Securities and Exchange Commission
Washington, D. C. 20549
_______________
Form 10-SB
______________
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
WHOLE LIVING, INC.
(Name of Small Business Issuer in its charter)
NEVADA 87-0621709
(State of Incorporation) (I.R.S. Employer Identification No.)
1185 S. Mike Jense Circle
Provo, Utah 84601
(801) 342-3300
(Address and telephone number of principal executive offices and principle
place of business)
Securities to be registered under Section 12(b) of the Act:
None
________________
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
_______________________________________
(Title of class)
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FORWARD LOOKING STATEMENTS
This Form 10-SB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-SB that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Whole Living's control. These factors include but are not limited to economic
conditions generally and in the industries in which Whole Living may
participate; competition within Whole Living's chosen industry, including
competition from much larger competitors; technological advances and failure
by Whole Living to successfully develop business relationships.
DESCRIPTION OF BUSINESS
In this registration statement references to "Whole Living," "we," "us,"
and "our" refer to Whole Living, Inc.
Business Development
Hystar Aerospace Marketing Corporation of Idaho was incorporated in the
state of Idaho on January 30, 1986 as a subsidiary of Nautilus Entertainment,
Inc. (the "Hystar Aerospace"). Hystar Aerospace was formed to lease, sell and
market the Hystar airship and the Burket Mill, a waste milling device.
However, the venture was found to be cost prohibitive and Hystar Aerospace
ceased such activities in 1986. Hystar Aerospace did not engage in any
further commercial operations. On March 5, 1998 Hystar Aerospace changed its
name to Brick Tower Corporation. Whole Living was incorporated in the state
of Nevada on March 18, 1999. On March 19, 1999 Brick Tower Corporation merged
with Whole Living for the sole purpose of changing Brick Tower's domicile from
Idaho to Nevada. In May of 1999, Whole Living completed a reverse merger with
a Utah corporation, Whole Living, Inc., doing business as Brain Garden, (the
"Brain Garden"). At the time of the merger, Brain Garden owned or produced
most of the products we currently sell. Pursuant to the merger agreement, our
parent company divested itself of its controlling interest, the directors and
officers of Whole Living resigned and the management of Brain Garden filled
the vacancies, and the former shareholders of Brain Garden obtained 58% of the
voting power.
Our Business
Whole Living, Inc., doing business as Brain Garden TM, is a total
lifestyle company focused on improving mental and physical performance through
a Whole Foods - Whole Learning - Whole Living philosophy. Our message is a
blend of cutting-edge research and proven ancient wisdom and methods. Our
product philosophy is to combine the best of science and nature and to produce
food and personal care products that are 100% natural, and to the extent
possible, organic. We employ a network marketing system to sell our products
to customers and independent distributors, and we rely on our distributors to
sponsor new distributors. We are committed to developing and providing
quality products that are easy to use, easy to sell and very effective.
Whole Foods. We promote an appreciation for earth's bounties and
encourage eating real foods, such as, fresh fruits and vegetables, legumes and
grains. Our line of Whole Foods snacks and meal replacements are convenient
and enjoyable and reduce or eliminate the need for nutritional supplements.
We believe that pills and supplements cannot replace Whole Foods and that
twentieth century convenience foods provide a high-fat, high-sugar, low-fiber
diet which may have resulted in increased cancer, heart disease and obesity
rates.
Whole Learning. We believe imagination is the key to unlocking learning
potential. Our Whole Learning products include interactive programs that help
the consumer create a "home-learning environment" for their family. We offer
a complete line of multi-media, interactive curriculum software for learners
from preschool through adulthood.
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Whole Living. We provide personal development and life-balancing
programs to help people and families experience life more abundantly. We have
created all-natural, chemical-free product lines of personal care, skin care
and essential oils, to enhance the rituals of daily living.
Principal Products
Our major Whole Foods product is Pulse TM, which consists of a variety of
nuts, seeds, fruits and grains. The ingredients used in Pulse TM are combined
in specific mathematical ratios which we believe are based on a 2500 year old
formula which originated in Biblical times. (See, Chapter 1 of the King James
version of Daniel.) We believe nutritional science is strongly pointing to
frequent snacking throughout the day as opposed to "three square meals." Pulse
TM may be used as a snack or a meal replacement. Pulse TM has the proteins,
fibers, carbohydrates and other nutrients needed in a healthy diet and comes
in four different flavors. Pulse TM also is an integral part of our weight-
loss program called "Daniel's 10-day Challenge." Currently 55% of our product
sales revenue is derived from our Pulse TM products. Our other major Whole
Foods snack products include Parched Pulse and Brain Grain.
Our Whole Learning products include our interactive educational programs
which provide learning tools for learners from kindergarten through adulthood.
These programs cover such topics as spelling, math, science, reading, foreign
languages and parenting tools. These programs are multi-sensory and
interactive and are designed to involve the creative imagination of the
learner. We believe the "rote learning" model of education has been used to
routinize the learning process and control the mind set of the learner. We
believe rote learning fails to recognize the individuality of learners,
stifles creativity and robs the human mind. We believe our programs offer a
clear, imaginative alternative for learners of all ages.
Our Whole Living product line includes essential oils, and chemical-free
personal and home-care products which are made from the oils and tissues of
plants. Our new line of personal care and essential oils is called Earthborn
Creations TM and will be introduced in the fall of 1999. We believe that what
is put on the skin is passed through the skin and finds its way into other
tissues in the body. Therefore, an individual should not put anything on the
body that cannot also be put in the body. Our most popular personal care
product is Pro L'eve which is a full strength progesterone cream made from
wild yams, soy and other natural ingredients. Pro L'eve is designed for women
who experience hormone imbalance.
Distribution Network
We currently have only one sales office located in Provo, Utah. We rely
on network marketing for the distribution of our products. Anyone can
purchase products from us for personal use or resell, but he or she does not
have the potential to earn commissions. Only those individuals who sign up as
a distributor can sponsor other distributors and earn commissions from the
resale of our products. Management believes that one of our key competitive
advantages is our "Unigen" distributor compensation plan (the "Unigen Plan").
It is designed to offer a simple method for a distributor to earn compensation
for development of his or her business. As the distributor is rewarded
financially, he or she is motivated to continue developing an organization
and, as a result, we continue to grow.
Our revenue depends directly upon the efforts of our distributors. We
distribute our products exclusively through independent distributors who have
contracted directly with us. Our revenue is directly dependent upon the
efforts of these independent distributors, and any growth in the total number
of distributors. As of June 1999, we have approximately 6,000 to 9,000 active
distributors. Twenty (20) distributorships have achieved Team Captain (17)
and All-Star (3) executive distributor levels, which are our two highest
executive distributor levels. These distributorships have extensive downline
networks and account for the majority of our revenue.
Sponsoring. Sponsoring activities are encouraged but not required of
distributors. While we provide product samples, brochures, magazines,
audiotapes, videotapes, and other sales materials, distributors are primarily
responsible for educating new distributors with respect to our products, the
Unigen Plan and how to build a successful distributorship. The sponsoring of
new distributors creates multiple levels in the network marketing structure.
Persons whom a distributor sponsors are referred to as "active legs,"
"downline" or "sponsored"
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distributors. If downline distributors also sponsor new distributors, they
create additional levels in the structure, but their downline distributors
remain in the same downline network as their original sponsoring distributor.
We promote sponsoring by using a "three-thirty-three" program which
encourages distributors to sponsor at least three new distributors within
thirty days and continue that approach for three months. We believe that
most of our distributors attempt, with varying degrees of effort and success,
to sponsor additional distributors because of the financial incentives
provided to those who succeed in building a distributor network that consumes
and resells products. Generally, distributors invite friends, family members,
and acquaintances to sales meetings, which we call Garden Parties. Our
products are represented and the Unigen Plan is explained at the Garden
Parties. People are often attracted to become distributors after using our
products and becoming regular retail consumers. Once a person becomes a
distributor, he or she is able to purchase products directly from us at
wholesale prices for resale to consumers or for personal consumption. The
distributor is also entitled to sponsor other distributors in order to build a
network of distributors and product users.
As is typical in the direct selling industry, there is turnover in
distributors from year to year, which requires the sponsoring and training of
new distributors by existing distributors to maintain or increase the overall
distributor force and motivate new and existing distributors. We may
experience seasonal decreases in distributor sponsoring and product sales
because of holidays and customary vacation periods. We cannot predict the
timing or degree of fluctuations because of the number of factors that impact
the sponsoring of new distributors, and the fact that we have little control
over the level of sponsorship of new distributors. We cannot assure that the
number or productivity of our distributors will be sustained at current levels
or increased in the future.
Our most successful distributors use current technology to increase their
sponsoring activities. They use lead generation systems which focus on target
databases. They assist their sales organization in processing and closing the
leads through use of automated voice mail systems, interactive web sites and
other technological tools. We believe that our distributors will need to adapt
their business models to integrate the Internet into their operations as more
and more consumers purchase goods and services over the Internet instead of
through traditional retail and direct sales channels.
Compensation. Each product carries a specified number of sales volume
points. Commissions are based on a distributor's personal and group volume.
A distributor receives commissions based on a percentage of sales volume of
his or her downline each month. Sales volume points are essentially based
upon a percentage of the product's wholesale cost, net of any point-of-sale
taxes. As a distributor's retail business expands and as he or she
successfully sponsors other distributors into the business, which in turn
expand their own businesses, he or she receives more commissions from downline
sales. Generally, a distributor can receive commission bonuses only if, on a
monthly basis, (i) the distributor achieves at least 50 points (approximately
$65) in personal sales volume, and (ii) the distributor is not in default of
any material policies or procedures.
Rules Affecting Distributors. A potential distributor must enter into a
standard distributor agreement with us which obligates the distributor to
abide by our policies and procedures. A new distributor is required to
purchase a Garden Starter Kit which includes the brochures, forms and other
written materials to develop a Brain Garden distributorship. These kits are
sold for the approximate cost of producing the starter kit. The new
distributor may also purchase a Garden Basket which includes product samples
and additional sales tools.
Our standard distributor agreement, policies and procedures, and
compensation plan contained in every Garden Starter Kit outline the scope of
permissible distributor marketing activities. Our distributor rules and
guidelines are designed to provide distributors with maximum flexibility and
opportunity within the bounds of governmental regulations regarding network
marketing and prudent business policies and procedures. Distributors are
independent contractors and are thus prohibited from representing themselves
as our agents or employees. Distributors are obligated to present our
products and business opportunity ethically and professionally. Distributors
agree to abide by all local, state and federal laws and regulations pertaining
to the advertising, sale and distribution of our products. All advertising
must be factual and not misleading and a distributor will be terminated for
making false claims about the income potential, the compensation plan, or
product efficacy.
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Distributors must represent to potential distributors that the receipt of
commissions is based on retail sales and substantial efforts. Distributors
may not use any form of media advertising to promote products without our
written consent. Products may be promoted by personal contact or by
literature produced or approved by us. Products generally may not be sold,
and the business opportunity may not be promoted, in traditional retail
environments.
We are not in a position to provide the same level of direction,
motivation, and oversight to our distributors as we would our own employees
because the distributors are independent contractors. We systematically
review alleged reports of distributor misbehavior, but the large number of
distributors and their independent status make it difficult to enforce
distributor policies and procedures. If we determine that a distributor has
violated any of the distributor policies or procedures, we may either
terminate the distributor's rights completely or impose sanctions such as
warnings, probation, withdraws or denial of an award, suspension of privileges
of a distributorship, withholding commissions until specified conditions are
satisfied, or other appropriate injunctive relief. Distributor terminations
based on violations of our policies and procedures have aggregated less than
.001% of our distributor force since inception. A distributor may voluntarily
terminate his or her distributorship at any time.
Payment. Distributors pay for products prior to shipment, therefore we
carry minimal accounts receivable. Distributors place orders by phone using
an automated system or by placing the order with our order takers. They
usually pay for the products with a credit card. Less than 2% of our sales
are paid for with cash.
Product Guarantees. We provide a 100% satisfaction guarantee. For 30
days from the date of purchase, our product return policy allows a retail
purchaser to return any product to the distributor through whom the product
was purchased for a full refund. After 30 days from the date of purchase, the
return privilege is in the discretion of the distributor. We warrant any item
that is not date stamped for a period of one year. Our product return policy
is a material aspect of the success of the distributors in developing a retail
consumer base. Our experience with actual product returns has averaged
approximately 1% of sales during the first half of 1999.
Product Liability. We maintain an insurance policy for product
liability claims with a $1,000,000 per claim and $2,000,000 annual aggregate
limit.
Product Development
We are committed to expanding our Whole Foods - Whole Learning - Whole
Living product lines with products that are easy to use, easy to sell and
which are effective. We anticipate that we will expend approximately $48,000
each year for the next two years for research and development of our product
lines. We have several products in development that we expect to launch in
late 1999. These products are part of our Earthborn Creations personal care
line. The Earthborn Creations product line will provide creams, lotions,
cleansers and shampoos made from essential oils and mixing powders that are
all natural and chemical-free, and made entirely from plants.
Competition
Product Lines. The market for products designed to enhance mental and
physical performance is large and intensely competitive. Our primary
competition includes other network marketing companies that manufacture and
market herbal remedies, personal care and nutritional products and educational
products. We also compete with major retail businesses that provide the same
types of products that we offer. We compete with these other companies by
emphasizing our uniqueness, the effectiveness and quality of our products and
the convenience of our distribution system. We emphasize products that
improve health through a diet of real food rather than pills and supplements.
All of our products are and will be 100% natural and to the extent possible,
organic. Also, our educational products are significantly different than most
offered by our competitors because they emphasize imagination rather than rote
learning.
Many of our competitors have much greater name recognition and financial
resources. In addition, herbal remedies, personal care and nutritional
products can be purchased in a wide variety of channels of distribution.
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While we believe that consumers appreciate the convenience of ordering
products from home through a sales person or through a catalog, the buying
habits of many consumers accustomed to purchasing products through traditional
retail channels are difficult to change. Our product offerings in each
product category are also relatively small compared to the wide variety of
products offered by our competitors.
Network Marketing Companies. We also compete for distributors with other
direct selling organizations, many of which have a longer operating history
and higher visibility, name recognition, and financial resources. The
dominant network marketing companies in our existing markets are Amway
Corporation and NuSkin Enterprises, Inc. We also compete with many smaller
network marketing companies who offer personal care products. We compete for
new distributors on the strength of our product line, compensation plan and
management strength. Management envisions the entry of many more direct
selling organizations into the marketplace as this channel of distribution
expands over the next several years.
Raw Materials and Suppliers
A majority of our products are currently produced by manufacturers
unaffiliated with us, however, the products are produced according to
specifications provided by us or developed by the manufacturers for us. Our
profit margins, and our ability to deliver our existing products on a timely
basis, are dependent upon the ability of these outside manufacturers to
continue to supply products in a timely and cost-efficient manner. Also, the
development of additional new products in the future will depend in part on
the services of suitable outside manufacturers.
We use approximately twelve major suppliers and vendors for food
ingredients, packaging, and printing. Future 500 Corporations, a food
processing company, is the principal producer of our food products. We are
currently negotiating a contract with Future 500 which will require Future 500
to provide us with fresh food products manufactured to our specifications.
Our business would be materially adversely affected if we lost Future 500 as a
supplier.
Excel Graphics supplies the majority of our printing services and Nature's
Best supplies the majority of our food ingredients. We may purchase our raw
materials from several different sources and most of the raw materials we use
are readily available in the market place. We maintain our product inventory
using a system in which we keep a 4-8 week inventory based on the product's
anticipated movement. Typically, we experience back orders with less than 1%
of our orders.
Trademarks, Patents and Intellectual Property
We are in the process of securing trademarks for our Brain Garden logo,
Brain Garden TM, Pulse TM, Earthborn Creations TM and several other
trademarks. We consider our trademark protection to be very important to
brand name recognition and distributor and consumer loyalty to our business.
We intend to register our important trademarks in the United States. In
addition, a number of our products utilize proprietary formulations, but we do
not own any patents for these products.
Government Regulations
Direct Selling Activities. Direct selling activities are regulated by
various federal, state and local governmental agencies in the United States
and foreign countries. We believe that our method of distribution is in
compliance in all material respects with the laws and regulations relating to
direct selling activities in the United States. These laws and regulations
are generally intended to prevent fraudulent or deceptive schemes, often
referred to as "pyramid," "money games," "business opportunity" or "chain
sales" schemes, that promise quick rewards for little or no effort, require
high entry costs, use high pressure recruiting methods, and/or do not involve
legitimate products. The laws and regulations in our current markets often
(i) impose certain cancellation/product return, inventory buy-backs and
"cooling-off" rights for consumers and distributors, (ii) require us or our
distributors to register with the governmental agency, (iii) impose certain
requirements on us, and/or (iv) impose various requirements, such as requiring
distributors to have certain levels of retail sales to qualify to receive
commissions.
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The purpose of these laws and regulations is to ensure that distributors
are being compensated for sales of products and not for recruitment of new
distributors. The extent and provisions of these laws vary from state to
state and internationally. International laws may impose significant
restrictions and limitations on our business operations. For example, in
Canada the government does not allow distributors to purchase product for
resale in Canada. All products purchased by Canadian consumers must be
purchased for personal use only.
Any assertion or determination that we are not in compliance with
existing laws or regulations, could potentially have a material adverse effect
on our business and results of operations. We cannot assure that regulatory
authorities in our existing markets will not impose new legislation or change
existing legislation that adversely affects our business in those markets.
Also, we cannot assure that new judicial interpretations of existing law may
be issued that adversely affects our business. Regulatory action, whether or
not it results in a final determination adverse to us, has the potential to
create negative publicity, with detrimental effects on the motivation and
recruitment of distributors and, consequently, on our revenue and net income.
Regulation of Personal Care and Nutritional Food Products. Our products
and related marketing and advertising are subject to some governmental
regulation by various domestic agencies and authorities, including the Food
and Drug Administration (the "FDA"), the Federal Trade Commission (the "FTC")
and Consumer Product Safety Commission, and the United States Department of
Agriculture. To date, we have not experienced any complications regarding
health and safety and food and drug regulations for our products.
Our markets have regulations concerning product formulation, labeling and
packaging. These laws and regulations often require us to, among other
things, conform product labeling to the regulations, and register or qualify
products with the applicable government authority or obtain necessary
approvals or file necessary notifications for the marketing of such products.
Many of our existing markets also regulate product claims and advertising.
These laws regulate the types of claims and representations that can be made
regarding the capabilities of products. For example, in the United States we
are unable to make any claim that our whole foods will diagnose, cure,
mitigate, treat, or prevent disease.
Employees
We have nineteen (19) full time employees. Five of these employees
directly support the distributor network. We do not anticipate increasing the
number of employees at this time. However, if we experience significant
growth, we may be required to hire new employees as necessary. Our employees
are not presently covered by any collective bargaining agreement. We believe
our relationships with our employees are good and we have not experienced any
work stoppages.
Reports to Security Holders
We have voluntarily filed this registration statement. Following the
effective date of this registration statement, we will be required to comply
with the reporting requirements of the Securities and Exchange Act of 1934.
We will file annual, quarterly and other reports with the SEC. We also will
be subject to the proxy solicitation requirements of the Exchange Act and,
accordingly, will furnish an annual report with audited financial statements
to our stockholders. Interested persons may also visit our web site at
www.thebraingarden.com.
Available Information
Copies of this registration statement may be inspected, without charge,
at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington D.C.
20549 and at the Denver Regional offices of the SEC located at 1801 California
Street, Suite 4800, Denver, Colorado 80202. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-
0300. Copies of this material also should be available through the Internet
by using the SEC's EDGAR Archive, the address of which is http://www.sec.gov.
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MANAGEMENTS' DISCUSSION AND ANALYSIS
The following Management's Discussion and Analysis contains forward-
looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors discussed below.
Whole Living is a network marketing company involved in the distribution
and sale of proprietary whole food, personal care and educational products.
Our revenue is primarily dependent upon the efforts of a network of
independent distributors who purchase products and sales materials from us for
personal use or for resale to customers or sponsored distributors. We realize
revenue when products are shipped and title passes to our customers or our
independent distributors. Revenue is net of returns, which have historically
been less than 1% of gross sales. Distributor commissions are paid to several
levels of distributors on each product sale. The amount and recipient of the
commission varies depending on the purchaser's position within the Unigen
Plan. (See "Business - Distribution Network," above.) These incentives are
classified as operating expenses.
