U.S. 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 fiscal year ended September 30, 1997 Commission File No. 0-17700
SIGMA-7 PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1095500
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2501 East 3rd Street
Casper, Wyoming 82609 (307) 235-0012
(Address of Principal's Executive Offices) (Registrant's Telephone No.
incl. area code)
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90 days.
Yes X No
Indicate by check mark if no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
Yes X No
The registrant's revenues for its most recent fiscal year were $-0-.
The aggregate market value of the 45,467,291 shares of common stock of the
registrant held by non-affiliates on September 30, 1997 was not determinable.
At September 30, 1997 a total of 758,287,497 shares of common stock were
outstanding.
PART I
Item 1. Description of Business.
BACKGROUND.
The Company was incorporated in the State of Colorado under the name of
Seek-2 Ventures, Inc. on October 3, 1988 as a blind pool corporation for the
purpose of obtaining capital to take advantage of domestic and foreign
business opportunities. On April 13, 1989, the Company completed its initial
public offering of 11,460,000 shares of stock raising the approximate net sum
of $93,467.
On April 19, 1989, the Company amended its Articles of Incorporation
changing the Company's name to Sigma-7 Products, Inc. Subsequently, on
January 25, 1992 the Company changed its name to Global Development Group,
Inc. and back again to Sigma-7 Products, Inc. on May 25, 1995.
During the period between April 19, 1989 and approximately March 1, 1991,
the Company engaged in the manufacture of electronic self-protection devices
commonly referred to as "stun-guns". During 1991 the Company determined that
pursuing the stun gun manufacturing business would require substantially more
funds than it could reasonably expect to raise in the near future, Further,
various economic, governmental and regulatory agencies brought focus on the
industry in such a manner that it did not appear to be in the Company's best
interest to pursue this endeavor. During late February and early March 1991,
the Company ceased to operate that business due to a lack of working capital
and extended debt.
Subsequent to January 1, 1991, the Company engaged in a financial restructur-
ing to eliminate as much debt as possible and to make the Company attractive
for acquisition and/or merger with qualified individuals and companies with
existing operations.
During fiscal year 1991 the Company issued 9,935,291 shares of its no par
value common stock as part of its warrants exercised at $.02 per share, in
exchange for the conversion of certain judgement obligations and other out-
standing trade debts amounting to approximately $198,706. This exchange
included 7,500,000 shares of the Company's common stock given in exchange for
$150,000 in loans and rentals by G&A Asset Management, Inc., a Colorado
corporation owned by the trusts for the children of the then Company's
president. It also includes 1,550,000 shares given as payment of accrued
unpaid salaries due to the Company's former officer, James Twist, in the
amount of $31,000.
During 1991 the Company determined that pursuing the stun gun manufacturing
business would require substantially more funds than it could reasonably
expect to raise in the near future. Further, various economic, governmental
and regulatory agencies brought focus on the industry in such a manner that
it did not appear to be in the Company's best interest to pursue this
endeavor. Accordingly, the Company became a shell corporation seeking to
acquire a business or assets and thereby become an operating business.
FORWARD LOOKING STATEMENT.
This report contains forward-looking statements and information relating to
the Company that are based on the beleifs of its management as well as
assumptions made by and information currently available to its management.
When used in this report, the words "anticipate", "beleif", "estimate",
"expect", "intend", "plan", and similar expressions, as they relate to the
Company or its management, are intended to identify forward-looking
statements. These statements reflect management's current view of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should any of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described in this report as anticipated,
estimated or expected. The Company's realization of its business aims will
depend in the near future principally on the successful completion of its
acquisition of operations as discussed below.
BUSINESS OF THE COMPANY.
The Company's sole business at this point is to seek to acquire assets of or
an interest in a small to medium-size company or venture actively engaged in
a business generating revenues or having immediate prospects of generating
revenues. The Company plans to acquire such assets or shares by exchanging
therefor the Company's securities. In order to avoid becoming subject to
regulation under the Investment Company Act of 1940, as amended, the Company
does not intend to enter into any transaction involving the purchase of
another corporation's stock unless the Company can acquire at least a
majority interest in that corporation. The Company has not identified any
industry, segment within an industry or type of business, nor geographic
area, in which it will concentrate its efforts, and any assets or interest
acquired may be in any industry or location, anywhere in the world. The
Company will give preference to profitable companies or ventures with a
significant asset base sufficient to support a listing on a national
securities exchange or quotation on the NASDAQ system. Members of management
(all of whom are devoting part time to the Company's affairs) plan to search
for an operating business or venture which the Company can acquire, thereby
becoming an operating company. There is no assurance that the Company will be
successful in this endeavor. The Company has no operations or source of
revenues. Unless the Company succeeds in acquiring a company or properties
which provide cash flow, the Company's ability to survive is in doubt.
COMPETITION.
The Company will be in direct competition with many entities in its efforts
to locate suitable business opportunities. Included in the competition will
be business development companies, venture capital partnerships and
corporations, small business investment companies, venture capital affiliates
of industrial and financial companies, broker-dealers and investment bankers,
management and management consultant firms and private individual investors.
Most of these entities will possess greater financial resources and will be
able to assume greater risks than those which the Company could consider.
Many of these competing entities will also possess significantly greater
experience, managerial abilities and contacts than the Company's management.
Moreover, the Company also will be competing with numerous other public
companies available to engage in business combinations with private entities.
EMPLOYEES.
The Company has no employees other than its officers and no full-time
employees. Its officers expect to devote as much of their time as they deem
necessary to find and acquire assets or interests in one or more other
businesses. It is unlikely that any officer or director will, on the average,
devote more than 15 hours per week to the Company's affairs.
Item 2. Description of Property.
The Company neither owns nor leases any real estate or other properties. The
Company's offices are located at 2501 East 3rd Street, Casper, Wyoming 82609,
and are provided at no charge by its President. This arrangement will
continue until the Company determines to relocate its offices, which is not
now anticipated, since the current arrangement is entirely adequate for the
Company's needs. The Company does not intend to acquire any properties or
additional offices, and Management does not anticipate that the Company will
rent office space unless and until it has acquired a business opportunity, in
which case the Company's offices almost certainly will be the same as those
of the business opportunity acquired.
