January 13, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
THE HARRISON ROSS GROUP, INC.
(Name of Small Business Issuer as specified in its charter)
Nevada 87-0307672
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
1839 Firestone Boulevard 90001
Los Angeles, CA ---------
----------------------------- (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: (323) 295-6601
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: $.001
par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Page 1 of 72 pages contained in the sequential numbering system. The
Exhibit Index may be found on page 51 of the sequential numbering system.
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Cautionary Note
This Registration Statement of The Harrison - Ross Group, Inc. (the
"Company") on Form 10-SB, contains forward-looking statements in which the
Company's management discusses factors it believes may affect the Company's
performance in the future. Such statements typically are identified by terms
expressing future expectations or projections of revenues, earnings, earnings
per share, capital expenditures, gross profit margin and other financial items.
All forward- looking statements, although made in good faith, are based on
assumptions about future events and are therefore inherently uncertain, and
actual results may differ materially from those expected or projected. Important
factors that may cause the Company's actual results in the future to differ
materially from expectations or projections in forward-looking statements
include those described under the heading "Forward Looking Statements" in Item 2
of Part I of this Form 10-SB. Forward- looking statements speak only as of the
date of this report, and the Company undertakes no obligation to update or
revise such statements to reflect new circumstances or unanticipated events as
they occur.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
The Company, through its wholly-owned subsidiary, is a provider of death
care products and services and currently owns or operates three funeral homes in
Los Angeles, California and manages one funeral home in Las Vegas, Nevada. The
Company commenced operations in the death care industry in March, 1993, when it
acquired Harrison-Ross Funeral Home, Inc., a privately-held California
corporation which has been operating in the death care industry since 1957.
Hereafter, the reference to the "Company" includes the Company and its
wholly-owned subsidiaries.
The Company provides a complete range of funeral services and products
to meet families needs, including consultation, removal and preparation of
remains, sale of caskets and related funeral merchandise, transportation
services and the use of funeral home facilities for visitation. The Company
previously operated a cemetery but has no current cemetery operations. The
Company provides a complete range of death care products and services both at
and prior to the time of need.
The Company's principal objectives are: (i) to provide the highest level
of quality, service and value to each family it serves; (ii) to attract, retain
and reward highly qualified individuals to operate its businesses; and (iii) to
pursue a strategy of disciplined internal and external growth, with the ultimate
goal of enhancing shareholder value.
The Company has historically served the minority community of Los
Angeles and intends to continue to market its services and products to the
minority community. The Company also intends to market its services and products
outside of the minority community. The Company intends to expand its operations
by acquiring other death care providers in other communities and
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will seek acquisitions of both minority and non-minority owned death care
businesses. Although the Company has not made any acquisitions in the past four
years, the Company continues to look for acquisitions as part of its business
plan. It has been hampered by the following:
1. High expectations of sellers of mortuaries;
2. Lack of long-term capital.
The decrease in the death rate and subsequent recession in the mortuary
industry have lowered sellers expectations to realistic levels. The Company
continues to pursue long-term capital see Business Strategy on Pages 4 and 5
regarding developing an active market in the Company's stock.
Industry Information
The death care industry in the United States is fragmented, with many
small, family-owned firms owning one or a few funeral homes or cemeteries in a
single community. Management of the Company estimates that there are
approximately 22,000 funeral homes and 9,600 commercial (as opposed to
religious, family, fraternal, military or municipal) cemeteries in the United
States.
Funeral home services typically are chosen based on reputation,
quality of personal services and geographic proximity to the home of the
deceased. Geographic market constraints, the advent of new zoning requirements
in most urban areas, the high costs of building a new funeral home, the
increasing regulatory complexity of the industry and the relative importance of
tradition and goodwill in competing for market share make it extremely difficult
for new or existing competitors to start a new funeral home operation in an
existing market. Moreover, because the business is stable, non-cyclical and
relatively predictable, business failures are uncommon. As a result, ownership
of a funeral home and cemetery business has traditionally passed from generation
to generation within the same family and the number of funeral homes and
cemeteries in the United States has remained relatively unchanged over the past
20 years.
The transfer of death care businesses to successive generations within a
family and the development of a local heritage and tradition has acted as a
formidable barrier for those wishing to enter an existing market. Heritage and
tradition afford an established funeral home or cemetery a local franchise and
provides the opportunity for repeat business. Other difficulties faced by
entities desiring to enter a market include local zoning restrictions,
substantial capital requirements, increasing regulatory burdens and scarcity of
cemetery land in certain urban areas.
As the industry has matured, however, a trend toward consolidation has
developed. From the perspective of individual owners, this trend appears to
result from family succession issues, a desire for liquidity, increasing tax and
estate planning complexities, and the increasing competitive threat posed by the
large, corporate death care providers. From the perspective of the corporate
death care providers, the consolidation trend is driven by the benefits derived
from economies of scale, improved managerial control and more effective
strategic and financial planning. The consolidation
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trend has accelerated in recent years, as several large, corporate death care
firms have expanded their operations significantly through acquisitions. The
active market for funeral homes and cemeteries that consequently has developed
has provided a source of potential liquidity that was not as readily available
to individual owners in the past. Despite this trend towards consolidation, the
industry today remains highly fragmented.
Industry studies indicate that in the past decade death rates have
declined due to rising life expectancy in the United States. However, recent
census projections indicate that the aging of the population will counterbalance
the impact of increased life expectancy, leading to a modest rise in the
aggregate number of deaths. In addition, industry studies indicate that while
the death rate is declining slightly, the average age of the population in the
United States is increasing. The aging of the population, particularly the "baby
boomers" who have only recently begun to turn 50, represents a significant
opportunity for firms such as the Company to expand their customer base and
secure a portion of their future market share by actively marketing prearranged
property, merchandise and services. Management believes that its principal
target market for sales of prearranged merchandise and services is those age 50
and above, while those most inclined to prearrange their funeral service are
typically age 60 and above. Although there are limited prospects for growth of
the death care industry as a whole, the Company believes that individual death
care companies can realize significant growth through increased market share,
which is principally achieved through three methods: acquisitions, extensive
marketing of prearranged products and services; and new funeral home
development.
Preneed Marketing. In addition to sales at the time of death or on
an "at need" basis, an increasing number of death care products and services are
being sold prior to the time of death or on a "preneed" basis by death care
providers who have developed marketing organizations to actively promote such
products and services. Preneed plans enable families to establish in advance and
prepay for the type of service to be performed, the products to be used and the
cost of such products and services at prices prevailing at the time the
agreement is signed, rather than when the products and services are delivered.
Preneed plans also permit families to eliminate the emotional strain of making
death care decisions at the time of need. Effective marketing of preneed
products and services provides a backlog of future business. In addition,
established firms' backlog of preneed, prefunded funerals or presold cemetery
and mausoleum spaces also makes it difficult for new entrants to gain entry into
the marketplace.
During the last four years the Company decided to sell pre-need services
through individual insurance policies. The purchaser is able to arrange for
funerals with any mortuary so sales of these policies do not guarantee the
Company of any future revenue or add to the backlog. As of December 31, 1998,
the Company had a backlog of 1,243 prearranged funeral services expected to be
delivered sometime in the future. As of September 1, 1999, the backlog was
1,198.
