AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1999
REGISTRATION NO. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
================================================================================
WASHINGTON, D.C. 20549
-------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
================================================================================
-------------------------
================================================================================
UNITED VENTURES GROUP, INC.
================================================================================
(Name of issuer in its charter)
DELAWARE 3970 65-0675444
(State or other jurisdiction (Primary Standard Industrial (I.R.S.) Employer
of incorporation or organization) Classification Code No.) Identification No.)
-------------------------
30-00 47TH AVENUE
LONG ISLAND CITY, NY 11101
(718) 361-0400
(Address and telephone number of principal executive offices)
-------------------------
ISAAC NUSSEN , PRESIDENT
UNITED VENTURES GROUP, INC.
30-00 47TH AVENUE
LONG ISLAND CITY, NY 11101
(718) 361-0400
(Name, address and telephone number of agent for service)
-------------------------
COPIES TO:
DAVID SELENGUT, ESQ.
ELLENOFF GROSSMAN SCHOLE & CYRULI, LLP
370 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 370-1300
(212) 370-7889 (FAX)
-------------------------
Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, check the following box. :|X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |__|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |__|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |__|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |__|
<PAGE>
<TABLE>
<CAPTION>
-------------------------
CALCULATION OF REGISTRATION FEE
================================================================================================================
<S> <C> <C> <C>
TITLE OF EACH CLASS OF AMOUNT TO BE REGISTERED PROPOSED MAXIMUM AMOUNT OF REGISTRATION FEE
SECURITIES TO BE REGISTERED (1) (2) AGGREGATE OFFERING PRICE (3)
================================================================================================================
Common Stock, $.001 par value 4,895,919 3,059,949.37 $1,055.69
================================================================================================================
</TABLE>
- ----------------
(1) Includes: (i) shares of common stock that have been issued or are reserved
for issuance upon the conversion of 8% Convertible Debentures due April 25, 2002
issued and to be issued by United Ventures Group, Inc.; (ii) shares of common
stock that have been issued or are reserved for issuance on the exercise of
Warrants issued in connection with the issuance of the debentures; and (iii)
shares of common stock that have been issued to consultants of United Ventures
Group, Inc.
(2) In the event of a stock split, stock dividend or similar transaction
involving the common stock, in order to prevent dilution, the number of shares
registered shall be automatically increased to cover additional shares in an
indeterminate amount in accordance with Rule 416(a) under the Securities Act of
1933, as amended.
(3) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457 under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION NOVEMBER 2 , 1999
================================================================================
Prospectus,
, 1999
UNITED VENTURES GROUP, INC.
4,895,919 SHARES OF COMMON STOCK
================================================================================
- --------------------------------------------------------------------------------
This prospectus relates to the sale of up to 4,895,919 shares of common stock of
United Ventures Group, Inc. offered by certain holders of United Ventures Group,
Inc. securities. The shares may be offered by the selling stockholders from time
to time in regular brokerage transactions, in transactions directly with market
makers or in certain privately negotiated transactions. For additional
information on the methods of sale, you should refer to the section entitled
"Plan of Distribution." We will not receive any of the proceeds from the sale of
the shares by the selling stockholders.
Each of the selling stockholders may be deemed to be an "underwriter," as such
term is defined in the Securities Act of 1933.
Our common stock is trading on the Bulletin Board under the symbol "UVGI" . On
November 14, 1999, the closing sale price of the common stock on the Bulletin
Board was $0.625. See "Certain Market Information."
The securities offered hereby are speculative and involve a high degree of risk
and substantial dilution. Only investors who can bear the risk of loss of their
entire investment should invest. See "Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY 5
THE COMPANY
RISK FACTORS 10
USE OF PROCEEDS 15
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
SELLING STOCKHOLDERS
PLAN OF DISTRIBUTION
CERTAIN MARKET INFORMATION
CAPITALIZATION 16
SELECTED FINANCIAL AND OTHER DATA 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 19
BUSINESS 25
MANAGEMENT 34
CERTAIN TRANSACTIONS 36
PRINCIPAL STOCKHOLDERS 37
DESCRIPTION OF CAPITAL STOCK 40
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1-F-16
<PAGE>
PROSPECTUS SUMMARY
================================================================================
THE FOLLOWING SECTION HIGHLIGHTS THE KEY INFORMATION CONTAINED IN THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING "RISK
FACTORS", THE FINANCIAL STATEMENTS AND ALL NOTES TO THE FINANCIAL STATEMENTS.
UNLESS THE CONTEXT OTHERWISE SUGGESTS, "WE," "US," "OUR" AND SIMILAR TERMS, AS
WELL AS REFERENCES TO "UNITED VENTURES" REFER TO UNITED VENTURES GROUP, INC. AND
ITS ONE ACTIVE SUBSIDIARY, JARNOW CORP.
================================================================================
THE COMPANY
We were incorporated in May 1996 under the name Travelnet International,
Corp. In 1998 we discontinued as a tour organizer and changed our name to United
Ventures Group, Inc. In November 1998, we acquired all of the outstanding shares
of common Stock of Shilaat Corp. in exchange for the issuance of 3,750,000 share
of our common stock.. Shilaat Corp. has no operations but owns all of the
outstanding share of common stock. of Jarnow Corp., our only active subsidiary.
We are a manufacturer, designer and distributor of a wide assortment of 14
karat gold earrings, charms, bracelets and rings in the United States some of
which are accented with colored gem stones. We offer our customers a large
selection of jewelry styles, consistent product quality and prompt delivery of
product orders. Our customers include mass merchandisers such as JC Penny and
Sears, discount stores , home shopping networks such as QVC , warehouse clubs
such as Jan Bell and jewelry wholesalers and distributors. In fiscal 1997 and
1998, we made sales to approximately 100 customers, with sales to our five
largest customers accounting for approximately 60% and 53% of net sales,
respectively. We currently offer over 1000 styles of gold charms, earrings,
bracelets and rings, with the majority of our products retailing between $50 and
$300. Our products are intended to appeal to consumers who are value conscious
as well as fashion conscious.
We maintain an in-house design staff to create new designs for our products
and to work closely with our Company's senior officers and marketing personnel
to develop new products meeting the needs of our customers. We update our
product catalogue each year by adding new designs and eliminating less popular
styles.
Substantially all of our jewelry is manufactured by us in our plant in New
York City. We have facilities in our plant for gold casting, gold stamping and
tool manufacturing and therefore we have the ability to design an item and to
progress from design to finished product in under four weeks. This enables us to
rapidly produce customer samples embodying new fashion trends.
We market and sell our jewelry primarily through our in-house sales force
from our showroom in our New York City facility, through direct presentations at
customer's locations and through the use of catalogues and trade show
exhibitions.
3
<PAGE>
THE OFFERING
Common stock offered by
Selling Shareholders ................... 4,895,919 shares
Common stock to be outstanding
After the offering...................... 11,650,929 SHARES(1)
Use of proceeds......................... We will not receive any of the proceeds
from the sale of the shares by the
selling shareholders.
NASDAQ symbol........................... UVGI
- --------------------------------------------------------------------------------
(1) Represents shares of common stock outstanding at September 30,
1999 excluding: 600,000 shares of common stock reserved for future
issuance under our stock option plan; none of which are currently
issued or exercisable.
- --------------------------------------------------------------------------------
<PAGE>
RISK FACTORS
BEFORE YOU INVEST IN OUR STOCK, YOU SHOULD BE AWARE OF VARIOUS RISKS,
INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK
FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS,
BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.
ECONOMIC CYCLES AND RETAIL INDUSTRY CONDITIONS AFFECT US
Our business is subject to economic cycles and retail industry conditions.
Purchases of discretionary fashion accessories such as jewelry, tend to decline
when there is a decline in consumer confidence or employment levels, or when
disposable income is low and consumers are hesitant to use available credit.
Although we believe that our lower-priced jewelry may sell better than
higher-priced jewelry in a recessionary period, any significant decline in
general economic conditions or uncertainties regarding future economic prospects
that affect consumer spending habits could in turn harm our operating results.
We sell our merchandise primarily to mass market retailers and independent
jewelry shops across the United States, and we extend credit based on an
evaluation of each of the customers ability to pay, usually without requiring
collateral. While in the past few years various retailers, including some of our
customers, have experienced financial difficulties, thereby increasing the risk
of extending credit to such retailers, our losses due to bad debts have been
limited. In the future, however, financial difficulties of a customer could
cause us to curtail sales to such customer. Our inability to collect on amounts
owed to us by our customers could have a material adverse affect on our
business.
WE MUST ANTICIPATE CONSUMER PREFERENCES
Our success depends upon our ability to anticipate and respond to changing
consumer preferences in a timely manner. Although we attempt to stay abreast of
emerging fashion preferences affecting the jewelry industry, any failure by us
to identify and respond to changing consumer tastes could hurt our sales. If we
misjudge the market for our products, we may be faced with unsold inventory.
OUR INDUSTRY IS HIGHLY COMPETITIVE
The jewelry industry is highly competitive. We compete with a large number
of established jewelry manufacturers and importers that have significantly
greater experience than us in designing, developing, marketing and distributing
such products, and who have significantly greater financial, distribution,
advertising and marketing resources than we do. Increased competitive pressures
from current and future competitors could have a material adverse affect on our
business.
WE ARE DEPENDENT ON SEVERAL LARGE CUSTOMERS
We are dependent on several large customers and the loss or a reduction of
purchases by any of these customers could hurt our operating results. In 1997 or
1998, our five largest customers represented approximately 60% and53% of sales,
respectively. In 1997 and 1998, our largest customer, J.C. Penny Company, Inc.,
accounted for approximately 27% and 21% of our sales, respectively. In 1998,
Design by FMC accounted for sales of approximately 13.2%. No other customer
accounted for more than 10% of our sales in 1998. The loss of, or decreased
orders from, our largest customers could have a material adverse affect on our
business.
WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEM
We believe we have replaced all of our systems that were not Year 2000
compliant. If any of our systems, however, are not compliant or if our customers
or shippers fail to achieve Year 2000 compliance, we may experience the
following adverse consequences: Our customers may be unable to place orders with
us due either to our system failures or those of our customers. We may be unable
to deliver our products on a timely basis. Our Year 2000 compliance efforts are
described under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Compliance."
<PAGE>
OUR EXISTING SHAREHOLDERS OWN A LARGE PERCENTAGE OF OUR STOCK AND HAVE A
MAJORITY OF VOTING RIGHTS
Messrs. George Weisz and Isaac Nussen own, directly or indirectly, an
aggregate of 2,250,000 shares of our common stock, representing approximately
33% of our currently outstanding shares. In addition, Messrs. Weisz and Nussen
own 200,000 shares of Preferred Stock which provide that they shall maintain the
right to 54% of the votes at any meeting of shareholders. As a result, these
shareholders will be in a position to significantly control all matters
requiring shareholder approval and our management and affairs. Matters that
typically require shareholder approval include:
election of directors;
merger or consolidation;
sale of substantially all our assets; and
amendment of by-laws.
This consolidation of ownership may delay, deter or prevent acts that would
result in change of control, which in turn could reduce the market price of our
common stock.
DELAWARE LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE A TAKEOVER
Certain provisions of the Delaware General Corporation Law, may render more
difficult, or have the effect of discouraging, unsolicited takeover bids from
third parties or the removal of our incumbent management. These provisions could
have the effect of depriving stockholders of an opportunity to sell their shares
at a premium over prevailing market prices.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
We will have outstanding 6,755,010 shares of common stock. Sales of a
substantial number of shares of common stock in the public market could
materially adversely affect the market price of our common stock. All the shares
to be sold with this prospectors will be freely tradable. 5,236,599 shares of
common stock may be sold only if registered under the Securities Act of 1933 or
subject to volume and other limitations under Rule 144 applicable to affiliates.
The sale or distribution of such shares in the public market or to its
stockholders, or the perception that such sale or divestment of stock could
occur, could negatively affect the prevailing market price for our stock.
In addition, outstanding convertible debentures are exercisable by its
holders to purchase shares of common stock at lower of (i) $2.32per share or
(ii) 70% of the lowest bid price for the 30 day period preceding the conversion.
There are also outstanding warrants exercisable to purchase 1,114,285 shares of
common stock at $3.25 per share and 300,000 shares of common stock at $.70 per
share. These shares are being included in this registration and upon exercise or
conversion of the debentures and the warrants from time to time, will allow such
holders the right to publicly sell the shares without any restrictions.
YOU SHOULD NOT RELY UNDULY ON FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements subject to risks and
uncertainties. These statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of activity,
performance, or achievements to be materially different from any future results,
levels of activity, performance, or achievements expressed or implied by such
forward-looking statements.
In some cases, you can identify forward-looking statements by words
like "anticipate," "believe," "expect," "plan," "future," "intend," "may,"
"will," "should," or "would," or the negative of such term or other comparable
terminology. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Our actual
results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks described above and elsewhere
in this prospectus.
<PAGE>
WE HAVE A SHORT OPERATING HISTORY
We have been engaged in the jewelry business only since July 1993. Our
operations are subject to all of the risks inherent in the establishment of a
new business enterprise. The likelihood of our success must be considered in the
light of the problems, expenses, complications and delays frequently encountered
in connection with the development of a new business.
THE PRICE OF GOLD FLUCTUATES
Approximately 90% of our products consist of gold which we obtain
principally from commodity dealers at world prices on a cash basis. As of
September 30, 1999, our gold inventory, including gold bullion, work in progress
and finished goods was valued at approximately $11,000,000. Changes in the
market price of gold can require that we to reduce the carrying value of the
gold owned by us and recognize a charge against earnings, which could be
substantial, in the period in which the change in market value occurs. We do not
engage in hedging transactions to protect against this potential risk. We
expect, however, to be able to pass along to our customers a majority of any
such increases in the cost of gold.
Furthermore, our cash flow is adversely affected by our need to pay for
the purchase of the gold in cash at the time of the purchase but we generally
provide our customers with the ability to pay for purchases on a 60-90 day
basis. This situation is further aggravated as we increase sales, since we have
to finance the increased sales.
WE DEPEND ON CERTAIN KEY PERSONNEL
Our business is dependent upon the participation of Isaac Nussen,
President, and George Weisz, Chief Executive Office. Messrs. Nussen and Weisz
have not entered into employment contracts with us. They each devote 100% of
their time to our business. The loss of services of either Mr. Nussen or Mr.
Weisz could adversely affect our business. We have not obtained key man life
insurance on either the life of Mr. Nussen or Mr. Weisz.
POSSIBLE LOSS DUE TO THEFT
Although we have instituted numerous security measures to protect
against theft and we believe we carry adequate insurance to protect us against
theft, there is no assurance that any of our precautionary measures or insurance
will fully protect us against loss.
DIVIDENDS ARE UNLIKELY
We have not previously paid any dividends on our capital stock and
currently intend to retain all earnings to finance the development and expansion
of our business. The payment of dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon our earnings, if any,
our capital requirements and financial condition and other relevant factors.
GROWTH BY ACQUISITION
Our growth has been achieved, in part, by means of acquisitions in 1993
and 1994 of Ultimar Creation, Inc., American Charm Division of Goldline Co. and
Joe Eisenberger & Co., Inc. We from time to time evaluate and enter into
negotiations with respect to potential acquisitions and we intend to make
additional acquisitions in the future. There can be no assurance that we will be
able to locate suitable acquisition opportunities, that we will be able to
obtain the necessary financing for any future acquisitions, that we will be able
to effectively and profitably integrate any operations that are acquired in the
future into our business or that any future acquisitions will not have a
material adverse effect on operating results or on the market price of our
common stock, particularly during the periods immediately following such
acquisition.
<PAGE>
THERE IS NO ASSURANCE THAT A PUBLIC MARKET WILL CONTINUE:
Currently, our shares of common stock are traded on the NASD's
Electronic Bulletin Board. We intend to apply to list our Common Stock on the
NASDAQ SmallCap Market if we can qualify. Our common stock currently does not
qualify since it does not meet the listing criteria of a minimum bid price of
$5.00 per share. In the event that we could qualify for listing on the NASDAQ
SmallCap Market, we would still be subject to the standards for maintenance of
such listing. For continued listing, a company, among other things, must have
$2,000,000 in net tangible assets, $1,000,000 in market value of securities in
the public float and a minimum bid price of $1.00 per share. As of September 30,
1999, we had approximately $14,457,727 in net tangible assets and approximately
$948,750 market value of securities in the public float and a bid price of
$0.625 per share. If we are unable to satisfy Nasdaq SmallCap Market's
maintenance criteria in the future assuming that we were listed, our securities
would be delisted from Nasdaq SmallCap Market. In such event, trading, if any,
in our securities would thereafter be conducted in the over the counter market
in the so called "pink sheets" or the NASD's "Electronic Bulletin Board."
Since we are currently on the NASD's Electronic Bulleting Board,
purchasers of our shares would likely find it difficult to dispose of, or to
obtain quotations as to, the price of our securities. If our common stock is not
quoted on Nasdaq SmallCap Market, as is currently the situation, or we do not
have $2,000,000 in stockholders' equity, trading in the common stock would be
covered by Rule-15g 9 promulgated under the Securities Exchange Act of 1934 for
non-Nasdaq SmallCap Market and non-exchange listed securities. Under that rule,
broker dealers who recommend such securities to persons other than established
customers and accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale. Securities are exempt from this rule if the market
price is at least $5.00 per share.
The Commission adopted regulations that generally define a penny stock
to be any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an equity security listed
on the Nasdaq SmallCap Market, and an equity security issued by an issuer that
has:
(1) net tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three years,
(2) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or
(3) average revenue of at least $6,000,000 for the preceding three years.
Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. If our
securities were to become subject to the regulations applicable to penny stocks,
the market liquidity for our securities would be severely affected, limiting the
ability of broker dealers to sell the securities and the ability of purchasers
of the securities offered hereby to sell their securities in the secondary
market. There is no assurance that trading in our securities will not be subject
to these or other regulations that would adversely affect the market for our
securities.
REGISTRATION RIGHTS HELD BY THE HOLDERS OF THE PRIVATE PLACEMENT WARRANTS.
The holders of the Private Placement Warrants have the right to demand
on one occasion, that we file a registration statement with the SEC registering
the Private Placement Warrants and the Common Stock issuable upon exercise
thereof for sale under the Securities Act. Such demand registration rights may
be exercised at any time during the five year period commencing six months from
the date of the Prospectus, and must be exercised by the holders of a majority
of the Private Placement Warrants. If such rights are exercised, we must prepare
and file a registration statement on an appropriate form to register for public
sale the Private Placement Warrants and the Common Stock issuable upon the
exercise thereof, and keep such registration statement effective for a period of
nine months. We must bear all costs of such registration, except for filing
fees, underwriter's discounts and commissions, stock transfer taxes and the fees
and expenses of such holders' counsel. The above-described registration rights
pertaining to the Private Placement Warrants could result in substantial future
expense to us and could adversely affect our ability to complete future equity
or debt financings. Furthermore, the registration and sale of our securities
held by or issuable to the holders of such registration rights, or even the
potential of such sales, could have an adverse effect on the market price of the
securities offered in this prospectus.
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
offered by the selling stockholders. The offering is made to fulfill our
contractual obligations to the selling stockholders to register the common stock
held by or which are issuable to the selling stockholders.
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
The shares covered by this prospectus include:
(1) Up to 3,098,938 shares of common stock that have been issued or are issuable
upon the conversion of 8% Convertible Debentures due April 26, 2002 issued by
United Ventures; this amount includes interest on the Debentures for six months
and a market price of $0.625, the closing bid price on November 14, 1999.
(2) 1,414,285 shares of common stock that are issuable on the exercise of Common
Stock Purchase Warrants issued in connection with the debentures;
(3) 300,000 shares of common stock that are issuable on the exercise of Common
Stock Purchase Warrants issued to our consultants; and
(4) 100,000 shares issued to our consultant.
Debentures and Debenture Warrants. On April 26, 1999, we entered into a
Securities Purchase Agreement for the sale of the debentures and debenture
warrants. Pursuant to the agreement, the purchasers agreed under certain terms
and conditions to purchase up to $1,300,000 of United Venture's debentures and
United Ventures agreed to issue to the purchasers warrants to purchase up to
1,414,285 shares of common stock.
The debentures are convertible into a number of shares of United
Venture's common stock based on the lower of $2.32 or 70% of the market price of
the common stock at the time of conversion. The market price for purposes of
conversion of the debentures is the lowest closing bid price of the common stock
during the thirty days ending on the trading day immediately preceding the date
that the debentures are converted. The actual number of shares of common stock
issued or issuable upon conversion of the debentures is subject to adjustment,
depending upon the future market price of the common stock and other factors.
The agreement also requires that we file with the Commission this
registration statement to register the common stock issuable upon conversion of
the debentures and upon exercise of the debenture warrants to allow the
purchasers to resell such common stock to the public.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the common stock as of October 31, 1999 by each of the
selling stockholders assuming the conversion of the debentures of $1,300,000
principal amount and a conversion rate of $0.4375 per share (in order to provide
a cushion for any fluctuations in the market price of the common stock, we have
agreed with certain of the selling stockholders to include in this prospectus
the number of shares of common stock which could be issuable upon conversion of
the debentures at an assumed conversion price of $0.4375per share plus the
number of shares issuable upon exercise of the debenture warrants) as provided
in the debenture and, the exercise of the debenture warrants to purchase
1,114,285 shares of common stock at $3.25 per share and 300,000 shares of common
stock at $.70 per share. In addition, we issued 100,000 shares of common stock
and warrants to purchase 300,000 shares of common stock to certain of our
consultant for services provided to us. We agreed to register these shares.
Unless otherwise indicated below, to our knowledge, all persons listed below
have sole voting and investment power with respect to the shares of common
stock, except to the extent authority is shared by spouses under applicable law.
<PAGE>
The information included below is based upon information provided by
the selling stockholders. Because the selling stockholders may offer all, some
or none of their shares, no definitive estimate as to the number of shares that
will be held by the selling stockholders after the offering can be provided and
the following table has been prepared on the assumption that all shares offered
under this prospectus will be sold.
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------- ----------------- ------------------------------
Common Stock Beneficially Common Stock to be
Owned on Beneficially Owned if All
October 31, 1999 (1) Shares Offered Hereunder Are
Sold
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
Shares That
Name Shares May be Shares Percent
Percent(2) Offered
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Austost Anstalt Schaan 832,000 11.0% 832,000 0 0
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
Amro International S.A. 1,617,142 19.3% 1,617,142 0 0
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
Belmore Funds S.A. 1,732,000 20.4% 1,732,000 0 0
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
Neser Inc. 195,920 2.4% 195,920 0 0
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
Guarantee & Finance 118,857 1.7% 118,857 0 0
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
Stuart Taylor Financial (3) 400,000 5.6% 400,000 0 0
- ------------------------------------- ------------------ ------------- ----------------- ---------------- -------------
</TABLE>
* Less than one percent (1%)
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days of October 31, 1999 through the conversion of debentures, the exercise of
any debenture warrant or other warrants or other right held by them. Pursuant to
the terms of the Securities Purchase Agreement for the sale of the debentures
and debenture warrants, except under certain circumstances, no holder of the
debentures may convert its debentures into common stock, if such conversion
would result in the holder beneficially owning more than 9.99% of the
outstanding common stock. All shares which may be issued on conversion of the
debentures are included in the table notwithstanding such limitation.
Accordingly, the number of shares indicated above as beneficially owned by
certain selling stockholders exceeds the actual number of shares such selling
stockholder may be entitled to on conversion. The actual number of shares of
common stock issuable upon the conversion of the debentures and exercise of the
debenture warrants is subject to adjustment depending on, among other factors,
the future market price of the common stock, and could be materially less or
more than the number estimated in the table.
(2) The percentage interest of each selling stockholder is based on the number
of shares of common stock beneficially owned by such stockholder divided by the
sum of the outstanding shares of common stock (as of October 31, 1999), plus the
shares, if any, which would be issued to such stockholder upon conversion of
debentures held or exercise of any warrants. On October 31, 1999, United
Ventures had 6,755,010 shares outstanding.
To: shares outstanding.
(3) Includes 300,000 shares that may be offered upon exercise of warrants.
<PAGE>
PLAN OF DISTRIBUTION
Sales of the shares may be effected by or for the account of the
selling stockholders from time to time in transactions (which may include block
transactions) on the NASD Bulletin Board, in negotiated transactions, through a
combination of such methods of sale, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale or at negotiated
prices. The selling stockholders may effect such transactions by selling the
shares directly to purchasers, through broker-dealers acting as agents of the
selling stockholders, or to broker-dealers acting as agents for the selling
stockholders, or to broker-dealers who may purchase shares as principals and
thereafter sell the shares from time to time in transactions (which may include
block transactions) on the NASD Bulletin Board, in negotiated transactions,
through a combination of such methods of sale, or otherwise. In effecting sales,
broker-dealers engaged by a selling stockholder may arrange for other
broker-dealers to participate. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the shares for whom such
broker-dealers may act as agents or to whom they may sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the distribution of the shares may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933.
Any commissions paid or any discounts or concessions allowed to any such
persons, and any profits received on the resale of the shares purchased by them
may be deemed to be underwriting commission or discounts under the Securities
Act of 1933.
We have agreed to bear all expenses of registration of the shares other
than legal fees and expenses, if any, of counsel or other advisors of the
selling stockholders. The selling stockholders will bear any commissions,
discounts, concessions or other fees, if any, payable to broker-dealers in
connection with any sale of their shares.
We have agreed to indemnify the selling stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act of 1933 or to contribute to payments the selling
stockholders or their respective pledges, donees, transferees or other
successors in interest, may be required to make in respect thereof.
CERTAIN MARKET INFORMATION
United Ventures Common Stock is listed for trading on the NASD Bulletin
Board under the symbol "UVGI". The following table sets forth the range of high
and low bid prices of our common stock for the fiscal quarters of 1997, 1998 and
1999 on the Bulletin Board. These quotations represent prices between dealers in
securities, do not include retail mark-ups, mark-downs or commissions and do not
necessarily represent actual transactions.
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
December 31, 1997 ------------------------- ---------------------
High Bid Low Bid December 31, 1998 December 31, 1999
High Bid Low Bid High Bid Low Bid
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK ( UVGI )
First Quarter 1.50 1.187 8.50 1.50
Second Quarter 1.25 .25 4.50 1.875
Third Quarter 4.00 .75 .3125 .25 2.50 0.625
Fourth Quarter 1.50 1.125 8.03 .25
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The closing bid price of the commonn stock on November 14, 1999 was $ 0.625
Holders of common stock are entitled to dividends, when, as, and if
declared by the Board of Directors out of funds legally available therefore. The
holders of the Common Stock may not receive dividends until the holders of the
Preferred Stock, if issued, receive all accrued but unpaid dividends. We have
not paid any cash dividends on our common stock and, we intend to retain
earnings, if any, for the immediate future to finance the development and
expansion of our business. In addition, the terms of convertible debentures
prohibit us from paying dividends without the lender's consent.
CAPITALIZATION
The following table presents our debt and capitalization at September 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Due to Stockholders 3,626,056
Total Liabilities 8,313,098
Common Stock, $0.001 par value - 35,000,000 shares authorized, 6,755,010
issued and outstanding 6,755
Preferred Stock, $0.001 par value - 5,000,000 shares
authorized, 200,000 Series A Preferred Stock issued and outstanding 200
Additional paid in capital 8,681,114
Deferred compensation expense (1,886,871)
Accumulated deficit (656,569)
TOTAL STOCKHOLDERS' EQUITY $6,144,629
TOTAL CAPITALIZATION $9,770,685
</TABLE>
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected historical financial and other
data of United Ventures. The historical financial data as of and for the nine
months ended September 30, 1999 and 1998 have been derived from unaudited
financial statements, which are contained later in this prospectus. The
historical financial data as of December 31, 1998 and 1999, have been derived
from, and should be read in conjunction with, the audited Consolidated Financial
Statements and the accompanying notes, which are contained later in this
prospectus. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements and the
accompanying notes, which are contained later in this prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
YEARS ENDED DECEMBER 31 SEPTEMBER 30,
(unaudited)
<S> <C> <C> <C> <C>
1998 1997 1999 1998
STATEMENT OF OPERATIONS DATA
REVENUES 10,564,598 14,818,772 3,650,994 7,122,191
GROSS PROFIT 3,399,533 3,983,432 1,377,848 2,492,767
Income (Loss) Before Extraordinary
ITEMS (3,316,056) 462,353 (483,669) (2,739,031)
NET INCOME (LOSS) (3,374,669) 182,729 39,447 (2,797,644)
INCOME (LOSS) PER SHARE (2.17) 0.26 0.02 (1.80)
December 31, 1998 September 30, 1999
(unaudited)
BALANCE SHEET DATA
Working Capital 4,345,680 5,767,104
Total Assets 14,165,541 14,457,727
Total Liabilities 9,092,559 8,313,098
Retained Earnings (deficit) (696,016) (656,569)
Stockholders' Equity 5,072,982 6,144,629
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
We design, market and distribute 14 karat jewelry. Our products are sold in
approximately 100 customers including J.C. Penny stores, and Sears and on QVC.
Prior to July 1998, United Ventures operated as a tour organizer under
the name Travelnet. In 1998 all its assets relating to this business was sold
and operations were discontinued. In November 1998, we purchased all the issued
and outstanding shares of Jarnow Corp. which is currently our only active
subsidiary. In 1993 and 1994, Jarnow acquired all the assets of three Jewelry
Manufactures. Therefore the results of operations reflect the historical
operations of Jarnow only.
Our products include over 1000 styles of gold earrings, charms,
bracelets and rings with the majority of such products retailing between $50 and
$300.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
<PAGE>
Net sales decreased $ 3,471,197 or 48.7 % for the nine months ended September
30, 1999 from net sales of $ 7,122,191 for the nine months ended September 30,
1998 due to reduced availability of funds received from the financing company in
early 1999. With reduced funding we declined substantial customer orders which
we were not able to meet. We were able to obtain new financing in September
1999, which, however, was not timely enough to fill all our orders for 1999.
Cost of sales as a percentage of net sales decreased to 61% for the nine months
ended September 30, 1999 from 65% for the same period in 1998.
Selling, general and administrative expenses was $ 1,238,401 and $1,836,441 for
the nine months ended September 1999 and 1998, respectively. We succeeded in
reducing costs, specifically in payroll and sales related expenses in line with
the reduction of sales.
During the nine months ended September 30, 1999 we had an extraordinary income
of $523,116 from early extinguishments of debt, which was from the termination
of our loan payable to finance company, more fully explained in other parts
herein.
Interest expense for the nine months ended September 1999 of $683,116 was
$77,869 or 10% lower than interest expenses for 1998 due to reduced borrowing
from lenders.
We had a net income of $39,447 in the nine months ended September 30, 1999 and a
loss of $ 2,797,644 in the nine months ended September 30, The loss for 1998 was
caused primarily due to bad debts, as explained below.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales decreased $ 4,254,174 or 28.7 % to $ 10,564,598 for the year ended
December 31, 1998 from net sales of $ 14,818,772 for the year ended December 31,
1997 due to a reduction of sales to two major retailers that changed from store
level buying to central buying, as well as our declining to take orders from
customers showing high risks of bad debts.
Cost of sales was $ 7,165,065 for fiscal 1998 and $ 10,835,340 for fiscal 1997.
As a percentage of net sales it decreased from 73.1% to 67.8% due to
management's efforts to improve production efficiency and improved utilization
of outsourced resources.
Selling, general and administrative expenses was $ 2,466,953 for fiscal 1998 and
$ 2,595,772 for fiscal 1997 . We succeeded in reducing costs, specifically in
payroll and sales related expenses in line with the reduction of sales
We incurred bad debts expense in 1998 of approximately $3,190,000 caused by
customers that have either ceased operations or incurred financial difficulties
causing payments to be made over long time periods, at times exceeding one year
from sale. Some outstanding balances were collected only in part and several
customers have taken large unauthorized deductions which we are disputing and
anticipate collecting a portion in the future.
Interest expense was $ 1,056,587 for fiscal 1998 and $ 794,968 for fiscal 1997.
The increase was due to higher borrowing levels as well as to substantially
higher rates charged by our financing company as compared with our previous
lender which was a bank.
Due to above bad debt expense we had a net loss of $ 3,374,669 in fiscal 1998
and we had net income of $ 182,729 in fiscal 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
We satisfied our working capital requirements through sale of jewelry, sales of
our equity and convertible debentures, periodic interest free loans from
shareholders and proceeds from a factoring arrangement. Our factoring agreement,
starting September 30, 1999, provides for funding by the factor of 65% of all
eligible sales. Upon collections of invoices the factor is repaid the 65%
advanced to us plus any interest or other applicable charges and we retain the
balance of funds received. Interest on borrowings is paid monthly. Initial
funding received at September 30, 1999 from the factor was $500,000, additional
advances were made subsequently based on sales. Outstanding balance as of
October 31, 1999 due to factor was approximately $985,000.
Prior to the factoring agreement we were financed by a finance company in an
agreement that provided for advances by the finance company based on sales and
inventory levels, as defined. Borrowings on this agreement ranged from $6.5
million at inception in 1998 to a high of $8.0 million in January 1999 to $5.5
million at time of termination on September 30, 1999. In September 1999, we
entered into an arrangement with the finance company to settle the obligation by
(i) the issuance of a $2,000,000 note payable to the finance company with an
annual interest rate of 10% due September 2000 and is guaranteed by our
principal shareholders, Isaac Nussen and George Weisz (ii) the payment of
$500,000 from advances by the factor, (iii) the transfer of the remaining
balance open at September 30, 1999 of approximately $3.5 million to the Isaac
Nussen and George Weisz, who assumed our liability and (iv) the issuance of
warrants exercisable at $0.01 to purchase 675,501 of our shares. The amount
assumed by Isaac Nussen and George Weisz is now a debt owed to them.
Borrowings under the factoring facilities tend to be highest in the fourth
quarter since that quarter is traditionally the busiest quarter in terms of
build up for the Christmas sales season. During that quarter we require
additional funds for labor and purchase of material. The added sales allow us to
obtain additional funds form the factor. Our obligations under the factoring
agreement are secured by a security interest on all of our assets and guaranteed
by Isaac Nussen and George Weisz. In 1998, Isaac Nussen and George Weisz
subordinated our obligations to them to the loans made by the finance company.
At September 30, 1999 total due to Isaac Nussen and George Weisz was $3,626,056
which was subordinated to the factor.
PROCEEDS FROM FUNDING
From November 1998 through March 1999 the Company received $1,000,000 from sale
of 1,470,000 shares of common stock. From February 1999 through August 1999
$750,000 was received as loans, for which we issued 330,000 shares of common
stock, 200,000 of such loans are due on demand and the remainder are due on
various dates. In April 1999 we sold 8% Convertible Debentures in the principal
amount of $1,300,000 and issued warrants to purchase 1,414,285 shares. The
debentures are convertible at the option of the holder into shares of common
stock. Proceeds from the loans, debentures and sale of stock were used for
working capital.
