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 the Year Ended September 30, 1998
Commission File No. 0-20922
WHITEHALL ENTERPRISES, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 75-2274730
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(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
801 Brickell Avenue, 9th Floor, Miami, Florida 33131
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(Address of Principal Executive Offices) (Zip Code)
(904) 409-0200
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
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Name of Each Exchange Title of Each Class
on Which Registered
___________________________________ _______________________________________
___________________________________ _______________________________________
Securities registered under Section 12(g) of the Exchange Act:__________________
Common Stock ($.0001 par value)
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(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports, and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No ____
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer'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 ___ No [X]
State issuer's revenues for its most recent fiscal year: $ 26,996
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State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
Common Stock, par value $.0001 per share ("Common Stock"), was
the only class of voting stock of the Registrant outstanding on
December 31, 1998. Due to the events and circumstances taking place in
the operations of the Company, there have been no material exchange
transactions, and consequently, no recent market value on the closing
bid price of the Common Stock on the NASD Automated Quotation System.
By the foregoing statements, the Registrant does not intend to imply
that any of these officers, directors or beneficial owners are
affiliates of the Registrant or that the aggregate market value, as
computed pursuant to rules of the Securities and Exchange Commission,
is in any way indicative of the amount which could be obtained for such
shares of Common Stock.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [X] No ____
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
124,900,000 shares of Common Stock, $.0001 par value, as of
December 31, 1998.
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PART I
BUSINESS
ITEM 1. DESCRIPTION OF BUSINESS
-----------------------
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND ITEMS DISCUSSED IN
THIS ANNUAL REPORT ON FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS OF TOTAL WORLD TELECOMMUNICATIONS, INC.
AND ITS SUBSIDIARIES (COLLECTIVELY, THE "COMPANY") MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT
COULD CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED WITH THE FORWARD-LOOKING
STATEMENTS THROUGHOUT THIS REPORT AND ARE SUMMARIZED IN THIS SECTION AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-FORWARD-LOOKING STATEMENTS-CAUTIONARY LANGUAGE."
INTRODUCTION AND RECENT DEVELOPMENTS
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Whitehall Enterprises, Inc. formerly Total World Telecommunications,
Inc., formerly International Standards Group, Limited (the "Company"), has filed
with the United States Bankruptcy Court for the Southern District of Florida
(the "Bankruptcy Court") its Amended Plan of Reorganization dated July 2, 1998.
The Company's Amended Disclosure Statement dated July 2, 1998, (the "Disclosure
Statement") were submitted pursuant to Section 1125 of the Bankruptcy Code 11
U.S.C. Section 101, et. seq. (the "Bankruptcy Code") in connection with the
solicitation of votes on the Plan from Holders of Impaired Claims against and
Impaired Equity Interests in the Debtor.
At a hearing on June 19, 1998, this Disclosure Statement was approved
by the Bankruptcy Court in accordance with Section 1125(b) of the Bankruptcy
Code as containing information of a kind and in sufficient detail adequate to
enable a hypothetical reasonable investor typical of holders of Claims and
Equity Interests of the relevant Voting Classes to make an informed judgment
whether to accept or reject the Plan. On August 28, 1998, the Court approved the
plan of reorganization.
In the opinion of the Company, as described below, the treatment of
claims and equity interests under the Plan contemplates a greater recovery than
that which is likely to be achieved under other alternatives for the
reorganization of the Company. Accordingly, the Company believes that
confirmation of the Plan is in the best interests of creditors and holders of
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equity interests and recommends that the creditors and holders of equity
interests vote to accept the Plan.
The Plan has been approved by the Company's Board of Directors. In
addition, Advantage Fund Limited, formerly known as GFL Advantage Fund Limited
("Advantage"), which the Company believes holds in excess of 90% of the
unsecured claims against the Company, has consented to the Plan as part of a
settlement between the Company and Advantage which has been approved by the
Bankruptcy Court.
In summary, the Plan is based upon (a) a transfer of all Unsecured
Claims and assets of the Company (excluding certain tax attributes and a portion
of the Condominium Parcel Net Proceeds) to a liquidating trust of which Holders
of Allowed Unsecured Claims will be the primary beneficiaries and Holders of
Allowed Subordinated Claims will be secondary beneficiaries, (b) the purchase by
the Company of all of the issued and outstanding stock of Mega Blow Moulding
Limited, a Canadian plastics company ("MBM"), from 1299004 Ontario Corporation
("129 Ontario"), a wholly-owned subsidiary of 1274328 Ontario Inc. (the
"Proponent"), in consideration for the issuance to the Proponent of
approximately 76% voting control of the Reorganized Debtor and the cash sum of
$75,000, (c) the cancellation of all Existing Preferred Stock and Existing
Common Stock of the Debtor, and (d) the issuance of common stock of the
Reorganized Debtor to Holders of Existing Preferred Stock and Existing Common
Stock of the Debtor.
In August 1997, the Board of Directors of the Company was substantially
reconstituted. The new Board, having observed the failure of TNT to successfully
continue its Chapter XI case, decided to examine alternatives to maintain a
level of stability with the Company for that period of time necessary for a new
investor to fund ongoing and future operations for the Company. The new Board
hoped to structure a transaction with a new investor which would satisfy
existing Creditor Claims and preserve some value for existing stockholders of
the Company. In examining all of its alternatives, the new Board concluded
shortly after its appointment that the Company had no resources (financial or
otherwise) to defend against any claims or actions which had been or could be
asserted by Advantage. In addition, the filing of the involuntary petition
against the Company on December 1, 1997 left the Company with no option but to
seek to successfully reorganize under Chapter 11 of the Bankruptcy Code. In
order to do so, the Company needed the support of Advantage, which, as stated
above, holds in excess of 90% of the Unsecured Claims against the Company.
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The Company's efforts have resulted in (a) the Advantage Settlement
Agreement, which has been approved by the Bankruptcy Court, pursuant to which
Advantage has agreed to support the Plan, and (b) an agreement for the Debtor to
acquire all of the stock of MBM from a wholly-owned subsidiary of the Proponent,
pursuant to which MBM will become a wholly-owned operating subsidiary of the
Reorganized Debtor.
Notwithstanding the uncertain distribution to Unsecured Creditors and
the reduced equity interest for stockholders, the Company believes that the Plan
is in the best interest of all Unsecured Creditors and Holders of Equity
Interests for a number of reasons. First, no free and clear assets of
significant value exist which are available for immediate liquidation and
distribution to Unsecured Creditors and Holders of Equity Interests. Second, TNT
the Company's chief operating subsidiary prior to the Involuntary Petition Date,
is presently in a Chapter 7 bankruptcy proceeding in Texas, and the Company will
in all likelihood receive nothing in return for its substantial investment in
TNT. Third, the costs of administering the Estate continue to accrue as long as
the Reorganization Case remains pending, further eroding whatever value there is
available for Unsecured Creditors. Fourth, Advantage, which holds in excess of
90% of the total dollar amount of Unsecured Claims, supports the Plan and has
already expended significant funds in investigating Causes of Action, the
proceeds of which will be available for distribution to all Unsecured Creditors
on a pro rata basis. Indeed, absent confirmation of the Plan, the Company would
itself have to consider an orderly liquidation of assets in Chapter 11 or a
conversion to Chapter 7, either of which would yield far less of the total
number of shares of Reorganized Debtor Common Stock issued and outstanding
immediately after the Effective Date.
The Company believes that its efforts to maximize the return for
Creditors and to find an investor and attract value for stockholders have been
full and complete. The Company further believes that the Plan is in the best
interest of all Creditors and Holders of Equity Interests, even though (a) it
does not appear that there are sufficient funds to pay Unsecured Creditors in
full and (b) the percentage of the outstanding equity to be retained by Holders
of Equity Interests following the Effective Date will be substantially diluted.
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Prior to the petition for bankruptcy and through September 12, 1997,
the Company, through various subsidiaries, provided telecommunications services.
Through Financial Standards Group, Inc. ("FSGI") and Real Estate Services
Network Holding Corp. ("RESN") subsidiaries, both Florida corporations the
Company assisted credit unions and their supervisory committees in performing
comprehensive or internal regulatory compliance audits in satisfaction of their
statutory requirements. It also provided related internal auditing, accounting
and managerial advisory services to credit unions. RESN provided commercial and
residential real estate brokerage, mortgage origination and title services.
In June 1996, the Company acquired Houston-based Total National
Telecommunications, Inc., doing business as Total World Telecom, Inc ("TWT"), a
Tier 2 switch-based interexchange carrier that utilizes digital and fiber optic
facilities, with switches located in New York, Chicago, Los Angeles, Atlanta,
Houston, Dallas, Kansas City and Miami as of December 31, 1996, and two
additional switches in Seattle and Washington, D.C. will be operational in early
1997.
In the latter part of March 1997, management elected to divest the two
business units comprising the Company's non-telecommunications operations. These
two units are Financial Standards Group, Inc., the credit union auditing
operation ("FSGI"), and Real Estate Services Network Holding Corp., the real
estate group ("RESN").
The Company has sold to former employees the outstanding stock in FSGI,
all of which was owned by The Company.
In addition, the Company has sold to management of the real estate
services group all of the outstanding stock in its subsidiary, RESN, as well as
the commercial warehouse facility in Mount Vernon, Ohio.
The Company received notes and receivables of $4,050,000 as proceeds
for the sale of the aforementioned companies; however, because of these
entities' poor operating performance, the Company has recorded these receivables
at no estimated realizable value of which is based on the underlying collateral
in the companies sold.
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The Company's net book value of the foregoing is approximately
$7,310,000. Accordingly, the Company has recorded a charge to operations during
the prior fiscal year of that amount which represented the difference between
the carrying value and the estimated realizable value.
On July 23, 1997, the Company's wholly-owned operating subsidiary,
Total National Telecommunications, Inc., ("TNT") filed a petition for relief
under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
Court for the Southern District of Texas. Under Chapter 11, certain claims
against the Company's subsidiary in existence prior to the filing of the
petitions for relief under the federal bankruptcy laws are stayed while the
subsidiary continues business operations as Debtor-in-Possession. Claims secured
against the subsidiary's assets ("secured claims") also are stayed, although the
holders of such claims would have the right to move the court for relief from
the stay.
