SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
International Solubles Corporation
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(Name of Small Business Issuer in Its Charter)
Florida 59-3540694
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
120 International Parkway, Suite 262, Heathrow, FL 32746
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(Address of Principal Executive Offices) (Zip Code)
(407) 833-0344
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
Title of Each Class to be so registered: Common Stock (No Par Value)
Name of Each Exchange on Which Each Class is to be Registered: none
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TABLE OF CONTENTS
Page No.
PART I
Item 1. Description of Business...........................................1
Item 2. Management's Discussion and Analysis or Plan of Operation.........7
Item 3. Description of Property...........................................9
Item 4. Security Ownership of Certain Beneficial Owners and Management...10
Item 5. Directors, Executive Officers, Promoters and Control Persons.....11
Item 6. Executive Compensation...........................................12
Item 7. Certain Relationships and Related Transactions...................14
Item 8. Description of Securities....................................14
PART II
Item 1. Market for Common Equity and Related Stockholder Matters.........15
Item 2. Legal Proceedings................................................16
Item 3. Changes in and Disagreements with Accountants....................16
Item 4. Recent Sales of Unregistered Securities..........................16
Item 5. Indemnification of Directors and Officers........................17
PART F/S
Financial Statements.........................................................F-1
PART III
Item 1. Index to Exhibits...........................................20
Signatures....................................................................21
Item 2. Description of Exhibits.....................................22
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Introduction and Business Development
International Solubles Corporation was incorporated in Florida on September 21,
1998. It has no predecessors or subsidiaries and has never merged with another
company. As used herein, the terms "Company," "we," "our," and "us" refer to
International Solubles Corporation, unless the context indicates otherwise.
We own and are in the initial stages of marketing three proprietary safety and
cleaning products. They are named "Ultra Grip Non-Slip," "Ultra Grip Degreaser,"
and "Ultra Grip Cleaner." Our main product is Ultra Grip Non-Slip, a
scientifically formulated floor coating used to prevent slip-and-fall accidents
in commercial, industrial, and residential settings. The other two products are
cleaners which can be used in conjunction with Non-Slip, to clean floors or
other surfaces before Non-Slip is applied to them, or as stand- alone cleaning
products.
In September 1998 we entered into an "exclusive" worldwide manufacturing and
marketing agreement with Welker Brothers Marketing, Inc., a subsidiary of R. P.
Welker Plants, Inc. of Florida ("WBM"). This agreement gave WBM exclusive rights
to manufacture and market our products, except that we expressly retained the
right to market our Ultra Grip products to dealers and to assist WBM's marketing
efforts in any market segment WBM requested. WBM has requested that we assist
them with marketing Ultra Grip products to all market segments, and our business
plan is to do so.
We were originally authorized to issue One Million (1,000,000) shares of no par
value common stock. 995,000 of those shares were issued and outstanding as of
July 7, 1999. On March 21, 2000, our Board of Directors unanimously recommended
to the shareholders that the Company amend its Articles of Incorporation to
increase our authorized capital to Nine Hundred Million (900,000,000) shares of
common stock. The Board also recommended that the Company perform a 200:1
forward split of all issued and outstanding shares. On March 22, 2000, the
Company's shareholders unanimously consented to increase the authorized capital
to Nine Hundred Million (900,000,000) shares, and to effect a 200:1 forward
split of the common stock, increasing the 995,000 pre-split shares to
199,000,000 post-split shares. This is the number of shares issued and
outstanding today.
We are filing this Form 10-SB voluntarily, under Section 12(g) of the Securities
Exchange Act of 1934, in order to (1) provide for our shareholders a limited
degree of liquidity for their stock, as restricted by Rule 144 of the Securities
Act of 1933; (2) enhance our company's image, because we believe filing reports
about our financial condition with the SEC offers assurances of reliability and
transparency which non- public companies do not; (3) improve our ability to
raise capital, since we believe having a registration statement in place will
put us in a better position to conduct a future public or private offering; and
(4) reduce liquidity discounts we may otherwise need to pay in any future
private placement, since we believe having a public registration in effect will
better assure potential private investors that they will be able to liquidate
their investment and that we will be able to satisfy the Rule 144(c)(1) public
information requirement and the Rule 144(g) requirement that stock sales occur
through broker transactions.
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B. Business of the Company
General
We are still in the development stage and have not yet achieved any revenues
from operations, although we have produced, bottled and labeled limited
quantities of our three Ultra Grip products. We use these limited quantities of
product for test marketing and delivery to potential customers as samples and
for obtaining product endorsements.
To date, we have completed much of our development. We have produced our Ultra
Grip products in limited quantities. We have negotiated a contract for the
large- scale manufacture and co-marketing of our Ultra Grip products through WBM
and have hired a chemist (Fred Muniz, one of our major shareholders) to work
with Welker Brothers in mixing the formulas for our Ultra Grip products. We have
also developed product labels and brochures for marketing, performed initial
test marketing, and obtained numerous written endorsements for our products.
During each of the past 2 fiscal years, we have spent approximately 10% of our
time (approximately 4 hours per week) engaged in research and development. We
had already developed our formulation for our product, so we focused on market
research, demonstrating the product for potential clients in Florida and
Kentucky, interviewing them about their impressions of the product and obtaining
endorsements where possible.
Our stock differs from many stocks, in that it is a "penny stock." The SEC has
adopted a number of rules to regulate "penny stocks." These rules include, but
are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and
15g-7 under the Securities Exchange Act of 1934, as amended. The rules may
affect your ability to sell your shares in any market that may develop for them.
There may be a limited market for penny stocks, due to the regulatory burdens on
broker-dealers. The market among dealers may not be active. Investors in penny
stock often are unable to sell stock back to the dealer that sold it to them.
The mark-ups or commissions charged by broker-dealers may be greater than any
profit a seller can make. Because of large dealer spreads, investors may be
unable to sell the stock immediately back to the dealer at the same price the
dealer sold it to them. In some cases, the stock value may fall quickly.
Investors may be unable to gain any profit from any sale of the stock, if they
can sell it at all.
Principal Products and Services
Ultra Grip Non-Slip coating is a proprietary chemical process which increases
the coefficient of friction on treated surfaces (i.e., makes them less slippery)
when subjected to water. The end-users of this product will use it to prevent
slip-and-fall type injuries. When properly applied and maintained, Ultra Grip
will last for approximately 2 years, and will help reduce the chance of slipping
on tub, tile, and other hard mineral surfaces. The product may minimally reduce
the brilliance of certain high gloss surfaces; therefore, the Company recommends
testing on a small area before general application. The product may be applied
over water-based concrete sealant, but should not be applied over acrylic
sealants. Ultra Grip Non-Slip may be used on hard, unpainted mineral surfaces,
including the following settings:
A. Commercial: office buildings, restaurants, airports, nursing homes,
stores, hospitals, and hotels . . . for public restrooms, pool decks,
showers, laundry areas, kitchens, patios, and pedestrian walkways.
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B. Industrial: factories and warehouses . . . for public restrooms,
showers, kitchens, work areas, work floors, and pedestrian walkways.
C. Residential: condominiums, apartments, and homes . . . for bathrooms,
entrance and hall areas, bath tubs, patios, kitchens, and pool decks.
Ultra Grip Degreaser is primarily designed to be used in conjunction with Ultra
Grip Non-Slip, but it can also serve as a stand-alone product for any degreasing
need. It is especially designed to cut grease, oils, and soap scum from tiles,
floors, and tubs. It cleans tile & marble floors, stoves, porcelain, chrome,
vinyl, fiberglass boats, engines, whitewall tires, lawnmowers, motorcycles,
floor mats, and driveways. It is designed to clean surfaces before application
of Ultra Grip Non-Slip coating. It is non-abrasive and can be used in many
different settings, including the settings listed above for Ultra Grip Non-Slip
coating.
