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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the fiscal years ended: December 31, 1997, and 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
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Commission file number: 0-16534
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DEUCALION RESEARCH, INC.
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(Name of small business issued in its charter)
North Dakota 45-0375367
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(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
118 First Avenue West, Williston, North Dakota 58801
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(Address of principal executive offices) (Zip Code)
(701) 572-6776
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.0001 Par Value
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB:
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State issuer's revenues for its most recent fiscal year. Net loss of
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($ 2,974)
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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 ask prices of such stock as of a specified date within the past 60 days.
(See definition of affiliate in Rule 12b-2 of the Exchange Act.). Since the
Company has not conducted any business since 1992 and the common stock of the
Company is not currently traded and there is no market for the Company's Common
Stock, the aggregate market value of the voting stock held by non-affiliates is
nominal.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort or expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 501,610,127 Common Stock, par
value $.0001 per share, were outstanding as of July 13, 1999.
Documents incorporated by reference: No documents are incorporated by
reference into this annual report on Form 10-KSB.
Transitional Small Business Disclosure Format (Check one):
Yes No X
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DEUCALION RESEARCH, INC.
FORM 10-KSB
PART I
Item 1. Business.
(a) Business Development
General.
Deucalion Research, Inc. ("Deucalion" or the "Company") was incorporated
under the laws of the State of North Dakota on May 3, 1983. The Company was
formed to research, develop, formulate, produce and market environmental
engineering products and related services. The Company initially emphasized the
development of custom-engineered environmentally sound products and processes to
remove toxic hydrogen sulfide ("H//2//S" or "sour" gas) and other impurities
from gas streams originating from petroleum fields and sanitary landfills,
leaving clean gas for immediate fuel use (the "Deucalion Process"). As a result
of the general decline of the petroleum industry, the Company, during 1986,
reduced its emphasis on oil field operations and began devoting its efforts to
the development and engineering of alternative products and processes as well as
the obtaining of additional funds primarily through the exchange of an interest
in a landfill gas project and additional issuances of its common stock to fund
such activities.
During January and February, 1988, the Company conducted a public offering
of 227,058,000 units at $.01 per Unit resulting in net proceeds to the Company
of $1,620,028. These proceeds were used to pursue the Company's business plan
until December 1991, when the Company ceased active operations. The Company's
last periodic report filed by the Company with the Securities and Exchange
Commission was its quarterly report on Form 10-Q for the quarter ended September
30, 1992.
Current Status.
The Company has determined that no further demonstration plans for the
Deucalion Process are warranted. The Company's single product, Ferro-Fluids, is
not being marketed at this time, and the Company has not been successful in its
attempt to license manufacturing and marketing of the product. The Company has
no other product or process currently capable of being commercially marketed.
The Company has had no business operations since 1992 and does not intend to
recommence operations at any time in the near future. The Company has been
attempting to find an operating enterprise with which to merge or otherwise form
a business combination.
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However, no such opportunity has presented itself until Messrs. Farley and
Metz offered to purchase the outstanding but unissued shares of the Company
under the terms of a Stock Purchase Agreement (the "Agreement"), dated April 20,
1999, between the Company and Michael R. Farley and Forrest L. Metz.
At the closing called for by the Agreement, the Company will deliver the
resignations of each of its officers and directors and Messrs. Farley and Metz
will be elected to the Board who will then appoint new officers of the Company.
As soon as practicable after the completion of the closing, Messrs. Farley and
Metz will cause the Company to call a special meeting of its shareholders to:
effect a recapitalization of the Company which may include a reverse stock split
of a magnitude not yet determined; change the name of the Company (new name not
decided yet); appoint independent accountants; and change the domicile of the
Company to Delaware. After the reverse stock split and recapitalization, Messrs.
Farley and Metz will purchase additional shares of common stock of the Company
and will end up owning 95% of the common stock of the Company.
Following the Closing, the Company will seek business opportunities in the
communications and internet businesses. Messrs. Farley and Metz have indicated
their intention to have the Company acquire certain of these interests but have
informed the Company that they have not yet determined the terms and conditions
of any such acquisition.
(b) Narrative Description of Business
Since the time it ceased active business operations in December 1991 and
until recently, the Company has been essentially inactive. It has not maintained
its status as a reporting company pursuant to the rules of the Securities and
Exchange Commission and it has not sought to provide a market for its
outstanding securities. The Company does not plan to voluntarily deliver an
annual report to security holders.
Recently, the Company determined to reinstate the Company as a reporting
entity under the Securities Exchange Act of 1934, and to file the reports
required since its last quarterly report on Form 10-Q filed for the quarter
ended September 30, 1992.
The Deucalion Process
The Company developed the Deucalion Process using the proprietary "Ferro-
Fluids" (hydrated iron oxide in fluid form) for removing hydrogen sulfide from
crude oil, natural gas and landfill gas during drilling and production
operations. H\\2\\S is a toxic and corrosive waste product which must be
removed before the petroleum products can be used for fuel or other purposes.
Traditionally, sour gas has been burned which is a cause of acid rain in the
atmosphere; this method is now subject to strict regulation by the Environmental
Protection Agency and other federal and state agencies. Where sour gas is used
to fuel engines, the resulting acid causes severe
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damage to engine components and results in polluted exhaust gases. The Company
is no longer utilizing the Deucalion Process in any operation, and the Company
has not been successful in its attempt to license manufacturing and marketing of
the Deucalion Process since 1991.
Regulation
Since the Company is not currently engaged in business operations, its
activities are not subject to significant governmental regulation.
Patents and Proprietary Rights
Neither the Company nor its officers or directors currently owns any
patents to any products or processes developed by the Company, including the
Deucalion Process.
Competition
The Company is not engaged in business operations and, therefore, is not in
competition with other companies.
Employees
From December 31, 1991 through December 31, 1998 the Company had no full-
time employees. Jon Geyerman, the Company's president and a director, devotes
approximately 20% of his time to the Company pursuant to a contract between the
Company and NJ&A, Inc. ("NJ&A"), formally known as Norman Jessen & Associates,
Inc.
Item 2. Properties.
The Company's offices are located in space shared with NJ&A, a company
owned by the Company's president, at no separate or additional expense to the
Company.
Item 3. Legal Proceedings
In 1989, the Securities and Exchange Commission ("SEC") commenced an
investigation into the Company's public offering of securities. The Company
cooperated fully in this investigation. To date, no response or report has been
received from the SEC regarding this investigation. The investigation is
confidential in nature, and the SEC has advised the Company that the
investigation "should not be construed as an indication by the SEC or its staff
that any violation of law has occurred, nor should it be construed as a
reflection upon any security, person or entity." The Company has received no
information regarding this investigation
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since 1991, and has no reason to believe that this investigation will result in
any action against the Company
Item 4. Submission of Matters to Vote of Securities Holders
None
PART II
Item 5. Market for The Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information
There is currently no public trading market for the Company's common stock
and the Company has no information regarding any bid or asked prices for the
Company's common stock since the first quarter of 1989. Prior to that time, the
Company's common stock was traded in the over the counter market and reported in
the "pink sheets."
(b) Holders
The number of holders of record of common shares as of July 13, 1999 was
approximately 1,130.
(c) Dividends
The Company has not paid a dividend with respect to its Common Stock and
cannot be expected to pay a dividend on its Common Stock in the foreseeable
future.
Item 6. Management's Discussion and Analysis and Plan of Operation.
(a) Plan of Operation
The Company has no specific business opportunities it is pursuing other
than the sale of a majority of its stock to Messrs. Farley and Metz according to
the terms of the Agreement. At the closing called for by the Agreement, the
Company will deliver the resignations of each of its officers and directors and
Messrs. Farley and Metz will be elected to the Board who will then appoint new
officers of the Company. As soon as practicable after the completion of the
closing, Messrs. Farley and Metz will cause the Company to call a special
meeting of its shareholders to: effect a recapitalization of the Company which
may include a reverse stock split of a magnitude not yet
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determined; change the name of the Company (new name not decided yet); appoint
independent accountants; and change the domicile of the Company to Delaware.
After the reverse stock split and recapitalization, Messrs. Farley and Metz will
purchase additional shares of common stock of the Company and will end up owning
95% of the common stock of the Company.
Following the Closing, the Company will seek business opportunities in the
communications and internet businesses. Messrs. Farley and Metz have indicated
their intention to have the Company acquire certain of these interests but have
informed the Company that they have not yet determined the terms and conditions
of any such acquisition.
Management fully expects the Agreement to close on schedule, if some
unforseen circumstances prevent the closing and Messrs. Farley and Metz do not
complete the transaction, then the Company will once again become essentially
inactive. The Company would continue to look for another business enterprise
with which to merge or form some other combination. The only cash requirements
would be to maintain the Company's status as a corporation in good standing with
the state of North Dakota.
