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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995.
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 ____________________
Commission file number: 0-19082
OPTIMAX INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
COLORADO 84-1059458
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
4465 NORTHPARK DR., COLORADO SPRINGS, COLORADO 80907
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 590-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.02 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
The Registrant's revenues for the year ended December 31, 1995 were $454,857.
As of March 31, 1996, the aggregate market value of the Common Stock of the
Registrant based upon the average of the closing bid and asked prices of the
Common Stock as quoted on the Automated Quotation Service ("NASDAQ") of the
National Association of Securities Dealers, Inc., ("NASD") under the symbol
"OPMX" held by non-affiliates of the Registrant was approximately $2,691,688.
As of March 31, 1996, 1,703,091 shares of the Common Stock of the Registrant
were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant incorporates by this reference the following documents:
PART IV - EXHIBITS
1. Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1992.
2. Incorporated by reference from current report on Form 8-K/A-1 reporting an
event of September 30, 1993.
3. Incorporated by reference from the Proxy Statement for Annual Meeting of
Shareholders held January 5, 1995.
4. Incorporated by reference from current report on Form 8-K dated January 20,
1995.
5. Incorporated by reference from an amendment to the Company's registration
statement on Form S-1, Commission file no. 33-38531, filed with the
Commission on the date specified.
6. Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1993.
7. Incorporated by reference from current report on Form 8-K dated February
13, 1995.
8. Incorporated by reference from the Company's registration statement on Form
S-8, S.E.C. File Number 0-19082 filed October 26, 1994.
9. Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1994.
10. Incorporated by reference from current report on Form 8-K dated July 31,
1995.
11. Incorporated by reference from the Company's two (2) registration statement
on Form S-8, S.E.C. File Number 0-19082 filed March 20, 1995.
12. Incorporated by reference from the Company's registration statement on Form
S-8, S.E.C. File Number 0-19082 filed August 10, 1995.
13. Incorporated by reference from an amendment to the Company's registration
statement on Form S-3, Commission file no. 33-98270, filed with the
Commission on October 17, 1995.
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PART I
ITEM 1. BUSINESS
Optimax Industries, Inc., formerly known as Plants For Tomorrow, Inc. (the
"Company") was organized under the laws of the State of Colorado on February 23,
1987 under the name of Grizzly Capital, Inc. ("Grizzly"). In May, 1988, Grizzly
completed its initial public offering of 137,500 Units resulting in gross
proceeds to the Company of $137,500.
On January 5, 1995, the shareholders of the Company approved an amendment
to the Company's Articles of Incorporation to change the name of the Company to
"Optimax Industries, Inc." Articles of Amendment were filed on January 10, 1995
effectuating such change. The Company presently serves as a holding company for
two (2) wholly owned operating subsidiaries, Plants For Tomorrow, Inc., a
Colorado corporation ("Plants"), and Taylor-Built Industries, Inc., a Texas
corporation ("TBI").
PLANTS FOR TOMORROW, INC.
BACKGROUND AND OVERVIEW
On June 22, 1990, pursuant to an Asset Purchase Agreement, the Company
issued 987,500 shares of its Common Stock in exchange for all of the assets
of Plants for Tomorrow and South Florida Seed Supply and changed its name to
"Plants for Tomorrow, Inc." As a result of the acquisition, the Company
entered the environmental sciences business, concentrating on the propagation
and growing of more than 400 species of native and aquatic plants and plant
seeds for the re-vegetation of wetlands and landscaping in the southeastern
United States.
On June 29, 1992, the Company acquired all of the outstanding capital
stock of Central Florida Lands and Timber, Inc. ("CFLT"), of Perry, Florida,
in exchange for $500,000 cash and 40,649 shares of the Company's restricted
Common Stock. At the time of the acquisition, CFLT owned an 80 acre nursery
in Mayo, Florida and 80 acres of timberland in northern Florida. Effective
September, 1993, CFLT's timber division was sold. As of December 31, 1994,
the nursery facilities, property and inventory were encumbered by debts to
the Barnett Bank of North Central Florida in the total amount of
approximately $300,000. On July 29, 1994, the Company executed an Asset
Purchase Agreement for the sale of all assets related to the CFLT nursery
operations to Lafayette County Enterprises, Inc., a Florida corporation
("LCE") owned and operated by Marvin E. Buchanan. The sale was approved by
the shareholders of the Company on January 5, 1995 and consummated on January
20, 1995. In consideration for the transfer and conveyance of such assets,
the Company received $91,365 in cash, $166,365 in an unsecured promissory
note accruing interest at the rate of 6.0% per year payable in two annual
installments, LCE's assumption of all indebtedness to the Barnett Bank of
North Central Florida of approximately $300,000, and LCE's assumption of
certain accounts payable.
Following the Company's sale of CFLT and change of name to Optimax
Industries, Inc. on January 10, 1995, the Company assigned all remaining
nursery operations and the assets and liabilities associated therewith to the
newly formed wholly owned subsidiary of the Company named Plants For
Tomorrow, Inc. Plants maintains its principal offices and nursery in
Loxahatchee, Florida where it is engaged in the propagation and growing of
native and aquatic plants and plant seeds for the re-vegetation of wetlands
and landscaping in the southeastern United States.
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PRODUCTS
The Company has specialized in the propagation and growing of more than
400 species of terrestrial and aquatic plants and plant seeds that are native
to Florida. Historically, the Company has been a leading source of supply
for certain varieties. Native plants are those plants that occur naturally
in the environment, as opposed to exotic plants that are more commonly grown
in nurseries. In addition to growing native plants in its nurseries, the
Company has also gathered seeds, seedlings, and plants from various sites
throughout the State of Florida when necessary to complete jobs or to restock
its nurseries. The original nursery located in western Palm Beach County,
Florida, can produce up to approximately 3,000,000 plants per year for use in
landscape, wetlands, beach and estuary re-vegetation.
Growing over 400 species of plants, including aquatics, the Company had
been one of the most diversified nurseries in the State of Florida. Its
operations have included the sale and installation of native plants,
monitoring the continued growth and maturation of projects it has completed
and those completed by others, and consulting with other nurseries and
landscape design firms as to the use of native plants. The Company also has
several contracts that require it to clear non-native (exotic) trees (such as
the Melaleuca) from natural areas. Customers include private developers and
governmental agencies.
The Company's business is not inherently hazardous, but does from time
to time require persons to work within swampy areas, lakes and marshes.
Although the Company takes every precaution to ensure that its personnel are
properly equipped and trained for such activities, all possible eventualities
cannot be precluded. The Company maintains workers' compensation insurance
through the State of Florida and it believes that this insurance is adequate
in the case of an accident. In addition, the Company does maintain general
liability insurance.
The Company's operations have been realizing operating losses and net
losses as a result of various factors. In many cases, these have resulted
from underbidding jobs and inadequate cost accounting controls. The Board of
Directors made certain significant changes in management in an effort to
rectify certain of the problems that have resulted in such losses. Thus, in
the past year, the Company has engaged in the concerted effort to downsize
its operations, disposing of certain non-productive assets and eliminating
further plant installation contracts.
DISTRIBUTION METHODS
The Company sells, delivers, and propagates native plants. The Company no
longer seeks bids for new installation contracts. The operations of the Company
are limited to the propagation and sale of nursery products, and to new
business endeavors which may be acquired.
COMPETITION
Growing and using native plants requires expertise significantly
different from that required for exotic plants. While there are many
nurseries in Florida, most specialize in exotic plants, although they may
have native plants available as well. There are other nurseries in Florida
that produce many of the same species of native, aquatic plants and seedlings
as the Company, although the Company historically has been the sole supplier
of certain varieties.
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AVAILABILITY OF RAW MATERIALS
Seeds and seedlings required for the growing of the Company's products
are readily available from natural resources in natural (or native)
ecosystems. The Company has the necessary permits from the State of Florida
to pick native plants throughout the State. The Company has prepared a
catalogue of locations where various plants can be found. The Company raises
certain native plants at its nurseries. As noted above, however, the Company
also has a list of locations from which desirable native plants can be
obtained. Consequently, the Company is able to fulfill its commitments not
only from the inventory on hand at the nurseries, but also by collecting
aquatic and terrestrial native plants from natural surroundings for
replanting in a specific job. In the past, the Company has not experienced
difficulty in obtaining a sufficient supply of seeds, seedlings, and plants
for its operations and, at this time, it has no reason to anticipate
difficulty in the future.
PRINCIPAL CUSTOMERS
The Company had no customers during the 1995 fiscal year upon which it
was dependent for a significant portion of its revenues on a continuing basis
because the Company's contracts are generally for a single project or a
finite term. However, as projects are completed, the remaining projects can
be expected to account for a greater proportion of the diminishing revenues
from nursery activities.
GOVERNMENT REGULATION
The activities of the Company are subject to federal and state
environmental laws and regulations which impose limitations on the discharge
of pollutants into the air and water and which establish standards for the
treatment, storage and disposal of solid and hazardous waste. Management
believes that the Company is substantially in compliance with such laws and
regulations, and there are no pending proceedings which question the
Company's compliance with all applicable environmental, health and safety
laws.
The Company's activities are also subject to the federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes relating to the
health and safety of the Company's employees. The Company believes that it
is in substantial compliance with such laws and regulations.
The Company's operations are subject to state and federal laws and
regulations governing discharge of runoff, storm water, process waste water
and the provision of drinking water to employees. The Company believes that
it is operating in compliance with the requirements of the Clean Water Act
and has not received any notice of a violation of that Act or any water
protection statute.
Management anticipates that increasingly strict laws and regulations
relating to the environment, natural resources, and health and safety will
result in increased costs, additional capital expenditures and reduced
operating flexibility. Although the Company does not consider current laws
and regulations relating to such matters to be materially burdensome, there
can be no assurances that future legislative or governmental actions or
judicial decisions will not adversely affect the Company or its ability to
continue to conduct its activities and operations as currently conducted.
EMPLOYEES
The Company currently employs 10 employees, 3 of which are employed on a
full-time basis.
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TAYLOR-BUILT INDUSTRIES, INC.
BACKGROUND AND OVERVIEW
On February 13, 1995, the Company closed upon and consummated the
acquisition of all issued and outstanding common stock of Taylor-Built
Industries, Inc., a Texas corporation ("TBI"), pursuant to an Agreement and
Plan of Reorganization dated January 20, 1995 (the "Agreement"). The
Agreement was between and among the Company, Polyphase Corporation, a Nevada
corporation ("Polyphase"), and TBI. The acquisition was structured in a
manner calculated to qualify as a tax-free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Under the
terms of the Agreement, the Company acquired from Polyphase all issued and
outstanding shares of common stock of TBI in exchange for 200,000 shares of
the Company's $0.02 par value Common Stock. The number of shares exchanged
for the TBI stock was the result of arm's-length negotiations between the
Company and Polyphase, and considered several factors, including the net
equity contribution of TBI of approximately $200,000, the public trading
price of the Company's Common Stock, the relative assets, equity, liabilities
and working capital of both corporations, the operating histories of both
corporations, and the market potential of each entity's products.
TBI will continue to operate as a wholly-owned subsidiary of the
Company, with the Company serving as a holding company and performing certain
administrative functions. The acquisition of TBI did not result in any
change in the directors or officers of the Company or its other subsidiary,
New Plants.