Ultra Grip Cleaner is also primarily designed for use in conjunction with Ultra
Grip Non-Slip, but it can also serve as a stand-alone cleaning product. It
cleans all washable surfaces, floors, tiles, marble, vinyl, and other non-porous
surfaces. It is useful for less heavy-duty cleaning than the Degreaser, and
should be used before application of Ultra Grip Non-Slip coating for maximum
benefit. It is non-abrasive and can be used many different settings, including
the commercial, industrial, and residential settings listed above for the
Degreaser.
Ultra Grip Non-Slip Home Kit: We also provide a small boxed kit containing three
8-oz bottles (one each for the Non-Slip, Degreaser, and Cleaner products), plus
an applicator and protective gloves, for home use. This size is estimated to be
sufficient to treat two average-sized bath tubs.
Application Services: We also plan to offer clients the service of
professionally applying Ultra Grip Non- Slip coating for them, using our own
technicians. Generally, we plan to bid a project per square foot, so that half
the square foot price includes degreasing and cleaning the surface, and the
other half includes professionally applying the Ultra Grip Non-Slip coating for
maximum benefit. For larger corporate or institutional accounts, we will train
the customers' personnel how to properly apply and maintain the Ultra Grip
Non-Slip coating.
Our products are made with some hazardous ingredients. They are stable once
mixed in our formulation, but may pose health hazards if exposed to the eyes or
skin or if ingested. Our Ultra Grip Non-Slip contains less than 10% ammonium
bifluoride and less than 5% 2-butoxyethanol. Our Ultra Grip Degreaser contains
less than 1% methanol and less than 10% 2-butoxyethanol.
Market Information
According to the National Safety Council, approximately 300,000 disabling
injuries per year are sustained from slips and falls, and the average cost of a
disabling slip and fall is approximately $27,000. By some estimates, over
564,000 workplace injuries result from slips and falls annually, over 11,000
work days are lost each year due to slips and falls, and over 1,500 slips and
falls result in death each year. By estimates cited in the U.S. Federal
Register, 51% of slips and falls occur on ordinary floors. According to
information from The Tile Institute, a trade organization for floor coverings,
the market for tile is estimated to grow at a rate of 20% per year for at least
the next five years.
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In connection with this sizable number of slips and falls, there is also
currently a litigious atmosphere in the United States, associated with personal
injury lawsuits, worker's compensation disability claims, and workplace safety
standards promulgated by OSHA and the insurance industry. These factors, as well
as other safety factors, have contributed to the rise of a sizable "home and
workplace safety market."
We have identified five market segments to target in our marketing plans:
Dealers: One primary market segment is the "dealer" market. This refers
to individuals or entities who are licensed to resell our product to
the public, businesses, and institutions, and who are also licensed
apply our products for commercial and residential uses. We plan to sell
to this market segment generally in 1-gallon bottles. We plan to choose
(or train) our dealers to make sure they have the technical and
logistical ability to provide our installation and application service
to end- users who want us to apply the product for them. Flooring,
swimming pool maintenance, and building maintenance companies are
notable examples of our planned dealer market.
Direct Sales: Direct sales encompass sales of our product to
high-volume end-users at discounted prices. Sales will generally be in
1-gallon bottles. We plan to target such end-users under our "house
accounts" rather than through dealers. Restaurant chains, grocery
stores, auto repair chains, health spas, hotel and motel chains are all
examples of potential high-volume end-users.
Wholesale Sales: This market segment is similar to the dealer market in
that these customers would resell the product to end-users, but they
are not in a position to provide installation and application service.
Sales to wholesalers would generally be made in 8-ounce bottles. Major
home repair retail chains, hardware companies, and major retailers
providing home and workplace maintenance products are all excellent
candidates in this area.
Network Marketing: We plan to target this segment by selling bulk
shipments of our product to outside, third-party network marketing
firms such as Amway, which would then sell our product through their
systems. In general, we would plan to sell them our product in groups
of 8-oz. bottles.
Overseas Bulk Concentrate Sales: Overseas distribution channels would
focus on bulk delivery of product concentrate for mixing and sale in
other countries, generally in 55-gallon drums.
We have engaged in some initial test marketing and have provided samples to
clients in return for product endorsements. This strategy has yielded
encouraging responses. We have received favorable written endorsements from
users in the restaurant, nursing home, floor coating, country club and health
spa industries.
Distribution Methods
We plan to distribute our Ultra Grip Non-Slip products via the five market
segments identified above, namely: (1) dealer sales, (2) direct sales, (3)
wholesale sales, (4) network marketing sales, and (5) overseas bulk concentrate
sales. We plan to develop 50 dealerships in exclusive territories throughout the
United States, and to use our in-house staff to service "house accounts" for
direct sales, wholesalers, network marketing programs, and overseas bulk
concentrate sales.
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Competition
The home and workplace safety market is fragmented. We have substantial
competition in the development, manufacture and sale of our various products,
and many of our competitors are more established than we are and have greater
resources than we do. One of our major competitors is Ultra Shield Products
International, Inc., a public company located in Rancho Cucamonga, California.
Ultra Shield's last public SEC filing was a Form 8-K/A filed in June of 1999,
describing a change in auditors, and their latest Form 10-QSB for the period
ending 9/30/98 showed total assets of $709,211, total liabilities of $1,990,896,
and net revenues of $395,960 for the 9 months ended 9/30/98.
Our competitive position in the market is that of a very small, untested
newcomer. Through our test- marketing, we have identified several key "decision
factors" our potential customers base their decisions on. Based on these
decision factors, our primary competitive strategy is to offer superior quality,
turn- around time, and pricing, as follows:
Quality: Currently, our Non-Slip product can last approximately 2 years
with proper application and maintenance, which is significantly more
than any competitor we have identified in our market. The end-users of
our products are very sensitive to quality issues. We plan to develop a
reputation for excellence in product quality and plan to take all
necessary steps to promote the "quality" label throughout our market.
Turn-Around Time. Industry norms for turnaround time are estimated at
approximately one week. By contrast, we have the ability to ship
product within 72 hours of receiving an order. This improved turn
around time, we estimate, will give us a selling advantage.
Price. Competitors currently market degreasers and cleaners in this
market at prices greater than our proposed pricing structure.
Therefore, we believe we can achieve a price advantage over our
competitors. Furthermore, our Non-Slip product can last approximately 2
years with proper application and maintenance, which also yields a
long-term price advantage because customers will not have to reapply a
non-slip coating as often with our product.
Principal Suppliers/Raw Materials
While our product formulas and formulation remain valuable trade secrets which
should not be disclosed, we can say that our main raw materials are ammonium
bifluoride, 2-butoxyethanol, methanol, and water. These raw materials are not
particularly rare and are available from a number of different sources, if need
be. The raw materials are plentiful enough that we do not foresee price or
supply fluctuations having a material impact on our business.
Our Contract with WBM. Our principal supplier is Welker Brothers Marketing,
Inc., a Florida corporation ("WBM"), with whom we have entered into an
"exclusive" worldwide manufacturing and marketing agreement. The agreement is
exclusive as to all the world, except that we have reserved the right to market
to as many dealers as we want, and to assist WBM with marketing to any other
segment it requests. In the Agreement, WBM has agreed to provide ". . . at its
sole cost and expense . . . raw materials (including water) . . . to produce,
box and ship the finished product." In addition to the raw materials, WBM has
agreed to provide, at its sole cost and expense, manufacturing facilities,
necessary manufacturing equipment, all labor, warehousing, shipping facilities,
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packaging, labeling, bottling, and utilities to produce, box and ship the
finished product in reasonable amounts necessary to meet the demand for our
products.
