UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
WIRELESS DATA SOLUTIONS, INC.
--------------------------------
(Name of Small Business Issuer in its charter)
UTAH 93-0734888
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1016 Shores Acres Drive, Leesburg, Florida 34784
- ------------------------------------------------ -----------------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (352) 323-1295
Securities to be Registered Pursuant to Section 12(b) of the Act: None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, no par value
----------------------------------
(Title of Class)
FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS FORM 10-KSB ANNUAL REPORT
CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, AND THE COMPANY DESIRES TO FALL
WITHIN THE "SAFE HARBOR" PROVISIONS THEREOF. THIS STATEMENT IS INCLUDED
HEREIN FOR THE EXPRESS PURPOSE OF AVAILING THE COMPANY OF THE PROTECTIONS OF
SUCH SAFE HARBOR WITH RESPECT TO ALL OF THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN. SUCH FORWARD-LOOKING STATEMENTS REFLECT THE CURRENT VIEWS
OF THE COMPANY AND ITS MANAGEMENT WITH RESPECT TO FUTURE EVENTS AND FINANCIAL
PERFORMANCE, AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER SUBSTANTIALLY FROM HISTORICAL RESULTS OR
ANTICIPATED RESULTS. IN THIS ANNUAL REPORT, THE WORDS "ANTICIPATES,"
"BELIEVES," "EXPECTS," "INTENDS," "FUTURE," "PROJECTED" AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED TO
CONSIDER SPECIFIC RISK FACTORS DESCRIBED HEREIN (SEE ITEM 6 "MANAGEMENT'S PLAN
OF OPERATIONS," UNDER THE SUBHEADING "FACTORS THAT COULD AFFECT THE COMPANY'S
ABILITY TO ACHIEVE ITS OBJECTIVES") AND NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE
AFTER THE DATE HEREOF.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development and Organizational History
-----------------------------------------------
Wireless Data Solutions, Inc. (the "Company") was organized under the
laws of the State of Oregon on March 7, 1984, under the name "Gold Genie
Worldwide, Inc." The Company was incorporated for the primary purposes of
manufacturing, assembling, selling and distributing mining equipment for
various uses, including the recovery of precious metals and gems.
The Company was initially authorized to issue 50,000,000 shares of common
stock with a par value of $.001 per share, and 3,000,000 shares of preferred
stock with a par value of $.002 per share. Upon the Company's incorporation,
the Board of Directors of the Company authorized the issuance of 10,805,000
shares of its common stock to directors, executive officers and persons who
may be deemed to have been promoters or founders of the Company for the total
consideration of $129,893. Of such initially authorized shares, 8,000,000
were issued to Heartland Diversified Industries, Inc., from which the Company
acquired all of its initial assets and liabilities, and 2,000,000 were issued
to the partners of Gold Genie Worldwide, the predecessor partnership to the
Company.
On July 24, 1985, the Company publicly offered 4,000,000 units, at a
offering price of $0.125 per unit, each unit consisting of one share of the
Company's common stock and two warrants. The two warrants were designated as
Warrant A and Warrant B. Warrant A could be exercised to purchase one share
of the Company's common stock at a purchase price of $0.25, and Warrant B
could be exercised to purchase one share of the Company's common stock at a
purchase price of $0.50. Total proceeds from the public offering, net an
issuance cost, including underwriting fees, of $75,908, amounted to $424,092.
On December 17, 1987, the Company entered into a Settlement Agreement and
Release (the "Settlement Agreement") with certain of the Company's
shareholders and directors (the "Settlement Shareholders"). The Settlement
Agreement became effective September 30, 1987, pursuant to which the Company
released its right to manufacture, distribute and sell the Gold Genie mining
machine, and conveyed to the Settlement Shareholders substantially all of the
Company's assets as in existence on September 30, 1987. In exchange for such
release, the Settlement Shareholders agreed to assume substantially all of the
Company's liabilities as in existence on September 30, 1987, and agreed to pay
to the Company a royalty of $10 per Gold Genie mining machine sold by the
Settlement Shareholders over the subsequent five-year period, which sales were
in no event to be less than 100 Gold Genie mining machines, and to return and
transfer to the Company 2,000,000 of the Company's common stock held by the
Settlement Shareholders.
At the annual shareholders meeting held June 4, 1988, the shareholders of
the Company approved a change to the name of the Company to "Products,
Services & Technology Corporation." This name change was effected on June 13,
1988, by the Company's filing with the Secretary of State of the State of
Oregon of a Certificate of Amendment of its Articles of Incorporation.
At the annual shareholders meeting held March 31, 1989, the shareholders
of the Company approved a further amendment to the Company's Articles of
Incorporation to decrease the authorized capital of the Company to 25,000,000
shares of common stock, retaining the par value at $.001 per share, with
appropriate adjustments to the stated capital and capital surplus accounts of
the Company. The shareholders voted to retain as authorized 3,000,000 shares
of preferred stock with a par value of $.002 per share.
On May 29, 1997, the Company's shareholders approved a change in the
Company's place of domestication to the State of Utah, which was effected on
June 2, 1997, pursuant to the Company filing Articles of Domestication with
the Utah Department of Commerce, Division of Corporations and Commercial Code
(the "Division"). Pursuant to requisite shareholder approval and in order
better to conform the Company's name to its primary business, on June 13,
1997, the Company changed its name to "Wireless Data Solutions, Inc." by
filing with the Division Articles of Amendment to its Articles of
Incorporation.
Subsidiaries
-------------
PST Financial Corporation. On October 3, 1985, the Company organized
Gold Genie Party Programs, Inc., a Montana corporation, as a wholly-owned
subsidiary of the Company. By Articles of Amendment to the Articles of
Incorporation, duly approved by the sole shareholder and filed with the
Montana Secretary of State, the name of the corporation was changed to PST
Financial Corporation ("PST Financial"). PST Financial has had minimal
operations since inception. At present, PST Financial is, in effect, a
"shell" company with no assets, liabilities, nor sales.
Distributed Networks, Inc. On April 19, 1988, the Company entered into a
certain Agreement to acquire all of the outstanding shares of Distributed
Networks, Inc., a California corporation ("Dinet"), in exchange for 8,500,000
shares of the Company's common stock. As part of the acquisition, the Company
provided $200,000 to Dinet for working capital, and in September, 1988, new
management was hired at Dinet. At the time it was acquired, Dinet was
primarily engaged in the development and marketing of technology relating to
the digital recording systems industry. The majority of Dinet's revenues
derived from sales to Dictaphone Corp., based on contracts which were set to
expire in 1989. Dinet also had developed a basic design for a product known
as the Mobile Data Terminal ("MDT"), which was known by the popular name "Data
Mate." Dinet has focused its continuing operations on the growing MDT market,
marketing electronic communications equipment primarily to vehicle fleet
owners.
Former Subsidiaries
-------------------
Bernard, Lee & Edwards Securities, Inc. On January 3, 1989, the Company
organized Pro America Securities, Inc. ("Pro America"), a Delaware
corporation, as a wholly-owned subsidiary of the Company, and which was formed
to engage in the business of a full-service securities firm. The Company
provided initial funding to Pro America of $25,000 on March 10, 1989, in
exchange for 25 shares of Pro America's common stock. At a special meeting of
the shareholders of Pro America held on November 6, 1990, an amendment to the
Certificate of Incorporation of Pro America was unanimously approved to change
the name of the corporation to Bernard, Lee & Edward Securities, Inc. ("BLE").
On June 17, 1991, the National Association of Securities Dealers ("NASD")
issued a license to BLE, and BLE began business operations in September, 1991
as a broker-dealer member of the NASD. On March 27, 1996, the Company entered
into a Buy/Sell Agreement with Heartland, whereby the Company agreed to sell
to Heartland all of the common stock of BLE owned by the Company. In exchange
for such common stock, Heartland agreed to pay the Company $164,000. At the
time of such transaction, and as referenced above, Heartland was a shareholder
of the Company, owning approximately 22.9% of the total issued and outstanding
shares of the Company's common stock.
Description of Business Operations
----------------------------------
Through its wholly-owned subsidiary, Dinet (all references herein to the
Company should be deemed to include Dinet), the Company is engaged in the
business of the design, manufacture and marketing of electronic digital
equipment, in several product categories.
1. Principal Products and Services
-------------------------------
The Data Mate.
The Data Mate is a wireless communication device that transmits
information in digital form over two-way radio. It may be installed in any
vehicles with conventional two-way radios. It is estimated that there are
more than 14 million such vehicles in use today in the United States. Because
of such a large volume of users, conventional two-way radio frequencies are
being overwhelmed.
The Data Mate has been designed to relieve the growing congestion
problem. In this regard, the Company has developed technology whereby the
Data Mate will interface with cellular telephone systems. Cellular systems
operate on two-way radio systems dedicated to telephone use. By means of
Cellular Digital Packet Data ("CDPD") technology, which underlies software
currently being developed by the Company, the Company's Data Mate's can be
employed to deliver rapid, digital bursts of information during the small,
unused periods of airtime on a cellular system. The Data Mate is capable of
identifying a split-second of open airtime, during which time up to 255
characters of data can be transmitted.
Compared to traditional telephone and voice-transmission technology, the
Data Mate offers numerous advantages, including confidentiality, accuracy, and
speed. Furthermore, the Data Mate can be equipped to store messages when a
vehicle is unattended, to record dates and times of messages, and to send
emergency alarm messages. The Data Mate provides a direct link to the central
vehicle fleet operator, and can interface with computer systems for seamless
automized fleet communication and control.
The Data Mate offers additional optional features, such as: (i) real-
time, central computerized vehicle tracking, which improves fleet efficiency
and facilitates rapid maintenance response and road-side assistance; (ii)
credit card readers, which can be employed by vehicles-for-hire, such as
taxis, limousines, or by transient service industries, such as plumbing
repair; (iii) bar code readers, used in businesses requiring inventory and
parts control; and (iv) hard copy printers, which can produce immediate, on-
site invoices and receipts.
The first market for the Data Mate ready-mix concrete trucks was
identified by the Company in 1992. There are currently over 10,000 Data Mates
installed in ready-mix concrete trucks. At present, the Date Mate has been
installed in the following types of vehicles: ready-mix trucks, sand and
aggregate trucks, parcel delivery vans, helicopters, concrete cutting and
drilling vehicles, taxis, television cable trucks, ambulances, paratransit
vans, and plumbing trucks.
Software Products.
In late 1995, the Company developed a plan to develop software products
to enhance vehicle fleet management. Such software products, some of which
are still currently in development, will be designed as a turn-key packages
that will provide for comprehensive fleet management.
The Company's first software product, which is presently available, is an
automatic vehicle tracking system which superimposes a vehicle's location on a
graphically-represented map installed on the central fleet control computer.
This tracking system utilizes the Global Positioning System (GPS), consisting
of 24 Earth-orbiting satellites deployed by the Department of Defense.
Because reception of the signals generated by GPS satellites is free and
unencumbered, the Company's mobile data terminals, such as the Data Mate,
equipped with the Company's tracking system software, can track each vehicle
in a mobile fleet, anywhere in the world. This product has recently formed an
integral part of a substantial order of the Company's Data Mates, bar code
readers and dispatching software by a large plumbing operation in Southern
California.
The development of other software products is underway, including the
following:
CDPD Software. CDPD software allows the interface of the Company's
Data Mates to cellular telephone systems. Development of this software is in
the final stages, and management expects that such software will be completed,
and beta testing finished, by the end of August, 1997. Marketing of the
Company's CDPD software will be targeted at cellular providers, among other
industries. The Company believes that the CDPD software will provide raise
the efficiency and profitability of cellular providers by facilitating the
identification and utilization of idle time on the cellular network between
cellular telephone calls to rapidly transmit substantial data packets. Use of
the Company's CDPD software will also result in a geographical expansion of
the communication capabilities of a vehicle fleet's central control, from a
"local" range with traditional two-way radio to a nationwide range with the
cellular system.
Dispatching Software. This operating software, which is currently
in the development stage, consolidates centralized control of a vehicle fleet,
creating a multi-function computer system platform for fleet management,
billing and credit extension, among other things. Because similar operating
software is and may become available in the mobile fleet management industry,
the Company expects to compete by offering user-friendly, convenient software
at a favorable cost to the consumer. The Company expects to complete this
software in November, 1997.
Mapping Software. As discussed above, the Company has completed
development and is actively marketing mapping software designed to track fleet
vehicles and display their location on a computer-generated map. The Company
intends to continue to enhance its mapping software, including the ongoing
development of add-on map modules. The creation of additional map modules for
new geographical regions will position the Company to market its mapping
software in various new markets.
Dinet Custom Software Interfaces. The Company has developed
several custom software interface products that allow the Company's
proprietary terminal and controller products to interface and communicate with
third-party software applications. Such interface products, called Dynamic
Link Libraries ("DLLs"), allow software developers to communicate with the
Company's mobile data terminals, such as the Data Mate. In essence, by
automatically handling the necessary interface timing and protocol, each DLL
enables a software programmer to integrate a differing software application
with the Company's Data Mate, without disclosing the Company's proprietary
software codes.
Risk Factors That May Affect Operating Results
----------------------------------------------
Important factors that may cause results to differ from expectations
include, without limitation, the following:
Limited Market for Shares. There is currently only a limited market for
the Company's common stock. There can be no assurance that a larger market
for the Company's common stock will ever be developed or maintained. Factors
such as the success or lack thereof of the Company's efforts to market its
products and services, competition, governmental regulations, and fluctuations
in operating results may all have an effect on the market for the Company's
common stock, which market may be volatile. The stock markets generally have
experienced, and will likely experience in the future, extreme price and
volume fluctuations which have affected the market price of the shares of many
small capital companies, and which have often been unrelated to the operating
results of such companies. Such broad market fluctuations, as well as general
economic and political conditions, may adversely affect the market price of
the Company's common stock in any market that develops.
Reliance on Key Personnel. The Company's performance is substantially
dependent on the performance of its executive officers and key employees. The
Company is dependent on its ability to retain and motivate highly-qualified
personnel, especially in management and technical positions. The Company does
not have a "key person" life insurance policy on any of its employees. The
loss of the services of any of its executive officers or other key employees
could have a material adverse effect on the business, operating results or
financial condition of the Company. The Company's future growth and success
also depends on its ability to identify, hire train and retain other qualified
management and technical personnel in the future. The inability to hire and
retain necessary personnel could have a material adverse effect on the
Company's business operations and financial condition.
Penny Stock. The Company's securities are deemed "penny stock" as
defined in Rule 3a51-1 of the Securities and Exchange Commission. Such a
designation could have a material adverse effect on the development of the
public market for shares of the Company's common stock or, if such a market
develops, its continuation, since broker-dealers are required to personally
determine whether an investment in such securities is suitable for customers
prior to any solicitation of any offer to purchase these securities.
Compliance with procedures relating to sale by broker-dealers of "penny
stocks" may make it more difficult for purchasers of the Company's common
stock to resell their shares to third parties or to otherwise dispose of such
shares.
2. Distribution Methods
--------------------
Marketing Efforts.
Historically, the Company has marketed its products from Dinet's offices
in Oceanside, California, by advertising in trade journals, attending industry
trade shows, and through referrals. As the Company's profitability continues
to improve, it is anticipated that the Company will expand its marketing
efforts, with increased exposure in trade publications and at industry
conferences and trade shows.
Among the Company's primary marketing methods, the most effective has
been trade journal advertising. The Company believes that such advertising is
effective because may vehicle fleet operators employ staff whose sole
responsibility is vehicle communications. Such responsibility would include
research and study regarding industry developments, requiring attention to
trade publications.
Distribution Efforts.
Standard distribution practice in the mobile data terminal ("MDT")
industry has focused on sales direct from the manufacturer to the mobile fleet
operators. The Company is engaged in this method of distribution, and employs
a sales force of three full-time salespeople and one part-time salesperson.
The Company's primary sales office is at Dinet's headquarters in Oceanside,
California, and the Company operates one satellite sales office in St. Cloud,
Minnesota, which is near Minneapolis. The Company's success in selling its
products direct to the end-user is and will continue to be dependent on the
continued success of the Company's advertising efforts, as well as the ability
of the Company's sales force to build and maintain contacts in the industry.
The Company believes that the industry's standard distribution practice
is limited in its potential because of the typical manufacturer/end-user
relationship. Most MDT manufacturers do not produce comprehensive turnkey
systems for immediate implementation by mobile fleet operators. Instead, in
most cases, a manufacturer seeks to negotiate contracts with a mobile fleet
operator whereby the manufacturer produces MDTs that are designed to the
mobile fleet operator's specifications. Because the manufacturer and mobile
fleet operator must agree on numerous details, including the underlying
software configuration, the process of negotiation can be lengthy and
expensive. The time-consuming sales process has limited the development of a
retail dealer network, since dealers, as "middlemen," often require faster
turn-around and greater volume to realize a reasonable profit margin.
The Company's products have been developed as comprehensive, turnkey MDT
systems, designed to be implemented by most mobile fleet operators without
significant alteration or reconfiguration. As a result, the Company believes
that it can foster the development of a retail dealer network. The Company
plans to establish five regional offices in the United States which will be
supervised by sales managers who will develop and support a retail dealer
network in their respective region. The Company has already opened its first
such regional office in St. Cloud, Minnesota, and is developing a uniform
program of operation which will provide the foundation for other offices to be
opened over time.
The Company believes that its products are accorded a favorable
reputation in the industry and that its ongoing development of a retail dealer
network will result in increased sales; however, there can be no assurance
that the Company's efforts to market its products either direct to end-users
or through retail dealers will be successful.
3. Competition
-----------
The MDT market is expanding and is intensely competitive. The
Company competes directly with other companies that offer similar MDT hardware
and software to mobile fleet operators. In so competing, the Company
emphasizes the low cost and the comprehensive, turnkey convenience and overall
compatibility of its products. However, many of the Company's competitors
have substantially greater name recognition and financial resources than the
Company. Some of the leading companies in the industry are Mentor, Data
Express, Command Data, and GSMI (Gandolph). There can be no assurance that
the Company's business and results of operations will not be affected
materially by market conditions and competition in the future.
4. Proprietary Rights
------------------
Certain elements of the Company's software and hardware constitute
confidential trade secrets that the Company protects through the use of
confidentiality agreements with relevant employees, and strict internal
controls on disclosure of confidential information. The Company has never
experienced an unauthorized public disclosure of any confidential trade
secrets.
5. Government Approvals
--------------------
The Company's mobile data terminals, or Data Mates, are subject to
regulation by the Federal Communications Commission (FCC) under FCC
Regulations Part 15. Such regulations require that operation of the Company's
Data Mates be subject to supervision by a controller situated at a "home base"
location. The Company's controller was tested in accordance with the
requirements of FCC Regulations Part 15, and satisfied such requirements.
6. Effect of Governmental Regulations
----------------------------------
Inasmuch as the Company has satisfied the requirements of FCC Regulations
Part 15, which is the only governmental regulation pertinent to the Company's
products or services, there is no governmental regulation that has a
substantial effect on the Company's business operations.
7. Research and Development Expenses
---------------------------------
The Company spent approximately $50,000 on research and development
efforts in fiscal year 1995, and approximately $200,000 on such efforts in
fiscal year 1996. The Company's research and development efforts are directed
toward the development of new products, rather than existing products. The
Company bases the sales price for existing products on the nature of the
product, market conditions and market norms, and competition, and therefore,
it is not possible for the Company to estimate the extent to which the
Company's research and development expenses are borne directly by customers.
8. Environmental Compliance
------------------------
To date, the Company's operations do not implicate any environmental laws
or regulations.
9. Employment Matters
-------------------
The Company currently employs 20 employees, of which 19 are full-time
employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Fiscal Years 1995 and 1996
--------------------------
Revenues in 1996 were higher than in 1995 by a margin in excess of
$500,000. This is a result of the Company's continued penetration in the
ready-mix cement segment of the market, along with repeat sales to the
Company's existing customer base. In addition, the Company has been able to
further penetrate other market segments such as plumbing, taxis, paratransit,
and shuttle services. Other income resulted from consulting fees received
from Heartland Diversified Industries, Inc., which purchased BLE from the
Company pursuant to an agreement dated March 27, 1996.
The gross profit margin increased by approximately five percent.
Typically, the gross profit margin as a percentage of product sales will vary
plus or minus five points based on the package of products sold. Certain
models have been in production longer; consequently, the company is realizing
some economies of scale, through more efficient purchasing and manufacturing.
Operating expenses increased approximately $250,000 as a result of
increasing our software capacity and additional sales personnel. However, the
increase was not proportionate to the sales which was reflected in a higher
net income. The resulting net income demonstrates, at that level of fixed
cost, that the Company is capable of generating revenues substantially in
excess of its cost structure. However, in order to increase its product line
and development of enhancements to existing products, the Company will need to
increase its fixed cost structure. Management believes that this move will
position the Company for the next level of achievement.
As a result of its increasing profitability, the Company's wholly-owned
subsidiary, Dinet, has become subject to California state income tax. The
full impact of the tax effect is not shown on the financial statements for
FY1995 and FY1996 due to an underestimation of the tax liability. The full
impact of the tax liability is shown as a prior period adjustment on the
comparative financial statements for the nine month period ending June, 1997.
These financials have been restated to reflect the effects of error in
estimation of approximately $55,000.
As a result of an agreement dated March 27, 1996, discussed above,
whereby the Company sold its subsidiary, BLE, to Heartland Diversified
Industries, Inc., minority interests no longer have a share in the income of
the company. The impacts of the sale are shown under the discontinued
operations section.
The account receivable increase reflects the increased volume of sales.
Historically, the Company has not experienced any difficulty collecting its
receivables. Receivables from Heartland Diversified Industries, Inc. have
increased as a result of the aforementioned sale of BLE.
Inventory increased due to a higher level of sales volume. The Company
operates on a "just in time" basis and the level of inventory was unusually
high because of finished goods which had not been shipped. On a going-forward
basis, management anticipates that inventory levels will probably closer to
$250,000. Historically, the Company has turned its inventory ten to twelve
times per year.
Equipment levels are unusually low because the Company outsources most of
the assembly that requires major capital expenditures for equipment. The
equipment that is purchased is expensed in accordance with IRS guidelines.
Management does not expect that the Company will make any major capital
expenditures in the near future.
The components of the current liability section do not vary
substantially. The accounts payable increased somewhat as a result of
increased sales activity.
The accrued salaries result from a period of time in the history of the
company when the officers had forgone their salaries as a means of injecting
funds in the company. In 1996, while $50,000 of such accrued salaries was
shown as a current liability, none was paid. Any payment of accrued salaries
has been and, continuing forward, will be subject to the company's cash flow
requirements. All accrued salaries and related taxes have been expensed so
that there will be no impact on future earnings.
In January, 1996, the Company's President, Michael B. McLaughlin,
exercised options on 25,000 shares of common stock at $.05 per share. In
addition, outside consulting services were purchased in exchange for 10,000
shares. Heartland Diversified Industries, Inc. purchased stock for a total of
$48,000, which is shown as a receivable from related entity.
Interim Financials
------------------
During the nine-month interim period ending June 30, 1997 (the "Interim
Period"), product sales increased approximately $275,000 with a corresponding
increase in the cost of product sales of three percent. This was a result of
substantial sales of a new product model offered by the Company. It is
anticipated that the cost of product will decrease as economies of scale are
realized for that model. Also, enhancements of existing products increased
promotion and more software sales will increase margins.
Operating expenses as a percentage of sales were up approximately six
percent during the Interim Period. The increase was due to heightened
emphasis on software development for product enhancements and new products.
In addition, more support personnel were added, which management views as an
investment in the Company's future.
The financial statements for the nine-month period ending June 30, 1996,
have been restated to show the impact of underestimation of California income
tax expense. The statement of cash flow shows the allocation for the period
prior to FY1996.
In the third quarter of FY1996, the Company entered into a personal
service contract with a public relations firm. Management anticipates that
services to be rendered to the Company thereunder will increase industry
awareness of the Company and its products.
During the third quarter of FY1997, the company sold 87,500 shares of
common stock to raise $35,000 which is to be used for working capital. In the
second quarter, 20,000 shares were issued to outsiders as payment for certain
consulting and public relations services.
ITEM 3. DESCRIPTION OF PROPERTY.
Office Space
------------
The Company maintains offices in three locations: (1) Oceanside,
California; (2) St. Cloud, Minnesota; and (3) Leesburg, Florida. For the
Oceanside office, which houses the headquarters of Dinet, the Company leases
5,200 square feet of space for a total rent of $2,621 per month. The
Oceanside lease is for a period of one year, renewable for additional one-year
terms from September to September. The St. Cloud office consists of 850
square feet of leased space, leased on month-to-month basis for $250 per
month. The Leesburg office, which constitutes the Company's headquarters,
consists of 300 square feet of leased space, leased on a month-to-month basis
for $100 per month.
At present, management believes that the Company's current space is
adequate for the Company's needs. However, the Company may require additional
space in the future if growth continues to occur. In such event, the Company
will seek to obtain favorable lease terms on any necessary additional space.
Investment Policies
-------------------
It is the Company's policy to avoid investments in illiquid assets such
as real estate and manufacturing equipment. With regard to excess funds and
retained earnings, the Company generally invests such funds in money market
funds or treasury funds. The Company typically funds ongoing operations from
cash flow, and does not generally have significant funds available for long-
term investment.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The following table sets forth the shareholdings of those persons who own
more than five percent of the Company's common stock as of June 30, 1997:
Number of Shares(1) Percentage of Total
Name of Shareholder Beneficially Owned Outstanding Shares
- ------------------------------------- ------------------ -------------------
Heartland Diversified Industries, Inc. 1,815,320 22.3%
Patrick L. Makovec 846,663 10.4%
Michael B. McLaughlin 977,248 12%
(1) Michael B. McLaughlin and Patrick L. Makovec are shareholders of Heartland
Diversified Industries, Inc. ("Heartland"), with Mr. McLaughlin holding 35%
and Mr. Makovec holding 15.6% of Heartland's outstanding stock. In addition,
Mr. McLaughlin is President and Chairman of the Board of Heartland. However,
because Heartland is an independent corporation with separate, unrelated
shareholders, Mr. McLaughlin and Mr. Makovec disclaim any beneficial ownership
of the shares in the Company held by Heartland.
Security Ownership of Management
--------------------------------
The following table sets forth the shareholdings of the Company's
directors and executive officers as of June 30, 1997:
<TABLE>
<CAPTION>
Percentage of Total
Name of Officer or Director Position or Title Number of Shares Owned Outstanding Shares
- --------------------------- -------------------- ---------------------- -------------------
<S> <C> <C> <C>
Michael B. McLaughlin Chairman, President
and CEO; Chairman and
Secretary of Dinet 977,248 12%
Patrick L. Makovec Director, CFO, Treasurer
and Secretary; Director,
President and Treasurer
of Dinet 846,663 10.4%
Brian Watts Director, Vice President
and General Manager of
Dinet 311,750 3.8%
Brian Blankenburg Director 5,000 Less than 1%
</TABLE>
Changes in Control
------------------
At present, there are no arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
List of Directors, Executive Officers, Promoters and Control Persons
--------------------------------------------------------------------
The following table sets forth the names of all current directors and
executive officers of the Company and its principal subsidiary, Dinet. These
persons will serve until the next annual meeting of the stockholders or until
their successors are elected or appointed and qualified, or their prior
resignation or termination. The Company has no employees who are not
executive officers, but who are expected to make a significant contribution to
the Company's business operations.