Cremation. In recent years, there has been steady, gradual growth
in the number of families in the United States that have chosen cremation as an
alternative to traditional methods of burial. According to industry studies,
cremations represented approximately 21% of the United States burial
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market in 1995, as compared to approximately 10% in 1980. Many parts of the
Southern and Midwestern United States and many non-metropolitan communities
exhibit significantly lower rates of cremation as a result of religious and
cultural traditions. Cremation historically has been marketed as a less costly
alternative to interment. However, cremation is increasingly marketed as part of
a complete death care package that includes traditional funeral services and
memorialization.
Business Strategy
The Company currently owns or operates four funeral homes, three of
which are located in the Los Angeles area and one of which is located in Las
Vegas, Nevada. The Company currently focuses its marketing efforts on the
minority population. Its business plan is to acquire additional funeral homes in
concentrated or clustered market areas. Clusters refer to funeral homes and/or
cemeteries which are grouped together in a geographical region. Clusters provide
a company with the ability to generate cost savings through the sharing of
personnel, vehicles and other resources. Firms also are increasingly combining
funeral home and cemetery operations at a single site to allow cross-marketing
opportunities and for further cost reductions through shared resources. The
ability to offer the full range of products and services at one location or to
cluster funeral home and cross-market the full range of death care services has
proven to be a competitive advantage which tends to increase the market share
and profitability of the funeral home. The Company believes that the advantages
of clustering funeral homes include the following:
o Obtaining economics of scale achieved by owning multiple properties in
a specific geographic area, eliminating certain duplicate
administrative expenses and sharing, where appropriate, equipment and
personnel;
o Creating marketing synergies and opportunities;
o Aggressively selling pre-need funeral business and services through a
single large regional sales organization; and
o Where appropriate, establishing new funeral homes or cemeteries in
those markets to maximize market coverage and enhance the ability to
capture market share.
The Company believes that if it can develop an active trading market for
its stock, it will be able to more easily move forward in attempting to
accomplish its business strategy of growing through acquisitions.. However,
there can be no assurance that an active market for the Company's common stock
will ever be developed. In the event an active market for the Company's
securities is not developed, it is unlikely that the Company will be able to
effectively achieve its plan of acquisitions unless it is able to raise
significant cash for cash purchases of other companies. If an active market for
the Company's securities is not developed and/or if the Company is not able to
raise a significant amount of additional capital, it is likely that the Company
will be limited to its current operations.
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Operations
The Company's funeral homes offer a complete range of services including
family consultation, the planning and arrangement of funeral services, the sale
of caskets and related products, the removal and preparation of remains, the use
of funeral home facilities for visitation and worship, the preparation of death
certificates and transportation services.
Part of the focus of the Company's operations is the sale of preneed
funeral services through insurance. The sale of a preneed funeral service is a
contractual right to a funeral service, a preselected casket, and other related
services or merchandise. Preneed funeral services are usually paid on an
installment basis. The performance of preneed funeral services is usually
secured by placing the funds collected in trust for the benefit of the customer
or by buying a life insurance policy, the proceeds of which will pay for such
services at the time of need. Insurance policies intended to fund preneed
funerals cover the original contract price and generally have built-in
escalation clauses designed to offset future inflationary cost increases.
Proceeds from the sale of preneed funeral services are recognized by the Company
as operating revenues only at the time such services are provided. The backlog
of preneed funerals sold and partially paid for but not yet delivered on
December 31, 1998, totaled $2,973,880.
Marketing
The Company's primary marketing strategy is to offer consumers full
service death care by providing a broad range of funeral products and services.
To implement such strategy, the Company, in addition to other marketing
activities, aggressively markets its high quality funeral products and services
through is own sales force. The Company's marketing and sales activities
include, without limitation, the use of radio and television advertisements,
telephone solicitation, direct mail campaign, door-to-door canvassing, customer
referrals, customer follow ups, and newspaper advertising.
As part of its marketing plan, the Company attempts to educate the public
of the need and necessity of the funeral director in time of need. Most families
are in shock and vulnerable position when they loose a loved one. It is the
practice of the Company to train its counselors and personnel to handle each
case with dignity and respect and to help the surviving members in any way they
can, for in doing so it creates a feeling of comfort and respect of the family
toward the funeral director and staff which helps generate future business
through referrals.
The Company is active on a co-op basis with smaller funeral homes in
supporting them with the use of personnel and equipment thereby reducing their
overhead and making available late model units that they can afford.
The Company has also negotiated with and become a member of Funeral
Cremation Societies to serve their members in the local area where the Company
has funeral homes, this will be a unique way of establishing the Company as a
high quality reasonably priced funeral home, especially at a time when the
industry is being criticized for the high costs of dying.
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The Company is working on setting up a Web page to help inform visitors to
the site, the need and use of the funeral rule and benefits to Veterans and
spouses.
Suppliers
The Company purchases inventory and supplies from a variety of sources.
The Company does not anticipate that it will experience any difficulties in
purchasing inventory and supplies in the future.
Future Acquisitions
Subject to additional financing of which there can be no assurance, the
Company continues to plan to expand its business through acquisitions. Although
there has been a significant number of acquisitions and consolidation within the
death care industry, consolidation has not occurred on a large scale in the
minority community and the Company intends, at least initially, to seek
acquisitions in the minority community. In evaluating specific properties for
potential acquisition, the Company will likely consider such factors as the
property's location, reputation, heritage, physical size, volume of business,
profitability, available inventory, name recognition, aesthetics, potential for
development or expansion and competitive market position and pricing structure
and the quality of operating management.
The Company anticipates that the consideration for future acquisitions
will consist of a combination of cash, long-term notes, the assumption of
existing indebtedness of the acquired businesses, and additional forms of
acquisition financing, which may include (without limitation) the issuance of
additional capital stock of the Company. The Company also anticipates that it
may enter into management, consulting and non-competition agreements with former
owners and key executive personnel of any future acquired businesses.
The Company may retain the key managers of acquired companies and give
them significant operational responsibility to assure the continuation of high
quality services and the maintenance of the acquired firm's reputation and
goodwill. The Company is currently anticipating seeking initial acquisition
candidates in the State of California in order to be able to effectively
"cluster" its operations. However, if it has the requisite capital resources and
it becomes aware of funeral homes in other states which meet its acquisition
criteria, it will attempt to effect acquisitions in other states.
Competition
The Company is engaged in a highly competitive business in which numerous
small companies are engaged. All of its funeral homes experience extensive
competition. Market share for funeral homes is largely determined by location
and family tradition, although the quality and condition of facilities and
services, pricing and advertising also play important factors. The sale of
prearranged funeral services has also become an increasingly important marketing
tool for funeral homes to capture and influence market share.
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The Company competes with a number of sectarian and nonsectarian
mortuaries and cemeteries in the greater Los Angeles area. Mortuary competition
is primarily from small, local mortuaries that attract customers through the
personal reputation of the funeral director and their ability to tailor their
services to their local ethnic, religious or fraternal communities. The
Company's primary methods of competition in both its mortuary operations consist
of building goodwill in the community by continually strengthening and
leveraging its heritage and name recognition and developing its infrastructure
to further improve its ability to serve the diverse population of the greater
Los Angeles area.
