UNITED STATES
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 (G) OF THE SECURITIES EXCHANGE ACT OF 1934
DIVERSIFIED FUNDS, INC.
-----------------------
(Name of Small Business Issuer in its Charter)
LOUISIANA 62-1708648
--------------------------------- ----------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
210 CROWN POINT CIRCLE, SUITE 108
LONGWOOD, FLORIDA 32779
--------------------------------- ----------------------
(Address of principal executive offices) (Zip code)
Issuers telephone number (407) 862-2212
--------------
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.00 PAR VALUE
-----------------------------
(Title of class)
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Diversified Funds, Inc., is filing this form 10-SB on a voluntary basis in order
to make Diversified Funds, Inc.'s financial information equally available to any
interested parties or investors and meet certain listing requirements for
publicly traded securities on the OTC Electronic Bulletin Board which is
sponsored by the National Association of Securities Dealers (NASD). As a result
of filing its registration statement, the Company is obligated to file with the
Commission certain interim and periodic reports including an annual report
containing audited financial statements. The Company intends to continue to
voluntarily file these periodic reports under the Exchange Act even if its
obligation to file such reports is suspended under applicable provisions of the
Exchange Act.
The Company was Incorporated under the Laws of the State of Louisiana on
November 25, 1983. The original Articles of Incorporation provided for
authorized capital of ten thousand (10,000) shares of common stock at ten cents
($.10) par value. On July 10, 1985, the shareholders of the Company approved an
amendment to the Articles of Incorporation changing the authorized capital to
thirty million (30,000,000) common shares of capital stock with no par value
($0.00). The amended Articles were filed with the State of Louisiana on August
8, 1997. The Company was formed with the stated purpose of conducting any
lawful business activity.
<PAGE>
The Company never engaged in an active trade or business throughout the period
from inception through 1997. On or about July 14, 1997, the directors
determined that the Company should become active and reinstated the Company with
the State of Louisiana, and began seeking potential operating businesses and
business opportunities with the intent to acquire or merge with such business.
On April 28, 1999, Diversified Funds, Inc. acquired all of the stock of Food
Safety Systems, Inc., a Nevada corporation. Food Safety Systems, Inc. is a
wholly owned subsidiary of Diversified Funds, Inc.
Food Safety Systems, Inc. has developed a complete process that incorporates an
application and monitoring system utilizing either existing or custom designed
spray application of Food Safe materials to fruit and vegetables after the
initial chlorine bath. The program continuously monitors water quality,
Oxidation Reduction Potential (ORP) , ph, chlorine concentration and maintains
continuous records in encrypted form that satisfies HACCP requirements.
The Food Safety Program is a proprietary process developed in accordance with
FDA specifications. The process reduces and keeps bacterial counts well under
USDA/FDA and most consumer guidelines.
The Food Safe Program reduces or eliminates E. Coli and other microbial
pathogens upon contact. Additionally, the emulsified spray continues to retard
the growth of additional microbial pathogens during shipping and display,
allowing for longer shelf life.
The Company's principal executive offices are located at 210 Crown Point Circle,
Suite 108, Longwood, Florida 32779.
PRODUCTS AND SERVICES
The Company has developed a complete process that incorporates an application
and monitoring system utilizing either existing or custom designed spray
application of Food Safe materials to fruit and vegetables after the initial
chlorine bath. The program continuously monitors water quality, Oxidation
Reduction Potential (ORP) , ph, chlorine concentration and maintains continuous
records in encrypted form that satisfies HACCP requirements. Any chemical run
off is neutral and is accepted in municipal waste water systems nationwide with
no special permitting required. The Company offers several different types of
chemicals and treatments, depending upon the nature of the product and the
objectives of the purchasers.
The Company believes its customer base is stable in that the Company provides
washing and monitoring systems and equipment to its customers under lease.
Additionally, each customer that is leased equipment must purchase chemicals
exclusively from the Company. Company personnel install the equipment or system
at each customers facility, and provide instruction and training. The Company
believes customer turnover will be low due to the quality of the products and
system, and the level of service provided on a regular basis. Minimum lease
periods begin at three years, with some going as high as ten years.
<PAGE>
The Company markets the following:
The Automated Truck "Worsher" -- The first automated truck and/or van
sanitizer. This machine utilizes ozone, peroxy acids or UV disinfection agents
to completely sanitize the interior of any conveyance of perishable commodities.
The "Worsher" effectively sanitizes truck trailers, ocean going vans or other
methods of transporting fruit, vegetables, meat, poultry or fish. By reducing
or eliminating contaminants from the interior of these conveyances, the safety
and cleanliness of the commodities being transported is ensured. A certificate
of sanitation is issued with each complete sanitation cycle which ensures that
the cleanliness chain is unbroken.
The Automated Commercial Produce "Worsher" -- The first automated commercial
produce "Worsher". This machine utilizes ozone, peroxy acids or UV disinfection
agents to safely wash and disinfect fruits and vegetables. It is suitable for
the kitchens of hotels, restaurants, commissaries and institutions. It is fully
self contained (only water and power are required). It effectively reduces or
eliminates pesticide residue and pathogens present on the surface of fruit and
vegetables. It ensures a clean, safe product that will ultimately be served to
consumers. Additionally, by removing surface pathogens, the shelf-life of
products is extended, reducing waste and costs of meal preparation.
The Automated Home Produce "Worsher" -- The first automated home produce
"Worsher". This machine utilizes ozone, peroxy acids or UV disinfection agents
to safely wash and disinfect fruits and vegetables. It is suitable for home use
and is used in conjunction with any stainless basin, existing water and power
supplies. It has an automated wash cycle with spray wand and is completely
EPA/OSHA environmentally friendly. It has an external control panel and gauges
that are easily accessible and is affordably priced. It is used to maintain the
safety of fruit and vegetables by reducing or eliminating pathogens on the
surface of the product. It is HACCP protocol compliant. It further lengthens
the shelf life of the fruit and vegetables by reducing or eliminating pathogens
on the surface of the product.
The Automated Packing System "Worsher" -- The Company offers
growers/packers/shippers previously unobtainable decontamination and
sterilization of agricultural produce using environmentally friendly processes.
These processes include, but are not limited to, chlorination, ozone, peroxy
acids, UV or electronic pasteurization of fruits and vegetables. These
processes reduce or eliminate the presence of microbial pathogens on the surface
of fruit and vegetables at the packing shed/distribution level prior to packing
and shipment to distributors and/or retailers. The reduction or elimination of
pathogens lengthens the shelf-life of the produce and maintains the sanitation
of the product throughout the distribution chain. Additionally, by monitoring
the sanitation of the product, a proper audit trail is established whereby any
problems that may occur have complete traceback capability.
The Company does not employ any processes or operations which are limited by
availability of materials or suppliers, as all components of the Company's
products and systems are commercially available and can be purchased from a
number of sources. The uniqueness of the products marketed is in the
combination and processes, which are strictly monitored.
<PAGE>
Over the first twelve months of the business plan, the Company intends to take
the following steps in order to make its services available; raise capital of
$1,000,000 to $1,250,000 through the sale of equity securities via a private
placement during months one through eight, open four offices, in Texas (Houston
office opened October 1, 1999), Florida, Maryland and New York during months six
through ten with a budget of $800,000 for installation of machinery, $200,000
for salaries, and 100,000 for advertising and other operating expenses during
months six through twelve. Management plans to continue penetration of
additional markets in year two.
There is no business in operations currently which competes directly with the
Company. Management is aware of a number of business which market chlorine
baths for use in the food safe industry. Although Management has limited access
to in-depth information regarding the operation of these chlorine bath
businesses, Management believes that the Company can effectively compete because
of Management's extensive knowledge of the food and food safe industry gained
from over seventy years of experience.
Management is not aware of any significant barriers to the Company's entry and
penetration into the food safe business, however, the Company at this time has
only a negligible market share of this market.
The Company's business is not subject to direct material regulation by federal
governmental agencies.
The Company does not have a formal research and development division. The
Company regards intellectual property rights as essential to its success, and
relies on trademark rights and confidentiality agreements, between and amongst
its partners, employees and others, to protect its proprietary interests. The
company is the proprietor of a service mark on the Food Safety Systems, Inc.
mark. There is no assurance that the steps taken to protect the Company's
proprietary rights will be adequate, or that third parties will not infringe or
misappropriate its service marks or similar proprietary rights. The Company
does not currently hold any patents on its chemical formulas.
The Company has entered into several advertising programs, but has grown
primarily through direct sales efforts, and referrals from customers. Although
the Company believes it competes in a new but fragmented market with few large
competitors, there is no assurance that the Company will not in the future
compete against larger companies with greater financial resources.
The Company currently has six full-time employees and one part-time employee.
No employees are covered by a collective bargaining agreement. Management
considers relations with its employees to be satisfactory.
Competition in the food safety business is fragmented, with the bulk of the
competition as family owned or closely held businesses. Some of these
businesses are being considered as potential acquisition candidates. However,
at the present time, the Company has no plans for such acquisitions. The
Company believes many of these businesses use antiquated, inefficient methods,
and the Company believes that an opportunity exists for it to become a primary
service provider nationwide by acquiring certain carefully selected facilities,
while at the same time building new modern facilities in key markets. The
Company will require external financing to execute its acquisition and expansion
strategy. At this time the Company has reviewed several financing alternatives,
but can provide no assurance that such financing will be available on favorable
terms, if at all.
<PAGE>
Computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of normal business activities.
The Company's management is familiar with all the software that will be utilized
in its business plan and has confirmation from third party suppliers that its
software is certified Year 2000 compatible for all of its computing
requirements. In addition embedded technology systems such as micro processors
in telephone systems and other non-computer devices that will be purchased per
the Company's business plan will be Year 2000 compatible.
While the Company has made what it believes to be adequate inquiries of its
software suppliers as to Year 2000 compliance, there can be no guarantee the
software suppliers will be adequately prepared for every possible contingent
Year 2000 software problem, which could have a minor adverse effect on the
Company's results of operations. Management's contingency plan for Year 2000
hardware and software business disruptions involves the purchase of new
off-the-shelf Year 2000 compatible software and hardware should it be necessary.
The total cost is not anticipated to be a material expense to the Company at
this time.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company's current cash balance is $12,740.00. Management believes the
current cash balance is sufficient to fund the current minimum level of
operations through October of 1999, however, in order to advance the Company's
business plan the Company must raise capital through the sale of equity
securities.