On September 12, 1997, the case was converted to Chapter 7, and a
trustee was appointed. On September 24, 1997, the assets of TNT were sold
pursuant to 11 U.S.C. Section 363. Accordingly, the Company's intangible assets
related to this subsidiary were written off during the year ended September 30,
1997.
ITEM 2. DESCRIPTION OF PROPERTIES
-------------------------
The Company's executive offices are located at 801 Brickell, Avenue,
9th Floor Miami, Florida 33131. These premises are being rented on a month to
month basis until the Company's acquisition of MBM is completed.
The Company's executive offices were located at 3200 North Military
Trail, Suite 300, Boca Raton, Florida 33431. These premises consist of
approximately 7,700 square feet of space. In June 1995, the Company purchased
this office condominium at a purchase price of $636,000 which included $50,000
in cash, the issuance of 200,000 shares of the Company's Common Stock and a
wrap-around mortgage totaling $520,000.
On June 19, 1998 the Bankruptcy Court approved the Company's sale of
the office condominium for $810,000 in cash plus all real property taxes due to
the Palm Beach County, Florida Tax Collector and condominium dues to the Potomac
Trail Condominium Association. The sale closed during July 1998.
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ITEM 3. LEGAL PROCEEDINGS
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All litigation closed as a result of the Company's Chapter XI
Bankruptcy.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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The Company's Common Stock is traded on NASDAQ under the symbol "TWTI."
On October 15, 1996, the Company amended its Certificate of Incorporation and
undertook a one-for-fifteen (1:15) reverse split of its outstanding Common
Stock. The following table sets forth the high and low bid quotations for the
Common Stock since the commencement of trading and for the periods indicated.
These quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
October 1 - December 31, 1995 $ 1.81 $0.66
January 1 - March 31, 1996 $ 1.56 $0.50
April 1 - June 30, 1996 $ 1.53 $0.56
July 1 - September 30, 1996 $ 1.16 $0.47
October 1 - October 14, 1996 $ 0.53 $0.41
October 15 - December 31, 1996 $10.05 $4.75
January 31 - February 27, 1997 $ 6.25 $2.94
February 28 - March 30, 1997 $ 7.31 $4.31
March 31 - April 29, 1997 $ 5.56 $3.50
April 30 - May 29, 1997 $ 4.06 $1.69
May 30 - June 29, 1997 $ 3.25 $0.56*
June 30 - September 29, 1997 $ 1.75 $0.13
September 30 - October 30, 1997 $ 0.19 $0.00
October 31 - November 27, 1997 $ 0.80 $0.01
November 28 - December 30, 1997 $ 0.10 $0.01
December 31 - January 29 1998 $ 0.10 $0.00
January 30 - March 31, 1998 $ 0.05 $0.00
April 30 - May 28, 1998 $ 0.13 $0.00
May 29 - June 29, 1998 $ 0.05 $0.00
June 30 - July 30, 1998 $ 0.07 $0.00
July 31 - August 30, 1998 $ 0.01 $0.00
August 31 - September 30, 1998 $ 0.05 $0.00
October 30 - December 31, 1998 $ 0.04 $0.00
</TABLE>
*After May, 1997, the Company had no significant operations. Consequently, after
May, 1997, there have been no authoritative/authentic bid quotations.
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As of December 31, 1998, the approximate number of holders of the
Company's Common Stock was 8600.
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
expansion of its business and does not anticipate that any cash dividends will
be paid in the foreseeable future. Future dividend policy will depend on the
Company's earnings, capital requirements, expansion plans, financial condition
and other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
During the year ended September 30, 1998, the Company focused its
resources in the effort to successfully achieve its Chapter XI Bankruptcy
reorganization Plan.
The Company's plan for growth included the acquisition of MBM. The
Board of Directors are currently studying several other acquisitions in South
Florida. To achieve this growth and the necessary working capital, the Company
will require additional funding. The Company has received preliminary
commitments from investors to arrange future funding. While the Company has
reason to expect the completion of these arrangements, no assurances can be
given that such funds will be provided.
Description of Stock Purchase Agreement
- ---------------------------------------
On June 19, 1998, following extensive negotiations, the Debtor entered
into the Stock Purchase Agreement with 129 Ontario has agreed to sell, and the
Debtor (subject to the approval of the Bankruptcy Court) has agreed to purchase,
effective as of the Effective Date 100% of the issued and outstanding stock of
MBM. As a result thereof, on and after the August 28, 1998, MBM will be a
wholly-owned subsidiary of the Reorganized Debtor. Prior to and during the
Reorganization Case, management of the Debtor has actively searched for an
operating business to bring into the Debtor following the Effective Date and has
determined, in the exercise of its business judgment, that MBM is the best
operating business available at this time. In this regard, the Debtor required
the Proponent to obtain an independent valuation of MBM. In addition, the Debtor
has conducted, and will continue to conduct up to the date of the Confirmation
Hearing, due diligence as to MBM and its business operations. The Debtor has
agreed in the Stock Purchase Agreement, in consideration for the sale of the MBM
stock, that, subject to the terms and conditions of the Stock Purchase
Agreement, including the Confirmation of the Plan, it will (a) cause the
Reorganized Debtor to issue to the Proponent at the Closing 4,000,000 shares of
the Reorganized Debtor Preferred Stock, and (b) pay the sum of $75,000 in cash
to the Proponent. The above is a brief summary of the material terms of the
Stock Purchase Agreement.
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General Information Regarding the Proponent and 129 Ontario
- -----------------------------------------------------------
The Proponent, 1274328 Ontario Inc., is an Ontario corporation which
was formed on December 31, 1997. The Proponent's business address is 3101
Bathurst Street, Suite 600, Toronto Ontario M6A2A6. The Proponent is a holding
company which has an investment in MBM and holds passive investments in other
enterprises. Because it was formed on December 31, 1997, the Proponent has no
financial history. The sole shareholder of the Proponent is The Gerendasi Group
129 Ontario, which controls the issued and outstanding stock of MBM, is a
wholly-owned subsidiary of the Proponent. The Debtor has been advised by the
Proponent that none of the Proponent, 129 Ontario or MBM have had or have any
affiliation with the Debtor or CVI, except that the Gerendasi Group formerly
owned a small percentage of the Debtor's common stock which was sold in 1996.
General Information Regarding MBM
- ---------------------------------
Overview. Since its formation in 1984, MBM has operated as a
specialized custom molder or manufacturer of plastic bottles and containers for
use in the pharmaceutical, health and beauty, household cleaner and food product
industries. During fiscal 1997, MBM's revenues are generated in the United
States. MBM also has a strong market presence in the Province of Ontario,
Canada, which is the main manufacturing center in Canada. Plastic is a
disposable material which is in high demand in today's environmentally friendly
and industrialized world. Management of MBM believes that demand will continue
to grow significantly well into the next century. With an estimated market in
North America of over $15 billion for plastic products, management of MBM
believes that MBM is well positioned for growth.
Customers. MBM concentrates on manufacturing products for customers who
are the end user of the products and orders placed by manufacturer agents. MBM
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has fostered relationships with many major North American corporations,
including Johnson & Johnson, G.K. Packaging, Fenton Webber, Novo Pharm, Jones
Packaging and the Canadian shampoo division of L'Oreal. Management of MBM
believes that MBM has an excellent reputation for quality and customer services
and prides itself on its ability to consistently maintain a zero percent defect
rate. This has resulted in long-standing customer relationships, many in excess
of 10 years.
Facilities/Equipment. MBM operates from a leased, 46,000 square foot
manufacturing facility in metropolitan Toronto, Canada. MBM operates nine Bekum
blowing machines. The Bekum machine is considered by industry experts to be the
best currently available and gives MBM a state-of-the-art manufacturing
capacity. The Bekum machine can be operated almost indefinitely when properly
maintained and updated. All machines are computerized and controlled by special
tracking devices which monitor all aspects of machine productivity. Further,
MBM's computerized systems give the manufacturing process numerous diagnostic
features which maximize productivity and quality control. All manufacturing
machines are constantly serviced and maintained to the highest degree possible
by a specially trained maintenance staff as well as by 24 hour on-call
maintenance professionals. MBM seeks to maximize productivity and utilization of
fixed overhead cost by operating the plant 24 hours a day with four shifts.
Personnel. MBM employs regular employees including production,
management, foremen and office staff. MBM's management is experienced in every
facet of operations including machine operation, machine repairs and
maintenance, completing setups, mold maintenance, purchasing, distributing and
marketing. A majority of MBM's staff has been with MBM since its inception and
has grown and been promoted over time. It is presently anticipated that MBM's
management will remain in place following the Effective Date.
Materials. MBM's major raw usage consists of the following resins: Pet
G., H.D.P.E. (High Density Polyethylene) and L.D.P.E. (Low Density
Polyethylene). Management of MBM is not aware of any environmental concerns in
respect of MBM, its manufacturing facilities or its products. MBM presently uses
six major suppliers of the above resins. MBM has been dealing with each of its
major suppliers for over ten years. In the event that its existing sources of
supplies are insufficient to meet its existing needs, management of MBM believes
that alternative supplies would be available at competitive prices from one of
its other major suppliers or from outside alternative suppliers not currently
engaged by MBM.
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Valuation of MBM. In connection with the transactions contemplated by
the Stock Purchase Agreement, the Proponent has engaged an independent
accountant to value the shares of MBM to be acquired by the Debtor. The
valuation report was conducted as of February 1, 1998 and provided a value
ranging from $9.7 to $11 million for MBM. The financial information included in
the valuation report is in Canadian dollar values. As of February 1, 1998, the
Canadian dollar had a value of $.69 in United States dollars. As of June 30,
1998, the Canadian dollar had a value of slightly in excess of $.68 in United
States dollars. Due to the cost to the Estate and the fact that the valuation
report has been rendered by an independent Canadian accounting firm, the Debtor
has decided not to obtain its own valuation of the shares of MBM.
RESULTS OF OPERATIONS
- ---------------------
Since May, 1997, the Company has not carried any significant continuing
operations. As discussed previously, the Company's efforts were focused on in
achieving its Chapter XI reorganization plan. During the year ended September
30, 1998, the Company's revenues of $26,996 were provided from the rental of
partial space in its executive premises. Read Part I-Item 2 "Description of
Properties" for further details about this property. Operating expenses for the
year ended September 30, 1998, amounted to $234,803 consisting primarily of
personnel costs, occupancy costs, and other necessary and ordinary general and
administrative expenses.
