U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the FISCAL YEAR ended, March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-9459
NUMEX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 06-1034587
(State or Other Jurisdiction of I.R.S. Employer Identification Number)
Incorporation or Organization)
14115 S. Pontlavoy Ave. Santa Fe Springs, CA 90670
(Address of Principal Executive Offices) (Zip Code)
(562) 404-7176
(Issuer's Telephone Number, Including Area Code)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if disclosure of delinquent filers in response to item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the registrant's knoledge, in definitive proxy or information statements
incorporated by refernece in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB X
Revenues for the fiscal year ended March 31, 1997 were $296,357.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 31, 1997, amounted to approximately $2,175,591.
Registrant had 5,967,750 shares of its common stock, $.10 par value,and
170,000 of Preferred Stock, $1.00 par value outstanding at March 31, 1997.
Traditional Small Business Disclosure Format (check one): Yes X No
<PAGE>
PART I. ITEM 1. DESCRIPTION OF BUSINESS
General Development
Numex Corporation, ("Registrant") was organized and incorporated in
Delaware on August 1, 1980. Registrant, through a wholly owned subsidiary was
engaged in the remanufacturing and servicing of metal cutting machine tools and
the retrofitting of such tools with new electronic controls. Registrant's
operations were substantially eliminated during fiscal year 1988, and from that
time until January 1991, Registrant was not an operating company.
In January 1991, Registrant acquired certain assets of Delux Distributions
International, Inc. ("DDI"). Since that acquisition, Registrant has been
operating as the manufacturer, through subcontractors, and the distributor of
its primary product known as Therapy Plus, a hand-held massage device used for
the relief of muscular pain.
In June 1994, Registrant acquired ViaStar Marketing, Inc., a Florida
corporation organized in December 1993 ("ViaStar Florida"), by means of a merger
of ViaStar Florida into Airmotive Acquisitions, Inc., a Delaware corporation,
and a wholly owned subsidiary of Registrant since April 1994. Upon the merger,
Airmotive Acquisitions, Inc., which had previously not been an operating
company, changed its name to ViaStar Marketing, Inc., a Delaware corporation
("ViaStar"). ViaStar is a wholly owned subsidiary of Registrant. ViaStar was in
the business of outbound telemarketing of celebrity owned or endorsed products.
ViaStar was not profitable, and an assignment for the benefit of creditors was
made of its assets (subject to liabilities) on July 31, 1995.
Subsequently, on March 26, 1997, in the Circuit Court of the Sixth Judicial
Circuit in and for Pineallas County, Florida, Case No. 95-00493-CI-19 regarding
ViaStar Marketing, Inc. (the "Assignor") v. Michael E. Moecker (the "Assignee")
the court issued an order on Assignee's Final Report and Petition for Discharge
of Assignee and Release of Bond, and discharged the Assignee from any further
obligations and released the Assignee's bond.
Acquisition of Therapy Plus
On January 2, 1991, Registrant acquired certain assets of DDI pursuant to
an Asset Purchase Agreement dated December 3, 1990 (the "Agreement"). DDI also
assigned to Registrant all of its rights under certain agreements which DDI
entered into with third parties relating to the advertising, sale and
distribution of a product known as Dermapoints, and Registrant assumed all of
DDI's obligations under such agreements.
The assets purchased included the inventory of two models of a hand-held,
non-electric, mechanical, patterned cutaneous nerve stimulator sold under the
trade name of Dermapoints Model 100 and Dermapoints Model 200 (collectively, the
"Product"). Since acquiring the Product, Registrant has changed the Product name
to "Therapy Plus." Registrant also acquired all of DDI's right, title and
interest in all assets and property used by DDI in the manufacture, sale and
distribution of the Product.
Therapy Plus
The Product is a patented non-electric, cylinder-shaped pain relieving
device comprised of a series of starwheels, mounted on a shaft, with hundreds of
points which do not puncture the surface of the skin. The Product is rolled
<PAGE>
briskly over the painful areas of the body for three to eight minutes. The sale
of the Product is permitted under a 510(k) registration with the Food and Drug
Administration (the "FDA") which authorizes the following claims to be made in
connection with the Product: Provides temporary relief of minor muscular pain
associated with arthritis; "Temporarily relieves pain from overexertion and
fatigue. Increases blood circulation. Relaxes tense muscles." The Product
produces the therapeutic effect of a massage.
Following the acquisition of the Product, and through August 1992,
Registrant engaged in a major marketing campaign, selling the Product primarily
through "infomercials" on television. An "infomercial" is a half-hour paid
television program whose primary purpose is to sell one or more products.
Television advertising time was purchased by Registrant through both its own
employees and independent buyers of airtime. Registrant broadcast its
infomercial entitled "Freedom From Pain" (the "Infomercial") daily on television
stations throughout the United States. Viewers could either call the toll-free
800 phone number given in the Infomercial to order the Product or could purchase
the Product by mail from Registrant. Orders generated by the Infomercial were
filled by Registrant within one to five working days from its facility in
Cerritos, California.
Subsequent to August 1992, Registrant discontinued the airing of the
Infomercial as a result of an investigation by the Federal Trade Commission (the
"FTC"). The FTC claimed among other things that Registrant's Infomercial
contained certain advertising claims which Registrant had not substantiated with
sufficient scientific evidence. In response during 1993 Registrant sponsored a
well controlled clinical study at an independent hospital and in November 1993,
the Company submitted a 510 (k) notification to the FDA advisory agency of the
Company's intention to add the word arthritis to its labeling claims. In
February 1996, the Company received an FDA notification that the Product could
be marketed as a "Temporary relief of minor muscular pain associated with
arthritis".
During late July through November 1996, Registrant produced a new
infomercial and commenced media tests and resumed marketing Therapy Plus in the
United States, using the newly accepted claims by the government regulatory
agency, regarding arthritis pain. The efforts were not successful. The primary
reason for the unsuccessful media attempt was the substantial higher media
costs.
Manufacturing
The Product has been manufactured for Registrant by unaffiliated companies
in conformity with Registrant's instructions and specifications. These companies
have no right, title or interest in or to the Product and serve only as
Registrant's subcontractors to manufacture the Product. To Registrant's best
knowledge, all of the materials used in making the Product are readily
available. Registrant is not dependent on its current manufacturers with respect
to tools, plans and specifications since they are owned by Registrant. If, for
some reason, Registrant's current manufacturers were unable to continue making
the Product, Registrant would take the tools, plans and specifications to other
manufacturing subcontractors.
Product Distribution and Customer Service
All orders of the Product are shipped to customers from Registrant's
facilities in Santa Fe Springs, California. Registrant's employees are available
to respond to customer questions and complaints, and offers a thirty-day
unconditional money back guarantee on retail sales in addition to a one-year
guarantee against defects in the Product.
Trademarks, Licenses, and Patents and Royalty Agreements
The name "Therapy Plus" is a trademark of Registrant. The Product was
formerly marketed, briefly, under the name "Dermapoints." After Registrant's
<PAGE>
acquisition of the Product, it made a minimal number of sales of the Product
under the name "Dermapoints", and thereafter changed the Product's name to
"Therapy Plus."