During the first twelve months of the business plan, the Company intends to take
the following steps in order to make its products and services available; raise
capital of $1,000,000 to $1,250,000 through the sale of equity securities via a
private placement during months one through eight, open four offices, in Texas
(Houston office opened October 1, 1999), Florida, Maryland and New York during
months six through ten with a budget of $800,000 for installation of machinery,
$200,000 for salaries, and 100,000 for advertising and other operating expenses
during months six through twelve. Management plans to continue penetration of
additional markets in year two. Management has taken several steps to implement
its business plan. On October 1, 1999, the Company opened a distribution
facility in Houston, Texas. A second warehouse is scheduled to be opened in
Jacksonville, Florida, on or about November, 1999. After raising capital,
Management intends to continue to utilize its experience in identifying and
securing distribution facilities, hire sales and plant management personnel, and
expand operations. The Company intends to use its equity capital to fund the
Company's business plan as cash flow from sales is estimated to begin within
thirty days after the Company opens each distribution facility in months six
through ten. The Company will face considerable risk in each of its business
plan steps, such as difficulty of securing adequate warehouse facilities within
its budget, difficulty of hiring competent personnel within its budget, and a
shortfall of funding due to the Company's inability to raise capital in the
equity securities market. If no funding is received during the next twelve
months, the Company will be forced to rely on its existing cash in the bank,
reduced cash flow, and funds loaned by the directors and officers. The
Company's directors and Officers have no formal commitments or arrangements to
advance or loan funds to the Company. In such a restricted cash flow scenario,
the Company would be unable to complete its business plan steps as contemplated,
and would, instead, delay all cash intensive activities. Without necessary cash
flow, the Company would be limited during the next twelve months, or until such
time as necessary funds could be raised in the equity securities market.
<PAGE>
ITEM 3 DESCRIPTION OF PROPERTY
Longwood, Florida. The Company operates from its offices at 210 Crown Point
Circle, Suite 108, Longwood , Florida 32779. Space is provided to the Company
on a rent free basis by Mr. Durket, an officer and director of the Company, and
it is anticipated that this arrangement will remain until such time as the
Company experiences sufficient cash flow to provide for such an expense.
Mesa, Arizona. Food Safety Systems, Inc. leases office space for $3,500.00 per
month. The lease is for a period of six months then converts to a month to
month basis.
Houston, Texas. Food Safety Systems, Inc. leases 900 square feet of office space
for $500.00 per month. The lease is for a period of three years.
Additionally, the Company owns $71,931 worth of equipment and $9,873 in
leasehold improvements, the majority of which is located in the Houston, Texas,
distribution facility.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
Name and Address Beneficial Ownership Percent of Class
- -------------------------- -------------------- -----------------
<S> <C> <C>
Steven Lorne Durket. . . . 416,667 8.49%
210 Crown Point Circle
Suite 108
Longwood, Florida 32779
C.W. "Bill" Karney . . . . 300,000 6.11%
350 W. Caldwell Avenue
Visalia, California 93277
Cede & Co. . . . . . . . . 1,051,100 21.42%
PO Box 222
Bowling Green Station
New York, NY 10247
</TABLE>
ITEM 5 DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
<TABLE>
<CAPTION>
Name Age Position Held Since
- ------------------- --- ---------------------- -----------
<S> <C> <C> <C>
Steven Lorne Durket 39 President and Director March, 1999
Secretary
C.W. "Bill" Karney. 58 President, Food Safety April, 1999
Systems, Inc.
</TABLE>
<PAGE>
The directors of the company are elected to hold office until the next annual
meeting of shareholders and until their respective successors have been duly
elected and qualified. There are no agreements with respect to the election of
directors. The Company has not compensated its directors for service on the
board of Directors or any committee thereof. As of the date hereof, no director
has accrued any expenses or compensation. Officers of the Company are appointed
annually by the Board of Directors and hold office until their successors are
duly appointed and qualified. Each Officer serves at the discretion of the
Board of Directors. The Company does not have any standing committees at this
time.
No Director, Officer, Affiliate or Promoter of the Company has, within the past
five years, filed any bankruptcy petition, been convicted in or been the subject
of any criminal proceedings, or is any such person the subject of any order,
judgment or decree involving the violation of any state or federal securities
laws.
Steven Lorne Durket -- Mr. Durket was appointed to the Board of Directors on
- ---------------------
March 22, 1999, to fill a vacancy. Mr. Durket graduated in 1982 from the Ohio
State University with a Bachelors of Science degree in Business Administration,
and in 1985 from Capitol University with a Juris Doctorate. Mr. Durket
currently practices law in Orlando, Florida. Mr. Durket is a member of the
Florida State Bar, the District of Colombia Bar, the United States District
Court, Middle District of Florida, the United States Supreme Court, and the
Orange County Bar Association. Mr. Durket is a member of Who's Who in Law, a
panel arbitrator for the American Arbitration Association, and an Adjunct
Professor of Law at Rollins College. Mr. Durket is also active in the American
Cancer Society, the Orlando Science Center, the Orlando Museum of Art, and other
local charitable organizations, and has served on the Board of Directors of
several public and private corporations.
C.W. "Bill" Karney -- Mr. Karney is a founder of Food Safety Systems, Inc.,
- --------------------
and currently serves as its President and Chief Executive Officer. Mr. Karney
brings over 35 years of experience in the produce business to the Company. Mr.
Karney has been involved in, among other things; domestic and international
grower relations for produce grown throughout the United States, Chile and
Mexico; farm management of row crop and fruit growing operations; establishment
of quality control standards for fresh market shipping of fruits and vegetables;
U.S. Department of Agriculture shipping point and terminal market inspections;
U.S. Department of Defense fresh fruit and vegetable buying contract officer;
consultant to numerous companies including Granada Marketing, Bartell Marketing,
Golden Maid Packers, ICN Produce, and JR Wood Company regarding sales and
distribution of fresh fruit and vegetables; quality control inspections of
imported fruit and vegetables arriving at the port of San Pedro, CA; and,
consultant to DTN, Inc., a provider of electronic information services to the
produce industry on a nation-wide scale
ITEM 6 EXECUTIVE COMPENSATION
Officers and Directors receive no remuneration at this time. All Company
Officers and Directors are entitled to reimbursement of funds advanced to pay
expenses in connection with the Company's business.
The Company does not have a bonus, profit sharing, or deferred compensation plan
for the benefit of its employees, officers or directors. The Company has not
paid any salaries or other compensation to its officers or directors through
this date. Further, the Company has not entered into any employment agreement
with any of its officers and directors at this time. It is intended that the
Company's officers and directors will defer any compensation until such time as
the business cash flow can provide their remuneration. As of the date hereof,
no person has accrued any compensation from the Company.
<PAGE>
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no related party transactions, or other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
The Officers and Directors are, so long as they are officers and directors,
subject to the restriction that all opportunities contemplated by the Company's
plan of operation which came to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to, the Company and the companies that they are affiliated with
on an equal basis. A breach of this requirement will be a breach of the
fiduciary duties of the officer or director. If the Company or the companies in
which the officers and directors are affiliated with both desire to take
advantage of an opportunity, than said officers and directors would abstain from
any involvement in negotiation or voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if the Company
should decline to do so.
The Issuer is not expected to have business dealings with affiliates, however,
if there are such dealings, the parties will deal on terms competitive in the
market, and on the same terms as either party would deal with a third person.
Stockholders shall be kept apprised of any such dealings. Presently, none of
the Officers, Directors, or Stockholders of the Company have any properties
which they contemplate offering to the Company.
ITEM 8 DESCRIPTION OF SECURITIES
Common Stock
The authorized capital stock of the Company consists of 30,000,000 shares of
common stock, with no par value per share, of which 4,905,000 are issued and
outstanding as of the date hereof. The shares are all one class, common, with
like rights and privileges. Each share is entitled to participate equally in
dividends and distributions declared by the Company. All shares of the
Company's common stock have equal voting rights and, when validly issued and
outstanding, have one vote per share in all matters to be voted upon by
shareholders. The shares have no preemptive, subscription, conversion or
redemption rights and may only be issued as fully paid and non assessable
shares. Cumulative voting in the election of directors is not allowed, which
means that the majority of the shares entitled to vote will be able to elect the
entire Board of Directors and that minority shareholders will not have the power
to elect any members to the Board.
Preferred Stock
The Company does not have any preferred stock, authorized or issued.
Presently, the Company has no agreements or understanding, express or implied,
with any person or entity concerning such options, warrants or calls entitling
the future purchase of the Company's common voting stock. There are no issued
or outstanding options, warrants, or calls entitling any person to purchase any
shares of the Company's common stock. The Company may, however, adopt a plan in
the future pursuant to which options, warrants, or calls would be made available
to Officers, Directors and key employees as an incentive to attract and maintain
their services on behalf of the Company.
<PAGE>
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades under the symbol "DVFU" on the OTC Electronic
Bulletin Board. The market for the common stock on the OTC Electronic Bulletin
Board is limited, sporadic, and highly volatile. The following table sets forth
the high and low prices per share of the common stock since the common stock
began trading on January 27, 1999, as reported by the OTC Electronic Bulletin
Board. These prices reflect inter-dealer prices, without retail mark-ups,
mark-downs or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal 1999
First Quarter . $ 5.25 $ 1.25
Second Quarter. $ 1.75 $0.375
Third Quarter . $2.156 $0.218
</TABLE>
On October 1, 1999, the last bid price of the Common Stock as reported by the
OTC Electronic Bulletin Board was $1.06250. The Company believes that as of
October 1, 1999, there were approximately 128 record owners of its common
stock. The Company can offer no assurance that it will generate earnings on
which cash dividends can be paid. Holders of shares of Common Stock are
entitled to dividends when, and if, declared by the Board of Directors out of
funds legally available therefor. The Company has not paid any dividends on its
Common Stock and intends to retain earnings, if any, to finance the development
and expansion of its business. Future dividend policy is subject to the
discretion of the Board of Directors and will depend upon a number of factors,
including future earnings, capital requirements and the financial condition of
the Company.