Name of Person Position or Title
- -------------------- -------------------------------
Michael B. McLaughlin Chairman, President and CEO; Chairman and
Secretary of Dinet
Patrick L. Makovec Director, CFO, Treasurer and Secretary; Director,
President and Treasurer of Dinet
Brian Watts Director, Vice President and General Manager of
Dinet
Brian Blankenburg Director
Background Information
----------------------
Michael B. McLaughlin. Mr. McLaughlin, age 59, has served as Chairman of
the Board of the Company since its inception in March, 1984. In January,
1989, he was elected CEO and Secretary, and in April, 1996, he was elected
President. Prior to joining the Company, Mr. McLaughlin was engaged in the
securities industry in Minneapolis, Minnesota, from 1965 to 1975, as a broker
and manager of various investment concerns. Following such experience, he was
involved in investment management in the farming and real estate industries.
In 1981, he was elected Chairman and President of Heartland Diversified
Industries, Inc., a Montana corporation involved primarily in the management
of mining properties and investments, which positions he continues to hold.
Mr. McLaughlin is also the Chief Executive Officer of Bernard, Lee & Edwards
Securities, Inc., a National Association of Securities Dealers licensed
broker-dealer located in Florida. He is resident in the Company's Leesburg,
Florida office.
Patrick L. Makovec. Mr. Makovec, age 55, has served as an Director of
the Company since December, 1987. He is currently also serving as Treasurer
of the Company, to which position he was elected in December, 1986. In
September, 1988, Mr. Makovec was elected as the President of the Company's
subsidiary, Dinet, a position which he continues to hold. Mr. Makovec's
responsibilities include oversight of the Company's accounting systems and
financial reporting. He is the former President of Tel Corp Leasing in St.
Cloud, Minnesota, and received a Masters of Science in Business from the
University of Wisconsin-Madison in May, 1974. Mr. Makovec is also currently
the Treasurer and Financial Operations Officer of Heartland Diversified
Industries, Inc., the Company's largest shareholder.
Brian J. Watts. Mr. Watts, age 62, has been a Director, Vice President
and General Manager of Dinet since September, 1988. Prior to that time, Mr.
Watts had been employed by Dinet as a consultant since November, 1986. He is
a native of London, England, and arrived in the United States in September,
1964, subsequently becoming a citizen. From November, 1964 until June, 1972,
Mr. Watts was Sales Administrator for Sprague Electric. Thereafter, until
March, 1976, he served as Operations Manager for AVX Corp., and subsequently
worked as Administrator and General Manager of Coded Communications until
January, 1988. He is resident in the Company's Oceanside, California office.
Brian B. Blankenburg. Mr. Blankenburg, age 52, was elected as a Director
of the Company in June, 1997. Mr. Blankenburg is a partner in the Business
Development Group ("BDG"), which provides consulting services in the areas of
strategic planning, sales and marketing, management, acquisitions, funding,
market research, due diligence and computer analysis. BDG has offices in
Seattle, Milwaukee, Minneapolis, and Montgomery, the latter of which is
managed by Mr. Blankenburg. Prior to joining BDG, from January, 1993 to
October, 1996, Mr. Blankenburg served as Executive Vice President, and later
President, of Hudson Industries, a holding company with assets in
transportation and other industries. While at Hudson Industries, Mr.
Blankenburg led the strategic repositioning of that company's business and the
doubling of sales in four years. From March, 1990 to December, 1992, Mr.
Blankenburg operated a business consulting company, Blankenburg & Bendt. From
March, 1987 to March, 1990, he was Vice President of Sales at Pies, Inc.
Prior to that time, Mr. Blankenburg held various management positions with
International Multifoods, Beatrice, Green Giant and Hormel Company. He is a
1971 graduate of the University of Minnesota, where he received a B.A. in
advertising. His continuing education has included the Beatrice Executive
Marketing School at the J.L. Kellogg Graduate School of Business, Northwestern
University, as well as studies at the University of Pennsylvania Wharton
School of Business.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the total compensation paid to the
Company's President and other four most highly-compensation employees during
the Company's past three fiscal years.
- --------------------------------------------------------------------------
Name of Person FY1994 FY1995 FY1996
- -------------------------- ----------- ---------- ---------------
Michael B. McLaughlin $84,000 $84,000 $84,000
Patrick L. Makovec $60,000 $60,000 $60,000
Brian J. Watts $50,000 $50,000 $60,000
Ralf Ubaldo $52,000 $52,000
Dana McKinzie $44,600 $53,150 $58,250
Eric Haynes $55,000
- --------------------------------------------------------------------------
No other compensation was given to any of the above-listed employees
during the relevant time period. Except for providing standard-form health
insurance to its employees, during such time period, the Company did not pay
any bonuses, or grant any stock awards, options or stock appreciation rights,
or pay any other form of compensation or perquisites.
In January, 1996, Michael B. McLaughlin exercised certain options granted
to him under the Company's executive incentive stock option plan (discussed
below), for the purchase of 25,000 shares of the Company's common stock at an
exercise price of $0.05 per share.
Executive Incentive Stock Option Plan
-------------------------------------
Under an incentive stock option plan ("ISOP") approved by the Company's
shareholders, 500,000 shares of the Company's common stock have been
authorized for issuance to officers and other key employees. Exercise prices
for options granted under such ISOP are determined by the Company's Board of
Directors, at prices that reflect adequate value, which generally will not be
less than the estimated, or, if applicable, actual fair market value of the
Company's common stock on the date of grant. Options granted under the ISOP
can remain effective for no more than ten years from the date of grant. As of
August 30, 1997, options to purchase 450,000 shares of the Company's common
stock had been granted under the ISOP. As of August 30, 1997, options
remained outstanding for the purchase of 245,000 shares of the Company's
common stock, all of which are exercisable at $0.05 per share.
<PAGE>
Management Incentive Earnings Plan
----------------------------------
Under a management incentive earnings plan ("MIEP"), which is effective
for five years beginning April 1, 1996 and ending March 31, 2001, officers and
key employees are eligible to receive warrants to purchase the Company's
common stock, if certain earnings criteria are met. Specifically, if the
Company generates after-tax per share profits of at least $0.06 by March 31,
1997, which amount is graduated annually in $0.06 per share increments.
Therefore, as of March 31, 2001, in order for any officer or key employee to
be eligible to receive warrants under the MIEP, the Company must achieve
after-tax per share profits of at least $0.30. The warrant exercise price is
$0.50 per share of the Company's common stock. If, at the end of any year
under the MIEP, the criteria for issuance of the warrants is not achieved, the
number of warrants available for issuance under the MIEP is reduced by 20%.
The MIEP initially authorized the issuance of a maximum of 500,000 warrants
per participant, with a corresponding maximum on the number of warrants that
may be issued under the MIEP of 1,500,000. As of the end of the first year of
the MIEP, which ended on March 31, 1997, none of the participants was eligible
to receive any warrants. As a result, the maximum number of warrants that can
be issued under the plan is now 1,200,000. When issued, the warrants are
valid and exercisable for a period of five years.
Compensation of Directors
--------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as a director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
There are no arrangements whereby any of the Company's directors was
compensated during the Company's last fiscal year for any service provided as
a director.
Employment Contracts and Termination of Employment and Change-in-
------------------------------------------------------------------
Control Arrangements
--------------------
Except as specifically provided in this paragraph, there are no
employment contracts, compensatory plans or arrangements, including payment to
be received by the Company, with respect to any director or executive officer
of the Company which could in any way result in payments to any such person
because of his or her resignation, retirement or other termination of
employment with the Company or any of its subsidiaries, any change in control
of the Company, or a change in the person's responsibilities following a
change in control of the Company. Notwithstanding the foregoing, the Company
has entered agreements with certain of its officers pursuant to which such
officer shall be entitled to severance pay in an amount equal to one year's
salary, in the event of a hostile or unfriendly takeover of the Company, or in
the event that such officer's employment with the Company is terminated for
any reason other than for fraud. Voluntary resignation by such officer
reduces the available severance pay by 25%. In addition, if the Company
becomes obligated to pay such severance pay, the Company will also be
obligated to pay applicable bonuses, accrued unpaid salaries and reimbursable
expenses, as well as the cost of benefits for one year.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as expressly set forth in this Item 7, there have been no material
transactions, series of similar transactions, or currently proposed
transactions, to which the Company or any of its subsidiaries has or is to be
a party, in which the amount involved exceeded or shall exceed $60,000 and in
which any director or executive officer, or any security holder who is known
to the Company to own of record or beneficially more than five percent of the
Company's common stock, or any member of the immediate family of the foregoing
persons, had a material interest.
Sale of Bernard, Lee & Edwards Securities, Inc.
----------------------------------------------
On March 27, 1996, the Company entered into a Buy/Sell Agreement with
Heartland Diversified Industries, Inc. ("Heartland"), whereby the Company
agreed to sell to Heartland all of the common stock of its subsidiary,
Bernard, Lee & Edwards Securities, Inc. ("BLE"). As discussed above, BLE had
been organized in January, 1989, under the corporate name "Pro America
Securities, Inc." for the purpose of engaging in the business of a full-
service securities firm. In exchange for all of BLE's outstanding stock,
Heartland agreed to pay the Company $164,000. At the time of such
transaction, and as referenced above, Heartland was a shareholder of the
Company, owning approximately 22.9% of the total issued and outstanding shares
of the Company's common stock. Heartland is a privately-held company engaged
in general investment activities, primarily focused on farming and real estate
investments. The Company's Chairman and President, Michael B. McLaughlin, is
also the President and 35% shareholder of Heartland. Patrick L. Makovec, a
Director and the Chief Financial Officer of the Company, is a 15.6%
shareholder of Heartland.
Certain Factoring Arrangements
------------------------------
Brian J. Watts, Vice President and General Manager of Dinet, the
Company's wholly-owned subsidiary, and members of Mr. Watt's immediate family
have on various occasions loaned funds to Dinet, which loans are secured by
individual sales invoices generated by Dinet. Terms provide for repayment of
the loans upon Dinet's collection of the receivables represented by such sales
invoices. Loan amounts vary greatly from loan to loan, as does length of
repayment, which has been as short as several days or as long as several
months. In FY1995, the Watts family loaned Dinet a total of $320,000, as to
which amount the Company has paid interest in the amount of $9,400. In
FY1996, the Watts family loaned Dinet a total of $220,000, as to which amount
the Company has paid interest in the amount of $9,500. Through the third
quarter of FY1997, the Watts family had advanced a total of $520,000 to Dinet,
as to which interest has accrued in the amount of $18,500.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue two classes of securities which are
designated, respectively, "common stock" and "preferred stock." The Company
is authorized to issue a total of 25,000,000 shares of common stock and
3,000,000 shares of preferred stock.
The holders of the Company's common stock are entitled to one vote per
share on each matter submitted to a vote at a meeting of the stockholders.
The shares of common stock do not carry cumulative voting rights in the
election of directors.
Stockholders of the Company do not have pre-emptive rights to acquire
additional shares of common stock or other securities of the Company. The
common stock is not subject to redemption rights and carries no subscription
or conversion rights. In the event of liquidation of the Company, the shares
of common stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. All shares of the common stock now
outstanding are fully paid and non-assessable.
At present, the Company has not issued any shares of preferred stock.
The Company's Articles of Incorporation provide that the Board of Directors
may designate and determine the preferences, limitation and relative rights of
the preferred stock, prior to any issuance thereof.
There is no provision in the Company's Articles of Incorporation or
Bylaws that would delay, defer or prevent a change in control of the Company.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
------------------
The Company's common stock is currently listed in the "pink sheets" of
the NQB and the OTC Bulletin Board of the NASD under the symbol "WSD." During
the Company's past two fiscal years, there has been a limited public market
for the Company's common stock, and there can be no assurance that a more
robust public market for the Company's common stock will develop or be
maintained in the future.
The high and low bid prices for shares of the common stock of the Company
for each quarter within the last two fiscal years and the interim period from
October 1, 1996 to June 30, 1997, are as follows:
Quarter Ending: High Bid Low Bid
- ---------------------- --------------- ---------------
December 31, 1994 3/16 1/8
March 31, 1995 11/32 1/4
June 30, 1995 3/8 5/16
September 30, 1995 1/2 3/8
December 31, 1995 7/16 3/8
March 31, 1996 1/2 7/16
June 30, 1996 9/16 7/16
September 30, 1996 1 1/4 7/8
December 31, 1996 1 1/8 3/4
March 31, 1997 3/4 5/8
June 30, 1997 1 1/2 7/16
The above-listed bid prices were obtained from market makers in the
Company's common stock and do not necessarily reflect actual transactions, or
retail mark-ups, mark-downs or commissions.
Outstanding Options, Warrants or Calls to Purchase the Company's
----------------------------------------------------------------
Common Stock
------------
As discussed above in Part I, Item 6, "Executive Compensation," there are
currently outstanding options, granted pursuant to the Company's incentive
stock option plan, to purchase 245,000 shares of the Company's common stock at
an exercise price of $0.05 per share.
On June 16, 1997, the Company's Board of Directors approved the grant of
an option to purchase 50,000 "unregistered" and "restricted" shares of the
Company's common stock at an exercise price of $1.00 per share. This option
was granted to Tom Costa, a computer/Internet and public relations consultant,
in connection with the Company's engagement of the consultant to perform
services for the Company related to the consultant's expertise. The option
vests in cumulative and progressive increments, based on a scheduled timetable
of specified performance criteria. The option is exercisable for a period of
24 months from the date of grant and will expire on June 15, 1999.
Securities Holders
------------------
The number of record holders of the Company's common stock as of August
15, 1997 was approximately 335.
Dividends
The Company has no declared any cash dividends with respect to its common
stock, and does not intend to declare dividends in the foreseeable future.
The future dividend policy of the Company cannot be ascertained with any
certainty. There are no material restrictions limiting, or that are likely to
limit, the Company's ability to pay dividends on its common stock.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceeding. No federal,
state or local governmental agency is presently contemplating any proceeding
against the Company. No director, executive officer or affiliate of the
Company or owner of record or beneficially of more than five percent of the
Company's common stock is a party adverse to the Company or has a material
interest adverse to the Company in any proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
James J. Harned, Certified Public Accountant, audited the Company's
financial statements for the fiscal years ended September 30, 1995 and
September 30, 1996. These financial statements accompany this Registration
Statement.
Any and all reports and financial statements prepared by James J. Harned
for and concerning the Company have not contained an adverse opinion, or a
disclaimer of opinion, nor were any such reports or financial statements
qualified or modified as to uncertainty, audit scope, or accounting
principles. During the engagement of James J. Harned, which engagement is
ongoing, there have been no disagreements on any matter of accounting
principles and practices, financial statement disclosure, or auditing scope or
procedure, that if not resolved to the satisfaction of James J. Harned, would
have caused him to make reference to the subject matter of the disagreements
in connection with any audit of the Company.
The Company has not been advised by James J. Harned that internal
controls necessary for the Company to develop reliable financial statements
did not exist nor that information came to its attention that led it to no
longer be able to rely on management's representations or that made it
unwilling to be associated with the financial statements prepared by
management. The Company has not been advised by James J. Harned of the need
to expand significantly the scope of the Company's audit, nor has the Company
been advised that any information has come to the attention of James J. Harned
that on further investigation may (i) materially impact the fairness or
reliability of either a previously issued audit report or the underlying
financial statements, or the financial statements issued or to be issued
covering the fiscal period subsequent to the date of the most recent financial
statements covered by an audit report, or (ii) cause James J. Harned to be
unwilling to rely on management's representations or be associated with the
Company's financial statements.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On April 7, 1997, the Company's Board of Directors approved a private
placement offering of a maximum of 125,000 shares of the Company's common
stock at a purchase price of $0.40 per share. The Company offered the common
stock in reliance on the limited offering exemption from registration under
the Securities Act of 1933, as set forth in Regulation D of the Securities and
Exchange Commission. As of July 17, 1997, all of the shares offered by the
Company pursuant to such private placement had been sold, resulting in receipt
by the Company of $50,000 in capital funding. Certificates representing the
shares of the Company's common stock issued pursuant to the private placement
bear legends indicating that such shares are "unregistered" and "restricted,"
and may only be sold pursuant to an applicable exemption from registration set
forth in relevant securities laws.
On April 15, 1997, the Company entered into an agreement with a public
relations firm, pursuant to which the Company obtained advertising, marketing
and general public relations assistance designed to increase awareness of the
Company and its products in the marketplace. In exchange for these services,
and in order to reduce initial cash payments for the public relations
services, the Company agreed to issue to the public relations personnel
300,000 shares of the Company's common stock. On June 7, 1997, and August 29,
1997, the public relations agreement was amended to increase the number of
shares to be issued by 115,000 and 60,000, respectively, for a total number of
475,000 shares to be issued in exchange for the public relations services. As
of August 30, 1997, none of such shares had been issued, and pursuant to the
agreement will be issued upon the effectiveness of certain securities
registration statements, including this Form 10-SB, to be filed with the
Securities and Exchange Commission. In the event that the Company is unable
to file such securities registration statements, or such registration
statements are not effective within a reasonable time, the Company will issue
such shares called for by the agreement, as amended, as "unregistered" and
"restricted" stock. The public relations firm engaged by the Company has
agreed to reimburse the Company for certain expenses incurred by the Company
in connection with preparation of the applicable securites registration
statements.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 16-10a-902(1) of the Utah Revised Business Corporation Act
authorizes a Utah corporation to indemnify any director against liability
incurred in any proceeding if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful.
Section 16-10a-902(4) prohibits a Utah corporation from indemnifying a
director in a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or in a proceeding in which
the director was adjudged liable on the basis that he or she improperly
received a personal benefit. Otherwise, Section 16-10a-902(5) allows
indemnification for reasonable expenses incurred in connection with a
proceeding by or in the right of the corporation.
Unless limited by the Articles of Incorporation, Section 16-10a-905
authorizes a director to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction. Section 16-10a-907(1)
extends this right to officers of a corporation as well.
Unless limited by the Articles of Incorporation, Section 16-10a-903
requires that a corporation indemnify a director who was successful, on the
merits or otherwise, in defending any proceeding to which he or she was a
party against reasonable expense incurred in connection therewith. Section
16-10a-907(1) extends this protection to officers of a corporation as well.
Pursuant to Section 16-10a-904(1), the corporation may advance a
director's expenses incurred in defending any proceeding upon receipt of an
undertaking and a written affirmation of his or her good faith belief that he
or she has met the standard of conduct specified in Section 16-10a-902.
Unless limited by the Articles of Incorporation, Section 16-10a-907(2) extends
this protection to officers, employees, fiduciaries and agents of a
corporation as well.
Regardless of whether a director, officer, employee, fiduciary or agent
has the right to indemnify under the Utah Revised Business Corporation Act,
Section 16-10a-908 allows the corporation to purchase and maintain insurance
on his or her behalf against liability resulting from his or her corporate
role.
Article IV of the Company's Articles of Incorporation provides for the
indemnification, to the fullest extent permitted by the Utah Revised Business
Corporation Act or any other applicable law as in effect from time to time, of
any director of the Company for liability to the corporation or to its
shareholders for monetary damages for any action taken, or any failure to take
any action, as a director.
PART F/S
Financial Statements.
(1) Audited Financial Statements for Fiscal Years Ending September 30,
1995 and September 30, 1996
Independent Auditor's Report
Consolidated Balance Sheet at September 30, 1995 and September 30,
1996
Consolidated Statement of Income at September 30, 1995 and September
30, 1996
Consolidated Statement of Stockholder's Equity
Consolidated Statement of Cash Flows at September 30, 1995 and
September 30, 1996
Notes to Financial Statements
(2) Unaudited Financial Statements for Nine-Month Period Ending June 30,
1997
Consolidated Balance Sheet, June 30, 1997
Consolidated Statement of Earnings, June 30, 1997
Consolidated Statement of Cash Flows, June 30, 1997
[Letterhead of James J. Harned, Certified Public Accountant]
June 9, 1997
INDEPENDENT AUDITOR'S REPORT
I have audited the consolidated balance sheet of Products, Services &
Technology Corporation and subsidiaries as at September 30, 1996 and the
related consolidated statements of earnings, stockholders equity, and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and conduct the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by managements, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for that opinion.
In June, 1997, the Company changes its name to Wireless Data Solutions, Inc.
This information has also been disclosed in Note 8. All of the notes refer to
Products, Services & Technology Corp., since that was the Company's name on
September 30, 1996. However, since the name "Products, Services & Technology
Corporation" does not exist as of the date of this writing, all of the
financial statements presented herein will be titled "Wireless Data Solutions,
Inc. And Subsidiaries Formerly Known As Products, Services & Technology
Corporation And Subsidiaries."
In my opinion, the consolidated balance sheet and statements of stockholders'
equity (deficiency) referred to above present fairly, in all material
respects, the financial position of Products, Services & Technology
Corporation at September 30, 1996 in conformity with generally accepted
accounting principles.
_____/s/ James J. Harned, C.P.A.__________
James J. Harned, C.P.A.
Bel Air, MD 21014<PAGE>
Wireless Data Solutions, Inc. And Subsidiaries
Formerly Known As Products, Services & Technology Corporation And Subsidiaries
CONSOLIDATED BALANCE SHEET
as at September 30
1996 1995
---------------- ---------------
ASSETS
Current Assets
- --------------
Cash and cash equivalents $92,879 $79,758
Accounts receivable, net of $6000
allowance for doubtful accounts (Note 1) 332,640 182,798
Receivable from Heartland Diversified (Note 2) 82,000
Inventory (Note 1) 349,442 189,876
----------------
Prepaid Expenses 923
-------------
Total current assets 856,961 453,355
---------------- -------------
Fixed Assets (Note 1)
- ---------------------
Office fixtures and equipment 15,033 18,603
Leasehold improvements 12,894 12,894
---------------- --------------
Sub-Total 27,927 31,497
Less: Accumulated depreciation and
amortization 27,927 29,356
---------------- --------------
Net fixed assets 0 2,141
---------------- --------------
Other Assets
- ------------
Due from Heartland Diversified (Note 2) 111,500 5,530
Security deposits 3,113 2,918
---------------- --------------
Total other assets 114,613 8,448
Total Assets $ 971,574 $ 463,944
================ ==============
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS REPORT
JAMES J. HARNED, C.P.A.
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
1996 1995
-------------- -------------
LIABILITIES
Current Liabilities
- -------------------
Accounts Payable $ 182,825 $ 93,055
Current portion of other liabilities 56,719 70,692
Advances from customers 9,800 5,000
Other accrued liabilities 13,395 11,298
-------------- -------------
Total current liabilities 262,739 180,045
Other Liabilities
- -----------------
Accrued salaries, related payroll taxes,
reimbursable expenses payable to officers 692,132 696,738
Less current portion 50,000 50,000
-------------- -------------
Total other liabilities 642,132 646,738
-------------- --------------
TOTAL LIABILITIES 904,871 826,783
-------------- --------------
Minority interests in consolidated
subsidiaries 20,000 84,519
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $.002 par value; 3,000,000
shares authorized; no shares issued or
outstanding
Common stock, $.001 par value; 25,000,000
shares authorized; 7,958,475 shares issued
and outstanding at 9/30/95 and 8,019,720
at 9/30/96 8,020 7,985
Common stock options outstanding 11,250 11,250
Additional paid-in capital 1,321,830 1,320,751
Deficit (1,245,624) (1,738,572)
------------- -------------
Sub-Total 95,476 (398,586)
Receivable from related entity for sale
of common stock (48,773) (48,773)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 46,703 (447,359)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 971,574 $ 463,943
============= =============
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS REPORT
JAMES J. HARNED, C.P.A.
Wireless Data Solutions, Inc. And Subsidiaries
Formerly Known As Products, Services & Technology Corporation And Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
as at September 30
1996 1995
----------------- --------------
REVENUES
Net product sales $ 2,049,580 $ 1,460,604
Brokerage commissions and fees 71,191
Other 41,975 186
----------------- ---------------
Total revenue 2,091,555 1,531,981
COST OF SALES
Products 836,607 681,313
Brokerage operations 0 81,026
----------------- ---------------
Total cost of sales 836,607 726,339
----------------- ---------------
Gross Profit 1,254,948 769,642
Operating Expenses 879,021 631,086
----------------- ---------------
Income before interest and taxes 375,927 138,556
Interest expense 9,500 8,759
----------------- ---------------
Income before taxes 366,427 129,797
Income taxes (Note 1) 3,838 0
----------------- ---------------
Income before minority interests 362,589 129,797
Minority interests 0 3,863
----------------- ---------------
Income from continuing operations 362,589 133,660
Discontinued operations
- ------------------------
Loss from operations of BLE (Note 7) (11,069) 0
Gain on sale of BLE (Note 7) 135,893 0
----------------- ---------------
Net Income $ 487,413 $ 133,660
============== ============
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS REPORT
JAMES J. HARNED, C.P.A.
Wireless Data Solutions, Inc. And Subsidiaries
Formerly Known As Products, Services & Technology Corporation And Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
as at September 30
<TABLE>
<CAPTION>
Common Additional
Common Stock Option Paid-in
Stock Outstanding Capital Deficit Total
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995 $ 7,816 $ 11,250 $ 1,320,921 ($1,738,572) ($398,585)
-------------
Net Earnings for the year
ended September 30, 1996 487,413 487,413
Issuance of common stock 10 10
Exercise of common stock options 25 25
Stock issued to non-related
parties for services 169 909 5,535 6,613
----------- ------------ ----------- ----------- ------------
Sub-Total 8,020 11,250 1,321,830 (1,245,624) 95,476
------------ ------------ ----------- ----------- ------------
Receivable from related entity
for sale of common stock (48,773)
------------
Balance at September 30, 1996 $ 8,020 $ 11,250 $1,321,830 ($1,245,624) $ 46,703
============ ============ =========== ============ ============
</TABLE>
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS REPORT
JAMES J. HARNED, C.P.A.
Wireless Data Solutions, Inc. And Subsidiaries
Formerly Known As Products, Services & Technology Corporation And Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
as at September 30
1996 1995
---------------- ---------------
Operating Activities:
Net Income $ 487,413 $ 133,660
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization (1,429)
Prior period adjustment 5,535
Changes in Operating Assets and Liabilities:
Increase in accounts receivable (231,842) 3,642
Increase in inventory (159,566) (38,795)
Decrease in other assets 923 3,189
Increase in accounts payable 89,770 (27,896)
Increase in advances from customers 4,800 (12,819)
Increase in other payables (11,876) 24,385
---------------- ----------------
Net cash provided by operating activities 183,728 85,366
---------------- ----------------
Investing Activities:
Proceeds of miscellaneous assets 3,570 1,236
---------------- ----------------
Financing Activities:
Increase in due from related parties (105,970) 3,286
Increase in security deposits (195)
Increase in due to related parties and
related expenses (4,606) (40,706)
Decrease in minority interest in
subsidiaries (64,519) 2,875
Proceeds of issuance of common stock 1,114 (1,189)
---------------- ----------------
Net cash provided by financing activities (174,176) (35,734)
---------------- ----------------
Net increase in cash 13,122 50,868
Cash at beginning of period 79,758 28,890
---------------- ----------------
Cash at end of period $ 92,880 $ 79,758
================ ================
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS REPORT
JAMES J. HARNED, C.P.A.