Our future financing needs are expected to be met with the use of the existing
factoring arrangement. We are currently negotiating with other institutions to
obtain a new line of credit that will provide funding at lower interest rates.
Future funds received through the sale of equity are expected to be used for
repayment of note due to financing company, working capital purposes, product
development and expansion through acquisitions of other entities in the
industry. We do not have any current agreement for any equity financing. If
sufficient additional funding is not received we will have to forgo expansions
and possibly reduce expenses through reductions in work force, product
development expenses and related sales expenses. If the necessary we may have to
decline customer orders.
<PAGE>
GOLD CONSIGNMENTS
We do not currently rely on a gold consignment program for our gold bullion
production requirements. Many jewelry manufacturing companies rely on such a
program to finance their inventories and to hedge against fluctuations in gold
values. Briefly described, a jewelry manufacturer tallies his raw gold value in
inventory and sells it to the lender, receiving full value thereof. This has a
positive and immediate impact on the jeweler's cash flow. Concurrently with the
sale of gold, the jeweler takes back physical possession of the sold gold, on a
consignment basis at low interest rates (generally 4.0%-6.0%). The jeweler then
uses the lender's gold for manufacturing requirements and replenishes on a cash
basis as the gold is used. The jeweler effectively is financing his gold
requirements "off balance sheet" as he is holding gold that is lender-owned. We
believe that current costs of borrowing funds is effectively low enough as to
not warrant using this method of financing. We also believe that this method of
financing carries certain risks and costs which we feel do not make it
worthwhile at current interest rates. Included in these risks is the absolute
necessity of tracking exact details of all gold shipments and immediately
replacing it. Failure to do so would put such company at risk of having to buy
gold at high prices in order to replace gold at low prices and not replenished
on time.
CONVERTIBLE DEBENTURE
In April 1999, we issued $1,300,000 of 8% Convertible Debenture due
April 25, 2002. The holders of the debentures also received warrants to
purchaser 1,114,285 shares of common stock at an exercise price of $3.25 and in
October 1999, a warrant to purchase 300,000 shares at $.70 per share. The
Debentures plus accrued interest are convertible at any time into shares of
common stock at the lower of (i) $2.32 per share or (ii) 70% of the lowest bid
price for 30 days prior to the date of conversion. The shares of common stock
issued or to be issuable upon conversion of the Debentures or upon exercise of
the warrants are being registered as part of this prospectus. The proceeds of
the sale of Debentures were used for working capital.
INFLATION AND SEASONALITY
Our operating expenses are affected by inflation, resulting in an
increased cost of labor and the cost of material. Because the cost of sales
depends on the price of raw materials bought in markets located throughout the
world, we are affected by the increase or decrease of the cost of gold on an
international basis. gold prices are affected by political factors, by changing
perception of the value of gold relative to currencies and by inflationary
pressures. However, recently there has been relatively low inflation and
therefore in the past two years inflation has not had a material effect on our
financial condition and results of operations over the past two years. We
believe however that we will be able to pass along to our clients a majority of
such increases in the cost of gold thereby reducing a portion of the effects or
us.
We are impacted by the seasonal demands of our customers. A significant
portion of the sales in the fine jewelry industry is concentrated in the forth
quarter in anticipation of the holiday season. Accordingly, our operating
results and working capital requirements fluctuate considerably during the year.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written to
use two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations. We currently use our information technology for
processing orders and tracking inventory.
We believe that our systems are Year 2000 compliant. In addition, we
have substantially completed the internal testing of our information technology
systems and will continue to monitor such systems through the summer of 1999. We
also specifically addressed internally our non-information technology-related
systems and believe that there will be no significant operational problems
relating to the Year 2000 issue. We have not obtained, and do not intend to
obtain, an independent verification and validation of our Year 2000 compliance.
<PAGE>
Other than system replacements due to planned upgrades, we have not
replaced any of our information technology or non-information technology systems
as a result of the Year 2000 issue. We depend heavily on our relationships with
customers and shippers. We are communicating with our customers and shippers to
determine the extent to which these third parties are moving toward Year 2000
compliance. To date, we have not been made aware of any Year 2000 compliance
problems.
We believe we have substantially completed our Year 2000 project. We
did not incur significant incremental costs specifically in connection with
seeking to achieve Year 2000 compliance, and all upgrades and system
replacements made in connection with our Year 2000 project were part of
previously planned software and hardware upgrades. Furthermore, in order to
achieve Year 2000 compliance, we need and expect to continue to need only
existing employees. Notwithstanding our progress to date, there are several ways
in which our systems could still be affected by the Year 2000 problem. First,
the software code we use in our information systems may not in fact be Year 2000
compliant in all instances. Second, we may be unable to fully test and monitor
the upgrades, making it difficult for us to identify and remedy any problems
that might exist. Third, our customers and shippers may be unable to achieve
timely Year 2000 compliance.
The most likely worst-case scenario resulting from our inability, or
the inability of our customers or shipper, to become Year 2000
compliant, includes the following adverse effects:
SUPPLY PROBLEMS. We would be unable to receive products due to Year
2000-related failures on the part of our suppliers, causing us to be
unable to fulfill the orders of many of our customers for our products.
ORDER DIFFICULTIES. Our customers would be unable to place their orders
with us because of our own system failures or those of our customers,
resulting in delayed or potentially lost orders for our products.
DELIVERY DELAYS. We would be unable to deliver ordered products to our
customers on a timely basis due to our system failure or that of one of
our product shippers, leading to delays in the arrival of our products
and possibly dissatisfied customers.
We have not developed, and do not intend to develop, contingency plans
relating to the Year 2000 problem unless we become aware of a Year 2000
compliance problem in our own system or those of our customers or shippers.
Our assessment of our Year 2000 compliance is based on numerous assumptions
about future events, including third-party modification plans and other factors.
However, there can be no guarantee that this assessment is correct and actual
results could differ materially from those anticipated. Specific factors which
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
BUSINESS
COMPANY
United Ventures Group, Inc., through our wholly owned subsidiary, Jarnow
Corp. is a manufacturer, designer and distributor of karat gold jewelry in the
United States. We offer our customers a large selection of jewelry styles,
consistent product quality and prompt delivery of product orders. Our customers
include mass merchandisers, discount stores, home shopping networks, catalog
showrooms, warehouse clubs and jewelry wholesalers and distributors. In fiscal
1997 and 1998, sales were made to approximately 100 customers, with sales to our
five largest customers accounting for approximately 60% and 53% of net sales,
respectively. Our principal product line is a wide assortment of 14 karat gold
earrings, charms, bracelets and rings. We offer over 1000 styles of gold charms,
earrings, bracelets and rings, with the majority of such products retailing
between $50 and $300. Some of the gold jewelry is accented with colored
gemstones. Our products are intended to appeal to consumers who are value
conscious as well as fashion conscious.
<PAGE>
We plan to focus our efforts to increasing our customer base through
expansion into department stores. We also seek to expand our product line and
customer base through selective acquisitions of other concerns which distribute
complementary jewelry products, although we have not identified any particular
acquisition as of the date of this Registration Statement. If we identify such
an acquisition we intend to finance it using, internally generated funds,
borrowing under credit facilities or , if necessary, issuance of our securities.
Jarnow Corp., our only active subsidiary, was incorporated in New York
State in July 1993.
We acquired all of the issued and outstanding shares of Shilaat Corp., a
New York Corporation, which owns all of the shares of Jarnow Corp. on November
26, 1998 in exchange for 3,750,000 shares of our common stock. Shilaat Corp. is
not an operating entity and its sole asset is the shares of Jarnow Corp. Between
November 1993 and April 1994, Jarnow acquired the assets of Ultimar Creations,
Inc., a manufacturer of fashion earrings and rings, for a consideration of
approximately $1,575,000, The asset of the American Charm division of Goldline
Co., a manufacturer of charms ,for a consideration of approximately $394,000,
and the assets of Joe Eisenberger & Co., Inc., a manufacturer of staple earrings
and rings for a consideration of approximately $2,948,000. Each of these
companies had separate manufacturing facilities, used different manufacturing
techniques, marketed their products through different channels, had different
customer bases, different personnel and different bookkeeping systems. Within
eight months, Jarnow was able to combine all three companies into one facility,
restructure the personnel, establish common manufacturing processes and
bookkeeping methods and substantially retain the customer bases of each of the
acquired companies. We believe that our growth was attributed to our ability to
furnish our customers with high quality, innovatively styled jewelry, at
reasonable cost, combined with a high level of customer service.
SOURCES OF SUPPLY
The principal raw materials purchased by us are gold and semi-precious
stones. Approximately 90% of our purchases are gold and 10% precious and
semi-precious stones. We purchase both our gold requirements and our precious
and semi-precious stones from Linea Nuova, Max Kahn Inc. and Kahan Jewelry and
other local and offshore suppliers in both small and large quantities including
Max Kahan Inc. and Kahan Jewelry in New York and Linea Nuova from Lima Peru.
Gold acquired for manufacture is at least .9995 fine and is then combined with
other metals to produce 14 karat and 10 karat gold. The term "karat" refers to
the gold content of alloyed gold, measured from a maximum of 24 karats (100%
fine gold). Varying quantities of metals such as silver, copper, nickel and zinc
are combined with fine gold to produce 14 karat gold of different colors. These
alloys are in abundant supply and are readily available.
Precious and semi-precious stones are available from many suppliers in
the United States. The world's supply of diamonds comes primarily from De Beers
Consolidated Mines, Limited ("De Beers"), a South African company. The continued
availability of diamonds to the jewelry industry is dependent, to some degree,
on a continual supply from De Beers. While several other countries are major
suppliers of diamonds, in the event of an interruption of supply from South
Africa, the Jewelry industry, as a whole, could be adversely affected, which
could impact the supply of diamonds to us.
We have no continuing contracts with any of our suppliers and our
relationship with them may be terminated by either party at any time. We are not
dependent upon any particular supplier for its raw materials. We have not
encountered and do not envisage in the future, any difficulty in obtaining
sufficient raw materials for our needs.
We generally lessen the risk of market fluctuations in the price of
gold by either using the price we pay for the gold to determine the prices we
charge to our customers for finished products incorporating the gold or by
maintaining appropriate forward contracts for the purchase of gold which
protects us against fluctuations in the price of gold between the order date and
the date of sale.
<PAGE>
We do not presently engage in hedging activities with respect to
possible fluctuations in the prices of precious, semi-precious gemstones or
metals. We believe the risk of not engaging in such activities is minimal, since
historically we have been able to adjust prices as material fluctuations have
occurred. We believe that a downward trend in the prices of stones or metals
would have little, if any, impact on the valuation of our inventories.
Manufacturing
We maintain an in-house design staff to create new designs for our
products and to work closely with our senior officers and marketing personnel to
develop new products meeting our customer's needs. Our marketing and
merchandising staff also work in partnership with major customers to develop
products that are sold by those customers. Our policy is to obtain proprietary
protection for our products and designs whenever possible. We update our product
catalogue each year by adding new designs and eliminating less popular styles.
At our facility in New York City, manufacturing processes combine
modern technology with hand craftsmanship to produce fashionable and affordable
jewelry products. Gold jewelry is principally produced using the "lost wax"
method of investment casting. This manufacturing operation originates with a
hand designed original which is then taken through a reverse molding procedure
to create a rubber mold. The rubber mold is infused with wax and a series of
such wax pieces are then surrounded in plaster of Paris. The plaster of Paris is
placed in a furnace where the wax is eliminated by subjecting the plaster to
high temperatures. Molten gold is then infused into the areas from which the wax
has been eliminated and a rough gold piece is removed after cooling. The piece
produced through this investment casting method must be ground and polished and
in some cases, set with stones. We also produce tools for many of our products
that are capable of stamping out gold items. This process enables us to produce
many of our gold items more cheaply than using the lost wax method.
One of the other production methods used is stamping. We create tools
and dies for a large variety of products and then stamps out the products.
Stamping dies are custom produced by computer-aided tool cutting machines or are
hand crafted. The rough, stamped pieces are then trimmed and rounded. Precious,
semi-precious, or synthetic stones may be set in the individual pieces.
Substantially all of our jewelry is manufactured by us in our plant in
New York City. We have facilities in our plant for gold casting, gold stamping
and tool manufacturing and has the ability to design an item and to progress
from design to finished product in under four weeks. Our products are designed
by our in-house staff, which enables us to rapidly produce customer samples
embodying new fashion trends.
MARKETING AND SALES
We market and sell our jewelry primarily through our in-house sales
force. Sales are made by our sales personnel primarily at our showroom in our
New York City facility and at direct presentations at customer's locations.
Products are promoted through the use of catalogues and trade show exhibitions.
We have an in-house sales force and do not employ outside regional
sales offices, and does not supply outside salespersons with samples. This sales
structure enables management to control our selling operation more effectively
as well as to deal directly with our customers and be readily accessible to
them. We supplement these sales efforts through attendance at major industry
trade shows. We assist our customers in allocating their purchasing budgets
among the different items offered by us and monitor retail sales in order to
assess customer response to our products. We advertise in industry trade
journals and participate with customers in cooperative advertising programs.
There are also ads appearing in the promotional advertising pieces of our
customers which are paid for by our customers. In November 1999 we set up our
Web site, AmericanCharm.Com. We expect to have this site fully operational for
the holiday season. Purchases on the site may be made using a credit card.
Our marketing efforts are directed towards large retailers, such as
mass merchandisers and discount stores, catalog showrooms, national and regional
jewelry chains, home shopping networks, warehouse clubs, department stores and
large regional wholesalers. Our marketing efforts emphasize maintaining and
building upon our relationship with existing customers. We believe that
providing exceptional customer service is a key element of its marketing
program. We maintain an adequate inventory of finished goods which, coupled with
our manufacturing capabilities, enables us to rapidly fill customer orders. Our
marketing efforts emphasize our ability to fill orders in a prompt and reliable
fashion. In addition to prompt and reliable order fulfillment, we offer a wide
variety of customer support services designed to meet the individual needs of
our customers. For many of our retail customers, we prepackages, price-tags and
bar codes individual pieces of jewelry, and then ships an assortment of many
prepackaged items to individual retail locations. We also are able to provide to
our customers computer generated reports analyzing the customers' sales and
information regarding market trends. In order to fill customer orders more
quickly and efficiently, we have implemented an electronic Data Interchange
("EDI") program with certain retail customers. EDI was developed to provide for
a secure paperless exchange of information between suppliers and major
retailers. Under EDI program, we electronically receive purchase orders from
participating customers and electronically transmit to the customer order
acknowledgments, invoices and advance shipping notices. Certain large retailers
require their vendors to utilize EDI programs. During each of fiscal years
1997and 1998, approximately 60% and 53% of our net sales, were made pursuant to
orders received through the EDI program.
<PAGE>
Our net sales during the fiscal year ended December 31, 1997 and 1998
to our five largest customers aggregated approximately 60% and 53% of total net
sales during those periods, and sales to one customer, J.C. Penney, accounted
for approximately 27% and 17% of net sales during the fiscal years ended
December 31, 1997 and 1998, respectively. Design by FMC accounted for
approximately 13% of sales in 1998. No other customers represented sales in
excess of 10% in 1997 or 1998. We would be adversely effected if we lose any of
our largest customers.
We have no contracts with any of our customers other than the orders
for made-to-order products and our relationships with them may be terminated by
either party at any time.
COMPETITION
The jewelry business is highly competitive in the United States. We
encounter competition primarily from manufacturers with national and
international distribution capabilities and, to a lesser extent, from small
regional suppliers of jewelry. We believe that we are well positioned in the
industry and have a reputation for responsive customer service, high quality and
well designed jewelry with broad consumer appeal. The principal competitive
factors in the industry are price, quality, design and customer service. Our
specialized customer service programs are important competitive factors in sales
to nontraditional jewelry retailers, including television shopping networks and
discount merchandisers. We believe that our infrastructure enables us to offer
these programs, combined with low cost manufacturing capabilities, provides us
with competitive strengths that distinguish it from most of its current
competitors.
SECURITY AND INSURANCE
Our facilities are protected by alarm systems connected to two "central
stations", one of which is located in the same building as our facility
providing ability to answer emergency calls on an immediate basis. Visitors to
the building pass three security check points provided by the building as well
as our security. An underground secured parking garage provides added
convenience and security.
We employ armed security guards, who are on the premises during all
operating hours. All employees handling gold are scanned for metal upon each
exit from premises. In addition to security cameras all employees are provided
with magnetically coded badges for restricted access to all sensitive areas.
Numerous gold controls are in place for full accountability of all gold
movements in the plant, with specific guidelines of responsibility for all
employees and managers in the production, quality control, vault and shipping
departments.
We have not experienced any material losses from theft and casualty to
date. Nevertheless we maintain primary all-risk insurance, as well as fidelity
insurance, to cover such losses in transit or otherwise if there were a loss. We
believe that we maintain insurance coverage which is adequate for our business
and in conformity with industry practices
Employees
At September 30, 1999 we employed 40 full time employees. Of such
employees, two were employed in management, three in sales and design, 31 in
refining, machining, finishing, polishing, assaying, and fabricating, and 4 in
administration.
We are not a party to any collective bargaining agreement. We consider
our relations with our employees to be satisfactory and have not experienced any
interruption of operation due to labor disagreements with its employees.
Tradenames and Trademarks
We hold United States trademarks for some of its various brand names
including American Charm(R) and Jarnow(R) but believe that our trademarks are
not material to its business.
