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 SECURITIES EXCHANGE ACT
- ------ OF 1934
For the fiscal year ended October 31, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number: 000-19708
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
(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: June 30 , 1999: 27,000,000
Transitional Small Business Disclosure Format (check one): YES NO X
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TABLE OF CONTENTS
ITEM NUMBER PAGE
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 22
Signatures 23
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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. It
also acquired oil and gas wells in West Virginia from719 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
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.
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(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 remains 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
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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.
The Registrant has no assets and no properties as of June 30, 1999.
ITEM 3 - LEGAL PROCEEDINGS
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 judgement collectively against the Company, Hughes
Wood Products, Inc. and Houston Woodtech, Inc.
On August 21, 1998, AG-PCA filed litigation titled "Petition to Enforce
Judgement" for collection of an unsatisfied balance of approximately $1,092,100,
as of May 6, 1998, in Texas District Court against 17 named co-defendants,
including the Company and its former officers. The litigation alleges various
actions on behalf of the defendants, including the Company and its former
officers, including Racketeering, Influence and Corrupt Organization (RICO)
statute violations. The Company continues to rely on indemnification discussed
in the following paragraph.
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 (the
Company) that all debts of any kind including, but not limited to amounts owed
to the United States Treasury Department, the State of Texas, Agriculture
Production Credit Association and or Community Bank, N. A., incurred or owed by
the Phoenix Resources Technologies, Inc. as of the closing date except specific
debts to be retained by the Seller under the Agreement will be paid on a timely
basis." Accordingly the Company is pursuing all avenues available to it in order
to cancel this judgment and related litigation and anticipates no material
financial impact as a result of this action.
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
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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's 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 1997 and 1998 and to date in
the fiscal year 1999.
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Part 11
ITEM 5 - MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS.
DESCRITPION OF SECURITIES
General
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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
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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 1997, 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.
13
<PAGE>
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
June 30, 1999, 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
14
<PAGE>
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.
15
<PAGE>
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 June 30, 1999, 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.
16
<PAGE>
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
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).
17
<PAGE>
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.
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
NONE
18
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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
William C. Nichols:
1989 -1991 Brainerd Steel, Inc., managed collection and delivery of platinum
catalyst to quantum metals for further refining. 1991 to present Nichols &
Associates. Core responsibilities are research and development of small public
Companies. Has served as President and Director of several of these Companies.
1997 to present. President of Klip-Kaddy, Inc. He designed, manufactured and
marketed the Klip-Kaddy cigar holder world wide. It is sold in all major tobacco
shops.
Paula M. Nichols
Bachelor of Science Degree in Business Administration. Member of American
Marketing Association.
March 1988 - August 1989. The Summit Condominiums. Reservationist. Responsible
for front desk operation. Book room reservations. Handled customer complaints
and scheduled work orders. Settled customer accounts on check out.
November 1988-October 1989. Landmark Land of Louisiana. Responsible for keying
journal entry data into computer terminal. Also catalog and bind entries for
filing.
November 1998-January 1990. Breezy Point Resort Timeshare. Assistant Secretary.
Responsible for confirming appointments, data entry of customer information,
answer telephones, also preparing and placing gifts for customers in their
rooms.
March 1991 - August 1991. Valet Temporary Service, Secretary. Responsibilities
included typing, data entry, answering phones, and filing for different
business.
1991 to present. Served as Corporate Secretary and Director for various small
Public Corporation and assisted in research and development of said Companies.
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
19
<PAGE>
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.
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
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.
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
20
<PAGE>
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.
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.
(Remainder of this page left blank intentionally)
21
<PAGE>
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 Statement for the periods November 1, 1996 to
October 31, 1998 (*)
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, 1997 form 10-KSB
(*) These Exhibits were filed with the year ending October 31, 1996 Form 10-KSB
22
<PAGE>
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: June 30, 1999
---------------------------------
William C. Nichols
Its President
By /s/ Paula Nichols Date: June 30, 1999
---------------------------------
Paula Nichols
Member of the Board of Directors
23
<PAGE>
PHOENIX RESOURCES
TECHNOLOGIES, INC.
