U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission File No. 002-97690-D
KARA INTERNATIONAL, INC.
------------------------
(Name of Small Business Issuer in its Charter)
NEVADA 87-0421191
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
9005 Cobble Canyon Lane
Sandy, Utah 84093
--------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 942-0555
467 North 970 East
Springville, Utah 84663
---------------------------------
(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act: None
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 Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if disclosure of delinquent files 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 Company'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: December 31, 1996 - 0
<PAGE>
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days.
January 31, 1997 - $309. There are approximately 309,487 shares of
common voting stock of the Company held by non-affiliates. The Company has
valued these shares on the basis of par value or $0.001 per share; there is
curently no market price for the Company's common stock.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
February 28, 1997
2,048,804*
* Does not include 750,000 shares authorized to be issued to
certain consultants and directors and executive officers of
the Company as outlined under the heading "Business
Development" of Item 1 of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained
in Item 13 of this report.
Transitional Small Business Issuer Format Yes X No
--- ---
<PAGE>
PART I
Item 1. Description of Business.
------------------------
Business Development.
- - ---------------------
Kara International, Inc. (the "Company") was organized under the
laws of the State of Nevada on April 22, 1985, under the name "R & D
Connections, Inc." The Company was formed for the purpose of engaging in the
business of investing in other enterprises and all other lawful businesses.
The Company's initial authorized capital consisted of 50,000,000 shares of one
mill ($0.001) par value common voting stock. A copy of the Company's initial
Articles of Incorporation is attached hereto and incorporated herein by
reference. See Item 13 of this Report.
The Company completed a public offering of 10,615 shares of its
common stock, which takes into consideration the reverse split of the
Company's common stock discussed below, pursuant to an S-18 Registration
Statement which was filed with the Securities and Exchange Commission in 1985.
The Company received gross proceeds of $265,360 and net proceeds of $197,109,
after deduction of legal and accounting fees, prospectus costs and other
expenses incidental to the public offering.
By this reference, the Company's Registration Statement on Form S-18
of the Securities and Exchange Commission and its Prospectus, are
incorporated herein. See Item 13 below.
On September 22, 1986, the Company acquired all of the outstanding
shares of Kara Incorporated, a Utah corporation ("Kara"), pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. As a result of
this transaction, Kara became a wholly owned subsidiary of the Company. A
Current Report on Form 8-K, dated September 22, 1986, covering this
acquisition was filed with the Securities and Exchange Commission and is
incorporated herein by this reference. See Item 13 of this Report.
On September 23, 1986, the Company changed its name to "Kara
International, Inc." A copy of the Articles of Amendment are attached hereto
and incorporated herein by this reference. See Item 13 of this Report.
The only business operations conducted by the Company from its
inception to the end of the period covered by this Report were those of Kara,
which was in the business of manufacturing and marketing candy. These
operations proved to be unsuccessful, and the Company ceased its business
operations during the last quarter of 1988. Other than maintaining its good
standing status in the State of Nevada, seeking prospective businesses or
assets to acquire, the Company has had no business operations since that time.
Pursuant to a resolution duly adopted by the shareholders of the
Company on January 4, 1995, the Company effected a reverse split of its
outstanding common voting stock on the basis of 250 for 1, while retaining the
authorized shares at 50,000,000 and the par value at one mill ($0.001) per
share. On June 15, 1995, the Company filed a Certificate of Amendment to the
Articles of Incorporation effecting the reverse split. All computations in
this Report take into account the 250 shares for one reverse split of the
Company's common stock. A copy of the Certificate of Amendment is attached
hereto and incorporated herein by this reference. See Item 13 of this Report.
Effective February 28, 1997, the Board of Directors of the Company
resolved to enter into a Consultant Compensation Agreement to compensate
certain consultants for non-capital raising services performed on behalf of
the Company through the issuance of 250,000 shares of the Company's common
stock and authorized the preparation and filing of an S-8 Registration
Statement covering the offer, sale and issuance of such securities.
Also, on February 28, 1997, the Board of Directors resolved to
issue 500,000 "unregsitered" and "restricted" shares of the Company's common
stock, 250,000 shares each to Messrs. David C. Merrell and Michael C. Brown,
its President and Secretary/Treasurer, respectively. See Items 10 and 11
hereof.
Business.
- - ---------
Other than the business operations formerly carried on by Kara and
seeking and investigating potential assets, properties or businesses to
acquire, the Company has had no business operations since its inception. To
the extent that the Company intends to continue to seek the acquisition of
assets, property or business that may benefit the Company and its
stockholders, the Company is essentially a "blank check" company. Because the
Company conducts no business and has no employees, management anticipates that
any such acquisition would require the Company to issue shares of its common
stock as the sole consideration for the acquisition. This may result in
substantial dilution of the shares of current stockholders. The Company's
Board of Directors shall make the final determination whether to complete any
such acquisition; the approval of stockholders will not be sought unless
required by applicable laws, rules and regulations, the Company's Articles of
Incorporation or Bylaws, or contract. Even if stockholder approval is sought,
David C. Merrell and Michael C. Brown beneficially own approximately 85% of
the outstanding shares of common stock of the Company (this excludes the
500,000 shares to be issued in the aggregate to these persons and is discussed
in Items 10 and 11 of this Report), and could approve any acquisition,
reorganization or merger they deemed acceptable. The Company makes no
assurance that any future enterprise will be profitable or successful.