Costs of sales primarily consist of the cost of the products purchased
from third-party vendors and distributor commissions. Distributor commissions
are paid to distributors on a monthly basis based upon their personal and
group sales volume. The overall payout average has been approximately 35% of
product sales. Also, distributor commissions include the cost of computing
and paying commissions as well as the cost of various incentive programs for
distributors which may include the cost of trips to our conventions and other
incentives paid to distributors for achieving certain sales goals.
Reverse Merger Treatment
In May of 1999 Whole Living merged with a Utah corporation, Whole Living,
Inc., doing business as Brain Garden TM (the "Brain Garden"). Whole Living,
the Nevada corporation, was the surviving entity in that transaction. At the
time of the merger, Brain Garden owned a significant portion of the products
we currently sell. Accordingly, in conformance with generally accepted
accounting principles, the merger has been accounted for as a "reverse merger"
and the accounting survivor is Brain Garden. Whole Living will use Brain
Garden's fiscal year of December 31 rather than March 31. The following
discussions will be based upon the audited financials for Whole Living for the
fiscal years ended March 31, 1999 and 1998. The discussions regarding the six
month interim period ended June 30, 1999 will be based upon the unaudited
financials which reflect the operations of the merged corporations.
Liquidity and Capital Resources
We have funded our cash requirements primarily through sales of our
common stock and debt. As of the fiscal year ended March 31, 1999 we had
$150,000 in cash and total assets of $800,000 with no liabilities. During the
interim period ended June 30, 1999, we posted cash amounts of $44,905 and
total current assets of $396,234, with current liabilities of $691,400,
resulting in a negative net worth of $295,166. Our operating loss for that
period was $914,124 and was funded primarily by an advance of $650,000 to
Brain Garden by Whole Living, a loan of $340,000 and $500,000 raised in a
private placement. (See, "Certain Relationships and Related Transactions," and
"Recent Sales of Unregistered Securities," below.) We currently do not have
any material capital commitments.
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A summary of our audited balance sheets for the years ended March 31,
1999 and 1998 and our balance sheet for the interim period ended June 30, 1999
are as follows:
Years Ended March 31, Interim Period Ended
1998 1999 June 30, 1999
----------- ------------ ---------------
Cash/Cash Equivalents $0 $ 150,000 $ 44,905
Current Assets 0 800,000 396,234
Total Assets 0 800,000 716,719
Current Liabilities 0 0 691,400
Total Liabilities 0 0 691,400
Total Stockholder Equity 0 800,000 25,319
Total Liabilities & Stockholder
Equity 0 800,000 716,719
We believe we have sufficient resources to continue our operations,
product development, and sales and marketing development for the next twelve
months. We expect to fund growth from internal cash flows if growth remains
relatively moderate (20% to 50% per month). However, if we experience growth
rates in excess of 50% per month, we will need to seek additional external
financing. We might also require external financing to fund the development
of Whole Learning programs if market research shows strong demand for the
proposed products.
Internal cash flows will be dependent on a number of factors: 1) our
ability to develop successful new product lines; 2) our ability to encourage
our distributors to sponsor new distributors and increase their own personal
sales; 3) regulatory changes; and 4) our ability to remain competitive in our
markets. Actual costs and revenues could vary from the amounts we expect or
budget, possibly materially, and those variations are likely to affect how
much additional financing we will need for our operations.
If additional funds are needed, we can not assure that funds will be
available from any source, or, if available, that we will be able to obtain
the funds on terms agreeable to us. We have not investigated the
availability, source or terms for additional financing. If we raise funds
through the sale of our common stock, our then current shareholders may
experience dilution in the value per share of their common stock. Also, the
acquisition of funding through the issuance of debt could result in a
substantial portion of our cash flows from operations being dedicated to the
payment of principal and interest on the indebtedness, and could render us
more vulnerable to competitive and economic downturns.
Results of Operations
Prior to our merger with Brain Garden, we did not generate any revenues
during the fiscal years 1998 and 1999. Brain Garden was incorporated in
November of 1998 and thus has a short history of operations prior to the
merger. Accordingly, we are unable to present a meaningful comparative
analysis of our operations from year to year or quarter to quarter. Since
Brain Garden is the accounting survivor, we will present a comparison of the
operations of Brain Garden for the fiscal year ended December 31, 1998 and our
interim six month period ended June 30, 1999.
We posted a net loss of $920,423 for the interim period, compared to a net
loss of $55,257 at the end of the fiscal year. Our revenues during the
interim period were $1,033,498 compared to $163,074 at year's end. Our gross
profit for the interim period was $745,177, compared to the year end amount of
$97,667. Our operating expenses totaled $1,659,301 for the interim period as
compared to $152,697 at year's end. The increase is operating expenses is a
result of general administrative costs which jumped from $87,902 to $982,777,
and selling expenses which increased from $54,755 to $675,477. The increase
in operating expenses is due primarily to: 1) expenditures to create and
support the infrastructure and systems to support expected revenue levels; 2)
costs to develop the
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distributor network, and 3) product and sales and marketing program
development.
We anticipate our operating losses to continue until we develop a larger
distributor network, produce new marketing and sales materials and develop new
product lines. However, we also expect our revenues to increase as a result
of our efforts to build a larger distributor network and expand our product
lines. This rise in revenues will likely be offset by increased operating
expenses due to additional burdens on our managerial, accounting, and support
personnel. Also, by becoming a fully reporting company we will add additional
expenses to our operations, including the expense of filing this registration
statement, preparing annual reports and preparation and filing of Form 10K's
and 10Q's.
Seasonal Aspects
In the direct selling industry, the summer months of June, July and
August, and the holiday months of November and December are relatively soft.
However, in the past we have not experienced a decrease in sales during these
time periods and are unsure how the industry-wide fluctuations will affect our
business in the future.
Year 2000 Compliance
We have completed a review of our computer systems and operations to
determine the extent to which our business will be vulnerable to potential
errors and failures as a result of the "Year 2000" problem. Year 2000
failures could result in system failures or miscalculations, causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, provide services or engage
in similar activities. These failures, miscalculations and disruptions could
have a material adverse effect on our business, operations and financial
condition.
We have concluded, based on our review of our operations and computer
systems, that our significant computer programs and operations will not be
materially affected by the Year 2000 problem, and that we can modify or
replace the programs that will be affected by the end of 1999 at a cost which
will not be significant. Our computer systems and/or operations could be
materially affected by the Year 2000 problem under a reasonably likely worst
case scenario.
In addition to our own properties and computer systems, we rely on
operations and computer systems of third-party customers, financial
institutions, vendors and other parties with or through which we conduct
business. We generally require our suppliers to warrant they are Year 2000
ready. We have attempted to identify those third-parties which may not be
Year 2000 compliant by the end of 1999, and we have adopted contingency plans
which we believe will mitigate any adverse impact to our business operations
resulting from those third parties' inability to perform their contractual
obligations. Our contingency plans include preparing and using backup copies
of our financial records, determining the availability and reliability of
alternate suppliers and scheduling additional administrative personnel to be
on hand on the transition date.
PROPERTIES
We lease 6,727 square feet of administrative and office space, as well
as, 686 square feet of warehouse space from RDR Properties, LC . The term of
the lease is for two years and will expire February 1, 2001. We pay $8,002
per month, which we believe is a typical lease price for similar premises in
the area.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1999, the beneficial
ownership of our outstanding common stock of; (i) each person or group known
by us to own beneficially more than 5% of our outstanding common stock, (ii)
each of our executive officers, (iii) each of our director's and (iv) all
executive officers and directors as a group.
10
<PAGE>
Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Except as indicated by footnote, the persons named in the table below have
sole voting power and investment power with respect to the shares of common
stock shown as beneficially owned by them. The percentage of beneficial
ownership is based on 10,699,000 shares of common stock outstanding as of July
15, 1999.
CERTAIN BENEFICIAL OWNERS
Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of Percentage
Beneficial Owners Common Stock of Class
- ------------------------------------ ------------------ -----------
Mark Comer 918,920 8.6%
1185 S. Mike Jense Circle
Provo, Utah 84601
PHI Mutual Ventures, LLC 4,702,701* 43.9%
525 South 300 East
Salt Lake City, Utah 84111
MANAGEMENT
Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of Percentage
Beneficial Owners Common Stock of Class
- ------------------------------------ ------------------ -----------
Ron Williams 1,567,567* 14.7%
1185 S. Mike Jense Circle
Provo, Utah 84601
Bruno Vassel III 1,567,567* 14.7%
1185 S. Mike Jense Circle
Provo, Utah 84601
Bill Turnbull 1,567,567* 14.7%
1185 S. Mike Jense Circle
Provo, Utah 84601
Mark Burdge 378,379 3.5%
1185 S. Mike Jense Circle
Provo, Utah 84601
All executive officers and
directors as a group 5,081,080 47.5%
*See, "Changes in Control," below.
Changes in Control.
On May 17, 1999 Whole Living borrowed cash from PHI Mutual Ventures, LLC.
The promissory note for the loan is secured by our common stock held in the
name of Messrs. Williams, Turnbull and Vassel. If the loan is not repaid with
interest by Whole Living by May 1, 2000, PHI Mutual Ventures, LLC, or the
holder of the note, will acquire 4,702,701 shares, which currently represents
44.1% of our outstanding shares. (See, "Certain
11
<PAGE>
Relationships and Related Transactions," below.)
MANAGEMENT
Our executive officers and directors and their respective ages and
positions with us are set forth below. Biographical information for each of
those persons is also presented below. Our executive officers are chosen by
our Board of Directors and serve at its discretion. There are no existing
family relationships between or among any of our executive officers or
directors.
Directors and Officers
Name Age Position Held
- ----------------------- ----- ----------------------------------
Ron Williams 38 President, C.E.O. and Director
Bruno Vassel III 55 Vice President, Treasurer, Chief
Operating Officer and Director
Bill Turnbull 42 Secretary and Director
Mark Burdge 42 Chief Financial Officer and Director
Ron Williams. President, C.E.O. and Director of Brain Garden since
November of 1998. Mr. Williams is a network marketing industry veteran,
having served from 1992-1997 as Vice President of Marketing for Neways
International, a $200 million company which markets personal care products in
the U.S. and internationally. In 1997, Mr. Williams left Neways to accept the
General Manager and Vice President of Marketing position at Young Living
Essential Oils, a $40 million company headquartered in Payson, Utah.
Bruno Vassel III. Vice President, Treasurer and Chief Operating Officer
of Brain Garden since November 1998. Mr. Vassel has 30 years of business and
senior management experience in multi-billion dollar corporations and in
rapidly growing small and medium sized companies in the direct-selling
industry. He directed human resource development and training for Avon
Products, Inc, as well as, international marketing in Central and South
America for that company. From 1993 to 1996 he served as Vice President of
Human Resources and Administrator and as a member of the Executive Committee
of Nature's Sunshine Products of Provo, Utah. For eight years, he built and
managed his own international consulting company, Human Resource Services,
Inc., with 61 client corporations, including many Fortune 500 companies.
Having resided in Europe and Latin America, Mr. Vassel speaks six languages,
and has spoken and lectured on five continents. He is the author of the book
"Lengthen Your Leadership Stride". He received a B.A. in 1969 from Brigham
Young University, located in Provo, Utah, and attended classes in the M.B.A.
program at that university in 1970.
Bill Turnbull. Secretary and Director of Brain Garden since November of
1998. Mr. Turnbull has founded several very successful private companies and
recently founded Insight USA, a direct sales company specializing in
educational software and Internet-based learning programs. Insight USA was
subsequently acquired by Whole Living. From 1989 to 1998, he was President
and CEO of Bonneville Foods, Inc., a franchised restaurant development
company. He also has been involved since 1986 with TJ Development, a
commercial real estate investment company. In 1982 he received a B.S. degree
from Brigham Young University, located in Provo, Utah, and completed M.A.
course work at that university during 1984.
Mark Burdge. Chief Financial Officer and Director of Brain Garden since
November of 1998. Mr. Burdge is primary owner and CEO of MCB Printing, Inc.,
a large printing concern in Provo, Utah that specializes in product marketing
materials for network marketing companies. Mr. Burdge graduated with a degree
in accounting from Brigham Young University, and later became a founding
distributor of NuSkin International. He also created and owns Digital Media,
a very successful graphics design firm in Provo, Utah.
12
<PAGE>
EXECUTIVE COMPENSATION
During the fiscal year ended March 31, 1998 none of our officers
received any cash compensation, bonuses, stock appreciation rights, long term
compensation, stock awards or long-term incentive rights. During the fiscal
year 1999, each of our executive officers received annual compensation of
$60,000 plus approximately $6,000 in personal benefits in the form of a leased
automobile. We do not have any standard arrangement for compensation of our
directors for any services provided as director, including services for
committee participation or for special assignments.
Employment Contracts
We have adopted a policy of entering into employment agreements with our
senior management, and have entered into such agreements with Messrs.
Williams, Vassel and Turnbull. The term of the agreements start on March 15,
1999 and have initial terms of three years, with automatic renewal for one
year periods thereafter. Under the agreements each officer is entitled to
receive a base salary of $60,000 during the first year of the agreement. Each
is entitled to incentive bonuses, vacation time, insurance on an automobile,
stock options at the Board's discretion and reimbursement for expenses. We
may terminate the employment agreements for cause as that term is defined in
the agreements. If we terminate the employment at our discretion, each will
receive compensation due him for a period of twelve months. Each has promised
not to compete with Whole Living for a period of one year after termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions either we
engaged in during the past two years or we propose to engage in involving our
executive officers, directors, 5% stockholders or immediate family members of
such persons.
Mark Comer, a shareholder of Whole Living, advanced $50,000 to Brain
Garden for operating capital during 1998. The entire amount was payable on
demand on December 31, 1998 and was unsecured. The debt remains outstanding.
Also, Mr. Comer owns a fifty-percent (50%) interest in RDR Properties,
LC who leases our office and warehouse space to us at $8,002 per month. We
will pay $96,024 annually to RDR Properties, LC until February 1, 2001. (See,
"Properties," above.)
All of our named executive officers own interests in MRB, LLC. MRB
prepares the sales aids and product kits for Whole Living. MRB's services
include the design and production of printing and packaging, and the
production of video tapes and audio tapes. Mr. Burdge owns a 40% interest in
MRB and Messrs. Williams, Turnbull and Vassel each own 20%. MRB provides
these products to Whole Living on 90 day credit. Whole Living has paid MRB
approximately $73,000.00 for the services it has provided to Whole Living from
December 1, 1998 through July of 1999.
Whole Living advanced $650,000 to Brain Garden in March of 1999 in
anticipation of the merger. The advance was interest free.
In May of 1999 PHI Mutual Ventures, LLC loaned $340,000 to Whole Living.
The loan is represented by a promissory note which is payable, with 9%
interest, on May 1, 2000. The note is secured by 4,702,701 shares of our
common stock held by three of our executive officers, Messrs. Williams,
Turnbull and Vassel. The stock certificates representing such shares are
currently held in escrow.
13
<PAGE>
LEGAL PROCEEDINGS
On July 26, 1999, Sharon Baez, an individual, filed a complaint in the
Fourth District Court, Provo Department, State of Utah, naming Don V. Tolman
individually and as agent for The Brain Garden, LLC, and Whole Living, Inc.
dba Brain Garden, a Nevada Corporation, as defendants. Ms. Baez alleges
breach of contract and unjust enrichment by the defendants. The complaint
claims that Mr. Tolman, as CEO and President of Brain Garden, LLC. entered
into an agreement with Ms. Baez on September 22, 1998. Per the agreement, Ms.
Baez loaned $121,264.34 to Mr. Tolman and he agreed to repay the principal
amount, with 10% interest, with monthly payments. Ms. Baez claims Mr. Tolman
failed to complete the repayment schedule. In addition, the complaint alleges
that Whole Living, Inc. contacted persons who had loaned money to Mr. Tolman
and had offered to refund their money. Ms. Baez claims she did not receive
such an offer. Ms. Baez seeks $113,966.81, pre-judgment interest of 10% per
annum and post-judgment interest at the maximum legal rate until all amounts
due and owing are paid in full. We disclaim any liability and have referred
this matter to our legal counsel.
MARKET PRICE FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Our common stock is traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "WLIV." There has not been any
trading activity in our common stock until August 5, 1999. We cannot assure
that an active public market will develop in our common stock and a
shareholder may be unable to liquidate his investment without considerable
delay, if at all.
Standard Transfer and Registrar Company of Draper, Utah, currently acts
as transfer agent for our common stock. As of July 15, 1999 we have
approximately 92 shareholders of record with 10,699,000 shares outstanding.
3,999,000 of such shares are freely tradeable (except for such shares as may
be acquired by our affiliates). The remaining 6,700,000 shares held by
existing shareholders are "restricted securities" as that term is defined by
Rule 144.
Dividends
We have not declared dividends on our common stock and do not anticipate
paying dividends on our common stock in the foreseeable future.
OTC Bulletin Board Eligibility Rule
In January of 1999, the SEC granted approval of amendments to the NASD
OTC Bulletin Board Eligibility Rule 6530 and 6540. These amendments now
require a company listed on the OTC Bulletin Board to be a reporting company
and current in its reports filed with the SEC. As a result of this rule
change we have voluntarily filed this registration statement in order to
become a fully reporting company and maintain the listing of our common stock
on the OTC Bulletin Board. The rule requires that the SEC come to a position
of no further comment regarding the registration statement before a company is
considered compliant. We cannot assure that the SEC will come to such a
position in regards to this registration statement prior to our phase-in date
of October 1, 1999. According to the rules, if we are not in compliance at
our phase-in date our common stock will be removed from the OTC Bulletin Board
and placed on the National Quotation Bureau's Pink Sheets. This move to the
"pink sheets" may adversely affect the market, if any, in our stock.
RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities sold by us within the
past three years without registration: On July 13, 1999 our Board authorized
the issuance of 400,000 common shares to SGS Holdings, Inc. for $500,000 cash;
on March 24, 1999 the Board authorized the issuance of 6,000,000 common shares
to the five shareholders of Brain Garden pursuant to an Agreement and Plan of
Reorganization, dated March 16, 1999; in March of 1999 at
14
<PAGE>
Whole Living's organizational meeting, the Board authorized the issuance of
100 common shares each to our then President, Anita Patterson, and our then
Secretary/Treasurer, April Marino, for $2.00 cash; on January 15, 1999 the
Board authorized the issuance of 300,000 shares to Daniel W. Jackson, as
escrow agent, for $800,000 cash.
In connection with each of these isolated issuances of our securities, we
believe that each purchaser (i) was aware that the securities had not been
registered under federal securities laws, (ii) acquired the securities for
his/her/its own account for investment purposes and not with a view to or for
resale in connection with any distribution for purpose of the federal
securities laws, (iii) understood that the securities would need to be
indefinitely held unless registered or an exemption from registration applied
to a proposed disposition and (iv) was aware that the certificate representing
the securities would bear a legend restricting their transfer. We believe
that, in light of the foregoing, the sale of our securities to the respective
acquirers did not constitute the sale of an unregistered security in violation
of the federal securities laws and regulations by reason of the exemptions
provided under Sections 3(b) and 4(2) of the Securities Act, and the rules and
regulations promulgated thereunder.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 50,000,000 shares of common stock, par value
$.001 per share, of which 10,699,000 shares were issued and outstanding as of
July 15, 1999. We have not authorized or issued preferred stock. All shares
of common stock have equal rights and privileges with respect to voting,
liquidation and dividend rights. Each share of common stock entitles the
holder (i) to one non-cumulative vote for each share held of record on all
matters submitted to a vote of the stockholders, (ii) to participate equally
and to receive any and all such dividends as may be declared by the Board of
Directors out of funds legally available; and (iii) to participate pro rata in
any distribution of assets available for distribution upon liquidation of
Whole Living. Our stockholders have no preemptive rights to acquire
additional shares of common stock or any other securities. All outstanding
shares of common stock are fully paid and non-assessable.
