FORM 10-SB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1 TO
FORM 10-SB
General Form For Registration of Securities of Small Business Issuers
Under Section 12(b) of 12(g) of the Securities Act of 1934
Evergreen Network.com, Inc. *
(Name of Small Business Issuer in Its Charter)
* The Registrant is not engaged in the Internet business has not derived any of
its revenue from that business and does not anticipate doing any such business
in the future.
Colorado 68-0166841
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
3336 North 32nd Street, Suite 106, Phoenix, Arizona 85018
(Address of Principal Executive Offices) (Zip Code)
(602) 956-5694
Issuer's Telephone Number
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
None
Securities to be registered pursuant to Section 12(g) of the Act:
$.01 Per Share Par Value Common Stock
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements set out herein constitute forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause the Company's actual results, levels of activity,
performance and achievements, to be materially different from any future
results, levels of activity, performance or achievements, expressed or implied
by such forward-looking statements.
Forward-looking statements relate to future events or the Company's
future financial performance. In some cases, forward-looking statements can be
identified by terminology such as "may", "will", "should", "expects", "plans",
"projected" "anticipates", "believes", "estimates", "predicts", "potential" or
"continue" or the negative of such terms or comparable terminology. These
statements are only predictions. Actual events or results may differ materially.
In evaluating these statements, potential investors should specifically consider
various factors, including the risks outlined under RISK FACTORS. These factors
may cause actual results to differ materially from any forward-looking
statements.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements.
Item 1. Description of the Business
------- ---------------------------
Summary of Present Operations.
------------------------------
Evergreen Network.com, Inc. ("Company") conducts operations in the
charitable gaming industry. It provides the TabForceTM Pull-Tab Ticket
Validation System ("TabForceTM System") to qualified charitable or fraternal
organizations (such as American Legion or Veterans of Foreign Wars Chapters) or
charitable bingo hall operations. The Company is also offering the Tab ForceTM
System to casino operators on Indian Reservations. The Company has entered into
an agreement with The McDowell-Yavapai Nation under which it is operating the
Tab ForceTM System in the casino on the Fort McDowell Indian Reservation in
Arizona. The Company is negotiating with four other Indian Tribes operating
casinos in Arizona for the installation of the Tab ForceTM System in their
casinos.
The Tab ForceTM System is a recreational game played by the user
utilizing Tab ForceTM Pull-Tab Tickets ("Pull-Tabs") and Tab ForceTM Validation
Machines ("Validation Machines"). The user purchases a Pull-Tab from the
cashier, pulls apart the Pull-Tab and inserts the bottom portion of the Pull-Tab
into the Validation Machine for validation. Each Pull-Tab has one play on the
Validation Machine for each $.25 of its purchase price (20 plays on a $5.00
Pull-Tab). The results of each play are displayed on the Validation Machine in a
Las Vegas entertainment style manner. When all the plays are completed in the
Pull-Tab, the Validation Machine displays the results and prints out a paper
voucher which the player returns to the cashier for payout.
The Company rents the Validation Machines to the location organizations
and sells them the Pull-Tabs. The Company is operating in Colorado with over 68
Validation Machines in operation for over 13 charitable and fraternal
organizations. Under its agreement with the manufacturer of the Validation
Machines and Pull-Tabs, it has the right to distribute and operate them in
Arizona, Colorado, California and Nebraska. The Company is presently
concentrating its business development efforts on: (i) the improvement of
production from the Validation Machines involved in its Colorado operations; and
(ii) the initiation of operations on Indian Reservations in Arizona. On October
6, 2000, it began operations on the Fort McDowell Reservation. As of November
30,2000 these operations included six Validation Machines, which is anticipated
to increase to 12 machines during the next several months. The Company's
application to operate at the Cliff Castle Casino on the Yavapai-Apache Indian
Reservation was approved December 4, 2000. It is anticipated that an Operating
Agreement will be completed and operations involving up to 12 Validation
Machines initiated at this casino on or before the end of January of 2001. The
Company has conducted extensive negotiations for operations at Harrah's Casino
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on the Auk-Chin Indian Reservation. It anticipates filing an Application for
Operation in Harrah's Casino during early December of 2000. If this application
is approved, operations are projected to begin within a month. The Company is
presently pursuing negotiations with two other Arizona Indian Reservation
Casinos for the installation of machines. The Company plans to initiate the
installation and operation of the Tab Force System(TM) in California charitable
and fraternal organizations in the spring of 2001. It presently has developed
interest from six organizations for the installation of 18 machines. These
installations in Arizona and California will be made from existing inventory of
Validation Machines and Pull-Tabs. The Company has applied for the necessary
licenses to operate in the charitable gaming industry in Nebraska. Although
objections to the issuance of Nebraska licenses have been received, the Company
and its counsel believe there is a good likelihood they will be granted.
The following sections set forth information on the history of the
Company, its present and proposed operations, its competition, regulation,
facilities and employees.
History of the Company
----------------------
The Company was organized as a Colorado corporation on May 27, 1987
under the name SEFCO, Inc. It was formed for the purpose of acquiring capital
funds to invest in an existing business. After completing a public offering in
September of 1989, with gross proceeds of $372,150.00 it entered into a merger
acquisition transaction with an Arizona corporation and changed its name to "The
Members Financial Service Bureau, Inc.". From the fall of 1989 to the spring of
1998, the Company was engaged in the telecommunications business (the Company's
name was changed to "Shared Use Network Services, Inc." in August of 1995). The
Company operated as an interchange carrier provided value added voice
communications and data communications and data processing services. In March of
1996, it became a majority-owned subsidiary of a publicly held Delaware
corporation named Interactive Telephone Network, Inc. by its acquisition of
approximately 89% of the Company's outstanding Common stock. The Company
continued its telecommunications business with its efforts concentrated in the
area of the development, sale and electronic servicing of prepaid debit cards
and, in particular, prepaid telephone cards. In the spring of 1998, due to the
inability of its then parent company to provide the necessary funding, the
Company ceased its business operations. The transaction with the Delaware
corporation was then reversed and approximately 89% of the Company's then
outstanding Common Stock was returned by the Delaware Corporation in exchange
for shares of the parent, which were returned to it.
The Company then concentrated its efforts on finding a new business
opportunity. In the summer of 1998, it entered into unsuccessful negotiations
for a corporate affiliation with Trilogy Gaming Corp., a Delaware corporation
engaged in the gaming business in Arizona, California and New York. Although the
transaction with Trilogy was never completed, the Company has concluded to make
available to certain shareholders of Trilogy a total of 1,326,204 shares of the
Company's Common Stock. Although the Company is not legally obligated to do so,
the shares will be offered to the Trilogy shareholders who endeavored to
complete the affiliation between Trilogy and the Company for cash $.01 per
share. These shares will be offered to them under a Registration Statement to be
filed under the Securities Act of 1933.
In the fall of 1999, the Company began the formation of its present
organization and business plan. The President of the Company who had received
back the approximately 89% of the Common Stock of the Company when the
transaction with the Delaware parent was reversed returned 4,989,548 shares of
Common Stock to the treasury of the Company in exchange for 100,000 shares of
its Series A Preferred Stock. When the Company's previous operations were
suspended in the spring of 1998, the Company had outstanding tax obligations to
the Internal Revenue Service. The Company has sold 776,000 shares of its common
stock held as treasury shares for $60,164.00 which funds were used to liquidate
the tax liability.
During the period from December of 1999 through September of 2000, the
Company raised debt capital to finance the commencement of its operations in the
net amount of $230,000 through the sale of promissory notes in that total
principal amount. A total of 460,000 shares of the Company's Common Stock were
issued for prepaid interest on these notes. As of November 30, 2000, $190,000
had been paid on principal of these notes leaving a balance of $40,000.
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On April 14, 20000, the Company began a private placement of 1,300,000
shares of its common stock at $1.00 a share. As of November 30, 2000, 554,000
shares had been sold in the placement resulting in $554,000 in gross proceeds.
On February 23, 2000 the Company entered into a Master Distributorship
Agreement with Infinity Group, Inc., the owner of the trade name Tab ForceTM and
the exclusive manufacturer of the Validation Machines and Pull-Tabs included in
the Tab ForceTM System. This agreement gives the Company the right to sell all
of Infinity's Tab ForceTM products in the states of Arizona, Colorado, Nebraska
and the charitable jurisdictions in California. On March 1, 2000 the Company
finalized a written agreement under which it is purchasing 235 Validation
Machines from Colorado Tab ForceTM, LLC, a Colorado limited liability company,
which had been selling the Tab Force SystemTM in Colorado since 1997. This
agreement provided for the payment by the Company of $710,000 for the machines.
