As filed with the Securities and Exchange Commission on May 11, 1999
Registration No.__________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act
of 1934
EURO TRADE & FORFAITING, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0571580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4835 NORTH O'CONNOR, SUITE 134-136 IRVING, TEXAS 75062
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code: (817)267-1866
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
<PAGE>
EURO TRADE & FORFAITING, INC.
FORM 10
TABLE OF CONTENTS
PAGE
----
ITEM 1. Business...........................................................3
ITEM 2. Financial Information.............................................15
ITEM 3. Properties........................................................23
ITEM 4. Security Ownership of Certain Beneficial
Owners and Management...........................................24
ITEM 5. Directors and Executive Officers..................................25
ITEM 6. Executive Compensation............................................26
ITEM 7. Certain Relationships and Related Transactions....................27
ITEM 8. Legal Proceedings.................................................27
ITEM 9. Market Price of and Dividends on Registrant's
Common Equity and Related Stockholder Matters...................27
ITEM 10. Recent Sales of Unregistered Securities...........................28
ITEM 11. Description of Registrant's Securities to be
Registered......................................................29
ITEM 12. Indemnification of Directors and Officers.........................30
ITEM 13. Financial Statements and Supplementary Data.......................31
ITEM 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..........................31
ITEM 15. Financial Statements and Exhibits.................................32
Signatures .................................................................S-1
-2-
<PAGE>
FORM 10
ITEM 1. Business
History of Business
Euro Trade & Forfaiting, Inc. (the "Company") was incorporated as
Rotunda Oil and Mining, Inc. on November 19, 1980 under the laws of the State of
Utah. The Company was originally formed to engage in the oil and gas, uranium
and hard rock mining business for profit. Within approximately two years, the
Company abandoned its pursuit of mining interest and remained inactive for
several years. In approximately 1996, the Company became engaged in the
development of the "Gas Hands" product. Gas Hands is a moist towelette to be
sold at gasoline service stations and convenience stores and is used to remove
and clean gasoline odors and residue from the customers' hands as they refuel.
The Company entered into a license agreement with the inventor of Gas Hands and
in September 1997, sold an exclusive distributorship for the product in the
Nevada and Arizona markets. However, in 1998 the project was abandoned and all
rights to the Gas Hands product were assigned by the Company.
On November 20, 1998 the Company entered into an Acquisition Agreement
and Plan of Reorganization (the "Agreement") with Euro Trade & Forfaiting
Company Limited, a privately held limited company based in, London, England
("Euro Trade Limited"). Pursuant to the Agreement, the Company acquired 100% of
the capital stock of Euro Trade Limited for 11,000,000 shares of Company's
authorized but previously unissued common stock. The acquisition was accounted
for as a recapitalization of Euro Trade Limited and all of Euro Trade Limited's
common shares were converted into shares of the Company. Euro Trade Limited
became a wholly owned subsidiary of the Company and the Company also changed its
name to Euro Trade & Forfaiting, Inc.
Euro Trade Limited was organized in the United Kingdom on February 25,
1997, for the purpose of servicing trade financing activities in the business
world. Euro Trade Limited's core business is based on non-recourse financing of
trade receivables. Euro Trade generates revenues by arranging and taking into
its portfolio non-recourse trade finance transactions and selling them into the
secondary market. These receivables are known as "forfaiting assets."
Euro Trade Limited was originally founded primarily to service the $1.5
billion trade finance requirements of its founding shareholders. In February
1997 Multikarsa Investama ("Multikarsa") established Euro Trade Limited with a
capitalization of $25 million dollars. Multikarsa is a holding company with
interests in many international companies. Euro Trade Limited's founders
-3-
<PAGE>
intended that business not only would support the import-export requirements of
companies wherein Multikarsa had a financial interest, but also develop a
separate trade finance activity. When the problems of the Asian emerging market
economies developed in the third and fourth quarters of 1997, Euro Trade Limited
shifted its focus to trade finance activity, drawing increasingly on the
contacts and trade finance experience of its management team.
Upon the closing of the Agreement and the exchange of 100% of the
shares of Euro Trade Limited for the Company's common stock, Multikarsa assigned
all rights to its shares to two separate investment companies, Collingwood
Investments Limited, a Bahamas company, and North Cascade Limited, a British
Virgin Island company. Thereafter, Multikarsa, as an entity, had no direct
ownership or management control in the Company.
Description of Business
The Company's primary business is trade finance. The Company employs
banking professionals with experience across a broad range of disciplines. These
professionals structure customized trade finance solutions for the Company's
clients, both importers and exporters. The Company is actively engaged in the
business of forfaiting trade receivables (see below), arranging debt for equity
swaps and debt for commodity swaps.
Although the Company's central businesses are in structured and
non-recourse trade financing of trade receivables, it has also begun refinancing
distressed trade debt held by international banks and financial institutions.
The Company has arranged and closed transactions exceeding $200 million since it
commenced dealing in trade receivables in 1997. Management believes that the
Company was not affected as severely as many of its competitors by the
deterioration in world economic conditions during 1997 and 1998. However, the
economic events did cause management to lower market valuations of some of some
of the assets it held, and made loss provisions of $5.7 million in 1998.
Services provided by the Company are detailed below.
Forfaiting
The Company's primary business is forfaiting. Forfaiting involves the
refinancing of trade receivables on a discount basis without recourse to the
previous holder. This financial service is available in all major currencies for
export contracts in excess of $250,000. Depending on transaction parameters,
such as country and bank risk, the financing periods range between a few months
and several years.
-4-
<PAGE>
The Company's primary market forfaiter is responsible for all normal
due diligence including documentary checks, and for ensuring that the
transaction is a bona fide and negotiable transaction. Forfaiting requires the
participants to act as principals and not brokers. This is necessary because of
the documentary complexity of each transaction and the impossibility of matching
buyers in the secondary market and sellers in the primary market in a time
efficient fashion.
The forfaiting market relates more to the individuals involved than to
the corporate or banking entities for whom they work. The Company estimates that
300 organizations, mainly international banks with departments of between five
and twenty people, participate in this aspect of trade finance. Bills of
exchange or promissory notes, referred to as assets, are placed in the secondary
market with over 1,000 banks and similar financial institutions participating
worldwide.
Forfaiting is based on non-recourse financing of trade receivables.
Non-recourse, in this instance, means that each purchaser of the assets in turn
relies on the ultimate obligor and gives up the right normally associated with
trade finance of having recourse to the previous holder. Its principal
characteristics are as follows:
* Transactions are normally comprised of bills of exchange drawn and
accepted under a letter of credit or promissory notes issued by an
importer. Bills of exchange are negotiable instruments drawn on the
importer/obligor by the exporter and returned to the exporter as the
payment mechanism for the underlying obligation of the importer. The
usual size of transaction ranges from $l,000,000 to $5,000,000.
* Bills of exchange or promissory notes are normally "avaled" by the
importer's bank. An aval is a guarantee, usually a bank guarantee that
is separate from the underlying trade contract. Bills of exchange are
usually issued in hard currencies such as U.S. Dollars, Deutsch Marks
and other recognized currencies.
* A series of notes are issued in relation to each export transaction.
These notes typically mature at six monthly intervals over periods from
six months to five years. Due to increasingly difficult market
conditions, the Company trades in shorter term trade letters of credit,
generally six to twelve months.
* Bills of exchange or promissory notes are priced relative to the
average life London Interbank Offering Rate (LIBOR), plus a margin to
-5-
<PAGE>
reflect the credit risk and are discounted through maturity. This is an
imperfect market however, and two-way prices are not quoted.
Income from forfaiting comes from fees relating to the negotiation of
the transaction and capital gains on the sale of the assets. Capital gains are
the result of an improvement in the perceived credit risk or because of a
downward movement in interest rates during the period the assets are held in the
portfolio. The Company also earns a yield over and above the carrying costs of
the assets to maturity. The Company, through its team of professional bankers,
believes that it has established good relationships with banks and corporations
in Europe and the Far East.
Structured Trade and Commodity Finance
The Company's other core business is the pre-export and specialized
financing of commodities to well established small and medium size trading
companies. The Company may arrange financing for trade from and to countries
where traditional trade financing arrangements are not available.
The Company works with traders and manufacturers world-wide to provide
'pre' and 'post' shipment financing in emerging markets. Pre-shipment financing,
short-term funding to finance the inventory and production costs includes
tolling facilities, pre production finance, ex-works, on rail, in-warehouse and
on-board financing. The Company also participates in structured trade and
commodity transactions with banks and financial institutions.
Trade finance is an area of economic activity that has enjoyed
consistent growth over the last 50 years. However, the Company's management
knows of no statistics on this part of the trade finance market reflecting
either the volume of transaction or the market share of individual participants.
In the 1960's and 1970's the source of bills of exchange or promissory notes in
this market was from capital goods' exporters in Europe. These assets entered
the secondary market either through the exporter's bank, or in some countries,
through brokers. In recent years the market has developed to source paper from
the developing markets and to deal with other forms of financial transactions
not necessarily trade related. Trade finance is unregulated in the United
Kingdom, and is less subject to rescheduling when a creditor country has
external payment problems. Furthermore, trade related assets are usually priced
at a premium, compared to other financial assets with a similar risk profile.
-6-
<PAGE>
Distressed Debt Refinancing
The Company has launched a program to arrange the purchase of prime
bank obligations at prices significantly higher than their present market value.
The primary purpose of these purchases is for swapping into equities or
commodities that the Company has purchased at a deep discount to the market. The
difference between the purchase price for the prime bank obligations, although
greater than the normal market value, and the sale or swap price at current
market value of the basket of equities or commodities which the Company obtained
at lower prices, generates the profit margin for the Company.
Market Background
Management believes that it is generally known that since the autumn of
1997, the global economy has experienced tremendous turmoil. This has especially
effected the emerging markets. Many analysts forecast that, in the coming year
there will be a slowdown in economic growth for both the developed and the
developing markets. This can already be seen in the reduction in capital goods'
exports from the stronger economies to the emerging markets. Also, many emerging
market exporters have been impacted and are experiencing a sharp fall in their
export prices. The major world financial markets reflect these events and
international financial institutions, such as the International Monetary Fund
("IMF") and the World Bank, have only a limited ability to deal with the
problems created in the current economic climate. Adding to the uncertainty is
the introduction of a major New World currency, the Euro.
Market Outlook
The Company's management believes that there is an increasing need for
banking institutions to support the stability of developed and developing
economies and help maintain their most important trade relationships. As the
distressed emerging economies seek to trade their way out of recession, they
will put particular emphasis on building and maintaining solid trade finance
facilities. Meanwhile there has been a reduced interest in emerging market
financial paper in banking and equity investment institutions. This is expected
to remain at a reduced level for at least the next year.
The Company believes the likelihood of reduced interest rates in
several of the major currencies will increase, as the fear of inflation becomes
less of a concern than the stability of the financial markets. Investment in
emerging markets will continue to be revalued at lower levels, and should
therefore give rise to higher yields. Many banks in emerging markets are likely
-7-
<PAGE>
to sell their international assets to increase their liquidity as they face the
need to make higher provisions on their domestic loan portfolios. Primary
commodity exporters in particular will need to manage their liquidity more
stringently.
In countries such as Japan and Korea, capital goods' exporters and
their banks may seek to liquidate some of their trade receivables in order to
provide working capital for their ongoing businesses.
Employees
As of the date hereof, the Company employed eight full-time
individuals, consisting of one executive officer, three market traders and four
office staff personnel. In addition to its full-time employees, the Company may
use the services of consultants on a contract basis as necessary. Management
considers the relations between the Company and its employees to be good.
Competition
To the best knowledge of the Company, the only other publicly held
company in this market is London Forfaiting Company PLC. This company has a
capital base of over $264 million, a staff of 200 and turnover in 1998 of about
$2.8 billion. This company is the only public source of financial information in
this industry and is arguably the biggest participant. Other major competitors
in this market include Standard Bank London Ltd., Westdeutsche Landesbank
(formerly West Merchant Bank), HSBC and Deutsche Bank.
Proposed Developments
The Company has existing contacts in the primary market and
distribution to the secondary market for both of its core businesses, structured
trade and commodity finance and non-recourse finance. The Company intends to
apply its skills in trade finance selectively to both expand these core
businesses and develop new niche businesses that have been identified as natural
extensions of the core business. Management believes that these developments
would:
* Take advantage of the present world economic situation and the
existing perceived weakness of the competition, to develop the primary
market penetration of the core businesses. This would give the Company
the opportunity to earn higher fees and capital gains by dealing direct
with capital goods' and commodity exporters in countries where the
local banking system may be too illiquid to provide more traditional
methods of financing. Initially the Company would market direct from
-8-
<PAGE>
London to the European market and establish regional offices to
identify and develop relationships with exporters in Asia and the
Americas. These regional offices would also establish relationships
with a limited number of local banks and brokers with good local
corporate contacts. As a first step, the Company is presently
negotiating a joint venture in the Far East.
* Develop the structured trade and commodity finance operation
concentrating on both high value products and markets where traditional
finance methods are not available. Management will focus on established
smaller and medium sized trading companies and undertake only the most
secure transactions. Transactions, such as pre-export finance and
countertrade can lead to high margin banking returns and fee income.
However these transactions are often complex and require flexible and
innovative financing arrangements.
* Enable the Company to purchase trade receivable assets at favorable
prices from distressed banks in certain developing countries and
liquidate these investments, either through arranging structured trade
finance deals or undertaking debt/equity swap business. This is similar
to re-scheduled debt developed in Latin America and Poland during the
mid 1980's. This business may concentrate initially on countries such
as Indonesia where the Company has strong existing relationships.
Although many of these activities are primarily fee generating, profits
will also be made from participating in the underlying transactions.
The Company has been advised that its core businesses do not require
supervision from the Financial Services Authority. However some of the
proposed development activities may require clearance from or
supervision by the United Kingdom regulatory authorities.
Operations and Finance
Management believes that it is important to maintain a system of
internal controls to manage and communicate with the Company's traders. An
experienced trader in the Company can complete an average of about two
transactions per week. Speed of reaction to change and new business inquiry is a
key ingredient to success in this market, which requires short reporting lines
and a pro-active credit research function.
The Company's trading teams use their skills and experience to source,
price and structure transactions and to develop secondary market buyers. This
ability to place an asset in the secondary market plays an important part in
reducing many of the risks associated with carrying the assets in the portfolio,
including asset concentration and interest rates.
-9-
<PAGE>
The potential profitability of the Company's transactions are
influenced by the credit research function. In addition to reviewing
"counterparty" (a buyer or seller of assets or obligations with another party)
and individual credit risks, credit research maintains a constant review of
emerging market risks. Researchers must be able to identify improving and/or
deteriorating economic situations to ensure that purchases and sales of assets
are made in a timely fashion. Also, in order to minimize interest rate risk,
researchers also provide advice on the interest rate outlook for the world's
major currencies.
Trading limits, internal controls and accounting principals that have
been adopted by the Company are similar to those applicable to a small merchant
bank. Valuation of assets in the Company's portfolio, which assets are typically
unquoted and trade only in a limited market, necessarily depends on input from
the Company's directors. Management must also keep current internal financial
information concerning the Company's business including normal budgeting
procedure and production of daily and monthly management accounting data.
The size of the Company's portfolio varies considerably from
month-to-month depending on both deal flow and the Company's views on the
interest rate and macro economic outlooks. Management believes, base on past
experience, that in the primary market, the holding period for assets is often
two to three months before an asset can be safely and profitably sold. This
reality determines the minimum level of the Company's portfolio. Size of the
portfolio is also constrained by the need to act within prudent leverage limits.
Risk Management
General
Trade finance is one of the oldest banking finance activities. Risks
associated with the Company's business are those most usually associated with
and undertaken within a bank. Therefore, control mechanisms for monitoring and
limiting these risks are based on controls that would be expected of a small
merchant banking operation. However it must be emphasized that due to the
trading nature of the Company's business, it must rely on its speed of reaction
to customer inquiry and changes in market conditions to achieve profitability.
These prerequisites require a flexible management structure with short reporting
lines.
Because the Company is not a deposit taking institution and trades only
with professional counterparties, the Financial Services Authority's ("FSA")
banking supervision department does not monitor its business. In the event the
-10-
<PAGE>
Company begins dealing in financial instruments such as bonds and equities,
management believes that the Company's business would become under the
supervision of the FSA.
Risk Categories
* Transactional. Non-recourse trade finance purchases are frequently made
"subject to documentation" and sometimes pay under reserve before the
documentation is finally approved. This requires the Company to have good
technical skills, financial reliability and probity of its counterparties. It is
also common practice to commit to purchase a transaction from an exporter at a
pre-determined rate of interest and to hold the commitment open for a period to
allow the exporter to negotiate its contract with the importer. These
commitments are fee earning and require the Company to take an informed view of
the interest rate outlook in the particular currency concerned. The primary
forfaiter also has the duty to know his customer and ensure that the underlying
transaction is bona fide. In the event of fraud, the "non-recourse" element of
the transaction is nullified and each party may proceed against the person from
whom they purchased the commitment. Each transaction has different documentation
covering such matters as the importer's legal right to import the equipment and
to finance the deal. The primary forfaiter will need to check the importer's
bank's ability to guarantee the transaction and the confirmation that the
financial obligation of the importer and his bank are abstract from the
performance of the underlying contract for delivery of goods.
* Portfolio Management. The Company's portfolio of trading assets is made up
of bills of exchange, promissory notes and other negotiable trade finance
instruments denominated in "hard" currencies. The great majority of these
instruments are purchased on the basis of discounting through to maturity for
periods of six months to five years. Prudent management demands that currency
and interest rate risks are minimized. The Company assesses these credit risks
on a daily basis to ensure that the it buys into improving risk categories and
sells assets in potentially deteriorating categories early to avoid potential
illiquidity. In addition to the day-to-day maintenance of the trading assets
portfolio, it is necessary to maintain adequate liquidity to purchase new
transactions as they arise. Although the Company's capital base provides
underlying funding for the portfolio, it is important to maintain adequate
funding facilities to permit prudent planning for such an operation. Management
believes that this is approximately three times its capital and reserves. In
difficult market conditions, it may be necessary to seek secured credit lines or
to maintain a higher level of short-term liquidity.
-11-
<PAGE>
* Contingent Liabilities. It is common market practice from time-to-time to
issue confirmations of letters of credit and to enter into "repo" facilities
with other market participants to borrow or lend transactions. These reciprocity
arrangements make it possible for the parties to spread and share the risk. Such
arrangements are only entered into with known and reliable counterparties.
