U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 2
TO
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION
12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
INDUSTRIAL RUBBER INNOVATIONS, INC.
(Name of small business issuer in its charter)
FLORIDA 91-1922981
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
4609 NEW HORIZON BOULEVARD, UNIT 8
BAKERSFIELD, CALIFORNIA 93313
(Address of Principal Executive Offices) (Zip Code)
(661) 833-8188
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
Title of Class
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TABLE OF CONTENTS
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PART I
Item 1 Description of Business.
Item 2 Plan of Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners and Management.
Item 5 Directors, Executive Officers, Promoters and Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
-------------------------------------
Industrial Rubber Innovations, Inc. develops, manufactures, and markets
specialty synthetic rubber molded products from its synthetic rubber compounds.
Described simplistically, the Company manufactures a rubber compound in bulk
which has the ability to withstand friction, heat, and wear-and-tear better than
the competition. The bulk product is custom molded, either by the Company or by
a third party who purchases the compound in bulk from the Company, into products
for the end-user. Until August 1999, the Company marketed and sold its existing
inventory of its sole product, IRI-500. Beginning in August 1999, the Company
began producing its new product, VeratonJ, whose characteristics substantially
exceed those of IRI-500. The Company's has now exhausted its existing inventory
of IRI-500, and is focusing its manufacturing and marketing efforts entirely on
the Veraton product line. The Company was organized as a Florida corporation on
August 7, 1986 and is currently based in Bakersfield, California.
On April 26, 1999, the Company, which at the time was designated EPL Ventures
Corp., a Florida corporation, acquired all of the outstanding common stock of
Industrial Rubber Innovations, Inc., a Nevada corporation, in a business
combination described as a "reverse acquisition." For accounting purposes, the
acquisition has been treated as the acquisition of EPL by IRI-Nevada. As part
of the acquisition, EPL changed its name to Industrial Rubber Innovations, Inc.
Immediately prior to the acquisition, and following the effectiveness of a
1-for-5 reverse stock split which was part of the acquisition, EPL had 3,444,000
shares of common stock outstanding.
As part of EPL's reorganization with IRI-Nevada, EPL issued 3,800,000 shares of
its common stock to the shareholders of IRI-Nevada in exchange for 3,800 shares
of IRI-Nevada common stock. In addition, the Company issued warrants,
exercisable until May 1, 2001 and containing registration rights, to purchase an
aggregate of 2,000,000 shares of its common stock, one-half at an exercise price
of $0.50 and one-half at an exercise price of $0.75, to the IRI-Nevada
shareholders (800,000 of the warrants have since been cancelled). EPL had no
significant operations prior to the merger.
Prior to the reorganization, the business of IRI-Nevada was operated for a
period of at least three years as a proprietorship owned by Steven Tieu, a
Director of the Company. The company was engaged in a limited amount of
business activity, primarily the sale in the United States of a small amount of
its IRI-500 product which was manufactured by contract-manufacturers in China.
The Company's current business plan is primarily an expansion of its sales
efforts in the United States, the introduction of a new and improved Veraton
product line, and the manufacture of its products in the United States.
The Company's chartered accountants have stated in their report included in this
Form 10-SB that unless the Company attains future profitable operations and/or
obtains additional financing, there is substantial doubt about the Company's
ability to continue as a going concern. As stated in Item 3 - Plan of
Operation, the Company is currently seeking additional financing to fund its
operations until it reaches a level of profitability. If the Company is
successful in obtaining such financing and reaching profitability, it believes
that its certified public accountants would not issue a going concern opinion in
its upcoming Fiscal Year 2000 report. However, there can be no assurances that
the Company will be able to raise sufficient capital to meet its needs. If the
Company is not successful in raising the necessary capital, then the Company
believes that its independent certified public accountants would issue an
opinion with a similar going concern modification regarding the Company's
financial condition.
BUSINESS OF ISSUER
There are two types of rubber: natural rubber and synthetic rubber. According
to 1998 statistics, synthetic rubber accounted for approximately sixty percent
(60%) of the world rubber production, while natural rubber accounted for forty
percent (40%) of the market. Fifty percent (50%) of the world's synthetic
rubber production is from the United States and Europe.
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Natural rubber deteriorates when exposed to the heat, pressure, and corrosive
chemicals encountered in many applications. The synthetic rubber industry
produces rubber compounds and products that have substantially expanded rubber
capabilities. These synthetic rubber attributes, developed in numerous classes
of synthetic rubber compounds, are used extensively in aerospace and defense,
construction, chemical processing, refineries, oil and gas recovery, and the
semiconductor industry. Major research efforts are directed at, among other
things, continuing to improve the ability of synthetic rubber to withstand
applications in increasingly hostile environments.
Under the terms of a royalty-free license agreement with Century Rubber, LLC
which gives the Company the exclusive right to manufacture, market, sell and
distribute products using a proprietary rubber compound formula, the Company
develops, manufactures, and markets specialty synthetic rubber molded products.
Under the terms of the license, the Company has the unrestricted right to
manufacture, market, sell, and distribute worldwide all products made from or
derived from the licensed formula for an indefinite period of time. The Company
also has an option to acquire a license for all new and future formulas and/or
products developed by Century Rubber, LLC on terms to be individually
negotiated, as well as a right of first refusal to match the terms of any
license agreements negotiated by Century Rubber, LLC. The license is for an
indefinite period, unless terminated by Century Rubber, LLC due to a breach of
the Agreement by the Company. The members of Century Rubber, LLC are Messrs.
Foran and Tieu, and Ms. Sheo, each a present member of the Company's management.
The proprietary formula which is the subject of the license was transferred to
Century Rubber, LLC by the above identified individuals, then licensed to the
Company, as a method of protecting its proprietary nature from creditors and
competitors. See "Patents, Trademarks, Licenses". As a result of the
transaction, there exists a potential conflict of interest between Century
Rubber, LLC, the Company, and the members of the Company's management who are
members of Century Rubber, LLC in that a dispute may arise concerning the terms
of the license agreement or its termination, and the interests and objectives of
the Company may be different than the interests and objectives of the members of
Century Rubber, LLC.
The attributes of the Company's initial synthetic rubber product IRI-500, used
in oil and gas production wells such as packing, rings, and cones, include
unusual resistance to heat, wear, and oils. In its production process, the
Company blends readily available raw materials to produce the required product
characteristics. The raw rubber material is then molded into a specific
product. The Company's products have been used primarily in the top of wells in
the oil and gas recovery industry, and products manufactured from the IRI-500
product line continue to outperform products made from competitive synthetic
rubbers. The Company sold all of its inventory of IRI-500 product, and has now
begun marketing its new VeratonJ product line.
The Company's new product line, VeratonJ, will substantially extend the
capabilities of the Company's product line beyond that of products manufactured
with IRI-500. Based on preliminary test results, Veraton appears to exceed many
of the high performance characteristics of DuPont's top perfluoroelastomer,
KalrezJ when compared to statistics found at Dupont's website. Applications
using KalrezJ are among the most demanding and highest priced synthetic rubber
products. The Company began producing Veraton in August 1999.
DISTRIBUTION METHODS
The Company intends to market and distribute its products through a combination
of direct sales to customers currently known by management and the use of
outside distributors.
In June 1999, the Company entered into a non-exclusive agreement with Petro-Rep
Co., an oil field supply company located in Kern County, California, to market
the Company's products. Under the terms of the Petro-Rep agreement, Petro-Rep
will receive up to 60,000 shares of the Company's common stock over a period of
twelve (12) months if the agreement is not earlier terminated. In addition,
Petro-Rep can earn additional shares of the Company's common stock based on
achieving certain sales levels, plus Petro-Rep has an option to purchase 50,000
shares of common stock at $1.00 per share during the first year of the
agreement. Finally, Petro-Rep will receive a commission of up to 20% of sales,
depending on the exact terms of each individual sale. Petro-Rep will be
reimbursed for expenses incurred on behalf of the Company. Included in the
agreement are sales projections provided by Petro-Rep, which are $350,000 in
year 1, $600,000 in year 2, and $1,000,000 in year 3 of the agreement. As of
the date hereof, Petro-Rep has not been responsible for the sale of any of the
Company's products.
In June 1999, the Company entered into an agreement with Gencon Capital
Resources, Ltd. which provides Gencon with the exclusive distributorship rights
for the Company's products in Canada. Specific compensation to Gencon is not
included in the agreement and will be negotiated on a case-by-case basis
depending on market conditions at the time of sale. It is anticipated by Gencon
that they will generate revenues to the Company of $1,000,000 in the first year
of the agreement and $2,000,000 in the second year of the agreement. As of the
date hereof, Gencon has not been responsible for the sale of any of the
Company's products.
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In July 1999, the Company entered into an agreement with Shenzhen Yujiang Trade
Limited which provided Shenzhen with the exclusive distributorship rights for
the Company's products in China. Specific compensation to Shenzhen is not
included in the agreement and will be negotiated on a case-by-case basis
depending on market conditions at the time of sale. As part of the agreement
Shenzhen anticipates that they will generate revenues to the Company of $600,000
in the first year of the agreement, $1,200,000 in the second year of the
agreement, and $2,500,000 in the third year of the agreement. As of the date
hereof, Shenzhen has not been responsible for the sale of any of the Company's
products.
COMPETITION
The Synthetic Rubber Industry as a Whole
The synthetic rubber industry is primarily made up of large, industrial chemical
companies located throughout the world. The industry is capital intensive for
both production and research and development. Most of the competitive companies
have substantially greater financial resources than the Company, and typically a
significant portion of their revenues are reinvested into research and
development. In addition, many competitive companies have historic business
relationships with their customers or have some form of mutual ownership or
financial relationships.
The Company intends to establish itself as a manufacturer of high end, high
performance synthetic rubber products that can be used in many of today's
demanding process and environmental applications. It is a highly competitive
market. The Company does not intend to compete in the high volume segment of
the industry, where price, capacity, and production efficiencies control the
marketplace. Instead, the Company intends to differentiate itself by offering
custom molded products with superior characteristics at a price comparable to
the current competition. The Company has reviewed publicly available
information and performed internal research on the characteristics of
competitor's products, and believes that their products will outperform the
competition's products in many areas, including resistance to heat and wear.
