SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
Commission file number 33-28188
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
Colorado 84-1116458
------------------------ -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
650 W. Georgia Street, Suite 450, Vancouver, B.C., Canada V6B-4N8
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 684-8662
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
X
State issuer's revenues for its most recent fiscal year. $0
Transitional Small Business Disclosure Format:
______ Yes __x__ No
<PAGE>
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1998: $945,424 (at $.87/share).
Number of outstanding shares of the registrant's no par value common stock, as
of December 31, 1998: 9,736,695.
<PAGE>
PART 1
Item 1. Business
Jefferson Capital Corporation (the Company), a development stage
company, was organized under the laws of the State of Colorado on
February 28, 1989. The Company is in the development stage as defined
in Financial Standards Board Statement No. 7.
On January 4, 1990, the Company sold 10,000,000 units of no par value
common stock in a "Blind Pool" public offering. The offering price for
each unit was $.01. Each unit consisted of one share of the Company's
no par value common stock and 25 Class A Common Stock Redeemable
Purchase Warrants (Class A Warrants). The Class A Warrants are
exercisable for 24 months from the effective date of the registration
statement (October 30, 1989) and entitled the holder thereof to
purchase 25 shares of common stock at a price of $.014 per share. The
Company received $72,730, net of offering costs, from the sale of
common stock in the public offering.
Effective June 13, 1990, the Company entered into a merger agreement
with Ohio & Southwestern Energy Company (OSEC). The Company issued
80,000,000 shares of its common stock in exchange for all of the
outstanding shares of OSEC. After the exchange of shares, OSEC's sole
shareholder, Members Service Corporation (MSC), owned 80% of the
Company's issued and outstanding common stock. The name of the
corporation was changed to Ohio & Southwestern Energy Company (OSEC).
While the company commenced 1990 with a successful public offering, the
subsequent merger agreement with Ohio & Southwestern Energy Corp.
(OSEC) became an abortive transaction. The new management of OSEC never
completed the merger with assets represented, and without authorization
distributed the corporate funds to unauthorized parties or uses which
resulted in a total write off of the capital of the Company.
The majority stockholder, MSC, failed to disclose to the minority
stockholders the distribution of corporate funds during the year ended
1990. The Company recorded an extraordinary loss in the amount of
$69,116 as a result of the unauthorized distribution of corporate funds
in 1990.
The minority shareholders filed a complaint in Arapahoe County Colorado
District Court, Civil Division, during April, 1991 alleging among other
things that the majority shareholder, MSC, failed to disclose the
distribution of corporate funds, failed to account for the operations
of the corporation and transferred assets of the corporation without
<PAGE>
stockholder or board meetings. The supposed assets of OSEC did not
exist and the Company (OSEC) was a sham.
On August 28, 1991, a Receiver was appointed and the court ordered the
80,000,000 shares of common stock issued to MSC to be canceled. On
January 12, 1995, the minority shareholders filed a motion for
supplemental orders requesting that the merger between Jefferson
Capital Corporation and Ohio and Southwestern Energy Company be
declared null and void and a bar date of April 15, 1995, be set within
which any and all creditors must file a claim.
On May 23, 1995, the Receiver issued his final report stating that no
claims of creditors had been filed by the bar date. The Receiver
incurred $36,395 in costs during receivership. Certain of the costs had
been advanced by the Receiver in the anticipation of issuance of shares
of common stock by the Board of Directors after the dismissal of the
Receivership.
On June 21, 1995, the Court ordered the merger null and void, approved
the Receiver's final report and authorized the restoration of the name
of the Company to Jefferson Capital Corporation. The Board has elected
to retain the existing name for consistency. The Company engaged in no
foreign operations or export sales to date, has no product and has no
full-time employees at year end.
On August 30, 1995 the shareholders of the company voted to approve a
reverse split of up to one new share for 300 shares outstanding. On
September 25, 1995, the directors effectuated a reverse split on a one
for 300 shares basis.
The Company was inactive in 1997.
On June 25, 1998, shareholders of Registrant entered into a Purchase
Agreement with CanArab Acquisitions Corp. under which Can Arab
purchased 8,650,000 common shares of The Ohio & Southwestern Energy
Company for $160,000, from GeoTech Management Services, Inc.
The following shareholders of CanArab Acquisition Corp. own or control
more than 5% of the total issued capital of CanArab:
Cankaz Technology Systems Corp. 10,000,000 shares 44%
Arab-German Fisheries, Inc. 9,500,000 shares 41%
Gerab Investments Corp. 1,175,000 shares 5%
Gerab Investments is owned 80% by Abbas Salih and 20% is held by three
German citizens. Cankaz Technology is owned 100% by Gerab Investments.
Arab German-Fisheries is owned 80% by Gerab Investments Corp and 20% by
the Arab Group International for Investment and Acquisition. Abbas
<PAGE>
Salih would be considered as the control person of the aggregated
entities and he therefore controls 94.8% of the Registrant.
Registrant entered into a Plan and Agreement to acquire CanArab
Technology Limited from shareholders in consideration of the issuance
of Fourteen Million Six Hundred Fifty Thousand (14,650,000) shares of
common stock of Registrant. CanArab has developed marine aquaculture
designs for shrimp farming. Concurrent with the acquisition. CanArab
Acquisitions Corp. was to surrender 8,650,000 shares to Registrant for
cancellation. The acquisition was closed but rescinded thereafter
because funding sufficient to implement the plan of business was never
achieved.
The Company entered into an Agreement in October 1998 to acquire Canbau
Construction GMBH of Germany for one million shares of common stock of
the Registrant. The Agreement required certain due diligence
investigation and is based upon the representation of Canbau that it
will have audited financial statements showing a four million dollar
asset base. Canbau has been retained to construct a shrimp processing
plant in Germany with an estimated cost of $42 million, subject to
arrangement of financing which is not yet assured as of the date of the
Agreement. The Agreement has never been consummated due to lack of
funding and lack of audited financial statements.
The Company is actively seeking acquisition candidates.
The Company's Articles of Incorporation, as amended, entitle it to
transact any lawful business or businesses for which corporations may
be incorporated pursuant to the Colorado Corporation Code. The Company
can be defined as a "shell" company, whose sole purpose at this time is
to locate and consummate a merger or acquisition with a private entity.
Any business combination or transaction will likely result in a
significant issuance of shares and substantial dilution to present
stockholders of the Company.
The proposed business activities described herein may classify the
Company as a "blank check" company. Many states have enacted statutes,
rules and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. In order to comply with
these various limitations, management does not intend to undertake any
efforts to sell any additional securities of the Company, either debt
or equity, or cause a market to develop in the Company's securities
until such time as the Company has successfully implemented its
business plan described herein.
<PAGE>
General Business Plan
The Company's purpose is to seek, investigate and, if such
investigation warrants, acquire an interest in business opportunities
presented to it by persons or firms who or which desire to seek the
perceived advantages of a corporation which reports under Section 13
and 15 of the Securities Exchange Act of 1934 (the "Exchange Act"). The
Company will not restrict its search to any specific business, industry
or geographical location and the Company may participate in a business
venture of virtually any kind or nature. This discussion of the
proposed business is purposefully general and is not meant to be
restrictive of the Company's virtually unlimited discretion to search
for and enter into potential business opportunities. Management
anticipates that it may be able to participate in only one potential
business venture because the Company has nominal assets and limited
financial resources. See "Financial Statements." This lack of
diversification should be considered a substantial risk to shareholders
of the Company because it will not permit the Company to offset
potential losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public
marketplace in order to raise additional capital in order to expand
into new products or markets, to develop a new product or service or
for other corporate purposes. The Company may acquire assets and
establish wholly-owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to
general economic conditions, rapid technological advances being made in
some industries and shortages of available capital, management believes
that there are numerous firms seeking the perceived benefits of a
publicly registered corporation. Such perceived benefits may include
facilitating or improving the terms on which additional equity
financing may be sought, providing liquidity for incentive stock
options or similar benefits to key employees, providing liquidity
(subject to restrictions of applicable statutes) for all shareholders
and other factors. Potentially, available business opportunities may
occur in many different industries and at various stages of
development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely
difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash
or other assets. However, management believes that the Company will be
<PAGE>
able to offer owners of acquisition candidates the opportunity to
acquire a controlling ownership interest in a publicly registered
company without incurring the cost and time required to conduct an
initial public offering. The owners of the business opportunities will,
however, incur significant legal and accounting costs in connection
with the acquisition of a business opportunity including the costs of
preparing forms 8-K, 10Q, or agreements and related reports and
documents. The Exchange Act specifically requires that any merger or
acquisition candidate comply with all applicable reporting
requirements, which include providing audited financial statements to
be included within the numerous filings relevant to complying with the
Exchange Act. Nevertheless, the officers and directors of the Company
have not conducted market research and are not aware of statistical
data which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity. The
analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company have not
conducted market research and are not aware of statistical data which
would support the perceived benefits of a merger or acquisition
transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officers and directors of the Company,
none of whom is a professional business analyst. Management intends to
concentrate on identifying preliminary prospective business
opportunities which may be brought to its attention through present
associations of the Company's officers and directors, or by the
Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available
technical, financial and managerial resources; working capital and
other financial requirements; history of operations, if any; prospects
for the future; nature of present and expected competition; the quality
and experience of management services which may be available and the
depth of that management; the potential for further research,
development or exploration; specific risk factors not now foreseeable
but which then may be anticipated to impact the proposed activities of
the Company; the potential for growth or expansion; the potential for
profit; the perceived public recognition or acceptance of products,
services or trades; name identification; and other relevant factors.
Officers and directors of the Company will meet personally with
management and key personnel of the business opportunity as part of
their investigation. To the extent possible, the Company intends to
utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company
for which audited financial statements cannot be obtained within a
reasonable period of time after closing of the proposed transaction.
<PAGE>
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own
efforts and, to a much lesser extent, the efforts of the Company's
shareholders, in accomplishing the business purposes of the Company. It
is not anticipated that any outside consultants or advisors, other than
the Company's legal counsel and accountants, will be utilized by the
Company to effectuate its business purposes described herein. However,
if the Company does retain such an outside consultant or advisor, any
cash fee earned by such party will need to be paid by the prospective
merger/acquisition candidate, as the Company has no cash assets with
which to pay such obligation. There have been no contracts or
agreements with any outside consultants and none are anticipated in the
future.
