U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934.
EVERLERT, INC.
(Name of Small Business Issuer in its charter)
Nevada 91-1886117
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1201 East Warner Avenue, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (714) 966-0710
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
None
(Title of Class)
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development.
Everlert, Inc., a Nevada corporation ("Company"), was
originally incorporated on February 3, 1998, and has adopted a
December 31 year-end. At December 31, 1999, the Company was a
development stage company, since it has not commenced its planned
principal operations.
On April 1, 1999, the Company entered into an agreement to
purchase certain smoke and heat detector technology from Safe at
Home Products, Inc., a California corporation, in exchange for
12,000,000 shares of the Company's common stock valued at
$6,000,000; this technology was owned by NuCo, Inc., a Nevada
corporation and subsidiary of Safe at Home. In return, the
Company received all of the issued and outstanding common stock
of NuCo, Inc. (12,000,000 shares, valued at fifty cents per
share) (see Exhibit 2 to this Form 10-SB).
Originally, Safe at Home, a development company in the business
of developing a series of products for home safety, licensed the
voice record playback smoke detector technology to the Company.
Under this agreement, the Company was to pay a down payment on
royalties approximately six months after the license agreement
was signed, the money was to come from the proceeds of a Rule 504
offering. When this offering failed to produce the cash, the
Company couldn't meet the down payment terms and was in a default
position on the terms of the licensing agreement. Safe at Home
determined that since the Company had already become known in the
investment community as the voice record and playback smoke alarm
company, it would make better business sense to find a way to let
the Company proceed on its course to develop and market the smoke
alarm and thereby providing a way for Safe at Home to recoup its
investment. Acting upon the advice of legal and tax consultants,
it was decided that Safe at Home should form a wholly owned
company, NuCo, and transfer the smoke detector rights and
technology into this company in exchange for its stock. Next, an
agreement was arrived at whereby Safe at Home would exchange the
NuCo stock for shares of the Company's common stock in a tax
free transaction. Upon completion of these transactions, the
Company holds the rights to the technology and the NuCo stock,
and Safe at Home holds Company.
The method that was used to determine the number of Company
shares to issue to Safe at Home in connection with the
acquisition of NuCo, Inc, is as follows:
The royalty stream originally agreed upon was that in exchange
for the technology the Company would pay Safe At Home a royalty
of 10% of the net sales for a 5 year period. The Company was to
pay Safe At Home a $100,000 advance against royalties on or
before September 15, 1998. Because the funding expected from the
504 offering did not materialize, the Company was in default
under this agreement.
Since the considerable effort to raise funds for the Company were
beginning to show some promise, it was not in either company's
interest to unwind the agreement. What made sense was to arrive
at another arrangement which would permit Safe At Home an
opportunity to recoup its investment in the technology at some
future date while allowing the Company to proceed with its
capital raising, product development, and marketing plans.
From the Company's calculations, the internal rate of return is
calculated at 29.5%. Therefore, to determine a fair value for
the Company to pay in a lump sum, the royalty stream was
discounted at the internal rate of return, to present value.
This is shown below:
Present Value
Year Revenues 10% Royalties @ 29.5%
1 $ 3,292,750 $ 329,275 $ 262,131
2 18,987,600 1,898,760 1,146,158
3 30,454,750 3,045,475 1,420,944
4 42,220,700 4,222,070 1,523,477
5 59,682,000 5,968,200 1,663,729
Totals $15,463,780 $6,016,439
Since the intention was to pay Safe at Home this amount in
restricted shares of Company common stock, a value had to be
arrived at for the restricted shares. It was decided that an
average of $0.50 per restricted share would be a fair valuation
for the technology deal with Safe At Home Products.
For ease of calculation, the $6,016,439 was rounded to
$6,000,000. At a value of $0.50 per restricted share, this
computes to 12 million shares.
Business of the Company.
The Company's principal business objective is to develop,
manufacture and market smoke and heat detectors and related
products for residential and commercial fire safety.
Activities to date have been limited primarily to organization,
initial capitalization, finding and securing an experienced
management team and board of directors, the development of a
business plan and commencing with initial operational plans. The
Company, however, has yet to establish a base of operations and
must be considered a start-up company with no current established
source of revenues until operations commence.
The Company seeks to establish a base of operations in the fire
safety industry. Through the share exchange agreement with SAHP,
the Company has acquired the technology and rights to develop and
produce smoke and heat detector product lines for residential
and commercial application. The first technology is a plastic
Christmas tree ornament-styled smoke detector. The second is
smoke and heat detector technology designed to replace or
supplement existing smoke detectors. The Company has not yet
manufactured or sold any products to date. Management seeks to
introduce the products for retail sales in approximately eight
months. The Company's products are not currently protected by
any patents since the Company has not had the available funds to
file such an application; it is the intent of the Company to do
so in the future. There are no design obstacles to be overcome
before the Company is ready to commercialize its products.
Management of the Company believes that its products will compete
with existing smoke detectors in that its products are more
advanced than existing detectors for the following reasons:
Unique design of the case and smoke chamber;
Blocking light approach to smoke detection rather than scattered
light approach used in other detectors.
No use of the ionization method in the detector element, which
requires the use of a radioactive substance.
Use of sound and voice alarm, as opposed to sound only in other
devices; this voice can be pre-recorded with various types of
messages.
Simultaneous heat detection, as opposed to smoke detection only
in other detectors.
The Company intends to outsource the manufacturing of printed
circuit boards and plastic housing for the detectors, with the
final assembly and testing to be done directly by the Company at
its current offices. Although the Company does not have any
manufacturing experience, the principals of the Company have
significant manufacturing experience in the fields of commercial
and aerospace. The Company will not need to obtain any license
agreements before it is able to market its products.
The Company plans to reach prospective customers via retail and
wholesale stores, its web site, strategic relationships and mail
order catalogs. Presently, the Company has yet to begin these
efforts, but plans to establish a base of operations in
approximately twelve months. The Company believes that recent
developments in technology, specifically the growth of the
Internet as a means of communication, will increase the ability
of the Company to reach more individuals and businesses. The
Company has already completed it website development at
www.everlert.com, although approximately $2,000 additional will
need to be invested in technical aspects for acceptance of
orders. There are not expected to be any security authorization
concerns with this website.
Planned advertising activities include retail trade magazines,
mail order catalogs and possibly television commercials and
infomercials. The use of these advertising media also have the
advantage of educating the consumer for the need to install
multiple smoke detectors, thus increasing home safety. The
Company has submitted its products for evaluation to potential
customers.
The Company does not have any relationships with suppliers to
acquire materials for production of its yet to be manufactured
products. The Company, however, is currently seeking suppliers
over its website and expects to establish relationships with
suppliers it seeks to provide smoke and heat detector products.
As of June 30, 2000, no sales revenues have been generated by the
Company. The Company does not anticipate that its revenues will
be dependent, however, on any one or even a few major customers
once its revenues begin.
Policing unauthorized use of the Company's proprietary and other
intellectual property rights could entail significant expense
and could be difficult or impossible. In addition, there can be
no assurance that third parties will not bring claims of
copyright or trademark infringement against the Company or
claim that certain of the Company's processes or features
violates a patent. There can be no assurance that third parties
will not claim that the Company has misappropriated their
creative ideas or formats or otherwise infringed upon their
proprietary rights. Any claims of infringement, with or without
merit, could be time consuming to defend, result in costly
litigation, divert management attention, or require the Company
to enter into costly royalty or licensing arrangements, to
prevent further infringement which could have a material adverse
effect on the Company's business, financial condition or
operating results.
The only agency testing required for Company products is
Underwriters Laboratories ("UL"), which is a private testing
organization. The Company's products have not yet been submitted
to UL for testing pending final tooling of the products (the
Company must meet UL Standard 217). Once listing by UL is
approved the Company is required to submit an application to the
state fire marshal which recognizes UL testing and listing.
Conversations with the California Fire Marshal's office indicate
that this is a two-week process. Most other states reciprocate
California Fire Marshal approval.
Foreign countries such as Canada and most European countries
require submittal to the cognizant testing agency prior to
initiating sales. As the market develops, the Company will
submit products to meet testing criteria on a country by country
basis. Many countries do not have any testing standards thus;
products can be marketed without further testing. In many
instances satisfaction of UL tests suffices and is recognized.
The Company's products are subject to the provisions of the
Federal Consumer Product Safety Act ("FCPS Act") and the rules
and regulations promulgated thereunder. The FCPS Act authorizes
the Consumer Product Safety Commission ("CPSC") to protect the
public against unreasonable risks of injury associated with
consumer products. The CPSC can require the repurchase or recall
by a manufacturer such as the Company of its products and can
impose fines or other penalties in the event of violations of
the FCPS Act. Similar laws exist in states and municipalities
and in foreign countries in which the Company may market its
products.
The Company will also be subject to various federal, state and
foreign laws and regulations pertaining to the use of potentially
dangerous materials, to the discharge of materials into the
environment or otherwise relating to the protection of the
environment, which may require the Company to allocate a portion
of its operating budget for use in ensuring its full compliance
with such regulations.
