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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-A/2
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Struthers, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 57-1075246
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Carriage Lane, Bldg. D, Suite G-E, Charleston, SC 29407
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 843-763-1755
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
--------------------------------------------------------------------------------
(Title of class)
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(Title of class)
-1-
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. BUSINESS
Furnish the information required by Item 101 of Regulation S-K
(ss229.101 of this chapter).
ITEM 2. FINANCIAL INFORMATION
Furnish the information required by Items 301, 303 and 305 of Regulation
S-K (ss ss229.301,229,303, and 229.305 of this chapter).
ITEM 3. PROPERTIES
Furnish the information required by Item 102 of Regulation S-K
(ss229.102 of this chapter).
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Furnish the information required by Item 403 of Regulation S-K
(ss229.403 of this chapter).
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Furnish the information required by Item 401 of Regulation S-K
(ss229.401 of this chapter).
ITEM 6. EXECUTIVE COMPENSATION
Furnish the information required by Item 402 of Regulation S-K
(ss229.402 of this chapter).
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Furnish the information required by Item 404 of Regulation S-K
(ss229.404 of this chapter).
ITEM 8. LEGAL PROCEEDINGS
Furnish the information required by Item 103 of Regulation S-K
(ss229.103 of this chapter).
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Furnish the information required by Item 201 of Regulation S-K
(ss229.201 of this chapter).
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Furnish the information required by Item 701 of Regulation S-K
(ss229.701 of this chapter).
-2-
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Furnish the information required by Item 202 of Regulation S-K
(ss229.202 of this chapter). If the class of securities to be registered
will trade in the form of American Depositary Receipts, furnish Item
202(f) disclosure for such American Depositary Receipts as well.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Furnish the information required by Item 702 of Regulation S-K
(ss229.702 of this chapter).
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Furnish all financial statements required by Regulation S-X and the
supplementary financial information required by Item 302 of Regulation
S-K (ss229.302 of this chapter).
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Furnish the information required by Item 304 of Regulation S-K
(ss229.304 of this chapter).
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) List separately all financial statements filed as part of the
registration statement.
(b) Furnish the exhibits required by Item 601 of Regulation S-K
(ss229.601 of this chapter).
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.
STRUTHERS, INC.
---------------
(Registrant)
Date: November 20, 2000 By:/s/ RICHARD S. LANE
----------------- -------------------
(Signature)*
Richard S. Lane, Acting Secretary
*Print name and title of the signing officer under his signature.
-3-
<PAGE>
ITEM 1. BUSINESS
Description of Business
In August 1997, Ronald Struthers licensed his porcine embryo transfer
technology to a company of which he was a controlling stockholder, Struthers
International Research Corporation (SIRC). By June 1998 SIRC was dormant, with
no operating capital, its only asset being the porcine embryo transfer
technology. Thus, on June 12, 1998 Ronald Struthers and SIRC in contemplation of
transferring the technology to Orbis Development, Inc. ("Orbis") agreed to
terminate the license. On June 18, 1998, in simultaneous and related
transactions, with the anticipation that having stock in a new enterprise (the
"Registrant") would offer the stockholders of SIRC the opportunity to realize
some value from their investments, Ronald Struthers, in consideration of a
controlling stock position (51%), assigned the porcine embryo transfer
technology to Orbis Development Inc. (a public company incorporated in Nevada in
1995 under the name Latitude Network Inc.) (Orbis); amended its Certificate of
Incorporation to change its name to Struthers, Inc. (the "Registrant") and
agreed to distribute ten shares of common stock of the Registrant to each of the
shareholders of SIRC of record as of September 1, 1998 for each share of SIRC
held by them.
Failing in his attempts to fund operation of the Company on November 1,
1998, he appointed a new board of directors, turned over voting control and
resigned as an officer and director. As a SIRC shareholder of record on
September 1, 1998 he received 24,246,250 shares of the Registrant as part of the
10 for 1 share distribution made to all SIRC shareholders. He received no other
consideration for his 51% equity position in the Company. New management opened
an office in Charleston, South Carolina and proceeded with the business of
building the Registrant into the Company as it exists today.
Effective August 25, 1998 the Registrant's outstanding shares were
reverse split 1000 for 1 and effective September 1,1998 forward split its shares
on a 10 for 1 basis. On September 2, 1999 the Registrant's Certificate of
Incorporation was further amended to authorize it to issue 900,000,000 shares of
common stock par value $.001. In February 2000 the Registrant amended its
Articles of Incorporation to increase the number of shares it is authorized to
issue to 906,520,000 shares of which 900 million shares are common stock and
6,520,000 are preferred stock.
The Registrant's business is the sale and marketing of products and
services designed to increase reproductive efficiency, animal production and
quality in the swine industry utilizing the technology and products it has
developed. Principal sources of revenue are through the sale of gilts (young
females that have not given birth to pigs), mature boars, barrows (castrated
male hogs), semen, artificial insemination supplies, embryo transfer services,
including embryo transfer equipment and training. Commencing in September 1998,
the Registrant began developing a semen delivery system for use in artificial
insemination which is now commercially available and a non-surgical porcine
embryo transfer system which to date is not commercially available. Embryo
transfer is the ability to remove an embryo from a genetically superior animal
and introduce it into a surrogate host (mature recipient female). This has been
done successfully, commercially in other large farm animals but has never been
successfully commercialized in swine due to the intricate nature of the swine
reproductive system.
-4-
<PAGE>
The advantages of embryo transfer are: (i) bloodlines are changed after
only one generation, when compared to traditional means of introducing a new
line of genetics through natural breeding or semen; (ii) no quarantine
requirements compared with live animals; (iii) low incidence of disease
transference, as embryos are "washed" in a proprietary solution to virtually
remove any disease which may be present on the membrane of the embryos, when
compared to natural or artificial insemination where disease may be transferred;
(iv) reduced transportation costs, when compared to live animal transfer because
embryos are transferred in a special heated briefcase; (v) high fertilization
rate, when compared to traditional artificial insemination techniques; and (vi)
uses existing livestock - embryos are implanted in the farmers' existing sows,
rather than risking the chance of disease transference through the introduction
of new animals to the herd.
Struthers was the first company to successfully achieve commercial
viability of surgical embryo transfer in swine when, in 1998, the Company
successfully transferred and implanted embryos into sows in Czechoslovakia, a
procedure which had previously only been employed in a laboratory setting. Since
then, the Company further developed its embryo transfer system, designing its
own Mobile Operating Theatre - a specially designed self-contained trailer,
towed behind a truck to the embryo transfer sites. This Mobile Operating Theatre
has been used on numerous occasions with our own herds to improve our surgical
procedures and to prove the safety and cost effectiveness of the technology. To
date, there have been no known instances of disease transference or deaths
resulting from the surgical embryo transfer procedures. Further, based on the
experience gained from these transfers, the cost of the procedure is very
favorable when compared to the alternative of purchasing a herd of genetically
superior gilts (adolescent females).
The Registrant has continued its product development to encompass the
technologies of non-surgical embryo transfer and an advanced semen delivery
system. In April 2000, the Company began experimenting with the Gourley Scope, a
device originally designed for artificial insemination in sheep, modifying it
for reproductive use with swine. The first trials involving non-surgical
transfer of embryos utilizing the Gourley Scope were conducted on May 13, 2000.
Subsequently, based upon the initial results, the Company acquired the rights to
the device on June 1, 2000. Research has continued with the use of the Gourley
Scope in non-surgical transfers and also in other applications such as
artificial insemination using both fresh and frozen semen. To date, more than
1,000 procedures have been performed on swine using the Gourley Scope without
adverse health consequences or a single death among the animals. With the recent
birth of the first litter of swine resulting from non-surgically implanted
embryos, announced on September 5, 2000, the Company's prospects for successful
commercialization of the embryo transfer process in the swine industry has been
advanced considerably. While product development continues, the Registrant
believes the new technology will be well received by the swine industry, due to
the added benefits of potential cost reductions and convenience offered by this
new non-surgical embryo and semen implantation device. It is currently estimated
that the first commercial applications of the non-surgical swine embryo
implantation technology may generate revenues in the first quarter of 2001. It
is premature to estimate the probable revenues or costs of such applications,
since the scope of such activities is yet to be defined.
The Registrant believes that swine industry demands for accelerated
genetic advancement and selection will be met by the safe and cost effective
Struthers embryo transfer system and the use of the Registrant's superior
genetic line (breeding stock, semen). The Registrant believes that embryo
transfer and genetic implantation will become the principal commercial vehicle
of genetic sales and exchange in the swine industry as seen in other animal
husbandry industries (i.e., cattle) and will lead to new and innovative breeding
strategies for the direct selection of lean high quality pork. The Registrant
believes by utilizing the combined benefits of Struthers superior genetic line
and embryo transfer technology, profitability is increased while the risk of
disease transmission is reduced.
-5-
<PAGE>
On November 2, 1999 the Registrant entered into an agreement with
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred") pursuant to
which the Registrant purchased physical assets, including livestock, operating
equipment and Legred's rights under an agreement with Norsvin International AS
("Norsvin"), an international developer and distributor of porcine genetic
materials and technology ("Legred Assets"). The purchase price was determined
based on management's knowledge of the industry and other studies conducted by
management. The aggregate amount of the purchase price was $5,000,000, of which
$1,000,000 was paid in cash, 2,220,000 shares of common stock at closing valued
at $250,000 and 6,660,000 shares of common stock valued at $750,000 due on
January 1, 2000 (based on the fair value of the common stock as of the date of
the agreement). The balance of $3,000,000 payable in the Registrant's common
stock, the final number of which shares will be determined based on the market
value of the Company's common shares at the dates payable as follows: $1,000,000
due May 2, 2000; $1,000,000 due November 2, 2000 and $1,000,000 due May 2, 2001.
The fair market value of the common shares the Registrant is required to issue
to Legred is $4 million. Pursuant to the Agreement with Legred, to date (August
15, 2000), the Registrant has issued 10,467,302 shares valued at $2 million
(based on the average trading price on the due dates issued). Additional shares
valued at $1 million each are to be issued on or about November 2, 2000 and May
2, 2001. The cash portion of the consideration paid to Legred was satisfied by
means of a cash payment of $100,000 on November 5, 1999 and a note payable in
the amount of $900,000; which was subsequently paid in full on February 15,
2000.
The Registrant was obligated under the purchase agreement with Legred
to build and subsequently did build a boar stud unit and operating laboratory,
the cost of which was approximately $450,000. In anticipation of the execution
of the said agreement, the Registrant formed a wholly owned subsidiary which was
incorporated in the State of Nevada on October 21, 1999 and called Legred
Struthers Genetics, Inc. ("LSG"). All of the Legred Assets were transferred into
LSG.
One of the assets acquired from Legred Genetics, Inc. was Legred's
rights under an agreement with Norsvin International AS (an unrelated third
party). Under this agreement LSG has, among other things, the exclusive right to
sell semen and animals produced from Norsvin swine genetics throughout the
United States. Legred is obligated to pay a royalty equal to 4% of revenues
derived from sale of progeny or semen produced from animals previously purchased
from Norsvin. Royalties are payable to Norsvin on a semi-annual basis of which
$1,683 and $8,121 was paid to Norsvin for the period from the date of the Legred
acquisition through December 31, 1999 and for the six months ended June 30, 2000
respectively. The full text of the agreement with Norsvin has been attached as
an exhibit to this registration statement and is incorporated herein by
reference. As of December 31, 1999 and June 30, 2000 there are no material
long-term or short-term purchase contracts or sales agreements pertaining to the
sale or purchase of Norsvin genetics.
-6-
<PAGE>
LSG is currently able to supply seven superior lines of swine genetics
developed from a genetic line over the previous 20 years by the Legred family
and the addition of Norsvin breeding stock. All genetic sales (semen, live
animal sales, and embryos) will occur through LSG. The Registrant has entered
into written agreements with 11 independent Swineherd Farmers to provide
breeding gilts and barrows to the Registrant for sale to the Registrant's
customers. As of June 30, 2000 the herds consist of approximately 28,500 swine.
Under the agreements, the Company has a first right of refusal to purchase any
and all animals produced which the Registrant then resells to its customers at a
profit. The agreements with these farmers are known as "Gilt Multiplier"
agreements. Only quality offspring (principally gilts) are selected and
purchased from the Swineherd Farmer for sale to the Company's customers, hence a
"genetic premium" ranging from $20 to $52 is paid to the Swineherd Farmer.
Because these contracts enable the Registrant to produce many more animals for
sale to its customers than it could otherwise from its own herds alone, these
agreements are termed "Multiplier Herd" agreements, since the Company has, in
effect, "multiplied" its genetic capabilities. None of these swine are fed
animal protein in their growth diet and great care is taken against the
introduction of any harmful chemicals and unnecessary antibiotic products.
On June 1, 2000, the Registrant purchased the assets of Elite Visions
L.L.C. of Waukon, Iowa. The total purchase price which was based upon management
studies was $2,154,445. The consideration paid was $22,000 in cash plus
$1,888,860 in common stock (2,303,488 shares issued on August 4, 2000 and valued
at $.82 per share at the date of the agreement) and the assumption of certain
liabilities in the amount of $243,585. The purchased assets include the physical
assets (i.e., land and building, furniture and fixtures, and office equipment
and computers) and the assignment of all rights to a patented item called the
"Gourley Scope(Tm)" (Trademark applied for), an instrument used for non-surgical
semen delivery in animal husbandry including swine. The scope employs the
imaging technology of a 1 mm camera, transmitter, and light source, which allows
the technician to view the reproductive system and deliver the semen or embryo
to the appropriate area of the reproductive tract for maximum conception. In
anticipation of the execution of the said agreement, the Registrant formed a
wholly owned subsidiary that was incorporated in the State of Nevada on May 26,
2000 and called Elite Visions, Inc. ("Elite"). Elite constructed a meat
distribution facility for the Registrant's Tender Prime(TM) line of meat
products in Waukon, Iowa, which, was completed at a cost of approximately
$50,000 in October 2000.
On May 15, 2000, the Registrant purchased the assets of Muller A.I.,
L.L.C. of Sioux Falls, South Dakota, a company in the business of retail and
wholesale of various goods and supplies utilized in the artificial
insemination of farm animals. The total purchase price which was based upon
studies by management was $252,857. The consideration paid was $131,290 in cash
plus $100,000 of common stock (195,168 shares issued on August 4, 2000 and
valued at $.51238 per share at the date of the agreement) and the assumption of
$21,267 in liabilities. The assets included all furniture, fixtures and
equipment as well as all supplies, materials and merchandise relating to and
used in connection with such business, including its list of customers and other
items of goodwill. The Registrant did not assume any of the liabilities of
Muller A.I., L.L.C.
except for a customer deposit in the amount of $21,267. The Registrant formed a
wholly owned subsidiary that was incorporated in the State of Nevada on May 26,
2000 and called Muller A.I., Inc. ("Muller").
-7-
<PAGE>
Competition
At present, the Registrant must compete with both national and
international swine genetic companies that are vastly larger in scope and
resources. The Company must also price many of its products and services at
rates which are competitive to these larger competitors, even though the
Registrant believes its products may be superior in quality. The Company uses
its best efforts to differentiate itself from the competition principally
through education of its customers as to the quality of its product and through
better service to its customers. In addition, the Company provides a warranty,
as described below. To date, to our knowledge, no one company alone supplies all
of the services that the Registrant can and does supply, i.e., semen, gilts,
boars, artificial insemination supplies, the reproductive technology of the
semen delivery and embryo transfer systems, animal husbandry and facility design
consultation and training. The Registrant warrants its product line to the
extent that the customers may return unused defective products. The breeding
animals also carry a guaranty from the Registrant that guarantees a percentage
of the animals will breed. If a percentage of the animals do not conceive
(fertilized), they are replaced at market price with no genetic premium paid by
the client up to 10% of the animals purchased. For these reasons, the Registrant
believes it can compete successfully in the market place for genetic products
and swine.
There is no guarantee that Embryo Transfer Technology will become the "standard"
for the swine industry nor that Struthers, Inc. will ultimately become the
"market leader" either in revenues or technology. The Company therefore strives
to continue to improve both its products and its visibility in the industry
against competitors. Struthers, Inc. has attempted to protect itself through its
patents and proprietary processes and techniques, and at the present time does
not know of any other company actively pursuing the "niche" in the reproductive
biotech marketplace it expects to occupy. It is similarly difficult to estimate
the value to the industry or its customers upon the deployment of the Company's
technology or of the costs which may be incurred in further product development,
manufacture and marketing activities, due to the fact the Company's technology
is unique and there is no previous product "track record" to compare to.
EFFECT OF GOVERNMENT REGULATIONS ON THE REGISTRANT'S BUSINESS
Currently, the Registrant must follow regulations and guidelines set by numerous
departments of the United States Department of Agriculture (USDA) for policies
and procedures pertaining to the raising of animals and the processing and
distribution of meat products. The Registrant also is subject to regulations set
forth by the Animal and Plant Health Inspection Service (APHIS) and the USDA in
areas of agricultural biotechnology permitting, notification, animal quarantine
issues and in Deregulation Biotechnology Permits. The Registrant must also
report to APHIS, which is responsible for enforcing regulations governing the
import and export of plants and animals within and outside the United States.
The Registrant must comply with all regulations as they may apply concerning
product labeling, animal health issues, product contamination, and the
importation and exportation of animals, semen and embryos. To date the
Registrant has complied with all of the above regulations and guidelines and is
not aware of any violations of the items listed above. The Registrant is also
aware that they may be subject to fines if any violations occur. With respect to
slaughter practices, the Registrant utilizes only USDA inspected slaughter and
packaging facilities to process and package their meat products.
The Registrant must also comply with regulations set forth by the Environmental
Protection Agency (EPA) with respect to the containment and spreading of animal
waste material and also chemical emissions and groundwater contamination issues.
The Registrant has obtained the necessary permits for the proper disposal or
spreading of animal waste products. To date, the Registrant is unaware of any
violations with respect to the above matters.
The Registrant is a member of the International Embryo Transfer Society (IETS)
(a self-regulating industry body). As such, the Registrant complies with
protocols set forth by the IETS for the safe handling of animals, transportation
of genetic material, surgical removal of embryos and the surgical and
non-surgical implantation of embryos.
-8-
<PAGE>
Distribution of Products, Services and Marketing by Subsidiaries
Legred Struthers Genetics, Inc. (LSG)
Products
Semen - collected and processed at the boar stud
facilities. Semen is sold on a yearly contract basis.
The sales price of semen is dependent upon volume
ordered.
Gilts (female prepubescent animal) - are sold from
gilt multiplier farms (a producer hog farm contracted
independently to raise our genetic lines of sows
which produce offspring as breeding stock for sale by
LSG). LSG at present has contracts with 11
independent Swineherd Farmers who raise gilts and
barrows for purchase and resale to its customers. The
contracts are written on a "first right of refusal"
basis such that the Company is generally not
obligated to purchase any specified numbers of
animals. Due to this arrangement, the Company has the
flexibility to service any reasonably anticipated
demand without the Capital outlay required to
maintain the herd sizes, and, to ensure profit
margins on the animals it sells to its customers. To
date, the agreements are terminable and renegotiable
on an annual basis.
Boars - Boars are sold on an individual basis from
LSG breeding stock at prices ranging from $500.00 to
$5,400.00 depending upon lineage and quality.
Customer Base
Gilt Multiplier Herds: The eleven gilt multiplier
herds that have been contracted to produce and raise
gilts for sale constitute a major source of supply of
genetic material. The loss of two or more of these
clients would result in a temporary reduction of
breeding stock until additional agreements are
entered into.
LSG is not dependent upon any one customer for sale
of its swine, nor does any one customer account for
ten percent or more of the Registrant's consolidated
revenues and the loss of such customer would not have
a material adverse effect on the Registrant and its
subsidiaries taken as a whole.
-9-
<PAGE>
Principal Markets
Gilts, boars and semen are primarily sold to hog
producers for raising market hogs for slaughter;
repopulating of herds lost to disease; completely
changing genetic lines; or the population of new
swine production facilities.
Marketing and Advertising
Brochures with genetic lines and price lists;
reprints of articles from trade papers that feature
LSG; and carcass data (detail analysis of meat
quality provided by slaughter centers) are
distributed via sales force at trade shows, industry
events, and via mailings.