Anti-Takeover Effective Nevada Law In Certain Provisions
Nevada law provides that any agreement providing for the merger,
consolidation or sale of all or substantially all of the assets of a
corporation be approved by the owners of at least the majority of the
outstanding shares of that corporation, unless a different vote is provided
for in the Articles of Incorporation. Our Articles of Incorporation do not
provide for a super-majority voting requirement in order to approve any such
transactions. Nevada law also gives appraisal rights for certain types of
mergers, plans of reorganization or exchanges or sales of all or substantially
all of the assets of a corporation. Under Nevada law, a stockholder does not
have the right to dissent with respect to (a) a sale of assets or
reorganization, (b) any plan of merger or any plan of exchange, if (i) the
shares held by the stockholder are part of a class of shares which are listed
on a national securities exchange or the NASDAQ National Market Systems, or
are held of record by not less than 2,000 shareholders and (ii) the
stockholder is not required to accept for his shares any consideration other
than shares of a corporation that, immediately after the effective time of the
merger or exchange, will be part of a class of shares which are listed on a
national securities exchange or the NASDAQ National Market System, or are held
of record by not less than 2,000 holders.
Control Share Acquisition Provision
Under Nevada law, when a person has acquired or offers to acquire one-
fifth, one-third or a majority of the stock of a corporation, a stockholders
meeting must be held after delivery of an "offerors" statement delivered to
the stockholders at the offerors expense, so that the stockholders of the
corporation can vote on whether the shares proposed to be acquired (the
"control shares") can exercise voting rights. Except as otherwise provided in
a corporation's Articles of Incorporation, the approval of the majority of the
outstanding stock not held by the offerors is required so that the stock held
by the offerors will have voting rights. The control share acquisition
provisions are applicable to any acquisition of a controlling interest, unless
the Articles of Incorporation or by-laws
15
<PAGE>
of a corporation in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provides that the control share
acquisition provisions do not apply. We have not elected out of the control
share acquisition provisions of Nevada law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Nevada Revised Statutes Section 78.7502 and 78.751, our
Articles of Incorporation and bylaws provide for the indemnification of
present and former directors and officers and each person who serves at our
request as our officer or director. We will indemnify such individuals
against all costs, expenses and liabilities incurred in a threatened, pending
or completed action, suit or proceeding brought because such individual is our
director or officer. Such individual must have conducted himself in good
faith and reasonably believed that his conduct was in, or not opposed to, our
best interest. In a criminal action he must not have had a reasonable cause
to believe his conduct was unlawful. This right of indemnification is not
exclusive of other rights the individual is entitled to as a matter of law or
otherwise.
We will not indemnify an individual adjudged liable to us due to his
negligence or wilful misconduct toward us, or if he improperly received
personal benefit. Indemnification in a derivative action is limited to
reasonable expenses incurred in connection with the proceeding. Also, we are
authorized to purchase insurance on behalf of an individual for liabilities
incurred whether or not we would have the power or obligation to indemnify him
pursuant to our bylaws.
Our bylaws provide that individuals may receive advances for expenses if
the individual provides a written affirmation of his good faith belief that he
has met the appropriate standards of conduct and he will repay the advance if
he is adjudged not to have met the standard of conduct.
FINANCIAL STATEMENTS
Our audited financial statements for the fiscal years ended March 31,
1999 and 1998, and our unaudited financial statements for the interim period
ended June 30, 1999 are as follows:
WHOLE LIVING, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 1999 and 1998
And From Inception (January 30, 1986)
Through March 31, 1999
<PAGE> 16
TABLE OF CONTENTS
Page
Independent Auditors' Report 3
Balance Sheets 5
Statements of Operations 6
Statements of Stockholders' Equity 7
Statements of Cash flows 8
Notes to Financial Statements 9-11
<PAGE> 17
<Letterhead of
HAMMOND
and COMPANY
A Professional Corporation
-------------------
Certified Public Accountants>
To the Board of Directors and Stockholders of
Whole Living, Inc.
We have audited the accompanying balance sheets of Whole Living, Inc. (a
development stage company) as of March 31, 1999 and 1998, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended March 31, 1999, 1998 and 1997, and for the period from January 30, 1986
(inception), 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles 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 financial statements referred to above present fairly, in
all material respects, the financial position of Whole Living, Inc. as of
March 31, 1999 and 1998, and the results of its operations and cash flows for
the years ended March 31, 1999, 1998 and 1997, and from January 30, 1986
(inception), to March 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. As discussed in Note 2 to the financial statements, the Company has
suffered losses from inception, and anticipates the need for additional cash
to fund its operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 2. The financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
/s/ Hammond and Company
Salt Lake City, Utah
April 23, 1999
1015 East 3900 South * Salt Lake City, Utah 84124
Office: 801-281-4043 * Fax: 801-281-4533
Email: [email protected]
3
<PAGE> 18
Whole Living, Inc.
(A Development Stage Company)
Balance Sheet
March 31, 1999
ASSETS
Current assets $ 0
Long term assets 0
---------
Total Assets $ 0
=========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities $ 0
Long term liabilities 0
---------
Total Liabilities 0
---------
Shareholders' Equity:
Common stock, $.001 par value,
25,000,000 shares authorized;
17,000,000 shares issued
and outstanding 17,000
Deficit accumulated during the development stage (17,000)
----------
Net shareholders' equity 0
----------
Total Liabilities and Shareholders Equity $ 0
==========
The accompanying notes are an integral part
of these financial statements.
5
<PAGE> 19
Whole Living, Inc.
(A Development Stage Company)
Statement of Operations
For the Twelve Months Ended March 31, 1999
and the Period from January 30, 1986 (Date of Inception)
to March 31, 1999
Twelve Months Cumulative
Ended From Incep. to
Mar 31, 1999 Mar 31, 1999
Net sales $ 0 $ 0
Cost of sales 0 0
----------- -----------
Gross profit (loss) 0 0
----------- -----------
Operating expenses:
General and administrative 0 0
----------- -----------
(Loss) from operations 0 (17,000)
Income taxes 0 0
----------- -----------
NET (LOSS) $ 0 $ (17,000)
=========== ===========
(Loss) per share $ 0 $ (.001)
=========== ===========
Shares Outstanding 17,000,000 17,000,000
=========== ===========
The accompanying notes are an integral part
of these financial statements
6
<PAGE> 20
Whole Living, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From Inception (January 30, 1986) Through
March 31, 1999
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-in - Earnings
Shares Amount Capital (Deficit) Total
------------ ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 30, 1986 (inception) -0- $ -0- $ -0- $ -0- $ -0-
Common Stock Issued for Marketing Rights 17,000,000 17,000 -0- -0- 17,000
Net loss -0- (17,000) (17,000)
------------ ----------- ------------ ------------- ----------
Balance at March 31, 1986 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1987 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1988 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1989 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1990 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1991 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1992 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1993 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1994 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1995 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1996 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1997 (audited) 17,000,000 17,000 -0- (17,000) -0-
------------ ----------- ------------ ------------- -----------
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1998 (audited) 17,000,000 $ 17,000 $ -0- $ (17,000) $ -0-
============ =========== ============ ============= ===========
Common Stock Issued for Cash 300,000 300 799,700 800,000
Issuance of Whole Living, Inc. Stock 200
Net Income -0- -0- -0-
------------ ----------- ------------ ------------- -----------
Balance at March 31, 1999 (audited) 17,300,200 $ 17,300 $ 799,700 $ (17,000) $ 800,000
============ =========== ============ ============= ===========
The accompanying notes are an integral part
of these financial statements.
7
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
WHOLE LIVING, INC.
(A Development Stage Company)
Statements of Cash Flows
From Inception (January 30, 1986)
Through March 31, 1999
Cumula-
tive
Amounts
From
Incep-
tion to
----------------------------------------------------------------------------------------- Mar 31,
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1999
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net Profit (loss) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $(17,000) $ (17,000)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Changes in assets and
liabilities
Amortization 0 0 0 0 0 0 0 0 0 0 0 0 0 17,000 17,000
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --------- --------
Net cash provided
(used) for operating
activities 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash flows from investing
activities: 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Advances (650,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 (650,000)
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --------- ---------
Net cash used for
investing
activities (650,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 (650,000)
Cash flows from financ-
ing activities:
Issuance of Common
Stock for Cash 800,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --------- ---------
Net cash provided by
financing activities 800,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --------- ---------
Net cash provided
(used) for investing
and financing
activities 150,000 0 0 0 0 0 0 0 0 0 0 0 0 0 (650,000)
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --------- ---------
Increase (decrease) in cash 150,000 0 0 0 0 0 0 0 0 0 0 0 0 0 (650,000)
Cash, beginning of the year 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash end of the year $150,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $(650,000)
======== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ========= =========
Supplemental Schedule of
Noncash Investing Activities
Issuance of common stock
for acquisition of marketing rights $ 17,000
=========
The accompanying notes are an integral part of these financial statements
8
</TABLE>
<PAGE> 22
Whole Living, Inc.
Notes to Financial Statements
For the Twelve Months Ended March 31, 1999 and 1998
And From Inception (January 30, 1986) Through March 31, 1999
Note 1- Organization and History
------------------------
Nature of Operations
Whole Living, Inc. (the Company), a Nevada corporation was incorporated March
18, 1999. On March 19, 1999 the Company merged with Brick Tower Corporation
(Brick Tower) an Idaho Corporation. The Company is the surviving corporation.
Brick Tower was incorporated on January 30, 1986, to lease, sell, and market
the Hystar airship in Idaho under Hystar Worldnet Inc., initially the only
shareholder. Brick Tower also acquired the marketing rights to the Burkett
Mill, a waste milling device, from Hystar Worldnet Inc. The technology to
further develop the Hystar airship and the mill by the parent company proved
to be prohibitive, and shortly after the acquisition of the marketing rights
further activity ceased.
The merger was recorded under the pooling of interests method of accounting.
Each share of the Company remained outstanding as one fully paid and
nonassessable share of capital stock of the surviving corporation, and each
share of Brick Tower was converted into one fully paid and non-assessable
share of capital stock of the surviving corporation.
Note 2- Basis of Presentation
---------------------
The accompanying financial statements have been prepared on the going concern
basis which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has suffered
cumulative losses of $17,000 since inception, and the ability of the Company
to continue as a going concern is dependent on its ability to successfully
develop assets and ultimately achieve profitable operations.
Management's plans in this regard are as follows:
The Company will continue to seek cash proceeds from the sale of common stock
or attempt to merge into an operating entity. If inadequate funds are received
from security offerings, the Company will seek required operating capital
through other means. There is no assurance that any such efforts would be
successful.
Officers and directors do not take a salary and will continue to do so until
such time as the Company is able to make payments from profits.
The Company believes that potential business opportunities warrant the effort
to seek funding for additional projects. However, there is no assurance that
any required capital will be available or that, if available, it can be
obtained on terms favorable to the Company. The Company may negotiate with
various investors to fund projects once identified, but there is no assurance
that funding arrangements can be reached on terms acceptable or favorable to
the Company.
9
<PAGE> 23
Whole Living, Inc.
Notes to Financial Statements
For the Twelve Months Ended March 31, 1999 and 1998
And From Inception (January 30, 1986) Through March 31, 1999
The Company believes that its continuous sale of securities through fiscal
2000 will enable it to meet its requirement for capital and liquidity
through the end of fiscal 2000. The Company's liquidity requirements
thereafter are not presently known inasmuch as they are substantially
dependent on the results of assets acquired and liabilities incurred.
The Company's management intends to raise additional operating funds through
equity and/or debt offerings. However, there can be no assurance management
will be successful in this endeavor.
Note 3- Significant Accounting Policies
--------------------------------
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles. The significant accounting policies
are summarized below:
(a) Continuing Operations: The accompanying financial statements have been
prepared on a going concern basis which contemplates the realization of assets
and liquidation of liabilities in the ordinary course of business. The Company
has no significant recurring sources of income at this time. However, the
Company is pursuing new objectives and business opportunities.
(b) Accounting Methods: The Company recognizes income and expenses according
to the accrual method of accounting.
(c) Fiscal Year End: The Company has selected March 31 as its fiscal year end
for financial reporting purposes.
(d) Loss per Share: The computation of loss per share of common stock is
based on the weighted average number of shares outstanding at the end of each
period.
(e) Issuance of Shares: Valuation of shares for services is based on the fair
market value of services.
(f) Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in financial
statements and accompanying notes. Actual results could differ from those
estimates.
Note 4- Stockholder's Equity
--------------------
On January 15, 1999 the Company issued 300,000 restricted shares of common
stock for $800,000.
10
<PAGE> 24
Whole Living, Inc.
Notes to Financial Statements
For the Twelve Months Ended March 31, 1999 and 1998
And From Inception (January 30, 1986) Through March 31, 1999
Note 5- Advance Receivable
------------------
Prior to March 31, 1999 the Company advanced to Whole Living, Inc., a Utah
Corporation, $650,000 in anticipation of a merger to be completed within
ninety days of the Company's fiscal year-end.
Note 6- Income taxes
------------
The Company records its income tax provision in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires the use of the liability method of accounting for deferred income
taxes.
The Company has a net operating loss carryforward of $17,000 which expires in
the year 2001.
At March 31, 1999 the Company did not have any significant deferred tax
liabilities or deferred tax assets.
11
<PAGE> 25
Whole Living, Inc.
Financial Statements
June 30, 1999 (unaudited)
and
December 31, 1998
<PAGE> 26
C O N T E N T S
Accountants' Report ..................................... 3
Balance Sheets ...........................................4
Statements of Operations .................................6
Statements of Stockholders' Equity....................... 7
Statements of Cash Flows .................................8
Notes to the Financial Statements ....................... 9
<PAGE> 27
<Letterhead of
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1120
Salt Lake City, Utah 84101
office (801) 363-1175
Fax: (801) 363-0615>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Whole Living, Inc.
We have audited the accompanying balance sheet of Whole Living, Inc. as of
December 31, 1998 and the related statements of operations, stockholders'
equity and cash flows from inception on November 25, 1998 through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whole Living, Inc. as of
December 31, 1998 and the results of its operations and cash flows from
inception on November 25, 1998 through December 31, 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5, the
Company's short operating history and operating losses raise substantial doubt
about its ability to continue as a going concern. Management's plans in those
matters are also described in Note 5. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
February 23, 1999
-3-
<PAGE> 28
Whole Living, Inc.
Balance Sheet
ASSETS
-------
June 30 December 31
1999 1998
-------------- ---------------
CURRENT ASSETS (unaudited)
Cash (Note 1) $ 44,905 $ 68,205
Accounts receivable 56,038 1,044
Inventory (Note 1) 209,337 93,995
Prepaid expenses 85,954 -
-------------- ---------------
Total Current Assets 396,234 163,244
-------------- ---------------
PROPERTY & EQUIPMENT (Note 2) 260,423 167,322
-------------- ---------------
OTHER ASSETS
Goodwill (Note 1) 60,062 43,295
-------------- ---------------
TOTAL ASSETS $ 716,719 $ 373,861
============== ===============
The accompanying notes are an integral part of these financial statements.
<PAGE> 29 -4-
Whole Living, Inc.
Balance Sheet continued
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
June 30 December 31
1999 1998
-------------- ---------------
CURRENT LIABILITIES (unaudited)
Accounts payable $ 89,956 $ 36,790
Accrued expenses 153,140 55,954
Current portion of long-term
liabilities (Note 3) 448,304 127,657
-------------- ---------------
Total Current Liabilities 691,400 220,401
-------------- ---------------
LONG TERM LIABILITIES (Note 3)
Notes payable-related party 390,000 50,000
Notes payable 47,051 70,872
Capital lease obligations 11,253 14,502
Less current portion (448,304) (127,657)
-------------- ---------------
Total long term Liabilities - 7,717
-------------- ---------------
TOTAL LIABILITIES 691,400 228,118
-------------- ---------------
STOCKHOLDERS' EQUITY
Common stock, authorized 50,000,000
shares $.001 par value, issued and
outstanding 10,299,000 and 11,100
shares, respectively 10,299 11
Additional paid in capital 990,700 200,989
Retained earnings (975,680) (55,257)
-------------- ---------------
Total Stockholders' Equity 25,319 145,743
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 716,719 $ 373,861
============== ===============
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 30
Whole Living, Inc.
Statement of Operations
From inception
on November
For the Six 25, 1998
Months Ended through
June 30 December 31,
1999 1998
-------------- ---------------
(unaudited)
REVENUES $ 1,033,498 $ 163,074
COST OF SALES 288,321 65,407
-------------- ---------------
GROSS PROFIT 745,177 97,667
-------------- ---------------
SELLING EXPENSES 675,477 54,755
RESEARCH & DEVELOPMENT 1,047 10,040
GENERAL & ADMINISTRATIVE EXPENSES 982,777 87,902
-------------- ---------------
TOTAL OPERATING EXPENSES 1,659,301 152,697
-------------- ---------------
OPERATING LOSS (914,124) (55,030)
-------------- ---------------
OTHER INCOME AND (EXPENSES)
Interest expense (1,109) (227)
Interest income 900 -
Loss on sale of asset (6,090) -
-------------- ---------------
Total Other Income and (Expenses) (6,299) (227)
-------------- ---------------
LOSS BEFORE INCOME TAXES (920,423) (55,257)
PROVISION FOR INCOME TAXES (Note 1) - -
-------------- ---------------
NET LOSS $ (920,423) $ (55,257)
============== ===============
NET LOSS PER SHARE $ (0.27) $ (4.98)
============== ===============
WEIGHTED AVERAGE OUTSTANDING SHARES 3,440,733 11,100
============== ===============
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 31
Whole Living, Inc.
Statement of Stockholders' Equity
From Inception on November 25, 1998 through December 31, 1998,
and June 30,1999 (unaudited)
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid in Earnings
Shares Amount Capital (Deficit)
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Beginning Balance November 25, 1998 - $ - $ - $ -
November 1998-Shares issued to
organizers for services 9,400 9 991 -
December 1998-Shares issued for cash 1,700 2 199,998 -
Net (Loss) from inception on
November 25, 1998 through
December 31, 1998 - - - (55,257)
------------- ------------ ------------ -------------
Balance on December 31, 1998 11,100 11 200,989 (55,257)
Reorganization adjustment 10,287,900 10,288 789,711 -
Net (Loss) for the three months
ended June 30,1999 - - - (920,423)
------------- ------------ ------------ -------------
Balance on June 30, 1999 10,299,000 $ 10,299 $ 990,700 $ (975,680)
============= ============ ============ =============
The accompanying notes are an integral part of these financial statements.
-7-
</TABLE>
<PAGE> 32
Whole Living, Inc.
Statement of Cash Flows
From inception
For the Six on November
Months 25, 1998
Ended through
June 30 December 31
1999 1998
-------------- ----------------
Cash Flows From Operating Activities (unaudited)
Net income (loss) $ (920,423) $ (55,257)
Non-cash items:
Depreciation & amortization 24,325 2,581
Stock issued for services - 1,000
(Increase)/decrease in current assets:
Accounts receivable (54,994) (1,044)
Inventory (115,342) (93,995)
Prepaid expenses (85,954) -
Increase/(decrease) in current liabilities:
Accounts payable 53,166 36,790
Accrued expenses 97,186 55,954
-------------- ----------------
Net Cash Provided (Used) by
Operating Activities (1,002,036) (53,971)
-------------- ----------------
Cash Flows from Investing Activities
Cash paid for Property and Equipment (117,427) (71,510)
Cash paid for Goodwill (16,767) (43,295)
-------------- ----------------
Net Cash Provided (Used) by
Investing Activities (134,194) (114,805)
-------------- ----------------
Cash Flows from Financing Activities
Cash received from stock issuance 800,000 200,000
Cash received from debt financing 340,000 50,000
Principal payments on long-term debt (27,070) (13,019)
-------------- ----------------
Net Cash Provided (Used) by
Financing Activities 1,112,930 236,981
-------------- ----------------
Increase/(decrease) in Cash (23,300) 68,205
Cash and Cash Equivalents at
Beginning of Period 68,205 -
-------------- ----------------
Cash and Cash Equivalents at
End of Period $ 44,905 $ 68,205
============== ================
Supplemental Cash Flow Information:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
Non-cash financing transaction:
Purchase of equipment with lease
obligations and notes $ - $ 101,393
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE> 33
Whole Living Inc.