The Company will not restrict its search to any specific kind of firms,
but may acquire a venture which is in its preliminary or development
stage, which is already in operation or which is in essentially any
stage of its corporate life. It is impossible to predict at this time
the status of any business in which the Company may become engaged, in
that such business may need to seek additional capital, may desire to
have its shares publicly traded or may seek other perceived advantages
which the Company may offer.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the
Company has no capital with which to pay these anticipated expenses,
present management of the Company will pay these charges with their
personal funds, as interest free loans to the Company. However, the
only opportunity which management has to have these loans repaid will
be from a prospective merger or acquisition candidate. Management has
agreed among themselves that the repayment of any loans made on behalf
of the Company will not impede, or be made conditional in any manner,
on consummation of a proposed transaction.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization,
joint venture or licensing agreement with another corporation or
entity. It may also acquire stock or assets of an existing business. On
the consummation of a transaction, it is probable that the present
management and shareholders of the Company will no longer be in control
of the Company. In addition, the Company's directors may, as part of
<PAGE>
the terms of the acquisition transaction, resign and be replaced by new
directors without a vote of the Company's shareholders or may sell
their stock in the Company. Any and all such sales will only be made in
compliance with the securities laws of the United States and any
applicable state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under
applicable federal and state securities laws. In some circumstances,
however, as a negotiated element of its transaction, the Company may
agree to register all or a part of such securities immediately after
the transaction is consummated or at specified times thereafter. If
such registration occurs, of which there can be no assurance, it will
be undertaken by the surviving entity after the Company has
successfully consummated a merger or acquisition and the Company is no
longer considered a "shell" company. Until such time as this occurs,
the Company will not attempt to register any additional securities. The
issuance of substantial additional securities and their potential sale
into any trading market which may develop in the Company's securities
may have a depressive effect on the value of the Company's securities
in the future, if such a market develops, of which there is no
assurance.
While the actual terms of a transaction to which the Company may be a
party cannot be predicted, it may be expected that the parties to the
business transaction will find it desirable to avoid the creation of a
taxable event and thereby structure the acquisition in a so-called
"tax-free" reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code (the "Code"). In order to obtain tax-free
treatment under the Code, it may be necessary for the owners of the
acquired business to own 80% or more of the voting stock of the
surviving entity. In such event, the shareholders of the Company would
retain less than 20% of the issued and outstanding shares of the
surviving entity, which would result in significant dilution in the
equity of such shareholders.
As part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, may
visit and inspect material facilities, obtain independent analysis or
verification of certain information provided, check references of
management and key personnel and take other reasonable investigative
measures, to the extent of the Company's limited financial resources
and management expertise. The manner in which the Company participates
in an opportunity will depend on the nature of the opportunity, the
respective needs and desires of the Company and other parties, the
management of the opportunity and the relative negotiation strength of
the Company and such other management.
<PAGE>
With respect to any merger or acquisition, negotiations with target
company management are expected to focus on the percentage of the
Company which target company shareholders would acquire in exchange for
all of their shareholdings in the target company. Depending upon, among
other things, the target company's assets and liabilities, the
Company's shareholders will in all likelihood hold a substantially
lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to
significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by
the Company can be expected to have a significant dilutive effect on
the percentage of shares held by the Company's then-shareholders. If
required to so do under relevant law, management of the Company will
seek shareholder approval of a proposed merger or acquisition via a
Proxy Statement. However, such approval would be assured where
management supports such a business transaction because management
presently controls sufficient shares of the Company to effectuate a
positive vote on the proposed transaction. Further, a prospective
transaction may be structured so that shareholder approval is not
required, and such a transaction may be effectuated by the Board of
Directors without shareholder approval.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although
the terms of such agreements cannot be predicted, generally such
agreements will require some specific representations and warranties by
all of the parties thereto, will specify certain events of default,
will detail the terms of closing and the conditions which must be
satisfied by each of the parties prior to and after such closing, will
outline the manner of bearing costs, including costs associated with
the Company's attorneys and accountants, will set forth remedies on
default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements
within a reasonable period of time after closing of the proposed
transaction. The Company is subject to all of the reporting
requirements included in the Exchange Act. Included in these
requirements is the affirmative duty of the Company to file independent
audited financial statements as part of its Form 8-K to be filed with
the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements
included in its annual report on Form 10-KSB (or 10-K, as applicable).
If such audited financial statements are not available at closing, or
within time parameters necessary to insure the Company's compliance
<PAGE>
with the requirements of the Exchange Act, or if the audited financial
statements provided do not conform to the representations made by the
candidate to be acquired in the closing documents, the closing
documents will provide that the proposed transaction will be voidable,
at the discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision
providing for the acquisition entity to reimburse the Company for all
costs associated with the proposed transaction.
Competition
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are
many established venture capital and financial concerns which have
significantly greater financial and personnel resources and technical
expertise than the Company. In view of the Company's combined extremely
limited financial resources and limited management availability, the
Company will continue to be at a significant competitive disadvantage
compared to the Company's competitors.
Employees
The Company has no full time employees. The Company's president,
treasurer and secretary have agreed to allocate a portion of their time
to the activities of the Company, without compensation. These officers
anticipate that the business plan of the Company can be implemented by
their devoting approximately 20 hours per month to the business affairs
of the Company and, consequently, conflicts of interest may arise with
respect to the limited time commitment by such officers. See Item 9,
"Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act."
Investment Company Act of 1940
The Company may participate in a business or opportunity by purchasing,
trading or selling the securities of such business. However, the
Company does not intend to engage primarily in such activities.
Specifically, the Company intends to conduct its activities so as to
avoid being classified as an "investment company" under the Investment
Company Act of 1940 (the "Investment Act"), and therefore avoid
application of the costly and restrictive registration and other
provisions of the Investment Act and the regulations promulgated
thereunder.
Section 3(a) of the Investment Act provides the definition of an
"investment company" which includes an entity that engages or holds
<PAGE>
itself out as being engaged primarily in the business of investing,
reinvesting or trading in securities, or that engages or proposes to
engage in the business of investing, reinvesting, owning, holding or
trading "investment securities" (defined as all securities other than
government securities, securities of majority-owned subsidiaries and
certain other securities) the value of which exceeds 40% of the value
of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner
that will result in the availability of this exception from the
definition of "investment company." Consequently, the Company's
participation in a business or opportunity through the purchase and
sale of investment securities will be limited. In order to avoid
classification as an investment company, the Company will search for,
analyze and acquire or participate in a business opportunity by use of
a method that does not involve the acquisition, ownership or holding of
investment securities.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it
consummates a reorganization as discussed above. Each of these areas is
regulated by the Investment Act, which regulation has the purported
purpose of protecting purchasers of investment company securities.
Since the Company will not register as an investment company, its
shareholders will not be afforded these purported protections.
The Company intends to vigorously resist classification as an
investment company and to take advantage of any exemptions or
exceptions from application of the Investment Act, which allows an
entity a one-time option during any three-year period to claim an
exemption as a "transient" investment company. The necessity of
asserting any such resistance, or making any claim of exemption, could
be time-consuming and costly, or even prohibitive, given the Company's
limited resources.
Certain Risks
The Company's business is subject to numerous risk factors, including
the following:
No Operating History or Revenue and Minimal Assets. The Company has had
no operating history nor any revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company
will, in all likelihood, sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in the Company incurring a net operating
loss which will increase continuously until the Company can consummate
<PAGE>
a business combination with a profitable business opportunity. There is
no assurance that the Company can identify such a business opportunity
and consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on
the operations, financial condition and management of the identified
business opportunity. While management intends to seek business
combination(s) with entities having established operating histories,
there can be no assurance that the Company will be successful in
locating candidates meeting such criteria. In the event the Company
completes a business combination, of which there can be no assurance,
the success of the Company's operations may be dependent upon
management of the successor firm or venture partner firm and numerous
other factors beyond the Company's control.
Scarcity of and Competition for Business Opportunities and
Combinations. The Company is and will continue to be an insignificant
participant in the business of seeking mergers with, joint ventures
with and acquisitions of small private and public entities. A large
number of established and well-financed entities, including venture
capital firms, are active in mergers and acquisitions of companies
which may be desirable target candidates for the Company. Nearly all
such entities have significantly greater financial resources, technical
expertise and managerial capabilities than the Company and,
consequently, the Company will be at a competitive disadvantage in
identifying possible business opportunities and successfully completing
a business combination. Moreover, the Company will also compete in
seeking merger or acquisition candidates with numerous other small
public companies.
No Agreement for Business Combination or Other Transaction; No
Standards for Business Combination. The Company has no arrangement,
agreement or understanding with respect to engaging in a merger with,
joint venture with or acquisition of, a private or public entity. There
can be no assurance that the Company will be successful in identifying
and evaluating suitable business opportunities or in concluding a
business combination. Management has not identified any particular
industry or specific business within an industry for evaluation by the
Company. There is no assurance that the Company will be able to
negotiate a business combination on terms favorable to the Company. The
Company has not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria which
it will require a target business opportunity to have achieved, and
without which the Company would not consider a business combination in
any form with such business opportunity. Accordingly, the Company may
enter into a business combination with a business opportunity having no
<PAGE>
significant operating history, losses, limited or no potential for
earnings, limited assets, negative net worth or other negative
characteristics.
Continued Management Control; Limited Time Availability. While seeking
a business combination, management anticipates devoting up to 20 hours
per month to the business of the Company. None of the Company's
officers has entered into a written employment agreement with the
Company and none is expected to do so in the foreseeable future. The
Company has not obtained key man life insurance on any of its officers
or directors. Notwithstanding the combined limited experience and time
commitment of management, loss of the services of any of these
individuals would adversely affect development of the Company's
business and its likelihood of continuing operations. See Item 9,
"Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act."
Conflicts of Interest - General. Certain of the officers and directors
of the Company are directors and/or principal shareholders of other
blank check companies and, therefore, could face conflicts of interest
with respect to potential acquisitions. In addition, officers and
directors of the Company may in the future participate in business
ventures which could be deemed to compete directly with the Company.
Additional conflicts of interest and non-arms length transactions may
also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the
Company transacts business. The Company's Board of Directors has
adopted a policy that the Company will not seek a merger with, or
acquisition of, any entity in which management serve as officers or
directors, or in which they or their family members own or hold a
controlling ownership interest. Although the Board of Directors could
elect to change this policy, the Board of Directors has no present
intention to do so. In addition, if the Company and other blank check
companies with which the Company's officers and directors are
affiliated both desire to take advantage of a potential business
opportunity, then the Board of Directors has agreed that said
opportunity should be available to each such company in the order in
which such companies registered or became current in the filing of
annual reports under the Exchange Act subsequent to January 1, 1997.
See Item 9, "Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act - Conflicts
of Interest."
Reporting Requirements May Delay or Preclude Acquisition. Sections 13
and 15(d) of the Exchange Act require companies subject thereto to
provide certain information about significant acquisitions, including
certified financial statements for the company acquired, covering one,
<PAGE>
two or three years, depending on the relative size of the acquisition.
The time and additional costs that may be incurred by some target
entities to prepare such statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition
by the Company. Acquisition prospects that do not have or are unable to
obtain the required audited statements may not be appropriate for
acquisition so long as the reporting requirements of the Exchange Act
are applicable.