In addition to the subject of raw materials, the Agreement provides that WBM, at
its expense, shall be responsible for developing a marketing plan and providing
a reasonably adequate sales force. WBM has also agreed to establish a proposed
price list for our products in each market segment, which we have 10 days to
object to.
In exchange for WBM's agreement to bear essentially all manufacturing and
marketing costs, we granted WBM exclusive worldwide rights to manufacture and
market our Ultra Grip products, except that we retained the right to market our
product to as many dealers as we wish, and to assist WBM with any other phase of
marketing its requests. WBM has currently requested that we assist it in all
phases of marketing.
We and WBM have agreed to split the profits from the sale of Ultra Grip products
as follows: we receive 80% of the profits (as calculated in the contract) for
dealer sales; 50% of the profits for direct sales, network marketing, and
product concentrate sales; and 20% of wholesale sales. WBM has contracted to
provide us with financial reports 20 days after the end of the month at issue,
and has given us a right to audit WBM's financial records to ensure accuracy of
financial, profit-sharing reports.
Moreover, WBM agreed to be responsible for and to pay all costs for complying
with environmental and other laws regarding the manufacturing process (other
than the mixing of the chemicals and the product formula), and we agreed to be
responsible for complying with all other laws regarding our products. This
provision essentially places some responsibility on us and some on WBM.
According to our arrangement with WBM, we have a chemist of our choice go to
WBM's facility, take the raw materials from supplies WBM has on premises, and
mix them in one of WBM's tanks. WBM then completes the manufacturing process by
bottling, labeling and packaging the product. Thus, the regulatory issues depend
on whether the incident arises from mixing the chemicals, or some other stage of
manufacturing. So far, we have had no disputes with WBM about environmental
compliance, and we do not foresee any disputes arising. So far, we have incurred
no costs for environmental compliance that we know of.
Other material terms of the contract include the following: we granted WBM an
exclusive license for the use of the trademarks and service marks Ultra Grip
Non-Slip, Ultra Grip Cleaner and Ultra Grip Degreaser. We agreed to defend, at
our expense, our products, trade names, and service marks. We agreed to
indemnify and hold WBM harmless from any expenses or claims assessed against WBM
as a result of their manufacturing our product or using our trade names and
service marks. We agreed to maintain, at our expense, product liability
insurance in the amount of five million dollars. Finally, we agreed to arbitrate
any disputes arising under the contract.
Dependence on Major Customers
We are still in the developmental stage and have not yet achieved revenues. As a
result, we do not have any major customers on whom we are dependent.
Patents/Trademarks/Copyrights
We do not plan to patent our product formulas or formulations, as we believe
that foreign companies can copy the patented formula and circumvent U.S. patent
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laws. We also believe it is more cost-effective to protect our product formulas
as trade secrets internally, rather than incurring the expense of going through
the patent process and (in the case of patent infringement) the litigation
process. We do not own any copyrights or trademarks, though we do plan to
register our trademarks in the United States.
Environmental Laws
WBM has agreed to assume all responsibility and expense for complying with all
laws, including environmental laws, as they apply to the manufacturing process,
other than the mixing of the chemical ingredients. We have agreed to be
responsible for complying with all other laws and regulations, including
environmental laws, other than as applying to the manufacturing process. We
believe any material type of environmental regulation would apply to the
manufacturing process, for which WBM would be responsible, and not to our simply
mixing chemicals or dealing with matters outside the factory.
Employees
We currently have 1 full-time employee and no part-time employees. We also
routinely enter into independent contractor agreements or work for hire
agreements with individuals to provide services on an as needed basis.
C. Reports to Security Holders
Our annual report will contain audited financial statements. We are not required
to deliver an annual report to security holders and will not deliver a copy of
the annual report to security holders unless they send us a formal request. We
intend, from this date forward, to file all of our required information with the
Securities and Exchange Commission ("SEC"). Before this form was filed, we had
filed no other forms with the SEC. We plan to file with the SEC our Forms
10-KSB, 10-QSB, and all other forms that may be or become applicable to the
Company.
The public may read and copy any materials that we file with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. The
Public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The statements and forms we file with the SEC
have also been filed electronically and are available for viewing or copying on
the SEC-maintained Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The Internet address for this site is: http://www.sec.gov.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
We are a development-stage company, organized since September 1998, which has
not yet generated any revenues from operations in either of the last two fiscal
years. We have, however, produced, bottled, and labeled (in limited quantities)
all three of our Ultra Grip products.
We have completed much of our development process. We have entered into an
"exclusive" manufacturing and marketing agreement with WBM, which gives WBM
exclusive worldwide rights to manufacture and market our products, except that
we reserved the right to market to as many dealers as we wish, and to
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assist WBM in any other area of marketing as they request. In exchange for these
manufacturing and marketing rights, WBM has agreed to give us a large share of
the profits from sales of our products (80% of profits from dealer sales; 50% of
profits from direct, network marketing, and product concentrate sales, and 20%
of wholesale sales). We have also developed labeling and brochures for our
products; hired a chemist (Fred Muniz, one of our major shareholders) to mix our
product formulas in the WBM factory; and performed initial test marketing which
has yielded numerous written endorsements for our products.
PLAN OF OPERATIONS FOR THE NEXT 12 MONTHS
For the next 12 months, our plan is to achieve the following milestones:
(1) Create gross revenues of $2,000,000 over the next 12 months, from our
combined product mix. Our revenues will come from our share of the
profits divided with WBM under our contract.
(2) Hire a secretary, marketing manager, and sales manager by the end of
the 2nd quarter of 2001.
(3) Focus our selling efforts in the dealer segment for the next 12 months,
where we are entitled to the largest share of profits-80% as opposed to
50% or 20% in the other market segments. We also plan to assist WBM
with sales in the wholesale and direct sale market segments for the
next 12 months.
(4) Sign contracts with at least 10 dealerships in 10 different territories
of the U.S. within the next 12 months. We plan to sign dealers in a
territory who will also be able to hire a number of dealers to work for
them in subdivided areas of each territory. As part of this plan, each
dealer will need at least 2 employees (1 trained as the "applicator" to
properly apply the Non-Slip product and 1 trained as the "water person"
to water the Non-Slip product as part of its application). We believe
these are somewhat skilled positions and plan to pay the applicator $15
per hour and the water person $10 per hour in order to attract better,
more conscientious employees and ensure quality application of our
product. In order to sign these dealers, we plan to have management
visit at least one major dealer prospect each week. We also plan to
contact enough potential dealers each week so that at least 2 contacts
per week will accept a "sample package" along with a proposal letter.
(5) Sign contracts with at least 100 "house accounts" during the next 12
months, for direct sales to high-volume end-users such as airports,
hospitals, universities and other institutional users. In order to
generate these accounts, we plan to have our sales force contact at
least ten viable prospects daily, and arrange for management to
personally visit at least 2 major prospects per week.
(6) Sign contracts with at least 2 major wholesalers during the next 12
months.
(7) Participate in one trade show for each quarter of the year.
(8) Develop a web site by the end of the 2nd quarter of 2001, which will
facilitate sales and marketing.