The Transfer Agent for the Company's Common Stock is Idaho Stock Transfer
Company, 421 Coeur d'Alene Avenue, Suite 3, Coeur d'Alene, Idaho 83814
ITEM 2 LEGAL PROCEEDINGS
To the knowledge of the Company, its Officers and Directors, neither the Company
nor any of its Officers or Directors are a party to any material legal
proceeding or litigation contemplated or threatened as of this date.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
<PAGE>
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
The following information sets forth certain information for all securities the
company sold within the past three years, without registration under the
Securities Act of 1933, as amended ("Securities Act"). There were no
underwriters in any of these transactions, nor were any sales commissions paid
thereon.
1. In July, 1998, the Company issued an aggregate of 2,000,000 shares to
eight non- affiliates in exchange for cash in the aggregate amount of
$20,000.00. The Company valued these shares at $20,000.00 or $0.01 per
share. The Company believes the securities issued were exempt from
registration pursuant to Regulation D, Rule 504, of the Securities Act.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-laws allow for the indemnification of Company Officers and
Directors in regard to their carrying out duties of their offices. The By-laws
also allow for reimbursement of certain legal defenses. The By-laws state as
follows:
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding whether civil, criminal, administrative, or investigative,
by reason of the fact that he or she is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of any other corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorney's fees), judgments,
fines, and amounts paid in settlements, actually and reasonably incurred by him
or her in connection with such action, suit, or proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonable
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe such conduct was unlawful. However, no indemnification shall be
provided in any action or suit by or in the right of the corporation to procure
a judgment in its favor, with respect to any claim, issue, or matter as to which
such person is adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the corporation. Indemnification hereunder
shall be made by the corporation only as authorized in the specific case on a
determination by a majority of disinterested directors, that such individual met
the applicable standard of conduct set forth above. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or on a
plea of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not meet the applicable standard of conduct.
Indemnification hereunder shall continue as to a person who has ceased to be a
director or officer, and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
As to indemnification for liabilities arising under the Securities Act of 1933
for directors, officers or persons "controlling" the Company, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
<PAGE>
PART F/S
intentionally left blank
<PAGE>
PART III
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit 2 Articles of Incorporation Attached
Exhibit 3 Bylaws Attached
Exhibit 4 Material Contracts None
Exhibit 5 Subsidiaries of the Registrant Attached
Exhibit 6 Material Foreign Patents None
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Diversified Funds, Inc.
Date: October 1, 1999 By /s/ Steven Lorne Durket
-----------------------------------------
Steven Lorne Durket, President & Director
Date: October 1, 1999 By /s/ Steven Lorne Durket
-----------------------------------------
Steven Lorne Durket, Secretary
<PAGE>
DIVERSIFIED FUNDS, INC.
AUDITED FINANCIAL STATEMENTS
APRIL 30, 1999 AND DECEMBER 31, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2-3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5-6
Consolidated Statements of Stockholders' Equity (Deficit) 7-8
Notes to Consolidated Financial Statements 9-19
</TABLE>
<PAGE>
ALBRIGHT, PERSING & ASSOCIATES, LTD.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Shareholders and Board of Directors
Diversified Funds, Inc.
We have audited the accompanying consolidated balance sheets of Diversified
Funds, Inc. and subsidiary (a development stage company) as of April 30, 1999
and December 31, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the four month period ended
April 30, 1999 and the year ended December 31, 1998 and for the period from
inception (November 25, 1983) to April 30, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Diversified Funds, Inc. as
of April 30, 1999 and December 31, 1998, and the results of its operations and
its cash flows for the four month period ended April 30, 1999, the year ended
December 31, 1998 and for the period from inception (November 25, 1983) to April
30, 1999 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 2 to the
financial statements, the Company's ability to generate sufficient cash flows to
meet its obligations and sustain its operations, either through future revenues
and/or additional debt or equity financing, cannot be determined at this time.
These uncertainties raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/S/ ALBRIGHT, PERSING & ASSOCIATES, LTD.
Reno, Nevada
September 23, 1999
1
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1999 AND DECEMBER 31, 1998
(SEE ACCOUNTANTS' REPORT)
ASSETS
April 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . $ 52 $ 9,314
Accounts receivable, related parties . . . . . 31,030 -
Prepaid expenses . . . . . . . . . . . . . . . 1,765 -
------------- -------------
Total Current Assets . . . . . . . . . . . . . 32,847 9,314
------------- -------------
Property and Equipment
Machinery and equipment. . . . . . . . . . . . 77,146 -
Leasehold improvements . . . . . . . . . . . . 9,873 -
------------- -------------
87,019 -
Less: accumulated depreciation . . . . . . . . (16,876) -
------------- -------------
Net Property and Equipment . . . . . . . . . . 70,143 -
------------- -------------
Other Assets
Goodwill, net of accumulated amortization
of $-0-. . . . . . . . . . . . . . . . . . . 246,916 -
Deferred tax asset, net of valuation allowance
of $48,609 in 1999 and $15,431 in 1998 . . . - -
------------- -------------
Total Other Assets . . . . . . . . . . . . . . 246,916 -
------------- -------------
Total Assets . . . . . . . . . . . . . . . . . $ 349,906 $ 9,314
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1999 AND DECEMBER 31, 1998
(SEE ACCOUNTANTS' REPORT)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
April 30, December 31,
1999 1998
------------- --------------
<S> <C> <C>
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . $ 28,451 $ 19
Current portion of capital lease obligation . 15,878 -
Note payable - Stockholder. . . . . . . . . . 96,030 -
------------- --------------
Total Current Liabilities . . . . . . . . . . 140,359 19
Capital Lease Obligation - Long term portion. 49,418 -
------------- --------------
Total Liabilities . . . . . . . . . . . . . . 189,777 19
------------- --------------
Stockholders' Equity (Deficit)
Common stock, no par value
authorized 30,000,000 shares,
issued and outstanding 4,855,000
shares at April 30, 1999 and 4,520,000
at December 31, 1998. . . . . . . . . . . . 210,000 42,500
Additional paid-in-capital. . . . . . . . . . 4,200 4,200
Deficit accumulated in the development
stage . . . . . . . . . . . . . . . . . . . (54,071) (37,405)
------------- --------------
Total Stockholders' Equity (Deficit). . . . . 160,129 9,295
------------- --------------
Total Liabilities and Stockholders'
Equity (Deficit). . . . . . . . . . . . . . . $ 349,906 $ 9,314
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
Four
Months Year Inception
Ended Ended Through
April 30, Dec. 31, April 30,
1999 1998 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Sales. . . . . . . . . $ - $ - $ -
----------------- ----------------- -----------------
Cost of Goods Sold . . . . - - -
----------------- ----------------- -----------------
Gross Profit . . . . . . . - - -
Operating Expenses . . . . 16,705 5,716 54,110
----------------- ----------------- -----------------
Loss from Operations . . . (16,705) (5,716) (54,110)
Other Income (Expense):
Interest income. . . . . . 39 - 39
----------------- ----------------- -----------------
Loss Before Provision for
Income Taxes . . . . . . . (16,666) (5,716) (54,071)
Income Taxes . . . . . . . - - -
----------------- ----------------- -----------------
Net Loss . . . . . . . . . $ (16,666) $ (5,716) $ (54,071)
================= ================= =================
Basic and Diluted Loss Per
Common share . . . . . . . $ (.01) $ - $ (.02)
================= ================= =================
Weighted average
shares outstanding . . . . 4,531,167 3,528,219 2,376,322
================= ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
Four
Months Year Inception
Ended Ended Through
April 30, Dec. 31, April 30,
1999 1998 1999
--------------- ------------- ---------------
<S> <C> <C> <C>
Cash Flows from/(for) Operating Activities:
Net (Loss). . . . . . . . . . . . . . . . . . $ (16,666) $ (5,716) $ (54,071)
--------------- ------------- ---------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for professional
services rendered . . . . . . . . . . . . . - - 29,000
Changes in assets and liabilities net
of effect of acquisitions:
Accounts payable . . . . . . . . . . . . 7,352 (2,470) 7,371
--------------- ------------- ---------------
Net Adjustments . . . . . . . . . . . . . 7,352 (2,470) 36,371
--------------- ------------- ---------------
Cash (Used) by Operating Activities . . . . . (9,314) (8,186) (17,700)
--------------- ------------- ---------------
Cash Flows From Investing Activities:
Cash acquired in acquisitions . . . . . . . . 52 - 52
--------------- ------------- ---------------
Cash Provided by Investing Activities . . . . 52 - 52
--------------- ------------- ---------------
Cash Flows From Financing Activities:
Stock issued for cash . . . . . . . . . . . . - 12,000 17,700
--------------- ------------- ---------------
Cash Provided by Financing Activities . . . . - 12,000 17,700
--------------- ------------- ---------------
Net change in cash. . . . . . . . . . . . . . (9,262) 3,814 52
Cash at beginning of period . . . . . . . . . 9,314 5,500 -
--------------- ------------- ---------------
Cash at end of period . . . . . . . . . . . . $ 52 $ 9,314 $ 52
=============== ============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
Four
Months Year Inception
Ended Ended Through
April 30, Dec. 31, April 30,
1999 1998 1999
---------------- --------------- ---------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- ----------------------------------------------------------------------
Amount paid for interest . . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ -
================ =============== ===============
Amount paid for income taxes . . . . . . . . . . . . . . . . . . . . . $ - $ - $ -
================ =============== ===============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
- ----------------------------------------------------------------------
Acquisition of Food Safety Systems, Inc:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . $ 31,030 $ - $ -
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765 - -
Equipment and leasehold improvements . . . . . . . . . . . . . . . . 70,143 - -
Intangibles and other assets . . . . . . . . . . . . . . . . . . . . 246,968 - -
Liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . (21,080) - -
Capital lease obligation assumed . . . . . . . . . . . . . . . . . . (65,296) - -
Stockholder notes assumed. . . . . . . . . . . . . . . . . . . . . . (96,030) - -
---------------- --------------- ---------------
Stock issued to acquire Food Safety
Systems, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,500 $ - $ -
================ =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY/DEFICIT
FOR THE PERIODS ENDED APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
Deficit
Accumulated
Additional in the
Common Stock Paid-in Treasury Development
--------------------------
Shares Amount Capital Stock Stage Total
------------- ----------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of founders stock on July 25,
1984 for professional services
rendered of $5,000, and $200 cash. . . . 10,000 $ 1,000 $ 4,200 $ - $ - $ 5,200
Net loss for year ended 12-31-84 . . . . - - - - (5,200) (5,200)
------------- ----------- ---------- ------------ ---------- ----------
Balance, December 31, 1984 . . . . . . . 10,000 1,000 4,200 - (5,200) -
Issuance of shares of common stock on
July 12, 1985 for professional
services rendered at $.01 per share . 2,200,000 22,000 - - - 22,000
Issuance of shares of common stock on
August 30, 1985 for professional
services rendered at $.01 per share . 200,000 2,000 - - - 2,000
Net loss for year ended 12-31-85 . . . . - - - - (24,000) (24,000)
------------- ----------- ---------- ------------ ---------- ----------
Balance, December 31, 1985 . . . . . . . 2,410,000 25,000 4,200 - (29,200) -
Issuance of shares of common stock
on September 10, 1997 for cash at
.05 per share in private placement. . . 110,000 5,500 - - - 5,500
Net loss for year ended 12-31-97 . . . . - - - - (2,489) (2,489)
------------- ----------- ---------- ------------ ---------- ----------
Balance, December 31, 1997 . . . . . . . 2,520,000 30,500 4,200 - (31,689) 3,011
Issuance of shares of common stock
on July 1, 1998 for cash at $.01
per share in a public offering, net
of offering costs of $8,000. . . . . 2,000,000 12,000 - - - 12,000
Issuance of share of common stock on
July 23, 1998 for 100,000 shares of
common stock of Medical Information
Synthesis Systems, Inc. at $.01 per
share in an exchange. . . . . . . . . 2,550,000 45,500 - - - 45,500
Recision of acquisition of Medical
Information Synthesis Systems, Inc. . (2,550,000) (45,500) - - - (45,500)
Net loss for year ended 12-31-98 . . . . - - - - (5,716) (5,716)
------------- ----------- ---------- ------------ ---------- ----------
Balance, December 31, 1998 . . . . . . . 4,520,000 $ 42,500 $ 4,200 $ - $ (37,405) $ 9,295
------------- ----------- ---------- ------------ ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY/DEFICIT
FOR THE PERIODS ENDED APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
Deficit
Accumulated
Additional in the
Common Stock Paid-in Treasury Development
------------------------
Shares Amount Capital Stock Stage Total
------------ ---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998, from
previous page . . . . . . . . . . . . 4,520,000 $ 42,500 $ 4,200 $ - $ (37,405) $ 9,295
------------ ---------- ---------- ------------ ----------- -----------
Issuance of share of common stock on
April 26, 1999 for 1,500 shares of
common stock of Food Safety Systems,
Inc. at $.50 per share in a stock-for-
stock exchange . . . . . . . . . . . . 335,000 167,500 - - - 167,500
Net loss for period ended 4-30-99 . . . . - - - - (16,666) (16,666)
------------ ---------- ---------- ------------ ----------- -----------
Balance, April 30, 1999 . . . . . . . . . 4,855,000 $ 210,000 $ 4,200 $ - $ (54,071) $ 160,129
============ ========== ========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
- --------------------------------------------------------------------------------
This summary of significant accounting policies of Diversified Funds, Inc.
