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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
COMMISSION FILE NUMBER: 000-22855
NEW DIRECTIONS MANUFACTURING, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 86-0671974
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2940 W. WILLETTA STREET, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip Code)
(602) 352-1165
(Issuer's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports),and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
The issuer's revenues for its most recent fiscal year were $6,813,316.
As of September 1, 1998, the issuer had 5,052,270 shares of it $.001
par value Common Stock issued and outstanding. Based upon the closing price of
$.50 per share on September 1, 1998, the aggregate market value of the Common
Stock, the issuer's only class of voting stock, held by non-affiliates was
$1,080,913.
Transitional Small Business Disclosure Format Yes [ ] No [X]
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NEW DIRECTIONS MANUFACTURING, INC.
TABLE OF CONTENTS
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PAGE
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PART I
ITEM 1. BUSINESS 1
HISTORY 1
DEVELOPMENT OF THE BUSINESS 2
MARKETING AND DISTRIBUTION 3
SOURCES AND AVAILABILITY OF RAW MATERIALS 3
INTELLECTUAL PROPERTY 3
CUSTOMERS 3
GOVERNMENT CONTRACTS 3
COMPETITION 3
ENVIRONMENTAL COMPLIANCE 3
EMPLOYEES 4
ITEM 2. PROPERTIES 4
ITEM 3. LEGAL PROCEEDINGS 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 4
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 4
MARKET INFORMATION 4
HOLDERS 5
DIVIDENDS 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 5
GENERAL 5
RESULTS OF OPERATIONS 5
LIQUIDITY AND CAPITAL RESOURCES 6
SEASONALITY 6
BACKLOG 6
YEAR 2000 ISSUE 7
ITEM 7. FINANCIAL STATEMENTS 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 22
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 22
ITEM 10. EXECUTIVE COMPENSATION 22
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 22
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS 22
ITEM IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 22
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PART I
ITEM 1. BUSINESS
HISTORY
New Directions-Manufacturers of Contemporary Furniture, Inc., an
Arizona corporation ("New Directions-Arizona") was established in 1989 by the
Horner family. Previously, Jack Horner, Sr. and Jr. both owned and managed
separate chains of furniture stores in the Southwest United States. Jack Jr. was
also a factory representative for different furniture manufacturers over a
period of 10 years. In the late 1980's, they saw the increasing demand for
quality oak furniture and the lack of an adequate supply of the product.
Consequently, Jack Sr. sold the furniture store chain and established New
Directions-Arizona with his two sons.
The Company manufactures quality oak furniture using no particleboard.
Its product line consists mainly of entertainment centers, wall units, and room
dividers; however, it also offers bookshelves, bedroom suites, and other oak
furniture units. The Company's customers are located throughout the United
States, as well as Canada, Puerto Rico, and Bermuda.
The business expanded from 12 employees and a 10,000 sq. ft. production
facility, to 80 employees in a 34,000 sq. ft. facility. Revenues grew to over $5
million for the fiscal year ending June 30, 1996. The Company's early growth was
financed entirely by internally generated funds.
Jack Sr. wished to retire from the business. For personal reasons,
neither of Jack Sr.'s sons desired to assume control of the Company from their
father. Consequently, the family offered the business for sale. Jack Jr.
expressed a strong interest in remaining with the business after the change in
ownership. New management retained Jack Jr. in the business to ensure a smooth
management transition and to take advantage of his extensive knowledge gained
from 15 years experience in the furniture trade.
New Directions Manufacturing, Inc. (the "Company") was incorporated
under the laws of Nevada on January 9, 1997. The Company acquired the option
("Option") to purchase the outstanding capital stock of New Directions-Arizona
from Mr. Sean F. Lee in exchange for the opportunity to purchase 1,530,000
shares of the Company at par value, and the reimbursement of Mr. Lee's costs
associated with acquiring the option ($20,000). The Company then paid the
initial purchase price of the Option of $100,000. The Stock Purchase Agreement
and the companion agreements pertaining to the acquisition of New
Directions-Arizona by the Company shall collectively be referred to herein as
the "Acquisition Agreement."
The terms of the Acquisition Agreement included the following:
1. The Company held the option to purchase 100% of the issued and
outstanding common stock of New Directions-Arizona for the stated
purchase price of $2.08 million, of which approximately $1.18 million
was to be paid in cash on or before January 31, 1997, the purchase price
of the option of $100,000 would be credited, and $800,000 was to be
financed by the Sellers under the term of a four year promissory note
bearing interest at the rate of 8% annually with level principal and
interest payments due monthly. The amount of the cash payments to be
made at closing was dependent upon the amount of New Directions-Arizona
accounts receivable on the closing date.
2. The selling shareholders of New Directions-Arizona, which included its
then current officers and directors, agreed to a five-year non-compete
covenant.
3. Except as noted in (4) below, the officers and directors of New
Directions-Arizona would resign and be replaced with the nominees of
the Company. (See "Management.")
4. Jack Horner, Jr., a co-founder, shareholder and executive officer of New
Directions-Arizona, would continue to serve as the Vice President of the
Company after the Company's acquisition of New Directions-Arizona.
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5. Two key executive officers of the Company, Donald A. Metke and Jack
Horner, Jr., were each issued 510,000 shares of restricted common stock
of the Company in exchange for the payment of par value ($510 each) and
to ensure their long term commitment to the Company. Sean F. Lee was
issued 1,530,000 shares of restricted common stock of the Company.
On January 10, 1997, the Company entered into an Exchange Agreement with
Premier Ventures & Exploration, Inc., a Louisiana corporation ("Premier"), a
public company with dormant operations, whereby the Company became a wholly
owned subsidiary of Premier. Pursuant to the terms of the Exchange Agreement,
the shareholders of the Company exchanged their shares of the Company on a
one-to-one basis for shares in Premier. Upon the closing of this transaction
(the Exchange Agreement), there existed Premier, a Louisiana corporation, with
dormant operations, and its wholly-owned subsidiary, the Company, which was
basically a shell with no shareholders but which held the Option to purchase New
Directions-Arizona.
On January 15, 1997, the Company exercised the Option to purchase New
Directions-Arizona with a cash payment of $1,180,000. The Company paid the cash
payment of $1,180,000 with funds raised in its private offering commenced on
January 9, 1997 as well as a short-term loan from a private individual in the
amount of $500,000. The loan was completely paid off, including principal and
interest, upon the completion of the private offering on May 14, 1997. The
remaining balance of the purchase price of $800,000 was financed by the sellers
according to a promissory note under the terms set forth in (1) above. There
remains due and owing $529,167 under the note as of June 30, 1998. Therefore,
upon the closing of the Acquisition Agreement, there existed Premier, a
Louisiana corporation, with dormant operations, and the Company (New Directions
Manufacturing, Inc., a Nevada corporation) which now owned a wholly-owned
subsidiary, New Directions-Arizona, the operating company.
Management of the Company desired to maintain a public company such that its
shareholders would have liquidity, but also desired to simplify this corporate
structure. The record keeping and accounting requirements to maintain three
different companies, all with different corporate residences, would be time
consuming and costly. Therefore, management decided to merge Premier, the public
company, with and into New Directions Manufacturing, Inc., a Nevada corporation.
This would leave New Directions Manufacturing, Inc., a Nevada corporation, as a
public company with a wholly owned subsidiary (New Directions-Arizona).
Accordingly, the Company entered into a Plan of Merger (the "Merger Agreement")
with Premier on February 25, 1997. The Merger Agreement called for all shares of
stock of Premier then outstanding to be converted into equal shares of New
Directions Manufacturing, Inc., a Nevada corporation, all Premier stock was
cancelled, and Premier was merged with and into the Company, leaving the Company
as the surviving entity. The Merger was effective on April 16, 1997. Upon the
closing of the Merger, there existed New Directions Manufacturing, Inc., a
Nevada corporation, which was now a public company and which owned as a
wholly-owned subsidiary, New Directions-Manufacturers of Contemporary Furniture,
an Arizona corporation, the operating company. New Directions-Manufacturers of
Contemporary Furniture, Inc., an Arizona corporation, subsequently changed its
name to New Directions Manufacturing, Inc., an Arizona corporation.
The address of the Company's principal executive offices is 2940 West
Willetta, Phoenix, AZ 85009. The Company's telephone number is (602) 352-1165.
Unless otherwise noted, the "Company" as used in this 10-KSB, will refer to the
consolidated entities described above.
DEVELOPMENT OF THE BUSINESS
The Company operates two showrooms, one in San Francisco, California, and
one in High Point, North Carolina. The showroom in High Point opened in October
1997. The showrooms have been well received by customers. Each showroom is open
twice each year as part of the National Furniture Market, at which time new
products, together with the Company's stable line of entertainment centers, wall
units, bedroom sets, and other products are presented. Management believes these
showrooms offer an excellent opportunity to present the Company's products now
and in the future.
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MARKETING AND DISTRIBUTION
The Company sells its products through retailers throughout the United
States including the East and West Coasts, Alaska, and Hawaii. Products are also
sold through retailers in Puerto Rico, Canada, and the Bahamas.
The Company currently has 10 sales representatives throughout the United
States who call on current customers and potential customers in the industry.
Additionally, a full color catalog is published which is sent to current and
potential customers. The Company displays its products as part of the National
Furniture Market twice a year at each of its showrooms in High Point, North
Carolina, and San Francisco, California.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company purchases the raw materials used in the production of its
furniture from a variety of sources. The Company believes that none of the
materials required for its furniture manufacturing operations are proprietary in
nature and that an adequate supply of raw materials is available from multiple
sources.
INTELLECTUAL PROPERTY
The Company neither owns nor has applied for any trade names or trademarks
in the United States or abroad, for use with its furniture product lines.
CUSTOMERS
For the fiscal year ended June 30, 1998, the Company had one customer, which
accounted for approximately 17.1% of the Company's total gross sales. No other
single customer accounted for more than 10% of the Company's total gross sales
for the fiscal year ended June 30, 1998. In July 1998, this customer informed
the Company that they had selected another manufacturer. While this loss could
have a negative short-term impact on the Company's revenues, management believes
the Company's new customers and new products will offset this loss in the
long-term. Further, while loss of any substantial customer could have a material
short-term impact on the Company's business, the Company believes that its
diverse furniture distribution channels would minimize the long-term impact of
any such loss.
