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As filed with the Securities and Exchange Commission on March 10, 2000
REGISTRATION NO. ____-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form For Registration Of Securities Of
Small Business Issuers
Under Section 12(B) Or (G) Of The Securities Exchange Act Of 1934
Gentry Resources, Inc.
(Name of Small Business Issuer in its charter)
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Nevada 6770 76-0594911
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1177 West Hastings, Suite 2110
Vancouver, British Columbia CANADA V6E 2K3
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (604) 687-2199
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act: Common Stock, $.001
Par Value
(Title of class)
Agent for Service: With a Copy to:
Michael Kirsh, President James L. Vandeberg
Gentry Resources, Inc. Ogden Murphy Wallace
1177 West Hastings, Suite 2110 2100 Westlake Center
Vancouver, British Columbia V6E 2K3, CANADA 1601 Fifth Avenue
(604) 687-2199 Seattle, Washington 98101
(Name, address, including zip code, and telephone (206) 447-7000
number, including area code, of agent for service)
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GENTRY RESOURCES, INC.
FORM 10-SB
TABLE OF CONTENTS
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PART I Page
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Item 1. Description of Business.......................................... 3
Item 2. Management's Discussion and Analysis or Plan of Operations....... 6
Item 3. Description of Property.......................................... 15
Item 4. Security Ownership of Certain Beneficial Owners and Management... 15
Item 5. Directors, Executive Officers, Promoters and Control Persons..... 15
Item 6. Executive Compensation........................................... 17
Item 7. Certain Relationships and Related Transactions................... 17
Item 8. Description of Securities........................................ 18
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity
and Other Shareholder Matters.................................... 19
Item 2. Legal Proceedings................................................ 20
Item 3. Changes in and Disagreements with Accountants on Accounting...... 20
Item 4. Recent Sales of Unregistered Securities.......................... 20
Item 5. Indemnification of Directors and Officers........................ 21
PART F/S
Index to Consolidated Financial Statements................................ 23
PART III
Item 1. Index to Exhibits................................................ 31
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PART I
Item 1. Description of Business.
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General
Gentry Resources, Inc. (the "Company") was incorporated under the laws of
the State of Nevada on July 17, 1998, and is in the early developmental and
promotional stages. To date, the Company's only activities have been
organizational, directed at raising its initial capital and developing its
business plan. The Company has not commenced operations. The Company has no
full time employees and owns no real estate.
Business Purpose.
The business plan of the Company is to merge with or acquire a business
entity in exchange for the Company's securities. The Company will attempt to
locate and negotiate with a business entity for the merger of that target
company into the Company. In certain instances, a target company may wish to
become a subsidiary of the Company or may wish to contribute assets to the
Company rather than merge. No assurances can be given that the Company will be
successful in locating or negotiating with any target company.
The Company will seek a foreign or domestic private company interested in
becoming, through a business combination with the Company, a reporting
("public") company whose securities are qualified for trading in the United
States secondary market. By entering in to a business combination with the
Company, the target company can acquire a controlling ownership interest in a
public company without incurring the cost and time required to conduct an
initial public offering. As a result, the target company may reap some of the
perceived benefits of being a reporting company with a class of publicly-traded
securities, including:
* the ability to use registered securities to make acquisitions of assets or
businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
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* a presence in the United States capital market.
Potential Target Companies
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
. a company for which a primary purpose of becoming public is the use of its
securities for the acquisition of assets or businesses;
. a company which is unable to find an underwriter of securities or is unable to
find an underwriter securities on terms acceptable to it;
. a company which wishes to become public with less of its common stock than
would occur upon an underwriting;
. a company which believes that it will be able obtain investment capital on
more favorable terms after it has become public;
. a foreign company which may wish an initial entry into the United States
securities market;
. a special situation company, such as a company seeking a public market to
satisfy redemption requirements under a qualified employee stock option plan;
. a company seeking one or more of the other perceived benefits of becoming a
public company.
A business combination with a target company will likely involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target company of its
own management and board of directors.
No assurances can be given that the Company will be able to enter into a
business combination, as to the terms of a business combination, or as to the
nature of the target company.
Blank Check Company
The proposed business activities described herein classify the Company as a
blank check company. The Company meets the definition of a "blank check" company
under the Securities Act of 1933, which defines blank check company as a
development stage company that has no specific business plan or purpose or has
indicated that its business plan is to engage in a merger or acquisition with an
unidentified company or companies and is issuing "penny stock" securities. A
"penny stock" security is any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions.
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The Securities and Exchange Commission and many states have enacted
statutes, rules and regulations limiting the sale of securities of blank check
companies. Management does not intend to undertake any efforts to cause a market
to develop in the Company's securities until such time as the Company has
successfully implemented its business plan described herein. Accordingly, the
sole shareholder of the Company has executed and delivered a "lock-up" letter
agreement affirming that he will not sell or otherwise transfer his shares of
the Company's common stock except in connection with or following completion of
a merger or acquisition resulting in the Company no longer being classified as a
blank check company. The sole shareholder has deposited his stock certificates
with the Company's legal counsel, who will not release the certificates except
in connection with or following the completion of a merger or acquisition. The
Company is voluntarily filing this Registration Statement with the Securities
and Exchange Commission and is under no obligation to do so under the Securities
Exchange Act of 1934.
Biocatalyst License
The Company's only asset is a license to distribute and produce an oxygen
enriched water product, called "Biocatalyst," for remediation of sewage and
waste water in septic tanks and waste water treatment facilities, and for other
similar uses, and the rights accruing from this license. A copy of the license
is filed herewith as Exhibit 6.2. The Company acquired the three-year license
from Mortenson & Associates on April 28, 1999. Mortenson & Associates acquired
its right to sublicense Biocatalyst to the Company from NW Technologies. The
Company's original business plan was to determine the feasibility of the
Biocatalyst sewage and waste remediation application, and, if Biocatalyst proved
to be feasible for this application, become a Biocatalyst producer. The Company
filed a Form S-1 Registration Statement with the SEC on July 2, 1999, Commission
File No. 333-82277, which was subsequently amended but never declared effective.
In December, 1999, David R. Mortenson, Mortenson & Associates' principal,
notified the Company that he was involved in a legal dispute with NW
Technologies, and would be unable to fulfill his obligations under the license
to the Company. As a result, the Company's ability to implement its business
plan was seriously undermined, and on February 10, 2000, the Company requested
withdrawal of its Form S-1 Registration Statement.
On February 18, 2000, Mortenson & Associates, the Company, and the
Company's sole shareholder, Michael Kirsh, entered into a settlement agreement
filed herewith as Exhibit 6.1. Under the terms of the settlement agreement,
Mortenson & Associates' affiliate, Vitamineralherb.com, will grant to Kirsh a
license to distribute vitamins and similar products in part for his agreement
not to pursue his individual claims against Mortenson & Associates. The
settlement agreement provides that Mortenson will prosecute his claims against
NW Technologies diligently, with a goal toward recovering the Biocatalyst
rights. Pursuant to the settlement agreement, the Company has retained its right
to prosecute its claims against Mortenson & Associates for breach of contract.
The Company has no plans to pursue a claim at this time.
