<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: January 14,1998
MILLENIUM ISTEC INC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 33-55254-35 87-0500742
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
RR#2, Site 25, Comp 6, Nelson, BC Canada V1L 5P5
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(250) 352-6880
--------------------------------------------------
Registrant's telephone number, including area code
-1-
</PAGE>
<PAGE>
The registrant filed an 8-K dated as of February 5, 1998 relating to a change
in control of the Registrant and the acquisition of significant assets by the
Registrant. The Form 8-K stated that the financial statements and proforma
financial information required to be submitted with the Form 8-K shall be
filed by amendment. This Form 8-K/A contains such financial information and
amends the Form 8-K in certain respects.
ITEM 1 - Changes in Control of Registrant.
1. Persons Acquiring Control:
On February 5, 1998, the Registrant consummated a reverse merger
transaction pursuant to Internal Revenue Code Section 368(a)(1)(B)
in which all of the common stock of the following companies (the
"Companies") was transferred to the Registrant solely in exchange for
the issuance to the former shareholders (the "New Stockholders") of
the Companies of 2,800,000 newly issued shares of common stock, par
value $0.001 per share (the "Common Stock"), of the Registrant:
(i) Specialty Coatings Ltd., an Alberta, Canada corporation;
(ii) Michael McCarthey Construction Ltd., a British Columbia, Canada
corporation; (iii) B.C. Thermal Dynamic Coatings Inc., a British
Columbia, Canada corporation; and (iv) West Kootenay Lite-Form Inc.,
a British Columbia, Canada corporation.
Immediately prior to February 5, 1998, the Registrant had 1,000,000
issued and outstanding shares of Common Stock. In connection with
the reverse merger transaction, Capital General Corporation
("Capital General"), a Utah corporation and principal stockholder of
the Registrant prior to the reverse merger transaction, and certain
affiliates of Capital General received 200,000 shares of Common Stock
for certain services rendered in connection with the reverse merger
transaction. The shares of Common Stock issued to the New
stockholders and to Capital General and its affiliates in connection
with the reverse merger transaction are restricted securities
within the meaning of Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), and, therefore, the resale
of such shares are subject to the terms and conditions of Rule 144.
On February 6, 1998, as part of a separate transaction from this
acquisition, Capital General sold 720,400 shares of its holdings of
Common Stock in the Registrant to Arthur Lang, a Canadian citizen for
$125,000. Mr. Lang is a consultant to the Registrant.
Subsequent to the reverse merger transaction, the Registrant and
the former shareholder of Michael McCarthey Construction Ltd.
rescinded the transaction as it related to Michael McCarthey
Construction Ltd. and the 4,000 shares of Common Stock issued to such
shareholder in such transaction have been returned to the Registrant
and held as treasury stock until subsequently issued in another
transaction.
Effective July 23, 1998, the Registrant changed its name from
Environmental Development Corporation to Millenium Istec Inc.
The following are summary descriptions of the Companies:
Specialty Coatings Ltd. ("Specialty Coatings") is a Canadian
corporation incorporated for the development of new ceramic sealants
and oil/gas storage tank wraps. Specialty Coatings was incorporated
in June 1996 and is currently developing and marketing these
products.
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</PAGE>
<PAGE>
West Kootenay Lite-Form Inc., ("West Kootenay") is a Canadian
corporation incorporated in 1993 for the purpose of providing
insulating forms for concrete construction. West Kootenay maintains
office storage and warehouse facilities in Nelson, British Columbia,
Canada. West Kootenay currently is developing new construction
opportunities using energy efficient design in both commercial and
residential construction. West Kootenay was founded by Judith and
Wilfred Walker.
BC Thermal Dynamic Coatings Inc., ("BC Thermal") is a Canadian
corporation incorporated in June 1997 to develop new opportunities
in the construction materials industry. BC Thermal is also
developing additional coatings and marketing relationships. BC
Thermal was founded by Arnie Gustafson and Wilfred Walker.
The Registrant is investigating the potential of incorporating
environmentally-friendly materials into the construction and oil
industries. Some of these products are currently being developed by
the above companies, which will continue as subsidiaries of Millenium
Istec Inc. The subsidiaries are working to develop new tank wrap and
other coating products. Specialty Coatings has developed roofing,
decking, waterproofing and fireproofing products that management
believes have the potential to make the Registrant a leader in
providing advanced materials to the construction and oil industries.
2. Amount and Source of Consideration: The Registrant issued 2.8
million shares of Common Stock to the New Stockholders in exchange
for 100% of the outstanding common stock of the Companies.
3. Basis of Control: As of February 5, 1998, the New Stockholders owned
beneficially 70% of all of Registrant's outstanding Common Stock
(see Item 1, Persons Acquiring Control). The following table of
Security Ownership lists the subsequent major stockholders:
<TABLE>
<CAPTION>
Security Ownership by Certain
Beneficial Owners and Management
<S> <C> <C>
Common Stock Ownership
Arnie Gustafson - President (1) 1,953,350 48.83%
Wilfred Walker - Director (1) (2) 646,650 16.17%
Arthur Lang 720,400 18.01%
Total Outstanding Shares of Common Stock 4,000,000 100.00%
(1) Includes shares held on record by BC Thermal as agent for
certain shareholders.
(2) Includes 30,400 shares held by his wife, Judith Walker.
</TABLE>
4. Date and Description of Transaction: The acquisition of
control occurred on February 5, 1998, through a reverse merger
(all common stock of the Companies was transferred to Registrant
solely in exchange for 2,800,000 shares of the Registrant's
common stock) pursuant to Internal Revenue Code Section 368(a)(1)(B).
The principles followed in determining the number of shares of the
Registrant's Common Stock to be issued in the reverse merger
transaction were based on negotiations between the parties. The
reverse merger transaction will
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</PAGE>
<PAGE>
be accounted for as a purchase in which the Companies as a group
(except Michael McCarthey Construction Ltd.) is assumed to have
acquired the Registrant. The entities will consolidate all activity
as of March 1, 1998.
5. Percentage of Voting Securities Acquired: 70% of Registrant's voting
securities.
6. Identity of Person From Whom Control Was Acquired: Capital General
Corporation, a Utah corporation.
7. Arrangements for Election of New Directors: Simultaneously,
with the closing of the reverse merger, Krista Nielson and Sasha
Belliston, the directors and officers of the Registrant at that
time, resigned, and Arnie Gustafson, Wilfred Walker and Marilyn
Auriat were elected to the Board of Directors of the Company,
resulting in effective control of the Company passing to the New
Stockholders. Subsequently, Alan Stewart, Murray Swales, and
Charles Polan were added as directors.
In addition, the following persons were elected as officers of the
Registrant:
Alan Stewart - Chairman of the Board of Directors
Arnie L. Gustafson - President and Chief Executive Officer
Wilfred W. Walker - Vice President - Operations
Murray Swales - Secretary and Treasurer, Principal
Financial and Accounting Officer
Effective October 29, 1998, the shareholders of the Registrant
removed Charles Polan as a director and according to the Company's
bylaws, the total number of directors was reduced to five. The
following biographical information is provided on the remaining
Directors and Officers.
Arnie L. Gustafson - President and Director
Mr. Arnie L. Gustafson (age 43) is the founder and president of
several companies with relation to the construction and oil field
industries. The last company he founded integrated the microbial
technologies into the oil field for environmental cleanups and waste
water treatments of municipalities throughout Canada. He researched
and received Canadian High-tech R & D status for four years running
in the hydroponic food production industry.
Wilfred W. Walker - Vice President of Operations and Director
Mr. Wilfred W. Walker (age 55) has been a successful businessman for
twenty-one years in steel fabrication. Through his companies, he
has managed major contracts for Cominco, the Canadian government,
Nelson City Power and Kootenay Power. Mr. Walker is the western
distributor of Lite-Form, Inc. and has been involved in the
construction of one hundred and fifty homes using Lite-Form.
Marilynn Auriat - Director
Ms. Marilynn Auriat (age 44)has a degree in business administration
and twenty years accounting background and is a past director of a
VSE Public Company. She has developed subdivisions and chaired a
co-op and for five years was a chairperson of a municipal planning
commission in a northern Canadian community.
major gas
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</PAGE>
<PAGE>
Alan M. Stewart - Chairman and Director
Mr. Alan M. Stewart (age 63)has served as the CEO of two money
management companies and the founder of a third. He is currently
associated with Roll & Ross Management, LLP, an investment advisor
registered with the Securities and Exchange Commission. The early
part of his career was devoted to the development of a series of
integrated global production, distribution and transportation
companies primarily involving the publishing industry. He was a
member of the founding team of New York State commercial bank and
thereafter worked in the business of investment banking and business
consulting. He has been a labor contract negotiator and has served
as a trustee of Erisa pension funds. Most recently, he was
associated with Cap/Cities ABC/Disney's publishing division where he
was a senior director and manager of Institutional Investor's
financial services conference division.
Murray Swales - Chief Financial Officer and Director
Murray Swales (age 48) is a Chartered Accountant (B.C. Institute of
Chartered Accountants), and has been a partner in both a local and
national Chartered Accountancy firm from 1982 to 1998. He has acted
as Chief Executive Officer of a farm machinery technology company
from 1989 to 1991 and he has been a director and officer of several
public and private companies. Mr. Swales' area of expertise is
providing accounting services to publicly traded companies and this
experience will be beneficial to the Registrant.
ITEM 2 - Acquisition or Disposition of Assets.