* Structured Trade Finance. This activity is primarily fee based and
therefore less reliant on using the Company's balance sheet. Many of the
transactions are secured by cash deposits, liens over the assets being financed,
or a third party letter of credit. However, the business does involve the
Company in several contingent liabilities related to both the clients'
management skills and experience in performing their contractual obligations and
the reliability of the documentation.
Internal Controls
* Transaction Approval. All existing or potential new counterparties are
subjected to a credit approval procedure by the Company's research department.
Credit limits are then established for the counterparty. These limits will be
authorized by two signatories including one from the research department and at
least one other designated signatory. A form will evidence each inquiry
concerning a potential transaction. All written indication quotations in
response to an inquiry must be signed by at least two designated signatories.
All firm quotes must be signed by at least one designated signatory and may only
be given after the credit has been approved (see below). After the purchase of
the transaction has been approved and the commitment confirmed to the seller by
at least one designated signatory, the underlying internal accounting
documentation must be signed by at least two designated signatories. All
correspondence confirming the sale of assets must be signed by at least one
designated signatory.
* Credit. All new deal "inquiries" are copied to the credit research
department for appraisal. In the highly competitive non-recourse market, speed
of response to inquiries is critical to success in bidding for transactions. The
three main areas of risk to be appraised are (i) country risk, (ii) bank risk,
and (iii) on an infrequent basis, corporate risk. Credit limits are established
for certain countries and for banks within those countries to provide the
trading desk with guidelines for transactions up to a certain size. The research
facility has access to up-to-date information regarding current situation in all
relevant countries and maintains a database on banks within those countries.
This information is augmented by the appointment of selected advisors covering
countries of particular interest and by regular appraisal visits. Once the
-12-
<PAGE>
creditworthiness of a transaction is investigated, the trading team approves the
transaction and then the head of trading must approve the transaction based on
salability. This procedure is designed to guard against an illiquid portfolio.
* Structured Trade Finance. The credit research department analyzes each
transaction and the individual risk components are assessed. Research of the
prospective transaction, a designated signature from the trading team and credit
approval must be completed before a commitment is made to the client.
* Portfolio Management. The research department maintains a continuous
review of all risks pertaining to the portfolio as well as an active review of
emerging markets generally. They seek to identify as early as possible both
improving and deteriorating risks and advise the trading team accordingly.
Country and bank credit limits for the trading team are adjusted on a day-to-day
basis and authorized in writing by the head of research and a designated
signatory. All new inquiries are evaluated against existing portfolio assets as
to profitability. The interest rate risk arising from the fixed interest nature
of the portfolio assets are minimized both by constant turnover and, where
deemed prudent, by entering into interest rate swaps or forward rate agreements
for the relevant currencies. The heads of trading and research make decisions on
interest rate swaps and forward rate agreements on a day-to-day basis and,
currencies are considered in light of interest rate trends. Management believes
that it is not cost effective to hedge the portfolio. All currency exposure on
the portfolio is matched daily either through borrowings or through currency
swaps. The Board reviews the outstanding commitments to purchase new deals, on a
daily basis to ensure that adequate room exists in the portfolio to fulfill
these obligations. This may require existing assets to be sold. The Board also
needs to ensure that adequate liquid resources exist to finance the purchase of
new deals in all market circumstances.
* Treasury. The trading team is informed daily of upcoming asset purchases
and sales in order to plan the necessary financing and foreign exchange cover.
The treasury back-up team checks all treasury transactions initiated by the
treasurer. Confirmations of individual treasury transactions are sent to
counterparties daily. All payment and receipt instructions are confirmed by a
secure coded telex and independently checked by a signatory outside the treasury
requirements. The accounts department provides daily treasury position sheets.
The treasury back up team reconciles the bank accounts on a weekly basis which
requires a designated signatory.
-13-
<PAGE>
Finance
The basis of the production of all day-to-day management accounting
information relating to the trading activities is the "Rohirst" (trade name)
software program. This program has been developed to not only undertake the
onerous calculations needed to price the purchase and sale of deep discounted
assets, but also to provide daily summaries of the following:
* Detailed listing of deals by obligator including exposure
reports.
* Interest accruals on both assets and borrowings.
* Control account summaries.
Maturity Reports Covering Both Assets and Borrowings
The Company' secretary/treasurer is responsible for preparing budgets
and profit forecasts in conjunction with the Board. All portfolio risk exposure
and treasury positions are prepared daily and profit and loss accounts,
including updates of market values, are produced monthly.
Financial Information About Geographic Areas
The Company's operations are conducted within one business segment, the
financing of international trade credit for financial institutions and operating
companies. All of the Company's total business operations are conducted outside
of the United States.
The Company's operation are conducted in the United Kingdom. Trading is
conducted through financial institutions in other countries.
The composition of the notes by country of the issuing financial
institution is as follows:
Country Year end from inception
June 30, 1998 February 25 to
June 30 1997
- --------------------------------------------------------------------------------
Turkey 5.7% 80.3%
Russia 8.6 -
Ukraine 5.0 -
Czech Republic 11.6 -
Indonesia 57.8 -
Nigeria 11.3 -
Thailand - 12.5
Japan - 7.2
Total 100.0% 100.0%
- --------------------------------------------------------------------------------
-14-
<PAGE>
ITEM 2. Financial Information
Selected Financial Data
The selected consolidated financial data set forth below have been
derived from the Company's financial statements. This data should be read in
conjunction with the Company's consolidated financial statements and notes
thereto, with Management's Discussion and Analysis of Financial Condition, and
with the other financial information of the Company included elsewhere herein.
The selected consolidated statements of operations data for the six
month period ended December 31, 1998 and years ended June 30, 1998 and 1997, and
the selected consolidated balance sheet data as of December 31, 1998, June 30,
1998 and 1997 are derived from and are qualified by reference to, the audited
financial statements of the Company appearing elsewhere in this registration.
The results of operations are not necessarily indicative of results to be
expected for any future period.
Consolidated Statement of Operations:
(Dollars in Thousands)
Six Months
Ended Year Ended June 30, 1998
December 31, --------------------------------------------
1998 1998* 1997* 1996 1995 1994
-------- -------- -------- -------- -------- ------
Revenue $ 3,770 $ 5,216 $ 460 $ -0- $ -0- $ -0-
Operating Expenses 1,324 3,258 88 -0- -0- -0-
Loss Provisions 6,950 68
Net Income (Loss) 2,446 (4,922) 304 -0- (3) (3)
<TABLE>
Consolidated Balance Sheets:
(Dollars in Thousands)
<CAPTION>
Six Months
Ended Year Ended June 30, 1998
December 31, ---------------------------------------------------------
1998 1998* 1997* 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Current Assets $ 31,638 $ 34,040 $ 9,453 $ -0- $ -0- $ -0-
Total Assets 35 35,516 9,456
Current Liabilities 12,123 15,177 9,152
Long Term Debt 34 27 -0-
Common Stock 17 9,250 9,250 19 19 19
Paid in Capital 25,263 750 750 36 36 36
Retained Deficit (2,309) (4,688) 304 (55) (55) (52)
</TABLE>
* Effect given to the recapitalization as if it had occurred
July 1, 1996.
-15-
<PAGE>
Rotunda Oil & Mining, Inc. was a development stage company
from its inception at November 19, 1980 until its acquisition of
Euro Trade Limited on November 20, 1998.
Euro Trade Limited was chartered in the United Kingdom on February 25,
1997 and operated as a United Kingdom limited company until it was acquired on
November 20, 1998. The Company and its subsidiary were recapitalized into a new
corporate structure on November 20, 1998. The transactions were accounted for as
a statutory merger. On the date of the acquisition, Rotunda Oil & Mining, Inc.
had substantially the same consolidated net worth as Euro Trade Limited prior to
the reorganization.
Subsequent to the acquisition, the Company raised funds through a
private placement offering pursuant to an exemption contained in regulation D,
Rule 504, promulgated under the Securities Act of 1933, as amended. The Company
sold 3,979,750 shares at a price of $.05 per share. The offering was closed on
December 2, 1998.
On December 14 1998, John Vowell, the Managing Director of the Company,
exercised warrants for 750,000 shares of the Company's common stock under an
employee stock-compensation plan regulated in the United Kingdom.
Management's Discussion and Analysis of Financial condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Form 10.
Rotunda Oil & Mining Company was a development stage company in 1996.
Euro Trade Limited began operations on February 25, 1997. Inclusion of financial
information prior to February 1997 is not believed to be material and is
therefore omitted.
Results of Operations
Acquisitions
The Company continues to pursue strategic alternatives to maximize the
value of its portfolio of businesses. Some of these alternatives have included,
and will continue to include selective acquisitions, divestitures and sales of
certain assets. The Company has provided, and may from time to time in the
future, provide information to interested parties regarding portions of its
businesses for such purposes.
-16-
<PAGE>
The following table sets forth the percentage relationship to total
revenues of principal items contained in the Company's Consolidated Statements
of Operations for the six month period ended December 30, 1998 and the two most
recent fiscal years ended June 30, 1998 and 1997. It should be noted that
percentages discussed throughout this analysis are stated on an approximate
basis.
Six Months Ended
December 31, December 31,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Total revenue .......... 100% 100% 100% 100%
Costs of Revenues
Interest ............. 11 8 21 --
Provisions for Losses. -- -- 133 15
Gross Profit (Loss) .... 89 92 (54) 85
Selling, General and
Administrative Expenses 24 19 42 19
Net Income (Loss) ...... 65 73 (96) 66
For the six month period ended December 31, 1998 compared to the six month
period ended December 31, 1997.
The Company (Euro Trade Limited) began operations on February 25, 1997.
For the period ended December 31, 1997 the Company generated $4.0 million in
revenue, $2.5 million from interest and fees, and $1.5 from the sale of
portfolio assets.
For the period ending December 31, 1998 the Company generated $3.7
million in revenue, $2.0 million from interest and fees, and $1.7 from the sale
of portfolio assets. The volume of operating revenues was reduced because of the
reduction of assets resulting from loan losses and asset sales.
Cost of revenue consisted solely of interest of $303 and $404 thousand
dollars in the period ending December 31, 1997 and 1998 respectively. The 33%
increase for the 1998 period was due to higher interest costs.
Selling general and administrative expenses were principally from
selling costs and related salaries and costs. Selling general and administrative
expenses were $780 and $920 thousand in the period ending December 31, 1997 and
1998 respectively. The 18% increase for the 1998 period was attributed to
increased employee costs due to an expansion of staff. Expenses in the
succeeding periods will be substantially higher primarily due to increased
selling volume and related expenses.
-17-
<PAGE>
For the year ended June 30, 1998 compared to the year ended June 30, 1997.
Revenues for 1998 increased to $5.2 million from $1.4 million in 1997
on annualized basis. Sales increased primarily due to implementation of the
Company's fundamental operating plan.
Cost of revenue for 1998 increased to $8.0 million from $68,000 in 1997
on an annualized basis. The increases in cost of revenues reflect the increased
operating activity and $7.0 million in loan loss reserves charged to income.
Depreciation expense was $20,000 in 1998.
Selling, administrative and general expenses for 1998 increased to $2.2
million in 1998 from $88,000 in 1997 also due to the increased operating
activity in 1998. These expenses are primarily personnel and occupancy costs.
Interest expense increased to $1.1 million in 1998 from $0 in 1997
reflecting the implementation of management's operation plan and increased
operating activity.
No net tax provision has been made for 1998 or 1997 respectively, based
on pre-tax operation losses. The Company pays taxes under both the United
Kingdom and United States tax laws.
Net loss in 1998 totaled $4.9 million or $.20 per share of common
stock. Net income in 1997 totaled $304 thousand or income of $.01 per share of
common stock.
Liquidity and Capital Resources
Short term trading investments and related short-term borrowings are
reported as cash flow from operating activities. Working capital accounts
(excluding cash short term investments, short term borrowings and current
maturities of long term debt) increased by $20 million including an increase of
$13.6 million of forfaiting assets before $7.0 million in allowances for loan
losses due to the financial crisis in Russia and Asia. Trade payables decreased
$917,000 due to $25 million from the initial capitalization of Euro Trade. Net
cash flow from financing activities totaled $6.6 million net of Euro Trade's
credit arrangements with financial institutions. $27 thousand of long-term debt
was utilized for purchase of office equipment.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
-18-
<PAGE>
Year 2000
Year 2000 issues may arise if computer programs have been written using
two digits (rather than four) to define the applicable year. Thus, on January 1,
2000 any clock or date recording mechanism including date sensitive software
that uses only two digits to represent the year, may recognize a date of 00 as
1900 instead of 2000. This could result in a system failure or miscalculations
causing disruption of operations, including among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activity.
Management believes that the Company's equipment currently in operation
including fax machines and personal computers, will function properly with
respect to dates in the year 2000. It is the Company's policy that all equipment
and software purchased will be year 2000 compliant.
Failure to correct a year 2000 problem could result in an interruption
of certain normal business activities or operations. Management does not expect
any issues that would cause such an interruption. The Company believes that
interruption from year 2000 problems will be minimal. The Company has not
developed any contingent plans regarding failure of any year 2000 operation of
the business. No substantial capital and maintenance expenditures will be
required to maintain and, or, upgrade operating facilities to remain competitive
and to comply with environmental requirements. The Company is not subject to the
Clean Air Act or its amendment of 1990.
The Company is in the process of contacting all of it significant
business contacts to determine the extent to which the Companies interface with
the contacts make it vulnerable to any third party failure to make their own
systems year 2000 compliant. At this time, the Company cannot estimate the
effect, if any, that non-compliant systems at these entities will have on the
Company's business, operating results and financial condition.
The total cost associated with required modifications to become year
2000 compliant is not expected to be material to the Company's financial
condition or results of operations. No funds are currently being provided to the
project.
Risk Factors and Cautionary Statements
This registration statement contains certain forward-looking
statements. The Company wishes to advise readers that actual results may differ
substantially from such forward-looking statements. Forward-looking statements
-19-
<PAGE>
involve risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements, including, but
not limited to, the following: trading market risks, currency fluctuations, wold
economic conditions and risks generally associated with the trading of financial
instruments.
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share" and
Statement of Financial Accounting Standards No. 129 "Disclosures of Information
About an Entity's Capital Structure." SFAS No. 128 provides a different method
of calculating earnings per share than is currently used in accordance with
Accounting Principles Board Opinion No. 15, "Earnings Per Share." SFAS No. 128
provides for the calculation of "Basic" and "Dilutive" earnings per share. Basic
earnings per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity, similar to
fully diluted earnings per share. SFAS No. 129 establishes standards for
disclosing information about an entity's capital structure. SFAS No. 128 and
SFAS No. 129 are effective for financial statements issued for periods ending
after December 15, 1997. Their implementation is not expected to have a material
effect on the financial statements.
The FASB has also issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributors to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that displays with the same prominence as other financial
statements. SFAS No. 131 supersedes SFAS No. 14 "Financial Reporting for
Segments of a Business Enterprise." SFAS No. 131 establishes standards on the
way that public companies report financial information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosure regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of a company about which separate financial information is available
-20-
<PAGE>
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Management believes that the implementation of the
new standards will not have a material effect on the Company's financial
statements.
The FASB has also issued SFAS No 132. "Employers' Disclosures about
Pensions and other Postretirement Benefits," which standardizes the disclosure
requirements for pensions and other Postretirement benefits and requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis. SFAS No. 132 is effective
for years beginning after December 15, 1997 and requires comparative information
for earlier years to be restated, unless such information is not readily
available. Management believes the adoption of this statement will have no
material impact on the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Management believes the adoption of this
statement will have no material impact on the Company's financial statements.
Quantitative And Qualitative Disclosures About Market Risk
Foreign Currency Exchange Rate Risk
The Company is subject to the risk of price fluctuations related to
anticipated revenues, operating costs and expenditures incurred in currencies
other than US dollars. The Company has not generally used derivative instruments
to manage this risk.
Equity Price Risk
The Company is not currently subject to equity price risk resulting
from investments in marketable equity securities of unrelated parties. Any
future investments will be accounted for in accordance with Statement of
-21
<PAGE>
Financial Accounting Standards No. 115. Accounting for Certain Investments in
Debt and Equity Securities "SFAS 115".
The Company has financed its operations primarily through private sales
of equity and short-term bank loans. For the six months ended December 31, 1998
the Company raised $198,987.50 in cash from the sale of its stock through a
private placement offering pursuant to an exemption contained in regulation D,
Rule 504 promulgated under the Securities Act of 1933, as amended. The Company
collected $25 million in cash from the sale of stock in the prior year. For the
year ended June 30, 1998 and the period from inception (February 25, 1997) to
June 30, 1997 the Company secured Bank debt of $6.5 million and $6.3 million
respectively. At December 31, 1998 the Company had outstanding warrants for
1,750,000 shares of its stock that had been paid for in a previous period.
At December 31, 1998 the Company's principal source of liquidity was
$21.8 million in cash of which $4.2 million is held as compensating balances on
Bank debt of $10.8 million. At December 31, 1998 the Company had no material
long-term debt or long term commitments.
In the six months ended December 31, 1998 cash provide by operations
was $4.8 million due to net income for the period of $2.4 million and an
increase of other assets of $2.0 million. The Company had an accumulated deficit
at December 31, 1998 of $2.3 million. The Company did not provide for any
additional loan losses in the unaudited results for the six months ended
December 31, 1998. Management believes that reserves accrued in the prior
periods are adequate to provide for loan losses in the existing forfaiting asset
portfolio.
There can be no assurance that either the net income for the period or
the current loan loss provisions are indicative of future operations. There are
no assurances that continuing financing will be available at terms favorable to
the Company. The Company has no current plans to raise capital from the sale of
its stock.
Interest Rate Risk
The Company is subject to the effects of interest rate fluctuations on
its financial instruments. A sensitivity analysis of the projected incremental
effect of a hypothetical 10% change in 1998 year-end interest rates on the fair
value of its financial instruments is provided in the following table.
-22-
<PAGE>
Dollars in Thousands
Fair
Carrying Market Incremental (1)
Value Value Incr./(Decr.)
------- ------- -------
Financial assets:
Investment in Forfaiting Assets $14,644 $14,432 $ (212)
Financial liabilities:
Fixed-rate and variable rate debt
( all due within one year) $12,832 $12,941 $ 109
(1) Reflects a 10 % increase in interest rate of financial assets and a 10%
decrease in interest rates of financial liabilities.
