SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the period ended December 31, 1997
Commission File No. 33-8964
AM-PAC INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Nevada 16-1260971
- -------------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
431 East Central Boulevard, Ste. 900
Orlando, FL 32801
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Include Area Code: (407) 841-1350
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
--------------------- ------------------------------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve (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 ninety (90)
days. Yes X No
----- -----
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $533,902.
As of October 31, 1998, 18,749,583 shares of common stock of the Registrant
were outstanding. As of such date, the aggregate market value of the common
stock held by non-affiliates, based on the average bid and asked price on the
NASD Bulletin Board, was approximately $2,975,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive annual information statement to be
filed within 120 days of the Registrant's fiscal year ended December 31, 1997
are incorporated by reference into Part III.
Transitional Small Business Disclosure Format: Yes No X
---- -----
<PAGE>
TABLE OF CONTENTS
Page
------
PART I
ITEM 1. DESCRIPTION OF BUSINESS.............................. 1
ITEM 2. DESCRIPTION OF PROPERTIES............................ 1
ITEM 3. LEGAL PROCEEDINGS ................................... 1
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.................................. 2
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.......................... 2
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS................. 2
ITEM 7. FINANCIAL STATEMENTS................................. 4
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE............... 4
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT.................... 5
ITEM 10. EXECUTIVE COMPENSATION............................... 5
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................ 5
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS......................................... 6
ITEM 13. EXHIBITS AND REPORTS OF FORM
8-K................................................. 7
SIGNATURES............................................................. 8
FINANCIAL STATEMENT.................................................... F-1
<PAGE>
PART I
This Form 10-KSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual result could differ materially from
those set forth in the forward looking statements. Certain factors that might
cause such a difference are the Company's ability to capitalize on
diversification opportunities, manage its growth and achieve operating
efficiencies. Although the Company believes that the forward looking statements
contained herein are reasonable, it can give no assurance that the Company's
expectations are correct. All forward looking statements are expressly qualified
in their entirety by this cautionary statement and the risks and other factors
detailed in the Company's other reports as filed with the Securities and
Exchange Commissions.
ITEM 1. DESCRIPTION OF BUSINESS
The Company was originally incorporated in the State of New York of 1985
under the name of Captain Tony's Pizza, Inc. The Company was originally formed
to own, operate and franchise restaurants under the name of Captain Tony Pizza &
Pasta Emporium. In 1996, the Company changed its name to Am-Pac International,
Inc. reincorporated in the State of Nevada, effected a 1:20 reverse stock split
and began efforts to acquire various operating businesses. During 1997, the
Company acquired various operations and subsequently disposed of substantially
all of its operations. Effective as of the close of business on December 31,
1997, the Company acquired all of the outstanding stock of Sun East
International Development Limited, a Cayman Island Company in exchange for
15,349,583 shares of common stock of the Company representing approximately
81.87% ownership of the Company following the exchange.
The Company is presently engaged in two active lines of business: the
franchising of Captain Tony's Pizza operations and the operation of a
restaurant/bar in Orlando, Florida. In addition, the Company is actively
exploring the development of U.S. fast food franchises in the People's Republic
of China (PRC).
The Company currently has eleven franchises operating Captain Tony's Pizza
restaurants. These restaurants are principally take out and delivery operations
and sell a variety of items including pasta, chicken wings, submarine sandwiches
and pizza. Of the eleven franchises, one is located in the State of New York,
one in Pennsylvania, one in Arizona, and one in Orlando. There are two
franchises in California and England. There are three franchises in Ohio. A
franchise generally pays a royalty for the use of the Captain Tony's name and
recipes ranging from $100-$400 per week. Franchisees conduct their own
advertising and promotion programs and therefore do not pay advertising
royalties. The restaurant located in Rochester, New York and owned by an officer
and director of the Company does not pay royalties.
As of January 1, 1997, the Company took over the operations of the Frat
House, a restaurant/bar located in Orlando, Florida. This facility caters
principally to college students and features a full line of beer, wine, mixed
drinks and a short order, snack type menu. The restaurant has various game
tables, a dance floor and other recreational activities. The Company plans to
re-do this restaurant/bar and make it the flag ship facility of a chain called
"Headlightz".
ITEM 2. PROPERTIES
The Company's executive officers are located at 431 East Central Blvd.,
Ste. 900, Orlando, Florida 32801. These premises consist of 3,000 square feet.
This space is provided to the Company by a related party, free of charge. The
related party's lease expires on December 31, 1998.
During 1997, the Company also owned approximately 8 acres of real estate in
Orlando, Florida. Part of this property is occupied by the Frat House, a
restaurant and bar, the operating assets of which have been leased for two years
by the Company.
ITEM 3. LEGAL PROCEEDINGS
None
1
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's shares of common stock are traded on the NASDAQ Electronic
Bulletin Board under the symbol AMPC. On October 31, 1998 the bid price for the
Company's common stock was $.80 per share. However, the trading market in the
Company's common stock is both limited and sporadic. The following table sets
forth the high and low bid price per share of the Company's common stock for
each quarterly period. All prices where appropriate have been adjusted to
reflect the 1:20 reverse split following the Company's redomicile to Nevada and
changing its name on October 4, 1996. These quotations reflect inter dealer
prices without retail markup, mark down or commissions and may not represent
actual transactions.
1997 1996
-------- --------
High Low High Low
------ ----- ------ -----
First Quarter $ 4.00 $ 3.50 $ 1.60 $ .60
Second Quarter $ 3.50 $ 3.00 $ 1.40 $ .60
Third Quarter $ 3.25 $ 2.25 $ 5.00 $ .60
Fourth Quarter $ 3.25 $ 2.50 $ 4.00 $ 1.25
Record Holders
As of October 31, 1998 there were approximately 411 record owners of the
common stock of the Company.
Dividends
The Company has never declared or paid any cash dividends on its common
stock and does not expect to declare or pay dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Form 10-KSB contains forward looking statements with the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward looking statements. Certain factors that might
cause such a difference are discussed in the section entitled "Certain Risk
Factors Affecting Future Operating Results" beginning on page 5 of this Form
10-KSB.
During 1997, Am-Pac International, Inc. (the "Company") through its
subsidiaries engaged in the franchising of pizza restaurants and operated a
restaurant and bar in Orlando, Florida.
The Company is the successor to Captain Tony's Pizza, Inc. a franchisor and
operator of pizza establishments. During 1997, the Company had a total of nine
franchisees, seven operating Captain Tony's restaurants in the United States and
two in England. The Company ha no company owned stores. Revenue is earned from
both an initial franchise fee and an ongoing royalty based on a percentage of
sales.
2
<PAGE>
During 1997, the Company, leased certain operating assets of T&P
Investments, Inc. a Florida corporation which operates a restaurant/bar in
Orlando, Florida under the name "The Frat House". The land on which this
facility is located was acquired by the Company and accounted for as a pooling
of interest and therefore, the rental income expense for this property is
included in income.
Results of Operations
The following table sets forth for the periods indicated certain items from
the Consolidated Statements of Income expressed as a percentage of net revenue.
Year Ended December 31,
----------------------
1997 1996
------ ------
Sales 75.5% .5%
Franchise fees 24.3% 32.2%
Commissions and other rental property income .2% 67.3%
Net revenue 100.0% 100.0%
Cost of sales 27.5% 0%
Rental property expenses 0% 50.8%
General and administrative expenses 208.2% 171.9%
Net income (135.8)% (222.7)%
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
Revenues: Revenues for the year ended December 31, 1997 totaled $533,902
compared to revenues of $150,136 for the corresponding period of the prior year.