The Company's plans can be described in two phases:
- Phase I. The Company plans to equip its manufacturing facility and be in
production of its oil field-related products during the third and fourth quarter
of 2000.
- Phase II. Following the implementation of Phase I, the Company intends to
install an on-site testing laboratory, allowing the Company to complete and
enhance testing on future products for a variety of industries, not just the oil
field-related industries.
Because the Company has the exclusive right to use proprietary formulas provided
to it by Century Rubber, LLC, the Company believes that no competitor can
produce products which match the characteristics of their products. By offering
superior products to the current competition, at substantially similar prices,
the Company believes it can achieve and maintain profitability within the
industry.
Major competitors include DuPont, which manufactures synthetic rubber compounds
known as VitonJ and KalrezJ.
Oil and Gas Well Producers
In contrast to the synthetic rubber industry as a whole, the oil and gas
industry uses large volumes of high performance rubber products and is extremely
fragmented. In most cases, petroleum companies have ceased to stock parts
inventories for their field operating leases, and the parts inventory function
has fallen to stocking distributors. Although there is powerful competition for
sales to this industry, the decentralization of the buying decision to the lease
engineer and the ability to sell to stocking distributors who will market the
product based on its capabilities creates an opportunity for the Company to
generate sales. For these reasons, this market is currently the Company's
primary target.
The five largest competitors currently selling molded rubber products for oil
and gas production wells in California are Skinner Brothers, Ratigan, Huber,
Utex, and E.M. Berry.
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RAW MATERIALS AND PRINCIPAL SUPPLIERS
The Company uses readily available chemicals and carbon black in the production
of its rubber compounds. The chemicals are manufactured by several of the
world's large chemical companies in plants located in the United States and in
other countries. These manufacturers include Dow, Chevron and Mobil, and are
available in most countries through various distributors.
DEPENDENCE ON KEY CUSTOMERS
The Company is not dependent presently on any one or several customers for the
sale of its rubber compound. Sales of its products are primarily to many
individual oil and gas well operators who are not dependent on their parent
companies for the purchase decision.
PATENTS, TRADEMARKS, LICENSES
The Company's products are currently made from a formula made available to the
Company through a royalty-free license agreement with Century Rubber, LLC, whose
principal members include present and former members of the Company's
management, namely David H. Foran, Steven Tieu, and Nancy Sheo. See "Certain
Relationships and Related Transactions". Under the terms of the license, the
Company has the unrestricted right to manufacture, market, sell, and distribute
worldwide all products made from or derived from the licensed formula for an
indefinite period of time. The Company also has an option to acquire a license
for all new and future formulas and/or products developed by Century Rubber, LLC
on terms to be individually negotiated, as well as a right of first refusal to
match the terms of any license agreements negotiated by Century Rubber, LLC.
The Company currently makes its facilities available and provides office space
to Century Rubber, LLC without charge, but does not otherwise contribute
financially to the research and/or development of formulas by Century Rubber,
LLC. The Company does not charge Century Rubber, LLC for the use of their
facilities or office space, estimated to have a market value of between $250 and
$500 per month, because management believes that having Century Rubber
performing their research within a reasonable distance of the Company provides a
mutually beneficial working relationship. In the future, the Company may enter
into agreements with Century Rubber, LLC which provide for the payment or
reimbursement of certain expenses and other research and development costs in
exchange for license rights.
Neither Century Rubber, LLC nor the Company generally relies upon patent
protection for their formulas and/or products, believing instead that treating
them as trade secrets affords better protection. To date, competitors have been
unable to reverse engineer the chemical composition of the Company's IRI-500 or
VeratonJ products. Based on the chemical reactions that take place during the
proprietary mixing phase of production, Management believes that there is a very
small likelihood that the trade secrets will ever be reverse engineered. There
can be no assurance that competitors of the Company do not have competing
patents which may preclude certain aspects of the Company's formulas or designs,
that competitors may reverse engineer and create competitive products to those
of the Company or that other technological protection can be obtained for the
Company's products. No assurance can be given that patents will be granted on
future patent applications. The Company has one trademark application pending,
that for the trade name "Veraton".
GOVERNMENTAL APPROVALS AND REGULATION
The Company is currently conducting an assessment of the federal, state and
local regulations to which it is subject. The Company has had several meetings
with the City of Bakersfield to assist in making this determination.
The Company believes it is in compliance with federal, state and local
regulations with respect to environmental protection. The Company does not
anticipate that costs of compliance with such regulations will have a material
effect on its capital expenditures, earnings or competitive position.
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RESEARCH AND DEVELOPMENT
During the past twelve months, substantial improvements have been made to the
rubber compounds developed by the Company. These improvements are a result of
continued testing by the Company after using its licensed formula to create
sample products. These testing and modification efforts have resulted in a
rubber compound capable of withstanding continuous temperatures of up to 1,000
degrees Fahrenheit. The product development efforts have led to the addition of
capabilities to withstand corrosive materials, such as Silicone Oil. Other
product development efforts have resulted in VeratonJ compound characteristics
that include resistance to radiation.
As a result of its license with Century Rubber, LLC, the Company has not engaged
in a significant amount of research and development to date, other than the
testing described above. All of the research efforts have been undertaken by
Century Rubber at no direct cost to the Company. As such, no research and
development costs have been directly borne by customers. Although not currently
contemplated by the Company, it may undertake significant research and
development projects in the future.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company's manufacturing facility in Bakersfield, California is located in an
area zoned appropriately for the mixing of chemicals and carbon black. Other
than requirements for the handling and storage of chemicals, the only
manufacturing requirements that must be addressed by the Company is installation
of an air filtration system in its manufacturing facility, expected to cost
approximately $50,000.
NUMBER OF EMPLOYEES
As of July 12, 2000, the Company employed approximately 5 people on a full time
basis. Of these 5 employees, three are executive officers of the Company. See
"Directors, Executive Officers, Promoters and Control Persons". The remaining 2
are an administrative support staff person and a physical plant worker.
ITEM 2 - PLAN OF OPERATION
-------------------------------
The following discussion contains certain forward-looking statements that are
subject to business and economic risks and uncertainties, and the Company's
actual results could differ materially from those forward-looking statements.
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements and notes thereto.
The Company's prior full fiscal year ending October 31, 1998 is not indicative
of the Company's current business plan and operations. During the periods
ending October 31, 1997 and October 31, 1998, the Company had no revenues and
was in its development stages. For the fiscal year ended October 31, 1999, the
Company had very limited revenues and continued in its development stages.
After the Company's merger with IRI-Nevada, as previously discussed, the current
business plan was implemented. Therefore, this plan of operation will focus on
the Company's current business plan and operations. For information concerning
the Company's prior full fiscal years, the Company refers the reader to the
financial statements provided herewith.
Industrial Rubber Innovations, Inc. develops, manufactures, and markets
specialty synthetic rubber molded products from its synthetic rubber compounds.
Described simplistically, the Company manufactures a rubber compound in bulk
which has the ability to withstand friction, heat, and wear-and-tear better than
the competition. The bulk product is custom molded, either by the Company or by
a third party who purchases the compound in bulk from the Company, into products
for the end-user. Until August 1999, the Company marketed and sold its existing
inventory of its sole product, IRI-500. Beginning in August 1999, the Company
began producing its new product, VeratonJ, whose characteristics substantially
exceed those of IRI-500. The Company has now exhausted its existing inventory
of IRI-500, and is focusing its manufacturing and marketing efforts entirely on
the Veraton product line. The Company was organized as a Florida corporation on
August 7, 1986 and is currently based in Bakersfield, California.
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On April 26, 1999, the Company, which at the time was designated EPL Ventures
Corp., a Florida corporation, acquired all of the outstanding common stock of
Industrial Rubber Innovations, Inc., a Nevada corporation, in a business
combination described as a "reverse acquisition." For accounting purposes, the
acquisition has been treated as the acquisition of EPL by IRI-Nevada. As part
of the acquisition, EPL changed its name to Industrial Rubber Innovations, Inc.
Prior to the reorganization, the business of IRI-Nevada was operated for a
period of at least three years as a proprietorship owned by Steven Tieu, a
Director of the Company. The company was engaged in a limited amount of
business activity, primarily the sale in the United States of a small amount of
its IRI-500 product which was manufactured by contract-manufacturers in China.
The Company's current business plan is primarily an expansion of its sales
efforts in the United States, the introduction of a new and improved Veraton
product line, and the manufacture of its products in the United States.
In order to fulfill orders for products, the Company is currently using its
existing supply of products in inventory, which is manufactured under contract
in China. During the next twelve months, the Company intends to equip its newly
leased facility with the necessary equipment to begin manufacturing its products
in Bakersfield. Once fully operational, it is anticipated that the
manufacturing facility will employ approximately 12 - 15 people on a full time
basis.
Liquidity
The Company currently has a minimal amount of capital available to it and
anticipates the need for at least $1,000,000 during the next twelve months to be
used for working capital purposes, marketing, and to acquire equipment. It is
anticipated that the Company will undertake a private placement of its common
stock in order to raise the necessary capital. In the event that the Company is
unable to raise the necessary capital, its ability to manufacture and market its
products will be severely limited, and its financial results will be materially
harmed.
The Company was previously the owner of record of an investment interest in
Savant Biomedical, Inc. The Savant interest was acquired by the Company for
$850,000 in fiscal year 1998, prior to the merger transaction with Industrial
Rubber Innovations, Inc. In March 1999, the Company entered into an agreement
with Co-Victory Capital Ltd. ("Co-Victory") to sell all of its investment in
Savant as well as a debenture receivable from Savant for total proceeds of
$800,000. In July 1999, the Company entered into an Escrow Agreement with
Co-Victory and various other parties wherein the parties transferred their
investment of 1,519,000 shares of the Company to an escrow agent, who is
responsible for the sale of those shares on behalf of Co-Victory and the various
other parties. The proceeds from the sale of the shares by the escrow agent
will compromise the total proceeds to be received by the Company from the sale
of its investment in Savant and the debenture receivable. As at October 31,
1999, the Company has written-off its investment in Savant and has written-down
its investment in the debenture receivable to $117,800, based on the estimated
proceeds from the sale of the shares of the Company by the escrow agent.