Note to the Financial Statements
December 31, 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Whole Living, Inc. (the Company) was incorporated on November 25,
1998 in the state of Utah. On November 30, 1998, the Company acquired the
assets, leases, product line and name of Brain Garden, L.L.C., a Utah limited
liability company engaged in the marketing and distribution of various natural
food products, oils and bath salts. The Company does business under the name
of Brain Garden, and maintains its headquarters in Provo, Utah.
b. Recognition of Revenue
The Company recognizes income and expense on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on
the weighted average number of shares outstanding at the date of the financial
statements.
d. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating
loss carryforwards totaling approximately $55,000 that will be offset against
future taxable income. Since the Company has yet to prove they can generate
taxable income, a valuation account has been created to eliminate the deferred
tax asset.
Deferred tax assets and the valuation account is as follows at
December 31, 1998:
December 31,
1998
-----------
Deferred tax asset:
NOL carryforward $ 18,700
Valuation allowance (18,700)
------------
Total $ -
------------
e. Cash and Cash Equivalents
The company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.
-9-
<PAGE> 34
Whole Living Inc.
Note to the Financial Statements
December 31, 1998
NOTE 1 - Summary of Significant Accounting Policies (Continued)
f. Property and Equipment
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life of assets or
convert the assets to a new use, are capitalized at cost. Expenditures for
maintenance, repairs and other renewals of items are charged to expense. When
items are disposed of, the cost and accumulated depreciation are eliminated
from the accounts, and any gain or loss is included in the results of
operations.
The provision for depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. Depreciation expense
for the period ended December 31,1998 is $2,581.
g. Inventory
Inventory is recorded at the lower of cost or market and consists
primarily of consumable food products and ingredients.
h. Fair Value of Financial Instruments
Unless other indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such amounts.
i. Goodwill
The Company recorded goodwill in the acquisition of the assets of
Brain Garden, LLC, due to the excess cost paid over the estimated value of
assets acquired. Goodwill is being amortized over 5 years on a straight-line
method, to begin in 1999.
j. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions that
affect the amounts reported in the financial statements and accompanying
notes. In these financial statements, assets, liabilities and earnings
involve extensive reliance on managements estimates. Actual results could
differ from those estimates.
-10-
<PAGE> 35
Whole Living Inc.
Note to the Financial Statements
December 31, 1998
NOTE 2 - Property & Equipment
Property and equipment consists of the following at December 31, 1998:
December 31,
1998
--------------
Office equipment & furnishings $ 33,682
Office furniture & fixtures 34,829
Software 86,379
Leased equipment 15,014
--------------
169,904
Less:
Accumulated depreciation (2,332)
Accumulated depreciation - leased equipment (250)
---------------
Total Property & Equipment $ 167,322
===============
NOTE 3 - Long-Term Liabilities
Long Term Liabilities are detailed in the following schedules as of
December 31, 1998:
Notes payable related party is detailed as follows: December 31
1998
-------------
Note payable to a shareholder of the Company,
non-interest bearing, due upon demand and
unsecured $ 50,000
-------------
Total notes payable - related party 50,000
-------------
Notes Payable are detailed as follows:
Note payable to a corporation, non-interest
bearing, due within 60 days of delivery of
software, unsecured $ 70,872
-------------
-11-
<PAGE> 36
Whole Living Inc.
Note to the Financial Statements
December 31, 1998
NOTE 3 - Long-Term Liabilities (continued)
Capital lease obligations are detailed in the following schedule as of
December 31, 1998:
December 31,
1998
--------------
Capital lease obligation to a corporation
for computer equipment, lease payments due
monthly of $435 through February 2000,
bears interest at 18%, secured by computer
equipment. $ 5,401
Capital lease obligation to a corporation
for computer equipment, lease payments
due monthly of $304 through April 2002,
bears interest at 18%, secured by equipment. 9,101
-------------
Total Lease Obligations 14,502
-------------
Total long term liabilities 135,374
Less current portion of:
Notes payable - related party 50,000
Notes payable 70,872
Capital lease obligations 6,785
-------------
Total current portion 127,657
-------------
Net Long Term Liabilities $ 7,717
=============
Future minimum principal payments on notes payable and notes
payable-related party are as follows:
1999 $ 120,872
-------------
Total notes payable and notes payable-related party $ 120,872
-------------
Future minimum lease payments are as follows at December 31, 1998:
1999 8,871
2000 4,471
2001 3,651
2002 1,217
-------------
18,210
Less portion representing interest (3,708)
-------------
Total $ 14,502
-------------
-12-
<PAGE> 37
Whole Living Inc.
Note to the Financial Statements
December 31, 1998
NOTE 4 - Commitments and Contingencies
The Company is committed for their office facilities. Monthly
lease payments are due of $4,886 on a month to month basis. Subsequent to the
audit, the Company moved their facilities to Provo, Utah.
The Company sales and distributes its products through independent
distributors. The Company is committed to a guaranteed monthly distributors
bonus of $5,000 to one of its distributors. The agreement has no termination
date.
NOTE 5 - Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has a short
operating history and net operating losses since inception and is dependent
upon financing to continue operations. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. It is management's plan to raise additional funds through a
merger with a public company and market it's products aggressively.
NOTE 6 - Related Party Transactions
Mark Comer, a shareholder of the Company, advanced $50,000 to the
Company for operating capital. The entire amount is payable at December 31,
1998 and is due upon demand.
NOTE 7 - Subsequent Events
Subsequent to the audit date, the Company received $650,000 in
advances from Whole Living, Inc., a Nevada public corporation in anticipation
of a merger to be completed by June 30, 1999.
NOTE 8 - Unaudited Information
Whole Living, Inc. (the Company) has elected to omit substantially
all footnotes to the financial statements for the six months ended June 30,
1999. The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to properly
reflect the results of the six months ended June 30, 1999. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
-13-
<PAGE> 38
Whole Living Inc.
Note to the Financial Statements
December 31, 1998
NOTE 9 - Principles of Consolidation
The June 30, 1999 unaudited financial statements include the books
of Whole Living, Inc. (Nevada) and its wholly owned subsidiary Whole Living,
Inc. (Utah). All intercompany transactions and balances have been eliminated
in the consolidation.
NOTE 10 - Reverse Acquisition
Effective March 24, 1999 the Company entered into an agreement
to merge with Whole Living, Inc. a Nevada Corporation (WLN). Pursuant to the
merger, WLN issued 6,000,000 shares of common stock to the shareholders of the
Company for all outstanding stock of the Company. The merger was recorded as
a reverse merger, with Whole Living, Inc. (Utah) being the accounting
survivor. A reverse merger adjustment was made to the books of the Company to
reflect the change in capital to that of WLN.
<PAGE> 39
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
Pursuant to the merger agreement, we continue to employ the accounting
survivor's (Brain Garden's) principal independent accountant, Crouch, Bierwolf
and Chisholm, located in Salt Lake City, Utah. For the past two fiscal years
we have not had any disagreements regarding accounting practices, financial
statement disclosure, or auditing scope or procedure with our former
independent accountant, Hammond & Company; nor have their reports contained an
adverse opinion or disclaimer of opinion.
FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits
Exhibit Number Description
2.1 Agreement and Plan of Reorganization between Whole
Living and Whole Living, dba Brain Garden, dated March
16, 1999.
3.1 Articles of Incorporation of Whole Living.
3.2 Articles of Merger filed March 19, 1999.
3.3 Articles of Merger filed May 24, 1999.
3.4 Bylaws of Whole Living
10.1 Lease between Whole Living and RDR Properties, LC,
dated March 1, 1999.
10.2 Form of Employment Agreement
11.1 Statement re computation of earnings per share
16.1 Letter of agreement from Hammond & Company, dated
August 2, 1999.
27.1 Financial Data Schedule
________________________
40
<PAGE> 40
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, who are duly authorized.
Date August 6, 1999 WHOLE LIVING, INC.
/s/ Bruno Vassell
By:___________________________________
Bruno Vassell III, Vice President,
Treasurer, Chief Operating Officer and
Director
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Plan") is made this 16th day of March
1999, among Whole Living, Inc., a Nevada corporation (formerly known as Brick
Tower Corporation) ("WLN"); Whole Living, Inc. (dba Brain Garden), a Utah
corporation, any and all of its subsidiaries and fictitious names (hereinafter
collectively referred to as "Whole Living") and its shareholders (hereinafter
"Shareholders").
WLN wishes to acquire one hundred percent (100%) of the issued and
outstanding stock of Whole Living for and in exchange for stock of WLN, in a
statutory merger intending to qualify as a tax-free exchange pursuant to Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. The parties
intend for this Plan to represent the terms and conditions of such tax-free
reorganization, which Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the holders of all the
issued and outstanding stock of Whole Living agree to assign, transfer, and
deliver to WLN, free and clear of all liens, pledges, encumbrances, charges,
restrictions or known claims of any kind, nature or description, all of their
shares of Whole Living stock, and WLN agrees to acquire such shares on the
date thereof, or as soon as practicable thereafter, by issuing and delivering
in exchange therefore solely common shares of WLN's stock, par value $0.001,
in the aggregate of 6,000,000 shares, of the then issued and outstanding
shares of WLN subject to the provisions of this Plan. Subsequent to the date
hereof, the Shareholders shall, upon the surrender of the Whole Living
certificates representing their respective beneficial and record ownership one
hundred percent (100%) of the issued and outstanding shares of Whole Living to
WLN, as soon as practicable hereafter, the Shareholders shall be entitled to
receive a certificate(s) evidencing shares of the exchanged WLN stock as
provided for herein. Upon the consummation of the transaction contemplated
herein, WLN shall merge with Whole Living and become the surviving
corporation.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of WLN shares to be issued and delivered pursuant to this Plan shall be
appropriately adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in WLN common stock,
which may occur between the date of the execution of this Plan and the date of
the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to WLN at
the closing provided for in Section 2 (the "Closing") the shares of common
stock of Whole Living listed opposite their respective names on Exhibit A
hereto (the "Whole Living shares") in exchange for shares of the common stock
of WLN as outlined above in Section 1.1 hereof (the "WLN Stock"). All of such
shares of WLN stock shall be issued at the closing to the Shareholders, in the
numbers shown opposite their respective names in Exhibit "A." The transfer of
Whole Living shares by the Shareholders shall be effected by the delivery to
WLN at the Closing of certificates representing the transferred shares
endorsed in blank or accompanied by stock powers executed in blank, with all
signatures guaranteed by a national bank and with all necessary transfer taxes
and other revenue stamps affixed and acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as WLN may request in order to more
effectively sell, transfer and assign clear title and ownership in the Whole
Living shares to WLN.
Section 2
Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Daniel W. Jackson, Esq. on or before March 31, 1999 or at
such other time or place as may be mutually agreed upon in writing by the
parties. The Closing may also be accomplished by wire, express mail or other
courier service, conference telephone communications or as otherwise agreed by
the respective parties or their duly authorized representatives. In any
event, the closing of the transactions contemplated by this Plan shall be
effected as soon as practicable after all of the conditions contained herein
have been satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
2.3 Mediation Arbitration. If a dispute arises out of or relates to
this Plan, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation under the Commercial Mediation
Rules of the American Arbitration Association, before resorting to
arbitration. Thereafter, any unresolved controversy or claim arising out of
or relating this Plan, or breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the Award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
Section 3
Representations, Warranties and Covenants of WLN
WLN represents and warrants to, and covenants with, the Shareholders and
Whole Living as follows:
3.1 Corporate Status. WLN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. WLN has
full corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business on all material respects as it is now being conducted, and there is
no jurisdiction in which the character and location of the assets owned by it,
or the nature of the business transacted by it, requires qualification.
Included in the WLN schedules (defined below) are complete and correct copies
of its Articles of Incorporation and Bylaws as in effect on the date hereof.
The execution and delivery of this Plan does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of WLN's
Articles of Incorporation or Bylaws. WLN has taken all action required by
law, its Articles of Incorporation, its Bylaws, or otherwise, to authorize the
execution and delivery of this Plan.
3.2 Capitalization. The authorized capital stock of WLN as of the date
hereof consists of 20,000,000 common shares, par value $0.001. The common
shares of WLN issued and outstanding are fully paid, non-assessable shares.
There are no outstanding options, warrants, obligations convertible into
shares of stock, or calls or any understanding, agreements, commitments,
contracts or promises with respect to the issuance of WLN's common stock or
with regard to any options, warrants or other contractual rights to acquire
any of WLN's authorized but unissued common shares. As of the Closing, WLN
shall have not more than 10,000,000 shares issued and outstanding.
3.3 Financial Statements.
(a) WLN hereby warrants and covenants to Whole Living that the
audited financial statements dated March 31, 1998, fairly and accurately
represent the financial condition of WLN and that no material change has
occurred in the financial condition of WLN.
(b) WLN hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of WLN as submitted heretofore to
Whole Living for examination and review.
3.4 Conduct of Business. WLN will use its best efforts to maintain and
preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of Whole Living, enter
into any material commitments except in the ordinary course of business.
WLN will conduct itself in the following manner pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Articles of Incorporation or Bylaws of WLN.
(b) Capitalization, etc. WLN will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
3.5 Options, Warrants and Rights. WLN has no options, warrants or stock
appreciation rights related to the authorized but unissued WLN common stock.
There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued WLN common stock, except
options, warrants, calls, or commitments, if any, to which WLN is not a party
and by which it is not bound.
3.6 Title to Property. WLN has good and marketable title to all of its
properties and assets, real and personal, proprietary or otherwise, as will be
reflected in the balance sheets of WLN, and the properties and assets of WLN
are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise
disclosed in its financial statements.
3.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of WLN, threatened by or against or
effecting WLN at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
WLN does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, warrant, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
3.8 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, WLN and its present management will (i) give to the
Shareholders and Whole Living, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
Whole Living, or their duly authorized representatives, may inspect them; and
(ii) furnish such information concerning the properties and affairs of WLN as
the Shareholders and Whole Living, or their duly authorized representatives,
may reasonably request. Any such request to inspect WLN's books shall be
directed to WLN's counsel, Daniel W. Jackson, at the address set forth herein
under Section 10.4 Notices.
3.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), WLN and its representatives will keep confidential any information
which they obtain from the Shareholders or from Whole Living concerning its
properties, assets and the proposed business operations of Whole Living. If
the terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on March 31, 1999 or otherwise waived
or extended in writing to a date mutually agreeable to the parties hereto, WLN
will return to Whole Living all written matter with regard to Whole Living
obtained in connection with the negotiations or consummation of this Plan.
3.10 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or other
material agreements or instrument to which WLN was or is a party, or to which
any of its assets or operations are subject, and will not conflict with any
provision of the Articles of Incorporation or Bylaws of WLN.
3.11 Corporate Authority. WLN has full corporate power and authority to
enter into this Plan and to carry out its obligations hereunder and will
deliver to the Shareholders and Whole Living, or their respective
representatives, at the Closing, a certified copy of resolutions of its Board
of Directors authorizing execution of this Plan by its officers and
performance thereunder.
3.12 Consent of Shareholders. WLN hereby warrants and represents that
the Shareholders of WLN, being the owners of a majority of the issued and
outstanding stock of the Corporation consented in writing to the authorization
to execute this Agreement and Plan of Reorganization as between WLN and Whole
Living pursuant to a stock-for-stock transaction in which WLN would acquire
one hundred percent of the issued and outstanding shares of Whole Living in
exchange for the issuance of a total of 6,000,000 common shares of WLN and
thereby Whole Living shall merge with and into WLN.
3.13 Resignation of Directors. Upon the Closing, the current directors
of WLN shall submit their resignations.
3.14 Special Covenants and Representations Regarding the Exchanged WLN
Stock. The consummation of this Plan and the transactions herein contemplated
include the issuance of the exchanged WLN shares to the Shareholders, which
constitutes an offer and sale of securities under the Securities Act of 1933,
as amended, and applicable states' securities laws. Such transaction shall be
consummated in reliance on exemptions from the registration and prospectus
requirements of such statutes which depend interlace on the circumstances
under which the Shareholders acquire such securities. In connection with the
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, at the Closing, Shareholders shall cause
to be delivered to WLN a Letter(s) of Investment Intent in the form attached
hereto as Exhibit B and incorporated herein by reference.
3.15 Undisclosed or Contingent Liabilities. WLN hereby represents and
warrants that it has no undisclosed or contingent liabilities which have not
been disclosed to Whole Living in writing or in this Agreement or in any
Exhibit attached hereto.
3.16 Information. The information concerning WLN set forth in this
Plan, and the WLN schedules attached hereto, are complete and accurate in all
material respects and do not contain, or will not contain, when delivered, any
untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Whole Living in connection with this
Plan.
3.17 Title and Related Matters. WLN has good and marketable title to
all of its properties, interests in properties, and assets, real and personal,
which are reflected, or will be reflected, in the WLN balance sheets, free and
clear of any and all liens and encumbrances.
3.18 Contracts or Agreements. WLN is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
Whole Living in writing or in this Agreement or in any Exhibit attached
hereto.
3.19 Governmental Authorizations. WLN has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof.
3.20 Compliance with State and Federal Reporting Requirements. WLN is
not nor has it ever been subject to the reporting requirements of section
12(g) of the Securities Exchange Act of 1934 or 15(d) of the Securities Act of
1933 (15 U.S.C. 78m or 78o (d)) and is not an investment company registered
or required to be registered under the Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.). There is publicly available information concerning WLN
as specified in paragraph (a)(5)(i) to (xiv), inclusive, and paragraph
(a)(5)(xvi) of Rule 15c2-11 under the Securities Exchange Act of 1934.
3.21 Compliance with Laws and Regulations. WLN has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of WLN or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Whole Living.
3.22 Approval of Plan. The Board of Directors of WLN has authorized the
execution and delivery of this Plan by WLN and have approved the Plan and the
transactions contemplated hereby. WLN has full power, authority, and legal
right to enter into this Plan and to consummate the transactions contemplated
hereby.
3.23 Investment Intent. WLN is acquiring the Whole Living shares to be
transferred to it under this Plan for the purpose of merging with Whole Living
and not with a view to the sale or distribution thereof, and WLN shall cancel
the Whole Living shares upon the completion of the merger.
3.24 Unregistered Shares and Access to Information. WLN understands
that the offer and sale of the Whole Living shares have not been registered
with or reviewed by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or with or by any state securities law
administrator, and no federal, state securities law administrator has reviewed
or approved any disclosure or other material concerning Whole Living or the
Whole Living shares. WLN has been provided with and reviewed all information
concerning Whole Living, the Whole Living shares as it has considered
necessary or appropriate as a prudent and knowledgeable investor to enable it
to make an informed investment decision concerning the Whole Living shares.
WLN has made an investigation as to the merits and risks of its acquisition of
the Whole Living Shares and has had the opportunity to ask questions of, and
has received satisfactory answers from, the officers and directors of Whole
Living concerning Whole Living, the Whole Living shares and related matters,
and has had an opportunity to obtain additional information necessary to
verify the accuracy of such information and to evaluate the merits and risks
of the proposed acquisition of the Whole Living shares.
3.25 Obligations. WLN is not aware of any outstanding obligations to
any of its employees or consultants as of the Closing.
3.26 WLN Schedules. WLN has delivered to Whole Living the following
items listed below, hereafter referred to as the "WLN Schedules", which is
hereby incorporated by reference and made a part hereof. A certification
executed by a duly authorized officer of WLN on or about the date within the
Plan is executed to certify that the WLN Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Financial statements;
(c) Shareholder list;
(d) Resolution of Directors approving Plan;
(e) Officers' Certificate as required under Section 6.2 of the
Plan;
(f) Opinion of counsel as required under Section 6.4 of the Plan;
(g) Certificate of Good Standing;
(h) Consent of Shareholders approving Plan.
