SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
------------
For the Fiscal Year Ended May 31, 1994 Commission file number 33-23430-D
THE TOEN GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State of other jurisdiction of incorporation or organization)
84-1091271
(I.R.S. Employer Identification No.)
2 Park Plaza, Suite 470, Irvine, California
(Address of Principal Executive Offices)
92614
Zip Code
Registrant's telephone number, including area code: (714) 833-2091
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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 No X
At July 31, 1996, 799,372 shares of Registrant's no par value common
stock issued and outstanding. There were also outstanding warrants to purchase
up to 668,000 shares of the Registrant's common stock. There has been no bid or
asked prices of the Registrant's common stock quoted in any market since
September 6, 1990.
Documents Incorporated by Reference:
None
Total Pages including cover: 40
[TOEN\10K\53194.10K]-10
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TABLE OF CONTENTS
Page
PART I
Item 1. Business ........................................................1
Item 2. Properties...................................................... 2
Item 3. Legal Proceedings................................................2
Item 4. Submission of Matters to a Vote of Security Holders..............2
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
matters ........................................................3
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................4
Item 7. Financial Statements and Supplementary Data......................5
Item 8. Change in and Disagreements With Accountants.....................5
PART III
Item 9. Directors and Executive Officers.................................6
Item 10. Management Remuneration and Transactions.........................8
Item 11. Security Ownership of Certain Beneficial Owners and Management...10
Item 12. Certain Relationships and Related Transactions...................10
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K..11
Index to Consolidated Financial Statements and Schedules.........F-1
[TOEN\10K\53194.10K]-10
<PAGE>
PART I
ITEM 1. BUSINESS
The Toen Group, Inc. (the Registrant" or the "Company") was
incorporated in the State of Colorado on June 10, 1988 for the purpose of
searching for, evaluating and organizing an interest in or more business
opportunities. On December 3, 1989, the Company completed a public offering of
its stock pursuant to a registration statement on Form S-18 filed with the
Denver Regional Office of the Securities and Exchange Commission. The Company,
through an underwriter, sold a total of 50,000,000 shares of the Company's no
par value common stock and 5,000,000 warrants for the purchase of 5,000,000
shares of common stock.
On March 9, 1990, the Company completed an agreement to exchange its
common stock for all of the issued and outstanding capital stock of Sunbelt
Media Group Inc. ("Sunbelt"). Pursuant to the terms of the agreement with the
shareholders of Sunbelt, the Company issued 278,400,000 shares of its common
stock in exchange for all the outstanding shares of common stock of Sunbelt and
Sunbelt became a wholly-owned subsidiary of the Company. From March 1990 to
October 1992 Sunbelt owned and operated low power television stations and
related businesses, and provided programming to those stations. The Company
discontinued the Sunbelt business in October 1992 and sold all the assets
associated with the operation of Sunbelt, including all contracts and lease
agreements necessary for its operations to William J. Kitchen ("Kitchen") in
consideration of 1) Kitchen's forgiveness of notes and other obligations owed to
Kitchen by the Registrant; and 2) Kitchen's assumption of miscellaneous debts of
Sunbelt. Pursuant to the sale, Kitchen also delivered 98,795,000 shares of the
Registrant's common stock to the Registrant for cancellation. Since October 1992
the Company has not had any revenues or operations.
Accordingly, Toen is currently in the process of seeking a merger or
acquisition with a business entity or entities expected to be private companies,
partnerships or sole proprietorships. Management believes the Registrant can
offer owners of potential merger or acquisition candidates the opportunity to
acquire a controlling interest in a public company at substantially less cost
than is required to conduct an initial public offering.
On August 31, 1992 Jeffrey Paul Stroud ("Stroud") acquired 173,995,000
shares of the Registrant's common stock, representing 51% of the then issued and
outstanding shares, from Kitchen. Stroud also acquired from Kitchen 162,000,000
warrants to acquire 162,000,000 shares of the Registrant's common stock. On
March 31, 1993 Stroud entered into a Stock Purchase Agreement with New World
Capital Markets, Ltd. under which he sold 173,995,000 shares of the Registrant's
common stock and 162,000,000 warrants to acquire an additional 162,000,000
shares of common stock.
On June 17, 1993 the Registrant's then existing Board of Directors
resigned and Fred G. Luke and Jon L. Lawver were appointed as replacement
Directors. The outgoing Board also elected Fred G. Luke as President of the
Registrant and Jon L. Lawver as Secretary, Treasurer and Chief Financial
Officer.
In September 1994 the Company's shareholders voted to effect a 1 for
1000 reverse split of the Company's issued and outstanding common stock. The
split was implemented through a merger with a newly formed Nevada corporation.
The accompanying financial statements have been retroactively restated to
reflect the merger including the change from no par value common stock to $.01
par value common stock. In connection with the merger and reverse split, the
Company's authorized number of
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shares was reduced from 785,000,000 to 50,000,000. There are presently
outstanding warrants to purchase 668,000 shares of common stock. The warrants
are exercisable at $5.00 per share.
The Registrant's day-to-day business affairs are handled by three
directors and two officers. No executive compensation has been paid to them or
to any other officers or directors during the fiscal year ended May 31, 1994. As
of the filing date of this Report the Registrant had no employees and no
operations. Current management is pursuing business opportunities, but no
assurance can be given that the Registrant will be successful in acquiring any
business opportunities, or if acquired, what revenues might be provided from
such operations.
As used herein, the term "Company" or the "Registrant" refers to The
Toen Group Inc. The Registrant currently maintains its executive offices at 2
Park Plaza, Suite 470, Irvine, California 92614.
The telephone number is (714)833-2094.
Effective October 8, 1996, the Board of Directors authorized a change
in the Company's name from the Toen Group, Inc. to Virtual Enterprises, Inc.
ITEM 2. PROPERTIES
The Registrant's principal executive offices are located in leased
premises of approximately 3,000 square feet in Irvine, California. These
premises are occupied by the Registrant under an Advisory and Management
Agreement with NuVen Advisors, Inc. ("NuVen"), an affiliate.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this report there are no legal proceedings to which
the Registrant is a party, or of which any of the Registrant's properties is the
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 28, 1994 the Annual Meeting of the stockholders of the
Registrant was held. Fred G. Luke, Jon L. Lawver and John D. Desbrow were
elected as directors for the 1995 fiscal year.
The matters voted upon and the number of votes cast for, against or
withheld, as well as the number of abstentions were as follows:
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<TABLE>
<CAPTION>
Votes
Votes Abstaining/Broker
Votes For Against Non-Votes
--------------- ----------- -----------------
<S> <C> <C> <C>
I. Election of Fred G. Luke, Jon L.
Lawver and John D. Desbrow 184,930,000 0 0
II. Approval and Adoption of an
Agreement of Merger with a newly
formed Nevada corporation 184,930,000 0 0
III. Approval and Adoption of a 1994
Non-Qualified Stock Compensation 183,330,000 1,600,000 0
Plan
</TABLE>
All of the above matters were approved by a majority of the issued and
outstanding shares.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Market Information
Following the completion of the public offering on November 30, 1989
and until September 6, 1990, the Company's common stock was traded on the
over-the-counter market and reported by the National Quotation Bureau Pink
Sheets. Trading ceased on September 6, 1990. The Registrant's outstanding
securities, consist of no par value common stock and Redeemable Common Stock
Purchase Warrants ("Warrants"). The Registrant's Board of Directors and
shareholders approved a 1:1000 reverse split of its common stock on September
28, 1994 decreasing the number of issued and outstanding common stock from
249,371,667 to 249,372. The Registrant's board of directors, shareholders and
warrantholders approved a 1:250 reverse split of the Warrants decreasing the
number of issued and outstanding Warrants from 167,000,000 to 668,000 and
increasing the exercise price from $.02 per Warrant to $5.00 per Warrant.
Additionally, the expiration date of the Warrants was extended to December 31,
1996. Each Warrant entitles the holder to purchase at a price of $5.00, one
share of the Company's common stock.
