SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1997 Commission file number 0-12746
HART INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State of other jurisdiction of incorporation or organization)
33-0661675
(I.R.S. Employer Identification Number)
4695 MacArthur Court, Suite 530, Newport Beach, California
(Address of Principal Executive Offices)
92660
(Zip Code)
Registrant's telephone number, including area code: (949) 833-5380
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K, is not contained herein and will not 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
o
The Registrant had no operating revenues for its most recent fiscal
year.
The aggregate market value of the voting stock held by non-affiliates
is not determinable as no average bid or asked prices of such stock have been
available since the Registrant's stock was de-listed from the National
Association of Securities Dealers Small Cap MarketSM in June, 1993.
Class Number of Shares Outstanding at December 31, 1997
- ----------------------------- -------------------------------------------------
Common Stock , $.01 par value 1,730,960 shares
Documents Incorporated by Reference:
None
[HART\10K:123197.KSB]-8
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business ........................................................1
Item 2. Properties ......................................................3
Item 3. Legal proceedings ...............................................3
Item 4. Submission of matters to a vote of security holders..............3
PART II
Item 5. Market for common equity and related stockholder matters ........3
Item 6. Management's discussion and analysis of financial condition
and results of operations.......................................4
Item 7. Financial statements.............................................4
Item 8. Changes in and disagreements with accountants on accounting
and financial disclosure........................................5
PART III
Item 9. Directors, executive officers, promoters and control persons
of the Registrant; compliance with section 16(a) of the
Exchange Act ...................................................5
Item 10. Executive compensation...........................................8
Item 11. Security ownership of certain beneficial owners and management...9
Item 12. Certain relationships and related transactions...................11
PART IV
Item 13. Exhibits and reports on Form 8-K.................................12
[HART\10K:123197.KSB]-8
<PAGE>
PART I
ITEM 1. BUSINESS
The Registrant was incorporated in the State of Utah in October, 1982.
Its developmental activities through September 30, 1990 principally consisted of
the negotiation of license agreements and incurring research and development
costs, the development of a non-electric, water-powered dishwasher (the
"Dishwasher Assets"), and, later, an Underground Storage Tank Leak Detection
System for use in petroleum storage applications. All costs, except those
associated with the license agreements, patents, trademarks and equipment costs,
were expended as incurred during the development stage.
The Registrant's Dishwasher Assets did not develop beyond the
prototype stage and in December 1990 the Dishwasher Assets were sold to an
unrelated third party for a $3,000,000 promissory note. In 1991 and 1992 the
Registrant negotiated a rescission of the sale due to the failure of the
purchaser to commence production. In May 1993, the Registrant again sold its
Dishwasher Assets to a second third party for $2,500,000 in the form of a
promissory note. In August, 1994, the second note was canceled and the
Dishwasher Assets were again returned to the Registrant. At that time the
Registrant had plans to liquidate the Dishwasher Assets in order to raise
working capital. As of the date of this Report, the Registrant has not been able
to sell the Dishwasher Assets. The Dishwasher Assets were written off during
fiscal 1994.
Commencing in 1988 through 1992, the Registrant pursued its Underground
Storage Tank Leak Detection System through a newly created Environmental
Services Division. This service was designed to meet the stringent regulations
promulgated by the Environmental Protection Agency ("EPA") in early 1989
covering pollution abatement caused by faulty underground storage tanks. The
Registrant offered services which included a complete tank package to service
station owners, small town municipalities and others who were not in compliance
with the EPA's requirements. The Registrant explored arrangements for the
manufacture, sale, installation and insurance of its tanks, rather than
acquiring the facilities, equipment and personnel necessary to perform such
functions itself. The Underground Storage Tank Leak Detection System was
discontinued in 1992.
In 1989 the Registrant acquired sixty percent (60%) of Occidental Fire
& Casualty Ltd, a European reinsurer. In September, 1989 it sold that interest
to Stevenson, Abercrombie & Claythorne ("SAC"), in exchange for debt and SAC's
assumption of certain of the Registrant's debt.
In October, 1989, the stockholders approved a decrease in the
authorized number of shares of common stock from 100,000,000 to 10,000,000 by
way of a one-for-ten (1:10) reverse stock split. The split date was April 13,
1991.
In May, 1990, through its Environmental Services Division, the
Registrant purchased for cash and stock a Transportable Sludge-Dewatering
Treatment Unit ("TTU") to actively engage in pollution cleanup. Subsequent to
the closing of the transaction, the seller of the TTU and two of its officers
disputed the title to the equipment and process. The Registrant responded by
filing a lawsuit in 1990, which was settled in 1992.
[HART\10K:123197.KSB]-8
1
<PAGE>
Revenues for the fiscal year ended December 31, 1990 were all derived
from the Environmental Ser vices Division. There was no revenue generated in
1991 from the TTU. The TTU was stolen in 1992. Revenues during fiscal 1992 were
generated through the Underground Storage Tank program of the Environmental
Services Division, which ceased operations at the end of fiscal 1992.
In June, 1992, in exchange for two million shares of its common stock,
the Registrant acquired all the outstanding stock of MediLife Holdings Limited
("MediLife"), a British corporation. At the Closing the shareholders of MediLife
represented that MediLife owned five nursing homes in the U.K. Subsequent to the
Closing the Registrant learned that MediLife's title to the nursing homes had
not been perfected due to defects and ownership disputes (the "MediLife
Claims"). Litigation ensued and, in July 1993, the Registrant assigned its
contractual rights to the shares of MediLife and the underlying assets and
certain causes of action against the MediLife shareholders to a third party in
exchange for investment securities. In connection with this transaction the
purchaser of the MediLife shares effected a settlement of all outstanding
litigation involving the MediLife claims.
