FORM SB-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Kanakaris Communications, Inc.
(Name of small business issuer in its charter)
29350 Pacific Coast Highway, Suite 12, Zuma Beach Terrace, Malibu,
CA 90265, (310) 589-2767
(Address and telephone number of Registrant's principal executive
offices and principal place of business)
Shawn F. Hackman, Esq., 1600 E. Desert Inn Rd. #102, Las Vegas,
NV 89109, (702) 732-2253
(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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If this Form is filed If this Form is a post-
to register additional effective amendment
securities for an filed pursuant to Rule
offering pursuant to 462(c) under the If delivery of the
Rule 462(b) under the Securities Act, check prospectus is
Securities Act, please the following box and expected to be
check the following list the Securities made pursuant to
box and list the Act registration Rule 434, please
Securities Act statement number of check the
registration number of the earlier effective following box.
the earlier effective registration statement
registration statement for the same offering.
for the same offering.
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CALCULATION OF REGISTRATION FEE
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Title of Amount to Proposed Proposed Amount of
each class be maximum maximum registration
of registered offering aggregate fee
securities price per offering
to be unit price
registered
Common 20,000,000 $0.3125 $6,250,000 $1,843.75
shares
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The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
The shares offered hereby are highly speculative and involve a
high degree of risk to public investors and should be purchased
only by persons who can afford to lose their entire investment.
(See "Risk Factors" on page 2).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS
Copy No.
Kanakaris Communications, Inc.
11,000,000 Shares
Common Stock
Offering Price $0.3125 per Share
Kanakaris Communications, Inc., (the "Company") is offering
for sale 11,000,000 Shares of its Common Stock, $.001 par value
per share (the "Shares") on a "best efforts" basis, pursuant to
the terms of this Prospectus (See "OFFERING.")
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Offering Net
Price Proceeds
To Public To Company
Per Share: $0.3125 $ 0.2813
Maximum (11,000,000 $3,437,500 $3,094,300
shares)
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Registered Sales Agent
The date of this Offering Memorandum is .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE,
ACCEPTANCE OF THE SUBSCRIPTIONS BY THE COMPANY AND APPROVAL OF
CERTAIN LEGAL MATTERS BY COUNSEL TO THE COMPANY.
ALL OFFEREES AND SUBSCRIBERS WILL HAVE AN OPPORTUNITY TO MEET WITH
REPRESENTATIVES OF THE COMPANY TO VERIFY ANY OF THE INFORMATION
INCLUDED HEREIN AND TO OBTAIN ADDITIONAL INFORMATION REGARDING THE
COMPANY. COPIES OF ALL DOCUMENTS, CONTRACTS, FINANCIAL STATEMENTS
AND OTHER COMPANY RECORDS WILL BE MADE AVAILABLE FOR INSPECTION AT
ANY SUCH MEETING OR DURING NORMAL BUSINESS HOURS UPON REQUEST TO
THE COMPANY.
ALL OFFEREES AND SUBSCRIBERS WILL BE ASKED TO ACKNOWLEDGE IN THE
SUBSCRIPTION AGREEMENT THAT THEY HAVE READ THIS MEMORANDUM
CAREFULLY AND THOROUGHLY, THEY WERE GIVEN THE OPPORTUNITY TO
OBTAIN ADDITIONAL INFORMATION; AND THEY DID SO TO THEIR
SATISFACTION.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS MEMORANDUM AND, IF GIVEN OR
MADE SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS MEMORANDUM DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS MEMORANDUM AT
ANY TIME DOES NOT IMPLY THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF TIME SUBSEQUENT TO ITS DATE.
THE COMPANY HAS THE RIGHT, IN ITS SOLE DISCRETION, TO ACCEPT OR
REJECT SUBSCRIPTIONS IN WHOLE OR IN PART, FOR ANY REASON OR FOR NO
REASON.
Kanakaris Communications, Inc.
Table of Contents
MEMORANDUM SUMMARY 1
RISK FACTORS 2
USE OF PROCEEDS 3
DETERMINATION OF OFFERING PRICE 4
PLAN OF DISTRIBUTION 4
LEGAL PROCEEDINGS 5
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 7
DESCRIPTION OF SECURITIES 7
INTEREST OF NAMED EXPERTS AND COUNSEL 9
DISCLOSURE OF COMMISSION POSITION ON INDENMIFICATION FOR
SECURITIES ACT LIABILITIES 9
ORGANIZATION WITHIN LAST FIVE YEARS 9
DESCRIPTION OF BUSINESS 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION 12
DESCRIPTION OF PROPERTY 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 15
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 15
EXECUTIVE COMPENSATION 15
FINANCIAL STATEMENTS 16
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 16
INDEMNIFICATION OF DIRECTORS AND OFFICERS 16
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION 17
RECENT SALES OF UNREGISTERED SECURITIES 17
EXHIBITS 17
UNDERTAKINGS 18
MEMORANDUM SUMMARY
The following summary is qualified in its entirety by
detailed information appearing elsewhere in this Memorandum. Each
prospective investor is urged to read this Memorandum in its
entirety.
THE COMPANY
Kanakaris Communications, Inc., (the "Company") is a Nevada
corporation formed as the result of a November 25, 1997
acquisition agreement between a Nevada Corporation and a Delaware
Corporation. The Company has two wholly owned subsidiaries,
Desience and Kanakaris InternetWorks, and its common stock is
listed on the OTC Bulletin Board under the symbol KANA.
The Company's principal business includes the Internet
(design and hosting of Web sites, proprietary Web sites, Internet
content and commerce) and computer command centers. Internet
services include the design and hosting of Web shows, corporate
Websites, digital book publishing, themed content commerce sites,
downloadable music Websites and online advertising. Command
center solutions include the design, manufacture and installation
of ergonomic solutions include the design, manufacture and
installation of ergonomic solutions for the utilization of
computers and peripherals in governmental agency and Fortune 500
company environments.
The Company is focusing on its proprietary web site,
NetBooks.com, as a major portion of its future Internet
operations. The site enables consumers to download books into
their computers directly from the Internet. It allows authors the
opportunity to publish their books on the internet. NetBooks.com
reflects the Company's vision for 100% digital publishing. The
Company is developing TalkingNetBooks as an addition to its
NetBooks product line.
The Company's offices are located at 29350 Pacific Coast
Highway, Suite 12, Zuma Beach Terrace, Malibu, California, 90265,
(310) 589-2767.
THE OFFERING
The Company's stock is traded on the OTC Bulletin Board under the
symbol KANA. The Company is registering 20,000,000 shares of its
$0.001 par value common stock. Of these shares, 9,000,000 are
currently issued and outstanding, some of which are subject to
various restrictions. The remaining 11,000,000 shares are being
offered for sale in accordance with the terms of this Prospectus.
Securities Offered:
Total 11,000,000 Shares
Offering Price Per Share: $0.3125
Shares Outstanding:
Before the Offering
Total Shares 9,000,000 Shares
After the Offering
Total Shares 20,000,000 Shares
USE OF NET PROCEEDS
If all the Shares offered are sold, net proceeds to the
Company will be approximately $3,094,300, which will be used for
working capital to permit the continued operation of the Company
and the improvement and development of its internet-based
products. (See "USE OF PROCEEDS.")
RISK FACTORS
The common stock is subject to the normal risks of
fluctuating market prices. As the company's business is centered
on Internet services, the stock value is subject further to
continued interest in and use of the Internet, and the acceptance
by the on-line community of the Company's Internet-based
offerings. In addition, holders of the common stock should not
expect to receive dividends, and are not able to vote their
shares cumulatively for election of directors. Because the stock
has been thinly traded, a purchaser may not be able to liquidate
his or her investment immediately.
DILUTION
The offering involves a dilution in the book value per Share
of the Common Stock from the public offering price.(See
"Description of Common Stock.")
FINANCIAL HIGHLIGHTS
The following schedule sets forth certain financial
information of the Company at the date indicated. (See "FINANCIAL
STATEMENTS.")
Date: March 31, 1998
Total Assets $486,213
Total Liabilities $441,713
Stockholders' Equity $44,500
RISK FACTORS
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS
Aside from the normal risks inherent in investment in any
company, there are no particular risks associated with this
Company. The Company's business is centered upon computer
technology, both for implementations within a particular business
or agency, and on the Internet. The Company is relatively newly
organized, but is in a large marketplace.
RISK FACTORS RELATING TO THE NATURE OF THE OFFERING
"BEST EFFORTS" OFFERING
The Shares are offered for sale on a "best efforts" basis.
No individual or entity has agreed to purchase any portion of the
Shares. There is no guarantee, therefore, that any of the Shares
offered hereby will be sold.
NO CUMULATIVE VOTING
Holders of the Common Stock 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. (See "DESCRIPTION OF COMMON STOCK.")
SHELF REGISTRATION / OFFERING PRICE
The Shares offered hereby are being registered pursuant to
Rule 415(a)(1)(ix) promulgated under the Securities Act of 1933.