Section 4
Representations, Warranties and Covenants of Whole Living
Whole Living represents and warrants to, and covenants with, the
Shareholders and WLN as follows:
4.1 Corporate Status. Whole Living is a corporation duly organized,
validly existing and in good standing under the laws of the State of Utah
incorporated on April 10, 1997. Whole Living has full corporate power and is
duly authorized, qualified, franchised, and licensed under all applicable
laws, regulations, ordinances, and orders of public authorities to own all of
its properties and assets and to carry on its business on all material
respects as it is now being conducted, and there is no jurisdiction in which
the character and location of the assets owned by it, or the nature of the
business transacted by it, requires qualification. Included in the Whole
Living schedules (defined below) are complete and correct copies of its
Articles of Incorporation and Bylaws as in effect on the date hereof. The
execution and delivery of this Plan does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of Whole
Living's Articles of Incorporation or Bylaws. Whole Living has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of Whole Living as of
the date hereof consists of 100,000 common shares. As of the date hereof all
common shares of Whole Living issued and outstanding are fully paid, non-
assessable shares. There are no outstanding options, warrants, obligations
convertible into shares of stock, or calls or any understanding, agreements,
commitments, contracts or promises with respect to the issuance of Whole
Living's common stock or with regard to any options, warrants or other
contractual rights to acquire any of Whole Living's authorized but unissued
common shares.
4.3 Conduct of Business. Whole Living will use its best efforts to
maintain and preserve its business organization, employee relationships and
goodwill intact, and will not, without the prior written consent of WLN, enter
into any material commitments except in the ordinary course of business.
Whole Living agrees that Whole Living will conduct itself in the
following manner pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of Whole Living.
(b) Capitalization, etc. Whole Living will not make any change in
its authorized or issued shares of any class, declare or pay any dividend or
other distribution, or issue, encumber, purchase or otherwise acquire any of
its shares of any class.
4.4 Title to Property. Whole Living has good and marketable title to
all of its properties and assets, real and personal, proprietary or otherwise,
as will be reflected in the balance sheets of Whole Living, and the properties
and assets of Whole Living are subject to no mortgage, pledge, lien or
encumbrance, unless as otherwise disclosed in its financial statements.
4.5 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Whole Living, threatened by or against
or effecting Whole Living at law or in equity, or before any governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of
any kind; Whole Living does not have any knowledge of any default on its part
with respect to any judgment, order, writ, injunction, decree, warrant, rule,
or regulation of any court, arbitrator, or governmental agency or
instrumentality.
4.6 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Whole Living and its present management will (i)
give to WLN, or their duly authorized representatives, full access, during
normal business hours, to all of its books, records, contracts and other
corporate documents and properties so that WLN, or their duly authorized
representatives, may inspect them; and (ii) furnish such information
concerning the properties and affairs of Whole Living as the Shareholders and
Whole Living, or their duly authorized representatives, may reasonably
request. Any such request to inspect Whole Living's books shall be directed
to Whole Living's representative, at the address set forth herein under
Section 10.4 Notices.
4.7 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Whole Living and its representatives will keep confidential any
information which they obtain from the Shareholders or from Whole Living
concerning its properties, assets and the proposed business operations of
Whole Living. If the terms and conditions of this Plan imposed on the parties
hereto are not consummated on or before 5:00 p.m. MST on March 31, 1999 or
otherwise waived or extended in writing to a date mutually agreeable to the
parties hereto, Whole Living will return to WLN all written matter with regard
to WLN obtained in connection with the negotiations or consummation of this
Plan.
4.8 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of WLN to be
delivered to them under this Plan for investment purposes and not with a view
to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to WLN
on the date of Closing or no later than the date on which the restricted
shares are issued and delivered to the Shareholders, their assigns, or
designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.9 Unregistered Shares and Access to Information. Whole Living and the
Shareholders understand that the offer and sale of WLN shares to be exchanged
for the Whole Living shares have not been registered with or reviewed by the
securities and Exchange Commission under the Securities Act of 1933, as
amended, or with or by any state securities law administrator, and no federal
or state securities law administrator has reviewed or approved any disclosure
or other material facts concerning WLN or WLN stock. Whole Living and the
Shareholders have been provided with and reviewed all information concerning
WLN and WLN shares, to be exchanged for the Whole Living shares as they have
considered necessary or appropriate as prudent and knowledgeable investors to
enable them to make informed investment decisions concerning the WLN shares,
to be exchanged for the Whole Living shares. Whole Living and the
Shareholders have made an investigation as to the merits and risks of their
acquisition of the WLN shares, to be exchanged for the Whole Living shares and
have had the opportunity to ask questions of, and have received satisfactory
answers from, the officers and directors of WLN concerning WLN shares to be
exchanged for the Whole Living shares and related matters, and have had an
opportunity to obtain additional information necessary to verify the accuracy
of such information and to evaluate the merits and risks of the proposed
acquisition of the WLN shares to be exchanged for the Whole Living shares.
4.10 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of Whole Living of whatever class or series,
which the Shareholders have contracted to exchange.
4.11 Contracts.
(a) Set forth in the Whole Living Schedules are copies or
descriptions of all material contracts which written or oral, all agreements,
franchises, licenses, or other commitments to which Whole Living is a party or
by which Whole Living or its properties are bound.
(b) Except as may be set forth in the Whole Living Schedules, Whole
Living is not a party to any contract, agreement, corporate restriction, or
subject to any judgment, order, writ, injunction, decree, or award, which
materially and adversely effect the business, operations, properties, assets,
or conditions of Whole Living.
(c) Except as set forth in the Whole Living Schedules, Whole Living
is not a party to any material oral or written (i) contract for employment of
any officer which is not terminable on 30 days (or less) notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance, or any other
retirement plan of arrangement covered by Title IV of the Employee Retirement
Income Security Act, as amended, or otherwise covered; (iii) agreement
providing for the sale, assignment or transfer of any of its rights, assets or
properties, whether tangible or intangible, except sales of its property in
the ordinary course of business with a value of less than $2,000; or (iv)
waiver of any right of any value which in the aggregate is extraordinary or
material concerning the assets or properties scheduled by Whole Living, except
for adequate value and pursuant to contract. Whole Living has not entered
into any material transaction which is not listed in the Whole Living
Schedules or reflected in the Whole Living financial statements.
4.12 Material Contract Defaults. Whole Living is not in default in any
material respect under the terms of any contract, agreement, lease or other
commitment which is material to the business, operations, properties or
assets, or condition of Whole Living, and there is no event of default or
event which, with notice of lapse of time or both, would constitute a default
in any material respect under any such contract, agreement, lease, or other
commitment in respect of which Whole Living has not taken adequate steps to
prevent such default from occurring, or otherwise compromised, reached a
satisfaction of, or provided for extensions of time in which to perform under
any one or more contract obligations, among others.
4.13 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Whole Living was or is a party, or
to which any of its assets or operations are subject, and will not conflict
with any provision of the Articles of Incorporation or Bylaws of Whole Living.
4.14 Governmental Authorizations. Whole Living is in good standing in
the State of Utah. Except for compliance with federal and state securities
laws, no authorization, approval, consent or order of, or registration,
declaration, or filing with, any court or other governmental body is required
in connection with the execution and delivery by Whole Living of this Plan and
the consummation by Whole Living of the transactions contemplated hereby.
4.15 Compliance with Laws and Regulations. Whole Living has complied
with all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Whole Living or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to WLN.
4.16 Approval of Plan. The Board of Directors of Whole Living have
authorized the execution and delivery of this Plan by Whole Living and have
approved the Plan and the transactions contemplated hereby. Whole Living has
full power, authority, and legal right to enter into this Plan and to
consummate the transactions contemplated hereby.
4.17 Information. The information concerning Whole Living set forth in
this Plan, and the Whole Living Schedules attached hereto, are complete and
accurate in all material respects and do not contain, or will not contain,
when delivered, any untrue statement or a material fact or omit to state a
material fact the omission of which would be misleading to WLN in connection
with this Plan.
4.18 Whole Living Schedules. Whole Living has delivered to WLN the
following items listed below, hereafter referred to as the "Whole Living
Schedules", which is hereby incorporated by reference and made a part hereof.
A certification executed by a duly authorized officer of Whole Living on or
about the date within the Plan is executed to certify that the Whole Living
Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Financial Statements;
(c) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(d) Resolutions of Board of Directors approving Plan;
(e) Consent of Shareholders approving Plan;
(f) A list of key employees, including current compensation,
with notation as to job description and whether or not such employee is
subject to written contract, and if subject to a contract or employment
agreement, a copy of the same;
(g) A schedule showing the name and location of each bank or
other institution with which Whole Living has an account and the names of the
authorized persons to draw thereon or having access thereto;
(h) A schedule setting forth all material contracts;
(i) Officers' Certificate as required by Section 7.2 of the
Plan;
(j) Schedule of all debts, mortgages, security interests,
pledges, liens, encumbrances, claims and the like;
(k) Certificate of Good Standing.
Section 5
Special Covenants
5.1 Whole Living Information Incorporated in WLN's Reports. Whole
Living represents and warrants to WLN that all the information furnished under
this Plan shall be true and correct in all material respects and that there is
no omission of any material fact required to make the information stated not
misleading. Whole Living agrees to indemnify and hold WLN harmless, including
each of its Directors and Officers, and each person, if any, who controls such
party, under any applicable law from and against any and all losses, claims,
damages, expenses or liabilities to which any of them may become subject under
applicable law, or reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
actions, whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement, alleged untrue statement, or omission of a material fact
contained in such information delivered hereunder.
5.2 WLN Information Incorporated in Whole Living's Reports. WLN
represents and warrants to Whole Living that all the information furnished
under this Plan shall be true and correct in all material respects and that
there is no omission of any material fact required to make the information
stated not misleading. The current officers and directors of WLN agree to
indemnify and hold Whole Living harmless, including each of its Directors and
Officers, and each person, if any, who controls such party, under any
applicable law from and against any and all losses, claims, damages, expenses
or liabilities to which any of them may become subject under applicable law,
or reimburse them for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such actions, whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based on any untrue statement,
alleged untrue statement, or omission of a material fact contained in such
information delivered hereunder.
5.3 Special Covenants and Representations Regarding the Exchanged WLN
Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the WLN shares in exchange for one
hundred percent (100%) of the issued and outstanding shares of Whole Living to
the Shareholders constitutes the offer and sale of securities under the
Securities Act and the applicable state statutes, which depend, inter alia, on
the circumstances under which the Shareholders acquire such securities. WLN
intends to rely on the exemption of the registration provision of Section 5 of
the Securities Act as provided for under Section 4.2 of the Securities Act of
1933, which states "transactions not involving a public offering", among
others. Each Shareholder upon submission of his Whole Living shares and the
receipt of the WLN shares exchanged therefor, shall execute and deliver to WLN
a letter of investment intent to indicate, among other representations, that
the Shareholder is exchanging the Whole Living shares for WLN shares for
investment purposes and not with a view to the subsequent distribution
thereof. A proposed Investment Letter is attached hereto as Exhibit B and
incorporated herein by reference for the general use by the Shareholders, as
they may determine.
5.4 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) Whole Living and WLN will (i) perform all of its obligations
under material contracts, leases, insurance policies and/or documents relating
to its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither Whole Living nor WLN will (i) make any change in its
Articles of Incorporation or Bylaws except and unless as contemplated pursuant
to Section 3 of this Plan; (ii) enter into or amend any contract, agreement,
or other instrument of the types described in the parties' schedules, except
that a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $10,000.
Section 6
Conditions Precedent to Obligations of
Whole Living and the Shareholders
All obligations of Whole Living and the Shareholders under this Plan are
subject to the satisfaction, on or before the Closing date, except as
otherwise provided for herein, or waived or extended in writing by the parties
hereto, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by WLN in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, WLN shall have performed and complied with all
aspects of this Agreement, unless waived or extended in writing by the parties
hereto. Whole Living shall have been furnished with a certificate, signed by
a duly authorized executive officer of WLN and dated the Closing date, to the
foregoing effect.
6.2 Officers' Certificate. Whole Living and the Shareholders shall have
been furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of WLN, to the effect that no litigation,
proceeding, investigation, claim, demand or inquiry is pending, or to the best
knowledge of WLN, threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Plan, or
which might result in any material adverse change in the assets, properties,
business, or operations of WLN, and that this Agreement has been complied with
in all material respects.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the financial condition,
business or operations of WLN, nor shall any event have occurred which, with
lapse of time or the giving of notice or both, may cause or create any
material adverse change in the financial condition, business or operations of
WLN, except as otherwise disclosed to Whole Living.
6.4 Opinion of Counsel of WLN. WLN shall furnish to Whole Living and
the Shareholders an opinion dated as of the Closing date and in form and
substance satisfactory to Whole Living and the Shareholders to the effect
that:
(a) WLN is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of WLN, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of Whole Living, does not require it to register it to do business as a
foreign corporation on any jurisdiction other than under the jurisdiction of
its Articles of Incorporation or Bylaws and WLN has complied to the best of
its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, and Secretary of State for the State of Nevada, all
statements and reports required to be filed.
(c) The authorized and outstanding capital stock of WLN as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against WLN of any court or before or by any
governmental body which might materially effect the business of WLN or the
financial condition of WLN as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against WLN.
(e) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of WLN, or any
contract, agreement, indenture, mortgage, or order by which WLN is bound.
(f) This Plan constitutes a legal, valid and binding obligation of
WLN enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(g) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been ratified by a majority of the
Shareholders of WLN and have been duly authorized by its Board of Directors.
(h) WLN has not, nor will it undertake any action, the result of
which would endanger the tax-free nature of the Plan.
6.5 Good Standing. Whole Living shall have received a Certificate of
Good Standing from the State of Nevada, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that WLN is in good standing as a corporation in the State
of Nevada.
6.6 Other Items. Whole Living and the Shareholders shall have received
such further documents, certifications or instruments relating to the
transactions contemplated hereby as Whole Living and the Shareholders may
reasonably request.
Section 7
Conditions Precedent to Obligations of WLN
All obligations of WLN under this Plan are subject, at its option, to the
fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by Whole Living and the Shareholders under this Plan were true when made
and shall be true as of the Closing date (except for changes therein permitted
by this Plan) with the same force and effect as if such representations and
warranties were made at and as of the Closing date; and, WLN shall have
performed and complied with all aspects of this Agreement, unless waived or
extended in writing by the parties hereto. WLN shall have been furnished with
a certificate, signed by a duly authorized executive officer of Whole Living
and dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. WLN shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of Whole Living, to the effect that no litigation, proceeding,
investigation, claim, deed, or inquiry is pending, or to the best knowledge of
Whole Living, threatened, which might result in an action to enjoin or prevent
the consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of Whole Living, and that this Agreement has been complied with in
all material respects.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the financial condition,
business or operations of WLN, nor shall any event have occurred which, with
lapse of time or the giving of notice or both, may cause or create any
material adverse change in the financial condition, business or operations of
Whole Living, except as otherwise disclosed to WLN.
7.4 Good Standing. WLN shall have received a Certificate of Good
Standing from the State of Utah, dated within sixty (60) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Whole Living is in good standing as a corporation in
the State of Utah.
7.5 Dissenters' Rights Waived. Shareholders representing at one hundred
percent (100%) of the issued and outstanding shares of Whole Living, and each
of them, have agreed and hereby waive any dissenters' rights, if any, under
the laws of the State of Utah in regards to any objection to this Plan as
outlined herein and otherwise consent to and agree and authorize the execution
and consummation of the within Plan in accordance to the terms and conditions
of this Plan by the management of Whole Living.
7.6 Other Items. WLN shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as WLN may reasonably request.
7.7 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit B to WLN.
Section 8
Termination
8.1 Termination by Whole Living or the Shareholders. This Plan may be
terminated at any time prior to the Closing date by action of Whole Living or
the Shareholders, if WLN shall fail to comply in any material respect with any
of the covenants or agreements contained in this Plan, or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 Termination by WLN. This Plan may be terminated at any time prior
to the Closing date by action of WLN if Whole Living shall fail to comply in
any material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of WLN, expressed by action of its Board of Directors,
Whole Living or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint Richard Hill,
as their agent and attorney in fact (the "Shareholders' Representative") with
full power and authority until the Closing to execute, deliver and receive on
their behalf all notices, requests and other communications hereunder; to fix
and alter on their behalf the date, time and place of the Closing; to waive,
amend or modify any provisions of this Plan and to take such other action on
their behalf in connection with this Plan, the Closing and the transactions
contemplated hereby as such agent deems appropriate; provided, however, that
no such waiver, amendment or modification may be made if it would decrease the
number of shares to be issued to the Shareholders under Section 1 hereof or
increase the extent of their obligation to WLN hereunder, unless agreed in
writing by the Shareholders.
Section 10
General Provisions
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Payments of Costs and Fees. WLN and Whole Living shall each bear
their own costs and expenses, including any legal and accounting fees in
connection with the negotiation, execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, Whole Living and the
Shareholders shall cause to have promptly prepared and disseminated a Whole
Living release concerning the execution and consummation of the Plan, such
press release and communication to be released promptly and within the time
required by the laws, rules and regulations as promulgated by the United
States Securities and Exchange Commission, and concomitant therewith to cause
to be prepared a full and complete letter to WLN's shareholders which shall
contain information required by Regulation 240.14f-1 as promulgated under
Section 14(f) as mandated under the Securities and Exchange Act of 1934, as
amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to Whole Living, Inc. of Nevada: Whole Living, Inc.
525 South 300 East
Salt Lake City, Utah 84111
With a copy to: Daniel W. Jackson
525 South 300 East
Salt Lake City, Utah 84111
If to Whole Living: Whole Living, Inc.
741 North SR 198
Salem, Utah 84653
With a copy to: Richard Hill
3319 North University Ave.
Provo, Utah
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between WLN, Whole
Living and the Shareholders with respect to the subject matter hereof, all of
which are hereby merged into this Plan, which alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
Excepting the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Nevada, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. Whole
Living and WLN acknowledge, however, that each are being represented by their
own tax advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
WHOLE LIVING, INC., a Nevada corporation
Attest:
/s/ John W. Peters By: /s/ Anita Patterson
- ------------------ --------------------
Its President
WHOLE LIVING, INC., a Utah corporation
Attest:
/s/ Bill Turnbull By: /s/ Ron Williams
- ----------------- ----------------
Its President
SHAREHOLDERS:
Attest:
/s/ Ron Williams By: /s/ Bill Turnbull
- ---------------- -----------------
Bill Turnbull
Attest:
/s/ Bill Turnbull By: /s/ Bruno Vassell III
- ----------------- ---------------------
Bruno Vassel III
Attest:
/s/ Bill Turnbull By: /s/ Ron Williams
- ----------------- ----------------
Ron Williams
<Stamp dated March 18, 1999
for the Secretary of State for
the Sate of Nevada appears here>
ARTICLES OF INCORPORATION
OF
WHOLE LIVING, INC.
The undersigned, natural person of eighteen years or more of age, acting
as incorporator of a Corporation (the "Corporation") under the Nevada Revised
Statutes, adopts the following Articles of Incorporation for the Corporation:
ARTICLE I
NAME OF CORPORATION
The name of the Corporation is Whole Living, Inc.
ARTICLE II
SHARES
The amount of the total authorized capital stock of the Corporation is
20,000,000 shares of common stock, par value $.001 per share. Each share of
common stock shall have one (1) vote. Such stock may be issued from time to
time without any action by the stockholders for such consideration as may be
fixed from time to time by the Board of Directors, and shares so issued, the
full consideration for which has been paid or delivered, shall be deemed the
full paid up stock, and the holder of such shares shall not be liable for any
further payment thereof. Said stock shall not be subject to assessment to pay
the debts of the Corporation, and no paid-up stock and no stock issued as
fully paid, shall ever be assessed or assessable by the Corporation.
The Corporation is authorized to issue 20,000,000 shares of common stock,
par value $.001 per share.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the Corporation is 1495
Ridgeview Dr., Suite 220, Reno, Nevada 89509 and the name of its initial
registered agent at such address is Michael J. Morrison.
ARTICLE IV
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
Anita Patterson 525 South 300 East
Salt Lake City, Utah 84111
ARTICLE V
DIRECTORS
The members of the governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the bylaws of the
Corporation, provided that the number of directors shall not be reduced to
less than one (1). The name and post office address of the first board of
directors, which shall be three in number, are as follows:
NAME ADDRESS
Anita Patterson 525 South 300 East
Salt Lake City, Utah 84111
April Marino 525 South 300 East
Salt Lake City, Utah 84111
John Peters 525 South 300 East
Salt Lake City, Utah 84111
ARTICLE VI
GENERAL
A. The board of directors shall have the power and authority to make and
alter, or amend, the bylaws, to fix the amount in cash or otherwise, to be
reserved as working capital, and to authorize and cause to be executed the
mortgages and liens upon the property and franchises of the Corporation.