Item 3. Legal Proceedings.
The Company is not involved in any threatened or pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security holders.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
MARKET INFORMATION.
The Company's common stock is quoted in th over-the-counter market under
symbol "SMSP" on the OTC Bulletin Board operated by the National Association
of Securities Dealers, Inc. at a price of $.01 per share. There has been
little activity in the market for the Company's shares, and there is no
assurance that an active market ever will arise.
HOLDERS.
The Company's common stock is held of record by approximately 95 persons,
which does not include shares held in nominee or "street" name.
DIVIDENDS.
The Company does not expect to pay a cash dividend upon its capital stock in
the foreseeable future. Payment of dividends in the future will depend on the
Company's earnings (if any) and its cash requirements at that time.
Item 6. Management's Discussion and Analysis or Plan of Operation.
BACKGROUND.
The Company has not had business operations or revenues since September 1994
and is in the development stage.
RESULTS OF OPERATIONS.
During the fiscal year ended September 30, 1997, the Company incurred a net
loss of $18,721 as compared to a net loss of 7,535 for the year ended
September 30, 1996. Expenses in fiscal 1997 and 196 related primarily to
accounting fees, legal fees and other costs incurred with bringing the
Company current in its SEC filings.
LIQUIDITY.
As of September 30, 1997, the Company had an accumulated deficit of $461,291.
The Company has no appreciable assets and is completely illiquid. Management
is actively seeking to make one or more acquisitions of privately held
companies, properties or interests as described above, but has not yet
entered into any understanding, agreement or arrangement with any person
respecting such an acquisition. Whether the Company continues as a going
concern depends upon its success in finding and acquiring a suitable private
business and the success of that acquired business. The Company has no
long-term liabilities but does have significant short-term liabilities. The
Company pays no salaries or rent. Assets and cash available to the Company
from its management and shareholders may not be sufficient for the
Company to carry out its business plan. Problems relating to capital
resources are more fully discussed in the paragraph below.
CAPITAL RESOURCES.
The Company has no commitment for any capital expenditure and foresees
none. However, the Company will incur routine fees and expenses incident
to its reporting duties as a public company, and it will incur fees and
expenses in the event it makes or attempts to make an acquisition. As a
practical matter, the Company expects no significant operating costs other
than professional fees payable to attorneys and accountants. In regard to a
proposed acquisition, the Company intends to require the target company to
deposit with the Company a retainer which the Company can use to defray
such professional fees and costs. In this way, the Company could avoid the
need to raise funds for such expenses or becoming indebted to such
professionals. Moreover, investigation of business ventures for potential
acquisition will involve some costs, including travel, lodging, postage and
long-distance telephone charges. Management hopes, once a candidate
business venture is deemed to be appealing, to likewise secure a deposit from
the business venture to defray expenses of further investigation, such as air
travel and lodging expenses. An otherwise desirable business venture may,
however, decline to post such a deposit. In this event, such expenses can
only be covered if affiliates of the Company loan or contribute the necessary
capital to the Company (which is not assured) or if the Company is otherwise
able to raise funds from third parties. No source of funding or capital has
been identified, and the Company has no credit or means to obtain a loan.
PLAN OF OPERATION.
The following discussion sets forth Management's plan of operation for the
Company over the next twelve months from the date of this report, and
thereafter, if no acquisition is made within twelve months.
BUSINESS.
The following discussion sets forth management's plan of operation for the
Company over the next twelve months from the date of this report, and
thereafter, if no acquisition is made within twelve months.
The Company is a "blank check" company which intends to seek, evaluate
and (if warranted) acquire one or more properties or private companies or
businesses. Such an acquisition may be made by purchase, merger, exchange
of stock or otherwise, and may encompass assets or a business entity such as
a corporation, partnership or joint venture. Since the Company has no
capital, it is unlikely that the Company will be able to take advantage of
more than one such opportunity. Management intends to seek acquisitions
demonstrating the potential for long-term growth in real value.
The Company is not restricted in its search for business opportunities to any
particular geographical area, industry or business within an industry and may
engage in any line of business, including service, finance, mining,
manufacturing, real estate, oil and gas, distribution, transportation, medical,
communications, high technology, biotechnology or any other. It is possible
that management may later determine to concentrate its search for business
opportunities to a particular industry, segment of an industry, or a particular
line of business, or to a defined geographical area. To date, however, no
such determination has been discussed. Management's discretion is, as a
practical matter, unlimited in the choice of a business venture or ventures.
The Company's search generally will be directed toward smallish to medium-
sized companies. Management anticipates that any business opportunity
seriously considered for acquisition will be out of the development stage, and
have revenues and earnings. The Company has no current plans to advertise
or publish notices concerning its quest to make such an acquisition.
Management does not intend to pursue any potential acquisition or com-
bination beyond the preliminary negotiation stage with any business venture
which does not have and cannot furnish the Company acceptable audited
financial statements for at least its two most recent fiscal years and unaudited
interim financial statements for any periods subsequent to its most recently
completed fiscal year.
No arrangements, agreements or understandings exist between non-management
shareholders and management under which the non-management
shareholders may participate in or influence the management of the
Company's affairs. Of non-management shareholders, Mr. Brasher has
indicated that management holds his confidence and that he currently intends
to vote for the sole incumbent director, Mr. Siedow, in the next election of
directors.
FORM OF ACQUISITION.
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters
of the opportunity and, upon the basis of that review and the relative
negotiating strength of the Company and such promoters, the legal structure
or method deemed by management to be suitable will be selected. In
addition, the current management and shareholders of the Company most
likely will not have control of a majority of the voting shares of the
Company following an acquisition transaction. As part of such a transaction,
all or a majority of the Company's directors may resign, and new directors
may be appointed without any vote by shareholders.
An acquisition or business combination may occur in one of several ways,
such as statutory merger or consolidation, asset purchase, or "reverse
merger," in which the Company acquires all of the private company's
outstanding common stock in exchange for the issuance of unregistered
shares of the Company's common stock. Because the Company will have
virtually no cash or other assets, it will be foreclosed from purchasing for
cash the assets or outstanding voting stock of a viable business venture and
can expect to make such an acquisition only by issuing additional shares of
its common stock.