Administrative Offices
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The Company currently maintains limited office space, occupied by its sole
officer, Michael Kirsh, for which it pays no rent. Its address is 1177 West
Hastings, Suite 2110, Vancouver, British Columbia V6E 2K3, CANADA, and its phone
number is (604) 687-2199.
Employees
The Company has no full time employees. The Company's president, Mr. Kirsh,
has agreed to allocate a portion of his time to the activities of the Company,
without compensation. The president anticipates that the business plan of the
Company can be implemented by his devoting no more than 10 hours per month to
the business affairs of the Company and, consequently, conflicts of interest may
arise with respect to the limited time commitment by such officer. See "Item 2,
Management's Discussion and Analysis or Plan of Operations, Outlook: Issues and
Uncertainties - Conflicts of Interest" and "Item 5, Directors, Executive
Officers, Promoters And Control Persons."
Item 2. Management's Discussion and Analysis or Plan of Operations.
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The following discussion and analysis should be read in conjunction with
the Company's Financial Statements and Notes thereto and other financial
information included elsewhere in this Form 10-SB. This Form 10-SB contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere in this Form 10-SB.
Overview
The Company's business plan is to merge with or acquire a business entity
in exchange for the Company's securities. The Company has no particular
acquisition in mind and has not entered into any negotiations regarding such an
acquisition. Neither the Company's sole officer and director nor any affiliate
has engaged in any negotiations with any representative of any company regarding
the possibility of an acquisition or merger between the Company and such other
company.
Management anticipates seeking out a target company through solicitation.
Such solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Management may engage in such solicitation
directly or may employ one or more other entities to conduct or assist in such
solicitation. Management and its affiliates will likely pay referral fees to
consultants and others who refer target businesses for mergers into public
companies in which management and its affiliates have an interest. Payments
would be made if a business combination occurs, and may consist of cash or a
portion of the stock in the Company retained by management and its affiliates,
or both.
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The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business entity which desires to seek the
perceived advantages of a corporation which has a class of securities registered
under the Exchange Act. The Company will not restrict its search to any specific
business, industry, or geographical location and the Company may participate in
a business venture of virtually any kind or nature. Management anticipates that
it will be able to participate in only one potential business venture because
the Company has nominal assets and limited financial resources. See "Item F/S,
Financial Statements." This lack of diversification should be considered a
substantial risk to the shareholders of the Company because it will not permit
the Company to offset potential losses from one venture against gains from
another.
The Company will not restrict its search for any specific kind of business
entity, but may acquire a venture which is in its preliminary or development
stage, which is already in operation, or in essentially any stage of its
business life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Company may offer.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Management believes
(but has not conducted any research to confirm) that there are business entities
seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, increasing the opportunity
to use securities for acquisitions, providing liquidity for shareholders and
other factors. Business opportunities may be available in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
difficult and complex.
The Company has, and will continue to have, no capital with which to
provide cash or other assets to the owners of business entities. However,
management believes the Company will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
public company without incurring the cost and time required to conduct an
initial public offering. Management has not conducted market research and is not
aware of statistical data to support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the sole officer and director of the Company, who is not a
professional business analyst. In analyzing prospective business opportunities,
management will consider such matters as the
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available technical, financial and managerial resources; working capital and
other financial requirements; history of operations, if any; prospects for the
future; the nature of present and expected competition; the quality and
experience of management services which may be available and the depth of that
management; the potential for further research, development, or exploration;
specific risk factors not now foreseeable but which then may be anticipated to
impact the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance of products, services, or trades; name identification; and other
relevant factors. This discussion of the proposed criteria is not meant to be
restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities.
The Company may enter into a business combination with a business entity
that desires to establish a public trading market for its shares. A target
company may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with the
Company. Such consequences may include, but are not limited to, time delays of
the registration process, significant expenses to be incurred in such an
offering, loss of voting control to public shareholders or the inability to
obtain an underwriter or to obtain an underwriter on satisfactory terms.
Management of the Company, which in all likelihood will not be experienced
in matters relating to the business of a target company, will rely upon its own
efforts in accomplishing the business purposes of the Company. Outside
consultants or advisors may be utilized by the Company to assist in the search
for qualified target companies. If the Company does retain such an outside
consultant or advisor, any cash fee earned by such person will need to be
assumed by the target company, as the Company has limited cash assets with which
to pay such obligation.
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued after
any business combination. Additionally, a target company may be presented to the
Company only on the condition that the services of a consultant or advisor be
continued after a merger or acquisition. Such preexisting agreements of target
companies for the continuation of the services of attorneys, accountants,
advisors or consultants could be a factor in the selection of a target company.
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is likely that the present management and shareholder of the
Company will no longer be in control of the Company. In addition, it is likely
that the Company's officer and director will, as part of the terms of the
acquisition transaction, resign and be replaced by one or more new officers and
directors.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will
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be undertaken by the surviving entity after the Company has entered into an
agreement for a business combination or has consummated a business combination
and the Company is no longer considered a blank check company. Until such time
as this occurs, the Company will not register any additional securities. The
issuance of additional securities and their potential sale into any trading
market which may develop in the Company's securities may depress the market
value of the Company's securities in the future if such a market develops, of
which there is no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a "tax-free" reorganization under Sections 351 or
368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target
company, management expects to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage of ownership may be subject to significant
reduction in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing, will outline
the manner of bearing costs, including costs associated with the Company's
attorneys and accountants, and will include miscellaneous other terms.
The Company will not acquire or merge with any entity which cannot provide
audited financial statements at or within a reasonable period of time after
closing of the proposed transaction. The Company is subject to all of the
reporting requirements included in the Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements as
part of or within 60 days following its Form 8-K to be filed with the Securities
and Exchange Commission upon consummation of a merger or acquisition, as well as
the Company's audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial statements are not
available at closing, or within time parameters necessary to insure the
Company's compliance with the requirements of the Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of the
Company.
Results of Operations
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During the period from July 17, 1998 (inception) through January 31, 2000,
the Company has engaged in no significant operations other than organizational
activities, acquisition of the rights to market Biocatalyst, and preparation for
registration of its securities under the Securities Act of 1933 (which was
withdrawn) and the Securities Exchange Act of 1934, as amended. No revenues were
received by the Company during this period.
For the current fiscal year, the Company anticipates incurring a loss as a
result of organizational expenses, expenses associated with registration under
the Securities Exchange Act of 1934, and expenses associated with setting up a
company structure to begin implementing its business plan. The Company
anticipates that until these procedures are completed, it will not generate
revenues other than interest income, and may continue to operate at a loss
thereafter, depending upon the performance of the business.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholder's equity. Consequently, the Company's balance sheet as of January
31, 2000 reflects current assets of $0.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its liquidity and capital resources will
be diminished prior to the consummation of a business combination or whether its
capital will be further depleted by the operating losses (if any) of the
business entity which the Company may eventually acquire.
The Company will need additional capital to carry out its business plan to
engage in a business combination. No commitments to provide additional funds
have been made by management or stockholders. Accordingly, there can be no
assurance that any additional funds will be available on terms acceptable to the
Company or at all. Irrespective of whether the Company's cash assets prove to be
inadequate to meet its operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
Outlook: Issues and Uncertainties
The Company's success is dependent on a number of factors that should be
considered by prospective investors. The Company is a relatively young company
and does not yet have a long history of earnings or profit and there is no
assurance that it will operate profitably in the future. As such, there is no
assurance that the Company will provide a return on investment in the future.
