UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB (Amendment 2)
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) or (g) of
The Securities Exchange Act of 1934
IVES HEALTH COMPANY, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1430235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
817 North J.M. Davis Blvd.
Claremore, OK 74017
(Address, including zip code, of registrant's executive office)
(918)283-1226
(Registrant's telephone number, including area code)
(918)283-1232
(Registrant's facsimile number, including area code)
Securities to be registered pursuant to section 12(b) of the Act: None
Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, $0.001
(Title of Class)
Information Required in Registration Statement
Certain Forward-Looking Information
Certain statements included in this report which are not historical facts
are forward looking statements, including the information provided with respect
to future business opportunities, expected financing sources and related
matters. These forward looking statements are based on current expectations,
estimates, assumptions and beliefs of management, and words such as "expects,"
"anticipates," "intends," "believes," "estimates," and similar expressions are
intended to identify such forward looking statements. Since this information is
based on current expectations that involve risks and uncertainties, actual
results could differ materially from those expressed in the forward-looking
statements.
<PAGE>
PART I
Item 1. Description of Business
(a) Business Development
1. Form and Year of Organization
Ives Health Company, Inc. (A Development Stage Company) ( the "Registrant",
"Company", "IHC" or "New Ives" ) was formed pursuant to an agreement between
Maxxon, Inc. and M. Keith Ives, entered into and made effective December 31,
1997 (see Exhibit I - Agreement Between M. Keith Ives and Maxxon, Inc.) Ives
Health Company, Inc., (a wholly owned subsidiary of Maxxon, Inc.) and Maxxon,
Inc. agreed to separate. The separation was accomplished by a non-pro rata
split-off of non-monetary assets, and the issuance of 7,000,000 shares of New
Ives common stock to M. Keith Ives, and 1,700,000 shares of New Ives common
stock to Maxxon, Inc. New Ives began operations January 1, 1998 and was
incorporated in Oklahoma on February 12, 1998. The split-off was valued and
recorded at the fair market value of the Maxxon stock in accordance with Issue
96-4 of the Emerging Issues Task Force.
2. Bankruptcy or Receivership
Ives has never been in bankruptcy or receivership.
3. Mergers, Reclassifications and purchases of Assets
Prior to August of 1997, Ives Health Company, Inc., was a privately held
company incorporated in the state of Oklahoma in 1993 and was engaged in the
business of selling and distributing homeopathic supplements, weight loss
products, vitamins, and other alternative medicines to the public through retail
grocery stores and other distribution outlets. In August, 1997, the shareholders
of Ives exchanged all of their issued and outstanding shares for Maxxon shares
in a tax free share exchange. As a result, Ives Health Company became a wholly
owned subsidiary of Maxxon. Mr. Keith Ives became a shareholder of Maxxon and
remained President and a director of Ives Health Company. Mr. Ives had never
been the holder of more than 5% of the issues and outstanding stock of Maxxon.
Mr. Ives also became a director of Maxxon. Note: Maxxon, Inc. is a development
stage company in the process of developing a safety syringe. Its stock has been
traded on the OTC Bulletin Board under the symbol, "MXON".
After a short period of time, it became apparent to both Maxxon and Ives
management that the business of Maxxon and Ives apparently did not fit together
as originally believed, that Maxxon was not able to obtain financing for the
Ives operations as expected, and that the management style of Maxxon was
incompatible with the management style of Mr. Ives. The parties determined to
separate. At that time, Ives Health Company, Inc., a wholly owned
<PAGE>
subsidiary of Maxxon Inc., changed it's name to SEVI Health Company a wholly
owned subsidiary of Maxxon Inc., in order to free up the name of Ives Health
Company, Inc. The separation agreement shown in Exhibit I shows that a new
corporation named Newco would be formed. The name Newco was never used as a name
for New Ives because permission was granted by the Secretary of State of
Oklahoma to use the old name Ives Health Company. The new Ives Health Company
was again incorporated as of February 12, 1998. Mr. Ives became the principal
stockholder of that new company. Substantially all of the assets of the old Ives
Health Company which later became a wholly owned subsidiary of Maxxon, Inc.,
which later became SEVI Health Company, Inc., a wholly owned subsidiary of
Maxxon, Inc., were transferred into New Ives the registrant. The assets included
inventory, equipment, contract rights, intellectual property rights, and product
specifications. The new Ives Health Company, Inc. commenced a Regulation D, Rule
504 offering in which additional capital was raised.
(b) Business of Issuer
1. Principal Products and Services of Ives and Their Markets
The Company is engaged in developing and marketing innovative, safe, high
quality natural medicines and nutritional supplements, which are guaranteed for
potency and purity, including homeopathic medicines, weight loss formulas,
natural remedies, and nutritional supplements. Ives Health Company presently
offers 27 different products as follows: Aches and Pains, Acne, Allergy,
Antacid, Arthritis, Cough & Sore Throat, Energy, Headache, and Sinus are all
homeopathic medicines that provide temporary symptomatic treatment for relief of
aches and pains, acne, allergies, upset stomach, pain in joints, cough and sore
throat, fatigue, head pain due to stress, and runny nose and sinus congestion.
Each of the homeopathic medicines comes in tablet form with 30 tablets in a
bottle and sells for $5.98 per bottle. Step 1 - Beginning Weight Loss sells for
$19.95, Step 2 - Continuing Weight Loss sells for $36.95, and Step 3 -
Maintaining Weight Loss sells for $30.95. Other products are as follows: L-
Chromatine - affects fat metabolism while aiding muscle mass gain - $9.95 for 60
tablets in a bottle, De-Tox - designed to cleanse and purify the body of toxins
- - $3.65 for 9 tablets in a bottle, Flora-Plus - provides bacteria and enzymes
which improves digestion - $9.95 for 30 tablets in a bottle, Poly-Pep - Free
form amino acids which help improve nutrient absorption - $9.95 for 30 tablets
in a bottle, Orangetic - A high energy performance drink containing a specific
blend of nutrients - $19.95 for 30 day supply in powder form, Arthritis Formula
- - Hydrolyzed collagen peptides which feed the joints - $48.00 for a 30 day
supply in powder form, Antioxidant - Helps eliminate free radicals and peroxides
in the blood - $11.95 for 60 tablets in a bottle, Cholest-Away - Helps lower and
control cholesterol and triglyceride levels - $21.30 for 60 tablets in a bottle,
Immune 2000 - Boosts immune system function while reducing secondary infections
- - $19.85 for 60 tablets in a bottle, Prostate Formula - enhances overall
prostate health - $39.50 for a three month supply, 270 tablets in a bottle, PMS
Formula - Helps build optimum levels of hormonal balancers; decreases cramping,
nausea and headache during menstruation - $10.95 for 15cc liquid in a bottle,
Relaxagent - relieves stress without drowsiness - $15.95 for 90 tablets in a
bottle, Trace Minerals - Achieves RDA blood levels of 77 trace minerals - $11.20
for 120 tablets in a bottle, and VEGI BEARS (original flavor and sour) - a
nutritional snack food - $5.99 for 60 bears in a box.
<PAGE>
2. Distribution Method of Products and Services
The Company sells to wholesale pharmacy distributors, various chain
pharmacies, and independent retail pharmacies. Three of the Company's principal
distribution alliances are with Albertsons, Winn Dixie, and Dillons with over a
1000 pharmacy locations, as well as over 700 independent retail pharmacies,
distributing IHC's products in 36 states.
3. Status of Publicly Announced Products and Services
During 1999 Ives announced a new product called, Immune 2000. All rights to
this product were purchased from Dr. Robert Slayton Bedeen in July of 1999 as
part of the Quantum Resources acquisition. Immune 2000 is a product that
resulted from 10 years of research and development. It has been tested on AIDS
patients and significantly increased their immune system function while reducing
secondary infections, offering them a better quality of life.
4. Competitive business conditions, Competitive Position and Methods of
Competition
(a) WEIGHT LOSS: Ultra Slim Fast, Weight Watchers, Nutra-System, Jenny
Craig, Dexatrim, Herbal Life, and Metabolite.
(b) HOMEOPATHIC MEDICINE: Nature's Way, Naturopath Medicines, Boyron, and
Centrum are the most prevalent.
(c) NUTRITIONAL SUPPLEMENTS: Nature's Resource, Nature's Way, and Centrum
are our biggest competitors and control approximately 35% of the market.
However, most of their distribution is targeted through health food stores, i.e.
GNC, Atkins and a variety of others.
5. Sources of Raw Materials and the Names of Principal Suppliers
The principal suppliers of Ives' raw materials are: International
Formulation and Manufacturing (IFM), Vegi Snack Foods, Inc., Summa Laboratories,
Inc.; Animal Technologies, Inc. and American Labs.
6. Dependence on one of a few major customers
Ives primary distribution focus is through regional and national chain
pharmacies. We are currently distributing through Mays, Drug Warehouse, Price
Mart, Horizon, Pamida and The Medicine Shoppes (these are regional chains).
National chains currently selling our products on a regional basis are
Albertsons (2700 national locations), Dillons and Winn-Dixie (1200 plus national
locations). Wal-Mart is expected to set us up as a vendor. Walgreens, K- Mart,
and Eckerds are our next three targeted chains. Walgreens, K-Mart, and Eckerds
have expressed interest in Ives products. While there are no distributor
agreements with these companies at this time, Ives anticipates that such
agreements will be entered into with each company in the near future.