Lack of Market Research or Marketing Organization. The Company has
neither conducted, nor have others made available to it, results of
market research indicating that market demand exists for the
transactions contemplated by the Company. Moreover, the Company does
not have, and does not plan to establish, a marketing organization.
Even in the event demand is identified for a merger or acquisition
contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a
business combination with a business opportunity. Consequently, the
Company's activities may be limited to those engaged in by the business
opportunity or opportunities which the Company merges with or acquires.
The Company's inability to diversify its activities into a number of
areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks
associated with the Company's operations.
Regulation. Although the Company will be subject to regulation under
the Exchange Act, management believes the Company will not be subject
to regulation under the Investment Company Act of 1940, insofar as the
Company will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a
number of entities, the Company could be subject to regulation under
the Investment Company Act of 1940. In such event, the Company would be
required to register as an investment company and could be expected to
incur significant registration and compliance costs. The Company has
obtained no formal determination from the Securities and Exchange
Commission as to the status of the Company under the Investment Company
Act of 1940 and, consequently, any violation of such Act would subject
the Company to material adverse consequences.
Probable Change in Control and Management. A business combination
involving the issuance of the Company's Common Stock will, in all
likelihood, result in shareholders of a private company obtaining a
controlling interest in the Company. Any such business combination may
<PAGE>
require management of the Company to sell or transfer all or a portion
of the Company's Common Stock held by them, or resign as members of the
Board of Directors of the Company. The resulting change in control of
the Company could result in removal of one or more present officers and
directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the
Company.
Reduction of Percentage Share Ownership Following Business Combination.
The Company's primary plan of operation is based upon a business
combination with a private concern which, in all likelihood, would
result in the Company issuing securities to shareholders of any such
private company. The issuance of previously authorized and unissued
shares of Common Stock of the Company would result in a reduction in
the percentage of shares owned by present and prospective shareholders
of the Company and may result in a change in control or management of
the Company.
Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public
trading market for its shares. A business opportunity may attempt to
avoid what it deems to be adverse consequences of undertaking its own
public offering by seeking a business combination with the Company.
Such consequences may include, but are not limited to, time delays of
the registration process, significant expenses to be incurred in such
an offering, loss of voting control to public shareholders and the
inability or unwillingness to comply with various federal and state
laws enacted for the protection of investors.
Taxation. Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination the Company may
undertake. Currently, such transactions may be structured so as to
result in tax-free treatment to both companies, pursuant to various
federal and state tax provisions. The Company intends to structure any
business combination so as to minimize the federal and state tax
consequences to both the Company and the target entity; however, there
can be no assurance that such business combination will meet the
statutory requirements of a tax-free reorganization or that the parties
will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition
of both federal and state taxes which may have an adverse effect on
both parties to the transaction.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential
business opportunity must provide audited financial statements for
review, for the protection of all parties to the business combination.
<PAGE>
One or more attractive business opportunities may choose to forego the
possibility of a business combination with the Company, rather than
incur the expenses associated with preparing audited financial
statements.
Item 2. Property
The Company maintains a corporate office at P.O. Box 11569, 650 W.
Georgia Street, Suite 450, Vancouver, BC, Canada V6B 4N8. The company
owns no real property.
Item 3. Legal Proceedings
The Company is a party to no pending legal proceedings, nor is its
property subject to such proceedings, at year end 1998.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fiscal year covered by this report
to a vote of security holders of the Company, through the solicitation
of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of the date of this report, management knows of no trading or
quotation of the Company's common stock. The range of high and low bid
quotations for each fiscal quarter since the last report, as reported
by the National Quotation Bureau Incorporated, was as follows:
1998 High Low
First quarter * *
Second quarter * *
Third quarter .82 .37
Fourth quarter .87 .37
1997 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
* No quotations reported
The above quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent
actual transactions.
As of December 31, 1998 there were approximately 60 record holders of
the Company's common Stock.
The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable
future.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition and Changes in Financial Condition
No operations were conducted and no revenues were generated in the
fiscal year. The Company at year end had no capital and only minimal
cash, and no other assets whatsoever. The Company at year end was
totally illiquid and would have needed cash infusions from shareholders
to provide capital.
Liquidity and Capital Resources
The Company had no cash at December 31, 1998.
<PAGE>
The Company ceased active operations in 1991 and has no business at the
present time. It anticipates seeking acquisition or merger candidates
in the future.
During the course of the fiscal year ended December 31, 1998, the
Company's outstanding debt level increased to $49,965 from $11,069 in
fiscal year ended December 31, 1997. This increase was due to costs
relating to company's public status, and legal and accounting.
Stockholders deficit increased to ($49,965) at December 31, 1998
compared to ($10,057) at December 31, 1997.
The Company currently has no capital resources.
The Company has no other known material commitments for capital
expenditures. The Company has entered into agreements concerning
transactions with Canarab Technology and Canbau Construction GMBH each
of which would require significant funding in excess of $2 million, but
neither of which has been consummated due to lack of funding.
Results of Operations
During the fiscal year ended December 31, 1998, the Company incurred
general and administrative expenses and consulting fees. At present,
the Company has no business income or operations. Accordingly, the
reported financial information herein may not be indicative of future
operating results.
Results of Operations for Year Ended December 31, 1998 Compared to Year
Ended December 31, 1997.
The Company had no operating business and no revenues in 1998 nor any
in 1997. The Company incurred general and administrative expenses,
including legal and accounting, of $67,772 in 1998 as compared to
$22,261 in 1997. The increased expenses resulted from legal,
accounting, and management fees related to change of control and
attempts to contract for a new business. The Company had a gain in 1998
on settlement of debt of $15,464. The net loss for the year in 1998 was
($52,308) as compared to a ($22,261) loss for 1997.
The trend of losses on operations (or lack thereof) can be expected to
continue until and unless the Company ever achieves substantial cash
flow from any business operations. The Company has no business or
operations as of the date hereof.
<PAGE>
Comparison of year Ended December 31, 1997 to year Ended December 31,
1996. The Company ceased operations in June 1991, and has had no
revenues or sales of any type since then.
General and administrative expenses for the years ended December 31,
1997 and 1996 were $22,261 and $9,068 respectively.
The operating losses for years ended December 31, 1997 and 1996 were
($22,261) and ($9,068), respectively. The net loss for year ended
December 31, 1997 was ($22,261). For year ended December 31, 1996, the
net loss was ($9,068).
Loss per share for year ended December 31, 1997 was ($.01) per share,
compared to approximately ($.08) per share for year ended December 31,
1996.
The management of the Company does not believe that inflation has had
any material effect on the Company during the year ended December 31,
1998.
Year 2000 issues "Year 2000 problems) result primarily from the
inability of some computer software to properly store, recall or use
data after December 31, 1999. The Company is engaged primarily in
organizational and fund raising activities and accordingly, does not
rely on information technology ("IT") systems. Accordingly, the Company
does not believe that it will be materially affected by Year 2000
problems. The Company relies on non-IT systems that may suffer from
Year 2000 problems including telephone systems, facsimile and other
office machines. Moreover, the Company relies on third-parties that may
suffer from Year 2000 problems that could affect the Company's minimal
operations, the Company does not believe that such non-IT systems or
third-party Year 2000 problems will affect the Company in a manner that
is different or more substantial than such problems affect other
similarly situated companies. Consequently, the Company does not
currently intend to conduct a readiness assessment of Year 2000
problems or develop a detained contingency plan with respect to Year
2000 problems that may affect the Company or third-parties.
The foregoing is a "Year 2000 Readiness Disclosure" within the meaning
of the Year 2000 Information and Readiness Disclosure Act of 1998.
Item 7. Financial Statements and Supplementary Data
Please refer to pages F-1 through F-10.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Amisano & Hanson, CPA's of Vancouver, B.C. were retained in 1998 as auditors for
the Company for fiscal year 1998. Prior auditors for the Company were A.J.
Robbins, & Co., CPA, PC of Denver, Colorado for the fiscal years 1991 through
1997.
In connection with audits of two most recent fiscal years and any interim period
preceding resignation, no disagreements exist with any former accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope of procedure, which disagreements if not resolved to the
satisfaction of the former accountant would have caused him to make reference in
connection with his report to the subject matter of the disagreement(s).
The decision to change accountants was approved by the Board of Directors as the
registrant had no audit committee.
The principal accountant's report on the financial statements for any of the
past two years contained no adverse opinion or a disclaimer of opinion nor was
qualified as to uncertainty, audit scope, or accounting principles except for
the "going concern" qualification.
PART III
Item 9. Directors and Executive Officers of the Registrant and Compliance with
Section 16(a)
The directors and executive officers of the Company as of December 31,
1998 are as follows:
Name Age Position
Ralph Shearing 42 President, Director
Ron Ginetz 52 Secretary/Treasurer
Abbas Salih 51 Director, Chairman
The term of office of each director and executive officer ends at, or
immediately after, the next annual meeting of shareholders of the Company.
Except as otherwise indicated, no organization by which any director or officer
has been previously employed is an affiliate, parent or subsidiary of the
Company.
Ralph Shearing resigned as a Director and President on October 7, 1998.
<PAGE>
Ronald Ginetz was appointed as a Director and as President on October
7, 1998. Abbas Salih was appointed as Chairman of the Board on October 7, 1998.
Subsequently, Ronald Ginetz resigned as President and Director, and
Ralph Shearing was reappointed President and Director in December 1998.
Ralph E. Shearing, B.Sc., P.Geol., age 42 President and Director
Mr. Shearing has been President and Director of CanArab Acquisition
Corp. since 1997 and is President and a Director of CanArab Technology Limited.
Mr. Shearing graduated from the University of British Columbia in 1981
with a B.Sc. in Geology and immediately began practicing his profession
throughout Canada on mining projects. In 1985 he and a colleague founded Quest
Canada Drilling, Ltd., a diamond drilling company and in 1986 he founded
Consolidated Samarkand Resources, Inc., a junior mining exploration and
development company listed on the Vancouver Stock Exchange. As its President and
Chief Executive Officer for over 10 years, Mr. Shearing has experience in
managing a public company. He is a director of Intertech Minerals Corp. and
principal owner and director of CMB Investments, Ltd.
Abbas Salih, age 51 Chairman and Director
Mr. Salih is Chairman and a Director of CanArab Technology Limited. Mr.
Salih is a graduate of the Khartoum Technical Institute in the Sudan. He
received his formal training while serving as a member of the Sudan Royal Air
force from 1965-1970 which included attendance at the British Royal Air Force
Academy, Newton No. 9 in Nottingham, England, where he studied aircraft
electronic and instrumentation.