1. Conflicts of Interest - General. Certain conflicts of interest exist
between the Company and its sole officer and director, Michael Kirsh. Mr. Kirsh
has other business interests to which he devotes his attention. He may be
expected to continue to do so. As a result, conflicts of interest may arise that
can be resolved only through exercise of such judgment as is consistent with his
fiduciary duties to the Company.
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2. Conflicts of Interest - Blank Check Companies. Management is currently
involved with other blank check companies. A conflict may arise in the event
that another blank check company with which management is affiliated actively
seeks a target company. The other blank check companies with which management is
affiliated may differ from the Company in certain items such as place of
incorporation, number of shares and shareholders, working capital, types of
authorized securities, or other items. It may be that a target company may be
more suitable for or may prefer one of the other blank check companies with
which management is affiliated, and a business combination might be negotiated
on behalf of the more suitable or preferred blank check company. See "Item 5,
Directors, Executive Officers, Promoters And Control Persons--Other Blank Check
Companies - Conflicts of Interest"
3. Securities Regulation. The Company's securities, when available for
trading, will be subject to the Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers that sell such
securities to other than established customers or accredited investors. For
purposes of the rule, the phrase "accredited investors" means, in general terms,
institutions with assets exceeding $5,000,000 or individuals having a net worth
in excess of $1,000,000 or having an annual income that exceeds $200,000 (or
that, combined with a spouses income, exceeds $300,000). For transactions
covered by the rule, the broker-dealer must make a special suitability
determination for the purchaser and receive the purchasers' written agreement to
the transaction prior to the sale. Consequently, the rule may affect the ability
of purchasers of the Company's securities to buy or sell in any market that may
develop.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." A "penny stock" is any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. Such
rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7
under the Securities and Exchange Act of 1934, as amended. The rules may further
affect the ability of owners of the Company's shares to sell their securities in
any market that may develop for them. Shareholders should be aware that,
according to the Securities and Exchange Commission Release No. 34-29093, the
market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include
. control of the market for the security by one or a few broker-dealers that are
often related to the promoter or issuer;
. manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases;
. "boiler room" practices involving high pressure sales tactics and unrealistic
price projections by inexperienced sales persons;
. excessive and undisclosed bid-ask differentials and markups by selling broker-
dealers; and
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. the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the
inevitable collapse of those prices with consequent investor losses.
4. No Operating History Or Revenue And Minimal Assets. The Company has
had no operating history nor any revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company will, in
all likelihood, sustain operating expenses without corresponding revenues, at
least until the consummation of a business combination. This may result in the
Company incurring a net operating loss which will increase continuously until
the Company can consummate a business combination with a target company. There
is no assurance that the Company can identify such a target company and
consummate such a business combination.
5. Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with only one business entity. Consequently, the Company's
activities will be limited to those engaged in by the business entity which the
Company merges with or acquires. The Company's inability to diversify its
activities into a number of areas may subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
6. Dependence on Management; Limited Participation of Management. While
seeking a business combination, management anticipates devoting only a limited
amount of time per month to the business of the Company. The Company's sole
officer has not entered into a written employment agreement with the Company and
he is not expected to do so in the foreseeable future. The Company has not
obtained key man life insurance on its officer and director. Notwithstanding the
combined limited experience and time commitment of management, loss of the
services of this individual would adversely affect development of the Company's
business and its likelihood of continuing operations.
7. Indemnification of Officers and Directors. The Company's Articles of
Incorporation provide for indemnification of its directors, officers, employees
and agents, under certain circumstances, against attorneys' fees and other
expenses incurred by them in any litigation to which they become a party arising
from their association with, or their activities on behalf of, the Company. The
Company will also bear the expense of such litigation for any of its directors,
officers, employees or agents, upon such person's promise to repay the Company
therefor if it is ultimately determined that any such person shall not have been
entitled to indemnification. This indemnification policy could result in
substantial expenditures by the Company.
8. Director's Liability Limited. The Company's Articles of Incorporation
exclude personal liability of its directors to the Company and its shareholders
for monetary damages due to breach of fiduciary duty except in certain specified
circumstances. Accordingly, the Company will have a much more limited right of
action against its directors than otherwise would be the case. The Company has
been advised that the SEC takes the position that this
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provision does not effect the liability of any director under applicable federal
and state securities laws.
9. No Foreseeable Dividends. The Company has not paid dividends on its
Common Stock and does not anticipate paying such dividends in the foreseeable
future.
10. Speculative Nature Of The Company's Proposed Operations. The success
of the Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified target company.
While management will prefer business combinations with entities having
established operating histories, there can be no assurance that the Company will
be successful in locating candidates meeting such criteria. In the event the
Company completes a business combination, of which there can be no assurance,
the success of the Company's operations will be dependent upon management of the
target company and numerous other factors beyond the Company's control.
11. Competition. The Company is and will continue to be an insignificant
participant in the business of seeking mergers with and acquisitions of business
entities. A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of companies which
may be merger or acquisition target candidates for the Company. Nearly all such
entities have significantly greater financial resources, technical expertise and
managerial capabilities than the Company and, consequently, the Company will be
at a competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
compete with numerous other small public companies in seeking merger or
acquisition candidates.
12. No Agreement For Business Combination Or Other Transaction--No
Standards For Business Combination. The Company has no current arrangement,
agreement or understanding with respect to engaging in a merger with or
acquisition of a specific business entity. There can be no assurance that the
Company will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance that the Company will be able
to negotiate a business combination on terms favorable to the Company. The
Company has not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria which it will
require a target company to have achieved, or without which the Company would
not consider a business combination with such business entity. Accordingly, the
Company may enter into a business combination with a business entity having no
significant operating history, losses, limited or no potential for immediate
earnings, limited assets, negative net worth or other negative characteristics.
13. Reporting Requirements May Delay Or Preclude Acquisition. Section 13
of the Securities Exchange Act of 1934 (the "Exchange Act") requires companies
subject thereto to provide certain information about significant acquisitions
including certified financial statements for the company acquired covering one
or two years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target companies to prepare such
financial statements may significantly delay or essentially preclude
consummation
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<PAGE>
of an otherwise desirable acquisition by the Company. Acquisition prospects that
do not have or are unable to obtain the required audited statements may not be
appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable.
14. Lack Of Market Research Or Marketing Organization. The Company has
neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by the Company.
Even in the event demand exists for a merger or acquisition of the type
contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
15. Regulation Under Investment Company Act. Although the Company will be
subject to regulation under the Exchange Act, management believes the Company
will not be subject to regulation under the Investment Company Act of 1940,
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the Investment
Company Act of 1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant registration
and compliance costs. The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the Company under the
Investment Company Act of 1940 and, consequently, any violation of such Act
could subject the Company to material adverse consequences.
