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, 1999
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)
(561) 997-5880
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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
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Securities registered under Section 12(g) of the Exchange Act:
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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
<PAGE>
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Yes No X
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State issuer's revenues for its most recent fiscal year: $ 4,170,370
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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") and
preferred stock par value $.001 per share ("preferred stock"), were,
the only class of voting stock of the Registrant outstanding on
December 31, 1999. Due to the events and circumstances taking place in
the operations of the Company, there have been no material exchange
transactions. Based on the recent market value on the closing bid price
of the Common Stock on the NASD Automated Quotation System of $1.0625
at December 31, 1999 the aggregate Market Value of the 124,900,000
shares of common stock held by persons other than officers, directors
or owners known to the Registrant to be beneficial owners "as that term
is defined under the rules of the SEC" of more than 5% of the common
stock on that date was approximately 7,806,250. 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
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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, 1999.
<PAGE>
PART I
BUSINESS
ITEM 1. DESCRIPTION OF BUSINESS
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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 WHITEHALL ENTERPRISES, 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
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Whitehall Enterprises, Inc., formerly Total World Telecommunication,
Inc., formerly International Standards Group Limited (the "Company") was
incorporated under the laws of the State of Delaware on October 12, 1988. The
Company, through its subsidiary, manufacturers plastic bottles and containers
for use in the pharmaceutical, health and beauty, household cleaner and food
product industries.
During September 1999, the Company acquired Hairbiotech, Inc., a
development stage biotechnology company with three unique patents for hair
growth and hair loss prevention. The companies are prepared to enter into a
licensing agreement with an established cosmetic industry leader that has an
established market share and the necessary financing to penetrate other existing
markets.
The Company's plan for growth included the acquisitions of MBM and
Hairbiotech during the fiscal year ended September 30, 1999. The Board of
Directors is currently studying several other acquisitions and specifically,
negotiating with the principals of two acquisition candidates, a mortgage lender
licensed in several states, and a South Florida oil and gasoline distributor. To
achieve this growth and the necessary working capital, the Company has received
preliminary commitments from investors to arrange future funding for
acquisitions. While the Company has reason to expect the completion of these
arrangements in the near future, no assurances can be given that such funds will
be available.
<PAGE>
In view of these planned acquisitions as well as the Company's focus in
new technologies, the Company will evaluate in the course of the current fiscal
year whether the operations of MBM are sufficiently compatible and synergetic.
In the event management determines that these operations are not complementary,
the Company will consider the sale or other disposition of MBM and its
operations.
BANKRUPTCY
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The Company 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
was submitted pursuant to Section 1125 of the Bankruptcy Code 11 U.S.C. Section
101, et. seq. in connection with the solicitation of votes on the Plan from
Holders of Impaired Claims against and Impaired Equity Interests in the Debtor.
These issues are discussed below in greater detail.
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 were Financial Standards Group, Inc., the credit union auditing
operation ("FSGI"), and Real Estate Services Network Holding Corp., the real
estate group ("RESN").
<PAGE>
The Company 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 recorded these receivables
at no estimated realizable value of which is based on the underlying collateral
in the companies sold.
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.
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.
<PAGE>
In the opinion of the Company, as described below, the treatment of
claims and equity interests under the Plan contemplated a greater recovery than
that which is likely to be achieved under other alternatives for the
reorganization of the Company. Accordingly, the Company believed that
confirmation of the Plan was in the best interests of creditors and holders of
equity interests and recommended 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 believed held 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 had been approved by the Bankruptcy
Court.
In summary, the Plan was 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 would be the primary beneficiaries and Holders of
Allowed Subordinated Claims would 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 (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,
<PAGE>
which, as stated above, held 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
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 believed that the Plan
was 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 existed which were 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, was in a Chapter 7 bankruptcy proceeding in Texas, and the Company would
in all likelihood receive nothing in return for its substantial investment in
TNT. Third, the costs of administering the Estate would continue to accrue as
long as the Reorganization Case remained pending, further eroding whatever value
there was available for Unsecured Creditors. Fourth, Advantage, which held in
excess of 90% of the total dollar amount of Unsecured Claims, supported the Plan
and had 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 believed that its efforts to maximize the return for
Creditors and to find an investor and attract value for stockholders had been
full and complete. The Company further believed that the Plan was in the best
interest of all Creditors and Holders of Equity Interests, even though (a) it
did 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 would be substantially diluted.
<PAGE>
RECENT DEVELOPMENTS
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MBM Acquisition
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On June 19, 1998, following extensive negotiations, the Company entered
into the Stock Purchase Agreement with 129 Ontario who agreed to sell, and the
Company, after the approval of the Bankruptcy Court, agreed to purchase,
effective as of December 1, 1998, 100% of the issued and outstanding stock of
MBM. As a result thereof, MBM became a wholly-owned subsidiary of the Company.
Prior to and during the Reorganization Case, management of the Company actively
searched for an operating business to bring into the Company following the
August 28, 1998 Court approved Plan. Management determined, in the exercise of
its business judgment, that MBM was the best operating business available at the
time. In this regard, the Company required 129 Ontario to obtain an independent
valuation of MBM. In addition, the Company conducted due diligence as to MBM and
its business operations. The Company 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 would (a) cause the Reorganized Company to issue to 1274328 Ontario,
Inc. the Proponent of the Chapter XI reorganization plan (the "Proponent"), at
the Closing 4,000,000 shares of the Company's Preferred Stock. The material
terms of the Stock Purchase Agreement are as follows:
o The Company issued 4 million preferred shares in the Company's capital
stock.
o 129 Ontario represented that MBM was not a party to or bound by any
agreement of guarantee, indemnification, surety, or similar commitments
of the obligations, liabilities (contingent or otherwise) or
indebtedness of any other person, corporation or partnership, except
for trade accounts payable incurred in the normal course of operations.
Consequently, the Company is accruing interest income in an amount
equal to MBM's interest expense.
o Whitehall Enterprises, Inc. acknowledged that all assets owned by MBM
are subject to a security issued by MBM to the Royal Bank of Canada as
collateral for bank notes aggregating approximately $1.2 million.
o 129 Ontario has executed all necessary documents holding the Company
harmless of any liability pursuant to the stock purchase agreement and
in accordance with the Reorganization Plan approved by the Bankruptcy
Court.
As of September 30, 1999, and through the date of this report, the
transactions and events relative to the purchase of MBM were managed in the form
prescribed and approved by the Bankruptcy Court in the Plan. Proceeds from the
collection of loans receivable is expected by March 31, 2000.
<PAGE>
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 was the Gerendasi
Group. 129 Ontario, which controlled the issued and outstanding stock of MBM,
was a wholly-owned subsidiary of the Proponent. The Company has been advised by
the Proponent that neither the Proponent, 129 Ontario or MBM have had or have
any affiliation with the Company, except that the Gerendasi Group formerly owned
a small percentage of the Company's common stock which was sold in 1996.
Hairbiotech Acquisition
-----------------------
In September 1999, Whitehall achieved yet another monumental business
advancement, with the acquisition of Hairbiotech, Inc., a development stage
biotechnology company with three unique patents for hair growth and hair loss
prevention technologies. The material terms of the stock purchase agreement are
as follows:
o $38,000 cash payment: payable by the Company to cover those start up
costs
o A total of 96,000 shares of 144 Restricted shares to be issued to Dr.
Doured Daghistani, 48,000 shares; and Dr. Abel Yunis- 48,000 shares.
o An amount of shares of common stock equivalent to $301,450.00 based on
a five day trading average at the time of issuance.
o A total of 15,000 shares of common stock to be issued for services
rendered by Campbell and Associates, 7,500 shares and Mr. Eugene
Rzucdlo, Esq., 7,500 shares.
o Doctors Daghistani, and Yunis will receive a total of 14%, (7% per
Doctor), of the net profits of the subsidiary, Hairbiotech,
notwithstanding any remuneration they will receive from Hairbiotech for
their services.
o Overhead obligation: The Company is committed to cover the HBI's
overhead of $7,000.00 per month until such time that it is no longer
necessary due to HBI's revenues or six months, whichever comes first.
<PAGE>
Hairbiotech currently holds patents to: (1) 1,25 Dihydroxy Vitamin D3
compound and its analogue, Patent Number 5,486,509, issued January 23, 1996,
with FDA approval for Phase II Human Clinical Trials; (2) Antioxidant A-O
Technology, Patent Number 5,877,209, issued March 2, 1999; and (3) Hair Growth
Factor (HGF) technology, Patent Number 5,888,551, issued March 30, 1999.
Through its research with the University of Miami School of Medicine,
Hairbiotech's Scientific Division has discovered a revolutionary process that
prevents hair loss due to oxidant injury. While multiple antioxidant skin
wrinkle treatments exist, Hairbiotech's patented formula is the only one of its
kind designed to treat and protect the hair follicle from oxidant injury.
Whitehall is prepared to enter into a licensing agreement with an established
cosmetic industry leader that has an established market share and the necessary
financing to penetrate other existing markets. Once this relationship is
established, the formula can be immediately offered to customers as a proven
method for reducing deterioration and the rejuvenation of the hair follicle due
to oxidant injury. It could be introduced under the prospective company's brand
name as a new product or as an addition to the HBI's existing line. The best
application method for the formula is threefold: via shampoo, condition, and
full strength, each applied directly to the hair and scalp. Whitehall's
management believes the marketing potential and recurring sales revenues for
this product are unrivaled.