Management anticipates that the acquisition will be structured so as to avoid
creating a taxable event under federal tax laws and probably will be
structured as a tax-free reorganization under Sections 351 or 368(a) of the
Internal Revenue Code of 1986, as amended. It is anticipated that the value
of any private company acquired no doubt will greatly exceed that of the
Company. Thus it is all but certain that, following the acquisition, the
current shareholders of the Company will in the aggregate own 10% or less
of the common stock of the Company.
The Company will participate in a business venture only after the
negotiation and execution of a written agreement. Although the terms of
such an agreement cannot be predicted, such agreements generally provide
for representations and warranties by the various parties thereto, conditions
of closing, post-closing covenants and restrictions, reciprocal indemnities,
remedies upon default and other terms. As a general matter, the Company
anticipates that it will enter into a letter of intent with the management,
principals or owners of a prospective business opportunity. Such a letter of
intent will set forth the terms of the proposed acquisition but will not bind
the Company to consummate it. Execution of such a letter of intent will by
no means indicate that consummation of an acquisition is probable.
The Company will not be bound unless and until it executes a definitive
agreement concerning the acquisition, as described in the foregoing
paragraph, and then only if the Company has no contractual right to
terminate the agreement on specified grounds. The investigation of specific
opportunities and the negotiation, drafting and execution of agreements and
other documents will require substantial costs for attorneys, accountants and
others, probably amounting to several thousand dollars for each acquisition
attempted. The Company does not have and may not be able to obtain the
needed funds. If a decision is made not to participate in a specific business
venture, or if a negotiated agreement is not consummated, the costs to the
Company (which could be substantial in light of the Company's lack of cash)
may not be recoverable. Management has not formulated any firm policy in
this regard, but does not intend to proceed further than the drafting of a non-
binding letter of intent in connection with any proposed acquisition unless
and until (i) the Company has determined that the company to be acquired
has or can obtain the financial statements required by applicable regulations
of the Securities and Exchange Commission, and (ii) the company to be
acquired has posted a deposit with the Company to be used for paying the
Company's attorneys and accountants. Such a precaution will enable
management to limit the Company's financial exposure as to any acquisition
which cannot be completed for any reason.
Any attempted acquisition can be expected to absorb several weeks at the
least, and perhaps longer. Moreover, any acquisition may involve substantial
time delays, which can be caused for several reasons, including delays
caused by complying with requirements of state law.
ANALYSIS AND INVESTIGATION OF OPPORTUNITIES.
The selection of a business venture or ventures in which the Company is to
participate will be entirely subjective. The Company's lack of funds and full-
time management will make it impossible to conduct complete investigations
and analyses of individual business opportunities before making a decision.
Participation may be based in large part on the perceived quality of a private
company's management and personnel, properties or proprietary rights,
products, services, marketing concepts, level of technology, or other factors
which are often difficult to analyze with complete objectivity. Management's
decisions may be made without the benefit of detailed feasibility studies,
independent analysis, market surveys and similar professional studies which
would be desirable if the Company had more funds available to it. In many
instances, it is anticipated that the historical operations of a specific firm
may not necessarily be indicative of its potential for the future because of
the possible need to shift marketing approaches substantially, expand
significantly, change product emphasis, change or substantially augment
management, or make other changes. Because of the lack of training and
experience of management, the Company will be heavily dependent upon the
owners of a business opportunity to identify such problems and to
implement, or be primarily responsible for the implementation of, required
changes. Because the Company may participate in a business opportunity
with a newly organized firm or with a firm which is entering a new phase of
growth, it should be emphasized that the Company will incur further risks,
because management in many instances will not have proved its abilities or
effectiveness, the eventual market for such company's products or services
will likely not be established, and such company may not be profitable when
acquired.
It is emphasized that management may effect transactions having a
potentially adverse impact upon its shareholders pursuant to the authority and
discretion of the Company's current directors to complete acquisitions
without submitting any proposal to the shareholders for their consideration.
In some instances, however, the proposed participation in a business
opportunity may be submitted to the shareholders for their consideration,
either voluntarily by the directors to seek the shareholders' advice and
consent or because state law so requires.
The analysis of any business opportunity will be undertaken by or under the
supervision of management, none of whom is a professional business analyst
or has any previous training or significant experience in business analysis. In
selecting business ventures, management anticipates that it will consider the
following factors related to each business venture examined, among other
possible factors: (1) total and net assets and shareholders' equity, in light of
current and long-term liabilities; (2) total revenues and earnings, both current
and over the prior three fiscal years; (3) potential for revenue and earnings
growth; (4) existing and potential competition; (5) proprietary technology
and know-how, as well as patents and trademarks, if any; (6) capabilities and
experience of current management and management prospects already
recruited; (7) capital requirements; (8) availability of new capital and debt
financing sources, as well as relationships with existing lenders; (9) the cost
and form of participation by the Company; (10) special risks associated with
the venture and its industry or industry segment; and (11) perceived
desirability of the venture to investors in the public capital markets.
It is anticipated that potential opportunities will become available to the
Company from many sources, primarily its management, but also including
attorneys and accountants, securities broker-dealers, venture capitalists,
members of the financial community, consultants, entrepreneurs and others
who may present unsolicited proposals. However, as of this date,
management does not intend paying a cash "finder's fee" to any person who
presents a business opportunity to the Company. The Company may
compensate a person who brings a business opportunity to the Company
which subsequently is acquired, but any such compensation would be in the
form of common stock (or options or other securities of the Company). Any
such issuance of the Company's securities would be made on an ad hoc
basis, and the amount or type of securities cannot at this time be predicted.
INSIDER SALES OF STOCK.
No officer, director or affiliate of the Company currently has any intention
of selling shares owned by them in the Company to any person in connection
with any business opportunity acquired by the Company. However, no law,
rule or regulation, and no bylaw or charter provision prevents any such
persons from thus actively negotiating or consummating such a sale of their
shares. Company shareholders will not be afforded any opportunity to review
or approve any buyout of shares held by an officer, director or other
affiliate, should such a buyout occur.
USE OF CONSULTANTS.