Fair value of cash and cash equivalents, receivables, short-term
borrowings, accounts payable, accrued interest and variable- rate long-term debt
approximate their carrying values. These items are relatively insensitive to
changes in interest rates due to the short-term maturity of the instruments or
the variable nature of underlying interest rates. Accordingly, these items have
been excluded from the above table.
At June 30, 1998, the Company's operating portfolio included forfaiting
assets totaling $14.6 million after allowance for $7.0 million loan reserves.
The fair value of these instruments will increase or decrease as a result of
changes in market interest rates. The Company accounts for these financial
instruments in accordance with SFAS 107. Accordingly, each year the Company
adjusts the balances of its portfolio to fair market value. With any resulting
adjustment being charged or credited to income as an unrealized loss or gain and
included in cost of revenue. Realized gains and losses resulting from the
disposition of such assets are recorded as income in the period during which
such disposition takes place. During 1998 the Company realized gains of $780
thousand and unrealized losses of $7.0 million in connection with its forfaiting
asset portfolio. The Company provides no assurance that these results are
representative on a going forward basis.
The Company's exposure to increases in interest rates that might result
in a corresponding decrease in the fair value of its forfaiting assets portfolio
could have an unfavorable effect on the Company's results of operations and cash
flows.
ITEM 3. Properties
The Company leases office facilities located at 4835 North O'Connor,
Suite 134-136, Irving, Texas 75062, which it shares with other businesses. The
facility represents the Company's principal offices in the United States.
-23-
<PAGE>
The Company's principal operations are located in London where the
Company lease the entire third floor of 9 King Street, London EC2V 8EA, United
Kingdom. The facility consists of 2,900 square feet of office space and is
leased pursuant to a ten year lease that commenced in March 1997. The lease is
subject to a rent review after five years. Currently, annual payments on the
property including rent, property taxes and service charge amount to $173
thousand per year. The Company has office equipment with a net book value of $74
thousand. Management believes that its present office facilities are adequate
for the Company's current business operations.
ITEM 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best knowledge of
the Company as April 30, 1999, with respect to each person known by the Company
to own beneficially more than 5% of the Company's outstanding common stock, each
director and all directors and officers as a group, and is adjusted to reflect
the one (1) share for one hundred (100) shares reverse stock split effected by
the Company on November 20, 1998.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
- ------------------- -------------------- -----------
John Vowell * 750,000 4.4%
9 King Street
London EC2V 8EA
United Kingdom
Collinwood Investments Ltd. 4,400,000(2) 26.0%
East Hill Street
P.O. Box 3944
Bahamas
North Cascade Limited 6,600,000(3) 39.0%
Trident Chambers
P.O. Box 146
Road Town BVI
All directors and executive
officers as a group 750,000 4.4%
(3 persons in group)
- ---------------------------------------------------
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting power over the shares
indicated above.
(1) As of April 30, 1999, there were 16,945,224 shares of common stock
outstanding.
(2) The directors of Collingwood Investments Limited are Colin Pearse and
Richard Baker and the secretary and principal shareholder is Richard
Baker.
-24-
<PAGE>
(3) The director of North Cascade Limited is Robert Griffin and the
Secretary and principal shareholder is Richard Tanner.
ITEM 5. Directors and Executive Officers
As of the date hereof, the executive officers and directors of the
Company are as follows:
Name Age Position
Charles Sekar ...................41 Chairman of the Board and
director
John Vowell......................35 President, C.E.O. and Managing
Director
Mukesh Pancholi..................41 Secretary/Treasurer and director
- ----------
All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. The Company has not
compensated its directors for service on the Board of Directors or any committee
thereof, but directors are reimbursed for expenses incurred for attendance at
meetings of the Board of Directors and any committee of the Board of Directors.
Executive officers are appointed annually by the Board of Directors and each
executive officer serves at the discretion of the Board of Directors. The
Executive Committee of the Board of Directors, to the extent permitted under
Utah law, exercises all of the power and authority of the Board of Directors in
the management of the business and affairs of the Company between meetings of
the Board of Directors.
The business experience of each of the persons listed above during the
past five years is as follows:
Chandra Sekar has been the Chairman of the Company's Board of Directors
since 1997. During this period and since 1992, Mr. Sekar has also served as
executive administrator of Polysindo UK Limited. Mr. Sekar holds a Bachelor of
Industrial & System Engineering and a Master of Industrial & System Engineering
from Bandung Institute of Technology. Prior to 1992, he was associated with PT.
Caltex Pacific Oil Company in Indonesia, a joint venture among oil companies.
John Vowell is the President and Managing Director of the Company
responsible for day-to-day trading and administration activities and for
monitoring the Company's overall trading and investment portfolio exposures. He
also assists the forfaiting trading desk and in planning marketing strategy to
-25-
<PAGE>
corporations and banks for both forfaiting and structured trade and commodity
finance transactions. Prior to joining Euro Trade Limited in 1997, Mr. Vowell
was a Senior Manager at Standard Bank London Limited from 1994 to 1997. He was
on of three founder members of the banks forfaiting team in London and developed
an active primary and secondary trading book. He was responsible for the
development and planning of the structured trade and commodity finance
department. From 1988 to 1994, Mr. Vowell was Assistant Manager of Trade Finance
for Sumitomo Bank Ltd. Mr. Vowell attended the St. Phillip Howard Secondary
School in Poplar, London from 1975 to 1980, but he does not hold any college
degrees.
Mukesh Pancholi joined Euro Trade Limited in 1997 and is the Company's
Secretary responsible for processing various forms of Trade Finance transactions
and other document controls. He is a member of the Credit Committee and
participates in all credit meetings with respect to approval of deals. Mr.
Pancholi is involved with marketing and developing customer relationships and
maintaining and developing existing and new banking relationships. He holds a
graduate diploma in Mathematics from DeMontfort University. Prior to joining the
Company, he was employed at Longulf Trading (UK) Limited from 1994 to 1997. His
responsibilities included processing various forms of trade finance transactions
and acting in a support role to the commodity trading desk. From 1988 to 1994 he
was an account officer at BCCI International, Swiss Cottage Branch.
ITEM 6. Executive Compensation
The Company does not have a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or directors, nor
has the Company entered into employment contracts with any of the aforementioned
persons.
Cash Compensation
The following table sets forth all cash compensation paid by the
Company for services rendered to the Company for the fiscal years ended June 30,
1998 and 1997, to the Company's Chief Executive Officer.
Summary Compensation Table
Other All
Annual Other
Name and Compen- Compen-
Principal Position Year Salary Bonus sation sation
- ------------------ ---- ------ ----- ------ ------
John Vowell 1998 $228,000 $220,000 $-0- $ 20,000
C.E.O 1997 -0- -0- -0- -0-
-26-
<PAGE>
ITEM 7. Certain Relationships and Related Transactions
During the past two fiscal years, except as set forth below there have
been no transactions between the Company and any officer, director, nominee for
election as director, or any shareholder owning greater than five percent (5%)
of the Company's outstanding shares, nor any member of the above referenced
individuals' immediate family.
On December 14 1998, John Vowell, The Managing Director, of the
Company, exercised warrants for 750,000 shares of the Company's common stock
under an employee stock compensation Plan Regulated in the United Kingdom.
ITEM 8. Legal Proceedings
There are presently no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of its property is
subject and, to the best of its knowledge, no such actions against the Company
are contemplated or threatened.
ITEM 9. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
No shares of the Company's common stock have previously been registered
with the Securities and Exchange Commission (the "Commission") or any state
securities agency or authority. The Company intends to make an application to
Nasdaq for the Company's shares to be quoted on The Nasdaq Stock Market. The
Company's application to the Nasdaq will consist of current corporate
information, financial statements and other documents as required by the
Securities Exchange Act of 1934, as amended, including this Registration
Statement. Inclusion on The Nasdaq Stock Market permits price quotations for the
Company's shares to be published by such service.
The Company's common stock is currently quoted on the OTC Bulletin
Board ("OTCBB") under the symbol "ETFC". For an extended period of time prior to
December 1998, there was not an established trading market for its common stock
nor was there a record of any significant trading in the public market.
As of April 30, 1999 there were approximately 410 holders of record of
the Company's common stock, which figure does not take into account those
shareholders whose certificates are held in the name of broker-dealers or other
nominees.
-27-
<PAGE>
The Company's common stock has been trading on the OTCBB since
approximately December 3, 1998. The following table sets forth the range of high
and low bid prices of the common stock for each calendar quarterly period since
the fourth quarter of 1998 as reported by the National Quotation Bureau, Inc.
("NQB"). Prices reported by the NQB represent prices between dealers, do not
include retail markups, markdowns or commissions and do not represent actual
transactions.
High Low
---- ---
1998
Fourth Quarter $ 18.00 $ 1.00
1999
First Quarter $ 35.00 $ 5.25
Second Quarter* $ 18.00 $ 3.00
- --------------
o Through April 30, 1999.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that it will pay
cash dividends or make distributions in the foreseeable future. The Company
currently intends to retain and invest future earnings to finance its
operations.
ITEM 10. Recent Sales of Unregistered Securities
Securities sold by the Company within the past three years that were
not registered under the Securities Act include sales of new issue common stock.
Subsequent to the acquisition Euro Trade Limited, the Company raised funds
through a private placement offering pursuant to an exemption contained in
Regulation D, Rule 504, promulgated under the Securities Act of 1933, as
amended. The Company sold 3,979,750.00 shares at a price of $.05 per share
raising a total of $198,987.50 out of an aggregate offering price of
$287,500.00. The offering was self-issued by the Company and was closed on
December 2, 1998. None of the securities issued were in exchange for property,
services, or other securities, and the new securities were the result from the
modification of outstanding securities. There were no underwriting discounts or
commissions.
On December 14 1998, John Vowell, the Managing Director of Euro Trade
exercised warrants for 750,000 shares of the Company's common stock under an
employee stock compensation Plan Regulated in the United Kingdom. The exercise
price for the shares was $.001 per share. This issuance was not registered with
the Commission because it was believed to be exempt form the registration
requirements of the Act under Section 4(2) of the Act.
-28-
<PAGE>
The shares of the Company's common stock issued pursuant to the
acquisition of Euro Trade Limited also were not registered with the Commission
because it was believed to be exempt form the registration requirements of the
Act under Section 4(2) of the Act.
The following table sets forth information concerning the Company's use
of proceeds following the sale of shares pursuant to Regulation D.
Aggregate Offering Price of Securities
Private Placement Offered pursuant to
Rule 504...................................................... $287,500
Convertible Securities......................................... $1,750
Total.......................................................... $289,250
Expenses:
Transfer Agent Fees............................................ $1,500
Printing & Engraving........................................... $1,500
Legal Fees..................................................... $2,000
Total.......................................................... $5,000
Adjusted Gross Proceeds to Euro Trade.......................... $284,250
Use of Adjusted Gross Proceeds:
Acquisition expense Rotunda Oil & Mining....................... $142,250
Working Capital................................................ $85,000
Provisions for foreign currency
transactions.................................................. $57,000
Total.......................................................... $284,250
- -----------
Item 11. Description of Registrant's Securities to be Registered
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
par value $.001 per share, of which 16,945,224 shares are issued and outstanding
as of the date hereof. On November 20, 1998, the Company effected the one (1)
share for one hundred (100) shares reverse stock split of its common Stock. All
references to the Company's common stock herein are in post-split shares. All
shares of Common Stock have equal rights and privileges with respect to voting,
liquidation and dividend rights. Each share of Common Stock entitles the holder
thereof to (i) one non-cumulative vote for each share held of record on all
matters submitted to a vote of the stockholders; (ii) to participate equally and
to receive any and all such dividends as may be declared by the Board of
Directors out of funds legally available therefor; and (iii) to participate pro
-29-
<PAGE>
rata in any distribution of assets available for distribution upon liquidation
of the Company. Stockholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or any other securities. The Common Stock is
not subject to redemption and carries no subscription or conversion rights. All
outstanding shares of Common Stock are fully paid and non-assessable.
Item 12. Indemnification of Directors and Officers.
As permitted by the provisions of the Utah Revised Business Corporation
Act (the "Utah Act"), the Company has the power to indemnify an individual made
a party to a proceeding because they are or were a director, against liability
incurred in the proceeding, if such individual acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interest of the
Company and, in a criminal proceeding, they had no reasonable cause to believe
their conduct was unlawful. Indemnification under this provision is limited to
reasonable expenses incurred in connection with the proceeding. The Company must
indemnify a director or officer who is successful, on the merits of otherwise,
in the defense of any proceeding or in defense of any claim, issue, or matter in
the proceeding, to which they are a party to because they are or were a director
of officer of the Company, against reasonable expenses incurred by them in
connection with the proceeding or claim with respect to which they have been
successful. Pursuant to the Utah Act, the Company's Board of Directors may
indemnify its officers, directors, agents, or employees against any loss or
damage sustained when acting in good faith in the performance of their corporate
duties.
The Company may pay for or reimburse reasonable expenses incurred by a
director, officer employee, fiduciary or agent of the Company who is a party to
a proceeding in advance of final disposition of the proceeding provided the
individual furnishes the Company with a written affirmation that their conduct
was in good faith and in a manner reasonably believed to be in, or not opposed
to, the best interest of the Company, and undertake to repay the advance if it
is ultimately determined that they did not meet such standard of conduct.
Also pursuant to the Utah Act, a corporation may set forth in its
articles of incorporation, by-laws or by resolution, a provision eliminating or
limiting in certain circumstances, liability of a director to the corporation or
its shareholders for monetary damages for any action taken or any failure to
take action as a director. This provision does not eliminate or limit the
liability of a director (i) for the amount of a financial benefit received by a
director to which they are not entitled; (ii) an intentional infliction of harm
on the corporation or its shareholders; (iii) for liability for a violation of
-30-
<PAGE>
Section 16-10a-842 of the Utah Act (relating to the distributions made in
violation of the Utah Act); and (iv) an intentional violation of criminal law.
To date, the Company has not adopted such a provision in its Articles of
Incorporation, By-Laws, or by resolution. A corporation may not eliminate or
limit the liability of a director for any act or omission occurring prior to the
date when such provision becomes effective. The Utah Act also permits a
corporation to purchase and maintain liability insurance on behalf of its
directors, officers, employees, fiduciaries or agents.
Item 13. Financial Statements and Supplementary Data
The Company's consolidated financial statements as of and for the six
month period ended December 31, 1998 and the fiscal years ended June 30, 1998
and 1997, have all been examined to the extent indicated in their report by Marc
Lumer & Company, independent certified public accountants, and have been
prepared in accordance with generally accepted accounting principles and
pursuant to Regulation S-X as promulgated by the Securities and Exchange
Commission. The aforementioned financial statements are included herein in
response to Item 13 of this Form 10.
ITEM 14. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
In January 1999, the Company's Board of Directors made the decision to
change independent accountants. Previously the Company used as its independent
accountants the firm of Jones, Jensen & Company ("JJ&Y"). The Company has
engaged as its new auditors Marc Lumer & Company. Euro Trade Limited is audited
in the United Kingdom by Andrew Murray and Company, Chartered Accounts.
Hollander Lumer LLP has audited Euro Trade Limited since its inception for its
financial statements that are presented in conformity with United States
generally accepted accounting principles ("GAAP").
The Company is not aware of any disagreement with its former auditors
JJ&C or any adverse opinion, disclaimer of opinion, modification or
qualification contained in any financial report prepared by JJ&C for the past
two years.
-31-
<PAGE>
ITEM 15. Financial Statements and Exhibits
(a) The following financial statements have been included under
Item 13 hereof:
(i) Consolidated Financial Statements for the six month
period ended December 31, 1998 and the fiscal years
ended June 30, 1998 and 1997.
(ii) Consolidated Proforma Financial Statements for the
years ended June 30, 1998 and 1997 and for the six
months ended December 31, 1998 and 1997
(b) EXHIBITS
The following exhibits are filed with this Registration Statement:
Exhibit No. Exhibit Name
- ----------- ------------
2.1 Acquisition Agreement and Plan of Reorganization with
Euro Trade & Forfaiting Company Limited
3.1 Articles of Incorporation and Amendments thereto
3.2 By-Laws of Registrant
4. See Exhibit No. 3.1, Articles of Incorporation,
Article VI
27. Financial Data Schedule
- ----------------
-32-
<PAGE>
EURO TRADE & FORFAITING, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS...........................1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets for June 30, 1998 and 1997
and for December 31, 1998 (Unaudited).................................2
Statements of Operation for the Years Ended June 30, 1998 and 1997 and
for the Six Months Ended December 31, 1997
and 1998 (Unaudited)..................................................3
Statement of Stockholder Equity.......................................4
Statement of Cash flows for the Years Ended June 30, 1998
and 1997 and for the Six Months Ended December 31, 1998 (Unaudited)...5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.................................6
<PAGE>
MARC LUMER & COMPANY Certified Public Accounts
Cerified Public Accountant Management Consultants
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
Euro Trade & Forfaiting, Inc.
Ihave audited the accompanying consolidated balance sheets of Euro Trade &
Forfaiting, Inc. ("The Company") as of June 30, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of The
Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Euro Trade &
Forfaiting, Inc. and subsidiary as of June 30, 1998 and 1997 and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting.
San Francisco, California
April 25, 1999
234 Front Street, Suite 300 San Francisco, CA 94111 (415)362-7807
Fax:(415)982-3543
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
BALANCE SHEETS
(In Thousands)
<CAPTION>
June 30, June 30, December 31,
1998 1997 1998
-------- -------- --------
(Unaudited)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 18,873 $ 1,367 $ 21,842
Interest receivable 523 86 467
Forfaiting assets (net of allowance) 14,644 8,000 9,329
-------- -------- --------
TOTAL CURRENT ASSETS 34,040 9,453 31,638
PROPERTY AND EQUIPMENT - NET 93 3 74
OTHER ASSETS 1,383 -- 3,392
-------- -------- --------
TOTAL ASSETS $ 35,516 $ 9,456 $ 35,104
======== ======== ========
LIABILITY AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and bank overdrafts $ 1,963 $ 2,880 $ 1,266
Accrued expenses 382 22 100
Loans payable:
Bank 12,832 -- 10,755
Related party -- 6,250 --
Deferred revenue -- -- 2
-------- -------- --------
TOTAL CURRENT LIABILITIES 15,177 9,152 12,123
-------- -------- --------
NOTE PAYABLE - NON CURRENT 27 -- 34
-------- -------- --------
COMMITMENT -- -- --
-------- -------- --------
TOTAL LIABILITIES 15,204 9,152 12,157
-------- -------- --------
STOCKHOLDERS' EQUITY
Preferred Stock, par value $1 authorized,
issued and outstanding 15,000 shares 15,000 15,000 0
Common Stock, Par value $1, authorized
10,000 shares; Issued 9,250 shares and
outstanding 750 shares 9,250 9,250 17
Additional paid-in capital 750 750 25,263
Retained earnings (deficit) (4,688) 304 (2,309)
Receivable from stockholder -- (25,000) (24)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 20,312 304 22,947
-------- -------- --------
TOTAL LIABILITY AND STOCK-
HOLDERS' EQUITY $ 35,516 $ 9,456 $ 35,104
======== ======== ========
</TABLE>
See accompanying notes and Accountant's Report.