The inventor of the Product obtained a United States patent for the Product
in February 1991. Registrant and the patent owner entered into a license
agreement (the "License Agreement") as of January 1, 1992. The License Agreement
grants to Registrant an exclusive license to market, manufacture and sell the
Product in the United States and its possessions and territories for the
remaining life of the patent, which is currently eleven years. Thereafter, the
design of the Product will be in the public domain and Registrant as well as
other companies will have the right to market, manufacture and sell the Product.
As a condition for obtaining the License Agreement, Registrant paid the
patent owner a one-time license fee of $120,000. This payment was made in June
1992 and was capitalized as an intangible asset. On March 31, 1997 the remaining
value of the license fee and related expenses were written off. The License
Agreement also provides for royalties at a rate ranging from $.50 per unit to
$1.20 per unit depending on the method of distribution used.
At March 31, 1997, Registrant owed the patent owner an aggregate of
$355,518 in accrued royalties, consisting of $544 relating to fiscal year 1997,
$5,744 relating to fiscal year 1996 sales, $18,073 relating to fiscal year 1995
sales, $13,895 relating to fiscal year 1994 sales, $76,962 relating to fiscal
year 1993 sales and minimum calendar year royalty requirements relating to 1997
& 1994 for $124,181 and $116,119 respectively. Per the terms of the License
Agreement, however, Registrant's position is that per the Licensee Registrant's
obligation to pay the minimum and accrued royalties are stayed due to government
intervention into the marketing of the product (see Government Regulation) as
provided for in the license agreement.
Customers
The Product is currently being sold primarily to the general public either
through wholesalers and export distributors. The target purchaser is any
individual who experiences muscular pain.
Backlog Orders
There is no current backlog of sales orders.
Competition
Significant competition exists in the pain relief market as a whole. Most
of Registrant's competition in the general pain relief market is from pills,
creams and ointments. Competition from companies selling medical devices is more
limited. Registrant is aware of several hand-held devices that are designed for
purposes of massage, but is unaware of any other such devices legally sold in
the United States for the relief of pain associated with arthritis.
Government Regulation
On January 29, 1996 the FDA approved the 510 (k) premarket notification
filed by the Company in November 1993 based on a clinical study by a major
hospital. The submission of this study and its subsequent approval by the FDA
allows the Company to make claims in relieving pain associated with arthritis.
<PAGE>
Employees
As of March 31, 1997, Registrant employed 2 full-time employees and 1
part-time employee. These employees performed services in administration,
marketing, order processing, shipping, customer service and accounting.
Registrant believes it is on good terms with its employees and does not foresee
any labor difficulties in the future.
Acquisition of ViaStar Marketing, Inc.
In June 1994 Registrant acquired ViaStar Marketing, Inc., a Florida
corporation ("ViaStar Florida"), by means of a merger of ViaStar Florida with
and into Airmotive Acquisitions, Inc., a Delaware corporation ("Airmotive") and
a wholly-owned subsidiary of Registrant. Concurrent therewith, Airmotive changed
its name to ViaStar Marketing, Inc., a Delaware corporation ("ViaStar"). Prior
to the merger, Airmotive was not an operating company.
ViaStar Florida, which was incorporated in November 1993, was acquired by
Registrant pursuant to the terms of an agreement dated June 3, 1994 by and among
Registrant, ViaStar Florida, Airmotive, Jack Salzberg, William Lovell, George
Simone and Robert Circosta (the "Acquisition Agreement").
Pursuant to the Acquisition Agreement the shareholders of ViaStar Florida,
Messrs. William Lovell, Robert Circosta and George Simone, at the closing, and
in accordance with the plan of merger of ViaStar Florida into ViaStar, received
an aggregate of 1,000,000 shares of the common stock of Registrant in exchange
for all of the issued and outstanding shares of ViaStar Florida. ViaStar
Florida's significant assets consisted of two licensing agreements with two
nationally recognized celebrities to market and distribute these celebrities
owned or endorsed products.
Subject to ViaStar's Marketing , Inc. achieving certain earnings goals,
500,000 of the shares issued to ViaStar Florida are being held in escrow (the
"Escrow Shares"). The Acquisition Agreement provided that if the cumulative net
income of ViaStar did not aggregate $900,000 prior to March 31, 1997, one and
eleven one hundredths (1.11) Escrow Shares would be released for each dollar of
cumulative net income over $450,000 at March 31, 1997. The acquisition of
ViaStar was an arm's length transaction and the consideration was arrived at by
good faith negotiation between the parties.
Mr. Lovell entered into a three year employment agreement with ViaStar to
be its President; Mr. Circosta entered into a three year employment agreement
with ViaStar to be its Executive Vice President, and George Simone entered into
a three year consulting contract with ViaStar to provide certain consulting
services. Pursuant to the terms of the two employment agreements and the
consulting contract, Messrs. Lovell, Circosta and Simone would receive a base
salary of $125,000 per year and bonuses out of a bonus pool established by
ViaStar. Additionally, these agreements entitled Messrs. Lovell, Circosta and
Simone to earn options to acquire up to an aggregate of 1,000,000, 500,000 and
500,000 additional shares of Registrant's common stock, respectively. The
options were to vest in increments based on ViaStar's achieving particular
performance goals by specific dates as set forth in the Acquisition Agreement.
During fiscal year 1995 ViaStar was engaged in outbound telemarketing of
celebrity owned or endorsed products and the initiation of a direct sales
representative program for such products. ViaStar was a party to a licensing and
distribution agreement with a nationally recognized celebrity for the
distribution of existing owned or endorsed products that are already selling on
national television by means of live direct response television.
In February 1995 Mr. George Simone resigned as a director of ViaStar, and
his consulting contract, including stock options, was terminated by mutual
consent. Mr. Simone received no consulting fees for his services under the
<PAGE>
contract. ViaStar and Mr. Simone also signed mutual general releases. In June
1995, Messrs. Lovell and Circosta resigned as directors, officers and employees
of ViaStar and the business essentially ceased operations shortly thereafter.
By July 31, 1995 ViaStar had exhausted the capital provided by its parent
and an assignment for the benefit of ViaStar's creditors was made on July 31,
1995 pursuant to Chapter 727 of the Florida State Statutes.
Subsequently, on March 26, 1997, in the Circuit Court of the Sixth Judicial
Circuit in and for Pinellas County, Florida, Case No. 95-00493-CI-19 regarding
ViaStar Marketing, Inc. (the "Assignor") v. Michael E. Moecker (the "Assignee")
the court issued an order on Assignee's Final Report and Petition for Discharge
of Assignee and Release of Bond, and discharged the Assignee from any further
obligations and released the Assignee's bond.
On March 28, 1997 a Certificate of Dissolution was filed with the Secretary
of State of Delaware authorizing the dissolution of ViaStar Marketing, Inc.