(b) Management's Discussion and Analysis for the fiscal years ended December
31, 1992, 1993, 1994, 1995, 1996, 1997 and 1998
Results of Operations
During September 1992, the Company ceased active operations. Since that
time, the Company's activities have primarily consisted of maintaining the
corporation's status as a corporation in good standing with the state of North
Dakota. The Company's earnings during 1992 through 1998 were funds received as a
result of a settlement with its former SEC counsel and payment of cash and a
consulting agreement in satisfaction of a note from Equitex, Inc. The funds,
approximately $100,000, were used to pay the Company's Small Business
Association loan, legal fees and accounting fees, and to reimburse certain
directors for funds extended by them to meet Company obligations on debt. No
interest was paid to the directors for this service. Because of the Company's
inactivity it has been able to minimize its expenses from 1992 through 1998.
Management anticipates that expenditures will increase significantly during
1999 as the Company incurs general and administrative expenses in connection
with the preparation of this Form 10-KSB as well as other reports required under
the Securities Exchange Act of 1934, including the preparation of a 14f
information statement, and expenses incurred in connection with the Agreement,
including the related Recapitalization and shareholder meeting. See - Item
1(a)-Plan of Operations.
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Liquidity and Capital Resources.
The independent auditors' report on the Company's financial statements as
of December 31, 1998, and for each of the years in the two-year period ended
December 31, 1998, includes a "going concern" paragraph that describes
substantial doubt about the Company's ability to continue as a going concern.
The Company's plan with regard to future operations involve pursuing the sale of
a majority of its common stock as described above.
As of December 31, 1991, at which time the Company ceased active
operations, the Company had a working capital deficiency of $57,765. Since that
time the Company received approximately $100,000 from a settlement with its
former SEC counsel and payment of a note from Equitex, Inc. The Company used
these funds to meet debt obligations.
As of December 31, 1991, the Company's total assets were $210,137 as
compared to $355,647 and $557,864 at December 31, 1990 and 1989, respectively.
The decrease in total assets during the 1991 fiscal year was primarily due to
operating expenses ($131,308), reduced fixed assets ($3,314), and reduced other
assets ($5,483). As of December 31, 1998, the Company's total assets were
$10,015 and total liabilities were $172,963.
During the years ended December 31, 1992 through December 31, 1998, the
Company had limited cash flows from a settlement and payment of a note. These
cash flows were used to: pay debt obligations; maintain the Company's status as
a corporation in good standing in the State of North Dakota; and to search for a
potential merger or other business combination partner.
The Company anticipates significantly increased need for working capital
during 1999 as it brings its required filings under the Securities and Exchange
Act of 1934 current and proceeds with the Stock Purchase Agreement,
Recapitalization and shareholder's meeting.
No capital expenditures have been made by the Company since December, 1991.
Item 7. Financial Statements.
The financial statements for the Company as of December 31, 1998, and for
each of the years in the two-year period ended December 31, 1998, are included
as pages F-1 - F-9 to this report on Form 10-KSB.
Independent Auditor's Report
Balance Sheet - December 31, 1998
Statements of Operations - For the Years Ended December 31, 1998 and 1997
Statements of Shareholders' Equity (Deficit) - For the Years Ended December
31, 1998 and 1997
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Statements of Cash Flows - For the Years Ended December 31, 1998 and 1997
Notes to Financial Statements
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
(a) Directors and Executive Officers
At the present time, there is only a single officer and three directors of
the Company, as follows:
Name Age Position(s)
- ----------------- --- -----------------------------------
Jon Geyerman 53 President, Chief Executive Officer,
Treasurer and Secretary; Director since
1992.
Richard Broshat 69 Director from 1983 to 1988 and Director
since April, 1999.
James Fransen 46 Director since April, 1999.
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After the transactions contemplated by the Agreement, the following persons
will be named directors and officers of the Company.
Name Age Position(s)
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Michael R. Farley 55 CEO, Secretary; and Director
Forrest L. Metz 53 President, Treasurer; and Director
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The Company does not have any nominating committee or audit committee or
other committees performing similar functions. The officers of Deucalion and
the members of its audit committee are elected by and serve at the pleasure of
the Board of Directors.
The Company did not hold a shareholders' meeting during the fiscal years
ended December 31, 1992, 1993, 1994, 1995, 1996, 1997 and 1998. Accordingly,
replacements for Messrs.
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Mollberg, Ritter and Raymond Fransen were appointed by Mr. Geyerman on
April, 5, 1999 and are serving as the Company's directors.
The following is a brief summary of the business experience of the
directors of the Company:
Jon Geyerman. Mr. Geyerman was appointed President and Chief Executive
------------
Officer of Deucalion in June 1988. From 1973 to the present he has been
president and owner of NJ&A, Inc., formally known as "Norman Jessen &
Associates, Inc." of Williston, North Dakota, involved in the oil and gas lease
brokerage business. Since 1973, Mr. Geyerman has also been president of the
following companies: Western Energy Corporation, a company involved in the oil
and gas exploration business; Precis' Databanc Incorporated, an oil and gas
information company; and Energy Data Source, Inc., also an oil and gas
information company. Western Energy Corporation and Precis' Databanc
Incorporated are wholly owned subsidiaries of NJ&A, and Energy Data Source,
Inc., is an 80% subsidiary of NJ&A. Mr. Geyerman is also an owner and managing
partner of Jesco Enterprises, a real estate partnership. Mr. Geyerman is a
member of the American Association of Petroleum Landmen, and the Independent
Petroleum Association of America.
Richard E. Broschat Mr. Broschat was a director of Deucalion from 1983 until
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1988. He agreed to serve as director again and was appointed director April 5,
1999, in order to facilitate the completion of the transaction contemplated by
the Agreement. From 1953 to 1963, Mr. Broschat was employed by Amerada Petroleum
Corporation ("Amerada") as a petroleum engineer serving in North Dakota, Texas,
New Mexico, and Oklahoma. In 1963, Mr. Broschat was promoted to Division
Engineer for the North American Division of Amerada. In 1970, he was promoted to
Manager of Technical Services, responsible for all technical operations in the
North Dakota region. In 1973, Mr. Broschat was promoted to Operations Manager of
Amerada responsible for all North Dakota field production operations. In this
capacity, he established and implemented the corporation's financial and
operational objectives for North Dakota. In 1976, Mr. Broschat formed Broschat
Engineering and Management Services in Williston, North Dakota. He continues to
serve as president of Broschat Engineering and Management Services, a company
that provides consulting services in; drilling, production, reservoir analysis,
property evaluation and management for oil companies.
Mr. Broschat received his Bachelor of Science Degree in Mechanical
Engineering from North Dakota State University in 1949 and his Masters of
Science Degree in Mechanical Engineering from Iowa Sate University in 1950. Mr.
Broschat is a registered Professional Engineer in North Dakota and a member of
the Society of Petroleum Engineers of AIME.
James R. Fransen Mr. Fransen was appointed a director of the Company on
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April 5, 1999. Mr. Fransen received his Bachelor of Science Degree in Business
Administration from the University of North Dakota in 1977. In 1981, after a
short time working in the oil industry, Mr. Fransen became involved in the
family business in Williston, North Dakota. He currently serves as
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president of the family business, Northern, Inc., a company that provides water
conditioning and satellite system service.
The following is a brief summary of the business experience of the persons
expected to be designated by the Company to be appointed directors of the
Company after the completion of the transactions contemplated by the Agreement:
Michael R. Farley Mr. Farley is the current President of Farley and
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Associates, Inc., a company involved in the business of providing financing and
strategic business plans for small and medium sized companies. From 1994 until
1996, Mr. Farley served as Chairman of the Board and CEO of Green Turf,
International, Inc., a company involved in the golf course maintenance business.
From 1988 to 1994, Mr. Farley was a member of the Board of Directors of Mid-
Atlantic Paging Company, Inc. and New Era Communications, Inc. Both of these
affiliated companies were involved in the communications industry and
specialized in paging. From 1988 to 1994, Mr. Farley was also the managing
General Partner of the Richmond/Tidewater System, which was also involved in the
communications industry and specialized in paging. In 1988, Mr. Farley served as
Director of Communications for George Bush for President at the Republican
National Convention. From 1985 to 1988 Mr. Farley served as Director, Chief
Financial Officer, and Vice President for Celutel, Inc., a company specializing
in the development of cellular telephone systems.
Mr. Farley has served in community organizations in the following capacity:
member of the Board of Trustees for St. Joseph's Hospital in Tucson, Arizona;
member of the Arizona State Board of Vocational/Technical Education; member of
the Advisory Committee on the Arts for the John F. Kennedy Center for the
Performing Arts; Chairman of the Policy Forum for the National Center for
Research in Vocational Education; Director for the University of Arizona
Foundation; Trustee for St. Gregory High School; President of the Parent-Teacher
Group for Fort Lowell School; and Treasurer of the Parents for St. Michael's
School.
Mr. Farley received his Bachelor of Science Degree from the University of
Arizona and studied at the American College of Life Underwriters. Mr. Farley is
a member of the Southern Arizona Association of Life Underwriters and the
National Association of Life Underwriters.