The Company is not currently engaging in any substantive business
activity and has no plans to engage in any such activity in the foreseeable
future. In its present form, the Company may be deemed to be a vehicle to
acquire or merge with a business or company. The Company does not intend to
restrict its search to any particular business or industry, and the areas in
which it will seek out acquisitions, reorganizations or mergers may include,
but will not be limited to, the fields of high technology, manufacturing,
natural resources, service, research and development, communications,
transportation, insurance, brokerage, finance and all medically related
fields, among others. The Company recognizes that the number of suitable
potential business ventures that may be available to it may be extremely
limited, and may be restricted to entities who desire to avoid what these
entities may deem to be the adverse factors related to an initial public
offering ("IPO"). The most prevalent of these factors include substantial time
requirements, legal and accounting costs, the inability to obtain an
underwriter who is willing to publicly offer and sell shares, the lack of or
the inability to obtain the required financial statements for such an
undertaking, limitations on the amount of dilution to public investors in
comparison to the stockholders of any such entities, along with other
conditions or requirements imposed by various federal and state securities
laws, rules and regulations. Any of these types of entities, regardless of
their prospects, would require the Company to issue a substantial number of
shares of its common stock to complete any such acquisition, reorganization or
merger. For acquiring companies with little or no assets, this usually amounts
to between 80 and 95 percent of the outstanding shares of a company similar to
this Company following the completion of any such transaction; because this
Company currently has substantial assets, management expects that the amount
of common stock to be issued will more than likely be based upon the relative
assets of the Company and any prospective acquisition, reorganization or
merger candidate, but will still be enough to transfer control of the Company
to the former principals of the acquired entity. Accordingly, investments in
any such private entity, if available, may tend to be much more favorable than
any investment in the Company.
In the event that the Company engages in any transaction resulting in a
change of control of the Company and/or the acquisition of a business, the
Company will be required to file with the Securities and Exchange Commission a
Current Report on Form 8-K within 15 days of such transaction. A filing on
Form 8-K also requires the filing of audited financial statements of the
business acquired, as well as pro forma financial information consisting of a
pro forma condensed balance sheet, pro forma statements of income and
accompanying explanatory notes.
Management intends to consider a number of factors prior to making any
decision as to whether to participate in any specific business endeavor, none
of which may be determinative or provide any assurance of success. These may
include, but will not be limited to an analysis of the quality of the entity's
management personnel; the anticipated acceptability of any new products or
marketing concepts; the merit of technological changes; its present financial
condition, projected growth potential and available technical, financial and
managerial resources; its working capital, history of operations and future
prospects; the nature of its present and expected competition; the quality and
experience of its management services and the depth of its management; its
potential for further research, development or exploration; risk factors
specifically related to its business operations; its potential for growth,
expansion and profit; the perceived public recognition or acceptance of its
products, services, trademarks and name identification; and numerous other
factors which are difficult, if not impossible, to properly or accurately
analyze, let alone describe or identify, without referring to specific
objective criteria.
Regardless, the results of operations of any specific entity may not
necessarily be indicative of what may occur in the future, by reason of
changing market strategies, plant or product expansion, changes in product
emphasis, future management personnel and changes in innumerable other
factors. Further, in the case of a new business venture or one that is in a
research and development mode, the risks will be substantial, and there will
be no objective criteria to examine the effectiveness or the abilities of its
management or its business objectives. Also, a firm market for its products or
services may yet need to be established, and with no past track record, the
profitability of any such entity will be unproven and cannot be predicted with
any certainty.
Management will attempt to meet personally with management and key
personnel of the entity sponsoring any business opportunity afforded to the
Company, visit and inspect material facilities, obtain independent analysis or
verification of information provided and gathered, check references of
management and key personnel and conduct other reasonably prudent measures
calculated to ensure a reasonably thorough review of any particular business
opportunity; however, due to time constraints of management, these activities
may be limited.
The Company is unable to predict the time as to when and if it may
actually participate in any specific business endeavor. The Company
anticipates that proposed business ventures will be made available to it
through personal contacts of directors, executive officers and principal
stockholders, professional advisors, broker dealers in securities, venture
capital personnel, members of the financial community and others who may
present unsolicited proposals. In certain cases, the Company may agree to pay
a finder's fee or to otherwise compensate the persons who submit a potential
business endeavor in which the Company eventually participates. Such persons
may include the Company's directors, executive officers, beneficial owners or
their affiliates. In this event, such fees may become a factor in negotiations
regarding a potential acquisition and, accordingly, may present a conflict of
interest for such individuals.
Although the Company has not identified any potential acquisition target,
the possibility exists that the Company may acquire or merge with a business
or company in which the Company's executive officers, directors, beneficial
owners or their affiliates may have an ownership interest. Current Company
policy does not prohibit such transactions. Because no such transaction is
currently contemplated, it is impossible to estimate the potential pecuniary
benefits to these persons.
Further, substantial fees are often paid in connection with the
completion of these types of acquisitions, reorganizations or mergers, ranging
from a small amount to as much as $250,000. These fees are usually divided
among promoters or founders, after deduction of legal, accounting and other
related expenses, and it is not unusual for a portion of these fees to be paid
to members of management or to principal stockholders as consideration for
their agreement to retire a portion of the shares of common stock owned by
them. It is not expected that such fees will be paid to management of the
Company in connection with any such transaction. However, in the event that
such fees are paid, they may become a factor in negotiations regarding any
potential acquisition by the Company and, accordingly, may present a conflict
of interest for such individuals.
Principal Products and Services.
- - --------------------------------
The limited business operations of the Company, as now contemplated,
involve those of a "blank check" company. The only activities to be conducted
by the Company are to manage its current assets and to seek out and
investigate the acquisition of any viable business opportunity by purchase and
exchange for securities of the Company or pursuant to a reorganization or
merger through which securities of the Company will be issued or exchanged.
Distribution Methods of the Products or Services.
- - -------------------------------------------------
Management will seek out and investigate business opportunities through
every reasonably available fashion, including personal contacts,
professionals, securities broker dealers, venture capital personnel, members
of the financial community and others who may present unsolicited proposals;
the Company may also advertise its availability as a vehicle to bring a
company to the public market through a "reverse" reorganization or merger.
Status of any Publicly Announced New Product or Service.
- - --------------------------------------------------------
None; not applicable.
Competitive Business Conditions.
- - --------------------------------
Management believes that there are literally thousands of "blank check"
companies engaged in endeavors similar to those engaged in by the Company;
many of these companies have substantial current assets and cash reserves.