The Company has had no discussions, and has entered into no agreements or
understandings, with any consultant. The Company's officers and directors
have not in the past used any particular consultant(s) on a regular basis and
have no plan to recommend that any particular consultant(s) be engaged by
the Company on any basis. No particular criteria regarding experience,
services, term of service, or the like has been considered or developed
regarding the engagement of consultant(s). However, the Company currently
has no plan to hire or engage consultant(s) and management believes that a
desirable business opportunity can be located and acquired by management.
ACQUISITION-RELATED COMPENSATION.
It is possible that compensation in the form of common stock, options,
warrants or other securities of the Company, cash or any combination
thereof, may be paid to various persons in connection with an acquisition by
the Company. Such persons may include officers, directors and promoters of
the Company and any of their respective affiliates, finders or other persons.
Any payments of cash would be made by the business acquired or persons
affiliated or associated with it, since the Company has no cash. It is possible
that the payment of such compensation may become a factor in any
negotiations for the Company's acquisition of a business opportunity. Any
such negotiations and compensation may present conflicts of interest between
the interests of persons seeking compensation and those of the Company's
shareholders, and there is no assurance that any such conflicts will be
resolved in favor of the Company's shareholders.
STATE SECURITIES LAWS CONSIDERATIONS.
Section 18 of the Securities Act of 1933, as amended in 1996, provides that
no law, rule, regulation, order or administrative action of any state may
require registration or qualification of securities or securities transactions
with respect to a "covered security." The term "covered security" is defined
in Section 18 to include, among other things, transactions which are exempt
from registration under the Securities Act of 1933 pursuant to Section 4(1),
which exempts transactions by "any person not an issuer, underwriter or
dealer," (that is, secondary resales, such as market trades) provided the
issuer of the security files reports with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. In other words, Section 18 defines a
covered security to include market trades and other secondary transactions by
shareholders in outstanding securities, even if the issuer is a "blank check"
company, provided the issuer is a reporting company.
While subparagraph (c) of Section 18 as amended preserves the authority of
the states to require certain limited notice filings and to collect fees as to
certain categories of covered securities (including Section 4(1) secondary
transactions in the securities of reporting companies), a state may not
"directly or indirectly prohibit, limit, or impose conditions based on the
merits of such offering or issuer, upon the offer or sale of any (covered)
security." This provision prohibits state registration or qualification
requirements, other than requiring certain limited notice filings, of trading in
the securities of blank check companies which are SEC reporting companies.
The Company will comply with any such state limited notice filings, but is
currently not aware of any such filing requirements for market trading.
Item 7. Financial Statements.
See index to financial statements at page 12. The financial statements begin
following that index. No supplementary financial data is required.
Item 8. Changes in and Disagreements with Accountants or Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The present directors and executive officers of the Company, their ages,
positions held in and tenure with the Company, are listed below. Each
director will serve until the next annual meeting of shareholders, or until
his respective successor has been elected and duly qualified. Directors serve
one-year terms. Officers hold office at the pleasure of the Board
of Directors, absent any employment agreement, of which none currently exist
or are contemplated. There is no arrangement between any such person or the
Company and any third person pursuant to which such third person was or is to
be selected as a director or officer of the Company. There are no family
relationships between the directors and executive officers.
Name Age Position Held and Tenure
Donald J. Smith 56 President, Chief Executive Officer, Director,
Chairman of the Board, since June 2, 1995.
Timothy S. Gibson 42 Vice President, Secretary, Director since
June 2, 1995.
Richard S. Rouse 56 Vice President, Director since June 2, 1995.
BIOGRAPHICAL INFORMATION.
The following is a brief account of the business experience during at least
the past five years of each person who is a director and executive officer at
the time of filing this report, indicating the principal occupation and
employment during that period, and the name and principal business of the
organization in which such occupation and employment were carried out. None
of such persons has ever devoted full time or any significant time to the
Company's business. These persons have agreed to devote only such time to the
Company's business as seems reasonable and necessary from time to time.
Donald J. Smith. Mr. Smith has been since 1981 the sole owner and operator
of Smith & Associates, a Real Estate brokerage firm in Casper, Wyoming. From
January 1977 until august 1981, he was an associate broker at Heiser Realty,
a Real Estate brokerage firm in Casper. In addition, Mr. Smith is a
Vice-President and Director of Leverage Group, Inc., a blind pool development
stage company in Denver, Colorado which is undergoing a public offering of
its securities.
Timothy S. Gibson. Mr. Gibson is a self-employed attorney who has practiced
law in Denver, Colorado since 1983. He was awarded a B.S. Degree from
Emporia State University (Kansas) in 1979 and a J.D. Degree from the
University of Arkansas in 1983. Mr. Gibson also is a director and chairman,
president and chief executive officer of another corporation with a business
plan virtually identical to that of the Company: Gaensel Gold Mines, Inc., a
Nevada corporation headquartered in Denver.
Richard S. Rouse. Mr. Rouse is the President of Gasket and Molded Products,
Inc. of Parker, Colorado. He has held that position since 1986. Between
1981 and 1985, Mr. Rouse was the General manager for the Boyd Corporation,
Denver Branch. Between 1976 and 1981, Mr. Rouse was the General manager for
the Boyd Corporation, Sparks, Nevada Branch and between 1974 and 1976 was a
Sales Representative for the Boyd Corporation, Seattle, Washington Branch.
Mr. Rouse received a Bachelor's degree in Business Management from Whitworth
College, Spokane, Washington in 1965 and 1983 completed the Management
Action Program, an intensive course for Upper Management and CEO's.
GENERAL CONFLICTS OF INTEREST.
Certain conflicts of interest now exist and will continue to exist between
the Company and its officers and directors due to the fact that each has
other employment or business interests to which he devotes his primary
attention. Each officer and director is expected to continue to do so,
notwithstanding the fact that Management time should be devoted to the
Company's affairs. The Company has not established policies or procedures
for the resolution of current or potential conflicts of interest between the
Company and its Management. There can be no assurance that members of
Management will resolve all conflicts of interest in the Company's favor.
The officers and directors are accountable to the Company as fiduciaries,
which means that they are legally obligated to exercise good faith and
integrity in handling the Company's affairs. Failure by them to conduct the
Company's business in its best interests may result in liability to them.