Forrest L. Metz From 1974 until the present, Mr. Metz has served as Chairman
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of the Board and CEO of Urban Engineering, Inc., a planning, engineering, and
surveying consulting firm. Mr. Metz is also Chairman of the Board and CEO of
Metz, LLC, a holding company involved in investing in communications, software,
and manufacturing industries. From 1988 to 1993, Mr. Metz served as President
and a Director of Celutel, Inc., a company that specialized in the development
of cellular telephone systems. Celutel, Inc. was sold to a regional telephone
company in 1993.
Mr. Metz is also a Board Member of the following community organizations;
United Way of Greater Tucson, Boys and Girls Club of Tucson, Educational
Enrichment Foundation, Mountain Oyster Club, Los Charros Del Desierto, and the
Pima County Fair Horse Racing Commission. Mr.
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Metz also served as a board member of the Arizona Mexico Commission, University
of Arizona Extra Point Club, University of Arizona Foundation Presidents' Club,
and the Southwestern Fair Commission.
Mr. Metz received his Bachelor of Science Degree from the University of
Arizona and took graduate level courses in Planning and Engineering there as
well. Mr. Metz is a member of the Urban Land Institute, American Planning
Association, and Society of Military Engineers.
(b) Significant Employees.
The Company has no salaried employees at the present time.
(c) Involvement in Certain Legal Proceedings.
During the past five years, none of the Company's directors or the expected
nominees have:
(1) Filed or has had filed against him a petition under the federal
bankruptcy laws or any state insolvency law, nor has a receiver, fiscal agent or
similar officer been appointed by a court for the business or property of such
person, or any partnership in which he was a general partner, or any corporation
or business association of which he was an executive officer at or within two
years before such filings;
(2) Been convicted in a criminal proceeding or is a named subject of
a pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from, or
otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the foregoing, or
as an investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director, or employee of any investment company, bank,
savings and loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
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(iii) Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of federal
or state securities laws or federal commodities laws;
(4) Been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described in paragraph (3)(i) above, or to
be associated with persons engaged in any such activity; or
(5) Been found by a court of competent jurisdiction in a civil action
or by the Securities and Exchange Commission (the "Commission") to have violated
any federal or state securities law, and the judgment in such civil action or
finding by the Commission has not been subsequently reversed, suspended, or
vacated.
(6) Been found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
(d) Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the officers and directors of the Company and persons
who own more than ten percent of a registered class of the Company's securities
(collectively, "reporting persons"), to file reports of ownership and changes in
ownership on Forms 3, 4, and 5 with the Securities and Exchange Commission
("SEC"). Reporting Persons are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4, and 5 filed.
To the best knowledge and belief of the Company, each of the 10% Beneficial
Owners and directors, with the exception of James Fransen, made the necessary
filing on Form 3. James Fransen was required to file an Initial Statement of
Beneficial Ownership of Securities on Form 3 when he was appointed director on
April 5, 1999. The Company has been informed that Mr. Fransen filed his Form 3
on July 14, 1999. The reports on Form 3 were due on or before April 15, 1999,
and accordingly, were filed late
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Item 10. Executive Compensation.
(a) Summary Compensation Table
The following table sets forth information regarding compensation paid to
(i) the Company's Chief Executive Officer and (ii) each of its other executive
officers whose total annual compensation exceeded $100,000 for the years ended
December 31, 1997 and 1998.
<TABLE>
<CAPTION>
Annual Compensation ($$) Long Term Compensation
------------------------ --------------------------------
Awards Payouts
------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Restricted
Name and Stock Options LTIP Other
Position Year Salary Bonus Other Awards & SARs Payouts Compensation
- --------------- ---- ------ ----- ----- ------- ------- ------- ------------
($$) ($$) ($$) ($$) (##) ($$) ($$)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jon Geyerman 1998 0 0 0 0 0 0 0
Chief Executive 1996 0 0 0 0 0 0 0
Officer 1995 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0
</TABLE>
No compensation in any form has been paid to any officer or director for
several years.
(b) Compensation Under Plans.
The Company has no stock option plan, stock bonus plan, other compensatory
plan or arrangement, or employee benefit plan for employees, consultants,
officers, or directors.
(c) Other Compensation.
No compensation was paid or distributed to any officer or director of the
Company for services rendered to the Company during the period from December 31,
1989 through December 31, 1998.
(d) Compensation of Directors.
The Company does not pay its directors for their services in that capacity;
however, officers and directors may receive reimbursement for out-of-pocket
expenses incurred by them in connection with the business of the Company.
Currently, the Company does not pay any directors a fee for attendance at board
meetings.
The Company has no other arrangements pursuant to which any director of the
Company was compensated from January 1, 1990 through December 31, 1998 for
services as a director.
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(e) Termination of Employment and Change in Control.
There are no compensatory plans or arrangements with respect to any
director or executive officer which results from the resignation, retirement or
any other termination of the individual's employment with the Company, or from a
change of control of the Company, or from a change of the individual's
responsibilities.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth information as of July 13, 1999, regarding
the beneficial ownership of shares of the Company's only outstanding class of
securities, its Common Stock, by the directors of the Company and by each person
who, to the knowledge of the Company at that date, was a beneficial owner of 5%
or more of the outstanding shares of Common Stock. The table does not include
information regarding shares of Common Stock held in the names of certain
depositories/clearing agencies as nominee for various brokers and individuals.
No such broker or individual is believed to hold greater than 5% of the
Company's Common Stock.
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| Name and Address | Number of | Percent |
| | Shares Owned | of Class |
| | Beneficially | Owned |
- ---------------------------------------------------------------------
| Jon Geyerman | 0 | 0% |
| P.O. Box 1107 | | |
| Williston, ND 58802-1107 | | |
- ---------------------------------------------------------------------
| James R. Fransen | 8,000,000 | 1.5% |
| 5511 Highway 85 | | |
| Williston, ND 58801 | | |
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| Richard E. Broschat | 20,797,362 | 4.14% |
| 1306 W. Jackson | | |
| Williston, ND 58801 | | |
- ---------------------------------------------------------------------
| Marlys Fransen | 51,587,587 | 10.2% |
| 5511 Highway 85 | | |
| Williston, ND 58801 | | |
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<PAGE>
- -----------------------------------------------------------------
| Alma Ritter | 49,211,575 | 9.8% |
| 2124 E. Dakota Parkway | | |
| Williston, ND 58801 | | |
- -----------------------------------------------------------------
| Loye A. Ashton | 55,427,350 | 11.0% |
| P.O. Box 1481 | | |
| Williston, ND 58802-1481 | | |
- -----------------------------------------------------------------
| Officers and Directors as a group | 28,797,362 | 5.7% |
- -----------------------------------------------------------------
Item 12. Certain Relationships and Related Transactions.
Repurchase and Surrender of Shares
- ------------------------------------
In accordance with an Agreement entered into with the University of North
Dakota-School of Engineering and Mines Foundation ("UND-SEM"), doing business as
Center for Innovation and Business Development ("CIBD"), the Company issued to
UND-SEM an aggregate of 50,000,000 shares of its restricted common stock.
Following a renegotiation of that agreement UND-SEM surrendered to the Company
an aggregate of 30,000,000 shares, and the Company agreed to contract for
$150,000 of research and development activities at CIBD. CIBD has acknowledged
that the Company has no further contractual obligation to CBID.
Payments To or on Behalf of Officers and Directors
- --------------------------------------------------
In 1990, the Company paid $6,600 for 1989 and $3,300 for 1990, to NJ&A,
formerly known as Norman Jessen & Associates, Inc., under the terms of the
Contract For Management Services, and accrued $36,300 for 1990 services by
agreement between the parties. The Company paid rent of $7,200 to Ritter
Industries, an affiliate of one of its officers/directors, and accrued $1,200
for 1990 rent by agreement between the parties.
In 1991, the Company paid $3,300 for 1990, to Norman Jessen & Associates,
Inc. and accrued $36,300 for 1991, under the terms of the Contract For
Management Services, by agreement between the parties. The Company paid rent of
$1,520 to Ritter Industries, an affiliate of one of its officers/directors.
Repayment of debts to NJ&A and Former Legal Counsel
- ---------------------------------------------------
The Company is in debt to NJ&A, Inc., formerly know as "Norman Jessen and
Associates, Inc.", a company owned and operated by Jon Geyerman, in the amount
of $93,411.94. After the Proposed Stockholders Meeting and the additional
purchase of shares by Messrs. Farley and Metz, the Company proposes to settle
this debt by issuing 1% of its outstanding securities. The Company
-17-
<PAGE>
is also in debt to Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
("FRSPT"), in the amount of $38,835.74. After the Proposed Stockholders Meeting
and the additional purchase of shares by the New Stockholders, the Company
proposes to settle this debt by issuing 1/2 of 1% of its outstanding securities
to FRSPT. FRSPT is also legal counsel to Messrs. Farley and Metz. FRSPT will
receive payment for the legal services to Messrs. Farley and Metz based upon the
normal hourly rates of the persons providing legal services.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits required to be filed are listed below and, except where
incorporated by reference, immediately follow the Financial Statements.