ViaStar - Release of Escrow Shares
Further to the "Acquisition of ViaStar Marketing, Inc.". as written above,
on the June 6, 1994 there was an Escrow Agreement made between Numex and three
directors of ViaStar Marketing, which provided for 500,000 shares of Numex
common stock to be issued to them. The Escrowed Shares were placed under certain
financial conditions. The financial goals were never met by the ViaStar
directors. Numex's Counsel, as Escrow Agent, held the Escrowed shares, and now,
in accordance with the terms of the agreement, has released the Escrow Shares to
Numex as of March 31, 1997. Upon the Company's instruction the shares were
placed into the Company's treasury stock with the Company's Transfer Agent.
ITEM 2. PROPERTIES
Registrant operated from one facility during fiscal year 1997 as follows:
14115 South Pontlavoy Avenue, Santa Fe Springs, California 90670
Numex moved into its current location on February 1, 1995. The new office
space is used for general office space, customer service and shipment of
Product, and until July 1995, was used to provide fulfillment services for
ViaStar. The facility contains 12,460 square feet, including shipping
facilities. The monthly rental is $5,732 plus taxes, insurance and other
maintenance costs. Registrant occupies this facility under a three-year lease
which expires in January 31, 1998. The Company also subleases a certain section
of the space for $2,250 per month.
ITEM 3. LEGAL PROCEEDINGS
Financial Advertising Services, Inc., etc. v. Numex Corporation, Etc., et
al LASC Case No. BC 162019
As previously reported in the Registrant's 10-Q filed December 31, 1996,
the litigation known as Financial Advertising Services, Inc. d.b.a. FMS Direct,
a California Corporation ("FMS") (the "Plaintiff"). v. Numex Corporation, a
Delaware Corporation (the "Company") (the "Defendants"), et al. was filed in the
Superior Court of the State of California for the County of Los Angeles, on
December 5, 1996. The action alleged that the supplier, FMS, and the Company
entered into an agreement dated March 21, 1996, (the "Agreement") and pursuant
to the Agreement, FMS was seeking $20,000 in accordance with paragraph 5.5
Additional Payments.
<PAGE>
Subsequently, the lawsuit filed against Registrant by Financial Advertising
Services, Inc. has been settled. Pursuant to the Settlement Agreement,
Registrant is required to pay FMS $20,000, payable $3,000 on April 15, 1997 and
$1,545.45 per month for eleven months thereafter.
Belin Rawlings & Badal LLP and Numex Corporation and Jack I. Salzberg American
Arbitration Association RE:72 194 01200 96
On December 6, 1997 Belin Rawlings & Badal LLP (the "Claimants") filed a
Demand for Arbitration before the American Arbitration Association in a
proceeding entitled In the Matter of the Arbitration between Belin Rawlings &
Badal LLP, and Numex Corporation and Jack I. Salzberg (the "Respondents") (Case
No. 72 194 01200 9) (the "Proceeding"). The proceeding arose out of an
allegation by the Claimants that pursuant to a Promissory Note and Agreement
dated June 28, 1994 (the "Agreement") by and between Belin Rawlings & Badal LLP
and Numex Corporation and Mr. Salzberg, the Respondents failed to meet an
obligation to pay an unpaid principal in the amount of $151,000.
Subsequently, on May 15, 1997, the American Arbitration Association awarded
to the Claimants,Belin Rawlings & Badall LLP a total amount of $208,778, plus
interest, at the rate of 10% per annum from May 6, 1997.
Discussions are currently being held by the Company and the Plaintiff to
convert this amount into common stock of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 1, 1996 by Written Consent of stockholders on owning a majority of
the issued and outstanding shares of Common Stock of the Company, Article IV of
the Certificate of Incorporation was amended to authorize the Company to issue
ten million (10,000,000) shares of Preferred Stock with a par value of $1.00, in
lieu of the one hundred thousand (100,000) shares with a par value of $100.00
previously authorized and as reported on Registrant's 10-Q June 30, 1996.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registrant's stock is traded in the over the counter market. The following
table sets forth the range of high and low bid and ask quotations for each of
the fiscal quarters for the years ending March 31, 1996 and March 31, 1997, as
reported by the National Quotation Bureau, Inc.
Fiscal Year Ended Range of Bid/Ask Quotes
High Low
March 31, 1996 Bid Ask Bid Ask
First Quarter 1/2 1 1/8 1/8 5/8
Second Quarter 7/16 15/16 1/4 9/16
Third Quarter 7/16 15/16 1/4 9/16
Fourth Quarter 1/2 1 1/4 5/8
March 31, 1997
First Quarter 5/8 15/16 7/16 11/16
Second Quarter 5/8 15/16 3/8 9/16
Third Quarter 1/2 3/4 3/8 5/8
Fourth Quarter 19/32 11/16 3/8 5/8
<PAGE>
The above quotations represent prices between dealers and do not include
retail markup, markdown or commission, and do not represent actual transactions.
As of March 31, 1997 there were approximately 430 shareholders of record of
Registrant's Common Stock. This number does not reflect individual participants
in security position listings held in "street name" accounts.
Registrant has not paid any cash or stock dividends on its common stock
since its incorporation and anticipates that, for the foreseeable future, any
earnings will be retained for use in Registrant's business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net sales during fiscal year 1997 were $296,000 as compared to $1,023,000
during fiscal year 1996. Of the last year's net sales, $601,000 is the result of
ViaStar's four months operation. The 30% net decrease in Numex sales from last
year's $422,000 represents the combination of $24,000 increase in consumer sales
as a result of the Therapy Plus new infomercial and $150,000 decrease in
wholesale sales.
Numex cost of sales as a percentage of net sales increased from 45% during
the fiscal year 1996 to 52% during the fiscal year 1997. The net increase was
primarily due to write offs of slow moving inventories. ViaStar's portion for
the year 1996 was $365,000.
Selling, general and administrative expenses during fiscal year 1997 were
$653,000, as compared to $864,000 during the prior year of which $422,000 is
ViaStar's. Current year's expenses consists of 20% video production costs, 19%
royalty requirement and 61% normal operating expenses The 52% overall increase
was primarily due to the new video production cost and royalty requirement.
Otherwise, 10% decrease compared to prior year's $442,000 in normal operating
costs was due to effective cost cutting measures.
The Licensing Agreement the Company entered into with the German inventor,
had a provision in it that if the operations of Numex are halted by any
government agency or action, that the minimum license fee of $125,000 per annum
would be stayed.
In February 1992 the Company signed a consent order from the Federal Trade
Commission "FTC", which prohibited the Company from making or using certain
claims or endorsements, which had previously proven extremely effective in
marketing the Product. After a 3 year clinical study, the Food and Drug
Administration ("FDA") gave the Company permission to market the Therapy Plus
Product using only a limited number of the original claims and endorsements.
Consequently the new and revised infomercials, using the limited claims and
endorsements, allowed by the FDA tested below expectations and the media testing
was discontinued. The discontinuance of the airing of the infomercial for all
practical purposes, took away the momentum of the sales equal to 98%.
<PAGE>
In February 1996, the FDA approval became totally moot for the following
two reasons:
1. Momentum had been lost.
2. The cost of the media airtime during the interim had gone up several
fold, causing the company to abandon the testing of the new
infomercial in November and December 1996.