16. Probable Change In Control And Management. A business combination
involving the issuance of the Company's common stock will, in all likelihood,
result in shareholders of a target company obtaining a controlling interest in
the Company. Any such business combination may require shareholders of the
Company to sell or transfer all or a portion of the Company's common stock held
by them. The resulting change in control of the Company will likely result in
removal of the present officer and director of the Company and a corresponding
reduction in or elimination of his participation in the future affairs of the
Company.
17. Reduction Of Percentage Share Ownership Following Business
Combination. The Company's primary plan of operation is based upon a business
combination with a business entity which, in all likelihood, will result in the
Company issuing securities to shareholders of such business entity. The issuance
of previously authorized and unissued common stock of the Company would result
in reduction in percentage of shares owned by the present shareholders of the
Company and would most likely result in a change in control or management of the
Company.
18. Taxation. Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target company; however, there can be no assurance that such business
combination will
14
<PAGE>
meet the statutory requirements of a tax-free reorganization or that the parties
will obtain the intended tax-free treatment upon a transfer of stock or assets.
A non-qualifying reorganization could result in the imposition of both federal
and state taxes which may have an adverse effect on both parties to the
transaction.
19. Requirement Of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company will request that any potential
business opportunity provide audited financial statements. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with the Company rather than incur the expenses associated
with preparing audited financial statements. In such case, the Company may
choose to obtain certain assurances as to the target company's assets,
liabilities, revenues and expenses prior to consummating a business combination,
with further assurances that an audited financial statement would be provided
after closing of such a transaction. Closing documents relative thereto may
include representations that the audited financial statements will not
materially differ from the representations included in such closing documents.
Item 3. Description of Property.
- ---------------------------------
The Company has no properties and at this time has no agreements to acquire
any properties. The Company currently maintains limited office space, occupied
by its sole officer and director, Michael Kirsh, for which it pays no rent. Its
address is 1177 West Hastings, Suite 2110, Vancouver, British Columbia V6E 2K3,
CANADA, and its phone number is (604) 687-2199.
Item 4. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
The following table sets forth, as of February 18, 2000, the Company's
outstanding Common Stock owned of record or beneficially by each Executive
Officer and Director and by each person who owned of record, or was known by the
Company to own beneficially, more than 5% of the Company's Common Stock, and the
shareholdings of all Executive Officers and Directors as a group. Each person
has sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Percentage of
Name Shares Owned Shares Owned
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael Kirsh, President, Secretary, Treasurer, and Director 2,500,000 100%
5076 Angus Drive
Vancouver, B.C. Canada V6M 3M5
- --------------------------------------------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS & DIRECTORS AS A GROUP (1 Individual) 2,500,000 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
- ----------------------------------------------------------------------
The following table sets forth the name, age and position of each Director
and Executive Officer of the Company:
15
<PAGE>
- -----------------------------------------------------------------
NAME AGE POSITION
- -----------------------------------------------------------------
Michael Kirsh 46 President, Secretary, Treasurer, Director
- -------------------------------------------------------------------
There are no agreements or understandings for the officer or director to
resign at the request of another person and the above-named officer and director
is not acting on behalf of nor will act at the direction of any other person.
The director named above will serve until his successors are elected and
qualified. Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement. No employment agreements currently
exist or are contemplated. There is no arrangement or understanding between the
director and officer of the Company and any other person pursuant to which any
director or officer was or is to be selected as a director or officer.
The director and officer of the Company will devote his time to the
Company's affairs on an "as needed" basis. As a result, the actual amount of
time which he will devote to the Company's affairs is unknown and is likely to
vary substantially from month to month.
Mr. Kirsh became the Company's sole director and officer in May 1999.
During the past five years, Mr. Kirsh has worked with a group of independent
investors that acquires private companies and conducts reverse takeovers.
(Because the investment group is not a formal entity, it has no name and no
employees.) In a reverse takeover, the shareholder of an acquired company
generally ends up owning all or most of the resulting combined company. Mr.
Kirsh devotes approximately 20% of his time to his position in the group,
overseeing acquisitions, operations, and financing. Since its inception, the
group has made one acquisition, Neptune Society, Inc. Neptune Society was
acquired through a reverse takeover in March, 1999. Neptune Society has
approximately 45 employees. Neptune Society now trades on the OTC bulletin board
under the symbol "NPTN". The principal business focus of Neptune Society is
cremations. Before forming his investment group, Mr. Kirsh had invested in both
real estate and the stock market. From approximately 1986 to 1992, Mr. Kirsh
developed two dental practices in Vancouver, British Columbia, CANADA, which he
sold in 1992 before forming his investment group.
Other Blank Check Companies/Conflicts Of Interest
Mr. Kirsh is also involved with two other "blank check" companies -
development stage companies that have no specific business plan or purpose, or
whose business plan is to engage in a merger or acquisition with an unidentified
entity.
. Mr. Kirsh is a director of Mezuma Inc. Mezuma traded on the Alberta Stock
Exchange under the symbol "MZI." Mezuma has currently raised approximately
$250,000.00 Canadian and is looking for a company to acquire.
. Mr. Kirsh is the sole officer, director, and shareholder of Growtex Inc.,
which also had a license to distribute Biocatalyst that has been compromised
by a dispute between the licensor and the owner of the technology. Growtex is
also in the process of registering as a 1934 Act company, and will seek a
business entity with which to do a business combination.
16
<PAGE>
As a result of Mr. Kirsh's involvement with other blank check companies,
there are potential inherent conflicts of interest in acting as an officer and
director of the Company. Insofar as Mr. Kirsh is engaged in other business
activities, Mr. Kirsh anticipates that he will devote only a minor amount of
time to the Company's affairs. The Company does not have a right of first
refusal pertaining to opportunities that come to management's attention insofar
as such opportunities may relate to the Company's proposed business operations.
A conflict may arise in the event that another blank check company with
which management is affiliated is formed and actively seeks a target company.
The other blank check companies with which management is affiliated may differ
from the Company in certain items such as place of incorporation, number of
shares and shareholders, working capital, types of authorized securities, or
other items. It may be that a target company may be more suitable for or may
prefer one of the other blank check companies with which management is
affiliated, and a business combination might be negotiated on behalf of the more
suitable or preferred blank check company. Mr. Kirsh will be responsible for
seeking, evaluating, negotiating and consummating a business combination with a
target company which may result in terms providing benefits to Mr. Kirsh.
Item 6. Executive Compensation.
- --------------------------------
The Company's officer and director does not receive any compensation for
his services rendered to the Company, has not received such compensation in the
past, and is not accruing any compensation pursuant to any agreement with the
Company.
The officer and director of the Company will not receive any finder's fee,
either directly or indirectly, as a result of his efforts to implement the
Company's business plan outlined herein. However, the officer and director of
the Company anticipates receiving benefits as a beneficial shareholder of the
Company.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
Item 7. Certain Relationships and Related Transactions.
- --------------------------------------------------------
No director, executive officer or nominee therefor of the Company, and no
owner of five percent or more of the Company's outstanding shares or any member
of their immediate family has entered into or proposed any transaction in which
the amount involved exceeds $60,000, except as discussed below. As previously
disclosed in the Company's Form S-1 which was subsequently withdrawn, the
initial shareholders of the Company were investor-participants in the licensor
of the Company's Biocatalyst license, Mortenson & Associates. The license formed
the basis for the Company's previous business plan. Under the license, Mortenson
& Associates was entitled to royalty payments under the license, with benefits
accruing to Mortenson & Associates' investor-participants. It is highly unlikely
that any benefits will accrue to such individuals in the future. (See "Item 1,
Description of Business - Biocatalyst License").
