UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark one)
XX ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
- --- 1934 (Fee required)
For the fiscal year ended October 31, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number: 1-10987
PHOENIX RESOURCES TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 84-1034982
(State of incorporation) (IRS Employer ID Number)
5565 Shady Lane Circle, Brainerd, MN 56401
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(Address of principal executive offices)
(218) 828-0415
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock NASDAQ EXCHANGE
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES _ NO X
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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. ___
State issuer's revenues for its most recent year. $0.00
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
July 13, 1998: 27,000,000
Transitional Small Business Disclosure Format (check one): YES NO X
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TABLE OF CONTENTS
ITEM NUMBER PAGE
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PART 1
1. Description of Business 2
2. Description of Property 8
3. Legal Proceedings 9
4. Submission of matters to a Vote of Shareholders 10
PART 11
5. Market for Company's Common Stock
and Related Stockholder Matters 11
6. Management's Discussion and Analysis
or Plan of Operation 13
7. Index to Financial Statements 18
8. Changes In and Disagreements with Accountants on 18
Accounting and Financial Disclosure
PART III
9. Directors, Executive Officers and Control Persons;
Compliance with Section 16(b) of the Exchange Act. 19
10. Executive Compensation 19
11. Security Ownership of Certain Beneficial
Owners and Management 20
12. Certain Relationships and Related Transactions 20
13. Exhibits and Reports on Form 8-K 23
Signatures 24
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Caution Regarding Forward-Looking Information
This annual report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words "anticipate",
"believe", "estimate", "expect" and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
ITEM I - DESCRIPTION OF BUSINESS
General
Phoenix Resources Technologies, Inc. ("Phoenix" or "Company") formerly named
Hughes Resources, Inc., was originally organized in the State of Colorado
("Firma, Inc.") as a corporation organized to take advantage of unspecified
business opportunities in 1986. On June 3, 1991, its subsidiary pursuant to a
reorganization agreement, Firma, Inc. merged with Hughes Wood Products, Inc.,
("HWP"), a Texas Corporation, principally owned by Mr. James E. Hughes, Sr.,
whereby Hughes Resources, Inc. became the named successor and parent corporation
and HWP became a wholly owned subsidiary.
From 1991 until August 12, 1996 the Company was in the business of logging,
milling, and testing wood products in Eastern Texas and Western Louisiana
through its subsidiaries. In 1996, the HWP business was resold to Mr. James E.
Hughes, Sr. as a part of settlement of a suit commenced by the Company against
Mr.
Hughes.( See item 3 hereunder.)
In 1995 the Company acquired certain oil and gas wells located in Louisiana from
Jade Petroleum, Inc.It also acquired oil and gas wells in West Virginia from 719
Corporation, HAH Petroleum, Inc. and Top Drilling Corporation. This business was
resold to the sellers on August 13, 1996. (See item 6 hereunder.)
(2) Additional Pipelines Acquired in West Virginia
On January 17, 1996 the Board of Directors of the Company approved the
acquisition of three pipeline systems located in West Virginia. This gas
gathering system is in excess of 56 miles of pipe varying in circumference from
2" to 8" and is located in Pleasant and Richie counties. As these pipelines are
in the same area as present pipelines owned by the Company, it was felt that
this acquisition would not only increase the competitive position of the Company
but lower the transportation costs for transporting a portion of the Company's
gas to market.
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The acquisition cost was $1,750,000.00 payable with 2,250,000 shares of stock
issued ppursuant to Regulation S of the US Securities & Exchange Commission, and
the assumption of $150,000.00 of debt. This debt is evidenced by note payable on
March 1996, bearing no interest.
The pipelines were owned by a Canadian Corporation by the name of 487016 B.C.,
Ltd. The stock issued pursuant to Regulation S was subject to an agreement not
to market the stock for a period of one year was in place. No Officer or
Director of the Company owns or is an officer or director of 487016 B.C., Ltd.
(3) Sale of Hughes Wood Products and Houston Woodtech, Inc., and settlement
of suit involving James R. Hughes, Sr.
On January 22, 1996, at a Special Meeting of the Board of Directors, James E.
Hughes, Chairman of the Board of Directors of the Company tendered his
resignation as a Director and as Chairman of the Board. The resignation was
accepted by the Board. James R. Ray, who was at that time President and Chief
Executive Officer of the Company was then elected as Chairman of the Board.
Subsequent thereto, the Company had acquired on January 31, 1996, from James R.
Hughes, 56 producing oil and gas wells. These properties had been acquired from
Mr. Hughes in a transaction to sell a Pole Mill located in Quincy, LA and the
office building and airplane and office equipment associated therewith. Mr.
Hughes had assumed certain liabilities associated with the properties sold to
him and had further agreed to return approximately 400,000 shares of the
Company's common stock to the Company.
The above transaction was never consummated by Hughes and consequently the Board
of Directors authorized the filing of a lawsuit against Mr. Hughes, certain
employees of Hughes and the Certified Public Accounting firm representing Hughes
in the transaction. This matter was settled on August 12, 1996 with the
Agreement that Phoenix would retain 46 of the producing wells, receive a
promissory note from Mr. Hughes in the amount of $1,000,000.00, collateralized
as agreed to by the parties, and would sell to Hughes the entire Wood Products
division of the Company known as Hughes Wood Products, Inc. ("HWP") and Houston
Woodtech, Inc. ("HWI"), a wholly owned subsidiary of HWP.
Phoenix had returned the stock of HWP, subject to the performance by Phoenix of
certain guarantees relating to the obligations owed to Agriculture Production
Credit Association ("AgPCA"). Hughes agreed to execute a liabilities undertaking
whereby he agreed to assume and pay all obligations and indebtedness of HWP or
HWI owing to AgPCA and Phoenix was to deliver the stock of WHP and HWI. This
note, in original principal amount of $3,551,000.00 was dated September 10,
1993, signed by Hughes Wood Products (now Phoenix Resources Technologies, Inc.
), Hughes Wood Products, Inc. and Houston Woodtech, Inc. and was related to the
business of Hughes Wood Products, Inc. and Houston Woodtech, Inc.
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(4) License Agreement for Water Production/Generation System.
On March 12, 1996 the Company entered into an Exclusive License Agreement with
J.J. Reidy & Co., Inc. (the "Licensee"), a Massachusetts Corporation, relating
to United States Patents Numbered 5,106,512,, 5,149,446, 5,203,989 and 5,366,705
relating to a Water Production/Generation System ("Licensed Property").
Licensee is a marketing firm with proprietary method(s) in which to market
products and was desirous of obtaining the exclusive right and license to make,
use and sell Water Production/Generation Systems products and component parts
therefore.
The term of the License was for the period of the life of the last expiring
Licensed Property. Licensee was to pay a Royalty of five percent (5%)of the
Gross sales, payable monthly following the signing of the License Agreement. In
addition an Advance Royalty payment of $37,500.00 was payable upon the signing
of the License Agreement, and a second payment of $37,500.00 was due and payable
on or before March 25, 1996. These payments were considered as in effect an
Annual Minimum Royalty and were credited to future Royalty payments that became
due.
(5) Sale of Drilling Sites and Turnkey Drilling Agreement
On July 29, 1996, pursuant to Board of Director action, taken on July 26, 1996,
the Company entered into an Agreement to convey Oil and Gas Drill Sites and
Turnkey Drilling Contract with respect to the West, Virginia properties with
Erin Oil Exploration, Inc., a Texas Corporation ("Erin").
The purpose of this Agreement was to consider drilling up to 500 wells on the
West Virginia property of the Company. The Company agreed to sell up to 500 well
drill sites at a price of $2,000.00 per site. Phoenix was to do turnkey drilling
at a cost of $250,000.00 per well, subject to the usual and normal escalation's
after the first year of drilling. The Agreement called for Erin to pick three
sites and thereafter to pick an additional 125 drilling sites (including the
first three drill sites). Erin also agreed that in the event it purchased the
first 250 drill sites, that it would commit to purchase additional 250 sites.
Erin gave Phoenix its Promissory Note in the amount of $500,000.00 to cover the
purchase of these additional drill sites, bearing interest at the rate of 5% per
annum and payable within 180 days from the date of the Agreement.
(6) Sale of West Virginia Properties.
On August 13, 1996 Mr. Warren Haught, a member of the Board of Directors, made
an offer to the Company to repurchase the oil and gas properties he had sold to
the Company over the last five years. Mr. Haught had become disenchanted with
Phoenix during the Court proceeding with Mr. Hughes, and the settlement of that
matter and Phoenix's failure to acquire additional to increase the number of oil
and gas wells in the West Virginia area. IN settlement of this dispute, the
Company agreed to convey to 719 Corporation, HAH Petroleum, Inc. and Top
Drilling Corporation the properties that the Company had acquired from them. As
further consideration Mr. Haught caused to be surrendered to the Company
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1,000,000 shares of Class C Preferred stock and 1,000,000 shares of Class D
Preferred stock in the Company, and Mr. Haught resigned as a Director of
Phoenix.
(7) Stock Distributions.
During 1996, the Company issued 750,000 shares of unregistered restricted common
stock to Pacific Corporate Equities, LLP, an unrelated third party in settlement
of a $225,000.00 debt owed to it.
Also in fiscal 1996 the Company issued an aggregate of 3,870,000 shares of
common stock registered pursuant to a prior year filing on Form S-8. These
transactions were valued at $0.10 per share, or an aggregate of $387,000 which
approximated the fair market value of services provided for legal and financial
consulting.
PERIOD FROM OCTOBER 31, 1996 TO OCTOBER 31, 1997
(8) Judgment by Agriculture Production Credit Association against Phoenix.
On December 31, 1996 an interlocutory Default Judgement was entered against
Phoenix, in the District Court, 11th Judicial District, Smith County Texas by
Agriculture Production Credit Association ("AgPCA") in the principal amount of
$3,045,140.35, together with pre-judgement interest from October 1, 1996 to date
of Judgement. The entire unpaid principal and interest as of date of Judgement
was $3,177,300.74 together with Attorney fees on $58,747.00.
This Judgement was also entered in Wood County Circuit Court, Parkersberg, W. VA
on March 17, 1997, in the principal amount of $3,236,048.24 and also filed in
the District Court, County of Arapaho, State of Colorado on September 26, 1997
in the principal amount of $3,236,047.74.
This debt is one that the Company was indemnified from by Hughes Wood Products,
Inc. in the sale of Hughes Wood Products, Inc. and Houston Woodtech, Inc. to
James R. Hughes, Sr. in 1966. However in the later part of 1996 Hughes Wood
Products, Inc. ("HWP") filed for bankruptcy in the United States Bankruptcy
Court for the Eastern Division of Texas, Beaumont Division. On May 22, 1997 the
Court approved HWP Third Amended Plan of Reorganization. The AgPCA debt of
$3,189,068.00, together with interest and other fees and expenses and attorney
fees, was allowed as a Class 4 Secured Claim in the principal amount of
$3,189,068.74, and constituted a lien on the Debtors property as set out in the
Loan document.
From that time to May 1998, AgPCA has reduced the amount of the debt through
foreclosures on HWP and HWI properties to approximately $1,100,000.00. AgPCA is
in the process of pursuing Guarantors of the debt, including MVP Holdings, Inc.,
which assumed the debt in a transaction as set out hereafter.
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(9) Acquisition of controlling Interest in Rocky Mountain Crystal Waters,
Inc.
On the 31st of January, 1997 Phoenix acquired controlling shares of Rocky
Mountain Crystal Water, Inc. ("RMCW") in a stock for stock exchange wherein
Phoenix issued 6,000,000 shares of Class B Preferred stock, convertible into
60,000,000 shares of Phoenix common stock at the option of RMCW. RMCW
transferred to Phoenix 6,000,000 shares of RMCW.
RMCW owed the rights to produce water from the aquifer located in Ten Sleep,
Wyoming and had a pilot plant in Ten Sleep for the production and distribution
of the spring water.
On the next day the Board of Directors of Phoenix consisting of James R. Ray and
George W. Smith resigned and a new Board of Directors was appointed, consisting
of Michael Puhr, Lorina Liang and Allen Wen Jen Lan.
(10) Sale of all Oil and Gas Operating Interests to MVP Holdings, Inc.
On March 10, 1997, Phoenix entered into an Agreement with MVP Holdings, Inc.
("MVP"), a Nevada corporation. The Agreement essentially called for Phoenix to
sell to MVP all of its operating assets excepting the RMCW operation. The
properties being sold consisted of the West Virginia Oil and Gas Properties,
including the pipeline systems known as Broad Run Pipeline, HPC Pipeline and
Panther Pipeline and the rights -of-way associated with these pipelines; the
Louisiana Oil and Gas Properties and miscellaneous other properties and assets
owned by Phoenix, including all accounts receivable and payables incurred in the
operation of the Oil and Gas properties, inventories of Oil and Gas and
Assignment of the Erin Oil Co. Contract to drill wells; note receivable from
James R. Hughes and note receivable from Erin Oil; right title and interests in
all Watermaker and Watermaker projects.