This increase in revenue is attributable to sales from the restaurant which did
not exist in the corresponding period of the prior year an $81,000 increase in
franchise fees which were partially offset by a $93,000 decrease in rental
property income.
Cost of sales: The cost of sales the year ended December 31, 1997 totaled
$147,075 compared to $0 for the corresponding period of the prior year. This
increase resulted from the acquisition of the restaurant in Orlando, Florida
during the current year.
Rental property expenses: Rental property expenses for the year ended December
31, 1997 totaled $0 compared to $76,246 for the corresponding period of the
prior year. This decrease resulted from the elimination of rent during the
fourth quarter of the prior year as the Company acquired the property.
Operating, general and administrative expenses: Operating, general and
administrative expenses for the year ended December 31, 1997 totaled $1,111,691
compared to $258,100 for the corresponding period of the prior year. This
increase resulted principally from the increased expenses associated with
operating the restaurant in Orlando, Florida.
Net loss: The net loss for the year ended December 31, 1997 was $724,864
compared to a net loss of $184,210 for the corresponding period of the prior
year. This increase in net loss is attributable to higher operating, general and
administrative expenses.
3
<PAGE>
Liquidity and Capital Resource
At December 31, 1997, the Company had a working capital deficit of $48,617
and a cash balance of $25,458 compared to working capital deficit of $95,628 and
a cash balance of $47,651 at December 31, 1997. The change in working capital is
attributable to an increase in accounts payable resulting from the loss from
operations.
At December 31, 1997, the primary obligation of the Company consisted of
two mortgage notes payable totaling $425,964 relating to the real estate
acquisition and three loans payable to a shareholder a shareholder owned company
of $438,261. One mortgage note has $382,635 and is collateralized by land and a
commercial building. This note has an adjustable interest rate currently stated
at 9.625%, requires monthly interest and principal payments of $3,666 and is due
in June, 2017. The second mortgage note has a $53,667 principal balance as of
December 31, 1997, carries a fixed interest rate of 10% and is collateralized by
land and a residential building. The notes require monthly interest and
principal payments of $657, and is due in June 2009.
The shareholder loans had a principal balance as of December 31, 1997 of
$214,345 and $1,772, respectively. The first loan carries an interest rate of
8%, is unsecured and is payable upon demand. The second loan is without
interest, is unsecured and is also payable upon demand.
The loan payable to shareholder owned companies had a principal balance of
$222,144 as of December 31, 1997. The loan carries an interest rate of 10%, is
unsecured and is payable upon demand.
Subsequent Events
As of the close of business on December 31, 1997, the corporation disposed
of all of its assets in exchange for all of its liabilities. Immediately
thereafter, the Company acquired all of the outstanding shares of Sun East
International Development Limited, a Cayman Island Company, in exchange for
15,349,583 shares of common stock of the Company representing approximately
81.87% ownership of the Company following the exchange. Pursuant to the terms of
the exchange, the Company assumed the operations of Sun East International
Development Limited and the management of SEIDL then assumed control of the
Company.
SEIDL was formed in July 1997 to acquire and carry on through its
subsidiaries the trading operations of Sun East International Development
Limited, a Hong Kong Company, and a 51% interest in the real estate development
operations as Sun East Shanghai Real Estate Development Company Limited. Because
these companies have substantial operations, the Company believes that it will
have sufficient cash to maintain and execute its business operations for the
next twelve months. However, in early 1999, the Company is planning to go to the
equity market to raise approximately 15 million dollars.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the Company, together with the
independent auditors' report thereon of H.J. Swart & Co. P.A. appears on pages
F-2 through F-17 of this report. See index to Financial Statements on pages F-1
of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
For the transitional period ended December 31, 1996, and as a result of the
change in control, the Company changed its independent auditors from Mengel,
Metzger Barr & Co., L.L.P. to H.J. Swart & Company P.A.
There were no disagreements with the prior accountants.
4
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Information Regarding Present Directors and Executive Officers
The following table sets forth the names, and ages of the executive
officers and directors of the Company and the current position held by each.
Name Age Title
- -------- ----- -------
Thomas L. Tedrow 47 President, Chief Executive Officer and Director
Sharron C. Martin 37 Secretary/Treasurer, Vice President and Director
(Principal Financial and Accounting Officer)
Thomas L. Tedrow Mr. Tedrow has been employed as president, chief executive
officer and director since October, 1996. Mr. Tedrow is a best selling author of
over sixteen books, the publisher of Financial Discoveries Magazine and since
1987 has been a communications and marketing consultant for both public and
private companies.
Sharron C. Martin Ms. Martin has been a director of the Company since
October, 1996. For the past five years Ms. Martin has been employed as an
officer and director of Martin Consulting, Inc., a consulting firm specializing
in Sino-foreign joint venture and merger and acquisition consulting in the
United States.
ITEM 10. EXECUTIVE COMPENSATION
The Company paid no salary or other compensation in excess of $100,000 to
any of its officers during 1997. The Company's chief-executive officer received
no compensation of any nature from the Company since joining the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 15, 1997, the number of shares
of the Company's common stock held by executive officers and directors both
individually and as a group, and by beneficial owners of more than five percent
of the Company's common stock.
Name & Address of Amount & Nature Percent
Beneficial Owner of Beneficial Ownership of Class
---------------------- ------------------------ -----------
Thomas L. Tedrow (1) 3,500,000 44.07 %
431 East Central Blvd.
Suite 900
Orlando, FL 32801
Sharron C. Martin 3,500,000 44.07 %
9025 South 700 West
Sandy, UT 84070
Executive Officers & Directors
as a group 7,000,000 88.14 %
- -----------------------
(1) Thomas Tedrow holds 1,500,000 shares in his name following the acquisition
of PFI. Mr. Tedrow may also be deemed to be the beneficial owner of
2,000,000 shares held in the name of Shipright Assets Limited. Shipright
Assets Limited is a corporation organized under the laws of the British
Virgin Islands, and is owned entirely by Lillian Wai, who holds the shares
in trust for the benefit of Mr. Tedrow.
5
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July, 1996, the Company issued 10,000 shares of its common stock to
Robert Wood, a prior officer of CTP for services rendered.
As of December 31, 1996, the Company has one franchise unit that is owned
and operated by a related party. The franchise is owned by a stockholder and
officer of the Company, and does not pay franchise fees on its sales.
During 1997 the Company sold a master franchise to a stockholder for
$75,000. No franchise units were opened under this agreement during 1997.
The Company has made loans to a stockholder with balances totaling $237,847
at December 31, 1997 and $238, 398 at December 31, 1996. The loans are due on
demand and are non-interest bearing. These loans were acquired as part of the
pooling of interests in 1996 with Am-Pac Investments, Inc.
During 1997 the Company loaned $41,629 to an entity managed but not owned
by certain of the Company's stockholders. The Company had agreed to acquire this
entity in 1997 in a pooling of interests but the agreement was terminated prior
to closing. The loan is non interest bearing and is payable on demand.
Rental income includes rents received from a company owned by a
stockholder. The amounts received were and $45,000 for the six months ended
December 31, 1996.
In six months ended December 31, 1996 and the year ended December 31, 1997
the Company borrowed $114,459 and $323,802 respectively from stockholder owned
entities. These loans have a stated interest rate of 8% and 10% respectively and
are due upon demand.
During the first quarter of 1997 the Company borrowed an additional
$500,000 from stockholder owned entities at an interest rate of 10%. To satisfy
this obligation, the Company completed a Regulation S offering of 500,000
shares. These shares were issued to a single subscriber, who assumed the
$500,000 notes payable as full consideration for the stock.
