U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
<P>
AMENDMENT NO. 3 TO FORM 10-SB
<P>
General Form for Registration of Securities of Small
Business issuers Under Section 12(b) or 12(g) of the
Securities Act of 1934
<P>
THE AUXER GROUP, INC.
(Name of Small Business Issuer in its Charter)
<P>
Delaware 22-3537927
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
<P>
12 Andrews Drive, West Paterson, New Jersey 07424
(Address of Principal Executive Offices) (Zip Code)
<P>
(973) 890-1331
(Issuer's Telephone Number)
<P>
Securities to be registered under Section 12(b) of the Act:
None
<P>
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
<P>
(Title of Class)
PAGE 1
<P>
TABLE OF CONTENTS
<TABLE>
<S> <C> PAGE #
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 24
ITEM 3. DESCRIPTION OF PROPERTY 39
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 40
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 43
ITEM 6. EXECUTIVE COMPENSATION 45
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 50
ITEM 8. LEGAL PROCEEDINGS 51
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 53
ITEM 10. RECENT SALE OF UNREGISTERED SECURITIES 57
ITEM 11. DESCRIPTION OF SECURITIES 70
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS 74
ITEM 13. FINANCIAL STATEMENTS 77
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 77
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS 78
</TABLE>
PAGE 2
<P>
Part I
<P>
Item 1. Description of Business
-------------------------------
<P>
BUSINESS DEVELOPMENT
<P>
The Auxer Group, Inc. was incorporated in Idaho on June
24, 1920 under the name "The Auxer Gold Mines, Inc." (the
"Auxer"). The Company's original business was mining.
Auxer's life was changed from a life of 50 years to a
term of existence of perpetuity on August 27, 1960. In
1972 the mining assets were transferred to Idora Silver
Mines, Inc. and Auxer maintained a dormant status for a
majority of the 1970's and 1980's.
<P>
Effective May 2, 1994, the National Association of
Securities Dealers (NASD) cleared Auxer's request for
unpriced quotation on the OTC Bulletin Board for the
Auxer Gold Mines common stock under the symbol AUXI. On
April 18,1995, Auxer acquired all of the issued and
outstanding shares of CT Industries, which became our
wholly owned subsidiary. CT's assets included the
distribution rights to an oil treatment formulation,
specifically Formula 2000. Auxer issued 4,000,000 shares
of its common stock to shareholders of CT Industries.
Upon consummation of such acquisition, Auxer moved its
offices to Ridgewood, New Jersey. Auxer continued to
develop the engine treatment and test market the product
it acquired from CT Industries through infomercials and
by sponsoring regional races.
<P>
In 1996, Auxer established Wayne, New Jersey as its
principal place of business and acquired the issued and
outstanding shares of two companies. Firstly, on February
8, 1996, it acquired Universal Filtration Industries,
Inc. ("Universal Filtration"), a company that
manufactured and delivered products for dry cleaners. On
March 24, 1999, the Company's board of directors approved
closing down Universal Filtrations operating account.
Currently, Universal Filtration is dormant with no
operating activity. Auxer issued 1,500,000 of its
shares of common stock to Universal Filtration
shareholders for all the outstanding shares of Universal
Filtration. 500,000 of the 1,500,000 shares were issued
and delivery was contingent upon meeting various
performance objectives. Universal Filtration is no
longer an active subsidiary. Secondly, on October 25,
1996, Auxer acquired Harvey Westbury Corporation,
Inc.("Harvey Westbury") a light manufacturer and
<P>
Page 3
<P>
wholesaler of aftermarket automotive products. Auxer
issued 170,000 shares of its common stock to Harvey
Westbury shareholders or their designees for all
outstanding shares of Harvey Westbury Corp. Both
acquisitions have been accounted for as reverse
acquisitions using the purchase method of accounting with
historic costs being the basis for value. Consideration
value was based upon the market value of Auxer's
securities at the time of the acquisition.
<P>
In early 1997, Auxer attempted to broaden its development
through a series of strategic investments in software
companies located in the United Kingdom. Auxer's
investments in the UK software group were developed in
conjunction with two key individuals, Robert Smith,
former President of Burroughs, London England and ITT
Caribbean Manufacturing, Puerto Rico; and Danny
Chapchal, currently Managing Director of Cambridge
Display Technology, Cambridge, England. The software
group was organized to create a spectrum of software
applications geared to the expanding asset care and
management markets. The software group attempted to
compete globally within the asset care market and the
enterprise resource market.
<P>
In August, 1997 shareholders of Auxer voted to exchange
their shares on a one for one basis for shares in The
Auxer Group, Inc., the new Delaware corporation (the
"Company"). The Company, was incorporated in the State
of Delaware on August 11, 1997 and was authorized to
issue 25,000,000 shares at $.001 par value. Of those
shares, 20,000,000 shares were for common stock, while
the remaining 5,000,000 shares were for preferred stock.
On September 22, 1997, the Company filed an amendment to
its articles of incorporation whereby it increased its
authorized shares to 75,000,000 at a par value of $.001
per share. Of those shares, 50,000,000 shares are
common stock, while the remaining 25,000,000 shares
are preferred stock. In August, 1997, Auxer merged into
the Company. Effective on or about August 7th, 1997, the
Company began trading on the OTC Electronic Bulletin
Board under the symbol AXGI.
<P>
In June 1998, the Company divested itself of its software
business for the amount of the investment, $353,000,
which was received in the form of a promissory note to be
repaid upon certain criteria being met. As of September
30, 1999, the Company determined the collectability of
the promissory note was doubtful and wrote it off.
<P>
Page 4
<P>
On March 19, 1999 the Company amended its articles of
incorporation to increase the number of shares the
Company had authority to issue to 175,000,000 shares
at a par value of $.001 par value per share. Of such
shares, 150,000,000 are common stock, while the remaining
25,000,000 shares are preferred stock.
<P>
On April 22, 1999, the Company purchased automotive parts
inventory from Ernest DeSaye, Jr., employed Mr. DeSaye
and placed these assets in Hardyston Distributors, Inc.,
one of the Company's wholly owned subsidiaries.
Hardyston was incorporated in New Jersey on April 22,
1999. The Company issued 836,700 shares of its common
stock plus $15,000 cash for the purchase of the
automotive parts inventory to Ernest DeSaye, Jr.
<P>
The following sets forth the valuation of the above-
referenced acquisitions based on the value per share:
<P>
<TABLE>
<S> <C> <C>
Acquisition Price Per Share Less than Fair
Market Value
(i)Universal Filtration $.05 No
(ii) Harvey Westbury $.50 No
(iii) Hardyston Distributors $.1075 No
(iv) CT Industries $.001 No
</TABLE>
<P>
Effective January 4, 1999, the National Association of
Securities Dealers ("NASD") enacted the OTC Bulletin
Board Eligibility Rule ("Eligibility Rule"). To be
compliant with the Eligibility Rule, a company must be
registered with the SEC under Section 13 or 15(d) of the
Securities and Exchange Act of 1934 and be current in its
required filings. To be current in its required filings
a company must have filed its latest required annual
filing and any subsequent filings. Alternatively, an
issuer who has recently filed its Form 10 or Form 10-SB
must have cleared all comments by the SEC. The Company
did not meet the new requirements to continue trading on
the OTC Bulletin Board, and its quotation was
discontinued. Effective September 4, 1999, the Company
began trading on the National Quotation Service Pink
Sheets.
<P>
Our auditors have stated in their opinion that there is
substantial doubt regarding our ability to continue as a
going concern. We were a development stage company with
limited revenues, a history of significant losses and a
substantial accumulated deficit as at the end of our
calendar year 1997. However, presently we are not a
development stage company.
<P>
Page 5
<P>
Neither the Company nor any of its subsidiaries has filed
any petition for bankruptcy and is not aware of any
actions related to bankruptcy. Furthermore, there are no
known personnel of the Company who currently have any
petitions filed under the Bankruptcy Act or under any
state insolvency laws.
<P>
BUSINESS OF THE ISSUER
<P>
The Company is a holding company which currently owns
four (4) subsidiaries: The Harvey Westbury Corporation
Inc. ("HW"), CT Industries, Inc. ("CT"), Hardyston
Distributors ("HD") and Universal Filtration Industries,
Inc. ("UFI") which is currently dormant. Harvey Westbury
accounts for approximately 54% of the Company's total
revenue in 1999. The Company assembles and packages
automotive accessories under the name, Easy Test, sells
engine treatment under the name, Formula 2000 Ultimate
and sells waxes and polishes under the name, Garry's
Royal Satin to the automotive, marine, and aviation
industries. Hardyston Distributors, Inc. is a
distributor of automotive parts and accessories to local
mechanics, service stations and dealers which account for
approximately 45% of the Company's revenue in 1999. CT
Industries, Inc. is a subsidiary currently set up to
house the Internet and retail sales which account for
less than 1% of the Company's total revenue. The Company
intends to continue these operations in the future.
<P>
In 1998, management continued development and sales of
the Garry's Marine Care Products line and completed
testing of Formula 2000 Ultimate. The first
production run of Ultimate 2000 was completed. The
Company believes that Easy Test sales suffered from a
warm winter across the United States. The beginning of
1998 proved to be a difficult period for the Company in
the software investment as well. Unfortunately, the
person expected to be the Company's primary financier,
Robert Smith, unexpectedly passed away in January of
1998, and as a result, management was forced to
divest itself of the software program. With the loss of
our financing, the Company opted to accept an offer by
Mr. Chapchal to purchase its software operations rather
than further drain the Company's cash flow position
and risk further delay of the advancement of its new
automotive products. The Company and Mr. Chapchal
completed arrangements to turn over the software division
in June 1998 while structuring the sale in such a manner
that the Company could recoup its investment. However,
the cash flow drain on the Company proved to be a burden
the remainder of the year as the Company was forced to
<P>
Page 6
<P>
direct a majority of the arranged financing for the
automotive companies to the software investment.
<P>
Additionally, the Company completed development of the
marine product line and began trying to reduce the costs
of IT silicone spray. With the cash flow strain Harvey
Westbury's sales and marketing plans were crippled and
the Company saw much of the planned sales deteriorate
due to inability to deliver in a timely fashion as
maintaining adequate inventory was not possible.
Additionally, layoffs in operations and sales were
required. The reduced sales group tried to focus on
marketing and selling of the Garry's Marine products line
and the Easy Test line as well as launch Formula 2000
during the Fall 98 buying season. The group's focus
turned from development to sales and marketing during
this period but the impact was limited due to funding.
<P>
In 1999, management focused on marketing the Garry's
Royal Satin marine care products line and developing the
Easy Test line. Additionally, management focused on
developing Hardyston Distributors.
REVIEW OF PRODUCTS
<P>
The Company currently has two subsidiaries selling
automotive products. Hardyston Distributors distributes
a variety of automotive hard parts (which represents 100%
of its sales), currently representing approximately 45%
of the Company's revenue during the year ending December
31, 1999. The Harvey Westbury product lines, which
include the products under the names Easy Test and
Garry's Royal Satin, represent the Company's other
revenue (approximately 54%). During the year ending
December 31, 1999, Harvey Westbury's sales by product
breaks down as follows: Easy Test Mobile A/C
Accessories - 28%; Easy Test Anti-freeze & Battery
Testers - 25%; Garry's Royal Satin Automotive - 13%;
Garry's Royal Satin Marine - 10%; Easy Test Drain Plug
Series - 10%; Easy Test Fleet Drain Plug Series - 3%;
Carbon Monoxide Testers - 3%; Easy Test Hatchback Lights
- 1%; and Formula 2000 Ultimate - less than 1%; Garry's
It Silicone and T-Bolt Rust Penetrant - less than 1%;
Miscellaneous Products - 9%.
<P>
Page 7
<P>
Garry's Royal Satin Automotive Product Line:
--------------------------------------------
<P>
King's Ransom Premium Cleaner Wax and Polish: This
cleaner wax was introduced in the late 1980s and is
formulated for clear-coat paint finishes. It maintains
the creamy texture that the Company believes Royal Satin
is noted for and offers what the Company perceives to be
a long lasting shine with no silicones.
<P>
Royal Satin Supreme: The product was designed with the
intent to provide an even longer lasting shine and better
durability than King's Ransom for clear-coat finishes.
<P>
Garry's Interior Car Care Products: The Company's
products in this category are a carpet cleaner,
waterproofing spray, leather cleaner and plastic and
fiberglass cleaner. The products are currently packaged
in spray tops, however new packaging options are
being reviewed.
<P>
Garry's Royal Satin Marine Products:
------------------------------------
<P>
The Royal Satin Marine line consists of a boat wash,
heavy-duty compound, a finishing polish and its flagship
cleaner wax. The line also offers care products covered
in the automotive line.
<P>
Cream Paste Cleaner Wax: The product is used by detailing
professionals. Its blend of waxes and cleaner offers a
one-step cleaning and waxing option or can be applied
after a compound in detailing practices.
<P>
Heavy Duty Rubbing Compound: This product is intended to
complement to the Company's cleaner wax for difficult
oxidation problems that are too difficult for normal
oxidation.
<P>
Finishing Polish: The product offers the detailer an
extra layer of protection that is intended to get them
through an entire season. Cleaner waxes on the market
typically fall short of performing more than 4 months.
This polish and protector is intended to give the boating
enthusiast extra months of added shine and protection
from oxidation.
<P>
Boat Wash: In this product, the Company has attempted to
formulate a product to clean and prep a boat for the
deoxidization process.
<P>
Page 8
<P>
It Silicone and T-Bolt Rust Penetrant:
--------------------------------------
<P>
Harvey Westbury markets a silicone and multipurpose
lubricant under the brand name It and T-Bolt.
<P>
Formula 2000 Ultimate Product Line:
-----------------------------------
<P>
Harvey Westbury markets a synthetic lubrication product
designed for engines and transmission lubrication
enhancement. In 1997, the Company created a new formula
and now markets this formula under the name "Formula 2000
Ultimate."
<P>
EasyTest Product Line:
----------------------
<P>
The Easy Test product series was founded by Harvey
Westbury. The products consist of three (3) types of
antifreeze and battery testers, a carbon monoxide tester,
and drain plug series. Additionally, the air
conditioning line is trademarked under Easy Test as well
as the Hatchback solar powered rechargeable light and
other accessory products.
<P>
Antifreeze & Battery Testers:
-----------------------------
<P>
The Harvey Westbury tester products are manufactured at
the Company's facilities in Farmingdale, NY. The main
products are anti-freeze and battery testers, which come
in three different sizes. The first type is a five-ball
tester that consists of a four-inch glass catheter,
assembled together with a vinyl squeeze bulb and
dispensing tail. The working components in these items
are five specific gravity balls that float at
different concentrated levels of the solution being
tested. The solution for the anti-freeze test involves a
water to anti-freeze mix, while the battery test
involves a water to acid mix. Once the items are
manufactured and assembled, they are then packaged for
retail distribution using Harvey Westbury's in-house
machinery and equipment. The same concept applies to the
other two size types, which are much larger and resemble
a French horn and turkey-baster in their respective
shapes. Most items are sold under their registered
trademark Easy-Test7, however, the Company also
maintains several private label contracts within the
industry.
<P>
Mobile Air Conditioning Accessories:
------------------------------------
<P>
Harvey Westbury markets all of its air-conditioning
accessory items under the brand name Easy-Test. The
product line is mainly comprised of retrofit kits,
recharge kits, charging hose, fittings, manifold
gauges, leak detector kits, thermometers, and protective
<P>
Page 9
<P>
goggles. Additionally, the accessory items are designed
to service all R-12 (CFC-12 or Freon) and R134a (HFC-
134a) automotive systems.
<P>
Crankcase Drain Plug Series (CDPs & EDPs):
------------------------------------------
<P>
Two series of crank case drain plugs are currently
packaged by the Company. The group actively markets the
CDP series which is a strong rubber plug complete with
an inserting tool. The product is marketed to the do it
yourself market and the quick oil change chains. The
product is purchased in single or six pack blister pack
options. The second series is a metal screw in product.
The product is self-tapping.
<P>
Carbon Monoxide Testers:
------------------------
<P>
Harvey Westbury assembles and packages Carbon Monoxide
devices that alert the consumer to the presence of carbon
monoxide by changing color. This small indicator is
roughly 2" in diameter and is comprised of a proprietary
blend of chemicals, which react to carbon monoxide. The
pill indicator is affixed to an adhesive backed plastic
applicator that allows the item to be placed almost
anywhere. In addition, the pill indicator changes back
to its original color after the carbon monoxide is
removed which makes the item reusable. Depending on the
surrounding climate, these detectors can last up to a
full year. Harvey Westbury offers two types of testers
based on their levels of detection sensitivity. Since
carbon monoxide is measured in Part Per Millions (PPM),
one tester will react to carbon monoxide dosages of 50ppm
and the other will react at 100ppm.
<P>
Fleet Drain Plug Series (RDPs):
-------------------------------
<P>
The Fleet drain plug series is an imported product. The
product is generally designed for large construction and
farm equipment as well as RVs. The product comes as a
kit. The product allows the user to insert a drain tube
by screwing onto a permanent attachment to vehicles.
<P>
Miscellaneous Products:
-----------------------
<P>
Harvey Westbury assembles pneumatic hoses. Additionally,
the Company continues to maintain several miscellaneous
items in the Easy Test line such as windshield wiper
cleaners, hatchback lights, and hacksaw blades. As of
December 31, 1999 the Company reported inventory of
$209,609. Carrying amount of inventory in miscellaneous
product is less than 2%. Products that are considered
<P>
Page 10
<P>
obsolete are "written off" in accordance with generally
accepted accounting principles.
<P>
MARKETING
<P>
The Company is engaged in business in several markets.
The Company is conducting business with automotive
retailers and distributors as well as marine retailers
and distributors. The Company's revenues do not exceed
20% with any individual customer. While the Company is
not engaged in any formal contracts with identified
volumes, the Company has arrangements to private label
for Warren Distribution for Polar products and CarQuest
Inc. for CarQuest products. The Company's products are
packaged under several other unknown brand names since
the products are sold in bulk and packaged by other
companies.
<P>
The Company's subsidiary, Harvey Westbury has entered
into several licensing agreements with third party
distribution companies to private label products. In
August 1998 Harvey Westbury entered into a licensing
agreement with Warren Distribution to use the trademark
Polar on its Easy Test Anti-freeze and Battery Tester
products, to be distributed through Warren Distribution.
In October 1998, Harvey Westbury entered into a licensing
agreement with CARQUEST, Inc. to use the trademark
CARQUEST on its Easy Test Anti-freeze and Battery Tester
products, to be distributed internationally throughout
CARQUEST's network of warehouse distributors and retail
outlets.
<P>
In June 1999, Harvey Westbury entered into an advertising
agreement with the Veritas Group, Ltd. (in Mexico) to
develop and implement a regional and national marketing
and advertising campaign to promote its Garry's Royal
Satin and Formula 2000 Synthetic Engine Treatment.
<P>
The Company produced infomercials for test marketing on
television in 1995 for its Formula 2000 product line.
The infomercials consisted of 30 minute TV spots for
Direct Response Television. In October through December
1996, CT Industries ran test market spots on local cable
and national TV channels. After evaluation of the
initial results, the Company decided to stop advertising
the commercials on TV due to low response. The Company
considers the commercial segments available for future
use should the Company determine an opportunity through
advertising the Formula 2000 product line on television
is productive. At this time, the Company does not plan
to advertise Formula 2000 on television in the next
twelve months.
<P>
Page 11
<P>
The Company's web sites, which were introduced in 1999,
are designed to assist in marketing and sales lead
generation. Due to the introduction of the Company's web
sites, the Company's Formula 2000, Easy Test, and Garry's
product lines have received requests for information on
distribution both domestically and internationally. The
Company plans to design an export section to the web
sites that oriented towards export buyers outside the
United States. This section is intended to provide
information to assist the export buyer in purchasing
decisions for the Company's products.
<P>
The Company is currently employing the strategies
outlined below:
<P>
Garry's Royal Satin Automotive Product Line:
--------------------------------------------
In 1999, the Company introduced an improved clear-coat in
Royal Satin Supreme. The Company intends to promote the
product through TV and magazine ads regionally. The
Company intends to repackage Garry's Royal Satin in new
plastic containers and labels.
<P>
Garry's Royal Satin Marine Products:
------------------------------------
In 2000, the Company intends to continue focus on its
sales and distribution efforts for its marine products in
the Northeast and Southeast region of the United
States. The Company intends to promote Garry's Royal
Satin Marine products through local and regional magazine
advertisements, discounted sales promotions, and
distribution of samples.
<P>
It Silicone and T-Bolt Rust Penetrant:
--------------------------------------
The Company sells limited quantities (less than 1% of
total revenues) of these products. No current marketing
programs are in place.
<P>
Formula 2000 Ultimate Product Line:
-----------------------------------
The Company introduced Formula 2000 Ultimate to the
market in 1998. In 1999, the Company introduced the
product on the Internet and intends to test market
several Internet banner concepts on automotive Internet
sites.
<P>
Engine treatment products are a competitive market place
and will need to be unique in order to differentiate
itself between other products. The Company had
independent lab tests performed by FES (Fluid Engineering
Services), Inc. in Stillwater, Oklahoma. FES, Inc. is a
fluids engineering and testing service. Fees were paid
for independent lab tests performed by FES. FES is
qualified to conduct most standard fluid tests related to
testing and evaluating anti-wear and lubrication
properties of system fluids in accordance with ISO, NFPA,
ASTM, SAE and MIL standards. The Company had load
resistance tests and wear analysis tests performed on the
new formula in March 1997 for Formula 2000 Ultimate, the
current formula being used by the Company. Wear rate
reduction from testing undertaken in March 1997 on the
new formula showed a 63% reduction in engine
<P>
Page 12
<P>
wear compared to base oil only. In an effort to be
unique, the group is seeking to initiate the Formula 2000
mileage challenge. By providing incentives to the user to
track his mileage through promotions and contests for
completing mileage tracking forms, the Company intends to
accumulate data, force the client to focus on the
product's performance, and develop a unique following of
resale clients.