Hairbiotech's 1,25 Dihydroxy Vitamin D3 compound and its analogue
patent was granted in February 1997 to the University of Miami and was acquired
by Hairbiotech in August of 1997. Hairbiotech currently sponsors research at the
university as part of its Research and Development agreement. This technology
has proven effective in the rat model in preventing hair loss due to
chemotherapy treatment. This product will generate significant revenue, when
marketed through an alliance between Hairbiotech and a leading pharmaceutical
company, to the tens of thousands of patients who are undergoing chemotherapy
treatment for cancer each year.
The Hair Growth Factor (HGF) hair growth stimulation composition patent
was granted in February 1998 for a research stage pharmaceutical product derived
from human cultured cells. The only FDA approved competing products are Rogaine
and Propecia which are limited in their effectiveness. Rogaine is effective in
only 20%-30% of its consumers, and Propecia is for use by men only and carried
the possible side effect of impotence. Hairbiotech's natural technology targets
specific human hormones responsible for hair growth and is safely effective when
used by both men and women. Whitehall anticipates that HGF will be marketed
within three to five years to both men and women experiencing any kind of
hair-related malady.
<PAGE>
MEGABLOW PLASTICS LIMITED
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Principal Products and their Market
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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 year 1998 - 1999, 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.
None of MBM's products are subject to existing or probable future
governmental regulations.
Additionally, MBM's manufacturing process has been established for
many years. Consequently, there has been no material changes to research and
development of new technologies. None of MBM's manufacturing processes or
products sold are restricted by patents or other agreements.
Distribution Methods
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Sales of containers to manufacturers and packaging vendors are
delivered through licensed common carriers.
Competition
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MBM concentrates on manufacturing products for customers who are the
end user of the products and orders placed by manufacturer agents. MBM has
fostered relationships with may 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 believed 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.
<PAGE>
MBM looks to always increase the number of agents it uses to increase
sales by having a presence in industry trade shows throughout the year.
Management of MBM believes that the Company does hot have any
significant risk relative to dependency on sales to a few number of customers.
Materials
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MBM's major raw usage consists of the following resins: Pet G.,
H.D.P.E. (High Density Plyethylene) 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
suppliers are insufficient to meet its existing needs, management of MBM
believes that alternative suppliers would be available at competitive prices
from one of its other major suppliers or from outside alternative suppliers not
currently engaged by MBM.
Additionally, management is not aware of any noncompliance with
federal, state or local environmental laws.
Employees
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MBM employs 82 regular full time 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. MBM's management has remained in place
following the acquisition. HAIRBIOTECH, INC.
INTRODUCTION
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<PAGE>
Hairbiotech, Inc. ("HBI"), a Nevada Corporation, is a developmental
stage company that intends to enter the hair growth stimulation and hair loss
prevention industry by marketing its hair growth and hair loss prevention
technologies. The founders of HBI initially signed a Research and Development
Agreement and License Agreement with the University of Miami (FL) regarding HBI
"Hair Growth Factor" technology. The patent for this technology was granted on
February 1, 1998 and this patent and related technology was licensed to HBI. The
second technology regards the prevention of chemotherapy-induced hair loss. The
patent for this technology was granted on February 1, 1997, and the technology
recently received FDA approval for clinical testing. The third technology patent
was granted to HBI in November, 1997. This technology seeks to prevent hair loss
due to oxidative damage, i.e., hair dye, sunlight, and pollution. Currently, HBI
is also involved in the development of products designed to combat as well as
counter the visible effects of aging on hair, in particular alopecia.
The primary goal of HBI is to develop, license, and market its hair
growth and preventative hair loss technology to individuals who have a hair
thinning condition, who are experiencing hair loss, who dye their hair or who
are presently undergoing chemotherapy. HBI's third biotechnological method which
protects the hair follicles (HF) against oxidative stress, and which ultimately
reduces the loss of hair is ready for market and does not need to be approved by
the United States Food and Drug Administration ("FDA") because it is a cosmetic
product.
Principal Products, Services and Markets
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HBI has three technologies that will provide the basis for its hair
restoration products: the antioxidant (A-O) technology, the vitamin D3
technology and the Hair Growth Factor (HGF) technology. All three of the
technologies are patented.
First, HBI believes that it can immediately offer its clients an
alternative method for reducing the deterioration of the HG due to oxidants and
free radicals through products that are currently ready for production. These
products are generated from proprietary technology referred to throughout this
documents as the "A/O technology" and will be offered to its clients in the form
of a lotion, cream, sunscreen, emulsion, liposomes and shampoo or conditioner
formulation. These products will be provided to individuals, through third party
cosmetic companies, who have a hair thinning condition, who are experiencing
hair loss actively, and who dye their hair.
<PAGE>
The technology is a cosmetic product and, as such, the FDA requires no
human studies on the product prior to its sale. It is prophylactic in nature:
people use it to protect against hair damage. For example, it is used to protect
the hair against oxidative damage resulting from regular dyeing, anoxious
environmental agents and sunlight. Additionally, management believes it is
useful in preventing further hair loss in both men and women who are
experiencing natural hair loss which is normally the result of exposure to
various environmental pollutants.
While there has been great publicity about the salutary health affects
of antioxidants on aging skin, HBI believes that it is the first to develop a
mechanism for the delivery of these benefits to that particular tissue
responsible for hair loss.
Secondly, the D3 technology will be used by chemotherapy patients who
are experiencing concomitant hair loss. The vitamin D3 technology is a
pharmaceutical product and does require human studies before it can be marketed.
The FDA has approved such human studies for this technology, and HBI plans to
initiate such studies on the technology in collaboration with large
pharmaceutical company within the next 12 months. Management of HBI estimates
that products based on this technology will be delivered to the market within
two (2) years.
Thirdly, the patented HGF technology is in the research phase and is
the exclusive technology of HBI. Like the A-O technology, it is a pharmaceutical
product; unlike the A-O technology, the HGF technology is remedial in nature and
not yet approved by the FDA. It is expected to be used via weekly injections by
both men and women with virtually any kind of hair-related malady. Management
estimates that products based on this technology will be delivered to the market
within two (2) years. The Company is negotiating with two pharmaceutical
companies to further the development of the HGF technology.
Management believes that it is quite important to recognize the
significance of the fact that the HGF technology is derived from a human hormone
and is therefore not a drug; it is in this respect that management believes HGF
products will be distinguished from current market leaders Rogaine and Propecia.
Specifically, because the HGF products will be distinguished from current market
leaders Rogaine and Propecia. Specifically, because the HGF products are human
hormones, management believes that they will be as effective for women as men.
Rogaine and Propecia are not as effective for women as for men. Moreover,
management believes HGF products will have a higher rate of effectiveness for
men than the 20-30% rate touted by Rogaine and Propecia.
<PAGE>
Marketing and Sales
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HBI plans to market its three technologies through two specific
channels: (1) large cosmetic companies, and (2) large pharmaceutical companies.
As a cosmetic product, the A/O technology will be licensed and/or
sub-licensed to cosmetic industry leaders with the understanding that those
entities will market products using the technology under their own brands. HBI
believes that existing market penetration enjoyed by these brands will generate
significant sales for the technology without requiring HBI to allocate resources
for the development of its own marketing infrastructure. Alternatively, HBI
itself could market the technology through infomercials and direct sales,
methods that are well-established and require no description here.
As pharmaceutical products, management believes that the Vitamin D3
technology and the hair growth factor technology will also be licensed and/or
sub licensed to pharmaceutical industry leaders. HBI has already entered into a
contractual relationship with a large pharmaceutical company with respect to
the Vitamin D3 technology. Management of HBI believes that existing market
penetration enjoyed by such a large pharmaceutical company or any other company
that HBI enters into agreement with will generate significant sales for the
technology without requiring HBI to allocate resources to the development of its
own marketing infrastructure.
Strategy
- --------
HBI's objective is to grow earnings and revenues by licensing or
assigning its technologies to large, well-established companies in the cosmetics
and pharmaceuticals industries. HBI believes that these large, well-established
firms will utilize their own trademarks in the marketing and distribution of
products derived from and/or based on technologies. HBI intends to require
royalty agreements from its licensees and assignees in addition to the
aforementioned fees. Such relationships are currently in negotiations and
therefore require secrecy until their terms are finalized.
Management believes that its first source of revenues will be derived
from the A/O technology. The product of this technology is ready for immediate
production as soon as HBI executes and agreement with a cosmetic concern.
The Vitamin D3 technology, which is already approved by the FDA form
clinical trials, is expected to generate revenues through royalty fees within
two (2) years.
<PAGE>
The hair growth factor, in management's opinion, is the most exciting
in terms of its revenue-generating potential. However, management believes that
it is still too early to accurately determine when this product will be ready
for production. Alternatively, HBI itself could market and distribute products
derived from and/or based on HBI's technologies via direct sales and
infomercials.
Products and Technology
- -----------------------
HBI has three (3) technologies that will provide the bases for hair
repair and growth products: the Antioxidant (A-O) technology, the Vitamin D3
technology and the Hair Growth Factor (HGF) technology. All three of HBI's
technologies are patented.
The Antioxidant (A-O) Technology
- --------------------------------
Products made with the A-O technology are ready for immediate
production. The technology is a cosmetic product and, as such, the FDA requires
no human studies on the product prior to its sale. It is prophylactic in nature,
designed to prevent hair damage. For example it protects the hair against damage
resulting from regular dyeing and sunlight. Additionally, it is useful in
preventing further hair loss in both men and women who are experiencing natural
hair loss, which is normally the result of exposure to various environmental
pollutants.
