SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number: 0-13066
PROCARE INDUSTRIES, LTD.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0932231
------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1960 White Birch Drive, Vista, California 92083
- - ----------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (760) 599-8559
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
--------------------------
Common Stock, No Par Value
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 there is no 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. [ ]
State issuer's revenues for its most recent fiscal year: $ -0-
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of February 29, 2000 the aggregate
market value of the voting stock held by non-affiliates was approximately
$9,590,178.
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of February 29, 2000, there were
approximately 1,785,559 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents incorporated by reference and the Part of this Form
10-KSB into which the document is incorporated: None.
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PART I
Item 1. Description of Business
ProCare Industries, Ltd. ("ProCare" or the "Company"), was incorporated under
the laws of Colorado on December 30, 1983, primarily for the purpose of
developing, manufacturing and marketing certain electronic testing products and
consumer products. On November 11, 1984, we completed an initial public offering
in which we issued 10,336,210 shares of no par value common stock for net
proceeds of $1,284,303. On March 26, 1986, we completed an offering made to
existing shareholders and to the public in which 2,617,377 units (each
consisting of one common share and one stock purchase warrant) were sold for net
proceeds of approximately $906,000. We redeemed the unexercised warrants on
September 4, 1986; however, prior to redemption, 2,526,741 warrants were
exercised at $.60 each, resulting in net proceeds to us of approximately
$1,515,954. During 1988, we conducted a private offering of units, raising
approximately $95,000 in gross proceeds, which resulted in the issuance of
905,000 common shares and an equal number of two series of warrants, each of
which subsequently expired.
On September 22, 1988, we filed a petition for Chapter 11 Reorganization with
the United States Bankruptcy Court for the District of Colorado, listing
$1,600,000 in assets and $1,200,000 in liabilities. The reorganization was
unsuccessful as no plan of reorganization was approved by secured creditors.
During the reorganization, all our assets were converted to cash and distributed
to secured creditors. In February 1990, the Chapter 11 filing was dismissed
after secured creditors received the net remaining assets. Thereafter, we
conducted no further business. We believe that claims of unpaid creditors became
uncollectible because various statutes of limitation applicable to the
collection of commercial debt would prevent enforcement of any claims.
On December 15, 1997, Mr. Robert W. Marsik, Allan Bergenfield and Joseph Rizzo,
the sole remaining directors and executive officer adopted a new plan of
business for ProCare. They appointed new officers for the purpose of bringing
the plan to bear. The new plan primarily provided for the "clean up" of ProCare
so as to provide for the filing of all delinquent reports with the Colorado
Secretary of State, the U.S. Securities and Exchange Commission and the Internal
Revenue Service. These initial objectives were achieved in 1998.
On November 10, 1998 our Board of Directors approved issuance of 40,000,000
common shares which were issued to three Directors for approximately $4,000 of
costs incurred on behalf of ProCare. The common shares issued were: 36,000,000
to Robert Marsik and 2,000,000 each to Allan Bergenfield and Joseph Rizzo. The
40,000,000 shares were issued on January 29, 1999, bringing the total number of
shares then outstanding to 76,659,919. Effective July 8, 1999 the shareholders
approved a 1 for 100 reverse split, bringing the total number of shares
outstanding after the reverse split to 766,715. All subsequent references in
this report to our outstanding common stock or issuances of our common stock
reflect this reverse stock split.
On November 23, 1999 the Board of Directors authorized the sale of 793,844
restricted common shares for $25,000 pursuant to a stock purchase agreement with
Arlington Capital LLC. At the same time the Board of Directors authorized Robert
Marsik, our president to purchase 125,000 restricted common shares for $3,937
subject to repurchase if Mr. Marsik is not available to provide services to
ProCare through completion of a merger transaction. On December 16, 1999 the
Board of Directors authorized the sale of 100,000 restricted common shares to an
unaffiliated third party, bringing the total number of shares outstanding to
1,785,559.
Phase two of the business plan includes attempting to acquire either a U.S.
based or a foreign based corporation that is privately owned, has assets,
revenues and earnings, and wishes to become a publicly owned corporation. As of
December 17, 1999 we signed a Letter of Intent describing our mutual intention
that ProCare will acquire all of the outstanding stock, including business and
assets, of Fastpoint Communications, Inc. which is a privately-held Delaware
corporation based in Los Angeles, California engaged in business as an Internet
service provider. The "reverse merger," pursuant to which we will issue stock
equal to about 88% of outstanding shares following the merger, is expected to be
completed in early 2000.
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Item 2. Description of Properties
The principal executive offices of ProCare are presently located at 1960 White
Birch Drive, Vista, California 92083. The telephone number at this address is
(760) 599-8559. There is no rental agreement in place. ProCare is receiving the
use of this space free of charge from Mr. Marsik.
Item 3. Litigation
No material legal proceedings to which ProCare is a party or to which the
property of ProCare is subject is pending and no such material proceeding is
known by management of ProCare to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders
At a special meeting of shareholders on July 6, 1999 shareholders considered
several matters submitted by Proxy Statement to shareholders of record as of
June 17, 1999. The matters were: (a) a 1 for 100 reverse split of the
outstanding common stock, (b) elimination of paid in capital and deficit
accumulated prior to January 1, 1999 (a "quasi-reorganization"), (c) election of
three Directors, and (d) approval to change the name of ProCare by amending its
Articles of Incorporation upon completion of a reverse merger or acquisition.
All of the issues pertained to "cleaning up" ProCare to accommodate an
acquisition of an operating business. At the shareholders' meeting Robert
Marsik, Allan Bergenfield and Joseph Rizzo were re-elected and the other three
matters were approved by more than a majority of outstanding shares. Following
the reverse split there were approximately 766,715 common shares (subject to
minor adjustments for rounding of fractional shares) and no preferred shares
outstanding.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
On March 9, 1999 an unaffiliated broker/dealer obtained clearance from NASD for
trading of ProCare's common stock on the electronic NASD OTC Bulletin Board
("OTCBB") system under the symbol PCRF. There are three market makers listed and
there has been modest trading volumes reported from May 1999 through December
31, 1999. We are not aware of any reported trading of, or quotes for, our common
stock before March 1999. As reported by the OTCBB the reported high and low bid
for ProCare's common stock during the last two fiscal years were as set forth
below. According to information furnished by the OTCBB, only sporadic trading in
very limited volumes has occurred. These quotations reflect interdealer prices,
without retail markup, markdown or commissions and may not represent actual
transactions.