Financial Statements
and
Auditor's Report
October 31, 1998 and 1997
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
CONTENTS
Page
----
Reports of Independent Certified Public Accountants 1
Financial Statements
Balance Sheets as of October 31, 1998 and 1997 2
Statements of Operations and Comprehensive Income
for the years ended October 31, 1998 and 1997 3
Statement of Changes in Stockholders' Equity
for the years ended October 31, 1998 and 1997 4
Statements of Cash Flows
for the years ended October 31, 1998 and 1997 5
Notes to Financial Statements 6
<PAGE>
Phoenix Resources Technologies, Inc.
5565 Shady Lane Circle
Brainard Minnesota 56401
June 28, 1999
S. W. Hatfield, CPA
9002 Green Oaks Circle, 2nd Floor
P. O. Box 820395
Dallas, TX 75382-0395
Gentlemen:
In connection with your audit of the financial statements of Phoenix Resources
Technologies, Inc. (Company) as of October 31, 1998 and 1997 and for each of the
two years then ended, for the purpose of expressing an opinion as to whether
such financial statements present fairly, in all material respects, the
financial position, results of operations, and cash flows of the Company in
conformity with generally accepted accounting principles , we confirm, to the
best of our knowledge and belief, as of June 25, 1999, the date of your report,
the following representations made to you during your audit.
Certain representations in this letter are described as being limited to those
matters that are material. Solely for the purpose of preparing this letter, the
term "material," when used in this letter, means any items referred to in this
letter, either individually or collectively in the aggregate, involving
potential amounts of more than $500. These amounts are not intended to represent
the materiality threshold for financial reporting and disclosure purposes. Items
are considered material, regardless of size, if they involve an omission or
misstatement of accounting information that, in light of surrounding
circumstances, makes it probable that the judgment of a reasonable person
relying on the information would be changed or influenced by the omission or
misstatement.
1. We acknowledge that the management of the Company is solely responsible
for the fair presentation in the financial statements of the financial
position, results of operations and cash flows of the Company in
conformity with generally accepted accounting principles.
The financial statements and related notes thereto include all
disclosures necessary for a fair presentation of the financial
position, results of operations and cash flows of the Company in
conformity with generally accepted accounting principles and
disclosures otherwise required to be included therein by the various
laws and regulations that the Company is subject to.
Additionally, we acknowledge that management is solely responsible for
adopting sound accounting practices, establishing and maintaining a
system of internal control and preventing and detecting fraud. The
Company's system of internal accounting control is designed to assure,
among other items, that 1) recorded transactions are valid; 2) valid
transactions are recorded; and 3) transactions are recorded in the
proper period in a timely manner to produce financial statements which
present fairly the financial condition, results of operations and cash
flows of the Company for the respective periods being presented.
<PAGE>
S. W. Hatfield + Associates
June 28, 1999
Page 2
2. We have made available to you all:
a. Financial records and related data
b. Minutes of the meetings of stockholders, directors and committees
of directors, or summaries of actions of recent meetings for
which minutes have not been prepared.
3. There has been and we are aware of no incidents of:
a. Fraud involving management or employees who have significant
roles in the internal control structure.
b. Fraud involving other employees that could have a material effect
on the financial statements.
c. Communications from regulatory agencies concerning noncompliance
with, or deficiencies in, financial reporting practices that
could have a material impact on the financial statements.
4. We have no plans or intentions that may materially affect the
carrying value or classification of the assets and liabilities.
5. The following have been properly recorded or disclosed in the financial
statements:
a. Guarantees, whether written or oral, under which the Company is
contingently liable.
b. Arrangements with financial institutions involving compensating
balances, written or oral guarantees either by or for the benefit
of others, or other arrangements involving restrictions on cash
balances and line-of-credit or other similar arrangements.
c. Agreements to repurchase assets previously sold.
d. Capital stock repurchase options or agreements or capital stock
reserved for options, warrants, conversions or other
requirements.
e. Related party transactions and related amounts receivable or
payable; including sales, purchases, loans, transfers, leasing
arrangements, and guarantees. For the purpose of this letter, we
understand the following to be the definition of the term
"related party":
Affiliates of the enterprise; entities for which investments
are accounted for by the equity method by the enterprise;
trusts for the benefit of employees, such as pension and
profit-sharing trusts that are managed by or under the
trusteeship of management; principal owners of the
enterprise; its management; members of the immediate
families of principal owners of the enterprise and its
management; and other parties with which the enterprise may
deal if one party controls or can significantly influence
the management or operating policies of the other to an
extent that one of the transacting parties might be
prevented from fully pursuing its own separate interests.