DEVELOPMENT HISTORY OF TBI
TBI was incorporated in March, 1990 as Roadway Products, Inc. The
company changed its name to Taylor-Built Industries, Inc. in December, 1991.
TBI is based in Dallas, Texas. TBI has an exclusive license to manufacture,
and its sole product is, a patented, electrically activated retractable
roll-up bed cover for pick-up trucks. TBI maintains a single limited
manufacturing facility located at 10500 Metric Drive, Suite 118, Dallas,
Texas. To date, its product has been marketed regionally on a very limited
basis due to significant capital constraints. Production and sales have been
limited due to lack of working capital with which to promote and market the
product.
TBI'S PRODUCT
TBI's product is an electronically activated hard cover for the back of
pick-up trucks. The product is marketed under the name "Truk'n'Trunk", and
it is also known as the "Power Security Cover". The product is comprised of
a motor, a box, and interlocking aluminum slats which travel on tracks along
the side of the bed of the pick-up truck. When closed, the cover provides a
solid surface cover for the bed, and the cover locks to secure the contents
of the bed. When opened by the operation of an electronic motor, the cover
retracts into a box at the front of the bed. The motor may be activated with
a key from inside the cab or at the rear of the bed. The cover may also be
activated by a remote switch.
COMPETITION
There are several options available for pick-up truck bed covers. Some
use a large piece of soft vinyl which snaps around the bed. Others use
large, rigid pieces of plastic or fiber-glass which lift as a single unit or
hinge in one or two places. The vinyl design does not provide any security
and is inconvenient to use. The rigid cover design can be heavy and
inconvenient to open and presents storage
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problems when not in use. The retractable solid cover design solves these
problems. There are two other manufacturers of retractable solid covers;
however, neither of these features electronic operation. The TBI product
provides a combination of security, convenience and ease of operation
unmatched by the competitors.
PRODUCT DEVELOPMENT
TBI has recently redesigned and improved the product to reduce its size
and improve its marketability. TBI has reduced the size of the box into
which the cover retracts. This modification increases the space available
for payload without sacrificing other features. TBI also has the ability to
install alarms at a customer's request.
PATENTS AND LICENSES
The TBI product is the subject of U.S. Patent No. 4,786,099 titled
"Truck Bed Cover Device". TBI manufactures and markets the product under an
exclusive, world-wide license from the patent holder. The terms of such
license call for the payment of royalties for each unit sold, and the sale of
a minimum number of units per year after the third year of the license.
Subject to compliance with its terms, including certain minimum sales and
production royalties, the license shall continue for the life of the patent,
as extended or renewed, unless earlier terminated for cause.
EMPLOYEES
TBI employs 4 persons in its Texas facility on a full-time basis. One
employee is clerical, 1 administrative and 2 are engaged in manufacture.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located at the Plants 10 acre
nursery, in Loxahatchee, near West Palm Beach, Florida. Improvements on this
property include nursery beds, two green houses, an extensive irrigation
system, and the Company's 6,000 square foot office building and shop area.
This property is subject to a mortgage collateralizing a loan guaranteed by
the Small Business Administration, which loan is currently in default.
During 1990, the Company purchased approximately 10 acres of land in
Highlands County, central Florida (near Avon) for $123,107. Effective March
31, 1995, this property was sold, with the Company realizing an accounting
loss of approximately $49,000.
As noted above, in June 1992, the Company acquired CFLT which owned an
80-acre nursery in Mayo, Florida. The CFLT nursery site had an office
building, maintenance shop, and a seedling packaging and shipping building,
with a combined total of 4,752 square feet. The nursery facilities, property
and inventory were encumbered by debts to the Barnett Bank of North Central
Florida in the total amount of approximately $300,000. On July 29, 1994, the
Company executed the Asset Purchase Agreement for the sale of all assets
related to the CFLT nursery operations to Lafayette County Enterprises. The
sale was consummated on January 20, 1995. In consideration for the transfer
and conveyance of such assets, the Company received $91,365 in cash, $166,365
in an unsecured promissory note accruing interest at the rate of 6.0% per
year payable in two annual installments, LCE's assumption
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of all indebtedness to the Barnett Bank of North Central Florida of
approximately $300,000, and LCE's assumption of certain accounts payable.
During the past six years, the Company has purchased numerous vehicles
and other nursery equipment. These acquisitions and improvements
significantly increased the Company's investment in the property, plant and
equipment. In addition, the Company owns miscellaneous office, nursery, and
logging equipment.
The Company's remaining nursery facility in Loxahatchee is more than
adequate for its current and prospective nursery operations. In each case,
the Company believes that the properties are adequately covered by liability
and comprehensive insurance.
TBI maintains a manufacturing facility located at 10500 Metric, Suite
118, Dallas, Texas. TBI leases this space and considers it to be adequate
for its manufacturing and administrative requirements during the next year.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1995, the Company was a party to numerous legal
proceedings initiated by trade creditors demanding payment for past due
amounts. The proceedings, were in various stages of litigation, judgment and
collection:
TU-CO PEAT, INC. V. PLANTS FOR TOMORROW, INC., pending in the
County Court for Highlands County, Florida, Case No. CC94-114; the Court
entered judgment of $3,449 in April, 1995.
S.D.K. OF BOCA, INC. V. PLANTS FOR TOMORROW, INC., judgment entered
in the County Court for Palm Beach County, Florida, Case No. MS94-007309RJ,
in the amount of $495 which has been paid in full.
JIM BLACKMAN FORD, INC. V. PLANTS FOR TOMORROW, INC., pending in
the County Court for Highlands County, Florida, Case No. CC94-64; the Company
has entered into a stipulation to pay $6,184.
DOHAN AND COMPANY, PA. V. PLANTS FOR TOMORROW, INC., judgment in
the amount of $5,489 has been paid.
TEAM TEMPS, INC. V. PLANTS FOR TOMORROW, INC., judgment in the
amount of $16,550 was entered on March 14, 1995.
TERRA ASGROW FLORIDA V. PLANTS FOR TOMORROW, INC., judgment in the
amount of $25,167 was entered on January 13, 1995.
In addition to the foregoing trade creditor lawsuits, the following
lawsuits are presently pending:
PRINCE CONTRACTING CO., INC. V. PLANTS FOR TOMORROW, INC. AND
AMERICAN BONDING COMPANY. Prince owes the Company $116,310 for work the
Company has completed. The bonding company has made claim to these funds
insisting that they be held in escrow until the monitoring portion of the
contract is completed (3 years). Prince filed the action in interpleader
with the court. The
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Company has filed a cross-claim against the bonding company for interference
in contract. The bonding company has gone into receivership, and the action
is stayed for 120 days. The Company believes that there is no legal basis
for the bonding company's claims, and that the Company will prevail.
DEVCON INTERNATIONAL CORP. V. PLANTS FOR TOMORROW, INC. Devcon has
sued the Company for breach of contract for the Orlando International Airport
project claiming unspecified damages for nonconforming plant materials. The
Company has counter-claimed for breach of contract for $163,376 plus interest
based on Devcon's continual delays causing plant materials to overgrow. The
Company believes that it will prevail in this lawsuit.
SWITCHGEAR SYSTEMS, INC.
On July 31, 1995, the Company closed upon the acquisition of certain
assets of Switchgear Systems, Inc., a Texas corporation ("SSI"), pursuant to
an Asset Purchase and Sale Agreement dated as of July 13, 1995 (the
"Agreement"). Following the closing, the Company engaged a firm of
independent public accountants who performed an audited examination of the
financial statements of SSI. Based upon the results of the audited
examination of the SSI financial statements, the Company discovered that
there existed a material and substantial variance between the audited
financial condition and historical results of operations of SSI and the
information, financial and otherwise, provided by SSI prior to Closing. In
addition, the audited examination of the SSI financial statements disclosed
numerous operational irregularities that had been effected by the prior owner
of SSI without the Company's knowledge and without disclosure prior to the
closing. Based upon these discoveries, the Company concluded that there
existed facts which would support a claim that the acquisition by the Company
of the assets of SSI had been induced by fraud on the part of the Seller both
by misrepresentation of material fact and by the omission to disclose
material information by the Seller. As a result, on November 22, 1995 the
Company's representative served notice upon SSI that the Company had elected
to rescind the transaction and would seek to recoup the capital investment
that the Company had made into the business prior to its discovery of the
facts which it believes constituted fraud in the inducement. On
approximately November 28, 1995, litigation was commenced in the District
Court of Dallas County, Texas, Case Number 95-12444. In that civil action,
claims for breach of contract are asserted by SSI and its sole shareholder,
David E. Muir ("Muir") against the Company and its wholly-owned subsidiary,
Switchgear Systems International, Inc. ("SSII"), and the Company and SSII
correspondingly are asserting claims against SSI and Muir to enforce its
election to rescind the transaction, and for damages due to fraud in the
transaction. In that civil action, a preliminary injunction has been entered
by the Court in favor of the Company and against SSI and Muir from disposing
or in any other way taking control of the assets of SSI pending further order
of the Court. SSII is no longer in operation. The assets have been seized
and sold on foreclosure of a lien for unpaid rent by the owner of the
business premises in which it had been a subtenant. The proceeds of the sale
were used to pay rent arrearage, with a balance having been paid to the
Internal Revenue Service for accrued and unpaid payroll taxes. It is
unlikely that SSII will resume operations as a going concern in the future.
Based upon the foregoing, the Company intends to vigorously pursue
enforcement of its rescission of the acquisition of SSI and pursue other
remedies for damages which it has against the principals of SSI, and to
defend itself against the claims of SSI and Muir, which it believes are
without merit.
SEC INVESTIGATION
During 1995, the Company received requests for information from the U.S.
Securities and Exchange Commission ("SEC") related to an investigation begun
by the SEC during 1994 into various matters, including certain transactions
in securities by the Company and one of its officers and directors. As of
March 31, 1996, neither management of the Company nor the Company's legal
counsel have been informed of the results, if any, of the SEC's investigation
or of any timetable for the SEC to complete its investigation. There is no
way to predict what, if any, effect the outcome of this matter will have on
the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of year ending December 31, 1995.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock is traded on the over-the-counter market and
quoted on the Automated Quotation Service ("NASDAQ") of the National
Association of Securities Dealers, Inc. ("NASD"), under the symbol, "OPMX."
Before the Company's name change, the trading symbol was "PFTI." The ranges
of high and low bid quotations for the Company's Common Stock for the last
two fiscal years and the current fiscal year are provided below. All quotes
have been adjusted to account for the one-for-twenty reverse split.
<TABLE>
<CAPTION>
HIGH BID LOW BID
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<S> <C> <C>
1994
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First Quarter $7.50 $3.75
Second Quarter $3.75 $1.20
Third Quarter $2.50 $1.50
Fourth Quarter $2.50 $1.50
1995
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First Quarter $2.88 $1.50
Second Quarter $3.88 $1.50
Third Quarter $3.25 $1.25
Fourth Quarter $2.56 $1.00
1996
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First Quarter $3.13 $1.50
</TABLE>
The bid price of the Company's Common Stock as of March 31, 1996,
was approximately $1.875. The foregoing quotations represent interdealer
prices which do not include retail markup, markdown or commissions. As a
result, they do not necessarily represent prices paid in actual transactions.
The number of recordholders of the Company's Common Stock on March
31, 1996 was approximately 248.
DIVIDENDS
The Company has never paid dividends on its Common Stock and does
not anticipate the payment of such dividends in the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report.