After his British training, Mr. Salih received further aviation
training in Kyrgyzstan, Southern Russia, as a guest of the Russian Air Force
where he studied and maintained MIG-21 jet aircraft. From 1970-1974, he
conducted business in the Sudan and Germany and in 1975 became the Managing
Director to Prince Sultan Bin Saud Bin Abdullah Al Saud of Riyadh, Saudi Arabia.
In 1975 Mr. Salih joined Bautechnque GmbH, a large German construction
and engineering firm as their financial manager where he arranged a $140 million
financing for the construction of schools in Saudi Arabia. In 1989, he and
several associates formed Regions International Investment Company Limited
(RIICO) the largest trucking company in the Sudan with a fleet of 125
tanker/cargo transport vehicles. Mr. Salih joined the Board of Directors of Arab
Group International for Investment and Acquisitions (AGIIA) during 1992. In
<PAGE>
1997, he formed CanArab Acquisitions Corp. of which he is a Director and
Chairman to investigate, evaluate, and design the shrimp aquaculture concept.
Ronald M.J. Ginetz, age 52, Director & Secretary Since 1998
Mr. Ginetz received his B.Sc. and M.Sc. degrees in Zoology at the
University of British Columbia in 1970 and 1972, respectively. From 1971 to
1981, he held several fisheries development positions within the Canadian
Department of Fisheries and Oceans, Pacific Region. From 1981-84, he served as
the National Coordinator of Employment Programming for the Department of
Fisheries and Oceans in Ottawa, and from 1984-87 as the Director, Employment
Development Branch. From 1987 to the present, he has served as the Regional
Aquaculture Coordinator, Department of Fisheries and Oceans, Pacific Region, in
Vancouver.
Mr. Ginetz has also authored several scientific and technical
publications on fisheries research and development and has traveled extensively
around the world to assess foreign fisheries technology for application in
Canada, and for the transfer of Canadian fisheries technology and management
systems to other jurisdictions (i.e., Japan, China, USA, Italy, Chile, Norway,
Scotland, Saudi Arabia, and Africa).
Item 10. Executive Compensation
The Company accrued a total of $0 in compensation to the executive
officers as a group for services rendered to the Company in all capacities
during the 1998 fiscal year. No one executive officer received, or has accrued
for his benefit, in excess of $60,000. No cash bonuses were or are to be paid to
such persons. No compensation was deferred.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was
paid or distributed during the last fiscal year, or is proposed to be paid or
distributed in the future, to the executive officers of the Company. No other
compensation not described above was paid or distributed during the last fiscal
year to the executive officers of the Company. There are no compensatory plans
or arrangements, with respect to any executive office of the Company, which
result or will result from the resignation, retirement or any other termination
of such individual's employment with the Company or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
- -------------------------- ----------- ------------- ----------- ------------------------ -------------------- =====================
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Year Salary ($) Bonus ($) Other Annual Restricted Stock Securities
Position Compensation ($) Award(s) Underlying Options/
($) SARs (#)
- --------------------------
----------- ------------- ----------- ------------------------ -------------------- =====================
Ralph Shearing, President 1996 0 0 0 0 0
----------- ------------- ----------- ------------------------ -------------------- =====================
1997 0 0 0 0 0
----------- ------------- ----------- ------------------------ -------------------- =====================
1998 0 0 0 0 0
========================== ----------- ------------- ----------- ------------------------ -------------------- =====================
Ron Ginetz, Secretary 1996 0 0 0 0 0
----------- ------------- ----------- ------------------------ -------------------- =====================
1997 0 0 0 0 0
=========== ============= =========== ======================== ==================== =====================
1998 0 0 0 0 0
========================== =========== ============= =========== ======================== ==================== =====================
</TABLE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
(Except for compensation of Officers who are also Directors which Compensation
is listed in Summary Compensation Table of Executives)
<TABLE>
<CAPTION>
Cash Compensation Security Grants
================================= ----------------- -------------- --------------------- ------------- =============================
Name Annual Retainer Meeting Fees Consulting Number of Number of Securities
Fees ($) ($) Fees/Other Fees ($) Shares (#) Underlying Options/SARs(#)
================================= ----------------- -------------- --------------------- ------------- =============================
<S> <C> <C> <C> <C> <C>
A. Director 0 0 0 0* 0
Ralph Shearing
================================= ----------------- -------------- --------------------- ------------- =============================
B. Director 0 0 0 0* 0
Abbas Salih
================================= ================= ============== ===================== ============= =============================
C. Ronald Ginetz 0 0 0 0* 0
================================= ================= ============== ===================== ============= =============================
</TABLE>
* See "Compensation Table of Executives"
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of December 31, 1998, with
respect to the beneficial ownership of the Company's no par value common stock
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding common stock, and by the Company's management.
Stock Names and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- ---------------- --------------------- ---------- --------
Common Ralph Shearing 0 0%
President/Director
650 W. Georgia St.
Suite 450
Vancouver, B.C.
Canada V6B 4N8
Common Abbas Salih 8,650,000 88%
(Chairman/Director)
650 W. Georgia St.
Suite 450
Vancouver, B.C.
Canada V6B 4N8
(Beneficially
through CanArab
Acquisitions)
Common Ronald M.J. Ginetz 0 0%
(Secretary/Treasurer
& Director)
650 W. Georgia St.
Suite 450
Vancouver, B.C.
Canada V6B 4N8
Officers and Directors as a group 8,650,000 88%
<PAGE>
Item 12. Certain Relationships and Related Transactions
During the year ended December 31, 1998, a director of the Company (Robert
Kropf) charged management fees of $7,000. These fees were settled by the
issuance of 7,000,000 shares of the Company at $0.01 per share.
During the year ended December 31, 1998, the Company was charged the following
by a company with a common director (Abbas Salih):
1998 1997
---- ----
General and administration expenses $ 2,171 $-
Rent 2,886 -
------- ----
$ 5,057 $-
During the year, the Company issued a total of 620,000 shares at $.01 for
services rendered in the negotiation of debt settlement and change of control of
the Company to two shareholders, who were neither officers, directors, nor
control parties at the time of issuance.
During the year ended December 31, 1997, the Company paid $10,000 to a
shareholder for consulting services and $5,000 to a shareholder for legal fees.
Due to a related party at December 31, 1998 is comprised of expenses paid by a
company with a common director on behalf of the Company for operating costs.
This amount is non-interest bearing, unsecured, and is payable upon demand.
PART IV
Item 13. Exhibits and Reports on Form 8-K
Exhibits are filed as part of this report.
1. Reports on Form 8-K (incorporated herein by reference):
July 10, 1998
September 10, 1998
November 9, 1998
2. Exhibits:
Agreement with Canbau Construction GMBH
<PAGE>
Form 10-K
Regulation Consecutive
S-K Number Exhibit Page Number
3.1 Articles of Incorporation *
3.3 Bylaws *
24.2 Court Order dated August 23, 1991 **
24.3 Court Order dated June 21, 1995 **
24.4 Share Purchase Agreement (1)
24.5 Plan and Agreement of Reorganization with Canarab Technology
Corporation (2)
24.6 Agreement with Canbau Construction GMBH p. 30
*Incorporated by reference to SEC filing #33-28188.
**Incorporated by reference to 10-KS B Report for 12/31/94 period.
(1)Incorporated by reference to Forms 8-K filed July 10, 1998.
(2)Incorporated by reference to Forms 8-K filed July 10, 1998.
<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.
THE OHIO & SOUTHWESTERN ENERGY CO.
(Registrant)
Date: June 24, 1999
/s/ Ralph Shearing
-------------------------------------
Ralph Shearing, President
/s/ Ronald M.J. Ginetz
-------------------------------------
Ronald M.J. Ginetz
Secretary
Pursuant to 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.
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(Registrant)
Date: June 24, 1999
/s/ Ralph Shearing
--------------------------------------------
Ralph Shearing, Director & President
/s/ Abbas Salih
--------------------------------------------
Abbas Salih, Director, Chairman, & Treasurer
/s/ Ronald M.J. Ginetz
--------------------------------------------
Ronald M.J. Ginetz, Secretary
<PAGE>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
Index to Financial Statements
Report of Independent Auditors F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Changes in
Stockholders' Equity F-4 - F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7 - F-10
<PAGE>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
(Stated in US Dollars)
<PAGE>
AUDITORS' REPORT
To the Stockholders,
The Ohio & Southwestern Energy Company
We have audited the balance sheet of The Ohio & Southwestern Energy Company (A
Development Stage Company) as at December 31, 1998 and the statements of loss
and deficit accumulated during the development stage, stockholders' equity and
cash flows for the year ended December 31, 1998. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1998, and the
results of its operations and its cash flows for the year ended December 31,
1998 in accordance with generally accepted accounting principles in the United
States.
The financial statements as at December 31, 1997 and for the period from
inception, February 28, 1989 to December 31, 1997 were audited by other auditors
who expressed an opinion without reservation on those statements in their report
dated April 16, 1998.
Vancouver, Canada "AMISANO HANSON"
April 15, 1999 Chartered Accountants
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is
substantial doubt about a company's ability to continue as a going concern. The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes the realization of assets
and discharge of liabilities in the normal course of business. As discussed in
Note 1 to the accompanying financial statements in respect of the company's
substantial losses from operations, substantial doubt about the company's
ability to continue as a going concern exists. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our report to the Stockholders dated April 15, 1999 is expressed in accordance
with Canadian reporting standards, which do not permit a reference to such
uncertainty in the auditors' report when the uncertainty is adequately disclosed
in the financial statements.
