U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal Year Ended September 30, 1996
Commission File No. 0-3926
ANTARES RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-1950459
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2345 Friendly Road, Fernandina Beach, FL 32034
(Address of Principal Executive Offices - Zip Code)
100 Quentin Roosevelt Blvd., Su. 202, Garden City, New York 11530
(Former address of Registrant)
Registrant's telephone number including area code (904) 261-8607
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to 12(g) of the Act:
Common Stock, par value $.001
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of 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
The issuer's revenues for its most recent fiscal year were
$3,342,060.
The aggregate market value of voting stock held by non-affiliates
based upon the closing NASDAQ sale price on December 17, 1996, was
$3,827,204.
Number of shares outstanding on December 11, 1996 was 24,253,972
Common Shares.
DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Historical Development
The Company was incorporated on November 19, 1958, pursuant to
the laws of the State of New York under the name "Brooklyn Strand
Lanes, Inc." On April 12, 1961, the Company's name was changed to
"Met Sports Centers, Inc.," and on December 20, 1982, its name was
changed to Antares Resources Corporation. From 1974 through
December 31, 1994, the Company was a "shell" company, engaged in no
operations other than seeking out a business opportunity to
acquire.
Empire Acquisition
On December 14, 1994, effective January 1, 1995, the Company
acquired, through three (3) newly organized wholly owned
subsidiaries (EEI, CBI and CSC), all of the assets and business
subject to certain liabilities of Empire Energy, Inc. ("Empire"),
including Empire's affiliated subsidiaries, Caribbean Breeze
International, Inc. and Cherokee Sun Corp. In consideration
therefor, the Company issued 250,000 shares of its "restricted"
Common Stock and 100,000 shares of its Series A $10 Convertible
Preferred Stock to the former shareholders of Empire. These
Convertible Preferred Shares are convertible into an aggregate of
4,000,000 shares of the Company's "restricted" Common Stock. The
total amount of liabilities assumed by the Company was
approximately $850,000. Upon effectiveness of this transaction,
Empire Energy, Inc., Caribbean Breeze International, Inc. and
Cherokee Sun Corp. were dissolved by operation of law.
Simultaneous therewith, the Company formed EEI, CBI and CSC. The
acquisition of these assets by the Company was intended to qualify
as a reorganization within the meaning of 368 of the Internal
Revenue Code of 1986, as amended.
Additionally, the Company issued to two of the Empire
shareholders, two subordinated promissory notes in the aggregate
principal amount of $600,000 ($300,000 per note), with interest
accruing on both notes at the rate of 12% per annum. Pursuant to
the terms of these notes, as amended, the Company became obligated
to tender interest payments on a quarterly basis, commencing June
30, 1995. The Company is current on all interest payments as of
the date of this report. An aggregate principal payment of
$300,000 was paid in March 1996. The remaining principal balance
of $300,000 is to be paid in 18 equal monthly installments
commencing 90 days after the payment of the initial obligation
under the Notes.
As a result of this transaction, the Company changed certain
operations relative to the management of these various business,
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including production, distribution and marketing of products. The
Company headquarters and daily operations are conducted out of its
location in Northern Florida.
Upon the effectiveness of this acquisition, the Company
commenced its operations through two of its three then existing
wholly owned subsidiary companies, EEI and CBI. In August 1996,
after the Company incurred significant losses from its operations
with no immediate opportunity to turn this business around, CBI was
subsequently sold to an affiliate of the Company. See "Sale of
CBI" hereinbelow.
EEI is engaged in the buying and selling of pine wood by-
products used as fuel in the firing boilers of paper mills. During
the fiscal year ended September 30, 1995, it was also engaged in
the transportation and disposal of waste corrugated cardboard
residue. However, in October 1995, EEI lost its principal supplier
of waste corrugated cardboard residue, Container Corporation of
America, Inc. ("CCA"). During the fiscal year ended September 30,
1996 and consistent with disclosure previously included in the
Company's prior reports, EEI has been able to maintain profits
derived from its operations despite this loss by reducing costs of
operations applicable to EEI. See "Item 6, Management's Discussion
and Results of Operation" and "Item 7 - s."
During the fiscal year ended September 30, 1996, three of
EEI's customers accounted for approximately 88% of EEI's revenues
generated from the sale of pine bark and related products,
including Gilman Paper Co., St. Mary's Georgia (58%), Jefferson
Smurfit Corp., Jacksonville, FL (16%) and ITT Rayonier, Inc.,
Fernandina Beach, FL (14%). During EEI's prior two fiscal years,
four customers accounted for approximately 94% of EEI's revenues
generated from the sale of pine bark and related products,
including Gilman Paper Co., St Mary's, Georgia (47%), Stone
Container Corp. "Seminole Kraft" of Jacksonville, Florida (21%),
Jefferson Smurfit Co., Jacksonville, Florida (15%) and ITT
Rayonier, Inc., Fernandina Beach, Florida (11%).
In the event the proposed Kina transaction described
hereinbelow is not successfully consummated, management is
exploring plans to expand EEI's business by looking at wood
pellets, wood chips and other areas of the wood waste products
industry.
Southern Trailers Acquisition
In October 1995, the Company formed Southern Trailers
Manufacturing, Inc. ("STM") as another wholly owned subsidiary
company. On November 14, 1995, STM acquired the assets of a
company which acted as a distributor of trailers principally used
for the transportation of horses and as utility trailers.
Consideration for this purchase consisted of $190,000 in cash and
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24,616 shares of the Company's Common Stock (valued at $200,000).
The assets acquired consisted of the ongoing business, all tangible
and intangible assets and covenants not to compete. In conjunction
with this acquisition, STM entered into a ten-year management
agreement which provides for annual compensation payments of
$85,000, plus 3.5% of pre-tax profits if they meet or exceed
$600,000 and 7% of such profits in excess of $600,000. In
addition, the manager is entitled to as much as $500,000 of stock
bonus compensation if pre-tax profits exceed specified sums. STM
also entered into a ten year employment agreement with one other
individual. The contracts provide for combined annual base
salaries of $75,000 and additional compensation based upon
performance.
After concluding this acquisition, management elected to
convert STM from a distributor of other manufacturer's trailers
into a mass manufacturer of quality horse, utility and cargo
trailers. STM executed a lease/purchase agreement on a 40,000
square foot warehouse facility in Unadilla, Georgia and has
upgraded this building with an overhead crane system and state of
the art paint booth, expending approximately $100,000 to establish
this manufacturing facility and $1,300,000 for purposes of
purchasing inventory and working capital. This facility went on-
line as a full manufacturer on March 1, 1996, and currently has the
capacity to manufacture between 25 to 50 trailers per month, which
management believes is presently sufficient to meet existing
orders. In the event the Company receives additional orders,
management will establish a second shift to increase production to
meet such demand. STM also maintains executive office space in
Perry, Georgia.
STM's trailers are sold on a retail basis through a several
state marketing area. It is anticipated that STM will retain four
or five independent wholesale distributors to assist marketing
efforts once full production is achieved. Additionally, the
Company attends horse shows and trade shows in the tri-state area
(Florida, Georgia and Alabama) to showcase its trailers and
generate new orders.
During the fiscal year ended September 30, 1996, STM incurred
losses from operations of approximately $997,267, from revenues of
$1,021,814. Management believes that during the fiscal year ending
September 30, 1997, that STM will being generating profits from
operations due primarily to management's increased knowledge of the
trailer business and elimination of an aggregate of approximately
$193,422 in one time costs associated with both the acquisition of
the assets referenced hereinabove, as well as the expenditure of
funds necessary to convert STM's operations into a full fledged
manufacturing facility. However, there can be no assurances that
STM will be profitable during the next fiscal year, or at all in
the future.
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Proposed Kina Transaction
During the Company's most recent fiscal quarter management was
approached by independent entities to ascertain whether the Company
would be interested in undertaking a share exchange with a
significant Chinese beer brewing company. After taking into
account the Company's existing financial condition, it's prospects
for the future and its obligation to provide the Company's
shareholders with as great a return on their respective investments
in the Company, management agreed to execute a letter agreement
with United Kina Brewing Group, Limited ("Kina"), a privately held
Bermuda corporation, whereby the Company agreed in principle to
acquire all of the issued and outstanding shares of Kina in
exchange for issuance by the Company of previously unissued
"restricted" common stock. This letter agreement was effective
August 30, 1996. The relevant terms of the proposed transaction
required the Company to (i) undertake a "reverse split" of its
common stock, whereby 1 share of common stock will be issued in
exchange for ten (10) shares of common stock; and (ii) issue to the
Kina shareholders an aggregate of 33,500,000 "restricted" common
shares (post split), representing approximately 93% of the
Company's then outstanding common stock, in exchange for all of the
issued and outstanding shares of Kina. Additional nominal shares
were to be issued to unrelated parties in consideration for finder
fees arising from the relevant transaction.
The proposed share exchange was initially subject to
satisfaction of certain conditions, including among other matters
completion of due diligence activities, the approval of the
transaction by all of the Kina shareholders and closing of a $5
million proposed private placement of the Company's securities.
Relevant thereto, a definitive Agreement and Plan of
Reorganization, as amended, between the Company and Kina was
executed by both parties, which agreement included the condition of
the closing of the proposed private offering. However, as of the
date of this report, the closing of the proposed private financing
has not occurred and effective December 6, 1996, no contractual
obligation existed between the Company and Kina. Subsequently,
management of the two companies have continued discussions and
based upon these conversations, it is anticipated that Kina will
elect to waive this condition and the proposed transaction is
expected to close shortly after the filing of this report,
consistent with the terms described hereinabove, with the exception
that the private financing will no longer be a condition to
closing. However, there can be no assurances that this will occur.
When and if the transaction with Kina is consummated, the present
officers and directors of the Company are expected to resign their
respective positions with the Company, to be replaced by the
present management of Kina.
Kina is a holding company which includes 7 joint ventures,
each of which is a brewing company and is engaged in the
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manufacturing, distributing and marketing of beer in the People's
Republic of China. On an unaudited basis and prepared in
accordance with International Accounting Standards (and assuming a
conversion ratio of 8.3 RMB to $1 US), Kina has approximately $164
million in total assets and $90 million in net assets. During its
fiscal year ended December 31, 1995, it had gross revenues of
approximately $94 million and generated profits of approximately
$6.6 million.
Further, originally, simultaneous with the Closing of the
transaction with Kina, the Company intended to assign all of its
assets and liabilities, including its subsidiary companies, Empire
Energy, Inc., Southern Trailers Manufacturing, Inc. and Cherokee
Sun Corporation to existing management in exchange for redemption
of a significant portion of their respective common stock in the
Company. However, based upon ongoing negotiations between the
Company and Kina, if this does occur it is not anticipated that
such a "roll out" will take place until after the Kina transaction
is consummated. If this "roll out" does occur, management will be
cancelling an additional portion of their shares in exchange for an
assumption of liabilities and assignment of nominal assets of the
Company.
Discontinuation of CSC Operations
CSC is a development stage Florida corporation which intended
to commence processing, bagging and marketing of cat litter
(fuller's earth) at a processing plant which the Company proposed
to build in Clinchfield, Georgia. In February, 1995, CSC entered
into a contract with Medusa Corporation ("Medusa"), (NYSE Symbol:
MSA), a Cleveland, Ohio based producer of grey portland cement and
the fourth largest domestically owned cement company in the United
States, to lease land in order to construct and operate this
processing and bagging operation of fuller's earth (cat litter) and
to receive from Medusa a continuous supply of raw material from
Medusa's cement quarry.
Subsequent to February 1995, CSC had extensive negotiations
with various parties in order to develop its cat litter processing
and bagging facility. Relevant thereto, in August, 1995, the
Company received a financing proposal from Heller Financial, Inc.,
providing for up to a $9,000,000 (+/- 10%) Senior Secured
Construction and Term Loan (the "Loan"), subject to standard due
diligence. The Loan would provide approximately 80% of the
project's capital costs, including accrued interest during the
construction phase and all closing costs, with the balance funded
by the Company. The proposed interest rate is 1.5% over the prime
rate, as established by the First National Bank of Chicago,
Chicago, Illinois, for 70% of the Loan, capitalized monthly during
construction, compounded monthly and payable quarterly commencing
6 months after commercial operations commence.
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This proposed financing was contingent upon numerous factors,
including standard due diligence, as well as the Company obtaining
a contract with an unaffiliated company for the Company to purchase
a minimum amount of cat litter for at least a 10 year term, with
established minimum pricing, which condition has been met by the
Company as a result of the Medusa agreement described above. As an
additional condition, the loan commitment was also dependent upon
the Company obtaining a contract with a major consumer products
seller of cat litter for the sale of the plant's output, requiring
a minimum term of 10 years, minimum annual purchase volumes
(approximately 100,000 tons per year of cat litter) and minimum
pricing. During the fiscal year ended September 30, 1996
management continues to have discussions with various prospective
purchasers of cat litter, to no avail. Management has been unable
to reach acceptable terms with any independent cat litter purchaser
so as to satisfy the requirements included in the Heller financing
proposal described hereinabove. As a result, in September 1996,
management notified both Medusa and Heller of the Company's
inability to proceed and the Medusa contract was cancelled.
As a result of the aforesaid discussion, it is extremely
doubtful that the Company will become involved in the production of
cat litter in the future. This unexpected development, together
with the Company's inability to generate profits from the business
of CBI, has had a significant negative impact on the Company's
future business opportunities. When the Kina transaction was
presented to management, it was therefore management's decision to
proceed with the prospective Kina transaction in order to provide
the Company's shareholders with a greater opportunity to generate
profits for the Company and liquidity for the Company's
shareholders.
Financing Activities
In June, 1995, the Company successfully consummated a private
financing with Tarlton Company, Ltd., a Cayman Island corporation
("Tarlton"), wherein Tarlton exercised options to purchase
4,000,000 shares of the Company's Common Stock for an aggregate
price of $7 million ($1.75 per share). Tarlton had paid an
aggregate of $100,000 to the Company in consideration for issuance
of the relevant options. The funds derived from issuance and
exercise of the Tarlton options have allowed the Company to
implement its business plan described herein. The Company also
issued an aggregate of 750,000 shares of its common stock to
Tarlton as consideration for certain financial consulting services
provided to the Company by Tarlton. These options and the
applicable Consulting Agreement were authorized by the Company's
Board of Directors on May 31, 1995. See "Item 6, Management's
Discussion and Analysis of Financial Condition - Liquidity and
Capital Resources."
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Also since June 30, 1995, the Company sold an aggregate of
135,000 additional shares of its Series B 9% Convertible Preferred
Stock to four accredited investors for aggregate consideration of
$337,500. During the fiscal year ended September 30, 1996, one of
these investors elected to convert their Preferred Stock to shares
of the Company's common stock.
