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SCHEDULE 14C INFORMATION STATEMENT
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/x/ Definitive Information Statement
GOLD SECURITIES CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g)
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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GOLD SECURITIES CORPORATION
65 Railroad Avenue
Ridgefield, New Jersey 07657
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
A Special Meeting of Stockholders of Gold Securities Corporation will be
held at the offices of the Company on February 2, 1996, at 10:00 a.m. for the
following purposes:
1. To authorize and approve amendments to the Company's Articles of
Incorporation to effect a .033 (thirty three one hundredths) for one reverse
stock split of the Company's Common Stock and to authorize the issuance of
Preferred Stock;
2. To approve the adoption of an Agreement of Merger whereby the Company
will change its state of incorporation from Idaho to Delaware pursuant to a
"migratory merger" that will merge the Company into Evolutions, Inc., a Delaware
corporation.
3. To approve the adoption of the Company's 1996 Stock Option Plan.
4. To ratify the appointment of Holtz Rubenstein & Co., LLP, as the
Company's independent auditors for the fiscal year ending December 31, 1995.
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The meeting may be recessed from time to time, and at any reconvened
meeting action with respect to the matters specified in this notice may be taken
without further notice to stockholders unless required by the By-laws of the
Company.
Stockholders of record at the close of business on January 5, 1996 are
entitled to notice of, and to vote on all matters at the meeting and any
adjournments thereof. A list of all stockholders will be available at the
Meeting and, during the 10 days prior to the Meeting, at the offices of the
Company, 65 Railroad Avenue, Ridgefield, New Jersey 07657.
By Order of the Board of Directors,
Paul Litwinczuk
Corporate Secretary
January 8, 1995
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GOLD SECURITIES CORPORATION
65 Railroad Avenue
Ridgefield, New Jersey 07657
INFORMATION STATEMENT
This Information Statement is furnished by the Board of Directors of Gold
Securities Corporation, an Idaho corporation (the "Company"), in connection with
a Special Meeting of Stockholders (the "Meeting") to be held at the offices of
the Company, on February 2, 1996, at 10:00 a.m., and at any adjournment thereof.
This Information Statement and the accompanying materials will be mailed on or
about January 9, 1996 to holders of record of common stock, no par value
("Common Stock"), of the Company as of the record date.
The record date for determining stockholders entitled to notice of, and to
vote at, the Meeting has been established as the close of business on January 5,
1996. On that date, the Company had outstanding and entitled to vote 18,726,189
shares of Common Stock. Holders of record of Common Stock on the record date
will be entitled to one vote for each share held on all matters properly brought
before the Meeting.
A majority of all shares represented in person or by proxy at the Meeting
constitutes a quorum. Abstentions are considered as shares present and entitled
to vote and therefore will have the same effect as a vote against a matter at
the Meeting. Shares held of record by a broker or its nominee are included in
determining the number of votes present.
The proposals to be submitted to stockholders for their approval requires
the affirmative vote of a majority of the votes cast at the Meeting.
Shareholders who do not vote in favor of the Merger described under "Merger
into Delaware Company", have the right to obtain payment in cash of the fair
value of their shares. Upon approval of the Merger, the Company will give to
each shareholder who did not vote in favor of the Merger written notice
containing instructions with respect to a demand for payment. Shareholders who
vote in favor of the Merger lose the right to obtain payment for their shares.
See "Merger into Delaware Company--Right to Dissent and Appraisal Rights of
Shareholders Objecting to the Proposed Merger."
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
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INTRODUCTION
General
The Company was incorporated in 1922 under the laws of the State of Idaho
under the name of Kaniksu Mining Company. In 1981, the Company merged with Gold
Securities Inc., a Washington corporation, and changed its name to Gold
Securities Corporation. The Company's current address is 65 Railroad Avenue,
Ridgefield, New Jersey 07657. Its telephone number at that address is (201)
941-6550.
Merger with Evolutions, Inc.
On July 21, 1995, the Company entered into an Agreement and Plan of Merger
(the "Agreement"), pursuant to which on July 24, 1995, the Company acquired
Evolutions, Inc., a New Jersey corporation ("EVI"), a majority owned subsidiary
of Pure Tech International, Inc., a Delaware corporation ("Pure Tech"). The
transaction was consummated by merging a wholly owned subsidiary of the Company
into EVI.
Under the Agreement, in exchange for the merger, the Company issued an
aggregate of 10,000,000 shares of the Company's Common Stock to the holders of
EVI Common Stock, consisting of 8,800,000 shares to Pure Tech and 1,200,000
shares to the other shareholders of EVI. An additional 88,851,174 shares of
Common Stock will be issued to these persons and certain other persons upon
shareholders' approval of amendments to the Company's Articles of Incorporation
to allow for such additional issuance. See "Amendments to Articles of
Incorporation--The Amendments--Reverse Stock Split." In conjunction with the
Agreement, options to purchase an aggregate of 12,000,000 shares of EVI Common
Stock previously granted to individuals affiliated with EVI were converted into
options to purchase the same number of shares of Common Stock of the Company.
As a result of this transaction, Pure Tech currently holds approximately 47% of
the Company's Common Stock. Upon the issuance of the additional Common Stock
contemplated under the Agreement, Pure Tech will hold approximately 75% of the
Company's outstanding Common Stock. See "Principal Shareholders."
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Under the terms of the Agreement, Robert O'Brien
resigned as the Company's President but will remain on the Company's Board. The
parties agreed that upon meeting the shareholder information requirements of
Rule 14(f) under the Securities Exchange Act of 1934, David C. Katz, President
and a director of Pure Tech, and Paul Litwinczuk, Pure Tech's Secretary, would
be elected to the Company's Board. The Company believes that distribution of
this Information Statement constitutes compliance with Rule 14(f).
Background of the Merger
The Company had been involved in the exploration of precious metals.
However, due to, among other things, increasing environmental regulations, it
had ceased its operations and was no longer generating material revenues. As a
consequence, the Board of Directors of the Company began to investigate the
possibility of a new business direction and to search for viable acquisition or
merger candidates which would enable the Company to maximize value to
shareholders.
In March 1995, after a lengthy search, the Company was introduced to EVI
by an investment banking firm. The Company's Board of Directors determined that
EVI was a young company involved in a promising business which had growth
potential if afforded access to the capital markets. In addition, EVI was
involved in negotiations for the purchase of two licenses which the Board of
Directors of the Company concluded would likely expand EVI's business.
See "Description of EVI." Further, EVI was majority owned by Pure Tech, a public
company, which the Board of Directors believed would provide the Company the
opportunity to benefit from the available expertise in managing a public company
as well as from Pure Tech's contacts with the investment banking community.
Therefore, the Board of Directors resolved that a business combination with EVI
had the potential to provide increased liquidity to the Company's shareholders
and to maximize shareholders value.
The Company commenced negotiations with EVI in May 1995. At the end of May
the parties reached a tentative agreement providing for the merger of a
wholly-owned subsidiary of the Company into EVI in consideration for the
issuance of Common Stock as set forth under "Merger with Evolutions, Inc." The
parties agreed that the Company had a value of approximately $175,000 to
$225,000. EVI had net assets of approximately $2,500,000. As a result of these
valuations, the parties agreed that the combined entity would be owned 92% by
EVI and 8% by the Company's then current shareholders.
Description of EVI
EVI is engaged in developing and expanding markets for products
manufactured from recycled materials that promote environmental awareness.
EVI's initial concentration has been on the manufacture of casual apparel,
including T-shirts, sweat shirts and baseball caps. EVI believes that this area
affords it the opportunity to create products that are substantially identical
in quality to, and compete in price with, non-environmental products. Many of
its products carry environmental imprints and have been used at grammar schools
in fundraising campaigns for environmental purposes and to advance children's
awareness of the environment. Special events, such as Earth Day, are often used
by EVI to generate interest in its products. EVI's current campaigns have been
endorsed by the National Wildlife Federation, a private not for profit
organization. In addition to expanding its line of apparel, EVI is exploring
opportunities to diversify its business into other areas, such as the production
of toy products.
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On September 27, 1995, Kidsview, Inc., a wholly owned subsidiary of EVI
("Kidsview"), purchased certain assets (the "Asset Purchase") of Direct Connect
International Inc. ("DCI"), consisting primarily of a line of toy animals
marketed under the tradenames ZOO BORNS and TEA BUNNIES. In consideration for
the purchase, EVI, among other things, conditionally released DCI of an
aggregate of $1,100,000 in indebtedness to EVI. In addition, the Company agreed
to issue to DCI 1,500,000 shares of its Common Stock, which issuance is
contingent upon shareholders' approval of proposals to amend the Company's
Articles of Incorporation. See "Amendments to the Articles of Incorporation."
Up to an additional 4,000,000 shares of the Company's Common Stock will be
issued to DCI if over a period of three years certain net sales and earnings
tests are met in connection with the business acquired from DCI. Under the
terms of the agreement between EVI and DCI, Kidsview and DCI entered into a
management agreement pursuant to which DCI will continue to manage the business
relating to the toy animals for a monthly fee of up to $100,000.
EVI's products consist of a 50-50 recycled polyester and reclaimed cotton
blend. The polyester is produced from recycled common soda bottles. The
cotton content consists of waste materials reclaimed from the process of
separating cotton fibers from the seeds.
EVI was incorporated in 1994 and is a majority owned subsidiary of Pure
Tech, the principal businesses of which are the recycling of plastics and the
injection molding of custom parts using both recycled and virgin materials. In
addition, Pure Tech, through its majority held subsidiary, Plastic Specialties
and Technologies, Inc., is involved in the manufacture of garden hose, specialty
plastic compounds, fabricated precision plastic components and non-woven textile
products.
AMENDMENTS TO ARTICLES OF INCORPORATION
The Board of Directors of the Company has adopted a proposal declaring
advisable amendments to the Articles of Incorporation of the Company to effect a
.033 (thirty three one hundredths) for one reverse stock split of the Company's
currently issued and outstanding Common Stock and to authorize the issuance of
Preferred Stock (collectively, the "Amendments"). The Company is currently
authorized to issue 50,000,000 shares of Common Stock, no par value. The number
of shares of Common Stock the Company is authorized to issue will not be
affected by the Amendments. As of the date hereof, there are issued and
outstanding 18,726,189 shares of Common Stock. Adoption of the reverse stock
split will reduce the presently issued and outstanding shares of Common Stock
from 18,726,189 to 617,964. Any fractional interests resulting from the reverse
stock split will be rounded up to the next higher whole number of shares.
Except for the process of rounding up of fractional interests to the next
higher whole number of shares, the proposed reverse stock split will not affect
any shareholder's proportionate equity interest in the Company. However, upon
approval of the Amendments, under the terms of the Agreement and in connection
with the Asset Purchase, the Company will issue an aggregate of 90,351,174
shares (2,981,589 on a post reverse split basis). See "Introduction--General"
and "--Description of EVI." The proposed form of the Articles of Amendment is
attached hereto as Attachment A.
The number of issued shares after the reverse stock split is approximate.
Except for changes resulting from the reverse stock split, the rights and
privileges of holders of shares of Common Stock will remain the same, both
before and after the proposed reverse stock split.
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The Articles of Incorporation of the Company, as amended in accordance with
the proposed provisions described herein, will be substantially similar to the
Certificate of Incorporation of the surviving corporation in the Merger
described under "Merger into Delaware Company" and will greatly facilitate the
Merger.
The Amendments
Reverse Stock Split
Adoption of the reverse stock split will reduce the presently issued and
outstanding shares of Common Stock from 18,726,189 to 617,964. The Company
believes that the decrease in the number of shares of Common Stock outstanding
as a consequence of the proposed reverse stock split should increase the per
share price of the Common Stock, which may encourage greater interest in the
Common Stock and possibly promote greater liquidity for the Company's
shareholders. However, the increase in the per share price of the Common Stock
as a consequence of the proposed reverse stock split may be proportionately less
than the decrease in the number of shares outstanding. In addition, any
increased liquidity due to any increased per share price could be partially or
entirely off-set by the reduced number of shares outstanding after the proposed
reverse stock split. Nevertheless, the proposed reverse stock split could
result in a per share price that adequately compensates for the adverse impact
of the market factors noted above. There can, however, be no assurance that the
favorable effects described above will occur, or that any increase in per share
price of the Common Stock resulting from the proposed reverse stock split will
be maintained for any period of time.
Commencing with the effectiveness of the reverse stock split, each
currently outstanding certificate will be deemed for all corporate purposes to
evidence ownership of the reduced number of shares resulting from the reverse
stock split. Currently outstanding certificates do not have to be surrendered
in exchange for new certificates in connection with the reverse stock split.
Rather, new stock certificates reflecting the number of shares resulting from
the reverse stock split will be issued only as currently outstanding
certificates are transferred.
No fractional shares will be issued. All fractional interests resulting
from the reverse stock split will be increased to the next higher whole number
of shares. The Company believes that the approximate total number of beneficial
holders of the Common Stock of the Company is in excess of 300, based on
information received from the transfer agent. After the reverse stock split the
Company estimates that, based on the shareholdings as of January 3, 1996, it
will continue to have approximately the same number of shareholders.
The number of issued shares after the reverse stock split is approximate.
Except for changes resulting from the reverse stock split, the rights and
privileges of holders of shares of Common Stock will remain the same, both
before and after the proposed reverse stock split.
There can be no assurance that the market price of the Common Stock after
the proposed reverse stock split will be proportionately greater than the market
price before the proposed reverse stock split, or that such price will either
exceed or remain in excess of the current market price.
The Company is currently authorized to issue 50,000,000 shares of Common
Stock, no par value. The number of shares of Common Stock the Company is
authorized to issue will not be affected by the
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Amendments. As a result of the reverse stock split, the Company will have
49,382,036 shares available for future issuances. This will enable the Company
to issue an aggregate of 90,351,174 shares (2,981,589 on a post reverse split
basis) in connection with the Agreement and the Asset Purchase. See
"Introduction- -General" and "--Description of EVI." In addition, sufficient
shares will be readily available for use in any acquisition or financing or upon
the exercise of options. See "Approval of 1996 Stock Option Plan.".
Shares that are presently authorized but not issued and outstanding would
be issuable at any time and from time to time, by action of the Board of
Directors without further authorization from the Company's stockholders, except
as otherwise required by applicable law or rules and regulations to which the
Company may be subject, to such persons and for such consideration as the Board
of Directors determines. This will permit the Company to consider acquisitions
or other transactions which may require the issuance of shares of Common Stock.
The Company is considering potential financing transactions which would involve
the issuance of Common Stock. However, other than in connection with the
Agreement and the Asset Purchase, the Company has no commitments which would
require the issuance of any shares of Common Stock. See "Introduction-General"
and "Reverse Stock Split."
Current holders of Common Stock of the Company have no preemptive rights to
acquire or subscribe to any of the shares of Common Stock which are authorized
but not issued and outstanding. Voting rights afforded to shares of Common Stock
upon their issuance would have a dilutive effect on the voting power of the
outstanding Common Stock of the Company. Issuance of any of such additional
shares of Common Stock could also have a dilutive effect on stockholders' equity
in the Company.
Management and certain principal shareholders of the Company have a
personal interest in the adoption of the reverse stock split since it will
enable the Company to issue additional shares of Common Stock pursuant to the
terms of the Agreement. See "Introduction-General." All directors and officers
intend to vote their stock in favor of the Amendments. The Board of Directors
recommends a vote in favor of the reverse stock split.
Federal Income Tax Consequences
The following material is based on discussions with counsel. No opinion of
counsel has been obtained. Shareholders are advised to consult with their own
tax advisors for more detailed information relating to their individual tax
circumstances.
1. The proposed reverse stock split will be a reorganization described in
section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. The Company will recognize no gain or loss as a result of the proposed
reverse stock split.
3. Shareholders will recognize no gain or loss to the extent that
currently outstanding shares of Common Stock are exchanged for new shares of
Common Stock pursuant to the proposed reverse stock split.
4. The basis of the new Common Stock received in exchange for Common
Stock pursuant to the proposed reverse stock split will be the same as the
shareholders' basis in the stock exchanged. Therefore, the new shares of Common
Stock in the hands of a shareholder will have an aggregate basis
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for computing gain or loss equal to the aggregate basis of shares of Common
Stock held by that shareholder immediately prior to the proposed reverse stock
split.
5. Shareholders whose fractional interests will be rounded up to the next
whole number of shares will recognize gain equal to the difference between the
fractional amount of shares owned by them and the whole number of shares they
receive pursuant to the proposed reverse stock split. Assuming that such
shareholders have held their Common Stock as a capital asset and have held such
stock for more than one year, the gain recognized upon the receipt of the whole
shares in lieu of fractional shares will be capital gain.
Authority to Issue Preferred Stock
The Company proposes to authorize the issuance of Preferred Stock. The
Board of Directors will have the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designation, preferences and
relative participation, optional or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions), redemption price
or prices, conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by the
stockholders. Such Preferred Stock may be used in acquisitions or to obtain
financing.
The issuance of preferred stock by the Board of Directors could adversely
affect the rights of the holders of Common Stock. For example, such issuance
could result in a class of securities outstanding that would have preferences
with respect to voting rights and dividends and in liquidation over the Common
Stock, and could (upon conversion or otherwise) enjoy all of the rights
appurtenant to Common Stock. The authority possessed by the Board of Directors
to issue preferred stock could potentially be used to discourage attempts by
others to obtain control of the Company through a merger, tender offer, proxy
contest or otherwise by making such attempts more difficult to achieve or more
costly. There are no agreements or understandings regarding the issuance of
preferred stock and the Board of Directors has no present intention to issue
preferred stock.
The Articles of Incorporation of the Company, as amended in accordance with
the proposed provisions described herein, will be substantially similar to the
Certificate of Incorporation of the surviving corporation in the Merger
described under "Merger into Delaware Company" and will greatly facilitate the
Merger.
Stockholders are urged to read the Amendments, the text of which is
attached as Attachment A to this Information Statement.
Approval Required
The approval of a majority of the outstanding stock entitled to vote will
be necessary to approve the Amendments. Pure Tech and Messrs. Robert O'Brien,
Nafash, Katz and Litwinczuk who are entitled to vote in the aggregate 11,902,792
shares or 63.6% of the total number of shares entitled to vote, intend to vote
for the proposed amendments.
The Board of Directors does not intend to solicit any proxies or consents
from any other
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shareholders in connection with this action or any other action proposed for the
meeting.
MERGER INTO DELAWARE COMPANY
General
The Board of Directors has recommended the adoption of the Agreement and
Plan of Merger attached to the Information Statement as Attachment B, pursuant
to which the Company will be merged (the "Merger"), into Evolutions, Inc., a
Delaware corporation (the "Delaware Company"). Under the terms of the Merger,
each outstanding share of the Company's Common Stock, no par value, will be
converted into one share of the Delaware Company's Common Stock $.01 par value
per share. The Articles of Incorporation of the Company, as amended in
accordance with the proposed provisions described under "Amendments to the
Articles of Incorporation," are substantially similar to the certificate of
the Delaware Company, which will greatly facilitate the Merger.
The purpose of the Merger is to change the place of incorporation of the
Company from Idaho to Delaware, thereby enabling the Company to enjoy the
benefits of certain provisions of Delaware law that the Board of Directors
believes would be more beneficial to the Company than the comparable provisions
of Idaho law. The Merger would not involve any change in the business,
properties, management or capital structure of the Company. Upon the effective
date of the Merger, the Delaware Company will be the continuing corporation and
will own all of the assets and will be responsible for all of the liabilities of
the Company. The Delaware Company will continue the Company's business under
the name Evolutions, Inc.
Results of the Change to Delaware
Summarized below are the principal differences between the Idaho Business
Corporations Act ("BCA") and the Delaware General Corporation Law which may
affect the interests of shareholders. This summary does not purport to be a
complete statement of the differences between the BCA and the Delaware General
Corporation Law and related laws affecting shareholders' rights, and the summary
is qualified in its entirety by reference to the provisions of these laws.
Shareholders of the Corporation are advised to consult with their own legal
counsel regarding all such matters.
Appraisal Rights: Idaho law provides shareholders with appraisal
rights in more situations than does Delaware law. Under Idaho law, a
shareholder may be entitled to appraisal when the shareholders vote (1) to
merge or consolidate with other corporations, or (2) to sell or exchange all
or substantially all of its property and assets. Delaware, for example,
does, not permit appraisal rights in the event of a merger or consolidation
for the shares of any class or series which are listed on a national stock
exchange or which are held of record by more than two thousand shareholders.
Loans to Directors. Under Idaho law, loans to directors are generally
prohibited unless approved by a majority of shareholders. Delaware law
permits loans to directors if approved by the Board of Directors;
shareholder approval is not required.
Employee Stock Options. Idaho law forbids Idaho corporations to grant
stock options
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to directors, officers or employees unless shareholder approval is
obtained. Delaware law permits the grant of such options upon Board
approval.
Special Meetings of Shareholders. Idaho law allows a special meeting
of shareholders to be called by 1/5 of the shares entitled to vote thereon.
Delaware law allows a corporation to determine the number of shares needed
to call a special meeting.
Action by Shareholders without Meeting. Under Idaho law, shareholders'
actions taken without a meeting require unanimous consent. Delaware law
permits any such action to be taken by majority vote, provided that written
notice is sent to the other shareholders informing them of the actions
taken.
Summary of Purpose and Effects of Provisions of the Delaware Company's Charter
Documents
The purpose of the Merger and the adoption of the Delaware Company's
Certificate of Incorporation and By-laws is to assure the continuity and
stability of the Company's business strategies and policies through the creation
of greater procedural flexibility in the conduct of its affairs as allowed under
Delaware law and explained in the immediate preceding section. The Delaware
Company's Certificate of Incorporation and By-laws are basically the same as the
Company's present Articles of Incorporation, as amended in accordance with the
proposed provisions described under "The Amendments" and By-laws.
The By-laws of the Delaware corporation provide that a special meeting may
be called by the Board of Directors and by certain executive officers of the
corporation. It will therefore not be possible for a small minority of the
stockholders to have a disproportionate impact on the affairs of the company by
calling special meetings possibly aimed at disrupting the implementation of the
Board's policies.
In addition, the Board believes that the ability by the Delaware
corporation to grant stock options to Board members and senior management
without a shareholders vote will facilitate the hiring of qualified individuals.
All directors and officers of the Company have a personal interest in
seeing the Merger approved to the extent that it relates to the company's
increased ability to grant options to them. All directors and officers intend
to vote their stock in favor of the merger proposal. The Board of Directors
recommends a vote in favor of the merger proposal.
The foregoing objectives will be accomplished through a "migratory merger",
some of the principal features of which are as follows.
(1) The Company will be merged into the Delaware Company, which will
be the survivor of the Merger.
(2) Subject to the applicable provisions regarding appraisal rights of
the Company's shareholders who file a written objection to the proposed
Merger, each share of the Company's Common Stock issued and outstanding on
the effective date of the Merger will automatically become one share of
Common Stock of the Delaware Company.
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(3) For Federal income tax purposes, no gain or loss will be
recognized by the Company's shareholders, except those who exercise their
appraisal rights.
(4) The Delaware Company will succeed to the business of the Company,
and the shareholders of the Company will become shareholders of the Delaware
Company.
(5) The Merger is not intended to effect any change in the business,
property, management or capitalization of the Company.
(6) The rights of the Company's shareholders, who upon consummation of
the Merger will become shareholders of the Delaware Company, will be
governed by the laws of the State of Delaware and by the terms and
provisions of the Certificate of Incorporation and By-laws of the Delaware
Company.
(7) The officers and Directors serving the Company on the Effective
Date of the Merger will thereupon hold the same offices with the Delaware
Company.
Shareholders have the right to dissent from the Merger and to demand and
receive appraisal rights for their shares of Common Stock in the Company by
complying with the requirements of Section 30-1-81 of the Idaho Business
Corporation Act. See "Right to Dissent and Appraisal Rights of Shareholders
Objecting to the Proposed Merger".
The discussion contained in this Information Statement is qualified in its
entirety by reference to the Agreement and Plan of Merger, a copy of which is
attached hereto as Attachment B, and to the Certificate of Incorporation of the
Delaware Company, as amended, a copy of which is attached hereto as Attachment
C.