Discussions are continuing with these companies as well as
<PAGE>
Krogers, CVS, Brookshire, Publix, and Randalls, and Ives expects to execute
agreements in the late 1st quarter or early 2nd quarter, 2000, with many of
these chains.. Ives estimates that 70% of our distribution will be through large
grocery and pharmaceutical chain stores.
Ives Health Company is dependent at this time upon product sales to 3 large
grocery and pharmaceutical chains, Albertsons, Winn Dixie and Dillons, which
have 318 stores, 707 stores and 71 stores, respectively, currently purchasing
Ives products. As the number of customers increases, the dependence of Ives upon
these chains will decrease. Ives anticipates that the growth of the acceptance
of its products will result in the addition of other large grocery and/or
pharmaceutical chains as customers.
7. Patents, trademarks, licenses, royalty agreements or labor contracts
IHC has an exclusive license agreement with Dr. Robert Slayton-Bedeen
relating to certain Technology developed by Dr. Bedeen. A Royalty agreement with
Dr. Bedeen reads as follows: a) Ten percent (10%) of the first $100,000 and five
percent (5%) on the excess over $100,000 of the adjusted sales revenue actually
received by Licensee (gross revenue received from sales of Licensed Products
less 28%) during the first five (5) years of the term of this agreement. b)
Three percent (3%) of the adjusted sales revenue during the second five years.
c) Two percent (2%) of the adjusted sales revenue during the remaining forty
(40) years. On November 30, 1998, the Company purchased for $10,000 and expensed
the cost of the royalty provision that was required under the License Agreement.
The purchase thereby eliminated any royalty payments to the previous owner of
the technology.
The purpose of the license agreement with Dr. Bedeen was to obtain all
rights to formulations (including the rights to manufacture, distribute and
sell) that Dr. Bedeen had developed with respect to products named, Immune 2000,
T-factor and a revolutionary burn creme. This agreement has not been significant
to Ives Health Company in the past. This agreement will be a significant part of
Ives year 2000 expansion. The aforementioned products will be the primary
products sold in the new Hospital and Doctor Direct Division of Ives which is
scheduled to be created in the spring of 2000.
8. Need for Governmental Approval
None.
Ives markets our products in the wholesale distribution market for
nutritional supplements. All of our products are sold strictly over-the-counter
and are non-prescription. At the present time, Ives does not manufacture any of
our own products. Manufacturers of our products are subject to FDA compliance.
Ives only packages and distributes products manufactured in FDA approved
facilities. None of our products have ever been challenged. Ives has never had
to revise a marketing claim or withdraw a product from the market.
<PAGE>
9. Effect of Existing or Probable Governmental Regulation
None.
10. Estimate of the amount spent on research and development
IHC's research and development department currently operates as follows:
internal tracking, quality control, test results, product development and other
important data are done internally in conjunction with an outside joint venture
with Albertsons, which is overseen by Dr. Ruth Miller. Through December 31, 1999
Ives has spent an estimate of $50,000, which includes R & D employees wages.
11. Costs and effects of environmental compliance
Ives has incurred no costs associated with environmental compliance.
12. Number of total employees and number of full time employees
The Company had 14 full-time employees at the year ended December 31, 1998
and 14 full-time employees as of December 31, 1999.
Item 2. Management's Discussion and Analysis
(a) Plan of Operations
There is no assurance that material expenses will not be incurred that
could jeopardize the stability of the Company nor that shareholders or future
shareholders will have or make available sufficient funds to cover such material
expenses. However, it is the belief of the Company, that the following summary
of the Company should occur.
The overall goal of the management team is to develop IHC into a major
player in the arena of natural health products. Objectives leading to that goal
include being a structured and professional organization of integrity, thus
maintaining strong relationships with suppliers and customers. Marketing goals
include having products in 15,000 pharmacies in the U.S. by the year 2001. Of
these 15,000 pharmacies, 30% are independent pharmacies and 70% are regional and
national chains, i.e. Albertsons, Winn-Dixie, Wal-Mart, Walgreens, K-Mart,
Eckerds, etc.
As of January 31, 2000, Ives products are sold in 146 independent
pharmacies and 1096 chain pharmacies (318 Albertsons, 707 Winn Dixies, and 71
Dillons) for a total of 1242 pharmacy locations that carry our products. There
are 2400 additional Albertsons stores that Ives has the opportunity to sell
products to. It is Ives plan to sell products nationwide by selling to as many
chain pharmacies as possible by the end of the year 2000. Most stores that carry
Ives products vend our entire product line. Ives has no exclusive arrangements
for the wholesale distribution of our products.
<PAGE>
The Company's products can generally be grouped into five categories:
Homeopathic medicines (pure medicines), Weight Management, Natural Remedies,
Nutritional food supplements, and Health and Beauty Aids. IHC will continue to
implement the same positive marketing strategy that brought the Company to this
point. It will sell the bulk of its product through wholesale distributors and
play off the success of its current wholesalers and generate business with new
wholesalers. Also IHC will continue to seek regional and national chain
pharmacies. Other strategies include attending more pharmacy trade shows,
getting endorsements from strategic pharmacy, physician, and health insurance
providers (by conducting our innovative validation testing), hiring more direct
sales representatives, and increasing regional advertising while expanding to a
national advertising campaign. Our greatest need is advertising dollars in order
to create more consumer awareness and demand (mass over time).
The Company's powders, capsules, tablets and liquids in bulk are produced
by International Formulation & Manufacturing, Inc. of San Diego, California,
Summa RX Laboratories, Inc. in Mineral Wells, Texas, Animal Technologies, Inc.
in Tyler, Texas, and American Labs, Inc. of Omaha, Nebraska. All of the
preceding companies are FDA registered drug companies. All final packaging, i.e.
(shrink-wrapping, UPC coding, expiration dating, and quality control, etc.) is
performed by IHC in Claremore, Oklahoma. Future products will be handled on the
same basis. The long-term goal of IHC is to manufacture products from start to
finish.
The Company's primary distribution focus is through regional and national
chain pharmacies. We are currently distributing through Mays, Drug Warehouse,
Price Mart, Horizon, Pamida and The Medicine Shoppes (these are regional
chains). National chains currently selling our products on a regional basis are
Albertsons (2700 national locations) and Winn-Dixie (1200 national locations).
Wal-Mart , Walgreens, K-Mart, and Eckerds are our next targeted chains. IHC has
established a strong alliance with wholesale distributors who sell to
independent pharmacies and continued growth with these distributors is another
reason for IHC achieving nationwide distribution. IHC's most noted strengths
with their wholesalers are product quality, a strong in-store marketing package,
high profit margins for both the wholesaler and the retail pharmacy, product and
alternative medicine education and validation testing.
Management of Ives believes that Ives is a leader in the industry in
promotional incentives and profit margins for its products. In the July 1999
issue of Pharmacy Today Magazine it was stated that the average margins on
over-the-counter pharmaceutical products is 23% and the average margins on
prescription drugs is 7-11% with a total average margin for pharmaceuticals of
17%. Ives Health Company products boast an average margin of 38% which is far
above our competitors. The average incentive by other pharmaceutical companies
to wholesalers and brokers is 3%. Ives give a 5-8% commission to wholesalers and
brokers.
(b) Results of Operations
Revenues were $469,567 for the year ended December 31, 1999 compared to
$394,854
<PAGE>
for the year ended December 31, 1998. This represents a 19% increase in revenue
from 1998 to 1999. Cost of sales were $330,526 for the year ended December 31,
1999 compared to $192,039 for the year ended December 31, 1998. Selling expenses
were $196,830 for the year ended December 31, 1999 compared to $329,149 for the
year ended December 31, 1998. General & Administrative expenses were $532,563
for the year ended December 31, 1999 compared to $323,693 for the year ended
December 31, 1998. This change represents an increase of $208,870 or 65% over
1998 general and administrative expenses. This General & Administrative expense
increase was primarily due to increases in consulting expenses, legal and
accounting expenses, research and development expenses, fringe benefits to
employees and office clerical salaries. The ratio of the cost of sales with
respect to revenue increased substantially in 1999 to 70.4% compared to 48.6%
during 1998. This increase in the cost of sales was due to a substantial
increase in the price of herbal and animal extracts which are necessary to
manufacture Ives products. In addition, to be more competitive in the market,
Ives lowered the retail pricing on many products which resulted in a higher
ratio when comparing the cost of sales to revenue. Selling expenses decreased
substantially in 1999 as compared to 1998 due to cash flow restrictions and a
corresponding reduction in allocation of funds to the advertising budget. The
company posted a net loss of $(590,242) for the year ended December 31, 1999,
compared to a net loss of $(502,746) for the year ended December 31, 1998. A
total deficit of $(1,092,988) accumulated during the 1998-1999 development stage
of the company.
(i) Cash Requirements
Management believes that to achieve its objectives , the Company should
seek additional funding of $750,000, whether it be through long-term debt or
additional sales of stock or both. The funds will be used for company expansion,
which will include the following: increasing inventory, significantly increasing
advertising expenses, creating a multi- level marketing division where private
label products will be sold to consumers directly over the internet, creating a
hospital and doctor direct division where the products purchased from Dr. Bedeen
and Quantum Resources will be sold directly to hospitals and doctors offices,
creating an international sales division where products will be sold abroad and
retirement of existing debt. Management also believes that the 4th quarter 1999
refocus on large chain pharmacy sales should significantly increase sales of the
company which combined with the above company expansion will result in projected
gross sales of $2 million for the year 2000 with positive net earnings.