<P>
Easy Test Product Line:
-----------------------
Antifreeze & Battery Testers:
-----------------------------
The Company plans to maintain an aggressive pricing
format for this commodity item and to continue to offer
discounts to old clients for returning. Management
continues to pursue lower cost manufacturing
opportunities in order to remain a low cost supplier of
these testers. Management intends to become a volume
importer of inexpensive testers and accessories. With
Harvey Westbury's in-house packaging capabilities, the
Company intends to pursue more private labeling
arrangements. The Company intends grow its other Easy
Test products through its current tester client base.
<P>
Mobile Air Conditioning Accessories:
------------------------------------
The Company plans to introduce a line of AC accessories
and chemicals with a new catalog. The Company intends to
be a low cost supplier of these accessory products.
<P>
Crankcase Drain Plug Series:
----------------------------
The Company intends to market this product to its current
tester client base. The Company intends to be a low cost
supplier of these accessory products.
<P>
Carbon Monoxide Testers:
------------------------
The Company intends to focus on maintaining its current
client base and to identify new clients with similar
profiles. Management believes it can market this product
to the small aircraft aviation industry where Garry's
Royal Satin has a small client base.
<P>
Fleet Drain Plug Series:
------------------------
The Company intends to reintroduce the product to the
client base as well as identify similar profile prospects
through mailing campaigns.
<P>
SOURCES AND SUPPLIERS
<P>
Page 13
<P>
Neither the Company nor any of its subsidiaries currently
have any contracts or arrangements with any
subcontractors and/or suppliers. Therefore, the
Company may be unable to obtain Products from its
manufacturers in a timely fashion. The raw materials for
all of the Company's current products are easily
accessible and several sources exist.
<P>
Harvey Westbury's Easy Test Anti-freeze and Battery
Testers. The 501 series testers are assembled and
packaged in West Paterson, New Jersey facility. The 701
and 901 series testers are assembled by the supplier and
packaged in Harvey Westbury's West Paterson, New Jersey
facility. Harvey Westbury's Easy Test Mobile Air
Conditioning Accessories are assembled by the supplier
and packaged in Harvey Westbury's West Paterson, New
Jersey facility. The Company does not have any
contractual agreements or licensing arrangements with its
suppliers for these products. There are no patents held
by third parties. The Company's subsidiary, Harvey
Westbury sells automobile accessories under the name East
Test, which is a registered trademark, number 942648
registered on Sept. 12, 1972 and renewed in 1993.
<P>
Harvey Westbury's Garry's chemical based products are
manufactured and packaged by a third-party chemical
manufacturer in New York. The Company does not have any
contractual agreements or licensing arrangements with its
suppliers for these products. There are no patents held
by third parties. The formulations for the products were
developed by the manufacturer. Harvey Westbury created
the formulas for Garry's Royal Satin and Garry's Royal
Satin Liquid. The name Garry's Royal Satin is not a
registered trademark. The Garry's Royal Satin products
are marketed and sold by Harvey Westbury.
<P>
Formula 2000 products are manufactured and packaged by
third-party chemical manufacturers in New York. The
Company does not have any contractual agreements or
licensing arrangements with its suppliers for these
products. There are no patents held by third parties.
Auxer created the formula for these products which is
currently marketed under the "Formula 2000 Ultimate"
name which is marketed and sold by Harvey Westbury. The
name Formula 2000 Ultimate is not a registered trademark.
<P>
Hardyston Distributors purchases automotive parts from
several local distributors in Northern New Jersey.
Products are manufactured and packaged by the supplier or
manufacturer. The Company does not have any contractual
agreements or licensing arrangements with its suppliers
for these products. Hardyston Distributors purchases
automotive parts for resale.
<P>
Page 14
<P>
Harvey Westbury's Easy Test Testers and Accessories are
imported from the following suppliers in Taiwan and
China: Pan Taiwan Enterprises, Co., Ltd, Yen Jen, Three-
In-One Enterprises and DHC. In Addition, another
supplier is ATS, based in the United States. The 501
series testers are assembled in Harvey Westbury's
West Paterson, New Jersey facility. Harvey Westbury's
Easy Test Mobile Air Conditioning Accessories are
imported from such suppliers as Yen Jen and Pan Taiwan
Enterprises, Co., Ltd. in Taiwan; Airosol basedin Kansas,
TCC based in Texas; du Pont based in Wilmington,
Delaware, Environmental Material Corp. based on New
Jersey and Allied Signal based in New Jersey. Some
products are manufactured at the Harvey Westbury
Farmingdale, NY facility. Harvey Westbury's Garry's
Royal Satin and Formula 2000 products are manufactured
and supplied by John Prior, Inc. and Innovative Chemical
both based in New York; CRC based on Pennsylvania;
Penray based on Illinois; and Bernard Laboratories based
in Ohio. Hardyston Distributors purchases automotive
parts from several local distributors in Northern New
Jersey including B&B Auto Parts and Allendale Automotive
Enterprises.
<P>
COMPETITION AND RELATED MATTERS
<P>
We have a market position of less than 5% for any of our
products.
<P>
Garry's Royal Satin Product Line for Automotive, Marine &
Aviation: The Wax and Polish market is mainly comprised
of waxes, polishes, and Protectants.
<P>
The care products industry is comprised of multiple types
of products and brand names. Any area or component of
one vehicle has a particular product made to clean and/or
protect it. The products, mechanically, generally come in
either aerosol cans or plastic spray bottles with a
typical range to include lubricants, cleaners, sealants,
adhesives, and protectants.
<P>
In addition to the Automotive Industry, the Company is
also involved in the Marine Waxes and Polishes industry.
<P>
The wax market primarily consists of what the company
terms Do It Yourselfer ("DIYer") client base. The
distribution chain from manufacturer to end-user
(consumer) generally follows a traditional route. It's
a three level process that starts with the
manufacturer wholesaler who sells to the distributor who,
in turn, sells product to the Jobber and/or retailer.
The consumer can then purchase from the retailer to
complete the chain.
<P>
Page 15
<P>
Major retailers command a larger influence in the
industry by being their own distributors. This push has
started to shift the distribution chain towards a two
step process, which entails the wholesaler selling direct
to the retailer. Under this method, the retailer can now
handle more volume than the distributor, in most cases,
and is able to demand lower purchase levels. Electronic
Data Inquiry ("EDI") systems are also becoming more
accepted by major retailers. These systems make it easier
to order directly from the manufacturer.
<P>
Harvey Westbury Corp. falls into the first level of
distribution. It is a manufacturer distributor of
Garry's, which is its own line of car care products to
include waxes, pastes, cleaners & Protectants.
<P>
There are three primary strategies from which the Company
intends for this segment of its business to provide
opportunity for growth. The first of which is better and
more appealing packaging. Few product lines offer
attractive, screw top containers. The second is the one-
step application process. Finally, sales support can
play a big factor. Market penetration exists for
those manufacturers who supply assistance with sales
support. Harvey Westbury has just introduced a new
packaging scheme for its Royal Satin Wax Garry's line
which involves a new twist off plastic container for
convenience along with a new color and label design.
<P>
The following is an overview of the competition:
<P>
(1) FIRST BRANDS located in Danbury, Connecticut. This
public company (NYSE:FBR) sells car care products
consisting of waxes and polishes (30-50% of the
market). Its principal brand name is STP, which is an
automotive additive. The brand name for which it markets
its wax is known as Simoniz. The product has been in
existence since the mid 1900's and is traditionally
packaged in a yellow metal container to include various
sizes.
<P>
(2) TURTLE WAX, INC. located in Chicago, Illinois
This private company has several branches located
throughout the nation. Over the years this company has
developed several car care trademarks and brand name
subsidiaries such as Lubricating 2001, Finish 2001,
Formula 2001, and CD-2. Its most recognized national
brand name is Turtle Wax. Turtle Wax, Inc. has strong
distributor and major retailer penetration and undertakes
extensive marketing and advertising to help support its
products.
<P>
Minnesota, Mining and Manufacturing (3M) located in St.
Paul, Minnesota: This public company (NYSE: MMM) is a
major leader in several industries including the
<P>
Page 16
<P>
Automotive and Marine industries. 3M's strength is its
brand name recognition.
<P>
Other Competition:
<P>
Other major competitors in the wax and polish industry
include BLUE CORAL, recently acquired by Quaker State and
StarBrite Distributors, Inc. located in Florida.
Another popular brand name called MOTHER'S located in
Huntington Beach, California has recently introduced a
complete car care product line to compliment its wax
items.
<P>
It Silicone and T-Bolt Rust Penetrant:
--------------------------------------
While dozens of competitors market a silicone spray, most
notably Gunk and Prestone, others market a multipurpose
lubricator such as WD-40 and Liquid Wrench.
<P>
Formula 2000 Ultimate Product Line:
-----------------------------------
The Engine Treatment and Oil Additive market is part of
the Automotive Aftermarket Parts & Accessories
Industry and the Company categorizes within the chemical
products group.
<P>
Currently, the distribution of engine treatment
follows the traditional paths within the Aftermarket
industry to include traditional wholesale distribution
to automotive retail chains (classical 3 tier), major
retail chains (two tier) and direct telemarketing and
infomercial settings.
<P>
The high-end brand names, where Formula 2000 Ultimate
intends to be associated, are products such as Slick 50,
Duralube, MotorUp, and Prolong, which dominate the retail
shelves.
<P>
The mid-range products consist of non-brand name products
and private label such as TM8, Tech2000 (Wal-Mart),
Lubricator2001 (Turtlewax). Typically, these products
include PTFE and low end oil additives packages. The
low-end products consist of additional private label
brands and STP's brand of oil additives. Typically,
these products consist only of low-end packages which
include cleaners and low grade oil alternatives.
<P>
The main competition within the marketplace comes from
well-known names from the automotive industry to include
First Brands and Blue Coral, a wholly owned subsidiary of
Quaker State.
<P>
First Brands: This company has a recognized name in oil
additives and engine treatments with its brand name,
STP. STP's product line is positioned as a low-end
product line with multiple product additives. The
products are typically a quality motor oil mixed with
old, well known, low-end additive packages. STP offers a
full line of additive products.
<P>
Page 17
<P>
Quaker State: Is a public company recognized for its line
of motor oil products. However, the company owns the
well recognized car care products company, Blue
Coral. Blue Coral acquired the Slick50 in 1994.
<P>
Slick50's initial engine treatment product was primarily
a quality motor oil and PTFE, sometimes better recognized
as DuPont's Teflon. Additionally, Blue Coral has
introduced a full line of additives and gas treatments as
well as semi-synthetic and full synthetic engine
treatments.
<P>
Prolong: This company is private and is located in
California. Prolong can be found in the West region of
the United States. The company has not changed its
format from a single showcase product, although the
company has a full line of additive products.
<P>
Prolong and DuraLube are typically not offered together;
but either Prolong or DuraLube are sold with Slick50.
<P>
DuraLube: This company is private and located in Eden,
New York. DuraLube is most noted for introduction of the
chlorine-based treatments. DuraLube contends its product
is no longer chlorine-based.
<P>
DuraLube offers a full line of additives and treatments.
<P>
MotorUp: MotorUp is private and represents a small
share of the market (1% to 3%). MotorUp is located in
Philadelphia. Additionally, this company popularized
the 15 oz. bottle, satisfaction guaranteed and A No
Oil Change product.
<P>
MotorUp has a full line of additives including simple
quality oil mixed with a strong additive package.
Currently, MotorUp is moving away from infomercials and
establishing distributors and retailers. The product
can be found in some of the less prominent retailers
on special isle shelving.
<P>
Other Competition:
------------------
The Company's other competition is comprised of many mid-
tier companies that offer engine treatments as part of
their additive product lines or private label vendors.
Several mid-tier products tend to have some brand name
recognition and include Lubricator 2001 (Turtlewax
product), TM8, Tech2000 (Wal-Mart Private Label), R-2000
(Bilstein), Marvel Mystery Oil, and Tufoil.
<P>
Page 18
<P>
Another indirect competitor to the engine treatment
market is the recently growing synthetic motor oils.
Mobile introduced the Mobile One technology, and has
recently introduced TMP technology. Today, Mobile
synthetic motor oil technology nearly parallels Formula
2000's synthetic technology.
<P>
EasyTest Product Line:
----------------------
Antifreeze & Battery Testers:
-----------------------------
The tester market primarily consists of a DIY (do it
yourselfer) client base. The distribution chain from
manufacturer to end-user (consumer) generally follows a
traditional route. It's a three level process that starts
with the manufacturer wholesaler who sells to the
distributor who, in turn, sells product to the Jobber and
or retailer. The consumer can then purchase from the
retailer to complete the chain. The typical third level
outlets are made up of automotive retailers, service
stations, convenience stores, grocery stores, etc.
<P>
Harvey Westbury Corp. is a manufacturer in the United
States of these tester items. Since the Easy-Test line
offers several other products, the Company also acts
as its own distributor.
<P>
The following is an overview of the competition:
<P>
JONI ENTERPRISES, LTD.- located in Taiwan, Republic of
China.
<P>
This company has been competing with Harvey Westbury for
over twenty years and currently leads the market as the
primary manufacturer. Joni also carries a small
automotive windshield accessory line.
<P>
THEXTON MFG., CO. - located in Minneapolis, Minnesota.
<P>
This company only makes the larger, professional type
testers, which, furthermore, represents less than
twenty percent of its entire revenue. The Company
primarily specializes in automobile repairs and service
equipment.
<P>
WILMAR CORPORATION - located in Seattle, Washington.
<P>
This company specializes in the manufacturing of
plastic products. It is currently importing several
items to increase its catalog selection and acts as a
distributor to several major retail chains.
<P>
CUSTOM ACCESSORIES, INC. - located in Niles, Illinois.
This private company specializes in automotive parts.
<P>
Page 19
<P>
Mobile Air Conditioning Accessories:
------------------------------------
This vast market consists of compressors, hoses, valves,
refrigerants, refrigerant recovery, retrofit servicing,
and accessories.
<P>
The automotive air conditioning accessories market
primarily consists of Jobbers and Do It Yourselfers
(DIY). It's a three level process that starts with the
manufacturer wholesaler who sells to the distributor who,
in turn, sells product to the Jobber and/or retailer.
The consumer can then purchase from the retailer to
complete the chain.
<P>
The following is an overview of the competition:
<P>
AEROQUIP CORP. - located in Maumee, Ohio.
<P>
This private company is headquartered in Ohio. The
company specializes in a variety of markets including
Hose, Fittings, and Coupling manufacturing; Heating and
Cooling parts & Accessories manufacturing; Automotive
and Aviation parts manufacturing; Plastic Products and
Plastic Extruders manufacturing; and Mold Making. It is
also important to note that the products sold from
this company mainly support the Jobber clientele.
<P>
WATSCO COMPONENTS, INC. - located in Hialeah, Florida.
<P>
This public company (NYSE: WSO) retrofits refrigerant
access valves, vacuum pumps, refrigerant recovery
machines & filters.
<P>
INTERDYNAMICS, INC. - located in Brooklyn, New York.
<P>
This private company specializes in the manufacture of
automobile parts and equipment. Its share of the AC
accessories market includes AC testing and charging
accessories, refrigerants, and electronic climate
control systems. Its items can be found in the major
discount chains such as Pep Boys, Western Auto, and R&S
Strauss.
<P>
Other Competition:
<P>
Another significant competitor in the accessories
industry is SCHRADER-BRIDGEPORT located in Altavista,
Virginia.
<P>
CASTROL INDUSTRIAL North America, INC. located in Downers
Grove, Illinois. It manufactures Retrofit Kits found in
the market to include its own brand name CASTROL.
<P>
Crankcase Drain Plug Series (CDPs & EDPs):
The other vendors currently known to manufacture this
product are Difco, Inc. and Cargo, Inc.
<P>
Page 20
<P>
Fleet Drain Plug Series (RDPs):
The markets for this product are companies with
maintenance sections who perform regular maintenance
requirements on fleet operations, trucking outlets and
repair centers. There is only one other known
distributor, IAS, in the United States.
<P>
Carbon Monoxide Testers:
<P>
Market & Competition:
<P>
Carbon Monoxide is a colorless, odorless, poisonous gas
byproduct of burning oils and other fuels. It can be
quickly absorbed by the body and cause such symptoms as
headache, dizziness, irritability, and nausea. Higher
concentrations of the gas are lethal. The distribution
chain from manufacturer to end-user (consumer)
generally follows a traditional route. It's a three
level process that starts with the manufacturer
wholesaler who sells to the distributor who, in turn,
sells the product to the Jobber and/or retailer. The
consumer can then purchase from the retailer to complete
the chain. The common retail sources for these
particular items are the major Discount Chains such as
Kmart and Home Depot.
<P>
Harvey Westbury currently directs its marketing efforts
towards the aviation and automotive safety arena.
Several state and local municipalities mandate these
detectors for their department vehicles, as well as
regulated flight school facilities. The third aspect of
growth is in technology. Harvey Westbury is one of the
few organizations that distribute the chemically treated
indicator disk, which currently acts as the main
component in battery-powered models.
<P>
The competition within this industry is as follows:
<P>
FIRST ALERT, INC. - located in Aurora, Illinois.
<P>
This is a public company that introduced the CO
detector. This company's primary source of revenue is
from smoke detectors. First Alert, Inc. products are
retailed under the brand name First Alert that offers a
complete line of gas detectors.
<P>
QUANTUM GROUP, INC. - located in San Diego, California.
<P>
This private company specializes in safety equipment and
measuring device manufacturing. The company's full line
of products is marketed under two brand names, COSTARJ,
and Quantum.
<P>
Other Competition:
<P>
Page 21
<P>
Several other brand name companies exist in the market.
Such competitive brand names are Nighthawk, Lifesaver, S-
Tech, American Sensors, Air-Zone, Emerson, Macurco, and
Safety1st.
<P>
POINTS OF OPERATION
<P>
Auxer, CT Industries, Harvey Westbury and Hardyston all
maintain their headquarters and administrative operations
in West Paterson, New Jersey. Additionally, Harvey
Westbury maintains its main sales office in West
Paterson, New Jersey. Harvey Westbury manufacturers and
warehouses its products in West Paterson, New Jersey.
The Easy Test product components are primarily
manufactured by various vendors throughout the United
States and Internationally and assembled/packaged at the
West Paterson, New Jersey location. Garry's waxes,
polishes, and chemicals, as well as Formula 2000 Engine
Treatment are manufactured and private labeled by several
vendors throughout the United States and warehoused at
the West Paterson, New Jersey location. Hardyston
Distributor's has an additional location in Franklin, New
Jersey. Hardyston distributes automotive parts and
accessories to the surrounding area automotive stores and
service stations. Hardyston warehouses parts inventory
and a small distribution staff at the Franklin location.
The Company currently employs 5 employees at Hardyston
and 5 employees at Harvey Westbury.
<P>
GOVERNMENT REGULATION
<P>
While numerous government regulations are developed
directed at the automotive and marine industries on an
on-going basis; the company does not believe that there
are any significant government regulations pending that
would impact the current product categories that the
Company is currently marketing and selling.
<P>
INTELLECTUAL PROPERTY
<P>
The Company does not own any material property in the
form of patents.
<P>
The Company's subsidiary, Harvey Westbury, sells
automotive accessories under the name Easy Test, which is
a registered trademark, number 942648 which was
registered on September 12, 1972 and renewed in 1993.
The Company does not have any contractual agreement or
licensing arrangements for these products. There are no
patents held by third parties. Additionally, Harvey
Westbury sells waxes and polishes under the name Garry's
Royal Satin, which is not a registered trademark.
Harvey Westbury previously was a distributor for Garry's
Laboratories based in Buffalo, New York. Garry's Laboratories
registered and owned the trademark. However, Garry's
Laboratories ceased doing business and the trademark
registration expired. Harvey
<P>
Page 22
<P>
Westbury has continued to distribute the product under
the trade name "Garry's Royal Satin." Harvey Westbury's
Garry's chemical based products are manufactured and
packaged by a third-party chemical manufacturer in New York.
The Company does not have any contractual agreements or
licensing arrangements with its suppliers for these products.
There are no patents held by third parties. The formulations
for the products were developed by the manufacturers.
<P>
In October 1995, Universal Filtration entered into an
agreement with William Hayday for the purchase of the
worldwide non-transferable rights to market the Fiona
Button Trap Filter and the rights to make any future
modification to the design. The term of the agreement
was October 1, 1995 until September 30, 1999. The
agreement has expired.
<P>
On May 23, 1996, CT Industries entered into a supply
agreement with MotionLube, licensee of patented
technology relating to vehicular and machinery lubricants
covered by Patent No. 5,385,683 whereas MotionLube will
manufacture or cause to be manufactured the product
covered above which will be sold under the name Formula
2000. The term of the agreement was for one year from
the date of the agreement, which will automatically renew
annually provided no violations by either party. The
agreement was not renewed after the first year.
Subsequently, the Company created a new formula,
specifically Formula 2000 Ultimate, which Harvey-Westbury
markets and sells.
<P>
Harvey Westbury does not have any contractual agreements
or licensing arrangements with its suppliers for Garry's
Royal Satin products. There are no patents held by third
parties or by Harvey Westbury.
<P>
Harvey Westbury does not have any contractual agreements
or licensing arrangements with its suppliers for these
products. There are no patents held by third parties.
The formulations for the products were developed by the
manufacturer. Harvey Westbury owns the rights to the
formulas for Garry's Royal Satin and Garry's Royal Satin
Liquid. The supplier owns the rights to the formulas for
the rest of the products under the Garry's line.
Auxer does not have any contractual agreements or
licensing arrangements with its suppliers for the Formula
2000 products. There are no patents held by third
parties. Auxer owns the rights to the formula for these
products.
<P>
Hardyston Distributors does not have any contractual
agreements or licensing arrangements with its suppliers
for Garry's Royal Satin products. Hardyston Distributors
purchases automotive parts for resale.