The Merger
It is presently anticipated that the date on which the Merger will be
consummated (the "Effective Date of the Merger") will be February 9, 1996 or as
soon thereafter as practicable. However, the Board of Directors of the Company
has reserved the right to abandon the Merger prior to the Effective Date of the
Merger. See "Termination."
Upon the Effective Date of the Merger each share of Common Stock of the
Company will be converted automatically into one share of Common Stock of the
Delaware Company and thereafter the outstanding certificates for shares of the
Company's Common Stock will represent the same number of shares of Common Stock
of the Delaware Company. Any shareholders desiring new certificates of the
Delaware Company may submit their existing certificates representing shares of
the Company to American Stock Transfer & Trust Company, the transfer agent of
the Delaware Company, and obtain new certificates. The Company will obtain a
new CUSIP number for shares of Common Stock authorized after the Effective Date
of the Merger.
The Delaware Company will assume the stock option plan which the Company
intends to adopt. See "Approval of the Company's 1996 Stock Option Plan."
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Federal Tax Consequences
The following material is based on discussions with counsel. No opinion of
counsel has been obtained. Shareholders are advised to consult with their own
tax advisors for more detailed information relating to their individual tax
circumstances.
The Merger will constitute a reorganization under Section 368(a)(1) of the
Code. For federal income tax purposes, no gain or loss will be recognized by the
shareholders (other than shareholders who exercise their appraisal rights) of
the Company on the automatic conversion of their shares of the Company into
shares of the Delaware Company as a result of the Merger. Each shareholder
(other than objecting shareholders) will have a basis in shares of the Delaware
Company equal to his basis in his shares of the Company immediately prior to the
Effective Date of the Merger and his holding period of shares of the Delaware
Company will include the period during which he held the corresponding shares of
the Company provided such shares were held by him as a capital asset on the
Effective Date of the Merger. No gain or loss will be recognized by the Company
or by the Delaware Company as a result of the Merger.
The receipt of cash in exchange for their shares by objecting shareholders
will be a taxable event to such shareholders. Each shareholder is advised to
consult his attorney or tax advisor as to the Federal, state or local tax
consequences of the proposed Merger in view of his individual circumstances.
Capital Stock of the Delaware Company
The Certificate of Incorporation of the Delaware Company authorizes the
issuance of 50,000,000 shares of Common Stock having a par value of $.01.
Except for those shares purchased from dissenting shareholders pursuant to their
appraisal rights, each of the outstanding shares of the Company's Common Stock
will be exchanged for one share of the Delaware Company's Common Stock.
The shares of the Delaware Company, as well as the shares of the Company,
have no preemptive, conversion, redemption or similar rights. Upon the
liquidation of the Delaware Company, the holders of Common Stock would be
entitled to share ratably in the net assets available for distribution to Common
Stock shareholders. Since the shares of Common Stock of the Delaware Company,
like those of the Company, do not have cumulative voting rights, the holders of
more than 50% of the shares voting for the election of directors can elect 100%
of the directors if they choose to do so.
In addition, the Delaware Company is authorized to issue an aggregate of
5,000,000 shares of Preferred Stock. The Board of Directors will have the
authority to issue such shares of Preferred Stock in one or more series and to
fix the number of shares constituting any such series, the voting powers,
designation, preferences and relative participation, optional or other special
rights and qualifications, limitations or restrictions thereof, including the
dividend rights and dividend rate, terms of redemption (including sinking fund
provisions), redemption price or prices, conversion rights and liquidation
preferences of the shares constituting any series, without any further vote or
action by the stockholders. Such Preferred Stock may be used in acquisitions or
to obtain financing.
Right to Dissent and Appraisal Rights of Shareholders Objecting to the Proposed
Merger
Under Section 30-1-80 of the Idaho Business Corporation Act ("BCA"),
shareholders who object
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<PAGE>
to the Merger, have the right to obtain payment for their shares. Section
30-1-81 of the BCA sets forth the procedures for demanding such payment. Any
shareholder of the Company who does not vote in favor of the Merger may, if the
Merger is consummated, obtain payment in cash of the fair value of his shares by
complying with the requirements of Section 30-1-81 of the BCA. Shareholders who
vote in favor of the Merger lose the right to obtain payment for their shares.
Upon approval of the Merger, the Company must give written notice of such
authorization to each shareholder who did not vote in favor of the Merger. The
notice will: (a) state where and when the demand for payment must be sent and
where stock certificates are to be deposited, (b) inform the shareholders of the
restrictions, if any, on the transfer of shares, (c) supply a form for demanding
payment, and (d) be accompanied by a copy of Sections 30-1-80 and 30-1-81 of
the BCA. Shareholders who fail to demand payment or deposit their shares in
accordance with the notice, will have no rights to receive payment. Immediately
upon consummation of the Merger, the Company must remit to the dissenting
shareholders the fair value of their shares. Such remittance must be
accompanied by the Company's most recent audited financial statements, a
statement of the Company's estimate of fair value and a notice of the right to
demand supplemental payment. Within 30 days after the remittance, the
shareholder may send to the Company his own estimate of his shares. Within 60
days after the notice for supplemental payment has been received by the Company,
it shall either settle with such shareholder or file a petition in the district
court of Ada County, Idaho, for a determination of the fair value of the
shares. A copy of such petition must be served on each dissenter whose demand
has not been settled. Expenses in connection with any court proceedings are
generally borne by the Company except to the extent that the court may deem
equitable.
The foregoing summary does not purport to be a complete statement of the
provisions of Sections 30-1-80 and 30-1-81 of the BCA and is qualified in its
entirety by reference to the relevant portions of such Sections copies of which
are attached hereto as Attachments D and E.
A dissenting shareholder who receives payment for his shares upon exercise
of his right of appraisal will, subject to the provisions of Section 302(b) of
the Internal Revenue Code, recognize gain or loss for Federal income tax
purposes, measured by the difference between the basis for his shares and the
amount of payment received.
Termination
The Agreement and Plan of Merger provides that the Board of Directors may
terminate and cancel the same at any time prior to the Effective Date of the
Merger, either before or after submission of the Merger to a vote of
shareholders.
Agreement and Plan of Merger and Charter Documents are Attached as Attachments
Stockholders are urged to read the Agreement and Plan of Merger, and the
Certificate of Incorporation of the Delaware Company, as amended, the text of
which are attached as Attachments B and C to this Information Statement,
respectively.
Approval Required
The approval of a majority of the outstanding stock entitled to vote will
be necessary to approve the proposed amendments. Pure Tech and Messrs. Robert
O'Brien, Nafash, Katz and Litwinczuk who are entitled to vote
in the aggregate 11,902,792 shares or 63.6% of the total number of shares
entitled to vote,
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<PAGE>
intend to vote for the proposed amendments.
APPROVAL OF THE COMPANY'S 1996 STOCK OPTION PLAN
The Board has determined that the Company should adopt a Stock Option Plan
in order to make options available to employees, officers, directors and others
who render services to the Company. Accordingly, the Board has adopted the 1996
Stock Option Plan (the "1996 Plan") and recommends to the shareholders that the
1996 Plan be approved.
Summary of the 1996 Plan
The Company may grant to its officers, key employees and others who render
services to the Company, options to purchase ("Options") up to 15,000,000 shares
(500,000 shares on a post-reverse split basis. See "Amendments to Articles of
Incorporation-The Amendments--Reverse Stock Split") of the Company's Common
Stock. Options may be granted in the form of incentive stock options or options
which do not qualify for treatment as incentive stock options. The exercise
price may not be less than the fair market value per share (110% of the fair
market value in the case of incentive stock options if the grantee owns more
than 10% of the Company' stock). Payment of this price shall be made in cash,
or, with the consent of the Board, in whole or in part, in shares of Common
Stock, by a promissory note or by an irrevocable instruction to a broker to sell
shares acquired upon exercise and to deliver to the Company a portion of the
proceeds equal to the exercise price. If an option granted under the 1996 Plan
shall expire, terminate or be canceled for any reason without being exercised in
full, the corresponding number of unpurchased shares shall again be available
for the purposes of the 1996 Plan.
The 1996 Plan will be administered by the Board of Directors or a committee
of the Board (the "Board"). The Board determines the persons who are to be
granted Options based upon the contribution of such persons to the management
and growth of the Company. No Option may be exercised after the expiration of
10 years from the date of grant. No Option may be granted under the 1996 Plan
after February 2, 2006.
Incentive stock options are also subject to the following limitations: (i)
The aggregate fair market value (determined at the time an option is granted) of
stock with respect to which incentive stock options are exercisable for the
first time by an optionee during any calendar year (under all such plans of the
Company, its parent or subsidiary) shall not exceed $100,000, and (ii) if the
individual to whom the incentive stock options were granted is considered as
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, then (A) the option price at the time of grant
may not be less than 110% of the fair market value per share for such Common
Stock and (B) the option period must be no more than five years from the date of
grant.
An individual whose employment terminates by reason other than death may
generally exercise an Option within a period after termination to be designated
by the Board, or if termination is by reason of death, within the twelve month
period after such termination, and then only if and to the extent that such
Option was exercisable at the date of termination of employment. Exercise of an
Option after termination of employment will be allowed only if, in the
discretion of the Company, the Optionee has
12
<PAGE>
not engaged in conduct adverse to the Company's interest.
The Board may, at any time, alter, suspend or terminate the 1996 Plan,
except that the Board may not, without further approval of the shareholders, (1)
increase the maximum number of shares for which Options may be granted under the
1996 Plan or which may be acquired by an individual employee, (2) decrease the
minimum purchase price for shares of Common Stock to be issued upon exercise of
Options or (3) change the class of persons eligible to receive Options. Except
in limited circumstances, the Board may not make any change which would have a
material adverse affect upon any Option previously granted unless the consent of
the Optionee is obtained.
The foregoing summary of the 1996 Plan is qualified in its entirety by, and
reference is hereby made to, the 1996 Plan, a copy of which is attached hereto
as Attachment F. The Delaware Company will assume the 1996 Plan. See "Merger
into Delaware Company."
Tax Matters
The following material is based on discussions with counsel. No opinion of
counsel has been obtained.
The grant or exercise of an incentive stock option will not generally cause
recognition of income by the Optionee; however, the amount by which the fair
market value of a share of Common Stock at the time of exercise of an incentive
stock option exceeds the option price, is a "tax preference item" for purposes
of the alternative minimum tax. In the event of a sale of the shares received
upon exercise of an incentive stock option more than two years from the date of
grant and more than one year from the date of exercise, any appreciation of the
shares received above the exercise price should qualify as long- term capital
gain. However, if shares of Common Stock acquired pursuant to the exercise of
an incentive stock option are sold by the Optionee before the completion of such
holding periods so much of the gain as does not exceed the difference between
the option price and the lesser of the fair market value of the shares at the
date of exercise or the fair market value at the date of disposition will be
taxable as ordinary income for the taxable year in which the sale occurs. Any
additional gain realized on the sale should qualify as a capital gain.
The grant of an Option that is not an incentive stock option (a
"non-qualified option") should not result in recognition of income by the
Optionee. Upon exercise of a non-qualified option, the excess of the fair
market value of the shares on the exercise date over the option price should be
considered compensation taxable as ordinary income to the employee. If the
Optionee is subject to the restrictions of Section 16(b), income will be
recognized at the time the restrictions lapse and should be measured by the
excess of the fair market value of the shares at such time over the option price
unless the Optionee elects to be taxed at the time of exercise. In the event of
a sale of the shares, any appreciation after the date of exercise or lapse of
the restriction of Section 16(b), as the case may be, should qualify as capital
gain.
In connection with incentive stock options and non-qualified options, the
Company will be entitled to a deduction for federal income tax purposes at the
same time and in the same amount as the ordinary income recognized by the
employee. If applicable holding period requirements in connection with an
incentive stock option are not satisfied, no deduction will be available to the
Company.
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<PAGE>
Approval Required
The approval of a majority of the outstanding stock entitled to vote will
be necessary to approve adoption of the 1996 Plan. Pure Tech and Messrs. Robert
O'Brien, Nafash, Katz and Litwinczuk who are entitled to vote in the aggregate
11,902,792 shares or 63.6% of the total number of shares entitled to vote,
intend to vote for adoption of the 1996 Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Holtz Rubenstein & Co.,
LLP ("Holtz Rubenstein") , as the new independent auditors of the Company for
1995, subject to ratification by the Company's shareholders. Holtz Rubenstein
was appointed upon the resignation of Terrence J. Dunne, CPA, Spokane,
Washington, which resignation became effective September 27, 1995. Neither Mr.
Dunne nor a representative of Holtz Rubenstein will attend the Meeting.
The Company's financial statements for the fiscal year ended December 31,
1994, were audited by Mr. Dunne who had been the principal auditor of Registrant
since March 1995. Mr. Dunne's reports did not contain any adverse opinion,
disclaimer of opinion, modification or qualification as to uncertainty, audit
scope or accounting principles. During the period of his engagement from March
31, 1995 until September 1995 there were no disagreements with Mr. Dunne on any
matter of accounting principles and practices, financial statement disclosure,
or audit scope and procedure, which disagreement if not resolved to the
satisfaction of Mr. Dunne, would have caused him to make reference to the
subject matter of the disagreement in connection with his report.
Mr. Dunne replaced Daniel Murphy, CPA, as the Company's independent
auditor. Mr. Murphy had served in such capacity during February and March 1995
and prior to January 1995. During the intervening period, the Company's engaged
as its independent auditor the firm of Bayaa & Dimeglio, Certified Public
Accountants ("Bayaa").
Mr. Murphy's and Bayaa's reports did not contain any adverse opinion,
disclaimer of opinion, modification or qualification as to uncertainty, audit
scope or accounting principles. During the period of their respective
engagements there were no disagreements with Mr. Murphy or with Bayaa on any
matter of accounting principles and practices, financial statement disclosure,
or audit scope and procedure, which disagreement if not resolved to the
satisfaction of Mr. Murphy or Bayaa, would have caused Mr. Murphy or Bayaa to
make reference to the subject matter of the disagreement in connection with
their respective reports.
Approval Required
The approval of a majority of the outstanding stock entitled to vote will
be necessary to ratify the appointment of Holtz Rubenstein as the Company's
independent auditors. Pure Tech and Messrs. Robert O'Brien, Nafash, Katz and
Litwinczuk who are entitled to vote in the aggregate 11,902,792 shares or 63.6%
of the total number of shares entitled to vote, intend to vote for
ratification.
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<PAGE>
MANAGEMENT
The following sets forth the name and age, present position(s) with the
Company, principal business occupations and committee service for the last five
years of each person who is presently a director or executive officer of the
Company, as well as the nominees who will fill vacancies on the Company's Board
on February 2, 1996. Stockholders are not voting on the initial election of
these nominees.
Name Age Position
---- --- --------
Michael Nafash 34 Chairman, President, Chief
Executive Officer and Treasurer
Robert O'Brien 60 Director
Paul Litwinczuk 42 Vice President and Secretary
Mark Mastroianni 33 Vice President
Mr. Nafash has been Chairman, President and Chief Executive Officer of the
Company since July 1995. He has been the President of Evolutions, Inc. since
February 1994. From June 1992 until March 1995 he worked for Pure Tech where he
served as the Chief Financial Officer from October 1993. Prior thereto he had
been a certified public accountant with Michaels, Nafash & Georgallas and with
Weidenbaum Ryder, & Co.
Mr. O'Brien had been President and a Director of the Company since 1982.
He resigned from his position as President in July 1995. In addition from 1985
until July 1993, Mr. O'Brien was Secretary, Treasurer and a Director of Inland
Resources, Inc., formerly known as Inland Gold and Silver Corp., a publicly
traded company involved in the exploration of oil and gas.
Mr. Litwinczuk has served as Secretary of Pure Tech since July 1994. From
September 1991 until July 1994 he was Assistant Secretary of that Company.
Prior to 1991, Mr. Litwinczuk was Administrative Manager with REI Distributors,
Inc., a company engaged in glass recycling and fabrication of reprocessing
equipment.
Mr. Mastroianni has served as Vice President of the Company since October
1995. He is currently the Finance Manager of Pure Tech and has been with Pure
Tech since 1993. From 1990 until 1993, Mr. Mastroianni was employed by Merrill
Lynch as a financial analyst and systems liaison. From 1987 until 1990 he was a
financial analyst and systems liaison at Prudential Insurance. He graduated cum
laude from Rider College with a B.S. degree in Finance.
On February 2, 1996 the following individuals will by Board action fill
vacancies on the Company's Board:
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<PAGE>
Name Age Position
---- --- --------
David C. Katz 54 Director
Paul Litwinczuk 41 Director
Mark Mastroianni 33 Director
Mr. Katz has served as President of Pure Tech since August 1988 and as a
director since September 1991. He was appointed Chief Operating Officer in March
1994. From 1987 until August 1988 he was an independent consultant to contract
and food and beverage packers. From 1982 until 1987, he was Vice President and
operations director for Taylor Wine Company, and was responsible for operation,
distribution, purchasing and maintenance of the plant owned by Taylor Wine
Company in Hammondsport, New York. From 1977 until 1982, he was U.S. manager of
packaging for The Coca-Cola Company in Atlanta, Georgia and in 1978 and 1979 he
coordinated the introduction of PET bottles to U.S. bottlers.
Mr. Litwinczuk has served as Secretary of Pure Tech since July 1994. From
September 1991 until July 1994 he was Assistant Secretary of that Company.
Prior to 1991, Mr. Litwinczuk was Administrative Manager with REI Distributors,
Inc., a company engaged in glass recycling and fabrication of reprocessing
equipment.
Mr. Mastroianni has served as Vice President of the Company since October
1995. He is currently the Finance Manager of Pure Tech and has been with Pure
Tech since 1993. From 1990 until 1993, Mr. Mastroianni was employed by Merrill
Lynch as a financial analyst and systems liaison. From 1987 until 1990 he was a
financial analyst and systems liaison at Prudential Insurance. He graduated cum
laude from Rider College with a B.S. degree in Finance.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company during the three fiscal years ended December 31, 1994 to its Chief
Executive Officer. No employee of the Company received compensation in excess
of $100,000 during these periods.
Restricted Stock
Year Salary(1) Awards
---- --------- ----------------
Robert W. O'Brien 1994 -0- $5,000
1993 -0- $5,000
1992 -0- $5,000
(1) Pursuant to the regulations promulgated by the Securities and Exchange
Commission, the table omits columns reserved for types of compensation not
applicable to the Company.
Committees of the Board
The Company's Board does not currently have an audit, compensation or other
committee. During
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<PAGE>
the last fiscal year, Mr. O'Brien, the Company's former Chairman and President,
participated in deliberations with respect to executive compensation.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The table below sets forth, as of January 3, 1996, information regarding
the beneficial ownership of the Company's Common Stock based upon the most
recent information available to the Company for (i) each person known by the
Company to own beneficially more than five (5%) percent of the Company's
outstanding Common Stock, (ii) each of the Company's officers and directors and
(iii) all officers and directors of the Company as a group. Unless otherwise
indicated, the address for all parties is c/o the Company, 65 Railroad Avenue,
Ridgefield, NJ 07657.
Shares Owned Beneficially
-------------------------
Name Number of Shares Percentage
- ---- ---------------- ----------
Pure Tech International, Inc. (1) 8,800,000 47%
Michael Nafash (2) 800,000 4.3%
Robert O'Brien
S. 1511 Riegel Court
Spokane, WA 99206 2,102,792 11.2%
Paul Litwinczuk (3) 200,000 1%
Mark Mastroianni (4) 0 --
All current officers and directors as a
Group (4 persons) (2)(3)(4) 3,102,792 16.6%
___________________
(1) Does not include 71,785,196 shares of Common Stock (2,368,912 as
adjusted for the post reverse stock split) to be issued upon approval of the
Amendments.
(2) Does not include 6,363,129 shares of Common Stock (209,983 as adjusted
for the post reverse stock split) to be issued upon approval of the Amendments.
In addition, does not include 3,000,000 shares of Common Stock (99,000 as
adjusted for the post reverse stock split) issuable upon the exercise of stock
options, which will become exercisable on July 31, 1996.
(3) Does not include 1,590,782 shares of Common Stock (52,496 as adjusted
for the post reverse stock split) to be issued upon approval of the Amendments.
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<PAGE>
(4) Does not include 3,330,000 shares of Common Stock (109,890 as adjusted
for the post reverse stock split) issuable upon the exercise of stock options,
which will become exercisable on July 31, 1996.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. To the Company's knowledge, based
on information furnished to the Company, during the last fiscal year all
applicable Section 16(a) filing requirements were met.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 24, 1995, the Company acquired EVI, a majority owned subsidiary of
Pure Tech. The transaction was consummated by merging a wholly owned subsidiary
of the Company into EVI. In connection with the merger, Michael Nafash,
President of EVI, was elected to the Company's Board and was appointed the
Company's President and Chief Executive Officer. Robert O'Brien resigned as the
Company's President but will remain on the Company's Board. The parties agreed
that upon meeting the shareholder information requirements of Rule 14(f) under
the Securities Exchange Act of 1934, David C. Katz, President of Pure Tech, and
Paul Litwinczuk, an executive officer of Pure Tech, would be elected to the
Company's Board. See "Introduction--General."
In exchange for the merger, the Company issued an aggregate of 10,000,000
shares of the Company's Common Stock to the holders of EVI Common Stock,
consisting of 8,800,000 shares to Pure Tech and 1,200,000 shares to other
shareholders of EVI. An additional 88,851,174 shares of Common Stock will be
issued to these persons and certain other persons upon shareholders' approval of
the amendment to the Company's Articles of Incorporation increasing the
authorized number of shares to allow such additional issuance. See "Amendments
to Articles of Incorporation." As a result of this transaction, Pure Tech
currently holds approximately 47% of the Company's Common Stock. Upon the
issuance of the additional Common Stock contemplated under the Agreement, Pure
Tech will hold approximately 75% of the Company's outstanding Common Stock. See
"Principal Shareholders."
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Upon the approval of the Amendments, an aggregate of 88,851,174 shares of
Common Stock will be issued to Pure Tech, and Messrs. Nafash, Litwinczuk and
Katz, as well as certain other persons. See "Amendments to Articles of
Incorporation", and "Principal Shareholders."
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<PAGE>
OTHER MATTERS
The Company knows of no items of business that are expected to be presented
for consideration at the Meeting which are not enumerated herein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Pursuant to the rules applicable to this Information Statement, the Company
is annexing as Attachments to this Information Statement its Form 10-K for the
year ended December 31, 1994 (except that exhibits listed on the Form 10-K will
be omitted from copies distributed pursuant hereto with copies of such exhibits
to be available to requesting persons in accordance with the applicable rules),
its Form 10-Q for the quarter ended September 30, 1995, as amended on December
8, 1995, as well as the Item 7 financial statements to the Company's Current
Report on Form 8-K dated July 31, 1995, as amended on September 28, 1995, which
contains financial statements and pro forma financial information to account for
the acquisition by the Company of EVI, and to the Company's Current Report on
Form 8-K dated October 10, 1995, as amended on December 8, 1995, which contains
financial statements and pro forma financial information to account for the
acquisition by the Company of the Assets from DCI.
The following documents, which have been filed with the Commission by the
Company are incorporated herein by reference and made a part hereof:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1994;
(2) Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, as amended on December 8, 1995;
(3) Complete audited financial statements for Evolutions, Inc. from
its date of inception on January 21, 1994 until December 31, 1994, and for
the six month period ended June 30, 1995, as well as Pro Forma Financial
Information included in Item 7 of the Company's Current Report on Form 8-K
dated July 31, 1995, for an event dated July 21, 1995, as amended on
September 28, 1995; and
(4) Complete audited financial statements for DCI's Zoo Borns Division
for its fiscal year ended April 30, 1995, as well as unaudited financial
information for the period ended September 30, 1995 and Pro Forma Financial
Information, included in Item 7 of the Company's Current Report on Form 8-K
for an event dated September 27, 1995, dated October 10, 1995, as amended on
December 8, 1995.
19
<PAGE>
The Commission file number for all of the Company's documents which are
incorporated by reference herein is 1-8958. All documents filed by the Company
pursuant to Sections 13 (a), 13 (c), 14 and 15 (d) of the Exchange Act
subsequent to the date of this Information Statement shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
thereof. Any statement contained herein shall be deemed to be modified or
superseded for all purposes of this Information Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Information Statement.