6
<PAGE>
Part IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Acquisition Agreement between the Shareholders of Pacific Foods, Ltd. and
the Company *
2.2 Acquisition Agreement between Shareholders of T&P Investments, Inc. and the
Company (1)
2.3 Acquisition Agreement between the Shareholders of Am-Pac Investments, Inc.
(1)
3.1 Articles of Incorporation *
3.2 Bylaws, as amended (1)
4.1 Certificate of Designation of Series A Cumulative Convertible Preferred
Stock (1)
16.1 Letter from Mengal, Metzger, Barr & Co. LLP relating to change of
certifying accountant (2)
(b) Reports on Form 8-K
None
- -------------------
* Filed herewith
(1) Incorporated by reference to the respective Exhibits files with the
Company's Report on Form 8-K - December 31, 1996
(2) Incorporated by reference to the respective Exhibits filed with the
Company's Report on Form 8-K - September 18, 1996
7
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AM-PAC INTERNATIONAL, INC.
By: /s/ Thomas L. Tedrow
-------------------------------
Thomas L. Tedrow
Chief Executive Officer
Dated: November 20, 1998
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
------------- -------- ------
/s/ Thomas L. Tedrow President, Chief Executive Officer and
- -------------------- Chairman of the Board of Directors November 20, 1997
Thomas L. Tedrow (Principal Executive Officer)
/s/ Sharron C. Martin Secretary/Treasurer, Vice President November 20, 1997
- --------------------- and Director (Principal Financial and
Sharron C. Martin Accounting Officer)
8
<PAGE>
AM-PAC INTERNATIONAL, INC.
Index to Consolidated Financial Statements
Page
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996 F-3
Consolidated Statements of Operations for the year ended December
31, 1997 and the six months ended December 31, 1996 F-5
Consolidated Statements of Stockholders' Equity (Deficit)
For the year ended December 31, 1997 and the six months
ended December 31, 1996 F-6
Consolidated Statements of Cash Flows for the year ended December
31, 1997 and the six months ended December 31, 1996 F-7
Notes to Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Am-Pac International, Inc.
We have audited the accompanying consolidated balance sheets of Am-Pac
International, Inc. as of December 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the year ended December 31, 1997 and the six months ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Am-Pac
International, Inc. as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for the year ended December 31, 1997 and the six
months ended December 31, 1996, in conformity with generally accepted accounting
principles.
Kissimmee, Florida /s/ Swart, Baumruk & Twohig, LLP
May 22, 1998
F-2
<PAGE>
Am-Pac International, Inc.
Consolidated Balance Sheets
December 31, 1997 and 1996
Assets
1997 1996
------ ------
Current assets
Cash $ 25,458 $ 47,651
Inventory 23,736 -0-
Employee advance 50 -0-
-------- ---------
49,244 47,651
Property and equipment
Buildings and improvements 337,606 171,614
Land and improvements 204,841 204,841
Furniture and equipment 101,416 2,000
-------- ---------
643,863 378,455
Less accumulated depreciation (119,786) (103,313)
-------- ---------
Net property and equipment 524,077 275,142
Other assets
Escrow deposits -0- 6,228
Loan receivable - stockholder 237,847 238,398
Related party receivable 41,629 -0-
Organizational costs - net 1,417 1,837
-------- ---------
Total other assets 280,893 246,463
-------- ---------
$ 854,214 $ 569,256
======== =========
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
Am-Pac International, Inc.
Consolidated Balance Sheets
December 31, 1997 and 1996
Liabilities and Stockholders' Equity (Deficit)
----------------------------------------------
1997 1996
------ ------
Current liabilities
Accounts payable $ 78,896 $ 111,287
Other liabilities 9,227 22,915
Current portion of long term debt 9,738 9,075
-------- --------
Total current liabilities 97,861 143,277
Long term debt
Mortgages payable 425,964 435,719
Loans payable - related parties 438,261 114,459
-------- --------
Total long term debt 864,225 550,178
-------- --------
Total liabilities 962,086 693,455
Stockholders' equity (deficit)
Common stock, $.001 par value,
149,900,000 shares authorized,
8,715,547 shares and 7,740,547
shares issued and outstanding,
respectively 8,715 7,740
Additional paid in capital 1,713,274 973,058
Accumulated deficit (1,829,861) (1,104,997)
--------- ---------
Total stockholders' equity (deficit) (107,872) (124,199)
--------- ---------
$ 854,214 $ 569,256
========= =========
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
Am-Pac International, Inc.
Consolidated Statements of Operations
For the year ended December 31, 1997
and the six months ended December 31, 1996
1997 1996
------ ------
Revenue
Sales $ 402,850 $ -0-
Franchise fees 129,570 15,468
Commissions and other 1,482 123
Rental property income -0- 50,400
-------- ---------
Total revenue 533,902 65,991
Costs and expenses
Cost of sales 147,075 -0-
Rental property expenses -0- 37,850
Marketing 161,154 600
Labor costs 307,111 40,749
Professional fees 178,570 124,006
Consulting services 110,156 42,000
Interest expense 68,088 20,927
Other expenses 286,612 4,890
-------- ---------
Total costs and expenses 1,258,766 271,022
Net loss $ (724,864) $ (205,031)
-------- ---------
Net loss per share $ (.09) $ (.03)
======== =========
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
Am-Pac International, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
For the year ended December 31, 1997
and the six months ended December 31, 1996
<TABLE>
Additional Total
Common Stock Paid in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
-------- ------------ ----------- ----------- (Deficit)
-------------
<S> <C> <C> <C> <C> <C>
Balance June 30, 1996 7,740,547 $ 7,740 $ 973,058 $ (899,966) $ 80,832
Net loss six months
ended December 31, 1996 -0- -0- -0- (205,031) (205,031)
Balance December 31, 1996 7,740,547 7,740 973,058 (1,104,997) (124,199)
Issuance of common stock
as final payment for
acquisition of Am-Pac
Investments, Inc. 200,000 200 (200) -0- -0-
Issuance of common stock
as payment of debt 500,000 500 499,500 -0- 500,000
Issuance of common stock
as payment for services 200,000 200 99,800 -0- 100,000
Issuance of common stock
as payment for services 75,000 75 141,116 -0- 141,191
Net loss year ended
December 31, 1997 -0- -0- -0- (724,864) (724,864)
Balance December 31, 1997 8,715,547 $ 8,715 $ 1,713,274 $(1,829,861) $ (107,872)
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Am-Pac International, Inc.
Consolidated Statements of Cash Flows
For the year ended December 31, 1997
and the six months ended December 31, 1996
1997 1996
------ ------
Cash flows from operating activities
Net income (loss) $ (724,864) $ (205,031)
Adjustments to reconcile net
cash provided (used) by
operating activities
Depreciation and amortization 16,893 4,154
Decrease in prepaids 6,228 -0-
Increase in inventory (23,736) -0-
Increase in receivable (50) -0-
Increase (decrease) in accounts payable (32,391) 105,422
Increase (decrease)in other current
liabilities (13,688) 8,801
Decrease in other assets -0- 8,749
--------- ---------
Net cash provided (used) by operating activities (771,608) (77,905)
Cash flows from investing activities
Purchase of equipment and leasehold improvements (265,408) (21,446)
Collection on related party receivable 7,259 -0-
Loans to related parties (48,337) -0-
Loan to stockholder -0- (11,033)
--------- ---------
Net cash provided (used) by investing activities (306,486) (32,479)
Cash flows from financing activities
Stock issued in exchange for services 241,191 -0-
Proceeds from related party borrowings 823,802 114,459
Repayment of debt (9,092) (4,263)
--------- ---------
Net cash provided (used) by financing activities 1,055,901 110,196
--------- ---------
Net decrease in cash (22,193) (188)
Cash at beginning of period 47,651 47,839
--------- ---------
Cash at end of period $ 25,458 $ 47,651
--------- ---------
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
1. Summary of Significant Accounting Policies
------------------------------------------
Organization and consolidation
--------------------------------
Am-Pac International, Inc., a Nevada corporation, (the Company) is the
surviving corporation of a merger with Captain Tony's Pizza, Inc., a New
York corporation. Am-Pac was formed on October 4, 1996 as a wholly owned
subsidiary of Captain Tony's Pizza, Inc. for the purpose of effecting this
merger. In conjunction with the merger, the Company had a 1 for 20 reverse
stock split. The financial statements reflect the effects of this
transaction.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, CTP Equipment, Inc. (CTPE),
Pacific Foods Limited (PFL), Am-Pac Investments, Inc. (INV), Captain Tony's
Pizza, Inc. (CTP), Leisureshare International Limited (LIL), and Headlightz
of Orlando, Inc. (HDL). All intercompany transactions and balances have
been eliminated in consolidation.