Number Description
- ------ -----------
3(i)(a) Articles of Incorporation, incorporated by reference to Exhibit
(3) to the Company's Registration Statement on Form S-18 filed
August 13, 1987, Registration No. 33-16535.
3(i)(b) Amended Articles of Incorporation, incorporated by reference to
Exhibit (3A) to the Company's Annual Report on Form 10-K, for the
year ended December 31, 1987, Commission File No. 0-16534.
3(ii) Bylaws, incorporated by reference to Exhibit (3.1) to the
Company's Registration Statement on Form S-18 filed August 13,
1987, Registration No. 33-16535.
(10.1) Stock Purchase Agreement Between the Company and Michael R.
Farley and Forrest L. Metz, dated April 20, 1999, included herein
as Exhibit 1.
(10.2)* Agreement with Norman Jessen & Associates, Inc.
(10.2A)** Agreement with Norman Jessen & Associates, Inc.
27 Financial Data Schedule.
__________
* Incorporated by reference from Annual Report on Form 10-K for the year
ended December 31, 1987.
-18-
<PAGE>
** Incorporated by reference from Annual Report on Form 10-K for the year
ended December 31, 1989.
(b) Reports on Form 8-K
None
-19-
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DEUCALION RESEARCH, INC.
By /s/ Jon Geyerman
-----------------------------------------
Jon Geyerman, President and Chief
Executive Officer and Principal Executive
Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signatures Title Date
- -------------------------- --------- ------------
/s/ Jon Geyerman Director August 5, 1999
- -------------------------- --------
Jon Geyerman
/s/ Richard E. Broschat Director August 5, 1999
- -------------------------- --------
Richard E. Broschat
/s/ James R. Fransen Director August 5, 1999
- -------------------------- --------
James R. Fransen
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Deucalion Research, Inc.
Williston, North Dakota
We have audited the accompanying balance sheet of Deucalion Research, Inc. as of
December 31, 1998, and the related statements of operations, shareholders'
equity (deficit) and cash flows for each of the years in the two-year period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 Deucalion Research, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue in existence as a going concern. As discussed in Note 2,
the Company has sustained recurring losses, and has limited resources which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
GELFOND HOCHSTADT PANGBURN & CO.
June 9, 1999
Denver, Colorado
F-1
<PAGE>
DEUCALION RESEARCH, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash $ 5,515
Prepaid expenses 4,500
-------------
Total current assets 10,015
-------------
Equipment 11,440
-------------
11,440
Less accumulated depreciation 11,440
-------------
-------------
$ 10,015
=============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable:
Related parties $ 1,170
Other (Note 2) 78,381
Accrued management service fees, related party (Note 3) 93,412
-------------
Total liabilities (all current) 172,963
-------------
Commitment (Note 3)
Shareholders' equity (deficit) (Note 2):
Common stock, $.0001 par value; authorized 1,500,000,000
shares; issued 517,859,353 shares 51,786
Capital in excess of par value 2,384,509
Accumulated deficit (2,343,125)
-------------
93,170
Less 16,249,226 shares of common stock held in
treasury, at cost 256,118
-------------
(162,948)
-------------
$ 10,015
=============
See notes to financial statements.
F-2
<PAGE>
DEUCALION RESEARCH, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
Expenses:
General and administrative $ 1,192 $ 8,882
------------ ------------
Operating loss (1,192) (8,882)
------------ ------------
Nonoperating expense:
Interest expense 1,782
------------ ------------
Net loss $ (2,974) $ (8,882)
============ ============
Basic and diluted loss per common share $ * $ *
============ ============
Weighted average number of shares outstanding 501,610,127 501,610,127
*Less than $.01 per share
See notes to financial statements.
F-3
<PAGE>
DEUCALION RESEARCH, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common stock Capital in Treasury stock
----------------------- excess Accumulated ----------------------
Shares Amount of par deficit Shares Amount Total
----------- ---------- ------------ -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997 517,859,353 $ 51,786 $ 2,384,509 $ (2,331,269) 16,249,226 $ (256,118) $ (151,092)
Net loss for the year (8,882) (8,882)
----------- ---------- ------------ -------------- ---------- ---------- -----------
Balances, December 31, 1997 517,859,353 $ 51,786 $ 2,384,509 (2,340,151) 16,249,226 (256,118) (159,974)
Net loss for the year (2,974) (2,974)
----------- ---------- ------------ -------------- ---------- ---------- -----------
Balances, December 31, 1998 517,859,353 $ 51,786 $ 2,384,509 $ (2,343,125) 16,249,226 (256,118) $ (162,948)
=========== ========== ============ ============== ========== ========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
DEUCALION RESEARCH, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
Cash flows from operating activities:
Net loss $ (2,974) $ (8,882)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for uncollectible receivables 20
Change in operating liabilities:
Increase in accounts payable and accrued
expenses 2,747 8,810
----------- -----------
Total adjustments 2,767 8,810
----------- -----------
Net cash used in operating activities (207) (72)
----------- -----------
Decrease in cash (207) (72)
Cash at beginning of year 5,722 5,794
----------- -----------
Cash at end of year $ 5,515 $ 5,722
=========== ===========
During the years ended December 31, 1998 and 1997 no cash was paid for interest
or income taxes.
See notes to financial statements.
F-5
<PAGE>
DEUCALION RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 1998 AND 1997
1. Summary of significant accounting policies and business of the Company:
Business of the Company:
Deucalion Research, Inc. (the Company) was organized on May 3, 1983, to
research, develop, formulate, produce and market environmental engineering
products and related services. The Company has had no significant operations
since 1992.
Equipment:
Equipment consists primarily of office furniture and is stated at cost.
Depreciation of equipment was computed principally by use of the straight-
line and accelerated methods over estimated useful lives of five to seven
years. At January 1, 1997, all equipment had been fully depreciated.
Recently issued accounting pronouncements:
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. This standard establishes
requirements for disclosures of comprehensive income and its components.
Reclassification of earlier financial statements for comprehensive purposes
is required. For the years ended December 31, 1998 and 1997, the Company did
not have any components of comprehensive income to report.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133). This statement is
effective for fiscal years beginning after June 15, 1999. Currently, the
Company does not have any derivative financial instruments and does not
participate in hedging activities, therefore management believes SFAS No.
133 will not impact the Company's financial statements.
Net loss per share of common stock:
Basic loss per share is computed by dividing loss applicable to common
shareholders by the weighted-average number of common shares outstanding for
the year. Diluted loss per share reflects the potential dilution that could
occur if dilutive securities and other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
F-6
<PAGE>
DEUCALION RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 1998 AND 1997
1. Summary of significant accounting policies and business of the Company
(continued):
Net loss per share of common stock (continued):
common stock that then shared in the earnings of the Company, unless the
effect is to reduce a loss or increase earnings per share. The Company had
no potential common stock instruments which would result in diluted loss per
share in 1998 and 1997.
Income taxes:
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Under this method, deferred tax liabilities and assets
are measured using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Use of estimates in the preparation of financial statements:
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
periods. Management makes these estimates using the best information
available at the time the estimates are made; however, actual results could
differ materially from these estimates.
2. Going concern and stock purchase agreement:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred
significant operating losses in 1998 and 1997 and has a working capital
deficiency and an accumulated deficit at December 31, 1998. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from
the outcome of these uncertainties.
F-7
<PAGE>
DEUCALION RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 1998 AND 1997
2. Going concern and stock purchase agreement (continued):
The Company is pursuing a proposed stock purchase agreement and has agreed to
sell 95% of the voting common stock that will be outstanding upon the
closing of certain transactions, as described in the stock purchase
agreement, for an aggregate purchase price of $110,000. At the agreed upon
purchase date ("the Initial Closing Date"), the directors and officers of
the Company will resign and the purchasers and/or their designees will be
elected as directors and officers of the Company.
Upon the Initial Closing Date, the purchasers will pay the Company $100,000
of the purchase price in exchange for the number of authorized but unissued
shares of the Company's common stock, which, in any event, shall be not less
than 998,000,000 shares. Subsequent to the Initial Closing Date, the
purchasers will pay the remaining $10,000 purchase price in exchange for
shares of the Company's common stock which will result in the purchasers
owning 95% of the Company.
The stock purchase agreement also provides for the settlement of certain
Company liabilities, including $38,836 owed to the Company's former legal
counsel and $93,412 owed for management service fees (Note 3). The Company
intends to settle these liabilities through the issuance of common stock
equal to 1/2% and 1%, respectively, of the total outstanding common stock of
the Company after completion of the proposed transaction.
3. Management service agreement:
Prior to January 1, 1997, the Company had a management service agreement with
an entity owned by an officer of the Company that provided for management
services and office space. No management fees were incurred during the two
years ended December 31, 1998. At December 31, 1998, $93,412 was due.
4. Income taxes:
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $1,783,000 which are available to offset future taxable
income, if any, through 2018. Based on statutory rates, the Company's
expected tax benefit arising from the net operating loss carryforward would
be approximately $793,500. A valuation allowance has been provided to reduce
the deferred tax asset, as realization of the asset is not assured. In
addition, the Company's net operating loss carry forwards may be subject to
annual limitations which could reduce or defer the utilization of the losses
should the Company have an ownership change as defined in section 382 of the
Internal Revenue Code.