There has been no market for the Registrant's Common Stock since
September 6, 1991. Prior to such date the closing bid and ask price for the
Company's common stock, giving effect to the 1:1000 revenue split of the
outstanding common shares which became effective September 28, 1994 reported by
the National Quotation Bureau Inc., is follows:
BID PRICE OF
COMMON STOCK
----------------------
HIGH LOW
------ ------
$10.00 $10.00
(b) Holders
The approximate number of holders of record of each class of equity
securities of the Registrant as of May 31, 1994, was as follows:
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- ----------------------------------------- --------------
Common Stock No Par Value 39
Redeemable Common Stock Purchase Warrants 29
(c) Dividends
The Registrant has never declared or paid a cash dividend on its common
stock. The Registrant does not intend to pay a cash dividend in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Year Ended May 31, 1994 Compared to Year Ended May 31, 1993
There were no operations during fiscal 1994 and as such there were no
revenues or cost of revenues recorded during fiscal 1994.
General and administrative expenses increased to $170,751 in fiscal
1994 compared to $57,448 in fiscal 1993 due to the Advisory and
Management Agreement and other consulting agreements entered into
during fiscal 1994.
Liquidity and Capital Resources.
As of May 31, 1994 the Registrant had a working capital deficit of
$170,011, an increase of $155,726 from fiscal year 1993 due to the
continued accrual of professional, consulting and advisory fees during
fiscal 1994 that were incurred but not paid.
The Registrant had cash balances of approximately $4,989 at May 31,
1994. The limited cash balances are a direct result of the Registrant
having no operations during fiscal year 1994.
The Registrant's plan is to keep searching for additional sources of
capital and new operating opportunities. In the interim, the
Registrant's existence is dependent on continuing financial support
from an affiliate which is estimated to be approximately $337,000 for
the next fiscal year based upon current agreements and obligations the
Company has at May 31, 1994. Furthermore, the Registrant may have to
utilize its common stock for future financial support to finance its
needs. Such conditions raise substantial doubt about the Registrant's
ability to continue as a
[TOEN\10K\53194.10K]-10
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going concern. As such, the Registrant's independent accountants have
modified their report to include an explanatory paragraph with respect
to the uncertainty.
The Registrant has no commitments for additional equity or debt
financing and no assurances can be made that its working capital needs
can be met.
Additionally, as of May 31, 1994, the Registrant had no employees or
operations.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as a part of this Annual
Report on Form 10-KSB and are included immediately following the signature page.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants ...............F-2
Balance Sheet for May 31, 1994....................................F-3
Statements of Operations for the years ended May 31, 1994
and 1993 .......................................................F-4
Statements of Stockholders' Deficiency for the years ended
May 31, 1994 and 1993 ..........................................F-5
Statements of Cash Flows for the years ended May 31, 1994
and 1993 .......................................................F-6
Notes to Financial Statements.....................................F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Following May 31, 1990, Jerome W. Karsh & Co. resigned as the
Registrant's principal accountants. In April, 1993, the Registrant notified
O'Neal & White of its appointment as the Registrant's principal independent
accountants. On July 19, 1995, C. Williams & Associates replaced O'Neal & White
as the Registrant's principal accountants. On April 24, 1996, Spurgeon, Kang &
Associates replaced C. Williams & Associates as the Registrant's principal
accountants.
Mr. Charles R. Williams, one of the principals of C. Williams, was
advised by the Texas State Board of Public Accountancy in a letter dated January
29, 1996, addressed to the Chief Accountant of the Division of Corporation
Finance of the Securities and Exchange Commission (the "Commission"), that his
certificate as a Certified Public Accountant was revoked effective as of May 18,
1995, which was subsequently revised to provide for a revocation date as of
March 2, 1995. The Chief Accountant of the Division of Corporation Finance
advised Mr. Williams by means of a letter dated February 7, 1996, that the
Commission does not recognize any person as a certified public accountant who is
not duly registered and in good standing as such under the laws of the place of
his residence or principal office as of March 2, 1995. No opinion on the
Registrant's financial statements was ever issued by C.
Williams & Associates.
In connection with the audit for the fiscal year ended May 31, 1990,
and for the period from June 10, 1988, to May 31, 1990, there were no
disagreements between the Registrant and Jerome W. Karsh & Co. on any matter of
accounting principles or practices, financial statement disclosure or auditing
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scope or procedures, which disagreements, if not resolved to the satisfaction of
Jerome W. Karsh & Co. would have caused it to make reference in connection with
its report.
None of the reports of Jerome W. Karsh & Co. on the Registrant's
financial statements contained an adverse opinion or a disclaimer of opinion or
was qualified as to uncertainty, audit scope, or accounting principles except
that the opinion was qualified by the assumption that the Registrant would
continue as a going concern.
The decision to change principal independent accountants was made by
the Registrant's Board of Directors.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
(a) Identification of Directors.
The following table furnishes the information concerning the directors
and those persons nominated and chosen to become directors of the Registrant as
of September 28, 1994. The directors of the Registrant are elected every year
and serve until their successors are elected and qualify.
Period Served as
Name Age Director
- ------------------------ --- -------------------
Fred G. Luke 50 6-17-93 to Present
Jon L. Lawver 58 6-17-93 to Present
John D. Desbrow 41 9-28-94 to Present
(b) Identification of Executive Officers.
The officers of the Registrant are chosen by and serve at the pleasure
of the Board of Directors. The following table furnishes information concerning
executive officers and all persons chosen to become executive officers of the
Registrant. The officers of the Registrant serve at the pleasure of the Board of
Directors.
Positions and Office
Name Age with Company Period Served as Officer
- ------------- --- ----------------------------- ------------------------
Fred G. Luke 50 Chairman and President June, 1993 to Present
Jon L. Lawver 58 Secretary and Chief Financial June, 1993 to April 24,
Officer 1996
The Registrant has no audit, compensation or nominating committees. No
family relationships exist between any of the officers or directors.
[TOEN\10K\53194.10K]-10
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In August 1995, the Company entered into an Employment Agreement with
Fred G. Luke, the Company's Chairman and President. The terms of the Employment
Agreement which is retroactive to June 1, 1994 call for Mr. Luke to receive
approximately $54,000 per year for five (5) years as a base salary; grants him
an option to purchase 750,000 shares of the Company's common stock at an
exercise price of 110% of the book value per share on August 1, 1995; and
requires the Company to purchase life insurance coverage, reimburse him for
vehicle expenses, and provide fringe benefits. No cash payments were made to Mr.
Luke by the Company during fiscal 1994. The Company expensed $0 during fiscal
1994 and had no amounts due as of May 31, 1994.
Effective April 24, 1996, the Company entered into a consulting
agreement with Mr. Steven H. Dong, pursuant to which Mr. Dong is to perform
accounting services and to hold the office of Chief Financial Officer through
June 30, 1996. Pursuant to the agreement the Company agreed to pay Mr. Dong
$5,000 in cash or in the Company's common stock and granted him an option to
purchase 100,000 shares of the Company's common stock at an exercise price of
$.10 per share. No cash payments were made to Mr. Dong by the Company during
fiscal 1994. The Company expensed $0 during fiscal 1994 and had no amounts due
as of May 31, 1994.
In July 1996, the Company memorialized a prior verbal consulting
agreement entered into in September 1994 with Mr. Desbrow, to hold the office of
Director through December 31, 1996. Pursuant to the agreement the Company agreed
to pay Mr. Desbrow $1,000 per month. No cash payments were made to Mr. Desbrow
by the Company during fiscal 1994. The Company expensed $0 during fiscal 1994
and had no amounts due as of May 31, 1994.
(c) Identification of Certain Significant Employees.
There are no employees other than the executive officers disclosed
above who make or are expected to make, significant contributions to the
business of the Registrant, the disclosure of which would be material.
(d) Family Relationships.
None.
(e) Business Experience.
The following is a brief account of the business experience during the
past five years of each director and executive officer of the Registrant,
including principal occupations and employment during that period and the name
and principal business of any corporation or other organization in which such
occupation and employment were carried on.