Other Matters
On October 16, 1995, Multi-Source Labs, Inc., ("MSL"), a
wholly owned subsidiary of the Company, contracted to become the
exclusive licensee to manufacture and market a beverage cup holder
designed for use in autos, trucks, recreational vehicles and boats
using the tradename "The Beverage Brat". Consideration for the
license consisted of a payment of $15,000, plus 3,077 shares of the
Company's common stock (valued at $25,000). In addition, MSL is
obligated to pay a royalty of $0.30 for each unit manufactured.
The license fee is for a 10 year period and is automatically
renewed for additional 10 year periods, except if either of the
parties gives written notice of intent to terminate at least six
months prior to the end of any term. However, all of the Company's
interest in MSL and the "Beverage Brat" were subsequently sold and
assigned as part of the sale of CBI discussed hereinbelow. See
"Sale of CBI", below.
Effective June 20, 1996, Marie Stubbs tendered her resignation
as a director of the Company. Relevant thereto, the Board of
Directors of the Company appointed Michael J. DeMayo as a director
of the Company pursuant to the applicable provisions of the
Company's Bylaws. Mr. DeMayo shall hold his respective office until
the next annual meeting of the Company's shareholders, or his
resignation, removal or death, whichever comes first. The reason
for Ms. Stubbs resignation was personal and there was no
disagreement between Ms. Stubbs and the Company concerning any
matter relating to the Company's operations, policies or practices.
Effective June 25, 1996, the Company entered into a letter of
intent with Weststar Environmental, Inc., Starke, Florida
("Weststar") and B&B Septic and Environmental Services, Inc.,
Deland, Florida, ("B&B")(Weststar and B&B hereinafter jointly
referred to as "Weststar"), whereby the Company agreed in principle
to acquire all of the issued and outstanding shares of both of said
companies in exchange for issuance by the Company of previously
unissued "restricted" common stock. The relevant terms of the
proposed transaction required the Company to (i) issue an aggregate
of 1,150,000 shares of previously unissued common stock in exchange
for all of the issued and outstanding shares of Weststar; (ii) upon
closing of the proposed transaction, to inject an aggregate of up
to $800,000 into Weststar for purposes of repayment of debt and
expansion. The maximum liabilities to be assumed by the Company
pursuant to the terms of the letter of intent were not to exceed
$700,000. This proposed transaction did not close during the
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fiscal year ended September 30, 1996 and if the proposed
transaction with Kina is successfully consummated, the proposed
transaction with Weststar will be terminated. If the Kina
transaction is not consummated, it is anticipated that management
of both the Company and Weststar will reopen negotiations to
attempt to reach an agreement wherein the Company will acquire
Weststar under different terms and conditions to those described
hereinabove, but acceptable to both companies. However, there can
be no assurances that this will occur.
Between December 1994 and June 1995, the Company undertook two
(2) separate reverse stock splits of its issued and outstanding
common stock, including a reverse stock split in December 1994,
whereby one (1) share of Common Stock was exchanged for fifty (50)
shares of Common Stock and another reverse stock split in June
1995, whereby one (1) share of Common Stock was exchanged for four
(4) shares of Common Stock. Thereafter, in December 1995, the
Board of Directors declared a two-for-one forward split of the
Company's common stock, effective for stockholders of record on
January 5, 1996. All references in this report to the Company's
Common Stock and all per share amounts have been adjusted to give
effect to all stock splits, unless otherwise indicated.
As part of the Empire acquisition, the Company acquired two
residential homes in Jacksonville, Florida. Empire, et al. had
owned other homes prior to the Empire Acquisition which it had sold
to HUD at a profit. It was anticipated at the time of the Empire
Acquisition that these two additional homes would be sold to HUD as
well. However, subsequent to the Empire Acquisition, HUD changed
its internal policies by eliminating its acquisition program due to
lack of available funds. Further, the Company was unable to
maintain insurance coverage for these properties, as they were
unoccupied and located in an indigent area. As a result, in April
1995 the Company elected to dispose of these homes, incurring a
loss of an aggregate of $58,644 on these sales.
On November 1, 1995, the Company invested $1,000,000 to
purchase 400,000 shares of 6% participating convertible preferred
stock of a company which is engaged in the purchase and lease back
of model homes with a major real estate developer. Each preferred
share may be converted into one share of common stock. Messrs.
Weiss and Wilson are directors and Ms. Schlapkohl and Kushay are
officers and directors of the company in which this investment was
made.
Employees
The Company and its subsidiaries presently have an aggregate
of 66 full-time employees functioning in the capacities of sales,
marketing, administration, manufacturing and management. There are
3 people employed directly by the parent company, 60 people
employed by STM and 3 people employed by EEI. None of the Company's
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employees are members of any union. Management believes that its
relationship with its employees is excellent.
Competition
Other than several small independent dealers, management of
EEI is unaware of any other entity that is engaged in EEI's
business within its geographic sphere of influence.
STM competes with both publicly and privately held companies
in the trailer manufacturing business. There are numerous other
entities engaged in the trailer manufacturing industry who have
greater resources, both financial and otherwise, than the resources
presently available to STM, including Featherlite, Inc., which is
the largest publicly held competitor, with over $60 million in
annual revenues. As of the date of this report, STM is not
considered a major factor in the trailer manufacturing business.
Trademarks
The Company does not utilize any other trademarks or patent
rights in its business.
Government Regulations
The Company is not subject to any extraordinary governmental
regulations relating to its businesses. Management believes that
the Company is in substantial compliance with all applicable
federal state and local governmental regulations.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal place of business is located at 2345
Friendly Road, Fernandina Beach, Florida 32034, which consists of
office and warehouse space. This space consists of approximately
1,500 square feet of office space and common area, including 2
offices and a conference room. These premises are leased pursuant
to an oral agreement on a year-to-year basis at a monthly rate of
$568. EEI and CBI's predecessor companies, Empire and Caribbean,
had been located at this location for six years prior to the Empire
acquisition.
During the fiscal year ended September 30, 1996, the Company
was also obligated to pay for warehouse space located on the
premises of Cosmetic Concepts, Inc., Miami, Florida, one of the
principal manufacturer's of CBI's products, which space was
utilized for storage of CBI's inventory. Monthly rental payments
of $2,700 for approximately 6,000 square feet of warehouse space is
required pursuant to an oral agreement between the parties. This
obligation ceased in August 1996 when CBI was sold.
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As part of the acquisition of the trailer manufacturing
business, the Company leases 1,500 square feet of office space and
approximately 8,500 square feet of manufacturing and warehouse
space at the rate of $2,000 per month located in Perry, Georgia,
pursuant to a 3 year lease agreement. Additionally, the principal
manufacturing facility constructed by the Company subsequent to
this acquisition consists of a 42,000 square foot warehouse in
Unadilla, Georgia, leased from the Development Authority under a 40
month primary term at the rate of $5,000 per month. The lease
contains a purchase option under which $750 per month of the rental
payments would apply towards the purchase price of $500,000.
The Company also leases, with an option to purchase, a 190
acre tract of land, known as Page's Dairy Property, in Nassau
County, Florida, which was acquired as part of the assets included
in the Empire acquisition. The lease/option agreement provides for
monthly lease payments of $5,000, all of which is applied to the
purchase price of $721,000 and may be exercised by the Company once
the aggregate amount of lease payments tendered to the lessor
equals $710,000, but no later than December 31, 2004. The Company
has the right to prepay the lease payments due, if it desires to
exercise its right to purchase prior to reaching the aforesaid
$710,000 threshold. This lease option agreement is effective until
February 28, 2005. The Company tendered all applicable payments
hereto during the fiscal year ended September 30, 1995.
Page's Dairy property is located near Amelia Island, a resort
community and adjacent to a 60 acre tract owned by the Ocean
Highway and Port Authority, Nassau County, Florida, which is in the
process of installing roads, water and sewer, which will also be
made available to the Company's property. Relevant thereto, on
March 22, 1995, the Ocean Highway and Port Authority publicly
announced that it was opening the Fernandina International
Tradeplex on this adjacent property, advising further that said
project was on line and moving forward. While management has no
immediate plan to develop this property, the Company is seeking a
joint venture partner to develop the property and offer a wide
variety of moderately-priced homes that are designed to appeal to
the entry-level and first-time move-up buyers. However, there can
be no assurances that the Company will undertake any development or
other activity on this property in the near future, or at all.
During the fiscal year ended September 30, 1995, the Company spent
approximately $4,250 improving this property, which improvements
consisted of general maintenance and landscaping activities.
In April 1996, the Company entered into a Contract of Sale to
purchase approximately 1,300 acres of undeveloped real estate in
Mt. Pleasant, South Carolina, from the Dunes West Joint Venture, a
subsidiary of Georgia Pacific Corporation. The purchase price of
this property was $5 million and the Company placed $250,000 into
a fully refundable escrow account. The Company did not have
sufficient funds to purchase or develop this property for its own
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account, nor was the Company able to obtain any commitment from any
financing institution, investment banking firm or other entity to
provide the funding necessary to consummate this acquisition and
develop the property. As a result, the contract was terminated and
all escrowed funds were returned to the Company, without any
deduction.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company (or any of its officers and directors in their capacities
as such) is a party or to which the property of the Company is
subject and no such material proceeding is known by management of
the Company to be contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal year ended September 30, 1996, the Company
held its annual meeting of shareholders on March 7, 1996 in Boca
Raton, Florida. At the meeting directors were elected, Horton &
Company, LLC. was appointed as the Company's independent certified
public accountants for the fiscal year ending September 30, 1996
and shareholders approved a new Stock Plan. See Item 9, below.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Market Information.
The following table sets forth the range of high and low bid
prices as reported on Nasdaq during the periods commencing June 20,
1995 (the date the Company's Common Stock commenced trading on
Nasdaq), as well as on the OTC Bulletin Board operated by the NASD,
where the Company's Common Stock traded prior to listing on Nasdaq
beginning in June, 1994. On December 17, 1996, the last reported
sales price on Nasdaq was $0.19 bid, $0.22 asked.
<TABLE>
<CAPTION>
Bid Price
Quarter Ended High Low
_________________________________ _____ _____
<S> <C> <C>
Post 1 for 50 Reverse Stock Split
December 1994 $5.00 $3.50
March 1995 $5.00 $1.00
Post 1 for 4 Reverse Stock Split
June 1995 $6.00 $3.50
September 1995 $8.38 $4.00
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Quarter Ended High Low
__________________________________ _____ _____
Post 2 for 1 Forward Split
December 1995 $9.13 $6.13
March 1996 $8.25 $1.63
June 1996 $4.63 $1.75
September 1996 $3.13 $0.25
</TABLE>
Holders
There were 1,068 shareholders of record as of September 30,
1996. This number does not include beneficial owners holding
shares through nominee or "street" names.
Dividends
With the exception of those dividends payable in accordance
with the terms of the Company's Series B Preferred Shares, the
Company is not obligated to pay any dividends. The Company has
paid no dividends during the past five fiscal years on any class of
its issued and outstanding securities, including the Series B
Preferred Stock. The dividends to be paid on the Series B
Preferred Stock is cumulative. Other than the requirements of the
Business Corporation Law of the State of New York that dividends be
paid out of capital surplus only and that the declaration and
payment of a dividend not render the Company insolvent, there are
no restrictions on the Company's present or future ability to pay
dividends.
The payment by the Company of dividends, if any, in the future
rests within the discretion of its Board of Directors and will
depend, among other things, upon the Company's earnings, its
capital requirements and its financial condition, as well as other
relevant factors. By reason of the Company's present financial
condition, the Company does not contemplate or anticipate paying
any dividends upon the Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company's principal operations consist of the operations
acquired with the purchase of the assets of Empire, et. al.
effective January 1, 1995, and with the purchase of assets of
Southern Trailer Manufacturing, Inc. in November of 1995 and
development of its manufacturing capabilities. The Company had not
had any operations for many years, until it acquired the assets of
EEI, CBI and CSC effective January 1, 1995, as discussed under Item
1, above.
13
<PAGE>
As of the date of this report, the Company's principal
businesses included (i) the purchase and sale of pine bark, wood
waste and other related waste materials generated primarily by
paper mills located in the southern Georgia and northern Florida
regions; and (ii) the manufacturing and sale of trailers
principally used as utility trailers or in the transportation of
horses.
The following information is intended to highlight
developments in the Company's operations to present a comparison of
the results of operations of the Company and its subsidiaries, to
identify key trends affecting the Company's businesses and to
identify other factors affecting the Company's consolidated results
of operations for the fiscal years ended September 30, 1996 and
1995.
Note that all information shown for the operating subsidiaries
in the following analyses is for the twelve month period ended
September 30, 1996. The current numbers for STM are from the date
of acquisition, November 14, 1995. CBI was sold effective June 30,
1996, so its numbers are presented separately as a discontinued
operation. Planned operations of CSC were abandoned during the
calendar quarter ended September 30, 1996; therefore, it is also
presented as a discontinued operation.
Results of Operations
Comparison of Results of Operations for the fiscal years ended
September 30, 1996 and 1995.
The following tables set forth, for the periods indicated, the
percentage of total revenues represented by certain items included
in the Company's audited Consolidated Income Statement contained
herein. See "Item 7, Financial Statements."
<TABLE>
Antares Resources Corporation (consolidated)
<CAPTION>
Fiscal Year Ended September 30,
1995 % 1994* %
__________ ______ __________ ______
<S> <C> <C> <C> <C>
Sales . . . . . . . . . $3,342,060 100.00 $1,428,889 100.00
Cost of Sales . . . . . $3,395,013 101.58 $ 958,013 67.05
Gross Profit . . . . . . ($52,953) (1.58) $ 470,876 32.95
Selling, General
and Administrative . . $1,766,890 52.87 $ 743,166 52.01
____________________
14
<PAGE>
<FN>
* Because Southern Trailer Manufacturing was not acquired until
November 14, 1995, numbers are those of Empire Energy, Inc.
and Antares only.
</TABLE>
The fiscal year ended September 30, 1996, was a year of
changes, since the Company sold CBI, purchased STM, and decided
against going into the kitty litter business. This decision was
made because after eighteen months of meeting with major kitty
litter producers, the Company was unable to obtain contracts for
enough finished product to make the business feasible. General and
Administrative Expenses increased from $743,166 to $1,766,890, an
increase of $989,119 (133%). This increase was attributed to the
addition of STM as an operating company which increased the number
of the Company's employees by 60, the parent company expenses being
up from $419,205 to $1,027,034 (145%), which management attributes
to the number of increased management and the fact that 1995 was
only nine months of operations versus twelve months in 1996.