As discussed elsewhere in these notes, PFL and INV were acquired by the
Company in the fourth quarter of 1996, subsequent to the merger and reverse
stock split, in separate transactions accounted for as pooling of
interests. All financial statements presented have been reported as though
the combination with INV had taken place prior to July 1, 1995 and as
though the combination with PFL had taken place on May 1, 1996, the date of
PFL's inception.
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, as well as the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
Concentration of credit risk
----------------------------
The Company maintains its cash balances in primarily one financial
institution located in the State of Florida. These balances are insured by
the Federal Deposit Insurance Corporation up to $100,000.
Cash
----
For cash flow reporting purposes, the Company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
F-8
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
1. Summary of Significant Accounting Policies (continued)
------------------------------------------------------
Property and equipment
----------------------
Property and equipment is stated at cost. Depreciation is provided on the
straight line method over the estimated useful lives of the various assets.
Depreciation expense for the twelve months ended December 31, 1997, and the
six months ended December 31, 1996 was $16,473 and $3,944 respectively.
Preferred stock
---------------
The Company has the authority to issue 100,000 shares of non-voting
preferred stock with terms to be established by the Board of Directors,
subject to certain limitations. No shares of this preferred stock have been
issued, nor does the Company have any present plans for the issuance or
sale of any such shares.
Franchise fee revenues
----------------------
The Company recognizes initial franchise fees when all material services or
conditions relating to the sale are substantially performed. This is
normally upon the opening of the franchise unit. Services consist of
various elective services including facilities and equipment design and
selection and training of the franchisee's management and staff in the
operations and management of a franchise. The direct incremental costs
associated with these services, primarily travel expenses, are deferred
until the related revenue is recognized. Franchise royalty fees, whether
based on a percentage of sales reported by franchisees or a fixed amount,
are recognized as revenue when cash payments are received.
The Company may enter into master franchise agreements which grant master
franchisees the exclusive right to develop and operate specific numbers of
Captain Tony's locations within territories for a fee. Fees from master
franchises are recognized based on the terms and conditions of each
agreement. If initial services must be performed by the Company and the
master franchise fee relates to the number of area outlets, the master
franchise fee is generally deferred and recognized ratably as units are
opened. However, when there is no substantial performance required of the
Company and the fees are non-refundable and do not relate to the number of
area outlets, fees are generally recognized in income when the agreement is
signed.
F-9
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
1. Summary of Significant Accounting Policies (continued)
-----------------------------------------------------
In certain instances involving individual or master franchises, the Company
may receive a portion of franchise fees in notes. If the notes are
personally guaranteed by individuals whose net worth exceed Company
requirements, or the facts and circumstances support collectibility of the
note, the portion of the fees represented by notes also is recognized in
income. Otherwise, fees are recognized as income on an installment basis as
cash is received.
Generally, master franchise agreements further provide for an initial
franchise fee for each franchise unit opened under the master franchise
agreement, part of which is payable to the Company. These fees are
non-refundable and recognized in income when all material services required
of the Company, if any, are substantially performed, which is normally upon
opening of the franchise unit.
New business venture
--------------------
In 1997 the Company began developing a sports bar and restaurant concept
called HeadLightZ, with the flagship unit located in Orlando, Florida. The
Company owns all trademarks for franchising, beer, magazines, and licensed
products. Expansion is planned through acquisition of additional facilities
and franchising.
Advertising costs
-----------------
The Company expenses advertising and promotion costs as incurred.
Advertising and promotion costs for the twelve months ended December 31,
1997 and the six months ended December 31, 1996 were $161,154 and $600
respectively.
Income taxes
------------
Deferred income tax assets and liabilities arise from temporary differences
associated with differences between the financial statement and tax basis
of assets and liabilities, as measured by the enacted tax rates which are
expected to be in effect when these differences reverse. Deferred tax
assets and liabilities are classified as current or noncurrent, depending
on the classification of the assets and liabilities to which they relate.
Deferred tax assets and liabilities not related to an asset or liability
are classified as current or non current depending on the periods in which
the temporary differences are expected to reverse. The principal type of
temporary difference between assets and liabilities for financial
statements and tax return purposes is net operating loss carryforwards.
F-10
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
1. Summary of Significant Accounting Policies (continued)
------------------------------------------------------
Per share data
--------------
Per share data is based on the weighted average number of common shares
outstanding during the periods, giving retroactive effect to the 1 for 20
reverse stock split.
Fiscal-year change
------------------
In October 1996, the Board of Directors approved a change in the Company's
fiscal year end from June 30 to December 31, effective the calendar year
beginning January 1, 1997. A six-month fiscal transition period from July
1, 1996 through December 31, 1996 preceded the start of the new
calendar-year cycle.
2. Franchise Operations
--------------------
There were no changes to the number of franchise units or their ownership
during the twelve months ended December 31, 1997. A master franchise was
sold to a stockholder for $75,000; however no new units opened leaving a
total of ten units.
There were no changes in the number of franchise units or their ownership
during the six months ended December 31, 1996.
3. Income Taxes
------------
The Company has net operating loss carryforwards of approximately
$1,575,000 that are available to offset future taxable income and expire at
various dates through the year 2017.
No related deferred tax asset has been recognized in the financial
statements since the valuation allowance is equal to any such tax benefit.
4. Related Party Transactions
--------------------------
As of December 31, 1996, the Company has one franchise unit that is owned
and operated by a related party. The franchise is owned by a stockholder
and officer of the Company, and does not pay franchise fees on its sales.
During 1997 the Company sold a master franchise to a stockholder for
$75,000. No franchise units were opened under this agreement during 1997.
F-11
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
4. Related Party Transactions (continued)
-------------------------------------
The Company has made loans to a stockholder with balances totaling $237,847
at December 31, 1997 and $238,398 at December 31, 1996. The loans are due
on demand and are non-interest bearing. These loans were acquired as part
of the pooling of interests in 1996 with Am-Pac Investments, Inc.
During 1997 the Company loaned $41,629 to an entity managed but not owned
by certain of the Company's stockholders. The Company had agreed to acquire
this entity in 1997 in a pooling of interests but the agreement was
terminated prior to closing. The loan is non interest bearing and is
payable on demand.
Rental income includes rents received from a company owned by a
stockholder. The amounts received were and $45,000 for the six months ended
December 31, 1996.
In the six months ended December 31, 1996 and the year ended December 31,
1997 the Company borrowed $114,459 and $323,802 respectively from
stockholder owned entities. These loans have a stated interest rate of 8%
and 10% respectively and are due upon demand.
During the first quarter of 1997 the Company borrowed an additional
$500,000 from stockholder owned entities at an interest rate of 10%. To
satisfy this obligation, the Company completed a Regulation S offering of
500,000 shares. These shares were issued to a single subscriber, who
assumed the $500,000 notes payable as full consideration for the stock.