(the "Company") is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Business Activity
- ------------------
The Company, a Louisiana corporation located in Longwood, Florida, was
incorporated on November 25, 1983, and is currently in the process of fulfilling
its business plan for (1) the marketing of new technologies for prolonging the
shelf life of fresh fruit and vegetables by reducing or eliminating microbial
pathogens, and (2) the development of new technologies in this area.
Principles of Consolidation and Basis of Presentation
- -----------------------------------------------------------
The consolidated financial statements include the accounts of Diversified
Funds, Inc. and its wholly owned subsidiary. All significant inter-company
balances and transactions have been eliminated in consolidation. Certain
reclassifications have been made to prior year financial statements to conform
to the current years presentation.
Revenue Recognition
- --------------------
The Company's products are ordered from suppliers when specific customer
orders are received. Revenues are recognized when the products are shipped.
Noncash Securities Issuance
- -----------------------------
Shares of common stock issued for other than cash have been assigned
amounts equivalent to the fair value of the services received in exchange.
Accounting Method
- ------------------
The Company's financial statements are prepared using the accrual method of
accounting.
9
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
- ------------------------------------------------------------------------------
Continued
Advertising
- -----------
Advertising costs are charged to operations when incurred.
Net (Loss) per Share
- -----------------------
In February, 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings per Share. SFAS No. 128 simplifies the standards for computing
earnings per share ("EPS") and was effective for financial statements issued for
periods ending after December 15, 1997, with earlier application not permitted.
Upon adoption, all prior EPS data was restated.
Basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing net
income by the weighted average shares outstanding, assuming all dilutive
potential common shares were issued.
Since the Company has no common shares that are potentially issuable, such
as stock options, convertible preferred stock, and warrants, basic and diluted
earnings per share are the same.
Statement of Cash Flows
- --------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents for purposes of the
statement of cash flows.
Income Taxes
- -------------
Effective January 1, 1993, Diversified Funds, Inc. adopted SFAS No. 109,
"Accounting for Income Taxes," which requires a liability approach to financial
accounting and reporting for income taxes. The differences between the
financial statement and tax bases of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently enacted tax
laws and rates that apply to the periods in which they are expected to affect
taxable income. Valuation allowances are established, if necessary, to reduce
deferred tax asset accounts to the amounts that will more likely than not be
realized. Income tax expense is the current tax payable or refundable for the
period, plus or minus the net change in the deferred tax asset and liability
accounts.
10
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
- ------------------------------------------------------------------------------
Continued
Use of Estimates
- ------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect (1) the reported amounts of assets and liabilities, (2)
disclosure of contingent assets and liabilities at the date of the financial
statements, and (3) reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
- --------------------------------
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash in bank, trade receivables, and receivables from
stockholders and related entities. The Company maintains its cash in various
bank deposit accounts. Accounts at each bank are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000 per bank. The Company's accounts at
these institutions, at times, may exceed federally insured limits. the Company
has not experienced any losses in such accounts. At April 30, 1999, all
accounts receivable were due from related parties.
Concentrations of Operations
- ------------------------------
The Company's planned business model and the current focus of its business
strategy involves the marketing of products designed for operation in the fruit
and vegetable reseller and producer markets. Any recessionary pressures or
other disturbances in such markets could have an adverse effect on the Company's
operations.
Goodwill
- --------
The Company has classified as goodwill the cost in excess of fair value of
the net assets of companies acquired in purchase transactions. Goodwill is
being amortized on a straight line method over a five year life. No
amortization has been charged to operations through April 30, 1999, as the
acquisition occurred at the end of this period.
11
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
- ------------------------------------------------------------------------------
Continued
Risks and Uncertainties
- -------------------------
The Company has not yet generated sufficient revenue and has funded its
operation primarily through the issuance of equity. The Company's prospects are
subject to the risks, expenses and uncertainties frequently encountered by
companies in the new and rapidly evolving markets for new technologies and
products. These risks include the inability of the Company to market its
products effectively to generate sales, the rejection of the Company's products
by consumers and other end product users, the failure to expand its sales and
marketing efforts to a national or international basis, as well as other risks
and uncertainties.
The Company experienced losses for every year since its inception in 1984
and had an accumulated deficit at April 30, 1999. Sufficient equity capital has
been raised throughout those years to fund operations. Accordingly, the
Company's ability to accomplish its business strategy and to ultimately achieve
profitable operations is dependent upon its ability to obtain additional
financing and execute its business plan. There can be no assurance that the
Company will be able to obtain additional funding, and if available, will be
obtained on terms favorable to or affordable by the Company. Failure to raise
additional capital when needed could have a material adverse effect on the
Company's business, results of operations and financial condition
Property and Equipment
- ------------------------
Property and equipment are stated at cost. Depreciation, which includes
the amortization of assets recorded under capital leases, is calculated using
the straight line method over estimated useful lives of 5-15 years, or the lease
term, whichever is shorter. There was no depreciation or amortization expense
for any of the periods presented in the financial statements.
New Accounting Standards
- --------------------------
In June, 1997, the Financial Accounting Standards Board issued SFAS No.
130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its components in a full
set of general-purpose financial statements. This statement does not, however,
require a specific format for the disclosure but requires the Company to display
an amount representing total comprehensive income for the period in its
financial statements. Comprehensive income is determined by adjusting net
income by other items not included as a component of net income, such as the
unrealized loss on marketable securities. The Company implemented SFAS No. 130
for its fiscal year 1999, but since it has no items of comprehensive income, no
presentation is required.
12
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
- ------------------------------------------------------------------------------
Continued
New Accounting Standards - Continued
- --------------------------
In June, 1997, the Financial Accounting Standards Board issued SFAS No.
131, Disclosures about Segments of an enterprise and Related Information. SFAS
No. 131 establishes standards for the manner in which public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. This
statement also requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. The Company
has determined that segment disclosures are not appropriate because the Company
operates in only one segment.
In June, 1998, the Financial Accounting Standards Board issued SFAS 131,
Accounting for Derivative Instruments and Hedging Activities, however, the
effective date for this pronouncement was delayed for one year from the original
effective date of fiscal years beginning after June 15, 1999. Since the Company
does not deal in derivative instruments or hedging activities, it is anticipated
that this pronouncement will have no impact on the Company's consolidated
financial statements.
NOTE 2 - CONSIDERATIONS RELATED TO CONTINUED EXISTENCE
- -------------------------------------------------------------
The Company has not yet generated significant revenue and has funded its
operations through the issuance of equity. Accordingly, the Company's ability
to accomplish its business strategy and to ultimately achieve profitable
operations is dependent upon its ability to obtain additional financing and
execute its business plan. The acquisition of Food Safety Systems, Inc. in
April, 1999 is viewed by management as a significant step in the ultimate
realization of profitable operations. However, additional capital will be
needed to fund the start up operations of the Food Safety Systems product line.