Wireless Data Solutions, Inc. And Subsidiaries
Formerly Known As Products, Services & Technology Corporation And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
1. Organization and Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying financial statements include the accounts of Products,
Services & Technology Corporation (PST) and the following majority-owned
subsidiaries:
Subsidiary % of Common Stock Owned
Distributed Networks, Inc. (Dinet) 100
PST Financial Corporation (PFC) 100
PST, Dinet and PFC are hereinafter referred to as the Company.
All significant intercompany accounts have been eliminated in
consolidation.
Organization
PST, which is headquartered in Florida, has approximately 350
shareholders of record as of September 30, 1996. PST's common stock is traded
on the OTC Bulletin Board. PST is not currently required to file quarterly or
annual reports with the Securities and Exchange Commission (SEC).
Dinet designs as markets fleet managements and control systems for the
two-way mobile radio and cellular (CDPD) markets. Its customers include
ready-mix concrete suppliers, taxi-cab companies, parcel delivery services,
public transportation, etc. From its offices in Oceanside, California, Dinet
sells to customers on a nationwide basis; since September 30, 1994, Dinet has
begun selling in the international market with clients in Mexico, Canada,
South America and Malaysia.
PFC has been a dormant entry for several years and does not have any
significant operations.
Trade Accounts Receivable
Bad debts are reported using the direct method whereby worthless or
uncollectible receivables are charged against current income.
Inventories
Raw materials and the related component of work-in-progress inventory are
recorded at lower of cost or market using the first-in, first-out method of
accounting for inventory.
Property and Equipment
All equipment, fixtures and leasehold improvements have been fully
depreciated and amortized, and have no value on the books of the Company.
Income Taxes
Dinet files separate federal and California income tax returns based on a
February 28/29 fiscal year. There are no significant differences in reporting
revenue or expenses for financial statement purposes vs. income tax purposes.
PST has not filed tax returns as a result of incurring substantial prior
losses. The tax losses can be carried forward for 15 years.
2. Related Party Transactions and Relationships
A. The names and relationships of the related parties referred to in
these notes are set forth below:
Mike McLaughlin, CEO-President of PST, Chairman and Secretary of Dinet
and 12% stockholder of PST.
Pat Makovec, Dinet President/PST Treasurer and Secretary and 10.3%
stockholder of PST.
Heartland Diversified Industries, Inc., a non-operating entity which is
50% owned together by Mr. McLaughlin and Mr. Makovec. Heartland is a 22.4%
stockholder of PST.
Brian Watts, Dinet vice-president and general manager and a 4%
stockholder of PST. Mr. Watts also factors the Company's accounts receivable
and has received approximately $10,000 in fees for his factoring services.
3. Preferred Stock
In a 1991/1992 private offering, Dinet sold 20 shares of $1,000 face
value preferred stock, each of which is convertible into 800 shares of Dinet
common stock. The 12% annual non-cumulative dividend increased to 25% in
January of 1995. This preferred stock is callable upon payment of (1) an 18%
premium (which decreased to 15% in January, 1995) for each year the stock is
outstanding and (2) all accrued dividends; the call premium is cumulative.
4. Stock Options and Warrants
Incentive Stock Options
Under an incentive stock option plan (ISOP) approved by PST's
stockholders, 500,000 shares of common stock have been authorized/reserved for
issuance to officers and other key employees. Exercise prices for options
granted under the ISOP shall generally not be less than the estimated fair
market value of the stock at the date of grant; option periods may not exceed
ten years. At September 30, 1996, options for 450,000 shares have been
granted. Options outstanding at that date, which are exercisable at 5 cents
per share, are summarized as follows:
Options Outstanding Expiration Date
- ----------------------------- -------------------
20,000 11/98
225,000 12/99
-------
245,000
-------
In January, 1996, Mr. McLaughlin exercised 25,000 shares at 5 cents per share.
Management Incentive Earnings Plan
Under a management incentive earnings plan (MIEP), officers and employees
could receive warrants based on a minimum after tax profit per share of common
stock on a fully diluted basis which would include any warrants to be issued.
The MIEP will be in existence for five years beginning on April 1, 1996 and
ending on March 31, 2001. The warrant exercise price is $.50 per share of
common stock. These officers and employees will receive warrants in
accordance with a schedule of after tax profits of $.06 per share by March 31,
1997 graduated annually by $.06 per share increments. Therefore, at the end
of the fifth year--March 31, 2001, an after tax profit of $.30 per share must
be achieved. At the start of the plan no participant could receive more than
500,000 warrants, and the maximum number of warrants that could be issued was
1,500,000. The first year of the plan has expired and participants were not
eligible for any warrants. At the end of each year if the targeted earnings
are not achieved, the number of warrants available are reduced by 20%. The
maximum number of warrants that could be issued under the plan is now
1,200,000, and the minimum that could be issued if the goal is reached in the
last year of the plan is 614,000. The life of the warrants if issued is five
years.
5. Commitments and Contingencies
The Company has entered into a golden parachute agreement under which it
is obligated to certain PST officers in the event of a hostile or unfriendly
takeover, or if any such officer is terminated for any reason other than
allegations of fraud, for severance pay equal to one year's salary. Voluntary
resignation reduces the amount by 25%. All liabilities for bonuses, back
salaries, and reimbursable expenses will be paid, and the cost of benefits
will be paid for one year.
6. Accrued Salaries and Expenses Payable
Over the course of five years, certain officers and key employees elected
to leave the major portion of their salaries and expenses as a way of infusing
additional cash in PST thereby enabling PST to continue its growth pattern.
Such salaries and expenses will be disbursed as management determines,
assuming cash flow is adequate. All related salaries and tax items have been
expenses so that there will be no effect on future earnings.
7. Sale of Bernard Lee & Edwards Securities, Inc.
Formerly a subsidiary, 670 shares of Bernard Lee & Edwards Securities,
Inc. (BLE) was sold in March, 1996 to Heartland Diversified Industries, Inc.
for $164,000. The 670 shares represented all of the holding by PST of BLE.
This was approximately 64% ownership.
8. Subsequent Events
In March, 1997, the Company terminated its relationship with Small,
Hatch, Doubek & Pyfer. The Company has hired counsel in the State of Utah in
order to handle its securities-related matters. The Company has been
domiciled in Utah since June, 1997. Previously, the Company was an Oregon
corporation.
In early 1997, the Company entered into an agreement with a public
relations firm to help develop a presence in the marketplace. The firm will
be issued 300,000 shares of common stock as a way of reducing its fees. Under
the terms of the agreement, the PR firm is required to pay SEC filing and
promotional fees estimated at $50,000.
In June, 1997, the Company changed its name to Wireless Data Solutions,
Inc.
Wireless Data Solutions, Inc. And Subsidiaries
CONSOLIDATED BALANCE SHEET
For Nine Months Ended June 30, 1997 and 1996
ASSETS June 30, 1997 June 30, 1996
--------------- ---------------
(Unaudited) (Unaudited)
--------------- ---------------
Current Assets:
Cash and cash equivalents $ 34,871 $ 91,359
Trade accounts receivable, net of
$6,000 estimated allowance for
doubtful accounts 836,555 406,550
Inventory 232,020 181,006
--------------- ---------------
Total Current Assets 1,103,446 678,915
--------------- ---------------
Fixed Assets
Office fixtures and equipment 15,033 16,247
Leasehold Improvements 12,894 12,894
--------------- ---------------
Sub-Total 27,927 29,141
Less: Accumulated Depreciation and
Amortization 27,927 27,927
--------------- ---------------
Net Fixed Assets 0 1,214
Other Assets:
Prepaid service contract 10,000
Due from related parties 231,172 181,530
Security deposits 3,113 2,918
--------------- ---------------
Total Other Assets 244,285 184,448
--------------- ---------------
TOTAL ASSETS $ 1,347,731 $ 864,577
=============== ===============
Wireless Data Solutions, Inc. And Subsidiaries
CONSOLIDATED BALANCE SHEET
For Nine Months Ended June 30, 1997 and 1996
LIABILITIES June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
---------------- ----------------
Current Liabilities
Trade accounts payable $ 338,073 $ 99,784
Current portion of other liabilities 8,390 13,058
Advance from customers 25,656 2,400
Other accrued liabilities 50,405 69,541
----------------- ----------------
Total Current Liabilities 422,524 184,783
----------------- ----------------
Other Liabilities:
Accrued salaries, related payroll
taxes, reimbursable expenses payable
to officers 692,133 710,164
Less: Current portion 0 11,474
---------------- ------------------
Total Other Liabilities 693,133 698,690
---------------- ------------------
TOTAL LIABILITIES 1,114,657 883,473
---------------- -----------------
Minority interests in consolidated
subsidiaries 20,000 20,000
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred Stock, $.002 par value,
3,000,000 shares authorized; no
shares issued or outstanding 0 0
Common Stock, $.001 par value;
25,000,000 shares authorized,
8,019,720 shares issued and
outstanding at 6/30/96 and
8,127,220 at 6/30/97 8,127 8,020
Common Stock options outstanding 11,250 11,250
Additional paid-in capital 1,363,523 1,321,830
Deficit (1,121,053) (1,331,223)
---------------- -----------------
Sub-Total 261,847 9,877
Receivable from related entity
for sale of common stock (48,773) (48,773)
---------------- -----------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 213,074 (38,896)
---------------- -----------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,347,731 $ 864,577
================ ==================
<PAGE>
Wireless Data Solutions, Inc. And Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
For Nine Months Ended June 30, 1996 and 1997
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
----------------- ---------------
REVENUES
Net product sales $ 1,928,658 $ 1,651,931
Other income 36,000 29,974
----------------- ---------------
Total Revenue 1,964,658 1,681,905
COST OF SALES
Products 895,230 712,955
----------------- ---------------
Total Cost of Sales 895,230 712,955
----------------- ---------------
Gross Profit 1,069,428 968,950
Operating Expenses 847,824 632,354
----------------- ---------------
Income before interest 221,604 336,596
Interest expense, net of interest income 22,251 9,125
----------------- ---------------
Income before taxes 199,353 327,471
Provision for income taxes 19,846 32,093
----------------- ---------------
Income from continuing operations 179,507 295,378
Loss of operations of BLE 0 11,069
Gain on Sale of BLE 0 137,416
----------------- ---------------
NET EARNINGS $ 179,507 $ 421,725
================= ================
Wireless Data Solutions, Inc. And Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For Nine Months Ended June 30, 1997 and 1996
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
--------------- ---------------
Operating Activities:
Net Income $ 179,507 $ 421,725
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization (1,429)
Prior period adjustment (54,936) (14,386)
Changes in Operating Assets and Liabilities:
Increase in accounts receivable (421,915) (223,752)
Decrease in inventory 117,422 8,870
Increase in prepaid assets (10,000) 923
Increase in accounts payable 155,248 6,729
Increase in advances from customers 15,856 (2,600)
Decrease in other payables (11,319) 618
-------------- ---------------
Net cash provided by operating activities $ (30,137) $ 196,698
-------------- ---------------
Investing activities:
Proceeds of miscellaneous assets $2,356
---------------
Financing Activities:
Increase in due from related parties (119,672) (176,000)
Decrease in due to related parties
and related expenses 50,001 51,952
Decrease in minority interest in
subsidiaries (64,519)
Proceeds of issuance of common stock 41,800 1,114
Net cash provided by financing activities (27,871) (187,453)
--------------- ----------------
Net increase in cash (58,008) 11,601
Cash at beginning of period 92,879 79,758
--------------- ---------------
Cash at end of period $ 34,871 $ 91,359
=============== ===============
PART III
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS.
The following exhibits are filed as a part of this Registration
Statement.
Exhibit
Number Description*
- --------- -----------------------------------------------
2.1 Agreement dated March 1, 1984, between Heartland Oil & Mineral
Corporation and Gold Genie Worldwide, an Oregon Partnership
2.2 Buy/Sell Agreement dated March 1, 1984, between the Company and
Heartland Oil & Mineral Corporation
3.1 Articles of Incorporation, filed on March 7, 1984
3.2 Certificate of Amendment to the Articles of Incorporation, filed on
June 13, 1988
3.3 Articles of Domestication, filed on June 2, 1997
3.4 Articles of Amendment to the Articles of Incorporation, filed on
June 13, 1997
3.5 Bylaws
10.1 Settlement Agreement and Release dated December 17, 1987, between
Heartland Diversified Industries, Inc., the Company, and certain
individuals
10.2 Agreement, dated April 19, 1988, by and between the Company,
Heartland Diversified Industries, Inc., Distributed Networks, Inc.,
and certain shareholders of Distributed Networks, Inc.
10.3 Buy/Sell Agreement, dated March 27, 1996, by and between the
Company and Heartland Diversified Industries, Inc.
21 List of Subsidiaries
27 Financial Data Schedule
99 Gold Genie Worldwide, Inc. Offering Prospectus, dated July 24, 1985
* Summaries of all exhibits contained in this Registration Statement are
modified in their entirety by reference to such exhibits.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
WIRELESS DATA SOLUTIONS, INC.
Date: September 4, 1997 By: /s/ Michael B. McLaughlin
--------------------- -----------------------------
Michael B. McLaughlin,
President and Chief Executive Officer
EXHIBIT 2.1
Agreement dated March 1, 1984, between Heartland Oil & Mineral Corporation
and Gold Genie Worldwide, an Oregon Partnership
AGREEMENT
----------
This Agreement made and entered into this 1st day of March, 1984, by and
between:
Heartland Oil & Mineral Corporation
P. O. Box 945, Lewistown, MT 49457
(hereinafter called "Buyer")
- and -
Gold Genie Worldwide (A Partnership)
140 N. Canyon, P. O. Box 322
Canyonville, OR 97417
(hereinafter called "Seller")
Whereas, Seller is the owner of a design patent number 268488
(hereinafter called "Patent"), said Patent being for a portable ore separating
bowl used in and being a part of a machine known as the Gold Genie designed
for the purpose of recovering precious metals and gems.
- and -
Whereas, Seller operates its business under the name of Gold Genie
Worldwide to manufacture, assemble, and to sell the Gold Genie and other
associated products, and has developed a certain amount of good will in the
marketing of and the performance of the Gold Genie.
- and -
Whereas, Seller has accumulated a certain amount of debt detrimental to
the growth and prosperity of the business.
-and -
Whereas, Buyer is willing to pay certain debt for Seller's assets and
enter into a joint venture.
- and -
Whereas, Sellers believe it to be in their best interests to enter into
this Agreement with Buyer.
Now, therefore, in consideration of the mutual promises, payments, and
covenants contained herein, the parties hereto agree as follows:
Agreement to Pay Debt for Assets
- --------------------------------
Buyer hereby agrees to pay certain outstanding debt of Seller, and of
other individuals who may be guarantors or co-signers on notes, mortgages, and
loan agreements on debt owed by Seller. However, Seller and guarantors and
co-signers positions on said notes, mortgages, and loan agreements may be
required to remain as is, but Buyer will assume the payments on said debt.
The debt being paid by Buyer is the debt created by Seller during its normal
course of business, and is the debt that is outstanding over 90 days from the
date of this Agreement, and is itemized and attached hereto as Exhibit "A".
All debt over 90 days old from the date herein not listed on Exhibit "A" will
remain the responsibility of Seller. Established payments on debt where
applicable are herein provided.
Included in the debt Buyer agrees to pay is the loan at the U.S. Bank,
mortgage on the Faulkner home, said funds being used to operate the business,
and trade accounts payable over 90 days old. Seller will also provide Buyer
with a current list of all debt and payables for the period 90 days prior to
the date of this Agreement.
The total of the debt in Exhibit "A" will be considered the purchase
price by Buyer (hereinafter called "Purchase Price"), of Seller's assets.
Those assets include, but are not limited to, the Patent, bank accounts, cash
on hand, receivables, inventory, business records, prepaid expenses,
equipment, good will, and any other assets owned by Seller in its business as
of the date of this Agreement. All of said assets being attached hereto as
Exhibit "B" indicating the true or estimated individual values, and also
indicating which items are being used as collateral, and the name of the
entity or individual being the holder of said collateral.
Payment of Debt by Buyer
Buyer will have the right to negotiate with each individual debtor to
establish a schedule of payments. At Buyer's request, Seller will aid in the
negotiations with debtors.
Buyer agrees to make timely payments to debtors upon establishing payment
schedules, and subject to Buyer obtaining adequate financing. Buyer will not
be bound to act as guarantor on any notes, mortgages, or loan agreements
outstanding prior to the execution of this Agreement.
In the case of the loan at the U.S. Bank, and the loan on the Faulkner
home, Buyer agrees to commence payment on those obligations upon the mutual
agreement of Buyer and Seller.
Assignment to Gold Genie Worldwide, Inc.
- ----------------------------------------
It is hereby acknowledged that a new Oregon corporation has been
organized and legally formed called Gold Genie Worldwide, Inc. (hereinafter
called "Genie, Inc."). In conjunction with, and on the same date of this
Agreement, a Buy/Sell Agreement will be executed by Buyer as the seller, and
Genie, Inc. as the buyer of the assets listed in Exhibit "B". Buyer will also
sell and assign a mold legally described as a "single cavity aluminum
injection mold to produce 18 inch Gold Genie urethane tubs", to Genie, Inc.
for $50,000. Buyer will receive stock in Genie, Inc. for the sale of assets
and the mold.
Genie, Inc. will assume all payables and other debt of Seller not more
than 90 days old from the date of this Agreement. Genie, Inc. will not assume
any other debts nor will it act as a guarantor on any notes, mortgages, or
loan agreements outstanding prior to the date of this Agreement that were the
responsibility of Seller.
Genie, Inc. will pay Buyer for all expenses involved in the organization
of the corporation, and for an advance for research and development for the
benefit of the corporation, and all said expenses are attached hereto as an
invoice marked Exhibit "C". Buyer shall have the option to receive payment
for said invoice in the form of cash or as part of the purchase price for
shares in Genie, Inc. to be issued Buyer as described below. Upon the
execution of this Agreement Buyer will indicate which option is to be selected
by signing the appropriate space provided on Exhibit "C".
Upon the execution of this Agreement, the Buy/Sell Agreement, and Exhibit
"C," a stock certificate will be issued to Buyer for 8,000,000 shares of the
common stock of Genie, Inc., and stock certificates will be issued to Seller
for 2,000,000 shares of common stock of Genie, Inc. Said 2,000,000 shares to
be issued to the individual parties, and in the amounts as listed on Exhibit
"D" attached hereto as prepared by Seller.
Upon the execution of this Agreement, Buyer will pay Seller warrants to
purchase 100,000 shares of Buyers common stock at $.20 per share for a period
of five years from the date of issuance. The warrants will be issued in
accordance with Exhibit "D".
Genie, Inc. Structure
- ---------------------
Genie, Inc. is an Oregon corporation with authorized stock of 50,000,000
shares of common, and 3,000,000 shares of preferred. The initial officers and
directors are as follows;
Lela E. Faulkner, President and Director
Marion E. Faulkner, Secretary and Director
Terry L. LeVasseur, Treasurer and Director
Clyde Marriott, Vice President and Director
Michael B. McLaughlin, Chairman of the Board
H. B. Kosanke, Director
Buyer will initially own 80% of Genie, Inc., and Seller will own 20%. It
is intended that the funding for Genie, Inc. will come from the private
placement of its common stock. Stock issued through a private placement will
come from authorized shares of common, and not from Buyers or Sellers
holdings. Buyer will provide management assistance on a consulting basis, and
may charge a consulting fee for said services. Outside consultants will be
hired direct by Genie, Inc. A reporting system will be developed as soon as
possible.
It is agreed that initial salaries to be paid by Genie, Inc. will total
$1,700.00 per month plus FICA, workmans compensation, and unemployment
insurance. Said total salaries of $1,700.00 to be paid three full time
employees named by Seller.
The parties hereto agree that all funds from stock sales and all other
forms of financing, and receipts from the sales of all products and services
produced and sold by Genie, Inc. will be deposited in bank accounts managed by
Buyer. A checking account will be provided for Genie, Inc. from one or more
banks, and the President, Treasurer, and Chairman of the Board will be
authorized to sign checks, and will have individual authority to do so. Buyer
may also establish a separate checking account in the name of Genie, Inc. to
pay loans, professional services, out-of-pocket expenses, etc. Funds required
for checking will be provided by Buyer from the accounts managed by Buyer.
Representations - Warranty
Seller represents and warrants that they have the right to sell, assign,
and transfer the herein described assets to Buyer subject to certain liens and
encumbrances on the items noted in Exhibit "B". Seller also warrants that
they have the power and capacity to enter into this Agreement.
Successors and Assigns
- -----------------------
Any reference to Seller shall read as including Seller and their
successors and assigns; and any reference to Buyer shall be read as including
Buyer and its successors and assigns.
Notices
- -------
All notices shall be deemed to have been given if the same are reduced to
writing, delivered in person or by registered or certified mail to the
following respective addresses until a different address is specified in
writing by one party to the other:
To Buyer: Heartland Oil & Mineral Corporation
P. O. Box 945
Lewistown, MT 59457
To Seller: Gold Genie Worldwide
140 N. Canyon, P. O. Box 322
Canyonville, OR 97417
Applicable Law
- --------------
This Agreement shall be governed by the laws of the State of Montana. In
the event suit or action is instigated by either party to enforce any of the
provisions herein, and to include arbitration, t he prevailing party in said
suit, action or arbitration shall be entitled to reasonable legal fees as
awarded by the court or arbitrator.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
1st day of March, 1984.
Heartland Oil & Mineral Corporation
By: /s/ Michael B. McLaughlin
----------------------------------------------
Michael B. McLaughlin, its President CORPORATE
SEAL
By: /s/ Earl P. Matney
--------------------------------------
Earl P. Matney, its Secretary
On this 5th day of March, 1984, before me a Notary Public, personally
appeared Michael B. McLaughlin and Earl P. Matney, to me known to be the
persons described in and who executed the foregoing instrument as President
and Secretary, respectively, and acknowledged that they executed the same as
their free act and deed.
NOTARY SEAL /s/ Milton R. Pietz
-----------------------------------
Notary Public for the State of Montana
County: Douglas
Residing at: Lewiston,Montana
My Commission Expires: March 1, 1986
Gold Genie Worldwide Partners
/s/ Marion E. Faulkner
----------------------
/s/ Lela E. Faulkner
-----------------------
/s/ David LeVasseur
----------------------
/s/ Terry L. LeVasseur
----------------------
On this 9th day of March, 1984, before me a Notary Public, personally
appeared Marion E. Faulkner, Lela E. Faulkner, David LeVasseur, Terry L.
LeVasseur, to me known to be the persons described in and who executed the
foregoing instrument as the Gold Genie Worldwide Partners, and acknowledged
that they executed the same as their free act and deed.
NOTARY SEAL /s/ Sandra R. Giblin
------------------------------------
Notary Public for the State of Montana
County: Douglas
Residing at: Canyonville
My Commission Expires: 7/27/84
EXHIBIT "A"
SELLERS OUTSTANDING DEBT OVER 90 DAYS
---------------------------------------
Debtor Amount
- ----------------------- ----------------
Bearings, Inc. $ 66
Bills Arco 622
Bosco 14
Colune Le Blanc 3,492
California Mining Journal 902
Chevron U.S.A. 269
Canyonville Hardware 175
D.J. Professional Services 545
Daveson Welding 98
Douglas Welding 570
Fisheries Supply 70
Kolstrand 180
Vernon Faulkner 952
Farwest Steele 224
Gardner & Budon 172
G.P.A.A. 675
Rocky Mountain Fire Ins. 391
Dicks Drywall 31
Ed Huntley (spoons) 1,956
Ed Huntley (loan) 808
Jess Publishing 3,471
Knudtson Auto Electric 4,656
K's Auto Supply 206
Kaser (Lawyer) 418
Korth (Lawyer) 858
Pollaczek (Lawyer) 65
Marriott, Inc. (Rent) 6,950
Marriott, Inc. (Loan) 3,358
Ted Ziegaus 325
Texaco 344
3M Machine 540
United Radi 136
Union 76 475
Valley Plating 439
Eugene Aluminum 35
Fidelity 26
KROR 145
Holtons 66
Vogue Marketing 106
Masonic 625
Ray Faulkner (Loan) 2,265
U.S. Credit Corp. (Home) 16,100 Payments of $266.98/mo.
U.S. National Bank (Loan) 12,333 Payments of $333.34/mo.+interest
* U.S. National Bank (Loan) 1,667 Payments of $277.87/mo.+interest
* U.S. National Bank (Loan) 3,148 Payments of $262.34/mo.+interest
----------
TOTAL 70,969
* Interest only during the winter months.
EXHIBIT "B"
------------
ASSETS
-------
Cash - on hand and in banks $1,214
Receivables 3,086
Inventory 6,831
Good will, dealer records, etc. 4,000
R & D, rights to new products 15,099
Patent 30,000
------
TOTAL $60,230
Note: The U.S. National Bank of Oregon has a lien on the receivables,
inventory, and equipment of Seller. Upon payment of loans due said
Bank, the lien will be removed.
Equipment
- ---------
Plant
-----
Item Value
- ---- ------
Skirt mold $ 450
Bowl trimmer mold 450
Wire welder 1,679
Accetylene torch 367
Band saw 310
Chicago drill press 225
Integram drill press 350
Maketa cut off saw 275
Grinding and sanding wheel 200
Champion air compressor 600
Shredder 550
Leg bender 150
Heat gun 40
Soldering iron and holders (3) 71
Craftsman electric drill 40
Vices (3) 119
Pop machine 350
Shop fan 90
Swamp cooler 150
UPS scale 40
Steel welding tables (2) 98
Miscellaneous small tools, tables, racks, etc.700
Gold Genie demonstrator machine 400
Wire testor 16
------
TOTAL $7,720
Office
--------
3M copier (equity) 1,804
Smith typewriter 180
Desks (2) 400
Calculators (2) 95
File cabinets (5) 280
Miscellaneous equipment 260
--------
TOTAL $3,019
EQUIPMENT TOTAL $10,739
TOTAL ASSETS $70,969
EXHIBIT "C"
-----------
INVOICE
----------
To: Gold Genie Worldwide, Inc.
140 N. Canyon
Canyonville, OR 97417
From: Heartland Oil & Mineral Corp.
P. O. Box 945
Lewistown, MT 59457
Preparation of 5 agreements $1,390
Preparation of Articles of Incorporation and Bylaws 400
Filing fees - State of Oregon 110
Legal and consulting 1,800
Accounting 200
Telephone 943
Travel 1,910
Lodging and meals 1,154
------------
TOTAL ORGANIZATION EXPENSES $7,907
Buyer hereby elects to receive cash
for the amount of the invoice
Michael B. McLaughlin Date
Buyer hereby agrees to include the
total amount of this invoice in the
purchase price for 8,000,000 shares
of Genie, Inc. /s/ Michael B. McLaughlin 3/1/84
------------------------- --------
Michael B. McLaughlin Date
EXHIBIT "D"
------------
STOCK ISSUANCE
----------------
Name Stock Issued from Gold Genie Worldwide, Inc.