Although there are thousands of experiments providing that oxidants
cause injury to the skin "wrinkles" and that antioxidants prevent the skin
injury, HBI believes that it is the first company to prove that the same theory
applies to the hair. HBI's antioxidant for the hair is HBI's exclusive
intellectual property as stated in its patent. The Antioxidant (A-O) technology
will be widely marketed to individuals who are experiencing thinning of the hair
due to regular hair drying or natural hair loss. This totals a number in excess
of 60,000,000 potential customers - both men and women - in the United States
alone, with over 100,000 new potential U.S. customers emerging each year.
The Vitamin D3 Technology
- -------------------------
The patented Vitamin D3 technology will be used by chemotherapy
patients experiencing concomitant hair loss. The vitamin D3 technology is a
pharmaceutical product and, as such, the FDA requires human studies before
marketing to the public. The FDA approved human studies for this technology, and
HBI's plans to initiate such studies in collaboration with a large
pharmaceutical company within the next 12 months. Management estimates that
products based on this technology will be delivered to the market within two (2)
years.
<PAGE>
The Hair Growth Factor (HGF) Technology
- ---------------------------------------
The patented HGF technology is in the research phase and is the exclusive
technology of HBI. Like the Vitamin D technology, it is a pharmaceutical
product. Unlike the Vitamin D technology, the HGF technology is remedial in
nature and not yet approved by FDA. It is expected to be used by both men and
women experiencing virtually any kind of hair-related malady. The HGF technology
is a natural hormone that is derived from human cultured cells and is expected
to be delivered to the user via weekly injections. Management estimates that
products based on this technology will be delivered to the market within three
to four years.
In the hair growth technology industry, the only FDA approved competing
products to date are Rogaine and Propecia. Unlike HBI's human hormone, the "hair
growth factor in the HGF Technology," however, both of these products are
chemicals with significant side effects, i.e., possible impotence in the case of
Propecia. In addition, both of these products have a low percentage of efficacy,
and Propecia is limited in its use for men only.
Competition
- -----------
Industry Background
-------------------
General
The FDA strictly regulates the hair growth and hair loss prevention
industry. HBI only recently acquired the patent for the first drug management
believes has been proven effective in protecting against chemotherapy-induced
alopecia. HBI believes that there is currently no competition for this treatment
of chemotherapy-induced alopecia. The Vitamin D3 technology, which has been
created to protect against chemotherapy-induced alopecia and has been recently
approved by the FDA for clinical testing, will be marketed specifically to those
individuals who are cancer patients and are undergoing chemotherapy.
In the hair growth technology industry, the only FDA approved competing
products are Rogaine and Propecia. Unlike HBI's human hormone, the "hair growth
factor," both of these products are chemicals with significant side effects,
i.e., possible impotence in the case of Propecia. In addition, both of these
products have low percentage of efficacy, and Propecia is limited in its use for
men only.
<PAGE>
Although there are thousands of experiments providing that oxidants
cause injury to the skin "wrinkles" and that antioxidants prevent the skin
injury, HBI believes that it is the first company to prove that the same theory
applies to the hair. HBI's antioxidant for the hair is HBI's exclusive
intellectual property as stated in its patent. The Antioxidant (A-O) technology
will be widely marketed to individuals who are experiencing thinning of the hair
due to regular hair drying or natural hair loss. This totals a number in excess
of 60,000,000 potential customers - both men and women - in the United States
alone, with over 100,000 new potential U.S. customers emerging each year.
History of Industry
- -------------------
The hair growth and hair loss prevention industry has long known that
hair is a fully cornified structure that results from the complete maturation of
follicular matrical cells emanating from the hair follicles. It is also known
that hair loss in the majority of cases is determined by the stage of growth of
the hair follicle. The hair follicle has three stages of growth: anagen, the
active growth cycle; catagen, the resting cycle; and telogen, the regression of
the hair follicle leading to hair fallout. For the past several years, intense
efforts have been applied to identity the factors that regulate the active hair
follicle growth cycle. Maintaining the hair follicle in a healthy and actively
growing status would translate to healthy hair.
The Market
- ----------
The Hair Growth Factor (HGF) technology, as well as the Antioxidant
(A-O) technology, will be widely marketed to individuals who are experiencing
thinning of the hair due to regular hair dyeing or natural hair loss. This
totals a number in excess of 60,000,000 potential customers - both men and women
- - in the United States alone, with over 100,000 new potential U.S. customers
emerging each year. The Vitamin D3 technology, which has been created to protect
against chemotherapy-induced alopecia, will be marketed to tens of thousands of
patients who are undergoing chemotherapy treatment for cancer each year.
<PAGE>
The HBI Solution
- ----------------
HBI believes its technologies will provide the basis for products that
will be demanded by individuals experiencing hair thinning or hair loss as well
as individuals who dye their hair or are presently undergoing chemotherapy, with
a method of protecting the hair follicles (HF) against oxidative stress and
chemotherapy, which HBI believes will ultimately reduce the loss of hair.
Intellectual Property and Proprietary Rights
- --------------------------------------------
HBI regards its hair growth and hair loss prevention technologies as
proprietary and has protected them using a combination some or all of the
following measures: copyrights, patents, trademarks, and trade secret laws,
employee and third-party nondisclosure agreements and other methods of
protections. There can be no assurance that these measures will be adequate or
that HBI's competitors will not independently develop technologies that are
substantially equivalent or superior to HBI's technologies. It may be possible
for unauthorized third parties to copy or reverse engineer portions of the
products developed with HBI's technologies or otherwise obtain and use
information that HBI regards as proprietary. Furthermore, the laws of certain
foreign countries in which HBI's products are or may be developed, manufactured
or sold may not protect HBI's products or intellectual property rights to the
same extent as do the laws of the United States and thus makes the possibility
of unauthorized use of HBI's products more likely. Significant and protracted
litigation may be necessary to protect HBI's intellectual property rights. Such
litigation would likely result in significant expenditures and the diversion of
management's attention. Any such litigation involving HBI could have a material
adverse effect on HBI's business, financial condition and results of operations.
The Vitamin D3 technology is U.S. Patent Number 5,486,509. The
inventors are Dr. Joaquin J. Jimenez and Dr. Adel A. Yunis, two researchers at
the University of Miami Medical School, and the patent was originally assigned
to the University of Miami (FL). In August 1997, the University of Miami then
assigned this patent to Hairbiotech, Inc. ("Hairbiotech of Florida"), a Florida
corporation controlled by the founders and officers and directors of the HBI,
for a $25,000 fee, payable in five annual installments of $5,000, commencing
January 1, 1998, and a 1% royalty fee generated by net sales of products derived
from or utilizing the patent. This patent, related technologies, and all rights
associated with both were sold and assigned to HBI on or about July 30, 1998.
<PAGE>
The HGF technology is patented under U.S. Patent Number 8,570,411. The
technology is the property of the University of Miami and Dr. Jimenez.
Hairbiotech of Florida retained an exclusive license from he University of Miami
for the entire life of the patent
The Antioxidant technology is U.S. Patent Number 8,745,911 and is the
property of Dr. Yunis and HBI.
Government Regulation
- ---------------------
HBI's products are subject to strict federal, state, and local
law/regulations. The hair growth and hair loss prevention industry is highly
regulated and closely monitored by the FDA. The only FDA-approved competing
products at this time are Rogaine and Propecia. HBI only recently acquired the
patent for the first drug proven effective in protecting against
chemotherapy-induced alopecia in the animal model. After demonstrating that the
HBI's product will provide protection against chemotherapy-induced alopecia, HBI
has received FDA approval for clinical trials. There is currently no competition
for the treatment of chemotherapy-induced alopecia. However, the hair growth and
hair loss prevention industry is currently dominated by companies that have
substantially greater capital, marketing, and research and development resources
than the Company. And while HBI will seek to protect its current patens and
technologies, there can be no assurance that HBI will be competitive or ever
establish a significant market share.
Research and Development Over the Last Two Years
- ------------------------------------------------
Management of HBI estimates that research and development costs over
the last two years amounted to $250,000. These costs were paid by HBI,
Hairbiotech of Florida and the scientific personnel involved in the research and
development activities. No research and development costs were borne directly by
customers.
Environmental Laws
- ------------------
HBI or its management is not aware of any noncompliance issues with
federal, state or local environmental laws.
Employees
- ---------
HBI currently has no (0) full-time employees and three (3) part-time
employees. None of the personnel is covered by a collective bargaining
agreement, and HBI considers its relationships with its employees to be very
good.
<PAGE>
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.
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.
MBM operates from a leased, 46,000-square foot manufacturing facility
in metropolitan Toronto, Canada. The premises, located at 7040 Tranmere Drive,
Missisauga, Ontario, Canada, L55 1L9, are leased under an agreement expiring in
2003.
HBI's corporate headquarters are located at Dr. Doured Daghistani's
pediatric oncology offices at 8940 No. Kendall Dr., Suite 905, Miami, Florida
33176. These headquarters are provided at no cost to the Company. HBI's
laboratory and other facilities are located at the University of Miami Medical
School, Miami, Florida. Management believes that these facilities are adequate
for the Company's current needs and that suitable additional space, should it be
needed, will be available to accommodate expansion of the Company's operations
on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
-----------------
All litigation closed as a result of the Company's Chapter XI
Bankruptcy.
As of the date of this report, the Company is not party to any legal
proceedings and is not aware of any threatened litigation, and does not expect
such litigation in the reasonably foreseeable future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
The Company's Common Stock is traded on NASDAQ under the symbol "WTHL."
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.