Dated: Ridgefield, New Jersey
January 8, 1996
By Order of the Board of Directors
Paul Litwinczuk, Secretary
20
<PAGE>
List of Attachments
Attachment A Articles of Amendment to the Articles of
Incorporation of the Company
Attachment B Agreement and Plan of Merger
Attachment C Certificate of Incorporation of the Delaware
Company, as amended
Attachment D Appraisal Rights provisions: Section 30-1-80
Attachment E Appraisal Rights provisions: Section 30-1-81
Attachment F 1996 Stock Option Plan
Attachment G Form 10-K for the fiscal year ended December
31, 1994
Attachment H Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, as amended on
December 8, 1995
Attachment I Complete financial statements for Evolutions,
Inc. from its date of inception on January
21, 1994 until December 31, 1994, and for the
six month period ending June 30, 1995, and
Pro Forma Financial Information
Attachment J Complete audited financial statements for
DCI's Zoo Borns Division for its fiscal year
ended April 30, 1995, and for the period ended
September 26, 1995 (unaudited) and Pro Forma
Financial Information
21
<PAGE>
ATTACHMENT A
Articles of Amendment
to the Articles of Incorporation
of
GOLD SECURITIES CORPORATION
under
Section 30-1-58 of the Idaho Business Corporation Act
The undersigned corporation declares as follows:
FIRST: the name of the corporation is GOLD SECURITIES
CORPORATION.
SECOND: Prior to the filing of this Amendment, there were
authorized for issuance 50,000,000 shares of Common Stock, no par
value, of which 18,726,189 were issued, and 31,273,811 were
unissued. Article V of the Articles of Incorporation as hereby
amended, shall read in its entirety as follows:
"(a) The total authorized capital stock of the
Corporation shall be FIFTY MILLION (50,000,000) shares of
Common Stock having no par value, and FIVE MILLION
(5,000,000) shares of Preferred Stock, having no par value.
At 5:00 p.m. on the date of the filing of these Articles of
Amendment to the Articles of Incorporation, all outstanding
shares of Common Stock held by each holder of record on such
date shall be automatically combined at the rate of .033
(thirty three one hundredths) for one without any further
action on the part of the holders thereof or this
Corporation. No fractional shares will be issued. All
fractional shares shall be increased to the next higher
whole number of shares.
(b) All shares of the Class of Preferred shall be
preferred over the class of Common as to dividends and
liquidation rights.
(c) (1) Shares of Preferred Stock may be issued from
time to time in one or more series as may from time to time
be determined by the Board of Directors, each of said series
to be distinctly designated. All shares of any one series
of Preferred Stock shall be alike in every particular,
except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made
cumulative. The voting powers and the preferences and
relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding; and the Board
of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior
to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designation,
<PAGE>
preferences and relative, optional and other special rights,
and the qualifications, limitations and restrictions of such
series, including, but without limiting the generality of
the foregoing, the following:
(A) The distinctive designation of, and the number
of shares of Preferred Stock which shall constitute
such series, which number may be increased (except
where otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of
the Board of Directors;
(B) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred
Stock of such series shall be paid, the extent of the
preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or
series of the same or other classes of stock and
whether such dividends shall be cumulative or non-cumulative;
(C) The right, if any, of the holders of Preferred
Stock of such series to convert the same into or
exchange the same for, shares of any other class or
classes or of any series of the same or any other class
or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(D) Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption
price or prices and the time or times at which, and the
terms and conditions on which, Preferred Stock of such
series may be redeemed;
(E) The rights, if any, of the holders of
Preferred Stock of such series upon the voluntary or
involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding-up,
of the Corporation;
(F) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the
Preferred Stock of such series; and
(G) The voting powers, if any, of the holders of
such series of Preferred Stock which may, without
limiting the generality of the foregoing, include the
right, voting as a series or by itself or together with
other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more
series of Preferred Stock or under such other
<PAGE>
circumstances and on such conditions as the Board of
Directors may determine.
(2) The relative powers, preferences and rights of
each series of Preferred Stock in relation to the powers,
preferences and rights of each other series of Preferred
Stock shall, in each case, be as fixed from time to time by
resolution of the Board of Directors, and the consent, by
class or series vote or otherwise, of the holders of such of
the series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the
Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such
other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in such
resolution that the consent of the holders of a majority (or
such greater proportion as shall be therein fixed) of the
outstanding shares of such series voting therein shall be
required for the issuance of any or all other series of
Preferred Stock.
(3) Subject to any limitations set forth herein,
Shares of Common Stock or any series of Preferred Stock may
be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(4) The authorized amount of shares of Common Stock
and of Preferred Stock may, without a class or series vote,
be increased or decreased from time to time by the
affirmative vote of the holders of a majority of the stock
of the Corporation entitled to vote thereon."
THIRD: The amendment to the Articles of Incorporation was
authorized by vote or written consent of the Board of Directors,
followed by the vote of the holders of ____________ shares of
Common Stock out of a total of 18,726,189 issued and outstanding
shares entitled to vote on the amendment at a duly called meeting
of Shareholders on ___________, 1996. The amendment was opposed
by ______ shares of Common Stock entitled to vote thereon.
<PAGE>
IN WITNESS WHEREOF, we hereunto sign our names and affirm
that the statements made herein are true under the penalties of
perjury, this ____ day of __________, 1996.
GOLD SECURITIES CORPORATION
By: ______________________________
President
By: ______________________________
Secretary
<PAGE>
ATTACHMENT B
THIS PLAN AND AGREEMENT OF MERGER by and between Gold
Securities Corporation, an Idaho corporation (herein sometimes
called the "Idaho Corporation") and Evolutions, Inc., a Delaware
corporation (herein sometimes called the "Delaware Corporation")
W I T N E S S E T H :
WHEREAS, the Idaho Corporation was incorporated
by the filing of a Certificate of Incorporation in the office of
the Secretary of State of the State of Idaho on September 16, 1922
under the name Kaniksu Mining Company; the total number of shares
which it is authorized to issue is 50,000,000 shares of Common
Stock, no par value, and 5,000,000 shares of Preferred Stock, par
value $.01; and the total number of shares which are issued and
outstanding is 18,726,189 shares of Common Stock (617,964 if a
proposal for a .033 for one reverse stock split is approved by the
Idaho Corporation's shareholders);
WHEREAS, the Delaware corporation was incorporated
on February 7, 1994 under the provisions of the General
corporation Law of the State of Delaware; its registered office
in Delaware is in the City of Dover, County of Kent; the total
number of shares which it is authorized to issue is 50,000,000
Common Stock, par value $.01 per share and 5,000,000 shares of
Preferred Stock, par value $.01; and no shares have been issued;
and
WHEREAS, the laws of the State of Delaware and Idaho
permit the merger of said corporations (herein sometimes called
the "constituent corporations") into a single corporation; and
WHEREAS, it is deemed advisable by the Board of
Directors of each of the constituent corporations that the
Delaware corporation merge the Idaho corporation into the Delaware
corporation;
NOW, THEREFORE, it is agreed as follows:
1. The Idaho corporation as of the Effective Date shall
be and hereby is merged pursuant to Section 252 of the General
corporation Law of the State of Delaware into the Delaware
corporation. The Delaware corporation shall be the surviving
corporation and it shall continue and shall be deemed to continue
for all purposes whatsoever after the merger with and into itself
of the Idaho corporation. For convenience, the Delaware
corporation, as it shall exist as the surviving corporation after
such merger, is hereinafter referred to as the "corporation".
1
<PAGE>
2. The Merger shall become effective when this
Agreement has been adopted by the Idaho corporation and by the
Delaware corporation and appropriate documentation has been
prepared and filed in accordance with the laws of the States of
Idaho and Delaware. For operational, accounting and bookkeeping
purposes, the time when the Merger shall become effective is
referred to herein as the "Effective Date" which shall be the date
fixed in accordance with the laws of and the documentation filed
with the state of incorporation of the Surviving Corporation.
3. After the Effective Date, the corporation shall be
governed by the laws of the State of Delaware and its name shall
continue to be Evolutions, Inc. The present Certificate of
Incorporation of the corporation shall continue to be the
Certificate of Incorporation of the corporation. The present By-
Laws of the Delaware corporation shall be and remain the By-Laws
of the corporation and the existing By-Laws of the Idaho
corporation shall no longer be in effect. The directors and
officers of the Idaho Corporation immediately prior to the
Effective Date shall be the directors of the corporation upon the
Effective Date.
4. Each share of Common Stock of the Idaho Corporation
shall be converted into one share of Common Stock of the
corporation. Each option to purchase a share of Common Stock of
the Idaho Corporation shall be converted into an option to
purchase one share of Common Stock of the corporation.
5. Upon the Effective Date, the outstanding
certificates for shares of the Idaho Corporation's Common Stock
will, until replaced by the corporation, represent the same
number of shares of Common Stock of the corporation.
6. This Agreement may be terminated and abandoned by
action of the Board of Directors of the Idaho corporation or the
Delaware corporation at any time prior to the Effective Date, for
any reason whatsoever.
7. This Agreement, upon its being authorized, adopted,
approved, signed and acknowledged by each of the constituent
corporations in accordance with the laws under which it is formed,
and filed in the office of the Secretary of State of the State of
Delaware, shall take effect and shall thereupon be deemed and
taken to be the Agreement and act of merger and consolidation of
the constituent corporations; and the organization and separate
corporate existence of the Idaho corporation, except in so far as
it may be continued by statute, shall cease. The point of time at
which the constituent corporations shall become a single
corporation shall be the Effective Date.
8. Upon the Effective Date all and singular, the
rights, capacity, privileges, powers, franchises and authority of
2
<PAGE>
each of the constituent corporations, and all property real,
personal and mixed, and all debts, obligations and liabilities,
due to each of the constituent corporations on whatever account as
well as for subscriptions for shares as for all other things,
belonging to each of the constituent corporations shall be vested
in the corporation; and all such property, rights, capacity,
privileges, powers, franchises, authority and immunities and all
and every other interest shall be thereafter as fully and
effectually the property of the corporation as though they were
the property of the several and respective constituent
corporations, and shall not revert or be in any way impaired by
reason of the Merger; provided however, that all rights of the
creditors of the constituent corporations shall be preserved
unimpaired and all debts, liabilities (including liability, if
any, to dissenting shareholders) and duties of the respective
constituent corporations shall thenceforth be attached to the
corporation and may be enforced against it to the same extent as
if said debts, liabilities and duties had been incurred or
contracted by the corporation.
9. The Idaho Corporation agrees that from time to time
as when it shall be requested by the corporation or by its
successors or assigns, it will execute and deliver or cause to be
executed and delivered all such other instruments and will take or
cause to be taken such further or other action as the corporation
may deem necessary or desirable in order to vest in and to confirm
to the corporation title to all of the property, capacity,
privileges, powers, franchises, authority, and immunities of the
Idaho corporation and otherwise to carry out the intent and
purposes of this Agreement.
10. The corporation agrees that it may be served with
process in the State of Delaware or in the State of Idaho, in any
proceeding for enforcement of any obligation of the Idaho
corporation as well as for enforcement of any obligation of the
corporation arising from the merger, including any suit or other
proceeding to enforce the right of any stockholder as determined
in any appraisal proceeding pursuant to Section 30-1-80 of the
Idaho Business Corporation Act and shall irrevocably appoint the
Secretary of State of the State of Delaware as its agent in
Delaware and the Secretary of State of the State of Idaho as its
agent in Idaho to accept service of process in any such suit or
other proceeding. The address to which a copy of such process
shall be mailed by the Secretary of State of the State of Delaware
shall be c/o United Corporate Services, Inc., 15 East North
Street, Dover, Delaware 19901, and by the Secretary of State of
the State of Idaho shall be 65 Railroad Avenue, Ridgefield, New
Jersey 07657.
3
<PAGE>
11. The corporation hereby reserves the right to amend,
alter, change or repeal any provisions contained in any of the
articles of this Agreement or as the same may hereafter be
amended, in the manner now or hereafter provided by the laws of
the State of Delaware and all rights of the stockholders of the
corporation are granted subject to this reservation.
IN WITNESS WHEREOF, we have signed this Agreement this ___
day of __________________, 1996.
GOLD SECURITIES CORPORATION
By:
-----------------------------------
President
EVOLUTIONS, INC.
By:
-----------------------------------
President
<PAGE>
ATTACHMENT C
CERTIFICATE OF INCORPORATION
OF
EVOLUTIONS, INC.
--------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "corporation")
is EVOLUTIONS, INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 32 Loockerman
Square, Suite L-100, City of Dover 19901, County of Kent; and the name of the
registered agent of the corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is one thousand. The par value of each of such shares is
one cent. All such shares are of one class and are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
---- ---------------
Stephen Kenyon-Slade 885 Third Avenue
New York, New York 10022
SIXTH: The corporation is to have perpetual existence.
-1-
<PAGE>
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the Bylaws. The phrase "whole Board" and
the phrase "total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the corporation would
have if there were no vacancies. No election of directors need be by written
ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the Bylaws of the corporation
may be exercised by the Board of Directors of the corporation; provided,
however, that any provision for the classification of directors of the
corporation for staggered terms pursuant to the provisions of subsection (d)
of Section 141 of the General Corporation Law of the State of Delaware shall
be set forth in an initial Bylaw or in a Bylaw adopted by the stockholders
entitled to vote of the
-2-
<PAGE>
corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice
of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of the certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) of Section 242 of the General
Corporation Law of the State of Delaware shall otherwise require; provided,
that no share of any such class which is otherwise denied voting power shall
entitle the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7) of
subsection (b) of Section 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on February 4, 1994.
/s/ STEPHEN KENYON-SLADE
--------------------------
Incorporator
STEPHEN KENYON-SLADE
-3-
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
EVOLUTIONS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Evolutions, Inc.
2. The corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the corporation is hereby amended by
striking out Article Fourth thereof and by substituting in lieu of said Article
the following new Article Fourth:
"Fourth: The total number of shares of stock which the corporation shall
have authority to issue is one hundred thousand. The par value of each such
share is one cent. All such shares are of one class and are shares of Common
Stock."
4. The amendment of the certificate of incorporation of the corporation herein
certified was duly adopted, pursuant to the provisions of Section 241 of the
General Corporation Law of the State of Delaware, by at least a majority of the
directors who have been elected and qualified.
Signed on February 18, 1994.
Attest:
/s/ Michael Nafash
------------------------
Name: Michael Nafash
Title: President
/s/ Mark Mastroianni
- -------------------------
Name: Mark Mastroianni
Title: Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EVOLUTIONS, INC.
The undersigned corporation in order to amend its
Certificate of Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is Evolutions, Inc. It
was incorporated in accordance with the General Corporation Law
of Delaware on February 7, 1994.
SECOND: The Certificate of Incorporation of the corporation
is hereby amended as follows:
(a) The corporation wishes to appoint a new registered agent
in the State of Delaware, and to that end amends in its entirety
Article SECOND to read as follows:
"SECOND: The address of the Corporation's registered office
in the State of Delaware is 15 East North Street, Dover, Delaware
19901. The registered agent at such address shall be United
Corporate Services, Inc."
(b) The corporation wishes to increase the number of shares
of common stock it is authorized to issue from 100,000 to
50,000,000, par value $.01 per share, and to be authorized to
issue shares of Preferred Stock, par value $.01 per share, and to
that end further amends in its entirety Article FOURTH to read as
follows:
"FOURTH: a. The total number of shares of stock which the
corporation shall have authority to issue is 50,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of
Preferred Stock, par value $.01 per share.
b. (1) Shares of Preferred Stock may be issued
from time to time in one or more series as may from time to time
be determined by the Board of Directors, each of said series to
be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except that
there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting
powers and the preferences and relative, participating, optional
and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and the
designation, preferences and relative, optional and other special
<PAGE>
rights, and the qualifications, limitations and restrictions of
such series, including, but without limiting the generality of
the foregoing, the following:
(A) The distinctive designation of, and the number
of shares of Preferred Stock which shall constitute
such series, which number may be increased (except
where otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of
the Board of Directors;
(B) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred
Stock of such series shall be paid, the extent of the
preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or
series of the same or other classes of stock and
whether such dividends shall be cumulative or non-cumulative;
(C) The right, if any, of the holders of Preferred
Stock of such series to convert the same into or
exchange the same for, shares of any other class or
classes or of any series of the same or any other class
or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(D) Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption
price or prices and the time or times at which, and the
terms and conditions on which, Preferred Stock of such
series may be redeemed;
(E) The rights, if any, of the holders of
Preferred Stock of such series upon the voluntary or
involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding-up,
of the Corporation;
(F) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the
Preferred Stock of such series; and
(G) The voting powers, if any, of the holders of
such series of Preferred Stock which may, without
limiting the generality of the foregoing, include the
right, voting as a series or by itself or together with
other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more
series of Preferred Stock or under such other
circumstances and on such conditions as the Board of
<PAGE>
Directors may determine.
(2) The relative powers, preferences and rights of
each series of Preferred Stock in relation to the powers,
preferences and rights of each other series of Preferred
Stock shall, in each case, be as fixed from time to time by
resolution of the Board of Directors, and the consent, by
class or series vote or otherwise, of the holders of such of
the series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the
Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such
other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in such
resolution that the consent of the holders of a majority (or
such greater proportion as shall be therein fixed) of the
outstanding shares of such series voting therein shall be
required for the issuance of any or all other series of
Preferred Stock.
(3) Subject to any limitations set forth herein,
Shares of Common Stock or any series of Preferred Stock may
be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(4) The authorized amount of shares of Common Stock
and of Preferred Stock may, without a class or series vote,
be increased or decreased from time to time by the
affirmative vote of the holders of a majority of the stock
of the Corporation entitled to vote thereon."
THIRD: The Corporation has not received payment for any of
its stock and the amendments affected herein were authorized by
the consent in writing, setting forth the action so taken,
unanimously signed by the directors of the Corporation pursuant
to Section 241 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that
the statements made herein are true under the penalties of
perjury this 25th day of October 1995.
/s/ Michael Nafash
-------------------------
Michael Nafash, President
<PAGE>
ATTACHMENT D
30-1-80. Right of shareholders to dissent and obtain payment for
shares.- (a) Any shareholder of a corporation shall have the
right to dissent from, and to obtain payment for his shares in
the event of any of the following corporate actions:
(1) Any plan of merger or consolidation to which the
corporation is a party, except as provided in subsection (c) of
this section;
(2) Any sale, lease, exchange, or other disposition of all
or substantially all of the property and assets of the
corporation not made in the usual or regular course of its
business, including a sale in dissolution, but not including a
sale pursuant to an order of a court having jurisdiction in the
premises or a sale for cash on terms requiring that all or
substantially all of the net proceeds of sale be distributed to
the shareholders in accordance with their respective interests
within (1) year after the date of sale;
(3) Any plan of exchange to which the corporation is a
party, as the corporation the shares of which are to be acquired;
(4) Any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the
shares of the dissenting shareholder in that it:
(i) Alters or abolishes a preferential right of such
shares;
(ii) Creates, alters or abolishes a right in respect of
the redemption of such shares, including a provision
respecting a sinking fund for the redemption or repurchase
of such shares:
(iii) Alters or abolishes a preemptive right of the
holder of such shares to acquire shares or other securities;
(iv) Excludes or limits the right of the holder of such
shares to vote on any matter, or to cumulate his votes,
except as such right may be limited by dilution through the
issuance of shares of other securities with similar voting
rights; or
(5) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles of
incorporation, the bylaws, or a resolution of the board of
directors directs that dissenting shareholders shall have a right
to obtain payment for their shares.
(b) (1) A record holder of shares may assert dissenters' rights
as to less than all the shares registered in his name only if he
dissents with respect to all the shares beneficially owned by any
one (1) person, and discloses the name and address of the persons
<PAGE>
on whose behalf the dissents. In that event, his rights shall be
determined as if the shares as to which he has dissented and his
other shares were registered in the names of different
shareholders.
(2) A beneficial owner of shares who is not the record
holder may assert dissenters' rights with respect to shares held
on his behalf, and shall be treated as a dissenting shareholder
under the terms of this section and section 30-1-31, Idaho Code,
if he submits to the corporation at the time of or before the
assertion of these rights a written consent of the record holder.
(c) The right to obtain payment under this section shall not
apply to the shareholders of the surviving corporation in a
merger if a vote of the shareholders of such corporation is not
necessary to authorize such merger.
(d) A shareholder of a corporation who has a right under this
section to obtain payment for his shares shall have no right at
law or in equity to attack the validity of the corporate action
that gives rise to his right to obtain payment, nor to have the
action set aside or rescinded, except when the corporate action
is unlawful or fraudulent with regard to the complaining
shareholder or to the corporation.
<PAGE>
ATTACHMENT E
30-1-81. Procedures for protection of dissenters' rights.- (a) As
used in this section:
(1) "Dissenter" means a shareholder or beneficial owner who
is entitled to and does assert dissenters' rights under section
30-1-80, Idaho Code, and who has performed every act required up
to the time involved for the assertation of such rights.
(2) "Corporation" means the issuer of the shares held by the
dissenter before the corporate action or the successor by merger
or consolidation of that issuer.
(3) "Fair value" of shares means their value immediately
before the effectuation of the corporate action to which the
dissenter objects, excluding any application or depreciation in
anticipation of such corporate action unless such exclusion would
be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment at the average rate
currently paid by the corporation on its principal bank loans,
or, if none, at such rate as is fair and equitable under all the
circumstances.
(b) If a proposed corporate action which would give rise to
dissenters' rights under subsection (a) of section 30-1-80, Idaho
Code, is submitted to a vote at a meeting of shareholders, the
notice of meeting shall notify all shareholders that they have
or may have a right to dissent and obtain payment for their
shares by complying with the terms of this section, and shall be
accompanied by a copy of sections 30-1-80 and 30-1-81, Idaho
Code.
(c) If the proposed corporate action is submitted to a vote at a
meeting of shareholders, any shareholder who wishes to dissent
and obtain payment for his shares shall refrain from voting his
shares in approval of such action. A shareholder who votes in
favor of such action shall acquire no right to payment for his
shares under this section or section 30-1-80, Idaho Code.
(d) If the proposed corporate action is approved by the required
vote at a meeting of shareholders, the corporation shall mail a
further notice to all shareholders who refrained from voting in
favor of the adoption of the plan of corporate action. The
notice shall:
(1) State where and when a demand for payment must be sent
and certificates of certificated shares must be deposited in
order to obtain payment;
(2) Inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that demand
for payment was received;
<PAGE>
(3) Supply a form for demanding payment which includes a
request for certification of the date on which the shareholder,
or the person on whose behalf the shareholder dissents, acquired
beneficial ownership of the shares; and
(4) Be accompanied by a copy of sections 30-1-80 and 30-1-
81, Idaho Code. The time set of the demand and deposit shall be
not less than thirty (30) days from the mailing of the notice.
(e) A shareholder who fails to demand payment or fails (in the
case of certificated shares) to deposit certificates, as required
by a notice pursuant to subsection (d) of this section shall have
no right under this section or section 30-1-80, Idaho Code, to
receive payment for his shares. If the shares are not
represented by certificates, the corporation may restrict their
transfer from the time of receipt of demand for payment until
effectuation of the proposed corporation action, or the release
of restrictions under the terms of the subsection (f) of this
section. The dissenter shall retain all other rights of a
shareholder until these rights are modified by effectuation of
the proposed corporate action.
(f) (1) Within sixty (60) days after the date set for demanding
payment and depositing certificates, if the corporation has not
effectuated the proposed corporate action and remitted payment
for shares pursuant to paragraph (3) of this subsection, it shall
return any certificates that have been deposited, and release
uncertificated shares from any transfer restrictions imposed by
reason of the demand for payment.
(2) When uncertificated shares have been released from
transfer restrictions, and deposited certificates have been
returned, the corporation may at any time send a new notice
conforming to the requirements of subsection (d) of this section,
with like effect.
(3) Immediately upon effectuation of the proposed corporate
action, or upon receipt of demand for payment if the corporate
action has already been effectuated, the corporation shall remit
to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates, the amount which
the corporation estimates to be the fair value of the shares,
with interest if any has accrued. The remittance shall be
accompanied by:
(i) The corporation's closing balance sheet and
statement of income for a fiscal year ending not more than
sixteen (16) months before the date of remittance, together
with the latest available interim financial statements;
(ii) A statement of the corporation's estimate of fair
value of the shares; and
(iii) A notice of the dissenter's right to demand
<PAGE>
supplemental payment.