General and administrative costs incurred during the year included
professional fees associated with the acquisition and disposition
of companies, as well as the costs incurred in maintaining the
Company's status as a public company.
The cost of goods sold for the fiscal year increased
significantly as a result of the expansion of STM into a
manufacturing entity beginning in November 1995. The plant was not
at full capacity until June of 1996, and the purchasing practices
and inventory usage suffered from the expansion. Management
believes it has solved the problems of inventory control and
purchasing by seeking bids on each item used in the process,
setting up better cost accounting systems, and raising wholesale
and retail prices.
Management made the decision to dispose of CBI to stop the
losses occurring in that segment of the Company, and the Company
began looking for an acquisition that would add significant
shareholder value (see "Commitments and Contingencies").
The following tables set forth, for the periods indicated, the
percentage of total revenues represented by each of the two wholly
owned subsidiary companies of the Company which are presently
engaged in operations compared with operations for the comparable
twelve month period from the last fiscal year.
15
<PAGE>
<TABLE>
Empire Energy, Inc.
<CAPTION>
Twelve Months Ended September 30,
1996 % 1995* %
__________ ______ __________ ______
<S> <C> <C> <C> <C>
Sales . . . . . . . . . $1,095,749 100.00 $1,428,889 100.00
Cost of Sales . . . . . $ 688,510 62.84 $ 958,013 67.05
Gross Profit . . . . . $ 407,239 37.16 $ 470,876 32.95
Selling, General and
Administrative . . . $ 278,578 25.42 $ 323,961 22.67
<FN>
*1995 represents 9 months of operations.
</TABLE>
<TABLE>
Southern Trailer Manufacturing, Inc.
<CAPTION>
Ten and One-Half Months Ended September 30,
1996 % 1995* %
__________ ______ __________ ______
<S> <C> <C> <C> <C>
Sales . . . . . . . . . $2,246,311 100.00 N/A N/A
Cost of Sales . . . . . $2,706,503 (120.48) N/A N/A
Gross Profit . . . . . ($ 460,192) (20.48) N/A N/A
Selling, General and
Administrative . . . $ 486,210 21.64 N/A N/A
<FN>
*Assets were acquired and manufacturing operations were begun on
November 14, 1995.
</TABLE>
The following analysis is for the combined operations of the
operating subsidiaries only.
Revenues for the twelve months ended September 30, 1996, were
$3,342,060 compared to revenues of $1,428,889 for the nine months
ended September 30, 1995, an increase of 134%. This increase was
solely because STM began operations in the first quarter of the
Company's fiscal '96 year. Sales of EEI were down by $333,140
(23.31%) because of the discontinuation of the disposal of
cardboard residue; however, the profit margin for Empire Energy,
Inc. increased by 1.46%.
Cost of sales for the year ended September 30, 1996, were
$3,395,013 versus $958,013 for the nine months ended September 30,
1995, an increase of 254%. Management believes that the cost of
16
<PAGE>
sales were abnormally high due to the start-up of STM. The Company
invested $1,447,037 to purchase equipment, supplies and for working
capital. Inventory usage and productivity were adversely affected
by personnel that were in training and unfamiliar with the
operations, as well as inadequate controls on purchasing. The
Company has made changes in both inventory control, purchasing, and
cost accounting to monitor and control the production process. STM
hired an inventory specialist to work in the plant and handle raw
materials and STM has put all components out for competitive bids.
Selling, General and Administrative expenses for operating
subsidiaries for the year ended September 30, 1996, were $739,856
versus $323,961 (128%) for the year ended September 30, 1995. The
increase came from STM being in operation in 1996 only. EEI
decreased expenses by $45,383, or a 14% decrease.
The following analysis is for the consolidated operations of
the Company and its subsidiaries.
The Company had a loss of $1,733,355 from continuing
operations at September 30, 1996, versus a loss of $397,373 (a 336%
increase) for the period ended September 30, 1995. The loss for
1995 was for nine months of operations, while the 1996 loss was for
twelve months. STM contributed $949,162 to the loss and the parent
company expenses added another $930,261 to the loss. EEI had a
profit of $146,068 to reduce the loss. The Company earned $158,264
in interest income for the year ended September 30, 1996, and
incurred interest expenses of $86,627, versus interest income of
$15,806 and interest expenses of $82,245 in the year ended
September 30, 1995.
Losses from discontinued operations were $3,927,261 at
September 30, 1996, versus a loss of $734,813 (a 434% increase) at
September 30, 1995. This loss came from CBI ($997,267) and CSC
($2,930,000) or a total loss at September 30, 1996 of $5,550,616
versus $1,129,686 for the year ended September 30, 1995 (a 391%
increase). CBI's losses came from smaller than anticipated sales.
The competitive nature of the industry caused products to be sold
at unprofitable margins. The loss in CSC was due to the write-off
of the intangible assets associated with the long-term lease with
Medusa Cement.
Intangibles relating to CSC were written off and this reduced
assets by $2,930,000. Current maturities of long-term debt related
to equipment and vehicles purchased and current portions of
subordinated debt ($199,851) represents the amortization of debt
owed pursuant to the original EEI acquisition. Accounts payable
and accrued expenses increased by $639,634 (467%), which relates to
STM and the requirement for a large raw materials inventory to
build trailers. Under the equity section, stock subscriptions
receivable relate to several employees exercising options granted
under the Company's stock option plan. The employees notified the
17
<PAGE>
Company to exercise their options, sell the stock, and give the net
proceeds to each employee. At the time of the notice, the options
were "in the money"; however, by the time the transfer agent issued
the stock certificates, the stock price had dropped and the options
were "out of the money." The Company is holding the stock
certificates and shows a receivable from the employees. These
shares will be cancelled if the Kina transaction referred to in
Item 1 is successfully completed, of which there can be no
assurances (see "Commitments and Contingencies").
EEI had a revenue decrease of $333,140 due to two factors:
the discontinuation of waste cardboard residue disposal and a
temporary reduction in the supply of bark available for purchase
due to a longer than anticipated shut-down of a major supplier.
The bark supply increased back to normal in the last quarter ended
September 30, 1996. Although revenue was down, a corresponding
drop in cost of goods sold caused the profit margin to increase by
1.6%. Management does not anticipate any material change in the
operations for the coming year.
STM incurred a net loss of ($949,162) for the ten and one-half
months the company was in business. As previously mentioned, this
business had significant start-up expenses and training expenses to
convert from a distributor of other manufacturers' trailers to a
mass manufacturer of custom horse, cargo and utility trailers. In
an effort to make inroads into the market, trailers were sold at a
discount or under competitive prices so that the company's name
would be recognized. This resulted in a negative gross profit
margin of ($460,192). The company has made adjustments to sales
prices and has put in place stringent purchasing guidelines to
ensure a positive gross margin. Also, the company has set up major
dealers in three states to ensure full production at the plant
facility in addition to retail sales in the pipeline. Sales for
the fourth quarter increased to $1,065,978 from $807,381 in the
third quarter of 1996. While no assurances can be provided,
management believes that the continued increase in sales, coupled
with other positive changes in the purchasing and inventory control
areas, may result in profits for future operations.
Liquidity and Capital Resources
Relating to the Company's assets and liabilities, cash
decreased from $6,120,164 at September 30, 1995, to $307,272 at
September 30, 1996. Cash was used to purchase and expand STM
($1,447,037), to build up inventory and cover expenses of CBI
($2,172,916), to invest in JJFN stock ($1,000,000), and to fund the
losses for 1996 ($1,733,355). The inventory figure of $1,053,109
is all of the inventory of Southern Trailer Manufacturing, and the
investment is Preferred Stock of JJFN, a company engaged in the
financial services industry. Several directors of the Company are
either officers or directors of JJFN.
18
<PAGE>
The Company has used the proceeds of a $7,000,000 private
placement in June of 1995 to fund the operations and losses
incurred to date. The Company has also used the funds to expand
the business of STM ($1,447,037). A significant portion of the
money ($2,172,916) was invested in CBI, which was disposed of in
June of 1996 (see "Discontinued Operations").
Additionally, relevant to the Empire acquisition discussed
under Item 1, above herein, the Company issued to two of the Empire
shareholders subordinated promissory notes in the aggregate
principal amount of $600,000 ($300,000 per note) with interest
accruing on both notes at the rate of 12% per annum. Pursuant to
the terms of these notes, as amended, the Company was obligated to
tender interest payments on a quarterly basis, commencing June 30,
1995. The Company is current in all interest payments as of the
date of this report. An aggregate principal payment of $300,000
was paid on March 15, 1996. The remaining balance is payable over
eighteen months commencing ninety days after March 15, 1996. As of
the date of this report, the Company is current on all principal
and interest payments. In the event the Kina transaction is
successfully consummated (of which there can be no assurance),
these notes will be assigned out of the Company as a part of the
consideration for the other assets to be assigned to certain
members of current management. During the year, the Company
borrowed various amounts for vehicles and computer equipment for a
total of $39,932. These notes carry interest rates from 7.25% to
18%.
In the event the Kina transaction does not close, management
intends to seek financing for a floor plan line for STM to help
carry the finished goods inventory as well as to provide the
Company with additional working capital. STM is approved to
provide trailers to dealers financed by Deuschebank. There is no
assurance that the Company will be successful in obtaining any
additional financing. The Company does not have enough financing
to survive the next twelve months and there is not any reasonable
chance to raise additional equity (refer to going concern
footnote). Management feels that the transaction with Kina gives
the Company the best chance for survival and has negotiated a deal
in order to keep the Company going. If the Kina transaction does
not happen or the Company is unsuccessful in obtaining additional
capital, the Company must either find another merger partner or
file for protection under the United States Bankruptcy Code in the
near future.
Trends
If the Kina transaction does not occur, the Company expects
EEI to perform in much the same manner as it did in the 1996 fiscal
year. STM appears to be poised to produce a profit each month
going ahead, but it has not been able to do so in the past. The
Company made the decision in the fiscal fourth quarter of 1996 to
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<PAGE>
look for a potential merger/acquisition candidate that could add
stability and earnings to the overall business of the Company.
First, the Company sold CBI to the former President, David Capps,
for a note and stock (see "Discontinued Operations"). Then the
Company began searching for significant acquisitions with the help
of outside consultants. A possible merger with United Kina Brewing
Group, Ltd. emerged in August 1996. The Company's growth and
continued operations will largely depend upon the successful
completion of this merger/acquisition (see "Commitments and
Contingencies" for details).
Inflation
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation had a material affect on the results of operations during
the fiscal year ended September 30, 1996.
Discontinued Operations
Disposition of Caribbean Breeze International, Inc.
Effective June 30, 1996, the Company adopted a formal plan to
dispose of its CBI sun and skin care products business. Net sales
of CBI were $1,021,814 for the nine month period ended June 30,
1996, and $720,476 for the period from January 1, 1995 (date of
acquisition) through June 30, 1996. Such amounts are not included
in net sales in the accompanying consolidated statements of
operations. The loss associated with this discontinued operation
was ($869,849) for Antares' fiscal year ended September 30, 1996,
thus giving management impetus for this disposition. The Company
successfully negotiated the terms of the sale of the business.
Under the terms, the sale was retroactive to July 1, 1996. The
sale also included the assets of Multi-Source Labs, Inc. Multi-
Source Labs, Inc. has had no operations. The sale was made to the
former President of CBI, Mr. David Capps. Mr. Capps is the
brother-in-law of D. Elton Stubbs and C. Richard Stubbs, officers
and directors of the Company.
The results of the CBI business have been reported separately
as discontinued operations in the consolidated statements of
operations. Consolidated financial statements for prior
comparative periods have been restated to present the CBI business
as a discontinued operation.
Assets and liabilities of CBI and Multi-Source Labs that were
disposed of consisted of the following:
20
<PAGE>
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1995
_____________ __________________
<S> <C> <C>
Accounts Receivable $ 387,301 $ 0
Inventories 950,430 397,191
Other Current Assets 51,953 6,095
Property & Equipment 156,162 96,273
Intangible Assets, Net 310,000 285,000
Liabilities (81,367) (39,761)
__________ __________
Net Assets of
Discontinued Segment $1,774,479 $ 744,798
</TABLE>
The net assets of the discontinued segment have been
classified as a non-current asset in the accompanying consolidated
balance sheet. The note receivable has been classified as a non-
current asset in the 1996 consolidated balance sheet.
Under the terms of the sale, the Company sold the net assets
of the discontinued segment for a note which bears interest at
prime plus 3/4% and matures in August 1998. The note is
collateralized by the assets of the CBI business and by common
stock of Antares Resources Corporation having a value equal to the
amount of the net receivable.
Discontinuation of Cherokee Sun Corporation
In the fiscal fourth quarter, the Company discontinued plans
for CSC to enter the kitty litter business and cancelled its
favorable lease with Medusa Cement Company. Cherokee Sun was
unable to generate contracts with major kitty litter producers to
take enough final product to make construction of a plant facility
feasible. The Company wrote off the intangible assets that related
to the venture which contributed $3,057,410 to the loss for Antares
for the year (this figure included $127,410 in expenses associated
with the operation of CSC).
Commitments and Contingencies
In August of 1996 the Company began discussions with United
Kina Brewing Group, Ltd., a private Bermuda corporation, concerning
a possible share exchange. The Company and Kina entered into a
definitive agreement dated August 30, 1996, which called for the
acquisition to occur upon the completion of certain conditions.
All conditions have been met with the exception of a private
placement equity transaction, which was to be arranged by Kina's
representatives. There have been several extensions to the
21
<PAGE>
agreement, with the last one expiring December 6, 1996. The
Company and Kina are still in discussions concerning the remaining
condition and management is confident that there will be an amended
agreement signed in the near future; however, there can be no
assurances that this will in fact happen. The basic terms of the
deal would require a stock exchange whereby Kina will assign all of
its issued and outstanding stock to Antares in return for issuance
of 33,500,000 post-split shares of Antares stock. There would be
a 1 for 10 reverse split of Antares stock prior to the
merger/acquisition. All current officers and directors of Antares
Resources Corporation would resign effective with the merger.
There have also been discussions that subsequent to the
closing of the Kina transaction, Antares would exchange the stock
of STM and EEI and substantially all of the other present assets of
the Company (except for the investment in JJFN stock and a
specified amount of cash) to certain members of the Company's
current management in exchange for the cancellation of a majority
of their Antares stock and the cancellation of their management
contracts.
This report contains assumptions and predictions made by
management of the Company. There can be no assurances that all or
any of them will occur.