There can be no assurance that the Company will be able to obtain additional
funding, and, if available, that the funding will be obtained on terms favorable
to or affordable by the Company. The Company's management is exploring several
funding options and expects to raise additional capital through private
placements to continue to develop the Company's operations around its business
plan. Ultimately, however, the company will need to achieve profitable
operations in order to continue as a going concern. The Company incurred net
losses of $54,071 since its inception, and has an accumulated deficit of $54,071
at April 30, 1999.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
13
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 3 - ACQUISITIONS
- ------------------------
On April 26, 1999, the Company entered into a Plan and Agreement of
Reorganization with Food Safety Systems, Inc. in a business combination
accounted for as a purchase. Under the Plan, the Company exchanged 335,000
shares of its common stock with no par value for 100% or 1,500 shares of the
common stock of Food Safety Systems, Inc. Food Safety Systems, Inc. is in the
process of implementing its business plan to market technology and machinery
related to the treatment of fresh fruits and vegetables in an effort to increase
their shelf life and eliminate microbial pathogens. The total cost of the
acquisition was valued at $167,500 based on the approximate fair market value of
the common stock at the date of acquisition. The acquisition was accounted for
using the purchase method of accounting and resulted in the assumption of net
liabilities of $79,416. The purchase price was allocated substantially to
acquired goodwill and equipment acquired in the acquisition.
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1999:
<TABLE>
<CAPTION>
<S> <C>
Net Sales. . . . . $ 27,500
================
Net Loss . . . . . $ 97,582
================
Net Loss per Share $ (.02)
================
</TABLE>
On July 23, 1998, the Company entered into a Plan and Agreement of
Reorganization with Medical Information Synthesis Systems, Inc. in a business
combination accounted for as a purchase. Under the Plan, the Company exchanged
2,550,000 shares of its common stock with no par value for 100,000 shares of the
common stock of Medical Information Synthesis Systems, Inc. During 1999, the
acquisition transaction was rescinded in its entirety, and the 2,550,000 shares
issued were returned to the Company and canceled.
NOTE 4 - INCOME TAXES
- -------------------------
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or noncurrent depending on
the periods in which the temporary differences are expected to reverse.
14
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 4 - INCOME TAXES - Continued
- -------------------------
Amounts for deferred tax assets are as follows:
<TABLE>
<CAPTION>
Four
Months Year Inception
Ended Ended Through
April 30, Dec. 31, April 30,
1999 1998 1999
--------------- ------------- -------------
<S> <C> <C> <C>
Deferred tax asset, net of valuation
allowance of $48,609 in 1999,
and $15,431 in 1998. . . . . . . . $ - $ - $ -
=============== ============= =============
</TABLE>
The following temporary differences gave rise to the deferred tax asset at
April 30, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
Four
Months Year Inception
Ended Ended Through
April 30, Dec. 31, April 30,
1999 1998 1999
---------------- -------------- --------------
<S> <C> <C> <C>
Tax benefit of net operating loss
carryforward . . . . . . . . . . . . $ 38,749 $ 5,571 $ 38,749
Stock issued for services, deferred
for tax since no income inclusion
reported by recipient. . . . . . . . 9,860 9,860 9,860
---------------- -------------- --------------
48,609 15,431 48,609
Valuation allowance for judgement of
realizability of net operating loss
and services carryforwards to future
years. . . . . . . . . . . . . . . . (48,609) (15,431) (48,609)
---------------- -------------- --------------
Net Deferred Tax Asset . . . . . . . $ - $ - $ -
================ ============== ==============
</TABLE>
Assuming that the Company is unable to deduct as expenses the services
rendered to it in exchange for common stock, the Company can carry forward
$113,968 in net operating losses as follows:
15
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 4 - INCOME TAXES - Continued
- -------------------------
<TABLE>
<CAPTION>
Year Ended
December 31,
- -------------
<S> <C>
1999. . . . . $ 200
2012. . . . . 2,489
2013. . . . . 13,697
2013. . . . . 97,582
--------
$113,968
========
</TABLE>
If such expenses could be deducted, the net operating loss carryforward
would be increased by $29,000.
NOTE 5 - COMMON STOCK
- -------------------------
During the period ended April 30, 1999, the Company completed a private
offering, exempt from registration requirements under Rule 504 of Regulation D,
of 2,000,000 shares of common stock at $.01 per share. All 2,000,000 shares
were sold resulting in proceeds to the Company of $12,000, net of offering costs
of $8,000.
NOTE 6 - NOTES PAYABLE TO RELATED PARTIES
- ------------------------------------------------
Short-term notes payable to related parties consisted of the following
amounts at April 30, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
------------- ---------------
<S> <C> <C>
Note payable to related party acquired
in acquisition of Food Safety Systems,
Inc., note dated April 15, 1999 bearing
interest at 8% per annum, maturity on
April 15, 2000, unsecured . . . . . . . 96,030 -
------------- ---------------
$ 96,030 $ -
============= ===============
</TABLE>
16
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 7 - CAPITAL LEASE OBLIGATIONS
- ---------------------------------------
The Company has spraying and monitoring system equipment with a net book
value of $60,270 (accumulated depreciation of $16,876) under capital leases at
April 30, 1999.
Capital lease obligations consisted of the following amounts at April 30,
1999 and December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
------------- ----------------
<S> <C> <C>
Capital lease payable to Farm Credit Leasing,
dated June 26, 1998, payable at $1,909 per
month, including interest imputed at 12.08%
per annum, maturity June, 2002, secured
by leased equipment, original lease executed
by Karney & Associates, a sole proprietorship
that was predecessor of Food Safety Systems. . $ 65,296 $ -
------------- ----------------
65,296 -
Less Current Portion . . . . . . . . . . . . . . (15,878) -
------------- ----------------
Long Term Capital Lease Obligation . $ 49,418 $ -
============= ================
</TABLE>
Minimum future lease payments under the capital leases as of April 30,
1999, for each of the next five years and in aggregate is as follows:
<TABLE>
<CAPTION>
Year ended
April 30, Amount
---------- ------------
<S> <C>
2000 $ 22,903
2001 22,903
2002 22,903
2003 11,532
2004 and thereafter -
------------
80,241
Less: amount representing interest. . . (14,945)
------------
Present value of minimum lease payments $ 65,296
============
</TABLE>
The interest rate on the capitalized lease, in the amount of 12.075%, is
imputed based on the lessor's implicit rate of return.
17
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 8 - COMMITMENTS
- -----------------------
LEASES
The Company leases an automobile and a copy machine under non-cancelable
operating leases. The following is a schedule, by years, of the future minimum
lease payments under operating leases, together with the net minimum lease
payments as of April 30, 1999.
<TABLE>
<CAPTION>
Years ending April 30,
- ----------------------
<S> <C>
2000 . . . . $ 9,574
2001 . . . . 5,478
2002 . . . . -
2003 . . . . -
2004 . . . . -
Thereafter -
----------
Totals . . $ 15,052
==========
</TABLE>
Rental expense for all operating leases was $-0- and $-0- for the four
months ended April 30, 1999 and the year ended December 31, 1998, respectively,
since the leases were acquired as part of the acquisition of Food Safety
Systems, Inc., which did not occur until the end of April, 1999.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
- ---------------------------------------------------
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments" ("SFAS No. 107"), requires disclosure of the
fair value of financial instruments. The estimated fair value amounts have been
determined by the Company using available market value information and
appropriate methodologies. However, considerable judgement is required to
interpret market data to develop the estimates of fair value. Accordingly, the
estimates may not be indicative of the amounts the Company could realize in a
current market exchange. Estimated fair values of the Company's financial
instruments as of April 30, 1999 and December 31, 1998 are the same as their
carrying amount.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
such values:
For cash and cash equivalents, accounts receivable, notes payable, and
capital leases, the carrying amount reported in the consolidated balance sheets
is considered to be a reasonable estimate of fair value based on interest rates
of similar financial instruments in the marketplace.
18
<PAGE>
DIVERSIFIED FUNDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998
AND INCEPTION (NOVEMBER 25, 1983) TO APRIL 30, 1999
(SEE ACCOUNTANTS' REPORT)
NOTE 10 - YEAR 2000 ISSUES
- -------------------------------
Because many computer systems and programs use only two digits to record
the year in date fields, such systems may not be able to accurately process
dates including the year 2000 and after. The effects of this problem will vary
from system to system and may result in a major system failure, or adversely
affect a company's operations as well as the ability to prepare financial
statements.
In order to determine the impact that Year 2000 issues have on the Company,
(1) a complete assessment of all systems potentially affected by Year 2000
issues needs to be completed, and (2) management needs to determine the
consequences that its Year 2000 issues would have on its business, results of
operations, and financial condition. The Company's assessment of its Year 2000
issues includes addressing whether third parties with whom the Company has a
material relationship are Year 2000 compliant.
At the current time, the Company has not conducted a comprehensive review
of the computer systems of its recently acquired subsidiary to identify the
systems that could be affected by the Year 2000 issue and is developing an
implementation plan to resolve the issue. In addition, the Company has not yet
begun the process of identifying all third parties with whom the Company has a
material relationship so that they may determine if such parties are Year 2000
compliant. The Company presently believes that, with modifications to existing
software and conversion to new software, the Year 2000 problem will not pose
significant operational problems for the Company's computer systems as so
modified and converted. However, if such modifications and conversions are not
completed timely, the Year 2000 may have a material impact on the operations of
the Company. Additionally, if the Company's customers and vendors are unable to
resolve such processing issues in a timely manner, it could result in material
financial risk.
NOTE 11 - SUBSEQUENT EVENTS
- -------------------------------
On May 28, 1999, the Company entered into a commitment to purchase a
produce packing line to be used by the Company. The terms of the purchase
commitment require a 50% down payment at the time of acceptance, and the balance
due within 10 days. The total cost of the equipment was $48,440.
19
<PAGE>
Exhibit 2
STATE OF LOUISIANA PARISH OF EAST BATON ROUGE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DIVERSIFIED FUNDS, INC.
ARTICLE I
The name of the Corporation is Diversified Funds, Inc.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Business Corporation Law of
Louisiana.
