<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 30, 1996
Date of earliest event reported: September 26, 1996
DYNASTY CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 33-11059-A 59-2773602
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Second Avenue South, Suite 1000 33701
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 895-4410
-------------------------
26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT
In connection with the acquisition of Visitor Services, Inc., under
the Agreement and Plan of Reorganization as set forth in Item 2, below, the
former directors and officers of the Registrant resigned their positions.
Earnest Mathis resigned as President, Treasurer and a Director; and Gary J.
McAdam resigned as Vice President, Secretary and a Director. Robert P. Gordon
was appointed as Chairman, Chief Executive Officer, President, and a Director;
Paul W. Henry was appointed Secretary, Treasurer and a Director; and Steve
McLean was appointed Executive Vice President, Chief Operating Officer and a
Director. Mr. Gordon, by virtue of the transaction, became a controlling
shareholder of the Registrant.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
AGREEMENT AND PLAN OF REORGANIZATION - DYNASTY CAPITAL CORPORATION
ACQUISITION OF VISITOR SERVICES, INC. On September 26, 1996, Registrant
executed an Agreement and Plan of Reorganization ("Agreement") with Visitor
Services, Inc. ("VSI"), and certain Stockholders of VSI, pursuant to which a
minimum of 80% of the issued and outstanding shares of VSI are to be exchanged
on a one share for one share basis for shares of restricted stock of the
Registrant, after the Registrant effects a 14.4 to 1 reverse stock split of the
shares outstanding before the date of the Agreement from 10,801,000 shares down
to 750,038 shares (in lieu of any fractional shares created as a result of the
reverse stock split, each holder of a fractional share shall be issued one
additional whole share). The Closing Date of the Agreement was September 27,
1996, when the Registrant's reverse stock split was effected and certain
Stockholders of VSI holding at least 80% of the outstanding shares of VSI
executed the Agreement. The exchange offer will now be extended to the
remaining shareholders of VSI, who have until November 25, 1996, to accept the
offer. The offering is being made in accordance with Rule 506 of Regulation D
of the Securities Act of 1933, as amended, or such other appropriate and
available exemption(s). By virtue of the reorganization, VSI becomes a
subsidiary of the Registrant, and the Registrant will continue to operate
through its newly acquired subsidiary.
Pursuant to the Agreement, on the Closing Date the Registrant's
Officers and Directors resigned and designees of VSI were appointed to the
vacated positions. See Item 1, Changes in Control of the Registrant.
VISITOR SERVICES, INC. VSI was formed under the laws of the State of
Florida in November 1992 as a destination marketing company providing automated
reservations and information services specifically designed to support the
special needs of Convention and Visitors Bureaus ("CVB") and major
convention/event organizers. VSI's focus is to generate revenue for the client
destination's hotels and attractions by converting information/visitor guide
calls into actual travel reservations. The traditional "passive" approach to
destination marketing involves placing advertisements, taking calls for
information/visitor guides and hoping the traveling public will choose to visit
a destination. VSI believes the only successful strategy in today's highly
competitive tourism industry is to take a "proactive" marketing approach,
whereby VSI's destination counselors actively "sell" their destinations during
each and every call. VSI provides a "state-of-the-art" reservation system and
incentive-motivated destination counselors that are accessible to leisure
travelers via destination specific toll-free telephone lines operating 24 hours
a day, 365 days a year.
2
<PAGE> 3
For major conventions and events, VSI provided complete travel
management services for the Convention or Event organizers. Anyone wishing to
attend a VSI managed event can call a toll-free number and get registration,
air, hotel and car arrangements at any time of the day. VSI currently counts 16
CVB's and 35 major convention/events as its customers.
SHAREHOLDINGS OF DIRECTORS, OFFICERS AND 5% OR GREATER SHAREHOLDERS.
The Following tabulates holdings of Common Shares of the Registrant, giving
effect to and as a result of the reorganization with VSI, held by directors,
officers and 5% or greater shareholders of the Registrant.
<TABLE>
<CAPTION>
Percent of Class
Beneficial Shares Owned Percent of Class If All Shareholders of
Owner on Closing Date (1) on Closing Date (2) VSI Exchange Shares (2)
- ---------- ------------------- ------------------- -----------------------
<S> <C> <C> <C>
Robert P. Gordon and
Elizabeth Gordon (3) 13,406,089 88.08% 67.86%
James F. Gordon (4) 1,814,206 11.92% 9.18%
</TABLE>
(1) All Common Shares held by them are "restricted securities" and as such
are subject to limitations on resale. The shares may be resold pursuant to
Rule 144 under certain circumstances.
(2) Assumes that there are exactly 750,038 shares of common stock of the
Registrant outstanding after effecting a 14.4 to 1 reverse-split, and
immediately prior to the issuance of shares as part of the reorganization.
(3) Robert P. and Elizabeth Gordon are husband and wife. Robert P. Gordon
individually owns 11,585,472 shares, Elizabeth Gordon individually owns
1,409,857 shares, and they jointly own 48,750 shares. Also included are 362,010
shares owned by Harvest International of America, Inc., which is controlled by
Robert P. Gordon.
(4) James F. Gordon is the brother of Robert P. Gordon.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired. The required
financial statements of VSI are being provided herewith.
(b) Pro Forma Financial Information. The required pro forma
financial information is being provided herewith.
3
<PAGE> 4
(c) Exhibits. The following exhibits are furnished in accordance
with the provisions of Item 601 of Regulation S-B.
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Reorganization between
Dynasty Capital Corporation and Visitor
Services, Inc., dated September 26, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DYNASTY CAPITAL CORPORATION
By: /s/ Robert P. Gordon
-----------------------------------
Robert P. Gordon, President
Date: September 30, 1996
4
<PAGE> 5
VISITORS SERVICES, INC.
MASTER INDEX
<TABLE>
<S> <C>
Visitors Services, Inc. Financial Statements F2
Dynasty Capital Corporation and Visitors Services, Inc.
Pro Forma Combined Financial Statements (Unaudited) F20
</TABLE>
F1
<PAGE> 6
VISITORS SERVICES, INC.
FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
June 30, 1995 (unaudited)
September 30, 1995
September 30, 1994
F2
<PAGE> 7
Contents
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Report of Independent Accountants F4
Financial Statements:
Balance Sheet F5
Statements of Operations F6
Statements of Cash Flows F7
Statement of Changes in Stockholders' Equity (Deficit) F8
Notes to Financial Statements F9
</TABLE>
F3
<PAGE> 8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Visitors Services, Inc.
We have audited the accompanying balance sheet of Visitors Services, Inc. as of
September 30, 1995, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended September 30, 1995 and
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 Visitors Services, Inc. as of
September 30, 1995, and the results of its operations, its changes in
stockholders' equity and its cash flows for the years ended September 30, 1995
and 1994 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 3 to the
accompanying financial statements, the Company has suffered recurring losses
from operations. This condition raises substantial doubt about the ability of
the Company to continue as a going concern, however, as discussed in Note 7,
certain stockholders have continued to provide working capital for the Company.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Joseph F. Morgan
Joseph F. Morgan
Certified Public Accountant
P.O.Box 489
400 North Main Street
Manahawkin, NJ 08050
January 24, 1996
F4
<PAGE> 9
Visitors Services, Inc.