Another party also is a related party if it can
significantly influence the management or operating policies
of the transacting parties or if it has an ownership
interest in one of the transacting parties and can
significantly influence the other to an extent that one or
more of the transacting parties might be prevented from
fully pursuing its own separate interests.
<PAGE>
S. W. Hatfield + Associates
June 28, 1999
Page 3
6. There currently no uncorrected incidents and have been no :
a. Violations or possible violations of laws or regulations whose
effects should be considered for disclosure in the financial
statements or as a basis for recording a loss contingency.
b. Other material liabilities or gain or loss contingencies that
are required to be accrued or disclosed by Statement of
Financial Accounting Standards No. 5.
7. There are no unasserted claims or assessments that our lawyer has
advised us are probable of assertion and must be disclosed in
accordance with Statement of Financial Accounting Standards No. 5.
8. There are no material transactions that have not been (or will not be)
properly recorded in the accounting records underlying the
aforementioned financial statements. The adjusting journal entries
proposed by you are approved by us and will be recorded on the books of
the Company.
9. The Company has valid and satisfactory title to all owned assets, and
there are no liens or encumbrances on such assets nor has any asset
been pledged, except as made known to you and disclosed in the notes to
the financial statements.
10. Provision, when material and applicable, has been made to reduce excess
or obsolete inventories to their estimated net realizable value.
11. Provision has been made for any material loss to be sustained in the
fulfillment of, or from inability to fulfill, any sales or other
revenue generating commitments or contracts.
12. Provision has been made for any material loss to be sustained as a
result of purchase commitments for inventory quantities or other items
to be used in the operations of the Company in excess of normal
requirements or at prices in excess of the prevailing market prices.
13. We have complied with all aspects of any contractual agreement(s) that
would have a material effect on the financial statements in the event
of a noncompliance. Further, all significant contractual commitments
and/or contingencies have been disclosed in the notes to the financial
statements.
14. The Company is in good standing in the States of Minnesota and/or
Nevada, where its principal domicile and executive offices are located.
The Company may, in future periods, operate in other states and will be
properly incorporated in those locations as a "foreign corporation"
prior to the commencement of operations in those respective states.
15. We have identified all accounting estimates that could be material to
the financial statements, including the key factors and significant
assumptions underlying those estimates, and we believe the estimates
are reasonable in the circumstances.
<PAGE>
S. W. Hatfield + Associates
June 28, 1999
Page 4
16. There are no such estimates that may be subject to material change in
the near term that have not been properly disclosed in the financial
statements. We understand that the term near term means the period
within one year of the date of the financial statements.
17. We have no knowledge of concentrations existing at the date of the
financial statements that make the Company vulnerable to the risk of
near term severe impact that have been properly disclosed in the
financial statements. We understand that concentrations include
individual or group concentrations of customers, suppliers, lenders,
products, services, sources of labor or materials, licenses or other
rights, or operating areas or markets. Additionally, we understand that
a "severe impact" is a significant financially disruptive effect on the
normal functioning of the Company.
18. The Company has acquired no assets, incurred no liabilities or
commitments and has had no business operations from the date of the
exchange of all operations for a block of MVP Holdings, Inc. and the
related distribution of the MVP Holdings, Inc. shares to the Company's
shareholders. Further, no subsequent events have occurred subsequent to
the balance sheet date that would require adjustment to, or disclosure
in, the financial statements; except for those disclosed therein.
19. The Company has not been and does not anticipate being named as a
Potentially Responsible Party under any Federal or State environmental
protection law. Accordingly, no loss contingency accrual or other
disclosure is warranted in the financial statements.
Very truly yours,
Phoenix Resources Technologies, Inc.