- ------------ --------------------------------------------
Lela E. Faulkner 500,000 shares
Marion E. Faulkner 500,000 shares
Terry L. LeVasseur 1,000,000 shares
----------
TOTAL SHARES ISSUED 2,000,000 shares
WARRANT ISSUANCE
-----------------
Name Warrants Issued from Heartland Oil
- ------- & Mineral Corporation
---------------------------------
Lela E. Faulkner 25,000 warrants
Marion E. Faulkner 25,000 warrants
Terry L. LeVasseur 50,000 warrants
-------
TOTAL SHARES ISSUED 100,000 warrants
SELLERS OUTSTANDING DEBT LESS THAN 90 DAYS OLD
---------------------------------------------
Debtor Amount
- -------- ----------
Jess Publishing $ 158
Sears 130
Taxes 47
Tax payment 200
U.S. Credit Corp. 267
U.S. National Bank 1,096
3M Copier 120
Pacific Power and Light 105
Water 42
Timber Community 272
Heartland Oil 500
---------
TOTAL $2,937
EXHIBIT 2.2
Buy/Sell Agreement dated March 1, 1984, between the Company
and Heartland Oil & Mineral Corporation
BUY/SELL AGREEMENT
------------------
This Agreement made and entered into this 1st day of March, 1984, by and
between:
Gold Genie Worldwide
(An Oregon Corporation)
140 N. Canyon, P. O. Box 322
Canyonville, OR 97417
(hereinafter called "Buyer)
- and -
Heartland Oil & Mineral Corporation
(A Montana Corporation)
P. O. Box 945
Lewistown, MT 49457
(hereinafter called "Seller")
Whereas, Seller is the owner of certain equipment, a mold, a patent,
receivables, inventory, and other items (hereinafter called "Assets"), and
required for the manufacturing, assembling, and sale of a gold recovery
machine known as the Gold Genie.
- and -
Whereas, Seller is willing to sell said Assets to Buyer for payment in
the form of Buyers common stock.
NOW, THEREFORE, in consideration of the mutual promises, payments, and
covenants contained herein, the parties hereto agree as follows:
Sale of Assets by Seller
- ------------------------
Seller hereby agrees to sell, assign, and transfer all of its rights to
the Assets as described in Exhibit "A" attached hereto, to Buyer for
10,000,000 shares of Buyers $.001 par value common stock.
Payment By Buyer
- -----------------
Upon the execution of this Agreement Buyer will issue to Seller
10,000,000 shares of its $.001 par value common stock to be considered payment
in full for the Assets as described in Exhibit "A" attached hereto, and valued
at a total price of $110,000.00.
Representations and Warranty
- ----------------------------
Seller represents and warrants that it has the right to sell, assign, and
transfer the Assets to Buyer subject to certain liens and encumbrances noted
on Exhibit "A".
Successors and Assigns
- ----------------------
Any reference to Seller shall read as including Seller and its successors
and assigns; and any reference to Buyer shall read as including Buyer and its
successors and assigns.
Entire Agreement
- ----------------
This Agreement contains the entire agreement between the parties hereto
and no oral agreement, promise, statement or representation which is not
contained herein shall be binding on either party.
Applicable Law.
- -----------------
This Agreement shall be governed by the laws of the State of Montana. In
the event suit or action is instigated by either party to enforce any of the
provisions herein, and to include arbitration, the prevailing party in said
suit, action or arbitration shall be entitled to reasonable legal fees as
awarded by the court or arbitrator.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
7th day of March, 1984.
SELLER
-------
Heartland Oil & Mineral Corporation
By: /s/ Michael B. McLaughlin
-------------------------------
Michael B. McLaughlin, its President CORPORATE
SEAL
By: /s/ Earl P. Matney
--------------------------------
Earl P. Matney, its Secretary
On this 5th day of March, 1984, before me a Notary Public, personally
appeared Michael B. McLaughlin and Earl P. Matney, to me known to be the
persons described in and who executed the foregoing instrument as President
and Secretary, respectively, and acknowledged that they executed the same as
their free act and deed.
NOTARY SEAL
/s/ Milton R. Pietz
----------------------
Notary Public for the State of Montana
County:_________________________
Residing at: Lewiston, Montana
My Commission Expires March 1, 1986
BUYER
------
Gold Genie Worldwide, Inc.
By: /s/ Lela E. Faulkner
----------------------------------------
Lela E. Faulkner, its President CORPORATE
SEAL
By: /s/ Marion E. Faulkner
----------------------------------------
Marion E. Faulkner, its Secretary
On this 9th day of March, 1984, before me a Notary Public, personally
appeared Lela E. Faulkner and Marion E. Faulkner, to me known to be the
persons described in and who executed the foregoing instrument as President
and Secretary respectively, and acknowledged that they executed the same as
their free act and deed.
NOTARY SEAL
/s/ Sandra K. Giblin
------------------------------
Notary Public for the State of Montana
County: Douglas
Residing at: Canyonville, Oregon
My Commission Expires: 7/27/84
EXHIBIT "A"
ASSETS
----------
Cash (from the sale of Gold Genies and other products) $1,214
Receivables (from the sale of Gold Genies and other products) 3,086
Inventory (parts to assemble Gold Genies and other products) 6,831
Patent, new product development, dealer records 30,000
(for Gold Genie and other products)
Organization expenses for Gold Genie Worldwide, Inc. 7,907
Mold (single cavity aluminum injection mold to produce 50,000
18 inch Gold Genie urethane tubs)
Equipment Item Value
- -------------- ------
Skirt mold $ 450
Bowl trimmer mold 450
Wire welder 1,679
Acetylene torch 367
Band saw 310
Chicago drill press 225
Integram drill press 350
Maketa cut off saw 275
Grinding and sanding wheel 200
Champion air compressor 600
Shredder 550
Leg bender 150
Heat gun 40
Soldering iron and holders (3) 71
Craftsman electric drill 40
Vices (3) 119
Pop machine 350
Shop fan 90
Swamp cooler 150
UPS scale 40
Steel welding tables (2) 98
Miscellaneous small tools, tables, racks, etc. 700
Gold Genie demonstrator machine 400
Wire testor 16
3M copier (equity) 1,804
Smith typewriter 180
Desks (2) 400
Calculators (2) 95
File cabinets (5) 280
Miscellaneous equipment 260
-----------
EQUIPMENT TOTAL $ 10,739
TOTAL ASSETS $109,777
Seller forgives $223 of a $500 advance to Buyer 223
-----------
Total amount being sold and assigned to Buyer by Seller $ 110,000
Note: The U.S. National Bank of Oregon has a lien on the receivables,
inventory, and equipment. Seller is purchasing the mold from Foxtek
of Milwaukee, Oregon on a contract over a period of 24 months. Upon
payment of the loans to the U.S. National Bank, the lien will be
removed.
EXHIBIT 3.1
Articles of Incorporation, filed on March 7, 1984
ARTICLES OF INCORPORATION OF GOLD GENIE WORLDWIDE, INC.
-------------------------------------------------------
WE, THE UNDERSIGNED, being natural persons over the age of twenty-one
years, act as incorporators of a corporation under the Oregon Business
Corporation Act and adopt the following Articles of Incorporation for such
corporation:
ARTICLE I
The name of the corporation is Gold Genie Worldwide, Inc.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose for which said corporation is organized, in addition to those
authorized by law is as follows:
To manufacture, assemble, sell and distribute that certain mining
equipment known as the "Gold Genie" for use in the recovery of precious metals
and gems; and to manufacture, assemble, sell and distribute other tools,
accessories, and equipment used in the mining industry. To do research and
development work on mining equipment and other products not related to the
mining industry for the purpose of expansion of the corporation's product
line, and to do all other business properly pertaining and belonging to a
corporation organized for the above stated purposes.
ARTICLE IV
A. The aggregate number of shares which the corporation shall have
authority to issue is 50,000,000 shares of common stock of the par value of
$.001, and 3,000,000 shares of preferred stock of the par value of $.002 per
share.
B. The board of directors shall have the authority and power to
accept and reject subscriptions for shares; to allot, sell, issue and deliver
shares, options thereon, purchase or subscription warrants therefor or other
evidence of such option rights; to grant rights to convert any of the
securities of the corporation, including shares of any class, into shares of
the corporation of any class; and to fix the terms, provisions and conditions
of said options, and said rights to convert, including the option price or
prices at which shares may be purchased or subscribed for and the conversion
basis or bases.
C. If any payment for shares subscribed and allotted is not made on
the due date, the corporation may, in addition to any other remedies provided
by law, terminate, cancel and revoke the allotment of unpaid shares.
D. The board of directors shall have the authority and power to fix
and alter, from time to time, in respect to shares then unallotted, any or all
of the following: the dividend rate; the redemption price; the liquidation
price; the conversion rights and sinking or purchase fund rights of shares of
any class, or of any series of any class, or the number of shares constituting
any series of any class.
ARTICLE V
Provisions for the regulation of the internal affairs of the corporation
are: Those set forth in the By-Laws of the Corporation not inconsistent with
the Laws of the State of Oregon.
ARTICLE VI
A. No holder of the stock of this corporation shall have any
preferential, preemptive or other rights of subscription to any shares of any
class of stock of the corporation allotted or sold or to be allotted or sold
and now or thereafter authorized, or to any obligations convertible into stock
of the corporation of any class, nor to any right of subscription or to any
part thereof.
B. No holder of the stock of this corporation shall be entitled to
any cumulative voting rights.
C. The presence at any meeting, in person or by proxy, of the holders
of not less than a majority of the shares entitled to vote shall constitute a
quorum for the purposes of voting.
D. The holders of a majority of the common shares of this corporation
then outstanding shall have the power to amend these Articles of
Incorporation, to adopt an agreement for consolidation or merger, and to
authorize the board of directors to sell, lease, exchange, or otherwise
dispose of all, or substantially all, of the property and assets of this
corporation, including its good will, upon such terms and conditions and for
such consideration, which may be money, shares, bonds or other instruments for
the payment of money or other property, as the board of directors deems
expedient.
ARTICLE VII
The corporation shall have the power to indemnify any person to the full
extent permitted by law.
ARTICLE VIII
The address of the initial registered office of the corporation is 140 N.
Canyon, Canyonville, Oregon 97417, and the name of its initial registered
agent at such address is Lela E. Faulkner.
ARTICLE IX
The number of directors constituting the initial Board of Directors of
the corporation is six, and the names and addresses of the persons who are to
serve as Directors until the first annual meeting of the shareholders, or
until their successors are elected and shall quality are:
Lela, E. Faulkner, P. O. Box 982, Canyonville, Oregon 97417
Canyonville Riddle Road, Canyonville, Oregon 97417
Marion E. Faulkner, P. O. Box 982, Canyonville, Oregon 97417
Canyonville Riddle Road, Canyonville, Oregon 97417
Terry L. LeVasseur, P. O. Box 983, Canyonville, Oregon 97417
Canyonville Riddle Road, Canyonville, Oregon 97417
Clyde Marriott, P. O. Box 494, Canyonville, Oregon 97417
305 Canyon St., Canyonville, OR 97417
H. B. Kosanke, 73-576 El Hasson Circle, Palm Desert, CA 92260
Michael B. McLaughlin, P. O. Box 17, Lewistown, Montana 59457
Gilt Edge Stage Road, Lewistown, MT 59457
ARTICLE X
The names and addresses of the Incorporators are:
Lela, E. Faulkner, P. O. Box 982, Canyonville, Oregon 97417
Canyonville Riddle Road, Canyonville, Oregon 97417
Terry L. LeVasseur, P. O. Box 983, Canyonville, Oregon 97417
Canyonville Riddle Road, Canyonville, Oregon 97417
DATED this 3rd day of February, 1984.
/ss/ Lela E. Faulkner /ss/ Terry L. LeVasseur
- --------------------- -----------------------
INCORPORATOR INCORPORATOR
STATE OF OREGON )
: ss.
County of )
I, Videll E. Elise, a Notary Public, hereby certify that on the 3rd day
of February, 1984, personally appeared before me Lela E. Faulkner and Terry L.
LeVasseur being first duly sworn by me, and declaring that they are the
persons who signed the foregoing document as Incorporators, and that the
statements therein contained are true.
/ss/ Videll E. Elise
--------------------
(NOTARY SEAL) Residing at Riddle, Oregon
--------------
My Commission Expires: 3/18/87
---------
EXHIBIT 3.2
Certificate of Amendment to the Articles of Incorporation,
filed on June 13, 1988
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
PRODUCTS, SERVICES & TECHNOLOGY CORPORATION
Henry A. Hanson and Michael B. McLaughlin, being duly authorized by the
common shareholders owning more than a majority of the issued and outstanding
shares of Products, Services & Technology Corporation, hereby certify that
they are the President and Secretary, respectively, of Products, Services &
Technology Corporation, a corporation organized and existing under the laws of
the State of Oregon, and that the shareholders at their annual shareholders
meeting held on March 31, 1989, adopted the following resolution:
RESOLVED, that Article IV, A. be amended to state:
"The aggregate number of shares which the corporation shall have
authority to issue is 25,000,000 shares of common stock of the par value of
$.001, and 3,000,000 shares of preferred stock of the par value of $.002 per
share."
RESOLVED, that the President and Secretary of the corporation be, and
hereby are, authorized and directed to execute and file with the Secretary of
State of the State of Oregon the Amendment to the Articles of Incorporation on
behalf of the corporation. There were 26,491,864 shares outstanding and
entitled to vote for this Amendment. A total of 20,859,713 shares were
present in person or by proxy. There were 20,779,663 votes for, 64,250 votes
against, and 15,800 votes abstaining.
IN TESTIMONY WHEREOF, the undersigned President and Secretary have
executed this Certificate of Amendment of Restated Articles of Incorporation
this 19th day of April, 1989.
/ss/ Henry A. Hanson
- ---------------------
Henry A. Hanson, President
/ss/ Michael B. McLaughlin
- ---------------------------
Michael B. McLaughlin, Secretary
STATE OF MONTANA )
:
County of Gallatin )
I, the undersigned, Notary Public, hereby certify that on the 19th day of
April, 1989, personally appeared before me Henry A. Hanson and Michael B.
McLaughlin, being first sworn by me, and declaring that they are the persons
that signed the foregoing document as President and Secretary, and that the
statements therein contained are true.
/ss/ Elizabeth Ann Mackie
--------------------------
Notary Public for the State of Montana
Residing at Bozeman
-------
(NOTARY SEAL) My commission expires May 25, 1991
------------
EXHIBIT 3.3
Articles of Domestication, filed on June 2, 1997
ARTICLES OF DOMESTICATION
OF PRODUCTS, SERVICES & TECHNOLOGY CORP.
Products, Services & Technology Corp., an Oregon corporation (the
"Corporation"), desires to become a domestic Utah business corporation,
subject to the provisions of the Utah Revised Business Corporation Act, as
amended (the "Act"). Pursuant to the provisions of Section 1540 of the Act,
the Corporation's Board of Directors has adopted, and its shareholders have
approved, these Articles of Domestication, for filling with the Utah
Department of Commerce, Division of Corporations and Commercial Code (the
"Division"), for the purposes of effecting the desired domestication of the
Corporation in Utah.
1. The Corporation was first incorporated in the State of Oregon on
March 7, 1984, pursuant to the terms of the Oregon Revised Statutes, under the
name Gold Genie Worldwide, Inc.
2. The Corporation's name was changed to Products, Services &
Technology Corp. on June 13, 1988, by filing of a Certificate of Amendment of
its Articles of Incorporation with the Oregon Secretary of State.
3. Immediately prior to the filing of these Articles of Domestication
with the Division, the name of the Corporation is Products, Services &
Technology Corp.
4. Immediately prior to the filing of these Articles of Domestication
with the Division, the State of Oregon constituted the location of
incorporation of the Corporation, and the principal office and principal place
of business of the Corporation were in the State of Florida.
5. As of the date hereof, the Corporation owns no property and has no
office in the State of Oregon.
6. By filing these Articles of Domestication, the Articles of
Incorporation of this Corporation, as previously amended, are hereby further
amended and restated to read in their entirety as follows:
ARTICLE I
----------
The name of this corporation is PRODUCTS, SERVICES & TECHNOLOGY CORP.
ARTICLE II
-----------
The corporation is organized to engage in any lawful acts, activities and
pursuits for which a corporation may be organized under the Act.
ARTICLE III
-----------
The corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares the corporation is authorized to issue is Twenty-Eight
Million (28,000,000) shares. The number of shares of Common Stock authorized
is Twenty-Five Million (25,000,000) shares. The number of shares of Preferred
Stock authorized is Three Million (3,000,000) shares.
The preferences, limitations and relative rights of each class of shares
are as follows:
A. Terms of Common Stock.
----------------------
1. Voting Rights. Except as otherwise expressly provided by law
or in this Article III, each outstanding share of Common Stock shall be
entitled to one (1) vote on each matter to be voted on by the shareholders of
the corporation. Except as otherwise expressly provided by law or in this
Article III, the Common Stock shall vote together with all other classes and
series of shares of the corporation as a single voting group on all actions to
be taken by the shareholders of the corporation.
2. Liquidation Rights. Subject to any prior or superior rights
of liquidation as may be conferred upon any shares or series of Preferred
Stock, and after payment or provision for payment of the debts and other
liabilities of the corporation, upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation, the holders of
Common Stock then outstanding shall be entitled to receive all of the assets
and funds of the corporation remaining and available for distribution. Such
assets and funds as are to be distributed to the holders of Common Stock shall
be divided among and paid to the holders of Common Stock, on a pro-rata basis,
according to the number of shares of Common Stock held by them.
3. Dividends. Dividends may be paid on the outstanding shares
of Common Stock as and when declared by the Board of Directors, out of funds
legally available therefore, provided, however, that no dividends shall be
declared or paid with respect to the Common Stock until any preferential
dividends required to be paid or set apart with respect to any shares or
series of Preferred Stock have been paid or set apart.
4. Residual Rights. All rights accruing to the outstanding
shares of the corporation not expressly provided for to the contrary in these
Articles of Incorporation or in the corporation's bylaws or in any amendment
hereto or thereto shall be vested in the Common Stock.
B. Authority of Board of Directors to Establish Terms of Preferred
---------------------------------------------------------------
Stock
-----
The Board of Directors, without shareholder action, may amend the
corporation's Articles of Incorporation, pursuant to the authority granted to
the Board of Directors by Subsection 1002(1)(e) of the Act, to do any of the
following:
1. Designate and determine, in whole or in part, the
preferences, limitations and relative rights, within the limits set forth in
Section 601 of the Act, of the Preferred Stock before the issuance of any
shares of Preferred Stock;
2. Create one or more series of Preferred Stock, fix the number
of shares of each such series (within the total number of authorized shares of
Preferred Stock available for designation as a part of such series), and
designate and determine, in whole or part, the preferences, limitations, and
relative rights of each series of Preferred Stock, within the limits set forth
in Section 601 of the Act, all before the issuance of any shares of such
series;
3. Alter or revoke the preferences, limitations and relative
rights granted to or imposed upon the Preferred Stock (before the issuance of
any shares of Preferred Stock), or upon any wholly unissued series of
Preferred Stock; or
4. Increase or decrease the number of shares constituting any
series of Preferred Stock, the number of shares of which was originally fixed
by the Board of Directors, either before or after the issuance of shares of
the series, provided that the number may not be decreased below the number of
shares of such series then outstanding, or increased above the total number of
authorized shares of the Preferred Stock available for designation as a part
of such series.
ARTICLE IV
-----------
To the fullest extent permitted by the Utah Revised Business Corporation
Act or any other applicable law as now in effect or as it may hereafter be
amended, no director of this corporation shall be personally liable to the
corporation or to its shareholders for monetary damages for any action taken,
or any failure to take any action, as a director. Neither any amendment nor
repeal of this Article IV, nor the adoption of any provision in these Articles
of Incorporation inconsistent with this Article IV, shall eliminate or reduce
the effect of this Article IV in respect of any matter occurring, or any cause
of action, suit or claim that, but for this Article IV, would accrue or arise,
prior to such amendment, repeal or adoption of inconsistent provision.
ARTICLE V
----------
The street address of the registered office of the corporation is 111
East Broadway, Suite 1100, Salt Lake City, Utah 84111. The name of the
corporation's registered agent at that office is Jeffrey M. Vincent. The
signature of this registered agent is set forth on the signature page of these
articles of incorporation."
7. The Corporation's domestication into the State of Utah, and the
amendments to and restatement of the Corporation's Articles of Incorporation
as set forth in these Articles of Domestication, were adopted by the
Corporation's Board of Directors and approved by its shareholders, effective
as of the 30th day of May, 1997, in accordance with the requirements of
Section 1540 and 1003 of the Act.
8. Upon the filing of these Articles of Domestication with the
Division, the Corporation shall be domesticated in the State of Utah, shall
thereafter be subject to all of the provisions of the Act, and shall continue
as if it had been incorporated under the Act.
9. The existence of the Corporation shall be considered to have
commenced on March 7, 1984, being the date of its original incorporation in
the State of Oregon.
10. These Articles of Domestication, upon filing with the Division,
shall become the Articles of Incorporation of the Corporation, and shall be
subject to amendment or restatement in the same manner as any other articles
of incorporation under the Act.
11. The domestication of the Corporation into the State of Utah upon
the filing of these Articles of Domestication with the Division shall not be
considered to affect any obligation or liability of the Corporation incurred
prior to its domestication.
12. The filing of these Articles of Domestication shall not affect
the choice of law applicable to the Corporation, except that from the date the
Articles of Domestication are filed with the Division, the law of the State of
Utah, including the provisions of the Act, shall apply to the Corporation to
the same extent as if the Corporation had been incorporated as a Utah
corporation on that date.
13. Upon adoption of the foregoing Articles of Domestication, the
Corporation had 8,127,220 shares of common stock outstanding, which were
entitled to vote with respect to the Articles of Domestication, and 4,392,136,
or approximately 54%, of these shares voted for the adoption and approval of
the Articles of Domestication.
IN WITNESS WHEREOF, these Articles of Domestication of Products, Services
& Technology Corp. are hereby executed, effective as of the 30th day of May,
1997.
PRODUCTS, SERVICES & TECHNOLOGY CORP.
/s/ Mike McLaughlin
-------------------
Mike McLaughlin, Director and President
The undersigned hereby accepts and acknowledges appointment as the
initial registered agent of the corporation named above, and confirms that the
undersigned meets the requirements of Section 501 of the Utah Revised Business
Corporation Act.
/s/ Jeffrey M. Vincent
- ----------------------
Jeffrey M. Vincent, Registered Agent
EXHIBIT 3.4
Articles of Amendment to the Articles of Incorporation,
filed on June 13, 1997
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
PRODUCTS, SERVICES & TECHNOLOGY CORP.,
a Utah Corporation
(which is changing its name hereby to Wireless Data Solutions, Inc.)
Pursuant to Sections 1001, 1003, and 1006 of the Utah Revised Business
Corporation Act (the "Act"), the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation:
1. The name of this corporation prior to the effectiveness of the
filing of these Articles of Amendment has been Products, Services & Technology
Corp. Upon the filing of these Articles of Amendment, the name of this
corporation will be changed to Wireless Data Solutions, Inc.
2. Article I of the Articles of Incorporation of this corporation, is
hereby be amended to read in its entirety as follows:
Article I
---------
The name of this Corporation is Wireless Data Solutions, Inc."
3. The amendment to the Articles of Incorporation set forth above was
adopted by the shareholders of the corporation effective on June ____, 1997
in accordance with the requirements of the Act.
4. Upon the adoption of the foregoing amendment to the Articles of
Incorporation, the corporation had 8,127,220 shares of outstanding Common
Stock.
5. The outstanding shares of Common Stock were each entitled to one
(1) vote on the amendment, so the total number of votes entitled to be cast by
the voting group entitled to vote on the amendment was 8,127,220 votes. The
amendment was approved by the written consent of the holders of 4,392,136, or
approximately 54%, of the total outstanding shares, as permitted by Section
704 of the Act.
6. Pursuant to the written consent of the shareholders, the number of
votes cast for the amendment was sufficient for approval of the amendment.
IN WITNESS WHEREOF, these Articles of Amendment are hereby executed,
effective as of the 13th day of June, 1997.
Products, Services & Technology Corp.
(which is hereby changing its name to
Wireless Data Solutions, Inc.)
/s/ Michael McLaughlin
- ----------------------
Michael McLaughlin, President and Director
EXHIBIT 3.5
Bylaws
BYLAWS
OF
PRODUCTS, SERVICES & TECHNOLOGY CORP.
A Corporation
Organized Under the
Utah Revised Business Corporation Act
INDEX TO BYLAWS
OF
PRODUCTS, SERVICES & TECHNOLOGY CORP.
Page
----
ARTICLE I - Offices 1
Section 1.01 Business Offices 1
Section 1.02 Principal Office 1
Section 1.03 Registered Office 1
ARTICLE II - Shareholders 1
Section 2.01 Rights and Meetings of Shareholders 1
ARTICLE III - Board of Directors 2
Section 3.01 General Powers 2
Section 3.02 Number, Tenure and Qualifications 2
ARTICLE IV - Officers 2
Section 4.01 Number and Qualifications 2
Section 4.02 Appointment and Term of Office 2
Section 4.03 Authority and Duties 3
Section 4.04 Compensation 4
ARTICLE V - Indemnification 4
Section 5.01 Indemnification of Directors and Officers 4
Section 5.02 Advances of Expenses 5
Section 5.03 Scope of Indemnification 5
Section 5.04 Other Rights and Remedies 5
Section 5.05 Severability 5
ARTICLE VI - Shares 5
Section 6.01 Issuance and Transfer of Shares 5
ARTICLE VII - Amendments to Bylaws 5
Section 7.01 Authority to Amend 5
ARTICLE VIII - Miscellaneous 6
Section 8.01 Corporate Seal 6
Section 8.02 Fiscal Year 6
BYLAWS
OF
PRODUCTS, SERVICES & TECHNOLOGY CORP.
Approved by Resolution of the Shareholders and Board of Directors of the
Corporation Dated Effective as of June 2, 1997.
ARTICLE I
Offices
Section 1.01 Business Offices. The corporation may have such
offices as the Board of Directors may from time to time determine or as the
business of the corporation may from time to time require.
Section 1.02 Principal Office. The principal office of the
corporation shall be located at 1016 Shore Acres Drive, Leesburg, Florida
34748, or at any other place as may be designated in the most recent document
on file with the Utah Department of Commerce, Division of Corporations and
Commercial Code (the "Division") providing information regarding the principal
office of the corporation. The corporation shall maintain at its principal
office a copy of such corporate records as may be required by Section 1601 of
the Utah Revised Business Corporation Act (the "Act").
Section 1.03 Registered Office. The registered office of the
corporation required to be maintained by Section 501 of the Act shall be the
registered office as originally so designated in the corporation's articles of
incorporation or subsequently designated as the corporation's registered
office in the most recent document on file with the Division providing such
information. The corporation shall maintain a registered agent at the
registered office, as required by Section 501 of the Act. The registered
office and registered agent may be changed from time to time as provided in
Sections 502 and 503 of the Act.
ARTICLE II
Shareholders
Section 2.01 Rights and Meetings of Shareholders. The
shareholders of this corporation shall have the rights afforded to them by the
Act, subject to the provisions of these Bylaws. Meetings of the shareholders
shall be held in accordance with the requirements of the Act and these Bylaws.
ARTICLE III
Board of Directors
Section 3.01 General Powers. As provided in Section 801 of the
Act, all corporate powers shall be exercised by or under the authority of, and
the business and affairs of the corporation shall be managed under the
direction of the board of directors, consistent with the provisions of the
Act, subject to any limitation set forth in the articles of incorporation.