Date and Manner of Acquisition: See Item 1 of this Form 8-K/A above.
Significant Assets Acquired: Assets of Companies described in Item
1, including rights to various patents pending, product designs, and
other research and development work-product and information.
Nature and Amount of Consideration Given: 2,800,000 shares (70%) of
Registrant's outstanding voting common stock and an additional
200,000 shares of stock were issued to Capital General and certain
affiliates for services rendered in connection with the acquisition
Identity of Persons from Whom Assets Acquired: See identities as
described in Item 1, above.
ITEM 7 - Financial Statements and Exhibits.
a. Financial Statements of Businesses Acquired
Specialty Coatings Ltd.:
Independent Audit Report F-1
October 7, 1998
Audited Balance sheets F-2
December 31, 1997 and 1996
Audited Statement of Operations F-4
Years ended December 31, 1997 and 1996
Audited Statements of Stockholders' equity F-5
Years ended December 31, 1997 and 1996
-5-
</PAGE>
<PAGE>
Audited Statements of Cash Flows F-6
Years ended December 31, 1997 and 1996
Notes to Financial Statements F-7
December 31, 1997 and 1996
Unaudited Balance Sheet F-14
February 28, 1998
Unaudited Statement of Operations F-16
Two months ended February 28, 1998
Unaudited Statement of Cash Flows F-17
Two months ended February 28, 1998
West Kootenay Lite-Form Inc.:
Independent Audit Report F-18
November 7, 1998
Audited Balance Sheets F-19
May 31, 1997 and 1996
Audited Statement of Operations F-21
Years ended May 31, 1997 and 1996
Audited Statement of Stockholders' Equity F-22
Years ended May 31, 1997 and 1996
Audited Statement of Cash Flows F-23
Years ended May 31, 1997 and 1996
Notes to Financial Statements F-24
May 31, 1997 and 1996
Unaudited Balance Sheet F-29
February 28, 1998
Unaudited Statement of Operations F-31
Nine months ended February 28, 1998
Unaudited Statement of Cash Flows F-32
Nine months ended February 28, 1998
BC Thermal Dynamic Coatings Inc.:
Unaudited Balance Sheet F-33
February 28, 1998
Unaudited Statement of Operations F-35
Nine months ended February 28,1998
Unaudited Statement of Cash Flows F-36
Nine months ended February 28, 1998
b. Pro Forma Financial Information
Unaudited pro forma combined Balance Sheet F-38
February 28, 1998
Unaudited pro forma combined Statement of
Operations
Year ended December 31, 1997 F-40
Two months ended February 28, 1998 F-41
Accompanying Explanatory Notes F-42
c. Exhibits
2.1 Purchase Agreement and Plan of Reorganization
Agreement, dated as of February 5, 1998, by and between
Environmental Development Corporation, a Nevada corporation,
and Specialty Coatings Ltd.,an Alberta company, Michael McCarthy
Construction Ltd., a British Columbia company, B.C. Thermal
Dynamic Coatings Inc., a British Columbia company, and West
Kootenay Lite-Form Inc., a British Columbia company, which
agreement provides for the plan of acquisition relating to the
reverse merger transaction described in this Form 8-K/A.
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</PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Environmental Development Corporation, by:
Dated: January 14, 1999 s\ Arnie Gustafson
-----------------------------------------
Arnie Gustafson, President and Director
-7-
</PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Specialty Coatings Ltd.
Spruce Grove, Alberta
Canada
We have audited the accompanying balance sheets of Specialty Coatings Ltd.
(a Canadian corporation) as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Specialty
Coatings Ltd. as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company has incurred net losses since its inception and has
experienced severe liquidity problems. Those conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters also are described in Note L.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s Williams & Webster, P.S.
Williams & Webster, PS
Certified Public Accountants
Spokane, Washington
October 7, 1998
F-1
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
---------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 185 $ 741
Stockholder receivable - 4,494
-------- ---------
TOTAL CURRENT ASSETS 185 5,235
-------- ---------
FIXED ASSETS
Property and equipment 13,946 4,417
Accumulated depreciation and amortization (4,913) (1,118)
-------- ---------
TOTAL FIXED ASSETS 9,033 3,299
-------- ---------
TOTAL ASSETS $ 9,218 $ 8,534
======== =========
The accompanying notes are an integral part of the financial statements.
F-2
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY December 31,
1997 1996
---------- --------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 23,189 $ 291
Customer deposits 53,559 8,396
Stockholder loans 140,363 62,263
Accrued interest 22,913 4,080
---------- --------
TOTAL CURRENT LIABILITIES 240,024 75,030
---------- --------
OTHER LIABILITIES
Commitments and contingencies 34,994 -
---------- --------
TOTAL LIABILITIES 275,018 75,030
----------- --------
STOCKHOLDERS' EQUITY
Preferred stock, no stated value: unlimited shares
authorized; no shares issued and outstanding - -
Common stock, class A, no par value: unlimited
shares authorized; 100 shares issued and outstanding 73 73
Common stock, class B, no par value: unlimited shares
authorized; no shares issued and outstanding - -
Accumulated deficit (273,000) (66,672)
Accumulated foreign currency translation adjustment 7,127 103
----------- --------
TOTAL STOCKHOLDERS' EQUITY (265,800) (66,496)
----------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,218 $ 8,534
=========== ========
The accompanying notes are an integral part of the financial statements.
F-3
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
STATEMENTS OF OPERATIONS
Years Ended
December 31,
1997 1996
--------- --------
<S> <C> <C>
REVENUES $ 71,324 $ 62,652
COST OF REVENUES 67,273 55,662
----------- ----------
GROSS PROFIT 4,051 6,990
----------- ----------
EXPENSES
Occupancy expenses 41,522 19,744
Professional fees 11,881 11,965
Advertising 4,062 1,506
Bank fees 395 270
Contract wages 16,963 17,811
Contributions - 110
Depreciation 3,923 1,120
Freight and fuel 7,258 8,401
Permits, licenses and fees 616 219
Research and development 89,951 -
Sales commissions - 3,656
Small tools 5,597 -
Travel 8,806 4,774
----------- ----------
190,974 69,576
----------- ----------
Income (loss) from operations (186,923) (62,586)
----------- ----------
Other expenses
Interest expense 19,405 4,086
----------- ----------
Income (loss) before income taxes (206,328) (66,672)
Income tax provision - -
----------- ----------
NET INCOME (LOSS) $ (206,328) $ (66,672)
==========- ==========
NET LOSS PER CLASS A COMMON SHARE $ (2,063) $ (667)
=========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 100 100
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-4
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Statements of Stockholders' Equity
Year Ended December 31, 1997 and 1996
Accumulated
Foreign
Common Stock Currency Total
Accumulated Translation Stockholders'
Shares Amount Deficit Adjustment Equity
-------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Common stock,
class A at $0.00
per share 100 $ 73 $ - $ - $ 73
Foreign currency
translation adjustment 103 103
Net loss - - (66,672) - (66,672)
---------- ------- --------- --------- ----------
Balance Dec. 31, 1996 100 $ 73 $ (66,672) $ 103 $ (66,496)
========== ======= ========== ========= =========
Foreign currency translation
adjustment 7,024 7,024
Net loss - - (206,328) - (206,328)
---------- ------- ----------- --------- ---------
Balance May 31, 1997 100 $ 73 $( 273,000) $ 7,127 $(265,800)
========== ======= =========== ========= =========
The accompanying notes are an integral part of the financial statements.
F-5
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
STATEMENTS OF CASH FLOWS
Years Ended
December 31
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (206,328) $ (66,672)
Adjustments to reconcile net loss activities
Depreciation and amortization 3,923 1,120
Research and development for stock 35,735 -
Decrease (increase) in:
Other assets 4,399 (4,501)
Increase (decrease) in:
Accounts payable 23,395 291
Accrued interest 19,404 4,086
Customer advances 46,473 8,409
--------- ----------
Net cash used in operating activities (72,999) (57,267)
--------- ----------
Cash flows from investing activities:
Purchase of equipment (9,917) (4,424)
--------- ----------
Net cash used in investing activities (9,917) (4,424)
--------- ----------
Cash flows from financing activities:
Proceeds from sale of stock - 73
Proceeds from shareholder loans 82,382 62,359
--------- ----------
Net cash provided by financing activities 82,382 62,432
--------- ----------
Net increase (decrease) in
cash and cash equivalents (534) 741
Foreign currency
translation adjustment (16) -
Cash and cash equivalents,
beginning of period 741 -
--------- ----------
Cash and cash equivalents,
end of period $ 185 $ 741
========= ==========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 5,111 $ 4,086
========= ==========
Taxes paid $ - $ -
========= ==========
The accompanying notes are an integral part of the financial statements.
F-6
</TABLE>
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<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in Alberta, Canada on June 10, 1996 for the
purpose of selling dealerships and product in the ceramic sealant and oil/gas
storage tank wrap industry. The Company's products are sold through dealers
in British Columbia and Alberta, Canada as well as in the northwestern United
States. Office, storage and warehouse facilities are maintained in Spruce
Grove, Alberta, Canada. At these facilities, the Company has developed
ceramic sealants and storage tank wraps, which are now being marketed.
This summary of significant accounting policies of Specialty Coatings Ltd.
(the Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less
to be cash equivalents.