High Low
---- ---
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*
January 1 - February 19, 1999 $ 0.09 $0.01*
February 20 - March 31, 1999 $ 0.15 $0.02*
April l, - June 30, 1999 $ 0.08 $0.01
July 1, - September 17, 1999 $ 0.15 $0.03
September 18 - December 31, 1999 $ 0.20 $0.03
*After May 1997, the Company had no significant operations. Consequently, after
May, 1997, there have been no authoritative/authentic bid quotations.
As of December 31, 1999, 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.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
----------------------------------------------------------
PLAN OF OPERATIONS
- ------------------
During the year ended September 30, 1999, the Company focused its
resources in the effort to successfully carry out the objectives approved by the
Bankruptcy Court in the Company's Chapter XI Bankruptcy Reorganization Plan. The
most important goal was to overview the operations of MBM.
The Company's plan for growth included the acquisitions of MBM and
Hairbiotech. The details of these acquisitions are discussed in "Recent
Developments" in Part I, Item 1, of this report. The Board of Directors is
currently studying several other acquisitions and specifically, negotiating with
the principals of two acquisition candidates. 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 for acquisitions.
The imminent collection of loans receivable as part of the MBM Stock
Purchase Agreement approved by the Bankruptcy Court will provide cash to expand
MBM sales, and capital for the further investigation of other acquisitions.
While the Company has reason to expect the completion of these arrangements in
the near future, no assurances can be given that such funds will be available.
HBI will continue with its research and development relative to the
prevention of hair loss in conjunction with the University of Miami School of
Medicine. The Company and HBI are currently negotiating with multinatinal
industry leaders for the funding of clinical trials and ongoing research.
Upon execution of an Option Agreement, a leading pharmaceutical company
will be responsible for funding 100% of Hairbiotech's human clinical trials and
ongoing research, as well supplying adequate bulk topical compound needed to
complete the study. The term of the study will commence within 30 days of the
FDA's acceptance of the application. Per the agreement, Hairbiotech is not
required to pay for any of the research or costs associated with the product.
The pharmaceutical company will furnish Hairbiotech with $1,200,000 in milestone
payments. In exchange for the pharmaceutical company's patronage, Hairbiotech
will grant it an option to acquire an exclusive worldwide license to the patent
and all applications of the study. The pharmaceutical company will utilize its
resources to manufacture, market and sell the product(s) and submit associated
reports to Hairbiotech. Upon commercialization, the
<PAGE>
pharmaceutical company is obligated to document sales of the product(s) and
submit royalty payments to Hairbiotech.
The Alternative Lending Group Acquisition
- -----------------------------------------
The Company recently signed a letter of intent to purchase 100% of the
common stock of Alternative Lending Group ("ALG") and all its related assets.
In just six years, ALG has grown from a single-city mortgage company
based in Chicago - with $38 million first-year gross business - to a mortgage
bank covering nine states, with $93,592,399 in actual 1999 gross mortgage loans
originated and closed. The company has focused its mortgage origination through
a consumer direct marketing channel and has maintained steady growth and
profitability by providing mortgage loans to fit all types of consumers' needs.
With the added control that mortgage banking status provides, ALG is able to
make loans simultaneously profitable and competitive because of the reduction in
sales commissions and expenses associated with conventional mortgage brokerage
firms.
ALG recently created two new divisions: the Wholesale Division and the
Internet Online Mortgage Division. These divisions will help establish the
company's national presence and substantially increase gross production over the
next 12 months.
Mortgage financing has traditionally been a lengthy ordeal, lasting
weeks or sometimes even months. ALG offers the convenience of applying for all
types of loans via the Internet. ALG has utilized the Internet as a referral
source for the past three years, and has maintained a $2 million monthly average
loan volume from its previous website. The company has spent much of the past 10
months developing a new website, Alternativelending.com, and a new business plan
for the Internet Online Mortgage Division.
With the launch of its new, state-of-the-art website,
Alternativelending.com, ALG plans to increase its market focus from nine states
to nationwide, during the next 12 months. Alternativelending.com intends to
become the premier place to shop online for a home loan. ALG will continue its
proven and successful Internet marketing strategy direct to customers and will
compete directly with current online leaders E-loan and Mortgage.com to provide
a low cost mortgage option to all customers regardless of credit history.
Alternativelending.com quickly and efficiently allows customers to find
a product, choose the rate and costs they want, and apply for a loan, all in
about 10 minutes...and from the comfort of their home computer. This feature
allows ALG to have more control over its Internet Online Mortgage loans, since
they
<PAGE>
make the determination to approve the customer or supply them with alternative
loan products to meet their needs. With other sites, those customers will simply
be approved or denied.
Since ALG is now a mortgage bank, it can provide a superior Internet
Online Mortgage service compared to those that still operate under the mortgage
broker laws. ALG will have more flexibility with pricing, underwriting, closing
times/locations and customer communication. ALG will continue to provide more
hands-on service to customers who request it, through its traditional offices
located in the Midwest and Southwest regions.
Because ALG closes most loans in its own name as a mortgage banker, the
company is able to assist customers in reducing many pass-through costs
associated with mortgage broker firms. Combined with the significant reduction
in sales commissions expenses the website will provide, ALG will be able to
provide the same efficient service its customers have come to expect at a
significant savings of both time and money.
With the additional of ALG's Wholesale Division, the company will not
only be marketing its Internet Online Mortgages, but also its mortgage banking
services to other mortgage brokers. The Wholesale Division has allowed ALG to
make every loan more profitable, thus allowing improved customer service and
more competitive rates, costs and closing times.
The C & M Oil Company Acquisition
- ---------------------------------
Whitehall recently signed a letter of intent to purchase 100% of the
common stock of C & M Oil Company, Inc. ("CMO") and all its related assets.
CMO has been a South Florida distributor of gasoline and oil related
products branded by CITGO. CMO operates under an agreement with CITGO supplying
several CITGO gasoline stations, as well as governments, local and national
businesses with truck fleets in South Florida.
CMO has grown its sales from $6 million in 1990 to over $12 million in
1998 and $15 million in 1999. CMO's growth in its customer base has been steady,
specially if we account for a very steady price in gasoline and oil products
until the third quarter of 1999. The Company's marketing efforts have been in
expanding its service based revenues. These services consist of maintaining
truck fleets of governmental entities and local and national carriers
operational on a daily basis. This type of service provides CMO with a higher
profit margin than sales of gasoline to gas stations. CMO is the only
distributor providing this service in South Florida.
<PAGE>
As a commitment to the management of CMO, the Company will provide
working capital to aggressively pursue the distribution of gasoline to gas
stations. With the recent mergers of Mobil, Exxon, and Amoco, BP Oil, the South
Florida market presents a great opportunity for signing up gasoline stations
that lose their brand because of the mergers. CMO can also enter into joint
venture agreements with individuals willing to operate CMO owned gasoline
stations.
CMO's management has over 40 years of experience in the industry and 10
years as CITGO distributors. The Company has obtained commitments through
employment agreements with senior management and sales executives to continue
the steady growth trends evident in CMO's history.
RESULTS OF OPERATIONS
- ---------------------
The Company's operations consists almost entirely of the operations of
MBM. Revenues consist of sales of finished inventory to customers. Cost of
inventory sold includes the purchased cost of raw materials, direct labor,
packaging and direct factory overhead.
Revenues from sales for the ten month period ended September 30, 1999,
were $4,170,370 representing a steady monthly performance since the acquisition
of MBM. MBM sales for the ten month period ended November 30, 1998 were
$3,674,336 representing an increase of $496,034 for the periods compared.
Corresponding cost of sales for the same ten month periods ended in September
30, 1999 and November 30, 1998 were $3,282,274 and $2,796,204, respectively. The
gross margin for the ten months ended September 30, 1999 was 21.3%. This
percentage is comparable to 23.9% for the 10 months ended November 30, 1998.
General and administrative expenses were $709,230 or 17% of sales for
the year to date period ended on September 30, 1999.
Improvements in results of operations is due from management's emphasis
in attaining greater profitability through cost cutting measures in the
subsidiary's operating methods.
Interest expense incurred in MBM was paid on loans due to the Royal
Bank of Canada during the period ended September 30, 1999.
The Company's consolidated net income for the year amounted to $74,368 compared
to net income of $26,710,498, derived from forgiveness of debt under the Chapter
XI Bankruptcy, for the year ended September 30, 1998.
Activities for the entire year ended September 30, 1998 were related to
carrying out the Plan of Reorganization under Chapter
<PAGE>
XI. Consequently, revenues were of a non operating and passive nature and
expenses incurred were significantly for attorneys fees and bankruptcy costs.
From May, 1997 until the acquisition of MBM on December 1, 1998, the
Company did not carry 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.
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 annual 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
<PAGE>
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 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 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
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
<PAGE>
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 MBM 129 Ontario, a
wholly-owned subsidiary of 1274328 Ontario Inc., in consideration for the
issuance to the Proponent of approximately 76% voting control of the Reorganized
Debtor (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
acquire all of the stock of MBM from a wholly-owned subsidiary of the Proponent,
pursuant to which MBM became a wholly-owned operating subsidiary of the Company
on December 1, 1998.
Notwithstanding the uncertain distribution to Unsecured Creditors and
the reduced equity interest for stockholders, the Company believes that the Plan
was in the best interest of all Unsecured Creditors and Holders of Equity
Interests for a number
<PAGE>
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 would 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.
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 was in the best
interest of all Creditors and Holders of Equity Interests, even though (a) it
does not appear that there would be 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.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
AT September 30, 1999, the Company had operating cash on hand of $2,264.