Competitors also include thousands of other publicly-held companies whose
business operations have proven unsuccessful, and whose only viable business
opportunity is that of providing a publicly-held vehicle through which a
private entity may have access to the public capital markets. There is no
reasonable way to predict the competitive position of the Company or any other
entity in the strata of these endeavors; however, the Company, having
virtually no operating history, will likely be at a competitive disadvantage
in competing with entities which have recently completed IPO's and have
operating histories when compared with the extremely limited operating history
of the Company.
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
- - -----------
None; not applicable.
Dependence on One or a Few Major Customers.
- - -------------------------------------------
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
- - ------------------------------
None; not applicable.
Need for any Governmental Approval of Principal Products or
Services.
- - ---------
None; not applicable.
Effect of Existing or Probable Governmental Regulations on
Business.
- - ---------
The integrated disclosure system for small business issuers adopted by
the Securities and Exchange Commission in Release No. 34-30968 and effective
as of August 13, 1992, substantially modified the information and financial
requirements of a "Small Business Issuer," defined to be an issuer that has
revenues of less than $25 million; is a U.S. or Canadian issuer; is not an
investment company; and if a majority-owned subsidiary, the parent is also a
small business issuer; provided, however, an entity is not a small business
issuer if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25 million or more.
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc. ("NASAA") have
expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets. The present laws, rules and regulations
designed to promote availability to the small business issuer of these capital
markets and similar laws, rules and regulations that may be adopted in the
future will substantially limit the demand for "blank check" companies like
the Company, and may make the use of these companies obsolete.
Research and Development.
- - -------------------------
None; not applicable.
Cost and Effects of Compliance with Environmental Laws.
- - -------------------------------------------------------
None; not applicable. However, environmental laws, rules and regulations
may have an adverse effect on any business venture viewed by the Company as an
attractive acquisition, reorganization or merger candidate, and these factors
may further limit the number of potential candidates available to the Company
for acquisition, reorganization or merger.
Number of Employees.
- - --------------------
None.
Item 2. Description of Property.
------------------------
The Company has virtually no assets, property or business; its principal
executive office address and telephone number are the business office address
and telephone number of its President, David C. Merrell, and are currently
provided at no cost. Because the Company has no business, its activities will
be limited to keeping itself in good standing in the State of Nevada and to
preparing and filing the appropriate reports with the Securities and Exchange
Commission. These activities have consumed an insubstantial amount of
management's time.
Item 3. Legal Proceedings.
------------------
The Company is not a party to any pending legal proceeding. To the
knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against the Company. No director,
executive officer or affiliate of the Company or owner of record or
beneficially of more than five percent of the Company's common stock is a
party adverse to the Company or has a material interest adverse to the Company
in any proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this Report; nor has
any meeting of the stockholders been held during the past three years.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
---------------------------------------------------------
Market Information
- - ------------------
The Company's common stock was only recently listed on the OTC Bulletin
Board of the NASD under the symbol "KARX" on December 2, 1996; and there was
no listing or any market whatsoever for the Company's securities for at least
the five previous fiscal years.
No assurance can be given that any "established public market" will
develop in the common stock of the Company, regardless of whether the Company
is successful in completing any acquisition, reorganization or merger deemed
by management to be beneficial for the Company, or if any such market does
develop, that it will continue or be sustained for any period of time. Sales
of securities by past members of management under Rule 144 could also have an
adverse effect on any market that does develop in the future; this is also the
case with respect to the 250,000 shares to be issued to certain consultants as
outlined under the heading "Business Development" of Item 1 hereof.
Holders
- - -------
The number of record holders of the Company's common stock as of the date
of this Report is approximately 387.
Dividends
- - ---------
The Company has not declared any cash dividends with respect to its
common stock and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and until the Company completes any acquisition, reorganization
or merger, as to which no assurance may be given, no such policy will be
formulated. There are no material restrictions limiting, or that are likely to
limit, the Company's ability to pay dividends on its common stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Plan of Operation.
- - ------------------
The Company has not engaged in any material operations since its
inception or during the calendar year ended December 31, 1996.
The Company's plan of operation for the next 12 months is to continue
to seek the acquisition of assets, properties or businesses that may benefit
the Company and its stockholders. Management anticipates that to achieve any
such acquisition, the Company will issue shares of its common stock as the
sole consideration for such acquisition.
During the next 12 months, the Company's only foreseeable cash
requirements will relate to maintaining the Company in good standing or the
payment of expenses associated with reviewing or investigating any potential
business venture, which the Company expects to pay from advances from
management.
Results of Operations.
- - ----------------------
The Company did not engage in any business activities during the
calendar year ended December 31, 1995, nor the year ended December 31, 1994.
General and administrative expenses for the period ended December 31, 1994,
were $1,080, compared with $287 for the period ended December 31, 1995.
Liquidity.
- - ----------
During the period ended December 31, 1995, 1,899,048 shares of the
Company's "unregistered" and "restricted" common stock was issued in
consideration of advances by shareholders in the amount of $1,899.
Item 7. Financial Statements.
---------------------
Financial Statements for the years ended
December 31, 1995 and 1994
Independent Auditors' Report
Balance Sheets - December 31, 1995 and 1994
Statements of Operations, for the years ended
December 31, 1995 and 1994, and for the
period from January 1, 1989 through December 31,
1995
Statement of Stockholders' Equity (Deficit)
from January 1, 1989 through December 31, 1995
Statements of Cash Flows for the years ended
December 31, 1995 and 1994, and for the
period from January 1, 1989 through December 31,
1995
Notes to the Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- - ---------------------
There has been no change in the principal accountants of the Company
during the past three years.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
- - --------------------------------------------------
Identification of Directors and Executive Officers
- - --------------------------------------------------
The following table sets forth the names of all current directors and
executive officers of the Company. These persons will serve until the next
annual meeting of the stockholders (to be held within 180 days after the end
of each fiscal year) or until their successors are elected or appointed and
qualified, or their prior resignation or termination.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- - ---- ---- ----------- --------------
<S> <C> <C> <C>
Dale Black President 9/22/86 5/4/94
Keith Cavanaugh Sec'y/Treasurer 9/22/86 5/4/94
David C. Merrell Director and 5/4/94 *
President
Michael C. Brown Director and 5/4/94 *
Sec'y/Treasurer
</TABLE>
* These persons presently serve in the capacities indicated.