It is not currently contemplated that the Company will perform any substantial
product research or development during the next twelve months.
The Company's chartered accountants have stated in their report included in this
Form 10-SB that unless the Company attains future profitable operations and/or
obtains additional financing, there is substantial doubt about the Company's
ability to continue as a going concern. As stated in Item 3 - Plan of
Operation, the Company is currently seeking additional financing to fund its
operations until it reaches a level of profitability. If the Company is
successful in obtaining such financing and reaching profitability, it believes
that its certified public accountants would not issue a going concern opinion in
its upcoming Fiscal Year 2000 report. However, there can be no assurances that
the Company will be able to raise sufficient capital to meet its needs. If the
Company is not successful in raising the necessary capital, then the Company
believes that its independent certified public accountants would issue an
opinion with a similar going concern modification regarding the Company's
financial condition.
Capital Expenditures
The Company expects to finance the purchase of the equipment necessary to
complete its newly leased facility through equipment leasing financing, however
the Company is not currently negotiating any terms of said equipment financing.
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ITEM 3 - DESCRIPTION OF PROPERTY
-------------------------------------
On June 3, 1999, the Company entered into a lease for an approximately 29,300
square foot facility located at 6801 McDivitt Drive, Bakersfield, California
93313. The lease term begins on September 1, 1999 and is effective through
August 31, 2004. The monthly base rent shall be equal to $8,500 in year one,
$8,775 in year two, $9,038 in year three, $9,309 in year four, and $9,589 in
year five of the lease. Under the terms of the lease, the Company has a right
of first refusal to purchase the premises and an option to renew the lease for
an additional five (5) year term beginning at $9,877 per month and increasing at
the end of each twelve (12) month period at a rate of 3% per annum. In January,
2000, the Company entered into an agreement with its landlord whereby upon
re-leasing the premises to a new tenant, and upon receipt by the landlord of an
aggregate of 25,000 shares of common stock of the Company, the landlord would
release the Company from any back rents owed, and from its future obligations
under the lease, as long as the new tenant continued to make payments in a
timely manner. A new tenant has occupied the McDivitt Drive premises and has
paid the rent as due.
The Company currently sublets office space at 4609 New Horizon Boulevard, Unit
8, Bakersfield, California 93313 from David Foran, the Company's Chief Financial
Officer, pursuant to a month-to-month arrangement at a monthly rent of $1,325.
This is the same rate that Mr. Foran pays under the terms of the master lease.
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ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------
The following table sets forth, as of July 12, 2000, certain information with
respect to the Company's equity securities owned of record or beneficially by
(i) each Officer and Director of the Company; (ii) each person who owns
beneficially more than 5% of each class of the Company's outstanding equity
securities; and (iii) all Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
Title of Class
--------------- -------------------------------- ---------------------- -----------------
Common Stock David H. Foran 210,000 (1) 2.6 %
4609 New Horizon Drive, Unit 8
Bakersfield, CA 93313
Common Stock Steven Tieu 270,000 (2) 3.3 %
4609 New Horizon Drive, Unit 8
Bakersfield, CA 93313
Common Stock Nancy Sheo 250,000 (3) 3.0 %
4609 New Horizon Drive, Unit 8
Bakersfield, CA 93313
All Officers and Directors
as a Group (3 Persons)
730,000 (1)(2)(3) 8.7 %
</TABLE>
(1) Includes warrants to acquire 100,000 shares of common stock, exercisable
until May 1, 2001 at an exercise price of $0.50 per share.
(2) Includes warrants to acquire 200,000 shares of common stock, exercisable
until May 1, 2001 at an exercise price of $0.75 per share.
(3) Includes warrants to acquire 200,000 shares of common stock, exercisable
until May 1, 2001 at an exercise price of $0.75 per share.
The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the Commission and generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes
of computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.
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ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------------------------
The following table sets forth the names and ages of the current directors and
executive officers of the Company, the principal offices and positions with the
Company held by each person and the date such person became a director or
executive officer of the Company. The executive officers of the Company are
elected annually by the Board of Directors. The directors serve one year terms
until their successors are elected. The executive officers serve terms of one
year or until their death, resignation or removal by the Board of Directors.
Other than the relationship between Mr. Tieu, who is the son of Ms. Sheo, there
are no family relationships between any of the directors and executive officers.
In addition, there was no arrangement or understanding between any executive
officer and any other person pursuant to which any person was selected as an
executive officer.
The directors and executive officers of the Company are as follows:
Name Age Positions
---- --- ---------
David H. Foran 51 Acting President, Chief Financial
Officer, Secretary, Director (1999)
Steven Tieu 32 Vice President of Technical Support,
Director (1999)
Nancy Sheo 42 Vice President of Development (1999)
DAVID H. FORAN has been the Company's Chief Financial Officer since April 1999,
and was its Acting President from September 30, 1999, when the Company's
then-President, John Proulx, resigned until February 15, 2000, when Richard E.
Frasch, Jr. became Chief Executive Officer. Mr. Foran has served in numerous
financial positions in the mortgage banking industry, including terms with
Associates Financial Services from 1970 to 1974, Citibank from 1974 to 1976,
Nova Financial Services from 1990 to 1996, and Million Plus Realty from 1996 to
1998. While at Nova Financial Services, Mr. Foran was a Mortgage Consultant
responsible for brokering residential and commercial mortgages through banks,
life insurance companies, and trust companies. While at Million Plus Realty,
Mr. Foran was a Financial Manager responsible for the financing of real estate
projects, raising capital, and overall financial management. In addition, Mr.
Foran has worked as an independent consultant since 1995, with responsibilities
including structuring and funding transactions, and accounting and reporting.
STEVEN TIEU learned rubber development and production at his family's rubber
plant in Vietnam, which also manufactured motorcycles for Honda. Since moving
to the United States in the 1980's, Mr. Tieu has used his experience, additional
education, and training to continue as a proprietor in the rubber industry and
in the import-export business. Specifically, from 1990 through 1998, Mr. Tieu
was the proprietor of T&T Rubber, which imported rubber from China for
distribution in the United States.
NANCY SHEO, Steven Tieu's mother, has been involved in all phases of the Tieu
family rubber business since the 1960's. Although she holds no formal higher
education degrees, she has years of practical experience in the research and
development and use of rubber compounds and the manufacture of rubber products.
From 1990 through 1998, Ms. Sheo was an employee and proprietor of T&T Rubber,
which imported rubber from China for distribution in the United States.
ITEM 6 - EXECUTIVE COMPENSATION
-----------------------------------
On May 15, 1999, the Company entered into a two (2) year Employment Agreement
with John Proulx, the Company's then-President and CEO, whereby the Company
agreed to pay Mr. Proulx an annual salary of $60,000. On September 30, 1999,
Mr. Proulx resigned as an officer, director, and employee of the Company for
personal reasons, and his employment agreement was terminated.
11
<PAGE>
On May 15, 1999, the Company entered into a two (2) year Employment Agreement
with David H. Foran, the Company's then-Chief Financial Officer and Secretary,
whereby the Company will pay Mr. Foran an annual salary of $60,000. The
Agreement can be terminated at any time for cause, as defined therein, without
penalty or severance. The Agreement can be terminated by Mr. Foran at any time
for good reason, as defined therein, in which case Mr. Foran would be entitled
to one-year's compensation as severance. The Agreement may be terminated by the
Company after the first year for good reason, as defined therein, in which case
Mr. Foran would be entitled to one-year's compensation as severance.
On May 15, 1999, the Company entered into a two (2) year Employment Agreement
with Steven Tieu, the Company's Vice President of Technical Support, whereby the
Company will pay Mr. Tieu an annual salary of $60,000. The Agreement can be
terminated at any time for cause, as defined therein, without penalty or
severance. The Agreement can be terminated by Mr. Tieu at any time for good
reason, as defined therein, in which case Mr. Tieu would be entitled to
one-year's compensation as severance. The Agreement may be terminated by the
Company after the first year for good reason, as defined therein, in which case
Mr. Tieu would be entitled to one-year's compensation as severance.
On May 15, 1999, the Company entered into a two (2) year Employment Agreement
with Benny Hun, the Company's then-Vice President of Production, whereby the
Company agreed to pay Mr. Hunn an annual salary of $60,000. On September 30,
1999, Mr. Hunn resigned as an officer, director, and employee of the Company for
personal reasons, and his employment agreement was terminated.
On May 15, 1999, the Company entered into a two (2) year Employment Agreement
with Nancy Sheo, the Company's Vice President of Development, whereby the
Company will pay Ms. Sheo an annual salary of $60,000. The Agreement can be
terminated at any time for cause, as defined therein, without penalty or
severance. The Agreement can be terminated by Ms. Sheo at any time for good
reason, as defined therein, in which case Ms. Sheo would be entitled to
one-year's compensation as severance. The Agreement may be terminated by the
Company after the first year for good reason, as defined therein, in which case
Ms. Sheo would be entitled to one-year's compensation as severance.
On February 15, 2000, the Company entered into a two (2) year Employment
Agreement with Richard E. Frasch, Jr., the Company's then-Chief Executive
Officer. Under the terms of the Agreement, the Company was to pay Mr. Frasch a
salary of Six Thousand Dollars ($6,000) per month for the first six months
following the effective date thereof, increasing to Seven Thousand Five Hundred
Dollars ($7,500) per month thereafter. In addition, Mr. Frasch was to receive
warrants to acquire an aggregate of 500,000 shares of the Company's common
stock, exercisable until February 15, 2003, at an exercise price of $0.50 per
share. The warrants vest at the rate of one-twenty fourth (1/24) per month over
the term of the Agreement. The Agreement may be terminated by the Company with
thirty (30) days notice, in which event Mr. Frasch would be entitled to receive
severance compensation equal to ninety (90) days salary. The Company may also
terminate the Agreement during the thirty (30) day period immediately following
its first six (6) month period, without severance or penalty, in the event the
Company is not successful in obtaining at least $500,000 in financing.
Effective on June 15, 2000, Mr. Frasch resigned as an officer, director, and
employee of the Company.