M. D. Price, Jr.
Attorney-in-fact
MDPJr./shwa:rep
<PAGE>
S. W. HATFIELD, CPA
certified public accountant
Member: 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, 1998 and 1997 and
the related statements of operations and comprehensive income, 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, 1998 and 1997 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, CPA
(formerly S. W. HATFIELD + ASSOCIATES)
Dallas, Texas
June 25, 1999
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
1
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
BALANCE SHEETS
October 31, 1998 and 1997
ASSETS
------
1998 1997
------------ -----------
<S> <C> <C>
Current assets
Cash on hand and in bank $ - $ -
------------ -----------
TOTAL ASSETS $ - $ -
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Judgment garnishment payable $ 293,311 $ 266,691
------------ -----------
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 shares issued and outstanding, respectively 27,000 27,000
Additional paid-in capital 13,312,212 13,312,212
Accumulated deficit (12,659,323) (12,632,703)
------------ -----------
680,089 706,709
Stock subscription receivable (240,000) (240,000)
Treasury stock - at cost (560,000 shares) (733,400) (733,400)
------------ -----------
Total stockholders' equity (293,311) (266,691)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ - $ -
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Years ended October 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
Net revenues $ -- $ --
Operating expenses
General and administrative expenses -- 202,703
------------ ------------
Total operating expenses -- 202,703
------------ ------------
Loss from operations -- (202,703)
Other (expense) income
Garnishment on judgment entered against Company -- (251,206)
Interest expense on judgment garnishment (26,620) (15,485)
------------ ------------
Loss from continuing operations before income taxes (26,620) (469,394)
Income tax benefit (expense) -- --
------------ ------------
Loss from continuing operations (26,620) (469,394)
------------ ------------
Discontinued operations, net of income taxes
Income (Loss) from discontinued operations,
net of income taxes of $-0- and $-0-, respectively
Oil & gas pipeline division -- 29,566
------------ ------------
Net Loss (26,620) (439,828)
Other comprehensive income -- --
------------ ------------
Comprehensive Loss $ (26,620) $ (439,828)
============ ============
Loss per weighted-average share of common
stock outstanding computed on net loss
From continuing operations nil $(0.03)
From discontinued operations -- --
---- -----
Total loss per share nil $(0.03)
=== =====
Weighted-average number of common shares outstanding 27,000,000 13,173,231
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended October 31, 1998 and 1997
Additional
Preferred Stock Common stock paid-in
Shares Amount Shares Amount capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at November 1, 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
Net loss for the year -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balances at October 31, 1998 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, 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)
Net loss for the year -- -- (26,620) (26,620)
------------ ------------ ------------ ------------
Balances at October 31, 1998 15,560,000 $ (973,400) $(12,659,323) $ (293,311)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
Years ended October 31, 1998 and 1997
1998 1997
------------ ---------
<S> <C> <C>
Cash flows from operating activities
Net loss for the year $ (26,620) $(439,828)
Adjustments to reconcile net loss to net
cash provided by operating activities
Common stock issued for various fees and expenses -- 95,011
Increase in judgment garnishment payable 26,620 266,691
Change in net assets and liabilities of discontinued operations -- 40,626
------------ ---------
Net cash provided by (used in) operating activities -- (37,500)
------------ ---------
Cash flows from investing activities -- --
------------ ---------
Cash flows from financing activities -- --
------------ ---------
INCREASE (DECREASE) IN CASH -- (37,500)
Cash at beginning of year -- 37,500
------------ ---------
Cash at end of year $ -- $ --
============ =========
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 financial statements.
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 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.
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
aquifer 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.
6
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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, 1998 and 1997, 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.
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, 1998 and 1997, 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 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 all oil & gas operations for Fiscal 1998
and 1997 are as follows:
1998 1997
--------- --------
Net sales $ - $103,825
======== =======
Operating income $ - $ 29,566
======== =======
Income upon disposition of discontinued operations $ - $ -
======== =======
7
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - COMMON STOCK TRANSACTIONS
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 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.
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.
On August 21, 1998, AG-PCA filed litigation titled "Petition to Enforce Final
Judgment" for collection of an unsatisfied balance of approximately $1,092,100,
as of May 6, 1998, in Texas District Court against 17 named co- defendants,
including the Company and its former officers. The litigation alleges various
actions on behalf of the Company, its former officers, including Racketeering,
Influence and Corrupt Organization (RICO) statute violations. The Company
continues to rely upon the indemnification discussed in the following paragraph.
8
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE F - LITIGATION - Continued
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 related litigation 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, 1998 in the
accompanying financial statements.
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000808575
<NAME> Phoenix Resources Technologies, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 293311
<BONDS> 0
0
200
<COMMON> 27000
<OTHER-SE> (320511)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26620
<INCOME-PRETAX> (26620)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26620)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