Section 3.02 Number, Tenure and Qualifications. The number of
directors of this corporation shall be as fixed from time to time by
resolution of the board of directors or shareholders amending this bylaw, but
in no instance shall there be fewer directors than the minimum number required
by Section 803 of the Act. The exact number of directors shall be two, until
changed, subject to the limitations set forth above, by a resolution duly
adopted by the board of directors or shareholders amending this Section 3.02.
Each director shall hold office until the next annual meeting of
shareholders or until removed. However, a director whose term expires shall
continue to serve until such director's successor shall have been elected and
qualified or until there is a decrease in the authorized number of directors.
No decrease in the authorized number of directors shall have the effect of
shortening the term of any incumbent director.
ARTICLE IV
Officers
Section 4.01 Number and Qualifications. The officers of the
corporation shall be such officers as may be appointed by the board of
directors, and may include one or more of: a president, chief executive
officer, chief operating officer, chief financial officer, treasurer,
controller, and secretary. The corporation may also have such other officers
and assistant officers as the board of directors in its discretion may
determine, by resolution, to be appropriate, including a chairman of the
board, one or more vice-presidents, assistant secretaries and assistant
treasurers. All such officers shall be appointed by the board of directors,
except that if specifically authorized by the board of directors, an officer
may appoint one or more officers or assistant officers (see Section 830 of the
Act). The same individual may simultaneously hold more than one office in the
corporation.
Section 4.02 Appointment and Term of Office. The officers of
the corporation shall be appointed by the board of directors (or, to the
extent permitted by Section 4.01 above, by an officer specifically authorized
by the board to make such appointments), for such terms as may be determined
by the board of directors. Neither the appointment of an officer nor the
designation of a specified term creates or grants to the officer any contract
rights, and the board can remove the officer at any time prior to the
termination of any term for which the officer may have been appointed. If no
other term is specified, officers shall hold office until they resign, die, or
until they are removed or replaced in the manner provided in Section 832 of
the Act.
Section 4.03 Authority and Duties. Except as otherwise
established by the board of directors, the officers of the corporation shall
have the authority and perform the duties specified below and as may be
additionally specified by the president, the board of directors or these
bylaws (and in all cases where the duties of any officer are not prescribed by
the bylaws or by the board of directors, such officer shall follow the orders
and instructions of the president), except that in any event each officer
shall exercise such powers and perform such duties as may be required by law:
(a) President. The president shall, subject to the
direction and supervision of the board of directors, (i) be the chief
executive officer of the corporation and have general and active control of
its affairs and business and general supervision of its officers, agents and
employees; (ii) unless there is a chairman of the board, preside at all
meetings of the shareholders and the board of directors; (iii) see that all
orders and resolutions of the board of directors are carried into effect; and
(iv) perform all other duties incident to the office of president and as from
time to time may be assigned to the president by the board of directors. The
director may sign, with the secretary or any other proper officer of the
corporation authorized to take such action, certificates for shares of the
corporation. The president may also sign, subject to such restrictions and
limitations as may be imposed from time to time by the board of directors,
deeds, mortgages, bonds, contracts or other instruments which have been duly
approved for execution.
(b) Vice-Presidents. The vice-president, if any (or if
there is more than one then each vice-president), shall assist the president
and shall perform such duties as may be assigned by the president or by the
board of directors. The vice-president, if there is one (or if there is more
than one then the vice-president designated by the board of directors, or if
there be no such designation then the vice-presidents in order of their
election), shall, at the request of the president, or in the event of the
president's absence or inability or refusal to act, perform 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. Any vice-president may sign, with
the secretary or an assistant secretary, certificates for shares of the
corporation the issuance of which have been authorized by resolution of the
board of directors. Vice-presidents shall perform such other duties as from
time to time may be assigned to them by the president or by the board of
directors. Assistant vice-presidents, if any, shall have such powers and
perform such duties as may be assigned to them by the president or by the
board of directors.
(c) Secretary. The secretary shall: (i) have
responsibility for the preparation and maintenance of minutes of the
proceedings of the shareholders and of the board of directors; (ii) have
responsibility for the preparation and maintenance of the other records and
information required to be kept by the corporation under Section 1601 of the
Act; (iii) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by the Act or other applicable law;
(iv) be custodian of the corporate records and of any seal of the corporation;
(v) when requested or required, authenticate any records of the corporation;
(vi) keep a register of the post office address of each shareholder which
shall be furnished to the secretary by such shareholder; (vii) sign with the
president, or a vice-president, certificates for shares of the corporation,
the issuance of which shall have been authorized by resolution of the board of
directors; (viii) have general charge of the stock transfer books of the
corporation, unless the corporation has a transfer agent; and (ix) in general
perform all duties incident to the office of secretary, including those
identified in the Act, and such other duties as from time to time may be
assigned to the secretary by the president or the board of directors.
Assistant secretaries, if any, shall have the same duties and powers, subject
to supervision by the secretary.
(d) Treasurer. The treasurer shall: (i) be the principal
financial officer of the corporation and have responsibility for the care and
custody of all its funds, securities, evidences of indebtedness and other
personal property and deposit and handle the same in accordance with
instructions of the board of directors; (ii) receive and give receipts and
acquittances for moneys paid in on account of the corporation, and pay out of
funds on hand all bills, payrolls and other just debts of the corporation of
whatever nature upon maturity; (iii) unless there is a controller, be the
principal accounting officer of the corporation and as such prescribe and
maintain the methods and systems of accounting to be followed, keep complete
books and records of account, prepare and file all local, state and federal
tax returns, prescribe and maintain an adequate system of internal audit and
prepare and furnish to the president and the board of directors statements of
account showing the financial position of the corporation and the results of
its operations; (iv) upon request of the board, make such reports to it as may
be required at any time; and (v) perform all other duties incident to the
office of treasurer and such other duties as from time to time may be assigned
by the board of directors or the president. Assistant treasurers, if any,
shall have the same powers and duties, subject to supervision by the
treasurer.
Section 4.04 Compensation. Officers shall receive such
compensation for their services as may be authorized or ratified by the board
of directors and no officer shall be prevented from receiving compensation by
reason of the fact that such officer is also a director of the corporation.
Appointment as an officer shall not of itself create a contract or other right
to compensation for services performed as such officer.
ARTICLE V
Indemnification
Section 5.01 Indemnification of Directors and Officers.
To the maximum extent permitted by the Act or any other applicable
law, the corporation shall indemnify its directors and officers in all cases
in which a corporation may indemnify a director or officer. Without limiting
the foregoing, the corporation shall indemnify its directors and officers in
all cases in which in may do so under Section 902 of the Act. This provision
constitutes authorization of indemnification as contemplated in Section 906 of
the Act, so that the corporation can indemnify directors once a determination
has been made in the specific case that indemnification is permissible in the
circumstances because the director has met the applicable standard of conduct
set forth in Section 902 of the Act, as referenced above. The corporation
shall consider and act as expeditiously as possible on any and all requests by
a director for indemnification.
Section 5.02 Advances of Expenses.
Pursuant to the provisions of Section 904 and 907 of the Act, if a
determination is made, following the procedures of Section 906(b) of the Act,
that a director or officer has met the statutory requirements for advancement
of expenses, and if an authorization of payment is made, following the
procedures and standards set forth in Section 906 of the Act, then the
corporation may pay for or reimburse the reasonable expenses incurred by a
director or officer who is a party to a proceeding in advance of final
disposition of the proceeding.
Section 5.03 Scope of Indemnification. The indemnification and
advancement of expenses authorized by this Article V is intended to permit and
require the corporation to indemnify to the fullest extent permitted by the
laws of the State of Utah any and all persons whom it shall have power to
indemnify under such laws from and against any and all of the expenses,
disabilities, or other matters referred to in or covered by such laws.
Section 5.04 Other Rights and Remedies. The rights to
indemnification and advancement of expenses provided in this Article V shall
be in addition to any other rights which a party may have or hereafter acquire
under any applicable law, contract, order, or otherwise.
Section 5.05 Severability. If any provision of this Article
shall be held to be invalid, illegal or unenforceable for any reason, the
remaining provisions of this Article shall not be affected or impaired
thereby, but shall, to the fullest extent possible, be construed so as to give
effect to the intent of this Article that each party covered hereby is
entitled to the fullest protection permitted by law.
ARTICLE VI
Shares
Section 6.01 Issuance and Transfer of Shares. The board of
directors may authorize the issuance of shares for consideration consisting of
any tangible or intangible property or benefit to the corporation, including
cash, promissory notes, services performed, contracts or arrangements for
services to be performed, or other securities of the corporation, in
accordance with the provisions of the Act..
ARTICLE VII
Amendments to Bylaws
Section 7.01 Authority to Amend. As provided in Section 1020 of
the Act, this corporation's board of directors may amend these bylaws at any
time, except to the extent that the articles of incorporation, these bylaws,
or the Act reserve such power exclusively to the shareholders, in whole or
part. The corporation's shareholders may amend these bylaws at any time.
ARTICLE VIII
Miscellaneous
Section 8.01 Corporate Seal. The board of directors may provide
for a corporate seal, to be in such a form as the directors may determine to
be appropriate, and any officer of the corporation may, when and as required
or as determined to be appropriate, affix or impress the seal, or a facsimile
thereof, to or on any instrument or document of the corporation.
Section 8.02 Fiscal Year. The fiscal year of the corporation
shall end on December 30 of each year, unless otherwise established by the
board of directors.
(END)
CERTIFICATE OF ADOPTION OF BYLAWS
OF
PRODUCTS, SERVICES & TECHNOLOGY CORP.
The undersigned hereby certifies that he is the duly appointed and acting
President of Products, Services & Technology Corp. (the "Corporation"), and
that the foregoing bylaws were approved and adopted by the shareholders and
board of directors of the Corporation effective as of June 2, 1997.
Executed effective as of June 2, 1997.
/s/ Michael McLaughlin
- -----------------------
Michael McLaughlin, President
EXHIBIT 10.1
Settlement Agreement and Release dated December 17, 1987, between Heartland
Diversified Industries, Inc., the Company, and certain individuals
SETTLEMENT AGREEMENT
AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE is hereby entered into by and
between Heartland Diversified Industries, Inc., a Montana corporation, and
Gold Genie Worldwide, Inc., an Oregon corporation, with its principal offices
in Montana, hereafter referred to as First Parties, and Marion Faulkner, Lela
Faulkner, Terry LeVasseur, David LeVasseur, Clyde Marriott and James Thomas,
hereafter referred to as Second Parties.
WITNESSETH:
First Parties have heretofore filed a lawsuit against Second Parties in
the First Judicial District Court, Lewis and Clark County, State of Montana,
and have therein asserted claims against Second Parties for tortious
interference with contract, breach of fiduciary duties, conversion, patent
infringement and abuse of process. Service of such lawsuit, Civil Cause No.
CDV-87-587, is expressly acknowledged by Second Parties. In an effort to
resolve the disputes and differences between First Parties and Second Parties,
the parties have agreed to enter into this settlement agreement and release
each other from any further liability for the claims asserted in said action
or which could have been asserted in said action and any defenses or
counterclaims which could have been asserted by Second Parties or any one of
Second Parties in that action or any other action. Further, the parties agree
to separate themselves from each other with no further responsibilities to
each other, with the exception of the obligations imposed upon the parties per
this Settlement Agreement and Release and appropriate security agreement
between the two parties for the duration of said agreement. In an effort then
to settle the claims and differences between First Parties and Second Parties,
the parties agree jointly and severally, as follows:
1. Second Parties assume responsibility and liability for all debts
and liabilities of Gold Genie Worldwide, Inc. (hereafter designated "Gold
Genie") as of September 30, 1986, fiscal year end, except those debts incurred
by the Lewistown office and not listed on Exhibit A; all debts and liabilities
of Gold Genie and its predecessor partnership which had been assumed by
Heartland Diversified Industries, Inc. (hereafter designated "Heartland");
and, all debts and liabilities incurred by Second Parties or any one of Second
Parties incurred in their name or the name of any other entity which is or was
attributable to the operation in Oregon of the Gold Genie business subsequent
to September 30, 1986. A list of such debts and liabilities while not
intended to be an exclusive list is attached hereto as Exhibit "A". Further,
with respect to all of the afore-referenced debts and liabilities, Second
Parties agree jointly and severally to take such action as is necessary to
release First Parties from any further responsibility and liability on said
debts. Further, First Parties agree to take such action as is necessary to
release Second Parties of all debts and liabilities not a part of Exhibit "A",
and which were incurred and accepted by the Lewistown, Montana office.
2. Second Parties, Marion Faulkner, Lela Faulkner, Terry LeVasseur
and David LeVasseur agree to return and do whatever is necessary to effectuate
the transfer and return of all of their common stock in Gold Genie (which
totals two million shares of said common stock) to Gold Genie and further
agree to make no claim for the value of such stock or against said stock.
Said Second Parties further agree to return all warrants in Heartland (which
totals 33,333 after split) or Gold Genie (which totals none) to the respective
corporations and make no further claim there against. In return, First
Parties agree to return and do whatever is necessary to effectuate the
transfer and return of all assets, rights of management, control of patent
manufacturing and selling rights, and inventories located in Canyonville,
Oregon to Second Parties and further agree to make no further claim there
against, with the exception of afore-mentioned security agreement between the
two parties.
3. Second Parties agree to cooperate and provide such information to
First Parties as their designated auditing firm may deem necessary to conduct
and complete audits or other financial documents.
4. Second Party, James Thomas, relinquishes any claim or right to
assert a claim against First Parties for any and all commissions, stock
options and all other forms of wages or remuneration. First Parties agree to
send one Gold Genie machine from the Lewistown offices after execution of this
Settlement Agreement and Release.
5. The parties agree that Gold Genie has previously manufactured
several products including a product called "Gold Genie" which is a gold
recovery machine known as an automatic gold panner. Such product has been
patented. In an effort to accommodate, both parties have agreed that Second
Parties will continue exclusively to manufacture and sell such product of Gold
Genie upon the following terms and conditions:
(a) Second Parties will provide a monthly report to First
Parties accounting for each and every machine sold or to be invoiced within
said month. Such date shall be the basis for determining the due date of
royalty payments hereunder. Such report shall be provided in a form verified
by an independent certified public accountant, the expense of which shall be
borne by Second Parties. Further, Second Parties agree to incur no debt in
the name of either of First Parties nor use the name of either First Parties
in the conduct of Second Parties' business. In return, First Parties agree to
incur no debt in the name of Second Parties nor use the name of Second Parties
in the conduct of First Parties' business.
(b) In return for each machine sold, Second Parties shall pay
within one month a royalty of $10.00 per machine to First Parties.
(c) Second Parties agree to sell a minimum of 100 machines per
year and further agree to pay said royalty payment on a monthly basis with
such payments being made on the 10th day of each month for a 5 year term.
(d) Second Parties shall have the privilege of buying out First
Parties' interest in said product, patent and mold and the security agreements
shall then be terminated by paying $12,000.00 within the first year of this
agreement. If Second Parties exercise their buy out privileges, then any
further royalty obligation shall cease and all further obligations between the
parties shall cease to the extent consistent with this Agreement and Release.
Further, if Second Parties exercise and complete their buy out privilege
within one year of the date of this agreement, any royalty payments made by
Second Parties would be applied to reduce the said $12,000.00 buy out amount.
If Second Parties exercise their buy out privilege in the second year of this
agreement, then the exercise of such privilege shall cost $15,000.00 instead
of $12,000.00 and there shall be no credit extended for any royalty payments
previously made by Second Parties even though some may have been made within
the first year of this agreement.
(e) Second Parties will purchase all existing machines and
usable excess parts and inventory from First Parties upon receipt of an
itemized statement and invoices. Further, there shall be no obligation to pay
a royalty payment on the existing units of which the parties believe there are
45 machines. Further, said purchase of existing machines, usable parts and
inventory will be payable as the units are sold and the balance of the total
being due and payable in 90 days of the date of this signed agreement.
(f) Second Parties shall execute such appropriate security
agreements as shall be deemed necessary to adequately secure First Parties
until Second Parties have fully performed hereunder.
(g) Second Parties agree to obtain written permission from First
Parties before they relocate the mold, which permission shall not be
unreasonably withheld by First Parties.
(h) Second Parties understand their right to manufacture and
sell said machines and will faithfully abide by the terms and conditions of
this agreement. First Parties understand their rights as outlined in this
agreement and will faithfully abide by the terms and conditions of this
agreement.
(i) Should Second Parties fail to abide by the terms and
conditions of this agreement, First Parties shall be entitled to assert all
lawful remedies available to First Parties. In return, should First Parties
fail to abide by the terms and conditions of this agreement, Second Parties
shall be entitled to assert all lawful remedies available to Second Parties.
(j) Second Parties agree to completely indemnify and hold First
Parties harmless from any and all claims asserted by others as to the
manufacture and/or sale of the said machine manufactured after September 30,
1986 and those machines upon which Second Parties perform any work. SEE
ADDENDUM.
6. As of September 30, 1986, the parties believe that there were
approximately $22,000.00 in accounts receivable. The parties agree that to
the extent First Parties collect any portion of said accounts receivable that
First Parties may keep those amounts collected. Similarly, the parties agree
that to the extent Second Parties collect any of such accounts receivable that
Second Parties may keep those amounts collected. Further, First Parties agree
to return all remaining 9/30/86 accounts receivable to Second Parties which
will become the property of Second Parties.
7. The parties agree that there is an outstanding NSF check in the
amount of $700.17 which First Parties agree to return to Second Parties. To
the extent all or any portion of this is collected, such shall go to Second
Parties.
8. The parties agree that there was approximately $34,000.00 of
inventory as of September 30, 1986. To the extent some of that inventory is
now in Montana, such shall stay in Montana with First Parties, subject to the
right of Second Parties to purchase the same for purposes of adding such
inventory or using such inventory for the purposes of building said machines.
Further, the remaining inventory which is in Canyonville shall stay in
Canyonville, Oregon and become property of Second Parties.
9. First Parties agree to send any and all revised dealer lists,
leads of sales, and records of warranties for replacement purposes in their
possession to Second Parties for use by Second Parties.
10. First Parties shall cease forwarding order of Gold Genie
Worldwide, Inc. mail to Second Parties. In return, Second Parties will
forward any mails belonging to First Parties.
11. First Parties shall write a letter consistent with this agreement
stating that they have released all rights of sale and manufacture of the Gold
Genie to Second Parties.
12. The parties agree that this settlement agreement and release and
the provisions hereof are not assignable by either parties without the express
written consent of either parties but is assignable by First Parties upon
written notification to Second Parties.
13. The parties agree that the terms and conditions of this
settlement agreement and release shall be construed in accordance with Montana
law and that the obligations and liabilities imposed herein are jointly and
severally imposed.
14. The parties agree that they shall each pay their own respective
attorneys' fees incurred to date.
15. If either of the parties hereto finds it necessary to employ an
attorney to enforce the provisions of this agreement, the prevailing party
shall receive reasonable attorneys' fees and costs from the party who does not
prevail on that particular issue.
16. The terms of this agreement shall be binding upon the heirs,
personal representatives and assigns of the parties for the duration of its
existence.
17. The parties state that they have carefully read the foregoing
release, and know the contents thereof and that they have signed the same as
their own free act after consulting with counsel of their choice.
IN WITNESS WHEREOF, the parties have hereunto set their hands.
HEARTLAND DIVERSIFIED INDUSTRIES,
INC., a Montana corporation
By:/s/ Michael B. McLaughlin
-------------------------
Its: Chairman
GOLD GENIE WORLDWIDE, INC., an
Oregon corporation
By:/s/ Michael B. McLaughlin
-------------------------
Its: Chairman
"FIRST PARTIES"
/s/ Marion E. Faulkner
- ----------------------
Marion Faulkner
/s/ Lela Faulkner
- -----------------
Lela Faulkner
/s/ David LeVasseur
- -------------------
David LeVasseur
/s/ Terry LeVasseur
- -------------------
Terry LeVasseur
/s/ Clyde Marriott
- ------------------
Clyde Marriott
/s/ James Thomas
- ----------------
James Thomas
"SECOND PARTIES"
Executed this 17th day of
December, 1987.
See 1 page Addendum.
ADDENDUM Page 1 of 1
First parties agree to completely indemnify and hold Second Parties harmless
from any and all claims asserted by others as to the units manufactured by
Henry Manufacturing of Eugene, Oregon, with the exception of those machines
which have been reworked by Canyonville.
/s/ James Thomas
----------------
James Thomas
HEARTLAND DIVERSIFIED INDUSTRIES
INC., a Montana Corporation /s/ Marion E. Faulkner
----------------------
Marion Faulkner
By:/s/ Michael B. McLaughlin /s/ Lela Faulkner
------------------------- -----------------
Its: Chairman Lela Faulkner
GOLD GENIE WORLDWIDE, INC., /s/ David LeVasseur
-------------------
an Oregon corporation David LeVasseur
---------------
/s/ Terry LeVasseur
-------------------
By:/s/ Michael B. McLaughlin Terry LeVasseur
Its: Chairman
/s/ Clyde Marriott
------------------
"FIRST PARTIES" Clyde Marriott
"SECOND PARTIES"
EXHIBIT 10.2
Agreement dated April 19, 1988, by and between the Company, Heartland
Diversified Industries, Inc., Distributed Networks, Inc., and certain
shareholders of Distributed Networks, Inc.
AGREEMENT
THIS AGREEMENT made and entered into this 19th day of April,
1988, by and between:
GOLD GENIE WORLDWIDE, INC.
P. O. Box 914
Lewistown, MT 59457
(hereinafter called "Genie")
- and -
HEARTLAND DIVERSIFIED INDUSTRIES, INC.
P. O. Box 6506
Bozeman, MT 59715
(hereinafter called "Heartland")
- and -
DISTRIBUTED NETWORKS, INC.
2182 El Camino Real
Oceanside, CA 92056
(hereinafter called "Dinet")
- and-
the following Dinet shareholders showing the amount of Dinet shares owned:
David B. Robison - 730,000 shares Brian Watts - 162,703 shares
2280 - E Avenida Magnifica 4400 Highland Drive
Carlsbad, CA 92008 Carlsbad, CA 92008
Frank Kurucz - 120,769 shares Paul Scott - 295,385 shares
2106 Via Rables 17500 Lemarsh Street
Oceanside, CA 92054 Northridge, CA 91325
Console Systems, Inc. - 250,000 shares
c/o Harry Linden, President
6357 Arizona Circle
Los Angeles, CA 90045
(hereinafter called "Dinet Shareholders")
WHEREAS, Genie, Dinet, and a majority or more of the Dinet Shareholders
have reached an agreement whereby at least a majority of the outstanding
shares of Dinet will be exchanged for Genie common stock, and this Agreement
provides for all of the Dinet Shareholders to participate and become a part
hereof.
- and -
WHEREAS, Heartland has agreed to accept certain obligations under certain
terms and conditions as described herein:
- and -
WHEREAS, this Agreement will be in full force and effect when executed by
a majority of the Dinet Shareholders, and for the purposes of this Agreement a
majority constitutes acceptance by Dinet Shareholders owning 800,000 shares in
total of Dinet stock;
- and -
WHEREAS, there is a mutual agreement by the parties hereto as to the
appointment of an Escrow Agent required under the terms of this Agreement, and
there is mutual agreement as to the new name of Genie which will be PRODUCTS,
SERVICES & TECHNOLOGY CORPORATION (PST), and Genie is satisfied as to the
financial condition of Dinet as presented by Dinet, and upon inspection of
Dinet's books, records, agreements, and such other tests that may be required.
NOW THEREFORE, in consideration of the mutual promises, payments, and
covenants contained herein, the parties hereto agree as follows:
Working Capital Provision
- -------------------------
On or before June 21, 1988 (hereinafter called "Closing Date") Genie will
provide Dinet with $200,000 in working capital for the purpose of enhancing
and expanding the company's business which would include the development of
new products, and enlarging marketing operations. IF the $200,000 is not made
available by Closing Date, the Dinet Shareholders, at their option, shall have
the right to terminate this Agreement, and if terminated the parties hereto
shall have no further obligation to each other. The Closing Date can be
extended by mutual agreement of a majority of the Genie Board of Directors and
by a majority of the Dinet Shareholders who have executed this agreement.
It is also agreed that if or when Warrant B is exercised by Genie warrant
holders, a minimum of 10% of the proceeds received from the exercised Warrant
B's shall be provided to Dinet for additional working capital.
Prior to Closing Date Genie will lend the first $50,000 it receives to
Dinet, from any source of financing available to Genie, and said funds will be
secured by Dinet receivables. Any funds loaned to Dinet will be credited to
and become a part thereof, of the $200,000 working capital requirement as
stated above at closing. If this Agreement should be terminated for any
reason, any outstanding loans to Dinet will be payable to Genie under the
terms of a loan agreement to be mutually agreed upon prior to the first loan.
Escrow Agent and Terms of Escrow
- --------------------------------
Upon the execution of this Agreement all participating Dinet Shareholders
will surrender their Dinet stock certificates to the Escrow Agent with
executed stock powers attached thereto. Genie and its corporate counsel will
direct American Securities Transfer, Incorporated, 938 Quail Street, Lakewood,
Colorado 80215 (hereinafter called "AST"), Genie's stock transfer Agent, to
issue the appropriate amount of shares from Genie authorized stock in the
appropriate names according to Schedule III of this Agreement, and forward the
certificates to the Escrow Agent. These shares will be restricted securities
and will bear a legend.
Under an agreement with former Genie management (hereinafter called
"FGM") there are 2,000,000 shares of Genie common stock with executed stock
powers being held in escrow at the Resource Bank & Trust, 900 Second Avenue
South, Minneapolis, MN 55402 (hereinafter called "Resource"). Resource is
Genie's escrow Agent for Genie shares owned by former Genie directors and
Heartland in accordance with the terms of the "Escrow Agreement' dated July
24, 1985, between the above parties and the Commissioner of Securities fro the
State of Minnesota, with said stock to be held in escrow until July 24, 1988.
The 2,000,000 FGM shares will be forwarded to participating Dinet Shareholders
as shown in Schedule II herein upon release of said shares from Resource, and
upon the satisfaction of the terms herein. It is understood that the FGM
shares can be sold in compliance with SEC Rule 144.
Andreason, Gore, Grosse, Greenman & Betz
804 Third Street
Oceanside, CA 92054
All shares held in escrow by the Escrow Agent shall be released to the
proper parties immediately upon notice that Genie has provided $200,000 in
working capital to Dinet if said capital is provided on or before June 21,
1988, and after John Doubek, Genie's corporate counsel, has provided a legal
opinion stating that the FGM shares are tradeable and can be sold in
compliance with SEC Rule 144. If the capital is not provided by that date,
and if there is no mutual agreement to extend the time period, then the Escrow
Agent shall release and surrender all stock in escrow to the original owners
with none of the parties having any further obligation to the other.
While the shares herein are being held in escrow, none of the parties
hereto will have voting rights to the others shares.
Exchange of Stock
- -----------------
It is agreed by the parties hereto that if all Dinet Shareholders
participate they will receive 8,500,000 shares of Genie common stock in
exchange for 1,558,857 shares of Dinet common stock, which represents 100% of
Dinet stock issued and outstanding. Genie will be the sole owner of all of
the Dinet stock after the exchange, and Dinet will operate as a wholly owned
subsidiary. Neither Genie not Dinet has any other class of stock issued or
outstanding.