B. The board of directors shall, from time to time, determine whether,
and to what extent, and at which times and places, and under what conditions
and regulations, the accounts and books of this Corporation, or any of them,
shall be open to the inspection of the stockholders; and no stockholder shall
have the right to inspect any account, book or document of this Corporation
except as conferred by the Statutes of Nevada, or authorized by the directors
or any resolution of the stockholders.
C. No sale, conveyance, transfer, exchange or other disposition of all
or substantially all of the property and assets of this Corporation shall be
made unless approved by the vote or written consent of the stockholders
entitled to exercise two-thirds (2/3) of the voting power of the Corporation.
D. The stockholders and directors shall have the power to hold their
meetings, and keep the books, documents and papers of the Corporation outside
of the State of Nevada, and at such place as may from time to time be
designated by the bylaws or by resolution of the board of directors or
stockholders, except as otherwise required by the laws of the State of Nevada.
E. The Corporation shall indemnify each present and future officer and
director of the Corporation and each person who serves at the request of the
Corporation as an officer or director of the Corporation, whether or not such
person is also an officer or director of the Corporation, against all costs,
expenses and liabilities, including the amounts of judgments, amounts paid in
compromise settlements and amounts paid for services of counsel and other
related expenses, which may be incurred by or imposed on him in connection
with any claim, action, suit, proceeding, investigation or inquiry hereafter
made, instituted or threatened in which he may be involved as a party or
otherwise by reason of any past or future action taken or authorized and
approved by him or any omission to act as such officer or director, at the
time of the incurring or imposition of such costs, expenses, or liabilities,
except such costs, expenses or liabilities as shall relate to matters as to
which he shall in such action, suit or proceeding, be finally adjudged to be
liable by reason of his negligence or willful misconduct toward the
Corporation or such other Corporation in the performance of his duties as such
officer or director, as to whether or not a director or officer was liable by
reason of his negligence or willful misconduct toward the Corporation or such
other Corporation in the performance of his duties as such officer or
director, in the absence of such final adjudication of the existence of such
liability, the board of directors and each officer and director may
conclusively rely upon an opinion of legal counsel selected by or in the
manner designed by the board of directors. The foregoing right of
indemnification shall not be exclusive of other rights to which any such
officer or director may be entitled as a matter of law or otherwise, and shall
inure to the benefit of the heirs, executors, administrators and assigns of
each officer or director.
The undersigned incorporator executed these Articles of Incorporation,
certifying that the facts herein stated are true this 15th day of March, 1999.
/s/ Anita Patterson
- -------------------
ANITA PATTERSON
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On this 15th day of March, 1999, personally appeared before me Anita
Patterson, personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is signed on the preceding document, and
acknowledged to me that she signed it voluntarily for its stated purpose.
/s/ John Clayton
- ----------------
NOTARY PUBLIC
<Notary Stamp appears here>
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
In the matter of Whole Living, Inc., I Michael J. Morrison, with
address at 1495 Ridgeview Drive, Suite 220, Reno, Nevada 89509, hereby accept
the appointment as Resident Agent of Frontier Industries, Inc. in accordance
with N.R.S. 78.090.
IN WITNESS WHEREOF, I hereunto set my hand this 16th day of March,
1999.
By: /s/ Michael J. Morrison
-----------------------
Michael J. Morrison, Resident Agent
Exhibit 3.2
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 19 1999
No. C6530-99
/s/ Dean Heller
Dean Heller, Secretary of State
ARTICLES OF MERGER FOR
WHOLE LIVING, INC.,
A NEVADA CORPORATION
Pursuant to the provisions of Section 92A.200 of the Nevada
Revised Statutes, Whole Living, Inc., a Nevada corporation (the
"Corporation"), hereby adopts and files the following Articles of Merger as
the surviving corporation to the merger of Brick Tower Corporation, an Idaho
corporation ("Brick Tower"), with and into the Corporation:
FIRST: The name and place of incorporation of each corporation
which is a party to this merger is as follows:
Name Place of Incorporation
---- ----------------------
Brick Tower Corporation Idaho
Whole Living, Inc. Nevada
SECOND: The Agreement and Plan of Merger (the "Plan") governing
the merger between the Corporation and Brick Tower, has been adopted by the
Board of Directors of the Corporation and Brick Tower.
THIRD: The approval of the shareholders of the Corporation and
Brick Tower was required to effectuate the merger. The number of shares of
stock outstanding in each of the corporations (and the number of votes
entitled to be cast) as of the date of the adoption of the Plan was as
follows:
Entity Type of Shares Number of Shares Outstanding
- ------ -------------- ----------------------------
Brick Tower Corporation Common 17,000,000
Whole Living, Inc. Common 200
The number of shares of stock of each corporation which voted for
and against the Plan was as follows:
Entity Type of Shares For Against
- ------ -------------- --- -------
Brick Tower Corporation Common 15,000,000 0
Whole Living, Inc. Common 200 0
<PAGE>
FOURTH: The number of votes cast for the Plan by each voting
group entitled to vote was sufficient for approval of the merger by each such
voting group.
FIFTH: Following the merger Article II to the Articles of
Incorporation of the surviving corporation shall be amended as follows:
Delete Article II in its entirety and substitute in its place the
following:
ARTICLE II
The amount of the total authorized capital stock of the
Corporation is 50,000,000 shares of common stock, par value $.001 per share.
Each share of common stock shall have one (1) vote. Such stock may be issued
from time to time without any action by the stockholders for such
consideration as may be fixed from time to time by the Board of Directors, and
shares so issued, the full consideration for which has been paid or delivered,
shall be deemed the full paid up stock, and the holder of such shares shall
not be liable for any further payment thereof. Said stock shall not be
subject to assessment to pay the debts of the Corporation, and no paid-up
stock and no stock issued as fully paid, shall ever be assessed or assessable
by the Corporation.
The Corporation is authorized to issue 50,000,000 shares of
common stock, par value $.001 per share.
SIXTH: The complete executed Plan is on file at the registered
office or other place of business of the Corporation.
SEVENTH: A copy of the Plan will be furnished by the Corporation,
on request and without cost, to any shareholder of either corporation which is
a party to the merger.
EIGHTH: The merger will be effective upon the filing of the
Articles of Merger.
DATED this 16th day of March, 1999.
WHOLE LIVING, INC., a Nevada corporation
/s/ Anita Patterson
By_______________________________________
Anita Patterson, President
/s/ April Marino
By _______________________________________
April Marino, Secretary/Treasurer
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 16th day of March, 1999, personally appeared before me
Anita Patterson and April Marino personally known to me or proved to me on the
basis of satisfactory evidence, and who, being by me duly sworn, did say that
they are the President and Secretary/Treasurer of Whole Living, Inc., and that
said document was signed by them on behalf of said corporation by authority of
its bylaws, and said Anita Patterson and April Marino acknowledged to me that
said corporation executed the same.
/s/ John S. Clayton
___________________________________________
NOTARY PUBLIC
<Notary stamp of
John S. Clayton
appears here. Expires
November 25, 2001
State of Utah>
Exhibit 3.3
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 24 1999
No. C6530-99
/s/ Dean Heller
Dean Heller, Secretary of State
ARTICLES OF MERGER FOR
WHOLE LIVING, INC.,
A NEVADA CORPORATION
Pursuant to the provisions of Section 92A.200 of the Nevada
Revised Statutes, Whole Living, Inc., a Nevada corporation (the
"Corporation"), hereby adopts and files the following Articles of Merger as
the surviving corporation to the merger of Whole Living, Inc., a Utah
corporation ("Whole Living Utah"), with and into the Corporation:
FIRST: The name and place of incorporation of each corporation
which is a party to this merger is as follows:
Name Place of Incorporation
----- ----------------------
Whole Living, Inc. Utah
Whole Living, Inc. Nevada
SECOND: The Agreement and Plan of Merger (the "Plan") governing
the merger between the Corporation and Whole Living Utah, has been adopted by
the Board of Directors of the Corporation and Whole Living Utah.
THIRD: The approval of the shareholders of the Corporation and
Whole Living Utah was required to effectuate the merger. The number of shares
of stock outstanding in each of the corporations (and the number of votes
entitled to be cast) as of the date of the adoption of the Plan was as
follows:
Entity Type of Shares Number of Shares Outstanding
- ------ -------------- ----------------------------
Whole Living, Inc. Nevada Common 17,000,000
Whole Living, Inc. Utah Common 11,100
The number of shares of stock of each corporation which voted for
and against the Plan was as follows:
Entity Type of Shares For Against
- ------- -------------- ---- -------
Whole Living, Inc. Nevada Common 15,000,000 0
Whole Living, Inc. Utah Common 11,100 0
FOURTH: The number of votes cast for the Plan by each voting
group entitled to vote was sufficient for approval of the merger by each such
voting group.
<PAGE>
FIFTH: Following the merger there are no changes to the
Corporation's Articles of Incorporation.
SIXTH: The complete executed Plan is on file at the registered
office or other place of business of the Corporation.
SEVENTH: A copy of the Plan will be furnished by the Corporation,
on request and without cost, to any shareholder of either corporation which is
a party to the merger.
EIGHTH: The merger will be effective upon the filing of the
Articles of Merger.
DATED this 30th day of March, 1999.
WHOLE LIVING, INC., a Nevada corporation
/s/ John Peters
By_______________________________________
John Peters, President
/s/ Anita Patterson
By _______________________________________
Anita Patterson, Secretary/Treasurer
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 30th day of March, 1999, personally appeared before me John
Peters and Anita Patterson personally known to me or proved to me on the basis
of satisfactory evidence, and who, being by me duly sworn, did say that they
are the President and Secretary/Treasurer of Whole Living, Inc., and that said
document was signed by them on behalf of said corporation by authority of its
bylaws, and said John Peters and Anita Patterson acknowledged to me that said
corporation executed the same.
/s/ M. Jeanne Ball
___________________________________________
NOTARY PUBLIC
<Notary Stamp of
M. Jeanne Ball
appears here. Expires
February 4, 2003
State of Utah>
Exhibit 3.4
BYLAWS
OF
WHOLE LIVING, INC.
ARTICLE 1. OFFICES
1.1 Business Office. The principal office of the corporation shall be
located at any place either within or outside the State of Nevada as
designated in the corporation's most recent document on file with the Nevada
Secretary of State, Division of Corporations. The corporation may have such
other offices, either within or without the State of Nevada as the board of
directors may designate or as the business of the corporation may require from
time to time.
1.2 Registered Office. The registered office of the corporation shall
be located within the State of Nevada and may be, but need not be, identical
with the principal office. The address of the registered office may be
changed from time to time.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Shareholder Meeting. The annual meeting of the shareholders
shall be held on the 15th day of March in each year, beginning with the year
1999 at the hour of 2:00 p.m., or at such other time on such other day within
such month as shall be fixed by the board of directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Nevada, such meeting shall be held on the next
succeeding business day.
2.2 Special Shareholder Meeting. Special meetings of the shareholders,
for any purpose or purposes described in the meeting notice, may be called by
the president, or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-fourth of all
outstanding votes of the corporation entitled to be cast on any issue at the
meeting.
2.3 Place of Shareholder Meeting. The board of directors may designate
any place, either within or without the State of Nevada, as the place of
meeting for any annual or any special meeting of the shareholders, unless by
written consent, which may be in the form of waivers of notice or otherwise,
all shareholders entitled to vote at the meeting designate a different place,
either within or without the State of Nevada, as the place for the holding of
such meeting. If no designation is made by either the directors or unanimous
action of the voting shareholders, the place of meeting shall be at 525 South
300 East, Salt Lake City, Utah 84111.
<PAGE>
2.4 Notice of Shareholder Meeting. Written notice stating the date,
time, and place of any annual or special shareholder meeting shall be
delivered not less than 10 nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, the board of directors, or other persons calling the meeting, to
each shareholder of record entitled to vote at such meeting and to any other
shareholder entitled by the Nevada Revised Statutes (the "Statutes") or the
articles of incorporation to receive notice of the meeting. Notice shall be
deemed to be effective at the earlier of: (1) when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid; (2) on
the date shown on the return receipt if sent by registered or certified mail,
return receipt requested, and the receipt is signed by or on behalf of the
addressee; (3) when received; or (4) 3 days after deposit in the United States
mail, if mailed postpaid and correctly addressed to an address other than that
shown in the corporation's current record of shareholders.
If any shareholder meeting is adjourned to a different date, time or
place, notice need not be given of the new date, time and place, if the new
date, time and place is announced at the meeting before adjournment. But if
the adjournment is for more than 30 days or if a new record date for the
adjourned meeting is or must be fixed, then notice must be given pursuant to
the requirements of the previous paragraph, to those persons who are
shareholders as of the new record date.
2.5 Waiver of Notice. A shareholder may waive any notice required by
the Statutes, the articles of incorporation, or these bylaws, by a writing
signed by the shareholder entitled to the notice, which is delivered to the
corporation (either before or after the date and time stated in the notice)
for inclusion in the minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
(a) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting because of lack of
notice or effective notice; and
(b) waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when
it is presented.
2.6 Fixing of Record Date. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive payment of any distribution,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors may fix in advance a date as the record date.
Such record date shall not be more than 70 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is so fixed by the board for the determination of
shareholders entitled to notice of, or to vote at a meeting of shareholders,
the record date for determination of such shareholders shall be at the
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close of business on the day the first notice is delivered to shareholders.
If no record date is fixed by the board for the determination of shareholders
entitled to receive a distribution, the record date shall be the date the
board authorizes the distribution. With respect to actions taken in writing
without a meeting, the record date shall be the date the first shareholder
signs the consent.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof unless the board of directors fixes a
new record date which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
2.7 Shareholder List. After fixing a record date for a shareholder
meeting, the corporation shall prepare a list of the names of its shareholders
entitled to be given notice of the meeting. The shareholder list must be
available for inspection by any shareholder, beginning on the earlier of 10
days before the meeting for which the list was prepared or 2 business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, and any adjournment thereof. The list shall
be available at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting is to be held.
2.8 Shareholder Quorum and Voting Requirements.
2.8.1 Quorum. Except as otherwise required by the Statutes or
the articles of incorporation, a majority of the outstanding shares of the
corporation, represented by person or by proxy, shall constitute a quorum at
each meeting of the shareholders. If a quorum exists, action on a matter,
other than the election of directors, is approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless the articles of
incorporation or the Statutes require a greater number of affirmative votes.
2.8.2 Voting of Shares. Unless otherwise provided in the
articles of incorporation or these bylaws, each outstanding share, regardless
of class, is entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
2.9 Quorum and Voting requirements of Voting Groups. If the articles
of incorporation or the Statutes provide for voting by a single voting group
on a matter, action on that matter is taken when voted upon by that voting
group.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Statutes provide
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
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If the articles of incorporation or the Statutes provide for voting by
two or more voting groups on a matter, action on that matter is taken only
when voted upon by each of those voting groups counted separately. Action may
be taken by one voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter.
If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless
the articles of incorporation or the Statutes require a greater number of
affirmative votes.
2.10 Greater Quorum or Voting Requirements. The articles of
incorporation may provide for a greater quorum or voting requirement for
shareholders, or voting groups of shareholders, than is provided for by these
bylaws. An amendment to the articles of incorporation that adds, changes, or
deletes a greater quorum or voting requirement for shareholders must meet the
same quorum requirement and be adopted by the same vote and voting groups
required to take action under the quorum and voting requirement then in effect
or proposed to be adopted, whichever is greater.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy which is executed in writing by the shareholder or which
is executed by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the corporation or other person authorized to
tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in
the proxy. All proxies are revocable unless they meet specific requirements
of irrevocability set forth in the Statutes. The death or incapacity of a
voter does not invalidate a proxy unless the corporation is put on notice. A
transferee for value who receives shares subject to an irrevocable proxy, can
revoke the proxy if he had no notice of the proxy.
2.12 Corporation's Acceptance of Votes.
2.12.1 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation corresponds to the name of a
shareholder, the corporation, if acting in good faith, is entitled to accept
the vote, consent, waiver, proxy appointment, or proxy appointment revocation
and give it effect as the act of the shareholder.
2.12.2 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation does not correspond to the name
of a shareholder, the corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver, proxy appointment, or proxy
appointment revocation and give it effect as the act of the shareholder if:
(a) the shareholder is an entity as defined in the Statutes and
the name signed purports to be that of an officer or agent of the entity;
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(b) the name signed purports to be that of an administrator,
executor, guardian, or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(c) the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment, or proxy appointment revocation;
or
(d) the name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority
to sign for the shareholder has been presented with respect to the vote,
consent, waiver, proxy appointment or proxy appointment revocation; or
(e) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all co-
tenants or fiduciaries.
2.12.3 If shares are registered in the names of two or more
persons, whether fiduciaries, members of a partnership, co-tenants, husband
and wife as community property, voting trustees, persons entitled to vote
under a shareholder voting agreement or otherwise, or if two or more persons
(including proxy holders) have the same fiduciary relationship respecting the
same shares, unless the secretary of the corporation or other officer or agent
entitled to tabulate votes is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating
the relationship wherein it is so provided, their acts with respect to voting
shall have the following effect:
(a) if only one votes, such act binds all;
(b) if more than one votes, the act of the majority so voting
bind all;
(c) if more than one votes, but the vote is evenly split on any
particular matter, each fraction may vote the securities in question
proportionately.
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If the instrument so filed or the registration of the shares shows that
any tenancy is held in unequal interests, a majority or even split for the
purpose of this Section shall be a majority or even split in interest.
2.12.4 The corporation is entitled to reject a vote, consent,
waiver, proxy appointment or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder.
2.12.5 The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
are not liable in damages to the shareholder for the consequences of the
acceptance or rejection.
2.12.6 Corporate action based on the acceptance or rejection of a
vote, consent, waiver, proxy appointment or proxy appointment revocation under
this Section is valid unless a court of competent jurisdiction determines
otherwise.
2.13 Action by Shareholders Without a Meeting.
2.13.1 Written Consent. Any action required or permitted to be
taken at a meeting of the shareholders may be taken without a meeting and
without prior notice if one or more consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shareholders entitled to vote
with respect to the subject matter thereof were present and voted. Action
taken under this Section has the same effect as action taken at a duly called
and convened meeting of shareholders and may be described as such in any
document.
2.13.2 Post-Consent Notice. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten days before the
consummation of the action authorized by such approval to (i) those
shareholders entitled to vote who did not consent in writing, and (ii) those
shareholders not entitled to vote. Any such notice must be accompanied by the
same material that is required under the Statutes to be sent in a notice of
meeting at which the proposed action would have been submitted to the
shareholders for action.
2.13.3 Effective Date and Revocation of Consents. No action
taken pursuant to this Section shall be effective unless all written consents
necessary to support the action are received by the corporation within a
sixty-day period and not revoked. Such action is effective as of the date the
last written consent is received necessary to effect the action, unless all of
the written consents specify an earlier or later date as the effective date of
the action. Any shareholder giving a written consent pursuant to this Section
may revoke the consent by a signed writing describing the action and stating
that the consent is revoked, provided that such writing is received by the
corporation prior to the effective date of the action.
2.13.4 Unanimous Consent for Election of Directors.
Notwithstanding subsection (a), directors may not be elected by written
consent unless such consent is unanimous by all shares entitled to vote for
the election of directors.
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2.14 Voting for Directors. Unless otherwise provided in the articles
of incorporation, every shareholder entitled to vote for the election of
directors has the right to cast, in person or by proxy, all of the votes to
which the shareholder's shares are entitled for as many persons as there are
directors to be elected and for whom election such shareholder has the right
to vote. Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers. Unless the articles of incorporation have
dispensed with or limited the authority of the board of directors by
describing who will perform some or all of the duties of a board of directors,
all corporate powers shall be exercised by or under the authority, and the
business and affairs of the corporation shall be managed under the direction,
of the board of directors.
3.2 Number, Tenure and Qualification of Directions. The authorized
number of directors shall be three (3); provided, however, that if the
corporation has less than four shareholders entitled to vote for the election
of directors, the board of directors may consist of a number of individuals
equal to or greater than the number of those shareholders. The current number
of directors shall be within the limit specified above, as determined (or as
amended form time to time) by a resolution adopted by either the shareholders
or the directors. Each director shall hold office until the next annual
meeting of shareholders or until the director's earlier death, resignation, or
removal. However, if his term expires, he shall continue to serve until his
successor shall have been elected and qualified, or until there is a decrease
in the number of directors. Directors do not need to be residents of Nevada
or shareholders of the corporation.