Business Experience.
- - --------------------
David C. Merrell. Since 1989, he has been the owner of DCM
Finance, a Salt Lake City based finance company that makes and brokers real
estate loans. Mr. Merrell received his Bachelor of Science degree in
Economics from the University of Utah in 1981.
Mike Brown. Mr. Brown is currently employed by Albertson's in
Salt Lake City, Utah, as a journeyman grocer, and has held this position for
the past three years. He also was employed at New Frontiers Market from July,
1993 to August, 1996. Previously, he was self employed for one year as a
wholesaler of used clothing; and he was an auditor for the Jewel Osco Division
of American Stores for the previous two years; and studied for one year for
the Certified Public Accountant's exam, which he has passed, although he has
not undertaken the required years of practice to become a CPA. Mr. Brown
received a Bachelor of Science Degree in Accounting in 1983 from the
University of Utah.
Significant Employees.
- - ----------------------
The Company has no employees who are not executive officers, but who are
expected to make a significant contribution to the Company's business.
Family Relationships.
- - ---------------------
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
Involvement in Certain Legal Proceedings.
- - -----------------------------------------
Except as stated below, during the past five years, no director, person
nominated to become a director, executive officer, promoter or control person
of the Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy
or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was 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 a federal or state securities or commodities law,
and the judgment has not been reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
- - -------------------------------------------------
The Company is not subject to Section 16(a) of the Securities Exchange
Act of 1934, as amended, as the Company files its Reports pursuant to Section
15(d) thereof.
Item 10. Executive Compensation.
-----------------------
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Optionsouts ensat'n*
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David C.
Merrell, 12/31/94 0 0 0 0 0 0 0
President, 12/31/95 0 0 0 0 0 0 0
Director 12/31/96* 0 0 0 0 0 0 0
Michael C.
Brown, 12/31/94 0 0 0 0 0 0 0
Secretary/ 12/31/95 0 0 0 0 0 0 0
Treasurer, 12/31/96* 0 0 0 0 0 0 0
Director
Keith 12/31/94 0 0 0 0 0 0 0
Cavanaugh, 12/31/95 0 0 0 0 0 0 0
Former 12/31/96* 0 0 0 0 0 0 0
Sec'y/Treas
Dale
Black, 12/31/94 0 0 0 0 0 0 0
Former 12/31/95 0 0 0 0 0 0 0
President 12/31/96* 0 0 0 0 0 0 0
</TABLE>
* For information regarding compensation to be paid to Messrs.
Merrell and Brown by the issuance of "unregistered" and
"restricted" securities of the Company, see the heading "Business
Development" of Item 1 of this Report.
** See the 10-KSB Annual Report for the year ended December 31,
1996, which has been filed with the Securities and Exchange
Commission simultaneous with the filing of this Report.
No other cash compensation, deferred compensation or long-term incentive
plan awards were issued or granted to the Company's management during the
calendar years ending December 31, 1996, 1995 or 1994, or the period ending on
the date of this Report.
Compensation of Directors.
- - --------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.
There are no arrangements pursuant to which any of the Company's
directors was compensated during the Company's last completed fiscal year for
any service provided as director.
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements.
- - -------------------------------
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from the Company, with respect to any
director or executive officer of the Company which would in any way result in
payments to any such person because of his or her resignation, retirement or
other termination of employment with the Company or any subsidiary, any change
in control of the Company, or a change in the person's responsibilities
following a change in control of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- - ------------------------------------------------
The following table sets forth the shareholdings of those persons who own
more than five percent of the Company's common stock as of the date of this
Report, with the computations being based upon 2,048,804 shares of common
stock being outstanding:
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class
- - ---------------- ------------------ --------
<S> <C> <C>
David C. Merrell 1,719,321* 83.9%
9005 Cobble Canyon Ln.
Sandy, Utah 84093
</TABLE>
* Of this amount, 1,639,041 shares are held in the name of
Chiricahua Company, a sole proprietorship owned by David C.
Merrell, and 80,280 shares are held in the name of Corie
Merrell, who is the wife of David C. Merrell. Does not
include 250,000 "unregistered" and "restricted" shares of
the Company resolved to be issued to Mr. Merrell for
compensation on February 28, 1997. See the heading
"Business Development" of Item 1 of this Report.
Security Ownership of Management.
- - ---------------------------------
The following table sets forth the shareholdings of the Company's
directors and executive officers as of December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned Percentage of
Name and Address as of 12/31/94 of Class
- - ---------------- ------------------ -------------
<S> <C> <C>
David C. Merrell 280* .002%
9005 Cobble Canyon Ln.
Sandy, Utah 84093
Dale Black 14,477 9.6%
467 North 970 East
Springville, Utah 84663
Keith Cavanaugh 7,967 5.3%
9929 South Albury Rd.
Sandy, Utah 84092
* These shares are held in the name of Corie Merrell, who is
the wife of David C. Merrell.
Number of Shares
Beneficially Owned Percentage of
Name and Address as of 12/31/95 of Class
- - ---------------- ------------------ -------------
<S> <C> <C>
David C. Merrell 1,719,321* 83.9%
9005 Cobble Canyon Ln.
Sandy, Utah 84093
Michael C. Brown 20,000 1%
2159 Alta Cove Cr.
Sandy, Utah 84093
Dale Black 14,477 9.6%
467 North 970 East
Springville, Utah 84663
Keith Cavanaugh 800 .0003%
9929 South Albury Rd.
Sandy, Utah 84092
* Of this amount, 1,639,041 shares are held in the name of
Chiricahua Company, a sole proprietorship owned by David C.
