SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-KSB
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ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1999
E-PAWN.COM, INC
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 33-2533-LA 87-0435741
(State or Other Jurisdiction Commission File Number (I.R.S. Employer
of Incorporation) Identification Number)
Merrill Lynch Tower
2855 University Drive, Suite 200
Coral Springs, Florida 33065
Tel. 954-575-7296
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(Address of Principal Executive Offices and Telephone)
WASATCH INTERNATIONAL CORP.
1301 N. Congress Avenue, Suite 135, Boynton Beach, Florida 33426
(Former Name and Address)
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act: Common Stock, par
value $.001 per share
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) 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-KSB or any amendment to this form 10-KSB. Yes No X
State issuer's revenues for period ending May 31, 1999: $ -0-
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No x Not Applicable
As of May 31, 1999 there were 38,433,820 shares of the Registrant's Common
Stock, $0.001 par value, outstanding, which is the only class of common or
voting stock of the registrant issued as of that date. The aggregate market
value of the voting stock held by non-affiliates and not containing a
restrictive legend computed by reference to the closing price for the Common
Stock as quoted by the Nasdaq Bulletin Board Stock Market as of May 31, 1999 was
approximately $ 183,434.
Transitional Small Business Disclosure Format : Yes X ; No : Model B of Form
1-A, Items 6-11
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TABLE OF CONTENTS
Part I
(Items 6-11 of Model B of Form 1-A)
Page Number
Item 6. Description of Business........................................... 1
Item 7. Description of Property........................................... 3
Item 8 Directors, Executive Officers and Significant Employees.............4
Item 9. Remuneration of Directors and Officers..............................5
Item 10. Security Ownership of Management and Certain Security Holders.......5
Item 11. Interest of Management and Others in Certain Transactions...........6
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters...........................................6
Item 2. Legal Proceedings...................................................7
Item 3. Changes in and Disagreements With Accountants.......................9
Item 4. Submission of Matter to a Vote of Security-Holders..................9
Item 5. Compliance With Section 16(b) of the Exchange Act...................9
Item 6. Reports on Form 8-K.................................................9
Part F/S
Index to Financial Statements................................................F-1
Independent Auditor's Report.................................................F-2
Balance Sheet................................................................F-3
Statement of Operations......................................................F-4
Statements of Stockholders' Deficit..........................................F-5
Statements of Cash Flows.....................................................F-6
Notes to Financial Statements...........................................F-7-F-15
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Part I
ITEM 6 . DESCRIPTION OF BUSINESS.
E-Pawn.com, Inc. (the "Company") was organized under the laws of the State
of Nevada on November 4, 1985, under the name Java, Inc. The Company was formed
for the purpose of engaging in the business of investing in businesses and all
other lawful business. The Company's initial authorized capital consisted of
50,000,000 shares, $.001 par value, common capital stock.
In 1986, the Company sold 1,320,350 shares of its common stock to the
public at a price of $0.10 per share, pursuant to an S-18 Registration Statement
filed with the Securities and Exchange Commission on January 10, 1986, and the
Company completed the offering on August 20, 1986.
The company changed its name to Wasatch International Corporation on
September 27, 1995. The company's principal business activity was to seek
potential business ventures which may warrant involvement or purchase.
On January 2000, the majority shareholder of the Company consented to amend
the article of incorporation to change the name of the Company to E-Pawn.com,
Inc., following its acquisition of the Florida corporation, E-Pawn, Inc. The
consent also changed the capitalization by increasing the number of shares of
common stock, par value $.001, to 500,000,000 and by providing for a new Class
A, Preferred Stock, par value $.10, with 100,000,000 authorized shares. The
Class A, Preferred Stock has a liquidation preference and each shares has voting
rights equal to 100 shares of common stock. The Preferred Stock has no other
economic rights to distributions or dividends.
CARIBBEAN HOLDINGS INTERNATIONAL CORPORATION
On September 25, 1996, the Company acquired all the issued and outstanding
stock of Caribbean Holdings International Corporation ("Caribbean"), a Florida
corporation, in exchange for 25,000,000 shares of the Company's common stock.
Caribbean is a partner in a joint venture which intends to secure and develop
certain land in the Bahamas which is part of the Effie Knowles Estate. Caribbean
had entered into the joint venture agreement in July 1996 with two individuals
who are the heirs to the estate, which is in the process of being probated and
that owned approximately 15,000 acres of land in the Bahamas. The agreement
provides for net profits to be shared 50% by Caribbean and 50% by the two
individuals. The agreement also stipulates that advance payments are to be made
to the two individuals toward their share of future net profits derived from the
real estate associated with the joint venture. Pursuant to the agreement, the
two individuals were paid $100,000 initially and $5,000 each month, until the
estate has been completely probated. Through May 31,1997, a total of $154,000 of
advances toward joint venture net profit have been paid to the two individuals.
On May 31, 1998, a total of $404,000 of advances toward joint venture net profit
have been paid to the two individuals. Through May 31, 1999, an additional
$60,000 of advances toward joint venture net profit have been paid to the two
individuals. Through August 1999 an additional amount of $15,000 was
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advanced pursuant to the joint venture agreement. In September 1999, the Company
became aware that the joint venture partners had entered into agreements with
third parties and had accepted advances from such parties in violation of the
joint venture agreement. The Company has therefore suspended payment of advances
under the agreement, and the joint venture partners have claimed a default by
Caribbean under the agreement.
On January 20, 2000, the Company approved the distribution to all of the
Company's shareholders of record on January 28, 2000 (extended to February 28,
2000 pursuant to NASD rules) of a stock dividend of one share of Caribbean, a
wholly owned subsidiary of the Company, for each share of the Company held as of
the record date. Caribbean assumed liabilities in the sum of approximately
$160,000 plus interest due to DBLA Associates. The Company has been released of
its obligations and guarantees to DBLA Associates, and the Company has no
further liability to DBLA Associates in connection with this debt. Caribbean has
claims through its joint venture with Merrill and Raymond MacDonald to an
interest in approximately 15,000 acres of land in the Bahamas. The rights of
Caribbean were retained by it in full when the stock of this company was
distributed to the shareholders of the Company pursuant to the stock dividend.
KIWI INTERNATIONAL AIRLINES
In October 1996, the Company agreed to advance funds in the form of Debtor
In Possession ("DIP") financing to Kiwi International Airlines of Newark, N.J.
("Kiwi"), an air carrier that had filed for reorganization pursuant to Chapter
11 of the Bankruptcy Code. The Company agreed to provide a total of $1,000,000
in DIP financing to Kiwi. In November of 1996, the Company along with Dr.