17
<PAGE>
On February 18, 2000, Mortenson & Associates, the Company, and the
Company's sole shareholder, Michael Kirsh, entered into a settlement agreement
filed herewith as Exhibit 6.1. As part of an overall settlement of potential
claims by the Company and Mr. Kirsh against Mortenson & Associates, Mr. Kirsh
received a license for Vitamineralherb.com which could have a potential future
value of more than $60,000. However, the value of the Vitamineralherb.com
license is dependent upon development of the license and territory. (See "Item
1, Description of Business - Biocatalyst License").
Item 8. Description of Securities.
- -----------------------------------
The following description of the Company's capital stock is a summary of
the material terms of the Company's capital stock. This summary is subject to
and qualified in its entirety by the Company's articles of incorporation and
bylaws, which are included as exhibits to the registration statement of which
this prospectus forms a part, and by the applicable provisions of Nevada law.
The Company's authorized capital consists of 10,000,000 shares of common
stock, par value $.001 per share. Immediately prior to this offering, 2,500,000
shares were issued and outstanding. Each record holder of common stock is
entitled to one vote for each share held on all matters properly submitted to
the shareholders for their vote. The articles of incorporation do not permit
cumulative voting for the election of directors, and shareholders do not have
any preemptive rights to purchase shares in any future issuance of the Company's
common stock.
Because the holders of shares of the Company's common stock do not have
cumulative voting rights, the holders of more than 50% of the Company's
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose. In such event, the holders of the
remaining shares will not be able to elect any of the Company's directors.
The holders of shares of common stock are entitled to dividends, out of
funds legally available therefor, when and as declared by the Board of
Directors. The Board of Directors has never declared a dividend and does not
anticipate declaring a dividend in the future. In the event of liquidation,
dissolution or winding up of the affairs of the Company, holders are entitled to
receive, ratably, the net assets of the Company available to shareholders after
payment of all creditors.
All of the issued and outstanding shares of common stock are duly
authorized, validly issued, fully paid, and non-assessable. To the extent that
additional shares of the Company's common stock are issued, the relative
interests of existing shareholders may be diluted.
18
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
- ------------------------------------------------------------------------------
Shareholder Matters
-------------------
Market Price.
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. There is no assurance that a trading
market will ever develop or, if such a market does develop, that it will
continue. Owing to the low price of the securities, many brokerage firms may not
be willing to effect transactions in the securities. Even if a purchaser finds a
broker willing to effect a transaction in Gentry's common stock, the combination
of brokerage commissions, state transfer taxes, if any, and other selling costs
may exceed the selling price.
The Company may apply for listing on the NASD OTC Bulletin Board or may
offer its securities in what are commonly referred to as the "pink sheets" of
the National Quotation Bureau, Inc. To qualify for listing on the NASD OTC
Bulletin Board, an equity security must have one registered broker-dealer, known
as the market maker, willing to list bid or sale quotations and to sponsor the
company for listing on the Bulletin Board. The Company may be unable to find a
market maker willing to sponsor the Company. If the Company does qualify for the
OTC Bulletin Board, shareholders may still find it difficult to dispose of, or
to obtain accurate quotations as to the market value of, the Company's
securities trading in the OTC market.
The Company's securities will also be subject to Securities and Exchange
Commission's "penny stock" rules. (See "Item 2, Management's Discussion and
Analysis or Plan of Operations - Outlook: Issues and Uncertainties - Securities
Regulation"). The penny stock rules may further affect the ability of owners of
the Company's shares to sell their securities in any market that may develop for
them. There may be a limited market for penny stocks, due to the regulatory
burdens on broker-dealers. The market among dealers may not be active. Investors
in penny stock often are unable to sell stock back to the dealer that sold them
the stock. The mark ups or commissions charged by the broker-dealers may be
greater than any profit a seller may make. Because of large dealer spreads,
investors may be unable to sell the stock immediately back to the dealer at the
same price the dealer sold the stock to the investor. In some cases, the stock
may fall quickly in value. Investors may be unable to reap any profit from any
sale of the stock, if they can sell it at all.
Holders.
As of February 18, 2000, there were 2,500,000 shares of common stock
outstanding, held by one shareholder of record.
Dividends.
19
<PAGE>
To date the Company has not paid any dividends on its common stock and does
not expect to declare or pay any dividends on such common stock in the
foreseeable future. Payment of any dividends will be dependent upon the
Company's future earnings, if any, its financial condition, and other factors as
deemed relevant by the Board of Directors.
Item 2. Legal Proceedings.
- ---------------------------
The Company is not a party to any pending legal proceeding or litigation
and none of its property is the subject of a pending legal proceeding. Further,
the Officers and Directors know of no legal proceedings against the Company or
its property contemplated by any governmental authority.
Item 3. Changes in and Disagreements with Accountants.
- --------------------------------------------------------
None.
Item 4. Recent Sales of Unregistered Securities.
- -------------------------------------------------
Since July, 1998 (the date of the Company's formation), the Company has
sold its Common Stock to the persons listed in the table below in transactions
summarized as follows:
- ------------------------------------------------------------------------------
Shareholder Date Number of Shares Consideration Exemption
- ------------------------------------------------------------------------------
J.P Beehner 7-30-98 250,000 /1/ /2/
- ------------------------------------------------------------------------------
Dorothy Mortenson 7-30-98 250,000 /1/ /2/
- ------------------------------------------------------------------------------
Laurent Barbudaux 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
Marie M. Charles 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
James R. Collins, D.V.M. 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
Jock R. Collins, D.V.M. 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
Terry Fowler 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
Roy Donovan Hinton, Jr. 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
C.E. Kaiser 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
David R. Mortenson 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
Joshua J. Mortenson 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
Joshua D. Smetzer 4-28-99 200,000 $200 /3/
- ------------------------------------------------------------------------------
/1/Consideration consisted of pre-incorporation consulting services rendered to
the Registrant related to investigating and developing the Registrant's proposed
business plan and capital structure and completing the organization and
incorporation of the Registrant.
/2/Sale made in reliance upon exemption from registration under Rule 506 of
Regulation D, and sections 3(b) and 4(2) of the Securities Act of 1933 due to
the shareholders being Gentry's founders and serving as its initial management,
and the limited number of investors (two).
20
<PAGE>
/3/Sale made in reliance upon exemption from registration under Rule 504 of
Regulation D and section 3(b) of the Securities Act of 1933. The Company's
shares were valued at $0.001 per share, and they were issued to accredited
investors according to an exemption from registration under Texas law that
permits general solicitation and general advertising so long as sales are made
only to accredited investors. Texas law defines "accredited investor" as a
natural person whose individual net worth, or joint net worth with the person's
spouse, at the time of purchase exceeds $1 million, or whose income during the
past two years exceeds $200,000 individually or $300,000 jointly with spouse and
who expects to continue the same income level in the current year. If the
exemption under Rule 504 of Regulation D is not available, the Company believes
that the issuance was also exempt under Rule 506 of Regulation D and Sections
3(b) and 4(2) under the Securities Act of 1933 due to limiting the manner of the
offering, promptly filing notices of sales, and limiting the issuance of shares
to a small number of accredited investors (ten).