Fred G. Luke, has been Chairman and President of the Registrant since
June, 1993. Mr. Luke has over twenty-four (24) years of experience in
domestic and international financing and the management of private and
publicly-held companies. In addition to his position with the Company,
Mr. Luke currently serves as Chairman and Chief Executive Officer of
Nona Morelli's II Inc., Diversified Land & Exploration Co. and New
World Capital Inc. Since 1982 Mr. Luke has provided consulting services
and has served, for brief periods usually lasting not more than
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six months, as Chief Executive Officer and/or Chairman Of The Board of
various public and privately-held companies in conjunction with such
financial and corporate restructuring services. Mr. Luke also served
from 1973 through 1985 as President of American Energy Corporation, a
privately held oil and gas company involved in the operation of
domestic oil and gas properties. From 1970 through 1985 Mr. Luke served
as an officer and Director of Eurasia, Inc., a private equipment
leasing company specializing in oil and gas industry equipment.
Jon L. Lawver, has been Secretary and a Director of the Registrant
since June, 1993 and was Chief Financial Officer from June 1993 to
April 24, 1996. Mr. Lawver has twenty-two (22) years of experience in
the area of bank financing where he has assisted medium size companies
($5 million to $15 million) by providing expertise in documentation
preparation and locating financing for expansion requirements. Mr.
Lawver was with Bank of America from 1961 to 1970, ending his
employment as Vice President and Manager of one of its branches. From
1970 to Present Mr. Lawver has served as President and a Director of
J.L. Lawver Corp., a financial consulting firm. Since 1988 Mr. Lawver
has served as President and a Director of Eurasia, a private finance
equipment leasing company specializing in oil and gas industry
equipment.
John D. Desbrow, has served as a Director of the Registrant since
September 28, 1994. Mr. Desbrow is also a Director of Hart Industries,
Inc. and holds the office of Secretary of Nona Morelli's II, Inc. and
NuOasis Gaming, Inc. Mr. Desbrow is a member in good standing of the
State Bar of California and has been since 1980. Prior to joining the
Company Mr. Desbrow was in the private practice of law. Mr. Desbrow
received his Bachelor of Science degree in Business Administration from
the University of Southern California in 1977, his Juris Doctorate from
the University of Southern California Law Center in 1980, and his
Master of Business Taxation degree from the University of Southern
California Graduate School of Accounting.
Steven H. Dong. Mr. Dong, a Certified Public Accountant, and as an
independent Consultant serves as Chief Financial Officer of the
Registrant. Mr. Dong replaced Jon L. Lawver who resigned as the
Registrants' Chief Financial Officer and as a Director effective April
24, 1996. Prior to joining the Registrant, Mr. Dong worked with the
international accounting firm of Coopers & Lybrand since 1988. As an
Assurance Manager with Coopers & Lybrand, Mr. Dong's experience
consisted of providing financial accounting and consulting services to
privately and publicly held companies. In addition to his position with
the Registrant, Mr. Dong currently serves as Chief Financial Officer of
Nona, NuOasis Gaming and Hart. Mr. Dong received his Bachelor of
Science degree in Accounting from Babson College in 1988 and is a
member in good standing with the California Society of Certified Public
Accountants and American Institute of Certified Public Accountants.
ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS
(a) Cash Compensation.
None of the Registrant's executive officers received any cash
compensation during the fiscal year ended May 31, 1994. On March 31, 1995, Fred
G. Luke, Fred Graves Luke, J.L. Lawver Corp., John D. Desbrow and Structure
America, Inc. each were issued 60,000 shares of restricted common stock.
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(b) Stock Options
During fiscal year 1994 there were no individual grants of stock options
made to the Company's Chief Executive Officer or to any of the four most highly
compensated executive officers other than the Chief Executive Officer.
(c) Aggregated Option Exercises
During the fiscal year ended May 31, 1994, there were no exercises of
stock options by the Chief Executive Officer or any of the four most highly
compensated executive officers other than the Chief Executive Officer.
(d) Long-Term Incentive Plans
During the fiscal year ended May 31, 1994, there were no awards under
any Long Term Incentive Plan to the Chief Executive Officer or any of the four
most highly compensated executive officers other than the Chief Executive
Officer.
(e) Compensation of Directors
The Company has no standard arrangement for the compensation of
directors or their committee participation or special assignments.
(f) Employment Contracts and Change of Control
On March 31, 1995 Fred G. Luke, J.L. Lawver Corp. and John D. Desbrow
were each issued 60,000 shares of restricted common stock for services rendered
to the Company as officers and directors or legal counsel through May 31, 1994.
The Company also issued 60,000 shares of restricted common stock each to two
consultants for merger and acquisition services in fiscal 1994. The Company
recorded an expense of $30,000 related to such share issuances in fiscal 1994.
(g) Report on Repricing of Options
During fiscal year 1994, the Registrant has not adjusted or amended the
exercise price of stock options.
(h) Termination of Employment and Change of Control Arrangements.
On March 31, 1993 Jeffrey Paul Stroud entered into a Stock Purchase
Agreement with New World Capital Markets, Ltd. under which Stroud sold to New
World Capital Markets 173,995,000 shares of the Registrant's common stock and
162,000,000 warrants to acquire an additional 162,000,000 shares of common
stock, all of which Stroud had acquired from William J. Kitchen. At the closing
of the Agreement, on June 17, 1993 the Registrant's then existing Board of
Directors resigned and Fred G. Luke and Jon L. Lawver were appointed as
replacement Directors. The outgoing Board also elected Fred G. Luke as President
of the Registrant and Jon L. Lawver as Secretary, Treasurer and Chief Financial
Officer.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AS OF MAY 31, 1994
(a) Beneficial owners of five percent (5%) or greater of the Registrant's
Outstanding Voting Securities.
The following sets forth information with respect to ownership by
holders of more than five (5%) of the Registrant's outstanding voting securities
known by the Registrant.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial
Title of Class of Beneficial Owner Interest Percent of Class
- ----------------------------- ----------------------------------------- --------------------- -------------------
<S> <C> <C> <C>
No par value
Common Stock New World Capital Markets, Ltd. 173,995 31.67%
Companies House
Tower Street
Ramsey, Isle of Man
Cede & Co. 16,147 2.93%
Box 222
Bowling Green, New York 10274
Redeemable Common Stock
Purchase Warrants New World Capital Markets, Ltd. 648,000 97.00%
Companies House
Tower Street
Ramsey, Isle of Man
Cede & Co. 13,278 2.00%
Box 222
Bowling Green, New York 10274
Combined no par value
Common Stock and New World Capital Markets, Ltd. 821,995 67.50%
Redeemable Common Stock Companies House
Purchase Warrants Tower Street
Ramsey, Isle of Man
Cede & Co. 29,425 2.41%
Box 222
Bowling Green, New York 10274
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions With Management and Others.
During fiscal 1994 there were no transactions with related parties that
exceeded $60,000 other than the following:
On March 31, 1993 Stroud entered into a Stock Purchase Agreement with
New World Capital Markets, Ltd. under which he sold 173,995,000 shares of the
Registrant's common stock and 162,000,000 warrants to acquire an additional
162,000,000 shares of common stock. As discussed above, Stroud had acquired the
173,995,000 shares and 162,000,000 warrants from Kitchen. At the
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closing of the Agreement, on June 17, 1993 the Registrant's then existing Board
of Directors resigned and Fred G. Luke and Jon L. Lawver were appointed as
replacement Directors. The outgoing Board also elected Fred G. Luke as President
of the Registrant and Jon L. Lawver as Secretary, Treasurer and Chief Financial
Officer.
The Luke Family Trust (the "Trust") and J.L. Lawver Corp. (the "JLL
Corp.") owns 93% and 7%, respectively, of the common stock of NuVen Advisors,
Inc. ("NuVen"). Fred G. Luke, as the trustee of the Trust, controls the Trust
and Jon L. Lawver is the majority stockholder of JLL Corp. Mr. Luke and Mr.
Lawver are also officers and directors of the Company.
Effective April 1, 1993, the Company and NuVen, entered into an
Advisory and Management Agreement for the engagement of NuVen to perform
advisory services on behalf of the Company for a 3 year term. Pursuant to such
agreement the Company is obligated to pay NuVen $120,000 annually in monthly
installments of $10,000. Under the terms of such agreement, the Company has
granted NuVen an option to purchase 100,000 shares of the Company's common stock
exercisable at a price of $1.00 per share. The option vested on the date of the
agreement.