(g) (1) If the corporation fails to remit as required by
subsection (f) hereof, or if the dissenter believes that the
amount remitted is less than the fair value of his shares, or
that the interest is not correctly determined, he may send the
corporation his own estimate of the value of the shares or of the
interest and demand payment of the deficiency.
(2) If the dissenter does not file such an estimate within
thirty (30) days after the corporation's mailing of its
remittance, he shall be entitled to no more than the amount
remitted.
(h) (1) Within sixty (60) days after receiving a demand for
payment pursuant to subsection (g) hereof, if any such demands
for payment remain unsettled, the corporation shall file in an
appropriate court a petition requesting that the fair value of
the shares and interest thereon be determined by the court.
(2) An appropriate court shall be the district court in the
county of this state where the registered office of the
corporation is located. If, in the case of a merger or
consolidation or exchange of shares, the corporation is a foreign
corporation without a registered office in this state, the
petition shall be filed in the county where the registered office
of the foreign corporation was last located. If there is no
known registered office, the petition may be filed in Ada County,
Idaho.
(3) All dissenters, wherever residing, whose demands have
not been settled shall be made parties to the proceeding as in
an action against their shares. A copy of the petition shall be
served on each such dissenter. If a dissenter is a nonresident,
the copy may be served on him by registered or certified mail or
by publication as provided by law.
(4) The jurisdiction of the court shall be plenary and
exclusive. the court may appoint one (1) or more persons as
appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers shall have such power and
authority as shall be specified in the order of their appointment
or in any amendment thereof. The dissenters shall be entitled to
discovery in the same manner as parties in other civil suits.
(5) All dissenters who are made parties shall be entitled to
judgment for the amount by which the fair of their shares is
found to exceed the amount previously remitted, with interest.
(6) If the corporation fails to file a petition as provided
in paragraph (1) of this subsection (h), each dissenter who made
a demand and who has not already settled his claim against the
corporation shall be paid by the corporation the amount demanded
by him, with interest, and may sue therefor in an appropriate
<PAGE>
court.
(i) (1) The cost and expenses of any proceeding under subsection
(h) of this section, including the reasonable compensation and
expenses of appraisers appointed by the court, shall be
determined by the court and assessed against the corporation,
except that any part of the costs and expenses may be apportioned
and assessed as the court may deem equitable against all or some
of the dissenters who are parties and whose action in demanding
supplemental payment the court finds to be arbitrary, vexatious,
or not in good faith.
(2) Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court may deem
equitable against the corporation and in favor of any or all
dissenters if the corporation failed to comply substantially with
the requirements of this section, and may be assessed against
either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith in respect to the rights provided by this section
and section 30-1-80, Idaho Code.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated and should not be assessed against the
corporation, it may award to counsel reasonable fees to be paid
out of the amounts awarded to the dissenters who were benefitted.
(j) (1) Notwithstanding the foregoing provisions of this
section, the corporation may elect to withhold the remittance
required by subsection(f) of this section from any dissenter with
respect to shares of which the dissenter (or the person on whose
behalf the dissenter acts) was not the beneficial owner on the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action. With respect to
such shares, the corporation shall, upon effectuating the
corporate action, state to each dissenter its estimate of the
fair value of the shares, state the rate of interest to be used
(explaining the basis thereof), and offer to pay the resulting
amounts on receiving the dissenter's agreement to accept them in
full satisfaction.
(2) If the dissenter believes that the amount offered is
less than the fair value of the shares and interest determined
according to this section, he may within thirty (30) days after
the date of mailing of the corporation's offer, mail the
corporation his own estimate of fair value and interest, and
demand their payment. If the dissenter fails to do so, he shall
be entitled to no more than the corporation's offer.
(3) If the dissenter makes a demand as provided in paragraph
(2) of this subsection (j), the provisions of subsections (h) and
(i) of this section shall apply to further proceedings on the
<PAGE>
dissenter's demand.
<PAGE>
ATTACHMENT F
GOLD SECURITIES CORPORATION
FORM OF 1996 STOCK OPTION PLAN
There is hereby established a 1996 Stock Option Plan
(the "Plan"). The Plan provides for the grant to certain
employees and others who render services to Gold Securities
Corporation or its subsidiaries (the "Company") of options
("Options") to purchase shares of common stock of the Company
("Common Stock").
1. Purpose: The purpose of the Plan is to provide
additional incentive to the officers, employees, and others who
render services to the Company, who are responsible for the
management and growth of the Company, or otherwise contribute to
the conduct and direction of its business, operations and
affairs. It is intended that Options granted under the Plan
strengthen the desire of such persons to join and remain in the
employ of the Company and stimulate their efforts on behalf of
the Company.
2. The Stock: The aggregate number of shares of Common
Stock which may be subject to Options shall not exceed 500,000
[on a post reverse split basis]. Such shares may be either
authorized and unissued shares, or treasury shares. If any Option
granted under the Plan shall expire, terminate or be canceled for
any reason without having been exercised in full, the
corresponding number of unpurchased shares shall again be
available for the purposes of the Plan.
3. Types of Options. Options granted under the Plan
shall be in the form of (i) incentive stock options ("ISOs"), as
defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or (ii) non-statutory options which do not
qualify under such Section ("NSOs"), or both, in the discretion
of the Board of Directors or any committee appointed by the Board
(each, the "Committee"). The status of each Option shall be
identified in the Option Agreement.
4. Eligibility:
a. ISOs may be granted to such employees
(including officers and directors who are employees) of the
Company as the Committee shall select from time to time.
b. NSOs may be granted to such employees
(including officers and directors) of the Company, and to other
persons who render services to the Company, as the Committee
shall select from time to time.
5. General Terms of Options:
a. Option Price. The price or prices per share of
<PAGE>
Common Stock to be sold pursuant to an Option (the "exercise
price") shall be such as shall be fixed by the Committee but
shall in any case not be less than:
(1) the fair market value per share for such
Common Stock on the date of grant in the case of ISOs other
than to a 10% Shareholder,
(2) 110% of the fair market value per share
for such Common Stock on the date of grant in the case of
ISOs to a 10% Shareholder, and
(3) the fair market value per share on the
date of grant in the case of NSOs.
A "10% Shareholder" means an individual who within the meaning of
Section 422(b)(6) of the Code owns stock possessing more than 10
percent of the total combined voting power of all classes of
stock of the Company or of its parent or any subsidiary
corporation.
b. Period of Option Vesting. The Committee shall
determine for each Option the period during which such Option
shall be exercisable in whole or in part, provided that no ISO to
a 10% Shareholder shall be exercisable more than five years after
the date of grant.
c. Special Rule for ISOs. The aggregate fair
market value (determined at the time the ISO is granted) of the
stock with respect to which ISOs are exercisable for the first
time by an Optionee during any calendar year (under all such
plans of the Company, its parent or subsidiary) shall not exceed
$100,000, and any excess shall be considered an NSO.
d. Effect of Termination of Employment.
(1) The Committee shall determine for each
Option the extent, if any, to which such Option shall be
exercisable in the event of the termination of the Optionee's
employment with or rendering of other services to the Company.
(2) However, any such Option which is an ISO
shall in all events lapse unless exercised by the Optionee:
(a) prior to the 89th day after the
date on which employment terminated, if termination was
other than by reason of death; and
(b) within the twelve-month period next
succeeding the death of the Optionee, if termination is
by reason of death.
2
<PAGE>
(3) The Committee shall have the right, at
any time, and from time to time, with the consent of the
Optionee, to modify the lapse date of an Option and to convert an
ISO into an NSO to the extent that such modification in lapse
date increases the life of the ISO beyond the dates set forth
above or beyond dates otherwise permissible for an ISO.
(4) After the date on which employment was
terminated, in addition to any other applicable restrictions,
Options may be exercised only if, in the Company's sole
discretion, the Optionee has not during Optionee's employment or
thereafter conducted himself in a way which adversely affects the
Company.
e. Payment for Shares of Common Stock. Upon
exercise of an Option, the Optionee shall make full payment of
the Option Price:
(1) in cash, or,
(2) with the consent of the Committee and to
the extent permitted by it:
(a) with Common Stock of the Company
valued at fair market value on date of
exercise, but only if held by the Optionee
for a period of time sufficient to prevent a
pyramid exercise that would create a charge
to the Company's earnings,
(b) with a full recourse interest
bearing promissory note of the Optionee,
secured by a pledge of the shares of Common
Stock received upon exercise of such Option,
and having such other terms and conditions as
determined by the Committee,
(c) by delivering a properly executed
exercise notice together with irrevocable
instructions to a broker to sell shares
acquired upon exercise of the Option and
promptly to deliver to the Company a portion
of the proceeds thereof equal to the exercise
price, or
(d) any combination of any of the
foregoing.
f. Option Exercises. Options shall be exercised by
submitting to the Company a signed copy of notice of exercise in
a form to be supplied by the Company. The exercise of an Option
shall be effective on the date on which the Company receives such
3
<PAGE>
notice at its principal corporate offices. The Company may cancel
such exercise in the event that payment is not effected in full,
subject to the terms of Section 1(e) above.
g. Non-Transferability of Option. No Option shall
be transferable by the Optionee or otherwise than by will or by
the laws of descent and distribution. During the Optionee's
lifetime, such Option shall be exercisable only by such Optionee.
If an Optionee should die while in the employ of the Company, the
Option theretofore granted to the Optionee, to the extent then
otherwise exercisable, shall be exercisable only by the estate of
the Optionee or by a person who acquired the right to exercise
such Option by bequest or inheritance or otherwise by reason of
the death of the Optionee.
6. Other Plan Terms.
a. Number of Options which may be Granted to, and
Number of Shares of Common Stock which may be Acquired by
Employees.
(1) The Committee may grant more than one
Option to an individual, and, subject to the requirements of
Section 422 of the Code, with respect to ISOs, such Option may be
in addition to, in tandem with, or in substitution for, Options
previously granted under the Plan or of another corporation and
assumed by the Company.
(2) The Committee may permit the voluntary
surrender of all or a portion of any Option granted under the
Plan or otherwise to be conditioned upon the granting to the
employee of a new Option for the same or a different number of
shares of Common Stock as the Option surrendered, or may require
such voluntary surrender as a condition precedent to a grant of a
new Option to such employee. Such new Option shall be exercisable
at the price, during the period, and in accordance with any other
terms or conditions specified by the Committee at the time the
new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the price, period of
exercise, or any other terms or conditions of the Option
surrendered.
b. Period of Grant of Options. Options under the
Plan may be granted at any time after the Plan has been approved
by the shareholders of the Company. However, no Option shall be
granted under the Plan after _____________, 2006.
c. Effect of Change in Common Stock. In the event
of a reorganization, recapitalization, liquidation, stock split,
stock dividend, combination of shares, merger or consolidation,
or the sale, conveyance, lease or other transfer by the Company
of all or substantially all of its property, or any change in the
4
<PAGE>
corporate structure or shares of common stock of the Company,
pursuant to any of which events the then outstanding shares of
the common stock are split up or combined or changed into, become
exchangeable at the holder's election for, or entitle the holder
thereof to other shares of common stock, or in the case of any
other transaction described in Section 424(a) of the Code, the
Committee may change the number and kind of shares of Common
Stock available under the Plan and any outstanding Option
(including substitution of shares of common stock of another
corporation) and the price of any Option and the fair market
value determined under this Plan in such manner as it shall deem
equitable in its sole discretion.
d. Optionees not Shareholders. An Optionee or a
legal representative thereof shall have none of the rights of a
stockholder with respect to shares of Common Stock subject to
Options until such shares shall be issued or transferred upon
exercise of the Option.
7. Option Agreement. The Company shall effect the
grant of Options under the Plan, in accordance with
determinations made by the Committee, by execution of instruments
in writing in a form approved by the Committee. Each Option
shall contain such terms and conditions (which need not be the
same for all Options, whether granted at the time or at different
times) as the Committee shall deem to be appropriate and not
inconsistent with the provisions of the Plan, and such terms and
conditions shall be agreed to in writing by the Optionee.
8. Certain Definitions.
a. Fair Market Value. As used in the Plan, the
term "fair market value" shall mean as of any date:
(1) if the Common Stock is not traded on any
over-the-counter market or on a national securities
exchange, the value determined by the Committee using the
best available facts and circumstances,
(2) if the Common Stock is traded in the
over-the-counter market, based on most recent closing prices
for the Common Stock on the date the calculation thereof
shall be made, or
(3) if the Common Stock is listed on a
national securities exchange, based on the most recent
closing prices for the Common Stock of the Company on such
exchange.
b. Subsidiary and Parent. The term "subsidiary"
and "parent" as used in the Plan shall have the respective
meanings set forth in Sections 424(f) and (e) of the Internal
5
<PAGE>
Revenue Code.
9. Not an Employment Contract. Nothing in the Plan or
in any Option or stock option agreement shall confer on any
Optionee any right to continue in the service of the Company or
any parent or subsidiary of the company or interfere with the
right of the Company to terminate such Optionee's employment or
other services at any time.
10. Withholding Taxes:
(a) Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the
Company shall have the right to require the Optionee to remit to
the Company an amount sufficient to satisfy any Federal, state
and/or local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares.
Alternatively, the Company may, in its sole discretion from time
to time, issue or transfer such shares of Common Stock net of the
number of shares sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of Common
Stock shall be valued on the date the withholding obligation is
incurred.
(b) In the case of shares of Common Stock that an
Optionee receives pursuant to his exercise of an Option which is
an ISO, if such Optionee disposes of such shares of Common Stock
within two years from the date of the granting of the ISO or
within one year after the transfer of such shares of Common Stock
to him, the Company shall have the right to withhold from any
salary, wages, or other compensation for services payable by the
Company to such Optionee, amounts sufficient to satisfy any
withholding tax obligation attributable to such disposition.
(c) In the case of a disposition described in
Section (b), the Optionee shall give written notice to the
Company of such disposition within 30 days following the
disposition within 30 days following the disposition, which
notice shall include such information as the Company may
reasonably request to effectuate the provisions hereof.
11. Agreements and Representations of Optionees:
As a condition to the exercise of an Option,
unless counsel to the Company opines that it is not necessary
under the Securities Act of 1933, as amended, and the pertinent
rules thereunder, as the same are then in effect, the Optionee
shall represent in writing that the shares of Common Stock being
purchased are being purchased only for investment and without any
present intent at the time of the acquisition of such shares of
Common Stock to sell or otherwise dispose of the same.
6
<PAGE>
12. Administration of the Plan:
a. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan, the
Committee shall have authority, in its discretion, to determine
the individuals to receive Options, the times when they shall
receive them and the number of shares of Common Stock to be
subject to each Option, and other terms relating to the grant of
Options. Directors, including those that may be members of the
Committee, shall be eligible to receive Options under the Plan.
b. Subject to the express provisions of the Plan,
the Committee shall have authority to construe the respective
option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the
terms and provisions of the respective option agreements (which
need not be identical) and, as specified in this Plan, the fair
market value of the common stock, and to make all other
determinations necessary or advisable for administering the Plan.
The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient
to carry it into effect, and it shall be the sole and final judge
of such expediency. The determinations of the Committee on the
matters referred to in this Section 12 shall be conclusive.
c. The Committee may, in its sole discretion, and
subject to such terms and conditions as it may adopt, accelerate
the date or dates on which some or all outstanding Options may be
exercised.
d. The Committee may require that any Option
Shares issued be legended as necessary to comply with applicable
federal and state securities laws.
13. Amendment and Discontinuance of the Plan:
a. The Board of Directors of the Company may at
any time alter, suspend or terminate the Plan, but no change
shall be made which will have a material adverse effect upon any
Option previously granted, unless the consent of the Optionee is
obtained; provided, however, that the Board of Directors may not
without further approval of the shareholders, (i) increase the
maximum number of shares of Common Stock for which Options may be
granted under the Plan or which may be purchased by an individual
Optionee, (ii) decrease the minimum option price provided in the
Plan, or (iii) change the class of persons eligible to receive
Options.
b. The Company intends that Options designated by
the Committee as ISOs shall constitute ISOs under Section 422 of
the Code. Should any provision in this Plan for ISOs not be
7
<PAGE>
necessary in order to so comply or should any additional
provisions be required, the Board of Directors of the Company may
amend the Plan accordingly without the necessity of obtaining the
approval of the shareholders of the Company.
14. Other Conditions: If at any time counsel to the
Company shall be of the opinion that any sale or delivery of
shares of Common Stock pursuant to an Option granted under the
Plan is or may in the circumstances be unlawful under the
statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make such sale or
delivery, and the Company shall not be required to make any
application or to effect or to maintain any qualification or
registration under the Securities Act of 1933 or otherwise with
respect to shares of Common Stock or Options under the Plan, and
the right to exercise any such Option may be suspended until, in
the opinion of said counsel, such sale or delivery shall be
lawful.
At the time of any grant or exercise of any Option, the
Company may, if it shall deem it necessary or desirable for any
reason connected with any law or regulation of any governmental
authority relative to the regulation of securities, condition the
grant and/or exercise of such Option upon the Optionee making
certain representations to the Company and the satisfaction of
the Company with the correctness of such representations.
13. Approval; Effective Date; Governing Law. The Plan
was adopted by the Board of Directors and was approved by the
stockholders of the Company. The effective date of this Plan is
____________, 1996. This Plan shall be interpreted in accordance
with the internal laws of the State of New Jersey.
8
<PAGE>
ATTACHMENT G
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended
December 31, 1994 Commission File Number 1-8958
----------------- -----------------------------
GOLD SECURITIES CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Idaho 91-1224178
------------------- ----------
(State or other jurisdiction of IRS Employer I.D. Number
incorporation or organization)
5503 E. Broadway, Spokane, Washington 99212
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
P.O. Box 14027, Spokane, Washington 99214
- -----------------------------------------------------------------
(Permanent corporate mailing address) (Zip Code)
Registrant's phone number, including area code (509) 535-4492
Securities registered pursuant to Section 12 (b) of the Act:
Common Non-Assessable Stock - No 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 Act during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
YES X NO ___
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. /X/
The registrant's revenues for its most recent fiscal year were: $924.00.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $330,027 as of April 5, 1995.
At April 5, 1995, the registrant had outstanding 8,726,189 shares of
non-assessable no par value common stock.
The Exhibit Index is located on page 23 of this Form 10-K.
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART I
Item 1: Business
a) The Registrant was incorporated September 16, 1922, in the State of Idaho and
authorized to issue capital stock in the amount of $300,000 divided into
3,000,000 shares with a par value of $.10 per share.
On April 17, 1981, the shareholders of Kaniksu Mining Company, Inc. (an Idaho
Corporation), and Gold Securities, Inc. (a Washington Corporation), approved
the merger of the two Companies, Kaniksu Mining Company, Inc., being the
surviving Company. The shareholders approved changing the name to Gold
Securities Corporation and approved the par value change to no par value and
changed the capitalization to 10,000,000 shares authorized.
On December 15, 1986, the shareholders approved the increase in
capitalization to 50,000,000 shares authorized. The shareholders also
approved the elimination of Preemptive Rights.
The Company is deemed to be a development stage company pursuant to
Regulation S-X. As used herein, the term "development stage company" means a
development stage company as defined in Statement of Financial Accounting
Standards (Accounting and Reporting by Development Stage Enterprises). In
using such term, the Company does not imply that its exploration has
disclosed a commercially mineable ore deposit.
The Company owns mining claims and has a lease agreement with Zortman
Mining, Inc., a wholly owned subsidiary of Pegasus Gold Corp. These claims
are located within the Little Rockies Mining District near Zortman/Landusky,
Montana where Pegasus operates two gold and silver mines. The lease
agreement, which covers 145 claims, is in effect until the year 2002 with an
additional 5 year option available. In the event commercial production should
commence on leased property, the Company will receive net profits royalties
in addition to certain minimum payments. Some exploration has been done on
these claims. It is not expected that any mining will be conducted on these
claims in 1995. It is anticipated that exploration will continue for the next
several years on this property. (See Item 2 - Properties)
-1-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
Part I, Continued
Item 1: Business, Continued
The Company has no employees.
It is felt that no other provisions of Item 101 of Regulation S-K needs to be
addressed in this section of the Report because they are not applicable or
will be more specifically answered in other sections of this Report.
Item 2: Properties
Little Rockies Property
The Company owns three mining claims plus royalty rights on 142 other claims
in what is known as the Little Rockies Unorganized Mining District located
near Landusky and Zortman, Montana, situated in Phillips County. The Area is
about fifty (50) miles southwest of Malta, Montana and is bound in part on
the West and North by the Fort Belknap Indian Reservation.
On October 6, 1982, the Company leased its claims for twenty (20) years with
an option for an additional five (5) years to Zortman Mining Inc., a wholly
owned subsidiary of Pegasus Gold, Inc. The Lease was modified in 1986 and
provided for advance royalty payments of $800 per month until August of 1988.
After August of 1988, the payment was $400 per month until August of 1989,
thence $200 per month until August of 1993. Now, if commercial production
commences on these claims, then the Company would be entitled to $1000 per
month minimum advanced royalty or at least 2-1/2% to 25% Defined Net Profits
Royalty payment, whichever is greater.
An additional 537 claims owned by Zortman Mining, Inc. are included in the
royalty obligations of our lease. The Company has realized over $130,000 in
various lease payments relative to these claims. In addition, Zortman Mining,
Inc. has expended over $600,000 in related assessment work on these leased
claims which has benefitted Gold Securities Corporation. Limited exploration
is ongoing on certain of these claims which fall under our existing royalty
agreements and the Company is hopeful that in the future an economic ore body
could be discovered and mined from these claims. However, no determination as
to the outcome of past and current exploration can be made at this time. But
exploration will continue on the project.
-2-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
Part I, Continued
Item 3: Legal Proceedings
None.
Item 4: Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5: Market for the Registrant's Common Stock and Related Stockholders
Matters
a) (i) Not Applicable
(ii) The Registrant's common stock was listed on the Spokane Stock Exchange
on June 26, 1986. The Spokane Stock Exchange closed its doors in May
of 1991. The prices reflected below for the years 1994 and 1993 are
from brokers that have quoted and traded the stock as it is now listed
on the NASDAQ Bulletin Board and "Pink Sheets" under the stock symbol
"GLDS".
1994 1993
---- ----
High Low High Low
---- --- ---- ---
First Quarter $.03 $.01 $.01 $.01
Second Quarter $.04 $.01 $.01 $.01
Third Quarter $.20 $.15 $.01 $.01
Fourth Quarter $.15 $.11 $.01 $.01
(iii) The above table sets forth the range of high and low bid prices
as reported by NASDAQ Bulletin Board Quotes and are from the market
makers listed in the Pink Sheets. The quotes reflect inter-dealer
prices without retail mark-up, or mark-down, or commissions, and may
not represent actual trades.
b) As of December 31, 1994 there were 336 holders of record of the Registrant's
common stock.
c) There have been no dividends paid by the Company and the Company has no
plans at this time to declare any stock dividends. However, there are no
restrictions on the payment of dividends on the Registrant's common stock.
-3-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART II, Continued
Item 6: Selected Financial Data
Following is a summary of selected financial data which highlights
significant trends in the Registrant's Financial Condition and Results of
Operations.
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Revenues:
- ---------
Royalty $ -0- $ 1,400 $ 2,400 $ 2,400 $ 2,400
Other 924 915 1,188 2,090 3,045
--- ----- ----- ----- -----
924 2,315 3,588 4,490 5,545
=== ===== ===== ===== =====
Net Earnings $(256,231) $(10,475) $ (7,978) $(47,327) $(82,984)
(Loss) ======= ====== ===== ====== ======
Earnings per
common share
no dilution $ (.03) $ (.001) $ (.001) $ (.008) $ (.015)
=== ==== ==== ==== ====
Total assets $ 81,632 $325,766 $328,041 $327,619 $363,546
====== ======= ======= ======= =======
Long Term $ -0- $ -0- $ -0- $ -0- $ -0-
Debt
Stockholders' $ 81,035 $325,766 $327,841 $327,619 $363,546
Equity ====== ======= ======= ======= =======
Common shares
Outstanding 8,606,189 7,456,189 6,616,189 5,776,189 5,671,189
-4-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART II, Continued
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company is primarily a development stage company and receives income
from interest received from cash in money market accounts and from the
occasional sale of its capital stock to investors on a private placement
basis. This income is adequate to cover normal general operating expenses.