<P>
Page 23
<P>
Item 2. Management's Discussion and Analysis or Plan of
Operation
--------------------------------------------------------
<P>
The Company is an investment holding company that is
comprised of four subsidiaries: the Harvey-Westbury
Corporation, Hardyston Distributors, Inc., CT Industries,
and Universal Filtration Industries. The Company is a
manufacturer, wholesaler, and distributor with a line
of automotive, marine, and aviation aftermarket and
hardware products. In July 1999, the Company's Board of
Directors approved the formation of a new entity with a
focus on Internet related acquisitions and development.
<P>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
<P>
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Years
December 31, 1998 and 1999. The financial statements for
the years ended December 31, 1998 and 1999 have been
prepared on a going concern basis. The issuance of a
going concern opinion by the auditors indicates that the
auditors have substantial doubt about the company's
ability to continue as a going concern. The Company
incurred net losses of $4,828,817 for period from April
18, 1995 to December 31, 1999. These factors indicate
that the Company's continuation, as a going concern is
dependent upon its ability to obtain adequate financing.
If the Company is unable to obtain adequate financing
necessary to support the Company's ability to continue
its operations, advance its plan of operations, increase
its sales, increase its inventory and working capital,
the Company would be substantially limited. If the
Company is unable to properly fund its plan of
operations, the Company's continuation would be
jeopardized.
<P>
Management's plan to overcome its financial difficulties
consists of raising additional capital and increasing
revenues from its subsidiaries. The plan of operations
discloses the Company's plan to grow its subsidiaries
sales. The Company requires additional funding in the
next twelve months to invest in the marketing programs,
inventory, equipment and working capital requirements.
<P>
The Company estimates its cash and capital commitments
during the next twelve months to be as follows:
<TABLE>
<S> <C>
Requirement Commitment 12 Month Cash Requirement
----------------------- -------------------------
Raw materials $2,500,000
<P>
Page 24
<P>
Payroll 600,000
<P>
Legal settlements 50,000
Debt payments 50,000
Leases 125,000
Insurance 50,000
Supplies 25,000
Marketing/Advertising 200,000
Maintenance/Repairs 10,000
General & Administrative 300,000
------------------------
TOTAL: $3,910,000.00
</TABLE>
<P>
The Company plans to increase its line of credit to
assist in financing the raw material requirements. The
Company will require a credit line up to $2.5 million.
Additionally, the Company plan's to support its
operations through increased revenues. Lastly, the
Company plans to raise additional capital to assist the
Company in meeting its commitments.
<P>
The Company will require additional financing to
capitalize the plans outlined above. The Company plans
to raise additional capital of $2,000,000 through a
private placement and/or registered offering in the
or 2nd or 3rd quarter of 2000. The proceeds of this
planned offering will be used to fund the above expansion
plans and operating expenses.
<P>
The Company expects additional funding may be required in
the next twelve months to satisfy increased inventory
requirements if Harvey Westbury and Hardyston sales
increase. In January 2000, the Company completed an
offering for 7,900,000 shares and raised an aggregate of
$395,000 pursuant to the exemption under Rule 504 of
Regulation D. Such offering was originally for 7,000,000
shares and was subsequently amended to increase the
offering.
<P>
In Footnote 12 of the financial statements, during 1998,
errors were discovered in which stock was issued and
recorded at the incorrect price. Such issues have been
corrected. The shares in question were issued by the
Company. The shareholders who received these shares were
Creative Capital, an investment company, in consideration
for reduction to loans payable and International
Development Corp., a finance and public relations firm in
consideration for professional services rendered. On
September 4, 2996, Creative Capital received 250,000
shares in consideration for $102,000 and on July 22,
<P>
Page 25
<P>
1997, International Development received 70,000 shares in
consideration of $17,500. The Company has implemented a
new procedure which requires the Company to maintain a
stock ledger which is updated with every stock issuance.
After each issuance the Company's stock ledger is
reconciled with the transfer agents records. The ledgers
are reviewed by the Company's Board of Directors on a
monthly basis. These errors were corrected by restating
note payable, accumulated deficit, common stock and
capital in excess of par. The effect of these errors was
to overstate 1996 net losses by $2,402, understate 1997
net losses by $17,500 and overstate notes payable by
$102,000 for a net increase in stockholders' equity of
$102,000.
<P>
In addition, the Company in error accrued as salary for
the President for the years ended December 31, 1995, 1996
and 1997 at $100,000 per year for a total of $300,000.
On July 6, 1999, the parties agreed that the accrued
compensation would not be paid. There was no accrual
made for year ended December 31, 1998. As a result, the
financial statements were restated to reflect the effect
of not accruing officer salary at $100,000 per year for
1995, 1996, and 1997 resulting in a net increase in
stockholders equity of $300,000.
<P>
In conjunction with the Company filing Form 10SB for
Registration of Securities of small business issuers, the
effect of a one time change in accounting principles is
accounted for by retroactively restating financial
statements for the years ended December 31, 1998 and
1997.
<P>
As a result, certain costs that were capitalized and
amortized were restated and charged to operations as
incurred. The financial statements were restated to
reflect the effect of expensing these costs in the
periods incurred, increasing net loss by $540,967, and
decreasing net loss by $136,603 for the years ended
December 31, 1997 and 1998, respectively. The net change
in stockholders' equity as a result of the restatement
was a increase of $136,603 and a decrease of $540,967 at
December 31, 1998 and December 31, 1997 respectively.
<P>
Also in conjunction with the Company filing a Form 10SB
for Registration of Security of small business issuers,
the effects of a change in the value of services paid for
through the issuance of the Company's common stock and
the recognition as a loss of the Company's investment in
Auxer UK were accounted for by retroactively restating
the financial statements for the years ended December 31,
1998 and 1997.
<P>
Page 26
<P>
As a result, the value of services received were changed
to reflect the fair value of the Company's common share
issued, increasing net losses by $336,135 and $515,791 or
the years ended December 31, 1998 and 1997. The company
also increased net losses by recognizing a loss on the
investment Auxer UK of $353,000 for the year ended
December 31, 1998. The net change in stockholders'
equity as a result of these changes was $353,000 for the
year ended December 31, 1998.
<P>
The net effect of the above changes covered by the
restatement on stockholders' equity was a decrease of
$216,397 and $158,967 at December 31, 1998 and 1997
respectively. The effect of the restatement on the
related per share data was to increase the loss by $.02
and $.08 per common share and per common share assuming
dilution for the year ended December 31, 1998 and 1997.
<P>
In 1996, 400,000 shares of common stock were issued, but
held for delivery contingent upon performance objectives
of Universal Filtration Industries being achieved. These
shares were rescinded when these objectives were not
achieved.
<P>
From April 18, 1995 to December 31, 1997, the Company was
in a development stage since it has generated moderate
recovery from the sales of its various product lines. The
company was primarily a development stage company due to
the fact that the company's focus was developing engine
treatment technology and redeveloping and establishing
new raw material vendors for most of the products under
the Garry's Royal Satin and Easy Test lines under Harvey
Westbury. While revenues were generated, generating sales
was not the primary focus of the company during this
period, but rather product development.
<P>
The Company currently has two subsidiaries selling
automotive products. Hardyston Distributors distributes
a variety of automotive hard parts (which represents 100%
of its sales), currently representing approximately 45%
of the Company's revenue during the year ending December
31, 1999. The Harvey Westbury product lines, which
include the products under the names Easy Test and
Garry's Royal Satin, represent the Company's other
revenue (approximately 54%). During the year ending
December 31, 1999, Harvey Westbury's sales by product
breaks down as follows: Easy Test Mobile A/C Accessories
28%; Easy Test Anti-freeze & Battery Testers - 25%;
Garry's Royal Satin Automotive - 13%; Garry's Royal Satin
Marine - 10%; Easy Test Drain Plug Series - 10%; Easy
<P>
Page 27
<P>
Test Fleet Drain Plug Series - 3%; Carbon Monoxide
Testers - 3%; Easy Test Hatchback Lights - 1%; and
Formula 2000 Ultimate - less than 1%; Garry's It Silicone
and T-Bolt Rust Penetrant - less than 1%; Miscellaneous
Products - 9%.
<P>
Results of operations for periods ended December 31, 1998
and 1999
<TABLE>
<S> <C> <C> <C>
Year ended Year ended +/- %
Dec. 31, 1998 Dec. 31, 1999
------------- ------------- ------
<P>
Net Sales $287,456 871,259 +203%
Gross Profit 49,504 249,049 + 8%
Selling, General &
Administrative Expenses 1,053,887 1,302,418 + 24%
Research & Development Costs 1,106 0 -100%
Depreciation Costs 12,928 11,626 - 10%
Amortization Costs 0 0 0%
Interest 20,790 31,964 - 49%
Net Income (Loss) (1,392,207) (975,127)
Inventory 164,302 290,725 + 77%
</TABLE>
<P>
Net Sales
<P>
The company had sales of sales of $871,259 in 1999
compared to sales of $287,456 in 1998 representing a
increase of $583,803 or 203%. The increase in sales in
1999 was due to an increase in revenue generated from
Harvey Westbury and sales from Hardyston Distributors,
the Company's two primary operating subsidiaries. Harvey
Westbury's sales increased from $283,528 to $474,344.
Additionally, sales from Hardyston were $393,225.
<P>
Gross Profit Margins
<P>
The company had gross profits of $249,049 and a gross
margin of 29% in 1999 compared to gross profits of
$49,504 and a gross margin of 21% in 1998 representing a
increase in the gross margin of 8%. The increase in
gross profit was a result of the companies ability to
buy raw materials in large volume to obtain volume
discounts.
<P>
Selling, General & Administrative Expenses
<P>
The company had general and administrative expenses of
$1,302,418 in 1999 compared to $1,053,887 in 1998
representing an increase of $248,531 or 24%. The increase
in these expenses was a result of increased spending in
marketing and sales of Harvey Westbury's products.
<P>
Research & Development Costs
<P>
Page 28
<P>
The company had research and development costs of $0
in 1999 compared to $1,106 in 1998 representing a
decrease of $1,106 or 100%. The decrease in these
costs was a result of the completion of developing the
Easy Test and Garry's Royal Satin product lines under
Harvey Westbury. The company's primary focus in 1999 was
marketing and selling these products.
<P>
Depreciation
<P>
The company had depreciation expenses of $11,626 in 1999
compared to $12,928 in 1998 representing an decrease of
$1,302 or 10%. The decrease in these expenses was a
result of an decrease in the equipment depreciation.
<P>
Amortization Costs
<P>
The company had amortization expenses of $0 in 1999
compared to $0 in 1998 representing no change. There
were no costs that were capitalized or amortized. All
costs were expenses in the period they incurred.
<P>
Interest
<P>
The company had interest expenses of $10,618 in 1999
compared to $20,790 in 1998 representing a decrease of
$10,172 or 49%. The decrease in these expenses was a
result of a lower average principal outstanding on Harvey
Westbury's credit facility in 1998.
<P>
Net Income (Loss)
<P>
The company had net losses of $975,127 or a loss of $0.02
per share in 1999 compared to losses of $1,392,207 or a
loss of $0.04 per share in 1998 representing a decrease
in losses of $417,080 or $0.02 per share. The decrease
in losses was a result of increase in sales, as well as,
an increase in gross profits in 1999.
<P>
Inventory
<P>
The company had inventory of $296,725 on December 31,
1999 compared to inventory of $164,302 on December 31,
1998 representing an increase of $126,423 or 77%. The
increase in inventory was a result of the company's
ability to fund Harvey Westbury's inventory
requirements during 1999.
<P>
Plan of Operation
<P>
The Company's plan of operation for the next twelve
months is to continue to develop sales of Harvey Westbury
<P>
Page 29
<P>
and Hardyston Distributors. The Company plans for Harvey
Westbury to generate enough sales in fiscal year 2000 to
begin supporting itself. The company plans for Hardyston
Distributors to add an additional location, satellite
warehouse in the 2nd quarter, 2000.
The company also plans to startup or to invest in an
Internet technology business or business that plans to
enter into Internet-related activity within the next
twelve months.
<P>
Over the next twelve months, the Company's plans will
require funding to increase Harvey Westbury's and
Hardyston's inventory and vehicles, support Harvey
Westbury's marketing and advertising program for Garry's
Royal Satin waxes and polishes, and support research and
development cost. The company can satisfy it cash
requirements for three to six months without additional
financing.
<P>
The Company has an on-going research and development
program with a focus on adding additional products to the
Easy Test and Garry's Royal Satin product lines within
Harvey Westbury. These programs are planned to continue
over the next twelve months. The company does not plan to
purchase or sell any significant assets during the term,
however the company may lease additional facility
requirements as needed for Hardyston Distributor's
satellite location and additional office space which may
be required for the Company's Internet-related entity and
activities.
<P>
The Company plans to add additional employees over the
next twelve months in Harvey Westbury's production and
sales personnel if the company's sales continue to
increase. Additionally, the company plans to add drivers
and sales personnel in Hardyston Distributors if the
company's sales continue to grow. If the company's
Internet entity and/or business develop over the next
twelve months, the company plans to add personnel to the
Internet Entity. The company may also add administrative
and executive personnel under The Auxer Group.
<P>
Trends, Events, or Uncertainties with Material Impacts
<P>
During 1997, the Company formed Auxer UK Ltd., a wholly
owned foreign corporation based in the United Kingdom.
This company invested in software technologies in the
United Kingdom. The Company invested $218,000 and
$135,000 in 1997 and 1998 respectively. In June 1998,
the Company divested itself of its software business for
the amount of the investment, $353,000, which was
received in the form of a promissory note to be repaid
upon certain criteria being met. As of September 30,
1999, the Company determined the collectability of the
note is doubtful and has written it off.
<P>
Page 30
<P>
The decrease in Harvey Westbury's sales in 1998 is partly
attributable to financing difficulty experienced in 1998.
The Company was relying on funding planned for the 1st
quarter of 1998 which failed to materialize. The planned
funding to increase marketing and sales efforts as well
as complete development projects for Garry's Royal Satin
and Easy Test was redirected to continue operations of
the software investment while arranging to divest of the
investment. As a result, the Company believes Harvey
Westbury sales were impacted.
<P>
The Company's subsidiary, Harvey Westbury has attempted
to sell automotive wax under the name, King's Ransom.
Sales as a result of this product are nominal and the
company has decided to sell the remaining inventory, less
than $10,000 and discontinue selling the product. Harvey
Westbury has developed a substitute product to replace
King's Ransom which is planned to be sold under the name
of Garry's Royal Satin Supreme.
<P>
The automotive industry consolidation over the past
several years has created a more competitive marketplace
for automotive parts and accessories. The direct impact
of this event has led to the success of major automotive
retail chains. The impact to the company appears to have
only changed name of the clients. The volumes of product
purchased appears to have remained constant.
<P>
The Company's subsidiary, Harvey Westbury agreed to
package its Easy Test products for Warren Distribution
under the trademark Polar for distribution throughout
Warren Distribution's network of warehouse distributors
and retail outlets. This arrangement began in August
1998. Revenues generated from sales to Warren were less
than two percent (2%) of the company's total revenue in
1999. The Company believes this relationship will
continue over the next twelve months and that additional
products may be added which may generate additional
revenue. If the current relationship is discontinued in
the next twelve months, the company does not believe this
event would have a material impact on the company.
<P>
The Company's subsidiary, Harvey Westbury entered a
licensing agreement with Carquest to use the trademark
Carquest on its Easy Test products to be distributed
throughout Carquest's network of warehouse distributors
and retail outlets in October 1998. Revenue generated
from sales to Carquest network represented less than five
percent (5%) of the company's total revenue in 1999. The
Company plans for the revenue generated from sales to
Carquest's network to increase as the Harvey Westbury's
products are being represented in Carquest's catalog in
1999. The company believes the relationship with
Carquest will continue over the next twelve months and
<P>
Page 31
<P>
the increased exposure in the Carquest catalog may
generate additional sales. If the current licensing
relationship is discontinued in the next twelve months,
the company does not believe this event would have a
material impact on the company.
<P>
In January 1999, the Company entered into an investor
relations agreement with PMR & Associates. Under the
terms of the agreement, PMR & Associates was to be paid a
fee of $3,500 for these services. The agreement was
renewed in April 1999 with fees to be paid of $6,000 for
these services for three months which expired in June
1999. In July 1999, the Company entered into a
management consulting agreement with PMR & Associates for
services related in assisting in the development of the
web site and Internet related development as well as
acquisition development. PMR & Associates was granted
options to purchase shares above market value at the time
of the agreement. The shares were not exercised and have
expired.
<P>
On April 22, 1999, the Company issued 836,700 shares of
common stock at $.1075 per share plus $15,000 for the
purchase of assets of Ernest DeSaye, Jr. The company
employed Mr. DeSaye and formed a newly incorporated
subsidiary, Hardyston Distributors, Inc. The company has
started a new company and plans for the subsidiary's
revenue to increase. The Company believes Hardyston
Distributors will need additional inventory, personnel
and vehicles to increase its sales.
<P>
The Company invested $10,000 towards advertising in the
Puerto Rico markets in May 1999. The advertising effort
was developed with the Veritas Group and was focused on
assisting current distributors in Puerto Rico sell
Garry's Royal Satin waxes and polish. The company
believes advertising and marketing support is necessary
to continue to sell Garry's Royal Satin waxes and
polishes. The Company plans to continue to advertise and
market its products in Puerto Rico over the next twelve
months and the budget for advertising is undetermined and
is relative to the ability to raise funds discussed in
the Plan of Operations subsection. The Company has not
been able to completely evaluate the results of the
advertising in 1999, but believes continued advertising
in Puerto Rico over the next twelve months is necessary
in order to increase revenues from sales in Puerto Rico.
<P>
The Company introduced web sites for Harvey Westbury and
Formula 2000 in April 1999, which enables visitors to the
site to purchase the Company's products. The Company has
not advertised the website in 1999 and revenue generated
from the sales from the website represent less than one
percent (1%) of the Company for the year ended December
31, 1999. The Company plans to advertise and market its
web sites in the next twelve months and is relative to
<P>
Page 32
<P>
the ability to raise funds discussed in the Plan of
Operations subsection. The Company believes
advertising over the next twelve months is necessary in
order to increase revenues from sales from the web sites.
<P>
In July 1999, the Company approved the formation of a new
entity with a focus on Internet related acquisition and
development. In August 1999, the Company signed a letter
of intent to purchase a domain name. The letter of
intent consists of the Company entering into negotiations
with the intention of purchasing an internet domain name,
TheLoadingDock.com. At this time, a price for the rights
to the name has not been agreed upon. The purchase
has not closed and no time has been established to close.
The Company expects to conclude negotiations in the next
twelve months. At this time, the Company doesn't know
what impact it will have on its financial audit or the
result of the operation. The Company plans to invest
funds toward the development of web sites and/or Internet
related businesses over the next twelve months. The
Company plans to advertise these potential web sites and
businesses over the next twelve months. The company
believes advertising over the next twelve months is
necessary in order to develop revenues from the sales
from these potential businesses.
<P>
Internal and External Sources of Liquidity
<P>
The company's subsidiary, Harvey Westbury has a credit
facility agreement with Finova Capital (formerly United
Credit Corp.) The credit facility currently permits
borrowings of up to $150,000 against a fixed percentage
of 75% of eligible accounts receivable. The interest rate
on the line of credit is basic interest on the daily
unpaid cash balances outstanding during each month at a
rate equal to the prime rate plus 8% per annum. The rate
shall not be less than 16 3/4% per annum nor more than
maximum permitted by applicable law. The credit facility
agreement requires a commitment fee of $1,750 per annum.
<P>
For year ending December 31, 1998, the Company paid for
operations by raising $1,054,400 through common stock
issuance and debt borrowings after payments to short term
debts. The Company borrowed $60,000 from the Augustine
fund in convertible notes at 8% dated November 21, 1998
payable on demand plus interest payable semi-annually on
March 1, and August 1 with shares of the Company's common
stock. The notes were converted at 70% of the 5 day
average bid price prior to conversion. The Company had
notes payable of $190,000 on December 31, 1998. The
Company borrowed and made payments of $28,759 under a
<P>
Page 33
<P>
security agreement with United Credit Corporation to
borrow money secured by the receivable evidenced by
invoices of Harvey Westbury Corp. The Company has
provided guarantees of the repayment of loans. United
agreed to lend an amount equal to 75% of the net value of
all Harvey Westbury accounts. The Company raised capital
of $688,225 through the sale and issuance of common
stock to provide for services rendered, consulting
requirements and operating and investment activities.
<P>
For the year ended December 31, 1999, paid for
operations by raising $1,261,714 through common stock
issuance and debt borrowing after payment to short term
debts. On February 2, 1999 and February 16, 1999, the
Company issued common stock of $39,020 to MYD
Distributors for a legal settlement. The Company had
notes payable of $82,523 on December 31, 1999. The
Company borrowed and made payments of $5,575 under a
security agreement with Finova Growth Finance (Finova
Growth Finance acquired United Credit's accounts) to
borrow money secured by the receivable evidenced by
invoices of Harvey Westbury Corp. The Company has
provided guarantees of the repayment of loans. Finova
agreed to lend an amount equal to 75% of the net value of
all Harvey Westbury accounts. On June 1, 1999, the
Company's subsidiary Hardyston Distributors entered into
a vehicle loan agreement for $5,000 with Hudson United
Bank. The period of the loan is for 24 months at rate of
13.5% per annum. On January 2, 1999, the Company issued
preferred stock of $412,500. The Company raised capital
of $850,224 through the sale and issuance of common stock
to provide for services rendered, consulting requirements
and operating and investment activities.
<P>
The table below outlines the debt outstanding as of
December 31, 1999:
<TABLE>
<S> <C> <C> <C>
Amount of Debt Interest Rate Maturity Convertible into
common Shares
-------------------------------------------------------------------
$107,887 None Various No
-------------------------------------------------------------------
<P>
$31,368 8% - 30 days No
Floating
-------------------------------------------------------------------
$80,000 8% Demand No
-------------------------------------------------------------------
$3,698 13.5% 24 months No
-------------------------------------------------------------------
$77,390 None Demand Yes
</TABLE>
<P>
Page 34
<P>
<P>
Presently, we do not have any unused sources of liquidity
available to us. In addition, it has been difficult to
raise cash through capital transactions based on our
delisting of our stock from the OTC Electronic Bulletin
Board to the National Quotations Bureau Pink Sheets.