Professional Associations
Registrant is a member of the National Pork Producers
Council (NPPC) and the International Embryo Transfer
Society (IETS) and utilizes resources made available
by these organizations (i.e., training, education,
and research papers).
Muller, A.I., Inc.
Products and Services
Wholesale and retail marketing of artificial
insemination (AI) supplies, and equipment. Provides
boar stud and breeding facility consulting services
consisting of facility design, feeding and health
maintenance, and AI training programs.
Principal Markets
Hog production facilities that use artificial
insemination techniques.
Veterinarians, wholesale and retail outlets that use
and sell animal husbandry products.
-10-
<PAGE>
Marketing and Advertising
Direct visits and phone calls to present and
potential customers.
Brochures and price lists distributed to potential
customers and client base.
Attendance and displays at trade shows; print
advertising in trade papers and magazines.
Customer Base
Muller A.I., Inc. is not dependent upon any one
customer, nor does one customer constitute an amount
equal to ten percent or more of the Registrant's
consolidated revenues and the loss of such customer
would not have a material adverse effect on the
Registrant or its subsidiaries.
Elite Visions, Inc.
Product Development
Gourley Scope(TM)
To date, the Gourley Scope(TM) is in the product
development and testing phase, and thus, no pro forma
projection of revenues has been made. The Registrant
is continuing on the development of the Semen
Delivery System and the Embryo Transfer System,
incorporating the Gourley Scope (TM) in order to make
implantation of swine embryos non-surgical.
Tender Prime(TM)
In the fourth quarter of 1999, the Registrant began
to test market a line of high quality, value added
pork products. The Registrant has completed the label
design and trademark application of the Tender
Prime(TM) name and logo. To date, Tender Prime(TM) is
in the product development and testing phase, and
thus, no pro forma projection of revenues has been
made.
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<PAGE>
Trademarks
Currently pending with the U.S. Patent and Trademark Office
are special intent to use applications for the following :
TENDERPRIME and TENDURPRIME: These trademarks will be used in
connection with genetically bred swine, namely pigs and hogs,
and meat products derived therefrom; and
GOURLEY SCOPE: This Trademark will be used in connection with
the non-surgical embryo and semen transfer device. Patent
issued in the United States, Australia and New Zealand.
(Exhibits)
An "actual use" application has been filed with the U.S.
Patent and Trademark Office for Tender Prime(TM) logo. The Tender
Prime(TM) logo design comprises a shield with the name "Struthers
Certified" across the top, a picture of a pig in the middle and a
banner across bottom of the shield.
As the Registrant believes its embryo transfer system to be
proprietary technology, it has not as of this date filed for trademark,
word mark or U.S. Patent.
Employees
The Registrant and its subsidiaries employ a total of 31 people. Six
full-time employees are located in the Registrant's administrative offices in
Charleston, South Carolina. There is one full-time employee and one part-time
employee in the Registrant's research facility in Spencer, Iowa. In the
Registrant's boar stud operations in Wells and Bricelyn, Minnesota there are
eleven full-time employees and one part-time employee and one student employee.
Elite Visions, Inc. has six full-time employees and two part-time employees in
Waukon, Iowa. Muller, A.I., Inc. has two full-time employees in Sioux Falls,
South Dakota. None of the employees are unionized.
ITEM 2. FINANCIAL INFORMATION
Some of the statements contained in this Registration Statement deal
with projections of revenues, net income (loss) and earnings (loss). These
projections may prove to be inaccurate as they are statements of plans,
objectives and expectations that are not statements of historical facts. You may
identify such statements by the following words: "projected", "could generate
revenues", "projected gross revenues", "projected to generate revenues" and
similar expressions. Although we believe that expectations reflected in these
forward-looking statements are reasonable, Registrant cannot guarantee future
results, levels of activities, performance or achievements. You are cautioned
not to place undue certainty on these or any other forward-looking statements.
Overview
In 1999 the swine industry realized the lowest price for slaughter
animals ($.08 lb.) in 40 years as per National Pork Product Council (NPPC)
historical data. As a result of the reversal in prices, many producers either
went out of business, quit the production of hogs or retained their breeding
stock past the optimum breeding age. Accordingly, marketing and advertising for
the sale of breeding stock was reduced. In anticipation of an increase of hog
slaughter prices and an increase in the need for replacement breeding sows,
Registrant proceeded to increase its breeding stock to meet this demand.
-12-
<PAGE>
The Company's current stud boar unit located in Bricelyn, Minnesota,
with 206 Great Grand Parent boars that produce semen for sale, will be augmented
by the addition of a new state-of-the-art stud boar facility also located in
Bricelyn that will house 400 additional boars. Each boar produces 1,200 doses of
semen per year with a retail price per dose of $7.00. At capacity, the facility
can produce 480,000 doses of semen per year. The new facility was completed
during September 2000 and became operational in October 2000. Semen sales for
the two months from the date of acquisition of Legred through December 31, 1999
were $31,074. Semen sales for the first and second quarter of 2000 were $53,374
and $63,552, respectively.
Gilt sales (prepubescent breeding sows) will be supplied through the
Registrant's gilt multiplier system. The Registrant currently generates an
average of 450 gilt sales per month with an average sales price of $195 per
gilt. The Registrant currently has contracts with eleven gilt multiplier farms
for the production of our superior genetic lines of gilts and barrows that will
be available for sale through our subsidiary. Gilt sales for the two months from
the date of acquisition of Legred through December 31, 1999 were $201,736. Gilt
sales for the first and second quarter of 2000 were $259,360 and $221,225,
respectively.
Boar and barrow (prepubescent boars) sales are also made through the
multiplier system or from the core genetic herd. Boar and barrow sales for the
two months from the date of acquisition of Legred through December 31, 1999 were
$59,758. Boar and barrow sales for the first and second quarter of 2000 were
$95,090 and $101,830, respectively.
The Registrant currently has the following two agreements for the sale
of gilts and semen for the production of TenderPrime(TM) line of meat products.
Andy Bakken Farms d/b/a A-B Duroc has been a customer of Legred Genetics, Inc.
(see ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS), now Legred
Struthers Genetics, Inc. (LSG) for four years and on February 2, 2000 Fairmont
Finishers became a customer of LSG. Both customers purchase gilts and semen from
the LSG Duroc line of animals. The LSG line of Duroc was chosen as the animal to
be processed for the Tender Prime(TM) line of high end, value added meat
products. The Registrant has agreements (referenced in the swine industry as
"Alliances") both with A-B Duroc and Fairmont Finishers to supply animals for
the Tender Prime (TM) line of products. The Registrant agreed to purchase A-B
Duroc and Fairmont Finishers animals based on the price of the Iowa-Southern
Minnesota Price Index (a pricing index commonly used at hog processing plants on
live animals based on per 100 lb. weight live - example: 250 lb. live animal X
$50 per 100 lb. weight = $125 for the animal) on the day of purchase plus a
genetic bonus of $13 per animal for A-B Duroc animals and $10 per animal for
Fairmont Finishers animals. Only animals that after visual inspection meet
desired requirements of weight (240-250 lbs.), muscle definition (dependent upon
experience of buyer), and good visual and documented general health status (no
coughing, runny noses, physical injuries or defects, veterinarian records, etc.)
are selected. The Alliance with A-B Duroc is pursuant to written agreement and
the Alliance with Fairmont Finishers is oral. Both agreements are non-exclusive
and are renewable upon negotiated terms.
-13-
<PAGE>
The Registrant currently has alliances with five swine producers for
the rearing of our superior genetic line of hogs for market under Registrant's
specific developed programs in order to fulfill the needs of identified meat
packers. The Registrant will collect a percentage of the premiums paid by meat
packers for hogs from our genetic line from both the Registrant's own herds and
alliance herds. Current premiums paid by meat packers for our top quality hogs
range from $9.00 to $22.00 per hog. Percentages paid to alliance hog producers
vary on a per contract basis, but generally range between $4.00 and $5.00 per
hog. The Registrant has identified several meat packers with needs for certain
types of animals under the Registrant's developed protocols and programs. The
Registrant continues to seek additional alliance herds to fulfill those
identified needs and expects to significantly expand its herd size in future
quarters. Market sales of hogs for the two months from the date of acquisition
of Legred through December 31, 1999 were $19,895. Market sales of hogs for the
first and second quarter of 2000 were $464,626 and $431,143, respectively.
Included in those sales were sales of market hogs to a meat processor of
$379,340 and $344,493 in the first and second quarter, respectively. The balance
of the increase in sales of market hogs in the first and second quarter was
attributed to sales of isoweaners(baby pigs recently weaned from their mothers).
The Registrant has perfected the surgical Embryo Transfer System and is
currently improving the procedure to include the non-surgical implantation of
embryos. The Registrant anticipates including this technology into its overall
marketing plans during the first quarter of 2001.
The following are selected supplementary data and analysis of the
results of operations for the three month and six month periods ended June 30,
2000 and 1999 and for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(1)
Three Months Six Months Year Ended
Ended June 30, Ended June 30, December 31,
--------------- ---------------- -----------------
2000 1999 2000 1999 1999 1998
---- ---- ---- ---- ---- ----
Operating Revenues:
<S> <C> <C> <C> <C> <C> <C>
Semen $ 63,552 $ --- $ 116,926 $ --- $ 31,074 $ ---
Gilts 221,225 --- 480,585 --- 201,736 ---
Boars and Barrows 101,830 --- 196,920 --- 59,758 ---
Market Swine 431,143 --- 895,769 --- 19,895 ---
Breeding Aides
(AI Supplies) 65,015 --- 70,837 --- 14,896 ---
Other Supplies 4,761 --- 22,022 --- 5,692 ---
--------- ------- ---------- ------ -------- -----
Total Operating Revenues $ 887,526 $ --- $ 1,783,059 $ --- $333,051 $ ---
--------- ------- ---------- ------ -------- -----
NET LOSS $(568,310) $(10,794) $ (856,955) $(10,794) $(617,061) $(524,129)
-------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE
- BASIC AND DILUTED $(.00) $(.00) $(.00) $(.00) $(.00) $(.00)
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999 1999 1998
---- ---- ---- ----
BALANCE SHEET DATA:
<S> <C> <C> <C> <C>
Working Capital $ 772,892 $ --- $(3,095,632) $ 2,278
Total Assets $12,192,274 $ --- $ 5,329,291 $ 2,278
Long Term Debt $ 31,830 $ --- $ 1,000,000 $ ---
Stockholders Equity $ 8,015,519 $ (87,643) $ 572,474 $(85,365)
<FN>
(1) Reflects operating results of the farm operations for the two months from
the date of the Legred acquisition through December 31, 1999.
</FN>
</TABLE>
There was no financial activity in 1997 or 1996.
-14-
<PAGE>
Results of Operations
Three and Six Months Ended June 30, 2000 and 1999 and for the Years
Ended December 31, 1999 and 1998.
The following table sets forth, for the periods indicated, the
percentages of total revenues represented by certain items reflected in the
Registrant's consolidated statements of operations.
<TABLE>
<CAPTION>
(1)
Three Months Six Months Year Ended
Ended June 30, Ended June 30, December 31,
-------------- -------------- ------------
2000 1999 2000 1999 1999 1998
---- ---- ---- ---- ---- ----
Operating Revenues:
<S> <C> <C> <C> <C> <C> <C>
Semen 7.2% ---% 6.6% ---% 9.3% ---%
Gilts 24.9% ---% 27.0% ---% 60.6% ---%
Boars and Barrows 11.5% ---% 11.0% ---% 17.9% ---%
Market Swine 48.6% ---% 50.2% ---% 6.0% ---%
Breeding Aides
(AI Supplies) 7.3% ---% 4.0% ---% 4.5% ---%
Other Supplies .5% ---% 1.2% ---% 1.7% ---%
Total Operating Revenues 100.0% ---% 100.0% ---% 100.0% ---%
Cost of Sales
- Farm Operations 63.5% ---% 66.1% ---% 50.9% ---%
Gross Profit 36.5% ---% 33.9% ---% 49.1% ---%
Expenses:
Research and Development 8.2% ---% 4.6% ---% 3.0% ---%
Marketing and Advertising 2.6% ---% 2.8% ---% 6.1% ---%
General and Administrative 61.7% ---% 44.9% ---% 159.1% ---%
Amortization
and Depreciation 32.1% ---% 31.8% ---% 60.9% ---%
Total Expenses 104.6% ---% 84.1% ---% 229.1% ---%
Operating Loss (68.1%) ---% (50.2%) ---% (180.0%) ---%
Other Income (Loss) 4.1% ---% 2.1% ---% ( 4.9%) ---%
Loss Before Income Taxes (64.0%) ---% (48.1%) ---% (184.9%) ---%
Income Taxes (Benefit) ---% ---% ---% ---% .3% ---%
Net Loss (64.0%) ---% (48.1%) ---% (185.2%) ---%
<FN>
(1) Reflects operating results of the farm operations for the two months from
the date of the Legred acquisition through December 31, 1999.
</FN>
</TABLE>
-15-
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1998
REVENUES
The Company generated revenues for the first time during the year 1999
as a result of the Legred acquisition. Total revenues for the year ended
December 31, 1999 were $333,051. The Company had no revenues in 1998.
COST OF SALES - FARM OPERATIONS
The cost of sales - farm operations for the year ended December 31,
1999 was $169,609 and represented 50.9% of total revenues. The Company had no
cost of sales in 1998. Cost of sales consists of the cost of farm animals sold,
freight, feed, supplies, veterinary fees and labor costs.
RESEARCH AND DEVELOPMENT COSTS
The Company incurred $10,000 in research and development costs in 1999
as compared with $180,074 in 1998. The 1999 research and development costs were
comprised primarily of lab expenses incurred since the Legred acquisition in
November 1999. The research and development costs in 1998 represented purchased
in-process Research and Development in connection with the acquisition of the
embryo transfer technology from Struthers International Research
Corporation(SIRC).
MARKETING AND ADVERTISING COSTS
Marketing and advertising costs for the year ended December 31, 1999
were $20,242 and represented 6.1% of total revenues. The Company had no
marketing and advertising costs in 1998.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs increased by $185,783 (54.0%) from
$344,055 in 1998 to $529,838 in 1999. The increase in general and administrative
costs was attributable to the Registrant's efforts in raising capital,
restructuring its business activities, and seeking a merger candidate. The
majority of the increase represents officers' wages of the parent corporation in
the amount of $80,000 and outside consulting, legal and accounting costs in the
amount of $93,683.
AMORTIZATION AND DEPRECIATION
Amortization and depreciation was $202,946 for the year ended
December 31, 1999 and was attributed primarily to the inclusion of the Legred
Struthers Genetics, Inc. Subsidiary. The Company had no depreciation and
amortization expense in 1998.
OTHER INCOME (LOSS)
Other income (loss) for 1999 of ($16,344) represented the net
investment loss for the year and included a $25,000 loss on a deposit to
purchase a 20% equity interest in an unrelated party called Struthers Pedigree
Herd Corporation. The parties could not reach an agreement on the final terms
and the Company rescinded the transaction. $80,000 of the initial $105,000
deposit was returned in June 2000. The Company had no investment activity in
1998.
PROVISION FOR TAXES
The Company has not had any taxable income since its inception and
therefore has not incurred any income taxes. The Company has not recognized any
deferred tax benefits in connection with net operating loss carryforwards and
will not until such time as it is more likely than not that the related tax
benefits will be realized.
-16-
<PAGE>
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1999
REVENUES
Revenues for the six months ended June 30, 2000 were $1,783,059. The
Company had no revenues during the six months ended June 30, 1999 since the
Company first began to generate revenues after the Legred acquisition in
November, 1999.
COST OF SALES - FARM OPERATIONS
The cost of sales - farm operations for the six months ended June 30,
2000 was $1,179,147 and represented 66.1% of total revenues. The Company had no
cost of sales during the six months ended June 30, 1999.
RESEARCH AND DEVELOPMENT COSTS
The Company incurred $82,106 in research and development costs,
representing 4.6% of total revenues for the six months ended June 30, 2000. The
Company did not incur any research and development costs during the six months
ended June 30, 1999.
MARKETING AND ADVERTISING COSTS
Marketing and advertising costs for the six months ended June 30,
2000 were $50,351 and represented 2.8% of total revenues. The Company had no
marketing and advertising costs during the six months ended June 30, 1999.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs increased by $789,610 from $10,794
for the six months ended June 30, 1999 to $800,404 for the six months ended June
30, 2000. The increase in general and administrative costs was attributable to
the Registrant's efforts in raising capital, restructuring its business
activities, and registering its common stock. The Company was in the early
stages of development during the first half of 1999 and had incurred minimal
administrative costs.
AMORTIZATION AND DEPRECIATION
Amortization and depreciation was $566,409 for the six months ended
June 30, 2000 and was attributed primarily to the inclusion of Legred Struthers
Genetics, Inc. Subsidiary. The Company had no depreciation and amortization for
the six months ended June 30, 1999.
OTHER INCOME
Other income for the six months ended June 30, 2000 was $38,403 and
represented interest income on invested cash. The Company had no investment
activity during the six months ended June 30, 1999.
PROVISION FOR TAXES
The Company has not had any taxable income since its inception and
therefore has not incurred any income taxes. The Company has not recognized any
deferred tax benefits in connection with net operating loss carryforwards and
will not until such time as it is more likely than not that the related tax
benefits will be realized.
-17-
<PAGE>
THREE MONTHS ENDED JUNE 30, 2000 AS COMPARED WITH THE THREE MONTHS ENDED MARCH
31, 2000 AND THE THREE MONTHS ENDED JUNE 30, 1999
REVENUES
Revenues for the three months ended June 30, 2000 were $887,526 as
compared with $895,533 for the three months ended March 31, 2000. The Company
had no revenues during the three months ended June 30, 1999 since the Company
first began to generate revenues after the Legred acquisition in November 1999.
COST OF SALES - FARM OPERATIONS
The cost of sales - farm operations for the three months ended June 30,
2000 was $563,551 and represented 63.5% of total revenues as compared with
$615,596 representing 68.7% of total revenues for the three months ended March
31, 2000. The decrease in the percentage of cost of sales in the second quarter
was primarily due to a favorable mix in sales volume attributable to the lower
cost of sales of gilts and isoweaners. The Company had no cost of sales during
the three months ended June 30, 1999.
RESEARCH AND DEVELOPMENT COSTS
The Company expended $73,474 in research and development costs
representing 8.2% of total revenues for the three months ended June 30, 2000 as
compared with $8,632 representing 1.0% of total revenues for the three months
ended March 31, 2000. The increase in the second quarter was primarily
attributable to the development of the Gourley Scope. The Company did not incur
any research and development costs during the three months ended June 30, 1999.
MARKETING AND ADVERTISING COSTS
Marketing and advertising costs for the three months ended June 30,
2000 were $23,006 and represented 2.6% of total revenues as compared with
$27,345 representing 3.1% of total revenues for the three months ended March 31,
2000. The Company had no marketing and advertising costs during the three months
ended June 30, 1999.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs were $547,293 representing 61.7% of
total revenues for the three months ended June 30, 2000 as compared with
$253,111 representing 28.3% of total revenues for the three months ended March
31, 2000. General and administrative costs increased by $294,182 (116.2%)in the
second quarter. The increase in general and administrative costs was
attributable to employee bonuses of $195,000 and employee relocation costs of
$25,000. General and Administrative costs for the three months ended June 30,
1999 were $10,794. The increase in the quarter ended June 30, 2000 as compared
with the quarter ended June 30, 1999 was primarily attributable to the
Registrant's efforts in raising capital, restructuring its business activities,
and registering its common stock.
AMORTIZATION AND DEPRECIATION
Amortization and depreciation was $284,854 for the three months ended
June 30, 2000 as compared with $281,555 for the three months ended March 31,
2000. The Company had no depreciation and amortization for the three months
ended June 30, 1999. The amortization and depreciation are attributed primarily
to the inclusion of Legred Struthers Genetics, Inc.
OTHER INCOME
Other income for the three months ended June 30, 2000 was $36,342 as
compared with $2,061 for the three months ended March 31, 2000 and represented
interest income earned on invested cash. The increase in the second quarter was
attributed to the cash proceeds received on the sale of preferred stock and
invested in interest bearing accounts at June 30, 2000. The Company had no
investment activity during the three months ended June 30, 1999.