Effective February 1, 1995 the Company amended its Advisory and
Management Agreement with NuVen. The amended terms require the Company to pay
NuVen, for services rendered, $5,000 a month for an annual total of $60,000
through January 31, 1998.
(b) Certain Business Relationships.
There are no employees other than the executive officers disclosed
above who make, or are expected to make, significant contributions to the
business of the Registrant, the disclosure of which would be material.
(c) Indebtedness of Management.
None.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Financial Statements: The Financial Statements are included elsewhere
herein and are indexed on Page F-1, "Index to Financial Statements."
(b) 8-K Reports:
On October 9, 1992 the Registrant filed a Current Report on Form 8-K
dated September 25, 1992 reporting the sale to William J. Kitchen by the
Registrant of all assets owned by the Registrant associated with the operation
of Sunbelt, including all contracts and lease agreements necessary for its
operations (the "Sunbelt Assets"). In return for the Sunbelt Assets, Kitchen
forgave all notes and other obligations of the Registrant to Kitchen and/or all
entities owned or controlled by Kitchen, as well as Kitchen's
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assumption of other miscellaneous debts of Sunbelt. Kitchen also returned to the
Registrant of 98,795,000 shares of the Registrant's common stock as partial
consideration for the sale by the Registrant of the Sunbelt assets to Kitchen.
The consideration offered and accepted by the Registrant and Kitchen was the
result of arms length negotiations. The amounts were arbitrarily determined by
the parties and bore no relationship to assets, shareholders' equity, or any
other recognized criteria of value.
The sale of the trade name "Sunbelt Media Group" and all of the assets
owned by the Registrant associated with its Sunbelt operation constituted the
sale of substantially all of the Registrant's assets.
In the same Report on Form 8-K the Registrant reported that pursuant to
an Agreement to Purchase Stock dated as of August 31, 1992 (the "Sunbelt
Agreement"), Jeffrey Paul Stroud acquired 173,995,000 shares of the Registrant's
common stock (the "Stroud Shares") representing fifty-one percent (51%) of the
issued and outstanding shares of stock of the Registrant from Kitchen, a
shareholder of the Registrant who, prior to closing the Sunbelt Agreement, owned
272,790,000 shares of common stock of the Registrant (the "Kitchen Shares"),
said shares representing eighty percent (80%) of the issued and outstanding
shares of the Registrant at the time as set forth above. Under the terms of the
Agreement, Stroud also acquired from Kitchen, all other equity rights, options,
warrants and the like in and to the Registrant's shares owned by Kitchen, which
rights included Warrants representing the right to acquire an additional
162,000,000 shares of common stock of the Registrant. As partial consideration
for the sale of the Warrants and the Stroud Shares to Stroud by Kitchen, Stroud
agreed to release Kitchen from any and all claims which Stroud had against
Kitchen as a result of Stroud's investment in the registered securities of the
Registrant prior to closing the Sunbelt Agreement.
At closing of the Agreement, the Registrant's then existing Board of
Directors systematically resigned and were replaced by Jeffrey Paul Stroud,
Gregory Skufca and Patricia Schoenbaum. The newly reconstituted Board of
Directors then elected Stroud to serve as President of the Registrant, and
Gregory Skufca to serve as Secretary/Treasurer.
(c) Exhibits:
Exhibit
Number Description
----------------------------------------------------------------------
3 Articles of Incorporation and Bylaws [incorporated herein by
reference to Exhibit 3.1 and 3.2 of Registrant's Registration
Statement on Form S-18 (No. 33-23430- D)].
4(a) Warrant Agreement and form of Warrant Certificate
[incorporated herein by reference to Exhibit 4.6 of
Registrant's Registration Statement on Form S-18 (No.
33-23430-D)].
4(b) Specimen Redeemable Common Stock Purchase Warrant
[incorporated herein by reference to Exhibit 4.2 of
Registrant's Registration Statement on Form S-18 (No.
33-23403-D)].
10(a) Underwriting Agreement with Tri-Bradley Investment, Inc.
[incorporated herein by reference as Exhibit 1.1 to Amendment
No. 5 to Form S-18 Registration Statement on Form S-18 (No.
33-23430-D)].
[TOEN\10K\53194.10K]-10
11
<PAGE>
10(b) Agreement to Purchase Stock dated August 31, 1992 between The
Toen Group, Inc., Jeffrey Stroud and William J. Kitchen
[incorporated herein by reference to Exhibit "A" to Form 8-K
dated September 25, 1992, and filed October 9, 1992].
10(c) Stock Purchase Agreement dated March 31, 1993 between New
World Capital Markets, Ltd. and Jeffrey Paul Stroud.
[Incorporated by reference to Exhibit 10.c to Form 10-KSB for
the fiscal years ended May 31, 1992 and 1993].
10(d) Advisory and Management Agreement with NuVen Advisors, Inc.
[TOEN\10K\53194.10K]-10
12
<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE TOEN GROUP, INC.
(Registrant)
Date: January 15, 1997 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke, Chairman
of the Board and President
Date: January 15, 1997 By: /s/ Jon L. Lawver
----------------------------------
Jon L. Lawver,
Secretary and Director
Date: January 15, 1997 By: /s/ John D. Desbrow
----------------------------------
John D. Desbrow, Director
Date: January 15, 1997 By: /s/ Steven H. Dong
----------------------------------
Steven H. Dong,
Chief Financial Officer
[TOEN\10K\53194.10K]-10
14
<PAGE>
THE TOEN GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
Financial Statements, Fiscal Year 1994 Page
Reports of Independent Public Accountants F-2
Balance heet as of May 31, 1994................................. F-3
Statements of Operations for the years ended May 31, 1994
and 1993 .......................................................F-4
Statements of Stockholders' Deficiency for the years Ended
May 31, 1994 and 1993 ..........................................F-5
Statements of Cash Flows for the Years Ended May 31, 1994
and 1993 .......................................................F-6
Notes to Financial Statements ....................................F-7
[TOEN\10K\53194.10K]-10
F-1
<PAGE>
Spurgeon, Kang & Associates
Accountancy Corporation
Certified Public Accountants
9831 Belmont Street
Belmont Street, Bellflower, CA. 90706
(310)251-2161
INDEPENDENT AUDITOR'S REPORT FYE 1994
Board of Directors and Stockholders THE TOEN GROUP, INC.
2 Park Plaza, Suite 470
Irvine, CA 92714
We have audited the accompanying balance sheet of The Toen Group, Inc. as of May
31, 1994 and the related statements of income, retained earnings, and cash flow
for the years ended May 31, 1994 and 1993. 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 audit.
We conducted our audit in accordance with generally accepted audited standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Toen Group, Inc. as of May
31, 1994 and the results of its operations and cash flows for the years ended
May 31, 1994 and 1993 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as going concern. As discussed in Note 1 to the financial
statements, the Company has incurred net losses and possesses limited liquid
resources and negative working capital as of May 31, 1994. Management's plans
regarding those matters are described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Spurgeon, Kang & Associates
Bellflower, CA
November 4, 1996
[TOEN\10K\53194.10K]-10
F-2
<PAGE>
THE TOEN GROUP, INC.
Balance Sheet
As of May 31, 1994
Assets
Cash $ 4,989
--------------
Total Assets $ 4,989
==============
Liabilities and Stockholders' Equity
Current Liabilities:
Due to affiliates $ 175,000
--------------
Total Current Liabilities $ 175,000
--------------
Commitments and Contingencies: -
Stockholders' Deficiency
Common stock, $.01 par value, 50,000,000 shares
authorized; 249,372 shares issued and outstanding 408,442
Additional paid-in capital -
Accumulated deficit (553,608)
Treasury stock (98,795 Shares, at Cost) (24,845)
---------------
Total Stockholders' Deficiency (170,011)
Total Liabilities and Stockholders'
Deficiency $ 4,989
===============
[TOEN\10K\53194.10K]-10
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
THE TOEN GROUP, INC.