<P>
Year 2000 Compliance
<P>
The Company's state of readiness is in the process of
completion. The Company's Information Technology (IT)
system's are based on a multi-unit network of personal
computers. The IT systems are using Microsoft Windows 95
and Windows 98 operating systems under a peer-to-peer
network. The IT systems have been upgraded with
Microsoft's Year 2000 Resource CD. The Company receives
the latest version from Microsoft as it becomes
available. All supporting business software has been
upgraded for Year 2000 compliant issues to the extent
that the third party software is known. The Company has
performed simulated tests and have not experienced any
material impacts. The Company will continue to maintain
the IT systems with the most up to date versions of Year
2000 compliant software. The Company's web sites and
credit card processing requirements are maintained on
server systems of third parties and have all been tested
for Year 2000 compliance. The Company does not consider
Y2K issues to be of high risk or expensive to fix. The
Company believes only minor fixes may be required. As a
contingency plan, the Company has implemented an
aggressive backup program where all data will be
maintained on backup storage independent of the Company's
IT systems. In the case of IT system failure (worst
case), the Company estimates $5000 in IT system upgrades
or replacements with new IT systems may be required. The
Company has budgeted these funds for this situation and
intends to reserve these funds through 2nd quarter 2000.
<P>
Page 35
<P>
Item 3. Description of Property
--------------------------------
<P>
The Company leases all properties it currently conducts
business on. The Auxer Group, Inc and its subsidiaries
maintain headquarters and administrative offices at 30
Galesi Drive, Wayne, New Jersey, 07470. Additionally,
Harvey Westbury houses it's main sales offices at the
same location. The property is an office complex area off
of a major local highway (State Highway 46). The lease
was entered into on November 1, 1996. An $1,800 security
deposit was paid and rental payments to be paid are as
follows: for December 1, 1997 to November 30, 1998,
annual rent of $21,948 (monthly payments of $1,829); for
December 1, 1998 to November 30, 1999, annual rent of
$23,777 (monthly payments of $1,981). In consideration
for the Company taking the space in an "as is" condition,
the landlord abated the monthly base rent for a period of
4 months and payments of rent began on April 1, 1997. The
Company has the right to terminate this lease after the
first year upon 90 days notice. After November 30, 1999,
the Company is continuing to lease the property on a
month to month basis through February 29,2000 at the same
rate as the last period.
Subsequently, on February 1, 2000, The Auxer Group, Inc.
and its subsidiaries moved its headquarters and
administrative offices to 12 Andrews Drive, West
Paterson, NJ. Additionally, the Company moved the
Farmingdale, NY operations to this location. The
property is a warehouse and offices flex space. The
Company entered into a five-year lease agreement with a
non-affiliated party beginning on February 1, 2000 and
expiring January 31, 2005. A Security deposit of $15,583
was required. Rental payments for February 1, 2000 to
January 31, 2001 are $85,000 annually (monthly payments
of $7,083.34). Rental payments for February 2001, to
January 31, 2002 are $89,250 (monthly payments of
$7,437.50). Rental payments for February 1, 2002 to
January 31, 2003 are $93,500 annually (monthly payments
of $7,791.67). Rental payments for February 2003 to
January 31, 2004 are $97,750 annually (monthly payment of
$8,145.84). Rental payments for February 1,2004 to
January 31, 2005 are $102,000 annually (monthly payments
of $8,500). In addition to the minimum monthly rental
payments, the company must pay real estate taxes,
insurance and utilities of approximately $1,700 per
month.
<P>
The Harvey Westbury Corp. maintains light manufacturing
and warehousing facilities at 18 Heisser Court,
Farmingdale, New York 10015. The property is a warehouse
and light manufacturing complex off of a major local
highway (State Highway 109). The lease was entered into
April 1, 1995 and initially expired on April 30, 1998.
On February 23, 1998, the lease was extended to expire on
April 30, 1999. A $5,770 security deposit was required.
<P>
Page 36
<P>
Rental payments for May 1, 1997 to April 30, 1998, were
$33,744 annual (monthly payments of $2,812). Rental
payments for May 1, 1998 to April 30, 1999 were $35,604
annual (monthly payments of $2,967). On March 29th,
1999, the lease was extended for the period from May 1,
1999 to April 30, 2000. Rental payments for the period
are $36,024 annual (monthly payments of $3,002).
Subsequently, the Company moved the operations to 12
Andrews Drive, West Paterson, NJ on February 15, 2000.
<P>
Hardyston Distributors, Inc. maintains a distribution
center and warehouse facility at 22-B Lasinski Road,
Franklin, New Jersey, 07416. The property is a warehouse
complex in Franklin New Jersey. The lease was entered
into on December 26, 1997 which commenced on March 1,
1998 and expires on February 28, 1999 with an option to
renew for an additional twelve months from March 1, 1999
to February 28, 2000. The option to renew was invoked.
Rental payments for March 1, 1998 to February 28, 1999
were $8,400 annually (monthly payments of $700). Rental
payments for March 1, 1999 to February 28, 2000 are
$8,700 (monthly payments of $725). Subsequently, the
Company renewed its lease at this location for an
additional 2 year term. Rental payments for March 1,
2000 to February 28, 2001 are $9,000 annually (monthly
payments of $750). Rental payments for March 1, 2001 to
February 28, 2002 are $9,300 annually (monthly payments
of $775).
<P>
Page 37
<P>
Item 4. Security Ownership of Certain Beneficial Owners
and Management
--------------------------------------------------------
<P>
The following table sets forth certain information
regarding the Company's common and preferred stock
beneficially owned on December 31, 1999, for (i) each
shareholder known by the Company to be the beneficial
owner of 5% or more of the Company's outstanding common
and preferred stock, (ii) each of the Company's executive
officers and directors, and (iii) all executive officers
and directors as a group. In general, a person is deemed
to be a "beneficial owner" of a security if that person
has or shares the power to vote or direct the disposition
of such security. A person is also deemed to be a
beneficial owner of any security of which the person has
the right to acquire beneficial ownership within 60 days.
At December 31, 1999, there were 56,736,797 (84,236,797
on a fully diluted basis if preferred shares were
converted) shares of common stock outstanding and
2,750,000 shares of preferred stock outstanding.
<P>
Class of Security- Common Stock
<P>
<TABLE>
<S> <C> <C>
Name and Address of Beneficial Owner: No. of Shares Percent of Class:
Beneficially
Owned
----------------------------------------------------------------------------
Eugene Chiaramonte, Jr. (1) 2,173,886 3.8%
(17,173,886) (20.4%)
12 White Birch Court,
Branchville, NJ 07826
Ronald Shaver (2) 600,000 1.1%
<P>
18 Caraway Court, (13,100,000) (15.6%)
Princeton, NJ 08540
Ernest DeSaye, Jr. (3) 836,700 1.5%
112 Clove Road, Sussex, NJ 07461 (1.0%)
<P>
All Executive Officers and Directors
as a Group (3 persons) 3,610,586 6.4%
(31,110,586) (36.7%)
</TABLE>
<P>
Page 38
<P>
Class of Security- Preferred Stock
<TABLE>
<S> <C> <C>
Name and Address of Beneficial Owner: No. of Shares Percent of Class:
Beneficially
Owned
----------------------------------------------------------------------------
Eugene Chiaramonte, Jr. (1) 1,500,000 54.5%
<P>
Converts to
12 White Birch Court, 15,000,000 of
Branchville, NJ 07826 Common Stock
<P>
Ronald Shaver (2) 1,250,000 45.5%
<P>
18 Caraway Court, Converts to
Princeton, NJ 08540 12,500,000 of
Common Stock
<P>
All Executive Officers and Directors
as a Group (3 persons) 2,750,000 100%
</TABLE>
<P>
(1) Shares held of record in common stock total
2,173,886 or 3.8% of the total outstanding shares of
common stock and preferred stock total 1,500,000. Each
share of preferred stock is convertible into 10 shares of
common stock. On a fully diluted basis if all preferred
shares were converted to common shares, shares held of
common stock would total 17,173,886 or 20.4% of the total
outstanding shares of common stock.
<P>
(2) Shares held of record in common stock total
600,000 or 1.1% of the total outstanding shares of common
stock and preferred stock total 1,250,000. Each share of
preferred stock is convertible into 10 shares of common
stock. On a fully diluted basis if all preferred shares
were converted to common shares, shares held of common
stock would total 13,100,000 or 15.6% of the total
outstanding shares of common stock.
<P>
(3) Shares held of record in common stock total
836,700 or 1.5% of the total outstanding shares of common
stock. On a fully diluted basis if all preferred shares
were converted to common shares, shares held of common
stock would total 836,700 or 1.0% of the total
outstanding shares of common stock.
<P>
Page 39
<P>
Item 5. Directors, Executive Officers, Promoters and
Control Persons
-----------------------------------------------------
<P>
The following table sets forth the names, ages, and
positions with the Company of the executive officers and
directors of the Company. Directors serve until the next
annual meeting of the Company's shareholders or until
their successors are elected and qualify. Officers are
elected by the Board and their terms of office are,
except to the extent governed by employment contracts, at
the discretion of the Board.
(2)<TABLE>
<S> <C> <C>
NAME AGE POSITION
Eugene Chiaramonte, Jr. 55 Director, President and Chief Executive Officer
Ronald Shaver 32 Consultant, Operations and Finance
Ernest DeSaye, Jr. 35 Manager, Hardyston Distributors
</TABLE>
<P>
Eugene Chiaramonte Jr. has served as Director, President
and Chief Executive Officer of the Company since April
1995. Mr. Chiaramonte was a founder and has served as
Director, President and Chief Executive Officer of the
Company's subsidiary, CT Industries since June 1994.
Additionally, he has served as Director and Secretary of
the Harvey Westbury Corp. since October 1996 and a co-founder,
Director and Secretary of Hardyston Distributors
since April 1999.
<P>
Ronald Shaver has served as a consultant to the Company
since February 1996. He has served as Director and is
acting in the capacity of President of the Harvey
Westbury Corp since October 1996. Additionally, he is a
co-founder and has served as a Director and is acting in
the capacity of President and Chief Executive Officer of
Hardyston Distributors since April 1999. From 1995 to
1996, Mr. Shaver was a management consultant with George
S. May International. From 1993 to 1995, he was a Vice
President of Atlantic Venture Group, an investment
banking firm. From 1989 to 1993, Mr. Shaver served with
the Corps of Engineers, U.S. Army with tours at Ft.
Leonard Wood, Mo, Republic of South Korea, and United
States Military Academy, West Point. Mr. Shaver is
currently a Captain in the United States Army Reserve.
He received his MBA from CW Post-Long Island and BS in
Engineering from the University of Kansas and is a
graduate of the National Engineer Center.
<P>
Ernest DeSaye has served as the senior manager for the
operations of Hardyston Distributors since April 1999.
From 1991 to April 1999, Mr. DeSaye had operated as a
sole proprietor distributing automotive parts and
accessories to the local automotive community. From 1981
to 1991, he was a Chief Mechanic and co-owner at Vernon
Transmission and Auto Repair.
<P>
Page 40
<P>
Item 6. Executive Compensation
-------------------------------
<P>
The following table shows, for the three-year period
ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C>
Name & Other All
Principal Position Year Salary Bonus Annual Other
Compensation Compensation
------------------ ----- ------- ------ ------------- ------------
Eugene Chiaramonte, Jr. (1)(4) 1999 $60,000 $0 $0 $208,500
Chief Executive Officer 1998 $ 0 $0 $0
1997 $ 0 $0 $0
Ronald Shaver (2) 1999 $ 0 $0 $70,000 $173,750
Operations & Finance 1998 $ 0 $0 $40,000
1997 $ 0 $0 $83,625
Ernest DeSaye Jr. (3) 1999 $45,000 $0 $0
Hardyston Operations 1998 $ 0 $0 $0
1997 $ 0 $0 $0
</TABLE>
<P>
(1) In January 1999, Mr. Chiaramonte was issued
1,500,000 shares of the Company's Preferred Stock valued
at $225,000 of which $15,000 was issued to repay a loan
and $208,000 was issued as deferred compensation. Mr.
Chiaramonte was paid no compensation during the
years of 1997 and 1998. Beginning in April 1999, the
Company paid Mr. Chiaramonte a salary at the rate of
$60,000 per annum.
<P>
(2) In January 1999, Mr. Chiaramonte was issued
1,250,000 shares of the Company's Preferred Stock valued
at $187,500 of which $12,500 was reimbursement of
expenses and $173,750 was issued as deferred
compensation. In 1998 and 1999 compensation includes
consulting fees related to Harvey Westbury. In 1997
compensation includes consulting fees related to Auxer
Industries of $10,225, related to Harvey Westbury of
$72,400, and related to Universal Filtration Industries
of $1,000.
<P>
(3) Mr. DeSaye was not an officer of the Company
until April 1999. Mr. DeSaye is being paid a salary of
$45,000 per annum in 1999.
<P>
(4) The Company in error accrued as salary for Mr.
Chiaramonte for the years ended December 31, 1995, 1996,
and 1997 at $100,000 per year for the total of $300,000.
On July 6, 1999, the parties agreed that the accrued
compensation would not be paid. In addition and in
conjunction with the Company filing this registration
document, the Company retroactively restated the
financial statements for the years ended December 31,
1998 and 1997 to reflect a one time change in accounting
principals.
<P>
Page 41
<P>
The following table sets forth information with respect
to the grant of options to purchase shares of common
stock during the fiscal year ended December 31, 1999, to
each person named in the Summary Compensation Table.
<P>
OPTION GRANTS IN THE LAST FISCAL YEAR
<P><TABLE>
<S> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR EXPIRATION
OPTIONS EMPLOYEES BASE PRICE DATE
NAME GRANTED (#) IN FISCAL YEAR ($/SH)
----- -------------- ------------ ------------- ----------
Eugene Chiaramonte, Jr. 0 0 0
Ronald Shaver 0 0 0
Ernest DeSaye, Jr. 0 0 0
</TABLE>
<P>
The Company's stockholders approved the adoption of a
Nonstatutory Option plan at the August 19, 1997
shareholder's meeting whereby the Company reserved
2,000,000 shares of the Company's common stock which
would be granted to employees, officers, directors, and
consultants to the Company. The option plan was to be
administered by the Board of Directors and would not
qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code.
<P>
The Plan shall be administered by the board of directors
of the Company or by an option committee to be
established by the board of directors of the Company.
Participants in the Plan shall be employees, officers,
directors, consultants of the Company or any other
parties who have made a significant contribution to the
business and success of the Company as may be selected
from time to time by the Board in its discretion.
<P>
Page 42
<P>
No options shall be granted under the Plan after March
31, 2001, but Options theretofore granted may extend
beyond that date. The number of Shares which may be
issued under the Plan shall not exceed 2,000,000 in the
aggregate. To the extent that any Option granted under
the Plan shall expire or terminate unexercised or for any
reason become unexercisable as to any Shares subject
thereto, such Shares shall thereafter be available for
further grants under the Plan.
<P>
All options granted under the Plan shall be subject to
the following terms and conditions:
<P>
(a) The exercise price under each option shall be
determined by the Board and may be more, equal to or less
than the then current market price of the Shares as the
Board may deem to be appropriate;
<P>
(b) Period of an Option shall not exceed five years
from the date of grant;
<P>
(c) Each Option shall be made exercisable at such
time or times, whether or not in installments, as the
Board shall prescribe at the time the Option is granted
and the person electing to exercise an Option shall give
written notice to the Company of his/her election and of
the number of shares he/she has elected to purchase and
shall at the time of such exercise tender the purchase
price of the shares he/she has elected to purchase.
<P>
(d) Upon exercise of any Option granted hereunder,
payment in full shall be made at the time of such
exercise for all such shares then being purchased.
<P>
(e) No options may be transferred by the Participant
otherwise than by will or by the laws of descent and
distribution, and during the participant's lifetime the
Option may be exercised only by the Participant.
<P>
(f) If the Participant is an employee and his/her
employment terminates for any reason other than his/her
death, the Participant may, unless discharged for cause,
thereafter exercise his/her Option.
<P>
(g) If prior to the expiration date of a participant
Option, an Optionee shall retire or resign with the
Company's consent, such Option may be exercised in the
same manner as if the Optionee had continued in the
Company's employ.
<P>
Page 43
<P>
(h) If a participant dies at a time when he/she is
entitled to exercise an Option, then at any time or times
within one (1) year after his/her death (or such further
period as the Board may allow) such Option may be
exercised, as to all for any of the shares which the
Participant was entitled to purchase prior to his/her
death.
<P>
In the event of a stock dividend, stock split or
recapitalization or merger in which the Company is the
surviving corporation, or other similar capital change,
the number and kind of shares of stock or securities of
the Company to be subject to the Plan and to Options then
outstanding or to be granted thereunder, the maximum
number of Shares or securities which may be issued or
sold under the Plan, the exercise price and other
relevant provisions shall be appropriately adjusted by
the Board of the Company, the determination of which
shall be binding on all persons.
<P>
The Board may at any time discontinue granting Options
under the Plan. The Board of the Company may at any time
or times amend the Plan or amend any outstanding Option
or Options for the purpose of satisfying the requirements
of any changes in applicable laws or regulations or for
any other purpose which may at the time be permitted by
law provided, however, that, except to the extent
required or permitted.
<P>
As of December 31, 1999, no options had been granted
pursuant to the Plan and no options had been exercised.
<P>
The following table sets forth information with respect
to the exercise of options to purchase shares of common
stock during the fiscal year ended December 31, 1999, to
each person named in the Summary Compensation Table and
the unexercised options held as of the end of 1999 fiscal
year.
<P>
AGGREGATED OPTION/EXERCISES IN LAST FISCAL YEAR AND 1999
FISCAL YEAR END OPTION/VALUES
<P>
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED IN
SHARES VALUE UNDERLYING THE MONEY
ACQUIRED REALIZED UNEXERCISED OPTIONS AT
ON ($) OPTIONS AT 1999 FISCAL
EXERCISED 1999 FISCAL YEAR END (#)
(#) YEAR END (#) EXERCISABLE/UN
NAME EXERCISABLE/UN
EXERCISABLE
----- -------- --------- -------------- --------------
Eugene Chiaramonte, Jr. 0 0 NONE
<P>
Page 44
<P>
Ronald Shaver 0 0 NONE
Ernest DeSaye Jr. 0 0 NONE
</TABLE>
<P>
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE
SHARES, OTHER PERIOD PAYOUTS UNDER NON-
UNITS PER UNTIL STOCK PRICE-BASED
OTHER RIGHTS MATURATION PLANS
PAYOUT
NAME THRESHOLD TARGET
----- ------------ -------------- ------- -------
Eugene Chiarmonte, Jr. 0 0 0 0
Ronald Shaver 0 0 0 0
Ernest DeSaye Jr. 0 0 0 0
</TABLE>
<P>
EXECUTIVE EMPLOYMENT AGREEMENTS:
<P>
Effective April 22, 1999, the Company entered into an
Employment Agreement with Ernest DeSaye Jr., whereby Mr.
DeSaye was employed as manager of the Company's
subsidiary, Hardyston Distributors. The Agreement is for
a term of five (5) years and provides for an annual base
salary in 1999 of $45,000 with a 5% increase being made
on each anniversary date of this Agreement. The
Agreement provides for incentive payments in cash and
stock or stock options based on gross profits of
Hardyston Distributors. More specifically, the terms are
as follows: Gross salary: $1,731 bi-weekly with a 5%
increase on each anniversary of the agreement; Term: 5
years commencing April 22, 1999; Additional compensation:
1% of the gross profits of Hardyston Distributors derived
from accounts purchased by the Company on the date of the
acquisition (April 22, 1999); 2% of the gross profits on
all new clients for the initial 12 month period of the
client's billings; stock or stock options equal to 1% of
gross profits on all supervised accounts in excess of
$1,000,000 in total revenue for a fiscal year; stock or
stock options equal to .5% of gross profits on all
supervised accounts in excess of $2,000,000 in total
revenue for a fiscal year.
<P>
Page 45
<P>
Item 7. Certain Relationships and Related Transactions
-------------------------------------------------------
<P>
In 1996, the Company issued 1,500,000 shares in
connection with the acquisition of Universal Filtration
Industries ("UFI"). The shares were issued as follows:
300,000 shares to Mr. Shaver (a shareholder of UFI);
800,000 shares to Catherine Smith (a shareholder of UFI);
400,000 shares held in escrow pending satisfaction of
certain conditions in the acquisition agreement. The
conditions were never satisfied and the 400,000 shares
were returned to treasury. In addition to the above, our
Board of Directors approved the issuance of an additional
300,000 shares to Mr. Shaver for future consulting work.
Each issuance of 300,000 shares to Mr. Shaver was valued
at $15,000.
<P>
In December 1998, Eugene Chiaramonte, Jr. gifted to his
son, Eugene Chiaramonte, III, 400,000 of his common
shares of the Company valued at $8,000.
<P>
In January 1999, the Company issued 2,750,000 shares of
preferred stock to Mr. Chiaramonte, Jr. and Mr. Shaver in
connection with loans due to Mr. Chiaramonte and expenses
reimbursed for Mr. Shaver. In January 1999, Mr.
Chiaramonte was issued 1,500,000 shares of the company's
preferred stock valued at $225,000, of which $15,000 was
issued to repay a loan and $208,500 was issued as
deferred compensation. In January 1999, Mr. Shaver was
issued 1,250,000 shares of the company's preferred stock
valued at $187,500, of which $12,500 was issued to
reimburse expenses and $173,750 was issued as deferred
compensation.