During fiscal 1999, the Company expects to achieve profitability
through the operations of MBM and other prospective acquisitions in growth
industries.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The foregoing matters and uncertainties raise substantial doubt about
the Company's ability to continue as a going concern. The Company recently
closed on the purchase of MBM pursuant to its stock purchase agreements. The
Company is currently negotiating with several alternative financing sources in
order to secure sufficient funding to support its reorganization and
restructuring plans.
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At September 30, 1998, the Company has operating cash of $22,695. The
cash would be used to defray operating costs and professional fees necessary to
continue supporting restructuring plans. For the year ended September 30, 1998
the Company utilized proceeds from the sale of assets to meet operating
expenses.
In August 1997, Joseph Lents resigned as Chairman of the Board of the
Company, and the Board of Directors of the Company was thereafter substantially
reconstituted to add Vincent Landis, Carlos Trueba and Les Miller as new members
of the Board with the then existing directors, Arnold Salinas and Loretta
Murphy. Loretta Murphy resigned as a director of the Company during the course
of the Reorganization Case in order to pursue other business interests. During
the Reorganization Case, Luis Alvarez has served as interim President of the
Company. None of the directors or executive officers of the Company has received
any compensation from the Company for service in such capacities for the period
from the Involuntary Petition Date to the date of this quarterly report.
A number of factors ultimately contributed to the Company's decision to
seek Bankruptcy Court protection. As of March 31, 1996, the Company was
experiencing a number of financial problems, including significant losses since
its inception, negative cash flow and arrears in several of its obligations. A
significant portion of these problems resulted from the losses sustained in the
TNT operations. As a result of the foregoing, the Company continued to finance
its expansion and operations with equity and debt financing in 1997. In 1997,
the Company was sued in various jurisdictions as a result of these equity
offerings. In July 1997, TNT was forced to seek protection under Chapter 11 of
the Bankruptcy Code. In September 1997, TNT's Chapter 11 case was converted to a
case under Chapter 7 of the Bankruptcy Code, thus leaving the Company with
little hope of recouping its substantial investment in TNT. On December 1, 1997,
three petitioning alleged creditors, Francesco Morello, Christopher Robichaux
and David J. Latraverse, filed an involuntary petition under Chapter 7 of the
Bankruptcy Code against the Company. On December 19, 1997, Advantage instituted
the Advantage Suit against certain former officers and directors of the Company.
Had it not been for the filing of the involuntary petition and the automatic
stay provisions of Section 362 of the Bankruptcy Code, Advantage would have also
named the Company as a defendant in the Advantage Suit. The combined effect of
these events led the Company to conclude that it was without any viable
procedure for handling these and other concerns outside of a reorganization
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proceeding under Chapter 11 of the Bankruptcy Code. Accordingly, on December 24,
1997, the Company consented to the entry of an order for relief under Chapter 11
of the Bankruptcy Code.
The Company has filed with the United States Bankruptcy Court for the
Southern District of Florida (the "Bankruptcy Court") its Amended Plan of
Reorganization dated July 2, 1998. The Company's Amended Disclosure Statement
dated July 2, 1998 (the "Disclosure Statement") and its Summary of Amended
Disclosure Statement of Total World Telecommunications, Inc. under Chapter 11 of
the United States Bankruptcy Code for Certain General Unsecured Creditors and
Holders of Existing Common Stock dated July 2, 1998 (the "Summary Disclosure
Statement") were submitted pursuant to Section 1125 of the Bankruptcy Code 11
U.S.C. Section 101, et. seq. (the "Bankruptcy Code") in connection with the
solicitation of votes on the Plan from Holders of Impaired Claims against and
Impaired Equity Interests in the Debtor and the hearing on Confirmation of the
Plan.
At a hearing on June 19, 1998, this Disclosure Statement was approved
by the Bankruptcy Court in accordance with Section 1125(b) of the Bankruptcy
Code as containing information of a kind and in sufficient detail adequate to
enable a hypothetical reasonable investor typical of holders of Claims and
Equity Interests of the relevant Voting Classes to make an informed judgment
whether to accept or reject the Plan. Approval of this Disclosure Statement by
the Bankruptcy Court and the transmittal of this Disclosure Statement does not,
however, constitute a determination by the Bankruptcy Court as to the fairness
or merits of the Plan and should not be interpreted as being a recommendation by
the Bankruptcy Court either to accept or reject the Plan.
In the opinion of the Company, as described below, the treatment of
claims and equity interests under the Plan contemplates a greater recovery than
that which is likely to be achieved under other alternatives for the
reorganization or liquidation of the Company. Accordingly, the Company believes
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that confirmation of the Plan is in the best interests of creditors and holders
of equity interests and recommends that the creditors and holders of equity
interests vote to accept the Plan.
The Plan has been approved by the Company's Board of Directors. In
addition, Advantage Fund Limited, formerly known as GFL Advantage Fund Limited
("Advantage"), which the Company believes holds in excess of 90% of the
unsecured claims against the Company, has consented to the Plan as part of a
settlement between the Company and Advantage which has been approved by the
Bankruptcy Court.
In summary, the Plan is based upon (a) a transfer of all Unsecured
Claims and assets of the Company (excluding certain tax attributes and a portion
of the Condominium Parcel Net Proceeds) to a liquidating trust of which Holders
of Allowed Unsecured Claims will be the primary beneficiaries and Holders of
Allowed Subordinated Claims will be secondary beneficiaries, (b) the purchase by
the Company of all of the issued and outstanding stock of Mega Blow Moulding
Limited, a Canadian plastics company ("MB"), from 1299004 Ontario Corporation
("129 Ontario"), a wholly-owned subsidiary of 1274328 Ontario Inc. (the
"Proponent"), in consideration for the issuance to the Proponent of
approximately 76% voting control of the Reorganized Debtor and the cash sum of
$75,000, (c) the cancellation of all Existing Preferred Stock and Existing
Common Stock of the Debtor, and (d) the issuance of common stock of the
Reorganized Debtor to Holders of Existing Preferred Stock and Existing Common
Stock of the Debtor.
In August 1997, the Board of Directors of the Company was substantially
reconstituted. The new Board, having observed the failure of TNT to successfully
continue its Chapter 11 case, decided to examine alternatives to maintain a
level of stability with the Company for that period of time necessary for a new
investor to fund ongoing and future operations for the Company. The new Board
hoped to structure a transaction with a new investor which would satisfy
existing Creditor Claims and preserve some value for existing stockholders of
the Company. In examining all of its alternatives, the new Board concluded
shortly after its appointment that the Company had no resources (financial or
otherwise) to defend against any claims or actions which had been or could be
asserted by Advantage. In addition, the filing of the involuntary petition
against the Company on December 1, 1997 left the Company with no option but to
seek to successfully reorganize under Chapter 11 of the Bankruptcy Code. In
order to do so, the Company needed the support of Advantage, which, as stated
above, holds in excess of 90% of the Unsecured Claims against the Company.
The Company's efforts have resulted in (a) the Advantage Settlement
Agreement, which has been approved by the Bankruptcy Court, pursuant to which
Advantage has agreed to support the Plan, and (b) an agreement for the Debtor to
16
<PAGE>
acquire all of the stock of MBM from a wholly-owned subsidiary of the Proponent,
pursuant to which MBM will become a wholly-owned operating subsidiary of the
Reorganized Debtor on and after the Effective Date August 28, 1998.
Notwithstanding the uncertain distribution to Unsecured Creditors and
the reduced equity interest for stockholders, the Company believes that the Plan
is in the best interest of all Unsecured Creditors and Holders of Equity
Interests for a number of reasons. First, no free and clear assets of
significant value exist which are available for immediate liquidation and
distribution to Unsecured Creditors and Holders of Equity Interests. Second, TNT
the Company's chief operating subsidiary prior to the Involuntary Petition Date,
is presently in a Chapter 7 bankruptcy proceeding in Texas, and the Company will
in all likelihood receive nothing in return for its substantial investment in
TNT. Third, the costs of administering the Estate continue to accrue as long as
the Reorganization Case remains pending, further eroding whatever value there is
available for Unsecured Creditors. Fourth, Advantage, which holds in excess of
90% of the total dollar amount of Unsecured Claims, supports the Plan and has
already expended significant funds in investigating Causes of Action, the
proceeds of which will be available for distribution to all Unsecured Creditors
on a pro rata basis. Indeed, absent confirmation of the Plan, the Company would
itself have to consider an orderly liquidation of assets in Chapter 11 or a
conversion to Chapter 7, either of which would yield far less of the total
number of shares of Reorganized Debtor Common Stock issued and outstanding
immediately after the Effective Date.
The Company believes that its efforts to maximize the return for
Creditors and to find an investor and attract value for stockholders have been
full and complete. The Company further believes that the Plan is in the best
interest of all Creditors and Holders of Equity Interests, even though (a) it
does not appear that there are sufficient funds to pay Unsecured Creditors in
full and (b) the percentage of the outstanding equity to be retained by Holders
of Equity Interests following the Effective Date will be substantially diluted.
In the event of a liquidation of the Company's assets under Chapter 7 of the
Bankruptcy Code, the Company believes the distribution to Unsecured Creditors
would be substantially less than under the Plan. In addition, absent concessions
from holders of Unsecured Claims, there would be no distribution to Holders of
Equity Interests. Should the Plan not be confirmed, the Company will have to
seriously consider a Chapter 7 liquidation. The plan was approved on August 28,
1998.
17
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
--------------------
The financial statements and supplementary data are included under Item
13(a)(1) and (2) of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
The Company changed its certified public accountant form Millward &
Co., CPA's of Fort Lauderdale, Florida to Thomas E. Sewell, CPA, PA of Pembroke
Pines, Florida. The Board of Directors authorized this change in October ,1998.
The Company has authorized Millward & Co., CPA's to respond fully to any
inquiries of Thomas E. Sewell, CPA, PA.