It is anticipated that sales will take place over a period of two
years, and that the offering price will change over that time to
reflect the market price of the common stock. The Company will
file, at any time it offers or sells securities, a post-effective
amendment to the registration statement, a prospectus which will
reflect any fundamental changes in the information in the
registration statement.
No Foreseeable Dividends
The Company does not anticipate paying dividends on its
Common Stock in the foreseeable future but plans to retain
earnings, if any, for the operation and expansion of its
business. (See "DESCRIPTION OF COMMON STOCK.")
USE OF PROCEEDS
Following the sale of 11,000,000 shares of common stock, the
gross proceeds to the Company will be $3,437,500. The Company
anticipates using these funds for the following purposes.
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Use of Proceeds: Amount:
Sales Commissions $343,750
Legal Fees $8,000
Filing Fees $1,250
Working Capital $3,084,500
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Management anticipates expending these funds for the
purposes indicated above. To the extent that expenditures are
less than projected, the resulting balances will be retained and
used for general working capital purposes or allocated according
to the discretion of the Board of Directors. Conversely, the
extent that such expenditures require the utilization of funds in
excess of the amounts anticipated, supplementing amounts may be
drawn form other sources, including, but not limited to general
working capital and/or external financing. The net proceeds of
this offering that are not expended immediately may be deposited
in interest or non-interest bearing accounts, or invested in
government obligations, certificates of deposit, commercial
paper, money market mutual funds or similar investments.
DETERMINATION OF OFFERING PRICE
This registration statement is filed in accordance with Rule
415 of the Securities Act of 1933. The offering is expected to
begin immediately after the effectiveness of the registration
statement and to be completed within two years. During that time,
this prospectus may be modified to reflect a change in, among
other material items, the offering price of the Shares, to
reflect changed market conditions.
PLAN OF DISTRIBUTION
The Company will sell a maximum of 11,000,000 Shares of its
Common Stock, par value $.001 per Share, to the public on an
"best efforts" basis. No underwriter has been retained by the
Company.
The public offering price of the Shares will be modified,
from time to time, by amendment to this Prospectus, in accordance
with changes in the market price of the Company's common stock.
The Company anticipates a sales commission of 10%.
The Shares are offered by the Company subject to prior sale
and subject to approval of certain legal matters by counsel. The
Company reserves the right to reject any subscription in whole or
in part, for any reason or for no reason.
Opportunity to Make Inquiries
The Company will make available to each Offeree prior to any
sale of the Shares the opportunity to ask questions and receive
answers from the Company concerning any aspect of the investment
and to obtain any additional information contained in this
Memorandum, to the extent that the Company possesses such
information or can acquire it without unreasonable effort or
expense.
Procedures For Subscribing
Each investor purchasing any of the Shares offered hereby
will be required to execute a Subscription Agreement which, among
other provisions, will contain representations as to the
investor's qualifications to purchase the common stock and his
ability to evaluate and bear the risk of an investment in the
Company, and will contain an acknowledgment of the receipt of the
opportunity to make inquiries and obtain additional information.
LEGAL PROCEEDINGS
There are no material legal proceedings involving the
Company that are known to the Company as of the date of this
prospectus, or that are known to have been threatened against the
Company as of the date of this prospectus.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names, addresses, ages, and respective positions of the
current directors and officers of Kanakaris Communication, Inc.,
are as follows:
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Name Age Position Term of Office
Alex F. Kanakaris 42 President / CEO 1 year
/ Director
Frank Firestone Ake, Jr. 45 Director 1 year
Branch Lotspeich 51 President, 1 year
Desience OPCON
Products /
Director
John R. McKay 36 President, 1 year
Marketing and
Internet
Operations /
Secretary /
Director
Craig Jones, CPA 44 Acting CFO / Per Consulting
Treasurer Agreement
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Alex F. Kanakaris; President
Alex F. Kanakaris positioned Kanakaris InternetWorks to be
the POP Culture content king of the internet. He developed a
strategic business plan based on the idea that unique and
appealing content on the Internet directly impacts the
ability to obtain revenue. Developed a Internet sales product
which can be sold to virtually any business in the world.
(1997) He has an extensive entrepreneurial background, is a
recognized industry leader on the Internet, and has a
diversified background in marketing, writing, publishing, as
well having been a stockbroker. Mr. Kanakaris personally
oversees the development of the Company's product line, and
is working on the launch of TalkingNetBooks, a product
utilizing Microsoft(R) NetShow(R) technology.
Frank Firestone Ake, Jr., Director:
In addition to credentials mentioned above, Mr. Firestone Ake
has educational experience at Investment Banking School,
Baraben/Interfirst; Mortgage Banking School, The Mortgage
Network; Illinois Institute of Technology, Bachelor of
Architecture, Chicago. For the Oriana Corporation, Chicago,
he financed, constructed, managed, and sold a sixty-three
employee restaurant. For Skidmore Owings & Merrill, Chicago,
he was a project architect for over seven billion dollars of
projects including architects, office towers and hotels for
the world's largest architecture firm at their headquarters
office. His professional licenses include Architect,
Illinois; Real Estate Broker, Illinois. He is a member of the
World Trade Center Association and a past member of the board
of directors of the American Institute of Architects (AIA),
Chicago.
Branch Lotspeich, President, Desience OPCON Products:
In the design and placement of command and control
environments for Fortune 500 corporations, Branch has worked
directly with AT&T, IBM, IRS, Ford Motor Co., and other
clients to develop data and networking centers. From 1992 to
1997, Mr. Lotspeich worked as an independent consultant in
telecommunications acquiring accounts including Proctor &
Gamble and Cincinnati Bell Telephone. His worked encompassed
site design, broadband communications, world-wide group
project communications, as well as telephony
For 10 years, from 1978 to 1988, Mr. Lotspeich was the
manager of the Medical Media Center at the University of
Cincinnati. He designed and oversaw the building of the first
Medical Media Center in Hangchou, China. He served as
television and media consultant to the Children's Hospital in
Krakow, Poland. Branch has an expertise in computer
programming, including Internet applications of HTML, CGI and
Java. From 1980 through 1986, he served as an appointment of
the mayor of Cincinnati to the Citizens Cable Regulatory
Board. Education: University of Cincinnati, Bachelor of Fine
Arts in Television Broadcasting. Graduated Summa Cum Laude.
John R. McKay, Vice President Marketing:
As Marketing Manager of the National Notary Association, Mr.
McKay was responsible for creating, designing, and producing
all marketing materials, including developing their corporate
Website. Oversaw all advertising and marketing decisions of
the organization. (1993-1997). Mr. McKay has an extensive
advertising and marketing background, including being
Advertising Manager for Kelly Moore Paint and Sales
Promotion, Manager for Alliance Electronics/ORA.
Craig Jones, Acting Chief Financial Officer:
Mr. Jones' background includes experience with Price
Waterhouse and as a tax manager at Ernst & Young. He is a
principal and co-founder of Hines & Jones, a full service
accounting firm, which has a relationship and office in the
law firm of Gibson, Dunn & Crutcher. Current clients of Hines
& Jones include high net worth individuals in California, the
largest furniture maker in Asia, the first Hispanic economic
development corporation in Los Angeles, and prominent figures
in politics and entertainment.
Mr. Jones was Financial Director of Asia and Latin America
for EF, the world's largest student travel company. As the
financial executive, Mr. Jones' responsibilities included the
organization's financial plans and policies, accounting
practices, executive direction over treasury, budgeting,
audit and tax activities and company expansion in Asia and
Latin America. Mr. Jones has been formation team member of
several large joint ventures in Asia. Mr. Jones is a member
of the American Institute of Certified Public Accountants,
National Society of Tax Professionals, Japan-America Society,
Asia Society, Chinese Chamber of Commerce, and a founding
member of the International Society of Public Accountants.
Mr. Jones was the former Chairman of the China Exploration
and Research Society and is currently a Director of Kham Aid
Foundation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table identifies all holders who are known to
management to control, either individually or beneficially, a
number of shares equal to or greater than 5% of the issued and
outstanding shares as of April 24, 1998.
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Title of Name and address of Amount and Percent
class beneficial owner nature of of
beneficial class
owner
Common Nelson Vazquez 3,000,000 33.33%
4450 S. Eastern, Suite 102
Las Vegas, NV 89119
Common Lloyd Wade Securities 600,000 6.67%
FBO Carlisle
Account #BZ05267
5005 LBJ Freeway, Suite 630
Dallas, TX 75244
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The following table identifies all shares owned individually
or beneficially by directors and officers of the Company as of
April 24, 1998.
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Title of Name and address of Amount and Percent
class beneficial owner nature of of
beneficial class
owner
Common Colby Marceau 57,236 0.64%
12 Via Torre
Rancho Santa Margurita,
CA 92688
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DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, $.001 par value per share.
The holders of Common Stock (i) have equal ratable rights to
dividends from funds legally available therefore, when, as, and
if declared by the Board of Directors of the Company; (ii) 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; (iii) do not have preemptive subscription or conversion
rights and there are no redemption or sinking fund applicable
thereto; and (iv) are entitled to one non-cumulative vote per
share, on all matters on which shareholders may vote at all
meetings of shareholders. As of the date of this memorandum, the
Company had 9,000,000 shares of common stock outstanding.