The purchase price for these properties was $14,000,000.00 payable by issuance
of 4,000,000 shares of the common stock of MVP, a Public Corporation. The stock
price at the time of sale was approximately $3.50 per share and was considered
to be substantially equal to the purchase price of $14,000,000.00. The Agreement
also provided that if the market price of the shares falls below $3.50 and
remains there for a period of 90 days, Phoenix would be entitled to receive
additional shares of MVP needed to keep the value of such shares equal to
$14,000,000.00. NO additional shares were issued pursuant to this Agreement, and
the stock was distributed to shareholders of the Company in 1998.
MVP also agreed to indemnify and hold Phoenix harmless from all liabilities that
currently existed at the time of the transaction, including the AgPCA Judgement
and any IRS claims arising out of the operation of HWP and HWI, that may be
made.
On April 9, 1997, the above Agreement was modified to give MVP the right of
first refusal and a right to repurchase the shares issued to Phoenix in the
event that Phoenix desired to sell said shares.
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(11) Garnishee Judgment against Phoenix.
On March 20, 1997, the Company was named as a Garnishee in the settlement of a
Judgement rendered against James R. Ray, the Company's former President and
Chief Executive Officer. The Judgement placed against the Company by the
Superior Court of the State of Arizona, Maricopa County, was in the amount of
$266,205.91 plus interest at 10% per annum, and is unpaid.
(12) Divestiture of Rocky Mountain Crystal Waters, Inc. and settlement of claims
against Phoenix.
On September 20, 1997 Phoenix Board of Directors determined that it was in the
best interests of the Company to rescind the acquisition of RMCW. RMCW was not
performing up to expectations and RMCW was making a claim that Phoenix was
unable to properly fund the operation of RMCW due to the suppression of books
and records of Phoenix; loss of financing due to the inability of Phoenix to
produce audits or accurate in-house financial statements; loss of revenue by
RMCW by reason of the above. RMCW also claimed business interruption due to
actions of Phoenix and addition that Phoenix failed to disclose liabilities in
excess of five million dollars, consisting of AgPCA note and possible
liabilities to the IRS.
RMCW had threatened to commence suit against Phoenix based on the foregoing.
(13) Adoption of New Business Plan and Actions Relating thereto.
To remedy this situation, and to get Phoenix back as a full reporting company,
the Board determined that specific actions were required which had the
possibility of returning value to the shareholder of Phoenix. In conjunction
therewith the Board of Directors on September 20, 1997 entered into an Agreement
with M. D. Price, Jr., acting as Escrow Agent ("Price"), whereby the Board
authorized the issuance of fifteen million shares of restricted common stock to
Price. Price agreed to seek and obtain a suitable merger or acquisition
agreement with an on-going privately owned business; engage a qualified public
accounting firm to audit the corporate financial records; validate the
corporation's corporate status and facilitate the filing of all delinquent
reports with the U. S. Securities and Exchange Commission. At the time of the
stock being issued to the Escrow Agent the Company's stock was trading at
approximately $0.04 per share. Due to the restricted nature of the stock the
value for the Subscription Agreement was determined to be $0.016 per share or
$240,000.00 fair value. The Subscription Agreement is to be settled upon the
successful completion of a merger or acquisition with an on-going private
business.
As the next step, the Board of Directors, consisting of Michael Puhr, Lorina
Liang and Allen Wen Jen Lan, on September 22, 1997 appointed a new Board of
Directors consisting of William C. Nichols, Robert Eckman and Paula Nichols. The
old Board members then resigned.
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Concurrently therewith, the Company entered into an Agreement with RMCW which
essentially reversed the acquisition of RMCW on January 31, 1997. RMCW returned
the 6,000,000 shares of Class B Preferred stock and Phoenix returned the
6,000,000 shares of common stock of RMCW. All liabilities of Phoenix relating to
the operation of RMCW were assumed by RMCW and RMCW indemnified Phoenix with
respect to these liabilities.
In settlement of RMCW claim against Phoenix, Phoenix agreed to transfer to RMCW
the stock of MVP Holdings, Inc. and the right to any increases of MVP stock
under that Agreement, and subject to MVP's right of first refusal. MVP exercised
the right of first refusal, and in connection therewith reissued the 4,000,000
shares to Phoenix with the Agreement that Phoenix would distribute the shares to
its shareholders. This was done on September 22, 1997, and the record date for
determining shareholders entitled to receive the MVP stock was set as October 1,
1997. The stock was distributed shortly thereafter to Phoenix shareholders.
Following the above actions, Phoenix had no assets and undetermined liabilities.
All known liabilities were assumed by MVP in its transaction with Phoenix, and
the AgPCA and IRS claim were also subject to an indemnity from HWP, and was a
part of AgPCA lien granted by the Bankruptcy Court and had been substantially
reduced by foreclosure on properties and assets of HWP.
(14) Stock Distributions.
During fiscal year 1997 the Company issued an aggregate of 950,112 shares of
common stock registered pursuant to a prior year filing on Form S-8. These
transactions were valued at $0.10 per share or an aggregate of $95,000 which was
the approximate fair value of the stock issued and the services provided for
legal and financial consulting services.
(16) Business Inactivity.
Since September 1997, the Company has not conducted any business. It is in the
process of attempting to settle any outstanding liabilities; bring the financial
information current and file any and all necessary reports with the Securities &
Exchange Commission. In addition, the Board of Directors has been searching for
and evaluating potential merger or acquisition prospects for combination with a
private Company or Group.
EMPLOYEES
Other than the Officers of the Company the Company had no other employees in
1996 and 1997.
ITEM 2 - PROPERTIES.
Executive and Administrative Offices
The only nominal office facility of the Company is being furnished by
Mr. William Nichols, the Company's President, at no cost to the Company.
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Registrant's Office
The Registrant offices are located at 5565 Shady Lane Circle, N. W., Brainerd,
Minnesota 56401. The Registrant's phone number is 218-829-5127. The Registrant's
corporate President is currently providing this facility (consisting primarily
of file space) at no cost to the Registrant. It is anticipated, that upon
consummation of the acquisition of a business opportunity, that the Registrant
may incur one or more leases for office facilities.
In the event of a consummation of a merger or acquisition with a suitable
candidate, it is highly probable that the Registrant's principal offices will be
relocated to the existing offices of the merger or acquisition candidate.
Further, the Registrant may also have offices at such other places both within
and without the State of Nevada and/or Minnesota as the Board of Directors may
from time to time determine or the future business, subsequent to the
consummation of a merger or acquisition, of the Registrant may require.
All corporate records are currently being maintained in the office of the
Registrant's counsel at 15945 Quality Trail North, Scandia, Minnesota 55073. It
is anticipated that all reasonably predictable future shareholder meetings will
take place in Minnesota.
Oil and Gas Properties
The Drilling equipment and including, trailers, trucks, automobiles,
forklift, backhoe, compressors, drilling rigs and related equipment all was
resold to Warren Haught as a part of the repurchase by his Companies of the
drilling sites previously sold to Phoenix by his Companies. The 59 Louisiana
well sites and the three pipeline properties were sold to MVP, together with the
West Virginia properties.
Milling and Processing Properties
In the settlement of the suit with James E. Hughes, all of the
property, equipment and related items were sold back to Mr. Hughes in that
transaction.
The Registrant has no assets and no properties since March 1997.
ITEM 3 - LEGAL PROCEEDINGS
Agriculture Production Credit Association obtained an Interlocutory
Default Judgement against the Company on December 31, 1996. The Note which was
the basis for the Judgement was signed by Hughes Resources, Inc., Hughes Wood
Products, Inc. and Houston Woodtech, Inc. and was in the original amount of
$3,236,047.70 (principal amount plus interest and attorney fees). This claim was
included in the Bankruptcy proceedings of Hughes Wood Products, Inc. To date
AgPCA has reduced this claim to approximately $1,100,000.00 by foreclosure on
Hughes Wood Products and Houston Woodtech, Inc. MVP Holdings, Inc. also
indemnified the Company at the time of the sale of the properties to it.
Currently negotiations are in process to settle the balance of this claim.
Phoenix is still a primary obligor on the Note and if the indemnities are
determined to be insufficient, Phoenix would still be liable for the balance of
the debt.
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The Company is also a Judgement debtor on a Judgement in the amount of
$266,205.91 together with interest from March 20, 1997 at the rate of 10% per
annum taken by Clark C. Nichols. No payments have been made on this obligation.
If current negotiation to bring in a Private Company/Group to combine with the
Company are successful, it is management opinion that this debt can be
successfully settled as a part of such transaction.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
There were no submissions of any matters to a vote of security holders
during the fourth quarter of 1995, the fiscal year 1996 and 1997 and to date in
the fiscal year 1998.
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Part 11
ITEM 5 - MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS.
DESCRITPION OF SECURITIES
General
The Registrant's Articles of Incorporation, as amended, authorize the issuance
of 100,000,000 shares of Common Stock of $0.001 par value per share, with
27,000,000 shares currently issued and outstanding, and 50,000,000 shares of
Series A - 5.0% annual dividend, non-cumulative, Convertible into 1,000,000
shares of common stock after March 29, 2000 with 200,000 shares currently issued
and outstanding.
The Registrants common stock, until April 24, 1996, was publicly traded on the
National Association of Securities Dealers, Inc. Automated Quotation System
under the symbol "PRTI", within the NASDAQ Small Cap Market. In addition, the
Registrants common stock was crosslisted and traded under the symbol of "HRS",
on the Boston Stock Exchange until May 20, 1996, at which time it was
deregistered by the Exchange. The Registrants common stock which is registered
pursuant to Section 12(g) of the Securities Exchange Act, was removed from
listing and trading was suspended from the NASDAQ Stock Market and the Boston
Stock Exchange due to the Companies delinquency in filing its annual report and
in preparing and submitting LAS application forms with NASDAQ to list additional
securities issued in connection with its financing and acquisition activities
during the fiscal year 1996. However, the Registrant intends to reapply for
listing it's registered common stock on the NASDAQ Electronic Bulletin Board,
upon the filing of and becoming current with its annual and periodic filing
requirements. The range of high and low bid quotations for the Company's common
stock as provided by the Electronic Bulletin Board and NASDAQ for the past two
years is provided below. These over the counter market quotation reflect
inter-dealer prices without retail markup, markdown or commissions and may not
necessarily represent actual transactions.
Common Stock
Each outstanding share of common stock is fully paid and non-assessable, and the
holders thereof are entitled to one vote per share at all meeting of
shareholders. All shares are equal to each other with regard to liquidation
rights and dividends. The Articles of Incorporation of the Registrant do not
include preemptive rights to purchase any additional shares of common stock and
do not provide for cumulative voting in the election of directors. In the event
of liquidation, dissolution or winding up of the Registrant, holders of common
stock will be entitled to receive on a pro rata basis all of the assets of the
Registrant after satisfaction of all liabilities, subject to the rights of
holders of Preferred stock.
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Preferred Stock
There is currently authorized 50,000,000 shares of Series A Preferred Stock, of
par value of $0.001 per share, convertible into 1,000,000 shares of common stock
after March 29, 2000, with a 5.0 % annual, non-cumulative dividend. There are
200,000 shares issued and outstanding.
The designations and the powers, preferences and rights, qualifications,
limitations or restrictions of the Preferred Stock shall be established in
accordance with the Nevada Corporation Code by the Board of Directors.
Additionally, the establishment of different series of Preferred Stock and
variations in the relative rights and preferences shall be established
accordingly.
Except of such voting powers with respect to the elections of directors or other
matters as may be stated in the resolutions of the Board of Directors creating
any series of Preferred Stock, the holders of any such series shall have no
voting power whatsoever.
Dividends
Holders of the common stock are entitled to share equally in dividends when, as
and if declared by the Board of Directors of the Registrant, out of funds
legally available therefore. No dividend has been paid on common stock since
inception, and none is contemplated in the foreseeable future.
Transfer Agent
The Registrant's Transfer Agent is Signature Stock Transfer, Inc. located at
14675 Midway Road, Suite 221, Dallas, Texas 75244.
Recent Sales of Unregistered Securities
On or about September 1997, the Company, in an effort to seek and obtain a
suitable merger or Acquisition agreement with an on-going privately owned
business, issued 15,000,000 shares of unregistered, restricted common stock into
the Escrow Account of M. D. Price, Jr., the Company's corporate attorney under a
Subscription Agreement. The attorney is responsible for securing the Company's
book and records, validating the Company's financial statements, facilitate the
filing of all delinquent reports with the US Securities and Exchange Commission
and evaluate the potential private companies for either merger or acquisition.
This transaction was valued at $240,000.00. The Stock Subscription Agreement
will be settled upon the successful merger with or acquisition of a suitable
private company.