Also, in July, 1993 the Registrant acquired certain manufacturing
assets, in conjunction with its Underground Storage Tank Leak Detection System
equipment leasing activities, for shares of its common stock. The assets
acquired as part of this transaction were leased to a sign fabrication firm in
Costa Mesa, California, for use in its business. The lease was secured by the
assets and was personally guaranteed by the principal shareholder of the lessee.
In fiscal year ended December 31, 1994, ("fiscal 1994") the Registrant did not
receive any lease revenues from the lessee. Due to uncertainties as to their
realizable value, the assets were written off during fiscal 1994. The Registrant
terminated the lease due to lessee's default and in May, 1995, the assets were
sold at a public auction.
Effective March 8, 1994 the Registrant reincorporated in the State of
Nevada pursuant to a merger with a wholly-owned Nevada corporation following
shareholder approval. As part of such reincorporation every twenty (20) shares
of the Registrant issued and outstanding prior to the reincorporation were
automatically converted into one share of the Nevada corporation, the name of
which remained "Hart Industries, Inc." As a result, giving effect to the
re-incorporation in Nevada, the Registrant on the effective date of the merger
had 480,962 shares of common stock issued and outstanding and 50,000,000 shares
authorized. All share and per share amounts have been restated, where noted, to
give effect to the merger.
In August, 1994 the Registrant entered into an Agreement to purchase a
net profits interest in two gaming casinos in Macau. In May, 1995 the Registrant
and the other party to the Agreement agreed to terminate the Agreement due to
the Registrant's inability to satisfy a condition precedent in the Agreement.
The Registrant is evaluating other proposed acquisitions and, at the appropriate
time, intends to relist its shares for trading.
The Registrant's day-to-day business affairs are handled by three
directors and three officers. All three officers were parties to employment or
consulting agreements with the Registrant for its fiscal year ending December
31, 1997 ("fiscal 1997"). As of the date of this Report, the Registrant had one
employee and no operations. Current management is pursuing additional business
opportunities in the equipment leasing industry and other industries, but no
assurance can be given that the Registrant will be successful in acquiring any
business opportunities, or if acquired what revenues might be provided from such
operations.
[HART\10K:123197.KSB]-8
2
<PAGE>
ITEM 2. PROPERTIES
The Registrant's principal executive offices are located in shared
leased premises of approximately 3,000 square feet in Newport Beach, California.
These premises are occupied by the Registrant under an agreement with an
affiliate, NuVen Advisors, Inc ("NuVen").
ITEM 3. LEGAL PROCEEDINGS
As of the date of this Report the Registrant is not a party to any
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Registrant's common stock was traded on NASDAQ until June 7, 1993
when it was delisted.
Bid prices of the Registrant's common stock are not available for
fiscal 1997 and 1996 as the Registrant's common stock was delisted on June 7,
1993.
Stockholders of Record
The approximate number of holders of record of the Registrant's common
stock as of the close of business on December 31, 1997 was approximately 840.
Dividends
The Registrant has never declared or paid any dividends on any class of
its securities. The Registrant's anticipated capital requirements are such that
it intends to follow a policy of retaining earnings, if any, to finance the
conduct of its business.
[HART\10K:123197.KSB]-8
3
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
There were no operations during fiscal 1997. As a result there were no
revenues or cost of revenues recorded during fiscal 1997.
Total operating expenses increased from $65,051 in fiscal 1996 to
$177,632 in fiscal 1997. The increase is primarily attributable to continued
professional advisory services incurred by the Company.
Liquidity and Capital Resources
The Registrant has incurred net losses and negative cash flows from
operating activities. The Registrant had cash and cash equivalents of
approximately $67 and $242 as of December 31, 1997 and 1996, respectively, and
negative working capital of $469,317 and $291,685 as of December 31, 1997 and
1996, respectively. The increase in working capital deficiency is a direct
result of the Registrant having no operating revenues during the year ended
December 31, 1997 to cover fees for professional services and other overhead
that the Registrant has incurred. As of the date of this Report, the Registrant
has no material commitments for capital expenditures or commitments for
additional equity or debt financing, and no assurances can be made that its
working capital needs can be met out of future operations or borrowings.
As a result of the Registrant having no revenue producing activities,
the Registrant had limited cash and cash equivalents remaining as of December
31, 1997 to finance future operations. The Registrant has received financial
support from NuVen, an affiliate, during fiscal 1997, and is dependent upon
NuVen for future working capital. The Registrant's plan is to continue searching
for additional sources of equity and working capital and new operating
opportunities. In the interim, the Registrant's existence is dependent upon
continuing financial support from NuVen for the next fiscal year. Such
conditions raise substantial doubt about the Registrant's ability to continue as
a going concern. As such, the Registrant's independent accountants have modified
their report to include an explanatory paragraph with respect to such
uncertainty.
ITEM 7. FINANCIAL STATEMENTS
Financial statements included elsewhere herein are referred to in Item
13 (a) and are listed in the Index to financial statements filed as a part of
this Annual Report on Form 10-KSB.
[HART\10K:123197.KSB]-8
4
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Reports of Kang, Yu & Jun, an accountancy corporation (formerly,
Spurgeon, Kang & Associates) with respect to the 1995, 1996 and 1997 fiscal
years financial statements include an explanatory paragraph with respect to the
substantial doubt existing about the ability of the Company to continue as a
going concern due to its recurring net losses, negative cash flows from
operating activities since its inception, limited liquid resources and negative
working capital.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
OF THE REGISTRANT; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
(a) Identification of Directors and Executive Officers.