GOVERNMENT CONTRACTS
The Company has no Government contracts.
COMPETITION
The furniture market is highly competitive, and includes numerous entities,
some of which may have substantially greater financial and marketing resources
than the Company. The Company believes that the principal competitive factors in
the furniture industry marketplace are price, quality, function, innovative
product design, style, prompt delivery, and the ability to offer customers a
full product line. The Company's varied product line is designed based on the
foregoing factors to achieve customer satisfaction and, accordingly, the Company
believes that its products effectively compete in such marketplace.
ENVIRONMENTAL COMPLIANCE
Environmental aspects of the Company's business are regulated primarily by
federal and state laws and by the ordinances of the localities where the
Company's facilities are located. The Company believes it is in compliance with
all of these laws and ordinances.
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EMPLOYEES
As of the 1998 fiscal year end, the Company employed a total of
approximately 75 full-time employees. There are no collective bargaining
agreements covering any of the Company's employees. The Company believes it has
good employee relations.
ITEM 2. PROPERTIES
The Company leases a 34,000 square foot facility in Phoenix, Arizona that
includes offices and manufacturing space, pursuant to a lease agreement renewed
as of July 1, 1998. The term of the lease renewal covers the period of July 1,
1998 through June 30, 2003. Monthly payments are as follows: July 1, 1998
through June 30, 1999 - $8,490.50/NNN; July 1, 1999 through June 30, 2001 -
$9,509.36/NNN; July 1, 2001 through June 30, 2002 - $10,188.60/NNN; and July 1,
2002 through June 30, 2003 - $10,494.26/NNN (plus applicable rental tax). The
Company also leases showrooms in San Francisco, California and High Point, North
Carolina that require approximate monthly lease payments of $2,037 and $6,000,
respectively.
ITEM 3. LEGAL PROCEEDINGS
On November 10, 1997, the Company was served with a Fourth Amended Complaint
in the matter of Marilyn S. Puniska v. Kane Furniture Corporation, et al.,
Circuit Court for the Sixth Judicial Circuit, in and for Pinallas County, State
of Florida, Circuit Civil Case Number 96-5545-CI-15. There are two claims
against the Company, strict liability and negligence, surrounding an accident
with a piece of furniture. The litigation has been turned over to the Company's
insurance carrier who is handling the defense for the Company. Management of the
Company believes that this matter will be completely covered by its liability
insurance and that the Company will not suffer any out-of-pocket cash losses in
defending/settling this matter.
Management of the Company believes that there are no other litigation
matters pending or threatened against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended June 30, 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION. The Company's Common Stock is traded on the
Over-the-Counter ("OTC") Bulletin Board Quotation System. The following table
sets forth the high and low sales prices of the Company's Common Stock, as
reported on the OTC Bulletin Board for the periods indicated. The prices
presented are bid prices which represent prices between broker-dealers and don't
include retail mark-ups and mark-downs or any commission to the dealer.
Therefore, the prices may not reflect actual transactions.
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Quarter Ended High Low
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1997
First $ 12.00 $ 1.875
Second $ 9.50 $ 3.00
Third $ 4.50 $ 1.00
Fourth $ 5.00 $ 1.125
1998
First $ 4.375 $ 1.00
Second $ 4.0625 $ 1.75
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(b) HOLDERS. As of September 1, 1998, the number of holders of record of the
Company's Common Stock was approximately 468. The Company believes that there
are approximately an additional 300 holders who own shares of the Company's
Common Stock in street name.
(c) DIVIDENDS. The Company has paid no cash dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion regarding the financial statements of the Company
should be read in conjunction with the Financial Statements of the Company
included herewith.
GENERAL
New Directions Manufacturing, Inc. (the "Company") is a manufacturer of
quality oak furniture. The Company produces oak contemporary home furnishing
items such as television stands, stereo towers, entertainment centers, wall
systems, bookcases, and both adult and youth bedroom units. The Company sells
its product through retailers on both the East and West Coasts of the United
States, and Alaska, Hawaii, Puerto Rico, Canada, and the Bahamas. The Company
includes New Directions Manufacturing, Inc., a Nevada corporation, and its
wholly owned subsidiary, New Directions Manufacturing, Inc., an Arizona
corporation, which was founded in 1989.
RESULTS OF OPERATIONS
Fiscal Year Ended June 30, 1998 as Compared to the Period from January 9,
1997 (date of incorporation) through June 30, 1997. Please note that this
discussion is comparing a full year period (July 1, 1997 through June 30, 1998)
to only an approximate six-month period (January 9, 1997 through June 30, 1997).
The Company was incorporated on January 9, 1997 and no comparable prior year
period exists. Therefore, this discussion is not indicative of a comparison of
two full fiscal years for the Company.
NET SALES
Net sales of $6,813,316 for fiscal 1998 ending June 30, 1998 compared to the
sales for the previous approximate six-month period ending June 30, 1997 of
$3,215,985 increased by $3,597,331 or 112%. The gains can be attributed to
strong retail sales, new customers, and the introduction and placement of new
products. Factors that attributed to our increase in sales were our current
strong economy and the commensurate increase in housing starts over the last
year. Additionally, the Company's new products were well received by our
established customers as well as our new customers.
COST OF SALES AND GROSS PROFIT
The gross profit was $1,390,737 or 20.4% in the year ending June 30, 1998 in
comparison with $686,300 or 21.3% for the previous approximate six-month period,
which ended June 30, 1997. As a percentage of sales, cost of sales was 79.6%
compared to 78.7% during the same aforementioned time periods. The decrease in
gross profit margin was primarily due to inventory adjustments and higher
manufacturing payroll costs.
OPERATING EXPENSES
Operating expenses were $1,421,603 or 20.9% of net sales during the year
ending June 30, 1998. This compares with $719,970 or 22.4% for the approximate
six-month period ending June 30, 1997.
Operating expenses for the year ending June 30, 1998 were $20.9% compared to
22.4% for the approximate six-month period ending June 30, 1997. The difference
was primarily due to adjustments for commissions and showroom costs.
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DOMESTIC SALES VERSUS EXPORT SALES
For the 1998 fiscal year ended June 30, 1998, the Company generated domestic
sales of approximately $6,717,930 or approximately 98.6% of total sales. Export
sales were approximately $95,386 or 1.4% of total sales.
INTEREST
Net interest expense for the year ending June 30, 1998 increased $26,640 or
133% compared to the approximate six-month period ending June 30, 1997. The
increase was primarily due to the comparison of a twelve-month period versus an
approximate six-month period, and also to a reduction of interest income for the
fiscal year ending June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures and
operating expenses, including labor costs, raw materials purchases, and funding
of accounts receivable. The Company's primary sources of cash have been from
operations since its acquisition in January 1997.
Accounts receivable-net at June 30, 1998 increased $9,686, or 1.7% from June
30, 1997. This represents 31.9% of total assets at June 30, 1998 versus 18.2% at
June 30, 1997. The increase is due to the increase in sales volume and does not
represent a change in uncollectible accounts. The Company has not recognized any
significant bad debt expense in any of the periods represented.
The Company spent $211,459 on capital expenditures during the fiscal year
ended June 30, 1998, which was financed primarily with net cash flow from
operating activities and a capital lease obligation. Capital expenditures in the
fiscal year ending June 30, 1999 with respect to the Company's existing
facilities, which include upgrading the Company's computer system and software,
are currently forecasted to be approximately $140,000. The Company believes that
current unused balances available under the existing credit agreements, along
with net cash flow generated from operating activities, will be adequate to fund
these capital expenditures during the fiscal year ending June 30, 1999.
In May 1998, the Company renewed a $500,000 revolving line of credit from a
bank, which expires on April 15, 1999. The line bears interest at prime plus 1%
and is secured by the accounts receivable and inventory. Advances on the line
may not exceed 75% of the eligible accounts receivable. The line contains
various restrictive covenants, including minimum equity, working capital and
tangible net worth. As of June 30, 1998, no advances have been made on this line
of credit.
SEASONALITY
The nature of the business in which the Company is engaged traditionally has
less volume during the summer months (May, June, July, and August) than in the
other eight months of the year. Therefore, quarterly results are not indicative
of the Company's yearly performance and should not be relied upon. Yearly
financial statements present a more complete picture of the Company's overall
results of operations.
BACKLOG
The Company believes that order backlog at any particular point in time is
not predictive of future sales performance since, as is standard in the
furniture industry, a customer may cancel a product order prior to shipment
without penalty. The Company has historically filled orders within approximately
three to five weeks of the receipt of a purchase order.
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YEAR 2000 ISSUE
The Company has begun to address possible remedial efforts in connection
with computer software that could be affected by the Year 2000 problem. The Year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The suppliers of substantially all of the Company's software
have informed the Company that all of those suppliers' software that is used by
the Company is Year 2000 compliant. The Company has no internally generated
software. After reasonable investigation, the Company has not yet identified any
Year 2000 problems but will continue to monitor the issue. However, there can be
no assurances that Year 2000 problems will not occur with respect to the
Company's computer systems. The Year 2000 problem may impact other entities with
which the Company transacts business, and the Company cannot predict the effect
of the Year 2000 problem on such entities.
The Company is currently in the process of upgrading its computer system and
software and believes the upgrades will be Year 2000 compliant.
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ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Independent Auditors Report 9
Consolidated Balance Sheets - June 30, 1998 and 1997 10
Consolidated Statements of Operations - For the Year Ended June 30, 1998 and the Period
From January 9, 1997 Through June 30, 1997 11
Consolidated Statement of Changes in Shareholders' Equity - For the Year
Ended June 30, 1998 and the Period From January 9, 1997 Through June
30, 1997 12
Consolidated Statements of Cash Flows - For the Year Ended June 30, 1998 and the Period
From January 9, 1997 Through June 30, 1997 13-14
Notes to Consolidated Financial Statements 15-21
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Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of New Directions
Manufacturing, Inc. and subsidiary as of June 30, 1998 and 1997 and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the year ended June 30, 1998 and the period from January 9, 1997 to
June 30, 1997. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits 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 disclosure 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of New
Directions Manufacturing, Inc. and subsidiary as of June 30, 1998 and 1997 and
the consolidated results of their operations and their cash flows for the year
ended June 30, 1998 and the period from January 9, 1997 to June 30, 1997 in
conformity with generally accepted accounting principles.