Non-Cumulative Voting
The holders of Shares of Common Stock of the Company 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. After
the present offering is completed, if all of the Shares offered
are sold to the public, the public shareholders will own
approximately 99% of the outstanding shares of the Company.
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. (See "RISK
FACTORS - No Foreseeable Dividends.")
Possible Anti-Takeover Effects of Authorized but Unissued Stock
Upon the completion of this Offering, the Company's authorized
but unissued capital stock will consist of 80,000,000 shares
(assuming the entire offering is sold) of common stock. 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 Alpha Tech Stock
Transfer, 4505 S. Wasatch Blvd., Salt Lake City, UT 84124, and
expects to continue using them as the transfer agent for the
Company's stock.
INTEREST OF NAMED EXPERTS AND COUNSEL
None.
DISCLOSURE OF COMMISSION POSITION ON INDENMIFICATION FOR
SECURITIES ACT LIABILITIES
The Company and its affiliates may not be liable to its
shareholders for errors in judgment or other acts or omissions
not amounting to intentional misconduct, fraud, or knowing
violations of the law, since provisions have been made in the
Articles of Incorporation and By-Laws limiting such liability.
The Articles of Incorporation and By-Laws also provide for
indemnification of the officers and directors of the Company in
most cases for any liability suffered by them or arising out of
their activities as officers and directors of the Company if they
were not engaged in intentional misconduct, fraud, or knowing
violations of the law. The company's Articles of Incorporation
and By-laws limit the liability of directors and officers to the
maximum extent permitted by Nevada law (Section 78.751).
Therefore, purchasers of these securities may have a more limited
right of action than they would have except for this limitation.
In the opinion of the Securities and Exchange Commission,
indemnification for liabilities arising under the Securities Act
of 1933 is contrary to public policy and, therefore,
unenforceable.
ORGANIZATION WITHIN LAST FIVE YEARS
Not Applicable.
DESCRIPTION OF BUSINESS
(a) Business Development
Kanakaris Internetworks, Inc. ("KIW") was incorporated in the
State of Delaware on February 25, 1997. On October 10, 1997, KIW
entered an agreement to purchase all of the common stock of the
Desience Corporation in exchange for a royalty to the owners of
Desience based upon gross sales. Desience Is a wholly-owned
subsidiary of KIW.
On November 25, 1997, KIW consummated an acquisition agreement
with Big Tex Enterprises, Inc., by which all stock of KIW was
transferred to Big Tex in exchange for stock of Big Tex. Big Tex
had been incorporated in Nevada on November 1, 1991, but was an
inactive company. KIW became a wholly-owned subsidiary of Big Tex
upon the exchange of stock, at which time the name of Big Tex
Enterprises, Inc. was changed to Kanakaris Communications, Inc.
The Company's common stock is traded on the OTC Bulletin Board
under the symbol KANA.
(b) Business of Issuer
The Company's principal business includes the Internet (design
and hosting of Web sites, proprietary Web sites, Internet content
and commerce) and computer command centers. Internet service
includes the design and hosting of Web show, corporate web sites,
digital book publishing, themed content commerce sites,
downloadable music Web sites and online advertising. Command
center solutions include the design, manufacture and installation
of ergonomic solutions for the utilization of computers and
peripherals in governmental agency and Fortune 500 company
environments.
The Company operates within two major divisions, Desience and
Kanakaris InternetWorks.
Desience Division
The Company seeks to revitalize and grow its Desience division.
The Company's OPCON Module System, a proprietary enclosure
product for high-end computer command centers, is utilized by
clients such as NASA, the Federal Bureau of Investigation, the
U.S. Navy, Bank of America, Mitsubishi, Pacfic Bell and other
Fortune 500 companies and governmental agencies. The Company
seeks to increase its independent sales force, update its
promotional materials, and update and expand its product line.
The division began business in 1972 designing and manufacturing
trading desks for the burgeoning investment industry. By 1984
Desience clients requested similar equipment "enclosures" for
their expanding computer centers.
Working with IBM, Desience developed the OPCON modular system for
enclosing and organizing the equipment and cabling associated
with data and network control centers. The first large OPCON
installation occurred in 1985, an installation of over 75 modules
at du pont de Nemours in Wilmington, Delaware.
The Company has been marketing and selling the OPCON modular
system to corporate and government mainframe computer users since
the early 1980's when mainframe computer use was growing
dramatically. While 90% of Desience's sales have been in the
United States, the 1990's have seen increased business from South
America including multiple orders from Venezuela and Mexico.
Desience has also sold and installed OPCON in Canada, Barbados,
Bermuda, St. Lucia, Kuwait, and Guam. Desience assists the client
in the planning process by making site visits, taking lists of
requirements, then providing customers with blueprint floor plans
of OPCON layouts, elevated views of suggested equipment layouts
and perspective presentation drawings. Additionally, Desience
oversees manufacturing of product and oversees the installation
processes.
The Desience OPCON modular system was developed in conjunction
with IBM in 1993-4 for use by IBM's large mainframe computer
users. OPCON was built to exacting standards using steel and
aluminum construction for strength, durability and fire
retardency. Ergonomic studies determined OPCON's viewing angles
and anti-glare screen technology was used in OPCON.
At that time, only one other manufacturer sold a product for data
center use. It was constructed of fiberboard and plywood, similar
to kitchen cabinets. The structures required final fitting on
site. The sawing and hammering caused disruption and a debris
problem for the client. Desience was the first and only
manufacturer using a standard, modular "system" which could be
quickly installed by bolting together without any site
construction. OPCON could similarly be added to or reconfigured
easily with additional parts.
Today, about five main manufacturers compete in the marketplace.
They are about evenly divided between "wood-type" products and
metal products. Most competitors offer similar services
(installation, warranties, customer service). Deciding factors in
a sale, such as price, service, features, etc., vary according to
the requirements of the customer.
In 1989, Desience joined the general services administration
(GSA) contract, allowing Desience to sell to the federal
government and its agencies at preferred pricing. Federal
government contracts today account for about 30% of Desience's
business.
In 1991, Desience began offering integrated electronic hardware
in conjunction with the OPCON system. Desience provides large
screen monitors, rear screen projections systems, video switching
systems, digital clocks and related cabling and interfaces.
Desience consults with clients to suggest the equipment best
suited to work in conjunction with the customers' existing
equipment.
In the 1990's customers began "de-centralizing" command centers,
splitting up processing activity into many smaller centers. The
practice of "out-sourcing" data processing to third party data
centers during the 1990'S also lessened the development of large
command centers. The most influential development in data
processing was the development of using "local area networks"
(LAN) of personal computers (PC's) to handle processing formerly
handles by mainframes.
Desience met these challenges in several ways. OPCON cabinet
design was updated with solutions for incorporating PC drives
into the cabinet design. In 1991 Desience introduced a new
corporate division offering integrated electronic hardware to
their customers. Using large screen monitors and rear screen
projection systems, Desience could link the customer's computers
and "switch" information to large screens for immediate viewing
by many operators and/or managers at once.
The OPCON design was re-engineered to accommodate LAN servers and
large screen technology yet stay compatible with all existing
cabinetry, so existing clients could add the new technology to
existing OPCON Shares. Desience prides itself in always "grand-
fathering" its new design enhancements for OPCON into its entire
installed base.
In 1997 Desience developed a new, "low-contour" module in
conjunction with the U.S. Navy. In a contract of over $200,000,
the products were installed in April of 1997 at Dahlgren, Va.
Desience proposes to refine this product to increase its
desirability in the commercial market. It intends to promote this
as a new line in 1998.
As the century closes, the mainframe is on the rebound having
proved to be the ultimate solution for processing and storage of
large data projects. While the trend to "outsourcing" continues,
the outsourcing companies are requiring larger and larger centers
and larger command centers and therefore becoming new Desience
clients.
Kanakaris InternetWorks Division
This division sells Multimedia Internet products to the "Popular
Culture" marketplace. The Company's Internet World Wide Websites
are available to consumers internationally. The division's
offerings include downloadable books and music, and on-line book
publishing. The division has obtained world-wide registration for
several Internet domain name to permit consumers access to the
Company's offerings.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Desience Division
Future intentions include the "universal workstation" a concept
currently in planning at Desience. The universal work station
will incorporate both electronics and the latest ergonomically
designed work desk area. This will allow the customer to purchase
a completely furnished work area in one step. Desience would
support the station with full service contracts and customer
support.
The Company would like to begin marketing in the Pacific Rim as
it believes the superior quality and durability of its product
and its reputation as the "top of the line" product of its type
will be especially appealing to this market.
User-groups rate Desience very high, often highest, for product
design, quality, durability, reliability and for ease of
installation, excellent customer service, and overall industry
knowledge. It is generally a customer seeking the lowest-cost
product that may make a choice other than Desience.
Desience OPCON modular system is widely known as the "top of the
line" solution. Desience consoles have been on the market for
nearly 15 years and many installations have outlasted the large
corporations and government agencies that originally ordered
them. Corporations using 10 year-old OPCON report it is "like
new" in appearance. About 25% of Desience business is in repeat
business to existing customers both adding new components to
existing installations and ordering new Shares for new sites.