<P>
In April 1999, the Company issued 836,700 shares of
Common stock to Mr. DeSaye Jr. in connection with the
purchase of automotive parts inventory and assets valued
at $104,945. The Company also paid $15,000 in cash
towards the purchase price. The Company entered into a
five (5) year employment agreement with Mr. DeSaye
whereas he will be compensated with a salary of $45,000
per annum in 1999 with a five percent (5%) increase
annually during the term of the employment agreement.
Under the terms of the agreement, Mr. DeSaye will receive
stock options or additional stock in connection with the
performance of Hardyston Distributors.
<P>
The Company has a consulting relationship with Mr.
Shaver. Mr. Shaver is a consultant to Harvey-Westbury
Corp. Mr. Shaver receives a weekly consulting fee of
$1,350.00.
<P>
Page 46
<P>
Item 8. Legal Proceedings
--------------------------
<P>
The Company has the following pending or threatened
litigation:
<P>
Ross & Craig Solicitors v. Auxer Industries, Inc. -
Superior Court of New Jersey, Law Division, Passaic
County - Index No. L1598-98. This is a case brought by
an English partnership against us. Ross & Craig is
requesting the sum of $46,666.23 plus interest accruing
from 1997 for work, labor and services rendered. This
case should have been commenced in England against one
of Auxer's subsidiary or affiliate corporations and
perhaps against certain management of Auxer
individually. To date there has been a complaint served
and an answer filed. We have a pending motion to extend
discovery. The Company plans to contest the case
vigorously. To date we cannot estimate the likelihood of
success of the defense because discovery has not yet
begun.
<P>
Eileen M. Huff, et. al. v. Harvey Westbury Corp. and
Auxer Industries, Inc. - Supreme Court of the State of
New York, Suffolk County, Index No. 29090-97 and Suffolk
County District Court, First District Civil Court of New
York, Index No. CEC67098; and Lorraine Duff v. Harvey
Westbury (and Auxer) and Suffolk County District Court,
First District Civil Court of New York, Index No.CEC67-98.
These cases all involved Auxer's purchase of Harvey
Westbury. They are about the "wrongful termination"
of one employee, and the alleged non-payment of
insurance premiums for another. The Company filed
answers to all lawsuits. In July 1999, the Lorraine Duff
case was settled whereby the parties signed a settlement
agreement. The Company agreed to pay the sum of $5,000
in 10 monthly installments of $500 each. Payments
commenced in August 1999 and will continue until May
2000. With respect to the other lawsuit, the Company
plans to defend its position vigorously. To date, we can
not estimate the likelihood that Auxer will be successful
in defending this lawsuit.
<P>
Crain Associated Enterprises, Inc. v. Ron Shaver d/b/a
Universal Filtration and Universal Filtration Industries,
Inc. - Superior Court of New Jersey, Special Civil Part,
Passaic County, Docket No. DC 5315-99. The lawsuit was
commenced on June 16, 1999. Plaintiff sued for the
sum of $9,999 (the maximum allowed by law in the State of
New Jersey in the Special Civil Part) based on an
outstanding accounts payable due by Universal Filtration.
Subsequently, this case was dismissed on March 27, 2000.
<P>
The Company is not currently aware of any other
pending, past or present litigation that would be
considered to have a material effect on the Company. The
Company considers that any litigation under 10% of its
net assets is not material. There are no known
<P>
Page 47
<P>
bankruptcy or receivership issues outstanding and has no
known securities law violations. Additionally, the
Company has no known legal proceedings in which certain
corporate insiders or affiliates of the issuer are in a
position that is adverse to the issuer.
<P>
Page 48
<P>
Item 9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters.
------------------------------------------------
<P>
Market Information
<P>
The Company's shares of Common Stock are currently traded
on the National Quotation System (NQS) "electronic pink
sheets" sponsored by the National Quotations Bureau, LLC
under the symbol "AXGI". Effective September 6, 1999, the
Company's shares of Common Stock were delisted from the
OTC Electronic Bulletin Board (OCTBB) pursuant to the
Amendments relating to Microcap Initiatives to NASD Rules
6530 and 6540, Eligibility Rule for OTCBB. The amendments
to Rules 6530 and 6540 were approved by the SEC on
January 4, 1999. The amendments limited the quotations
on the OTCBB to the securities of companies that report
their current financial information to the SEC, banking,
or insurance regulators. Since the Company was quoted on
the OTCBB prior to the amendment, the Company was
required to comply with the amended NASD Rule 6530 and
6540 by September 6, 1999. The Company was not compliant
with the amended NASD Rules and was de-listed as a result
on September 6, 1999. The Company qualifies for quotation
on other mediums to include the National Quotation
Bureau's Pink Sheets under the exemption from Rule 15c2-
11 granted from the SEC for securities being removed from
the OTCBB pursuant to the Eligibility Rule. Under the
exemption, broker-dealers are permitted to publish or
submit quotations in other quotation mediums, including
the National Quotation Bureau's Pink Sheets. There is no
assurance that an active trading market will develop
which will provide liquidity for the Company's existing
shareholders or for persons who may acquire common stock
through the exercise of any options.
<P>
The reported high and low bid prices for the common stock
are shown below for each quarter during the last two
complete fiscal years. The high and low bid price for
the periods in 1997, 1998, and 1999 shown below are
quotations from the OTCBB. The high and low bid prices
for 1999 shown below are quotations from the NQS. The
quotations reflect inter-dealer prices and do not include
retail mark-ups, mark-downs or commissions. The prices do
not necessarily reflect actual transactions. For periods
reported under the first, second, and third quarters of
1997, Auxer traded under the symbol AUXI. For the fourth
quarter of 1997 and beyond, Auxer traded under the symbol
AXGI.
<P>
Page 49
<P>
<TABLE>
<S> <C> <C>
Period HIGH BID LOW BID
------ -------- --------
1997
First Quarter 1.625 0.8125
Second Quarter 1.7813 0.5625
Third Quarter 0.9375 0.40625
Fourth Quarter .57 .195
<P>
1998
First Quarter 0.42 0.15
Second Quarter 0.26 0.08
Third Quarter 0.20 0.035
Fourth Quarter 0.60 0.010
<P>
1999
First Quarter .22 0.001
Second Quarter 1.035 0.055
Third Quarter 0.09 0.0600
Fourth Quarter 0.08 0.01
</TABLE>
<P>
As of December 31, 1999, the Company had 150,000,000
authorized shares of common stock (at par value $.001)
whereas 56,736,797 shares were issued and outstanding. As
of December 31, 1999, the Company had 25,000,000
authorized shares of Preferred stock whereas 2,750,000
shares were issued and outstanding.
<P>
As of December 31, 1999, there were 2,000,000 shares of
common stock reserved for the Company's option plan
whereas no options have been granted or exercised.
<P>
As of December 31, 1999, there were 27,500,000 shares of
common stock reserved for the conversion of the Company's
preferred stock whereas 2,750,000 shares of preferred
stock have been issued and outstanding. One share of
preferred stock is convertible into ten (10) shares of
common stock.
<P>
As of December 31, 1999, there were 2,100,000 shares of
common stock reserved for an offering registered pursuant
to Rule 504 of Regulation D. Under the offering, the
Company sold 7,900,000 share for the value of $395,000.
This offering closed in January 2000.
<P>
As of December 31, 1999, there were no convertible notes
outstanding and no shares of Common stock reserved for
convertible notes.
<P>
Page 50
<P>
Holders
-------
<P>
The Company has approximately 3,000 holders of its common
stock.
<P>
Dividend Policy
---------------
<P>
The Company has never declared or paid cash dividends on
its common stock, and may elect to retain its net income
in the future to increase its capital base. The Company
does not currently anticipate paying cash dividends on
its common stock in the foreseeable future. The Company
has not paid any dividends, made distributions, or
redeemed any securities within the last five years.
<P>
Penny Stock Considerations.
----------------------------
<P>
Broker-dealer practices in connection with transactions
in "penny stocks" are regulated by certain penny stock
rules adopted by the Securities and Exchange Commission.
Penny stocks generally are equity securities with a price
of less than $5.00. Penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides
information about penny stocks and the risks in the penny
stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock
held in the customer's account. In addition, the penny
stock rules generally require that prior to a transaction
in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's
written agreement to the transaction.
<P>
These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny
stock rules. Our shares will likely be subject to such
penny stock rules, and our shareholders will, in all
likelihood, find it difficult to sell their securities.
<P>
Page 56
<P>
No market exists for our securities and there is no
assurance that a regular trading market will develop, or
if developed will be sustained. A shareholder, in all
likelihood, therefore, will not be able to resell the
securities referred to herein should he or she desire to
do so. Furthermore, it is unlikely that a lending
institution will accept our securities as pledged
collateral for loans unless a regular trading market
develops. There are no plans, proposals, arrangements or
understandings with any person in regard to the
development of a trading market in any of our securities.
<P>
Page 51
<P>
Item 10. Recent Sales of Unregistered Securities
--------------------------------------------------
<P>
In October 1996, the Company issued 250,000 shares of its
Common Stock to Joel Pensley for legal services rendered
for which services were valued at $25,000. Shares were
issued pursuant to the exemption under Section 4(2)of the
Act. Such investor was a sophisticated investor and had
pre-existing relationships with members of management of
the Company. Accordingly, the issuance of shares was
exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
<P>
In October 1996, the Company issued an aggregate of
170,000 shares of its Common Stock in connection with
the acquisition of Harvey Westbury to Gerald Harvey or
his designee and were valued at $85,000. Such investor
was a sophisticated investor and had pre-existing
relationships with members of management of the Company
and had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In November 1996, the Company issued 400,000 shares of
its Common Stock to Lewis Ransom and his designees
pursuant to a supply agreement between MotionLube
Corporation and CT Industries and were valued at $20,000.
The initial 255,000 shares of the total 655,000 shares in
connection with this agreement were issued in June 1996.
Such investors were sophisticated investors, had pre-existing
relationships with members of management of the
Company and had access to relevant information pertaining
to the contemplated operations of the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) of the Act.
<P>
In November 1996, the Company issued 250,000 shares of
its Common Stock to Janice D'Auito, spouse of Anthony
D'Aiuto in connection with Mr. D'Aiuto providing
bookkeeping services rendered and temporary use office
space valued at $12,500. Such investor had a pre-existing
relationship with members of management of the Company
and had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In November 1996, the Company issued 10,000 shares of its
Common Stock to Domenica Morano and Mirza Deljkic for
cash consideration in connection with a private sale
valued at $10,000. Such investors were sophisticated
investors, had pre-existing relationships with members of
management of the Company had access to relevant
<P>
Page 52
<P>
information pertaining to the contemplated operations of
the Company. Accordingly, the issuance of shares was
exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
<P>
In December 1996, September 1997 and October 1997, the
Company issued an aggregate of 110,000 shares of its
Common Stock to Mr. Anthony Towell and Mr. Robert Smith
for consulting services rendered in connection with the
acquisition of Harvey Westbury and were valued at
$32,000. Such investors were sophisticated investors, had
pre-existing relationships with members of management of
the Company and had access to relevant information
pertaining to the contemplated operations of the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) of the Act.
<P>
From October through December 1996, the Company issued an
aggregate of 350,000 shares of its common stock in cash
consideration of $150,000 to two (2) sophisticated
investors pursuant to an exemption from registration
provided by Regulation D, Rule 504. Such investors were
qualified investors based on their financial resources
and knowledge of investments, had access to or was
provided with relevant financial and other information
relating to the Company. The issuances were as follows:
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
----------- -------- ------------------ -----------
11-1-96 Creative Capital $100,000 250,000
12-18-96 Joel Pensely $50,000 100,000
</TABLE>
Mark Schultz exercised control over Creative Capital.
<P>
In January 1997, the Company issued 40,000 shares of its
Common Stock to Joel Pensely for legal services rendered
and were valued at $42,500. Such investor was a qualified
investor based on his financial resources and knowledge
of investments and had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was exempt
from the registration requirements of the Act pursuant to
Section 4(2) of the Act.
<P>
In February 1997, the Company issued 100,000 shares of
its Common Stock to Michael Ellis for engineering
services rendered and 2,000 shares of its common stock to
Nicholas Schiano for consulting services valued at
$40,800. Such investors were sophisticated investors, had
pre-existing relationships with members of management of
<P>
Page 53
<P>
the Company and had access to relevant information
pertaining to the contemplated operations of the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) of the Act.
<P>
In February 1997, the Company issued 50,000 shares of its
common stock to Thomas Trobiano for consulting services
rendered valued at $25,000. Such investor was a
sophisticated investor, had pre-existing relationships
with members of management of the Company and had access
to relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
<P>
In February 1997, the Company issued 50,000 shares of its
common stock to Edward Cowle and 50,000 shares of its
common stock to Deworth Williams for financial consulting
services rendered valued at $129,376. Such investors were
sophisticated investors, had pre-existing relationships
with members of management of the Company and had access
to relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
<P>
In April 1997, the Company issued 2,000 shares of its
Common Stock to Jonathan Benefiel for cash consideration
in connection with a private sale valued at $1,500. Such
investor was a sophisticated investor, had a pre-existing
relationship with members of management of the Company
and had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In May 1997, the Company issued 20,000 shares of its
Common Stock to Sherman Square Ltd. for marketing
consulting services rendered valued at $26,875. Joel
Pensely exercised control over Sherman Square Ltd. Such
investor was a qualified investor based on his financial
resources and knowledge of investments, had access to or
was provided with relevant financial and other
information relating to the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In May through December 1997, the Company issued an
aggregate of 340,000 shares of its Common Stock to
Michael Ellis for engineering consulting services
rendered valued at $261,338. Such investor was a
<P>
Page 54
<P>
sophisticated investor, had pre-existing relationships
with members of management of the Company and had access
to relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of
the Act pursuant to Section 4(2) under the Act.
<P>
In June and July 1997, the Company issued an aggregate of
140,000 shares of its Common Stock to International
Corporate Development for public relations consulting
services rendered valued at $98,280. Donald Whitlock
exercises control over International Corporate
Development. Such investor was a qualified investor based
on his financial resources and knowledge of investments
and had access to or was provided with relevant financial
and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) under the Act.
<P>
In August and September 1997, the Company issued an
aggregate of 175,000 shares of its common stock to Market
Surveys International Inc. for public relations services
rendered valued at $89,875. Bernie Schmidt exercised
control over Market Surveys International. Such investor
was a qualified investor based on his financial resources
and knowledge of investments, had access to or was
provided with relevant financial and other information
relating to the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
<P>
In August and December 1997, the Company issued an
aggregate of 100,000 shares of its Common Stock to Joel
Pensely and Steve Gutstein for legal services rendered
valued at $48,750. Such investors were qualified
investors based on their financial resources and
knowledge of investments, had access to and were provided
with relevant financial and other information relating to
the Company. Accordingly, the issuance of shares was
exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
<P>
In August 1997 through June 1998, the Company issued an
aggregate of 255,000 shares of its Common Stock to Mr.
Chapchal, Jos Coad, Peter Antil and Ivor Lewis for
consulting services rendered in connection with
investments in the United Kingdom based software
companies valued at $87,030. Such investors were
sophisticated investors, had pre-existing relationships
with members of management of the Company and had access
to relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of
the Act pursuant to Section 4(2) of the Act.
<P>
Page 55
<P>
In September 1997, the Company issued 62,500 shares of
its Common Stock to James Tilton for services rendered in
connection with FT Trading funding valued at $24,750.
Anthony Ardizzone exercised control over FT Trading. Such
investor was a qualified investor based on his financial
resources and knowledge of investments, had access to or
was provided with relevant financial and other
information relating to the Company. Accordingly, the
issuance of shares was issued pursuant to the exemption
of Rule 504 of Regulation D under the Securities Act of
1933, as amended.
<P>
In September 1997 through January 1998, the Company
issued an aggregate of 464,899 shares of its Common Stock
to FT Trading in conversion of a series of 14 convertible
demand notes of $10,000 each with interest accruing at
the rate of 8% per annum, for a total of $140,000.
Anthony Ardizzone exercised control over FT Trading. Such
investor was a qualified investor based on his financial
resources and knowledge of investments, had access to or
was provided with relevant financial and other
information relating to the Company. Accordingly, the
issuance of shares was issued pursuant to the exemption
of Rule 504 of Regulation D under the Securities Act of
1933, as amended.
<P>
In October 1997 through September 1998, the Company
issued an aggregate of 700,000 shares of its Common Stock
to Frank Palmari and Jan Talamo of Media Marketing for
marketing consulting services rendered valued at
$100,250. Such investors were qualified investors based
on their financial resources and knowledge of
investments, had access to or were provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) under the Act.
<P>
In October 1997, the Company issued 300,000 shares of its
Common Stock to Mr. Shaver for consulting services
rendered valued at $94,500. Such investor was a
sophisticated investor, had pre-existing relationships
with members of management of the Company, was an
employee and a member of management of the Company and
had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
From January through December 1997, the Company issued an
aggregate of 1,690,428 shares of its common stock in cash
consideration of $546,360 to 13 sophisticated investors
pursuant to exemption from registration provided by
<P>
Page 56
<P>
Regulation D Rule 504. Such investors were either
accredited or an otherwise qualified investor based on
his financial resources and knowledge of investments, had
access to or were provided with relevant financial and
other information relating to the Company. The issuances
were as follows:
<P>
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
-------- -------- ------------------ ------------
2-17-97 Creative Capital $92,000 230,000
2-17-97 Sherman Square Ltd. $4,000 10,000
3-6-97 James Stedman $5,000 10,000
3-28-97 The Marketing Co. $5,000 15,000
4-21-97 Edward Scodak $2,500 5,000
4-21-97 Joel Pensely $17,550 39,000
4-21-97 Robert Carrol $2,500 5,000
5-15-97 Joel Pensely $12,000 24,000
5-20-97 Thomas Kernaghan $50,000 50,000
5-22-97 Wade McCaskie $5,000 5,000
6-6-97 Grail Ives Consultants $20,000 40,000
6-18-97 Thomas Kernaghan $10,000 20,000
6-23-97 James Tilton $3,750 15,000
6-23-97 James Stedman $10,000 20,000
6-23-97 Kurt Vezner $10,000 20,000
7-8-97 James Tilton $7,500 25,000
<P>
7-21-97 William Palla $2,500 10,000
7-21-97 James Tilton $16,800 60,000
7-21-97 Andy Dyer $5,100 17,000
7-28-97 James Tilton $20,000 71,000
7-28-97 Andy Dyer $5,000 12,500
8-11-97 James Tilton $32,500 100,000
8-11-97 Andy Dyer $10,000 25,000
8-19-97 Andy Dyer $5,000 17,857
8-19-97 James Tilton $15,000 53,571
8-29-97 FT Trading $25,160 68,000
9-12-97 James Tilton $22,500 100,000
10-9-97 James Tilton $25,000 100,000
10-31-97 James Tilton $25,000 125,000
11-13-97 James Tilton $15,000 100,000
11-21-97 Thomas Kernaghan $35,000 87,500
12-10-97 James Tilton $20,000 100,000
12-31-97 James Tilton $10,000 110,000
-------------------
$546,360 1,690,428
</TABLE>
<P>
Page 57
<P>
Mark Schultz exercised control over Creative Capital.
Joel Pensely exercised control over Sherman Square Ltd.
Michael Fugler exercised control over The Marketing Co.
Thomas Kernaghan exercised control over Grail Ives
Consultants. Anthony Ardizzone exercised control over FT
Trading.
<P>
In January 1998 through January 1999, the Company issued
an aggregate of 4,995,833 shares of its Common Stock to
the Augustine Fund in conversion of a series of 16
convertible demand notes of $10,000 each, accruing
interest at the rate of 8% per annum, for a total of
$160,000. Tom Dyzinski exercised control of the
Augustine Fund. Such investor was a qualified investor
based on his financial resources and knowledge of
investments, had access to or was provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was issued pursuant
to the exemption of Rule 504 of Regulation D under the
Securities Act of 1933, as amended.
<P>
In March through October 1998, the Company issued an
aggregate of 675,000 shares of its Common Stock to Elite
Public Relations (400,000 shares), Investments 101 Ltd.
(75,000 shares), and Wall Street Investments (200,000
shares) for public relations consulting services rendered
valued at $121,000. Jason Mantione exercised control of
Elite Public Relations. Jeffery Brommer exercised control
of Investments 101. Anthony Tomaso exercised control of
Wall Street Investments. Such investors were qualified
<P>
investors based on their financial resources and
knowledge of investments, had access to or were provided
with relevant financial and other information relating to
the Company. Accordingly, the issuance of shares was
exempt from the registration requirements of the Act
pursuant to Section 4(2) of the Act.
<P>
In April 1998, the Company issued 100,000 shares of its
Common Stock to Louis Szilezy for consulting services
rendered valued at $19,000. Such investor was a qualified
investor based on his financial resources and knowledge
of investments, had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was exempt
from the registration requirements of the Act pursuant to
Section 4(2) of the Act.
<P>
In June 1998, the Company issued an aggregate of 320,000
shares of its Common Stock to Acebarn Limited, David
Jolly, and Romande Limited pursuant to releasing any
rights and claims against the Company in connection with
the sale of the software investment valued at $32,230.
Paul Macaulay exercised control of Acebarn Limited. Brian
Aukett exercised control of Romande Limited. Such
investors were either sophisticated investors, had pre-
<P>
Page 58
<P>
existing relationships with members of management of the
Company and had access to relevant information pertaining
to the contemplated operations of the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) of the Act.
<P>
In June and July 1998, the Company issued an aggregate of
1,200,000 shares of its Common Stock to Tripp & Co.
(250,000 shares), Capital Investments (200,000 shares)
and Rapid Release Research (750,000 shares) for financial
consulting services rendered valued at $183,250. Donald
Carman exercised control of Tripp & Co. Randy Wheeler
exercised control of Capital Investments. Bruce Pollock
exercised control of Rapid Release Research. Such
investors were qualified investors based on their
financial resources and knowledge of investments, had
access to or were provided with relevant financial and
other information relating to the Company. Accordingly,
the issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In August 1998, the Company issued 35,000 shares of its
common stock to the Law offices of Roger Fidler for legal
services rendered valued at $5,600. Such investor was a
qualified investor based on his financial resources and
knowledge of investments, had access to or was provided
with relevant financial and other information relating to
the Company. Accordingly, the issuance of shares was
exempt from the registration requirements of the Act
pursuant to Section 4(2) under the Act.