We do not believe that we require a large contribution of capital in order to
continue as a going concern, because most of the costs associated with producing
our product will be borne by WBM under our contract
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with them, our management is willing to wait at least a while longer for payment
of their accrued salary, and we have no other employees at this point. However,
we will need some additional funding over the next year, and if we are not able
to raise sufficient capital contributions, we would plan to eliminate some or
most of the foregoing 8 elements from our 12-month plan in the following order
of priorities: first, we would forego developing our web site; second, we would
skip the trade shows; third, we would not hire a secretary or other staff;
fourth, we would forego signing contracts with 2 major wholesalers; fifth, we
would not seek out contracts with dealerships in other territories of the U.S.
but would stay close to home. We believe we could continue for an indefinite
period of time with the remaining elements of our business plan.
Meeting Cash Requirements
We generated no cash flow from general operations during the period ended Sept.
30, 2000 and the year ended December 31, 1999, respectively. For the 9-month
period ending Sept. 30, 2000, we had a net loss of $30,900, compared to a net
loss of $140,650 for the fiscal year ended December 31, 1999.
We have funded our cash needs over the past two years through issuing common
stock, as well as obtaining a $20,000 loan from Copytec Partnership. We have no
cash on hand at present. We believe that we can satisfy our cash needs for the
next twelve months through the sale of additional shares of our common stock
pursuant to a registration statement or an appropriate exemption from
registration; from contributions by our existing management or shareholders; or
by obtaining bank, private or equity financing. In order to continue operations,
such financing arrangements during the next 12 months will be necessary.
However, there is no guarantee that we will be able to raise additional funds
from borrowing or the sale of our securities, and neither management nor
shareholders have made any commitments to make contributions of any particular
size to us.
Going Concern
We have had no sales and have suffered recurring losses from operations, which
raises substantial doubt about our ability to continue as a going concern. Our
plan with regard to these matters is to seek further equity funding to allow the
Company to complete its development stage and move into successful operations.
However, in order to support ongoing operations for the next twelve-month
period, additional financing must be obtained either through sale of equity,
management contributions, or borrowing.
Expected Significant Change in Number of Employees
We plan to increase our number of full-time employees from 1 (currently) to 5
(by the end of the 2nd quarter of 2001), by adding a secretary, general manager,
marketing manager, and sales manager. We expect that the source of funding for
these four additional employees' pay and benefits will come from the revenues we
generate from sales during the coming year. Our plan is to add staff as
operations generate sufficient revenue to pay for them.
ITEM 3. PROPERTY
Our principal place of business is an office at 120 International Parkway, Suite
262, Heathrow, Florida. On June 20, 2000, we entered into a month-to-month
lease, terminable on 60 days notice. Base rent is $2,866 per month, plus
utilities and a pro rata share of common area expense, taxes, and insurance. We
do
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not plan to acquire any new properties in the next year, nor to invest in real
estate, real estate mortgages, or securities of persons who primarily engage in
real estate investment. We do not lease or own any other real estate.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information concerning the ownership of
the Company's Common Stock as of October 6, 2000, with respect to: (i) each
person known to the Company to be the beneficial owner of more than 5 percent of
the Company's Common Stock, (ii) all directors; and (iii) directors and
executive officers as a group. The notes accompanying the information in the
table below are necessary for a complete understanding of the figures provided
below. As of October 6, 2000, there were 199,000,000 shares of outstanding
common stock.
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and Nature of Percent of
Owner Beneficial Ownership Class
<S> <C> <C> <C>
Common Stock L. Henry Sarmiento 60,000,000 30.15 %
Par Value $0.001 Director and CEO
952 Lake Destiny Rd. Suite F (180,000,000)(1) 30.15 %(1)
Altamonte Springs, Florida 32714
Common Stock Debra L. Sea 60,000,000 30.15 %
Par Value $0.001 Director and Secretary/Treasurer
1126 Druid Road (180,000,000)(1) 30.15 %(1)
Maitland, Florida 32751
Common Stock Fred Muniz 20,000,000 10.05 %
Par Value $0.001 Director, Chief Chemist
c/o International Solubles Corporation (60,000,000)(1) 10.05 %(1)
120 International Parkway, Suite 262
Heathrow, Florida 32746
Common Stock Hudson Consulting Group, Inc.(2) 40,000,000 20.10 %
Par Value $0.001 268 West 400 South, Suite 300
Salt Lake City, UT 84101 (120,000,000)(1) 20.10 %(1)
Common Stock Howard Spiegel 10,000,000 5.03 %
Par Value $0.001 Attorney at Law
1133 Louisiana Avenue, Suite 214 (30,000,000)(1) 5.03 %(1)
Winter Park, Florida 32789
Common Stock Directors and Officers as a Group 130,000,000 70.35 %
Par Value $0.001 (390,000,000)(1) 70.35 %(1)
</TABLE>
----------------------
(1)These numbers include 2 warrants (one exercisable at $0.10 per share,
and one exercisable at $0.15 per share) for each share of common stock held by
each person listed herein, and assume that all warrants are exercised. All
warrants are exercisable at any time until July 7, 2002, and thus all warrants
could be exercised within the next 60 days.
(2) The controlling beneficial owners of Hudson Consulting Group, Inc. are
as follows: Hudson is owned, roughly 90%, by Diversified Holdings I, Inc., which
in turn is roughly 90% owned by AXIA Group, Inc., a public company where no
single shareholder or group of shareholders owns more than 10% of its stock
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Changes in Control. There are no arrangements that will result in a change in
control of the Company.
ITEM 5. DIRECTORS, OFFICERS, PROMOTERS, AND CONTROL PERSONS
The directors, executive officers, control persons, and significant employees of
the Company, their respective ages, and positions with the Company are as
follows:
Name Age Positions
L. Henry Sarmiento 77 Director, Chairman of Board, CEO, President
Debra L. Sea 45 Director, Secretary, Treasurer
Fred Muniz 43 Director and Chief Chemist
Howard A. Speigel 55 Counsel to the Company
L. Henry Sarmiento, age 77, has served as a director of the Company since his
appointment by the incorporators of the Company on September 21, 1998, and will
continue to serve until the next annual meeting of the shareholders in September
of 2001. Mr. Sarmiento has also served as CEO and President of the Company since
his appointment by the incorporators on September 21, 1998, and he will continue
to serve in those capacities until the Board of Directors determines otherwise.
Mr. Sarmiento received a law degree from the Libre University of Santa Fe de
Bogota, Colombia in 1942, and was a licensed attorney in Colombia. He received a
Bachelor of Arts degree in banking and finance from Columbia University, New
York City in 1952 and studied at the London School of Economics from 1953-55. He
was a partner of Willis E. Burnside & Co., Investment Bankers, in New York City
from approximately 1960 to 1985, when the owner died and the firm was dissolved.
He has also served as CFO of Vittoria Witterman Ltd. of Torino, Italy; President
of Solutions de Espana, S.L., Marbella, Spain; and President of Sure Step
Ultra-Grip Non-Slip in Sidney, Australia and London, United Kingdom. During the
past 5 years, Mr. Sarmiento has engaged in financial and legal consulting for
clients. He also acted as president of Solutions de Espana and Sure Step
Ultra-Grip of Sidney and London, companies which also produced non-slip and
cleaning products, until 1996 when he retired and the companies ceased
operations.
Debra L. Sea, 45, has served as a director of the Company since her appointment
by the incorporators of the Company on September 21, 1998, and will continue to
serve until the next annual meeting of the shareholders in September of 2001.
She has also served as secretary and treasurer of the Company since her
appointment by the incorporators of the Company on September 21, 1998, and will
continue to serve until the Board of Directors determines otherwise. Ms. Sea
obtained a Bachelor of Arts degree in psychology from Purdue University in West
Lafayette, Indiana in 1990, and obtained a Master of Arts degree in counseling
from Webster University in Altamonte Springs, Florida in 1997. Since 1995, Ms.