However, this income will not be sufficient to sustain the overhead of the
Company indefinitely.
Office rent is paid either by cash or issuance of investment stock, or a
combination of both.
Management fee and Director's fees are financed by the issuance of
investment stock in lieu of cash. This stock is issued as of the first
trading day of each new year, or as prudently thereafter as practical. This
method has been approved by the shareholders and the Board of Directors.
1994 versus 1993
Gross income for 1994 was $924 compared to gross income for 1993 of $2,315.
Expenses for 1994 were $30,830 plus a writedown of mining claims for
$226,325, compared to expenses for 1993 of $12,790. Management fee and
Director's fees are a non-cash item.
1993 versus 1992
Gross income for 1993 was $2,315 compared to gross income for 1992 of
$3,558. Expenses for 1993 were $12,790 compared to expenses for 1992 of
$11,566. Management fee and Directors fees are a non-cash item. Lease income
was $200 per month until August 1, 1993. No more lease income is due the
registrant at this time.
A significant cash deficit is not anticipated in 1995. The Company has
adequate funds to cover any anticipated expenses for 1995. The Company will
more than likely be required to raise operating funds for 1996 and beyond to
continue to operate under present conditions. In the event additional
funding is required, the Company would attempt to accomplish the required
funding by the methods described in the Results of Operations Section of
this Report. (See Item 7, c)
-5-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART II, Continued
Item 7: Management's Discussion and Analysis of Financial Condition and
results of Operations
a) Liquidity and Capital Resources
The principal assets of the Company are the mining claims included in the
royalty leases with Pegasus Gold Corp. at Zortman/Landusky, Montana. The
property covered by these Leases requires that certain rental fees and
filing obligations be complied with on an annual basis. These functions have
been done for several years by Pegasus and they will continue to do so while
the Leases are in effect which is until at least until the year 2002.
b) At the present time, the Company has no commitments for any significant
capital expenditures. Capital expenditures should be small and the Company
has adequate cash reserves to fund them through fiscal 1995.
c) Results of Operations
The Company at the present time really has no "Operations". Our initial
business plan was to acquire a working interest in a gold mining operation.
The Company has not been successful in this endeavor. We now intend to wait
and see if Pegasus Gold Corp. discovers and mines economical ore from
property that comes under our present leases. This should be determined one
way or another within the next five years. If mining is achieved our income
should improve considerably. However, it should be noted that if this does
not occur, which is quite possible, then the Company's income will diminish
and continue to do so under the Company's present operating conditions.
Management believes that presently the most favorable business plan for the
Company is to focus our efforts for a possible merger. There have been
considerable inquiries relative to this possibility. To date, nothing
definitive has been accomplished even though the Company did attempt by
acquiring the assets of a California Partnership to do a deal that would
have resulted in a change of control of the Company. This deal was
subsequently rescinded and has no efffect on the present condition of the
Company. More definitive information concerning this transaction is
contained in Form 8-K which was timely filed.
-6-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART II, Continued
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations, Continued
c) Results of Operations, Continued
As previously mentioned, the Company will continue to search for a merger
candidate or similar situation. If funding is required for a future event it
is possible that such required funding will not be available. However, the
Company believes that funding could be available by several methods. The
main method would be the availability of 41,173,811 shares of authorized and
unissued capital stock that could be used for asset infusion, operating
capital, merger potential, etc. The Company does not anticipate any
immediate funding needs, but our stock registration and listing on the
NASDAQ Bulletin Board should enhance our capital funding capabilities.
In summation, our corporate affairs remain solvent and the Company has
adequate cash for this year's present operating expenses, no significant
debt, and a positive outlook for the potential of a merger or acquisition
during 1995.
Item 8: Financial Statements and Supplementary Data
Pages 8 through 20 of this Report contain the necessary financial data for
compliance with this Form 10-K.
(This space left blank on purpose)
-7-
<PAGE>
GOLD SECURITIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
-8-
<PAGE>
TERRENCE J. DUNNE, MBA, MST
Certified Public Accountant
Member:
SEC PRACTICE SECTION Suite 1100
OF THE AMERICAN Washington Trust Bank Bldg.
INSTITUTE OF CERTIFIED West 717 Sprague
PUBLIC ACCOUNTANTS Spokane, Washington 99204
WASHINGTON SOCIETY OF (509) 747-6752
CERTIFIED PUBLIC
ACCOUNTANTS Since 1978
To The Board of Directors of
Gold Securities Corporation
Spokane, Washington
INDEPENDENT AUDITOR'S REPORT
I have audited the statement of financial position of Gold Securities
Corporation (a development stage company) as of December 31, 1994 and the
related statements of operations, changes in stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit. The financial statements of Gold
Securities Corporation as of December 31, 1993, and the years ended December 31,
1993 and 1992 and cumulative amounts from April 17, 1981, were audited by other
auditors whose report dated March 10, 1994 expressed an unqualified opinion on
these statements.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Gold Securities Corporation as of
December 31, 1994 and the results of operations, changes in stockholders' equity
and cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Terrence J. Dunne
Terrence J. Dunne
Certified Public Accountant
Spokane, Washington
April 7, 1995
-9-
<PAGE>
Gold Securities Corporation Statement of Financial Position As
(A Development Stage Company) Of December 31, 1994 and 1993
- -----------------------------------------------------------------------
ASSETS
------
1994 1993
---- ----
CURRENT ASSET - Cash $ 20,011 $ 37,591
------- -------
MINING PROPERTIES (Notes 1 & 2) 61,621 287,945
------- -------
OTHER ASSET - Deposits 230
------- -------
TOTAL ASSETS $ 81,632 $ 325,766
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES - Accounts payable $ 597
----
STOCKHOLDERS' EQUITY
Common stock; no-par value, 50,000,000
shares authorized, 7,456,189 shares
issued and outstanding as of December 31,
1993 and 8,606,189 shares issued and
outstanding as of December 31, 1994 640,269 $ 628,769
Accumulated deficit:
Prior to development stage (93,296) (93,296)
During the development stage (465,938) (209,707)
------- -------
Total stockholders' equity 81,035 325,766
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,632 $ 325,766
======= =======
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Gold Securities Corporation Statement of Operations For the Years
(A Development Stage Company) Ended December 31, 1994, 1993 and 1992
and Cumulative Amounts From April 17,
1981 Through December 31, 1994
- -----------------------------------------------------------------------
April 17,
1981
Through
December
1994 1993 1992 31, 1994
---- ---- ---- --------
REVENUE
Lease $ $ 1,400 $ 2,400 $ 101,800
Interest 924 915 1,188 32,765
Gain on sale of stock 4,744
Other 372
------- ------- ------- -------
Total revenue 924 2,315 3,588 139,681
------- ------- ------- -------
OPERATING EXPENSES
Management fees 10,606 4,500 4,500 59,856
Registration 7,500
Assessment work 12,154
Directors fees 6,500 1,500 1,500 24,000
Telephone 1,486 1,123 702 19,397
Rent 3,000 2,400 2,400 37,397
Travel 1,145 1,265 20,878
Licenses and fees 1,370 694 329 15,280
Office 4,162 413 344 25,803
Public relations 150 11,554
Contributions 125 50 1,600
Legal and accounting 3,563 300 310 16,842
Meetings and seminars 143 375 62 4,981
Employee benefits 7,192
Dues and subscriptions 65 104 2,685
Depreciation 1,021
Abandoned mining claims 226,325 256,268
Investment loss 80,000
Other 1,211
------- ------- ------- -------
Total operating expenses 257,155 12,790 11,566 605,619
------- ------- ------- -------
NET (LOSS) $(256,231) $ (10,475) $ (7,978) $(465,938)
======= ======= ======= =======
NET (LOSS) PER SHARE $ (.03) $ (.001) $ (.001)
======= ======= =======
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Gold Securities Corporation Statement of Changes in Stockholders'
(A Development Stage Company) Equity From April 17, 1981 Through
December 31, 1994
- -----------------------------------------------------------------------
Common Stock
---------------------- Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
Balances at
April 17, 1981 1,861,260 $ 135,126 $ (93,296) $ 41,830
Reverse split
one for three
(1 for 3) (1,240,840)
Shares issued in
exchange for all
of the outstanding
shares of Gold
Securities, Inc. 4,185,600 228,369 228,369
Shares returned
to treasury and
canceled (901,563)
Net (loss) (19,189) (19,189)
--------- ------- ------- -------
Balances at
December 31, 1981 3,904,457 363,495 (112,485) 251,010
--------- ------- ------- -------
Shares issued for
mining properties 6,000 1,800 1,800
Shares issued for
accounts payable 100,000 59,570 59,570
Net income 8,809 8,809
--------- ------- ------- -------
Balances at
December 31, 1982 4,010,457 424,865 (103,676) 321,189
--------- ------- ------- -------
Shares issued for
cash at $.20 per
share 125,000 25,000 25,000
Shares issued in
exchange for
investment stock
of TyTan Resources,
Inc. 25,000 25,000 25,000
Shares issued for
cash advanced by
officer at $.20
per share 50,270 10,054 10,054
Shares issued to
an officer and
director for
services at $.05
per share 85,000 4,250 4,250
Net (loss) (14,900) (14,900)
--------- ------- ------- -------
Balances at
December 31, 1983 4,295,727 489,169 (118,576) 370,593
--------- ------- ------- -------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Gold Securities Corporation Statement of Changes in Stockholders'
(A Development Stage Company) Equity From April 17, 1981 Through
December 31, 1994
- -----------------------------------------------------------------------
Common Stock
---------------------- Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
Balances
Forward 4,295,727 $ 489,169 $(118,576) $ 370,593
--------- ------- ------- -------
Shares issued for
cash at $.20 per
share 225,000 51,000 51,000
Shares issued for
cash at $.05 per
share 155,000 7,500 7,500
Net (loss) (3,538) (3,538)
--------- ------- ------- -------
Balances at
December 31, 1984 4,675,727 547,669 (122,114) 425,555
--------- ------- ------- -------
Shares issued for
services at $.05
per share 130,000 6,500 6,500
Shares issued for
partial payment
on acquisition
of mining claims
at $.05 per share 100,000 5,000 5,000
Net (loss) 3,594 3,594
--------- ------- ------- -------
Balances at
December 31, 1985 4,905,727 559,169 (118,520) 440,649
--------- ------- ------- -------
Shares issued for
services at $.05
to $.10 per share 165,000 11,500 11,500
Net (loss) (17,908) (17,908)
--------- ------- ------- -------
Balances at
December 31, 1986 5,070,727 570,669 (136,428) 434,241
--------- ------- ------- -------
Shares issued for
services at $.05
$.10 per share 132,950 9,000 9,000
Net (loss) (8,137) (8,137)
--------- ------- ------- -------
Balances at
December 31, 1987 5,203,677 579,669 (144,565) 435,104
--------- ------- ------- -------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Gold Securities Corporation Statement of Changes in Stockholders'
(A Development Stage Company) Equity From April 17, 1981 Through
December 31, 1994
- -----------------------------------------------------------------------
Common Stock
---------------------- Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
Balances
Forward 5,203,677 $ 579,669 $(144,565) $ 435,104
--------- ------- ------- -------
Shares issued for
cash at $.07 per
share 50,000 3,500 3,500
Shares issued for
services at $.05
to $.07 per share 121,515 6,000 6,000
Net (loss) (6,219) (6,219)
--------- ------- ------- -------
Balances at
December 31, 1988 5,375,192 589,169 (150,784) 438,385
--------- ------- ------- -------
Shares issued for
services and
expenses at $.05
to $.07 per share 55,999 8,400 8,400
Net (loss) (7,455) (7,455)
--------- ------- ------- -------
Balances at
December 31, 1989 5,431,191 597,569 (158,239) 439,330
--------- ------- ------- -------
Shares issued for
services and
expenses at $.07
per share 105,000 7,200 7,200
Net (loss) (82,984) (82,984)
--------- ------- ------- -------
Balances at
December 31, 1990 5,536,191 604,769 (241,223) 363,546
--------- ------- ------- -------
Shares issued for
services at $.03
per share 239,998 7,200 7,200
Net (loss) (43,327) (43,327)
--------- ------- ------- -------
Balances at
December 31, 1991 5,776,189 611,969 (284,550) 327,419
--------- ------- ------- -------
Shares issued for
services and
expenses at $.01
per share 840,000 8,400 8,400
Net (loss) (7,978) (7,978)
--------- ------- ------- -------
Balances at
December 31, 1992 6,616,189 620,369 (292,528) 327,841
--------- ------- ------- -------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Gold Securities Corporation Statement of Changes in Stockholders'
(A Development Stage Company) Equity From April 17, 1981 Through
December 31, 1994
- -----------------------------------------------------------------------
Common Stock
---------------------- Accumulated
Shares Amount Deficit Total
------ ------ ------- -----
Balances
Forward 6,616,189 $ 620,369 $(292,528) $ 327,841
--------- ------- ------- -------
Shares issued for
services and
expenses at $.01
per share 840,000 8,400 8,400
Net (loss) (10,475) (10,475)
--------- ------- ------- -------
Balances at
December 31, 1993 7,456,189 628,769 (303,003) 325,766
--------- ------- ------- -------
Shares issued for
services and
expenses at $.01
per share 1,150,000 11,500 11,500
Net (loss) (256,231) (256,231)
--------- ------- ------- -------
Balances at
December 31, 1994 8,606,189 $ 640,269 $(559,234) $ 81,035
========= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Gold Securities Corporation Statement of Cash Flows For the
(A Development Stage Company) Years Ended December 31, 1994,
1993 and 1992 and Cumulative
Amounts From April 17, 1981
Through December 31, 1994
- -----------------------------------------------------------------------
April 17,
1981
Through
December
1994 1993 1992 31, 1994
---- ---- ---- --------
CASH FLOWS FROM
OPERATING ACTIVITIES $(256,231) $ (10,475) $ (7,978) $(465,938)
Adjustments to reconcile
Depreciation 1,021
Gain on sale of stock 4,744
Unearned income realized (200)
Common stock issued for
services 11,500 8,400 8,400 116,678
Loss on investments 55,000
Loss on joint venture
lease and exploration
costs 226,554 256,497
Increase in accounts
payable 597 597
------- ------- ------- -------
Net cash provided (used)
from operating activities (17,580) (2,275) 422 (31,401)
------- ------- ------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of mining claims (7,790)
Investment in joint
venture lease (29,943)
Purchase of investment (50,000)
Proceeds from sale of
marketable securities 25,000
------- ------- ------- -------
Net cash used from
financing activities (62,733)
------- ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES
Sale of common stock 114,145
------- ------- ------- -------
NET INCREASE (DECREASE)
IN CASH (17,580) (2,275) 422 20,011
CASH AT BEGINNING
OF YEAR 37,591 39,866 39,444
------- ------- ------- -------
CASH AT END OF YEAR $ 20,011 $ 37,591 $ 39,866 $ 20,011
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Gold Securities Corporation Notes to Financial Statements
(A Development Stage Company)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on September 16, 1922, in the State of Idaho and
was authorized to issue 3,000,000 shares of common stock with a par value of
$.10 per share. On April 17, 1981, the shareholders of Kaniksu Mining Company,
Inc., (an Idaho corporation) approved a reverse split of its outstanding
common stock on a one for three basis. The shareholders of Kaniksu then
approved the merger with Gold Securities, Inc. (a Washington corporation).
Kaniksu Mining Company then acquired all of the common stock of Gold
Securities, Inc. The merger was in exchange for 4,185,600 shares of common
stock, and was accounted for as a pooling of interests with Kaniksu Mining
Company, Inc., being the surviving company. Additionally, the shareholders
approved the changing of the company name to Gold Securities Corporation,
changing the par value to no-par value, and increasing the authorized common
stock to 10,000,000 shares. On December 15, 1986, the shareholders of the
Company approved the increasing of the authorized common stock to 50,000,000
shares.
The Company has been in the development stage of acquiring and exploring
precious metal properties.
The Company has elected to capitalize all acquisition and development costs of
the mining properties until the acquisition and development costs exceed the
net realizable value from a sale or net realizable value of engineered
reserves (a commercial mineable ore deposit).
Equipment is depreciated over its estimated useful life using either the
straight line method or an accelerated method.
Earnings (losses) per share are computed on the weighted average number of
shares outstanding during the year.
In the statement of cash flows the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
NOTE 2 - MINING PROPERTIES
As of January 1, 1993, the Company owned fourteen mining claims in the Little
Rockies Mining District in Phillips County, Montana. During 1993 and 1994, it
was determined to retain three of these mining claims and abandon the
remaining eleven. On October 6, 1982, (amended on November 25, 1986), the
Company leased the mining claims for twenty years with an option for an
additional five years. The lease provided for a monthly advance royalty
payment of $800 until August 3, 1988. On August 4, 1988, the royalty was
reduced to $400 per month for one year and the reduced to $200 per month until
July, 1993, when all payments terminated. Total annual rentals were $1,400 for
1993 and $2,400 for 1992. If the lessee were to declare its intention to
conduct mining operations on the claims, then the lessee would be deemed to
have acquired the ownership in the claims and then would also be deemed to
have acquired the entire working interest. Gold Securities Corporation would
then retain a minimum 5% net profits royalty. The net profits royalty
percentage would vary with the price of gold with a minimum royalty of 5% at a
gold price of $400 per ounce.
17
<PAGE>
Gold Securities Corporation Notes to Financial Statements
(A Development Stage Company)
- --------------------------------------------------------------------------------
NOTE 2 - MINING PROPERTIES - continued
In addition, Gold Securities Corporation retains a 2.5% to 25% net profits
royalty (depending on various conditions) on one-hundred forty-two contiguous
mining claims. Five-hundred thirty-seven mining claims were abandoned by the
lessee in 1993. Thus, if the lessee commences commercial production on any of
the remaining claims, the Company is entitled to at least a minimum of 2.5%
net profits royalty.
In order to retain these mining claims, (three owned by the Company and
one-hundred forty-two under an area of interest net profits royalty agreement
with the lessee) an annual rental fee of $100 per claim is required to be paid
to the U.S. Government. The lessee has made these required payments throughout
the assessment year ending September 1, 1995.
NOTE 3 - RISK AND UNCERTAINTIES
The majority of the Company's assets are in the form of non-producing mining
properties. If the Company is not able to recover its costs from these assets,
and the mining properties are subsequently abandoned, the financial statements
would significantly impaired.
NOTE 4 - FEDERAL INCOME TAXES
The Company has a net operating loss carryover of $393,240 to the year ended
December 31, 1995. These operating loss carryovers will commence to expire in
1996 and will fully expire in 2009. The Company also has a net capital loss
carryover of $80,000. This capital loss carryover will totally expire in 1996.
A deferred tax asset has not been recorded for the benefit of the net
operating loss carryovers because it is uncertain if the Company will have
sufficient future taxable income.
NOTE 5 - RELATED PARTY TRANSACTIONS
In 1994, 1993 and 1992, the Company issued common stock at its market value to
its president and director and other directors for services rendered to the
Company. The common stock was issued at $.01 per share. The total amount of
the shares issued and the related compensation to these officers and directors
is as follows:
SHARES
YEAR ISSUED AMOUNT
---- ------- -------
1992 600,000 $ 6,000
1993 600,000 $ 6,000
1994 650,000 $ 6,500
18
<PAGE>
Gold Securities Corporation Notes to Financial Statements
(A Development Stage Company)
- --------------------------------------------------------------------------------
NOTE 6 - ACQUISITION AND SUBSEQUENT EVENT
On August 4, 1994, the Company issued 10,000,000 shares of common stock to
Alexander Hope and George Richart, d/b/a HR Asset Management, a California
general partnership, in exchange for various equipment items with a reported
value of $3,214,788 and a reported cost of $5,456,383. On February 9, 1995,
the Company rescinded this transaction with HR Asset Management, whereby the
equipment was returned and the 10,000,000 shares of common stock was canceled.
Given the fact that the transaction was formally rescinded shortly after the
end of the Company's fiscal year, neither the assets nor the outstanding
shares of common stock were shown on the statement of financial position.
19
<PAGE>
TERRENCE J. DUNNE, MBA, MST
Certified Public Accountant
Member:
SEC PRACTICE SECTION Suite 1100
OF THE AMERICAN Washington Trust Bank Bldg.
INSTITUTE OF CERTIFIED West 717 Sprague
PUBLIC ACCOUNTANTS Spokane, Washington 99204
WASHINGTON SOCIETY OF (509) 747-6752
CERTIFIED PUBLIC
ACCOUNTANTS Since 1978
April 7, 1995
To the Board of Directors of
Gold Securities Corporation
Gentlemen:
I consent to the use of my name in regard to the audited financial statements of
Gold Securities Corporation as of December 31, 1994, which financial statements
are included in the annual 10-K report for 1994.
Sincerely,
/s/ Terrence J. Dunne
Terrence J. Dunne
Certified Public Accountant
Spokane, Washington
-20-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART II, Continued
Item 9: Disagreements on Accounting and Financial Disclosures
None
PART III
Item 10: Directors and Executive Officers of the Registrant
Robert W. O'Brien 59 President and Director since 1982. He is the retired
vice-president of a Spokane retail mens wear chain,
a graduate of Gonzaga University with a degree in
Economics, a U.S. Army Veteran and a licensed general
contractor. He is a corporate consultant
specializing in public relations and was an Officer
and a Director of Inland Resources Inc. (INLN) a
NASDAQ Company.
Howard K. Michaelsen 67 Secretary and Director since 1975. He is an Attorney
and the Senior Partner in the Law Firm, H. K.
Michaelsen, P.S.
Gordon E. Hawk 55 Vice-President and Director since 1982. He is a
dentist who owns and operates his own clinic in
Spokane, Washington and has practiced here for
several years.
There are no family relationships between any of the executive officers and
directors.
-21-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART III, Continued
<PAGE>
Item 11: Executive Compensation
The following table sets forth the remuneration of each of the executive
officers and directors of the Company whose cash compensation exceeds
$60,000 and of all the executive officers as a group for the fiscal year
ended December 31, 1994.
Name of Individual Capacities in Which Cash
or Number in Group Served Compensation
------------------ ------ ------------
None None None
All executive offi- Officers - Directors
cers as a group (3) and Manager (Note 1) $6,500
Note (1) Stock Options
The Company has granted no stock options, but the Directors are issued
common stock for their services at the rate of $500 per year. The Company
will continue paying the medical insurance premiums for the President as
done in several previous years.
Item 12: Security Ownership of Certain Benefitial owners and Management
Title Name of Amount and Nature Percent
of Beneficial of Beneficial of
Class Owner Ownership (*) Class
----- ----- ------------- -----
Common Robert W. O'Brien 2,157,792 25.0%
Common Howard K. Michaelsen 263,786 3.0%
Common Gordon E. Hawk 240,549 3.0%
Directors as a Group (3) 31.0%
(*) All Directors have Record and Beneficial Ownership
Item 13: Certain Relationships and Related Transactions
None
-22-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART IV
Item 14: Exhibits, Financial Statement Schedule and Reports on Form 8-K
a) Index to Financial Statements and Supporting Schedules:
This Report
1) Financial Statements Page Number
-------------------- -----------
Report of Independent Certified Accountant's 9
Balance Sheets at December 31, 1994 and 1993 10
Statement of Operations and Retained (Deficit)
for Years Ending December 31, 1994, 1993, 1992,
and from April 17, 1981 to Dec. 31, 1994 11
Statement of Cash Flows for Years Ending
December 31, 1994, 1993, 1992, and from
inception April 17, 1981 to December 31, 1994 16
Statement of Changes in Stockholders' Equity
from April 17, 1981 to December 31, 1994 12-15
Notes to Consolidated Financial Statements
at December 31, 1994 17-19
Accountant's Consent Letter for 10-K 20
b) Exhibits included in this 10-K preceded by an Asterisk (*) are
filed by incorporation into this annual report on Form 10-K.
Others are attached as required.
1985 FORM 10-K
* 3.1 Articles of Incorporation and By-Laws and Amendments
1985 FORM 10-K
* 10.1 Agreement with Zortman Mining, Inc.
1986 FORM 10-K
* 10.2 Updated Lease Payment Agreement
1988 FORM 10-K
* 10.3 Mining Lease with Five "O"
1988 FORM 10-K
* 10.4 Joint Venture Agreement with N. A. Degerstrom, Inc.