The Company believes that it will be able to comply in all
material respects with laws and regulations governing the fire
safety industry, and that such laws will not have a material
effect on its operations. However, various federal and state
agencies may propose new legislation that may adversely affect
the Company's business, financial condition and results of
operations. The Company is not aware of any other federal, state
or local environmental laws that would affect its operations.
The Company has incurred minimal research and development costs,
although the Company believes that the long-term success of its
business may require substantial research and development. The
Company will seek to further develop its products internally
through research and development or strategic partnerships, but
if the Company can purchase or license products, services or
technologies from third-parties at reasonable costs, it will do
so in order to avoid the time and expense involved in
developing such products, services or technologies. The Company
is not currently in negotiations with any strategic partners.
As a start up company in the research and development phase the
Company presently has three full time employees and no part
time employees. The Company's employees are currently not
represented by a collective bargaining agreement, and the Company
believes that its relations with its employees are good.
Management does anticipate changes in the number of employees
over the next twelve months to approximately eleven total
employees.
ITEM 2. PLAN OF OPERATION.
Twelve Month Plan of Operation.
The operational period from February 3, 1998 to December 31,
1999, achieved two main goals for the Corporation: (a) formation
of the organization to pursue the Company's business objective,
and (b) obtain sufficient capital to commence initial operations.
The Company is a developmental stage enterprise, and has not
generated any revenues to date. The Company has devoted
substantially all of its present efforts to developing its
products to be manufactured and marketed and completing its
reporting requirements with the Securities Act of 1934 and its
commencement of trading on the Over-the-Counter Bulletin Board
(the Company was delisted from this exchange as of November 18,
1999). In order to qualify for relisting on the Bulletin Board,
the Company must comply with the new eligibility rules of this
exchange, which require that all listed companies be reporting
companies. Accordingly the Company filed its Form 10-SB
Registration Statement with the Securities and Exchange
Commission on November 18, 1999; the Company must clear comments
on this Registration Statement to be eligible for relisting.
Realization of sales of the Company's products during the fiscal
year ending December 31, 2001 is vital to its plan of operations.
The Company believes that its initial revenues will be primarily
dependent upon the its ability to cost-effectively and
efficiently develop and market smoke and heat detectors. The
Company designates as its priorities for the first next twelve
months of operations as developing and marketing its products
to establish its operations by: (a) implementing and
successfully executing its business and marketing strategy,
including developing and marketing its products to establish its
business in the home safety industry; (b) developing
relationships with strategic partners; (c) responding to
competitive developments; and (d) attracting, retaining and
motivating qualified personnel.
Management of the Company believes that the need for additional
capital going forward will be derived somewhat from earnings
generated from the sale of its products. In such case, it is the
intent of the Company to seek to raise additional capital via a
private placement offering. The Company currently has a stock
subscription at June 30, 2000 for common stock in the approximate
amount of $918,000. The Company believes that realization of
this capital will sustain it for at least twelve months of
operations. In the meantime, management of the Company plans to
advance funds to the Company on an as-needed basis although there
is no definitive or legally binding arrangement to do so. The
Company currently has no arrangements or commitments for accounts
and accounts receivable financing. There can be no assurance
that any such financing can be obtained or, if obtained that it
will be on reasonable terms. The Company believes that its
initial revenues will be primarily dependent upon the Company's
ability to cost effectively and efficiently develop, manufacture
and market smoke detectors and related home safety products.
The Company incurred significant expenses for the operating
period February 3, 1998 to June 30, 2000, totaling $2,236,025.
Expenditures were primarily due to costs incurred for
amortization expenses, consulting fees, engineering, and general
and administrative expenses. The Company's consulting expenses
were incurred from its public listing process on the Over-the-
Counter Bulletin Board. Due to the significant operating
expenses, the Company experienced a net loss of $2,236,025 for
this period. The Company anticipated incurring this loss during
the initial commencement of operations until such time that it
will realize revenues from operations in the fiscal year 2000.
The Company's ability to distribute, and generate awareness of,
the Company's products must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new
markets. There can be no assurance that the Company will be
successful in establishing a base of operations, and the failure
to do so could have a material adverse effect on the Company's
business, prospects, financial condition and results of
operations.
Risk Factors Connected with Plan of Operation.
(a) Only Limited Prior Operations.
The Company has only limited operations and is subject to all the
risks inherent in the creation of a new business. Since the
Company's principal activities to date have been limited to
organizational activities and prospect development, it has no
record of any revenue-producing operations. Consequently, there
is only a limited operating history upon which to base an
assumption that the Company will be able to achieve its business
plans. In addition, the Company has only limited assets. As a
result, there can be no assurance that the Company will generate
significant revenues in the future; and there can be no assurance
that the Company will operate at a profitable level. If the
Company is unable to obtain customers and generate sufficient
revenues so that it can profitably operate, the Company's
business will not succeed.
(b) Need for Additional Financing May Affect Operations.
Current funds available to the Company will not be adequate for
it to be competitive in the areas in which it intends to operate.
Therefore, the Company will need to raise additional funds in
order to fully implement its business plan. However, there can
be no assurance that the Company will be successful in raising
such additional funds. Regardless of whether the Company's cash
assets prove to be inadequate to meet the Company's operational
needs, the Company might seek to compensate providers of
services by issuance of stock in lieu of cash.
Since inception, the Company has financed operations
primarily through private placements of common stock. The
Company has significant ongoing liquidity needs to support its
existing business and continued growth. The Company's
continued operations therefore will depend upon its ability to
raise additional funds through bank borrowings, equity or debt
financing. Adequate funds may not be available when needed or
may not be available on favorable terms. If funding is
insufficient at any time in the future, the Company may not be
able to take advantage of business opportunities or respond to
competitive pressures, any of which could have a negative impact
on the business, operating results and financial condition. In
addition, if additional shares were issued to obtain financing,
current shareholders may suffer a dilutive effect on their
percentage of stock ownership in the Company.
(c) No Assurance of Protection of Proprietary Rights.
The Company's success and ability to compete will be dependent in
part on the protection of its potential patents, trademarks,
trade names, service marks and other proprietary rights. The
Company intends to rely on trade secret and copyright laws to
protect the intellectual property that it plans to develop, but
there can be no assurance that such laws will provide sufficient
protection to the Company, that others will not develop a service
that are similar or superior to the Company's, or that third
parties will not copy or otherwise obtain and use the Company's
proprietary information without authorization. In addition,
certain of the company's know-how and proprietary technology may
not be patentable.
The Company may rely on certain intellectual property licensed
from third parties, and may be required to license additional
products or services in the future, for use in the general
operations of its business plan. The Company currently has no
licenses for the use of any specific products. There can be no
assurance that these third party licenses will be available or
will continue to be available to the Company on acceptable terms
or at all. The inability to enter into and maintain any of
these licenses could have a material adverse effect on the
Company's business, financial condition or operating results.
(d) No Assurance of Meeting Underwriters Laboratories Standard.
The agency testing required for Company products is Underwriters
Laboratories ("UL"), which is a private testing organization.
The Company's products have not yet been submitted to UL for
testing pending final tooling of the products. Although Company
management believes that the Company's products meet applicable
UL Standard 217, there is a risk that they may not. This testing
is of importance since many state fire marshals recognize UL
testing and listing. The Company's products would not be
available to sale in any state which requires such certification;
although they would be in a number of foreign countries which do
not require such certification.
(e) No Assurance of Successful Manufacturing.
The company has no experience manufacturing commercial quantities
of products, but management has had experience in this area. The
company presently has no plans for developing an in-house
manufacturing capability. Accordingly, the company will be
dependent upon securing a contract manufacturer or other third
party to manufacture the circuit boards and plastic housing of
the detectors (the final assembly and testing will be done in-
house). There can be no assurance that the terms of any such
arrangement would be favorable enough to permit the products to
compete effectively in the marketplace.
(f) Dependence on Outsourced Manufacturing.
The risks of association with outsourced manufacturers are
related to aspects of these firms' operations, finances and
suppliers. The Company may suffer losses if the outside
manufacturer fails to perform its obligations to manufacture and
ship the product manufactured. These manufacturers' financial
affairs may also affect the Company's ability to obtain product
from these firms in a timely fashion should they fail to continue
to obtain sufficient financing during a period of incremental
growth. The company intends to maintains a strong relationship
with these manufacturers to ensure that any issues they may face
are dealt with in a timely manner.
(g) No Assurance of Market Acceptance.
There can be no assurance that any products successfully
developed by the company or its corporate collaborators, if
approved for marketing, will ever achieve market acceptance. The
company's products, if successfully developed, may compete with a
number of traditional products manufactured and marketed by major
e-commerce and technology companies, as well as new products
currently under development by such companies and others. The
degree of market acceptance of any products developed by the
company or its corporate collaborators will depend on a number of
factors, including the establishment and demonstration of the
efficacy of the product candidates, their potential advantage
over alternative methods and reimbursement policies of government
and third party payors. There can be no assurance that the
marketplace in general will accept and utilize any products that
may be developed by the company or its corporate collaborators.
(h) Substantial Competition.