Charles Edwards ( "Edwards") agreed to form a Partnership Edwards-Wasatch
Enterprises ( "EWE") to which the Company assigned its right to provide Kiwi the
DIP financing. Pursuant to the agreement (the "EWE Agreement"), Edwards agreed
to loan up to $1,000,000 as required to fund Kiwi operations, and the Company
agreed to provide up to an additional $1,000,000. (As of the date of the EWE
Agreement, the Company had previously provided Kiwi with $100,000 of the DIP
financing.) The Company's assignment of its right to provide the DIP financing
to Kiwi was approved by the Bankruptcy Court and on that date the Company was in
default of its financing obligations to Kiwi, which default the Court waived in
the order. Two orders were entered by the Bankruptcy Court at subsequent
hearings which resulted in an increase in the DIP financing to a total of
$9,500,000 consisting of $6,000,000 in cash and $3,500,000 million in the form
of letters of credit.
The EWE Agreement has been amended on two occasions, from November 1996 the
partnership was owned 41% by the Company, and the balance by Edwards. The
Company had an option to acquire all of interest of EWE by converting the
interest into shares of the stock of the Company which shares were to be
convertible into shares of Kiwi. The conversion was to be based on the value of
Wasatch, which value was to be determined upon reliance on an appraisal of its
interest through Caribbean to land in the Bahamas. During this period, Edwards
had advanced approximately $4,280,000 in cash and $3,159,000 in letters of
credit to EWE, while the Company had advanced approximately $1,450,000 in cash.
All of the funds contributed to EWE were used to finance Kiwi.
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The former President of the Company, Joseph Logan Jr., executed an
agreement with EWE and Edwards placing the Company's claim to $1,450,000 in a
subordinated position to that of EWE and as a junior claim behind approximately
$16,000,000 of additional financing provided by Edwards and or EWE, thus
significantly impairing the company's ability to recover the $1,450,000. Upon
the resignation of Joseph Logan, as President and Director, the Company entered
into an agreement with Aviation Holdings, Inc. to exchange the Company's claim
in the sum of approximately $1,450,000 plus an amount of up to $250,000 to which
the Company would be entitled to as a break-up fee in the event that Kiwi was
not acquired by the Company for 333,000 shares of common stock of Aviation
Holdings, Inc., a public Company traded over the counter. To date, the shares of
Aviation Holdings, Inc have not been delivered to the Company despite demand.
Kiwi has received a order for relief under Chapter 7 of Bankruptcy Code, and the
Company is reviewing with its legal counsel its options for recovery of its
damages.
E-PAWN ACQUISITION
On January 20, 2000, the Board of Directors approved the acquisition of
E-Pawn, Inc., a Florida corporation, from two companies, namely, Swiss Arctic
Traders, Ltd., a Bahamian company and an affiliate of the Company's majority
stockholder, LaSalle Group, Ltd., and Fortuna Holdings Limited, a Bahamian
company. E-Pawn, Inc. is a multifaceted Internet portal, website designer and
e-commerce software developer. The terms of the transaction are provided in the
Acquisition Agreement dated January 27, 2000, which became effective on February
28, 2000. A copy of the Acquisition Agreement is included as an Exhibit to the
Form 8-K filed on April 19, 2000. The Company plans an aggressive expansion into
business which may use the expertise and assets of E-Pawn.
ITEM 7. DESCRIPTION OF PROPERTY.
During the period of the Annual Report, the Company has no direct physical
property assets and its executive office has been provided at a nominal rental
fee by its majority stockholder, LaSalle Group, Ltd. The Company has no
obligations in respect of lease agreements to occupy office space.
In September 1996, the Company acquired all of the common stock of
Caribbean Holdings International Corporation, a Florida corporation. Caribbean
Holdings International Corporation was a partner in a joint venture that held
interest in approximately 15,000 acres in the Bahamas. The Company distributed
all of the shares of Caribbean Holdings International Corporation to its
shareholders on February 29, 2000. See Notes to Financial Statements.
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ITEM 8 DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
The following table presents the directors, officers and key employees who
are serving and have served during the period covered by this Annual Report. The
table includes the name, age, position, and time of service. Below the table is
a description of the business experience, family relationship, and involvement
in legal proceedings associated with the persons listed.
Name Age Position Elected
Eli Leibowitz 55 Director, President and October 1996
Chief Financial Officer
Anne M.E. Greyling* 45 Director June 1997
Vaughan Dabbs* 47 Director June 1997
David Lerger* 38 Director June 1997
Clinton Greyling 25 Director and Vice President January 1998
Mary Duncan 45 Secretary July 1996
* On January 20, 2000, Anne M.E. Greyling, Vaughan Dabbs, and David Lerger
resigned from the Board of Directors of the Company
Eli Leibowitz is a licensed Certified Public Accountant with practice
experience in all areas of finance, administration, management and taxation. He
is associated with Inventive Industries, Inc. which is a financial consulting
firm in Englewood, New Jersey, which specializes in providing temporary Chief
Financial Officers to client companies. Mr Leibowitz served as Corporate
Controller for LMT Steel Products, Inc., of Hoboken, New Jersey and from 1985 to
1988 he was the Chief Financial Officer of Masco Industries, Inc, a New York
Stock Exchange company. He was a Senior Accountant for the international
accounting firm, Grant Thornton.
Anne M.E. Greyling is a business executive and the controlling shareholder
of La Salle Group, Ltd., a Cayman Island company which is the controlling
shareholder of the Company. She has been an officer an director of numerous
companies engaged in real estate development involving hotels, timeshares,
apartments, commercial projects and condominiums throughout the Caribbean and
Europe. She is the mother of Clinton Greyling, a director.
Vaughan Dabbs, D.C. is the Director of Operations, at the Spine and
Rehabilitations Centers of Maryland, in Columbia, Maryland. Prior to assuming
this position in 1998, he owned and operated the Chiropractic Wellness Center in
Columbia, Maryland.
David Lerger, D.C. is the clinic director for the Montgomery Spine and
Rehabilitation Center. From 1988 to 1998 he served as President of Oswego Spine
and Rehabilitation Center.
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Clinton Greyling is a director and President of Caribbean International
Holdings Corporation, a subsidiary of the Company. Mr. Greyling has been engaged
in the real estate marketing and development business in the United States and
the Caribbean Basin. He is the son of Anne M.E.Greyling, a director.
Mary Duncan has served as Corporate Secretary since 1996, and she has
served in the same capacity for several public companies.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS.
During the period of this Annual Report, the Company provided no
compensation to directors for serving that position.