Sea has worked as a children's targeted case manager and a counselor for "Our"
Children First in Daytona Beach, as well as a counselor for the Children's Home
Society at the Pine Hills Neighborhood Center in Orlando, Florida. Ms. Sea works
in the Company's office approximately 10 hours per week, where she focuses on
marketing and contact with potential clients.
Fred Muniz, 43, has served as a director of the Company since his appointment by
the incorporators of the Company on September 21, 1998, and will continue to
serve until the next annual meeting of the shareholders in September of 2001.
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Has 20 years of experience in chemistry, product development, production
planning and plant management. Mr. Muniz obtained his Bachelor of Science degree
in Biology and Chemistry from the Inter-American University in Puerto Rico in
1979. From 1979 to 1982, he worked as a quality control auditor for Roche
Products, Inc., a subsidiary of Hoffman LaRoche, a large, international health
care company. From 1982 to 1989, Mr. Muniz worked in production planning and
inventory control for Key Pharmaceuticals, a subsidiary of Schering Plough,
another large health care company. From 1989 to 1992, he served as plant manager
for Cosmetic Concepts, Inc., where he was responsible for manufacturing and
production of skin care products, as well as formulation and development of skin
care and sun care products. From 1992 to 1997, he was chief chemist and plant
manager for Pro-Ma Systems USA Inc., where he was responsible for development,
production, and distribution of skin care, sun care and nutritional products.
From 1997 to 1998, he was a chemist and formulator for Hawaiian Tropic, Tanning
Research Institute, where he developed sunscreen products, worked with oil and
water, micro-emulsions, gels and colloidal suspensions, and performed
trouble-shooting to correct manufacturing problems related to formulas. From
1998 to the present, Mr. Muniz has worked as a senior development scientist for
Smith & Nephew, a publicly traded health care company with a market
capitalization of approximately 40 billion dollars, headquartered in England and
traded on the New York Stock Exchange, where he has been responsible for
managing the development of wound treatments. Mr. Muniz devotes less than 5
hours per month, on average, to our Company's business. However, his role in the
Company is an important one, because he is our chemist who mixes the chemical
formulations for our products at WBM's facility.
Howard A. Speigel, 55, is currently outside counsel to the Company and an owner
of more than 5% of the Company's outstanding stock. Mr. Speigel obtained a
Bachelor of Science degree from the University of Maryland, College Park,
Maryland, in 1967, and before commencing law school in 1969 practiced accounting
with the national CPA firm of Price, Waterhouse & Co. Mr. Speigel was granted a
Juris Doctor degree from the American University, Washington College of Law,
Washington, D.C., in 1971, attending night school for his final year and working
full time with the Internal Revenue Service as a tax law specialist. From 1972
through 1976, Mr. Speigel was a partner in the firm of Sigman and Speigel,
Attorneys at Law, practicing in the Orlando metropolitan area, and from that
time until the present has operated a sole practitioner's practice emphasizing
corporate and business law.
ITEM 6. EXECUTIVE COMPENSATION
Compensation of Executives
The following table provides summary information for the period from September
21, 1998 to October 6, 2000 and for the fiscal years 1998-1999 and 1999-2000
concerning cash and non-cash compensation paid or accrued by the Company to or
on behalf of the Chief Executive Officer and the President of the Company.
Except as indicated below, no officer or employee of the Company received a
total salary and bonus exceeding $100,000 during the periods reflected.
Stock-based compensation has been adjusted (in most cases, retroactively) to
reflect a 1 for 200 forward stock split effected on March 22, 2000.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
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<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Restricted Underlying
Other Annual Stock Options LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L. Henry Sarmiento, 2000 $41,6001 - - - - - -
Director, CEO, 1999 $41,6001 - - - 120,000,0003 - -
President 1998 $41,6001 - - 0(2) - - -
</TABLE>
Employment Agreements
Effective September 21, 1998, the Company entered into an employment agreement
with L. Henry Sarmiento, the Company's Chairman, President, and CEO, for an
indefinite period of time, terminable by either party upon 30 days written
notice. Pursuant to this agreement, Mr. Sarmiento is entitled to receive a base
salary of $800 per week ($41,600 per year), plus reimbursement for necessary
expenses incurred while traveling at the employer's direction. Mr. Sarmiento has
received no cash payments of salary to date. The balance of the salary due to
Mr. Sarmiento under the terms of his employment contract are accrued to date,
but not paid. The employment agreement contains no provisions to compensate Mr.
Sarmiento if he resigns, retires, otherwise has his employment terminated, or if
there is a change in control.
Beginning September 21, 1998 and ending in April, 1999, the Company had an
employment agreement with Van Sea to act as the Company's general manager, for
an indefinite period of time, terminable by either party upon 30 days written
notice. The agreement was terminated in April, 1999. Pursuant to this agreement,
Mr. Sea was entitled to receive a base salary of $800 per week ($41,600 per
year), plus reimbursement for necessary expenses incurred while traveling at the
employer's direction. Mr. Sea has received no cash payments of salary to date.
The balance of the salary due to Mr. Sea under the terms of his employment
contract were accrued, but not paid. The employment agreement contains no
provisions to compensate Mr. Sea if he resigns, retires, otherwise has his
employment terminated, or if there is a change in control.
Compensation of Directors
There are currently no agreements to pay Directors for their service on the
Company's Board of Directors.
-------------
(1) Accrued but neither paid by the Company nor received by the employee.
(2) Restricted stock award of 400,000 restricted shares of common stock,
later reduced to 300,000 shares, and then adjusted to 60,000,000 shares by
virtue of a 200:1 forward stock split, all shares valued at $0.00 because the
book value of the stock is currently less than $0.00, and has been since
inception, and the stock has no par value and no market.
(3) 600,000 warrants issued on July 7, 1999, each of which can be exchanged
for one share of common stock at any time until July 7, 2002, adjusted for a
200:1 forward stock split, and each valued at $0.00 because the book value of
the stock is currently less than $0.00, and has been since inception, and the
stock has no par value and no market.
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<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 21, 1998, the Company and president L. Henry Sarmiento entered into
an employment agreement which extends for an indefinite period of time and
provides for annual compensation of $41,600 and reimbursement of necessary
expenses incurred while traveling at the direction of the Company. On September
21, 1998, the Company issued a promissory note for $20,000 to Copytec, a related
party by virtue of the fact that it was the employer of Van Sea, who was then
the Company's general manager and is now the husband of Company director Debra
L. Sea. The note bears interest at the rate of 7% per annum, payable upon the
generation of excess cash flows, but due no later than September, 2001.
On January 19, 1999, the Company entered into a consulting agreement with Hudson
Consulting Group, Inc. (Hudson). On July 7, 1999, the Company issued 200,000
shares of common stock to Hudson as an initial engagement fee pursuant to the
agreement. According to the agreement, the Company has agreed to pay Hudson
$100,000 in cash or stock, such sum to become due and payable upon the Company's
common stock being publicly quoted. Hudson currently holds 40,000,000 shares
(the original 200,000 adjusted for a 200:1 forward stock split effected March
22, 2000), equaling 20 % of the Company's issued and outstanding common stock.
Also on July 7, 1999, the Company issued Hudson 400,000 warrants (200,000
exercisable for one share of common stock each, at an exercise price of $0.10
each, and another 200,000 warrants exercisable for one share of common stock
each, at an exercise price of $0.15 each). These warrants have also been
adjusted in proportion to the 200:1forward stock split effected March 22, 2000,
and are therefore equal to 80,000,000 outstanding warrants.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock. The Company is presently authorized to issue 900,000,000 shares of
no par value common stock. The Company presently has 199,000,000 shares issued
and outstanding. Holders of shares of Common Stock are entitled to share, on a
ratable basis, such dividends as may be declared by the Board of Directors out
of funds legally available therefor. Upon liquidation, dissolution or winding up
of the Company, after payment to creditors and holders of any outstanding shares
of preferred stock, if applicable, the assets of the Company will be divided pro
rata on a per share basis among the holders of the Common Stock.