The Registrant's common stock, until April 24, 1996, was publicly traded on the
National Association of Securities Dealers, Inc. Automated Quotation System
under the symbol "PRTI", within the NASDAQ Small Cap Market. In addition, the
Registrants common stock was cross listed and traded under the symbol of "HRS",
on the Boston Stock Exchange until May 20, 1996, at which time it was
deregistered by the Exchange. The Registrants common stock which is registered
pursuant to Section 12(g) of the Securities Exchange Act, was removed from
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listing and trading was suspended from the NASDAQ Stock Market and the Boston
Stock Exchange due to the Companies delinquency in filing its annual report and
in preparing and submitting LAS application forms with NASDAQ to list additional
securities issued in connection with its financing and acquisition activities
during the fiscal year 1996. However, the Registrant intends to reapply for
listing it's registered common stock on the NASDAQ Electronic Bulletin Board,
upon the filing of and becoming current with its annual and periodic filing
requirements. The range of high and low bid quotations for the Company's common
stock as provided by the Electronic Bulletin Board and NASDQ for the past two
years is provided below. These over the counter market quotation reflect
inter-dealer prices without retail markup, markdown or commissions and may not
necessarily represent actual transactions.
Stock Distributions
During 1997, the Company issued 750,000 shares of unregistered restricted common
stock in settlement of a $225,000.00 debt owed to said shareholder
ITEM 6 - MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The current management group intends to actively to seek, investigate and, if
warranted, acquire an interest in one or more business opportunities or
ventures. As of the date hereof, the Registrant has divested itself of all
operating assets and has no business opportunities or ventures under
contemplation for acquisition but proposes to investigate potential
opportunities in the form of investors or entrepreneurs with a concept which has
not yet been placed in operation, or in the form of firms which are developing
companies in need of limited additional funds for expansion into new products or
services, and which are seeking to develop a new product or service. The
Registrant may also seek out established businesses which may be experiencing
financial or operational difficulties and are in need of the limited additional
capital the Registrant could provide. The Registrant anticipates that it will
seek to merge with an existing business. After the merger, the surviving entity
will be the Registrant (Phoenix Resources Technologies, Inc.); however,
management from the acquired entity will in all likelihood operate the
Registrant. There is, however, a remote possibility that the Registrant may seek
to acquire and operate an ongoing business, in which case the existing
management might be retained. Due to the absence of capital available for
investment by the Registrant, the types of businesses seeking to be acquired by
the Registrant will no doubt be smaller and higher risks of businesses. In all
likelihood, a business opportunity will involve the acquisition of or merger
with a corporation which does not need additional cash but which desires to
establish a public trading market for its Common Stock. Accordingly, the
Registrant's ability to acquire any business of substance may be extremely
limited.
During September 1995, the Registrant experienced a change in control due a
change in management and the issuance of 15,000,0000 shares of common stock of
the Registrant to M. D. Price, Jr., Escrow Account.. It is the intent of the
current majority shareholder and management to continue seeking a suitable
situation for merger or acquisition. Further, the Registrant is dependent upon
management and/or significant shareholders to provide sufficient working capital
to preserve the integrity of the corporate entity during this phase. It is the
intent of management and significant shareholders to provide sufficient working
capital necessary to support and preserve the integrity of the corporate entity.
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The Registrant does not propose to restrict its search for investment
opportunities to any particular industry or geographical location and may,
therefore, engage in essentially any business, anywhere, to the extent of its
limited resources.
It is anticipated that business opportunities will be available to the
Registrant and sought by the Registrant from various sources, throughout the
United States and Canada, including its Officers and Directors, professional
advisors such as attorneys, accountants, securities broker(s)/dealer(s), venture
capitalists, members of the financial community, other businesses and others who
may present solicited and unsolicited proposals. The Registrant also anticipates
soliciting proposals through financial periodicals and newspapers. The reason
for this approach is to attract the most favorable business opportunities and
ventures available. Management believes that business opportunities and ventures
will become available to it following the effective date of this Registration
Statement, due to a number of factors, including, among others: a) Management's
willingness to enter into unproven, speculative ventures; b) Management's
contacts and acquaintances; and, c) the Registrant's flexibility with respect to
the manner in which it may structure potential financing and/or acquisitions.
However, there is no assurance that the Registrant will be able to structure or
finance and/or acquire any business opportunity or venture.
Operation of the Registrant
The Registrant intends to search throughout the United States and Canada for a
merger/acquisition candidate, however, because of the lack of capital, the
Registrant believes that the merger/acquisition candidate will be conducting
business within a limited geographical area. In the event of a consummation of a
merger or acquisition with a suitable candidate, it is highly probable that the
Registrant's principal offices will be relocated to the existing office of the
merger or acquisition candidate. Further the Registrant may also have offices at
such other places as the Board of Directors may from time to time determine or
the future business, subsequent to the consummation of a merger or acquisition
of the Registrant may require. to the consummation of a merger or acquisition,
of the Registrant may require.
At the present time, all corporate records will be maintained at 15945 Quality
Trail North, Scandia, Minnesota 55073 and it is anticipated that all reasonably
predictable future shareholder meetings will take place in Minnesota.
The Officers and Directors will personally seek acquisition/merger candidates
and/or orally contact individuals or broker(s)/dealer(s) and advise them of the
availability of the Registrant as an acquisition candidate. The Officers will
review material furnished them by the proposed merger/acquisition candidate and
decide if a merger/acquisition is in the best interests of the Registrant and
its shareholders. The proposed merger/acquisition will then be submitted to all
the Registrant's shareholders.
The Registrant may also employ outside consultants, however, no such consultants
will be engaged until a merger/acquisition candidate has been targeted by the
Registrant. Management believes that it is impossible to consider the specific
criteria that will be used to hire consultants; however, several of the criteria
may include the consultant's relevant experience, the services to be provided,
the term of service required by the Registrant. In prior situations, management
has not used any specific outside consultants and cannot predict the probability
that management will recommend any specific consultant(s) for future use. As of
July 1, 1998, the Registrant has not had any discussions with or executed
agreements with any outside consultants.
Other than disclosed herein, there are no other plans for accomplishing the
business purpose of the Registrant.
Selection of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the Officers and Directors of the Registrant, none of whom is a
professional business analyst or has any previous training or experience in
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business analysis. Inasmuch as the Registrant will have no funds available to it
in its search for business opportunities and ventures, the Registrant will not
be able to expend significant funds on a complete and exhaustive investigation
of such business or opportunity. The Registrant will, however, investigate, to
the extent believed reasonable by Management, such potential business
opportunities or ventures.
As a part of the Registrant's investigation, the Officers and Directors will
meet personally with management and key personnel of the firm sponsoring the
business opportunity, may visit and inspect plants and facilities, obtain
independent analysis or verification of certain information provided, check
references of management and key personnel, and conduct other reasonable
measures, to the extent of the Registrant's limited financial resources and
management and technical expertise.
Prior to making a decision to recommend to shareholders participation in a
business opportunity or venture, the Registrant will generally request that it
be provided with written materials regarding the business opportunity containing
such items as a description of products, services and company history;
management resumes; financial information; available projections with related
assumptions upon which the projections were based; evidence of existing patents,
trademarks or service marks or rights thereto; present and proposed forms of
compensation to management; a description of transactions between the
prospective entity and its affiliates during relevant periods; a description of
present and required facilities; an analysis of risks and competitive
conditions; and, other information deemed relevant.
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting, and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and costs for accountants, attorneys and others. If a decision is made
not to participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable. Furthermore,
even if an agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result in the loss
to the Registrant of the costs incurred.
The Registrant will have unlimited flexibility in seeking, analyzing, and
participating in business opportunities. In its efforts, the Registrant will
consider the following kinds of factors:
a) Potential for growth, indicated by new technology, anticipated
market expansion or new products;
b) Competitive position as compared to other firms engaged in
similar activities;
c) Strength of the merger/acquisition candidate's management;
d) Capital requirements and anticipated availability of required
funds from future operations, through the sale of additional securities, through
joint ventures or similar arrangements or from other sources; and
e) Other relevant factors.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize that due to
the Registrant's limited capital available for investigation and management's
limited experience in business analysis, the Registrant may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.
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The Registrant has not had any substantive conversations and is not currently
engaged in substantive discussions related to a proposed merger or acquisition
and, further, is unable to predict when it may identify or participate in a
business opportunity. It expects, however, that the analysis of specific
proposals and the selection of a business opportunity may take several months or
more.
As of July 1, 1998, management has not identified any entity in which a current
officer, director or significant shareholder has a direct or indirect ownership
interest as a potential merger or acquisition candidate. Existing corporate
policy is silent to this situation; however, it is the intent of management to
seek candidates in which current directors, officers and/or significant
shareholders do not have direct or indirect ownership interests.
Further, the consummation of a merger or acquisition transaction may or may not
involve the sale of shares of common stock currently held by members of
management, directors or significant shareholders. The terms and conditions
related to any potential sale of these shares may or may not be made available
to other minority or non-controlling existing shareholders of the Registrant.
Prior to the consummation of any merger or acquisition, the Registrant will
request the approval of the existing shareholders. Accordingly, all shareholders
will be provided with the pertinent information related to the proposed merger
or acquisition, including audited financial statements, concerning the proposed
target company of the merger or acquisition.
Additionally, the Registrant will be subject to all disclosure and reporting
requirements of The Securities and Exchange Commission, including, but not
limited to, the filing of a Form 8-K Current Report for the disclosure of any
pending merger or acquisition and the dissemination of audited financial
statements of the merger or acquisition candidate upon consummation.
Form of Acquisition
The manner in which the Registrant participates in an opportunity will depend
upon the nature of the opportunity, the respective needs and desires of the
Registrant and the promoters of the opportunity, and the relative negotiating
strength of the Registrant and such promoters. The exact form or structure of
the Registrant's participation in a business opportunity or venture will be
dependent upon the needs of the particular situation. The Registrant's
participation may be structured as an asset purchase, a lease, a license, a
joint venture, a partnership, a merger or the acquisition of securities.
As set forth above, the Registrant may acquire its participation in a business
opportunity through the issuance of Common Stock or other securities in the
Registrant. Although the terms of any such transaction cannot be predicted, it
should be noted that, in certain circumstances, the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1976, as amended, may depend
upon the issuance to the shareholders of the acquired company of at least 80.0%
of the Common Stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other "tax free" provisions provided under the Internal
Revenue Code, all prior shareholders may, in such circumstances, retain 20.0% or
less of the total issued and outstanding Common Stock. If such a transaction
were available to the Registrant, it will be necessary to obtain shareholder
approval to effectuate a reverse stock split or to authorize additional shares
of Common Stock prior to completing such acquisition. This could result in
substantial additional dilution to the equity of those who were shareholders of
the Registrant prior to such reorganization. Further, extreme caution should be
exercised by any investor relying upon any tax benefits in light of any existing
tax laws or any proposed changes thereto. It is possible that no tax benefits
will exist at all. Prospective investors, if any, should consult their own
legal, financial and other business advisors.
In conjunction with a merger with or acquisition of a privately-owned company,
there exists a probability that a change in control will occur upon the
consummation of the merger or acquisition. In order to make such a transaction
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feasible, it is highly probable that management will offer a controlling
interest in the Registrant to any identified merger or acquisition candidate.
The present management and the current shareholders of the Registrant may not
have control of a majority of the voting shares of the Registrant following a
reorganization transaction. As part of such a transaction, all or a majority of
the Registrant's Directors may resign and new Directors may be appointed without
any vote by shareholders.
Present shareholders have not agreed to vote their respective shares of Common
Stock in accordance with the vote of the majority of all non-affiliated future
shareholders of the Registrant with respect to any business combination.
Anti-takeover Provisions
The Nevada General Corporation Law (NGCL) contains certain provisions that may
make the acquisition of control of the Registrant by the means of a tender
offer, open market purchase, proxy fight or other method more difficult. The
NGCL contains provisions restricting the ability of a corporation to engage in
business combinations with an interested stockholder. In general, except under
certain circumstances, business combinations with interested shareholders are
not permitted for a period of five years following the date such shareholder
became an interested shareholder. The NGCL defines an interested shareholder,
generally, as a person who owns 10.0% or more of the outstanding shares of the
corporation's voting stock.
In addition, the NGCL generally disallows the exercise of voting rights with
respect to "control shares" of an "issuing corporation" held by an "acquiring
person", unless such voting rights are conferred by a majority vote of the
disinterested shareholders. "Control shares" are the voting shares of an issuing
corporation acquired in connection with the acquisition of a "controlling
interest". "Controlling interest" is defined in terms of threshold levels of
voting share ownership, which thresholds, whenever each may be crossed, trigger
application of the voting bar with respect to the shares newly acquired.
The NGCL also permits Directors to resist a change or potential change in
control of the corporation if the Directors determine that the change or
potential change is opposed to or not in the best interest of the corporation.