The following table sets forth certain information concerning the
Registrant's directors and executive officers:
<TABLE>
<CAPTION>
Position Held with Date First
Name Age the Registrant Elected or Appointed
- ----------------------- ------ ---------------------------- --------------------------------
<S> <C> <C> <C>
Fred G. Luke 51 President July 24, 1993 to Present
Director July 24, 1993 to Present
Fred Graves Luke 76 Chief Financial Officer July 31, 1993 to April 21, 1996
Director July 31, 1993 to Present
John D. Desbrow 41 Secretary July 31, 1993 to May 9, 1997
Director July 31, 1993 to May 9, 1997
Steven H. Dong 31 Chief Financial Officer April 21, 1996 to June 30, 1997
</TABLE>
All directors serve until the Registrant's next Annual Meeting of
Shareholders and until their successors are elected and qualified. The
Registrant's officers serve at the pleasure of the Board of Directors. The Board
generally considers the status of the officers at the meeting of the Board
following each Annual Meeting of Shareholders.
Fred G. Luke is the son of Fred Graves Luke. Other than this father-son
relationship, there are no family relationships between any director or officer
of the Registrant and any other director or officer of the Registrant.
(b) Business Experience
The following is a brief account of the business experience during the
past five years of each director and executive officer of the Registrant,
including principal occupations and employment during that period and the name
and principal business of any corporation or other organization in which such
occupation and employment were carried on.
[HART\10K:123197.KSB]-8
5
<PAGE>
Fred G. Luke. Mr. Fred Luke has been a Director, Chairman and President
of the Registrant since July 24, 1994. Mr. Luke has over twenty-eight (28) years
of experience in domestic and international financing and the management of
private and publicly held companies. Since 1982, Mr. Luke has provided
consulting services and has served, for brief periods lasting usually not more
than six months, as Chief Executive Officer and/or Chairman of the Board of
various publicly held and privately held companies in conjunction with such
financial and corporate restructuring services. In addition to his position with
the Registrant, Mr. Luke currently serves as Chairman and Chief Executive
Officer of NuOasis Resorts, Inc. ("NuOasis"), Chairman and President of NuVen
Advisors, Inc., ("NuVen Advisors") formerly New World Capital, Inc. ("New
World"), President and Director of Virtual Enterprises, Inc. ("VEI"), Chairman
and President of Diversified Land & Exploration Co. ("DL&E"). DL&E is a former
publicly traded independent natural resource development company engaged in
domestic oil and gas exploration, development and production. Mr. Luke also
served as Chairman and President of Group V Corporation ("Group V"), former
subsidiary of NuOasis, which trades on the OTC Bulletin Board. Prior to 1995,
DL&E was a 90% owned subsidiary of Basic Natural Resources, Inc. ("BNR"). From
1991 through 1994 Mr. Luke served as the President and a Director of BNR. BNR is
presently inactive. DL&E was formerly in the environmental services and natural
gas processing business. VEI is a public company which was formerly traded on
NASDAQ or the OTC Bulletin Board. VEI does not have ongoing operations. NuOasis
is a publicly held company whose shares are traded on the OTC Bulletin Board.
NuOasis is a diversified holding company with overseas gaming and domestic pasta
production subsidiaries. NuOasis Gaming is a publicly traded (OTC Bulletin
Board) holding company with domestic gaming development activities. NuVen
Advisors provides managerial, acquisition and administrative services to public
and private companies including NuOasis, Group V, VEI and the Registrant
pursuant to independent Advisory and Management Agreements. NuVen Advisors,
which is controlled by Fred G. Luke, as Trustee of the Luke Family Trust, is an
affiliate of the Registrant. NuVen Advisors is a stockholder of Group V, DL&E,
NuOasis and the Registrant, and is also a beneficial stockholder of VEI. Mr.
Luke also served from 1973 through 1985 as President of American Energy
Corporation, a privately held oil and gas company involved in the operation of
domestic oil and gas properties. From 1970 through 1985 Mr. Luke served as an
officer and Director of Eurasia, Inc., a private equipment leasing company
specializing in oil and gas industry equipment. Mr. Luke received a Bachelor of
Arts Degree in Mathematics from California State University, San Jose in 1969.
Fred Graves Luke. Mr. Fred Graves Luke served as a Director and Chief
Financial Officer of the Registrant from July 31, 1993 and resigned his position
as Chief Financial Officer of the Registrant on April 21, 1996. Mr. Luke also
currently serves as Chairman of the Advisory Board of NuOasis. Prior to his
association with the Registrant, Mr. Luke served as Chief Executive Officer of
three private firms operating oil and gas properties from 1954 until his
retirement in 1985. He received his B.A. and LLB Degrees from the University of
Arizona and was admitted to the bar in the State of Arizona in 1950. Mr. Luke
served in the U.S. Army Air Corp. in World War II as a pilot and served in the
U.S. Air Force as a legal officer during the Korean War.
[HART\10K:123197.KSB]-8
6
<PAGE>
John D. Desbrow. Mr. Desbrow served as Secretary and a Director of the
Registrant from July 31, 1993 to May 9, 1997. He was also a director of VEI from
September 28, 1994 to May 9, 1997. Mr. Desbrow is a member in good standing of
the State Bar of California and has been since 1980. Prior to joining the
Registrant, Mr. Desbrow was in the private practice of law. Mr. Desbrow received
his Bachelor of Science degree in Business Administration from the University of
Southern California in 1977, his Juris Doctorate from the University of Southern
California Law Center in 1980, and his Master of Business Taxation degree from
the University of Southern California Graduate School of Accounting in 1982.