Common Stock
------------------
High Low
---- ---
1998: (no reported trades)
1999:
First quarter .............................. none none
Second quarter ............................. $0.015 $0.015
Third quarter .............................. $0.015 $0.015
Fourth quarter ............................. $ 3.25 $0.125
2000:
First quarter through March 15.............. $10.50 $ 4.25
Outstanding Shares and Shareholders
As of December 31, 1999 there were 1,785,559 common shares outstanding held by
2,091 holders of record. (See note D in notes to financial statements)
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Dividends
ProCare has not declared or paid any dividends on the common stock from
inception to the date of this report, although there are no restrictions on the
payment of dividends. Further, no dividends are contemplated at any time in the
foreseeable future.
Sales of Unregistered Securities
During the last three fiscal years ProCare issued the following unregistered
securities.
(a) On November 10, 1998 we approved issuance of 400,000 shares of our common
stock to our three directors, Robert Marsik, Allan Bergenfield and Joseph Rizzo
for approximately $4,000 of costs incurred personally by the directors in
bringing ProCare into good standing. The shares were issued in January 1999. No
underwriter was involved in the transaction. As directors, the persons to whom
the shares were issued had full information concerning the business and affairs
of ProCare and acquired the shares for investment, for their own accounts and
not for purposes of distribution. A restrictive legend was placed in the
certificate evidencing the shares and our stock transfer agent was directed to
enter "stop transfer" instructions to prevent transfer of the shares except in
compliance with applicable securities laws. We relied upon Section 4(2) of the
Securities Act of 1933 in issuing the shares without registration.
(b) On November 15, 1999 ProCare sold 793,844 shares of its no par value common
stock to Arlington Capital, a nonaffiliated entity for $25,000. No underwriter
was involved in the transaction. The purchaser was furnished full information
concerning the business and affairs of ProCare and purchased the shares for
investment and for his own account and not for purposes of distribution of the
shares to other persons. A restrictive legend was placed on the certificate
evidencing the shares and our stock transfer agent was directed to enter "stop
transfer" instructions to prevent transfer of the shares except in compliance
with applicable securities laws. We relied upon Section 4(2) of the Securities
Act of 1933 in issuing the shares without registration.
(c) On November 15, 1999 ProCare issued 125,000 shares to Robert W. Marsik, the
president of the Company for $3,937. No underwriter was involved in the
transaction. The purchaser was furnished full information concerning the
business and affairs of ProCare and purchased the shares for investment and for
his own account and not for purposes of distribution of the shares to other
persons. A restrictive legend was placed on the certificate evidencing the
shares and our stock transfer agent was directed to enter "stop transfer"
instructions to prevent transfer of the shares except in compliance with
applicable securities laws. We relied upon Section 4(2) of the Securities Act of
1933 in issuing the shares without registration.
(d) On December 16, 1999 ProCare issued 100,000 shares to i3 Communications, an
unaffiliated entity for $3,000. No underwriter was involved in the transaction.
The purchaser was furnished full information concerning the business and affairs
of ProCare and purchased the shares for investment and for his own account and
not for purposes of distribution of the shares to other persons. A restrictive
legend was placed on the certificate evidencing the shares and our stock
transfer agent was directed to enter "stop transfer" instructions to prevent
transfer of the shares except in compliance with applicable securities laws. We
relied upon Section 4(2) of the Securities Act of 1933 in issuing the shares
with registration.
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Item 6. Management's Plan of Operations
The following information should be reviewed in connection with the financial
statements and notes to financial statements identified under Item 7, below and
included with this report:
Years Ended December 31,
1999 1998 1997
Statement of Operations:
Revenues ..................... $ -- $ -- $ --
Operating Expenses ........... -- -- --
----------- ---------- ----------
Net Profit (Loss) ............ $ (38,849) $ (4,000) $ --
Profit (Loss) Per Share ...... * * *
Balance Sheet Data:
Assets ....................... $ 14,936 $ -- $ --
Liabilities .................. 73,252(1) -- --
Stockholders' Equity (Deficit) (38,849) (4,394,823)(2) --
- - -----------------
*Negligible in amount.
(1) ProCare believes that there were approximately $1,200,000 in unpaid
obligations of ProCare at the time the bankruptcy reorganization was
dismissed in February 1990. ProCare believes none of such claims would
be collectible by creditors as statutes of limitations applicable to
collection of such debt has expired under Colorado Revised Statue
13-80-101, which limits commercial debt to six years from the last
payment made. ProCare has agreed with Robert Marsik, ProCare president,
that it will pay Mr. Marsik $150,000 upon the completion of an
acquisition transaction acceptable to the Company and its directors and
Mr. Marsik agreed to pay ProCare's out-of-pocket expenses through the
time of completion. We advanced a portion of this fee to Mr. Marsik in
1999.
(2) Except for the $4,000 of expenses incurred in 1998, the shareholder
deficit at December 31, 1998 and 1997 is carried over from the
operations of ProCare prior to 1990. Shareholders of ProCare approved a
"quasi-reorganization" in 1999 to eliminate the deficit accrued prior
to January 1, 1999, to more accurately reflect the present financial
condition of ProCare.
Liquidity
ProCare has not generated any revenue or cash flow from operating or investing
activities since February, 1990. No operating capital was required through 1997.