Prior to any business combination for which shareholder approval is required,
the Registrant intends to provide its shareholders complete disclosure
documentation concerning the business opportunity or target company and its
business. Such disclosure will in all likelihood be in the form or a proxy
statement which will be distributed to shareholders within the time prescribed
by the NGCL prior to any shareholder's meeting.
Not an "Investment Advisor"
The Registrant is not an "investment advisor" under the Federal Investment
Advisers Act of 1940, which classification would involve a number of negative
considerations. Accordingly, the Registrant will not furnish or distribute
advise, counsel, publications, writings, analysis or reports to anyone relating
to the purchase or sale of any securities within the language, meaning and
intent of Section 2(a)(11) of the Investment Advisers Act of 1940, 15USC
80b2(a)(11).
Not an "Investment Company"
The Registrant may become involved in a business opportunity through purchasing
or exchanging the securities of such business. The Registrant does not intend,
however, to engage primarily in such activities and is not registered as an
"investment company" under the Federal Investment Company Act of 1940. The
Registrant believes such registration is not required.
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The Registrant must conduct its activities so as to avoid becoming inadvertently
classified as a transient "investment company" under the Federal Investment
Company Act of 1940, which classification would affect the Registrant adversely
in a number of respects. Section 3(a) of the Investment Company Act provides the
definition of an "investment company" which excludes an entity which does not
engage primarily in the business of investing, reinvesting or trading in
securities, or which does not engage in the business of investing, owning,
holding or trading "investment securities" (defined as "all securities other
than United States government securities or securities of majority-owned
subsidiaries") the value of which exceeds forty (40.0%) of the value of its
total assets (excluding government securities, cash or cash items). The
Registrant intends to implement its business plan in a manner which will result
in the availability of this exemption from the definition of "investment
company". The Registrant proposes to engage solely in seeking an interest in one
or more business opportunities or ventures.
Effective January 14, 1981, the U. S. Securities and Exchange Commission adopted
Rule 3a-2 which deems that an issuer is not engaged in the business of
investing, reinvesting, owning, holding or trading in securities for purposes of
Section 3(a)(1), cited above, if, during a period of time not exceeding one
year, the issuer has a bona fide intent to be engaged primarily, or as soon as
reasonably possible (in any event by the termination of a one year period of
time), in a business other that of investing, reinvesting, owning, holding or
trading in securities and such intent is evidenced by the Registrant's business
activities and appropriate resolution of the Registrant's Board of Directors
duly adopted and duly recorded in the minute book of the Registrant. The Rule
3a-2 "safe harbor" may not be relied on more than a single time. The Registrant
expects to have invested or committed all, or substantially all, of the proceeds
of this public offering in the investigation and/or acquisition of a business
opportunity acquisition within a year after completion of the offering and
thereafter to not encounter the possibility of being classified as a transient
investment company.
ITEM 7 - INDEX TO FINANCIAL STATEMENT
The required accompanying financial statements begin on page F-1 of this
document.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
The Accounting firm of Smith, Dance & Co., the independent auditors of the
Company, were dismissed effective as of October , 1996. During the fiscal years
ended October 31, 1995 and 1994 and the interim period subsequent to October 31,
1995, there have been no disagreements with Smith, Dance & Co. on any matter of
events. Smith, Dance & Co.'s report on the financial statements for the fiscal
year ended October 31, 1995 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principals.
The Company engaged the accounting firm of S. W. Hatfield & Associates as
independent auditors for the Company, effective as of March 1, 1998 for the
fiscal years ended October 31, 1996 and 1997 and for subsequent periods. The
engagement of S. W. Hatfield & Associates was approved by the Company's Board of
Directors. During the fiscal years ended October 31, 1996 and 1997 and the
interim period subsequent to October 31, 1997 and prior to March 1, 1998, there
were no consultants with S. W. Hatfield & Associates on any matter of accounting
principles to a specific transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial condition.
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PART 111
ITEM 9- OFFICERS AND DIRECTORS
The officers and directors of Registrant are as follows:
Name Age Position
William C. Nichols 30 President and Chairman, Director
Paula Nichols 32 Secretary and Treasurer, Director
Robert Eckman Director
During the year 1996, the officers and directors were as follows:
James E. Hughes, Sr. Chairman of the Board of Directors
(Resigned 1/22/96)
James R. Ray President and Chief Executive Officer
(Chairman of Board until 2/1/97)
George W. Smith Director, Secretary (until 2/1/97)
Warren Haught Director, President of Energy Division
Unit (until 8/13/96).
On January 31, 1997 the above Officers and Directors resigned and the following
persons were elected as Officers and Directors who held that position until
September 22, 1997 when the current Board of Directors and Officers were
elected.
Michael Puhr President and Director
Lorina Liang Director
Allen Wen Jen Lan Director
ITEM 10 EXECUTIVE COMPENSATION
None of the Registrants current officers or directors receives or has received
any salary from Registrant during the preceding five years. The Registrant does
not anticipate entering into Employment agreements with any of its officers or
directors in the near future. Directors do not receive compensation for their
services as directors and are not reimbursed for expenses incurred in attending
board meeting.
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During the years 1996, 1997 and 1998 Registrant paid the following salaries to
its officers:
Name 1996 1997 1998
---- ---- ---- ----
James R. Ray $36,000 -0- -0-
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Number of
Name Shares owned Percent
---- ------------ -------
M. D. Price, Jr., Escrow Agent
15945 Quality Trail North
Scandia, MN 55073 15,000,000 55.55%
George W. Smith 2,500 .00009%
James E. Hughes, Sr. 283,642 .0105%
Hughes Wood Products, Inc. 24,469(1) .009%
James R. Ray 454,610(2)
(1) The 24,469 shares of common stock held in name of Hughes Wood Products,
Inc., a Company that is controlled by James E. Hughes, Sr. As such, Mr. Hughes,
by virtue of his control over Hughes Wood Products, Inc., has a beneficial
ownership interest in these shares.
(2) Mr. Ray disposed of these shares in May, 1997.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sale of Hughes Wood Products and Houston Woodtech, Inc., and settlement of suit
involving James R. Hughes, Sr.
On January 22, 1996 James E. Hughes, Sr., Chairman of the Board of Directors and
owner, directly or indirectly, of 308,111 shares of the Company's common stock,
resigned as Chairman and as a Director. On January 31, 1996, the Company entered
into a transaction with Mr. Hughes whereby the Company would acquire 56
producing oil and gas wells and sell to Mr. Hughes the Pole Mill located in
Quincy, LA and the office building and airplane and office equipment associated
therewith. The above transaction was never consummated by Hughes and
consequently the Board of Directors authorized the filing of a lawsuit against
Mr. Hughes, certain employees of Hughes and the Certified Public Accounting firm
representing Hughes in the transaction. This matter was settled on August 12,
1996 with the Agreement that Phoenix would retain 46 of the producing wells,
receive a promissory note from Mr. Hughes in the amount of $1,000,000.00,
collateralized as agreed to by the parties, and would sell to Hughes the entire
Wood Products division of the Company known as Hughes Wood Products, Inc.
("HWP") and Houston Woodtech, Inc. ("HWI"), a wholly owned subsidiary of HWP.
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Phoenix had returned the stock of HWP, subject to the performance by Phoenix of
certain guarantees relating to the obligations owed to Agriculture Production
Credit Association ("AgPCA"). Hughes agreed to execute a liabilities undertaking
whereby he agreed to assume and pay all obligations and indebtedness of HWP or
HWI owing to AgPCA and Phoenix was to deliver the stock of WHP and HWI. This
note, in original principal amount of $3,551,000.00 was dated September 10,
1993, signed by Hughes Wood Products (now Phoenix Resources Technologies, Inc.
), Hughes Wood Products, Inc. and Houston Woodtech, Inc. and was related to the
business of Hughes Wood Products, Inc. and Houston Woodtech, Inc.
Sale of West Virginia Properties.
On August 13, 1996 Mr. Warren Haught, a member of the Board of Directors, made
an offer to the Company to repurchase the oil and gas properties he had sold to
the Company over the last five years. Mr. Haught had become disenchanted with
Phoenix during the Court proceeding with Mr. Hughes, and the settlement of that
matter and Phoenix's failure to acquire additional to increase the number of oil
and gas wells in the West Virginia area. IN settlement of this dispute, the
Company agreed to convey to 719 Corporation, HAH Petroleum, Inc. and Top
Drilling Corporation the properties that the Company had acquired from them. As
further consideration Mr. Haught caused to be surrendered to the Company
1,000,000 shares of Class C Preferred stock and 1,000,000 shares of Class D
Preferred stock in the Company, constituting his total holdings in the Company,
and Mr. Haught resigned as a Director of Phoenix.
Sales Of Assets To MVP Holdings, Inc.
At the time of the bulk sale of assets to MVP Holdings, Inc., no officer or
director of Phoenix was an officer or shareholder of MVP, and no officer or
director of MVP was an officer or shareholder of director of Phoenix. Subsequent
to the sale, James R. Ray became an officer and director of MVP on June 5, 1997
and became a shareholder of MVP in July 1997.
Divestiture of Rocky Mountain Crystal Waters, Inc. and settlement of claims
against Phoenix.
On September 20, 1997 Phoenix Board of Directors determined that it was in the
best interests of the Company to rescind the acquisition of RMCW. RMCW was not
performing up to expectations and RMCW was making a claim that Phoenix was
unable to properly fund the operation of RMCW due to the suppression of books
and records of Phoenix; loss of financing due to the inability of Phoenix to
produce audited or accurate internally-prepared financial statements and loss of
revenue by RMCW by reason of the above. RMCW also claimed business interruption
due to actions of Phoenix and, additionally, that Phoenix failed to disclose
liabilities in excess of five million dollars, consisting of the AgPCA note and
potential liabilities to the Internal Revenue Service.
RMCW had threatened to commence suit against Phoenix based on the foregoing.
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The Board of Directors, consisting of Michael Puhr, Lorina Liang and Allen Wen
Jen Lan, on September 22, 1997 appointed a new Board of Directors consisting of
William C. Nichols, Robert Eckman and Paula Nichols. The old Board members then
resigned.
Concurrently therewith the Company entered into an Agreement with RMCW which
essentially reversed the acquisition of RMCW on January 31, 1997. RMCW returned
the 6,000,000 shares of Class B Preferred stock and Phoenix returned the
6,000,000 shares of common stock of RMCW. All liabilities of Phoenix relating to
the operation of RMCW were assumed by RMCW and RMCW indemnified Phoenix with
respect to these liabilities. Michael Puhr was a major shareholder in RMCW. In
settlement of RMCW claim against Phoenix, Phoenix agreed to transfer to RMCW the
stock of MVP Holdings, Inc. and the right to any increases of MVP stock under
that Agreement, and subject to MVP's right of first refusal. MVP exercised the
right of first refusal, and in connection therewith reissued the 4,000,000
shares to Phoenix with the Agreement that Phoenix would distribute the shares to
its shareholders. This was done on September 22, 1997, and the record date for
determining shareholders entitled to receive the MVP stock was set as October 1,
1997.
The stock was distributed shortly thereafter to Phoenix shareholders
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ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as exhibits to this Registration
Statement.
Page F-1 - Item 7; Financial Statements for the periods November 1, 1995 to
October 31, 1997
Exhibit 10.1 - Item 1, (3); Agreement for Purchase and Sale of Stock between
Phoenix and James E. Hughes, Sr., dated August 12, 1996. (*)
Exhibit 10.1 - (a) Security Agreement for Pledge of Instruments, dated August
12, 1996 between Phoenix and James E. Hughes, Sr. (*)
Exhibit 10.1 - (b) Non-Negotiable Promissory Note executed by James E. Hughes,
Sr. for $1,000,000 in favor of Phoenix. (*)
Exhibit 10.2 - Item 1, (4); Exclusive License Agreement between J. J. Reidy &
Co., Inc. and Phoenix, dated March 12, 1996.(*)
Exhibit 10.3 - Item 1, (5); Agreement to Convey Oil and Gas Drill Sites and
Turnkey Drilling Contract, dated July 24, 1996 between Phoenix and Erin Oil
Exploration, Inc., and accompanying exhibits to Agreement. (*)
Exhibit 10.4 - Item 1, (6); Settlement Agreement and Mutual Release of All
Claims between Phoenix and 710 Corporation, HAH Petroleum, Inc. and Top Drilling
Corporation, dated August 13, 1996. (*)
Exhibit 10.5 - Item 1, (10); Purchase and Subscription Agreement between Phoenix
and Rocky Mountain Crystal Water, Inc., dated January 31, 1997.
Exhibit 10.6 - Item 1, (11); Agreement for Purchase and Sale of Assets between
Phoenix and MVP Holdings, Inc., dated March 10, 1997.
Exhibit 10.7 - Item 1, (13); Agreement between Phoenix and Rocky Mountain
Crystal Water, Inc., dated September 20, 1997.
(b) Reports on Form 8-K: None
(*) These Exhibits were filed with the year ending October 31, 1996 Form 10-KSB
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHONEIX RESOURCES TECHNOLOGIES, INC.