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30,
June 30, 1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ - $ 155,744
Cash, restricted (Note 2) 31,683
Accounts receivable, net of allowance for
doubtful accounts of $22,670 114,085 89,102
Other Current Assets 30,876 3,425
------------- ------------
Total current assets 176,644 248,271
Investment in related party (Note 6) 357,052 357,052
Equipment, net of accumulated depreciation of
$140,873 at June 30, 1996 and $84,364 at
September 30, 1995 (Note 5) 730,646 526,809
------------- ------------
Total assets $ 1,264,342 $ 1,132,132
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 543,226 $ 161,416
Loans payable, stockholders (Note 7) 854,612 461,574
Outstanding checks in excess of amounts
reported by bank 86,256 -
Accrued payroll and taxes 51,278 30,033
Capital leases payable, current portion (Note 4) 56,670 67,213
------------- ------------
Total current liabilities 1,592,042 720,236
Capital leases payable, net of current portion
(Note 4) 67,260 92,231
------------- ------------
Total liabilities 1,659,302 812,467
------------- ------------
Commitments and Contingencies (Notes 3, 4, 7 and 8) - -
Stockholders' equity (deficit):
Common stock, $.0001 par value,
30,000,000 shares authorized,
16,993,666 shares issued and outstanding at
June 30, 1996 and 15,507,944 shares issued
and outstanding at September 30, 1995 1,699 1,551
Additional paid-in capital 4,062,198 2,320,739
Accumulated (deficit) (4,458,857) (2,002,625)
------------- ------------
Total stockholders' equity (deficit) (394,960) 319,665
------------- ------------
Total liabilities and stockholders' equity (deficit) $ 1,264,342 $ 1,132,132
============= ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F5
<PAGE> 10
Visitors Services, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Nine months
ended June 30, Year ended September 30,
1996 1995 1995 1994
------------ ------------ ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Total Revenues $ 401,740 $ 248,897 $ 341,572 $ 180,671
------------ ------------ ----------- ------------
Operating Expenses:
Salaries 1,210,927 484,122 665,464 285,628
Payroll taxes 174,187 42,368 74,735 26,517
Insurance 76,767 41,506 61,340 26,096
Contract services 269,815 80,741 170,322 113,159
Rent 74,568 37,654 56,550 52,771
Utilities 3,825 8,221 12,346 5,455
Telephone 357,098 44,652 72,921 83,390
Repairs and maintenance 8,770 4,769 5,177 986
Office supplies and expense 31,006 22,661 35,943 15,510
Computer repairs and supplies 11,754 846 2,959 754
Postage and delivery 17,793 5,312 9,164 1,870
Equipment rental 13,813 3,415 6,689 1,165
Legal and accounting 39,288 35,593 104,527 13,408
Travel and entertainment 214,233 54,793 148,784 30,037
Licenses, fees and permits 5,956 18,350 25,189 24,717
Advertising and promotion 62,624 26,588 55,591 8,040
Depreciation 189,874 17,481 66,855 16,337
Other expenses 51,380 22,834 68,309 11,087
------------ ------------ ----------- ------------
Total operating expenses 2,813,678 951,906 1,642,865 716,927
------------ ------------ ----------- ------------
Net (loss) from operations (2,411,938) (703,009) (1,301,293) (536,256)
Other (expenses):
Interest (expense) (44,294) - - (23,108)
------------ ------------ ----------- ------------
Net (loss) $ (2,456,232) $ (703,009) $(1,301,293) $ (559,364)
============ ============ =========== ============
Net (loss) per share $ (.16) $ (.05) $ (.09) $ (.06)
============ ============ =========== ============
Weighted Average Shares Outstanding 15,836,465 13,611,450 13,801,450 9,405,036
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F6
<PAGE> 11
Visitors Services, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months
ended June 30, Year ended September 30,
1996 1995 1995 1994
------------ ----------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (2,456,232) $ (703,007) $ (1,301,293) $ (559,364)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
(Increase) in investment in related party - (357,052) (357,052) -
(Increase) in accounts receivable (24,983) (46,408) (72,136) (16,966)
(Increase) decrease in other receivables - 431,762 431,762 (431,762)
(Increase) decrease in other assets (59,134) (5,130) 6,405 (1,572)
Depreciation expense 189,874 17,481 66,885 16,337
Increase (decrease) in accounts payable 468,066 339,406 145,731 (9,063)
Increase (decrease) in accrued payroll
and taxes 21,245 (1,627) (25,266) 37,604
Increase (decrease) in accrued interest 33,503 (5,327) (5,327) 5,327
Repayment of loans payable - (96,000) (96,000) (102,100)
Stock issued for services 60,000 - - -
------------ ----------- ------------ ------------
Net cash (used in)
operating activities (1,767,661) (425,902) (1,206,291) (1,061,559)
------------ ----------- ------------ ------------
Cash flows from investing activities:
(Acquisition) of equipment (393,616) (258,671) (510,451) (52,466)
------------ ----------- ------------ ------------
Net cash (used in)
investing activities (393,616) (258,671) (510,451) (52,466)
------------ ---------- ------------ ------------
Cash flows from financing activities:
Proceeds from (repayment of)
leases payable (35,514) - 159,444 -
Cash proceeds from related party 359,535 321,325 461,574 -
Issuance of common stock 1,681,512 472,000 1,250,000 1,062,290
Proceeds from sale of convertible notes - - - 46,000
------------ ----------- ------------ ------------
Net cash provided by
financing activities 2,005,533 793,325 1,871,018 1,108,290
------------ ----------- ------------ ------------
Increase (decrease) in cash (155,744) 108,752 154,276 (5,735)
Cash, beginning of period 155,744 1,468 1,468 7,203
------------ ----------- ------------ ------------
Cash, end of period $ - $ 110,220 $ 155,744 $ 1,468
============ =========== ============ ============
Interest paid $ 10,791 $ - $ - $ 5,442
============ =========== ============ ============
Income taxes paid $ - $ - $ - $ -
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F7
<PAGE> 12
Visitors Services, Inc.
Statement of Changes in Stockholders' Equity (Deficit)
From September 30, 1993 through June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, Sept. 30, 1993 8,520,000 $ 852 $ 9,148 $ (141,968) $ (131,968)
Issuance of common stock 5,656,694 566 1,061,724 1,062,290
Net (loss) - - - (559,364) (559,364)
---------- -------- ----------- ----------- -----------
Balance, Sept. 30, 1994 14,176,694 1,418 1,070,872 (701,332) 370,958
Issuance of common stock 1,331,250 133 1,249,867 - 1,250,000
Net (loss) - - - (1,301,293) (1,301,293)
---------- -------- ----------- ----------- -----------
Balance, Sept. 30, 1995 15,507,944 1,551 2,320,739 (2,002,625) 319,665
Issuance of common stock 1,485,722 148 1,741,459 - 1,741,607
Net (loss) (Unaudited) - - - (2,456,232) (2,456,232)
---------- -------- ----------- ----------- -----------
Balance, June 30, 1996
(Unaudited) 16,993,666 $ 1,699 $ 4,062,198 $(4,458,857) $ (394,960)
========== ======== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F8
<PAGE> 13
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(1) Organization and Operations:
Visitors Services, Inc. (Company) was formed under the laws of the
State of Florida in November 1992 to provide automated reservations
and information services specifically designed to support the special
needs of convention and visitors bureaus.
(2) Summary of Significant Accounting Policies
(a) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary
cash investments and trade accounts receivable. The Company
grants credit to various business and entities, in the U.S.A.
The Company does not require collateral for its accounts
receivable. The Company maintains its cash balance in one
financial institution located in Florida. The balances are
insured by the Federal Deposit Insurance Corporation up to
$100,000. At September 30, 1995, the Company's uninsured
cash balances total $55,744.
(b) Income Tax
The Company has net operating loss carryovers totaling
approximately $4,459,000 at June 30, 1996 and $2,003,000 at
September 30, 1995 which expire in various years through 2011.