The Company may experience substantial competition in its
efforts to locate and attract customers for its products. Many
competitors in the smoke detector industry have greater
experience, resources, and managerial capabilities than the
Company and may be in a better position than the Company to
obtain access to attract customers. There are a number of larger
companies which will directly compete with the Company. Such
competition could have a material adverse effect on the Company's
profitability or viability.
(i) Other External Factors May Affect Viability of Company.
The smoke detector industry in general is a speculative venture
necessarily involving some substantial risk. There is no
certainty that the expenditures to be made by the Company will
result in commercially profitable business. The marketability of
its products will be affected by numerous factors beyond the
control of the Company. These factors include market
fluctuations, and the general state of the economy (including the
rate of inflation, and local economic conditions), which can
affect peoples' spending. Factors which leave less money in the
hands of potential customers of the Company will likely have an
adverse effect on the Company. The exact effect of these factors
cannot be accurately predicted, but the combination of these
factors may result in the Company not receiving an adequate
return on invested capital.
(j) Control by Officers and Directors Over Affairs of the Company.
The Company's officers and directors beneficially own
approximately 61% of the outstanding shares of the Company's
common stock. As a result, such persons, acting together, have
the ability to exercise significant influence over all matters
requiring stockholder approval. Accordingly, it could be
difficult for the investors hereunder to effectuate control over
the affairs of the Company. Therefore, it should be assumed that
the officers, directors, and principal common shareholders who
control these voting rights will be able, by virtue of their
stock holdings, to control the affairs and policies of the
Company.
(k) Success of Company Dependent on Management.
The Company's success is dependent upon the hiring and retention
of key personnel. None of the officers or directors has any
employment or non-competition agreement with the Company.
Therefore, there can be no assurance that these personnel will
remain employed by the Company. Should any of these individuals
cease to be affiliated with the Company for any reason before
qualified replacements could be found, there could be material
adverse effects on the Company's business and prospects.
In addition, all decisions with respect to the management of the
Company will be made exclusively by the officers and directors of
the Company. Investors will only have rights associated with
minority ownership interest rights to make decision which effect
the Company. The success of the Company, to a large extent, will
depend on the quality of the directors and officers of the
Company. Accordingly, no person should invest in the Shares
unless he is willing to entrust all aspects of the management of
the Company to the officers and directors.
(l) Conflicts of Interest May Affect Independence of Officers
and Directors.
The officers and directors have other interests to which they
devote time, either individually or through partnerships and
corporations in which they have an interest, hold an office, or
serve on boards of directors, and each will continue to do so
notwithstanding the fact that management time may be necessary to
the business of the Company. As a result, certain conflicts of
interest may exist between the Company and its officers and/or
directors which may not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of
corporate opportunities which cannot be resolved through arm's
length negotiations. All of the potential conflicts of interest
will be resolved only through exercise by the directors of such
judgment as is consistent with their fiduciary duties to the
Company. It is the intention of management, so as to minimize
any potential conflicts of interest, to present first to the
Board of Directors to the Company, any proposed investments for
its evaluation.
(m) Limitations on Liability, and Indemnification, of Directors
and Officers May Result in Expenditures by the Company.
The Company's Articles of Incorporation include provisions
to eliminate, to the fullest extent permitted by the Nevada
Revised Statutes as in effect from time to time, the personal
liability of directors of the Company for monetary damages
arising from a breach of their fiduciary duties as directors.
The By-Laws of the Company include provisions to the effect that
the Company may, to the maximum extent permitted from time to
time under applicable law, indemnify any director, officer, or
employee to the extent that such indemnification and advancement
of expense is permitted under such law, as it may from time to
time be in effect. Any limitation on the liability of any
director, or indemnification of directors, officer, or employees,
could result in substantial expenditures being made by the
Company in covering any liability of such persons or in
indemnifying them.
(n) Absence of Cash Dividends.
The Board of Directors does not anticipate paying cash
dividends on the common stock for the foreseeable future and
intends to retain any future earnings to finance the growth of
the Company's business. Payment of dividends, if any, will
depend, among other factors, on earnings, capital requirements
and the general operating and financial conditions of the Company
as well as legal limitations on the payment of dividends out of
paid-in capital.
(o) No Cumulative Voting.
Holders of the shares of common stock of the Company are not
entitled to accumulate their votes for the election of directors
or otherwise. Accordingly, the holders of a majority of the
shares present at a meeting of shareholders will be able to elect
all of the directors of the Company, and the minority
shareholders will not be able to elect a representative to the
Company's board of directors.
(p) No Assurance of Continued Public Trading Market; Risk
of Low Priced Securities.
Since August 25, 1998, there has been only a limited
public market for the common stock of the Company. The common
stock of the Company is currently quoted on the National
Quotation Bureau's Pink Sheets; the Company intends to reapply
for relisting on the Over the Counter Bulletin Board after
clearing comments on this registration statement. As a result,
an investor may find it difficult to dispose of, or to obtain
accurate quotations as to the market value of the Company's
securities. In addition, the common stock is subject to the low-
priced security or so called "penny stock" rules that impose
additional sales practice requirements on broker-dealers who sell
such securities. The Securities Enforcement and Penny Stock
Reform Act of 1990 ("Reform Act") requires additional disclosure
in connection with any trades involving a stock defined as a
penny stock (generally, according to recent regulations adopted
by the U.S. Securities and Exchange Commission, any equity
security that has a market price of less than $5.00 per share,
subject to certain exceptions), including the delivery, prior to
any penny stock transaction, of a disclosure schedule explaining
the penny stock market and the risks associated therewith. The
regulations governing low-priced or penny stocks sometimes limit
the ability of broker-dealers to sell the Company's common stock
and thus, ultimately, the ability of the investors to sell their
securities in the secondary market.
(q) Effects of Failure to Maintain Market Makers.
If the Company is unable to maintain a National Association
of Securities Dealers, Inc. member broker/dealers as market
makers, the liquidity of the common stock could be impaired, not
only in the number of shares of common stock which could be
bought and sold, but also through possible delays in the timing
of transactions, and lower prices for the common stock than might
otherwise prevail. Furthermore, the lack of market makers could
result in persons being unable to buy or sell shares of the
common stock on any secondary market. There can be no assurance
the Company will be able to maintain such market makers.
(r) Uncertainty Due to Year 2000 Problem.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Company's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Company currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Company may
experience serious unanticipated negative consequences (such as
significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of consumers may be affected by Year 2000
issues. The Company does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Company's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Plan of Operation contains "forward looking
statements" within the meaning of Rule 175 of the Securities Act
of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934,
as amended, including statements regarding, among other items,
the Company's business strategies, continued growth in the
Company's markets, projections, and anticipated trends in the
Company's business and the industry in which it operates. The
words "believe," "expect," "anticipate," "intends," "forecast,"
"project," and similar expressions identify forward-looking
statements. These forward-looking statements are based largely
on the Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the
Company's control. The Company cautions that these statements
are further qualified by important factors that could cause
actual results to differ materially from those in the forward
looking statements, including, among others, the following:
reduced or lack of increase in demand for the Company's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Company's products and the level of
expenses incurred in the Company's operations. In light of these
risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact
transpire or prove to be accurate. The Company disclaims any
intent or obligation to update "forward looking statements."
ITEM 3. DESCRIPTION OF PROPERTY.
The Company leases its office space from Wyvern Technologies.
The terms of this lease are for $1.00 per square foot per month
($2,500.00 per month) on a month to month basis. This facility
consists of 2,500 square feet, and management believes this is
currently suitable as the main administrative office and should
remain so for the next twelve months. The Company does not have
any additional facilities. Additionally, there are currently no
proposed programs for the renovation, improvement or development
of the property currently being utilized by the Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the
beneficial ownership of shares of common stock of the Company
("Shares") as of September 30, 2000 (issued and outstanding
common stock of 19,672,477) by (i) all stockholders known to the
Company to be beneficial owners of more than 5% of the
outstanding common stock; and (ii) all officers and directors of
the Company, and as a group (each person has sole voting power
and sole dispositive power as to the shares shown):
Title of Name and Address of Amount of Percent
Class Beneficial Owner Beneficial of
Ownership(1) class
Common Safe at Home Products, Inc. 10,000,000 50.83%
Stock 1201 East Warner Avenue
Santa Ana, California 92705
Common Rich Bourg Financial, Ltd. 2,111,750 10.73%
Stock 6281 Tweedholm Court
San Jose, California 95120
Common James J. Weber 1,500,000 7.62%
Stock 1201 East Warner Avenue
Santa Ana, California 92705
Common Sigam Investments, Inc. 1,500,000 7.62%
Stock 1201 East Warner Avenue
Santa Ana, California 92705
Common Jerry G. Hilbert 200,000 1.02%
Stock 1201 East Warner Avenue
Santa Ana, California 92705
Common Shares of all directors and 11,700,000 59.47%
Stock executive officers as a group
(2 persons)
(1) None of these security holders has the right to acquire any
amount of the Shares from options, warrants, rights, conversion
privilege, or similar obligations.
(2) Includes the shares owned by Safe at Home Products, Inc.
since Mr. Weber and Mr. Hilbert are principals of that firm. The
other major shareholder of that firm is Sigam Investments, Inc.,
which is controlled by Todd T. Marsh.