We also use various unregistered tradenames, trademarks and service
marks. With the introduction of new products, we anticipate continuing to adopt
additional unregistered names and marks.
EDI ORDERS
As part of its programs to provide customers with just-in-time
inventory management and year-round availability of products, we maintain
year-round in-stock inventory of many of our products at our New York City
facility. We historically have not experienced excess inventory buildup nor have
we been forced to sell substantial amounts of inventory below cost. We believe
that we have been able to control excessive inventory buildup because a
substantial portion of our net sales have been attributable to products
pre-ordered by customers prior to manufacture, and because items kept in our
in-stock inventory tend to be stable products, which are not particularly
susceptible to rapid changes in fashion trends. As our customers make greater
use of EDI just-in-time inventory management systems, we may be required to
increase our in-stock inventory.
ENVIRONMENTAL REGULATION
Our manufacturing operations are required to comply with regulations
relating to the disposal of waste water and hazardous wastes and operation of
air exhaust systems. We are required to send samples of our wastewater to a
laboratory certified by the state of New York for analysis on a semi-annual
basis. In the past, this analysis has come back reporting acceptable levels of
metals in waste waters. The only hazardous waste generated by us results from
using cyanide in the bombing operation. The Cyanide waste is shipped to a
precious reclaimer and therefore we are exempt from such a regulations. We are
required to obtain a permit from the New York City Department of Environmental
Protection Bureau of Air Resources to operate any exhaust fans. The cost to
comply with all these regulations are generally less than $2,5000 per year.
However, there can be no assurance that we will not incur material costs or
liabilities with the environmental laws and regulations in the future. In
addition, potentially significant expenditures could be required in order to
comply with evolving environmental and health and safety laws, regulations or
requirements that may be adopted or imposed in the future. Legal Proceedings
There are no legal proceedings to which we are a party or to which our
properties are subject, other than routine litigation incident to our business
which is covered by insurance or which would not have a material adverse effect
on our operations. Seasonality
Retail sales of jewelry are generally weighted to the fourth quarter.
For manufacturers sales patterns reflect a business that tends to fall one-third
in the first half of the year with the remaining two-thirds in the second half
of the year. While our sales are subject to seasonal fluctuations, this
fluctuation is mitigated to a degree by the early placement of orders by many of
our customers, particularly for the Christmas holiday season. Facilities
<PAGE>
We lease facilities at 30-00 47th Avenue, Long Island City, N.Y. from an
unaffiliated person which it uses as its executive and sales offices and for
manufacturing. It occupies 20,000 sq. feet at a rent starting at $104,500 per
annum over a five and a half year lease terminating December 31, 1999, plus a
proportional share of real estate tax and operating expense increases and
utilities. Approximately 50% of the facility is used for manufacturing, 25% is
used for distribution and shipping, and 25% is used for sales and administration
functions. We believe that our facilities are adequate for its present level of
operations and sufficient to accommodate any increase until December 31, 1999.
We believe that we will be able to renew the lease after December 31, 1999. If
it will be necessary for us to relocate, we believe there are similar spaces
available in the same neighborhood at comparable rent. Any relocation expenses
would cost less than $50,000.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY OUR DIRECTORS AND EXECUTIVE
OFFICERS ARE:
Name Age Position
Isaac Nussen 50 President, CEO and Director
George Weisz 60 Chief Operating Officer, Vice President , Secretary
and Director
Eric J. Rothschild 68 Director
Martin Weisz 32 Treasurer and Chief Financial Officer
Israel Braun 54 Director
Isaac Nussen has served as President, CEO and Director since November 1998.
Since 1993 he also served in the same positions for Jarnow Corporation. He is
responsible for our marketing and sales. Prior to 1993 he served as an executive
officer of Michael Anthony Jewelers, Inc. and other jewelry manufacturing
companies for over 25 years.
George Weisz (a.k.a. Ghidale Weisz) has served as Chief Operating Officer,
Vice President and Secretary since November 1998. Since 1993 he also served in
the same positions for Jarnow Corporation. He is responsible for day to day
operations including development and manufacturing. Prior thereto he served as
an executive officer of Michael Anthony Jewelers, Inc. and other jewelry
manufacturing companies for over 25 years.
Eric J. Rothschild has served as a director since November 1998. For the
past five years, and prior thereto, he has been a self-employed physician and a
member of Orangeburg Orthopedic Associates.
Martin Weisz has served as Treasurer and Chief financial officer since
January 1999. During the past five years Mr. Weisz was vice president of Jarnow
Inc., in charge of several major customer accounts. He is a signatory to all the
Company's bank accounts and was involved in bank relations since he started with
the Company.
<PAGE>
Israel Braun has served as a Director since November 1998. Since 1990 he
has been the President of American Computer Forms, Inc., a distributor of
stationary and computer paper.
Mr. George Weisz and Mr. Isaac Nussen are brothers in law. Martin Weisz is
George Weisz's son. Directors are elected to serve until the next annual meeting
of shareholders or until their respective successors are elected and qualified.
We do not pay direct remuneration for services to any of its directors. All
officers serve at the discretion of the Board of Directors subject to the terms
of their employment agreements. By agreement, in connection with the sale of
Jarnow to us, the parties agreed that Mr. Weisz and Mr. Nussen shall have a
right to nominate themselves and an additional two persons to be members of the
Board of Directors. Odyssey Acquisition Corp.,( "Odyssey") shall have a right to
nominate one member of the Board of Directors.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth compensation paid by us for the
three fiscal years ended December 31, 1998 for services in all capacities for
its CEO and President. No other principal executive officer received a total
annual salary and bonus which exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------- ------------------- -------------------- ------------------- -----------------
Other
Name and Principal Position Year Annual Annual Awards
Compensation Compensation Options
- -------------------------------- ------------------- -------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Isaac Nussen, 1998 $ 23,000 none none
President
- -------------------------------- ------------------- -------------------- ------------------- -----------------
1997 $117,000 none none
- -------------------------------- ------------------- -------------------- ------------------- -----------------
1996 $ 66,000 none none
- -------------------------------- ------------------- -------------------- ------------------- -----------------
George Weisz, 1998 $ 23,000 none none
Chief Operations Officer
- -------------------------------- ------------------- -------------------- ------------------- -----------------
1997 $117,000 none none
- -------------------------------- ------------------- -------------------- ------------------- -----------------
1996 $ 66,000 none none
- -------------------------------- ------------------- -------------------- ------------------- -----------------
</TABLE>
Salaries for Isaac Nussen and George Weisz were $250,000 per year, however they
did not receive the entire salary allowed and have waived all amounts not
received.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Mr. Weisz and Mr. Nussen are entitled to receive an annual salary of $250,000
each. In addition, both are entitled to receive a bonus of 2.5% of net profit
(before taxes) in excess of $500,000 in each fiscal year commencing with the
fiscal year ending December 31, 1999, cost of living increase, a life insurance
policy in the face amount of $1,000,000 payable to them. In addition, on a
change of control, in the event either or both Mr. Weisz or Mr. Nussen,
terminates their employment with us, they will each be entitled to receive a
lump sum payment equal to 290% of his average annual compensation for the five
years preceding the date of termination.
STOCK OPTION PLAN
In November 1998, we adopted a Stock Option Plan. An aggregate of 600,
000 shares of common stock are authorized for issuance under the plan. The plan
provides that incentive and non-qualified options may be granted to officers and
other key employees and consultants for the purpose of providing an incentive to
such persons to work for us. The plan may be administered by either the board of
directors or a committee of three directors appointed by the board. The board or
committee determines, among other things, the persons to whom stock options are
granted, the number of shares subject to each option, and the date or dates upon
which each option may be exercised, and the exercise price per share.
<PAGE>
Options may be granted under the plan until November 2008. Options
granted under the plan are exercisable for a period of up to ten years from the
date of grant. Options terminate upon the optionee's termination of employment
with us, except that under certain circumstances an optionee may exercise an
option within the three-month period after termination of employment. An
optionee may not transfer any options granted to such optionee except that an
option may be exercised by the personal representative of a deceased optionee
within the three-month period following the optionee's death. Incentive options
granted to any employee who owns more than 10% of our common stock immediately
before the grant must have an exercise price of not less than 110% of the fair
market value of such underlying stock on the date of the grant and the exercise
term of such options may not exceed five years. The aggregate fair market value
of common stock (determined at the date of grant) for which any employee may
exercise incentive option in the first calendar year may not exceed $100,000.
The board of directors may from time to time amend or may terminate the
plan without action by our shareholders, but no such amendment may increase the
number of shares of common stock that may be issued under the plan without the
consent of the shareholders or impair the rights of holders of outstanding
options without the consent of such holders. To date no stock options are
outstanding under the plan.
We have no pension or profit sharing plan or other contingent forms of
remuneration, other than as provided for in employment agreements with George
Weisz and Isaac Nussen.
CERTAIN TRANSACTIONS
On November 26, 1998, we issued 2,250,000 shares of Common Stock to
George Weisz and Isaac Nussen (1,125,000 to each) in exchange for all of their
issued and outstanding shares of Shilaat Corp., the parent company of Jarnow
Corp. In addition, in November 1998, we issued 1,500,000 shares of Common Stock
to Odyssey Acquisition Corp. in exchange for its shares of Shilaat Corp. Mr.
Nussen and Mr. Weisz, each received 100,000 shares Series A Preferred Stock, for
nominal consideration, allowing them the right to 54% of total votes. These
preferred Stock do not have the right to receive dividends, distributions or
conversion rights.
At September 1999, we owed George Weisz and Isaac Nussen $3,626,056 in
connection with certain interest free loans made to us. The loans made to us by
Mr. Weisz and Mr. Nussen are due on demand. These loans have been subordinated
to senior debt of the factor.
George Weisz and Isaac Nussen have personally guaranteed, without
compensation, our indebtedness to our factor. In accordance with the terms of
guarantee, in the event that we do not make the payments to factor, Mr. Weisz
and Mr. Nussen will be required to make such payments. On September 30, 1999 Mr.
Nussen and Mr. Weisz have also personally assumed approximately $3,477,000 of an
obligation formerly due to the finance company as part of an agreement to
terminate that loan. In addition, they have guaranteed the $2,000,000 note to
the finance company issued by us.
PRINCIPAL STOCKHOLDERS
The following table summarizes certain information regarding the beneficial
ownership of our outstanding common stock as of September 30, 1999, for
each person or group that we know owns more than 5%of the common
stock;
each of our directors;
our chief executive officer;
the officer whose compensation exceeded $100,000 in 1998; and
all of our directors and executive officers as a group.
<PAGE>
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and includes shares over which the indicated beneficial
owner exercises voting and/or investment power. Shares of common stock
subject to options currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage ownership of the person
holding the options but are not deemed outstanding for computing the
percentage ownership of any other person. Except as otherwise indicated, we
believe the beneficial owners of the common stock listed below, based on
information furnished by them, have the sole voting and investment power
with respect to the number of shares listed opposite their names. Unless
otherwise indicated, the following officers, directors and shareholders can
be reached at our principal offices.
The following list does not include any of the shares that may be issued
upon conversion of the 8% Convertible Debentures or the exercise of the
Warrants issued to the Debenture holders and being registered in this
prospectus.
<TABLE>
<CAPTION>
SHARES PERCENT OF SHARES
BENEFICIALLY
NAME AND ADDRESS OWNED OWNED
<S> <C> <C>
GEORGE WEISZ(1) 1,125,000 16.6%
30-00 47TH AVENUE
LONG ISLAND CITY, NEW YORK 11101
ISAAC NUSSEN(1) 1,125,000 16.6%
30-00 47TH AVENUE
LONG ISLAND CITY, NEW YORK 11101
ODYSSEY ACQUISITION CORP(1) 1,500,000 22.2%
30-00 47TH AVENUELONG ISLAND CITY, NEW YORK 11101
ERIC J. ROTHSCHILD -0- -0-
30-00 47 AVENUE
LONG ISLAND CITY, NEW YORK 11101
ISRAEL BRAUN -120,000- - 1.8%
30-00 47 AVENUE
LONG ISLAND CITY, NEW YORK 11101
ALL OFFICERS AND DIRECTORS AS A 2,370,000 35.1%
GROUP (6 PERSONS)
</TABLE>
(1) Odyssey Acquisition Corp. granted Mr. Weisz and Mr. Nussen the unconditional
right to vote 750,000 of such shares. In addition, we issued preferred shares to
Mr. Weisz and Mr. Nussen which provide that they will be able to vote no less
than 54% of all of our voting stock.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of (i) 35,000 shares of common stock, par
value $.001 per share and (iii) 5,000,000 shares of Preferred Stock, par value
$.001 per share ("Preferred Stock"). 6,755,010 shares OF COMMON STOCK AND
200,000 SHARES OF SERIES A PREFERRED STOCK ARE CURRENTLY OUTSTANDING.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. Each share of common stock has
the right to one vote for each nominee to the board of directors. The holders of
common stock are entitled to receive dividends equally, if any, as may be
declared from time to time by the board of directors out of funds legally
available for dividends, subject to the payment of any preferential dividends
with respect to any preferred stock that from time to time may be outstanding.
In the event of the liquidation, dissolution or winding up of United Ventures,
the holders of common stock are entitled to share equally in all assets
remaining after payment of liabilities, subject to prior distribution rights of
the holders of any outstanding preferred stock. The holders of common stock have
no preemptive or conversion rights or other subscription rights, and there are
no redemptive or sinking funds provisions applicable to the common stock. All of
the outstanding shares of common stock are fully paid and nonassessable, and all
of the shares of common stock, when issuable upon conversion of the debentures
and exercise of the warrant, will be fully paid and nonassessable.
The vote of the holders of a majority of the issued and outstanding common
stock entitled to vote thereon is sufficient to authorize, affirm, ratify or
consent to such act or action, except as otherwise provided by law. However, Mr.
Nussen and Mr. Weisz, the holders of the Class A Preferred Stock, have the right
to cast a minimum of 54% of the votes on any matter requiring shareholder
approval
PREFERRED STOCK
The board of directors, without further action by the stockholders, is
authorized to issue up to 5,000,000 shares of preferred stock in one or more
series and to fix and determine as to any series any and all of the privileges,
relative rights and preferences of shares in that series, including relative
rights with respect to redemption, conversion, voting, dividends and preferences
on liquidation. Other than the 200,000 Series A Preferred Stock described below,
we have no present intention to issue any preferred stock, but may determine to
do so in the future.
SERIES A PREFERRED STOCK
There is outstanding 200,000 shares of Series A Preferred Stock owned by
Mr. Nussen and Mr. Weisz. The Preferred shares are not entitled to receive cash
dividends and will not receive a distribution in the event we are liquidated or
dissolved. These preferred shares allow Mr. Weisz and Mr. Nussen to an aggregate
of 54% of the total votes of all our outstanding shares. These preferred shares
are not convertible into other shares and may not be transferred except to
family members or to the estate of Mr. Weisz and Mr. Nussen .
<PAGE>
Under the Delaware General Corporation Law ("DGCL"), stockholders may take
certain actions without the holding of a meeting by a written consent or
consents signed by the holders of a majority of the outstanding shares of the
capital stock of a company entitled to vote. Prompt notice of the taking of any
action without a meeting by less than unanimous consent of the stockholders will
be given to those stockholders who do not consent in writing to the action. The
purposes of this provision are to facilitate action by stockholders and to
reduce the corporate expense associated with annual and special meetings of
stockholders. If stockholders action is taken by written consent, we will be
required to send each stockholder entitled to vote on the applicable matter, but
whose consent was not solicited, an information statement containing information
about the action taken.
CERTAIN ANTI-TAKEOVER MATTERS
We are a Delaware corporation and we are subject to Section 203 of the DGCL.
In general, subject to certain exceptions, Section 203 prohibits a Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date that such
stockholder became an interested stockholder, unless (i) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder or (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding for purposes of determining the number of
shares outstanding those shares owned by (x) persons who are directors and also
officers and (y) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer), or (iii) on or subsequent to
such date the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66-2/3% of the outstanding vote
stock which is not owned by the interested stockholder. Section 203 defines a
"business combination" to include certain mergers, consolidations, asset sales
and stock issuances and certain other transactions resulting in a financial
benefit to an "interested stockholder." In addition, Section 203 defines an
"interested stockholder" to include any entity or person beneficially owning 15%
or more of the outstanding voting stock of the corporation and any entity or
person affiliated with such an entity or person.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
us by Ellenoff Grossman Schole & Cyruli, LLP, New York, NY
EXPERTS
The Consolidated Financial Statements of United Ventures Group, Inc. at
December 31, 1998 and for the two years then ended included in this Prospectus,
have been audited by Feldman Sherb Horowitz & Co. , P.C., New York, NY,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
.
<PAGE>
<TABLE>
<CAPTION>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
THE ESTIMATED EXPENSES AS PART OF THIS OFFERING ARE AS FOLLOWS:
<S> <C>
SEC FILING FEE....................................... $ 1,055.69
NASDAQ NATIONAL MARKET LISTING FEE................... $
NASD FILING FEE...................................... $
PRINTING AND ENGRAVING*.............................. $
TRANSFER AGENT FEES*................................. $
LEGAL FEES AND EXPENSES*............................. $ 45,000.00
ACCOUNTING FEES AND EXPENSES*........................ $ 30,000.00
MISCELLANEOUS EXPENSES*.............................. $ 10,000.00
.....................................................TOTAL $ 91,055.69
*....................................................INDICATES EXPENSES THAT HAVE BEEN ESTIMATED FOR THE PURPOSE OF FILING.
ITEM 14..............................................INDEMNIFICATION OF DIRECTORS AND OFFICERS.