A significant area of competition for the Company is and will be for
acquisitions. There are several major publicly and privately owned companies
that are aggressive buyers of funeral homes Some of those companies are larger
and have greater financial resources than the Company. The acquisition
environment in the death care industry is highly competitive. Five publicly held
death care companies, Service Corporation International, The Loewen Group, Inc.,
Stewart Enterprises, Inc. and Carriage Services, Inc. are substantially larger
than the Company and have significantly greater financial and other resources
than the Company. In addition, a number of smaller companies are actively
acquiring funeral homes and cemeteries. Through 1998, prices for funeral homes
and cemeteries have increased substantially, and, in some cases, competitors
have paid acquisition prices substantially more than the prices offered by the
Company. The recession in the industry in 1998 had led to financial problems for
several of the public companies and acquisition offers have decreased as well as
acquisition prices. No assurance can be given that the Company will be
successful in expanding its operations through acquisitions or that funeral
homes and cemeteries will be available at reasonable prices or on reasonable
terms. Management believes that because of the large portion of the funeral
industry that remains controlled by local family-owned firms, opportunities for
substantial growth through acquisition continue to be significant. There can be
no assurances that the Company will be able to make acquisitions, or make
acquisitions at prices that would enable it to reach its goals.
Regulation
The Company's funeral home operations are subject to regulation,
supervision and licensing under various federal, state and local statutes,
ordinances and regulations. In recent years, the death care industry has
generally been subjected to increased regulation.
The Company's funeral home operations are subject to substantial
regulation by the Federal Trade Commission (the "FTC"). Certain regulations
contain minimum standards for funeral industry practices, require extensive
price and other affirmative disclosures to the customer at the time of sale and
impose mandatory itemization requirements for the sale of funeral products and
services.
The Company is subject to the requirements of the federal
Occupational Safety and Health Act ("OSHA") and comparable state statutes. The
OSHA hazard communication standard, the United States Environmental Protection
Agency community right-to-know regulations under Title III of the federal
Superfund Amendment and Reauthorization Act and similar state statutes require
the Company to organize information about hazardous materials used or produced
in its operations.
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Certain of this information must be provided to employees, state and local
governmental authorities and local citizens. The Company is also subject to the
Federal Americans with Disabilities Act and similar laws which, among other
things, may require that the Company modify its facilities to comply with
minimum accessibility requirements for disabled persons.
The Company's operations are also regulated by the State of California,
which regulates the sale of pre-need cemetery and funeral services. California
state regulations require, among other things, that a portion of the funds
received by the Company in connection with all cemetery sales be deposited in an
endowment care fund. The principal of such endowment care fund must be invested
and the income from such investment may be used only for the development,
improvement, embellishment and maintenance of the cemetery. California state
regulations also require that money received from the sale of pre-need funeral
service contracts be held in trust until the services are delivered, that such
contracts may be cancelled by the customer at any time prior to the delivery of
such services and that upon any such cancellation the principal and interest of
such trust (less, in certain cases, a revocation fee) be repaid to the customer.
From time to time states and other regulatory agencies have considered and
may enact legislation or regulations that could affect the death care industry.
For example, many states and regulatory agencies have or are considering
regulations that, without limitation, could require more liberal refund and
cancellation policies for prearranged products and services, prohibit
door-to-door or telephone solicitation of potential customers, increase trusting
requirements and prohibit the common ownership of funeral homes and cemeteries
in the same market. If adopted, these and other possible proposals could have a
material adverse effect on the Company's results of operations.
Factors Affecting Future Performance
Future operating results of the Company depend upon many factors and are
subject to various risks and uncertainties. Some of the risks and uncertainties
which may cause the Company's operating results to vary from anticipated results
or which may materially and adversely affect its operating results are as
follows:
Recent Operating Results. The Company's revenues remain constant from
fiscal 1997 to fiscal 1998. Results for any quarter are not necessarily
indicative of the results that the Company may achieve for any subsequent
quarter or a full fiscal year. Quarterly results may vary materially as a result
of the timing and structure of acquisitions, the timing and magnitude of costs
related to such acquisitions and seasonal fluctuations in the death rate.
Competition for Acquisitions. Acquisitions of funeral homes and cemeteries
in selected markets will continue to be an integral part of the Company's
business strategy. Competition in the acquisition market is intense, and prices
paid for funeral homes and cemeteries have decreased substantially in 1998. In
addition, the four other publicly held North American death care companies, each
of which has significantly greater financial and other resources than the
Company, are actively engaged in acquiring funeral homes and cemeteries in a
number of markets. Accordingly,
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no assurance can be given that the Company will be successful in expanding its
operations through acquisitions or that funeral homes will be available at
reasonable prices or on reasonable terms.
Acquisition Risks. The Company plans to grow primarily through the
acquisition of additional funeral homes. There can be no assurance that the
Company will be able to identify, acquire or profitably manage additional
funeral homes and cemeteries or successfully integrate acquired funeral homes
and cemeteries, if any, into the Company without substantial costs, delays or
other operational or financial problems. Further, acquisitions involve a number
of special risks, including possible adverse effects on the Company's operating
results, diversion of management's attention, failure to retain key acquired
personnel and unanticipated events or liabilities, some or all of which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Substantial Capital Requirements. The Company will have substantial
capital requirements for the acquisition of funeral homes.. There can be no
assurance that sufficient debt or equity financing or cash generated by
operations will be available to meet the capital requirements for e
acquisitions.
Dependence upon Key Personnel. The Company depends to a large extent upon
the abilities and continued efforts of its president William H. Smith, Jr.,
Chairman of the Board and Chief Executive Officer, and its other senior
management. The loss of the services of the key members of the Company's senior
management could have a material adverse effect on the Company's continued
ability to compete in the death care industry. The Company has not entered into
employment agreements with any of its principal executive officers. The
Company's future success will also depend upon its ability to attract and retain
skilled funeral home management personnel.
Control by Existing Stockholders. The Leon Harrison, Jr. Irrevocable Trust
owns approximately 73% of the total shares of the Company's common stock issued
and outstanding and therefore, has total control over the outcome of most
corporate action requiring shareholder approval.
Decrease in Death Rate. In recent years the death rate has declined and
people are living longer. This has a direct bearing on the Company's revenues
and growth potential.
Regulation. The Company's operations are subject to regulation,
supervision and licensing under numerous federal, state and local laws,
ordinances and regulations, including extensive regulations concerning trust
funds, preneed sales of funeral and cemetery products and services and various
other aspects of the Company's business. The impact of such regulations varies
depending on the location of the Company's funeral homes and cemeteries.
From time to time, states and other regulatory agencies have considered
and may enact additional legislation or regulations that could affect the death
care industry. For example, some states and regulatory agencies have considered
or are considering regulations that could require more liberal refund and
cancellation policies for preneed sales of products and services, prohibit
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door-to-door or telephone solicitation of potential customers, increase trust
requirements and prohibit the common ownership of funeral homes and cemeteries
in the same market. If adopted in the states in which the Company operates,
these and other possible proposals could have a material adverse effect on the
Company's results of operations.
Dividends. The Company intends to retain its cash for the continued
development of its business and currently does not intend to pay cash dividends
on the Common Stock in the foreseeable future.
Employees
As of December 1, 1999, the Company and its subsidiaries employed 37
full-time employees and 22 part-time employees. All of the Company's funeral
directors and embalmers possess licenses required by applicable regulatory
agencies. Management believes that its relationship with its employees is good.
No employees of the Company or its subsidiaries are members of a collective
bargaining unit.
Trust Fund
Preneed funeral sales are facilitated by deposits to a trust or purchase
of a third-party insurance product. All preneed funeral sales are deferred until
the service is performed. The trust fund income earned and any increase in
insurance benefits are also deferred until the service is performed in order to
offset possible inflation in cost when providing the service in the future.