Page 2
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
(In Thousands)
<CAPTION>
Year Ended Six Months Ended
June 30, December 31,
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited)(Unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 5,216 $ 460 $ 3,770 $ 4,036
COST OF REVENUES
Interest 1,088 0 404 303
Provisions for losses 6,950 68 -- --
-------- -------- -------- --------
TOTAL COST OF REVENUE 8,038 68 404 303
-------- -------- -------- --------
GROSS PROFIT (LOSS) (2,822) 392 3,366 3,733
Selling, general and administrative 2,170 88 920 780
-------- -------- -------- --------
NET INCOME (LOSS) $ (4,992) $ 304 $ 2,446 $ 2,953
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE $ (.20) $ .01 $ .14 $ .12
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON
SHARES EQUIVALENTS
OUTSTANDING 25,000 25,000 16,945 25.000
======== ======== ======== ========
</TABLE>
See accompanying notes and Accountant's Report.
Page 3
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
STATEMENT OF STOCKHOLDER EQUITY
(In Thousands)
<CAPTION>
Common Stock Preferred Stock Paid-in Retained Receivable
Shares Amount Shares Amount Capital Earnings Stockholder Total
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996 0 $ 0 0 $ 0 $ 0 $ 0 $ 0 $ 0
Stock Issued 9,250 9,250 15,000 15,000 750 (25,000) 0
Net income -- -- -- -- -- 304 -- 304
-------- -------- -------- -------- -------- -------- -------- --------
BALANCE, June 30, 1997 9,250 9,250 15,000 15,000 750 304 (25,000) 304
Payment received on
Stockholder receivable -- -- -- -- -- -- 25,000 25,000
Net loss -- -- -- -- -- (4,992) -- (4,992)
-------- -------- -------- -------- -------- -------- -------- --------
BALANCE, June 30, 1998 9,250 9,250 15,000 15,000 750 (4,688) 20,312
Options Exercised 750 750 -- -- (750) -- -- --
Exchange:
Euro Trade shares acquired (10,000) (10,000) (15,000) (15,000) 25,000 -- -- --
New Rotunda shares issued 11,750 12 -- -- -- -- -- 12
Recapitalization 195 -- -- -- 43 (67) -- (24)
Exercise of option 1,000 1 -- -- 24 -- (24) 1
Sale of shares for cash 4,000 4 -- -- 196 -- -- 200
Net income -- -- -- -- -- 2,446 -- 2,446
-------- -------- -------- -------- -------- -------- -------- --------
BALANCE,
December 31, 1998 (unaudited) 16,945 $ 17 -- $ -- $ 25,263 $ (2,309) $ (24) $ 22,947
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes and Accountant's Report.
Page 4
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 (UNAUDITED)
<CAPTION>
June 30, June 30, December 31,
1998 1997 1998
--------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Purchase of forfaiting assets $(216,984) $ (10,865) $ (22,368)
Proceeds from sales and maturity
of forfaiting assets 203,391 2,797 27,673
Net income (loss) from operations (4,992) 304 2,446
Depreciation 42 -- -- 19
Loan loss reserves 6,950 68 --
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
(Increase) decrease in:
Interest receivable (437) (86) 56
Other assets (1,383) -- (2,009)
Increase (decrease) in:
Accounts payable and overdrafts (917) 2,880 (697)
Accrued expenses 360 22 (282)
--------- --------- ---------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVIES (13,970) (4,880) 4,838
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from banks (repayment) 6,582 6,250 (2,077)
Equipment financing 27 -- 7
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 6,609 6,250 (2,070)
--------- --------- ---------
CASH FLOWS FROM INVESTING
Purchase of equipment (133) (3) --
Sale of securities 25,000 -- 201
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 24,867 (3) 201
--------- --------- ---------
INCREASE IN CASH 17,506 1,367 2,969
CASH AT BEGINNING OF PERIOD 1,367 -- 18,873
--------- --------- ---------
CASH AT END OF PERIOD $ 18,873 $ 1,367 $ 21,842
========= ========= =========
</TABLE>
See accompanying notes and Accountant's Report.
Page 5
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE A ORGANIZATION AND ACCOUNTING BASIS
Rotunda Oil and Mining, Inc., incorporated under the Laws of Utah on November
19, 1980, was a development stage company until November 20, 1998 when it
acquired Euro Trade & Forfaiting Co. Limited in exchange for substantially 100%
all of its outstanding shares. See Note B.
As a result of the merger, Rotunda Oil and Mining, Inc. changed its name to Euro
Trade & Forfaiting, Inc. (The Company) on December 1, 1998.
Euro Trade & Forfaiting Co. Limited is a wholly owned subsidiary, incorporated
under the laws of United Kingdom on February 25. 1997.
Significant Accounting Policies Basis Of Consolidation
- ------------------------------------------------------
The consolidated financial statements include the accounts of the company and
its wholly owned subsidiary. The company is engaged in a single line of business
as a financier in connection with international trade and the arrangement and
syndication of transferable export letters of credit. Any pre-consolidation
inter-company balances have been eliminated.
Accounting Method
- -----------------
The Company maintains its books on the accrual basis of accounting.
Cash and Cash Equivalents
- -------------------------
The Company considers all purchases from financial institutions of highly liquid
debt instruments with maturities of three months or less to be cash equivalents.
Compensating Balances
- ---------------------
Cash in the amount of $4.2 million was on deposit in financial institutions
subject to compensating balance agreements for loans. See Note F.
The Company borrows the funds necessary to purchase forfaiting assets. The
lenders require that cash be deposited in interest bearing accounts until the
corresponding loan matures.
Collateral
- ----------
The Company reports assets it has pledged as collateral in secured borrowing and
other arrangements when the secured party cannot sell or re-pledge the assets or
Euro Trade can substitute collateral or otherwise redeem it on short notice.
Page 6
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE A ORGANIZATION AND ACCOUNTING BASIS (Continued)
Transactions of Foreign Currencies
- ----------------------------------
The Company and its subsidiary treat the U.S. dollar as their functional
currency. Accordingly, gains and losses resulting from the translation of
accounts designated in other than the functional currency are reflected in the
determination of net income.
At June 30, 1998, monetary assets and liabilities of The Company are denominated
in the following currencies:
U.S. Pounds Deutsche
Total Dollars Sterling Marks
----- ------- -------- -----
Cash and Equivalents 100% 91 -- 9
Forfaiting Assets 100% 20 -- 80
Current Liabilities 100% 99 1 --
At June 30, 1997, monetary assets and liabilities of The Company are denominated
in the following currencies:
Total Dollars Sterling Marks
----- ------- -------- -----
Cash and equivalents 18,873 18,221 157 495
Forfaiting Assets 15,904 13,203 1,790 911
Current Liabilities 15,176 12,230 1,959 988
Financial instruments are valued at fair value as determined by management.
U.S. Pounds Deutsche
Total Dollars Sterling Marks
----- ------- -------- -----
Cash and Equivalents 100% 96 1 3
Forfaiting Assets 100% 83 11 6
Current Liabilities 100% 80 13 7
Page 7
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE A ORGANIZATION AND ACCOUNTING BASIS (Continued)
Income Taxes
- ------------
The Company and its subsidiary will not be included in a consolidated federal
income tax return filed by the parent. Federal income taxes are calculated as if
the companies filed on a separate return basis, and the amount of current tax or
benefit calculated is either remitted to or received from The Company. The
amount of current and deferred taxes payable or refundable is recognized as of
the date of the financial statements, using currently enacted tax laws and
rates. Deferred tax expenses of benefits are recognized in the financial
statements for the changes in deferred tax liabilities or assets between years.
Depreciation
- ------------
Depreciation is calculated to write down the cost of tangible fixed assets to
their residual values over the period of their estimated useful lives using the
straight line method as follows:
Computer Equipment 3 years
Furniture, Fixtures and Fittings 4 years
Net Income Per Share
- --------------------
Net income per share is computed using the weighted average number of common
shares and common share equivalents outstanding during the respective periods.
Common shares equivalents consist of The Company's preferred stock and shares
issuable upon the exercise of stock options. All stock options have been treated
as if they were outstanding for all periods.
Related Parties
- ---------------
The Company paid salaries and director fees of $ 531,747 to a principal employee
and director. The Company paid management fees of $25,190 and $0l in fiscal 1998
and 1997, respectively, to Norfil Ltd., a company controlled by the then
majority shareholder.
Stock Option Plans
- ------------------
In 1997 Euro Trade established a stock option plan for the Managing Director. In
accordance with British law, the shares are purchased and held in treasury until
the options are exercised.
Page 8
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE A ORGANIZATION AND ACCOUNTING BASIS (Continued)
Forfaiting Transactions
- -----------------------
Proprietary transactions are recorded on the trade date. Profits and loss
arising from sales entered into for the account and risk of the subsidiary are
recorded on the settlement date basis.
Amount receivable and payable for forfaiting transactions that have not yet
reached their contractual settlement date are recorded net on the balance sheet.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of financial instruments such as cash and cash equivalents
and accrued interest income approximate their fair market value using the
specific identification method.
Revue Recognition
- -----------------
Interest income on forfaiting assets is recognized based on principal amounts
outstanding, at applicable interest rates. Accrual of interest on loans is
discontinued (non-accrual status when reasonable doubt exists as to the full,
timely collection of interests or principle, or when payment of principle or
interest is past due 90 days, unless the loan is currently in the process of
collection. When a loan is placed on non-interest income in the current period,
income recognition on such loans is on the cash basis, unless the reasonable
doubt is reversed. All cash receipts on reasonable doubt loans are applied to
the principal balance.
Because forfaiting assets typically mature in less than one year, the company's
policy is to recognize fees and costs associated with these assets in the year
received or paid.
Allowance for Loan Losses
- -------------------------
Management makes regular credit reviews of the forfaiting portfolio on an
individual loan basis. Past experience, current economic conditions, and
problems associated with specific lenders, are all factors in determining the
adequacy of the allowance balance. The allowance is increased by provision
charged to operating expense and by recoveries on loans previously charged off,
and reduced by charge-offs.
Page 9
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE A ORGANIZATION AND ACCOUNTING BASIS (Continued)
Interim Financial Information (Unaudited)
- -----------------------------------------
The accompanying unaudited financial statements as of December 31, 1998 and for
the six months ended December 31, 1998 and 1997 have been prepared in accordance
with generally accepted accounting principles for interim financial information.
In the opinion of management, all adjustments (consisting only of normal,
recurring adjustments) necessary for a fair presentation, have been included
except loan loss reserves. Results for the interim periods are not necessarily
indicative of the results to be expected for a full year.
Accrued Compensated Absences
- ----------------------------
The Company has not established a policy with respect to compensated absences.
Accordingly, no accrual has been made as prescribed by Statement of Financial
Accounting Standards No. 43.
Use of Estimates
- ----------------
The preparation of the financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could differ from those
estimates.
NOTE B REORGANIZATION
The following are the principal terms with respect to the exchange of shares of
capital stock of Euro Trade & Forfaiting, Inc. (The Company), a Utah corporation
(formerly Rotunda Oil and Mining, Inc.) for the shares of Euro Trade &
Forfaiting Co. Limited (Euro Trade) a United Kingdom corporation.
Pre-Exchange Capitalization
- ---------------------------
On November 10, 1998, The Company declared a reverse stock split of 1 for 1,000
of the outstanding shares. As a result, 19.5 million outstanding shares were
reduced to 195 thousand outstanding shares.
Euro Trade issued 15 million preferred shares and 9.2 million common shares for
cash on February 25, 1997. An option for .8 million shares of the common stock
was issued on the same date and funded as required by United Kingdom law.
The option was exercised immediately prior to the exchange.
Page 10
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE B REORGANIZATION (Continued)
Equity Conversion Mechanics
- ---------------------------
At the closing of the exchange, The Company issued and exchanged 11.8 million
shares of restricted Rule 144 common stock for all of the outstanding common and
preferred shares of Euro Trade.
After the closing, two options were granted for .5 million shares of the
company's common stock at a price of $.025. The options were exercised
immediately. Approximately $500 was paid for each option. The remaining $12,000
is due June 30, 1999.
Additionally, The Company issued an aggregate of 4 million new shares of common
stock at $.05 per share.
The Company will hold the shares of Euro Trade, which will continue to operate
as a subsidiary.
Post Exchange Capitalization
- ----------------------------
After the exchange and the subsequent offering of 5 million shares of common
stock, the capitalization consisted of 16.9 million shares of common stock of
which 11.8 million are restricted.
Basis of Consolidation
- ----------------------
The accompanying financial statements have been prepared to give effect to the
exchange completed on November 20, 1998. The two companies in the exchange are:
Euro Trade & Forfaiting, Inc., a Utah corporation,
(formerly Rotunda Oil and Mining, Inc.), "The Company"
Euro Trade & Forfaiting Co. Limited
a United Kingdom corporation, "Euro Trade"
After the exchange, The Company owned all of the outstanding shares of Euro
Trade. The exchange is accounted for as if The Company purchased Euro Trade for
stock. All assets are reflected at historical cost. For purposes of the proforma
statement of stockholders' equity, multiple transactions are considered to have
taken place concurrently.
Page 11
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE C PROPERTY AND EQUIPMENT
Property and equipment consists of office furniture and computer equipment as
follows:
Cost $ 136 $ 3 $ 136
Less: Accumulated depreciation 43 - 62
------ ------ ------
$ 93 $ 3 $ 74
====== ====== ======
Depreciation expense $ 43 $ 0 $ 19
====== ====== ======
NOTE D INCOME TAX
The Company has cumulative losses at June 30, 1998 and 1997 and December 31,
1998, that could result in a net operating loss carryforwards for federal income
and United Kingdom tax purposes. Ownership changes in The Company may result in
an annual limitation on the utilization of operating loss carryforwards.
NOTE E FORFAITING ASSETS
Forfaiting is a method of financing international trade. The Company purchases
from an exporter the debt due by an importer when credit is required. The debt
is usually evidenced by a series of negotiable financial instruments such as
promissory notes or by deferred payment letters of credit opened by a bank. The
notes are usually guaranteed by a bank in the importer's country and, subject to
the quality of the guarantor, become marketable amongst international banks and
other financial institutions. In forfaiting, the notes are purchased without
recourse to the exporter.
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, Disclosure about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by The Company and independent experts using available market
information and appropriate valuation methodologies.
The fair value of the non-impaired financial instruments approximate carrying
value due to the short-term maturity of the instruments. The fair values of the
non-impaired financial instruments are $12,508,906 and $8,000,362 at June 30,
1998 and June 30, 1997, respectively.
The following disclosure of the financial instruments which are impaired is made
in accordance with the requirements of SFAS No. 118, Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures. The carrying values of
the impaired financial instruments are measured at market value.
Page 12
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE E FORFAITING ASSETS (Continued)
The market value of the impaired financial instruments is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Recorded investments in impaired financial instruments $ 9,765,425 $ 0
Less allowance for losses (7,018,259) 0
----------- -----------
Market value of impaired financial instruments $ 2,747,166 $ 0
=========== ===========
Average recorded investment in
impaired financial investments 0 0
=========== ===========
The activity in the allowance for losses account is as follows:
Beginning balance $ 0 $ 0
Additions charged to operations 7,018,259 0
----------- -----------
Ending balance $ 7,018,259 $ 0
=========== ===========
</TABLE>
The Company does not accrue interest on its impaired financial instruments.
Therefore, no interest income was recognized during the impairment period. Any
cash receipts on these financial instruments are recorded as income when
collected.
The composition of the notes by country of issuers bank was:
June 30, June 30,
Country 1998 1997
------- --------- ---------
Turkey 5.7% 80.3%
Russia 8.6 --.--
Ukraine 5.0 --.--
Czech Republic 11.6 --.--
Indonesia 57.8 --.--
Nigeria 11.3 --.--
Thailand --.-- 12.5
Japan --.-- 7.2
--------- ---------
Total 100% 100%
========= =========
Page 13
<PAGE>
EURO TRADE & FORFAITING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997 (UNAUDITED)
NOTE F SHORT TERM BORROWING
Short-term borrowing consisted of the following:
June 30, December 31,
1998 1997 1998
---- ---- ----
(Unaudited)
Loans payable to banks $12,832 $ 0 $10,755
Loans payable to related parties 0 6,250 0
Interest paid on short term borrowings for the periods ended June 30, 1998 and
1997, and December 31, 1998 was $1.1 million, $0 and $388, respectively.
At June 30, 1997, The Company had a non-interest bearing loan from a company
related to the stockholder.
Weighted average interest rates on short term borrowing from banks was 6.6% for
the year ended June 30, 1998.
The Company had immaterial long term debt in conjunction with the purchase of
office equipment.
NOTE G FOREIGN EXCHANGE
The Company is subject to foreign exchange risk through future foreign currency
cash flow as movement in currency exchange rates impact: 1) the U.S. dollar
value of foreign currencies and 2) the U.S. dollar value of cost incurred in
foreign currencies.
Foreign exchange gains included in the consolidated financial statements at June
30, 1998 and 1997 and December 31, 1998 were $0, $242,000 and $3,000
(unaudited), respectively.
NOTE H COMMITMENTS
At June 30, 1998, The Company had a commitment to purchase $11.4 million in
forfaiting assets. The Company was also a guarantor to a transaction amounting
to $.8 million at June 30, 1998. The fee earned was recorded in the period the
guarantee was given.
NOTE I MINIMUM FUTURE RENTALS
The Company occupies premises provided under month-to-month agreement.
Page 14
<PAGE>
EURO TRADE & FORFAITING, INC.