Effective on January 1, 1997, the Company entered into an employment
agreement with Mr. Eli Leibowitz to serve as Chief Financial Officer for a
period of five years. The agreement provides for annual compensation of $150,000
with annual increases of $10,000 and other benefits and bonuses. Mr. Leibowitz
agreed to postpone payment of his salary until the Company has obtained
sufficient operational funding. Upon resignation of Mr. Joseph Logan in October
1997, Mr. Leibowitz became the President of the Company. The Company did not
provide any compensation to Mr. Leibowitz during the period of this Annual
Report. In January 2000, Mr. Leibowitz agreed to accept 1,500,000 shares of
common stock in lieu of all compensation owed to him through January 31, 2000.
ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
The following table provides the number of shares held by management
and the directors and those persons who own more than five percent of the
Company's common stock as of May 31, 1999.
Names and Address Shares Beneficially Owned Percentage of Class
Eli Leibowitz 20,000 <0.1%
289 Starling Road
Englewood, New Jersey
Anne M.E. Greyling 16,080,100* 40%
153 St. Johns Road
Turnbridge Wells
Kent, UK
Vaughan Dabbs 796,000** <2%
4269 Buckskin Lake Dr.
Ellicott, Maryland
David Lerger 30,548 <0.1%
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Names and Address Shares Beneficially Owned Percentage of Class
Mary Duncan 20,000 <0.1%
1510 Shaker Circle
West Palm Beach, Florida
La Salle Group, Ltd 16,080,100 > 40%
c/o Anne Greyling
153 St. Johns Road
Turnbridge Wells
Kent, UK
* Anne M.E. Greyling is the sole stockholder of LaSalle Group, Ltd.
which holds more than 16,000,000 shares of the Company. She is
considered an affiliate of LaSalle Group, Ltd, and a controlling
person of the Company.
** Dr. Dabbs holds shares directly and beneficially through his
professional company and through his joint tenancy with Lis Dabbs.
Effective in February 1997, the company agreed to pay Diran Kaloustian a
fee of $2,000 per month for his services as a director and consultant. He
resigned in June 1997.
The Company filed an S-8 Registration Statement on October 14, 1996 which
became effective under Rule 462 promulgated under the Securities Act of 1933, as
amended. The registration statement is incorporated herein. The Company
subsequently granted stock options and awards of shares of its common stock
subject to the S-8 Registration Statement pursuant to the terms of the Wasatch
Stock Plan. The directors received shares under the Plan. On June 3, 1997, the
Company filed an amended registration statement on Form S-8 POS. The
registration statement is incorporated herein.
ITEM 11. Interest of Management and Others in Certain Transactions
Not applicaable
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's common stock has traded over -the -counter and quoted on the
OTC NASDAQ Electronic Bulletin Board (OTCBB) under the symbol "EPWN" since
February 29, 2000. The Company previously traded under its former symbol "WITD."
The Company traded under this symbol since 1995. The following table represents
the range of the high and low bid prices of the Company's stock as reported by
the NASDAQ Trading and Market Services for the fiscal quarter for the fiscal
year ending May 31, 1999 . Such quotations represent prices between dealers and
may not include retail markups, markdowns, or commissions or actual
transactions.
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Quarter Ended High Low
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August 31, 1998 $ .10 $ .015
November 30, 1998 $ .20 $ .01
February 28, 1999 $ .08 $ .01
May 31, 1999 $ .06 $ .04
As of May 31, 1999, the Company had approximately 500 stockholders of
record of the Company's common stock although the Company believes that the
number of stockholders is significantly larger because many firms hold shares on
behalf of many beneficial owners.
Dividends
The Company has never paid cash dividends on its stock, and it anticipates
that it will continue to retain any future earnings to finance the growth and
expansion of its business. The Company may elect to issue stock dividends from
its subsidiaries and investments.
Quotations
The Company's common stock is currently on the OTC Bulletin Board. Under
the rules, a company must be current with its filings in order to maintain the
listing on the OTC Bulletin Board. If the Company sustains a period of
delinquency, its listing may be removed from the OTC Bulletin Board, in which
case the company will move the listing to the National Quotations Bureau's Pink
Sheets. This move, if made, may adversely affect the market in the Company's
stock.
ITEM 2. LEGAL PROCEEDINGS.
In addition to the possibility of Bankruptcy Court proceedings in
connection with the investment in Kiwi International Air Lines, Inc., referred
to in Part I Item 6, "Description of Business" and Note 4 to the Financial
Statements, the Company has been the party to several lawsuits and matters which
may lead to litigation. Management believes that none of the legal proceedings
in which the Company was engaged for the period of this Annual Report and the
subsequent period to the filing of the Report will have a material adverse
affect on the financial condition of the Company. All matters have been settled
as of the filing or the matters represent actions in which the Company will be
the plaintiff seeking relief.
In February 1997, the Company delivered 4,000,000 shares of common stock to
Dr. Charles Edwards as partial consideration for his agreement to merge Wasatch
Edwards LLC into the Company. Dr. Edwards elected not to conclude the merger and
wholly failed to perform, which caused the Company significant damages. The
Company has demanded the return of all shares, and the Company
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has issued a stop transfer order to the transfer agent. The Company may commence
litigation against Dr. Edwards and others in order to cancel the shares and to
recover damages suffered by the Company. In addition, the Company issued 500,000
shares to Dr. Charles Edwards under a consulting contract by which he was to
perform certain services. No work and no service was ever performed, and the
Company may seek recovery of the shares or damages.
In June 1998, the Company settled a $500,000 judgment held by Hans Kooring
in exchange for issuing 500,000 additional shares of its common stock to Hans
Kooring and 500,000 shares to attorney Jay Salyer. The claim arose from a
dispute in connection with $500,000 Regulation S stock purchase undertaken in
December 1996 with the Company in which the Company issued 500,000 shares to
Hans Kooring. At the conclusion of the transactions, Hans Kooring received a
total of 1,000,000 shares and Jay Salyer received 500,000 shares.
Massachusetts Asset Financing Corp. ("MAFC"), a Massachusetts Corporation,
obtained a default judgement against the Company in the sum of approximately
$10,000 together with $287.70 in interest and $126.00 in costs arising from a
claim for fees for due diligence work allegedly performed by MAFC for a loan of
$500,000 which MAFC represented it would provide to the Company. The Company
believes that this claim has been satisfied as the result of the garnishment of
$13,000 from the bank account of John Frohling, legal counsel to the Company.
The Company has been unable to obtain written release and satisfaction of
judgement from the judgment creditor. The Company may have to resort to legal
action to remove the judgement from the Court Record. The Company does not
consider this matter to be one that will have a material effect on the Company.