LIQUIDITY AND CAPITAL RESOURCES: AT DECEMBER 31, 1995.
The Company's assets, liabilities and stockholders' equity all
substantially declined during the year ended December 31, 1994. The
Company's total assets fell from $2,008,504 on December 31, 1994, to
$1,236059 on December 31, 1995, a 38.52% decline. The Company had no cash as
of December 31, 1995, compared to cash of $55,821 on December 31, 1994.
Accounts receivable have decreased from $342,359 on December 31, 1994, to
$75,852 on December 31, 1995. This 77.8% decrease reflects reduced operations
at Plants and a substantial allowance ($245,143) for doubtful accounts.
Inventory decreased from $436,977 on December 31, 1994, to $345,606 on
December 31, 1995. Again, this 20.9% decrease was the result of reduced
operations at Plants and the sale of the CFLT nursery division. Current
assets as a whole decreased from $863,517 on December 31, 1994, to $618,101
on December 31, 1995, a 28.4% decline. This reduction was the result of
substantially reduced operations as Plants completes current installations
and mitigation contracts without entering into new contracts.
The Company's investment in property, plant and equipment decreased
from $698,889 on December 31, 1994, to $435,827 on December 31, 1995, a 37.6%
decrease. This reduction reflects the sale of the CFLT nursery in January,
1995. (See "ITEM 2. DESCRIPTION OF PROPERTY".) As Plants has completed
portions of its larger projects, contract retainage has increased. Contract
retainage increased from $175,930 on December 31, 1994, to $194,475 on
December 31, 1995; however, $176,005 has been deducted as an allowance for
doubtful accounts leaving a net contract retainage of $18,470, a decrease of
89.5%. The Company has also written off checks totalling $157,500 which have
been returned for insufficient funds.
The Company's liabilities have increased substantially. Accounts
Payable have increased from $366,584 at year end 1994 to $598,080 on
December 31, 1995, a 63.1 % increase. This change reflects the Company's
purchase of TBI, the aborted purchase of Switchgear, and the substantial
expenses incurred in those transactions. The Company is in default on
virtually all of its long-term debts. Therefore, all debts are being reported
as current liabilities. As a result, the current portion of notes payable has
increased from $396,680 on December 31, 1994, to $441,882 on December 31, 1995.
Long-term liabilities of $588,941 on December 31, 1994, have been eliminated.
Notes payable to related parties were reduced 56.6% from $97,541 on December 31,
1994, to $42,256 on December 31, 1995. Reflecting the foregoing, current
liabilities have increased from $860,805 on December 31, 1994, to $1,217,970
on December 31, 1995, a 41.5% increase.
The Company's had a working capital deficit of $599,869 on
December 31, 1995, compared to positive working capital of $2,712 on
December 31, 1994. The current ratio fell from 1.0 at year end 1994 to 0.5
on December 31, 1995.
In December, 1994, the Company issued 76,440 units of the Company's
securities for a purchase price of $2.00 per unit. Each unit consisted of
two (2) shares of the Company's Common Stock and one (1) Warrant for the
purchase of one (1) share of Common Stock at an exercise price of $1.00. The
debt conversion, exchange of BB Warrants and December private placement
combined to increase investment in common shares by $6,032 and additional
paid in capital by $445,873 for a combined increase of $451,905 or 7.7%.
Unfortunately, net losses of ($904,327) more than offset the investments
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<PAGE>
in equity, increasing the accumulated deficit 21.5% to ($5,314,044) and
reducing total stockholders' equity to $1,009,473, a 32.7% decline.
In August, 1994 the Company undertook a one-for-twenty (1-for-20)
reverse split of its $0.001 par value Common Stock and outstanding Options
and Warrants. The reverse split was necessary for the Company to maintain
its NASDAQ listing. In conjunction with the reverse split, the par value of
the Common Stock was increased to $0.02. This change did not result in any
adjustment to the Company's stockholders' equity accounts.
During 1995, the Company sold an aggregate of 740,624 shares of
Common Stock pursuant to the exercise of Warrants issued to various
consultants to the Company. As a result of those stock sales, the Company
realized an increase in capital of $867,284; however, due to the net loss for
the year ended December 31, 1995 of $(1,858,668), stockholders' equity
decreased from $1,900,473 at December 31, 1994 to $18,089 at December 31,
1995.
As a result of the issuance of new stock during the year ended
December 31, 1995, equity capital investment increased from $6,323,517 on
December 31, 1994, to $7,200,806 at year end 1995. Unfortunately, this
equity investment of $877,289 was more than offset by net losses which
increased the accumulated deficit 35.2% to ($7,182,717). Total stockholders'
equity decreased from $1,009,473 on December 31, 1994, to $18,089 on
December 31, 1995.
The Company anticipates that the Company's working capital will
continue to decrease in the short term as Plants and TBI continue to generate
losses and capital continues to be used for its operations. This includes
the need to expend funds to complete work under contract by Plants as of
December 31, 1995. In the absence of the infusion of additional working
capital, either through an equity financing or debt offering, there exists
significant doubt as to the Company's ability to continue as a going concern.
Other than the foregoing, the Company knows of no trends, demands,
commitments, or uncertainties that will result in or are reasonably likely to
result in the Company's liquidity increasing or decreasing in any material way,
and the Company knows of no material trends, demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in a
change in the mix or cost of such resources.
RESULTS OF OPERATIONS: DECEMBER 31, 1995 COMPARED TO DECEMBER 31, 1994.
The Company's sales revenue continued to decline sharply from
$2,251,477 in 1994, to $454,857 for the year ended December 31, 1995, a 79.8%
decrease. This decrease was the result of the sale of the CFLT operations in
January, 1995, and other reductions in operations at Plants. The cost of goods
sold was reduced 58.8% from $1,885,297 in 1994 to $777,375 in 1995. Due to the
foregoing, gross profit decreased from a profit of $366,180 for the year ended
December 31, 1994, to a loss of ($322,518) for the same period in 1995.
Operating expenses increased sharply with the Company's purchase of
TBI and the rescinded purchase of Switchgear. Bad debts in the amount of
$129,172 and returned checks in the amount of $117,495, which were previously
reported as income, have been expensed. Depreciation expense was reduced 22.2%
as a result of the sale of CFLT. The Company took a loss on the write-off of
certain investments totalling $223,980. Salaries not included in the cost of
sales increased 5.9% to $263,153 for the year ended December 31, 1995. Other
expenses decreased 7.4% to $601,867. Total expenses
-12-
<PAGE>
increased from $840,603 form the year ended December 31, 1994, to $1,484,045
for the year ended December 31, 1995, a 76.5% increase.
With the decreased revenues and increased cost of sales and expenses,
the Company's net loss increased from a loss of ($474,423) in 1994 to a loss of
($1,806,563) in 1995.
As a result of the CFLT sale and assignment of related debt, interest
expense was reduced 54.5% to $36,019 for the year ended December 31, 1995.
However, loss on the sale of equipment in that transaction was $26,091.
Due to the foregoing, the Company suffered a net loss of ($1,868,673)
for the year ended December 31, 1995, compared to a loss of ($904,327) in 1994,
a 106% increase. Loss per share increased from ($1.48) in 1994 to ($1.65) in
1995.
The Company is continuing its efforts to reduce operational expenses,
eliminate unproductive assets and sell unprofitable operations.
Because of the Company's continuing operating losses, there is
substantial uncertainty with respect to its ability to continue as a going
concern. Other than the foregoing, the Company knows of no trends, demands, or
uncertainties that will result in or are reasonably likely to result in a change
in the Company's operations.
ITEM 7. FINANCIAL STATEMENTS.
Report of Independent Certified Public Accountants
Balance Sheet - December 31, 1995
Statement of Operations - Years ended December 31, 1994 and 1995
Statements of Stockholders' Equity - Years ended December 31, 1994 and 1995
Statements of Cash Flows - Years ended December 31, 1994 and 1995
Notes to Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no changes in or disagreements with the Company's accountant
which must be reported under this Item during the years ending December 31, 1995
or December 31, 1994. The Company's accountant is Schumacher & Associates, Inc.
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The executive officers and members of the Board of Directors of the Company
and their respective ages and terms are as follows:
NAME AGE POSITION
- ---- --- --------
Paul Stevens 50 President, Chief Financial Officer, Director
since January, 1994
Stephen G. Calandrella 34 Chairperson of the Board of Directors since
1993, Secretary
_________________
No family relationship exists between or among any of the directors or officers
of the Company.
PAUL STEVENS. Mr. Stevens has been President, Chief Financial Officer and
Director of the Company since January 1, 1994. Prior to joining the Company,
Mr. Stevens was Chief Executive Officer of Polyphase Corporation, a publicly-
traded manufacturer and supplier to the United States Department of Defense and
other purchasers of electronic parts. Mr. Stevens was with Polyphase
Corporation from 1988 to 1993. From 1978 through 1988 Mr. Stevens was a
consultant to private companies providing consulting services with regard to
operations.
STEPHEN G. CALANDRELLA. Mr. Calandrella currently serves as Chairman of
the Company's Board of Directors. Mr. Calandrella has been President and
Director of The Rockies Fund, Inc. since February, 1991. The Rockies Fund,
Inc., a Colorado Springs, Colorado-based business development company regulated
under the Investment Company Act of 1940, makes investments in, and managerial
assistance available to, certain eligible portfolio companies. Mr. Calandrella
has served as a Director of Kelly Motors, Ltd., a Fort Collins, Colorado-based
manufacturer of specialty automobiles, Combined Penny Stock Fund, Inc. and
Redwood MicroCap Fund, Inc., both of which are closed-end investment companies
registered under the Investment Company Act of 1940, Good Times Restaurants,
Inc., a publicly-held Denver, Colorado-based company engaged in owning and
operating Good Times Restaurants and Round-The-Corner Restaurants, Southshore
Corp., a publicly-traded family entertainment company, Cogenco International,
Inc., a publicly-traded financial services company, Premier Concepts, Inc., a
publicly-traded jewelry retail chain, and Gold Capital Corporation, a publicly-
traded mining company. Mr. Calandrella also serves as Director and Interim
President of Global Casinos, Inc., a publicly-traded gaming company.
Mr. Calandrella is also engaged in financing and consulting activities for
development stage companies, which consists of advising public and private
companies on capital formation methods, enhancing shareholder valuations,
mergers, acquisitions and corporate restructurings, as well as arranging for
bridge loans and equity purchases.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the Securities Laws of the United States, the Company's Directors,
its Executive (and certain other) Officers, and any persons holding more than
ten percent (10%) of the Company's Common Stock are required to report their
ownership of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and the NASDAQ stock market. Specific due
dates for these reports have been established and the Company is required to
report in this Proxy
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Statement any failure to file by these dates during 1994 and 1995. All of
these filing requirements were satisfied by its Officers and Directors and
ten percent holders except as follows:
Stephen G. Calandrella failed to file with the Securities and Exchange
Commission on a timely basis one report relating to one transaction involving
the Common Stock of the Company. In making these statements, the Company has
relied on the representations of its Directors, Officers and/or ten percent
(10%) shareholders, or copies of the reports that they have filed with the
Commission.
ITEM 10. EXECUTIVE COMPENSATION.
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by, or paid to the
Company's Chief Executive Officer.