Phoenix, Arizona
August 31, 1998
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NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1998 and 1997
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ASSETS
1998 1997
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Current assets:
Cash and cash equivalents $ 232,203 $ 570,486
Accounts receivable, net of allowance for doubtful accounts of $31,040
in 1998 and $14,938 in 1997 564,565 554,879
Inventory 287,893 236,868
Other 29,361 27,614
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Total current assets 1,114,022 1,389,847
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Goodwill, net of accumulated amortization of $46,800 in 1998
and $14,000 in 1997 584,734 598,605
Covenant not-to-compete, net of accumulated amortization of $240,000
in 1998 and $79,998 in 1997 560,000 720,002
Property and equipment, net 474,915 327,643
Other 16,926 9,074
----------- -----------
$ 2,750,597 $ 3,045,171
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 199,231 $ 184,215
Current portion of capital lease obligations 26,132 25,239
Commissions payable 16,932 28,937
Accounts payable 168,455 307,700
Accrued expenses 70,545 44,995
Income taxes payable 20,000 2,000
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Total current liabilities 501,295 593,086
----------- -----------
Long-term debt, net of current portion 329,936 529,167
Deferred income taxes 17,000 36,800
Capital lease obligations, net of current portion 77,071 18,680
----------- -----------
424,007 584,647
----------- -----------
Commitments, contingencies and subsequent events (see notes)
Shareholders' equity:
Common stock, par value $.001; 25,000,000 shares authorized, 5,052,270
and 4,987,770 shares issued and outstanding in 1998 and 1997 5,052 4,988
Additional paid-in-capital 1,923,575 1,907,248
Accumulated deficit (103,332) (44,798)
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1,825,295 1,867,438
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$ 2,750,597 $ 3,045,171
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</TABLE>
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See accompanying notes to the consolidated financial statements
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NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Year Ended June 30, 1998 and the Period
From January 9, 1997 Through June 30, 1997
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<CAPTION>
1998 1997
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Sales, net of returns and allowances $ 6,813,316 $ 3,215,985
----------- -----------
Cost of sales
Materials 4,039,008 1,913,273
Payroll costs 1,093,758 511,020
Overhead 289,813 105,392
----------- -----------
5,422,579 2,529,685
----------- -----------
Gross profit 1,390,737 686,300
----------- -----------
Selling, general and administrative expenses
Advertising and show expenses 75,349 58,699
Amortization of goodwill and covenant-not-to-compete 192,800 93,998
Other 1,153,454 567,273
----------- -----------
1,421,603 719,970
----------- -----------
Net loss from operations (30,866) (33,670)
----------- -----------
Other income (expense)
Interest and other income 17,746 15,001
Interest expense (64,414) (35,029)
----------- -----------
(46,668) (20,028)
----------- -----------
Net loss before provision for income taxes (benefit) (77,534) (53,698)
Provision for income taxes (benefit) (19,000) (8,900)
----------- -----------
Net loss $ (58,534) $ (44,798)
=========== ===========
Loss per common share $ (0.01) $ (0.01)
=========== ===========
</TABLE>
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See accompanying notes to the consolidated financial statements
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NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
For the Year Ended June 30, 1998 and the Period From
January 9, 1997 Through June 30, 1997
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Common Stock
--------------------------- Additional
Number of Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Incorporation of New Directions 2,550,000 $ 2,550 $ - $ - $ 2,550
Private placement of stock 1,000,000 1,000 1,908,686 - 1,909,686
Merger with Premier Ventures 1,437,770 1,438 (1,438) - -
Net loss - - - (44,798) (44,798)
--------- ----------- ----------- ----------- -----------
Balance June 30, 1997 4,987,770 4,988 1,907,248 (44,798) 1,867,438
Exercise of stock options 14,500 14 32,611 - 32,625
Issuance of stock to director 50,000 50 450 - 500
Additional costs related to
offering and registration - - (16,734) - (16,734)
Net loss - - - (58,534) (58,534)
--------- ----------- ----------- ----------- -----------
Balance, June 30, 1998 5,052,270 $ 5,052 $ 1,923,575 $ (103,332) $ 1,825,295
========= =========== =========== =========== ===========
</TABLE>
12
See accompanying notes to the consolidated financial statements
<PAGE> 15
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Year Ended June 30, 1998 and the Period
From January 9, 1997 Through June 30, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (58,534) $ (44,798)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of goodwill and covenant 192,800 93,998
Depreciation 64,187 12,580
Deferred income taxes (38,727) (10,900)
Increase in accounts receivable (9,686) (254,879)
Increase in inventory (51,025) (97,695)
Increase in other assets (9,599) (28,590)
Increase (decrease) in accounts payable (139,245) 307,700
Increase in accrued expenses 25,550 44,995
Increase (decrease) in commissions payable (12,005) 28,937
Increase in income taxes payable 18,000 2,000
----------- -----------
Net cash provided by (used in) operating activities (18,284) 53,348
----------- -----------
Cash flows from investing activities:
Purchase of property & equipment (113,059) (14,973)
Cash payment for stock of New Directions - Arizona - (1,280,000)
----------- -----------
Net cash used in investing activities (113,059) (1,294,973)
----------- -----------
Cash flows from financing activities:
Repayment of debt (184,215) (86,618)
Payment of capital lease obligations (39,116) (13,507)
Proceeds from issuance of stock 16,391 1,912,236
----------- -----------
Net cash provided by (used in) financing activities (206,940) 1,812,111
----------- -----------
Net increase in cash (338,283) 570,486
Cash, beginning of year 570,486 -
----------- -----------
Cash, end of year $ 232,203 $ 570,486
=========== ===========
</TABLE>
13
See accompanying notes to the consolidated financial statements
<PAGE> 16
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Year Ended June 30, 1998 and the Period
From January 9, 1997 Through June 30, 1997
Supplementary Disclosure of Cash Flow Information
<TABLE>
<S> <C> <C>
Cash paid during the period for interest $ 64,414 $ 35,029
======== ========
Cash paid during the period for taxes $ 6,100 $ -
======== ========
</TABLE>
Summary of Non-cash Investing and Financing Activities
During 1998, the Company leased equipment for $98,400 under a capital lease
obligation.
In January, 1997, the Company acquired New Directions-Manufacturers of
Contemporary Furniture, Inc. The Company paid cash of $1,280,000 and signed
a note for $800,000. The values assigned to the assets and liabilities
acquired are as follows:
<TABLE>
<S> <C>
Accounts receivable $ 300,000
Inventory 139,173
Property and equipment 325,250
Other 8,098
Covenant-not-to-compete 800,000
Goodwill 612,605
Capital lease obligations assumed. (57,426)
Deferred tax liability (47,700)
-----------
$ 2,080,000
===========
</TABLE>
14
See accompanying notes to the consolidated financial statements
<PAGE> 17
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
1. Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies
followed by New Directions Manufacturing, Inc. The policies
conform with generally accepted accounting principles, which
requires management to make estimates and assumptions that
affect the reported amount 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.
a. Operations
New Directions Manufacturing, Inc. manufactures oak
furniture in Phoenix, Arizona and sells to customers
located throughout the United States and Canada.
b. Consolidation
The accompanying financial statements include the
activity of New Directions Manufacturing, Inc. (The
Company or NDM-NV, a Nevada corporation) and its
wholly-owned subsidiary, New Directions
Manufacturing, Inc., (formerly New Directions -
Manufacturers of Contemporary Furniture, Inc. -
NDMCF). All significant intercompany transactions and
accounts have been eliminated in consolidation.
c. Cash Equivalents
Cash equivalents include money market accounts and other
short-term investments with an original maturity of
three months or less.
d. Inventory
Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
e. Goodwill
Goodwill, which resulted from the acquisition of NDMCF, is
being amortized over twenty years on the
straight-line basis.
f. Covenant-not-to-compete
The covenant-not-to-compete is being amortized over five
years on the straight-line basis.
g. Property and Equipment
Property and equipment are recorded at cost and are being
depreciated over estimated useful lives of six to
seven years using the straight-line method.
15
<PAGE> 18
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
1. Summary of Significant Accounting Policies, continued
h. Income taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are
recognized for the future tax consequences
attributable to differences between the financial
statement carrying amount of existing assets and
liabilities and their respective tax bases, including
operating loss and tax credit carryforwards. 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 in
deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax
assets to the amount expected to be realized.
i. Advertising costs:
Advertising costs are expensed as incurred
j. Net Loss Per Share
Net loss per share is computed based upon the weighted
average number of shares outstanding during the
period, which was assumed to be 5,002,171 for the
year ended June 30, 1998 and 4,987,770 for the period
ended June 30, 1997. Options are considered
antidilutive and were not considered in the
calculation.
2. Organization and Capital Transactions
New Directions Manufacturing, Inc. - Nevada was incorporated on
January 9, 1997. The Company's chairman acquired 1,530,000
shares of common stock in exchange for $1,530 and the
assignment of his option to acquire the stock of NDMCF. At the
same time, the Company's President and Vice President each
acquired 510,000 shares of common stock for $510 each. NDM-NV
had no significant assets, liabilities or operations prior to
its acquisition of NDMCF.
On January 9, 1997, the Company prepared a private placement
memorandum that offered 1,000,000 shares of common stock for
sale at $2.25 per share. The offering was successful and the
Company received cash proceeds of $1,909,686, which was net of
offering costs.
In January 1997, the Company acquired 100% of the stock of New
Directions-Manufacturers of Contemporary Furniture, Inc.