Due to the refocus on large chain pharmacy sales in the 4th quarter of
1999, company financial conditions had significantly improved by December 31,
1999. As of January 31, 2000, Ives Health Company was posting positive
operational cash flow. Ives is presently providing working capital from the sale
of inventory; however, is seeking to borrow additional working capital which
will be used to implement the aforementioned company expansion.
As of January 31, 2000, Ives Health Company is servicing $21,191.99 in
monthly short- term and long-term debt payments and is meeting this debt service
out of operational cash flow.
<PAGE>
(ii) Product Development and Research Plan for the Next Twelve Months
IHC's research and development department currently operates as follows:
internal tracking, quality control, test results, product development and other
important data are done internally in conjunction with an outside joint venture
with Albertsons, which is overseen by Dr. Ruth Miller. Management plans to
continue the validation testing for current products and all new products
introduced.
During the last half of 1999, Ives Health Company entered into a validation
testing agreement with Albertsons where 400 participants were enrolled for
validation testing in Oklahoma Albertsons pharmacies. The reason for this
program was to substantiate the efficacy of our products. Each participant was
given a 30 day supply of a specific product. A series of tests were performed
under a doctor's supervision on each participant as part of the validation
testing. The testing was completed on November 15, 1999. From these tests it was
determined that Ives products have an overall effectiveness of 83%. This
information is being used in Ives new Preventive Health Discount Plan where
Ives, pharmacy chains and insurance companies enter into agreements that provide
wellness to participants. The Ives Preventive Health Plan will be of significant
benefit to insurance companies (decreased claims and increased profits),
consumers (decreased drug expense, better health and lower insurance premiums),
companies ( better employee health, less absenteeism, increased employee
performance and lower insurance premiums), the participating pharmacy chains
(increased traffic, increased sales and increased profits), and will
significantly boost the sales of Ives products. The validation testing program
has validated the product claims of Ives and will be very important in the
expansion of Ives products, its markets, and the acceptance of its products by
the ultimate consumer.
(iii) Expected Purchase or Sale of Plant and Significant Equipment
None.
(iv) Expected Significant changes in number of employees.
Ives intends to hire two to three additional sales representatives to
service our customers in the field.
Item 3. Description of Property
(a) Location and Description of Property
The Company owns land and building at 817 North J.M. Davis Blvd.,
Claremore, OK 74017, and all furniture, fixtures, and equipment. The land and
building has a mortgage against it, held by Seven Brothers LLC. The balance due
at December 31, 1998 was $164,574. The balance due on the building mortgage as
of December 31, 1999, was $154,305. The Company purchased the land (.565 acres)
and building (13,180 sq.ft.) in July, 1998 for $270,000, the cost of remodeling
was $99,747. The appraised value after remodeling was $462,000. The Company
carries adequate insurance coverage on all property and equipment.
<PAGE>
The Ives building at 817 North J.M. Davis Blvd. in Claremore, OK, is used
mostly for packaging, storage and shipping of Ives products and a lesser part of
the building houses the corporate offices of the company. The equipment located
in the building is limited to computers, a labeling machine, two packaging
machines and a forklift.
Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) Beneficial Owners of More than Five Percent
The following shareholders own of record more than 5% and/or includes
security ownership of management personnel of the 9,577,650 shares issued and
outstanding as of December 31, 1998 and as of December 31, 1999 of 12,846,946:
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature
Of Beneficial Owner Of Beneficial Owner % of Class
- -------------------------------------------------------------------------------------------
As of December
31, 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common M. Keith Ives, Officer/Director 8,439,260 65.7%
22972 Woodridge Dr., Claremore,
OK 74017
Common Maxxon, Inc., Beneficial Owner 1,700,000 13.2%
8908 S. Yale Ave, Ste 409, Tulsa,
OK 74137
Common Bill Elliott, Beneficial Owner 150,187 1.2%
Route 1, Box 156, Tahlequah, OK
7446
Common Pat Storms, Beneficial Owner 349,975 2.7%
15849 Sheffield Rd., Siloam
Springs, AR 72761
Common JoEtta Hughes, Officer/Director 549,984 4.3%
Claremore, OK 74017
Common Perry Ives, Officer/Director 329,800 2.6%
316-A S. Choctaw, Claremore, OK
74017
Common Tony Fauver/Director 80,000 0.6%
Claremore, OK 74017
Common Jim Jones, Director 2,000 N/A
6937 E 97th St. South, Tulsa, OK
74133
Common All Officers and Directors as a 9,401,044 73.2%
group ( 4 persons )
</TABLE>
Note: Maxxon is a company with over 12,000,000 shares of common stock
issued and outstanding at December 31, 1999. Ives does not know who the
principal shareholders are. Mr. Gifford Mabee is the President, but Ives does
not know who other officers are. Maxxon filed a form 10-SB on December 22, 1999.
Information regarding Maxxon can be found from that filing.
(b) Security Ownership of Management
These numbers are included in the table 4(a) shown above.
(c) Changes in Control
None.
Item 5. Directors, Executive Officers, Promoters and Control Persons
(a) Identify directors and executive officers.
(1) - (4) Names, ages, positions, offices, business experience.
A) M. Keith Ives, age 42, is President, of Ives Health Company. Mr. Ives,
upon graduating from college, went to work for McKesson Drug Co. as a territory
sales manager where he gained expertise in sales, pharmacology, marketing,
business management, and business consulting. After seven years with McKesson
Drug Co. Mr. Ives decided to start his own pharmaceutical company for two
primary reasons ( to specialize in natural preventive health products and to
find products which would help improve the quality of life for his wife who had
contracted Multiple Sclerosis). To accomplish this goal, he bought an insurance
agency to gain experience in personnel management, sales management, and
knowledge about the insurance industry and their role on the pharmaceutical
industry. Simultaneously, he became a distributor for a direct marketing company
to gain the knowledge necessary in applying direct marketing to his future
pharmaceutical business. Mr. Ives then started a pharmaceutical company and has
been the driving force to realizing his goals. Mr. Ives' perseverance has led
this company to its present position and with proper funding, IHC will become a
leader in the growing preventive health care industry.
RESPONSIBILITIES - Mr. Ives oversees the day to day operations, coordinates
closely with Fred Oberloh, National Sales Manager, on company promotions and
sales, makes direct sales calls, conducts ride-alongs with wholesale/broker
representatives to secure new business, attends local, regional and national
trade shows, promotes the company's growth and vision to the pharmaceutical
industry, via alternative medicine seminars both live & televised, and conducts
the business of securing funds for IHC's growth. Mr. Ives has been recognized by
his employers, peers, and his customers for his outstanding achievements in
sales, service, consulting and management. These achievements include: #1 in
annual multi-million dollar
<PAGE>
sales volume seven of ten years before starting IHC, Mr. Ives and the sales
people he managed were always in the top 5% of sales producers for their
respective companies.
B) Michael Harrison, age 45, was hired as CEO of Ives Health Company on
December 27, 1999. Mr. Harrison managed the largest oil operation in the state
of Kansas from 1987- 1991. Applied operation management skills which resulted in
net earnings increased from 14 million dollars in 1987 to 31 million dollars in
1991. Successfully performed duties a financial consultant for the corporate
financial planning and analysis department of OXY USA from 1991-1993.
Co-instructor of an in-house business decision making school. Evaluated 106 oil
companies for possible acquisition during 1992. Managed divestment of $5 million
of company properties at auction during 1992. Acquired the world renown
Hasty-Bake Barbecue Grill Company in 1993. Successfully marketed and operated
company resulting in doubling of sales and significant increase in earnings.
Developed marketing strategy and revitalized dealer network. Reestablished and
redesigned many old products. Sold majority interest in company to minority
partner in 1996. Divestiture resulted in a profit of five times the original
cash investment in the company. Acquired 100% of RPC Company an industrial
powder coating operation in 1996. Secured bank and SBA financing for acquisition
and subsequent expansion involving buyout of competition. Tripled revenues and
earnings of company in three years. Increased net value of company ten times the
original investment by November 1999.
RESPONSIBILITIES - Mr. Harrison is responsible for the daily operations and
administration of the company. He is the company's primary deal maker with
respect to future acquisitions and financing. Mr. Harrison is also responsible
for all future performance predictions of the company as well as a liaison with
the SEC on corporate filing matters. Mr. Harrison works very closely with Mr.
Keith Ives in the planning and future direction of the company and with respect
to targeted sales efforts. Mr. Harrison has been instrumental in attaining
continuing education (CE) certification status for Ives Health Company with
local and national pharmacy boards. By utilizing CE certification, Ives Health
Company can better inform pharmacists about the generalities of Ives products
and at the same time award the pharmacists with local or national continuing
education credits.
C) JoEtta Hughes, age 43, is CFO of Ives Health Company. Ms. Hughes has
comprehensive experience in accounting, the pharmaceutical industry, warehouse
and personnel management and has worked for McKesson Drug Co. and a division of
Cooper and Lybrand accounting firm. She graduated valedictorian from Bryan
Institute in computer programming and accounting. She is currently Vice
President of the local chapter of Business and Professional Woman's Federation
as well as state Membership Chair. She sits on the advisory boards for Rogers
University and OSU.