Lock Up Agreement
The shareholders of the Company have executed and delivered a "lock-up"
letter agreement which provides that such shareholders shall not sell the
securities except in connection with or following the consummation of a merger
or acquisition. Further, each shareholder has placed its stock certificates with
the Company's legal counsel until such time. Any liquidation by the current
shareholders after the release from the "lock-up" selling limitation period may
have a depressive effect upon the trading price of the Company's securities in
any future market which may develop.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to its
stockholders when it deems appropriate. The Company intends to comply with the
periodic reporting requirements of the Securities Exchange Act of 1934 for so
long as it is subject to those requirements.
Item 5. Indemnification of Directors and Officers
- --------------------------------------------------
In accordance with Nevada law, the Company's Articles of Incorporation,
filed as Exhibit 2.1, provide that the Company may indemnify a person who is a
party or threatened to be made a party to an action, suit or proceeding by
reason of the fact that he or she is an officer, director, employee or agent of
the Company, against such person's costs and expenses incurred in connection
with such action so long as he or she has acted in good faith and in a manner
which he or she reasonably believed to be in, or not opposed to, the best
interests of the Company, and, in the case of criminal actions, had no
reasonable cause to believe his or her conduct was unlawful. Nevada law requires
a corporation to indemnify any such person who is successful on the merits or
defense of such action against costs and expenses actually and reasonably
incurred in connection with the action.
21
<PAGE>
The bylaws of the Company, filed as herewith Exhibit 2.2, provide that the
Company will indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits, or proceedings
against them on account of their being or having been directors or officers of
the Company, absent a finding of negligence or misconduct in office. The
Company's Bylaws also permit the Company to maintain insurance on behalf of its
officers, directors, employees and agents against any liability asserted against
and incurred by that person whether or not the Company has the power to
indemnify such person against liability for any of those acts.
Conflicts of Interest
The officer and director of the Company will not devote more than a portion
of his time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of his other
business and investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that the services
of such persons will be available or that they can be obtained upon terms
favorable to the Company.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest in
favor of the Company could result in liability of management to the Company.
However, any attempt by shareholders to enforce a liability of management to the
Company would most likely be prohibitively expensive and time consuming.
22
<PAGE>
PART F/S
Financial Statements
Index to Financial Statements
Gentry Resources, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
Index
<S> <C>
Independent Auditor's Report.................................... F-1
Balance Sheets.................................................. F-2
Statements of Operations........................................ F-3
Statements of Cash Flows........................................ F-4
Statement of Stockholders' Equity............................... F-5
Notes to the Financial Statements............................... F-6 to F-7
</TABLE>
23
<PAGE>
Independent Auditor's Report
----------------------------
To the Board of Directors
Gentry Resources, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Gentry Resources, Inc. (A
Development Stage Company) as of April 30, 1999 and the related statements of
operations, stockholders' equity and cash flows for the period from July 17,
1998 (Date of Inception) to April 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of Gentry Resources, Inc. (A
Development Stage Company), as of April 30, 1999, and the results of its
operations and its cash flows for the period from July 17, 1998 (Date of
Inception) to April 30, 1999, in conformity with U.S. generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has not generated any revenues or conducted any
operations since inception. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
CHARTERED ACCOUNTANTS
Vancouver, Canada
December 15, 1999
F-1
<PAGE>
Gentry Resources, Inc.
(A Development Stage Company)
Balance Sheets
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
January 31, April 30,
2000 1999
(unaudited)
<S> <C> <C>
Asset
$ $
License (Note 3) - 2,000
======= ========
Liabilities and Stockholders' Equity
Current Liabilities - -
------- --------
Contingent Liability (Note 1)
Stockholders' Equity
Common Stock, 10,000,000 shares authorized with
a par value of $.001; 2,500,000 shares issued
and outstanding 2,587 2,587
Deficit Accumulated During the Development Stage (2,587) (587)
------- --------
- 2,000
------- --------
- 2,000
======= ========
</TABLE>
F-2
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
Gentry Resources, Inc.
(A Development Stage Company)
Statements of Operations
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Accumulated from
July 17, 1998
(Date of Inception) Nine months ended From July 17, 1998
to January 31, 2000 January 31, 2000 (Date of Inception)
(unaudited) (unaudited) to April 30, 1999
$ $ $
<S> <C> <C> <C>
Revenues - - -
--------- ------- -------
Expenses
Amortization of license 1,500 1,500 -
License written-off 500 500 -
Organization expenses 587 - 587
--------- ------- -------
2,587 2,000 587
--------- ------- -------
Net Loss (2,587) (2,000) (587)
========= ======= =======
</TABLE>
F-3
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
Gentry Resources, Inc.
(A Development Stage Company)
Statements of Cash Flows
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Accumulated from
July 17, 1998
(Date of Inception) Nine months ended From July 17, 1998
to January 31, 2000 January 31, 2000 (Date of Inception)
(unaudited) (unaudited) to April 30, 1999
$ $ $
<S> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (2,587) (2,000) (587)
Non cash items
Expenses not paid with cash 87 - 87
Amortization of license 1,500 1,500 -
License written-off 500 500 -
-------- -------- -------
Net Cash Used by Operating Activities (500) - (500)
-------- -------- -------
Cash Flows from Financing Activities
Increase in shares issued 500 - 500
-------- -------- -------
Net Cash Provided by Financing Activities 500 - 500
-------- -------- -------
Change in cash - - -
Cash - beginning of period - - -
-------- -------- -------
Cash - end of period - - -
======== ======== =======
Non-Cash Financing Activities
A total of 2,000,000 shares were issued at
a fair market value of $0.001 per share for
the acquisition of a License (Note 3) 2,000 - 2,000
Organization costs paid for by a director
for no consideration treated as additional
paid in capital 87 - 87
-------- -------- -------
2,087 - 2,087
======== ======== =======
Supplemental Disclosures
Interest paid - - -
Income tax paid - - -
</TABLE>
F-4
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
Gentry Resources, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From July 17, 1998 (Date of Inception) to January 31, 2000
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Common Stock Development
Shares Amount Stage
# $ $
<S> <C> <C> <C>
Balance - July 17, 1998 (Date of Inception) - - -
Stock issued for $500 of organizational expenses 500,000 500 -
Additional paid in capital for organizational expenses
incurred by a director on behalf of the Company - 87 -
Stock issued for "The Biocatalyst License" at a fair
market value of $0.001 per share 2,000,000 2,000 -
Net loss for the period - - (587)
----------- ------ -------
Balance - April 30, 1999 2,500,000 2,587 (587)
Net loss for the period - - (2,000)
----------- ------ -------
Balance - January 31, 2000 (unaudited) 2,500,000 2,587 (2,587)
=========== ====== ========
</TABLE>
F-5
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
Gentry Resources, Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
1. Development Stage Company
Gentry Resources, Inc. herein (the "Company") was incorporated in the State
of Nevada, U.S.A. on July 17, 1998. The Company acquired a license to
market and distribute a product. As discussed in Note 3, this license is in
jeopardy and the Company has retained the right to sue the vendor.