3.3 Regular Meetings of the Board of Directors. A regular meeting of
the board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of
shareholders, for the purpose of appointing officers and transacting such
other business as may come before the meeting. The board of directors may
provide, by resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
3.4 Special Meetings of the Board of Directors. Special meetings of
the board of directors may be called by or at the request of the president or
any director. The person authorized to call special meetings of the board of
directors may fix any place as the place for holding any special meeting of
the board of directors.
3.5 Notice of, and Waiver of Notice for, Special Director Meeting.
Unless the articles of incorporation provide for a longer or shorter period,
notice of the date, time, and place of any special director meeting shall be
given at least two days previously thereto either orally or in writing. Any
director may waive notice of any meeting. Except as provided in the next
sentence, the waiver must be in writing and signed by the director entitled to
the notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any
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business and at the beginning of the meeting (or promptly upon his arrival)
objects to holding the meeting or transacting business at the meeting, and
does not thereafter vote for or assent to action taken at the meeting. Unless
required by the articles of incorporation, neither the business to be
transacted at, nor the purpose of, any special meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
3.6 Director Quorum and Voting.
3.6.1 Quorum. A majority of the number of directors prescribed
by resolution shall constitute a quorum for the transaction of business at any
meeting of the board of directors unless the articles of incorporation require
a greater percentage.
Unless the articles of incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
A director who is present at a meeting of the board of directors
or a committee of the board of directors when corporate action is taken is
deemed to have assented to the action taken unless: (1) the director objects
at the beginning of the meeting (or promptly upon his arrival) to holding or
transacting business at the meeting and does not thereafter vote for or assent
to any action taken at the meeting; and (2) the director contemporaneously
requests his dissent or abstention as to any specific action be entered in the
minutes of the meeting; or (3) the director causes written notice of his
dissent or abstention as to any specific action be received by the presiding
officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting. The right of dissent or
abstention is not available to a director who votes in favor of the action
taken.
3.7 Director Action Without a Meeting. Any action required or
permitted to be taken by the board of directors at a meeting may be taken
without a meeting if all the directors consent to such action in writing.
Action taken by consent is effective when the last director signs the consent,
unless, prior to such time, any director has revoked a consent by a signed
writing received by the corporation, or unless the consent specifies a
different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.
3.8 Resignation of Directors. A director may resign at any time by
giving a written notice of resignation to the corporation. Such resignation
is effective when the notice is received by the corporation, unless the notice
specifies a later effective date.
3.9 Removal of Directors. The shareholders may remove one or more
directors at a meeting called for that purpose if notice has been given that a
purpose of the meeting is such removal. The removal may be with or without
cause unless the articles of incorporation provide that directors may only be
removed with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in
the vote to remove
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him. A director may be removed only if the number of votes cast to remove him
exceeds the number of votes cast not to remove him.
3.10 Board of Director Vacancies. Unless the articles of incorporation
provide otherwise, if a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors, the
shareholders may fill the vacancy. During such time that the shareholders
fail or are unable to fill such vacancies then and until the shareholders act:
(a) the board of directors may fill the vacancy; or
(b) if the board of directors remaining in office constitute
fewer than a quorum of the board, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting group
of shareholders:
(a) if there are one or more directors elected by the same voting
group, only such directors are entitled to vote to fill the vacancy if it is
filled by the directors; and
(b) only the holders of shares of that voting group are entitled
to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
3.11 Director Compensation. By resolution of the board of directors,
each director may be paid his expenses, if any, of attendance at each meeting
of the board of directors and may be paid a stated salary as director or a
fixed sum for attendance at each meeting of the board of directors or both.
No such payment shall preclude any director from serving the corporation in
any other capacity and receiving compensation therefor.
3.12 Director Committees.
3.12.1 Creation of Committees. Unless the articles of
incorporation provide otherwise, the board of directors may create one or more
committees and appoint members of the board of directors to serve on them.
Each committee must have one or more members, who shall serve at the pleasure
of the board of directors.
3.12.2 Selection of Members. The creation of a committee and
appointment of members to it must be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the articles of incorporation to take such action.
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3.12.3 Required Procedures. Those Sections of this Article 3
which govern meetings, actions without meetings, notice and waiver of notice,
quorum and voting requirements of the board of directors, apply to committees
and their members.
3.12.4 Authority. Unless limited by the articles of
incorporation, each committee may exercise those aspects of the authority of
the board of directors which the board of directors confers upon such
committee in the resolution creating the committee. Provided, however, a
committee may not:
(a) authorize distributions;
(b) approve or propose to shareholders action that the Statutes
require be approved by shareholders;
(c) fill vacancies on the board of directors or on any of its
committees;
(d) amend the articles of incorporation pursuant to the authority
of directors to do so;
(e) adopt, amend or repeal bylaws;
(f) approve a plan of merger not requiring shareholder approval;
(g) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the board of directors; or
(h) authorize or approve the issuance or sale or contract for
sale of shares or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the board of
directors may authorize a committee (or an officer) to do so within limits
specifically prescribed by the board of directors.
ARTICLE 4. OFFICERS
4.1 Number of Officers. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be appointed by the
board of directors. Such other officers and assistant officers as may be
deemed necessary, including any vice presidents, may also be appointed by the
board of directors. If specifically authorized by the board of directors, an
officer may appoint one or more officers or assistant officers. The same
individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors for a term as determined by the
board of directors. If no term is specified, they shall hold office until the
first meeting of the directors held after the next
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annual meeting of shareholders. If the appointment of officers shall not be
made at such meeting, such appointment shall be made as soon thereafter as is
convenient. Each officer shall hold office until his successor shall have
been duly appointed and shall have qualified until his death, or until he
shall resign or is removed.
The designation of a specified term does not grant to the officer any
contract rights, and the board may remove the officer at any time prior to the
termination of such term.
4.3 Removal of Officers. Any officer or agent may be removed by the
board of directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer or agent shall not of itself create contract rights.
4.4 Resignation of Officers. Any officer may resign at any time,
subject to any rights or obligations under any existing contracts between the
officers and the corporation, by giving notice to the president or board of
directors. An officer's resignation shall take effect at the time specified
therein, and the acceptance of such resignation shall not be necessary to make
it effective.
4.5 President. Unless the board of directors has designated the
chairman of the board as chief executive officer, the president shall be the
chief executive officer of the corporation and, subject to the control of the
board of directors, shall in general supervise and control all of the business
and affairs of the corporation. Unless there is a chairman of the board, the
president shall, when present, preside at all meetings of the shareholders and
of the board of directors. The president may sign, with the secretary or any
other proper officer of the corporation thereunder authorized by the board of
directors, certificates for shares of the corporation and deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board f directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
4.6 Vice Presidents. If appointed, in the absence of the president or
in the event of his death, inability or refusal to act, the vice president (or
in the event there be more than one vice president, the vice presidents in the
order designate at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
of the president, and when so acting, shall have all the powers of, and be
subject to, all the restrictions upon the president.
4.7 Secretary. The secretary shall: (a) keep the minutes of the
proceedings of the shareholders, the board of directors, and any committees of
the board in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (c) be custodian of the corporate records; (d) when requested
or required, authenticate any records of the corporation; (e) keep a register
of the
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post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (f) sign with the president, or a vice
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (g) have
general charge of the stock transfer books of the corporation; and (h) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned by the president or by the board
of directors. Assistant secretaries, if any, shall have the same duties and
powers, subject to the supervision of the secretary.
4.8 Treasurer. The treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such bank, trust companies, or other depositaries as shall be
selected by the board of directors; and (c) in general perform all of the
duties incident to the office of treasurer and such other duties as from time
to time may be assigned by the president or by the board of directors. If
required by the board of directors, the treasurer shall give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the board of directors shall determine. Assistant treasurers, if
any, shall have the same powers and duties, subject to the supervision of the
treasurer.
4.9 Salaries. The salaries of the officers shall be fixed from time to
time by the board of directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS, AND EMPLOYEES
5.1 Indemnification of Directors. Unless otherwise provided in the
articles of incorporation, the corporation shall indemnify any individual made
a party to a proceeding because the individual is or was a director of the
corporation, against liability incurred in the proceeding, but only if such
indemnification is both (i) determined permissible and (ii) authorized, as
such are defined in subsection (a) of this Section 5.1.
5.1.1 Determination of Authorization. The corporation shall not
indemnify a director under this Section unless:
(a) a determination has been made in accordance with the
procedures set forth in the Statutes that the director met the standard of
conduct set forth in subsection (b) below, and
(b) payment has been authorized in accordance with the procedures
set forth in the Statutes based on a conclusion that the expenses are
reasonable, the corporation has the financial ability to make the payment, and
the financial resources of the corporation should be devoted to this use
rather than some other use by the corporation.
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5.1.2 Standard of Conduct. The individual shall demonstrate
that:
(a) he or she conducted himself in good faith; and
(b) he or she reasonably believed:
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(i) in the case of conduct in his official capacity with the
corporation, that his conduct was in its best interests;
(ii) in all other cases, that his conduct was at least not
opposed to its best interests; and
(iii) in the case of any criminal proceeding, he or she had
no reasonable cause to believe his conduct was unlawful.
5.1.3 Indemnification in Derivative Actions Limited.
Indemnification permitted under this Section in connection with a proceeding
by or in the right of the corporation is limited to reasonable expenses
incurred in connection with the proceeding.
5.1.4 Limitation on Indemnification. The corporation shall not
indemnify a director under this Section of Article 5:
(a) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(b) in connection with any other proceeding charging improper
personal benefit to the director, whether or not involving action in his or
her official capacity, in which he or she was adjudged liable on the basis
that personal benefit was improperly received by the director.
5.2 Advance of Expenses for Directors. If a determination is made
following the procedures of the Statutes, that the director has met the
following requirements, and if an authorization of payment is made following
the procedures and standards set forth in the Statutes, then unless otherwise
provided in the articles of incorporation, the corporation shall pay for or
reimburse the reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding, if:
(a) the director furnishes the corporation a written affirmation
of his good faith belief that he has met the standard of conduct described in
this section;
(b) the director furnishes the corporation a written undertaking,
executed personally or on his behalf, to repay the advance if it is ultimately
determined that he did not meet the standard of conduct;
(c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under this Section
or the Statutes.
5.3 Indemnification of Officers, Agents and Employees Who Are Not
Directors. Unless otherwise provided in the articles of incorporation, the
board of directors may indemnify and advance expenses to any officer,
employee, or agent of the corporation, who is not a director of the
corporation, to the same extent as to a director, or to any greater extent
consistent with public policy, as determined by the general or specific
actions of the board of directors.
5.4 Insurance. By action of the board of directors, notwithstanding
any interest of the directors in such action, the corporation may purchase and
maintain insurance on behalf of a person who is or was a director, officer,
employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary, or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Statutes.
ARTICLE 6. STOCK
6.1 Issuance of Shares. The issuance or sale by the corporation of any
shares of its authorized capital stock of any class, including treasury
shares, shall be made only upon authorization by the board of directors,
unless otherwise provided by statute. The board of directors may authorize
the issuance of shares for consideration consisting of any tangible or
intangible property or benefit to the corporation, including cash, promissory
notes, services performed, contracts or arrangements for services to be
performed, or other securities of the corporation. Shares shall be issued for
such consideration expressed in dollars as shall be fixed from time to time by
the board of directors.
6.2 Certificates for Shares.
6.2.1 Content. Certificates representing shares of the
corporation shall at minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Nevada; the
name of the person to whom issued; and the number and class of shares and the
designation of the series, if any, the certificate represents; and be in such
form as determined by the board of directors. Such certificates shall be
signed (either manually or by facsimile) by the president or a vice president
and by the secretary or an assistant secretary and may be sealed with a
corporate seal or a facsimile thereof. Each certificate for shares shall be
consecutively numbered or otherwise identified.
6.2.2 Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations
applicable to each class and the variations in rights, preferences and
limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate.
-14-
<PAGE>
Alternatively, each certificate may state conspicuously on its front or back
that the corporation will furnish the shareholder this information on request
in writing and without charge.
6.2.3 Shareholder List. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the
corporation.
6.2.4 Transferring Shares. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have
been surrendered and canceled, except that in cash of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
6.3 Shares Without Certificates.
6.3.1 Issuing Shares Without Certificates. Unless the articles
of incorporation provide otherwise, the board of directors may authorize the
issue of some or all the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
6.3.2 Information Statement Required. Within a reasonable time
after the issue or transfer of shares without certificates, the corporation
shall send the shareholder a written statement containing, at a minimum, the
information required by the Statutes.
6.4 Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a
nominee is to be recognized by the corporation as the owner, the person in
whose name shares stand in the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
6.5 Restrictions on Transfer or Registration of Shares. The board of
directors or shareholders may impose restrictions on the transfer or
registration of transfer of shares (including any security convertible into,
or carrying a right to subscribe for or acquire shares). A restriction does
not affect shares issued before the restriction was adopted unless the holders
of the shares are parties to the restriction agreement or voted in favor of or
otherwise consented to the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
(a) to maintain the corporation's status when it is dependent on
the number or identity of its shareholders;
-15-
<PAGE>
(b) to preserve entitlements, benefits or exemptions under
federal or local laws; and
(c) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(a) obligate the shareholder first to offer the corporation or
other persons (separately, consecutively or simultaneously) an opportunity to
acquire the restricted shares;
(b) obligate the corporation or other persons (separately,
consecutively or simultaneously) to acquire the restricted shares;
(c) require as a condition to such transfer or registration, that
any one or more persons, including the holders of any of its shares, approve
the transfer or registration if the requirement is not manifestly
unreasonable; or
(d) prohibit the transfer or the registration of transfer of the
restricted shares to designated persons or classes of persons, if the
prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section and its existence is noted
conspicuously on the front or back of the certificate or is contained in the
information statement required by this Article 6 with regard to shares issued
without certificates. Unless so noted, a restriction is not enforceable
against a person without knowledge of the restriction.
6.6 Corporation's Acquisition of Shares. The corporation may acquire
its own shares and the shares so acquired constitute authorized but unissued
shares.
If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation, which
amendment may be adopted by the shareholders or the board of directors without
shareholder action. The articles of amendment must be delivered to the
Secretary of State and must set forth:
(a) the name of the corporation;
(b) the reduction in the number of authorized shares, itemized by
class and series;
(c) the total number of authorized shares, itemized by class and
series, remaining after reduction of the shares; and
-16-
<PAGE>
(d) a statement that the amendment was adopted by the board of
directors without shareholder action and that shareholder action was not
required.
ARTICLE 7. DISTRIBUTIONS
7.1 Distributions to Shareholders. The board of directors may
authorize, and the corporation may make, distributions to the shareholders of
the corporation subject to any restriction sin the corporation's articles of
incorporation and in the Statutes.
7.2 Unclaimed Distributions. If the corporation has mailed three
successive distributions to a shareholder at the shareholder's address as
shown on the corporation's current record of shareholders and the
distributions have been returned as undeliverable, no further attempt to
deliver distributions to the shareholder need be made until another address
for the shareholder is made known to the corporation, at which time all
distributions accumulated by reason of this Section, except as otherwise
provided by law, be mailed to the shareholder at such other address.
ARTICLE 8. MISCELLANEOUS
8.1 Inspection of Records by Shareholders and Directors. A shareholder
or director of a corporation is entitled to inspect and copy, during regular
business hours at the corporation's principal office, any of the records of
the corporation required to be maintained by the corporation under the
Statutes, if such person gives the corporation written notice of the demand at
least five business days before the date on which such a person wishes to
inspect and copy. The scope of such inspection right shall be as provided
under the Statutes.
8.2 Amendments. The corporation's board of directors may amend or
repeal the corporation's bylaws at any time unless:
(a) the articles of incorporation or the Statutes reserve this
power exclusively to the shareholders in whole or part; or
(b) the shareholders in adopting, amending, or repealing a
particular bylaw provide expressly that the board of directors may not amend
or repeal that bylaw; or
(c) the bylaw either establishes, amends, or deletes, a greater
shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the
board must meet the same quorum requirement and be adopted by the same vote
and voting groups required to take action under the quorum and voting
requirements then in effect or proposed to be adopted, whichever are greater.
8.3 Fiscal Year. The fiscal year of the corporation shall be
established by the board of directors.
-18-
Exhibit 10.1
LEASE AGREEMENT
This lease agreement is entered into this 1st day of March, 1999, between
RDR PROPERTIES, LC a Limited Liability Company organized and doing business in
the State of Utah, hereinafter called Lessor (Landlord), and BRAINGARDEN,
INC., a Utah Corporation hereinafter called Lessee (Renter).
WITNESSETH
Lessor does hereby lease and rent unto Lessee, and Lessee does hereby
take as tenant under Lessor, the building located at the Provo City Airport
with the address being 1185 South Mike Jense Circle, Provo, UT 84601, County
of Utah, State of Utah, to be used by Lessee as a Commercial office, Storage
and Hangar from the date of this agreement for a term of two years. If at the
end of the initial lease period, the parties do not execute a new lease, then
this lease shall be automatically renewed for successive one year periods
unless otherwise terminated. as provided herein.
IN CONSIDERATION WHEREOF, and of the covenants hereinafter expressed, it
is covenanted and agreed as follows:
1. Lessee agrees to pay to Lessor, or Lessor's agent, in advance, at
the office of lessor or said agent, located at 1185 S. Mike Jense Circle,
Provo, UT 84601, on the first day of each month of said term, as rent for said
premises, the sum of $8,002.20 per month which represents rent for 6,727
square feet of Commercial Office space @ 70 cents per square foot, and 686
square feet of Inside Storage space @ 55 cents per square foot. If the rent is
not paid by the fifth day of the month, at five (5) PM, a late fee of 5% of
the monthly payment shall be assessed.
2. Lessee shall not permit any unlawful and immoral practice to be
committed on the premises; nor shall he permit them to be used as a boarding
or lodging house, for rooming or
RENTAL AGREEMENT PAGE -1 - OF 4
<PAGE>
school purposes, nor for any purpose which will increase the insurance rate;
nor shall he permit to be kept or used on the premises inflammable fluids or
explosives without the consent of Lessor; nor permit them to be used for any
purpose which will injure the reputation of the building or which will disturb
the tenants of the building or the inhabitants of the neighborhood.
3. Lessee agrees to keep the property and yard in good repair, clean
and well maintained. Lessee agrees to maintain renters insurance on the
premises and further, agrees to hold Lessor harmless for any damage to any
person from lessee's failure to keep the premises safe. Lessee shall name the
Lessor an additional insured, and provide proof of insurance to the Lessor
upon the signing of the agreement and to provide Notice to the Lessor upon the
changing or cancellation of any relevant insurance policy.
4. Lessee has examined the premises and is satisfied with the physical
condition and its act of taking possession is conclusive evidence of receipt
of them in good order and repair, and the Lessee agrees to keep said premises
in a clean and satisfactory condition, and, upon termination of this tenancy,
will leave said premises, equipment and furnishings in as good condition as
when entered upon, except for reasonable wear and tear or damage by the
elements or by fire; and in the event of damage or injury to said premises,
except as otherwise provided herein, said Lessee shall pay for all such
damages.
5. Lessor agrees to pay all electric, power and light. Lessee shall
pay all telephone charges and normal day to day cleaning and maintenance. If
the Lessee leaves the premises in an unclean condition, Lessee agrees to pay
for cleaning said premises at a reasonable rate.
6. Deleted except for the following: Lessee shall not be responsible
for normal wear and tear.[initials "BT" appear in margin]
RENTAL AGREEMENT PAGE -2- OF 4
<PAGE>
7. Lessee shall not have the right or power to sublet the premises or
any part thereof, or to transfer or assign this lease without the written
consent of Lessor.
8. It is expressly agreed and understood by the Lessor and Lessee that
the Lessor shall not be liable for any damage or injury by water which may be
sustained by the Lessee or other person or for any damage or injury resulting
from carelessness, negligence or improper conduct on the part of any other
tenant or agents or employees.