The holders of Common Stock are entitled to one vote per share for the election
of directors and with respect to all other matters submitted to a vote of
shareholders. Shares of Common Stock do not have cumulative voting rights, which
means that the holders of more than 50% of such 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 so voting will not be able to
elect any directors.
Upon any liquidation, dissolution or winding-up of the Company, the assets of
the Company, after the payment of the Company's debts and liabilities and any
liquidation preferences of, and unpaid dividends on, any class of preferred
stock then outstanding, will be distributed pro-rata to the holders of the
Common Stock. The holders of the Common Stock do not have preemptive or
conversion rights to subscribe for any securities of the Company and have no
right to require the Company to redeem or purchase their shares. The holders of
Common Stock are entitled to share equally in dividends if, as and when declared
by the Board of Directors of the Company, out of funds legally available
therefor, subject to the priorities accorded any class of preferred stock which
may be issued. A consolidation or merger of the Company, or a sale, transfer or
lease of all or substantially all of the assets of the Company, which does not
involve distribution by the Company of cash or other property to the holders of
Common Stock, will not be deemed to be a liquidation, dissolution or winding up
of the Company.
14
<PAGE>
Preferred Stock. There are no shares of preferred stock authorized or issued, as
of the date of this report.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
Market Identification. There is no public trading market for the
Company's common stock.
Options, Warrants, Convertible Securities. The Company currently has
issued 398,000,000 warrants, each exercisable for one share of common stock.
There are 2 sets of warrants issued and outstanding (199,000,000 of each set, as
adjusted for the 200:1 stock split of March 22, 2000), each with identical
rights except that one set of warrants has an exercise price of $0.10 per share,
and the other set of warrants has an exercise price of $0.15 per share. Each
warrant entitles the holder to purchase one share of the Company's common stock
at the exercise price, at any time up until the third anniversary of the
issuance of the warrant. All warrants are adjustable in the event of a stock
split or consolidation in the same proportion as the stock split or
consolidation. The mere ownership of the warrant, without exercise, does not
constitute the holder a shareholder of the Company. A copy each warrant is
attached as an exhibit to this registration statement.
Shares that Could Be Sold Under Rule 144 or to Be Registered. None of
the 199,000,000 shares of the Company's common stock currently outstanding (as
adjusted for the 1 to 200 forward stock split of March 22, 2000) could be sold
pursuant to Rule 144 at the time of filing this Form 10-SB, due to the fact that
current public information under Rule 144(c) has never been made available,
either through Rule 15c2-11 disclosures or otherwise. 150,000,000 shares of the
Company's common stock have been issued and outstanding for more than 2 years,
but all of those shares are in the hands of affiliates and thus cannot be sold
under Rule 144(k). All 199,000,000 shares of common stock have been issued and
outstanding for more than one year, but almost all of those shares (190,000,000)
have been held by affiliates of the Company (namely, L. Henry Sarmiento, Debra
Sea, Fred Muniz, Howard Speigel, and Hudson Consulting), so that even if the
Rule 144(c) current public information requirement had been met, the affiliates
would be limited to selling only 1% each (i.e., 1,990,000 shares) per quarter.
There are no agreements to register any of the shares of the Company's common
stock.
Proposed or Actual Public Offerings. None of the Company's stock has
been, or is proposed to be, offered in any public offering at the time of the
filing of this registration statement.
Shareholders. As of October 6, 2000, there were 6 shareholders of
record of the common stock of the Company. The holders of the Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. Holders of the Common Stock have no preemptive rights and
no right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock.
Dividends. The Company has not declared any cash dividends since
inception and does not anticipate paying any dividends in the foreseeable
future. The payment of dividends is within the discretion of the Board of
Directors and will depend on the Company's earnings, capital requirements,
financial condition, and other relevant factors. There are no restrictions that
currently limit the Company's ability to pay dividends on its
15
<PAGE>
Common Stock other than those generally imposed by applicable state law.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants
since inception.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of all unregistered securities sold by the Company
within the last three years, including the date sold, the title of the
securities, the amount sold, the identity of the person who purchased the
securities, the price or other consideration paid for the securities, and the
section of the Securities Act of 1933 under which the sale was exempt from
registration as well as the factual basis for claiming such exemption.
On September 21, 1998, the Company issued a total of 950,000 shares of its
common stock to the following 4 individuals: L. Henry Sarmiento (400,000
shares); Debra L. Sea (400,000 shares); Fred Muniz (100,000 shares); and Howard
A. Speigel (50,000 shares). The sales were in consideration of services rendered
to the company as the initial founders, directors, and counsel to the Company,
and were exempt from registration pursuant to Section 4(2) of the Securities Act
of 1933, based on the facts that the issuance was an isolated private
transaction by the Company which did not involve a public offering; there were
only 4 offerees; the offerees all had a special relationship with the Company as
its founding officers, directors, and legal counsel; the offerees did not resell
the stock but continue to hold the stock to this day; there was no subsequent or
contemporaneous public offering of the Common Stock; the stock was not broken
down into smaller denominations; the shares were restricted under Rule 144; and
the negotiations for the sale took place directly between the offerees and the
Company.
On July 6, 1999, the Company canceled a total of 200,000 shares of its common
stock (100,000 of the shares previously issued to L. Henry Sarmiento and 100,000
of the shares previously issued to Debra L. Sea) in order to induce Hudson
Consulting Group, Inc. to enter into a consulting agreement with the Company and
to free up enough authorized shares to issue Hudson Consulting Group 200,000
shares of common stock.
On July 6, 1999, the Company issued a total of 45,000 shares of its common stock
to I. Zink, Inc. The sale was in consideration of financial and business
consulting services rendered to the Company by I. Zink, Inc., and was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, based
on the facts that the issuance was an isolated private transaction by the
Company which did not involve a public offering; there was only one offeree; the
offeree had a special relationship with the Company as financial consultant,
having access to all of the Company's financial and corporate data; the offeree
did not resell the stock but continues to hold the stock to this day; there was
no subsequent or contemporaneous public offering of the Common Stock; the stock
was not broken down into smaller denominations; the shares were restricted under
Rule 144; and the negotiations for the sale took place directly between the
offeree and the Company.
On July 7, 1999, the Company issued a total of 200,000 shares of its common
stock to Hudson Consulting Group, Inc. The sale was in consideration of
financial and business consulting services rendered to the Company by Hudson
Consulting Group, Inc., and was exempt from registration pursuant to Section
4(2) of the
16
<PAGE>
Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering;
there was only one offeree; the offeree had a special relationship with the
Company as financial consultant, having access to all of the Company's financial
and corporate data; the offeree did not resell the stock but continues to hold
the stock to this day; there was no subsequent or contemporaneous public
offering of the Common Stock; the stock was not broken down into smaller
denominations; the shares were restricted under Rule 144; and the negotiations
for the sale took place directly between the offeree and the Company.
On July 7, 1999, the Company issued a total of 1,990,000 warrants (one set of
995,000 warrants with an exercise price of $0.10 per share, and another set of
995,000 warrants with an exercise price of $0.15 per share) to six persons: L.