Although direct marketing costs and commissions incurred for the sale of preneed
funeral contracts are a current use of cash, such costs are also deferred and
amortized over the expected timing of the performance of the services related to
the preneed funeral sales
The Company has established a trust to secure funds paid by the purchasers
of preneed funeral contracts pending the use of the funds at the time of need. A
portion of the proceeds from the sale of each prearranged funeral service is
deposited in such trust. These trusts is administered by the Harrison-Ross
Pre-Need Trustees. The Company is not permitted to withdraw principal or
investment income from such trust until the time the funeral service is
performed. The aggregate principal balance in the Company's preneed funeral
trust was approximately $972,057 as of September 30, 1999.
For additional information with respect to the Company's trusts, see Note
5 of the Consolidated Financial Statements.
History and Business Development
The Company was formed November 7, 1974 under the laws of the State of
Utah. A total of 500,000 shares were issued to its founders for an aggregate
consideration of $5,000. Subsequently, the Company offered and sold 3,000,000
shares of its common stock at $.01 per share in a securities offering registered
by qualification with the Utah Securities Division and exempted
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from federal registration pursuant to Section 3(a)(11) of the Securities Act of
1933, as amended. The Company subsequently issued 1,500,000 shares of its common
stock in private transactions.
The Company was initially formed as a blind pool or blank check company to
invest in technologies, properties or companies which held potential for long
term growth. Subsequent to its formation, the Company entered into the business
of manufacturing and marketing gold and silver medallions. The Company's
medallion business was not successful and during the last several years, the
Company was inactive except for the search for potential acquisition and merger
opportunities.
In February 1993, the Company effected a 1-for-10 reverse split of the
issued and outstanding shares of the Company's common stock and acquired
Harrison-Ross Funeral Home, Inc., a privately- held California corporation in
exchange for 7,880,000 shares of the Company's common stock, calculated after a
the reverse stock split. The Company issued 7,880,000 shares of its common stock
to the sole shareholder of Harrison-Ross Funeral Home, Inc. in connection with
the acquisition. The sole shareholder of Harrison-Ross Funeral Home, Inc. was
the Leon Harrison, Jr. Irrevocable Trust. The beneficiaries of the trust are as
follows:
Beneficial
Name Interest
-----------------------------------------
William H. Smith, Jr. 27.5%
Leon Harrison, Jr. 27.5%
Lucille Y. Harrison 45.0%
Mr. Smith and Mr. Harrison are trustees of the trust and as such, have the
right and responsibility to vote all of such shares. The trust agreement
provides that upon the death of the three beneficiaries, their beneficial
interests shall be distributed to the remaining beneficiaries or to others.
However, upon the death of Leon Harrison, Jr. the trust shall be terminated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company is engaged in the death care industry and currently operates
four funeral homes located in Los Angeles, California and Las Vegas, Nevada.
Although the Company intends to grow through acquisitions, it has not commenced
its acquisition plan as of the date of this Form 10-SB. The Company's revenues
are derived from the sale of services and products related to the death
industry. This Management's Discussion and Analysis should be read in
conjunction with the financial statements attached hereto.
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Results of Operations
The following table sets forth certain income statement data for the
Company expressed as a percentage of net revenues for the periods presented:
Year Ended December 31
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1998 1997
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Total revenues, net................. 100.0% 100.0%
Total gross profit.................. 46.2% 47.7%
General and administrative expenses. 43.5% 43.0%
Operating income.................... 2.8% 4.8%
Interest expense, net............... 3.8% 2.9%
Net income (loss)................... [18.4%] 1.3%
Management's Discussion and Analysis and Plan of Operation
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto in this annual report.
Overview
Harrison-Ross Group, Inc. (the Company) through its subsidiary
Harrison-Ross Funeral Home, Inc. is principally engaged in providing funerals
and funeral services. The subsidiary has been providing these services since
1957 and it was purchased by the Harrison-Ross Group, Inc. in January 1993. The
subsidiary operates and owns three funeral homes in California and through a
management agreement manages a funeral home in Nevada. To a large extent this
industry is dependent on the national death and said death rate has been
declining for the past two years.
Results of Operations - Fiscal Years Ended December 31, 1998 and December 31,
1997
Sales of goods and professional services remained practically the same for 1998
and 1997. Sales increased slightly from $3,533,087 to $3,540,062. The number of
actual cases handled decreased by approximately 5%. Selling prices increased to
make up for the shortage of cases. The decrease in the number of cases is a
direct result of the decrease in the death rate. The Company's advertising
expenses more than doubled in this period but this did not have the desired
effect of increasing the net revenues. Cost of goods sold increased in the
current period to 53.7% of net revenues as contrasted to 52.2% in the preceding
year. This basic increase was due to price rises in the purchasing of caskets
that could not be fully passed on to customers.
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Costs and Expenses
Costs and expenses increased from 43.0% in 1997 to 43.5% in 1998. The three
major costs that increased are:
(1) Advertising as discussed above.
(2) Insurance due to a number of recent lawsuits.
(3) Interest and finance charges.
Income from Operations
Income from operations decreased by approximately $70,000 due mainly to the
increased cost of goods sold.
Other Income and Other Expenses
The Company had previously sold its interest in Angeles Abbey Cemetery in Los
Angeles County and received a $400,000 note in connection with that sale.
Subsequently the Company who purchased the cemetery went out of business. After
repeated efforts to reclaim the cemetery or resell the note, the Company decided
to fully reserve the $400,000 note as uncollectible at this time.
The Company recorded a loss on the sale of land located in Los Angeles County
that it had held for the construction of a new mortuary. It became impossible
for the company to carry the cost of the land and it was sold in 1998 for
$1,700,000. The purchase was made years earlier when land values were much
higher. The sale gave the Company additional working capital of approximately
$111,000 and paid off significant liabilities that the Company was obligated
for. In addition, the Company sold 950 acres that it had purchased in 1998 for a
net gain of $200,000. The income statement includes $290,174 which represents
the net loss of these two transactions.
Net Income (Loss)
As a result of the items discussed under Other Income and Expenses, the Company
shows a net loss for the year of $654,815 after taxes as contrasted to a profit
in 1997 of $43,165. The Company's operations remain profitable and now that the
extraneous items are off the balance sheet the Company anticipates a return to
profitability.
Liquidity and Capital Resources
The Company has been operating with little capital for many, many years. It has
managed to do so by getting extended terms from its vendors and borrowing when
necessary. The Company anticipates that it will generate sufficient cash in the
future to take care of its current obligations.
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Results of Operations
Comparison of Nine Months Ended 9/30/99 and 9/30/98
Revenues decreased from $2,590,125 to $2,474,261 or a decrease of $116,000. This
represents a 3.9% decrease in revenues. The number of funerals actually
performed decreased from 794 in 1998 to 775 in 1999. This decrease, we believe,
was due to a decrease in the national and local death rates. Actual revenues
received per funeral decreased from $3,262 to $3,192.
Cost of Goods Sold. Although the actual dollars spent on cost of goods sold
remained approximately constant, as a percentage of those revenues cost of goods
sold increased from 55% to 59%. The bulk of this increase can be traced to items
other than the caskets and the vaults which were included in the funeral as an
incentive to (1) offset the decrease in the death rate and (2) decreasing the
selling price of each funeral from $3,262 to $3,192. The effect of these
promotional items was to increase cost of sales as a percentage of sales and
decrease gross profit.
Cost and Expenses. Cost and expenses decreased by $119,000 (as a percentage of
revenues from 44.9% to 42.2%). A large portion of this decrease was related to
savings in insurance and interest due to the land sale.
Seasonality
Although the death care business is relatively stable and fairly
predictable, the Company's business can be affected by seasonal fluctuations in
the death rate. Generally, death rates are higher during the winter months. In
addition, the quarterly results of the Company may fluctuate depending on the
magnitude and timing of acquisitions.