The Company has deferred tax assets of approximately
$1,115,000 at June 30, 1996 and $501,000 at September 30, 1995
related to loss carryovers but due to the uncertainty of the
Company's ability to utilize these carryovers, valuation
allowances of the total $1,115,000 and $501,000 have been
provided. Therefore, as of June 30, 1996 the Company's
financial statements do not include any provision for deferred
tax assets. A change in ownership of more than 50% of the
Company could reduce or eliminate the Company's ability to
utilize these loss carryovers.
F9
<PAGE> 14
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(2) Summary of Significant Accounting Policies, Continued
(c) Equipment - Equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets ranging
from 3 to 5 years.
(d) Per Share Information
The per share information is computed based upon the weighted
average shares outstanding.
(e) Use of Estimates in the Preparation of Financial Statements
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 revenue and expenses during the
reporting periods. Significant assumptions in the accompanying
financial statements relate to the Company's ability to
continue as a going concern as described in note 3 and
estimated useful lives of equipment as disclosed in note 2(c).
The ultimate resolution of the reasonableness of the related
assumptions cannot presently be determined. Actual results
could differ from the Company's estimates.
(f) Bad Debts
An allowance for uncollectible accounts has been provided
based on the Company's past collection history.
(g) Advertising and Promotion Costs
Advertising and promotion costs are expensed as incurred.
F10
<PAGE> 15
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(2) Summary of Significant Accounting Policies, Continued
(h) Geographic Area of Operations
The Company provides services to customers in the U.S.A. The
potential for severe financial impact can result from negative
effects of economic conditions within the market or geographic
area. Since the Company's business is principally in one area
and in one industry, this concentration of operations results
in an associated risk and uncertainty.
(i) Unaudited Financial Statements
The balance sheet as of June 30, 1996, the statements of
operations and the statements of cash flows for the nine month
periods ended June 30, 1996 and 1995, and the statement of
changes in stockholders' equity (deficit) for the nine month
period ended June 30, 1996 have been prepared by the Company
without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations,
cash flows and changes in stockholders' equity (deficit) as
June 30, 1996 and for all periods presented, have been made.
(j) Stock Split
Effective January 16, 1996 the Company effected a 1.065 to 1
forward stock split. All shares and per share amounts referred
to have been adjusted retroactively.
(k) Restricted Cash
Included in cash on June 30, 1996 is $31,683 being held in a
separate bank account for the benefit of a customer.
F11
<PAGE> 16
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(3) Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company
has sustained recurring operating losses since its inception.
Management is attempting to raise additional capital and has,
subsequent to June 30, 1996, converted certain loans from related
parties to equity.
In view of these matters, realization of certain assets in the
accompanying balance sheet is dependent upon continued operations of
the Company, which in turn is dependent upon the Company's ability to
meet its financial requirements, raise additional capital, and the
success of its future operations. Management believes that its ability
to raise additional capital provides the opportunity for the Company
to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
(4) Lease Commitments
The Company entered into an operating lease agreement for its office
facilities beginning in September, 1995 for a term of seven years.
Minimum future rental payments under operating leases with terms
greater than one year are summarized as follows:
<TABLE>
<S> <C>
Three months ending September 30, 1996 $ 55,863
Year ending September 30
1997 $ 231,728
1998 $ 240,004
1999 $ 248,280
2000 $ 256,556
2001 $ 264,832
2002 $ 273,108
</TABLE>
F12
<PAGE> 17
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(4) Lease Commitments, Continued
The Company entered into a capital finance lease agreement covering
its telephone equipment. Under the terms of the agreement which
commenced in September, 1995 the Company is making aggregate lease
payments over a three year period of $185,196, which includes deferred
interest of approximately $27,000. The Company made a down payment of
approximately $82,000 at the beginning of the lease period. At the end
of the lease period, the equipment will be owned by the Company for a
nominal charge of $1.00. The Company has accounted for this
transaction as a capital lease. At June 30, 1996 the Company's
financial statements included equipment leased through capital leases
in the amount of approximately $240,000 with accumulated depreciation
of approximately $37,000.
Total future minimum lease payments under this capital lease are
summarized as follows:
<TABLE>
<S> <C>
Three months ending September 30, 1996 $ 15,435
Year ending September 30,
1997 61,740
1998 61,740
--------
Total 138,915
Amount representing interest (14,985)
--------
Net after interest reduction 123,930
Current portion (56,670)
--------
Non current portion $ 67,260
========
</TABLE>
F13
<PAGE> 18
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(5) Equipment
The Company's equipment is summarized as follows:
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
----------- -------------
(Unaudited)
<S> <C> <C>
Furniture and fixtures $ 315,459 $ 13,117
Telephone equipment 292,932 305,675
Computer equipment 263,128 192,380
---------- ---------
871,519 611,172
Accumulated depreciation (140,873) (84,364)
---------- ---------
$ 730,646 $ 526,808
========== =========
</TABLE>
(6) Investment in Related Party
The Company is the record owner of 714,104 restricted shares of
Phoenix Information Systems Corp. (Phoenix), a related party. These
shares represent less than 2% of the issued and outstanding common
stock of Phoenix. The Company's controlling stockholders are
affiliated with Phoenix, a publicly held company based in St.
Petersburg, Florida. As further discussed in Note 7, the Company
received these shares in conjunction with the settlement of
obligations from the related entity. The closing market price for free
trading shares of Phoenix was $1.625 on September 23, 1996 with a
volume of 120,300 shares traded on that day. These shares are
restricted under Rule 144 and do not become saleable until December 3,
1996. The sale of these shares is further restricted due to the
related party relationship. The shares are carried at a cost of
$357,952 rather than market due to these restrictions.
F14
<PAGE> 19
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(7) Related Party Transactions
The Company subleased office space from Phoenix from July, 1993
through November, 1995. The Company paid Phoenix $1,500 per month from
July, 1993 through December, 1993 and paid Phoenix $4,400 per month
from January, 1994 through November, 1995. The Company then entered
into a lease for office space effective in November, 1995 with an
unrelated party as described in note 4 above.
Phoenix has a hotel reservation system, known as Phoenix Hotel, which
forms the basis for the Company's software that it uses to serve its
customers. In July, 1993 and later updated in January, 1995, the
Company entered into a software license and maintenance agreement with
Phoenix, whereby the Company has the right to use the Phoenix Hotel
software to support the booking and information needs of its
customers. Under the terms of the agreement, the Company pays Phoenix
a monthly licensing fee of $2000 and 50% of this fee credits toward a
fully paid license fee of $100,000. After these credits total
$100,000, the Company will receive a fully paid and non-assessable
license to the software. At any time, the Company may achieve a fully
paid status by paying the difference between $100,000 and the credits
applied. As of June 30, 1996 the difference was approximately $76,000.
Phoenix has agreed to maintain the system and has agreed to make
available a copy of any upgrade of the system to the Company. All
license fees paid by the Company to Phoenix have been expensed in the
accompanying financial statements.
On July 14, 1993, two officers of the Company each purchased
subscriptions for 426,000 shares of common stock for $.0001 per share.
The subscription agreements state that the subscribed stock is to be
earned evenly over a 36 month period and the officers rights to the
shares would be forfeited if the officers cease to provide services to
the Company during that 36 month period. In addition, at the same time
subscriptions to 117,150 shares of common stock were also issued to
outside parties for $.0001 per share. Since shares were issued to
outside parties for the same price per share, no compensation expense
was recorded in this transaction
F15
<PAGE> 20
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(7) Related Party Transactions, Continued
Various related parties have made loans to the Company which are
repayable to them on demand. These loans have been used to pay for
general operating expenses of the Company as well as loans to related
parties as described below. During the year ended September 30, 1994
loans of $1,062,290 were converted at the rate of approximately $.19
per share into 5,656,694 shares of the Company's common stock.