5. Long Term Debt
--------------
Long term debt consists of the following:
<TABLE>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Mortgage payable to bank at an adjustable
interest rate, currently stated at 9.625%,
collateralized by land and commercial building,
with current principal and interest payments of
$3,666 per month, due June 2017 $382,635 $389,331
Mortgage payable to mortgage company at an
interest rate of 10%, collateralized by land
and residential building, with payments of
principal and interest of $657 per month,
due June 2009 53,067 55,463
</TABLE>
F-12
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
5. Long Term Debt (continued)
--------------------------
<TABLE>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Loans payable to stockholder owned companies
at an interest rate of 8%, due upon demand 214,345 114,459
Loans payable to stockholder owned companies
at an interest rate of 10%, due upon demand 222,144 -0-
Loan payable to a stockholder without interest,
due upon demand 1,772 -0-
-------- ---------
Total long term debt 873,963 559,253
Less current portion 9,738 9,075
-------- ---------
$ 864,225 $ 550,178
======== =========
</TABLE>
Current maturities of long term debt are as follows:
1998 $ 9,738
1999 10,954
2000 12,035
2001 13,223
2002 and thereafter 828,013
---------
$873,963
6. Supplemental Cash Flow Information
----------------------------------
There were no cash payments for income taxes for the twelve months ended
December 31, 1997 and the six months ended December 31, 1996. Interest paid
for the twelve months ended December 31, 1997 and the six months ended
December 31, 1996 was $68,088 and $20,927 respectively.
Supplemental schedule of non cash investing and financing activities:
1997
----
The Company issued 500,000 shares of common stock valued at $1.00 per share
in satisfaction of debt owed to certain related parties.
The Company issued 75,000 shares of common stock as payment of an
outstanding obligation to the Company's legal counsel in the amount of
$141,191.
The Company issued 200,000 shares of common stock as payment for consulting
services with a value of $100,000.
F-13
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
7. Segment and Major Customer Information
--------------------------------------
The Company operates in generally three industry segments: franchising,
food service and real estate rental. The assets used in the real estate
rental segment in 1996 were converted to operating assets used in the food
service segment in 1997.
Financial information by industry segment is as follows:
Year Six Months
ended ended
December 31, 1997 December 31, 1996
----------------- -----------------
Revenues:
Franchising $ 129,570 $ 15,468
Food service 402,850 -0-
Real estate rental -0- 50,400
---------- -----------
$ 532,420 $ 65,868
========== ===========
Income (loss) from operations:
Franchising $ 7,792 $ (41,498)
Food service 30,466 -0-
Real estate rental -0- 33,448
---------- -----------
$ 38,258 $ (8,050)
========== ===========
Identifiable assets:
Franchising $ -0- $ -0-
Food service 547,813 -0-
Real estate rental -0- 259,924
---------- -----------
$ 547,813 $ 259,924
========== ===========
Only cash cannot be identified with a particular segment. All other assets
are identified with the franchising segment, food service segment or real
estate rental segment.
During the twelve months ended December 31, 1997 the Company had a
franchisee from whom it derived more than 10% of its consolidated revenues.
Franchise fees received from this franchisee represented 58% of franchise
revenues or 14% of consolidated revenues.
F-14
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
7. Segment and Major Customer Information (continued)
-------------------------------------------------
During the six months ended December 31, 1996 the Company had a lessee from
whom it derived more than 10% of its consolidated revenues. Rents received
from this lessee represented 89% of rental income or 68% of consolidated
revenues.
8. Acquisitions
------------
On October 15, 1996 the Company acquired all of the outstanding common
stock of Pacific Foods Limited, a British Virgin Islands corporation (PFL)
in exchange for 7,000,000 post reverse split shares of the Company's common
stock. The acquisition has been accounted for as a pooling of interests
and, accordingly, the accompanying consolidated financial statements for
periods prior to the date of acquisition reflect the accounts and
operations of PFL.
On December 31, 1996 the Company acquired all of the outstanding common
stock of Am-Pac Investments, Inc., (INV) in exchange for 533,939 shares of
the Company's common stock. The acquisition has been accounted for as a
pooling of interests and accordingly, the accompanying consolidated
financial statements for periods prior to the date of acquisition reflect
the accounts and operations of INV.
9. Subsequent Events
-----------------
Effective after the close of business on December 31, 1997 the Company
transferred ownership of 100% of the outstanding shares of all of its
subsidiaries to Forbes Investments, Ltd., a British Virgin Islands company
owned by a controlling stockholder of the Company, in exchange for 800,000
shares of the Company's common stock owned by Forbes.
Of the $854,214 of the Company's consolidated assets at December 31, 1997,
$810,385 are owned by the subsidiaries; of the $962,086 of the Company's
consolidated liabilities at December 31, 1997, $830,442 are obligations of
the subsidiaries. Consequently, the effect of this transaction is to
increase the Company's net worth by $20,057. No independent valuation of
the assets transferred was obtained by the Company.
In May, 1998, effective after the close of business December 31, 1997, the
Company agreed to acquire 100% of the outstanding common stock of Sun East
International Holdings, Ltd., a Caymen Islands corporation with its
headquarters in Hong Kong.
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
9. Subsequent Events (continued)
----------------------------
Under the terms of the agreement, the Company will issue between 12,500,000
shares and 15,000,000 shares of common stock for 100% of Sun East's common
stock. The number of shares issued will depend upon Sun East's net income
for the year ended December 31, 1997 as reported in Sun East's 1997 audited
financial statements.
At the time of closing, the Company will have no assets or liabilities and
will have reduced its issued and outstanding common stock to 3,000,000
shares. To achieve this, the Company's controlling stockholders will return
5,715,547 shares to the Company and will receive the Company's remaining
assets ($43,829, primarily a related party receivable) and will assume the
Company's remaining liabilities ($131,644, primarily loans from stockholder
owned entities).
F-15
<PAGE>
Am-Pac International, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
10. Supplemental Information
------------------------
The following unaudited Consolidated Statement of Operations and Consolidated
Statement of Cash Flows for the year ended December 31, 1996 are provided as
supplementary information only.
<PAGE>
Am-Pac International, Inc.
Consolidated Statement of Operations
For the year ended December 31, 1996
(Unaudited)
1996
----
Revenue
Sales
Franchise fees $ 720
Commissions and other 48,372
Rental property income 7,456
Interest income 93,300
288
--------
Total revenue 150,136
Costs and expenses
Rental property expenses 76,246
Marketing 600
Labor costs 40,749
Professional fees 124,006
Consulting services 42,000
Interest expense 20,927
Other expenses 29,818
---------
Total costs and expenses 334,346
---------
Net loss $ (184,210)
=========
Net loss per share $ (.02)
=========
F-16
<PAGE>
Am-Pac International, Inc.
Consolidated Statement of Cash Flows
For the year ended December 31, 1996
(Unaudited)
1996
------
Cash flows from operating activities
Net income (loss) $ (184,210)
Adjustments to reconcile net
cash used by
operating activities
Depreciation and amortization 8,097
Increase in prepaids (9,587)
Decrease in receivable 7,175
Increase in accounts payable 107,462
Increase in other current liabilities 9,560
Decrease in other assets 8,749
--------
Net cash used by operating activities (52,754)
Cash flows from investing activities
Purchase of equipment and leasehold improvements (21,446)
Loans to related parties (1,977)
Loan to stockholder (11,033)
-------
Net cash used by investing activities (34,456)
Cash flows from financing activities
Proceeds from related party borrowings 114,459
Repayment of debt (13,638)
--------
Net cash provided by financing activities 100,821
--------
Net increase in cash 13,611
Cash at beginning of period 34,040
--------
Cash at end of period $ 47,651
========
F-17
ACQUISITION AGREEMENT
AGREEMENT, dated as of July , 1996 by and between Captain Tony's Pizza,
Inc. a New York corporation (hereinafter "Tony's"), and Thomas L. Tedrow and
Sharron C. Martin (hereinafter "Shareholders") Shareholders of Pacific Foods
Limited, a British Virgin Islands corporation (hereinafter "Foods").