Except for the Company's vice president, who currently owns
510,000 shares of the Company's common stock, the stock
ownership of NDMCF was different from that of NDM-NV. The
selling shareholders of NDMCF received cash of $1,280,000 at
closing and agreed to finance $800,000 over four years at 8%
interest. The Company used proceeds from the private placement
and a short-term loan for the cash payment at closing.
16
<PAGE> 19
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
2. Organization and Capital Transactions, continued
The sellers were responsible for the payment of substantially all
liabilities existing at the time of the sale and distributed
all excess cash to themselves as bonuses. In addition, the
sellers were entitled to receive all accounts receivable in
excess of $300,000 as part of the purchase price. The
agreement provides for a five-year covenant not-to-compete by
the original shareholders of NDMCF. This transaction is being
accounted for as a purchase and includes the operations of
NDMCF effective January 1, 1997.
Subsequently, during 1997, the Company merged with Premier Ventures and
Exploration, Inc. with the Company being the surviving
corporation. The shareholders of NDM-NV and Premier received
3,550,000 and 1,437,770 shares, respectively, of the merged
Company. The merger is being accounted for as purchase
transaction. Premier had no significant assets or operations
at the time of the merger and management believes that no
shareholder owned five-percent or more of Premier's stock at
that time. Prior to the merger, Premier effected a reverse
stock split of 415 to 1 and issued approximately 1,400,000
shares of common stock at $.01 per share.
In conjunction with the private placement and subsequent
registration statement, the Company's legal counsel received
options to acquire 50,000 shares at $2.25 per share. During
the year ended June 30, 1998, legal counsel exercised options
to acquire 14,500 shares for proceeds of $32,625.
The following unaudited proforma summary presents the consolidated
results of operations of the company as if the acquisition had
occurred on July 1, 1996. These proforma results are based
upon certain assumptions and estimates, which the company
believes are reasonable. They are not necessarily indicative
of the results of operations, which would have occurred had
the acquisition taken place on July 1, 1996 or results, which
may occur in the future.
<TABLE>
<S> <C>
Net sales $6,089,000
Net loss (75,000)
Loss per share (.02)
</TABLE>
3. Inventory
Inventory consists of the following at June 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 259,220 178,703
Work-in-process 13,592 39,790
Finished goods 15,081 18,375
---------- ----------
$ 287,893 236,868
========== ==========
</TABLE>
17
<PAGE> 20
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
4. Property and Equipment
Property and equipment consist of the following at June 30, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Machinery and equipment $ 473,015 303,087
Showroom fixtures 23,236 -
Office furniture & equipment 45,477 36,681
---------- ----------
541,728 339,768
Less: Accumulated depreciation 66,813 12,125
---------- ----------
$ 474,915 327,643
========== ==========
</TABLE>
5. Debt
Debt consists of an 8% promissory note to the former shareholders of
NDMCF, due January 2001. The unpaid balance of the note was
$529,167 at June 30, 1998.
Future minimum principal payments required in accordance with the
terms of this agreement are:
<TABLE>
<CAPTION>
Year ending June 30,
--------------------
<S> <C>
1999 $ 199,231
2000 215,767
2001 114,169
----------
$ 529,167
==========
</TABLE>
The Company has a $500,000 revolving line of credit from a bank,
which expires on April 15, 1999. The line bears interest at
prime plus 1% and is secured by accounts receivable and
inventory. Advances on the line may not exceed 75% of eligible
accounts receivable. The line contains various restrictive
covenants, including minimum equity, working capital and
tangible net worth.
6. Significant Customer and Supplier
During the year ended June 30, 1998, the Company had a customer,
which accounted for approximately 17% of net sales. No other
single customer accounted for more than 10% of sales for the
year ended June 30, 1998 and the period ended June 30, 1997.
In July, 1998, this customer informed the Company that they
had selected another manufacturer.
The Company also acquired materials from a single supplier, which
accounted for approximately 63% of total materials cost.
However, management believes that these materials are readily
available from other suppliers.
18
<PAGE> 21
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
7. Lease Commitments
The Company leases its plant in Phoenix and showrooms in San
Francisco and North Carolina under non-cancelable operating
leases. In addition to rent, the leases generally require the
Company to pay increases in the operating expenses of the
properties.
The Company also leases certain equipment, under non-cancelable
financing leases, with a cost of approximately $211,000 and
accumulated depreciation of $19,000 at June 30, 1998. Certain
leases contain purchase options. The leases require the
Company to pay all operating expenses and taxes related to the
equipment.
Future minimum lease obligations at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Year ending June 30, Capital Operating
-------------------- ------- ---------
<S> <C> <C>
1999 $ 35,938 181,920
2000 32,939 171,712
2001 27,501 114,112
2002 24,926 122,263
2003 3,966 125,931
---------- ---------
125,270 715,938
=========
Less amounts representing interest
at rates ranging from 10% to 19% 22,067
----------
Present value of capital lease
obligations 103,203
Current portion 26,132
----------
Capital lease obligations, net of
current portion $ 77,071
==========
</TABLE>
Rent expense for the year ended June 30, 1998 and the period ended
June 30, 1997 was $166,008 and $99,627, respectively.
8. Concentration of Risk
At June 30, 1998, the Company maintained cash accounts in a
single financial institution that exceeded federally insured
limits by approximately $185,000.
19
<PAGE> 22
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
9. Income Taxes
Deferred income tax liabilities consist of the following at June 30,
1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Difference in basis of property and equipment $ 98,000 65,200
Difference in basis of covenant-not-to-compete (64,000) (12,200)
State net operating loss carryforwards (4,000) (12,800)
Other (13,000) (3,400)
--------- ---------
$ 17,000 36,800
========= =========
A reconciliation of expected to actual taxes follows:
Expected tax recovery at rate of 34% $ (27,000) (18,300)
Amortization of goodwill 11,000 4,800
State income taxes (3,000) 4,600
--------- ---------
Financial statement recovery of income taxes $ (19,000) (8,900)
========= =========
</TABLE>
NDMCF had an Arizona net operating loss carryforward of
approximately $46,000 at June 30, 1998, which may be used to
offset future state income taxes through 2001.
10. Related Party Transactions
The Company has entered into employment and consulting agreements with
the principal officers and directors of the Company. The
agreements have an initial term of three years and contain
five year covenants-not-to-compete. During 1998, the Company
entered into agreements with its principal stockholders and
directors, whereby the Company is obligated to repurchase
their stock with the proceeds from life insurance policies on
the individuals. Consulting fees paid to the Company's
chairman were $60,000 for the year ended June 30, 1998 and
$30,000 for the period ended June 30, 1997.
During 1997, the Company's president received compensation of $30,000
in conjunction with the acquisition of NDMCF in 1997. The
Company's chairman also received reimbursement for costs he
incurred related to the acquisition of approximately $42,000.
The Company's vice president was also an officer and stockholder
of NDMCF, prior to the acquisition. As such, he received his
proportionate share of the $1,280,000 cash payment made to
acquire NDMCF. He also received his pro-rata share of all
principal and interest payments made through June 30, 1998.
Total principal and interest payments to all former
shareholders during 1998 and 1997 were $234,364 and $117,180,
respectively.
20
<PAGE> 23
NEW DIRECTIONS MANUFACTURING, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
10. Related Party Transactions, continued
On May 1, 1998, the Company issued 50,000 shares of unregistered,
restricted common stock to a new director at $.01 per share,
in conjunction with a three-year consulting agreement which
became effective in May, 1998. The Company recorded this
transaction at $500, the amount paid by the director for the
stock. If the consulting agreement is terminated prior to its
three year term, the director is required to return a pro-rata
portion of the stock at its acquisition price of $.01 per
share.
11. Disclosures about fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" requires that the Company
disclose estimated fair values for its financial instruments.
The following summary presents a description of the
methodologies and assumptions used to determine such amounts.
Fair value estimates are made at a specific point in time and are based
on relevant market information and information about the
financial instrument; they are subjective in nature and
involve uncertainties, matters of judgment and, therefore,
cannot be determined with precision. These estimates do not
reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of
a particular instrument. Changes in assumptions could
significantly affect the estimates.
Since the fair value is estimated as of June 30, 1998, the amounts
that will actually be realized or paid at settlement of the
instruments could be significantly different.
The carrying amount of cash and cash equivalents is assumed to be
the fair value because of the liquidity of these instruments.
Accounts receivable, accounts payable and accrued expenses
approximate fair value because of the short maturity of these
instruments. The recorded balance of notes payable are assumed
to be the fair value since the rates specified in the notes
approximate current market rates.
12. Litigation
On November 10, 1997, the Company was served with a complaint,
which alleges claims for strict liability and negligence,
surrounding an accident with a piece of furniture. The
litigation has been turned over to the Company's insurance
carrier, who is handling the defense for the Company. This
case is in the discovery phase and no trial date has been set.
Legal counsel is unable to provide the Company with an
evaluation concerning any potential loss associated with this
lawsuit. Management believes, however, that this matter will
be completely covered by its liability insurance and that the
Company will not suffer any out-of-pocket cash losses in
defending/settling this matter.
21
<PAGE> 24
PART II (CONTINUED)
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
The information required by Items 9, 10, 11, and 12 are omitted because
the Company will file a definitive Proxy Statement pursuant to Regulation 14A
under the Securities Exchange Act of 1934 not later than September 28, 1998. The
information required by such items will be included in the definitive Proxy
Statement to be so filed for the Company's Annual Meeting of Stockholders
scheduled for October 8, 1998 and is hereby incorporated by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3.2 Amended and Restated Bylaws of New Directions Manufacturing, Inc.,
dated July 20, 1998
10 Consulting Agreement with Michael D. Dunn, dated May 1, 1998
(B) REPORTS ON FORM 8-K
None
22
<PAGE> 25
SIGNATURE PAGE
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NEW DIRECTIONS MANUFACTURING, INC.
Date: September 15, 1998 /s/ Donald A. Metke__________________________
DONALD A. METKE
President, Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer,
Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Date: September 15, 1998 /s/ Donald A. Metke__________________________
DONALD A. METKE
President, Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer,
Director
Date: September 15, 1998 /s/ Sean F. Lee______________________________
SEAN F. LEE
Chairman of the Board
Date: September 15, 1998 /s/ Jack Horner, Jr._________________________
JACK HORNER, JR.