TABLE 1
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------- ----------------------- -------
OTHER ALL
ANNUAL RESTRICTED OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) BONUS ($)(1) ($) (#) ($) ($)
- -------- ---- --- ----- ------ --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul Stevens, 1995 $84,000 -0- -0- -0- *** -0- -0-
President 1994 $84,000 -0- -0- -0- 500,000 -0- -0-
</TABLE>
(1) All executive officers of the Company participate in the Company's group
health insurance plan. However, no executive officer received perquisites
and other personal benefits which, in the aggregate, exceeded the lesser of
either $50,000 or 10% of the total of annual salary and bonus paid during
the respective fiscal years.
EMPLOYMENT AGREEMENTS
Effective January 1, 1994, the Company entered into a written Employment
Agreement with Paul Stevens for a term of one (1) year. Pursuant to the
Agreement, Mr. Stevens served the Company as President, Chief Executive
Officer and Chief Financial Officer. Upon execution of the agreement, as
additional compensation, the Company issued to Mr. Stevens Non-Qualified
Options exercisable to acquire up to 12,500 shares of the Company's Common
Stock at an exercise price of $5.62 per share, which shares, upon issuance,
will be "restricted securities" under the Securities Act of 1933, as amended.
The Agreement provides for payment of base salary of $6,000 per month
together with a housing allowance of $1,000 per month. Under the Agreement,
Mr. Stevens was also entitled to receive, as additional compensation,
Non-Qualified Stock Options exercisable to purchase up to an additional
12,500 shares of the Company's Common Stock at a price equal to $7.50 per
share, and up to an additional 25,000 shares of the Company's Common Stock at
a price equal to $10.00 per share, which shares, upon issuance, will also be
"restricted securities" under the Securities Act of 1933, as amended. Of
such Stock
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<PAGE>
Options, 12,500 vested upon issuance, 12,500 vested on June 30, 1994 and the
remaining 25,000 vested on December 31, 1994. Mr. Stevens has voluntarily
surrendered to the Company for cancellation all of the foregoing Options due
to their exercise prices being so much greater than the value of the
underlying Common Stock. Mr. Stevens also received customary benefits and
perquisites made generally available to other executive officers of the
Company, and is entitled to be reimbursed for reasonable and necessary
expenses incurred on behalf of the Company in the discharge of his duties.
Mr. Steven's employment agreement expired on December 31, 1994. No
employment agreement was executed for 1995; however, the Company continued to
pay Mr. Stevens a salary of $6,000 per month and a housing allowance of
$1,000 per month. Payments for November and December have not been made, but
have been reported as accrued liabilities.
STOCK OPTIONS AND WARRANTS
To date, the Company has not implemented a Stock Incentive Plan pursuant
to which it would be authorized to grant Incentive Stock Options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
During 1995, the Company did not grant any Non-Qualified Stock Options
to any directors, officers or consultants.
At December 31, 1995, the Company had outstanding Class BB Common Stock
Purchase Warrants ("BB Warrants") exercisable to purchase, in the aggregate,
229,124 shares of the Company's Common Stock. The exercise price of the BB
Warrants was reduced to $4.00 by the Company's Board of Directors on
September 9, 1995, and reduced further to $3.00 per share by the Board of
Directors on October 16, 1995. The BB Warrants are exercisable until April 1,
1999.
On March 12, 1996, the Company issued BB Warrants exercisable to
purchase 100,000 shares to Stephen G. Calandrella in consideration of
services to the Company. Further, on March 12, 1996, the Company issued BB
Warrants exercisable to purchase 100,000 shares of Common Stock to Allan H.
Applestein as partial compensation under a Financial Advisory Agreement. The
$3.00 per share exercise price of the BB Warrants was substantially higher
than the fair market value of the Company's Common Stock on the date of
grant. As a result of the foregoing grants, there are currently BB Warrants
outstanding exercisable to purchase in the aggregate 429,124 shares of Common
Stock.
In addition to the foregoing, the Company has outstanding Warrants
exercisable to purchase an aggregate of 27,500 shares of Common Stock at an
average exercise price of $22.10 per share. These Warrants were granted in
1992 and 1993 to various consultants to the Company and are substantially
"out of the money."
In addition, the Company granted to the D.C.A. Grantor Trust (the "DCA
Trust") Warrants exercisable to purchase an additional 150,000 shares of
Common Stock at an exercise price of $2.00 per share. The exercise of the
DCA Trust Warrants has been registered on a Registration Statement on Form
S-3 filed under the Securities Act of 1933, as amended, which Registration
Statement was declared effective by the Commission in 1995.
The Company has outstanding Non-Qualified Stock Options which it issued
to former directors exercisable to purchase, in the aggregate, 20,000 shares
of the Company's Common Stock at an exercise price of $15.63 per share. The
exercise price of these Non-Qualified Stock Options is substantially above
the fair market value of the Company's Common Stock.
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<PAGE>
On March 12, 1996, the Company granted Non-Qualified Stock Options
exercisable to purchase for five (5) years an aggregate of 137,500 shares of
Common Stock at an exercise price of $1.50 per share, the market price of the
Company's Common Stock on the date of grant. The Non-Qualified Stock Options
were issued for services rendered to the Company by the following individuals:
NUMBER OF
NON-QUALIFIED
NAME STOCK OPTIONS
---- -------------
Stephen G. Calandrella 25,000
Paul Stevens 25,000
Keith Prim 50,000
Clifford L. Neuman 37,500
Effective December 31, 1994, Mr. Stevens voluntarily surrendered for
cancellation the Non-Qualified Stock Options issued to him under his January 1,
1994 Employment Agreement. Those Non-Qualified Stock Options were exercisable
at prices substantially above the market price of the Company's Common Stock and
were deemed by Mr. Stevens to have no realizable economic value.
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<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of March 31, 1995, the stock ownership of
(i) each person known by the Company to be the beneficial owner of five percent
(5%) or more of the Company's Common Stock, (ii) all officers individually, and
(iii) all directors individually. Each person has sole voting and investment
power with respect to the shares shown, except as noted.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
TITLE OF NAME & ADDRESS ---------------------------
CLASS OF BENEFICIAL OWNER NUMBER(2) PERCENT(1)
----- ------------------- --------- ----------
<S> <C> <C> <C>
$.02 par value Paul Stevens 75,000(3) 4.3%
Common Stock 16361 Norris Road
Loxahatchee, Florida 33470
" Stephen G. Calandrella 357,524(4) 19.4%
7210 Antelope Lane
Colorado Springs, Colorado 80920
" Polyphase Corporation 200,000 11.7%
16885 Dallas Parkway
Dallas,Texas 75248
" Allan H. Applestein 325,000(5) 16.6%
7600 Red Road, Suite 300
South Miami, Florida 33143
" Clifford L. Neuman 87,500(6) 5.0%
1507 Pine Street
Boulder, Colorado 80302
" All directors and officers 432,524 23.2%
as a group (2 persons)
</TABLE>
________________
(1) Shares not outstanding but being beneficially owned by virtue of the
individual's right to acquire them as of the Record Date or within sixty
(60) days of such date are treated as outstanding when determining the
percent of the class owned by such individual.
(2) Gives effect to a one-for-twenty (1-for-20) reverse stock split effective
August 23, 1994.
(3) Includes 50,000 shares of Common Stock and Non-Qualified Stock Options
exercisable to purchase an additional 25,000 shares of Common Stock at an
exercise price of $1.50 per share.
(4) Includes 55,000 shares of Common Stock, Options exercisable to acquire an
additional 2,500 shares of Common Stock at an exercise price of $15.625 per
share, Non-Qualified Stock Options exercisable to purchase an additional
25,000 shares at an exercise price of $1.50 per share, and Class BB
Warrants exercisable to purchase an additional 100,000 shares of Common
Stock at an exercise of $3.00 per share, owned by Mr. Calandrella
individually.
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<PAGE>
Also reflects 162,524 shares of Common Stock and Class BB Warrants
exercisable to purchase an additional 12,500 shares of Common Stock
at an exercise price of $3.00 per share held by the Rockies Fund,
Inc., a Colorado Springs, Colorado-based business development company, of
which Mr. Calandrella is an officer and director. Beneficial ownership of
the shares held by Rockies Fund, Inc. is exercised by the corporation's
Board of Directors whose members are Stephen Calandrella, Charles Powell
and Clifford C. Thygesen. Mr. Calandrella disclaims beneficial ownership
of all shares of Common Stock and Class BB Warrants owned by the Rockies
Fund, Inc. for purposes of Section 16 of the Securities Exchange Act of
1934.
(5) Includes 75,000 shares of Common Stock and BB Warrants exercisable to
purchase an additional 100,000 shares of Common Stock at an exercise price
of $3.00 per share issued pursuant to a Financial Advisory Agreement. (See
"CERTAIN TRANSACTIONS.") Also includes Common Stock Purchase Warrants
exercisable to purchase an additional 150,000 shares of Common Stock at an
exercise price of $2.00 per share granted to and held by the D.C.A. Grantor
Trust, as to which Mr. Applestein exercises voting and investment power.
(6) Includes 50,000 shares of Common Stock and Non-Qualified Stock Options
exercisable to purchase an additional 37,500 shares of Common Stock at an
exercise price of $1.50 per share.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1993, the Company issued 50,000 shares of its Common Stock in a
private placement for $500,000, of which a portion was purchased by an affiliate
of Mr. Calandrella and a portion was purchased by Mr. Power. As further
consideration for their assistance in the placement, Mr. Power and the affiliate
of Mr. Calandrella were each issued BB Warrants exercisable to purchase 12,500
shares of the Company's Common Stock at an exercise price of $6.00 per share.
The expiration date of the BB Warrants, originally May 9, 1994, has been
extended to December 31, 1995. These investors were granted certain
registration rights related to the shares of Common Stock and the shares of
Common Stock underlying the Class BB Warrants. Neither Mr. Calandrella nor Mr.
Power was an officer, director or affiliate of the Company at the time of their
investment in the Company.
Effective September 30, 1993, the Company sold its timber brokerage and
logging division to a corporation owned by Jimmy Mincy, Sr., a former director
of the Company. The terms of the sale included assumption of liabilities of
approximately $600,000 in exchange for assets with a net book value of
approximately $932,000. In addition, the buyer signed a non-interest bearing,
non-recourse note of $350,000, due September 30, 1994, collateralized by 13,750
shares of the Company's common stock owned previously by Mr. Mincy. As part of
the transaction, Mr. Mincy resigned as a director and employee of the Company.
The note is uncollectible, an Mr. Mincy has voluntarily surrendered the 13,750
shares to the Company.