18
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
-------------------------------------------------------------
COMPLIANCE UNDER SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------------------
The following table sets forth the names, ages and positions with the
Company of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of stockholders and serve for one
year or until their successors are elected and qualify. Officers are elected by
the Board and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
Name Position Age
---- -------- ---
Luis Alvarez President and Director 39
Joseph Lebovics Director 44
Carlos M. Trueba Director 44
Vince Landis Director 52
Les Miller Director 56
The business backgrounds of the individuals referred to above are as follows:
Luis Alvarez, the current president of the Company is also Chief Executive
Officer and President of Sentrex Financial Consulting Services, Inc., a position
he has held for the past four years. Prior to that, Mr. Alvarez was President
and CEO of Knight Corporation (1991-1995) and President and CEO of Sentrex
Security Systems, Inc. (1985-1991). Mr. Alvarez also spent four years serving
the community as a police officer with the City of Miami (1981-1985).
19
<PAGE>
Joseph Lebovics graduated from the University of Toronto with a degree in
accounting. Mr. Lebovics is presently a chartered accountant with the accounting
firm of Lebovics and Good, and has practiced public accounting in Toronto,
Canada since 1976. Mr. Lebovics is also an investor, through various holding
companies, in real estate and corporate securities (public and private), with a
market value of approximately $7.5 million (Canadian Dollars)
Carlos M. Trueba is a certified public accountant with over 20 years of
experience practicing his profession in South Florida. He graduated from Florida
International University with a degree in business administration with majors in
accounting and finance. Mr. Trueba is currently Vice President and director of
the audit practice of the Accounting firm of Rodriguez, Trueba & Company CPA's
P.A.
Vince Landis has been employed with the City of Miami Police Department for the
past 31 years and has served in every organizational department therein. Mr.
Landis is currently a Captain of Police in the City of Miami Police Department.
Mr. Landis has also served in the City of Miami Civil Service Board.
Leslie Miller graduated from temple University with a major in business
administration. Mr. Miller has 35 years of experience in the lumber industry,
and for over a decade has been President of L. Miller Forest Products, Inc.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
CASH COMPENSATION
- -----------------
There was no cash compensation paid to executive officers as a group
for services provided to the Company in all capacities during the year ended
September 30, 1998.
EMPLOYMENT AGREEMENTS
- ---------------------
There were no employment agreements in effect during the year ended
September 30, 1998.
20
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth Common Stock ownership as of December
31, 1998 with respect to (i) each person known to the Company to be the
beneficial owner of five (5%) percent or more of the Company's outstanding
Common Stock, (ii) each director of the Company and (iii) all executive officers
and directors of the Company as a group. This information as to beneficial
ownership was furnished to the Company by or on behalf of the persons named.
Unless otherwise indicated, the business address of each person listed is 801
Brickell Avenue, 9th Floor, Miami, Florida, 33131. Information with respect to
the percent of class is based on 124,927,647 shares of the Company's Common
Stock issued and outstanding at December 31, 1998.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Name Owned (1) of Class
--------------------------------------------------------------
<S> <C> <C> <C>
Luis Alvarez (2) 0 0
Joseph Lebovics (3) 0 0
Carlos M. Trueba (4) 0 0
Vince Landis (5) 0 0
Les Miller (6) 0 0
1274328 Ontario Inc. (7) - -
All executive officers and
Directors as a group
(5 persons) 0 0
</TABLE>
21
<PAGE>
(1) Except as otherwise indicated in the footnotes below, each stockholder
has sole power to vote and dispose of all the shares of common stock
listed opposite his name.
(2) Mr. Alvarez is Chairman of the Board and President of the Company and he
owns no shares of the Company's common stock as of the date of this
report.
(3) Mr. Lebovics is a director of the Company and he owns no shares of common
stock as of the date of this report. Mr. Lebovics is a director of 129
Ontario, (See (7) below), however, he does not own any shares, directly
or indirectly, in 129 Ontario as of the date of this report.
(4) Carlos M. Trueba is a director of the Company and he owns no shares of
common stock as of the date of this report.
(5) Vince Landis is a director of the Company and he owns no shares of common
stock as of the date of this report.
(6) Les Miller is a director of the Company and he owns no shares of common
stock as of the date of this report.
(7) In connection with the acquisition of MBM, the Company issued 4,000,000
shares of its Series 1, $1 Convertible Preferred Stock (the "Series 1
Preferred Stock")to 129 Ontario. Each of the shares of Series 1 Preferred
Stock is convertible into 100 shares of Common Stock over various periods
based on the underlying Common Stock reaching price levels ranging from
$10.00 to $50.00 per share. However, no shares of Series 1 Preferred
Stock may be converted into Common Stock before January 1, 2004. Each
share of Series 1 Preferred Stock has 100 notes or a total of 4,000,000
notes. 1274328 Ontario Inc. is beneficially owned by Leslie Gerendasi.
The Company intends to compensate the directors referred to above with
approximately 300,000 shares of the Company's Common Stock. As of the date of
this report, no shares have been issued to these directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
22
<PAGE>
See discussion in Part I-Item 6 relative to Agreement with 129 Ontario
for the purchase of the stock of MBM.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
--------------------------------------
(a)(1) and (2) Financial Statements and Schedules
----------------------------------
The financial statements listed on the index to financial statements on
page F-1 are filed as part of this Form 10-KSB.
(b) Reports on Form 8-K
-------------------
The Company filed Form 8-K reports dated December 21, 1995 (item 2 and
item 5), February 21, 1996 (item 5), May 28, 1996 (item 5), June 11, 1996 (item
5), October 29, 1996 (item 1 and item 5), November 8, 1996 (item 5), and
February 10, 1999.
(c) Exhibits
--------
Exhibit
Number Description of Document
- ------- -----------------------
3.01 Articles of Incorporation 1
3.01(a) Certificate of Amendment to Certificate of Incorporation 5
3.01(b) Certificate of Amendment to Certificate of Incorporation 7
3.01(c) Certificate of Amendment to Certificate of Incorporation 24
3.01(d) Certificate of Amendment to Certificate of Incorporation
3.02 By-Laws 5
4.01 Specimen of Common Stock certificate 1
10.02 Warrant Agent Agreement 1
10.03 Line of Credit Agreement 1
10.04 Stock Purchase Agreement between Texas American Group, Inc.
and Daniel M. Boyar 2
23
<PAGE>
10.05 Stock Purchase Agreement for acquisition of Financial
Standards Group, Inc. 2
10.06 Stock Purchase Agreements for acquisition of Mount Vernon
Distribution, Inc. and Eau Gallie Properties, Inc. 2
10.06.1 Amendments to Stock Purchase Agreements referred to in Exhibit
10.06 7
10.07 Stock Purchase Agreement for acquisition of Bibbins & Rice
Electronics, Inc. and Rice Electronics,Inc. 3
10.08 Investment Banking Consulting Agreement with H.D. Vest
Investment Securities, Inc. 7
10.09 Sales and Service Agreement with Corroon & Black
Administrative Services, Inc. 7
10.10 Agreement with Arkansas Credit Union League and Service
Corporation 7
10.11 Agreement with HCU Services Corporation (Hawaii) 7
10.12 Agreement with KYCUL Services Incorporated (Kentucky) 7
10.13 Agreement with League Services Corporation (Michigan) 7
10.14 Selling Agent Agreement with Meridian Associates, Inc. 7
10.15 Financial Consulting Agreement with Meridian Associates,
Inc. 7
10.16 Lock-Up Agreement with Selling Security Holders 7
10.17 Rescission Offer Responses 7
10.18 Agreement with Computer Concepts Corp. 8
10.19 Agreement with Greg Paige and Paige & Associates Corp. 9
10.20 Agreements with Computer Concepts Corp. 13
10.21 Agreement with Comstator, S. A. 13
10.22 Agreement with Allan J. Ontai 10
10.23 Letter of Agreement with Servicecorp (Indiana Credit Union
League) 13
10.24 Agreement and Plan of Merger with Membership Realty Ltd., Inc.
and other parties described therein 10
10.25 Agreement with Stenton Leigh Capital Corp.10
10.26 Agreement with Universal Solutions, Inc., Investor Resource
Services, Inc. and SMI Capital Corp. 12
10.27 Amendment No. 1 to Agreement and Plan of Merger with
Membership Realty Ltd., Inc. 14
10.28 Agreement with Computer Concepts Corp. 15
10.29 Agreement and Plan of Merger with Elfworks, Inc. 16
10.30 Stock Purchase Agreement and Assignments with Administracion
de Seguros, S.A. 17
10.31 Letter of Intent to Purchase and Sell between Jalmark Realty,
Inc. and Membership Realty Holding Corp. 19
24
<PAGE>
10.32 Amendment No. 4 To Agreement and Plan of Merger with
Membership Realty Ltd., Inc. 20
10.33 Agreement with JRL Acquisition, Inc. 20
10.34 Financial Advisory and Consulting Agreement with Coleman and
Company 20
10.35 Stock Purchase and Exchange Agreement with American Indemnity
Company Limited 21
10.36 Stock Purchase Agreement with U.S. Mortgage Network Corp. 22
10.37 Stock Purchase Agreement with Maraval & Associates 22
10.38 Stock Purchase and Exchange Agreement with American Indemnity
Company Limited and Global RE., Ltd. 23
10.39 Agreement wit Real Estate Services Network Holding Corp., U.S.
Mortgage Network Corp., Intervest, Inc. and Sidney A. Lewis 24
10.40 Agreement with Total National Telecommunications, Inc.25
10.41 Agreement with Global RE., Ltd. and American Indemnity
Company, Ltd. 26
10.42 Stock Purchase Agreement with Southwestern Telecom, Inc. 27
10.43 Stock Purchase Agreement for the purchase of NETTouch
Communications, Inc. and Common Stock Purchase Warrant 28
10.44 Note Purchase Agreement with GFL Advantage Fund Limited,
Registration Rights Agreement and Promissory Note 28
10.45 Stock purchase agreement for the purchase of all issued and
outstanding shares of Mega Blow Moulding Limited from 1299004
Ontario Corporation.