INDEMNIFICATION.
The Company's Articles of Incorporation make provision to limit its
directors liability to the greatest extent permitted by Colorado law.
Colorado has legislation which authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders
for monetary damages for breach of directors fiduciary duty of care. The
duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgement based on all material
information reasonably available to them. Absent the limitations authorized
by the legislation, directors are accountable to corporations and their
stockholders for monetary damages for conduct constituting gross negligence
in the exercise of their duty of care. Although the statute does not change
directors duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or recision.
EXCLUSION OF DIRECTOR LIABILITY.
Directors of the Company will not be personally liable for monetary damages
for breach of a director's fiduciary duty as a director, except for liability
(I) for any breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) acts omissions
for which liability is expressly provided by statute; or (iv) for any
transaction from which the director derived an improper personal benefit.
The Certificate of Incorporation provides that if the Colorado Business
Corporation Act is amended after the effective date of the Certificate of
Incorporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Company will be eliminated or limited to the fullest extent permitted by
Colorado Business Corporation Act, as so amended. The inclusion of this
provision in the Certificate of Incorporation may have the effect of reducing
the likelihood of derivative litigation against directors, and may discourage
or deter stockholders or management from bringing a lawsuit against directors
for breach of their duty of care, even though such action, if successful,
might otherwise have benefited the Company and its stockholders.
In addition to the above provisions, the Company's Articles of Incorporation
provide for indemnification of officers, directors and employees for certain
of their acts in such capacities to the fullest extent permitted by law.
SIGNIFICANT EMPLOYEES.
None, other than officers of the Company listed above.
Item 10. Executive Compensation.
CASH COMPENSATION.
For the fiscal year ended September 30, 1997, no executive officer received
cash compensation.
COMPENSATION PURSUANT TO PLANS.
No compensation was paid to executive officers pursuant to any plan during
the fiscal year just ended, and the Company has no agreement or
understanding, express or implied, with any officer or director concerning
employment or cash compensation for services.
EMPLOYEE BONUS PLAN
The Company has adopted an Employee Bonus Plan. The purpose of the Plan is
to aid the Company in obtaining and retaining the services of salaried and
non-salaried employees an officers by providing them with an opportunity to
share in the profits of the Company. The Plan provides for the payment of
six percent (6%) of the Company's pretax profit in excess of $50,000 to a
Plan Administrator which shall be selected by the Board of Directors.
Employee bonuses will be distributed fifty percent (50%) to non-salaried
employees, twenty-five percent (25%) to salaried employees, and twenty-five
percent (25%) to officers of the Company. The Plan provides for quarterly
determinations and distributions within thirty (30) days of each quarter end.
No distributions have been made or intended to be made pursuant to this Plan.
STOCK OPTION PLAN
The Company has also adopted a Stock Option Plan for key employees. The
purpose of such Plan is to retain the services of selected key employees by
providing an opportunity for such personnel to acquire a proprietary interest
in the Company and thus share in its growth and success. The Company will
reserve a maximum of 500,000 shares to be issued upon exercise of options
which may be granted under the Plan. The Plan is intended to qualify as an
incentive stock option plan under Section 422A of the Internal Revenue Code
of 1986, as amended. Accordingly, options will be granted under the Plan at
exercise prices at least equal to the fair market value per share of the
Company's Common Stock on the respective dates of grant and will be subject
to the limitations provided by such law. However, options may be granted to
employees who own more than ten percent 10% of the Company's outstanding
Common Stock only at an option price which is at least 110% of the fair
market value of the Common Stock on the date the option is granted. With
respect to options granted pursuant to Section 422A, employees will not
recognize taxable income upon either the grant or the exercise of such
options. The Company will not be entitled to any compensation deduction with
respect to such options unless disqualifying dispositions, as defined by such
law, are made. The Plan will be administered by the Board of Directors. No
options have been granted pursuant to this Plan.
OTHER COMPENSATION.
None.
COMPENSATION OF DIRECTORS.
None.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the date of this Registration
Statement, the stock ownership of each officer and director of the Company,
of all officers and directors of the Company as a group, and of each person
known by the Company to be a beneficial owner of 5% or more of its Common
Stock. Except as otherwise noted, each person listed below is the sole
beneficial owner of the shares and has sole investment and voting power as
such shares. No person listed below has any option, warrant or other right to
acquire additional securities of the Company, except as may be otherwise
noted.
As of September 30, 1997
Name and Address Amount & Nature Percent
of Beneficial of Beneficial of
Title of Class Owner Ownership Class
- -------------- ------------------------- -------------------- -----------
Common Stock Donald J. Smith* 249,000,000 32.93%
No par value 2501 East 3rd Street
Casper, WY 80021
SAME Timothy S. Gibson* 1,000,000 0.0%
3300 E. 1st Avenue,
Suite 230
Denver, CO 80206
SAME Richard S. Rouse* 1,000,000 0.0%
8218 E. Lakeshore Drive
Parker, CO 80134
SAME Eric J. Sundsvold** 150,000,000 19.84%
5121 S. Ironton Way
Englewood, CO 80111
SAME Jeffrey Benjamin 200,000,000 26.45%
9954 W. Vassar Way
Lakewood, CO 80227
* All officers and directors as a group - 251,000,000. 33.20%
** Eric Sundsvold is a licensed securities dealer employed by Rocky Mountain
Securities, Inc. and a member of the NASD (National Association of
Securities Dealers).
CHANGES IN CONTROL.
A change in control undoubtedly will occur when and if the Company
acquires a business opportunity. Although the extent of the change of
control cannot be predicted at this time, it is unlikely that the existing
shareholders will own more than 10% of the company (or combined entity)
following an acquisition.
Item 12. Certain Relationships and Related Transactions.
There were no transactions, or series of transactions, for the fiscal year
ended September 30, 1997, nor are there any currently proposed
transactions, or series of transactions, to which the Company is a party, in
which the amount exceeds $60,000, and in which to the knowledge of the
Company any director, executive officer, nominee, five percent or greater
shareholder, or any member of the immediate family of any of the foregoing
persons, have or will have any direct or indirect material interest.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits, if any, marked with an asterisk (*)
are filed with this report. Other exhibits have previously been filed
with the Securities and Exchange Commission and are incorporated by
reference to another report, registration statement or form. As to any
shareholder of record requesting a copy of this report, the Company will
furnish any exhibit indicated in the list below as filed with report
upon payment to the Company of its expenses in furnishing the
information. References to the "Company" mean Sigma-7 Products, Inc.