Steven H. Dong. Mr. Dong, a Certified Public Accountant, served as
Chief Financial Officer of the Registrant from April 21, 1996 to June 30, 1997.
Prior to joining the Registrant, Mr. Dong worked with the international
accounting firm of Coopers & Lybrand since 1988. As an Assurance Manager with
Coopers & Lybrand, Mr. Dong's experience consisted of providing financial
accounting and consulting services to privately and publicly held companies. Mr.
Dong had also previously served as Chief Financial Officer of NuOasis and VEI,
and Group V. Mr. Dong received his Bachelor of Science degree in Accounting from
Babson College in 1988 and is a member in good standing with the California
Society of Certified Public Accountants and American Institute of Certified
Public Accountants.
(c) Identification of Certain Significant Employees.
None.
(d) Family relationships
Fred G. Luke is the son of Fred Graves Luke. Other than this father-son
relationship, there are no family relationships between any director or officer
of the Registrant and any other director or officer of the Registrant.
(e) Involvement in Certain Legal Proceedings.
During the past five years, no director or officer of the Registrant
has:
1. Filed or has had filed against him a petition under the federal
bankruptcy laws or any state insolvency law, nor has a receiver, fiscal
agent or similar officer been appointed by a court for the business or
property of such person, or any partnership in which he was a general
partner, or any corporation or business association of which he was an
executive officer at or within two years before such filings; except,
however, that Fred G. Luke was Secretary of Diversified Production
Services, Inc., an Oklahoma corporation ("DPS") which filed a Voluntary
Petition under Chapter 11 of the U.S. Bankruptcy Code in 1991. DPS was
discharged from its bankruptcy proceedings in May 10, 1994 following
the affirmative vote on its Plan of Reorganization.
2. Been convicted in a criminal proceeding.
3. Been the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining such person from, or otherwise
limiting his involvement in any type of business, securities or banking
activities.
4. Been found by a court of competent jurisdiction in a civil action,
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated any federal or state securities or
commodities law, which judgment has not been reversed, suspended, or
vacated.
[HART\10K:123197.KSB]-8
7
<PAGE>
(f) Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Registrant's directors and officers and persons who own more
than ten percent of the Registrant's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Directors, officers and greater than ten-percent shareholders are
required by SEC regulations to furnish the Registrant with copies of all Section
16(a) reports filed.
Based solely on its review of the copies of the reports it received
from persons required to file, the Registrant believes that during the period
from January 1, 1997 through December 31, 1997 all filing re quirements
applicable to its officers, directors and greater than ten-percent shareholders
were complied with.
ITEM 10. EXECUTIVE COMPENSATION
(a) Summary Compensation Table.
The following summary compensation table sets forth in summary form the
compensation received during each of the Registrant's last three completed
fiscal years by the Registrant's President and four most highly paid officers
("Named Executive Officers"). There were no officers who earned in excess of
$100,000 per annum:
<TABLE>
<CAPTION>
Name and Principal Fiscal Salary Other Annual Options
Position Year ($) Compensation ($) Granted (#)(2)
- -------------------------- ---- ----- ------------------ --------------
<S> <C> <C> <C> <C>
Fred G. Luke 1997 54,000(1) N/A N/A
Chairman and 1996 54,000(1) N/A N/A
President (4-93 to 1995 54,000(1) N/A 1,000,000
Present)
</TABLE>
(1) The accrued but unpaid value of base salary (cash and non-cash).
(2) Except for stock option plans, the Registrant does not have in effect
any plan that is intended to serve as incentive for performance to
occur over a period longer than one fiscal year.
(b) Stock Options
There were no options granted during fiscal year 1997. The following
table sets forth in summary form the aggregate options exercised during fiscal
year 1997, and the December 31, 1997 value of unexercised options for the
Registrant's Named Executive Officers:
[HART\10K:123197.KSB]-8
8
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Option/SAR's at Fiscal Options/SAR's at Fiscal
Year-End (#) Year-End ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------------------- ----------------- ------------ ------------------------------ ------------------------------
<S> <C> <C> <C>
Fred G. Luke, Chairman
and President - - 1,166,666 Exercisable - Exercisable (3)(2)
NuVen Advisors, Inc. (1) - - 100,000 Exercisable - Exercisable (2)(3)
</TABLE>
(1) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co- Trustee of the Luke Trust
determines the voting of such shares and, as a result, may be deemed to
control the Luke Trust.
(2) As of the date of this Report the potential realizable value of each grant
of options is not applicable due to a lack of a market price for the shares
of common stock underlying the options.
(3) Exercise price for Mr. Luke's options are 110% of net market value on
August 1, 1995 of the Company. Since the Company had a negative book value
on August 1, 1995, the exercise price is deemed to be $.01 per share.
(c) Long-Term Incentive Plans Table
There were no long-term incentive plans during the last three fiscal
years.