Inflation
Inflation has not had a significant impact on the results of operations
of the Company during the last three years.
Liquidity
Liquidity remains a problem but was greatly alleviated by the sale of the
land and the resulting decrease in interest payments.
Forward-looking Statements
Certain statements in this Form 10-K include "forward-looking statements"
as defined in Section 21E of the Securities Exchange Act of 1934. All statements
other than statements of historical facts included herein, including, without
limitation, the statements under Item __ "Management's Discussion and Analysis
of Financial Condition and Results of Operations" regarding the Company's
financial position, plans to increase revenues, reduce general and
15
<PAGE>
administrative expense and take advantage of synergies, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed herein, including, without limitation, in conjunction
with the forward-looking statements included herein.
All subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." The new statement is effective for fiscal years beginning
after December 15, 1997. Management does not consider that the implementation of
the FASB will have a material effect on income.
Year 2000 Compliance
The Company currently believes that it will be internally year 2000 compliant in
all material respects prior to January 1, 2000 and that the effort to achieve
Year 2000 compliance has not and will not have a significant impact on the
financial condition or results of future operations of the Company. The costs
associated with ensuring that the Company's systems are Year 2000 Complaint are
not expected to be material (and have already been incurred). The Company has
been informed its banking institutions, utilities, telecommunications and
transportation companies have complied and are prepared for January 1, 2000 to
continue business as usual.
ITEM 3. PROPERTIES
The Company's corporate offices are located in its Firestone Boulevard
Mortuary which is further described below. The Company currently operates four
funeral homes located in Los Angeles. Set forth below is a summary of these
facilities.
Year Square Owned or
Location Founded Feet Leased
Firestone Boulevard 1953 11,761 Owned
Compton Boulevard 1972 6,800 Owned
Crenshaw Boulevard(1) 1971 7,000 Leased
(1) The lease expires August 2003 . The Company pays a monthly lease
payment of $3,376.53 and a 5% increment per year.
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The Company purchased a 950 acre parcel of undeveloped real property
located eight miles north east of San Jacinto, California. The property is in a
rural area. The property was acquired from Robert L. Jones and Lieselotta Jones
(See "Part 1, Item 7 - Certain Relationships and Related Transactions"). In
1998, the Company sold this property to the Remembrance Association for Two
Million One Hundred Thousand Dollars ($2,100,000.00) paying off a note of Seven
Hundred Thousand Dollars ($700,000.00) and taking back a note receivable for One
Million Four Hundred Thousand Dollars ($1,400,000.00) at nine percent (9%)
interest per annum due in a lump sum in July of 1999. The Company realized a Two
Hundred Thousand Dollar ($200,000) gain on this sale. The July, 1999 payment of
principal and interest was not made and the parties agreed to extend the payment
date to July, 2000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information regarding shares of the
Company's common stock beneficially owned as of December 1, 1999 by: (1) each
officer and director of the Company; (ii) all officers and directors as a group;
and (iii) each person known by the Company to beneficially own 5 percent or more
of the outstanding shares of the Company's common stock
- -------------------------------------------------------------------------------
Name Amount
and Address and Nature Percent
of Beneficial of Beneficial of Class(1)
Owner Ownership Ownership
- -------------------------------------------------------------------------------
William H. Smith, Jr.(2)(3) 6,180,000 72.88%
1839 Firestone Boulevard
Los Angeles, CA 90001
William H. Smith, III(2) -0- 0%
1839 Firestone Boulevard
Los Angeles, CA 90001
Leon Harrison, Jr.(2)(4) 6,180,000 72.88%
1839 Firestone Boulevard
Los Angeles, CA 90001
Ivan F. Houston(2) -0- 0%
5901 Rosebud Lane
Sacramento, CA 95841
Walter Kornbluh 692,500 8%
8240 Beverly Boulevard, Suite 12
Los Angeles, CA 90048
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Robert Jones(2)(5) 1,350,000 17.22%
4114 Marine Avenue
Lawndale, CA 90260
Conrad A. Fernandez(2) -0- 0%
1839 Firestone Boulevard
Los Angeles, CA 90001
Leon Harrison, Jr. Irrevocable Trust(2)(6) 6,180,000 72.88%
1839 Firestone Boulevard
Los Angeles, CA 90001
All Officers and Directors
as a Group (6 Persons) 7,140,000 84.20%
(1) As of December 1, 1999, there were 8,480,000 shares of the Company's
common stock issued and outstanding. Under Securities and Exchange
Commission Rules, for purposes of calculating beneficial ownership only,
all shares which may be acquired within 60 days upon the exercise of
options are also deemed to be outstanding.
(2) These individuals are the directors and/or officers of the Company.
(3) Mr. Smith is the Chief Executive Officer of the Company. All of the
shares listed as owned by Mr. Smith are owned of record by the Leon
Harrison, Jr. Irrevocable Trust. Mr. Smith has a 27.5 percent beneficial
interest in the Trust.
(4) Mr. Harrison is the Executive Vice President of the Company. All of
the shares listed as owned by Mr. Harrison are owned of record by the Leon
Harrison, Jr. Irrevocable Trust. Mr.
Harrison has a 27.5 percent beneficial interest in the Trust.
(5) Mr. Jones is a director of the Company. Of the shares listed as owned
by Mr. Jones 850,000 are owned of record. The remaining 500,000 shares may
be acquired by Mr. Jones from the Leon Harrison, Jr. Irrevocable Trust at
price of $.75 per share. Such option expires December 31, 2002.
(6) The Trust is the record owner of these shares. The beneficial owners
of described in Part I, Item 1 of this Form 10-SB
Security Ownership of Management
See Item 4(a) above.
Changes in Control
No changes in control of the Company are currently contemplated.
18
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, PROMOTERS AND CONTROL
PERSONS
Identification of Directors and Executive Officers
The current directors and officers of the Company who will serve until the
next annual meeting of shareholders or until their successors are elected or
appointed and qualified, are set forth below:
Name Age Position
William Smith, Jr. 58 Chairman, CEO, President
William R. Smith, III 31 Secretary
Leon Harrison, Jr. 37 Executive Vice President
Ivan J. Houston 74 Director
Robert Jones 73 Director
Conrad Fernandez 54 Vice-President and Controller
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. The last Annual Meeting of Shareholders was held
September 24, 1998. Background information concerning the Company's officers and
directors is as follows:
William H. Smith, Jr. Mr. Smith has been affiliated with Harrison-Ross
Funeral Home, Inc. for the past 30 years and is currently President and Chairman
of the Board of Directors of the Company. Mr. Smith is a licensed funeral
director and manages the day-to-day business of the company. He attended
Pepperdine University, Howard University School of Law and the National School
of Mortuary Management. Mr. Smith has also been involved in real estate
development and is a licensed insurance agent.
William H. Smith, III. Mr. Smith is an attorney and has been secretary of
Harrison-Ross Funeral Home, Inc. since 1991. From 1988 to 1989, Mr. Smith was
employed by the District of Columbia - Department of Human Rights & Minority
Business Development. During 1991, he worked for the Superior Court of the
District of Columbia. During 1989, he was employed by the law firm of Girardi,
Keese & Crane. Mr. Smith is a graduate of Tufts University and the Georgetown
University Law Center. Mr. Smith is the son of William H. Smith, Jr., the
President of Harrison-Ross Funeral Home, Inc.