The Company's new business plan is as a "blank check" company. Under the
Securities Act of 1933, a blank check company is defined as a development
stage company that has no specific business plan or purpose or has
indicated that its business plan is to engage in a merger or acquisition
with an unidentified company or companies and is issuing "penny stock"
securities.
In a development stage company, management devotes most of its activities
in investigating business opportunities. Planned principal activities have
not yet begun. The ability of the Company to emerge from the development
stage with respect to any planned principal business activity is dependent
upon its successful efforts to raise additional equity financing and find
an appropriate merger candidate. There is no guarantee that Gentry will be
able to raise any equity financing or find an appropriate merger candidate.
There is substantial doubt regarding the Company's ability to continue as a
going concern.
2. Summary of Significant Accounting Policies
(a) Year end
The Company's fiscal year end is April 30.
(b) Licenses
Costs to acquire licenses are capitalized as incurred. These costs
will be amortized on a straight-line basis over their remaining
estimated useful lives.
(c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the time of issuance to be cash equivalents.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the periods. Actual results could differ from
those estimates.
3. License
The Company's only asset is a license to distribute and produce an oxygen
enriched water product, called "Biocatalyst," for remediation of sewage and
waste water in septic tanks and waste water treatment facilities, and for
other similar uses, and the rights accruing from this license. The
Company's original business plan was to determine the feasibility of the
Biocatalyst sewage and waste remediation application, and, if Biocatalyst
proved to be feasible for this application, become a Biocatalyst producer.
The Company acquired the three-year license from Mortenson & Associates on
April 28, 1999 by issuing 2,000,000 shares at a fair market value of $.001
or $2,000. The general partner of Mortenson & Associates is also a spouse
of a former director and officer of the Company. Mortenson & Associates
acquired its right to sublicense Biocatalyst to the Company from NW
Technologies.
The Company filed a Form S-1 Registration Statement with the SEC on July 2,
1999, which was subsequently amended but never declared effective. In
December, 1999, David R. Mortenson, Mortenson & Associates' principal,
notified the Company that he was involved in a legal dispute with NW
Technologies, and would be
F-6
<PAGE>
unable to fulfill his obligations under the license to the Company. As a
result, the Company's ability to implement its business plan was seriously
undermined, and on February 10, 2000, the Company requested withdrawal of
its Form S-1 Registration Statement. On February 18, 2000, Mortenson &
Associates, the Company, and the Company's sole shareholder, Michael Kirsh,
entered into a settlement agreement. Under the terms of the settlement
agreement, Mortenson & Associates' affiliate, Vitamineralherb.com will
grant to Kirsh a license to distribute vitamins and similar products in
part for his agreement not to pursue his individual claims against
Mortenson & Associates. The settlement agreement provides that Mortenson
will prosecute his claims against NW Technologies diligently, with a goal
toward recovering the Biocatalyst rights. Pursuant to the settlement
agreement, the Company has retained its right to prosecute its claims
against Mortenson & Associates for breach of contract. The Company has no
plans to pursue a claim at this time.
<TABLE>
<CAPTION>
January 31,
2000 April 30,
(unaudited) 1999
$ $
<S> <C> <C>
License
Cost 2,000 2,000
Less accumulated amortization (1,500) -
Less amount written-off (500) -
------- -------
- 2,000
======= =======
</TABLE>
4. Related Party Transaction
The License referred to in Note 3 was sold to the Company by a partnership
whose general manager is the spouse of the Secretary/Treasurer of the
Company and a director for consideration of 2,000,000 shares for total fair
market consideration of $2,000. These shares were paid evenly to the ten
partners.
5. Uncertainty Due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using the year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year 2000
Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, have been fully resolved.
F-7
<PAGE>
PART III
Item 1. Index to Exhibits
- --------------------------
Exhibit
Number Name
- ------- ----
2.1* Articles of Incorporation
2.2* Bylaws
3.1 Specimen Share Certificate for Common Stock
3.2 Lock Up Agreement
6.1 Settlement Agreement
6.2* License Agreement
27.1 Financial Data Schedule
* Incorporated by reference from the Company's registration statement on form
S-1 filed with the Securities and Exchange Commission on July 2, 1999.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
/s/ Michael Kirsh March 10, 2000
- ----------------------------------------- --------------------
Michael Kirsh, President, (Date)
Secretary, Treasurer, and Director
31
<PAGE>
EXHIBIT 3.1
------------------------------
INCORPORATED UNDER THE LAWS OF
------------------------------
- ----- --------------
No. Shares
- ----- --------------
The State of Nevada
[LOGO] Gentry Resources Inc.
Ten Million Shares Authorized, $0.001 Par Value
This Certifies That SPECIMAN is the owner of _______________________ Shares of
--------
$0.001 each of the Capital Stock of
Gentry Resources Inc.
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers, and to be sealed with the Seal of the
Corporation this ____, day of _____ At
[SEAL]
___________________ ___________________
President Secretary
------ ----
SHARES $0.001 EACH
------ ----
<PAGE>
CERTIFICATE
FOR
200,000
SHARES
[SEAL APPEARS HERE]
OF THE
CAPITAL STOCK
GENTRY RESOURCES, INC.
ISSUED TO
_____________________
DATED
_____________________
For Value Received ___ hereby sell, assign and transfer unto _______
_________________________________________________________________________
___________________________________________________________________ Shares
of the Capital Stock represented by the written Certificate and do hereby
irrevocably constitute and appoint ______________________________________
to transfer the said Stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ________________________
In presence of
__________________________
________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN ON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR WITHOUT ALTERATION
AND ENLARGEMENTS OR ANY CHANGE WHATEVER
PLEASE NOTE THAT ALL CERTIFICATES MUST BE LEGENDED AS FOLLOWS:
The shares to be acquired upon exercise of these warrants have not
been registered under the Securities Act of 1933, as amended, (the
"Act") and may not be sold, transferred or otherwise disposed of by
the holder, unless registered under the act or unless, in the opinion
of counsel satisfactory to the issuer, the transfer qualifies for an
exemption from or exemption to the registration provisions thereof.
<PAGE>
EXHIBIT 3.2
LOCK UP AGREEMENT
This LOCK UP AGREEMENT ("Agreement") dated and effective the 18/th/ day of
February, 2000, is by and between Michael Kirsh ("Shareholder"), and Gentry
Resources, Inc., a Nevada corporation ("Company").