(d) Contracts with Named Executive Officer
In January 1995, the Company entered into an Employment Agreement with
Mr. Luke, pursuant to which Mr. Luke is to hold the office of President through
December 1996. Pursuant to the agreement the Company agreed to pay Mr. Luke
$54,000 per annum in cash or in the Company's common stock payable monthly in
arrears, and granted him an option to purchase 1,000,000 shares of the Company's
common stock at an exercise price per share of 110% of market value at date of
grant. During fiscal year 1996, the agreement was renewed effective January 1,
1997 for $54,000 annually. The Company expensed $54,000 during each fiscal year
of 1997, 1996 and 1995, and owed $149,958 to Mr. Luke as of December 31, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding ownership
of the Registrant's common stock as of December 31, 1997. The table includes (a)
each person known by the Registrant to be the beneficial owner of more than 5%
of the Registrant's common stock, (b) each director, (b) each director
individually, (c) the name executive officer, and (d) the directors and officers
of the Registrant as a group. Unless otherwise indicated, the persons named in
the table possess sole voting and investment power with respect to the shares
listed (except to the extent such authority is shared with spouses under
applicable law).
[HART\10K:123197.KSB]-8
9
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial
Title of Class of Beneficial Owner Interest(1) Percent of Class(2)
- -------------------- ------------------------------------ ------------------- -------------------
<S> <C> <C> <C>
$.01 par value Overseas Equity (UK) Limited 150,000 8.7%
Common Stock 700-595 Howe Street
Vancouver, British Columbia
V6C 2T5
NuVen Advisors, Inc. (formerly 900,000 52.0%
New World Capital, Inc.)
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
</TABLE>
(1) All shares have been adjusted to take into account the reincorporation
of the Registrant and the resulting one-for-twenty share reverse stock
split effective March 8, 1994.
(2) Based on 1,730,960 shares outstanding.
The following sets forth information with respect to the Registrant's
common stock beneficially owned by each officer and director, and by all
officers and directors as a group:
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial
Title of Class of Officers and Directors Interest Percent of Class(1)
- ------------------------ ------------------------- ------------- -------------------
<S> <C> <C> <C>
$.01 par value Fred G. Luke(2)
Common Stock 4695 MacArthur Court
Suite 530
Newport Beach, CA 92660 1,333,332 46%
Fred Graves Luke(2)
4695 MacArthur Court
Suite 530
Newport Beach, CA 92660 333,332 17.5%
John D. Desbrow(2)(3)
4695 MacArthur Court
Suite 530
Newport Beach, CA 92660 333,332 17.5%
Steven H. Dong(2)
4695 MacArthur Court
Suite 530
Newport Beach, CA 92660 166,666 8.8%
---------- ----
</TABLE>
[HART\10K:123197.KSB]-8
10
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial
Title of Class of Officers and Directors Interest Percent of Class(1)
- ---------------------- ----------------------------- ----------- -------------------
<S> <C> <C> <C>
All Officers and Directors
as a group 2,166,662 67%
========= ===
</TABLE>
(1) Number of shares deemed outstanding includes 1,730,960 as of December 31,
1996, and any shares subject to stock options held by the person or entity.
(2) As of the date of this Report, Fred G. Luke, Fred Graves Luke and John D.
Desbrow each hold 166,666 shares. No shares are held by Steven Dong. Fred
G. Luke, Fred Graves Luke, John D. Desbrow and Steven Dong each hold an
option to purchase 166,666 shares.
(3) Excludes shares held as a trustee under escrow instructions.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Luke Family Trust (the "Luke Trust") owns 93% of NuVen. Fred G.
Luke, as Co-Trustee of the Luke Trust determines the voting of such shares and,
as a result, may be deemed to control the Luke Trust.
Effective January 1, 1994, the Company entered into an Advisory and
Management Agreement with NuVen for the engagement of NuVen to perform
professional and advisory services. Pursuant to such Agreement, the Company
agreed to pay NuVen $120,000 annually, payable monthly in $10,000 increments in
arrears, and granted NuVen an option to purchase 150,000 shares of the Company's
common stock exercisable at a price of $.20 per share. During fiscal year 1996,
the agreement was renewed effective January 1, 1996 for up to $120,000 annually.
Due to the minimal services performed by NuVen, the Company received a credit of
$170,990 against amounts owed to NuVen and accordingly, the Company recorded a
net credit of $50,990 during fiscal 1996. Effective July 1, 1997 the agreement
was revised to $3,500 per month. The Company expensed $120,000 during fiscal
1996 and had $82,457 due to NuVen as of December 31, 1997.
Effective April 24, 1996, the Company entered into a consulting
agreement with Mr. Steven H. Dong, pursuant to which Mr. Dong is to perform
accounting services and to hold the office of Chief Financial Officer through
June 30, 1996. Pursuant to the agreement the Company agreed to pay Mr. Dong
$10,000 in cash or in the Company's common stock and granted him an option to
purchase 166,666 shares of the Company's common stock at an exercise price of
$.01 per share. Effective July 1, 1996, the Consulting Agreement was renewed for
fiscal year 1997 for an amount of $1,000 per month. No cash payments were made
to Mr. Dong by the Company during fiscal 1997 or 1996. The Company expensed
$16,000 and $12,000 during fiscal 1997 and 1996, respectively, and had $28,000
due to Mr. Dong as of December 31, 1997. Effective June 30, 1997, Mr. Dong
resigned as Chief Financial Officer and has been retained as an accounting
consultant on a monthly basis.
PART IV
[HART\10K:123197.KSB]-8
11
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Financial Statements
The Financial Statements included in this Item are included elsewhere
herein and are indexed on Page F-1, "Index to Financial Statements."
(b) Financial Statement Schedules
None.