Leon Harrison, Jr.. Mr. Harrison has been employed by Harrison-Ross Funeral
Home, Inc. since 1971 and is currently Vice President. Mr. Harrison has been
involved in the daily operations of the Company since 1984. Mr. Harrison
attended Boston University. Mr. Harrison is the half- brother of William H.
Smith, Jr.
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<PAGE>
Ivan J. Houston. Mr. Houston is currently Chairman of the Board for Golden
State Mutual Life Insurance Company and President of the Golden State Minority
Foundation. From 1938 to 1970, Mr. Houston served as an accountant, actuary,
Vice President and Senior Vice President for Golden State Mutual Life Insurance
Company. In 1970, Mr. Houston was elected President and Chief Executive Officer.
In 1980, Mr. Houston was elected Chairman and Chief Executive Officer. In 1991,
Mr. Houston retired as Chief Executive Officer. Mr. Houston was a member of the
Board of Directors for Golden Mutual Life Insurance Company, Family Savings and
Loan Association, First Interstate Bank of California, Pacific Bell, Pacific
Telesys, Kaiser Aluminum & Chemical Corporation, Metromedia, and Pacific
Indemnity. Mr. Houston received his Bachelor of Science Degree in 1948 from the
University of California at Berkley and he studied Actuarial Science at the
University of Manitoba, Winnipeg, Canada from 1948 through 1949.
Robert Jones. Mr. Jones is Chairman of Commonwealth Thrift BanCorp,
formerly A.R.B. Group, Inc., a computer data processing company. From 1985 to
1988, he was Director and Vice Chairman of the Republic Bank. Also during that
time period, he was the Director, Vice Chairman and Chairman of American
Republic Bancorp which is a bank holding company. Mr. Jones is also currently
and has been since 1972, the owner of Robert L. Jones Consultant, which is a
management and tax consulting firm. Mr. Jones is currently Chairman of Universal
Plating and Inspection Corporation. He was formerly President and CEO of
Universal and has held those positions since 1964. Conrad A. Fernandez. Mr.
Fernandez has worked for Harrison-Ross Funeral Home, Inc. for the last 20 years
and is currently Vice President and Controller. He was formerly an auditor for
the Capital Bank in Manila, Philippines. Mr. Fernandez earned his Bachelor of
Science Degree in accounting.
Committees of the Board
The Board of Directors has an Audit Committee on which Messrs. Mr. Robert
L. Jones and Mr. Ivan J. Houston serve. The Audit Committee has general
responsibility for meeting periodically with representatives of the Company's
independent public accountants to review the general scope of audit coverage,
including consideration of the Company's accounting practices and procedures and
its system of internal accounting controls, and for reporting to the Board with
respect thereto. The Audit Committee also recommends to the Board the
appointment of the Company's independent auditors.
The Board of Directors also has a Compensation Committee on which Messrs.
Mr. Robert L. Jones and Mr. Ivan J. Houston serve. The Compensation Committee
reviews, analyzes and recommends compensation programs to the Board.
The Board of Directors does not have a nominating committee.
Involvement in Certain Legal Proceedings
None.
20
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ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last three years to the Company's Chief
Executive Officer and to the Company's most highly compensated executive
officers other than the CEO, whose annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
--------------------------- ----------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Year Annual Restrict Option/ LTIP Other
Name and Ended ($) ($) Compen- Stock SAR's Payouts Compen-
Principal Position 2/28 Salary Bonus sation($) Awards($) (#) ($) sation ($)
- ---------------------- ------- ------- -------- ---------- -------------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Smith, Jr. 1998 $60,000 $ -0- $ -0- $ -0-- $ -0- $ -0- $ -0-
President, CEO 1997 $60,000 $ -0- $ -0- $ -0-- $ -0- $ -0- $ -0-
Chairman 1996 $60,000 $ -0- $ -0- $ -0-- $ -0- $ -0- $ -0-
</TABLE>
No options, stock appreciation rights or long-term incentive plan awards
were issued or granted to the Company's management during the fiscal year ending
December 31, 1998. As of December 31, 1998, the end of the Company's last fiscal
year, the Company's management owned no options or stock appreciation rights.
Accordingly, no tables relating to such items have been included in this Item 6.
Compensation of Directors
The Company's non-employee directors are not currently compensated.
The Leon Harrison, Jr. Irrevocable Trust, principal shareholder of the
Company, has granted options to each of Walter Kornbluh and Robert Jones to
purchase 500,000 shares each of the share of the Company's common stock
currently owned by the Leon Harrison, Jr. Irrevocable Trust. (See "Certain
Relationships and Related Transactions - Part I, Item 7").
Employment Contracts
The Company is not a party to any legal or oral employment agreement. Its
officers and other employees are terminable at will.
The Profit Sharing Plan is eligible to all employees who have attained the
age of 21 and completed one year of service with the Company.
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The Company may make profit sharing contributions to the Profit Sharing
Plan which are allocated among all participants who are actively employed as of
the last day of the year. All contributions are deposited in a trust under a
written trust agreement with William H. Smith, Jr. as trustee.
Participants generally vest in profit sharing contributions pursuant to
the following schedule:
Percentage
Year Vested
------ ------------
0-1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
No amounts were contributed by the Company to the Plan during the last
three (3) years.
Directors who are not executive officers of the Company did not
participate in the Profit Sharing Plan.
Future Incentive Plans
The Company will likely adopt additional qualified and/or unqualified
incentive compensation plans in the future including incentive stock option
plans, pension plans, profit plans or other similar type of plans.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In May 1997, the Company purchased a 950 acre parcel of real property
from Robert L. Jones, who at the time of the transaction was a director of the
Company and continues to be a director of the Company. The property was
purchased for $1,900,000, which the amount of an appraisal obtained in
connection with the property. A total of $1,200,000 of the purchase price was
paid for by the issuance of 960,000 shares to Mr. Jones. The remaining $700,000
of the purchase price was paid for by the delivery of a Promissory Note from the
Company to Mr. Jones.
The property was sold in 1998 to the Remembrance Association for
$2,100,000. The Company took back a note for $1,400,000 which is due in July,
1999.
Mr. Robert L. Jones, a director of the Company, was the Chairman of the
Board of Commonwealth Thrift which made a loan in the amount of $200,000 to the
Company. The loan was repaid in full in February, 1998.
22
<PAGE>
Mr. Ivan J. Houston is the Chairman of Golden State Mutual Insurance which
the Company uses to sell insured, preneed funerals. Mr. Houston is also an agent
at Golden State Insurance and as such, earns commissions in connection with the
sale of Golden State Insurance to the Company's customers.
Over the last several years, the Company had made loans to William H.
Smith, Jr., its chairman, and to Leon Harrison, Jr., its Executive Vice
President. The loan proceeds were used to purchase a mortuary in Las Vegas,
Nevada and for working capital for the mortuary. The loan accrues interest at 8%
per annum and is due January 1, 2001 and is unsecured.
Over the 10 years prior to 1997, the Company had made loans to William H.
Smith, Jr., its Chairman and Leon Harrison, Jr., its Executive Vice-President.
In February, 1997, the Leon Harrison, Jr. Irrevocable Trust transferred
1,5000,000 shares of the Company's common stock to the Company for cancellation
as payment in full of $750,000 of said loans.
The Leon Harrison, Jr. Irrevocable Trust has granted each of Walter
Kornbluh and Robert L. Jones an Option to purchase 500,000 of its shares of the
Company's common stock at a price of $.75 per share. Such options expire
December 31, 2002.