Operating capital subsequent to December 31, 1997 used to resurrect the
corporate status of ProCare, establish its shareholder records and for similar
purposes, totaling approximately $4,000 was provided by Mr. Marsik and the other
directors. In November 1998 the Board of Directors approved the issuance of
400,000 shares of its common stock to reimburse such advances. In late 1999,
ProCare sold 1,018,844 shares of common stock for $31,937. Also, when ProCare
signed a letter of intent with FastPoint Communications in December 1999,
FastPoint advanced $25,000 to Procare. The proceeds of these transactions were
used to satisfy a portion of the $38,849 in obligations of ProCare incurred in
1999. The balance of ProCare's obligations were satisfied by Mr. Marsik and he
is obligated to continue to fund the cash requirements of ProCare under an
agreement entered into with ProCare in July 1999. Under this agreement Mr.
Marsik will fund the capital requirements of ProCare through the earlier of July
2000 or through the completion of an acquisition transaction.
Plan of Operations
ProCare had no operations from 1990 through December 31, 1999. In December 1997,
ProCare began the plan to acquire an operating business described under Item 1,
above, held a shareholders meeting in July 1999 to adopt a quasi-reorganization
and take other actions and in December 1999 entered into a Letter of Intent to
acquire an operating business. The 1999 losses primarily represent expenses
incurred in connection with the shareholders meeting, preparing and filing
annual and quarterly reports, legal and accounting fees and reimbursements of
out-of-pocket expenses. Under the Letter of Intent, we expect that upon
completion of the planned transaction present stockholders of FastPoint
Communications, Inc. will receive common stock of ProCare equal to approximately
88% of the voting stock of ProCare. Following the planned transaction ProCare
would be re-named "FastPoint Communications, Inc." and will be the parent
corporation of FastPoint Communication, Inc., a Delaware corporation, which
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would be the operating entity. Upon completion of the transaction the present
management of FastPoint will become management and directors of ProCare, and
will implement its business plan in the Internet communications business.
Year 2000 concerns. ProCare had no operations from 1990 through 1999 and there
were no historical business records maintained on computer files. ProCare
currently owns no computer systems. Therefore, the year 2000 concerns that could
have impacted other businesses should have minimal impact on ProCare. However,
the year 2000 concern may continue to have an impact on any business ProCare may
acquire in the future. Management has reviewed this issue as part of its "due
diligence" related to the potential acquisition of Fastpoint.
Item 7. Financial Statements
We are filing the following reports, financial statements and notes to financial
statements with this annual report. These reports may be found following Part IV
of this report.
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Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
ProCare has had no disagreement with its accountants on any matter of accounting
principal or practice, financial statement disclosure or auditing scope or
procedure which would have caused the accountant to make reference in its report
upon the subject matter of the disagreement. However, in May 1999 ProCare's
certified public accountants, Harlan & Boettger, LLC, informed ProCare that it
was resigning as accountants for ProCare effective May 3, 1999. ProCare was
informed at the time that Harlan & Boettger were resigning because of changes in
that firm's business strategy, not as a result of any dispute or disagreement
with ProCare. ProCare reported the resignation in a Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 10, 1999. On February
10, 2000 the firm of Halliburton & Hunter & Associates was engaged for auditing
of ProCare's 1999 financial statements and records.
PART III
Item 9. Directors and Executive Officers of ProCare
The following table sets forth all directors and executive officers of ProCare,
as of December 31, 1999, as well as their ages:
NAME AGE POSITION WITH COMPANY
- - ---- --- ---------------------
Robert W. Marsik 53 Chairman of the Board of Directors, Chief Executive,
Financial and Accounting Officer, President and
Treasurer
Allan Bergenfield 58 Director & Secretary
Joseph V. Rizzo(1) 68 Director
- - ----------------------
(1) Mr. Rizzo died following a lengthy illness on January 24, 2000. On
March 6, 2000, Carlotta R. Marsik, age 51, the wife of Mr. Marsik, was
elected by the other directors to fill the vacancy on ProCare's Board
of Directors.
No current director has any arrangement or understanding whereby they are or
will be selected as a director or nominee.
Officers hold office until the next annual meeting of shareholders and until
their successors have been duly elected and qualified. The officers are elected
by the Board of Directors at its annual meeting immediately following the
shareholders' annual meeting and hold office until their death or until they
earlier resign or are removed from office. There are no written or other
contracts providing for the election of directors or term of employment of
executive officers, all of whom serve on an "at will" basis.
ProCare does not have any standing audit, nominating or compensation committees,
or any committees performing similar functions. The board will meet periodically
throughout the year as necessity dictates. During the years of 1990, 1997 and
1998 the board held only one meeting, acting by consent as necessity dictated.
In 1999 the Board has held three meetings, all of which consisted of meetings
held by written consent and no formal meeting was held.
Business Background of Directors
Robert W. Marsik was the Founder of ProCare and has been an executive officer
and director of ProCare since inception in 1983. On May 17, 1993, he was
appointed a director and executive officer of America's Coffee Cup, Inc., a
public company engaged in wholesale marketing of specialized coffee. On December
18, 1997, he resigned all positions with that entity to pursue other business
interests and has been an independent business consultant since that time. Mr.
Marsik graduated in 1970 from the University of Maryland at College Park,
Maryland, with a degree in Business Administration/Marketing.
Allen Bergenfield has been a director of ProCare since March 1987. He is the
president and principal owner of Bergenfield and Associates, Inc. which is a
regional sales and marketing company servicing primarily the Eastern Seaboard
portion of the United States and provides sales, broker and marketing services
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for numerous personal care product manufacturing and marketing companies. He
established this business in 1985 after resigning a position as Senior Vice
President of Marketing for Minnetonka Inc. a manufacturer of health and beauty
aids.
Joseph V. Rizzo was a director for ProCare from its inception until his death in
January 2000. Mr. Rizzo was retired in 1994. During his executive career he held
positions of Vice President and President of numerous electronic and
manufacturing companies, most recently with D. B. Products and prior to that he
was a Division President with Oak- Mitsui Corporation.
Carlotta R. Marsik was appointed a director on March 6, 2000 to fill the vacancy
created by the death of Joseph V. Rizzo. Mrs. Marsik is the wife of Robert W.