RESPONSIBILITIES - Ms. Hughes conducts all of the in-house financial business
for IHC and works closely with IHC's CPA. While her main duties are financially
related, she contributes a great deal to the day to day operations, customer
service, data entry, secretarial duties, and consulting with M. Keith Ives in
running the company. In order for IHC to be successful Mr. Ives felt he must
have Ms. Hughes on board to draw from her expertise in the pharmaceutical and
accounting fields. She has been instrumental in applying her abilities in
keeping the
<PAGE>
company functioning.
D) Perry Ives, age 35, Vice President, of Ives Health Company has 13 years
experience in employee relations and day to day operations as maintenance
supervisor for apartment management firms. He graduated high school in
Stillwater, OK and received his Associates Degree in Computerized Accounting at
Condie College in California with a 3.99 GPA. Perry is responsible for producing
our television and radio commercials, and our newspaper advertisements. He is
presently developing a CD ROM that will be used as an educational marketing
tool. Perry's diversified abilities and his knowledge of daily operations of IHC
have proven to be a valuable asset to the company.
RESPONSIBILITIES - Director of Marketing and Advertising while overseeing the
day to day operations and product production. Mr. Ives primary function is
designing and implementing in-house sales and marketing materials, creating ad
slicks, and supporting the efforts of JoEtta Hughes in accounting and computer
work. Mr. Ives has demonstrated his diversified abilities in the daily
operations of IHC and has proven to be capable of exceeding every challenge that
the company has thrown his way. He has been instrumental in performing work the
company would have had to out source, thus assisting the company's efforts to
control costs.
E) Tony Fauver, age 44, is the Director/Production & Quality Control and
has 17 years experience in warehouse management, production, and quality
control. Mr. Fauver has been employed with IHC since May of 1997. Born and
raised in Edwardsville, Illinois. Tony received his training in the United
States Army. His experience as a General Manager of a manufacturing company,
plus his experience in sales and purchasing has made him a valuable asset to
Ives Health Company, Inc. His knowledge of general management principles is
synonymous with Ives Health Company's high standards for the production of our
all natural products and weight management program.
F) Jim Jones, age 68, is currently a member of Ives Health Company's Board
of Directors. Mr. Jones was a successful insurance agent before his retirement
in 1992. Although he considers himself retired, he still acts as Ives Health
Company's independent insurance agent. Throughout his career, he has sat on the
Board of Directors for banks, insurance companies, & several corporations.
(5) Other Directorships
None.
(b) Identify Significant Employees
1) Fred Oberloh, age 40, is National Sales Manager at IHC. Mr. Oberloh has
been in the pharmaceutical industry for over 20 years as a Regional Sales
Manager with Pittman Moore Drug Company. Fred has been another welcomed addition
to our management team and started with IHC in January, 1999. His strengths are
a work ethic which is beyond reproach and his attention to detail.
<PAGE>
RESPONSIBILITIES - Managing local, regional and national chain accounts at both
the Corporate and Pharmacy levels. Overseeing the sales and service function for
three Sales Representatives, creating, initiating and implementing sales
promotions & bonus buys while informing IHC accounts on these promotions.
(c) Family Relationships.
M. Keith Ives, President, JoEtta Hughes, CFO and Perry Ives, Vice President
are siblings.
(d) Involvement in certain legal proceedings
NONE
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE
YEAR 1999
<TABLE>
<CAPTION>
Executive/ Annual Stock
Position Year Salary Bonus
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
M. Keith Ives, 1999 $70,333.28 To be determined by performance of
President Co.
- -------------------------------------------------------------------------------------------
Michael Harrison, 1999 $ 0.00 To be determined by performance of
CEO Co.
- -------------------------------------------------------------------------------------------
JoEtta Hughes, 1999 $43,552.00 To be determined by performance of
CFO Co.
- -------------------------------------------------------------------------------------------
Perry Ives, 1999 $32,165.03 To be determined by performance of
Vice President Co.
- -------------------------------------------------------------------------------------------
</TABLE>
Item 7. Certain Relationships and Related Transactions
(a) Describe Related Party Transactions
During 1998 M. Keith Ives and JoEtta Hughes, officers of the Company loaned
the Company funds to cover certain operating expenses. The notes accrue interest
at a rate of 10% per year and are payable on demand. During 1998 payments were
made to the officers in the
<PAGE>
amount of $81,711 to reduce the note balances. As of December 31, 1998, there
remained a balance due to JoEtta Hughes of $41,752. During 1999 certain officers
and shareholders of the company advanced $270,487 to the company to cover
operating expenses. During 1999 a total of $191,101 was paid on these notes
leaving a balance of $121,137 at December 31, 1999.
Item 8. Description of Securities
The following summary of certain provisions of the Common Stock is complete
and is subject to, and qualified in its entirety by, the provisions of
applicable law and the provisions of Ives' Certificate of Incorporation, which
is included as an exhibit to this Registration.
Ives is authorized to issue 50,000,000 shares of Common Stock, par value
$0.001 per share, of which 9,577,650 shares were outstanding as of December 31,
1998 and 12,846,946 shares were outstanding as of December 31, 1999.
Voting Rights. Holders of shares of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members or the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are entitled
to receive dividends when and if declared by the Board of Directors. To date,
Ives has not paid cash dividends on its Common Stock. Holders of Common Stock
are entitled to receive such dividends as may be declared and paid from time to
time by the Board of Directors out of funds legally available, therefore, Ives
intends to retain any earnings for the operation and expansion of its business
and does not anticipate paying cash dividends in the foreseeable future. Any
future determination as to the payment of cash dividends will depend upon future
earnings, results of operations, capital requirements of Ives financial
condition and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Ives, holders of shares of Common Stock are entitled to receive pro rata share
of all the assets of Ives' available for distribution to shareholders after
liabilities are paid.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Ives.
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
(a) Market information
(1) Identify the principal market or markets where common stock is traded.
Ives' common stock is traded on the NASD's Over-The-Counter Bulletin Board
and other (Pink Sheets). The trading symbol for Ives common stock is IVEH.
(i) The high and low prices for Ives' common stock during the calendar
quarters ended were:
Quarter ended High Low
------------- ---- ---
June 30, 1999 $ 2.00 $ 1.20
September 30, 1999 $ 1.20 $ 1.20
December 31, 1999 $ .50 $ .03
Quotations on the OTC Bulletin Board reflect bid and ask quotations, may
reflect inter- dealer prices, without retail markup, mark-down or commission,
and may not represent actual transactions. The common stock of Ives was not
traded publicly before June 30, 1999. Ives cleared the NASD on June 30, 1999.
The opening price was $2.00/share and trading has ranged from $0.03/share to
$2.00/share in the pink sheets.
(b) Holders
As of December 31, 1999, there were 128 holders of record of Ives' common
stock, this figure does not take into account those shareholders whose
certificates are held in the name of broker-dealers or other nominees. Ives
estimates there are approximately 25 owners who hold their shares in brokerage
accounts. These securities were sold primarily to individual investors.
(c) Dividend Policy
Ives has not declared any dividends in the past and there is no intention
to declare dividends in the future.
Item 2. Legal Proceedings
None.
Item 3. Changes in and Disagreements with Accountants
None.
<PAGE>
Item 4. Recent Sales of Unregistered Securities
(a) Securities Sold
February 12, 1998, the Company issued 7,000,000 shares of common stock to
M. Keith Ives and 1,700,000 common shares to Maxxon, Inc. in accordance with the
separation agreement between M. Keith Ives and Maxxon, Inc. The shares were
issued in a tax free exchange under the terms of the agreement.
From April 20, 1998 through December 31, 1998 the Company sold 877,650
shares of common stock to various purchasers pursuant to Rule 504 of Regulation
D and Section 4 (2) of the Securities Act of 1933. The 552,650 shares issued
under the 504 offering to individual investors were sold at an average purchase
price of $0.72 per share. The 305,000 restricted shares issued to employees and
officers, and 20,000 restricted shares issued to Summa Laboratories for the
purchase of rights to product formulas were issued at par value at an average
price of $0.001 per share. The stock certificates for Summa Laboratories were
prepared in 1998, but the terms of the agreement were not completed until 1999
when the Summa formula investment was recorded at a fair market value of $0.80
per share.
From January 1, 1999 through December 31, 1999 the Company sold 400,736
shares of common stock to various purchasers pursuant to Rule 504 of Regulation
D and Section 4 (2) of the Securities Act of 1933. The average purchase price
was $0.72 per share which includes commissions, fees and expenses.
During 1999 the Company issued 2,868,560 common shares to various
employees, officers and directors pursuant to Rule 504 of Regulation D and
Section 4 (2) of the Securities Act of 1933. These shares were issued to
employees and officers for services rendered and were issued at an average price
of $0.05 per share.
(b) Underwriters and other Purchases
There was no public offering of the shares. The shares were sold to
officers, directors and key consultants, and to purchasers in compliance with
Regulation D, Rule 504 of the Securities Exchange Act of 1933 or in compliance
with Rule 701.
(c) Consideration
The total offering price for the common stock sold for cash in 1998 & 1999
was $413,112 and $290,258, respectively. Ives paid $13,897 in commissions and
$87,222 in offering costs in connection with the sale of shares of Ives' common
stock. The total offering price for the common stock exchanged for services
rendered was $151,436.
In accordance with the split-off and separation agreement with Maxxon,
Inc., the
<PAGE>
Company issued to M. Keith Ives and Maxxon, Inc. 8,700,000 shares of Common
Stock of the Company at par value.