Accordingly, Management's opinion of the $125,000 minimum license fee is
that it need not be paid because it is an outcome of the same government agency
action causing the Company to abandon its marketing program.
Therefore, it is Management's humble opinion that the liabilities related
to actual sales should be the only one recognized in the books for $115,000.
Net loss from operations during the fiscal year 1997 was $512,000 compared
to $399,000 in fiscal year 1996. For fiscal 1996, ViaStar's loss was $186,000
and Numex loss was $213,000.
Net interest expense during fiscal year 1997 and 1996 were $204,000 and
$183,000. Of the 1996 interest expense $2,000 was ViaStar and $181,000. The
increase in Numex current year's interest expense which was to increased
borrowings to continue ongoing operations.
Other income Numex for fiscal year 1997 and 1996 were $41,000 and $219,000.
For the fiscal year 1997, $30,000 were from product liability insurance refund
and cost recoveries and $11,000 reversal of accrued expenses.
Financial Condition, Liquidity and Capital Resources
Net cash used in operations during fiscal year 1997 was $204,000.
Registrant funded this usage from notes payable proceeds and sale of preferred
stock which resulted in net cash flows from financing activities of $225,000.
Cash used for operating activities exceeded cash generated by operating revenues
as a result of low sales volumes which were not adequate to cover minimum
overhead costs.
Registrant's liquidity is negatively affected by Registrant's current low
sales volumes and its debt maturities. However, Registrant believes that, if
necessary, it would be successful in either extending the maturity dates on
certain debt obligations, in aggregate of $631,000 as they mature or obtaining
new debt financing to retire existing debt as it matures. At March 31, 1997,
Registrant's Chairman of the Board converted $300,000 of notes payable due him
into common stock at the rate of $1.00 per share.
Because Registrant's liquid assets are currently insufficient to meet cash
requirements of its ongoing operations, Registrant plans to continue to rely
upon external financing sources in the near future.
Accrued expenses of $694,000 are mainly royalties of $356,000. Of the
$356,000, $240,000 is due for the minimum royalties under the licensing
agreement. Given the FTC's order for the company to cease sale of the product in
1992, the company is in discussion with the license holder to waive the minimum
royalties. The remaining accrued expenses consist of accrued interest of
$195,000, customer deposits $116,000, audit fees $21,000 and miscellaneous
expenses for $6,000.
In the past, Registrant's Chairman of the Board and principal stockholder
has provided Registrant, either directly or indirectly through guarantees, with
the necessary working capital needed to continue operating. However, Registrant
has received no assurances that its Chairman of the Board will continue to
provide such funding.
<PAGE>
Private Placement
In April 1996 the Company commenced a private placement of 350,000 shares
of $1.00 par convertible preferred stock and warrants of the Company pursuant to
a private placement memorandum dated April 8, 1996 and would have provided
proceeds of $350,000 if all units were sold. The offering closed on our about
September 30, 1996 with a total of 170,000 shares of the Registrant's preferred
stock issued. The Company sold 170 units for gross proceeds of $171,000. The net
proceeds, $140,000, of this placement were used to finance the reintroduction of
the Product.
Current Plans of Registrant
Numex
On February 6, 1996 the U.S. Food and Drug Administration (FDA) in response
to a Premarket Notification (510-k) advised Registrant that it may market its
Therapy Plus manual massage roller for temporary relief of minor muscular pain
associated with arthritis. Registrant also previously sponsored a controlled
clinical study to comply with an FTC order with respect to Therapy Plus's
effectiveness in relief of pain associated with arthritis.
Accordingly, the Company plans to continue marketing Therapy Plus through
wholesale and export distributors, using the newly accepted claims by the
government regulatory agency, regarding arthritis pain. The Company is currently
negotiating with several major companies to distribute the Therapy Plus Product.
Since late fall 1996, Management has been intensively pursuing acquisitions
of a profitable business. Management has been reviewing several acquisition
candidates. In anticipation of possible acquisitions the Company has established
a relationship with a medium size investment banking house which specializes in
private placements of securities and notes with institutional investors.
Management is now in the process of due diligence phase of several
acquisition candidates, whose revenues range from $4 - $30 million annual sales.
Although, there is no guarantee that any of the proposed acquisitions will
materialize, there is reasonable anticipation, once the target company is
definitely established and meets all the criteria of the Company and
institutional investors that funds can be obtained to finalize such an
acquisition.
It is to be noted that the Company has approximately a $6.5 million tax
loss carryforward which can be available to be utilized by any profitable
acquisition.
Registrant continues to conduct negotiations with a number of companies
with the intent of acquiring either them or their products. Registrant's
intention is to raise the requisite funding either through the issuance and sale
of Registrant's stock, by issuing Registrant's stock as consideration for the
acquisition, or by any other means that is agreeable to all parties involved in
the transaction.
Inflation and Changing Prices
Registrant does not foresee any adverse effects on its earnings as a result
of inflation or changing prices.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
Page
Report of Independent Certified Public Accountants 13
Consolidated Balance Sheet As of March 31, 1996 14
Consolidated Statements of Operations for the Years Ended March 31, 1996
and 1995 15
Consolidated Statements of Stockholders' Deficiency for the Years
Ended March 31, 1996 & 1995 16
Consolidated Statements of Cash Flows for the Years Ended March 31, 1996
and 1996 17
Notes to Consolidated Financial Statements 18-26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Numex Corporation
We have audited the accompanying consolidated balance sheet of Numex
Corporation and subsidiary as of March 31, 1997 and the related consolidated
statements of operations, stockholders' deficiency, and cash flows for each of
the two years in the period ended March 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Numex
Corporation and subsidiary as of March 31, 1997, and the consolidated results of
their operations and their consolidated cash flows for each of the two years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in the
financial statements, the Company has incurred net losses from operations, has
negative cash flows from operations, and has a net capital deficiency. These
factors, among others as discussed in Note 1 to the financial statements, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
June 3, 1997
<PAGE>
Numex Corporation and Subsidiary
CONSOLIDATED BALANCE SHEET
March 31, 1997
ASSETS
Current assets
Cash and cash equivalents $ 14,981
Restricted cash (Note 3) 5,775
Accounts receivable 9,058
Inventories (Note 4) 8,824
Total current assets 38,638
Fixed assets, net (Note 5) 18,910
Deposits 12,391
Total assets $ 69,939
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Notes payable, current portion (Note 6) $1,122,778
Notes payable - related parties (Note 12) 76,834
Accounts payable 78,699
Accrued expenses (Note 7) 693,790
Total current liabilities 1,972,101
Notes payable, less current portion (Note 6) 600,000
Total liabilities 2,572,101
Commitments and contingencies (Note 13)
Stockholders' deficiency
Preferred stock, $1.00 par value, 10,000,000 shares authorized;
170,000 shares issued and outstanding 170,000
Common stock, $.10 par value, 20,000,000 shares authorized;
6,592,750 shares issued and 5,967,750 shares outstanding 659,275
Treasury stock, at cost, 625,000 shares (705,824)
Additional paid-in capital 8,132,280
Accumulated deficit (10,757,893)
Total stockholders' deficiency (2,502,162)
Total liabilities and stockholders' deficiency $ 69,939
The accompanying notes are integral part of the financial statements.