3.1 Articles of Incorporation of the Company, incorporated by reference
from Exhibit 3.1 to registration statement on Form S-18, registration
No. 33-25201-FW dated October 27, 1988.
3.2 Bylaws of the Company, incorporated by reference from Exhibit 3.2 to
registration statement on Form S-18, file No. 33-25201-FW dated
October 27, 1988.
10.0 Material Exhibits
10.6 Employee Bonus Plan, incorporated by reference from Exhibit 10.6 to
Form S-18 Post-Effective Amendment No. 1 dated April 28, 1989.
10.7 1989 Stock Option Plan, incorporated by reference from Exhibit 10.7 to
Form S-18 Post-Effective Amendment No. 1 dated April 28, 1989.
(b) Reports on Form 8-K. None were filed by the Company during the fourth
fiscal quarter ended September 30, 1997.
(c) Financial statements and supplementary data.
Index to Financial Statements
Independent Auditor's Report .......................................... F-1
Balance Sheets as of September 30, 1997 and 1996 ...................... F-2
Statements of Operations for fiscal years ended
September 30, 1997, 1996 and 1995 and from October 3, 1988
(inception) through September 30, 1997 ............................... F-3
Statement of Shareholders' Equity
For the period from October 3, 1988 (inception) to
September 30, 1997 ................................................... F-4
Statements of Cash Flows for fiscal years ended
September 30, 1997, 1996 and 1995 and from October 3, 1988
(inception) through September 30, 1997 ............................... F-6
Notes to Financial Statements ......................................... F-7
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
SIGMA-7 PRODUCTS, INC.
Cheyenne, Wyoming
We have audited the accompanying balance sheets of Sigma-7
Products, Inc. (a development stage company) as of September 30,
1997 and 1996, and the related statements of operations,
stockholders' equity and cash flows for years ended September 30,
1997, 1996 and 1995 and for the period from (inception) October 3,
1988 to September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based upon our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Sigma-7
Products, Inc. (a development stage company) as of September 30,
1997 and 1996, and the results of its operations and its cash flows
for the years ended September 30, 1997, 1996 and 1995 and the
period from inception (October 3, 1988) to September 30, 1997, in
conformity with generally accepted accounting principals.
Levine, Hughes & Mithue Inc.
Englewood, Colorado
January 8, 1998
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
ASSETS
1997 1996
Current assets: ----------- -----------
Cash $ 581 $ 1,431
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,657 $ 536
Loan payable - shareholders 9,750 -
---------- -----------
Total current liabilities 18,407 536
Stockholders' equity:
Preferred stock, no par value,
10,000,000 shares authorized;
none issued and outstanding
Common stock, no par value;
1,000,000,000 shares authorized;
758,287,497 shares issued
and outstanding at September
30, 1997 and 1996 430,715 430,715
Contributed capital 12,750 12,750
Deficit accumulated during the
development stage (461,291) (442,570)
---------- ----------
Total stockholders' equity (deficit) (17,826) 895
---------- ----------
$ 581 $ 1,431
========== ==========
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
October 3,
1988
Fiscal Yr. Fiscal Yr. Fiscal Yr. (Inception)
Ended Ended Ended To
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1995 1997
--------- ----------- ---------- -----------
Revenue $ - $ - $ - $ 20,966
--------- ----------- ---------- -----------
Operating expenses:
General and
administration 18,721 6,862 12,643 503,368
Interest expense - 673 900 35,917
Amortization - - - 250
--------- ----------- ----------- ----------
18,721 7,535 13,543 539,535
--------- ----------- ----------- ----------
Other income - - 51,160 51,160
--------- ----------- ----------- ----------
Income (loss) before
extraordinary item: (18,721) (7,535) 37,617 (467,409)
Extraordinary items:
Gain on conversion of
debt to equity - - - 6,118
---------- ----------- ----------- ----------
Net income (loss) $ (18,721) $ (7,535) $ 37,617 $ (461,291)
========== =========== =========== ==========
Net loss per share $ * $ * $ * $ *
========== =========== =========== ==========
Weighted average
number of common
shares outstanding 758,287,496 755,310,521 683,083,387 349,404,056
============ ============ ============ ===========
* less than $.01 per share
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from October 3, 1988
(inception) to September 30, 1997
(DEFICIT)
RETAINED
EARNINGS
ACCUMULATED
COMMON STOCK DURING THE TOTAL
------------------- CONTRIBUTED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNTS CAPITAL STAGE EQUITY
--------- --------- ----------- ------------ -------------
BALANCE AT
INCEPTION
OCT. 3, 1988 - - - - -
ISSUANCE OF
STOCK FOR
CASH AT $.005
PER SHARE 1,000,000 5,000 - - 5,000
ISSUANCE OF
STOCK FOR
SERVICES AT
$.002 PER
SHARE 1,500,000 3.000 - - 3,000
ISSUANCE OF
STOCK FOR
SERVICES AT
$.0001 PER
SHARE 200,000,000 20,000 - - 20,000
ISSUANCE OF
STOCK ON
OCT. 4,
1988 FOR
SEVICES AT
$.001 PER
SHARE 1,000,000 1,000 - - 1,000
ISSUANCE OF
STOCK AT
CLOSE OF
PUBLIC
OFFERING ON
APRIL 13,
1989 11,460,000 114,600 - - 114,600
COST OF
PUBLIC
OFFERING - (21,133) - - (21,133)
ISSUANCE OF
STOCK ON
MAY 8, 1989
FOR SERVICES
AT $.0005
PER SHARE 10,000,000 5,000 - - 5,000
WARRANTS
EXERCISED
AT $.02
PER SHARE 2,709,500 54,190 - - 54,190
NET LOSS, FOR
THE YEAR
ENDED SEPT.