Inventories
Inventories consist primarily of product and are stated at the lower of cost
or market value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method for financial reporting
purposes at rates based on the following estimated useful lives:
<TABLE>
<CAPTION>
Years
---------
<S> <C>
Equipment 10
Office Equipment 5
Vehicles 5
</TABLE>
F-7
</PAGE>
<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 & 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment (Continued)
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Conversion Rate
The Company conducts operations in Alberta, Canada and therefore a
substantial portion of its business is conducted in Canadian currency.
Accounts carrying balances in Canadian currency were converted to United
States Dollars as of December 31, 1997 and 1996, for financial statement
presentation using the applicable exchange rates of 1.4288 and 1.3697,
respectively. The average exchange rates for these periods were used for
translation of income and expenses.
NOTE B - STOCKHOLDER LOANS
Stockholder loans are due on demand with interest accrued periodically at 15%
on the unpaid balance. The amounts have fluctuated throughout the years
ended December 31, 1996 and 1997 as the Company has experienced fluctuating
cash demands. Stockholder loans consist of the following:
<TABLE>
<CAPTION>
Dec. 31 Dec. 31
1997 1996
--------- ----------
<S> <C> <C>
Brian Boudreau $ 68,474 $ 62,263
Marilyn Auriat 71,889 -0-
</TABLE>
The total amount of interest accrued on stockholder loans for the same
periods was:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Brian Boudreau $ 14,416 $ 4,080
Marilyn Auriat 8,497 -0-
</TABLE>
NOTE C - STOCKHOLDERS' EQUITY
The Company issued an initial 100 shares of common stock, class A, no par
value to Mr. Boudreau in exchange for $73 on June 10, 1996. No additional
shares have been issued, however several stock transactions have occurred
outside the Company. The following summarizes these transactions.
F-8
</PAGE>
<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE C - STOCKHOLDERS' EQUITY (Continued)
Marilyn Auriat acquired 50 shares directly from Mr. Boudreau at a purchase
price of $18,280 on June 10, 1996 and became an active officer of the Company.
Mr. Boudreau then loaned the proceeds to the Company as operating cash.
On June 24, 1996, Mr. Boudreau transferred another 5 shares of his stock to 5
individuals in exchange for services that had been performed for the Company.
These services consist of the following: $7,312 professional services; $3,656
promotional fees; $3,656 clerical and promotional fees; $3,656 sales
commissions. These transactions were recorded by the Company as an increase
to the shareholder loan for the amount of services provided the Company.
On February 24, 1997 Mr. Boudreau sold another 7 shares of his stock to 5
individuals at a purchase price of $3,573 per share and Ms. Auriat sold 6
shares of her stock to 3 individuals at a purchase price of $3,573 per share.
They both loaned the proceeds to the Company as operating cash.
On June 2, 1997, Ms. Auriat sold another 8.5 shares to 3 individuals and 3.5
shares to Kenton Environmental, Inc. for total proceeds of $67,896. She then
loaned the total proceeds to the Company as operating cash.
On July 29, 1997, Mr. Boudreau and Ms. Auriat each transferred 1 share for a
total of 2 shares to B.C. Thermal Dynamic Coatings Inc. in payment of
research and development services performed for the Company.
Also on July 29, 1997, Mr. Boudreau sold an additional 2.5 of his shares to
an individual investor for proceeds of $17,867. The proceeds from the sale
were loaned to the Company as operating cash.
Since all stock transfers have occurred outside the Company, the original
amount of common stock has remained unchanged.
F-9
</PAGE>
<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE D - RESEARCH AND DEVELOPMENT
The Company is currently involved in research and development of sealant
products. These products include a secondary wrap for below grade
containment tanks used in the oil industry for underground storage of
gasoline, a secondary wrap or blanket system for above ground oil and gas
storage tanks which is impermeable by animals, waterproof, and UV resistant,
a wear resistant deck and floor coat primer system and a water-resistant,
weather-proofing acrylic latex architectural wall coat with greater wear
resistance than paint. During 1997, the Company had expended a total of
$54,217 for the research and development of these products, which was charged
to operations.
The Company also has plans to research and develop a latex-based, elastomeric
coating for roof replacement on tar and gravel or metal buildings. This
prospective product is expected to offer greater insulating efficiency and be
more waterproof than current roof replacement.
NOTE E - CUSTOMER DEPOSITS
During the years ended December 31, 1996 and 1997, the Company received
deposits for future sales of product distributorships in British Columbia
and Alberta, Canada. These distributorships were subsequently cancelled,
with one refunded for $1,429 and the others renegotiated for shares of stock
pending the Company's common stock becoming publicly traded. Mutual releases
were negotiated during March 1998. The fees collected have been classified
as customer deposits in the financial statements and will be repaid with
common shares in Millenium Istec Inc. The amounts reclassified as customer
deposits for the years ended December 31, 1996 and 1997 are $8,396 and
$53,559 respectively. See Note F.
NOTE F - RELATED PARTY TRANSACTIONS
During 1997, the Company purchased $27,821 of product from International
Specialty Coatings Ltd., an entity owned by Mr. Boudreau and Ms. Auriat,
both directors and shareholders of Specialty Coatings Ltd., and two other
partners.
F-10
</PAGE>
<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE G - SUBSEQUENT EVENTS
Pending Litigation
Subsequent to the dates of these financial statements, a supplier has alleged
that the Company is indebted to it in the sum of $22,870. No litigation has
been commenced and management considers the allegation to be frivolous and
without merit. No provision has been made in the financial statements for
this matter.
Merger and Acquisition of Millenium Istec Inc.
In February, 1998, Specialty Coatings Ltd. became a member of a group of
acquiring companies, including Michael McCarthy Construction Ltd.
(subsequently removed from the group of acquiring companies), B.C. Thermal
Dynamic Coatings Inc. and West Kootenay Lite-Form Inc., which became
subsidiaries in a reverse merger transaction in which the shareholders of
these acquiring companies assumed control of Environmental Development
Corporation (subsequently renamed Millenium Istec Inc.). As part of this
acquisition, Millenium Istec Inc. acquired all 100 shares of the Company's
outstanding stock in exchange for shares of Millenium Istec Inc.'s common
stock. The reverse merger transaction will be accounted for as a purchase
in which the acquiring companies as a group is assumed to have acquired
Millenium Istec Inc. Furthermore, the above companies are being treated as a
consolidated group as of March 1, 1998. In addition, customer deposits and
other commitments currently held by Specialty Coatings Ltd. will be converted
to stock in Millenium Istec Inc. as reported in Note E.
NOTE H - INCOME TAXES
The Company is subject to income tax reporting in Canada and has net
operating losses for the years ended December 31, 1996 and 1997 of $66,672
and $206,328 respectively. These net-operating losses may be offset against
future taxable income. Because of the likelihood that these carryforwards
may expire unused, no provision has been made for their utilization in these
financial statements.
F-11
</PAGE>
<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE I - LEASE COMMITMENTS
The Company leases office and shop facilities from Quiring Holdings for $765
per month. Simms Welding, Ltd. has subsequently acquired the facility from
Quiring Holdings and the lease is currently being renegotiated. The original
lease term was two years, however, the new owner has indicated that
renegotiations may result in a month-to-month agreement with a 90-day
notification clause.
NOTE J - CONVERSION RATES
The accompanying financial statements are prepared in accordance with U.S.
generally accepted accounting principles using the appropriate Canadian
currency translation rates. Canadian currency translation resulted in an
aggregate exchange gain/loss of $24,484 in 1996 and $113,387 in 1997.
NOTE K - COMMITMENTS AND CONTINGENCIES
Calgary Specialty Coatings gave to the Company as deposit for a
distributorship and also performed research and development services for
which no payment was received. In exchange for the services and
distributorship fees, the Company has agreed that 10,000 shares will be
issued to Calgary Specialty Coatings at the Company's initial public trading
date. Since the opening public trading price has not been established, no
amount is reflected in these financial statements for the value of these
research and development services.
During 1997, the chief officer of B.C. Thermal Dynamic Coatings Inc.,
hereinafter "BCT", has performed research and development services for the
Company without compensation. BCT is a joint party with Specialty Coatings
Ltd. in the acquisition of Millenium Istec Inc. as further explained in
Note H. BCT is also currently a minority shareholder of Specialty Coatings
Ltd. as reported in Note C. BCT has agreed to receive an indeterminate
amount of stock in Millenium Istec Inc. in lieu of compensation. No effect
has been shown in the financial statements for this liability, which is
considered immaterial.
F-12
</PAGE>
<PAGE>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE L - GOING CONCERN
As shown in the financial statements, the Company incurred net losses of
$66,672 and $206,328 during 1996 and 1997, respectively. Since December 31,
1997, the Company has not raised any substantial additional capital. These
factors indicate that the Company may be unable to continue in existence.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of additional capital that might be necessary in the event
the Company cannot continue existence.
Management of the Company has begun to address its cash flow issues by
becoming involved in a merger and acquisition with Millenium Istec Inc.
(formerly Environmental Development Corp.) (See note G). It is the goal of
management that with the merger of these companies with similar product lines,
greater financing will become available. The management is currently seeking
interim financing to maintain operations and to position the Company for
future equity investments.