CONSOLIDATED PROFORMA
FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AND FOR THE SIX MONTHS
ENDED DECEMBER 31, 1998 AND 1997
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS...........................1
FINANCIAL STATEMENTS
Consolidated Proforma Balance Sheets at June 30, 1998 and 1997
and at December 31, 1998..............................................2
Consolidated Proforma Statements of Operation for the Years Ended June
30, 1998 and 1997 and for the Six Months Ended
December 31, 1998 and 1997............................................3
Consolidated Proforma Statement of Stockholder Equity for the Years
Ended June 30, 1998 and 1997 and for the Six Months Ended
December 31, 1998 and 1997............................................4
NOTES TO CONSOLIDATED PROFORMA FINANCIAL STATEMENTS............................5
<PAGE>
MARC LUMER & COMPANY Certified Public Accounts
Cerified Public Accountant Management Consultants
ACCOUNTANT'S REPORT
To the Board of Directors
Euro Trade & Forfaiting, Inc.
(formerly Rotunda Oil and Mining, Inc.)
I have compiled the accompanying consolidated proforma balance sheet of Euro
Trade & Forfaiting, Inc. (a Utah corporation) (formerly Rotunda Oil and Mining,
Inc.) as of June 30, 1998 and 1997 and December 31, 1998, and the related
consolidated proforma statements of operations and stockholders' equity for the
years ended June 30 1998 and 1997 and the six months ended December 31, 1998 and
1997, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
The consolidated proforma financial statements give effect to the acquisition by
Euro Trade & Forfaiting, Inc. (The Company) of all of the outstanding shares of
Euro Trade & Forfaiting Co. Limited (Euro Trade) pursuant to an exchange
agreement set forth herein and in the notes to the financial statements. This
proforma information has been prepared using the historical financial
information of both entities. The proforma financial data is provided for
comparative purposes only and does not purport to be indicative of the results
which would have been obtained if the share exchange transaction had been
effected on the date indicated or of those results which may be obtained in the
future.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and accordingly, do not express
an opinion or any other form of assurance on them except that the financial
statements of Rotunda Oil and Mining, Inc. were audited by another accountant at
June 30, 1998 and 1997 and the financial statements of Euro Trade were audited
by me at June 30, 1998 and 1997.
Management has elected to omit the statement of cash flows and notes to
financial statements (except as described above) required by generally accepted
accounting principles. If the statement of cash flows and footnotes were
included in the financial statements, they might influence the user's conclusion
about The Company's financial position, results of operations and cash flows.
Accordingly, these financial statements are not designed for those who are not
informed about such matters.
234 Front Street, Suite 300 San Francisco, CA 94111 (415)362-7807
Fax:(415)982-3543
April 25, 1999
San Francisco, California
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
(Formerly Rotunda Oil and Mining , Inc.)
CONSOLIDATED PROFORMA BALANCE SHEETS
(In Thousands)
<CAPTION>
June 30, June 30, December 31,
1998 1997 1998
-------- -------- --------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 18,875 $ 1,367 $ 21,842
Interest receivable 523 86 467
Forfaiting assets (net of allowance) 14,644 8,000 9,329
-------- -------- --------
TOTAL CURRENT ASSETS 34,042 9,453 31,638
PROPERTY AND EQUIPMENT - NET 93 3 74
OTHER ASSETS 1,383 -- 3,392
-------- -------- --------
TOTAL ASSETS $ 35,518 $ 9,456 $ 35,104
======== ======== ========
LIABILITY AND STOCKHOLDER'S EQUITY
LIABILITIES
Accounts payable and bank overdrafts $ 1,973 $ 2,880 $ 1,266
Accrued expenses 383 107 100
Loans payable12,832 6,250 10,755
Deferred revenue 2 -- 2
-------- -------- --------
TOTAL CURRENT LIABILITIES 15,190 9,237 12,123
-------- -------- --------
NOTE PAYABLE - NON CURRENT 26 -- 34
-------- -------- --------
TOTAL LIABILITIES 15,216 9,237 12,157
-------- -------- --------
STOCKHOLDERS' EQUITY
Common Stock, par value $.001 per share; authorized
50,000 shares, issued and outstanding 11,195 at
June 30, 1998 and 1997 and 16,195 at December 31,
1998 (unaudited) 12 12 17
Receivable from stockholder (12) (24)
Additional paid-in capital 25,044 55 25,263
Retained (deficit) income (4,754) 164 (2,309)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 20,302 219 22,947
-------- -------- --------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 35,518 $ 9,456 $ 35,104
======== ======== ========
</TABLE>
See accompanying notes and Accountant's Report.
Page 2
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
(Formerly Rotunda Oil and Mining , Inc.)
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997 AND FOR
THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(In Thousands)
<CAPTION>
Year Ended Six Months Ended
June 30, December 31,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE $ 5,217 $ 460 $ 3,770 $ 4,036
COST OF REVENUES
Interest 1,003 85 404 303
Provisions for losses 6,951 68 -- --
-------- -------- -------- --------
TOTAL COST OF REVENUE 7,954 153 404 303
-------- -------- -------- --------
GROSS PROFIT (LOSS) .. (2,737) 307 3,366 3,733
Selling, general and administrative 2,181 88 921 780
-------- -------- -------- --------
OPERATING INCOME (LOSS) (4,918) 219 2,445 2,953
PROVISION FOR TAXES
ON INCOME -- -- -- --
-------- -------- -------- --------
NET INCOME $ (4,918) $ 219 $ 2,445 $ 2,953
======== ======== ======== ========
LOSS (PROFIT) PER SHARE $ (.44) $ .02 $ .15 $ .26
======== ======== ======== ========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 11,195 11,195 16,195 11,195
======== ======== ======== ========
</TABLE>
See accompanying notes and Accountant's Report
Page 3
<PAGE>
<TABLE>
EURO TRADE & FORFAITING, INC.
(Formerly Rotunda Oil and Mining , Inc.)
CONSOLIDATED PROFORMA STATEMENT OF STOCKHOLDER EQUITY
(In Thousands)
<CAPTION>
Additional Retained
Common Stock Paid-in Earnings Receivable
Shares Amount Capital (Deficit) Stockholder Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996 19,522 $ 19 $ 36 $ (55) $ -- $ --
Reverse split (19,327) (19) 19 -- -- --
Exchange of shares 11,750 12 -- -- (12) --
Net income -- -- -- 219 -- 219
-------- -------- -------- -------- -------- --------
BALANCE, June 30, 1997 11,945 12 55 164 (12) 219
Receipt of cash for sale of shares -- -- 24,989 -- 12 25,001
Net loss -- -- -- (4,918) -- (4,918)
-------- -------- -------- -------- -------- --------
BALANCE, June 30, 1998 11,945 12 25,044 (4,754) -- 20,302
Sales of shares for cash 5,000 5 219 -- (24) 200
Net income -- -- -- 2,445 -- 2,445
-------- -------- -------- -------- -------- --------
BALANCE, December 31, 1998 (unaudited) 16,945 $ 17 $ 25,263 $ (2,309) (24) $ 22,947
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes and accountant's report.
Page 4
<PAGE>
EURO TRADE & FORFAITING INC.
(Formerly Rotunda Oil and Mining , Inc.)
NOTES TO CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997 AND FOR
THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
NOTE A REORGANIZATION
The following are the principal terms with respect to the exchange of shares of
capital stock of Euro Trade & Forfaiting, Inc. (The Company), a Utah corporation
(formerly Rotunda Oil and Mining, Inc.) for the shares of Euro Trade &
Forfaiting Co. Limited (Euro Trade), a United Kingdom corporation.
Pre-Exchange Capitalization
- ---------------------------
In November, 1998, The Company declared a reverse stock split of 1 for 1,000 of
the outstanding shares. As a result 19.5 million outstanding shares were reduced
to 195 thousand outstanding shares.
Euro Trade issued 15 million preferred shares and 9.2 million common shares for
cash on February 25, 1997. An option for .8 million shares of the common stock
was issued on the same date and funded as required by United Kingdom law.
The option was exercised immediately prior to the exchange.
Equity Conversion Mechanics
- ---------------------------
At the closing of the exchange, The Company issued and exchanged 11.8 million
shares of restricted Rule 144 common stock for all of the outstanding common and
preferred shares of Euro Trade.
After the closing two options were granted for .5 million shares of the
company's common stock at a price of $.025. The options were exercised
immediately. Approximately $500 was paid for each option. The remaining $12,000
is due June 30, 1999.
Additionally, The Company issued an aggregate of 4 million new shares of common
stock at $.05 per share.
The Company will hold the shares of Euro Trade, which will continue to operate
as a subsidiary.
Post Exchange Capitalization
- ----------------------------
After the exchange and the subsequent offering of 5 million shares of common
stock, the capitalization consisted of 16.9 million shares of common stock of
which 11.8 million are restricted.
Page 5
<PAGE>
EURO TRADE & FORFAITING INC.
(Formerly Rotunda Oil and Mining , Inc.)
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997 AND FOR
THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
NOTE B BASIS OF CONSOLIDATION
The accompanying financial statements have been prepared to give effect to the
exchange completed on November 20, 1998. The two companies in the exchange are:
Euro Trade & Forfaiting, Inc., a Utah corporation,
(formerly Rotunda Oil and Mining, Inc.) "The Company"
Euro Trade & Forfaiting Co. Limited, a United Kingdom corporation,
"Euro Trade"
After the exchange, The Company owned all of the outstanding shares of Euro
Trade. The exchange is accounted for as if The Company purchased Euro Trade for
stock. All assets are reflected at historical cost. For purposes of the proforma
statement of stockholders' equity, multiple transactions are considered to have
taken place concurrently.
As noted in the Accountant's Report, the financial statements of Rotunda Oil and
Mining, Inc. were audited at June 30, 1998 and 1997 by other auditors.
Page 6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
EURO TRADE AND FORFAITING, INC.
(Registrant)
Date: May 11, 1999 By: /S/ JOHN VOWELL
--------------------------------
John Vowell, President, Chief
Executive Officer and Director
S-1
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION, (hereinafter the
"Agreement") is made and entered into this 20th day of November, 1998 by and
between Rotunda Oil & Mining, Inc., a Utah corporation (hereinafter "Rotunda"),
Euro Trade & Forfaiting Company Limited, a United Kingdom corporation
(hereinafter "ETFC"), and the shareholders of ETFC (hereinafter "Shareholders").
RECITALS
WHEREAS, Rotunda desires to acquire all of the issued and outstanding
shares of ETFC capital stock in exchange for 11,000,000 shares of authorized but
previously unissued Rotunda common stock, par value $.001 per share, post-split
as per Section 1.4 below, and pursuant to the terms and conditions set forth
herein;
WHEREAS, the Shareholders of ETFC desire to exchange all of their
shares of ETFC capital stock for shares of Rotunda common stock in the
respective amounts set forth herein;
WHEREAS, Rotunda and ETFC intend to cooperate in order to facilitate
the offering and sale of up to 4,0000,000 shares of Rotunda common stock
pursuant to an exemption from registration; and
WHEREAS, the parties hereto desire to reorganize the management and
operations of Rotunda, to change the corporate name, and to change the principal
place of business of the corporation.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
ACQUISITION AND EXCHANGE OF SHARES
SECTION 1.1 Acquisition and Plan of Reorganization. The parties hereby agree
that Rotunda shall acquire all of the issued and outstanding shares of ETFC
capital stock and/or options and/or other securities, in exchange for eleven
million (11,000,000) shares of authorized but previously unissued Rotunda common
stock, par value $.001 per share, post-split as per Section 1.4 below.
(a) Assets. It is also agreed to by the parties hereto that by
acquiring the shares of ETFC capital stock, Rotunda will acquire all
rights, title and interest to the assets and property presently owned
by ETFC and represented in ETFC's financial statements or other
schedules provided to Rotunda. Said assets and property may be subject
to certain interests, liens and/or encumbrances which are to be further
described ETFC's financial statements or other schedules provided to
Rotunda.
(b) Valuation. For purposes of the transactions contemplated hereby,
the valuation of the ETFC securities to be exchanged for Rotunda common
stock hereunder will be based upon a multiple of two and one-half (2
1/2) times ETFC's net asset value for its fiscal year ended June 30,
1998, and it is agreed upon by the parties hereto to accept this
valuation.
(c) Reorganization. The parties hereto agree that at the Closing (i)
ETFC shall become a wholly-owned subsidiary of Rotunda subject to the
conditions and provisions of Section 1.6 hereof; (ii) Rotunda shall
change its corporate name to Euro Trade & Forfaiting, Inc.; and (iii)
the necessary steps shall be taken in order to reflect the relocation
of Rotunda's principal place of business to London, England.
<PAGE>
SECTION 1.2 Exchange of Shares.
(a) Upon the Closing of this Agreement, Rotunda shall cause to be
issued and held for delivery to the Shareholders of ETFC or their
designees, stock certificates representing an aggregate of 11,000,000
shares (the "Rotunda Shares") of Rotunda common stock (post-split), in
exchange for all the issued and outstanding shares of ETFC capital
stock, which shares shall be delivered to Rotunda at the Closing. It is
agreed that the Rotunda Shares shall be held and not delivered to
Shareholders until the closing of the 4,000,000 share offering
described in Section 1.5 below.
(b) The Rotunda Shares to be issued hereunder shall be authorized but
previously unissued shares of Rotunda common stock. The Rotunda Shares
shall be issued to those persons and in the respective amounts set
forth in Exhibit 1.2 annexed hereto and by this reference made a part
hereof.
(c) All Rotunda Shares to be issued hereunder are deemed "restricted
securities" as defined by Rule 144 of the Securities Act of 1933, as
amended (the "1933 Act"), and the recipients shall represent in writing
that they are acquiring said shares for investment purposes only and
without the intent to make a further distribution of the Rotunda
Shares. All Rotunda Shares to be issued under the terms of this
Agreement shall be issued pursuant to an exemption from the
registration requirements of the 1933 Act, under Section 4(2) of the
1933 Act and the rules and regulations promulgated thereunder.
Certificates representing the Rotunda Shares to be issued hereunder
shall bear a restrictive legend in substantially the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered for sale, sold or otherwise transferred
except in compliance with the registration provisions of such
Act or pursuant to an exemption from such registration
provisions, the availability of which is to be established to
the satisfaction of the Company.
(d) ETFC and Shareholders acknowledge and agree that the Rotunda
Shares to be issued hereunder shall be issued upon the closing of the
4,000,000 share offering described in Section 1.5 below.
SECTION 1.3 Closing. The closing of this Agreement and the transactions
contemplated hereby (the "Closing") shall take place on the 20th day of
November, 1998 (the "Closing Date"), at a time and place to be mutually agreed
upon by the parties hereto, and shall be subject to the provisions of Article X
of this Agreement. At the Closing:
(a) ETFC shall deliver to Rotunda stock certificates representing 100%
of the issued and outstanding shares of ETFC capital stock, duly
endorsed, so as to make Rotunda the sole holder thereof, free and clear
of all claims and encumbrances;
(b) Rotunda shall deliver to those persons listed in Exhibit 1.2,
stock certificates representing an aggregate of 11,000,000 shares of
Rotunda common stock, which certificates shall bear a standard
restrictive legend in the form customarily used with restricted
securities and as set forth in Section 1.2(c) above;
(c) Rotunda shall deliver an Officer's Certificate as described in
Sections 9.1, 9.2 and 9.4 hereof, dated the Closing Date, that all
representations, warranties, covenants and conditions set forth herein
by Rotunda are true and correct as of, or have been fully performed and
complied with by, the Closing Date; and
-2-
<PAGE>
(d) ETFC shall deliver an Officer's Certificate as described in
Sections 8.1, 8.2 and 8.4 hereof, dated the Closing Date, that all
representations, warranties, covenants and conditions set forth herein
by ETFC and Shareholders are true and correct as of, or have been fully
performed and complied with by, the Closing Date;
SECTION 1.4 Rotunda Special Meeting of Shareholders. In anticipation of this
Agreement, Rotunda has taken all necessary and requisite action to call for and
hold a Special Meeting of Shareholders on November 20, 1998, in order to
transact the following business:
(a) To ratify the prior action by the Rotunda Board of Directors to
effect a reverse stock split of Rotunda's issued and outstanding shares
of common stock on a one (1) share for one hundred (100) shares basis,
effective November 20, 1998; and
(b) To ratify this Agreement and all transactions contemplated hereby;
(c) To ratify the amendment to the Articles of Incorporation to permit
action which may be taken at any annual or special meeting of
shareholders, to be taken by written consent of shareholders having not
less than the minimum number of votes that would be necessary to
authorize or take the action at a meeting of shareholders.
SECTION 1.5 Offering and Sale of Rotunda Common Stock. The parties hereto
agree to cooperate to cause the offering and sale of up to 4,000,000 shares
(post-split) of Rotunda's authorized but previously unissued common stock
pursuant to the provisions of Regulation D, Rule 504 of the 1933 Act. It is
further agreed that ETFC will facilitate the offering and sale and that all
sales will be made outside the United States and to persons not citizens of the
United States.
SECTION 1.6 Consummation of Transaction. If at the Closing, no condition
exists which would permit any of the parties to terminate this Agreement, or a
condition then exists and the party entitled to terminate because of that
condition elects not to do so, then the transactions herein contemplated shall
be consummated upon such date, and then and thereupon, Rotunda shall file any
additional necessary documents that may be required by the State of Utah.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ROTUNDA
Rotunda hereby represents, warrants and agrees that:
SECTION 2.1 Organization, Good Standing and Corporate Power of Rotunda.
Rotunda is a corporation duly organized, validly existing and presently in good
standing under the laws of the State of Utah, is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
such qualification is necessary, and has the corporate power and authority to
own its properties and assets and to transact the business in which it is
engaged. There are no corporations or other entities with respect to which (i)
Rotunda owns any of the outstanding stock or other interest, or (ii) Rotunda may
be deemed to be in control because of factors or relationships other that the
quantity of stock or other interest owned.
SECTION 2.2 Capitalization of Rotunda. Prior to the action to be taken at the
Rotunda Special Meeting of Shareholders as set forth in Section 1.4 above and
the transactions contemplated by this Agreement, the authorized capital stock of
Rotunda consisted of 50,000,000 shares of common stock, par value $.001 per
share, of which 19,522,000 shares were issued and outstanding. Taking into
consideration the effect of the proposed one share for one hundred shares
reverse stock split, the number of shares of common stock issued and outstanding
-3-
<PAGE>
shall be approximately 195,220 shares, par value $.001 per share, without giving
effect to the rounding-up of fractional shares resulting from the reverse stock
split, and the shares to be issued pursuant to this Agreement. All shares of
Rotunda common stock currently issued and outstanding have been duly authorized
and validly issued and are fully paid and non-assessable. There are no
preemptive rights, or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights, calls,
agreements or commitments of any character obligating Rotunda to issue any
shares of its capital stock or any security representing the right to acquire,
purchase or otherwise receive any such stock. Shares of Rotunda common stock to
be issued pursuant to this Agreement, when so issued, will be duly authorized,
validly issued, fully paid and non-assessable.
