- ---------- ----------
BALANCES, OCTOBER 31, 1996 20,000,000 $ 130,303 $ (27,367) $ 102,936
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
FROM JANUARY 3, 1996 (DATE OF INCEPTION) TO APRIL 30, 1996
and THE SIX MONTHS ENDED OCTOBER 31, 1996
April 30, October 31,
1996 1996
--------- -----------
Cash Flows From Operating Activities
- ------------------------------------
Net income $ (10) $ (27,357)
Adjustments to reconcile net income to
net cash used for operating activities:
Amortization 10 15
Accounts receivable -- (185,000)
Inventory -- (4,368,550)
Accounts payable 150 17,589
Deferred income taxes payable -- 28,000
Incorporation costs (150) --
----------- -----------
Net Cash From Operating Activities -- (4,535,303)
- ---------------------------------- ----------- -----------
Cash Flows From Financing Activities
- ------------------------------------
Proceeds from long-term debt-net -- 4,500,000
Issuance of common stock -- 50,000
Contributed capital -- 80,303
----------- -----------
Net Cash From Financing Activities -- 4,630,303
- ---------------------------------- ----------- -----------
Net Increase in Cash -- 95,000
-----------
Cash at Beginning of Period -- --
- --------------------------- ----------- -----------
Cash at End of Period $ -- $ 95,000
- --------------------- =========== ===========
See Notes to Financial Statements
GLOBAL-CHASE INDUSTRIES, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
FROM JANUARY 3, 1996 (DATE OF INCEPTION) TO APRIL 30, 1996
and THE SIX MONTHS ENDED OCTOBER 31, 1996
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The Company was incorporated on January 3, 1996
in the State of Minnesota. The Company's primary concentrations are to
include the wholesaling of pictures and framed pictures primarily to
other businesses. The company had no activity through April 30, 1996.
Development Stage Company - The Company is in the development stage of
its existence. The Company's principal operations as noted above have
commenced, but there has been no significant revenue therefrom.
Name Change - The Company was incorporated on January 3, 1996 under the
name of W.N. and Associates, Inc. Effective July 2, 1996 the name was
changed to Global-Chase Industries, Inc.
Financial Instruments - The carrying amounts of the Company's financial
instruments, which include accounts receivable, accounts payable, and
long-term debt, approximate their fair values as of October 31, 1996.
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 amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Plan of Operation - The management of the Company believes that the
planned operations will meet the cash needs of the Company due to the
profit structure in the product, coupled with the deferred payments on
the rent and on the note payable. The Company may also look at other
wholesale products to bring into the sales structure. If the cash needs
are not sufficient for operations due to a delay in anticipated
revenues and profits the Company has the following options as a
possible source of cash needs:
1) bank financing, 2) call the warrants, 20,000,000 warrants @ $.10 =
$200,000 plus 20,000,000 warrants @ $.20 = $400,000, for a total of
$600,000, 3) a private placement, and 4) a public offering. The Company
believes that the operations will satisfy its cash requirements, and
has stated that they have no intention of using the options listed.
Revenue Recognition - Revenue is recognized when the sales cycle is
completed: from the receipt of the sales order through the shipping of
the goods and the invoicing of the sale.
Inventory - Inventory consists of artwork and is valued at the lower of
cost (first-in, first-out) or market.
NOTE B COMMON STOCK
The authorized number of common shares was 100,000 at April 30, 1996
and 700,000,000 at October 31, 1996. The number outstanding was zero at
April 30, 1996 and 20,000,000 at October 31, 1996.
The stock offering was done as a unit consisting of one common share,
one common Warrant A, and one common Warrant B. Warrant A is
exercisable at $.10, and Warrant B is exercisable at $.20. Both
Warrants have a thirty six (36) month exercisable time frame from July
2, 1996. Both Warrants can be called by a written board resolution and
will expire within thirty (30) days of being called if they are not
exercised.
NOTE C LONG-TERM DEBT
$4,500,000 Promissory note at 8% dated July 20, 1996 with the following
terms:
1. No principal or interest payable for first twelve months.
2. Interest accrual starts on thirteenth month and paid annually
every twelve months after starting.
3. Interest and principal paid starting with the thirty first
month at $100,000 per month.
4. The note will be due and fully payable on July, 2001.
Current maturities are as follows:
Year ended: April 30, 1997 $ -0-
April 30, 1998 -0-
April 30, 1999 427,000
April 30, 2000 907,000
April 30, 2001 982,000
Thereafter 2,184,000
----------
$4,500,000
==========
NOTE D LEASE OBLIGATION
Starting August, 1996 the Company is subject to the lease agreement
that calls for no charge for the first four months, $3,850 per month
for the next 8 months, $4,850 per month for the next twelve months, and
$5,850 per month for the final twelve months. The lease is through
July, 1999.
Minimum lease payments are as follows:
Year ended: April 30, 1997 $ 19,250
April 30, 1998 55,200
April 30, 1999 67,200
April 30, 2000 17,550
----------
$ 159,200
==========
NOTE E EARNINGS PER SHARE
Primary weighted earnings per common share is computed by dividing net
income available to common shareholders by the weighted average number
of shares outstanding during the period.
Fully diluted weighted earnings per share would normally be computed
using the warrants as common share equivalents. However, the warrants
were not used as the effect would be antidilutive.
NUMBER OF SHARES
-------------------------------------------
From January 2, 1996 Six Months
(Date of Inception) Ended
To April 30, 1996 October 31, 1996
-------------------- ----------------
Primary -0- 239,130
Fully Diluted -0- 239,130
NOTE F CONTRIBUTED CAPITAL
The lease agreement stipulates no rent was to be paid for the first
three months of the lease (see footnote D). Also, the note agreement
stipulates that no interest is to accrue for the first twelve months
(see footnote C). Interest expense and rent expense have been recorded
for these periods to properly reflect the costs of doing business:
Interest $ 100,603
Rent 7,700
------------
108,303
Deferred income taxes (28,000)
------------
$ 80,303
============
The corresponding amount of $ 80,303 has been recorded as a
contribution to capital.
NOTE G DEFERRED INCOME TAXES
The Company has a deferred tax liability from the expensing of certain
expenses for financial statements that would not be deducted for income
taxes for the same period. The expensing of interest expense and rent
expense with a corresponding contribution to capital gives rise to the
deferred tax liability. See footnote F.