In November 1994, Phoenix's Board of Directors approved converting
certain of Phoenix's existing debt owed to the Company into Phoenix
common stock. The Board of Directors authorized the conversion of
$557,052 of principal amount of non-interest bearing loans due the
Company into 1,114,104 shares of the common stock of Phoenix from the
authorized but unissued stock of Phoenix. Between December 15, 1994
and January 24, 1995, a Company shareholder made loans to the Company
of approximately $212,000 for expansion and operating capital. On
January 24, 1995, the Company's Board approved the exchange of 400,000
shares of Phoenix stock owned by the Company with the shareholder for
forgiving $200,000 of the indebtedness.
Between January 26, 1995 and June 26, 1995, the Company raised
$1,200,000 through a confidential private placement memorandum dated
January 26, 1995. The Company successfully raised the maximum amount
of $1,200,000 at the price of $25,000 per Unit, each Unit consisting
of 26,625 shares of the Company at approximately $.94 per share. A
total of 1,278,000 shares were issued as a result of this offering.
Between January, 1995 and September 30, 1995, stockholders of the
Company made demand loans to the Company totaling $461,574 for
expansion and operating capital. In addition, subsequent to September
30, 1995, stockholders continued to advance funds to the Company.
During December, 1995 the stockholders converted $750,000 into 798,750
shares of the common stock of the Company.
F16
<PAGE> 21
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(7) Related Party Transactions (continued)
As of June 30, 1996 loans payable to stockholders totaled $854,612
including accrued interest of $33,503. The loans from stockholders
were non-interest bearing through September 30, 1995 but accrued
interest at 11% per annum effective October 1, 1995. The loans are
payable on demand and are uncollateralized. See note 8 for a
description of subsequent events including the proposal to exchange
this debt for common stock of the Company.
The Company has an aggregate of 2,931,610 options outstanding to
various employees, officers and related parties at purchase prices
ranging from $.94 to $1.50 per share. While some of these options are
fully vested, the majority of options vest over periods of up to three
years. These options expire at various dates through 2001. The Company
also agreed to issue 230,040 shares of restricted common stock to a
Board member. These shares are for services being rendered as a
Director to the Company and vest over three years. As of June 30, 1996
63,900 of these shares have been earned and recorded as stock issued
for services in the amount of $60,000. The above referenced securities
are restricted securities under the Securities Act of 1933, as
amended.
(8) Subsequent Events
The Company has signed a letter of intent with Dynasty Capital
Corporation (Dynasty) regarding a business combination arrangement.
According to the terms, the Company's stockholders would exchange
their shares of the Company for common stock of Dynasty. The current
stockholders of the Company would control Dynasty after the exchange
and therefore the transaction would be accounted for as a reverse
acquisition. The consummation of the transaction is contingent upon
various matters including the following:
(a) The related party debt payable of the Company being converted
in the Company's common stock at $.75 per share.
F17
<PAGE> 22
VISITORS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited), June 30, 1995 (Unaudited),
September 30, 1995 and September 30, 1994
(8) Subsequent Events, Continued
(b) Approximately 1,750,000 shares of Dynasty's common stock being
issued for gross proceeds of approximately $1,312,500 through
a private placement.
(c) A Form S-8 registration statement to be filed, registering
2,500,000 shares of Dynasty's common stock directly or
pursuant to options issued under a formal stock option plan.
(d) At least 80% of the outstanding shares of stock of the Company
being exchanged for Dynasty common stock.
(e) Dynasty reverse splitting its stock so that at closing, there
would be no more than 750,000 shares outstanding, prior to the
closing, excluding the shares to be issued as described above.
F18
<PAGE> 23
DYNASTY CAPITAL CORPORATION
AND
VISITORS SERVICES, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
F19
<PAGE> 24
Contents
<TABLE>
<S> <C>
Pro Forma Combined Balanced Sheet F21
Pro Forma Combined Statements of Operations:
Nine Months Ended June 30, 1996 F22
Year Ended September 30, 1995 F23
Notes to Pro Forma Combined Financial Statements F24
</TABLE>
F20
<PAGE> 25
DYNASTY CAPITAL CORPORATION(DYNASTY)
VISITORS SERVICES, INC. (VISITORS)
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
Assets
<TABLE>
<CAPTION>
DYNASTY VISITORS Pro Forma Pro Forma
June 30, 1996 June 30, 1996 Adjustments Combined
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Current Assets:
Cash $ 302 $ - $(3) 1,312,500 $ 1,312,802
Cash, restricted - 31,683 31,683
Accounts receivable - 114,085 114,085
Other - 30,876 30,876
--------- ------------ ------------
Total Current Assets 302 176,644 1,489,446
Investment in related party - 357,052 357,052
Equipment, net of - 730,646 730,646
--------- ------------ ------------
Total Assets $ 302 $ 1,264,342 $ 2,577,144
========= ============ ============
LIABILITIES AND STOCKHOLDERS' (EQUITY)
Current liabilities:
Accounts payable and accrued
expenses $ - $ 594,504 $ $ 594,504
Leases payable, current portion - 56,670 56,670
Advances from, related party
stockholders - 854,612 (2) (854,612) -
Outstanding checks in excess of
balance reported by bank - 86,256 86,256
--------- ------------ ------------
Total Current Liabilities 1,592,042 737,430
Lease payable, net of current
portion - 67,260 67,260
--------- ------------ ------------
Total Liabilities - 1,659,302 804,690
--------- ------------ ------------
Stockholders' Equity (Deficit):
Common Stock 1,080 1,699 (4) (1005)
(1) 1701
(1) (1699)
(3) 175 1,951
Additional paid-in capital 53,245 4,062,198 (4) 1,005
(3) 1,312,325
(2) 854,612
(1) (53,025) 6,230,360
Accumulated (deficit) (54,023) (4,458,857) (1) 54,023 (4,458,857)
--------- ------------ ------------
Total Stockholders' Equity
(Deficit) 302 (394,960) 1,772,454
--------- ------------ ------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 302 $ 1,264,342 $ 2,577,144
========= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F21
<PAGE> 26
DYNASTY CAPITAL CORPORATION (DYNASTY)
VISITORS SERVICES, INC. (VISITORS)
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
DYNASTY VISITORS
Nine Months Ended Nine Months Ended Pro Forma Pro Forma
June 30, 1996 June 30, 1996 Adjustments Combined
----------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
REVENUE:
Sales $ - $ 401,740 $ $ 401,740
------------- -------------- --------------
OPERATING EXPENSES:
Salaries - 1,210,927 1,210,927
Depreciation - 189,874 189,874
Rent - 74,568 74,568
Other operating expenses 4929 1,338,309 1,343,238
------------- -------------- --------------
Total Operating Expenses 4929 2,813,678 2,818,607
------------- -------------- --------------
Net operating (Loss) (4929) (2,411,938) (2,416,867)
Interest (Expense) - (44,294) (5) 33,503 (10,791)
------------- -------------- --------------
Net (Loss) $ (4929) $ (2,456,232) $ (2,427,658)
============= ============== ==============
Net (Loss) per Common Share $ (.12)
==============
Total Number of Common Shares Outstanding (A) 19,506,694
==============
</TABLE>
Note A - Assumes issuance of 17,006,694 shares for the acquisition of
Visitors and the issuance of 1,750,000 shares of Dynasty in a private
placement plus 750,000 shares (after giving effect to reverse
splitting its stock from 10,801,000 shares) shares of Dynasty
outstanding as of June 30, 1996.
The accompanying notes are an integral part of the financial statements.