Merrell, and 80,280 shares are held in the name of Corie
Merrell, who is the wife of David C. Merrell.
Number of Shares
Beneficially Owned Percentage of
Name and Address as of 12/31/96 of Class
- - ---------------- ------------------ -------------
<S> <C> <C>
David C. Merrell 1,719,321* 83.9%
9005 Cobble Canyon Ln.
Sandy, Utah 84093
Michael C. Brown 20,000** 1%
2159 Alta Cove Cr.
Sandy, Utah 84093
Dale Black 14,477 .007%
467 North 970 East
Springville, Utah 84663
Keith Cavanaugh 800 .0003%
9929 South Albury Rd.
Sandy, Utah 84092
* Of this amount, 1,639,041 shares are held in the name of
Chiricahua Company, a sole proprietorship owned by David C.
Merrell, and 80,280 shares are held in the name of Corie
Merrell who is the wife of David C. Merrell. Does not
include 250,000 "unregistered" and "restricted" shares of
the Company resolved to be issued to Mr. Merrell for
compensation on February 28, 1997. See the heading
"Business Development" of Item 1 of this Report.
** Does not include 250,000 "unregistered" and "restricted" shares of
the Company resolved to be issued to Mr. Brown for compensation on
February 28, 1997. See the heading "Business Development" of Item
1 of this Report.
Currently, all directors 1,739,321 84.9%
and executive officers
as a group (2 persons)
</TABLE>
See Item 9 of this Report for information concerning the offices or other
capacities in which the foregoing persons serve with the Company.
Changes in Control.
- - -------------------
There are no present arrangements or pledges of the Company's securities
which may result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
Transactions with Management and Others.
- - ----------------------------------------
Except as indicated under Item 1 of this Report, there have been no
material transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, to which the Company or any
of its subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
Certain Business Relationships.
- - -------------------------------
Except as indicated under Item 1 of this Report, there have been no
material transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, to which the Company or any
of its subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
Indebtedness of Management.
- - ---------------------------
Except as indicated under Item 1 of this Report, there have been no
material transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, to which the Company or any
of its subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
Parents of the Issuer.
- - ----------------------
The Company has no parents.
Transactions with Promoters.
- - ----------------------------
Except as indicated under Item 1 of this Report, there have been no
material transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, to which the Company or any
of its subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any promoter or founder, or any member of the
immediate family of any of the foregoing persons, had a material interest.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
Reports on Form 8-K
None.
Exhibits*
(i)
Where Incorporated
in this Report
--------------
S-18 Registration Statement filed with the Part I**
Securities and Exchange Commission
Form 8-K Current Report dated 9/22/86 Part I**
(ii)
Exhibit
Number Description
- - ------ -----------
3.1 Initial Articles of Incorporation of
R & D Connections, Inc.
3.2 Articles of Amendment regarding name change
to "Kara Internatonal, Inc."
3.3 Certificate of Amendment regarding reverse split
27 Financial Data Schedule
* Summaries of all exhibits contained within this
Report are modified in their entirety by reference
to these Exhibits.
** These documents and related exhibits have been
previously filed with the Securities and Exchange
Commission and are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
KARA INTERNATIONAL, INC.
Date: By /s/ David C. Merrell
---------- --------------------------------------
David C. Merrell
Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
KARA INTERNATIONAL, INC.
Date: By /s/ David C. Merrell
---------- ------------------------------------
David C. Merrell
Director and President
Date: By /s/ Michael C. Brown
---------- ------------------------------------
Michael C. Brown
Director and Secretary/Treasurer
KARA INTERNATIONAL, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
PRITCHETT, SILER & HARDY, P.C.
(Letterhead)
INDEPENDENT AUDITORS' REPORT
Board of Directors
KARA INTERNATIONAL, INC.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Kara International, Inc. [a
development stage company] at December 31, 1995 and 1994, and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the years ended December 31, 1995 and 1994 and for the period from January 1,
1989 through December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Kara International, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years ended December 31, 1995 and 1994 and for the period from
January 1, 1989 through December 31, 1995, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 6 to the financial
statements, the Company has suffered losses since inception, has expended most
of its working capital and has not yet been successful in establishing
profitable operations raising substantial doubt about its ability to continue
as a going concern. Management's plans in regards to these matters are also
described in Note 6. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
/s/Prichett, Siler & Hardy
March 21, 1996
<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
BALANCE SHEETS
<CAPTION>
ASSETS
December 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash in bank $ 613 $ -
Total Current Assets $ 613 $ -
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Advance from shareholder 81 1,080
Total Current Liabilities 81 1,080
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value,
50,000,000 shares authorized,
2,048,810 and 149,762
shares issued and outstanding at
December 31, 1995 and 1994 2,049 150
Capital in excess of par value 1,120,128 1,120,128
Deficit accumulated during the
development stage (1,121,645) (1,121,358)
Total Stockholders' Equity (Deficit) 532 (1,080)
Total Liabilities and Stockholders
Equity $ 613 $ -
</TABLE>
<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
<CAPTION>
Cumulative from
For the Years Ended January 1,1989
December 31, Through
December 31,
1995 1994 1995
<S> <C> <C> <C>
REVENUE:
Interest income $ - $ - $ -
EXPENSES:
General and administrative 287 1,080 1,367
Professional fees - - -
Interest Expense - 20,815 161,459
Total Expenses 287 21,895 162,826
(LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND DISCONTINUED
OPERATIONS (287) (21,895) (162,826)
CURRENT INCOME TAX EXPENSE - - -
DEFERRED INCOME TAX EXPENSE - - -
(LOSS) BEFORE DISCONTINUED
OPERATIONS (287) (21,895) (162,826)
(LOSS) FROM OPERATIONS OF
DISCONTINUED SUBSIDIARY NET
OF NO TAX EFFECT - - (27,426)
GAIN ON DISPOSAL OF DISCONTINUED
SUBSIDIARY - - 203,390
NET INCOME (LOSS) $ (287) $ (21,895) $ 13,138
INCOME (LOSS) PER COMMON SHARE:
(Loss) from continuing
operations $ (.00) $ (.27) $ (.46)
(Loss) from discontinued
operations .00 .00 (.08)
Gain on disposal of discontinued
operations .00 .00 .58
INCOME (LOSS) PER COMMON SHARE: $ (.00) $ (.27) $ .04
</TABLE>
<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
Earnings
Accumulated
Common Stock Capital in During the
Excess of Development
Shares Amount Par Value Stage
<S> <C> <C> <C> <C>
BALANCE,
January 1, 1989 69,762 $ 70 $688,749 $(1,134,783)
Net income for the
period ended December 31,
1989 - - - 160,520
BALANCE,
December 31, 1989 69,762 70 688,749 (974,263)
Net loss for the year
ended December 31, 1990 (31,300)
BALANCE,
December 31, 1990 69,762 70 688,749 (1,005,563)
Net loss for the year
ended December 31, 1991 (31,300)
BALANCE,
December 31,1991 69,762 70 688,749 (1,036,863)
Net loss for the year
ended December 31, 1992 (31,300)
BALANCE,
December 31, 1992 69,762 70 688,749 (1,068,163)
Net loss for the year
ended December 31, 1993 (31,300)
BALANCE,
December 31, 1993 69,762 70 688,749 (1,099,463)
Issuance of 80,000
shares to a related
party as payment for a
judgment related
to a note payable and
related interest,
November, 1994 80,000 80 431,379 -
Net loss for the year
ended December 31, 1994 (21,895)
BALANCE,
December 31,1994 149,762 150 1,120,128 (1,121,358)
Issuance of 1,899,048
shares to officers &
shareholders to repay
amounts previously
advanced for investments,
January, 1995, at $.001
per share 1,899,048 1,899 - -
Net loss for the year
ended December 31, 1995 - - - (287)
BALANCE,
December 31,1995 2,048,810 2,049 1,120,128 (1,121,645)
</TABLE>
<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
<CAPTION>
Cumulative from
For the Years Ended on January 1,
December 31, 1989 Through
December 31,
1995 1994 1995
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income (loss) $ (287) $ (21,895) $ 13,138
Adjustments to reconcile
net loss to net cash used
by operating activities:
Non-cash expenses
(income) - 20,815 (14,505)
Changes in assets and
liabilities:
Increase (decrease)
accounts payable - - -
Net Cash Flows Used by
Operating Activities (287) (1,080) (1,367)
Cash Flows from Investing
Activities - - -
Net Cash Used by Investing
Activities - - -
Cash Flows from Financing
Activities:
Proceeds from common stock
issuance - - -
Advances by shareholders 900 1,080 1,980
Net Cash Provided by Financing
Activities 900 1,080 1,980
Net Increase in Cash 613 - 613
Cash at Beginning of Period - - -
Cash at End of Period $ 613 $ - $ 613
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities:
For the year ended December 31, 1995:
The Company issued 1,899,048 shares of common stock in re-payment of
advances made by shareholders in the amount of $1,899.
For the year ended December 31, 1994
The Company issued 80,000 shares of common stock as payment in full for
a note payable and its related accrued interest in the amount of
$431,459.
KARA INTERNATIONAL, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was incorporated in the State of Nevada under the
name of R & D Connections on April 22, 1985. The Company completed a public
offering of common stock during 1986 [See Note 5]. On September 22, 1986, the
Company acquired all of the outstanding shares of Kara, Incorporated, a Utah
corporation, that manufactured and marketed candy, and changed its name to
Kara International, Inc. [the Company]. From September 1986, the Company
commenced operating the business of marketing and developing confectionery
products. The Company abandoned its subsidiary operation during the last
quarter of 1988 [See Note 3]. The Company is not currently engaged in any
business activity, but is seeking potential investments or business
acquisitions and consequently is considered a development stage company as
defined in SFAS No. 7. The Company has, at the present time, not paid any
dividends and any dividends that may be paid in the future will depend upon
the financial requirements of the Company and other relevant factors.
Income (Loss) Per Share - The computation of income (loss) per share is based
on the weighted average number of shares outstanding during the period
presented.
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those estimated.
Reclassification - The financial statements for periods prior to 1995 have
been reclassified to conform to the titles and headings used in the 1995
financial statements.
Stock Split - During January 1995, the Board of Directors authorized a 1 for
250 stock reverse of the issued and outstanding common shares of the Company.
The Company retained the authorized shares at 50,000,000 shares with the par
value at $.001 per share. The financial statements for all periods presented
have been restated to reflect the effect of the common stock split.
NOTE 2 - INCOME TAXES
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" which requires the
liability approach for the effect of income taxes. The financial statements
for prior years have not been restated and the cumulative effect of the change
in accounting principle is included in determining net income for 1994. Such
effect was not material in 1994 or for prior years.
The Company has available at December 31, 1995, unused operating loss
carryforwards of approximately $1,000,000, which may be applied against future
taxable income and which expire in various years beginning in 1999 through
2010. However, due to substantial changes in the Company's ownership, there
will be annual limitations on the amounts of net operating loss carryforwards
which can be utilized by the Company.
The amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the loss carryforwards the Company has established a
valuation allowance equal to the amount of the loss carryforwards and,
therefore, no deferred tax asset has been recognized for the loss
carryforwards. The change in the valuation allowance is equal to the current
period's net loss.