16.01 Letter from Samson, Robbins & Associates to the Securities and
Exchange Commission4
16.02 Letter from Grau & Registrant to the Securities and Exchange
Commission 6
16.03 Letter from Arthur Andersen & Co. to the Securities and
Exchange Commission 11
16.04 Letter from Grant Thornton to the Securities and Exchange
Commission 18
16.05 Letter from Millward & Co. to the Securities and Exchange
Commission
25
<PAGE>
1 Incorporated by reference from the Registrant's Registration Statement, as
amended, on Form S-18 filed with the Securities and Exchange Commission on
January 27, 1989 and declared effective on February 28, 1989.
2 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated January 11, 1991.
3 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated March 4, 1991.
4 Incorporated by reference to the Registrant's report on Form 8 filed with
the Securities and Exchange Commission dated February 27, 1991.
5 Incorporated by reference to the Registrant's report on Form 10-K filed with
the Securities and Exchange Commission dated April 30, 1991.
6 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated February 6, 1992.
7 Incorporated by reference to the Registrant's Registration Statement, as
amended, on Form S-1 filed with the Securities and Exchange Commission on May
14, 1992 and declared effective on November 12, 1992.
8 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated January 15, 1993.
9 Incorporated by reference to the Registrant's report on Form 10-K filed with
the Securities and Exchange Commission dated May 5, 1993.
10 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated April 8, 1994.
11 Incorporated by reference to the Registrant's report on Form 8-K/A filed
with the Securities and Exchange Commission dated January 17, 1994.
12 Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on March 23, 1994.
13 Incorporated by reference to the Registrant's report on Form 10-KSB filed
with the Securities and Exchange Commission dated December 31, 1993.
26
<PAGE>
14 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated April 21, 1994.
15 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated May 31, 1994.
16 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated July 19, 1994.
17 Incorporated by reference to the Registrant's report on Form 10-QSB filed
with the Securities and Exchange Commission dated September 20, 1994.
18 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated September 12, 1994.
19 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated March 1, 1995.
20 Incorporated by reference to the Registrant's report on Form 10-QSB filed
with the Securities and Exchange Commission dated August 17, 1995.
21 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated December 21, 1995.
22 Incorporated by reference to the Registrant's report on Form 10-KSB filed
with the Securities and Exchange Commission dated September 30, 1995.
23 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated December 21, 1995.
24 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated February 21, 1996.
24 Incorporated by reference to the Registrant's report on Form 10-QSB filed
with the Securities and Exchange Commission dated March 31, 1996.
25 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated May 28, 1996.
26 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated June 11, 1996.
27 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated October 29, 1996.
28 Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated November 8, 1996.
27
<PAGE>
SIGNATURE
---------
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized on this day of , 1998.
WHITEHALL ENTERPRISES, INC.
By:_________________________________
President
In accordance with the Exchange, this Report has been signed below by
the following person on behalf of the Registrant, and in the capacities and on
the date indicated.
Signature
---------
______________________ President and Director , 1999
Luis Alvarez
______________________ Director , 1999
Joseph Lebovics
______________________ Director , 1999
Vincent Landis
______________________ Director , 1999
Carlos M. Trueba
______________________ Director , 1999
Les Miller
28
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Financial Statements
For the Year Ended September 30, 1998
Table of Contents
-----------------
Page No.
--------
Independent Auditors' Report 2
Balance Sheet 4
Statement of Income 5
Statement of Changes in Stockholders' Equity 6
Statement of Cash Flows 7
Notes to Financial Statements 8
F-1
<PAGE>
Independent Auditors' Report
----------------------------
To the Stockholders and Board of Directors of
Whitehall Enterprises, Inc.
Formerly Known as
Total World Telecommunications, Inc.
Miami, Florida
We have audited the accompanying balance sheet of Whitehall Enterprises, Inc.,
formerly known as Total World Telecommunications, Inc. (formerly International
Standards Group, Limited) as of September 30, 1998, and the related statement of
income, statements of changes in stockholders' equity and cash flows for the
year then ended. 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 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.
During 1997, the Company was in Chapter XI, and as such, we are unable to obtain
written representations from management of the Company concerning transactions
prior to October 1, 1997, which took place under substantially different
management. Accordingly, the financial statements for the year ended September
30, 1997, were not audited by us or any other independent Certified Public
Accountant.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whitehall Enterprises, Inc.
formerly known as Total World Telecommunications, Inc., as of September 30,
1998, and the results of its operations, and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
F-2
<PAGE>
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
which raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
SEWELL AND COMPANY, PA
Certified Public Accountants
Pembroke Pines, Florida
December 1, 1998, except as to Note 5 which is dated January 7, 1999
F-3
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Balance Sheet
September 30, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets
Cash $ 22,695
-----------------
Total Current Assets $ 22,695
Fixed Assets 53,620
Less Accumulated Depreciation (46,928)
-----------------
Net Fixed Assets 6,692
Other Assets
Deposits 500
-----------------
TOTAL ASSETS $ 29,887
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Shareholders' Equity
Common Stock . par value
200,000,000 authorized
124,927,647 issued & outstanding $ 12,493
Additional Paid In Capital 17,394
Retained Earnings since 9/30/98
After Quasi-Reorganization 0
-----------------
Total Stockholders' Equity 29,887
-----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 29,887
=================
</TABLE>
See Auditors' Report and Notes to Financial Statements.
F-4
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Statement of Income
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Revenues from Operations $ 26,996
Operating Expenses
Sales, General and Administration $ 234,803
Depreciation 9,361
---------------------
Total Operating Expenses 244,164
-----------------
Net Loss from Operations (217,168)
Other Income
Forgiveness of debt income 27,091,064
Gain on disposal of assets 147,265
Other Income 6,496
---------------------
Total Other Income 27,244,825
Other Expenses
Administrative claims and fees 303,466
Bankruptcy fees and expenses 13,693
---------------------
Total Other Expenses 317,159
-----------------
NET INCOME $ 26,710,498
=================
Earnings per common share. $ 0.23
=================
</TABLE>
See Auditors' Report and Notes to Financial Statements.
F-5
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Statement of Changes in Stockholders' Equity
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
Preferred Stock Common Stock Paid in Unearned Treasury Stock Accumulated
Shares Amount Shares Amount Capital Compensation Shares Amount Deficit Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
September 30, 1997 377,699 4 81,118,900 811 82,474,223 (4,927,394) (55,933) (740,000) (106,723,452) (29,915,808)
Adjustments of:
Chapter XI
Reorganization (377,699) (4) 43,808,747 11,682 (82,239,662) 4,927,394 55,933 740,000 79,795,786 3,235,196
Net Other Income 26,927,666 26,927,666
Net Loss from
Operations (217,167) (217,167)
---------------------------------------------------------------------------------------------------------------
Total 0 0 124,927,647 12,493 234,561 0 0 0 (217,167) 29,887
Effect of Quasi
Reorganization on
September 30, 1998 (217,167) 217,167 0
---------------------------------------------------------------------------------------------------------------
Balance
September 30, 1998 0 0 124,927,647 $12,493 $ 17,394 0 0 0 0 $ 29,887
===============================================================================================================
</TABLE>
See Auditors' Report and Notes to Financial Statements.
F-6
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Statement of Cash Flows
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Cash flows form operating activities:
Net Income $ 26,710,498
---------------
Adjustments to reconcile net income to new cash Provided by operating
activities:
Depreciation 9,361
(Increase) decrease in other assets 3,949
Income from forgiveness of debt (27,091,064)
---------------
Total adjustments (27,077,754)
---------------
Net cash provided (used) by operating activities $ (367,256)
---------------
Cash flows from investing activities:
Cash proceeds form the sale of property 345,392
----------------
Net cash provided (used) by investing activities 345,392
----------------
Net increase (decrease) in cash and cash equivalents (21,864)
Cash and cash equivalents, beginning of year 44,559
----------------
Cash and cash equivalents, end of year $ 22,695
================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 16,715
================
Non-cash transactions include forgiveness
of debt as follows $ 27,091,064
================
</TABLE>
See Auditors' Report and Notes to Financial Statements.
F-7
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Notes to Financial Statements
September 30, 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
Whitehall Enterprises, Inc. ("the Company"), formerly Total World
Telecommunications, Inc. and International Standards Group, Limited (See Note
5), was incorporated under the laws of the State of Delaware on October 12,
1988.
The initial objective of the Company was the establishment of accounting
services to assist credit unions and their supervisory committees in performing
comprehensive internal or regulatory compliance audits in satisfaction of their
statutory requirements. The Company also offers various other auditing,
accounting and managerial advisory services to the credit union industry but
does not perform audits of financial statements.
On April 21, 1994, the Company acquired all of the outstanding stock of
Membership Realty Limited, Inc. and subsequently formed Real Estate Services
Network Holding Corp (RESN). RESN is primarily engaged as a full service
commercial and residential real-estate brokerage firm that also provides
mortgage origination and title services.
In June, 1996, the Company acquired Houston based Total National
Telecommunications, Inc. (renamed Total World Telecommunications, Inc.) a Tier 2
switch-based inter exchange carrier that utilized digital and fiber optic
facilities, with switches located in five major United States cities.
On October 11, 1995, the Company's Board of Directors approved an amendment to
the certificate of incorporation of the Company to permit the Company to issue
up to 100,000,000 shares of common stock, $.00001 par value, and 10,000,000
shares of preferred stock, $.00001 par value, of the Company in order to permit
holders of various series of preferred stock and warrants and options to convert
their preferred stock or exercise their warrants and options for shares of
common stock of the Company.
On October 15, 1996, the Company effected a one-for-fifteen reverse stock split
of its outstanding common stock. All transactions described herein, and all
references to outstanding common stock of the Company or rights to acquire
common stock give effect to such reverse stock split unless otherwise indicated.
Chapter XI Bankruptcy
- ---------------------
On December 24, 1997, the Company filed for protection under Chapter XI of the
Federal Bankruptcy laws. Chapter XI encompasses the submission, by the court
appointed trustees, to the Court of a plan of reorganization. On August 28,
1998, the Court approved the plan of reorganization.
Pursuant to this plan, all preferred and common stock previously issued was
canceled. In place of these canceled shares, 124,927,647 shares of common stock,
par value $.0001 were issued.
F-8
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Notes to Financial Statements
September 30, 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Another 4,000,000 shares of preferred stock (see Note 6) with a par value of
$.001 will be issued under a stock purchase agreement between the Company and
1299004 Ontario Corporation. In exchange for these shares, the Company will
acquire 100% of the outstanding common stock of Mega Blow Moulding, Ltd., a
Canadian Corporation. There is a five (5) year restriction on the conversion of
preferred shares to common shares pursuant to the Agreement.
