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As filed with the Securities and Exchange Commission on November 12, 1999
Registration no. 333-82633
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 5
To
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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GROWTEX INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Nevada 0273 76-0602955
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1177 West Hastings, Suite 2110
Vancouver, British Columbia V6E 2K3, CANADA
(604) 687-2199
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Agent for Service: With a Copy to:
MICHAEL KIRSH, President JAMES L. VANDEBERG
Growtex Inc. Vandeberg Johnson & Gandara
1177 West Hastings, Suite 2110 600 University Street, Suite 2424
Vancouver, British Columbia V6E 2K3, CANADA Seattle, Washington 98101
(604) 687-2199 (206) 386-8080
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Approximate date of commencement of proposed sale to the public: As soon as
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,
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, 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. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered per unit offering price registration fee
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<S> <C> <C> <C> <C>
Common stock.................... 2,500,000 shares $0.05 per share(1) $125,000.00 $34.75(2)
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(1) No exchange or over-the-counter market exists for Growtex's common stock.
The most recent sale of Growtex's common stock from one investor to
another occurred on May 11, 1999 at a price of $0.047 per share. Growtex
believes this transaction supports a bona fide estimate of $0.05 per share
as the maximum offering price solely for the purpose of calculating the
amount of the registration fee pursuant to Rule 457(a) under the
Securities Act of 1933.
(2) Previously paid.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to such section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. The +
+information in this prospectus is not complete and may be changed. We may not +
+sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an a +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--November 12, 1999
PROSPECTUS
, 1999
GROWTEX INC.
1177 West Hastings, Suite 2110
Vancouver, British Columbia V6E 2K3, CANADA
(604) 687-2199
2,500,000 Shares of Common Stock
to be sold by current shareholders
This is the initial public offering of common stock of Growtex Inc., and no
public market currently exists for shares of Growtex's common stock. This
prospectus is part of a registration statement that permits selling
shareholders to sell their shares on a continuous or delayed basis in the
future. Selling shareholders will determine the price for the stock as the
market develops. The most recent sale of Growtex's common stock from one
investor to another occurred on May 13, 1999 at a price of $0.001 per share.
Growtex has no revenues to date and there may not be a market for the only
product it plans to sell.
This is not an underwritten offering, and Growtex's stock is not listed on
any national securities exchange or the Nasdaq Stock Market. Growtex intends to
apply to have its shares traded on the OTC bulletin board under the symbol:
"GWTX"
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 1.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
You should rely only on the information contained in this document. Growtex
has not authorized anyone to provide you with information that is different.
This document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
TABLE OF CONTENTS
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Page
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Risk Factors.......................................................... 1
Use of Proceeds....................................................... 7
Determination of Offering Price....................................... 7
Dilution.............................................................. 7
Selling Shareholders.................................................. 7
Plan of Distribution.................................................. 8
Description of Capital Stock.......................................... 8
Interests of Named Experts and Counsel................................ 8
Description of Business............................................... 9
Description of Property............................................... 13
Legal Proceedings..................................................... 13
Market Price of and Dividends on Capital Stock and Related Stockholder
Matters.............................................................. 14
Selected Financial Data............................................... 14
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 15
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. 16
Directors and Executive Officers...................................... 17
Executive Compensation................................................ 17
Security Ownership of Certain Beneficial Owners and Management........ 18
Certain Relationships and Related Transactions........................ 19
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities...................................................... 19
Index to Financial Statements......................................... F-1
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing the common stock of
Growtex Inc. ("Growtex"). Investing in Growtex's common stock involves a high
degree of risk. Any of the following risks could adversely affect Growtex's
business, financial condition and results of operations and could result in a
complete loss of your investment.
Application of Biocatalyst Technology to Fish Farming and Aquarium Uses May
Not Be Feasible
Growtex was formed in April of 1999 for the purpose of exploiting a new
technology into an unproven practical and viable business in aquatic systems.
In a license agreement with David R. Mortenson & Associates ("Mortenson"),
Growtex acquired the rights to distribute and produce Biocatalyst, an oxygen-
enriched water product, for fish farming and aquarium uses. Any failure to
establish the technical and economic feasibility of the fish farming or
aquarium applications would prevent Growtex from implementing its business
plan, and could cause its stock to be worthless.
Growtex anticipates that Biocatalyst would be supplied to the fish farming
and aquarium systems using an on-site generator or generators. No generator
has been successfully installed and operated at any fish farming system (or at
any large aquarium), even on a test basis. No credible scientific study has
been undertaken to document and quantify the benefits of bottled Biocatalyst
to small private aquarium displays. The initial step that Growtex plans to
take in conjunction with Mortenson and other licensees is to identify a fish
farming system proprietor interested in participating in a trial. Growtex may
not be successful in locating a fish farming system proprietor willing to test
the technology. Growtex may be unable to reach an agreement with other
licensees regarding collaboration and sharing of expenses. Even if a trial is
conducted, adapting Biocatalyst to fish farming and aquarium uses may not
prove to be either technically or economically feasible.
Growtex May Lose Its Biocatalyst License If It Fails to Meet Its Minimum
Purchase Requirements
Growtex currently does not have funds to meet the minimum purchase
requirements under its license with Mortenson and may be unable to meet the
minimum purchase requirements by their respective deadlines. Growtex has the
exclusive right to distribute and market Biocatalyst under a private label in
Mexico for a period of three years, expiring April 5, 2002. Growtex is
required to purchase $125,000 of Biocatalyst by April 5, 2000, and a further
$175,000 by April 5, 2001, to retain its license. The current price for
Biocatalyst is $2.00 per gallon; Mortenson may change the price on 10 days'
notice. Growtex currently has no prospective purchasers lined up, and does not
yet know if adapting Biocatalyst to fish farming and aquarium uses will even
be feasible. Growtex does not intend to meet its minimum purchase requirement
simply by stockpiling an inventory of Biocatalyst. If Growtex does not meet
its minimum purchase requirement and does not exercise its right to become a
producer of Biocatalyst, Growtex may be deemed to be in default under its
license agreement with Mortenson. Mortenson would then be able to terminate
Growtex's license rights to Biocatalyst. Loss of its license could prevent
Growtex from implementing its business plan, and could cause its stock to be
worthless.
Distribution of Biocatalyst May Not Be Feasible Without A Producer's License,
Which Growtex May Be Unable to Obtain.
If Growtex meets certain requirements, it has the right to become a producer
of Biocatalyst. However, it may not be feasible for Growtex to obtain a
producer license, and failure to obtain a producer license may limit Growtex's
ability to implement its business plan to distribute Biocatalyst, and could
cause its stock to be worthless. Should the Biocatalyst application prove
feasible, it is imperative that Growtex become a producer. Without a producer
license, Growtex must continue to purchase Biocatalyst from Mortenson at
marked up distribution rates. In order to produce Biocatalyst itself, Growtex
must have access to Biomas, a product necessary to producing Biocatalyst,
which requires a producer license and a generator. With a producer license,
Growtex can produce Biocatalyst on clients' premises with the installation of
a generator. To become a producer, Growtex either would have to purchase a
minimum of 5,000 gallons of Biocatalyst per month for a minimum
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period of six consecutive months (which is highly unlikely), or it would have
to demonstrate its financial capability, pay Mortenson a one-time fee of
$25,000, an additional one-time payment of $10,000 to reimburse unspecified
expenses, and pay minimum annual royalties of $20,000. Growtex's business plan
will likely require it to become a producer, because any fish farming client
would probably need a Biocatalyst generator installed on its premises. There
is no guarantee that fish farming system proprietors, the primary target
market, will conclude that Biocatalyst's health, size and growth rate benefits
are worth the price Growtex would have to charge to make money producing and
selling Biocatalyst. Even if Growtex obtains a producer license, it may be
unable make the minimum royalty payments. Although the final terms of the
right to produce are subject to future negotiation, presumably the failure to
pay minimum royalties would be a default that would allow Mortenson to
terminate the production license. Any termination of a producer license would
severely limit Growtex's ability to implement its license, and could cause its
stock to be worthless.
Growtex May Lose Its Biocatalyst License If Mortenson Defaults Under Its
Agreement with N.W. Technologies
Mortenson granted the Biocatalyst license to Growtex based on an agreement
Mortenson has with N.W. Technologies, Inc., the owner of the Biocatalyst
technology. If Mortenson defaults under its agreement with N.W. Technologies,
it could lose its Biocatalyst rights, and the rights Mortenson has granted
Growtex would become meaningless. Similarly, any dispute between Mortenson and
N.W. Technologies (or their successors) could impair Growtex's ability to
fully exploit its license rights. Any termination or impairment of Growtex's
license rights due to circumstances under the control of Mortenson, N.W.
Technologies or others with an interest in the Biocatalyst technology could
prevent Growtex from implementing its business plan, thereby limiting its
profitably and decreasing the value of its stock.
Increases in Biocatalyst Prices Could Destroy Growtex's Profitability
There can be no guarantee that Growtex ever will be profitable. If Growtex
does become profitable, Mortenson has the right to increase Biocatalyst prices
on 10 days notice by revising its published pricing schedule. If Growtex
becomes a producer of Biocatalyst, the final terms governing pricing of raw
materials will be subject to future negotiation. Assuming Mortenson retains
the right to set prices for Biocatalyst and the raw materials necessary to
produce Biocatalyst, Mortenson could raise prices to its licensees. Any
material price increases could decrease or eliminate Growtex's profitability.
Competitors Could Develop Alternative and More Cost-Effective Products to
Permit the Release of Additional Oxygen into Fish Farming and Aquarium
Systems
It is possible that an unknown competitor may have or develop a product that
could achieve results similar to or better than Biocatalyst. Any development
of a competing product could limit the marketability of Biocatalyst, thereby
limiting or eliminating the profitability of Growtex's business. Growtex is
aware that pumping systems currently exist for injecting oxygen into fish
farming systems, and that aquariums generally have a filtration system that
includes an oxygen pump to inject oxygen into the aquarium. Another company
could develop a product similar to Biocatalyst that would permit the release
of additional oxygen into fish farming and aquarium systems. Growtex may have
to compete with such companies in the future if it succeeds in establishing
the feasibility of adapting Biocatalyst to fish farming and aquarium uses.
Government Regulation Could Adversely Affect Viability of Biocatalyst
Application
Fish farming and large public aquarium systems may be subject to regulation
by Mexico's local, state and federal environmental agencies. Due to its
inexperience in Mexico, Growtex does not know whether there are any such
regulations which may affect its ability to market its product for certain
applications or in certain geographic areas. There can be no assurance that
such regulations or licensing do not exist or will not be adopted in the
future. Any such regulations or licensing could prove to be burdensome, and
impose significant additional
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costs on Growtex's business or subject Growtex to additional liabilities,
affecting the profitability and perhaps the viability of Growtex's business
plan.
Heavy Dependence on One Individual Who Will Not Devote His Full Time and
Attention to Growtex's Affairs Could Result in Delays or Business Failure
Michael Kirsh is serving as Growtex's sole officer and director. Loss of Mr.
Kirsh's services may hamper Growtex's ability to implement its business plan,
and could cause its stock to be worthless. Mr. Kirsh devotes approximately 25
hours per week to Growtex's business. He also operates an investment company,
and is the sole officer and director of Gentry Resources, Inc., a company
which distributes Biocatalyst for waste remediation applications but which
does not compete with Growtex. Growtex will be heavily dependent upon Mr.