ITEM 7. FINANCIAL STATEMENTS
22
<PAGE>
ANTARES RESOURCES CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
with
INDEPENDENT AUDITORS' REPORT
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
23
<PAGE>
<TABLE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
Page
<S> <C>
Independent Auditors' Report F-2
Consolidated balance sheets as of
September 30, 1996 and 1995 F-3 - F-4
Consolidated statements of operations for the
years ended September 30, 1996 and 1995 F-5
Consolidated statements of stockholders' equity
for the years ended September 30, 1996 and 1995 F-6
Consolidated statements of cash flows for the
years ended September 30, 1996 and 1995 F-7 - F-8
Notes to consolidated financial statements F-9 - F-32
</TABLE>
F-1
24
<PAGE>
HORTON & COMPANY, L.L.C.
Certified Public Accountants and Business Consultants
1680 Route 23, Suite 110
Wayne, New Jersey 07470
TEL: 201-305-9800, FAX: 201-305-8213
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Antares Resources Corporation and subsidiaries
Fernandina Beach, Florida
We have audited the accompanying consolidated balance sheets of
Antares Resources Corporation and subsidiaries as of September 30,
1996 and 1995, and the related consolidated statements of
operations and of stockholders' equity, and cash flows for the
years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Antares Resources Corporation and subsidiaries as of
September 30, 1996 and 1995, and the consolidated results of its
operations and its consolidated cash flows for the years then
ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 13 to the financial statements, the Company has suffered
recurring losses from operations that raise substantial doubt about
its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 13. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Horton & Company, L.L.C.
November 22, 1996, except for the business combination
section of Note 13 as to which the date is December 10, 1996.
F-2
25
<PAGE>
<TABLE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
September 30,
1996 1995
__________ ___________
<S> <C> <C>
Current assets:
Cash and equivalents $ 307,272 $ 6,120,164
Accounts receivable, net of allowance for doubt-
ful accounts of $20,000 in 1996 and $0 in 1995 133,684 69,872
Current portion of notes receivable 67,831 24,019
Current portion of stockholder loans receivable 70,730 0
Inventories 1,053,109 0
Prepaid expense 1,324 17,657
__________ ___________
Total current assets 1,633,950 6,231,712
Property and equipment:
Real estate held for development 1,767,062 1,754,245
Leasehold improvement 35,604 0
Machinery and equipment 335,170 51,506
Vehicles 135,888 48,871
Office equipment 45,441 23,196
__________ ___________
2,319,165 1,877,818
Less accumulated depreciation 104,032 19,471
__________ ___________
2,215,133 1,858,347
Other assets:
Investments 1,002,500 2,500
Notes receivable, net of current portion 29,365 34,477
Stockholder loans receivable,
net of current portion 43,608 0
Intangibles, net of accumulated amortization 152,646 44,167
Note receivable from sale of discontinued segment 1,774,479 0
Net assets of discontinued segments 0 3,674,798
__________ ___________
3,002,598 3,755,942
__________ ___________
$6,851,681 $11,846,001
<FN>
See notes to consolidated financial statements.
</TABLE>
F-3
26
<PAGE>
<TABLE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30,
1996 1995
__________ ___________
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 27,911 $ 9,122
Current portion of capital lease obligation 37,231 35,068
Current portion of subordinated debt 199,851 350,000
Note payable 50,000 0
Accounts payable and accrued expenses 826,691 187,057
Payroll taxes payable 91,179 23,088
__________ ___________
Total current liabilities 1,232,863 604,335
Long-term debt, net of current maturities 36,494 24,473
Capital lease obligation, net of current portion 359,126 396,357
Subordinated debt, net of current portion 53,804 250,000
__________ ___________
1,682,287 1,275,165
Stockholders' equity:
Preferred stock, $.01 par value
5,000,000 shares authorized,
Series A - 100,000 shares issued and
outstanding in 1995 0 1,000
Series B - 126,000 shares issued and
outstanding in 1996 900 0
Series B - 135,000 shares issued and
outstanding in 1995 0 1,350
Common stock, $.001 par value
200,000,000 shares authorized
24,253,972 shares issued and
outstanding in 1996 24,254 0
12,209,988 shares issued and
outstanding in 1995 0 12,210
Additional paid-in capital 14,021,452 13,455,772
Accumulated deficit (8,560,112) (2,899,496)
__________ ___________
5,486,494 10,570,836
Less: stock subscriptions receivable (317,100) 0
__________ ___________
5,169,394 10,570,836
__________ ___________
$6,851,681 $11,846,001
<FN>
See notes to consolidated financial statements.
</TABLE>
F-4
27
<PAGE>
<TABLE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Years ended September 30,
1996 1995
___________ ___________
<S> <C> <C>
Revenues:
Alternative fuel $ 1,095,749 $ 1,070,889
Waste disposal 0 358,000
Trailer sales 2,246,311 0
___________ ___________
3,342,060 1,428,889
___________ ___________
Costs of revenues:
Alternative fuel 688,510 690,110
Waste disposal 0 267,903
Trailer sales 2,706,503 0
___________ ___________
3,395,013 958,013
___________ ___________
Gross profit (loss) (52,953) 470,876
___________ ___________
Selling expenses 34,605 0
General and administrative expense 1,732,285 743,166
___________ ___________
1,766,890 743,166
Loss from operations (1,819,843) (272,290)
___________ ___________
Other expenses (income):
Interest expense 86,627 82,245
(Gain) loss on sale of assets (14,851) 58,644
Interest and dividend income (158,264) (15,806)
___________ ___________
(86,488) 125,083
Loss from continuing operations (1,733,355) (397,373)
___________ ___________
Discontinued operations:
Loss from operations (987,261) (734,813)
Estimated loss on disposal (2,940,000) 0
----------- -----------
(3,927,261) (734,813)
___________ __________
Loss before cumulative effect of change in
marketable securities accounting principle (5,660,616) (1,132,186)
Cumulative effect on prior years of change in
marketable securities accounting principle 0 2,500
___________ ___________
Net loss $(5,660,616) $(1,129,687)
<FN>
*Revenues and expenses of operating subsidiaries are for the nine-month
period from date of acquisition (January 1, 1995) through September 30,
1995.
See notes to consolidated financial statements.
</TABLE>
F-5
28
<PAGE>
<TABLE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended September 30, 1996 and 1995
<CAPTION>
Preferred Stock Common Stock
________________ __________________
Additional
Shares Shares Paid-In Accumulated
Issued Amount Issued Amount Capital Deficit
________ ______ __________ _______ ___________ ___________
<S> <C> <C> <C> <C> <C> <C>
Balance Sept-
ember 30, 1994 0 0 499,988 $ 500 $ 1,715,193 $(1,769,810)
Options
exercised 0 0 11,180,000 11,180 7,071,306 0
Stock issued in
combination-
January 1995;
Series A
Preferred 100,000 1,000 0 0 999,000 0
Common 0 0 530,000 530 3,334,123 0
Series B
Preferred
Stock Issued 135,000 1,350 0 0 336,150 0
Net loss 0 0 0 0 0 (1,129,686)
_______ ______ __________ _______ ___________ ___________
Balance Sept-
ember 30, 1995 235,000 2,350 12,209,988 12,210 13,455,772 (2,899,496)
Stock issued
in business
combinations 0 0 55,384 55 224,972 0
Options
exercised 0 0 3,898,600 3,899 347,348 0
Conversion of
Series A
Preferred
Stock (100,000) (1,000) 8,000,000 8,000 (7,000) 0
Conversion of
Series B
Preferred
Stock (45,000) (450) 90,000 90 360 0
_______ ______ __________ _______ ___________ ___________
Net loss 0 0 0 0 0 (5,660,616)
Balance Sept-
ember 30, 1996 90,000 $ 900 24,253,972 $24,254 $14,021,452 $(8,560,112)
<FN>
See notes to consolidated financial statements.
</TABLE>
F-6
29
<PAGE>
<TABLE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended September 30,
1996 1995*
___________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,660,616) ($1,129,686)
Adjustments to reconcile net loss to net cash
used in operating activities:
Cumulative effect on prior years of change in
marketable securities accounting principle 0 (2,500)
Depreciation and amortization 96,809 65,313
(Gain) loss in sale of assets (14,851) 58,644
Bad debts 46,417 36,060
Other 5,156 3,873
Estimated loss on disposal of
discontinued segments 2,940,000 0
Changes in assets and liabilities, net of
effects from business combination:
(Increase) decrease in accounts receivable (110,229) 115,570
(Increase) decrease in inventories (941,228) 63,568
(Increase) decrease in prepaid expenses 16,333 (76,871)
(Increase) decrease in deferred
financing costs 0 (30,000)
(Increase) decrease in deferred
acquisition costs 0 (44,167)
(Increase) decrease in net assets of
discontinued segments (999,681) 0
(Increase) decrease in accounts payable
and accrued expenses 642,309 (17,626)
(Increase) decrease in payroll taxes payable 68,091 28,485
___________ ___________
Total adjustments 1,749,126 200,349
___________ ___________
Net cash used in operating activities (3,911,490) (929,337)
___________ ___________
Cash flows from investing activities:
Acquisition costs (195,443) (55,670)
Capital expenditures (252,274) (77,853)
Proceeds from sale of property and equipment 28,808 30,643
Loans to stockholders (114,338) 0
Loan to unaffiliated company (65,000) 0
Principal payments from loans receivable 26,300 0
Investment (1,000,000) 0
___________ ___________
Net cash used in investing activities (1,571,947) (102,880)
___________ ___________
Cash flows from financing activities:
Principal payments under loan agreements (375,886) (47,369)
Principal payments under capital lease obligation (35,068) (19,508)
Proceeds from (repayment of) financing agreements 50,000 (116,000)
Repayment of stockholder loans 0 (9,728)
Proceeds from issuance of capital stock and options 31,499 7,344,986
___________ ___________
F-7
30
<PAGE>
<CAPTION>
Years ended September 30,
1996 1995*
___________ ___________
<S> <C> <C>
Net cash (used in) provided by
financing activities (329,455) 7,152,381
___________ ___________
Net (decrease) increase in cash (5,812,892) 6,120,164
Cash at beginning of year 6,120,164 0
----------- -----------
Cash at end of year $ 307,272 $ 6,120,164
<FN>
*Activities of operating subsidiaries are for the
nine-month period from the date of acquisition
(January 1, 1995) through September 30, 1995.
Supplemental disclosure of cash flow information:
Interest and finance charges paid $ 86,627 $ 334,175
Interest and dividend income received $ 15,806 $ 158,264
Supplemental schedules of non-cash investing and financing activities:
For the years ended September 30, 1996 and 1995, the Company purchased equipment
totaling $312,625 and $145,022, respectively. The purchases were financed as
follows:
<S> <C> <C>
Equipment purchased $312,625 $ 145,022
Long-term debt financing (60,351) (67,169)
________ ___________
Capital expenditures $252,274 $ 77,853
For the years ended September 30, 1996 and 1995, the Company acquired assets as
described in Note 2, in exchange for common stock, preferred stock, subordinated
notes and debt assumed as follows:
<S> <C> <C>
Assets acquired $420,443 $ 5,840,709
Consideration given (225,000) (5,785,039)
________ ___________
Acquisition costs $195,443 $ 55,670
During the year ended September 30, 1995, the Company issued capital stock and
options as follows:
<S> <C>
Capital stock issued $ 7,466,200
Payables due under financing
agreement converted to equity (75,000)
Offering costs (46,214)
___________
Proceeds from issuance of
capital stock and options $ 7,344,986
<FN>
See notes to consolidated financial statements.
</TABLE>
F-8
31
<PAGE>
ANTARES RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended September 30, 1996 and 1995
1. Summary of significant accounting policies
This summary of significant accounting policies of Antares
Resources Corporation and subsidiaries (the "Company") is
presented to assist in understanding the consolidated
financial statements. The consolidated financial statements
and notes are representations of the Company's management,
which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted
accounting principles and have been consistently applied in
the preparation of the consolidated financial statements.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Antares Resources Corporation for the years
ended September 30, 1996 and 1995 and of its wholly-owned
subsidiaries, Empire Energy, Inc. ("Empire"), and Southern
Trailer Manufacturing, Inc. ("Southern"), for the period from
their dates of incorporation (December 16, 1994 and November
15, 1995, respectively) through September 30, 1996.
Discontinued operations include Caribbean Breeze International
("Caribbean"), Multi-Source Labs, Inc. ("Multi-Source") and
Cherokee Sun Corporation ("Cherokee"). Operations of Empire,
Caribbean and Cherokee began on January 1, 1995 concurrent
with the business combination described in Note 2.
Multi-Source was incorporated on June 19, 1995 but was never
active. Effective June 30, 1996, the Company adopted a formal
plan to dispose of the Caribbean and Multi-Source business
segment. The results of Caribbean business have been reported
separately as discontinued operations in the consolidated
statement of operations as described in Note 14. During the
quarter ended September 30, 1996, the Company discontinued
plans for Cherokee's business which was in the development
stage. Intercompany transactions and balances have been
eliminated in consolidation.
F-9
32
<PAGE>
1. Summary of significant accounting policies (continued)
History and business activity
The Company was incorporated in the State of New York on
November 19, 1958, and had several name changes reflecting its
prior business operations until December 20, 1983, at which
time the Company changed its name to Antares Resources
Corporation. Prior to the business combination (Note 2) which
took place January 1, 1995, the Company had not conducted any
material business operations since 1984. Antares Resources
Corporation is a publicly held company whose stock is listed
on the NASDAQ Small-Cap Stock Market.
Empire Energy, Inc. is engaged in the buying and selling of
pine wood by-products used as fuel in the firing boilers of
paper mills. Through September 1995, it was also engaged in
transporting recycled corrugated cardboard residue. This
activity was discontinued in October 1995. Southern Trailers
Manufacturing, Inc. manufactures and sells utility, cargo, and
horse trailers. Caribbean Breeze International, Inc. was
engaged in the design, production and sale of sun and skin
care products until its discontinuance effective June 30,
1996. Multi-Source Labs, Inc. (a development stage company)
is the owner of rights to certain products which are licensed
on an exclusive basis to Caribbean Breeze International, Inc.
to manufacture and market. Cherokee Sun Corporation (a
development stage company) was attempting to enter the kitty
litter production business as a supplier of the raw material
(fuller's earth) in bulk form or as finished product which has
been processed and packaged with private labels.
Revenue recognition
Alternative fuel revenues are recognized when the fuel is
delivered. Waste disposal revenue is recognized when the
services are performed. Revenue from sales of trailers are
recognized upon shipment.
Concentration of credit risk and major customers
Antares Resources Corporation routinely maintains cash
balances with one bank in excess of the $100,000 limit which
is insured by the Federal Deposit Insurance Corporation
(FDIC). The Company's policy is to have excess funds swept by
the bank on a daily basis and used to purchase federal
securities. At September 30, 1996 and 1995, the Company's cash
balance in excess of the FDIC insured limit was approximately
$111,000 and $5,985,000, respectively. In addition, there is
off-balance sheet risk to the extent that outstanding checks,
when added to the cash balance, exceed the limit insured by
F-10
33
<PAGE>
1. Summary of significant accounting policies (continued)
Concentration of credit risk and major customers
(continued)
the FDIC. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant
credit risk on cash and equivalents.