Henry Sarmiento (300,000 warrants at $0.10 and 300,000 warrants at $0.15); Debra
L. Sea (300,000 warrants at $0.10 and 300,000 warrants at $0.15); Fred Muniz
(100,000 warrants at $0.10 and 100,000 warrants at $0.15); Howard A. Speigel
(50,000 warrants at $0.10 and 50,000 warrants at $0.15); Hudson Consulting
Group, Inc. (200,000 warrants at $0.10 and 200,000 warrants at $0.15); and I.
Zink, Inc., (45,000 warrants at $0.10 and 45,000 warrants at $0.15). The sale
was in consideration of services rendered to the Company as officers, directors,
and legal counsel to the Company, and for financial and business consulting
services rendered to the Company by Hudson Consulting Group, Inc. and I. Zink,
Inc. The sale was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, based on the facts that the issuance was an isolated
private transaction by the Company which did not involve a public offering;
there were only six offerees; the offerees had a special relationship with the
Company as its officers, directors, legal counsel, and financial consultants,
having access to all of the Company's financial and corporate data; the offerees
did not resell the warrants but continue to hold the warrants to this day; there
was no subsequent or contemporaneous public offering of the warrants; the
warrants were not broken down into smaller denominations; and the negotiations
for the sale took place directly between the offerees and the Company.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Neither the Company's bylaws, nor its articles of incorporation, nor any of its
employment agreements with its executive officers, currently provides for any
form of indemnification of its officers or directors.
However, the Company may amend its bylaws or articles of incorporation, or
revise or create new employment agreements, which provide for indemnification of
the Company's officers and directors.
Subsection (1) of Section 607.0850 of the Florida Business Corporation Act (the
"FBCA") empowers a corporation to indemnify any person who was or is a party to
any proceeding (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against liability incurred in connection
with such proceeding (including any appeal thereof) if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
17
<PAGE>
Subsection (2) of Section 607.0850 of the FBCA empowers a corporation to
indemnify any person who was or is a party to any proceeding by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth in the preceding paragraph,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expenses of litigating the proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such proceeding including appeals, provided that the person
acted under the standards set forth in the preceding paragraph. However, no
indemnification should be made for any claim, issue or matter as to which such
person is adjudged to be liable unless, and only to the extent that, the court
in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
deems proper.
Subsection (3) of Section 607.0850 of the FBCA provides that to the extent a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in the defense of any proceeding referred to in subsections
(1) or (2) of Section 607.0850 or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith.
Subsection (4) of Section 607.0850 of the FBCA provides that any indemnification
under subsections (1) or (2) of Section 607.0850, unless determined by a court,
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in subsections (1) or (2) of Section 607.0850. Such
determination shall be made:
(a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) if such a quorum is not obtainable, or, even if obtainable, by
majority vote of a committee duly designated by the board of directors
(in which directors who are parties may participate) consisting solely
of two or more directors not at the time parties to the proceeding;
(c) by independent legal counsel:
(1) selected by the board of directors as prescribed in paragraph
(a) or a committee selected as prescribed in paragraph (b); or
(2) if no quorum of directors can be obtained under paragraph (a)
or no committee can be designated under paragraph (b), by a
majority vote of the full board of directors (in which directors
who are parties may participate); or
(d) by the shareholders by a majority vote of a quorum of shareholders
who were not parties to such proceedings or if no quorum is
obtainable, by a majority vote of shareholders who were not parties to
such proceeding.
Under subsection (6) of Section 607.0850 of the FBCA, expenses incurred by a
director or officer in defending a civil or criminal proceeding may be paid by
the corporation in advance of the final disposition thereof upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it is ultimately determined that such director or officer is not entitled to
indemnification under Section 607.0850.
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Subsection (7) of Section 607.0850 of the FBCA states that indemnification and
advancements of expenses provided under Section 607.0850 are not exclusive and
empowers the corporation to make any other further indemnification or
advancement of expenses under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, for actions in an official capacity and in
other capacities while holding an office. However, a corporation cannot
indemnify or advance expenses if a judgment or other final adjudication
establishes that the actions of the director, officer, employee or agent were
material to the adjudicated cause of action and such person (a) violated
criminal law, unless the person had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful, (b)
derived an improper personal benefit from a transaction, (c) was or is a
director in a circumstance where the liability under Section 607.0834 of the
FBCA (relating to unlawful distributions) applies, or (d) engaged in willful
misconduct or conscious disregard for the best interests of the corporation in a
proceeding by or in right of the corporation to procure a judgment in its favor
or in a proceeding by or in right of a shareholder.
Subsection (8) of Section 607.0850 provides that indemnification and advancement
of expenses shall continue, unless otherwise provided when authorized or
ratified, as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
Subsection (9) of Section 607.0850 of the FBCA permits any director or officer
who is or was a party to a proceeding to apply for indemnification or
advancement of expenses, or both, to any court of competent jurisdiction and
lists the determinations the court should make before ordering indemnification
or advancement of expenses.
Subsection (12) of Section 607.0850 of the FBCA permits a corporation to
purchase and maintain insurance for a director or officer against any liability
incurred in his official capacity or arising out of his status as such
regardless of the corporation's power to indemnify him against such liability
under Section 607.0850.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Directors, Officers and controlling persons of the
Company, the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a Director, Officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by, such Director, Officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
PART F/S
The Company's financial statements for the fiscal year ended December 31, 1999
and the unaudited period ended September 30, 2000 are attached hereto as F-1
through F-8.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
19
<PAGE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Corportation)
Financial Statements
September 30, 2000
(With Independent Auditors' Report Thereon)
<PAGE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Corportation)
Table of Contents
Independent Auditor's Report...................................................1
Financial Statements:
Balance Sheet..................................................................2
Statement of Operations........................................................3
Statement of Stockholders' Equity..............................................4
Statement of Cash Flows........................................................5
Notes to Financial Statments...................................................6
<PAGE>
[Letterhead of Parks, Tschopp, Whitcomb & Orr, P.A.]
Independent Auditors' Report
The Board of Directors
International Solubles Corporation:
We have audited the accompanying balance sheets of International Solubles
Corporation (a development stage company) as of September 30, 2000 and December
31, 1999, and the related statements of operations, stockholders' equity, and
cash flows for the period from January 1, 2000 to September 30, 2000, the year
ended December 31, 1999, the period from September 21, 1998 (date of inception)
through December 31, 1998 and the cumulative period from September 21, 1998
(date of inception) through September 30, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Solubles
Corporation (a development stage company) as of September 30, 2000 and December
31, 1999, and the results of its operations and its cash flows for the periods
from January 1, 2000 to September 30, 2000, the year ended December 31, 1999,
the period from September 21, 1998 (date of inception) through December 31, 1998
and the cumulative period from September 21, 1998 (date of inception) through
September 30, 2000, in conformity with generally accepted accounting principles.