Parents of Company
The only parents of the Company, as defined in Rule 12b-2 of the Exchange
Act, are the officers and directors of the Company and the Leon Harrison, Jr.
Irrevocable Trust. For information regarding the shareholdings of the Company's
officers and directors, see Item 4.
ITEM 8. DESCRIPTION OF SECURITIES
The Company presently has two classes of capital stock authorized. The
Company's authorized classes of capital stock consists of (1) $.001 par value
common stock of which 25,000,000 shares are authorized and 8,480,000 are issued
and outstanding; and (2) $.001 par value Preferred Stock of which 5,000,000
shares are authorized, 350,000 of which have been designated as Series "A'
Convertible Preferred Stock, all 350,000 of which are issued and outstanding.
Common Stock
The Company is authorized to issue 25,000,000 shares of its $.001 par
value common stock. There are presently 8,480,000 shares of common stock issued
and outstanding. The holders of the Company's common stock are entitled to one
vote per share on each matter submitted to vote at any meeting of stockholders.
The shares of common stock do not carry cumulative voting rights in the election
of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is not
subject to redemption rights and carries no subscription or conversion rights.
In the event of liquidation of the Company, the shares of
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<PAGE>
common stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. All shares of the common stock now outstanding
are fully paid for and non-assessable and all shares of common stock which are
the subject of this offering, when issued, will be validly issued, fully paid,
and non-assessable.
Holders of common stock are entitled to receive such dividends as the
Board of Directors may from time to time declare out of funds legally available
for the payment of dividends. The Company has never paid a dividend. The Company
seeks growth and expansion of its business through the reinvestment of profits,
if any, and does not anticipate that it will pay dividends in the foreseeable
future.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of $.001 par value
Preferred Stock. The Company's Certificate of Incorporation provides that shares
of Preferred Stock may be issued in one or more series as determined by the
Board of Directors.
Series "A" Preferred Stock. The Board of Directors has adopted a Series
"A" Preferred Stock consisting of 350,000 shares. All 350,000 shares designated
as Series A Preferred Stock have been issued to the Harrison-Ross Preneed Trust.
The stock has a guaranteed cumulative dividend of 8.5%. The stock is non-voting
and is not convertible into common stock as of September 14, 1999. Dividends are
$106,604 in arrears.
In the event of any liquidation, dissolution or winding up of the affairs
of the Company, whether voluntary or otherwise, after payment or provision for
payment of debts and the liabilities of the Company, the holders of Series "A"
Preferred Stock shall be entitled to receive, out of the net assets of the
Company, the principal amount paid to the Company for the original purchase of
the Series "A" Preferred Stock before any distribution shall be made to the
holders of any class of Common Stock of the Company.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
Market for Common Stock
The Company's common stock is currently traded on a limited basis in
over-the-counter market and quoted on the NASD's Electronic Bulletin Board under
the symbol "HRGP". As of December 1, 1999, the Company's management believes
that less than 10% of the Company's issued and outstanding shares are in the
public float. Currently, there is only limited trading activity in the Company's
common stock and the quotations set forth below reflect such limited activity.
There can therefore be no assurance that quotations will not fluctuate greatly
in the future in the event trading activity increases or decreases. The
information contained in the following table was obtained from
24
<PAGE>
the NASD and from various broker-dealers and shows the range of representative
bid prices for the Company's common stock for the periods indicated. The prices
represent quotations between dealers and do not include retail mark-up,
mark-down or commission, and do not necessarily represent actual transactions:
Bid Price
1999 High Low
First Quarter $ .25 $.25
Second Quarter $ .25 $.25
Third Quarter $ .25 $.25
Fourth Quarter $ .25 $.25
(Through December 1, 1999)
1998
First Quarter $ .78125 $.53125
Second Quarter $ .9375 $.6875
Third Quarter $ 1.0625 $.75
Fourth Quarter $ .6875 $.4375
1997
First Quarter $ .875 $.50
Second Quarter $ .875 $.51
Third Quarter $ 1.25 $.75
Fourth Quarter $ .625 $.375
(Through November 16, 1998)
Holders
The number of record holders of the Company's common stock as of December
1, 1999 was 190.
Dividends
The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying dividends in the foreseeable future. It is the
present intention of management to utilize all available funds for the
development of the Company's business.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently involved in the following lawsuits:
1. Keys, et al. v. Harrison Ross, et al., Case No. BC195124. This
matter is presently in process of discovery by other defendants, but
none has been directed toward Harrison Ross. A Motion to Strike
Plaintiff's First Amended Complaint, filed by other defendants, is
set for February 25, 1999. A Status Conference has been set for
March 11, 1999 at 8:00 a.m. in Department 9. No trial date
has been requested. Deposition of Horace Carter is set for March
3, 1999. This case is awaiting decision from the Mandatory
Arbitration Settlement.
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<PAGE>
2. Westra v. Harrison Ross, et al., Case No. BC188746. This matter has
been set for Status Conference on March 16, 1999 at 8:00 a.m. in
Department 4. In process of discovery. Cross-Complaint filed against
National Music, not yet served. This case is awaiting decision from
the Mandatory Arbitration Settlement.
The Company is, from time to time, a party to legal proceedings that have
arisen in the ordinary course of business. While the outcome of these
proceedings cannot be predicted with certainty, management does not expect these
matters to have a material adverse effect on its financial condition.
The Company carries insurance with coverages and coverage limits that it
believes to be customary in the funeral home industry. Although there can be no
assurance that such insurance is sufficient to protect it against all
contingencies, management believes that its insurance protection is reasonable
in view of the nature and scope of its operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following table gives effect to the 1-for-5 reverse split which
occurred on September 9, 1993 and sets forth information as to sales of the
Registrant's common stock since 1990 which were not registered under the
Securities Act of 1933, as amended:
Number
Date of Aggregate
Name of Owner Acquired Shares Consideration
- -------------------------------------------------------------------------------
Robert L. Jones 5/28/97 960,000 Real Estate Transfer*
* See Part I, Item 7 of this Form 10-SB for additional information.
In the issuance of shares to Mr. Jones, the Company relied upon Section 4(2) of
the Securities Act of 1933 (the "Act") in that the transactions did not involve
a public offering and were therefore exempt from the registration requirements
of the Act. A restrictive legend was placed on each certificate evidencing the
shares issued to the above-referenced persons. Mr. Jones was an accredited
investor, as that term is defined in Regulation D promulgated under the
Securities Act of 1933.
26
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has provided for indemnification for its directors and others
pursuant to its Restated Certificate of Incorporation, its Bylaws and
Indemnification Contracts.
Restated Certificate of Incorporation
Article XI of the Company's Articles of Incorporation provides as
follows:
The Corporation shall, to the fullest extent permitted by the
provisions of ss. 751 of the General Corporation Law of the State of
Nevada, as the same may be amended and supplemented, indemnify any and
all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities, or other matters
referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under the Bylaw, agreement, vote
of stockholders, or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
Article XI of the Company's Articles of Incorporation provides as follows
A director or officer of the Corporation shall not be personally
liable to the Corporation or its stockholders for damages for breach of
fiduciary duty as a director or officer, except for: (1) acts or
omissions which involve intentional misconduct, fraud or a knowing
violation of law; or (2) the payment of dividends in violation of NRS
78.300.
Any repeal or modification of the provisions of this Article X by
the stockholders of the Corporation shall be prospective only, and shall
not adversely affect any limitation on the personal liability of a
director or officer of the Corporation with respect to any act or
omission occurring prior to the effective date of such repeal or
modification.