Following are three schedules showing the transfer of shares assuming
100% participation by Dinet Shareholders:
SCHEDULE I - From Dinet Shareholders to Genie
Number of
Dinet Shares % of Transferred Share
Shareholder Transferred Total To Status
- ---------------------------------------------------------------------------
David B. Robison 730,000 .4682918 Genie Restricted
Brian Watts 162,703 .1043732 Genie Restricted
Frank Kurucz 120,769 .0774727 Genie Restricted
Paul Scott 295,385 .1894881 Genie Restricted
Console Systems, Inc. 250,000 .1603739 Genie Restricted
SCHEDULE II - From FGM to Dinet Shareholders
Number of Shares Transferred Share
Transferred from FGM To Status
- ----------------------------------------------------------------
936,585 David B. Robison Rule 144
208,745 Brian Watts Rule 144
154,945 Frank Kurucz Rule 144
378,976 Paul Scott Rule 144
320,748 Console Systems, Inc. Rule 144
SCHEDULE III - From Genie to Dinet Shareholders
Number of Shares Transferred Share
Transferred from Genie To Status
- -----------------------------------------------------------
3,043,898 David B. Robison Restricted
678,426 Brian Watts Restricted
503,573 Frank Kurucz Restricted
1,231,673 Paul Scott Restricted
1,042,430 Console Systems, Inc. Restricted
Buy-Back Provision
- ------------------
Genie and Heartland have agreed to a buy-back provision hereby if one of
the present Dinet Shareholders, excluding David B. Robison, wishes to sell a
portion of his Genie stock, within the authorized quantities and time limit as
provided for herein, shall first offer his Rule 144 stock for sale and may not
sell any restricted stock under this provision until all of his Rule 144 stock
is sold, and if the sale cannot be executed at the minimum price of $.10 per
share excluding sales commission, then the stock must be offered to Genie.
Genie or its assignee will have the option to purchase said stock at $.10 per
share for cash. If Genie is not in the position to purchase the stock, or if
;it is detrimental to Genie's working capital or for any other reason, and if
Genie does not place the stock, then Genie and the shareholder must offer the
stock to Heartland. Heartland agrees that at that time it will pay the Dinet
Shareholder $.10 per share cash or will have the right to direct the sale of
said stock on the market, and if the sale is made below the minimum price
herein, Heartland will pay the stockholder the difference between the lower
price received on the market and the set minimum price up to the maximum
amount per shareholder as described below. Heartland's commitment shall not
exceed $100,000 in total.
Maximum Cash Payment
Dinet Shareholder From Heartland
- ----------------------------------------------------------
Brian Watts $ 19,629.80
Frank Kurucz 14,570.54
Paul Scott 35,637.63
Console Systems, Inc. 30,162.03
---------
$100,000.00
Heartland shall have a period of six months from the date of written
confirmation of the sale for each transaction by each Dinet Shareholder to pay
said shareholder the difference as described herein up to the maximum. If not
all of the four Dinet Shareholders listed above execute and participate in
this Agreement, the $100,000 Heartland commitment will be adjusted downward by
the amount next to the name of the Dinet Shareholder that does not
participate.
This Buy-Back provision shall cease and terminate on May 31, 1989, and
none of the parties hereto shall have any obligation to each other thereafter,
except for Heartland's responsibility for those shares sold by Dinet
Shareholders prior to May 31, 1989. Further, all parties hereto, including
Heartland and David Robison, agree that they will not offer for sale an amount
of stock in excess of one-half of one percent of the total Genie shares
outstanding per consecutive 90-day periods until after May 31, 1989, at which
time sales will be subject to volume requirements under Rule 144. However, no
sales can be made by any of the parties hereto of over 1% of the total shares
outstanding every 90 days without authority of the duly appointed
representatives of the Dinet Shareholders, Dinet, Genie, and Heartland, and
any sales must be in compliance with SEC Rule 144 and other securities laws
and regulations.
If Heartland should have to sell some of its Genie stock to provide
capital for its commitment under this Buy-Back Provision, said stock shall not
be included in computing the one-half percent agreement herein. Further,
Genie shall issue a warrant to Heartland to replace any stock Heartland has
provided for Dinet Shareholders under this provision. The warrant shall be
issued upon the termination of this Buy-Back Provision; and shall be
exercisable at $.20 per share for a period of five years from the date of
issuance.
Because of Heartland's commitment under this provision, it is necessary
and imperative that when Heartland becomes involved in a sale of stock for a
Dinet Shareholder, it must receive fully cooperation of said shareholder in
the handling of the transaction. When selling large blocks of stock,
especially on the public market, it is very important that sales be negotiated
and handled professionally with brokerage firms. All Rule 144 sales must be
executed through a brokerage firm. If not handled properly there could be
adverse downward effects on the price of the stock which is not in the best
interests of the parties hereto or any of the other shareholders of the
company. The company's credibility in the brokerage community could be hurt
which can also have an effect on financing. Therefore, it would be in the
best interests of all parties to notify Genie when a sale is contemplated so
that Genie can assist and advise regarding said sale. Genie management will
more than likely know more than anyone as to who and where there is an
interest in the stock.
Further, the performance of Dinet will have a direct effect on the market
price of Genie stock. If for some reason Dinet should become insolvent or
enter into some form of bankruptcy, or should be the subject of some type of
legal action that would affect growth and financial stability, or if sales,
earnings, and the consistent growth pattern were adversely affected as a
result of negligence by management, and all of the above was of no fault of
Heartland, then Heartland shall be relieved of its obligations under this
provision.
Warrant Provision for Heartland
- -------------------------------
In addition to the warrant as described under the Buy-Back Provision, and
in consideration of its commitment and obligations under this Agreement,
Heartland will be issued a warrant to purchase 3,000,000 shares of Genie
common stock at a price of $.60 per share for a period of five years from date
of issuance. Said warrant will be issued upon the release of the Genie shares
to Dinet Shareholders by the Escrow Agent.
If or when Genie prepares a securities registration statement for any
reason, Heartland shall have the right to include as part of the registration
all of the warrants issued to Heartland and the underlying stock at no expense
to Heartland. All warrants issued under this Agreement shall be assignable
and transferrable in whole or in part.
Reporting, Expenses, Structure, and Board of Directors
- ------------------------------------------------------
Dinet agrees to provide any information requested and/or required by any
regulatory body including an unaudited balance sheet and profit and loss
statement for the period ending February 29, 1988.
Genie agrees that it will pay the expense of certified audits, and will
pay the legal fees related to this acquisition except for escrow fees that may
be charged by the Escrow Agent being that the Escrow Agent is the corporate
counsel for Dinet. Dinet will pay all legal expense incurred or resulting
from its normal business activity, and it will pay routine accounting expenses
necessary to operate the business, and in a manner conducive for preparing
certified audits.
Dinet will operate as a wholly owned subsidiary of Genie, and its is
agreed that initially the growth of Genie will be though acquisitions which
may be diversified in nature subject to proper circumstances, and through the
development and marketing of its products, services, and technology.
Initially, Genie corporate offices will be in Bozeman, Montana.
Genie shall appoint David B. Robison to its board of directors, and Dinet
shall appoint Michael B. McLaughlin to its board of directors with said
appointments to be on or before March 15, 1988.
Genie Shareholders Meeting
- --------------------------
A Genie shareholders meeting will be initiated immediately and the
following items will be presented for ratification:
1. Increase the amount of stock available under the Incentive Stock
Option Plan form 1,500,000 to 2,500,000 shares.
2. Change the name of Genie to PRODUCTS, SERVICES, & TECHNOLOGY
CORPORATION (PST).
Contribution by Present Genie Stock Option Holders
Upon the release of the Genie shares to Dinet Shareholders by the Escrow
Agent, the following individuals will contribute back to Genie's Incentive
Stock Option Plan the amounts as listed beside their names:
Michael B. McLaughlin 75,000 options
Henry A. Hanson 12,500 options
Patrick L. Makovec 12,500 options
Right to Remain a Dinet Shareholder
- -----------------------------------
Any Dinet Shareholder who chooses not to execute and participate in this
Agreement is free to do so and shall thereby remain to be a Dinet Shareholder
with all the rights of a shareholder under the laws of the State of
California.
Fiscal Year End
- ---------------
It is agreed that the fiscal year end for Genie and Dinet shall be
September 30th. Dinet shall take the necessary steps and notify the Internal
Revenue Service of the change in the fiscal year end.
Governing Law
- -------------
The parties agree that the terms and conditions of this Agreement shall
be construed in accordance with California law. If the parties hereto find it
necessary to employ an attorney to enforce the provisions of this Agreement,
the prevailing party shall receive reasonable attorneys' fees and costs from
the party that does not prevail on that particular issue.
Heirs and Assigns
- -----------------
The terms of this Agreement shall be binding upon the heirs, personal
representatives and assigns of the parties for the duration of its existence.
Acknowledgment
- --------------
The parties hereto State that they have carefully read this Agreement,
and know the contents thereof and that they have signed the same as their own
free act after consulting with counsel of their choice.
IN WITNESS WHEREOF, the parties hereunto set their hands.
DISTRIBUTED NETWORKS, INC. GOLD GENIE WORLDWIDE, INC.
/s/ David B. Robison
- --------------------
David B. Robison, President
/s/ Michael B. McLaughlin
- -------------------------
Michael B. McLaughlin, Chairman
DINET SHAREHOLDERS:
/s/ David B. Robison
- --------------------
David B. Robison
/s/ Brian Watts
- ---------------
Brian Watts
/s/ Frank Kurucz
- ----------------
Frank Kurucz
HEARTLAND DIVERSIFIED INDUSTRIES, INC.
/s/ Michael B. McLaughlin
- -------------------------
Michael B. McLaughlin, Chairman
/s/ Paul Scott
- --------------
Paul Scott
/s/ Harry Linden
- ----------------
Console Systems, Inc., by
Harry Linden, Its President
EXHIBIT 10.3
Buy/Sell Agreement dated March 27, 1996, by and between
the Company and Heartland Diversified Industries, Inc.
BUY/SELL AGREEMENT
This Agreement made and entered into this 27th day of March, 1996 by and
between:
Products, Services & Technology Corp.
1016 Shore Acres Drive
Leesburg, FL 34748
(hereinafter called "PST")
- and -
Heartland Diversified Industries, Inc.
1016 Shore Acres Drive
Leesburg, FL 34748
(hereinafter called "HDI")
Whereas, PST is the owner of 670 shares of the common stock of Bernard,
Lee & Edwards Securities, Inc. (hereinafter called "BLE"), equal to 71.3% of
the total BLE common stock outstanding, and the only BLE voting stock is
common; and
Whereas, PST is the owner of certain office furniture and equipment
applicable to the business of BLE, a list of which is attached hereto as
Exhibit A; and
Whereas, PST is willing to sell its BLE stock, equipment and furniture to
HDI, and HDI has agreed to purchase same.
Now Therefore, in consideration of the mutual promises, payments, and
covenants contained herein, the parties hereto agrees as follows:
Terms of Sale
- -------------
PST hereby agrees to sell, assign and transfer 670 shares of common stock
of BLE, and the furniture and equipment listed in Exhibit A hereto, to HDI for
$164,000. HDI agrees to purchase said stock, equipment and furniture, and to
use its bets efforts to pay the $164,000 within twelve months of the effective
date of the transfer and sale which is March 31, 1996.
The $164,000 ill be collateralized by the 6570 shares of BLE, and HDI
agrees it will provide other assets, to be agreed upon, as collateral at the
request of PST. There will be no interest charged HDI on the outstanding
amount due.
Representations
- ---------------
PST represents that it has the right to sell its 670 shares of BLE, and
that said stock is unencumbered. PST also represents that included in the
assets of BLE and will remain the property of BLE, are 7,450 Federal
Affordable Housing Corp. stock purchase warrants exercisable at $6.00 per
share until June 2000, and a letter of interest to act as the lead underwriter
for an IPO for Enhanced Network Development Corp. located in St. Paul, MN.
PST represents that There is no known legal action pending or
contemplated against BLE, and that BLE is in good standing with the National
Association of Securities Dealers (NASD), and the State of Delaware where it
is incorporated.
HDI represents that it has the right to enter into this agreement, and
that it will provide and be responsible for the management of BLE. HDI also
represents that it is satisfied There is no legal action pending or
contemplated against BLE, and agrees to hold PST harmless from any such action
after the transfer of ownership from PST to HDI on March 31, 1996.
Successors and Assigns
- ----------------------
Any reference to PST shall read as including PST and its successors and
assign; and any reference to HDI shall read as including HDI and its
successors and assigns.
Entire Agreement and Applicable Law
- -----------------------------------
This Agreement contains the entire agreement between the parties hereto
and no oral agreement, promise, statement or representation which is not
contained herein shall be binding on either party. This Agreement shall be
governed by the State of Florida. In the event suit or action is instigated
by either party to enforce any of the provisions herein, and to include
arbitration, the prevailing party in said suit, action or arbitration shall be
entitled to reasonable legal fees as awarded by the court or arbitrator.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
27th day of March, 1996.
HEARTLAND DIVERSIFIED INDUSTRIES, INC..
By/s/ Michael B. McLaughlin
- ---------------------------
Michael B. McLaughlin, President
PRODUCTS, SERVICES & TECHNOLOGY GROUP
By:/s/ Patrick L. Makovec
- -------------------------
Patrick L. Makovec, Treasurer
EXHIBIT 21
List of Subsidiaries
List of Subsidiaries
Distributed Networks, Inc. (Dinet)
State of Incorporation: California
PST Financial Corporation (formerly, Gold Genie Party Programs, Inc.)
State of Incorporation: Montana
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's audited
financial statements for its year ended September 30, 1996, and from its
unaudited financial statements for the nine-month period ended June 30, 1997,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997
<PERIOD-END> SEP-30-1996 JUN-30-1997
<CASH> 92,879 34,871
<SECURITIES> 0 0
<RECEIVABLES> 414,640 836,555
<ALLOWANCES> 6,000 6,000
<INVENTORY> 349,442 232,020
<CURRENT-ASSETS> 856,961 1,103,446
<PP&E> 27,927 27,927
<DEPRECIATION> 27,927 27,927
<TOTAL-ASSETS> 971,574 1,347,731
<CURRENT-LIABILITIES> 262,739 422,524
<BONDS> 0 0
0 0
0 0
<COMMON> 8,020 8,127
<OTHER-SE> 38,683 204,947
<TOTAL-LIABILITY-AND-EQUITY> 971,574 1,347,731
<SALES> 2,049,580 1,928,658
<TOTAL-REVENUES> 2,091,555 1,964,658
<CGS> 836,607 895,230
<TOTAL-COSTS> 836,607 895,230
<OTHER-EXPENSES> 879,021 847,824
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,500 22,251
<INCOME-PRETAX> 366,427 199,353
<INCOME-TAX> 3,838 19,846
<INCOME-CONTINUING> 362,589 179,507
<DISCONTINUED> 124,824 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 487,413 179,507
<EPS-PRIMARY> 0.06 0.02
<EPS-DILUTED> 0.06 0.02
</TABLE>
EXHIBIT 99
Gold Genie Worldwide, Inc. Offering Prospectus
<PAGE>
4,000,000 Units
GOLD GENIE WORLDWIDE, INC.
Minimum Offering - 2,5000,000 Units Maximum Offering - 4,000,000 Units
Offering Price $0.125 Per Unit
Each unit consists of 1 common share ($.001 par value) and 2 Warrants to
be issued in registered form, Warrant A and Warrant B (Warrant B to be issued
when Warrant A is exercised), to purchase 2 shares of commons stock ($.001 par
value), one share for Warrant A and one share for Warrant B, at the price of
$.25 for Warrant A and $.50 for Warrant B. Warrant A shall be immediately
detachable from the common stock and separately transferable, (though there is
no assurance that a market will exist), and exercisable at $.25 per share for
a period of 18 months from and after the effective date of this offering with
the Company having the right to extend the exercise period for an additional
18 month period. The Company shall have the right to call said Warrants upon
45 days notice to the Warrant holders and pay $.02 per Warrant for all or part
of Warrants not exercised. Warrant B shall be transferable (though there is
no assurance that a market will exist) when issued, which shall be upon the
exercise of Warrant A, the receipt of funds by the Company to purchase the
common stock at $.25 per share and the subsequent issuance of a stock
certificate to the subscriber for shares purchased. Warrant B shall then
entitle the holder to purchase another share of common stock at $.50 per share
for a period of 12 months from the date of issuance with the Company having
the right to extend the exercise period an additional 24 months. The Company
shall have the right to call all or part of the outstanding Warrants upon 45
days notice to the Warrant holders and pay $.02 per Warrant for all or part of
Warrants not exercised.
Prior to this offering there has been no market for the Company's common
stock or warrants, and there is no assurance that such a market will exist
after the offering. The public offering prices have been arbitrarily
determined and bear no relationship to the assets or book value of the Company
or any other recognized criteria of value. The exercise price of the Warrants
as described above is wholly arbitrary and there is no assurance that the
price of the common stock of the Company will ever rise to a level where
exercise of the Warrants would be of any value. Accordingly, the possible
maximum proceeds to the Company from exercise of the aforesaid Warrants may
never be received by the Company in whole or in part and therefore the
Warrants portion of this Unit Offering may be without value to either the
Company or the holders thereof. The Warrants can only be exercised if a
current prospectus is in effect for this offering.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION.
THERE WILL BE TRANSACTIONS BETWEEN THE COMPANY AND MANAGEMENT WHICH MAY
INVOLVE A POTENTIAL CONFLICT OF INTEREST. THERE IS A HIGH DEGREE OF RISK THAT
THE COMPANY WILL BE UNSUCCESSFUL. THE PURCHASE HEREOF SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. (See
"Risk Factors.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- ----------------------------------------------------------------------------
Price to Public Underwriting Proceeds
Commission (1) Company (2)
- ----------------------------------------------------------------------------
Per Unit................... $0.125 $.0125 $.1125
Total Minimum (3)............ $312,500 $31,250 $281,250
Total Maximum................. $500,000 $50,000 $450,000
- ----------------------------------------------------------------------------
GOLD GENIE WORLDWIDE, INC.
140 N. Canyon
Canyonville, Oregon 97417
The date of this prospectus is July 24, 1985
GOLD GENIE
PRODUCTS AT THE TRADE SHOWS
[INSERT PHOTO HERE] Demonstrating Gold Genie mining equipment
known as an automatic gold panner at the
Pacific Northwest World Trade Expo in Tacoma,
Washington, October 1984.
Gold being recovered from [INSERT PHOTO HERE]
concentrate by the Gold
Genie automatic gold panner.
[INSERT PHOTO HERE] Unveiling of the Gold Genie Wheel of Fortune
game to the amusement park industry at the
International Association of Amusement Parks
and Attractions Trade Show in Dallas, Texas,
November 1984.
(1) The minimum number of Units are offered on an all or none basis, and
the balance on a best efforts basis by the Issuer on the terms described under
the caption: "Underwriting -- Escrow of Funds", and there is no assurance
that any or all of the securities will be sold. The offering will continue
for a period of one hundred twenty (120) days from the effective date of the
Prospectus, or until completion of the Offering whichever is sooner. No
commissions will be paid unless the minimum amount of the Offering is raised
(see Note 3 below).
The Issuer may enter into agency agreements with certain broker-dealers
who are members of the National Association of Securities Dealers and will pay
a sales commission of 10 percent to such broker-dealers for any amounts sold
hereunder. The Issuer's officers and directors will also use their best
efforts to sell the securities but will not be paid a commission. For
purposes of estimating net proceeds, the full 10 percent commission is assumed
to be payable hereunder. (See "Underwriting -- Escrow of Funds.")
(2) The proceeds to the Company are shown before the deductions of
expenses (legal, accounting, printing, filing, registration and miscellaneous
expenses) estimated at $31,250.
The 8,000,000 Warrants (4,000,000 for Warrant A, 4,000,000 for Warrant B)
being offered hereby represent part of this Unit offering (see "Prospectus
Summary The Offering", "Dilution", and "Capitalization Description of the
Securities"). The Warrants will be issued in registered form. The Company
may derive as much as $3,000,000 or as little as $0 from the Warrants compared
with an initial maximum offering of only $500,000. The Company currently has
no specific plan for the use of proceeds which may be derived from the
exercise of the Warrants other than to continue the Company purpose of
engaging in the manufacture and sale of its Gold Genie product or products and
real estate ventures and further examine the possibilities of mergers and
acquisitions to expand its product line.
(3) The Units being offered by the Issuer are on a "best efforts, all-or-
none basis" until 2,500,000 Units are sold and on a "best efforts" basis
thereafter. Until such minimum Units are subscribed to, all subscriptions
will be deposited promptly in a special escrow account at the Resource Bank &
Trust, 900 Second Avenue South, International Centre, Suite 200, Minneapolis,
MN 55402. If such minimum Units are not subscribed to within 120 days from
the effective date of this Prospectus, all subscription payments will be
returned to subscribers in full. Subscribers have no right to the return of
their funds during the term of the escrow. If the minimum is sold, the funds
will be released to Issuer and the offering will continue on a "best efforts"
basis until 120 days from the effective date or until earlier terminated.
THE UNITS ARE OFFERED SUBJECT TO PRIOR SALE, ACCEPTANCE OF AN OFFER TO
PURCHASE, AND TO WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE OFFERING
WITHOUT NOTICE. THE OFFERING CANNOT BE MODIFIED UNLESS AN AMENDED
REGISTRATION STATEMENT IS FILED AND DECLARED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION.
UNTIL OCTOBER 22, 1985, (NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
THE COMPANY IS NOT CURRENTLY SUBJECT TO SECTION 14 OF THE SECURITIES
EXCHANGE ACT OF 1934. THE COMPANY WILL FURNISH TO ITS SHAREHOLDERS AND
WARRANT HOLDERS, ANNUAL REPORTS CONTAINING FINANCIAL INFORMATION EXAMINED AND
REPORTED UPON, WITH AN OPINION EXPRESSED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS. IN ADDITION, THE COMPANY MAY FURNISH UNAUDITED QUARTERLY OR
OTHER INTERIM REPORTS TO ITS SHAREHOLDERS AS IT DEEMS APPROPRIATE. THE
COMPANY WILL COMPLY WITH ALL APPLICABLE PERIODIC REPORTING REQUIREMENTS
IMPOSED BY THE SECURITIES EXCHANGE ACT OF 1934.
NO DEALER, SALESMAN, AGENT OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE
TO ANY PERSON IN ANY STATE, TERRITORY, OR POSSESSION OF THE UNITED STATES IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED BY THE LAWS THEREOF, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
AS HERETOFORE INDICATED, THE UNITS OFFERED BY THIS PROSPECTUS ARE PURELY
SPECULATIVE IN NATURE. THE COMPANY MAKES NO GUARANTEES, WARRANTIES OR OTHER
REPRESENTATIONS TO THE CONTRARY.
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
The Company
Gold Genie Worldwide, Inc. (the "Company") was incorporated under the
laws of the State of Oregon on March 7, 1984, for the purpose of
manufacturing, assembling and marketing mining equipment known as the "Gold
Genie" an automatic gold panner used in the recovery of precious metals and
gems. The Company also sells a tool called the "Huntley Spoon" and
concentrating solution for use with fine gold, to miners. The Company intends
to continue its research and development work on mining equipment, and other
products not related to the mining industry. (See "Description of Business".)
Over the last four years, the Gold Genie was manufactured and marketed by
Gold Genie Worldwide, an Oregon family partnership. Through a joint venture
arrangement with Heartland Diversified Industries, Inc., formerly called
Heartland Oil & Mineral Corporation ("Heartland"), a Montana corporation, the
Company was formed and a patent and other assets were sold to the Company for
stock. (See "Description of Business".)
If funds are received from the offering, the Company will promptly
manufacture its products and expend its research and development work at its
Canyonville, Oregon location and will market its products both nationally and
internationally.
The Company's offices and business is located at 140 N. Canyon, P.O. Box
322, Canyonville, Oregon 97417, and its telephone number is (503) 839-4681.
The Offering
Minimum Maximum
- -----------------------------------------------------------------------------
Units Offered: 2,500,000 4,000,000
Shares to be Outstanding Assuming Warrants
are not exercised 2,500,000 4,000,000
Shares to be Outstanding Assuming
all Warrants are exercised* 7,500,000 12,000,000
- -----------------------------------------------------------------------------
*There are 10,805,000 shares currently issued and outstanding to Officers,
Directors, Founders and existing shareholders as of the effective date of this
offering. The above numbers do not reflect 10,805,000 shares currently issued
and outstanding.
Use of Proceeds
Net proceeds to the Company after deducting issuer expenses and other
expenses of the offering will be used for the manufacturing and marketing of
its products. Such expenses will include materials, labor, salaries, office
supplies, facility overhead, equipment and advertising. (See "Use of
Proceeds".)
Risk Factors
Investment in the Company should be considered highly speculative,
start-up and unproven. Investors herein will place an unusually high degree
of discretion over the company's business in the hands of management. No
person should invest in these shares who cannot afford the loss of his or her
entire investment. The main risk factors include that the Company has limited
operating history and is subject to various development and marketing risks.
(See "Risk Factors".)
Price Per Unit
$0.125
Transfer Agent
American Stock Transfer, Inc.
1825 Lawrence Street, #444
Denver, CO 80202
Proceeds Escrow Agent
Resource Bank & Trust
900 Second Avenue South
International Centre
Suite 200
Minneapolis, MN 55402
Selected Financial Information as of September 30, 1984
- -------------------------------------------------------------------------
The Company is a development stage enterprise and has limited operating
history. The Company was only recently formed and has had limited revenues
and no earnings from operations. There is no assurance that the Company will
ever have material revenues or that its operations will be profitable. (See
the financial statements bound herein.)
As of September 30, 1984
Current Assets..................................$ 22,651
Total Assets.................................... 117,456
Current Liabilities............................. 21,253
Total Liabilities............................... 21,253
Accumulated Deficit............................. (33,690)
Stockholders' Equity............................ 96,203
THE COMPANY
The Company was incorporated under the laws of the State of Oregon, on
March 7, 1984, for the purpose of manufacturing, assembling and marketing
mining equipment known as the "Gold Genie", an automatic gold panner used in
the recovery of precious metals and gems. Application to trademark the name
Gold Genie has been filed in Washington, D.C. The company also sells a tool
called the "Huntley Spoon" and concentrating solution for use in recovering
fine gold, to miners. Since its incorporation, the Company has designed a
console, using parts from its mining equipment, that it believes has
application in the amusement park industry. The project has been named "the
Gold Genie Wheel of Fortune." The Company intends to continue its research
and development work on mining equipment and other products not related to the
mining industry.
Over the last four years, the Gold Genie was manufactured and marketed by
Gold Genie Worldwide, an Oregon family partnership. On February 16, 1984,
Heartland acquired an aluminum injection mold used to make the separating
bowls for the Gold Genie from a third party. On March 1, 1984, the Gold Genie
partnership and Heartland entered into an agreement whereby Heartland acquired
the assets of the partnership. The assets included a patent, equipment,
receivables, bank accounts, inventory, goodwill and other items. On March 7,
1984, Heartland sold the mold and assets to the Company for 10,000,000 shares
of common stock. It was agreed that the partners were to continue their
function as managers, and they received 2,000,000 shares of common stock from
Heartland's position, and became officers and directors of the Company.