</TABLE>
Indemnification is provided for in Article 10 of our bylaws and these
provisions are incorporated herein by reference.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation to provide indemnification to a director, officer,
employee or agent of the corporation, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him or
her as part of the action, suit or proceeding, if the party acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful
as determined under the statute, and except that with respect to any action
which results in a judgment against the person and in favor of the corporation,
the corporation may not indemnify unless a court determines that the person is
fairly and reasonably entitled to the indemnification.
Section 145 further provides that indemnification shall be provided if
the party in question is successful on the merits.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person in connection with the securities being registered) the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
<PAGE>
Item 15. ............................................Recent Sales of
Unregistered Securities.
No securities that were not registered under the Securities Act have been
issued or sold by the
Registrant within the past three years except as follows:
In November 1998, we issued 3,750,000 shares of Common Stock to three persons in
exchange for all of the shares of Shilaat Corp. owned by them. This transaction
was exempt under the Securities Act pursuant to Section 4(2) thereof as a
transaction not involving a public offering. The transaction was made without an
underwriter and the certificates evidencing the shares bear a restrictive
legend.
From November 13 to December 11, 1998, we issued 595,066 shares to four persons
for a consideration of $650,000. The transaction was exempt under Regulation D,
Rule 504, as an Exemption for a Limited Offering not exceeding $1,000,000.
From January 6, to March 5, 1999 we issued 875,000 shares to seven persons for
consideration of $350,000. The transaction was exempt under Regulation D, Rule
504, as an Exemption for a Limited Offering not exceeding $1,000,000.
From February 4, 1999 to August 25, 1999 five persons lent us $750,000 in short
term loans. These persons received 330,000 shares as an inducement to make the
loans. These transactions were exempt under the Securities Act pursuant to
Section 4(2) thereof, as transactions not involving a public offering. The
transactions were made without an underwriter and the certificates evidencing
the shares bear a restrictive legend.
In February 1999 Taylor Stuart Financial received 100,000 restricted shares and
warrants to purchase 100,000 shares at $2.50 per share, 100,000 shares at $4.00
per share and 100,000 shares at $5.50 per share, in consideration for providing
financial consulting services to us. This transaction was exempt under the
Securities Act, pursuant to Section 4(2) thereof as not involving a public
offering. The Securities contain a restrictive legend.
In April 1999 we sold to five persons 8% Convertible Debentures in the Principal
amount of $1,300,000 and issued warrants to purchase 1,114,285 shares at $3.25
per share and 300,000 shares at $.70 per share. This transaction was exempt
under Securities Act pursuant to Section 4(2) thereof as a transaction not
involving a public offering. The transaction was made without an underwriter and
the certificates evidencing the securities contain a restrictive legend.
On September 30, 1999, our finance company received a warrant to purchase
675,501 shares of common stock as part of a settlement of outstanding
indebtedness. This transaction was exempt under the Securities Act, pursuant to
Section 4(a), thereof, as not involving a public offering. The warrant contains
a restrictive legend.
We issued 200,000 shares of Series A Preferred Stock to two persons in March
1999 for nominal consideration. This transaction was exempt under the Securities
Act, pursuant to Section 4(2) thereof as not involving a public offering. The
Securities contain a restrictive legend.
The aforementioned issuances and sales were made in reliance upon the exemption
from the registration provisions of the Securities Act afforded by Section 4(2)
thereof and/or Regulation D promulgated thereunder, as transactions by an issuer
not involving a public offering. The purchasers of the securities described
above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the securities may not be offered, sold or transferred
other than pursuant to an effective registration statement under the Securities
Act, or an exemption from such registration requirements. The Registrant will
place stop transfer instructions with its transfer agent with respect to all
such securities.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION.
<S> <C>
3.1 CERTIFICATE OF INCORPORATION OF THE REGISTRANT. *
3.2 Amendment to certificate of incorporation
3.3 Bylaws of the Registrant.
4.1 Form of Registrant's Common Stock Certificate. *
5.1 Opinion of Ellenoff Grossman Schole & Cyruli LLP with respect to legality of the Common Stock being issued.*
10.1 Stock Option Plan.
10.2 Securities Purchase Agreement relating to the Debentures. *
10.3 Form of 8% Convertible Debentures. *
10.4 Form of Warrant between the Registrant and the Debenture Holder. *
10.5 Registration Right Agreement. *
23.1 Consent of Feldman, Sherb, Horowitz & Co. P.C.
23.3 Consent of Ellenoff Grossman Schole & Cyruli LLP (included in its opinion to be filed as Exhibit 5.1).*
24.1 Powers of Attorney of Directors and Executive Officers (included on the Signature Page of this Registration
Statement).
27 Financial Data Schedule.
</TABLE>
---------------------------------
* To be filed by amendment.
+ Certain provisions of this exhibit have been omitted and are subject to
a request for confidential treatment filed with the Securities and
Exchange Commissions.
(b) The following financial statement schedules have been filed with
this Registration Statement:
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
<PAGE>
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 434(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii) For purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, STATE OF NEW
YORK, ON THIS 26TH day of November 1999.
United Ventures Group, Inc.
BY: /S/ISAAC NUSSEN
ISAAC NUSSEN, PRESIDENT
<PAGE>
POWER OF ATTORNEY
The undersigned directors and officers of United Ventures Group, Inc.
hereby constitute and appoint George Weisz and Isaac Nussen and each of them,
with full power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact and agents with full power
to execute in our name and on our behalf in the capacities indicated below any
and all amendments (including Rule 462(b) amendments, post-effective amendments
and amendments thereto) to this Registration Statement and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully in all intents and purposes as he might or could do in person, and
hereby ratify and confirm that such attorneys-in-fact, or either of them, or
their substitutes shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/S/ ISAAC NUSSEN PRESIDENT AND CHIEF EXECUTIVE OFFICER NOVEMBER 26TH, 1999
ISAAC NUSSEN
/S/ GEORGE WEISZ VICE PRESIDENT, CHIEF OPERATING NOVEMBER 26TH, 1999
GEORGE WEISZ OFFICER AND DIRECTOR
/S/ MARTIN WEISZ TREASURER AND CHIEF FINANCIAL OFFICER NOVEMBER 26TH, 1999
MARTIN WEISZ (PRINCIPAL ACCOUNTING OFFICER)
/S/ ERIC J. ROTHSCHILD DIRECTOR NOVEMBER 26TH, 1999
ERIC J. ROTHSCHILD
/S/ ISRAEL BRAUN DIRECTOR NOVEMBER 26TH, 1999
ISRAEL BRAUN
____________, 1999
UNITED VENTURES GROUP INC.
4,895,919 SHARES OF COMMON STOCK
PROSPECTUS
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THE AFFAIRS OF UNITED
VENTURES GROUP, INC. HAVE NOT CHANGED SINCE THE DATE HEREOF.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
NUMBER
Independent Auditors' Report .......................................... F-2
Consolidated Financial Statements :
Balance Sheet ..................................................... F-3
Statements of Operations .......................................... F-4
Statements of Stockholders' Equity ................................ F-5
Statements of Cash Flows .......................................... F-6
Notes to Financial Statements ..................................... F7 - F12
Unaudited Consolidated Financial Statements for the Nine Months Ended
September 30, 1999 :
Balance Sheet ..................................................... F-13
Statements of Operations .......................................... F-14
Statements of Stockholders' Equity ................................ F-15
Statements of Cash Flows .......................................... F-16
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
United Ventures Group, Inc.
Long Island City, New York
We have audited the accompanying consolidated balance sheets of United
Ventures Group, Inc. and Subsidiaries as of December 31, 1998 and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1998 and 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of United Ventures
Group, Inc. and Subsidiaries as of December 31, 1998 and the results of its
operations and its cash flows for the years ended December 31, 1998 and 1997 in
conformity with generally accepted accounting principles.
As discussed in Note 3 to the financial statements, United Ventures
Group, Inc. and subsidiaries have reserved $3,243,000 of accounts receivable as
allowance for doubtful accounts, since they were deemed uncollectible. If any
collection is received subsequent to December 31, 1998, they will be recorded as
income.
/S/ FELDMAN SHERB HOROWITZ & CO., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
September 24, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1998
ASSETS
CURRENT ASSETS:
<S> <C>
Cash .................................................................... $ 13,028
Accounts receivable-net of allowance for doubtful
accounts of $ 3,243,000 ............................................... 2,131,649
Inventories ............................................................. 11,290,949
Prepaid expenses ........................................................ 2,613
------------
TOTAL CURRENT ASSETS ................................................. 13,438,239
------------
PROPERTY AND EQUIPMENT, net ............................................. 592,628
OTHER ASSETS :
Goodwill, net ........................................................... 117,050
Other ................................................................... 17,624
------------
TOTAL OTHER ASSETS ................................................... 134,674
------------
$ 14,165,541
============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Overdraft ............................................................... $ 146,065
Accounts payable and accrued expenses ................................... 851,288
Line of credit - bank ................................................... 7,417,354
Due to stockholder - subordinated ....................................... 677,852
------------
TOTAL LIABILITIES .................................................... 9,092,559
------------
STOCKHOLDERS' EQUITY :
Common Stock, $.001 par value - 35,000,000 shares authorized,
4,400,010 shares issued and outstanding ............................... 4,400
Additional paid in capital .............................................. 6,014,598
Subscription receivable ................................................. (250,000)
Retained earnings (deficit) ............................................. (696,016)
------------
TOTAL STOCKHOLDERS' EQUITY ............................................ 5,072,982
------------
$ 14,165,541
============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1998 1997
----------- -----------
Net sales .................................. $ 10,564,598 $ 14,818,772
Cost of goods sold ......................... 7,165,065 10,835,340
----------- -----------
Gross profit ............................... 3,399,533 3,983,432
Selling, general and administrative expenses 2,466,953 2,595,772
Bad debts .................................. 3,192,050 50,539
----------- -----------
Income (loss) from operations .............. (2,259,470) 1,337,121
Interest expense ........................... 1,056,586 794,968
----------- -----------
Income (loss) before income taxes and
extraordinary items ........................ (3,316,056) 542,153
Provision for income taxes ................. -- 79,800
----------- -----------
Income (loss) before extraordinary items ... (3,316,056) 462,353
Extraordinary items - Loss on early
extinguishment of debt, net of taxes ....... 58,613 279,624
----------- -----------
Net income (loss) .......................... $ (3,374,669) $ 182,729
=========== ==========
Basic and diluted earnings (loss) per share $ (2.17) $ 0.26
=========== ==========
Weighted average common shares outstanding . 1,555,488 702,350
=========== ==========
See notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
($.001par value) Additional
------------------------ Paid-In Subscription Accumulated Stockholders'
Shares Amount Capital Receivable deficit Equity
------------------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 .......................... 677,350 $ 677 $ 1,499,323 $ -- $ (35,078) $ 1,464,922
Issuance of common stock ....................... 25,000 25 5,899,975 -- -- 5,900,000
Net income ..................................... -- -- -- -- 182,729 182,729
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 .......................... 702,350 702 7,399,298 -- 147,651 7,547,651
Issuance of common stock pursuant to acquisition 3,750,000 3,750 (3,750) -- -- --
Cancellation of common stock ................... (699,218) (699) 699 -- -- --
Sale of common stock ........................... 646,878 647 649,353 (250,000) -- 400,000
Forgiveness of notes payable by stockholders ... -- -- 500,000 -- -- 500,000
Net loss ....................................... -- -- -- -- (3,374,669) (3,374,669)
Termination of S Corporation status ............ -- -- (2,531,002) -- 2,531,002 (0)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 .......................... 4,400,010 $ 4,400 $ 6,014,598 $ (250,000) $ (696,016) $ 5,072,982
=========== =========== =========== =========== =========== ===========
See notes to consolidated financial statements
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES :
<S> <C> <C>
Net income (loss) .............................................. $(3,374,669) $ 182,729
----------- -----------
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ............................................... 447,648 448,047
Amortization ............................................... 325,451 423,128
Bad debts .................................................. 3,192,050 50,539
Write-off of deferred financing and offering costs ......... 159,672 175,446
Change in assets and liabilities;
(Increase) decrease in accounts receivable ................. (444,508) 405,354
Increase in inventories .................................... (368,156) (4,626,708)
Decrease (increase) in prepaid expenses .................... 97,247 (66,336)
Increase in deposits ....................................... -- (171)
Increase (decrease) in accounts payable and accrued expenses 209,199 (392,431)
Decrease in deposits from customers ........................ -- (100,000)
----------- -----------
Total adjustments ...................................... 3,618,603 (3,683,132)
----------- -----------
Net cash provided by (used in) operating activities ................. 243,934 (3,500,403)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES :
Acquisition of property and equipment ...................... (90,229) (155,431)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds - bank ....................................... -- 9,138,941
Repayment of notes payable - line of credit ................ (756,312) (6,146,048)
Repayment of notes payable - term loan ..................... (320,831) --
Proceeds from notes payable - related party ................ -- 500,000
Increase in deferred financing costs ....................... -- (79,625)
Proceeds from issuance of stock ............................ 400,000 --
Borrowings from stockholders ............................... 383,731 242,704
----------- -----------
Net cash (used in) provided by financing activities ................. (293,412) 3,655,972
----------- -----------
Net increase in cash ................................................ (139,707) 138
Cash - beginning of year ............................................ 6,670 6,532
----------- -----------
Cash - end of year .................................................. $ (133,037) $ 6,670
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION :
Interest paid .............................................. $ 1,055,328 $ 786,856
=========== ===========
Taxes paid ................................................. $ 14,248 $ 24,659
=========== ===========
NON-CASH FINANICING AND INVESTING ACTIVITIES:
Forgiveness of notes payable by related party .............. $ 500,000 $ --
=========== ===========
</TABLE>
see notes to consolidated financial statements
F-6
<PAGE>
UNITED VENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. THE COMPANY
United Ventures Group, Inc. ("UVGI"), formerly known as Travelnet
International, Corp., was organized in May 1996. In 1998, UVGI discontinued
its operations as a tour organizer and changed its name to United Ventures
Group, Inc.
In October 1998, UVGI acquired all of the issued and outstanding shares of
Shilaat Corp. ("Shilaat"), a New York shell corporation formed on August
1998, which acquired all of the shares of Jarnow Corporation ("Jarnow"), a
company which was incorporated in 1993 and manufactures and distributes
gold jewelry, in exchange for 3,750,000 shares of UVGI's common stock (the
"Exchange"). The Exchange was completed pursuant to the Stock Exchange
Agreement between UVGI, Shilaat and Odyssey Acquisition Corp, in which
1,500,000 shares were issued to Odyssey Acquisition Corp, which owned 40%
of Shilaat and 2,250,000 shares were issued to the two other stockholders
who owned the remaining 60% of Shilaat. The Exchange has been accounted for
as a reverse acquisition under the purchase method for business
combinations.
Hereinafter, UVGI, Shilaat, and Jarnow are collectively referred to as the
"Company".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The presentation 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 reporting period.
Actual results could differ from those estimates.
INVENTORIES - Inventories consisting mainly of gold are stated at the lower
of cost, determined by the first-in first-out method, or market.
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURNS - Provisions for losses on
accounts receivable are made in amounts required to maintain an adequate
allowance for doubtful accounts. Accounts receivables are written off
against such allowance when it is determined by the Company that collection
will not be received.
The Company provides an allowance for returns by customer. The allowance is
on a specific identification basis by customer. Such allowance was
$1,808,000 at December 31, 1998.
F-7
<PAGE>
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation is provided using the straight-line method over their
estimated useful lives of 5 years. Depreciation expense for December 31,
1998 and 1997 is $ $447,648 and $448,047, respectively.
GOODWILL - Goodwill is amortized on a straight-line basis over an estimated
life of five years.
INCOME TAXES - Jarnow, with the consent of its stockholders, had elected
under the Internal Revenue Code and New York State Tax Statutes to be an S
Corporation. In lieu of corporate income taxes, the stockholders of an S
Corporation are taxed on their proportionate share of the Company's taxable
income. Therefore, no provision or liability for federal or state income
taxes were included in the financial statements pertaining to Jarnow. Local
income taxes are calculated based on income as defined by New York City.
Such S corporation status terminated upon the acquisition of Jarnow by
Shilaat.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews long-lived assets for
impairment whenever circumstances and situations change such that there is
an indication that the carrying amounts may not be recovered. At December
31, 1998, the Company believes that there has been no impairment of its
long-lived assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reported in the
balance sheet for cash, receivables, and accounts payable approximate their
fair market value based on the short-term maturity of these instruments.
NEW ACCOUNTING PRONOUNCEMENT - The Company will adopt Statement of
Financial Accounting Standard No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities" as amended by SFAS No. 137
for the year ended December 31, 2000. SFAS No. 133 establishes a new model
for accounting for derivatives and hedging activities and supersedes and
amends a number of existing standards. The application of the new
pronouncement is not expected to have a material impact on the Company's
financial statements.
EARNINGS PER SHARE - The Company has adopted the provisions of Financial
Accounting Standards No. 128, "Earnings Per Share". Basic earnings per
share is based on the weighted average number of shares outstanding.
Potential common shares included in the computation are not presented in
the financial statements as their effect would be anti-dilutive.
STOCK-BASED COMPENSATION - In October 1995, the Financial Accounting
Standards Board issued Statement No.123, "Accounting for Stock-Based
Compensation," which is effective for transactions entered into after
December 31, 1995. Statement No.123 establishes a fair value method of
accounting for stock-based compensation, through either recognition or
disclosure. The Company adopted the employee stock-based compensation
disclosure - only provisions of Statement No. 123 in fiscal 1998 by
disclosing the pro forma net income amounts assuming the fair value method
was adopted May 1, 1996. The adoption of Statement No. 123 did not impact
the Company's results of operations, financial position or cash flows.