By /s/ William C. Nichols Date: July 9, 1998
------------------------
William C. Nichols
Its President
By /s/ Paula Nichols Date: July 9, 1998
--------------------------------
Paula Nichols
Member of the Board of Directors
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S. W. HATFIELD + ASSOCIATES
certified public accountants
Members: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Phoenix Resources Technologies, Inc.
We have audited the accompanying balance sheets of Phoenix Resources
Technologies, Inc. (a Nevada corporation) as of October 31, 1997 and 1996 and
the related statements of operations, changes in stockholders' equity and cash
flows for each of the years then ended. These 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 financial statements referred to above present fairly, in
all material respects, the financial position of Phoenix Resources Technologies,
Inc. as of October 31, 1997 and 1996 and the related statements of operations,
changes in stockholders' equity and cash flows for each of the years then ended,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note A. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
S. W. HATFIELD + ASSOCIATES
Dallas, Texas
March 18, 1998
Use our past to assist your future sm
P. O. Box 820392 o Dallas, Texas 75382-0392 o 214-342-9635
9236 Church Road, Suite 1040 o Dallas, Texas 75231 o 800-244-0639
214-342-9601 (fax) o [email protected] (e-mail)
F-1
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
BALANCE SHEETS
October 31, 1997 and 1996
ASSETS
1997 1996
------------ ------------
<S> <C>
Current assets
Cash on hand and in bank $ -- $ 37,500
Net current assets of discontinued operations -- 1,794,623
------------ ------------
Total current assets -- 1,832,123
------------ ------------
Other assets
Net other assets of discontinued operations -- 8,749,073
------------ ------------
TOTAL ASSETS $ -- $ 10,581,196
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Judgment garnishment payable $ 266,691 $ --
Net current liabilities of discontinued operations -- 233,705
Total current liabilities 266,691 233,705
------------ ------------
Long-term liabilities
Net other liabilities of discontinued operations -- --
------------ ------------
Total liabilities 266,691 233,705
------------ ------------
Commitments and contingencies
Stockholders' equity
Preferred stock - $0.001 par value
50,000,000 shares authorized
Series A - 5.0% annual dividend, non-
cumulative. Convertible into 1,000,000
shares of common stock after March 29,
2000. 200,000 shares issued and outstanding 200 200
Common stock - $0.001 par value
100,000,000 shares authorized 27,000,000
and 11,049,888 shares issued and outstanding, respectively 27,000 11,050
Additional paid-in capital 13,312,212 12,993,151
Accumulated deficit (12,632,703) (1,923,510)
------------ ------------
706,709 11,080,891
Stock subscription receivable (240,000) --
Treasury stock - at cost (560,000 shares) (733,400) (733,400)
------------ ------------
Total stockholders' equity (266,691) 10,347,491
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ -- $ 10,581,196
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
Years ended October 31, 1997 and 1996
1997 1996
------------ ------------
<S> <C>
Net revenues $ -- $ --
Operating expenses
General and administrative expenses 202,703 669,895
------------ ------------
Total operating expenses 202,703 669,895
------------ ------------
Loss from operations (202,703) (669,895)
Other (expense) income
Garnishment on judgment entered against Company (251,206) --
Interest expense on judgment garnishment (15,485) --
------------ ------------
Loss from continuing operations before income taxes (469,394) (669,895)
Income tax benefit (expense) -- --
------------ ------------
Loss from continuing operations (469,394) (669,895)
------------ ------------
Discontinued operations, net of income taxes
Income (Loss) from discontinued operations,
net of income taxes of $-0- and $-0-, respectively
Wood products division -- 144,276
West Virginia oil & gas division -- 131,066
Oil & gas pipeline division 29,566 --
Impairment of marketable securities held to maturity -- (1,976,562)
Income (Loss) on disposition, net of income
taxes of $-0- and $-0-, respectively
Wood products division -- 618,186
West Virginia oil & gas division -- 1,504,586
------------ ------------
Income (loss) from discontinued operations 29,566 421,552
------------ ------------
Net Loss $ (439,828) $ (248,343)
============ ============
(Loss) Earnings per weighted-average
share of common stock outstanding
From continuing operations $ (0.03) $ (0.08)
From discontinued operations -- 0.05
------------ ------------
Total loss per share $ (0.03) $ (0.03)
============ ============
Weighted-average number of common shares outstanding 13,173,231 8,534,260
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended October 31, 1997 and 1996
Additional
Preferred Stock Common stock paid-in
--------------- ------------
Shares Amount Shares Amount capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C>
Balances at November 1, 1995 2,200,000 $ 2,200 4,179,888 $ 4,180 $ 18,786,021
Common stock issued for
Exchange of shareholder debt -- -- 750,000 750 224,250
Acquisition of pipeline systems -- -- 2,250,000 2,250 1,597,750
Fees and expenses under Form
S-8 consulting services plan -- -- 3,870,000 3,870 383,130
Reversal of acquisition of
drilling rig and West
Virginia oil & gas wells (2,000,000) (2,000) -- -- (7,998,000)
Dividends paid on
preferred stock -- -- -- -- --
Net loss for the year -- -- -- -- --
------------ -------- ------------ ------------ ------------
Balances at October 31, 1996 200,000 200 11,049,888 11,050 12,993,151
Common stock issued for fees
and expenses under Form S-8
consulting services plan -- -- 950,112 950 94,061
Common stock issued into
escrow to facilitate a merger
with or acquisition of a
qualified business candidate -- -- 15,000,000 15,000 225,000
Distribution of common stock
of MVP Holdings, Inc. to
Phoenix Resources Tech-
ologies, Inc. shareholders -- -- -- -- --
Net loss for the year -- -- -- -- --
------------ -------- ------------ ------------ ------------
Balances at October 31, 1997 200,000 $ 200 27,000,000 $ 27,000 $ 13,312,212
============ ======== ============ ============ ============
Stock subscription agreement
and Treasury stock Accumulated
------------------
Shares Amount deficit Total
------------ ------------ ------------ ------------
Balances at November 1, 1995 560,000 $ (733,400) $ (1,660,167) $ 16,398,834
Common stock issued for
Exchange of shareholder debt -- -- -- 225,000
Acquisition of pipeline systems -- -- -- 1,600,000
Fees and expenses under Form
S-8 consulting services plan -- -- -- 387,000
Reversal of acquisition of
drilling rig and West
Virginia oil & gas wells -- -- -- (8,000,000)
Dividends paid on
preferred stock -- -- (15,000) (15,000)
Net loss for the year -- -- (248,343) (248,343)
------------ ------------ ------------ ------------
Balances at October 31, 1996 560,000 (733,400) (1,923,510) 10,347,491
Common stock issued for fees
and expenses under Form S-8
consulting services plan -- -- -- 95,011
Common stock issued into
escrow to facilitate a merger
with or acquisition of a
qualified business candidate 15,000,000 (240,000) -- --
Distribution of common stock
of MVP Holdings, Inc. to
Phoenix Resources Tech-
ologies, Inc. shareholders -- -- (10,269,365) (10,269,365)
Net loss for the year -- -- (439,828) (439,828)
------------ ------------ ------------ ------------
Balances at October 31, 1997 15,560,000 $ (973,400) $ (12,632,703) (266,691)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
Years ended October 31, 1997 and 1996
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss for the year $ (439,828) $ (248,343)
Adjustments to reconcile net loss to net
cash provided by operating activities
Common stock issued for various fees and expenses 95,011 387,000
Impairment of marketable securities prior to disposition -- 1,976,562
(Income) Loss on disposition of discontinued operations -- (1,504,586)
Increase in judgment garnishment payable 266,691 --
Change in net assets and liabilities of discontinued operations 40,626 (599,788)
----------- -----------
Net cash provided by (used in) operating activities (37,500) 10,845
----------- -----------
Cash flows from investing activities -- --
----------- -----------
Cash flows from financing activities
Payment of dividends on preferred stock -- (15,000)
----------- -----------
Net cash provided by (used in) financing activities -- (15,000)
----------- -----------
INCREASE (DECREASE) IN CASH (37,500) (4,155)
Cash at beginning of year 37,500 41,655
----------- -----------
Cash at end of year $ -- $ 37,500
=========== ===========
Supplemental disclosure of interest and income taxes paid
Interest paid for the period $ -- $ --
=========== ===========
Income taxes paid for the period $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Phoenix Resources Technologies, Inc. (Company) was originally incorporated in
1986 as Firma, Inc. under the laws of the State of Colorado as a corporation
organized to take advantage of unspecified business opportunities. In 1991, in
accordance with a reorganization agreement, the Company acquired 100% of the
issued and outstanding stock of Hughes Wood Products, Inc., a privately-owned
Texas corporation, and changed its corporate name to Hughes Resources, Inc.
Hughes Wood Products, Inc. became a wholly-owned subsidiary of the Company.
Pursuant to a plan of merger and reorganization, the Company, as a Colorado
corporation, merged into Hughes Resources, Inc., a Nevada corporation, on June
27, 1995. The purpose of this merger was to redomicile the Company from Colorado
to Nevada. The Nevada corporation had been formed solely for this reorganization
purpose and had no assets, liabilities or operations prior to the merger. The
Articles of Incorporation of the surviving Nevada corporation were amended to
increase the authorized number of common shares to 100,000,000 with a par value
of $0.001 each and to increase the authorized number of preferred shares to
50,000,000 with a par value of $0.001 per share.
In May 1995, the Company acquired oil & gas wells located in the State of
Louisiana from an entity domiciled in the British Virgin Islands for
approximately 825,100 shares of the Company's common stock issued pursuant to
Regulation S of the US Securities and Exchange Commission and approximately
200,000 shares of Series A Preferred Stock. These assets were disposed of by the
Company in a block asset transfer during the year ended October 31, 1997.
In July 1995, the Company acquired approximately 330 oil & gas producing
properties located in the State of West Virginia and related equipment and real
estate for the issuance of approximately 1,000,000 shares of Series C Preferred
Stock and 1,000,000 shares of Series D Preferred Stock. In August 1996, the
original seller, and member of the Company's Board of Directors, made an offer
to repurchase these properties at terms identical to the initial sale. This
offer was accepted by the Company and the issued and outstanding shares of
Series C and Series D Preferred Stock were returned to the Company and canceled.
In January 1996, the Company entered into a transaction to acquire 56 producing
oil & gas wells from the former sole shareholder of Hughes Wood Products, Inc.
and former officer of the Company in a transaction to sell a Pole Mill located
in DeQuincy, Louisiana back to the former officer. As a part of this
transaction, the former officer was to assume certain liabilities of the Company
and return approximately 400,000 shares of common stock to the Company. This
transaction was not completed and the Company filed a lawsuit against the former
officer and the former officer's certified public accounting firm seeking
damages and alleging acts that would allow the assessment of treble damages
against the defendants. This litigation was settled in May 1996 with the
agreement that the Company would retain the 56 producing oil & gas wells,
receive a $1,000,000 promissory note from the former officer and would sell the
entire wood products division (Hughes Wood Products, Inc.) to the former
officer. Additionally, the former officer would assume all debt and other
liabilities attributable to this division and indemnified the Company against
all debts arising from the sale of these assets to the former officer.
In January 1996, the Company acquired three pipeline systems in West Virginia
from an unrelated Canadian corporation for the issuance of 2,250,000 shares of
the Company's common stock issued pursuant to Regulation S of the US Securities
and Exchange Commission and the assumption of a related $100,000 debt associated
with the pipeline properties. These properties were disposed of by the Company
in a block asset transfer during the year ended October 31, 1997.
F-6
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS - Continued
In January 1997, the Company exchanged 6,000,000 shares of Class "B" Preferred
Stock for 6,000,000 shares of common stock of Rocky Mountain Crystal Water, Inc.
Rocky Mountain Crystal Water, Inc. owned the rights to produce water from the
acquifer located in Ten Sleep, Wyoming. Various disputes arose between the
selling parties and the Company and this transaction was rescinded in September
1997. Due to the nature and timing of the disputes, the Company experienced no
financial impact from this transaction between January and September 1997.
In March 1997, the Company exchanged all of its assets and liabilities with MVP
Holdings, Inc., an unrelated entity, for approximately 4,000,000 shares of MVP
Holdings, Inc. common stock with a street value of approximately $3.50 per share
or $14,000,000 in total. The Company valued this transaction at the historical
values of the assets given and liabilities assumed by MVP Holdings, Inc. and no
gain or loss was recognized in this transaction.
In October 1997, the Company distributed 100.0% of its holdings in MVP Holdings,
Inc. to its shareholders as a property distribution. Concurrent with this
action, the Company ceased to have any assets, liabilities or operations and
became totally dependent upon management and/or significant shareholders to
provide sufficient working capital to preserve the integrity of the corporate
entity at this time. It is the intent of management and significant shareholders
to provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity.