On June 3, 1999, the Company's Board of Directors and a majority of its
shareholders approved the Industrial Rubber Innovations, Inc. Omnibus Stock
Option Plan, effective July 1, 1999. Under the terms of the Option Plan, the
Board of Directors has the sole authority to determine which of the eligible
persons shall receive options, the number of shares which may be issued upon
exercise of an option, and other terms and conditions of the options granted
under the Plan to the extent they don't conflict with the terms of the Plan. An
aggregate of 750,000 shares of common stock are reserved for issuance under the
Plan during the year July 1, 1999 to June 30, 2000. For each subsequent year
beginning July 1, 2000, there shall be reserved for issuance under the Plan that
number of shares equal to 10% of the outstanding shares of common stock on July
1 of that year. The exercise price for all options granted under the Plan shall
be 100% of the fair market value of the Company's common stock on the date of
grant, unless the recipient is the holder of more than 10% of the already
outstanding securities of the Company, in which case the exercise price shall be
110% of the fair market value of the Company's common stock on the date of
grant. All options shall vest equally over a period of five years from the date
of issuance. Currently, the Board of Directors has not issued any options under
the terms of the Plan.
12
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the fiscal years ended October 31, 1998
and 1999. Other than as set forth herein, no executive officer's salary and
bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
--------------------- ----------------------------
Awards Payouts
-------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
YEAR ($) ($) ($) ($) SARS (#) ($) ($)
NAME AND
PRINCIPAL
POSITION
John Proulx (1) 1998 - 0 - -0- -0- -0- -0- -0- -0-
(President, CEO) (10/31)
1999 22,500 -0- -0- - 0 - - 0 - -0- -0-
(10/31)
David H. Foran 1998 - 0 - -0- -0- -0- -0- -0- -0-
(Acting President, (10/31)
CFO, Secretary)
1999 22,500 -0- -0- - 0 - - 0 - -0- -0-
(10/31)
</TABLE>
(1) Mr. Proulx resigned as an officer, director, and employee of the Company
effective September 30, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/SAR'S GRANTED TO EXERCISE OF BASE PRICE
GRANTED (#) EMPLOYEES IN FISCAL YEAR ($/SH) EXPIRATION DATE
NAME
-------------------------------------------------------------------------------------------------------------
John Proulx - 0 - -- -- --
David H. Foran - 0 - -- -- --
</TABLE>
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FY-END THE-MONEY OPTION/SARS
SHARES ACQUIRED ON (#) AT FY-END ($)
EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME
--------------------------------------------------------------------------------------------------------------------------
John Proulx -0- -0- - 0 - --
David H. Foran -0- -0- - 0 - --
</TABLE>
COMPENSATION OF DIRECTORS
The Directors have not received any compensation for serving in such capacity,
and the Company does not currently contemplate compensating its Directors in the
future for serving in such capacity.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------
On April 26, 1999, the Company, which at the time was designated EPL Ventures
Corp., a Florida corporation acquired all of the outstanding common stock of
Industrial Rubber Innovations, Inc., a Nevada corporation, in a business
combination described as a "reverse acquisition." For accounting purposes, the
acquisition has been treated as the acquisition of EPL by IRI-Nevada. As part
of the acquisition, EPL changed its name to Industrial Rubber Innovations, Inc.
Immediately prior to the acquisition, and following the effectiveness of a
1-for-5 reverse stock split which was part of the acquisition, EPL had 3,444,000
shares of common stock outstanding.
As part of EPL's reorganization with IRI-Nevada, EPL issued 3,800,000 shares of
its common stock to the shareholders of IRI-Nevada in exchange for 3,800 shares
of IRI-Nevada common stock. In addition, the Company issued warrants,
exercisable until May 1, 2001 and containing registration rights, to purchase an
aggregate of 2,000,000 shares of its common stock, one-half at an exercise price
of $0.50 and one-half at an exercise price of $0.75, to the IRI-Nevada
shareholders (800,000 of the warrants have since been cancelled). EPL had no
significant operations prior to the merger.
A shareholder of the Company retained the services of Fritz Boudreaux &
Associates in approximately May 1999 to perform public relations services. The
oral agreement with Fritz Boudreaux & Associates lasted for only one month, and
Boudreaux was compensated with 4,000 shares of common stock transferred from
that shareholder.
In approximately May 1999, the Company entered into a verbal agreement with
Market-Info.com wherein the Company agreed to pay a fee of $1,000, plus an
additional $500 per month for each month that the Company's information was
available on the Market-Info.com web site. The Company paid a total of $2,500
under the terms of that agreement, which was been terminated.
In approximately May 1999, the Company entered into a verbal agreement with
Internetstockmarket.com, wherein the Company agreed to pay a fee of $2,500 per
month for each month that the Company's information was available on their
website. After the first month, and the resulting $2,500 payment, the Company
had its profile removed from the Internetstockmarket.com website.
14
<PAGE>
Effective June 25, 1999, the Company entered into a royalty-free license
agreement with Century Rubber, LLC which gives the Company the exclusive right
to manufacture, market, sell and distribute products using a proprietary rubber
compound formula. Under the terms of the license, the Company has the
unrestricted right to manufacture, market, sell, and distribute worldwide all
products made from or derived from the licensed formula for an indefinite period
of time. The Company also has an option to acquire a license for all new and
future formulas and/or products developed by Century Rubber, LLC on terms to be
individually negotiated, as well as a right of first refusal to match the terms
of any license agreements negotiated by Century Rubber, LLC. The license is for
an indefinite period, unless terminated by Century Rubber, LLC due to a breach
of the Agreement by the Company. The members of Century Rubber, LLC are Messrs.
Foran and Tieu, and Ms. Sheo, each a present member of the Company's management.
The proprietary formula which is the subject of the license was transferred to
Century Rubber, LLC by the above identified individuals, then licensed to the
Company, as a method of protecting its proprietary nature from creditors and
competitors. See "Patents, Trademarks, Licenses". As a result of the
transaction, there exists a potential conflict of interest between Century
Rubber, LLC, the Company, and the members of the Company's management who are
members of Century Rubber, LLC in that a dispute may arise concerning the terms
of the license agreement or its termination, and the interests and objectives of
the Company may be different than the interests and objectives of the members of
Century Rubber, LLC.
The Company does not have a conflicts policy and does not anticipate adopting
one.
The Company currently sublets office space at 4609 New Horizon Boulevard, Unit
8, Bakersfield, California 93313 from David Foran, the Company's Chief Financial
Officer, pursuant to a verbal month-to-month arrangement at a monthly rent of
$1,325. This is the same rate that Mr. Foran pays under the terms of the master
lease.
ITEM 8 - DESCRIPTION OF SECURITIES
---------------------------------------
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of 50,000,000
shares of common stock, $0.001 par value per share, of which 7,895,227 were
outstanding as of July 12, 2000. Pursuant to the Agreement and Plan of
Reorganization dated April 12, 1999, the Company approved a 1-for-5 reverse
stock split of its common stock. All references to the numbers of shares of the
Company's common stock are adjusted to reflect the 1-for-5 reverse split of the
Company's common stock. Holders of shares of common stock are entitled to one
vote for each share on all matters to be voted on by the stockhol-ders. Holders
of common stock have no cumulative voting rights. Holders of shares of common
stock are entitled to share ratably in dividends, if any, as may be declared,
from time to time by the Board of Direc-tors in its discretion, from funds
legally available therefor. In the event of a liquidation, dis-solution or
winding up of the Company, the holders of shares of common stock are entitled to
share pro rata all assets remaining after payment in full of all liabilities.
Holders of common stock have no pre-emptive rights to purchase the Company's
common stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares of
common stock are fully paid and non-assessable.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of 5,000,000
shares of preferred stock, $0.001 par value, none of which are issued and
outstanding. The Company's Board of Directors has authority, without action by
the shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series. The issuance of preferred stock may also include restricting
dividends on the common stock, dilute the voting power of the common stock,
and/or impair the liquidation rights of the holders of common stock.
TRANSFER AGENT
The transfer agent for the common stock is Interwest Transfer Co., 1981 4800
South, Suite 100, Salt Lake City, Utah 84117.
15
<PAGE>
------
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
--------------------------------------------------------------------------------
OTHER SHAREHOLDER MATTERS
---------------------------
MARKET INFORMATION
The following table sets forth the high and low bid prices for shares of the
Company's common stock for the periods noted, as reported by the National Daily
Quotation Service and the NASDAQ Bulletin Board. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. On November 21, 1997, the Company's common stock
began listing on the NASDAQ exchange under the trading symbol EPLV. Effective
on April 27, 1999, the trading symbol for the Company's common stock changed to
IRIB.
BID PRICES
YEAR PERIOD HIGH LOW
----- ------ ---- ----
2000 First Quarter (1) .09 .02
Second Quarter (1) .09 .02
1999 First Quarter .07 .06
Second Quarter 1.94 1.00
Third Quarter 1.47 0.36
Fourth Quarter 0.49 0.14
1998 First Quarter 5.19 3.90
Second Quarter 3.62 2.12
Third Quarter .44 .06
Fourth Quarter .10 .06
(1) During the first and second quarter of 2000, the Company's securities
were traded on the "pink sheets". Because of the lack of accurate information
for securities traded on the pink sheets, the high and low prices reflected
herein are only estimates.
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4, 1999,
issuers who do not make current filings pursuant to Sections 13 and 15(d) of the
Securities Act of 1934 are ineligible for listing on the NASDAQ Over-
the-Counter Bulletin Board. Pursuant to the Rule, issuers who are not current
with such filings are subject to de-listing pursuant to a phase-in schedule
depending on each issuer's trading symbol as reported on January 4, 1999. The
Company's trading symbol on January 4, 1999 was EPLV. Therefore, pursuant to
the phase-in schedule, the Company was de-listed in November, 1999.
The Company is not currently in compliance with the Rule, and in the past, has
not made filings pursuant to Sections 13 and 15(d) of the Securities Act of
1934. The Company has filed this Registration Statement on Form 10-SB in order
to become a "reporting" company and therefore comply with the Rule. Quotation
of the Company's securities was removed from the OTCBB on November 18, 1999, and
will remain removed until such time as the Securities and Exchange Commission
("SEC") has reviewed the Company's Form 10-SB and has stated that it has no
further comments Once the Company has complied with the Rule, it will once
again become eligible for listing on the NASDAQ Over-the-Counter Bulletin Board
and will seek to be reinstated on the NASDAQ Over-the-Counter Bulletin Board.