ITEM 5. DIRECTORS, OFFICERS, PROMOTERS, AND CONTROL PERSONS.
Directors and Executive Officers.
The names, ages, and respective positions of the directors and
executive officers of the Company are set forth below; there are
no promoter and control persons of the Company.. The Directors
named below will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected
and have qualified. Directors are elected for a one-year
term at the annual stockholders' meeting. Officers will hold
their positions at the will of the Board of Directors, absent
any employment agreement, of which none currently exist or are
contemplated. There are no arrangements, agreements or
understandings between non-management shareholders and management
under which non-management shareholders may directly or
indirectly participate in or influence the management of the
Company's affairs. The Directors and Executive Officers of the
Company are not a party to any material pending legal proceedings
and, to the best of their knowledge, no such action by or against
them has been threatened.
(a) James J. Weber, President/Treasurer/Director.
Mr. Weber, age 61, received his Bachelor of Science Degree in
Industrial Engineering from Gannon University in 1962. He
received a Master of Science Degree in Industrial Engineering
from New Mexico State University in 1969. During the Viet Nam
war, he served as a regular Army officer, rising to the rank of
Major; he was decorated with the Silver Star, Distinguished
Flying Cross, Bronze Star, three air medals and other
decorations.
From 1970 to 1977, Mr. Weber held progressively more responsible
positions in manufacturing and sales and marketing of electronic
systems, and became CEO of a medical instrument company in 1978.
In 1984, he founded Wyvern Technologies, Inc., a prime
manufacturer of defense electronic systems. Continuing to date
as President of this firm, Mr. Weber has negotiated exclusive
license agreements with Northrop Grumman, where Wyvern is the
sole manufacturer of all OEM electronics on the F-5 fighter and
the B-2 bomber. Additionally, this company has manufactured
electronics used on most of the current United States military
aircraft, including the new F-22 fighter.
(b) Jerry G. Hilbert, Vice President/Director.
Mr. Hilbert, age 57, earned his Electrical Engineering degree
from West Coast University in 1970. Upon graduation, he worked
for several electronics companies; he has gained nearly 28 years
experience developing electronics related products. His career
began in 1964 through 1970 as a Senior Project Manager at Ford
Aeronautics. From 1970 to 1980, he was the Systems Design
Manager for MAI/Basic Four, a computer firm. From 1980 through
1984, Mr. Hilbert has held various positions at Philips
Ultrasound. During the latter part of the 1980's and continuing
through 1988, he was a senior project engineer for Palamar
Systems and Machines. As this firm, Mr. Hilbert, was
instrumental in the coordination of turn-key automated factories
in the Peoples Republic of China. Since he left this firm, he
has been an independent consultant to many electronics companies,
where he has helped to develop new products.
ITEM 6. EXECUTIVE COMPENSATION.
(a) The current officers and directors have not received
any compensation to date. They will not be remunerated until the
Company turns profitable.
(b) There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors, or employees of the
Company in the event of retirement at normal retirement date as
there is no existing plan provided for or contributed to by the
Company.
(c) No remuneration is proposed to be paid in the future
directly or indirectly by the Company to any officer or director
since there is no existing plan which provides for such payment,
including a stock option plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as set forth below, there are no relationships,
transactions, or proposed transactions to which the Company was
or is to be a party, in which any of the named persons set forth
previously had or is to have a direct or indirect material
interest.
(a) On March 3, 1998, the Company sold 3,100,000 shares of its
common stock to the founding stockholders for $0.001 per share (a
total consideration of $3,100), as follows: James J. Weber,
1,500,000 shares; Sigam Investments, Inc., 1,500,000 shares;
Jerry G. Hilbert, 75,000 shares; and Anthony Lagomarsino, 25,000
shares.
(b) The initial acquisition of the Company's technology was
consummated on March 17, 1998, when the Company entered into a
Technology Purchase Agreement with Safe at Home Products, Inc.
("SAHP"); the principals of this firm are the same as the
Company. In connection with the acquisition, SAHP's principal
stockholders were to receive royalties equal to the sum of 10% of
the gross revenues generated from the use of the technologies.
These royalties were to be paid for a period of sixty (60)
months, with the first payment due on or before April 10, 1998 in
exchange for all patent, product and legal rights to SAHP's
technologies. In addition, the Company agreed to pay SAHP the
sum of $100,000 as an advance against future royalties on or
before September 15, 1998. The founding shareholders of the
Company are also the founding majority shareholders of SAHP. On
April 1, 1999, the Company renegotiated and signed an amended
Share Exchange Agreement whereby it paid 12,000,000 shares valued
at $0.50 per share of restricted common stock of the Company to
SAHP to acquire 12,000,000 of the outstanding shares, valued at
$0.50 per share, of NuCo, Inc., a Nevada corporation that SAHP
transferred the technology to after the Company failed to meet
the payment terms of the original Technology Purchase Agreement
dated March 17, 1998.
(c) As of December 31, 1999, the Company borrowed $173,669
from a related party. The note is unsecured, payable in one
payment including principal and interest at maturity, bearing an
interest rate of 10%, and maturing September 2000. Additionally,
the holder has the option to convert any unpaid balances,
including accrued interest, into shares of the Company's common
stock at a price of $1.00 per share.
(d) As of December 31, 1999, the Company borrowed $5,000
from a related party. The balance is non-interest bearing and
due on demand.
For each of the transactions noted above, the transaction was
negotiated, on the part of the Company, on the basis of what is
in the best interests of the Company and its shareholders. In
addition, in each case the interested affiliate did vote in favor
of the transaction; however, the full board of directors did make
the determination that the terms in each case were as favorable
as could have been obtained from non-affiliated parties.
The Company leases its office space from Wyvern Technologies.
Mr. Weber is the principal and director of Wyvern Technologies.
Ana, California 92705. The terms of this lease are for $1.00
per square foot per month ($2,500.00 per month) on a month to
month basis.
The officers and directors of the Company are engaged in other
businesses, either individually or through partnerships and
corporations in which they have an interest, hold an office, or
serve on a board of directors. As a result, certain potential
conflicts of interest, such as those set forth above with the
transactions, may arise between the Company and its officers and
directors. The Company will attempt to resolve such conflicts of
interest in favor of the Company by carefully reviewing each
proposed transaction to determine its fairness to the Company and
its shareholders and whether the proposed terms of the
transaction are at least as favorable as those which could be
obtained from independent sources. The officers and directors of
the Company are accountable to it and its shareholders as
fiduciaries, which requires that such officers and directors
exercise good faith and integrity in handling the Company's
affairs. A shareholder may be able to institute legal action on
behalf of the Company or on behalf of itself and other similarly
situated shareholders to recover damages or for other relief in
cases of the resolution of conflicts is in any manner prejudicial
to the Company.
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock.
The authorized capital stock of the Company includes
50,000,000 shares of common stock, par value $0.001 per share.
The holders of the shares: (a) have equal ratable rights to
dividends from funds legally available therefore, when, as, and
if declared by the Board of Directors of the Company; (b) are
entitled to share ratably in all of the assets of the Company
available for distribution upon winding up of the affairs of the
Company; and (c) are entitled to one non-cumulative vote per
share on all matters on which shareholders may vote at all
meetings of shareholders. These securities do not have any of the
following rights: (a) cumulative or special voting rights; (b)
preemptive rights to purchase in new issues of shares; (c)
preference as to dividends or interest; (d) preference upon
liquidation; or (e) any other special rights or preferences. In
addition, the shares are not convertible into any other security.
There are no restrictions on dividends under any loan other
financing arrangements or otherwise. See a copy of the Articles
of Incorporation, and an amendment thereto, and Bylaws of the
Company, attached as Exhibits to this Form 10-SB. As of
September 30, 2000, the Company had 19,552,477 shares of common
stock issued and outstanding
Preferred Stock.
The authorized capital stock of the Company also
includes 5,000,000 shares of preferred stock, par value $0.001.
As of the date of this Form 10-SB, the Company had 14,333 shares
of 8% cumulative preferred stock issued and outstanding. These
shares of preferred stock have a conversion feature whereby these
shares may be converted into shares of the Company's common stock
on a basis of 10 shares of common stock for 1 share of preferred
stock. In addition, these shares of preferred stock are callable
2 years from the date of issuance, but before 3 years from the
date of issuance at a redemption rate of 110% of the liquidation
value. Accordingly, the liquidation value is stated at $3.00 per
share of preferred stock.
Non-Cumulative Voting.
The holders of the Shares do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding
Shares, voting for the election of directors, can elect all of
the directors to be elected, if they so choose. In such event,
the holders of the remaining Shares will not be able to elect any
of the Company's directors.
Dividends.
The Company does not currently intend to pay cash dividends. The
Company's proposed dividend policy is to make distributions of
its revenues to its stockholders when the Company's Board of
Directors deems such distributions appropriate. Because the
Company does not intend to make cash distributions, potential
shareholders would need to sell their shares to realize a return
on their investment. There can be no assurances of the projected
values of the Shares, nor can there be any guarantees of the
success of the Company.