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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
2. Income taxes
The Company utilizes the asset and liability method of accounting for
income taxes. At October 31, 1997 and 1996, the deferred tax asset and
deferred tax liability accounts, as recorded when material, are entirely
the result of temporary differences. Temporary differences represent
differences in the recognition of assets and liabilities for tax and
financial reporting purposes, primarily the allowance for doubtful
accounts, accumulated depreciation and certain liability items. A 100%
valuation allowance was provided against deferred tax assets, where
applicable.
F-7
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
2. Income taxes
Due to the liquidation and/or disposition of all of the Company's assets,
liabilities and operations as of October 31, 1997, the Company will have
no available net operating loss carryforwards available for use in future
years.
3. Earnings (loss) per share
Earnings (loss) per share are computed by dividing net income (loss) by
the weighted-average number of shares issued and outstanding during the
reporting period. As of October 31, 1997 and 1996, the Company had no
warrants, options or other equity issues which might be considered
dilutive in nature to the weighted-average number of shares outstanding
calculation.
NOTE C - DISCONTINUED OPERATIONS
On August 12, 1996, the Company sold its wood products division, also known as
Hughes Wood Products, Inc., back to Mr. James E. Hughes, Sr., the former sole
shareholder of Hughes Wood Products, Inc. for a $1,000,000 promissory note and
the assumption of all liabilities associated with Hughes Wood Products, Inc.
On August 22, 1996, the Company and the former owners of various oil & gas
properties and assets located in West Virginia rescinded this transaction with
the return of 1,000,000 shares each of the Company's Series C and Series D
Preferred Stock. These properties were originally acquired in July 1995.
On March 10, 1997, the Company sold all remaining assets to MVP Holdings, Inc.
in exchange for 4,000,000 shares of MVP Holdings, Inc. restricted, unregistered
common stock issued pursuant to Rule 144 of the US Securities and Exchange
Commission and the assumption of all liabilities, known and unknown, of the
Company. The shares received by the Company had a street value of approximately
$3.50 per share or an aggregate approximate $14,000,000. This transaction was
valued by the Company at approximately $10,300,000, which approximates the net
book value of the assets transferred less the value of the liabilities assumed.
In October 1997, the Company distributed 100.0% of its holdings in MVP Holdings,
Inc. to its shareholders as a property distribution.
Summarized results of operations for Hughes Wood Products,
Inc. for Fiscal 1997 and 1996 are as follows:
1997 1996
-------- --------
Net sales $ - $753,668
======= =======
Operating income $ - $144,276
======= =======
Income upon disposition of discontinued operations $ - $618,186
======= =======
Summarized results of operations for all oil & gas
operations for Fiscal 1997 and 1996 are as follows:
1997 1996
-------- ----------
Net sales $103,825 $1,047,000
======= =========
Operating income $ 29,566 $ 131,066
======= =========
Income upon disposition of discontinued operations $ - $1,504,586
======= =========
F-8
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - COMMON STOCK TRANSACTIONS
During Fiscal 1996, the Company acquired three pipeline systems from an entity
controlled by a former officer of the Company. The total price of this
acquisition was approximately $1,750,000, paid in 2,250,000 shares of the
Company's common stock issued pursuant to Regulation S of the US Securities and
Exchange Commission and the assumption of $150,000 in debt. The debt was
originally due on March 15, 1996.
During Fiscal 1996, the Company issued 750,000 shares of unregistered,
restricted common stock to a shareholder in settlement of $225,000 in debt
payable to the shareholder.
During Fiscal 1996, the Company issued an aggregate 3,870,000 shares of common
stock registered pursuant to a prior year filing on Form S-8. These transactions
were valued at $0.10 per share, or an aggregate $387,000, which approximates the
fair value of the stock issued and the fair value of the services provided for
legal and financial consulting services.
During Fiscal 1997, the Company issued an aggregate 950,112 shares of common
stock registered pursuant to a prior year filing on Form S-8. These transactions
were valued at $0.10 per share, or an aggregate $95,011, which approximates the
fair value of the stock issued and the fair value of the services provided for
legal and financial consulting services.
In August 1996, due to non-performance on the part of the Company, the Fiscal
1995 acquisition of certain oil and gas properties and related assets located in
West Virginia was rescind. This transaction caused the return and retirement of
100.0% of the issued and outstanding Series C and Series D Preferred Stock of
the Company.
In September 1997, the Company, in an effort to seek and obtain a suitable
merger or acquisition agreement with an on-going privately owned business,
issued 15,000,000 shares of unregistered, restricted common stock into the
escrow account of the Company's corporate attorney under a subscription
agreement. The attorney is responsible for securing the Company's books and
records, validating the Company's corporate status, procuring the services of a
qualified independent certified accounting firm to audit the Company's financial
statements, facilitate the filing of all delinquent reports with the US
Securities and Exchange Commission and evaluate potential private companies for
either merger or acquisition. The Company's common stock had an estimated market
trading price of approximately $0.04 per share on the date of the issuance of
these shares. Due to the restricted nature of the shares issued into escrow, the
Stock Subscription Agreement was valued at approximately $0.016 per share, or
approximately $240,000 in total, as the "fair value" of this transaction. The
Stock Subscription Agreement will be settled upon the successful merger with or
acquisition of a suitable private company.
NOTE E - DISTRIBUTIONS
In March 1997, the Company exchanged all of its assets to an unrelated entity in
exchange for 4,000,000 shares of the acquiring company's common stock and the
assumption of all known and unknown liabilities. The street value of the stock
issued to the Company was approximately $3.50 per share at closing. This
transaction was valued by the Company at approximately $10,300,000, which
approximates the net book value of the assets transferred less the value of the
liabilities assumed. In October 1997, the Company distributed 100.0% of its
holdings in MVP Holdings, Inc. to its shareholders as a property distribution.
F-9
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE F - LITIGATION
The Company was a co-maker on a loan payable to Agriculture Production Credit
Association (AG-PCA) along with its former subsidiary, Hughes Wood Products,
Inc. and Houston Woodtech, Inc. On March 17, 1997, AG- PCA foreclosed on the
underlying assets collateralizing the loan and was subsequently granted an
approximate $3,236,048 judgment collectively against the Company, Hughes Wood
Products, Inc. and Houston Woodtech, Inc. As of October 31, 1997, approximately
$1,800,000 remains unsatisfied on the collective judgment against all named
parties, including the Company.
In the March 1997 sale of the Company's assets to and assumption of liabilities
by MVP Holdings, Inc., the Company was specifically indemnified in the sale
document as follows: "The Purchaser [MVP] will guarantee seller [Company] that
all debts of any kind including but not limited to amounts owed to the United
States Treasury Department, the State of Texas, Agricultural Production Credit
Association and or Community Bank, N. A., incurred or owed by the Phoenix
Resources Technologies, Inc. as of the closing date except the specific debts to
be retained by Seller under this agreement will be paid on a timely basis."
Accordingly, the Company is vigorously pursuing all avenues available to it in
order to cancel this judgment and anticipates no material financial impact as a
result of this action.
On March 20, 1997, the Company was named as the Garnishee in the settlement of a
judgment rendered against Mr. James R. Ray, the Company's former president and
chief executive officer. The garnishment placed against the Company by the
Superior Court of the State of Arizona, Maricopa County, was in the amount of
$266,205.91, plus interest at 10.0% per annum until paid in full. The Company
has accrued this garnishment as a current liability and has accrued the
requisite interest on the unpaid balance through October 31, 1997 in the
accompanying financial statements.
F-10
EXHIBIT 10.5
ITEM 1,(10)
PURCHASE AND SUBSCRIPTION AGREEMENT BETWEEN
PHOENIX RESOURCES TECHNOLOGIES, INC. AND ROCKY MOUNTAIN
CRYSTAL WATER, INC.
DATED JAUNARY 31, 1997
<PAGE>
PURCHASE AND SUBSCRIPTION AGREEMENT
THIS AGREEMENT MADE AS OF THE 31ST DAY OF JANUARY 1997 BY AND BETWEEN
PHOENIX RESOURCES TECHNOLOGIES, INC., [PRTI] A NEVADA CORPORATION, HEREINAFTER
REFERRED TO AS "PRTI AND OR ACQUIROR" AND ROCKY MOUNTAIN CRYSTAL WATER,
INC.,RMCW A WYOMING CORPORATION, HEREINAFTER AS REFERRED TO AS THE "RNCW,
PURCHASER OR SUBSCRIBER / ACQUIREE"; COLLECTIVELY REFERRED TO AS THE PARTIES.
WITNESSETH
RECITALS
WEHEREAS: "ACQUIROR" WISHES TO ACQUIRE THE CONTROLLING SHARE OWNERSHIP INTEREST
OF ROCKY MOUNTAIN CRYSTAL WATKR, INC., A WYOMING CORPORATION, HERE-IN-AFTER
REFERRED TO ALSO AS "RMCW", FOR AND IN GOOD AND VALUABLE CONSIDERATION, AND;
WHEREAS: ACQUIROR WISHES TO, AND SUBSCRIBER / PURCHASER WISHES TO ACQUIRE
ACQUIROR'S 6,000,000 CLASS "B" PREFERRED CAPITAL STOCK OWERSHIP OF "PRTI" FOR
AND IN CONSIDERATION OF 6,000,000 CO~ON SHARES ISSUED BY SUBSCRIBER TO ACQUIROR,
AND;
WHEREAS: THE PARTIES TO THIS AGREEMENT HEREIN AGREE; THAT THIS TRANSACTION IS
BY MEANS OF PRIVATE SALE AND TREATY AND IS REFERENCED SOLELY AS TO THE
RESPECTIVE CONSIDERATION PAID SHARES EXCHANGED AS BEING A PRIVATE SECURITIES
TRANSACTION FOR ACQUISITION PURPOSES, AS PROMULGATED BY ANY STATE, TERRITORIAL,
PROVINCIAL OR FEDERAL AGENCY RULE OR LAW.
WHEREAS: THE PARTIES TO THIS AGREEMENT HAVE AS HEREIN REPRESENTED AND
WARRANTED, ENTERED INTO THIS BINDING AGREEMENT, WHICH TERMS ARE HEREIN
INCORPORATED, INCLUSIVE OF ALL EXHIBITS TO THIS AGREEMENT, INCLUDING POST
CLOSING DOCUMENTS OR ACTIONS AND IT IS AGREED TO BY THE PARTIES HERETO THAT AS
SUCH THEY ARE AN INTEGRAL PART HEREOF, AND SHALL REMAIN AND SURVIVE AS TO THEIR
CONSTRUCTIVE INTENT AND CONTENT PURSUANT AND SUBJECT TO ALL CONDITIONS OF THIS
AGREEMEN, AS CONTAINED HEREIN, TO SUBSTANTIATE THE VALIDITY OF THIS AGREEMENT AS
TO PRECLUDE ANY ABSENCE OF ANY CONDITIONS VOIDING THIS AGREEMENT.
THEREFORE, IT IS AGREED:
A.
TERMS AND CONDITIONS
1.O1 ACQUIROR WISHES TO, AND SUBSCRIBER / PURCHASER WISHES TO ACQUIRE PRTI'S
6,000,000 CLASS "B" PREFERRED CAPITAL STOCK OF WHICH SHALL CONTAlN VOTING RIGHTS
AND CONVERSION RIGHTS INTO 60,000,000 COMMON SHARES OF PRTI COMMON SHARES AT THE
OPTION OF RMCW INTO OWNERSHIP OF "PRTI" FOR AND IN CONSIDERATION OF 6,000,OO0
COMMON SHARES ISSUED BY SUBSCRIBER TO ACQUIROR, EFFECTIVE THIS DATE, AS PAYMENT
IN FULL.
1.02 PRTI REPRESENTS IT HAS 125 MlLLION COMMON SHARE AUTHORIZED WITH 11,O49,888
COMMON SHARE ISSUED FULLY PAID AND NON ACCESSIBLE. PRTI FURTHER REPRESENTS IT
HAS 10 MlLLION PREFERRED SHARES AUTHORIZED
INITIAL: JM/ MP
PAGE #1 OF 5
<PAGE>
WITH 100,000 SHARES ISSUED WHICH SAID ISSUED PREFERRED SHARES OF WHICH [100,000]
WILL BE CANCELLED SUBSEQUENT TO THIS AGREEMENT AND CLOSING.