The principal competitors in this area do not all offer the same
selection of products as Desience such as integrated electronic
hardware, large screen monitors and rear screen projection and
digital clocks. Two metal console manufacturers, Engineered Data
Products and Systems Manufacturing Corporation, were selling
other metal storage units to data centers prior to developing
monitor enclosures. Their consoles are constructed of lighter
weight materials and are known to be less able to withstand the
rigors of 24 hour use than Desience OPCON modules.
Major competition (listed in decreasing order of pricing) include
Evans Consoles Fiberboard & Aluminum (Canada); Infrastructures
Fiberboard (U.S.A); Stacking Systems Fiberboard (U.S.A.); Systems
Mfg. Corp. Metal (U.S.A.); Engineered Data Products Metal
(U.S.A.)
In the Company's analysis of the competition, Evans Consoles is
seen as the leading competitor. It has minimized the weaknesses
of a wood-type product by incorporating an aluminum framework.
Evans owns its own manufacturing plant in Alberta, Canada and is
able to discount deeply when needed. Buying from a non-American
company does not seen to be an issue with their U.S.A. customers.
The Company believes the OPCON product has superior compatibility
with American lighting and electrical standards.
Desience competes successfully against Evans as OPCON has a
sleeker, "American" look and can hold more equipment in less
space. OPCON offers UL approved electrical outlets at each level
and a unique lighting system with a patented lens which directs
light onto the work surface and away from the monitors. OPCON
pricing is generally compatible with Evans'.
The second serious competitor, Infrastructures, has aggressive
sales and marketing techniques. Desience believes it has a
superior product and marketing techniques appreciated by its
customers.
The Company's current product line includes three major segments:
OPCON Modular Enclosures. These enclosures provide an
ergonomic work space, enclose and organize equipment and cabling
required for large data and network control centers.
Low Contour OPCON Modules. These modules provide all the
function of the standard OPCON module, but has a very low profile
allowing operators full view of the command center.
Universal Workstation. This is a design concept under
development which fully integrates the user interface equipment
with its ergonomic workstation.
The existing OPCON modular system is sold to commercial customers
with a standard requirement of a 1/3 materials deposit with order
placement; balance due on a net 30 day basis from shipment.
Freight and installation are invoiced separately. Desience pays
its suppliers on a net 30 day basis, although, at its discretion
it may pay a portion of the deposit to the manufacturer at order
placement.
The new "low-contour" modules have been designed and installed at
a Virginia site. Desience plans to refine the design of these
modules to standardize dimensions and parts to make it more
flexible to the commercial market. This project should require
about 6 weeks of engineering time and no further prototype work.
The "universal workstation" is a design concept at this time.
Desience plans to spend requirements definition sessions with its
important commercial, government and military clients to
determine their needs and concerns regarding the "universal
workstation" concept and to determine the scope and size of the
project.
This workstation will require significant engineering time, the
development of project business partners on the electronics and
software sides and the process of prototype and beta testing.
The Company does not expect, if the project is spread out over
the course of 12 - 15 months, that the development would require
significant resources of the company. Desience would like to
develop this product in conjunction with one manufacturer who
might become a "business partner" in the development of the
product. One existing Desience manufacturer has expressed
interest in developing talks along these lines. Desience intends
to research the market to find one or two other possible
resources for this concept.
It is the hope of Desience that the "universal workstation"
project would be developed in conjunction with the needs of an
interested client, such as was the case with the "low-contour"
console development with the U.S. Navy.
Kanakaris InternetWorks Division
In the Internet industry, the Company envisions explosive growth
opportunities for publishing and programming as a result of
technology advances which will reach a mass Popular Culture
market in the coming years. Specifically, President Clinton has
supported the growth of the "electronic highway" providing
interactive information services to millions. Technology will
become more widely available which allow Internet channels
including audio and video, to be received into homes on
television; computers will continue to evolve and provide more
Multimedia program capabilities, and new electronic hardware,
such as transportable pen and voice operated "digital
assistants", will emerge. In the Internet industry, the Company
anticipates growing domestic and international demand for
Websites which are designed to reflect the style, taste, and
consciousness of the Popular Culture marketplace. In particular,
the Company sees a growing trend and demand for fashion,
food/wine and other content/commerce Websites.
The company sees a growing demand for online Multimedia
(publishing and programming and downloadable music) which are
interactive with society.
The Company's main headquarters are in the greater Los Angeles
area. Because of its strong foundation in the motion picture,
television, movie, and home-video industries as well as its
attraction to artists and innovative thinkers and its multi-
ethnic demographic makeup, L.A. has all the right ingredients to
be the world capital of Multimedia and Popular Culture. The
Company believes that the creative growth of Multimedia mandates
the melding of existing entertainment industries, and that no
other city in the world has the vast resources that the greater
Los Angeles area has in terms of Entertainment industry
experience, ability, and size of existing operations. While
certain industries which have traditionally provided Southern
Californians jobs, such as the Defense industry, are being
permanently downsized, the Company believes that new jobs will be
created in new Multimedia technologies to help offset these
losses. The Company believes that it can play an important niche
role in the Multimedia economy of the region.
The Company believes that its World Wide Websites, concentrating
on music, fashion, multiculture and Cyberculture topics, are
significantly different in nature from other Websites currently
available on the Internet. The Company believes its pricing and
size of audience will provide a competitive combination and that
it will be able to effectively obtain a niche on the Internet of
sufficient scope to be attractive to multiple revenue streams.
The Company plans to expand its proprietary web site,
NetBooks.com, by adding new book titles, seeking relationships
with publishers, and expanding its sales force. The Company is
participating in publishing and internet related events such as
book conventions (including booths at the 1998 Los Angeles Times
Festival of Books, 1998 White House Internet Conference in Los
Angeles) to create greater consumer awareness of NetBooks.com.
The Company expects to generate revenue from NetBooks.com in
several ways: Fees to authors to publish their books online, a
percentage of the price charged for books downloaded from the
site, advertising on the site, and possible joint ventures
related to the site. The Company will seek strategic partners to
offer software providing tools to authors to create their books
for submission to the NetBooks.com site and to tie-in with a
hardware product to interface with the site (specifically, a book
reader device that should be compatible with the technology
utilized by NetBooks.com).
The Company plans to charge fees to design and administer "e-
commerce" web sites, particularly those which can offer a large
number of products delivered by direct download. The company will
seek to be involved with a web site offering high quality
downloads of music.
DESCRIPTION OF PROPERTY
The Company owns no real property. It leases the office
space used as the Company's principal offices.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's stock is traded on the OTC Bulletin Board
under the symbol KANA.
EXECUTIVE COMPENSATION
The following table indicates the compensation to each executive
officer and other highly compensated employees. Note that all
values shown are annual compensation - the Company has not
instituted a long-term compensation program. (4)
<TABLE>
<S> <C> <C>
Name and Position Year Salary
Alex Kanakaris, CEO 1998 $120,000
1997
1996
Branch Lotspeich, 1998 $100,000
President, Desience 1997
1996
John McKay 1998 $80,000
VP Marketing 1997
1996
David Valenti 1998 $120,000 (1)
President, Sales
1997
1996
Craig Jones, 1998 $3,000 / mo (2)
Acting CFO 1997
1996
Colby Marceau 1998 $2,000 / mo (3)
National Sales 1997
Manager 1996
</TABLE>
(1) David Valenti has a consulting contract which replaces a
previous employment contract. The annual compensation shown above
is contingent upon reaching specified levels of sales performance
or Company capitalization.
(2) Craig Jones has a consulting contract which entitles him to
receive, in addition to the monthly remuneration, 300,000 shares
of restricted common stock.
(3) Colby Marceau has a consulting contract entitling him to the
specified monthly retainer which increases to $3,000 plus a
percentage of sales.
(4) The directors and members of the advisory board serve
without cash remuneration. They have either been issued stock or
will be included in a future stock option program.
FINANCIAL STATEMENTS
The financial statements and supplemental data required by
this form follow the index of financial statements appearing in the section
labeled "EXHIBITS" below.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Officers and Directors of the Company are accountable to the
Company as fiduciaries, which means such Officers and Directors
are required to exercise good faith and integrity in handling the
Company's affairs. A shareholder may be able to institute legal
action on behalf of himself and all other similarly situated
shareholders to recover damages where the Company has failed or
refused to observe the law.
Shareholders may, subject to applicable rules of civil procedure,
be able to bring a class action or derivative suit to enforce
their rights, including rights under certain federal and state
securities laws and regulations. Shareholders who have suffered
losses in connection with the purchase or sale of their interest
in the Company due to a breach of a fiduciary duty by an officer
or director of the Company in connection with such sale or
purchase, including the misapplication by any such Officer or
Director of the proceeds from the sale of these securities, may
be able to recover such losses from the Company.
The Company and its affiliates may not be liable to its
shareholders for errors in judgment or other acts or omissions
not amounting to intentional misconduct, fraud, or knowing
violations of the law, since provisions have been made in the
Articles of Incorporation and By-Laws limiting such liability.