F-8
<PAGE>
DEUCALION RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 1998 AND 1997
5. Fair value of financial instruments:
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires the Company to disclose estimated
fair values for its financial instruments, for which it is practicable to
estimate. The fair value of the Company's payables to related parties are
not practicable to estimate due to the related party nature of the
underlying transactions. Management believes that the carrying amounts of
the Company's other financial instruments approximates their fair values
primarily because of the short-term maturity of these instruments.
Estimates are not necessarily indicative of the amounts which could be
realized or would be paid in a current market exchange. The effect of using
different market assumptions and/or estimation methodologies may be material
to the estimated fair value amounts.
F-9
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE
AGREEMENT
____________________
BETWEEN
DEUCALION RESEARCH, INC.,
as Seller
AND
MICHAEL R. FARLEY
and
FORREST L. METZ
as Purchasers,
April 20, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
Table of Contents
-----------------
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C>
RECITALS........................................................................ -1-
1. The Purchase...................................................... -1-
1.1 Agreement to Purchase.................................... -1-
1.3 Closing.................................................. -2-
2. Actions on the Initial Closing Date............................... -2-
2.1 Directors................................................ -2-
2.2 Officers................................................. -2-
2.3 The Purchasers Actions at Closing........................ -2-
2.4 The Company's Actions at Closing......................... -2-
3. Representations and Warranties.................................... -2-
3.1 The Purchasers........................................... -2-
3.2 The Company.............................................. -3-
4. Conditions to Obligations of Parties.............................. -5-
4.1 Conditions to the Obligations of the Company............. -5-
4.2 Conditions to Obligations of the Purchasers.............. -5-
5. Post Closing Events............................................... -6-
5.1 Meeting of Shareholders.................................. -6-
5.2 Completion of Transactions............................... -6-
6. Termination....................................................... -6-
6.1 Termination by Agreement................................. -6-
6.2 Termination upon Default................................. -6-
6.3 Automatic Termination.................................... -7-
7. Miscellaneous..................................................... -7-
7.1 Notice................................................... -7-
7.3 Survival of Representations.............................. -8-
7.4 Benefit.................................................. -8-
7.5 Fees..................................................... -8-
7.6 Waiver of Terms.......................................... -8-
7.7 Modification............................................. -8-
7.8 Applicable Law........................................... -8-
7.9 Counterparts............................................. -9-
7.10 Status................................................... -9-
7.11 Finder's Fee............................................. -9-
</TABLE>
-ii-
<PAGE>
EXHIBITS
Exhibit
- -------
A Subscription Agreement (Farley)
B Subscription Agreement (Metz)
C Minutes of the Board of Directors of the Company
------------------------------
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT is executed as of the 20th day of April, 1999
(hereinafter called the "Agreement"), by and between DEUCALION RESEARCH, INC.
(hereinafter referred to as "the Company"), a North Dakota corporation, and
MICHAEL R. FARLEY and FORREST L. METZ (hereinafter Messrs. Farley and Metz
collectively referred to as "the Purchasers").
RECITALS
--------
WHEREAS:
A. The Company is a corporation organized and existing under the laws of
the State of North Dakota, having its principal place of business located in
Williston, North Dakota.
B. The Purchasers are residents of the State of Arizona.
C. The Company has not conducted business operations for several years.
D. The Purchasers have offered to purchase a number of shares of common
stock of the Company that will equal 95.0 percent of the voting stock of the
Company that will be outstanding upon closing of the transactions contemplated
by this Agreement for an aggregate purchase price of $110,000. The Board of
Directors of the Company deems it advisable and in the best interests of the
Company and the shareholders of the Company that the Company sell such shares to
the Purchasers pursuant to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the above premises and of the
respective representations, warranties and agreements herein contained, the
parties agree as follows:
1. The Purchase
1.1 Agreement to Purchase. The Purchasers hereby agree to purchase from
---------------------
the Company, and the Company hereby agrees to sell to the Purchasers, that
number of shares of common stock of the Company that will equal 95.0 percent of
the voting stock outstanding upon closing on that transactions contemplated by
this Agreement (the "Company Shares") for an aggregate purchase price of
$110,000.
1.2 Assignment by Purchasers. The Purchasers may assign their right to
------------------------
receive all or part of the Company Shares to one or more designees.
-1-
<PAGE>
1.3 Closing. The completion of the initial purchase shall take place as
-------
may be agreed between the parties, no later than June 30, 1999 (the "Termination
Date"). The date of completion of the purchase shall be hereinafter referred to
as the "Initial Closing Date."
2. Actions on the Initial Closing Date
2.1 Directors. On the Initial Closing Date, the Directors of the Company
---------
shall resign and the Purchasers and/or their designees shall be elected as the
Directors of the Company. The Board of Directors of the Company shall have
approved Minutes or a Statement of Consent in substantially the form of Exhibit
C, attached.
2.2 Officers. On the Initial Closing Date, the current officers of the
--------
Company shall resign and the Purchasers and/or their designees shall be elected
as officers of the Company.
2.3 The Purchasers Actions at Closing. On the Initial Closing Date, the
---------------------------------
Purchasers shall deliver to the Company:
2.3.1 The Subscription Agreements in substantially the form of
Exhibits A and B attached .
2.3.2 $100,000 of the Purchase Price.
2.4 The Company's Actions at Closing. On the Closing Date the Company
--------------------------------
shall deliver to the Purchasers:
2.4.1 Certificates registered in the names of the Purchasers or their
designees for the number of authorized but unissued shares of the Company's
common stock, which, in any event, shall be not less than 998,000,000 shares.
2.4.2 A certificate of good standing from the North Dakota Secretary
of State.
2.4.3 Such other certificates as the Purchasers reasonably may
request.
2.4.4 The financial statements described in Section 4.2.6.
2.4.5 An agreement signed by Norman Jessen & Associates, Inc. under
which the $93,411.94 owed by the Company would be satisfied through the issuance
by the Company of common stock equal to 1% of the outstanding stock of the
Company after completion of the transactions contemplated by this Agreement.
-2-
<PAGE>
2.4.6 An agreement signed by Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC under which the $38,835.74 owed by the Company would be
satisfied through the issuance by the Company of Common Stock equal to 1/2 of
1% of the outstanding stock of the Company after completion of the transactions
contemplated by this Agreement.
3. Representations and Warranties
3.1 The Purchasers. The Purchasers represent and warrant to the Company as
--------------
follows:
3.1.1 Corporate Powers, Compliance with Other Instruments,
---------------------------------------------------
Governmental Consents and Law. The Purchasers have the unconditional right,
- -----------------------------
power and authority to execute, pursue and complete this Agreement, and neither
the execution of this Agreement, nor the completion of the acts and events
described in and/or contemplated by this Agreement, in accordance with its
provisions, will alter the rights or remedies under or the condition or status
of the Purchasers with respect to others, conflict with or constitute a default
under or a breach or a violation of or grounds for termination of, or an event
which, with the lapse of time or notice, could constitute a default under or
breach or violation or grounds for termination, of any note, indenture,
mortgage, deed of trust or other agreement or instrument to which the Purchasers
or either of them, is a party or by which either of them is bound, nor any
existing law, order, rule, regulation, writ, injunction or decree of any union
or any government, governmental department, commission, board, bureau, agency or
instrumentality or court, domestic or foreign, having jurisdiction over the
Purchasers or their properties. No consent, approval, authorization or order of
any court or governmental agency or body or union or other body is required by
the Purchasers to complete the transactions contemplated herein.
3.1.2 Enforceability. This Agreement constitutes the valid and
--------------
binding obligation of each of the Purchasers, enforceable against them in
accordance with the terms, except that such enforceability may be subject to
bankruptcy, insolvency, reorganization or other similar laws affecting or
relating to enforcement of creditors rights generally and general equitable
principles.
3.1.3 Subscription Agreements. The Purchasers will execute and deliver
-----------------------
to the Company the Subscription Agreements in substantially the form of
Exhibits A and B attached hereto.
3.1.4 Actions of the Purchasers. Prior to the Initial Closing Date,
-------------------------
the Purchaser shall use their best efforts to complete the transaction
contemplated in this Agreement.
3.2 The Company. The Company represents and warrants to the Purchasers as
follows:
3.2.1 Organization and Good Standing. The Company is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of North Dakota. The Company has full power and authority, corporate and
otherwise, to carry on its business as and where now conducted. The Company is
not required to qualify as a foreign corporation in any state.
-3-
<PAGE>
3.2.2 Authorized Capitalization. The authorized capital stock of the
-------------------------
Company is 1,500,000,000 shares of $.0001 value common stock, of which
501,610,127 shares currently are outstanding and no shares of preferred stock
are authorized. The Company has no outstanding rights, options, warrants,
convertible securities, contracts or commitments or demands of any character
which would require the original issuance or reissuance from treasury by the
Company of any shares of its capital stock and the Company Shares will
constitute 95.0 percent of the issued and outstanding shares of the voting stock
of the Company upon completion of the transactions contemplated by this
Agreement.