SECTION 2.3 Charter Documents. Certified copies of the Rotunda Articles of
Incorporation and By-Laws, as amended to date, have been or will be delivered to
ETFC prior to the Closing.
SECTION 2.4 Corporate Documents. The most recent Rotunda shareholders' list
and corporate minute books, which have been made available to ETFC, are complete
and accurate as of the date hereof and the corporate minute books contain the
recorded minutes of all corporate meetings of shareholders and directors.
SECTION 2.5 Financial Statements. Rotunda's financial statements for the three
month ended March 31, 1998 and the year ended December 31, 1997, a copy of which
is annexed hereto as Exhibit 2.5 and by this reference made a part hereof, are
true and complete in all material respects, having been prepared in accordance
with generally accepted accounting principles applied on a consistent basis for
the periods covered by such statements, and fairly present, in accordance with
generally accepted accounting principles, the financial condition of Rotunda and
results of its operations for the periods covered thereby. Except as otherwise
disclosed to ETFC in writing and as set forth herein and in Exhibit 2.5, and
other than according to the ordinary and usual course of Rotunda's business
consistent with such practice, (a) Rotunda has not engaged in any material
transaction since the date of its financial statements, and (b) there has not
been any material adverse change in the business operations, assets, properties,
prospects or condition (financial or otherwise) of Rotunda, taken as a whole,
from that reflected in the financial statements referred to in this Section 2.5.
SECTION 2.6 Absence of Certain Changes or Events. Since the date of the
Rotunda financial report attached hereto as Exhibit 2.5 and except as disclosed
otherwise herein, Rotunda has not (i) issued or sold any promissory note, stock,
bond, option or other corporate security of which it was an issuer or other
obligor, (ii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability, absolute or contingent, direct of indirect, (iii)
incurred or suffered to be incurred any liability or obligation other than in
the ordinary and usual course of business, (iv) caused or permitted any lien,
encumbrance or security interest to be created or arise on or in any of its
properties or assets, (v) declared, set aside or made any dividend, payment or
other distribution to any shareholder or purchased or redeemed or agreed to
purchase or redeem any shares of its capital stock (except for the cancellation
of 1,603,038 shares (post-split) as set forth in Section 1.1(b) above), (vi)
reclassified its shares of capital stock, or (vii) entered into any agreement or
transaction except in the ordinary and usual course of business or in connection
with the execution and performance of this Agreement.
SECTION 2.7 Tax Returns and Payments. Rotunda has filed with the appropriate
governmental authority, all tax returns, whether based upon income, sales or
franchise, as required by law to be filed on or before the date of this
Agreement, and Rotunda has paid all taxes to be due on said returns, any
assessments made against Rotunda and all other taxes, fees and similar charges
imposed on Rotunda by any governmental authority. No tax liens have been filed
and no claims are being assessed and no returns are under audit with respect to
any such taxes, fees or other similar charges.
-4-
<PAGE>
SECTION 2.8 Contracts. Rotunda is not a party to or bound by any material
contract or commitment, including guaranty whether written or oral, except as
may otherwise be disclosed in Exhibit 2.8, annexed hereto and by this reference
made a part hereof.
SECTION 2.9 Compliance with Law and Government Regulations. Rotunda is in
compliance with and is not in violation of applicable federal, state, local or
foreign statutes, laws and regulations (including without limitation, any
applicable building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business. Rotunda is not subject to any
order, decree, judgment or other sanction of any court, administrative agency or
other tribunal.
SECTION 2.10 Litigation. There is no material litigation, arbitration,
proceeding or investigation pending or threatened to which Rotunda is a party or
which may result in any material adverse change in the business or condition,
financial or otherwise, of Rotunda or in any of its properties or assets, or
which might result in any liability on the part of Rotunda, or which questions
the validity of this Agreement or of any action taken or to be taken pursuant to
or in connection with the provisions of this Agreement and, to the best
knowledge of Rotunda, there is no basis for any such litigation, arbitration,
proceeding or investigation.
SECTION 2.11 Trade Names and Rights. Rotunda does not use any trade mark,
service mark, trade name, or copyright in its business, nor does it own any
trade marks, trade mark registrations or application, trade name, service marks,
copyrights, copyright registrations or application. No person owns any trade
mark, trade mark registration or application, service mark, trade name,
copyright, or copyright registration or application, the use of which is
necessary or contemplated in connection with the operation of Rotunda's
business.
SECTION 2.12 Governmental Consent. No notices, reports or other filings are
required to be made nor are any consents, registrations, approvals, permits,
authorizations or designations required to be obtained by Rotunda from any
court, governmental or regulatory authority, agency, commission, body or other
governmental entity, in connection with the execution and delivery of this
Agreement by Rotunda or the carrying out and consummation of any transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a material adverse
effect or prevent, materially delay or materially impair the ability of Rotunda
to consummate the transactions contemplated by this Agreement.
SECTION 2.13 Corporate Authority. Rotunda has all requisite corporate power and
authority and has taken all corporate actions necessary in order to execute,
deliver and perform its obligations under this Agreement and to consummate,
subject (if required by law) only to approval of this Agreement by the holders
of a majority of the outstanding shares of Rotunda common stock. The Rotunda
Board of Directors has unanimously approved this Agreement and all transactions
contemplated hereby. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Rotunda
with the provisions hereof will not (a) conflict with or result in a breach of
any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Rotunda under, any of the terms, conditions or
provisions of the Articles of Incorporation or By-Laws of Rotunda, or any note,
bond, mortgage, indenture, license, lease, agreement or any instrument or
obligation to which Rotunda is a party or by which it is bound; or (b) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Rotunda or any of its properties or assets. Assuming due execution and delivery
by the parties hereto, this Agreement is the valid and binding agreement of
Rotunda enforceable against Rotunda in accordance with its respective terms,
except as such enforceability may be limited by applicable bankruptcy laws or
creditors' rights generally or by general principles of equity.
-5-
<PAGE>
SECTION 2.14 Full Disclosure. None of the representations and warranties made
by Rotunda herein, or in any exhibit, certificate or memorandum furnished or to
be furnished by Rotunda or on its behalf pursuant hereto, contains or will
contain any untrue statement of material fact, or omits any material fact, the
omission of which would be misleading.
ARTICLE III
COVENANTS OF ROTUNDA
SECTION 3.1 Conduct Prior to the Closing. Rotunda covenants and agrees as to
itself that, after the date hereof and prior to the Closing (unless ETFC shall
otherwise approve in writing, which approval shall not be unreasonably
withheld):
(a) Except within the regular course of business and for the
transactions contemplated by this Agreement, Rotunda will not enter
into any material agreement, contract or commitment, whether written or
oral, or engage in any substantive transaction;
(b) Rotunda will not declare, set aside or pay any dividends or
distributions payable in cash, stock or property, in respect of its
capital stock
(c) Rotunda will not amend its Articles of Incorporation or By-Laws,
except as set forth in Section 1.4 above or except for any amendment
which will not hinder, delay or make more costly to ETFC the
transactions contemplated by this Agreement;
(d) Rotunda will not authorize, issue, sell, purchase or redeem or
repurchase any shares of its capital stock or any options, rights or
other securities convertible, exchangeable or exercisable for any
shares of its capital stock, except as set forth in Section 1.1(b)
above;
(e) Rotunda will comply with all requirements which federal or state
law may impose on it with respect to this Agreement and the
transactions contemplated hereby, and will promptly cooperate with and
furnish written information to ETFC in connection with any such
requirements imposed upon the parties hereto in connection therewith;
(f) Except within the regular course of business, Rotunda will not
incur any indebtedness for money borrowed, issue or sell any debt
securities, incur or suffer to be incurred any liability or obligation
of any nature whatsoever, cause or permit any lien, encumbrance or
security interest to be created or arise on or in any of its properties
or assets, acquire or dispose of fixed assets, change employment terms,
enter into any material or long-term contract, guarantee obligations of
any third party, settle or discharge any balance sheet receivable for
less than its stated amount or enter into any other transaction, except
to comply with the terms of this Agreement; and
(g) Rotunda shall grant to ETFC and its counsel, accountants and other
representatives, full access during normal business hours during the
period prior to the Closing to all its respective properties, books,
contracts, commitments and records and, during such period, furnish
promptly to ETFC and such representatives all information relating to
Rotunda as ETFC may reasonably request, and shall extend to ETFC the
opportunity to meet with Rotunda's accountants and attorneys to discuss
the financial condition of Rotunda;
SECTION 3.2 Affirmative Covenants. Prior to Closing, Rotunda will do the
following:
(a) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all conditions
contained in this Agreement;
-6-
<PAGE>
(b) Promptly notify ETFC in writing of any material adverse change in
the financial condition, business, operations or key personnel of
Rotunda, any threatened material litigation or investigation, any
breach of its representations or warranties contained herein, and any
material contract, agreement, license or other agreement which, if in
effect on the date of this Agreement, should have been included in this
Agreement or in an exhibit annexed hereto and made a part hereof;
(c) Reserve, and promptly after the Closing, issue and deliver to
Shareholders and/or their designees, the number of shares of Rotunda
common stock required hereunder;
(d) Upon completion of the offering and sale of the 4,000,000 shares
of common stock as set forth in Section 1.5 above, the Rotunda Board of
Directors will nominate as new directors to its Board those persons to
be designated by ETFC and, contemporaneous with or immediately
thereafter, the current members of the Rotunda Board of Directors will
tender to the Board their respective resignations as directors and/or
officers.; and
(e) Take any and all other necessary and requisite corporate actions
to accomplish the transactions anticipated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ETFC AND SHAREHOLDERS
ETFC and Shareholders hereby represent, warrant and agree that:
SECTION 4.1 Organization, Good Standing and Corporate Power of ETFC. ETFC is a
corporation duly organized, validly existing and presently in good standing
under the laws of the United Kingdom, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which such
qualification is necessary, and has the corporate power and authority to own its
properties and assets and to transact the business in which it is engaged. There
are no corporations or other entities with respect to which (i) ETFC owns any of
the outstanding stock or other interest, or (ii) ETFC may be deemed to be in
control because of factors or relationships other that the quantity of stock or
other interest owned.
SECTION 4.2 Charter Documents. Complete and correct copies of the Articles of
Incorporation and By-Laws of ETFC and all amendments thereto, have been or will
be delivered to Rotunda prior to the Closing.
SECTION 4.3 Financial Statements / Assets and Liabilities. ETFC's financial
statements for the period ended June 30, 1998, a copy of which is annexed hereto
as Exhibit 4.3 and by this reference made a part hereof, are true and complete
in all material respects, having been prepared in accordance with generally
accepted accounting principles applied on a consistent basis for the periods
covered by such statements, and fairly present the financial condition of ETFC
and results of its operations for the periods covered thereby. ETFC has good and
marketable title to all of its assets and property to be acquired by Rotunda
hereunder (by way of Shareholders tendering all of their outstanding shares of
common stock to Rotunda), free and clear of any and all liens, claims and
encumbrances, except as may be otherwise set forth herein, in its financial
statements and in Exhibit 1.1. Except as otherwise disclosed to Rotunda in
writing and as set forth herein and in Exhibit 4.3, and other than according to
the ordinary and usual course of ETFC's business, consistent with such practice,
(a) ETFC has engaged only in its routine daily business since the date of its
financial statements, and (b) there has not been any material adverse change in
the business operations, assets, properties, prospects or condition (financial
or otherwise) of ETFC taken as a whole, from that reflected in the financial
statements referred to in this Section 4.3 or in Exhibit 1.1 annexed hereto.
-7-
<PAGE>
SECTION 4.4 Tax Returns and Payments. All tax returns for ETFC (federal,
state, city, county or foreign) which are required by law to be filed on or
before the date of this Agreement, have been duly filed or extended with the
appropriate governmental authority. ETFC has paid all taxes to be due on said
returns, any assessments made against ETFC, and all other taxes, fees and
similar charges imposed on ETFC by any governmental authority (other than those,
the amount or validity of which is being contested in good faith by appropriate
proceedings). No tax liens have been filed and no claims are being assessed with
respect to any such taxes, fees or other similar charges.
SECTION 4.5 Required Authorizations. There have been or will be timely filed,
given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications waivers or other actions of any kind
required by virtue of execution and delivery of this Agreement by ETFC or the
consummation by it of the transactions contemplated hereby.
SECTION 4.6 Compliance with Law and Government Regulations. ETFC is in
compliance with all applicable federal, state, local or foreign statutes, laws
and regulations (including without limitation, any applicable building, zoning
or other law, ordinance or regulation) affecting their properties or operation
of their businesses. ETFC is not subject to any order, decree, judgment or other
sanction of any court, administrative agency or other tribunal.
SECTION 4.7 Litigation. There is no material litigation, arbitration,
proceeding or investigation pending or threatened to which ETFC is a party or
which may result in any material change in the business or condition, financial
or otherwise, of ETFC or in any of its properties or assets, or which if
determined against ETFC, would have a material adverse effect against ETFC, or
which might result in any liability on the part of ETFC, or which questions the
validity of this Agreement or of any action taken or to be taken pursuant to or
in connection with the provisions of this Agreement, and to the best knowledge
of ETFC, there is no basis for any such litigation, arbitration, proceeding or
investigation.
SECTION 4.8 Patents, Trade Names and Rights. Exhibit 4.8 annexed hereto and by
this reference made a part hereof, contains a complete list of all patents,
trademarks, service marks, trademark, service mark and copyright registrations,
applications and licenses with respect to the foregoing owned or held by ETFC.
ETFC has no knowledge of any facts and nothing has come to its attention that
would lead it to believe that ETFC has infringed or misappropriated or are
infringing upon any trademark, copyright, patent or other similar right of any
person. No claim relating thereto is pending or to the knowledge of ETFC is
threatened.
SECTION 4.9 Governmental Consent. No notices, reports or other filings are
required to be made nor are any consents, registrations, approvals, permits,
authorizations or designations required to be obtained by ETFC from any court,
governmental or regulatory authority, agency, commission, body or other
governmental entity, in connection with the execution and delivery of this
Agreement by ETFC or the carrying out and consummation of any transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a material adverse
effect or prevent, materially delay or materially impair the ability of ETFC to
consummate the transactions contemplated by this Agreement.
SECTION 4.10 Authority. ETFC and its Shareholders representing no less than one
hundred percent (100%) of the issued and outstanding shares of ETFC capital
stock of record, have approved this Agreement and duly authorized the execution
and delivery hereof. ETFC has full power, authority and legal right to enter
into this Agreement on behalf of ETFC and its Shareholders and to consummate the
transactions contemplated hereby, and all corporate action necessary to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby has been duly and validly taken. ETFC
further represents that it has been empowered by Shareholders by powers of
attorney and/or otherwise, to execute this Agreement on behalf of Shareholders.
The execution and delivery of this Agreement, the consummation of the
-8-
<PAGE>
transactions contemplated hereby and compliance by ETFC with the provisions
hereof will not (a) conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
ETFC under, any of the terms, conditions or provisions of the Articles of
Incorporation or By-Laws of ETFC, or any note, bond, mortgage, indenture,
license, agreement or any instrument or obligation to which ETFC is party or by
which it is bound; or (b) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to ETFC or any of its properties or assets.
Assuming due execution and delivery by the parties hereto, this Agreement
represents the valid and binding agreement of ETFC enforceable against ETFC in
accordance with its respective term, except as such enforceability may limited
by applicable bankruptcy laws or creditors' rights generally or by general
principles or equity.
SECTION 4.11 Legal Proceedings and History. ETFC and Shareholders hereby
represent that, unless otherwise disclosed herein or by a written attachment
hereto, no officer, director or affiliate of ETFC nor any Shareholder or any
other person receiving a portion or all of the Rotunda Shares to be issued
hereunder, shall have been, within the past five years; a party to any
bankruptcy petition against such person or against any business of which such
person was affiliated; convicted in a criminal proceeding or subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses; subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting their
involvement in any type of business, securities or banking activities; or found
by a court of competent jurisdiction in a civil action, by the Securities
Exchange Commission or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
SECTION 4.12 Ownership of Shares. Shareholders representing 100% of the ETFC
capital stock currently issued and outstanding and which stock is to be
transferred to Rotunda under this Agreement, have full power and authority to
transfer such shares of ETFC capital stock to Rotunda hereunder, and such shares
are free and clear of any liens, charges, mortgages, pledges or encumbrances and
such shares are not subject to any claims as to the ownership thereof, or any
rights, powers or interest therein, by any third party.
SECTION 4.13 Investment Purpose . ETFC and Shareholders represent that the
recipients of the Rotunda Shares hereunder are acquiring the shares for
investment purposes only and acknowledges that the Rotunda Shares issued
hereunder are "restricted securities" and may not be sold, traded or otherwise
transferred without registration under the 1933 Act or exemption therefrom.
SECTION 4.14 Full Disclosure. None of the representations and warranties made
by ETFC or Shareholders herein, or in any exhibit, certificate or memorandum
furnished or to be furnished by ETFC or Shareholders, on their behalf pursuant
hereto, contains or will contain any untrue statement of material fact, or omit
any material fact, the omission of which would be misleading.