The Articles of Incorporation and By-Laws also provide for
indemnification of the officers and directors of the Company in
most cases for any liability suffered by them or arising out of
their activities as officers and directors of the Company if they
were not engaged in intentional misconduct, fraud, or knowing
violations of the law. The company's Articles of Incorporation
and By-laws limit the liability of directors and officers to the
maximum extent permitted by Nevada law (Section 78.751).
Therefore, purchasers of these securities may have a more limited
right of action than they would have except for this limitation.
In the opinion of the Securities and Exchange Commission,
indemnification for liabilities arising under the Securities Act
of 1933 is contrary to public policy and, therefore,
unenforceable.
The Company will not acquire assets from its current management
or any entity in which such management has a five percent or
greater equity interest unless the Company has first received an
independent opinion as to the fairness of the terms of the
acquisition. In negotiating the terms of the acquisition of the
assets, management may be influenced by the possibility of future
personal benefit from unrelated business dealings with such
persons or entities. There can be no assurance that such conflict
of interest will be adequately resolved in favor of the Company
and its Shareholders. The Officers and Directors are required to
exercise good faith and integrity in handling the Company's
affairs. Management of the Company has agreed to abide by this
fiduciary duty.
It should be noted that this is a rapidly developing and changing
area of the law. Investors are urged to consult their own legal
counsel.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company anticipates that it will incur, in addition to
the commission associated with selling the common stock,
additional legal and registration expenses. These anticipated
costs are listed above (See "Use of Proceeds.")
RECENT SALES OF UNREGISTERED SECURITIES
NONE
EXHIBITS
The following financial statements are attached:
Consolidated Balance Sheet
Statement of Changes in Stockholders' Equity
Consolidated Statement of Operations
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
The following exhibits are included:
(3.1) Articles of Incorporation
(3.2) By-Laws
(5) Opinion re: legality
(10) Material Contracts
(15) Letter on unaudited interim financial information
(22) Subsidiaries of the registrant
(24) Consent of experts and counsel
(25) Power of attorney
UNDERTAKINGS
(a) The Company agrees that it will:
(1) file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(e) Insofar as indemnifications for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforeceable.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant hereby certifies that it has reasonable
grounds to believe that it meets all of the requirements of
filing on Form SB-2 and authorized this registration statement to
be signed on its behalf by the undersigned in the City of Las
Vegas, State of Nevada, on July 21, 1998.
Registrant Kanakaris Communications, Inc.
By Alex Kanakaris
In accordance with the requirements of the Securities Act of
1933, this registration statement was signed by the following
persons in the capacities and on the dates stated.
Signature /s/ Alex Kanakaris
Title President
Date July 21, 1998
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors of:
Kanakaris Communications, Inc.
We have reviewed the accompanying consolidated balance sheet of
Kanakaris Communications, Inc. and Subsidiary (formerly Kanakaris
Internetworks, Inc. and Subsidiary) as of March 31, 1998 and the
related consolidated statements of operations, changes in
stockholders' equity and cash flows for the six months then ended, in
accordance with Statements on Standards for Accounting and Review
Service issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is
the representation of the management of Kanakaris Communications, Inc.
and Subsidiary.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express any such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order
for them to be in conformity with generally accepted accounting
principles.
WEINBURG & COMPANY, P.A.
Boca Raton, Florida
July 7, 1998
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY KANAKARIS INTERNETWORKS, INC.
AND SUBSIDIARY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $18,949
Accounts Receivable 5,326
Inventory 7,452
TOTAL CURRENT ASSETS 31,727
PROPERTY & EQUIPMENT
Furniture and equipment 287,644
Leasehold improvements 3,623
Less: Accumulated depreciation (270,632)
TOTAL PROPERTY AND EQUIPMENT 20,635
OTHER ASSETS
Notes receivable - shareholder 101,915
Organization costs - net 2,350
Security deposits 1,400
Goodwill - net of amortization 328,186
TOTAL OTHER ASSETS 433,851
TOTAL ASSETS $486,213
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $418,481
Notes payable 2,126
Due to former Desience shareholder 20,222
Customer deposits 884
TOTAL CURRENT LIABILITIES $938,365
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, $1,000
1,000,000 shares authorized, issued, and outstanding
Common stock, $0.001 par value, 9,000
100,000,000 shares authorized,
9,000,000 shares issued and outstanding
Additional paid in capital 623,498
Accumulated deficit (588,988)
TOTAL STOCKHOLDERS' EQUITY 44,500
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $486,213
</TABLE>
The accompanying footnotes are an integral part of these
financial statements
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY KANAKARIS INTERNETWORKS, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
AS OF MARCH 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON COMMON PREFERRED PREFERRED ADDITIONAL ACCUMULATED TOTAL
SHARES AMOUNT SHARES AMOUNT PAID-IN DEFICIT
CAPITAL
Balance, 2,802,154 $28,022 1,697,280 $16,973 $515,203 ($269,208) $290,990
September 30,
1997
Issuance of 426,800 4,268 69,032 73,300
Common Stock
Changes in (3,228,954) (32,290) (1,697,280) (16,973) 49,263 0
Equity Resulting 6,000,000 6,000 (6,000) 0
Resulting from
Recap. Acctg.
Treatment
Issuance of 3,000,000 3,000 (3,000) 0
Common Stock to
Shareholders of
Kanakaris
Internetworks,
Inc. Pursuant
to Recap.
Issuance of 1,000,00 1,000 (1,000) 0
Preferred Stock
to Shareholders of
Kanakaris
Internetworks, Inc.
Pursuant to
Recapitalization
Net Loss for Six (319,790) (319,790)
Months Ended March
31, 1998
BALANCE March 31, 1998 9,000,000 $9,000 1,000,00 $1,000 $623,498 ($588,998) $44,500
</TABLE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY KANAKARIS INTERNETWORKS, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<S> <C>
NET SALES $235,301
OPERATING EXPENSES
Executive compensation 235,179
Salaries 145,836
Payroll Taxes 10,901
Consulting Fees 26,311
Travel and entertainment 25,664
Telephone and utilities 16,083
Marketing 18,214
Professional Fees 11,049
Rent 18,904
Office Supplies and expense 9,658
Equipment rental and expense 4,786
Insurance 10,144
Auto expense 1,500
Depreciation and amortization 17,018
Taxes - other 800
Repairs and maintenance 1,623
Other expenses 6,096
TOTAL OPERATING EXPENSES 559,766
(LOSS) BEFORE INTEREST INCOME (324,465)
Interest Income 4,675
NET LOSS $(319,790)
NET LOSS PER COMMON SHARE (0.04)
WEIGHTED AVERAGE COMMON SHARES 8,000,000
OUTSTANDING
</TABLE>
The accompanying footnotes are an integral part of these
financial statements
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY KANAKARIS INTERNETWORKS, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(319,790)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 17,018
Changes in assets and liabilities (Increase) decrease in:
Accounts receivable 51,488
Inventory 1,236
Prepaid Expenses 11,846
Interest receivable 5,135
Increase (decrease) in:
Accounts payable and accrued expenses 187
Deferred revenue (68,598)
Customer deposits 884
Net cash used in operating activities (300,634)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (9,676)
Payment of security deposits (700)
Decrease in notes receivable 139,799
Net cash provided by investing activities 129,423
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings 2,126
Proceeds from sale of common stock 73,300
Net cash provided by financing activities 75,426
DECREASE IN CASH AND CASH EQUIVALENTS (95,785)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 114,734
CASH AND CASH EQUIVALENTS - END OF PERIOD $18,949
</TABLE>
The accompanying footnotes are an integral part of these
financial statements
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY KANAKARIS INTERNETWORKS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business Organization and Activity
Kanakaris Internetworks, Inc. was incorporated in the State
of Delaware on February 25, 1997. The Company develops and
supplies one-of-a-kind internet products, on-line products,
and on-line commerce.
(B) Business Combination
On October 10, 1997, the Company consummated a Stock Purchase
Agreement (the "Purchase Agreement") with the Desience
Corporation (Desience) to purchase 10,000 shares representing
100$ of its issued and outstanding common stock in exchange
for a 4% royalty on the gross sales (after collection) of
Desience, to be paid monthly for as long as Desience remains
in business or its products are sold. In addition, the seller
shall receive five percent of funds which are to be allocated
to Desience arising from to the Company's next securities
offering as a non-refundable advance on the royalty. The
Company will hold harmless the seller from any claims, caused
of action, costs, expenses, liabilities and prior shareholder
advances. Immediately following the exchange, Desience became
a wholly owned subsidiary of the Company. Desience designs
and installs trading desks for the investment industry.
On November 23, 1997, the Company consummated an acquisition
agreement with Big Tex Enterprises, Inc. (Big Tex) to sell
all of its outstanding preferred stock and all of its
outstanding common stock, which represented 100% of the
Company's issued and outstanding capital stock, to Big Tex in
exchange for 7,000,000 shares (6,000,000 common 1,000,000
preferred) of its restricted stock, (the "Exchange"). Big
Tex was founded in 1991 for the purpose of lawful business or
enterprise, but has been inactive since 1987. Immediately
following the exchange, the Company became a wholly owned
subsidiary of Big Tex and its name was changed to Kanakaris
Communications, Inc.