16
<PAGE>
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on Nasdaq and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average annual revenue
of at least $6,000,000, if such issuer has been in continuous operation for less
than three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of the common stock of the company as
of the close of business on June 12, 2000 was approximately 90. Many of the
shares of the Company's common stock are held in "street name" and consequently
reflect numerous additional beneficial owners.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its common stock, and
does not expect to pay cash dividends in the next term. The Company intends to
retain future earnings, if any, to provide funds for operation of its business.
ITEM 2 - LEGAL PROCEEDINGS
------------------------------
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of its business. The
Company is not currently involved in any such litigation which it believes could
have a materially adverse effect on its financial condition or results of
operations.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
--------------------------------------------------------------
Prior to the acquisition of IRI-Nevada, EPL engaged Barry L. Friedman, P.C.,
Certified Public Accountants ("Mr. Friedman"), to audit the Company' s financial
statements for the year ended December 31, 1996 and the ten month period ended
October 31, 1997.
Effective March 11, 1999, Davidson & Company, Chartered Accountants, were
engaged by the Company as their principal accountant to audit the Company's
financial statements for the period of incorporation on August 7, 1986 to
October 31, 1998 and not the ten month period ended October 31, 1997 and the
year ended December 31, 1998. There have been no disagreements between Barry L.
Friedman, Davidson & Company and Management of the type required to be reported
under this Item 3 since the date of their engagement.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
-------------------------------------------------------
Prior to the merger of EPL and IRI
In connection with a private offering of securities which was made by the
Company in January 1998, the Company sold an aggregate of 2,200,000 units to
sixteen (16) purchasers under Rule 504 of Regulation D of the Securities Act of
1933. Each Unit contained one (1) share of common stock and one (1) common
stock purchase warrant. The Warrants were exercisable for a period of one year
from the date of issuance at a price of $1.00 per share. Each Unit was sold at
a price of $0.25 per unit, resulting in net proceeds to the Company of $550,000.
In connection with the exercise of the Warrants, an aggregate of 500,000 shares
of common stock was issued to three (3) existing shareholders in February 1998,
resulting in net proceeds to the Company of $500,000. The issuance was exempt
from registration under Rule 504 of Regulation D in accordance with the sale of
the Units in January 1998.
17
<PAGE>
In connection with the exercise of the Warrants, an aggregate of 20,000 shares
of common stock was issued to one (1) existing shareholder in May 1998,
resulting in net proceeds to the Company of $20,000. The issuance was exempt
from registration under Rule 506 of Regulation D.
In connection with a private offering of securities which was made by the
Company in April 1999, the Company sold an aggregate of 13,500,000 shares of
common stock to ten (10) accredited investors under Rule 504 of Regulation D of
the Securities Act of 1933. Each share was sold at a price of $0.04 per share,
resulting in net proceeds to the Company of $540,000.
Subsequent to the merger of EPL and IRI
On April 26, 1999, the Company, which at the time was designated EPL Ventures
Corp., a Florida corporation, acquired all of the outstanding common stock of
Industrial Rubber Innovations, Inc., a Nevada corporation, in a business
combination described as a "reverse acquisition." For accounting purposes, the
acquisition has been treated as the acquisition of EPL by IRI-Nevada. As part
of the acquisition, EPL changed its name to Industrial Rubber Innovations, Inc.
Immediately prior to the acquisition, and following the effectiveness of a
1-for-5 reverse stock split which was part of the acquisition, EPL had 3,444,000
shares of common stock outstanding. As part of EPL's reorganization with
IRI-Nevada, EPL issued 3,800,000 shares of its common stock to the shareholders
of IRI-Nevada in exchange for 3,800 shares of IRI-Nevada common stock (1,420,000
of the shares issued have since been cancelled and returned to the Company's
treasury). In addition, the Company issued warrants to purchase an aggregate of
2,000,000 shares of its common stock to the IRI-Nevada shareholders (800,000 of
the warrants have since been cancelled). All of the issuances were exempt under
Section 4(2) of the Securities Act of 1933.
On June 1, 1999, pursuant to a verbal agreement with an investor in IRI-Nevada
prior to its merger with EPL Ventures Corp., the Company issued to Pegasus
Consulting, an accredited investor, warrants to acquire 9,333 shares of common
stock at a price of $0.75 per share, exercisable until June 1, 2000. The
issuance was exempt under Section 4(2) of the Securities Act of 1933.
On January 18, 1999, IRI-Nevada entered into a loan agreement with Gencon
Investments, Ltd., an accredited investor, whereby Gencon loaned to IRI-Nevada
the sum of $37,500. In accordance with the terms of the agreement, on May 25,
1999, the Company issued to Gencon warrants to acquire 50,000 shares of common
stock at a price of $0.75 per share, exercisable until May 21, 2000. In
addition, and in accordance with the terms of the agreement, on May 25, 1999 the
Company issued to two Gencon affiliates, Gordon Reid and Robert Dent, warrants
to acquire 100,000 shares and 150,000 shares, respectively, of common stock at a
price of $0.75 per share, exercisable until May 21, 2000. All of the issuances
were exempt under Section 4(2) of the Securities Act of 1933.
In July 1999, the Company issued an aggregate of 30,000 shares of common stock,
restricted in accordance with Rule 144, to MRC Legal Services Corporation and
one of its employees as payment for certain services rendered. The issuance was
exempt from registration under Section 4(2) and Rule 506 of Regulation D.
In September 1999, the Company issued an aggregate 256,227 shares of common
stock, restricted in accordance with Rule 144, to three (3) accredited investors
in exchange for an aggregate of $166,000. The issuance was exempt from
registration under Rule 506 of Regulation D.
In October 1999, the Company issued 70,000 shares of common stock, restricted in
accordance with Rule 144, to one (1) accredited investor in settlement of a
dispute. The issuance was exempt from registration under Rule 506 of Regulation
D.
In January and March 2000, the Company issued an aggregate of 90,000 shares of
common stock, restricted in accordance with Rule 144, to three (3) accredited
investors in exchange for an aggregate of $20,000. The issuance was exempt from
registration under Rule 506 of Regulation D.
18
<PAGE>
------
In June 2000, the Company issued an aggregate of 1,600,000 shares of common
stock, restricted in accordance with Rule 144, to a single accredited investor
in exchange for aggregate consideration equal to $112,000. The issuance was
exempt from registration under Rule 506 of Regulation D.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
---------------------------------------------------------
The Corporation Laws of the State of Florida and the Company's Bylaws provide
for indemnification of the Company's Directors for liabilities and expenses that
they may incur in such capacities. In general, Directors and Officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action or proceeding, actions that the indemnitee
had no reasonable cause to believe were unlawful. Furthermore, the personal
liability of the Directors is limited as provided in the Company's Articles of
Incorporation.
The Company does not currently maintain a policy of directors and officers
insurance.
19
<PAGE>
------
PART F/S
FINANCIAL STATEMENTS
---------------------
The Financial Statements required by this Item are included at the end of this
report beginning on Page F-1.
PART III
ITEM 1 - INDEX TO EXHIBITS
-------------------------------
EXHIBIT NO. DESCRIPTION
------------ -----------
*2 Agreement and Plan of Reorganization dated April 12, 1999
*3.1 Articles of Incorporation of Henry Winkler, Inc. Filed August
7, 1986
*3.2 Amendment to Articles of Incorporation Filed June 23, 1997
*3.3 Amendment to Articles of Incorporation Filed November 3, 1997
*3.4 Articles of Merger filed with the Florida Secretary of State
on April 26, 1999
*3.5 Bylaws
*10.1 Loan Agreement with Gencon Investments, Ltd. dated January
18, 1999
*10.2 License Agreement with Century Rubber, LLC dated June 25,
1999
*10.3 Employment Agreement for John Proulx dated May 15, 1999
*10.4 Employment Agreement for David H. Foran dated May 15, 1999
*10.5 Employment Agreement for Benny Hun dated May 15, 1999
*10.6 Employment Agreement for Steven Tieu dated May 15, 1999
*10.7 Employment Agreement for Nancy Sheo dated May 15, 1999
*10.8 Lease of Premises Located at 6801 McDivitt Drive,
Bakersfield, CA
*10.9 Omnibus Stock Option Plan adopted June 3, 1999
*10.10 Marketing Consulting Agreement with Petro-Rep Co.
*10.11 Manufacturer's Distributorship Agreement with Gencon
Capital Resources Ltd.
*10.12 Distribution Agreement with Shenzhen Yujiang Trade Limited
10.13 Agreement with Co-Victory Capital Ltd. dated March 29, 1999
10.14 Escrow Agreement dated July 28, 1999
10.15 Addendum to Escrow Agreement dated November 22, 1999
10.16 Letter Agreement with Olson Farms dated January 13, 2000
10.17 Letter Agreement with Olson Farms dated March 16, 2000
10.18 Settlement Agreement and Mutual Release with John Proulx
dated January 14, 2000
10.19 Settlement Agreement and Mutual Release with Benny Hun dated
January 14, 2000
10.20 Sublease of premises located at 4609 New Horizon Boulevard
10.21 Employment Agreement with Richard E. Frasch, Jr. dated
February 15, 2000
10.22 Stock Purchase Agreement with Lin Wei dated June 28, 2000
23.1A Consent of Davidson & Company, Chartered Accountants
23.1B Consent of Davidson & Company, Chartered Accountants
_____________
* Previously Provided
ITEM 2 - DESCRIPTION OF EXHIBITS
-------------------------------------
Not applicable
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
INDUSTRIAL RUBBER INNOVATIONS, INC.
Date: July 18, 2000 By: /s/ David Foran.
--------------------------
David Foran
Acting President
21
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(FORMERLY EPL VENTURES CORP.)
CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors
Industrial Rubber Innovations, Inc.
(formerly EPL Ventures Corp.)