Executive Vice President, Secretary, Director
Date: September 15, 1998 /s/ Michael D. Dunn__________________________
MICHAEL D. DUNN
Director
23
<PAGE> 26
EXHIBIT INDEX
EX- 3.2 Amended and Restated Bylaws of New Directions Manufacturing, Inc.,
dated July 20, 1998
EX- 10 Consulting Agreement with Michael D. Dunn, dated May 1, 1998
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
NEW DIRECTIONS MANUFACTURING, INC.
A NEVADA CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES 1
Section 1. Principal Office 1
Section 2. Other Offices 1
ARTICLE II - DIRECTORS - MANAGEMENT 1
Section 1. Powers, Standard of Care 1
1.1 Powers 1
1.2 Standard of Care; Liability 1
Section 2. Number and Qualification of Directors 2
Section 3. Election and Term of Office of Directors 2
Section 4. Vacancies 3
Section 5. Removal of Directors 3
Section 6. Place of Meetings 4
Section 7. Annual Meetings 4
Section 8. Other Regular Meetings 4
Section 9. Special Meetings/Notices 4
Section 10. Waiver of Notice 5
Section 11. Quorums 5
Section 12. Adjournment 5
Section 13. Notice of Adjournment 5
Section 14. Sole Director Provided by Articles or Bylaws 5
Section 15. Directors Action by Unanimous Written Consent 6
Section 16. Compensation of Directors 6
Section 17. Committees 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 18. Meetings and Action of Committees 6
Section 19. Advisors 6
ARTICLE III - OFFICERS 7
Section 1. Officers 7
Section 2. Election of Officers 7
Section 3. Subordinate Officers, Etc 7
Section 4. Removal and Resignation of Officers 7
Section 5. Vacancies 7
Section 6. Chairman of the Board 7
Section 7. President 8
Section 8. Vice President 8
Section 9. Secretary 8
Section 10. Treasurer 9
ARTICLE IV - STOCKHOLDERS' MEETINGS 9
Section 1. Place of Meetings 9
Section 2. Annual Meeting 9
Section 3. Special Meetings 9
Section 4. Notice of Meetings - Reports 10
Section 5. Quorum 11
Section 6. Adjourned Meeting and Notice Thereof 11
Section 7. Waiver or Consent by Absent Stockholders 12
ARTICLE V - AMENDMENTS TO BYLAWS 12
Section 1. Amendment by Stockholders 12
Section 2. Amendment by Directors 12
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 3. Record of Amendments 12
ARTICLE VI - SHARES OF STOCK 13
Section 1. Certificate of Stock 13
Section 2. Lost or Destroyed Certificates 13
Section 3. Transfer of Shares 13
Section 4. Record Date 14
ARTICLE VII - DIVIDENDS 14
ARTICLE VIII - FISCAL YEAR 14
ARTICLE IX - CORPORATE SEAL 14
ARTICLE X- INDEMNITY 15
ARTICLE XI - MISCELLANEOUS 15
Section 1. Stockholders' Agreements 15
Section 2. Subsidiary Corporations 16
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
NEW DIRECTIONS MANUFACTURING, INC.
A NEVADA CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office for the transaction of
business of the Corporation is hereby fixed and located at 2940 West Willetta,
Phoenix, Arizona 85009. The location may be changed by approval of a majority of
the authorized directors, and additional offices may be established and
maintained at such other place or places, either within or outside of Nevada, as
the Board of Directors may from time to time designate.
Section 2. Other Offices. Branch or subordinate offices may at any
time be established by the Board of Directors at any place or places where
the Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. Powers, Standard of Care.
1.1 Powers: Subject to the provisions of the Nevada Revised Statutes
(hereinafter the "Code"), and subject to any limitations in the Articles of
Incorporation of the Corporation relating to action required to be approved by
the Stockholders, as that term is defined in the Code, or by the outstanding
shares, as that term is defined Code, the business and affairs of the
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors. The Board of Directors may
delegate the management of the day-to-day operation of the business of the
Corporation to a management company or other persons, provided that the business
and affairs of the Corporation shall be managed, and all corporate powers shall
be exercised, under the ultimate direction of the Board.
1.2 Standard of Care; Liability:
1.2.1 Each Director shall exercise such powers and otherwise
perform such duties, in good faith, in the matters such Director believes to be
in the best interests of the Corporation, and with such care, including
reasonable inquiry, using ordinary prudence, as a person in a like position
would use under similar circumstances.
1.2.2 In performing the duties of a Director, a Director shall
be entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, in which case prepared or
presented by:
1
<PAGE> 6
(a) One or more officers or employees of the
Corporation whom the Director believes to be reliable and competent in the
matters presented,
(b) Counsel, independent accountants or other
persons as to which the Director believes to be within such person's
professional or expert competence, or
(c) A Committee of the Board upon which the
Director does not serve, as to matters within its designated authority, which
committee the Director believes to merit confidence, so long as in any such case
the Director acts in good faith, after reasonable inquiry when the need therefor
is indicated by the circumstances and without knowledge that would cause such
reliance to be unwarranted.
Section 2. Number and Qualification of Directors. The authorized number of
Directors of the Corporation shall be not less than one (1) nor more than seven
(7) until changed by a duly adopted amendment to the Articles of Incorporation
or by an amendment to this Section 2 of Article II of these Bylaws or, without
amendment of these Bylaws, the number of directors may be fixed or changed by
resolution adopted by the vote of the majority of directors in office or by the
vote of holders of shares representing a majority of the voting power at any
annual meeting, or any special meeting called for such purpose; but no reduction
of the number of directors shall have the effect of removing any director prior
to the expiration of his term. The number of Directors shall not be less than
two (2) unless all of the outstanding shares of stock are owned beneficially and
of record by less than two (22) stockholders, in which event the number of
Directors shall not be less than the number of stockholders or the minimum
permitted by statute.
Section 3. Election and Term of Office of Directors.
3.1 Directors shall be elected at each annual meeting of the
Stockholders to hold office until the next annual meeting. If any such annual
meeting of Stockholders is not held or the Directors are not elected thereat,
the Directors may be elected at any special meeting of Stockholders held for
that purpose. Each Director, including a Director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
3.2 Except as may otherwise be provided herein, or in the Articles
of Incorporation by way of cumulative voting rights, the members of the Board of
Directors of this Corporation, who need not be stockholders, shall be elected by
a majority of the votes cast at a meeting of stockholders, by the holders of
shares of stock present in person or by proxy, entitled to vote in the election.
2
<PAGE> 7
Section 4. Vacancies.
4.1 A vacancy or vacancies on the Board of Directors shall be deemed
to exist in the event of the death, resignation or removal of any Director, or
if the Board of Directors by resolution declares vacant the office of a Director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors be increased, or if the
shareholders fail, at any annual or special meeting of shareholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at the meeting.
4.2 Vacancies on the Board of Directors, except for a vacancy
created by the removal of a Director, may be filled by a majority of the
remaining Directors, though less than a quorum, or by a sole remaining Director.
Each Director so elected shall hold office until the next annual meeting of the
Stockholders and until a successor has been elected and qualified. A vacancy in
the Board of Directors created by the removal of a Director may only be filled
by the vote of a majority of the shares entitled to vote represented at a duly
held meeting at which a quorum is present, or by the written consent of the
holders of a majority of the outstanding shares.
4.3 The Stockholders may elect a Director or Directors at any time
to fill any vacancy or vacancies, but any such election by written consent shall
require the consent of a majority of the outstanding shares entitled to vote.
4.4 Any Director may resign, effective on giving written notice to
the Chairman of the Board, the President, the Secretary, or the Board of
Directors, unless the notice specifies a later time for that resignation to
become effective. When one or more directors give notice of his or her or their
resignation from the Board of Directors, effective at a future date, the Board
may fill the vacancy or vacancies to take effect when the resignation or
resignations become effective, each Director so appointed to hold office during
the remainder of the term of office of the resigning Director(s)."
4.5 No reduction of the authorized number of Directors shall have
the effect of removing any Director before that Director's term of office
expires.
Section 5. Removal of Directors.
5.1 The entire Board of Directors, or any individual Director, may
be removed from office as provided by Section 78.335 of the Code at any special
meeting of stockholders called for such purpose by vote of the holders of
two-thirds of the voting power entitling them to elect directors in place of
those to be removed, subject to the provisions of Section 5.2.
5.2 No Director may be removed (unless the entire Board is removed)
when the votes cast against removal or not consenting in writing to such removal
would be sufficient to elect such Director if voted cumulatively at an election
at which the same total number of votes were cast (or, if such action is taken
by written consent, all shares entitled to vote, were voted) and the entire
number of Directors authorized at the time of the Directors most recent election
were then being elected; and when by the provisions of the Articles of
Incorporation the holders
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of the shares of any class or series voting as a class or series are entitled to
elect one or more Directors, any Director so elected may be removed only by the
applicable vote of the holders of the shares of that class or series.
Section 6. Place of Meetings. Regular meetings of the Board of Directors
shall be held at any place within or outside the state that has been designated
from time to time by resolution of the Board. In the absence of such resolution,
regular meetings shall be held at the principal executive office of the
Corporation. Special meetings of the Board shall be held at any place within or
outside the state that has been designated in the notice of the meeting, or, if
not stated in the notice or there is no notice, at the principal executive
office of the Corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment pursuant to Section
78.320 of the Code, so long as all Directors participating in such meeting can
hear one another, and all such Directors shall be deemed to have been present in
person at such meeting.
Section 7. Annual Meetings. Immediately following each annual meeting of
Stockholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, the election of officers and the transaction of other
business. Notice of this meeting shall not be required. Minutes of any meeting
of the Board, or any committee thereof, shall be maintained as required by the
Code by the Secretary or other officer designated for that purpose.
Section 8. Other Regular Meetings.