RECITALS
WHEREAS, the Shareholders are the owners of all of the issued and
outstanding shares of Foods;
WHEREAS, the Shareholders are desirous of exchanging their shares of Foods
after completion of the one for twenty reverse split for shares of common stock
("Common Stock") of Tony's;
WHEREAS, Tony's wishes to acquire all of the issued and outstanding shares
of Foods in exchange for shares of Common Stock of Tony's, $.001 par value per
share;
NOW THEREFORE, in consideration of the premises herein contained, the
adequacy of which is hereby acknowledged, and the mutual covenants hereinafter
set forth, the parties hereto have agreed, and by these presents, do hereby
contract as follows:
TERMS
1. Exchange of Securities. Subject to the terms and conditions hereinafter set
forth, at the time of the closing referred to in Section 6 hereof
(hereinafter the "Closing Date"), Tony's will issue and deliver, or cause
to be issued and delivered, to the Shareholders, 700,000 post reverse split
shares of Tony's common stock in exchange for all of the issued and
outstanding Common Stock of Foods.
2. Representations and Warranties of the shareholders. The Shareholders
represent and warrant to Tony's, all of which representations and
warranties shall be true and complete at the Closing Date, and shall
survive the Closing Date for a period of two (2) years from the Closing
Date, except as to the warranties and representations set forth in
subsection (f) hereof which shall survive for a period of three (3) years
from the Closing Date, and those set forth in subsection (h) which shall
survive for a period of six (6) months from the Closing Date, or from the
date when the accounts receivable become due and payable, whichever is the
later, that:
<PAGE>
(a) Foods is corporation duly organized and validly existing and in good
standing under the laws of the British Virgin Islands and has the
corporate powers to own its property and carry on its business as and
where it is now being conducted. A Certified copy of the Memorandum
and Articles of Association of Foods which have hereto been furnished
by the Shareholders to Tony's, are a true and correct copy of the
Memorandum and Articles of Association and include all amendments to
the date hereof.
(b) The authorized capital stock of Foods consists of 50,000 shares of
Common Stock, $1.00 par value per share of which 200 shares have been
validly issued and are now outstanding.
(c) The Shareholders have the full power and authority to exchange the
shares of the capital stock of Foods upon the terms and conditions
provided for in this Agreement, and all such shares are duly and
validly issued and are free and clear of any lien or other
encumbrance.
(d) The unaudited balance sheet prepared by management, but which will be
audited by H.J. Swart & Company, P.A., Certified Public Accountants,
as of May 31, 1996, attached hereto as Exhibit B, constitute true and
correct statements as of the date thereof of the financial condition
of Foods and of its assets and liabilities prepared in accordance with
generally accepted accounting principles consistently applied, and
that from May 31, 1996, and until the Closing Date, no dividends or
distributions of capital, surplus, or profits shall be paid or
declared by Foods in redemption of its outstanding shares or
otherwise, nor shall any additional shares be issued by Foods.
(e) Since May 31, 1996, Foods has not engaged in any transaction other
than transactions in the normal course of the operations of its
business, except as specifically authorized by Tony's in writing.
(f) Foods is not involved in any pending or threatened litigation which
would materially affect its financial condition as shown by its
balance sheets of May 31, 1996, shown on Exhibit B hereto, which has
not been provided for on such balance sheet, or referred to in such
balance sheet, or disclosed to Tony's in writing.
(g) Foods has and will have at the Closing Date, good and marketable title
to all of its property and assets shown on Exhibit B hereto, free and
clear of any and all liens or encumbrances or restrictions, except as
shown on Exhibit B hereto, and except for taxes and assessments due
and payable after the Closing Date and easements or minor restrictions
with respect to its real property which do not materially affect the
present use of such real property.
(h) The accounts receivable of Foods, as reflected in Exhibit B and as
specifically set forth in separate schedules furnished by Foods prior
to the execution hereof, which shall become due and payable on or
before the closing shall be good and collectible and can reasonably be
anticipated to be paid within 180 days after the Closing Date.
(i) Foods does not now have nor will it have on the Closing Date any
long-term contracts ("long-term" being defined as more than one year)
except for such contracts as are set forth as Exhibit C.
(j) Foods does not now have nor will it have on the Closing Date any
pension plan, profit-sharing plan, or stock-purchase plan for any of
its employees.
2
<PAGE>
3. Representations and Warranties by Tony's. Tony's represents and warrants to
the Shareholders of Foods, all of which representations and warranties
shall be true at the Closing Date, and shall survive the closing for a
period of three (3) years from the Closing Date as follows:
(a) Tony's is a corporation duly organized and validly existing and in
good standing under the laws of the State of New York and has the
corporate powers to own its properties and carry on its business as
now being conducted and has authorized capital stock consisting of
150,000,000 shares of Common Stock, $.001 par value per share, of
which 8,131,161 shares are issued and outstanding. These shares will
be reverse split as a one for twenty basis prior to closing.
(b) Tony's has the corporate power to execute and perform this Agreement
and to deliver the stock required to be delivered to the Shareholders
of Foods hereunder.
(c) The execution and delivery of this Agreement, and the issuance of the
stock required hereunder, have been duly authorized by all necessary
corporate action, and neither the execution nor delivery of this
Agreement, nor the issuance of the stock, nor the performance,
observance or compliance with the terms and provisions of this
Agreement will violate any provision of law, any order of any court or
other governmental agency, the Certificate of Incorporation or By-Laws
of Tony's or any indenture, agreement or other instrument to which
Tony's is a party, or by which Tony's is bound or by which any of its
property is bound.
(d) The shares of Tony's Common Stock deliverable hereunder will, on
delivery in accordance with the terms hereof, be duly authorized,
validly issued, fully paid and nonassessable. Such shares will be
restricted shares and cannot be sold or exchanged except pursuant to
registration or an exemption therefrom.
(e) The financial statements prepared by Mengel, Metzger Barr & Co.,
Certified Public Accountants, for the year ending June 30, 1995,
attached hereto as Exhibit E constitute true and correct statements as
of such date of the financial condition of Tony's and of its assets,
liabilities and income prepared in accordance with generally accepted
accounting principles consistently applied and that from June 30,
1995, and until the Closing Date, no dividends or distributions of
capital, surplus, or profits have been paid or declared by Tony's in
redemption of its outstanding shares or otherwise, nor have any
additional shares been issued by Tony's.
(f) Since June 30, 1995, Tony's has not engaged in any transaction other
than transactions in the normal course of the operations of its
business, except as specifically authorized by the Shareholders of
Foods in writing. Such authorization specifically includes a bonus to
Martella of Tony's cash, which distribution shall occur at Closing.
(g) Tony's is not involved in any pending or threatened litigation which
would materially adversely affect its financial condition as shown by
the balance sheets of December 31, 1995, attached hereto as Exhibit E,
which has not been provided for on such balance sheet or referred to
in such balance sheet or disclosed to the Shareholders of Foods in its
10-KSB or other filings.