Capital Transactions
- --------------------
During fiscal year 1997, 838,601 shares of preferred stock were exchanged for
74,483,735 shares of common stock. As part of the exchange, the Company paid to
preferred shareholders $26,420,049.
During 1997, the Company filed a Regulation S private placement and raised
$38,841,188, which was recorded as paid in capital. No additional shares of
stock were issued.
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities 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 debt instrument purchased with an
original maturity of three months or less to be cash equivalents.
Income Taxes
- ------------
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 109 Accounting for Income Taxes, which requires
companies to use the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. Pursuant
to SFAS No. 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. Under the
deferred method, deferred taxes were recognized using the tax rate applicable to
the year of the calculation and were not adjusted for subsequent changes in tax
rates. The Company adopted SFAS No. 109 in 1993.
F-9
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Notes to Financial Statements
September 30, 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk
- ----------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily cash and accounts receivable. The Company extends
credit based on an evaluation of the customer's financial condition, generally
(except for mortgages receivable) without requiring collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses. In addition, at September 30, 1998,
the Company had $22,695 on deposit with one financial institution, which was
insured for up to $100,000 by the U.S. Federal Deposit Insurance Corporation.
The Company believes it is not exposed to any significant credit risk on cash
and cash equivalents.
Net Loss per Common Share
- -------------------------
Net loss per common share is calculated by dividing the net loss by the weighted
average number of common shares outstanding.
Going Concern Consideration
- ---------------------------
Since inception, the Company has incurred substantial losses and, as of
September 30, 1996, has an accumulated deficit of $30,221,374 and a working
capital deficiency of $10,761,404. The Company commenced revenue producing
operation in October 1991. A significant amount of the Company's officers' and
directors' time has been spent in various financing activities including, but
not limited to raising private placement funds and seeking new acquisitions.
The Company plans to purchase a Canadian Company in 1999, which the Company
anticipates will increase profitability. Management believes that the
acquisition, along with other future acquisitions and other activities, coupled
with cost cutting and revenue raising programs, should result in significant
improvement in the future.
There can be no assurance that funding will be completed, if the newly acquired
entities will be profitable, the cost cutting and revenue raising programs will
be effective, all of which are necessary to meet the Company's obligations over
the next year. During 1997-98 the Company went through a Chapter XI
Reorganization.
F-10
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Notes to Financial Statements
September 30, 1998
NOTE 2 PROPERTY, PLANT AND EQUIPMENT
Property, machinery, and equipment are stated at cost, and are depreciated over
their estimated useful lives on a straight-line basis as follows:
<TABLE>
<CAPTION>
Useful Life
-----------
<S> <C>
Furniture and fixtures (including software) 3-5 years
Machinery and equipment 5 years
</TABLE>
<TABLE>
<CAPTION>
The following is a summary of plant and equipment, at cost, less accumulated
depreciation and amortization at September 30, 1998:
<S> <C>
Computer equipment $ 10,292
Furniture and fixtures 27,186
Equipment 16,142
--------
53,620
Less: accumulated depreciation 46,928
--------
Total $ 6,692
========
</TABLE>
Depreciation expense for the year ended September 30, 1998 totals $9,361.
NOTE 3 INCOME TAXES
The Company reduced taxable income for the year ended September 30, 1998, by
applying federal net operating losses to pre-tax income, reducing taxable income
by $71,249,531. These losses were carried forward from prior years.
The Company has a remaining federal net operating loss carryforward of
$71,650,735, of which $71,249,531 expires in 2004, and $401,204 expires in 2017.
NOTE 4 STOCKHOLDER'S EQUITY
Quasi-Reorganization
- --------------------
The Company's Board of Directors approved a Quasi-Reorganizaion effective
September 30, 1998, whereby the accumulated deficit has been offset against
additional paid in capital. The resulting retained earnings at September 30,
1998 is zero. Profit or loss shall be measured and included in retained earnings
from October 1, 1998 forward.
NOTE 5 SUBSEQUENT EVENTS
During January 8, 1999, the Company amended its articles of incorporation
changing its name from Total World Telecommunications, Inc. to Whitehall
Enterprises, Inc.
F-11
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
Notes to Financial Statements
September 30, 1998
NOTE 6 STOCKHOLDERS' EQUITY
A summary of the stock is as follows:
Common Stock
- ------------
Authorized 200,000,000 shares of common stock , $.0001 par value per share.
Issued and outstanding 124,927,647 shares of common stock.
Preferred Stock -
- ---------------
Authorized 4,000,000 shares of preferred stock at $.001 par value per share.
None issued or outstanding.
F-12
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made the 19th day of June, 1998.
B E T W E E N:
1299004 ONTARIO CORPORATION, a company incorporated under the
laws of Ontario (the "Vendor")
- and -
TOTAL WORLD TELECOMMUNICATIONS, INC., a
company incorporated under the laws of the State of Delaware,
United States of America (the "Purchaser")
WHEREAS the Vendor is a wholly owned subsidiary of 1274328
Ontario Inc.;
AND WHEREAS the Vendor has the right to acquire ownership of
all of the issued and outstanding shares of Mega Blow Moulding Limited (the
"Company") and desires to sell to the Purchaser and the Purchaser wishes to
purchase all of the Vendor's right, title and interest in and to such its shares
in the Company's capital stock;
AND WHEREAS the Purchaser is in the process of reorganization
in proceedings under Chapter 11 of the United States Bankruptcy Code pending in
the United States Bankruptcy Court for the Southern District of Florida, Case
No. 97-36030-BKC-SHF;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the payments and mutual covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. - INTERPRETATION
1.1 Definitions
In addition to other terms defined in this Agreement, the following terms shall
have the following meanings:
(a) "Bankruptcy Code" means Title 11 of U.S. Code, 11 U.S.C., 1.1 Et Seq.";
1
<PAGE>
(b) "Business" means the business presently carried on by the Company
consisting of the development and production of blow moulded plastic
products;
(c) "Business Day" means a day other than Saturday, Sunday or legal holiday
as such term is defined in Bankruptcy Rule 9006(a) of the Bankruptcy
Code;
(d) "Closing" means the completion of the purchase and sale of the
Purchased Shares in accordance with Article 11 hereof;
(e) "Closing Date" means that date which is eleven (11) calendar days
following the date upon which all of the conditions precedent to
Closing set forth in this Agreement have been satisfied or waived by
the Purchaser and the Vendor as applicable or such other dates as may
be agreed upon by the parties;
(f) "Confirmation Order" means the order of the United States Bankruptcy
Court in the reorganization case of the Purchaser confirming the Plan
pursuant to section 1129 and other applicable sections of the
Bankruptcy Code, as it may be amended, modified or supplemented with
the consent of the Purchaser and the Vendor;
(g) "Financial Statements" mean the Company's financial statement for its
last fiscal year end (and as may be available), together with notes to
such statements, all as reported upon by the Company's accountant;
(h) "Liens" means all mortgages, claims, charges, liens, pledges,
encumbrances, security interests, adverse claims and other restrictions
of any kind and nature whatsoever;
(i) "Ontario" means 1274328 Ontario Inc;
(j) "Ontario Indebtedness" means all of the indebtedness, liabilities and
obligations of the Company to Ontario under the Company's guarantee of
a debenture in the original principal of $1,000,000 CDN which was
assigned to Ontario and which will be satisfied prior to Closing;
(k) "Ontario Security" means the security agreements, charges and security
interests executed and delivered by the Company to Ontario charging all
of the Company's present and future property, assets and undertaking as
further and continuing collateral security for the Ontario
Indebtedness;
(l) "Plan" means the plan of reorganization of the Purchaser under Chapter
11 of the Bankruptcy Code dated May 8, 1998, as may be amended,
modified or supplemented;
(m) "Preferred Shares" shall have the meaning ascribed to it in Section
3.2(b) hereof;
2
<PAGE>
(n) "Purchase Price" shall have the meaning ascribed to it in Section 3.2
hereof;
(o) "Purchased Shares" means all of the issued and outstanding shares in
the capital of the Company owned and being sold by the Vendor, being
two hundred and forty (240) shares in the Company's capital stock all
of which are being purchased by the Purchaser;
(p) "RBC" means Royal Bank of Canada;
(q) "RBC Indebtedness" means all of the Company's indebtedness, liabilities
and obligations to RBC, howsoever and wheresoever incurred;
(r) "RBC Security" means the security issued by the Company to RBC charging
all of the Company's property, assets and undertaking; and
(s) "Taxes" means all taxes, duties, levies, assessments, reassessments or
governmental charges, including without limitation, income,
corporation, capital, real or personal property, excise, payroll
(including Unemployment Insurance and Canada Pension Plan
contributions), franchise, sales, and goods and services taxes imposed
by any jurisdiction (whether federal, provincial or municipal)
applicable to the Vendor or the Company and any interest, penalties and
fines therein.
1.2 Certain definitions
"Agreement", "this Agreement", "hereto", "hereof", "herein",
"hereunder" and similar expressions refer to this Agreement and not to any
particular Article, Section, paragraph or other portion of this Agreement and
include every amendment or instrument supplementary hereto or in implementation
hereof.
1.3 Number and Gender
Except where the context otherwise indicates, words importing the
singular number only shall include the plural, and vice versa, and words
importing the masculine gender shall include the feminine gender and "persons"
shall include individuals, partnerships, joint ventures, associations,
corporations and all other forms of business organizations, governments,
regulatory or governmental agencies, commissions, departments and
instrumentalities.
ARTICLE 2. - GENERAL
2.1 Dollar Amounts
All dollar amounts referred to herein are in lawful currency of the
United States unless otherwise stated.
3
<PAGE>
2.2 Accounting Terms
Each accounting term used herein, unless a contrary definition is
provided, shall have the meaning given to it under generally accepted accounting
principles in Canada existing at the date hereof.
ARTICLE 3. - PURCHASED SHARES AND PURCHASE PRICE
3.1 Purchased Shares
Subject to the terms and conditions contained in this Agreement, the
Vendor agrees to sell, assign, transfer and deliver to the Purchaser all of the
Vendor's right, title and interest in and to the Purchased Shares and the
Purchaser agrees to purchase the Purchased Shares.