8.1 Other regular meetings of the Board of Directors shall be held
without call at such time as shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice, provided the time
and place of such meetings has been fixed by the Board of Directors, and further
provided the notice of any change in the time of such meeting shall be given to
all the Directors. Notice of a change in the determination of the time shall be
given to each Director in the same manner as notice for such special meetings of
the Board of Directors.
8.2 If said day falls upon a holiday, such meetings shall be held on
the next succeeding day thereafter.
Section 9. Special Meetings/Notices.
9.1 Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or the President
or any Vice President or the Secretary or any two Directors.
9.2 Notice of the time and place for special meetings shall be
delivered personally or by telephone to each Director or sent by first class
mail or telegram, charges prepaid, addressed to each Director at his or her
address as it is shown in the records of the Corporation. In case such notice is
mailed, it shall be deposited in the United States mail at least four days prior
to the time of holding the meeting. In case such notice is delivered personally,
or by telephone or telegram, it shall be delivered personally or be telephone or
to the telegram company at least 48 hours prior to the time of the holding of
the meeting. Any oral notice given
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personally or by telephone may be communicated to either the Director or to a
person at the office of the Director who the person giving the notice has reason
to believe will promptly communicate same to the Director. The notice need not
specify the purpose of the meeting, nor the place, if the meeting is to be held
at the principal executive office of the Corporation.
Section 10. Waiver of Notice.
10.1 The transactions of any meeting of the Board of Directors,
however called, noticed, or wherever held, shall be as valid as though had at a
meeting duly held after the regular call and notice if a quorum is present and
if, either before or after the meeting, each of the Directors not present signs
a written waiver of notice, a consent to holding the meeting or an approval of
the minutes thereof. Waivers of notice or consent need not specify the purposes
of the meeting. All such waivers, consents and approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
10.2 Notice of a meeting shall also be deemed given to any Director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such Director.
Section 11. Quorums. Presence of a majority of the authorized number of
Directors shall constitute a quorum for the transaction of business, except to
adjourn as provided in Section 12 of this Article II. Members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting as permitted by the preceding
sentence constitutes presence in person at such meeting. Every act or decision
done or made by a majority of the Directors present at a meeting duly held at
which a quorum was present shall be regarded as the act of the Board of
Directors, unless a greater number is required by law or the Articles of
Incorporation. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of Directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
Section 12. Adjournment. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and
place.
Section 13. Notice of Adjournment. Notice of the time and place of the
holding of an adjourned meeting need not be given, unless the meeting is
adjourned for more than 24 hours, in which case notice of such time and place
shall be given prior to the time of the adjourned meeting to the Directors who
were not present at the time of the adjournment.
Section 14. Sole Director Provided by Articles or Bylaws. In the event
only one Director is required by the Bylaws or the Articles of Incorporation,
then any reference herein to notices, waivers, consents, meetings or other
actions by a majority or quorum of the Board of Directors shall be deemed or
referred as such notice, waiver, etc., by the sole Director, who shall have all
rights and duties and shall be entitled to exercise all of the powers and shall
assume all the responsibilities otherwise herein described, as given to the
Board of Directors.
Section 15. Directors Action by Unanimous Written Consent. Pursuant to
Section 78.315 of the Code, any action required or permitted to be taken by the
Board of Directors may
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be taken without a meeting and with the same force and effect as if taken by a
unanimous vote of Directors, if authorized by a writing signed individually or
collectively by all members of the Board of Directors. Such consent shall be
filed with the regular minutes of the Board of Directors.
Section 16. Compensation of Directors. Directors, and members as such,
shall not receive any stated salary for their services, but by resolution of the
Board of Directors, a fixed sum and/or expenses, if any, may be allowed for
their attendance at each regular and special meeting of the Board of Directors
or for their services contributed to the Board of Directors; provided, however,
that nothing contained herein shall be construed to preclude any Director from
serving the Corporation in any other capacity as an officer, employee or
otherwise receiving compensation for such services.
Section 17. Committees. Committees of the Board of Directors may be
appointed by resolution passed by a majority of the whole Board. Committees
shall be composed of two or more members of the Board of Directors. The Board
may designate one or more Directors as alternate members of any committee, who
may replace any absent member at any meeting of the committee. Committees shall
have such powers as those held by the Board of Directors as may be expressly
delegated to it by resolution of the Board of Directors, except those powers
expressly made non-delegable by the Code.
Section 18. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article II, Sections 6, 8, 9, 10, 11, 12, 13 and 15, with such
changes in the context of those Sections as are necessary to substitute the
committee and its members for the Board of Directors and its members, except
that the time of the regular meetings of the committees may be determined by
resolution of the Board of Directors as well as the committee, and special
meetings of committees may also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
Section 19. Advisors. The Board of Directors from time to time may request
and/or hire for a fee one or more persons to be Advisors to the Board of
Directors, but such persons shall not by such appointment be members of the
Board of Directors. Advisors shall be available from time to time to perform
special assignments specified by the President, to attend meetings of the Board
of Directors upon invitation, and to furnish consultation to the Board of
Directors. The period during which the title shall be held may be prescribed by
the Board of Directors. If no period is prescribed, the title shall be held at
the pleasure of the Board of Directors.
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ARTICLE III
OFFICERS
Section 1. Officers. The principal officers of the Corporation shall be a
President, a Secretary, and a Treasurer. The Corporation may also have, at the
discretion of the Board of Directors, a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article III. Any number of offices may be held by the same
person.
Section 2. Election of Officers. The principal officers of the
Corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be chosen by the
Board of Directors, and each shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment. Each officer shall hold office until his successor shall be duly
elected and qualified, or until his death, resignation, or removal in the manner
hereinafter provided.
Section 3. Subordinate Officers, Etc. The Board of Directors may appoint
such other officers as the business of the Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from time to time
determine.
Section 4. Removal and Resignation of Officers.
4.1 Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or without cause, by a
majority of the Directors at that time in office, at any regular or special
meeting of the Board of Directors, or, except in the case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
4.2 Any officer may resign at any time by giving written notice to
the Board of Directors. Any resignation shall take effect on the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Corporation under any contract to which
the officer is a party.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for regular appointments to that office.
Section 6. Chairman of the Board.
6.1 The Chairman of the Board, if such an officer be elected, shall,
if present, preside at the meetings of the Board of Directors and exercise and
perform such other powers and duties as may, from time to time, be assigned by
the Board of Directors or prescribed by the Bylaws. If there is no President,
the Chairman of the Board shall, in addition, be the Chief
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Executive Officer of the Corporation and shall have the powers and duties
prescribed in Section 7 of this Article III.
Section 7. President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there is
such an officer, the President shall be the Chief Executive Officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
Corporation. The President shall preside at all meetings of the Stockholders
and, in the absence of the Chairman of the Board, or if there be none, at all
meetings of the Board of Directors. The President shall have the general powers
and duties of management usually vested in the office of President of a
corporation, shall be ex officio a member of all the standing committees,
including the Executive Committee, if any, and shall have such other powers and
duties as may be prescribed by the Board of Directors or the Bylaws.
Section 8. Vice President. In the absence or disability of the President,
the Vice Presidents, if any, in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them, respectively, by
the Board of Directors or the Bylaws, the President, or the Chairman of the
Board.
Section 9. Secretary.
9.1 The Secretary shall keep, or cause to be kept, a book of minutes
of all meetings of the Board of Directors and Stockholders at the principal
office of the Corporation or such other place as the Board of Directors may
order. The minutes shall include the time and place of holding the meeting,
whether regular or special, and if a special meeting, how authorized, the notice
thereof given, and the names of those present at Directors' and committee
meetings, the number of shares present or represented at Stockholders' meetings
and the proceedings thereof.
9.2 The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or at the office of the Corporation's transfer agent,
a share register, or duplicate share register, showing the names of the
Stockholders and their addresses; the number and classes or shares held by each;
the number and date of certificates issued for the same; and the number and date
of cancellation of every certificate surrendered for cancellation.
9.3 The Secretary shall give, or cause to be given, notice of all
the meetings of the Stockholders and of the Board of Directors required by the
Bylaws or by law to be given. The Secretary shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
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Section 10. Treasurer.
10.1 The Treasurer shall keep and maintain, or cause to be kept and
maintained, in accordance with generally accepted accounting principles,
adequate and correct accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, earnings (or surplus) and shares issued.
The books of account shall, at all reasonable times, be open to inspection by
any Director.
10.2 The Treasurer shall deposit all monies and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of all of the
transactions of the Treasurer and of the financial condition of the Corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
ARTICLE IV
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. Meetings of the Stockholders shall be held
at any place within or outside the state of Nevada designated by the Board of
Directors. In the absence of any such designation, Stockholders' meetings shall
be held at the principal executive office of the Corporation.
Section 2. Annual Meeting.
2.1. The annual meeting of the Shareholders shall be held, each
year, as follows:
Time of Meeting: 10:00 A.M.
Date of Meeting: October 8
2.2 If this day shall be a legal holiday, then the meeting shall be
held on the next succeeding business day, at the same time. At the annual
meeting, the Shareholders shall elect a Board of Directors, consider reports of
the affairs of the Corporation and transact such other business as may be
properly brought before the meeting.
2.3 If the above date is inconvenient, the annual meeting of
Shareholders shall be held each year on a date and at a time designated by the
Board of Directors within a reasonable date of the above date upon proper notice
to all Shareholders.
Section 3. Special Meetings.
3.1 Special meetings of the Stockholders for any purpose or purposes
whatsoever, may be called at any time by the Board of Directors, the Chairman of
the Board, the President, or by one or more Stockholders holding shares in the
aggregate entitled to cast not less than 50% of the votes at any such meeting.
Except as provided in paragraph B below of this Section 3, notice shall be given
as for the annual meeting.
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3.2 If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
time of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the Chairman of the Board, the
President, any Vice President or the Secretary of the Corporation. The officer
receiving such request shall forthwith cause notice to be given to the
Stockholders entitled to vote, in accordance with the provisions of Sections 4
and 5 of this Article, that a meeting will be held at the time requested by the
person or persons calling the meeting, not less than 35 nor more than 60 days
after the receipt of the request. If the notice is not given within 20 days
after receipt of the request, the person or persons requesting the meeting may
give the notice in the manner provided in these Bylaws or upon application to
the Superior Court. Nothing contained in this paragraph of this Section shall be
construed as limiting, fixing or affecting the time when a meeting of
Stockholders called by action of the Board of Directors may be held.