Statements of Operations
For the Years Ended May 31,
1994 1993
-------------------- -------------------
<S> <C> <C>
Revenues $ - $ -
Cost of Revenues - -
-------------------- -------------------
Gross Profit - -
-------------------- -------------------
General and Administrative Expenses:
Consulting services 170,000 -
Depreciation - 25,399
Other 751 32,049
-------------------- -------------------
Total 170,751 57,448
-------------------- -------------------
Operating Loss (170,751) (57,448)
Other Income (Expense):
Interest Expense, Net - (344)
-------------------- --------------------
Net Loss Before Discontinued Operations (170,751) (57,792)
Income From Discontinued
Operations 14,286 29,889
-------------------- -------------------
Net Loss $ (156,465) $ (27,903)
==================== ====================
Net Income (Loss) Per Share:
Loss From Continuing Operations $ (.6847) $ (.0002)
==================== ====================
Income from Discontinued
Operations $ .0573 $ .0001
==================== ===================
Net Loss per Share $ (.6274) $ (.0001)
==================== ====================
Weighted Average Number of Shares
Outstanding 249,372 298,769,167
==================== ===================
</TABLE>
[TOEN\10K\53194.10K]-10
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
THE TOEN GROUP, INC.
Statements of Stockholders' Deficiency
For The Years Ended May 31, 1994 and 1993
TOTAL
COMMON STOCK-
SHARES COMMON TREASURY ACCUMULATED HOLDERS'
OUTSTANDING STOCK STOCK DEFICIT DEFICIENCY
---------------------- -------------- --------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Balances at June 1, 1992 348,166,667 $ 408,442 - $ (369,240) $ 39,202
Exchange of assets and
liabilities for common
stock (98,795,000) - (24,845) - (24,845)
Net Loss - - - (27,903) (27,903)
---------------------- -------------- --------------- --------------------- ---------------------
Balances at May 31, 1993 249,371,667 $ 408,442 $ (24,845) $ (397,143) $ (13,546)
Effect of reverse stock
split (249,122,295) - - - -
Net Loss - - - (156,465) (156,465)
---------------------- -------------- --------------- --------------------- ---------------------
Balances at May 31, 1994 249,372 $ 408,442 $ (24,845) $ (553,608) $ (170,011)
====================== ============== =============== ===================== =====================
</TABLE>
[TOEN\10K\53194.10K]-10
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
THE TOEN GROUP, INC.
Statements of Cash Flows
For the Years Ended May 31,
1994 1993
--------------------- --------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (156,465) $ (27,903)
Adjustments to Reconcile Net Loss to Net Cash Provided
(Used) by Operating Activities:
Depreciation - 25,399
Expiration of construction permits - 8,000
Amortization 739 -
Change in Assets and Liabilities:
(Increase) Decrease in Assets:
Inventory - 3,408
Other assets - 1,856
Increase (Decrease) in Liabilities:
Accounts payable (14,285) (3,400)
Due to Affiliates 175,000 -
--------------------- -------------------
Net cash provided (used) by operating activities 4,989 7,360
--------------------- -------------------
Cash Flows From Investing Activities:
Sale (purchase) of equipment - 6,354
--------------------- -------------------
Net cash provided (used) by investing activities - 6,354
--------------------- -------------------
Cash Flows From Financing Activities:
Repayment on notes payable and capital leases - (13,747)
--------------------- --------------------
Net cash provided (used) by financing activities - (13,747)
--------------------- --------------------
Increase (decrease) in cash and cash equivalents 4,989 (33)
Beginning Balance, Cash and Cash Equivalents - 33
--------------------- --------------------
Ending Balance, Cash and Cash Equivalents $ 4,989 $ -
===================== ====================
Supplemental Disclosure of Cash Flow Information:
Cash payments for income taxes $ - $ -
Cash payments for interest $ - $ -
===================== ===================
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Common stock issued for services $ - $ -
===================== ===================
Retirement of common stock for assets and liabilities $ - $ 24,845
===================== ===================
</TABLE>
[TOEN\10K\53194.10K]-10
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1994
Note 1. Summary of Significant Accounting Policies
Business and Organization
The Company was incorporated in June, 1989 as a Colorado corporation. The
Company was primarily engaged in the acquisition, maintenance and operation of
television stations in various states through 1992.
In August 1992, the Company sold its Sunbelt Media Group ("Sunbelt") division,
operating the television stations, to a majority stockholder of the Company.
Since August 1992 through the date of this report, the Company has had no
operations and management is seeking a merger and/or sale of controlling
interest in its stock.
Principals of Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
accelerated methods over the estimated useful lives of the assets ranging from
3-15 years. The company provides tax depreciation in conformity with the
provisions of applicable tax law. Cost and accumulated depreciation of assets
sold or retired are removed form the accounts and the net gain or loss is
recorded in operations in the year of the transaction.
Income Taxes
The Company accounts for income taxes using the liability method. Income taxes
are provided on all revenue and expense items, regardless of the period in which
such items are recognized for tax purposes, except for those items representing
a permanent difference between pre-tax income and taxable income. A valuation
allowance is recorded when it is more likely than not that benefits resulting
from deferred tax assets will not be realized.
[TOEN\10K\53194.10K]-10
F-7
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 1994
Earnings (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income (loss)
by the weighted average number of shares outstanding during each year. All per
share amounts are reported as adjusted after the merger and resulting reverse
stock split. Common stock equivalents were not considered in the loss per share
calculations as the effect would have been anti dilutive.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in
accordance with APB16 at the fair market value of the stock issued or the fair
market of the services provided, whichever value is the more clearly evident.
The value of the services are typically stipulated by contract.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1993 financial statements have been
reclassified, where appropriate, to conform with the financial statement
presentation used in fiscal 1994.
Note 2. Going Concern
The Company has experienced recurring net losses, has limited liquid resources,
negative working capital and its primary operating subsidiary was liquidated
during the fiscal year 1993. Management's intent is to keep searching for
additional sources of capital and new operating opportunities. In the interim,
the Company will keep operating with minimal overhead and key administrative
functions will be provided by NuVen Advisors, Inc., an affiliate ("NuVen"). It
is estimated that NuVen will have to contribute approximately $337,000 for
future financial support for the Company to exist for the next fiscal year.
Accordingly, the accompanying consolidated financial statements have been
presented under the assumption the Company would continue as a going Concern.
Note 3. Discontinued Operations
In August, 1992, the Company executed an agreement with an 80% shareholder of
the Company, whereby the Sunbelt Media Group ("Sunbelt") trade name and all
assets and debt related to Sunbelt, were sold to the majority shareholder. A
note due to the majority stockholder in the amount of $24,500 was outstanding at
the date of the agreement, and was forgiven as part of the payment price. In
exchange, the majority shareholder returned 98,795,000 shares of its common
stock holdings in the Company. No gain or loss was recognized on the
transaction, as the resulting value of assets sold over liabilities assumed was
assigned as the cost of the treasury stock acquired.
[TOEN\10K\53194.10K]-10
F-8
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 1994
Note 4. Related Party Transactions
The Luke Family Trust (the "Trust") and J.L. Lawver Corp. (the "JLL Corp.") owns
93% and 7%, respectively, of the common stock of NuVen. Fred G. Luke, as the
trustee of the Trust, controls the Trust and Jon L. Lawver is the majority
stockholder of JLL Corp. Mr. Luke and Mr. Lawver are also officers and directors
of the Company.
Effective April 1, 1993, the Company and NuVen, entered into an Advisory and
Management Agreement for the engagement of NuVen to perform advisory services on
behalf of the Company for a 3 year term. Pursuant to such agreement the Company
is obligated to pay NuVen $120,000 annually in monthly installments of $10,000.
Under the terms of such agreement, the Company has granted NuVen an option to
purchase 100,000 shares of the Company's common stock exercisable at a price of
$1.00 per share. The option vested on the date of the agreement.
NuVen's advisory services include the payment on behalf of the Company, of
monthly office rent, telephone expenses, monthly accounting expenses and the
costs associated with the preparation of annual state and federal regulatory
filings, and franchise and federal tax returns.