3.2 Consideration
In consideration for the transfer of the Vendor's right, title and
interest in and to the Purchased Shares, the Purchaser shall at Closing:
(a) pay to the Vendor up to the sum of $75,000 U.S. Funds by certified
check or bank cashier's check in accordance with the terms and
conditions of the Plan (the "Cash Payment"); and
(b) issue to Ontario at Closing four million (4,000,000) preferred shares
(the "Preferred Shares") in the Purchaser's capital stock, to be issued
pursuant to the Plan,
all of which shall be collectively referred to herein as the "Purchase Price".
ARTICLE 4. - VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser as follows and
acknowledges that the Purchaser is relying upon such representations and
warranties in connection with this Agreement:
4.1 Share Ownership of the Company
At Closing, the Vendor will be the registered and beneficial owner of
the Purchased Shares.
4
<PAGE>
4.2 Authorized and Issued Capital
The authorized capital of the Company consists of an unlimited number
of common shares, of which two hundred and forty (240) common shares are issued
and outstanding. The Purchased Shares have been duly and validly authorized and
issued and are outstanding as fully paid and non-assessable shares.
4.3 Corporate Power
The Company has the corporate power to own or lease its property and to
carry on its business and is qualified as a corporation to do business and is in
good standing in each jurisdiction in which its business is conducted or the
property owned or leased by it makes such qualification necessary.
4.4 Guarantees, etc.
Other than the guarantee of the Ontario Indebtedness (which will be
satisfied prior to Closing), the Company is not a party to or bound by any
agreement of guarantee, indemnification, surety or similar commitment of the
obligations, liabilities (contingent or otherwise) or indebtedness of any other
person, corporation or partnership.
4.5 Corporate Authority
The execution, delivery and performance by the Vendor of this
Agreement, and each and every agreement, document and instrument of conveyance
contemplated hereby, and the consummation of the transactions herein, have been
duly and validly authorized by all necessary corporate action.
4.6 Real Property Lease
The lease of the Company's premises is the only lease to which the
Company is a party, whether as lessor or lessee, in respect of any real
property.
4.7 Equipment Leases
The Company is not a party to any lease or agreement in the nature of a
lease, conditional sale agreement, installment obligation or similar obligation
(all such obligations and agreements being referred to herein as a "Lease"),
whether as lessor or lessee, in respect of personal property.
5
<PAGE>
4.8 Conformity with Laws
There are no violations, notices of violations, outstanding work
orders, notices or similar requirements relating to the business carried on by
the Company by or from any police or fire department, sanitation, health,
building, labour safety or environmental authorities or from any other federal,
provincial or municipal authority and there are no matters under discussion with
any such departments or authorities relating to work orders, notices or similar
requirements.
4.9 Laws and Regulations
The Company is conducting its business in compliance, in all material
respects, with all applicable laws, rules, regulations, notices, approvals and
orders of Canada and Ontario and any municipality thereof in which its business
is carried on, is not in breach in any material respect of any such laws, rules,
regulations, notices, approvals or orders and is duly licensed, registered or
qualified, and duly possesses all such licenses in Ontario and any municipality
thereof in which the Company carried on its business to enable its business to
be carried on as now conducted and all such licenses, registrations,
qualifications and permits are valid and subsisting and in good standing.
4.10 Incorporation and Organization
The Company is a corporation duly incorporated and organized and
validly subsisting under the laws of Ontario and is duly qualified as a
corporation to do business in Ontario.
4.11 Binding Agreement
This Agreement constitutes a legal, valid and binding obligation of the
Vendor, enforceable against it in accordance with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditor's rights
generally; and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
4.12 Non-Contravention; Consents
The execution and delivery of this Agreement and the completion by the
Vendor of the transactions contemplated herein will not result in any material
violation or breach of any of the provisions of the constating documents or
by-laws of the Company, or to the Vendor's knowledge breach any material
contract or lease, written or oral, to which the Company or the Vendor is a
party or by which they are bound, nor to the Vendor's knowledge require the
Company or the Vendor to obtain any consents, authorizations or approvals, save
for the approval of the Vendor's and the Company's directors, or to the Vendor's
knowledge result in the creation of any Lien on the Purchased Shares.
6
<PAGE>
4.13 No Other Purchase Agreements
No person, company, partnership or other entity has any Agreement or
option or any right or privilege capable of becoming an Agreement for the
purchase of the Purchased Shares save and except as provided for in this
Agreement.
4.14 Title to Assets; Permitted Liens
The assets owned or used by the Company (other than those leased by the
Company) are owned by the Company as the beneficial and legal owner thereof with
a good and marketable title therein and thereto and with full right of use
thereof subject only to:
(a) the RBC Security; and
(b) the Ontario Security, which shall be released prior to Closing.
The Purchaser acknowledges and confirms that the RBC Security and the Ontario
Security shall remain as valid and binding obligations of the Company until the
RBC Indebtedness and the Ontario Indebtedness have been satisfied in full.
4.15 Financial Statements
(a) The Financial Statements of the Company provided to the Purchaser has
been prepared in accordance with Canadian generally accepted accounting
principles.
(b) There are no liabilities or obligations of the Company, in respect of
which the Company or the Purchaser is or may become liable on or after
the consummation of the transactions contemplated by this Agreement
other than:
(i) liabilities disclosed on the Financial Statements and those
liabilities and obligations specifically disclosed in this
Agreement; and
(ii) liabilities incurred in the ordinary course of business of the
Company.
4.16 Residency of Vendor
The Vendor is not a non-resident of Canada within the meaning of the
Income Tax Act (Canada).
4.17 Truth on Closing
The Vendor shall deliver a certificate to the Purchaser certifying that
each of the representations and warranties of the Vendor contained herein are
true and correct on and as of the Closing Date with the same force and effect as
though made on such date.
7
<PAGE>
4.18 Litigation
There is no litigation, suit, proceeding, action, claim or
investigation, at law or in equity, pending a threat against, or effecting in
any way the Company's ability to own and conduct its business as presently
conducted nor is the Company subject to any judgment, order, writ, injunction or
decree of any court or governmental authority, department, commission, board,
bureau, agency or other instrumentality which would have a material effect on
its business or on the transactions contemplated herein.
ARTICLE 5. - PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Vendor as follows and
acknowledge that the Vendor is relying upon such representations and warranties
in connection with this Agreement:
5.1 Binding Agreement
This Agreement constitutes a legal, valid and binding obligation of the
Purchaser, subject to the Confirmation Order, enforceable against it in
accordance with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditor's rights
generally; and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
5.2 Non-Contravention
The execution and delivery of this Agreement and the consummation by
the Purchaser of the transactions contemplated hereby will not result in any
material violation or breach of any material contract or lease, written or oral,
to which the Purchaser is a party or by which it is bound.
5.3 Truth on Closing
The Purchaser shall deliver a certificate to the Vendor certifying that
each of the representations and warranties of the Purchaser contained herein are
true and correct on and as of the Closing Date with the same force and effect as
though made on such date.
8
<PAGE>
ARTICLE 6. - COVENANTS OF THE VENDOR
The Vendor hereby covenants with the Purchaser that the following will
be done or caused to be done at or prior to Closing or earlier as herein
provided:
6.1 Vendor's Compliance with Agreement
The Vendor shall have used its best efforts to take all steps necessary
to ensure that the representations and warranties contained in this Agreement
are true and correct on the Closing Date as if made on and as of such date and
shall have done all things necessary to facilitate the transactions provided for
herein.
6.2 Tax Filings
The Vendor shall cause the Company to promptly pay all Taxes due and
owing by the Company up to the date of this Agreement, unless other satisfactory
arrangements have been made by the Vendor and the Purchaser in writing.
6.3 Transfers
The Vendor shall cause all necessary resolutions to be enacted and
other steps to be taken so as to validly and effectively transfer the Purchased
Shares to the Purchaser at Closing.
6.4 Third Party Consents
The Vendor shall co-operate with the Purchaser and its representatives
to obtain any third party consents which may be required.
6.5 Purchaser's Investigation
The Vendor shall cause the Company to permit the Purchaser and its
agents and professional advisors, at the Purchaser's expense, to make such
inspections of the assets, books and records, liabilities and financial and
legal condition of the Company and the Business as the Purchaser deems necessary
or advisable, acting reasonably.
9
<PAGE>
ARTICLE 7. - COVENANTS OF THE PURCHASER
The Purchaser hereby covenants with the Vendor that the following will
be done at or prior to Closing or earlier as herein provided:
7.1 Purchaser's Compliance with Agreement
The Purchaser shall have taken all steps necessary to ensure that his
representations and warranties contained herein are true and correct on the
Closing Date as if made on and as of such date and shall have done all things
necessary to facilitate the transactions herein provided for.
7.2 Confidentiality
Prior to Closing and, if the transaction contemplated herein is not
completed, at all times after Closing, the Purchaser will keep confidential all
information obtained by it relating to the Company and the Business, except for
such information which must reasonably be disclosed in the Plan or in the
process of confirming the Plan. The Purchaser further agrees that such
information will be disclosed only to those of its representatives and advisors
who need to know such information for the purposes of evaluating and
implementing the transactions contemplated hereby. If the transactions
contemplated herein are not completed for any reason, the Purchaser will return
forthwith, without retaining any copies thereof, any and all information and
documents obtained from the Vendor and the Company.
7.3 Third Party Consents
The Purchaser shall co-operate with the Vendor and its representatives
to obtain any further consents required by any third party.
7.4 Directors
At Closing, the Purchaser shall ensure that not less than three (3) of
the Vendor's nominees are appointed or elected to the Purchaser's board of
directors which shall number five (5) in total.
ARTICLE 8. - SURVIVAL
8.1 Survival of Vendor's Representations and Warranties
The Vendor's representations and warranties contained in this Agreement
shall survive the closing of the purchase and sale of the Purchase Shares
provided for and, notwithstanding such closing, nor any investigation made by or
on behalf of the Purchaser, shall continue in full force and effect for the
benefit of the Purchaser following such closing.