(d) Section under which exemption from registration was claimed
The issuance of the securities described above were deemed to be exempt
from registration under the Securities Act in reliance on Section 4 (2) and SEC
Regulation D, Rule 504, among other exemptions. Each recipient of securities in
each such transaction represented his or her intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and, where applicable, appropriate legends were
affixed to the share certificates issued in such transactions. All recipients
had access to information about the Company.
Item 5. Indemnification of Directors and Officers
Ives' Certificate of Incorporation provides for indemnification to the full
extent permitted by Oklahoma law of all persons it has the power to indemnify
under Oklahoma law. In addition, Ives' Bylaws provide for indemnification to the
full extent permitted by Oklahoma law of all persons it has the power to
indemnify under Oklahoma law. Such indemnification is not deemed to be exclusive
of any other rights to which those indemnified may be entitled, under any bylaw,
agreement, vote of stockholders or otherwise. The provisions of Ives'
Certificate of Incorporation and Bylaws which provide indemnification may reduce
the likelihood of derivative litigation against Ives' directors and officers for
breach of their fiduciary duties, even though such action, if successful, might
otherwise benefit Ives and its stockholders.
In addition, Ives has entered into indemnification agreements with its
officers and directors, key consultants and others. These agreements provide
that Ives will indemnify each person for acts committed in their capacities and
for virtually all other claims for which a contractual indemnity might be
enforceable.
<PAGE>
Part F/S
INDEX TO FINANCIAL STATEMENTS AND RELATED NOTES
Independent Auditor's Report 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Cash Flows 4
Statements of Shareholders' Equity 5
NOTES TO FINANCIAL STATEMENTS 6-12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of Ives Health Company, Inc.:
We have audited the balance sheet of Ives Health Company, Inc., (A
Development Stage Company), an Oklahoma Corporation, as of December 31, 1999 and
1998 and the related statements of operation, shareholders' equity and cash
flows from January 1, 1998 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our 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 provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ives Health Company, Inc.,
(A Development Stage Company), as of December 31, 1999 and 1998 and the results
of its operations and its cash flows for the years ending December 31, 1999 and
1998 and from January 1, 1998 (inception) to December 31, 1999 in conformity
with generally accepted accounting principles.
HENDERSON SUTTON & CO., P.C.
/s/ HENDERSON SUTTON & CO., P.C.
- --------------------------------
Certified Public Accountants
Tulsa, Oklahoma
March 15, 2000
<PAGE>
IVES HEALTH COMPANY, INC.
(A Development Stage Company)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---- ----
Current Assets
Cash $ 3,165 $ 24,787
Accounts Receivable 78,704 8,853
Less Allowance For Doubtful Accounts (10,000) --
Inventories 153,970 156,819
Prepaid expenses 110,952 --
Loans to officers 5,000 --
----------- -----------
Total Current Assets 341,791 190,459
----------- -----------
Property and Equipment
Property, Plant & Equipment 491,180 445,586
Less Accumulated Depreciation 62,097 21,136
----------- -----------
Net Property and Equipment 429,083 424,450
----------- -----------
Other Assets
Goodwill-net 284,700 306,600
Deposits 600 900
Marketing design program-net 13,849 31,778
Investments 39,825 34,055
----------- -----------
Total Other Assets 338,974 373,333
----------- -----------
TOTAL ASSETS $ 1,109,848 $ 988,242
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 252,847 $ 179,940
Payroll & sales taxes payable 22,924 11,092
Accrued Expenses 11,283 22,998
Note payable to officer 121,137 41,752
Current Portion of Long Term Debt 151,434 272,219
----------- -----------
Current Liabilities 559,625 528,000
----------- -----------
<PAGE>
Balance Sheets (Continued)
1999 1998
---- ----
Long-Term Liabilities
Notes Payable 681,758 556,904
Less current portion long-term debt (151,434) 272,219
----------- -----------
Total Long-term Liabilities 530,324 284,685
----------- -----------
Total Liabilities 1,089,949 812,685
----------- -----------
Shareholders' Equity
Common Stock (Par $.001) 12,847 9,578
12,846,946 and 9,577,650 outstanding at
December 31, 1999 and 1998 respectively
Additional Paid in Capital 1,100,040 668,725
Deficit Accumulated During
The Development Stage (1,092,988) (502,746)
----------- -----------
Total Shareholder's Equity 19,899 175,556
----------- -----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $ 1,109,848 $ 988,242
----------- -----------
(The accompanying notes are an integral part of these Financial Statements)
<PAGE>
IVES HEALTH COMPANY, INC
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
JANUARY 1, 1998
(INCEPTION) TO
REVENUES DECEMBER 31, 1999 1999 1998
----------------- ------------ ------------
<S> <C> <C> <C>
Sales $ 864,421 $ 469,567 $ 394,854
Cost of Sales 522,565 330,526 192,039
------------ ------------ ------------
Gross Profit 341,856 139,041 202,815
------------ ------------ ------------
OPERATING EXPENSES
Selling Expenses 525,979 196,830 329,149
General & Administrative Expenses 856,256 532,563 323,693
Depreciation & Amortization 105,222 77,694 27,528
Interest & Factoring Expense 97,387 72,196 25,191
------------ ------------ ------------
Total Operating Expenses 1,584,844 879,283 705,561
------------ ------------ ------------
NET OPERATING LOSS (1,242,988) (740,242) (502,746)
Gain On Contract Default 150,000 150,000 --
Income Tax Expense -- -- --
------------ ------------ ------------
NET LOSS $ (1,092,988) $ (590,242) $ (502,746)
------------ ------------ ------------
Weighted Average of Shares Outstanding 10,146,618 9,034,076
------------ ------------
Net Loss Per Share $ (.058) $ (.056)
============ ============
</TABLE>
(The accompanying notes are an integral part of these Financial Statements)
<PAGE>
IVES HEALTH COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
JANUARY 1, 1998
(INCEPTION) TO
DECEMBER 31, 1999 1999 1998
----------------- ---- ----
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net loss from operations $(1,092,988) $ (590,242) $ (502,746)
Depreciation 50,529 40,961 9,568
Amortization 62,738 36,641 26,097
Stock Issued for services 151,436 151,436 --
(Increase) decrease in accounts receivable (68,704) (59,851) (8,853)
(Increase) decrease in inventories (153,971) 2,848 (156,819)
(Increase) decrease in prepaid expenses (110,951) (110,951) --
Increase(decrease) in accounts payable 244,234 72,908 171,326
Increase (decrease) in accrued payroll taxes 22,924 11,832 11,092
Increase (decrease) in accrued expenses 11,282 (11,716) 22,998
----------- ----------- -----------
Net Cash Provided (Used) by Operating Activities (883,471) (456,134) (427,337)
----------- ----------- -----------
Cash Flows From Investing Activities
Loans to Officers (5,000) (5,000) --
Property Plant and Equipment (479,612) (45,594) (434,018)
Deposits (600) 300 (900)
Investments (22,557) 13,418 (35,975)
Other Assets (34,055) -- (34,055)
----------- ----------- -----------
Net Cash Provided (Used) by Investing Activities (541,824) (36,876) (504,948)
----------- ----------- -----------
Cash Flows From Financing Activities
Notes payable to Officers 45,898 4,147 41,751
Long term debt 756,758 199,854 556,904
Sale of Common Stock for Cash, 625,804 267,387 358,417
----------- ----------- -----------
Net of offering cost
Net Cash Provided (Used) by Financing Activities 1,428,460 471,388 957,072
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 3,165 (21,622) 24,787
CASH AT BEGINNING OF YEAR 24,787 24,787 --
CASH AT END OF YEAR $ 27,952 $ 3,165 $ 24,787
=========== =========== ===========
<PAGE>
Statements of Cash Flows (Continued)
JANUARY 1, 1998
(INCEPTION) TO
DECEMBER 31, 1999 1999 1998
----------------- ---- ----
Non-cash financing & investing activities:
Stock issued for product formulas $ 16,000 $ 16,000 $ --
----------- ----------- -----------
=========== =========== ===========
</TABLE>
(The accompanying notes are an integral part of these Financial Statements)
<PAGE>
Ives Health Company, Inc.
(A Development Stage Company)
Statements of Changes in Shareholders' Equity
For the Years Ended
December 31, 1999 and 1998
<TABLE>
<CAPTION>
DEFICIT
PRICE COMMON STOCK DURING THE
PER ------------------------ PAID-IN DEVELOPMENT
SHARE SHARES AMOUNT CAPITAL STAGE
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 $ -- -- $ -- $ -- $ --
Shares Issued in Conjunction With .001 8,700,000 8,700 6,000 --
The Maxxon/Ives Split-Off Transaction
To Record Goodwill 328,500 --
Shares Issued Under 504 Offering .72 552,650 553 398,662 --
Shares Issued to Employees & Officers .001 305,000 305 (305) --
Shares Issued for Summa License .001 20,000 20 (20) --
Less Offering Cost (64,112) --
Net Loss For the Year (502,746)
-------------------------------------------------------------------
BALANCE DECEMBER 31, 1998 9,577,650 9,578 668,725 (502,746)
-------------------------------------------------------------------
Shares Issued to Employees & Officers .05 2,868,560 2,858 148,578 --
for Services
Shares Issued Under 504 Offering .72 400,736 411 289,847
Shares Issued for Summa License .80 16,000
Less Offering Cost (23,110)
Net Loss For The Year (590,242)
-------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 12,846,946 $ 12,847 $1,100,040 $(1,092,988)
-------------------------------------------------------------------
</TABLE>
(The accompanying notes are an integral part of these Financial Statements)
<PAGE>
Ives Health Company, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Ives Health Company,
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 who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the presentation of the financial
statements.