Kirsh's entrepreneurial skills and experience to implement its business plan
and may, from time to time, find that his inability to devote full time and
attention to Growtex's affairs will result in delay(s) in progress towards the
implementation of its business plan or in a failure to implement its business
plan. Moreover, Growtex does not have an employment agreement with Mr. Kirsh
and as a result, there is no assurance that he will continue to manage
Growtex's affairs in the future. If Growtex loses the services of Mr. Kirsh,
or if he should decide to join a competitor or otherwise compete directly or
indirectly with Growtex, this could have a significant adverse effect on
Growtex's business and could cause the price of its stock to be worthless. The
services of Mr. Kirsh would be difficult to replace. Because investors will
not necessarily be able to evaluate the merits of Growtex's business
decisions, they should carefully and critically assess Mr. Kirsh's background.
See "Directors and Executive Officers".
Growtex Has No Experience Conducting Business in Mexico
Mr. Kirsh has no experience conducting business in Mexico. Growtex may face
unknown legal, cultural and administrative obstacles unique to Mexico. As a
result, Growtex will likely need to rely on others, including local
professionals, who understand how to conduct business in Mexico. Because of
its lack of experience in operating in a foreign market, Growtex may
overestimate the marketability of Biocatalyst and it may underestimate the
costs and difficulties associated with doing business in Mexico. Any
unanticipated costs or difficulties arising out of the unique circumstances
posed by operating in Mexico could prevent Growtex from implementing its
business plan, thereby limiting its profitability and decreasing the value of
its stock.
Year 2000 Issues Could Result in Sales or Inventory Difficulties
There is also risk due to Year 2000 issues. These issues arise because many
computerized systems use two digits rather than four digits to identify a
year. Date-sensitive systems may recognize the year 2000 as 1900 or some other
date, resulting in errors when information using the year 2000 date is
processed. In addition, similar problems may arise in some systems which use
certain dates in 1999 to represent something other than a date. The effects of
the Year 2000 issue may be experienced before, on, or after January 1, 2000,
and, if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not possible to
be certain that all aspects of the Year 2000 Issue affecting Growtex,
including those related to the efforts of customers, suppliers, or other third
parties, will be fully resolved. It is possible that one of Growtex's
suppliers, such as a utility or the producer of Biocatalyst or Biomas, or one
of Growtex's clients may become inoperative, and cause Growtex to incur heavy
expenses or losses. At present, due to Growtex's developmental stage, it has
no critical systems that it must test for Year 2000 compliance. However,
Growtex cannot be certain that it will not experience unanticipated negative
consequences from Year 2000 problems, or that it will be able to make any such
modifications as may become necessary in a timely, cost-effective and
successful manner, and the failure to do so could interfere with Growtex's
ability to do business.
Growtex Has No Operating History and Financial Results Are Uncertain
Growtex is a relatively young company with no history of earnings or profit
and there is no assurance that it will operate profitably in the future.
Growtex faces all the risks of a new business. As a result of Growtex's
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limited operating history, it is difficult to accurately forecast its
potential revenue, and there is no meaningful historical financial data upon
which to base planned operating expenses. Its revenue and income potential is
unproven and its business model is still emerging. As such, there is no
assurance that Growtex will provide a return on investment in the future.
An investor in Growtex's common stock must consider the risks and
difficulties frequently encountered by early stage companies in new and
rapidly evolving markets. Growtex's ability to achieve and then sustain
favorable operating results will depend on a number of factors, including
costs related to:
1) identifying a fish farming system to test the Biocatalyst application;
2) testing the Biocatalyst application;
3) identifying and marketing to prospective purchasers;
4) purchasing the amounts of Biocatalyst or Biomas necessary for
operation and required by the license agreement, and increases in the cost
of product;
5) licensing and royalty fees;
6) loss of licensing rights;
7) evaluation and expense of entering into a new business opportunity;
8) the expense of delays in introducing or making any necessary
improvements to the Biocatalyst application; and
9) general economic conditions, as well as those specific to the related
industries.
Growtex May Be Unable to Continue As A Going Concern
In its Independent Auditor's Report, Growtex's accountants state that
Growtex's failure to generate revenues and conduct operations since its
inception raise substantial doubt about Growtex's ability to continue as a
going concern. Growtex will require substantial working capital, and currently
has inadequate capital to fund its business. Growtex may be unable to raise
the funds necessary for implementing its business plan, which could severely
limit its operations and cause its stock to be worthless.
Growtex expects its operating expenses will significantly increase due to
testing, marketing, distributing and producing Biocatalyst. Initially, Growtex
will need sufficient funds to locate a test facility and conduct the necessary
testing. Growtex cannot commence operations until a generator has been
successfully installed and operated on a test basis at a fish farming system
or large aquarium. As a result, it will need to generate significant revenue
and/or raise additional funds to achieve profitability. Growtex will be unable
to pay its operating expenses prior to achieving profitability unless it can
raise the funds necessary to do the feasibility testing and market the product
Biocatalyst. If Growtex does not become profitable, it may be unable to
maintain its Biocatalyst license, which could cause its stock to be worthless.
If Growtex does achieve profitability, it cannot be certain that it will
sustain or increase it.
Growtex May Need Additional Financing Which May Not Be Available
Growtex's ultimate success will depend on its ability to raise additional
capital. Growtex's only resources have come from the private sale of Growtex's
stock. No commitments to provide additional funds have been made by management
or other shareholders. Growtex has not investigated the availability, source
or terms that might govern the acquisition of additional financing. There is
no assurance that funds will be available from any source or, if available,
that they can be obtained on terms acceptable to Growtex. If not available,
Growtex's operations would be severely limited, and it would be unable to
implement its business plan.
Growtex may raise additional funds through the issuance of equity, equity-
related or convertible debt securities. These securities may have rights,
preferences or privileges senior to those of the rights of its common stock,
and the ownership interest of its stockholders may be diluted.
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Potential Business Combinations Dilute Stockholder Value
Because Growtex has a limited time to develop a highly speculative and
unproven technology, Growtex's management will spend a significant portion of
the time it devotes to Growtex evaluating other business opportunities that
may be available to Growtex. In the event of a business combination, the
ownership interests of holders of existing shares of Growtex stock will be
diluted. Due to its limited financial resources, the only way Growtex will be
able to diversify its activities to provide a hedge, should its business plan
prove to be impractical, would be to enter in to a business combination.
Growtex has had discussions with a number of third parties regarding business
opportunities, but none of these discussions has reached the stage where an
agreement in principle is imminent. In any business opportunity reviewed by
Growtex thus far, significant business and economic issues would have to be
resolved in order to reach an agreement.
Any asset acquisition or business combination would likely include the
issuance of a significant amount of Growtex's common stock, which would dilute
the ownership interest of holders of existing shares of Growtex's common
stock, and may result in a majority of the voting power being transferred to
new investors. Depending on the nature of the transaction, Growtex's
stockholders may not have an opportunity to vote on whether to approve it. For
example, Growtex's board of directors may decide to issue a significant amount
of stock to effect a share exchange with another company. Such a transaction
does not require shareholder approval, but in approving any such transaction
Growtex's officers and directors must exercise their powers in good faith and
with a view to the interests of the corporation.
Potential Business Combinations Could Be Difficult To Integrate and Disrupt
Business
Any acquisition of or business combination with another company could
disrupt Growtex's ongoing business, distract management and employees and
increase its expenses. If Growtex acquires a company, it could face
difficulties in assimilating that company's personnel and operations. In
addition, the key personnel of the acquired company may decide not to work for
Growtex. Acquisitions also involve the need for integration into existing
administration, services, marketing, and support efforts. Any amortization of
goodwill or other assets, or other charges resulting from the costs of these
acquisitions, could limit Growtex's profitability and decrease the value of
its stock. In addition, Growtex's liquidity and capital resources may be
diminished prior to or as a result of consummation of a business combination
and its capital may be further depleted by the operating losses (if any) of
the business entity which Growtex may eventually acquire.
Growtex May Enter In To New Line of Business Which Investors Could Not
Evaluate
In the event of a business combination, acquisition, or change in
shareholder control, Growtex may enter in to a new line of business which an
investor did not anticipate and in which that investor may not want to
participate. Growtex may make investments in or acquire complementary
products, technologies and businesses, or businesses completely unrelated to
Growtex's current business plan. Similarly, an asset acquisition or business
combination would likely include the issuance of a significant amount of
Growtex's common stock, which may result in a majority of the voting power
being transferred to new investors. New investors may replace Growtex's
management. New management may decide not to continue to implement Growtex's
current business plan, and may decide to enter into a business completely
unrelated to Growtex's current business plan which an investor did not
anticipate and in which that investor may not want to participate. In such
case, an investor could not only lose its entire investment, but could lose
its entire investment on a business decision it did not get to evaluate at the
time of investing in Growtex.
Growtex Common Stock Has No Prior Market, And Prices May Decline After The
Offering
There is no public market for Growtex's common stock and no assurance can be
given that a market will develop or that any shareholder will be able to
liquidate his investment without considerable delay, if at all. The trading
market price of Growtex's common stock may decline below the offering price.
If a market should develop, the price may be highly volatile. In addition, an
active public market for Growtex's common stock may not develop or be
sustained. If Growtex's selling stockholders sell substantial amounts of
common stock in the
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public market, the market price of Growtex's common stock could fall. Factors
such as those discussed in this "Risk Factors" section may have a significant
impact on the market price of Growtex's securities. Owing to the low price of
the securities many brokerage firms may not be willing to effect transactions
in the securities. Even if a purchaser finds a broker willing to effect a
transaction in Growtex's common stock, the combination of brokerage
commissions, state transfer taxes, if any, and other selling costs may exceed
the selling price. Further, many lending institutions will not permit the use
of such securities as collateral for loans. Thus, a purchaser may be unable to
sell or otherwise realize the value invested in Growtex stock.
Investors May Face Significant Restrictions on the Resale of Growtex Stock
Due to State Blue Sky Laws
Because Growtex's securities have not been registered for resale under the
blue sky laws of any state, the holders of such shares and those persons
desiring to purchase them in any trading market that may develop in the future
should be aware that there may be significant state blue sky law restrictions
on the ability of investors to sell and on purchasers to buy Growtex's
securities. Each state has its own securities laws, often called "blue sky
laws", which limit sales of stock to a state's residents unless the stock is
registered in that state or qualifies for an exemption from registration.
These laws also govern the reporting requirements for broker-dealers and stock
brokers doing business directly or indirectly in the state. Before a security
is sold in a state, there must be a registration in place to cover the
transaction, and the broker must be registered in that state, or otherwise be
exempt from registration. Growtex does not know whether its stock will be
registered under the laws of any states. A determination regarding
registration will be made by the broker-dealers, if any, who agree to serve as
the market-makers for Growtex's stock. Accordingly, investors should consider
the secondary market for Growtex's securities to be a limited one. Investors
may be unable to resell their stock, or may be unable to resell it without the
significant expense of state registration or qualification.
Investors May Face Significant Restrictions on the Resale of Growtex Stock
Due To Federal Laws and Regulations.
The Securities and Exchange Commission has adopted a number of rules to
regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3,
15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934,
as amended. The Securities and Exchange Commission has advised Growtex that
its securities constitute "penny stock" within the meaning of the rules, and
therefore these rules apply to Growtex and its securities. The rules may
further affect the ability of owners of Growtex's shares to sell their
securities in any market that may develop for them.
Shareholders should be aware that, according to the Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include
. control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
. manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
. "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
. excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
. the wholesale dumping of the same securities by promoters and broker-
dealers after prices have been manipulated to a desired level, along
with the inevitable collapse of those prices with consequent investor
losses.