In April 1993, the Company's Board of Directors authorized a grant of Non-
Qualified Stock Options ("NQOs") to directors and former directors of the
Company in consideration of their services. The following table summarizes the
names of those individuals and Options granted:
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<PAGE>
OPTIONS ISSUED BY THE COMPANY TO DIRECTORS
IN APRIL 1993 WHICH OPTIONS DID NOT (AND DO NOT)
EXPIRE UPON THEIR RESIGNATIONS:
<TABLE>
<CAPTION>
NUMBER EXERCISE
NAME OF OPTIONS PRICE EXPIRATION
- ---- ---------- ----- ----------
<S> <C> <C> <C>
Murray Howe 1,250 $15.625 4/30/96
1,250 $15.625 4/30/98
Paul Muncy 6,250 $15.625 4/30/96
6,250 $15.625 4/30/98
Carl T. Bates, Jr. 1,250 $15.625 4/30/96
1,250 $15.625 4/30/98
Peter J. Porath 1,250 $15.625 4/30/96
1,250 $15.625 4/30/98
Jimmy R. Mincy, Sr. 1,250 $15.625 4/30/96
1,250 $15.625 4/30/98
Stephen G. Calandrella 1,250 $15.625 4/30/96
1,250 $15.625 4/30/98
John C. Power 1,250 $15.625 4/30/96
1,250 $15.625 4/30/98
</TABLE>
Through affiliates and in their respective individual capacities,
Mr. Calandrella effected loans to the Company in the aggregate amount of
$223,228.06, and Mr. Power has effected loans to the Company in the aggregate
amount of $85,491.18. The loans carried interest at 7% per annum and were
collateralized by subordinated liens on real property and certain other assets
of the Company. The loans matured and were payable on or before December 31,
1994. On June 30, 1994, the loans effected through Mr. Calandrella and his
affiliates were converted into 186,023 restricted shares of the Company's Common
Stock, and the loans effected through Mr. Power and his affiliates were
converted into 71,242 restricted shares of Common Stock. The conversion value
of $1.20 per share was equal to 100% of the market price of the Company's free-
trading shares on the date of conversion.
Also effective June 30, 1994, other unsecured creditors of the Company also
converted an aggregate of $29,061 in debt into 24,218 restricted shares of
Common Stock. The conversion value of $1.20 per share was equal to 100% of the
market price of the Company's free-trading shares on the date of conversion.
In July and August 1993, the Company undertook a private placement of its
securities in which it obtained subscriptions to purchase 332,500 Units (pre-
split), each Unit consisting of one (1) share of common stock, $.001 par value,
and one (1) Class BB Common Stock Purchase Warrant (the "August 1993 Offering").
Giving effect to the one-for-twenty (1-for-20) reverse split, the foregoing
private placement would have consisted of 16,625 Units. None of the investors
in the private placement were officers, directors or affiliates of the Company.
Due to the dramatic decline in the public trading price of the Company's common
stock, the BB Warrants to be issued as part of the Units suffered a substantial
and material diminution in value. With the realization that the BB Warrants
would unlikely become "in the money" prior to their expiration date in May 1995,
the Company's Board of Directors resolved to permit the investors in the August
1993 Offering to receive one share of the Company's
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<PAGE>
common stock in lieu of each BB Warrant to be issued as part of the Units in
the offering. All subscribers in the offering accepted the substitution and,
as a result, the Company issued an additional 16,625 shares of common stock,
$.02 par value per share, to investors in the August 1993 Offerings in
exchange for the BB Warrant originally included as part of the Units.
The accounting firm of Schumacher & Associates, C.P.A. ("Schumacher") has
served as the Company's independent auditors. In November 1994, Schumacher
purchased from Redwood Properties, Inc. 9 residential properties located in the
State of Arizona. Redwood Properties, Inc. is a wholly-owned subsidiary of
Redwood Microcap Fund, Inc. ("Redwood"), a publicly-traded closed-end management
company registered under the Investment Company Act of 1940 of which Mr. Power
is President, a director and principal shareholder. The purchase price for the
properties was $76,893, of which $61,041 was paid pursuant to a promissory note
given by Schumacher to Redwood. Additionally, Schumacher has agreed to assume
all remaining liabilities related to the properties. The impetus and necessity
for the transaction stemmed from the Company's inability to pay Schumacher's
outstanding invoice for prior services which would have prevented it from being
able to prepare its Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1994 as well as complete the audited examination of its financial
statements as of December 31, 1994 as required under Section 13(a) of the
Exchange Act. Of the $100,000 in cash proceeds received by the Company in
connection with the sale of the Mayo Nursery, the Company paid Schumacher the
full $61,041 which is needed to retire its promissory note in favor of Redwood.
In connection with the acquisition of CFLT the Company entered into
employment agreements with Jimmy Mincy Sr. and Marvin Buchanan that provide for
compensation to them at the rate of $55,000 per year for five years, together
with salary increases and such other benefits and bonuses similar to those paid
to Mr. Bates, the Company's former President. The Company also entered into a
five-year contract with Jimmy Mincy, Jr. at an annual salary of $40,000. With
the sale of CFLT's timber division to a corporation owned and controlled by Mr.
Mincy, Sr., both of the Mincys' employment agreements terminated. Additionally,
in connection with the sale of CFLT's remaining assets to LCE, of which Mr.
Buchanan is President, Mr. Buchanan terminated his employment with the Company
effective September 29, 1994.
DEBT CONVERSION
Effective June 30, 1994, certain creditors of the Company holding debts
which totalled $337,780.24 converted such debts to restricted shares of the
Company's Common Stock. Such debts were converted at the rate of $1.20 per
share (accounting for the 1-for-20 reverse split) which was 100% of the market
price of shares of the Company's free-trading Common Stock at the time. An
aggregate of 281,483 shares were issued to such creditors.
AUGUST, 1993 PRIVATE PLACEMENT
In July and August 1993, the Company undertook a private placement of its
securities in which it obtained subscriptions to purchase 332,500 Units (pre-
split), each Unit consisting of one (1) share of common stock, $.001 par value,
and one (1) Class BB Common Stock Purchase Warrant (the "August 1993 Offering").
Giving effect to the one-for-twenty (1-for-20) reverse split, the foregoing
private placement would have consisted of 16,625 Units. None of the investors
in the private placement were officers, directors or affiliates of the Company.
Due to the dramatic decline in the public trading price of the Company's common
stock, the BB Warrants to be issued as part of the Units suffered a substantial
and material diminution in value. With the realization that the BB Warrants
would unlikely
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<PAGE>
become "in the money" prior to their expiration date in May 1995, the
Company's Board of Directors resolved on October 3, 1994, to permit the
investors in the August 1993 Offering to receive one share of the Company's
common stock in lieu of each BB Warrant to be issued as part of the Units in
the offering. All subscribers in the offering accepted the substitution and,
as a result, the Company issued an additional 16,625 shares of common stock,
$.02 par value per share, to investors in the August 1993 Offerings in
exchange for the BB Warrant originally included as part of the Units.
AGREEMENT WITH CONSULTANT
On October 3, 1994, the Company executed the Neuman & Cobb, 1994
Consultation and Warrant Compensation Agreement with its counsel. Pursuant to
such Agreement, Neuman & Cobb ("N&C") provided certain legal services in
consideration for Common Stock purchase Warrants exercisable to purchase 50,000
shares of the Company's Common Stock at an exercise price of $1.75 per share.
Such Warrants shall expire on October 16, 1997. The shares of Common Stock
issuable upon the exercise of such Warrants were registered under the Securities
Act on Form S-8 filed October 26, 1994, SEC File No. 33-85648.
DECEMBER 1994 PRIVATE PLACEMENT
In December, 1994, the Company sold in private sales 76,440 Units of the
Company's securities. Each Unit consisted of two (2) shares of the Company's
$0.02 par value Common Stock, and one (1) Class A Common Stock Purchase Warrant
exercisable to purchase one share of the Company's Common Stock for an exercise
price of $1.00 and expiring December 31, 1995. The purchase price was $2.00 per
Unit. The Units were sold to sixteen (16) investors in reliance upon an
exemption from the registration requirements of the Securities Act contained in
Sections 3(b) and 4(2) thereof, and Regulation D thereunder. Investors in the
offering received customary piggy-back registration rights, and demand
registration rights commencing one year after issuance subject to certain
limitations and requirements.
WORLD ENTERTAINMENT, INC./SWISS EURO FUND, INC.
Pursuant to Warrant Compensation Agreements dated March 14, 1995, the
Company entered into consulting agreements with World Entertainment, Inc.
("World Entertainment") and Swiss Euro Fund, Inc. ("Swiss Euro Fund") pursuant
to which World Entertainment and Swiss Euro Fund agreed to assist the Company in
marketing and distributing both domestically and internationally the proprietary
truckbed cover manufactured by the Company's newly-acquired subsidiary, Taylor-
Built Industries. Under each agreement, World Entertainment and Swiss Euro Fund
were each granted Warrants exercisable to purchase, in the aggregate, 137,500
shares of the Company's Common Stock at an exercise price of $1.25 per share for
the first 25,000 shares, $1.75 per share for the second 25,000 shares, $2.00 per
share for the next 37,500 shares, $2.25 per share for the next 25,000 and $2.50
per share for the next 25,000 shares. The Company registered under the
Securities Act the exercise of the foregoing Warrants on a Registration
Statement on Form S-8. In connection with the exercise of a portion of the
foregoing Warrants, World Entertainment and Swiss Euro Fund tendered to the
Company the Warrant exercise price in the form of bank drafts which were
dishonored by the depository banks. Nevertheless, the Company authorized the
issuance of shares of Common Stock against delivery of these bank drafts. As of
December 31, 1995, a portion of these bank drafts remain uncollected
notwithstanding the fact that the shares of the Company's Common Stock have been
issued and subsequently resold by World Entertainment and Swiss Euro Fund,
respectively. The Company has retained legal counsel and is engaged in efforts
to collect sums due under these dishonored drafts.
-22-
<PAGE>
D.C.A. GRANTOR TRUST SETTLEMENT
By Agreement dated March 20, 1995, the Company settled certain pending
litigation which had been brought by the D.C.A. Grantor Trust and Allan H.
Applestein, individually, against the Company, its directors and other parties.
Pursuant to the terms of the settlement, the D.C.A. Grantor Trust was granted
Warrants exercisable to purchase, in the aggregate, 150,000 shares of the
Company's Common Stock at an exercise price of $2.00 per share. As part of the
Settlement Agreement, the Company guaranteed a gross profit of $1.25 per share
on the exercise of the first 50,000 Warrants (an aggregate of $62,500);
provided, however, that the Company's maximum liability for any deficiency is
$25,000. The Company has registered the exercise of the foregoing Warrants by
the D.C.A. Trust on a Registration Statement on Form S-3 which has been declared
effective by the Securities and Exchange Commission. As of December 31, 1995,
none of the D.C.A. Grantor Trust Warrants had been exercised and all were
outstanding and exercisable in accordance with their terms.
DEBT CONVERSION
On December 22, 1995, the Company's legal counsel, Neuman & Cobb, agreed to
accept in satisfaction of $30,000 accrued and unpaid charges for legal services
rendered the issuance of 25,000 shares of the Company's Common Stock, valued at
$1.20 per share. The conversion value per share was equal to the fair market
value of the Company's Common Stock on the date of the Agreement. The shares
issued in conversion of the outstanding account payable were "restricted
securities" under the Securities Act but granted to the holder customary
participatory or piggyback registration rights.
FINANCIAL ADVISORY AGREEMENT
On March 12, 1996, the Company entered into a Financial Advisory Agreement
with Allan H. Applestein pursuant to which Mr. Applestein agreed to provide
certain financial advisory services to the Company in connection with the
Company's efforts to seek additional financing as well as merger or acquisition
opportunities. Mr. Applestein is a principal of the D.C.A. Grantor Trust. In
consideration of his financial advisory services, the Company granted to Mr.
Applestein 75,000 shares of Common Stock and BB Warrants exercisable to
purchase, in the aggregate, an additional 100,000 shares of Common Stock at an
exercise price of $3.00 per share. The foregoing securities were "restricted
securities" under the Securities Act of 1933, as amended, but carried customary
participatory or piggyback registration rights. Mr. Applestein continues to be
active as a consultant to the Company and provides financial advisory services
to the Company on an ongoing basis. The Financial Advisory Agreement terminates
on December 31, 1996 or upon three days' prior written notice by either party.