F-13
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
BALANCE SHEETS
(Unaudited)
February 28,
1998
----------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,171
Stockholder receivables 1,484
Inventory 340
------------
TOTAL CURRENT ASSETS 2,995
------------
FIXED ASSETS
Property and equipment 13,990
Accumulated depreciation and amortization (5,500)
------------
TOTAL FIXED ASSETS 8,490
------------
TOTAL ASSETS $ 11,485
============
F-14
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
BALANCE SHEETS
(Unaudited)
February 28,
1998
---------------
<S> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 832
Customer deposits 53,823
Notes payable 35,167
Stockholder loans 128,570
Accrued interest 26,993
-------------
TOTAL CURRENT LIABILITIES 245,385
-------------
OTHER LIABILITIES
Commitments and contingencies 35,167
-------------
TOTAL LIABILITIES 280,552
-------------
STOCKHOLDERS EQUITY
Preferred stock, no stated value: unlimited shares
authorized; no shares issued and outstanding -
Common stock, class A, no par value: unlimited
shares authorized; 100 shares issued and outstanding 71
Common stock, class B, no par value: unlimited
shares authorized; no shares issued and outstanding -
Accumulated deficit 261,867
Accumulated foreign currency translation adjustment 7,129
-------------
TOTAL STOCKHOLDERS' EQUITY (269,067)
-------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 11,485
=============
F-15
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
STATEMENTS OF OPERATIONS
(Unaudited)
Two Months Ended
February 28,
1998
-----------------
<S> <C>
REVENUES $ -
COST OF REVENUES -
-----------------
GROSS PROFIT -
-----------------
EXPENSES
Administrative expense 2,857
Salaries 5,503
Professional services 4,250
Depreciation 587
Research and development 12,933
-----------------
TOTAL EXPENSES 26,130
-----------------
Income (loss) from operations (26,130)
-----------------
Other (income) expense
Interest expense 3,960
Sale of manufacturing rights (28,133)
-----------------
Income (loss) before income taxes 1,957
Income tax provision -
-----------------
NET INCOME (LOSS) $ (1,957)
=================
NET LOSS PER CLASS A COMMON SHARE $ (19.57)
=================
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 100
=================
F-16
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
SPECIALTY COATINGS LTD.
(A Canadian Corporation)
STATEMENTS OF CASH FLOWS
(Unaudited)
Two Months Ended
February 28,
1998
----------------
<S> <C>
Cash flows from operating activities:
Net Loss $ (1,957)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 587
Decrease (increase) in:
Inventory (340)
Increase (decrease in:
Accounts payable (22,357)
Accrued interest 4,080
Customer advances 264
-------------
NET CASH USED IN OPERATING ACTIVITIES (19,723)
-------------
Cash flows from financing activities:
Proceeds from shareholder loans 35,167
Payments on shareholder loans (14,238)
-------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,929
-------------
Net increase (decrease) in cash and cash equivalents 1,206
-------------
Foreign currency translation adjustment (220)
-------------
Cash and cash equivalents, beginning of period 185
-------------
CASH AND CASH EQUIVELENTS, END OF PERIOD $ 1,171
=============
SUPPLEMENTAL DISCLOSURE:
Interest paid $ -
=============
Taxes paid $ -
=============
F-17
</TABLE>
</PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
West Kootenay Lite-Form Inc.
Nelson, British Columbia
CANADA
We have audited the accompanying balance sheets of West Kootenay Lite-Form
Inc. (a Canadian corporation) as of May 31, 1996 and 1997, and the related
statements of operations, stockholders' equity (deficit), and cash flows for
the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, based on our audits, the financial statements referred to
above present fairly in all material respects, the financial position of West
Kootenay Lite-Form Inc. at May 31, 1997 and 1996, and the results of its
operations, changes in stockholders' equity (deficit) and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company has a deficit in its stockholders' equity section
and has experienced liquidity problems. Those conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters also are described in Note J.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s Williams & Webster, P.S.
Williams & Webster, PS
Certified Public Accountants
Spokane, Washington
November 7, 1998
F-18
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
BALANCE SHEETS May 31,
ASSETS 1997 1996
----------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ 3,784
Accounts receivable 400 5,149
Taxes receivable - 7,183
Inventory 1,176 2,918
Prepaid expenses 655 455
--------- --------
TOTAL CURRENT ASSETS 2,231 19,489
--------- --------
FIXED ASSETS
Property and equipment 31,098 31,179
Accumulated depreciation and amortization (20,904) (17,044)
--------- ---------
TOTAL FIXED ASSETS 10,194 14,135
--------- ---------
TOTAL ASSETS $ 12,425 $ 33,624
========= =========
The accompanying notes are an integral part of the financial statements.
F-19
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
BALANCE SHEETS
May 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT 1997 1996
-------- --------
<S> <C> <C>
CURRENT LIABILITIES
Bank drafts in excess of deposits $ 970 $ -
Accounts payable 9,518 30,333
Loan from shareholder 46 -
Due to related company 59,055 65,371
Current portion long term debt 1,901 1,681
------- --------
TOTAL CURRENT LIABILITIES 71,490 97,385
------- --------
COMMITMENTS AND CONTINGENCIES - -
LONG TERM DEBT
Long term debt less current portion - 1,998
-------- --------
TOTAL LIABILITIES 71,490 99,383
-------- --------
STOCKHOLDERS' DEFICIT
Preferred stock, class A, $1 par value; 100,000
shares authorized; no shares issued and outstanding - -
Preferred stock, class B, $1 par value; 100,000
shares authorized; no shares issued and outstanding - -
Common stock, no par value: 1,000 shares authorized;
1 share issued and outstanding 1 1
Accumulated deficit (59,066) (65,760)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (59,065) (65,759)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 12,425 $ 33,624
========= =========
The accompanying notes are an integral part of the financial statements.
F-20
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
STATEMENTS OF OPERATIONS Years Ended
May 31,
1997 1996
------------ -----------
<S> <C> <C>
REVENUES $ 59,440 $ 119,752
COST OF REVENUES 30,471 86,869
---------- ---------
GROSS PROFIT 28,969 32,883
---------- ---------
EXPENSES
Professional fees 1,166 1,004
Advertising 1,228 853
Bank fees 342 655
Depreciation and amortization 3,910 5,057
Insurance 900 537
Miscellaneous expenses - 399
Office supplies 175 30
Permits, licenses and fees 26 26
Rent - warehouse 896 6,295
Telephone 724 915
Travel 4,859 9,026
Utilities - 276
---------- ----------
14,226 25,073
---------- ----------
Income from operations 14,743 7,810
---------- ----------
Other expenses
Interest expense 198 448
---------- ----------
Income before income taxes 14,545 7,362
Income tax provision - -
---------- ----------
NET INCOME $ 14,545 $ 7,362
========== ==========
NET INCOME PER COMMON SHARE $ 14,545 $ 7,362
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1 1
========== ==========
The accompanying notes are an integral part of the financial statements.
F-21
</TABLE>
</PAGES>
<PAGES>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
Statements of Stockholders' Equity (Deficit)
Years Ended May 31, 1997 and 1996
Common Stock Total
Accumulated Stockholders'
Shares Amount Deficit Equity
---------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Balance June 1, 1995 1 $ 1 $ (73,152) $ (73,152)
Foreign currency translation
adjustment 30 30
Net income - - 7,362 7,362
---------- --------- ----------- ----------
Balance May 31, 1996 1 $ 1 $ (65,760) $ (65,760)
Dividends paid - - (8,016) (8,016)
Foreign currency translation
adjustment 165 165
Net income - - 14,545 14,545
---------- ---------- ------------ ---------
Balance May 31, 1997 1 $ 1 $ (59,066) $(59,066)
========== ========== ============ ==========
The accompanying notes are an integral part of the financial statements.
F-22
</TABLE>
</PAGES>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
STATEMENTS OF CASH FLOWS Years Ended
May 31,
1997 1996
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,545 $ 7,362
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,910 5,057
Decrease (increase) in:
Accounts receivable 4,741 (1,614)
Taxes receivable 7,174 (361)
Inventory 1,738 1,460
Prepaid expenses (202) 490
Increase (decrease) in:
Accounts payable (19,790) 2,641
Accrued expenses - (786)
--------- ---------
Net cash provided by operating activities 12,116 14,249
--------- ---------
Cash flows from investing activities:
Purchase of equipment - (1,679)
--------- ---------
Net cash used in investing activities - (1,679)
--------- ---------
Cash flows from financing activities:
Payments on long term debt (1,770) (1,523)
Payments of dividends (8,016) -
Advances from shareholder 46 -
Advances from (to) related company (6,154) (12,203)
--------- ---------
Net cash used in financing activities (15,894) (13,726)
--------- ---------
Net increase (decrease) in
cash and cash equivalents (3,779) (1,156)
Foreign currency translation adjustment (5) (1)
Cash and cash equivalents, beginning of period 3,784 4,941
--------- ---------
Cash and cash equivalents, end of period $ - $ 3,784
========= =========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 198 $ 448
========= =========
Taxes paid $ - $ -
========= =========
The accompanying notes are an integral part of the financial statements.
F-23
</TABLE>
</PAGE>
<PAGE>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
Notes to the Financial Statements
May 31, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in British Columbia, Canada on May 31, 1993 for
the purpose of providing insulating forms for concrete construction. The
Company's customers are primarily in British Columbia, Canada. Office,
storage and warehouse facilities are maintained in Nelson, British Columbia,
Canada.
This summary of significant accounting policies of West Kootenay Lite-Form
Inc. (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations
of the Company's management who is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation
of the financial statements.
In February 1998, the Company's shareholder assigned her stock interest to
Millenium Istec Inc. (formerly Environmental Development Corp.) as part of a
merger described in Note G.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less
to be cash equivalents.