A distribution of revenues will be made only when, in the
judgment of the Company's Board of Directors, it is in the best
interest of the Company's stockholders to do so. The Board of
Directors will review, among other things, the investment quality
and marketability of the securities considered for distribution;
the impact of a distribution of the investee's securities on its
customers, joint venture associates, management contracts, other
investors, financial institutions, and the company's internal
management, plus the tax consequences and the market effects of
an initial or broader distribution of such securities.
Possible Anti-Takeover Effects of Authorized but Unissued Stock.
The Company's authorized but unissued common stock consists
of 30,447,523 Shares. One effect of the existence of authorized
but unissued capital stock may be to enable the Board of
Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a merger, tender offer,
proxy contest, or otherwise, and thereby to protect the
continuity of the Company's management. If, in the due exercise
of its fiduciary obligations, for example, the Board of Directors
were to determine that a takeover proposal was not in the
Company's best interests, such shares could be issued by the
Board of Directors without stockholder approval in one or more
private placements or other transactions that might prevent, or
render more difficult or costly, completion of the takeover
transaction by diluting the voting or other rights of the
proposed acquiror or insurgent stockholder or stockholder group,
by creating a substantial voting block in institutional or other
hands that might undertake to support the position of the
incumbent Board of Directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise.
Transfer Agent.
The Company has engaged the services of Pacific Stock Transfer
Company, 5844 South Pecos Road, Suite D, Las Vegas, Nevada 89120,
to act as transfer agent and registrar for the Company.
PART II.
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information.
From August 25, 1998 to November 17, 1999, the Company's common
stock was traded on the Over the Counter Bulletin Board. After
the latter date, the shares have been traded in the National
Quotation Bureau's Pink Sheets (symbol "EVRL") and the range of
closing bid prices shown below is reported while trading on the
Bulletin Board and the Pink Sheets. The quotations shown reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 2000
High Low
Quarter Ended March 31, 2000 * 2.62 0.01
Quarter Ended June 30, 2000 ** 2.25 2.25
Quarter Ended September 30, 2000 *** 2.00 2.00
* The Shares only traded on 11 days during this quarter.
** The Shares only traded on two days during this quarter
*** The Shares only traded on one day during this quarter
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 1999
High Low
Quarter Ended March 31, 1999 3.25 1.00
Quarter Ended June 30, 1999 3.50 0.12
Quarter Ended September 30, 1999 2.25 1.25
Quarter Ended December 31, 1999 3.00 2.00
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended December 31, 1998
High Low
Quarter Ended September 30, 1998 *** 3.25 1.75
Quarter Ended December 31, 1998 1.56 0.01
*** The shares of common stock of the Company commenced trading
on the Bulletin board on August 25, 1998.
In order to qualify for relisting on the Bulletin Board, the
Company must comply with the new eligibility rules of the
Bulletin Board (that is, all listed companies must be reporting
companies), and accordingly the Company filed its Form 10-SB
Registration Statement with the Securities and Exchange
Commission on November 18, 1999.
Holders of Common Equity.
As of September 30, 2000, there were approximately 95
shareholders of record of the Company's common stock.
Dividend Information.
The Company has not declared or paid a cash dividend to
stockholders since it became a "C" corporation. The Board of
Directors presently intends to retain any earnings to finance
Company operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash
dividends in the future will depend upon the Company's earnings,
capital requirements and other factors.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
(a) In February 1998, the Company engaged its initial
independent accountant, Barry Friedman, C.P.A.. This engagement
was approved by the Board of Directors. Mr. Friedman prepared
and audited financial statement for the period of February 3,
1998 (date of inception of the Company) through March 16, 1998 in
connection with a private offering of shares of common stock. In
March 1999, Mr. Friedman resigned in such capacity.
(b) Effective in March 1999, James E. Slayton, C.P.A. was
engaged to serve as the new independent accountant for the
Company. During the Company's initial fiscal year and the
subsequent interim period prior to engaging that accountant,
neither the Company (nor someone on its behalf) consulted the
newly engaged accountant regarding any matter. Mr. Slayton
audited the Company's financial statements for the fiscal years
1998 and 1999. Mr. Slayton's report on these financial
statements was modified as to uncertainty that the Company will
continue as a going concern; other than this, this accountant's
report on the financial statements for the past two years neither
contained an adverse opinion or a disclaimer of opinion, nor was
qualified or modified as to uncertainty, audit scope, or
accounting principles. Effective on or about May 11, 2000, Mr.
Slayton was dismissed. The decision to change accountants was
approved by the Board of Directors.
(c) Effective on May 11, 2000, the firm of L.L. Bradford &
Company was engaged to serve as the new principal accountants to
audit the Company's financial statements for the 1998 and 1999
fiscal years. The decision to retain the new firm was approved
by the Board of Directors. During the Company's two most recent
fiscal years, and the subsequent interim period prior to engaging
those accountants, neither the Company (nor someone on its
behalf) consulted the newly engaged accountants regarding any
matter.
During the Company's two most recent fiscal years and any
subsequent interim period preceding such changes, there have been
no disagreements with former accountants on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. In addition, there
were no "reportable events" as described in Item
304(a)(1)(iv)(B)1 through 3 of Regulation S-B that occurred
within the Company's two most recent fiscal years and the
subsequent interim period preceding such changes.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following equity securities of the Company were sold
without registration during period commencing on February 3,
1998, the date of incorporation of the Company, to the present:
(a) On March 3, 1998, the Company sold 3,100,000 shares of its
common stock to the founding shareholders for a total
consideration of $3,100 ($0.001 per share), as follows: James J.
Weber, 1,500,000 shares; Sigam Investments, Inc., 1,500,000
shares; Jerry G. Hilbert, 75,000 shares; and Anthony
Lagomarsino, 25,000 shares.
(b) On June 8, 1998, the Company sold a total of 54,000 shares
of its common stock for a total consideration of $2,700.
(c) On July 23, 1998, the Company issued 183,000 shares of its
common stock for services rendered in the amount of $9,100.
These services consisted of assistance in the preparation of a
private placement memorandum and the plan of business of the
company.
(d) On August 24, 1998, the Company issued 305,000 shares of its
common stock for services rendered in the amount of $30,250.
These services consisted of assistance in the preparation for the
establishment of a retail market for the common stock of the
Company, and preparation of the business plan of the Company.
(e) On August 24, 1998, the Company issued 40,000 shares of
its common stock as payment for a debt owed by the Company in the
amount of $2,000.
(f) On December 31, 1998, the Company issued 2,000 shares of its
common stock for services rendered in the amount of $2,750.
These services consisted of legal work in connection with
preparation of a private placement memorandum for the Company.
(g) On March 25,1999, the Company issued 12,000 shares of its
common stock for services rendered in the amount of $12,900.
These services consisted of legal services in connection with the
preparation of a private placement memorandum for the Company.
(h) On April 5, 1999, the Company issued 12,000 share of common
stock for services rendered in the amount of $12,900. These
services consisted of other work in connection with the
preparation of a private placement memorandum.
(i) On April 5, 1999, the Company entered into two Common
Stock Subscription Agreements under which the Company is entitled
to receive funds of $450,000 for the issuance of warrants
covering 300,000 shares of the Company's common stock
(exercisable at $1.50 per share from April 5, 1999). These
subscriptions are covered by two promissory notes, dated April 5,
1999, each for $225,000. These promissory notes were due and
payable not later than July 5, 1999 (extended to December 31,
2000 by oral agreement of the parties). In September 1999, the
stock subscriptions receivable was reduced by $57,375 to satisfy
the Company's debt to one of the purchasers. Accordingly, 38,250
shares of the Company's common stock were transferred from a
stock subscription holder to the debt holders for full
satisfaction of such debts.
Warrants covering all 300,000 shares were exercised prior to
April 7, 1999; 150,000 of the shares were issued on April 8, 1999
and the other 150,000 shares were issued on September 27, 1999.
As of December 31, 1999, stock subscriptions receivable totaled
$392,625.
(j) On April 5, 1999, the Company entered into two Common
Stock Subscription Agreements which entitle the Company to
receive funds of $525,000 through the issuance of warrants
covering 300,000 shares of the Company's common stock
(exercisable at $1.75 per share). These subscriptions are
covered by two promissory notes, dated April 5, 1999, each for
$262,500. These promissory notes were due and payable not later
than July 5, 1999 (extended to December 31, 2000 by oral
agreement of the parties). As of December 31, 1999, no shares of
the Company's common stock were issued or funds received in
relation to these Subscription Agreements. Warrants covering all
300,000 shares were exercised prior to April 7, 1999; however,
the shares were not actually issued until March 2000.
(k) On April 15, 1999, the Company issued 11,000 shares of
preferred stock for $33,000 in cash.
(l) On September 2, 1999, the Company issued 12,000,000 shares
of its common stock per an asset purchase agreement with Safe at
Home Products, Inc, dated April 1, 1999.
(m) On September 2, 1999, the Company issued 125,000 shares of
its common stock for $125 in cash.