9. Should Lessee fail to pay the rent, or any part thereof, as the same
becomes due, or violate any other term or condition of this lease, Lessor
shall then have the right, at his option, to re-enter the leased premises and
terminate the lease; such re-entry shall not bar the right of recovery of rent
or damage for breach of covenants, nor shall the receipt of rent after
conditions broken be deemed a waiver of forfeiture.
10. Should the Lessor be compelled to commence or sustain an action at
law to collect said rents or part thereof, or for damages, or to dispossess
the Lessee or to recover possession of said premises, the Lessee shall pay all
damages and costs in connection therewith, including reasonable attorneys fees
and treble damages allowed by law.
11. It is mutually understood and agreed that the Lessor and his agents
shall have access to the leased premises at all reasonable times to inspect
and protect the same, to show the same to a prospective purchaser, tenant or
mortgagee, and to make any repairs thereto.
12. Lessee agrees not to keep or maintain a dog, cat or any other
animal or pet on the leased premises without the prior written consent of the
Lessor. Violation of this shall be grounds for immediate termination of this
lease.
13. Lessee shall comply with all the reasonable rules and regulations
now in force by Lessor, and posted in or about the premises, or otherwise
brought to the notice of Lessee, both in regard to the building as a whole and
as to the premises herein leased.
RENTAL AGREEMENT PAGE -3- of 4
<PAGE>
<PAGE>
14. In the event the leased premises are furnished with furniture of
the Lessor an inventory of the furniture shall be attached hereto and made a
part hereof, and it is hereby agreed that all furnishings are received in good
condition, unless otherwise expressly stated, and the Lessee further agrees to
return the same at the expiration hereof in like condition, reasonable wear
and tear excepted.
15. It is expressly stipulated that there are no terms of this
agreement different from any of the preceding numbered paragraphs or in
addition thereto, except the following:
______________________________________________________________________________
______________________________________________________________________________
____________________________________________________________________________ .
16. All covenants and representations herein are binding upon and inure
to the benefit of the heirs, executors, administrators and assigns of Lessor
and Lessee.
IN WITNESS WHEREOF the parties hereto have hereunto set their signatures
and seals, the day and year first above written.
/s/ Bill Turnbull /s/ Mark Comer
____________________________________ ____________________________________
(Lessee) (Lessor)
____________________________________ ___________________________________
(Lessee) (Lessor)
RENTAL AGREEMENT PAGE -4- OF 4
Exhibit 10.2
Employment Agreement
EMPLOYMENT AGREEMENT dated March 15,1999, (the "Effective Date"), by and
between Whole Living, Inc. (the "Company") and Ron Williams ("Executive"). The
Company desires to engage the services of the Executive as President of the
Company on the terms and subject to the conditions of this Agreement, and
Executive desires to accept such employment.
In consideration of the terms and mutual covenants contained in this
Agreement, the Company and Executive agree as follows:
1. Employment. The Company hereby engages the services of Executive as
President of the Company with powers and duties consistent with such position,
and Executive hereby accepts such engagement. During the terms of this
Agreement, Executive shall perform such additional duties and accept election
or appointment to such additional offices or positions of the Company or its
affiliates of an executive nature as may be specified by the Board of
Directors of the Company. Executive shall perform his obligations to the
Company and its subsidiaries pursuant to this Agreement under the direction of
the Board of Directors of the Company, and Executive shall devote
approximately all of his business time and efforts to such performance.
2. Term. This Agreement shall continue in full force and effect for a
term of three years beginning on the Effective Date, unless sooner terminated
pursuant to the provisions contained herein (the "Initial Term"). Unless
terminated, this Agreement will be renewed automatically for one or more
successive one-year terms (The "Renewal Terms"), unless Executive or the
Company gives its written notice of non-renewal to the other party not less
than ninety (90) days prior to the expiration of the then-current term.
Executive's period of employment hereunder, including the Initial Terms and
all Renewal Terms, shall constitute and be hereinafter referred to as the
"Term" of this Agreement.
3. Compensation. For services rendered pursuant to this Agreement,
Executive shall receive, commencing on the Effective Date, the following
compensation: (i) a base salary of Sixty Thousand Dollars ($60,000.00) in
fiscal year 1999; and (ii) such bonuses and/or increases as from time to time
as referenced herein or as authorized by the Board of Directors in their sole
discretion. Executive's base salary shall be paid in equal bi-monthly
installments.
4. Incentive Bonus. In addition to the base salary, Executive shall be
eligible for an incentive bonus ("Incentive Bonus") each year in the amount as
identified herein. The Incentive Bonus shall be based upon the operating
results for that year of the Company and shall be issued, if earned, within
thirty days after such operating results have been determined by the companies
accountants. The criteria upon which the Incentive Bonus is awarded shall be
set by the Board of Directors.
5. Employment Benefits. Executive shall be entitled to three weeks of
paid vacation each calendar year, beginning January 1, 1999. Unused vacation
time shall not accrue or carry over to future years, so that three weeks will
be the maximum amount of paid vacation to which Executive shall be entitled
hereunder during any calendar year.
During the term of this Agreement, the Company will provide to
Executive the following benefits:
(a) Insurance. Medical, dental, and short and long term disability
insurance programs for the benefit of Executive and his immediate family.
<PAGE>
(b) Automobile. The Company will provide a leased vehicle selected by
Executive in the name of Executive, as follows: The Company will pay up to
$500 per month in lease payments; any lease payment amount above $500 per
month will be deducted from Executive's salary. During the length of the
lease, Company will pay for all maintenance and service costs for the vehicle.
At the end of the lease, Company will pay the residual amount on behalf of
Executive, who will then have clear title to the vehicle.
(c) Stock Option: Executive shall be provided a stock option plan. The
stock option plan is attached hereto as an exhibit.
6. Reimbursement of Future Expenses. Executive shall be reimbursed by
the Company for all reasonable out-of-pocket expenses documented and incurred
by Executive in performance of his duties under this Agreement.
7. Annual Plan. Executive team shall submit to the Board of Directors
for its approval, not later than 60 days before the beginning of each calendar
year, an annual business plan for the Company (the "Annual Plan"). The Annual
Plan shall be revised by Executive team and submitted to the Board of
Directors for its review (and approval in the case of material changes from
the approved Annual Plan) from time to time during each year to reflect
changes in the Annual Plan because of operations or otherwise. Each Annual
Plan shall include the following information:
(a) an annual forecast of income and expenses for the operation of the
Company;
(b) a cash flow budget, estimate of profit, and source and use of cash
statements for the operation of the Company;
(c) a payroll and staffing plan and budget for the operation of the
Company; and
8. Termination. Executive's employment will terminate upon the first
to occur of the following:
(a) Termination by the Company for "cause," as reasonably determined
by the Company's board of Directors in good faith. For the purpose of this
section 8, "cause" shall mean:
(i) misfeasance or negligence in the performance of his duties
hereunder;
(ii) engagement by Executive in dishonest or illegal conduct that is
injurious to the Company; or
(iii) a breach of the Company's policy and procedure as reasonably
established from time to time by the Board of Directors of the Company that is
not cured within 30 days of written notice being sent by the Company.
Executive shall be given 30 days written notice of any anticipated
termination of his employment for cause, and a 30 days opportunity to rectify
or correct the alleged problem. Immediately upon termination of the Executive
under this Agreement other than the continuation of insurance policies to the
extent required by law.
<PAGE>
(b) Termination by the Company (in its sole discretion) in the event
of Executive's disability. "Disability" will be deemed to exist if Executive
has substantially failed to perform his duties hereunder for 90 consecutive
days for reasons of mental or physical health and is no longer able to perform
his duties hereunder with or without reasonable accommodations by the Company,
or if a physician selected in good faith by the Company examines Executive
(and Executive agrees to permit such examinations at the Company's expense)
and advises the Company that Executive will not be able to perform his duties
hereunder with or without reasonable accommodations by the Company for the
following 90 consecutive days. In determining what are reasonable
accommodations, the Company shall comply with the Americans with Disabilities
Act. If the Company terminates Executive's employment for disability,
Executive shall receive compensation due under Section 3 of this Agreement and
the employee benefits due under Section 4 of this Agreement through the date
of termination and the Company will have no further obligation under this
Agreement other than the continuation of insurance policies to the extend
required by law upon termination. At the sole discretion of the Board of
Directors, the employee stock option plan may be extended, for a period of
time to be determined by the Board, following the Disability.
(c) Executive's death. In the event of the Executive's death,
Executive's estate or surviving spouse, as applicable, shall receive all
compensation due to Executive under this Agreement through the date of death
and the Company will have no further obligation under this Agreement other
than the continuance of insurance polices to the extent required by law and
continuation of other benefits under this Agreement for six months following
the date of death. At the sole discretion of the Board of Directors, the
employee stock option plan may be extended, for a period of time to be
determined by the Board, following the Death.
(d) Termination by the Company at its discretion. Upon such
termination, Executive shall receive all compensation due him under this
Agreement and the employee benefits due under this Agreement for a period of
twelve months after termination. The Company will have no further obligation
under this Agreement other than the continuation of insurance policies to the
extent required by law. At the sole discretion of the Board of Directors, the
employee stock option plan may be extended, for a period of time to be
determined by the Board, following the termination of Executive.
9. Notice of Termination. Any termination of Executive's employment
under this Agreement shall be communicated by a written Notice of Termination
to the other party hereto, which notice shall specify the particular
termination provision in this Agreement relied upon by the terminating party
and shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination under such provision.
10. Executive's Devotion of Time. Executive hereby agrees to devote
his full time, abilities and energy to the faithful performance of the duties
assigned to him or her and to the promotion and forwarding of the business
affairs of the Company, and not to divert any business opportunities from the
Company to himself or to any other person or business entity without approval
of the Board of Directors.
11. Agreement Not to Compete. In the event that this Agreement expires
in accordance with its terms or is terminated for any reason, Executive
covenants and agrees that for a period of one years after his employment under
this Agreement expires or is so terminated, he will not directly or indirectly
whether as employee, director, owner, 5% or greater stockholder, consultant,
partner (limited or general) or otherwise engage in or have any interest in
any business that competes with the business
<PAGE>
of the Company or its subsidiaries provided, except as approved by the Board
of Directors on a case by case basis.
The Company may, in its discretion, give Executive written approval(s) to
personally engage in any activity or render any services referred to in this
Section if Company secures written assurances (satisfactory to the Company and
its counsel) from the Executive and any prospective employer(s) of Executive
that the integrity of the Company's Confidential or Proprietary Information
will not in any way be jeopardized by such activities, provided that the
burden or so establishing the foregoing to the satisfaction of the Company and
its counsel shall be upon the executive and prospective employer(s).
12. Agreement Not to Solicit Employees, Customers, or Others.
Executive covenants and agrees that, for a period of two years after this
Agreement is terminated, he will not, directly or indirectly, (i) solicit,
induce or hire away, or assist any third party in soliciting, diverting or
hiring away, any employee of the Company or its subsidiaries, whether or not
the employee's employment is for a specified term or is at will, or (ii)
induce or attempt to induce any customer, supplier, dealer, lender, licensee,
consultant, or other business relation of the Company or its subsidiaries to
cease doing business with the Company or its subsidiaries.
13. Inventions and Improvements. Executive agrees that all company
related inventions, innovations, or improvements in the Company's or its
subsidiaries' products or methods of conducting its business (including new
combinations, applications, improvements, ideas, and discoveries, whether or
not copyrightable or patentable) conceived or made by him while he is employed
by the Company or its subsidiaries. Executive will promptly disclose such
inventions, innovations or improvements to the Board of Directors of the
Company and perform all actions reasonably requested to establish or confirm
the ownership of the Company or its subsidiaries thereof.
14. Ownership, Non-Disclosure and Non-Use of Confidential or
Proprietary Information.
(a) Executive covenants and agrees that while he is employed by the
Company and after termination of employment he will not, directly or
indirectly:
(i) give any person not authorized by Company to receive it or use
it, except for the sole benefit of the company or its subsidiaries, any of the
Company's or subsidiaries' proprietary date of information whether relating to
management, know-how, patents or otherwise; or
(ii) give to any person not authorized by the Company to receive it
any specifications, reports, or technical information or the like owned by the
Company or its subsidiaries; or
(iii) give to any person not authorized by the Company to receive
it any information that is not generally known outside the Company or that is
designated by the Company or its subsidiaries as limited, private, or
confidential.
(b) If Executive is employed in a sales capacity, Executive will not
render services, directly or indirectly, to any competitor of the Company or
its subsidiaries in connection with the development, marketing, sales,
merchandising, leasing, servicing, or promotion of any product sold by the
Company or its subsidiaries.
<PAGE>
(c) Executive covenants and agrees that he will keep himself informed
of the Company's policies and procedures for safeguarding the Company property
including proprietary data and information and will strictly comply therewith
at all times. Executive will return to the Company or its subsidiaries
immediately upon termination of his employment all Company or its subsidiaries
property in his possession or control.
15. Limitations. The parties agree that in the event any court of
competent jurisdiction should determine that the term or restrictions set
forth herein is unreasonable in scope, then in such event the court shall fix
the term or restrictions so as to be reasonable, enforceable and consistent
with the intent of this Agreement.
16. Independent Agreements: Survival. Executive and Company agree that
the covenants made in Sections 8 through and including 13 herein shall be
construed as agreements independent of any other provision of this Agreement,
and shall survive the termination of this Agreement, and shall survive the
termination of this Agreement. Moreover, the existence of any claim or cause
of action of Executive against the Company, or the Company against Executive,
whether or not predicated upon the terms of this Agreement, shall not
constitute a defense to the enforcement of any of these covenants against
Executive by Company, or against Company by Executive, respectively. Any
reference to the Company in Sections 7 through and including 12 shall include
the Company and its subsidiaries where applicable.
17. Complete Agreement. This Agreement embodies the complete Agreement
and understanding between the parties and supersedes any prior understandings,
agreements, or representations by or among the parties, whether written or
oral, concerning the subject matter hereof in any way.
18. Amendments: Waivers. This Agreement may not be amended except by a
writing signed by both an appropriate member of the Company's management or
Board of Directors and Executive. Any waiver by a party hereof of any right
hereunder shall be effective only if evidenced by a signed writing, and only
to the extent set forth in such writing.
19. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, heirs, and assigns, except that Executive may not
assign any of his obligations hereunder without the prior written consent of
the Company.
20. Remedies. Each of the parties to this Agreement will be entitles
to specifically enforce its rights under this Agreement, to recover damages by
reason of any breach of any provisions of this Agreement and to exercise all
other rights to which it may be entitles. The parties agree and acknowledge
that money damages may not be an adequate remedy for breach of the provision
of the Agreement and accordingly, each party hereby agrees and consents that
in the event of any material breach of this Agreement by it, the non-breaching
party may obtain appropriate injunctive relief or an order for specific
performance, in order to enforce or prevent any violations of the provisions
of this Agreement.
21. Governing Law. In the event of any disputes arising under this
Agreement, it is agreed between the parties that the laws of the State of Utah
will govern the interpretation, validity, and effect of this Agreement without
regard to the place of execution or performance hereof.
<PAGE>
22. Dispute Resolution. In the event of any dispute between the
parties arising out of or related to this Agreement, the parties agree to use
the following procedure prior to either party pursuing other available
remedies:
(a) A meeting shall be held promptly between the parties, attended by
representatives having decision-making authority regarding the disputes, to
attempt in good faith to negotiate a resolution of the dispute.
(b) If, within thirty (30) days after such meeting, the parties will
have not succeeded in negotiating a resolution of the disputes, they will
jointly appoint mutually acceptable neutral person not affiliated with either
of the parties (the "Neutral), seeking assistance in such regard from the
American Arbitration Association, Center for Public Resources, or other
mutually agreed-upon organization if they have been unable to agree upon such
appointment within forty (40) days from the initial meeting. The fees of, and
authorized costs incurred by, the Neutral shall be shared equally by the
parties.
(c) In consultation with the Neutral, the parties will select or
devise an alternative disputes resolution procedure ("ADR") by which they will
attempt to resolve the dispute, and a time and place for the ADR to be held,
with the Neutral making the decision as to the procedure and/or place and
time, if the parties have been unable to agree on any of such matters within
twenty (20) days after initial consultation with the Neutral. In any case, the
ADR shall be held no later that sixty (60) days after selection of the
Neutral.
(d) The parties agree to participate in good faith in the ADR to its
conclusion. If the parties are not successful in resolving the dispute through
the ADR, then either party may pursue other available remedies upon seven (7)
days written notice to the other party specifying its intended course of
action.
23. Notices. Any notice to be given hereunder shall be in writing and
shall be effective when personally delivered or sent to the other party by
registered or certified mail, return receipt requested, or overnight courier,
postage prepaid, or otherwise when received by the other party, at the address
set forth at the end of this Agreement.
24. Severability. Any provision of this agreement that is deemed
invalid, illegal, or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this section, be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any
other provisions of this Agreement invalid, illegal, or unenforceable in any
other jurisdiction. If the covenant should be deemed invalid, illegal, or
unenforceable because its scope of the covenant is reduces only to the minimum
extent necessary to render the modified covenant valid, legal and enforceable.
25. Attorney Fees. In the event any action or proceeding is brought
by any party, against any other party, to enforce the provisions of this
Agreement, the prevailing party shall be entitled to recover its costs and
reasonable attorney fees, whether such sums are expended with or without suit,
at trial or on appeal.
26. Taxes. Any payments provided for hereunder shall be paid net of
any applicable withholding required under federal, state or local law.
<PAGE>
27. Construction. This Agreement shall not be construed against the
party preparing it, and shall be construed without regard to the identity of
the person who drafted it or the party who caused it to be drafted and shall
be construed as if all parties had jointly prepared this Agreement and it
shall be deemed their joint work product, and each and every provision of this
Agreement shall be construed as though all the parties hereto participated
equally in the drafting hereof, and any uncertainty or ambiguity shall not be
interpreted against any one party. As a result of the foregoing, any rule of
construction that a document is to be construed against the drafting party
shall not be applicable.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
15th day of March 1999.
WHOLE LIVING INC. EXECUTIVE
By: /s/ Bill Turnbull /s/ RW
Name: Bill Turnbull Ron Williams, President
Exhibit 11
Whole Living, Inc.
Statement re Computation of Earnings Per Share
1999 1998
----------- ----------
Average shares outstanding 17,300,200 17,000,000
Net Income (Loss) 0 0
Earnings (loss) per share 0 0
Exhibit 16
<Letterhead of
HAMMOND
and COMPANY
A Professional Corporation
-------------------
Certified Public Accountants>
August 2, 1999
Securities and Exchange Commission
Washington, DC 20549
Dear SEC.
Hammond and Company agrees with the following statement as contained in
the filing of Form 10 for Whole Living, Inc.:
For the past two fiscal years we have not have any disagreements
regarding accounting practices, financial statement disclosure, or
auditing scope or procedure with our former independent accountant,
Hammond and Company; nor have their reports contained an adverse
opinion or disclaimer of opinion.
Sincerely,
/s/ M.M. Hammond
Michael M. Hammond, President
Salt Lake City, Utah
April 23, 1999
1015 East 3900 South * Salt Lake City, Utah 84124
Office: 801-281-4043 * Fax: 801-281-4533
Email: [email protected]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-2000
<PERIOD-END> MAR-31-1999 JUN-30-1999
<CASH> 0 44,905
<SECURITIES> 0 0
<RECEIVABLES> 0 56,038
<ALLOWANCES> 0 0
<INVENTORY> 0 209,337
<CURRENT-ASSETS> 0 396,234
<PP&E> 0 284,022
<DEPRECIATION> 0 (23,599)
<TOTAL-ASSETS> 0 716,719
<CURRENT-LIABILITIES> 0 691,400
<BONDS> 0 0
0 0
0 0
<COMMON> 17,000 1,000,999
<OTHER-SE> (17,000) (975,680)
<TOTAL-LIABILITY-AND-EQUITY> 0 716,719
<SALES> 0 1,033,498
<TOTAL-REVENUES> 0 1,033,498
<CGS> 0 288,321
<TOTAL-COSTS> 0 1,659,301
<OTHER-EXPENSES> 0 5,190
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 1,109
<INCOME-PRETAX> 0 (920,423)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 (920,423)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 (920,423)
<EPS-BASIC> 0 (.27)
<EPS-DILUTED> 0 (.27)
</TABLE>