F-8
<PAGE>
PRINCIPLE OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All material
intercompany transactions and balances have been eliminated.
3. ALLOWANCE FOR DOUBTFUL ACCOUNTS
At December 31, 1998, the Company deemed $3,243,000 of its accounts
receivable as uncollectible and fully reserved them as an allowance for
doubtful accounts. If any collection is received subsequent to December 31,
1998, they will be recorded as income.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 consist of the following:
Factory machinery and equipment $2,040,648
Furniture and fixtures 27,781
Leasehold improvements 43,267
Computer software 194,004
Computer equipment 126,554
------------------
2,432,254
Less : Accumulated depreciation 1,839,626
==================
$592,628
==================
Substantially, all of the Company's property and equipment are collateral
for its debt obligations.
5. GOODWILL - NET
Goodwill relates to the prior years' acquisition by Jarnow of stock and
assets of other companies and consists of following at December 31, 1998.
Customer lists, styles, and backlog $ 601,230
Acquisition cost 1,026,031
------------------
1,627,261
Less : Accumulated amortization 1,510,211
==================
$ 117,050
==================
Amortization expense of goodwill amounted to $325,451 for the years
ended December 31, 1998 and 1997.
F-9
<PAGE>
6. NOTE PAYABLE - BANK
Through June 1998, the Company had a $10,000,000 line of credit and a
$350,000 term loan with a bank which bore an interest rate of 1/2% above
the bank's base rate, as defined, and expire on August 12, 2000.
In June 1998, the Company entered into a financing agreement with a
financial institution ("Finance Company") which provided initial funding of
$6,500,000 based upon certain levels of accounts receivable, inventory and
equipment, and secured by Company's assets. The proceeds of this loan were
used to repay the Company's existing line of credit and term loan with
bank. Additional advances were made to the Company based on additional
sales and other requirements, as defined. In September 1999, the Company
entered into an arrangement with the Finance Company to settle the
obligation by executing the following; (i) the issuance of a $2,000,000
note payable to Finance Company with an annual interest rate of 10% due
September 2000 and guaranteed by the principal shareholders of the Company;
(ii) the payment of $500,000 (see below), and (iii) the transfer of the
remaining balance open at September 30, 1999 of $3,477,460, to the
principal shareholders of the Company who assumed the liability on behalf
of the Company.
Concurrent with the above financing, the Company entered into a factoring
agreement with a financial institution which provided for payment of
$500,000 to Finance Company. Additional funds are advanced directly to the
Company based on subsequent sales and levels of accounts receivable, as
defined, and collateralized by Company's assets.
7. LOAN PAYABLE - RELATED PARTY
In December 1997, the Company entered into a $500,000 loan with an entity
that is wholly owned by two of its shareholders. The loan was contributed
to the capital of the Company upon forgiveness of such loan by the lender
to the shareholders in September 1998.
8. UNPAID PAYROLL TAXES
The Company has been delinquent on its payment of payroll taxes aggregating
approximately $129,000 at the end of October 1999. The Company is currently
pursuing a payment plan with Internal Revenue Service.
9. DUE TO STOCKHOLDERS
Due to stockholders in the aggregate amount of $677,852 represents advances
from stockholders of the Company. Such advances are in the form of
noninterest bearing loans and are payable on demand.
F-10
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
The Company leases space for its administrative offices, showrooms and its
manufacturing facility under an operating lease expiring on December 31,
1999. The lease provides for the Company to pay a proportionate share of
the building's real estate taxes and operating expense escalations, as
defined.
For the years ended December 31, 1998 and 1997, the Company incurred total
rent expense amounting to $118,377 and $123,537 respectively.
11. ECONOMIC DEPENDENCY AND CREDIT RISK
For the years ended December 31, 1998 and 1997, 21% and 27% of the
Company's net sales, respectively, were derived from one customer.
12. STOCKHOLDERS' EQUITY
COMMON STOCK :
In December 1998, the Company approved an amendment to its Article of
Incorporation to raise the authorized shares of its common stock to
35,000,000 shares.
PREFERRED STOCK :
In December 1998, the Company approved an amendment to its Article of
Incorporation to authorize 5,000,000 shares of Blank Preferred Stock.
In March 1999, the Company issued 200,000 shares of Series A Preferred
Stock at $.001 per shares to two of principal shareholders, which gave them
54% of the votes on any matter that requires a vote of shareholders.
CONVERTIBLE DEBENTURES :
In January 1999, the Company authorized the issuance of up to $10,000,000
of convertible debentures.
STOCK OPTIONS PLAN:
In December 1998, The Company approved the establishment of a stock option
plan for the issuance of 600,000 shares of its common stock.
CONVERTIBLE DEBENTURES:
In April 1999, the Company entered into a Securities Purchase Agreement
("Agreement") for the sale of debentures for an aggregate purchase price of
$1,300,000. Such debentures are due in 2002 and bear an interest rate of 8%
per annum. The debentures are convertible into shares of the Company's
common stocks based on the lower of $ 2.318 or 70% of the market price of
the Company's common stock at the time of conversion. The net proceeds from
this agreement were $997,000.
F-11
<PAGE>
Pursuant to the Agreement, the Company agreed to issue warrants to purchase
up to 300,000 shares of the Company's common stock at $.70 per share and up
to 1,114,285 shares at $3.325 per share.
In September 1999, the Company issued warrants to the financial institution
described in Note 6 to purchase 645,501 shares of the Company's common
stock at $.01 per share. The warrants were issued in connection with the
settlement of debt described in Note 6 and will expire in September 2004.
F-12
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
September 30,
1999
------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash ................................................................... $ 4,956
Accounts receivable, net of allowance for accounts
for $3,243,000 ....................................................... 2,456,757
Inventories ............................................................ 11,545,508
Prepaid expenses ....................................................... 72,981
------------
TOTAL CURRENT ASSETS ................................................. 14,080,202
PROPERTY AND EQUIPMENT, NET .................................................... 359,901
DEPOSITS ....................................................................... 17,624
------------
$ 14,457,727
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses .................................. $ 899,042
Line of credit ......................................................... 2,500,000
Convertible debentures, net of conversion benefit ...................... 628,000
Loans payable .......................................................... 660,000
Due to stockholder ..................................................... 3,626,056
------------
TOTAL CURRENT LIABILITIES ............................................ 8,313,098
STOCKHOLDER'S EQUITY
Common stock, $.001 par value - 35,000,000 shares
authorized and 6,755,010 shares issued and outstanding ............... 6,755
Preferred stock, $.001 par value - 5,000,000 shares authorized
and 200,000 Series A shares issued and outstanding ................... 200
Deferred compensation expense .......................................... (1,886,871)
Additional paid in capital ............................................. 8,681,114
Accumulated deficit .................................................... (656,569)
------------
TOTAL STOCKHOLDER'S EQUITY ........................................... 6,144,629
------------
$ 14,457,727
============
</TABLE>
F-13
<PAGE>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30, September 30,
1999 1998
----------- -----------
Net sales ................................. $ 3,650,994 $ 7,122,191
Cost of goods sold ........................ 2,213,146 4,629,424
----------- -----------
Gross profit .......................... 1,437,848 2,492,767
Selling, general and administrative ....... 1,238,401 1,836,441
Bad debts ................................. -- 2,634,372
----------- -----------
Income (loss) from operations ......... 199,447 (1,978,046)
Interest expense .......................... 683,116 760,985
----------- -----------
Loss before extraordinary item ........ (483,669) (2,739,031)
Early extinguishment of debt .............. 523,116 (58,613)
=========== ===========
Net income (loss) ......................... $ 39,447 $(2,797,644)
=========== ===========
Basic and diluted earnings (loss) per share $ 0.02 $ (1.80)
=========== ===========
Weighted average common shares outstanding 2,608,821 1,555,488
=========== ===========
F-14
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Common Stock Preferred Stock, Series A
($.001par value) ($.001par value) Additional
--------------------- ----------------- Deferred Paid-In Subscription Accumulated Stockholders'
Shares Amount Shares Amount Compensation Capital Receivable deficit Equity
----------- --------- --------- ------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ... 4,400,010 $ 4,400 -- $ -- $ -- $ 6,014,598 $ (250,000) $ (696,016) $ 5,072,982
Sale of common stock ......... 2,355,000 2,355 -- -- (1,886,871) 2,234,516 -- -- 350,000
Sale of preferred stock ...... -- -- 200,000 200 -- -- -- -- 200
Payment of subscription
receivable ................... -- -- -- -- -- -- 250,000 -- 250,000
Beneficial conversion features
of convertible debentures .... -- -- -- -- -- 432,000 -- -- 432,000
Net loss ..................... -- -- -- -- -- -- -- 39,447 39,447
----------- --------- --------- ------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1999 .. 6,755,010 $ 6,755 200,000 $ 200 $(1,886,871) $ 8,681,114 $ -- $ (656,569) $ 6,144,629
=========== ========= ========= ======= =========== =========== =========== =========== ===========
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
UNITED VENTURES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30, September 30,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES :
<S> <C> <C>
Net income (loss) ............................................... $ 39,447 $(2,797,644)
----------- -----------
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ................................................ 232,727 258,324
Amortization ................................................ 117,050 195,959
Interest expense on conversion benefit ...................... 60,000 --
Extinguishment of debt ...................................... (523,116) 58,613
Write-off of deferred financing and offering costs .......... -- 90,000
Change in assets and liabilities;
(Increase) decrease in accounts receivable .................. (325,108) 2,429,704
(Increase) decrease in inventories ......................... (254,559) 723,061
(Increase) decrease in prepaid expenses ..................... (70,368) 21,737
Increase in accounts payable and accrued expenses ........... 47,754 83,403
----------- -----------
Total adjustments ........................................ (715,620) 3,860,801
----------- -----------
Net cash (used in) provided by operating activities ................. (676,173) 1,063,157
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES :
Acquisition of property and equipment ....................... -- (90,229)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable - line of credit ................. (1,446,034) (508,898)
Proceeds from sale of common stock .......................... 350,000 --
Proceeds from sale of preferred stock ....................... 200 --
Proceeds from debentures .................................... 1,000,000 --
Loan proceeds ............................................... 660,000 --
Repayment of notes payable - term loan ...................... -- (320,831)
Payment of subscription receivable .......................... 250,000 --
Borrowing from stockholders ................................. -- 383,731
----------- -----------
Net cash (used in) provided by financing activities ................. 814,166 (445,998)
----------- -----------
Net increase in cash ................................................ 137,993 526,930
Cash - beginning of period .......................................... (133,037) 6,670
----------- -----------
Cash - end of period ................................................ $ 4,956 $ 533,600
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION :
Interest paid ............................................... $ 523,116 $ 760,985
=========== ===========
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Forgiveness of notes payable by related party ............... $ -- $ 500,000
=========== ===========
Assumption of note payable by stockholders .................. $ 3,500,000 $ --
=========== ===========
Beneficial conversion features recorded as additional paid-in
capital .................................................. $ 432,000 $ --
=========== ===========
</TABLE>
F-16
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
UNITED VENTURES GROUP, INC.
Under Section 242 of the
General Corporation Law of the States of Delaware
UNITED VENTURES GROUP, INC.(the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by meeting of the Board,
adopted the following resolutions proposing and declaring advisable the
following amendment to the Certificate of Incorporation of said Corporation:
RESOLVED, that Article FOURTH of the Certificate of Incorporation be
amended and, as amended, read as follows:
FOURTH: The total number of shares of all classes of stock which
the Corporation shall be authorized to issue is 40,000,000 of which
35,000,000 shall be designated as Common Stock with a par value of
$.001 per share, and 5,000,000 shall be designated as Preferred Stock
with a par value of $.001 per share.
The Board of Directors may divide the Preferred Stock into any
number of series, fix the designation and number of shares of each such
series, and determine or change the designation, relative rights,
preferences, and limitations of any series of Preferred Stock. The
Board of Directors (within the limits and restrictions of any
resolutions adopted by it originally fixing the number of shares of any
series of Preferred Stock) may increase or decrease the number of
shares initially fixed for any series, but no such decrease shall
reduce the number below the number of shares then outstanding and
shares duly reserved for issuance.
SECOND: That the aforesaid amendment has been consented to and authorized by the
holders of a majority of the issued and outstanding stock entitled to vote by
written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware, and prompt notice of the
taking of this corporate action is being given to all stockholders who did not
consent in writing, in accordance with Section 228 of the General Corporation
Law of the State of Delaware.
<PAGE>
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President and Secretary, this 30 th day of December, 1998.
UNITED VENTURES GROUP, INC.
By:/s/ Isaac Nussen_______
Isaac Nussen, President
ATTEST:
By: /s/_George Weisz_____
George Weisz
<PAGE>
CERTIFICATE OF DESIGNATION
OF THE
SERIES A PREFERRED STOCK
OF
UNITED VENTURES GROUP, INC.
Under Section 151 of the
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
UNITED VENTURES GROUP, INC.(the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by meeting of
the Board, approved by resolution the creation of a Series A Preferred Stock
from among the Preferred Stock previously authorized in the Certificate of
Incorporation and which the Board of Directors has the authority to designate.
The following sets forth the designation and relative rights of the Series A
Preferred Stock:
There is hereby created a series of the Preferred Stock of
this Corporation to consist of 200,000 of the 5,000,000 shares of
Preferred Stock, $.001 par value per share, which this Corporation now
has authority to issue.
1. The distinctive designation of the series shall be
"Series A Preferred Stock"; the number of shares of Series A
Preferred Stock shall be 200,000.
2. The holders of the Series A Preferred Stock shall
not be entitled to receive cash dividends.
3. The Series A Preferred Stock shall not receive
assets in the event of the voluntary or involuntary
liquidation, dissolution or winding up of this Corporation.
<PAGE>
I. The holders of the Series A Preferred Stock shall have the
right to vote along with the holders of the Common Stock as
one class on all matters for which the shareholders of the
Corporation shall vote. The holders of the outstanding Series
A Preferred Stock shall have the right to cast an aggregate of
54% of the total votes of all the shares of the Corporation.
I. The Series A Preferred Stock shall not be convertible into any
other shares and shall not be transferable except to family
members of the holder or to the estate or beneficiaries of the
holder.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President and SECRETARY, THIS 11 th day of March 1999.
UNITED VENTURES GROUP, INC.
BY:__S/ ISAAC NUSSEN _____
Isaac Nussen, President
ATTEST:
BY:__S/ GEORGE WEISZ___________________________
George Weisz
EXHIBIT 3.3
BYLAWS
OF
UNITED VENTURES GROUP, INC.
(a Delaware corporation)
TABLE OF CONTENTS
Page
----
ARTICLE 1 Offices 1
1.1 Principal Office ....................................................1
1.2 Additional Offices...................................................1
ARTICLE 2 Meeting of Stockholders .............................................1
2.1 Place of Meeting ....................................................1
2.2 Annual Meeting ......................................................1
2.3 Special Meetings ....................................................1
2.4 Notice of Meetings ..................................................2
2.5 Business Matter of a Special Meeting ................................2
2.6 List of Stockholders ................................................2
2.7 Organization and Conduct of Business ................................2
2.8 Quorum and Adjournments .............................................3
2.9 Voting Rights........................................................3
2.10 Majority Vote .......................................................3
2.11 Record Date for Stockholder Notice and Voting .......................3
2.12 Proxies .............................................................4
2.13 Inspectors of Election ..............................................4
2.14 Action Without Meeting by Written Consent ...........................4
ARTICLE 3 Directors
3.1 Number; Qualifications ..............................................5
3.2 Resignation and Vacancies ...........................................5
3.3 Removal of Directors ................................................5
3.4 Powers ..............................................................5
3.5 Place of Meetings ...................................................5
3.6 Annual Meetings .....................................................7
3.7 Regular Meetings ....................................................7
3.8 Special Meetings ....................................................7
<PAGE>
3.9 Quorum and Adjournments .............................................7
3.10 Action Without Meeting ..............................................7
3.11 Telephone Meetings ..................................................7
3.12 Waiver of Notice ....................................................7
3.13 Fees and Compensation of Directors...................................8
3.14 Rights of Inspection ................................................8
ARTICLE 4 Committees of Directors .............................................8
4.1 Selection ...........................................................8
4.2 Power ...............................................................8
4.3 Committee Minutes ...................................................9
ARTICLE 5 Officers.............................................................9
5.1 Officers Designated..................................................9
7.2 Waiver .............................................................14
ARTICLE 8 General Provisions .................................................14
8.1 Dividends ..........................................................14
8.2 Dividend Reserve ...................................................14
8.3 Annual Statement ...................................................14
8.4 Checks .............................................................14
8.5 Corporate Seal .....................................................14
8.6 Execution of Corporate Contracts and Instruments ...................14
ARTICLE 9 Amendments .........................................................15
ARTICLE 10 Indemnification......................................................
-ii-
<PAGE>
BYLAWS
OF
UNITED VENTURES GROUP, INC.
(a Delaware corporation)
ARTICLE 1
Offices
1.1 Principa1 Office. The Board of Directors shall fix the location of the
principal executive office of the corporation at any place within or outside the
State of Delaware.
1.2 Additional Offices. The Board of Directors (the "Board") may at any
time establish branch or subordinate offices at any place or places.