Empire derives revenue from sales of products and services to
paper mills in northern Florida and southern Georgia.
Caribbean sells its products to retailers, convenience stores
and distributors throughout the Unites States and the
Caribbean but principally in the southeastern United States.
Southern derives revenue from sales of new and used trailers
to consumers principally in the southeastern United States.
The Company's credit policies generally do not require
collateral to support accounts receivable.
For the year ended September 30, 1996, no individual customer
accounts for more than 10% of consolidated revenue from all
sources. For the year ended September 30, 1995, two customers
individually accounted for 50.5% and 25.0% of consolidated
revenue from all sources. Waste disposal operations, which
accounted for 25.0% of consolidated revenue, were discontinued
in October 1995.
Loss per common share
Loss per common share is computed by dividing the net loss by
the weighted average number of shares of common stock
outstanding during the year. For the years ended September
30, 1996 and 1995, the weighted average number of shares used
in the calculation was 29,490,389 and 2,555,177, respectively.
Primary loss per common share does not include the effect of
common stock equivalents because the effect of such inclusion
would be to reduce loss per common share. Fully diluted loss
per share amounts are not presented because they are
anti-dilutive. Primary loss per share data is as follows:
<TABLE>
<CAPTION>
Year ended September 30,
1996 1995
__________ ___________
<S> <C> <C>
Primary loss per common share:
Loss from continuing operations $ (.06) $ (.15)
Loss from discontinued operations (.03) (.29)
Estimated loss on disposal of
discontinued operations (.10) 0
______ ______
Net loss $ (.19) $ (.44)
</TABLE>
F-11
34
<PAGE>
1. Summary of significant accounting policies (continued)
Property and equipment
Property and equipment are carried at cost. Depreciation of
property and equipment is provided on accelerated and
straight-line methods over the following estimated useful
lives:
<TABLE>
<CAPTION>
Years
_____
<S> <C>
Machinery and equipment 3-5
Vehicles 5
Office equipment 3-5
</TABLE>
Depreciation expense for the year ended September 30, 1996 and
1995 was $83,863 and $50,313, respectively.
Maintenance, repairs and renewals which neither materially add
to the value of the equipment nor appreciably prolong its life
are charged to expense as incurred. Gains or losses on
dispositions of equipment are included in income. Leasehold
improvements are depreciated over the lesser of the term of
the related lease or the estimated useful lives of the assets.
Intangibles
Intangibles are carried at cost and represent the value of
covenants not-to-compete and goodwill which represents the
excess of cost over fair market value related to the Southern
Trailer Manufacturing, Inc. business combination described in
Note 2. Goodwill is being amortized on the straight-line
method over a fifteen-year period and the covenants
not-to-complete are being amortized on the straight-line
method over the ten-year life of the agreements. Accumulated
amortization at September 30, 1996 and amortization expense
for the year then ended was $12,946. There was no
amortization expense from continuing operations for the year
ended September 30, 1995.
Cash equivalents
The Company considers all highly-liquid debt instruments
purchased with an original maturity of three months or less to
be cash equivalents.
Reclassifications
Certain reclassifications have been made to the 1995 financial
statements to conform to the 1996 presentation.
F-12
35
<PAGE>
2. Business combinations
Empire Energy, Inc., Caribbean Breeze International,
Inc., and Cherokee Sun Corp.
On January 1, 1995, the Company acquired the assets of Empire
Energy, Inc. ("Old Empire"), and its affiliates, Caribbean
Breeze International, Inc. ("Old Caribbean") and Cherokee Sun
Corp. ("Old Cherokee"), in exchange for 1,000,000 shares of
its .001 par value common stock, 100,000 shares of $10
convertible preferred stock and $600,000 of 12% subordinated
notes. In addition, Antares Resources Corporation assumed
certain liabilities of Old Empire, Old Caribbean and Old
Cherokee. The acquisition was accounted for as a purchase.
The acquisition included the ongoing businesses, all tangible
assets and intangible assets including contract rights,
customer lists, product formulas and the agreement of certain
shareholders not to compete with the business.
Since the acquisition was accounted for as a purchase, assets
were recorded at their fair market value as of the date of the
acquisition as follows:
<TABLE>
<S> <C>
Cash $ 1,187
Accounts receivable 168,383
Inventories 458,259
Real estate 1,844,000
Property and equipment 168,880
Contract rights 2,900,000
Intangibles 300,000
__________
$5,840,709
</TABLE>
The value of the consideration paid was as follows:
<TABLE>
<S> <C>
Common stock $3,314,428
Preferred stock 1,000,000
Notes issued (Note 8) 600,000
Deferred acquisition costs 75,489
Liabilities assumed 850,792
__________
Purchase cost $5,840,709
</TABLE>
The presentation of the following proforma unaudited results
present operations for the year ended September 30, 1995 on a
proforma basis as if the business combination had occurred on
October 1, 1994:
F-13
36
<PAGE>
2. Business combinations (continued)
Empire Energy, Inc., Caribbean Breeze International,
Inc., and Cherokee Sun Corp. (continued)
<TABLE>
<S> <C>
Net sales $ 1,926,429
___________
Loss from continuing operations $ (476,549)
___________
Loss from discontinued operations$ $ (859,606)
___________
Net loss $(1,336,155)
___________
Loss from continuing operations
per common share $ (.35)
___________
Loss from discontinued operations
per common share $ (.63)
___________
Net loss per common share $ (.98)
___________
</TABLE>
Southern Trailer Manufacturing, Inc.
On October 24, 1995, Southern Trailer Manufacturing, Inc.
("Southern") was incorporated as a wholly-owned subsidiary.
On November 14, 1995, Southern acquired the assets of a
company which sold and serviced horse and utility trailers.
Consideration for the purchase consisted of $190,000 in cash
and $200,000 of the Company's common stock.
The acquisition included the ongoing business, all tangible
and intangible assets and covenants not to compete. Since the
acquisition was accounted for as a purchase, assets were
recorded at their fair market values, specified in the
agreement as follows:
Property and equipment $166,000
Inventories 124,000
Goodwill and restrictive covenants 100,000
________
$390,000
In conjunction with the business combination described above,
Southern entered into a ten-year consulting agreement which
F-14
37
<PAGE>
2. Business combinations (continued)
Southern Trailer Manufacturing, Inc. (continued)
provides for annual compensation payments of $85,000 plus,
3.5% of pre-tax profits if they meet or exceed $600,000 and 7%
of such profits in excess of $600,000. In addition, the
consultant is entitled to as much as $500,000 of stock bonus
compensation if pre-tax profits exceed specified sums.
Southern also entered into ten-year employment agreements with
two individuals. The contracts provide for combined annual
base salaries of $110,000 and additional compensation based on
performance.
Multi-Source Labs, Inc.
On October 16, 1995, Multi-Source became the exclusive
licensee to manufacture and market a product using the trade
name of "The Beverage Brat," a beverage cup holder designed
for use in autos, trucks, recreational vehicles and boats.
Consideration for the license consisted of a payment of
$15,000 plus $25,000 in stock of Antares Resources
Corporation. In addition, Multi-Source must pay a royalty of
$.30 for each unit manufactured. This business was
discontinued as part of the Caribbean segment effective June
30, 1996 (Note 14).
3. Notes receivable
Notes receivable consist of the following:
<TABLE>
<CAPTION>
September 30
1996 1995
__________ __________
<S> <C> <C>
10% unsecured note receivable from
a subcontractor, payable in monthly
installments of $ 1,029, including
interest through February 1996. $ 0 $ 6,000
Non-interest bearing note receivable
from a trust, payable in one
installment on October 31, 1995.
The note is secured by a mortgage
on real estate. 0 15,500
6% note receivable from an individual,
payable in weekly installments of $90,
including interest through July 2006.
The note is secured by a mobile home. 32,196 36,996
F-15
38
<PAGE>
3. Notes receivable (continued)
10% note receivable from a corporation,
payable on demand. 65,000 0
__________ __________
97,196 58,496
Less current portion 67,831 24,019
__________ __________
$ 29,365 $ 34,477
</TABLE>
4. Stockholder loans receivable
Stockholder loans receivable consist of the following:
<TABLE>
<CAPTION>
September 30,
1996 1995
__________ __________
<S> <C> <C>
9% unsecured loan receivable from a
stockholder, payable in monthly
installments of $500, including
interest through June 2001. $ 29,169 $ 0
9% unsecured loan receivable from a
stockholder, payable in monthly
installments of $500, including
interest through June 2001. 29,169 0
10% loan receivable from a stockholder,
payable on demand. The note is secured
by 90,000 shares of the Company's
common stock. 56,000 0
__________ __________
114,338 0
Less current portion 70,730 0
__________ __________
$ 43,608 $ 0
</TABLE>
5. Note receivable from sale of discontinued segment
Note receivable from sale of discontinued segment bears
interest at prime plus 3/4%. Principal and accrued interest
matures in August 1998. The note is collateralized by the
assets of Caribbean Breeze International (Note 14) and by
common stock of Antares Resources Corporation currently having
a value equal to the amount of the note receivable.
F-16
39
<PAGE>
6. Investments
Investments consist of the following:
<TABLE>
<CAPTION>
September 30,
1996 1995
__________ __________
<S> <C> <C>
Non-marketable preferred stock $1,000,000 $ 0
Marketable equity securities 2,500 2,500
__________ __________
$1,002,500 $ 2,500
</TABLE>
On November 1, 1995, the Company invested $1,000,000 in
400,000 shares of 6% participating, convertible preferred
stock of JJFN Services, Inc. ("JJFN"), a company which is
engaged in the purchase and lease back of model homes with a
major real estate developer and home builder. The preferred
stock is redeemable at the option of JJFN. Each preferred
share may be converted into one share of common stock. There
is no market for the preferred stock. At September 30, 1996,
the fair value of the common stock of JJFN was $2 per share as
listed on the OTC bulletin board. It is management's opinion
that the decline in market value of the common stock is
temporary. Four directors of the Company are also directors
and/or officers of JJFN.
Marketable securities, which consist of equity securities
available-for-sale, are shown in the balance sheet at fair
value. The cost of securities sold is determined using the
specific identification method.
Effective October 1, 1994, the Company has adopted the
provisions of Statement of Financial Accounting Standards No.
115 (SFAS No. 115) "Accounting for Certain Investments in Debt
and Equity Securities," which changed the criteria for
classifying and valuing debt and equity securities and the
recording of unrealized gains or losses on debt and equity
securities. The provisions of SFAS No. 115 require unrealized
holding gains and losses for available-for-sale securities be
excluded from earnings and reported as a net amount in a
separate component of stockholders' equity until realized.
During the years ended September 30, 1996 and 1995, the
Company owned 5,180 shares of common stock of Compuflex
Systems, Inc. ("Compuflex"). Compuflex is a publicly held
company whose stock is listed and traded on the OTC Bulletin
Board. While the Company's cost basis in the stock was
$41,200, the book value was written down to zero during the
year ended September 30, 1989, since Compuflex was a
F-17
40
<PAGE>
6. Investments (continued)
development stage company with no net value and no foreseeable
operations. As of September 30, 1996 and 1995, Compuflex was
trading at a bid price of $.50 per share bringing the market
value of the shares owned by the Company to approximately
$2,500.
Fair value, based on quoted bid prices at September 30, 1996
and 1995, is as follows:
<TABLE>
<S> <C>
Aggregate cost $41,200
Write-down in prior years due to
reduction in value (41,200)
Gross unrealized holding gain 2,500
_______
Aggregate fair value $ 2,500
</TABLE>
The cumulative effect of adopting SFAS No. 115 was to reduce
the loss for the year ended September 30, 1995, by $2,500.
7. Inventories
Inventories are stated at the lower of cost (first-in,
first-out method) or net realizable value.
At September 30, 1996, inventories consist of the following:
<TABLE>
<S> <C>
Raw materials and parts $ 366,837
Finished trailers 320,116
Used trailers 153,378
Work in process 212,778
__________
$1,053,109
</TABLE>
8. Long-term debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
1996 1995
__________ __________
<S> <C> <C>
7.25% note payable to a commercial
finance company in monthly
installments of $407 including
interest through February 1998.
The note is secured by the equipment
with an original cost of $21,931. $ 6,563 $ 10,807
F-18
41
<PAGE>
8. Long-term debt (continued)
11.6% note payable to a credit
corporation in monthly installments
of $606 including interest through
August 1999. The note is secured
by a vehicle with an original cost
of $23,169. 17,910 22,788
17.25% note payable to a credit
corporation in monthly installments
of $789 including interest through
September 2000. The note is secured
by a vehicle with an original cost
of $35,583. 27,227 0
8.78% note payable to a vendor in
monthly installments of $151 including
interest through May 1997. The note is
secured by equipment with an original
cost of $2,258. 1,165 0
8.84% note payable to a vendor in
monthly installments of $251 including
interest through February 1997. The note
is secured by equipment with an original
cost of $3,794. 1,469 0
8.17% note payable to a vendor in
monthly installments of $659 including
interest through January 1997. The note
is secured by equipment with an original
cost of $10,046. 2,590 0
8.89% note payable to a vendor in
monthly installments of $606 including
interest through June 1997. The note
is secured by equipment with an original
cost of $9,205. 5,258 0
18% note payable to a vendor in monthly
installments of $241 including interest
through June 1997. The note is secured
by equipment with an original cost of
$3,465. 2,223 0
__________ ___________
64,405 33,595
Less current maturities 27,911 9,122
__________ ___________
$ 36,494 $ 24,473
</TABLE>
F-19
42
<PAGE>
8. Long-term debt (continued)
At September 30, 1996, maturities of long-term debt are as
follows:
<TABLE>
<CAPTION>
Year ending
September 30,
_____________
<S> <C>
1997 $ 27,911
1998 14,280
1999 13,572
2000 8,642
________
$ 64,405
</TABLE>
9. Capitalized lease obligation
The Company is leasing approximately 200 acres of undeveloped
land which is not currently used in the operations of the
business. The Company is seeking a joint venture partner to
develop the property and offer a wide variety of
moderately-priced homes that are designed to appeal to the
entry-level and first-time, move-up buyers. The leasing
arrangement transfers to the Company substantially all of the
risks and benefits of ownership of the related land. The land
was recorded at its fair value as of the date of the business
combination described in Note 2. The capitalized lease
obligation is payable in monthly installments of $5,000 plus
a final payment of $11,000, including interest imputed at 6%,
through February 2005.