Accounts Receivable
Accounts receivable consists of primarily trade receivables. No allowance
for doubtful accounts has been recorded as the Company has a good history of
collections. The amounts recorded as accounts receivable approximates its
fair market value in all material respects.
Inventories
Inventories consist primarily of product purchased for resale and are stated
at the lower of cost or market value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using an accelerated method for financial reporting
purposes.
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
F-24
</PAGE>
<PAGE>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
Notes to the Financial Statements
May 31, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions regarding
certain types of assets, liabilities, revenues and expenses. Such estimates
primarily relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
NOTE B - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and their estimated useful lives, methods of
depreciation and the related accumulated depreciation at May 31, 1997 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
Description Life Method 1997 1996
- ------------------------- -------- ----------- ------- --------
<S> <C> <C> <C> <C>
Machinery and equipment 5-7 yrs Accelerated $ 6,161 $ 6,177
Vehicle 5-7 yrs Accelerated 23,263 23,324
Computer Equipment 5-10 yrs Accelerated 1,674 1,678
-------- ----------- ------- --------
Total 31,098 31,179
------- --------
Less: Accumulated depreciation (20,904) (17,044)
------- --------
Balance $ 10,194 $ 14,135
======= ========
</TABLE>
Depreciation expense was $3,910 and $5,057 in 1997 and 1996 respectively.
The aforementioned property plant and equipment are pledged as collateral
for a bank loan (see Note C).
F-25
</PAGE>
<PAGE>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
Notes to the Financial Statements
May 31, 1997 and 1996
NOTE C - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt at May 31, 1997 and 1996 is summarized as follows:
1997 1996
-------- --------
<S> <C> <C>
Royal Bank of Canada; vehicle loan payable at $225
per month including interest at a floating rate
of prime plus 2%; secured by a personal
guarantee of the shareholder, a general security
agreement, assignment of accounts receivable,
inventory, equipment, and the vehicle purchased
with the loan proceeds $1,901 $3,678
Less current portion 1,901 1,681
------- ------
$ 0 $1,998
======= ======
</TABLE>
All long term debt is due and payable by the end of the May 31, 1998 fiscal
year.
NOTE D - STOCKHOLDERS' EQUITY
The Company issued one initial share of common stock to Mrs. Walker in
exchange for $1 on May 31, 1993. No additional shares were issued for the
years ended May 31, 1996 and May 31, 1997.
On February 5, 1998, the Company was involved in a merger and acquisition
(See Note G). At that time 100% of the stock of the Company was transferred
to Millenium Istec Inc. (formerly Environmental Development Corp.). A
subsequent sale of 40 shares of common stock by the Company to other outside
parties results in Millenium Istec Inc. having 83% ownership of the Company.
NOTE E - CONCENTRATIONS
At the present time the Company acquires the majority of the materials used
in its business from a single supplier. Although other suppliers are readily
available, a change in suppliers could cause a delay in the selling process,
which could ultimately affect operating results.
NOTE F - RELATED PARTY TRANSACTIONS
The Company leases its warehousing facilities from its sole shareholder.
This lease is a month-to-month lease and is therefore being recorded as an
operating lease. During the years ended May 31, 1997 and 1996 the Company
paid $895 and $6,294 respectively.
The Company has received an advance from an affiliated company. The advances,
from West Kootenay Reinforcing, which bear no interest and have no fixed
terms of repayment, amount to $59,055 and $65,371 at May 31, 1997 and 1996
respectively.
The Company received an advance from its sole shareholder in the amount of
$46 during the year ended May 31, 1997. This advance bears no interest and
has no fixed terms of repayment.
F-26
</PAGE>
<PAGE>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
Notes to the Financial Statements
May 31, 1997 and 1996
NOTE G - SUBSEQUENT EVENTS
Capital Stock
On April 21, 1998, the Board of Directors authorized a 200 for 1 split of
common stock to shareholders of record on April 20, 1998, thereby increasing
the number of issued and outstanding shares to 200. The stock has no par
value and therefore there was no change in the components of stockholder's
equity.
On April 21, 1998, the Company sold an additional 40 shares of common stock
at $364 per share. The proceeds will be used for general corporate purposes.
Merger and Acquisition of Millenium Istec Inc.
In February, 1998, West Kootenay Lite-Form Inc. became a member of a group of
acquiring companies, including Michael McCarthy Construction Ltd.
(subsequently removed from the group of acquiring companies), B.C. Thermal
Dynamic Coatings Inc. and West Kootenay Lite-Form Inc., which became
subsidiaries in a reverse merger transaction in which the shareholders of
these acquiring companies assumed control of Environmental Development
Corporation (subsequently renamed Millenium Istec Inc.). As part of this
acquisition, Millenium Istec Inc. acquired all 200 shares of the Company's
outstanding stock in exchange for shares of Millenium Istec Inc.'s common
stock. The reverse merger transaction will be accounted for as a purchase
in which the acquiring companies as a group is assumed to have acquired
Millenium Istec. Subsequently, the Company sold an additional 40 shares to
other outside parties resulting in Millenium Istec Inc. having 83% ownership
of the Company. Furthermore, the above companies are being treated as a
consolidated group as of March 1, 1998.
NOTE H - INCOME TAXES
The Company is subject to income tax reporting in Canada and had taxable net
income for the years ended May 31, 1997 and 1996 of $14,545 and $7,362
respectively. These taxable income amounts were offset against prior
net-operating losses and resulted in taxable income for both years of $0.
At May 31, 1997, the Company has remaining net operating loss carryovers in
the amount of $37,737.
NOTE I - CONVERSION RATES
The accompanying financial statements are prepared in accordance with U.S.
generally accepted accounting principles using the appropriate Canadian
currency translation rates. Canadian currency translation resulted in an
aggregate exchange gain of $165 in 1997 and $30 in 1996.
F-27
</PAGE>
<PAGE>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
Notes to the Financial Statements
May 31, 1997 and 1996
NOTE J - GOING CONCERN
As shown in the financial statements, the Company had net income of $14,545
and $7,362 for the years ended May 31, 1997 and 1996, respectively. Since
May 31, 1997, the Company has raised $20,000 in additional capital. However,
the Company continues to have a deficit in stockholder's equity. This factor
indicates that the Company may be unable to continue as a going concern in its
present fashion. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of additional capital that might be necessary in the
event the Company cannot continue existence.
Management of the Company has begun to address its cash flow issues by
becoming involved in a merger and acquisition with Millenium Istec Inc.
(formerly Environmental Development Corp.) (See note G). It is the goal of
management, that with the merger of these companies with similar product lines,
greater financing will become available. The management is currently seeking
interim financing to maintain operations and to position the Company for
future equity investments.
F-28
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
BALANCE SHEETS
(Unaudited)
February 28,
1998
---------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -
Accounts receivable 633
Inventory 1,137
Advances from stockholder 966
-------------
TOTAL CURRENT ASSETS 2,736
-------------
FIXED ASSETS
Property and equipment 30,052
Accumulated depreciation and amortization (21,779)
-------------
TOTAL FIXED ASSETS 8,273
-------------
OTHER ASSETS
Notes receivable 1,761
-------------
TOTAL OTHER ASSETS 1,761
-------------
TOTAL ASSETS $ 12,770
=============
F-29
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
BALANCE SHEETS
(Unaudited)
February 28,
1998
------------
<S> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Bank drafts in excess of deposits $ 3,474
Accounts payable 7,483
Due to related company 57,772
-----------
TOTAL CURRENT LIABILITIES 68,729
-----------
COMMITMENTS AND CONTINGENCIES -
-----------
STOCKHOLDERS EQUITY
Preferred stock, Class A, $1 par value; 100,000
shares authorized; no shares issued and outstanding -
Preferred stock, class B,$1 par value; 100,000
shares authorized; no shares issued and outstanding -
Common stock,, no par value: 1,000
shares authorized; 1 share issued and outstanding 1
Accumulated deficit (55,960)
-----------
TOTAL STOCKHOLDERS' DEFICIT (55,959)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT $ 12,770
===========
F-30
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
February 28,
1998
-----------------
<S> <C>
REVENUES $ 22,467
COST OF REVENUES 15,213
--------------
GROSS PROFIT 7,254
--------------
EXPENSES
Administrative expense 2,611
Salaries 878
Professional services 1,020
Depreciation 1,578
--------------
TOTAL EXPENSES 6,087
--------------
Income from operations 1,167
--------------
Other expenses
Interest expense 48
--------------
Income before income taxes 1,119
Income tax provision -
--------------
NET INCOME $ 1,119
==============
NET INCOME PER CLASS A COMMON SHARE $ 1,119
==============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 1
==============
F-31
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
WEST KOOTENAY LITE-FORM INC.
(A Canadian Corporation)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
February 28,
1998
-----------------
<S> <C>
Cash flows from operating activities:
Net Income $ 1,119
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,578
Decrease (increase) in:
Accounts receivable (233)
Inventory 39
Prepaid expenses 655
Increase (decrease) in:
Accounts payable 469
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,627
-----------
Cash flows from financing activities:
Payments on long term debt (1,901)
Advances to shareholder (1,012)
Advances to related company (1,761)
Advances from related company 1,390
-----------
NET CASH USED IN FINANCING ACTIVITIES (3,284)
-----------
Net increase (decrease) in cash and cash equivalents 343
Foreign currency translation adjustment (343)
-----------
Cash and cash equivalents, beginning of period -
-----------
CASH AND CASH EQUIVELENTS, END OF PERIOD $ -
===========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 48
===========
Taxes paid $ -
===========
F-32
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
BC THERMAL DYNAMIC COATINGS INC.