ARTICLE III
The total number of shares of stock which the Corporation shall have
authority to issue is Thirty Million (30,000,000) common shares having no par
value. Shareholders shall have no preemptive rights and shall not be entitled
to cumulative voting. The Corporation may issue one or more series of shares of
preferred stock, each of which series may have such voting powers, full or
limited, or no voting powers, or such other powers, and such designations and
preferences, or other special rights, and qualifications, limitations, or
restrictions thereof, if any, as shall be stated and expressed in the resolution
or resolutions providing for the issuance of such series adopted by the board of
directors. The authority of the board of directors with respect to each series
of shares of preferred stock shall include, but not be limited to, determination
of the following:
<PAGE>
(a) the number of shares of preferred stock of any series issued
and the distinctive designation of the shares of such series of stock, if any;
(b) the dividend rate on the shares of any series of preferred
stock, whether dividends shall be cumulative, and, if so, from which date or
dates, and whether they shall be payable in preference to, or in another
relation to, the dividends payable on any other shares of stock;
(c) whether any series of shares of preferred stock shall have
conversion or exchange privileges, and, if so, the terms and conditions of such
conversion or exchange, including provision for adjustment of the conversion or
exchange rate upon the occurrence of such events as the board of directors shall
determine;
(d) whether or not any series of shares of preferred stock shall
be redeemable, and, if so, the terms and conditions of such redemption,
including the manner of selecting shares of preferred stock for redemption if
less than all shares of stock of a series are to be redeemed, the date or dates
upon or after which they shall be redeemable, and the amount per share of stock
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates;
(e) whether any series of shares of preferred stock shall be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of the shares of stock, and, if so, the terms and amount of such
sinking fund;
(f) the rights of any series of shares of preferred stock to the
benefit of conditions and restrictions upon the creation of indebtedness of the
Corporation or any subsidiary, upon the issue of any additional shares of stock
(including additional shares of stock of such series or of any other series),
and upon the payment of dividends or the making of other distributions on and
the purchase, redemption, or other acquisition by the Corporation or any
subsidiary of any outstanding shares of stock of the Corporation;
(g) the rights of any series of shares of preferred stock in the
event of any voluntary or involuntary liquidation , dissolution, or winding
up of the Corporation and whether such rights shall be in preference to , or
in another relation to, the comparable rights of any other class or classes
or series of shares of stock; and
(h) any other relative, participating, optional or other special
rights, qualifications, limitations, or restrictions of any series of shares of
preferred stock.
<PAGE>
ARTICLE IV
The address of the Corporation's registered office in the State of
Louisiana is 8550 United Plaza Road, Baton Rouge, Louisiana 70809. The name of
the Corporation's registered agent at that address is C T Corporation System.
ARTICLE V
To the extent permitted by law, and without action by the shareholders,
shares of stock of the corporation may be issued from time to time by the Board
of Directors, and any and all shares so issued, shall be deemed fully paid for
stock and not liable to any further assessment or call, the holder of such
shares shall not be liable for any further payment thereon. Additionally, the
Corporation may purchase or otherwise acquire shares of stock of any class
issued as may be authorized by its board of directors, in its direction, from
time to time.
ARTICLE VI
The number of directors of the corporation is fixed at not less than one
(1) nor more than seven (7), except that when all of the outstanding shares of
the corporation are held of record by fewer than seven shareholders, than there
need be only as many directors as there are shareholders, but this shall not
prevent a greater number of directors as aforesaid. The board of directors
shall meet at least semi-annually.
ARTICLE VII
The Corporation's board of directors shall have the power and authority to
amend or repeal the Corporation's by-laws and adopt new by-laws; provided that
the board of directors of the Corporation may not amend or repeal any provisions
in the Corporation's by-laws adopted by the stockholders, if the stockholders or
such by-laws specifically provide that any such provision shall not be subject
to amendment or repeal by the board of directors.
<PAGE>
ARTICLE VIII
Any director or the entire board of directors of the Corporation may be
removed, with or without cause, by the holders of at least two-thirds of the
shares of stock then entitled to vote at an election of directors; provided that
if two-thirds of the entire board of directors recommend to the stockholders
that a director be removed, then such director may be removed, with or without
cause, by the holders of at least a majority of the shares of stock then
entitled to vote at an election of directors.
ARTICLE IX
The Corporation's board of directors, in connection with the exercise of
its judgment in determining what is in the Corporation's and its stockholder's
best interests, when reviewing and evaluating any proposal of another party to
(a) make a tender or exchange offer for any of the Corporation's equity
securities, (b) merger or consolidate the Corporation with another corporation,
(c) sell, mortgage, pledge, or make another disposition of 20% or more of the
assets of the Corporation, or (d) make or enter into any transaction similar in
purpose or effect to any of the foregoing, may, to the extent rationally related
to benefits accruing to the stockholders and to the extent not inconsistent with
Louisiana Law, consider all factors which the board of directors deems relevant,
including without limitation:
(1) The adequacy or inadequacy of the proposed offer based upon
the current market price of the Corporation's securities, the historical and
present operating results or financial condition of the Corporation, the then
current value of the Corporation in a freely negotiated transaction, and the
estimated future value of the Corporation as an independent entity;
(2) Any questions concerning the illegality of the proposed offer;
(3) The impact of the proposed offer on the Corporation's
employees, customers, suppliers, and creditors and on the local community;
(4) The potential risk that the proposed offer cannot or will not
be consummated;
(5) The quality of the securities and other consideration being
offered;
(6) The business and financial condition of the offeror, including
the possible impact of the offeror's financial condition could have on the
Corporation;
(7) The experience and integrity of the offeror and its
management; and
(8) Such other factors as the board of directors may deem
relevant.
<PAGE>
ARTICLE X
In addition to any necessary percentage voting requirements (and
notwithstanding that a lesser percentage may be required) under the Business
Corporation Law of Louisiana, as the same exists or may hereafter be amended,
for the amendment or repeal of any provision of this Amended and Restated
Articles of Incorporation, any provision of this Amended and Restated Articles
of Incorporation may be amended or repealed by the affirmative vote of the
holders of shares of stock entitling them to exercise at least two-thirds of the
voting power on such proposal; provided that if such proposal was recommended
for approval by at least two-thirds of the directors, then the affirmative vote
of the holders of shares of stock entitling them to exercise at least a majority
of the voting power on such proposal shall be required.
ACKNOWLEDGED AND APPROVED this 22nd day of June, 1998.
-----
/s/ Steven Lorne Durket
--------------------------
Steven Lorne Durket, Secretary
CERTIFICATION OF ARTICLES OF INCORPORATION
OF
DIVERSIFIED FUNDS, INC.
OCTOBER 1, 1999
The undersigned, as the Secretary of Diversified Funds, Inc., a corporation
organized under the laws of the State of Louisiana, does hereby certify and
state that the attached is a true copy of the Articles of Incorporation and all
amendments of the Company, as in effect as of the day and year first written
above.
/s/ Steven Lorne Durket
--------------------------
Steven Lorne Durket
Secretary
<PAGE>
Exhibit 3
BYLAWS
OF
DIVERSIFIED FUNDS, INC.
ARTICLE I. CORPORATE OFFICE
The office and principal place of business of the corporation shall be
located at 210 Crown Point Circle, Suite 108, Longwood, Florida 32779.
ARTICLE II. SHAREHOLDERS
Section One - Annual Meeting
(a) An annual meeting of shareholders shall be held in each year on or
about the second Saturday in July at 12:00 p.m., local time, unless such a day
should fall on a legal holiday, in which event the meeting shall be held at the
same hour on the next succeeding business day that is not a legal holiday.
Annual meetings shall be held at the principal office of the corporation or at
such other place within the State of Florida as may be determined by the board
of directors and designated in the notice of such meeting.
(b) If, in any year, the election of directors is not held at the
annual meeting of shareholders or an adjournment thereof, the board of directors
shall call a special meeting of shareholders as soon thereafter as reasonable
possible for the purpose of holding such election and transacting such other
business as may properly be brought before the meeting. In the event the board
of directors fails to call a special meeting within six months after the date
prescribed for the annual meeting, any shareholder may call such a meeting, and
at such meeting the shareholders may elect directors and transact all other
business properly brought before the meeting.
(c) No change in the time or place of a meeting for the election of
directors may be made within thirty (30) days of the date for which such meeting
is scheduled, and written notice of any change in the date of such a meeting
must be given to each shareholder of record at lease ten (10) days prior to the
date for which any such meeting is re-scheduled.
(d) Any shareholders' meeting, annual or special, may be adjourned from
time to time by the affirmative vote of a majority of the shares represented at
such meeting either in person or by proxy. An adjournment may be voted
regardless of whether a quorum is present. When a shareholders' meting is
adjourned for ten (10) days or more, notice of the adjourned meeting must be
given as in the case of an original meeting. When a meeting is adjourned for
less than ten (10) days, no notice of the time and place of the adjourned
meeting need be given other than by announcement at the meeting at which the
adjournment is voted.
Section Two - Special Meetings
Special meetings of shareholders may be called for any purpose. Such
meetings may be called at any time by the president, the board of directors, or
by the holders of not less than one-tenth of all outstanding shares of the
corporation. On the written request of any person or persons entitled to call a
special meeting, the secretary shall inform the board of directors as to such
call, and the board shall fix a time and place, the meeting shall be held at the
principal office of the corporation at a time fixed by the secretary.
<PAGE>
Section Three - Action by shareholders by Written Consent
(a) Any action required or permitted by law to be taken at a meeting of
shareholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, is 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 shares entitled to vote thereon were present and voted. If any class
of shares entitled to vote as a class thereon, and of the total shares entitled
to vote thereon.
(b) Within ten (10) days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing. Such notice shall fairly summarize the material features of the action
so authorized and, if the action is a merger, consolidation, or sale or exchange
of assets, for which dissenters' rights are provided by law, shall contain a
clear statement of the right of dissenting shareholders to be paid the fair
value of their shares on compliance with the applicable statutory provisions.
Section Four - Notice of Meetings
Written or printed notice stating the place, day, and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than sixty
(60) days before the date of the meeting, either personally or by first-class
mail, by or at the direction of the president, secretary, or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
the meeting. If the notice is mailed at least 30 days before the date of the
meeting, it may be done by a class of United States mail other than first class.
If mailed, such notice shall be deemed to have been delivered when deposited in
the United States mail, postage prepaid, addressed to the shareholder to receive
it at his or her address as it then appears on the records of the corporation.
<PAGE>
Section Five - Waiver of Notice
A shareholder may waive notice of any annual or special meeting by signing
a written notice of waiver either before or after the date of such meeting.
Section Six - Closing of Transfer Books; Record Date
(a) For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders, or to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors may provide that the stock transfer books
will be closed for a stated period not less than ten (10) not more than sixty
(60) days.
(b) In lieu of closing the stock transfer books, the board of directors
may fix, in advance, a date as the record date for a determination of
shareholders for any of the purposes enumerated in subsection (a) above. Such
date shall be not less than ten (10) nor more than sixty (60) days.