Vancouver, Canada "AMISANO HANSON"
April 15, 1999 Chartered Accountants
<PAGE>
<TABLE>
<CAPTION>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
BALANCE SHEETS
December 31, 1998 and 1997
(Stated in US Dollars)
ASSETS
December 31, December 31,
1998 1997
<S> <C> <C>
Current
Cash $ - $ 212
------------- -------------
$ - $ 212
------------- -------------
LIABILITIES
Current
Accounts payable $ 21,642 $ 11,069
Due to related party - Note 4 28,323 -
------------- -------------
49,965 11,069
STOCKHOLDERS' DEFICIENCY
Common stock - Note 3 118,730 105,530
Contributed capital 25,442 25,442
Deficit accumulated during the development stage ( 194,137) (141,829)
--------------- ----------------
( 49,965) ( 10,857)
$ - $ 212
================ ================
</TABLE>
Nature and Continuance of Operations - Note 1
SEE ACCOMPANYING NOTES
<PAGE>
<TABLE>
<CAPTION>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
for the years ended December 31, 1998 and 1997
and February 28, 1989 (Date of Inception) to December 31, 1998
(Stated in US Dollars)
Cumulative
from February
28, 1989 (Date
of Inception) to
December 31,
1998 1997 1998
---- ---- ----
<S> <C> <C> <C>
Expenses
Accounting and audit fees $ 4,500 $ - $ 4,500
Amortization - - 750
Consulting fees - Note 4 6,200 - 6,200
Filing fees 300 - 300
General and administrative expenses -Note 4 8,542 22,261 80,505
Legal fees - Note 4 33,090 - 33,090
Management fees - Note 4 7,000 - 7,000
Rent - Note 4 2,886 - 2,886
Telephone expense 2,452 - 2,452
Transfer agent fees 1,358 - 1,358
Travel and promotion 1,444 - 1,444
---------------------------------------------------------------
Loss before the following: ( 67,772) ( 22,261) ( 140,485)
Unauthorized distribution - - ( 69,116)
Gain on settlement of debt 15,464 - 15,464
Net loss for the year ( 52,308) ( 22,261) $( 194,137)
---------------------------------------------------------------
Deficit, beginning of year 141,829 119,568
Deficit, end of year $ 194,137 $ 141,829
Net loss per share $ ( 0.01) $ ( 0.01)
Weighted average number of common shares
outstanding 7,835,928 1,683,818
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
<TABLE>
<CAPTION>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the period from February 28, 1989 (Date of Inception) to December 31, 1998
(Stated in US Dollars)
Deficit
Accumulated
During the
Common Stock Contributed Development
--------------------------------
Shares Amount Capital Stage Total
<S> <C> <C> <C> <C> <C>
Balance, February 28, 1989 - $ - $ - $ - $ -
Issuance of stock to insiders
on March 7, 1989 - at $0.30
per share 33,347 10,000 - - 10,000
---------------------------------------------------------------------------------
Balance, December 31, 1989 33,347 10,000 - - 10,000
Issuance of stock during
public offering for $3.00 per
share, net of offering costs of
$27,270 33,348 72,730 - - 72,730
Net loss - - - ( 84,159) ( 84,159)
---------------------------------------------------------------------------------
Balance, December 31, 1990 66,695 82,730 - ( 84,159) ( 1,429)
Net loss - - - ( 3,416) ( 3,416)
---------------------------------------------------------------------------------
Balance, December 31, 1991 66,695 82,730 - ( 85,575) ( 4,845)
Net loss - - - ( 2,713) ( 2,713)
---------------------------------------------------------------------------------
Balance, December 31, 1992 66,695 82,730 - ( 90,288) ( 7,558)
Net loss - - - ( 1,614) ( 1,614)
---------------------------------------------------------------------------------
Balance, December 31, 1993 66,695 82,730 - ( 91,902) ( 9,172)
Net loss - - - ( 1,863) ( 1,863)
---------------------------------------------------------------------------------
Balance, December 31, 1994 66,695 82,730 - ( 93,765) ( 11,035)
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
<TABLE>
<CAPTION>
Continued
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the period from February 28, 1989 (Date of Inception) to December 31, 1998
(Stated in US Dollars)
Deficit
Accumulated
During the
Common Stock Contributed Development
--------------------------------
Shares Amount Capital Stage Total
<S> <C> <C> <C> <C> <C>
Issuances of stock for
services rendered - at $0.03
per share 50,000 1,500 - - 1,500
Contributed capital - - 24,842 - 24,842
Net loss - - - (16,735) (16,735)
---------------------------------------------------------------------------------
Balance, December 31, 1995 116,695 84,230 24,842 (110,500) (1,428)
Net loss - - - (9,068) (9,068)
---------------------------------------------------------------------------------
Balance, December 31, 1996 116,895 84,230 24,842 (119,568) (10,496)
Issuance of stock for cash
- at $0.011 per share 2,000,000 21,300 - - 21,300
Contributed capital - - 600 - 600
Net loss - - - (22,261) (22,261)
---------------------------------------------------------------------------------
Balance, December 31, 1997 2,116,695 105,530 25,442 (141,829) (10,857)
Issuance of stock for
services rendered
- at $0.001 per share 7,000,000 7,000 - - 7,000
- at $0.01 per share 620,000 6,200 - - 6,200
Net loss - - - (52,308) (52,308)
---------------------------------------------------------------------------------
Balance, December 31, 1998 9,736,695 $ 118,730 $ 25,442 $(194,137) $(49,965)
=================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
<TABLE>
<CAPTION>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for years ended December 31, 1998 and 1997
and February 28, 1989 (Date of Inception) to December 31, 1998
(Stated in US Dollars)
Cumulative
from February
28, 1989
(Date of Incep-
tion) to
December 31,
1998 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash flow used in operating activities:
Net loss $ (52,308) $ (22,261) $ (194,137)
Adjustments to reconcile net loss to net cash used in operations:
Amortization - - 750
Consulting fees 6,200 - 6,200
Gain on settlement of debt (15,464) - (15,464)
Management fees 7,000 - 7,000
Changes in non-cash items:
Accounts payable 26,037 573 38,606
Due to related party 28,323 - 28,323
------------------------------------------------------
Net cash used in operating activities (212) (21,688) (128,722)
------------------------------------------------------
Cash flows used in investing activity
Organization costs - - (750)
------------------------------------------------------
Net cash used in investing activity - - (750)
------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock - 21,300 131,300
Payment of offering costs - - (27,270)
Contributed capital - 600 25,442
------------------------------------------------------
Net cash provided by financing activities - 21,900 129,472
------------------------------------------------------
Net increase in cash - 212 -
Cash, beginning of period 212 - -
======================================================
Cash, end of period $- $212 $-
======================================================
Non-Cash Transactions - Note 7
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE OHIO & SOUTHWESTERN ENERGY COMPANY
(A Development Stage Company)
NOTE TO THE FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Stated in US Dollars)
Note 1 Nature and Continuance of Operations
The company is in the development stage and is devoting its
efforts to locating merger candidates.
These financial statements have been prepared on a going concern
basis. The company has accumulated a deficit of $194,137 since
inception. Its ability to continue as a going concern is dependent
upon the ability of the company to generate profitable operations
in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business
operations when they come due.
The company was incorporated in Colorado on February 28, 1989.
Note 2 Summary of Significant Accounting Policies
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in the
United States. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of
financial statements for a period necessarily involves the use of
estimates which have been made using careful judgement. Actual
results could differ from those estimates.
The financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below:
Development Stage Company
The company is a development stage company as defined in Statement
of Financial Accounting Standards No. 7. The company is devoting
substantially all of its present efforts to establish a new
business and none of its planned principal operations have
commenced. All losses accumulated since inception have been
considered as part of the company's development stage activities.
Income Taxes
The company uses the liability method of accounting for income
taxes pursuant to Statement of Financial Accounting Standards, No.
109 "Accounting for Income Taxes."
Loss Per Share
Loss per share figures have been calculated based upon the
weighted average number of shares outstanding during the years.
Fair Value of Financial Instruments
The carrying value of cash, accounts payable and due to related
parties approximates fair value because of the short maturity of
these instruments.
Note 3 Capital Stock - Note 4
i) Preferred Stock
a) Authorized:
100,000,000, $0.01 par value
b) Issued:
None issued
ii) Common stock
a) Authorized:
1,000,000,000, no par value
<TABLE>
<CAPTION>
# #
b) Issued: 1998 1997
---- ----
<S> <C> <C>
Balance, December 31, 1998 and 1997 9,736,695 2,116,895
================ ===============
</TABLE>
iii)On October 22, 1997, the company completed a reverse split on
a one common share for 300 common shares basis. All common
share transactions prior to the split have been restated to
reflect this split.
Note 4 Related Party Transaction
During the year ended December 31, 1998, a director of the company
charged management fees of $7,000. These fees were settled by the
issuance of 7,000,000 shares of the company at $0.01 per share.
During the year ended December 31, 1998, the company was charged
the following by a company with a common director:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
General and administration expenses $2,171 $-
Rent 2,886 -
==================== ====================
$5,057 $-
==================== ====================
</TABLE>
During the year ended December 31, 1997, the company paid $10,000
to a shareholder for consulting services and $5,000 to a
shareholder for legal fees.
Due to a related party at December 31, 1998 is comprised of
expenses paid by a company with a common director on behalf of the
company for operating costs. This amount is non-interest bearing,
unsecured and is payable upon demand.
<PAGE>
Note 5 Deferred Tax Assets
The Financial Accounting Standards Board issued Statement Number
109 in Accounting for Income Taxes ("FAS 109") which is effective
for fiscal years beginning after December 15, 1992. FAS 109
requires the use of the asset and liability method of accounting
of income taxes. Under the assets and liability method of FAS 109,
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. 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.
The following table summarizes the significant components of the
company's deferred tax assets:
Total
Deferred Tax Assets
Non-capital loss carryforwards $ 194,137
-----------------
Gross deferred tax assets $ 97,069
Valuation allowance for deferred tax asset ( 97,069)
=================
$ -
=================
The amount taken into income as deferred tax assets must reflect
that portion of the income tax loss carryforwards which is likely
to be realized from future operations. The company has chosen to
provide an allowance of 100% against all available income tax loss
carryforwards, regardless of their time of expiry.
Note 6 Income Taxes
No provision for income taxes has been provided in these financial
statements due to the net loss. At December 31, 1998, the company
has net operating loss carryforwards which expire commencing in
2005 totaling approximately $194,137, the benefit of which has not
been recorded in the financial statements.
Note 7 Non-Cash Transactions - Note 4
---------------------
Operating, investing and financing activities that do not have a
direct impact on cash flows are excluded from the cash flow
statement. The company issued common shares for services provided
to the company during the following years:
<PAGE>
<TABLE>
<CAPTION>
Number of Price
Common Shares Per Share $
------------- ---------- ------------------
<S> <C> <C> <C> <C>
1995 50,000 $0.03 1,500
1998 7,000,000 $0.001 7,000
1998 620,000 $0.01 6,200
------------------------
========================
7,670,000 14,700
======================== ========================
</TABLE>
Note 8 Uncertainty Due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using the year 2000 date is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. The effects of the Year 2000 Issue may be experienced
before, on, or after January 1, 2000 and if not addressed, the
impact on operations and financial reporting may range from minor
errors to significant system failure which could affect an
entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue
affecting the entity, including those related to the efforts of
customers, suppliers, or other third parties, will be fully
resolved.
Exhibit 24.6
Agreement and Plan of Reorganization
<PAGE>
Agreement and Plan of Reorganization
by and among
CANBAU CONSTRUCTION GMBH
a German corporation
and
THE OHIO & SOUTHWESTERN ENERGY COMPANY
a Colorado corporation
dated: November 2, 1998
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
CANBAU CONSTRUCTION GMBH
and
THE OHIO & SOUTHWESTERN ENERGY COMPANY
This Agreement and Plan of Reorganization ("Agreement"), dated as of
July 29, 1998, among CANBAU CONSTRUCTION GMBH ("CB"), a German Corporation, THE
OHIO & SOUTHWESTERN ENERGY COMPANY ("OSWE"), a Colorado Corporation, and the
shareholders of CANBAU CONSTRUCTION GMBH ("CB Shareholders") who will join this
agreement by execution.