PROVISION FOR TAXES
The Company has not had any taxable income since its inception and,
therefore has not incurred any income taxes. The Company has not recognized any
deferred tax benefits in connection with net operating loss carryforwards and
will not until such time as it is more likely than not that the related tax
benefits will be realized.
-18-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Registrant has financed its operations and met its capital
requirements including the acquisition of Legred through the sales of equity
securities during 1999. Legred has historically financed its farm operations and
met its capital requirements primarily through cash flows from operations and
short-term bank financing. Cash flows from operations was a negative $390,466
for the first year of operations in 1999. Cash flows from operations was a
negative $867,799 for the six months ended June 30, 2000.
The Company has an agreement, whereby it purchases boars from Norsvin
International A.S. for breeding with the Company's sows. The Company derives
revenue from the sales of the genetic offspring and from the sale of semen from
the boars purchased from Norsvin. From this revenue, the Company has agreed to
pay a royalty to Norsvin of 4%. The agreement is for an indefinite period with
royalty payments due semi annually.
The gross revenue recorded by the Company from the sale of offspring
and semen directly attributable to Norsvin acquired boars amounted to $42,079
for the period from the date of the Legred acquisition through December 1999 and
$203,022 for the six months ended June 30, 2000. These sales represented
approximately 12.6% and 11.4% of the total consolidated revenue for those
periods respectively. Of those sales the Company was obligated to pay a royalty
to Norsvin International A.S. of 4% or approximately $1,683, and $8,121
respectively. While the Company expects the sales under this arrangement to
increase in dollar volume, the Company expects the percentage contribution to
total consolidated revenue to diminish in the future due to the development of
its other product lines.
On May 15, 2000, the Registrant purchased the assets of Muller A.I., L.L.C. of
Sioux Falls, South Dakota, a company in the business of retail and wholesale
sale of various goods, supplies and services utilized in the artificial
insemination of farm animals. The total purchase price which was based upon
studies by management was $252,857. The consideration paid was $131,290 in cash
plus $100,000 of common stock (195,168 shares issued on August 4, 2000 and
valued at $.51238 per share at the date of the agreement) and the assumption of
$21,267 in liabilities. The assets included all furniture, fixtures and
equipment as well as all supplies, materials and merchandise relating to and
used in connection with such business, including its list of customers and other
items of goodwill. The Registrant did not assume any of the liabilities of
Muller A.I., L.L.C. except for a customer deposit in the amount of $21,267. In
September of 2000, the Company acquired the worldwide distribution rights to the
"AutoPacker", a semen processing machine at a cost of $10,000.
On June 1, 2000, the Registrant purchased the assets of Elite Visions L.L.C. of
Waukon, Iowa. The total purchase price which was based upon management studies
was $2,154,445. The consideration paid was $22,000 in cash plus $1,888,860 in
common stock (2,303,488 shares issued on August 4, 2000 and valued at $.82 per
share at the date of the agreement) and the assumption of certain liabilities in
the amount of $243,585. The purchased assets include the physical assets (i.e.,
land and building, furniture and fixtures, and office equipment and computers)
and the assignment of all rights to a patented (trademark applied for) item
called the "Gourley Scope(TM)", an instrument used for non-surgical semen
delivery in animal husbandry including swine.
Cash used in investing activities was $243,052 in 1999. The Registrant purchased
$138,052 in Property and Equipment and $105,000 was invested in Struthers
Pedigree Herd Corp. Cash used in investing activities was $1,103,903 for the six
months ended June 30, 2000. $1,093,903 of cash was used to purchase equipment
(including cash used in the acquisition of Elite Visions, Inc. and Muller A. I.)
and in construction of the new boar stud facility and $80,000 was received on
the return of the deposit on an investment in the Struthers Pedigree Herd Corp.
Cash provided by financing activities was $832,400 including $932,400
in net proceeds from common stock offerings during 1999. $100,000 was repaid on
the note payable to Brent Legred in connection with the acquisition. The net
cash provided by financing activities for the six months ended June 30, 2000 was
$5,599,787. The Company received net proceeds on preferred stock offerings of
$6,500,000 and paid $900,000 on the notes payable to Brent Legred during the six
months ended June 30, 2000.
At December 31, 1999, the Registrant had a deficiency in working
capital of $345,632 including a short-term note payable of $900,000 and
excluding short-term stock obligations payable in common stock in connection
with the Legred acquisition of $2,750,000. The Registrant's primary source of
liquidity at December 31, 1999 was $201,160 in cash, $112,649 in accounts
receivable, and $260,000 in inventories of animals available for sale. At
December 31, 1999, the Registrant was committed under the Legred agreement to
the construction of a stud boar facility in the amount of $450,000.
As of June 30, 2000, the Registrant had net working capital of
$4,761,782 exclusive of stock obligations payable in common stock of $3,988,890
in connection with the Legred, Elite Visions and Muller A. I. acquisitions. The
Company's primary source of liquidity at June 30, 2000 was $3,909,245 in cash,
$305,715 in accounts receivable and $610,066 in inventories of animals available
for sale.
In February, 2000, the Registrant offered 1,500,000 shares of its Class
A Convertible Preferred Stock at $1.00 per share. The Registrant received
$1,500,000 in net proceeds from the sale of these equity securities. The
proceeds were used to repay the $900,000 note payable to Brent Legred in
connection with the acquisition. The note provided for 3 equal installments of
$300,000 each due in 6 month intervals from the date of acquisition, unless a
successful public stock offering was completed, in which case the note would be
paid in full to the extent of 50% of the proceeds of the offering. The note was
secured by the assets purchased and was non-interest bearing. The $900,000 was
paid in full in February 2000. The balance of the proceeds were used as follows:
$200,000 towards construction of the stud boar facility, and the balance for
working capital.
-19-
<PAGE>
In March, 2000, the Registrant offered 5,000,000 shares of its Class
B Convertible Preferred Stock at $1.00 per share. The Registrant received
$5,000,000 in net proceeds from the sale of these equity securities. The
proceeds are to be used primarily for the construction of additional breeding
facilities and working capital needs.
The Registrant may in the future pursue additional acquisitions of
businesses, products and technologies, or enter into joint venture arrangements,
that could complement or expand the Registrant's business. Any material
acquisition or joint venture could result in a decrease to the Registrant's
working capital, depending on the amount, timing and nature of the consideration
to be paid. The Company has not completed any negotiations for any significant
acquisitions, joint ventures or mergers at the present time which has not been
disclosed.
The Company does not have any material commitments for capital
expenditures during the next 12 months other than those disclosed herein. The
Registrant believes that existing cash and cash equivalent balances as of June
30, 2000 and the potential cash flow from operations will satisfy the
Registrant's working capital and capital expenditure requirements for at least
the next 12 months. The Registrant may consider various alternatives for
obtaining additional equity or debt financing should the need occur. Any
material acquisitions of complementary businesses, products, services or
technologies could require the Registrant to obtain such financing. There can be
no guarantee that such financing will be available on acceptable terms, if at
all.
ITEM 3. PROPERTIES
Description of Properties
The Registrant maintains its executive offices in approximately 2,200
sq. ft. of space in Charleston, South Carolina pursuant to a lease which expired
May 31, 2000 and which was renewed for three years at a monthly rental of
$1,456.38 for the first year, $1,485.50 for the second year and $1,515.50 for
the third year. The lease was cancelled effective December 12, 2000.
The Company entered into a lease for new office space for 2,170 sq. ft.
of space at $2,984 per month for a 5 year period commencing November 1, 2000.
The lease contains an annual escalator clause of 4% of the prior years base
rent.
The Registrant has a field office containing approximately 1,500 sq.
ft. located in Wells, Minnesota in a building owned by Legred Struthers
Genetics, Inc. The property was purchased on January 21, 2000 for $50,000 and is
subject to a $40,000 first mortgage. The Registrant has an approximately 22,000
sq. ft. facility housing boar stud semen collection and embryo transfer
operating rooms and an administrative office. It is located on 40 acres of
leased land at $1 per year for 99 years located in Bricelyn, Minnesota. Also in
Bricelyn, Minnesota is a 175 boar stud unit facility containing approximately
5,000 sq. ft. under a month to month lease at a rental of $1,000 per month.
The Registrant has leased two gestation barns, one 1,800 sq. ft. and
the other 2,400 sq. ft. in Spencer, Iowa consisting of approximately 4 acres
that is used as a research facility under a month to month lease at a monthly
rental of $500.
-20-
<PAGE>
ITEM 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Registrant's stock by each Director, by all
Directors and Officers as a group and by each person known to the Registrant to
be the beneficial owner of more than 5% of the outstanding shares of the
Registrant's stock as of October 9, 2000. Unless otherwise indicated, each of
the following persons has sole voting and dispositive power with respect to the
shares which he beneficially owns.
<TABLE>
<CAPTION>
AMOUNT OF SHARES PERCENTAGE AMOUNT OF SHARES PERCENTAGE
OF COMMON STOCK OF COMMON OF CLASS B PREFERRED STOCK OF CLASS B
BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED PREFERRED
NAME AND ADDRESS OF
BENEFICIAL OWNER
<S> <C> <C> <C> <C>
Douglas W. Beatty
President and Director
1 Carriage Lane
Bldg. D, Suite G-E 6,883,000 1.85%
Charleston, SC 29407
Rhett C. Seabrook
Secretary and Director
1 Carriage Lane
Bldg. D, Suite G-E 6,983,000 1.85%
Charleston, SC 29407
Bertram K. Remley
Chief Financial Officer
1 Carriage Lane
Bldg. D, Suite G-E 495,400 .13% 154,000 2.37%
Charleston, SC 29407
Brent Legred
President of Operations of
Legred Struthers Genetics, Inc.
3500 490 Avenue 9,467,302(1) 2.54%
Bricelyn, Minnesota 56014
All Directors and Officers as
a group (4 persons) 23,828,702 6.40% 154,000 2.37%
<FN>
(1) Mr. Legred is entitled to receive additional shares in accordance with the
terms of a November 22, 1999 agreement with Registrant (see ITEM 1. BUSINESS) as
follows: on November 2, 2000, shares valued at $1 million and on May 2, 2001,
shares valued at $1 million based on the then market value.
</FN>
</TABLE>
-21-
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Registrant are as follows:
NAME AGE POSITION
---- --- --------
Douglas W. Beatty 41 President and Director
Rhett C. Seabrook 38 Secretary and Director
Bertram K. Remley 55 Chief Financial Officer
Brent Legred 37 President of Operations
of Legred Struthers
Genetics, Inc.
The following information summarizes the business experience during at
least the past five years of each officer:
Douglas W. Beatty, President, November, 1998 to date, overseeing the
day by day operations of the Registrant, including the development of product
commercialization and reproductive technology. In 1991 to November, 1998, was
President of Winners's Circle, Inc., a Charleston, South Carolina, based seminar
and training production company. Hired and trained sales staff to promote
celebrity speakers and perform training programs in corporations throughout the
country. In addition, developed marketing plans for corporations launching new
innovative products. Running day to day operations of company programs and
business. His educational background includes B.S. in biology, vertebrate
physiology from Trent University and B.S. (Hon.) in chemotherapy/laboratory
biology from University of Toronto, certified surgical embryo transfer
techniques, University of Missouri.
Rhett W. Seabrook, Secretary, November, 1998 to date, responsible for
sales and marketing of Registrant's porcine reproductive biotechnology and
genetics. September, 1997 to November, 1998, Senior Vice President and
co-founder of Future Financial, a debt consolidation service, located in
Charleston, South Carolina, handling sales, marketing, advertising and product
development. 1996 to 1997 Associate Manager/co-Owner of Fric's-N-Frac's retail
store in Charlotte, North Carolina, establishing marketing, development and
promotional events. 1995 to 1996 Assistant Sales Manager Rhodes Furniture,
Charlotte, North Carolina, directed sales and service and provided sales staff
training and motivation. 1991 to 1995 Beverage Director at The Club of Seabrook
Island, Seabrook Island, South Carolina. Managed lounges and banquet operations,
including facility event planning. Mr. Seabrook attended the College of
Charleston, South Carolina.
-22-
<PAGE>
Bertram K. Remley, Chief Financial Officer, May, 2000 to date,
responsible for financial operations, human resources and general
administration. From 1980 to May, 2000 operated his own accounting firm
representing businesses in a broad spectrum of enterprises, including, among
other things, a vertically integrated meat processor (from feedlot to meat
wholesaler), nationally recognized wholesale meat distributors and hotel and
restaurant chains. From 1976 to 1979 was employed by Main Hurdman, a national
accounting firm (subsequently merged into Peat Marwick), and from 1974 to 1976
was employed by the firm of Pannell Kerr Forster, a national accounting firm,
for which two companies he conducted or supervised audits of both public and
non-public entities. His educational background includes a BA Degree in Business
Administration - Accounting from California State University at Fullerton and in
1979 received his CPA certificate from the State of California.
Brent Legred, President of Operations, Legred Struthers Genetics, Inc.,
February 15, 2000 to present, responsible for sales and marketing of the seven
superior genetic lines of swine, continual genetic development, and all
day-to-day operations associated with Legred Struthers Genetics, Inc., January
1, 1995 to February 14, 2000, President/Founder of Legred Swine Genetics, and
President/CEO of Legred Swine Genetics/Norsvin Inc. responsible for the sales
and marketing of swine genetics including the Norsvin genetic line of superior
swine and all day-to-day operations of both companies. Received a B.S. degree in
Business and Finance from the University of Minnesota in 1984.
ITEM 6. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
RESTRICTED
NAME AND FISCAL STOCK
PRINCIPAL POSITION YEAR SALARY AWARDS(8)
------------------ ---- ------ --------
<S> <C> <C> <C>
Douglas W. Beatty 1999 $48,000
President and Director(1)(6) 1998 --- 7,123,000(4)
Rhett C. Seabrook 1999 $48,000
Secretary and Director(1)(6) 1998 --- 7,123,000(4)
Bertram K. Remley (2)(7) 1999 -0- -0-
Brent Legred 1999 $75,000(3) -0-
President of Operations 1998 75,000(3)
of Legred Struthers
Genetics, Inc. (5)(7)
<FN>
(1) As of March 1, 2000 Mr. Beatty's and Mr. Seabrook's annual salary is
$75,000.
(2) As of May 2000 Mr. Remley's annual salary is $60,000.
(3) Mr. Legred did not receive any compensation during the fiscal year
ended December 31, 1999. An annual salary of $75,000 was imputed and
reflected in the statement of operations and a contribution to
capital. As of February 15, 2000 his annual salary is $75,000 pursuant
to a written contract.
(4) These shares were granted by the board of directors as compensation
for past services on December 1, 1998. A total of 7,623,000 shares of
common stock were awarded to each of these officers with a fair value
on the date of grant of $.01 per share and the Company recognized
compensation expense of $76,230 for each of the officers in 1998.
4,123,000 shares were issued in 1998, 1,000,000 shares were issued in
1999 and the remaining 2,500,000 shares were issued in 2000.
(5) Mr. Legred is entitled to receive additional shares in accordance with
the terms of a November 22, 1999 agreement with Registrant (see ITEM
1. BUSINESS) as follows: on November 2, 2000, shares valued at $1
million and on May 2, 2001, shares valued at $1 million based on the
then market value.
(6) Douglas Beatty and Rhett Seabrook have identical employment
agreements. Each is for a term of 42 months commencing July 1, 2000
with a salary of $75,000 through June 30, 2000 and increasing every
six month period thereafter by $25,000 with the last period being July
1, 2003 through December 31, 2003 at a salary rate of $250,000.
(7) Mr. Remley's employment agreement is for a term of 36 months
commencing May 1, 2000 at an annual salary of $60,000. Brent Legred's
employment agreement is for a term of 36 months commencing February
15, 2000 at an annual salary of $75,000.
(8) An additional 5,123,000 shares were awarded in 1998 to a former
officer of the Company in connection with the December 1, 1998 stock
award for compensation for services rendered in 1998.
</FN>
</TABLE>
All of the officers and directors are reimbursed for out-of-pocket
expenses incurred in connection with the Registrant's business. So long as the
expenses incurred in connection with the Registrant's business are reasonable in
amount and accounted for to the satisfaction of the Board of Directors, there is
no set limitation on the amount of expenses which may be incurred.
The Registrant has written employment contracts with Douglas W. Beatty,
Rhett W. Seabrook, Bertram K. Remley and Brent Legred. No other officer of the
Registrant has a written employment contract with the Registrant. At the present
time the Registrant has no retirement, pension, profit sharing, stock option
plan or other similar programs for the benefit of its employees. There are
currently no outstanding options, warrants or rights granted to any director or
officer of the Registrant except that Brent Legred is entitled to certain shares
pursuant to a written agreement with the Registrant (Item 7 below).
-23-
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 2, 1999 the Registrant entered into an agreement with
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred") pursuant to
which the Registrant purchased physical assets, including livestock, operating
equipment and Legred's rights under agreements with third parties (including one
with Norsvin International AS ("Norsvin"), an international developer and
distributor of porcine genetic materials and technology) ("Legred Assets").
There was no prior affiliation between Registrant and Legred. Pursuant to the
agreement the Registrant paid Legred the sum of $1 million and shares of the
Registrant's Common Stock, the final number of which shares will be determined
based on the market value of the Company's common shares at the dates payable as
follows: $250,000 due at closing; $750,000 due January 1, 2000; $1,000,000 due
May 2, 2000; $1,000,000 due November 2, 2000 and $1,000,000 due May 2, 2001. The
Registrant was obligated under this agreement to and did build a boar stud unit
and operating laboratory, the cost of which was approximately $450,000. In
anticipation of the execution of the said agreement, the Registrant formed a
wholly owned subsidiary which was incorporated in the State of Nevada on October
21, 1999 and called Legred Struthers Genetics, Inc. All of the Legred Assets
were transferred into the subsidiary. Further and pursuant to the agreement
Legred became President of Operations of Legred Struthers Genetics, Inc. at an
annual salary of $75,000.
With the exception of the foregoing, there are no transactions with
management nor business relationships or transactions with promoters which are
required to be reported under this item. There is no indebtedness owed by
management to the Registrant.
ITEM 8. LEGAL PROCEEDINGS
The Registrant is not a party to any material pending lawsuits, nor
have any been threatened and to the best of its knowledge, none are
contemplated. No such proceedings are known by the Registrant to be contemplated
by any governmental authority.
-24-
<PAGE>
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDERS MATTERS
The Common Stock commenced trading on the OTC Bulletin Board on June
16, 1998 under the symbol "STRU". The following table sets forth, for the fiscal
periods indicated, the high and low bid prices of a share of Common Stock as
reported by the OTC Bulletin Board for periods on and subsequent to June 16,
1998. Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
High Low
---- ---
Fiscal Year 1998
3rd quarter 6.37 .09
4th quarter .06 .01
Fiscal Year 1999
1st quarter .03 .01
2nd quarter .60 .01
3rd quarter .28 .09
4th quarter .52 .07
Fiscal Year 2000
1st quarter 1.66 .27
2nd quarter 1.09 .44
There are no restrictions that currently materially limit the
Registrant's ability to pay dividends or that the Registrant believes are likely
to limit materially the future payments of dividends. The Registrant has not
paid any dividends to date. For the foreseeable future it is anticipated that
earnings which may be generated from operations of the Registrant will be used
to finance the growth of the Registrant. Therefore, it is not expected that cash
dividends will be paid to stockholders.
As of October 9, 2000 there were approximately 1,603 holders of record of the
Common Stock.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Since its inception in June, 1998, Registrant has made the following
sales of unregistered securities, all of which sales were exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act")
pursuant to Section 3(b) thereof or as otherwise indicated herein.
On October 10, 1995, the Company was initially capitalized by the
issuance of 25,000,000 shares (250,050 shares after giving retroactive effect to
the August 25, 1998 reverse split and the September 1, 1998 forward split) to
stockholders in exchange for organization expenses paid personally by the
shareholders. The Company recorded the organization costs as an expense during
1995, with a corresponding increase to stockholders' equity for $25,000
(25,000,000 shares at $.001 par value).
On August 25, 1998, the Board of Directors approved a 1 for 1,000 share
reverse stock split in which the shareholders received 1 share for every 1,000
shares previously held. The Company recorded the transaction as a reduction of
the par value of the common stock outstanding and a corresponding increase to
additional paid-in capital. The effects of the reverse split have been given
retroactive treatment in the financial statements.