3
<PAGE>
4. Conditions to the Obligations of Tony's. The obligations of Tony's
hereunder shall be subject to the conditions that:
(a) Tony's shall not have discovered any material error or misstatement in
any of the representations and warranties made by the Shareholders of
Foods herein and all the terms and conditions of this Agreement to be
performed and complied with shall have been performed and complied
with. (b) There shall have been no substantial adverse changes in the
conditions, financial, business or otherwise of Foods from May 31,
1996, to the Closing Date, except for changes resulting from those
operations in the usual and ordinary course of the business, and
between such dates the business and assets of Foods shall not have
been materially adversely affected as the result of any fire,
explosion, earthquake, flood, accident, strike, lockout, combination
or workmen, taking over of any such assets by any governmental
authorities, riot, activities or armed forces, or acts of God or of
the public enemies.
(c) Tony's shall have received the opinion of Messrs. Vanderkam & Sanders,
legal counsel for Foods, to the effect that (1) Foods is duly
organized and validly existing under the laws of the jurisdiction of
its incorporation and has the power and authority to own their
properties and to carry on their respective business wherever the same
may be located and operated as of the Closing Date, and (2) the
Agreement has been duly executed, and when delivered by the
Shareholders is enforceable in accordance with its terms.
d) An Employment Contract with Michael Martella providing for his
continued employment with the surviving entity of Tony's shall have
been executed by all parties a signator thereto and shall constitute a
valid and binding obligation of Tony's after the acquisition of Foods.
5. Conditions to the Obligations of the Shareholders of Foods. The obligations
of the Shareholders of Foods hereunder are subject to the conditions that:
(a) The Shareholders shall not have discovered any material error or
misstatement in any of the representations or warranties made by
Tony's herein and all the terms and conditions of this Agreement to be
performed and complied with by Tony's shall have been performed and
complied with.
(b) The Shareholders shall have received the opinion of Patrick J. Lane,
P.C., counsel for Tony's, to the effect that (1) Tony's is a
corporation duly organized and validly existing under the laws of the
State of New York, and has the power to own and operate its properties
wherever the same shall be located as of the Closing Date; (2) the
execution, delivery and performance of Tony's has been duly authorized
by all necessary corporate action including approval by the
shareholders at a lawfully convened meeting and constitutes a legal,
valid and binding obligation of Tony's enforceable in accordance with
its terms; (3) the stock to be delivered to Tony's puruant to the
terms of this Agreement has been validly issued, is fully paid and
nonassessable; and (4) the exchange of the stock herein contemplated
does not require the registration of the Tony's Common Stock pursuant
to any Federal law dealing with the issuance, sale, transfer, and/or
exchange of corporate securities as the shares issued are exempt from
registration under the provisions of Regulation D of Rule 506. Tony's
common shares will however bear a Rule 144 Restrictive Legend.
4
<PAGE>
6. Closing Date. The closing shall take place at 10:00 A.M. Central Standard
Time, on July , 1996, at the offices of Vanderkam & Sanders in Houston,
Texas, or at such other time and place as the parties hereto shall agree
upon. This Agreement shall be effective as of the close of business on the
Closing Date.
7. Actions at the Closing. At the closing, Tony's and the Shareholders of
Foods will each deliver, or cause to be delivered to the other, the
securities to be exchanged in accordance with Section 1 of this Agreement
and each party shall pay any and all Federal and State taxes required to be
paid in connection with the issuance and the delivery of their own party to
which the same are deliverable.
In addition, the following transactions will take place.
(a) Tony's will deliver to the Shareholders of Foods:
(i) Duly certified copies of all corporate resolutions and other
corporate proceedings taken by Tony's to authorize the execution,
delivery and performance of this Agreement.
(ii) The opinion of Patrick J. Lane, P.C., counsel for Tony's, as
provided in Section 5 (b) of this Agreement.
(iii)A Certificate executed by a principal officer of Tony's
attesting to the fact that all of the representations and
warranties of Tony's are true and correct as of the Closing Date,
and that all of the conditions to the obligations of the
Shareholders of Foods to be performed by Tony's have been
performed as of the Closing Date.
(iv) A Certificate of Incumbency and Signatures of the officers of
Tony's dated as of the date of this Agreement.
(v) The written resignations of all directors and such officers and
auditors of Tony's as are requested by the Shareholders, which
resignations shall contain an acknowledgment from each resignee
that they have no claims against Tony's for loss of office or
otherwise.
(vi) All registration certificates, statutory books, minutes books and
common seals of Tony's, all accounts books and all documents of
title relating to Tony's's assets (unless already in the
possession of the Shareholders) as are required by the
Shareholders.
(vii)In addition, Martella shall receive a bonus equal to one-hundred
percent of the cash on hand at Tony's.
(b) The Shareholders of Foods will deliver to Tony's: (i) The
opinion of Vanderkam & Sanders, counsel for the Shareholders
of Foods, as provided for in Section 4(c) hereof.
(ii) A Certificate from the Shareholders of Foods signed by
all the Shareholders that each of the representations
and warranties of the Shareholders are true and correct
as of the Closing Date and that all of the conditions
to the obligations of Tony's to be performed by the
Shareholders have been performed as of the Closing
Date.
(iii)All of the outstanding common share certificates of
Foods.
5
<PAGE>
8. Conduct and Business, etc. Between the date hereof and the Closing Date,
Foods shall conduct its business in the same manner in which it has
heretofore been conducted and the Shareholders will not permit it to (1)
enter into any contract, etc., other than in the ordinary course of
business, or (2) declare or make any distribution of any kind to the
Shareholders, without first obtaining the written consent of Tony's.
9. Access to the Properties and Books of Foods. The Shareholders of Foods
hereby grant to Tony's, through its duly authorized representatives and
during normal business hours between the date hereof and the Closing Date,
the right of full and complete access to the properties of Foods, and full
opportunity to examine Foods's books and records. A similar access to
Tony's's properties, books and records in likewise granted to the
Shareholders of Foods.
10. Costs and Expenses. Foods shall pay the expenses and costs incident to the
preparation of this Agreement and to the consummation of the transaction
contemplated herein.
11. Funding of Captain Tony's Pizza. The Shareholders agree to fund the Pizza
franchising business with a minimum of two million dollars during the
twelve months following the date of this agreement for expansion and
working capital.
6
<PAGE>
12. Miscellaneous.
(a) This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of New York.
(b) This Agreement shall not be assignable by either party without the
prior written consent of the other.
(c) All paragraph headings herein are inserted for the parties convenience
in identifying the provisions of this Agreement, and shall not effect
the construction or interpretation of the provisions of this
Agreement.
(d) This Agreement sets forth the entire understanding between the
parties, there being no terms, conditions, warranties or
representations other than those contained herein, and no amendments
hereto shall be valid unless made in writing and signed by the parties
hereto.
(e) This Agreement shall be binding upon and shall inure to the benefit of
the heirs, executors, administrators and assigns of Foods and upon the
successors and assigns of Tony's.
(f) The company "Tony's" shall change its Name to "Am Pac Corporation"
(g) All notices, requests, instructions, or other documents to be given
hereunder shall be in writing and sent by registered mail:
7
<PAGE>
If to the Share Thomas L. Tedrow
holders of Foods: Sharon C. Martin
2440 S. Progress Drive
Salt Lake City, UT 84119
with copies to: Messrs. Vanderkam & Sanders
1111 Caroline, Ste. 2905
Houston, Texas 77010
If to Tony's: Captain Tony's Pizza, Inc.
P.O. Box 82
Deland, FL 32721
with copies to: Patrick J. Lane
(h) For purposes of this Agreement only, facsimile signatures shall be
considered original signatures.
(i) This agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
CAPTAIN TONY'S PIZZA, INC.
By:
--------------------------------
President
ATTEST:
By:
---------------------
Its:
--------------------
-------------------------------
Thomas Tedrow
-------------------------------
Sharon C. Martin
SHAREHOLDERS OF
PACIFIC FOODS LIMITED
8
ARTICLES OF INCORPORATION
OF
AM-PAC INTERNATIONAL, INC.