Future minimum lease payments under the capitalized lease as
of September 30, 1996, are as follows:
<TABLE>
<CAPTION>
Year ending
September 30,
_____________
<S> <C>
1997 $ 60,000
1998 60,000
1999 60,000
2000 60,000
2001 60,000
Thereafter 206,000
________
Total minimum lease payments 506,000
Less amount representing interest 109,643
________
F-20
43
<PAGE>
9. Capitalized lease obligation (continued)
Present value of minimum lease payments 396,357
Less current portion 37,231
________
$359,126
</TABLE>
10. Subordinated debt
In connection with the business combination described in Note
2, the Company issued $600,000 of 12% subordinated debt to the
stockholders of the businesses acquired. The notes are
subordinated to all senior debt which may be issued. One-half
of the principal ($300,000) was paid on March 15, 1996.
The remaining balance is payable in 18 consecutive monthly
installments commencing June 1996. The notes were originally
due in August 1995. In connection with the extension of
payment terms, the Company changed the conversion terms of the
Series A preferred stock, which is held by the same
individuals to whom the subordinated debt is payable (Note
11). Maturities of subordinated debt are as follows:
<TABLE>
<CAPTION>
Year ending
September 30,
_____________
<S> <C>
1997 $199,851
1998 53,804
________
$253,655
</TABLE>
11. Stockholders' equity
Stock splits
Effective December 19, 1994, the Board of Directors declared
a reverse stock split whereby 50 shares of the Company's
existing common stock were exchanged for one share of new
common stock. Effective June 1995, the Board of Directors
declared an additional reverse stock split whereby four shares
of the Company's existing common stock were exchanged for one
share of new common stock. On December 26, 1995, the Board of
Directors declared a two-for-one forward split of the
Company's common stock, effective for stockholders of record
on January 5, 1996. The number of authorized shares and
capital structure was otherwise unchanged. Accordingly, the
consolidated statement of stockholders' equity, loss per
share, weighted average shares of common stock outstanding and
F-21
44
<PAGE>
11. Stockholders' equity (continued)
Stock splits (continued)
the stock option information in this note have been restated
to reflect the effect of the forward and reverse stock splits.
Preferred stock
The Company is authorized to issue a maximum of 5,000,000
shares of preferred stock, in one or more series and
containing such rights, privileges and limitations, including
voting rights, dividend rates, conversion privileges,
redemption rights and terms, redemption prices and liquidation
preferences, as the Board of Directors of the Company may
determine.
In connection with the Empire business combination described
in Note 2, the Company issued 100,000 shares of Series A
preferred stock having a stated value of $10 per share and
paying a noncumulative dividend of 9%. Dividends are payable
semi-annually on July 1 and January 1. Originally, each share
of the Series A preferred stock was convertible into two
shares of common stock beginning February 1, 1996. In
connection with an extension of payment terms of the
subordinated debt (Note 10), whose payees are the same as the
holders of the preferred stock, the conversion rights were
changed to 40 shares of common stock for each preferred share.
The conversion ratio became 80 shares of common stock for each
preferred share because of the two-for-one stock split in
January 1996. All Series A preferred shares were converted to
8,000,000 common shares during the quarter ended March 31,
1996.
During 1995, the Company issued 135,000 shares of Series B
preferred stock having a stated value of $2.50 per share and
paying a cumulative dividend of 9%. The shares carry
registration rights and were issued as part of a private
placement offering of up to $1,000,000 of Series B preferred
stock. Each share is convertible into one share of common
stock. During March 1996, 9,000 shares of Series B preferred
stock were converted to 90,000 shares of common. At September
30, 1996, accrued dividends are approximately $31,600,
however, no dividends have been declared by the Board of
Directors.
Stock option plans
During 1993, the Company adopted a stock incentive plan which
provides for non-transferable rights to purchase up to an
aggregate of 10 million shares of the Company's common stock
which are reserved for issuance and may be granted to
F-22
45
<PAGE>
11. Stockholders' equity (continued)
Stock option plans (continued)
directors, officers, key employees or agents of the Company.
The exercise price of the options granted shall be determined
by the Board of Directors, but shall not be less than 100% of
the fair market value of the common stock at the time the
option is granted, and not less than 110% of such fair market
value if the option is granted to an individual owning more
than 10% of the then issued and outstanding shares of the
Company's common stock. The options become exercisable one
year after the date of the grant and generally expire ten
years from the date of the grant.
As of September 30, 1995 and 1996, there were 20,000 options
outstanding under the 1993 option plan.
Long Term Incentive Plan
During December 1994, the Company adopted a new Long Term
Incentive Stock Option Plan whereby rights to purchase up to
an aggregate of 2,500,000 post-split shares of the Company's
common stock are reserved for issuance and may be granted to
directors, officers, key employees or consultants of the
Company. The exercise price of the options granted shall be
determined by the Board of Directors, but shall not be less
than 100% of the fair market value of the common stock subject
to the stock option at the date of the grant, and not less
than 110% of such fair market value if the option is granted
to an individual owning more than 10% of the then issued
outstanding shares of the Company's common stock. The term of
the options shall be fixed by the Company's compensation
committee but no option shall be exercisable more than 10
years after the date of the grant.
During December 1994, the Board of Directors granted 400,000
options exercisable at a price of $.05 per share. The options
were granted to stockholders to induce conversion of loans
made to the Company. All 400,000 options were exercised prior
to December 31, 1994.
During December 1994, 40,000 options to purchase shares were
granted at an exercise price of $3.50 per share. During March
1995, the Company cancelled such previously issued options and
reissued 235,800 options to officers, directors, key
employees, consultants and professionals exercisable at
between $2.00 and $2.20 per share.
In connection with certain financing transactions during 1995,
and other services rendered, the Company granted a total of
2,325,004 options exercisable at $.001. In addition, the
F-23
46
<PAGE>
11. Stockholders' equity (continued)
Long Term Incentive Plan (continued)
Company granted 904,465 options to stockholders who had made
loans and provided other services to the Company. Such
options are exercisable at $.001. Prior to September 30,
1995, a total of 860,000 options had been exercised.
1996 Stock Plan
During March 1996, the Company adopted the 1996 Stock Plan to
provide an incentive to officers, directors, employees,
independent contractors, and consultants. The Board reserved
2,500,000 of the Company's common stock for issuance under the
plan. The plan provides for issuance of Incentive Stock
Options to employees of the Company. In addition,
Nonqualified Stock Options or Stock Appreciation Rights may be
granted to employees and other persons who provide substantial
services to the Company. The exercise price of the Incentive
Stock Options shall be determined by the Plan Committee, but
shall not be less than 100% of the fair market value of the
shares on the date the option is granted, or not less than
110% of the fair market value if the option is granted to an
individual owning 10% or more of the total combined voting
power of all classes of stock. The options expire ten years
after the date of the grant, five years in the case of 10% or
greater stockholders. The exercise price of Nonqualified
Stock Options shall not be less than 85% of the fair market
value of the shares on the date of the grant or not less than
110% of the fair market value if granted to an individual
owing 10% or more of the total combined voting power of all
classes of stock. Stock Appreciation Rights shall entitle the
holder to receive an amount equal to the excess of fair market
value of the Company's stock on the date of exercise over the
fair market value on the date of grant.
During March 1996, the Company granted 232,000 options to
employees and vendors exercisable at between $3.00 and $4.00
per share. During August 1996, the Company granted 250,000
options to a director for services in connection with Kina
(Note 13). Such options are exercisable at $.625 per share.
The following is a summary of option transactions during the
years ended September 30, 1996 and 1995.
<TABLE>
<S> <C>
Outstanding at September 30, 1994 60,000
Granted 3,865,269
Canceled (20,000)
Exercised (1,260,000)
Effect of 1-for-4 reverse stock split (30,000)
_________
F-24
47
<PAGE>
11. Stockholders' equity (continued)
1996 Stock Plan (continued)
Outstanding at September 30, 1995 2,615,269
Effect of 2-for-1 stock split 1,740,269
Exercised (3,023,600)
_________
Outstanding at September 30, 1996 1,331,938
</TABLE>
At September 30, 1996, stock subscriptions receivable
represents amounts receivable from stock issued under employee
stock options. Such unpaid stock will be cancelled in the
event the prospective business combination described in Note
13 is consummated.
Private placement
During June 1995, the Company entered into stock option and
consulting agreements with Tarlton Company, Ltd. ("Tarlton")
a Cayman Island corporation. The agreements provided for
Tarlton to receive a total of 4,750,000 shares of the
Company's common stock for total consideration of $7,000,000.
In addition, Tarlton paid the Company $100,000 for the option
rights. All funds were received and stock issued prior to
September 30, 1995.
12. Income taxes
The Company has net operating losses available for
carryforward to offset future years' taxable income. The net
operating losses expire in the years ending September 30, 1996
through 2010.
Deferred income taxes arise from temporary differences in
reporting assets and liabilities for income tax and financial
accounting purposes. The components of the deferred tax asset
and the related tax effects of the temporary differences are
as follows:
<TABLE>
<CAPTION>
September 30,
1996 1995
__________ _________
<S> <C> <C>
Non-current deferred income
tax asset arising from net operating
loss carryforward $1,626,000 $ 522,000
Valuation allowance (1,626,000) (522,000)
__________ _________
Net deferred income tax asset $ 0 $ 0
</TABLE>
F-25
48
<PAGE>
13. Commitments and contingencies
Rental arrangements
The Company leases office and warehouse space in Fernandina
Beach, Florida, on a month-to-month basis at a monthly rental
of approximately $2,000. In addition, the Company entered
into operating leases for the manufacturing facility in
Unadilla, Georgia and for the office and showroom facility in
Perry, Georgia. The operating leases expire in various years
through 2001.
The following is a schedule of future minimum lease payments
under non-cancelable operating leases having remaining terms
in excess of one year as of September 30, 1996:
<TABLE>
<CAPTION>
Year ended Manufacturing
September 30, Office Plant
_____________ __________ _____________
<S> <C> <C>
1997 $ 24,000 $ 60,000
1998 24,000 60,000
1999 24,000 35,000
2000 24,000 0
2001 24,000 0
_________ ________
$120,000 $155,000
</TABLE>
Total rent expense was $85,127 and $15,282 for the years ended
September 30, 1996 and 1995, respectively.
Employment and consulting agreements
Effective, January 1, 1995 and concurrent with the business
combination described in Note 2, the Company entered into
employment contracts with four of its officers. The ten-year
contract for the Chief Operating Officer provides for a
$180,000 annual salary and 10% annual increase in
compensation. The three other employment contracts provide
for combined salaries of $275,000. The effective date of one
contract was deferred until August 1995, while another was
deferred until after September 30, 1995. Each contract
provides for a five-year term and 10% annual increases in
compensation.
Also, effective January 1, 1995, the Company entered into
ten-year consulting agreements with two significant
shareholders of the Company. Each contract provides for
annual compensation of $180,000 and 1O% annual increases.
F-26
49
<PAGE>
13. Commitments and contingencies (continued)
Business combination
Effective August 30, 1996, Antares Resources Corporation (the
"Company") entered into a letter agreement with United Kina
Breweries Limited and related parties ("Kina"), a privately
held Bermuda corporation, whereby the Company has agreed in
principle to acquire all of the issued and outstanding shares
of Kina, in exchange for issuance by the Company of previously
unissued "restricted" common stock. The relevant terms of the
proposed transaction require the Company to (i) undertake a
"reverse split" of its common stock, whereby 1 share of common
stock will be issued in exchange for ten (10) shares of common
stock; and (ii) issue to the Kina shareholders an aggregate of
33,500,000 "restricted" common shares (post split),
representing approximately 93% of the Company's then
outstanding common stock, in exchange for all of the issued
and outstanding shares of Kina. Additional shares shall be
issued to unrelated parties in consideration for finder fees
arising from the relevant transaction. The letter agreement
expired December 6, 1996. There has been no formal extension
of the terms but the parties have continued with discussions.
Kina is a holding company which includes 7 joint ventures,
each of which is a brewing company and is engaged in the
manufacturing, distributing and marketing of beer in the
People's Republic of China. On an unaudited basis and
prepared in accordance with International Accounting Standards
(and assuming a conversion ratio of 8.3 RMB to $1 US), Kina
has approximately $164 million in total assets and $90 million
in net assets. During its fiscal year ended December 31,
1995, it had gross revenues of approximately $94 million and
generated profits of approximately $6.6 million. As part of
the terms of the Letter Agreement, Kina is undertaking a
financial audit in accordance with generally accepted
accounting principles, which audited financial statement will
be included in a subsequent Form 8-K to be filed after closing
of the transaction described herein (if, in fact, it closes),
in accordance with the provisions of the Securities Exchange
Act of 1934, as amended.
The proposed share exchange is subject to satisfaction of
certain conditions, including among other matters completion
of due diligence activities, the approval of the transaction
by all of the Kina shareholders, closing of a $5 million
proposed private placement of the Company's securities. Based
upon recent conversations between the parties, the financing
requirement is expected to be eliminated. When and if the
transaction with Kina is consummated, the present officers and
directors of the Company are expected to resign their
F-27
50
<PAGE>
13. Commitments and contingencies (continued)
Business combination (continued)
respective positions with the Company, to be replaced by the
present management of Kina.
Further, in connection with the closing of the transaction
with Kina, the Company is contemplating a two-part transaction
to roll-out existing assets and liabilities of the Company in
exchange for cancellation of issued and outstanding common
stock held by existing management and others. The first part
would involve the distribution of specified assets of the
Company, including the note receivable from sale of
discontinued segment, in exchange for the assumption of debt
and the cancellation of common stock. The second part would
involve the sale of the stock of Antares' subsidiary
companies, Empire Energy, Inc. and Southern Trailers
Manufacturing, Inc. to existing management in exchange for
cancellation of a majority of their individual common stock of
the Company, assumption of all liabilities, termination of
each of the existing employment agreements, termination of
option agreements, cancellation of stock which has been
subscribed but unpaid, and execution of releases and general
indemnification agreements.
Going concern
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles,
which contemplates continuation of the Company as a going
concern. However, the Company has sustained substantial
operating losses that raise doubt about its ability to
continue as a going concern. In addition, the Company has
used substantial amounts of working capital in its operations.
A substantial amount of the Company's assets are not actively
used in its current operations. At September 30, 1996, such
assets include the following:
<TABLE>
<S> <C>
Real estate held for development $1,767,062
Investments 1,002,500
Note receivable from sale of
discontinued segment 1,774,479
__________
$4,544,041
</TABLE>
Further, in the event that the proposed business combination
with Kina described in the preceding section of this note
takes place, it will necessitate the split-off of
substantially all existing assets and liabilities of the
F-28
51
<PAGE>
13. Commitments and contingencies (continued)
Going concern (continued)
Company. In addition, in order to effect such split-off, the
Company may not realize the full value of such assets as
presently shown.