(n) On October 29, 1999, the Company issued 2,000,000 shares of
its common stock for services rendered in the amount of $20,000.
These services consisted of developing retail markets for the
Company products.
(o) On November 11, 1999, the Company issued 759,485 of its
common stock for $106,007 in cash.
(p) During various dates from March 2000 to May 2000, the
Company issued 359,992 shares of the Company's common stock
pursuant to its stock subscriptions payable balance of $77,773 at
December 31, 1999.
(q) In September 2000, the Company issued a total of
120,000 restricted shares of common stock for legal services to
be provided to the Company, which have been valued at $30,000.
None of the shares issued for services to the Company were
issued to affiliates of the Company. No commissions or fees were
paid in connection with these sales. All of the above sales
through April 5, 1999 were undertaken pursuant to the limited
offering exemption from registration under the Securities Act of
1933 as provided in Rule 504 under Regulation D as promulgated by
the U.S. Securities and Exchange Commission. All offerings made
after that date were undertaken under Rule 506 of Regulation D.
The Rule 506 offerings also were made only to sophisticated
investors; that is, the investor either alone or with his
purchaser representative(s) has such knowledge and experience in
financial and business matters that he is capable of evaluating
the merits and risks of the prospective investment, or the issuer
reasonably believes immediately prior to making any sale that
such purchaser comes within this description.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Limitation of Liability.
The articles of incorporation of the Company (see Exhibit 3.1 to
this Form 10-SB) provide the following with respect to liability:
"A director or officer of the corporation shall not be
personally liable to this corporation or its stockholders for
damages for breach of fiduciary duty as a director or officer,
but this Article shall not eliminate or limit the liability of
a director or officer for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of the law
or (ii) the unlawful payment of dividends. Any repeal or
modification of this Article by stockholders of the corporation
shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director or officer of
the corporation for acts or omissions prior to such repeal or
modification."
Indemnification.
(a) Articles of Incorporation.
The articles of incorporation of the company provide the
following with respect to indemnification:
"Every person who was or is a party to, or is threatened to be
made a party to, or is involved in any such action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by the reason of the fact that he or she, or a
person with whom he or she is a legal representative, is or was a
director of the corporation, or who is serving at the request of
the corporation as a director or officer of another corporation,
or is a representative in a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless to the
fullest extent legally permissible under the laws of the State
of Nevada from time to time against all expenses, liability and
loss (including attorneys' fees, judgments, fines, and amounts
paid or to be paid in a settlement) reasonably incurred or
suffered by him or her in connection therewith. Such right of
indemnification shall be a contract right which may be enforced
in any manner desired by such person. The expenses of officers
and directors incurred in defending a civil suit or proceeding
must be paid by the corporation as incurred and in advance of the
final disposition of the action, suit, or proceeding, under
receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to
be indemnified by the corporation. Such right of indemnification
shall not be exclusive of any other right of such directors,
officers or representatives may have or hereafter acquire, and,
without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any
bylaw, agreement, vote of stockholders, provision of law, or
otherwise, as well as their rights under this article.
Without limiting the application of the foregoing, the Board
of Directors may adopt By-Laws from time to time without
respect to indemnification, to provide at all times the
fullest indemnification permitted by the laws of the State of
Nevada, and may cause the corporation to purchase or maintain
insurance on behalf of any person who is or was a director or
officer."
(b) Bylaws.
The Bylaws of the company (see Exhibit 3.3 of this Form 10-SB)
provide the following with respect to indemnification:
"The Corporation shall indemnify its directors, officers and
employees as follows:
Every director, officer, or employee of the Corporation shall be
indemnified by the Corporation against all expenses and
liabilities, including counsel fees, reasonably incurred by or
imposed upon him/her in connection with any proceeding to which
he/she may be made a party, or in which he/she may become
involved, by reason of being or having been a director,
officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of the Corporation, partnership, joint venture,
trust or enterprise, or any settlement thereof, whether or not
he/she is a director, officer, employee or agent at the time
such expenses are incurred, except in such cases wherein the
director, officer, employee or agent is adjudged guilty of
willful misfeasance or malfeasance in the performance of his/her
duties; provided that in the event of a settlement the
indemnification herein shall apply only when the Board of
Directors approves such settlement and reimbursement as being for
the best interests of the Corporation.
The Corporation shall provide to any person who is or was a
director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of the Corporation, partnership,
joint venture, trust or enterprise, the indemnity against
expenses of a suit, litigation or other proceedings which is
specifically permissible under applicable law.
The Board of Directors may, in its discretion, direct the
purchase of liability insurance by way of implementing the
provisions of this Article."
(c) Nevada Revised Statutes.
NRS 78.7502 Discretionary and mandatory indemnification of
officers, directors, employees and agents: General provisions.
(1) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation, and that, with respect to any criminal action
or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
(2) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation or for amounts paid in settlement to
the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper.
(3) To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue or matter
therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
NRS 78.751 Authorization required for discretionary
indemnification; advancement of expenses; limitation on
indemnification and advancement of expenses.
(1) Any discretionary indemnification under NRS 78.7502 unless
ordered by a court or advanced pursuant to subsection 2, may be
made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The
determination must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit
or proceeding;
(iii) If a majority vote of a quorum consisting of directors
who were not parties to the action, suit or proceeding so orders,
by independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not
parties to the action, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(2) The articles of incorporation, the bylaws or an agreement
made by the corporation may provide that the expenses of officers
and directors incurred in defending a civil or criminal action,
suit or proceeding must be paid by the corporation as they are
incurred and in advance of the final disposition of the action,
suit or proceeding, upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by the corporation. The
provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or
otherwise by law.
(3) The indemnification and advancement of expenses authorized
in NRS 78.7502 or ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either
an action in his official capacity or an action in another
capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to or for the advancement of
expenses made pursuant to subsection 2, may not be made to or on
behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was
material to the cause of action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
NRS 78.752 Insurance and other financial arrangements against
liability of directors, officers, employees and agents.
(1) A corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee
or agent, or arising out of his status as such, whether or not
the corporation has the authority to indemnify him against such
liability and expenses.
(2) The other financial arrangements made by the corporation
pursuant to subsection 1 may include the following:
(i) The creation of a trust fund.
(ii) The establishment of a program of self-insurance.
(iii) The securing of its obligation of indemnification by
granting a security interest or other lien on any assets of the
corporation.
(iv) The establishment of a letter of credit, guaranty or
surety.
No financial arrangement made pursuant to this subsection may
provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable for intentional misconduct, fraud or a knowing violation
of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
(3) Any insurance or other financial arrangement made on behalf
of a person pursuant to this section may be provided by the
corporation or any other person approved by the board of
directors, even if all or part of the other person's stock or
other securities is owned by the corporation.
(4) In the absence of fraud:
(i) The decision of the board of directors as to the propriety
of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the
person to provide the insurance or other financial arrangement is
conclusive; and
(ii) The insurance or other financial arrangement:
(A) Is not void or voidable; and
(B) Does not subject any director approving it to personal
liability for his action, even if a director approving the
insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
(5) A corporation or its subsidiary which provides self-
insurance for itself or for another affiliated corporation
pursuant to this section is not subject to the provisions of
Title 57 of NRS.
PART F/S.
EVERLERT, INC.