30, 1989 - - - (240,908) (240,908)
------------- -------- ----------- ------------- ------------
BALANCE AT
SEPT. 30,
1989 227,669,500 181,657 - (240,908) (59,251)
WARRANTS
EXERCISED
AT $.02
PER SHARE 1,362,500 27,250 - - 27,250
ISSUANCE OF
STOCK FOR
SERVICES:
DEC. 26,
1989 AT $.001
PER SHARE 2,500,000 2,500 - - 2,500
DEC. 26,
1989 AT $.1
PER SHARE 75,000 7,500 - - 7,500
MAR. 31,
1990 AT $.001
PER SHARE 2,500,000 2,500 - - 2,500
DEFERRED
OFFERING
COSTS - (17,324) - - (17,324)
NET LOSS,
FOR THE YEAR
ENDED SEPT.
30, 1990 - - - (183,683) (183,683)
------------ --------- ------------ ------------ -------------
BALANCE AT
SEPT. 30,
1990 234,107,000 204,083 - (424,591) (220,508)
ISSUANCE OF
COMMON
STOCK FOR
CONVERSION
OF DEBT
AT $.02
PER SHARE 9,935,291 198,706 - - 198,706
NET LOSS,
FOR THE
YEAR ENDED
SET. 30,
1991 - - - (25,713) (25,713)
------------ --------- ------------ ------------- ------------
BALANCE AT
SEPT. 30,
1991 244,042,291 402,789 - (450,304) (47,515)
NET LOSS,
FOR THE
YEAR ENDED
SEPT. 30,
1992 - - - - -
------------ --------- ------------ ------------- ------------
BALANCE AT
SEPT. 30,
1992 244,042,291 402,789 - (462,424) (59,675)
NET LOSS,
FOR THE
YEAR ENDED
SEPT. 30,
1993 - - - (6,003) (6,003)
------------ --------- ------------ ------------- ------------
BALANCE AT
SEPT. 30,
1993 244,042,291 402,789 - (468,467) (65,678)
NET LOSS,
FOR THE
YEAR ENDED
SEPT. 30,
1994 - - - (4,185) (4,185)
------------ --------- ------------ ------------- ------------
BALANCE AT
SEPT. 30,
1994 244,042,291 402,789 - (472,652) (69,863)
ISSUANCE OF
STOCK FOR
CASH OCT.
1994 AT
$.000025
PER SHARE 200,000,000 5,000 - - 5,000
ISSUANCE OF
STOCK FOR
CASH OCT.
1994 AT
$.000033
PER SHARE 150,000,000 5,000 - - 5,500
ISSUANCE OF
STOCK FOR
CASH OCT.
1994 AT
$.000036
PER SHARE 150,000,000 5,500 - - 5,500
CONTRIBUTED
CAPITAL
JUNE 1995 - - 500 - 500
CONTRIBUTED
CAPITAL
AUG. 1995 - - 5,750 - 5,750
NET INCOME
FOR THE
YEAR ENDED
SEPT. 30,
1995 - - - 37,617 37,617
------------ ---------- ----------- ------------- ------------
BALANCE AT
SEPT. 30,
1995 744,042,291 418,289 6,250 (435,035) (10,496)
ISSUANCE OF
STOCK FOR
CASH OCT.
1995 AT
$.0001
PER SHARE 12,000,000 1,200 - - 1,200
ISSUANCE OF
STOCK FOR
DISPOSITION
OF NOTE
PAYABLE
SEPT. 1996
AT $.005 2,245,206 11,226 - - 11,226
CONTRIBUTED
CAPITAL OCT.
1995 - - 2,000 - 2,000
CONTRIBUTED
CAPITAL MAY
1996 - - 4,500 - 4,500
NET INCOME
FOR THE
YEAR ENDED
SEPT. 30,
1996 - - - (7,535) (7,535)
------------ ---------- ----------- ------------- ------------
BALANCE AT
SEPT. 30,
1996 758,287,497 430,715 12,750 442,570 895
NET LOSS
FOR THE
YEAR ENDED
SEPT. 30
1997 - - - (18,721) (18,721)
------------ ---------- ------------- ------------- -------------
BALANCE AT
SEPT. 30
1997 758,287,497 430,715 12,750 (461,291) (17,826)
============ ========== ============= ============= =============
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
October 3,
1988
Fiscal Yr. Fiscal Yr. Fiscal Yr. (Inception)
Ended Ended Ended To
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1995 1997
----------- ---------- ---------- -----------
Cash flows from
operating activities:
Net (loss) income $ (18,721) $ (7,535) $ 37,617 $ (461,291)
Adjustments to reconcile
net income(loss) to
net cash provided by
operating activities:
Amortization - - - 250
Cash provided (used)
due to changes in
assets and
liabilities:
Issuance of common
stock for services - 1,200 - 42,700
Other income - - (51,160) (51,160)
Accounts payable 8,121 (1,107) (8,607) 45,125
Accrued interest
and expense - (5,553) 900 12,281
--------- --------- ----------- ------------
Net cash used by
operating activities (10,600) (12,995) (21,250) (412,095)
--------- --------- ----------- ------------
Cash flows from
financing activities:
Net proceeds from
issuance of common
stock:
For cash - - 15,500 195,405
For conversion
of debt - 12,426 - 211,132
Increase in notes
payable 9,750 (5,000) - 10,963
Deferred offering
costs - - - (17,324)
Contributed capital - 6,500 6,250 12,750
Increase in
organization costs - - - (250)
--------- ---------- ----------- ------------
Net cash provided by
financing activities 9,750 13,926 21,750 412,676
--------- ---------- ----------- ------------
Net increase in cash
and cash equivalent (850) 931 500 581
Cash and cash equivalents,
beginning of period 1,431 500 - -
--------- ---------- ----------- ------------
Cash and cash equivalents,
end of period $ 581 $ 1,431 $ 500 $ 581
========= ========== =========== ============
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations:
Sigma-7 Products, Inc., formerly Seek-2 Ventures, Inc. was organized
as a Colorado corporation on October 3, 1988 and since its
inception, the Company has been in the development stage.
The Company's original objective was to raise equity capital for the
purpose of identifying and reviewing domestic and foreign business
opportunities for the purpose of completing mergers and acquisitions.