F22
<PAGE> 27
DYNASTY CAPITAL CORPORATION (DYNASTY)
VISITORS SERVICES, INC. (VISITORS)
PRO FORMA STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
DYNASTY VISITORS
Nine Months Ended Nine Months Ended
September 30, September 30, Pro Forma Pro Forma
1995 1995 Adjustments Combined
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUE:
Sales $ - $ 341,572 $ 341,572
----------- ------------ ------------
OPERATING EXPENSES:
Salaries - 665,464 665,464
Depreciation 66,855 66,855
Rent - 56,550 56,550
Other operating expenses 4960 853,996 858,966
----------- ------------ ------------
Total Operating Expenses 4960 1,642,865 1,647,835
----------- ------------ ------------
Net operating (Loss) (4960) (1,301,293) (1,306,253)
Interest (Expense) - - -
----------- ------------ ------------
Net (Loss) $ (4960) $ (1,301,293) $ (1,306,253)
============ ============ ============
Net (Loss) per Common Share $ (.07)
============
Total Number of Common Shares Outstanding (A) 19,506,694
============
</TABLE>
Note A - Assumes issuance of 17,006,694 shares for acquisition of
Visitors and the issuance of 1,750,000 shares of Dynasty in a private
placement plus 750,000 shares (after giving effect to reverse
splitting its stock from 10,801,000 shares) of Dynasty outstanding as
of September 30, 1995.
The accompanying notes are an integral part of the financial statements.
F23
<PAGE> 28
DYNASTY CAPITAL CORPORATION (DYNASTY)
VISITORS SERVICES, INC. (VISITORS)
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
(1) General
During September, 1996 Dynasty entered into a business combination
agreement with Visitors whereby according to the terms of the
agreement, Visitors became a subsidiary of Dynasty. See note 8 to the
financial statements of Visitors for a description of the transaction
and related contingencies.
(2) Pro Forma Information
The pro forma gives effect to the reverse acquisition of Dynasty by
Visitors effective in September 1996 and to the conversion of certain
related party debt to common stock of Visitors and to the issuance of
additional common stock of Dynasty in a private placement.
(2) Pro Forma Adjustments
(1) This entry records the effect to the issuance of 17,006,694
shares of Dynasty common stock for one hundred percent of the
outstanding common stock of Visitors, assuming that 100% of
Visitors stockholders exchange their stock for Dynasty stock.
(2) This entry records the effect of the conversion of certain
related party debt to equity of Visitors. The related party
debt was $854,612 at June 30, 1996. The debt to be converted
at the closing date will be $1,500,000. The difference was
loaned to Visitors to cover operating losses and working
capital subsequent to June 30, 1996.
(3) This entry records the effect of the issuance of 1,750,000
additional shares common stock of Dynasty in a private
placement for $1,312,500.
(4) Dynasty reverse splitting its stock from 10,801,000 to 750,000
shares outstanding prior to closing.
(5) Elimination of interest expense on related party debt
conversion.
F24
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between
Dynasty Capital Corporation and Visitor
Services, Inc., dated September 26, 1996.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
DYNASTY CAPITAL CORPORATION
Acquisition of
VISITOR SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
RECITALS
AGREEMENT
1. Plan of Reorganization
2. Exchange of Reorganization Shares
3. Delivery of Shares
4. Representations of Acquiree
5. Representations of Acquiror
6. Closing Date
7. Conditions Precedent to the Obligations of Acquiree and
Stockholders
8. Conditions Precedent to the Obligations of Acquiror
9. Indemnification
10. Nature and Survival of Representations
11. Documents at Closing
12. Miscellaneous
SIGNATURE PAGE
EXHIBITS
DOCUMENTS TO BE DELIVERED INCIDENT TO CLOSING
<PAGE> 3
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is entered into as of the 26th day of
September, 1996, by and between DYNASTY CAPITAL CORPORATION, a Florida
corporation (hereinafter "Acquiror"); VISITOR SERVICES, INC., a Florida
corporation (hereinafter "Acquiree"); and certain stockholders of Acquiree
(hereinafter "Stockholders"):
RECITALS
Signatory Stockholders of Acquiree own at least 80% of the issued and
outstanding common stock of Acquiree. Acquiror desires to acquire at least 80%
of the issued and outstanding stock of Acquiree, making Acquiree a subsidiary
of Acquiror, and Stockholders desire to make a tax-free exchange solely of
their shares in Acquiree for shares of Acquiror's common stock to be exchanged
as set out herein with said Stockholders.
NOW, THEREFORE, for the mutual consideration set out herein, the
parties agree as follows:
AGREEMENT
1. Plan of Reorganization. Signatory Stockholders of Acquiree own
at least 80% of the issued and outstanding common stock of Acquiree. It is the
intention of the parties hereto that at least 80% and up to 100% of the issued
and outstanding capital stock of Acquiree shall be acquired by Acquiror in
exchange solely for Acquiror's voting stock. It is the intention of the parties
hereto that this transaction qualify as a tax-free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended, and related
sections thereunder.
2. Exchange of Reorganization Shares. Acquiror offers to each
Stockholder of Acquiree identified on the signature page hereof one share of
the restricted Common Stock, $.0001 par value, of Acquiror (collectively the
"Shares") for each issued and outstanding share of the Common Stock, par value
$.0001 per share, of Acquiree (the "Offer"). The Offer will be made pursuant to
Rule 506 of Regulation D of the Securities Act of 1933, as amended, or such
other appropriate and available exemption(s). Each Stockholder of Acquiree may
accept the Offer only with respect to all shares of the Common Stock of
Acquiree owned by him. The Offer will remain open until the close of business
on November 25, 1996 (the date on which the Offer expires is hereinafter
referred to as the "Expiration Date"). Each Stockholder of Acquiree who desires
to accept the Offer shall indicate his acceptance by delivering or mailing to
the law firm of Futro & Associates, P.C. (the "Escrow Agent"), to be held in
escrow, prior to the Expiration Date, all duly executed documents identified in
Section 11.1.
3. Delivery of Shares. On or before the Expiration Date,
Stockholders will deliver certificates to the Escrow Agent representing all of
the shares of Acquiree duly endorsed so as to make Acquiror the sole holder
thereof, free and clear of all claims and encumbrances; and by or shortly after
such Expiration Date, delivery of the Acquiror shares, which will be
appropriately restricted as to transfer, will be made to the Stockholders as
set forth herein.
If on or before the Expiration Date the holders of at least eighty
percent (80%) of the total shares outstanding of the Common Stock of Acquiree
shall have accepted the Offer in accordance with Section 2, Acquiror shall
thereupon be obligated, subject to the conditions of this Agreement, to accept
the Common Stock of Acquiree, and the holders of Common Stock of Acquiree
accepting the Offer shall be entitled to receive shares of Acquiror (the date
on which such "80% acceptance" occurs is defined as the "Closing Date" in
Section 6 hereinbelow). Acquiror shall deliver to the Escrow Agent, as soon as
practicable after receipt by the Escrow Agent of all required documents from
the Stockholders and notice thereto to Acquiror, for the account of the
Stockholders, certificates in proper form for the number of shares of Common
Stock of Acquiror to which such Stockholders are entitled, and the Escrow Agent
shall, no later than ten (10) business days after the Expiration Date, mail
such certificates to the respective Stockholders
<PAGE> 4
by registered mail. If on or before the Expiration Date the Offer shall not be
accepted by the holders of at least eighty percent (80%) of the total shares
outstanding of the Common Stock of Acquiree or if thereafter the obligations of
Acquiror and the Stockholders of Acquiree shall terminate pursuant to the terms
of this Agreement, the Escrow Agent shall promptly return to all parties all
documents submitted to the Escrow Agent.
4. Representations of Acquiree. Acquiree hereby represents and
warrants that, with respect to the shares of Acquiree and as to the Acquiree,
effective this date and the Closing Date, the representations listed below are
true and correct.