As of November 30, 2000, the Company has paid $ 180,000.00 on the agreement for
the purchase of 240 machines and assumed the liability of Colorado Tab ForceTM,
LLC on a lease covering 120 machines. The remaining 135 Validation Machines are
subject to a lease-purchase arrangement between Colorado Tab ForceTM, LLC and
the Lessor. Following the execution of the Agreement between the Company and
Colorado Tan Force(TM), LLC a dispute arose between Colorado Tab Force(TM), LLC
and other parties as to the title and use of these 135 Validations Machines
which prevents Colorado Tab Force(TM), LLC from completing its agreement with
the Company and delivering the machines. Under an oral understanding with the
manufacturer of the Validation Machines and Colorado Tab Force(TM), LLC the
Company has made arrangements to purchase up to 135 replacement machines from
the manufacturer for the same price it would have paid Colorado Tab Force(TM),
LLC with a corresponding reduction on the Company's obligation to Colorado Tab
Force(TM), LLC. Under the arrangement with Colorado Tab ForceTM, LLC, the
Company took over the operations of the Tab ForceTM System in Colorado in
January of 2000.
On October 16, 2000, the Company declared a stock dividend of one share
of Common stock for each share outstanding, which is in effect constituted a two
share for one share forward split. It also adjusted the purchase the purchase
price of the Common Stock in its Private Placement from $2.00 to $1.00 and
doubled the number of shares to be offered to the Trilogy shareholders. All the
numbers contained in the text of this Form 10-SB relating to issued or issued
and outstanding stock have been adjusted to reflect this stock dividend and its
related adjustments.
Present and Proposed Operations
-------------------------------
As of November 30, 2000, the Company has over 68 Validation Machines
operating for over 13 fraternal and charitable organizations in Colorado. The
Colorado operations are conducted through three distributors who are responsible
to place and service the Validation Machines and deliver the Tab ForceTM System
products. The Company derives revenue from rentals on the Validation Machines
and from the sale of the Tab ForceTM Pull-Tabs. For the past several months the
Company has been engaged in the process of removing machines from unprofitable
locations and reinstalling them to better ones. During this period machines
operating in Colorado dropped from over 80 to 68. The Company intends to
continue its efforts to expand and improve its Colorado operations.
The Company has initiated its marketing efforts in the charitable
gaming industry in Arizona and California. In these states the Company intends
to provide the Validation Machines and Tab ForceTM products directly without the
use of distributors. The marketing efforts in Arizona will be aimed at
charitable and fraternal organizations that are just now installing raffle
programs to raise funds. The California marketing efforts will be concentrated
on charitable organizations using bingo hall operations and card games. The
Company presently intends to begin installations and operations in California
and Arizona in the spring of 2001. As a result of its marketing efforts through
November 30, 2000, it has received indication of interest from six charitable
organizations for about 18 Validation Machines. The Company is presently
concentrating on marketing the Tab Force(TM) System to Indian Reservations in
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Arizona; but intends to increase its marketing efforts to charitable and
fraternal organizations in California and Arizona in the spring of 2001.
The Company has filed application for the necessary license to be able
to offer the Tab ForceTM System in Nebraska. These have been objections filed to
the Company's Nebraska Application. However the Company has been advised by
counsel that the prospects for the issuance of the license are very good. If and
when the licenses are obtained, the Company intends to initiate a direct
marketing program to Nebraska charitable organizations and Reservations.
The Company is concentrating its present marketing efforts on the
installations and operations of the Tab Force(TM) System in casinos in Arizona
Indian Reservations. On October 6, 2000 it commenced operations on the Fort
McDowell Indian Reservation. As of November 30, 2000 there were six Validation
Machines operating at this casino. It is expected that these operations will
expand to 12 machines over the next several months. The company received
approval of its application to operate at the Cliff Castle Casino on the
Yavapai-Apache Indian Reservation on December 4, 2000. Details are being
finalized on an operating agreement for this facility. It is anticipated that
there will up to 12 Validation Machines in operation at this casino on or before
the end of January of 2001. The Company has conducted extensive negotiations for
operations in the Harrah's Casino on the Auk-Chin Indian Reservation and
anticipates filing a formal application for permission for such operations in
early December of 2000.
The Company is presently negotiating with two other Arizona Indian
Reservation casino operators for the sale of the Tab ForceTM System. The Company
also intends to pursue negotiations for similar arrangements with other Arizona
Indian Reservations and Reservations in the other states in which the Company
operates.
The Validation Machines are manufactured by Infinity Group, Inc.
("Infinity") of Albuquerque, New Mexico which also owns the Tab ForceTM
trademark. Infinity has also dome extensive work to establish that the Tab
ForceTM System may be legally marketed in the charitable gaming industry. The
Company has a Master Distributorship Agreement with Infinity to market the Tab
ForceTM System in the states of Arizona, Colorado and Nebraska and to the
charitable jurisdictions in California. This includes the Validation Machines,
Pull-Tabs and all other Tab ForceTM products of Infinity. The Company has
experienced some difficulty in obtaining sufficient quantities of Pull-Tabs form
Infinity on a timely basis. The Company has made arrangements with the producer
of the Pull-Tabs for direct delivery of Pull-Tabs to the Company if necessary to
alleviate this problem.
The Company is working with Infinity in its efforts to bring to market
a new desk-top smaller style Validation Machine. The Company's market research
indicates that the market will be receptive to these new machines. Although the
Company is presently dependent upon Infinity as the sole of its Tab ForceTM
System products, its management is of the opinion that these products will be
available as reasonably needed.
The Company is continuing its effort to raise additional equity through
the sale of common stock in the private placement being made under Rule 506 of
Regulation D adopted under the Securities Act of 1933. The Company's management
is of the opinion that it has developed sufficient business to enable it to fund
continued operations from revenues; however, it will need additional capital to
adequately fund any material expansion of operations on an expedited basis.
Competition
-----------
The Company competes directly with and faces potential competition with
many sources for the consumers' expenditure of recreational and discretionary
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funds, including legal gaming operations. There is limited legalized gaming in
Colorado, legalized charitable gaming operations and legalized gaming on
American Indian Reservations in all of the concerned states. In addition, the
Company directly competes with other charitable gaming operations (such as bingo
and non-electronic pull-tab games) in its territories. Many of the Company's
competitors are established organizations with established trade names and
goodwill and far greater resources and capital.
Regulation
----------
All of the states in which the Company proposed to operate have
extensive prohibitions and/or regulations upon gambling and gaming operations.
The Company's charitable gaming business is allowed to operate under specific
statutory and/or regulatory provisions which limit or regulate its operations in
greater detail. The Company has been advised by counsel that it may sell the Tab
ForceTM System in the four states in which it intends to operate; provided it
complies with the applicable legal restrictions. At the present time, Colorado
authorities have affirmatively indicated that the Tab ForceTM System may be used
in Colorado for the benefit of licensed charitable and fraternal organizations.
In California, charitable gaming operations are regulated by local city and
county authorities. The Company's counsel is presently working with these
authorities in areas in which it is initiating operations. It should be noted
that there is a risk that future legal regulatory provisions may adversely
effect the Company's operations or potential profitability.
Personnel
---------
Mr. Howard E. Tooke, President of the Company, presently spends full
time as a management consultant to the Company. The Company presently has four
other consultants working for it in the areas of office administration, sales
and product installation and servicing. If the Company's operations expand, it
may be anticipated that additional personnel will be required.
Item 1A. Company Risk Factors.
-------- ---------------------
The securities of Evergreen Network.com, Inc. ("Company") are
speculative and subject to investment risks including those set out in this
Item.
OUR BUSINESS IS ESPECIALLY VULNERABLE TO ECONOMIC DOWNTURN. Our
charitable gaming business essentially involves our customers' recreation and
entertainment and their expenditures therefore are discretionary in nature.
Accordingly, it may be anticipated that a slump or downturn in the economy where
we operate would more adversely affect our operations than businesses involving
non-discretionary expenditures.
PREVIOUS COLORADO OPERATIONS NOT PROFITABLE. Under the purchase
agreement for the initial 235 Validation Machines, we took over the locations
and operations of the seller which had been selling the Tab ForceTM System in
Colorado since 1997. These previous Colorado operations were unprofitable. We
believe that we can develop and expand the Colorado operations and make them
profitable. However, there is no assurance such profitability will be achieved.