Generally accepted accounting principles require that the
company whose stockholders retain the majority interest in a
combined business be treated as the acquirer for accounting
purposes. As a result, the Big Tex acquisition will be
accounted for as a recapitalization of the company using the
purchase method of accounting for financial reporting
purposes. Accordingly, Big Tex's financial statements
immediately following the acquisition will be as follows:
(1) the balance sheet will consist of the Company's net
assets at a fair market value (acquired cost) and (2) the
statement of operations will include the Company's operations
for the period presented and Big Tex's operations from
November 25, 1997. As part of the agreement, Big Tex changed
its name to Kanakaris Communications, Inc.
(C) Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and Desience Corporation, a
wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in
consolidation.
(D) Use of Estimates
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles.
The preparation of financial statements in accordance 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.
(E) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash
equivalents.
(F) Property and Equipment
Property and equipment are stated at cost and depreciated
using the declining balance method over the estimated
economic useful life of 5 to 7 years. Maintenance and
repairs are charged to expense as incurred. Major
improvements are capitalized. Depreciation expense for the
period ended March 31, 1998 was $5,340.
(G) Inventories
Inventories consisting of parts, finished goods, and
collectibles are recorded at the lower of cost or market,
cost being determined on a first-in, first-out method.
(H) Organization Costs
Organization costs, which are included in other assets, are
being amortized over 60 months on a straight line basis.
(I) Goodwill
Goodwill arising from the acquisition of Desience
Corporation, as discussed in Note 1 (B) - Business
Combination, is being amortized on a straight-line basis over
15 years. Amortization expense for the period ended March
31, 1998 was $11,379.
(J) Earnings Per Share
Earnings per share are computed using the weighted average of
common shares outstanding as defined by Financial Accounting
Standards No. 128, "Earnings per Share".
(K) Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). SFAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected
future events other than enactments of changes in the tax law
or rates. Any available deferred tax assets arising from net
operating loss carryforwards has been offset by a deferred
tax valuation allowance on the entire amount.
(L) Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk or
cash equivalents.
(M) New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued
several new accounting pronouncements. Statement No. 130,
"Reporting Comprehensive Income" establishes standards for
reporting and display of comprehensive income and its
components, and is effective for fiscal years beginning after
December 15, 1997. Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information"
establishes standards for the way that public business
enterprises report selected information about operating
segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about
products and services, geographic areas, and major customers,
and is effective for financial statements for periods
beginning after December 15, 1997. Statement No. 132,
"Employers' Disclosures About Pensions and Other
Postretirement Benefits" revises employers' disclosure
requirements about pension and other postretirement benefit
plans and is effective for fiscal years beginning after
December 15, 1997. Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" establishes
accounting and reporting standards for Derivative Instruments
and related contracts and hedging activities. This statement
is effective for all fiscal quarters and fiscal years
beginning after June 15, 1999. The Company believes that its
future adoption of these pronouncements will not have a
material effect on the Company's financial position or
results of operations.
NOTE 2 - NOTES RECEIVABLE - SHAREHOLDER
The following is a summary of notes receivable at March 31, 1998:
Notes receivable - Shareholder, unsecured.
Interest at 8%, principal is payable in five annual
installments of $38,250 plus interest beginning September 30, 1998.
The note was prepaid through a portion of the year 2000.
$101,915
TOTAL NOTES RECEIVABLE $101,915
The aggregate amount of notes receivable maturing in each of the
five years subsequent to March 31, 1998 is as follows:
For the year ending March 31, 1999 $ -
2000 $6,290
2001 $38,250
2002 $38,250
2003 $19,125
$101,915
NOTE 3 - PREFERRED STOCK
Preferred stock issued in connection with the Big Tex
business combination discussed in Note 1 (B) is convertible
to common stock. The preferred stock also has 3 to 1 voting
rights over all common stock.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
In the normal course of business, there may be various legal
actions and proceedings pending which seek damages against
the Company. Management believes that the amount, if any,
that may result from these claims, will not have a material
adverse effect on the financial statements.
NOTE 5 - SUBSEQUENT EVENTS
Stock Registration and Offering
R E S T A T E D A R T I C L E S O F I N C O R P 0 R A T I 0N
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have voluntarily associated
ourselves together for the purpose of forming a corporation under
and pursuant to the laws of the State of Nevada, and we do hereby
certify:
FIRST: The name of the corporation is:
KANAKARIS COMMUNICATIONS, INC.
SECOND: The principal office of the corporation is to be
located VAZQUEZ & ASSOCIATES 4660 South Eastern, Ste. 102, City
of Las Vegas, County of Clark, State of Nevada, and that the
Resident Agent in charge thereof is NELSON VAZQUEZ but the
corporation may maintain an office at such towns, cities and
places outside the State of Nevada as the Board of Directors may,
from time to time, determine, or as may be designated by the By
laws of the corporation.
THIRD: That the purpose for which said corporation is
formed, and the nature of the objects proposed to be transacted
and carried on by it are: To engage in any lawful activity or
practice.
FOURTH: The total authorized capital stock of the
corporation shall be One-Hundred-Million Shares of Class A Common
stock of the Par Value of .001 without par value all of which
shall be entitled to voting power.
FIFTH: The members of the governing board shall be styled
Directors, and the number of such Board of Directors shall not be
less than two (2) nor more than five (5), and the names and
addresses of the first Board of Directors consisting of members,
are as follows:
<TABLE>
<S> <C>
NAME POST OFFICE ADDRESS
JAMES MICHAEL SKILES 3950 Koval Lane #1084
Las Vegas, NV 89109
AL DiCICCO 3950 Koval Lane #1084
Las Vegas, NV 89109
</TABLE>
SIXTH: The capital stock of the corporation, after the
amount of the subscription price had been paid in money, property
or services, as the Directors shall determine, shall not be
subject to assessment to pay the debt of the corporation, nor for
any other purpose, and no stock issued as fully paid up shall
ever be assessable or assessed, and the Articles of Incorporation
shall not be amended in this particular.
SEVENTH: Rescinded on June 26, 1997.
EIGHTH: The names and post office addresses of each of the
incorporators signing these Articles of Incorporation are as
follows:
<TABLE>
<S> <C>
NAME POST OFFICE
ADDRESSES
JAMES MICHAEL SKILES 3950 Koval Lane #1084
Las Vegas, NV 89109
AL DiCICCO 3950 Koval Lane #1084
Las Vegas, NV 89109
</TABLE>
NINTH: The corporation shall have perpetual existence.
TENTH: The stockholders of the corporation shall not be
individually liable for the debts or the liabilities of the
corporation, except that the holder of shares of stock not fully
paid shall be personally liable to the corporation in amounts not
to exceed the amount unpaid on the shares held by, him, at the
subscription price, then, and then only, when there is a written
contract of subscription of stock.
ELEVENTH: The Board of Directors shall have the power and
authority to make and alter or amend the By Laws, to fix the
amount in each or to otherwise be reserved as working capital,
and to authorize and cause to be executed, mortgages, and other
liens upon the property, business and franchises of the
corporation.
Bylaws
Of
Big Tex Enterprises
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1. The annual meeting of the stockholders of the
Company shall be held at its office in the City of Las Vegas,
Clark County, at 1 o'clock in the afternoon on the 13th day of
November in each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding day not a legal holiday, for
the purpose of electing directors of the company to serve during
the ensuing year and for the transaction of such other business
as may be brought before the meeting.
At least five days' written notice specifying the time and place,
when and where, the annual meeting shall be convened, shall
be mailed in a United States Post Office addressed to each
of the stockholders of record at the time of issuing the
notice at his or her, or its address last known, as the same
appears on the books of the company.
SECTION 2. Special meetings of the stockholders may be held at
the office of the company in the State of Nevada or
elsewhere, whenever called by the President, or by the Board
of Directors, or by vote of, or by an instrument in writing
signed by the holders of 51% of the issued and outstanding
capital stock of the company. At least ten days' written
notice of such meeting, specifying the day and hour and
place, when and where such meeting shall be convened, and
objects for calling the same, shall be mailed in a United
States Post Office, addressed to each of the stockholders of
record at the time of issuing the notice, at his or her or
its address last known, as the same appears on the books of
the company.
SECTION 3. If all the stockholders of the company shall
waive notice of a meeting, no notice of such meeting shall be
required, and whenever all of the stockholders shall meet in
person or by proxy, such meeting shall be valid for all purposes
without call or notice, and at such meeting any corporate action
may be taken.
The written certificate of the officer or officers calling
any meeting setting forth the substance of the notice, and the
time and place of the mailing of the same to the several
stockholders, and the respective addresses to which the same were
mailed, shall be prima facie evidence of the manner and fact of
the calling and giving such notice.
If the address of any stockholder does not appear upon the
books of the company, it will be sufficient to address any notice
to such stockholder at the principal office of the corporation.