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USE OF PROCEEDS
This prospectus is part of a registration statement that permits selling
shareholders to sell their shares on a continuous or delayed basis in the
future. Because this prospectus is solely for the purpose of selling
shareholders, Growtex will not receive any proceeds from the sale of stock
being offered.
DETERMINATION OF OFFERING PRICE
This offering is solely for the purpose of allowing Growtex's shareholders
to sell their stock. The selling shareholders may sell their shares when the
registration statement becomes effective, or they may elect to sell some or
all of their shares at a later date. As the market develops, the selling
shareholders will determine the price for the stock.
DILUTION
This offering is for sales of stock by existing Growtex shareholders on a
continuous or delayed basis in the future. Sales of common stock by
shareholders will not result in any substantial change to the net tangible
book value per share before and after the distribution of shares by the
selling shareholders. There will be no change in net tangible book value per
share attributable to cash payments made by purchasers of the shares being
offered. Prospective investors should be aware, however, that the price of
Growtex's shares may not bear any rational relationship to net tangible book
value per share.
SELLING SHAREHOLDERS
The following are the shareholders for whose accounts the shares are being
offered; the amount of securities owned by such shareholder prior to this
offering; the amount to be offered for such shareholder's account; and the
amount to be owned by such shareholder following completion of the offering:
<TABLE>
<CAPTION>
Number of
Number of Number of Shares After
Name Position with Company Shares Owned Shares Offered Sale(1)
---- --------------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Michael Kirsh........... President, Secretary,
Treasurer, Director 700,000 700,000 0
David Goldman........... None 200,000 200,000 0
Peter Finck............. None 200,000 200,000 0
Michael Robison......... None 200,000 200,000 0
Brian Gruson............ None 200,000 200,000 0
Brent Lokash............ None 200,000 200,000 0
Mark R. Epstein Law
Corp................... None 200,000 200,000 0
John Trotter............ None 200,000 200,000 0
KM Lifestyle Enterprise
Inc.................... None 200,000 200,000 0
Plantation Capital
Corp. ................. None 200,000 200,000 0
</TABLE>
- --------
(1) This table assumes that each shareholder will sell all of its shares
available for sale during the effectiveness of the registration statement
that includes this prospectus. Shareholders are not required to sell their
shares. See "Plan of Distribution."
7
<PAGE>
PLAN OF DISTRIBUTION
This is not an underwritten offering. This prospectus is part of a
registration statement that permits selling shareholders to sell their shares
on a continuous or delayed basis in the future. Selling shareholders may sell
their shares to the public when the registration statement becomes effective,
or they may elect to sell some or all of their shares at a later date. Growtex
has not committed to keep the registration statement effective for any set
period of time.
While the registration statement is effective, selling shareholders may sell
their shares directly to the public, without the aid of a broker or dealer, or
they may sell their shares through a broker or dealer if Growtex's stock is
authorized for inclusion on the OTC bulletin board. Any commission, fee or
other compensation of a broker or dealer would depend on the brokers or
dealers involved in the transaction. The selling shareholders and any
participating broker-dealers may be deemed to be "underwriters" within the
definition of Section 2(11) of the Securities Act of 1933, and any
compensation received by these persons on resale may be deemed "underwriting
compensation."
No public market currently exists for shares of Growtex's common stock.
Growtex intends to apply to have its shares traded on the OTC bulletin board
under the symbol "GWTX".
DESCRIPTION OF CAPITAL STOCK
The following description of Growtex's capital stock is a brief explanation
of the material terms of Growtex's capital stock. This summary is subject to
and qualified in its entirety by Growtex's articles of incorporation and
bylaws, which are included as exhibits to the registration statement of which
this prospectus forms a part, and by the applicable provisions of Nevada law.
Growtex's authorized capital consists of 25,000,000 shares of common stock,
par value $.001 per share. Immediately prior to this offering, 2,500,000
shares were issued and outstanding. Each record holder of common stock is
entitled to one vote for each share held on all matters properly submitted to
the shareholders for their vote. The articles of incorporation do not permit
cumulative voting for the election of directors, and shareholders do not have
any preemptive rights to purchase shares in any future issuance of Growtex's
common stock.
Because the holders of shares of Growtex's common stock do not have
cumulative voting rights, the holders of more than 50% of Growtex's
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose. In such event, the holders of the
remaining shares will not be able to elect any of Growtex's directors.
The holders of shares of common stock are entitled to dividends, out of
funds legally available therefor, when and as declared by the Board of
Directors. The Board of Directors has never declared a dividend and does not
anticipate declaring a dividend in the future. In the event of liquidation,
dissolution or winding up of the affairs of Growtex, holders are entitled to
receive, ratably, the net assets of Growtex available to shareholders after
payment of all creditors.
All of the issued and outstanding shares of common stock are duly
authorized, validly issued, fully paid, and non-assessable. To the extent that
additional shares of Growtex's common stock are issued, the relative interests
of existing shareholders may be diluted.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Neither Elliott Tulk Pryce Anderson nor Vandeberg Johnson & Gandara was
employed on a contingent basis in connection with the registration or offering
of Growtex's common stock.
8
<PAGE>
DESCRIPTION OF BUSINESS
General
Growtex was incorporated under the laws of the State of Nevada on April 2,
1999, and is in its early developmental and promotional stages. To date,
Growtex's only activities have been organizational, directed at acquiring its
principal asset, raising its initial capital and developing its business plan.
Growtex has not commenced commercial operations. Growtex has no full time
employees and owns no real estate. Growtex's business plan is to determine the
feasibility of the Biocatalyst fish farming and aquarium applications, and, if
Biocatalyst proves to be feasible for these applications, to become a
Biocatalyst producer.
On April 5, 1999, Growtex acquired from David R. Mortenson & Associates
("Mortenson") the rights to distribute and produce the oxygen-enriched water
product "Biocatalyst" only for aquaculture, mariculture, fish farming and
aquarium uses in Mexico. (Aquaculture and mariculture are forms of fish
farming; the term fish farming is used to refer to aquaculture, mariculture
and fish farming collectively.) A copy of the license agreement has been filed
as an exhibit to the registration statement of which this prospectus is a
part. Mortenson acquired these rights from the inventor of the product,
N.W. Technologies, Inc., under a distribution agreement. The distribution
agreement granted Mortenson exclusive distribution rights for the use of
Biocatalyst in fish farming, aquarium and other applications, along with the
right to sublicense distribution for those applications. N.W. Technologies
reserved for itself the right to use Biocatalyst for oil spill remediation; it
has no other licensees besides Mortenson. Mortenson has sublicensed its rights
to distribute Biocatalyst for various applications in various geographic
locations to approximately 20 sublicensees; however, none of these is a
potential competitor of Growtex, which has exclusive right to distribute
Biocatalyst for fish farming and aquarium applications in Mexico. The
Biocatalyst technology's purpose is to improve the effectiveness of existing
processes that include an oxygenation process that takes place in a liquid or
solid environment. N.W. Technologies's Biocatalyst technology is proprietary
and subject to a confidentiality agreement. The technology is not patented.
Growtex's initial shareholders, Mr. David Mortenson and Mr. John Bauska,
were each issued 250,000 shares of Growtex common stock on April 2, 1999, in
payment for certain organizational costs. An additional 2,000,000 shares were
issued on April 28, 1999, to a total of 10 shareholders. Each of these
shareholders was a partner in Mortenson & Associates, and the stock was issued
as compensation for the grant of the Biocatalyst distribution and production
rights held by Mortenson & Associates as a licensee of N.W. Technologies. All
stock was issued based on a valuation by the Board of Directors of $0.001 per
share. The original shareholders sold their stock to the current shareholders
in private transactions, as follows:
<TABLE>
<CAPTION>
Number
of Sale
Sellers Purchasers Date Shares Price
- ----------------- ---------------------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Laurent Barbudaux Michael Robison May 11, 1999 200,000 $ 200(1)
Marie M. Charles Brian Gruson May 11, 1999 200,000 $ 200(1)
James R. Collins,
D.V.M. John Trotter May 12, 1999 200,000 $ 200(1)
Jock R. Collins,
D.V.M. KM Lifestyle Enterprise Inc. May 12, 1999 200,000 $ 200(1)
Terry Fowler David Goldman May 11, 1999 200,000 $ 200(1)
Roy Donovan
Hinton, Jr. Mark R. Epstein Law Corp. May 11, 1999 200,000 $ 200(1)
C.E. Kaiser Brent Lokash May 11, 1999 200,000 $ 200(1)
David R. Michael Kirsh May 11, 1999 500,000 $33,000(2)
Mortenson and
John T. Bauska
David R.
Mortenson Michael Kirsh May 13, 1999 200,000 $ 200(1)
Joshua J.
Mortenson Peter Finck May 11, 1999 200,000 $ 200(1)
Joshua D. Smetzer Plantation Capital Corp. May 12, 1999 200,000 $ 200(1)
</TABLE>
(1) Price based on purchase of minority interest and limited representations,
warranties, covenants and indemnification from seller.
(2) Price based on purchase of controlling interest and extensive
representations, warranties, covenants and indemnification from seller.
9
<PAGE>
The sale prices were determined by the seller's offer of what he or she
believed was a fair price, which offer each buyer accepted. The original
shareholders were introduced to the current shareholders through Management
Services International, a business consulting group in Vancouver, British
Columbia. Management Services International is not affiliated with N.W.
Technologies, Mortenson, or Growtex or its former or current shareholders.
Background to Development of Biocatalyst
The technology behind Biocatalyst was developed by a Houston, Texas based
company, N.W. Technologies, for the bioremediation of oil spills.
Bioremediation is the use of microbes to biodegrade substances such as oil.
N.W. Technologies discovered that by breaking the oil into colloidal
(microscopic) particles using a contact emulsifier, which also acts as a host
for oil-eating microbes, it could speed up the process of bioremediating
spilled oil. By breaking the oil into colloidal (microscopic) particles, the
microbes have access to an increased surface area of spilled oil (better
access to the food source). This increased access to the food source allows
the microbes to consume spilled oil more quickly.
The microbes need a ready supply of oxygen in order to consume the spilled
oil. Below six to twelve inches of soil depth, depending on soil type, oxygen
exchange is virtually non-existent, yet many oil spills reach far below that
level. Remediation companies have historically used a process called sparging
to oxygenate soils where bioremediation is being used. Sparging utilizes
perforated pipes placed in the affected area. Air is then pumped into them and
released through the perforations. Sparging is an expensive process to
implement and may result in the release of some of the volatile compounds to
be remediated, thus causing secondary air pollution.
To counter the problems with sparging, N.W. Technologies created
Biocatalyst. This is a water product with oxygen organically bonded to the
water molecule. When the microbe's extra-cellular enzymes come in contact with
the water/oxygen molecule structure, they release this oxygen, making it
available to the microbes. This process provides a means to deliver oxygen to
the microbes at depths below six to twelve inches of soil. N.W. Technologies
and their distributors/applicators have found that the use of Biocatalyst
substantially speeds up oil spill bioremediation times. N.W. Technologies has
ceased using ordinary water in the formulation of its products. Instead it
uses Biocatalyst because N.W. Technologies feels that Biocatalyst does
everything that the water does, while also providing extra oxygen needed by
the oil-eating microbes.
Production of Biocatalyst
Biocatalyst is produced through an organic process that uses any water
source. The organic process takes place in a generator, which may be built
using standard off-the-shelf tankage, pumps and plumbing supplies. The
generator uses a six-foot by ten-foot print, and the total cost of an
industrial grade generator is approximately $5,000 per unit. With proper care
and maintenance, generators should last for years. An initial culture, which
is part of N.W. Technologies's proprietary process, is introduced into the
generator to create oxygen-enriched water. The generator then requires a
regular supply of "biomas", a proprietary product of N.W. Technologies, to
keep producing Biocatalyst.