10
<PAGE>
8.2 Survival of Vendor's Covenants
The Vendor's covenants contained in this Agreement shall survive the
closing of the purchase and sale of the Purchase Shares herein provided for and,
notwithstanding such closing, shall continue in full force and effect for the
benefit of the Purchaser in accordance with the terms thereof.
8.3 Survival of Purchaser's Representations and Warranties
The Purchaser's representations and warranties contained in this
Agreement shall survive the closing of the purchase and sale of the Purchase
Shares herein provided for and, notwithstanding such closing, nor any
investigation made by or on behalf of the Vendor, shall continue in full force
and effect following such closing.
8.4 Survival of Purchaser's Covenants
The Purchaser's covenants contained in this Agreement shall survive the
closing of the purchase and sale of the Purchase Shares herein provided for and,
notwithstanding such closing, shall continue in full force and effect for the
benefit of the Vendor in accordance with the terms thereof.
ARTICLE 9. - CONDITIONS IN FAVOUR OF THE PURCHASER
The purchase and sale of the Purchased Shares is subject to the
following terms and conditions for the exclusive benefit of the Purchaser to be
fulfilled or performed by the Vendor or waived by the Purchaser at or prior to
Closing:
9.1 Full Performance
The Vendor shall have performed in all material respects all the terms,
covenants and conditions of the Vendor under this Agreement.
9.2 No Adverse Change
At the Closing Date, there shall have been no material adverse change
in the financial condition of the Business. For purposes of this Section, a
"material adverse change" does not include any change in the affairs,
operations, prospects, assets or condition of the Business arising directly or
indirectly from (i) any activities of the Purchaser, his employees, officers,
agents or representatives (whether pursuant to this Agreement or otherwise) or
(ii) any activities arising in the ordinary course of business.
11
<PAGE>
9.3 Litigation
No action or proceeding shall be pending or, to the knowledge of the
Vendor, threatened by any person to enjoin, prohibit or materially affect the
transactions herein contemplated or which may have a material adverse effect on
the Company, but excluding any litigation, action or proceeding arising, in
whole or in part, from the acts or omissions of the Purchaser, its agents or
representatives, whether pursuant to this Agreement or otherwise.
9.4 RBC
On or prior to Closing, the Purchaser shall not have received any
indication that RBC shall withhold its consent or approval to the transactions
contemplated by this Agreement.
9.5 Approval of Plan
On or prior to Closing, the Purchaser's Plan shall be confirmed and the
United States Bankruptcy Court will have executed the Confirmation Order.
If any of the foregoing conditions set forth in Article 9 hereof has
not been fulfilled by the Vendor or waived by the Purchaser on or prior to the
Closing Date, the Purchaser may rescind this Agreement by notice in writing to
the Vendor (except where failure to fulfill such conditions arises as a result
of the Purchaser's actions or omissions). In such event the Purchaser shall be
released from all its obligations hereunder and unless the Purchaser can
demonstrate the condition or conditions for the non-performance of which they
have rescinded this Agreement are reasonably capable of being performed by the
Vendor, the Vendor shall also be released form all of its obligations.
ARTICLE 10. - CONDITIONS IN FAVOUR OF THE VENDOR
The purchase and sale of the Purchased Shares is subject to the
following terms and conditions for the exclusive benefit of the Vendor, to be
fulfilled or performed by the Purchaser or waived by the Vendor at or prior to
Closing:
10.1 Full Performance
The Purchaser shall have performed in all material respects all the
terms, covenants and conditions of the Purchaser under this Agreement.
10.2 Payment or Satisfaction of Purchase Price
The Purchaser shall have paid the cash portion of the Purchase Price to
the Vendor and shall have made arrangements with the Purchaser's transfer agent
for the issuance of Preferred Shares to the Vendor in accordance with the terms
herein.
12
<PAGE>
10.3 RBC
On or prior to Closing, the Vendor shall not have received any
indication that RBC shall withhold its consent or approval to the transactions
contemplated by this Agreement.
10.4 Approval of Plan of Reorganization
On or prior to Closing, the Purchaser's Plan shall be confirmed and the
United States Bankruptcy Court will have executed the Confirmation Order.
If any of the foregoing conditions set forth in Article 10 has not been
fulfilled by the Purchaser or waived by the Vendor on or prior to the Closing
Date, the Vendor may rescind this Agreement by notice in writing to the
Purchaser. In such event, the Vendor shall be released from all its obligations
hereunder and unless the Vendor can demonstrate the condition or conditions for
the non-performance of which it has rescinded this Agreement are reasonably
capable of being performed by the Purchaser, the Purchaser shall also be
released form all of its obligations hereunder.
ARTICLE 11. - CLOSING ARRANGEMENTS
11.1 Place of Closing
The closing of the transactions contemplated by this Agreement shall
take place at Closing on the Closing Date at the offices of Schantz, Schatzman,
Aaronson & Perlman, P.A., Suite 1050, 200 South Biscayne Boulevard, Miami,
Florida, or at such other place as the parties hereto may agree.
11.2 Deliveries by the Vendor
Subject to the satisfaction and fulfilment of all conditions provided
for in this Agreement (unless waived in writing by the Purchaser at or prior to
Closing) the Vendor shall deliver to the Purchaser the following documents or
matters duly executed by all persons other than the Purchaser or do the
following acts or things which delivery and performance constitute a condition
precedent in favour of the Purchaser to the completion of the transactions
herein provided for:
(a) the share certificates representing the Purchased Shares duly endorsed
in blank for transfer to the Purchaser or, in the alternative, an
acknowledgment by the Vendor that it has conveyed all of its right,
title and interest in and to the Purchased Shares and retains no
interest therein;
(b) a copy of a resolution of the board of directors of the Company and the
Vendor authorizing the transfer of the Purchased Shares to the
Purchaser; and
13
<PAGE>
(c) the Company's minute book and other corporate records.
11.3 Deliveries by the Purchaser
Subject to the satisfaction and fulfilment of all conditions provided
for in this Agreement (unless waived in writing by the Vendor at or prior to
Closing), the Purchaser shall deliver to the Vendor:
(a) a certified cheque or bank draft in the amount equal to the Cash
Payment; and
(b) satisfactory evidence that the Purchaser has requested its transfer
agent to issue the Preferred Shares to the Vendor.
ARTICLE 12. - GENERAL PROVISIONS
12.1 Notice
Any notice required or permitted to be given for purposes of this
Agreement shall be in writing and shall be sufficiently given if personally
delivered, at the applicable address set out below, or sent by registered
letter, postage prepaid or transmitted by telecopier (confirmed on the same day
or following day by prepaid mail or by return telecopier transmittal):
(a) if to the Vendor, addressed to:
3101 Bathurst Street
Suite 600
Toronto, Ontario
M6A
Attention: The President
Facsimile No.: (416) 787-9831
(b) if to the Purchaser addressed to:
3200 North Military Trail, Suite 300
Boca Raton, Florida 33431
USA
Attention: Luis Alvarez, President
Facsimile No.: (305) 858-2355
14
<PAGE>
- or -
c/o Luis Alvarez
2601 South Bayshore Drive
Suite 170
Miami, Florida 33133-5419
USA
or at such other address as the party to whom such writing is to be given shall
have notified the party giving the same in the manner provided in this Section.
Any notice delivered to the party to whom it is addressed as hereinbefore
provided shall be deemed to have been given and received on the date it is so
delivered at such address, provided that if such day is not a Business Day, then
a notice shall be deemed to have been given and received on the next Business
Day following such day. Any notice mailed as aforesaid shall be deemed to have
been given and received on the date it is so delivered at such address, provided
that if such day is not a Business Day, then a notice shall be deemed to have
been given and received on the next Business Day following such day. Any notice
mailed as aforesaid shall be deemed to have been given and received on the fifth
Business Day next following the date of its mailing. Any notice transmitted by
telecopier shall be deemed given and received on the first Business Day after
its transmission.
12.2 Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, understandings, negotiations and
discussions between the parties hereto with respect to the subject matter of
this Agreement. There are not and shall not be any verbal statements,
representations, warranties, undertakings or agreements between the parties with
respect to the subject matter of this Agreement and this Agreement may not be
amended or modified in any respect except by written instrument signed by the
parties hereto.
15
<PAGE>
12.3 Waiver
No waiver of any of the provisions of this Agreement shall be deemed to
constitute a waiver of any other provision (whether or not similar) nor shall
such waiver be effective or binding unless in writing and, unless otherwise
provided, shall be limited to the specific breach waived.
12.4 Applicable Law
This Agreement shall be governed by and construed in accordance with
the laws of Ontario and the laws of Canada applicable therein.
12.5 Enurement
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors and legal personal
representatives, and shall not be assignable by any of the parties hereto
without the written consent of the other party.
12.6 Counterparts
This Agreement may be executed in one or more counterparts, all of
which when executed and delivered (including by facsimile transmission) shall be
considered one and the same agreement, and each of which shall be deemed an
original. If executed by facsimile the party(s) so executing shall forthwith
deliver an original thereof to the other.
12.7 Further Assurances
From time to time subsequent to the Closing Date, each of the parties
hereto shall, at the request and expense of the requesting party, execute and
deliver such additional conveyances, transfers and other assurances, as may, in
the opinion of counsel for such party, be required to effectually carry out the
intent of this Agreement in accordance with the terms hereof.
12.8 Severability
If any provision of this Agreement is determined to be invalid or
unenforceable by a court of competent jurisdiction from which no further appeal
lies or is taken, the provision shall be deemed to be severed herefrom, and the
remaining provisions of this Agreement shall not be affected thereby and shall
remain valid and enforceable.
12.9 Independent Legal Advice
This Agreement has been drafted by Gowling, Strathy & Henderson, as
solicitor for the Vendor. The Purchaser has been advised to obtain independent
legal advice before signing this Agreement and acknowledges that it has obtained
or has had the opportunity to obtain but has declined independent legal advice
prior to the execution of this Agreement.
16
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed and delivered by
the parties hereto on the date first above written.
1299004 ONTARIO CORPORATION
a corporation incorporated under the laws of Ontario
Per:________________________________________________
Name:
Title:
I have the authority to bind the Corporation
TOTAL WORLD TELECOMMUNICATIONS, INC.,
a corporation incorporated under the laws of Delaware
Per:________________________________________________
Luis Alvarez, President
I have the authority to bind the Corporation
17
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