The undersigned natural persons of the age of eithteen (18) years or more
acting as incorporator of a corporation under the Nevada Revised Civil Statute
78, hereby adopts the following Articles of Incorporation:
ARTICLE I
NAME
------
The name of the corporation (hereinafter called "Corporation") is Am-Pac
International, Inc.
ARTICLE II
PERIOD OF DURATION
--------------------
The period of duration of the Corporation is perpetual.
ARTICLE III
PURPOSES AND POWERS
---------------------
The purpose for which this Corporation is organized is to engage in the
business of investing in investments of all forms and nature and to engage in
any and all other lawful business.
ARTICLE IV
CAPITALIZATION
----------------
The total number of shares of stock which the Corporation shall have the
authority to issue is one hundred fifty million (150,000,000) shares, consisting
of one hundred forty nine mi1lion (l49,9OO,OOO) shares of Common Stock having a
par value of S.OOl per share and one hundred thousand (10O,OOO) shares of
Preferred Stock having a par value of $.QOl per share.
A. Preferred Stock
The Board of Directors is authorized, subject to the limitations
prescribed by law and the provisions of this Article, to provide for
the issuance of the shares of Preferred Stock in series, and by filing
a certificate pursuant to the applicable law of the State of Nevada,
to establish from time to time the number of shares to be included in
each such series and to fix the designation, powers preferences and
rights of the shares of each such series and the qualifications,
limitations or restrictions thereof.
1
<PAGE>
1. The authority of the Board with respect to each series shall
include, but not be limited to, determination of the followinq:
a. The number of shares constituting that series and the
distinctive designation of that series;
b. The dividend rate on the shares of that series, whether
dividends shall be cumulative, and if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
c. Whether that series sha1l have voting rights, in addition to
the voting rights provided by law, and if so, the terms of such voting
rights;
d. Whether that series shall have conversion priviledges and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
e. Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
f. Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and if so, the terms and amount of such
sinking fund;
2
<PAGE>
g. The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series; and
h. Any other relative rights, preferences and limitations of that
series.
2. Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment, before any dividends shall be paid
or declared and set apart for payment on Common Stock with respect to
the same dividend period.
3. If upon any voluntary or invo1untary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution
to holders of shares of Preferred Stock of all series shall be
insufficient to pay such holders the full preferential amount to which
they are entitled then such assets shall be distributed ratably among
the shares of all series of Preferred Stock in accordance with the
respective preferential amounts including unpaid cumulative dividends,
if any) payable with respect thereto.
4. Unless otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Preferred
Stock, no holder of Preferred Stock shall have any pre-emptive right
as such holder to suscribe for, purchase or receive any part of any
new or additional issue of capital stock of any class or series,
including unissued and treasury stock, or obliqations or other
securities convertible into or exchangeable for capital stock of any
class or series, or warrants or other instruments evidencing rights or
options to subscribe for, purchase or receive any capital stock of any
class or series, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of dividend.
3
<PAGE>
3. Common Stock
1. Subject to the prior and superior rights of the Preferred Stock
and on the conditions set forth in the foregoing parts of this
Article or in any resolution of the Board of Directors providing
for the issuance of any particular series of Preferred Stock, and
not otherwise, such dividends (payable in cash, stock or
otherwise) as may be determined by the Board of Directors may be
declared and paid on the Common Stock from time to time out of
any funds legally available therefor.
2. Except as otherwise provided by law, by this Certificate of
Incorporation or by the resolution or resolutions of the Board of
Directors providing for the issue of any series of the Preferred
Stock, the Common Stock shall have the exclusive right to vote
for the election of directors and for all other purposes, each
holder of the Common Stock being entitled to one vote for each
share held.
3. Upon any liquidation, dissolution or winding up of the
Corporation, whether volunatary or involuntary, and after the
bolders of the Preffered Stock of each series sha11 have been
paid in full the amount to which they respectively shall be
entitled or a sum sufficient for such payment in assets of the
Corporation shall be distributed pro rata to the ho1ders of the
Common Stock in accordance with their respective rights and
interests, to the exclusion of the holders of the Preferred
Stock.
ARTICLE V
REGISTERED OFFICE AND AGENT
-----------------------------
The name and address of the corporations's registered agent is The Corporation
Trust Company of Nevada, One East First Street, Reno, Nevada 89501.
4
<PAGE>
ARTICLE VI
DIRECTORS
-----------
The Corporation shall be governed by a Board of Directors consisting of
such number of directors as shall be fixed the Corporation's bylaws. The number
of directors constituting the initial board of directors of the corporation is
five and the names and addresses of the directors are as follows:
NAME ADDRESS
------ ---------
Thomas L. Tedrow 431 E. Central Blvd., Suite 900
Orlando, FL 32801
Michael J. Martella 431 E. Central Blvd., Suite 900
Orlando, FL 32801
Malcolm Wright 431 E. Central Blvd., Suite 900
Orlando, FL 32801
Linda Xu 431 E. Central Blvd., Suite 900
Orlando, FL 32801
Sharron C. Martin 431 E. Central Blvd., Suite 900
Orlando, FL 32801
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
----------------------------
There shall be no preemptive right to acquire unissued and/or treasury
shares of the stock of the Corporation.
ARTICLE VIII
LIABILITY OF OFFICERS AND DIRECTORS
-------------------------------------
A director or officer of the Corporation shall not be liable to the
Corporation or its sbareholders for damages for breach of fiduciary duty as a
director or officer unless the act or omission involves intentional misconduct,
fraud, a knowing violation of law or the payment of an unlawful dividend in
violation of NRS 78.300.
5
<PAGE>
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-------------------------------------------
The Corporation shall indemnify any and all persons who may serve or who
have served at any time as directors or officers or who, at the request of the
Board of Directors of the Corporation, may serve or at any time have served as
directors or officers of another corporation in which the Corporation at such
time owned or may own shares of stock or of which it was or may be a creditory,
and their respective heirs, administrators, successors and assigns, against any
and all expenses, including amounts paid upon judgements, counsel fees and
amounts paid in settlement (before or after suit is commenced), actually and
necessarily by such persons in connection with teh defense or settlement of any
claim, action, suit or proceeding in which they, or any of them, are made
parties, or a party, or which may be asserted against them or any of them, by
reason of being or having been directors or officers of the Corporation, or of
such other corporation, except in relation to matters as to which any such
director or officer of the Corporation, or of such other corporation or former
director or officer or person shall be adjudged in any action, suit or
proceeding to be liable for his own negligence or misconduct in the performance
of his duty. Such indemnification shall be in addition to any other rights to
which those indemnified may be entitled under any law, by law, agreement, vote
of shareholder or otherwise.
DATED this 4th day of October, 1996 Incorporator:
------------------------------
William Erwin
CT Corporation System
811 Dallas Ave.
Houston, TX 77002
COUNTY OF HARRIS )
)
COUNTY OF HARRIS )
On October 4, 1996, personally appeared before me, a Notary Public, Wil1iam
Erwin, who acknowledged that he executed the above document in his capacity as
duly authorized agent of the CT Corporation System and Incorporator Am-Pac
International, Inc.
----------------------------------------
Notary Public
6
<PAGE>
Am-Pac International, Inc.
Certificate of Acceptance of Appointment of Resident Agent
The Corporation Trust Company of Nevada hereby accepts appointment as
Resident Agent for the above named corporation.
Dated: 10/4/96
---------
Corporation Trust Company of Nevada
- ----------------------------
By: /s/ K.S. Hood
-------------------------
Title: Asst. Secretary
----------------------
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<PERIOD-START> JAN-01-1997
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