We have audited the accompanying consolidated balance sheet of Industrial Rubber
Innovations, Inc. (formerly EPL Ventures Corp.) as at October 31, 1999 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the period from November 19, 1998 to October 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Industrial Rubber
Innovations, Inc. (formerly EPL Ventures Corp.) as at October 31, 1999 and the
results of its operations, changes in stockholders' equity and its cash flows
for the period from November 19, 1998 to October 31, 1999, in conformity with
generally accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that Industrial Rubber Innovations, Inc. (formerly EPL Ventures Corp.) will
continue as a going concern. As discussed in Note 3 to the consolidated
financial statements, unless the Company attains future profitable operations
and/or obtains additional financing, there is substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regards
to these matters are discussed in Note 3. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
January 10, 2000
F-2
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
CONSOLIDATED BALANCE SHEET
AS AT OCTOBER 31, 1999
=============================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT
Cash $ 5,327
Accounts receivable 42,062
Subscriptions receivable 35,000
Inventory 104,250
------------
Total current assets 186,639
CAPITAL ASSETS (Note 5) 40,024
NOTE RECEIVABLE (Note 6) 117,800
------------
TOTAL ASSETS $ 344,463
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 126,549
Note payable (Note 7) 50,000
------------
Total current liabilities 176,549
------------
STOCKHOLDERS' EQUITY
Capital stock (Note 11)
Authorized
50,000,000 common shares with a par value
of $0.001
5,000,000 preferred shares with a par
value of $0.001
Issued and outstanding
7,530,227 common shares with a par value
of $0.001 7,530
Additional paid-in capital 1,393,706
Share subscriptions received (Note 17) 60,000
Deficit (1,293,322)
------------
167,914
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 344,463
==================================================================================
</TABLE>
COMMITMENTS (Note 14)
ON BEHALF OF THE BOARD:
---------------------------- Director
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 19, 1998 TO OCTOBER 31, 1999
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
SALES $ 93,437
COST OF GOODS SOLD 73,718
------------
19,719
------------
OPERATING EXPENSES
Accounting and legal fees 177,952
Amortization 5,166
Automobile expenses 33,988
Bank charges 4,364
Consulting fees 68,590
Foreign exchange gain (385)
Insurance 21,791
Management fees 75,052
Office expenses 33,062
Product packaging 10,732
Rent 24,088
Salaries and wages 109,911
Supplies 4,750
Telephone and utilities 21,335
Travel and entertainment 77,945
------------
668,341
------------
OTHER ITEM
Write-down of note receivable and investment (682,200)
------------
LOSS BEFORE EXTRAORDINARY ITEM (1,330,822)
EXTRAORDINARY ITEM
Gain on settlement of debt (Note 8) 37,500
------------
LOSS FOR THE PERIOD $(1,293,322)
==================================================================================
BASIC AND DILUTED LOSS PER SHARE BEFORE EXTRAORDINARY ITEM $ (0.30)
EXTRAORDINARY ITEM 0.01
------------
BASIC AND DILUTED LOSS PER SHARE $ (0.29)
==================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 4,455,256
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
=============================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Share Total
Common Stock Additional Sub- Stock-
Paid-in scriptions holders'
Shares Amount Capital Received Deficit Equity
Balance, November 19, 1998 - $ - $ - $ - $ - $ -
Capital stock of Industrial Rubber
Innovations Inc. (Nevada)
issued for cash 3,800 4 - - - 4
Capital stock of Industrial Rubber
Innovations Inc. (Nevada) (3,800) (4) - - - (4)
Capital stock of Industrial Rubber
Innovations Inc.
April 25, 1999 3,444,000 - - - - -
Capital stock issued pursuant to the
acquisition of Industrial Rubber
Innovations Inc. (Nevada)
(Note 9) 3,800,000 3,800 1,193,846 - - 1,197,646
Adjustment for par value - 3,444 (3,444) - - -
Capital stock issued for
legal services 30,000 30 37,560 - - 37,590
Capital stock issued for cash 256,227 256 165,744 - - 166,000
Share subscriptions received - - - 60,000 - 60,000
Loss for the period - - - - (1,293,322) (1,293,322)
------------- ------------ ----------- --------- ------------ ------------
Balance, October 31, 1999 7,530,227 $ 7,530 $1,393,706 $ 60,000 $(1,293,322) $ 167,914
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM NOVEMBER 19, 1998 TO OCTOBER 31, 1999
======================================================================
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $(1,293,322)
Items not involving an outlay of cash:
Amortization 5,166
Issuance of shares for legal services 37,590
Write-down of note receivable and investment 682,200
Changes in non-cash working capital items:
Increase in accounts receivable (42,062)
Increase in inventory (104,250)
Increase in accounts payable 80,121
Increase in loan payable 50,000
------------
Net cash used in operating activities (584,557)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from subscriptions receivable 406,000
Share subscriptions received 60,000
Issuance of common stock 166,000
------------
Net cash provided by financing activities 632,000
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (45,190)
Acquisition of cash on purchase of subsidiary 3,074
------------
Net cash used in investing activities (42,116)
------------
CHANGE IN CASH FOR THE PERIOD 5,327
CASH, BEGINNING OF PERIOD -
------------
CASH, END OF PERIOD $ 5,327
=========================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 12)
The accompanying notes are an integral part of these consolidated financial
Statements.
F-6
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
========================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on August 7, 1986, under the laws of the State of
Florida as Henry Winkler, Inc.
On October 21, 1997, the name of the Company was changed to EPL Ventures
Corp.
Effective April 26, 1999, the Company acquired all of the issued and
outstanding common stock of Industrial Rubber Innovations, Inc. ("IRI
(Nevada)"). IRI (Nevada) was organized on November 19, 1998, under the laws of
the State of Nevada, and is in the business of selling specialty synthetic
rubber mold products.
Concurrent with this acquisition, the Company changed its name to
Industrial Rubber Innovations, Inc. ("IRI").
2. BASIS OF PRESENTATION
These financial statements contain the financial statements of IRI (Nevada)
and IRI presented on a consolidated basis. On April 26, 1999, IRI acquired all
of the issued and outstanding share capital of IRI (Nevada) by issuing 3,800,000
common shares (Note 9). As a result of the share exchange, control of the
combined companies passed to the former shareholders of IRI (Nevada). This type
of share exchange has been accounted for as a capital transaction accompanied by
a recapitalization of IRI (Nevada). Recapitalization accounting results in
consolidated financial statements being issued under the name of IRI, but are
considered a continuation of IRI (Nevada). As a result, the financial
statements presented represent the consolidated financial position of the above
Companies as at October 31, 1999 and the results of operations and changes in
cash flows of IRI (Nevada) for the period from November 19, 1998 to October 31,
1999 and the results of operations and changes in cash flows of IRI from its
deemed date of acquisition during the period. The number of shares outstanding
at October 31, 1999 as presented are those of IRI
3. GOING CONCERN
The Company's consolidated financial statements are prepared using the
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company has minimal sources of revenue.
Without realization of additional capital, it would be unlikely for the Company
to continue as a going concern. It is management's plan to seek additional
capital through private placements.
================================================================================
October 31,
1999
-------------------------------------------------------------------------------
Deficit $ (1,293,322)
Working capital 10,090
==============================================================================
4. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the
period. Actual results could differ from these estimates.
F-7
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
===============================================================================
4. SIGNIFICANT ACCOUNTING POLICIES (cont'd )
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include Industrial Rubber
Innovations, Inc. (Nevada), which was incorporated on November 19, 1998, and
Industrial Rubber Innovations, Inc. All significant intercompany balances and
transactions have been eliminated upon consolidation.
LOSS PER SHARE
Loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Due to the Company's simple
capital structure and with only common stock outstanding, only the basic loss
per share is presented. Basic loss per share is computed by dividing losses
available to common stockholders by the weighted average number of common shares
outstanding during the period.
INVENTORY
Inventory is valued at the lower of cost and net realizable value.
CAPITAL ASSETS
Capital assets are recorded at cost. Amortization is provided over the
estimated useful life of the asset using the following methods:
Computer equipment 5 year straight-line
Machinery and equipment 10 year straight-line
INVESTMENT
Under Statement of Financial Accounting Standards No. 115 ("SFAS 115"),
Accounting for Certain Investments in Debt and Equity Securities, the Company's
investments are classified into available-for-sale or trading securities
categories stated at their fair values. The fair market value of marketable
equity securities is determined through published market value quotations,
obtained for the day of the valuation. Any unrealized holdings gains or losses
are to be reported as a separate component of shareholders' equity until
realized for available-for-sale securities, and included in earnings for
trading securities. All of the Company's equity securities at October 31, 1999
were classified as available-for-sale securities.
REVENUE RECOGNITION
Revenue is derived from the sales of speciality synthetic rubber molded
products and compounds. Revenue from sales is recognized when the goods are
shipped and collectibility is reasonably assured.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between financial
and tax reporting and net operating loss carryforwards. Deferred tax expenses
(benefit) results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
F-8
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
===============================================================================
4. SIGNIFICANT ACCOUNTING POLICIES (cont'd )
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
The Company has chosen to account for stock-based compensation using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee is required to pay for the stock. As the Company
does not currently have any stock options outstanding, there is no impact on the
financial statements.
COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its components.
The adoption of SFAS 130 had no impact on total stockholders' equity as of
October 31, 1999.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
In June 1999, FASB issued SFAS 137 to defer the effective date of SFAS No. 133
to fiscal quarters of fiscal years beginning after June 15, 2000. The Company
does not anticipate that the adoption of the statement will have a significant
impact on its financial statements.
REPORTING ON COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998 with initial adoption reported as
the cumulative effect of a change in accounting principle. The Company adopted
SOP 98-5 during the current period. The Company's adoption of SOP 98-5 has no
impact on its financial statements.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
note receivable, accounts payable and accrued liabilities, and note payable.