(c) Exhibits
Exhibit
Number Description
------- ----------------------------------------------------
3.1 Articles of Incorporation1
3.2 Certificate of Amendment of Articles of Incorporation1
3.3 Bylaws, as amended1
3.4 Articles of Merger - Utah1
3.5 Articles of Merger - Delaware1
3.6 Articles of Merger - Nevada5
10.1 Agreement dated March 20, 1989 between Hart Industries and
Occidental Fire & Casualty Ltd.2
10.2 Mutual Release Agreement dated December 19, 1989 between
Hart Industries, Inc., and North American Polymer2
10.3 Letter and Agreement dated May 31, 1990 between Hart
Industries, Inc., and Stevenson, Abercrombie & Claythorne
Co. with regard to the purchase of a transportable
treatment unit from Magnolia Energy and Refining
Corporation2
10.4 Sale and Exclusive Patent License Agreement between Hart
Industries, Inc., and GNE Enterprises, Inc., dated
December 21, 1992
10.5 Settlement of Magnolia Lawsuit and Cancellation of Shares2
10.6 Russian Lease Agreement and Subsequent Recision3
10.7 MediLife Agreement3
[HART\10K:123197.KSB]-8
12
<PAGE>
10.8 Assets Sales Agreement4
10.9 Assignment and Transfer of Contractual Rights and Causes
of Action4
10.10 Equipment Lease Agreement4
10.11 Assignment and Bill of Sale4
10.12 Agreement with Overseas Equity (UK) Limited4
[HART\10K:123197.KSB]-8
13
<PAGE>
Exhibit
Number Description
10.13 Merger Agreement with Casino Management of America, Inc., a
Nevada corporation4
10.14 Non-Qualified Stock Option Agreement with Fred G. Luke5
10.15 Non-Qualified Stock Option Agreement with Fred Graves Luke5
10.16 Non-Qualified Stock Option Agreement with John D. Desbrow5
10.17 Employment Agreement with Fred G. Luke6
10.18 Consulting Agreement with Steven H. Dong6
10.19 Consulting Agreement with John D. Desbrow6
10.20 Advisory and Management Agreement with NuVen Advisors, Inc.,
a Nevada Corporation6
27. Financial Data Schedule7
(d) Reports on Form 8-K
On April 24, 1996, the Registrant filed a current report on Form 8-K
dated February 19, 1996, reporting a change in auditors from C.
Williams & Associates, P.C. to Spurgeon, Kang & Associates.
1 Each of the foregoing exhibits is incorporated herein by reference to the
Registrant's Form 10.
2 Each of the foregoing exhibits is incorporated herein by reference to the
Registrant's 1990 Form 10K.
3 Each of the foregoing exhibits is incorporated herein by reference to the
Registrant's 1992 Form 10K.
4 Each of the foregoing exhibits is incorporated herein by reference to the
Registrant's 1993 Form 10K.
5 Each of the foregoing exhibits is incorporated herein by reference to the
Registrant's 1994 Form 10KSB.
6 Each of the foregoing exhibits is incorporated herein by reference to the
Registrant's 1995 Form 10KSB.
7 Each of the foregoing exhibits is included with this Form 10-KSB.
[HART\10K:123197.KSB]-8
14
<PAGE>
SIGNATURES
In accordance with 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.
HART INDUSTRIES, INC.
Date: October 15, 1998 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke, President
In accordance with the requireme ts 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.
HART INDUSTRIES, INC.
Date: October 15, 1998 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke, Director
Date: October 15, 1998 By: /s/ Fred Graves Luke
----------------------------------
Fred Graves Luke, Director
[HART\10K:123197.KSB]-8
15
<PAGE>
HART INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
(1) FINANCIAL STATEMENTS:
INDEPENDENT AUDITOR'S REPORT .....................................F-2
BALANCE SHEET AS OF DECEMBER 31, 1997.............................F-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996.......................................F-4
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996.......................................F-5
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996.......................................F-6
NOTES TO FINANCIAL STATEMENTS.................................F-7/F-10
[HART\10K:123197.KSB]-8
F-1
<PAGE>
Spurgeon, Kang & Associates Steven Y.C. Kang, CPA
Accountancy Corporation John H. Spurgeon, CPA
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Hart Industries, Inc.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
We have audited the accompanying balance sheets of Hart Industries, Inc. as of
December 31, 1997 and 1996, and the related statements of income, retained
earnings, 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 audit.
We conducted our audit in accordance with generally accepted audited standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Hart Industries, Inc. as of
December 31, 1997 and 1996, and the results of its operations and 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 going concern. As discussed in Note 2 to the financial
statements, the Company has incurred recurring net losses and negative cash
flows from operating activities since its inception, has limited liquid
resources and had negative working capital as of December 31, 1997. Management's
plans regarding those matters are described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Spurgeon, Kang & Associates
- ----------------------------------
Spurgeon, Kang & Associates
Bellflower, CA 90706
October 20, 1998
Telephone: 310-867-2715 o Facsimile: 310-866-7046
9831 Belmont Street, Bellflower, CA 90706
Mailing Address: PO Box 1399, Bellflower, CA 90706
[HART\10K:123197.KSB]-8
F-2
<PAGE>
<TABLE>
<CAPTION>
HART INDUSTRIES, INC.
Balance Sheets
As of December 31, 1996
ASSETS 1997
-----------------------
<S> <C>
Current Assets:
Cash $ 67
----------------------
Total current assets 67
----------------------
TOTAL ASSETS $ 67
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 13,086
Due to affiliates 456,298
----------------------
Total current liabilities $ 469,384
----------------------
Commitments and contingencies -
Stockholders' Deficiency:
Common stock $.01 par value, 50,000,000 shares
authorized; 1,730,960 shares issued and outstanding
as of December 31, 1996 17,310
Additional paid-in capital 5,252,948
Accumulated deficit (5,739,575)
-----------------------
Total stockholders' deficiency (469,317)
TOTAL LIABILITIES & STOCKHOLDERS'
DEFICIENCY $ 67
======================
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123197.KSB]-8
F-3
<PAGE>
<TABLE>
<CAPTION>
HART INDUSTRIES, INC.