In view of these matters, realization of a major portion of
the assets in the accompanying balance sheet is dependent upon
continued operations of the Company, which in turn is
dependent upon the Company's ability to meet its current
obligations, and the success of its future operations.
Management believes that actions presently being taken to
revise the Company's operations and to seek a significant
acquisition which would add both value and profitability and
provide the opportunity for the Company to continue as a going
concern.
14. Discontinued operations
Caribbean and Multi-Source
Effective June 30, 1996, the Company disposed of its Caribbean
Breeze International sun and skin-care products business. The
sale included the assets of Multi-Source Labs, Inc. which has
had no operations.
The results of the Caribbean Breeze International business
have been reported separately as discontinued operations in
the consolidated statements of operations. Consolidated
financial statements for prior comparative periods have been
restated to present the Caribbean Breeze business as a
discontinued operation.
Net sales of Caribbean Breeze International, Inc. were
$1,021,814 for the nine-month period ended June 30, 1996 and
$720,476 for the period from January 1, 1995 (date of
acquisition) through June 30, 1995. Such amounts are not
included in the net sales in the accompanying consolidated
statements of operations.
Assets and liabilities of Caribbean Breeze International and
Multi-Source Labs disposed of consisted of the following:
F-29
52
<PAGE>
14. Discontinued operations (continued)
Caribbean and Multi-Source (continued)
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1995
_____________ __________________
<S> <C> <C>
Accounts receivable $ 387,301 $ 0
Inventories 950,430 397,191
Other current assets 51,953 6,095
Property and equipment, net 156,162 96,273
Intangible assets, net 310,000 285,000
Liabilities (81,367) (39,761)
__________ _________
$1,774,479 $744,798
</TABLE>
The net assets of the discontinued segment have been
classified as a non-current asset in the accompanying
consolidated balance sheet.
Under the terms of the agreement, the Company sold the net
assets of the discontinued segment for a note which bears
interest at prime plus 3/4% and matures in August 1998. The
note is collateralized by the assets of Caribbean Breeze
International business and by common stock of Antares
Resources Corporation having a value equal to the amount of
the note receivable.
Cherokee Sun Corporation
During the quarter ended September 30, 1996, the Company
discontinued plans for Cherokee Sun Corporation (a development
stage company) to enter the kitty litter production business
as a supplier of the raw material (fuller's earth). Cherokee
has had no operations to date.
Expenses incurred by Cherokee during the development stage
have been reported separately as discontinued operations in
the consolidated statement of operations. Consolidated
financial statements for prior comparative periods have been
restated to present Cherokee as a discontinued operation. As
a result of the discontinuance of planned operations,
Cherokee's intangible assets were written-down to zero and an
estimated loss on disposal of $2,930,000 was recorded.
Assets of Cherokee consisted of the following intangibles:
F-30
53
<PAGE>
14. Discontinued operations (continued)
Cherokee Sun Corporation (continued)
<TABLE>
<CAPTION>
September 30,
1996 1995
__________ __________
<S> <C> <C>
Contract rights $ 0 $2,900,000
Deferred financing costs 0 30,000
__________ __________
$ 0 $2,930,000
</TABLE>
Results of discontinued operations are as follows:
<TABLE>
<CAPTION>
September 30,
1996 1995
__________ _________
<S> <C> <C>
Loss from operations:
Caribbean Breeze $ (859,851) $(596,399)
Cherokee Sun (127,410) (138,414)
___________ _________
$ (987,261) $(734,813)
Estimated loss on disposal:
Caribbean Breeze $2,930,000 $ 0
Cherokee Sun 10,000 0
__________ _________
$2,940,000 $ 0
</TABLE>
15. Business segments
Information about the Company's operations in different
businesses for the two years ended September 30, 1996 is as
follows:
<TABLE>
<CAPTION>
Alternative Waste Trailer Discontinued Consolidated
Fuel Disposal Sales Segments Corporate Total
_________ _______ _________ _________ _________ _________
<S> <C> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers:
1996 1,095,749 0 2,246,311 0 0 3,342,060
1995 1,070,889 358,000 0 0 0 1,428,889
Income (loss)
from continuing
operations:
1996 146,068 0 (949,162) 0 (930,261) (1,733,355)
1995 137,807 9,107 0 0 (544,288) (397,373)
F-31
54
<PAGE>
15. Business segments (continued)
Alternative Waste Trailer Discontinued Consolidated
Fuel Disposal Sales Segments Corporate Total
_________ _______ _________ _________ _________ _________
Identifiable
assets:
1996 1,938,562 0 1,667,444 1,774,479 1,471,196 6,851,681
1995 2,082,539 0 0 3,674,798 6,088,664 11,846,001
Capital
expenditures:
1996 19,116 0 229,158 35,860 4,000 288,134
1995 66,461 0 0 11,392 0 77,853
Depreciation
and
amortization
expense:
1996 14,679 0 65,143 58,565 16,987 155,374
1995 15,687 0 0 31,666 17,960 65,313
</TABLE>
F-32
55
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors are elected for one-year terms or until the next
annual meeting of shareholders and until their successors are duly
elected and qualified. Officers continue in office at the pleasure
of the Board of Directors.
The Directors and Officers of the Company as of the date of
this report are as follows:
<TABLE>
<CAPTION>
Name Age Position
________________________ ___ ______________________________
<S> <C> <C>
William W. Perry, III(1) 49 President, Chief Executive
Officer & Director
C. Richard Stubbs(3)(4) 50 Chief Financial Officer,
Treasurer and Director;
President of EEI
Darcy E. Stubbs, Jr.(2)(4) 56 Chief Operating Officer &
Director
Samuel G. Weiss(3) 47 Secretary, General Counsel
& Director
Joan E. Kushay(3) 35 Assistant Secretary & Director
Ralph Wilson(1)(2) 66 Director
Susan Schlapkohl(1)(2) 46 Director
Michael DeMayo 45 Director
_______________________
<FN>
(1) Member of Board Audit Committee
(2) Member of Board Compensation Committee
(3) Member of Board Stock Option Committee
(4) Darcy Stubbs Jr. and C. Richard Stubbs are brothers. No other
family relationship exists between any of the directors of the
Company.
</TABLE>
56
<PAGE>
Biographical Information of Directors and Executive Officers
William W. Perry III, President, Chief Executive Officer and
a director. Mr. Perry was appointed to his present positions with
the Company in February 1995. Prior, in January 1995, Mr. Perry was
Treasurer. From November 1991 through December 1995, Mr. Perry was
President and a principal of JWP Enterprises, Inc., a Florida
corporation, which is engaged in the maintenance of commercial real
estate properties in the Tampa, Florida area. From October 1983
through December 1990, Mr. Perry was a Senior Vice President of
Fortune Savings Bank located in the Tampa, Florida area. His
responsibilities included Senior Commercial Lender, Strategic
Planning, Asset-Liability, Management and Rate Sensitivity
Analysis. Mr. Perry is also President of CSC and will assume the
responsibility of developing CSC's business upon receipt by the
Company of a firm financing commitment. He received a Bachelor of
Business degree in Marketing from the University of Georgia in 1969
and an MBA degree in Management in 1970, also from the University
of Georgia. Mr. Perry devotes substantially all of his time to the
business of the Company.
C. Richards Stubbs, Chief Financial Officer, Treasurer and a
director. Mr. Stubbs has held his positions with the Company since
January 1995. Prior, from June 1990 through December 1994, he was
President of Empire Energy, Inc., Fernandina Beach, Florida, a
privately held Florida corporation, from whom the Company acquired
those assets and liabilities described herein effective January 1,
1995. Mr. Stubbs is also president of EEI. Prior, from 1968
through May 1990, Mr. Stubbs was a maritime captain, operating on
the Georgia and Florida coasts. Mr. Stubbs devotes all of his
working time to the business of the Company.
Samuel G. Weiss, Secretary, General Counsel and a director,
has held his positions with the Company since June, 1993.
Simultaneously therewith and since 1974, Mr. Weiss has been engaged
in the private practice of law in New York. Mr. Weiss is also an
officer and director of JJFN Holdings, Inc., a public reporting
company. He received a Bachelor of Arts degree in 1971 and JD/LLM
degrees in 1977 from New York University. Mr. Weiss devotes only
such time as necessary to the business of the Company.
Ralph Wilson has been a director of the Company since December
1983. From October, 1990 through February, 1995, Mr. Wilson was
President of the Company. In addition and since 1971, Mr. Wilson
has been and currently is a principal of Comet Electronics Corp.,
a privately owned manufacturer of electronic sub-assemblies located
in Farmingdale, New York. Mr. Wilson is also a director of Action
Staffing, Inc., Kent Holdings, Ltd., JJFN Holdings, Inc. and
Compuflex Systems, Inc. all public companies. Mr. Wilson devotes
only such time as necessary to the business of the Company.
Joan E. Kushay has been Assistant Secretary and a director
since December, 1994 and simultaneously therewith and since June
1994 has been employed by XYZ Cleaning Contractors, Inc., a
privately held New York corporation engaged in office cleaning and
57
<PAGE>
maintenance and located in Great Neck, New York, as Assistant
Manager Financial Services Division. From February 1994 to June
1994, Ms. Kushay was employed by Arrow Electronics, Inc., a
publicly held corporation located in Melville, N.Y., where her
responsibilities included Shareholder and Investor Relations. From
July 1988 through January 1994, Ms. Kushay was employed by Action
Staffing, Inc., a publicly held Florida corporation located in
Tampa Florida and engaged in the employee leasing business as
Executive Assistant to the Chairman of the Board. She is also a
Vice President and Assistant Secretary of JJFN Holdings, Inc., a
public company. Ms. Kushay devotes all of her working time to the
business of the Company.
D. Elton Stubbs, Jr., director. Mr. Stubbs has been a
director of the Company since January 1995. From June 1990 through
December 1994, Mr. Stubbs was employed by Empire Energy, Inc., as
General Manager. Prior, from January 1986 through December 1989,
Mr. Stubbs was Secretary-Treasurer of Fernandina Beach Marine
Management, Inc., a privately held Florida corporation, which
developed and operated the port of Fernandina Beach, Florida. Mr.
Stubbs devotes all of his time to the business of the Company.
Susan Schlapkohl, director. Ms. Schlapkohl was appointed as
a director of the Company in March 1995. From September 1986
through the present, Ms. Schlapkohl has also been Vice President
and manager of National Bank of Canada, Boca Raton, Florida. Ms.
Schlapkohl is also an officer and director of JJFN Holdings, Inc.,
a public company. She obtained a Bachelor's degree from Kennesan
College in 1974, majoring in accounting. She devotes only such
time as necessary to the business of the Company.
Michael DeMayo, director. Mr. DeMayo was appointed as a
director of the Company in June, 1996. Presently, since September
1996, Mr. DeMayo has been CEO of R.T.G. Richards & Co., Inc.,
Garden City, N.Y., an NASD licensed brokerage firm. This company
is a principal market maker for the Company's common stock.
Previously, from January 1995 through September 1996, Mr. DeMayo
was the manager of business development for Rust Engineering,
Beaumont, Texas, an engineering and construction company performing
petrochemical related work throughout the Texas/Louisiana Gulf
Coast area. From August 1986 through September 1996 Mr. DeMayo was
also a consultant and sales representative for Industrial Field
Services, Beaumont, Texas, engaged in the sales of equipment and
services in the petrochemical field throughout the Gulf Coast area.
Mr. DeMayo received a Bachelor of Science degree from Villanova
University in 1974. He devotes only such time as necessary to the
business of the Company.
ITEM 9B. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
During the fiscal year ending September 30, 1996, all of the
Company's officers and directors filed all reports required to be
filed pursuant to Section 16(a) of the Exchange Act in a timely
manner. Based upon the Company's review of these reports, no sales
58
<PAGE>
of the Company's securities were made by management during the
fiscal year ended September 30, 1996.
ITEM 10. EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for
services to the Company for the fiscal years ended September 30,
1996 and 1995 of the chief executive officer of the Company and
other executive officers who received in excess of $100,000 in
aggregate compensation during the last fiscal year of the Company.
The Company acquired all of its present business operations
effective January 1, 1995. Prior to this date, the Company was a
"shell" corporation with no assets and therefore, did not pay any
salaries during the prior three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
____________________________
Annual Compensation Awards Payouts
_____________________ ____________________ _______
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
__________ ____ ________ _____ ______ ________ _______ _______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William W.
Perry, III
President,
CEO(2) 1995 $ 16,667 $ 0 $ 0 $ 0 0 $ 0 $ 0
1996 $113,654 $ 0 $ 0 $ 0 0 $ 0 $4,340
Darcy E.
Stubbs, Jr.,
COO(3) 1995 $165,000 $ 0 $ 0 $ 0 0 $ 0 $ 0
1996 $217,346(3) $ 0 $ 0 $ 0 0 $ 0 $2,119
_________________________
<FN>
(1) Mr. Perry did not begin collecting any salary until August 1, 1995.
(2) Mr. Stubbs' employment contract provides for an annual salary of $198,00.
However, due to the losses from operations incurred by the Company during
the fiscal year ended September 30, 1996, Mr. Stubbs voluntarily accepted
a reduction in salary to $100,000, effective October 1, 1996. The balance
59
<PAGE>
of salary due per the employment agreement is not being accrued by the
Company.
(3) Mr. Stubbs' additional salary arose from the payment of accrued vacation
time.
</TABLE>
Stock Option Plans
The Company has adopted a Long Term Incentive Stock Option
Plan and Stock Incentive Plan ("the "Plans"), reserving for
issuance 5,000,000 shares of the Company's common stock for
issuance thereto. Relevant to the Plans, the Company filed two
separate registration statements on Form S-8 with the Securities
and Exchange Commission during the fiscal year ended September 30,
1995, registering 700,000 of those shares reserved for issuance
therewith.
Pursuant to the Plans, non-transferrable rights to purchase
shares of the Company's Common Stock reserved for issuance may be
granted to persons who are or who become key employees of the
Company. The exercise price of the options granted shall be
determined by the Board of Directors, but shall not be less than
one hundred (100%) percent of the fair market value of the Common
Stock at the time the option is granted and not less than one
hundred ten (110%) percent of such fair market value if the option
is granted to an individual owning more than 10% of the then issued
and outstanding shares of the Company's Common Shares. The options
shall become exercisable one year after the date of the grant and
expire (5) years from the date of the grant.