Unless otherwise noted, it is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
5. CAPITAL ASSETS
===============================================================================
Accumulated Net Book
Cost Amortization Value
------------------------------------------------------------------------------
Computer equipment $ 6,471 $ 1,294 $ 5,177
Machinery and equipment 38,719 3,872 34,847
------- ------ -------
$ 45,190 $ 5,166 $ 40,024
===============================================================================
F-9
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
===============================================================================
6. NOTE RECEIVABLE
On January 16, 1998, the Company entered into an agreement with Savant
Biomedical, Inc. ("Savant") to acquire 10,000,000 shares of Savant for a cash
payment of $5,000,000. The Company only paid $850,000 and pursuant to the terms
of the agreement the Company was issued 850,000 shares of Savant. During the
year ended 1998, the Company issued 720,000 of its shares for total proceeds of
$180,000 to an unrelated party. Subsequent to issuing the shares, the third
party satisfied its obligation to the Company through the assignment of a note
in the amount of $180,000 from Savant. The debenture was non-interest bearing
and had no stated terms of repayment. On March 29, 1999, the Company entered
into an agreement with Co-Victory Capital Ltd. ("Co-Victory") to sell all of its
investment in Savant as well as the $180,000 note receivable for total proceeds
of $800,000. This agreement was subsequently amended on July 22, 1999. On July
29, 1999, an Escrow Agreement was entered into in which Co-Victory and various
other parties, transferred their investment of 1,519,000 shares of the Company
to an escrow agent, who is responsible for the sale of these shares on behalf of
Co-Victory and the various other parties. The proceeds from the sale of the
shares by the escrow agent will comprise the total proceeds to be received by
the Company from the sale of its investment in Savant and the debenture
receivable. As at October 31, 1999 the Company has written-off its investment
in the shares of Savant, resulting in an unrealized holding loss of $850,000 and
has written-down its investment in the debenture receivable to $117,800
resulting in an unrealized holding loss of $62,200, based on the estimated
proceeds from the sale of the shares of the Company by the escrow agent.
7. NOTE PAYABLE
The note payable in the amount of $50,000 is non-interest bearing and
repayable on or before September 30, 2000.
The note can be converted into common shares of the Company on terms and
conditions no less beneficial to the Payee than the terms and conditions of any
other debt conversion and any third party.
8. LOAN PAYABLE
The Company entered into a Loan Agreement dated January 18, 1999, whereby
the Company is obligated to pay $37,500 plus interest at a rate of 20% per annum
by May 19, 1999.
During the period, the loan was settled by the issuance of 300,000 warrants
entitling the holder to acquire 300,000 shares of common stock of the Company at
a price of $0.75 per share. No value was attributed to the warrants by the
Company due to the going concern risks associated with investing in a company
with a limited operating history.
In addition, a shareholder of the Company gave 100,000 free trading shares
to the creditor as part of the settlement. As a result, a gain on settlement of
debt in the amount of $37,500 was recognized during the period.
9. BUSINESS COMBINATION
On April 26, 1999, IRI acquired all of the issued and outstanding share
capital of IRI (Nevada). As consideration, IRI issued 3,800,000 common shares
and 2,000,000 warrants. Legally, IRI is the parent of IRI (Nevada). However,
as a result of the share exchange described above, control of the combined
companies passed to the new shareholders of IRI. This type of share exchange,
has been accounted for as a capital transaction accompanied by a
recapitalization of IRI rather than a business combination. Accordingly, the
net assets of IRI (Nevada) are included in the balance sheet at book values,
with the net assets of IRI recorded at fair market value at the date of
acquisition. The revenues and expenses and assets and liabilities reflected in
the financial statements prior to the date of acquisition are those of IRI
(Nevada). Revenue and expenses or assets and liabilities incurred subsequent to
the date of acquisition include the amounts of IRI.
F-10
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
============================================================================
9. BUSINESS COMBINATION (cont'd )
The cost of an acquisition should be based on the fair value of the
consideration given, except where the fair value of the consideration given is
not clearly evident. In such a case, the fair value of the net assets acquired
is used.
At April 26, 1999, IRI was inactive with a thin market for its shares,
making it impossible to estimate the actual market value of the 3,800,000 common
shares. In addition, the Company has not assigned a value to the warrants
issued, due to the going concern risks associated with investing in a company
with a limited operating history. Therefore, the cost of the acquisition,
$1,197,646, has been determined by the fair value of IRI's net assets.
The total purchase price of $1,197,646 was allocated as follows:
Cash $ 3,074
Investment 800,000
Share subscriptions receivable 441,000
Accounts payable and accrued liabilities (46,428)
--------
$ 1,197,646
============
10. WARRANTS
As at October 31, 1999, the Company has the following outstanding warrants:
a) 2,000,000 warrants entitling the holders to acquire common shares of
the Company. One half of the warrants are exercisable at an exercise price of
$0.50 per common share and the balance shall be exercisable at an exercise price
of $0.75 per common share until May 12, 2001.
b) 300,000 warrants enabling the holders to acquire common shares of
the Company at a price of $0.75 per share until May 21, 2000.
c) 9,333 warrants enabling the holder to acquire common shares of the
Company at a price of $0.75 per share until June 1, 2000.
11. CAPITAL STOCK
a) On April 26, 1999, the Company implemented a 5:1 reverse stock
split. The consolidated statements of changes in stockholders equity has been
restated to give retroactive recognition of the reverse stock split. All
references to number of shares and per share amounts of common shares have been
restated to reflect the reverse stock split.
b) On August 14, 1986,the Company issued 200,000 (1,000,000 pre-reverse
stock split shares) common shares for total proceeds of $5,000.
c) In connection with a private offering of securities which was made
by the Company in January 1998, the Company sold an aggregate of 440,000 units
(2,200,000 pre reverse stock split units) under Rule 504 of Regulation D of the
Securities Act of 1933. Each unit contained .20 shares of common stock (one pre
reverse stock split) and .20 (one pre reverse stock split) warrant. The
warrants were exercisable for a period of one year from the date of issuance at
a price of $0.20 ($1.00 pre reverse stock split) per share. Each unit was sold
at a price of $1.25 ($0.25 pre reverse stock split) for total proceeds of
$550,000.
F-11
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
===============================================================================
11. CAPITAL STOCK
d) In February of 1998 the Company issued 100,000 common shares (
500,000 pre reverse stock split) as part of an exercise of warrants for net
proceeds of $500,000.
e) In May of 1998, the Company issued 4,000 common shares (20,000 pre
reverse stock split) as part of an exercise of warrants for net proceeds of
$20,000.
f) In April of 1999 the Company issued 2,700,000 common shares at a price of
$0.20 per share as part of a private placement under Rule 504 of Regulation D
for total proceeds of $540,000.
g) On April 26, 1999, the Company issued 3,800,000 common shares to the
shareholders of Industrial Rubber Innovations, Inc. (Nevada) in exchange for all
of its outstanding common shares (Note 9).
h) The Company issued 256,227 common shares for total cash proceeds of
$166,000.
i) Issued 30,000 common shares at a deemed value of $37,950 for legal
services.
12. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
================================================================================
October 31,
1999
--------------------------------------------------------------------------------
Cash paid during the period for interest $ -
Cash paid during the period for income taxes -
===============================================================================
The following non-cash transactions occurred during the period from
November 19, 1998 to October 31, 1999:
a) The Company issued 3,800,000 shares of common stock of the Company
at a deemed value of $1,197,646 to acquire 100% of the outstanding shares of
Industrial Rubber Innovations, Inc. (Nevada).
b) Issued 30,000 common shares at a deemed value of $37,590 for legal
services.
13. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related parties
during the period:
a) Paid or accrued consulting fees of $60,232 to directors, former
directors, officers, and a relative of a director.
b) Paid or accrued management fees of $75,050 to a director and a
former director.
14. COMMITMENTS
a) The Company entered into five two-year Employment Agreements with
directors and an officer of the Company. Each director and officer will be paid
an annual salary of $60,000. These agreements may be terminated by either party
after the first year and would be subject to one year's compensation as
severance.
F-12
<PAGE>
INDUSTRIAL RUBBER INNOVATIONS, INC.
(formerly EPL Ventures Corp.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
===============================================================================
14. COMMITMENTS
b) The Company entered into a five-year lease agreement dated June 3, 1999
beginning September 1, 1999, whereby the Company has minimum lease payments as
follows:
2000 $ 102,000
==== ==========
2001 105,300
2002 108,456
2003 111,708
2004 115,068
15. INCOME TAXES
The Company's total deferred tax asset is as follows:
================================================================================
October 31,
1999
-------------------------------------------------------------------------------
Net operating loss carryforward $ 195,559
Valuation allowance (195,559)
---------
$ -
================================================================================
The Company has a net operating loss carryforward of approximately $611,122
which expires between the years 2018 and 2019. The Company provided a full
valuation allowance on the deferred tax asset because of the uncertainty
regarding realizability.
16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the entity, including
those related to customers, suppliers, or other third parties, have been fully
resolved.
17. SUBSEQUENT EVENT
The Company issued 70,000 shares under Rule 506 in respect of the $60,000
share subscriptions received.
F-13
<PAGE>
EPL VENTURES CORP.
FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
MARCH 31, 1999
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
EPL Ventures Corp.
(A Development Stage Company)
We have audited the balance sheets of EPL Ventures Corp. as at March 31, 1999
and October 31, 1998 and the statements of operations, changes in shareholders'
equity and cash flows for the five month period ended March 31, 1999, the year
ended October 31, 1998 and the period from incorporation on August 7, 1986 to
March 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EPL Ventures Corp. as at March
31, 1999 and October 31, 1998 and the results of its operations and its cash
flows for the five month period ended March 31, 1999, the year ended October 31,
1998 and the period from incorporation on August 7, 1986 to March 31, 1999 in
conformity with generally accepted accounting principles in the United States of
America.
The accompanying financial statements have been prepared assuming that EPL
Ventures Corp. will continue as a going concern. As discussed in Note 2 to the
financial statements, unless the Company attains future profitable operations
and/or obtains additional financing, there is substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regards
to these matters are discussed in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The audited financial statements as at October 31, 1997 and for the ten month
period ended October 31, 1997 were examined by another auditor who expressed an
opinion without reservation on those statements in his report dated November 6,
1997.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
May 27, 1999
F-15
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 Tulita Drive Office (702) 361-8414
Las Vegas, Nevada 89123 Fax No. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors November 6, 1997
EPL VENTURES CORP.