Once a generator is set up and producing, production continues for the life
of the generator provided that water is available (minimum of 15 gallons per
hour, maximum 30 gallons per hour), that the generator is protected from
freezing, and that "biomas" is added 5 days per week. Mortenson has indicated
a willingness to furnish end-users a production package consisting of the
generator, the initial culture to create the oxygen enriched water, and a
regular supply of "biomas" for the generator. The client will supply a source
of usable water, electrical power and staff to operate the generator(s). As
currently configured, each generator can produce 720 gallons of raw undiluted
product per day. Where more than this volume is needed, multiple generators
can be supplied.
Application of Biocatalyst to Fish Farming and Aquarium Uses
Growtex believes that Biocatalyst can be adapted to fish farming and
aquarium uses. From the lower rungs of a food chain up to the end product
being raised for human consumption, the organisms in a fish farming
10
<PAGE>
system all require oxygen. Tests have shown that the introduction of
Biocatalyst into these systems enhances the growth of bacteria and
microorganisms at the bottom of the food chain. Growtex believes that
increasing the food supply at the bottom of the food chain will result in an
increased food supply throughout the food chain, and therefore larger,
healthier fish and shellfish. In addition, Growtex anticipates that additional
oxygen in and of itself will enhance the health and size of the end product
being raised for human consumption, as well as accelerate its growth rate.
Growtex believes that the major cash crop species that will benefit from the
use of Biocatalyst are, in fresh water, crayfish, catfish and talapia (a
perch-type fish native to Mexico), and, in brackish water, shrimp. For fish
farming systems, Growtex anticipates that Biocatalyst would be supplied to the
systems using an on-site generator or generators.
Growtex also believes that a market exists for aquarium uses of Biocatalyst.
As with fish farming systems, Growtex believes that Biocatalyst will improve
the overall health of aquarium systems, whether the system is a large public
aquarium or an individual's private display in the home or office. For large
public aquariums, Growtex anticipates that Biocatalyst would be supplied to
the systems using an on-site generator or generators. For private displays,
Growtex anticipates that Biocatalyst would be supplied in bottled form.
Mortenson has had preliminary discussions with large pet supply retailers who
have expressed an interest in carrying Biocatalyst for aquarium uses. The
additional oxygen supplied by Biocatalyst is believed to enhance the growth
and overall health of fish in aquariums, and may supplement or even replace
the need for air pumps in tanks.
Short-Term Plan of Operation
The license agreement with Mortenson that provides the rights to distribute
and produce Biocatalyst includes a minimum purchase requirement that must be
met by April 5, 2000. Because the offering under this prospectus is solely for
selling shareholders, Growtex will need to raise funds to develop its license
rights. By raising additional funds, the ownership interest of holders of
existing shares of Growtex's common stock will be diluted.
Growtex plans to cooperate with Mortenson and licensees that have
Biocatalyst fish farming or aquarium use license rights in other territories
to economize on the costs of product research and development. No generator
has been successfully installed and operated at any fish farming system or at
any large aquarium, even on a test basis. No credible scientific study has
been undertaken to document and quantify the benefits of bottled Biocatalyst
to small private aquarium displays. The initial step that Growtex plans to
take in conjunction with Mortenson and other licensees is to identify a fish
farming system interested in participating in a trial. Once the system is
identified, Growtex, Mortenson and the other licensees will develop a budget
for installing the test generator and agree on an allocation of its costs.
Each participant would then raise its required contribution, and in exchange
it would have access to the trial run results to be used in its marketing and
for business planning purposes. Growtex anticipates that it would raise its
share by one or more private offerings of its common stock. There is no
written agreement to ensure this cooperation. Growtex's expectations
concerning this cooperation are based on informal communications with the
parties and their enlightened economic self-interests.
If the trial is successful from a technical standpoint, Growtex would have
to assess the economic feasibility of proceeding further. Under its license
agreement with Mortenson, to become a Biocatalyst producer Growtex would be
required to pay Mortenson a one-time fee of $25,000, an additional one-time
payment of $10,000 to reimburse unspecified expenses, and minimum annual
royalties of $20,000. Although Growtex's production rights are subject to
negotiation of a definitive agreement, prices for the biomas used to produce
Biocatalyst will likely be subject to change following notice from Mortenson.
There is no guarantee that fish farming system proprietors, the primary target
market, will conclude that Biocatalyst's health, size and growth rate benefits
are worth the price Growtex would have to charge to make money producing and
selling Biocatalyst. Growtex does not plan initially to focus its resources on
the aquarium use market. Growtex believes that if it succeeds in adapting
Biocatalyst to fish farming uses, it will then have a more credible sales
pitch when marketing for aquarium displays.
Growtex recognizes that it may not be feasible to adapt Biocatalyst to fish
farming and aquarium uses. To address this possibility, Growtex continually
evaluates other business opportunities that may be available to it,
11
<PAGE>
whether in the form of asset acquisitions or business combinations. Growtex's
management will spend a significant portion of the time it devotes to Growtex
evaluating other business opportunities that may be available to Growtex.
These opportunities may be related to the Biocatalyst product, or they may be
in a completely unrelated field. Growtex has had discussions with a number of
third parties regarding business opportunities, but none of these discussions
have reached the stage where an agreement in principle is imminent. In any
business opportunity reviewed by Growtex thus far, significant business and
economic issues would have to be resolved in order to reach an agreement. Any
asset acquisition or business combination would likely include the issuance of
a significant amount of Growtex's common stock, which would dilute the
ownership interest of holders of existing shares of Growtex's common stock.
Industry Conditions and Competition
Growtex does not yet know whether adapting Biocatalyst to fish farming and
aquarium uses will be a feasible money-making venture. It does know, however,
that if the application turns out to be successful, it will hold an exclusive
license in Mexico until April 5, 2002, as long as it meets its minimum
purchase requirements or becomes a producer. Growtex is aware that pumping
systems currently exist for injecting oxygen into fish farming systems, and
that aquariums generally have a filtration system that includes an oxygen pump
to inject oxygen into the aquarium. Growtex believes that Biocatalyst will be
a superior solution to injection of oxygen, however, because the extra oxygen
bonded to the water molecule is released upon contact with a living organism.
Existing oxygen injection systems simply dissolve oxygen into the water.
Growtex is currently unaware of any other product that holds potential to
introduce oxygen to fish farming and aquarium systems in excess of that able
to be dissolved into water. It is not unthinkable, however, that another
company could develop a product similar to Biocatalyst that would permit the
release of additional oxygen into fish farming and aquarium systems. Growtex
may have to compete with such companies in the future if it succeeds in
establishing the feasibility of the Biocatalyst for fish farming and aquarium
uses.
Employees
Growtex is a development stage company and currently has no employees.
Management plans to use consultants, attorneys and accountants as necessary
and does not plan to engage any full-time employees in the near future. If
Growtex establishes the feasibility of Biocatalyst for fish farming and
aquarium uses, its priority will shift to developing and implementing a plan
for marketing. The marketing plan would focus on two major goals: identifying
the most likely prospects for installing generators and retaining one or more
qualified individuals to market Biocatalyst generators to those prospects.
Growtex would hire marketing employees based on the projected size of the
market and the compensation necessary to retain qualified sales employees. A
portion of any employee compensation likely would include the right to acquire
stock in Growtex, which would dilute the ownership interest of holders of
existing shares of Growtex's common stock.
Available Information
Growtex has filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the
registration statement. For further information with respect to Growtex and
its common stock, see the registration statement and the exhibits and
schedules thereto. Any document Growtex files may be read and copied at the
Commission's public reference rooms in Washington, D.C.; New York, New York;
and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Growtex's filings with
the Commission are also available to the public from the Commission's website
at http://www.sec.gov.
Upon completion of this offering, Growtex will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, accordingly, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the
Commission's public reference rooms, and the website of the Commission
referred to above.
12
<PAGE>
DESCRIPTION OF PROPERTY
Growtex currently maintains limited office space, occupied by Mr. Kirsh, for
which it pays no rent. Its address is 1177 West Hastings, Suite 2110,
Vancouver, British Columbia V6E 2K3, CANADA, and its phone number is (604)
687-2199. Growtex does not believe that it will need to obtain additional
office space at any time in the foreseeable future until its business plan is
more fully implemented.
LEGAL PROCEEDINGS
Growtex is not a party to any material pending legal proceedings, and none
of its property is the subject of a pending legal proceeding. Further, the
officer and director knows of no legal proceedings against Growtex or its
property contemplated by any governmental authority.
13
<PAGE>
MARKET PRICE OF AND DIVIDENDS ON CAPITAL
STOCK AND OTHER SHAREHOLDER MATTERS
No established public trading market exists for Growtex's securities.
Growtex has no common equity subject to outstanding purchase options or
warrants. Growtex has no securities convertible into its common equity. There
is no common equity that could be sold pursuant to Rule 144 under the
Securities Act or that Growtex has agreed to register under the Securities Act
for sale by shareholders. Except for this offering, there is no common equity
that is being, or has been publicly proposed to be, publicly offered by
Growtex.
As of May 31, 1999, there were 2,500,000 shares of common stock outstanding,
held by 10 shareholders of record. The most recent sale of Growtex's common
stock from one investor to another occurred on May 11, 1999, when Mr. Kirsh
purchased a total of 450,000 shares of Growtex common stock from Mr. Mortenson
and 250,000 shares from Mr. Bauska at an average price of $0.047 in an arms'
length transaction. The transaction was an arms' length transaction,
negotiated by unrelated parties, each acting for his own self-interest. The
price was determined by the sellers' offer of what they believed was a fair
price, which offer Mr. Kirsh accepted. Upon effectiveness of the registration
statement that includes this prospectus, all of Growtex's outstanding shares
will be eligible for sale.
To date Growtex has not paid any dividends on its common stock and does not
expect to declare or pay any dividends on its common stock in the foreseeable
future. Payment of any dividends will depend upon Growtex's future earnings,
if any, its financial condition, and other factors as deemed relevant by the
Board of Directors.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements appearing elsewhere in this
prospectus. The statement of operations data set forth below for the period
from April 2, 1999, (inception) to April 30, 1999 and the three months ended
July 31, 1999, and the balance sheet data at April 30, 1999 and July 31, 1999,
are derived from Growtex's audited financial statements included elsewhere in
this prospectus. The historical results are not necessarily indicative of
results to be expected for any future period.
<TABLE>
<CAPTION>
Inception to
July 31, 1999
-------------
<S> <C>
Statement of Operations Data:
Net sales.................................................. $ --
======
Loss from continuing operations............................ $ --
======
Loss per share from continuing operations.................. $ --
======
<CAPTION>
As of
April 30 and
July 31, 1999
-------------
<S> <C>
Balance Sheet Data:
Total assets............................................... $2,600
======
</TABLE>
Growtex is in its early developmental and promotional stages. To date,
Growtex's only activities have been organizational, directed at acquiring its
principal asset, raising its initial capital and developing its business plan.
Growtex has not commenced commercial operations. As a result, the selected
financial data presented above bear no resemblance to the results that Growtex
expects when it begins operations. See "Risk Factors," "Description of
Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This prospectus contains forward-looking statements, the accuracy of which
involve risks and uncertainties. We use words such as "anticipates,"
"believes," "plans," "expects," "future," "intends" and similar expressions to
identify forward-looking statements. This prospectus also contains forward-
looking statements attributed to certain third parties relating to their
estimates regarding the potential uses of Biocatalyst and markets for it.