OUR EXPANSION INTO NEW MARKETS MAY ADVERSELY AFFECT POTENTIAL
PROFITABILITY. We just initiated operations in the states of Arizona and
California and have applied for authority to operate in Nebraska. It may be
anticipated that the expenses of these start-up operations will exceed their
income until a significant amount of business has been developed, of which there
is no assurance.
WE ARE DEPENDENT UPON DEVELOPMENT OF ADDITIONAL BUSINESS AND/OR
ACQUISITION OF ADDITIONAL CAPITAL. We are of the opinion that the proceeds from
the sale of our present private placement, if obtained, will be sufficient to
finance our business development activities and we will not need to acquire
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additional debt or equity capital in the next 12 months. However, there is no
assurance that: (i) a sufficient amount of these proceeds will be received; (ii)
we will be able to achieve profitable operations; or (iii) any needed additional
capital will be available.
WE HAVE NO TRADING MARKET FOR OUR SHARES. There is presently no trading
market for the Common Stock of the Company. Since we are in the business
development stage and most of our outstanding stock and the shares being sold in
the private placement will be subject to the transferability restrictions under
the securities and tax laws, it is unlikely any material trading market will
develop for a significant period of time. Upon completion of this registration
of our Common Stock under Section 12(g) of the Exchange Act we intend to take
the necessary actions to qualify our Common Stock for trading in the
over-the-counter market. There is no assurance that these actions will result in
the development of a viable trading market for the Common Stock.
THE PROPOSED REGISTRATION OF SHARES FOR SALE BY SHAREHOLDERS MAY
ADVERSELY EFFECT OUR ABILITY TO RAISE ADDITIONAL CAPITAL. We intend to file a
Registration Statement under the Securities Act of 1933 for the sale of shares
held by shareholders and for the distribution of 681,102 shares of Common Stock
to the shareholders of Trilogy Gaming Corp. The actual and potential
distribution of these shares into the marketplace may have a material adverse
effect upon the potential market for the Company's stock and upon the Company's
ability to raise any needed additional capital.
OUR BOARD OF DIRECTORS AND MANAGEMENT'S STOCK OWNERSHIP ASSURE
CONTINUED CONTROL BY PRESENT GROUP. Our Articles of Incorporation provide that
the members of the Board of Directors shall be divided into three classes, as
evenly divided as possible, with one class being elected each year for a
three-year term. The present officers and directors of the Company will own
2,000,950 shares (26.8%) of the 6,102,464 shares of Common Stock outstanding
after distribution of the 1,362,204 shares to the Trilogy shareholders. As a
result of these factors it should be assumed that the present management has the
ability to maintain control of the Company for an indefinite period.
WE OPERATE IN A HEAVILY REGULATED ENVIRONMENT. All of the states in
which we operate or proposed to operate have legal prohibitions or restrictions
upon gambling and/or gaming operations. The Company's charitable gambling
business is allowed to operate under specific statutory and/or regulatory
provisions which limit or regulate its operations in great detail. We have been
advised by counsel that we may sell the Tab ForceTM System in the four states in
which we intend to operate, provided we comply with the applicable legal
restrictions. It should be noted that there is a risk that future regulatory
provisions may adversely affect the Company's operations or potential
profitability.
WE FACE EXTENSIVE COMPETITON. We face actual and potential competition
from many sources, including established companies and companies with greater
resources and capital. Although we are not involved in the for-profit gaming or
gambling industry except on Indian Reservations, we do compete with those
entities that are for the customers' discretionary expenditures. There is
limited legalization gambling in Colorado, legalized charitable gaming
operations, and legalized gambling on American Indian Reservations in all of the
concerned states. In addition, we directly compete with other charitable gaming
operations (such as bingo and non-electronic pull-tab games) in our territories.
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Item 3. Description of Property
------ -----------------------
The Company presently operates out of leased office facilities in
Phoenix, Arizona. The facilities contain approximately 1,000 square feet. The
lease is for 3 years commencing September 1, 2000 at a monthly rental of $1,500.
The Company also leases 1,000 square feet of warehouse facilities at the same
Phoenix location for $1,000 a month. This warehouse lease expires August 31,
2003.
Item 4. Security Ownership of Management and Certain Securityholders.
------- -------------------------------------------------------------
Information with respect to the ownership of shares of each class of
the Company's outstanding stock as of November 30, 2000 by each shareholder who
owns 5% or more of each class and by the officers and directors of the Company
and by all its officers and directors as a group is set forth in the following
table.
<TABLE>
<CAPTION>
NAME, CAPACITY AMOUNT AND
TITLE AND ADDRESS OF NATURE OF PERCENT
OF BENEFICIAL BENEFICIAL OF
CLASS OWNER OWNER(1) CLASS(1)
----- --------------- ---------- --------
<S> <C> <C> <C>
200 Series A
Preferred Stock Howard E. Tooke
President
3336 N. 32nd Street, Suite 106 100,000 100.0%
Phoenix, AZ 85018
Common Stock Howard E. Tooke 400,000 5.4%(1)
President
3336 N. 32nd Street, Suite 106
Phoenix, AZ 85018
Jim T. Boyle 507,000(1) 6.8%(1)
Secretary-Treasurer and Director
4202 E. Phelps
Phoenix, AZ 85032
Bonnie J. Andrikopoulos 98,200(1) 1.3%(1)
Director
1165 Pennsylvania, #20
Denver, CO 80203
Joseph M. Imhoff, Sr. 457,000(1) 6.1%(1)
Director
2999 N. 44th Street, Suite 100
Phoenix, AZ 85018
John E. Mulligan -0- 0.0%(1)
Director
2999 N. 44th Street, Suite 100
Phoenix, AZ 85018
Robert G. Rettig 538,750(1) 7.2%(1)
Director
102 Burr Ridge Cl. Dr.
Burr Ridge, IL 60521
All Officers & Directors as a Group 2,000,000(1) 26.8%(1)
</TABLE>
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(1) These stated number of shares and percentages assumes that the 1,362,204
shares of common stock reserved for distribution to certain shareholders of
Trilogy Gaming Corp. have been distributed and added to the 6,102,464 shares
outstanding as of November 30, 2000. In that case, of the 1,362,204 shares so
distributed, shares would have been distributed to the above persons as follows:
(i) Jim T. Boyle-102,400; (ii) Bonnie J. Andrikopoulos-38,200; (iii) Joseph M.
Imhoff, Sr.-52,000; and (iv) Robert G. Rettig, Sr.-133,750.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
------- ----------------------------------------------------------------
Certain information with respect to the directors and officers of the
Company is as follows:
Name Age Position
---- --- --------
Howard E. Tooke 64 President
Jim T. Boyle 64 Secretary, Treasurer and
Director
Bonnie J. Andrikopoulos 65 Director
Joseph M. Imhoff, Sr. 66 Director
John E. Mulligan 54 Director
Robert G. Rettig, Sr. 71 Director
The Company's Articles of Incorporation provide for the members of the
Board to be divided into three classes with one class of directors standing for
election each year for a three-year term. The classification of the present
Board of Directors and their respective terms of office are as follows:
Term Expires
Name Class Annual Meeting
---- ----- --------------
Robert G. Rettig, Sr. A 2001
Jim T. Boyle B 2002
John E. Mulligan B 2002
Bonnie J. Andrikopoulos C 2003
Joseph M. Imhoff, Sr. C 2003
Messrs. Boyle, Imhoff and Rettig are the members of the Executive
Committee of the Board of Directors.
Howard E. Tooke has served as the President of the Company since
October of 1989. He also served as a director of the Company from October of
1989 to September of 2000. During the period from November of 1995 to December
of 1998, he was also President and Director of the Delaware telecommunications
company which was the parent of the Company during most of that period. From
December of 1986 until October of 1989, Mr. Tooke was the founder, Chief
Executive Officer and President of an Arizona corporation which was merged into
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the Company in October of 1989. From July of 1985 until December of 1986, Mr.
Tooke operated as a sole proprietor, developing the business which became the
Arizona Corporation. During the period from December 1982 through June of 1985,
Mr. Tooke was the President and Chief Executive Officer of Shared Use Network
Services, a company operating in Phoenix, Arizona in the telecommunications
business. During the period from July of 1979 through November of 1982, Mr.