W I T N E S S E T H:
A. WHEREAS, CB and OSWE are corporations duly organized under the laws
of the State of Germany and Colorado, respectively.
B. Plan of Reorganization. The CB Shareholders are the owners of all of
the issued and outstanding common stock of CB. It is the intention that all of
the issued and outstanding stock of CB shall be acquired by OSWE in exchange
solely for its voting stock. For federal income tax purposes it is intended that
this exchange shall qualify as a reorganization within the meaning of SEC 368
(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code").
C. Exchange of Shares. OSWE and the CB Shareholders agree that all of
the common shares issued and outstanding of CB shall be exchanged with OSWE for
1,000,000 shares of the common stock of OSWE. The pro rata numbers of the OSWE
shares, on the closing date, shall be delivered to the individual shareholders
in exchange for their CB shares as hereinafter set forth.
D. WHEREAS, the parties hereto wish to enter into this Agreement,
pursuant to the provisions of the Colorado Statutes.
NOW, THEREFORE, it is agreed among the parties as follows
ARTICLE I
The Consideration
1. Subject to the conditions set forth herein on the "Effective Date"
(as herein defined), Shareholders of CB shall exchange all of their shares of CB
for 1,000,000 common shares of OSWE common stock. The transactions contemplated
by this Agreement shall be completed at a closing ("Closing") on a closing date
("Closing Date") which shall be as soon as possible after all regulatory
approvals and shareholder approvals are obtained in accordance with law as set
forth in this Agreement, but no later than 30 days after date hereof.
<PAGE>
On the Closing Date, all of the documents to be furnished to OSWE and
CB, including the documents to be furnished pursuant to Article VII of this
Agreement, shall be delivered to M.A. Littman, to be held in escrow until the
Effective Date or the date of termination of this Agreement, whichever first
occurs, and thereafter shall be promptly distributed to the parties as their
interests may appear.
1.2 At the Effective Date, CB shall become a wholly owned subsidiary of
OSWE. CB's shareholders shall receive pro rata shares of $.0001 par value voting
common stock as follows:
OSWE shall issue 1,000,000 of its shares of common stock for 100% of
the outstanding common shares of CB, pro rata to the shareholders of
CB.
1.3 If this Agreement is duly adopted by the holders of the requisite
number of shares, in accordance with the applicable laws and subject to the
other provisions hereof, such documents as may be required by law to accomplish
the Agreement shall be filed as required by law to effectuate same, and it shall
become effective. The time of filing the last document required by law shall be
the Effective Date for the Agreement. For accounting purposes, the Agreement
shall be effective as of 12:01 a.m., on the last day of the month preceding the
Effective Date.
ARTICLE 11
Issuance and Exchange of Shares
2.1 The shares of $.0001 par value common stock of OSWE shall be issued
by it to CB shareholders at closing.
2.2 OSWE represents that no outstanding options or warrants for its
unissued shares exist. All preferred stock of OSWE due for redemption as of the
date hereof shall have been redeemed as of closing date, if any.
2.3 The stock transfer books of CB shall be closed on the Effective
Date, and thereafter no transfers of the stock of CB shall be made. CB shall
appoint an exchange agent ("Exchange Agent"), to accept surrender of the
certificates representing the common shares of CB, and to deliver in exchange
for such surrendered certificates, shares of common stock of OSWE. The
authorization of the Exchange Agent may be terminated by OSWE after six months
following the Effective Date. Upon termination of such authorization, any shares
of CB and any funds held by the Exchange Agent for payment to CB shareholders
pursuant to this Agreement shall be transferred to OSWE or its designated agent
who shall thereafter perform the obligations of the Exchange Agent. If
outstanding certificates for shares of CB are not surrendered or the payment for
them not claimed prior to such date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
<PAGE>
unclaimed items shall, to the extent permitted by abandoned property and other
applicable law, become the property of OSWE (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any persons previously entitled to such items. Notwithstanding the foregoing,
neither the Exchange Agent nor any party to this Agreement shall be liable to
any holder of CB shares for any amount paid to any governmental unit or agency
having jurisdiction of such unclaimed item pursuant to the abandoned property or
other applicable law of such jurisdiction.
2.4 No fractional shares of OSWE stock shall be issued as a result of
the Agreement. Shares shall be rounded to nearest whole share.
2.5 At the Effective Date, each holder of a certificate or certificates
representing common shares of CB, upon presentation and surrender of such
certificate or certificates to the Exchange Agent, shall be entitled to receive
the consideration set forth herein, except that holders of those shares as to
which dissenters' rights shall have been asserted and perfected pursuant to
Germany law shall not be converted into shares of OSWE common stock, but shall
represent only such dissenters' rights. Upon such presentation, surrender, and
exchange as provided in this Section 2.5, certificates representing shares of CB
previously held shall be canceled. Until so presented and surrendered, each
certificate or certificates which represented issued and outstanding shares of
CB at the Effective Date, shall be deemed for all purposes to evidence the right
to receive the consideration set forth in Section 1.2 of this Agreement. If the
certificates representing shares of CB have been lost, stolen, mutilated or
destroyed, the Exchange Agent shall require the submission of an indemnity
agreement and may require the submission of a bond in lieu of such certificate.
ARTICLE III
Representations, Warranties
and Covenants of Canbau Construction GMBH
No representations or warranties are made by any director, officer,
employee or shareholder of CB as individuals, except as and to the extent stated
in this Agreement or in a separate written statement (the "CB Disclosure
Statement"), if any. CB hereby represents, warrants and covenants to OSWE except
as stated in the CB Disclosure Statement, as follows:
3.1 CB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Germany, and has the corporate power and
authority to own or lease its properties and to carry on its business as it is
now being conducted. The Articles of Incorporation and Bylaws of CB are complete
and accurate, and the minute books of CB contain a record, which is complete and
<PAGE>
accurate in all material respects, of all meetings, and all corporate actions of
the shareholders and board of directors of CB.
3.2 The aggregate number of shares which CB is authorized to issue
shares of common stock with par value of which shares are issued and
outstanding.
3.3 CB has complete and unrestricted power to enter into and, upon the
appropriate approvals as required by law, to consummate the transactions
contemplated by this Agreement.
3.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by CB will conflict with or result in a breach or violation of the
Articles of Incorporation or Bylaws of CB.
3.5 The execution, delivery and performance of this Agreement has been
duly authorized and approved by CB's Board of Directors.
3.6 CB will deliver to OSWE before the Closing, current consolidated
audited financial statements of CB prepared by a "Big 6" accounting firm or
other firm acceptable to OSWE. These audited financial statements must be dated
within 3 months of the Closing date. All such statements, herein sometimes
called "CB Financial Statements," are complete and correct in all material
respects and, together with the notes to these financial statements, present
fairly the financial position and results of operations of CB for the periods
included. The said statements will have beer) prepared in accordance with
generally accepted accounting principles.
3.7 Since the dates of the CB Financial Statements, there have not been
any Material adverse changes in the business or condition, financial or
otherwise of CB.
3.8 There are no legal proceedings or regulatory proceedings involving
material claims pending, or to the knowledge of the officers of CB, threatened
against CB or affecting any of its assets or properties, and CB is not in any
material breach or violation of or default under any contract or instrument to
which CB is a party, and no event has occurred which with the lapse of time or
action by a third party could result in a material breach or violation of or
default by CB under any contract or other instrument to which CB is a party or
by which it or any of its properties may be bound or affected, or under its
respective Articles of Incorporation or Bylaws, nor is there any court or
regulatory order pending, applicable to CB.
3.9 All liability of CB has been properly provided for and is adequate
to comply with all regulatory requirements regarding same.
<PAGE>
3.10 The representations and warranties of CB shall be true and correct
as of the date hereof and as of the Effective Date.
3.11 CB has no employee benefit plan, including non-qualified stock
awards, options, and consulting fees for independent contractors.
3.12 No representation or warranty by CB in this Agreement, the CB
Disclosure Statement or any certificate delivered pursuant hereto contains any
untrue statement of a material fact or omits to state any material fact
necessary to make such representation or warranty not misleading.
3.13 Intellectual Property. All trade names, inventions, discoveries,
ideas, research, engineering, methods, practices, processes, systems, formulae,
designs, drawings, products, projects, improvements, developments, know-how, and
trade secrets which are used in the conduct of CB's business, whether registered
or unregistered (collectively the "Proprietary Rights") are owned by CB. To the
knowledge of each Seller and CB, CB created or developed such Proprietary Rights
and such Proprietary Rights are not subject to any restriction, lien,
encumbrance, right, title or interest in others. All of the foregoing
Proprietary Rights that are not in the public domain stand solely in the name of
CB and not in the name of any shareholder, director, officer, agent, partner or
employee or anyone else known to any Seller or CB and none of the same have any
right, title, interest, restriction, lien or encumbrance therein or thereon or
thereto. To the knowledge of each Seller and CB, CB's ownership and use of the
Proprietary Rights do not and will not infringe upon, conflict with or violate
in any material respect any patent, copyright, trade secret or other lawful
proprietary right of any other party, and no claim is pending or, to the
knowledge of any Seller or CB, threatened to the effect that the operations of
CB infringe upon or conflict with the asserted rights of any other person under
any of the Proprietary Rights, and to the knowledge of each Seller and CB there
is no reasonable basis for any such claim (whether or not pending or
threatened). No claim is pending, or to the knowledge of each Seller and CB,
threatened to the effect that any such Proprietary Rights owned or licensed by
CB, or which CB otherwise has the right to use, is invalid or unenforceable by
CB and there is no reasonable basis for any such claim (whether or not pending
or threatened). CB has not granted or assigned to any other person or entity any
right to manufacture, have manufactured, assemble or sell the products or
proposed products or to provide the services or proposed services of Seller.
3.14 a. Liens. Except as disclosed on Schedule 3.14(a), no one other
than Seller has any right, title, interest, lien, claim, security interest,
restriction or encumbrance in, on or to CB's assets.
b. Material Contracts. Other than as disclosed on Schedule 3.14(b),
Seller does not have any material obligation, contract, agreement, lease,
sublease, commitment or understanding of any kind, nature or description, oral
or written, fixed or contingent due or to become due, existing or inchoate.
c. No Undisclosed Liabilities. CB does not have any material
liabilities or obligations, including, without limitation, contingent
liabilities for the performance of any obligation, except for (i) liabilities or
obligations which are disclosed or fully provided for in CB's Financial
Statements, (ii) liabilities or obligation to States, federal, state, provincial
and local laws with respect to pollution or protection of the environment
("Environmental Laws") relating to assets now owned or operated by CB or any of
its subsidiaries, including Environmental Laws relating to actual or threatened
emissions, discharges or releases, of pollutants, contaminants or hazardous or
toxic materials or wastes ("Pollutants"), have been obtained and are effective,
and, with respect to assets previously owned or operated by CB, were obtained
and were effective during the time of CB's operation; (iii) To the knowledge of
CB, no conditions exist on, in or about the properties now or previously owned
or operated by CB or any third-party properties to which any Pollutants
generated by CB were sent or released that could give rise on the part of CB to
liability under any Environmental Laws, claims by third parties under
Environmental Laws or under common law or the occurrence of costs to avoid any
such liability or claim; and (iv) to the knowledge of CB, all operators of CB's
assets are in compliance with all terms and conditions of such Environmental
Laws, permits, licenses and authorizations, and are also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder, relating to
CB's assets.