NOW THEREFORE, the parties hereto agree as follows:
Shareholder hereby represents, warrants, covenants and agrees, for the
benefit of the Company and the holders of record (the "third party
beneficiaries") of the Company's outstanding securities, including the Company's
Common Stock, $.001 par value (the "Stock") at the date hereof and during the
pendency of this Agreement that the Shareholder will not transfer, sell,
contract to sell, devise, gift, assign, pledge, hypothecate, distribute or grant
any option to purchase or otherwise dispose of, directly or indirectly, his
shares of Stock of the Company owned beneficially or otherwise by the
Shareholder except in connection with or following completion of a merger,
acquisition or other transaction by the Company resulting in the Company no
longer being classified as a blank check company as defined in Section 7(b)(3)
of the Securities Act of 1933, as amended. Any attempted sale, transfer or other
disposition in violation of this Agreement shall be null and void. The
Shareholder further agrees that the Company (i) may instruct its transfer agent
not to transfer such securities (ii) may provide a copy of this Agreement to the
Company's transfer agent for the purpose of instructing the Company's transfer
agent to place a legend on the certificate(s) evidencing the securities subject
hereto and disclosing that any transfer, sale, contract for sale, devise, gift,
assignment, pledge or hypothecation of such securities is subject to the terms
of this Agreement and (iii) may issue stop-transfer instructions to its transfer
agent for the period contemplated by this Agreement for
<PAGE>
such securities. This Agreement shall be binding upon the Shareholder, his
agents, heirs, successors, assigns and beneficiaries. Any waiver by the Company
of any of the terms and conditions of this Agreement in any instance must be in
writing and must be duly executed by the Company and the Shareholder and shall
not be deemed or construed to be a waiver of such term or condition for the
future, or of any subsequent breach thereof. The Shareholder agrees that any
breach of this Agreement will cause the Company and the third party
beneficiaries irreparable damage for which there is no adequate remedy at law.
If there is a breach or threatened breach of this Agreement by the Shareholder,
the Shareholder hereby agrees that the Company and the third party beneficiaries
shall be entitled to the issuance of an immediate injunction without notice to
restrain the breach or threatened breach. The Shareholder also agrees that the
Company and all third party beneficiaries shall be entitled to pursue any other
remedies for such a breach or threatened breach, including a claim for money
damages.
SHAREHOLDER: COMPANY:
GENTRY RESOURCES, INC.
/s/ Michael Kirsh /s/ Michael Kirsh
- -------------------------------- ------------------------------
Michael Kirsh By Michael Kirsh, President
<PAGE>
EXHIBIT 6.1
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is entered into this
18/th/ day of February, 2000 by and among Gentry Resources, Inc., a Nevada
corporation ("Gentry"), David R. Mortenson & Associates, a Texas general
partnership ("Mortenson & Associates"), David R. Mortenson, individually and in
his capacity as general partner of Mortenson & Associates (collectively,
"Mortenson"), and Michael Kirsh ("Kirsh").
RECITALS
WHEREAS, Kirsh is the sole shareholder of Gentry; and
WHEREAS, Gentry and Mortenson & Associates entered into that certain
License Agreement dated as of April 28, 1999, as amended (the "License
Agreement"), whereby Mortenson & Associates granted to Gentry a three-year
exclusive license for distribution of Biocatalyst and related products in
Alabama, Arkansas, Louisiana and Mississippi; and
WHEREAS, Mortenson & Associates acquired its right to sublicense
Biocatalyst to Gentry from NW Technologies, Inc.; and
WHEREAS, Mortenson has notified Gentry that Mortenson & Associates will be
unable to fulfill its obligations under the License Agreement due to a legal
dispute between Mortenson and NW Technologies, Inc.; and
WHEREAS, Gentry and Kirsh have been damaged by Mortenson & Associates'
inability to fulfill its obligations under the License, including, without
limitation, damages caused by having
1
<PAGE>
to withdraw the Company's registration statement with the Securities and
Exchange Commission;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. In consideration of Vitamineralherb.com, Inc., an affiliate of
Mortenson & Associates, granting to Kirsh an exclusive license of even date
herewith to distribute Vitamineralherb.com products in British Columbia, Kirsh,
his successors and assigns, hereby release, acquit and discharge Mortenson &
Associates, its affiliates, successors and assigns, its present and former
employees, partners, and agents, both individually and in their partnership
capacities, from any and all claims, actions, disputes, causes of action,
rights, demands, debts, damages, costs and attorneys fees, or other accountings
of every kind or nature arising out of the purchase of Gentry stock and the
License Agreement, and from any and all liability for any acts or omissions of
Mortenson & Associates, its present and former employees, partners, and agents,
whether presently known or unknown, including without limitation those claims,
damages, or disputes which could be or have been alleged to have arisen under
common law, including without limitation corporate fiduciary claims, or under
any federal or state securities statute or regulation, including without
limitation claims under Sections 12 and 17 of the Securities Act of 1933, except
as provided in Paragraph 3.
2. Mortenson hereby agrees to diligently prosecute his claims against NW
Technologies in an attempt to recover his ability to fulfill his obligations to
Gentry under the License Agreement, and to take Gentry's interests in the
License Agreement into account in any settlement agreement he may enter into
with NW Technologies concerning Biocatalyst rights.
3. Paragraph 1 shall not release Mortenson or Mortenson & Associates from
their
2
<PAGE>
performance obligations under the License Agreement or any claims, actions,
disputes, causes of action, rights, demands, debts, damages, costs and attorneys
fees, or other accountings of every kind or nature which Gentry may have arising
out of the License Agreement, and from any and all liability for any acts or
omissions of Mortenson & Associates, its present and former employees, partners,
and agents, whether presently known or unknown, including without limitation
those claims, damages, or disputes which could be or have been alleged to have
arisen under common law or state or federal law or regulation, including without
limitation breach of contract; provided, however, that Gentry shall not
prosecute any of its claims against Mortenson & Associates under this Paragraph
3 so long as Mortenson complies with his obligations under Paragraph 2; and
provided further, that upon the consummation of a merger or reorganization of
Gentry with or into any other corporation, or sale of substantially all of the
assets of Gentry, Gentry's rights under this Paragraph 3 shall be extinguished.
4. Kirsh understands and agrees that the agreements by Mortenson &
Associates set forth herein represent and constitute Mortenson & Associates'
total offer to resolve and fully and finally settle any and all claims, actions,
disputes, causes of action, rights, demands, debts, damages, costs and attorneys
fees, and other accountings of every kind and nature between Kirsh and Mortenson
& Associates, and that it is a full, complete and adequate consideration and
compensation for Kirsh's agreement to sign this Agreement and that Kirsh will
receive no other or further consideration under the terms hereof or otherwise.
5. The parties acknowledge and agree that this settlement is upon
compromise of disputed claims and that nothing contained herein shall be
construed to be an admission of any kind by any party to this Agreement.
3
<PAGE>
6. This Agreement prevails over prior communications regarding the matters
contained herein. This Agreement contains the entire understanding of the
matters between the parties and no representation, warranty, or promise has been
made or relied on by any party hereto other than as set forth herein.
7. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, their respective heirs, legal representatives, successors
and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day first written above.
DAVID R. MORTENSON & ASSOCIATES GENTRY RESOURCES, INC.
/s/ David R. Mortenson /s/ Michael Kirsh
- ---------------------------------------- -------------------------------
By David R. Mortenson, General Partner By Michael Kirsh, President
MICHAEL KIRSH DAVID R. MORTENSON
/s/ Michael Kirsh /s/ David R. Mortenson
- ---------------------------------------- -------------------------------
Michael Kirsh David R. Mortenson
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,587
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,587
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,500
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,000)
<EPS-BASIC> (0)
<EPS-DILUTED> (0)
</TABLE>