Prospective investors should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Growtex's
actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by
Growtex described in "Risk Factors" and elsewhere in this prospectus. The
following discussion and analysis should be read in conjunction with Growtex's
Financial Statements and Notes thereto and other financial information
included elsewhere in this prospectus.
Results of Operations
During the period from April 2, 1999, (inception) through April 30, 1999 and
the three months ended July 31, 1999, Growtex has engaged in no significant
operations other than organizational activities, acquisition of the rights to
market Biocatalyst and preparation for registration of its securities under
the Securities Act of 1933, as amended. No revenues were received by Growtex
during this period.
For the current fiscal year, Growtex anticipates incurring a loss as a
result of organizational expenses, expenses associated with registration under
the Securities Act of 1933, and expenses associated with setting up a company
structure to begin implementing its business plan. Growtex anticipates that
until these procedures are completed, it will not generate revenues, and may
continue to operate at a loss thereafter, depending upon the performance of
the business.
Growtex's business plan is to determine the feasibility of the Biocatalyst
in fish farming and aquarium applications, and, if Biocatalyst proves to be
feasible for these applications, become a Biocatalyst producer. Under the
license agreement with Mortenson, Growtex is required to purchase $125,000 of
Biocatalyst by April 5, 2000, and a further $175,000 by April 5, 2001, to
retain its license. Growtex currently does not have funds to meet the minimum
purchase requirements and may be unable to meet the minimum purchase
requirements by their respective deadlines.
The initial step that Growtex plans to take to implement its business plan
is to identify a fish farming system interested in participating in a trial,
which Growtex hopes to conduct in conjunction with Mortenson and other
licensees. There is no written agreement to ensure this cooperation. Growtex's
expectations concerning this cooperation are based on informal communications
with the parties and the economic interests of the parties in sharing the
expense of testing. Growtex has been discussing the location of a test
facility with Mortenson and other licensees. Once the system is identified,
Growtex, Mortenson and the other licensees will develop a budget for
installing the test generator and agree on an allocation of costs. Each
participant would then raise its required contribution, and in exchange it
would have access to the trial run results to be used in its marketing and for
business planning purposes. It is difficult to estimate Growtex's share of
testing costs without knowing the identity or location of the fish farming
test facility. Presumably, however, the total cost of installing a test
generator, assuming difficulty in engineering its installation and other
unforeseen difficulties, would not exceed $50,000 (ten times the estimated
$5,000 per unit cost). Growtex anticipates that it would raise its share by
one or more private offerings of its common stock.
Year 2000 Issues
At present, due to Growtex's developmental stage, it has no critical systems
that it must test for Year 2000 compliance. Growtex does not anticipate any
expenditures for Year 2000 issues. However, Growtex cannot be
15
<PAGE>
certain that it will not experience unanticipated negative consequences from
Year 2000 problems, or that it will be able to make any such modifications as
may become necessary in a timely, cost-effective and successful manner, and
the failure to do so could have a material adverse effect on Growtex's
business and operating results. It is also possible that one of Growtex's
suppliers, such as a utility or the producer of Biocatalyst or Biomas, or one
of Growtex's clients may become inoperative, and cause Growtex to incur heavy
expenses or losses. Growtex has obtained written certifications of Year 2000
readiness from its primary suppliers, Mortenson & Associates and N.W.
Technologies, ensuring that there will be no interruption to Growtex's supply
of Biomas and Biocatalyst.
Liquidity and Capital Resources
Growtex remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
shareholders' equity. Consequently, Growtex's balance sheet as of April 30,
1999, reflects total assets of $2,600, in the form of a license and
capitalized organizational costs.
Growtex expects to carry out its plan of business as discussed above.
Growtex has no commitments for capital expenditures. There will be no
compensation expense in the short term, as Mr. Kirsh will serve in his
capacity as sole officer and director of Growtex without compensation until a
test site is established. However, it is unlikely that Growtex's current
assets will meet Growtex's capital expenses over the next twelve months,
including the funds needed to install a test generator. In addition, Growtex
may engage in a combination with another business. Growtex cannot predict the
extent to which its liquidity and capital resources will be diminished prior
to the consummation of a business combination or whether its capital will be
further depleted by the operating losses (if any) of the business entity with
which Growtex may eventually combine. Growtex has engaged in discussions
concerning potential business combinations, but has not entered into any
agreement for such a combination.
Funds for capital expenses may be raised by capital contributions by current
shareholders or through an offering. No commitments to provide additional
funds have been made by management or other shareholders. Accordingly, there
can be no assurance that any additional funds will be available on terms
acceptable to Growtex or at all. Growtex's auditors express substantial doubt
regarding Growtex's ability to continue as a going concern.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Elliott Tulk Pryce Anderson has served as Growtex's independent auditor
since inception, and Growtex has not had any dispute with Elliott Tulk Pryce
Anderson over accounting or financial disclosure.
16
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each director
and executive officer of Growtex:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael Kirsh................ 46 President, Secretary, Treasurer, Director
</TABLE>
In May, 1999, Mr. Kirsh was elected as the sole officer and director of
Growtex by the current shareholders, of whom he is majority stockholder. In
spite of Mr. Kirsh's lack of experience in the fish farming industry and in
Mexico, Messrs. Mortenson and Bauska sold the controlling interest in Growtex
to Mr. Kirsh based upon his entrepreneurial experience and his willingness to
put his own money at risk to invest in the Biocatalyst technology. Messrs.
Mortenson and Bauska sold their interests to Mr. Kirsh because of their common
interest in the success of Growtex as a distributor of Biocatalyst, and Mr.
Kirsh's intention to pursue Growtex's business plan to determine the
feasibility of the Biocatalyst fish farming and aquarium applications, and to
distribute Biocatalyst in Mexico should Biocatalyst prove to be feasible for
these applications. During the past five years, Mr. Kirsh has worked with a
group of independent investors that acquires private companies and conducts
reverse takeovers. In a reverse takeover, the shareholders of an acquired
company generally end up owning all or most of the resulting combined company.
Before forming his investment group, Mr. Kirsh had invested in both real
estate and the stock market. Mr. Kirsh is also a director of Mezuma Mining,
which is traded on the Alberta Stock Exchange. Mezuma Mining is a blank check
company--a development stage company which has no specific business plan or
purpose. Mezuma Mining has currently raised approximately $250,000.00 Canadian
and is looking for a company to acquire. From approximately 1986 to 1992 Mr.
Kirsh developed two dental practices in Vancouver, British Columbia, CANADA,
which he sold in 1992 before forming his investment group.
The director named above will serve until the first annual meeting of
Growtex's shareholders. Thereafter, directors will be elected for one-year
terms at the annual shareholders' meeting. Officers will hold their positions
at the pleasure of the board of directors, absent any employment agreement. No
employment agreements currently exist or are contemplated. There is no
arrangement or understanding between the director and officer of Growtex and
any other person pursuant to which any director or officer was or is to be
selected as a director or officer.
The director and officer of Growtex will devote his time to Growtex's
affairs on an "as needed" basis. As a result, the actual amount of time which
he will devote to Growtex's affairs is unknown and is likely to vary
substantially from month to month.
EXECUTIVE COMPENSATION
No officer or director has received any remuneration from Growtex. Although
there is no current plan in existence, it is possible that Growtex will adopt
a plan to pay or accrue compensation to its officers and directors for
services related to the implementation of Growtex's business plan. Growtex has
no stock option, retirement, incentive, defined benefit, actuarial, pension or
profit-sharing programs for the benefit of directors, officers or other
employees, but the Board of Directors may recommend adoption of one or more
such programs in the future. Growtex has no employment contract or
compensatory plan or arrangement with any executive officer of Growtex. The
director currently does not receive any cash compensation from Growtex for his
service as a member of the board of directors. There is no compensation
committee, and no compensation policies have been adopted. See "Certain
Relationships and Related Transactions."
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 1999, Growtex's outstanding
common stock owned of record or beneficially by each executive officer and
director and by each person who owned of record, or was known by Growtex to
own beneficially, more than 5% of Growtex's common stock, and the
shareholdings of all executive officers and directors as a group.
<TABLE>
<CAPTION>
Percentage
Shares of
Name Owned Shares Owned
---- ------- ------------
<S> <C> <C>
Michael Kirsh, President, Secretary, Treasurer, and
Director
5076 Angus Drive
Vancouver, B.C. Canada V6M 3M5........................... 700,000 28%
David Goldman
910 Richards Street
Vancouver, B.C. Canada V6B 3C1........................... 200,000 8%
Peter Finck
124 - 3989 Henning Drive
Burnaby, B.C. Canada V5C 6N5............................. 200,000 8%
Michael Robison
3147 West 8th Avenue
Vancouver, B.C. Canada V6K 2C4........................... 200,000 8%
Brian Gruson
bce Place
181 Bay Street, Suite 3100
Toronto, Ontario, Canada M5J 2T3......................... 200,000 8%
Brent Lokash
1708 - 808 Nelson Street
Vancouver, B.C. Canada V6G 3A9........................... 200,000 8%
Mark R. Epstein Law Corp.(1)
650 - 1500 West Georgia Street
Vancouver, B.C. Canada V6G 3A9........................... 200,000 8%
John Trotter
13 - 2654 Morningstar Crescent
Vancouver, B.C. Canada V5S 4P4........................... 200,000 8%
KM Lifestyle Enterprise, Inc.(2)
2110 - 1177 West Hastings
Vancouver, B.C. Canada V6E 2K3........................... 200,000 8%
Plantation Capital Corp.(3)
302 - 1132 Hamilton Street
Vancouver, B.C. Canada V6B 2S2........................... 200,000 8%
ALL EXECUTIVE OFFICERS & DIRECTORS AS A GROUP (1
Individual)............................................ 700,000 28%
</TABLE>
- --------
(1) Mark R. Epstein is the sole beneficial owner of shares held by the Mark R.
Epstein Law Corp.
(2) Carla Markin is the sole beneficial owner of shares held by K.M.
Lifestyles Enterprise, Inc.
(3) Tim Gamble is the sole beneficial owner of shares held by Plantation
Capital Corp.
All shares are held of record and each record shareholder has sole voting
and investment power. Growtex knows of no one who has the right to acquire
beneficial ownership in Growtex common stock. Other than the sale of Growtex
stock contemplated by this prospectus, there are no arrangements known to
Growtex the operation of which may at a subsequent date result in a change of
control of Growtex.
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director, executive officer or nominee for election as a director of
Growtex, and no owner of five percent or more of Growtex's outstanding shares
or any member of their immediate family has entered into or proposed any
transaction in which the amount involved exceeds $60,000. David R. Mortenson
and John T. Bauska, the initial shareholders, are, respectively, the principal
of and an investor-participant in David R. Mortenson & Associates, the
licensor of Growtex's right to distribute and produce the Biocatalyst oxygen-
enriched water product. Mr. Mortenson and Mr. Bauska were previously directors
of Growtex, and the president and secretary-treasurer, respectively. They are
no longer directors, officers or shareholders of Growtex. If Growtex succeeds
in implementing its business plan, Growtex will make payments to David R.
Mortenson & Associates in the future that will exceed $60,000, although the
resulting benefits to Mr. Mortenson and Mr. Bauska may not individually exceed
$60,000.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Growtex's bylaws provide that Growtex will indemnify its officers and
directors for costs and expenses incurred in connection with the defense of
actions, suits, or proceedings against them on account of their being or
having been directors or officers of Growtex, absent a finding of negligence
or misconduct in the performance of duty.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Growtex
pursuant to the forgoing provisions, Growtex has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in that Act and is, therefore,
unenforceable.