ARTICLE IV
Representations, Warranties and Covenants of
The Ohio & Southwestern Energy Company
No representations or warranties are made by any director, officer,
employee or shareholder of OSWE as individuals, except as and to the extent
stated in this Agreement or in a separate written statement.
OSWE hereby represents, warrants and covenants to CB, except as stated
in the OSWE Disclosure Statement, as follows:
4.1 OSWE is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado, and has the corporate power
and authority to own or lease its properties and to carry on its business as it
<PAGE>
is now being conducted. The Articles of Incorporation and Bylaws of OSWE, copies
of which have been delivered to CB, are complete and accurate, and the minute
books of OSWE contain a record, which is complete and accurate in all material
respects, of all meetings, and all corporate actions of the shareholders and
Board of Directors of OSWE.
4.2 The aggregate number of shares which OSWE is authorized to issue is
300,000,000 shares of common stock with a par value of $.0001 per share, of
which 14,382,000 shares of such common stock will be issued and outstanding,
fully paid and non-assessable, prior to closing under this agreement. OSWE has
no outstanding options, warrants or other rights to purchase, or subscribe to,
or securities convertible into or exchangeable for any shares of capital stock.
No preferred stock of OSWE is outstanding.
4.3 OSWE has complete and unrestricted power to enter into and, upon
the appropriate approvals as required by law, to consummate the transactions
contemplated by this Agreement.
4.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by OSWE will conflict with or result in a breach or violation of the
Articles of Incorporation or Bylaws of OSWE.
4.5 The execution of this Agreement has been duly authorized and
approved by the OSWE's Board of Directors.
4.6 OSWE has delivered to CB financial statements of OSWE dated
December 31, 1997. All such statements, herein sometimes called "OSWE Financial
Statements" are (and will be) complete and correct in all material respects and,
together with the notes to these financial statements, present fairly the
financial position and results of operations of OSWE of the periods indicated.
All statements of OSWE will have been prepared in accordance with generally
accepted accounting principles.
4.7 Since the dates of the OSWE Financial Statements, there have not
been any material adverse changes in the business or condition, financial or
otherwise, of OSWE. OSWE does not have any material liabilities or obligations,
secured or unsecured except as shown on updated financials (whether accrued,
absolute, contingent or otherwise).
4.8 OSWE has delivered to CB a list and description of all pending
legal proceedings involving OSWE, none of which will materially adversely affect
them, and, except for these proceedings, there are no legal proceedings or
regulatory proceedings involving material claims pending, or, to the knowledge
of the officers of OSWE, threatened against OSWE or affecting any of its assets
or properties, and OSWE is not in any material breach or violation of or default
<PAGE>
under any contract or instrument to which OSWE is a party, and no event has
occurred which with the lapse of time or action by a third party could result in
a material breach or violation of or default by OSWE under any contract or other
instrument to which OSWE is a party or by which they or any of their respective
properties may be bound or affected, or under their respective Articles of
Incorporation or Bylaws, nor is there any court or regulatory order pending,
applicable to OSWE.
4.9 OSWE shall not enter into or consummate any transactions prior to
the Effective Date other than in the ordinary course of business and will pay no
dividend, or increase the compensation of officers and will not enter into any
agreement or transaction which would adversely affect its financial condition.
4.10 OSWE is not a party to any contract performable in the future
except its land lease obligation which will not adversely affect it.
4.11 The representations and warranties of OSWE shall be true and
correct as of the date hereof and as of the Effective Date.
4.12 OSWE has delivered, or will deliver within two weeks of the date
of this Agreement, to CB, all of its corporate books and records for review.
OSWE will also deliver to CB on or before the Closing Date any reports relating
to the financial and business condition of OSWE which occur after the date of
this Agreement and any other reports sent generally to its shareholders after
the date of this Agreement.
4.13 OSWE has no employee benefit plan in effect at this time.
4.14 No representation or warranty by OSWE in this Agreement, the OSWE
Disclosure Statement or any certificate delivered pursuant hereto contains any
untrue statement of a material fact or omits to state any material fact
necessary to make such representation or warranty not misleading.
4.15 OSWE agrees that all rights to indemnification now existing in
favor of the employees, agents, directors or officers of CB and its
subsidiaries, as provided in the Articles of Incorporation or Bylaws or
otherwise in effect on the date hereof shall survive the transactions
contemplated hereby in accordance with their terms, and OSWE expressly assumes
such indemnification obligations of CB.
ARTICLE V
Obligations of the Parties Pending the Effective Date
5.1 This Agreement shall be duly submitted to the shareholders of CB
for the purpose of considering and acting upon this Agreement in the manner
<PAGE>
required by law at a meeting of shareholders on a date selected by CB, such date
to be the earliest practicable date. The Board of Directors of CB, subject to
its fiduciary obligations to shareholders, shall use its best efforts to obtain
the requisite approval of CB shareholders of this Agreement and the transactions
contemplated herein. CB and OSWE shall take all reasonable and necessary steps
and actions to comply with and to secure CB shareholder approval of this
Agreement and regulations of such states.
5.2 At all times prior to the Effective Date during regular business
hours, each party will permit the other to examine its books and records and the
books and records of its subsidiaries and will furnish copies thereof on
request. It is recognized that, during the performance of this Agreement, each
party may provide the other parties with information which is confidential or
proprietary information. During the term of this Agreement, and for four years
following the termination of this Agreement, the recipient of such information
shall protect such information from disclosure to persons, other than members of
its own or affiliated organizations and its professional advisers, in the same
manner as it protects its own confidential or proprietary information from
unauthorized disclosure, and not use such information to the competitive
detriment of the disclosing party. In addition, if this Agreement is terminated
for any reason, each party shall promptly return or cause to be returned all
documents or other written records of such confidential or proprietary
information, together with all copies of such writings and, in addition, shall
either furnish or cause to be furnished, or shall destroy, or shall maintain
with such standard of care as is exercised with respect to its own confidential
or proprietary information, all copies of all documents or other written records
developed or prepared by such party on the basis of such confidential or
proprietary information. No information shall be considered confidential or
proprietary if it is (a) information already in the possession of the party to
whom disclosure is made, (b) information acquired by the party to whom the
disclosure is made from other sources, or (c) information in the public domain
or generally available to interested persons or which at a later date passes
into the public domain or becomes available to the party to whom disclosure is
made without any wrongdoing by the party to whom the disclosure is made.
5.3 OSWE and CB shall promptly provide each other with information as
to any significant developments in the performance of this Agreement, and shall
promptly notify the other if it discovers that any of its representations,
warranties and covenants contained in this Agreement or in any document
delivered in connection with this Agreement was not true and correct in all
material respects or became untrue or incorrect in any material respect.
5.4 All parties to this Agreement shall take all such action as may be
reasonably necessary and appropriate and shall use their best efforts in order
to consummate the transactions contemplated hereby as promptly as practicable.
<PAGE>
ARTICLE VI
Procedure Exchange
6.1 At the Effective Date, the exchange shall be effected as set forth
in Colorado Laws with common stock certificates of OSWE being exchanged for CB
common stock certificates as and when submitted to the transfer agent.
ARTICLE VII
Conditions Precedent to the
Consummation of the Exchange
The following are conditions precedent to the consummation of the
Agreement on or before the Effective Date:
7.1 CB shall have performed and complied with all of its respective
obligations hereunder which are to be complied with or performed on or before
the Effective Date and OSWE and CB shall provide one another at the Closing with
a certificate to the effect that such party has performed each of the acts and
undertakings required to be performed by it on or before the Closing Date
pursuant to the terms of this Agreement.
7.2 This Agreement, the transactions contemplated herein shall have
been duly and validly authorized, approved and adopted, at meetings of the
shareholders of CB duly and properly called for such purpose in accordance with
the applicable laws.
7.3 No action, suit or proceeding shall have been instituted or shall
have been threatened before any court or other governmental body or by any
public authority to restrain, enjoin or prohibit the transactions contemplated
herein, or which might Subject any of the parties hereto or their directors or
officers to any material liability, fine, forfeiture or penalty on the grounds
that the transactions contemplated hereby, the parties hereto or their directors
or officers, have violated any applicable law or regulation or have otherwise
acted improperly in connection with the transactions contemplated hereby, and
the parties hereto have been advised by counsel that, in the opinion of such
counsel, such action, suit or proceeding raises substantial questions of law or
fact which could reasonably be decided adversely to any party hereto or its
directors or officers.
7.4 All actions, proceedings, instruments and documents required to
carry out this Agreement and the transactions contemplated hereby and the form
<PAGE>
and substance of all legal proceedings and related matters shall have been
approved by counsel for CB and OSWE.
7.5 The representations and warranties made by CB and OSWE in this
Agreement shall be true as though such representations and warranties had been
made or given on and as of the Effective Date, except to the extent that such
representations and warranties may be untrue on and as of the Effective Date
because of (1) changes caused by transactions suggested or approved in writing
by CB or (2) events or changes (which shall not, in the aggregate, have
materially and adversely affected the business, assets, or financial condition
of OSWE or CB during or arising after the date of this Agreement.)
7.6 CB shall have furnished OSWE with:
(1) a certified copy of a resolution or resolutions duly adopted by the
Board of Directors of CB approving this Agreement and the transactions
contemplated by it and directing the submission thereof to a vote of
the shareholders of CB;
(2) a certified copy of a resolution or resolutions duly adopted by a
majority of all of the classes of outstanding shares of CB capital
stock approving this Agreement and the transactions contemplated by it;
(3) an agreement from each "affiliate" of CB as defined in the rules
adopted under the Securities Act of 1933, as amended, to the effect
that (a) the affiliate is familiar with SEC Rules 144 and 145; (b) none
of the shares of OSWE common stock will be transferred by or through
the affiliate in violation of the Federal Securities Laws; (c) the
affiliate will not sell or in any way reduce his risk relative to any
OSWE common stock received pursuant to this Agreement until such time
as financial results covering at least 30 days of post-closing date
combined operations shall have been published by OSWE on SEC Form 1O-Q
or otherwise; and (d) the affiliate acknowledges that OSWE is under no
obligation to register the sale, transfer, or the disposition of OSWE
common stock by the affiliate or to take any action necessary in order
to make an exemption from registration available to the affiliate, but
understands that OSWE will satisfy the public information requirements
of Rules 144 and 145 during the three-year period following the Closing
Date.