ORGANIZATION
Ives Health Company, Inc. ("IVES" or the "Company") was formed pursuant to
an agreement between Maxxon, Inc. and M. Keith Ives, entered into and made
effective December 31, 1997. IVES, (a wholly owned subsidiary of Maxxon, Inc.)
and Maxxon, Inc. agreed to separate. The separation was accomplished by, a
non-pro-rata split-off of non-monetary assets in accordance with Issue 96-4 of
the Emerging Issues Task Force, a recapitalization and the issuance of 7,000,000
shares of new Ives common stock to M. Keith Ives, and 1,700,000 shares of new
Ives common shares to Maxxon, Inc. The new IVES began operations January 1, 1998
and was incorporated in Oklahoma on February 12, 1998.
Ives Health Company, Inc. (A Development Stage Company) is engaged in
developing and marketing innovative, safe, high quality natural non-prescription
medicines and nutritional supplements. IVES products, which are guaranteed for
potency and purity, include natural medicines, herbal formulas, vitamins,
minerals and homeopathic medicines. The Company wholesales the products to
pharmacies.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid assets with maturities of three
months or less to be cash equivalents.
INVENTORY
Inventory consists primarily of bulk product that will be packaged into
capsules, bottled, and packaged for distribution to customers. Inventory is
stated at the lower of cost or market value using the first-in, first-out
method. Obsolete products are written off in the year they are determined to be
obsolete.
FISCAL YEAR END
The Company's fiscal year ends on December 31.
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. All material property and
equipment additions are capitalized and depreciated on a straight-line basis
over the estimated useful life of the asset.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INCOME TAXES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
measurement of deferred tax assets for deductible temporary differences and
operating loss carry-forwards, and of deferred tax liabilities for taxable
temporary differences. Measurement of current and deferred tax liabilities and
assets is based on provisions of enacted tax law. The effects of future changes
in tax laws or rates are not included in the measurement. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable for the period
and the change during the period in deferred tax assets and liabilities.
EARNINGS PER SHARE
Earnings (Loss) per Share
-------------------------
The Company computes net income per share in accordance with SFAS No. 128,
"Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
provision of SFAS No. 128 and SAB 98 basic net income (loss) per share is
calculated by dividing net income (loss) available to common stockholders for
the period by the weighted average shares of common stock of the Company
outstanding during the period. Diluted net income per share is computed by
dividing the net income for the period by the weighted average number of common
and common equivalent shares outstanding during the period. The calculation of
fully diluted income (loss) per share of common stock assumes the dilutive
effect of stock options outstanding.
Segment Information
-------------------
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
Company identifies its operating segments based on business activities,
management responsibility and geographical location. During the years ended
December 31, 1999 and 1998, the Company operated in the single business segment
engaged in developing and marketing selected healthcare products.
New Accounting Standards
------------------------
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
during 1998. The Company had no comprehensive income items during 1999 and 1998.
Therefore, net loss equals comprehensive income. The Company operates in only
one business segment. The
<PAGE>
company adopted SFAS No. 133, "Accounting for Derivative Investments and Hedging
Activities" during 1999. As of December 31, 1999, the Company did not engage in
hedging activities or other transactions involving derivatives.
REVENUE RECOGNITION
Revenue is recognized monthly based upon the terms of the sale. The Company
issues credit to customers on a discount basis of 2% if paid within ten days of
the invoice or the full balance due within thirty days of the invoice.
Management uses the allowance method of recognizing bad debts. A provision for
doubtful accounts was required at December 31, 1999, for a doubtful account of
$10,000.
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of the major classes of property and equipment:
ESTIMATED
USEFUL LIFE 1999 1998
------------ ---- ----
Building 30 years $ 249,347 $ 249,347
Building Improvements 30 years 100,400 100,400
Land -- 20,000 20,000
Equipment 5-7 years 68,387 65,171
Furniture 5-7 years 11,075 10,668
Master Dies 5 years 4,355 --
Vehicles 3 years 37,616 --
---------------------------------------
491,180 445,586
Accumulated Depreciation 62,097 21,136
--------------------------
Property and equipment (net) $ 429,083 $ 424,450
--------------------------
NOTE 3 - OTHER ASSETS
GOODWILL
--------
Effective December 31, 1997 M. Keith Ives exchanged 275,360 shares of
Maxxon Inc. common shares valued at $1.01 per share (using the average of the
last five trading days in 1997) for 7,000,000 common shares of the Company's
stock. Maxxon retained 1,700,000 shares of the newly formed Ives Health Company,
Inc. After the issuance of the 8,700,000 common shares, M. Keith Ives owned
80.5% of the outstanding shares and Maxxon owned 19.5% of the outstanding
shares. The exchange was accounted for as a purchase using the fair market value
of the Maxxon common stock as consideration for 80.5% of the newly formed
company. The transaction was a non-pro-rata split-off of certain non-monetary
assets, whereby Maxxon exchanged assets for a non-controlling interest in a new
entity. The transaction was recorded in accordance with the Emerging Issues Task
Force Issues # 96-4 and #89-7. Goodwill in the amount of $328,500 was recorded
with a resulting credit to Paid-in Capital. The Goodwill is being amortized over
its estimated useful life of fifteen years.
<PAGE>
NOTE 3 - CONTINUED
INVESTMENT IN LICENSING AND OPTION TO PURCHASE AGREEMENTS
---------------------------------------------------------
On August 24, 1998, the Company entered into a License Agreement to the
rights to certain technology known as (1) the T-Factor Immune System Optimizer
and (2) The Burn Treatment Therapy. The rights to the technology were acquired
for future development of the technology for the consumer market. These products
achieved technological feasibility as of the licensing date and have future uses
in research and development and other aspects of Ives business. Dr. Bedeen
conducted an 18 month study in Jakarta, Indonesia, in which 186 AIDS patients
were given the T-Factor medicine and their T-cell count increased favorably from
3 to 22 points with an average increase in T-cell count of 11 point per month.
Studies performed on the burn creme showed it to be very effective in clinical
trials. The products have already been developed for the consumer market by Dr.
Bedeen and are expected to become two of Ives' primary products as soon as funds
are available for inventory build up and marketing. The rights to the license,
which included a royalty provision to the seller and extends through August 24,
2049, were acquired for approximately $25,000. The cost related to the license
and rights were capitalized and is being amortized over five years.
On July 30, 1999, the company purchased for $10,000 and expensed the cost
of the royalty provision that was required under the License Agreement. The
purchase thereby eliminated any royalty payments to the previous owner of the
technology.
In January 1998, Ives Health Company paid $10,000 for the option to
purchase VEGI-Snack Foods, Inc., where Ives had the exclusive right to sell VEGI
BEARS and related products and retained the right to purchase VEGI-Snack Foods,
Inc. until the end of 1999. The option to purchase VEGI-Snack Foods expired at
the end of 1999 and the $10,000 investment made to secure this purchase option
was written off during 1999.
Investments 1999 1998
----------- ---- ----
Veggie Snack Foods $ -- $ 10,000
Quantum License 34,602 24,602
Summa Formulas 16,000 --
---------------------
Total Investments $ 50,602 $ 34,602
Accumulated Amortization (10,777) (547)
---------------------
$ 39,825 $ 34,055
Marketing Design Program
------------------------
During 1998, the Company incurred $35,975 in costs related to the
development of a marketing design program. The marketing design program is a
CD-Rom computer program that is being developed to be used as a sales tool for
Ives sales people in the field. During 1999 the program was curtailed and the
cost and related accounts payable were reduced by $13,418. The remaining costs
are expected to benefit the Company over the five-year amortization period.
<PAGE>
NOTE 3 - CONTINUED
1999 1998
Marketing design $ 22,557 $ 35,975
Accumulated amortization (8,708) (4,197)
---------------------
Net capitalized $ 13,849 $ 31,788
NOTE 4 - NOTES PAYABLE-OFFICERS
During 1998 M. Keith Ives and JoEtta Hughes, officers of the Company loaned
the Company funds to cover operating expenses. The notes accrue interest at
a Rate of 10% per year and are payable on demand. During 1998 payments were
made to the officer in the amount of $81,711 to reduce the note balances.
As of December 31, 1998, there remained a balance due JoEtta Hughes of
$41,752. During 1999 certain officers & shareholders of the company
advanced $270,487 to the company to cover certain operating expenses.
During the year at total of $191,101 was paid on these notes leaving a
balance due of $121,137 at December 31, 1999.