<P>
From January through December 1998, the Company issued an
aggregate of 15,551,490 shares of its common stock in
cash consideration of $445,725 to 13 sophisticated
investors pursuant to exemption from registration
provided by Regulation D Rule 504. Such investors were
qualified investors based on their financial resources
and knowledge of investments, had access to or were
provided with relevant financial and other information
relating to the Company. The issuances were as follows:
<P>
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
-------- -------- ------------------ --------
2-3-98 James Tilton $20,000 200,000
2-3-98 Jerry Schwartz $2,500 25,000
2-3-98 Stewart Schwartz $2,500 25,000
2-26-98 James Tilton $25,000 250,000
3-4-98 Jerry Schwartz $2,050 20,500
3-4-98 Stewart Schwartz $2,050 20,500
<P>
Page 59
<P>
3-18-98 James Tilton $20,000 200,000
3-31-98 James Tilton $15,000 200,000
4-14-98 James Tilton $7,500 100,000
4-14-98 Edward Scodak $3,000 30,000
4-14-98 Jerry & Stewart Schwartz $15,000 150,000
4-27-98 James Tilton $10,125 135,000
4-27-98 Jerry & Stewart Schwartz $3,000 40,000
5-11-98 Andy Dyer $5,000 100,000
5-11-98 James Tilton $10,000 180,000
5-11-98 Jerry Schwartz $10,000 133,333
5-21-98 Jerry & Stewart Schwartz $7,000 140,000
5-28-98 James Tilton $9,625 192,500
5-28-98 Laurie Harvey $375 7,500
6-8-98 Jerry & Stewart Schwartz $5,000 125,000
6-15-98 James Tilton $10,000 200,000
6-24-98 Jerry & Stewart Schwartz $16,000 400,000
6-24-98 James Tilton $5,000 100,000
7-9-98 James Tilton $7,500 250,000
7-9-98 Jerry & Stewart Schwartz $14,000 280,000
8-3-98 James Tilton $27,040 545,000
8-3-98 Kurt Vezner $2,960 60,000
8-4-98 Jerry & Stewart Schwartz $10,000 200,000
8-24-98 James Tilton $5,000 166,666
9-11-98 Jerry & Stewart Schwartz $10,000 300,000
9-23-98 Sandra Lam $50,000 1,250,000
10-6-98 Jerry Schwartz $2,000 125,000
10-6-98 Stewart Schwartz $2,000 125,000
10-10-98 James Stedman $10,000 200,000
10-18-98 Coastal International $6,250 500,000
10-18-98 Jeff Applebaum $6,250 500,000
10-20-98 Emerald Group Management $12,500 1,000,000
10-24-98 Olympia Partners, LLC $15,000 1,000,000
11-3-98 Olympia Partners, LLC $7,500 750,000
12-1-98 Coral Cove Partners $8,750 1,029,412
12-8-98 Nismic Sales Corp $8,750 1,029,412
12-14-98 Olympia Partners, LLC $10,000 666,667
12-17-98 Jerry & Stewart Schwartz $8,500 1,000,000
12-17-98 Ashbourne Associates $8,000 800,000
12-17-98 J. Prince Inc. $8,000 800,000
$445,725.00 15,551,490
</TABLE>
<P>
Page 60
<P>
Seth Fireman exercised control over Olympia Partners,
LLC. Jeff Applebaum exercised control over Coral Cove
Partners and Ashbourne Associates. Jared Shaw exercised
control over Coastal International, the Emerald Group
Management and J. Prince Inc. Michael Mannis exercised
control over Nismic Sales Corp.
<P>
In January 1999, the Company issued 2,750,000 shares of
its Preferred Stock to Eugene Chiaramonte, Jr. and Ronald
Shaver in exchange for reducing the loans and expenses
due and deferred compensation from the Company valued at
$412,500. Such investors were sophisticated investors,
were employees and members of management of the Company
and had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In February 1999, the Company issued 489,000 shares of
its Common Stock to MYD Marine Distributor, Inc. ("MYD")
pursuant to a legal settlement valued at $39,240. In
March 1998, MYD filed a lawsuit against the Company and
Harvey-Westbury Corp. in Dade County, Florida. The
lawsuit was based on breach of contract under an
agreement to distribute goods between MYD and Harvey-Westbury.
<P>
In February 1999, the parties settled this
matter for the sum of $39,240. The Company issued
489,000 shares of its Common Stock to MYD as payment of
such settlement. Dan Delmonico exercised control over
MYD. Such investor was a qualified investor based on his
financial resources and knowledge of investments, had
access to or was provided with relevant financial and
other information relating to the Company. Accordingly,
the issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act.
<P>
In April 1999, the Company issued 836,700 shares of its
Common Stock to Ernest DeSaye Jr. in connection with the
exchange of assets agreement valued at $89,945. Such
investor was a sophisticated investor, had pre-existing
relationships with members of management of the Company
and had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
<P>
Page 61
<P>
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act under the Act.
<P>
In January 2000, the Company completed an offering for
7,900,000 shares and raised an aggregate of $395,000
pursuant to the exemption under Rule 504 of Regulation D.
Such offering was originally for 7,000,000 shares and was
subsequently amended to increase the offering. Such
investors were accredited or otherwise qualified
investors based on their financial resources and
knowledge of investments, had access to or were provided
with relevant financial and other information relating to
the Company. In connection with the offering, Harvey
Murdock served as the selling agent and received $5,000
for his services as selling agent.
<P>
From January through December 1999, the Company issued
an aggregate of 10,150,000 shares of its common stock in
cash consideration of $360,000 to 4 sophisticated
investors pursuant to exemption from registration
provided by Regulation D, Rule 504. Such investor were
accredited or otherwise qualified investors based on
their financial resources and knowledge of investments,
had access to or were provided with relevant financial
and other information relating to the Company. The
issuances were as follows:
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash
Consideration # of
Shares
-------- -------- ------------- --------
1-6-99 J. Prince Inc. $20,000 2,000,000
1-12-99 Patrick Rost $40,000 1,000,000
1-21-99 James Tilton $30,000 1,000,000
1-23-99 Patrick Rost $40,000 1,000,000
2-1-99 Patrick Rost $40,000 1,000,000
2-3-99 Patrick Rost $40,000 1,000,000
2-23-99 Patrick Rost $40,000 1,000,000
3-25-99 James Tilton $25,000 500,000
3-29-99 James Tilton $25,000 500,000
4-1-99 Andy Dyer $10,000 150,000
4-9-99 James Tilton $50,000 1,000,000
$360,000.00 10,150,000
</TABLE>
<P>Jared Shaw exercised control over J. Prince Inc.
<P>
Subsequently, in January 2000, the Company issued an
aggregate of 8,266,666 shares of its common stock in
connection with an offering pursuant to Regulation D,
Rule 504 in cash consideration of $248,000. The offering
<P>
Page 62
<P>
was closed in January 2000. Such investors were
accredited or otherwise qualified investors based on
their financial resources and knowledge of investments,
had access to or were provided with relevant financial
and other information relating to the Company.
<P>
Subsequently, in March 2000, the Company issued an
aggregate of 300,000 shares to Steve Trobiano valued at
$19,500 in connection with the exchange of assets
(vehicle). Such investor was a sophisticated investor,
had pre-existing relationship with members of management
of the Company and had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuances of shares was exempt
from registration requirements of the Act pursuant to
Section 4(2) under the Act.
<P>
Subsequently, in March 2000, the issued an aggregate of
2,043,182 shares of its common stock in cash
consideration of $109,875 to Jan Talamo (209,091 shares),
Frank Palmieri (209,091 shares), Stewart & Jerry Schwartz
(1,125,000 shares) and Thomas Trobiano (500,000 shares).
Such investors were a sophisticated investors, had pre-existing
relationships with members of management of the
Company and had access to or were provided with relevant
financial and other information relating to the Company.
Accordingly, the issuances of shares were exempt from
registration requirements of the Act pursuant to Section
4(2) under the Act.
<P>
In general, under Rule 144, as currently in effect,
subject to the satisfaction of certain other conditions,
a person, including an affiliate of the Company(in
general, a person who has a control relationship with the
Company) who has owned restricted securities of common
stock beneficially for a least one year is entitled to
sell, within any three-month period, that number of
shares of a class of securities that does not exceed the
greater of (I) one percent (1%) of the shares of that
class then outstanding or, if the common stock is quoted
on NASDAQ, (ii) the average weekly trading volume of that
class during the four calendar weeks preceding such sale.
A person who has not been an affiliate of the Company for
at least the three months immediately preceding the sale
and has beneficially owned shares of common stock for a
least two (2) years is entitled to sell such shares under
Rule 144 without regard to any of the limitations
described above.
<P>
No prediction can be made as to the effect, if any, that
future sales of shares of common stock or the
availability of common stock for future sale will have on
the market price of the common stock prevailing from
time-to-time. Sales of substantial amounts of common
stock on the public market could adversely affect the
prevailing market price of the common stock.
<P>
Page 63
<P>
Terms of Conversion for Convertible Notes
<P>
Terms of Conversion for Convertible Notes
For year ending December 31, 1997, the Company paid for
operations by raising $1,925,175 through common stock
issuance and debt borrowings after payments to short term
debts. The Company borrowed $140,000 from FT Trading in
convertible notes at 8% dated September 5, 1997 payable
on demand plus interest payable semi-annually on January
1, and June 1 with shares of the Company's common stock.
The notes were converted at 70% of the 5 day average bid
price prior to conversion. The Company borrowed $100,000
from the Augustine Fund in convertible notes at 8% dated
November 21, 1997 payable on demand plus interest payable
semi-annually on March 1, and August 1 with shares of the
Company's common stock. The notes were converted at 70%
of the 5 day average bid price prior to conversion.
The Company borrowed $60,000 from the Augustine Fund in
convertible notes at 8% dated November 21, 1998 payable
on demand plus interest payable semi-annually on March 1,
and August 1 with shares of the Company's common stock.
The notes were converted at 70% of the 5 day average bid
price prior to conversion.
<P>
Page 64
<P>
Item 11. Description of Securities.
-------------------------------------
<P>
Our authorized capital stock is 150,000,000 shares of
Common Stock, par value $0.001 per share and 25,000,000
shares of preferred Stock, par value $.001 per share. As
of December 31, 1999, we had issued 56,736,797 of our
shares of Common Stock and 2,750,000 of our shares of
Preferred Stock.
<P>
As of December 31, 1999, there were 2,000,000 shares of
common stock reserved for the Company's option plan
whereas no options have been granted or exercised.
<P>
As of December 31, 1999, there were 27,500,000 shares of
common stock reserved for the conversion of the Company's
preferred stock whereas 2,750,000 shares of preferred
stock have been issued and outstanding. One share of
preferred stock is convertible into ten (10) shares of
common stock.
<P>
In January 2000, the Company completed an offering for
7,900,000 shares and raised an aggregate of $395,000
pursuant to the exemption under Rule 504 of Regulation D.
Such offering was originally for 7,000,000 shares and was
subsequently amended to increase the offering.
<P>
The following brief description of our common stock and
preferred stock is subject in all respects to Delaware
law and to the provisions of our Articles of
Incorporation, as amended (the "Articles") and our
Bylaws, copies of which have been filed as exhibits to
this registration statement.
<P>
COMMON STOCK
<P>
Each share of our common stock entitles the holder to one
(1) vote on all matters submitted to a vote of the
stockholders. Our common stock does not have cumulative
voting rights, which means that the holders of a majority
of the outstanding shares of our common stock voting for
the election of directors can elect all members of the
Board of Directors. A majority vote is also sufficient
for other actions that require the vote or concurrence of
stockholders except in cases in which more than a simple
majority is required by law. Holders of our common stock
are entitled to receive dividends, when, as and if
declared by the Board of Directors, in its discretion,
from funds legally available therefore. Holders of
shares of our common stock are entitled to share, on a
ratable basis, such dividends as may be declared by the
Board of Directors out of funds, legally available
therefor. Upon our liquidation, dissolution or winding
up, after payment to creditors, the holders of our common
stock are entitled to share ratably in the assets of the
Company, if any, legally available of distribution to our
<P>
Page 65
<P>
common stockholders. Our Bylaws require that only a
majority of the issued and outstanding shares of our
common stock need be represented to constitute a quorum
and to transact business at a stockholders' meeting.
<P>
Our common stock has no preemptive rights or no
subscription, redemption or conversion privileges.
<P>
Our Board of Directors has total discretion as to the
issuance and the determination of the rights and
privileges of any shares of our common stock which may be
issued in the future, which rights and privileges may be
detrimental to the rights and privileges of the holders
of our existing shares of our common stock now issued and
outstanding.
<P>
PREFERRED STOCK
<P>
Under the Company's Certificate of Incorporation, the
Board of Directors has the power, without further action
by the stockholder, to designate the relative rights and
preferences of the Company's preferred stock, when and if
issued. Such rights and preferences could include
preferences, any of which may be dilutive of the interest
of the holders of Common Stock. The issuance of
preferred stock may have the effect of delaying or
preventing a change in control of the Company and may
have an adverse effect on the rights of the holders of
the Common Stock.
<P>
The Company has instructed its Transfer Agent to reserve
from its authorized but unissued Common Stock a
sufficient number of shares for issuance upon conversion
of the Preferred Stock. The holders of the shares of
Preferred Stock have no preemptive rights with respect to
any securities of the Company.
<P>
Dividends
<P>
Holders of our preferred stock are entitled to receive
dividends, when, as and if declared by the Board of
Directors, in its discretion, from funds legally
available therefore. Holders of shares of our preferred
stock are entitled to share, on a ratable basis, such
dividends as may be declared by the Board of Directors
out of funds, legally available therefore.
<P>
Conversion
<P>
The Preferred Stock is convertible, at the holder's
option, at any time into shares of the Company's Common
Stock at a rate of ten shares of Common Stock for each
share of Preferred Stock.
<P>
Page 66
Redemption
<P>
The Preferred Stock is not redeemable.
<P>
Liquidation Rights
<P>
In the event of any liquidation, dissolution or winding
up of the Company, holders of shares of Preferred Stock
are entitled to receive, out of legally available assets,
a liquidation preference of $100.00 per share and no more
before any payment or distribution is made to the holders
of Common Stock or any series or class of the Company's
stock hereafter that ranks junior as to liquidation
rights to the Preferred Stock. After payment in full of
the liquidation preference of the shares of Preferred
Stock, the holders of such shares will not be entitled to
any further participation in any distribution of assets
by the Company. Neither a consolidation, merger or other
business combination of the Company with or into another
corporation or other entity nor a sale or transfer of all
or part of the Company's assets for cash, securities or
other property will be considered a liquidation,
dissolution or winding up of the Company.
<P>
Voting Rights
<P>
The holders of the Preferred Stock will have voting
rights equal to ten shares of Common Stock for each share
of Preferred Stock.
<P>
Reorganization/Recapitalization
<P>
In the event of a reorganization or recapitalization of
the Company's Common Stock, holders of the Preferred
Stock shall not be entitled to the benefits of, or be
subject to the detriments of, such reorganization or
recapitalization.
<P>
Anti-Dilution
<P>
The shares of the Company's Preferred Stock shall not be
subject to dilution unless the unanimous holders of the
Preferred Stock vote to change this preference. In
addition, the Preferred Stock shall maintain its status
even if the Common Stock undertakes a reverse or forward
split of its shares. Therefore, the Preferred Stock can
not be diluted unless it is converted to Common Stock.
<P>
The transfer agent and registrar for our common stock is
Interstate Transfer Agent, 874 E. 5900 South, Salt Lake
City, Utah 84107.
<P>
Page 67
<P>
Item 12. Indemnification of Directors and Officers
---------------------------------------------------
<P>
The Company's Certificate of Incorporation includes
provisions to eliminate, to the full extent permitted by
Delaware General Corporation Law as in effect from time
to time, the personal liability of directors of the
Company for monetary damages arising from a breach of
their fiduciary duties as directors. The Certificate
of Incorporation also includes provisions to the effect
that the Company shall, to the maximum extent permitted
from time to time under the law of the State of Delaware,
indemnify any director or officer. In addition, the
Company's By-laws require the Company to indemnify, to
the fullest extent permitted by law, any director,
officer, employee or agent of the Company for acts which
such person reasonably believes are not in violation of
the Company's corporate purposes as set forth in the
Certificate of Incorporation.
<P>
Section 145(a) of the Delaware Law provides that a
corporation may indemnify any person who was or is a
party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was
a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or
upon a plea of non contendere or its equivalent, shall
not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of
the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his
conduct was unlawful.
<P>
Section 145(b) of the Delaware Law states that a
corporation may indemnify any person who was or is a
party or is threatened to be made a party to any
threatened, pending or completed action or suite by or in
<P>
Page 68
<P>
the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or
was serving at the request or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or
suit is brought shall determine upon application that,
despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem
proper.
<P>
Section 145(c) of the Delaware Law provides that to the
extent that a director, officer, employee or agent of a
corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of section 145, or
in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him
in connection therewith.
<P>
Section 145(d) of the Delaware Law states that any
indemnification under subsections (a) and (b) of section
145 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon
a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination
shall be made (i) by the board of directors by a majority
vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii)
by the stockholders.
<P>
Section 145(e) of the Delaware Law provides that expenses
(including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative
or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer
to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the
corporation as authorized in section 145. Such expenses
<P>
Page 69
<P>
(including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions,
if any, as the board of directors deems appropriate.
<P>
Section 145(f) of the Delaware Law states that the
indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of section
145 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to
action in another capacity while holding such office.
<P>
Section 145(g) of the Delaware Law provides that a
corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as
a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation
would have the power to indemnify him against such
liability under the provisions of section 145.
<P>
Section 145(j) of the Delaware Law states that the
indemnification and advancement of expenses provided by,
or granted pursuant to, section 145 shall, unless
otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a director, officer,
employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
<P>
Page 70
<P>
Item 13. Financial Statements
------------------------------
<P>
See Item 15(a) below.
<P>
Page 71
<P>
Item 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
-------------------------------------------------------
<P>
During the Corporation's last two fiscal years and the
subsequent interim period, no independent accountant who
was previously engaged as the principal accountant to
audit the Corporation's financial statements, resigned
or was dismissed.
<P>
The firm of Edelman and Kalosieh, Certified Public
Accountants, has been the Corporation's auditor for the
last two years.
<P>
Page 72
<P>
Item 15. Financial Statements and Exhibits
-------------------------------------------
<P>
Financial Statements
<P>
Index to Financial Statements
<P>
Index to Financial Statements
The Auxer Group, Inc.
The Auxer Group, Inc.
<TABLE>
<S> <C>
Report of Independent Auditors F-2-3
Consolidated Balance Sheets F-4-5
Consolidated Statement of Income and Retained Earnings F-6
Consolidated Statement of Changes in Stockholders Equity F-7
Consolidated Statement of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
<P>
Page F-1
<P>
EDELMAN & KALOSIEH, CPAs P.A.
CERTIFIED PUBLIC ACCOUNTANTS
15-01 BROADWAY
FAIR LAWN, NEW JERSEY 07470
----------
TEL (201) 797-4490
FAX (201) 797-0881
<P>
GEORGE A. KALOSIEH, CPA
JOSEPH F. SHACKIL, CPA
PAUL MEOLA, CPA
MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS
N.N. SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
------------
DONALD L. EDELMAN, CPA (RETIRED)
To the Board of Directors and Shareholders
of The Auxer Group, Inc.
Independent Auditor's Report
We have audited the accompanying consolidated
balance sheets of The Auxer Group, Inc. as of December
31, 1999 and 1998 and the related statements of
operations, cash flows and shareholders' equity for the
years then ended. 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 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 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 financial statements referred to
above represent fairly, in all material respects, the
financial position of The Auxer Group, Inc. as of
December 31, 1999 and 1998 and the results of its
operations, shareholders equity and cash flows for the
years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been
prepared assuming that The Auxer Group, Inc. will
continue as a going concern. As more fully described in
Note 2, the Company has incurred operating losses since
inception and requires additional capital to continue
operations. These conditions raise substantial doubt
about the Company's ability to continue as a going
concern. Management's plans as to these matters are
described in Note 2. The financial statements do not
include any adjustments to reflect the possible effects
on recoverability and classification of assets or the
amounts and classifications of liabilities that may
result from the possible inability of The Auxer Group,
Inc. to continue as a going concern. The financial
statement do not include any adjustments that might
result from the outcome of this uncertainty.
As discussed in Note 12 to the financial statements,
the Company's 1998 and 1997 financial statements have
been restated.