Heartland has provided management assistance, and some financing.
The Company owns a patent on the separating bowl or wheel which provides
the most important function in the Gold Genie mining equipment and the Gold
Genie Wheel of Fortune. The marketing of Gold Genie has some relationship to
the fluctuation of the price of gold, however, there appears to be other uses
for the Gold Genie. Further, it is unknown what affect gold prices will have
on the Gold Genie Wheel of Fortune.
The Company also intends to diversify its interests to include developed
and undeveloped real estate, and to examine the possibilities of mergers and
acquisitions to expand its product line.
The Company's offices are presently located at 140 North Canyon, P.O. Box
322, Canyonville, Oregon 97417.
RISK FACTORS
THE UNITS BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY
SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE
PROSPECTUS AND CAREFULLY CONSIDER AMONG THE OTHER FACTORS AND FINANCIAL DATA
DESCRIBED HEREIN, THE FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE
BUSINESS OF THE COMPANY:
The Company and its Business
1. New Company. The Company was formed on March 7, 1984, and has
commenced business operations for only that short period of time and there is
no assurance that it can be operated successfully. (See "Business of the
Company".)
2. Manufacturing and Marketing Costs. There are significant risks
that manufacturing and marketing costs may exceed current projections. The
cost of inventory acquisition, labor and other assembly costs may increase
unexpectedly. Changes in price or policy by competitors or suppliers may
assume particular significance.
3. Limited Capitalization. The present shareholders of the Company
contributed $129,893 which consists of property, past services and $19,250 of
cash contributions. The Company has therefore had limited capital to conduct
its proposed operations to date. Although the Company intends to apply the
net proceeds of this offering over a one-year period, the Company may not have
sufficient capital to conduct its operations over an extended period of time
even if the maximum proceeds from this offering are realized by the Company.
(See "Use of Proceeds".)
4. Necessity of Additional Financing. The proceeds realized by the
Company from this offering may not be sufficient for the Company to carry on
its proposed business activities beyond the one-year period over which the
Company intends to apply such proceeds. It is not certain that the Company
will generate income from its operations within the immediately foreseeable
future. Accordingly, the Company may rely on debt financing to finance a
portion of its operations. There can be no assurance that any such financing
or other types of financing will be available to the Company. (See "Business
of the Company".)
5. Administrative Expenses Benefits to Management. Since the
Company may have minimal operating revenues in the immediately foreseeable
future, a portion of the proceeds of this offering are to be used to pay the
general and administrative expenses of the Company, including the salaries of
its officers and directors. (See "Use of Proceeds".)
6. Lack of Experience. Each of the officers and directors is limited
in his or her own experience as it relates to the total Company experience.
For example, and as discussed in "Business of the Company", some are
experienced in marketing but not with the Company's products; some are
experienced with the products but not in marketing.
7. Dependence Upon Management. The business of the Company is
greatly dependent upon the active participation of its directors and officers.
The Company has no employment agreements nor "key man" life insurance policies
on the lives of the directors and officers and loss of their services could
adversely affect the conduct of its business. To the extent services of said
people would be unavailable, other personnel would need to be obtained. In
such event, there can be no assurance that the Company would be able to employ
a qualified person(s) on terms favorable to the Company.
8. Competition. There are other companies marketing machines similar
to the Gold Genie. However, the Company feels the Gold Genie patented design
enables the machine to better recover fine gold efficiently and at a cheaper
price than its present competitors. If the market for the Gold Genie and
similar devices continues to strengthen, large companies may enter into the
competition.
9. Products Acceptance. Although a market exists for the Gold Genie,
the extent of said market is undetermined at present. There is no assurance
that new products being developed will have a market place, and the Company's
marketing strategy and progress will depend heavily on the experience and
judgment of its officers, directors, and consultants.
10. Related Party Transactions. The Company performs only limited
manufacturing functions at present, and is mainly an assembler. The Company
rents on a month to month basis a 1,000 square foot building for $350 per
month. A member of the board of directors of the Company, Clyde Marriott, is
the owner of the building and built it specifically for the Gold Genie
operation. He has indicated that he will expand the building upon request of
the Company, and adjust the rent accordingly.
11. Gold Prices. Fluctuations in the price of gold will likely have
an effect on the sale of mining equipment. Although the precise measure is
unknown, sales will likely be better as the price of gold increases, and worse
when it decreases. With respect to the Gold Genie Wheel of Fortune Gold
Concentrate the Company anticipates the price of each can will increase 15-20
cents for each $50 increase in the price of gold.
12. Dilution. Investors participating in this offering will incur
immediate substantial dilution of their investment and thus will bear most of
the investment risk.
The Offering
1. Control by Present Owners and Dilution. Following completion of
this offering if all 4,000,000 Units offered hereby are sold, and assuming no
Warrants are exercised, the present shareholders of the Company will own 72.5
percent of the outstanding shares of the Company's Common Stock and will be in
a position to elect all the Company's directors and otherwise control the
Company. Present shareholders purchased their shares of Common Stock at
prices substantially below the offering price of the shares offered hereby.
Additionally, certain present shareholders received shares in return for
services they have provided the Company in the past. Therefore, investors
participating in this offering will incur immediate substantial dilution of
their investment insofar as it relates to the net tangible book value of the
shares of Common Stock after the completion of the offering and, thus, the
investors in this offering will bear most of the investment risk. (See
"Dilution", "Comparative Data", and "Management Remuneration and
Transactions".)
2. Arbitrary Determination of Offering Price. The offering price set
forth on the cover page of this Prospectus does not bear any relationship to
the assets, book value, revenues or net worth of the Company and should not be
considered to be an indication of the actual value of the Company. The
offering price of the Units offered hereby was arbitrarily determined by the
Company in consideration of such matters as estimates of the business
potential of the Company and general condition of the securities market and,
to a lesser extent, such matters as the state of development of the Company's
business.
3. Dividends Not Likely. The Company does not contemplate paying
dividends in the foreseeable future and there is no assurance that it will
achieve a profitable level of operations allowing dividends to be paid in the
future. Moreover, for the foreseeable future, the Company anticipates
retaining any earnings for the development of its business.
4. No Assurance of a Public Market. While the Units to be issued
pursuant to this offering will be free of restrictions on transferability,
there is presently no market for the Company's Common Stock or Warrants and
there can be no assurance a market will develop or that purchasers will be
able to resell their Units at the public offering price or that a purchaser
will be able to liquidate his investment without considerable delay, if at
all.
5. Potential Future Sales Pursuant to Rule 144. All of the shares of
stock which are presently issued and outstanding (10,805,000) are "restricted
securities" as that term is defined under Rule 144 promulgated under the
Securities Act of 1933, as amended. In general, under Rule 144 a person (or
persons whose shares are aggregated) who has satisfied a two-year holding
period, may sell within any three-month period, a number of shares which does
not exceed the greater of 1 percent of the then outstanding shares of common
stock or the average weekly trading volume during the four calendar weeks
prior to such sale. Under certain circumstances, Rule 144 also permits the
sale of shares, without any quantity limitation, by a person who is not an
affiliate of the Company and who has beneficially owned the shares for a
minimum period of three (3) years. Hence, the possible sale of these
restricted shares may, in the future dilute an investor's percentage of free-
trading shares and may have a depressive effect on the price of the Company's
common stock in any market which may develop.
6. No Firm Commitment to Purchase Units. The Units offered herein
are offered on a best efforts basis by the Issuer and no commitment exists by
anyone to purchase all or any portion of the Units being offered, and the
Company can give no assurance that any Units will be sold. A provision has
been made to deposit in escrow the first $312,500 received from the purchase
of Units with Resource Bank & Trust, 900 Second Avenue south, International
Centre, Suite 200, Minneapolis, MN 55402. In the event that amount is not
received within 120 days from the date of this Prospectus, the proceeds so
collected will be refunded promptly to the investors without paying interest
thereon and without deducting sales commissions and expenses therefrom. In
the event that at least the minimum amount is received, the escrowed funds
will be transmitted to the Company, after deduction for commission and
expenses, and Units will be issued therefor. (See "Underwriting Escrow of
Funds.")
7. Exercise Price of Warrants Arbitrarily Determined. The exercise
price of the Warrants that make up the Units being offered hereby bears no
relationship to the offering price of the Units or any other objective
criteria of value, and in no event should it be regarded as an indication of
any future market price of the securities.
8. Exercise of Warrants Uncertain. Because of the exercise price of
the Warrants, the lack of a market, and the uncertain success potential of the
Company's business, the Warrants may not be exercised before they expire with
the result that no proceeds would be received by the Company.
DILUTION
As of the 30th day of September, 1984, the net tangible book value of the
Company (total tangible assets less total liabilities) was a positive $60,032
approximately $.006 per share. Assuming the sale by the Company of all
offered Units at the public offering price of $0.125 per Unit, and assuming no
other changes to the Company's financial position, the net tangible book value
of the Company would be $478,782 or approximately $.033 per share. Assuming
that none of the purchase price paid for Units is attributed to the Warrants,
this represents an immediate dilution of $.092 per share or 73.6% to new
investors; and an immediate increase in the net tangible book value of shares
held by present shareholders of $.027 per share.
Under a similar set of assumptions, but assuming that only the minimum of
2,500,000 Units is sold, the net tangible book value of the Company after the
offering would be $310,032 or approximately $.024 per share. Under these
assumptions, this represents an immediate dilution of $.101 per share or 80.8%
to new investors and an immediate increase in the net tangible book value of
shares held by present shareholders of $.018 per share.
No assurance can be given that any of the Warrants offered hereby will
ever be exercised. Under the assumptions that (i) all offered Units are sold;
(ii) all Warrants are exercised; and (iii) no change has occurred to the
Company's balance sheet since the 30th day of September, 1984, other than
reflection of the net proceeds from the sale of the Units, then the pro forma
net tangible book value from the sale of the Company's share would be
$3,478,782 or $.154 per share. The dilution from the composite exercise price
to the pro forma net tangible book value would be $.138 or 47.3% per share.
Under a similar set of assumptions, but assuming that only the minimum
offering of 2,500,000 Units is sold, the pro forma net tangible book value
following exercise of Warrants would be $2,185,032 or $.121 per share. This
represents a dilution of $.171 per share or 58.6% from the exercise price.
Under an incentive stock option plan approved by the stockholders,
1,500,000 shares of common stock have been authorized and reserved for
issuance to directors, officers and key employees. Under the plan, option
prices for shares granted shall be equal to the fair market value of the stock
on the date granted. Option periods may not exceed ten years. As of
January 1, 1985, no options had been granted. Under certain limited
circumstances issuance of stock per the option plan may dilute the equity
interest of the stockholders.
The following table illustrates the per Unit dilution prior to exercise of the
Warrants:
Assuming Assuming
Minimum Maximum
Units Units
Sold Sold
Public offering price per Unit(1).............. $0.125 $0.125
====== =======
Net tangible book value per share before
offering (2)................................... .006 .006
Increase per share attributable
to new investors .............................. .018 .027
------- -------
Net tangible book value per
share after offering (3)....................... $.024 $ .033
======= =======
Dilution of net tangible book value
per share to new investors..................... $.101 $ .092
======= =======
Note 1. Offering price before deduction of offering expenses.
Note 2. Determined by dividing the number of shares of common stock
outstanding into the net tangible book value of the company.
Note 3. After deduction of offering expenses and commissions, estimated at
$62,500 if only 2,500,000 Units are sold and at $81,250 if all of the Units
offered hereby are sold.
COMPARATIVE DATA
The following charts illustrate the percentage ownership in the Company
held by the present shareholders as of September 30, 1984 and by the public
investors in this offering assuming all offered Units are sold, and set forth
a comparison of the amounts contributed by the present shareholders of the
Company ($129,893 paid as of 9/30/84 or a current positive $.012 per share)
and by the public investors in this offering. This data assumes that no value
is attributed to the Warrants.
Sale of 2,500,000 Units Sale of all Offered Units
- ------------------------ -------------------------
Percent of stock to be issued and Percent stock to be issued and
outstanding which was purchased by outstanding which was purchased
present investors for $129,893 by present investors for $129,893
[Pie chart inserted here] [Pie chart inserted here]
Percent of stock to be issued and Percent of stock to be issued and
outstanding which was purchased by outstanding which was purchased
new investors for $312,500 by new investors for $500,000
The following tables summarized, under the assumptions stated for each
table, the number of shares of common stock purchased from the Company, the
number of shares purchased as a percentage of the Company's total outstanding
shares, the aggregate cash consideration for such shares, the aggregate
consideration as a percentage of total consideration, and the current average
consideration per share for such shares by all existing shareholders and the
public investor.
<TABLE>
<CAPTION>
Percentage Aggregate Consideration
Shares Of Total Consideration Paid
Assuming Maximum Units are Sold: Purchased Shares Paid Percentage Share
- -------------------------------- --------- ---------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C>
Present Shareholders 10,525,000 72.5% $ 129,893 20.6% $0.012
Including
Past services
& property
& cash
Public Investors 4,000,000 27.5% 500,000 79.4% $0.125
---------- ----- --------- ----- ------
TOTALS 14,525,000 100.00% $ 629,893 100.00%
</TABLE>
<TABLE>
<CAPTION>
Percentage Aggregate Consideration
Shares Of Total Consideration Paid
Assuming Minimum Units are Sold: Purchased Shares Paid Percentage Share
- -------------------------------- --------- ---------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C>
Present Shareholders 10,525,000 80.8% $ 129,893 29.4% $0.012
Including
Past services
& property
& cash
Public Investors 2,500,000 19.2% 312,000 70.6% $0.125
---------- ----- ---------- -------- ------
TOTALS 13,025,000 100.0% $ 442,393 100.00%
</TABLE>
<TABLE>
<CAPTION>
Percentage Aggregate Consideration
Assuming Maximum Units are sold Shares Of Total Consideration Paid
and all Warrants are Exercised: Purchased Shares Paid Percentage
- -------------------------------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Present Shareholders 10,525,000 46.7% $ 129,893 3.6%
Including
Past services
& property
& cash
Public Investors 12,000,000 53.3% 3,500,000 96.4%
---------- ----- ---------- ------
TOTALS 22,525,000 100.00% $3,629,893 100.00%
</TABLE>
Note: There is no assurance that the price of the Common Stock of the
Company will even rise to a level where exercise of the Warrant would be of
any value. And, present shareholders are stated as of September 30, 1984 and
not effective date of this prospectus.
USE OF PROCEEDS
It is anticipated that the proceeds received by the Company will be
applied substantially in the manner shown in the chart below. Use of proceeds
may change from time to time as the Company's business develops and priorities
dictate. No one has guaranteed the sale of any (See "Underwriting Escrow of
Funds.") Unless two million five hundred thousand (2,500,000) Units are sold
within one hundred and twenty (120) days of the date of this Prospectus, all
funds for purchase of Units will be promptly refunded without deducting sales
commission or expenses of the offering (and without payment to the subscriber
of any interest on his funds) and no sale of Units will be made. Expenditures
are estimated for twelve months and are listed below:
Minimum Maximum
Units Sold Units Sold
Gross Proceeds of Public Offering $ 312,500 $ 500,000
Less:
Issuer Commissions (1) 31,250 50,000
Other Costs of Issuance and Distribution (2) 31,250 31,250
---------- ----------
Net to Company $ 250,000 $ 418,750
========== ==========
General and Administrative $ 60,000 $ 60,000
Management and Consulting Fees 48,000 48,000
Product Development & Inventory 60,000 90,000
Marketing & Promotion 30,000 55,000
Equipment 27,000 27,000
Purchase of Natural Gold (3) gold for
content of Gold Genie gold containers -0- 55,000
Working Capital 25,000 83,750
---------- ----------
$ 312,500 $ 500,000
========== ==========
Note (1): This amount assumes that a 10 percent commission is paid on
all sales. No commission will be paid on sales made by the Company's officers
and directors.
Note (2): Including attorneys' fees, accountants' fees, costs of
printing this Prospectus and stock certificates, and registration and issuance
of stock certificates to public investors.
To the extent the net proceeds of this offering are not immediately
used, they will be invested in certificates of deposit, savings deposits,
short-term obligations of the United States Government, or shares of regulated
investment companies investing in such instruments. It is not expected that
management of such investments will be the primary business of the Company.
The Company does not intend to become an investment company under the
Investment Company Act of 1940 and, therefore, may be limited in the temporary
investments that it can make with the proceeds of this offering.
The Company currently has no specific plans for the use of proceeds
which may be derived from exercise of the warrants other than to continue the
Company purpose of the manufacture and marketing of its products and further
examine the possibilities of mergers and acquisitions to expand its product
line. The Company may derive as much as $3,000,000 or as little as $0.00 from
the warrants compared with an initial maximum offering of $500,000. The
exercise price of the warrant is wholly arbitrary. And, there can be no
assurance that the price of the common stock will even rise to a level where
exercise of the warrants would be of any value and therefore provide proceeds
to the Company.
Note (3): Gold for contents of Gold Genie gold containers.
Note (4): Lela E. Faulkner and Heartland Diversified Industries, Inc.
have loaned the Company $15,786 at various times between March 7, 1984 and
September 30, 1984.
These are classified as current obligations. And though management has
some discretion as to when such loans are to be repaid, they may be repaid
from working capital.
BUSINESS OF THE COMPANY
General
The Company performs some manufacturing (grinding and drilling),
assembles (forming ad bending legs of the machines), packages and markets a
gold recovery machine known as an automatic gold panner in the United States
and a number of foreign countries. The Gold Genie is a machine used by
hobbyists, prospectors and miners to extract gold, silver, cinnabar, zinc,
mercury, gemstone, platinum, lead, galena, manganese and other heavy materials
from sand, gravel and concentrates.
Prior to the incorporation of the Company the Gold Genie and other
products were produced and marketed by an Oregon family partnership called
Gold Genie Worldwide of Canyonville, Oregon. The Gold Genie was designed in
1979, and marketing began in early 1980. Approximately 2,000 units have been
sold throughout the world to date, and the device has achieved an excellent
reputation. Lack of capital and other associated problems with a new
enterprise hindered the growth of the partnership. In late 1983 negotiations
commenced between the partnership and Heartland whereby an agreement was
consummated in March 1984 and the Company was formed.
The Gold Genie has an 18" diameter bowl or wheel in which the concentrate
is deposited, and with the application of water and a rotating motion, gold
and other heavy minerals move up the wheel to the center where they travel
through a pipe into a container. The tailings fall off of the bottom of the
wheel into a waste pile or waste container. The Genie has a pump that can
recirculate the water required to operate the machine. It works off of a 12
volt battery such as an automobile battery. The weight of the Genie is about
25 pounds thereby making it fairly easy to transport to remote areas. The
machine retails for $399.95, and the Company markets the Gold Genie and other
products direct and through a network of over 100 dealers located in the U.S.
and foreign countries.
The most important part of the Gold Genie is the wheel design for which a
patent has been issued. There are similar type machines on the market, most
of which sell at a higher price than the Gold Genie. The Gold Genie is very
competitive because of its wheel design and price. It is quite efficient in
the recovery of fine gold which is most important in a mining operation.
The market area for the Gold Genie is anywhere precious metals or gems
are found in a free state. A free state meaning that the metals or gems to be
recovered are in gravel, sand or concentrate made up of similar materials.
Metals and gems not in a free state would be in place in rock such as in hard
rock mining. The Gold Genie is designed to process the material deposited in
the wheel, and to remove the metals and gems by use of water and gravity.
Free state metals can be found in the following areas: South America, Africa,
Canada, Mexico, Phillippines, Australia, the U.S. and a number of other areas
and countries. Gold Genies have been sold in all of the above areas.
A number of small miners use gold pans to process material. Although the
gold pan can be purchased for considerably less money, there is no comparison
to the performance of the Gold Genie in the amount of material that it can
process, and the recovery of precious metals and gems, especially in the hands
of a novice. The Gold Genie has attracted the attention of a number of
commercial miners that are interested in larger wheel design. A 50"diameter
wheel is being designed and should be ready for marketing in 1985. Though the
rate or amount of recovery varies with the type of material being processed,
in general, 95% of the metals from any material for mining operations can be
recovered with the Gold Genie.
The Company also markets a device called the Huntley Spoon. The Huntley
Spoon is a crevicing tool used to remove gravel and other materials from
cracks and crevices in rock structures. The Company makes and sells a
concentrating solution which is a biodegradable wetting solution designed to
cling to gold flake particles to make them settle so they do not float away.
New Products and Interests
With the use of the 18" diameter wheel from the Gold Genie, the Company
has designed a console which has been named The Gold Genie Wheel of Fortune.
The Product is being tested for use in amusement parks, carnivals, fairs and
related operations. The prototype console is of rustic decor, and it is
expected that at least two different decors will be required.
The console is 30" square, 4" high with an adjustable top in which the
wheel is situated. The Company sells cans of concentrate with tear off lids
containing approximately 4 ounces of gravel and a certain amount of gold. A
gold nugget is deposited in the containers at certain intervals. The label on
each can states the following:
GOLD GENIE WHEEL OF FORTUNE
GOLD CONCENTRATE
If seal has not been broken the Gold
within the contents of this container is
GUARANTEED TO BE GENUINE AND NATURAL.
The price per container at the amusement parks has not been determined,
but test marketing is being done in the three to five dollar range. Each
person that purchases a can of concentrate pours the material into the Gold
Genie wheel from which the gold is extracted in approximately 30 seconds. The
gold travels to a small container set in a glass enclosed compartment, and
becomes the property of the purchaser. Every purchaser is guaranteed gold.
The Company is also test marketing associated items with the Gold Genie
Wheel of Fortune such as necklaces, lockets and other jewelry items to hold
the gold after recovery.
Because there are so many amusement parks, fairs, carnivals, etc., in the
U.S. the Company hopes to engage the services of a major distributor to the
amusement park industry. It is also anticipated that a market exists in some
foreign countries. Sales of the Gold Genie Wheel of Fortune and associated
items are expected to commence the first half of 1985. Patent and copyright
protection is being pursued.
Other products being researched and developed relate more closely to
amusement park business. These include silver concentrate and gem concentrate
cans, like the gold concentrate containers. The research and development is
currently and will likely be performed by the Company's in-house people.
The Company may possibly diversify its interests to include developed and
undeveloped real estate, and may possibly participate in mergers or
acquisitions though none are currently under contemplation, if management
determines such is in the Company's best interest. Objectives of
diversifications and such transactions may include strengthening the asset
base of the Company, to provide more sales, or to aid the Company's growth.
Patent and Trademark
A patent was applied for on March 10, 1981, and Design Patent No. 268588
was issued on April 12, 1983, to protect the design of the Gold Genie wheel or
separating bowl. The Patent is in effect for 14 years from the date of issue,
and is the property of the Company. If the Company develops new products that
are patentable, patents will be applied for. Application to protect the name
"Gold Genie" on a national basis has been filed with the proper authorities in
Washington, D.C. The process is expected to take approximately five months.
There is no reason to believe at this time that the name will not be
protected.
Facilities
The Company performs only limited manufacturing functions at present and
is mainly an assembler. The Company rents on a month to month basis a 1,000
square foot building for $350.00 per month. A member of the Company's board
of directors, Clyde Marriott, is the owner of the building and built it
specifically for the Gold Genie operation. He will expand the building upon
request of the Company. The rent will be adjusted accordingly to reflect the
cost of building expansion.
The Company is located in the town of Canyonville, Oregon. Interstate 5,
the main Oregon freeway running north and south goes through the town of
Canyonville. Truck service is readily available. Commercial airports are
located in Medford, Oregon, 70 miles from the Company and Eugene, 85 miles
away.
Employees
The Company is a development stage company and currently has no regular
employees other than certain of its officers and directors. Officers and
directors have handled all incoming orders in the past. (See, "Management.")
Management of the Company expects to hire employees pursuant to its
manufacturing and marketing needs as business requires. An inexpensive labor
force has been available but there is no assurance that such will continue to
be true.
MANAGEMENT
The following table sets forth the name, address, age and position of
each officer and director of the Company.
Name and Address Age Position
Michael B. McLaughlin
Lewiston, MT 47 Director, Chairman of the Board
Lela E. Faulkner
Canyonville, OR 53 Director, President
Clyde Marriott
Canyonville, OR 61 Director- Vice President
Terry L.LeVasseur
Canyonville, OR 29 Director-Treasurer
Marion E. Faulkner
Canyonville, OR 55 Director-Secretary
Harold B. Kosanke
Palm Desert, CA 66 Director
David LeVasseur
Canyonville, OR 39 Vice President of Manufacturing
Michael B. McLaughlin, since February of 1981, has been the Chairman of
the Board and President of Heartland Oil & Mineral Corporation, now Heartland
Diversified Industries, Inc., a Montana corporation. Heartland is involved in
the exploration and development of mining properties and various other
business activities, and is located in Lewiston, Montana. His previous
experience was president of a development company, involvement in real estate
limited partnerships as general partner, and 10 years in the securities
business in Minneapolis, Minnesota. While in the securities business, he held
the positions as a registered representative, sales manager, manager of
underwriting and syndication during his tenure with seven different securities
firms in Minneapolis. He has lived in Lewistown, Montana for 5 years.
Lela E. Faulkner was one of the original partners of Gold Genie
Worldwide, and has worked full time for Gold Genie since 1979 in all
capacities. She is intimately familiar with the products and other operations
of the Company and presently is President. Her previous experience was in
sales and working for a manufacturing company. She lives in Canyonville,
Oregon.
Clyde Marriott in 1972, formed Marriott's Inc., an Oregon corporation for
the purpose of developing property. Marriott's, Inc. presently owns a
shopping center, and other properties. Previous to that, Mr. Marriott had his
own chain saw business. He lives in Canyonville, Oregon. He has been a Gold
Genie dealer for nearly 4 years.
Terry L. LeVasseur has worked for Gold Genie Worldwide since 1981. Her
responsibilities have been accounting, bookkeeping, purchasing and marketing.
She became a partner in 1981. Prior to joining Gold Genie, she was in
inspector for a manufacturing company. She lives in Canyonville, Oregon.
Marion E. Faulkner was an original partner of Gold Genie Worldwide. He
does not work for the Company on a full time basis. Mr. Faulkner is presently
employed by Roseburg Lumber Company in Riddle, Oregon. He lives in
Canyonville, Oregon. He has over 10 years experience in the mining business,
and has extensive knowledge as to the various applications of the Company's
products.
Harold B. Kosanke worked for Minnesota Mining and Manufacturing Co.,
("3M"), for 35 years. Mr. Kosanke held various positions at 3M including
General Sales Manager of the European Export Area, Managing Director of 3M
Italy and Managing Director of 3M Australia. He was instrumental in the
negotiation and acquisition of many companies on behalf of 3M. His knowledge
in the areas of sales and marketing is extensive. Mr. Kosanke lives in Palm
Desert, California.
David LeVasseur has been with Gold Genie since July of 1981. His duties
have been the supervision, fabrication and shipment of Gold Genie products.
In 1981 prior to joining Gold Genie, he was a crew leader for the Umpqua
Training and Employment Program in Roseburg, Oregon where he supervised
teenagers for various work projects. From 1980 to 1981 he worked for the Days
Creek School District, and instructed and supervised FHA members in a number
of school projects. From 1975 to 1980, he worked for J.R. Simplot, Co. of
Moses Lake, Washington as a salesman.