ARTICLE 2
Meeting of Stockholders
2.1 Place of Meeting. All meetings of the stockholders for the election of
directors shall be held at the principal office of the Corporation, at such
place as may be fixed from time to time by the Board or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board and stated in the notice of the meeting. Meetings of
stockholders for any purpose may be held at such time and place within or
without the State of Delaware as the Board may fix from time to time and as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2.2 Annual Meeting. Annual meetings of stockholders shall be held at such
date and time as shall be designated from time to time by the Board and stated
in the notice of the meeting. At such annual meetings, the stockholders shall
elect a Board and transact such other business as may properly be brought before
the meetings.
2.3 Special Meetings. Special meetings of the stockholders may be called
for any purpose or purposes, unless otherwise prescribed by the statute or by
the Certificate of Incorporation, at the request of the Board, the Chairman of
the Board, the President or the holders of shares entitled to cast not less than
ten percent (10%) of the votes at the meeting or such additional persons as may
be provided in the certificate of incorporation or bylaws. Such request shall
state the purpose or purposes of the proposed meeting. Upon request in writing
that a special meeting of stockholders
1
<PAGE>
be called for any proper purpose, directed to the chairman of the board of
directors, the president, the vice president or the secretary by any person
(other than the board of directors) entitled to call a special meeting of
stockholders, the person forthwith shall cause notice to be given to the
stockholders entitled to vote that a meeting will be held at a time requested by
the person or persons calling the meeting, such time not to be less than
thirty-five (35) nor more than sixty (60) days after receipt of the request.
Such request shall state the purpose or purposes of the proposed meeting.
2.4 Notice of Meetings. Written notice of stockholders' meetings, stating
the place, date and time of the meeting and the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days prior to the
meeting.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
2.5 Business Matter of a Special Meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
2.6 List of Stockholders. The officer in charge of the stock ledger of the
Corporation or the transfer agent shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, at a place within the
city where the meeting is to be held, which place, if other than the place of
the meeting, shall be specified in the notice of the meeting. The list shall
also be produced and kept at the place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person
thereat.
2.7 Organization and Conduct of Business. The Chairman of the Board or, in
his or her absence, the President of the Corporation or, in their absence, such
person as the Board may have designated or, in the absence of such a person,
such person as may be chosen by the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, shall call to order any meeting
of the stockholders and act as Chairman of the meeting. In the absence of the
Secretary of the Corporation, the Secretary of the meeting shall be such person
as the Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of
2
<PAGE>
discussion as seems to him or her in order.
2.8 Quorum and Adjournments. Except where otherwise provided by law or the
Certificate of Incorporation or these By-Laws, the holders of a majority of the
stock issued and outstanding and entitled to vote, present in person or
represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person or
represented by proxy shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented.
2.9 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.
2.10 Majority Vote. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation or of these By-Laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
2.11 Record Date for Stockholder Notice and Voting. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any dividend or other distribution, or entitled
to exercise any right in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten (10)
days before the date of any such meeting nor more than sixty (60) days before
any other action.
If the Board does not so fix a record date, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
2.12 Proxies. Every person entitled to vote for directors or on any other
matter shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Corporation. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder's
attorney-in-fact. A validly
3
<PAGE>
executed proxy which does not state that it is irrevocable shall continue in
full force and effect unless (i) revoked by the person executing it, before the
vote pursuant to that proxy, by a writing delivered to the Corporation stating
that the proxy is revoked or by a subsequent proxy executed by, or attendance at
the meeting and voting in person by, the person executing the proxy; or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the Corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven months from
the date of the proxy, unless otherwise provided in the proxy.
2.13 Inspectors of Election. Before any meeting of stockholders the Board
may appoint any person other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are so
appointed, the Chairman of the meeting may, and on the request of any
stockholder or a stockholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more stockholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the Chairman of the meeting may, and upon the request of any
stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.
2.14 Action Without Meeting by Written Consent. All actions required to be
taken at any annual or special meeting may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office, its principal place of business, or an
officer or agent of the corporation having custody of the book in which
proceedings of meetings or stockholders are recorded.
ARTICLE 3
Directors
3.1 Number; Qualifications. The number of the directors shall be determined
from time to time by resolution of the Board and the initial Board shall consist
of three (3) directors. All directors shall be elected at the annual meeting or
any special meeting of the stockholders, except as provided in Section 3.2, and
each director so elected shall hold office until the next annual meeting or any
special meeting or until his successor is elected and qualified or until his
earlier resignation or removal. Directors need not be stockholders.
3.2 Resignation and Vacancies. A vacancy or vacancies in the Board shall be
deemed to exist in the case of the death, resignation or removal of any
director, or if the authorized number of directors be increased. Vacancies may
be filled by a majority of the remaining directors, though less than a quorum,
or by a sole remaining director, unless otherwise provided in the Certificate
4
<PAGE>
of Incorporation. The stockholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors. If the Board
accepts the resignation of a director tendered to take effect at a future time,
the Board shall have power to elect a successor to take office when the
resignation is to become effective. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.
3.3 Removal of Directors. Unless otherwise restricted by statute, the
Certificate of Incorporation or these By-Laws, any director or the entire Board
may be removed, with or without cause, by the holders of at least a majority of
the shares entitled to vote at an election of directors.
3.4 Powers. The business of the Corporation shall be managed by or under
the direction of the Board which may exercise all such powers of the Corporation
and do all such lawful acts and things which are not by statute or by the
Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders. Without prejudice to these general
powers, and subject to the same limitations, the directors shall have the power
to:
(a) Select and remove all officers, agents, and employees of the
Corporation; prescribe any powers and duties for them that are consistent with
law, with the Certificate of Incorporation, and with these By-Laws; fix their
compensation; and require from them security for faithful service;
(b) Confer upon any office the power to appoint, remove and suspend
subordinate officers, employees and agents;
(c) Change the principal executive office or the principal business
office in the State of California or any other state from one location to
another; cause the Corporation to be qualified to do business in any other
state, territory, dependency or country and conduct business within or without
the State of California; and designate any place within or without the State of
California for the holding of any stockholders meeting, or meetings, including
annual meetings;
(d) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates;
(e) Authorize the issuance of shares of stock of the Corporation on
any lawful terms, in consideration of money paid, labor done, services actually
rendered, debts or securities canceled, tangible or intangible property actually
received;
(f) Borrow money and incur indebtedness on behalf of the Corporation,
and cause to be executed and delivered for the Corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations and other evidences of debt and securities;
(g) Declare dividends from time to time in accordance with law;
5
<PAGE>
(h) Adopt from time to time such stock option, stock purchase, bonus
or other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(i) Adopt from time to time regulations not inconsistent with these
By-Laws for the management of the Corporation's business and affairs.
3.5 Place of Meetings. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
3.6 Annual Meetings. The annual meetings of the Board shall be held
immediately following the annual meeting of stockholders, and no notice of such
meeting shall be necessary to the Board, provided a quorum shall be present. The
annual meetings shall be for the purposes of organization, and an election of
officers and the transaction of other business.
3.7 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and place as may be determined from time to time by the
Board.
3.8 Special Meetings. Special meetings of the Board may be called by the
Chairman of the Board, the President, a Vice President or a majority of the
Board upon one (1) day's notice to each director.
3.9 Quorum and Adjournments. At all meetings of the Board, a majority of
the directors then in office shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board, except as may otherwise
be specifically provided by law or the Certificate of Incorporation. If a quorum
is not present at any meeting of the Board, the directors present may adjourn
the meeting from time to time, without notice other than announcement at the
meeting at which the adjournment is taken, until a quorum shall be present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved of
by at least a majority of the required quorum for that meeting.
3.10 Action Without Meeting. Unless otherwise restricted by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
3.11 Telephone Meetings. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any member of the Board or any committee may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
6
<PAGE>
constitute presence in person at the meeting.
3.12 Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
3.13 Fees and Compensation of Directors. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, the Board shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board and may be paid a
fixed sum for attendance at each meeting of the Board or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 Rights of Inspection. Every director shall have the absolute right at
any reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the Corporation and also of
its subsidiary corporations, domestic or foreign. Such inspection by a director
may be made in person or by agent or attorney and includes the right to copy and
obtain extracts.
ARTICLE 4
Committees of Directors
4.1 Selection. The Board may, by resolution passed by a majority of the
entire Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
4.2 Power. Any such committee, to the extent provided in the resolution of
the Board, shall have and may exercise all the powers and authority of the Board
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in Section 151(a)
of the General Corporation Law of
7
<PAGE>
Delaware, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of
dissolution, removing or indemnifying directors or amending the By-Laws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board.
4.3 Committee Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.
ARTICLE 5
Officers
5.1 Officers Designated. The officers of the Corporation shall be chosen by
the Board and shall be a President, a Secretary and a Treasurer. The Board may
also choose a Chairman of the Board, one or more Vice Presidents, and one or
more assistant Secretaries and assistant Treasurers. Any number of offices may
be held by the same person, unless the Certificate of Incorporation or these
By-Laws otherwise provide.
5.2 Appointment of Officers. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 5.3 or
5.5 of this Article 5, shall be appointed by the Board, and each shall serve at
the pleasure of the Board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 Subordinate Officers. The Board may appoint, and may empower the
President to appoint, such other officers and agents as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as the
Board may from time to time determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any, of
an officer under any contract of employment, any officer may be removed, either
with or without cause, by an affirmative vote of the majority of the Board, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board, by any officer upon whom such power of removal may be
conferred by the Board. Any officer may resign at any time by giving written
notice to the Corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the
8
<PAGE>
acceptance of the resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the Corporation under
any contract to which the officer is a party.
5.5 Vacancies in Offices. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
5.6 Compensation. The salaries of all officers of the Corporation shall be
fixed from time to time by the Board and no officer shall be prevented from
receiving a salary because he is also a director of the Corporation.
5.7 The Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, perform such other powers and duties as
may be assigned to him from time to time by the Board. If there is no President,
the Chairman of the Board shall also be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in Section
5.8 of this Article 5.
5.8 The President. Subject to such supervisory powers, if any, as may be
given by the Board to the Chairman of the Board, if there be such an officer,
the President shall be the Chief Executive Officer of the Corporation, shall
preside at all meetings of the stockholders and in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board, shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board are carried into effect. He or she
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board to some other officer or agent of the
Corporation. 5.9 The Vice President. The Vice President (or in the event there
be more than one, the Vice Presidents in the order designated by the directors,
or in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his disability or refusal to
act, perform the duties of the President, and when so acting, shall have the
powers of and subject to all the restrictions upon the President. The Vice
President(s) shall perform such other duties and have such other powers as may
from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these By-Laws.
5.10 The Secretary. The Secretary shall attend all meetings of the Board
and the stockholders and record all votes and the proceedings of the meetings in
a book to be kept for that purpose and shall perform like duties for the
standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board,
and shall perform such other duties as may from time to time be prescribed by
the Board, the Chairman of the Board or the President, under whose supervision
he or she shall act. The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant
9
<PAGE>
Secretary, shall have authority to affix the same to any instrument requiring
it, and, when so affixed, the seal may be attested by his or her signature or by
the signature of such Assistant Secretary. The Board may give general authority
to any other officer to affix the seal of the Corporation and to attest the
affixing thereof by his or her signature. The Secretary shall keep, or cause to
be kept, at the principal executive office or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation.
5.11 The Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order designated by the Board (or in
the absence of any designation, in the order of their election) shall, in the
absence of the Secretary or in the event of his or her inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
5.12 The Treasurer. The Treasurer shall have the custody of the Corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the President and
the Board, at its regular meetings, or when the Board so requires, an account of
all his or her transactions as Treasurer and of the financial condition of the
Corporation.
5.13 The Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order designated by the Board (or
in the absence of any designation, in the order of their election) shall, in the
absence of the Treasurer or in the event of his or her inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
ARTICLE 6
Stock Certificates
6.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the Corporation by, the Chairman of the Board, or
the President or a Vice President and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Within
a reasonable time after the issuance or transfer of uncertified stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required by the General Corporation Law of the State
of Delaware or a statement that the Corporation will furnish without charge to
each stockholder
10
<PAGE>
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
6.2 Signatures on Certificates. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
6.3 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate of shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated share, such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the Corporation.
6.4 Registered Stockholders. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a percent registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
6.5 Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or to exercise
any rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board may fix, in advance, a record date which
shall not be more than sixty (60) nor less than ten (10) days prior to the date
of such meeting, nor more than sixty (60) days prior to the date of any other
action. A determination of stockholders of record entitled to notice or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
6.6 Lost, Stolen or Destroyed Certificates. The Board may direct thee a new
certificate or certificates be issued to replace any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing the
issue of a new certificate or certificates, the Board may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of the lost,
stolen or destroyed certificate or certificates, or his
11
<PAGE>
or her legal representative, to advertise the same in such manner as it shall
require, and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE 7
Notices
7.1 Notice. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram or telephone.
7.2 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
.
ARTICLE 8
General Provisions
8.1 Dividends. Dividends upon the capital stock of the Corporation, subject
to any restrictions contained in the General Corporation Laws of Delaware or the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board at any regular or special meeting. Dividends may be paid in cash, in
property or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
8.2 Dividend Reserve. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
8.3 Annual Statement. The Board shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
12
<PAGE>
8.4 Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
8.5 Corporate Seal. The Board may provide a suitable seal, containing the
name of the Corporation, which seal shall be in charge of the Secretary. If and
when so directed by the Board or a committee thereof, duplicates of the seal
maybe kept and used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
8.6 Execution of Corporate Contracts and Instruments. The Board, except as
otherwise provided in these By-Laws, may authorize any officer or officers, or
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the Board or
within the agency power of an officer, no officer, agent or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
ARTICLE 9
Amendments
In addition to the right of the stockholders of the corporation to make,
alter, amend, change, add to or repeal the bylaws of the corporation, the Board
of Directors shall have the power (without the assent or vote of the
stockholders) to make, alter, amend, change, add to or repeal the bylaws of the
corporation.
ARTICLE 10
Indemnification
10.01 Action. Etc. Other Than by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with 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 criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
13
<PAGE>
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
10.02 Actions Etc. by or in the Right of the Corporation. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit 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,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
10.03 Determination of Right of Indemnification. Any indemnification
under Section 10.01 or 10.02 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 10.01 and 10.02. Such determination shall be made (i) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
10.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 10.01 or 10.02, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys fees) actually and
reasonably incurred by him in connection therewith.
10.05 Prepaid Expenses. Expenses (including attorneys' fees)incurred by
an officer or director in defending a civil or criminal action, suitor
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board in the specific case
upon receipt of an undertaking by or on behalf of the director or officer to
repay
14
<PAGE>
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate.
10.06 Other Rights and Remedies. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
10.07 Insurance. Upon resolution passed by the Board, The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
10.08 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
10.09 Other Enterprises, Fines, and Serving at Corporation's Request.
For purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this article.
15
EXHIBIT 10.1
UNITED VENTURES GROUP, INC.
1998 STOCK OPTION PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1998 Stock Option Plan (the "Plan") of UNITED
VENTURES GROUP, INC. (the "Company") are (i) to align the interests of the
Company's stockholders and the recipients of options under this Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success, (ii) to advance the interests of the Company by attracting and
retaining officers, other key employees and consultants, and well-qualified
persons who are not officers or employees of the Company ("Non-Employee
Directors") for service as directors of the Company and (iii) to motivate such
persons to act in the long-term best interests of the Company's stockholders.
1.2 ADMINISTRATION. This Plan shall be administered by the Board of Directors
(the "Board") or a committee (the "Committee")designated by the Board of
Directors of the Company consisting of two or more members of the Board. Each
member of the Committee, if a Committee shall be appointed, shall be a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
The Board or Committee shall, subject to the terms of this Plan, select
eligible persons for participation in this Plan and shall determine the number
of shares of Common Stock subject to each option granted hereunder, the exercise
price of such option, the time and conditions of exercise of such option and all
other terms and conditions of such option, including, without limitation, the
form of the option agreement. The Board or Committee shall, subject to the terms
of this Plan, interpret this Plan and the application thereof, establish rules
and regulations it deems necessary or desirable for the administration of this
Plan and may impose, incidental to the grant of an option, conditions with
respect to the grant, such as limiting competitive employment or other
activities. All such interpretations, rules, regulations and conditions shall be
final, binding and conclusive. The Board or Committee may, in its sole
discretion and for any reason at any time take action such that any or all
outstanding options shall become exercisable in part or in full. Each option
shall be evidenced by a written agreement (an "Agreement") between the Company
and the optionee setting forth the terms and conditions of such option.
The Board or Committee may delegate some or all of its power and
authority hereunder to the Chief Executive Officer or other executive officer of
the Company as the Board or Committee deems appropriate; provided, however, that
the Board or Committee may not delegate its power and authority with regard to
the selection for participation in this Plan of an officer or other person
subject to Section 16 of the Exchange Act or decisions concerning the timing,
pricing or amount of an option grant to such an officer or other person.
<PAGE>
No member of the Board of Directors or Committee, and neither the Chief
Executive Officer nor other executive officer to whom the Board or Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the Chief Executive Officer or other executive officer shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising therefrom to
the full extent permitted by law and under any directors' and officers'
liability insurance that may be in effect from time to time.
A majority of the Board or Committee shall constitute a quorum. The
acts of the Board or Committee shall be either (i) acts of a majority of the
members of the Board or Committee present at any meeting at which a quorum is
present or (ii) acts approved in writing by all of the members of the Board or
Committee without a meeting.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such officers and
other employees or persons expected to become employees of the Company or its
subsidiaries and consultants who are providing bona fide services unrelated to
the offer or sale of securities in a capital raising transaction to the Company
or a Subsidiary from time to time (individually a "Subsidiary" and collectively
the "Subsidiaries") as the Board or Committee in its sole discretion may select
from time to time. For purposes of this Plan, references to employment by the
Company shall also mean employment by a Subsidiary and engagement as a
consultant to the Company or a Subsidiary. The Board or Committee's selection of
a person to participate in this Plan at any time shall not require the Board or
Committee to select such person to participate in this Plan at any other time.