<PAGE>
Numex Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 1997 and 1996
1997 1996
Net sales (Note 8) $ 296,357 $1,022,878
Cost of sales 155,203 557,409
Gross profit 141,154 465,469
Selling, general and administrative expenses 653,447 864,139
Loss from operations (512,293) (398,670)
Other (Expense) income
Interest expense, net (203,766) (183,224)
Other income 40,618 218,796
Write-off of intangible assets in excess of net
present value (392,398)
Write-off of cost in excess of fair value of net
assets acquired (533,474)
Loss on assignment of assets for benefit
of creditors of subsidiary (399,572)
Total other (expense) income (555,546) (897,474)
Loss before provision for income taxes and
extraordinary item (1,067,839) (1,296,144)
Provision for income taxes(Note 9) 800 800
Loss before extraordinary item (1,068,639) (1,296,944)
Extraordinary item - gain on extinguishment of
debt (Note10) 603,565
Net Loss $(465,074) $(1,296,944)
Loss per share before extraordinary item $ (0.18)
Gain per share attributable to extraordinary item $ 0.10
Net loss per share $ (0.08) $ (.21)
Weighted average common shares outstanding 6,166,031 6,145,600
The accompanying notes are integral part of the financil statements.
<PAGE>
Numex Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
For the years ended March 31, 1997 and 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unearned
Portion of Additional
Preferred Stock Common Stock Treasury Stock Restricted Paid-In Accumulated
Shares Amount Shares Amount Shares At Cost Stock Issued Capital Deficit Total
Balance, March 31, 1995 6,270,600 $627,060 125,000 (143,324) (562,500)$7,882,903 $(8,995,875) (1,191,736)
Net loss (1,296,944) (1,296,944)
Balance, March 31, 1996 6,270,600 $627,060 125,000 $(143,324)$(562,500)$7,882,903 $(10,292,819) $(2,488,680)
Preferred stock issued 170,000 $170,000
for cash 850 170,850
Offering costs (30,602) (30,602)
Common stock issued
for conversion of debt 322,150 32,215 279,129 311,344
Conversion or restricted
stock to Treasury stock 500,000 (562,500) 562,500
Net Loss (465,074) (465,074)
Balance, March 31, 1997 170,000 $170,000 6,592,750 $659,275 625,000 $(705,824) $0 $8,132,280 $(10,757,893)$(2,502,162)
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
Numex Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 1997 and 1996
1997 1996
Cash flows from operating activities
Net loss $( 465,074) $(1,296,944)
Adjustments required to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,249 81,895
Write-off of cost in excess of fair value of
net assets acquired of subsidiary 533,474
Loss on assignment of assets of subsidiary 399,352
Write-off of intangible asset 392,398
Gain on extinguishment of debt (603,565)
Legal fees and interest expense accrued as
loan payable 57,778
(Increase) Decrease in:
Accounts receivable ( 8,384) ( 579)
Inventory 41,106 82,419
Prepaid expenses and other current assets 36,600 (43,465)
Deposits 40 7,483
(Decrease) Increase in:
Accounts payable 23,715 (210,628)
Accrued expenses 318,261 (17,850)
Net cash used in operating activities (203,876) (464,843)
Cash flows from investing activities
Purchase of fixed assets (17,866) (1,364)
Net cash used in investing activities (17,866) (1,364)
Cash flows from financing activities
Restricted cash (1,454) 5,851
Repayment of notes payable (59,000) (100,730)
Proceeds from notes payable 145,000 472,000
Repayment of notes payable - related parties (12,000) (17,500)
Proceeds from notes payable - related parties 12,000 5,000
Sale of preferred stock 170,850
Offering costs (30,602)
Net cash provided by financing activities 224,794 364,621
Net (decrease) increase in cash and cash equivalents 3,052 (101,586)
Cash and cash equivalents, beginning of year 11,929 113,515
Cash and cash equivalents, end of year $14,981 $11,929
See Note 14 for supplemental disclosure of cash flow information.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Numex Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND MANAGEMENT'S PLANS
On August 2, 1995, ViaStar filed, and was granted, a petition commencing an
assignment for the benefit of creditors, pursuant to Chapter 727 of the Florida
State Statutes. The book value of the assets in the amount of $399,352 was
assigned to the trustee for the benefit of the creditors and has been charged to
earnings. As a result of the petition, the Company determined that there had
been a permanent impairment in the carrying value of goodwill, and the remaining
unamortized balance of $533,474 has been charged to earnings for the year ended
March 31, 1996. ViaStar sales were $601,000 in 1996.
On March 28, 1997, the shareholders of ViaStar dissolved the corporation
under Delaware state law (see Note 10).
The Company's consolidated financial statements have been presented on the
basis that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. In the absence of the airing of the Infomercial, the Company
incurred net losses during 1996 and incurred net losses during 1997 after airing
a new infomercial, and has a net capital deficiency. Also during the fiscal
years 1997 and 1996, the Company experienced insufficient cash flows from
operations, and funds for operations were obtained through the issuances of
notes payable and preferred stock. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
The Company's continued existence is dependent upon its ability to achieve
a new operating plan, its success of selling Therapy Plus through wholesale
distributors. Management's plans in connection with this uncertainty is as
follows:
The Company plans to continue marketing Therapy Plus through wholesale
distributors and exporters.
Since late fall of 1996, management has been intensively pursuing
acquisitions of a profitable business. Management has been reviewing several
acquisition candidates. In anticipation of possible acquisitions, the Company
has established a relationship with a medium-size investment banking house which
specializes in private placements of securities and notes with institutional
investors.
The Company has approximately a $6,500,000 tax loss carryforward which is
or could be available to be utilized by a profitable acquisition. The loss
carryforward would be limited on an annual basis if change in ownership is
significant.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiary. All intercompany accounts and transactions have been
eliminated.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, and all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. The carrying amounts of these assets approximate fair
value due to the short maturity of the instruments.
Inventories
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out ("FIFO") method.
Fixed Assets
Fixed assets are stated at cost. Expenditures for maintenance and repairs
are charged to earnings as incurred; additions, renewals, and betterments are
capitalized. When fixed assets are retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the respective accounts, and
any gain or loss is included in operations.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. The following are the estimated useful
lives:
Furniture and fixtures 3 years
Tools and dies 3 to 5 years
Depreciation expense was $3,305 and $40,493 for fiscal years ended March
31, 1997 and 1996, respectively.
Impairment of Long-Lived Assets
In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amounts
of such assets may not be recoverable. Impairment losses would be recognized if
the carrying amounts of the assets exceed the fair value of the asset. The
impact of such adoption resulted in the write-off of $392,398 for the purchased
intangibles and the costs of obtaining a licensing agreement from the patent
holder of the Product.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising
The Company expenses the cost of advertising the first time the advertising
takes place, except for direct-response advertising. Direct-response advertising
consists primarily of cost to produce a television infomercial. The cost of
direct-response advertising is deferred and amortized over the expected revenue
stream of approximately six to twelve months.