4.1 The Stockholders listed on the attachedExhibit 4.1 are the
owners of all of the issued and outstanding shares of common stock of Acquiree;
such shares are free from claims, liens, or other encumbrances except as
disclosed in writing to Acquiror; and Stockholders have the unqualified right
to transfer and dispose of such shares.
4.2 The shares constitute validly issued shares of Acquiree
fully-paid and nonassessable.
4.3 The audited financial statements of Acquiree as of September
30, 1995, are attached hereto asExhibit 4.3. There are no liabilities, either
fixed or contingent, not reflected in such balance sheet other than contracts
or obligations in the ordinary and usual course of business, except as may be
otherwise disclosed by Acquiree; and no such contracts or obligations in the
usual course of business constitute liens or other liabilities which, if
disclosed, would alter substantially the financial condition of Acquiree as
reflected in such financial statements. Acquiree will also provideunaudited
financial statements of Acquiree as of June 30, 1996, for purposes of filing
the Form 8-K in connection with this transaction and will undertake to have
prepared audited financial statements as of September 30, 1996.
4.4 Prior to the Closing Date there will not be any negative
material changes in the financial position of Acquiree, except changes arising
in the ordinary course of business, and as disclosed to Acquiror, which changes
will in no event adversely affect the financial position of Acquiree.
4.5 Acquiree warrants that the assets of Acquiree as set forth
inExhibit 4.3 have been acquired in bona fide transactions, fully supported by
appropriate instruments of assignment, sale, or transfer, where appropriate,
and are offset by no liabilities or contingencies, contractual or otherwise,
except as indicated inExhibit 4.3.
4.6 Acquiree is not involved in any pending litigation or
governmental investigation or proceeding not reflected in such financial
statements, or otherwise disclosed in writing to Acquiror and, to the best
knowledge of Acquiree, no litigation, claims, assessments, or governmental
investigation or proceeding is threatened against Acquiree, its stockholders or
properties.
4.7 As of the Closing Date, Acquiree will be in good standing in
its state of incorporation, and will be in good standing and duly qualified to
do business in each state where required to be so qualified.
4.8 Acquiree has complied with all state, federal and local laws
in connection with its formation, issuance of securities, organization,
capitalization and operations, and no contingent liabilities have been
threatened or claims made, and no basis for the same exists with respect to
said operations, formation or capitalization, including claims for violation of
any state or federal securities laws.
4.9 Acquiree has filed all governmental, tax or related returns
and reports due or required to be filed and has paid all taxes or assessments
which have become due as of the Closing.
4.10 Except as disclosed on any Exhibit, Acquiree has not breached,
nor is there any pending or threatened claims or any legal basis for a claim
that Acquiree has breached, any of the terms or conditions of any agreements,
contracts or commitments to which it is a party or is bound and the
<PAGE> 5
execution and performance hereof will not violate any provisions of applicable
law of any agreement to which Acquiree is subject.
4.11 Acquiree has no subsidiary corporations other than as
disclosed in writing to Acquiror.
4.12 The corporate financial records, minute books, and other
documents and records of Acquiree are to be available to present management of
Acquiror prior to the Closing Date.
4.13 The execution of this Agreement will not violate or breach any
agreement, contract, or commitment to which Acquiree is a party and has been
duly authorized by all appropriate and necessary action.
4.14 Acquiree has one class of common stock, of which all
outstanding shares have been duly authorized, validly issued and are fully paid
and nonassessable with no personal liability attaching to the ownership
thereof. Acquiree has a formal stock option plan entitled the "1995
Non-Qualified Stock Option Plan of Visitor Services, Inc., as amended" (the
"Plan"), which reserves 3,250,000 shares of common stock of Acquiree for
issuance directly or pursuant to options issued under the plan, with direct
share issuances and options outstanding under the Plan representing
approximately 3,161,650 of the shares of common stock of Acquiree reserved
under the Plan as of this date and the Closing Date. It is contemplated that
after the Closing, all convertible notes of Acquiree and all options issued and
issuable under the Plan will be convertible into shares of common stock of
Acquiror.
4.15 At the date of this Agreement, Acquiree has, and at the
Closing Date it will have, disclosed all events, conditions and facts
materially affecting the business and prospects of Acquiree. Acquiree has not
now and will not have, at the Closing Date, withheld disclosure of any such
events, conditions, and facts which it, through management, has knowledge of,
or has reasonable grounds to know, which may materially affect the business and
prospects of Acquiree.
4.16 Acquiree will cause to be filed or prepared, as applicable, by
the Closing Date, all federal, state, county and local income, excise, property
and other tax returns, forms, or reports, which are due or required to be filed
by it prior to the date hereof.
5. Representations of Acquiror. Acquiror hereby represents and
warrants as follows:
5.1 When delivered, the Shares will constitute valid and legally
issued shares of Acquiror, fully-paid and nonassessable. By the Closing Date
and before issuance of the Shares, the Acquiror will effect a reverse split of
its outstanding shares such that the issued and outstanding common shares of
Acquiror shall be reduced from 10,801,000 to no more than 750,000.
5.2 The officers of Acquiror are duly authorized to execute this
Agreement and have taken all action required by law and agreements, charters,
bylaws, etc., to properly and legally execute this Agreement.
5.3 The audited financial statements of Acquiror as of June 30,
1996, are incorporated in Acquiror's most recent Form 10-KSB, which is attached
hereto asExhibit 5.3. These financial statements are true, complete and
accurate; and there are not presently and shall at Closing there will be no
material liabilities, either fixed or contingent, not reflected in such
financial statements and records, except as may be otherwise disclosed by
Acquiror. Said financial statements fairly and accurately reflect the financial
condition of the Acquiror as of the dates thereof and the results of operations
for the periods reflected herein. Such statements shall have been prepared in
accordance with generally accepted accounting principles, consistently applied,
except as otherwise stated therein.
5.4 Since the date of the financial statements there have not
been, and as of the Closing Date there shall not be, any material changes in
the financial position of Acquiror, except changes arising in the
<PAGE> 6
ordinary course of business, which changes shall in no event adversely affect
the financial condition of the Acquiror.
5.5 As of the Closing Date and the date hereof Acquiror is duly
organized, validly existing and in good standing under the laws of the State of
Florida; it has the corporate power to own its property and to carry on its
business as now being conducted and is duly qualified to do business in any
jurisdiction where so required.
5.6 Except as disclosed on any Exhibit, Acquiror has not breached,
nor is there any pending or threatened claims or any legal basis for a claim
that Acquiror has breached, any of the terms or conditions of any agreements,
contracts or commitments to which it is a party or is bound and the execution
and performance hereof will not violate any provisions of applicable law of any
agreement to which Acquiror is subject.
5.7 The capitalization of Acquiror will comprise at the Closing
Date hereof, authorized preferred stock of 10,000,000 shares, no par value,
none issued, and common stock of 100,000,000 shares, $.0001 par value, of which
no more than 750,000 shares shall be issued and outstanding after effecting a
reverse stock split on or prior to the Closing Date and prior to issuance of
the restricted common shares to be issued to the Stockholders pursuant to this
transaction. There are no outstanding convertible securities, warrants, options
or commitments of any nature which may cause authorized but unissued shares of
Acquiror to be issued to any person.
5.8 Acquiror is not involved in any pending litigation, claims, or
governmental investigation or proceeding not reflected in such financial
statements or otherwise disclosed in writing to Acquiree and there are no
lawsuits, claims, assessments, investigations, or similar matters, to the best
knowledge of management, threatened or contemplated against Acquiror, its
management or properties. Additionally, there are no formal proceedings or
inquiries in progress, nor has there been notice of any intent to commence an
inquiry or proceeding by any state or federal securities commission or agency
with regard to Acquiror.