19
<PAGE>
INDEX TO FINANCIAL STATEMENTS
GROWTEX INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report........................................ F-2
Balance Sheet as of April 30, 1999 and July 31, 1999................ F-3
Statement of Operations from April 2, 1999 (Date of Inception) to
April 30, 1999 and the three months ended July 31, 1999............ F-4
Statement of Cash Flows from April 2, 1999 (Date of Inception) to
April 30, 1999 and the three months ended July 31, 1999............ F-5
Statement of Stockholders' Equity from April 2, 1999 (Date of
Inception) to April 30, 1999 and the three months ended July 31,
1999............................................................... F-6
Notes to the Financial Statements................................... F-7 to F-8
</TABLE>
<PAGE>
Independent Auditor's Report
To the Board of Directors
Growtex Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Growtex Inc. (A
Development Stage Company) as of April 30, 1999 and July 31, 1999 and the
related statements of operations, stockholders' equity and cash flows for the
period from April 2, 1999 (Date of Inception) to April 30, 1999 and the three
months ended July 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of Growtex Inc. (A Development
Stage Company), as of April 30, 1999 and July 31, 1999, and the results of its
operations and its cash flows for the period from April 2, 1999 (Date of
Inception) to April 30, 1999 and the three months ended July 31, 1999, in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated any revenues or conducted
any operations since inception. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also discussed in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Elliott, Tulk, Pryce, Anderson
/s/ Elliott, Tulk, Pryce, Anderson
CHARTERED ACCOUNTANTS
Vancouver, Canada
September 28, 1999
F-2
<PAGE>
Growtex Inc.
(A Development Stage Company)
Balance Sheet
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
July 31, April 30,
1999 1999
Assets -------- ---------
<S> <C> <C>
License (Note 3)......................................... $2,000 $2,000
Organizational costs..................................... 600 600
------ ------
2,600 2,600
====== ======
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current Liabilities...................................... -- --
------ ------
Contingent Liability (Note 1)
Stockholders' Equity
Common Stock, 25,000,000 shares authorized with a par
value of $.001; 2,500,000 shares issued and
outstanding............................................. 2,600 2,600
Deficit Accumulated During the Development Stage......... -- --
------ ------
2,600 2,600
------ ------
2,600 2,600
====== ======
</TABLE>
(The accompanying notes are an integral part of the financial statements)
F-3
<PAGE>
Growtex Inc.
(A Development Stage Company)
Statement of Operations
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three months From April 2, 1999
ended (Date of Inception)
July 31, 1999 to April 30, 1999
$ $
------------- -------------------
<S> <C> <C>
Revenues................................. -- --
----- -----
Expenses................................. -- --
----- -----
Net Loss................................. -- --
===== =====
</TABLE>
(The accompanying notes are an integral part of the financial statements)
F-4
<PAGE>
Growtex Inc.
(A Development Stage Company)
Statement of Cash Flows
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three months From April 2, 1999
ended (Date of Inception)
July 31, 1999 to April 30, 1999
$ $
------------- -------------------
<S> <C> <C>
Cash Flows to Operating Activities
Net loss............................... -- --
----- -----
Net Cash Used by Operating Activities.... -- --
----- -----
Cash Flows from Financing Activities
Increase in shares issued.............. -- 500
----- -----
Net Cash Provided by Financing
Activities.............................. -- 500
----- -----
Cash Flows to Investing Activities
Increase in organizational costs....... -- (500)
----- -----
Net Cash Used in Investing Activities.... -- (500)
----- -----
Change in cash........................... -- --
Cash--beginning of period................ -- --
----- -----
Cash--end of period...................... -- --
===== =====
Non-Cash Financing Activities
A total of 2,000,000 shares were issued
at a fair market value of $0.001 per
share for the acquisition of a License
(Note 3).............................. -- 2,000
Organization costs paid for by a
director for no consideration treated
as additional paid in capital......... -- 100
----- -----
-- 2,100
===== =====
Supplemental Disclosures
Interest paid.......................... -- --
Income tax paid........................ -- --
</TABLE>
(The accompanying notes are an integral part of the financial statements)
F-5
<PAGE>
Growtex Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From April 2, 1999 (Date of Inception) to July 31, 1999
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Common Stock Development
------------------ Stage
Shares # Amount $ $
--------- -------- -----------
<S> <C> <C> <C>
Balance--April 2, 1999 (Date of Inception)... -- -- --
Stock issued for $500 of organizational
expenses.................................. 500,000 500 --
Additional paid in capital for
organizational expenses incurred by a
director on behalf of the Company......... -- 100 --
Stock issued for "The Biocatalyst License"
at a fair market value of $0.001 per
share..................................... 2,000,000 2,000 --
Net loss for the period.................... --
--------- ----- -----
Balance--April 30, 1999...................... 2,500,000 2,600 --
--------- ----- -----
Net loss for the period.................... -- -- --
Balance--July 31, 1999....................... 2,500,000 2,600 --
========= ===== =====
</TABLE>
(The accompanying notes are an integral part of the financial statements)
F-6
<PAGE>
Growtex Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
1. Development Stage Company
Growtex Inc. herein (the "Company") was incorporated in the State of
Nevada, U.S.A. on April 2, 1999. The Company has acquired a license to
market and distribute a product as discussed in Note 3.
In a development stage company, management devotes most of its activities
to establishing these new businesses. Planned principal activities have not
yet begun nor produced any revenues. The ability of the Company to emerge
from the development stage with respect to any planned principal business
activity is dependent upon its successful efforts to raise additional
equity financing and develop a market for its products.
2. Summary of Significant Accounting Policies
(a) Year end
The Company's fiscal year end is April 30.
(b) Licenses
Costs to acquire licenses are capitalized as incurred. These costs will
be amortized on a straight-line basis over their remaining estimated
useful lives upon the licenses becoming commercially viable or written-
off to operations if the licenses do not become commercially viable.
(c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the time of issuance to be cash equivalents.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the periods. Actual results could differ from those estimates.
3. License
On April 5, 1999 the Company acquired a license for a product called
Biocatalyst. The Company has the exclusive right to distribute and market
the product under a private label in Mexico for a period of three years
expiring April 5, 2002. Biocatalyst is an oxygen enriched water product
used to enhance the growth of microbes in soils located underground. The
Company issued 2,000,000 shares at a fair market value of $.001 or $2,000.
The shares were issued to the licensor who are members of a partnership and
whose general partner is also a spouse of a director and officer of the
Company. Once the Company purchases a minimum of 5,000 gallons of product
for a minimum period of six consecutive months, then a license will be
granted to the Company to produce the product in a location to be mutually
agreed upon. A producer license will also be granted if the Company can
demonstrate its financial capability, pay the licensor a one time fee of
$25,000, an additional one-time payment of $10,000 to reimburse unspecified
expenses, and pay minimum annual royalties of $20,000. If no producing
license is granted then the Company is committed to purchase a minimum
amount of product during each of the first two years of its license. At
current prices, Growtex would have to purchase approximately 62,500 gallons
of Biocatalyst by April 5, 2000, and a further 87,500 gallons by April 5,
2001, to retain its license. The Company has the option to renew the
license for an additional three years.
F-7
<PAGE>
4. Related Party Transaction
The License referred to in Note 3 was sold to the Company by a partnership
whose general manager is the President of the Company and a director for
consideration of 2,000,000 shares for total fair market consideration of
$2,000. These shares were paid evenly to the ten partners.
5. Uncertainty Due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using the year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the Company,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
F-8
<PAGE>
PROSPECTUS
, 1999
GROWTEX INC.
1177 West Hastings, Suite 2110
Vancouver, British Columbia V6E 2K3, CANADA
(604) 687-2199
2,500,000 Shares of Common Stock
to be sold by current shareholders
Growtex has 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 a
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 Growtex
have not changed since the date hereof.
Until , 1999 (90 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The securities are being registered for the account of selling shareholders,
and all of the following expenses will be borne by such shareholders. The
amounts set forth are estimates except for the SEC registration fee:
<TABLE>
<S> <C>
SEC registration fee................................................ $ 35
Printing and engraving expenses..................................... 5,000
Attorneys' fees and expenses........................................ 9,000
Accountants' fees and expenses...................................... 1,500
Transfer agent's and registrar's fees and expenses.................. 500
Miscellaneous....................................................... 965
-------
Total............................................................. $17,000
=======
</TABLE>
Item 14. Indemnification of Directors and Officers.
Pursuant to Nevada law, a corporation may indemnify a person who is a party
or threatened to be made a party to an action, suit or proceeding by reason of
the fact that he or she is an officer, director, employee or agent of the
corporation, against such person's costs and expenses incurred in connection
with such action so long as he or she has acted in good faith and in a manner
which he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, in the case of criminal actions, had no
reasonable cause to believe his or her conduct was unlawful. Nevada law
requires a corporation to indemnify any such person who is successful on the
merits or defense of such action against costs and expenses actually and
reasonably incurred in connection with the action.
The bylaws of Growtex, filed as Exhibit 3.2, provide that Growtex will
indemnify its officers and directors for costs and expenses incurred in
connection with the defense of actions, suits, or proceedings against them on
account of their being or having been directors or officers of Growtex, absent
a finding of negligence or misconduct in office. Growtex's Bylaws also permit
Growtex to maintain insurance on behalf of its officers, directors, employees
and agents against any liability asserted against and incurred by that person
whether or not Growtex has the power to indemnify such person against
liability for any of those acts.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding the issuance and sales of Growtex's
securities without registration since its formation. No such sales involved
the use of an underwriter and no commissions were paid in connection with the
sale of any securities.
(a) On April 2, 1999, Growtex issued 500,000 shares of common stock to two
shareholders in satisfaction of certain organizational costs
(approximately $500) and activities performed by the shareholders. The
issuance of the shares was exempt from registration under Rule 506 of
Regulation D, and sections 3(b) and 4(2) of the Securities Act of 1933, as
amended, due to the shareholders being Growtex's founders and serving as
its initial management, their status as accredited investors, and the
limited number of investors (two).
(b) On April 5, 1999, Growtex issued a total of 2,000,000 shares of common
stock to ten shareholders, one of whom is the general partner of, and nine
of whom are investor participants in, the licensor of Growtex's
Biocatalyst rights. The issuance was compensation for the license of the
Biocatalyst rights. The issuance of the common stock was exempt from
registration under Rule 504 of Regulation D and section 3(b) of the
Securities Act of 1933, as amended. Growtex's shares were valued at $0.001
per share, and they were issued to accredited investors according to an
exemption from registration under Texas law that permits sales to
accredited investors. If the exemption under Rule 504 of Regulation D is
not available, Growtex believes
II-1
<PAGE>
that the issuance was also exempt under Rule 506 of Regulation D and
Sections 3(b) and 4(2) under the Securities Act of 1933, as amended, due to
limiting the manner of the offering, promptly filing notices of sales, and
limiting the issuance of shares to a small number of accredited investors
(ten).
Item 16(a). Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Name Page
------- ---- ----
<C> <S> <C>
3.1* Articles of Incorporation
3.2* Bylaws
5.1 Opinion re: Legality
10.1*+ License Agreement
10.2* Amendment No. 1 to License Agreement
10.3 Stock Purchase Agreement Between Kirsh, Bauska and Mortenson
10.4 Stock Purchase Agreement Between Kirsh and Mortenson
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (see Exhibit 5.1).
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
+ Portions of the exhibit have been omitted pursuant to a request for
confidential treatment; omitted material has been filed with the Commission.
Item 16(b). Financial Statement Schedules.