-23-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
PART IV - Continued
Item 14: Exhibits, Financial Statement Schedule and Reports on Form 8-K
c) Reports on Form 8-K
Item 1 - Changes in Control of Registrant
Item 2 - Acquisition or Disposition of Assets
Item 6 - Resignation of Registrant's Directors
Item 7 - Financial Statements and Exhibits
Filed on August 4, 1994
8-K-A Filed on October 14, 1994
Item 7 - Financial Statements and Exhibits
Item 4 - Changes in Registrant's Certifying Accountant
Item 7 - Financial Statements and Exhibits
Filed on January 2, 1995
Item 1 - Changes in Control of Registrant
Item 2 - Acquisition or Disposition of Assets
Item 4 - Changes in Registrant's Certifying Accountant
Item 6 - Resignations of Registrant's Directors
Item 7 - Financial Statements and Exhibits
Filed on March 24, 1995
Item 4 - Change in Registrant's Certifying Accountant
Item 7 - Financial Statements and Exhibits
Filed on March 24, 1995
-24-
<PAGE>
GOLD SECURITIES CORPORATION
Form 10-K - December 31, 1994
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of
1934, the Registrant has duly caused this annual report to be signed on its
behalf by the undersigned thereto duly authorized.
GOLD SECURITIES CORPORATION
Registrant
Date 4/7/95 By /s/ Robert W. O'Brien
-----------------------------------
Robert W. O'Brien
President (Chief Executive Officer)
Pursuant to the requirements of the Securities 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 so indicated:
Date 4/7/95 By /s/ Robert W. O'Brien
-----------------------------------
Robert W. O'Brien, Director
Date 4/7/95 By /s/ Howard K. Michaelsen
-----------------------------------
Howard K. Michaelsen
Director
Date 4/7/95 By /s/ Gordon E. Hawk
-----------------------------------
/s/ Gordon E. Hawk, Director
The above signatures represent a majority of the Board of Directors of the
Registrant.
-25-
<PAGE>
ATTACHMENT H
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
Commission file number 1-8958
GOLD SECURITIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
IDAHO 91-1224178
(State of Incorporation) (I.R.S. Employer Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
(Address of Principal Executive Offices)
(201) 941-6550
(Registrant's Telephone Number)
Indicate by checkmark 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 X No ___
As of November 15, 1995, there were 18,726,189 shares of Common Stock
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages F-1 through F-5.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
On July 24, 1995 the Company acquired Evolutions, Inc., a New Jersey
corporation ("EVI"), which is a majority owned subsidiary of PTI Plastics, Inc.,
a Delaware corporation ("PTIP"), which is, in turn, a wholly owned subsidiary of
Pure Tech International, Inc., a Delaware corporation ("PTI"). Since the
consummation of the Company's transaction with EVI, EVI is deemed to have become
the reporting company for financial reporting purposes and the Company's
financial statements now show historical information only for EVI. References
to the Company with respect to historical financial information refer to such
information for EVI. Financial information for the three and nine month periods
ended September 30, 1995 consolidates information for the Company, EVI and
subsidiaries following consummation of the EVI transaction on July 24, 1995. The
following discussion and analysis should be read in conjunction with the
Financial Statements and notes thereto appearing elsewhere herein.
Pursuant to an Agreement and Plan of Merger dated July 21, 1995 (the
"Agreement"), on July 24, 1995, the Company acquired EVI, a New Jersey
corporation. EVI is involved in the manufacture and marketing of casual apparel
made of recycled materials. The transaction was consummated by merging a wholly
owned subsidiary of the Company into EVI.
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Robert O'Brien will remain as a Director of the
Company, but has resigned as the Company's CEO. The parties agreed that upon
meeting the requirements of Rule 14(f) under the Securities Exchange Act of
1934, David C. Katz, President of PTI, and Paul Litwinczuk, an executive officer
of PTI, would be elected to the Company's Board.
Under the Agreement, in exchange for the merger, the holders of EVI stock
received an aggregate of 10,000,000 shares of the Company's Common Stock, as
follows: 8,800,000 shares to PTIP, 800,000 shares to Mr. Nafash and 200,000 to
each of Messrs. Katz and Litwinczuk. An additional 88,851,174 shares of Common
Stock will be issued to these parties and certain other parties upon
shareholders' approval of an amendment to the Company's certificate of
incorporation increasing the number of shares available for issuance to allow
such additional issuance. As a result of this transaction, PTIP currently holds
approximately 47% of the Company's Common Stock. Upon the issuance of the
additional Common Stock contemplated
2
<PAGE>
under the Agreement, PTIP will hold approximately 75% of the Company's
outstanding Common Stock. Mr. Nafash owns approximately 4.3% of the Company's
Common Stock (6.7% upon the issuance of the additional shares), and Messrs. Katz
and Litwinczuk each own approximately 1.0% (1.7% upon the issuance of the
additional shares).
Results of Operations
The Company had net revenues of $43,705 and $309,910 for the three and nine
month periods ended September 30, 1995 as compared to $8,987 and $106,434 for
the three and nine month periods ended September 30, 1994. Net losses for the
current three and nine month periods were $155,479 and $243,787, or $.01 and
$.02 per share as compared to losses of $22,767 and $207,767, or $15.89 and
$144.99 per share for the three and nine month periods ended September 30, 1994.
Liquidity and Capital Resources
The Company had a working capital deficit of $1,923,562 at September 30,
1995, compared to a working capital surplus of $455,507 at December 31, 1994.
The current working capital deficit is due primarily to a recorded liability of
approximately $2,700,000 due to investors that will be eliminated upon issuance
of Company common stock at such time as the number of authorized shares of the
Company is increased as per the Agreement and Plan of Merger dated July 21,
1994, see above.
The Company has borrowed $150,000 from Bear, Stearns Securities Corp.,
against marketable securities owned by the Company on deposit in a brokerage
margin account. The Company has also borrowed $796,000 from related parties and
issued demand promissory notes in return. These notes bear interest at the rate
of 12% per annum.
Inflation
The Company has not been materially affected by the impact of inflation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no current material legal proceedings involving the Company and
its subsidiaries and the Company is not aware of any potential proceedings.
3
<PAGE>
Item 2. Changes in Securities.
(a) Not applicable.
(b) Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Pursuant to an Agreement and Plan of Merger dated July 21, 1995 (the
"Agreement"), on July 24, 1995, the Company acquired EVI. EVI is involved in
the manufacture and marketing of casual apparel made of recycled materials. The
transaction was consummated by merging a wholly owned subsidiary of the Company
into EVI.
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Robert O'Brien will remain as a Director of the
Company, but has resigned as the Company's CEO. The parties agreed that upon
meeting the requirements of Rule 14(f) under the Securities Exchange Act of
1934, David C. Katz, President of PTI, and Paul Litwinczuk, an executive officer
of PTI, would be elected to the Company's Board.
Under the Agreement, in exchange for the merger, the holders of EVI stock
received an aggregate of 10,000,000 shares of the Company's Common Stock, as
follows: 8,800,000 shares to PTIP, 800,000 shares to Mr. Nafash and 200,000 to
each of Messrs. Katz and Litwinczuk. An additional 88,851,174 shares of Common
Stock will be issued to these parties upon shareholders' approval of an
amendment to the Company's certificate of incorporation increasing the
authorized number of shares to allow such additional issuance. As a result of
this transaction, PTIP currently holds approximately 47% of the Company's Common
Stock. Upon the issuance of the additional Common Stock contemplated under the
Agreement, PTIP will hold approximately 75% of the Company's outstanding Common
Stock. Mr. Nafash owns approximately 4.3% of the Company's Common Stock (6.7%
upon the issuance of the additional
4
<PAGE>
shares), and Messrs. Katz and Litwinczuk each own approximately 1.0% (1.7% upon
the issuance of the additional shares).
On September 27, 1995, Terrence J. Dunne resigned as the Company's principal
auditor. Mr. Dunne had been the principal auditor of the Company since March
1995. On the same date, the Company's Board of Directors accepted Mr. Dunne's
resignation and appointed Holtz Rubenstein & Co., LLP to be its principal
independent auditors.
Also on September 27, 1995, pursuant to an agreement of the same date (the
"DCI Agreement"), Kidsview, Inc., a New Jersey corporation ("KVI") acquired
certain assets (the "Assets") from Direct Connect International, Inc., a
Delaware corporation ("DCI"). KVI is a wholly owned subsidiary of EVI. The
Assets consist of DCI's business to the extent that it relates to manufacturing,
promoting and selling Zoo Borns and Tea Bunnies brand toy animals, including the
marks KIDSVIEW, ZOO BORNS, and TEA BUNNIES.
In consideration for the purchase, EVI, among other things, released DCI of
an aggregate of $750,000 in indebtedness to EVI. The DCI Agreement provides
that DCI shall again become liable for repayment of such indebtedness upon the
exercise by DCI of an option to purchase 80% of the common stock of KVI. This
option expires on December 31, 1995, and became exercisable on October 31,
1995. As of the date of this report, no action has been taken by DCI to
exercise this option. In addition, the Company agreed to issue to DCI 1,500,000
shares of its Common Stock, which issuance is contingent upon shareholders'
approval of a proposal to increase the number of shares the Company is
authorized to issue. Up to an additional 4,000,000 shares of the Company's
Common Stock will be issued to DCI if, over a period of three years, certain net
sales and earnings tests are met in connection with the business acquired from
DCI.
Under terms of the DCI Agreement, KVI and DCI also entered into a management
agreement pursuant to which DCI will make available to KVI Peter Schneider,
DCI's President, to manage the Assets. The management agreement provides for a
maximum monthly fee of up to $100,000. The first $350,000 of management fees
incurred will be offset against a $350,000 note payable to EVI by DCI. The
Company has classified this note receivable from DCI as a prepaid expense in
anticipation of the management fee offset. The management agreement has a term
of one-year, subject to two automatic one-year extensions if certain net sales
and earnings tests are met.
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) On July 31, 1995, the Company filed a report on Form 8-K, as
amended November 1, 1995 related to the acquisition of Evolutions,
Inc. by the Company as described in "Item 5 - Other."
5
<PAGE>
On October 13, 1995, the Company filed a report on Form 8-K
related to the DCI Agreement as described in "Item 5. - Other."
On September 27,1995, the Company filed a report on Form 8-K
related to the resignation of Terrence J. Dunne as the Company's
principal auditor and the appointment of Holtz Rubenstein & Co., LLP
as the Company's principal independent auditors.
6
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------------
(unaudited) (Derived from
audited financial
ASSETS statements)
------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 3,786 $ 22,713
Investments in available-for sales
securities 1,209,595 279,384
Accounts receivable 21,077 -
Due from contractor 199,195 197,864
Inventory 59,000 9,000
Notes receivable - related party 40,000 40,000
Prepaid fees and other expenses 399,000 -
---------- ---------
1,931,653 548,961
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $3,153 & $1,653
respectively 11,076 6,611
Security deposits - 950
Goodwill, net of amortization of $1,646 270,975 -
Licenses 825,000 -
---------- ---------
$3,038,704 $ 556,522
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 97,834 $ 78,954
Loans payable 189,500 14,500
Due to related parties 796,000 -
Due to investors 2,696,881 -
Due to DCI 75,000 -
---------- ---------
3,855,215 93,454
---------- ---------
STOCKHOLDERS' EQUITY
Common stock, $10 par value; 100,000
shares authorized; 1,000 shares issued
and outstanding - 10,000
Common stock, no par value, 50,000,000
shares authorized, 18,726,189 and
8,606,189 issued and outstanding at
September 30, 1995 and December 31,
1994 respectively. 320,154 -
Additional paid-in capital 300,000 865,000
Deficit (510,327) (341,538)
Unrealized holding (loss) on securities
available-for-sale (926,338) (70,394)
---------- ---------
(816,511) 463,068
$3,038,704 $ 556,522
========== =========
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
REVENUES $ 309,910 $ 106,434 $ 43,705 $ 8,987
COSTS AND EXPENSES:
Cost of sales 229,822 165,659 46,140 2,732
Selling, general
and administrative 188,301 145,042 49,023 27,522
---------- --------- ---------- --------
418,123 310,701 95,163 30,254
---------- --------- ---------- --------
OPERATING LOSS (108,213) (204,267) (51,458) (21,267)
---------- --------- ---------- --------
OTHER:
Loss on sale of
securities 49,697 - 21,227 -
Interest expense 37,794 3,500 7,794 1,500
Interest income (26,917) - - -
---------- --------- ---------- --------
60,574 3,500 29,021 1,500
---------- --------- ---------- --------
NET LOSS $ (168,787) $(207,767) $ (80,479) $(22,767)
========== ========= ========== ========
NET LOSS PER SHARE $ (0.02) $ (144.99) $ (0.01) $ (15.89)
========== ========= ========== ========
Weighted average
number of shares
of common stock
outstanding 11,070,511 1,433 15,682,711 1,433
========== ========= ========== ========
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (168,787) $(207,767) $ (80,479) $(22,767)
----------- --------- --------- --------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation & Amortization 3,146 - 2,146 -
Non-cash compensation - 25,000 - -
Loss on sale of securities 49,697 - 21,227 -
Changes in operating assets - - - -
and liabilities: - - - -
(Increase)decrease in assets:
Accounts receivable (21,077) - (13,510) -
Due from contractor (1,331) - 4,957 -
Inventory (50,000) - - 9,000
Notes receivable - related party - - - -
Prepaid fees and other expenses (3,000) - 434 -
Security deposits 950 (950) 950 (950)
Increase(decrease) in liabilities:
Accounts payable and accrued
expenses 14,281 17,250 3,333 (13,324)
----------- --------- --------- --------
Total adjustments (7,334) 41,300 19,537 (5,274)
----------- --------- --------- --------
Net cash used in operating activities (176,121) (166,467) (60,942) (28,041)
----------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and fixtures (5,965) (7,413) - (7,413)
Increase in Goodwill (75,000) (75,000)
Proceeds from sales of securities 97,148 - - -
Purchases of available-
for-sale securities (4,000) - - -
Increase in loan receivable - - - -
Repayment of loan receivable - - - -
Increase in note receivable (1,146,000) (100,805) (350,000) (50,805)
Increase in cash from acquisitions 20,011 20,011
----------- --------- --------- --------
Net cash provided by (used in)
investing activities (1,113,806) (108,218) (404,989) (58,218)
----------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loan payable 175,000 - 160,000 -
Loan from related party 796,000 44,000 - (10,000)
Proceeds from issuance of stock 300,000 881,980 300,000 731,980
----------- --------- --------- --------
Net cash provided by
financing activities 1,271,000 925,980 460,000 721,980
----------- --------- --------- --------
Net increase (decrease) in cash (18,927) 651,295 (5,931) 635,721
Cash and cash equivalents
at beginning of year 22,713 0 9,717 15,574
----------- --------- --------- --------
Cash and cash equivalents
at end of period $ 3,786 $ 651,295 3,786 651,295
=========== ========= ========= ========
</TABLE>
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER 30, 1995
1. The balance sheet as of September 30, 1995 and the statements of operations
and statements of cash flows for the nine months and three months ended
September 30, 1995 and 1994 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normally recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1995 & 1994
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the audited financial statements of
Evolutions, Inc. for the year ended December 31, 1994 included in the form
8-K filed. The results of operations for the periods ended September 30,
1995 & 1994 are not necessarily indicative of the operating results for the
full year.
2. On July 24, 1995, the Company acquired Evolutions, Inc., a New Jersey
corporation, which is a majority owned subsidiary of PTI Plastics, Inc., a
wholly owned subsidiary of Pure Tech International, Inc., a Delaware
corporation. Evolutions is involved in the manufacture and marketing of
casual apparel made from recycled materials. The transaction was
consummated by merging a wholly owned subsidiary of the Company into
Evolutions, Inc.
Under the Agreement, in exchange for the merger, the holders of Evolutions,
Inc. received an aggregate of 10,000,000 shares of the Company's Common
Stock. An additional 88,851,174 shares of Common Stock will be issued to
the Evolutions Shareholders upon shareholder approval of an amendment to the
Company's certificate of incorporation increasing the authorized number of
shares to allow such an issuance. The value of the additional 88,851,174
shares to be issued, approximately $2,700,000, is included in current
liabilities in the accompanying financial statements as of September 30,
1995.
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER 30, 1995
3. On September 27, 1995, pursuant to an agreement of the same date, Kidsview
Inc., a New Jersey company and a wholly owned subsidiary of Evolutions,
Inc., acquired certain assets from Direct Connect International, Inc. (DCI),
a Delaware corporation. The assets consist of DCI's business to the extent
that it relates to manufacturing, promoting and selling Zoo Borns and Tea
Bunnies brand toy animals, including the marks KIDSVIEW, ZOO BORNS and TEA
BUNNIES.
In consideration of the purchase, Evolutions, among other things, released
DCI of an aggregate of $750,000 in indebtedness to Evolutions. The DCI
agreement provides that DCI shall again become liable for repayment of such
indebtedness upon the exercise by DCI of an option to purchase 80% of the
common stock of Kidsview. This option expires on December 31, 1995, and
became exercisable on October 31, 1995. As of the date of this report, no
action has been taken by DCI to exercise this option. In addition, the
company agreed to issue to DCI 1,500,000 shares of its Common Stock, which
issuance is contingent upon shareholders' approval of a proposal to increase
the number of shares the Company is authorized to issue. The value of the
1,500,000 shares to be issued, approximately $75,000, is included in current
liabilities in the accompanying financial statements as of September 30,
1995. Up to an additional 4,000,000 shares of the Company's Common Stock
will be issued to DCI if, over a period of three years, certain net sales
and earnings tests are met in conjunction with the business acquired from
DCI.
Under terms of the DCI agreement, Kidsview and DCI also entered into a
management agreement pursuant to which DCI will make available to Kidsview,
Peter Schneider, DCI's President to manage the Assets. The management
agreement provides for a maximum monthly fee of $100,000. The first
$350,000 of management fees incurred will be offset against a $350,000 note
payable to EVI by DCI. The Company has classified this note receivable from
DCI as a prepaid expense in anticipation of the management fee offset. The
management agreement has a term of one-year, subject to two automatic
one-year extensions if certain net sales and earnings tests are met.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
GOLD SECURITIES CORPORATION
By: /s/ Michael Nafash
-------------------------------------
Michael Nafash
President and Chief Financial Officer
Date: November 16, 1995
7
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
Commission file number 1-8958
GOLD SECURITIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
IDAHO 91-1224178
(State of Incorporation) (I.R.S. Employer Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
(Address of Principal Executive Offices)
(201) 941-6550
(Registrant's Telephone Number)
Indicate by checkmark 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 X No ___
As of November 15, 1995, there were 18,726,189 shares of Common Stock
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages F-1 through F-5.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
On July 24, 1995 the Company acquired Evolutions, Inc., a New Jersey
corporation ("EVI"), which is a majority owned subsidiary of PTI Plastics, Inc.,
a Delaware corporation ("PTIP"), which is, in turn, a wholly owned subsidiary of
Pure Tech International, Inc., a Delaware corporation ("PTI"). Since the
consummation of the Company's transaction with EVI, EVI is deemed to have become
the reporting company for financial reporting purposes and the Company's
financial statements now show historical information only for EVI. References
to the Company with respect to historical financial information refer to such
information for EVI. Financial information for the three and nine month periods
ended September 30, 1995 consolidates information for the Company, EVI and
subsidiaries following consummation of the EVI transaction on July 24, 1995. The
following discussion and analysis should be read in conjunction with the
Financial Statements and notes thereto appearing elsewhere herein.
Pursuant to an Agreement and Plan of Merger dated July 21, 1995 (the
"Agreement"), on July 24, 1995, the Company acquired EVI, a New Jersey
corporation. EVI is involved in the manufacture and marketing of casual apparel
made of recycled materials. The transaction was consummated by merging a wholly
owned subsidiary of the Company into EVI.
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Robert O'Brien will remain as a Director of the
Company, but has resigned as the Company's CEO. The parties agreed that upon
meeting the requirements of Rule 14(f) under the Securities Exchange Act of
1934, David C. Katz, President of PTI, and Paul Litwinczuk, an executive officer
of PTI, would be elected to the Company's Board.
Under the Agreement, in exchange for the merger, the holders of EVI stock
received an aggregate of 10,000,000 shares of the Company's Common Stock, as
follows: 8,800,000 shares to PTIP, 800,000 shares to Mr. Nafash and 200,000 to
each of Messrs. Katz and Litwinczuk. An additional 88,851,174 shares of Common
Stock will be issued to these parties and certain other parties upon
shareholders' approval of an amendment to the Company's certificate of
incorporation increasing the number of shares available for issuance to allow
such additional issuance. As a result of this transaction, PTIP currently holds
approximately 47% of the Company's Common Stock. Upon the issuance of the
additional Common Stock contemplated
2
<PAGE>
under the Agreement, PTIP will hold approximately 75% of the Company's
outstanding Common Stock. Mr. Nafash owns approximately 4.3% of the Company's
Common Stock (6.7% upon the issuance of the additional shares), and Messrs. Katz
and Litwinczuk each own approximately 1.0% (1.7% upon the issuance of the
additional shares).
Results of Operations
The Company had net revenues of $43,705 and $309,910 for the three and nine
month periods ended September 30, 1995 as compared to $8,987 and $106,434 for
the three and nine month periods ended September 30, 1994. Net losses for the
current three and nine month periods were $155,479 and $243,787, or $.01 and
$.02 per share as compared to losses of $22,767 and $207,767, or $15.89 and
$144.99 per share for the three and nine month periods ended September 30, 1994.
Liquidity and Capital Resources
The Company had a working capital deficit of $2,123,562 at September 30,
1995, compared to a working capital surplus of $455,507 at December 31, 1994.
The current working capital deficit is due primarily to a recorded liability of
approximately $2,700,000 due to investors that will be eliminated upon issuance
of Company common stock at such time as the number of authorized shares of the
Company is increased as per the Agreement and Plan of Merger dated July 21,
1994, see above.
The Company has borrowed $150,000 from Bear, Stearns Securities Corp.,
against marketable securities owned by the Company on deposit in a brokerage
margin account. The Company has also borrowed $796,000 from related parties and
issued demand promissory notes in return. These notes bear interest at the rate
of 12% per annum.
Inflation
The Company has not been materially affected by the impact of inflation.
PART I: OTHER INFORMATION
3
Item 5. Other Information.
Pursuant to an Agreement and Plan of Merger dated July 21, 1995 (the
"Agreement"), on July 24, 1995, the Company acquired EVI. EVI is involved in
the manufacture and marketing of casual apparel made of recycled materials. The
transaction was consummated by merging a wholly owned subsidiary of the Company
into EVI.
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Robert O'Brien will remain as a Director of the
Company, but has resigned as the Company's CEO. The parties agreed that upon
meeting the requirements of Rule 14(f) under the Securities Exchange Act of
1934, David C. Katz, President of PTI, and Paul Litwinczuk, an executive officer
of PTI, would be elected to the Company's Board.
Under the Agreement, in exchange for the merger, the holders of EVI stock
received an aggregate of 10,000,000 shares of the Company's Common Stock, as
follows: 8,800,000 shares to PTIP, 800,000 shares to Mr. Nafash and 200,000 to
each of Messrs. Katz and Litwinczuk. An additional 88,851,174 shares of Common
Stock will be issued to these parties upon shareholders' approval of an
amendment to the Company's certificate of incorporation increasing the
authorized number of shares to allow such additional issuance. As a result of
this transaction, PTIP currently holds approximately 47% of the Company's Common
Stock. Upon the issuance of the additional Common Stock contemplated under the
Agreement, PTIP will hold approximately 75% of the Company's outstanding Common
Stock. Mr. Nafash owns approximately 4.3% of the Company's Common Stock (6.7%
upon the issuance of the additional
4
<PAGE>
shares), and Messrs. Katz and Litwinczuk each own approximately 1.0% (1.7% upon
the issuance of the additional shares).
On September 27, 1995, Terrence J. Dunne resigned as the Company's principal
auditor. Mr. Dunne had been the principal auditor of the Company since March
1995. On the same date, the Company's Board of Directors accepted Mr. Dunne's
resignation and appointed Holtz Rubenstein & Co., LLP to be its principal
independent auditors.