On August 31, 1998, the Company issued 13,500,000 shares (135,000,000
shares after giving retroactive effect to the September 1, 1998 forward split)
to outside consultants as compensation for services rendered to the Company. The
services rendered consisted of legal and investment advisory services. The
shares were valued at $.01 per share equivalent to the fair value of the
services rendered of $135,000 and were recorded by the Company as an expense
with a corresponding increase to stockholders' equity.
On September 1, 1998, the Board of Directors approved a 10 for 1
forward stock split in which the shareholders received 10 shares for every 1
share previously held. The Company recorded the transaction as an increase to
the par value of the common stock outstanding and a corresponding decrease to
additional paid-in capital. The effects of the forward split have been given
retroactive treatment in the financial statements.
On September 1, 1998, the Company issued 180,073,570 to the
shareholders of Struthers International Research Inc., (SIRC), in connection
with the acquisition of the Embryo Transfer Technology. The shares were valued
at $.001 per share equivalent to the fair value of the in-process research and
development of $180,074 and were recorded by the Company as research and
development expense with a corresponding increase to stockholders' equity.
-25-
<PAGE>
In November 1998, the Registrant offered for sale 22 million shares of
Common Stock in 176,000 units at $5 per unit (each unit consisting of 125 shares
for a total of 22 million shares at $.04 per share). The Company received
oversubscriptions for 1,310,000 shares and the Board of Directors approved the
oversubscription. In 1999, the Company sold and issued 23,310,000 shares of
common stock for a total of $932,400. The proceeds of this offering (no sales
commissions were paid) less sales expenses of the offering were applied to
market development, commercialization of the embryo transfer technology and
working capital. The shares were sold to a total of 147 investors, none of whom
were affiliated with the Registrant.
The Registrant believes that such issue and sale was exempt from
registration pursuant to Section 3(b) of the Act and/or Rule 504 under
Regulation D promulgated thereunder.
On December 1, 1998, the Board of Directors awarded 20,369,000 shares
of common stock to employees as compensation for services previously rendered
during 1998 to the Company. On December 31, 1998, the Company issued 12,369,000
shares to employees with the balance of the 8,000,000 shares to be issued as
follows: 3,000,000 shares by July 1, 1999 and 5,000,000 shares by July 1, 2000.
This was done to ease the tax burden on the employees. The shares awarded were
valued at the market value of $.01 per share on the date of grant and were
recorded by the Company as compensation expense in the amount of $203,690 with a
corresponding increase to stockholders' equity of $123,690 and compensation
payable of $80,000 at December 31, 1998.
On May 25, 1999 the Company issued 3,000,000 shares to employees in
connection with the December 1, 1998 stock award. The shares were valued at the
market value of $.01 per share at the date of grant and were recorded by the
Company as a reduction of $30,000 to compensation payable with a corresponding
increase to stockholders' equity.
On May 25, 1999 the Company issued 100,000 shares to an outside
consultant as compensation for services rendered to the Company during 1999. The
services rendered consisted of website design and computer network consultation.
The shares were valued at the market value of $.10 per share and were recorded
by the Company as an expense in the amount of $10,000 with a corresponding
increase to stockholders' equity.
On May 25, 1999 the Company issued 400,000 shares to an unrelated
entity as a charitable contribution. The shares were valued at the market value
of $.10 per share and were recorded by the Company as an expense in the amount
of $40,000 with a corresponding increase to stockholders' equity.
On November 9, 1999 the Company issued 2,220,000 shares to Brent Legred
in connection with the acquisition of Legred Genetics, Inc. and Brent Legred, a
sole proprietorship for the farming operations. The shares were valued at the
market value of $.1126 per share and were recorded by the Company as a reduction
to the stock obligations payable with a corresponding increase to stockholders'
equity in the amount of $250,000.
On January 27, 2000 the Company issued 6,660,000 shares to Brent Legred
in connection with the acquisition of Legred Genetics, Inc. and Brent Legred, a
sole proprietorship for the farming operations. The shares were valued at the
market value of $.1126 per share and were recorded by the Company as a reduction
to the stock obligations payable with a corresponding increase to stockholders'
equity in the amount of $750,000.
In February 2000, Registrant sold 1,500,000 shares of Class A
Convertible Preferred Stock ("Class A Stock") to an accredited investor not
affiliated with the Registrant, at a price of $1 per share. Each share of Class
A Stock is convertible at the option of the holder into fully paid and
nonassessable shares of Common Stock as follows: commencing on the first day of
the sixth month following the issuance of Class A Stock ("Conversion Period")
and on the first day of each sixth month period thereafter, for a total of six
Conversion Periods, one-sixth (1/6) of the shares of Class A Stock held may be
converted by each holder thereof. The amount of common shares into which the
Class A Stock shall be converted at each Conversion Period shall be as follows:
at each of the six Conversion Periods the amount of Class A Stock shares which
may be converted shall be divided by the average market value between the bid
and ask price of the Registrant's shares during the ten day trading period
immediately preceding the date of such Conversion Period, but not more than
$.40, and the resultant figure multiplied by three (i.e., each share of Class A
Stock is convertible into 7.5 shares of Common Stock). The proceeds of this
offering (no sales commissions were paid), less sales expenses of the offering,
were applied to the purchase of the Legred Assets (see Item 7), construction of
a boar stud facility and working capital.
The Registrant believes that such issue and sale was exempt from
registration pursuant to Section 3(b) and or 4(2) of the Act or under Regulation
D promulgated thereunder.
-26-
<PAGE>
In March 2000, Registrant offered and by April 30, 2000 sold 5,000,000
shares of Class B Convertible Preferred Stock ("Class B Stock") to 91 accredited
investors and one non-accredited investor, none of whom were affiliated with the
Registrant, at a price of $1 per share. Each share of Class B Stock is
convertible at the option of the holder into fully paid and non-assessable
shares of Common Stock as follows: commencing on the first day of the sixth
month following the issuance of Class B Stock ("Conversion Period") and on the
first day of each sixth month period thereafter, for a total of six Conversion
Periods, one-sixth (1/6) of the shares of Class B Stock held may be converted by
each holder thereof. The amount of common shares into which the Class B Stock
shall be converted at each Conversion Period shall be as follows: at each of the
six Conversion Periods the amount of Class B Stock shares which may be converted
shall be divided by the average market value between the bid and ask price of
the Registrant's shares during the ten day trading period immediately preceding
the date of such Conversion Period, but not more than $.40, and the resultant
figure multiplied by three ( i.e., each share of Class B Stock is convertible
into 7.5 shares of Common Stock). The proceeds of this offering (no sales
commissions were paid), less sales expenses of the offering, will be applied to
expansion of physical facilities, equipment, research and development,
acquisitions and working capital needs.
The Registrant believes that such issue and sale was exempt from
registration pursuant to Section 3(b) and/or 4(2) of the Act or under Regulation
D promulgated thereunder.
On May 17, 2000 the Company issued 1,587,302 shares to Brent Legred in
connection with the acquisition of Legred Genetics, Inc. and Brent Legred, a
sole proprietorship for the farming operations. The shares were valued at the
market value of $.63 per share and were recorded by the Company as a reduction
to the stock obligations payable with a corresponding increase to stockholders'
equity in the amount of $1,000,000.
On June 30, 2000 the Company issued 5,000,000 shares to employees in
connection with the December 1, 1998 stock award. The shares were valued at the
market value at the date of grant and were recorded by the Company as a
reduction to compensation payable in the amount of $50,000 with a corresponding
increase to stockholders equity.
The Registrant believes that all of the above sales or other issuances
of such securities were exempt from registration pursuant to Section 3(b) and/or
4(2) of the Act or under Regulation D and/or Regulation S and/or by rules 504,
701 and 904 promulgated by the Securities and Exchange Commission pursuant to
the Securities Act.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Registrant is authorized to issue 900,000,000 shares of Common
Stock, par value $.001, of which 372,127,921 shares are issued and outstanding
as of October 9, 2000. Each outstanding share is entitled to one vote in all
matters. Subject to the preferential rights of the Preferred stock (if any),
holders of Common Stock have equal rights to dividends as and when they may be
declared by the Board of Directors, out of any funds of the Registrant legally
available for the payment of such dividends. Upon any liquidation, dissolution
or winding up of the Registrant, whether voluntary or involuntary, the remaining
net assets of the Registrant shall, after payment in full of the liquidation
preference of any Preferred Stock, be distributed pro rata to the holders of the
Common Stock and the Preferred Stock on an "as if converted" basis. The Common
Stock does not have any preemptive rights and is fully paid and nonassessible
when issued.
The Registrant is authorized to issue 6,520,000 shares of Preferred
Stock, par value $.001, of which 1,500,000 shares are designated as Class A
Convertible Preferred Stock ("Class A Stock"), 5,000,000 shares of which are
designated as Class B Convertible Preferred Stock ("Class B Stock"), 10,000
shares of which are designated as Class C Preferred Stock ("Class C Stock") and
10,000 shares of which are designated as Class D Preferred Stock ("Class D
Stock"). All of the Preferred shares are issued and outstanding.
-27-
<PAGE>
Each share of the Class A Stock and Class B Stock carries a number of
votes equal to the number of shares of Common Stock then issuable upon its
conversion into Common Stock. The Class A Stock and Class B Stock will vote
together with the Common Stock and not as separate class, except as set forth in
the following five paragraphs.
In no instance shall Class A and Class B shareholders be entitled to
vote for directors of the Registrant or on any sale, stock issuance or the like
with a combined vote of more than 49%. In the event of a vote of shareholders
with respect to any of the instances set forth in the following two paragraphs,
the Class C Stock shall have a number of votes equivalent to 51% of all shares
having voting rights and entitled to vote on such matters.
The consent of the holders of a majority of each of the outstanding
Class A Stock, Class B Stock and the holders of all of the outstanding Class C
Stock and Class D Stock shall be required for (i) any amendment or change of the
rights, preferences, privileges or powers of, or the restrictions provided for
the benefit of the Class A Stock, Class B Stock, Class C Stock and Class D
Stock; (ii) any action that authorizes, creates or issues shares of any class of
stock having preferences superior to or on a parity with the Class A Stock,
Class B Stock, Class C Stock and Class D Stock; (iii) any action that
reclassifies any outstanding shares into shares having preferences or priority
as to dividends or assets senior to or on a parity with a preference of the
Class A Stock, Class B Stock, Class C Stock and Class D Stock; and (iv) any
amendment of the Registrant's Articles of Incorporation that adversely affects
the rights of the Class A Stock, Class B Stock, Class C Stock and Class D Stock.
The consent of the holders of all of the outstanding Class C Stock and
Class D Stock shall be required for (i) any merger or consolidation of the
Registrant with one or more other corporations and or entities in which the
shareholders of the Registrant immediately prior to such merger or consolidation
hold majority of the voting power of the Registrant and immediately after such
merger or consolidation would hold stock representing less than a majority of
the voting power of the outstanding stock of the surviving corporation; (ii) the
sale of all or substantially all the Registrant's assets; (iii) the liquidation
or dissolution of the Registrant; (iv) the declaration or payment of any
dividend on the Common Stock (other than a dividend payable solely in shares of
Common Stock); or (v) any action which the holders of the Class C Stock and
Class D Stock believe to be contrary to the best interests of the Registrant.
The shares of Class D Stock, as a unit, shall have the right, at the
option of the holders thereof, their designees, assignees, heirs and/or legal
representatives, to purchase on the first day of January and on the first day of
July of each year shares of Common Stock aggregating in number 2 1/2% annually
of the issued and outstanding stock of the Registrant. For this purpose, the
number of issued and outstanding shares shall be fixed at a maximum of 100
million shares or the then outstanding stock, whichever is less, and a minimum
of 50 million shares or the then outstanding shares, whichever is greater. The
purchase price shall be equal to 10% of the average of the bid and ask price of
the Registrant's shares during the ten day trading period immediately preceding
the first day of January and July of each year.
-28-
<PAGE>
In the event of any liquidation, dissolution or winding up of the
Registrant, a merger or consolidation of the Registrant, in which its
shareholders do not retain a majority of the voting power in the surviving
corporation, or a sale of all or substantially all of the Registrant's assets,
the holders of the Class A Stock will be entitled to receive an amount equal to
the original purchase price per share for the Class A Stock plus an amount equal
to all declared but unpaid dividends thereon (the "Preference Amount"). After
the full liquidation preference on all outstanding shares of the Class A Stock
has been paid, then thereafter the holders of the Class B Stock will be entitled
to receive an amount equal to the original purchase price per share for the
Class B Stock plus an amount equal to all declared but unpaid dividends thereon.
After the full liquidation preference on all outstanding shares of the Class B
Stock has been paid, any remaining funds and assets of the Registrant legally
available for distribution to shareholders will be distributed pro rata among
the holders of the Preferred Stock and the Common Stock on an "as-if-converted"
basis. If the Registrant has insufficient assets to permit payment of the
Preference Amount in full to any class of Preferred Stock shareholders, then the
assets of the Registrant will distributed ratably to the holders of that class
of Preferred Stock in proportion to the Preference Amount each such holder would
otherwise be entitled to receive.
Registrant's Common Stock falls within the definition of a `penny
stock' under Securities and Exchange Commission rule (Rule 3a51-1) that imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors,
generally institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and transaction prior to the sale. Consequently, the rule may affect the ability
of broker-dealers to sell Registrant's securities and also may affect the
ability of purchasers of Registrant's stock to sell their shares in the
secondary market and may result in fewer broker-dealers willing to make a
market.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada law enables a corporation to indemnify any director and officer
who is made a party to any suit or proceeding, whether civil, criminal,
administrative or investigative brought against such person by having acted in
its capacity as such director or officer providing such director or officer had
acted in good faith and in a manner reasonably believed to be in the best
interest of the corporation and with respect to any criminal action, where such
director or officer had no reasonable cause to believe its conduct was unlawful.
The Registrant's By-Laws include the following language:
"Each director and officer of this corporation shall be indemnified by the
corporation against all costs and expenses actually and necessarily incurred by
him or her in connection with the defense of any action, suit or proceeding in
which he or she may be involved or to which he or she may be made a party by
reason of his or her being or having been such director or officer, except in
relation to matters as to which he or she shall be finally adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty."
-29-
<PAGE>
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data for the Registrant are
set forth in Item 15 hereof beginning on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrant has no disagreements with any accountants on accounting
and financial disclosures to report under this item, nor has it ever had any
disagreements.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
-30-
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
TABLE OF CONTENTS
-------------------------------------------------------------------------------
Independent Auditors' Report F-2
Consolidated Balance Sheets at December 31, 1999 and 1998 F-3
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 1999 and 1998 F-4 to F-5
Consolidated Statements of Operations for the Years Ended
December 31, 1999 and 1998 F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 F-7 to F-8
Notes to the Consolidated Financial Statements F-9 to F-19
Pro Forma Consolidated Financial Statements F-20 to F-25
Unaudited Interim Financial Statements as of
June 30, 2000 and 1999 F-26 to F-34
Combined Financial Statements of Legred Genetics, Inc. and
Brent Legred F-35 to F-43
Financial Statements of Elite Visions, LLC F-44 to F-52
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholders
Struthers, Inc. and Subsidiary
Charleston, South Carolina
We have audited the accompanying consolidated balance sheets of
Struthers, Inc. and Subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of changes in stockholders' equity, operations and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Struthers,
Inc. and Subsidiary as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in Note M, the financial statements have been restated to
give effect to adjustments made in recording certain equity transactions in 1998
and 1999, to record a valuation allowance against deferred tax assets and to
revise the estimated useful life of the goodwill and customer lists acquired in
the Legred acquisition.