The Company has settled a lawsuit brought by an individual in the Orlando
District Court seeking $70,000 for the purchase price and approximately $200,000
in damages in connection with the proposed purchase of a start up Internet
advertising company made in November 1996. The Company had previously filed an
answer and defended the action; however, in the interest of resolving all
outstanding litigation and avoiding the cost of defense, the Company agreed to
settle the action in March 2000 for 100,000 shares of restricted common stock,
in exchange for a dismissal of the claim, release of all liability and delivery
to the Company of certain computer equipment that the Company will use in its
newly acquired Internet businesses
The Company has been subject of civil litigation arising from a loan
advanced to the Company in April 1997 by two individuals. This claim has been
settled in December 1997 in exchange for a cash payment of approximately $20,000
and delivery of 200,000 shares of common stock of the Company by a third party.
The Company has settled a claim from an investor who purchased restricted
common stock of the Company from a third party. The settlement agreement
provides for the Company to deliver to the claimant, Solar Lane Productions Inc.
70,000 shares of restricted common stock of Caribbean Holdings International
Corp. and 90,000 shares of restricted common stock of the Company by no later
than March 3, 2000, and failing which the claimant will be entitled to obtain
judgement against the Company in the sum of $300,000 plus costs. The Company
anticipates no difficulty in delivering the
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shares required in terms of the settlement agreement by the stipulated date of
March 3, 2000, and the claim of Solar Lane Productions, Inc. will be
extinguished in full and final settlement. On March 8, 2000, a motion to dismiss
was filed in this action.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On March 14, 2000, the Company's auditors, Jones Jenson & Company LLC,
advised the Company that the firm could not continue to perform accounting and
auditing services for the Company, and it advised that the Company should engage
another firm. The Company had no disagreement with its auditors, Jones Jensen &
Company LLC, relating to any matters concerning its accounting procedures or
policy.
The Company accepted the resignation of Jones Jensen & Company LLC, and
on March 16, 2000, the Company engaged the firm of Feldman Sherb Horowitz & Co.,
P.C., Certified Public Accountants, of New York, New York and Boca Raton,
Florida to serve as its auditor of its balance sheet for the periods ending May
31, 1999, May 31, 1998, and May 31, 1997.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY-HOLDERS.
No annual or special meeting of shareholders has been set during the
period of this Annual Report and for any period subsequent to it at this time.
All actions taken by shareholders and directors have been taken pursuant to
Nevada Revised Statutes 78.315 and the Bylaws of the Company which permit
approval of action by written consent of the number of shareholders required to
approve the action under the law and the Bylaws.
ITEM 5. COMPLIANCE WITH SECTION 16(B) OF THE EXCHANGE ACT.
During the period of this Annual Report, the only persons subject to
Section 16 (b) of the Securities Exchange Act of 1934 reporting are the officers
and directors and LaSalle Group, Ltd., the controlling shareholder. During the
period, none of the persons subject to Rule 16a-3(e) engaged in any transaction
which required the filing of form with the Company, and the Company received no
forms or amendments. The Company has no knowledge of any failure to file a
required form.
ITEM 6. REPORTS ON FORM 8-K.
No Form 8-K was filed during the last quarter of the period covered by
this report. However, the Company filed a report on Form 8-K on April 19, 2000
which covered matters included in this Report and included Exhibits which relate
to matters covered by this Report on Form 10-K.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed by the undersigned, thereunto duly
authorized.
E-PAWN.COM, INC.
(formerly Wasatch International Corporation)
BY /S/ELI LEIBOWITZ
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Eli Leibowitz, President, Chief Financial
Officer and Director
DATE APRIL 22, 2000
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
BY /S/ CLINTON GREYLING
----------------
Clinton Greyling, Vice President andDirector
DATE APRIL 22, 2000
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E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-2
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Deficit F-5
Consolidated Statements of Cash Flows F-6
Notes to Financial Statements F-7 - F-15
F-1
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of E-Pawn.Com, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of E-Pawn.Com, Inc.
and Subsidiary (formerly Wasatch International Corporation) (A Development Stage
Company) as of May 31, 1999 and the related consolidated statements of
operations, stockholders' deficit and cash flows for the periods ended May 31,
1999 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of E-Pawn.Com, Inc. and
Subsidiary as of May 31, 1999 and the results of their operations and their cash
flows for the periods ended May 31, 1999 and 1998, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 9 to the
financial statements, the Company incurred significant operating losses of
$333,166 and $406,133 in 1999 and 1998, respectively. Additionally, the Company
had a working capital deficiency of approximately $1,095,000 at May 31, 1999.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans with respect to these matters are also
described in Notes 1 and 9 to the financial statements. The accompanying
financial statements do not include any adjustments that might result should the
Company be unable to continue as a going concern.
/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
April 19, 2000
F-2
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E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
MAY 31, 1999
ASSETS
OTHER ASSETS
Investment in Carribean Holdings $ 478,029
Investment in Ethnic Broadcasting 1
Investment in Edwards / Wasatch LLC 1
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TOTAL OTHER ASSETS 478,031
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$ 478,031
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 511,907
Due to affiliate 422,851
Note payable 160,000
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TOTAL CURRENT LIABILITIES 1,094,758
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STOCKHOLDERS' DEFICIT:
Preferred stock, $10 par value;
10,000,000 shares authorized;
no shares issued and outstanding -
Common stock, $.001 par value;
50,000,000 shares authorized;
38,433,820 shares issued and outstanding 38,434
Additional paid-in capital 7,491,198
Accumulated deficit (8,146,359)
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TOTAL STOCKHOLDERS' DEFICIT (616,727)
----------
$ 478,031
==========
See Notes to financial statements.
F-3
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31,
-----------------------------
1999 1998
------------ --------------
EXPENSES:
Selling, general, and administrative $ 333,166 $ 406,133
------------ --------------
TOTAL EXPENSES 333,166 406,133
------------ --------------
Net loss applicable to common stock $ (333,166) $ (406,133)
============ ==============
Net loss per common share-basic
and diluted $ (0.01) $ (0.01)
============ ==============
Weighted average common shares
outstanding 38,387,245 37,233,461
============ ==============
See notes to financial statements.