For the year ended March 31, 1997, direct-response advertising costs of
approximately $113,000 were expensed due to the unsuccessful attempt of a
direct-response advertising campaign during 1997.
Revenue Recognition
Sales and related cost of sales are recorded upon shipment of the Product.
The Company has an unconditional money-back guarantee policy under which the
full sale price is returned to retail customers if the Product is returned
within 30 days from the date of sale. The Company has estimated provision for
future returns for sales to retail customers.
Income Taxes
The Company uses the liability method of accounting for income taxes
pursuant to SFAS No. 109, "Accounting for Income Taxes."
Deferred income tax assets result from temporary differences when certain
amounts are deducted for financial statements purposes and when they are
deducted for income tax purposes.
Net Loss Per Share
Net loss per common share is computed based on the weighted average number
of common shares outstanding. The shares to be issued upon exercise of
outstanding stock options are not included as common stock equivalents as they
are anti-dilutive.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash, accounts receivable, accounts payable,
and accrued expenses, the carrying amounts approximate fair value due to their
short maturities. The amounts shown for debt also approximate fair value because
current interest rates offered to the Company for debt of similar maturities are
substantially the same.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 3 - RESTRICTED CASH
As of March 31, 1997, the Company had $5,775 of restricted cash to serve as
collateral for a credit card reserve.
NOTE 4 - INVENTORIES
Inventory consists of the following:
Finished goods $ 2,647
Supplies and packaging 6,177
Total $ 8,824
NOTE 5 - FIXED ASSETS
Fixed assets consist of the following:
Furniture and fixtures $ 178,507
Tools and dies 38,259
216,766
Less accumulated depreciation 197,856
Total $ 18,910
<PAGE>
NOTE 6 - NOTES PAYABLE
Notes payable consist of the following:
Unsecured promissory note, bearing interest at 10%, due
on demand. The note is personally guaranteed by the
Company's Chairman of the Board. $ 6,000
Promissory note, bearing interest at 10%, due on November
24, 1997. This note is collateralized by cash, accounts
receivable, inventories, and fixed assets, and is also
personally guaranteed by the Company's Chairman of
the Board. 50,000
Promissory note, at prime (8.5% at March 31, 1997) plus 2%,
payable in monthly principal payments of $2,000 plus
interest, due on December 17, 1995. This note is
collateralized by cash, accounts receivable, inventories,
and fixed assets. The note is delinquent. 27,000
Promissory note, bearing interest at 10%, payable due on
August 31, 1996. This note is convertible into common
stock at a conversion price of $1.00 per share. The
note is personally guaranteed by the Company's
Chairman of the Board. The note is delinquent. 200,000
Unsecured promissory notes, bearing interest at 10%,
due on demand. 789,778
Promissory notes, bearing interest at 10%, due on September
30, 1998. These notes are convertible into shares of
common stock at a conversion price of $1.00 per share. 600,000
Unsecured promissory note, bearing interest at 9.5%, due
on July 15, 1997. 50,000
Total notes payable 1,722,778
Less current portion 1,122,778
Long-term portion, due in fiscal 1999 $ 600,000
<PAGE>
NOTE 7 - ACCRUED EXPENSES
Accrued expenses consist of the following:
Accrued royalties $ 115,218
Accrued minimum royalties 240,300
Accrued interest 194,575
Customer deposits 116,424
Other 27,273
Total $ 693,790
NOTE 8 - SALES
Major Customers
During the year ended March 31, 1997, the Company did business with two
customers whose sales comprised approximately 56% and 28%, respectively, of net
sales. During the year ended March 31, 1996, the Company did business with one
customer whose sales comprised approximately 38% of net sales.
NOTE 9 - INCOME TAXES
The current provision for income taxes in both fiscal years 1997 and 1996
is related to state income taxes. As of March 31, 1997, the Company had net
federal operating loss carryforwards totaling approximately $6,500,000. The net
operating loss carryforwards expire in various years through 2012.
The primary components of temporary differences which give rise to the
Company's net deferred tax asset (liability) at March 31, 1997 are as follows:
Deferred tax asset (liability)
Net operating losses $ 2,300,000
Valuation allowance (2,300,000)
Net deferred tax asset (liability) $ -
The valuation allowance decreased by $1,096,000 in 1997 due to the
expiration of net operating loss carryforwards.
<PAGE>
NOTE 10 - GAIN ON EXTINGUISHMENT OF DEBT
On March 28, 1997, the shareholders of ViaStar filed a corporate
dissolution under Delaware law. Since the corporation was dissolved and the
shareholders are not responsible for the debt of the Company, the unpaid debts
of $603,565 were extinguished, and the Company recognized a gain. There is no
tax effect of the gain since the Company has no current tax expense given its
utilization of net operating loss carryforwards.
NOTE 11 - STOCK OPTION PLANS
On September 30, 1992, the stockholders approved a non-qualified stock
option plan and an incentive stock option plan, pursuant to which a maximum
aggregate of 1,000,000 shares of common stock have been reserved for grant to
officers and key employees. Under both plans, the option price may not be less
than the fair market value of the common stock on the date of grant. Options are
exercisable over a five-year period beginning one year after the date of grant,
and the option exercise period is not to exceed ten years from that date. On
June 30, 1993, 150,000 options were granted under the non-qualified option plan
to an officer of the Company at an exercise price of $1.625 per share. As of
March 31, 1997, 90,000 of these options were vested and unexercised.
NOTE 12 - RELATED PARTY TRANSACTIONS
As of March 31, 1997, a note payable in the amount of $76,834 is unsecured
and due to the Company's Chairman of the Board. The note bears interest at 10%
and is due on demand.
Interest expense to related parties was approximately $38,345 and $38,880
for the years ended March 31, 1997 and 1996, respectively.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Licensing Agreements
The inventor of the Product obtained a United States patent for the Product
in February 1991. The Company and the patent owner entered into a license
agreement (the "License Agreement") as of January 1, 1992. The License Agreement
grants the Company to an exclusive license to market, manufacture, and sell the
Product in the United States and its possessions and territories for the
remaining life of the patent which is currently twelve years. Thereafter, the
design of the Product will be in the public domain, and the Company, as well as
other companies, will have the right to market, manufacture, and sell the
Product.
<PAGE>
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
Licensing Agreements (Continued)
The License Agreement also provides for royalties at rates ranging from
$.50 per unit to $1.20 per unit depending on the method of distribution used.
However, a minimum royalty of $125,000 is required to be paid during each
calendar year of the term of the License Agreement whether or not the Company
sells any units of the Product.
At March 31, 1997, the Company owed the patent owner an aggregate of
$355,518 in accrued royalties.
Litigation
As of March 31, 1996, the Company and an officer of the Company (the
"Defendants") had been named Defendants in a lawsuit. The action alleges that
the Defendants made certain representations in connection with the offer and
sale by the Company to plaintiffs pursuant to a private placement offering by
the Company in May 1994. On July 17, 1996, this matter was dismissed by the
courts.
In addition to the above, the Company is subject to other legal proceedings
which arise in the ordinary course of its business. In the opinion of
management, the amounts of ultimate liabilities with respect to these actions
will not materially affect the Company's financial position, results of
operations, or cash flows.