Statements of Operations
For the Years Ended December 31,
1997 1996
------------------------- ------------------------
<S> <C> <C>
Costs and Expenses:
General and administrative expenses 177,632 65,051
------------------------- ------------------------
Total Costs and Expenses 177,632 65,051
------------------------- ------------------------
Operating loss (177,632) (65,051)
Other Income (Expense):
Gain on sale of assets - -
------------------------- -------------------------
Net Loss $ (177,632) $ (65,051)
========================= =========================
Loss Per Common Share $ (.10) $ (.04)
========================= =========================
Weighted Average Common Shares
Outstanding 1,730,960 1,730,960
========================= ========================
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123197.KSB]-8
F-4
<PAGE>
<TABLE>
<CAPTION>
HART INDUSTRIES, INC.
Statement of Cash Flows
For the Years Ended December 31,
1997 1996
----------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (177,632) $ (65,051)
Adjustments to Reconcile Net Loss to Net Cash Provided (Used)
by Operating Activities:
Gain on Sale of Assets - -
Increase in Liabilities:
Accounts payable and accrued expenses (370) 6,081
Due to affiliate 177,827 59,171
----------------------- ---------------------
Net Cash Provided (Used) by Operating Activities (175) 201
----------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of assets - -
----------------------- ---------------------
Net Cash Provided by Investing Activities - -
----------------------- ---------------------
Net Increase (Decrease) in Cash and Cash Equivalents (175) 201
Cash and Cash Equivalents - Beginning of Period 242 41
----------------------- ---------------------
Cash and Cash Equivalents - End of Period $ 67 $ 242
======================= =====================
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Interest paid $ - $ -
Income taxes paid $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123197.KSB]-8
F-5
<PAGE>
<TABLE>
<CAPTION>
HART INDUSTRIES, INC.
Statements of Stockholders' Deficiency
For the Years Ended December 31, 1997 and 1996
Common Common Additional
Stock Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
------------------- -------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1996 1,730,960 $ 17,310 $ 5,252,948 $ (5,496,892) $ (226,634)
Net income (loss) (65,051) (65,051)
------------------- --------------- ---------------- ----------------- --------------
Balances at December 31, 1996 1,730,960 17,310 5,252,948 (5,561,943) (291,685)
-------------------- --------------- ---------------- ----------------- --------------
Net Income (loss) (177,632) (177,632)
-------------------- --------------- ---------------- ----------------- --------------
Balances at December 31, 1997 1,730,960 $ 17,310 $ 5,252,948 $ (5,739,575) $ (469,317)
==================== =============== ================ ================= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123197.KSB]-8
F-6
<PAGE>
HART INDUSTRIES, INC.
Notes to Financial Statements
December 31, 1997
Note 1. Summary of Significant Accounting Policies and Business Activities
Organization
The Company was in the development stage from incorporation in October,
1982 to September 30, 1990. Activities through September 30, 1990
principally consisted of organizing the Company, issuing common stock
for cash, services, and equipment, negotiation of license agreements
and incurring research and development costs. All costs, except those
associated with the license agreements, patents, trademarks and
equipment costs, were expensed as incurred during the development
stage. In December, 1990, the Company sold its assets and all rights to
the nonelectric dishwasher for a note receivable and future royalties.
During 1990, the Company began performing sludge dewatering operations
through its Transportable Treatment Unit (TTU) and was taken out of the
development stage for accounting purposes. The revenue generated in
1990 was from the Environmental Services Division and the TTU. There
was no revenue generated in 1991 from the TTU. 1992 revenue was
generated through the Environmental Services Division. Since fiscal
year 1992, there have been no operating revenues through the date of
this Report.
Principles of Management 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 the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reorganization
Effective March 8, 1994 the Company reorganized via a merger with a
newly formed Nevada corporation whose name became Hart Industries, Inc.
at the effective date. The Merger Agreement was approved by the
Company's stockholders at the Annual Meeting held on January 18, 1994.
Under the Merger Agreement each shareholder received one share in the
Nevada corporation for every twenty shares held in the Company. Any
fractional shares resulting from the merger were rounded up to the
nearest whole share. As a result of the merger, the number of
authorized shares of common stock increased from 10,000,000 to
50,000,000 while retaining the same $.01 par value. All share and per
share amounts have been restated to give effect to the merger.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less as cash equivalents.
[HART\10K:123197.KSB]-8
F-7
<PAGE>
HART INDUSTRIES, INC.
Notes to Financial Statements
December 31, 1997
Note 1. Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Income taxes are provided on all revenue and expense items, regardless
of the period in which such items are recognized for tax purposes,
except for those items representing a permanent difference between
pre-tax accounting income and taxable income. A valuation allowance is
recorded when it is more likely than not that benefits resulting from
deferred tax assets will not be realized.
Earnings (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of shares outstanding during each
year. All per share amounts are reported as adjusted after the merger
and resulting reverse stock split. Common stock equivalents were not
considered in the loss per share calculations as the effect would have
been anti-dilutive.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded
in accordance with APB16 at the fair market value of the stock issued
or the fair market of the services provided, whichever value is the
more clearly evident. The values of the services are typically
stipulated by contract.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1995 consolidated financial
statements have been reclassified, where appropriate, to conform with
the financial statement presentation used in fiscal 1996.