F-4
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock Additional Retained
---------------------- Paid-in Earnings
Shares Amount Capital (Deficit) Total
---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - MAY 31, 1997 35,862,820 $ 35,863 $7,300,555 $(7,407,060) $ (20,642)
Common stock issued for
consulting services
for $1.15 per share 26,000 26 29,974 - 30,000
Common stock issued for
consulting services
for $0.50 per share 75,000 75 37,425 - 37,500
Common stock issued for
consulting services
for $0.10 per share 750,000 750 74,244 - 74,994
Common stock issued for
consulting services at par value 500,000 500 - - 500
Common stock issued to director
pursuant to an employee
agreement issued at par value 220,000 220 - - 220
Net loss - - - (406,133) (406,133)
----------- ----------- ----------- ----------- ---------
BALANCE - MAY 31, 1998 37,433,820 37,434 7,442,198 (7,813,193) (283,561)
Common stock issued pursuant
to legal settlement at $0.05
per share 1,000,000 1,000 49,000 - 50,000
Net loss - - - (333,166) (333,166)
---------- ----------- ----------- ----------- ---------
BALANCE - MAY 31, 1999 38,433,820 $ 38,434 $7,491,198 $(8,146,359) $(566,727)
========== =========== =========== =========== =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31,
----------------------------
1999 1998
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (333,166) $ (406,133)
Change in assets and liabilities
Stock subscription receivable - 150,000
Accounts payable and accrued expenses 283,166 (42,921)
Due to affiliate 60,000 250,758
------------- --------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 10,000 (48,296)
------------- --------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Investment in Caribbean Holdings (60,000) (255,000)
------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (60,000) (255,000)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of note payable - 160,000
Change in additional paid in capital 49,000 141,643
Proceeds from issuance of common stock 1,000 1,571
------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 50,000 303,214
------------- --------------
NET DECREASE IN CASH - (82)
CASH - Beginning of year - 82
------------- --------------
CASH - end of year $ - $ -
============= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
============= ===============
Income taxes $ - $ -
============= ===============
Non-cash financing and investing activities:
Common stock issued for services $ - $ 142,994
============= ===============
See notes to financial statements.
F-6
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1999 AND 1998
Note 1 - ORGANIZATION
E-Pawn.com, Inc. (the "Company") was incorporated in the State of
Nevada on November 4, 1985 as Java, Inc. The Company changed its name to Wasatch
International Corporation on September 27, 1995 and on February 28, 2000 changed
its name to E-Pawn.com, Inc. The Company's principal business activity is to
seek potential business ventures and assets, which may warrant investment or
purchase. Therefore, the Company has been a business development stage company
from inception.
On November 7, 1986, the Company issued shares of its common stock to
acquire Quazon Communications, Inc. In 1989, the Company ceased operations along
with the operations of its wholly owned subsidiary. On November 12, 1995, the
Company acquired all of the issued and outstanding common stock of Graffiti
Removal Systems, Inc. ("Graffiti"). Graffiti was incorporated on November 8,
1995 in the State of Utah. Graffiti's principal business is that of graffiti
removal and consulting. The Company has sold its subsidiary to its former
President in exchange for the recovery of expenses.
Effective September 25, 1996, the Company acquired all of the issued
and outstanding common stock of Caribbean Holdings International Corporation
("Caribbean") in exchange for 25,000,000 share of the Company's common stock.
Caribbean was incorporated in the State of Florida on December 27, 1995.
Caribbean was a partner in a joint venture engaged in the development and sale
of recreational property in the Bahamas. The acquisition of Caribbean has been
accounted for as a purchase, because a shareholder of Caribbean controlled the
Company after the acquisition. Accordingly, Caribbean has been treated as the
acquiring entity. There was no adjustment to the carrying value of the assets or
liabilities of the Company as a result of the acquisition.
On January 18, 2000, the majority stockholder of record consented to
amend the Articles of Incorporation to provide that the authorized share capital
shall be increased to a total of 500,000,000 shares of common stock at $0.001
par value and the creation of 100,000,000 shares of Class A Preferred Stock par
value $0.10 per share. Each share of Class A Preferred shall have 100 votes per
share.
On January 20, 2000, the Company's Board of Directors approved the
distribution of a stock dividend of shares of Caribbean on a share for share
basis. This action will cause the company to have no assets and limited
liabilities. On January 20, 2000, the Company's Board of Directors approved the
purchase of E-Pawn, Inc., a Florida corporation. The Company has agreed to pay
two hundred million dollars, payable entirely in stock of the Company. The
Company has agreed to value the common shares at one dollar per share and to
issue one hundred million shares of Common Stock and one hundred million share
of Class A Preferred Stock. The purchase price is subject to an appraisal as to
the value of E-Pawn, Inc. that will be acceptable to the Board of Directors.
F-7
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
Development Stage and Continued Existence
As of February 29, 2000, the activities of the Company and its
subsidiaries have had no revenues from operations. Accordingly, the Company is
considered to be in the development stage. In addition, the accompanying
consolidated financial statements have been prepared assuming the Company will
continue as going concerns. The Company has incurred only losses from
operations, which creates reservations about the Company's ability to continue
as a going concern. The recovery of assets and continuation of future operations
are dependent upon the Company's ability to obtain additional debt or equity
financing and its ability to generate revenues sufficient to continue pursuing
its business purposes. The Company is actively pursuing equity and debt
financing and acquisitions and investments to fund future operations and
acquisitions.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation - The accompanying consolidated financial
statements include the Company and its wholly owned subsidiary, Caribbean On
February 29, 2000 the Company distributed shares of Caribbean as a dividend to
its shareholders of record on February 28, 2000.
B. Earnings (Loss) Per Share - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128
("SFAS 128")" Earnings Per Share", which became effective for both interim and
annual financial statements for period ending after December 15, 1997. SFAS 128
requires a presentation of "Basic" and, where applicable, "Diluted" earnings per
share. Generally, Basic earnings per share is computed on only the weighted
average number of common shares actually outstanding during the period, and the
Diluted computation considers potential shares issuable upon exercise or
conversion of other outstanding instruments where dilution would result.
Furthermore, SFAS 128 requires the restatement of prior earnings per share to
conform to the new standard. The per share presentations in the accompanying
financial statements reflect the provisions of SFAS 128. Diluted earnings per
share is not being shown due to the fact that the years ended May 31, 1999, 1998
and 1997 show a net loss and the conversion of the preferred stock and common
stock outstanding during those years would be anti-dilutive.
C. Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
D. Cash and Cash Equivalents - Cash equivalents consist of money market accounts
and commercial paper with an initial term of fewer than three months. For the
purposes of the statement of cash flows, the Company considers highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
F-8
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
E. Income Taxes - Pursuant to Statement of Financial Accounting Standards No.
109 ("SFAS 109") "Accounting for Income Taxes, the Company accounts for income
taxes under the liability method. Under the liability method, a deferred tax
asset or liability is determined based upon the tax effect of the differences
between the financial statement and tax basis of assets and liabilities as
measured by the enacted rates which will be in effect when these differences
reverse.