Tooke was the Executive Vice President and Chief Operating Officer of GCI, a
Phoenix, Arizona company engaged in the telecommunications business. From
September of 1970 through June of 1979, Mr. Tooke was employed as Executive Vice
President and Director of the Institute of human Resources in Phoenix, Arizona,
a company doing research in the biofeedback aspects of human behavior. From
March of 1966 through September of 1968, Mr. Tooke was employed as the Vice
President of Sales and marketing for the Apollo Tire and Rubber Company of
Houston, Texas. During the period from January 1963 through February of 1966,
Mr. Tooke was employed by the National Aeronautics Space Administration as a
Technical Director of Communication and Flight Operations in Houston, Texas. Mr.
Tooke holds a Bachelors or Divinity degree from the Tennessee Temple Baptist
College of Chattanooga, Tennessee and a Masters of Arts in Human Behavior, which
he acquired from the University of Texas in 1968.
Jim T. Boyle became the Secretary and Treasurer of the Company in April
of 2000. He became a director on September 12, 2000. He has been associated with
J.T.B. Associates, Inc., a wholesale supplier of chemical and construction
products since 1968 and has been its President since 1979. Mr. Boyle is a
graduate of Dakota Wesleyan University from which he received a Bachelors degree
in English in 1956.
Bonnie J. Andrikopoulos became a director of the Company on September
12, 2000. Ms. Andrikopoulos has been the owner and manager of a private company
in Denver, Colorado which owns and/or manages oil and gas properties and other
investments since 1984. From 1960 to 1984, she was self-employed as an oil and
gas lease broker. She has served as the President of Pennborough Condominium
Association in Denver, Colorado since 1996. She was the President of Colorado
Micro Credit, Inc., of Denver, Colorado from 1997 to 1999. Ms. Andrikopoulos
became a Registered Nurse in Wyoming in 1957 and received a Bachelor of Science
degree in Nursing from the University of Wyoming in 1966.
Joseph M. Imhoff, Sr. became a director of the Company on September 12,
2000. Mr. Imhoff has been active in the securities industry for over 42 years.
From July of 1986 to present, he has been the Senior Vice President of Peacock
Hislop, Staley, Givens, Inc., a securities broker-dealer in Phoenix, Arizona.
From June 1978 to June of 1986, he was the Executive Vice President and a
director of Hanifen Imhoff, Inc., a securities broker-dealer in Denver,
Colorado. From May of 1970 to May of 1978, he was the President and a director
of J. Imhoff-Nimmo, Inc., a securities broker-dealer in Denver, Colorado. Mr.
Imhoff is a graduate of Regis University in Denver, Colorado from which he
received a Bachelor of Science degree in Business Administration in 1956.
John E. Mulligan became a director of the Company on September 12,
2000. Mr. Mulligan was an officer with the Denver Police Department from July of
1968 to August of 1990, and held the rank of Lieutenant when he retired. From
July of 1984 to the present, he has been the owner and President of The Bingo
Company of Denver, Colorado. Mr. Mulligan is an active member of the Colorado
Charitable Gaming Association. He attended the University of Northern Colorado
in Greeley, Colorado in 1964 and 1965.
Robert G. Rettig, Sr. became a director of the Company on September 12,
2000. He has served as a director of Lawson Products, Inc. of Des Plaines,
Illinois since 1989, Bermo, Inc. of Circle Pines, Minnesota since 1993 and The
Tech Group of Scottsdale, Arizona since 1995. From 1953 to 1989 he was the
Executive Vice President of Illinois Toolworks, Inc. of Glenview, Illinois. From
1989 to 1999 Mr. Rettig was a director of Scotsman Industrial of Vernon Hills,
Illinois.
Item 6. Executive Compensation.
------ ----------------------
The Company did not pay any compensation to any officer or director in
1999. During the period from January 1, 2000 through October 31, 2000, the
Company paid a corporation owned by Howard E. Tooke, President of the Company a
management consulting fee totaling $80,000. It is anticipated that the Company
will continue to pay this consulting fee for the remainder of the year 2000 at
the rate of $8,000 per month.
10
<PAGE>
The Company has also paid a consulting fee in 2000 to Joseph M. Imhoff,
Sr. for services rendered totaling $15,000 through October 31, 2000; and may pay
an additional amount to him during the balance of the year 2000.
Although he has not received any compensation through October 31, 2000, Mr.
Boyle may receive compensation during 2000 if he devotes sufficient time to the
Company affairs, at a rate to be determined by the Board of Directors.
The directors of the Company did nor receive any compensation for their
services as such in 2000. They may be compensation for any services rendered
outside their normal duties as directors. All directors will be reimbursed for
their cash expenses. The directors may also participate in any stock incentive
or stock option programs developed by the Company.
Item 7. Certain Relationships and Related Transactions.
------ ----------------------------------------------
Information with respect to transactions of the Company during the
period since September 1, 1998 in which any of its officers or shareholders
owning 5% or more of its Common Stock as of November 30, 2000 are set forth in
the following paragraphs.
In March of 2000, Howard E. Tooke and/or entities owned by him
transferred 4,989,548 shares of the Company's Common Stock to the Company to be
held as treasury shares in exchange for 100,000 shares of the Company's 2000
Series A Preferred Stock. At the time of the transfer by him the shares of
Common Stock had a negative net tangible asset value. Mr. Tooke had an
identifiable cash cost in the shares transferred to the Company of $1,094,493.
In April of 2000 the Company sold 2,000,000 shares of its Common Stock
held as treasury shares for $.005 per share or a total of $10,000. These shares
were sold in the amount of 400,000 each to: (i) Howard E. Tooke, President of
the Company; (ii) Jim T. Boyle, Secretary-Treasurer and a director of the
Company; (iii) Messrs. Joseph M. Imhoff, Sr., and Robert G. Rettig, Sr.
directors of the Company; and (iv) William Daniels, a consultant to the Company.
John E. Mulligan, a director of the Company is a distributor of the Tab
ForceTM System in Colorado. His arrangement with the Company is on the same
terms and conditions as its other two Colorado distributors.
Bonnie J. Andrikopoulos, a director of the Company purchased $30,000 of
principal amount of the Company's promissory notes on the same terms and
conditions as other purchasers of notes. She received 60,000 shares of Common
Stock as prepaid interest on these notes. The Company has repaid the principal
on the notes.
In December of 1999, the Company sold four notes for $5,000 each of
which has been repaid. These notes provided that the holders would receive, as
prepaid interest, two shares of Common Stock for each $2.00 of note principal.
Messrs. Boyle, Imhoff and Rettig each purchased one of these notes. Accordingly,
they each received 5,000 shares of Common Stock as prepaid interest in these
notes.
If the distribution of the 1,362,204 shares of Common Stock to certain
shareholders of Trilogy Gaming Corp. is completed, four of the Company's
directors, Ms. Andrikopoulos and Messrs. Boyle, Imhoff, and Rettig will receive
an aggregate of 326,350 of these shares.
On June 28, 2000, Robert G. Rettig, Sr., a director of the Company,
loaned the Company $90,000.00 under a letter agreement. The agreement provides
that the loan is payable on December 31, 2000 and the principle bears interest
at 10% per annum payable December 31,2000.
11
<PAGE>
Item 8 Description of Securities.
------ -------------------------
The Company's authorized capitalization is 30,000,000 shares consisting
of 20,000,000 shares of $.01 par value common stock ("Common Stock") and
10,000,000 shares of $.01 par value preferred stock ("Preferred Stock"). As of
November 30, 2000, there were: (i) 6,102,464 shares of Common Stock issued and
outstanding; and (ii) 100,000 shares of Preferred Stock issued and outstanding
and designated as 2000 Series A Preferred Stock ("Series A Stock"). As of that
date there were no outstanding options, warrants or other rights to acquire
shares of the Common Stock. Under applicable Colorado law and its Articles of
Incorporation, the Company's Board of Directors may issue additional shares of
its stock up to a total amount of authorized Common and/or Preferred Stock
without approval of its shareholders.
Information is set forth in the following subsections concerning the
Common Stock, and the Preferred Stock.
COMMON STOCK. The Company has been advised by Gilbert L. McSwain,
Attorney at Law of Denver, Colorado, that the shares of Common Stock currently
outstanding are fully paid and non-assessable. The holders of Common Stock do
not have any preemptive rights to acquire shares of any capital stock of the
Company. In the event of liquidation of the Company, assets then legally
available for distribution to the holders of Common Stock (assets remaining
after payment or provision for payment of all debts and of all preferential
liquidation payments to holders of any outstanding Preferred Stock) will be
distributed in pro rata shares among the holders of Common Stock and the holders
of any outstanding Preferred Stock with liquidation participation rights in
proportion to their stock holdings.