Note 5. Subsequent Events
In September 1994 the Company's shareholders voted to effect a 1 for 1000
reverse split of the Company's issued and outstanding common stock. The split
was implemented through a merger with a newly formed Nevada corporation. The
accompanying financial statements have been retroactively restated to reflect
the merger including the change from no par value common stock to $.01 par value
common stock. In connection with the merger and reverse split, the Company's
authorized number of shares was reduced from 785,000,000 to 50,000,000. There
are presently outstanding warrants to purchase 668,000 shares of common stock.
The warrants are exercisable at $5.00 per share.
Effective February 1, 1995 the Company amended its Advisory and Management
Agreement with NuVen (Note 4). The Amended terms require the Company to pay
NuVen, for services rendered, $5,000 a month for an annual total of $60,000
through January 31, 1998.
On March 31, 1995 Fred G. Luke, J.L. Lawver Corp. and John D. Desbrow were each
issued 60,000 shares of restricted common stock for services rendered to the
Company as officers, directors, or legal counsel through May 31, 1994, the
Company also issued 60,000 shares of restricted common stock each to two
consultants for merger and acquisition services in fiscal 1994. The Company
recorded an expense of $30,000 related to such share issuances.
In August 1995, the Company entered into an Employment Agreement with Fred G.
Luke, the Company's Chairman and President. The terms of the Employment
Agreement which is retroactive to June 1, 1994 call for Mr. Luke to receive
approximately $54,000 per year for five (5) years as a base salary; grants him
an option to purchase 750,000 shares of the Company's common stock at an
exercise price of 110% of the book value per share on August 1, 1995; and
requires the Company to purchase life insurance coverage, reimburse him for
vehicle expenses,
[TOEN\10K\53194.10K]-10
F-9
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 1994
and provide fringe benefits. No cash payments were made to Mr. Luke by the
Company during fiscal 1994. The Company expensed $0 during fiscal 1994 and had
no amounts due as of May 31, 1994.
Effective April 24, 1996, the Company entered into a consulting agreement with
Mr. Steven H. Dong, pursuant to which Mr. Dong is to perform accounting services
and to hold the office of Chief Financial Officer through June 30, 1996.
Pursuant to the agreement the Company agreed to pay Mr. Dong $5,000 in cash or
in the Company's common stock and granted him an option to purchase 100,000
shares of the Company's common stock at an exercise price of $.10 per share. No
cash payments were made to Mr. Dong by the Company during fiscal 1994. The
Company expensed $0 during fiscal 1994 and had no amounts due as of May 31,
1994.
In July 1996, the Company memorialized a prior verbal consulting agreement
entered into in September 1994 with Mr. Desbrow, to hold the office of Director
through December 31, 1996. Pursuant to the agreement the Company agreed to pay
Mr. Desbrow $1,000 per month. No cash payments were made to Mr. Desbrow by the
Company during fiscal 1994. The Company expensed $0 during fiscal 1994 and had
no amounts due as of May 31, 1994.
Effective October 8, 1996, the Board of Directors authorized a change in the
Company's name from The Toen Group, Inc. to Virtual Enterprises, Inc.
[TOEN\10K\53194.10K]-10
F-10
EXHIBIT 10D
ADVISORY AND MANAGEMENT AGREEMENT WITH NUVEN ADVISORS, INC.
<PAGE>
ADVISORY AND MANAGEMENT AGREEMENT
THIS ADVISORY AND MANAGEMENT AGREEMENT ("Agreement") is made this 1st
day of February, 1994 effective the first day the Services (as defined below)
were first rendered by and between NuVen Advisors, Inc. a Nevada corporation
("Advisor") with offices at 2 Park Plaza, Suite 470, Irvine, California 92714
and The Toen Group Inc., a Nevada corporation with its principal offices at 3753
Howard Hughes Parkway, Suite 200, Las Vegas, Nevada 89109 ("Client").
WHEREAS, Advisor and Advisor's personnel have numerous years of
experience in managing and in performing administrative duties for
privately-held companies and development stage investment opportunities; and
WHEREAS, Client desires to retain the Services of Advisor, and Advisor
desires to provide the Services (as defined below) for Client on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Client and Advisor
agree as follows:
1. Engagement
Client hereby engages Advisor to provide Client with merger and
acquisition advice, and management and general administrative services
("Advisor's personnel"), and Advisor accepts such engagement.
2. Scope of Services to be Provided
Advisor, subject to the control, direction and supervision of Client's
Board of Directors, and in conformity with applicable laws, Client's
Articles of Incorporation, By-laws, registration statements, business
plan objectives, policies and restrictions, shall provide the following
Services, excluding the compensation to Advisor's employees or agents
covered under separate agreements, if any, and their related expenses,
as provided below:
(A) Management of Assets. Advisor will manage the Client's assets
including, by way of illustration, the evaluation of pertinent
economic, statistical, financial and other data, and
formulation and/or implementation of a corporate business
plan; and
(B) Management of Operations. Advisor will conduct and manage the
day-to-day operations of the Client including, by way of
illustration, the furnishing of routine legal, supervisory,
accounting and administrative services, and the supervision of
the Client's administrative personnel, except for services
provided by outside counsel selected by Client; and
(C) Administrative Facilities. Advisor will furnish to Client
office space, facilities, equipment and personnel adequate to
provide the Services.
[NUVEN/AGR:TOEN94.AGR]-3
- 1 -
<PAGE>
3. Term
This Agreement shall have an initial term of three (3) years (the
"Initial Advisory Period"), with an effective date retroactive to the
date the Services were first performed by Advisor, which was on or
about June 1, 1993. At the conclusion of the Initial Advisory Period,
this Agreement will automatically be extended on a month to month basis
(the "Extension Period") unless Advisor or Client shall serve written
notice on the other party terminating the Agreement; provided, however,
that Advisor and Client shall agree in writing as to Advisor's
continuing compensation during any Extension Period. Any notice to
terminate given hereunder shall be in writing and shall be delivered at
least ten (10) days prior to the end of the Initial Advisory Period or
any subsequent Extension Period.
4. Time and Effort of Advisor
Advisor shall cause Advisor's personnel to devote that amount of time,
as necessary, on a weekly basis, to fulfilling Advisor's obligations
under this Agreement. The particular amount of time may vary from day
to day or week to week. Advisor unconditionally agrees that Advisor's
personnel, or his replacement, will at all times, faithfully and to the
best of his experience, ability, and talents, perform all the duties
required of Advisor under this Agreement.
5. Compensation
Client agrees to pay Advisor the following (collectively, the
"Consideration") for the Services rendered hereunder:
(A) The Services. The Client shall pay to the Advisor, as
compensation for the Services rendered, facilities furnished
and expenses paid by the Advisor, a monthly fee equal to Ten
Thousand Dollars ($10,000). Such fee shall be payable for each
calendar month as soon as practicable after the end of that
month.
(B) Options. As incentive to execute this Agreement, Client grants
to Advisor the option to purchase Client's common stock (the
"Option") consisting of One Hundred Thousand (100,000) shares
(the "Option Shares"), exercisable at a price of $1.00 per
share (the"Exercise Price"). The right of Advisor to exercise
such Option will vest to Advisor upon execution hereof.
The parties acknowledge that the consideration for Client's
shares to be delivered to Advisor shall consist of the
Services rendered to Client, and that Advisor is accepting
payment in shares as an accommodation to Client. Client and
Advisor acknowledge that Advisor may be considered an
affiliate subject to Section 16(b) of the Securities Exchange
Act of 1934 and, in this regard, Client and Advisor agree that
for purposes of any "profit" computation under Section 16(b)
the price paid for the Fee Shares is equal to the Base Fee.
[NUVEN/AGR:TOEN94.AGR]-3
- 2 -
<PAGE>
6. Role of Advisor
The Advisor, and any person controlled by or under common control with
the Advisor, shall be free to render similar services to others and
engage in other activities, so long as the Services rendered to the
Client are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (
the "1940 Act"), any of the shareholders, directors, officers and
employees of the Client may be a shareholder, trustee, director,
officer or employee of, or be otherwise interested in, the Advisor, and
in any person controlled by or under common control with the Advisor,
and the Advisor and any person controlled by or under common control
with the Advisor, may have an interest in the Client.