STOCK FOR SERVICES
On March 12, 1996, the Company issued to Mr. Calandrella 50,000 shares of
Common Stock and Non-Qualified Stock Options exercisable to purchase an
additional 25,000 shares of Common Stock at an exercise price of $1.50 per
share. The foregoing securities were issued in consideration of Mr.
Calandrella's services to the Company as an executive officer and director.
On March 12, 1996, the Company granted and issued to Mr. Stevens 50,000
shares of Common Stock and Non-Qualified Stock Options exercisable to purchase
an additional 25,000 shares at an exercise price of $1.50 per share. The
foregoing securities were issued to Mr. Stevens in consideration of his services
as a director and executive officer of the Company.
-23-
<PAGE>
On March 12, 1996, the Company granted and issued to Keith Prim Non-
Qualified Stock Options exercisable to purchase 50,000 shares at an exercise
price of $1.50 per share. Mr. Prim is an executive officer of Taylor-Built
Industries and the foregoing Options were granted in consideration of his
services to that subsidiary.
On March 12, 1996, the Company granted and issued to Clifford L. Neuman
25,000 shares of Common Stock and Non-Qualified Stock Options exercisable to
purchase an additional 37,500 shares at an exercise price of $1.50 per share.
The foregoing securities were issued to Mr. Neuman in consideration of his
services to the Company as legal counsel.
The exercise price of $1.50 per share of the foregoing Non-Qualified Stock
Options issued to Messrs. Calandrella, Stevens, Prim and Neuman was equal to the
fair market value of the Company's Common Stock on the day of grant.
All of the foregoing shares of Common Stock and Non-Qualified Stock Options
were "restricted securities" under the Securities Act, but granted to the
holders customary participatory or piggyback registration rights.
LOAN TO OFFICER AND DIRECTOR
During 1995, the Company loaned to Paul Stevens the sum of approximately
$42,000. The loan was unsecured and due on demand. However, over the course of
1995, the Company continued to suffer from a lack of liquidity and capital
resources and was unable to pay Mr. Stevens' salary as President of the Company
on a regular basis. As a result, the loan to Mr. Stevens has been off-set in
part by accrued and unpaid salary.
-24-
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS
The following financial statements are filed herewith as part of this report:
Report of Independent Certified Public Accountants
Balance Sheet - December 31, 1994
Statement of Operations - Years ended December 31, 1993 and 1994
Statements of Stockholders' Equity - Years ended December 31, 1993 and
1994
Statements of Cash Flows - Years ended December 31, 1993 and 1994
Notes to Financial Statements
CURRENT REPORTS ON FORM 8-K
The Company did not file any current reports on Form 8-K during the fourth
quarter of the year ending December 31, 1994.
EXHIBITS
EXHIBIT NO. TITLE
- ----------- -----
2.1(1) Contract for Sale and Purchase dated September 16, 1992
(acquisition of Central Florida Lands & Timber, Inc.);
2.2(2) Asset Purchase and Sale Agreement dated July 29, 1994 (Sale of
CFLT).
2.3(3) Exchange Agreement Dated as of February 9, 1995 between
Optimax Industries, Inc. and Plants For Tomorrow, Inc.;
2.4(4) Agreement and Plan of Reorganization dated January 20, 1995
between Taylor-Built Industries, Inc. and Optimax Industries,
Inc. and Polyphase Corporation;
2.5(5) Asset Purchase and Sale Agreement dated as of July 31, 1995
(Switchgear)
3(i).1(6) Amended and Restated Articles of Incorporation and Certificate
of Correction;
3(i).2(3) Articles of Amendment dated October 19, 1994 (increasing par
value of Common Stock to $0.02 per share);
3(i).3(3) Articles of Amendment dated January 10, 1995 (name change);
3(ii)(6) Bylaws;
-25-
<PAGE>
10.1(7) Employment Agreement with Paul Stevens effective January 1,
1994;
10.2(6) Warrant Agreement with Respect to the Class BB Warrants;
10.3(8) Neuman & Cobb, 1994 Consultation and Warrant Compensation
Agreement dated October 3, 1994;
10.4(9) Swiss Euro Fund, Inc., 1995 Consultation and Warrant
Compensation Agreement;
10.5(9) World Entertainment, Inc., 1995 Consultation and Warrant
Compensation Agreement;
10.6(3) Agreement For Settlement of Litigation and Grant of Warrant
dated March 20, 1995;
10.7(10) Charles V. Lemmon 1995 Consultation and Warrant Compensation
Agreement;
21 Subsidiaries of the Company.
__________________________________
(1) Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1992.
(2) Incorporated by reference from the Proxy Statement for Annual Meeting of
Shareholders held January 5, 1995 and from current report on Form 8-K dated
January 20, 1995.
(3) Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1994.
(4) Incorporated by reference from current report on Form 8-K dated February
13, 1995.
(5) Incorporated by reference from current report on Form 8-K dated July 31,
1995.
(6) Incorporated by reference from an amendment to the Company's registration
statement on Form S-1, Commission file no. 33-38531, filed with the
Commission on the date specified.
(7) Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1993.
(8) Incorporated by reference from the Company's registration statement on Form
S-8, S.E.C. File Number 0-19082 filed October 26, 1994.
(9) Incorporated by reference from the Company's two (2) registration
statements on Form S-8, SEC File Number 0-19082 filed March 20, 1995.
(10) Incorporated by reference from the Company's two (2) registration
statements on Form S-8, SEC File Number 0-19082 filed August 10, 1995.
-26-
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
and
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1995 and 1994
F-1
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
December 31, 1995 and 1994
Table of Contents
PAGE
----
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements:
Consolidated Balance Sheet F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Changes in Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Optimax Industries, Inc.
Loxahatchee, FL 33470
We have audited the consolidated balance sheets of Optimax Industries, Inc.
and Consolidated Subsidiaries as of December 31, 1995 and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the two years ended December 31, 1995. 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 an 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Optimax Industries, Inc. and Consolidated Subsidiaries as of December 31,
1995 and the consolidated results of its operations, its changes in
stockholders' equity and its cash flows for the two years ended December 31,
1995 in conformity with generally accepted accounting principles.
The Company is involved in certain litigation as described in note 8. The
amount, if any, of additional assets or liabilities that may ultimately be
realized from this litigation cannot presently be determined.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Notes 1 & 7 to the consolidated financial statements, the Company has had
recurring losses from operations which have reduced cash on hand to minimal
balances. This raises substantial doubt about its ability to continue as a
going concern. Management's plan in regard to these matters is also described
in Note 7. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road, Tower II, Suite 110
Englewood, CO 80112
March 16, 1996
F-3
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995
ASSETS
<TABLE>
<S> <C>
Current Assets
Accounts receivable, net of allowance for doubtful
accounts of $245,143 $ 75,852
Advances to related parties (Note 11) 24,319
Inventory (Note 5) 345,606
Note receivable (Note 1) 170,000
Other 2,324
-----------
Total Current Assets 618,101
Property and equipment, net of accumulated depreciation of
$639,523 (Notes 2 and 4) 435,827
Contract retainage, net of allowance for doubtful accounts
of $176,005 18,470
Nonsufficient checks receivable, net of allowance for bad
debts of $117,495 (Note 6) -
Goodwill, net of accumulated amortization of $11,690 (Note 1) 163,661
-----------
Total Assets $ 1,236,059
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Outstanding checks in excess of amounts reported by banks $ 5,786
Payroll taxes payable (Note 1) 129,966
Accounts payable and accrued expenses 598,080
Notes payable (Note 4) 441,882
Advances payable, related parties (Note 9) 42,256
-----------
Total Current Liabilities 1,217,970
-----------
Total Liabilities 1,217,970
-----------
Commitments and contingencies (Notes 1,3,6,7,8,10,12,13 and 14) -
Stockholders' Equity (Note 3):
Preferred shares - $.001 par value, 5,000,000 shares
authorized, none issued -
Common shares - $.02 par value, 20,000,000 shares authorized;
1,503,091 shares issued and outstanding 30,062
Additional paid in capital 7,160,739
Accumulated deficit (7,172,712)
-----------
Total Stockholders' Equity 18,089
-----------
Total Liabilities and Stockholders' Equity $ 1,236,059
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sales $ 454,857 $2,251,477
Cost of sales (exclusive of depreciation
shown separately below) 777,375 1,885,297
----------- ----------
Gross Profit (Loss) (322,518) 366,180
----------- ----------
Expenses
Bad debts 129,172 (196,866)
Nonsufficient checks received (Note 6) 117,495 -
Depreciation 108,373 139,355
Loss from investment write-off (Note 1) 223,980 -
Salaries, not included in cost of sales 263,153 248,381
Other expenses 631,867 649,733
----------- ----------
Total Expenses 1,474,040 840,603
----------- ----------
Net (Loss) before Other (Expenses) and
loss from discontinued operations (1,796,558) (474,423)
----------- ----------
Other (Expenses)
Interest (expense) (36,019) (79,204)
(Loss) on disposition of division
(Note 1) - (272,886)
(Loss) on disposition of equipment (26,091) (10,129)
----------- ----------
Total Other (62,110) (362,219)
----------- ----------
Net (Loss) from Continuing
Operations (1,858,668) (836,642)
Discontinued operations (Note 1):
(Loss) from operations of discont-
inued divisions - (67,685)
----------- ----------
Net (Loss) $(1,858,668) $ (904,327)
----------- ----------
----------- ----------
Net (Loss) per Share $ (1.64) $ (1.48)
----------- ----------
----------- ----------
Weighted Average Shares Outstanding 1,132,779 611,641
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
From December 31, 1993 through December 31, 1995
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON STOCK PAID-IN (ACCUMULATED
NO./SHARES AMOUNT CAPITAL DEFICIT) TOTAL
---------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 460,816 $ 9,217 $5,862,395 $(4,409,717) $ 1,461,895
Common stock issued 301,651 6,032 445,873 - 451,905
Net (loss) for the year ended
December 31, 1994 - - - (904,327) (904,327)
--------- ------- ---------- ----------- -----------
Balance at December 31,1994 762,467 15,249 6,308,268 (5,314,044) 1,009,473
Common stock issued 740,624 14,813 852,471 - 867,284
Net (loss) for the year ended
December 31, 1995 - - - (1,858,668) (1,858,668)
--------- ------- ---------- ----------- -----------
Balance at December 31,1995 1,503,091 $30,062 $7,160,739 $(7,172,712) $ 18,089
--------- ------- ---------- ----------- -----------
--------- ------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $(1,858,668) $ (904,327)
Adjustments to reconcile net (loss) to
net cash used in operating activities
Depreciation 108,373 139,355
Increase (decrease) in accounts payable
and accrued expenses 361,462 (314,953)
Stock issued for services 30,000 -
Decrease in accounts receivable 266,507 111,641
Decrease in inventory 91,371 954,445
Other 35,935 56,863
----------- -----------
Net Cash Provided by (Used in) Operating
Activities (965,020) 43,024
Cash Flows from Investing Activities:
Disposition of property and equipment 308,172 575,320
(Increase) decrease in notes receivable 87,730 (257,730)
Other 24,319 (56,432)
----------- -----------
Net Cash Provided by Investing Activities 420,221 261,158
Cash Flows from Financing Activities:
Issuance of stock and capital contributions 637,284 451,905
Repayment of advances from related parties (55,285) (108,709)
Repayment of notes payable (93,021) (620,659)
----------- -----------
Net Cash Provided by (Used in) Financing
Activities 488,978 (277,463)
Increase (Decrease) in Cash (55,821) 26,719
----------- -----------
Cash, Beginning of Period 55,821 29,102
----------- -----------
Cash, End of Period $ - $ 55,821
----------- -----------
----------- -----------
Interest Paid $ - $ 79,204
----------- -----------
----------- -----------
Income Taxes Paid $ - $ -
----------- -----------
----------- -----------
</TABLE>
Note: During 1995 the Company issued 200,000 shares of its common stock in
exchange for Taylor-Built Industries, Inc.