(c) If the stock transfer books are not closed and a record date is not
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring the dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
(d) 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 of such meeting.
Section Seven - Quorum
The presence, at any shareholders' meeting, in person or by proxy, of
persons entitled to vote a majority of the shares of the corporation then
outstanding shall constitute a quorum for the transaction of business. In
determining whether quorum requirements for a meeting have been met, any share
that has been enjoined from voting or that for any reason cannot be lawfully
voted shall not be counted.
Section Eight - Proxies
Every person entitled to vote at a shareholders' meeting of the
corporation, or entitled to execute written consent authorizing action in lieu
of a meeting, may do so either in person or by proxy executed in writing by the
shareholder or by his or her duly authorized attorney-in-fact. No proxy shall
be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy.
Section Nine - Voting
<PAGE>
Each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. The
affirmative vote of the majority of shares represented at a meeting at which a
quorum is present shall be the act of the shareholders unless the vote of a
greater number or a vote by classes is required by the articles of
incorporation, these bylaws, or the laws of the State of Louisiana.
Section Ten - Voting Record
(a) At least ten (10) days before each meeting of shareholders, the
secretary or other officer of the corporation having charge of the transfer
books shall compile a complete list, in alphabetical order, of the names and
addresses of shareholders entitled to vote at such meeting, together with the
number and class and series, if any, or shares held by each. The list shall be
kept on file at the registered office of the corporation and shall be subject to
inspection by any shareholder during the ten days immediately prior to such
meeting, during usual business hours. The list shall also be produced and kept
open at the time and place of the meeting, and shall be subject to the
inspection of any shareholder throughout the meeting.
(b) The original stock transfer books shall be prima facie evidence as
to who are the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.
(c) Failure to comply with the requirements of this section shall not
affect the validity of any action taken at the meeting of shareholders.
However, if the requirements of this section have not been substantially
complied with, the meeting shall be adjourned until the requirements are
complied with, on the demand of any shareholder in person or by proxy.
Section Eleven - Order of Business
The order of business at the annual meeting of shareholders and, insofar as
possible, at all other meetings of shareholders, shall be as follows:
(a) Call to order.
(b) Proof of notice of meeting.
(c) Reading and disposing of any unapproved minutes.
(d) Reports of officers.
(e) Reports of committees.
(f) election of directors.
(g) Disposition of unfinished business.
(h) Disposition of new business.
(i) Adjournment.
<PAGE>
ARTICLE III. BOARD OF DIRECTORS.
Section One - General Powers
Subject to limitations of the articles of incorporation, these bylaws, and
the laws of the State of Louisiana concerning corporate action that must be
authorized or approved by the shareholders of the corporation, all corporate
powers shall be exercised by or under the authority of the board of directors,
and the business and affairs of the corporation shall be controlled by the
board.
Section Two - Number, Tenure, Qualifications, and Elections
The board of directors shall consist of not less than one (1) persons who
need not be shareholders of the corporation. The number of directors may be
increased or decreased from time to time by amendment to these bylaws.
Directors of the corporation shall be elected at the annual meeting of
shareholders or at a meeting held in lieu thereof as provided in Article II
Section One (b), above, and shall serve until the next succeeding annual meeting
and until their successors have been elected and qualified.
Section Three - Meetings
(a) The board of directors shall hold an organizational meeting
immediately following each annual meeting of shareholders. Additionally,
regular meetings of the board of directors shall be held at such times as shall
be fixed from time to time by resolution of the board.
(b) Special meetings of the board may be called at any time by the
president, or, if the president is absent or is unable or refuses to act, by any
vice president or by any two members of the board.
(c) Notice need not be given of regular meetings of the board, nor need
notice be given of adjourned meetings. Notice of special meetings shall be in
writing delivered in person or by first-class mail or telegram or cablegram at
least three (3) days prior to the date of the meeting. Neither the business to
be transacted at nor the purpose of any such meeting need by specified in the
notice. Attendance of a director at a meeting shall constitute a waiver of
notice and a waiver of all objection to the place, time, and manner of calling
the same, except where the director states, at the beginning of the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.
(d) Members of the board may participate in a meeting of the board by
means of a conference telephone or similar communications equipment by which all
persons participating can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting.
<PAGE>
Section Four - Quorum and Voting
A majority of directors in office shall constitute a quorum for the
transaction of business, and the acts of a majority of directors present at a
meting at which a quorum is present shall constitute the acts of the board of
directors. If, at any meeting of the board of directs, less than a quorum is
present, a majority of those present may adjourn the meeting, from time to time,
until a quorum is present. In the event vacancies exist on the board of
directors, other than vacancies created by the removal of a director present at
a meeting at which a quorum is present shall constitute the acts of the board of
directors. If, at any meeting of the board of directors, less than a quorum is
present, a majority of those present may adjourn the meeting, from time to time,
until a quorum is present. In the event vacancies created by the removal of a
director or directors by the shareholders or by an increase in the number of
directors, the remaining directors, although less than a quorum, may elect a
successor or successors for the unexpired term or terms by majority vote.
Section Five - Vacancies
(a) A vacancy in the board of directors shall exist on the happening of
the following events:
(1) A director dies, resigns, or is removed from office.
(2) The authorized number of directors is increased with out
the simultaneous election of a director or directors to fill the newly
authorized position.
(3) The shareholders at any annual, regular, or special meeting at
which directors are to be elected, elect less than the number of directors
authorized to be elected at that meeting.
(4) The board of directors declares vacant the office of a
director who has been adjudicated of unsound mind or has been finally convicted
of a felony or who, within ten days after notice of his or her election to the
board, neither accepts the office in writing nor attends a meeting of the board
of directors.
A reduction in the authorized number of directors does not remove any director
from office prior to the expiration of his or her term of office.
<PAGE>
(b) A vacancy in the board of directors, except a vacancy occurring by
the removal of a director, maybe filled by the vote of a majority of the
remaining directors, even though less than a quorum is present. Each director
so elected shall hold office for the unexpired term of his or her predecessor in
office. Any directorship that is to be filled as a result of an increase in the
number of directors must be filled by election at an annual or special meeting
of shareholders called for that purpose.
Section Six - Removal
(a) At any regular meeting of shareholders, or at any special meeting
called for such purpose, any director or directors may be removed from office,
with or without cause, by majority vote.
(b) New directors may be elected by the shareholders for the unexpired
terms of directors removed from office at the same meetings at which such
removals are voted. If the shareholders fail to elect persons to fill the
unexpired terms or removed directors, such terms shall be considered vacancies
to be filled by the remaining directors as provided in Section Five, above.
Section Seven - Compensation
Directors, including directors also serving the corporation in another
capacity and receiving separate compensation therefor shall be entitled to
receive from the corporation as compensation for their services as directors
such reasonable compensation as the board may from time to time determine, and
shall also be entitled to reimbursements for any reasonable expenses incurred in
attending meetings of directors.
Section Eight - Indemnification
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding whether civil, criminal, administrative, or investigative,
by reason of the fact that he or she is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of any other corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorney's fees), judgments,
fines, and amounts paid in settlements, actually and reasonably incurred by him
or her in connection with such action, suit, or proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonable
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe such conduct was unlawful. However, no indemnification shall be
<PAGE>
provided in any action or suit by or in the right of the corporation to procure
a judgment in its favor, with respect to any claim, issue, or matter as to which
such person is adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the corporation. Indemnification hereunder
shall be made by the corporation only as authorized in the specific case on a
determination by a majority of disinterested directors, that such individual met
the applicable standard of conduct set forth above. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or on a
plea of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not meet the applicable standard of conduct.
Indemnification hereunder shall continue as to a person who has ceased to be a
director or officer, and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
Section Nine - Committees
(a) The board of directors may, by resolution adopted by a majority of
the whole board, designate two or more directors go constitute an executive
committee which , to the extent provided in such resolution, shall have and may
exercise all of the authority of the board of directors in the management of the
corporation, except that such committee shall have no authority to (1) approve
or recommend to shareholders actions or proposals required by law to be approved
by the shareholders; (2) Designate candidates for the office of director,
for purposes of proxy solicitation or otherwise; (3) fill vacancies on the board
of directors or any committee thereof; (4) amend these bylaws; (5) authorize or
approve the re-acquisition of shares, unless pursuant to a general formula or
method specified by the board of directors; or (5) authorize or approve the
issuance or sale of, or any contract to issue or sell shares, except as
otherwise provided by law. The board of directors shall have power at any time
to fill vacancies in, to change the size or membership of, and to discharge any
such committee.
(b) Any such executive committee shall keep a written record of its
proceedings and shall submit such record to the whole board at each regular
meeting thereof and at such other times as may be requested by the board.
However, failure to submit such record, or failure of the board to approve any
action indicated therein shall not invalidate such action to the extent it has
been carried out by the corporation prior to the time the record thereof was or
should have been submitted to the board as provided herein.
<PAGE>
ARTICLE IV. OFFICERS
Section One - Renumeration of Offices
The corporation shall have as officers a president, a secretary, and a
treasurer. The board of directors, in its discretion, may appoint a chairman of
the board, one or more additional vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as the
business of the corporation may require.
Section Two - Election and Term of Office
The principal officers of the corporation shall be elected by the board of
directors at its organizational meeting immediately following the annual meeting
of shareholders, or as soon thereafter as is reasonably possible. Subordinate
officers may be elected from time to time as the board may see fit. Each
officer shall hold office until his or her successor is elected and qualified,
or until his or her resignation, death, or removal.
Section Three - Removal
Any officer may be removed from office at any time, with or without cause,
on the affirmative vote of a majority of the board of directors. Removal shall
be without prejudice to any contract rights of the officer remove.
Section Four - Vacancies
Vacancies in offices, however occasioned, may be filled by election by the
board of directors at any time for the unexpired terms of such offices.
Section Five - President; Powers and Duties
Subject to any supervisory duties that may be given by the board of
directors to any chairman of the board, the president shall be the principle
executive officer of the corporation. Subject to the control of the board of
directors, the president shall supervise and direct generally all the business
and affairs of the corporation. The president shall preside at all meetings of
the shareholders at which her or she is present. In the absence of the chairman
of the board, or if there is no such chairmen, the president shall preside at
all meetings of the board of directors at which he or she is present. The
president may sign, with the secretary or any other officer of the corporation
so authorized by the board of directors, certificates for shares of the
corporation, and any deeds, mortgages, bonds, contracts, or other instruments
that the board of directors has authorized for execution, except when the
signing and execution thereof has been expressly delegated by the board of
directors of these bylaws to some other officer or agent of the corporation or
is required by law to be otherwise signed or executed. The president shall also
make reports to the board of directors and shareholders and in general shall
perform all duties incident to the office of president and such other duties as
may be prescribed from time to time by the board of directors.