Each stockholder is entitled to one vote for each share of Common Stock
held by such shareholder. A quorum for a meeting of the stockholders is one-half
of the shares of capital stock entitled to vote at that meeting. There is no
right to cumulate votes for the election of directors. This means that holders
of more than 50% of the shares voting for the election of directors can elect
100% of the directors if they choose to do so; and, in such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the Board of Directors.
Holders of Common Stock are entitled to dividends when, and if,
declared by the Board of Directors out of funds legally available therefore; and
then, only after all preferential dividends have been paid on any outstanding
Preferred Stock. The Company has not had any earnings and it does not presently
contemplate the payment of any cash dividends in the foreseeable future.
The Company's Common Stock does not have any mandatory redemptive
provisions, sinking fund provisions or conversion rights.
PREFERRED STOCK. The Preferred Stock of the Company may be issued from
time to time by the Board of Directors in one or more series. The description of
shares of each series of Preferred Stock will be set forth in resolutions
adopted by the Board of Directors and a certificate of designation to be filed
as required by Colorado law prior to issuance of any shares of the series. The
certificate of designation will set the number of shares to be included in each
series of Preferred Stock and set the designations, preferences, conversion or
other rights, voting powers, restrictions, limitations as to distribution,
qualifications, or terms and conditions of redemption relating to the shares of
each series. However, the Board of Directors is not authorized to change the
right of the Common Stock to vote one vote per share on all matters submitted
for shareholder action. The authority of the Board of Directors with respect to
each series of Preferred Stock includes, but is not limited to, setting or
changing the following:
o The designation of the series and the number of shares
constituting the series, provided that the aggregate number of
shares constituting all series of preferred shares may not exceed
10,000,000;
o The annual distribution rate on shares of the series, whether
distributions will be cumulative and, if so, from which date or
dates;
12
<PAGE>
o Whether the shares of the series will be redeemable and, if so,
the terms and conditions of redemption, including the date or
dates upon and after which the shares will be redeemable, and the
amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption
dates;
o The obligation, if any, of the Company to redeem or repurchase
shares of the series pursuant to a sinking fund;
o Whether shares of the series will be convertible into, or
exchangeable for, shares of stock of any other class or classes
and, if so, the terms and conditions of conversion or exchange,
including the price or prices or the rate or rates of conversion
or exchange and the terms of adjustment, if any;
o Whether the shares of the series will have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of the voting rights;
o The rights of the shares of the series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Company; and
o Any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to the series which
may be authorized or permitted under Colorado law.
The shares of Preferred Stock of any one series will be identical with
each other in all other respects except as to the dates from and after which
dividends thereon will cumulate, if cumulative.
Outstanding Series A Preferred
------------------------------
The Company's Series A Stock (of which there are 100,000 shares
outstanding as of the date of this Memorandum) has the following rights,
preferences and limitations:
o The Series A Stock is not entitled to any dividend preferences;
however, the Company may not pay a cash dividend on Common Stock
or any other Preferred Stock until all of the Series A Stock has
been redeemed by the Company.
o In the event of any liquidation of dissolution or winding up of
the Company, voluntary or involuntary, the holders of the Series
A Stock shall be entitled to receive out of the assets of the
Company legally available for distribution to its stockholders,
and before any distribution is made on any class of stock junior
to the Series A Stock, the sum equal to the $1.00 call price. If,
upon any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, the amounts payable to with respect to
the Series A Stock are not paid in full, the holders of the
Series A Stock shall share ratably as only among the holders of
Series A Stock in any such distribution of assets of the Company
in proportion to the full respective preferential amounts to
which they are entitled. After payment to the holders of the
Series A Stock of the full preferential amounts provided for in
this Section 1.4, the holders of the Preferred Stock shall not be
entitled to any further participation in any distribution of
assets by the Company. A consolidation or merger of the Company
with one or more corporations or sale of substantially all of the
assets of the Company shall not be deemed to be a liquidation,
dissolution nor winding up of the Company.
o The Company will redeem all outstanding shares of Series A Stock
at the $1.00 call price as of April 30, 2002.
o The Company will not create any class of stock with rights senior
to the Series A Stock.
o There shall be no sinking fund or other similar provision in
respect of redemption or purchase of the Series A Stock.
o Holders of the Preferred Stock shall have no voting rights in the
affairs of the Company, other than such voting rights as a class
as may be required by the Colorado Corporation Code.
13
<PAGE>
o The Board of Directors shall have at all times the right to
establish and designate other series of Preferred Stock. At no
time, however, will any other series of Preferred Stock have
dividend or liquidation rights superior to the class of Series A
Stock established herein unless otherwise approved by a majority
vote of the issued and outstanding Series A Stock voting as a
class.
The Company's Articles of Incorporation provide for the members to the
Board to be divided into three classes with one class of directors standing for
election each year for a three-year term. These provisions could delay, defer or
prevent a change in control of the Company.
14
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Related Shareholder Matters.
-------------------------------------------------------------------
There has not been any public trading market for any stock of the
Company since January 1, 1997. When this Form 10-SB Registration Statement has
become effective the Company will endeavor to take the necessary action to have
its common stock included on OTC Bulletin Board. However, there is no assurance
that any public trading market will develop for the Company's common stock.
As of November 30, 2000, information with respect to the Company's
common stock is as follows:
o There were 6,102,464 shares held by 190 stockholders of record
outstanding;
o There were no outstanding options or warrants to purchase, or
securities convertible into common stock;
o Of the outstanding common stock 3,790,000 shares were sold as
"restricted securities" [as defined under the Securities Act of
1933 ("Securities Act')] since January 1, 2000;
o The Company was offering to sell up to an additional 756,000
shares of common stock in a private placement being made directly
by the Company under Rule 506 of Regulation D adopted under the
Securities Act; and
o Following the filing of this Form 10-SB Registration Statement
registering the Company's common stock under Section 12(g) of the
Securities Exchange Act of 1934 ("Exchange Act"), the Company
will use its best efforts to prepare, file and achieve
effectiveness of the Registration Statement under the Securities
Act relating to: (i) the sale by the holders thereof of all
3,790,000 outstanding shares of common stock issued as restricted
securities; (ii) the sale by the holders of any additional shares
sold in the Company's Private Placement prior to the filing of
the Registration Statement and (iii) the distribution by the
Company of 1,362,204 shares of the Company's common stock to the
stockholders of Trilogy Gaming Corp.
The Company has never paid any cash dividends on any class of its
outstanding stock and there are no present plans to pay any cash dividends in
the future. It may be anticipated that any future net revenues will be retained
by the Company to finance its operations.
Item 2. Legal Proceedings.
------ -----------------
Neither the Company nor any of its property is a party or subject to
any pending legal proceeding. The Issuer is not aware of any contemplated or
threatened legal proceeding against it by any governmental authority or other
party.
Item 3. Changes in and Disagreements with Accountants.
------ ---------------------------------------------
No principal independent accountant of the Company or any subsidiary
thereof has ever resigned, been dismissed or declined to stand for re-election.
15
<PAGE>
Item 4. Recent Sales of Unregistered Securities.
------ ---------------------------------------
Information with respect to all securities sold by the Company since
September 1, 1996, the offer and sale of which was not subject to an effective
registration statement filed under the Securities Act is as follows:
A. In December of 1999, the Company sold and issued for $5,000 a
promissory note in the principal amount of $5,000 to each of four
individuals (three of whom are now directors of the Company).
These notes have been paid. Under the terms of the notes, on May
22, 2000, the Company issued, as interest on the principal of the
notes, one share of its common stock for each $1.00 in note
principal or 5,000 shares to each noteholder for a total of
20,000 shares. No person acted as underwriter with respect to the
sale of these notes and no underwriting discounts or commissions
were paid therefor. These securities were sold in reliance upon
the exemption form the registration requirements of Section 5 of
the Securities Act as a transaction not involving a public
offering under Section 4(2) of the Securities Act. The securities
were: (i) acquired for investment; (ii) issued to four persons
with access to information about the Company, three of whom are
now directors of the Company; and (iii) issued as "restricted
securities" as defined under the Securities Act. The certificates
or notes issued to represent these securities contain restrictive
legends denoting their statue as restricted securities;
B. In January of 2000, the Company sold and issued promissory notes
in the aggregate principal amounts of $210,000 to 21 investors.