As compared to cash on hand at September 30, 1998 of $22,695. At September 30,
1999, the Company had a negative working capital ratio of current assets to
current liabilities of approximately .65. The long term portion of debt at
September 30, 1999 consisted of loans due to the Royal Bank of Canada. The bank
indebtedness is secured by a registered general assignment of book debts and a
general security agreement, a guarantee and postponement of claim in the amount
of $2,150,000 by 129 Ontario, assignment of all shares of the company,
postponement and assignment of all shareholder debt and an assignment of Keyman
insurance. The company has violated certain covenants with respect to the
operating loans. While the bank has been advised of this, they have not
expressly waived the conditions.
<PAGE>
Cash flows provided by operating activities during the year ended
September 30, 1999 were approximately $490,576. The cash provided by operations
was used to pay for the expenses of the parent and service debt. Cash used in
operating activities for the year ended September 30, 1998 was approximately
$367,256, consisting substantially of the costs of the bankruptcy process.
Cash flows used in investing activities during the year ended September
30, 1999 were approximately $109,210 used to acquire the HBI patents and to
purchase capital assets required for manufacturing processes in MBM. Cash flows
provided by investing activities during the year ended September 30, 1998 were
approximately $345,392 consisting of the proceeds from the sale of Company
properties during the bankruptcy process. The cash provided by investing
activities was used to defray the costs of the bankruptcy process.
Cash flows used in financing activities consists mainly of changes in
loans receivable balances from 129 Ontario and debt service costs in the form of
capitalized deferred charges and loan costs and other loan payments required
under the agreements between MBM and the Royal Bank of Canada. MBM has violated
certain covenants with respect to the term loans. While the bank has been
advised of this, they have not expressly waived the conditions.
On December 1, 1998, under conditions and terms prescribed to and
approved by the Bankruptcy Court in the Company's Chapter XI Reorganization, the
Company entered into an agreement with 129 Ontario for the purchase of 100% of
the issued and outstanding stock of MBM. As a result thereof MBM became a wholly
owned subsidiary of the Company. 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 1999, 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 this new 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.
In September 1999, Whitehall achieved yet another monumental business
advancement, with the acquisition of Hairbiotech, Inc., a development stage
biotechnology company with three unique patents for hair growth and hair loss
prevention technologies.
<PAGE>
The primary goal of HBI is to develop, license, and market its hair
growth and preventative hair loss technology to individuals who have a hair
thinning condition, who are experiencing hair loss, who dye their hair or who
are presently undergoing chemotherapy. HBI's biotechnological method, which
protects the hair follicles (HF) against oxidative stress, and which ultimately
reduces the loss of hair, is ready for market and does not need to be approved
by the United States Food and Drug Administration ("FDA") because it is a
cosmetic product.
HBI will continue with its research and development relative to the
prevention of hair loss in conjunction with the University of Miami School of
Medicine. The Company and HBI are currently negotiating with multinatinal
industry leaders for the funding of clinical trials and ongoing research.
The Company's plan for growth included the acquisitions of MBM and
Hairbiotech. The Board of Directors is currently studying several other
acquisitions and specifically, negotiating with the principals of two
acquisition candidates, a multistate mortgage lender and a CITGO gasoline and
oil products distributors. 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 for
acquisitions.
The imminent collection of loans receivable as part of the MBM Stock
Purchase Agreement approved by the Bankruptcy Court will provide cash to expand
MBM sales, and capital for the further investigation of other acquisitions.
While the Company has reason to expect the completion of these arrangements in
the near future, no assurances can be given that such funds will be available.
In view of these planned acquisitions as well as the Company's forces
in new technologies, the Company will evaluate in the course of the current
fiscal year whether the operations of MBM are sufficiently compatible and
synergetic. In the event management determines that these operations are not
complementary, the Company will consider the sale or other disposition of MBM
and its operations.
ITEM 7. FINANCIAL STATEMENTS
--------------------
The financial statements and supplementary data are included under Item
13(a)(1) and (2) of this Report.
<PAGE>
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.
<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 40
Carlos M. Trueba Director 45
Vince Landis Director 53
Les Miller Director 57
Mary Lou Foy Director 55
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).
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.
<PAGE>
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.
Mary Lou Foy graduated from Auburn University with a BA major in Journalism. Ms.
Foy conducted graduate studies at the University of Florida in journalism and
environmental engineering. She received a journalism law research scholarship
funded by the Environmental Protection Agency. Ms. Foy is the current Picture
Editor at the Washington post where she has been employed since 1990. Previously
she was a staff/chief photographer with major newspaper publications since 1971.
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, 1999.
EMPLOYMENT AGREEMENTS
- ---------------------
There were no employment agreements in effect during the year ended
September 30, 1999.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth Common Stock ownership as of December
31, 1999 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, 1999.
Shares
Beneficially Percent
Name Owned (1) of Class
----- ------------ --------
Luis Alvarez (2) 0 0
Mary Lou Foy (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
(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) Ms. Foy is a director of the Company and he owns no shares of common
stock 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.
<PAGE>
(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 200,000 shares of the Company's Common Stock for each year of
service. As of the date of this report, no shares have been issued to these
directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
See discussion in Part I-Item 1 and Part II-Item 6 relative to
Agreement with 129 Ontario for the purchase of the stock of MBM and the
Agreement for the purchase of the common stock of HBI.
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 February 10, 1999 (item 8) and
May 10, 1999 (item 1).
<PAGE>
(c) Exhibits
--------
Exhibit
Number Description of Document
- ------ -----------------------
3.01 Articles of Incorporation1
3.01(a) Certificate of Amendment to Certificate of Incorporation5
3.01(b) Certificate of Amendment to Certificate of Incorporation7
3.01(c) Certificate of Amendment to Certificate of Incorporation24
3.01(d) Certificate of Amendment to Certificate of Incorporation
3.02 By-Laws5
4.01 Specimen of Common Stock certificate1
10.02 Warrant Agent Agreement1
10.03 Line of Credit Agreement1
10.04 Stock Purchase Agreement between Texas American Group, Inc.
and Daniel M. Boyar2
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
10.067
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
Corporation7
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 Holders7
10.17 Rescission Offer Responses7
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. Ontai10
<PAGE>
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 therein10
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
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
Company20
10.35 Stock Purchase and Exchange Agreement with American Indemnity
Company Limited21
10.36 Stock Purchase Agreement with U.S. Mortgage Network Corp.22
10.37 Stock Purchase Agreement with Maraval & Associates22
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. Lewis24
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 Warrant28
10.44 Note Purchase Agreement with GFL Advantage Fund Limited,
Registration Rights Agreement and Promissory Note28
10.45 Stock purchase agreement for the purchase of all issued and
outstanding shares of Mega Blow Moulding Limited from 1299004
Ontario Corporation29
10.46 Audited financial statements of business acquired. Audited
financial statements of MBM as of and for the period ended
November 30, 199829
<PAGE>
10.47 Pro-forma combined financial data. Unaudited pro forma
combined balance sheet and statements of operations of the
Company and MBM is filed herewith29
16.01 Letter from Samson, Robbins & Associates to the Securities and
Exchange Commission4
16.02 Letter from Grau & Registrant to the Securities and Exchange
Commission6
16.03 Letter from Arthur Andersen & Co. to the Securities and
Exchange Commission11
16.04 Letter from Grant Thornton to the Securities and Exchange
Commission18
16.05 Letter from Millward & Co. to the Securities and Exchange
Commission30
- ---------------
<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.
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.
<PAGE>
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.
29)Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated May 10, 1999.
30)Incorporated by reference to the Registrant's report on Form 8-K filed with
the Securities and Exchange Commission dated February 10, 1999.
<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 , 1999.
WHITEHALL ENTERPRISES, INC.
By: /s/ Luis Alvarez
--------------------
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
---------
/s/ Luis Alvarez President and Director January 13, 2000
----------------------
Luis Alvarez
/s/ Carlos M. Trueba Director January 13, 2000
----------------------
Carlos M. Trueba
/s/ Vincent Landis Director January 13, 2000
----------------------
Vincent Landis
/s/ Mary Lou Foy Director January 13, 2000
----------------------
Mary Lou Foy
/s/ Les Miller Director January 13, 2000
----------------------
Les Miller
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 1999 AND 1998
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE NO.
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Changes in Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Financial Statements F-7
Supplemental Information
Report of Independent Auditors' Report on Supplemental
Information F-18
Consolidated Balance Sheet F-19
Consolidated Statement of Income F-20
Consolidated Statement of Cash Flows F-21
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders
of Whitehall Enterprises, Inc. and Subsidiaries
Miami, Florida
We have audited the accompanying consolidated balance sheet of Whitehall
Enterprises, Inc. and subsidiaries (formerly known as Total World
Telecommunications, Inc.) (a Delaware corporation) as of September 30, 1999, and
the related consolidated statements of income, statement of changes in
stockholders' equity and cash flows for the year then ended. These consolidated
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 did not audit the financial statements of Mega Blow Moulding,
Limited, a wholly owned subsidiary, which statements reflect total assets of
$3,498,358 as of September 30, 1999, and total revenues of $4,170,370 for the
year then ended. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for Mega Blow Moulding, Limited, is based solely on the report of the
other auditors.