The aggregate market value (determined as of the date an
option is granted) of the shares for which any person may be
granted options in any single calendar year shall not exceed
$100,000. Upon exercise, the purchase price shall be paid in whole
or in part in cash or with an amount of shares of the Company's
Common Stock having a fair market value equal to the substituted
amount.
The Plans are administered by the Compensation Committee of
the Board of Directors. The Board has discretion to amend, suspend
or discontinue the Plan at any time, except with respect to options
then outstanding. No compensation is to be paid to any individual
Board member or the Board of Directors as a whole for administering
the Plan and no individual serving on the Board will act upon the
grant of options to himself.
Additionally, in March 1996, the Company's shareholders and
Board of Directors approved and adopted a proposal to adopt the
Company's 1996 Incentive Stock Plan, which provides for the grant
of incentive stock options ("ISO's") qualifying under the Internal
Revenue Code, the grant of non-qualified stock options ("NSO's"),
and the grant of awards of stock appreciation rights, stock
options, restricted stock or performance units to officers,
employees and consultants of the Company and its affiliates. Two
60
<PAGE>
million five hundred thousand (2,500,000) shares of the Company's
Common Stock are reserved for issuance pursuant to the Plan. The
Plan is administered by the Stock Option Committee of the Board of
Directors.
The Company does not have any other stock option plans, stock
appreciation right plans, phantom stock plans, or any other
incentive or compensation plan or arrangement pursuant to which
benefits, remuneration, value or compensation was or is to be
granted, awarded, entered, set aside or accrued for the benefit of
any executive officer of the Company.
Benefit Plans
Effective November 1995, the Company established a group
health insurance plan, providing major medical benefits to all full
time employees and certain consultants of the Company. Under the
Plan, the Company pays for the employees coverage and the employee
pays any dependent coverage. The Plan is a partially self-funded
plan, with reinsurance and stop loss provisions to limit liability
to that of an outside benefit plan.
The Company's Board of Directors has also adopted a Section
401(k) benefit plan in November 1995, wherein each employee of the
Company has the right to contribute up to 15% of their respective
salary. Any contribution by the Company is discretionary. As of
the date of this report, the Company has no plans to contribute to
this plan until such time as the Company begins generating profits
from operations. This plan is administered by AETNA Insurance
Company.
The Company has no other individual or group life or accident
insurance, medical or dental reimbursement plan, group
hospitalization or similar individual or group payment or benefit
plan or pension plan. Other than as described herein, the Company
does not reimburse any individuals for the cost of any medical
insurance. Accordingly, no remuneration is proposed to be made
directly or indirectly, by the Company pursuant to any such
existing plan or agreement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP AND
MANAGEMENT
(a) and (b) Security Ownership of Certain Beneficial Owners
and Management.
The table below lists the beneficial ownership of the
Company's voting securities by each person known by the Company to
be the beneficial owner of more than 5% of such securities, as well
as by all directors and officers of the issuer. Unless otherwise
indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
61
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage
Name and Address(1) Shares of Class(2)
_______________________________ _________ ___________
<S> <C> <C>
D. Elton Stubbs(3)(4)(5) 3,578,850 14.30%
2345 Friendly Road
Fernandina Beach, FL 32034
Marie Stubbs(4)(5) 3,486,344 14.00%
Cottage 405
Sea Island, GA 31561
William W. Perry III(3)(5) 405,000 1.60%
2345 Friendly Road
Fernandina Beach, FL 32034
Ralph Wilson(3)(6) 30,000 *
7 Ensign Lane
Massapequa, N.Y. 11758
Samuel G. Weiss(3)(7) 20,000 *
30 Main Street
Port Washington, NY 11050
C. Richard Stubbs(3)(8) 65,600 *
2345 Friendly Road
Fernandina Beach, FL 32034
Susan Schlapkohl(3)(6) 20,000 *
199 Shelter Lane
Jupiter, FL 33469
Joan Kushay(3)(6) 20,000 *
8626 Eagle Run Road
Boca Raton, FL 33434
Michael DeMayo(3)(9) 250,000 1.00%
100 Quentin Roosevelt Blvd.
Suite 200
Garden City, N.Y. 11530
All Executive Officers
and Directors as a Group
(8 people) 4,389,450 17.69%
_______________________
<FN>
* Less than 1%
(1) The information relating to beneficial ownership of the
Company's common stock by its nominees and other directors is
based on information furnished by them using the definition of
"beneficial ownership" set forth in rules promulgated by the
Securities and Exchange Commission under Section 13(d) of the
Securities Exchange Act of 1934. Except where there may be
62
<PAGE>
special relationships with other persons, including shares
voting or investment power (as indicated in other footnotes to
this table), the directors and nominees possess sole voting
and investment power with respect to the shares set forth
beside their names.
(2) Includes an aggregate of 679,600 shares subject to options
that have been granted to officers and/or directors pursuant
to the Company's various stock option plans and which are
presently exercisable.
(3) Officer and/or director of the Company.
(4) D. Elton Stubbs and Richard Stubbs are brothers. Marie Stubbs
is their sister-in-law. No other family relationship exists
between any officer and/or director of the Company.
(5) Includes 7,000 shares subject to option that has been granted
and which are presently exercisable under the Company's
various stock option plans.
(6) Includes 5,000 shares subject to option that have been granted
and which are presently exercisable under the Company's
various stock option plans.
(7) Includes 20,000 shares subject to option that have been
granted and which are presently exercisable under the
Company's various stock option plans.
(8) Includes 65,600 shares subject to option that has been granted
and which is presently exercisable under the Company's stock
option plan.
(9) All of these shares are subject to an option that has been
granted and which is presently exercisable under the Company's
stock option plan.
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 16, 1996, the Company sold all of its interests in
Caribbean Breeze International, Inc. ("CBI") and Multi-Source Labs,
Inc. ("MSL") to David M. Capps, a director of the Company. The
initial purchase price, which was established based upon CBI and
MSL's net assets, was $1,774,479. Pursuant to the terms of the
applicable agreement, the purchase price may be increased based
upon an independent valuation of CBI and MSL being undertaken by an
independent valuator retained by the Company for the stated
purpose. The effective date of the transaction was established at
June 30, 1996. The purchase price is to be paid pursuant to the
terms of a non-recourse Promissory Note payable by Mr. Capps within
two years, with interest accruing on all unpaid balances at the
rate of .75% over the prime lending rate as established by Chase
Manhattan Bank, New York. Mr. Capps secured the Note payable to
63
<PAGE>
the Company by granting the Company a security interest in all of
the assets of CBI and MSL, as well as an aggregate of 2,027,976
shares of the Company's common stock held by Mr. Capps and other
grantees. The number of shares securing the obligation is also
subject to adjustment, depending upon the final purchase price.
Additionally, on the last day of each calendar quarter during the
primary term of the Note commencing September 30, 1996, the number
of common shares providing such security may be increased or
decreased. Pursuant to the agreement, Mr. Capps may be obligated
to tender additional common shares as additional security of his
obligation, or the Company may be obligated to return to Mr. Capps
any overage of the number of shares necessary to secure the
obligation, except as limited in the agreement. Such obligations
shall arise in the event the per share market price of the
Company's common stock, as traded on Nasdaq or such other national
market system, multiplied by the number of the Company's common
stock held in escrow, is less or more, as applicable, than the
final purchase price. If less, Mr. Capps is required to provide
the number of shares of the Company's common stock necessary to
insure that the full principal balance of the Note, plus accrued
interest, is secured by the shares of common stock. If more, the
Company will be obligated to return the number of shares of the
Company's common stock tendered to Mr. Capps, except the number of
shares held as such security shall not be reduced below the
original number of shares established on the Closing Date. If and
when the Company is compensated in full (including any and all
costs of liquidation applicable thereto) at the time the Note
becomes due, or if a default occurs prior to the termination of the
principal term of the Note, any remaining shares of the Company's
common stock held in escrow will be returned to Mr. Capps.
Applicable thereto, effective August 16, 1996, David M. Capps
tendered his resignation as a director of the Company.
Effective January 1, 1995, the Company consummated an
agreement to purchase the assets and businesses of Empire Energy,
Inc. ("Empire") and its affiliates, Caribbean Breeze International,
Inc. and Cherokee Sun Corp. in exchange for 1,000,000 shares of the
Company's common stock, 100,000 shares of the Company's $10 stated
value convertible preferred stock, each share convertible into 40
shares of common stock and $600,000 in 12% subordinated notes,
payable to Peggy Stubbs and Marie Stubbs, who became an officer and
a director, respectively, of the Company after closing of this
transaction. As part of the terms of this transaction, the Company
also assumed certain liabilities of approximately $850,000.
Messrs. C. Richard Stubbs, Chief Financial Officer and a director
of the Company and Mrs. Peggy Stubbs and Marie Stubbs, directors of
the Company, were the former principal shareholders of Empire, et
al.
The Company is obligated to tender two payments of $150,000
per payment to Peggy and Marie Stubbs pursuant to the terms of the
relevant promissory notes referenced above, which are due and
payable on or before April 1, 1996. These notes are unsecured and
accrue interest at the rate of 12% per annum. Interest accruing is
due and payable by the Company on a quarterly basis, beginning June
64
<PAGE>
1995. The balance of the notes are required to be paid in 18 equal
monthly payment commencing June 29, 1996, until the balance due
under the notes have been paid. These notes are unsecured.
In November 1995, the Company invested $1,000,000 to purchase
400,000 shares of 6% participating convertible preferred stock of
JJFN Services, Inc., a company which is engaged in the purchase and
leaseback of model homes with major real estate developers and home
builders. The preferred stock is redeemable at the option of JJFN.
Each preferred share may be converted into one share of common
stock. There is presently no market for the preferred stock and it
is not expected that such a market will develop in the future.
Messrs. Wilson, Weiss and Ms. Schlapkohl and Kushay, who are
directors of the Company, are also directors of JJFN.
As of the date of this report, there are three outstanding
notes receivable to affiliates held by the Company. Included in
these notes is a note payable by Peggy Stubbs, the wife of Elton
Stubbs, in the present principal balance of $29,169, which note is
unsecured and incurs interest at the rate of 9% per annum. Monthly
payments of $500 are due pursuant to the terms of the relevant
note, which payments are current as of the date of this report.
In addition, William W. Perry, President of the Company, is
obligated to pay the principal balance of $56,000, which note
incurs interest at the rate of 10% per annum. This note is secured
by 90,000 shares of the Company's common stock and is due on
demand.
The third note in the principal amount of $29,169 is the
obligation of a principal shareholder of the Company, Marie Stubbs,
the terms of which are consistent with the note issued in favor of
Peggy Stubbs discussed hereinabove.
Samuel G. Weiss, Esq., an officer and director of the Company,
also provides legal services to the Company. During the fiscal
year ended September 30, 1996, $18,703 in legal fees were paid by
the Company to the Law Offices of Samuel G. Weiss.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
The following exhibits were filed with the Securities and
Exchange Commission in the Exhibits to the Company's Registration
Statement on Form 10, Registration Statement No. 0-3926 and are
incorporated by reference herein:
65
<PAGE>
2.1 Certificate of Incorporation
2.2 Amendment to Certificate of Incorporation
The following exhibit was filed with the Securities and
Exchange Commission in the Exhibits to the Company's Form 10-K
Annual Report for the fiscal year ended September 30, 1972 and is
incorporated by referenced herein:
2.3 Bylaws
The following exhibit was filed with the Securities and
Exchange Commission in the Exhibits to the Company's Form 8-K filed
with the Commission in January 1995 and is incorporated by
reference herein:
6.1 Agreement and Plan of Reorganization with EEI, et al.
The following exhibit is included with this report:
EX-27 Financial Data Schedule
Reports on Form 8-K: During the last quarter of the Company's
fiscal year ended September 30, 1996 the Company filed four (4)
reports on Form 8-K with the SEC, including a report on or about
July 5, 1996, advising of the execution of a letter of intent to
acquire Weststar, another on or about August 21, 1996, advising of
the sale of CBI, a third report on or about August 30, 1996,
advising of the execution of the letter of intent with Kina and a
final report on or about October 18, 1996, updating the status of
the proposed transaction with Kina.
66
<PAGE>
EXHIBIT INDEX
Description of Document Location
(2.0) Charter and Bylaws
2.1 Certificate of Exhibit (1) filed with Form 10
Incorporation Registration Statement No. 0-3926
2.2 Certificate of Filed with Form 10 Registration
Amendment Statement No. 0-3926
2.3 Bylaws Filed with Form 10-K Annual
Report for the fiscal year
ended September 30, 1972
(6) Material Contracts
6.1 Agreement and Plan of Filed with Form 8-K Current
Reorganization with EEI, Report for the month of
et al. January 1995
27 Financial Data Page 69
Schedule
67
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act the
registrant has duly caused this Report to be filed on its behalf by
the undersigned thereunto duly authorized.
ANTARES RESOURCES CORPORATION
Date: December 17, 1996 By:/s/ William W. Perry III
William W. Perry III,
President and Chief
Executive Officer
Date: December 17, 1996 By:/s/ C. Richard Stubbs
C. Richard Stubbs,
Chief Financial Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
in the capacities and on the dates indicated.
Date: December 17, 1996 /s/ William W. Perry III
William W. Perry III, Director
Date: December 17, 1996 /s/ D. Elton Stubbs, Jr.
D. Elton Stubbs, Jr., Director
Date: December 17, 1996 /s/ C. Richard Stubbs
C. Richard Stubbs, Director
Date: December 17, 1996 /s/ Michael DeMayo
Michael DeMayo, Director
Date: December 17, 1996 /s/ Susan Schlapkohl
Susan Schlapkohl, Director
Date: December 17, 1996 /s/ Samuel G. Weiss
Samuel G. Weiss, Director
Date:
Ralph Wilson, Director
Date:
Joan Kushay, Director
68
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FILED WITH FORM 10-KSB FOR THE YEAR
ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 307,272
<SECURITIES> 0
<RECEIVABLES> 153,684
<ALLOWANCES> 20,000
<INVENTORY> 1,053,109
<CURRENT-ASSETS> 1,633,950
<PP&E> 2,319,165
<DEPRECIATION> 104,032
<TOTAL-ASSETS> 6,851,681
<CURRENT-LIABILITIES> 1,232,863
<BONDS> 449,424
0
900
<COMMON> 24,254
<OTHER-SE> 5,144,240
<TOTAL-LIABILITY-AND-EQUITY> 6,851,681
<SALES> 3,342,060
<TOTAL-REVENUES> 3,342,060
<CGS> 3,395,013
<TOTAL-COSTS> 3,395,013
<OTHER-EXPENSES> 1,766,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,627
<INCOME-PRETAX> (1,733,355)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,733,355)
<DISCONTINUED> (3,927,261)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,660,616)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> 0
</TABLE>