Marsik, president and a director of ProCare. Mrs. Marsik has owned and operated
a jewelry design business for the past 12 years. Prior to starting her own
business she had a career as a graphic artist.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of Forms 3 and 4 furnished to ProCare during 1999 and
written representations received by ProCare, no person failed to make any filing
required under Section 16 of the Securities Exchange Act of 1934, as amended.
Item 10. Executive Compensation
No compensation was paid to the Board of Directors or executive officers of
ProCare in their capacities as such to the date of this report, and no cash
compensation is anticipated to be paid at any time in the immediate future to
any member of the board in that capacity. However, as described below, we agreed
to pay Mr. Marsik a contingent fee if we complete an acquisition transaction and
we advanced a portion of that fee to him in 1999.
Employment Agreements: Mr. Marsik has an agreement with ProCare under which he
has agreed to pay ProCare's unpaid liabilities at June 30, 1999, which totaled
approximately $9,793 and to pay all other liabilities or obligations of the
Company which the Company is unable to satisfy through the earlier of (1) July
1, 2000, or (2) completion of an acquisition transaction acceptable to the Board
of Directors. Mr. Marsik also agreed to remain as ProCare's president and a
director for the same period. In return ProCare agreed to pay to Mr. Marsik a
contingent cash fee of $150,000 upon completion of an acquisition transaction.
Separately, in November 1999, Mr. Marsik agreed to purchase 125,000 shares of
common stock for $3,937, the price paid per share by an unaffiliated person in a
separate transaction. Mr. Marsik agreed that ProCare can re-purchase the shares
at the same price if (i) ProCare does not complete an acquisition transaction by
July 1, 2000, or (ii) Mr. Marsik fails or refuses to assist the Company during a
three month period following completion of an acquisition transaction.
Item 11. Security Ownership of Management and Certain Others
Based upon information which has been made available to ProCare by its stock
transfer agent, the following table sets forth, as of March 31, 1998, the shares
of common stock owned by each current director, by directors and executive
officers as a group and by each person known by ProCare to own more than 5% of
the outstanding Common Stock, with the addresses of each such person.
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<TABLE>
<CAPTION>
Name and Address of
Title of Class Beneficial Owner Number of Shares Percent of Class(1)
- - -------------- ------------------- ---------------- ------------------
<S> <C> <C> <C>
Common Stock ........................ Robert W. Marsik 337,985(2) 19%
1960 White Birch Drive
Vista, California 92083
Common Stock ........................ Allan Bergenfield 22,100 0.1%
12000 Trailridge Drive
Potomac, Maryland 20854
Common Stock ........................ Carlotta R. Marsik 337,985(2) 19%
1960 White Birch Drive
Vista, California 92083
Common Stock ........................ Arlington Capital 793,844 44.4%
P. O. Box 11447
Beverly Hills, California 90213
Directors and Executive
Officers as a Group
(three persons): .................... 360,085 20.2%
</TABLE>
- - ----------------------
(1) Based on 1,785,559 shares of common stock issued and outstanding as of
December 31, 1999.
(2) Shares are held by Mr. Marsik, husband of Carlotta R. Marsik, and they may
be deemed to share beneficial ownership of the shares.
Item 12. Certain Transactions
In November 1998, the Board of Directors approved the issuance of shares of its
common stock, which had no market value, to the three directors of ProCare for
approximately $4,000 in expenses advanced on behalf of ProCare and for services
provided in connection with reactivation of ProCare and reestablishing ProCare
as a Colorado corporation in good standing. The share certificates were issued
on January 29, 1999 as follows: 360,000 shares to Robert Marsik, and 20,000
shares each to Allan Bergenfield and Joseph Rizzo. In November 1999 the Board of
Directors authorized three parties to purchase restricted common shares,
Arlington Capital LLC purchased 793,844 shares for $25,000, Robert Marsik
purchased 125,000 restricted common shares for $3,937 and an unaffiliated party
purchased 100,000 restricted common shares for $3,000.
The office space, telephone and office supplies consumed by ProCare are provided
by Robert Marsik.
In 1999, the Company entered into the agreements with Mr. Marsik described in
Item 10 above.
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PART IV
Item 13. Exhibits and Reports on Form 8-K.
The following documents and reports are filed as a part of this report:
(a) Exhibits required by Item 601:
Exhibit No. Description and Method of Filing
----------- --------------------------------
4.1 Articles of Incorporation and amendments
thereto, incorporated by reference to Exhibit
3(i) to ProCare's Quarterly Report on form
10-QSB for the quarter ended March 31, 1999.
4.2 Bylaws of ProCare, incorporated by reference
to Exhibit 3(ii) to ProCare's Quarterly
Report on form 10-QSB for the quarter ended
March 31, 1999.
10.1 Letter of Intent between Fastpoint
Communications, Inc. and ProCare Industries,
Ltd.
10.2 Agreement with Robert W. Marsik.
(b) Reports on Form 8-K: During the fourth quarter, the Company filed the
following Reports on Form 8-K:
Date Item Subject
---- ---- -------
November 30, 1999 Item 5. Issuance of common stock to
Arlington Capital.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PROCARE INDUSTRIES, LTD.
Date: March 30, 1999 By: /s/ Robert W. Marsik
-------------- ----------------------------
Robert W. Marsik, President,
Chief Executive, Financial
and Accounting Officer,
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 30, 1999 By: /s/ Robert W. Marsik
--------------- --------------------------
Robert W. Marsik, Director
Date: March 30, 1999 By: /s/ Allen Bergenfield
--------------- ---------------------------
Allen Bergenfield, Director
Date: March 30, 1999 By: /s/ Carlotta R. Marsik
--------------- ----------------------------
Carlotta R. Marsik, Director
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INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITOR'S REPORT ......................................... F-1
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 1999 and 1998 .............. F-2
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 ............................. F-3
Statements of Changes in Stockholders' Equity for
The years ended December 31, 1999, 1998 and 1997 ............. F-4
Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997 ................................................ F-5
NOTES TO FINANCIAL STATEMENTS ........................................ F-6 & F-7
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Halliburton, Hunter & Assoicates, P.C. Phone (303) 730-7999
Fax (303) 730-2683
CERTIFIED PUBLIC ACCOUNTANTS
5583 South Prince Street
Littleton, Colorado 80120
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
PROCARE INDUSTRIES, LTD. (a Development Stage Company)
We have audited the accompanying balance sheet of ProCare Industries, Ltd. (a
Development Stage Company) as of December 31, 1999 and 1998 and the related
statements of operations, changes in shareholder's deficit and cash flows for
the years ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, based on our audit and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of ProCare Industries, Ltd. ( a Development Stage
Company) as of December 31, 1999 and 1998, and the results of its operations and
cash flows for the years ended December 31, 1999 and 1998 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 the financial
statements, the Company has suffered recurring losses from operations and has a
net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regards to those matters are
discussed in notes to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Halliburton, Hunter & Associates, P.C.