Section 4. Notice of Meetings - Reports.
4.1 Notice of any Stockholders meetings, annual or special, shall be
given in writing not less than 10 days nor more than 60 days before the date of
the meeting to Stockholders entitled to vote thereat by the Secretary or the
Assistant Secretary, or if there be no such officer, or in the case of said
Secretary or Assistant Secretary's neglect or refusal, by any Director or
Stockholder.
4.2 Such notices or any reports shall be given personally or by mail
or other means of written communication as provided in the Code and shall be
sent to the Stockholder's address appearing on the books of the Corporation, or
supplied by the Stockholder to the Corporation for the purpose of notice, and in
the absence thereof, as provided in the Code by posting notice at a place where
the principal executive office of the Corporation is located or by publication
at least once in a newspaper of general circulation in the county in which the
principal executive office is located.
4.3 Notice of any meeting of Stockholders shall specify the place,
the day and the hour of meeting, and (i) in case of a special meeting, the
general nature of the business to be transacted and that no other business may
be transacted, or (ii) in the case of an annual meeting, those matters which the
Board of Directors, at the date of mailing of notice, intends to present for
action by the Stockholders. At any meetings where Directors are elected, notice
shall include the names of the nominees, if any, intended at the date of notice
to be presented for election.
4.4 Notice shall be deemed given at the time it is delivered
personally or deposited in the mail or sent by other means of written
communication. The officer giving such notice or report shall prepare and file
in the minute book of the Corporation an affidavit or declaration thereof.
4.5 If action is proposed to be taken at any meeting for approval of
(i) contracts or transactions in which a Director has a direct or indirect
financial interest, pursuant to the Code, (ii) an amendment to the Articles of
Incorporation, pursuant to the Code, (iii) a reorganization of the Corporation,
pursuant to the Code, (iv) dissolution of the Corporation,
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pursuant to the Code, or (v) a distribution to preferred Stockholders, pursuant
to the Code, the notice shall also state the general nature of such proposal.
Section 5. Quorum.
5.1 The holders of a majority of the shares entitled to vote at a
Stockholders' meeting, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Stockholders for the transaction of
business except as otherwise provided by the Code or by these Bylaws.
5.2 The Stockholders present at a duly called or held meeting at
which a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Stockholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by a majority
of the shares required to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
6.1 Any Stockholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at such meeting, either in person or by
proxy, but in the absence of a quorum, no other business may be transacted at
such meeting.
6.2 When any meeting of Stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than 45 days from the date set for
the original meeting, in which case the Board of Directors shall set a new
record date. Notice of any adjourned meeting shall be given to each Stockholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Section 4 of this Article. At any adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting.
Section 7. Waiver or Consent by Absent Stockholders.
7.1 The transactions of any meeting of Stockholders, either annual
or special, however called and noticed, shall be valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each of the
Stockholders entitled to vote, not present in person or by proxy, sign a written
waiver of notice, or a consent to the holding of such meeting or an approval of
the minutes thereof.
7.2 The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any regular or special meeting of
Stockholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in Section E of Section 4 of this
Article, the waiver of notice or consent shall state the general nature of such
proposal. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
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7.3 Attendance of a person at a meeting shall also constitute a
waiver of notice of such meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters not included
in the notice.
ARTICLE V
AMENDMENTS TO BYLAWS
Section 1. Amendment by Stockholders.
All Bylaws of the Corporation shall be subject to alteration or
repeal, and new Bylaws may be made by the affirmative vote of stockholders
holding of record in the aggregate at least a majority of the outstanding shares
of stock entitled to vote in the election of directors at any annual or special
meeting of stockholders, provided that the notice or waiver of notice of such
meeting shall have summarized or set forth in full therein, the proposed
amendment.
Section 2. Amendment by Directors.
The Board of Directors shall have power to make, adopt, alter, amend
and repeal, from time to time, Bylaws of the Corporation, provided, however,
that the stockholders entitled to vote with respect thereto as in this Article V
above-provided may alter, amend or repeal Bylaws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meetings of stockholders or of the Board of Directors or to change any
provisions of the Bylaws with respect to the removal of directors or the filling
of vacancies in the Board resulting from the removal by the stockholders. If any
bylaw regulating an impending election of directors is adopted, amended or
repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of stockholders for the election of directors, the Bylaws so
adopted, amended or repealed, together with a concise statement of the changes
made.
Section 3. Record of Amendments.
Whenever an amendment or new Bylaw is adopted, it shall be copies in
the corporate book of Bylaws with the original Bylaws, in the appropriate place.
If any Bylaw is repealed, the fact of repeal with the date of the meeting at
which the repeal was enacted or written assent was filed shall be stated in the
corporate book of Bylaws.
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ARTICLE VI
SHARES OF STOCK
Section 1. Certificate of Stock.
1.1 The certificates representing shares of the Corporation's stock
shall be in such form as shall be adopted by the Board of Directors, and shall
be numbered and registered in the order issued. The certificates shall bear the
following: the Corporate Seal, the holder's name, the number of shares of stock
and the signatures of: (1) the Chairman of the Board, the President or a Vice
President and (2) the Secretary, Treasurer, any Assistant Secretary or Assistant
Treasurer.
1.2 No certificate representing shares of stock shall be issued
until the full amount of consideration therefore has been paid, except as
otherwise permitted by law.
1.3 To the extent permitted by law, the Board of Directors may
authorize the issuance of certificates for fractions of a share of stock which
shall entitle the holder to exercise voting rights, receive dividends and
participate in liquidating distributions, in proportion to the fractional
holdings; or it may authorize the payment in cash of the fair value of fractions
of a share of stock as of the time when those entitled to receive such fractions
are determined; or its may authorize the issuance, subject to such conditions as
may be permitted by law, of scrip in registered or bearer form over the
signature of an officer or agent of the corporation, exchangeable as therein
provided for full shares of stock, but such scrip shall not entitle the holder
to any rights of a stockholder, except as therein provided.
Section 2. Lost or Destroyed Certificates.
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of any loss or destruction
of the certificate representing the same. The Corporation may issue a new
certificate in the place of any certificate theretofore issued by it, alleged to
have been lost or destroyed. On production of such evidence of loss or
destruction as the Board of Directors in its discretion may require, the Board
of Directors may, in its discretion, require the owner of the lost or destroyed
certificate, or his legal representatives, to give the Corporation a bond in
such sum as the Board may direct, and with such surety or sureties as may be
satisfactory to the Board, to indemnify the Corporation against any claims,
loss, liability or damage it may suffer on account of the issuance of the new
certificate. A new certificate may be issued without requiring any such evidence
or bond when, in the judgment of the Board of directors, it is proper to do so.
Section 3. Transfer of Shares.
3.1 Transfer of shares of stock of the Corporation shall be made on
the stock ledger of the Corporation only by the holder of record thereof, in
person or by his duly authorized attorney, upon surrender for cancellation of
the certificate or certificates representing such shares of stock with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, with such proof of the authenticity of the signature and of authority
to transfer and of payment of taxes as the Corporation or its agents may
require.
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3.2 The Corporation shall be entitled to treat the holder of record
of any share or shares of stock as the absolute owner thereof for all purposes
and , accordingly, shall not be bound to recognize any legal, equitable or other
claim to, or interest in, such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Section 4. Record Date.
In lieu of closing the stock ledger of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding sixty (60) days, nor less
than ten (10) days, as the record date for the determination of stockholders
entitled to receive notice of, or to vote at, any meeting of stockholders, or to
consent to any proposal without a meeting, or for the purpose of determining
stockholders entitled to receive payment of any dividends or allotment of any
rights, or for the purpose of any other action. If no record date is fixed, the
record date for the determination of stockholders entitled to notice of, or to
vote at, a meeting of stockholders shall be at the close of business on the day
next preceding the day on which the notice is given, or, if no notice is given,
the day preceding the day on which the meeting is held. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the resolution of the directors relating thereto is adopted.
When a determination of stockholders of record entitled to notice of, or to vote
at, any meeting of stockholders has been made, as provided for herein, such
determination shall apply to any adjournment thereof, unless the directors fix a
new record date for the adjourned meeting.
ARTICLE VII
DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amount, and at such time or times as
the Board of Directors may determine.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be June 30, and may be changed by
the Board of Directors from time to time subject to applicable law.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the Corporation, the date of its incorporation, and the word
"Nevada" to indicate the Corporation was incorporated pursuant to the laws of
the State of Nevada.
14
<PAGE> 19
ARTICLE X
INDEMNITY
Section 1. Every person who was or is a party or is threatened to be made
a party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a director or officer of
the corporation or is or was serving at the request of the corporation or for
its benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust, or other enterprise,
shall be indemnified and held harmless to the fullest extent legally permissible
under the general corporation law of the State of Nevada from time to time
against all expenses, liability and loss (including attorneys' fees, judgments,
fines, and amounts paid or to be paid in settlement) reasonably incurred or
suffered by him in connection therewith. The Board of Directors may, in its
discretion, cause the expense of officers and directors incurred in defending a
civil or criminal action, suit or proceeding to be paid by the corporation as
they are incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. No such person shall be indemnified against, or be reimbursed for,
any expense or payments incurred in connection with any claim or liability
established to have arisen out of his own willful misconduct or gross
negligence. Any right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire and, which such directors, officers, or representatives may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under this Article.
Section 2. The Board of Directors may cause the corporation to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
Section 3. The Board of Directors may from time to time adopt further
Bylaws with respect to indemnification and may amend these and such Bylaws to
the full extent permitted by the General Corporation Law of the State of Nevada.