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 consolidated 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 and the report of other auditors provide
a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Whitehall Enterprises, Inc. and
subsidiaries as of September 30, 1999, and the results of their operations, and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
SEWELL AND COMPANY, PA
Hollywood, Florida
December 29, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
ASSETS
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------ ------------
<S> <C> <C>
Current Assets
Cash $ 2,264 $ 22,695
Accounts receivable 577,477 --
Interest receivable -- --
Inventories 448,361 --
Prepaid expenses 73,949 --
----------- -----------
Total Current Assets 1,102,051 22,695
----------- -----------
Loans Receivable 1,608,853 --
----------- -----------
Deferred Financing Costs 279,337 --
----------- -----------
Property and Equipment 2,662,553 53,620
Less Accumulated Depreciation (2,142,371) (46,928)
----------- -----------
Property and Equipment - Net 520,182 6,692
----------- -----------
Other Assets
Patents 350,000 --
Deposits 1,166 500
----------- -----------
$ 3,861,589 $ 29,887
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities
Current portion of long-term debt $ 536,510 $ --
Notes payable - bank 525,624 --
Income taxes payable 30,413 --
Accounts payable 995,585 --
----------- -----------
Total Current Liabilities 2,088,132 --
Deferred Income Taxes 54,171 --
Long-Term Debt 629,771 --
----------- -----------
2,772,074 --
----------- -----------
Stockholders' Equity
Preferred stock, $.001 par value, 4,000,000
shares authorized and outstanding 4,000 --
Common stock, $.0001 par value, 200,000,000
shares authorized, 124,927,647 shares issued
and outstanding 12,493 12,493
Additional paid in capital 998,653 17,394
Retained earnings since 9/30/98 after Quasi-reorganization 74,369 --
----------- -----------
1,089,515 29,887
----------- -----------
$ 3,861,589 $ 29,887
=========== ===========
</TABLE>
See auditors' report and notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
------------- ------------
<S> <C> <C>
Revenues from Operations
Sales (net of returns) $ 4,170,370 $ --
Cost of Sales 3,282,274 --
------------ ------------
Gross Profit 888,096 --
------------ ------------
Operating Expenses:
Sales, general and administration 709,230 234,803
Depreciation and amortization 199,932 9,361
------------ ------------
Total Operating Expenses 909,162 244,164
------------ ------------
Income (loss) from operations (21,066) (244,164)
------------ ------------
Other Income
Rental income -- 26,996
Forgiveness of debt -- 27,091,064
Unrealized income on foreign currency translation 1,801 --
Gain on disposal of assets -- 147,265
Interest 242,589 6,496
------------ ------------
Total Other Income 244,390 27,271,821
------------ ------------
Other Expenses
Interest expense 95,839 --
Bankruptcy fees and expenses -- 317,159
------------ ------------
Total Other Expenses 95,839 317,159
------------ ------------
Income Taxes
Currently payable 29,709 --
Deferred 23,406 --
------------ ------------
Total Income Taxes 53,115 --
------------ ------------
Net Income $ 74,370 $ 26,710,498
============ ============
Earnings per Share
Net Income $ 0.0006 $ 0.2139
============ ============
</TABLE>
See auditors' report and notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
Preferred Stock Common Stock Paid in Unearned
Shares Amount Shares Amount Capital Compensation
------ ------ -------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance
September 30, 1997 377,699 $ 4 81,118,900 $ 811 $ 82,474,223 $ (4,927,394)
Adjustments of:
Chapter XI
Reorganization (377,699) (4) 43,808,747 11,682 (82,239,662) 4,927,394
Net Other Income
Net Loss from
Operations
-------------------------------------------------------------------------------------------------
Total 0 0 124,927,647 12,493 234,561 0
Effect of Quasi
Reorganization on
September 30, 1998 (217,167)
-------------------------------------------------------------------------------------------------
Balance
September 30, 1998 0 0 124,927,647 12,493 17,394 0
Acquisition of
MBM 4,000,000 4,000 669,259
Acquisition of
Hairbiotech 312,000
Net Income
-------------------------------------------------------------------------------------------------
Balance
September 30, 1999 4,000,000 $ 4,000 124,927,647 $ 12,493 $ 998,653
=================================================================================================
(RESTUBBED TABLE)
Retained
Treasury Stock Earnings
Shares Amount (Deficit) Total
------ ------ -------- -----
Balance <C> <C> <C> <C>
September 30, 1997 (55,933) $ (740,000) $(106,723,452) $ (29,971,741)
Adjustments of:
Chapter XI
Reorganization 55,933 740,000 79,795,786 3,291,129
Net Other Income 26,927,666 26,927,666
Net Loss from
Operations (217,167) (217,167)
-------------------------------------------------------------
Total 0 0 (217,167) 29,887
Effect of Quasi
Reorganization on
September 30, 1998 217,167 0
-------------------------------------------------------------
Balance
September 30, 1998 0 0 0 29,887
Acquisition of
MBM 673,259
Acquisition of
Hairbiotech 312,000
Net Income 74,370 74,370
-------------------------------------------------------------
Balance
September 30, 1999 $ 74,370 $ 1,089,516
=============================================================
</TABLE>
See auditors' report and notes to financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
-------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 74,370 $ 26,710,498
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 139,038 9,361
Amortization of deferred costs 60,894 --
Income taxes 23,407 --
Income from forgiveness of debt -- (27,091,064)
Change in assets and liabilities net of effects from Purchase of MBM:
(Increase) in accounts receivable (3,838) --
Decrease in inventory 136,937 --
Decrease in prepaid expenses 13,230 --
(Increase) decrease in other assets (666) 3,949
Increase in income tax liabilities 29,710 --
Increase in accounts payable 17,494 --
------------ ------------
Total Adjustments 416,206 (27,077,754)
------------ ------------
Net cash provided by (used in) operating activities 490,576 (367,256)
------------ ------------
Cash flows from investing activities:
Cash proceeds from sale of property -- 345,392
Acquisition of intangible assets (38,000) --
Acquisition of equipment (71,210) --
------------ ------------
Net cash provided by (used in) investing activities (109,210) 345,392
------------ ------------
Cash flows from financing activities:
Net borrowings 322,637 --
Increase in deferred costs (289,311) --
Increase in loan receivable (435,678) --
------------ ------------
Net cash provided by (used in) financing activities (402,352) --
------------ ------------
Net (decrease) in cash and cash equivalents (20,986) (21,864)
Cash received in acquisition of MBM 556 --
Cash and cash equivalents - beginning of year 22,695 44,559
------------ ------------
Cash and cash equivalents - end of year $ 2,265 $ 22,695
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense $ 95,839 $ 16,715
============ ============
Non cash transactions include forgiveness of debt as follows: $ -- $ 27,091,064
============ ============
</TABLE>
See auditors' report and notes to financial statements.
F-6
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Whitehall Enterprises, Inc. ("the Company), formerly Total World
Telecommunications, Inc., was incorporated under the laws of the State of
Delaware on October 12, 1988. On January 8, 1999, the Company amended its
articles of incorporation changing its name from Total World Telecommunications,
Inc. to Whitehall Enterprises, Inc. The acquisition of Mega Blow Mounding,
Limited was effective December 1, 1998. The acquisition of Hairbiotech, Inc. was
effective September 30, 1999. Results of consolidated operations and cash flows
include the transactions of Whitehall Enterprises, Inc. for the year and Mega
Blow Moulding, Limited for the ten-month period ended September 30, 1999.
Principles of Consolidation
- ---------------------------
The consolidated financial statements of the Company include those accounts of
Whitehall Enterprises, Inc., Hairbiotech, Inc., a development stage
biotechnology company, and Mega Blow Moulding, Limited, a Canadian plastics
company. All significant intercompany transactions and balances have been
eliminated in the consolidation.
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 or reorganization. On August 28,
1998, the Court approved the plan of reorganization.
Pursuant to this plan, all preferred and common stock previously issued were
canceled. In place of these canceled shares, 124,927,647 shares of common stock,
par value $.0001 were issued and the Court also approved the debtors purchase of
stock of Mega Blow Moulding, Limited.
Accounting Estimates
- --------------------
The preparation of consolidated 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 consolidated 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 instruments purchased with an
original maturity of three months or less to be cash equivalents.
F-7
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Inventories
- -----------
Inventories from Mega Blow Moulding, Limited, consisting of raw materials,
packaging and skids, and finished goods, are valued at the lower of cost or
market. Cost is determined by the first-in first-out method (FIFO) except for
finished goods, which are accounted for on a retail inventory method.
Property and Equipment
- ----------------------
Property, machinery, and equipment are stated at cost, and are depreciated over
their estimated useful lives using accelerated and straight-line methods as
follows:
Useful Life
-----------
Office equipment 3-5 years
Machinery and equipment 5 years
Leasehold improvements 5 years
Deferred Cost
- -------------
Deferred costs include deferred financing costs and corporate transaction costs
and are stated at cost less accumulated amortization. These costs are amortized
between five and seven years using the straight-line method.
Accounting Pronouncements
- -------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information (SFAS No. 131) which established presentation of financial
data based on the "management approach". SFAS No. 131 is applicable for fiscal
years beginning after December 15, 1997.
Accounting Policies
- -------------------
The Company's products are manufactured to specific customer orders and revenues
are recognized when the products are shipped. Revenue is reduced for estimated
customer returns and allowances.
Accounts Receivable
- -------------------
Management believes that accounts receivable are fully collectible based upon
the Company's history of collections. Accordingly, no allowance for doubtful
accounts has been provided.
F-8
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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 consolidated
financial statements 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.
Concentration of Risk
- ---------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of balances at financial institutions.