Rotenberg & Company, LLP
Rochester, New York
March 17, 2000
(except Note M, dated October 12, 2000)
F-2
<PAGE>
<TABLE>
<CAPTION>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
(RESTATED) (RESTATED)
December 31, 1999 1998
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 201,160 $ 2,278
Accounts Receivable 112,649 --
Deposit 80,000 --
Inventory 260,000 --
Prepaid Expenses 7,376 --
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 661,185 2,278
PROPERTY AND EQUIPMENT -
NET OF ACCUMULATED DEPRECIATION 2,408,906 --
Intangible Assets -
Net of Accumulated Amortization 2,259,200 --
--------------------------------------------------------------------------------
TOTAL ASSETS $ 5,329,291 $ 2,278
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 56,817 $ 7,643
Compensation Payable - Stock Grants 50,000 80,000
Note Payable- Legred Acquisition 900,000 --
Stock Payable- Legred Acquisition 2,750,000 --
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,756,817 87,643
Long-Term Portion of Stock Payable-
Legred Acquisition 1,000,000 --
--------------------------------------------------------------------------------
TOTAL LIABILITIES 4,756,817 87,643
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock - $.001 Par; 900,000,000
Shares Authorized; 356,722,690 and
327,692,620 Shares Issued and
Outstanding at December 31, 1999
and 1998, Respectively 356,723 327,693
Convertible Preferred Stock- $.001 Par;
6,500,000 Shares Authorized -- --
Additional Paid-in Capital 1,381,941 136,071
Deficit (1,166,190) (549,129)
--------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 572,474 (85,365)
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,329,291 $ 2,278
--------------------------------------------------------------------------------
Preferred Stock - $.001 Par;
20,000 Sharex Authorized
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
<TABLE>
<CAPTION>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Additional Total
Common Stock Preferred Stock Paid-In Stockholders'
Shares(1) Par Value Shares Par Value Capital Deficit Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE - JANUARY 1, 1995 -- $ -- -- $-- $ -- $ -- $ --
Initial Capitalization -
Organization Expenses
Paid by Shareholders 250,050 250 -- -- 24,750 -- 25,000
Net Loss - 1995 -- -- -- -- -- (25,000) (25,000)
---------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1995 250,050 $ 250 -- $-- $ 24,750 $ (25,000) $ --
Net Loss - 1996 -- -- -- -- -- -- --
Net Loss - 1997 -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1997 250,050 $ 250 -- $-- $ 24,750 $ (25,000) $ --
Shares Issued to Consultants
for Services Rendered
at Par $.001 135,000,000 135,000 -- -- -- -- 135,000
Shares Issued in Connection
with Acquisition of Embryo
Transfer Technology at par $.001 180,073,570 180,074 -- -- -- -- 180,074
Shares Issued to Employees
for Compensation for Services at $.01 12,369,000 12,369 -- -- 111,321 -- 123,690
Net Loss - 1998--Restated -- -- -- -- -- (524,129) (524,129)
---------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1998--Restated 327,692,620 $ 327,693 -- $-- $ 136,071 $ (549,129) $ (85,365)
---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
<FN>
(1) The share and per share amounts have been restated to give retroactive
effect to a 1 for 1,000 share reverse stock split on August 25, 1998 and a 10
for 1 share forward stock split on September 1, 1998.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Additional Total
Common Stock Preferred Stock Paid-In Stockholders'
Shares(1) Par Value Shares Par Value Capital Deficit Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998 327,692,620 $327,693 -- $ -- $ 136,071 $ (549,129) $ (85,365)
Issuance of Common Stock
for Cash at $.04 per Share 23,310,000 23,310 -- -- 909,090 -- 932,400
Issuance of Common Stock in
Connection with Legred Acquisition 2,220,000 2,220 -- -- 247,780 -- 250,000
Capital Contributed in Form of Services -- -- -- -- 12,500 -- 12,500
Shares Issued to Employees
- Previously Granted Shares 3,000,000 3,000 -- -- 27,000 -- 30,000
Shares Issued to Consultants
for Services Rendered 100,000 100 -- -- 9,900 -- 10,000
Shares Issued - Charitable Contribution 400,000 400 -- -- 39,600 -- 40,000
Net Loss - 1999--Restated -- -- -- -- -- (617,061) (617,061)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999--Restated 356,722,620 $ 356,723 -- $ -- $1,381,941 $(1,166,190) $ 572,474
Issuance of Common Stock in Connection
with Legred Acquisition:
At $.1126 per Share 6,660,000 6,660 -- -- 743,340 -- 750,000
At $.6300 per Share 1,587,302 1,587 -- -- 998,413 -- 1,000,000
Shares Issued to Employees
- Previously Granted Shares 5,000,000 5,000 -- -- 45,000 -- 50,000
Issuance of Preferred Stock
For Cash at $1.00 per Share -- -- 6,500,000 6,500 6,493,500 -- 6,500,000
Net Loss - Six Months Ended
June 30, 2000 (Unaudited) -- -- -- -- -- (856,955) (856,955)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2000 (UNAUDITED) 369,969,922 $ 369,970 6,500,000 $ 6,500 $9,662,194 $(2,023,145) $8,015,519
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
<TABLE>
<CAPTION>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
(Restated) (Restated)
For the Years Ended December 31, 1999 1998 1997
--------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Sales $ 327,359 $ -- $ --
Other Income 5,692 -- --
--------------------------------------------------------------------------------
TOTAL REVENUE
333,051 -- --
COSTS AND EXPENSES
Farm Operations 169,609 -- --
--------------------------------------------------------------------------------
GROSS PROFIT 163,442 -- --
--------------------------------------------------------------------------------
EXPENSES
Research and Development 10,000 180,074 --
Marketing and Advertising 20,242 -- --
General and Administrative 529,838 344.055 --
Amortization and Depreciation 202,946 -- --
--------------------------------------------------------------------------------
TOTAL EXPENSES 763,026 524,129 --
--------------------------------------------------------------------------------
LOSS BEFORE OTHER INCOME AND (EXPENSES) (599,584) (524,129) --
--------------------------------------------------------------------------------
OTHER INCOME AND (EXPENSES)
Interest 8,656 -- --
Loss on Investment (25,000) -- --
--------------------------------------------------------------------------------
TOTAL OTHER INCOME AND (EXPENSES) (16,344) -- --
--------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (615,928) (524,129) --
Income Taxes (Benefit) 1,133 -- --
--------------------------------------------------------------------------------
NET LOSS $ (617,061) (524,129) --
--------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 342,207,620 316,354,380 250,056
--------------------------------------------------------------------------------
LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.00) $ (0.00) $ --
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement
F-6
<PAGE>
<TABLE>
<CAPTION>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
(Restated) (Restated)
For the Years Ended December 31, 1999 1998 1997
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
NET LOSS $(617,061) $(524,129) $--
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization and Depreciation 202,946 -- --
Employee Compensation - Grant of Common
Stock -- 123,690 --
Compensation of Consultants in Common Stock 10,000 135,000 --
Acquired In-Process Research & Development
Costs for Common Stock -- 180,074 --
Charitable Contribution of Common Stock 40,000 -- --
Loss on Investment 25,000 -- --
Capital Contribution - Services Rendered 12,500 -- --
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (110,649) -- --
Prepaid Expenses (2,376) -- --
Accounts Payable 49,174 7,643 --
Compensation Payable - Stock Grants -- 80,000 --
--------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (390,466) 2,278 --
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (138,052) -- --
Purchase of Investments (105,000) -- --
--------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (243,052) -- --
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 932,400 -- --
Legred Acquisition (100,000) -- --
--------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 832,400 -- --
--------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 198,882 2,278 --
Cash and Cash Equivalents - Beginning of Year 2,278 -- --
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 201,160 $ 2,278 $--
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement
F-7
<PAGE>
<TABLE>
<CAPTION>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
--------------------------------------------------------------------------------
For the Year Ended December 31, 1999
--------------------------------------------------------------------------------
ACQUISITION OF SUBSIDIARY IN EXCHANGE
FOR CASH AND STOCK
ASSETS ACQUIRED:
<S> <C>
Inventory $ 260,000
Breeding Animals 2,160,000
Capitalized Land Lease 1,200,000
Goodwill 800,000
Customer List 304,000
Real Estate 200,000
Property And Equipment 69,000
Contracts 5,000
Accounts Receivable 2,000
-------------------------------------------------------------
5,000,000
LIABILITIES INCURRED:
Stock Payable (3,750,000)
Note Payable (900,000)
-------------------------------------------------------------
CASH PAID AND STOCK ISSUED $ 350,000
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement
F-8
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE A - THE COMPANIES
In August 1997, Ronald Struthers licensed his porcine embryo transfer
technology to a company of which he was a controlling stockholder,
Struthers International Research Corporation (SIRC). By June 1998
SIRC was dormant, with no operating capital, its only asset being the
porcine embryo transfer technology. Thus, on June 12, 1998 Ronald
Struthers and SIRC in contemplation of transferring the technology to
Orbis Development, Inc. ("Orbis") agreed to terminate the license. On
June 18, 1998, in simultaneous and related transactions, with the
anticipation that having stock in a new enterprise (the "Registrant")
would offer the stockholders of SIRC the opportunity to realize some
value from their investments, Ronald Struthers, in consideration of a
controlling stock position (51%), assigned the porcine embryo
transfer technology to Orbis Development Inc. (a public company
incorporated in Nevada in 1995 under the name Latitude Network Inc.)
(Orbis); amended its Certificate of Incorporation to change its name
to Struthers, Inc. (the "Registrant") and agreed to distribute ten
shares of common stock of the Registrant to each of the shareholders
of SIRC of record as of September 1, 1998 for each share of SIRC held
by them.
Effective August 25,1998 the outstanding shares of Orbis were reverse
split 1000 for 1 and effective September 1 1998 forward split on a 10
for 1 basis. The Company amended its Articles of Incorporation to
change its name to Struthers, Inc. and increase the number of shares
it was authorized to issue from 50 million shares to 100 million
shares. The Company further amended its Articles of Incorporation on
September 22, 1998 to authorize it to issue 900 million shares of its
common stock. In February 2000 the Company again amended its Articles
of Incorporation to increase the number of shares it was authorized
to issue to 906,520,000 shares of which 900 million are Common Stock
and 6,520,000 shares are Preferred Stock.
On November 2, 1999, the Company entered into an agreement with
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred")
pursuant to which the Company purchased all of the tangible and
intangible assets, including livestock, machinery and equipment, and
Legred's rights under agreements with third parties (including one
with Norsvin International AS, an international developer and
distributor of porcine genetic materials and technology). Pursuant to
the agreement, the Company was required to pay Legred the sum of $1
million in cash and $4 million worth of common shares of the Company,
which the final number of shares will be determined by the market
value of the Company's shares on the dates issued. The Company was
obligated under this agreement and began construction of a boar stud
unit and operating laboratory, the final cost of which was
approximately $450,000. As of December 31, 1999, construction was in
progess and
the Company had expended $88,390 in connection therewith. The boar
stud facility owned by Legred Struthers Genetics, Inc. was completed
in September 2000 and became operational in October 2000. In
anticipation of the execution of the agreements in connection with
this acquisition, the Company formed a wholly owned subsidiary, which
was incorporated in the State of Nevada on October 21, 1999, called
Legred Struthers Genetics, Inc. All of the assets purchased pursuant
to this acquisition were transferred into the subsidiary.
The acquisition has been accounted for under the purchase method of
accounting. Under purchase accounting, the total purchase price is
allocated to the tangible and intangible assets and liabilities of
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred")
based upon their respective fair value. Operating activity of the
subsidiary is reflected in the accompanying financial statements from
the date of acquisition (November 2, 1999 through December 31, 1999.)
Neither the Company nor its subsidiary, conducted any business or had
any financial activity during 1997.
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is an agricultural producer principally involved in the
breeding and delivery of swine and swine genetics using advanced
reproductive techniques throughout the industry. The Company sells
primarily to producers in North America and worldwide. The Company
disseminates its genetics through the sale of live animals in the
form of gilts, barrows, and boars; semen sales from boar studs; and
embryo sales using its non-surgical "Embryo Transfer System".
The Company maintains its corporate offices in Charleston, South
Carolina and operates its field office including its operating
laboratory and stud boar facility in Bricelyn, Minnesota. In addition
the Company operates a research facility in Spencer, Iowa.
- continued -
F-9
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Struthers, Inc. and its wholly owned subsidiary, Legred Struthers
Genetics, Inc. All significant inter-company balances and
transactions have been eliminated in the consolidation.
DEVELOPMENT STAGE ENTERPRISE
The Company was in the development stage from its inception through
the date of the Legred Acquisition. The year 1999 is the first year
during which the Company is considered an operating company.
SEGMENT DATA, GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS The
Company does business primarily in North America. The Company also
has an agreement with Norsvin International, AS (a Norwegian Company)
to sell its product lines. The Company was assigned the rights under
the contract through its subsidiary, Legred Struthers Genetics, Inc.
via the acquisition of Legred Genetics, Inc. Under this agreement,
the Company purchases boars from Norsvin International A.S. for
breeding with the Company's sows. The Company derives revenue from
the sale of the genetic offspring and from the sale of semen from the
boars purchased from Norsvin. From this revenue, the Company has
agreed to pay a royalty to Norsvin of 4%. The agreement is for an
indefinite period with royalty payments due semi annually.
The gross revenue recorded by the Company from the sale of offspring
and semen directly attributable to Norsvin acquired boars amounted to
$42,079 for the period from the date of the Legred acquisition
through December 31, 1999 and $203,022 for the six months ended June
30, 2000. These sales represented approximately 12.6% and 11.4% of
the total consolidated revenues for those periods, respectively. Of
those sales the Company was obligated to pay a royalty to Norsvin of
4% or approximately $1,683 and $8,121, respectively. While the
Company expects the sales under this arrangement to increase in
dollar volume, the Company expects the percentage contribution to
total consolidated revenue to diminish in the future due to the
development of its other product lines.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially expose the Company to
significant concentrations of credit risk consist principally of bank
deposits, temporary investments and accounts receivable. Cash is
placed primarily in high quality short-term interest bearing
financial instruments and may periodically exceed federally insured
amounts. The Company performs ongoing credit evaluations of its
customers' financial condition. An allowance for uncollectible
accounts receivable is maintained based upon the expected
collectibility of all accounts receivable.
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 disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results can
differ from those estimates.
REVENUE RECOGNITION
The Company recognizes all genetic sales (semen, embryos, and live
animals upon delivery. Sales of market hogs and other accessories
supplies to other breeders are recognized upon the transfer of title
which corresponds to the date of shipment, net of any applicable
discounts and allowances.
ADVERTISING EXPENSES
Advertising expenses are charged against operations during the period
incurred, except for direct-response advertising costs, which are
capitalized and amortized over periods not exceeding one year.
Advertising expenses charged against operations were $20,242 and $-0-
for 1999 and 1998, respectively. The Company did not incur any
direct-response advertising costs during 1999 or 1998.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged against operations as
incurred. Research and development costs were $10,000 and $180,074 in
1999 and 1998, respectively. The 1998 research and development costs
represent in-process R & D costs recorded in connection with the
acquisition of the embryo transfer technology form Struthers
International Research Corporation.
- continued -
F-10
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, establishes a standard for reporting and
displaying comprehensive income to reflect charges and credits to
equity that result from transactions and economic events from all
non-owner sources. Comprehensive income is composed of two subsets -
Net Income (Loss) and Other Comprehensive Income (Loss). The Company
has had no items of comprehensive income since its inception.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less.
INVENTORIES
Swine inventories are stated at the lower of cost (first-in,
first-out method) or market. Costs of raised swine include
proportionate costs of breeding, including depreciation of the
breeding herd, plus the costs of maintenance to maturity. Purchased
swine are carried at purchase cost plus cost of maintenance to
maturity.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Breeding animals are
carried at purchase costs or inventory transfer amounts equal to the
lower of accumulated animals maintenance costs or market. Renewals
and improvements are capitalized. Costs of maintenance and repairs
that do not improve or extend asset lives are charged to expense.
Depreciation is provided on the straight-line basis over the
estimated productive useful lives of the assets as follows:
Buildings and Improvements 10 Years
Machinery and Equipment 7 Years
Breeding Herds 3 Years
Vehicles 5 Years
Office Furniture and Fixtures 5 Years
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price over the fair
value of the net assets of acquired companies and is being amortized
on a straight line basis over 5 years based on its estimated useful
life. Acquired intangibles also consist of customer lists and are
amortized over their 5 year estimated useful life.
CAPITALIZED LAND LEASE
Included in intangible assets is a land lease acquired in the Legred
Acquisition. The lease terms require payment of $1 per year for a
term of 99 years. A portion of the total purchase price of $5,000,000
has been allocated to the land in the amount of $1,200,000. The lease
is being amortized over 99 years as a charge to farm operations.
LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. The Company evaluates any
possible impairment of long-lived assets using discounted future cash
flows. When required, impairment losses on assets to be held and used
are recognized based on the fair value of the asset. Long-lived
assets to be disposed of are reported at the lower of carrying amount
or fair value less cost to sell.
- continued -
F-11
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, ACCOUNTING FOR
INCOME TAXES. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision for
income taxes.
BASIC EARNINGS PER SHARE
Basic earnings per share of common stock was computed by dividing
income available to common shareholders by the weighted-average
number of shares outstanding for the year. Diluted earnings per share
are not presented because the Company has not issued any potentially
dilutive convertible securities as of December 31, 1999. All share
and per share amounts have been restated to give retroactive effects
to a 1,000 for 1 reverse stock split on August 25, 1998 and a 10 for
1 forward stock split on September 1, 1998.
STOCK OPTIONS AND AWARDS
As described in Note J, the Company has elected to follow the
accounting provisions of Accounting Principles Board Opinion (APBO)
No. 25 Accounting for Stock Issued to Employees, for stock-based
compensation and awards made to employees and to provide the pro
forma disclosures required under SFAS No. 123, Accounting for
Stock-Based Compensation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which summarizes the accounting
for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize
those assets and liabilities in the statement of financial position
and measure them at fair value. SFAS no. 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000.
The Company will comply with the requirements of the new standard
that becomes effective for the Company's 2001 financial reporting
cycle.
The Company's only financial instruments which currently meet the
definition of a derivative instrument are certain obligations in
connection with acquisitions of businesses which are payable in
shares of the Company's common stock at various future dates. The
final number of common shares ultimately to be distributed will
depend upon the market price of the Company's common stock at such
future dates. Management does not believe that the new standard
will have any material effect on its financial statements.
NOTE C - DEPOSIT
Deposit consisted of the following:
---------------------------------------------------------------------
December 31, 1999 1998
---------------------------------------------------------------------
Deposit with Struthers Pedigree Herd Corp. $ 105,000 $--
Less: Loss Recognized 25,000 --
---------------------------------------------------------------------
Deposit $ 80,000 $--
---------------------------------------------------------------------
The deposit with Struthers Pedigree Herd Corp. (an unrelated party)
represents a down payment made in June 1999 pursuant to a tentative
stock purchase agreement in which the Company would acquire an
initial 20% interest with an option to acquire up to 100% of the
common stock. The final purchase price was subject to an acceptable
appraisal of the underlying assets of the corporation. In March 2000,
the parties could not reach an agreement as to the final terms and
decided not to consummate the transaction and further agreed that
$80,000 of the initial deposit would be refunded. Accordingly, the
Company recognized a loss of $25,000 as of December 31, 1999.
F-12
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
-----------------------------------------------------------------
December 31, 1999 1998
-----------------------------------------------------------------
Buildings and Improvements $ 200,000 $--
Machinery and Equipment 69,000 --
Breeding Herds 2,160,000 --
Vehicles 30,000 --
Office Furniture and Fixtures 14,437 --
-----------------------------------------------------------------
$ 2,473,437 $--
Less: Accumulated Depreciation 158,146 --
-----------------------------------------------------------------
$ 2,315,291 $--
Construction in Progress 93,615 --
-----------------------------------------------------------------
Property and Equipment - Net $ 2,408,906 $--
-----------------------------------------------------------------
Included in construction in progress at December 31, 1999 are
deposits made to construct a new boar stud facility at the Bricelyn,
Minnesota location. The total estimated cost of construction is
approximately $450,000 (of which $88,390 was expended at December 31,
1999) and was completed during the 3rd quarter of 2000. Also included
is a deposit to acquire an existing structure at the Minnesota
location from an independent third party. The total purchase price
was $50,000 (of which $5,225 was expended as of December 31, 1999)
and the acquisition was completed in January 2000 and financed by
securing a first mortgage on the property in the amount of $40,000.
Depreciation expense has not been recorded on these transactions
since the property was not placed in service as of December 31, 1999.
Depreciation charged against operations was $158,146 and $0 for the
years ended December 31, 1999 and 1998, respectively.
NOTE E - INTANGIBLE ASSETS
Intangible assets recorded on the Legred acquisition consisted of the
following:
-------------------------------------------------------------------
December 31, 1999 1998
-------------------------------------------------------------------
Capitalized Land Lease $ 1,200,000 $--
Goodwill 800,000 --
Customer Lists 304,000 --
-------------------------------------------------------------------
$ 2,304,000 $--
Less: Accumulated Amortization (44,800) --
-------------------------------------------------------------------
Intangible Assets - Net $ 2,259,200 $--
-------------------------------------------------------------------
Amortization charged against operations for the years ended December
31, 1999 and 1998 was $48,800 and $0, respectively.
F-13
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE F - NOTE AND STOCK PAYABLE - LEGRED ACQUISITION
In connection with the Legred acquisition, the Company is obligated
to Brent Legred for the balance of the purchase price as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------- -----------------------------------
Years Ended December 31, 1999 1998
-------------------------------------------------------------------- -----------------------------------
Note Payable in cash without interest due in 3 equal installments of
$300,000 each on May 2, 2000, November 2, 2000 and May 2, 2001 unless
a successful stock offering is completed in which case the note is to
be repaid to the extent of 50% of the offering proceeds. This note
was paid in full in February 2000 upon completion of a preferred
<S> <C> <C>
stock offering. $ 900,000 $ --
Stock payable to Brent Legred, without interest, due January 1, 2000
payable in 6,660,000 shares of the Company's common stock based upon
the $.1126 per share fair value as of the
date of acquisition of November 2, 1999. 750,000 --
Stock payable to Brent Legred without interest in the number of
shares equivalent (based on the fair value of the common stock on
such dates) to the specified dollars on the following dates:
$1,000,000 due on May 2, 2000; $1,000,000 due on November 2,
2000; and $1,000,000 due on May 2, 2001(1) 3,000,000 --
-------------------------------------------------------------------- -----------------------------------
Total $ 4,650,000 $ --
Less: Current Portion 3,650,000 --
-------------------------------------------------------------------- -----------------------------------
Long-Term Portion $ 1,000,000 $ --
-------------------------------------------------------------------- -----------------------------------
</TABLE>
(1) The Company would have had to issue approximately 6,122,449
shares of common stock using the trading price of $.49 per share as
of December 31, 1999 in order to settle the remaining obligation to
Brent Legred in addition to the 6,660,000 shares of common stock due
on January 1, 2000 valued at the $.1126 per share fair value as of
the date of acquisition on November 2, 1999.
The final stock payable installment of $1,000,000 due May 2, 2001
will be reduced by the percentage by which net income from semen
sales per 100 boars for the previous 18 months is less than $600,000.
The above obligations are collateralized by a first security interest
in the assets purchased from Legred.
F-14
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE G - PROVISION FOR INCOME TAXES
The provision for income taxes is attributable to:
<TABLE>
<CAPTION>
--------------------------------------------------- ---------------------------
Years Ended December 31, 1999 1998
--------------------------------------------------- ---------------------------
<S> <C> <C>
Income (Loss) Before Provision for Income Taxes $(615,928) $(524,129)
--------------------------------------------------- ---------------------------
State Income Tax $ 1,133 $ --
--------------------------------------------------- ---------------------------
Deferred Tax Benefits - Net of Allowance $ -- $ --
--------------------------------------------------- ---------------------------
</TABLE>
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before
provision for taxes. The sources and tax effects of the differences
are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------- ------------- -------------------
Years Ended December 31, 1999 1998
---------------------------------------------------- ------------- -------------------
<S> <C> <C>
Income Tax at the Federal Statutory Rate of 35% $(215,575) $(183,445)
Effect of Graduated Tax Rates 16,888 16,888
State Income Tax, Net of Federal Benefit (36,400) (31,972)
---------------------------------------------------- ------------- -------------------
Total Benefit from Income Taxes (235,080) (198,529)
Less: Allowance 236,220 198,529
---------------------------------------------------- ------------- -------------------
Income Taxes (Benefit) $ 1,133 $--
---------------------------------------------------- ------------- -------------------
</TABLE>
The Company's income tax provision was computed based on the federal
statutory rate, reduced by the effect of graduated tax rate and the
average state statutory rates, net of related federal benefit.