1.O3 PPTI REPRESENTS THAT AT CLOSING THE TOTAL ASSETS OF $12,700,000 AND TOTAL
LIABILITIES, LIENS, PAYABLES, OBLIGATIONS OR PENDING ACTIONS EITHER PENDING OR
THREATENED, DIRECT, INDIRECT OR CONTINGENT DOES NOT EXCEED THE AMOUNT OF
$15,000. FURTHER, THE STOCKHOLDERS' EQUITY IS 12,685,000, INCLUSIVE OF $733,400
IN TREASURY STOCK. PRTI IS AS OF THE CLOSING OF THIS AGREEMENT SIMULTANEOUSLY
CLOSING ON THE SALE OF ALL OPERATIONS INCLUSIVE OF ALL ASSETS AND LIABILITIES
FOR AND IN CONSIDERATIN OF A NOTE ATTACHED HERETO AS AN EXHIBIT IN THE AMOUNT OF
$12,700,000. IF ANY LIABILITY, DEBT, CAUSE OF ACTION OCCURS AFTER THE DATE OF
CLOSING, IT SHALL BE CURED WITHIN 45 DAYS. IN THE EVENT THAT ANY OF THE
FOREGOING ARE NOT CURED RMCW HAS THE SOLE OPTION TO RESCIND THIS AGREEMENT.
1.04 PRTI BOARD OF DIRECTORS SHALL AND DOES NOMINATE AND ELECT ALL OF RMCW'S
BOARD MEMBERS TO THE BOARD, AND ACCEPTS THE RESIGNATION OF JAMES RAY OF ALL
OFFICES INCLUDING THAT OF CHAIRAAN, CEO AND PRESIDENT AND ELECTS, HIRES AND
RATIFIES MICHAEL PUHR TO THESE OFFICES OF PRTI EFFECTIVE ON THIS DATE. THE
ACCEPTANCE OF SAID RMCW DIRECTORS, RESIGNATION OF MR. RAY AND ACCEPTANCE BY MR.
PUHR ARE ATTACHED HERETO AS AN EXHIBITS.
1.05 THE PARTIES AGREE TO COOPERATE FULLY TO TIMELY FILE ALL NECESSARY ITEMS
PURSUANT TO STATE AND FEDERAL CORPORATE LAW, AND FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION INCLUDING AUDITED CONSOLIDATED FINANCIAL STATEMENTS.
1.06 THIS AGREEMENT SHALL BE PURSUANT TO A TAX FREE EXCHANGE, INCLUSIVE OF THE
OPTION OF THE CURRENT RMCW SHAREHOLDERS1 EXCHANGE OF THIER CURRENT COMMON SHARE
HOLDINGS FOR THE PRTI PREFERRED THEN OWNED AND CONVERTIBLE TO PRTI COMMON.
1.07 PURSUANT TO THE CONDITIONS OF THIS AGREEMENT PRTI REPRESENTS THAT IT IS A
FULLY REPORTING COMPANY AND HAS MAINTAINED A CONTINUING REGISTRATION BY FILINGS
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 AND FULLY
REGISTERED UNDER THE SECURITIES ACTS OF 1933 AND 1934, SEC FILE #1-10987 &
#0-19708, AND CUSIP #719131-10-4.
1.08 IT IS ACKNOWLEDGE THAT PRTI HAS IN EXISTENCE AN EFFECTIVE EMPLOYEE BENEFIT
INCENTIVE PLAN, SEC REGISTRATION #33-90484. PURSUANT TO THE TERMS AND CONDITIONS
HEREIN IT IS AGREED THAT THE PLAN SHALL BE INCREASED BY TWENTY FIVE MILLION
SHARES1 IMMEDIATELY AFTER CLOSING.
1. 09 THE PARTIES SPECIFIOALLY MUTUALLY AGREE TO ADHERE TO FULL AND PROPER
CORPORATE GOVERNANCE INCLUSIVE OF FULL RATIFICATION OF EACH RESPECTIVE BOARD OF
DIRECTORS, WHICH ARE ATTACHED HERETO AS EXHIBITS.
INITIAL:JM / MP /
PAGE #2 OF *5*
<PAGE>
B.
CONVEYANCE, TRANSFER AND DELIVERY OF CONSIDERATION:
As soon as practical after closing of this Agreement, the Parties shall cause to
be transferred and delivered the total shares of capital stock represented
herein, fully paid, non ascessable and properly issued.
C.
REPRESENTATIONS:
1. "ACQUIROR", represents and warrants that the financial statements
accurately represent the assets and liabilities thereof; that all
proprietary items relating to the business of "PRTI". Further, that no
known undisclosed contingent liabilities or threatened claims exist or are
applicable to "PRTI" that would or could be passed on to SUBSCRIBER {RMCW}.
5. ACQUIROR represents that "PRTI" is not involved directly in any
litigation, dispute1 investigation or proceedings1 constituting materiality
in this transaction.
6. As of the date of this Agreement and transfer of ownership "PRTI", is a
corporation in good standing.
7. "PRTI" represents that it has filed all reports and paid or reserved any
monies currently due, as required by all governmental bodies, inclusive of
all local, state, federal authorities and or as required pursuant to the
business.
8. FURTHER, THE PARTIES TO THIS AGREEMENT HEREIN AGREE THAT THIS
TRANSACTION IS BY MEANS OF PRIVATE SALE AND TREATY, AND WAIVE ANY AND
ALL REFERENCE OR REMEDIES AS TO THE CONSIDERATION PAID BEING CONSTRUED
OR CONFORMING CONSTRUCTIVELY AS A SECURITIES TRANSACTION, [except
under applicable exemptions] AS PROMULGATED BY ANY STATE, PROVINCIAL
OR FEDERAL AGENCY OR LAW.
FURTHER, THE PARTIES HERETO REPRESENT THAT THEY ARE SOPHISTICATED AS
PROSCRIBED AND PURSUANT TO SEC RULES AND REGULATIONS; AND ARE
KNOWLEDGXBLE IN BUSINESS ACQUISITIONS, THE ACCOUNTING PROFESSION AND
HAVE CONCLUDED ALL DUE DILIGENCE PER THIS TRANSACTION.
D.
PROHIBITED ACTS
"The Parties"; hereby agree that the following acts shall not occur after the
closing Date of this Agreement.
1. Declare or pay any dividends or make other distributions of its cash,
assets, or stock, or redeem or purchase any of its shares.
2. Issue any stock or other securities including any of its shares or
issue notes or other evidence of indebtedness not in the usual course
of business.
INITIAL: JR / MP/
PAGE #3 OF *5*
<PAGE>
NOTICES:
All notices and other communications hereunder shall be In writing and
shall be deemed to have been given if mailed and or delivered by registered or
certified mail1 postage prepaid.
Any party may change its address by written notice to the other party by
certified Postal
MISCELLANEOUS:
This Agreement, together with the schedules provided for herein:
(a) constitutes the entire Agreement and INCLUDES all relevant prior
agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter hereof;
(b) may be executed in multiple counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
instrument;
(c) shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and shall be assignable
by either party without the prior written Consent of the other;
(d) shall be an agreed contract by and between the parties, devoid of any
third party broker or broker fees due or payable.
(f) this Agreement is SOLELY juridically controlled, bound, and
enforceable pursuant to the laws of the State of Colorado.
IN WITNESS WHEREOF, each party hereto, with full board authority, has
caused this Agreement to be executed on and as of the date first above written.
PHOENIX RESOURCES TECHNOLOGIES, INC.
/S/ JAMES RAY
---------------------------
BY: JAMES RAY, PRESIDENT
AGREED AND ATTEST: BY:
ROCKY MOUNTAIN CRYSTAL WATER1 INC.
/s/ Michael Puhr
---------------------------
BY: MICHAEL PUHR, PRESIDENT
AGREED AND ATTEST. BY:
INITIAL: JR / MP/
PAGE #4 OF *5*
<PAGE>
INDEX OF EXHIBITS
<PAGE>
April 9, 1997
Mr. Michael Puhr
Phoenix Resources Techno1ogies, Inc.
5575 S. Sycamore St., Suite 103
Littleton, Colorado 80120
Re: Right of first Refusal or Repurchase
Dear Mr. Puhr:
This 1etter is to outline the basis upon which we have agreed that MVP
Holdings, Inc., shall retain a right of first refusal and a right to repurchase
stock issued by MVP Holdings, Inc., (hereinafter "MVP")to Phoenix Resources,
Inc., (hereinafter "Phoenix") as consideration for the purchase of certain
assets by MVP.
You understand that this right of first refusal and right to repurchase
applies only to stock retained by Phoenix and not to any stock distributed to
Phoenix shareholders as a dividend, gift or otherwise.
In the event that Phoenix receives a bona fide offer for the purchase of
any or all of the retained stock Phoenix is to immediately inform MVP of such
offer in and MVP will notify Phoenix of its intent to exercise its right of
first refusal within 48 hours of such notification. Fai1ure to respond within
the 48 hour period shall be the same as informing Phoenix that it will not
exercise its right of first refusal. If MVP chooses to exercise its right of
first refusal it shall have 15 days to either match the offer itself or provide
a purchaser of its own choice to purchase the stock.
In the event that Phoenix decides to offer any or all of the retained stock
for sa1e without a bona fide offer Phoenix shall notify MVP of its intent to
offer stock for sale including the amount of stock it intends to offer and MVP
will notify Phoenix within 48 hours of its intent to exercise its right of first
refusal as to any or all of the stock to be offered for sale by Phoenix. If MVP
notifies Phoenix of it's intent to exercise its right of first refusal the
purchase price shall be the market price at the time Phoenix notified MVP. MVP
shall have 15 days to either price the stock at the price herein specified or
provide a purchaser of its own choice to purchase the stock at the price herein
specified. Either way, payment will be in the form of cash.
Phoenix agrees that it shal1 not hypothecate any of the retained MVP stock
without approval of MVP as the resulting lien would interfere with MVP's right
of first refusal. MVP agrees that it will not arbitrarily withhold its approval
except for good cause shown. If MVP fails to notify Phoenix of its objections
within 48 hours it shall be the same as approval of the transaction.
<PAGE>
In the event that Phoenix files for bankruptcy it will notify MVP of its
intent to file at least 48 hours before the filing and MVP may repurchase any
and all retained MVP stock at the market price at the time such notice is given
less 10% if the market price is more than 10% over $3.50. MVP will be allowed to
give a promissory note for the full purchase price. Said promissory note is to
be for a period of 5 years and will be at an interest rate equal to the market
rate at Bank of America on the date said notice is given.
Please sign in the space provided below signifying your agreement and
return the original to this office.
Sincerely yours,
/S/ Michael W. Berg
-----------------------------
Michael W. Berg, President
MVP Holdinqs, Inc.
AGREED
Phoenix Resources
Technologies, Inc.
By /s/ Michael A. Puhr
--------------------------
EXHIBIT 10.6
ITEM 1, (11)
AGREEMENT FOR PURCHASE AND SALE OF ASSETS BETWEEN
PHONEIX RESOURCES TECHNOLOGIES, INC. AND MVP HOLDINGS, INC.
DATED MARCH 10, 1997
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT IS entered into as of the 10th day of March, 1997, between MVP
Holdings, Inc., a Nevada Corporation, or its assign, hereinafter referred to as
"The Purchaser", and Phoenix Resources Technologies, Inc., a Nevada Corporation,
hereinafter referred to as "the Seller".
RECITALS
A. The Seller is the owner of certain properties as outlined in Exhibits A
B and C and made a part of this agreement.
B. The Seller desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Seller all of these assets and consents to the assumption
of all liabilities incurred in operation of these assets under the terms and
conditions contained herein.
C. That Michael Puhr is the Chairman of the Board of Directors and Chief
Executive Officer of the Seller and is duly authorized to enter into this
transaction.
D. That Michael Berg is the President and a director of the Purchaser and
is duly authorized to enter into this transaction.
THEREFORE, in consideration of the mutual promises and conditions herein
contained, the parties agree as follows;
AGREEMENT
---------
PURCRASE AND SALE OF ASSETS
---------------------------
(1) Subject to the terms and conditions of this Agreement the Seller agrees
1
<PAGE>
to sell, transfer and assign to the Purchaser and the Purchaser agrees to the
purchase, at the closing, as hereinafter defined, one hundred (100%) percent of
the assets listed in Exhibits A, B, and C and assume the liabilities incurred in
the operation of these assets. At the closing, an from time to time thereafter,
the Seller shall execute and deliver such other documents and instruments and
take such other actions, as the Purchaser may reasonably request, in order more
fully to vest in the Purchaser and perfect his title to any and all other right,
title and interest, claim or demand of any kind the Seller may have in, to, or
upon any of the transferred, assets, or business of the Corporations.
PURCHASE PRICE
--------------
(2) The total price to he paid by the Purchaser to the Seller for all the
assets in Exhibits A B and C of Seller to be $14,000,000.00.
PAYMENT OF PURCHAE PRICE
------------------------
(3) The purchase price described in paragraph 2 hereof shall be paid as
follows:
(a) Purchaser agrees to have issued Four million (4,000,000) shares of
common stock. At the present market price this approximates
($3.50/share) and is substantially equal to the entire purchase price
of $14,000,000.00. For a period of one year the purchaser agrees to
issue additional common shares if the market price of such shares of
common stock falls below Three-Dollars and fifty cents ($3.50) and
remains below Three Dollars and Fifty Cents ($3.50) for a period of
ninety consecutive days. The number of shares issued will be based
upon a number needed to keep the total value paid at $14,000,000.00.