(A Canadian Corporation)
BALANCE SHEETS
(Unaudited)
February 28,
1998
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 79
Accounts receivable 4,455
Stockholder receivables 13,442
------------
TOTAL CURRENT ASSETS 17,976
------------
OTHER ASSETS
Notes receivable 35,167
Investments 14,067
------------
TOTAL OTHER ASSETS 49,234
------------
TOTAL ASSETS $ 67,210
============
F-33
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
BC THERMAL DYNAMIC COATINGS INC.
(A Canadian Corporation)
BALANCE SHEETS
(Unaudited)
February 28,
1998
-------------
<S> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,332
Note payable 82,055
Stockholder loans 13,431
Line of credit 10,550
-----------
TOTAL CURRENT LIABILITIES 108,368
-----------
OTHER LIABILITIES
Commitments and contingencies -
-----------
TOTAL LIABILITIES 108,368
-----------
STOCKHOLDERS EQUITY
Preferred stock, Class B, no par value: 1,000,000
shares authorized; no shares issued and outstanding -
Common stock, class A, no par value: 10,000
shares authorized; 2,400 shares issued and outstanding 84
Common stock, class C & D, no par value: 20,000
shares authorized; no shares issued and outstanding -
Accumulated deficit (41,242)
----------
TOTAL STOCKHOLDERS' EQUITY (41,158)
----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 67,210
==========
F-34
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
BC THERMAL DYNAMIC COATINGS INC.
(A Canadian Corporation)
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
February 28,
1998
------------------
<S> <C>
REVENUES $ 33,925
COST OF REVENUES 15,690
-------------
GROSS PROFIT 18,235
-------------
EXPENSES
Administrative expense 40,992
Professional services 2,168
Consulting 16,317
-------------
TOTAL EXPENSES 59,477
-------------
Income (loss) before income taxes (41,242)
Income tax provision -
-------------
NET INCOME (LOSS) $ (41,242)
=============
NET LOSS PER CLASS A COMMON SHARE $ (17.18)
=============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 2,400
=============
F-35
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
BC THERMAL DYNAMIC COATINGS INC.
(A Canadian Corporation)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
February 28,
1998
-----------------
<S> <C>
Cash flows from operating activities:
Net Loss $ (41,242)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Services paid with stock (14,067)
Decrease (increase) in:
Accounts receivable (4,455)
Stockholder receivable (13,442)
Increase (decrease in:
Accounts payable 2,322
-----------
NET CASH USED IN OPERATING ACTIVITIES (70,884)
-----------
Cash flows to investing activities:
Loan to related company (35,167)
-----------
NET CASH USED IN INVESTING ACTIVITIES (35,167)
-----------
Cash flows from financing activities:
Proceeds from sale of stock 84
Proceeds from shareholder loans 170,092
Payments on shareholder loans (125,000)
Proceeds from line of credit 10,550
Proceeds from notes payable 50,404
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 106,130
-----------
Net increase (decrease) in cash and cash equivalents 79
-----------
Cash and cash equivalents, beginning of period -
-----------
CASH AND CASH EQUIVELENTS, END OF PERIOD $ 79
===========
SUPPLEMENTAL DISCLOSURE:
Interest paid -
===========
Taxes paid -
===========
F-36
</TABLE>
</PAGE>
<PAGE>
Pro Forma Financial Information
Millenium Istec Inc.
The following pro forma combined Balance Sheet as of February 28,
1998 and the combined Statements of Operations for the two months
ended February 28, 1998 and the year ended December 31, 1997 are
unaudited. These pro forma financial statements relate to the
reverse acquisition of Environmental Development Corporation by
Specialty Coatings Ltd., BC Thermal Dynamic Coatings Inc. and West
Kootenay Lite-Form Inc. Environmental Development Corporation
(subsequently renamed Millenium Istec Inc.) issued 2,800,000 shares
of common stock for 100% of the outstanding common stock of these
Companies.
The pro forma financial information have been prepared utilizing the
historical financial statements of Millenium Istec Inc., Specialty
Coatings Ltd., BC Thermal Dynamic Coatings Inc. and West Kootenay
Lite-Form Inc. and should be read in conjunction with the separate
historical financial statements and notes thereto of these Companies
for the respective period presented.
The pro forma financial information is based on the purchase method
of accounting. The pro forma combined Statements of Operations
assume the acquisition had occurred at the beginning of the period
presented in the statements. All intercompany accounts and
transactions have been eliminated.
The pro forma combined financial statements do not purport to be
indicative of the financial positions and results of operations and
cash flows which actually would have been obtained if the acquisition
had occurred on the date indicated or the results which may be
obtained in the future.
F-37
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
MILLENIUM ISTEC INC
Pro Forma Combined Balance Sheet
February 28, 1998
(Unaudited) B.C.
West Thermal
Millenium Specialty Kootenay Dynamic
Istec Coatings Lite-Forms Coatings Adjust Combined
Inc. Ltd. Inc. Inc. ments Total
----------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ $ 1,171 $ $ 79 $ $ 1,250
Inventory 340 1,137 1,477
Accounts receivable 1,484 633 4,455 6,572
Stockholder receivables 966 13,442 14,408
----------- --------- ---------- --------- ---------- ---------
TOTAL CURRENT ASSETS - 2,995 2,736 17,976 23,707
----------- --------- ---------- --------- ---------- ---------
PROPERTY, PLANT & EQUIPMENT
Property & Equipment (net of - 8,490 8,273 30,000(b) 46,763
accumulated depreciation) ----------- --------- ---------- --------- ---------- ---------
OTHER ASSETS
Notes receivable 1,761 35,167 (35,167)(b) 1,761
Investments 14,067 (14,067)(b) -
Goodwill & Intangible 485,800 (a)
property 350,251 (b) 836,051
----------- --------- ---------- --------- ---------- ---------
TOTAL OTHER ASSETS - - 1,761 49,234 794,071 837,812
----------- --------- ---------- --------- ---------- ---------
TOTAL ASSETS $ - $11,485 $ 12,770 $67,210 $816,817 $ 908,282
=========== ========= ========== ========= ========== =========
The accompanying notes are an integral part of these financial statements.
F-38
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
MILLENIUM ISTEC INC
Pro Forma Combined Balance Sheet
February 28, 1998
(Unaudited) B.C.
West Thermal
Specialty Kootenay Dynamic
Millenium Coatings Lite-Form Coatings Adjust Combined
Istec Inc. Ltd. Inc. Inc. ments Total
------------ ---------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ $ 832 $ 10,957 $ 2,332 $ $14,121
Customer deposits 53,823 53,823
Notes payable 35,167 57,772 82,055 (35,167)(b)139,827
Accrued interest 26,993 26,993
Line of credit 10,550 10,550
Stockholder loans 128,570 13,431 142,001
------------ ---------- ---------- -------- ----------- --------
TOTAL CURRENT LIABILITIES - 245,385 68,729 108,368 (35,167) 387,315
COMMITMENTS AND CONTINGENCIES
Commitments and contingencies - 35,167 - - - 35,167
------------ ---------- ---------- -------- ----------- --------
STOCKHOLDERS EQUITY
Common stock 1,000 71 1 84 (156)(b)
3,000 (a) 4,000
Retained Earnings (1,000) (269,138) (55,960) (41,242) 366,340 (b) (1,000)
Additional paid in capital 482,800 (a)482,800
------------ ---------- ---------- -------- ----------- --------
TOTAL STOCKHOLDERS EQUITY - (269,067) (55,959) (41,158) 851,984 485,800
------------ ---------- ---------- -------- ----------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ - $ 11,485 $ 12,770 $67,210 $816,817 $908,282
============ ========== ========== ======== =========== ========
The accompanying notes are an integral part these financial statements.
F-39
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
MILLENIUM ISTEC INC
Pro Forma Combined
Statement of Operations
Year Ended December 31, 1997
(Unaudited) B.C.
West Thermal
Specialty Kootenay Dynamic
Millenium Coatings Lite-Forms Coatings Adjust Combined
Istec Inc. Ltd. Inc. Inc. ments Total
----------- --------- ---------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Revenues $ - $ 71,324 $ 45,595 $ 33,841 $ - $ 150,760
Cost of Revenues - 67,273 28,204 15,690 - 111,167
----------- --------- ---------- --------- ------ ------------
GROSS PROFIT - 4,051 17,391 18,151 - 39,593
----------- --------- ---------- --------- ------ ------------
EXPENSES
Administrative expenses 68,256 4,743 16,771 89,770
Salaries 16,963 - - 16,963
Professional services 11,881 1,442 1,465 14,788
Consulting - - 13,504 13,504
Depreciation 3,923 3,910 - 7,833
Research and development 89,951 - - 89,951
----------- --------- --------- ---------- ------ ------------
TOTAL EXPENSES - 190,974 10,095 31,740 - 232,809
----------- --------- --------- ---------- ------ ------------
OTHER INCOME AND EXPENSES
Interest expense - 19,405 150 - - 19,555
----------- --------- --------- ---------- ------ ------------
NET INCOME (LOSS) $ - $(206,328) $ 7,146 $(13,589) $ - $(212,771)
=========== ========= ========= ========== ====== ============
EARNINGS (LOSS) PER SHARE $ nil $ (1.03) $ 0.23 $ nil $ - $ (.05)
=========== ========= ========= ========== ====== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 1,000,000 200,000 30,400 2,569,600 - 3,800,000
=========== ========= ========= ========== ====== ============
The accompanying notes are an integral part of these financial statements.