3.2.3 Status of the Company Shares. The Company Shares, when issued
----------------------------
pursuant to the terms hereof, will be duly authorized, legally and validly
issued, fully-paid, and non-assessable.
3.2.4 Corporate Powers, Compliance with Other Instruments,
---------------------------------------------------
Governmental Consents and Laws. The Company has the unconditional right, power
- ------------------------------
and authority execute, pursue and complete this Agreement and neither the
execution of this Agreement, nor the completion of the acts and events described
in and/or contemplated by this Agreement, in accordance with its provisions,
will alter the rights or remedies under or the condition or status of the
Company with respect to others, conflict with or constitute a default under or a
breach or a violation of or grounds for termination of, or an event which, with
the lapse of time or notice, could constitute a default under or breach or
violation or grounds for termination of the articles of incorporation, as
amended, or bylaws of the Company, or any note, indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party or by
which it is bound, nor, to the best of the Company's knowledge, any existing
law, order, rule, regulation, writ, injunction or decree of any union or any
government, governmental department, commission, board, bureau, agency or
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or its properties. Except for compliance with the various state and
federal securities laws and all necessary approvals by regulatory agencies with
jurisdiction over said securities laws, no consent, approval, authorization or
order of any court or governmental agency or body or union or other body is
required by the Company to complete the transactions contemplated herein.
3.2.5 The Company Information. The Company has made information
-----------------------
available to the Purchasers as set forth in the Subscription Agreements attached
hereto as Exhibits A and B, such information being referred to herein as the
"Available Information." The financial statements contained in the Available
Information are accurate and complete and the Company has no liabilities,
absolute or contingent, other than as described in the Available Information.
3.2.6 No Subsequent Material Events. Except for the transaction
-----------------------------
contemplated hereby, there have been (1) no increases or commitments made or
outstanding for the increases of salaries, fees or other forms of compensation
of any employee, (2) no bonuses paid or incurred and no commitments made or
outstanding for any such bonuses, (3) no loans made or agreed to be made to any
person, firm or corporation, (4) no dividends or other distributions declared or
paid, (5) no purchase or commitments for the purchase or redemption of any
shares of outstanding capital stock,
-4-
<PAGE>
(6) no capital expenditures and no commitments for capital expenditures and (7)
no other material transactions.
3.2.7 Filing with SEC. Not less than ten days prior to the Closing
---------------
Date the Company shall file with the Securities and Exchange Commission and mail
to the Company's shareholders the information required by Rule 14f-1 under the
Securities Exchange Act of 1934.
3.2.8 Authorization by Directors; Enforceability. The execution and
------------------------------------------
delivery of this Agreement and the completion of the transactions contemplated
hereby have been duly authorized by the Board of Directors of the Company and
constitutes the valid and binding obligation of the Company, enforceable against
it in accordance with its terms, except that such enforceability may be subject
to bankruptcy, insolvency, reorganization or other similar laws affecting or
relating to enforcement of creditors' rights generally and general equitable
principles.
4. Conditions to Obligations of Parties
4.1 Conditions to the Obligations of the Company. The obligations of
--------------------------------------------
the Company hereunder are, at the option of the Company, subject to compliance
with and/or fulfillment of each of the following conditions prior to the Initial
Closing Date.
4.1.1 Representations. The representations and warranties of the
---------------
Purchasers contained in this Agreement shall be true and correct on and as of
the date hereof and the Initial Closing Date, with the same effect as though all
such representations and warranties had been made on and as of such dates.
4.1.2 Compliance. All the terms, covenants and conditions hereof to
----------
be followed and performed by the Purchasers on or before the Initial Closing
Date shall be fully and timely performed.
4.1.3 No Errors or Misrepresentations. On or before the Initial
-------------------------------
Closing Date, the Company shall not have discovered any material error, mistake
or omission in the representations and warranties made herein by the Purchasers.
4.1.4 Consents; Actions. All consents, approvals, authorizations,
-----------------
waivers or orders of any court, tribunal, arbitrator or governmental agency or
body or union required or necessary for the completion of the transactions
contemplated by this Agreement shall have been obtained. No person, including,
without limitation, any agency or department of any government unit or
subdivision, shall have threatened any action against either the Purchasers or
the Company to prevent, or as a result of, the completion of the transactions
contemplated by this Agreement.
4.2 Conditions to Obligations of the Purchasers. The obligations of
-------------------------------------------
the Purchasers hereunder are, at the option of the Purchasers, subject to
compliance with and/or fulfillment of each of the following conditions prior to
the Initial Closing Date.
-5-
<PAGE>
4.2.1 Representations. The representations and warranties of the
---------------
Company contained in this Agreement shall be true and correct on and as of the
date hereof and Initial Closing Date, with the same effect as though all such
representations and warranties had been made on and as of such dates.
4.2.2 Compliance. All the terms, covenants and conditions hereof to be
----------
followed and performed by the Company on or before the Initial Closing Date
shall be fully and timely performed.
4.2.3 No Material Change. There shall not have been any material
------------------
adverse change in the condition, financial or otherwise or net worth of the
Company from that described in the Company Available Information.
4.2.4 No Errors or Misrepresentations. On or before the Initial
-------------------------------
Closing Date, the Purchasers shall not have discovered any material error,
mistake or omission in the representations and warranties made herein by the
Company or in the information filed by the Company under Rule 14f-1 under the
Securities Exchange Act of 1934.
4.2.5 Consents; Actions. All consents, approvals, authorizations,
-----------------
waivers or orders of any court, tribunal, arbitrator or governmental agency or
body or union required or necessary for the completion of the transactions
contemplated by this Agreement shall have been obtained. No person, including,
without limitation, any agency or department of any government unit or
subdivision, shall have threatened any action against either the Company or the
Purchasers to prevent, or as a result of, the completion of the transactions
contemplated by this Agreement.
4.2.6 Audit. The Company shall have delivered to the Purchasers
-----
audited financial statements for the years ended December 31, 1998, 1997 and
1996 prepared in accordance with generally accepted accounting principles
consistently applied and in a form acceptable for filing in a registration
statement on Form S-1 under the Securities Act of 1933, as amended and
reasonably acceptable to Purchasers.
5. Post Closing Events
5.1 Meeting of Shareholders. As soon as practicable after the Closing,
-----------------------
the Purchaser will cause the Company to call a special meeting of its
shareholders to consider, among other things, a recapitalization of the Company
which may include a reverse stock split of a magnitude not yet determined, the
election of directors, appointment of independent accountants and a change of
domicile of the Company. The Purchasers do not intend to have the Company or
others solicit proxies in connection with the special meeting of shareholders.
5.2 Completion of Transactions. At the conclusion of the
--------------------------
recapitalization, the Company will issue to the Purchasers that number of
Company Shares not yet issued to the Purchasers so that, after the
recapitalization, the Purchasers will own 95.0 percent of the issued and
outstanding shares
-6-
<PAGE>
of the Company's voting securities and the Purchasers will pay to the Company
the remaining $10,000 of the Purchase Price.
6. Termination
6.1 Termination by Agreement. This Agreement shall terminate if the
------------------------
Purchasers and the Board of Directors of the Company, prior to the Termination
Date, decide that the transaction is un desirable and mutually agree to
terminate this Agreement.
6.2 Termination upon Default. If any party shall fail to use its best
------------------------
efforts to complete this Agreement and all conditions precedent thereto which
are the responsibility of that party by the Termination Date, then such shall
constitute an event of default under this Agreement. Upon the occurrence of an
event of default hereunder, the non-defaulting party shall have the right to
give notice to the defaulting party of the existence of the event of default no
later than ten days after such event. If the defaulting party shall not have
cured the event of default within 15 days of the date notice is given, the non-
defaulting party shall have the right to terminate this Agreement and to recover
from the defaulting party all costs and expenses incurred by it in connection
with this Agreement and the transactions contemplated hereby, including
reasonable attorneys' fees and other costs of collection.
6.3 Automatic Termination. This Agreement shall terminate in the
---------------------
event the Agreement has not been completed by the Termination Date, unless
extended by mutual agreement of the Company and the Purchasers, or unless notice
of default under Section 6.2 hereof has been given.
7. Miscellaneous
7.1 Notice. Any notice, request, instruction or other document to be
------
given hereunder shall be in writing and, except as otherwise provided for
herein, shall be delivered personally or sent by facsimile (with a confirmation
of receipts) or certified mail as follows:
If to the Company: DEUCALION RESEARCH, INC.
P.O. Box 1107
Williston, North Dakota 58802-1107
Fax Number: 701-774-8400
Attention: President
-7-
<PAGE>
with a copy to:
If to the Purchasers: MICHAEL R. FARLEY and FORREST L. METZ
with a copy to: Gerald Raskin
Raymond L. Friedlob
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Third Floor
Denver, Colorado 80202-5099
or to any subsequent address as to which the other party is advised in
accordance with the foregoing.