5.9 Acquiror has or will cause to be filed or prepared, as
applicable, all federal, state, county and local income, excise, property and
other tax returns, forms, or reports and all federal and state securities law
reports and filings required of it under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and any state
securities law, rules or regulations, which are due or required to be filed by
it prior to the date hereof.
5.10 Acquiror is a public company which is subject to the periodic
reporting requirements of the Securities and Exchange Act of 1934, and hereby
represents that it is current in its periodic filings with the Securities and
Exchange Commission and has timely filed all required periodic filings over the
past two years.
5.11 Acquiror has no subsidiary corporations other than as
disclosed in writing to Acquiree.
5.12 The corporation financial records, minute books, and other
documents and records of Acquiror are to be available to present management of
Acquiree prior to the Closing Date and will be turned over to new management in
their entirety on the Closing Date or as soon thereafter as practicable.
5.13 Current officers and directors of Acquiror shall resign their
positions effective the Closing Date and shall take such action as necessary to
appoint the current officers and directors of Acquiree to the then vacated
positions with Acquiror.
6. Closing Date. The Closing Date is defined herein as follows,
and contemplates that certain events may occur after the Closing Date and as
late as ten (10) business days after the Expiration Date:
<PAGE> 7
6.1 The Closing Date shall occur on such date that Stockholders
holding, in the aggregate, at least 80% of the issued and outstanding shares of
Acquiree execute this Agreement. The Closing Date is anticipated to occur on
the same date as the date of this Agreement. On the Closing Date, by virtue of
their signatures to the Agreement, the Stockholders will be deemed to have
accepted delivery of the certificates representing shares of Acquiror's common
stock to be issued in their names, and in connection therewith, will make
delivery of the certificates representing their shares of common stock in
Acquiree, duly executed Subscription Agreements (Exhibit 6.1), and all other
documents required by Section 11.1, to the Escrow Agent. On the Closing Date,
the officers and directors of Acquiror will resign and be replaced by designees
of Acquiree, who will then extend the Offer to all "minority" stockholders of
Acquiree; and a "Second Closing Date" will occur on or before the Expiration
Date for all "minority" stockholders of Acquiree who elect to accept the Offer
subsequent to the Closing Date, if such stockholders submit all documents
required by Section 11.1 to the Escrow Agent prior to the Expiration Date.
Certain opinions, exhibits, etc., may be delivered subsequent to the Closing
Date upon the mutual agreement of the parties hereto.
6.2 It is understood and agreed to by all parties that on the
Closing Date and prior to the exchange of shares:
a. Acquiror will effect a reverse split of its
outstanding common stock so that after the reverse split, no more than
750,000 shares shall be issued and outstanding.
b. Outstanding promissory notes of Acquiree aggregating
approximately $2,000,000 in principal amount held by Robert P. Gordon,
will be converted into at least 2,000,000 shares and up to 3,000,000
shares of Acquiree's common stock at the rate of $.75 per share, all
of which shall be exchanged for shares of Acquiror at Closing; and
after Closing, any unconverted portion of the principal and accrued
interest of the promissory notes will be maintained on the books of
Acquiree and shall be convertible into shares of Acquiror at a rate of
$.75 per share.
6.3 It is understood and agreed to by all parties that on or after
the Closing Date, the newly designated management of Acquiror may:
a. Issue approximately 1,750,000 shares of Acquiror's
common stock in connection with a private placement pursuant to
Section 4(2) of the Securities Act of 1933, for gross proceeds of
approximately $1,312,500.
b. File a registration statement on Form S-8,
registering 2,500,000 shares of Acquiror's common stock for issuance
directly or pursuant to options issued under a formal stock option
plan.
7. Conditions Precedent to the Obligations of Acquiree and
Stockholders. All obligations of Acquiree and Stockholders under this Agreement
are subject to the fulfillment by Acquiror, prior to or as of the Closing Date,
of each of the following conditions:
7.1 The representations and warranties by or on behalf of Acquiror
contained in this Agreement or in any certificate or document delivered to
Acquiree pursuant to the provisions hereof shall be true in all material
respects at and as of the Closing Date as though such representations and
warranties were made at and as of such time.
7.2 Acquiror shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing on the Closing Date.
7.3 All instruments and documents delivered to Stockholders
pursuant to the provisions hereof shall be reasonably satisfactory to the
Stockholders.
<PAGE> 8
7.4 Acquiror shall have delivered to Stockholders and Acquiree a
Representation Letter of management dated the Closing Date, attached hereto
asExhibit 7.4, to the effect that:
a. Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida;
b. Acquiror has the corporate power to carry on its
business as now being conducted;
c. This Agreement has been duly authorized, executed and
delivered by Acquiror and is a valid and binding obligation of
Acquiror enforceable in accordance with its terms;
d. Acquiror, through its Board of Directors, has taken
all corporate action necessary for performance under this Agreement;
e. The documents executed and delivered to Acquiree and
Stockholders hereunder are valid and binding in accordance with their
terms and vest in Stockholders all right, title and interest in and to
the Shares which, when issued, will be duly and validly issued,
fully-paid and nonassessable; and
f. Except as referred to herein, such management knows
of (i) no actions, suit or other legal proceedings or investigations
pending or threatened against or relating to or materially adversely
affecting Acquiror; and (ii) no unsatisfied judgments against
Acquiror.
8. Conditions Precedent to the Obligations of Acquiror. All
obligations of Acquiror under this Agreement are subject to the fulfillment by
Acquiree and Stockholders, prior to or at the Closing on the Closing Date, of
each of the following conditions:
8.1 The representations and warranties by Acquiree and
Stockholders contained in this Agreement or in any certificate or document
delivered to Acquiror pursuant to the provisions hereof shall be true at and as
of the Closing Date as though such representations and warranties were made at
and as of such time.
8.2 Acquiree and Stockholders shall have performed and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by them prior to or on the Closing Date, including
undertaking to promptly deliver the certificates representing their shares of
the outstanding stock of Acquiree to the Escrow Agent.
8.3 Stockholders shall have submitted duly executed Subscription
Agreements to the Escrow Agent that represent, in the aggregate, 80% of the
issued and outstanding shares of Acquiree.
8.4 Acquiree shall have delivered to Acquiror a Representation
Letter of management,Exhibit 8.4 hereto, dated the Closing Date to the effect
that:
a. Acquiree is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida,
and is duly qualified to do business in any jurisdiction where so
required;
b. Acquiree has the corporate power to carry on its
business as now being conducted;
c. This Agreement has been duly authorized, executed and
delivered by Acquiree;
<PAGE> 9
d. Acquiree, through its Board of Directors, has taken
all corporate action necessary for performance under this Agreement;
e. Except as referred to herein, Acquiree knows of no
(i) actions, suits or other legal proceedings or investigations
pending or threatened against or relating to or materially adversely
affecting Acquiree; and (ii) unsatisfied judgments against Acquiree.
9. Indemnification. Within the period provided in paragraph 10
herein, and in accordance with the terms of that paragraph, each party to this
Agreement shall indemnify and hold harmless each other party at all times after
the date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses, including attorney's fees, incident to any of the
foregoing, resulting from any misrepresentations, breach of covenant or
warranty or nonfulfillment of any agreement on the part of such party under
this Agreement or from any misrepresentation in or omission from any
certificate furnished or to be furnished to a party hereunder. Subject to the
terms of this Agreement, the defaulting party shall reimburse the other party
or parties on demand, for any reasonable payment made by said parties at any
time after the Closing Date, in respect of any liability or claim to which the
foregoing indemnity relates, if such payment is made after reasonable notice to
the other party to defend or satisfy the same and such party failed to defend
or satisfy the same.