Through May 31, 1999, the Company and its subsidiary have sustained operating
losses totaling approximately $8,146,359 that may be offset against future
taxable income through the year 2013. No tax benefit has been reported in the
consolidated financial statements since their realization cannot be assured. A
substantial amount of the carry forwards are subject to annual limitations
pursuant to the Internal Revenue Code which become effective when an "ownership
change," such as a change of control occurs. To the extent that such net
operating losses are not utilized in a particular year, such amounts become
available in increase the following year's limitation.
F. Property and Equipment - Property and equipment is carried at cost.
Depreciation is computed using the straight -line method over the useful lives
of the various assets.
NOTE 3 - RECEIVABLE
In July 1996, the Company submitted a bid proposal to the U.S.
Bankruptcy Court in Florida in an effort to purchase all the assets of Palm
Beach Cruise Lines, Inc. ("Palm Beach"). As part of that acquisition proposal,
the Company advanced $312,000 to Palm Beach as Debtor-in-Possession financing.
The Company was unsuccessful in its bid proposal. As part of the plan of
reorganization of the ultimate buyer of Palm Beach, the U.S. Bankruptcy Court in
Florida ordered that the Company be repaid the $312,000 no later than scheduled
closing of the plan of reorganization, January 18, 1997. In February 1997, the
Company sold its interest in the $312,000 receivable for $200,000 and the
forgiveness of $100,000 owed to an affiliate of the Company's principal
shareholder. The Company collected the $200,000. Accordingly, the accompanying
consolidated financial statements thus reflect collection of the receivable. The
offset against contributions of an affiliate of the Company's primary
shareholder, and the $12,000 differential has been treated as a loss on
disposition of an asset on the current financial statement.
NOTE 4 - INVESTMENT IN KIWI
The Company advanced funds in the form Debtor In Possession ("DIP")
financing to Kiwi International Airlines of Newark, N.J. ("Kiwi"), an air
carrier that had filed for reorganization pursuant to Chapter 11 of the
Bankruptcy Code. The Company, in October of 1996, agreed to provide a total of
$1,000,000 in DIP financing to Kiwi. In November of 1996, the Company along with
a Baltimore individual, (hereinafter referred to as "Edwards") agreed to form a
Partnership Edwards-Wasatch Enterprises (hereinafter "EWE") to which the Company
assigned its right to provide Kiwi the DIP financing. Pursuant to the agreement
(the "EWE Agreement"), Edwards agreed to loan up to $1,000,000 as required to
fund Kiwi operations, and the Company agreed to provide up to an additional
$1,000,000. (As of the date of the EWE Agreement, the Company had provided Kiwi
with $100,000 of the DIP financing.) The Company's assignment of its right to
provide the DIP financing to Kiwi was approved by the Bankruptcy Court and on
that date the Company was in default of its financing obligations to Kiwi, which
F-9
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
default the Court waived in the order. Two orders were entered by the Bankruptcy
Court at subsequent hearings which resulted in an increase in the DIP financing
to a total of $9,500,000 consisting of $6,000,000 in cash and $3,500,000 million
in the form of letters of credit.
The EWE Agreement has been amended on two occasions, from November 1996
the partnership was owned 41% by the Company, and the balance Charles Edwards.
The Company had an option to acquire all of EWE by converting the interest into
shares of the stock of the Company which shares were to be convertible into
shares of Kiwi. The conversion was to be based on the value of Wasatch, which
value was to be determined upon reliance on an appraisal of its land in the
Bahamas. During this period, Edwards had advanced approximately $4,280,000 in
cash and $3,159,000 in letters of credit to EWE, while the Company had advanced
approximately $1,450,000 in cash. All of the funds contributed to EWE were used
to finance Kiwi.
The former president of the Company, Joseph Logan Jr., executed an agreement
with EWE and Edwards placing the Company's claim to $1,450,000 in a subordinated
position to that of EWE and as a junior claim behind approximately $16,000,000
of additional financing provided by Edwards and or EWE, thus significantly
impairing the company's ability to recover the $1,450,000. Upon the resignation
of Joseph Logan, as President and Director, the Company entered into an
agreement with Aviation Holdings, Inc. to exchange the Company's claim in the
sum of approximately $1,450,000 plus an amount of up to $250,000 to which the
Company would be entitled to as a break-up fee in the event that Kiwi was not
acquired by the Company for 333,000 shares of common stock of Aviation Holdings,
Inc., a public Company traded over the counter. To date, the shares of Aviation
Holdings, Inc have not been delivered to the Company despite demand. Kiwi has
received a order for relief under Chapter 7 of Bankruptcy Code, and the Company
is reviewing with its legal counsel its options for recovery of its damages.
NOTE 5 - JOINT VENTURE NET PROFIT ADVANCES
On July 10, 1996, the Company's wholly owned subsidiary, Caribbean,
entered into a joint venture agreement with two individuals previously
unaffiliated with the Company or any of its subsidiaries to, develop, lease and
sell real estate located in the Bahamas beneficially owned by those individuals.
These individuals are the heirs to an estate, which is in the process of being
probated, that own the real estate. The agreement provides for net profits to be
shared by Caribbean and the two individuals. The agreement also stipulates that
advance payments are to be made to the two individuals toward their share of
future net profits derived from the real estate associated with the joint
venture. Pursuant to the agreement, the two individuals were paid $100,000
initially and $5,000 each month, until the estate has been completely probated.
Through May 31,1997, a total of $154,000 of advances toward joint venture net
profit have been paid to the two individuals. On May 31, 1998, a total of
$404,000 of advances toward joint venture net profit have been paid to the two
individuals. Through May 31, 1999, an additional $60,000 of advances toward
joint venture net profit have been paid to the two individuals. Through August
1999 an additional amount of $15,000 was advanced pursuant to the joint venture
agreement. In September
F-10
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
1999, the Company became aware that the Joint Venture Partners had entered into
agreements with third parties and had accepted advances from such parties in
violation of the agreement. The Company has therefore suspended payment of
advances under the agreement, and the Joint Venture partners have claimed a
default by Caribbean of the agreement. (See Note 10, "Subsequent Events" for
further explanation).
NOTE 6 - STOCKHOLDERS' EQUITY
A. Common Stock-The Company amended its Articles of Incorporation on
January 18, 2000 to increase the authorized common stock from
50,000,000 authorized to 500,000,000 authorized, $0.001 par value.