EDELMAN & KALOSIEH, CPAs PA
Fair Lawn, New Jersey
March 23, 2000
THE AUXER GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<S> <C> <C>
Year End Year End
December 31, December 31,
1999 1998
(Restated)
Current assets:
---------------
Cash $8,400 $3,087
<P>
Accounts receivable (net of allowances
$19,639 in 1999, $2,486 in 1998) 92,370 33,523
<P>
Inventory 290,725 164,302
<P>
Subscriptions Receivable -0- 15,125
<P>
Other receivables 23,283 23,283
------------------------------------------
Total current assets 414,778 239,320
------------------------------------------
Property and Equipment
----------------------
<P>
Vehicles 7,700 -0-
<P>
Furniture and fixtures 9,234 7,749
<P>
Machinery and equipment 44,129 41,751
<P>
Leasehold improvements 5,757 5,757
------------------------------------------
66,820 55,257
<P>
Less: accumulated depreciation (34,062) (22,436)
-------------------------------------------
Property and equipment (Net) 32,758 32,821
-------------------------------------------
Other assets:
--------------
<P>
Security deposit 24,299 7,852
--------------------------------------------
Total other assets 24,299 7,852
--------------------------------------------
Total assets $471,835 $279,993
=============================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<P>
Liabilities and Stockholders' Equity
<TABLE>
<S> <C> <C>
Year End Year End
December 31, December 31,
1999 1998
(Restated)
Current liabilities
-------------------
Accounts payable and accrued expenses $107,887 $202,632
<P>
Credit Line 31,368 25,793
<P>
Notes payable 82,368 190,000
<P>
Notes payable-shareholders 77,390 21,893
--------------------------------------
Total current liabilities 299,168 440,318
<P>
Long Term Debt, less current maturities 1,155 36,361
<P>
Capital stock
-------------
Capital stock-authorized 150,000,000
share, $.001 par value per share,
56,736,797, 36,361,097 and
12,996,245 shares outstanding in
1999, 1998, respectively 56,747 36,361
<P>
Preferred stock - authorized 25,000,000
shares $.001 par value per share,
2,750,000 shares outstanding in 1999 2,750 -0-
<P>
Additional paid in capital 4,940,832 3,657,004
<P>
Accumulated deficit (4,828,817) (3,853,690)
-----------------------------------------
<P>
Total stockholders' equity 171,512 (160,325)
---------------------------------------
Total liabilities and
stockholders' equity $471,835 $279,993
========================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<S> <C> <C>
Restated
Year End Year End
December 31, December 31,
1999 1998
(Restated)
------------ ------------
Income $871,259 $287,456
<P>
Less cost of good sold 622,210 237,952
------------------------------------------------------
Gross profit 249,049 49,504
------------------------------------------------------
Operations:
-----------
General and administrative 1,302,418 1,053,887
<P>
Deprecation 11,626 12,928
<P>
Interest expense 10,618 20,790
<P>
Research and development -0- 1,106
<P>
---------------------------------------------------------
Total expenses 1,324,662 1,088,711
---------------------------------------------------------
<P>
Income (loss) from operations (1,075,613) (1,039,207)
<P>
Other Income (Expense)
<P>
Interest Income 706 -0-
<P>
Lost on Investment -0- (353,000)
<P>
Net income (loss)before extraordinary items (1,074,907) (1,392,207)
<P>
Extraordinary item, gain on
forgiveness of debt 99,780 -0-
<P>
Net Income (loss) (975,127) (1,392,207)
-------------------------------------------------------
accumulated deficit
at beginning (3,853,690) (2,461,483)
----------------------------------------------------------
Accumulated deficit at end ($4,828,817) ($3,853,690)
----------------------------------------------------------
Net income (loss) per
common share ($0.02) ($0.04)
==========================================================
Net income (loss) per common
share - assuming dilution ($0.02) ($0.04)
==========================================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(1998 Restated)
<TABLE>
<S> <C> <C> <C>
Preferred Stock Preferred Stock Common Stock
Shares Par Value $.001 Shares
(A) Amount (B)
-------------------------------------------------------
Balances at December 31, 1997 0 $0 12,996,245
===========================================================
Common Stock Issued for cash 16,169,823
<P>
Common Stock Issued for services 2,525,000
<P>
Common Stock Issued for debt
extinguishment 4,288,362
-------------------------------------------------------
Common Stock Issued for
subscriptions receivable 381,667
<P>
Net Loss for the year -0-
-------------------------------------------------------
Balance at December 31, 1998 0 $0 36,361,097
===========================================================
<P>
Common Stock Issued for cash 17,950,000
<P>
Common Stock Issued for services 589,000
<P>
Common Stock Issued for debt extinguishment 1,000,000
<P>
Common Stock Issued for acquisition 836,700
<P>
Stock Issued 2,750,000 2,750
<P>
Net Loss for the year
-----------------------------------------------------
Balances at December 31, 1999 2,750,000 $2,750 56,736,797
==========================================================
<P>
Preferred stock, par value $.001, convertible to 10 shares of common stock,
25,000,000 shares authorized, 2,750,000 shares and outstanding at December 31, 1999
<P>
Common stock, par value $.001, 150,000,000 shares authorized, 54,036,797 shares
issued and outstanding at December 31, 1999
<P>
See accountants' report and accompanying notes to consolidated financial statements.
<P>
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(1998 Restated)
CONTINUE
--------
<TABLE>
<S> <C> <C> <C>
Common Stock Additional
Par Value $.001 Paid In Accumulated
Amount Capital Deficit
-------------------------------------------------------
Balances at December 31, 1997 $12,996 2,520,409 ($2,461,483)
===========================================================
Common Stock Issued for cash $16,170 456,930 -0-
<P>
Common Stock Issued for services 2,525 469,210
<P>
Common Stock Issued for debt
extinguishment 4,288 195,712
<P>
Common Stock Issued for
subscriptions receivables 382 14,743
-------------------------------------------------------
Net Loss for the year -0- -0- (1,392,207)
-------------------------------------------------------
Balance at December 31, 1998 $36,361 $3,657,004 ($3,853,690)
===========================================================
<P>
Common Stock Issued for cash 17,960 732,099
<P>
Common Stock Issued for services 589 43,651
<P>
Common Stock Issued for
debt extinguishment 1,000 9,220
<P>
Common Stock Issued for
acquisition 837 89,108
<P>
Stock Issued 409,750
<P>
Net Loss for the year -0- -0- (975,127
------------------------------------------------------
Balances at December 31, 1999 $56,747 $4,940,832 ($4,828,817)
==========================================================
<P>
(A) Preferred stock, par value $.001, convertible to 10 shares of common stock,
25,000,000 shares authorized, 2,750,000 shares and outstanding at December 31, 1999
<P>
(B) Common stock, par value $.001, 150,000,000 shares authorized, 54,036,797 shares
issued and outstanding at December 31, 1999
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
<P>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C>
Year End Year End
December 31, December 31,
1999 1998
(Restated)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<P>
Net profit (loss) $(975,127) $(1,039,207)
Depreciation 11,626 12,928
Common Stock issued for services 44,240 471,735
Loss on Investment -0- (353,000)
Extraordinary gain on
forgiveness of debt 99,780 -0-
------------------------------------------------------
(819,481) (907,544)
<P>
(Increase) decrease:
<P>
Accounts receivable (58,847) 20,918
Inventory (126,423) 58,362
Prepaid expenses -0- 4,276
Subscriptions receivables 15,125
(15,125)
<P>
Increase (decrease):
<P>
Accounts payable &
accrued expenses (94,745) 13,269
-------------------------------------------------------
TOTAL CASH FLOW FROM OPERATIONS (1,084,371) ( 825,844)
-------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
<P>
Purchase property, inventory
and equipment (111,343) (2,735)
Investments -0- 218,000
Security deposit (16,447) -0-
-------------------------------------------------------
TOTAL CASH FLOWS FROM
INVESTING ACTIVITIES (127,790) 215,265
-------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
<P>
Borrowings/payments under line
of credit agreement (net) 5,575 (28,759)
Proceeds from short term debt -0- -0-
Payments on short term debt (110,000) (40,000)
Proceeds from long term debt 5,000 -0-
Payments on long term debt (1,322) -0-
Shareholder loan payable 55,497 (36,801)
Sale of common stock 850,224 688,225
Sale of preferred stock 412,500 -0-
------------------------------------------------------
<P>
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES 1,217,474 582,665
------------------------------------------------------
NET INCREASE IN CASH 5,313 (27,914)
<P>
CASH BALANCE BEGINNING OF PERIOD 3,087 31,001
------------------------------------------------------
CASH BALANCE END OF PERIOD 8,400 $3,087
=========================================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
<P>
Note 1 - Organization of Company
-----------------------
<P>
Creation of the Company
<P>
Auxer Industries, Inc. (the "Company") was formed on June
20, 1920 under the laws of the State of Idaho as The
Auxer Gold Mines with an initial capitalization of
500,000 shares of common stock, $1.00 par value each and
a life of 50 years. On August 22, 1960, its certificate
of incorporation was amended to change the number of
authorized shares to issue to 10,000,000 common shares
$.50 par value each. On May 2, 1995, the certificate of
incorporation was amended to change the name of the
Company to Auxer Industries, Inc. and to change the
number of authorized shares to 50,000,000 shares of
common stock, $.001 par value each.
<P>
On August 11, 1997 the Company incorporated in the State
of Delaware under the name The Auxer Group, Inc. In
September 1997 the shareholders of the company voted to
exchange their shares on a one for one basis for shares
in the new company, The Auxer Group, Inc. The new
corporate name was effective January 1, 1998 for
accounting and tax purposes.
<P>
Description of the Company
<P>
The Company is an investment holding company that is
comprised of four subsidiaries: the Harvey Westbury
Corporation, Hardyston Distributors, Inc., CT Industries,
and Universal Filtration Industries. The Company is a
manufacturer, wholesaler, and distributor with a line of
automotive, marine, and aviation aftermarket and hardware
products. The Company was considered to be in a
development stage from April 18, 1995 until the end of
its fiscal year December 31, 1997 since it has generated
moderate recovery from the sales of its various product
lines.
<P>
On April 18, 1995, the Company acquired CT Industries,
Inc. ("CT"), a New Jersey corporation based in Wayne, New
Jersey. CT is a distributor of various automotive
products.
<P>
On February 8, 1996, the Company acquired Universal
Filtration Industries, Inc. ("Universal Filtration") a
New York corporation. Based in Farmingdale, New York,
Universal Filtration has developed the "Fiona Micro
Screen Filter", a replacement upgrade to a component of
machinery used by the dry cleaning industry.
<P>
On October 25, 1996, the Company acquired Harvey-Westbury
Corp. ("Harvey-Westbury"), a New York corporation. Based
in Farmingdale, New York, Harvey-Westbury is a
manufacturer and wholesaler of various automotive, marine
and aviation products.
<P>
On April 22, 1999, the Company formed Hardyston
Distributors, Inc., a Nevada corporation. Based in
northern New Jersey, Hardyston Distributors is an
automotive parts distributor.
<P>
Note 2 - Summary of Significant Accounting Policies
------------------------------------------
<P>
Basis of Financial Statement Presentation
<P>
The accompanying financial statements have been prepared
on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities
in the normal course of business. The Company incurred
net losses of $4,828,817 for period from April 18, 1995
to December 31, 1999. These factors indicate that the
Company's continuation as a going concern is dependent
upon its ability to obtain adequate financing.
<P>
The Company is anticipating that with the completion of
proposed private placements of its securities, the
Company will have sufficient funding to increase sale of
its products to the public. The Company will require
substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing
long-term need to obtain additional financing. The
Company's future capital requirements will depend on
numerous factors including, but not limited to, continued
progress developing additional products, improve
manufacturing efficiency and build an inventory to meet
fulfillment requirements for the Company's various
automotive products and filters for the cleaning industry
and the completion of planned acquisitions. The Company
plans to engage in such ongoing financing efforts on a
continuing basis.
<P>
The consolidated financial statements presented consist
of the company and its wholly owned subsidiaries CT,
Universal Filtration and Harvey Westbury, all of which
are under common control. Material inter-company
transactions and balances have been eliminated in the
consolidation.
<P>
Earnings per share
<P>
Earnings per share have been computed on the basis of the
total number of shares of common stock outstanding as of
December 31, 1999 of 56,736,797.
<P>
Earnings per share have been computed on the basis of the
total number of shares of common stock outstanding as of
December 31, 1998 of 36,361,097.
<P>
Earnings per share - assuming dilution, have been
computed on the basis of the number of shares of common
stock outstanding as of December 31, 1999 of 84,236,797
assuming the dilution effect of the convertible preferred
stock issued and outstanding. Each preferred share is
convertible to 10 shares of the Company's common stock.
Conversion was omitted in determining the diluted
earnings per share because the effect was anti-dilutive.
<P>
Receivables
<P>
Allowances against receivables are provided equal to the
estimated collection losses that will be incurred in
collection of all receivables and a reserve for returns
and discounts traditionally taken. Estimated allowances
are based on historical collection experience coupled
with review of current status of the existing receivables
and amounted to $19,639 at December 31, 1999 and $2,486
at December 31, 1998, respectively.
<P>
Property and Equipment
<P>
Property and equipment are recorded at cost and are
depreciated under the straight-line methods over the
estimated useful lives of the related assets.
Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
<P>
<TABLE>
<S> <C> <C>
Cost at Accumulated
12/31/99 Depreciation
12/31/99
------------------------------
<P>
Vehicles $7,700 $1,540
Machinery and equipment 44,129 25,766
Office furniture
and fixtures 9,234 3,516
Leasehold improvements 5,757 3,240
Revenue recognition
<P>
Cost at Accumulated
12/31/98 Depreciation
12/31/98
------------------------------
Machinery and equipment 41,751 $17,780
Office furniture
and fixtures 9,234 2,423
Leasehold improvements 5,757 2,233
</TABLE>
<P>
Revenue recognition
<P>
Revenue is recognized when products are shipped or
services are rendered.
<P>
Investment
<P>
During 1997, the Company invested in Auxer UK Ltd., a
wholly-owned foreign corporation based in the United
Kingdom. Auxer UK Ltd. invests in software technologies
in the United Kingdom. The Company invested $218,000
and $135,000 in 1997 and 1998 respectively.
<P>
In June 1998, the Company divested itself of its
software business for the amount of the investment,
$353,000, which was received in the form of a promissory
note to be repaid upon certain criteria being met. As of
September 30, 1999 the Company determined that the
collectability of the note is doubtful and has written it
off as a loss on investment as of December 31, 1998. See
Note 12 restatement as to the effect of this change.
<P>
Research and development expenses
<P>
Research and development costs are charged to
operations when incurred.
<P>
Use of Estimates
<P>
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that effect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Accordingly, actual results could differ from those
estimates.
<P>
Impairment of Long-Lived Assets
<P>
In the event that facts and circumstances indicate
that the carrying value of long lived assets, including
associated intangibles, may be impaired, an evaluation of
recoverability is performed by comparing the estimated
future undiscounted cash flows associated with the asset
to the assets carrying amount to determine if a write
down to market value or discounted cash flows is
required.
<P>
Note 3 - Acquisitions
------------
<P>
Acquisition of CT Industries, Inc.
<P>
On April 18, 1995, the Company acquired all the
capital stock CT, owned equally by Eugene Chiaramonte,
Jr. and Howard Tapen, for 4,000,000 shares of common
stock. The transaction has been accounted for as a
reverse acquisition and using the purchase method of
accounting with historic costs being the basis of
valuation.
<P>
Acquisition of Universal Filtration Industries, Inc.
<P>
On February 10, 1996, the Company entered into a
memorandum of understanding which was formalized on
August 7, 1996, for the acquisition of all of the common
shares of Universal Filtration for 1,500,000 shares of
common stock. Under this agreement, the Company
delivered stock certificates representing 1,000,000
shares. Certificates representing 500,000 shares of
common stock were issued but not delivered, as their
delivery was premised on the results of operations as set
forth in audited financial statements. The transaction
has been accounted for as a reverse acquisition and using
the purchase method of accounting with historic costs
being the basis of valuation.
<P>
As of December 20, 1996, the acquisition agreement was
modified as follows because certain economic
representations of Universal were note met:
<P>
Of the 500,000 shares of common stock issued, the
delivery which was contingent on Universal Filtration
meeting various performance objectives, 400,000 shares
were rescinded.
<P>
Acquisition of Harvey-Westbury Corp.
<P>
On October 25, 1996, the Company issued 170,000 shares
of common stock for acquisition of Harvey-Westbury at
$.50 per share. The transaction has been accounted for as
a reverse acquisition and using the purchase method of
accounting with historic costs being the basis of
valuation.
<P>
Acquisition of the assets of Hardyston Distributors
<P>
On April 22, 1999 the Company issued 836,700 shares of
common stock at $.1075 per share
plus $15,000 for the purchase of inventory and sundry
equipment from Mr. Ernest DeSaye, a sole proprietor.
<P>
Note 4 - Inventory
--------
<P>
Inventory consists of raw materials, work in process and
finished goods and is valued at the lower of cost
determined on the first-in, first-out method or market.
<P>
Note 5 - Debt
----
Security Agreement
<P>
The Company has entered into a security agreement with
Finova Growth Finance to borrow money secured by the
receivables evidenced by invoices of Harvey-Westbury
Corp. The Company has provided guarantees of the
repayment of loans. United agreed to lend an amount
equal to 75% of the net value of all Harvey-Westbury's
accounts.
<P>
Notes Payable
<P>
The following is a summary of short term debt at
December 31, 1999:
<P>
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
<P>
The following is a summary of short term debt at
December 31, 1998:
<P>
Convertible Notes Payable to Augustine Fund in the
amount of $110,000, dated November 21, 1998 payable on
demand plus interest at a rate of 8%, payable semi-annually
on March 1 and August 1 with shares of the
Company's common stock.
<P>
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
<P>
Long term debt is as follows:
<P>
13.5% installment note, collateralized by vehicle with
a carrying value of $4,000, payable in monthly
installments of $239 with the final payment due May, 2001
<P>
$3,678
Less current maturities 2,523
<P>
1,155
<P>
The following is a summary of short term at December 31,
1998:
<P>
Convertible Notes Payable to Augustine Fund in the
amount of $110,000, dated November 21, 1998 payable on
demand plus interest at a rate of 8%, payable semi-annually
on March 1 and August 1 with shares of the
Company's common stock.
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
<P>
Note 6 - Related Party Transactions
--------------------------
<P>
Issuance of Common Shares
<P>
On April 18, 1995, the Company acquired all the capital
CT, owned equally by Eugene Chiaramonte, Jr. and Howard
Tapen, for 4,000,000 shares of common stock.
<P>
Note 7 - Income Taxes
<P>
The Company provides for the tax effects of transactions
reported in the financial statement. The provision, if
any, consists of taxes currently due plus deferred taxes
related primarily to differences between the basis of
assets and liabilities for financial and income tax
reporting. The deferred tax assets and liabilities, if
any, represent the future tax return consequences of
those differences, which will either be taxable or
deductible when the assets and liabilities are recovered
or settled. As of December 31, 1999, the Company had no
material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position
because the deferred tax asset related to the Company's
net operating loss carry forward and was fully offset by
a valuation allowance.
<P>
The Company has net operating loss carry forwards for
income tax purposes of $(4,828,817) at December 31, 1999,
and $(3,853,690) at December 31, 1998, respectively.
These carry forward losses are available to offset future
taxable income, if any, and expires starting in the year
2011. The Company's utilization of this carry forward
against future taxable income may become subject to an
annual limitation due to a cumulative change in ownership
of the company of more than 50 percent.
<P>
<TABLE>
<S> <C> <C>
Deferred
tax asset: Dec 31, 1999 Dec 31, 1998
----------------------------------------------------------------------------
Net Operating loss
carry forward $1,641,798 $1,310,255
Valuation allowance (1,641,798) (1,310,255)Net deferred
tax assets $0 $0
</TABLE>
<P>
The Company recognized no income tax benefit for the loss
generated for the periods through December 31, 1999.
<P>
SFAS No. 109 requires that a valuation allowance be
provided if it is more likely than not that some portion
of all of a deferred tax asset will not be realized. The
Company's ability to realize benefit of its deferred tax
asset will depend on the generation of future taxable
income. Because the Company has yet to recognize
significant revenue from the sale of its products, the
Company believes that a full valuation allowance should
be provided.
<P>
Note 8 - Business and Credit Concentrations
----------------------------------
<P>
The amount reported in the financial statements for cash,
trade accounts receivable and investments approximates
fair market value. Because the difference between cost
and the lower of cost or market is immaterial, no
adjustment has been recognized and investments are
recorded at cost.
<P>
Financial instruments that potentially subject the
company to credit risk consist principally of trade
receivables. Collateral is generally not required.
<P>
Note 9 - Commitments and Contingencies
-----------------------------
<P>
Lease agreement for office space
<P>
The Company entered into a three-year lease agreement
with a nonaffiliated party beginning on November 1, 1996
at 30 Galesi Drive, Wayne, New Jersey for office space.
An $1,800 security deposit was required with minimum
monthly rental payments to be paid as follows:
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
---------- ----------- ------------
December 1, 1997 to November 30, 1998 $21,948.00 $1,829.00
December 1, 1998 to November 30, 1999 $23,777.04 $1,981.42
</TABLE>
<P>
In consideration of the Company taking the space in an
"as is' condition, the Landlord abated the monthly base
rent for a period of 4 months. Payment of rent began on
April 1, 1997. After November 30, 1999, the company is
continuing to lease the property on a month to month
basis through February 29, 2000 at the same rate as the
last period.
<P>
The Company has the right to terminate this lease
after the first year upon 90 days notice. If the Company
elected to terminate the lease, the Company agrees to pay
a termination fee equal to four months rent.
<P>
Lease Agreement for Industrial Facility
<P>
The Company entered into a three-year lease agreement
with a non affiliated party beginning on April 1, 1995
and expiring April 1, 1998, at 15 Heisser Court,
Farmingdale, New York, for the Harvey-Westbury
operations. On February 23, 1998, the lease was extended
to expire on April 30, 1999. On March 29, 1999 the lease
was extended to expire on April 30, 2000. A $5,770
security deposit was required with minimum monthly rental
payments to be paid as follows:
<P>
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
--------- ----------- ------------
May 1, 1997 to April 30, 1998 $33,744.00 $2,812.00
May 1, 1998 to April 30, 1999 $35,604.00 $2,967.00
May 1, 1999 to April 30, 2000 $36,024.00 $3,002.00
</TABLE>
<P>
The Company assumed the lease agreement with a non
affiliated party entered into by Mr. Ernest DeSaye, Jr.
beginning March 1, 1999 and expiring on February 28,
2000, at 22B Lasinski Road, Franklin, NJ. The option to
renew for an additional two years was invoked extending
the expiration of the lease to February 28, 2002.
<P>
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
--------- ----------- ------------
March 1, 1999 to February 28, 2000 $8,700.00 $725.00
March 1, 2000 to February 28, 2001 $9,000.00 $750.00
March 1, 2001 to February 28, 2002 $9,300.00 $775.00
</TABLE>
<P>
Purchase of Filter Marketing Rights
<P>
In October, 1995, Universal Filtration entered into an
agreement with William Hayday for the purchase of the
worldwide non transferable rights to market the Fiona
Button Trap Filter and the rights to make any future
modification to the design.