Littleton, Colorado
March 16, 2000
F-1
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<TABLE>
<CAPTION>
PROCARE INDUSTRIES, LTD.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31,
1999 1998
<S> <C> <C>
Current Assets:
Cash ............................................................... $ 14,916 --
---------- ----------
Total Current Assets ............................................... 14,916 --
---------- ----------
----------
Total Assets ....................................................... $ 14,916 --
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable ................................................... $ 8,752 --
----------
Advances ........................................................... 25,000 --
---------- ----------
Total Current Liabilities ................................... 33,752 --
---------- ----------
Stockholders' Equity (Deficit)
Preferred stock, $1 par value, 5,000,000 shares
Authorized; none issued
Common Stock, no par value, 100,000,000
shares authorized, 1,785,559 in 1999
and 36,659,919 in 1998 issued and outstanding ................. 35,937 3,175,795
Stock to be issued ................................................. -- 4,000
Additional paid-in capital ......................................... -- 1,215,028
Accumulated deficit ................................................ (54,772) (4,394,823)
---------- ----------
Total Equity .................................................... (18,836) --
---------- ----------
Total Liabilities and Shareholders' Equity (Deficit) ........ $ -- --
========== ==========
</TABLE>
The Auditor's report and accompanying notes are an integral part of these
statements
F-2
<PAGE>
<TABLE>
<CAPTION>
PROCARE INDUSTRIES, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Years ended December 31,
1999 1998
<S> <C> <C>
Net Sales ................................................ -- --
----------- -----------
Cost of sales ............................................ -- --
----------- -----------
Gross Profit ......................................... -- --
----------- -----------
Operating expenses
General and administrative ........................... 50,773 4,000
----------- -----------
Total operating expenses ................................. 50,773 4,000
----------- -----------
Net income on operations
before income taxes .................................. (50,773) (4,000)
Income taxes ............................................. -- --
----------- -----------
Net loss ................................................. $ (50,773) (4,000)
=========== ===========
Basic loss per share ..................................... $ (.03) --
=========== ===========
Weighted average shares outstanding ...................... 1,785,559 42,306,919
=========== ===========
</TABLE>
The Auditor's report and accompanying notes are an integral part of these
statements
F-3
<PAGE>
<TABLE>
<CAPTION>
PROCARE INDUSTRIES, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
Common Stock Total
---------------------- Additional Accumulated Equity Stock to
Shares Amount Paid-in Capital (Deficit) (Deficit) be issued
------ ------ --------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 ....... 36,659,919 $ 3,175,795 1,215,028 (4,390,823) -- --
Common stock to be issued for
payment of expenses (Note C) .... 4,000 4,000
Net loss ........................... -- -- -- (4,000) (4,000) --
------------ ------------ ------------ ------------ ------------ -----------
Balance at December 31, 1998 ....... $ 26,659,919 3,175,795 1,215,028 (4,394,823) -- 4,000
Issuance of stock for services ..... 40,000,000 4,000 -- -- -- (4,000)
Reorganization ..................... (75,893,204) (3,175,795) (1,215,028) 4,390,823 -- --
Sale of common stock ............... 1,018,844 31,937 -- -- 31,937 --
Net loss ........................... -- -- -- (50,773) (50,773) --
------------ ------------ ------------ ------------ ------------ ------------
1,785,559 $ 35,937 -- (54,773) (18,836) --
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
PROCARE INDUSTRIES, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOW
Years ended December 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................... $(50,773) $ (4,000)
Increase in current liabilities ............................ 33,752 --
-------- --------
Net Cash Flows (used) by
operating activities ................................... (17,021) (4,000)
-------- --------
Cash flows from unresting activities ....................... -- --
Cash flows from financing activities
Sale of common stock ................................... 31,937 4,000
-------- --------
Net cash from financing activities .................. 31,937 4,000
-------- --------
Increase in cash ........................................... 14,916 --
Cash at Beginning of the Period ............................ -- --
-------- --------
Cash at End of the Period .................................. $ 14,916 $ --
======== ========
</TABLE>
The Auditor's report and accompanying notes are an integral part of these
statements
F-5
<PAGE>
PROCARE INDUSTRIES, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
A. Organization and Summary of Significant Accounting Policies:
Organization - ProCare Industries, Ltd. (the "Company") was incorporated
under the laws of the State of Colorado on December 30, 1983 and became a
publicly traded company on the NASDAQ market in 1984. In September 1988,
the Company filed a Chapter 11 bankruptcy petition and subsequently
liquidated all of its assets (Note B).
The Company had no operations from 1990 through December 31, 1999. The
company is a development stage business which intends to acquire a United
States or foreign based corporation which is privately owned and wishes to
become a public company.
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 the financial statements and reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Cash and Cash Equivalents - For the purpose of the statements of cash
flows, the Company considers all investments with a maturity of three
months or less to be cash equivalents.
Earnings per share - Earnings per share are provided in accordance with
Statement of Financial Accounting Standard No.128 (FAS No. 128) "Earnings
Per Share". Due to the Company's simple capital structure, with only common
stack outstanding, only basic earnings per share is presented. Basic
earnings per share are computed by dividing earnings available to common
stockholders by the weighted average number of common shares outstanding
plus the weighted average of "stock to be issued" during the period.