B. Preferred Stock-The Company was authorized to issue a maximum of
10,000,000 preferred shares, $10 par value.
Class A, Preferred Stock-January 18, 2000, the Company was authorized
to issue a maximum of 100,000,000 shares of Class A, Preferred Stock,
par value of $0.10 per share. Each share of Class A Preferred Stock
shall have 100 votes per share and be entitled to preference over the
common stock holders in the event of a liquidation of the Company.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On October 1, 1996, the Company entered into an employment agreement
with its President, Joseph Logan, for a period of five years. The agreement
provides for annual compensation of $250,000 with annual increases of $10,000.
On his resignation in 1997, Mr. Logan and the Company settled all claims for
compensation by agreeing to issue 250,000 shares of the company's common stock
in lieu of compensation. These shares were never issued because Mr. Logan made a
commitment to an third party shareholder to deliver the shares to the third
party, which Joe Logan failed to timely perform, and the Company's majority
stockholder undertook to deliver the shares directly to the third party on
Joseph Logan's behalf. In January 2000, LaSalle waived claim to the 250,000
shares in connection with the settlement of all claims against the Company.
Effective January 1, 1997, the Company entered into an employment
agreement with Mr. Eli Leibowitz to serve as Chief Financial Officer for a
period of five years. The agreement provides for annual compensation of $150,000
with annual increases of $10,000 and other benefits and bonuses.. Mr. Leibowitz
agreed to postpone payment of his salary until the Company has obtained
sufficient operational funding. Upon resignation of Mr. Joseph Logan in October
1997, Mr. Leibowitz became the President of the Company. During January 2000,
Mr. Leibowitz agreed to accept 1,500,000 shares of common stock in lieu of all
compensation owed to him through January 31, 2000.
In October 1996, in connection with the Wasatch International
Corporation Stock Plan and the filing of the related registration statement, the
Company entered into various consulting agreements with officers, directors and
consultants wherein those individuals are to provide services to the Company for
a period of one year with the shares of common stock issued as sole
compensation.
F-11
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
As discussed in Notes 1 and 8, the Company issued 25,000,000 share of
common stock to acquire all of the issued and outstanding common stock of
Caribbean. On February 29, 2000, the Company distributed to shareholders of
record all of the shares of Caribbean held by the Company in the form of a stock
dividend of one share of Caribbean for each share of the Company held on the
record date. As of February 29, 2000, the Company no longer has any investment
or interest in Caribbean.
Massachusetts Asset Financing Corp. ("MAFC"), a Massachusetts
Corporation, obtained a default judgement against the Company in the sum of
approximately $10,000 together with $287.70 in interest and $126.00 in costs
arising from a claim for fees for due diligence work allegedly performed by MAFC
for a loan of $500,000 which MAFC represented it would provide to the Company.
The Company believes that this claim has been satisfied as the result of the
garnishment of $13,000 from the bank account of John Frohling, legal counsel to
the Company. The Company has been unable to obtain written release and
satisfaction of judgement from the judgment creditor. The Company may have to
resort to legal action to remove the judgement from the Court Record. The
Company does not consider this matter to be one that will have a material effect
on the Company.
The Company has settled a lawsuit brought by an individual in the
Orlando District Court seeking $70,000 for the purchase price and approximately
$200,000 in damages in connection with the proposed purchase of a start up
Internet advertising company made in November 1996. The Company had previously
filed an answer and defended the action; however, in the interest of resolving
all outstanding litigation and avoiding the cost of defense, the Company agreed
to settle the action in March 2000 for 100,000 shares of restricted common
stock, in exchange for a dismissal of the claim, release of all liability and
delivery to the Company of certain computer equipment that the Company will use
in its newly acquired Internet businesses.
In February 1997, the Company delivered 4,000,000 shares of common
stock to Dr. Charles Edwards as partial consideration for his agreement to merge
Wasatch Edwards LLC into the Company. Dr. Edwards elected not to conclude the
merger and wholly failed to perform, which caused the Company significant
damages. The Company has demanded the return of all shares, and the Company has
issued a stop transfer order to the transfer agent. The Company may commence
litigation against Dr. Edwards and others in order to cancel the shares and to
recover damages suffered by the Company. In addition, the Company issued 500,000
shares to Dr. Charles Edwards under a consulting contract under which he was to
perform certain services. No work was ever performed, and the Company may seek
recovery of the shares or damages.
In June 1998, the Company settled a $500,000 judgment held by Hans
Kooring in exchange for issuing 500,000 additional shares of its common stock to
Hans Kooring and 500,000 shares to attorney Jay Salyer. The claim arose from a
dispute in connection with $500,000 Regulation S stock purchase undertaken in
December 1996 with the Company in which the company issued 500,000 shares to
Hans Kooring. At the conclusion of the transactions, Hans Kooring received a
total of 1,000,000 shares and Jay Salyer received 500,000 shares.
The Company has been subject of civil litigation arising from a loan
advanced to the Company in April 1997 by two individuals. This claim has been
settled in February 2000 in exchange for a cash payment of approximately $20,000
and delivery of 200,000 shares of common stock of the Company by a third party.
F-12
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
The Company has settled a claim from an investor who purchased
restricted common stock of the Company from a third party. The settlement
agreement provides for the Company to deliver to the claimant, Solar Lane
Productions Inc. 70,000 shares of restricted common stock of Caribbean Holdings
International Corp. and 90,000 shares of restricted common stock of the Company
by no later than March 3, 2000, and failing which the claimant will be entitled
to obtain judgement against the Company in the sum of $300,000 plus costs. The
Company anticipates no difficulty in delivering the shares required in terms of
the settlement agreement by the stipulated date of March 3, 2000, and the claim
of Solar Lane Productions, Inc. will be extinguished in full and final
settlement. On March 8, 2000, a motion to dismiss was filed in this action.
NOTE 9 - SUBSEQUENT EVENTS
On January 18, 2000, LaSalle Group Ltd. acquired ten million common
shares from the Company in exchange for the forgiveness of debt plus interest
which LaSalle had provided to finance the Kiwi Airlines transaction which has
been written off because of the bankruptcy of Kiwi Airlines. In addition,
LaSalle covered the ongoing expenses of the Company through January 2000. This
issuance of stock resulted in LaSalle controlling approximately 52% of the total
issued and outstanding common stock.
On January 20, 2000, LaSalle, a Cayman Island company, advised the Company
that it had rescinded a Stock Purchase Agreement by which LaSalle had agreed to
sell ten million shares of common stock to Aviation Holding Inc., a Florida
Company affiliated with Mr. Joe Logan the Company's former President.