Miami, Florida
I have audited the Balance Sheets of EPL VENTURES CORP., (formerly Henry
Winkler, Inc.), (A Development Stage Company), as of October 31, 1997, December
31, 1996, and December 31, 1995, and the related Statements of Operations,
Stockholders' Equity and Cash Flows for the period January 1, 1997, thru October
31, 1997, and the two years ended December 31, 1996, and December 31, 1995.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EPL VENTURES CORP.,
(formerly Henry Winkler, Inc), (A Development Stage Company) as of October 31,
1997, December 31, 1996, and December 31, 1995, and the results of its
operations and its cash flows for the period January 1, 1997 thru October 31,
1997, and the two years ended December 31, 1996, and December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered losses from operations and has no
established source of revenue. This raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Barry L. Friedman
Barry L. Friedman
Certified Public Accountant
F-16
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
BALANCE SHEETS
=============================================================================
<TABLE>
<CAPTION>
March 31, October 31,
<S> <C> <C>
1999 1998
----------- -------------
ASSETS
CASH $ - $ 158
INVESTMENT (Note 4) 800,000 800,000
DUE FROM INDUSTRIAL RUBBER INNOVATIONS INC. 58,500 -
----------- -------------
$ 858,500 $ 800,158
=======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Bank indebtedness $ 23 $ -
Accounts payable and accrued liabilities 108,931 80,424
----------- -------------
108,954 80,424
----------- -------------
SHAREHOLDERS' EQUITY
Capital stock
Authorized
50,000,000 common shares with a par value of $0.001
Issued and outstanding
October 31, 1997 - 1,000,000 common shares with a
par value of $0.001
March 31, 1999 - 3,720,000 common shares with 3,720 3,720
a par value of $0.001
Share subscriptions received 58,500 -
Additional paid-in capital 1,071,280 1,071,280
Deficit accumulated during the development stage (383,954) (355,266)
----------- -------------
749,546 719,734
----------- -------------
$ 858,500 $ 800,158
=========================================================================================
</TABLE>
ON BEHALF OF THE BOARD:
---------------------------- Director
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
==============================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Cumulative
Amounts from
Incorporation
on August 7, Five Month Ten Month
1986 to Period Ended Year Ended Period Ended
March 31, March 31, October 31, October 31,
1999 1999 1998 1997
------------------------------------------------------------------------------------------------------
EXPENSES
Accounting and legal fees 38,645 1,431 37,214 -
Administrative fees 19,000 - 19,000 -
Bank and interest charges 3,080 1,279 1,801 -
Consulting fees 59,842 20,700 39,142 -
Filing fees 697 - 697 -
Foreign exchange 2,291 (78) 2,369 -
Office expenses 16,139 3,158 6,161 1,820
Travel and entertainment 7,010 1,341 5,669 -
Telephone 7,250 857 6,393 -
--------------- ------------- -------------- --------
(153,954) (28,688) (118,446) (1,820)
OTHER ITEM
Write-down of investments (Note 4) (230,000) - (230,000) -
--------------- ------------- -------------- --------
LOSS FOR THE PERIOD $ (383,954) $ (28,688) $ (348,446) $(1,820)
==============================================================================================
LOSS PER SHARE $ (0.01) $ (0.14) $ (0.0018)
==============================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 3,720,000 2,501,849 1,000,000
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
==============================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Share Subscriptions Received Development
-------------------- ----------------------------- Stage
Shares Amount Capital Shares Amount Total
-------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1995 10,000 $ 1,000 $ 4,000 - $ - $ (5,000) $ -
Loss for the year - - - - - - -
------------ ------------ --------------------- ------------ -------- ---------- -----------
Balance, December 31,
1996 10,000 1,000 4,000 - - (5,000) -
On June 23, 1997,
changed from $0.10
par value to $0.001 par
value - (990) 990 - - - -
On June 23, 1997, forward
stock
split 100:1 990,000 990 (990) - - - -
Loss for the period - - - - - (1,820) (1,820)
------------ ------------ --------------------- ------------ -------- ---------- -----------
Balance, October 31, 1997 1,000,000 1,000 4,000 (6,820) (1,820)
Shares issued for cash 2,720,000 2,720 1,067,280 - - - 1,070,000
Loss for the year - - - - - (348,446) (348,446)
------------ ------------ --------------------- ------------ -------- ---------- -----------
Balance, October 31, 1998 3,720,000 3,720 1,071,280 - - (355,266) 719,734
Loss for the period - - - - - (28,688) (28,688)
Shares subscription
received (net of
issuance costs) - - - - 58,500 - 58,500
------------ ------------ --------------------- ------------ -------- ---------- -----------
Balance, March 31, 1999 3,720,000 $ 3,720 $ 1,071,280 - $58,500 $(383,954) $ 749,546
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
==============================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Cumulative
Amounts from
Incorporation
on August 7, Five Month Ten Month
1986 to Period Ended Year Ended Period Ended
March 31, March 31, October 31, October 31,
1999 1999 1998 1997
--------------- ------------- -------------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (383,954) $ (28,688) $ (348,446) $(1,820)
Item not involving an outlay of cash:
Write-down of investments 230,000 - 230,000 -
Increase in accounts payable 108,931 28,507 78,604 1,820
--------------- ------------- -------------- --------
Net cash used in operating activities (45,023) (181) (39,842) -
--------------- ------------- -------------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 1,075,000 - 1,070,000 -
--------------- ------------- -------------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment (1,030,000) - (1,030,000) -
--------------- ------------- -------------- --------
CHANGE IN CASH (BANK INDEBTEDNESS) FOR THE PERIOD (23) (181) 158 -
CASH (BANK INDEBTEDNESS), BEGINNING OF PERIOD - 158 - -
--------------- ------------- -------------- --------
CASH (BANK INDEBTEDNESS), END OF PERIOD $ (23) $ (23) $ 158 $ -
===============================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Cash paid during the period for interest $ - $ - $ - $ -
Cash paid during the period for income taxes - - - -
===============================================================================================================
</TABLE>
THERE WERE NO NON-CASH TRANSACTIONS FOR THE PERIODS ENDED MARCH 31, 1999,
OCTOBER 31, 1998 AND OCTOBER 31, 1997.
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999
==========================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized August 7, 1986, under the laws of the State of
Florida as Henry Winkler, Inc. The Company currently has no operations and, in
accordance with SFAS #7, is considered a development stage company.
On August 14, 1986, the Company issued 10,000 shares of its $0.10 par value
common stock for $5,000.
On June 23, 1997, the State of Florida approved the Company's restated
Articles of Incorporation, which increased its capitalization from 10,000 common
shares, $0.10 par value, to 50,000,000 common shares, $0.001 par value.
Effective June 23, 1997, the Board of Directors approved a forward stock
split of 100:1. Thus increasing the number of common shares outstanding from
10,000 common shares to 1,000,000 common shares.
On October 21, 1997, the name of the Company was changed to EPL Ventures
Corp.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek additional capital
through a merger with an existing operating company.
===============================================================================
March 31, October 31,
1999 1998
----- -----
Deficit accumulated during the
development stage $ (383,954) $ (355,266)
Working capital deficiency (108,954) (80,266)
3. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
In May 1993, the Financial Accounting Standards Board issued Statement No.
115 ("SFAS 115"), Accounting for Certain Investments in Debt and Equity
Securities, which is effective for years beginning after December 15, 1993.
Under SFAS 115, the Company's investments are classified into available-for-sale
or trading securities categories stated at their fair values. The fair market
value of securities is determined through published market value quotations,
obtained for the day of the valuation. Any unrealized holding gains or losses
are to be reported as a separate component of shareholder's equity until
realized for available-for-sale securities, and included in earnings for
trading securities.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting standards Board issued Statements of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") which establishes accounting an reporting
standards for derivative instruments and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The Company does not anticipate that the adoption of the statement will have a
significant impact on its financial statements.
F-21
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999
==============================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd )
REPORTING ON COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998 with initial adoption reported as
the cumulative effect of a change in accounting principle. The Company has not
yet determined the effect that the adoption of this statement will have on its
financial statements.
LOSS PER SHARE
Loss per share is based on the weighted average number of common shares
outstanding during the peirod.
COMPARATIVE FIGURES
Certain comparative figures have been adjusted to conform to the current
year's presentation.
4. INVESTMENTS
During the year, the Company invested $850,000 in common shares of Savant
Biomedical Inc. ("Savant"). In addition, the Company holds a note from Savant
in the amount of $180,000. During the year, the Company wrote-down its
investment by the amount of $230,000 due to a permanent decline in its market
value, the amount of which has been included in the statement of operations.
5. SUBSEQUENT EVENTS
a) The Company issued 13,500,000 common shares in connection with a private
placement offering at a price of $0.04 per common share, for proceeds totaling
$540,000.
b) Effective April 26, 1999 the Company acquired all of the issued and
outstanding share capital of Industrial Rubber Innovations Inc ("IRI"). As
consideration, the Company issued 3,800,000 common shares of the Company.
Immediately prior to the acquisition, the Company implemented a five for one
reverse stock split, resulting in a total of 3,444,000 common shares
outstanding. Post-acquisition number of shares outstanding totaled 7,244,000
common shares. As part of the acquisition agreement, the Company also issued
warrants to acquire 2,000,000 common shares of the Company to the IRI
shareholders.
Legally, the Company is the parent of IRI. However, as a result of the
share exchange described above, control of the combined companies passed to the
former shareholders of IRI. This type of share exchange, referred to as a
"reverse acquisition", deems IRI to be the acquiror for accounting purposes.
Accordingly, the net assets of the IRI will be included in the balance sheet at
book values and the deemed acquisition of the Company will be accounted for by
the purchase method with the net assets of the Company recorded at fair market
value at the date of acquisition.
At April 26, 1999, the Company was inactive with a thin market for its
shares, making it impossible to estimate the actual market value of the
3,800,000 common shares. Therefore, the cost of the acquisition will be
determined by the fair value of the Company's net assets.
F-22
<PAGE>
EPL VENTURES CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999
=============================================================================
5. SUBSEQUENT EVENTS (cont'd )
c) The Company changed its name to Industrial Rubber Innovations, Inc.
d) The Company entered into five two-year Employment Agreements with
directors and an officer of the Company. Each director and officer will be paid
an annual salary of $60,000. These agreements may be terminated by either party
after the first year and would be subject to one year's compensation as
severance.
F-23