Income taxes - Income taxes are provided in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss
carryforwards. Deferred tax expense (benefit) results from the net change
during the year of deferred tax assets and liabilities.
B. Chapter 11 Bankruptcy and Liquidation of Assets:
On September 22, 1988, the Company filed a voluntary petition under Chapter
11, Title 11, O.S.C. with the United States Bankruptcy Court for the
District of Colorado, Case Number 88 B 12842 E. Management of the Company,
in conjunction with special legal counsel related to the bankruptcy
proceedings, submitted a reorganization plan to the court in August 1989.
Management of the Company operated under the Chapter 11 action until
February 1990. On March 6, 1990, the secured creditors of the Company
rejected the Plan of Reorganization. The Company ceased operations and was
liquidated for the benefit of the secured creditors. Management is unaware
of any liabilities due as of December 31, 1999 or 1998 as a result of these
proceedings.
C. Common Stock
On November 10, 1998, the Board of Directors authorized the issuance of
40,000,000 shares of common stock to reimburse the board members for $4,000
of expenses they paid on behalf of the Company. In January 1999, such
shares were issued to the board members. Accordingly, this transaction is
reported as "stock to be issued" in the accompanying balance sheet at
December 31, 1998. In December 1999, the Board of Directors authorized the
issuance of 125,000 common shares for $3,937,793,844. Common shares for
$25,000 and 100,000 common shares for $3,000. At December 31, 1999 there
were 1,785,559 common shares issued and outstanding.
F-6
<PAGE>
PROCARE INDUSTRIES, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
D. Going Concern
The Company has not had operations since February 1990. Management believes
the Company will generate operating capital in future periods as a result
of acquiring an operating company. The ability of the Company to become a
going concern is dependent on its success in acquiring an operating company
which will enable it to achieve future profitability and sufficient cash
flows. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. At the present time, the
Company is conducting negotiations with a potential merger partner which
would allow it to generate operating capital in future periods.
E. Quasi-Reorganization
The Stockholders Equity section has been changed to reflect the approval by
shareholders on July 6, 1999 of: (A) a quasi-reorganization to eliminate
the accumulated deficit and paid in capital which accumulated from
inception of the Company through December 31, 1998, effective January 1,
1999, and (B) a 1 for 100 reverse split of the common stock, effective July
8, 1999.
F. Commitment and contingencies
Note 5, In July 1999 the Company, through the Board of Directors, entered
into an agreement with Robert Marsik, its President, whereby Mr. Marsik
agreed to serve as President and to continue to fund the expensed of the
Company and the expenses associated with an acquisition, if one occurs, for
the next twelve months or until an acquisition transaction, if earlier, for
a contingent fee of $150,000. The contingent fee shall be payable to Marsik
only if an acquisition or reverse merger occurs, and only if the funds are
available.
F-7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description and Method of Filing
4.1 Articles of Incorporation and amendments thereto,
incorporated by reference to Exhibit 3(i) to
ProCare's Quarterly Report on form 10-QSB for the
quarter ended March 31, 1999.
4.2 Bylaws of ProCare, incorporated by reference to
Exhibit 3(ii) to ProCare's Quarterly Report on form
10-QSB for the quarter ended March 31, 1999.
10.1 Letter of Intent between Fastpoint Communications,
Inc. and ProCare Industries, Ltd.
10.2 Agreement with Robert W. Marsik.
12
ProCare Industries, Ltd.
1960 White Birch Drive
Vista, CA 92083
706-599-8559
March 8, 2000
FastPoint Communications, Inc.
5777 West Century Blvd., Suite 600
Los Angeles, California 99945
Re: Amended and Restated Letter of Intent for Acquisition
Gentlemen:
This amended and restated letter of intent will outline the mutual
understandings which have been reached pursuant to which ProCare Industries,
Ltd., a Colorado corporation ("ProCare"), will acquire FastPoint Communications,
Inc., a Delaware corporation ("FastPoint"). This amended and restated letter of
intent supersedes the letter of intent between ProCare and FastPoint dated
December 17, 1999. The completion of the transaction described herein (the
"Closing") is intended to occur at the earliest practicable time, but not sooner
than the completion, to our mutual satisfaction, of the matters set forth below.
We intend that the following conditions will exist or that the
following steps will be taken at the earliest practicable time:
1. ProCare. ProCare is a public corporation with 1,785,559 shares of
common stock issued and outstanding and held by approximately 2,000
shareholders. ProCare's no par value common stock is registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and has been so registered for more than 10 years. ProCare's most
recent Form 10-QSB, for the quarter ended September 30, 1999, was
timely filed. ProCare's common stock is included in the NASD OTC
Electronic Bulletin Board with the symbol "PCRF." As of the present,
ProCare has no assets, no liabilities except a contingent liability of
$150,000 owed to its President, who is obligated to satisfy all
current liabilities of ProCare (including the cost and expenses
incurred by ProCare in consummating the transactions contemplated
hereby), and a minimal loss carryforward. ProCare is not engaged in
any business.
2. FastPoint. FastPoint is a privately_held Delaware corporation with a
limited number of stockholders. FastPoint is engaged in business as an
Internet service provider and related businesses.
3. Structure of Transaction. The transaction shall be structured as
nontaxable to the shareholders of FastPoint, as a merger (the
"Merger") of a newly_formed subsidiary of ProCare with and into
FastPoint (an "A" reorganization).
4. Securities Implications. The ProCare stock to be issued to the
FastPoint shareholders in the Merger shall be issued under Rule 506 of
Regulation D, an exemption from registration under the Securities Act
of 1933, as amended (the "Securities Act"). FastPoint shareholders
will receive restricted ProCare common stock. Notwithstanding the
foregoing, an attempt will be made to have the issuance of the ProCare
stock approved at a fairness hearing by the California Department of
<PAGE>
FastPoint Communications, Inc.
March 8, 2000
Page 2
Corporations, thus exempting the issuance of such stock from
registration under the Securities Act by virtue of Section 3(a)(10)
thereunder.