(b) Purchaser will assist the seller in completing the required filinqs
with the Securities and Exchange Commission and the Internal Revenue
Service.
(c) At the end of one year from date of this contract Purchaser will
consent to register the common stock to be issued in paragraph (a)
above, if such registration rights are available.
(4) The Closing Date under this agreement shall be on March 10, 1997 or on
such date and at such location as the Purchaser and the Seller shall mutually
agree upon from time to time.
2
<PAGE>
REPRESENTATIONS OF SELLER
(5) WARRANTIES OF DEBTS
(a) The Purchaser will guarantee seller that all debts of any kind
including but not limited to amounts owed to the United States
Treasury Department, the State of Texas, Agricultural Production
Credit Association and or Community Bank N.A., incurred or owed by the
Phoenix Resources Technologies, Inc. as of the closing date except the
specific debts to be retained by Seller under this agreement will be
paid on a timely basis. Where possible Purchaser will obtain a written
release of the Seller from the debts. In all other cases Purchaser
will indemnify against any and all litigation including suits
arbitration, or other legal, administrative or other governmental
proceedings, threatened against the assets, properties, or business
Purchaser will at closing give Seller an indemnification/Hold harmless
agreement for all legal problems concerning these debts and will pay
all reasonable legal costs of any actions brought against seller for
non-payment at any liabilities as noted above.
Title to Properties and Assets
(c) To best of Seller's knowledge and belief the corporation owns,
possesses, and has good title to all copyrights, trademarks, trademark
rights, patents, patent rights and licenses necessary in the conduct
of its business as provided to and acknowledged by the Purchaser in
the Due Diligence Package under the sections addressing these issues.
To the best of Se11er's knowled9e and belief, there is no infringement
upon or otherwise acts adverse to the rights of any person under, or
in respect to, any copyrights, trademarks, trademark rights, patents,
patent rights, or licenses owned by any person or persons, and there
is no such claim or pending or threatened action with respect thereto.
The Corporation has the unrestricted right to use all trade secrets,
customer lists, manufacturing and other processes incident to the
manufacture use or sale of any and all products presently sold by it.
OTHER MATTERS
-------------
(6) The parties agree and hereby warrant that they will perform the
agreements, covenants and warranties contained said agreements, covenants and
warranties prior to the transfer of the assets required by this agreement and do
hereby warrant to defend and indemnify the other party against any claims
arising out of this agreement as a result of this transaction excluding from
said agreement the obligation of either 9arty to defend and indemnify acts of
fraud performed by the other party arising out of this agreement.
Governing Law
This agreement and the legal relations between the parties shall be governed by
and construed in accordance with the laws of the State of Colorado. The parties
hereto irrevocably submit to the jurisdiction of the state or federal courts in
the State of Colorado, and agree that the only proper venue for any action
hereunder is the State of Colorado.
3
<PAGE>
OTHER MATTERS
-------------
7) All corporate and other proceedings and actions taken in connection with
the transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transaction
shall be satisfactory in form and substance to the Purchaser and his counsel.
AMENDMENT AND WAIVER
--------------------
8) This Agreement may be amended or modified at any time and in all
respects by an instrument in writing executed by the Purchaser and the Seller.
NOTICES
--------
9) All notices which are required or may be given pursuant to this
Agreement or subsequent thereto, shall be sufficient in all respects if given in
writing and delivered personally or by certified or register mail, postage
pre-paid as follows:
If to Seller Michael Puhr
Phoenix Resources Technologies, Inc.
5575 5. Sycamore St. Suite 103
Litttleton, CO 80120
If to Purchaser:
Michael Berg, President
16729 Enterprise Suite 206
Fountain Hills, AZ. 85268
All notices shall be deemed to have been duly given at the time receipt by the
party to which such notice is addressed.
LIMITATION OF DAMAGES, REPRESENTATIONS AND WARRANTIES:
(10)
(a) Either party Shall have remedy for default, prior to Closing, a suit
for specific performance or money damages.
4
<PAGE>
(b) Subsequent to closing, each party shall have all its rights and
remedies at law or in equity for breach of representations, warranties
and agreements of the parties hereto which survive the closing. Seller
shall not be liable for Purchaser's loss of profits, both parties
acknowledge that Seller has provided full disclosure of all facts
requested as to the conditions of the company, its assets liabilities,
including operating revenue and Purchaser has performed sufficient due
diligence as required by law.
ASSIGNNENT
----------
(11) Purchaser may not assign any rights under this agreement without the
prior written consent of Seller.
REPRESENTATION AND WARRANTIES OF PURCHASER:
(a) Organization, Standing and Power:
Purchaser is a corporation duly organized and validly existing under the
laws of the State of Nevada and has full legal power and right to carry on
its business as such is now being conducted. Purchaser is also authorized
to carry on its business in Arizona.
(b} Authority and Enforceability:
The execution and delivery by Purchaser of this Agreement And the
consumation of the transactions contemplated hereby, have been duly arid
validly authorized by all requisite actions on the part of Purchaser. This
Agreement constitutes the valid and binding obligation of the Purchaser,
enforceable against Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable Bankruptcy Law Neither the
consumation of the transaction contemplated hereby nor the compliance by
Purchaser with any other provision hereof shall violate any statute or law
of the State of Colorado or Federal Law.
(c) Liability for Broker's Fees:
Seller shall not directly or indirectly incur liability or expenses as a
result of undertakings or agreements of purchaser for any broker's fees,
finder's fees, agent's commission or other similar forms of compensation in
connection with this agreement or transaction contemplated hereby.
(d) Litigation:
There are no claims, actions, suits or proceedings pending or to
Purchaser's best knowledge threatened proceedings against Purchaser or any
affiliate of Purchaser which has or will materially affect Purchaser
ability to consummate the transactions herein as represented by past
management contractually, in the contract which closed 1/31/97.
(e} To the best of its' knowledge Purchaser is full compliance with all
applicable Securities and Exchange regulations and will maintain this
status.
TERM OF THE AGREEMENT
(13) It is agreed that time is of the essence of this agreement and if
closing of the transaction does not occur by March 10, 1997, then the contract
is null and void and all parties are released herefrom.
5
<PAGE>
HEADINGS
--------
(14) Headings contained in this Agreement are for reference purposes only
and shall not affect in any way the
(15) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which toqether shall constitute
but one and the same instrument.
INTEGRATED AGREEMENT
--------------------
(16) All the terms and provisions of this agreement shall be binding upon
and inure to the benefit of and be enforceable by the Purchaser and the Seller,
their heirs, executors, administrators, successors, and assigns.
ENTIRE AGREEMENT
----------------
(17) This Agreement constitutes the entire agreement between the parties
hereto, and there are no agreements, understandings, restrictions, warranties or
representations between the parties other than those set forth herein or
provided for.
PURCHASER
HVP Holdings, Inc.
By/s/ Michael W. Berg
---------------------
TITLE PRESIDENT
SELLER
PHOENIX RESOURCES
TECHNOLOGIES, INC.
BY/s/ Michael A. Puhr
---------------------
6
<PAGE>
Exhibit A
List of West Virginia Oil and Gas Properties
RICHIE COUNTY Permit No.
hodge #1 85-5393
Byrd *1 85-5591
Corbin 85-5611
Gardner #1 85-5720
A. Nichols #1 85~5735
A. Pifer 85-5844
F. Pifer #1 85-5845
S. Bird #1 85-5902
Devereaus #1 85-59560
Wince #6 85-6114
Templeton #4 85-6150
Berdine #1 85-6238
Abicht 85-6281
Robertson 85-6309
Johnson 85-6367
Kibbee 85-6414
Fleming #1 85-6500
Russell 85-6538
Kibbee/Sanders 85-6552
Schofield 85-6596
Robinson #1 85-6653
R. Gregg 1 85-6720
Henthorne 85--6872
Carmichael 85-6928
R. Gregg #2 85-7122
Fleming #2 85-7131
Grayham 85-7228
Goodnight 85-7239
Pleasants Conty
Scadden #1 73-1206
Roayt #1 73-1381
Varner # 73-1384
Austin/Adams #1 73-1404
Austin/Adams #2 73-1405
H. Nichols #1 73-1427
Peter #1 73-1449
Waugh #1 73-1467
Abicht #1 73-1481
Mullenix #1 73-1493
EXHIBIT A (CONTINUED)
White #1 73-1501
Severns #1 73-1585
7
<PAGE>
Severns #5-1 73-1714
Plun #S~1 73-1863
Severn #S-1 73-1869
Barnhart #5-1 73-1870
J. Greggs *1 73-1872
Templeton #2 73-1878
Templeton #3 73-1916
EXHIBIT B
Properties assigned with rights to operate only. Richie County
Me tts 85-6362
McCloskey #1 85-6650
McCloskey #2 85-7202
Nelly Smith 85-7217
Pleasants Countv
Higgins #1 73-1681
Higgins #3 73-1684
Hiqgins #4 73-1685
Clark #1 73-1708
Sevgr~ #1 73-1713
Clark #2 73-1757
Barhart #1 73-1798
PLum #1 73~1809
Pipeline system known as the Broad Run Pipeline and right of way for the
entire system.
Pipeline System Known as the HPC pipeline and right of way for the entire
system.
Pipeline, System Known as the entire system.
8
<PAGE>
EXHIBIT C
1. Computer Systems (2)
2. File cabinets (2)
3. Desks (7)
4. Tables (3)
S. Chairs (12)
6. Copy machine
7. Fax machine
8. Calculators
Right title and
Common stock of
Note receivable
Note receivable
OTHER PROPERTY
(2)
interest in all Watermaker and Waterstar projects. Straford Acquisitions,
Inc.
from James R. Hughes. Sr.. from Erin Oil Co.
All accounts receivable and accounts payable incurred in the operation of
the oil and gas properties.
Inventories of oil and gas products.
9
EXHIBIT 10.7
ITEM 1, (13)
AGREEMENT BETWEEN
PHOENIX RESOURCES TECHNOLOGIES, INC.
AND
ROCKY MOUNTAIN CRYSTAL WATERS, INC.
DATED SEPTEMBER 20, 1997
<PAGE>
AGREEMENT
This Agreement, made and entered this 20th day of September, 1997, by
and between Phoenix Resources Technologies, Inc. ("PRTI") and Rocky Mountain
Crystal Water, Inc.("RMCW"):
WITNESSETH:
WHEREAS, PRTI and RMCW had entered into an Agreement under date of January 31,
1997 wherein PRTI obtained a controlling share interest in RMCW, and
WHEREAS, it has been determined that the interest of all parties are best served
by backing out of said Agreement:
NOW THEREFORE, in consideration of the mutual covenants herein
contained the parties agree as follows:
1. RMCW will return to PRTI the 6,000,000 shares of Class "B" Preferred Stock
which was issued to it under the Agreement.
2. PRTI will return to RMCW the 6,000,000 shares of common stock of RMCW which
was issued to it under said Agreement.
3. If PRTI has any assets that are used in the operation of RMCW it will by
separate Bill of Sale transfer said assets to RMCW.
4. All liabilities which PRTI may have incurred in the operation of RMCW,
pertaining to the operation of RMCW, are hereby assumed and become the
liabilities of RMCW and RMCW hereby agrees to indemnify and hold PRTI harmless
with respect to said liabilities.
5. (A) PRTI has further agreed to transfer to RMCW, or his designee, all shares
of MVP Holdings, Inc., constituting 4,000,000 shares, and all rights under
PRTI's contract with MVP Holdings, Inc. pertaining to said shares, including,
but not by way of limitation, the right to have such shares increased in the
event of a fall in the price of MVP Holdings, Inc. below $3.50 per share. The
transfer is deemed to be at the Historical Valuation, as set forth in the March
10, 1997 Agreement of $14,000,000, and is additional consideration for any
damages RMCW may have relating to the original contract with PRTI. Such transfer
is, however, subject to MVP Holdings, Inc. Right of First Refusal to purchase
said stock under letter Agreement entered into April 6, 1997, which right has to
be exercised within 48 hours after notification of the proposed transfer..
(B) Nothing contained herein is meant to obviate or terminate PRTI's rights
to indemnity as set forth in the March 10, 1997 together with such
other rights of PRTI as set forth in said Agreement.
1
<PAGE>
(C) It is further agreed by and between the parties, that all parties are
aware of the Right of First Refusal held by MVP Holdings, Inc. In the event that
they should exercise said right, or make any other claims with respect to said
right and/or the sale of said stock, such exercise or other claims shall not
constitute a breach of this Agreement, or the action taken by the parties
hereto. All other actions taken hereunder or in connection herewith shall be
deemed to be sufficient consideration for the upholding of the rights of the
parties hereto.
PHOENIX RESOURCES TECHNOLOGY, INC.
By
William C. Nichols, President
ROCKY MOUNTAIN CRYSTAL WATERS, INC.
By
Michael Puhr, President
2