(A development stage company)
BALANCE SHEET
JUNE 30, 2000
(Unaudited)
ASSETS
Current assets
Cash $ 98
Total current assets 98
Other assets
Acquired technology, net 4,500,000
Deposits 53,500
4,553,500
Total assets $4,553,598
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,114
Accrued liabilities 42,909
Due to related party 2,350
Notes payable - related party 178,669
Note payable 169,600
Total current liabilities 409,642
Total liabilities 409,642
Commitments and contingencies -
Stockholders' equity
8% cumulative preferred stock; $.001
par value; 5,000,000 shares authorized,
14,333 shares issued and outstanding 14
Common stock; $.001 par value;
50,000,000 shares authorized,
19,552,477 shares issued and
outstanding 19,552
Additional paid-in capital 7,278,040
Stock subscriptions receivable (917,625)
Accumulated deficit (2,236,025)
Total stockholders' equity 4,143,956
Total liabilities and stockholders'
equity $4,553,598
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
Period from
February 3, 1998
Date of Inception)
Through
June 30, 2000
For the three months For the six months
ended June 30 ended June 30
2000 1999 2000 1999
Revenue
$ - $ - $ - $ - $ -
Operating
expenses
Amortization 300,000 300,000 600,000 300,000 1,500,000
Research and
Development - - - 733 68,383
General and
administrative 2,905 23,826 21,410 86,351 620,600
Total operating
expenses 302,905 323,826 621,410 387,084 2,188,983
Net loss from
operations (302,905) (323,826) (621,410) (387,084) (2,188,983)
Other expense
Interest expense 8,582 8,582 17,163 8,582 47,042
8,582 8,582 17,163 8,582 47,042
Net loss before
provision for
income taxes (311,487) (332,408) (638,573) (395,666) (2,236,025)
Provision for
income taxes - - - - -
Net loss (311,487) (332,408) (638,573) (395,666) (2,236,025)
Basic and
diluted loss
per common
share (0.02) (0.08) (0.03) (0.11) (0.25)
Basic and
Diluted
weighted average
common shares
outstanding 19,279,557 3,987,560 9,068,776 3,696,066 8,749,138
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
February 3
1998
(Date of
inception)
For the six months ended June 30 through
2000 1999 June 30 2000
Cash flows from operating
activities:
Net loss $ (638,573) $ (395,666) $(2,236,025)
Adjustments to reconcile
net loss to net
cash used by operating
activities:
Amortization 600,000 300,000 1,500,000
Interest and financing
costs satisfied
in exchange of
common stock - - 23,375
Common stock issued for
expenses - 25,800 87,900
Changes in operating
assets and liabilities:
Increase in deposits - - (53,500)
Increase (decrease) in
accounts payable (4,679) (288,700) 16,114
Increase in accrued
liabilities 17,163 6,715 42,909
Increase in due to
related party 2,350 - 2,350
Net cash used by
operating activities (23,739) (351,851) (616,877)
Cash flows from financing
activities:
Proceeds from issuance
of notes payable -
related party - 173,669 178,669
Proceeds from issuance
of note payable - 169,600 205,600
Proceeds from issuance
of preferred stock 10,000 33,001 43,001
Proceeds from issuance
of common stock - - 111,932
Proceeds from issuance
of stock subscriptions
payable - - 77,773
Net cash provided by
financing activities 10,000 993,245 616,975
Net increase (decrease)
in cash (13,739) 641,394 98
Cash, beginning of period 13,837 733 -
Cash, end of period 98 642,127 98
Supplemental disclosure
of cash flow:
Cash paid for interest - - -
Schedule of non-cash
investing and financing
activities:
40,000 common shares issued
for payment of debt - - 2,000
300,000 common shares issued
in exchange for stock
subscriptions receivable - 450,000 450,000
Debt satisfied through
transfer of common stock - - 34,000
12,000,000 common shares
issued in exchange for
acquired technology - - 6,000,000
Subscriptions payable
satisfied through issuance
of 359,992 common shares 77,773 - 77,773
300,000 common shares issued
in exchange for stock
subscriptions receivable 525,000 - 525,000
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in
accordance with Securities and Exchange Commission requirements
for interim financial statements. Therefore, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The financial statements should be read in conjunction with the
Form 10-KSB for the year ended December 31, 1999 of Everlert,
Inc. ("the Company").
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected
for the full year. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of
such operation. All such adjustments are of a normal recurring
nature.
2. GOING CONCERN
The Company incurred a net loss of approximately $638,000 for the
six months ended June 30, 2000, and the Company's current
liabilities exceed its current assets by approximately $400,000
as of June 30, 2000. The Company plans to complete the
development of its voice record and playback smoke detector,
along with the heat sensor Christmas tree ornaments. The Company
will seek additional sources of capital through the issuance of
debt or equity financing, but there can be no assurance the
Company will be successful in accomplishing its objectives.
The ability of the Company to continue as a going concern is
dependent on additional sources of capital and the success of the
Company's plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Everlert, Inc.
(A Development Stage Company)
Santa Ana, California
We have audited the accompanying balance sheet of Everlert, Inc.
as of December 31, 1999, and the related statements of
operations, stockholders' equity, and cash flows for the year
ended December 31, 1999 and the period from February 3, 1998
(date of inception) through December 31, 1998. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Everlert, Inc. as of December 31, 1999, and the results of its
activities and cash flows for the year ended December 31, 1999
and the period from February 3, 1998 (date of inception) through
December 31, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 8 to the financial statements, the Company has suffered
losses from operations and current liabilities exceed current
assets, all of which raise substantial doubt about its ability to
continue as a going concern. Management's plans in regards to
these matters are also described in Note 8. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ L.L. Bradford & Company, LLC
L.L. Bradford & Company, LLC
August 14, 2000
Las Vegas, Nevada
EVERLERT, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets
Cash $ 13,837
Total current assets 13,837
Other assets
Acquired technology, net 5,100,000
Deposits 53,500
Total other assets 5,153,500
Total assets $ 5,167,337
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 20,793
Accrued liabilities 25,746
Stock subscriptions payable 77,773
Notes payable - related party 178,669
Note payable 169,600
Total current liabilities 472,581
Total liabilities 472,581
Commitments and contingencies -
Stockholders' equity
8% cumulative preferred stock; $.001 par
value; 5,000,000 shares authorized, 11,000
shares issued and outstanding 11
Common stock; $.001 par value;
50,000,000 shares authorized, 18,892,485 shares
issued and outstanding 18,892
Additional paid-in capital 6,665,930
Stock subscriptions receivable (392,625)
Accumulated deficit (1,597,452)
Total stockholders' equity 4,694,756
Total liabilities and stockholders' equity 5,167,337
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Period from Period from
February 3 1998 February 3 1998
(Date of (Date of
inception) inception
Year Ended through through
December 31 1999 December 31 1998 December 31 1999
Revenue - $ - $ -
Operating expenses
Amortization 900,000 - 900,000
Research and
development 733 67,650 68,383
General and
administrative 239,391 359,799 599,190
Total operating
expenses 1,140,124 427,449 1,567,573
Loss from operations (1,140,124) (427,449) (1,567,573)
Other expense
Interest expense 28,012 1,867 29,879
Loss before provision
for income taxes (1,168,136) (429,316) (1,597,452)
Provision for income
taxes - - -
Net loss (1,168,136) (429,316) (1,597,452)
Basic and diluted
loss per common share (0.15) (0.14) (0.28)
Basic and diluted
weighted average
common shares
outstanding 7,816,424 2,993,359 5,696,891
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Stock
Outstanding Subcrip Total
Shares Pref Add'l tion Accumu Stock
Pref erred Common Paid In Receiv lated Holders
erred Common Stock Stock Capital able Deficit Equity
Balance at
February 3
1998
(Date of
inception) - - $ - $ - $ - $ - $ - $ -
Common stock
issued for
cash, $0.002
weighted
average price
per share - 3,154,000 - 3,154 2,646 - - 5,800
Common stock
issued for
expenses $0.086
weighted
average price
per share - 490,000 - 490 41,610 - - 42,100
Common stock
issued for
for payment
of debt $0.05 - 40,000 - 40 1,960 - - 2,000
Net loss - - - - - - (429,316)(429,316)
Balance
December 31
1998 - 3,684,000 - 3,684 46,216 - (429,316) (379,416)
Preferred
stock issued
for cash $3.00 11,000 - 11 - 32,990 - - 33,001
Common stock
issued for
expenses $0.025
weighted
average price
per share - 2,024,000 - 2,024 43,776 - - 45,800
Common stock
issued for
acquired
technology
$0.50 - 12,000,000 - 12,000 5,988,000 - - 6,000,000
Common stock
issued for
stock
subscription
receivable
$1.50 - 300,000 - 300 449,700 (450,000) - -
$57,375 debt
(including
interest and
financing
cost of
$23,375)
satisfied
through
transfer of
common stock
$1.50 - - - - - 57,375 - 57,375
Common stock
issued for
cash, $0.12
weighted
average price
per share - 884,485 - 884 105,248 - - 106,132
Net loss - - - - - - (1,168,136)(1,168,136)
Balance
December 31
1999 11,000 18,892,485 $11 $ 18,892 $6,665,930 (392,625)$(1,597,452)$4,694,756
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period from Period from
February 3, 1998 February 3, 1998
(Date of inception) (Date of inception)
Year Ended through through
December 31, 1999 December 31, 1998 December 31, 1999
Cash flows from
operating
activities:
Net loss $ (1,168,136) $ (429,316) $ (1,597,452)
Adjustments
to reconcile
net loss to
net cash used
by operating
activities:
Amortization 900,000 - 900,000
Interest and
financing costs
satisfied in
exchange of
common stock 23,375 - 23,375
Common stock
issued for
expenses 45,800 42,100 87,900
Changes in
operating assets
and
liabilities:
Increase in
deposits (53,500) - (53,500)
Increase
(decrease) in
accounts payable (318,489) 339,282 20,793
Increase in accrued
liabilities 23,879 1,867 25,746
Net cash used
by operating
activities (547,071) (46,067 (593,138)
Cash flows
from financing
activities:
Proceeds from
issuance of notes
payable - related
party 173,669 5,000 178,669
Proceeds from
issuance of note
payable 169,600 36,000 205,600
Proceeds from
issuance of
preferred stock 33,001 - 33,001
Proceeds from
issuance of
common stock 106,132 5,800 111,932
Proceeds from
issuance of stock
subscriptions
payable 77,773 - 77,773
Net cash
provided by
financing
activities 560,175 46,800 606,975
Net increase
in cash 13,104 733 13,837
Cash, beginning
of period 733 - -
Cash, end of
period 13,837 733 13,837
Supplemental
disclosure of cash
flow:
Cash paid for
interest - - -
Schedule of
non-cash
investing and
financing
activities:
12,000,000 common
shares issued
in exchange for
acquired
technology 6,000,000 - 6,000,000
300,000 common
shares issued in
exchange for
stock
subscriptions
receivable 450,000 - 450,000
Debt satisfied
in exchange of
common stock 34,000 - 34,000
40,000 common
shares issued for
payment of debt - 2,000 2,000
See Accompanying Notes to Financial Statements
EVERLERT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT
POLICIES
Description of business - Everlert, Inc. (hereinafter referred to
as the "Company") is a development stage company that plans to
develop, manufacture, and market voice record and playback smoke
detectors and related products including heat sensor Christmas
tree ornaments. The Company was incorporated in the State of
Nevada on February 3, 1998.