7.2 Assignability. Except as otherwise provided in this Agreement, the
-------------
rights and obligations of any party hereto may not be assigned or transferred to
any other person without the consent of the other parties hereto.
7.3 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements herein contained shall survive the execution of this
Agreement and the Initial Closing Date and the completion of the purchase for a
period of one year from the Initial Closing Date.
7.4 Benefit. This Agreement shall be binding upon and shall inure to
-------
the benefit of the Company and the Purchasers, and their respective successors
and permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the Company and the Purchasers
and their successors and permitted assigns, any rights or remedies under or by
reason thereof.
7.5 Fees. Except as otherwise provided herein, the Company and the
----
Purchasers shall pay their own costs and expenses incident to the negotiation,
preparation and performance of this Agreement, and compliance with all
agreements and conditions contained herein, including all fees, expenses and
disbursements of their respective counsel, whether or not the transactions
contemplated hereby are completed.
7.6 Waiver of Terms.
---------------
7.6.1 If any of the conditions specified in Section 4.1 of this
Agreement hereof have not been satisfied, the Company may, nevertheless, at its
election, proceed with the transactions contemplated hereby.
7.6.2 If any of the conditions specified in Section 4.2 of this
Agreement hereof have not been satisfied, the Purchasers may, nevertheless, at
their election, proceed with the transactions contemplated hereby.
-8-
<PAGE>
7.6.3 Any election by the Company or the Purchasers to proceed
pursuant to this Section 6.5 shall be evidenced by a certificate executed by an
officer of the Company or the Purchasers as the case may be.
7.7 Modification. This Agreement cannot be modified, changed,
------------
discharged or terminated except by an instrument in writing, signed by the party
against whom the enforcement of any waiver, change, discharge or termination is
sought. This Agreement and the Subscription Agreements contain the entire
understanding between the parties with respect to the transactions covered
hereby.
7.8 Applicable Law. This Agreement will be construed and governed in
--------------
accordance with the laws of the State of North Dakota.
7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7.10 Status. "Status" as such term is used in this Agreement shall
------
denote whether there is a default or breach in specific contractual obligations
and shall include a description of the character type of such default/breach and
the amount thereof in terms of money, if applicable.
7.11 Finder's Fee. Each of the parties represents and warrants to each
------------
other that no broker or other person is entitled to a brokerage or finder's fee
or commission or other compensation in respect to the execution of this
Agreement and the completion of the transactions contemplated hereby. Each of
the parties hereto agrees to indemnify and hold the other harmless against and
in respect to any and all claims, losses, liabilities or expenses which may be
asserted against such other party by any broker or other person who claims to be
entitled to a brokerage or finder's fee or commission in respect of the
execution of this Agreement and the completion of the transactions contemplated
hereby by reason of his or its acting at the request of such party.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
DEUCALION RESEARCH, INC.
By_____________________________
President
THE PURCHASERS:
_______________________________
Michael R. Farley
_______________________________
Forrest L. Metz
-10-
<PAGE>
EXHIBIT A
---------
DEUCALION RESEARCH, INC.
(A NORTH DAKOTA CORPORATION)
SUBSCRIPTION AGREEMENT
- ----------------------
THE SECURITIES BEING OFFERED BY DEUCALION RESEARCH, INC. HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE BLUE SKY OR
SECURITIES LAWS AND ARE OFFERED UNDER AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF SUCH LAWS.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER CONTAINED IN THIS STOCK
SUBSCRIPTION AGREEMENT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
This Subscription Agreement is entered for the purpose of MICHAEL R. FARLEY (the
"Undersigned") acquiring __________ shares of $.0001 par value common stock (the
"Securities") of DEUCALION RESEARCH, INC., a North Dakota corporation ("the
Company" or the "Company") from the Company in exchange for consideration as set
forth in the Stock Purchase Agreement to which this Subscription Agreement is
attached as Exhibit A. It is understood that this Subscription Agreement is not
binding until the Company accepts it in writing and then only in accordance with
the terms of this Subscription Agreement.
In connection with the Undersigned's acquisition of the Securities, the
Undersigned represents and warrants to the Company as follows:
The Undersigned has been provided, and has reviewed the following documents
to the extent the Undersigned deemed necessary or appropriate (the "Available
Information"):
Describe Available Information In Detail;
The Stock Purchase Agreement; and
Such other information as the Undersigned may have requested of the Company
regarding its past and current business, operations, management, and
financial condition.
The Securities are being acquired by the Undersigned for its own account
and not on behalf
-1-
<PAGE>
of any other person or entity.
The Securities are being acquired for investment purposes and not for
resale or distribution.
1. The Undersigned is not aware of the payment of any commission or other
remuneration to any person in connection with the execution of this transaction
or the purchase of the Securities.
2. The Undersigned has reviewed the Available Information and is aware of
the current situation whereby the Company owes significant sums to creditors and
to certain officers, directors, and shareholders. The Undersigned reviewed the
audit of the Company's financial statements for the three years ended September
30, 1998 and the qualified opinion issued by the Company's independent
[accountants, and the liquidation basis accounting utilized in connection with
the preparation of the Company's financial statements.] The Undersigned further
understands that the Company is not currently engaged in business.
3. The Company has given the Undersigned the opportunity to ask questions
of and to receive answers from persons acting on the Company's behalf concerning
the terms and conditions of this transaction and the opportunity to obtain any
additional information regarding the Company, its business and financial
condition which the Company possesses or can acquire without unreasonable effort
or expense.
4. The Undersigned understands that the Company has substantial
liabilities which will survive the completion of the transactions contemplated
by the Stock Purchase Agreement. The Undersigned further acknowledges and
agrees that the initial obligation to pay the balance of the Purchasers Price as
described in the Stock Purchase Agreement will survive the purchase of the
Securities, and the Undersigned agrees that he intends to pay the balance of the
Purchase Price as described in the Stock Purchase Agreement.
5. The Undersigned's present financial condition is such that it is
unlikely that it would be necessary for the Undersigned to dispose of any
portion of the Securities in the foreseeable future.
6. The Undersigned understands that the Securities being acquired hereby
are and will continue to be restricted securities within the meaning of Rule 144
of the General Rules and Regulations under the Securities Act of 1933, as
amended (the "Act") and applicable state statutes, and consents to the placement
of an appropriate restrictive legend or legends on any certificates evidencing
the Securities and any certificates issued in replacement or exchange therefor
and acknowledges that the Company will cause its stock transfer records to note
such restrictions.
-2-
<PAGE>
7. The Undersigned understands and agrees that:
(a) the Securities have not been registered under the Act or any state
or foreign securities laws;
(b) the Securities cannot be sold unless they are registered under
the Act and any applicable state securities laws or unless an exemption from
such registration requirements is available;
(c) the Undersigned must bear the economic risks of the investment in
the Securities for an indefinite period of time because they have not been
registered under the Act or any state securities laws;
(d) The Company is the only person which may register the Securities
under the Act and state securities statutes and the Company has not made any
representations to the Undersigned regarding the registration of the Securities
or compliance with Regulation A or some other exemption under the Act;
(e) the Undersigned will not sell or attempt to sell the Securities
without registration under the Act and any applicable state securities laws,
unless exemptions from such registration requirements are available and the
Undersigned has satisfied the Company that an exemption is available for such
sale;
(f) The Company shall have the right to issue stop transfer
instructions to its transfer agent to bar the transfer of any of the
certificates representing the Securities except in accordance with the Act.
8. The Undersigned acknowledges and understands that there is no, and may
never be, a market for the Securities. If such an active market should develop
(of which there can be no assurance), the Undersigned will only be able to
resell the Securities pursuant to the provisions of Rule 144 (the "Rule") if the
exemption from registration provided by the Rule is in fact available at the
time that the Undersigned desires to sell the Securities. In case the Rule is
not applicable, any sales may be made only pursuant to an effective registration
statement or an available exemption from registration.
9. The Undersigned agrees to disclose to any proposed buyer or transferee
of the Securities the restrictions relating to the sale or transfer of the
Securities being purchased hereby.
10. This Subscription Agreement shall be irrevocable unless it is rejected
by the Company. By the Undersigned's execution below, it is acknowledged and
understood that the Company is relying upon the accuracy and completeness hereof
in complying with certain obligations under applicable securities laws.
-3-
<PAGE>
11. The Undersigned has reviewed the terms of this Subscription Agreement
and all of the Available Information with his tax and financial advisors to the
extent the Undersigned deems such consultation appropriate, and the Undersigned
has also consulted with such advisors with regard to the advisability of this
investment to the extent deemed appropriate. The undersigned has relied on its
own investigation and upon its advisors with respect to issues regarding the
acquisition of the Company's common stock, including tax aspects and the merit
of the investment, and has not relied on any representations made by the Company
or the officers or directors of the Company.
12. The Undersigned hereby represents that an investment in the Securities
is a suitable investment for it, taking into consideration the restrictions on
transferability and the other considerations affecting the Securities and the
Company as described herein and in the documents attached hereto, and in the
investigation that the Undersigned has made.