<TABLE>
<CAPTION>
NOTE 5 - NOTES PAYABLE 1999 1998
<S> <C> <C>
NationsBank, N.A
Note dated June 17, 1998 bearing interest @ 9%, due $ 39,613 $ 48,660
in sixty monthly installments of $1,097, principle and
interest through June 2, 2003. Note is secured by
inventory and equipment, a security agreement with
William D. Elliott, a shareholder and by a personal
guarantee of M. Keith Ives, an officer and major
shareholder of the Company. Certain personal assets
of Mr. Ives also collateralize the note
Seven Brothers, LLC
Interest @ 8.5%, due in one hundred twenty monthly $154,305 $165,840
installments of $1,888, principle and interest, through
August 1, 2008. Note is secured by land and building
Interest @ 45% calculated according to the actuarial -- $ 30,000
Method, principle and interest due December 20, 1998
Dr. Bedeen - Balance due on technology purchase -- $ 9,600
Paid during 1999
<PAGE>
NOTE 5 - NOTES PAYABLE (CONTINUED) 1999 1998
State Bank & Trust, N.A
Interest @ Wall Street Prime plus 1.5%, currently -- $102,804
9.25%, due January 25, 1999
Paid with financing from Armstrong Bank. This note
was secured by personal stock and an annuity
owned by M. Keith Ives. Mr. Ives also personally
Guaranteed the note
State Bank & Trust, N.A
Interest @ Wall Street Prime plus 1.5%, currently -- $ 20,000
9.25%, payable monthly with principle due January
25, 1999. The note was retired with proceeds from
the Armstrong Bank financing. Mr. Ives personally
guaranteed this note
Local America Bank
Interest @ 9.99%, in monthly installments of -- $ 20,000
approximately $1,200 monthly through June 15, 2000,
personally guaranteed by M. Keith Ives and secured
by personal automobiles. Paid during 1999
Dr. Craft Loan Agreement
Dr. Craft advanced Ives $160,000 under an agreement -- $160,000
to provide additional funding. Dr. Craft defaulted on
agreement and under terms of agreement $160,000 was
retained by Ives and booked as gain on contract default
Armstrong Bank
Interest @ 9.30%. Originated July 9, 1999 $121,382 --
Personally guaranteed by Dr. Bill Elliot (shareholder)
and M. Keith Ives
Armstrong Bank
Interest @ 8.75%. Originated July 9, 1999 $273,849 --
Personally guaranteed by Dr. Bill Elliot (shareholder)
and M. Keith Ives
Armstrong Bank
Interest @ 9.50 %. Originated June 18, 1999 $ 42,379 --
Personally guaranteed by Dr. Bill Elliot (shareholder)
and M. Keith Ives
<PAGE>
NOTE 5 - NOTES PAYABLE (CONTINUED) 1999 1998
State Bank
Interest @ 10.12%. Originated September 24, 1999 $ 19,755 --
Personally guaranteed by M. Keith Ives
Ford Motor Credit
Interest @ 8.90%. Originated August 3, 1999. Loans $ 30,476 --
to purchase three automobiles. Secured
by three 1998 Ford Taurus automobiles. Monthly
payment equals $1075
TOTAL NOTES PAYABLE $681,759 $556,904
-------- --------
Less current maturities: $151,434 $272,219
--------
Long-term Debt $530,325 $284,685
======== ========
</TABLE>
Maturities of long-term debt is as follows for the next five years:
2000 $ 151,434
2001 116,760
2002 122,215
2003 107,204
2004 105,682
Thereafter 78,464
---------
Total $ 681,759
---------
NOTE 6 - INCOME TAXES
The Company has incurred net operating losses since inception and has a
loss carry-forward of approximately $1,093,000 at December 31, 1999, expiring in
years beginning 2014. Deferred tax assets have not been recorded for future
reduction in income taxes that may result from the net operating loss
carry-forward.
The deferred tax assets and liabilities are as follows at December 31,
1999:
1999 1998
----------- -----------
Net operating loss carry-forward $ 1,092,988 $ 502,746
Depreciation 16,480 8,252
----------- -----------
Total 1,076,508 510,998
Less valuation allowance (1,076,508) (510,998)
----------- -----------
Net Deferred Tax Liability $ 0 $ 0
----------- -----------
<PAGE>
NOTE 6 - CONTINUED
Deferred taxes reflect a combined federal and state tax rate of
approximately 40%. For financial reporting purposes, a valuation allowance equal
to the deferred tax asset has been established in accordance with the provisions
of FASB Statement No. 109, "Accounting for Income Taxes". The Company will
continually review the adequacy of the valuation allowance and will recognize
these benefits only as assessment indicates that it is more likely than not that
the benefits will be realized.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is defendant in lawsuits arising from normal business
activities. Management has reviewed pending litigation with legal counsel and
believes that the action is without merit or that the ultimate liability, if
any, resulting from it will not have a material adverse affect on the Company's
earnings, cash flows or financial position.
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN-CAPITAL
In February 12, 1998, the Company issued 7,000,000 shares of common stock
to M. Keith Ives and 1,700,000 common shares to Maxxon, Inc., in accordance with
the separation agreement between M. Keith Ives and Maxxon, Inc.. The shares were
issued in a tax free exchange under the terms of the agreement.
From April 20, 1998 through December 31, 1998 the Company sold 877,650
shares of common stock to various purchasers pursuant to Rule 504 of Regulation
D and Section 4 (2) of the Securities Act of 1933. The 552,650 shares issued
under the 504 offering to individual investors were sold at an average purchase
price of $0.72 per share. The 305,000 restricted shares issued to employees and
officers, and 20,000 restricted shares issued to Summa Laboratories for the
purchase of rights to product formulas were issued at par value at an average
price of $0.001 per share. The stock certificates for Summa Laboratories were
prepared in 1998, but the terms of the agreement were not completed until 1999
when the Summa formula investment was recorded at a fair market value of $0.80
per share.
From January 1, 1999 through December 31, 1999 the Company sold 400,736
shares of common stock to various purchasers pursuant to Rule 504 of Regulation
D and Section 4 (2) of the Securities Act of 1933. The average purchase price
was $0.72 per share which includes commissions, fees and expenses.
During 1999 the Company issued 2,868,560 to various employees, officers and
directors pursuant to Rule 504 of Regulation D and Section 4 (2) of the
Securities Act of 1933. These shares were issued to employees, officers and
directors for services rendered and were issued at an average price of $0.05 per
share.
<PAGE>
NOTE 9 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 1998, officers loaned the Company
$91,044 to cover certain operating expenses. During 1998, the Company repaid a
total of $81,711. The remaining note payable-officer balance of $41,752 accrues
interest at a rate of 10% per year.
During 1999 certain officers & shareholders of the company advanced
$270,487 to the company to cover certain operating expenses. During the year a
total of $191,101 was paid on these notes leaving a balance due of $121,137 at
December 31, 1999.
NOTE 10 - EARNING PER SHARE
The following table reconciles the number of common shares outstanding as
shown on the Balance Sheet with the weighted average common shares outstanding
as shown on the Statement of Operations for the year ended December 31, 1999 and
1998.
1999 1998
---------- ----------
Common shares outstanding 12,846,946 9,577,650
Effect of using weighted average
common shares outstanding 2,700,328 543,574
---------- ----------
Weighted average common shares 10,146,618 9,034,076
outstanding ---------- ----------
PART III
Item 1. Index to Exhibits
Exhibit I - AGREEMENT BETWEEN KEITH IVES AND MAXXON, INC. ( See attached )
----------------------------------------------
Exhibit II - STATE OF OKLAHOMA CERTIFICATE OF INCORPORATION AND BYLAWS
---------------------------------------------------------
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this Registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
IVES HEALTH COMPANY, INC.
Date: March 31, 2000 /s/ Michael Harrison
--------------------------- --------------------
By: Michael Harrison
Chief Executive Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Michael Harrison and/or M. Keith Ives, his
true and lawful attorneys-in-fact and agents, to sign any or all amendments to
this Report on Form 10- SB, and to file the same with all exhibits thereto and
other and documents in connection therewith, with the Securities and Exchange
Commission, granting unto the attorney-in-fact agent full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might
or could do in person hereby ratifying and confirming that said attorney-in-fact
and agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Exchange Act of 1934, this Report on Form
10-KSB has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
- --------------------------------------------------------------------------------
/s/ M. KEITH IVES President and Director March 31, 2000
- -------------------------
M. Keith Ives
/s/ MICHAEL HARRISON CEO and Director March 31, 2000
- -------------------------
Michael Harrison
/s/ PERRY IVES Vice-President and Director March 31, 2000
- -------------------------
Perry Ives
/s/ JOETTA HUGHES Secretary, Treasurer & Director March 31, 2000
- -------------------------
JoEtta Hughes
/s/ JIM JONES Director March 31, 2000
- -------------------------
Jim Jones
EXHIBIT I
---------
AGREEMENT BETWEEN M. KEITH IVES AND MAXXON, INC.
------------------------------------------------
This Agreement ("Agreement") is entered into and effective this 31st day of
December 1997 by and among M. Keith Ives("Keith Ives"), Ives Health Company,
Inc. ("Ives"), Gifford Mabie ("Mabie"), and Maxxon, Inc. ("Maxxon").
Whereas, Ives and Maxxon completed a share exchange in August, 1997
pursuant to which Ives became a wholly owned subsidiary of Maxxon; and
Whereas, the parties have concluded that it is in their mutual best
interests and the interests of their shareholders to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt adequacy
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Formation of Newco. Upon execution of this Agreement, Maxxon will
organize a new corporation ("Newco") under Oklahoma law with an authorized
capitalization of 50,000,000 shares of common stock, par value $.001 per share,
whose name shall be Ives Health Company, Inc.. Keith Ives shall designate the
directors and officers of Newco. Maxxon will change the name of its current
subsidiary and make the name "Ives Health Company, Inc." available to this new
corporation.
2. Resignation of Keith Ives. Upon execution of this Agreement, Keith Ives
agrees to resign as a director, officer, employee, agent, and representative of
Maxxon in every other capacity and as a director, officer, employee, agent and
representative of The Health Club, Inc. and in every other capacity of The
Health Club, Inc.