On January 20, 2000, the board of directors approved the acquisition of
E-Pawn, Inc., a Florida corporation, from two companies, namely, Swiss Arctic
Traders Ltd, a Bahamian company and affiliate of the Company's majority
stockholder, LaSalle, and Fortuna Holdings Limited, a Bahamian company. E- Pawn,
Inc. is multi-faceted Internet portal, website designer, and software developer
which operates the "e- pawn.com" and "ubuynetwork" websites. The terms of the
transaction are provided in the Acquisition Agreement dated on January 27, 2000,
and the transaction will be effective on February 28, 2000. A copy of the
Acquisition Agreement is attached as an exhibit to the Form 8-K filed on April
18, 2000.
On completion of the proposed acquisition, a change of control will
take place because the two acquiring companies, Swiss Arctic Traders, Ltd. and
Fortuna Holdings Limited., will each acquire, respectively, fifty million
(50,000,000) shares of restricted series A preferred stock which grants the
holders the power to elect a majority of the directors to the board. The one
hundred million shares of series A preferred issued under the Acquisition
Agreement represents all of the authorized series A preferred stock. The Company
will also issue fifty million (50,000,000) shares of the Company's restricted
common stock to each of the companies that is transferring together all of the
E-Pawn, Inc. stock, and the aggregate of the shares issued in connection with
the acquisition will represent over two-thirds of the issued and outstanding
shares of common stock of the Company. The stock was issued at a value of $1.00
per share giving the transaction a value of $200 million.
The closing of the E-Pawn, Inc. stock purchase transaction is subject
to receipt of an independent appraisal of the value of E-Pawn, Inc. and its
business and assets compared to similar companies, acceptable to the Board of
Directors and the auditors of the Company for the purpose of carrying the assets
on the balance sheet of the Company.
F-13
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
On January 20, 2000, the Company approved the distribution to all of
the Company's shareholders of record on January 28, 2000 (extended to February
28, 2000 pursuant to NASD rules) of a stock dividend of one share of Caribbean,
a wholly owned subsidiary of the Company, for each share of the Company held as
of the record date. Caribbean assumed liabilities in the sum of approximately
$160,000 plus interest due to DBLA Associates. The Company has been released of
its obligations and guarantees to DBLA Associates, and the Company has no
further liability to DBLA Associates in connection with this debt. Caribbean has
claims through its joint venture with Merrill and Raymond MacDonald to an
interest in approximately 15,000 acres of land in the Bahamas. The rights of
Caribbean were retained by it in full when the stock of this company was
distributed to the shareholders of the Company pursuant to the stock dividend.
On January 30, 2000, the majority stockholder by written action taken,
also consented to an amendment to the articles of incorporation to reverse split
the common stock of the company on a one for 200 share basis effective January
30, 2000. Subject to the ten-day notice Rule of NASDAQ the effected date of the
stock split may be adjusted to be a date as set by the NASDAQ Bulletin Board.
This date was extended to February 28, 2000. On February 27, 2000, the Company
announced that its Board had rescinded a previously announced 200 for 1 reverse
stock split because this change in the capital structure would not be conducive
to an orderly market in view of the market changes which arose after the
announcement of the acquisition of E-Pawn, Inc., an Internet portal involving
e-commerce and online auction sites. The consent further provided for an
amendment to the Articles of Incorporation to change the capital structure of
the Company to provide that "the Corporation shall have the authority to issue
500,000,000 shares of common stock $0.001 par value and 100,000,000 shares of
Class A Preferred Stock, par value $0.10 per share. Each share of Class A
Preferred stock shall have 100 votes per share. And shall be entitled to
preference over the common stock holders in the event of a liquidation of the
company. Fully paid stock of this corporation shall not be liable for further
call or assessment."
The name of the Company was also changed by majority consent to
E-Pawn.com Inc. and a certified copy of the amendment to the Company's Articles
of Incorporation, as filed with the Secretary of State for the State of Nevada
is attached as an exhibit to the Form 8-K filed on April 18, 2000. On February
29, 2000, the Company announced the change of its name to E-Pawn.com, Inc., and
the designation of a new trading symbol "EPWN."
On February 24, 2000, the Company issued a press release announcing the
global expansion of E- Pawn.com, Inc. by granting an exclusive development and
marketing rights license for its online auction and barter website software to
Exchequer Investments Ltd., a privately held UK company, which will develop and
operate E-Pawn.com and Ubuynetwork programs under the Company's Global Partner
Program. Exchequer Investments will open the market for E-Pawn.com programs,
products, and systems in several European market places as a strategic local
partner that will provide working capital for the launch, local expertise and
management. The initial launch will be in the United Kingdom under the domain
name E-Pawn.co.uk, and the company shall be E-Pawn.co.uk PLC.
On March 5, 2000, the Company announced that it would distribute common
stock of its subsidiary, Ubuynetwork.com, Inc., as a special dividend to
shareholders of record as of April 18, 2000, on a 2 shares of Ubuynetwork.com
Inc. for each share of the Company held on the record date.
F-14
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1999 AND 1998
On March 9, 2000, the Company announced that it had entered into an
agreement to acquire Home Realty, a Florida full service real estate company,
established in 1994.
On March 14, 2000, the Company announced that it had formed a strategic
alliance with CeleXx Corporation (OTCBB: CLXX) under the terms of which CeleXx
will provide management services, IT engineering and support service, website
design and website hosting services on a fee basis. In addition, the agreement
provides that the Company shall purchase one million shares of CeleXx common
stock at $5 per share. On March 19, 2000, the Company announced that CeleXx
Corporation through a subsidiary, Computer Marketplace, Inc., will administer
and host the Company's Internet based business sites.
On March 15, 2000, the Company announced that it will distribute shares
of its subsidiary, Ubuyhomes.com, Inc., as a special dividend to the Company's
shareholders of record as of May 1, 2000. The shareholders of the Company on the
record date will receive two shares of Ubuyhomes.com, Inc. for each E-Pawn.com,
Inc common share held.
On March 19, 2000, the Company announced that it had entered into a
letter of intent to acquire a 15 year old, jewelry manufacturer, O'Con
Enterprise, Inc. of Hollywood, Florida.
On March 29, 2000, the Company announced it had reached an agreement to
form a joint venture with Silverhawk Development Company and Yunan Tobacco
Company to market timeshares under the Sun Vacation Club brand name via the
Internet using the UBUYTIMESHARE.COM systems. The joint venture will initially
market 65 hotel properties located in China and owned by Yunan Tobacco Company.
F-15
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