As of December 31, 1999 the Company has net operating loss
carryforwards of approximately $1.1 million for tax purposes which
will be available to offset future taxable income. The net operating
loss carryforwards begin to expire in 2019. Deferred tax assets of
approximately $428,000 and $198,000 at December 31, 1999 and 1998,
respectively, have been recognized for the net operating loss
carryforwards. However, they have been reduced by a valuation
allowance of approximately $428,000 and $198,000 at December 31, 1999
and 1998, respectively, which will remain until it is more likely
than not that the related tax benefits will be realized.
NOTE H - COMMON STOCK
The Company's securities are not registered under the Securities Act
of 1933 and, therefore, the stockholders may not sell, transfer,
pledge or otherwise dispose of the common shares of the Company in
the absence of either an effective registration statement covering
said shares under the 1933 Act and relevant state securities laws, or
an opinion of counsel that registration is not required under the Act
or under the securities laws of any such state.
F-15
<PAGE>
On October 10, 1995, the Company was initially capitalized by the
issuance of 25,000,000 shares (250,050 shares after giving retroactive effect to
the August 25, 1998 reverse split and the September 1, 1998 forward split)to
stockholders in exchange for organization expenses paid personally by the
shareholders. The Company recorded the organization costs as an expense during
1995, with a corresponding increase to stockholders' equity for $25,000
(25,000,000 shares at $.001 par value).
On August 25, 1998, the Board of Directors approved a 1 for 1,000
reverse stock split in which the shareholders received 1 share for every 1,000
shares previously held. The Company recorded the transaction as a reduction of
the par value of the common stock outstanding and a corresponding increase to
additional paid-in capital. The effects of the reverse split have been given
retroactive treatment in the financial statements.
On August 31, 1998, the Company issued 13,500,000 shares (135,000,000
shares after giving retroactive effect to the September 1, 1998 forward split)
to outside consultants as compensation for services rendered to the Company. The
services rendered consisted of legal and investment advisory services. The
shares were valued at $.01 per share equivalent to the fair value of the
services rendered of $135,000 and were recorded by the Company as an expense
with a corresponding increase to stockholders' equity.
On August 31, 1998, the Company issued 18,007,357 shares (180,073,570
shares after giving retroactive effect to the September 1, 1998 forward split)
to Struthers International Research Inc., (SIRC), in connection with the
acquisition of the Embryo Transfer Technology. The shares were valued at $.01
per share equivalent to the fair value of the in-process research and
development of $180,074 and were recorded by the Company as research and
development expense with a corresponding increase to stockholders' equity.
On September 1, 1998, the Board of Directors approved a 10 for 1
forward stock split in which the shareholders received 10 shares for every 1
share previously held. The Company recorded the transaction as an increase to
the par value of the common stock outstanding and a corresponding decrease to
additional paid-in capital. The effects of the forward split have been given
retroactive treatment in the financial statements.
In November 1998, the Company offered for sale 22 million shares of
Common Stock in 176,000 units at $5 per unit (each unit consisting of 125 shares
for a total of 22 million shares at $.04 per share). The Company received
oversubscriptions for 1,310,000 shares and the Board of Directors approved the
oversubscription. In 1999, the Company sold and issued 23,310,000 shares of
common stock for a total of $932,400. The proceeds of this offering (no sales
commissions were paid) less sales expenses of the offering were applied to
market development, commercialization of the embryo transfer technology and
working capital.
On December 1, 1998 the Board of Directors awarded 20,369,000 shares
of common stock to employees as compensation for services previously rendered
during 1998 to the Company. On December 31, 1998, the Company issued 12,369,000
of those shares to the employees with the balance of the 8,000,000 shares to be
issued as follows: 3,000,000 shares by July 1, 1999 and 5,000,000 shares by July
1, 2000. This was done in order to ease the tax burden on the employees. The
shares awarded were valued at the market value of $.01 per share on the date of
grant and were recorded by the Company as compensation expense in the amount of
$203,690 with a corresponding increase to stockholders' equity of $123,690 and
compensation payable of $80,000 at December 31, 1998.
On May 25, 1999, the Company issued 3,000,000 shares to employees in
connection with the December 1, 1998 stock award.. The shares were valued at the
market value of $.01 per share at the date of grant and were recorded by the
Company as a reduction of $30,000 to compensation payable with a corresponding
increase to stockholders' equity.
On May 25, 1999, the Company issued 100,000 shares to an outside
consultant as compensation for services rendered to the Company during 1999. The
services rendered consisted of website design and computer network consultation.
The shares were valued at the market value of $.10 per share and were recorded
by the Company as an expense in the amount of $10,000 with a corresponding
increase to stockholders' equity.
F-16
<PAGE>
On May 25, 1999, the Company issued 400,000 shares to an unrelated
entity as a charitable contribution. The shares were valued at the market value
of $.10 per share and were recorded by the Company as an expense in the amount
of $40,000 with a corresponding credit to stockholders equity.
On November 9, 1999, the Company issued 2,220,000 shares to Brent
Legred in connection with the acquisition of Legred Genetics, Inc. and Brent
Legred, a sole proprietorship for the farming operation. The shares were valued
at $.1126 per share and were recorded by the Company as a reduction to the stock
obligations payable with a corresponding credit to stockholders equity in the
amount of $250,000.
On January 27, 2000, the Company issued 6,660,000 shares to Brent
Legred in connection with the acquisition of Legred Genetics, Inc. and Brent
Legred, a sole proprietorship for the farming operations. The shares were valued
at $.1126 per share and were recorded by the Company as a reduction to the stock
obligations payable with a corresponding credit to stockholders equity in the
amount of $750,000.
On May 17, 2000, the Company issued 1,587,302 shares to Brent Legred
in connection with the acquisition of Legred Genetics, Inc. and Brent Legred, a
sole proprietorship for the farming operations. The shares were valued at the
market value of $.63 per share and were recorded by the Company as a reduction
to thestock obligations payable with a corresponding credit to stockholders
equity in the amount of $1,000,000.
On June 30, 2000, the Company issued 5,000,000 shares to employees in
connection with the December 1, 1998 stock award. The shares were valued at the
market value at the date of grant and were recorded by the Company as a
reduction to compensation payable in the amount of $50,000 with a corresponding
credit to stockholders equity.
F-17
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE I - PREFERRED STOCK
The Company has 6,520,000 shares of preferred stock authorized of
which no shares were issued as of December 31, 1999. The Company has
designated 1,500,000 shares as Class A Convertible Stock ("Class A
Stock") and 5,000,000 shares as Class B Convertible Stock ("Class B
Stock"). Each share of Class A Stock and Class B Stock carries a
number of votes equal to the number of shares of Common Stock then
issuable upon its conversion into Common Stock.
Each share of Class A Stock and Class B Stock is convertible at the
option of the holder into fully paid and non-assessable shares of
common stock as follows: on the first day of the sixth month
following the issuance of the Class A Stock ("Conversion Period") and
on the first day of each sixth month period thereafter, for a total
of six Conversion Periods, one-sixth of the shares of the Class A
Stock may be converted by each shareholder thereof. The amount of
common shares into which the Class A Stock may be converted at each
Conversion Period shall be as follows: at each of the six Conversion
Periods the amount of the Class A Stock shares which may be converted
shall be divided by the average market value between the bid and ask
price of the Company's common shares during the ten day trading
period immediately preceding the date of such Conversion Period, but
not more than $.40, and the resultant figure multiplied by three.
In the event of any liquidation, dissolution or winding up of the
Company, a merger or consolidation of the Company in which its
shareholders do not retain a majority of the voting power in the
surviving corporation, or a sale of all or substantially all of the
Company's assets, the holders of the Class A Stock will be entitled
to receive an amount equal to the original purchase price per share
for the Class A Stock plus an amount equal to all declared but unpaid
dividends thereon (the "Preference Amount"). After the full
liquidation preference has been paid on all outstanding shares of the
Class A Stock, the holders of the Class B Stock will be entitled to
receive an amount computed in the same manner. After the full
liquidation preference on all outstanding shares of the Class B Stock
has been paid, any remaining funds and assets of the Company legally
available for distribution to shareholders will be distributed pro
rata among the holders of the Preferred Stock and the Common Stock on
an "as converted" basis.
NOTE J - STOCK COMPENSATION AND AWARDS
On December 1, 1998, the Board of Directors awarded 20,369,000 shares
of common stock to employees as compensation for services rendered
during 1998. 12,369,000 shares were issued on the date of grant with
the balance of the shares payable over 18 months as follows:
3,000,000 shares by July 1, 1999 and 5,000,000 shares by July 1,
2000. The 8,000,000 shares payable at December 31, 1998 were fully
vested and without forfeiture provisions. The Company
recognized a charge to operations for the fair market value of the
stock awarded as compensation expense at the date of grant of $.01
per share for a total of $203,690.
NOTE K - SUBSEQUENT EVENTS
In February 2000, the Company offered for sale and issued 1,500,000
shares of the Class A Preferred Stock at $1.00 per share. The Company
received net proceeds from the sale of $1,500,000 which was used to
repay a $900,000 short-term note payable to Brent Legred in
connection with the Legred acquisition (see Note F), $200,000 towards
the construction of the new stud boar facility, and the balance of
$400,000 for working capital.
In March 2000, the Company offered for sale 5,000,000 shares of the
Class B Preferred Stock at $1.00 per share. As of April 30, 2000, the
Company had received subscriptions for all 5,000,000 shares. The net
proceeds of $5,000,000 from the offering are to be used primarily for
the construction of additional breeding facilities and working
capital, as outlined in the subscription agreement.
On May 15, 2000, the Company purchased the assets of Muller A.I.,
L.L.C. of Sioux Falls, South Dakota, a company in the business of
retail and wholesale of various goods and supplies utilized in the
artificial insemination of farm animals. The total purchase price
which was based upon studies by management was $252,857. The
consideration paid was $131,290 in cash plus $100,000 of common stock
(195,168 shares issued on August 4, 2000 and valued at $.51238 per
share at the date of the agreement) and the assumption of $21,267 in
liabilities. The assets included all furniture, fixtures and
equipment as well as all supplies, materials and merchandise relating
to and used in connection with such business, including its list of
customers and other items of goodwill. The Registrant did not assume
any of the liabilities of Muller A.I., L.L.C. except for a customer
deposit in the amount of $21,267. The Company formed a wholly owned
subsidiary that was incorporated in the State of Nevada on May 26,
2000 and called Muller A.I., Inc. ("Muller").
F-19
<PAGE>
On June 1, 2000, the Company purchased the assets of Elite Visions
L.L.C. of Waukon, Iowa. The total purchase price which was based upon
management studies was $2,154,445. The consideration paid was $22,000
in cash plus $1,888,860 in common stock (2,303,488 shares issued on
August 4, 2000 and valued at $.82 per share at the date of the
agreement) and the assumption of certain liabilities in the amount of
$243,585. The purchased assets include the physical assets (i.e.,
land and building, furniture and fixtures, and office equipment and
computers) and the assignment of all rights to a patented item called
the "Gourley Scope(TM)" (Trademark applied for), an instrument used
for non-surgical semen delivery in animal husbandry including swine.
The scope employs the imaging technology of a 1 mm camera,
transmitter, and light source, which allows the technician to view
the reproductive system and deliver the semen or embryo to the
appropriate area of the reproductive tract for maximum conception. In
anticipation of the execution of the said agreement, the Company
formed a wholly owned subsidiary that was incorporated in the State
of Nevada on May 26, 2000 and called Elite Visions, Inc. ("Elite").
In July, 2000, Elite Visions, Inc., a wholly owned subsidiary of
Company, began constructing a meat distribution facility for the
Company's Tender Prime(TM) line of meat products in Waukon, Iowa,
which, was completed in October, 2000 at a cost of $50,000.
F-20
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED)
On November 2, 1999, the Company entered into an agreement with
Legred Genetics, Inc., Legred Genetics, and Brent Legred ("Legred")
pursuant to which the Company purchased all of the tangible and
intangible assets, including livestock, machinery and equipment, and
Legred's rights under agreements with third parties (including one
with Norsvin International AS, an international developer and
distributor of porcine genetic materials and technology). Pursuant to
the agreement the Company is to pay Legred the sum of $1 million in
cash and $4 million worth of common shares of the Company. The
Company issued 2,220,000 shares of common stock at closing valued at
$250,000 and 6,660,000 shares are to be issued on January 1, 2000
valued at $750,000 ($.1126 per share based on the average trading
price on the
date of the agreement). The final number of shares still to be issued
will be determined based on the market value of the Company's shares
on the dates payable as follows: $1,000,000 due on May 2, 2000;
$1,000,000 due on November 2, 2000 and $1,000,000 due on May 2, 2001.
The Company was obligated under this agreement to build and
subsequently did build a boar stud unit and
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
operating laboratory, the cost of which was approximately
$450,000. In anticipation of the execution of the agreements in
connection with this acquisition, the Company formed a wholly owned
subsidiary, which was incorporated in the State of Nevada on October
21, 1999, called Legred Struthers Genetics, Inc. All of the assets
purchased pursuant to this acquisition were transferred into the
subsidiary.
The acquisition has been accounted for under the purchase method of
accounting. Under purchase accounting, the total purchase price is
allocated to the tangible and intangible assets and liabilities of
Legred Genetics, Inc. and Brent Legred ("Legred") based upon their
respective fair values as of the closing date based upon management's
knowledge of the industry and other studies conducted by management.
On June 1, 2000, the Company purchased the assets of Elite Visions L.L.C. of
Waukon, Iowa. The total purchase price which was based upon management studies
was $2,154,445. The consideration paid was $22,000 in cash plus $1,888,860 in
common stock (2,303,488 shares issued on August 4, 2000 valued at $.82 per share
at the date of the agreement) and the assumption of certain liabilities in the
amount of $243,585. The purchased assets include the physical assets (i.e., land
and building, furniture and fixtures, and office equipment and computers) and
the assignment of all rights to a patented item called the "Gourley Scope(TM)"
(Trademark applied for), an instrument used for non-surgical semen delivery in
animal husbandry including swine.
In anticipation of the execution of the agreements in connection with the
acquisition, the Company formed a wholly owned subsidiary which was incorporated
in the state of Nevada on May 26, 2000 called Elite Visions, Inc. of the assets
purchased pursuant to the acquisition were transferred into the subsidiary.
The acquisition has been accounted for under the purchase method of accounting.
Under purchase accounting, the total purchase price is allocated to the tangible
and intangible assets and liabilities of Elite Visions, LLC based upon their
respective fair values as of the closing date based upon management's knowledge
of the industry and other studies by management.
The accompanying Unaudited Pro Forma Consolidated Financial
Statements of Operations and Cash Flows for the year ended December
31, 1999 assume that the acquisition of Legred and Elite Visions, LLC
took place on January 1, 1999, the beginning of the Company's fiscal
year. The Pro Forma Consolidated Statements of Operations do not
include the effect of any non-recurring write-offs directly
attributable to the acquisition. The Pro Forma Financial Statements
do not reflect any anticipated cost savings from the Legred or Elite
Visions, LLC acquisition, or any synergies that are anticipated to
result from the transaction, and there can be no assurances that any
such cost savings or synergies will occur. The Pro Forma Financial
Statements do not purport to be indicative of the results of
operations of the Company that would have actually been obtained had
such transaction been completed as of the assumed date and for the
periods presented, or which may be obtained in the future. The Pro
Forma financial statements should be read in conjunction with the
separate historical financial statements of Struthers and Legred and
the notes thereto and "Management's Discussions and Analysis of
Financial Condition and Results of Operations".
F-22
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
The purchase price and allocation of the purchase price in excess of
the net assets acquired as a result of the acquisition is as follows:
<TABLE>
<CAPTION>
Legred Acquisition
---------------------------------------------------------------------------------
Purchase Price:
<S> <C>
Cash Paid on Signing of Agreement $ 100,000
Cash Balance Payable Over 18 Months - Paid in Full
in February 2000 (see Note F) 900,000
Fair Value of Stock Issued at Closing:
Unrestricted Shares - 1,000,000 Shares @ Approximately $.1126 112,000
Restricted Shares - 1,220,000 Shares @ Approximately $.1126 138,000
Balance of Purchase Price Payable in Common Shares Over
18 Months 3,750,000
---------------------------------------------------------------------------------
Total Purchase Price $ 5,000,000
---------------------------------------------------------------------------------
Allocation of Purchase Price to Fair Value of Net Assets Acquired
Working Capital $ 7,000
Building and Improvements 200,000
Machinery and Equipment 69,000
Breeding Herd:
100 Boars 540,000
300 Sows 1,620,000
---------------------------------------------------------------------------------
Total Breeding Herd 2,160,000
Inventory - 2,600 Growing Pigs 260,000
Capitalized Land Lease 1,200,000
Customer List 304,000
Goodwill 800,000
---------------------------------------------------------------------------------
Total $ 5,000,000
Less: Net Book Value of Assets Acquired 207,096
---------------------------------------------------------------------------------
Increase to Fair Value $ 4,792,904
---------------------------------------------------------------------------------
</TABLE>
The purchase price of $5,000,000 to acquire the operations and assets of Legred
Genetics, Inc. and the sole proprietorship of Brent Legred was based on
management's overall knowledge of the industry and other studies performed by
management with respect to Legred's operation. Specific assets such as property,
plant and equipment were valued using underlying appraisals. The breeding herd
was valued at the estimated market value plus a genetic premium assigned to the
ancestral blood lines. The inventory of growing pigs were valued at fair market
value. The balance of the purchase was allocated between customer lists and
goodwill.
F-23
<PAGE>
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
ELITE VISIONS, LLC
The purchase price and allocation of the purchase price in excess of the net
assets acquired is as follows:
---------------------------------------------------------------------------
Purchase Price:
Cash Paid at Signing $ 22,000
Fair Value Of Stock Payable at Closing:
2,303,488 shares @ Approximately $.82 per share 1,888,860
Liabilities Assumed 243,585
---------------------------------------------------------------------------
Total Purchase Price $ 2,154,445
Allocation of Purchase Price to Fair Value
of Net Assets Acquired:
Inventory 26,438
Land and Building 400,000
Equipment 27,189
Gourley Scope Patent 1,694,967
Other Patents 5,851
---------------------------------------------------------------------------
2,154,445
LESS: NET BOOK VALUE OF ASSETS ACQUIRED (394,415)
---------------------------------------------------------------------------
INCREASE TO FAIR MARKET VALUE 1,760,030
---------------------------------------------------------------------------
F-24
<PAGE>
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
PRO-FORMA CONSOLIDATING STATEMENTS OF OPERATIONS - (UNAUDITED)
--------------------------------------------------------------------------------
For The Year December 31, 1999
-----------------------------------------------
COMBINED
LEGRED (UNAUDITED)
STRUTHERS GENETICS
INC. & INC. AND ELITE VISIONS PRO-FORMA PRO-FORMA
SUBSIDIARY BRENT LEGRED LLC. COMBINED ADJUSTMENTS CONSOLIDATED
------- ------------ ---- -------- ----------- ------------
REVENUE
<S> <C> <C> <C> <C> <C> <C>
Sales $ 327,359 $ 936,001 $ 132,012 $ 1,395,372 $ -- $ 1,395,372
Other Income 5,692 9,660 4,500 19,852 -- 19,852
------------------------------------------------------------------------------------------------------------------------------------
Cost of Goods Sold 333,051 945,661 136,512 1,415,224 -- 1,415,224
Total Revenues 169,609 728,851 70,162 968,622 -- 968,622
------------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 163,442 216,810 66,350 446,602 -- 446,602
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General And Administrative 539,838 253,509 143,193 936,540 -- 936,540
Marketing And Advertising 20,242 31,367 866 52,475 -- 52,475
Amortization and Depreciation 183,746 55,178 34,067 272,991 (1) 194,000
(2) 583,000
(4) 113,000
(5) 2,000
1,164,991
Interest -- 29,765 14,283 44,048 (3) (29,765) 14,283
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 743,826 369,819 192,409 1,306,054 862,235 2,168,289
------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE OTHER
INCOME(EXPENSE) (580,384) (153,009) (126,059) (859,452) (862,235) (1,721,687)
OTHER INCOME (EXPENSE)
Interest Income 8,656 -- 2,497 11,153 -- 11,153
Loss on Investment (25,000) -- -- (25,000) -- (25,000)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME(EXPENSE) (16,344) -- 2,497 (13,847) -- (13,847)
------------------------------------------------------------------------------------------------------------------------------------
Loss Before Income Taxes (596,728) (153,009) (123,562) (871,922) (873,299) (1,735,534)
Provision for Income Taxes 1,133 - -- 1,133 -- 1,133
------------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (597,861) $ (153,009) $ (123,562) $ (873,055) $(874,432) $ (1,736,667)
------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Number of
Shares Outstanding 342,207,620
342,207,620
------------------------------------------------------------------------------------------------------------------------------------
Net Loss Per Common Share
Basic and Diluted (0.00) (0.00)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-25
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
Notes And Assumptions:
(1) Amortization of acquired goodwill and customer lists over a 5 year useful
life to reflect the retroactive effect of the Legred acquisition occurring
on January 1, 1999.