3. Initial Business Plan for Newco.
(a) The parties agree to issue at par 7,000,000 shares of common stock to
Keith Ives. The parties agree to issue, in a stock for stock tax free
reorganization, 1,700,000 shares of Common Stock of Newco in exchange for all
the issued and outstanding shares of Ives. Simultaneously, and as consideration
for the above stock exchange, Keith Ives agrees to surrender to Maxxon 275,360
shares of Maxxon Common Stock owned by him, so that thereafter he shall
personally own of record 80,000 shares of Maxxon Common Stock.
(b) The parties agree that Newco will immediately commence to conduct a
private offering under SEC Regulation D, Rule 504 to sell up to 1,000,000 shares
of Newco for $1.00 per share for up to $1,000,000 less costs and expenses
thereof ("Offering"). Newco shall bear all the costs and expenses in connection
with the Offering, including all printing, copying, mailing, shipping, filing
fees, and federal and state compliance expenses, and related brokerage and
finder's fees, expenses and commissions.
<PAGE>
(c) In connection with the Offering, Maxxon agrees to introduce to Newco at
least 5 persons who might agree to assist Newco in the conduct of the Offering
for a fee upon terms and conditions which shall be agreed to by Keith Ives.
(d) Maxxon agrees to assist Newco in drafting a private offering
memorandum, including projections generated from information supplied by Newco,
for use by Newco in the conduct of the Offering and supplying Ives/Newco a
copied disk of the Offering. All the information in the private placement
memorandum shall be provided by Newco and Keith Ives. The parties agree that
Maxxon is rendering its services to Newco in connection with the Offering
memorandum solely as an accommodation to Newco and as an independent contractor
for no fee whatsoever. It is expressly agreed that the content of the private
placement memorandum is solely the product of Newco, for which Newco is solely
responsible; and Maxxon shall have no responsibility or liability in connection
with the Offering for any reason whatsoever, including assisting Newco in
preparing disclosure documents. The failure to disclose any facts and the
omission of disclosures from the private placement memorandum is a matter within
the sole discretion of Newco and Keith Ives and is not the determination of or
within the power or discretion of Maxxon in any respect.
(e) Newco and its officers, directors, agents, employees and
representatives shall be solely responsible for the compliance with federal and
state securities laws in connection with the Offering, including the filing of
notice of Form D and all applicable state law requirements in connection
therewith. Maxxon will assist and consult with this and all applicable
compliance and filings.
(f) The parties agree that neither Maxxon nor any of its directors,
officers, employees, agents, or representatives shall have any responsibility or
liability for any matter relating to the Offering; and Newco agrees to indemnify
and hold them harmless therefrom. (g) As soon as reasonably appropriate and
after substantial completion of the Offering, Maxxon agrees to assist Newco in
the preparation of a filing with the SEC under Section 15c211 of the Securities
Exchange Act of 1934; provided all information contained therein shall be
supplied by Newco; and further provided, neither Maxxon nor any of its
directors, officers, employees, agents or representatives shall have any
responsibility or liability for the content thereof in connection therewith.
(h) Mabie agrees to consult with Newco and Keith Ives for up to 25 hours
after the execution of this Agreement; provided the times at which such
consulting services shall be rendered shall be at mutually agreed times and
further provided Mabie shall have no liability with respect to any advice given
or information provided during such consulting services.
4. Option to Unwind Maxxon's Acquisition of The Health Club, Inc. Maxxon
hereby grants Keith Ives the right for two years from the date of execution of
this Agreement to unwind Maxxon's acquisition of The Health Club, Inc. by paying
Maxxon the $10,000 paid to Keith Ives and by returning to Maxxon the 35,000
shares of Maxxon Common Stock issued to Keith Ives in connection with Maxxon's
acquisition thereof.
5. Distribution Agreement. Maxxon agrees to propose, execute, deliver and
enter into a distribution agreement with Newco granting Newco a non-exclusive
right to sell the Maxxon Safety
<PAGE>
Syringe(TM) for a period of five years after the date hereof containing standard
wholesale prices and upon terms no less favorable to Newco than to any other
distributor purchasing the same volumes, upon the same terms and subject to
other applicable requirements. Newco shall be granted the ability to verify the
terms and/or contracts of other distributors.
6. Payment of Outstanding Invoice. Maxxon agrees to pay the outstanding
invoices, invoiced to Ives from Frederick K. Slicker and Cross & Robinson, CPA
to Ives before this agreement can be finalized.
(a) All information, documents, etc.. in the possession of Cross &
Robinson, CPA, that was removed from Ives CPA, E. Carolyn Tolmans' office must
be returned to Ives before this agreement can be finalized.
(b) Regarding this transaction, Ives is responsible for payment to Russell
Barber, Attorney at Law and Maxxon is responsible for payment to Frederick K.
Slicker, Attorney at Law and/or any other counsel.
7. No Restrictions upon Ives, Newco or Keith Ives. The parties agree that
upon execution and delivery of this Agreement there shall be imposed by Maxxon
no restrictions of any kind upon Ives, Keith Ives, or Newco.
8. Transfer Restrictions of Maxxon Shares. This Agreement shall have no
adverse effect upon any applicable transfer restrictions under SEC Rule 144 or
otherwise to the extent such provisions are available.
9. Release. The parties agree that the execution and delivery of this
Agreement constitute a full and complete general release, settlement, discharge,
accord and satisfaction by Newco, Keith Ives, Ives, on the one hand, and by
Mabie and Maxxon, on the other hand, and their respective directors, officers,
employees, agents, partners, representatives, successors, and assigns, from and
against any and all claims, actions, causes of action, rights, obligations,
debts, duties, demands, damages or liabilities of every kind, character and
description, whatsoever, whether known or unknown, actual or contingent, from
the beginning of time through the date hereof, except as Keith Ives/Ives may
bring action against Maxxon/Mabie in the event Keith Ives/Newco are sued by
third parties which have as its basis any allegations attributable to or
resulting from the actions of Maxxon/Mabie.
10. Full Settlement. Each party hereto represents and acknowledges to the
other that it has read and understands the terms, conditions and legal effect of
this Agreement; that it has been represented by counsel of its own choosing in
connection herewith; that its counsel is competent and has explained the meaning
and legal effect of the terms of this Agreement to its satisfaction; that this
Agreement is made voluntarily without any promise, inducement, threat, coercion
or intimidation of any kind, character and description from anyone; and that the
execution and delivery of this Agreement constitutes a full and final general
release, accord, satisfaction, acquittal, compromise, adjustment, adjudication,
reimbursement, restitution, discharge and settlement of all claims by Keith Ives
and Ives, on the one hand, and Mabie and Maxxon, on the other hand, and vice
versa, which either has or may have against the other. This Agreement does not
constitute an admission of
<PAGE>
wrongdoing or of liability for any reason whatsoever. The Agreement may not be
used for any purpose whatsoever except to reflect the settlement of the parties
as set forth herein.
11. Covenant not to Disparage. Keith Ives, Newco and Ives, on the one hand,
and Mabie and Maxxon, on the other hand, agree not to make untrue or disparaging
statements with respect to each other.
12. Confidentiality with respect to this Agreement. The parties agree to
keep confidential the terms of the Agreement to the extent permitted by law and
not to disclose the terms hereof to any person without the written consent of
the other parties except as required by law. In the event any lawful process,
action, subpoena or other process is commenced against any party hereto which
seeks in whole or in part the disclosure of all or any portion of the terms and
conditions of this Agreement, the party against whom such disclosure agrees to:
(1) promptly and before any such disclosure is made notify the other parties to
this Agreement of the nature and of such request; (2) seek by all appropriate
means a protective or other order preventing such disclosure; (3) cooperate
fully with the other parties in seeking a protective order preventing such
disclosure; (4) respond by stating that the information is covered by a
confidentiality agreement which cannot be disclosed without an order from a
court or competent jurisdiction requiring such disclosure; and (5) decline to
make any such disclosure unless and until ordered to do so by a court of
competent jurisdiction.
13. Binding Effect. This Agreement shall be binding upon, shall inure to
the benefit of, and shall be enforceable by and against, all the parties and
their respective heirs, legal representatives, successors and assigns.
14. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original and all of which shall
constitute one agreement. The parties agree that faxed signed copies of this
Agreement shall have the same force an effect as originals.
15. Representations. Each individual executing this Agreement on behalf of
a corporation or other entity represents and warrants that he has express
authority to bind, enter and deliver this Agreement on behalf of that entity
which he represents and that this Agreement is valid, binding and enforceable in
accordance with its terms.
16. Non Compete Clause. Maxxon/Mabie or its successors may not enter into
any negotiations or attempt to buy products or the actual operations of Cap Tabs
NFM, Inc. 5660 Eastgate Drive, San Diego, CA 92121 and /or Summa Rx
Laboratories, Inc., 15840 FM Rd. #3028, Mineral Wells, TX 76067. Additionally,
Maxxon/Mabie or it successors may not use any information attained from Keith
Ives/Ives to start, fund or induce start up of any competitive business, for a
period of five (5) years in any areas where Ives conducts its business,
including but not limited to the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives effective the 31st day of December
1997.
<PAGE>
MAXXON, INC. IVES HEALTH COMPANY, INC.
By:_____________________________ By:___________________________
Gifford Mabie, President M. Keith Ives, President
________________________________ ______________________________
Gifford Mabie, individually M. Keith Ives, individually
(Please note this is a word-processed copy of the executed agreement; therefore,
signatures will not appear on this document.)