SECTION 4. All business lawful to be transacted by the
stockholders of the company, may be transacted at any
special meeting or at any adjournment thereof. Only such
business, however, shall be acted upon at special meeting of
the stockholders as shall have been referred to in the
notice calling such meetings, but at any stockholders'
meeting at which all of the outstanding capital stock of the
company is represented, either in person or by proxy, any
lawful business may be transacted, and such meeting shall be
valid for all purposes.
SECTION 5. At the stockholders' meetings the holders of more
than 50 percent (50%) in amount of the entire issued and
outstanding capital stock of the company, shall constitute a
quorum for all purposes of such meetings.
If the holders of the amount of stock necessary to
constitute a quorum shall fail to attend, in person or by proxy,
at the time and place fixed by these By-laws for any annual
meeting, or fixed by a notice as above provided for a special
meeting, a majority in interest of the stockholders present in
person or by proxy may adjourn from time to time without notice
other than by announcement at the meeting, until holders of the
amount of stock requisite to constitute a quorum shall attend. At
any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted
as originally called.
SECTION 6. At each meeting of the stockholders every
stockholder shall be entitled to vote in person or by his duly
authorized proxy appointed by instrument in writing subscribed by
such stockholder or by his duly authorized attorney. Each
stockholder shall have one vote for each share of stock standing
registered in his or her or its name on the books of the
corporation, ten days preceding the day of such meeting. The
votes for directors, and upon demand by any stockholder, the
votes upon any question before the meeting, shall be by voice
vote.
At each meeting of the stockholders, a full, true and
complete list, in alphabetical order of all the stockholders
entitled to vote at such meeting, and indicating the number of
shares held by each, certified by the Secretary of the Company,
shall be furnished, which list shall be prepared at least ten
days before such meeting, and shall be open to the inspection of
the stockholders, or their agents or proxies, at the place where
such meeting is to be held, and for ten days prior thereto. Only
the persons in whose names shares of stock are registered on the
books of the company for ten days preceding the date of such
meeting, as evidenced by the list of stockholders, shall be
entitled to vote at such meeting. Proxies and powers of Attorney
to vote must be filed with the Secretary of the Company before an
election or a meeting of the stockholders, or they cannot be used
at such election or meeting.
SECTION 7. At each meeting of the stockholders the polls
shall be opened and closed; the proxies and ballots issued,
received, and be taken in charge of, for the purpose of the
meeting, and all questions touching the qualifications of voters
and the validity of proxies, and the acceptance or rejection of
votes, shall be decided by two inspectors. Such inspectors shall
be appointed at the meeting by the presiding officer of the
meeting.
SECTION 8. At the stockholders' meetings, the regular order
of business shall be as follows:
1. Reading and approval of the Minutes of previous meeting
or meetings;
2. Reports of the Board of Directors, the President,
Treasurer and Secretary of the Company in the order
named;
3. Reports of Committee;
4. Election of Directors;
5. Unfinished Business;
6. New Business;
7 Adjournment.
ARTICLE II
DIRECTORS AND THEIR MEETINGS
SECTION 1. The Board of Directors of the Company shall
consist of 3 persons who shall be chosen by the stockholders
annually, at the annual meeting of the Company, and who shall
hold office for one year, and until their successors are elected
and qualify.
SECTION 2. When any vacancy occurs among the Directors by
death, resignation, disqualification or other cause, the
stockholders, at any regular or special meeting, or at any
adjourned meeting thereof, or the remaining Directors, by the
affirmative vote of a majority therefor shall elect a successor
to hold office for the unexpired portion of the term of the
Director whose place shall have become vacant and until his
successor shall have been elected and shall qualify.
SECTION 3. Meeting of the Directors may be held at the
principal office of the company in the state of Nevada or
elsewhere, at such place or places as the Board of Directors may,
from time to time, determine.
SECTION 4. Without notice or call, the Board of Directors
shall hold its first annual meeting for the year immediately
after the annual meeting of the stockholders or immediately after
the election of Directors at such annual meeting.
Regular meetings of the Board of Directors shall be held at
the office of the company in the City of Las Vegas, State of
Nevada on November 1, at 3 o'clock in the P.M. Notice of such
regular meetings shall be mailed to each Director by the
Secretary at least three days previous to the day fixed for such
meetings, but no regular meeting shall be held void or invalid if
such notice is not given, provided the meeting is held at the
time and place fixed by these by-laws for holding such regular
meetings.
Special meetings of the Board of Directors may be held on the
call of the President or Secretary on at least three days
notice by mail or telegraph.
Any meeting of the Board, no matter where held, at which all
of the members shall be present, even though without or of which
notice shall have been waived by all absentees, provided a quorum
shall be present, shall be valid for all purposes unless
otherwise indicated in the notice calling the meeting or in the
waiver of notice.
Any and all business may be transacted by any meeting of the
Board of Directors, either regular or special.
SECTION 5: A majority of the Board of Directors in office
shall constitute a quorum for the transaction of business, but if
at any meeting of the Board there be less than a quorum present,
a majority of those present may adjourn from time to time, until
a quorum shall be present, and no notice of such adjournment
shall be required. The Board of Directors may prescribe rules not
in conflict with these By-laws for the conduct of its business;
provided, however, that in the fixing of salaries of the officers
of the corporation, the unanimous action of all of the Directors
shall be required.
SECTION 6. A Director need not be a stockholder of the
corporation.
SECTION 7. The Directors shall be allowed and paid all
necessary expenses incurred in attending any meeting of the
Board, but shall not receive any compensation for their services
as Directors until such time as the company is able to declare
and pay dividends on its capital stock.
SECTION 8. The Board of Directors shall make a report to the
stockholders at annual meetings of the stockholders of the
condition of the company, and shall, at request, furnish each of
the stockholders with a true copy thereof.
The Board of Directors in its discretion may submit any
contract or act for approval or ratification at any annual
meeting of the stockholders called for the purpose of considering
any such contract or act, which, it approved, or ratified by the
vote of the holders of a majority of the capital stock of the
company represented in person or by proxy at such meeting,
provided that a lawful quorum of stockholders be there
represented in person or by proxy, shall be valid and binding
upon the corporation and upon all the stockholders thereof, as if
it had been approved or ratified by every stockholder of the
corporation.
SECTION 9. The Board of Directors shall have the power from
time to time to provide for the management of the offices of the
company in such manner as they see fit, and in particular from
time to time to delegate any of the powers of the Board in the
course of the current business of the company to any standing or
special committee or to any officer or agent and to appoint any
persons to be agents of the company with such powers (including
the power to subdelegate), and upon such terms as may be deemed
fit.
SECTION 10. The Board of Directors is invested with the complete
and unrestrained authority in the management of all the
affairs of the company, and is authorized to exercise for
such purpose as the General Agent of the Company, its entire
corporate authority.
SECTION 11. The regular order of business at meetings of the
Board of Directors shall be as follows:
1. Reading and approval of the minutes of any previous
meeting or meetings;
2. Reports of officers and committeemen;
3. Election of officers;
4. Unfinished business;
5. New business;
6. Adjournment.
ARTICLE III
OFFICERS AND THEIR DUTIES
SECTION 1. The Board of Directors, at its first and after each
meeting after the annual meeting of stockholders, shall elect a
President, a Vice-President, a Secretary and a Treasurer to hold
office for one, year next coming, and until their successors are
elected and qualify. The offices of the Secretary and Treasurer
may be held by one person.
Any vacancy in any of said offices may be filled by the
Board of Directors.
The Board of Directors may from time to time by resolution,
appoint such additional Vice Presidents and additional Assistant
Secretaries, Assistant Treasurer and Transfer Agents of the
company as it may deem advisable; prescribe their duties, and fix
their compensation, and all such appointed officers shall be
subject to removal at any time by the Board of Directors. all
officers, agents, and factors of the company shall be chosen and
appointed in such manner and shall hold their office for such
terms as the Board of Directors may by resolution prescribe.
SECTION 2. The President shall be the executive officer of
the company and shall have the supervision and, subject to the
control of the Board of Directors, the direction of the Company's
affairs, with full power to execute all resolutions and orders of
the Board of Directors not especially entrusted to some other
officer of the company. He shall be a member of the Executive
Committee, and the Chairman thereof; he shall preside at all
meetings of the Board of Directors, and at all meetings of the
stockholders, and shall sign the Certificates of Stock issued by
the company and shall perform such, other duties as shall be
prescribed by the Board of Directors.
SECTION 3. The Vice-President shall be vested with all the
powers and perform all the duties of the President in his absence
or inability to act, including the signing of the Certificates of
Stock issued by the company, and he shall so perform such other
duties as shall be prescribed by the Board of Directors.