The Company had deposits with two financial institutions amounting to $2,264 at
September 30, 1999, which was insured for up to $100,000 by the U.S. Federal
Deposit Insurance Corporation. The Company believes that risks relating to cash
balances are minimized as a result of the size and stature of the financial
institutions in which the Company maintains its accounts
Basic Loss per Share and Diluted Loss per Share
- -----------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128), which
specifies the computation, presentation and disclosure requirements for earnings
per share. SFAS No. 128 supercedes Accounting Principle Board Opinion No. 15
entitled Earnings Per Share. Basic earnings per share are computed by dividing
income available to common stockholders (the numerator) by the weighted-average
number of common shares (the denominator) for the period. The computation of
diluted earnings per share is similar to basic earnings per share, except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potentially dilutive common shares had
been issued.
F-9
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Basic Loss per Share and Diluted Loss per Share
- -----------------------------------------------
The numerator in calculating basic earnings per share is reported net loss. The
denominator is based on the following weighted-average number of common shares:
1999 1998
---- ----
Basic 124,927,647 113,975,460
NOTE 2 STOCKHOLDERS' EQUITY
Common Stock
- ------------
Authorized 200,000,000 shares of common stock, $.0001 per 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. The stock is outstanding as part of the purchase of MBM. (See Note
2)
On December 10, 1998, 4,000,000 shares of preferred stock with a par value of
$.001 were issued under a stock purchase agreement between the Company and
1299004 Ontario Corporation ("129 Ontario"). In exchange for these shares, the
Company acquired 100% of the outstanding common stock of Mega Blow Moulding,
Limited ("MBM"). There is a five (5) year restriction on the conversion of
preferred shares to common shares pursuant to the Agreement.
At September 30, 1999, and 1998, the total shares of common stock was as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
124,927,647 shares of common stock;
issued and outstanding at $0.0001 par value $ 12,493 $ 12,493
4,000,000 shares of preferred stock
at $0.001 par value 4,000 0
--------- --------
$ 16,493 $ 12,493
========= ========
</TABLE>
As of the date of this report, the shares of preferred stock have not been
issued.
F-10
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1999 and 1998 consisted of the
following:
1999 1998
---- ----
Computer $ 0 $ 10,292
Furniture and fixtures 143,751 27,186
Machinery and equipment 2,514,860 16,142
Leasehold improvement 3,942 0
----------- -----------
2,662,553 53,620
Less: accumulated depreciation (2,142,371) (46,928)
----------- -----------
Total $ 520,182 $ 6,692
=========== ===========
Depreciation expense for the years ended September 30, 1999 and 1998 was
$139,038 and $9,361, respectively.
NOTE 4 INVENTORY
At September 30, 1999, inventory was as follows:
Raw materials $ 134,871
Packing and skids 23,062
Finished goods 290,428
---------
$ 448,361
=========
NOTE 5 LOAN RECEIVABLE
The loan receivable is due on demand and bears an interest rate varying from
6.72% - bank prime plus 2%. The loan is secured by property with a market value
of approximately $5,000,000. (See Note 10)
F-11
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 6 BANK INDEBTEDNESS
The bank indebtedness includes operating loans, due on demand, of $402,126
($422,573 - as of November 30, 1998). The operating loans bear interest at rates
varying from prime + 1.25% to prime +1.75%. The bank indebtedness is secured by
a registered general assignment of book debts and a general security agreement,
a guarantee and postponement of claim in the amount of $1,465,376 by the parent
company, assignment of all shares of the company, postponement and assignment of
all shareholder debt and an assignment of Keyman insurance.
The Company has violated certain covenants with respect to the operating loans.
While the bank has been advised of this, they have not expressly waived the
conditions.
NOTE 7 LONG-TERM DEBT
At September 30, 1999, long-term debt consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Term loans (see Note 14) $ 536,510
Note payable with an interest rate of 12% per annum; Monthly interest
consisting of interest only; principal
amount maturing October 1, 2004. 629,771
-----------
1,166,281
Less current portion (536,510)
-----------
$ 629,771
===========
</TABLE>
Interest expense for the year ended September 30, 1999 and 1998 was $95,839 and
$16,715, respectively.
F-12
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 8 LEASE COMMITMENTS
The minimum rentals payable under long-term operating leases, expiring December
31, 2003, exclusive of certain operating costs for which the Company is
responsible, are approximately $147,735 annually.
The future payments of the rental lease for the next 5 years are as follows:
2000 $ 147,735
2001 147,735
2002 147,735
2003 147,735
2004 and thereafter 0
----------
$ 590,940
==========
The rental lease expense for the year ended September 30, 1999 and 1998 was
$123,113, and $0, respectively.
NOTE 9 RELATED PARTY TRANSACTIONS
The bank indebtedness and the long-term debt are guaranteed by the Company's
parent and a beneficial shareholder of the parent. The shareholder has not
charged a fee to this company for this guarantee.
NOTE 10 MEASUREMENT UNCERTAINTY
The Company carries, as an asset, a loan receivable from a public company,
which, until November 30, 1998, was its ultimate parent, in the amount of
approximately $1,112,931. The shares of this public company have been and are
actively trading on the National Association of Securities Dealers over the
counter market and is solvent. Accordingly, while the Company does not believe
the carrying value has been impaired, there is uncertainty as to the final
realization of this amount.
F-13
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 11 UNCERTAINTY DUE TO YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems, which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors in significant systems failure, which
could affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 issued affecting
the entity, including those related to the efforts of customers, suppliers, or
other third parties will be fully resolved.
NOTE 12 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 13 ACQUISITION
MBM Acquisition
On December 1, 1998, the Company acquired 100% of the outstanding common stock
of Mega Blow Moulding, Limited, a Canadian plastic manufacturing company, from
1299004 Ontario Corporation. The acquisition took place under conditions and
terms prescribed and approved by the Bankruptcy Court in the Company's Chapter
XI Reorganization. The purchase price of $673,259 was exchanged for 4,000,00
shares of preferred stock. As of the date of these financial statements, these
shares have not been issued. The acquisition was accounted for as a stock
purchase under Accounting Principles Board Opinion No. 16 (APB No. 16). The
results of operations of the acquired company were included in the consolidated
results of the Company from the respective acquisition date.
F-14
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 13 ACQUISITION - continued
MBM Acquisition
The estimated fair value of assets acquired and liabilities assumed is
summarized as follows:
Accounts receivable $ 548,917
Inventories 563,262
Loan receivables 1,112,931
Fixed assets 557,736
Other assets 127,524
Bank indebtedness (500,740)
Accounts payable (936,263)
Long-term debt (800,108)
----------
$ 673,259
==========
Whitehall Enterprises, Inc. acknowledged that all assets owned by MBM are
subject to a security issued by MBM to the Royal Bank of Canada as collateral
for bank notes aggregating approximately $1,762,000.
The Company carries, as an asset, a $1,112,931 loan receivable from a public
company, which, until November 30, 1998, was its ultimate parent. (See Note 10)
Hairbiotech, Inc.
On September 30, 1999, the Company acquired 100% of all the outstanding common
stock of Hairbiotech, Inc., a Nevada corporation with three unique patents for
hair growth and hair loss prevention technologies. Hairbiotech, Inc. is
considered to be in the development stage. The purchase price is approximately
$350,000, pending certain post-closing adjustments. The acquisition consists of
$38,000 in cash; common stock of the Company, the value equivalent to $301,450,
based on a five day trading at the time of issuance; 96,000 shares of restricted
common stock, and 15,000 shares of common stock exchanged for services rendered
by Campbell and Associates. As of the date of these financial statements, these
shares have not been issued.
F-15
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 13 ACQUISITION - continued
Hairbiotech, Inc.
The acquisition was accounted for as a purchase under Accounting Principles
Board Opinion No. 16. (APB No. 16). Accordingly, the Company allocated the
purchase price of Hairbiotech, Inc. based on the fair value of the assets
acquired, identified as intangible assets. The intangible assets include
in-process research and development, and three patents for projects that have
future alternative uses. These intangibles will be amortized over estimated
useful lives of 15 years.
The estimated fair value of assets acquired, which is subject to further
refinement consists of patents and research & development totaling $350,000.
As part of the acquisition agreement, the sellers will receive a total of 14% of
the net profits of Hairbiotech, Inc., notwithstanding any remuneration they will
receive from Hairbiotech, Inc. for their services. The Company is also committed
to cover the overhead of Hairbiotech, Inc. amounting to $7,000.00 per month for
a period not to exceed six months.
The Company had two agreements with the University of Miami Department of
Medicine, related to research studies entitled: "Study of Chemically-Induced
Alopecia and Hair Growth Stimulating Composition" and "Studies of Hair Growth
Factor". The agreement commenced in 1996, and is for various times through May
2000. The agreement calls for financial support of $241,687 for the period
6/1/98 - 5/31/99, and $35,000 for the remaining period.
NOTE 14 SUBSEQUENT EVENTS
Long-Term Debt
- --------------
On December 14, 1999, the term loan in the amount of $536,510 was repaid with
the proceeds from the sale of plastic injection molding equipment. The Company
leased back the equipment for a total amount of $681,570, at an interest rate of
9.35% per annum, repayable in 72 monthly installments of $12,627, including
principal and interest.
Acquisitions
- ------------
C & M Oil Company, Inc.
On June 12, 1999, the Company signed a letter of intent to acquire C & M Oil
Company, Inc., a Florida corporation. C & M Oil Company, Inc. operates a bulk
lubricant and service station fuel and mobile on-site fueling business. As of
the date of this report, there was no contract in force.
F-16
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 14 SUBSEQUENT EVENTS- continued
Alternative Lending Group, Inc.