These notes provided for: (i) maturity at June 30, 2000 (extended
to December 31, 2000); (ii) initial interest payable in shares of
the Company's common stock at the rate of one share for each $.50
in note principal; and (iii) payment of additional interest in
cash on notes not paid at maturity at the rate of 10% per year
after maturity until paid. As of November 30, 2000, 18 of these
notes with an aggregate principal of $ 180,000 had been paid in
full. On May 22, 2000 the Company issued a total of 420,000
shares of its common stock for payment of the initial interest on
these notes. No person acted as an underwriter with respect to
sale of these notes or shares and no underwriting discounts or
commissions were paid therefor. These securities were sold in
reliance upon the exemption form the registration requirements of
Section 5 of the Securities Act as a transaction not involving a
public offering under Section 4(2) of the Securities Act. The
securities were: (i) acquired for investment; (ii) issued to
persons with access to information about the Company; and (iii)
issued as "restricted securities" as defined under the Securities
Act. The certificates or notes issued to represent these
securities contain restrictive legends denoting their statues as
restricted securities;
C. In 1996 the Company agreed to issue a total of 209,000 shares of
its common stock to two individuals for consulting services which
had been rendered to the Company. These rights to receive 209,000
shares were transferred several times in a corporate
reorganization transaction which was reversed and they were
eventually owned and held by Howard E. Tooke the President of the
Company. In April of 2000 these shares were issued to the
President of the Company in satisfaction of the Company's
obligations to issue them. No person acted as underwriter with
respect to the sale of these shares and no underwriting discounts
or commissions were paid therefor. These securities were sold in
reliance upon the exemption form the registration requirements of
Section 5 of the Securities Act as a transaction not involving a
public offering under Section 4(2) of the Securities Act. The
securities were: (i) acquired for investment; (ii) issued to the
President of the Company; and (iii) issued as "restricted
securities" as defined under the Securities Act. The certificates
issued to represent these securities contain restrictive legends
denoting their statues as restricted securities. These shares
were conveyed back to the Company by its President along with all
other shares of the Company's common stock owned by him in the
transaction described in "D." immediately following.
16
<PAGE>
D. On April 14, 2000, the Company issued to its President, Howard E.
Tooke, 100,000 shares of its Series A Preferred Stock in exchange
for 4,989,548 shares of the Company's common stock which were
acquired as Treasury stock. No person acted as underwriter with
respect to the sale of these shares and no underwriting discounts
or commissions were paid therefor. These securities were sold in
reliance upon the exemption form the registration requirements of
Section 5 of the Securities Act as a transaction not involving a
public offering under Section 4(2) of the Securities Act. The
securities were: (i) acquired for investment; (ii) issued to four
persons with access to information about the Company, three of
whom are now directors of the Company; and (iii) issued as
"restricted securities" as defined under the Securities Act. A
restrictive legend was placed on the certificate representing
these securities, denoting their status as restricted securities;
E. On April 14, 2000, the Company sold 400,000 shares of its common
stock each to five individuals constituting its founders for a
total conveyance of 2,000,000 shares. These shares were sold for
cash at $.005 per share. No person acted as underwriter with
respect to the sale of these shares and no underwriting discounts
or commissions were paid therefor. These securities were sold in
reliance upon the exemption form the registration requirements of
Section 5 of the Securities Act as a transaction not involving a
public offering under Section 4(2) of the Securities Act. The
securities were: (i) acquired for investment; (ii) issued to the
President, three directors and a consultant all familiar with its
affairs; and (iii) issued as "restricted securities" as defined
under the Securities Act. A restrictive legend was placed on the
certificate representing these securities, denoting their status
as restricted securities;
F. During the period from April 14, 2000 through November 30, 2000
the Company sold an aggregate of 776,000 shares of its common
stock to 11 investors for an aggregate of $ 60,164.00 No person
acted as underwriter with respect to the sale of these shares and
no underwriting discounts or commissions were paid therefore.
These securities were sold in reliance upon the exemption form
the registration requirements of Section 5 of the Securities Act
as a transaction not involving a public offering under Section
4(2) of the Securities Act. The securities were: (i) acquired for
investment; (ii) issued to persons familiar with the Company; and
(iii) issued as restricted securities" as defined under the
Securities Act. A restrictive legend was placed on the
certificates representing these securities, denoting their status
as restricted securities; and
G. During the period from April 14, 2000 through November 30, 2000
the Company has sold an aggregate of 554,000 shares of its common
stock for cash at $1.00 per share for an aggregate of $554,000.
No person acted as underwriter with respect to the sale of these
shares and no underwriting discounts or commissions were paid
therefor. These securities were sold in reliance upon the
exemption form the registration requirements of Section 5 of the
Securities Act provided in Rule 506 of Regulation D adopted under
the Securities Act. The securities were: (i) acquired for
investment; (ii) issued to "accredited investors" as such are
defined under the Securities Act; and (iii) issued as "restricted
securities" as defined under the Securities Act. The Company
filed a Form D with the Securities and Exchange Commission
relating to these sales. A restrictive legend was placed on the
certificate representing these securities denoting their status
as restricted securities; and
H. On September 15, 2000 the Company sold a promissory note in the
principal amount of $5,000.00 to two investors (each of whom had
purchased a note described (in B above). This note provides for;
(i) Maturity at December 31,2000; (ii) initial interest payable
in shares of the Company's Common stock at the rate of on share
for each $.50 in note principal; and (iii) payment of additional
interest in cash on maturity until paid. On September 15,2000 the
Company issued a total of 20,000 shares of its common stock for
payment of the initial interest on these notes. No person acted
as an underwriter with respect to sale of these notes or shares
17
<PAGE>
no underwriting discounts or commissions were paid therefore.
These securities were sold in reliance upon the exemption from
the registration requirements of Section5 of the Securities Act
as a transaction not involving a public offering under Section 4
(2) of the Securities Act securities were; (i) acquired for
investment; (ii) issued to two persons with access to information
about the Company and (iii) issued as "restricted securities" as
defined under the Securities Act. The certificates or notes
issued to represent these securities contain restrictive legends
denoting their status as restricted securities.
Item 5. Indemnification of Directors and Officers.
------------------------------------------
Pursuant to Title 7 of the Colorado Revised Statues (herein after
"Title 7") and the Company's Articles of Incorporation, the Company may
indemnify a person made a party to a proceeding because the person is or was a
director, officer, employee, fiduciary, or agent of the Company (hereinafter
"defined persons"), against liability incurred in the proceeding if:
(a) The person conducts himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the
corporation's best interests; and
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
However, under Title 7 the Company may not indemnify a director or
defined person where:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which basis that he
or she derived an improper personal benefit, unless a Court finds
that the director or defined person is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances. A court may then order indemnification, as the
court deems proper. Indemnification is limited to reasonable
expenses incurred in connection with the relevant proceeding.
Title 7 and the Company's Articles of Incorporation also provides for
the mandatory indemnification of persons who were wholly successful on the
merits or otherwise, in the defense of any proceeding to which the person was a
party because the person is or was a director or defined person, against
reasonable expenses incurred by him or her in connection with the proceeding.
Title 7 and the Company's Articles of Incorporation provide for the advancement
of expenses, with certain restrictions, for directors or defined persons who are
parties to a proceeding as a result of that person's current or prior status as
a director or defined person. The Company is also allowed to purchase and
maintain insurance on behalf of directors and defined persons. At present the
Company has no such insurance. The Company's By-Laws are consistent with Title 7
and the Company's Articles of Incorporation and neither enlarges or restricts
the indemnification provided by Colorado Law or the Articles of Incorporation
18
<PAGE>
PART F/S
Index to Financial Statements
-----------------------------
Independent Accountant's Compilation Report F-2
Balance Sheets F-3 - F-4
Income Statements F-5
Statement of Retained Earnings F-6
Earnings Per Share F-7
Statements of Shareholder's Equity F-8
Statements of Cash Flows F-9
Notes to Financial Statements F-10
F-1
<PAGE>
The Whitmore Company, P.C. 7335 E. Acoma Dr., Suite 203
Certified Public Accountant Scottsdale, AZ 85260
PH: 480-951-2212 FAX: 480-951-2064
E-MAIL: [email protected]
December 7, 2000
Evergreen Network.Com, Inc.
3336 N. 32nd St., Suite 106
Phoenix, AZ 85018
We have compiled the accompanying balance sheet of Evergreen Network.Com, Inc.
as of September 30, 2000 and the related income statement, statement of retained
earnings, statement of cash flows, and statement of shareholders equity for the
nine months then ended in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and accordingly, do not express
an opinion or any other form of assurance on them.