ARTICLE V
COVENANTS OF ETFC
SECTION 5.1 Conduct Prior to the Closing. ETFC covenants and agrees that,
after the date hereof and prior to the Closing (unless Rotunda shall otherwise
approve in writing, which approval shall not be unreasonably withheld):
(a) ETFC will not declare, set aside or pay any dividends or
distributions payable in cash, stock or property, in respect of its
capital stock;
-9-
<PAGE>
(b) ETFC will not amend its Articles of Incorporation or By-Laws,
except for any amendment which will not hinder, delay or make more
costly to Rotunda the transactions contemplated by this Agreement;
(c) ETFC will comply with all requirements which federal or state law
may impose on it with respect to this Agreement and the transactions
contemplated hereby, and will promptly cooperate with and furnish
written information to Rotunda in connection with any such requirements
imposed upon the parties hereto in connection therewith;
(d) Except within the regular course of business, ETFC will not incur
any indebtedness for money borrowed, issue or sell any debt securities,
incur or suffer to be incurred any liability or obligation of any
nature whatsoever, cause or permit any lien, encumbrance or security
interest to be created or arise on or in any of its properties or
assets, acquire or dispose of fixed assets, change employment terms,
enter into any material or long-term contract, guarantee obligations of
any third party, settle or discharge any balance sheet receivable for
less than its stated amount or enter into any other transaction, except
to comply with the terms of this Agreement;
(e) ETFC shall grant to Rotunda and its counsel, accountants and other
representatives, full access during normal business hours during the
period prior to the Closing to all its respective properties, books,
contracts, commitments and records and, during such period, furnish
promptly to Rotunda and such representatives all information relating
to ETFC as Rotunda may reasonably request, and shall extend to Rotunda
the opportunity to meet with ETFC's accountants and attorneys to
discuss the financial condition of ETFC; and
SECTION 5.2 Affirmative Covenants. Prior to Closing, ETFC will do the
following:
(a) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all the conditions
contained in this Agreement; and
(b) Promptly notify Rotunda in writing of any materially adverse
change in the financial condition, business, operations or key
personnel of ETFC, any breach of its representations or warranties
contained herein, and any material contract, agreement, license or
other agreement which, if in effect on the date of this Agreement,
should have been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. Whether or not the transactions contemplated in this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense or as otherwise agreed to herein.
SECTION 6.2 Brokers and Finders. Each of the parties hereto represents, as to
itself, that no agent, broker, investment banker or firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement,
except as may be otherwise set forth herein or by separate document.
SECTION 6.3 Necessary Actions. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In the event at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers
and/or directors of Rotunda or ETFC, as the case may be, shall take all such
necessary action.
-10-
<PAGE>
SECTION 6.4 Indemnification.
(a) From and after the Closing of this Agreement, ETFC and
Shareholders agree to indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Closing a director or officer of
Rotunda, against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, demands, liabilities, damages
and deficiencies, including interest and penalties, incurred or
suffered in connection with any claim action, suit, proceeding or
investigation, whether civil, criminal or administrative, arising out
of matters existing or occurring prior to the Closing, whether asserted
or claimed prior to, at or after the Closing, which is based in whole
or in part on, or arising in whole or in part out of the fact that such
person is or was a director or officer of Rotunda including, without
limitation, all losses, claims, damages, costs, expenses, liabilities,
judgments or settlement amounts based in whole or in part on, or
arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby to the fullest extent that Rotunda
could have been permitted under applicable state laws and its
certificate of incorporation, by-laws and other agreements in effect on
the date hereof to indemnify such individual.
(b) From and after the Closing of this Agreement, Rotunda agrees to
indemnify, defend and hold harmless each person who is now, or has been
at any time prior to the date of this Agreement, or who becomes prior
to the Closing a director or officer of ETFC, against any costs or
expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, demands, liabilities, damages and deficiencies,
including interest and penalties, incurred or suffered in connection
with any claim action, suit, proceeding or investigation, whether
civil, criminal or administrative, arising out of matters existing or
occurring prior to the Closing, whether asserted or claimed prior to,
at or after the Closing, which is based in whole or in part on, or
arising in whole or in part out of the fact that such person is or was
a director or officer of Rotunda including, without limitation, all
losses, claims, damages, costs, expenses, liabilities, judgments or
settlement amounts based in whole or in part on, or arising in whole or
in part out of, or pertaining to this Agreement or the transactions
contemplated hereby to the fullest extent that ETFC could have been
permitted under applicable state laws and its certificate of
incorporation, by-laws and other agreements in effect on the date
hereof to indemnify such individual.
(c) Any indemnified party wishing to claim indemnification under
subsection (a) or (b) of this Section 6.4, upon leaning of any such
claim, action , suit, proceeding or investigation, shall promptly
notify ETFC if under subsection (a), or Rotunda if under subsection
(b), but failure to so notify the appropriate party shall not relieve
the indemnifying party from any liability which it may have under this
Section 6.4 except to the extent such failure materially prejudices
such party. In the event of any such claim, action, suit, proceeding or
investigation, (i) the indemnifying party shall have the right to
assume the defense thereof and shall not be liable to any such
indemnified party in connection with the defense thereof, (ii) the
indemnified party will cooperate in all respects as requested by the
indemnifying party in the defense of any such matter, and (iii) the
indemnifying party shall not be liable for any settlement effected
without its prior written consent, which consent shall not be
unreasonably withheld; provided, however, that the indemnifying party
shall not have any obligation hereunder to any indemnified party if and
when a court shall ultimately determine, and such determination shall
have become final, that the indemnification of such indemnified party
in the manner contemplated hereby is prohibited by law.
SECTION 6.5 Confidentiality. All parties hereto agree to keep confidential
this Agreement and all information and documents relating to this Agreement
until such time as the Agreement and the transactions contemplated hereunder are
made public by means of an appropriate press release or by any other means
reasonably assured to make such information publicly available.
-11-
<PAGE>
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The respective obligations of each party to this Agreement are subject
to the fulfillment, satisfaction or waiver at or prior to the Closing of each of
the following conditions:
SECTION 7.1 Legal Action. No federal or state court or other governmental
entity of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree, preliminary
or permanent injunction or other order that is in effect and restrains, enjoins
or otherwise prohibits consummation of the transactions contemplated by this
Agreement (collectively, an "Order"), and no governmental entity shall have
instituted any proceeding or formally threatened to institute any proceeding
seeking any such Order and such proceeding or threat remains unresolved.
SECTION 7.2 Absence of Termination. The obligations to consummate the
transactions contemplated hereby shall not have been canceled pursuant to
Article X hereof.
SECTION 7.3 Required Approvals. Rotunda and ETFC shall have received all such
approvals, consents, authorizations or modifications as may be required to
permit the performance by Rotunda and ETFC of the respective obligations under
this Agreement, and the consummation of the transactions herein contemplated,
whether from governmental authorities or other persons, and Rotunda and ETFC
shall each have received any and all permits and approvals from any regulatory
authority having jurisdiction required for the lawful consummation of this
Agreement.
SECTION 7.4 Blue Sky Compliance. There shall have been obtained any and all
permits, approvals and consents of the Securities or "Blue Sky" Commissions of
any jurisdictions, and of any other governmental body or agency, which counsel
for Rotunda may reasonably deem necessary or appropriate so that consummation of
the transactions contemplated by this Agreement may be in compliance with all
applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF ROTUNDA
All obligations of Rotunda under this Agreement are subject to the
fulfillment and satisfaction by ETFC and Shareholders prior to or at the time of
the Closing, of each of the following conditions, any one or more of which may
be waived by Rotunda.
SECTION 8.1 Representations and Warranties True at the Closing. All
representations and warranties of ETFC and Shareholders contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and, except to the extent such representations and warranties
speak as of an earlier date, as of the time of the Closing as though made on and
as of the Closing, and ETFC shall have delivered to Rotunda a closing
certificate, dated the date of the Closing, to such effect and in the form and
substance satisfactory to Rotunda, and signed, in the case of ETFC, by its
president and secretary.
SECTION 8.2 Performance. Each of the obligations of ETFC and Shareholders to
be performed on or before the Closing pursuant to the terms of this Agreement
shall have been duly performed at such time, and ETFC shall have delivered to
Rotunda a closing certificate, dated the date of the Closing, to such effect and
in form and substance satisfactory to Rotunda.
-12-
<PAGE>
SECTION 8.3 Authority. All action required to be taken by, or on the part of
ETFC and Shareholders to authorize the execution, delivery and performance of
this Agreement by ETFC and Shareholders and the consummation of the transactions
contemplated hereby, shall have been duly and validly taken. SECTION 8.4 Absence
of Certain Changes or Events. There shall not have occurred, since the date
hereof, any adverse change in the business, condition, (financial or otherwise),
assets or liabilities of ETFC, or any event or condition of any character
adversely affecting ETFC, and ETFC shall have delivered to Rotunda, a closing
certificate, dated the date of the Closing, to such effect and in form and
substance satisfactory to Rotunda and signed, in the case of ETFC, by its
president and secretary.
SECTION 8.5 Acceptance by ETFC Shareholders. The holders of record as of the
Closing of an aggregate of not less than one hundred percent (100%) of the
issued and outstanding shares of capital stock of ETFC have agreed to exchange
their shares for the Rotunda Shares specified herein.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF ETFC
All obligations of ETFC and Shareholders under this Agreement are
subject to the fulfillment and satisfaction by Rotunda, prior to or at the time
of Closing, of each of the following conditions, any one or more of which may be
waived by ETFC and Shareholders.
SECTION 9.1 Representations and Warranties True at the Closing. All
representations and warranties of Rotunda contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and,
except to the extent such representations and warranties speak as of an earlier
date, as of the time of the Closing as though made on and as of the Closing, and
Rotunda shall have delivered to ETFC a certificate, dated the date of the
Closing, to such effect and in the form and substance satisfactory to ETFC and
Shareholders, and signed, in the case of Rotunda, by its president and
secretary.
SECTION 9.2 Performance. Each of the obligations of Rotunda to be performed on
or before the Closing pursuant to the terms of this Agreement shall have been
duly performed at the time of the Closing, and Rotunda shall have delivered to
ETFC a closing certificate, dated the date of the Closing, to such effect and in
form and substance satisfactory to ETFC and Shareholders, and signed, in the
case of Rotunda, by its president and secretary.
SECTION 9.3 Authority. All action required to be taken by, or on the part of
Rotunda, to authorize the execution, delivery and performance of this Agreement
by Rotunda, and the consummation of the transactions contemplated hereby shall
be duly and validly taken.
SECTION 9.4 Absence of Certain Changes or Events. There shall not have
occurred, since the date hereof, any adverse change in the business, condition,
(financial or otherwise), assets or liabilities of Rotunda or any event or
condition of any character adversely affecting Rotunda and Rotunda shall have
delivered to ETFC, a closing certificate, dated the date of the Closing, to such
effect and in form and substance satisfactory to ETFC and Shareholders and
signed, in the case of Rotunda by its president and secretary.
SECTION 9.5 Action by Rotunda Shareholders. Prior to the Closing of this
Agreement, the shareholders of Rotunda shall have approved the reverse stock
split and the amendment to the Rotunda Articles of Incorporation changing the
corporate name as set forth in Section 1.4 above
-13-
<PAGE>
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Notwithstanding anything herein or elsewhere to the
contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned an/or rescinded:
(a) By mutual written agreement of all the parties hereto at any time,
whether before or after the approval of this Agreement by the
respective parties;
(b) By the board of directors of Rotunda at any time prior to the
Closing if:
(i) a condition to Rotunda's performance under this Agreement
or a covenant of ETFC and/or Shareholders contained herein
shall not be fulfilled on or before the time of the Closing or
at such other time and date specified for the fulfillment for
such covenant or condition;
(ii) a material default or breach of this Agreement shall be
made by ETFC and/ or Shareholders; or
(iii) the Closing shall not have taken place on or prior to
December 31, 1998.
(c) By the board of directors of ETFC at any time prior to the Closing
if:
(i) a condition to ETFC's and Shareholders' performance under
this Agreement or a covenant of Rotunda contained in this
Agreement shall not be fulfilled on or before the Closing or
at such other time and date specified for the fulfillment of
such covenant or conditions;
(ii) a material default or breach of this Agreement shall be
made by Rotunda; or
(iii) the Closing shall not have taken place on or prior to
December 31, 1998.
(d) By either Rotunda or ETFC at any time within two (2) years from
the Closing Date, if it is discovered or determined that any
representation or warranty set forth in the Agreement is proven to be
false or materially misleading or any obligation to be performed
hereunder shall not be fulfilled within the time and date specified
herein, by the non-offending party serving at least ten (10) days
written notice upon the other party that they intend to terminate the
Agreement and all transactions contemplated herein.
SECTION 10.2 Effect of Termination. If this Agreement is terminated, this
Agreement, except as to Section 11.1 and Section 11.2, shall become void and of
no further effect and there shall be no liability on the part of any party
hereto or any of its respective directors, officers, employees, agents,
shareholders, legal, accounting and financial advisors or other representatives;
provided however, that in the case of a Termination without cause by a party or
a termination pursuant to Sections 10.1(b)(i) or 10.1(c)(i) hereof because of a
prior material default under or a material breach of this Agreement by another
party, the damages which the aggrieved party or parties may recover from the
defaulting party or parties shall in no event exceed the amount of out-of-pocket
costs and expenses actually incurred by such aggravated party or parties in
connection with this Agreement, and no party to this Agreement shall be entitled
to any injunctive relief. It is further agreed to by the parties hereto that
upon the termination of this Agreement pursuant to Section 10.1 above, all
shares of Rotunda common stock (Rotunda Shares) issued hereunder shall be
returned to Rotunda to be cancelled on its stock ledger and, in the event such
Rotunda Shares are not returned to Rotunda, Rotunda will have the absolute right
to immediately proceed with the cancellation of the Rotunda Shares without
having possession thereof.
-14-
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Cost and Expenses. All costs and expenses incurred in connection
with this Agreement will be paid by the party incurring such expenses. In the
event of any termination of this Agreement pursuant to Section 10.1, subject to
the provisions of Section 10.2, Rotunda and ETFC will each bear their own
respective expenses.
SECTION 11.2 Extension of Time: Waivers. At any time prior to the Closing date:
(a) Rotunda may (i) extend the time for the performance of any of the
obligations or other acts of ETFC and/or Shareholders, (ii) waive any
inaccuracies in the representations and warranties of ETFC and
Shareholders contained herein or in any document delivered pursuant
hereto by ETFC and Shareholders, and (iii) waive compliance with any of
the agreements or conditions contained herein to be performed by ETFC
and Shareholders. Any agreement on the part of Rotunda to any such
extension or waiver shall be valid only if set forth in an instrument,
in writing, signed on behalf of Rotunda;
(b) ETFC may (i) extend the time for the performance of any of the
obligations or other acts of Rotunda, (ii) waive any inaccuracies in
the representations and warranties of Rotunda contained herein or in
any document delivered pursuant hereto by Rotunda and (iii) waive
compliance with any of the agreements or conditions contained herein to
be performed by Rotunda. Any agreement on the part of ETFC and to any
such extension or waiver shall be valid only if set forth in an
instrument, in writing, signed on behalf of ETFC.
SECTION 11.3 Notices. Any notice to any party hereto pursuant to this Agreement
shall be in writing and given by Certified or Registered Mail or by facsimile,
addressed as follows:
Copy to:
Rotunda Oil & Mining, Inc. Leonard E. Neilson
135 West 900 South Attorney at Law
Salt Lake City, Utah 84101 1121 East 3900 South, Suite 200
Salt Lake City, Utah 84124
Copy to:
Euro Trade & Forfaiting Company Limited Appleton Company Services Limited
9 King Street, 3rd Floor 186 Hammersmith Road
London C2V 8EA London W8 7Dj
Additional notices are to be given as to each party, at such other
address as should be designated in writing complying as to delivery with the
terms of this Section 11.3. All such notices shall be effective when sent,
addressed as aforesaid.
SECTION 11.4 No Personal Liability. This Agreement shall not create or be
deemed to create any personal liability or obligation on the part of any direct
or indirect shareholder of Rotunda, ETFC, or any of their respective officers,
directors, employees, agents or representative.
SECTION 11.5 Parties in Interest. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and the respective successors and
assigns. Nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by reason of
this Agreement.
-15-
<PAGE>
SECTION 11.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together shall
constitute one document. The delivery by facsimile of an executed counterpart of
this Agreement shall be deemed to be an original and shall have the full force
and effect of an original executed copy. SECTION 11.7 Severability. The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision hereof shall not affect the validity or
enforceability of any of the other provisions hereof. If any provisions of this
Agreement, or the application thereof to any person or any circumstance, is
illegal, invalid or unenforceable, (a) a suitable and equitable provision shall
be substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision,
and (b) the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
SECTION 11.8 Headings. The Article and Section headings are provided herein for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
SECTION 11.9 Governing Law. This Agreement shall be deemed to be made in and in
all respects shall be interpreted, construed and governed by and in accordance
with the law of the State of Utah without regard to the conflict of law
principles thereof. Any action to enforce the provisions of this Agreement shall
be brought in a court of competent jurisdiction in the State of Utah and in on
other place.
SECTION 11.10 Survival of Representations and Warranties. All terms, conditions,
representations and warranties set forth in this Agreement or in any instrument,
certificate, opinion, or other writing providing for in it, shall survive the
Closing and the delivery of the Shares of Rotunda common stock to be issued
hereunder at the Closing, regardless of any investigation made by or on behalf
of any of the parties hereto.
SECTION 11.11 Assignability. This Agreement shall not be assignable by operation
of law or otherwise and any attempted assignment of this Agreement in violation
of this subsection shall be void.
SECTION 11.12 Amendment. This Agreement may be amended with the approval of
Shareholders and the boards of directors of Rotunda and ETFC at any time before
or after approval thereof by shareholders of Rotunda and ETFC, if required; but
after such approval, if required, no amendment shall be made which substantially
and adversely changes the terms hereof. This Agreement may not be amended except
by an instrument, in writing, signed on behalf of each of the parties hereto.
-16-
ARTICLES OF INCORPORATION
-------------------------
of
ROTUNDA OIL, AND MINING, INC.
-------------------------
WE, the undersigned natural persons, bona fide residents of Utah, over
the age of twenty-one years, associating to establish a corporation for the
business purposes hereinafter stated, do hereby act as incorporators of a
corporation pursuant to the Utah Business Corporation Act, and we do adopt and
declare the following as Articles of Incorporation for the same:
ARTICLE I
---------
The name of this Corporation is ROTUNDA 0IL, AND MINING, INC.
ARTICLE II
----------
The initial registered agent and the registered office are:
Registered Agent: Gary C. Thompson
Registered Office: 327 South Main Street
Salt Lake City, Utah 84111
ARTICLE III
-----------
The duration of this corporation is perpetual.
ARTICLE TV
----------
The powers of this corporation shall be those enumerated, granted and
specified in the Utah Business Corporation Act, or implied therefrom; and any
and all powers necessary or convenient to effect any or all of the purposes for
which the corporation is organized.
ARTICLE V
---------
The purposes for which this corporation is organized, are:
Sec. l. To generally engage in the oil and gas, uranium and coal, and
hard-rock mining business for profit; to engage in, conduct ventures, perform
Page One of Six Pages
<PAGE>
contracts and have dealings in all kinds of mineral operations, explorations,
geologic and engineering activities, drilling, recovery, refining and marketing,
and to have dealings in other various interests, investments, rights and
royalties related to mining.