Except as otherwise agreed, in the absence of willful misfeasance, bad
faith, negligence or reckless or reckless disregard or obligations or
duties hereunder on the part of the Advisor or Advisor's personnel,
Advisor shall not be subject to liability to the Client, or to any
shareholder of the Client, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, management, holding or sale of any asset
of or security issued by Client.
7. Other Services
If, as a result of providing the Services or otherwise, Advisor is
successful in effecting a merger or reverse acquisition between a
Business Opportunity and Client (a "Business Combination"), in addition
to the Advisory Fee set forth in Paragraph 5A, above, Advisor shall be
entitled to a Finder's Fee. Such Finder's Fee shall be equal to ten
percent (10%) of the value of each transaction and shall be payable at
the close of each and every transaction in cash, notes, or capital
stock of Client, or other consideration as the parties shall mutually
agree. Such agreement as to the make-up of such consideration shall be
reduced to writing prior to the execution and a definitive agreement
between Client, and the prospective purchaser/seller. Failing to reach
an agreement as to the make-up of such Finder's Fee, Client agrees that
such fee shall consist solely of cash. In the event that the Finder's
Fee contains capital stock ("Finders Fee Shares"), unless otherwise
mutually agreed between the parties in writing, such stock to be issued
to Advisor shall be valued at the average bid price of such stock
during the ten (10) days preceding the execution of the definitive
agreement relative to such Business Combination, or any public
announcement related to such transaction, whichever is the earlier
date.
In the event that the Finder's Fee Arrangement calls for capital stock,
unless otherwise mutually agreed to by the parties, such stock to be
issued to Consultant shall be valued at fifty percent (50%) of the
average bid price, or if no bid price then the book value, of such
stock during the thirty days' preceding execution of the definitive
agreement relating to such Business Combination or any public
announcement related to such Business Combination, whichever first
occurs.
8. Registration of Client's Shares
No later than ten (10) days following the date of an event giving use
to the obligation by Client to issue Fee Shares, Option Shares or
Finder Fee Shares, Client will register such shares with the Securities
and Exchange Commission under a Form S-8 or other applicable
registration statement. At Client's sole discretion, such shares may be
issued prior to registration in reliance on
[NUVEN/AGR:TOEN94.AGR]-3
- 3 -
<PAGE>
exemptions from registration provided by Section 4(2) of the Securities
Act of 1933 (the "Act"), Regulation D of the Act, and applicable state
securities laws. Such issuance or reservation shall be in reliance on
representations and warranties of Advisor set forth herein.
9. Costs and Expenses
All third party and out-of-pocket expenses, filing fees, copy, and
mailing expenses incurred by Advisor in the performance of the Services
under this Agreement are the responsibility of Client, and shall be
paid by Client, or reimbursed to Advisor, within ten (10) days, of
receipt of written notice by Advisor.
10. Place of Services
The Services provided by Advisor hereunder will be performed primarily
at Advisor's offices except as otherwise mutually agreed by Advisor and
Client. It is understood and expected that Advisor may make contacts
with persons and entities and perform the Services in other locations
as deemed appropriate by Advisor.
11. Independent Contractor
Advisor and Advisor's personnel will act as an independent contractor
in the performance of its duties under this Agreement. Accordingly,
Advisor will be responsible for payment of all federal, state, and
local taxes on compensation paid under this Agreement, including income
and social security taxes, unemployment insurance, and any other taxes
due relative to Advisor's personnel, and any and all business license
fees as may be required.
12. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between Client and Advisor, or Employee and
Employer as between Advisor's personnel and Client. Neither Advisor's
personnel or Advisor are authorized to enter into any agreements on
behalf of Client. Advisor expressly retains the right to approve, in
its sole discretion, each and every transaction introduced to Client,
and to make all final decisions with respect to activities undertaken
by Advisor or Advisor's personnel related to this Agreement.
13. Termination
(A) Termination for Disability. If during the Initial Consulting
Period, Advisor or Advisor's personnel shall be unable to
provide the Services as set forth under this Agreement for 120
consecutive business days because of illness, accident, or
other incapacity, Client shall have the right to terminate
this Agreement upon written notice to Advisor not less than 30
business days after the end of any such 120-day period.
Termination under this Paragraph 13(A) shall be effective upon
receipt by Advisor of the written notice.
(B) Death. In the event of the death of Advisor's personnel with
replacement, this Agreement and all obligations hereunder
shall immediately be terminated.
[NUVEN/AGR:TOEN94.AGR]-3
- 4 -
<PAGE>
(C) Termination for Cause. The Client may, at its option,
terminate this Agreement by giving written notice of
termination to Advisor without prejudice to any other remedy
to which the Client may be entitled either at law, in equity,
or under this Agreement, if Advisor:
(i) Willfully breaches or neglects the duties that
Advisor is required to perform under the terms of
this Agreement;
(ii) Fails to promptly comply with and carry out all
directives of Client's Board of Directors;
(iii) Commits any dishonest or unlawful act, in the
judgment of Client's Board of Directors;
(iv) Engages in any conduct which disrupts the business of
Client or any entity affiliated with Client; or
(D) Termination Other Than For Cause. This Agreement shall
terminate immediately on the occurrence of any one of the
following events:
(i) The occurrence of circumstances, in the judgment of
Client's Board of Directors, that make it
impracticable for Client to continue its present
line(s) of business;
(ii) The decision of and upon notice by Advisor to
voluntarily terminate this Agreement;
(iii) If Client files a petition in a court of bankruptcy
or is adjudicated a bankrupt;
(iv) If Client institutes, or has instituted against it
any bankruptcy proceeding for reorganization for
rearrangement of its financial affairs;
(v) If Client has a receiver of its assets or property
appointed because of insolvency;
(vi) If Client makes a general assignment for the benefit
of creditors; or
(vii) If either party otherwise becomes insolvent or unable
to timely satisfy its obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
Termination Other Than For Cause prior to the completion of
the Initial Consulting Period, Advisor shall be entitled to
the full Compensation, the rights under the Options, and any
outstanding unpaid portion of the Consideration and expenses.
[NUVEN/AGR:TOEN94.AGR]-3
- 5 -
<PAGE>
14. Representations and Warranties of Client
Client represents and warrants to Advisor that:
(A) Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Nevada with the corporate power to own property and
carry on its business as it is now being conducted.
(B) Financial Information. Client has or will cause to be
delivered concurrently with the execution of this Agreement,
copies of the Disclosure Documents (as defined in Paragraph
15(D)(1)) which accurately set forth the financial condition
of Client as of the respective dates of such documents.
(C) No Conflict. This Agreement has been duly executed by Client
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in
any agreement, instrument, judgment, decree or order to which
Client is a party or to which Client is subject, nor will such
execution and performance constitute a violation or conflict
of any fiduciary duty to which Client is subject.
(D) Full Disclosure. The information concerning Client provided to
Advisor pursuant to this Agreement is, to the best of Client's
knowledge and belief, complete and accurate in all material
respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to
make the statements made, in light of the circumstances under
which they were made, not misleading.
(E) Date of Representations and Warranties. Each of the
representations and warranties of Client set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
15. Representations and Warranties of Advisor
Advisor represents and warrants to Client that:
(A) No Conflict. This Agreement has been duly executed by Advisor
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in
any agreement, instrument, judgment, decree or order to which
Advisor is a party or to which Advisor is subject, nor will
such execution and performance constitute a violation or
conflict of any fiduciary duty to which Advisor is subject.
(B) No Litigation. Advisor is not a defendant, nor plaintiffs
against whom a counterclaim has been asserted, in any
litigation, pending or threatened, nor has any material claim
been made or asserted against Advisor, nor are there any
proceedings threatened or pending before any U.S. or other
territorial, federal, state or municipal government, or any
department, board, body or agency thereof, involving as of the
date hereof, that may entitle a successful litigant to a claim
against any assets of Advisor, or interfere in any way with
the duties of Advisor hereunder.
[NUVEN/AGR:TOEN94.AGR]-3
- 6 -
<PAGE>
(C) Registration and/or Exemption of Client's Shares. Option
Shares or Finder's Fee Shares may be issued prior to
registration in reliance on the exemptions from registration
provided by Section 4(2) of the Securities Act of 1933 (the
"Act"), Regulation D, and applicable state securities laws.