5. Cash Payments. FastPoint shall make cash payments to ProCare as set
forth below. ProCare shall use the cash payments to pay all
outstanding obligations and liabilities of ProCare, including amounts
owed to Robert W. Marsik, President of ProCare.
(1) The parties acknowledge that FastPoint tendered to ProCare
$25,000 at the time the original letter of intent was signed by
the parties. This cash payment shall be nonrefundable unless
ProCare fails to complete the transaction, in which event ProCare
shall be required to refund this payment on the day that it
notifies FastPoint that it is unwilling to proceed with the
transaction.
(2) $50,000 shall be paid on the date this amended and restated
letter of intent is signed by the parties. This cash payment
shall be nonrefundable unless ProCare fails to complete the
transaction, in which event ProCare shall be required to refund
this payment on the day that it notifies FastPoint that it is
unwilling to proceed with the transaction.
(3) $75,000 shall be paid immediately prior to the Closing, which
ProCare shall use to discharge all current liabilities. At
Closing, ProCare shall have no assets or liabilities. ProCare
will have a tax loss for fiscal 1999 of approximately $35,000.
6. Name Change. The Board of Directors shall cause ProCare to file an
amendment to its Articles of Incorporation to change the name of the
corporation to "FastPoint Communications, Inc.," effective at the
Closing. Authorization to effect the change of name was given to the
Board of Directors of ProCare by the shareholders of ProCare at a
meeting of shareholders held July 6, 1999.
7. Management. At the Closing the officers and directors of ProCare shall
resign, to be replaced by the present officers and directors of
FastPoint and such persons shall promptly make all filings which shall
be required of such persons under the Exchange Act. The new management
shall also cause the corporation to make such filings as may be
required or indicated under said Act.
8. Additional Stock Issuance. Immediately following the Closing, the new
directors of the corporation, then to be named "FastPoint
Communications, Inc.," shall cause the corporation to issue 270,000
shares of common stock to certain finders in connection with the
transaction described in this amended and restated letter of intent.
9. Closing. The parties shall use their best efforts to cause the Closing
to occur by May 31, 2000, subject to extensions which may be required
to comply with applicable laws, rules, regulations or obligations, to
be determined by FastPoint. The Closing shall be subject to the
following additional conditions:
(1) Any required approval by stockholders of FastPoint in order to
effect the transaction and assure that FastPoint becomes a
wholly-owned subsidiary of ProCare after the Closing shall have
been received, in the opinion of counsel to FastPoint;
<PAGE>
FastPoint Communications, Inc.
March 8, 2000
Page 3
(2) The Board of Directors of FastPoint shall have determined to its
satisfaction that the issuance of shares to the shareholders of
FastPoint shall not be a taxable event for the holders thereof
and that any cash payment which may be received by the FastPoint
shareholders shall be treated as a capital gain for federal tax
purposes;
(3) FastPoint receives all third party consents to the transactions
contemplated by this amended and restated letter of intent;
(4) The Board of Directors and, to the extent necessary, the
shareholders of ProCare, shall have approved the Merger in
accordance with applicable corporate law;
(5) The Board of Directors of ProCare shall have approved the Merger
in accordance with applicable corporate law;
(6) FastPoint shall deliver a compiled Balance Sheet and Income
Statement to ProCare for the current fiscal year through December
31, 1999. An audit of the financial statements for FastPoint from
inception through its last fiscal year by the outside auditing
firm of FastPoint shall be completed within 60 days of the
Closing and filed with the Securities and Exchange Commission
(the "SEC"). FastPoint shall prepare pro forma financial
statements suitable for inclusion in a Form 8_K to be filed by
ProCare/FastPoint under the Exchange Act, within a timely fashion
following the Closing;
(7) FastPoint shall have at least $12.8 million paid in capital at
the time of the Closing, as certified by its President;
(8) Robert W. Marsik, President of ProCare, shall agree (a) not to
sell in excess of 10,000 shares of the stock of the corporation
in any 30-day period following the Closing without the prior
consent of the Chairman of the Board or the Chief Executive
Officer of the corporation; and (b) to place into escrow 125,000
shares of ProCare stock for a period of one year following the
Closing as security for any claims made by the creditors of
ProCare which arose prior to the Closing;
(9) ProCare shall have prepared and timely filed with the SEC all
reports and other filings required by the Exchange Act,
including, without limitation, its Annual Report on Form 10-KSB
for its most recently completed fiscal year;
(10) ProCare and FastPoint shall have jointly prepared and delivered
to their respective shareholders an information statement
regarding the Merger that complies, to the extent practicable, to
the requirements of Regulation 14C under the Exchange Act that
would be applicable if the Merger was being submitted to a vote
of ProCare's shareholders.
10. Conversion of FastPoint Securities. Except as described in the next
sentence, at the effective time of the Merger, each issued and
outstanding share of FastPoint common stock, and each issued and
outstanding security convertible into or exercisable for a share of
FastPoint common stock, shall be converted into the right to receive
<PAGE>
FastPoint Communications, Inc.
March 8, 2000
Page 4
(upon payment of any applicable conversion or exercise price) 1.77
shares of ProCare common stock (the "Exchange Ratio"). At the
effective time of the Merger, each issued and outstanding option or
warrant to purchase FastPoint common stock, whether or not
exercisable, shall be converted into an option or warrant, as
applicable, to purchase a number of shares of FastPoint common stock
equal to the number of shares of FastPoint common stock underlying
such option or warrant, multiplied by the Exchange Ratio, with an
appropriate adjustment to the exercise price of such option or
warrant.
11. NASDAQ Listing. The new management of the corporation shall apply to
have the post_closing shares of the corporation listed on the NASDAQ
Small Cap Market within ninety (90) days of the Closing.
12. Preparation of Documents. Legal counsel for ProCare and FastPoint
shall prepare all documents necessary to complete the transactions
described in this amended and restated letter of intent, including the
merger agreement, stockholder approvals and related matters.
13. Expenses. Each party shall be responsible for its respective costs and
expenses.