13. This Agreement may be amended or modified only in writing signed by
the parties hereto. No evidence shall be admissible in any court concerning any
alleged oral amendment hereof. The Stock Purchase Agreement and this Agreement
fully integrate all prior agreements and understandings between the parties
concerning their subject matter.
14. This Agreement binds and inures to the benefit of the representatives,
successors and permitted assigns of the respective parties hereto.
15. Each party hereto agrees for itself, its successors and permitted
assigns to execute any and all instruments necessary for the fulfillment of the
terms of this Agreement.
16. This Agreement is made under, shall be construed in accordance with
and shall be governed by the laws of the State of North Dakota.
IN WITNESS WHEREOF, subject to acceptance by the Company, the Undersigned
has completed this Subscription Agreement and tendered payment as set forth
above to evidence the Undersigned's commitment to purchase the Securities as set
forth above.
(Undersigned)
--------------------------
MICHAEL R. FARLEY
-4-
<PAGE>
SUBSCRIPTION ACCEPTED AND RECEIPT OF CONSIDERATION ACKNOWLEDGED:
DEUCALION RESEARCH, INC.
______________, 1999 By____________________________
President
-5-
<PAGE>
EXHIBIT B
---------
DEUCALION RESEARCH, INC.
(A NORTH DAKOTA CORPORATION)
SUBSCRIPTION AGREEMENT
- ----------------------
THE SECURITIES BEING OFFERED BY DEUCALION RESEARCH, INC. HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE BLUE SKY OR
SECURITIES LAWS AND ARE OFFERED UNDER AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF SUCH LAWS.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER CONTAINED IN THIS STOCK
SUBSCRIPTION AGREEMENT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
This Subscription Agreement is entered for the purpose of FORREST L. METZ (the
"Undersigned") acquiring __________ shares of $.0001 par value common stock (the
"Securities") of DEUCALION RESEARCH, INC., a North Dakota corporation ("the
Company" or the "Company") from the Company in exchange for consideration as set
forth in the Stock Purchase Agreement to which this Subscription Agreement is
attached as Exhibit B. It is understood that this Subscription Agreement is not
binding until the Company accepts it in writing and then only in accordance with
the terms of this Subscription Agreement.
In connection with the Undersigned's acquisition of the Securities, the
Undersigned represents and warrants to the Company as follows:
The Undersigned has been provided, and has reviewed the following documents
to the extent the Undersigned deemed necessary or appropriate (the "Available
Information"):
Describe Available Information In Detail;
The Stock Purchase Agreement; and
Such other information as the Undersigned may have requested of the Company
regarding its past and current business, operations, management, and
financial condition.
The Securities are being acquired by the Undersigned for its own account
and not on behalf
-1-
<PAGE>
of any other person or entity.
The Securities are being acquired for investment purposes and not for
resale or distribution.
1. The Undersigned is not aware of the payment of any commission or other
remuneration to any person in connection with the execution of this transaction
or the purchase of the Securities.
2. The Undersigned has reviewed the Available Information and is aware of
the current situation whereby the Company owes significant sums to creditors and
to certain officers, directors, and shareholders. The Undersigned reviewed the
audit of the Company's financial statements for the three years ended September
30, 1998 and the qualified opinion issued by the Company's independent
[accountants, and the liquidation basis accounting utilized in connection with
the preparation of the Company's financial statements.] The Undersigned further
understands that the Company is not currently engaged in business.
3. The Company has given the Undersigned the opportunity to ask questions
of and to receive answers from persons acting on the Company's behalf concerning
the terms and conditions of this transaction and the opportunity to obtain any
additional information regarding the Company, its business and financial
condition which the Company possesses or can acquire without unreasonable effort
or expense.
4. The Undersigned understands that the Company has substantial
liabilities which will survive the completion of the transactions contemplated
by the Stock Purchase Agreement. The Undersigned further acknowledges and
agrees that the initial obligation to pay the balance of the Purchasers Price as
described in the Stock Purchase Agreement will survive the purchase of the
Securities, and the Undersigned agrees that he intends to pay the balance of the
Purchase Price as described in the Stock Purchase Agreement.
5. The Undersigned's present financial condition is such that it is
unlikely that it would be necessary for the Undersigned to dispose of any
portion of the Securities in the foreseeable future.
6. The Undersigned understands that the Securities being acquired hereby
are and will continue to be restricted securities within the meaning of Rule 144
of the General Rules and Regulations under the Securities Act of 1933, as
amended (the "Act") and applicable state statutes, and consents to the placement
of an appropriate restrictive legend or legends on any certificates evidencing
the Securities and any certificates issued in replacement or exchange therefor
and acknowledges that the Company will cause its stock transfer records to note
such restrictions.
-2-
<PAGE>
7. The Undersigned understands and agrees that:
(a) the Securities have not been registered under the Act or any state
or foreign securities laws;
(b) the Securities cannot be sold unless they are registered under
the Act and any applicable state securities laws or unless an exemption from
such registration requirements is available;
(c) the Undersigned must bear the economic risks of the investment in
the Securities for an indefinite period of time because they have not been
registered under the Act or any state securities laws;
(d) The Company is the only person which may register the Securities
under the Act and state securities statutes and the Company has not made any
representations to the Undersigned regarding the registration of the Securities
or compliance with Regulation A or some other exemption under the Act;
(e) the Undersigned will not sell or attempt to sell the Securities
without registration under the Act and any applicable state securities laws,
unless exemptions from such registration requirements are available and the
Undersigned has satisfied the Company that an exemption is available for such
sale;
(f) The Company shall have the right to issue stop transfer
instructions to its transfer agent to bar the transfer of any of the
certificates representing the Securities except in accordance with the Act.
8. The Undersigned acknowledges and understands that there is no, and may
never be, a market for the Securities. If such an active market should develop
(of which there can be no assurance), the Undersigned will only be able to
resell the Securities pursuant to the provisions of Rule 144 (the "Rule") if the
exemption from registration provided by the Rule is in fact available at the
time that the Undersigned desires to sell the Securities. In case the Rule is
not applicable, any sales may be made only pursuant to an effective registration
statement or an available exemption from registration.
9. The Undersigned agrees to disclose to any proposed buyer or transferee
of the Securities the restrictions relating to the sale or transfer of the
Securities being purchased hereby.
10. This Subscription Agreement shall be irrevocable unless it is rejected
by the Company. By the Undersigned's execution below, it is acknowledged and
understood that the Company is relying upon the accuracy and completeness hereof
in complying with certain obligations under applicable securities laws.
-3-
<PAGE>
11. The Undersigned has reviewed the terms of this Subscription Agreement
and all of the Available Information with his tax and financial advisors to the
extent the Undersigned deems such consultation appropriate, and the Undersigned
has also consulted with such advisors with regard to the advisability of this
investment to the extent deemed appropriate. The undersigned has relied on its
own investigation and upon its advisors with respect to issues regarding the
acquisition of the Company's common stock, including tax aspects and the merit
of the investment, and has not relied on any representations made by the Company
or the officers or directors of the Company.
12. The Undersigned hereby represents that an investment in the Securities
is a suitable investment for it, taking into consideration the restrictions on
transferability and the other considerations affecting the Securities and the
Company as described herein and in the documents attached hereto, and in the
investigation that the Undersigned has made.
13. This Agreement may be amended or modified only in writing signed by
the parties hereto. No evidence shall be admissible in any court concerning any
alleged oral amendment hereof. The Stock Purchase Agreement and this Agreement
fully integrate all prior agreements and understandings between the parties
concerning their subject matter.
14. This Agreement binds and inures to the benefit of the representatives,
successors and permitted assigns of the respective parties hereto.
15. Each party hereto agrees for itself, its successors and permitted
assigns to execute any and all instruments necessary for the fulfillment of the
terms of this Agreement.
16. This Agreement is made under, shall be construed in accordance with
and shall be governed by the laws of the State of North Dakota.
IN WITNESS WHEREOF, subject to acceptance by the Company, the Undersigned
has completed this Subscription Agreement and tendered payment as set forth
above to evidence the Undersigned's commitment to purchase the Securities as set
forth above.
(Undersigned)
_______________________________________
FORREST L. METZ
-4-
<PAGE>
SUBSCRIPTION ACCEPTED AND RECEIPT OF CONSIDERATION ACKNOWLEDGED:
DEUCALION RESEARCH, INC.
__________________, 1999 By____________________________
President
-5-
<PAGE>
EXHIBIT C
---------
Minutes or Consent of the Board of Directors of The Company
Pursuant to Section 2.1
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,515
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,015
<PP&E> 11,440
<DEPRECIATION> (11,440)
<TOTAL-ASSETS> 10,015
<CURRENT-LIABILITIES> (172,963)
<BONDS> 0
0
0
<COMMON> (51,786)
<OTHER-SE> 214,734
<TOTAL-LIABILITY-AND-EQUITY> (10,015)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,172
<LOSS-PROVISION> 20
<INTEREST-EXPENSE> 1,782
<INCOME-PRETAX> (2,974)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,974)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