F-40
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
MILLENIUM ISTEC INC
Pro Forma Combined
Statement of Operations
Two Months Ended February 28, 1998
(Unaudited) B.C.
West Thermal
Specialty Kootenay Dynamic
Millenium Coatings Lite-Forms Coatings Adjust Combined
Istec Inc. Ltd. Inc. Inc. ments Total
---------- --------- ---------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Revenues $ - $ - $ - $ 84 $ - $ 84
Cost of Revenues - - 4,245 - - 4,245
---------- --------- ---------- ---------- ------ ------------
GROSS PROFIT - - (4,245) 84 - (4,161)
---------- --------- ---------- ---------- ------ ------------
EXPENSES
Administrative expenses 2,857 298 24,222 27,377
Salaries 5,503 878 - 6,381
Professional services 4,250 - 703 4,953
Consulting - - 2,813 2,813
Depreciation 587 1,578 - 2,165
Research and development 12,933 - - 12,933
---------- --------- ---------- ---------- ------ ------------
TOTAL EXPENSES - 26,130 2,754 27,738 - 56,622
---------- --------- ---------- ---------- ------ ------------
OTHER INCOME AND EXPENSE
Interest expense - 3,960 48 - - 4,008
Sale of manufacturing rights - (28,133) - - - (28,133)
---------- --------- ---------- ---------- ------ ------------
NET INCOME $ - $(1,957) $ (7,047) $(27,654) $ - $(36,658)
========== ========= ========== ========== ====== ============
EARNINGS (LOSS) PER SHARE $ nil $ nil $ (.23) $ (.01) $ - $ (.01)
========== ========= ========= ========== ====== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 1,077,966 200,000 30,400 2,569,600 - 3,877,966
========== ========= ========= ========== ====== ============
The accompanying notes are an integral part of these financial statements.
F-41
</TABLE>
</PAGE>
<PAGE>
MILLENIUM ISTEC INC
Pro Forma Combined Financial Statements
Accompanying Explanatory Notes
(Unaudited)
NOTE A - Valuation of Issuance of Common Stock for Acquisition ofSubsidiaries
The February 5, 1998 issuance of 2,800,000 shares of common stock for the
acquisition of Specialty Coatings Ltd., West Kootenay Lite-Form Inc. and B.C
Thermal Dynamic Coatings Inc. was valued at approximately $0.17 per share for
a total of $485,800. This value was based upon the sale of 720,400 shares of
common stock by Capital General to Art Lang for $125,000 completed on February
6, 1998. The management of Millenium Istec Inc. has assigned the $485,800
recognized for the value of the common stock of Millenium Istec Inc to
goodwill and intangible property.
NOTE B - Eliminations and Purchase Method of Accounting Adjustments
Prior to the acquisition agreement, B.C. Thermal Dynamic Coatings Inc. had
made an investment valued at $14,067 for two percent of Specialty Coatings
Ltd.'s common stock. Also, B.C. Thermal Dynamic Coatings Inc., during 1997,
loaned $35,167 to Specialty Coatings Ltd. Both of these transactions were
eliminated.
The reverse merger acquisition required a valuation adjustment for the
liabilities assumed in the purchase of the common stock of Specialty Coatings
Ltd., West Kootenay Lite-Form Inc, and B.C. Thermal Dynamic Coatings Inc.
The value of the liabilities assumed as part of the purchase of the
subsidiary Companies was allocated by management to property and equipment
in the amount of $30,000 and $350,251 for goodwill and other intangible
property rights including patents, tradenames and formulas.
F-42
2.1 Purchase Agreement and Plan of Reorganization
</PAGE>
<PAGE>
AGREEMENT
----------
THIS AGREEMENT, made and entered into in Las Vegas, Nevada sets forth the
plan of reorganization as of the 5th day of February, 1998, by and between
ENVIRONMENTAL DEVELOPMENT CORPORATION, a Nevada corporation, herein called
"PURCHASER", and Specialty Coatings Ltd., an Alberta company, Michael
McCarthey Construction Ltd., B.C. Thermal Dynamic Coatings Inc., and West
Kootenay LiteForm Inc., all British Columbia companies, hereinafter jointly
called "SELLER".
PLAN OF REORGANIZATION
- ----------------------
This plan of reorganization shall be a reorganization within the
meaning of IRC (1987), Section 368(a)(1)(B) as amended. PURCHASER
shall acquire 100% of all right, title and interest, in the common
stock owned by the shareholders of SELLER in exchange solely for a
part of PURCHASER'S voting common stock. It is understood and agreed
by the parties that the transaction contemplated herein is termed a
"shell transaction" or reverse merger/acquisition, the purpose of
which is to provide a public trading market for the shares of
PURCHASER/SELLER once the acquisition transaction is completed.
AGREEMENT
- ---------
In order to consummate the foregoing plan of reorganization and in
consideration of the mutual benefits to be derived therefrom and the
mutual agreements hereinafter contained, PURCHASER and SELLER approve
and adopt this agreement and plan of reorganization effective the
closing date of February 5, 1998, and mutually covenant and agree
with each other as follows:
SHARES TO BE TRANSFERRED AND SHARES TO BE ISSUED
- ------------------------------------------------
On the closing date, set herein to be February 5, 1998, PURCHASER
shall issue 3,000,000 shares of PURCHASER'S common stock bearing a
restrictive legend. As of the date hereof, there are issued and
outstanding one million (1,000,000) shares of common stock. It is
understood by SELLER that PURCHASER is presently authorized to issue
25,000,000 shares of common stock.
In exchange for PURCHASER'S stock being issued to SELLER as above
described, SELLER shall on the closing date and contemporaneously
with such issuance of PURCHASER'S common stock deliver to PURCHASER
100% of the outstanding common stock of SELLER.
All negotiations relative to this agreement and the transactions
contemplated hereby have been conducted with the assistance of
CAPITAL GENERAL CORPORATION who is acting as a broker, finder and
consultant on behalf of both PURCHASER and SELLER. Both PURCHASER
and SELLER agree to hold harmless and indemnify CAPITAL GENERAL
CORPORATION from any and all claim, demand, cause of action or suit
raised or filed in connection with the operation or promotion of
PURCHASER and/or SELLER and the trading of PURCHASER/SELLER's shares.
REPRESENTATIONS AND WARRANTIES OF SELLER
- ----------------------------------------
To the best Knowledge of the parties, no representation or warranty
by PURCHASER in this agreement, nor any statement, certificate,
schedule or exhibit hereto furnished or to be furnished by or on
behalf of SELLER to this agreement, nor any document or certificate
delivered to PURCHASER pursuant to this agreement or in connection
with actions contemplated hereby, contains or shall
-50- Exhibit 2.1
</PAGE>
<PAGE>
contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statement contained therein not
misleading.
SELLER understands and agrees that PURCHASER is without substantial
assets or liabilities and with its public shareholders is thus
defined herein as a public "shell" corporation. SELLER understands
and agrees that PURCHASER is a "shell" corporation and makes no
claim on any assets owned by PURCHASER previous to the closing
contemplated herein.
There are no legal, administrative or other proceedings, or other
claims, judgments, injunctions or restrictions, either threatened,
pending or outstanding against or involving PURCHASER or SELLER which
are known, or which they have reasonable grounds to know, of any
basis for any such proceedings, or other claims, judgments,
injunctions or restrictions, except as in the Prospectus attached
hereto as Exhibit B and made a part of this Agreement or otherwise
disclosed herein. Specifically, a "Complaint and Order Denying
Exemptions and to Cease and Desist in the Matter of Capital General
Corporation, David Rex Yeaman et al. filed by the State of New Jersey
in January, 1994. This matter was resolved as disclosed in the
Company's Form 10-Q/A filing with the SEC dated November 28, 1994.
Also, on February 8, 1996, David R. Yeaman, formerly
Secretary/Treasurer and Director of the Company was charged in the
U.S. District Court for the Eastern District of Pennsylvania with
conspiracy, wire fraud and fraud in the offer, purchase and sale of
securities, in violation of 18 U.S.C.sections 2,371 and 1343, 15
U.S.C. section 77q(a), 77x, 78j(b) and 78ff, and 17 C.F.R. section
240.10b-5 (1986); and, that, on April 16, 1997, Mr. Yeaman was
convicted of one count of conspiracy, five counts of wire fraud and
three counts of securities fraud; and, that while Mr. Yeaman has
resigned his affiliation with PURCHASER, Yeaman Enterprises and
Capital General Corporation, he may continue to be deemed an
affiliate of the Company by virtue of his familial and historical
relationships with the Company, its shareholders, officers and
directors.
However, SELLER acknowledges and represents that he is aware of the
risks of being a public company and understands and agrees that
regulatory efforts regarding public shell transactions similar to the
transaction contemplated herein has been and is currently being
exerted by some states, the U.S. Securities and Exchange Commission
and the National Association of Securities Dealers, Inc. (NASD).
PURCHASER agrees to provide any supplemental information which may be
requested by SELLER relating to any matter discussed herein or in the
Prospectus attached hereto as Exhibit B.