(4) Securities Laws Compliance. Each NON-U.S. citizen who is a
shareholder of CB shall sign an affidavit as contained on Exhibit "A."
7.7 OSWE shall furnish CB with a certified copy of a resolution or
resolutions duly adopted by the Board of Directors of OSWE, approving this
Agreement and the transactions contemplated by it.
<PAGE>
7.8 As a condition to closing, the CB Financial Statements, as
described in Article 111, 3.6, must show an unencumbered minimum asset value of
US $4,000,000. Should this value not be demonstrated in the audited financial
statements this agreement will terminate unless an extension to the Closing is
agreed to by both CB and OSWE.
ARTICLE VIII
Termination and Abandonment
8.1 Anything contained in this Agreement to the contrary
notwithstanding, the Agreement may be terminated and abandoned at any time
(whether before or after the approval and adoption thereof by the shareholders
of CB) prior to the Effective Date.
(a) By mutual consent of CB and OSWE;
(b) By CB, or OSWE, if any condition set forth in Article VII
relating to the other party has not been met or has not been
waived;
(c) By CB, or OSWE, if any suit, action or other proceeding shall
be pending or threatened by the federal or a state government
before any court or governmental agency, in which it is sought
to restrain, prohibit or otherwise affect the consummation of
the transactions contemplated hereby;
(d) By any party, if there is discovered any material error,
misstatement or omission in the representations and warranties
of another party;
(e) By any party if the Agreement Effective Date is not within 30
days from the date hereof; (f) or CB shall have the right to
assign this agreement to any other entity, at any time,
subject to the due diligence terms herein.
8.2 Any of the terms or conditions of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof, by action taken
by its Board of Directors provided; however, that such action shall be taken
only if, in the judgment of the Board of Directors taking the action, such
waiver will not have a materially adverse effect on the benefits intended under
this Agreement to the party waiving such term or condition.
ARTICLE IX
Termination of Representation and
Warranties and Certain Agreements
9.1 The respective representations and warranties of the parties hereto
shall expire with, and be terminated and extinguished by consummation of the
<PAGE>
Agreement; provided, however, that the covenants and agreements of the parties
hereto shall survive in accordance with their terms.
ARTICLE X
Miscellaneous
10.1 This Agreement embodies the entire agreement between the parties,
and there have been and are no agreements, representations or warranties among
the parties other than those set forth herein or those provided for herein.
10.2 To facilitate the execution of this Agreement, any number of
counterparts provide such executed instruments or do all things necessary or
proper to carry out the purpose of this Agreement.
10.4 This Agreement may be amended upon approval of the Board of
Directors of each party provided that the shares issuable hereunder shall not be
amended without approval of the requisite shareholders of CB.
10.5 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier
service, fees prepaid, addressed as follows:
To Canbau Construction GMBH:
Rose-Luxembourg - Str. 16-18
18055 Rostock, Germany
To The Ohio & Southwestern Energy Company:
650 W. Georgia Street, #450
Vancouver, BC., Canada V6B 4N8
or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
received.
10.6 No press release or public statement will be issued relating to
the transactions contemplated by this Agreement without prior approval of CB and
OSWE. However, either CB or OSWE may issue at any time any press release or
other public statement it believes on the advice of its counsel it is obligated
to issue to avoid liability under the law relating to disclosures, but the party
issuing such press release or public statement shall make a reasonable effort to
give the other party prior notice of and opportunity to participate in such
release or statement.
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals this day
of October, 1998.
Canbau Construction GMBH
By:_________________________________
President
Attest:_____________________________
Secretary
The Ohio & Southwestern Energy Company
By:_________________________________
President
Attest:_____________________________
Secretary
CANBAU CONSTRUCTION GMBH, SHAREHOLDERS (by signature below or pursuant to
execution of the Exchange Agreement and Representations incorporating this
Agreement by reference.)
- ------------------------------- -----------------------------------
- ------------------------------- -----------------------------------
- ------------------------------- -----------------------------------
- ------------------------------- -----------------------------------
- ------------------------------- -----------------------------------
- ------------------------------- -----------------------------------
<PAGE>
EXHIBIT "A"
Affidavit
I hereby certify under penalty of perjury that the following statements
are true and correct as of the date hereof:
Each NON-U.S. citizen (hereafter "Affiant"):
(i) has been represented by such legal and tax counsel and others, each
of whom has been personally selected by Affiant, as Affiant has found necessary
to consult concerning this transaction, and any such representation has included
an examination of applicable documents, and an analysis of all tax, financial,
and securities law aspects. Affiant, his counsel and advisors, and such other
persons with whom Affiant has found it necessary to consult, have sufficient
knowledge and experience in business and financial matters to evaluate the above
information, and the merits and risks of the share exchange contemplated by this
Agreement, and to make an informed investment decision with respect thereto;
(ii) is acquiring the OSWE Common Stock for Affiant's own account and
not as a fiduciary for any other person and for investment purposes only and not
with a view to or for the transfer, assignment, resale, or distribution thereof,
in whole or in part. Affiant represents and warrants to OSWE as of the date of
this Agreement, that Affiant has no present plan or intention to sell such stock
in the United States at any predetermined time, and has made no predetermined
arrangements to sell the OSWE Common Stock. Affiant covenants that neither
Affiant nor its affiliates nor any person acting on its or their behalf has
entered into, has the intention of entering into, or will enter into any hedging
transaction, short position or other similar instrument, contract, arrangements
or position with respect to the OSWE Common Stock anytime until the end of the
Distribution Compliance period, as hereinafter defined. Affiant understands the
meaning and legal consequences of the foregoing representations and warranties.
(iii) understands that the OSWE Common Stock has not been registered
under the Securities Act nor pursuant to the provisions of the securities or
other laws of any applicable jurisdictions and such stock is being offered and
sold pursuant to Regulation S based in part upon the representations of Affiant
contained herein. Affiant further understands that the OSWE Common Stock cannot
he sold, assigned, pledged, transformed or otherwise disposed of unless such
shares are registered or an exemption from registration is available, and that
the OSWE Common Stock shall bear a restrictive legend to that effect;
(iv) represents and warrants to OSWE that (i) the Affiant is not a U.S.
person ("U.S. person") as that term is defined in Rule 902(k) of Regulation S
and which definition includes, without limitation, a corporation or partnership
<PAGE>
that is organized under the laws of a jurisdiction other than the United States
if it is formed by a U.S. person principally for the purpose of investing in
securities not registered under the Act, unless it was organized or
incorporated, and is owned, by accredited investors (as defined in Rule 501(a)
of Regulation D Under the Act) who are not natural persons, estates or trusts,
(ii) the OSWE Common Stock is not offered to the Affiant in the United States
and at the time off execution of this Agreement and the time of any offer to the
Affiant to purchase the OSWE Common Stock hereunder, the Affiant was physically
outside the United States. (iii) the Affiant is acquiring the OSWE Common Stock
for its own account and not on behalf of or for the benefit of any U.S. person
and the sale and resale of the OSWE Common Stock has not been prearranged with
any U.S. person or buyer in the United States; (iv) the Affiant agrees that no
offers and sales of the OSWE Common Stock prior to the expiration of a period
commencing on the Closing Date and ending one (1) year thereafter (the
"Distribution Compliance period") shall be made to U.S. persons or for the
account or benefit of U.S. persons and shall otherwise be made in compliance
with the provisions of Regulation S, and (v) Affiant is not an Underwriter,
dealer, distributor or other person who is participating, pursuant to
contractual arrangement in the distribution of the OSWE Common Stock offered or
sold in reliance on Regulation S.
(v) understands and acknowledges that an investment in the OSWE Common
Stock involves a high degree of risk. Affiant acknowledges that there are
limitations on the liquidity of the OSWE Common Stock. The Affiant represents
that the Affiant is able to bear the economic risk of an investment in the OSWE
Common Stock, including a possible total loss of investment. In making this
statement, the Affiant hereby represents and warrants to OSWE that the Affiant
has adequate means of providing for the Affiant's current needs and
contingencies; that Affiant is able to afford to hold the OSWE Common Stock for
an indefinite period; and that Affiant has such knowledge and experience in
financial and business matters that the Affiant is capable of evaluating the
merits and risks of the investment in the OSWE Common Stock. Further, the
Affiant represents, as of the date of signing this Agreement, that the Affiant
has no present need for liquidity in the OSWE Common Stock and the Affiant is
willing to accept such investment risks;
(vi) Understands that no United States federal or state agency, or
similar agency of any other country, has reviewed, approved, passed upon or made
any recommendation or endorsements of OSWE or the OSWE Common Stock;
(vii) acknowledges that to such Affiant's knowledge, without any
independent investigation, neither OSWE, nor any person acting for OSWE has
conducted any directed selling efforts in the United States as the term
"directed selling efforts" is defined in Rule 902(c) of Regulation S, which in
general means, any activity undertaken for the purpose of, or that could
<PAGE>
reasonably be expected to have the effect of, conditioning the market in the
United States for any of the OSWE Common stock being offered in reliance on
Regulation S. Such activity includes, without limitation, the mailing of printed
material to investors residing in the United States, the holding of promotional
seminars in the United States, and the placement of advertisement with radio or
television stations broadcasting in the United States or in publications with a
general circulation in the United States, that refers to the offering of the
OSWE Common Stock in reliance on Regulation S;
(viii) knows of no public solicitation or advertisement of an offer in
connection with the proposed issuance and sale of the OSWE Common Stock;
(ix) covenants that he, she or it will not knowingly make any sale,
transfer or other disposition of the OSWE Common Stock in violation of the Act
(including Regulation S), the Exchange Act, any applicable state acts or the
rules and regulations of the Commission or of any state securities commission or
similar state authorities promulgated under any of the forgoing; and
(x) OSWE has made available to Affiant, Affiant's counsel and advisors,
prior to the date hereof, the opportunity to ask questions of, and to receive
answers from, OSWE and its representatives, concerning the terms and conditions
of the exchange of the OSWE Common Stock for the CB Shares and access to obtain
any information, documents, financial statements, records and books (A) relative
to OSWE, the business and an investment in OSWE, and (B) necessary to verify the
accuracy of any information furnished to Affiant. All materials and information
requested by Affiant, Affiant's counsel and advisors, or others representing
such Affiant, including any information requested to verify any information
furnished to Affiant, have been made available and examined.
Affiant:
date: _____________________________________
address: ___________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 49,965
<BONDS> 0
0
0
<COMMON> 118,730
<OTHER-SE> (168,695)
<TOTAL-LIABILITY-AND-EQUITY> (49,965)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (67,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 15,464
<CHANGES> 0
<NET-INCOME> (52,308)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