As of April 30, 1999, Growtex:
. has no valuation or qualifying accounts
. does not have a substantial portion of its business devoted to acquiring
and holding for investment real estate or interests therein
. has no subsidiaries
. has no investments in mortgage loans on real estate.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Vancouver, Province of
British Columbia, CANADA, on November 12, 1999.
GROWTEX INC.
/s/ Michael Kirsh
_____________________________________
By: Michael Kirsh
Its: President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael Kirsh President, Secretary, November 12, 1999
____________________________________ Treasurer, and Director
Michael Kirsh
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Name
------- ----
<C> <S> <C>
3.1* Articles of Incorporation
3.2* Bylaws
5.1 Opinion re: Legality
10.1*+ License Agreement
10.2* Amendment No. 1 to License Agreement
10.3 Stock Purchase Agreement Between Kirsh, Bauska and Mortenson
10.4 Stock Purchase Agreement Between Kirsh and Mortenson
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (see Exhibit 5.1).
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
+ Portions of the exhibit have been omitted pursuant to a request for
confidential treatment; omitted material has been filed with the Commission.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF VANDEBERG JOHNSON & GANDARA APPEARS HERE]
November 12, 1999
Growtex Inc. - c/o BG Capital
1177 West Hastings
Suite 2110
Vancouver, BC V6E 2K3
CANADA
Re: Growtex Inc. Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel for Growtex Inc., a Nevada corporation (the
"Company"), in connection with the preparation of the registration statement on
Form S-1 (the "Registration Statement") filed with the Securities and Exchange
Commission(the "Commission") pursuant to the Securities Act of 1933, as amended
(the"Act"), relating to the public offering (the "Offering") of up to 2,500,000
shares (the "Shares") of the Company's common stock, $.001 par value (the
"Common Stock"), to be sold by the selling stockholders. This opinion is being
furnished pursuant to Item 601(b)(5) of Regulation S-K under the Act.
In rendering the opinion set forth below, we have reviewed (a) the
Registration Statement and the exhibits thereto; (b) the Company's Articles of
Incorporation; (c) the Company's Bylaws; (d) certain records of the Company's
corporate proceedings as reflected in its minute books; and (e) such statutes,
records and other documents as we have deemed relevant. In our examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, and conformity with the originals of all
documents submitted to us as copies thereof. In addition, we have made such
other examinations of law and fact as we have deemed relevant in order to form a
basis for the opinion hereinafter expressed.
Based upon the foregoing, we are of the opinion that the Shares are validly
issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to all references to this Firm under the caption
"Interests of Named Experts and Counsel" in the Registration Statement.
Very truly yours,
VANDEBERG JOHNSON & GANDARA
/s/ James L.Vandeberg
James L. Vandeberg
<PAGE>
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this 11th day of
May, 1999, between Michael Kirsh (the "Purchaser") and John T. Bauska and David
R. Mortenson (collectively the "Sellers").
R E C I T A L S
WHEREAS, Growtex Inc., a Nevada corporation, (the "Company") is a corporation
with 25,000,000 shares of $.001 par value common stock authorized (the
"Stock"); and
WHEREAS, the Purchaser desires to purchase and the Sellers desire to sell
500,000 (the "Shares") of the 2,500,000 shares of issued and outstanding Stock,
all pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Sale and Purchase of Shares.
---------------------------
Subject to the provisions of this Agreement, the Sellers agree to sell, and
Purchaser agrees to buy, the Shares, consisting of 500,000 shares of Stock,
which will at Closing constitute 20% of the issued and outstanding shares of
Stock of the Company.
2. Purchase Price.
--------------
Purchaser agrees to pay to the Sellers, as the purchase price for the Shares,
the sum of Thirty-Three Thousand Dollars ($33,000.00) at closing.
3. Closing.
-------
The Closing shall occur at 5:00 p.m. on May 12, 1999, (the "Closing Date") at
the offices of Vandeberg Johnson & Gandara, 600 University Street, Suite 2424,
Seattle, Washington, or at such other time and place as is mutually agreeable to
Purchaser and the Sellers. Purchaser shall deliver the
Stock Purchase Agreement
Page 1 of 1
<PAGE>
consideration set forth in Section 2 above. The Sellers shall deliver to the
Purchaser at Closing the following:
(a) Stock certificates together with stock powers representing the Shares;
(b) The corporate minute books and such other books, papers and records of the
Company as relate to its assets and operations;
(c) The written resignations of all officers and directors of the Company;
(d) A certificate from the officers and directors of the Company, certifying
that on the Closing Date, there were 2,500,000 shares of Stock issued and
outstanding;
(e) A shareholders' certificate, in the form of Exhibit 3(e) hereto, duly
executed by the shareholders of the Company set forth thereon; and
(f) A duly executed amendment to that certain License Agreement (the "License
Agreement") dated April 5, 1999, by and between David R. Mortenson &
Associates and the Company, in the form of Exhibit 3(f) hereto.
4. Representations, Warranties and Covenants of the Sellers.
--------------------------------------------------------
The Sellers hereby represent and warrant to the Purchaser that the following
are and will be true and correct on the Closing Date and such representations
and warranties shall survive the Closing:
(a) Organization of Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada. The Company has full power and lawful authority to own, or to hold
under lease, property and to engage in any lawful business.
(b) Authorization of Agreement. This Agreement constitutes a valid
obligation, legally binding upon the Sellers in accordance with its terms.
The execution and delivery of this Agreement and the consummation of the
transaction do not and will not result in any breach of, or default under,
any agreement, license or other obligation of the Sellers or the Company.
(c) Stock Ownership. The Company's entire authorized and issued capital stock
consists of 2,500,000 shares of common stock. There are not now, and will
not be on the Closing Date, any
Stock Purchase Agreement
Page 2 of 2
<PAGE>
outstanding subscriptions, options, rights, warrants, convertible shares,
debts or other agreements or commitments obligating the Company to issue
any other shares of its capital stock. Upon issuance and on the Closing
Date, the Shares were fully paid, non-assessable, free and clear of all
restrictions, liens, security interests, hypothecations, pledges and
encumbrances of every kind and nature whatsoever. There are no
restrictions in the Articles of Incorporation, Bylaws or other corporate
documents of the Company prohibiting the free transferability of the
Shares.
(d) Financial Information. The Sellers have furnished to Purchaser the
balance sheet and income statement for the period ending March 31, 1999 of
the Company (the "Financial Information"). All of the Financial
Information is true and accurate, has been taken from the Company's books
of account, was prepared in accordance with generally accepted accounting
principles applied on a consistent basis, and does not omit any
information which would make the Financial Information materially
misleading.
(e) Liabilities. On the Closing Date, the Company shall have no liabilities of
any kind, fixed or contingent, including but not limited to accounts
payable, taxes, debts, obligations, leases, employment related
obligations, fringe benefits, employment taxes and contributions to
industrial or unemployment insurance funds, or any other indebtedness or
leasehold interest of any nature. There are no amounts due for the payment
of all federal, state, county, local or foreign taxes of the Company which
are or may become payable by the Company for all periods ending prior to
the Closing Date. The Company has filed all federal, state, county, local
and foreign income, excise, corporate license or franchise, property,
sales or retail occupation taxes and other tax returns required to be
filed by it, and such returns are true and correct.
(f) Compliance with Law. The Company complies and will, as of the Closing
date, comply in all material respects with all applicable federal and
state laws, including but not limited to those relating to environmental
regulation and hazardous materials, and all rules, regulations and orders
of local governing authorities. The Company has not received any notice
with which it has not complied from any governmental authority or agency
or from any inspection body stating that the Company fails or may fail to
comply with any applicable law, ordinance, regulation, building or zoning
law, or requirements of any public authority or body.
(g) Litigation. There is no pending or threatened suit, action or litigation,
administrative, arbitration or other proceeding or governmental
investigation or inquiry to which the Company or its officers or directors
are a party or subject.
Stock Purchase Agreement
Page 3 of 3
<PAGE>
(h) Employees. The Company has no employees (other than its officers, who
serve without compensation) and has no obligation, contractual or
otherwise, to anyone regarding employment or consulting services. The
Company has not taken any actions with respect to any person which would
give rise to any claims of discrimination on the basis of age, sex, race,
disability or any other status protected by federal or local law, any
violation of the Fair Labor Standards Act, or any other state or federal
law related to the rights of employees.
(i) Environmental Liability. The Company has not manufactured, stored,
handled, disposed, transferred, produced, or processed "hazardous
substances" or other dangerous or toxic substances, except in compliance
with all federal, state or local regulations .
(j) Existing Contracts. Except for the License Agreement, the Company is
not a party to any contracts for services or otherwise.
(k) Licenses. The assets acquired by issuance of shares, rights under the
License Agreement, are properly valued in the Financial Information, the
assets exist and the Company holds proper title to those assets.
(l) Status of Affiliates. None of the officers, directors, promoters,
underwriters or beneficial owners of 10% or more of any class of equity
security of the Company: (A) has, within the last five years, (1) filed a
registration statement which is the subject of a currently effective
registration stop order entered by the United States Securities and
Exchange Commission or any state securities administrator, or (2) been
convicted of any criminal offense in connection with the offer, purchase,
or sale of any security, or involving fraud or deceit, or (B) is currently
subject to (1) any state or federal administrative enforcement order or
judgment, entered within the last five years, finding fraud or deceit in
connection with the purchase or sale of any security, or (2) any order,
judgment or decree of any court of competent jurisdiction, entered within
the last five years, temporarily, preliminarily or permanently restraining
or enjoining such party from engaging in or continuing to engage in any
conduct or practice involving fraud or deceit in connection with the
purchase or sale of any security.
(m) Status of Certain Investors. The ten Subscription Agreements dated April
28, 1999 are true and correct in all respects, including specifically the
assertions contained therein that each investor is an "accredited
investor" as that term is defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended. None of the ten investors purchased
their shares with a view to distribution or resale except pursuant to a
registration statement effective under the Texas Securities Act, (S) 7, or
to an accredited investor pursuant to an exemption available under the
Texas Securities
Stock Purchase Agreement
Page 4 of 4
<PAGE>
Act or rules of the State Securities Board of Texas.
(n) License Agreement. David R. Mortenson & Associates (the "Partnership") is
a Texas general partnership, and David Mortenson is an authorized
signatory of the Partnership with full power and authority to bind it.
David Mortenson is authorized to execute Amendment No. 1 to that certain
License Agreement dated April 5, 1999, by and between the Partnership and
the Company, as contemplated by Section 3(f) of the Stock Purchase
Agreement. The License Agreement attached to the April 28, 1999 minutes of
the Company and dated April 5, 1999 supersedes and replaces in its
entirety any prior License Agreement by and between David R. Mortenson &
Associates and Growtex Inc.
5. Indemnification by the Sellers.
------------------------------
The Sellers, their successors and assigns, jointly and severally, shall
indemnify, defend and hold Purchaser harmless from any and all losses, claims,
damages or liabilities, including any costs of recovery, suffered by Purchaser
as a result of:
(a) The failure of any representation or warranty of the Sellers contained in
this Agreement to be true and accurate when made and as of the Closing
Date;
(b) The failure of the Sellers to comply with any obligations, agreements or
covenants contained in this Agreement;
(c) Any accounts payable, liabilities, debts, taxes, leases or other
obligations of the Company with respect to any period prior to the Closing
Date.
The Sellers, their successors and assigns, shall reimburse Purchaser for any
legal or other expense reasonably incurred by Purchaser in connection with any
loss, claim, damage or liability indemnified hereby. This indemnification shall
benefit and inure to the successors and assigns of Purchaser, including the
Company, and shall survive the Closing. In the event Purchaser, his successors
or assigns, believe they are entitled to indemnification hereunder, they shall
give the Sellers written notice of the basis for the claim for indemnification.