PURCHASER/SELLER understands and agrees that once this transaction is
completed, it will be a public company subject to the extensive,
complex state, federal and NASD securities regulations incumbent on
public companies. In particular, the parties understand and agree
that a Form 8-K must be filed with the United States Securities and
Exchange Commission within fifteen days after closing which filing
requires that audited financial statements be filed within sixty
days after the filing of the 8-K and that such responsibility shall
not be the responsibility of Capital General Corporation, its officers,
directors or employees nor the existing officers of PURCHASER, but the
sole responsibility of the new officers and directors of PURCHASER.
SELLER acknowledges that they have carefully evaluated their financial
resources and investment position and the risks associated with this
transaction and acknowledges that they are able to bear the economic
risks of this transaction. SELLER further acknowledges that their
knowledge and experience in financial and business matters in general,
and investments in particular, qualifies them as sophisticated
investors, and therefore capable of evaluating the merits and risks of
this transaction.
-51- Exhibit 2.1
</PAGE>
<PAGE>
SELLER acknowledges receipt of a copy of the Prospectus dated June 30,
1993, which is attached hereto as Exhibit B and made a part of this
Agreement, setting forth the relevant terms, conditions and disclosures
of PURCHASER, as well as such other information as SELLER deems
necessary or appropriate as a prudent sophisticated and knowledgeable
investor in evaluating the acquisition of PURCHASER'S shares and making
this Agreement. SELLER has carefully read the Prospectus, including
particularly the portion thereof entitled "Risk Factors" and
acknowledges that PURCHASER has made available the opportunity to
obtain additional information to verify the accuracy of the information
contained in the Prospectus and to evaluate the merits and risks of
this transaction. SELLER acknowledges that they have had the
opportunity to ask questions of PURCHASER and CAPITAL GENERAL and have
received satisfactory answers from PURCHASER, CAPITAL GENERAL, or its
affiliates, associates or employees concerning the terms and conditions
of this transaction and the information in the Prospectus.
SELLER covenants and warrants that the shares of common stock of
PURCHASER to be received by them pursuant to this agreement are being
acquired for their own account and for investment and not with the
present view toward the sale or distribution in the United States
thereof and will not be disposed of except (I) pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or
(ii) another transaction, which, in the opinion of counsel acceptable
to PURCHASER, is exempt from registration under the Securities Act of
1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder. In order to effectuate the covenants of
this paragraph, an appropriate endorsement will be placed on the
certificates for shares of common stock of PURCHASER delivered to
SELLER pursuant to this agreement and stop transfer instructions shall
be placed with the transfer agent for the securities.
SELLER is aware that the shares distributed to him will not have been
registered pursuant to the Securities Act of 1933, as amended; and,
therefore, under current interpretations and applicable rules,
particularly Rule 144 and Regulation S, he will probably have to retain
such shares for a period of at least one (1) year and at the expiration
of such one-year period his sale may be confined to brokerage
transactions of limited amounts requiring a notification filing on Form
144 with the Securities and Exchange Commission and such disposition
may be available only if the PURCHASER is current in his filings with
the Securities and Exchange Commission and SELLER is aware of Rule 144
issued by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and the other limitations imposed thereby on
their disposition of PURCHASER'S shares. SELLER is aware that there can
be no assurance regarding the individual tax consequences of this
transaction, nor can there be any assurance that the Internal Revenue
Code or the regulation promulgated thereunder will not be amended in
such manner as to deprive SELLER of any tax benefit that might
otherwise be received. SELLER is relying upon the advice of their
personal tax advisor with respect to the tax aspects of this
transaction.
SELLER acknowledges that it is his responsibility to comply with the
appropriate state and federal securities laws, as well as NASD rules
and regulations, particularly secondary trading requirements. SELLER
agrees to list PURCHASER in either Moody's investor Services or
Standard and Poors, exempting secondary trading of PURCHASER'S stock
in those states providing for such secondary trading exemption.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
- -------------------------------------------
To the knowledge of the officers of PURCHASER, PURCHASER is not a
party to nor bound by any agreement, deed, lease, power of
attorney or other instrument
-52- Exhibit 2.1
</PAGE>
<PAGE>
other than which is herein disclosed. PURCHASER has executed an
Agreement with National Stock Transfer, Inc. A copy of this agreement
is available for inspection by SELLER.
PURCHASER represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of
the state of Nevada and that the execution and performance of this
agreement and the issuance of stock contemplated hereby have been
authorized by the board of directors of PURCHASER. The shares of
PURCHASER'S common stock to be delivered pursuant to this agreement,
when so delivered, will have been duly and validly authorized and
issued by PURCHASER and will be fully paid and nonassessable.
SELLER hereby further acknowledges and agrees that no representations
or warranties have been made by PURCHASER or CAPITAL GENERAL
CORPORATION as to the benefits to be derived by SELLER in completing
this transaction. It is expressly understood and agreed that neither
CAPITAL GENERAL CORPORATION nor PURCHASER or its officers or agents
have made any warranty or agreement, expressed or implied, as to the
tax or securities consequences of the transactions contemplated by
this agreement or the tax or securities consequences of any action
pursuant to or growing out of this agreement.
ACTIONS PRIOR TO CLOSING
- ------------------------
SELLER shall duly comply with all applicable laws as may be required
for the valid and effective transfer of property, assets and business
contemplated by this agreement.
The representations and warranties made by PURCHASER in this agreement
or given on its behalf hereunder shall be substantially accurate in
all material respects on and as of the closing date with the same
effect as though such representations and warranties had been made or
given on and as of the closing date.
SELLER shall perform and comply with all its obligations under this
agreement which are to be performed and complied with by it prior to
or on the closing date including the delivery of its documents
specified herein.
This Agreement shall have been approved by the boards of directors of
both PURCHASER and SELLER.
LAW GOVERNING
- --------------
It is understood and agreed that all communications, negotiations,
meetings, agreements and understandings relative to this Agreement
have taken place in or from the state of Nevada. No communications,
offerings, proposals or other forms of negotiations have been
conducted in or from the state of Utah. This agreement may not be
modified or terminated orally, and shall be construed and interpreted
according to the laws of the State of Nevada and enforced in its
courts.
Any and all disputes and controversies of every kind and nature
between the parties hereto arising out of or relating to this
Agreement relating to the existence, construction, validity,
interpretation or meaning, performance, non-performance, enforcement,
operation, breach, continuance or termination thereof shall be
subject to an arbitration mutually agreeable to the parties or, in
the absence of such mutual agreement, then subject to arbitration in
accordance with the rules of the American Arbitration Association. It
is the intent of the parties hereto and the purpose of this provision
to make the submission to arbitration of any dispute or controversy
arising hereunder an express condition
-53- Exhibit 2.1
</PAGE>
<PAGE>
precedent to any legal or equitable action or proceeding of any nature
whatsoever.
ASSIGNMENT, AMENDMENT AND MODIFICATION
- --------------------------------------
This agreement shall not be assigned by any party without the written
consent of the other. PURCHASER and SELLER may amend, modify and
supplement this agreement in such manner as may be agreed upon by them
in writing.
TERMINATION AND ABANDONMENT
- ----------------------------
This agreement may be terminated and the transactions provided for by
this agreement may be abandoned without liability on the part of any
party to any other, at any time before the closing date by mutual
consent of PURCHASER and SELLER. In the event of termination and
abandonment by any party as herein provided, written notice shall
forthwith be given to the other party, and each party shall pay its
own expenses incident to preparation for the consummation of this
agreement and the transactions contemplated hereunder. In the event
that this Agreement has not been completed by the closing date or
within thirty days thereafter, this Agreement and the transactions
contemplated hereby shall be deemed to have been abandoned and neither
party shall be under any further obligation to the other. In the event
of such termination or abandonment, SELLER shall forfeit any deposits,
payments or other consideration tendered in connection with the
execution of this Agreement, unless otherwise expressly provided
herein.
NOTICES
- -------
All notices, requests, demands and other communications hereunder shall
be deemed to have been duly given, if delivered by hand or mailed,
certified or registered mail with postage prepaid:
(a) If to PURCHASER:
1800 E. Sahara, Suite 107
Las Vegas, Nevada 89104
(b) If to SELLER:
P.O. Box 34
Nelson, B.C. Canada VlL 5P7
ENTIRE AGREEMENT
- ----------------
This instrument embodies the entire agreement between the parties
hereto with respect to the transactions contemplated herein, and there
have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein. Any
announcements, amendments or modifications shall be set forth in
writing and approved by the parties hereto.
This agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
FURTHER DOCUMENTS
- -----------------
PURCHASER and SELLER agree to execute any and all other documents and
to take such other action or corporate proceedings as may be necessary
or desirable to carry out the terms hereof.
-54- Exhibit 2.1
</PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed all as of the day and year first above written.
ENVIRONMENTAL DEVELOPMENT CORPORATION ("PURCHASER")
By: /s/ Krista Nielson
---------------------------
Krista Nielson, President
"SELLERS":
SPECIALTY COATINGS LTD. B.C. THERMAL DYNAMIC COATINGS INC.
By: /s/ Marilyn Auriat By: /s/ Arnie Gustafson
--------------------- ----------------------------
Marilyn Auriat, Vice President Arnie Gustafson, President
MICHAEL MACCARTHEY CONSTRUCTION LTD. WEST KOOTNAY LITE-FORM LTD.
By: /s/ Michael McCarthey By: /s/ Judith Walker
--------------------------- ---------------------------
Michael McCarthey, President Judith Walker, President
-55- Exhibit 2.1