<PAGE>
Section Six - Vice President; Powers and Duties
In the absence of the president of the corporation or in the event of his
or her death or inability or refusal to act, the vice president shall perform
the duties of the president and, when so acting, shall act with all of the
powers of and be subject to all the restrictions on the president. In the event
more than one vice president is elected, the vice presidents shall serve in the
capacity of the president in the order designated at the time of their election.
Any vice president may sign share certificates with the secretary or an
assistant secretary. The vice president or vice presidents shall also perform
such other duties as may be assigned, from time to time, by the president or the
board of directors.
Section Seven - Treasurer; Power and Duties
The treasurer of the corporation shall have the following powers and
duties:
(a) To be custodian and take charge of and be responsible for all funds
and securities of the corporation;
(b) To receive and give receipts for money due and paid to the
corporation form any source whatsoever;
(c) To deposit all such monies paid to the corporation in the name of
the corporation in such banks, trust companies, or other depositories as shall
be selected in accordance with the provisions of these bylaws;
(d) To perform all of the duties incidental to the office of treasurer
and such other duties as may be assigned to the treasurer, from time to time, by
the president or the board of directors;
(e) To give a bond for faithful discharge of his or her duties when
required to do so by the board of directors.
<PAGE>
Section Eight - Secretary; Powers and Duties
The secretary of the corporation shall have the following powers and
duties:
(a) To keep the minutes for the meetings of shareholders and of the
board of directors, in one or more books provided for that purpose;
(b) To see that all notices are duly given, in accordance with these
bylaws or as required by law;
(c) To be custodian of the corporate records and the seal of the
corporation;
(d) To see that the seal of the corporation is affixed to all documents
duly authorized for execution under seal on behalf of the corporation;
(e) To keep a register of the post-office address of each shareholder
whose address shall be furnished to the secretary by the shareholder;
(f) To sign with the president, or a vice president, certificates for
corporate shares the issuance of which have been authorized by resolution of the
board of directors;
(g) To have general charge of the stock transfer books of the
corporation; and
(h) To perform all duties incidental to the office of secretary and
such other duties as may be assigned to the secretary, from time to time, by the
president or the board of directors.
Section Nine - Subordinate Officers
Other subordinate officers, including without limitation an assistant
treasurer or treasurers and an assistant secretary or secretaries may be
appointed by the board of directors from time to time, and shall exercise such
powers and perform such duties as may be delegated to them by the resolutions
appointing them, or by subsequent resolutions adopted by the board of directors
from time to time.
Section Ten - Absence or Disability of Officers
In the case of the absence or disability of any officer of the corporation
and of any person hereby authorized to act in his or her place during such
absence or disability, the board of directors may be resolution delegate the
power and duties of such officer to any other officer, or to any director, or to
any other person whom it may select.
Section Eleven - Salaries
The salaries of all officers of the corporation shall be fixed from time to
time by the board of directors. No officer shall be disqualified from receiving
a salary by reason of also being a director of the corporation and receiving
compensation therefore.
<PAGE>
ARTICLE V. STOCK CERTIFICATES
Section One - Form
The shares of the corporation shall be represented by certificates signed
by the president or a vice president, and by the secretary or an assistant
secretary. If a certificate is manually signed on behalf of a transfer agent or
registrar other than the corporation, any other signatures or counter-signatures
on the certificate may be facsimiles. Each shares certificate shall also state:
(a) The name of the corporation;
(b) That the corporation is organized under the laws of the State of
Louisiana;
(c) The name of the person or persons to whom issued;
(d) The number and class of shares, and the designation of the series,
if any, which such certificate represents; and
(e) The par value of each share represented by such certificate, or a
statement that the shares are without par value.
Each certificate shall also set forth or fairly summarize on the face or
back thereof, or shall state that the corporation will furnish to any
stockholder on request and without charge, a full statement of designations,
preferences, limitations, and relative rights of the shares of each class or
series authorized to be issued. Any certificate representing shares that are
restricted as to the sale, disposition, or other transfer of such shares, shall
also state that such shares are restricted as to transfer, and shall set forth
or fairly summarize on the certificate, or shall state that the corporation will
furnish to any stockholder on request and without charge, a full statement of
such restrictions.
Section Two - Subscriptions for Stock
Unless otherwise provided in the subscription agreement, subscriptions for
shares shall be paid in full at such time, or in such installments and at such
times, as shall be determined by the board of directors. Any call made by the
board of directors for payment on subscriptions shall be uniform as to all
shares of the same class or as to all shares of the same series, as the case may
be. In case of default in the payment of any installment or call when such
payment is due, the corporation may proceed to collect the amount due in the
same manner as any debt due the corporation.
Section Three - Transfer
<PAGE>
Transfer of shares of the corporation shall be made in the manner specified
in the Louisiana Code. The corporation shall maintain stock transfer books, and
any transfer shall be registered thereon only on request and surrender of the
stock certificate representing the transferred shares, duly endorsed.
Additionally, the board of directors may appoint one or more transfer agents or
transfer clerks and one or more registrars as custodians of the transfer books,
and may require all transfers to be made with and all share certificates to bear
the signatures of any of them. The corporation shall have the absolute right to
recognize as the owner of any shares of stock issued by it, for all proper
corporate purposes, including the voting of such shares and the issuance and
payment of dividends on such shares, the person or persons in whose name the
certificate representing such shares stands on its books. However, if a
transfer of shares is made solely for the purpose of furnishing collateral
security, and if such fact is made known to the secretary of the corporation, or
to the corporation's transfer agent or transfer clerk, the record entry of such
transfer shall state the limited nature thereof.
Section Four - Lost, Destroyed and Stolen Certificates
No certificate for shares of stock in the corporation shall be issued in
place of any certificate alleged to have been lost, destroyed stolen, or
mutilated except on production of such evidence and provision of such indemnity
to the corporation as the board of directors may prescribe.
ARTICLE VI. CORPORATE ACTIONS
Section One - Contracts
The board of directors may authorize any officer or officers, or any agent
or agents of the corporation to enter into any contract or to execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section Two - Loans
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation, or of a
subsidiary, including any officer or employee who is a director of the
corporation or of a subsidiary, whenever, in the judgment of the board of
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty, or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. No loans shall be made or contracted on behalf of the
corporation, and no evidences of indebtedness shall be issued in its name,
unless authorized by resolution of the board of directors. Such authority may
be general or confined to specific instances.
<PAGE>
Section Three - Checks, Drafts, or Orders
All checks, drafts, or other orders for the payment of money by or to the
corporation, and all notes and other evidence of indebtedness issued in the name
of the corporation shall be signed by such officer or officers, agent or agents
of the corporation and in such manner as shall from time to time be determined
by resolution of the board of directors.
Section Four - Bank Deposits
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies, or
other depositories as the board of directors may select.
Section Five - Voting Securities Held by the Corporation
Unless otherwise ordered by the board of directors, the president, or any
vice president and the secretary or an assistant secretary of the corporation
shall have authority to vote, represent, and exercise on behalf of the
corporation all rights incidental to any and all shares of any other corporation
standing in the name of the corporation. Such authority may be exercised by the
designated officers in person or by proxy.
The board of directors shall have authority to establish branch or
subordinate offices of the corporation at such place or places in which the
corporation is authorized to do business as the board shall determine to be in
the best business interest of the corporation.
ARTICLE VII. MISCELLANEOUS
Section One - Reports to Shareholders
The board of directors shall cause an annual report to be sent to the
shareholders of the corporation, not later than four months after the close of
the fiscal year of the corporation. Such report shall include a balance sheet
as of the close of the fiscal year of the corporation and an income statement
for the year ending on such closing date. Such financial statements shall be
prepared from and in accordance with the books of the corporation, in conformity
with generally accepted accounting principles applied on a consistent basis, and
shall be certified by an independent certified public accountant.
<PAGE>
Section Two - Inspection of Corporate Records
Any person who has been a holder of record of shares or of voting trust
certificates for shares of the corporation for at least six months immediately
preceding his or her demand, or is the holder of record of, or the holder of
record of voting trust certificates for, at least five percent (5%) of the
outstanding shares of any class or series of the corporation, shall have the
right, for any proper purpose, at any reasonable time, on written demand stating
the purpose thereof, to examine and make copies from the relevant books and
records of accounts, minutes, and record of shareholders of the corporation.
On the written request of any shareholder, the corporation shall mail to
such shareholder, a balance sheet as of the close of its latest fiscal year and
a profit and loss statement for such fiscal year. If such request is received
by the corporation before such financial statements are available for its latest
fiscal year, the corporation shall mail such financial statements as soon as
they become available, and in any event within four months after the close of
its latest fiscal year. Additionally, balance sheets and profit and loss
statements shall be filed in the registered office of the corporation in
Florida, and shall be kept for at least five years, and shall be subject to
inspection during business hours by any shareholder or holder of voting trust
certificates, in person or by agent.
Section Four - Fiscal Year
The fiscal year of the corporation shall begin on the first day of January
of each year and end at midnight on the thirty-first day of December of the same
year.
Section Five - Corporate Seal
The board of directors shall adopt an official seal for the corporation,
which shall be circular in form and be inscribed with the name of the
corporation, the state of incorporation, and the words "Corporate Seal."
ARTICLE VIII. AMENDMENTS
These bylaws may be altered, amended, or repealed by a majority vote of the
board of directors.
<PAGE>
CERTIFICATION OF BY-LAWS
OF
DIVERSIFIED FUNDS, INC.
OCTOBER 1, 1999
The undersigned, as the Secretary of Diversified Funds, Inc., a corporation
organized under the laws of the State of Louisiana, does hereby certify and
state that the attached is a true copy of the By-laws of Incorporation and all
amendments of the Company, as in effect as of the day and year first written
above.
/s/ Steven Lorne Durket
--------------------------
Steven Lorne Durket
Secretary
<PAGE>
Exhibit 5
FOOD SAFETY SYSTEMS, INC., A NEVADA CORPORATION.
<PAGE>