6. Representations, Warranties of Purchaser.
----------------------------------------
The Purchaser hereby represents and warrants to the Sellers, which shall
survive the
Stock Purchase Agreement
Page 5 of 5
<PAGE>
Closing, that this Agreement constitutes a valid obligation, legally binding
upon Purchaser in accordance with its terms. The Purchaser hereby represents and
warrants to the Sellers that he is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended, and is purchasing their Shares for investment and not with a view to
resale.
7. Indemnification by Purchaser.
----------------------------
Purchaser, his successors and assigns, shall indemnify, defend and hold the
Sellers harmless from any and all losses, claims, damages or liabilities
suffered or incurred by the Sellers as a result of:
(a) The failure of any representation or warranty of Purchaser contained in
this Agreement to be true and accurate when made and as of the Closing
Date;
(b) The failure of Purchaser to comply with any obligations, agreements or
covenants contained in this Agreement;
(c) The conduct of the Company's business after the Closing Date; and
(d) Any accounts payable, liabilities, debts, taxes, leases or other
obligations of the Company arising with respect to any transaction or
occurrence occurring completely after the Closing Date.
Purchaser, his successors or assigns, shall reimburse the Sellers for any legal
or other expense reasonably incurred by them in connection with any loss, claim,
damage or liability indemnified hereby. This indemnification obligation will
survive the Closing.
8. Conditions to Purchaser's Obligations.
-------------------------------------
The obligations of Purchaser under this Agreement are subject to satisfaction
of each of the following conditions, unless waived in writing by Purchaser, at
or prior to Closing:
(a) Representations True; Compliance with Covenants. The representations and
warranties of the Sellers contained in this Agreement shall be true in all
material respects on and as of Closing with the same force and effect as
though made on and as of said date. The Sellers shall have performed and
complied in all material respects with all covenants contained herein
required to be
Stock Purchase Agreement
Page 6 of 6
<PAGE>
performed or complied with at or prior to Closing.
(b) No Litigation. There shall not be pending or threatened any claim, suit,
action, proceeding, investigation or inquiry by any person, governmental
body or authority or other entity seeking to restrain or prohibit this
transaction, to obtain damages in connection with this Agreement, or any
claim of any nature filed or commenced against the Company.
(c) No Material Adverse Change. There shall have been no material adverse
change in the Company since the date of the Financial Information
presented to Purchaser, March 31, 1999.
(d) Additional Documents. The Company shall have delivered or caused to be
delivered to Purchaser all additional instruments and copies of
instruments required to complete the Closing and as Purchaser may
otherwise reasonably request.
9. Miscellaneous.
-------------
(a) Notice. All notices and other communications required to be given by the
parties shall be in writing and sent to the respective parties at the
following addresses:
The Sellers: David R. Mortenson
2400 Loop 35, #1502
Alvin, TX 77511
Purchaser: James L. Vandeberg
Vandeberg Johnson & Gandara
600 University Street, Suite 2424
Seattle, WA 98101
(b) Washington Law. This Agreement shall be construed in accordance with the
laws of the State of Washington.
(c) Attorney' Fees. In any action brought to enforce this Agreement, or to
seek damages for breach thereof, the prevailing party shall be entitled to
recover a reasonable attorney's fee (including a reasonable attorney's fee
on any appeal thereof) and reasonable costs of litigation in addition to
any other award or decree granted or given by the court.
Stock Purchase Agreement
Page 7 of 7
<PAGE>
(d) Entire Agreement. This Agreement supersedes all prior agreements of the
parties, constitutes the entire agreement and understanding between the
parties and may only be modified or amended by a subsequent written
agreement executed by both parties.
(e) Assignment. Each party hereto may assign its rights hereunder, but may
not, without the prior written consent of the other party hereto, such
consent not to be unreasonably withheld, delegate any or all of its
obligations hereunder. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns.
(f) No Waiver. No failure on the part of either party to exercise and no
delay in exercising any rights hereunder shall operate as a waiver
thereof; nor shall any waiver or acceptance of a partial, single or
delayed performance of any term or condition of this Agreement operate as
a continuing waiver or a waiver of any subsequent breach thereof.
(g) Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, such provision shall be fully severable and this
Agreement shall be continued and enforced if such illegal, invalid or
unenforceable provision were never a part hereof; and in lieu of such
provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible to make such provision legal, valid and
enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
SELLERS: PURCHASER:
/s/ John T. Bauska /s/ Michael Kirsh
- ------------------------------ ------------------------------
John T. Bauska Michael Kirsh
David R. Mortenson
/s/ David R. Mortenson
- ------------------------------
Stock Purchase Agreement
Page 8 of 8
<PAGE>
Exhibit 3(e)
FORM OF
SHAREHOLDERS' CERTIFICATE
Each undersigned hereby represents and warrants to Michael Kirsh, the
"Purchaser" under that certain Stock Purchase Agreement dated as of May 11, 1999
by and between the Purchaser and John T. Bauska and David R. Mortenson (the
"Sellers"), as follows:
1. My Subscription Agreement dated April 28, 1999 is true and correct in all
respects, including specifically the assertions contained therein that I am an
"accredited investor" as that term is defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended. I did not purchase my shares with a
view to distribution or resale except pursuant to a registration statement
effective under the Texas Securities Act, (S) 7, or to an accredited investor
pursuant to an exemption available under the Texas Securities Act or rules of
the State Securities Board of Texas.
2. David R. Mortenson & Associates (the "Partnership") is a Texas general
partnership, and David Mortenson is an authorized signatory of the Partnership
with full power and authority to bind it. I hereby confirm that David Mortenson
is authorized to execute Amendment No. 1 to that certain License Agreement dated
April 5, 1999, by and between the Partnership and Growtex Inc., as contemplated
by Section 3(f) of the Stock Purchase Agreement. I hereby confirm that the
License Agreement attached to the April 28, 1999 minutes of the Company and
dated April 5, 1999 supersedes and replaces in its entirety any prior License
Agreement by and between the Partnership and Growtex Inc.
This Certificate is delivered pursuant to Section 3(e) of the Stock Purchase
Agreement, and it is effective, true and correct as of the Closing Date
thereunder.
/s/ David R. Mortenson David R. Mortenson
- -----------------------------
/s/ Terry Fowler Terry Fowler
- -----------------------------
/s/ Joshua J. Mortenson Joshua J. Mortenson
- -----------------------------
/s/ Laurent R. Barbudaux Laurent R. Barbudaux
- -----------------------------
/s/ Marie M. Charles Marie M. Charles
- -----------------------------
/s/ C.E. Kaiser C.E. Kaiser
- -----------------------------
/s/ Roy Donovan Hinton, Jr. Roy Donovan Hinton, Jr.
- -----------------------------
/s/ James R. Collins James R. Collins
- -----------------------------
/s/ Jock R. Collins Jock R. Collins
- -----------------------------
/s/ Joshua D. Smetzer Joshua D. Smetzer
- -----------------------------
<PAGE>
EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this 13th day
of May, 1999, between Michael Kirsh (the "Purchaser") and David R. Mortenson
(the "Seller").
R E C I T A L S
WHEREAS, Growtex Inc., a Nevada corporation, (the "Company") is a corporation
with 25,000,000 shares of $.001 par value common stock authorized (the "Stock");
and
WHEREAS, the Purchaser desires to purchase and the Seller desires to sell
200,000 (the "Shares") of the 2,500,000 shares of issued and outstanding Stock ,
all pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Sale and Purchase of Shares.
---------------------------
Subject to the provisions of this Agreement, the Seller agrees to sell, and
the Purchaser agrees to buy, the Shares, consisting of 200,000 shares of Stock,
which will at Closing constitute 8% of the issued and outstanding shares of
Stock of the Company.
2. Purchase Price.
--------------
Purchaser agrees to pay to the Sellers, as the purchase price for the Shares,
the sum of Two Hundred Dollars ($200.00) at closing.
3. Closing.
-------
The closing shall occur at the offices of Vandeberg Johnson & Gandara, 600
University Street, Suite 2424, Seattle, Washington, at such time as is mutually
agreeable to Purchaser and the Sellers (the "Closing Date"). Purchaser shall
deliver the consideration set forth in Section 2 above. The Seller shall deliver
to the Purchaser at closing Stock certificates together with stock powers
representing the Shares.
4. Representations, Warranties and Covenants of the Seller.
-------------------------------------------------------
Seller represents and warrants to the Purchaser that the following are and
will be true and correct on the Closing Date and such representations and
warranties shall survive the Closing:
(a) Authorization of Agreement. This Agreement constitutes a valid obligation,
legally binding upon the Seller in accordance with its terms. The
execution and delivery of this Agreement and the consummation of the
transaction do not and will not result in any breach of, or default under,
any agreement, license or other obligation of Seller.
<PAGE>
(b) Stock Ownership. Upon issuance and on the Closing Date, Seller owns the
Shares, the Shares were fully paid, non-assessable, free and clear of all
restrictions, liens, security interests, hypothecations, pledges and
encumbrances of every kind and nature whatsoever, and Seller has full and
exclusive power and legal right to sell the Shares in accordance with the
terms of this Agreement.
(c) Status of Seller. Seller's Subscription Agreement dated April 28, 1999 is
true and correct in all respects, including specifically the assertions
contained therein that Seller is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the "1933 Act"). Seller did not purchase the Shares with a view
to distribution or resale except pursuant to a registration statement
effective under the Texas Securities Act, (S) 7, or to an accredited
investor pursuant to an exemption available under the Texas Securities Act
or rules of the State Securities Board of Texas.
5. Indemnification by the Sellers.
------------------------------
The Seller, and his or her successors and assigns, shall indemnify, defend and
hold Purchaser harmless from any and all losses, claims, damages or liabilities,
including any costs of recovery, suffered by Purchaser as a result of:
(a) The failure of any representation or warranty of Seller contained in this
Agreement to be true and accurate when made and as of the Closing Date; and
(b) The failure of the Seller to comply with any obligations, agreements or
covenants contained in this Agreement.
The Seller, and his or her successors and assigns, shall reimburse Purchaser for
any legal or other expense reasonably incurred by Purchaser in connection with
any loss, claim, damage or liability indemnified hereby. This indemnification
shall benefit and inure to the successors and assigns of Purchaser, and shall
survive the Closing. In the event Purchaser, and his or her successors or
assigns, believe they are entitled to indemnification hereunder, they shall give
the Seller written notice of the basis for the claim for indemnification.
6. Representations, Warranties and Covenants of the Purchaser.
----------------------------------------------------------
Purchaser represents and warrants to Seller that Purchaser is, and at closing
will be, an "accredited investor" as that term is defined in Rule 501 of
Regulation D under the 1933 Act.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
SELLER: PURCHASER:
/s/ David R. Mortenson /s/ Michael Kirsh
- ---------------------------------------------- -------------------------------
David R. Mortenson Michael Kirsh
- ---------------------------------------------- -------------------------------
(Print Name) (Print Name)
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Accountants On
Accounting And Financial Disclosure" and "Interests Of Named Experts And
Counsel" and to the use of our report dated September 28, 1999, in the
Registration Statement (Form S-1 No. 333-82633) and related Prospectus of
Growtex Inc. for the registration of shares of its common stock.
Elliott, Tulk, Pryce, Anderson
CHARTERED ACCOUNTANTS
/s/ Elliott, Tulk, Pryce, Anderson
_____________________________________
Elliott, Tulk, Pryce, Anderson
November 12, 1999
Vancouver, Canada