Also on September 27, 1995, pursuant to an agreement of the same date (the
"DCI Agreement"), Kidsview, Inc., a New Jersey corporation ("KVI") acquired
certain assets (the "Assets") from Direct Connect International, Inc., a
Delaware corporation ("DCI"). KVI is a wholly owned subsidiary of EVI. The
Assets consist of DCI's business to the extent that it relates to manufacturing,
promoting and selling Zoo Borns and Tea Bunnies brand toy animals, including the
marks KIDSVIEW, ZOO BORNS, and TEA BUNNIES.
In consideration for the purchase, EVI, among other things, released DCI of
an aggregate of $750,000 in indebtedness to EVI. The DCI Agreement provides
that DCI shall again become liable for repayment of such indebtedness upon the
exercise by DCI of an option to purchase 80% of the common stock of KVI. This
option expires on December 31, 1995, and became exercisable on October 31,
1995. As of the date of this report, no action has been taken by DCI to
exercise this option. In addition, the Company agreed to issue to DCI 1,500,000
shares of its Common Stock, which issuance is contingent upon shareholders'
approval of a proposal to increase the number of shares the Company is
authorized to issue. Up to an additional 4,000,000 shares of the Company's
Common Stock will be issued to DCI if, over a period of three years, certain net
sales and earnings tests are met in connection with the business acquired from
DCI.
Under terms of the DCI Agreement, KVI and DCI also entered into a management
agreement pursuant to which DCI will make available to KVI Peter Schneider,
DCI's President, to manage the Assets. The management agreement provides for a
maximum monthly fee of up to $100,000. The first $150,000 of management fees
incurred will be offset against a $350,000 note payable to EVI by DCI. DCI was
conditionally released from the balance of the note, which has been attributed
to additional consideration for the acquired assets. The management agreement
has a term of one-year, subject to two automatic one-year extensions if certain
net sales and earnings tests are met.
6
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------------
(unaudited) (Derived from
audited financial
ASSETS statements)
------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 3,786 $ 22,713
Investments in available-for sales
securities 1,209,595 279,384
Accounts receivable 21,077 -
Due from contractor 199,195 197,864
Inventory 59,000 9,000
Notes receivable - related party 40,000 40,000
Prepaid fees and other expenses 199,000 -
---------- ---------
1,931,653 548,961
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $3,153 & $1,653
respectively 11,076 6,611
Security deposits - 950
Goodwill, net of amortization of $1,646 270,975 -
Licenses 1,025,000 -
---------- ---------
$3,038,704 $ 556,522
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 97,834 $ 78,954
Loans payable 189,500 14,500
Due to related parties 796,000 -
Due to investors 2,696,881 -
Due to DCI 75,000 -
---------- ---------
3,855,215 93,454
---------- ---------
STOCKHOLDERS' EQUITY
Common stock, $10 par value; 100,000
shares authorized; 1,000 shares issued
and outstanding - 10,000
Common stock, no par value, 50,000,000
shares authorized, 18,726,189 and
8,606,189 issued and outstanding at
September 30, 1995 and December 31,
1994 respectively. 320,154 -
Additional paid-in capital 300,000 865,000
Deficit (510,327) (341,538)
Unrealized holding (loss) on securities
available-for-sale (926,338) (70,394)
---------- ---------
(816,511) 463,068
$3,038,704 $ 556,522
========== =========
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
REVENUES $ 309,910 $ 106,434 $ 43,705 $ 8,987
COSTS AND EXPENSES:
Cost of sales 229,822 165,659 46,140 2,732
Selling, general
and administrative 188,301 145,042 49,023 27,522
---------- --------- ---------- --------
418,123 310,701 95,163 30,254
---------- --------- ---------- --------
OPERATING LOSS (108,213) (204,267) (51,458) (21,267)
---------- --------- ---------- --------
OTHER:
Loss on sale of
securities 49,697 - 21,227 -
Interest expense 37,794 3,500 7,794 1,500
Interest income (26,917) - - -
---------- --------- ---------- --------
60,574 3,500 29,021 1,500
---------- --------- ---------- --------
NET LOSS $ (168,787) $(207,767) $ (80,479) $(22,767)
========== ========= ========== ========
NET LOSS PER SHARE $ (0.02) $ (144.99) $ (0.01) $ (15.89)
========== ========= ========== ========
Weighted average
number of shares
of common stock
outstanding 11,070,511 1,433 15,682,711 1,433
========== ========= ========== ========
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (168,787) $(207,767) $ (80,479) $(22,767)
----------- --------- --------- --------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation & Amortization 3,146 - 2,146 -
Non-cash compensation - 25,000 - -
Loss on sale of securities 49,697 - 21,227 -
Changes in operating assets - - - -
and liabilities: - - - -
(Increase)decrease in assets:
Accounts receivable (21,077) - (13,510) -
Due from contractor (1,331) - 4,957 -
Inventory (50,000) - - 9,000
Notes receivable - related party - - - -
Prepaid fees and other expenses (3,000) - 434 -
Security deposits 950 (950) 950 (950)
Increase(decrease) in liabilities:
Accounts payable and accrued
expenses 14,281 17,250 3,333 (13,324)
----------- --------- --------- --------
Total adjustments (7,334) 41,300 19,537 (5,274)
----------- --------- --------- --------
Net cash used in operating activities (176,121) (166,467) (60,942) (28,041)
----------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and fixtures (5,965) (7,413) - (7,413)
Increase in Goodwill (75,000) (75,000)
Proceeds from sales of securities 97,148 - - -
Purchases of available-
for-sale securities (4,000) - - -
Increase in loan receivable - - - -
Repayment of loan receivable - - - -
Increase in note receivable (1,146,000) (100,805) (350,000) (50,805)
Increase in cash from acquisitions 20,011 20,011
----------- --------- --------- --------
Net cash provided by (used in)
investing activities (1,113,806) (108,218) (404,989) (58,218)
----------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loan payable 175,000 - 160,000 -
Loan from related party 796,000 44,000 - (10,000)
Proceeds from issuance of stock 300,000 881,980 300,000 731,980
----------- --------- --------- --------
Net cash provided by
financing activities 1,271,000 925,980 460,000 721,980
----------- --------- --------- --------
Net increase (decrease) in cash (18,927) 651,295 (5,931) 635,721
Cash and cash equivalents
at beginning of year 22,713 0 9,717 15,574
----------- --------- --------- --------
Cash and cash equivalents
at end of period $ 3,786 $ 651,295 3,786 651,295
=========== ========= ========= ========
</TABLE>
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER 30, 1995
1. The balance sheet as of September 30, 1995 and the statements of operations
and statements of cash flows for the nine months and three months ended
September 30, 1995 and 1994 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normally recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1995 & 1994
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the audited financial statements of
Evolutions, Inc. for the year ended December 31, 1994 included in the form
8-K filed. The results of operations for the periods ended September 30,
1995 & 1994 are not necessarily indicative of the operating results for the
full year.
2. On July 24, 1995, the Company acquired Evolutions, Inc., a New Jersey
corporation, which is a majority owned subsidiary of PTI Plastics, Inc., a
wholly owned subsidiary of Pure Tech International, Inc., a Delaware
corporation. Evolutions is involved in the manufacture and marketing of
casual apparel made from recycled materials. The transaction was
consummated by merging a wholly owned subsidiary of the Company into
Evolutions, Inc.
Under the Agreement, in exchange for the merger, the holders of Evolutions,
Inc. received an aggregate of 10,000,000 shares of the Company's Common
Stock. An additional 88,851,174 shares of Common Stock will be issued to
the Evolutions Shareholders upon shareholder approval of an amendment to the
Company's certificate of incorporation increasing the authorized number of
shares to allow such an issuance. The value of the additional 88,851,174
shares to be issued, approximately $2,700,000, is included in current
liabilities in the accompanying financial statements as of September 30,
1995.
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER 30, 1995
3. On September 27, 1995, pursuant to an agreement of the same date, Kidsview
Inc., a New Jersey company and a wholly owned subsidiary of Evolutions,
Inc., acquired certain assets from Direct Connect International, Inc. (DCI),
a Delaware corporation. The assets consist of DCI's business to the extent
that it relates to manufacturing, promoting and selling Zoo Borns and Tea
Bunnies brand toy animals, including the marks KIDSVIEW, ZOO BORNS and TEA
BUNNIES.
In consideration of the purchase, Evolutions, among other things, released
DCI of an aggregate of $750,000 in indebtedness to Evolutions. The DCI
agreement provides that DCI shall again become liable for repayment of such
indebtedness upon the exercise by DCI of an option to purchase 80% of the
common stock of Kidsview. This option expires on December 31, 1995, and
became exercisable on October 31, 1995. As of the date of this report, no
action has been taken by DCI to exercise this option. In addition, the
company agreed to issue to DCI 1,500,000 shares of its Common Stock, which
issuance is contingent upon shareholders' approval of a proposal to increase
the number of shares the Company is authorized to issue. The value of the
1,500,000 shares to be issued, approximately $75,000, is included in current
liabilities in the accompanying financial statements as of September 30,
1995. Up to an additional 4,000,000 shares of the Company's Common Stock
will be issued to DCI if, over a period of three years, certain net sales
and earnings tests are met in conjunction with the business acquired from
DCI.
Under terms of the DCI agreement, Kidsview and DCI also entered into a
management agreement pursuant to which DCI will make available to Kidsview,
Peter Schneider, DCI's President to manage the Assets. The management
agreement provides for a maximum monthly fee of $100,000. The first
$150,000 of management fees incurred will be offset against a $350,000 note
payable to EVI by DCI. DCI was conditionally released from the balance of
the note, which has been attributed to additional consideration for the
acquired assets. The management agreement has a term of one-year, subject
to two automatic one-year extensions if certain net sales and earnings
tests are met.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
GOLD SECURITIES CORPORATION
By: /s/ Michael Nafash
-------------------------------------
Michael Nafash
President and Chief Financial Officer
Date: December 7, 1995
7
<PAGE>
ATTACHMENT I
EVOLUTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-1
Balance sheets as of December 31, 1994
and June 30, 1995 (unaudited) F-2
Statements of operations for the period January 21,
1994 (inception) to December 31, 1994, six months
ended June 30, 1995 (unaudited), and period
January 21, 1994 (inception) to June 30, 1994 F-3
Statement of stockholders' equity for the period
January 21, 1994 (inception) to December 31, 1994
and six months ended June 30, 1995 (unaudited) F-4
Statements of cash flows for the period January 21,
1994 (inception) to December 31, 1994, six months
ended June 30, 1995 (unaudited), and period
January 21, 1994 (inception) to June 30, 1994 F-5 - F-6
Notes to financial statements F-7 - F-11
<PAGE>
Independent Auditors' Report
Board of Directors
and Stockholders
Evolutions, Inc.
Paramus, New Jersey
We have audited the balance sheet of Evolutions, Inc. as of December 31, 1994
and the related statements of operations, stockholders' equity and cash flows
for the periods January 21, 1994 (inception) to December 31, 1994 and January
21, 1994 (inception) to June 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform 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 financial statements referred to above present fairly, in
all material respects, the financial position of Evolutions, Inc. as of December
31, 1994 and the results of its operations and its cash flows for the periods
January 21, 1994 (inception) to December 31, 1994 and January 21, 1994
(inception) to June 30, 1994 in conformity with generally accepted accounting
principles.
HOLTZ RUBENSTEIN & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
September 22, 1995
Melville, New York
F-1
<PAGE>
EVOLUTIONS, INC.
BALANCE SHEETS
December 31, June 30,
1994 1995
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 22,713 $ 9,717
Investments in available-for-sales
securities (Notes 3 and 8) 279,384 2,280,822
Accounts receivable - 7,567
Due from contractor (Note 4) 197,864 204,152
Inventory 9,000 59,000
Note receivable - related party (Note 5) 40,000 40,000
Prepaid expenses and other current assets - 3,434
--------- ----------
548,961 2,604,692
NOTE RECEIVABLE (Note 6) - 796,000
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $1,653 and $2,653,
respectively 6,611 11,576
OTHER 950 950
--------- ----------
$ 556,522 $3,413,218
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 78,954 $ 92,402
Loans payable (Note 7) 14,500 29,500
Due to related parties (Note 8) - 796,000
--------- ----------
93,454 917,902
--------- ----------
STOCKHOLDERS' EQUITY: (Note 9)
Common stock, $10 par value; 100,000 shares
authorized; issued and outstanding 1,000
and 1,650 shares, respectively 10,000 16,500
Additional paid-in capital 865,000 2,783,500
Deficit (341,538) (428,346)
Unrealized holding (loss) gain on
securities available-for-sale (70,394) 123,662
--------- ----------
463,068 2,495,316
--------- ----------
$ 556,522 $3,413,218
========= ==========
See notes to financial statements
F-2
<PAGE>
EVOLUTIONS, INC.
STATEMENTS OF OPERATIONS
Period Period
January 21, 1994 Six Months January 21, 1994
(Inception) to Ended (Inception) to
December 31, 1994 June 30, 1995 June 30, 1994
(Unaudited)
REVENUES: (Note 4) $ 124,281 $266,205 $ 97,447
--------- -------- ---------
COSTS AND EXPENSES:
Cost of sales 216,389 183,682 162,927
Selling, general and
administrative 227,245 137,778 117,520
--------- -------- ---------
443,634 321,460 280,447
--------- -------- ---------
OPERATING LOSS (319,353) (55,255) (183,000)
--------- -------- ---------
OTHER:
Loss on sale of securities 60,874 28,470 -
Interest expense 3,573 30,000 2,000
Interest income (42,262) (26,917) -
--------- -------- ---------
22,185 31,553 2,000
--------- -------- ---------
NET LOSS $(341,538) $(86,808) $(185,000)
========= ======== =========
NET LOSS PER SHARE (Note 9) $(533.65) $(60.58) $(840.91)
======== ======= ========
Weighted average number of
shares of common stock
outstanding (Note 9) 640 1,433 220
=== ===== ===
See notes to financial statements
F-3
<PAGE>
EVOLUTIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Available-
Common Stock Paid-in for-Sale
Shares Amount Capital Deficit Securities Total
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization (Note 9) -
January 21, 1994 200 $ 2,000 $ 23,000 $ - $ - $ 25,000
Issuance of stock to parent
(Note 9) 800 8,000 842,000 - - 850,000
Unrealized holding loss on
available-for-sale securities - - - - (70,394) (70,394)
Net loss - - - (341,538) - (341,538)
----- ------- ---------- --------- -------- ----------
Balance, December 31, 1994 1,000 10,000 865,000 (341,538) (70,394) 463,068
Issuance of stock to parent
(Note 9) (unaudited) 850 8,500 1,916,500 - - 1,925,000
Surrender of stock (Note 9)
(unaudited) (200) (2,000) 2,000 - - -
Unrealized holding gain on
available-for-sale
securities (unaudited) - - - - 194,056 194,056
Net loss (unaudited) - - - (86,808) - (86,808)
----- ------- ---------- --------- -------- ----------
Balance, June 30, 1995 (unaudited) 1,650 $16,500 $2,783,500 $(428,346) $123,662 $2,495,316
===== ======= ========== ========= ======== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
EVOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Period
January 21, 1994 Six Months January 21, 1994
(Inception) to Ended (Inception) to
December 31, 1994 June 30, 1995 June 30, 1994
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (341,538) $ (86,808) $(185,000)
Adjustments to reconcile net ---------- --------- ---------
loss to net cash used in
operating activities:
Depreciation 1,653 1,000 -
Non-cash compensation 25,000 - 25,000
Loss on sale of securities 60,874 28,470 -
Non-cash interest income (37,500) - -
Changes in operating assets
and liabilities:
(Increase) in assets:
Accounts receivable - (7,567) -
Due from contractor (147,864) (15,318) -
Inventory (9,000) (50,000) (9,000)
Prepaid expenses and
other current assets - (3,434) -
Other assets (950) - -
Increase in liabilities:
Accounts payable and
accrued expenses 78,954 13,448 30,574
---------- --------- ---------
Total adjustments (28,833) (33,401) 46,574
---------- --------- ---------
Net cash used in operating
activities (370,371) (120,209) (138,426)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment (8,264) (5,965) -
Proceeds from sales of
securities 1,205,170 93,148 -
Purchases of available-
for-sale securities (878,322) (4,000) -
Increase in loan receivable (50,000) - (50,000)
Repayment of loan receivable - 9,030 -
Increase in note receivable -
officer (40,000) - -
Increase in note receivable - (796,000) -
---------- --------- ---------
Net cash provided by (used in)
investing activities 228,584 (703,787) (50,000)
---------- --------- ---------
</TABLE>
(Continued)
F-5
<PAGE>
EVOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Period Period
January 21, 1994 Six Months January 21, 1994
(Inception) to Ended (Inception) to
December 31, 1994 June 30, 1995 June 30, 1994
(Unaudited)
CASH FLOWS FROM FINANCING
ACTIVITIES:
<S> <C> <C> <C>
Increase in loan payable $ 14,500 $ 15,000 $ -
Loan from related party 54,000 796,000 54,000
Repayment to related party (54,000) - -
Proceeds from issuance of stock 150,000 - 150,000
-------- -------- --------
Net cash provided by
financing activities 164,500 811,000 $204,000
-------- -------- --------
Net increase (decrease) in cash 22,713 (12,996) 15,574
Cash and cash equivalents
at beginning of period - 22,713 -
-------- -------- --------
Cash and cash equivalents
at end of period $ 22,713 $ 9,717 $ 15,574
======== ======== ========
</TABLE>
See notes to financial statements
F-6
<PAGE>
EVOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIOD JANUARY 21, 1994 (INCEPTION) TO DECEMBER 31, 1994,
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED), AND PERIOD
JANUARY 21, 1994 (INCEPTION) TO JUNE 30, 1994
(Information with respect to the six months
ended June 30, 1995 is unaudited)
1. Organization:
Evolutions, Inc. (the "Company") was formed on January 21, 1994 and is
engaged in the manufacturing and marketing of clothing made from recycled
materials. Effective June 27, 1994, the Company became a majority owned
subsidiary of Pure Tech International, Inc. ("Pure Tech").
2. Summary of Significant Accounting Policies:
a. Inventory
Inventory, consisting principally of finished goods, is valued at
the lower of cost (first-in, first-out method) or market.
b. Revenue recognition
The majority of the Company's revenue is from the sale of clothing
manufactured from recycled materials. The Company recognizes revenues as
products are shipped.
c. Depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets.
d. Income taxes
The Company provides for Federal and State income taxes based upon
financial accounting income. Deferred income taxes are recorded in instances
where transactions are included in different periods for financial reporting and
income tax purposes.
e. Statement of cash flows
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
f. Marketable securities
Trading securities consist of equity securities held for the purpose
of selling in the near term. They are reported at fair market value, with
unrealized gains and losses included in earnings.
F-7
<PAGE>
2. Summary of Significant Accounting Policies: (Continued)
f. Marketable securities (Continued)
Available-for-sale securities are carried at fair value with the
unrealized holding gain (loss) included in stockholders' equity.
g. Reclassifications
Certain reclassifications have been made to the financial statements
for the period January 21, 1994 (inception) to June 30, 1994 to conform with the
classifications used in 1995.
h. Interim financial statements
The unaudited financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the period. The
results of operations are not necessarily indicative of the results expected for
the fiscal year.
3. Investments in Available-for-Sale Securities:
a. Investments in available-for-sale securities
Investments in available-for-sale securities consist of the
following:
December 31, June 30,
1994 1995
(Unaudited)
Pure Tech International
common stock $ 27,815 $1,946,875
Other equity securities 251,569 333,947
-------- ----------
$279,384 $2,280,822
======== ==========
b. Trading securities
The Company held no trading securities at December 31, 1994 or June
30, 1995. In July 1994, the Company sold 153,850 shares of the common stock of
its parent, Pure Tech International, Inc. (classified as trading securities) for
net proceeds of approximately $700,000.
4. Due from Contractor:
Due from contractor consists of the following:
December 31, June 30,
1994 1995
(Unaudited)
Note receivable (a) $ 50,000 $ 40,970
Advances (b) 147,864 163,182
-------- --------
$197,864 $204,152
======== ========
F-8
<PAGE>
4. Due from Contractor: (Continued)
(a) Note receivable, bearing interest at 10%, is due on demand and is
collateralized by borrower's accounts receivable. This note can be
repaid by cash or services.
(b) In August 1994, the Company entered into a one-year product
financing agreement with a clothing manufacturer. Under the
agreement, the Company will advance to the manufacturer up to 90%
of the value of sales orders the manufacturer has received from
third parties. Maximum advances under this agreement are $200,000,
and are collateralized by a lien on the related inventory. The
Company earns a financing fee based upon sales order value. Revenue
under this agreement approximated $2,000 for the period January 21,
1994 (inception) to December 31, 1994 and $9,000 for the six months
ended June 30, 1995.
5. Note Receivable - Related Party:
Note receivable - related party consists of a $40,000 demand note due from
an officer/stockholder. The note bears interest at 10% and is collateralized by
6,000 shares of Pure Tech common stock held by the officer/stockholder.
6. Note Receivable:
At June 30, 1995, note receivable includes a $750,000 note, bearing
interest at 12%, due on September 1, 1996. The note is secured by certain
marketable securities held by the borrower and an interest in certain accounts
receivable.
Subsequent to June 30, 1995, the Company entered into a proposed
acquisition with the borrower (see Note 11).
7. Loans Payable:
Loans payable bear interest at 10% per annum and are due upon demand.
8. Due to Related Parties:
At June 30, 1995, due to related parties consist of the following:
Secured notes (a) $770,000
Loans payable - officers (b) 26,000
--------
$796,000
========
(a) Consist of two notes to relatives of shareholders/officers. The
notes are due on demand and bear interest at 12%. The notes are
secured by 350,000 shares of the parent corporation's stock held by
the Company.
(b) Loans payable to officers are due on demand and bear interest at
10%.
F-9
<PAGE>
9. Stockholders' Equity:
a. Capitalization
The Company's authorized capital consists of 100,000 shares of
common stock with a par value of $10 a share.
b. Initial capitalization
In January 1994, the Company issued 200 shares to the founding
shareholders in consideration for services provided. The services and shares
were valued at $25,000.
c. Issuance of shares to parent
In June 1994, the Company issued 800 shares of common stock
(representing 80% of the outstanding shares) to Pure Tech International, Inc.
("Pure Tech") for $150,000 cash and 153,850 shares of Pure Tech common stock
(valued at $700,000).
In March 1995, the Company issued an aggregate of 850 shares of
common stock and 55 stock options ("1995 options") to Pure Tech and certain of
its officers for 350,000 shares of Pure Tech common stock (valued at
$1,925,000). Concurrently, the founding shareholders surrendered 200 shares of
common stock and outstanding options in exchange for 165 stock options ("1995
options"). The 1995 options have an exercise price of $100, and are exercisable
through 2000.
As of June 30, 1995, Pure Tech holds 88% of the Company's
outstanding common stock.
d. Loss per share
Net loss per common share was computed by dividing the net loss by
the weighted average number of shares of common stock outstanding during each
period presented.
10. Supplementary Information - Statement of Cash Flows:
Cash paid for interest approximated $3,600 for the period January 21,
1994 (inception) to December 31, 1994, $-0- for the six months ended June 30,
1995, and $2,000 for the period January 21, 1994 (inception) to June 30, 1994.
In January 1994, the Company issued common stock to the founding
shareholders for services provided (see Note 9). In June 1994 and March 1995,
the Company issued common stock to Pure Tech for an aggregate of 503,850 shares
of Pure Tech common stock (see Note 9). In October 1994, the Company received
marketable securities (valued at $37,500) as consideration for a loan made to a
third party.
F-10
<PAGE>
11. Subsequent Events:
a. Business combination
On July 24, 1995, Gold Securities Corporation ("Gold") acquired
Evolutions by merging a wholly-owned subsidiary, GSC Acquisition Corporation,
into the Company. The holders of Evolutions stock received an aggregate of
10,000,000 shares of Gold common stock and the right to receive an additional
88,851,174 upon shareholder approval to increase Gold's authorized number of
shares.
Although in the form of a merger, the transaction is, in substance,
an acquisition of Gold by Evolutions as the control of Gold will transfer from
the management of Gold to the management of Evolutions.
b. Proposed acquisition
Subsequent to June 30, 1995, the Company entered negotiations to
purchase of rights and interest in certain product lines of a distributor of
infant, preschool, and general soft toy products. Proposed consideration
includes cash, shares of Evolutions common stock, and the right to receive
additional shares of Evolutions common stock based upon certain performance
levels of the product lines over the next three years.