NOTE 14 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information for the years ended March 31 is as follows:
1997 1996
Cash paid for interest $ 73,958 $ 96,302
Cash paid for income taxes $ 800 $ 800
Non-cash financing activities for the years ended March 31 were as follows:
1997 1996
Conversion of note payable - related party to
300,000 shares of common stock $ 300,000 $ -
Conversion of accounts payable to 22,150 shares
of common stock $ 11,344 $ -
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the directors and executive officers of
Registrant as of March 31, 1997.
Name Age Current Position With Company
Jack I. Salzberg 74 Chairman of the Board and President
Valerio L. Giannini 59 Secretary and Director
William R. Fryrear 59 Chief Financial Officer
Gerald A. Bagg 45 Director
Martin Lautman 50 Director
Isaac S. Salzberg 45 Director
Listed below are descriptions of the business experience for at least the
past five years for each director and executive officer listed in the preceding
table. Unless otherwise described below, none of these individuals is related in
any way, or has been involved in certain legal proceedings in the past five
years, except as described in the legal proceedings section of this report.
GERALD A. BAGG served as President, Chief Operating Officer, and a director
of Registrant since March 20, 1992 and as Chief Executive Officer since December
30, 1992. As of February 1996, Mr. Bagg resigned as President and CEO but
remains a director and employee. From at least 1988, Mr. Bagg served as
President of Brentwood Marketing, a marketing and strategic planning firm
located in Los Angeles, California.
WILLIAM R. FRYREAR has served as Chief Financial Officer of Registrant
since January, 1994. He previously served in this capacity from March, 1989
until December, 1991. Mr. Fryrear has been Owner of Bar Professional Services,
an accounting firm located in Beverly Hills, California since 1976.
VALERIO L. GIANNINI served as President of Registrant from January, 1985 to
February, 1987 has served as a director since 1985 and was elected Secretary in
February 1995. Since 1990, Mr. Giannini has been a self employed investment
banker and financial consultant. He served as President of Geneva Business
Network, Inc., located in Irvine, California from 1987 to 1990.
MARTIN R. LAUTMAN has been a director of Registrant since January 1985. He
formerly served as President from February, 1987 to March, 1989 and as Secretary
from 1985 to February, 1987. Mr. Lautman has been Executive Vice President of
Arbor, Inc., located in Media, Pennsylvania, since 1977 and President of Arbor's
Market Research and Consulting Division since 1986.
ISAAC S. SALZBERG has served as a director of Registrant since March, 1989.
He was formerly President and Chief Executive Officer of Registrant from March,
1989 to March, 1992. He has been a director of First Charter Bank since 1988 and
an officer since 1989. Mr Salzberg left the bank and all positions in October
1996. Mr. Salzberg is the son of the Chairman of the Board of Registrant, Jack
I. Salzberg.
JACK I. SALZBERG has been Chairman of the Board since January, 1985 and has
served as Chief Executive Officer of Registrant from March, 1992 until December,
1992. He assumed the additional office of President in February 1996. He had
been Chairman of the Board since 1983 and Chief Executive Officer since June,
1989 of First Charter Bank, N.A., a national bank which operates two branch
offices in the Los Angeles area, and of which he was also a major stockholder.
Mr. Salzberg retired from all positions with First Charter Bank and divested
himself all stock ownership on September 30, 1995. Mr. Salzberg is the father of
Isaac S. Salzberg, a director of Registrant.
____________________
footnote (1)
It is with regret that we report that William Fryrear, Registrant's CFO,
passed away on October 18, 1996.
ITEM 10. EXECUTIVE COMPENSATION
Pursuant to Regulation S-K Item 402 (6) Omission of Table or Column, there
has been no compensation awarded to, earned by or paid to any of the named
executives required to be in the table or column for fiscal year March 31, 1997.
Arrangements with Directors
During the fiscal year 1997, Valerio L. Giannini, a director and Secretary
of Registrant, received a total of $12,500 as compensation for professional
services rendered to Registrant unrelated to his services and duties as a
director.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Registrant's Common Stock as of March 31, 1997 by (a) each director of the
Registrant; (b) each person known to Registrant to be the beneficial owner of
more than five percent (5%) of its Common Stock; and (c) all directors and
officers of Registrant as a group.
<PAGE>
Amount and Nature
of
Beneficial Ownership
Name of Beneficial Percent of
Owner Title Number of Shares Class
Gerald A. Bagg Director 90,000 (1) 1.48%
Valerio L. Giannini Corporate Secretary and Director 193,590 3.20%
Martin R. Lautman Director 140,430 2.32%
Isaac S. Salzberg Director 378,500 (2) 6.25%
Jack I. Salzberg Chairman of the Board & President 1,160,000 19.15%
All Directors and Officers as a Group (5 persons) 1,962,520 32.40%
(Footnotes)
(1) Includes 90,000 shares which Mr. Bagg has the right to acquire through
common stock options which became exercisable as of June 1, 1996.
(2) Includes 85,000 shares are held by Isaac S. Salzberg and Susan S.
Salzberg as trustees for the Isaac S. Salzberg and Susan S. Salzberg Living
Trust. The balance of these shares is held by Mr. Salzberg as custodian for his
minor children. Mr. Salzberg has the power to both vote and direct the
disposition of his children's shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans from Related Parties
Jack I. Salzberg
Registrant renewed $76,834 in demand notes payable to Jack I. Salzberg,
Registrant's Chairman of the Board, to fiscal year ended March 31, 1997. As of
fiscal 1996 total was $376,834 of which he exercised his option to convert
$300,000 into common stock at $1.00 per share during the fiscal year 1997. Mr.
Salzberg's note is due on demand and carry interest at 10% at March 31, 1997.
Esther Kozienicki
Registrant renewed $566,000 in notes payable to Esther Kozienicki, the
sister of Jack I. Salzberg, Registrant's Chairman of the Board, to fiscal year
ended March 31, 1997 Notes payable to Esther Kozienicki at March 31, 1996 were
$566,000. Registrant's board of directors approved and Esther Kozienicki has the
option to convert $300,000 of her notes payable into common stock at $1.00 per
share. The notes bear interest at 10% and mature September 30, 1998.
Malka Livne
Registrant renewed $350,000 in notes payable to Malka Livne, the sister of
the wife of Registrant's Chairman of the Board to fiscal year ended March 31,
1997. Notes payable to Malka Livne at March 31, 1996 were $350,000. The notes
bear interest at 10% and mature September 30, 1998. Registrant's board of
directors approved and Malka Livne has the option to convert $300,000 of his
notes payable into common stock at $1.00 per share.
<PAGE>
Bank Accounts Held at First Charter Bank
Registrant maintains several bank accounts with First Charter Bank, located
in Beverly Hills, California. Registrant's Chairman of the Board was a major
stockholder and Chairman of the Board through September 30, 1995 of First
Charter Bank.
PART IV.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a)(1) Exhibits
See Index to Exhibits. The exhibits therein listed and attached hereto, and
the Exhibits therein incorporated by reference, are filed as a part of this
report.