(2) Depreciation of property, plant and equipment including breeding herds
over useful lives ranging from 3 to 10 years to reflect the retroactive
effect of the Legred acquisition occurring on January 1, 1999.
(3) Elimination of interest expense on Legred's bank loans were not assumed in
the transaction and were paid off prior to the consummation of the
acquisition.
(4) Amortization of acquired patents over a 15 year useful life to reflect the
retroactive effect of the acquisition of Elite Visions occurring on
January 1, 1999
(5) Depreciation of property, plant and equipment over useful lives of 3 to 39
years to reflect the retroactive effect of the acquisition of Elite
Visions occurring on January 1, 1999.
F-26
<PAGE>
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
STRUTHERS, INC. & SUBSIDIARY
ELITE VISIONS, LLC
PRO-FORMA CONSOLIDATING STATEMENTS OF OPERATIONS - (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
For The Six Months Ended June 30, 2000
(UNAUDITED)
STRUTHERS ELITE VISIONS PRO-FORMA PRO-FORMA
INC. & SUBSIDIARY LLC. COMBINED ADJUSTMENTS CONSOLIDATED
----------------- ---- -------- ----------- ------------
REVENUE
Sales $ 1,774,719 $ 15,085 $ 1,787,198 $ -- $ 1,787,198
Other Income 8,340 2,250 10,590 -- 10,590
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Revenues 1,783,059 17,335 1,800,394 -- 1,800,394
Cost of Goods Sold 1,179,147 5,094 1,184,241 -- 1,184,241
-----------------------------------------------------------------------------------------------------------
GROSS PROFIT 603,912 12,241 616,153 -- 616,153
-----------------------------------------------------------------------------------------------------------
EXPENSES
Research And Development 82,106 -- 82,106 -- 82,106
General And Administrative 800,404 22,634 823,038 -- 823,038
Marketing And Advertising 50,351 70 50,421 -- 50,421
Amortization and Depreciation 566,409 13,284 579,693 47,250(1)
5,667(2) 632,610
Interest -- 8,061 8,061 8,061
-----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,499,270 44,049 1,543,319 52,926 1,596,245
-----------------------------------------------------------------------------------------------------------
INCOME BEFORE OTHER
INCOME(EXPENSE) (895,358) (31,808) (927,166) (52,926) (980,092)
OTHER INCOME (EXPENSE)
Interest Income 38,403 -- 38,403 -- 38,403
Loss on Investment -- -- -- -- --
-----------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME(EXPENSE) 38,403 -- 38,403 -- 38,403
-----------------------------------------------------------------------------------------------------------
Loss Before Income Taxes (856,955) (31,808) (888,763) (52,926) (941,689)
Provision for Income Taxes -- -- -- -- --
-----------------------------------------------------------------------------------------------------------
NET LOSS $ (856,955) $ (31,808) $ (888,763) $ (52,926) $ (941,689)
-----------------------------------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE>
NOTE L - PRO FORMA FINANCIAL INFORMATION - (UNAUDITED) - CONTINUED
Notes And Assumptions:
(1) Amortization of acquired patents over a 15 year useful life to reflect the
retroactive effect of the acquisition of Elite Visions occurring on January 1,
1999.
(2) Depreciation of acquired property, plant and equipment over useful lives of
3 to 39 years to reflect the retroactive effect of the acquisition of Elite
Visions occurring on January 1, 1999.
NOTE M - RESTATEMENT
The financial statements for the years ended December 31, 1999 and
1998 have been restated to record the effects of stock splits, shares
issued in exchange for services, other equity transactions, to
record a valuation allowance against deferred tax assets and to
revise the estimated useful life of goodwill and customer lists
acquired in the Legred acquisition,
A summary of the effect of the retroactive restatements on net income
for the years ended December 31, 1999 and 1998 and stockholders'
equity at December 31, 1999 are as follows:
---------------------------------------------------------------------
NET INCOME STOCKHOLDERS' EQUITY
1999 1998 DECEMBER 31, 1999
---------------------------------------------------------------------
As originally reported $(338,861) $ (24,942) 850,674
Effect of Restatement:
Stock Grants to Employees -- (203,690) (50,000)
Stock Issued to Acquire
In-Process R&D -- (180,074) --
Stock Issued to Consultants (10,000) (135,000) --
Stock Issued as Charitible
Contribution (40,000) -- --
Valuation Allowance Against
Deferred Tax Assets (207,867) -- (207,867)
Revision of useful life
Of goodwill and customer
Lists (19,200) -- (19,200)
Other (1,133) 19,557 (1,133)
--------- --------- ---------
As Restated $(617,061) $(524,149) $572,474
---------- ---------- --------
Loss per share
- Basic and Dilted $0.00 $0.00
========= =========
There was no impact from the restatement on the loss per common share on both a
basic and fully diluted basis in terms of whole cents due the the large number
of shares outstanding.
F-28
<PAGE>
STRUTHERS, INC. AND SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Independent Accountants' Report F-27
Consolidated Balance Sheets at June 30, 2000 (Unaudited)
and December, 1999 F-28
Consolidated Statement of Changes in Stockholders' Equity for the Three Months
Ended March 31, 1999 and the Six Months Ended June 30, 1999 (Unaudited),
December 31, 1999 and The Three Months Ended March 31, 2000 (Unaudited) and
June 30, 2000 (Unaudited) F-29 - F-31
Consolidated Statements of Operations for the Three Months Ended June 30, 2000
and 1999 (Unaudited) and for the Six Months Ended June 30, 2000 and 1999
(Unaudited) F-32
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 (Unaudited) F-33 - F-34
Notes to the Consolidated Financial Statements (Unaudited) F-35
F-29
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
and Stockholders
Struthers, Inc. and Subsidiaries
(A Nevada Corporation)
Charleston, South Carolina
We have reviewed the accompanying consolidated balance sheets of
Struthers, Inc. and Subsidiaries as of June 30, 2000, the related consolidated
statements of changes in stockholders equity, consolidated statements of
operations for the three months and six months ended June 30, 2000 and 1999, and
the consolidated statements of cash flows for the six months ended June 30, 2000
and 1999 in accordance with standards established by the American Institute of
Certified Public Accountants. All information included in these consolidated
financial statements is the responsibility of the Company's management.
A review of interim financial information consists principally of
inquiries of Company personnel and analytical procedures applied to the
financial data. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial statements in
order for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of Struthers, Inc. and
Subsidiary as of December 31, 1999 and 1998, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended, and in our report dated March 17, 2000, we expressed an
unqualified opinion on those consolidated financial statements.
Rotenberg & Company, LLP
Rochester, New York
August 22, 2000
F-30
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
------------------------------------------------------------------------------------------------------------------
(Restated)
JUNE 30, December 31,
2000 1999
------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 3,909,245 $ 201,160
Accounts Receivable 305,715 112,649
Other Receivables
34,122 --
Investment
19,567 80,000
Inventory 610,066 260,000
Prepaid Expenses and Deposits
39,102 7,376
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,917,817 661,185
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 3,323,239 2,408,906
OTHER ASSETS
Intangible Assets - Net of Accumulated Amortization 3,951,218 2,259,200
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $12,192,274 $ 5,329,291
------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Other Current Liabilities $ 148,078 $ 56,817
Compensation Payable - Stock Grants
-- 50,000
Mortgage Payable - Due Within One Year
7,957 --
Note Payable - Legred Acquisition - Due Within One Year 900,000
--
Stock Payable - Due Within One Year 3,988,890 2,750,000
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 4,144,925 3,756,817
OTHER LIABILITIES
Mortgage Payable - Due After One Year
31,830 --
Stock Payable - Legred Acquisition - Due After One Year 1,000,000
--
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,176,755 4,756,817
------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock - $.001 Par; 900,000,000 Shares Authorized;
369,969,922 Shares Issued and Outstanding 369,970 356,723
Convertible Preferred Stock- $.001 Par; 6,500,000 Shares Authorized
6,500,000 Shares Issued and Outstanding 6,500 --
Preferred Stock - $.001 Par; 20,000 Shares Authorized 20,000 Shares
Issued and Outstanding 20 --
Additional Paid-in Capital 9,682,174 1,381,941
Deficit (2,043,945) (1,166,190)
------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 8,015,519 572,474
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,192,274 $ 5,329,291
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F-31
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------------------
Convertible
Common Stock Preferred Stock Additional Total
-------------------------- ------------------
Paid-In Stockholders'
Shares Par Value Shares Par Value Capital Deficit Equity
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998--Restated 327,692,620 $ 327,693 -- $ -- $ 136,071 $ (549,129) $ (85,365)
Issuance of Common Stock
for Cash at $.04 per Share 23,310,000 23,310 -- -- 909,090 -- 932,400
Shares Issued to Employees
- Previously Granted Shares 3,000,000 3,000 -- -- 27,000 -- 30,000
Shares Issued to Consultants
for Services Rendered 100,000
100 -- -- 9,900 -- 10,000
Shares Issued - Charitable Contribution 400,000
400 -- -- 39,600 -- 40,000
Net Loss for the Three Months Ended (Unaudited) -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - MARCH 31, 1999 354,502,620 $ 354,503 -- $ -- $ 1,121,661 $ (549,129) $ 927,035
Net Loss for the Three Months Ended (Unaudited) -- -- -- -- -- (10,794) (10,794)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 1999 354,502,620 $ 354,503 == $ -- $ 1,121,661 $ (559,923) $ 916,241
Issuance of Common Stock in Connection
with Legred Acquisition at $.1126 per Share 2,220,000 2,220 -- -- 247,780 -- 250,000
Capital Contributed in Form of Services 12,500
-- -- -- -- -- 12,500
Net Loss for the Six Months Ended -- -- -- -- -- (587,067) (587,067)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999--Restated 356,722,620 $ 356,723 == $ -- $ 1,381,941 $(1,146,990) $ 591,674
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F-32
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Common Stock Preferred Stock
--------------------------------- ----------------------------
Shares Par Value Shares Par Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1999--Restated 356,722,620 356,723 -- --
Issuance of Common Stock in Connection
with Legred Acquisition at $.1126 per Share 6,660,000 6,660 -- --
Net Loss for the Three Months Ended (Unaudited)
-- -- -- --
------------------------------------------------------------------------------------------------------------------------------
BALANCE - MARCH 31, 2000 363,382,620 363,383 -- --
Issuance of Common Stock in Connection
with Legred Acquisition at $.63 per Share 1,587,302 1,587 -- --
Shares Issued to Employees
- Previously Granted Shares 5,000,000 5,000 -- --
Issuance of Convertible Preferred Stock
for Cash at $1.00 per Share -- -- 6,500,000 6,500
Issuance of Preferred Stock for Cash
at $1.00 per Share -- -- 20,000 20
Net Loss for the Three Months Ended (Unaudited) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2000 369,969,922 $ 369,970 6,520,000 $ 6,520
------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Additional Total
Paid-In Stockholders'
Capital Deficit Equity
---------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999 1,381,941 (1,166,190) 572,474
Issuance of Common Stock in Connection
with Legred Acquisition at $.1126 per Share 743,340 -- 750,000
Net Loss for the Three Months Ended (Unaudited)
-- (252,644) (252,644)
-------------------------------------------------------------------------------------------------------------------
BALANCE - MARCH 31, 2000 2,125,281 (1,418,834) 1,069,830
Issuance of Common Stock in Connection
with Legred Acquisition at $.63 per Share 998,413 -- 1,000,000
Shares Issued to Employees
- Previously Granted Shares 45,000 -- 50,000
Issuance of Convertible Preferred Stock
for Cash at $1.00 per Share 6,493,500 -- 6,500,000
Issuance of Preferred Stock for Cash
$1.00 per share 19,980 -- 20,000
Net Loss for the Three Months Ended (Unaudited) -- (624,311) (624,311)
---------------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2000 $ 9,682,174 $ 2,043,145 $8,015,519
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F-33
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------- -----------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 887,526 $ -- $ 1,783,059 $ --
Cost of Sales - Farm Operations 563,551 -- 1,179,147 --
--------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 323,975 -- 603,912 --
--------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Research and Development 73,474 -- 82,106 --
Marketing and Advertising 23,006 -- 50,351 --
General and Administrative 567,293 10,794 820,404 10,794
Amortization and Depreciation 284,854 -- 566,409 --
--------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 948,627 10,794 1,19,270 10,794
--------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE OTHER INCOME AND (EXPENSES) (624,652) (10,794) (905,358) (10,794)
OTHER INCOME AND (EXPENSES)
Interest 36,342 -- 38,403 --
--------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (588,310) (10,794) (876,955) (10,794)
Provision for Income Taxes
-- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (588,310) $ (10,794) $ (876,955) $ (10,794)
--------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 363,382,620 354,502,620 366,676,270 354,502,620
LOSS PER COMMON SHARE- BASIC AND DILUTED $ (0.00) $ (0.00) $ (0.00) $ (0.00)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F-34
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 1999
-----------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $ (876,955) $ (10,794)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization and Depreciation 566,409
--
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (193,066) --
Deposit Received 80,000 --
Other Receivables (34,122) --
Inventory (350,066)
--
Prepaid Expenses and Deposits (31,726) --
Accounts Payable and Other Current Liabilities 41,261 8,516
Other 405 --
-----------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (797,860)
(2,278)
-----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (950,552)
--
Acquisition of Elite Visions (22,000) --
Acquisition of Muller AI (131,290) --
Investments (10,000) --
-----------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (1,113,842)
--
-----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Convertible
Preferred Stock 6,500,000 --
Proceeds from Issuance of Preferred Stock 20,000 --
Repayment of Mortgage
(213) --
Repayment of Note Payable (900,000)
--
-----------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 5,619,787
--
-----------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 3,708,085 (2,278)
Cash and Cash Equivalents - Beginning of Period 201,160 (2,278)
-----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 3,909,245 $ --
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F-35
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
----------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000
----------------------------------------------------------------------------------------------
<S> <C>
Issuance of Stock in Connection with Acquisition of Legred Susidiary $ 1,000,000
----------------------------------------------------------------------------------------------
Issuance of Stock to Employees - Previously Granted Shares 50,000
----------------------------------------------------------------------------------------------
Acquisition of Assets- Elite Visions, LLC
Assets Purchased 1,910,860
Liabilities Assumed 243,585
----------------------------------------------------------------------------------------------
2,154,445
Less: Liabilities Assumed (243,585)
Less: Purchase Price Financed via Future Stock Issuance (1,888,860)
----------------------------------------------------------------------------------------------
CASH PAID 22,000
----------------------------------------------------------------------------------------------
Acquisition of Assets- Muller A.I., LLC
Assets Purchased 231,290
Liabilities Assumed 21,567
----------------------------------------------------------------------------------------------
252,857
Less: Liabilities Assumed (21,567)
Less: Purchase Price Financed via Future Stock Issuance (100,000)
----------------------------------------------------------------------------------------------
CASH PAID 131,290
----------------------------------------------------------------------------------------------
Acquisition of Property and Equipment via Mortgage 40,000
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F-36
<PAGE>
STRUTHERS, INC. AND SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE A - BASIS OF PRESENTATION
The condensed consolidated financial statements of Struthers, Inc.
and Subsidiaries (the "Company") included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial
statements prepared in conjunction with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate so that the information presented is not misleading. These
condensed financial statements should be read in conjunction with the
annual audited financial statements and the notes thereto included in
the Company's Form 10 Registration Statement, and other reports filed
with the SEC.
The accompanying unaudited interim financial statements
reflect all adjustments of a normal and recurring nature which are,
in the opinion of management, necessary to present fairly the
financial position, results of operations and cash flows of the
Company for the interim periods presented. The results of operations
for these periods are not necessarily comparable to, or indicative
of, results of any other interim period or for the fiscal year as a
whole. Factors that affect the comparability of financial data from
year to year and for comparable interim periods include the
acquisition of additional subsidiaries, and general and
administrative costs required to meet SEC reporting obligations.
Certain financial information that is not required for interim
financial reporting purposes has been omitted.
NOTE B - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries, Legred Struthers Genetics, Inc., Elite
Visions, Inc., and Muller A.I., Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
NOTE C - STOCK PAYABLE - BRENT LEGRED
The Company would have to issue approximately 4,082,000 shares of
common stock using the trading price of $.49 as of June 30, 2000 in
order to settle the outstanding obligation to Brent Legred.
F-37
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Independent Auditors' Report F-31
Combined Balance Sheets at November 1, 1999 and December 31, 1998 F-32
Combined Statements of Changes in Stockholder's /Owner's Equity for the Ten
Months Ended November 1, 1999 and the Year Ended
December 31, 1998 F-33
Combined Statements of Operations for the Ten Months Ended
November 1, 1999 and the Year Ended December 31,1998 F-34
Combined Statements of Cash Flows for the Ten Months Ended
December 31, 1999 and the Year Ended December 31,1998 F-35
Notes to the Combined Financial Statements F-36 to F-38
F-38
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Legred Genetics,Inc. and
The Proprietor, Brent Legred
Bricelyn, Minnesota
We have audited the accompanying combined balance sheets of Legred
Genetics, Inc. (A Minnesota Corporation) and Brent Legred (A Sole Proprietor) as
of November 1, 1999 and December 31, 1998 and the related combined statements of
changes in stockholder's/owner's equity, operations and cash flows for the ten
months ended November 1, 1999 and the year ended December 31, 1998. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
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 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
Legred Genetics, Inc. and Brent Legred as of November 1, 1999 and December 31,
1998 and the combined results of their operations and their cash flows for the
ten months ended November 1, 1999 and the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
Rotenberg & Company, LLP
Rochester, New York
March 17, 2000
F-39
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS
---------------------------------------------------------------------------------------------------
NOVEMBER 1, DECEMBER 31,
1999 1998
---------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ - $ 19,497
Accounts Receivable - 19,253
Due From Stockholder 4,334 4,363
---------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,334 43,113
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 202,762 258,143
---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 207,096 $ 301,256
---------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S/OWNER'S EQUITY
CURRENT LIABILITIES
Accounts Payable 20,475 12,156
Note Payable 52,650 275,000
Accrued Expenses -- 11,500
---------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 73,125 298,656
STOCKHOLDER'S/OWNER'S EQUITY
Common Stock - No Par; 1,000 Shares Authorized;
1000 Shares Issued and Outstanding 1,000 1,000
Additional Paid-in Capital 422,901 132,201
Retained Earnings (Deficit) (289,930) (130,601)
---------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S/OWNER'S EQUITY 133,971 2,600
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S/OWNER'S EQUITY $ 207,096 $ 301,256
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-40
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S/OWNER'S EQUITY (DEFICIT)
------------------------------------------------------------------------------------------------------------------
For The Year Ended December 31, 1998 and
the Ten Months Ended November 1, 1999 Total
Additional Stockholder's
Common Retained Paid-in /Owner's
Stock Earnings Capital Equity (Deficit)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1997 $ 1,000 $ (19,248) $ - $ (18,248)
Capital Contributions - - 132,201 132,201
Net Loss - (111,353) - (111,353)
------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1998 1,000 (130,601) 132,201 2,600
Capital Contributions - - 290,700 290,700
Net Loss - (159,329) - (159,329)
------------------------------------------------------------------------------------------------------------------
BALANCE - NOVEMBER 1, 1999 $ 1,000 $(289,930) $422,901 $133,971
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-41
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
TEN MONTHS YEAR
ENDED ENDED
NOVEMBER, 1 DECEMBER, 31
1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
SALES $936,001 $1,432,029
Other Income 9,660 15,255
-------------------------------------------------------------------------------
TOTAL REVENUE 945,661 1,447,284
Cost of Goods Sold 728,851 1,051,973
-------------------------------------------------------------------------------
Gross Profit 216,810 395,311
-------------------------------------------------------------------------------
EXPENSES
Marketing And Advertising 31,367 60,328
General and Administrative 253,306 384,003
Depreciation 55,381 50,129
Interest 29,765 11,500
-------------------------------------------------------------------------------
TOTAL EXPENSES 369,819 505,960
-------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (153,009) (110,649)
Provision for Income Taxes 6,320 704
-------------------------------------------------------------------------------
NET LOSS $ (159,329) $ (111,353)
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-42
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------
TEN MONTHS YEAR
ENDED ENDED
NOVEMBER, 1 DECEMBER,31
1999 1998
--------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $ (159,329) $ (111,353)
Adjustments to Reconcile Net Loss to
Net Cash Flows From Operating Activities:
Depreciation 55,381 50,129
Changes in Assets and Liabilities:
Accounts Receivable 19,253 (19,253)
Accounts Payable 8,319 (6,092)
Accrued Expenses (11,500) 11,500
------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (87,876) (75,069)
------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment -- (308,272)
------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES -- (308,272)
------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital Contributions 290,700 132,201
Repayment of Debt (222,350) --
Proceeds from Notes Payable -- 275,000
Due from Stockholder 29 (4,363)
------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 68,379 402,838
------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (19,497) 19,497
Cash and Cash Equivalents - Beginning 19,497 --
------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - ENDING $ -- $ 19,397
------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-43
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
NOTES TO THE COMBINED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE A - THE COMPANIES
Legred Genetics, Inc. was incorporated in the state
of Minnesota in 1996 and is primarily engaged in the business of
raising livestock for sale and genetically implanting embryos into
livestock for procreation. Brent Legred is primarily engaged in
raising livestock for production and for sale in the market place.