As part of the proposed agreement, the seller will manage the
product lines for a specified period, for which it will receive an amount equal
to its monthly operating costs. These management services will include the
services of the seller's president.
As an inducement for the Company to enter into this agreement, the
seller will issue to Evolutions warrants to purchase 100,000 shares of its stock
at an exercise price of $.10 and 200,000 shares of its stock at an exercise
price of $.20.
In March 1995, the Company loaned the seller $750,000 under a
secured note (see Note 6). In July 1995, the Company loaned an additional
$300,000, under a note, to the seller. The July note is secured by certain
accounts receivable and is due on October 31, 1995. Upon consummation of the
proposed acquisition, the two notes will be cancelled. Under certain
circumstances, at the option of seller on or before December 31, 1995, the
seller can reacquire the product lines but will be obligated to repay the two
notes (aggregating $1,050,000) and return all Evolutions shares previously
issued.
F-11
<PAGE>
GOLD SECURITIES CORPORATION
AND
EVOLUTIONS, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
On July 24, 1995, Gold Securities Corporation ("Gold") acquired
Evolutions, Inc. ("EVI") by merging a wholly owned subsidiary, GSC
Acquisition Corporation, into EVI. The holders of EVI stock received an
aggregate of 10,000,000 shares of Gold common stock and the right to receive
an additional 88,851,174 shares ("Additional Shares") upon shareholder
approval to increase Gold's authorized number of shares. Approximately 7.5
million of the Additional Shares will be issued to third parties as brokerage
fees in connection with the acquisition.
Although in the form of a merger, the transaction is, in substance, an
acquisition of Gold by EVI as the control of Gold will transfer from the
management of Gold to the management of EVI. For purposes of the pro forma
financial statements, the value of the acquisition has been based on the
estimated value of the recorded assets and liabilities of EVI, as being the
most indicative measurement. Such value aggregated $2,495,316 at June 30, 1995.
<PAGE>
EVOLUTIONS, INC.
AND
GOLD SECURITIES CORPORATION
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1995
<TABLE>
<CAPTION>
GOLD
EVOLUTIONS SECURITIES PRO FORMA PRO FORMA
INC CORPORATION ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $9,717 $20,011 $ - $29,728
Securities - available for sale 2,280,822 - - 2,280,822
Accounts receivable 7,567 - - 7,567
Due from contractor 204,152 - - 204,152
Inventory 59,000 - - 59,000
Note receivable - related party 40,000 - - 40,000
Prepaid expenses 3,434 - - 3,434
---------- -------- ------------ ----------
Total current assets 2,604,692 20,011 - 2,624,703
Notes receivable 796,000 - - 796,000
Property and equipment 11,576 - - 11,576
Mining properties - 61,621 (1) (61,621) -
Goodwill - - (1) 197,621 197,621
Other assets 950 - - 950
---------- -------- ------------ ----------
$3,413,218 $81,632 $136,000 $3,630,850
========== ======== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $92,402 $597 $ - $92,999
Loans payable 29,500 - - 29,500
Due to related parties 796,000 - - 796,000
---------- -------- ------------ ----------
Total current liabilities 917,902 597 - 918,499
STOCKHOLDERS' EQUITY:
Common stock, $10 par value;
authorized 100,000 shares; 1,650
issued and outstanding 16,500 - (1) (16,500) -
Common stock; no par value
issued and outstanding 8,606,189 and
107,457,363, respectively - 640,269 (1) 2,376,766 3,017,035
Additional paid-in capital 2,783,500 - (1) (2,783,500) -
Deficit (428,346) (559,234)(1) 559,234 (428,346)
Unrealized holding gain on securities
available for sale 123,662 - - 123,662
---------- -------- ------------ ----------
2,495,316 81,035 136,000 2,712,351
---------- -------- ------------ ----------
$3,413,218 $81,632 $136,000 $3,630,850
========== ======== ============ ==========
</TABLE>
See notes to pro forma combined balance sheet
<PAGE>
GOLD SECURITIES CORPORATION
AND
EVOLUTIONS, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1995
(UNAUDITED)
(1) The pro forma combined balance sheet of Gold and EVI gives effect to the
July 24, 1995 issuance of 10,000,000 shares of Gold common stock for 1,650
shares (100% of the outstanding stock) of EVI and the additional issuance
of 81,329,889 shares of Gold common stock to be issued to EVI stockholders
and 7,521,285 shares of Gold Common Stock as brokerage fees in connection
with the acquisition, as if the transaction had occurred on June 30, 1995.
PRO FORMA ADJUSTMENTS:
<PAGE>
EVOLUTIONS, INC.
AND
GOLD SECURITIES CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1994 SIX MONTHS ENDED JUNE 30, 1995
-------------------------------------------------- -------------------------------------------------
GOLD GOLD
EVOLUTIONS SECURITIES PRO FORMA PRO FORMA EVOLUTIONS SECURITIES PRO FORMA PRO FORMA
INC CORPORATION ADJUSTMENTS COMBINED INC CORPORATION ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES $124,281 $924 $ - $125,205 $266,205 $ - $ - $266,205
---------- --------- -------- ----------- -------- ------- -------- -----------
COSTS AND EXPENSES:
Cost of goods sold 216,389 - 216,389 183,682 - - 183,682
Selling,general, and
administrative 227,245 30,830 (1) 19,800 277,875 137,778 - (1) 9,900 147,678
---------- --------- -------- ----------- -------- ------- -------- -----------
443,634 30,830 19,800 494,264 321,460 - 9,900 331,360
---------- --------- -------- ----------- -------- ------- -------- -----------
OPERATING LOSS (319,353) (29,906) (19,800) (369,059) (55,255) - (9,900) (65,155)
---------- --------- -------- ----------- -------- ------- -------- -----------
OTHER:
Loss on sale of
securities 60,874 - 60,874 28,470 - - 28,470
Abandoned mining claims - 226,325 (2) (226,325) - - - - -
Interest expense 3,573 - 3,573 30,000 - - 30,000
Interest income (42,262) - (42,262) (26,917) - - (26,917)
---------- --------- -------- ----------- -------- ------- -------- -----------
22,185 226,325 (226,325) 22,185 31,553 - - 31,553
---------- --------- -------- ----------- -------- ------- -------- -----------
NET LOSS ($341,538) ($256,231) $206,525 ($391,244) ($86,808) $ - ($9,900) ($96,708)
========= ======== ======== =========== ======== ======= ======== ===========
LOSS PER SHARE ($533.65) ($0.03) ($0.00) ($60.58) ($0.00)
========= ======== =========== ======== ===========
WEIGHTED AVERAGE
NUMBER OF SHARES 640 107,457,363 1,433 107,457,363
========= =========== ======== ===========
</TABLE>
See notes to pro forma combined statements of operations
<PAGE>
GOLD SECURITIES CORPORATION
AND
EVOLUTIONS, INC.
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
PERIOD FROM INCEPTION (JANUARY 21, 1994) TO DECEMBER 31, 1994
AND
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
The pro forma combined statements of operations for the periods ended December
31, 1994 and June 30, 1995 give effect to the issuance of the Gold shares as
if such transaction had occured as of the inception of EVI (January 21, 1994).
PRO FORMA ADJUSTMENTS:
1)Amortization of goodwill arising from the acquisition,
assuming an amortization period of 10 years.
2)Write down of assets to fair value based on purchase accounting
<PAGE>
ATTACHMENT J
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
FINANCIAL STATEMENTS
APRIL 30, 1995
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
APRIL 30, 1995
CONTENTS
Page
----
Independent Auditors' Report 1
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 7
<PAGE>
[Letterhead of Bederson & Company LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Direct Connect International Inc.
and Subsidiary
Midland Park, New Jersey
We have audited the accompanying balance sheet of the Zoo Borns Division (as
defined in Note 1) of Direct Connect International Inc. and Subsidiary as of
April 30, 1995 and the related statements of operations and accumulated deficit,
and cash flows for the year then ended. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform 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 financial statements referred to above present fairly, in
all material respects, the financial position of the Zoo Borns Division of
Direct Connect International Inc. and Subsidiary as of April 30, 1995, and the
results of its operations and its cash flows for the year ended April 30, 1995
in conformity with generally accepted accounting principles.
BEDERSON & COMPANY LLP
/s/ Bederson & Company LLP
West Orange, New Jersey
November 22, 1995
(1)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
BALANCE SHEETS
ASSETS
September 26, April 30,
1995 1995
------------- ---------
(Unaudited)
CURRENT ASSETS:
Inventories $ - $ 40,367
Prepaid royalties 10,000 10,000
------------ -----------
TOTAL CURRENT ASSETS 10,000 50,367
MOLDS, MACHINERY AND EQUIPMENT, at cost,
less accumulated depreciation of
$7,151 and $3,151 84,228 32,446
------------ -----------
TOTAL ASSETS $ 94,228 $ 82,813
============ ===========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 160,434 $ 185,846
Due to owner 1,062,013 1,139,636
------------ -----------
TOTAL LIABILITIES 1,222,447 1,325,482
ACCUMULATED DEFICIT (1,128,219) (1,242,669)
------------ -----------
TOTAL LIABILITIES AND ACCUMULATED
DEFICIT $ 94,228 $ 82,813
============ ===========
The accompanying notes are an integral part
of these financial statements.
(2)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
May 1, 1995
Through
September 26, Year Ended
1995 April 30, 1995
------------- --------------
(Unaudited)
SALES $ 1,071,922 $ 1,389,923
----------- -----------
COSTS AND EXPENSES:
Cost of goods sold 543,724 662,599
Royalties/licensing fees 84,817 110,898
Advertising and promotion 65,881 758,142
Depreciation 4,000 3,151
General and administrative expenses 259,050 552,600
Product development costs - 545,202
----------- -----------
TOTAL COSTS AND EXPENSES 957,472 2,632,592
----------- -----------
NET INCOME (LOSS) 114,450 (1,242,669)
ACCUMULATED DEFICIT - beginning (1,242,669) -
----------- -----------
ACCUMULATED DEFICIT - ending $(1,128,219) $(1,242,669)
=========== ===========
The accompanying notes are an integral part
of these financial statements.
(3)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
STATEMENTS OF CASH FLOWS
May 1, 1995
Through
September 26, Year Ended
1995 April 30, 1995
------------- --------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 114,450 $(1,242,669)
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation 4,000 3,151
(Increase) decrease in assets:
Inventories 40,367 (40,367)
Prepaid royalties - (10,000)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses (25,412) 185,846
Due to owner (77,623) 1,139,636
---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 55,782 35,597
---------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of molds, machinery
and equipment (55,782) (35,597)
---------- -----------
NET INCREASE IN CASH - -
CASH - beginning - -
---------- -----------
CASH - ending $ - $ -
========== ===========
The accompanying notes are an integral part
of these financial statements.
(4)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
NOTES TO FINANCIAL STATEMENTS
THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Business and Basis of Presentation
The accompanying financial statements present the financial position,
results of operations and changes in accumulated deficit and cash flows
of the rights and interest to the Zoo Borns product line, Tea Bunnies
product line and Kidsview name (collectively the Zoo Borns Division )
of Direct Connect International Inc. and Subsidiary (the Company). The
financial statements are prepared for Evolutions, Inc., in connection
with its acquisition of the Zoo Borns Division (Note 5). Certain
amounts in the accompanying financial statements have been allocated in
a reasonable and consistent manner in order to depict the financial
position, results of operations and cash flows of the Zoo Borns
Division on a stand-alone basis.
The Zoo Borns Division, which commenced operations during the year
ended April 30, 1995, is engaged in the business of designing,
developing, marketing, and distributing a variety of infant, preschool
and general soft toy products. Substantially, all of the Company s
purchases are from suppliers in the Far East.
The accompanying balance sheet reflects a working capital deficiency of
$1,212,447 at September 26, 1995 (unaudited) and $1,275,115 at April
30, 1995 and the statement of operations for the year ended April 30,
1995 reflects a net loss of $1,242,669. The management of the Company
believes the subsequent events described in Note 5, will provide
sufficient funds to meet the Zoo Borns Division s operating needs
during the next twelve (12) months, assuming no material change in the
level of its business operations.
Inventories
Inventories are valued at the lower of cost (first-in, first-out
method) or market and consist principally of finished goods held for
resale.
Prepaid Royalties
The Company has entered into license agreements and royalty
arrangements for the use of certain characters for its toys and is
obligated to pay nonrefundable advances over the terms of these
agreements, which are recoupable by the Company to the extent of the
royalties earned on products sold. In order to match revenues with
expenses, these minimum guarantees are treated as prepaid expenses and
are charged against income as the products are sold. Any minimum
guaranty paid in excess of earned royalties is charged against income
at such point that it is known that earned royalties will not cover
minimum royalties.
Molds, Machinery and Equipment
Molds, Machinery and equipment, stated at cost less accumulated
depreciation, is depreciated using the straight-line method over a five
year period.
(5)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
NOTES TO FINANCIAL STATEMENTS
THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Certain income and expense items are accounted for in different periods
for income tax purposes than for financial reporting purposes.
Provisions for deferred income taxes are made in recognition of these
temporary differences.
Deferred income tax assets as of April 30, 1995 have been reduced to
zero by a valuation allowance of approximately $500,000 due to
uncertainties concerning their realization.
Interim Financial Statements
The unaudited financial statements reflects all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the
period. The results of operations are not necessarily indicative of
the results expected for the fiscal year.
NOTE 2 - RELATED PARTY TRANSACTIONS
During the period May 1, 1995 through September 26, 1995 (unaudited)
and year ended April 30, 1995, the Zoo Borns Division purchased
products totaling approximately $-0- and $266,986, respectively, from a
corporation which is owned and operated by a principal stockholder and
executive vice president of the Company. During the year ended April
30, 1995, Zoo Borns Division incurred product development expenses of
$49,000 payable to this corporation.
NOTE 3 - LICENSE AGREEMENTS
The Company has the right to use product names and designs under
license agreements with designers. These agreements require the
Company to pay royalties ranging from five percent to ten percent of
sales. The Company is obligated to make minimum annual cash royalty
payments aggregating $15,000 for the fiscal year ending April 30, 1996,
with respect to the Tea Bunnies product line.
NOTE 4 - MAJOR CUSTOMERS
The Zoo Borns Division had ninety six percent of its sales to two
customers during the period May 1, 1995 through September 26, 1995
(unaudited) and seventy-eight percent of its sales to two customers
during the year ended April 30, 1995.
(6)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
NOTES TO FINANCIAL STATEMENTS
THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 1995
NOTE 5 - SUBSEQUENT EVENTS (Unaudited)
On September 27, 1995, the Company entered into an agreement with
Evolutions, Inc. ( Evo ), an unaffiliated public company, whereby the
Company transferred all rights and interests to its Zoo Borns product
line, Tea Bunnies product line and Kidsview name to Evo for $750,000
and shares of common stock of Evo equivalent to approximately seven
percent of Evo s then outstanding common stock. The Company also has
the right to receive additional shares of Evo s common stock,
equivalent to approximately fifteen percent of the then outstanding
common stock based on certain performance levels of the Zoo Borns
Division over the next three years.
As part of the agreement, the Company will manage these product lines
for Evo, and will receive an amount equal to its monthly operating
costs, up to $100,000, for such period of time as the Company is
managing such product lines. The Company will provide the services of
Peter Schneider, president of the Company, for such management, and he
has so agreed. This management arrangement may terminate after one
year, but could be extended for up to two additional years depending on
certain performance levels of such product lines.
As an inducement for Evo to enter into this agreement, the Company
issued to Evo warrants to purchase 300,000 shares of common stock of
the Company at exercise prices of $.10 per share with respect to
100,000 shares and $.20 per share with respect to 200,000 shares. In
anticipation of consummating the agreement, Evo and the Company entered
into a lending arrangement under which the Company signed a promissory
note in March 1995 for $750,000 with interest at the annual rate of
twelve percent. Such note was secured by 133,973 shares of common
stock of Glasgal Communications, Inc. held by the Company and by an
interest in certain amounts receivable and is due on September 1, 1996.
Subsequently, the Company also signed promissory notes totalling
$350,000 with interest at the annual rate of twelve percent. Such
notes were due on October 31, 1995. Upon consummation of the
agreement, all notes were cancelled with $1,100,000 applied to the
purchase price and management fees. Under certain circumstances and at
the Company s option on or before December 31, 1995, the Company can
reacquire the product lines but will be obligated to pay to Evo
$1,100,000 and deliver to Evo the shares of Evo common stock previously
issued to the Company.
The Company recognized a gain of approximately $1,000,000 as a result
of the sale of the Zoo Borns Division.
(7)
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
On July 24, 1995, Gold Securities Corporation ("Gold") acquired
Evolutions, Inc. ("EVI") by merging a wholly-owned subsidiary, GSC Acquisition
Corporation, into EVI. The holders of EVI stock received an aggregate of
10,000,000 shares of Gold common stock and the right to receive an additional
88,851,174 shares upon shareholder approval to increase Gold's authorized number
of shares.
Although in the form of a merger, the transaction is, in substance, an
acquisition of Gold by EVI as the control of Gold will transfer from the
management of Gold to the management of EVI. For purposes of the pro forma
financial statements, the value of the record assets and liabilities of EVI, as
being the most indicative measurement. Such value aggregated $2,495,316 at June
30, 1995.
On September 27, 1995, Kidsview, Inc., a wholly owned subsidiary of EVI
("Kidsview"), purchased certain assets of Direct Connect International, Inc.
("DCI"), consisting primarily of a line of toy animals marketed under the
tradenames Zoo Borns and Tea Bunnies. In consideration for the purchase, EVI,
among other things, conditionally released DCI of $750,000 in indebtedness to
EVI. In addition, the Company agreed to issue to DCI 1,500,000 shares of Gold
common stock, which issuance is contingent upon shareholder approval to increase
Gold's authorized number of shares. Up to an additional 4,000,000 shares of Gold
common stock ("Contingent Shares") will be issued to DCI if over a period of
three years certain net sales and earnings tests are met in connection with the
business acquired from DCI.
DCI was also indebted to EVI under a $350,000 note payable. Under the
terms of the agreement between EVI and DCI, Kidsview and DCI entered into a
management agreement pursuant to which DCI will continue to manage the business
relating to the toy animals for a monthly fee of up to $100,000. The first
$150,000 of management fees incurred will be offset against this note. DCI was
conditionally released from the balance of the note, which has been attributed
to additional consideration for the acquired assets.
<PAGE>
GOLD SECURITIES CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Gold
Evolutions Securities Pro forma Direct Pro forma
Inc. Corporation Adjustments Subtotal Connect Adjustments Total
---------- ----------- ----------- -------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES $ 124,281 $ 924 $ - $ 125,205 $1,331,853 $ - $ 1,457,058
--------- --------- --------- --------- ---------- ---------- -----------
COSTS AND EXPENSES:
Cost of goods sold 216,389 - - 216,389 635,329 - 851,718
Selling, general
and administrative 227,245 30,830 (1) 27,000 285,075 701,036 (5) (701,036) 431,475
(3) 146,400
Management fee - - - - - (4) 1,200,000 1,200,000
--------- --------- --------- --------- ---------- ---------- -----------
443,634 30,830 27,000 501,464 1,336,365 645,364 2,483,193
--------- --------- --------- --------- ---------- ---------- -----------
OPERATING LOSS (319,353) (29,906) (27,000) (376,259) (4,512) (645,364) (1,026,135)
--------- --------- --------- --------- ---------- ---------- -----------
OTHER:
Loss on sale of
securities 60,874 - - 60,874 - - 60,874
Abandoned mining
claims - 226,325 (2) (226,325) - - - -
Interest expense 3,573 - - 3,573 - - 3,573
Interest income (42,262) - - (42,262) - - (42,262)
--------- --------- --------- --------- ---------- ---------- -----------
22,185 226,325 (226,325) 22,185 - - 22,185
--------- --------- --------- --------- ---------- ---------- -----------
NET (LOSS) INCOME $(341,538) $(256,231) $ 199,325 $(398,444) $ (4,512) $ (645,364) $(1,048,320)
========= ========= ========= ========= ========== ========== ===========
LOSS PER SHARE $(0.00) $(0.01)
====== ======
WEIGHTED AVERAGE
NUMBER OF SHARES 107,457,363 108,957,363
=========== ===========
</TABLE>
See notes to pro forma combined statements of operations
<PAGE>
GOLD SECURITIES CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Gold
Evolutions Securities Pro forma Direct Pro forma
Inc. Corporation Adjustments Subtotal Connect Adjustments Total
---------- ----------- ----------- -------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES $ 309,910 $ - $ - $ 309,910 $1,904,696 $ - $2,214,606
--------- --------- --------- --------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of goods sold 229,822 - - 229,822 947,579 - 1,177,401
Selling, general
and administrative 188,301 - (1) 18,700 207,001 1,275,062(5) (1,275,062) 317,001
(3) 110,000
Management fee - - - - - (4) 900,000 900,000
--------- --------- --------- --------- ---------- ---------- ----------
418,123 - 18,700 436,823 2,222,641 (265,062) 2,394,402
--------- --------- --------- --------- ---------- ---------- ----------
OPERATING (LOSS) INCOME (108,213) - (18,700) (126,913) (317,945) 265,062 (179,796)
--------- --------- --------- --------- ---------- ---------- ----------
OTHER:
Loss on sale of
securities 49,697 - - 49,697 - - 49,697
Interest expense 37,794 - - 37,794 - - 37,794
Interest income (26,917) - - (26,917) - - (26,917)
--------- --------- --------- --------- ---------- ---------- ----------
60,574 - - 60,574 - - 60,574
--------- --------- --------- --------- ---------- ---------- ----------
NET (LOSS) INCOME $(168,787) $ - $(18,700) $(187,487) $ (317,945) $ 265,062 $ (240,370)
========= ========= ======== ========= ========== ========== ==========
LOSS PER SHARE $(0.00) $(0.00)
====== ======
WEIGHTED AVERAGE
NUMBER OF SHARES 107,457,363 108,957,363
=========== ===========
</TABLE>
See notes to pro forma combined statements of operations
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 AND
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
The pro forma combined statements of operations for the year ended
December 31, 1994 includes the statement of operations of EVI for the period
from inception (January 21, 1994) to December 31, 1994, the statement of
operations of Gold for the year ended December 31, 1994, and the statement of
operations of the acquired product line of DCI for the twelve months January 31,
1995. The statement of operations of the acquired product line of DCI for the
twelve month period ended January 31, 1995 was derived by deducting the
statement of operations data for the three months ended April 30, 1995 from the
statement of operations data for the year ended April 30, 1995 and adding the
statement of operations data for the three months ended April 30, 1994.
The pro forma combined statements of operations for the nine months ended
September 30, 1995 includes the statement of operations of EVI for the nine
months ended September 30, 1995, the statement of operations of Gold from
January 1, 1995 through July 24, 1995 (date of merger) and the statement of
operations of the acquired product line DCI for the nine months ended September
30, 1995. The statement of operations of the acquired product line of DCI from
the nine months ended September 30, 1995 was derived by adding the statement of
operations for the eight months ended September 30, 1995 with the statement of
operations for the one month ended January 31, 1995.
The pro forma combined statements of operations have been prepared as if the
merger and acquisition transactions had been consummated as of January 21, 1994
and January 1, 1995, respectively. The pro forma results of operations do not
purport to be indicative of the results of operations that actually would have
resulted had such transactions been consummated on such dates.
Combination of Gold and EVI
(1) To record additional amortization of goodwill arising from the
acquisition, assuming an amortization period of 10 years.
(2) To record write down of assets to fair value based upon purchase
accounting.
Acquisition of DCI Product Line
(3) To record amortization of intangible assets arising from the
acquisition, assuming an amortization period of 7 years.
(4) To record monthly management fee due to DCI under the Management
Agreement dated September 27, 1995. The Agreement provides for a
monthly fee equal to the lesser of $100,000 or DCI's documented
operating costs in performing its services. The pro forma
statements of operations assume a monthly fee of $100,000.
(5) To deduct selling, general, and administrative costs of DCI, as
such costs will be covered by the monthly management fee described
in Note 4.