Use of estimates - The preparation of consolidated financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from those estimates.
Fixed assets - Fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided principally on the
straight-line method over the estimated useful lives of the
assets. The cost of repairs and maintenance is charged to
expense as incurred. Expenditures for property betterments and
renewals are capitalized. Upon sale or other disposition of a
depreciable asset, cost and accumulated depreciation are removed
from the accounts and any gain or loss is reflected in other
income (expense). Currently, the Company has no fixed assets.
Acquired technology - The acquired technology is amortized
principally on the straight-line method over a period of 5 years.
The Company periodically evaluates whether events and
circumstances have occurred that may warrant revision of the
estimated useful life of the acquired technology or whether the
remaining balance of the acquired technology should be evaluated
for possible impairment. The Company uses an estimate of the
related undiscounted cash flows over the remaining life of the
intangible asset in measuring their recoverability.
Earnings (loss) per share - Basic earnings (loss) per share
excludes any dilutive effects of options, warrants and
convertible securities. Basic earnings (loss) per share is
computed using the weighted-average number of outstanding common
shares during the applicable period. Diluted earnings per share
is computed using the weighted average number of common and
common stock equivalent shares outstanding during the period.
Common stock equivalent shares are excluded from the computation
if their effect is antidilutive.
Income taxes - The Company accounts for its income taxes in
accordance with Statement of Financial Accounting Standards No.
109, which requires recognition of deferred tax assets and
liabilities for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in operations in the period that includes the
enactment date.
As of December 31, 1999, the Company has available net operating
loss carryovers of approximately $1.6 million that will expire in
various periods through 2014. Such losses may not be fully
deductible due to the significant amounts of non-cash service
costs and the change in ownership rules under Section 382 of the
Internal Revenue Code. The Company has established a valuation
allowance for the full tax benefit of the operating loss
carryovers due to the uncertainty regarding realization.
Comprehensive income (loss) - The Company has no components of
other comprehensive loss. Accordingly, net loss equals
comprehensive loss for all periods.
Advertising costs - The Company recognizes advertising expenses
in accordance with Statement of Position 93-7 "Reporting on
Advertising Costs." Accordingly, the Company expenses the costs
of producing advertisements at the time production occurs, and
expenses the costs of communicating advertisements in the period
in which the advertising space or airtime is used. The Company
has recorded no significant advertising costs for the year ended
December 31, 1999 and period ended December 31, 1998.
Research and development costs - Research and development costs
are charged to expense as incurred.
Stock-based compensation - The Company accounts for stock-based
employee compensation arrangements in accordance with provisions
of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statements of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." Under APB No. 25, compensation expense is based
on the difference, if any, on the date of the grant, between the
fair value of the Company's stock and the exercise price. The
Company accounts for stock issued to non-employees in accordance
with the provisions of SFAS No. 123 and the Emerging Issues Task
Force ("EITF") Issue No. 96-18.
2. ACQUIRED TECHNOLOGY
In April 1999, the Company entered into an agreement to purchase
technology from Safe at Home Products, Inc. in exchange for
12,000,000 shares of the Company's common stock valued at
$6,000,000. Acquired technology is amortized over 5 years, and
is calculated as follows:
Acquired technology $6,000,000
Less: accumulated amortization 900,000
Acquired technology, net $5,100,000
3. NOTE PAYABLE
As of December 31, 1999 the Company borrowed $169,600. The note
is unsecured, bearing an interest rate of 10%, and is due on
demand. Additionally, the holder has the option to convert any
unpaid balances, including accrued interest, into shares of the
Company's common stock at a price of $1.00 per share.
4. STOCK SUBSCRIPTIONS RECEIVABLE
The Company entered into several Common Stock Subscription
Agreements ("Subscription Agreements") during 1999. These
Subscription Agreements entitle the Company to receive funds of
$450,000 for the issuance of 300,000 shares of the Company's
common stock. In September 1999, the stock subscriptions
receivable was reduced by $57,375 to satisfy the Company's debt.
Accordingly, 38,250 shares of the Company's common stock were
transferred from a stock subscription holder to the debt holders
for full satisfaction of such debts. As of December 31, 1999,
stock subscriptions receivable totaled $392,625.
5. STOCKHOLDERS' EQUITY
Preferred stock - As of December 31, 1999, 11,000 shares of
preferred stock have a conversion feature which may be converted
into shares of the Company's common stock on a basis of 10 shares
of common stock for 1 share of preferred stock. In addition,
these shares of preferred stock are callable 2 years from the
date of issuance, but before 3 years from the date of issuance at
a redemption rate of 110% of the liquidation value. Accordingly,
the liquidation value is stated at $3.00 per share of preferred
stock.
6. RELATED PARTY TRANSACTIONS
Note payable - related party - As of December 31, 1999, the
Company borrowed $173,669 from a related party. The note is
unsecured, payable in one payment including principal and
interest at maturity, bearing an interest rate of 10%, and
maturing September 2000. Additionally, the holder has the option
to convert any unpaid balances, including accrued interest, into
shares of the Company's common stock at a price of $1.00 per
share.
As of December 31, 1999, the Company borrowed $5,000 from a
related party. The balance is non-interest bearing and due on
demand.
7. COMMITMENTS AND CONTINGENCIES
Stock Subscription Agreements - In April 1999, the Company
entered into several Common Stock Subscription Agreements
("Subscription Agreements") whereby entitling the Company to
receive funds of $525,000 through the issuance of 300,000 shares
of the Company's common stock. The common stock related to these
Subscription Agreements was issued in March 2000, as further
discussed in Note 9. As of December 31, 1999, no shares of the
Company's common stock were issued or funds received in relation
to these Subscription Agreements.
Non-competition agreement - In April 1999, the Company signed a
non-competition agreement with Safe at Home Products, Inc. for a
period of 5 years. The Company will not engage or conduct,
directly or indirectly, any business in competition with Safe at
Home Products, Inc.
Other - The Company is involved in a dispute which has arisen in
the ordinary course of business. While the results of this
matter cannot be predicted with certainty, the Company's
management believes that losses, if any, resulting from the
ultimate resolution of this matter will not have a material
adverse effect on the Company's results of operations, cash flows
or financial position.
8. GOING CONCERN
The Company incurred a net loss of approximately $1,100,000 for
the year ended December 31, 1999, and its current liabilities
exceed the Company's current assets by approximately $380,000 as
of December 31, 1999. The Company plans to complete the
development of its voice record and playback smoke detector,
along with the heat sensor Christmas tree ornaments. The Company
will seek additional sources of capital through the issuance of
debt or equity financing, but there can be no assurance the
Company will be successful in accomplishing its objectives.
The ability of the Company to continue as a going concern is
dependent on additional sources of capital and the success of the
Company's plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
9. SUBSEQUENT EVENTS
In March 2000, the Company issued 300,000 shares of the Company's
common stock to satisfy an existing Subscription Agreement as
described in Note 7. The Subscription Agreement entitles the
Company to receive funds of $525,000.
During various dates from March 2000 to May 2000, the Company
issued 359,992 shares of the Company's common stock pursuant to
its stock subscriptions payable balance of $77,773 at December
31, 1999.
PART III.
ITEMS 1 and 2. INDEX TO EXHIBITS; DESCRIPTION OF EXHIBITS.
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached to this Form 10-SB.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Company caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
Everlert, Inc.
Dated: October 19, 2000 By: /s/ James J. Weber
James J. Weber, President
Special Power of Attorney
The undersigned constitute and appoint James J. Weber their true
and lawful attorney-in-fact and agent with full power of
substitution, for him and in his name, place, and stead, in any
and all capacities, to sign any and all amendments, including
post-effective amendments, to this Form 10-SB Registration
Statement, and to file the same with all exhibits thereto, and
all documents in connection therewith, with the U.S. Securities
and Exchange Commission, granting such attorney-in-fact the full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorney-in-fact may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this registration statement has been signed below by the
following persons on behalf of the Company and in the capacities
and on the dates indicated:
Signature Title Date
/s/ James J. Weber President/Treasurer/Director October 19, 2000
James J. Weber
/s/ Jerry G. Hilbert Vice President/Director October 19, 2000
Jerry G. Hilbert
EXHIBIT INDEX
Number Exhibit Description
2 Share Exchange Agreement between the Company and Safe at
Home Products, Inc., dated April 1, 1999 (see below).
3.1 Articles of Incorporation (see below).
3.2 Certificate of Amendment of Articles of Incorporation (see below).
3.3 Bylaws (see below).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the Form 10-KSB/A filed on September 8, 2000).
27 Financial Data Schedules (see below).