During April, 1989, the Company amended its Articles of Incorporation
changing the name of the Company to Sigma-7 Products, Inc.
Subsequently, on April 13, 1989, the Company completed its initial
public offering with the sale of 19,100 Units of its no par value
common stock for $114,600 (See Note 2). Proceeds from the offering
were used to develop the prototype of an electronic protection device
that the Company attempted to market through third parties. The
Company was unable to raise sufficient capital to complete the final
engineering on the prototype, and as a result, ceased operation and
has remained inactive since September 30, 1991.
Summary of significant accounting policies:
The accounting policies and reporting practices conform to generally
accepted accounting principals. The following is a description of the
more significant accounting policies used in the preparation of these
financial statements:
Organization costs:
Organization costs consist of legal and other expenses incurred by the
Company in its development stage. Costs of organization are amortized
over a five year period using the straight-line method.
Net loss per share:
The loss per share is computed by dividing the net loss for the period
by the weighted average number of shares outstanding during the period.
Cash flows:
For purposes of the statement of cash flows, the Company considers
cash and cash equivalents to include cash on hand, cash in banks and
all highly liquid instruments purchased with a maturity of three
months of less.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
NOTE 2 CHANGE IN CONTROL
During the fiscal year 1995 certain shareholders of the Company, in a
private transaction, contracted to sell in the aggregate, 189,000,000
shares of their common stock of the Company representing approximately
77% of the common voting control and ownership of the Company.
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 CHANGE IN CONTROL (continued)
As a result of this transaction, a special meeting was held during May
1995 whereby the Company's former officers and directors vacated their
positions and new officers and directors were appointed.
Additionally, during fiscal year 1995 the Company issued 500,000,000
shares of its common stock at $.000031 per share, realizing gross
proceeds of $15,500. The proceeds were used to pay for legal and
accounting fees and other costs of a similar nature to bring the
Company current with its annual 10-KSB filings and other
administrative matters.
NOTE 3 PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
10,000,000 shares of preferred stock without par value. The board of
directors of the Company is authorized to issue the preferred stock
from time to time in series and is further authorized to establish
such series, to fix and determine the variations in the relative
rights and preferences as between the series and to allow for the
conversion of preferred stock into common stock. No preferred stock
has been issued by the Company.
NOTE 4 NOTES PAYABLE
A note payable of $ 5,000 was executed July 31, 1989 at an interest
rate of 18% per annum. Principal and interest were due in full at
October 1, 1989. The note was continued by verbal agreement until
additional funds were available for repayment. Interest of $5,553 was
accrued to September 30, 1995. During fiscal 1996, the Company issued
2,245,206 "restricted" shares of its common stock in settlement of
the loan and accrued interest.
A note payable of $1,212, was entered into with United Bank of
Boulder, the note was uncollateralized with an interest rate of 16%
per annum. Principal and interest matured on October 21, 1990.
This obligation was discharged in bankruptcy during June, 1991 and
recognized as other income during the fiscal year ended September 30,
1995. The lender has not commenced any formal legal action in this
matter.
The Company has recognized as other income $37,667 from prior years
unsecured trade payables (including accrued interest of $12,280),
which was incurred during the fiscal years ended 1988 and 1989,
and have remained unsettled through 1995. The Company, with the
approval of the Board of Directors, has concluded to remove these
unsecured trade payables during the fiscal year ended September 30,
1995.
NOTE 5 EMPLOYEE PROFIT SHARING PLAN
On April 18, 1989, the Company adopted an Employee Bonus Plan (the
"Plan") which provides for the payment of 6% (Six percent) of the
Company's pre-tax profit in excess of $50,000 to a plan administrator
which shall be selected by the board of directors. Employee bonuses
will be distributed 50% to non-salaried employees, 25% to salaried
employees and 25% to officers of the Company. The Plan provides for
quarterly determinations and distributions within 30 days of each
quarter end. No such bonuses have been paid or accrued as of
September 30, 1997.
SIGMA-7 PRODUCTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 STOCK OPTION PLAN (continued)
The Company has adopted an incentive stock option plan for its key
employees (ISOP). The Company has reserved a maximum of 500,000 shares
to be issued upon exercise of options which may be granted under the
ISOP. The ISOP is intended to qualify as an "incentive stock option"
plan under Section 422A of the Internal Revenue Code of 1954, as
amended. Accordingly, options will be granted under the ISOP at
exercise prices at least equal to the fair market value per share
of the Company's common stock on the respective dates of grant and
will be subject to the limitations provided by such law.
However, options may be granted to employees who own more than 10% of
the Company's outstanding common stock only at an option price which
is at least 110% of the fair market value of the common stock on the
date the option is granted. With respect to options granted pursuant
to Section 422A, employees will not recognize taxable income upon
either the grant or the exercise of such options. The Company will not
be entitled to any compensation deduction with respect to such options
unless disqualifying dispositions, as defined by such law, are made.
The plan will be administered by the board of directors. No options
have been granted or exercised as of September 30, 1997.
NOTE 7 INCOME TAX
At September 30, 1997, the Company has a net operating loss
carryforward of approximately $461,000. The losses are available to
be carried forward for a period of up to fifteen (15) years and will
expire at various dates from 2004 to 2012.
NOTE 8 RELATED PARTY TRANSACTIONS
During the fiscal year 1997 the shareholders of the Company made two
loans to the Company totalling $9,750. These loans were made to allow
the Company to pay for legal accounting fees. The loans are non-
interest bearing and are due and payable upon demand.
SIGNATURES
In accordance with section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this Report on Form 10-KSB to be signed on its
behalf by the undersigned, thereto duly authorized individual.
Date: 1/19/98 SIGMA-7 PRODUCTS INC.
/s/ Donald J. Smith
By...............................
Donald J. Smith, President and
Chief Executive Officer
In accordance with 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.
Name Title Date
---- ----- ----
/s/ Donald J. Smith
................................ President, Chief Executive 1/19/98
Donald J. Smith Officer, Chief Financial
Officer, Director
/s/ Timothy S. Gibson
................................ Vice President, Director 1/19/98
Timothy S. Gibson
/s/ Richard S. Rouse
................................ Vice President, Director 1/19/98
Richard S. Rouse
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