Representations and warranties by Advisor in this Paragraph
15(C) will be used and relied upon by Client to determine
whether any issuance of Option Shares may be made to Advisor
pursuant to Section 4(2) of the Act and Regulation D and
applicable state securities laws, and Advisor will notify
Client immediately of any material changes. With these
specific understandings, Advisor represents and warrants that:
(1) Advisor has been furnished with a copy of Client's
most recent Annual Report on Form 10-K and all
reports or documents required to be filed under
Sections 13(a), 14(a), and 15(d) of the Securities
and Exchange Act of 1934, as amended, including but
not limited to quarterly reports on Form 10-Q,
current reports on Form 8-K, and proxy statements
(the "Disclosure Documents"). In addition, Advisor
has been furnished with a description of Client's
capital structure and any material changes in
Client's affairs that may not have been disclosed in
the Disclosure Documents.
(2) Advisor has had the opportunity to ask questions and
receive answers concerning the terms and conditions
of the Option Shares and/or Finder's Fee Shares to be
issued and/or reserved for issuance and to obtain any
additional information which Client possesses or can
acquire without unreasonable effort or expense that
is necessary to verify the accuracy of information
furnished under Paragraph 15(D)(1) of this Agreement.
(3) By reason of Advisor's knowledge and experience in
financial and business matters in general, and
investments in particular, Advisor is capable of
evaluating the merits and risks of this transaction
and in bearing the economic risks of an investment in
the Option Shares and the Introduction Shares, if
any, and the company in general, and fully understand
the speculative nature of such securities and the
possibility of such loss.
(4) The present financial condition of Advisor is such
that Advisor is not under any present or contemplated
future need to dispose of any portion of the Option
Shares or the Finder's Fee Shares, if any, to satisfy
an existing or contemplated undertaking, need, or
indebtedness.
(5) Advisor is fully aware that any Option Shares and
Finder's Fee Shares issued to Advisor prior to
registration are "Restricted Securities" as defined
by Rule 144 of the Act and that any resale of such
securities by Advisor may be governed by Rule 144.
Advisor is further aware of the specific restrictions
on resale of such securities contained in Rule 144.
(6) Advisor will not sell, transfer or otherwise dispose
of any Option Shares or Finder's Fee Shares issued or
reserved for issuance prior to registration except in
compliance with the Act.
[NUVEN/AGR:TOEN94.AGR]-3
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<PAGE>
(7) Any and all certificates representing Clients share
issued upon exercise of options or otherwise prior to
registration of such shares and any and all
securities issued in replacement thereof or in
exchange therefore, shall bear the following legend:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is
defined in Rule 144 under the Act. The
shares may not be offered for sale, sold, or
otherwise transferred except pursuant to an
effective Registration Statement under the
Act or pursuant to an exemption from
registration under the Act, the availability
of which is to be established to the
satisfaction of the Company."
(D) Full Disclosure. The information concerning Advisor provided
to Client pursuant to this Agreement is, to the best of
Advisor's knowledge and belief, complete and accurate in all
material respects and does not contain any untrue statement of
a material fact or omit to state a material fact required to
make the statements made, in light of the circumstances under
which they were made, not misleading.
(E) Date of Representations and Warranties. Each of the
representations and warranties of Advisor set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
16. Indemnification
Client and Advisor agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement.
17. Agreement Does not Contemplate Corrupt Practice - Domestic or Foreign
All payments under this Agreement constitute compensation for services
performed and this Agreement and all payments and the use of the
payments by Advisor, do not and shall not constitute an offer, payment,
or promise or authorization of payment of any money or gift to an
official or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These payments
may not be used to influence any act or decision of an official, party
or candidate to use his/her/its influence with a government to assist
Client in obtaining, retaining, or directing business to Client or any
person or other corporate entity. As used in this paragraph, the term
"official" means any officer or employee of a government, or any person
acting in an official capacity for or on behalf of any government; the
term "government" includes any department, agency, or instrumentality
of a government.
[NUVEN/AGR:TOEN94.AGR]-3
- 8 -
<PAGE>
18. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Advisor may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Advisor acknowledges that his use of such information to
purchase or sell securities of Client, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in Client's securities is prohibited by law and would
constitute a breach of this Agreement and notwithstanding the
provisions of this Agreement, will result in the immediate termination
of the Agreement.
19. Specific Performance
Advisor and Client acknowledge that in the event of a breach of this
Agreement by either party, money damages would be inadequate and the
non-breaching party would have no adequate remedy at law. Accordingly,
in the event of any controversy concerning the rights or obligations
under this Agreement, such rights or obligations shall be enforceable
in a court of equity by a decree of specific performance. Such remedy,
however, shall be cumulative and non-exclusive and shall be in addition
to any other remedy to which the parties may be entitled.
20. Miscellaneous
(A) Subsequent Events. Advisor and Client each agree to notify the
other party if, subsequent to the date of this Agreement,
either party incurs obligations which could compromise its
efforts and obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take
actions and to execute and deliver documents a may be
reasonably necessary to effectuate the purposes of this
Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply
with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed. The failure of any party to this Agreement
to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such
provision or a waiver of the right of such party thereafter to
enforce each and every such provision. No waiver of any breach
of or non-compliance with this Agreement shall be held to be a
waiver of any other or subsequent breach or non- compliance.
(E) Assignment. Neither this entire Agreement nor any right
created by it shall be assignable by either party without the
prior written consent of the other.
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
[NUVEN/AGR:TOEN94.AGR]-3
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<PAGE>
company for transmittal, or when sent by facsimile
transmission charges prepared, provided that the communication
is addressed:
(i) In the case of Client:
The Toen Group, Inc.
3753 Howard Hughes Parkway, Suite 200
Las Vegas, Nevada 89109
Telephone: (702) 892-3782
Telefax: (714) 833-7854
(ii) In the case of Advisor and Advisor's personnel, to:
NuVen Advisors, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
or to such other person or address designated by Client or
Advisor to receive notice.
(G) Headings. The section and subsection headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of Nevada, and shall be governed
by the laws of the State of Nevada, notwithstanding any
conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understan dings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
[NUVEN/AGR:TOEN94.AGR]-3
- 10 -
<PAGE>
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties agree to execute
an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date
hereof, all prior rights of Advisor relating to the accrual or
payment of any form of compensation or other benefits from
Client based upon any agreements other than this Agreement,
whether written or oral, entered into prior to the date
hereof, are hereby terminated.
(O) Consolidation or Merger. Subject to the provisions of
Paragraph 7 hereof, in the event of a sale of the stock, or
substantially all of the stock, of Client, or consolidation or
merger of Client with or into another corporation or entity,
or the sale of substantially all of the operating assets of
the Client to another corporation, entity or individual,
Client may assign its rights and obligations under this
Agreement to its successor-in-interest and such
successor-in-interest shall be deemed to have acquired all
rights and assumed all obligations of Client hereunder;
provided, however, that in no event shall the duties and
Services of Advisor provided for in Paragraph 2 hereof, or the
responsibilities, authority or powers commensurate therewith,
change in any material respect as a result of such sale of
stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date above written.
"Advisor"
NUVEN ADVISORS, INC.
a Nevada corporation
By: /s/ NuVen Advisors Inc.
"Client"
THE TOEN GROUP INC.
a Nevada corporation
By: /s/ The Toen Group Inc.
[NUVEN/AGR:TOEN94.AGR]-3
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1994
<PERIOD-END> MAY-31-1994
<CASH> 4,989
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,989
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,989
<CURRENT-LIABILITIES> 175,000
<BONDS> 0
0
0
<COMMON> 408,442
<OTHER-SE> (238,431)
<TOTAL-LIABILITY-AND-EQUITY> 4,989
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 170,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (170,751)
<INCOME-TAX> 0
<INCOME-CONTINUING> (170,751)
<DISCONTINUED> 14,286
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (156,465)
<EPS-PRIMARY> (.627)
<EPS-DILUTED> 0
</TABLE>