NOTE 3 - DISCONTINUED OPERATIONS
On September 22, 1986, the Company acquired all of the outstanding shares of
Kara, Incorporated, a Utah corporation, by the issuance of 35,967 (restated)
shares of the Company stock to the shareholders of Kara, Incorporated in a tax
free reorganization wherein Kara Incorporated became a wholly-owned subsidiary
of the Company. The business combination was accounted for using the purchase
method of accounting. The investment in the subsidiary was recorded in the
financial statements based on the net asset value of the subsidiary at June
30, 1986, which was $ 146,992. Kara Incorporated manufactured and marketed
candy. The Company operated its subsidiary candy company through 1988. During
the last quarter of 1988, the Company abandoned and discontinued all of its
candy manufacturing and marketing operations. All of the assets of the company
were foreclosed and used to satisfy liabilities. At the point in time when the
company discontinued its operations, there were 69,762 shares of common stock
issued and outstanding. The Company also had certain notes payable that were
not satisfied from the discontinued operation. During 1994, in settlement of a
judgment from the court, the Company issued 80,000 shares of common stock to
satisfy the notes payable including principal of $270,000 and accrued interest
of $161,459. The discontinued operations have been segregated on the
Statements of Operations. There was a $203,390 gain recorded during 1989 for
the disposal of the discontinued operations.
NOTE 4 - RELATED PARTY TRANSACTIONS
Rent - The Company has not had a need to rent office space. An officer of the
Company is allowing the Company to use his address, as needed, at no expense
to the Company.
Management Compensation - During the periods presented the Company did not pay
any compensation to its officers and directors.
Advance from Shareholder - During 1994, a shareholder/officer advanced $1,080
to the Company. An additional advance of $900 was made during 1995. At
December 31, 1995 and 1994 the unpaid balance owing the shareholder/officer
was $81 and $1,080, respectively.
Stock Issued - In January, 1995, the Company issued 1,899,048 shares to
shareholders and officers to reduce shareholder advances.
NOTE 5 - COMMON STOCK
Public Stock Offering - The Company completed a public offering of 10,615
shares of its authorized but unissued common stock. The offering was
registered on Form S-18 in accordance with the Securities Act of 1933. Total
proceeds of the offering amounted to $265,360 and stock offering costs of
$68,251 were offset against capital in excess of par value.
Debt Cancellation - During November, 1994, the Company issued 80,000 shares of
common stock as payment in full for a judgment related to a note payable of
$270,000 and related accrued interest of $161,459.
Officer/Shareholder - In January, 1995, the Company issued 1,899,048 shares of
common stock to shareholders and officers to repay previous advances made by
the shareholders.
Stock Split - During January 1995, the Board of Directors authorized a 1 for
250 reverse stock split of all the issued and outstanding common shares of the
Company. The Company retained the authorized shares at 50,000,000 shares with
the par value at $.001 per share. The financial statements for all periods
presented have been restated to reflect the reverse split.
NOTE 6 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has incurred losses since
inception, has expended most of its working capital and has not yet been
successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management is proposing to raise additional funds
through loans and/or through additional sales of its common stock or through
the proposed acquisition of another company by issuing common stock. There is
no assurance that the Company will be successful in raising this additional
capital.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the company be
unable to obtain additional financing or establish profitable operations.
NOTE 7 - CONTINGENCIES
During 1989, the Company discontinued the candy manufacturing and marketing
operations of its subsidiary. Management believes that the Company is not
liable for any existing liabilities related to its former operations and
subsidiary but the possibility exists that creditors and others seeking relief
from the subsidiary may also include the Company in claims and suits pursuant
to the parent subsidiary relationship which existed between the Company and
its subsidiary. The Company is not currently named in any such suits nor is it
aware of any such suits against is former subsidiary. It is the belief of
Management and their Counsel that the Company would be successful in defending
against any such claims and that no material negative impact on the financial
position of the Company would occur. Management and counsel further believe
that with the passage of time the likelihood of any such claims being raised
is becoming more remote and that various Statutes of Limitations should
provide adequate defenses for the Company. Consequently, the financial
statements do not reflect any accruals or allowances for any such claims.
The Company has approximately 340 shares of common stock outstanding for which
it is unable to identify a shareholder. The Company is contingently liable
should the unidentified shares someday be traded to a third party. The shares
are not included in the outstanding stock of the Company.
NOTE 8 - SUBSEQUENT EVENTS
Proposed Quasi Reorganization - The Company is proposing to perform a quasi
reorganization which would result in a restatement of its accumulated deficit
as though the Company were just commencing operations. The Company would also
change its name and may restructure its capital structure. Management believes
the reorganization would assist the Company in its efforts to attract new
investors and to develop new business operations. The proposed reorganization
requires the approval of the shareholders of the Company.
ARTICLES OF INCORPORATION
OF
R & D CONNECTIONS, INC,
WE, THE UNDERSIGNED natural persons of the age of twenty-one (21) years
or more, acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
The name of the Corporation is R & D Connections, Inc.
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE III - PURPOSES
The purpose or purposes for which this corporation is engage; are:
(a) To engage in the specific business of making investments, including
investment in, purchase and ownership of any and all kinds of property, assets
or business, whether alone or in conjunction with others. Also, to acquire,
develop, explore and otherwise deal in and with all kinds of real and personal
property and all related activities, and for any and all other lawful
purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise' and to hold, own, mortgage, pledge, hypothecate, sell, assign,
transfer, exchange, or otherwise dispose of or deal in or with its own
corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds, debentures, notes, mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein on any property or assets created or
issued by any person, firm, associate, or corporation, or instrumentalities
thereof t to make payment therefor in any lawful manner or to issue in
exchange therefor its unreserved earned surplus for the purchase of its own
shares, and to exercise as owner or holder of any securities, any and all
rights, powers, and privileges in respect thereof.
(c) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one or more of
the subjects herein enumerated, or which may, at any time, appear conducive to
or expedient for the protection or benefit of this corporation, and to do said
acts as fully and to the same extent aa natural persons might, or could do in
any part of the world as principals, agents, partners, trustees, or otherwise,
either alone or in conjunction with any other person, association, or
corporation.
(d) The foregoing clauses shall be construed both as purposes and powers and
shall not be held to limit or restrict in any manner the general powers of the
corporation, and the enjoyment and exercise thereof, as conferred by the laws
of the State of Nevada and it is the intention that the purposes and powers
specified in each of the paragraph 7 of the Article III shall be regarded as
independent purposes and powers.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have authority to
issue is 50,000,000 shares of Common Stock having a par value of $.001 per
share. All stock of the corporation shall be of-the same class, common, and
shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment.