CONFLICTS OF INTEREST
Certain conflicts of interest have existed and will continue to exist
between the Company and its officers and directors. Except for Lela Faulkner,
Terry LeVasseur and David LeVasseur who are full-time Company employees, each
of the other directors has other interests including business interests to
which he devotes his attention and each may continue to do so.
Director Clyde Marriott owns the building leased on a month to month
basis to the Company. He built it specifically for the Company's operation
and has agreed to expand it upon the Company's request. The terms of the
lease agreement were not negotiated at arms length.
The Company has no arrangement (except for lease of the building as
described herein and transactions described hereafter) or understanding to
enter into any transaction for participating in any business opportunity with
any officer, director or principal shareholder or with any firm or business
organization with which they are affiliated, whether by reason of stock
ownership, position as officer or director, or otherwise. Transactions, if
any, with affiliates will be permitted in the future when and to the extent
the Company determines it is in the best interest of the Company.
MANAGEMENT REMUNERATION AND CERTAIN TRANSACTIONS
Remuneration
The President and Treasurer of the Company, Lela Faulkner and Terry
LeVasseur, are full time employees and each receive a salary of $1,000 per
month. David LeVasseur is Vice President of Manufacturing, and is also a full
time employee, and he receives a salary of $1,000 per month. David LeVasseur
and Terry LeVasseur are husband and wife. No other officers or directors
receive any compensation.
Certain Transactions
Michael McLaughlin is chairman of the board and president of Heartland
Diversified Industries, Inc., and chairman of the board of the Company.
Heartland Diversified Industries, Inc., has and will continue to be paid a
management fee of not less than $1,000 per month with increases directly
proportionate to time spent by Heartland Management on the affairs of the
Company. Substantial time has been devoted to the preparation of this
offering and has been and will be devoted to the development and marketing of
Company products.
Consultant Contract
The Company has employed Patrick L. Makovec, age 43, of Clear Lake,
Minnesota, as a consultant for the purpose of establishing systems and
procedures for a minimum period of 30 working days commencing in March 1985,
at the rate of $200 per day plus expenses, $3,000 of which has been satisfied
by payment of 60,000 shares of the Company's common stock. Mr. Makovec is the
former President of Tel Corp Leasing, a subsidiary of Jack Frost, Inc., of St.
Cloud, Minnesota. He resigned in March, 1985, and is now in a consulting
business of his own. From 1970 to 1973 he attended graduate school at the
University of Wisconsin, and graduated with a Masters Degree in Accounting.
He obtained a B.S. Degree in Industrial Technology from the University of
Wisconsin Stout.
Incentive Stock Option Plan
The Company has adopted an Incentive Stock Option Plan. A total of
1,500,000 shares have been reserved for option under the Plan with the option
price to be the fair market value at the time the option is granted. No
options have been issued under the Plan.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the effective date of this
offering, the outstanding common stock of the Company owned of record or
beneficially by each person who owned of record, or was known by the Company
to own beneficially, more than 5% of the Company's common stock, and the name
and shareholdings of each officer and director and all officers and directors
as a group:
<TABLE>
<CAPTION>
Assuming Assuming Assuming
Number Sale of Sale of Exercise of
of Shares Minimum Maximum All Warrants
Name Owned Percent 2,500,000 4,000,000 12,000,000
- ---- --------- ------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Heartland Oil &
Mineral Corporation,
now Heartland
Diversified Industries, 8,000,000 76.01% 61.42% 55.08% 35.52%
Inc.
Lela E. Faulkner
Canyonville, OR
(director officer 500,000 4.75% 3.84% 3.44% 2.22%
Marion E. Faulkner
Canyonville, OR
(director officer) 500,000 4.75% 3.84% 3.44% 2.22%
Terry L. LeVasseur
Canyonville, OR
(director officer) 1,000,000 6.95% 7.68% 6.88% 4.44%
Harry Jerrard and
Clyde Marriott
(director officer) 75,000 .71% .58% .52% .33%
Clyde and Vernita Marriott
Canyonville, OR 10,000 .10% .08% .07% .04%
Harold B. Kosanke
(director) 100,000 .95% .77% .69% .44%
All directors and
officers as a group 2,185,000
Amount as of 9/30/84 10,525,000
shares
Total Shares Outstanding 10,805,000 at effective date
</TABLE>
CAPITALIZATION-DESCRIPTION OF THE SECURITIES
The Capitalization of the Company as of the effective date of this
offering, and as adjusted to give effect to the issuance and sale of the Units
offered hereby is as follows:
Shares Shares to be Outstanding
Shares Outstanding as of After Offering
Title of Class Authorized Effective Date Minimum Maximum
- --------------- ---------- ---------------- ----------- ------------
Common Stock
$0.001 par value 50,000,000 10,805,000 13,305,000 14,805,000
Warrants 8,000,000 none 5,000,000 8,000,000
---------- ---------- ---------- ----------
Totals (1) 18,305,000 22,805,000
Note 1. If all warrants are exercised there will be a total of
22,805,000 shares issued and outstanding. If only the minimum amount of Units
are sold pursuant to this offering and all Warrants thereby sold are exercised
then there will be a total of 18,305,000 issued and outstanding.
The Company is presently authorized to issue 50,000 shares of its $0.001
par value common stock. Presently 10,805,000 shares are issued and
outstanding and 4,000,000 Units consisting of 4,000,000 shares and Warrants
exercisable for the purchase of an additional 8,000,000 shares are offered for
sale pursuant to this Prospectus. The holders of the Company's common stock
are entitled to one vote per share on each matter submitted to vote at any
meeting of shareholders. Shares of common stock do not carry cumulative
voting rights and, therefore, a majority of the outstanding common stock will
be able to elect the entire Board of Directors, and, if they do so, minority
shareholders would not be able to elect any members to the Board of Directors.
As a result of the sale of the maximum offering the public shareholders may
still not be able to elect the Board of Directors. (See "Risk Factors-The
Offering".)
Shareholders of the Company have no preemptive rights to acquire
additional shares of common stock or other securities. The common stock is
not subject to redemption and carries no subscription or conversion rights.
In the event of liquidation of the Company, the shares of common stock are
entitled to share equally in corporate assets after satisfaction of all
liabilities. The shares of common stock, when issued, will be fully paid and
non-assessable.
Holders of common stock are entitled to receive such dividends as the
Board of Directors may from time to time declare out of funds legally
available for the payment of dividends. The Company seeks growth and
expansion of its business through the reinvestment of profits, if any, and
does not anticipate that it will pay dividends in the foreseeable future.
Warrants
The 8,000,000 Warrants offered hereby are to be in registered form. They
will be detachable from the Units upon the following terms and in the
following manner.
Each Unit consists of 1 common share ($.001 par value) and 2 Warrants,
Warrant A and Warrant B (Warrant B to be issued when Warrant A is exercised),
to purchase 2 shares of common stock ($.001 par value), one share for Warrant
A and one share for Warrant B, at the price of $.25 for Warrant A and $.50 for
Warrant B. Warrant A shall be immediately detachable from the common stock
and separately transferable, though there is no assurance that a market will
exist, and exercisable at $.25 per share for a period of 18 months from and
after the effective date of this offering with the Company having the right to
extend the exercise period for an additional 18 month period. The Company
shall have the right to call said Warrants upon 45 days notice to the Warrant
holders and pay $.02 per Warrant for all or part of Warrants not exercised.
Warrant B shall be transferable (through there is no assurance that a market
will exist) when issued, which shall be upon the exercise of Warrant A, the
receipt of funds by the Company to purchase the common stock at $.25 per share
and the subsequent issuance of a stock certificate to the subscriber for
shares purchased. Warrant B shall then entitle the holder to purchase another
share of common stock at $.50 per share for a period of 12 months from the
date of issuance with the Company having the right to extend the exercise
period of an additional 24 months. The Company shall have the right to call
all or part of the outstanding Warrants upon 45 days notice to the Warrant
holders and pay $.02 per Warrant for all or part of Warrants not exercised.
The exercise price of the Warrants is wholly arbitrary and there is no
assurance that the price of the Common Stock of the Company will even rise to
a level where exercise of the Warrant would be of any value.
Management intends to keep this Prospectus and Registration Statement
current with respect to all material changes in the business, and financial
condition of the Company during such exercise period of the Warrants being
offered hereby.
UNDERWRITING--ESCROW OF FUNDS
General
The Issuer of these securities is acting as the general underwriter with
respect to the securities offered pursuant to this Prospectus and said
securities will be sold to the public at a price of $.125 per Unit. The
Issuer intends to enter into agreements with securities broker-dealers, who
are members of the National Association of Securities Dealers, Inc., whereby
these broker-dealers will be involved in the sale of these Units to the public
and will be paid a commission by the Issuer. In addition, the officers and
directors may also be involved in the sale of the Units but will not receive
any sales commission or other remunerations. This distribution will not
involve any reallocations between N.A.S.D. members and non-members.
Management of the Company may provide any Sales Agent or Underwriter with
a list of persons who management believes may be interested in purchasing
Units in this offering. The Sales Agent or Underwriter may sell a portion of
the Units to any such person if he resides in a state where the shares can be
sold and where the Sales Agent or Underwriter can sell the Units. No Sales
Agent or Underwriter is obligated to sell any Units to any such person and
will do so only to the extent that such sales would not be inconsistent with
the public distribution of the Units. Officers, directors and affiliates of
the Company may purchase such Units for the express purpose of successfully
completing the sale of the minimum number of Units being offered within the
time period permitted. There is no maximum number of Units which may be
purchased by management or affiliates of persons whose names are furnished by
the Company, although the Company anticipates that total purchases by these
persons would not exceed 10 percent of the maximum amount of the offering.
The Company is unaware of any person, including any affiliate, who intends to
finance any portion of the purchase price of Units to be acquired in this
offering. It is not intended that the proceeds from this offering will be
used, directly or indirectly, to enable anyone to purchase Units.
Method of Subscribing
Persons may subscribe by paying Gold Genie Worldwide, Inc., the amount of
their desired subscription. The subscription price of $.125 per Unit must be
paid in cash or by check, bank draft or postal or express money order payable
in United States dollars to the order of Resource Bank & Trust, escrow agent
for Gold Genie Worldwide, Inc. Certificates for shares of common stock and
warrants subscribed for will be issued as soon as practicable after
termination of the offering (but not prior to receipt of subscriptions for
2,500,000 Units and the release of the proceeds from the escrow account).
Expiration Date
The subscription offer will expire one hundred twenty (120) days from the
date of this Prospectus or on such earlier date, after the acceptance of at
least subscriptions for the minimum 2,500,000 Units as the Company shall
determine in its discretion (the "Expiration Date".)
Right to Reject
The Company reserves the right to reject any subscription in its sole
discretion for any reason whatsoever and to withdraw this offer at any time
prior to acceptance by the Company of the subscriptions received.
Escrow
The minimum amount of $312,500 of proceeds received under this Offering
will be deposited in an escrow account with Resource Bank & Trust, 900 Second
Avenue South, International Centre, Suite 200, Minneapolis, MN 55402. In the
event that less than $312,500 gross proceeds are received by the Issuer within
one hundred twenty (120) days from the date hereof, all proceeds received will
be promptly refunded to purchasers without any deduction for commission or
other expenses. No refund shall be made to purchasers in the event that an
amount in excess of the $312,500 minimum escrow is raised.
LITIGATION
The officers and directors of the Company certify that to the best of
their knowledge, neither the Company nor any of its officers and directors are
parties to any legal proceeding or litigation. The officers and directors of
the Company know of no such litigation being threatened or contemplated. None
of the officers and directors have been convicted of a felony and none have
been convicted of any criminal offense, felony or misdemeanor relating to
securities or performance in corporate office. To the best of the knowledge
of the officers and directors, no investigation of such felonies, misfeasance
in office or securities investigations are either pending or threatened at the
present time.
LEGAL MATTERS
The validity of the issuance of the common stock of the Company covered
by this Prospectus has been passed upon for the Company by John C. Doubek,
III, Esq., of the law firm of Small, Hatch, Doubek & Pyfer, Livery Square
Building, 39 Neill Avenue, Helena, Montana 59601. The Company has paid a
portion of its counsel's legal fee for preparation of this offering by
delivering 140,000 shares of common stock to said counsel at $.05 per share.
EXPERTS
The financial statements of Gold Genie Worldwide, Inc. as of September
30, 1984 and for the period from March 7, 1984 (date of inception) to
September 30, 1984 and the statements of operations, partners' deficit and
changes in financial position of Gold Genie Worldwide (a partnership) for the
period from January 1, 1984 to March 7, 1984 and the years ended December 31,
1983 and 1982 included herein and elsewhere in the Registration Statement have
been included herein and in the Registration Statement in reliance upon the
report of Peat, Marwick, Mitchell & Co., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Seattle Regional Office of the Securities
and Exchange Commission, 3040 Jackson Federal Building, 915 2nd Avenue,
Seattle, Washington 98174, an S-18 Registration Statement under the Securities
Act of 1933, as amended, with respect to the securities offered by this
Prospectus. This Prospectus omits certain information contained in the
Registration Statement. For further information, reference is made to the
Registration Statement and the Exhibits and Schedules filed therewith.
Statements contained in this Prospectus as to the contents of any document
referred to are not necessarily complete, and where such document is an
exhibit to the Registration Statement, each such statement is deemed to be
qualified and amplified in all respects by the provisions of the exhibit.
Copies of the complete Registration Statement, including exhibits, may be
examined at the Seattle Office of Securities and Exchange Commission or
obtained from its offices in Washington, D.C., 450 5th Street, N.W.,
Washington, D.C. 20549, upon the payment of usual fees for reproduction.
The Board of Directors
Gold Genie Worldwide, Inc.:
We have examined the balance sheet of Gold Genie Worldwide, Inc. (a
development state enterprise) as of September 30, 1984 and the related
statements of operations, stockholders' equity and changes in financial
position for the period from March 7, 1984 (date of inception) to September
30, 1984. We have also examined the statements of operation, partners'
deficit and changes in financial position of Gold Genie Worldwide (a
predecessor partnership - see note 2) for the period from January 1, 1984 to
March 7, 1984 and the years ended December 31, 1983 and 1982. Our
examinations were made in accordance with generally accepted auditing
standards and, accordingly, included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the aforementioned financial statements present fairly
the financial position of Gold Genie Worldwide, Inc. at September 30, 1984 and
the results of its operations and the changes in its financial position for
the period from March 7, 1984 (date of inception) to September 30, 1984, and
the results of operations and changes in financial position of Gold Genie
Worldwide (a partnership) for the period from January 1, 1984 to March 7, 1984
and the years ended December 31, 1983 and 1982, in conformity with generally
accepted accounting principles applied on a consistent basis.
PEAT, MARWICK, MITCHELL & CO.
January 2, 1985
Billings, Montana
GOLD GENIE WORLDWIDE, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
September April
ASSETS 30, 1984 30, 1985
--------- --------
(Unaudited)
Current assets:
Cash $ 1,119 ___
Accounts receivable, net of allowance for
doubtful accounts of $2,000 at September
30, 1984 (note 2) 7,370 5,322
Inventory (note 2) 14,162 8,769
Prepaid expense --- 3,000
--------- --------
Total current assets 22,651 17,091
--------- --------
Property and equipment (note 2) 62,264 63,063
Less accumulated depreciation 3,630 7,305
--------- --------
Net property and equipment 58,634 55,758
--------- ---------
Organization costs and other, net of amortization 637 1,824
Patent, net of amortization (note 2) 35,534 33,973
--------- ---------
$ 117,456 $108,646
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdraft --- 1,603
Accounts payable 5,467 12,857
Due to affiliates 15,786 20,684
Total current liabilities 21,253 35,144
Stockholders' equity (notes 2 and 6):
Preferred stock, $.002 par value. Authorized
3,000,000 shares; no shares issued or outstanding ___ ___
Common Stock, $.001 par value. Authorized
50,000,000 shares; 10,525,000 and 10,805,000 shares
issued and outstanding at September 30, 1984 and
April 30, 1985 10,525 10,805
Additional paid-in capital 119,368 133,088
Accumulated deficit (33,690) (70,391)
Total stockholders' equity 96,203 73,502
Commitments and contingencies (notes 2 and 7) _________ ________
$117,456 108,646
======== =========
See accompanying notes to financial statements.
GOLD GENIE WORLDWIDE, INC.
(A Development Stage Enterprise)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Gold Genie Worldwide
(A Partnership) Gold Genie Worldwide, Inc.
------------------------ --------------------------
Total
Inception Seven Inception
Year Year Period March 7, months March 7,
ended ended ended 1984 to ended 1984 to
December December March September April April 30,
31, 1982 31, 1983 7, 1984 30, 1985 30,1985 1985
-------- -------- ------- -------- ------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Sales $44,239 90,340 14,346 47,310 35,736 83,046
Other --- --- --- 740 --- 740
------- ------ ------ ------ ------ ------
Total revenue 44,239 90,340 14,346 48,050 35,736 83,786
------- ------- -------- -------- -------- --------
Expenses:
Operating expenses 55,900 70,316 4,383 43,224 48,001 91,225
Selling, general and
administrative
expenses 28,582 30,701 3,557 38,516 24,436 62,952
--------- ------- ------- ------- -------- ---------
Total expenses 84,482 101,017 7,940 81,740 72,437 154,177
Net income
(loss) and (loss)
from inception $(40,243) (10,677) 6,406 (33,690) (36,701) (70,391)
========= ======== ===== ======== ======== ========
Net loss per common
share --- --- ---
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
GOLD GENIE WORLDWIDE, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY
(Information as of April 30, 1985
and for the seven months then ended is unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Issuance of 10,000,000 shares for
accounts receivable, inventory,
patent, equipment and reimburse-
ment of organization costs (note 2) $ 10,000 93,643 103,643
Issuance of 140,000 shares for
retirement of debt 140 6,860 -- 7,000
Sale of 385,000 shares for cash 385 18,865 --__ 19,250
Net loss (33,690) (33,690)
--------- -------- -------- --------
Balance at September 30, 1984 $ 10,525 119,368 (33,690) 96,203
Sale of 220,000 shares for cash
(Unaudited) 220 10,780 -- 11,000
Issuance of 60,000 shares for
prepayment of services
(Unaudited) 60 2,940 -- 3,000
Net loss (Unaudited) -- -- (36,701) (36,701)
---------- --------- --------- --------
Balance at April 30, 1985
(Unaudited) $ 10,805 133,088 (70,391) 73,502
=========== ========= ========= ========
See accompanying notes to financial statements.
/TABLE
<PAGE>
GOLD GENIE WORLDWIDE, INC.
Statements of Partners' Deficit of
Gold Genie Worldwide (A Partnership) (note 2)
Period ended March 7, 1984 and
years ended December 31, 1983 and 1982
Balance at December 31, 1981........................ $ 10,122
Net loss............................................ (40,243)
Partner draws ...................................... (6,910)
----------
Balance at December 31, 1982........................ (37,031)
Net loss............................................ (10,677)
Partner draws....................................... (7,940)
-----------
Balance at December 31, 1983 ....................... (55,648)
Net income.......................................... 6,406
Partner draws ...................................... (2,600)
-----------
Balance at March 7, 1984............................ $(51,842)
===========
See accompanying notes to financial statements.
<PAGE>
GOLD GENIE WORLDWIDE, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
Gold Genie Worldwide Gold Genie Worldwide, Inc.
(A Partnership)
Total
Inception Seven Inception
Year Year Period March 7, Months March 7,
Ended Ended Ended 1984 to Ended 1984, to
December December March September April April
31, 1982 31, 1983 7, 1984 30, 1984 30, 1985 30, 1985
----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sources of working capital:
Proceeds from issuance of stock $ ---- ---- --- 129,893 14,000 143,893
Proceeds from borrowings 5,000 --- --- --
Decrease in working capital 49,622 29,982 --- 19,451 18,053
----------- --------- --------- ------------ ---------- ---------
54,622 29,982 --- 129,893 33,451 161,946
=================================================================
Uses of working capital:
Net loss (income) 40,243 10,677 (6,046) 33,690 36,701 70,391
Items not requiring working capital:
Depreciation (1,119) (1,295) (350) (3,630) (3,675) (7,305)
Amortization --- --- --- (1,154) (1,609) (2,763)
----------- --------- -------- ------------ --------- ----------
Working capital used (provided)
by operations 39,124 9,382 (6,756) 28,906 31,417 60,323
Additions to property and equipment 310 2,063 241 62,264 799 63,063
Current installments and repayment
of long-term debt 8,278 10,556 1,908 --- --- --
Organization costs -- --- 721 --- 721
Increase in other assets --- 41 -- --- 1,235 1,235
Purchase of patent --- --- -- 36,604 --- 36,604
Partner draws 6,910 7,940 2,600 --- --- ---
Increase in working capital --- --- 2,007 1,398 ---
----------- -------- --------- ----------- --------- ---------
$ 54,622 29,982 --- 129,893 33,451 161,946
=========== ======== ========== ============= ========== ==========
</TABLE>
<PAGE>
GOLD GENIE WORLDWIDE, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
Gold Genie Worldwide Gold Genie Worldwide, Inc.
(A Partnership)
------------------------------ -------------------------------------
Total
Inception Seven Inception
Year Year Period March 7, Months March 7,
Ended Ended Ended 1984 to Ended 1984, to
December December March September April April
31, 1982 31, 1983 7, 1984 30, 1984 30, 1985 30, 1985
----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Changes in components of working
capital:
Increase (decrease) in current assets:
Cash $ (67) 138 1,872 1,119 (1,119) ---
Accounts receivable, net (23,512) 1,624 107 7,370 (2,048) 5,322
Inventory (4,840) (9,818) 831 14,162 (5,393) 8,769
Prepaid expense --- --- --- --- 3,000 3,000
----------- --------- --------- ----------- ---------- ---------
(28,419) (8,056) 2,810 22,651 (5,560) 17,091
----------- --------- --------- ---------- ---------- ---------
Increase (decrease) in current
liabilities:
Bank overdraft --- --- --- --- 1,603 1,603
Accounts payable 17,544 19,426 (697) 5,467 7,390 12,857
Due to affiliates --- --- --- 15,786 4,898 20,684
Current installments of long-
term debt 3,659 2,500 1,500 --- ---
---------- ---------- ---------- ----------- ---------- ---------
21,203 21,926 803 21,253 13,891 35,144
---------- ---------- ---------- ----------- ---------- ---------
Increase (decrease) in working
capital $ (49,622) (29,982) 2,007 1,398 (19,451) (18,053)
=========== ========== ========== =========== ========== ==========
</TABLE>
<PAGE>
GOLD GENIE WORLDWIDE, INC.
(A Development State Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information as of April 30, 1985
and for the seven months then ended is unaudited)
1. Summary of Significant Accounting Policies
(a) Operations
Gold Genie Worldwide, Inc. (the Company) was formed on March 7, 1984 to engage
in the research, development, production and marketing of tools, accessories
and equipment used in the mining industry, and to do research and development
work on mining equipment and other products not related to the mining industry
for the purpose of expanding the Company's product line. The Company
concentrates its efforts on developing markets for its principal product, an
automatic gold panning machine. The accompanying financial statements include
operations of Gold Genie Worldwide, Inc. from March 7, 1984 to April 30, 1985.
The company's fiscal year ends September 30.
In connection with the unaudited financial statements for the seven months
ended April 30, 1985, all adjustments necessary for a fair presentation have
been made and all adjustments were normal recurring adjustments.
(b) Property and Equipment
Property and equipment is stated at cost. Depreciation is provided by the
straight-line method over an estimated useful life of 10 years.
(c) Organization Costs
The Company amortizes organization costs on a straight-line basis over a 60
month period.
(d) Patent
The cost of the patent (expiring April 12, 1997) is amortized using the
straight-line method.
(e) Income Taxes
The Company has made no provision for income taxes because it has had no tax
or accounting earnings.
The Company intends to provide for income taxes using comprehensive inter-
period income tax allocation. Investment tax credits will be recorded as a
reduction of income taxes in the year the credits are utilized to reduce tax
expense.
(f) Inventory
Inventory is stated at lower of cost (first-in, first-out) or net
realizable value.
2. Organization
Gold Genie Worldwide, Inc. is an Oregon Corporation organized in March 1984
for the purpose of acquiring a patent and technology for the manufacture,
assembly and marketing of mining equipment known as the "Gold Genie" which is
used in the recovery of precious metals and gems.
Gold Genie Worldwide, Inc. is a 76% owned subsidiary of Heartland Diversified
Industries, Inc. (Heartland).
Gold Genie Worldwide, Inc. acquired all of its assets and liabilities from
Heartland in exchange for 10,000,000 common shares. Heartland was issued
8,000,000 of the common shares and the partners of Gold Genie Worldwide (the
predecessor partnership) were issued 2,000,000 of the common shares.
Heartland acquired the assets from the partnership in exchange for the
assumption of liabilities of the partnership aggregating approximately
$71,000. In addition, Heartland issued to the partners warrants to purchase
100,000 shares of Heartland's common stock. The net assets have been recorded
at Heartland's cost which approximates fair value based on the liabilities
assumed by Heartland. The accompanying statements of operations, partners'
deficit and changes in financial position of Gold Genie Worldwide (a
partnership) for the periods ended March 7, 1984 and December 31, 1983 and
1982 are included herein.
Substantially all assets contributed or subsequently acquired by Gold Genie
Worldwide, Inc. (receivable, inventory, property and equipment) secure debt
owed by Heartland.
3. Liquidity
Operations form inception (March 7, 1984) to April 30, 1985 did not generate
sufficient cash to satisfy current obligations. It is expected the Company
will be required to raise additional capital or attain more profitable
operations to meet its current and future cash requirements.
4. Related Party Transactions
Gold Genie Worldwide, Inc. paid consulting fees totaling $8,700 and $1,300 to
Heartland during the periods ended September 30, 1984 and April 30, 1985,
respectively.
5. Income Taxes
Gold Genie Worldwide, Inc. incurred a loss for both tax and financial
reporting for the period ending September 30, 1984. The net operating loss
carry forward for tax and book purposes is approximately $33,700, expiring in
1999. Gold Genie Worldwide, Inc. has no significant timing differences.
6. Stock Option Plan and Warrants
Under an incentive option plan approved by the stockholders, 1,500,000 shares
of common stock have been authorized and reserved for issuance to directors,
officers and key employees. Under the plan, option prices for shares granted
shall be equal to the fair market value of the stock on the date granted.
Option periods may not exceed ten years. At September 30, 1984 and April 30,
1985, no options had been granted.
In connection with the offering of the common shares contemplated herein, Gold
Genie Worldwide, Inc. will issue Warrants A and B each entitled the holder
thereof to acquire one share of common stock for each warrant held.
7. Commitments
Gold Genie Worldwide, Inc. occupies certain facilities and utilizes equipment
under operating lease arrangements.
Rental expense for the periods ended September 30, 1984 and April 30, 1985
totaled $3,265 and $3,671, respectively. These totals include payments to a
director of Gold Genie Worldwide, Inc. of $1,810 and $3,100.
A summary of the future minimum rental payments required under operating lease
agreements follows:
Year ending
April 30, Commitment
----------------- -------------
1986 $ 5,887
1987 2,740
Total $ 8,627