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
October 9, 2000
<PAGE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Corportation)
Balance Sheets
Assets
------
September 30, December 31,
2000 1999
--------------- -------------
Current assets:
Due from shareholders $ 600 $ 600
----------- -------------
600 600
=========== =============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable and accrued expense 105,100 74,200
Notes payable, shareholders (note 2) 20,000 20,000
---------- -------------
Total Current Liabilites 125,100 94,200
----------- -------------
Stockholders' equity
Common stock, no par value, authorized
900,000,000 shares, issued and outstanding
199,000,000 shares 87,850 87,850
Deficit accumulated in the development stage (212,350) (181,450)
---------- -------------
Total stockholders' equity (124,500) (93,600)
----------- -------------
Commitments (notes 2 and 3)
Total liabilities and stockholders' equity $ 600 $ 600
========== =============
2
<PAGE>
<TABLE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Corportation)
Statements of Operations
<CAPTION>
Period from Period from
September 21, 1998 Year ended Nine months September 21, 1998
(inception) through December 31, ended (inception) through
December 31, 1998 1999 September 30, 2000 September 30, 2000
<S> <C> <C> <C> <C>
Revenue $ - - - -
------------------ -------------- ------------------- --------------------
Costs and expenses:
Product development and marketing 20,000 - - 20,000
General and administrative 20,800 139,250 30,000 190,050
Interest expense - 1,400 900 2,300
-------------- --------------- ------------------ --------------------
Total Costs and expenses 40,800 140,650 30,900 212,350
Net loss $ (40,800) (140,650) (30,900) (212,350)
============== =============== ================== ====================
Weighted average number of shares
outstanding 190,000,000 194,500,000 199,000,000 194,500,000
============== =============== ================== ====================
Net loss per share $ (.0002) (.0007) - (.001)
============== =============== ================== ====================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Corportation)
Statement of Stockholders Equity
<CAPTION>
Total
Common Stock Deferred Accumulated Stockholders'
Shares Amount Compensation Deficit Equity
--------- -------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Common stock issued to founding
directors 800,000 $ 800 - - 800
Common stock issued for services 150,000 75,000 (75,000) - -
Net loss - - - (40,800) (40,800)
--------- -------- ------------ ----------- ----------
Balances at December 31, 1998 950,000 $ 75,800 (75,000) (40,800) (40,800)
========= ======== ============ =========== ==========
Cancellation of shares (200,000) (200) - - (200)
Common stock issued for services 245,000 12,250 - - 12,250
Accrued stock issuance - - 75,000 - 75,000
Net loss - - - (140,650) (140,650)
-------- -------- ------------ ---------- ----------
Balances at December 31, 1999 995,000 $ 87,850 - (181,450) (93,600)
Effect of 200 for 1 stock split 198,005,000 - - - -
Net loss - - - (30,900) (30,900)
-------- -------- ------------ ---------- ----------
Balances at September 31, 2000 199,000,000 $ 87,850 - (212,350) (124,500)
============ ========== ============ =========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Corportation)
Statements of Cash Flows
<CAPTION>
Period from Period from
September 21, 1998 Year ended Nine months September 21, 1998
(inception) through December 31, ended (inception) through
December 31, 1998 1999 September 30, 2000 September 30, 2000
------------------- --------------- ------------------ -----------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (40,800) (140,650) (30,900) (212,350)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common stock issued for services - 87,050 - 87,050
Change in operating assets and
liabilities:
Due from shareholder (800) 200 - (600)
Accounts payable 20,800 53,400 30,900 105,100
------------ ------------- ----------------- -------------------
Net cash used in operating
activities (20,800) - - (20,800)
------------ ------------- ----------------- -------------------
Cash flows from financing activities:
Proceeds from issuance of
common stock 800 - - 800
Proceeds from issuance of
notes payable 20,000 - - 20,000
------------ ------------- ----------------- -------------------
Net cash provided by
financing activities $ (20,800) - - 20,800
============== =============== ================== ==================
Net increase in cash - - - -
------------ ------------- ----------------- ------------------
Cash at beginning of period - - - -
============== =============== ================== ===================
Cash at end of period - - - -
============== =============== ================== ===================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 2000
(1) Summary of Significant Accounting Policies
(a) Nature of development stage operations
International Solubles Corporation, (ISC or the Company) was formed on
September 21, 1998. The Company holds the proprietary rights to a
chemical product which becomes part of a hard mineral surface such as
tile, porcelain, brick, concrete, marble and many others. The purpose
of such application is to reduce the incidences of slips and falls.
Operations of the Company through the date of these financial
statements have been devoted primarily to product development and
marketing, raising capital, and administrative activities.
(b) Property and equipment
Property and equipment are recorded at cost and depreciated over the
estimated useful lives of the assets which range from three to five
years, using the straight-line method.
(c) Income taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Changes in tax rates are recognized in the
period that includes the enactment date.
Development stage operations for the period ended September 30, 2000
resulted in a net operating loss. It is uncertain whether any tax
benefit of net operating loss will be realized in future periods.
Accordingly, no income tax provision has been recognized in the
accompanying financial statements. At September 30, 2000, the Company
has net operating loss carryforwards of approximately $200,000 which
will expire beginning in 2019.
(Continued)
6
<PAGE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(1), Continued
(d) Financial Instruments Fair Value, Concentration of Business and Credit
Risks
The carrying amount reported in the balance sheet for cash, accounts
receivable, accounts payable and accrued expenses approximates fair
value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported in the
accompanying balance sheet for notes payable approximates fair value
because the actual interest rates do not significantly differ from
current rates offered for instruments with similar characteristics.
(e) Use of Estimates
Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(f) Cash Flows
For purposes of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less to
be cash equivalents.
(g) Net Loss Per Common Share
Net loss per common share has been computed based upon the weighted
average number of common shares outstanding during the period
presented.
(2) Notes Payable
Notes payable consist of the following at September 30, 2000:
Promissory note to related party bearing interest
at 7% payable upon the generation of excess cash
flows, but no later than September, 2001. $ 20,000
--------
Total notes payable $ 20,000
========
(Continued)
7
<PAGE>
INTERNATIONAL SOLUBLES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(3) Commitments
Employment Agreements
The Company has entered into an employment agreement with one of its
founding directors requiring an annual salary of $41,600 beginning in
September 1998.
(4) Forward Stock Split
In March 2000, the Board of Directors authorized a 200 for 1 stock split to
all holders of record at that date. All share and per-share amounts in the
accompanying financial statements have been restated to give effect to the
stock split.
(5) Stock Warrants
The Company has issued 398,000,000 warrants for the purchase of common
stock to certain officers and directors of the Company. The warrants can be
exercised any time within three years of issuance at $0.10 - 0.15 per
share.
8
<PAGE>
PART III
ITEM 1. EXHIBITS
(a) Exhibits. Exhibits required to be attached are listed in the Index to
Exhibits beginning on page 21 of this Form 10-SB/A under "Item 2.
Description of Exhibits."
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, this 10th day of January, 2001.
International Solubles Corporation
/s/ L. Henry Sarmiento
-----------------------------------
L. Henry Sarmiento, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signatures Title Date
/s/ L. Henry Sarmiento
__________________ Director January 10, 2001
L. Henry Sarmiento
/s/ Debra L. Sea
__________________ Director January 10, 2001
Debra L. Sea
/s/ Fred Muniz
__________________ Director January 10, 2001
Fred Muniz
/s/ L. Henry Sarmiento
__________________ Chief Financial Officer January 10, 2001
L. Henry Sarmiento
21
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS
INDEX TO EXHIBITS
Exhibit Page
No. No. Description
2(i) * Articles of Incorporation of International Solubles
Corporation dated 9/17/98
2(ii) * Articles of Amendment to Articles of Incorporation, dated
3/23/00
2(iii) * Bylaws of International Solubles Corporation
3(i) * Share Purchase Warrant Certificate (exercise price of $0.10
per share)
3(ii) * Share Purchase Warrant Certificate (exercise price of $0.15
per share)
6(i) * Exclusive Worldwide Manufacturing and Marketing Agreement,
dated 9/24/97
6(ii) * Employment Agreement with L. Henry Sarmiento, dated 9/21/98
6(iii) * Employment Agreement with Van Sea, dated 9/21/98
6(iv) * Promissory Note, dated 9/21/98
6(v) * Consulting Agreement between Hudson Consulting Group, Inc.
and International Solubles Corporation, dated 1/19/99
6(vi) * Lease Agreement, dated 6/20/00
27 Financial Data Schedule "CE"
* Incorporated by reference from Form 10-SB filed October 16, 2000.
22