Recent Accounting Development
In October 1995, the FASB adopted Statement No. 123, "Accounting for
Stock-Based Compensation." This Statement encourages entities to adopt
a fair value method of accounting for stock-based compensation plans
including stock options and warrants issued to employees. For entities
which do not adopt this method, the Statement requires disclosure of
the effect that the fair- value method would have on net income and
earnings per share. The Statement is effective for transactions entered
into in fiscal years that begin after December 15, 1995. The Company
has not determined the effect of this Statement nor has it decided when
it will adopt the provisions of this Statement.
[HART\10K:123197.KSB]-8
F-8
<PAGE>
HART INDUSTRIES, INC.
Notes to Financial Statements
December 31, 1997
Note 2. Going Concern
The Company has experienced recurring net losses, has limited liquid
resources, negative working capital and has no current operations.
Management's intent is to keep searching for additional sources of
capital and new operating opportunities. In the interim, the Company
will keep operating with minimal overhead and key administrative
functions will be provided by NuVen Advisors, Inc. ("NuVen"), an
affiliate. Accordingly, the accompanying financial statements have been
presented under the assumption the Company would continue as a going
concern.
Note 3. Federal Income Taxes
The Company accounts for income taxes using the liability method. The
Company has net operating loss carry forwards as of December 31, 1996
of approximately $5.5 million, which expire at various times from 1999
through 2009, and are available to reduce future Federal taxable
income, if any.
As a result of a change in ownership that occurred in 1994, the
Company's use of net operating loss carry forwards may be limited by
section 382 of the Internal Revenue Code until such net operating loss
carryforwards expire. Deferred tax assets have been computed using the
maximum expiration terms of 13 to 5 years for federal and state tax
purposes, respectively.
The deferred tax benefit applicable to the net operating loss carry
forwards has been offset by a 100% valuation reserve since it is more
likely than not that the Company will not recognize any tax benefit
from the net operating loss carry forwards.
Note 4. Commitments and Contingencies
The Company maintains its executive offices at facilities provided by
NuVen under an Advisory and Management Agreement (Note 6).
Note 5. Sale of Manufacturing Assets
In July 1993, the Company acquired certain manufacturing assets and in
conjunction with its equipment leasing activities leased the assets to
a third party. Due to uncertainties as to their realizable value the
assets were written down to $61,910 during fiscal year 1994. The
Company terminated the lease due to the lessee's default, and in May
1995, sold the assets at auction for $72,710, resulting in a gain of
$10,800 during fiscal year 1995.
[HART\10K:123197.KSB]-8
F-9
<PAGE>
HART INDUSTRIES, INC.
Notes to Financial Statements
December 31, 1997
Note 6. Related Party and other Transactions
The Luke Family Trust (the "Luke Trust") owns 93% of NuVen. Fred G.
Luke, as Co-Trustee of the Luke Trust determines the voting of such
shares and, as a result, may be deemed to control the Luke Trust.
Effective January 1, 1994, the Company entered into an Advisory and
Management Agreement with NuVen for the engagement of NuVen to perform
professional and advisory services. Pursuant to such Agreement, the
Company agreed to pay NuVen $120,000 annually, payable monthly in
$10,000 increments in arrears, and granted NuVen an option to purchase
150,000 shares of the Company's common stock exercisable at a price of
$.20 per share. During fiscal year 1996, the Agreement was renewed
effective January 1, 1996 for up to $120,000 annually. Due to the
minimal services performed by NuVen, the Company received a credit of
$170,990 against amounts owed to NuVen and accordingly, the Company
recorded a net credit of $50,990 during fiscal 1996. Also, the Company
expensed $81,000 during fiscal 1997 and had $81,962 due to NuVen as of
December 31, 1997.
In January 1995, the Company entered into an Employee Agreement with
Mr. Luke, pursuant to which Mr. Luke is to hold the office of President
through December 1996. Pursuant to the Agreement the Company agreed to
pay Mr. Luke $54,000 per annum in cash or in the Company's common stock
payable monthly in arrears, and granted him an option to purchase
1,000,000 shares of the Company's common stock at an exercise price per
share of 110% of market value at date of grant. During fiscal year
1996, the Agreement was renewed effective January 1, 1997 for $54,000
annually. The Company expensed $54,000 during each fiscal year of 1997
and 1996, and owed $164,000 to Mr. Luke as of December 31, 1997.
Effective April 24, 1996, the Company entered into a consulting
agreement with Mr. Steven H. Dong, pursuant to which Mr. Dong is to
perform accounting services and to hold the office of Chief Financial
Officer through June 30, 1996. Pursuant to the agreement the Company
agreed to pay Mr. Dong $10,000 in cash or in the Company's common stock
and granted him an option to purchase 166,666 shares of the Company's
common stock at an exercise price of $.01 per share. Effective July 1,
1996, the Consulting Agreement was renewed for fiscal year 1997 for an
amount of $1,000 per month. No cash payments were made to Mr. Dong by
the Company during fiscal 1997 or 1996. The Company expensed $16,000
and $12,000 during fiscal 1997 and 1996, respectively, and had $28,000
due to Mr. Dong as of December 31, 1997. Effective June 30, 1997, Mr.
Dong resigned as Chief Financial Officer and has been retained as an
accounting consultant on a monthly basis.
[HART\10K:123197.KSB]-8
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 67
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 67
<CURRENT-LIABILITIES> 469,384
<BONDS> 0
0
0
<COMMON> 17,310
<OTHER-SE> (486,627)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 177,632
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (177,632)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (177,632)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
</TABLE>