(a)(2) List
See exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NUMEX CORPORATION
By /s/ JACK I. SALZBERG
Jack I. Salzberg
Chairman of the Board & President
Dated: June 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ JACK I. SALZBERG
Jack I. Salzberg
Chairman of the Board & President
/s/ GERALD A. BAGG
Gerald A. Bagg
Director
/s/ VALERIO L. GIANNINI
Valerio L. Giannini
Secretary and Director
/s/ MARTIN R. LAUTMAN
Martin R. Lautman
Director
/s/ ISAAC S. SALZBERG
Isaac S. Salzberg
Director
Dated: June 27, 1997
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
2.1 Asset Purchase Agreement by and between Registrant and DDI dated
December 3, 1990. Incorporated by reference to exhibit 2(a) to Form 8-K dated
December 9, 1990.
2.2 Amendment to Asset Purchase Agreement by and between Registrant and
DDI, dated January 2, 1991. Incorporated by reference to exhibit 2(b) to Form
8-K dated December 9, 1990.
3.1 Registrant's Certificate of Incorporation. Incorporated by reference to
exhibit 2.1 to Registrant's Registration Statement on Form S-18, filed on August
14, 1980.
3.2 Registrant's Certificate of Amendment to the Certificate of
Incorporation filed August 30, 1985. Incorporated by reference to exhibit 3.3 to
Registrant's Form 10-K for fiscal year ending March 31, 1988.
3.3 Registrant's Certificate of Amendment to the Certificate of
Incorporation filed March 31, 1986. Incorporated by reference to exhibit 10.4 to
Registrant's Form 10-K for fiscal year ending March 31, 1986.
3.4 Registrant's Certificate of Amendment to the Certificate of
Incorporation filed October 14, 1992. Incorporated by reference to exhibit 3.4
to Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
3.5 Bylaws of Registrant. Incorporated by reference to exhibit 2.2 to
Registrant's Registration Statement on Form S-18, filed on August 14, 1980.
3.6 Amendment to Bylaws dated March 19, 1992. Incorporated by reference to
exhibit 3.6 to Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
3.7 Amendment to Bylaws dated March 30, 1992. Incorporated by reference to
exhibit 3.7 to Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
3.8 Amendment to Bylaws dated July 15, 1992. Incorporated by reference to
exhibit 3.8 to Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
3.9 Amendment to Bylaws dated December 30, 1992. Incorporated by reference
to exhibit 3.9 to Registrant's Form 10-KSB for fiscal year ending March 31,
1993.
4 Specimen Common Stock Certificate. Incorporated by reference to exhibit
3.0 to Registrant's Registration Statement on Form S-18, filed on August 14,
1980 (by amendment).
10.1 License agreement dated as of January 1, 1992 between Registrant and
Gunter Schweisfurth concerning the Product. Incorporated by reference to exhibit
10.1 to Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
10.2 Mutual Release and Settlement Agreement dated December 17, 1993
between Registrant and Delux Distributions International, Incorporated. Filed
herewith.
10.8 Registrant's 1992 Stock Option Plan. Incorporated by reference to
exhibit 10.8 to Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
<PAGE>
INDEX TO EXHIBITS, cont.
Exhibit No
10.9 Stock Option Agreement with Gerald A. Bagg. Incorporated by reference
to exhibit 10.9 to Registrant's Form 10-KSB for fiscal year ending March 31,
1993.
10.10 Consent Agreement Containing Order to Cease and Desist between
Registrant and the United States Federal Trade Commission dated October 21, 1992
and related Complaint. Incorporated by reference to exhibit 10.10 to
Registrant's Form 10-KSB for fiscal year ending March 31, 1993.
10.11 Exchange Agreement dated as of April 7, 1994 by and among Registrant,
Jack I. Salzberg, William Lovell and ViaStar Marketing, Inc. Incorporated by
reference to exhibit 10.11 to Form 8-K filed on April 22, 1994.
10.12 Amended and Restated Acquisition Agreement dated as of June 3, 1994
by and among Registrant, Airmotive Acquisitions, Inc., ViaStar Marketing, Inc.,
Jack I. Salzberg, William Lovell, Robert Circosta and George Simone.
Incorporated by reference to exhibit 10.12 to Form 8-K filed on June 17, 1994.
10.13 Employment Agreement dated June 6, 1994 by and among ViaStar
Marketing, Inc. (f/k/a Airmotive Acquisitions, Inc.), Registrant and William
Lovell. Incorporated by reference to exhibit 10.13 to Form 8-K filed on June 17,
1994.
10.14 Employment Agreement dated June 6, 1994 by and among ViaStar
Marketing, Inc. (f/k/a Airmotive Acquisitions, Inc.), Registrant and Robert
Circosta. Incorporated by reference to exhibit 10.14 to Form 8-K filed on June
17, 1994.
10.15 Employment Agreement dated June 6, 1994 by and among ViaStar
Marketing, Inc. (f/k/a Airmotive Acquisitions, Inc.), Registrant and George
Simone. Incorporated by reference to exhibit 10.15 to Form 8-K filed on June 17,
1994.
11 Statement regarding computation of per share earnings. Set forth on
Consolidated Statements of Operations, above, as Registrant has a simple capital
structure.
21 Subsidiaries of Registrant.
INDEX TO ANNUAL REPORT ON FORM 10-K
10-K Contents
PAGE
PART I
Item 1. Business 2
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to Vote of Security Holders 6
PART II.
Item 5. Market for the Registrant's Common Stock Equity and
Related Security Holder Matters 6-7
Item 6. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 7-9
Item 7. Financia1 Statements and Supplementary Data 11-24
Item 8. Changes in and disagreements with Accountants
on Accounting and Financial Disclosure 25
Item 9. Directors and Executive Officers of the Registrant 25
Item 10. Executive Compensation 26
Item 11. Security Ownership of Certain Beneficial
Owners and Management . 26-27
Item 12. Certain relationships and Related Transactions 27-28
PART IV
Item 13. Exhibits List and Reports on Form 8-K 30-31
SIGNATURES 32
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> AUDITED
FINANCIAL DATA SCHEDULE
</LEGEND>
<CIK> 318716
<NAME> NUMEX CORPORATION
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 0
<CASH> 14,981
<SECURITIES> 0
<RECEIVABLES> 9,058
<ALLOWANCES> 0
<INVENTORY> 8,824
<CURRENT-ASSETS> 38,638
<PP&E> 216,766
<DEPRECIATION> (197,856)
<TOTAL-ASSETS> 69,939
<CURRENT-LIABILITIES> 1,972,101
<BONDS> 600,000
0
170,000
<COMMON> 659,275
<OTHER-SE> (3,331,437)
<TOTAL-LIABILITY-AND-EQUITY> 69,939
<SALES> 296,357
<TOTAL-REVENUES> 296,357
<CGS> 155,203
<TOTAL-COSTS> 808,650
<OTHER-EXPENSES> 351,780
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203,766
<INCOME-PRETAX> (464,274)
<INCOME-TAX> 800
<INCOME-CONTINUING> (1,068,639)
<DISCONTINUED> 603,565
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (465,074)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