Sec. 2. To deal and invest in the securities of other public and
private corporations for profit, including mining entities and any and all other
lawful business corporations.
Sec. 3. To buy, sell, hold and deal in non-mineral real property,
particularly undeveloped acreage, and to improve and develop the same.
Sec. 4. To engage In any and all other lawful business endeavor.
ARTICLE VI
----------
The aggregate number of shares which this corporation shall have the
authority to issue shall be Fifty Million Shares (50,000,000) of a par value of
1 mill ($0.001) per share, or $50,OOO
ARTICLE VII
-----------
There shall be but one class of stock, namely common stock. Each share
shall be entitled to one vote in shareholder meetings and cumulative voting is
denied. All shares shall be non-assessable with equal rights and privileges.
Shareholder pre-emptive rights are not accorded shareholders.
ARTICLE VIII
------------
The board of Directors shall consist of no less than three nor more
than seven. The initial Board shall be three Directors, as follows:
Gary C. Thompson 6400 South 2300 East Salt Lake City, Utah 84121
Tom S. Thompson 2569 Canterbury Lane Salt Lake City, Utah 84121
Milton C. Jones Route 2 Box 192-5 Highland, Utah 84003
ARTICLE IX
----------
The names and addresses of the incorporators are:
Gary C. Thompson 6400 South 2300 East Salt Lake City, Utah 84121
Tom S. Thompson 2569 Canterbury Lane Salt Lake City, Utah 84121
Milton C. Jones Route 2 Box 192-5 Highland, Utah 84003
Page Two of Six Pages
<PAGE>
ARTICLE X
---------
This corporation shall not commence business until consideration of at
least ONE THOUSAND DOLLARS ($1,000.00) has been paid into the corporation for
the issuance of shares. However, this requirement shall not preclude
transactions or the incurring of indebtedness which is incidental to its
organization or to the obtaining of subscriptions to or payment for its shares
by the founding group of individuals.
ARTICLE XI
----------
The following provisions shall govern shareholder meetings:
Sec. 1. An annual meeting of the! shareholders shall be held at time
and place within or without the State of Utah, and in further manner as may be
provided in By-Laws or other action of the Board of Directors. Failure to hold
an annual meeting shall not work a forfeiture or dissolution of the corporation.
Sec. 2. Thirty percent (30%) of the shares of common stock entitled to
vote shall be necessary to constitute a quorum of shareholders. Affirmative vote
of the majority of shares represented shall be the act of the shareholders, at
any annual or special meeting-unless a greater approval is required by law
concerning a specific subject matter of proposition.
Sec. 3. Special meetings of the shareholders may be called by the
Board, the Chairman of the Board, the President, or the holders of not less than
ten percent (10%) of the shares outstanding.
ARTICLE XII
-----------
Other provisions regulating the internal affairs of this corporation
are:
Sec. 1. Board of Directors. The business and affairs of the
corporation shall be managed by its board of directors. A director need not be a
shareholder. Directors terms shall continue until proper stockholder meeting is
called and successors are elected and qualify. A majority of the Board is
necessary to constitute a quorum. Board meetings may be held within or without
the state. Unless other-wise later required by By-Laws, neither the purpose nor
the business to be transacted at any regular or special Board meeting, need be
specified in the notice of meeting or waiver thereunto appertaining.
Page Three of Six Pages
<PAGE>
Sec. 2. Officers. Corporate officers shall include a President, a
Vice-President, a Secretary and a Treasurer. The positions of Secretary and
Treasurer may, by the Directors, be at any time combined in one person. Officers
shall be elected by the Board in meeting immediately following annual
shareholder meeting, for each year-to-year period (unless replaced or removed by
the Board, with officer tenure being at the ultimate discretion of the Board).
Duties of the officers are those usually and normally incumbent upon holders of
office of that title, subject to specific direction of the Board of Directors
and as provided by By-Laws. The President shall be the principal executive
officer to put into effect the decisions of the Board of Directors, and he shall
supervise and control the business and affairs of the corporation subject to the
Board decisions, and shall preside at meetings of the shareholders and
directors. The Vice-President shall perform the duties of the President when the
President is absent or unable to act. The Secretary shall keep minutes of
meetings and have general charge of the stock records of the corporation.
Sec. 3. Fiscal Year. Until changed by the Board of Directors, the
fiscal period shall end each year on the anniversary date (month and year) of
incorporation in Utah.
Sec. 4. By-Laws. The affairs of this corporation shall be governed by
these articles until By-Laws are adopted and thereafter shall be governed by
these articles and and By-Laws. The Board shall have the power to adopt By-Laws
and to amend same at any regular or special Board meeting.
Sec. 5. The Board of Directors may authorize any officer or agent to
enter into any contract or to execute any instrument for the corporation. Such
authority may be general or be confined to specific instances.
Sec. 6. Action Without Meeting. Any action required or permitted to be
taken by the Board of Directors or the shareholders at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all directors or shareholders, as the case may be.
Page Four of Six Pages
<PAGE>
Sec. 7. Waiver of Notice. Whenever any notice is required to be given
to any shareholder or director of the corporation under provisions of these
Articles, By-Laws, or the Utah Business Corporation Act, a waiver thereof in
writing signed by the person or persons entitled to such notice. whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE X111
------------
No contract or other transaction between this corporation and any
other corporation or entity shall be affected or invalidated solely by the fact
that any director or officer of this corporation is interested in, or is a
director or officer of such other corporation or entity--provided that the
extent of the Interest and connection of such director or officer shall have
been fully or satisfactorily disclosed to this corporation Board of Directors,
and no Board member disapproves of such contract or transaction under the
circumstances disclosed.
IN WITNESS WHEREOF, we, the undersigned, being all of the
incorporators of ROTUNDA OIL AND MINING, INC.
stated are truly set forth and constitute our desire, and we do now accordingly
hereunto set our hands to same on this l8th day of November, 1980 Salt Lake
City, Utah.
/s/ Gary C. Thompson Residing at: 6400 South 2300 East
- --------------------
Gary C. Thompson Salt Lake City, 84121
/s/ Tom S. Thompson Residing at: 2569 Canterbury Lane
- -------------------
Tom S. Thompson Salt Lake City, Utah 8412
/s/ Gary C. Thompson, Jr. Residing at: 2240 East 3300 So.
- -------------------------
Gary C. Thompson, Jr. Salt Lake City, Utah 84109
- - - - -
STATE OF UTAH as. )
: ss.
County of Salt Lake )
BE IT KNOWN AND REMEMBERED, That personally appeared before me, Rodney
B. Tunks, a Notary Public in and for the: County and the State aforesaid, Gary
C. Thompson, Tom S. Thompson and Gary C. Thompson, Jr.
Page Five of Six Pages
<PAGE>
personally known to me to be the same and being the incorporators and all of
same who signed the foregoing Articles of Incorporation: and I having made known
to them and each of them the contents of said Articles, they did under oath
severally acknowledge their signature as their free act and deed and that the
facts are truly set forth therein.
Given under my hand and seal of office this 18th day of November,
1980, at Salt Lake City, Utah.
/s/ Rodney B. Tunks
--------------------------
Notary Public
Residing at:
My Commission Expires:
March 25, 1983
- ---------------
Page Six of Six Pages
BY-LAWS
Of
ROTUNDA OIL AND MINING, INC.
- --------------------------------------------------------------------------------
ARTICLE I - OFFICES
Section 1. The principal office of the corporation in the State of
Utah shall be at 135 West 900 South, Salt Lake City, UT 84101. The officer in
charge thereof is Lane Clissold.
Section 2. The Corporation may have such other offices within or
without the state as the board of directors may from time to time designate.
ARTICLE 11 - STOCKHOLDERS
Section 1. Annual Meeting The annual meeting of the stockholders
shall be held at the corporate office on the third Friday of November of each
year at the hour of 10:00 am., or at such other time as may be fixed by the
board of directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day designated herein for the
annual meeting or at any adjournment thereof, the board of directors shall cause
the election to be held at a special meeting of the stockholders as soon
thereafter as may be convenient.
Section 2. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the president or by any director, and shall be called by the president
at the written request of fifteen percent (15%) of all outstanding shares of the
corporation entitled to vote at the meeting. Unless requested by stockholders
entitled to cast a majority of all the votes entitled to be cast at the meeting,
a special meeting need not be called to consider any matter which is
substantially the same as a matter voted on at any meeting of stockholders held
during the preceding twelve months.
Section 3. Place of Meeting. The board of directors may designate any
place, either in the State of Utah or elsewhere, as the place of any annual or
special meeting of stockholders.
<PAGE>
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting. A proxy shall be void one year after it is executed unless it
shall, prior to the epirationof one year have been renewed in writing. All
proxies shall be revocable.
Section 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter suibmitted to a vote at a meeting
of stockholders.
Section 10. Informal Action by Stockholders. Any action required or
permitted to be taken at a meeting of the stockholders, except matters as to
which dissenting stockholders may hold a statutory right of appraisal, may be
taken without a meeting if a consent in writing, setting forth the action to
take, shall be signed by a majority of the stockholders entitled to vote with
respect to the subject matter thereof. Notice of any such action shall be
provided to stockholders in the rnanner set forth in Section 4 of these By-laws,
within ten (10) days of the effective date of the action.
Section 11. Cumulative Voting There shall be no cumulative voting of
shares.
Section 12. Removal of Directors, At a meeting called expressly for
that purpose, directors may be removed with or without cause, by a vote of the
holders of a majority of the shares entitled to vote at an election of
directors.
ARTICLE 111- DIRECTORS
Section 1. The business and affairs of this corporation shall be
managed by its Board of Directors, which may be no less than two (2) no more
than seven (7) in number. The directors need not be residents of this state or
stockholders in the corporation. They shall be elected by the stockholder at the
annual meeting of stockholder of the corporation. Each director shall be elected
for the term of one (1) year, and until his successor shall have been elected
and accepted his election to the Board in writing.
Section 2. The number of directors may be increased or decreased from
time to time by the vote of a majority of the outstanding shares of the
corporation.
Section 3. Regular meetings.A regular meeting of the board of
directors shall be held without any notice other than this by-law immediately
after, and at the same place as, the annual
<PAGE>
Section 4. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall, unless otherwise prescribed by
statute, be delivered not less than ten (10) nor more than fifty (50) days
before the meeting, either personally or by mail, to each stockholder of record
entitled to vote at such meeting. If maiIed such notice shall, be deemed to be
delivered ten days (10) after it has been deposited in the United States Mail,
addressed to the stockholder at his address as it appears on the share registry
of the corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For
any purpose requiring identification of shareholders, the record date shall be
established by the board of diretors, and shall be not more than fifty (50) days
from the date on which any such purpose is to be accomplished. Absent a
resolution establishing any such date, the record date shall be deemed to be the
date on which any such action is accomplished.
Section 6. Voting List. The corporation shall maintain a stock ledger
which contains:
(1) The name and address of each stockholder.
(2) The number of shares of stock of each class which the
stockholder holds.
The stock ledger shall be in written form and available for visual inspection.
The original or a duplicate of the stock ledger shall be kept at the principal
office of the corporation.
Section 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be presented or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The stockholders present at a duly organized meeting may
continue to transact business until adjounment, notwithstanding the withdrawal
of enough stockholders to reduce the number of stockholders present to less than
a quorum.
Section 8. Proxies At all meetings of stockholders, a stockholder may
vote in person or by proxy executed in writing by the stockholder or by his duly
<PAGE>
authorized attorney in fact. Such meeting of stockholders. The board of
directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than such resolution.
Section 4. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or any director.
The person or persons calling any such meeting may fix the time and place of the
meeting.
Section 5. Notice Notice of any special meeting shall be given at
least five(5) days previously thereto by written notice delivered personally,
mailed or delivered by fax to each director at his business address. Notices
shall be deermed to have been delivered when transmitted personally or by fax,
and two days after mailed. Any director may waive notice of any meeting so long
as such waiver is in writing. The business to be conducted at any special
meeting need not be specified in the notice.
Section 6. Quorum A majority of the duly elected board of directors
shall constitute a quorum of the board of directors for the transaction of
business at any meeting of the board of directors.
Section 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 8. Informal Action by Directors. Action consented to by a
majority of the board of directors without a meeting is nevertheless board
action so long as (a) a written consent to the action is signed by all the
directors of the corporation and (b) a certificate or resolution detailing the
action taken is filed with the minutes of the corporation. Any one or more
directors may participate in any meeting of the board of directors by means of
conference telephone or other similar communications device which permits all
directors to hear the comments made by the others at the meeting.
Section 9. Executive and other Commitees, The board of directors may,
from time to time, as the business of the corporation may demand, delegate its
authority to committees of the board of directors under such term and conditions
as it may deem appropriate. The appointment of any such committee, the
<PAGE>
delegation of authority to it or action by it under that authority does not
constitute of itself,compliance by any director not a member of the committee,
with the standard provided by statute for the performance of duties of
directors.
Section 10. Compensation. By resolution of the board of directors,
each director may be paid his expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a stated salary as director or a fixed
per diem for attendance at each such meeting of the board of directors, or both.
No such payments shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate action is taken shall be presumed to have assented to the action taken
unless he shall announce his dissent at the meeting and his dissent is entered
in the minutes and he shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjounment of the meeting.
Section 12. Certificates of Resolution. At any such time as there
shall be only one duly elected and qualified director, actions of the
corporation may be manifest by the execution by such director of a Certificate
of Resolution specifying the corporate action taken and the effective date of
such action.
ARTICLE IV - OFFICERS
Section 1. Number. Officers of the corporation shall be a president
and a secretary, each of whom shall be elected by the board of directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the board of directors. Any two or more offices may be held by
the same person, except that no officer may act in more than one capacity where
action of two or more officers is required by law.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors after each
annual meeting of the stockholders. Each officer shall hold office for a period
of one (1) year and until his successor shall have been duly elected and shall
have accepted his election as an officer of the corporation in writing.
Section 3. Removal. Any officer or agent may be removed by the board
of directors whenever in its judgment the best interests of the corporation will
<PAGE>
be served thereby. Election to an office in the corporation shall not create any
contractual right of any type or sort in the person elected.
Section 4. Vacancies A vacancy in any office may be filled by the
board of directors for the unexpired portion of the term.
Section 5. Vacancies. The president shall be a director of the
corporation and shall be the principal executive officer of the corporation, and
subject to the control of the board of directors, shall in general supervise and
control all of the business and affairs of the corporation. The president shall
have authority to institute or defend legal proceedings when the directors are
deadlocked. He shall, when present, preside at all meetings of the stockholders
and of the board of directors. He ma sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed, and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
Section 6. Secretary The secretary shall: (a) keep the minutes of the
proceedings of the stockholders and of the board of directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation, if any;
(d) keep a register of the post office address of each stockholder which shall
be furnished to the secretary by such stockholder, (e) sign, with the president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (f) have general charge
of the stock registry of the corporation, (g) have charge and custody of and be
responsible for all funds and securities of the corporation; (h) Receive and
give receipts for moneys due and payable to the corporation and deposit all such
moneys in the name of the corporation in such bank accounts as may be
<PAGE>
established for that purposed; and (i) in general, perform all duties incident
to the office of secretary, as well as such duties as generally required upon
treasurers of corporations.
Section 7. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V - INDEMNIFICATION OF DIRECTORS
AND OFFICERS OF THE CORPORATION.
Section 1. The corporation shall indemnify any person who was or is a
party or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other tharn an action by or in the right of the corporation) by
reason of the fact that he is or was a director or oficer of the corporation,
againstt expenses (including attorneys fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminall action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or as equivalent shall not, without more, create a
presumption tha the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best mterest of the
corporation, and, with respect to any criminal action or prooceding, had
reasonable cause to believe that his conduct was unlawful.
ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts The board of directors may authorize any officer
or officers or agents to enter into any contract or execute and deliver any
instrument, including loans, mortgages, checks, drafts, deposits, deeds and
documents evidencing other transactions, in the name of the corporation. Such
authority may be general or confined to specific instances.
<PAGE>
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares
of the corporation shall be in the form approved in the organizational
resolutions of the corporation. They shall be signed by the president and
secretary of the corporation. Each certificate shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on each certificate and on the stock registry of the
corporation. All certificates surrendered to the corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except in
the case of a lost, destroyed or mutilated certificate, a new one may be issued
therefor upon such terms of indemnity to the corporation as the board of
directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock registry of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificates for such shares. The person in
whose name shares stand on the books o the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VII - FISCAL YEAR
Section 1. The fiscal year of the corporation shall begin on the
first day of January of each year and expire of the thirty-first day of December
of each year.
ARTICLE IX - CORPORATE SEAL
Section 1. Use of the corporate seal adopted by the board of
directors shall be optional with the officer or agent of the corporation signing
any document on behalf of the corporation. No Duly executed corporate document
shall be void because it does not bear the imprint of a seal.
ARTICLE X - WAIVER OF NOTICE
Section 1. Whenever any notice is required to be given to any
stockholder or director of the corporation under these By-laws, by provisions of
the Articles of Incorporation, or by the State of the Utah, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
<PAGE>
ARTICLE XI - AMENDMENTS
Section 1. The board of directors shall have the power to make, alter
and repeal by-laws; but by-laws made by the board may be altered or repeated, or
new by-laws made, by the stockholders.
ADOPTED by the order of the directors of the corporation on November
10, 1995.
ROTUNDA OIL AND MINING INC.
/s/ April Clissold
--------------------------------
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE EURO TRADE &
FORFAITING, INC. FINANCIAL STATEMENTS FOR THE
PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1999
<PERIOD-START> JUL-01-1997 JUL-01-1998
<PERIOD-END> JUN-30-1998 DEC-01-1998
<CASH> 18,873 21,842
<SECURITIES> 14,644 9,329
<RECEIVABLES> 523 467
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 34,040 31,638
<PP&E> 93 74
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 35,516 35,104
<CURRENT-LIABILITIES> 15,177 12,123
<BONDS> 27 34
0 0
15,000 0
<COMMON> 9,250 17
<OTHER-SE> 750 25,263
<TOTAL-LIABILITY-AND-EQUITY> 35,516 35,104
<SALES> 5,216 3,770
<TOTAL-REVENUES> 5,216 3,770
<CGS> 8,038 404
<TOTAL-COSTS> 8,038 404
<OTHER-EXPENSES> 2,170 920
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (4,992) 2,446
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,992) 2,446
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,922) 2,446
<EPS-PRIMARY> (.20) .14
<EPS-DILUTED> (.20) .14
</TABLE>