SECTION 4. The Treasurer shall have the custody of all the
funds and securities of the company. When necessary or proper he
shall endorse on behalf of the company for collection checks,
notes, and other obligations; he shall deposit all monies to the
credit of the company in such bank or banks or other depository
as the Board of Directors may designate; he shall sign all
receipts and vouchers for payments made by the company, except as
herein otherwise provided. He shall sign with the President all
bills of exchange and promissory notes of the company; he shall
also have the care and custody of the stocks, bonds,
certificates, vouchers, evidence of debts, securities, and such
other property belonging to the company as the Board of Directors
shall designate; he shall sign all papers required by law or by
those By-Laws or the Board of Directors to be signed by the
Treasurer. Whenever required by the Board of Directors, he shall
render a statement of his cash account; he shall enter regularly
in the books of the company to be kept by him for the purpose,
full and accurate accounts of all monies received and paid by him
on account of the company. He shall at all reasonable times
exhibit the books of account to any Directors of the company
during business hours, and he shall perform all acts incident to
the position of Treasurer subject to the control of the Board of
Directors.
The Treasurer shall, if required by the Board of Directors,
give bond to the company conditioned for the faithful performance
of all his duties as Treasurer in such sum, and with such
security as shall be approved by the Board of Directors, with
expense of such bond to be borne by the company.
SECTION 5. The Board of Directors may appoint an Assistant
Treasurer who shall leave such powers and perform such duties as
may be prescribed for him by the Treasurer of the company or by
the Board of Directors, and the Board of Directors shall require
the Assistant Treasurer to give a bond to the company in such sum
and with such security as it shall approve, as conditioned for
the faithful performance of his duties as Assistant Treasurer,
the expense of such bond to be borne by the company.
SECTION 6. The Secretary shall keep the Minutes of all
meetings of the Board of Directors and the Minutes of all
meetings of the stockholders and of the Executive Committee in
books provided for that purpose. He shall attend to the giving
and serving of all notices of the company; he may sign with the
President or Vice-President, in the name of the Company, all
contracts authorized by the Board of Directors or Executive
Committee; he shall affix the corporate seal of the company
thereto when so authorized by the Board of Directors or Executive
Committee; he shall have the custody of the corporate seal of the
company; he shall affix the corporate seal to all certificates of
stock duly issued by the company; he shall have charge of Stock
Certificate Books, Transfer books and Stock Ledgers, and such
other books and papers as the Board of Directors or the Executive
Committee may direct, all of which shall at all reasonable times
be open to the examination of any Director upon application at
the office of the company during business hours, and he shall, in
general, perform all duties incident to the office of Secretary.
SECTION 7. The Board of Directors may appoint an Assistant
Secretary who shall have such powers and perform such duties as
may be prescribed for him by the Secretary of the company or by
the Board of Directors.
SECTION 8. Unless otherwise ordered by the Board of
Directors, the President shall have full power and authority in
behalf of the company to attend and to act and to vote at any
meetings of the stockholders of any corporation in which the
company may hold stock, and at any such meetings, shall possess
and may exercise any and all rights and powers incident to the
ownership of such stock, and which as the new owner thereof, the
company might have possessed and exercised if present. The Board
of Directors, by resolution, from time to time, may confer like
powers on any person or persons in place of the President to
represent the company for the purposes in this section mentioned.
ARTICLE IV
CAPITAL STOCK
SECTION 1. The capital stock of the company shall be issued in
such manner and at such times and upon such conditions as shall
be prescribed by the Board of Directors.
SECTION 2. Ownership of stock in the company shall be
evidenced by certificates of stock in such forms as shall be
prescribed by the Board of Directors, and shall he under the seal
of the company and signed by the President or the Vice-President
and also by the Secretary or by an Assistant Secretary
All certificates shall be consecutively numbered; the name
of the person owning the shares represented thereby with the
number of such shares and the date of issue shall be entered on
time company's books.
No certificates shall be valid unless it is signed by the
President or Vice-President and by the Secretary or Assistant
Secretary.
All certificates surrendered to the company shall be
cancelled and no new certificate shall be issued until the former
certificate for the same number of shares shall have been
surrendered or cancelled.
SECTION 3. No transfer of stock shall be valid as against
the company except on surrender and cancellation of the
certificate therefor, accompanied by an assignment or transfer by
the owner therefor.
Whenever any transfer shall be expressed as made for collateral
security and not absolutely, the same shall be so expressed
in the entry of said transfer on the books of the company.
SECTION 4. The Board of Directors shall have power and
authority to make all such rules and regulations not inconsistent
herewith as it may deem expedient concerning the issue, transfer
and registration of certificates for shares of the capital stock
of the company.
The Board of Directors may appoint a transfer agent and a
registrar of transfers and may require all stock certificates to
bear the signature of such transfer agent and such registrar of
transfer.
SECTION 5. The Stock Transfer Books shall be closed for all
meetings of the stockholders for the period of ten days prior to
such meetings and shall be closed for the payment of dividends
during such periods as from time to time may be fixed by the
Board of Directors, and during such periods no stock shall be
transferable.
SECTION 6. Any person or persons applying for a certificate
of stock in lieu of one alleged to have been lost or destroyed,
shall make affidavit or affirmation of the fact, and shall
deposit with the company an affidavit. Whereupon, at the end of
six months after the deposit of said affidavit and upon such
person or persons giving Bond of Indemnity to the company with
surety to be approved by the Board of Directors in double the
current value of stock against any damage, loss or inconvenience
to the company which may or can arise in consequence of a new or
duplicate certificate being issued in lieu of the one lost or
missing, the Board of Directors may cause to be issued to such
person or persons a new certificate, or a duplicate of the
certificate, or a duplicate of the certificate so lost or
destroyed. The Board of Directors may, in its discretion refuse
to issue such new or duplicate certificate save upon the order of
some court having jurisdiction in such matter, anything herein to
the contrary notwithstanding.
ARTICLE V
OFFICES AND BOOKS
SECTION 1. The principal office of the corporation, in
Nevada shall be at 1700 E. Desert Inn Rd. Suite 403, 89109 and
the company may have a principal office in any other state or
territory as the Board of Directors may designate.
SECTION 2. The Stock and Transfer Books and a copy of the By-
Laws and Articles of Incorporation of the company shall be kept
at the office of its Resident Agent, Shawn F. Hackman 1600 E.
Desert Inn Rd. Suite 102, Las Vegas in the County of Clark, State
of Nevada, for the inspection of all who are authorized or have
the right to see the same, and for the transfer of stock. All
other books of the company shall be kept at such places as may be
prescribed by the Board of Directors.
ARTICLE VI
MISCELLANEOUS
SECTION 1. The Board of Directors shall have power to
reserve over and above the capital stock paid in, such an amount
in its discretion as it may deem advisable to fix as a reserve
fund, and may, from time to time, declare dividends from the
accumulated profits of the company in excess of the amounts so
reserved, and pay the same to the stockholders of the company,
and may also, if it deems the same advisable, declare stock
dividends of the unissued capital stock of the company.
SECTION 2. No agreement, contract or obligation (other than
checks in payment of indebtedness incurred by authority of the
Board of Directors involving the payment of monies or the credit
of the company for more than dollars) shall he made without the
authority of the Board of Directors, or of the Executive
Committee acting as such.
SECTION 3. Unless otherwise ordered by the Board of
Directors, all agreements and contracts shall be signed by the
President and the Secretary in the name and on behalf of the
company, and shall have the corporate seal thereto attached.
SECTION 4. All monies of the corporation shall be deposited
when and as received by the Treasurer in such bank or banks or
other depository as may from time to time be designated by the
Board of Directors, and such deposits shall be made in the name
of the company.
SECTION 5. No note, draft, acceptance, endorsement or other
evidence of indebtedness shall be valid or against the company
unless the same shall be signed by the President or a Vice-
President, and attested by the Secretary or an Assistant
Secretary, or signed by the Treasurer or an Assistant Treasurer,
and countersigned by the President, Vice-President, or Secretary,
except that the Treasurer or an Assistant Treasurer may, without
countersignature, make endorsements for deposit to the credit of
the company in all its duly authorized depositories.
SECTION 6. No loan or advance of money shall be made by the
company to any stockholder or officer therein, unless the Board
of Directors shall otherwise authorize.
SECTION 7. No director nor executive officer of the company
shall be entitled to any salary or compensation for any services
performed for the company, unless such salary or compensation
shall be fixed by resolution of the Board of Directors, adopted
by the unanimous vote of all the Directors voting in favor
thereof.
SECTION 8. The company may take, acquire, hold, mortgage, sell,
or otherwise deal in stocks or bonds or securities of any
other corporation, if and as often as the Board of Directors
shall so elect.
SECTION 9. The Directors shall have power to authorize and
cause to be executed, mortgages, and liens without limit as to
amount upon the property and franchise of this corporation, and
pursuant to the affirmative vote, either in person or by proxy,
of the holders of a majority of the capital stock issued and
outstanding; the Directors shall have the authority to dispose in
any manner of the whole property of this corporation.
SECTION 10. The company shall have a corporate seal, the
design thereof being as follows:
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 1. Amendments and changes of these By-Laws may be made at
any regular or special meeting of the Board of Directors by a
vote of not less than all of the entire Board, or may be made by
a vote of, or a consent in writing signed by the holders of 77%
of the issued and outstanding capital stock.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned,
being the directors of the above named corporation. do hereby
consent to the foregoing By-Laws and adopt the same as and for
the By-Laws of said corporation.
IN WITNESS WHEREOF we have hereunto act our hands this 8th
day of November, 1991.