On December 22, 1999, the Company entered into an agreement to acquire
Alternative Lending Group, Inc., an Illinois corporation that is engaged in the
mortgage banking and brokerage business. The Company will acquire 100% of the
shares of common stock of Alternative Lending Group, Inc. in exchange for
$950,000 as working capital for Alternative Lending Group, Inc., and 8,000,000
shares of common stock equivalent to 4% of 200,000,000 shares. In the event that
prior to one year to the date of closing, the amount of common stock of the
Company exceeds 200,000,000 shares, a proportional adjustment shall be made to
the seller.
F-17
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
SEPTEMBER 30, 1999
SUPPLEMENTAL INFORMATION
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION
--------------------------------------------------------
To the Board of Directors and Stockholders
of Whitehall Enterprises, Inc. and Subsidiaries
Miami, Florida
Our report on our audit of the basic financial statements of Whitehall
Enterprises, Inc. and subsidiaries (formerly known as Total World
Telecommunications, Inc.) for the year ended September 30, 1999 appears on page
2. That audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The consolidated information is presented
for purposes of additional analysis of the consolidated financial statements
rather than to present the financial position, results of operations and cash
flows of the individual companies, and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
SEWELL AND COMPANY, PA
Hollywood, Florida
December 29, 1999
F-18
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS WORLD TELECOMMUNICATIONS, INC.
CONSOLIDATING BALANCE SHEET - UNAUDITED
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
ASSETS
Whitehall Hairbiotech MBM Consolidated
September 30 September 30 September 30 Before
1999 1999 1999 Eliminations
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Current Assets
Cash $ 2,264 $ -- $ 2,264
Accounts Receivable 577,477 577,477
Inventories 448,361 448,361
Prepaid Expenses 10,000 63,949 73,949
----------- ----------- ----------- -----------
Total Current Assets 12,264 1,089,787 1,102,051
----------- ----------- ----------- -----------
Loans Receivable -- 1,608,853 1,608,853
Deferred Financing Costs -- 279,337 279,337
Property and Equipment 53,620 2,608,933 2,662,553
Less Accumulated Depreciation (53,620) (2,088,751) (2,142,371)
----------- ----------- ----------- -----------
Property and Equipment - Net -- 520,182 520,182
----------- ----------- ----------- -----------
Investments in MBM 673,259 -- 673,259
Investment in Hairbiotech 350,000 -- 350,000
Other Assets
Patents 350,000 350,000
Deposits 1,166 -- 1,166
----------- ----------- ----------- -----------
TOTAL ASSETS $ 1,036,689 $ 350,000 $ 3,498,159 $ 4,884,848
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Checks issued in excess of cash balance $ -- $ -- $ --
Current portion of long-term debt -- 536,510 536,510
Income taxes payable -- 30,413 30,413
Notes payable - bank -- 525,624 525,624
Accounts payable 25,177 970,408 995,585
----------- ----------- ----------- -----------
Total Current Liabilities 25,177 2,062,955 2,088,132
----------- ----------- ----------- -----------
Deferred Income Taxes -- 67,757 67,757
Long-Term Debt -- 629,771 629,771
----------- ----------- ----------- -----------
Total Liabilities 25,177 2,760,483 2,785,660
----------- ----------- ----------- -----------
Stockholders' Equity
Preferred stock, $.001 par value, 4,000,000
shares authorized, issued and outstanding
at September 30, 1999 4,000 -- 4,000
Common stock, $.0001 par value, 200,000,000
shares authorized, 124,900,000 shares issued
and outstanding 12,493 45,000 164 57,657
Additional Paid-In Capital 998,653 305,000 659,509 1,963,162
Retained Earnings (Accumulated Deficit) (3,634) 78,003 74,369
----------- ----------- ----------- -----------
Total Stockholders' Equity 1,011,512 350,000 737,676 2,099,188
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,036,689 $ 350,000 $ 3,498,159 $ 4,884,848
=========== =========== =========== ===========
[restubbed table]
Consolidated
After
Eliminations Eliminations
------------ -------------
Current Assets
Cash $ 2,264
Accounts Receivable 577,477
Inventories 448,361
Prepaid Expenses 73,949
-----------
Total Current Assets 1,102,051
-----------
Loans Receivable 1,608,853
-----------
Deferred Financing Costs 279,337
-----------
Property and Equipment 2,662,553
Less Accumulated Depreciation (2,142,371)
-----------
Property and Equipment - Net 520,182
-----------
Investments in MBM (673,259) --
Investment in Hairbiotech (350,000) --
Other Assets
Patents 350,000
Deposits 1,166
-----------
TOTAL ASSETS $ 3,861,589
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Checks issued in excess of cash balance
Current portion of long-term debt 536,510
Income taxes payable 30,413
Notes payable - bank 525,624
Accounts payable 995,585
-----------
Total Current Liabilities 2,088,132
-----------
Deferred Income Taxes (13,586) 54,171
Long-Term Debt 629,771
-----------
Total Liabilities 2,772,074
-----------
Stockholders' Equity
Preferred stock, $.001 par value, 4,000,000
shares authorized, issued and outstanding
at September 30, 1999 4,000
Common stock, $.0001 par value, 200,000,000
shares authorized, 124,900,000 shares issued
and outstanding (45,164) 12,493
Additional Paid-In Capital (964,509) 998,653
Retained Earnings (Accumulated Deficit) 74,369
-----------
Total Stockholders' Equity 1,089,515
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,861,589
===========
</TABLE>
See auditors' report and notes to financial statements.
F-19
<PAGE>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS TOTAL WORLD TELECOMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Consolidated Consolidated
Whitehall MBM Before After
September 30, 1999 September30, 1999 Eliminations Eliminations Eliminations
------------------ ----------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from Operations
Sales -- 4,170,370 4,170,370 4,170,370
Cost of Sales -- 3,282,274 3,282,274 3,282,274
------------- ------------- ------------- -------------
Gross Profit -- 888,096 888,096 888,096
Consulting fees 88,067 -- 88,067 (88,607) --
------------- ------------- ------------- -------------
Total Operating Revenues 88,067 888,096 976,163 888,096
------------- ------------- ------------- -------------
Operating Expenses
Sales, General and Administration 85,007 712,290 797,297 (88,607) 709,230
Depreciation 6,693 193,239 199,932 199,932
------------- ------------- ------------- -------------
Total Operating Expenses 91,700 905,529 997,229 909,162
------------- ------------- ------------- -------------
Net Loss from Operations (3,633) (17,433) (21,066) (21,066)
------------- ------------- ------------- -------------
Unrealized income foreign transaction -- 1,801 1,801 1,801
Interest income - MBM -- 242,589 242,589 242,589
Other Expense
Interest Expense -- 95,839 95,839 95,839
------------- ------------- ------------- -------------
Income taxes
Currently Payable -- 29,709 29,709 29,709
Deferred -- 23,406 23,406 23,406
------------- ------------- ------------- -------------
-- 53,115 53,115 53,115
------------- ------------- ------------- -------------
Net Income (Loss) ($ 3,633) $ 78,003 $ 74,370 $ 72,568
============= ============= ============= =============
Net Income (Loss) Per Common Share -- $ 325.01 0.0006
============= ============= ============= =============
Number of Shares Used in Computation 124,900,000 240 124,900,000 124,900,000
============= ============= ============= =============
</TABLE>
See auditors' report and notes to financial statements.
F-20
<PAGE>
<TABLE>
<CAPTION>
WHITEHALL ENTERPRISES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS TOTAL WORLD TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
Consolidated Consolidated
Whitehall MBM Before After
1999 1999 Eliminations Eliminations Eliminations
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,633) $ 78,003 $ 74,370 $ 74,370
Adjustments to reconcile net income
(loss) by operating activities:
Depreciation 6,693 132,345 139,038 139,038
Amortization of deferred costs 60,894 60,894 60,894
Income taxes 23,407 23,407 23,407
Change in assets and liabilities net of effects
from purchase of MBM:
Decrease in accounts receivable -- (3,838) (3,838) (3,838)
(Increase) in inventory 136,937 136,937 136,937
(Increase) in prepaid expenses (10,000) 23,230 13,230 13,230
(Increase) decrease in other assets (666) (666) (666)
(Increase) decrease in income tax liabilities 29,710 29,710 29,710
Increase (decrease) in accounts payable 25,176 (7,682) 17,494 17,494
--------- --------- --------- ---------
Total adjustments 21,203 395,003 416,206 416,206
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 17,570 473,006 490,576 490,576
--------- --------- --------- ---------
Cash flows from investing activities:
Acquisition of intangible assets (38,000) -- (38,000) (38,000)
Acquisition of equipment -- (71,210) (71,210) (71,210)
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities (38,000) (71,210) (109,210) (109,210)
--------- --------- --------- ---------
Cash flows from financing activities:
Net borrowings -- 322,637 322,637 322,637
Increase in deferred costs (289,311) (289,311) (289,311)
Increase in loan receivable (435,678) (435,678) (435,678)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities -- (402,352) (402,352) (402,352)
--------- --------- --------- ---------
Net (decrease) in cash and cash equivalents (20,430) (556) (20,986) 556 (20,430)
Cash received in acquisition of MBM -- 556 556 (556) --
Cash and cash equivalents - beginning of year 22,695 -- 22,695
--------- --------- --------- ---------
22,695
Cash and cash equivalents - end of period $ 2,265 $ 0 $ 2,695 $ 2,695
========= ========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest expense $ -- $ 95,839 $ 95,839 $ 95,839
========= ========= ========= =========
</TABLE>
See auditors' report and notes to financial statements.
F-21