All adjustments which in the opinion of management were necessary in order to
make the financial statements not misleading have been included.
/s/ The Whitmore Company,P.C.
The Whitmore Company, P.C.
Scottsdale, Arizona
F-2
<PAGE>
Evergreen Network.Com, Inc.
Balance Sheets
December 3l, September 30,
1999 2000 Change
----------- ------------- ----------
ASSETS
Current Assets
--------------
Cash $ 0 $ 3,039 $ 3,039
Prepaid Expenses 0 2,000 2,000
Accounts Receivable *2 0 3,675 3,675
---- -------- --------
Total Current Assets 0 8,714 8,714
Plant & Equipment *3
--------------------
Equipment & Fixtures 0 738,747 $738,747
(Less) Accumulated Depreciation 0 (43,376) (43,376)
---- -------- --------
Total Plant & Equipment 0 695,371 695,371
Other Assets
------------
Deposits 0 2,910 2,910
---- -------- --------
Total Other Assets 0 2,910 2,910
---- -------- --------
TOTAL ASSETS $ 0 $706,995 $706,995
==== ======== ========
Unaudited.. See Accountant's Compilation Report
F-3
<PAGE>
Evergreen Network.Com, Inc.
Balance Sheets
December 3l, September 30,
1999 2000 Change
----------- ------------- ----------
LIABILITIES *4
Current Liabilities:
--------------------
Accounts Payable $ 20,000 $ 60,984 $ 40,984
Payroll Taxes Payable 40,914 0 (40,914)
Excise Taxes Payable 3,782 0 (3,782)
Accrued Income Taxes *5 200 200 -
Shareholder Notes *6, *4 0 130,000 130,000
Contract - Tab Force 0 530,000 550,000
Accrued Interest 11,470 5,250 (6,220)
Accrued Penalties 7,000 7,000 -
---------- ---------- ----------
Total Current Liabilities 83,366 733,434 650,068
Long Term Liabilities: *6
-------------------------
Redeemable Preferred Stock 0 20,533 20,833
---------- ---------- ----------
TOTAL LIABILITIES 83,366 754,267 670,901
STOCKHOLDERS' EQUITY *6
Common Stock 2,771,232 36,509 (2,734,723)
Preferred Stock 0 0
Paid in Capital - Common 0 3,321,906 3,321,906
Treasury Stock 0 (242) (242)
---------- ---------- ----------
Total Paid In Capital 2,771,232 3,358,173 586,941
Retained Earnings (2,854,598) (3,405,445) (550,847)
TOTAL STOCKHOLDERS' EQUITY (83,366) (47,272) 36,094
---------- ---------- ----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 0 $ 706,995 $ 706,995
========== ========== ==========
Unaudited. See Accountant's Compilation Report
F-4
<PAGE>
Evergreen Network.Com, Inc.
Income Statements
9 Months Ended September 30
1999 2000 Change
------------ ------------ ----------
REVENUES:
Operating Revenues $ 0 $ 72,437 $ 72,437
Cost of Sales 0 49,509 49,509
------- --------- ---------
Gross Profit 0 22,928 22,928
OPERATING EXPENSES:
Professional 375,959 375,959
General Admin 0 27,969 27,969
Postage & Delivery 0 11,667 11,667
Supplies 0 l5,975 15,975
Utilities & Telephone 0 16,516 16,516
Rent 0 20,388 20,388
Travel & Entertainment 0 28,484 28,484
Miscellaneous 0 8,370 8,370
Depreciation & Amortization *3 0 43,376 43,376
------- --------- ---------
Total Operating Expenses 0 548,704 548,704
INCOME FROM OPERATIONS 0 (525,776) (525,776)
OTHER INCOME & (EXPENSES):
Preferred Stock Redemption *6 - (19,833) (19,833)
Interest Income - 12 12
Interest Expense *4 (1,998) (5,250) (3,252)
Total Other Income & (Expenses) (1,998) (25,071) (23,073)
NET INCOME BEFORE TAX (1,998) (550,847) (548,849)
------- --------- ---------
Income Taxes *5 25 0 (25)
------- --------- ---------
NET INCOME $(2,023) $(550,847) $(548,824)
======= ========= =========
Unaudited. See Accountant's Compilation Report
F-5
<PAGE>
Everareen Network.Com, Inc.
Statement of Retained Earnings
Balance 12/31/99 $(2,854,598)
Net Income (Loss) (550,847)
-----------
Balance 9/30/00 $(3,405,445)
Unaudited. See Accountant's Compilation Report
F-6
<PAGE>
Evergreen Nctwork.Com, Inc.
Earnings Per Share *10
9 Months Ended September 30
1999 2000 Change
------------ ------------ ----------
Weighted Average Common
Shares Outstanding 2,771,232 3,046,232 275,000
Net Income (Loss) Per Share $0.00 ($0.l8) (0.18)
Fully Diluted $0.00 ($0.13) (0.13)
Unaudited. See Accountant's Compilation Report
F-7
<PAGE>
Evergreen Network.com, Inc.
STATEMENTS OF SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
Total
Common Stock Preferred Stock Paid-In Retained Treasury Shareholders
Shares Amount Shares Amount Capital Earnings Stock Equity
---------- ---------- ---------- ---------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 2,771,232 $2,771,232 0 $ 0 $ 0 $(2,854,598) 0 $(83,366)
Issuance of Common Stock 6,117,968 8,797 578,386 587,183
Conversion (2,743,520) (2,743,520) 2,743,520 0
Net Loss for 6 months
ended 6/30/00 (550,847) (550,847)
Reversion of Treasury Stock (2,494,774) (242) (242)
---------- ---------- --- ----- ---------- ----------- ---- ---------
Balance September 30, 2000 3,650,906 $ 36,509 0 $ 0 $3,321,906 $(3,405,445) (242) $ (47,272)
</TABLE>
Unaudited. See Accountant's Compilation Report
F-8
<PAGE>
<TABLE>
<CAPTION>
Evergreen NetworkCom. Inc.
Statements of Cash Flows
9 Months Ended September 30
1999 2000 Change
------------ ------------ ----------
<S> <C> <C> <C>
Operating Activities:
Net income (Loss) $(2,023) $ (550,847) $ (548,824)
Add:
Depreciation & Amortization - 43,376 43,376
Accrual of Preferred Stock Redemption - 20,833 20,833
Increase in Current Liabilities 2,023 - (2,023)
Decrease in Current Assets - - -
Deduct:
Increase in Current Assets - (5,675) (5,675)
Decrease in Current Liabilities - (9,932) (9,932)
Accrued Interest - - 0
------- ---------- ----------
Cash Provided by Operating Activities - (502,245) (502,245)
======= ========== ==========
Investing Activities:
Purchase of Fixed Assets 0 (738,747) (738,747)
Debt Reduction - (360,000) (360,000)
Purchase of Other Assets - (2,910) (2,910)
------- ---------- ----------
Cash Provided by Investing Activities - (l,101,657) (1,101,657)
======= ========== ==========
Financing Activities:
Purchase of Treasury Stock 0 (242) (242)
Stock Sales - 587,183 587,183
Stockholder Loans - 310,000 310,000
Machine Contract - 710,000
------- ---------- ----------
Cash Provided by Financing Activities 1,606,941 896,941
======= ========== ==========
Net Increase (Decrease) in Cash - 3,039 3,039
Beginning Cash Balance 0 0
Increase (Decrease) 0 3,039
------- ---------- ----------
Ending Cash Balance $ 0 $ 3,039 $ 3,039
======= ========== ==========
</TABLE>
Unaudited. See Accountant's Compilation Report
F-9
<PAGE>
Evergreen Network.com, Inc.
NOTES TO FINANCIAL STATEMENTS
9/30/2000
1) Company Organization:
--------------------
The Company was organized as a Colorado corporation on May 27, 1987 under the
name SEFCO, Inc. In September, 1989 it merged with an Arizona corporation and
changed its name to The Members Financial Service bureau, Inc. The Company
changed its name to Shared Use Network Services, Inc. in August, 1995.
The Company was engaged in various telecommunications endeavors throughout its
existence. In the winter of 1997, due to problems associated with
under-capitalization, it ceased operations. In the fall of 1999, management
decided to engage in a new business opportunity in the field of charitable
gaming. Specifically, it provides "pull-tab" validation machines and cards for
charitable and fraternal organizations. In the fall of 1999, the Company also
changed its name to Evergreen Network.com, Inc.