ARTICLE V - AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote of "a
majority" of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDERS RIGHTS
The authorized and treasury stock of this corporation may be issued at such
time, upon such terms and conditions and for such consideration as the Board
of Directors shall determine. Shareholders shall not have pre-emptive rights
to acquire unissued shares of the stock of this corporation.
ARTICLE VII - CAPITALIZATION
This corporation will not commence business until consideration of a value of
at least $1,000 has been received for the issuance of said shares.
ARTICLE VIII - INITIAL OFFICE AND AGENT
The Corporate Trust Company of Nevada
One East First Street Reno, NV 89501
ARTICLE IX - DIRECTORS
The directors are hereby given the authority to do an, act on behalf of the
corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorize such Action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or pledge any
or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of this
corporation is three. The names and addresses of persons who are to serve as
Directors until the first annual meeting of stockholders or until their
successors are elected and qualify, are:
NAME ADDRESS
Mark T. Anderson 4101 North Timpview Dr.
Provo, Utah 84604
Gilbert D. Freewald 11089 Susan Drive
Sandy, Utah 84070
Sharon Goodwill 4156 South 590 East
Murray, Utah 84107
ARTICLE X - INCORPORATORS
The name and address of each incorporator is:
NAME ADDRESS
Thomas G. Kimble 311 South State, #440
Salt Lake City, UT 84111
Leon W. Crockett 311 South State, #440
Salt Lake City, UT 84111
Van L. Butler 311 South State, #440
Salt Lake City, UT 84111
ARTICLE XI
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATIONS
No contract or other transaction between this corporation and any one or more
of its directors or any other corporation, firm, association, or entity in
which one or more of its directors or officers are financially interested,
shall be either void or voidable because of such relationship or interest, or
because such director or directors are present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves, or ratifies
such contract or transaction, or because his or their votes are counted for
such purpose if: (a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by vote or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent, or c) the contract or
transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves, or ratifies such contract or transaction.
Under penalties of perjury, we declare that these Articles of Incorporation
have been examined by us and are, to the best of our knowledge and belief,
true, correct and complete.
DATED this 17th day of April, 1985.
/s/Thomas G. Kimble
/s/Leon W. Crockett
/s/Van L. Butler
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 17th day of April, 1985, personally appeared before me, Thomas G.
Kimble, Leon W. Crockett and Van L. Butler who duly acknowledged to me that
they signed the foregoing Articles of Incorporation.
My Commission Expires: /s/Jody York
10/28/88 --------------------------
Notary Public
Residing at Sandy, Utah
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
R & D CONNECTIONS, INC.
Pursuant to the applicable provisions of the Nevada Business Corporation
Act, the undersigned Corporation adopts the following Articles of Amendment to
its Articles of Incorporation by stating the following:
FIRST: The present name of the corporation is R & D Connections, Inc.
SECOND: The following amendments to its Articles of Incorporation were
adopted by the shareholders of the corporation on September 22, 1986 in the
manner prescribed by Nevada law.
1. Article I is amended as follows:
ARTICLE I - CORPORATE NAME
The name of the corporation (hereinafter called the Corporation) is Kara
International, Inc.
THIRD: The number of shares of the Corporation outstanding and entitled
to vote at the time of the adoption of said amendment was 3, 853,600 shares.
FOURTH: The number shares voted for such amendment was 2,018,000 and
the number voted against such amendments was -0-.
DATED this 22nd day of September, 1986.
Attest: R & D CONNECTIONS, INC.
/s/Gilbert D. Freewald, Secretary by:/s/Mark Anderson, President
VERIFICATION
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states, that the
undersigned is the Secretary of R & D Connections, Inc. that the undersigned
has read the Articles of Amendment and knows the contents thereof and that the
same contains a truthful statement of the amendment duly adopted by the
stockholders of the Corporation.
/s/Gilbert D. Freewald, Secretary
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of R & D Connections,
Inc., a Nevada corporation, and signed the foregoing Articles of Amendment as
their own free and voluntary act and deed pursuant to a corporate resolution
for the uses and purposes set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day
of September, 1986.
My Commission Expires: /s/Thomas G. Kimble
1989 --------------------------
Notary Public, residing at
Salt Lake City, Utah
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF KARA INTERNATIONAL, INC.
We, the undersigned, David C. Merrell, President, and Michael C. Brown,
Secretary, of KARA INTERNATIONAL, INC., a Nevada corporation (the
"corporation"), do hereby certify:
I
The Articles of Incorporation of the corporation shall be amended as
follows:
The foregoing amendment was adopted by the shareholders of the
corporation at a meeting held January 4th, 1995.
II
Pursuant to a resolution duly adopted by the shareholders of the
corporation on January 4th, 1995 the 37,440,400 outstanding shares of the
corporation were reversed split on a basis of 250 for 1, retaining the
authorized shares at 50,000,000 and the par value at one mill ($.001) per
share, with the appropriate adjustments being made in the additional paid in
capital and stated capital accounts of the corporation.
III
The number of shares entitled to vote on the amendment was 37,440,400.
IV
The number of shares voted in favor of the amendment was 20,070,000 with
none opposing and none abstaining.
/s/David C. Merrell, President
/s/Michael C. Brown, Secretary
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE)
On the 1st day of June, 1995, personally appeared before me, a Notary
Public, David C. Merrell, who acknowledged that he is the President of Kara
International, Inc. and that he is authorized to and did execute the above
instrument.
/s/Silvia G.
-----------------------------
Notary Public
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE)
On the 30th day of May, 1995, personally appeared before me, a Notary
Public, Michael C. Brown, who acknowledged that he is the Secretary of Kara
International, Inc. and that he is authorized to and did execute the above
instrument.
/s/David L. Green
-----------------------------
Notary Public
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