10. Nature and Survival of Representations. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing hereunder and the consummation of the transactions contemplated hereby
for two (2) years from the date hereof. All of the parties hereto are executing
and carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for and not
upon any investigation upon which it might have made or any representations,
warranty, agreement, promise or information, written or oral, made by the other
party or any other person other than as specifically set forth herein.
11. Documents at Closing. At the Closing, the following
transactions shall occur, all of such transactions being deemed to occur
simultaneously:
11.1 Stockholders will deliver, or cause to be delivered, to the
Escrow Agent the following:
a. a duly executed Subscription Agreement evidencing
acceptance of the Offer; and
b. the stock certificate(s) representing all shares of
the Common Stock of Acquiree owned by him and being tendered
hereunder, duly endorsed in blank;
c. such other instruments, documents and certificates,
if any, as are required to be delivered pursuant to the provisions of
this Agreement or which may be reasonably requested in furtherance of
the provisions of this Agreement.
11.2 Acquiree will deliver, or cause to be delivered, to Acquiror
the following:
a. the Representation Letter of Acquiree's management as
set forth herein;
b. a certificate from the Secretary of State of its
incorporation dated at or about the date of the Closing to the effect
that Acquiree is in good standing under the laws of said State; and
c. such other instruments, documents and certificates,
if any, as are required to be delivered pursuant to the provisions of
this Agreement or which may be reasonably requested in furtherance of
the provisions of this Agreement.
<PAGE> 10
11.3 Acquiror will deliver or cause to be delivered to Stockholders
and Acquiree:
a. copies of resolutions by Acquiror's Board of
Directors authorizing this transaction;
b. all corporate records of Acquiror, including without
limitation, corporate minute books (which shall contain copies of the
Articles of Incorporation and Bylaws, as amended to the Closing),
stock books, stock transfer books, corporate seals, and all such other
corporate books and records;
c. a certificate from the Secretary of State of
Acquiror's state of incorporation dated at or about the date of
Closing that Acquiror is in good standing under the laws of said
State;
d. the Representation Letter of Acquiror's management as
set forth herein;
e. resignations of all of the members of the Board of
Directors and officers of Acquiror effective as of the Closing Date;
and
f. such other instruments, documents and certificates,
if any, as are required to be delivered pursuant to the provisions of
this Agreement or which may be reasonably requested in furtherance of
the provisions of this Agreement.
12. Miscellaneous.
12.1 Resale Restrictions Imposed on Prior Insiders of Acquiror.
Earnest Mathis, Gary McAdam, and Van Perkins are considered insiders of
Acquiror prior to the date hereof and are individual signatories to this
Agreement (the "Insiders"). A schedule of the Insider's share ownership
(directly and/or beneficially) of Acquiror immediately prior to the date
hereof, signed by the Insiders, is attached asExhibit 12.1. By execution of
this Agreement, the Insiders hereby agree to limit their sales of stock of
Acquiror after the Closing Date as follows:
(i) Each individual Insider may sell up to fifteen
percent (15%) of the shares owned by the Insider as of the Closing
Date, as shown onExhibit 12.1, at any time, if and when available for
resale under Rule 144, but each individual Insider's sales shall not
exceed three percent (3%) of the total volume on any single day.
(ii) With respect to the balance of the eighty-five
percent (85%) of the shares owned by each Insider as of the Closing
Date, as shown onExhibit 12.1, each individual Insider may, if and
when available for resale under Rule 144, sell no more than ten
percent (10%) of the number of shares owned by such individual Insider
as of the Closing Date, as shown onExhibit 12.1, within any thirty
(30) day period, and in no event may an individual Insider sell more
than an 3,333 shares on any single day.
These limitations on resales by the Insiders shall be in force and
effect at all times during which the quoted closing price per share of
Acquiror's common stock is at least two dollars ($2.00). Further, each Insider
shall notify Acquiror by facsimile every Monday of all sales made the prior
week, and acknowledge that Acquiror may issue stop-order instructions to the
transfer agent in the event that any violation of these sales volume
restrictions has occurred.
12.2 Undertakings and Further Assurances. At any time, and from
time to time, after the effective date, each party will execute such additional
instruments and take such action as may be reasonably requested by the other
party to confirm or perfect title to any property transferred hereunder or
otherwise to carry out the intent and purposes of this Agreement. Documents
intended to be delivered by the Closing Date may be delivered subsequent to the
Closing Date upon mutual agreement of the parties.
<PAGE> 11
12.3 Waiver. Any failure on the part of any party hereto to comply
with any of Its obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
12.4 Brokers or Finders. No party to this Agreement has engaged a
broker or finder with regard to the transaction contemplated herein.
12.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given if delivered in person or
sent by prepaid first class registered or certified mail, return receipt
requested, or by Federal Express or other means of overnight delivery.
12.6 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 Governing Law. This Agreement was negotiated and is being
contracted for in the State of Colorado, and shall be governed by the laws of
the State of Colorado.
12.8 Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
12.9 Entire Agreement. This Agreement is the entire agreement of
the parties covering everything agreed upon or understood in the transaction.
There are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof.
12.10 Time. Time is of the essence.
12.11 Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
12.12 Default Costs. In the event any party hereto has to resort to
legal action to enforce any of the terms hereof, such party shall be entitled
to collect attorney's fees and other costs from the party in default.
12.13 Counterparts. This Agreement and any Exhibits, attachments, or
documents ancillary thereto, may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Execution and delivery
of this Agreement by exchange of facsimile copies bearing the facsimile
signature of a party hereto shall constitute a valid and binding execution and
delivery of this Agreement by such party. Such facsimile copies shall
constitute enforceable original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
DYNASTY CAPITAL CORPORATION
By: /s/ Earnest Mathis, Jr.
------------------------------------
Earnest Mathis, Jr., President
Attest:
/s/Gary J. McAdam
- -------------------------------------
Gary J. McAdam, Secretary
<PAGE> 12
VISITOR SERVICES, INC.
By: /s/ Steve McLean
-----------------------------------
Steve McLean, Chief Executive Officer
Attest:
/s/ Joseph Avila
- -----------------------------------
Joseph Avila, Secretary
[ADDITIONAL SIGNATURES FOLLOW]
<PAGE> 13
"INSIDERS" OF ACQUIROR:
/s/ Earnest Mathis
------------------------------------------
Earnest Mathis, individually
/s/ Gary McAdam
------------------------------------------
Gary McAdam, individually
/s/ Van Perkins
------------------------------------------
Van Perkins, individually
THE CLOSING SHALL OCCUR UPON COMPLETION OF THE REQUIREMENTS OF SECTION 6.2 AND
EXECUTION HEREOF BY THE FOLLOWING STOCKHOLDERS OF ACQUIREE WHO HOLD AT LEAST
80% OF THE OUTSTANDING SHARES OF ACQUIREE:
1. /s/ Robert P. Gordon Shares: 11,585,472
------------------------------------------ -------------
Robert P. Gordon
2. /s/ Elizabeth Gordon Shares: 1,409,857
------------------------------------------ -------------
Elizabeth Gordon
3. /s/ Robert P. Gordon Shares: 48,750
------------------------------------------ -------------
/s/ Elizabeth Gordon
------------------------------------------
Robert P and Elizabeth Gordon, jointly
4. /s/ Robert P. Gordon Shares: 362,010
------------------------------------------ -------------
Harvest International of America, Inc.
By: R.P. Gordon Its: President
5. /s/ James F. Gordon Shares: 1,814,206
------------------------------------------ -------------
James F. Gordon
A "SECOND CLOSING DATE" SHALL OCCUR FOR ALL "MINORITY" STOCKHOLDERS WHO SUBMIT
ALL DOCUMENTS REQUIRED BY SECTION 11.1 TO THE ESCROW AGENT BY THE EXPIRATION
DATE.