14. Conduct Pending Closing. Pending the completion of the transaction
described in this amended and restated letter of intent, ProCare and
FastPoint shall each carry on their respective businesses in the
ordinary course and each shall preserve and protect its business and
assets and complete and make each and every filing which may be
required under applicable state or federal law. ProCare shall issue no
additional shares, and shall enter into no material agreements and
shall otherwise undertake no action which might be deemed to adversely
affect the rights of any of the parties to this anticipated
transaction. Neither party shall make any disclosure concerning the
terms of the intended transaction except as may be required by
applicable laws or in order to properly complete the transaction.
Neither party nor any affiliate of either party shall purchase or sell
any securities of the other party until after the Closing.
15. Confidentiality. Each party agrees to hold all information heretofore
or hereafter obtained from the other or their respective advisors in
strict confidence and to use the information so obtained only for the
purpose of evaluating the transaction. In the event that no definitive
agreement is reached, or if reached, is thereafter terminated, each
party agrees to promptly return all such information in written form
and any copies thereof to the other party.
16. Due Diligence. Each party's obligations hereunder are subject to
completion of a satisfactory due diligence investigation of the
other's business. Each party agrees to cooperate with the other in
connection with such due diligence review.
17. Modification. The terms of this amended and restated letter of intent
may not be modified without the express written consent of each of the
parties hereto.
18. Assignability. This amended and restated letter of intent shall not be
assignable by either party hereto without the express written consent
of the other party.
<PAGE>
FastPoint Communications, Inc.
March 8, 2000
Page 5
19. Counterparts. This amended and restated letter of intent may be
executed in counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
20. Non-Binding. Except for the provisions of clause (1) and (2) of
Section 5 and except for the provisions of Sections 13, 14 (other than
the first two sentences thereof), 15, 17 and 18, this amended and
restated letter of intent (i) is intended as a statement of the
parties' mutual intentions only, (ii) is not intended to be, and shall
not constitute, a binding or enforceable agreement between the parties
and (iii) is not intended to impose any obligation whatsoever on
either party. This Section 20 supersedes all other conflicting or
ambiguous language in this amended and restated letter of intent or
any contemporaneous document or other instrument that precedes this
amended and restated letter of intent.
To confirm that the foregoing accurately sets forth our mutual
intentions regarding the proposed transaction, please sign a copy of this
amended and restated letter of intent in the place set forth below and return
the signed amended and restated letter of intent, together with your check for
$50,000, payable to ProCare Industries, Ltd.
Sincerely,
PROCARE INDUSTRIES, LTD.
By: /s/ Robert W. Marsik
-----------------------------------------
Robert W. Marsik, President
FASTPOINT COMMUNICATIONS, INC.
By: /s/ Michael Allocca
-----------------------------------------
Michael Allocca, Chairman
FUNDING AGREEMENT
THIS AGREEMENT, is effective July __, 1999, and is between ProCare
Industries, Ltd. ("Company") and Robert W. Marsik, President ("Marsik") and is
made with reference to the following agreed facts:
A. The Company is a publicly owned corporation in good standing under
applicable state and federal securities and corporate law. The Company has no
present assets with which to pay its accumulated and ongoing expenses and
obligations.
B. The Company, through its Board of Directors, intends to seek and
consummate a suitable acquisition transaction pursuant to which the Company will
acquire the assets and business of one or more privately-owned businesses, such
that the Company becomes an operating entity, thereby providing the private
business with the structure of a publicly-owned corporation and providing
liquidity and value to the present shareholders of the Company.
C. Marsik has agreed to provide services as an officer of the Company in
seeking and negotiating the terms of an acceptable acquisition transaction for
the Company. Marsik has also agreed to be responsible for, and to pay, the
Company's outstanding and ongoing expenses and liabilities which the Company may
incur from time to time in connection with preparing and filing necessary
reports and other disclosures under applicable federal securities laws, issuing
the Company's securities and documenting and completing and acquisition
transaction which may be approved in the future by the Board of Directors.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Marsik and the Company agree as
follows:
1. Marsik shall continue to serve as the President and as a director of the
Company until the first to occur of the following: (i) 12 months from the date
of this Agreement, or (ii) the date on which an acquisition transaction approved
by the Board of Directors of the Company is completed. In connection with such
services, Marsik shall report his activities from time to time to the Board of
Directors of the Company and shall take such other action as may be necessary or
appropriate or as shall be assigned by the Board of Directors.
2. Marsik shall be responsible for, and shall assume and pay, all of the
Company's existing and outstanding unpaid liabilities, which total approximately
$9,793 at June 30, 1999 and all other liabilities and obligations of the Company
which shall be incurred during the term of this Agreement and which the Company
shall be unable to satisfy from other sources. Marsik agrees to pay all such
amounts to or on behalf of the Company as an additional capital contribution to
the Company.
3. At such time as an acquisition transaction which has been approved by
the Board of Directors of the Company and which is deemed by the Board of
Directors to be in the best interests of the Company and all of its shareholders
is completed, the Company shall pay to Mr. Marsik a contingent fee of $150,000,
<PAGE>
as his compensation or providing management services through the date of
completion of the acquisition transaction. If an acquisition transaction
approved by the Board of Directors of the Company is not completed within 12
months from the date of this Agreement, the Company and Mr. Marsik shall
negotiate in good faith new arrangements for future compensation.
4. The parties agree to take such further action and to consider such
additional developments as may be reasonably necessary in order to accomplish
the purposes set forth herein.
Dated effective the date first set forth above.
PROCARE INDUSTRIES, LTD.
By /s/ Allan Bergenfield
-----------------------------------------
Allan Bergenfield, Director
By /s/ Joseph V. Rizzo
-----------------------------------------
Joseph V. Rizzo, Director
/s/ Robert W. Marsik
--------------------------------------------
Robert W. Marsik
2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 14,916
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,916
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,916
<CURRENT-LIABILITIES> 33,752
<BONDS> 0
0
0
<COMMON> 1,785,559
<OTHER-SE> (54,772)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 50,773
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (50,773)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,773)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