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
(a) GENERAL
Optimax Industries, Inc. (Optimax) formerly Plants for Tomorrow, Inc.
(Plants) was organized under the laws of the State of Colorado on
February 23, 1987. During January, 1995 the Company changed its name
to Optimax Industries, Inc. and formed a new Colorado Corporation
named Plants for Tomorrow, Inc. All of the operating assets and
liabilities of the nursery division located in Loxahatchee, Florida
were assigned to the new Plants for Tomorrow, Inc.
Plants is in the environmental sciences business and its business
operations include the propagation and growing of more than 400
species of native and aquatic plants, trees and seeds for
revegetation of wetlands and landscaping. Plants also provides
contract mitigation services related to the revegetation of wetlands.
Effective January 20, 1995 the Company acquired what it believed to
be 100% ownership of Taylor-Built Industries, Inc. (TBI) in exchange
for 200,000 shares of the Company's common stock. For accounting
purposes, the business combination was considered to be a purchase,
as such, all of the assets and liabilities of TBI were revalued as of
the date of acquisition to net fair value. The market value of the
Company's common stock discounted by 50% due to its restrictive
nature, was used as the value of the shares issued. This resulted in
goodwill of $175,351 which is being amortized on a straight-line
basis over 15 years. TBI is in the business of manufacture and sale
of electronic truck covers for pickup trucks. After acquiring TBI,
the Company learned that another party may have had an option to
acquire 20% of TBI. The seller represented that he had ownership of
100% of TBI. It is managements belief that to the extent an option
was outstanding related to TBI, the optionholder's recourse is to the
seller. The optionholder has made no demands on the Company
regarding this matter. The results of operations of TBI since
acquisition and its assets and liabilities as of December 31, 1995
have been included in the 1995 consolidated financial statements.
F-8
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES, CONTINUED
(a) GENERAL, CONTINUED
The approximate purchase cost of TBI is summarized as follows:
Inventory $ 45,000
Accounts receivable 1,000
Equipment 24,000
Other assets 5,000
Goodwill 175,000
--------
$250,000
--------
--------
Accounts payable and other
liabilities assumed $ 50,000
Common stock issued 200,000
--------
$250,000
--------
--------
Effective April 17, 1993 TBI entered into an exclusive license
agreement with an Illinois limited partnership granting TBI the
exclusive right to use and sell the electrically-activated
retractable covers for truck vehicles. TBI paid advance royalties of
$10,000 which are being applied against earned royalties. Royalty
fees range between $6.60 and $12.60 per unit sold depending upon
production costs, with an additional $3.00 per unit royalty due if
sales exceed 5,000 units per year. As of December 31, 1995 prepaid
royalty fees totalled $2,325. The Company is attempting to sell the
license rights in exchange for future royalty payments.
Included in the consolidated financial statements are the accounts of
Flora Fauna, Inc. (FFI), (formerly Central Florida Lands & Timber,
Inc.) a wholly-owned subsidiary. FFI was an inactive subsidiary
during 1995. Effective December 31, 1994 but closing in January,
1995, FFI sold its bareroot nursery division located in north central
Florida for $257,730. The terms of the sale included cash of
$91,365, which was received in January, 1995 and a promissory note in
the amount of $166,365. The note bears had an interest rate of 6%
per annum. The note was payable in two equal annual installments of
$91,520, including interest on December 31, 1995 and December 31,
1996.
F-9
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES, CONTINUED
(a) GENERAL, CONTINUED
Effective in February 1996 the original note balance plus accrued
interest was negotiated to be $170,000. Of this amount, $125,000 was
paid in February, 1996 leaving a balance due of $45,000. This
balance is a non-recourse note with a provision requiring the note
signer to sell 16,876 shares of Optimax Industries, Inc. stock at the
request of the Company and pay the proceeds toward the note balance.
During March, 1996 approximately one third of the shares were sold
for $15,278 which was credited to the balance of the note, with the
remaining unpaid balance then equalling $29,722. A contingency
exists with respect to the ability of the payor to sell the remaining
shares at a price sufficient to cover the remaining $29,722 balance
on the note. The ultimate resolution of this matter cannot presently
be determined.
During 1995 the Company formed Switchgear Systems International, Inc.
for the purpose of acquiring the assets of Switchgear Systems, Inc.
The Company closed on the transaction and subsequently discovered
material misrepresentation and fraudulent transactions of Switchgear
Systems, Inc. and rescinded the transaction. There is litigation in
process regarding this transaction. The Company lost approximately
$223,980 related to this transaction. Contingencies exist with
respect to this matter, the ultimate resolution of which cannot
presently be determined.
The results of operations of the disposed of division have been
separated in the 1994 statement of operations. All material
intercompany transactions and account balances have been eliminated
in the consolidation. All references to "Company" refer to Optimax
and Subsidiaries on a consolidated basis.
F-10
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES, CONTINUED
(b) INCOME TAXES
The Company has net operating loss carryovers of approximately
$7,000,000 expiring in the years 2010. Recent changes in stock
ownership or changes in control of the Company could reduce or
eliminate the Company's ability to utilize this net operating loss
carryover. As of December 31, 1995 the Company has total deferred
tax assets of approximately $1,050,000 due to operating loss
carryovers. However, because of the uncertainty of potential
realization of these tax assets, the Company has provided a valuation
allowance for the entire $1,050,000. Therefore, no tax assets have
been recorded in the financial statements as of December 31, 1995.
(c) REVENUE RECOGNITION
Revenues are recognized when earned and the related cost of sales are
then matched against the revenues. Revenues related to contracts are
recognized as earned based upon the percentage completion method.
(d) COST OF SALES
Cost of the acquisition and care of seeds and plants are recorded as
cost of sales. Such costs are primarily labor costs, and include the
cost of labor associated with the gathering of seeds and plants from
properties under agreement with the respective landowners whereby
there is no charge to the Company for the seeds or plants gathered.
Cost of sales of the contract services operations include labor,
materials and related direct expenses.
(e) BAD DEBTS
The Company provides an allowance for uncollectible accounts
receivable based on the Company's past collection history. Credit
risk is concentrated principally in Florida. The Company does not
require customers to collateralize accounts receivable. During 1994,
the Company reduced its allowance for bad debts based on collection
experience and review of the remaining past due accounts receivable
resulting in a credit to bad debts expense of $196,866. During 1995
a provision for bad debts of $129,172 was provided.
F-11
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES, CONTINUED
(f) INVENTORY
The inventory which consists principally of plants and trees is
valued at the lower of cost or market, determined by the average cost
method. No general and administrative costs are allocated to
inventory.
(g) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost less accumulated
depreciation. Depreciation is provided over the estimated useful
lives of the assets using the accelerated methods of depreciation.
The estimated useful lives of the assets are: vehicles - 3 to 7
years; equipment - 5 to 10 years; furniture and fixtures - 5 to 7
years; buildings - 31 1/2 years.
(h) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. At December
31, 1995, the Company had no net cash on hand and was in default on
the payment of various notes payable as described in Note 4 and in
default on payment of withheld payroll taxes. The Company has
incurred substantial operating losses in 1994 and 1995. These
factors raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements
do not include any adjustments include potential substantial losses
from liquidation of various equipment and inventory that might result
from the outcome of this uncertainty.
(i) REVERSE STOCK SPLIT
During 1994, the Company effected a one-for-twenty reverse common
stock split. All references to shares of common stock in the
financial statements have retroactively been adjusted for this
reverse stock split.
F-12
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES, CONTINUED
(j) 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
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
(2) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 is summarized as
follows:
Buildings and land improvements $ 430,596
Vehicles 225,835
Equipment 264,738
Furniture and Office
Equipment 154,181
----------
1,075,350
Accumulated Depreciation (639,523)
----------
$ 435,827
----------
----------
(3) SECURITIES
The Company has 20,000,000 common and 5,000,000 preferred shares
authorized. There is no preferred stock outstanding as of December 31,
1995. The Board of Directors have the right to issue preferred stock and
designate the terms and preferences.
During December, 1995 the Company issued 25,000 shares of its common stock
for services valued at $30,000. This transaction was recorded as an
expense in the amount of $30,000 as stock issued for services. During
1995, 515,624 shares of the Company's common stock were issued for
$637,284 through various Form S-8 offerings and other transactions. In
addition, 200,000 shares of common stock were issued in exchange for TBI.
F-13
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(3) SECURITIES, CONTINUED
During 1995 the Company did not grant any Non-Qualified Stock Options to
any directors, officers or consultants.
At December 31, 1995, the Company had outstanding Class BB Common Stock
Purchase Warrants (BB Warrants) exercisable to purchase, in the aggregate,
229,124 shares of the Company's Common stock. The exercise price of the
BB Warrants was reduced to $4.00 by the Company's Board of Directors on
September 9, 1995, and reduced further to $3.00 per share by the board of
Directors on October 16, 1995. The BB warrants are exercisable until
April 1, 1999.
On March 12, 1996, the Company issued BB Warrants exercisable to purchase
100,000 shares to Stephen G. Calandrella in consideration of services to
the Company. Further, on March 12, 1996, the Company issued BB Warrants
exercisable to purchase 100,000 shares of Common Stock to Allan H.
Applestein as partial compensation under a Financial Advisory Agreement.
The $3.00 per share exercise price of the price of the BB Warrants was
substantially higher than the fair market value of the Company's Common
Stock on the date of grant. As a result of the foregoing grants, there
are currently BB Warrants outstanding exercisable to purchase in the
aggregate 429,124 shares of Common Stock.
In addition to the foregoing, the Company has outstanding Warrants
exercisable to purchase an aggregate of 27,500 shares of Common Stock at
an average exercise price of $22.10 per share. These Warrants were
granted in 1992 and 1993 to various consultants to the Company.
In addition, the Company granted to the D.C.A. Grantor Trust (DCA Trust)
Warrants exercisable to purchase an additional 150,000 shares of Common
Stock at an exercise price of $2.00 per share. The exercise of the DCA
Trust Warrants has been registered on a Registration Statement on Form S-3
filed under the Securities Act of 1933, as amended, which Registration
Statement was declared effective by the Commission in 1995.
The Company has outstanding Non-Qualified Stock Options which it issued to
former directors exercisable to purchase, in the aggregate, 20,000 shares
of the Company's Common Stock at an exercise price of $15.63 per share.