2) Accounts Receivable:
-------------------
Management believes that all accounts are good and collectable and thus, no
allowance has been established. The Company is subject to credit risk as 100%
of receivables has been concentrated in a single customer at times during the
financial statement period.
3) Plant & Equipment:
-----------------
All fixed assets are carried at cost. Tab Force Machines constitute $710,000
and are depreciated over seven years. Computer Equipment constitutes $22,687 and
is depreciated over five years. Office furniture of $6,060 is depreciated
over seven years. Depreciation is computed under the straight line method.
4) Liabilities:
-----------
When the Company wound down its previous business in the fall of 1997, it had
remaining a payroll tax debt of $40,914 and excise tax debt of $3,782. The tax
and associated interest were paid June 13, 2000. The Company is currently in
negotiations with IRS over proposed penalties in the approximate amount of
$7,000.
In year 2000 the Company has raised $210,000 through the sale of promissory
notes of $10,000 each to 21 investors. These notes matured on June 30, 2000. As
of September 30, 2000 $30,000 is still outstanding; extensions having been
granted by the investors to December 31, 2000. The Company has prepaid interest
on these notes with shares of its common stock at the rate of one share for each
F-10
<PAGE>
$1.00 note principal. The notes bear additional interest at the rate of 10% per
year after maturity until paid. $30,000 of these notes were purchased by Bonnie
J. Andrikopoulos, a director of the Company.
Additionally, on June 30, 2000, the company borrowed $90,000 from a board of
directors member. This note is due December 31, 2000. In September, 2000 two
more loans of $5,000 each were received.
On February 23, 2000 the Company entered into a Master Distributorship
Agreement with Infinity Group, Inc. On March 1, 2000 the Company finalized a
written agreement under which it is purchasing 240 validation machines from
Colorado Tab Force, Inc. This agreement calls for the payment by the Company
of $710,000 for the machines. As of September 30, 2000 the Company had paid
$180,000 on the purchase price. Certain of the machines in question have not
yet been certified by the state of Colorado for gaming use in that state,
The Company is withholding payment for those machines until the matter is
rectified.
5) Income Taxes:
------------
The company has large net operating loss carry-forward amounts from prior years.
However, as the Company is again in a start up phase and future earnings are not
reasonably assured, no tax benefit from these operating losses has been accrued.
6) Capitalization & Long Term Liabilities:
--------------------------------------
The Company's current authorized capitalization is 30,000,000 shares consisting
of 20,000,000 of $.01 par value common stock and 10,000,000 shares of $.Ol par
value preferred stock.
As of September 30, 2000 there were 3,650,906 shares of common stock issued
of which 3,046,232 shares were outstanding with the remaining 604,674 shares
held by the Company as treasury stock; and 100,000 shares of preferred stock
issued and outstanding and designated as 2000 Series A Preferred Stock. The
preferred stock shares are required to be redeemed by April 30, 2002 at a price
of $1.00 per share. As of this date there are no outstanding options, warrants,
or other rights to acquire shares of the common stock. The Company used 388,000
treasury to raise funds to pay a tax liability for previous operations. The
Company is committed to offer 681,102 shares of common stock to others in
settlement of contingent obligations created by pior equity transactions. Four
directors of the Company: Mssrs. Boyle, Imhoff and Rettig and Ms. Andrikopoulos
will receive 162,975 of these shares. If all of these shares are distributed and
sold, along with those of the Company's currrent offering, there will be
4,105,334 shares of common stock issued and outstanding.
The 100,000 outstanding shares of preferred stock are to be redeemed by the
company by April 30, 2002 at $1.00 per share. The preferred stock also carries a
liquidation preference of $1.00 share.
F-11
<PAGE>
On April 14, 2000, the Company began a private placement of 650,000 shares of
its common stock at $1.00 per share as of November 30, 2000, 554,000 shares had
been sold in the placement resulting in $554,000 in gross proceeds.
On October 16, 2000 the Board of Directors declared a stock dividend of one
share for each common share outstanding.
7) Non Arms Length Transactions:
----------------------------
In December of 1999, the Company agreed to sell and issue for $5,000 a
promissory note in the principal amount of $5,000 to each of four individuals
(three of whom are now directors of the Company). The transactions were not
consummated until January 2000 and thus, are not represented in these financial
statements. These notes have been paid. Under the terms of the notes, on May 22,
2000 the Company issued as interest, one share its common stock for each $2.00
in note principal or 2,500 shares to each note holder for a total of 10,000
shares.
In March of 2000, Howard E. Tooke and/or entities owned by him transferred
2,494,774 shares of the Company's common stock to the Companv to be held as
treasury shares in exchange for 100,000 shares of the Company's 2000 Series A
Preferred Stock. At the time of the transfer by him the shares of common
stock had a negative net tangible asset value. Mr. Tooke had an identifiable
cash cost in the shares transferred of $1,094,493.
In April 2000 the company sold 1,000,000 shares of its common shares held
as treasury shares for $.01 per share. These shares were sold in the amount of
20O,000 each to: Howard Tooke, president of the Company; Jim T. Boyle,
Secretary-Treasurer and a director; Messrs. Joseph M. Imhoff Sr. and Robert G.
Rettig, directors of the Company; and William Daniels, a consultant to the
Company.
John E. Mulligan a director of the Company, is a distributor of the Tab
Force tm System in Colorado. His arrangement with the Company is on the same
terms and conditions as its other two Colorado distributors.
8) Regulation Risk:
----------------
All of the states in which the Company operates or proposes to operate have
legal prohibitions or restrictions upon gambling and/or gaming operations. The
Company's charitable gaming business is allowed to operate under specific
statutory and regulatory provisions which limit or regulate its operations in
great detail. The Company has been advised by counsel that it may sell the "Tab
Force System" in the four states in which it intends to operate; provided it
complies with the applicable legal restrictions. It should be noted that there
F-12
<PAGE>
is a risk that future legal regulatory provisions may adversely affect the
Company's operations or potential profitability.
9) Officer Compensation
--------------------
The Company did not pay compensation to any officers or directors in 1999.
The president is receiving a salary during year 2000 at the rate of $8,000 per
month. The secretary/treasurer has agreed to compensation commensurate with the
time he is able to devote to the Company and has received $2,000 so far in 2000.
10) Earnings Per Share:
------------------
Total operating loss of $550,947 divided by outstanding shares of 3,046,232
and 4,105,334 shares (fully diluted, if the current offering sells out).
11) Going Concern:
-------------
Due to a negative equity position and the fact that the Company has only
recently recommenced operations, there exists substantial doubt as to the
Company's ability to continue as a going concern for a reasonable period of
time.
12) Statement of Shareholder's Equity:
---------------------------------
Treasury stock was recorded at the par value, $1,000, of the Preferred
Stock for which it was surrendered. The latter has been accreted as the treasury
stock is re-issued.
F-13
<PAGE>
PART III
Index to Exhibits
-----------------
Exhibit Number Description of Exhibits
-------------- -----------------------
3.1* Original Articles of Incorporation of SEFCO, Inc.
dated May 26, 1987
3.2* Articles of Amendment to the Articles of
Incorporation to change name to Members Financial
Service Bureau, Inc., dated October 6, 1989
3.3* Articles of Amendment to the Articles of
Incorporation changing the name of the Corporation,
among other changes, to Shared Use Network Services,
Inc., dated September 5, 1995
3.4* Articles of Amendment to the Articles of
Incorporation changing the name of the Corporation,
among other changes, to Evergreen Network.com, Inc.,
dated April 5, 2000
3.5* Corporate By-Laws
5.1 Opinion of Counsel (with consent)
10.1* Machine Purchase Agreement Between the Company and
Colorado Tab Force, L.L.C., et. al.
10.2* Master Distribution Agreement Between the Company and
Infinity Group, Inc.
10.3* Distribution Agreement with the Bingo Company
10.4* Distribution Agreement with Fungi, Inc.
10.5* Distribution Agreement with Bingo West of Denver
10.6 Equipment Operating Agreement for Operations on
Fort McDowell
23.1* Consent of The Whitmore Company, P.C.
27.1 Financial Data Schedule
* Previously filed with original Form 10-SB on October l2, 2000 and incorporated
herein by this reference.
19
<PAGE>
SIGNATURES
The Registrant, pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form 10SB12(g) and has duly
caused this Amentment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, duly authorized individual, the 5th day of December, 2000.
EVERGREEN NETWORK.COM, INC.
Dated: December 5, 2000 By: /s/ Howard Tooke
-----------------------------------
Howard Tooke, President
20