ARTICLE XI
MISCELLANEOUS
Section 1. Stockholders' Agreements. Notwithstanding anything contained in
this Article XI to the contrary, in the event the Corporation elects to become a
close corporation, an agreement between two or more Stockholders thereof, if in
writing and signed by the parties thereto, may provide that in exercising any
voting rights, the shares held by them shall be voted as provided therein, and
may otherwise modify the provisions contained in Article IV, herein as to
Stockholders' meetings and actions.
15
<PAGE> 20
Section 2. Subsidiary Corporations. Shares of the Corporation owned by a
subsidiary shall not be entitled to vote on any matter. For the purpose of this
Section, a subsidiary of the Corporation is defined as another corporation of
which shares thereof possessing more than 25% of the voting power are owned
directly or indirectly through one or more other corporations of which the
Corporation owns, directly or indirectly, more than 50% of the voting power.
16
<PAGE> 21
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1. I am the duly elected and acting Secretary of NEW DIRECTIONS
MANUFACTURING, INC., a Nevada corporation; and
2. The foregoing Amended and Restated Bylaws, consisting of 16 pages, are
the Bylaws of this Corporation as adopted by the Board of Directors.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal
of this Corporation on this 20th day of July, 1998.
/s/ Jack Horner, Jr.
------------------------------
Jack Horner, Jr., Secretary
17
<PAGE> 1
Exhibit 10
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of May 1,
1998 (the "Effective Date"), by and between New Directions Manufacturing, Inc.,
a Nevada corporation (the "Company"), and Michael D. Dunn ("Consultant").
RECITALS
WHEREAS, the Company desires to retain the Consultant to provide the
services set forth in Exhibit A hereto for the benefit of the Company (the
"Consulting Services");
WHEREAS, Consultant is engaged in the business of providing the Consulting
Services and desires to provide the Consulting Services to the Company in
accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto hereby agree as follows:
A G R E E M E N T
1. Appointment and Duties. The Company hereby engages Consultant to
perform the Consulting Services commencing upon the date of this Agreement and
terminating in accordance with the terms set forth in Exhibit A. Consultant
agrees to accept such engagement upon the terms and conditions set forth herein.
Consultant shall faithfully and diligently perform the Consulting Services.
2. Compensation. Subject to the termination of this Agreement as provided
herein, the Company shall compensate Consultant for the performance of the
Consulting Services hereunder upon the terms and conditions set forth in
attached Exhibit B hereto
3. Non-Exclusive; Non-Disclosure.
3.1. Consultant agrees to perform Consultant's Consulting Services
efficiently and to the best of Consultant's ability. It is anticipated that the
Consultant shall spend as much time as deemed necessary by the Consultant in
order to perform the obligations of Consultant hereunder. Notwithstanding the
foregoing, the Company acknowledges and agrees that Consultant's engagement with
the Company is not exclusive and that Consultant is engaged in other business
endeavors and reserves the right to continue to do so throughout the terms of
this Agreement.
3.2. Consultant acknowledges that Consultant may have access to
proprietary information regarding the business operations of the Company and
agrees to keep all such information secret and confidential and not to use or
disclose any such information to any individual or organization without the
Company's prior written consent.
<PAGE> 2
4. Independent Contractor. Both the Company and the Consultant agree that
the Consultant will act as an independent contractor in the performance of its
duties under this Agreement. Nothing contained in this Agreement shall be
construed to imply that Consultant, or any employee, agent or other authorized
representative of Consultant, is a partner, joint venturer, agent, officer or
employee of the Company.
5. Term; Termination
(a) Consultant may terminate this Agreement immediately for cause at
any time without notice. For purposes of this subsection (b), "cause" for
termination by Consultant shall be (i) a breach by The Company of any material
covenant or obligation hereunder; or (ii) the voluntary or involuntary
dissolution of the Company.
(b) The Company may terminate this Agreement for cause at any time
without notice. For purposes of this subsection (c), "cause" for termination
shall be: (i) any felonious conduct or material fraud by Consultant in
connection with The Company; (ii) any embezzlement or misappropriation of funds
or property of The Company by Consultant; (iii) any material breach of or
material failure to perform any covenant or obligation of Consultant under this
Agreement; or (iv) gross negligence by Consultant in the performance of his
duties under this Agreement.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto their respective devisees, legatees, heirs, legal
representatives, successors, and permitted assigns. The preceding sentence shall
not affect any restriction on assignment set forth elsewhere in this Agreement.
7. Notices
<PAGE> 3
Any notice, request, instruction, or other document required by the terms of
this Agreement, or deemed by any of the Parties he reto to be desirable, to be
given to any other Party hereto shall be in writing and shall be given by
facsimile, personal delivery, overnight delivery, or mailed by registered or
certified mail, postage prepaid, with return receipt requested, to the following
addresses:
If to the Company: Donald A. Metke, President
New Directions Manufacturing, Inc.
2940 W. Willetta
Phoenix, AZ 85009
With copy to: Lynne Bolduc, Esq.
Horwitz & Beam
Two Venture Plaza, Suite 380
Irvine, California 92718
If to Consultant: Mr. Michael D. Dunn, President
WADCO SERVICES INNS, INC.
1409 Weiler Boulevard
Forth Worth, TX 76112-2905
The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid. If notice is given by facsimile, personal
delivery, or overnight delivery in accordance with the provisions of this
Section, said notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the provisions of this
Section, such notice shall be conclusively deemed given seven business days
after deposit thereof in the United States mail.
8. Entire Agreement. Except as provided herein, this Agreement contains
the entire agreement of the parties, and supersedes all existing negotiations,
representations, or agreements and all other oral, written, or other
communications between them concerning the subject matter of this Agreement.
9. Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The Parties agree that facsimile signatures of this Agreement shall
be deemed a valid and binding execution of this Agreement.
10. Modification. No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties hereto.
11. Attorneys' Fees. Except as otherwise provided herein, if a dispute
should arise between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for all
reasonable expenses incurred in resolving such
<PAGE> 4
dispute, including reasonable attorneys' fees exclusive of such amount of
attorneys' fees as shall be a premium for result or for risk of loss under a
contingency fee arrangement. In the event of such a dispute, it shall be
resolved at the Orange County, California office of the American Arbitration
Association.
12. Assignment. Neither party shall assign its rights or obligations
under this Agreement without the express prior written consent of the other
party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date.
"The Company"
NEW DIRECTIONS MANUFACTURING, INC.
/s/ Donald A. Metke
- ----------------------------
BY: Donald A. Metke
ITS: President
"The Consultant"
/s/ Michael D. Dunn
- ----------------------------
Michael D. Dunn
<PAGE> 5
EXHIBIT "A"
DESCRIPTION OF CONSULTING SERVICES
During the three year period of time commencing upon the date of this
Agreement, the Consultant shall provide general business advice to the Company.
Additionally, if elected by the shareholders of the Company at their annual
meeting, the Consultant shall serve as a member of the Board of Directors of the
Company for three years.
<PAGE> 6
EXHIBIT "B"
COMPENSATION
The Consultant shall receive the following Compensation for the provision
of the Consulting Services:
1. Compensation in the form of stock. The Consultant shall have the right
to acquire 50,000 shares of restricted common stock of the Company at a price of
$0.01 per share simultaneous with the execution of this Agreement (the
"Shares"). The Shares shall not be sold, pledged, or transferred during the
three year term of this Agreement, except through a merger or sale of the
Company. If the Consultant does not serve as a consultant and/or director of the
Company for three full years (36 months) from May 1, 1998, due to resignation,
the failure to adequately perform his fiduciary duty (cause), or the failure of
the shareholders to elect or re-elect him, then, except in the case of a merger
or sale of the Company, the Consultant is obliged to sell back to the Company,
for each month less than the 36 months agreed to be served, 1/36th of the shares
at $0.01 per share.
In connection with the Consultant's right to purchase the Shares, the
Consultant hereby represents and warrants to the Company as follows:
(a) Consultant has sufficient liquid assets to invest in the Shares.
(b) Consultant has had an opportunity to ask questions of and
receive answers from the Company or a person or persons acting on its behalf
concerning the terms and conditions of the purchase of the Shares. Consultant is
satisfied with all information provided by the Company and/or persons acting on
behalf of the Company;
(c) Consultant acknowledges that the Shares are being solicited and
are exempt from registration pursuant to Regulation D of the Securities Act of
1933, as amended (the "Act"), and in connection therewith, covenants and agrees
that he will not offer, sell, or otherwise transfer the Shares unless and until
the Shares are registered pursuant to the Act or unless the Company shall be
entitled to rely upon an opinion of counsel satisfactory to Company with respect
to compliance with the above securities laws.
(d) Consultant understands he is purchasing the Shares without being
furnished any offering literature or prospectus other than any specific
information which the Consultant may have requested that the Company provide to
him.
(e) The Shares for which he hereby subscribes are being acquired
solely for his own account, for investment purposes only, and are not being
purchased with a view to or for the resale, distribution, subdivision or
fractionalizing thereof; he has no present plans to enter into any such
contract, undertaking, agreement or arrangement. Consultant understands that he
shall not have the right to sell or otherwise transfer the Shares unless and
until the Shares are registered for
<PAGE> 7
sale in the public securities markets. Consultant further understands that he
shall be subject to any underwriter or broker/dealer trading restrictions.
(f) Consultant acknowledges and is aware of the following:
(i) There are substantial restrictions on the transferability
of the Shares; the Shares will not be, and Consultant has no right to demand
that the Shares be, registered under the Act; and accordingly, he may have to
hold the Shares for a substantial period of time.
(ii) Consultant, by reason of his business or financial
experience, or the business or financial experience or his/her professional
advisor who is not affiliated with, or compensated by the Company or any of its
affiliates, or any selling agent of the Company, directly or indirectly, has the
capacity to protect his own interests in connection with his purchase of the
Shares.
(g) In order to purchase the Shares, Consultant shall:
(i) Deliver a check in the amount of $500 to "New
Directions Manufacturing, Inc.;" and
(ii) Execute this Agreement.
2. Reimbursement of expenses. The Consultant shall also be entitled to
reimbursement of all pre-approved expenses beginning on May 1, 1998 and
concluding, but subject to termination pursuant to 5.b. above or extension by
mutual agreement, on May 1, 2001.