Mr. Legred is a sole proprietor and has been in operation since 1991.
On November 2, 1999, the Companies entered into an agreement with
Struthers, Inc. and Legred Struthers Genetics, Inc., pursuant to
which the Companies sold all of their tangible and intangible assets;
including livestock, machinery and equipment, and Legred's rights
under agreements with third parties (including one with Norsvin
International AS, an international developer and distributor of
porcine genetic materials and technology). Pursuant to the agreement
Struthers is to pay Legred the sum of $1 million in cash and $4
million worth of common shares of Struthers, which the final number
of shares will be determined by the market value of the Company's
shares from time to time. Struthers was obligated and subsequently
did build a boar stud unit and operating laboratory, the cost of
which was approximately $450,000. In anticipation of the execution of
the agreements in connection with this acquisition, the Company
formed a wholly owned subsidiary, which was incorporated in the State
of Nevada on October 21, 1999, called Legred Struthers Genetics, Inc.
All of the assets sold pursuant to this acquisition were transferred
into the subsidiary.
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is an agricultural producer principally involved in the
breeding and delivery of swine and swine genetics using advanced
reproductive techniques throughout the industry. The Company sells
primarily to producers in North America. The Company disseminates its
genetics through the sale of live animals in the form of gilts,
barrows, and boars; semen sales from boar studs; and embryo sales
using our non-surgical "Embryo Transfer System".
The Company maintains its corporate offices and operates its Boar
stud facility in Bricelyn, Minnesota.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Legred
Genetics, Inc. and Brent Legred, a sole proprietor. The entities have
been combined due to their common ownership. All significant
inter-company balances and transactions have been eliminated in the
combination.
SEGMENT DATA, GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMER The
Company, through Legred Genetics, Inc., does business primarily in
North America. The Company also has an agreement with Norsvin, AS (A
Norwegian Company) to sell its product line. The agreement provides
for royalties of 4% to be paid to Norsvin on all sales of its product
line. The duration of the agreement is for an indefinite period, but
can be terminated by either party upon twelve months written notice.
Sales under this agreement represented 29% and 15% of total sales for
the ten months ended November 1, 1999 and the year ended December 31,
1998, respectively.
- continued -
F-44
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
NOTES TO THE COMBINED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially expose the Company to
significant concentrations of credit risk consist principally of bank
deposits, temporary investments and accounts receivable. Cash is
placed primarily in high quality short-term interest bearing
financial instruments and may periodically exceed federally insured
amounts. The Company performs ongoing credit evaluations of its
customers' financial condition. An allowance for uncollectible
accounts receivable is maintained based upon the expected
collectibility of all accounts receivable.
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 disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results can
differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Breeding animals are
carried at purchase costs or inventory transfer amounts equal to the
lower of accumulated animals maintenance costs or market. Renewals
and improvements are capitalized. Costs of maintenance and repairs
that do not improve or extend asset lives are charged to expense.
Depreciation is provided on the straight-line basis over the
estimated productive useful lives of the assets as follows:
Buildings and Improvements 10 Years
Machinery and Equipment 7 Years
Breeding Herds 3 Years
Vehicles 5 Years
Office Furniture and Fixtures 5 Years
LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. The Company evaluates any
possible impairment of long-lived assets using discounted future cash
flows. When required, impairment losses on assets to be held and used
are recognized based on the fair value of the asset. Long-lived
assets to be disposed of are reported at the lower of carrying amount
or fair value less cost to sell.
INVENTORY
The Company expenses the cost of growing pigs as a charge to
operations when incurred.
- continued -
F-45
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
NOTES TO THE COMBINED FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. No income taxes for the sole
proprietorship have been recorded in the financial statements as they
are the sole responsibility of the owner.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at November 1, 1999
and December 31, 1998:
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
Buildings and Improvements $ 185,144 $ 185,144
Machinery and Equipment 156,594 156,594
Breeding Herds 2,074,892 1,933,769
Vehicles 24,426 24,426
-------------------------------------------------------------------
$2,441,056 $2,299,933
Less: Accumulated Depreciation 2,238,294 2,041,790
-------------------------------------------------------------------
Net Property and Equipment $ 202,762 $ 258,143
-------------------------------------------------------------------
Depreciation expense charged against operations for the ten months
ended November 1, 1999 and the year ended December 31, amounted to
$56,381 and $50,129, respectively.
NOTE D - NOTE PAYABLE
The Company have available two lines of credit with a maximum
borrowing base of $2,000,000. The lines bear interest at the rates of
9.5% and 10% per annum and are secured by the general assets of the
company.
NOTE E - PROVISION FOR TAXES
The provision for income taxes is attributable to for the ten months
ended November 1, 1999 and the year ended December 31, 1998:
------------------------------------------------------------------
1999 1998
------------------------------------------------------------------
Loss Before Provision for Income Taxes $(153,009) $(110,649)
------------------------------------------------------------------
State Income Tax $ 1,898 $ 704
------------------------------------------------------------------
Federal Income Taxes $ 4,422 $ --
------------------------------------------------------------------
F-46
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Independent Auditors' Report F-45
Balance Sheets at May 31, 2000 and December 31, 1999 and 1998 F-46
Statements of Changes in Members' Equity for the Five Months Ended May 31, 2000
and for the Years Ended December 31, 1999 and 1998 F-47
Statements of Operations for the Five Months Ended May 31, 2000 and for the
Years Ended December 31, 1999 and 1998 F-48
Statements of Cash Flows for the Five Months Ended May 31, 2000 and
For the Years Ended December 31, 1999 and 1998. F-49
Notes to the Financial Statements F-50 - F-52
F-47
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members of
Elite Visions, LLC
Waukon, Iowa
We have audited the accompanying balance sheets of Elite Visions, LLC
as of May 31, 2000 and December 31, 1999 and 1998 and the related statements of
changes in Members' Equity, operations and cash flows for the five months ended
May 31, 2000 and for the years ended December 31, 1999 and 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 Elite Visions, LLC
as of May 31, 2000 and December 31, 1999 and 1998 and the results of its
operations and its cash flows for the five months ended May 31, 2000 and for the
years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles. The financial statements were restated to give effect to
the application of SOP 98-5 to write-off unamortized organization costs as of
December 31, 1999.
Rotenberg & Company, LLP
Rochester, New York
October 13, 2000
(Except Note G, dated November 17, 2000)
F-48
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
<TABLE>
<CAPTION>
BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
MAY 31, December 31, December 31,
2000 1999 1998
-----------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C> <C>
Cash and Cash Equivalents $ -- $ 3,515 $ 57,072
Stock Commitments -- -- 4,000
Accounts Receivable 11,743 15,682 13,181
Inventory 26,336 23,970 26,169
-----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 38,079 43,167 100,422
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 201,692 210,275 225,816
OTHER ASSETS
Patents- Net of Accumulated Amortization 166,288 172,544 200,309
Organization Costs- Net of Accumulated Amortization -- -- 1,992
-----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $406,059 $ 425,986 $ 528,539
-----------------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES
Line of Credit $50,000 $ 50,000 $ 84,000
Accounts Payable 4,117 20,318 31,680
Accrued Expenses 8,020 9,833 15,883
Notes Payable - Due Within One Year 10,912 -- --
-----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 73,049 80,151 131,563
OTHER LIABILITIES
Notes Payable - Due After One Year 174,653 189,451 199,301
Director Fees Payable -- 4,400 4,400
-----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 247,702 274,002 335,264
-----------------------------------------------------------------------------------------------------------------
MEMBERS' CAPITAL
Capital 601,852 563,671 481,400
Retained Earnings (Deficit) (443,495) (411.687) (288,125)
-----------------------------------------------------------------------------------------------------------------
TOTAL MEMBERS' CAPITAL 158,357 151,984 193,275
-----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND MEMBERS' CAPITAL $406,059 $ 425,986 $ 528,539
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-49
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
<TABLE>
<CAPTION>
STATEMENTS OF MEMBERS' EQUITY
-----------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
For the Five Months Ended May 31, 2000 and the MAY 31, DECEMBER 31, DECEMBER 31,
Years Ended December 31, 1999 and 1998 2000 1999 1998
MEMBERS' RETAINED MEMBERS' RETAINED MEMBERS' RETAINED
CAPITAL EARNINGS CAPITAL EARNINGS CAPITAL EARNINGS
(DEFICIT) (DEFICIT) (DEFICIT)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - BEGINNING OF PERIOD $563,671 $(411,687) $481,400 $ (288,125) $538,755 $ 57,355
Contributions (withdrawals), net 38,181 82,271 (57,355)
Net Loss (31,808) (123,562) (345,480)
--------------------------------------------------------------------------------------------------------------------
BALANCE - END OF PERIOD $601,852 $(443,495) $563,671 $ (411,687) $481,400 $ (288,125)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-50
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------
(Reststed) (Restated)
For the Five Months Ended May 31, 2000 and the MAY 31, December 31, December 31,
Years Ended December 31, 1999 and 1998 2000 1999 1998
----------------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Sales $ 389 $ 100,563 $ 31,819
Contracted Services -- -- 15,196
Training Fees 800 28,580 12,086
Interest Income -- 2,498 5,573
Rent Income 2,250 4,050 5,450
Other Income 13,896 3,318 17,866
------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 17,335 139,009 87,990
Cost of Sales 5,094 70,162 33,913
------------------------------------------------------------------------------------------------------------
GROSS PROFIT 12,241 68,847 54,077
EXPENSES
Advertising 70 866 10,133
Amortization 7,260 17,007 2,880
Depreciation 6,024 17,060 16,195
General and Administrative 22,634 87,776 267,459
Payroll -- 55,417 81,452
Interest 8,061 14,283 21,438
------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 44,049 192,409 399,557
------------------------------------------------------------------------------------------------------------
NET LOSS $ (32,068) $ (122,185) $ (345,480)
------------------------------------------------------------------------------------------------------------
</TABLE>
F-51
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------------------------
(Reststed) (Restated)
For the Five Months Ended May 31, 2000 and the MAY 31, December 31, December 31,
Years Ended December 31, 1999 and 1998 2000 1999 1998
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Loss $ (31,808) $ (123,562) $ (345,480)
ADJUSTMENTS:
Depreciation 6,024 17,060 16,195
Amortization 7,260 17,007 2,880
Accounts Receivable 3,939 (2,501) (13,181)
Inventory (2,366) 2,199 (26,169)
Stock Commitments -- 4,000 (4,000)
Accounts Payable (16,201) (11,362) 31,680
Accrued Expenses (6,213) (6,050) 15,883
Other (1,004)
----------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (40,369) (103,209) (322,192)
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization Costs -- -- (1,992)
Patent -- 12,135 (203,189)
Purchase of Property and Equipment -- (904) (242,011)
Proceeds from Sale of Property and Equipment 2,559 -- --
----------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES 2,559 11,231 (447,192)
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (Repayment) from Debt (3,886) (59,850) 287,701
Capital Contributions 38,181 98,271 538,755
----------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 34,295 38,421 826,456
----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (3,515) (53,557) 57,072
Cash and Cash Equivalents - Beginning of Year 3,515 57,072 --
----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ -- $ 3,515 $ 57,072
----------------------------------------------------------------------------------------------------------------
</TABLE>
F-52
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE A - THE COMPANY
The Company was formed in Iowa on January 15, 1997. On June 1, 2000
the Company sold a significant portion of its assets to Struthers,
Inc. and Subsidiaries, Charleston, South Carolina. In this
transaction, the Company sold all of its inventory, property and
equipment, patents including the rights to the Gourley Scope
trademark in exchange for cash and common stock of Struthers, Inc.
The Company's principal operations are located in Waukon, Iowa.
SCOPE OF BUSINESS
The Company's objective is to be a leading developer and
manufacturer of instrumentation for artificial insemination in
animals. It has successfully developed a state of the art device
which is commercially manufactured in Iowa.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES METHOD OF ACCOUNTING
The Company maintains its books and prepares its financial
statements on the accrual basis of accounting.
REVENUE RECOGNITION
Sales of equipment are recognized when the product is shipped and
invoiced to the customer. Fees earned from training are recognized
upon completion of the training.
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 disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results can differ from those estimates.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially expose the Company to
significant concentrations of credit risk consist principally of
bank deposits. Cash is placed primarily with high quality AAA rated
financial institutions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less.
INVENTORY
Inventory consists of artificial insemination equipment and is
stated at the lower of cost or market on the first in first out
method.
PATENTS
Patents are carried at cost and are amortized using the
straight-line method over the estimated useful life of 15 years
from the date of issuance of the patent.
- continued -
F-53
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
ORGANIZATION COSTS
Organization costs were being amortized over 60 months. The balance
was written off as of December 31, 1999 in accordance with SOP 98-5.
INCOME TAXES
The Company is organized as a limited liability company under the
provisions of the Internal Revenue Code. No provision for Federal
or state income tax is recorded in the financial statements as the
Company has elected to be taxed as a partnership and as such income
taxes are the responsibilities of the individual members for
Federal tax purposes.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consists of furniture, fixtures and
equipment located in Waukon, Iowa. Property and equipment are
stated at cost, less accumulated depreciation computed on the
straight-line method over the estimated useful lives as follows:
Building 39 Years
Lab Equipment 5 Years
Furniture and Fixtures 5 Years
Office Equipment 3 - 5 Years
Maintenance and repairs are charged to expense. The cost of
property and equipment retired or otherwise disposed of and the
related accumulated depreciation are removed from the accounts.
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
------------------------------------ ------------- ---------------------- --------------------
MAY 31, December 31, December 31,
------------ ------------ ------------
2000 1999 1998
------------------------------------
<S> <C> <C> <C>
Land $ 15,000 $ 15,000 $ 15,000
------------------------------------
Building 181,085 181,085 181,085
------------------------------------
Lab Equipment 14,170 14,170 12,943
------------------------------------
Furniture and Fixtures 13,396 15,955 15,955
------------------------------------
Office Equipment 27,783 27,783 27,492
------------------------------------ ------------- --------------- --------------
$ 251,434 $ 253,993 $ 252,475
------------------------------------
Less: Accumulated Depreciation 49,742 43,718 26,659
------------------------------------ ------------- --------------- --------------
Net Property, Plant and Equipment $ 201,692 $ 210,275 $ 225,816
------------------------------------ ------------- --------------- --------------
</TABLE>
Depreciation expense for the five months ended May 31, 2000 and for
the years ended December 31, 1999 and 1998 was $6,024, $17,060 and
$16,195, respectively.
F-54
<PAGE>
ELITE VISIONS, LLC
WAUKON, IOWA
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE E - LINE OF CREDIT
The Company had available an unsecured line of credit in the amount
of $50,000 bearing interest at the prime rate plus 3%. The amount
outstanding on the line on May 31, 2000 and December 31, 1999 and
1998 was $50,000. The line of credit was paid in full in June 2000.
NOTE F - NOTES PAYABLE
-------------------------------------------------------------------
MAY 31, December 31, December 31,
------------- ------------ ------------
2000 1999 1998
-------------- ----------------------- --------------------
Note payable to Allamakee County requiring monthly principal and
interest payments of $587.45. The note was for a 7 year term and
bears interest at 6% per annum. This note was paid in full in
August, 2000.
$ 25,471 $ 27,264 $ 32,109
-------------------------------------------------------------------
Note payable to Upper Explorer Land requiring monthly principal and
interest payments of $1,150.70. The note was for a 5 year term and
bears interest at 7.33% per annum. The note was paid in full in
June, 2000.
113,092 114,910 119,915
-------------------------------------------------------------------
Note payable to the State of Iowa requiring quarterly payments of
$3,713.82. The note is for a 5 year term and bears interest at 8.5%
per annum. This note is secured by inventory, equipment and
fixtures.
47,002 47,277 47,277
----------------------------------
Total $ 185,565 $ 189,451 $ 199,301
----------------------------------
Less: Amount Due Within One Year 10,912 - 0 - - 0 -
----------------------------------
Amount Due After One Year $ 174,653 $ 189,451 $ 199,301
------------------------------------------------ ---------- ---------
Annual maturities of debt for the five years succeeding May 31,
2000 are as follows:
2001 2002 2003 2004 2005 Total
---------- ---------- ----------- ------------ ---------- ----------
$ 10,912 $ 12,169 $ 13,237 $ 10,684 $- 0 - $ 47,002
---------- ---------- ----------- ------------ ---------- ----------
Interest expense for the five months ended May 31, 2000 and years
ended December 31, 1999 and 1998 was $8,061, $14,283 and $21,438,
respectively.
Note G - Restatement
The financial statements have been restated to give effect to the application of
SOP 98-5 to write-off unamortized organization costs as of December 31, 1999.
The effect of the restatement was immaterial.
F-55
<PAGE>
EXHIBIT NO. DESCRIPTION
-----------
3.1 *Articles of Incorporation of Latitude Network Inc.
3.2 *Amended Articles of Incorporation of Latitude Network, Inc.
3.3 *Amended Articles of Incorporation of Orbis Development, Inc.
3.4 *Amended Articles of Incorporation of Struthers, Inc.
3.5 *Certificate of Correction of Amended Articles of Incorporation of
Struthers, Inc.
3.6 *Amended Articles of Incorporation of Struthers, Inc.
3.7 *By-Laws of Struthers, Inc.
4 See Exhibit 3.4, 3.5, 3.6 filed herewith for rights of security holders.
9 *Voting Trust Agreement
10.1 *Agreement dated November 2, 1999 among Struthers, Inc., Legred Genetics,
Inc., Legred Genetics, and Brent Legred (with exhibits).
10.2 *Assignment and Assumption of Lease between Struthers, Inc. and Legred
Struthers Genetics, Inc.
10.3 *Employment Agreement with Douglas W. Beatty.
10.4 *Employment Agreement with Rhett Seabrook.
10.5 *Employment Agreement with Bertram K. Remley.
10.6 *Employment Agreement with Brent Legred.
21.1 *Articles of Incorporation of Legred Struthers Genetics, Inc., a subsidiary
of Registrant.
21.2 *Amended Articles of Incorporation of Legred Struthers Genetics, Inc.
21.3 *Articles of Incorporation of Elite Visions, Inc.
21.4 *Articles of Incorporation of Muller A. I., Inc.
27.0 Financial Data Schedule
*Previously filed.
<PAGE>