Non-employee directors of the Company shall be eligible to participate in this
Plan in accordance with Section III.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 4.7, 600,000
shares of the common stock, $0.001 par value, of the Company (the "Common
Stock"), shall be available for grants of options under this Plan, reduced by
the sum of the aggregate number of shares of Common Stock which become subject
to outstanding options under this Plan. To the extent that shares of Common
Stock subject to an outstanding option are not issued or delivered by reason of
the expiration, termination, cancellation or forfeiture of such option or by
reason of the delivery or withholding of shares of Common Stock to pay all or a
portion of the exercise price of such option, or to satisfy all or a portion of
the tax withholding obligations relating to such option, then such shares of
Common Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Board or Committee may, in its discretion,
grant options
2
<PAGE>
to purchase shares of Common Stock to such eligible persons as may be selected
by the Board or Committee. Each option, or portion thereof, that is not an
incentive stock option, shall be a non-qualified stock option. An incentive
stock option may not be granted to any person who is not an employee of the
Company or any subsidiary (as defined in Section 424 of the Code). An incentive
stock option shall mean an option to purchase shares of Common Stock that meets
the requirements of Section 422 of the Code, or any successor provision, which
is intended by the Board or Committee to constitute an incentive stock option.
Each incentive stock option shall be granted within ten years of the effective
date of this Plan. To the extent that the aggregate Fair Market Value
(determined as of the date of grant) of shares of Common Stock with respect to
which options designated as incentive stock options are exercisable for the
first time by a participant during any calendar year (under this Plan or any
other plan of the Company, or any parent or subsidiary as defined in Section 424
of the Code) exceeds the amount (currently $100,000) established by the Code,
such options shall constitute non-qualified stock options. "Fair Market Value"
shall mean the last reported sale price of a share of Common Stock on Nasdaq, or
on such principal stock exchange on which the Common Stock may then be listed,
on the date as of which such value is being determined or, if there shall be no
reported sale price for such date, on the next preceding date for which a sale
was reported, in each case as such price is officially reported by Nasdaq or
such exchange, or if the Common Stock is not then listed on an exchange or
quoted on a system that reports last sale price, then the average of the last
reported bid and asked prices for the Common Stock for such date as furnished by
Nasdaq or a similar organization if Nasdaq is not then reporting such
information; provided, that if Fair Market Value for a specified date cannot be
determined as provided in the preceding clause, Fair Market Value shall be
determined by the Board or Committee by whatever means or method as the Board or
Committee, in the good faith exercise of its discretion, shall at such time deem
appropriate.
2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Board or Committee shall deem
advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Board or
Committee; provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of a non-qualified stock option shall not be less than
the Fair Market Value of a share of Common Stock on the date of grant of such
option and the purchase price per share of Common Stock purchasable upon
exercise of an incentive stock option shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant of such option;
provided further, that if an incentive stock option shall be granted to any
person who, at the time such option is granted, owns capital stock possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company (or of any parent or subsidiary as defined in Section 424 of the
Code) (a "Ten Percent Holder"), the purchase price per share of Common Stock
shall be the price (currently 110% of Fair Market Value) required by the Code in
order to constitute an incentive stock option.
(b) Option Period and Exercisability. The period during which an option
may be exercised
3
<PAGE>
shall be determined by the Board or Committee; provided, however, that no
incentive stock option shall be exercised later than ten years after its date of
grant; provided further, that if an incentive stock option shall be granted to a
Ten Percent Holder, such option shall not be exercised later than five years
after its date of grant. The Board or Committee may, in its discretion,
establish performance measures or other criteria which shall be satisfied or met
as a condition to the grant of an option or to the exercisability of all or a
portion of an option. The Board or Committee shall determine whether an option
shall become exercisable in cumulative or non-cumulative installments and in
part or in full at any time. An exercisable option, or portion thereof, may be
exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (A) in
cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of previously owned whole shares of Common Stock
(which the optionee has held for at least six months prior to the delivery of
such shares or which the optionee purchased on the open market and in each case
for which the optionee has good title, free and clear of all liens and
encumbrances) having an aggregate Fair Market Value, determined as of the date
of exercise, equal to the aggregate purchase price payable by reason of such
exercise, (c) by authorizing the Company to withhold whole shares of Common
Stock which would otherwise be delivered upon exercise of the option having an
aggregate Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (D) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each
case to the extent set forth in the Agreement relating to the option and (ii) by
executing such documents as the Company may reasonably request. The Company
shall have sole discretion to disapprove of an election pursuant to any of
clauses (B)-(E). Any fraction of a share of Common Stock which would be required
to pay such purchase price shall be disregarded and the remaining amount due
shall be paid in cash by the optionee. No certificate representing Common Stock
shall be delivered until the full purchase price therefor has been paid (or
arrangement made for such payment to the Company's satisfaction).
2.3 TERMINATION OF EMPLOYMENT.
(a) Disability, Retirement and Death. Subject to paragraph (d) below
and unless otherwise specified in the Agreement relating to an option, if an
optionee's employment with the Company terminates by reason of Disability or
death each option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the effective date of such optionee's
termination of employment or date of death, as applicable, and may thereafter be
exercised by such optionee (or such optionee's executor, administrator, legal
representative, beneficiary or similar person) until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement relating to such option) after the effective date of such
optionee's termination of employment or date of death, as applicable, and (ii)
the expiration date of the term of such option. For purposes of this Plan,
"Disability" shall mean the inability of an optionee substantially to perform
4
<PAGE>
such optionee's duties and responsibilities for a continuous period of at least
six months.
(b) Other Termination. Subject to paragraph (d) below and unless
otherwise specified in the Agreement relating to an option if an optionee's
employment with the Company terminates for any reason other than Disability or
death, each option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the effective date of such optionee's
termination of employment and may thereafter be exercised by such optionee (or
such optionee's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months after the effective date
of such optionee's termination of employment and (ii) the expiration date of the
term of such option.
(c) Death Following Termination of Employment. Subject to paragraph (d)
below and unless otherwise specified in the Agreement relating to an option, if
an optionee dies during the period set forth in Section 2.3(a) following
termination of employment by reason of Disability or if an optionee dies during
the period set forth in Section 2.3(b) following termination of employment for
any other reason other than Disability, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the date of
such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person
until and including the earliest to occur of (i) the date which is one year (or
such other period as set forth in the Agreement relating to such option) after
the date of death and (ii) the expiration date of the term of such option.
(d) Termination of Employment - Incentive Stock Options.
(i) Unless otherwise specified in the Agreement relating to the option,
if the employment with the Company of a holder of an incentive stock option
terminates by reason of Permanent and Total Disability (as defined in Section
22(e)(3) of the Code) or death, each incentive stock option held by such
optionee shall be exercisable only to the extent that such option is exercisable
on the effective date of such optionee's termination of employment by reason of
Permanent and Total Disability or date of death, as applicable, and may
thereafter be exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person) until and
including the earliest to occur of (1) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option) after the
effective date of such optionee's termination of employment by reason of
Permanent and Total Disability or date of death, as applicable, and (2) the
expiration date of the term of such option.
(ii) If the employment with the Company of a holder of an incentive
stock option terminates for any reason other than Permanent and Total Disability
or death, each incentive stock option held by such optionee shall be exercisable
only to the extent such option is exercisable on the effective date of such
optionee's termination of employment, and may thereafter be exercised by such
holder (or such holder's legal representative or similar person) until and
including the earliest to occur of (1) the date which is three months after the
effective date of such optionee's termination of employment and (2) the
expiration date of the term of such option.
5
<PAGE>
(iii) If the holder of an incentive stock option dies during the period
set forth in Section 2.3(d)(i) following termination of employment by reason of
Permanent and Total Disability (or such shorter period as set forth in the
Agreement relating to such option), or if the holder of an incentive stock
option dies during the period set forth in Section 2.3(d)(ii) following
termination of employment for any reason other than Permanent and Total
Disability or death, each incentive stock option held by such optionee shall be
exercisable only to the extent such option is exercisable on the date of the
optionee's death and may thereafter be exercised by the optionee's executor,
administrator, legal representative, beneficiary or similar person until and
including the earliest to occur of (1) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option) after the
date of death and (2) the expiration date of the term of such option.
III. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
3.1 ELIGIBILITY. Each member of the Board of Directors of the Company who is not
an employee, either full-time or part-time, of the Company or a Subsidiary (a
"non-employee director") may be granted options to purchase shares of Common
Stock in accordance with this Section III. All options granted under this
Section III shall constitute non-qualified stock options.
3.2 GRANTS OF STOCK OPTIONS. Each non-employee director shall be granted
non-qualified stock options in such amount as the Board or Committee shall
determine from time to time.
3.3 EXERCISE PRICE. Each option granted under this Section III shall have an
exercise price equal to the Fair Market Value per share of Common Stock on the
date of grant.
3.4 OPTION PERIOD AND EXERCISABILITY. Each option granted under this Section III
shall be exercisable and shall expire at such time as the Board or Committee
shall determine.
3.5 TERMINATION OF DIRECTORSHIP. Upon the termination of an optionee's service
as a non-employee director for any reason, all options granted to such
non-employee director under this Section III shall remain fully exercisable to
the extent exercisable on the date of such termination and thereafter may be
exercised by such holder (or such holder's executor, administrator, legal
representative, beneficiary or similar person) until and including the earliest
to occur of (i) the date which is three months after the effective date of such
optionee's termination of directorship and (ii) the expiration date of the term
of such option.
IV. GENERAL
4.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the stockholders,
shall become effective as of the date of approval by the Board. No option may be
exercised prior to the date of such stockholder approval. This Plan shall
terminate when shares of Common Stock are no longer available for the
6
<PAGE>
grant of options, unless terminated earlier by the Board. Termination of this
Plan shall not affect the terms or conditions of any option granted prior to
termination.
If this Plan is not approved by the stockholders of the Company,
this Plan and any options granted hereunder shall be null and void.
4.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) of the Code; provided, however,
that no amendment shall be made without stockholder approval if such amendment
would (i) increase the maximum number of shares of Common Stock available under
this Plan (subject to Section 4.7) or (ii) effect any change inconsistent with
Section 422 of the Code. No amendment may impair the rights of a holder of an
outstanding option without the consent of such holder.
4.3 AGREEMENT. No option shall be valid until an Agreement is executed by the
Company and the optionee and, upon execution by the Company and the optionee and
delivery of the Agreement to the Company, such option shall be effective as of
the effective date set forth in the Agreement.
4.4 NON-TRANSFERABILITY. Unless otherwise specified in the Agreement relating to
an Option, no option hereunder shall be transferable other than by will or the
laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence, each option may be exercised during the optionee's lifetime
only by the optionee or the optionee's legal representative or similar person.
Except as permitted by the second preceding sentence, no option hereunder shall
be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any option
hereunder, such option and all rights thereunder shall immediately become null
and void.
4.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the optionee of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection with an option hereunder. An Agreement may provide that (i)
the Company shall withhold whole shares of Common Stock which would otherwise be
delivered upon exercise of the option having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with the option (the "Tax Date") in the amount necessary to satisfy
any such obligation or (ii) the optionee may satisfy any such obligation by any
of the following means: (A) a cash payment to the Company, (B) delivery (either
actual delivery or by attestation procedures established by the Company) to the
Company of previously owned whole shares of Common Stock (which the optionee has
held for at least six months prior to the delivery of such shares or which the
optionee purchased on the open market and in each case for which the optionee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (c) authorizing the Company to
withhold whole shares of Common Stock which would otherwise be delivered upon
exercise of the option having an
7
<PAGE>
aggregate Fair Market Value determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (D) a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (E) any combination of (A), (B) and (C), in each case to
the extent set forth in the Agreement relating to the option; provided, however,
that the Company shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(E). Any fraction of a share of Common Stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the optionee.
4.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise of such option
or the delivery of shares thereunder, such option shall not be exercised and
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of Common Stock delivered pursuant
to any option hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
4.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option, the purchase
price per security, and the number and class of securities subject to each
option to be granted to non-employee directors pursuant to Article III shall be
appropriately adjusted by the Board or Committee, such adjustments to be made in
the case of outstanding options without an increase in the aggregate purchase
price. The decision of the Board or Committee regarding any such adjustment
shall be final, binding and conclusive. If any adjustment would result in a
fractional security being (a) available under this Plan, such fractional
security shall be disregarded, or (b) subject to an option under this Plan, the
Company shall pay the optionee, in connection with the first exercise of the
option in whole or in part occurring after such adjustment, an amount in cash
determined by multiplying (A) the fraction of such security (rounded to the
nearest hundredth) by (B) the excess, if any, of (x) the Fair Market Value on
the exercise date over (y) the exercise price of the option.
4.8 CHANGE IN CONTROL. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations, or upon the sale of substantially all the assets or more than 50%
or the then outstanding shares of stock of the Company to another person or
entity, the Board or Committee may provide in writing in connection with such
transaction for any or all of the following alternatives (separately or in
combinations); (i) for outstanding options to become immediately exercisable
and/or for other acceleration of the exercisability of options outstanding under
this Plan, and may in either case provide that such options shall terminate
unless exercised within a specified time period; (ii) for the assumption of the
options
8
<PAGE>
theretofore granted under this Plan or the substitution for such options
outstanding under this Plan of new options to purchase shares of capital stock
of a successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise prices; or (iii)
for the continuance of this Plan by a successor corporation in which event this
Plan and the options theretofore granted under this Plan shall continue in the
manner and under the terms so provided.
4.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
4.10 RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock which are subject to an
option hereunder until such person becomes a stockholder of record with respect
to such shares of Common Stock.
4.11 DESIGNATION OF BENEFICIARY. If permitted by the Company, an optionee may
file with the Board or Committee a written designation of one or more persons as
such optionee's beneficiary or beneficiaries (both primary and contingent) in
the event of the optionee's death. To the extent an outstanding option granted
hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in writing
with the Board or Committee during the optionee's lifetime on a form prescribed
by the Board or Committee. The spouse of a married optionee domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Board or Committee of a new
beneficiary designation shall cancel all previously filed beneficiary
designations. If an optionee fails to designate a beneficiary, or if all
designated beneficiaries of an optionee predecease the optionee, then each
outstanding option hereunder held by such optionee, to the extent exercisable,
may be exercised by such optionee's executor, administrator, legal
representative or similar person.
4.12 GOVERNING LAW. This Plan, each option hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of New York and construed in accordance
therewith without giving effect to principles of conflicts of laws.
4.13 FOREIGN EMPLOYEES. Without amending this Plan, the Board or Committee may
grant options to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Board or Committee be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such purposes
the Board or Committee may make such modifications, amendments, procedures,
subplans and the like as may be necessary or advisable to comply with provisions
of laws in other countries or jurisdictions in which the Company or its
Subsidiaries operates or has employees.
9
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our reports dated September 24, 1999 of United Ventures Group,
Inc. and subsidiary in the Registration Statement on Form SB-2 and the related
Prospectus of United Ventures Group, Inc and subsidiary.
/S/FELDMAN SHERB HOROWITZ & CO.,P.C.
Feldman Sherb Horowitz & Co.,P.C.
Certified Public Accountants
New York, New York
November 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001077543
<NAME> UNITED VENTURES GROUP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,956
<SECURITIES> 0
<RECEIVABLES> 5,699,757
<ALLOWANCES> 3,243,000
<INVENTORY> 11,545,508
<CURRENT-ASSETS> 14,080,202
<PP&E> 2,432,254
<DEPRECIATION> 2,072,353
<TOTAL-ASSETS> 14,457,727
<CURRENT-LIABILITIES> 8,313,098
<BONDS> 0
0
200
<COMMON> 6,755
<OTHER-SE> 6,137,674
<TOTAL-LIABILITY-AND-EQUITY> 14,457,727
<SALES> 3,650,994
<TOTAL-REVENUES> 3,650,994
<CGS> 2,213,146
<TOTAL-COSTS> 2,213,146
<OTHER-EXPENSES> 1,238,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 683,116
<INCOME-PRETAX> (483,669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (483,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 523,116
<CHANGES> 0
<NET-INCOME> 39,447
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001077543
<NAME> UNITED VENTURES GROUP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 13,028
<SECURITIES> 0
<RECEIVABLES> 5,374,649
<ALLOWANCES> 3,243,000
<INVENTORY> 11,290,949
<CURRENT-ASSETS> 13,438,239
<PP&E> 2,432,254
<DEPRECIATION> 1,839,626
<TOTAL-ASSETS> 14,165,541
<CURRENT-LIABILITIES> 9,092,559
<BONDS> 0
0
0
<COMMON> 4,400
<OTHER-SE> 5,068,582
<TOTAL-LIABILITY-AND-EQUITY> 14,165,541
<SALES> 10,564,598
<TOTAL-REVENUES> 10,564,598
<CGS> 7,165,065
<TOTAL-COSTS> 7,165,065
<OTHER-EXPENSES> 5,656,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,056,586
<INCOME-PRETAX> (3,316,056)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,316,056)
<DISCONTINUED> 0
<EXTRAORDINARY> (58,613)
<CHANGES> 0
<NET-INCOME> (3,374,669)
<EPS-BASIC> (2.17)
<EPS-DILUTED> (2.17)
</TABLE>