<P>
The term of the agreement was October 1, 1995 until
September 30, 1999, when it expired. The agreement was
not renewed.
<P>
Note 10 - Development Stage Company
-------------------------
<P>
The Company was considered to be a development stage
company with little operating history and having
conducted research and development and test market
activities, funded the production of multiple sales
videos of the Company's expanded product lines for
television and cable presentation, obtained financing,
hired personnel and developed consulting relationships
for the period April 18, 1995 to December 31, 1997. The
Company will also be dependent upon its ability to raise
additional capital to complete its marketing program,
acquiring additional equipment, management talent,
inventory and working capital to engage in profitable
business activity. Subsequent to December 31, 1997, the
Company's primary attention turned to routine, on-going
activities and ceased to be a development stage
enterprise.
<P>
Note 11 - Segment Information
-------------------
Management Policy in Identifying Reportable Segments
-----------------------------------------------------
The Company reportable business segments are strategic
business units that offer distinctive products and
services that are marketed through different channels.
They are managed separately because of their unique
technology, marketing, and distribution requirements.
<P>
Types of Products and Services
<P>
The Company is an investment holding company that is
comprised of four subsidiaries: The Harvey Westbury
Corp., Hardyston Distributors Inc., CT Industries, and
Universal Filtration Industries, Inc. Harvey Westbury is
a manufacturer and wholesaler of various automotive,
marine and aviation products. Hardyston Distributors is
a Northern New Jersey based automotive parts
distributor. CT Industries distributor of various
automotive products. Universal Filtration has in the
past manufactured and distributed filters used by the dry
cleaning industry and is currently inactive.
<P>
Segment Profit or Loss
<P>
The Company's accounting policies for segments are the
same as those described in the summary of significant
accounting policies. Management evaluates segment
performance based on segment profit or loss before income
taxes and nonrecurring gains and losses. Transfers
between segments are accounted for at market value.
<P>
The Company's consolidated balance sheet consists of the
following subsidiary components as of December 31, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CT Universal Hardyston Harvey Auxer
Auxer Industries Filtration Distributors, Westbury Group, Inc.
Group, Inc. Inc. Industries, Inc. Corp. Consolidated
Inc.
---------------------------------------------------------------------
Balance Sheet
Current Assets $4,089 $19,695 $0 $140,082 $250,912 $414,778
Fixed Assets 9,171 0 2,912 7,877 12,798 32,758
Other Assets 2,022,686 200 0 629 6,004 24,299
----------------------------------------------------------------------
Total Assets $2,035,946 $19,895 $2,912 $148,588 $269,714 $471,835
=========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities $134,288 $40,318 $54,451 $ 39,293 $ 30,818 $299,168
Long Term
liabilities 0 324,550 327,622 15,755 1,338,448 1,155
Stockholders'
Equity 1,901,658 (344,973)(379,161) 93,540 (1,099,552) 171,512
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity $2,035,946 $19,895 $2,912 $148,588 $269,714 $471,835
==========================================================================
<P>
The Company's consolidated statement of operations for the nine month period ended
December 31, 1999
<P>
Statement of operations
Revenues $0 $3,690 0 $393,225 $474,344 $871,259
Costs of goods sold 0 3,013 0 267,413 351,784 622,210
Gross profit 0 677 0 125,812 122,560 249,049
Operating
expenses (658,794) (15,112) (17,812) (72,390) $(500,613) (1,324,662)
----------------------------------------------------------------------
Income (loss)
from operations $(658,879) $(14,435)$(17,812) $(6,519) $(378,053)$(1,075,613)
----------------------------------------------------------------------
Extraordinary item
- gain on forgiveness
of debt 99,780 99,780
Interest Income 706 706
==========================================================================
Net income
(loss) $(558,308) $(14,435)$(17,812) $(6,519) $(378,053) $(975,127)
==========================================================================
<P>
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of December 31, 1999: -CONTINUE
--------
<TABLE>
<S> <C>
Intercompany
Eliminations
-------------
Balance Sheet
Current Assets 0
Fixed Assets 0
Other Assets (2,005,220)
----------------------------------------------------------------------
Total Assets (2,005,220)
=========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities 0
Long Term
liabilities (2,005,220)
Stockholders'
Equity 0
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity (2,005,220)
==========================================================================
<P>
The Company's consolidated statement of operations for the nine month period ended
December 31, 1999
<P>
Statement of operations
Revenues
Costs of goods sold
Gross profit 0
Operating
expenses
----------------------------------------------------------------------
Income (loss)
from operations 0
----------------------------------------------------------------------
Extraordinary item
- gain on forgiveness
of debt
Interest Income
==========================================================================
Net income
(loss) 0
==========================================================================
</TABLE>
<P>
The Company's restated consolidated balance sheet consists
of the following subsidiarY components as of December 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C>
CT Universal Harvey Auxer
Auxer Industries Filtration Westbury Group, Inc.
Group, Inc. Inc. Industries, Corp. Consolidated
Inc.
---------------------------------------------------------------------
Balance Sheet
Current Assets $19,153 $19,348 $280 $200,539 $239,320
Fixed Assets 13,029 107 4,076 15,609 32,821
Other Assets 1,431,938 200 0 5,770 360,852
----------------------------------------------------------------------
Total Assets $1,464,120 $(19,655) $(4,356) $(221,918) $279,993
==========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities $220,863 $42,142 $37,580 $139,733 $440,318
Long Term liabilities 0 308,052 328,125 793,879 0
Stockholders'
Equity 1,243,257 (330,539) (361,349) (711,694) (160,325)
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity $1,464,120 $ (19,655) $ (4,356) $ (221,918) $279,993
==========================================================================
<P>
The Company's consolidated statement of operations for the year ended December 31,1998
<P>
Statement of operations
Revenues $0 $1,168 $2,750 $283,538 $287,456
Cost of goods sold 0 38,934 400 198,618 237,952
---------------------------------------------------------------------
Gross profit 0 (37,766) 2,350 84,920 49,504
Operating
expenses (264,849) (2,729) (2,335) (482,663) (1,441,711)
---------------------------------------------------------------------
Net income (loss)$(953,984) $(40,495) $15 $(397,743) $(1,392,207)
=========================================================================
<P>
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of December 31, 1998: -CONTINUE
--------
<TABLE>
<S> <C>
Intercompany
Eliminations
Balance Sheet
Current Assets 0
Fixed Assets
Other Assets (1,430,056)
----------------------------------------------------------------------
Total Assets (1,430,056)
==========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities 0
Long Term liabilities (1,430,056)
Stockholders'
Equity 0
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity (1,430,056)
==========================================================================
<P>
The Company's consolidated statement of operations for the year ended December 31,1998
<P>
Statement of operations
Revenues
Cost of goods sold
---------------------------------------------------------------------
Gross profit 0
Operating
expenses
---------------------------------------------------------------------
Net income (loss) 0
=========================================================================
<P>
</TABLE>
<P>
Note 12 - Restatement
------------
<P>
During 1998, errors were discovered in which stock was
issued and not recorded, and stock was issued and
recorded at the incorrect price. These errors were
corrected by restating notes payable, accumulated
deficit, common stock and capital in excess of par. The
effect of these errors was to overstate 1996 net losses
by $2,402, understate 1997 net losses by $17,500 and
overstate notes payable by $102,000 for a net increase in
stockholders' equity of $102,000.
<P>
In addition, the Company in error accrued as salary for
the President for the years ended December 31, 1995, 1996
and 1997 at $100,000 per year for a total of $300,000.
On July 6, 1999, the parties agreed that the accrued
compensation would not be paid. There was no accrual
made for year ended December 31, 1998. As a result, the
financial statements were restated to reflect the effect
of not accruing officer salary at $100,000 per year for
1995, 1996, and 1997 resulting in a net increase in
stockholders equity of $300,000.
<P>
In conjunction with the Company filing Form 10SB for
Registration of Securities of small business issuers, the
effect of a one time change in accounting principles is
accounted for by retroactively restating financial
statements for the years ended December 31, 1998 and
1997.
<P>
As a result, certain costs that were capitalized and
amortized were restated and charged to operations as
incurred. The financial statements were restated to
reflect the effect of expensing these costs in the
periods incurred, increasing net loss by $540,967, and
decreasing net loss by $136,603 for the years ended
December 31, 1997 and 1998, respectively. The net change
in stockholders' equity as a result of the restatement
was a increase of $136,603 and a decrease of $540,967 at
December 31, 1998 and December 31, 1997 respectively.
<P>
Also in conjunction with the Company filing a Form 10SB
for Registration of Security of small business issuers,
the effects of a change in the value of services paid for
through the issuance of the Company's common stock and
the recognition as a loss of the Company's investment in
Auxer UK were accounted for by retroactively restating
the financial statements for the years ended December 31,
1998 and 1997.
<P>
As a result, the value of services received were changed
to reflect the fair value of the Company's common share
issued, increasing net losses by $336,135 and $515,791 or
the years ended December 31, 1998 and 1997. The company
also increased net losses by recognizing a loss on the
investment Auxer UK of $353,000 for the year ended
December 31, 1998. The net change in stockholders'
equity as a result of these changes was $353,000 for the
year ended December 31, 1998.
<P>
The net effect of the above changes covered by the
restatement on stockholders' equity was a decrease of
$216,397 and $158,967 at December 31, 1998 and 1997
respectively. The effect of the restatement on the
related per share data was to increase the loss by $.02
and $.08 per common share and per common share assuming
dilution for the year ended December 31, 1998 and 1997.
<P>
Note 13 - Subsequent Events
-----------------
<P>
The Company entered into a five year lease agreement with
a nonaffiliated party beginning on February 1, 2000 and
expiring January 31, 2005, at 12 Andrews Drive, West
Paterson, NJ, for their Wayne, NJ and Farmingdale, NY
operations. A $15,583 security deposit was required with
minimum monthly payments to be paid as follows:
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
Feb. 1, 2000 - Jan. 31, 2001 $85,000 $7,083,34
Feb. 1, 2001 - Jan. 31, 2002 $89,250 $7,437.50
Feb. 1, 2002 - Jan. 31, 2003 $93,500 $7,791.67
Feb. 1, 2003 - Jan. 31, 2004 $97,750 $8,145.84
Feb. 1, 2004 - Jan 31, 2005 $102,000 $8,500.00
</TABLE>
<P>
In addition to the minimum monthly rental payments, the
Company must pay real estate taxes, insurance, and
utilities.
<P>
Note 14 Stockholders' Equity
--------------------
<P>
On January 2, 1999, the Company issued 1,500,000 shares and
1,250,000 shares of the Company's preferred stock valued at
$.15 per share to Eugene Chiaramonte, Jr. and Ronald Shaver
respectively as repayment of loans in the amount of $15,000,
reimbursement of expenses of $12,500, and deferred
compensation of $208,500 and $173,750 respectively.
<P>
The Preferred Stock is convertible, at the holder's option,
at any time into shares of the Company's Common Stock at a
rate of ten shares of Common Stock for each share of
Preferred Stock.
<P> EDELMAN & KALOSIEH, CPAS PA.
CERTIFIED PUBLIC ACCOUNTANTS
15-01 BROADWAY
FAIR LAWN, NEW JERSEY 07410
-----------------
TEL (201) 797-4490
FAX (201) 797-0881
<P>
GEORGE A. KALOSIEH, CPA
JOSEPH F. SHACKIL, CPA MEMBERS
PAUL MEOLA, CPA AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS
N.J. SOCIETY OF CERTIFIED
PUBLIC ACCOUNTANTS
<P>
DONALD L. EDELMAN, CPA (RETIRED)
<P>
Independent Auditor's Report
----------------------------
Mr. Ernest De Saye, Jr., Owner
DB/A Hardyston Distributors
12 Andrews Drive
West Paterson, NJ 07424
<P>
We have audited the accompanying balance sheet of Ernest De
Saye, Jr., DB/A Hardyston Distributors (a sole
proprietorship) as of December 31, 1998, and the related
statements of income and proprietor's capital, and cash
flows from April 1, 1998 (date of inception) to December 31,
1998. 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.
<P>
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
<P>
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Ernest De Saye, Jr., DB/A Hardyston Distributors
(a sole proprietorship) as at December 31, 1998, and the
results of its operations and its cash flows for the nine
months then ended in conformity with generally accepted
accounting principles.
<P>
EDELMAN & KALOSIEH, CPAS PA
<P>
March 23, 2000
<P>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
BALANCE SHEET
DECEMBER 31, 1998
<P>
Assets
<TABLE>
<S> <C>
Current Assets
Cash $ 13,508
Accounts Receivable 8,608
Inventory 17,019
-------------
Total Current Assets 39,135
<P>
Property and Equipment
Machinery & Equipment 4,050
Office Equipment 2,000
-------------
Total Cost 6,050
Less Accumulated Depreciation (865)
-------------
Property and Equipment (Net) 5,185
-------------
Total Assets $ 44,320
=============
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
BALANCE SHEET
DECEMBER 31, 1998
<P>
Liabilities & Proprietor's Capital
<TABLE>
<S> <C>
Current Liabilities
Accounts Payable $298
Payroll Taxes Payable 499
------------
Total Current Liabilities 797
------------
Total Liabilities 797
------------
<P>
Proprietor's Capital 43,523
------------
Total Liabilities 8 Proprietor's Capital $ 44,320
============
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
STATEMENT OF CASH FLOWS
FROM APRIL 1, 1998 (DATE OF INCEPTION) TO
DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 28,137
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 865
(Increase) decrease in account receivable (8,608)
(Increase) decrease in inventory (17,019)
Increase in accounts payable 298
Increase (decrease) in payroll taxes payable 499
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,172
------------
<P>
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,050)
<P>
-------------
NET CASH USED BY INVESTING ACTIVITIES (6,050)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions by owner 36,618
Withdrawals by proprietor (21,232)
-------------
NET CASH USED BY FINANCING ACTIVITIES 15,386
-------------
NET INCREASE (DECREASE) IN CASH 13,508
CASH AT BEGINNING OF PERIOD -
-------------
CASH AT END OF PERIOD $ 13,508
=============
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
STATEMENT OF INCOME AND PROPRIETOR'S CAPITAL
FROM APRIL 1, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<S> <C>
From Apr. 1, 1998
to Dec. 31, 1998
-----------------
Income
Income $ 302,222
----------
Total Income 302,222
----------
<P>
Cost of Sales
Purchases 266,925
Direct Labor 2,363
----------
Total Available Inventory 269,288
Less: Ending Inventory (17,019)
----------
Total Cost of Sales 252,269
----------
Gross Profit 49,953
<P>
Operating Expenses
Advertising 159
Bank Service Charges 249
Bookkeeping Expense 300
Utilities 1,090
Insurance Expense 2,822
Miscellaneous Expenses 964
Office Supplies and Expenses 1,015
Rent Expense 6,450
Repairs and Maintenance 782
Payroll Taxes 243
Telephone 1,825
Travel 16
Truck Expense 5,036
Depreciation Expense 865
-----------
Total Operating Expenses 21,816
-----------
Income from Operations 28,137
Proprietor's Capital at Beginning of Year -
Contributions 36,618
Withdrawals (21,232)
-----------
Proprietor's Capital at End of Year
$ 43,523
===========
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON DISTRIBUTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<P>
NOTE A - SAY OF SIGNIFICANT ACCOUNTING POLICIES
<P>
Nature of Operations and Basis of Accounting
- ---------------------------------------------
<P>
Hardyston Distributors, a sole proprietorship, began
operations on April 1, 1998. The Company is engaged in
the auto parts distribution business with one warehouse
located in Franklin, New Jersey. The Company's financial
statements are presented in accordance with generally
accepted accounting principles. The accompanying financial
statements have been prepared solely from the accounts of
Ernest De Saye, Jr., D/B/A Hardyston Distributors, and the
owner, Ernest De Saye, Jr., represents that they do not
include his personal accounts or those of any other
operation in which he is engaged.
<P>
Property and Equipment
- ---------------------
<P>
Depreciation of property and equipment is provided on both
the straight-line and declining-balance methods.
Expenditures for maintenance and repairs are charged against
operations. Renewals and betterments that materially extend
the life of the asset are capitalized.
<P>
Income Taxes
- ------------
<P>
The proprietorship itself is not a taxpaying entity for
purposes of federal and state income taxes. Federal and
state income taxes of the proprietor are computed on his
total income from all sources; accordingly, no provision for
income taxes is made in these statements. The proprietor
customarily makes estimated tax payments toward his personal
income tax liability from the proprietorship bank account.
These payments are treated as withdrawals of capital.
<P>
Use of Estimates
- ----------------
<P>
The preparation of financial statements in conformity with
generally accepted accounting principles requires the
proprietor to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
<P>
Inventory
- ---------
Inventory is valued at the lower of cost determined on the
first-in, first-out method or market.
<P>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON DISTRIBUTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<P>
NOTE B- COMMITMENTS
<P>
The Company entered into a lease agreement with a
non-affiliated party beginning March 1, 1998 and expiring on
February 28, 1999. The option to renew for an additional
year was invoked extending the expiration of the lease to
February 28, 2000. Minimum monthly rental payments are to be
paid as follows:
<P>
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
- --------------- ----------- ------------
March 1, 1998 to February 28, 1999 $8,400.00 $700.00
March 1, 1999 to February 28, 2000 $8,700.00 $725.00
</TABLE>
<P>
NOTE C- SUBSEQUENT EVENTS
<P>
On April 22, 1999, the owner of the Company, Ernest De Saye, Jr., sold the
inventory and equipment to the Auxer Group Inc.
<P>
The Auxer Group, Inc.
Proforma Financial Information - Income Statement
For The Twelve Months Ended December 31, 1999
<TABLE>
<S> <C> <C> <C>
Hardyston Distributors The Auxer Group, Combined Income
Inc. Statement
<P>
(A Sole Proprietorship)
1/1/99 - 4/21/99 1/1/99 - 12/31/99 1/1/99 - 12/31/99
Revenues $116,865 $871,259 $988,124
Cost of Goods Sold $95,278 $622,210 $717,488
---------------------------------------------------------------
Gross Profit $21,587 $249,049 $270,636
===============================================================
Operations:
<P>
General & Administrative $10,471 $1,302,418 $1,312,889
Depreciation $0 $11,626 $11,626
Interest Expense $0 $10,618 $10,618
Total Expenses $10,471 $1,324,662 $1,335,133
---------------------------------------------------------------
Income (loss) from
operations $11,116 $(1,075,613) $(1,064,497)
===============================================================
Other Income (Expenses)
<P>
Interest Income $0 $706 $706
Extraordinary Item, gain on
forgiveness of debt $0 $99,780 $99,780
---------------------------------------------------------------
Net Income (loss) $11,116 $(975,127) $(964,011)
===============================================================
</TABLE>
Unaudited - See Accountant's Report
<P>
Signatures
<P>
In accordance with Section 12 of the Securities Exchange
Act of 1934, the registrant caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
<P>
/S/EUGENE CHIARAMONTE, JR.
--------------------------
BY: EUGENE CHIARAMONTE, JR.
Title: President, Chief
Executive Officer and
Director
Date: May 8, 2000
<P>
Item 15.(b) Exhibits
<P>
<TABLE>
<S> <C>
Exhibit No. Description
- ----------------------------
<P>
2.0 Plan of Reincorporation
<P>
3.1 Articles of Incorporation of The Auxer Group, Inc. and Articles of
Amendment
<P>
3.2 By-laws of The Auxer Group, Inc.
<P>
4.1 Certificate of Designations of Preferred Stock of The Auxer Group, Inc.
<P>
4.2 Non-Statutory Stock Option Plan
<P>
10.1 Acquisition Agreement and Plan of Reorganization between the Auxer Gold
Mines and CT Industries Inc.
<P>
10.2 Acquisition Agreement of Harvey-Westbury Corp.
<P>
10.3 Carquest Products, Inc. License Agreement
<P>
10.4 Agreement of Business Combination By Exchange of Assets for Stock between
The Auxer Group, Inc. and Ernest DeSaye, Jr. doing business as
Hardyston Distributors.
<P>
10.5 Agreement and Plan of Acquisition between Auxer Industries, Inc. and
Universal Filtration Industries, Inc.
10.6 Finova Capital Corporation Agreement and Amendment.
<P>
10.7 PMR and Associates Investor Relation Agreement dated January 4, 1999
<P>
10.8 PMR and Associates Investor Relations Services Agreement dated
April 6, 1999
<P>
10.9 PMR and Associates Management Consulting Services Agreement dated
July 1, 1999
<P>
10.10 Employment Agreement between A Subsidiary Corporation To Be Formed By The
Auxer Group, Inc. and Ernest R. Desaye, Jr.
<P>
21 Subsidiaries
27.1 Financial Data Schedule for The Auxer Group, Inc.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-99
<PERIOD-END> DEC-31-99
<CASH> 8,400
<SECURITIES> 0
<RECEIVABLES> 112,009
<ALLOWANCES> 19,639
<INVENTORY> 290,725
<CURRENT-ASSETS> 414,778
<PP&E> 66,820
<DEPRECIATION> <34,062>
<TOTAL-ASSETS> 471,835
<CURRENT-LIABILITIES> 299,168
<BONDS> 0
0
2,750
<COMMON> 56,747
<OTHER-SE> 112,015
<TOTAL-LIABILITY-AND-EQUITY> 471,835
<SALES> 871,259
<TOTAL-REVENUES> 871,259
<CGS> 622,210
<TOTAL-COSTS> 622,210
<OTHER-EXPENSES> 1,314,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,618
<INCOME-PRETAX> <1,074,907>
<INCOME-TAX> 0
<INCOME-CONTINUING> <1,074,907>
<DISCONTINUED> 0
<EXTRAORDINARY> 99,780
<CHANGES> 0
<NET-INCOME> <975,127>
<EPS-BASIC> <.02>
<EPS-DILUTED> <.02>
</TABLE>