F-14
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(3) SECURITIES, CONTINUED
On March 12, 1996, the Company entered into a Financial Advisory Agreement
with Allan H. Applestein pursuant to which Mr. Applestein agreed to
provide certain financial advisory services to the Company in connection
with the Company's efforts to seek additional financing as well as merger
or acquisition opportunities. Mr. Applestein is a principal of the DCA
Trust. In consideration of his financial advisory services, the Company
granted Mr. Applestein 75,000 shares of Common Stock and BB warrants
exercisable to purchase, in the aggregate, an additional 100,000 shares of
Common Stock at an exercise price of $3.00 per share. The foregoing
securities were "restricted securities" under the Securities Act of 1933,
as amended, but carried customary participatory or piggyback registration
rights. Mr. Applestein continues to be active as a consultant to the
Company and provides financial advisory services to the Company on an
ongoing basis. The Financial Advisory Agreement terminates on December
31, 1996 or upon three days' prior written notice by either party.
On March 12, 1996, the Company issued to Mr. Calandrella 50,000 shares of
Common Stock and Non-Qualified Stock Options exercisable to purchase an
additional 25,000 shares on Common Stock at an exercise price of $1.50 per
share. The foregoing securities were issued in consideration of Mr.
Calandrella's services to the Company as an executive officer and
director.
On March 12, 1996, the Company granted and issued to Mr. Stevens 50,000
shares of Common Stock and Non-Qualified Stock Options exercisable to
purchase an additional 25,000 shares at an exercise price of $1.50 per
share. The foregoing securities were issued to Mr. Stevens in
consideration of his services as a director and executive officer to the
Company.
On March 12, 1996, the Company granted and issued to Keith Prim Non-
Qualified Stock Options exercisable to purchase 50,000 shares at an
exercise price of $1.50 per share. Mr. Prim is an executive officer of
Taylor-Built Industries and the foregoing Options were granted in
consideration of his services to that subsidiary.
On March 12, 1996, the Company granted and issued to Clifford L. Neuman
25,000 shares of Common Stock and Non-Qualified Stock Options exercisable
to purchase an additional 37,500 shares at an exercise price of $1.50 per
share. The foregoing securities were issued to Mr. Neuman in
consideration of his services to the Company as legal counsel.
F-15
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(3) SECURITIES, CONTINUED
The exercise price of $1.50 per share of the foregoing Non-Qualified Stock
Options issued to Messrs. Calandrella, Stevens, Prim and Neuman was equal
to the fair market value of the Company's Common Stock on the day of
grant.
All of the foregoing shares of Common Stock and Non-Qualified Stock
Options were "restricted securities" under the Securities Act, but granted
to the holders customary participatory or piggyback registration rights.
(4) NOTES PAYABLE
The following is a summary of notes payable at December 31, 1995:
A nineteen year mortgage loan guaranteed
by the Small Business Administration
dated April 28, 1989, collateralized by
certain real property, accounts receivable,
inventory, and equipment bearing interest
at the New York prime rate as published
by the Wall Street Journal plus 2.75%.
Amounts are payable in monthly install-
ments of $3,007 including principal and
interest. This loan is in default and
has been classified as a current liability $ 230,752
A nineteen year mortgage loan collateral-
ized by certain real property, dated
April 28, 1989, bearing interest at the
New York prime rate as published by the
Wall Street Journal plus 2.75%. Amounts
are payable in monthly installments of
$611 including principal and interest. As
of December 31, 1995 this note was in
default and has been classified as a current
liability. 40,479
Short-term note payable to a bank, col-
lateralized by accounts receivable and
equipment, matured May 6, 1994, and is
in default. Total principal is currently
due. 157,030
F-16
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(4) NOTES PAYABLE, CONTINUED
Other note payable to an entity owned by the
former owner of TBI. This note payable
balance is in default. 13,621
-----------
Total $ 441,882
-----------
-----------
The majority of the notes payable are guaranteed by former officers of the
Company or of its Subsidiaries.
(5) INVENTORY
The Company's inventory consists principally of plants, trees and seeds.
There are no significant amounts of materials and supplies included in
inventory. Seeds are sold directly or are planted for sale. Plants and
trees are sold at various stages of growth.
(6) NON-SUFFICIENT CHECKS RECEIVABLE
During 1995 the Company, pursuant to a S-8 registration issued 75,000
shares in exchange for checks totalling $150,000 which never cleared the
bank due to non-sufficient funds. Of this amount $38,100 was later
received. As of December 31, 1995 the Company had a receivable of the
$111,900 plus a 5% penalty of $5,595 receivable for these bad checks. An
allowance for bad debts for the total $117,495 has been provided. A
contingency exists with respect to the potential ultimate recovery of any
amounts related to this matter. The amount, if any, of potential future
recovery cannot presently be determined.
(7) OPERATING LOSSES
During 1994 and 1995 the Company incurred substantial operating losses.
Operating losses have continued through the first quarter of 1996. These
operating losses have resulted in a substantial negative cash flow from
operating activities. Management has a plan to alleviate the negative cash
flow and to increase available cash resources as follows:
The Company is in the process of negotiations with a potential
business combination candidate which would be able to provide
financial resources for the Company.
See Note 1 for a discussion of the basis of presentation of the financial
statements.
F-17
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(8) LITIGATION
Various creditors have filed litigation against the Company demanding
payment of past due amounts. Balances owed to these creditors are
included in accounts payable.
During 1994, a shareholder of the Company filed litigation against the
Company and certain officers and directors. Subsequent to December 31,
1994 the Company agreed to grant the shareholder the right to acquire
150,000 shares of the Company's common stock at $2 per share at any time
during the following five years. The Company has agreed to register the
underlying shares at the Company's expense.
The Company has also been sued by a customer that alleges breach of
contract for one of the Company's contract projects. The suit claims
unspecified damages for nonconforming plant materials. The Company has
counter claimed for breach of contract for $163,376, plus interest. The
Company contends that the customer caused continual delays which caused
the plant material to overgrow and, subsequently the materials were deemed
to be not acceptable. The Company has been served with a demand for
judgement in this matter totalling approximately $250,000. Under Florida
law, if the demand is not paid and if a jury awards 25% more than the
demand amount, the Company would be liable for the plaintiffs legal costs
and fees. The Company has indicated that they will not agree with the
settlement. The Company's legal counsel believes that the Company has a
defensible position but that the outcome of this matter cannot reasonably
be determined. The Company has provided no specific liability for this
matter in the financial statements but has recorded a general provision
for warranty losses of $92,500 as of December 31, 1995. A contingency
exists with respect to this matter.
The Company and a director have been named as defendants in a lawsuit
filed March 19, 1996. The plaintiff alleges breach of contract for
consulting services and seeks damages in the amount of $300,000. The
Company deems the claims made to be without merit and the Company's legal
counsel considers the likelihood of a material adverse judgement against
the Company to be extremely remote. A contingency exists with respect to
this matter.
F-18
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(8) LITIGATION, CONTINUED
Also included in accounts receivable is $116,310 for work completed for a
customer. The bonding company has made claim on these funds, insisting
that they be held in escrow until the three year monitoring phase of the
contract is completed. According to the escrow agreement terms, $116,310
is being held for the benefit of the Company, but both the Company and the
bonding company have made demands for the funds. An allowance for bad
debts has been provided related to this matter and the Company is carrying
a net receivable from this customer of approximately $70,000. Management
believes that the company will at least collect $70,000 and it is likely
that more will be collected. A contingency exists with respect to this
matter, and the ultimate resolution cannot presently be determined. The
customer filed an action in interpleader with the court. The Company has
filed a cross-claim against the bonding company form interference in
contract. The bonding company has gone into receivership and the action
is stayed by court order. The Company's attorney believes that there is
no legal basis for the claim of the bonding company and that the Company
will ultimately prevail. A contingency exists with respect to this
matter. The outcome cannot presently be determined.
(9) RELATED PARTY TRANSACTIONS
As of December 31, 1995 the Company had unpaid advances totalling $42,255
from related parties. These amounts bear interest at 7% per annum, are
not collateralized and are payable on demand.
During 1994 a stockholder of the Company transferred certain real estate
owned by the stockholder to the Company's independent certified public
accountant as payment for past services. The properties were transferred
based on fair value at that time with equity of approximately $75,000.
During 1995 the Company reimbursed to the stockholder the $75,000.
(10) WARRANTY LIABILITIES
As a part of the Company's plant installation business, the Company
provides certain warranties that the plants will survive for certain
specified periods. Based on managements estimates, the Company has
provided a $92,500 liability to cover future warranty losses. This amount
has been included with accounts payable and other accrued expenses in the
financial statements. The amount, if any, of additional liabilities
related to this contingency cannot presently be determined.
F-19
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 1995 and 1994
(11) ADVANCES TO RELATED PARTIES
During 1995 the Company advanced $21,000 to an entity owned by a
stockholder of the Company. Of this amount $5,000 has been repaid. The
advance is uncollateralized, bears no interest and has no written
repayment terms. The Company also had an advance receivable from the
Company's President of $8,319 at December 31, 1995. This amount was
offset against salaries to the President for January through March, 1996.
(12) LACK OF INSURANCE
The Company has not paid its insurance premiums for property, liability
and workers' compensation insurance. The Company is in violation of
various contract provisions, statutes related to this matter and in
addition is at substantial risk of loss related to this matter.
(13) GEOGRAPHIC AREA OF OPERATIONS AND INTEREST RATES
The Company's customers are principally in Florida. The potential for
severe financial impact can result from negative effects of economic
conditions within the market or geographic area. Since the Company's
business is principally in one area, this concentration of operations
results in an associated risk and uncertainty. Approximately 80% of the
Company's sales were sales of plants and plant installation projects.
(14) CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. Concentrations of credit with respect to trade receivables
are limited due to the large number of customers comprising the Company's
customer base. As of December 31, 1995, the Company has no significant
accounts receivable concentrations of credit risk other than the net
amount carried of approximately $70,000 as disclosed in note 8.
(15) FOURTH QUARTER DATA
The aggregate effect of year-end adjustments which are material to the
fourth quarter totalled approximately a negative $1,000,000.
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OPTIMAX INDUSTRIES, INC.
Date: 4/12/96 /s/ Paul Stevens
------------------- --------------------------------------
Paul Stevens, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Paul Stevens President, Director 4/12/96
- ---------------------------- (Chief Executive Officer, -----------
Paul Stevens Chief Accounting Officer)
/s/ Stephen G. Calandrella Secretary, Director 4/12/96
- ---------------------------- -----------
Stephen G. Calandrella
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF OPTIMAX INDUSTRIES, INC.
Plants for Tomorrow, Inc., a Colorado corporation ("New Plants").
FloriFauna, Inc., a Florida corporation, is a subsidiary of New Plants.
Taylor-Built Industries, Inc., a Texas corporation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES F-4 AND F-5 OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,324
<SECURITIES> 0
<RECEIVABLES> 515,314
<ALLOWANCES> 245,143
<INVENTORY> 345,606
<CURRENT-ASSETS> 618,101
<PP&E> 1,075,350
<DEPRECIATION> 639,523
<TOTAL-ASSETS> 1,236,059
<CURRENT-LIABILITIES> 1,217,970
<BONDS> 0
0
0
<COMMON> 30,062
<OTHER-SE> 18,089
<TOTAL-LIABILITY-AND-EQUITY> 1,236,059
<SALES> 454,857
<TOTAL-REVENUES> (322,518)
<CGS> 777,375
<TOTAL-COSTS> 2,251,415
<OTHER-EXPENSES> (62,110)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,019
<INCOME-PRETAX> (1,796,558)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,858,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,858,668)
<EPS-PRIMARY> (1.64)
<EPS-DILUTED> (1.64)
</TABLE>