If the Nevada General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of
directors or officers, then the liability of a director or officer of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended
Nevada General Corporation Law.
In the event that any of the provisions of this Article X
(including any provision within a single sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable,
the remaining provisions are severable and shall remain enforceable to
the fullest extent permitted by law.
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Bylaws
Article 5 of the Company's Bylaws provides as follows:
The Corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Nevada, as that Section may be
amended and supplemented from time to time, indemnify any director,
officer or trustee which it shall have power to indemnify under that
Section against any expenses, liabilities or other matters referred to in
or covered by that Section. The indemnification provided for in this
Article (i) shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any bylaw, agreement or vote of
stockholders or disinterested directors or otherwise, both as to action
in their official capacities and as to action in another capacity while
holding such office, (ii) shall continue as to a person who has ceased to
be a director, officer or trustee, and (iii) shall inure to the benefit
of the heirs, executors and administrators of such a person. The
Corporation's obligation to provide indemnification under this Article
shall be offset to the extent of any other source of indemnification or
any otherwise applicable insurance coverage under a policy maintained by
the Corporation or any other person.
Indemnification Agreements
The Company has not entered into Indemnification Agreements with any
officer or director but may do so in the future.
PART F/S
Index to Financial Statements
Report of Independent Certified Public Accountants
Financial Statements Page No.
December 31, 1998 and December 31, 1997
Report of Independent Accountants 30
Balance Sheets - 31
December 31, 1998
Statements of Income - 33
Years ended December 31, 1998 and 1997
Statement of Stockholders' Equity - 34
Years ended December 31, 1998 and 1997
Statements of Cash Flows - 35
Years ended December 31, 1998 and 1997
Notes to Financial Statements 38
28
<PAGE>
September 30, 1999
Balance Sheet - 42
September 30, 1999
Income Statement - 44
Nine months ended September 30, 1999 and 1998
Statements of Cash Flows - 46
Nine months ended September 30, 1998
Statement of Stockholders' Equity 47
29
<PAGE>
June 1, 1999
Board of Directors
Harrison-Ross Group, Inc.
Los Angeles, California
We have audited the accompanying consolidated balance sheet of Harrison-Ross
Group, Inc., as of December 31, 1998, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the two years in the
period ended December 31, 1998. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Harrison-Ross
Group, Inc., at December 31, 1998, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Karl F. Ketterer
30
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
ASSETS
CURRENT ASSETS
Cash $ 47,530
Accounts Receivable - Trade
Less: Allowance for Doubtful Accounts of $47,109 307,262
Inventory of Caskets and Clothing (Note 1) 20,998
Prepaid Expenses 48,427
Loans - Officer 11,427
Loan to Las Vegas Partnership (Note 2) 339,359
Note Receivable (Note 3) 1,464,899
---------------
TOTAL CURRENT ASSETS $ 2,239,902
PROPERTY AND EQUIPMENT - At Cost (Note 1)
Land 142,257
Buildings 418,306
Landscaping and Paving 24,055
Furniture, Furnishings and Equipment 479,292
Automotive Equipment 72,671
Leasehold Improvements 131,155
--------------
1,267,736
Less: Accumulated Depreciation 913,379
--------------
NET PROPERTY AND EQUIPMENT 354,357
OTHER ASSETS
Deferred Finance Charges 8,299
Deposits 22,547
Other Investments 11,005
Note Receivable (Note 4) 0
Prearranged Funeral Contracts (Note 5) 2,973,880
--------------
TOTAL OTHER ASSETS 3,015,731
--------------
TOTAL ASSETS $ 5,609,990
===============
- ----------------------------------------------------------------------------
(See notes to consolidated financial statements)
31
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable - Trade $ 284,598
Accounts Payable - Other (Note 6) 243,501
Federal and State Taxes on Income (Note 7) 7,554
Dividends Payable - Preferred Stock (Note 5) 29,750
Current Portion of Notes Payable (Schedule 2) 279,073
Accrued Profit Sharing Payable (Note 8) 0
--------------
TOTAL CURRENT LIABILITIES 844,476
NOTES PAYABLE - LONG TERM (Schedule 2) 19,759
DEFERRED PREARRANGED FUNERAL CONTRACT
REVENUES (Note 5) 3,016,720
STOCKHOLDERS' EQUITY
Capital Stock (Note 10), 25,000,000 shares authorized,
8,480,000 issued and outstanding 8,480
Preferred Stock, 5,000,000 shares authorized,
350,000 issued and outstanding 350
Paid in Capital 950,670
Retained Earnings 769,535
-------------
TOTAL STOCKHOLDERS' EQUITY 1,729,035
--------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,609,990
==============
(See notes to consolidated financial statements)
32
<PAGE>
<TABLE>
<CAPTION>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(In dollars, except per share amounts)
1998 1997
REVENUE --------------- --------------
<S> <C> <C>
Sale of Goods & Professional Services $ 3,550,410 $ 3,544,427
Less - discounts (10,348) (11,340)
NET REVENUE 3,540,062 3,533,087
COST OF GOODS & SERVICES SOLD
Beginning Inventories 34,545 53,326
Purchased Goods & Services 1,090,125 1,054,113
Salaries - Operations 733,497 706,377
Payroll Taxes - Operations 63,910 63,779
GOODS & SERVICES AVAILABLE FOR SALE 1,922,077 1,877,595
Less: Ending Inventories (20,998) (34,545)
COST OF GOODS SOLD 1,901,079 1,843,050
GROSS PROFIT 1,638,983 1,690,037
COST & EXPENSES (Schedule 1) 1,540,166 1,520,698
INCOME FROM OPERATIONS 98,817 169,339
OTHER INCOME AND EXPENSES
Escrow extension fee (Note 11) 20,000
Write down of Note and Loan Receivable (Note 4) (400,000)
Interest on Investments - Net 9,143 (130,827)
Loss on Sales of Land - Net (Note 12) (290,174)
Loss on Termination of Management Contract (65,030)
(Note 13)
TOTAL OTHER INCOME & EXPENSES (746,061) (110,827)
INCOME (LOSS) BEFORE TAXES (647,244) 58,512
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (Note 14) 7,571 15,347
NET INCOME (LOSS) $ (654,815) $ 43,165
EARNINGS (LOSS) PER COMMON SHARE $ (0.08) $ 0.01
See notes to consolidated financial statements)
</TABLE>
33
<PAGE>
HARRISON-ROSS GROUP, INC.
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCKS PAID IN PREFERRED STOCK RETAINED
SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS TOTAL
------------ ----------- -------------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 9,020,000 $ 9,020 $ 500,130 350,000 $ 350 $1,440,077 $1,949,577
STOCK ISSUED FOR LAND 960,000 960 1,199,040 1,200,000
DIVIDENDS ON PREFERRED STOCK (NOTE 5) (29,750) (29,750)
STOCK EXCHANGE FOR OFFICER'S LOAN (1,500,000) (1,500) (748,500) (750,000)
NET INCOME 43,165 43,165
------------ ----------- -------------- ----------- ----------- ------------ ----------
BALANCE, DECEMBER 31, 1997 8,480,000 $ 8,480 $ 950,670 350,000 $ 350 $1,453,492 $2,412,992
============ =========== ============== =========== =========== ============ ==========
DIVIDENDS ON PREFERRED STOCK (NOTE 5) (29,750) (29,750)
INCOME TAX ADJUSTMENT 608 608
NET LOSS (654,815) (654,815)
------------ ----------- -------------- ----------- ----------- ------------ ----------
BALANCE, DECEMBER 31, 1998 8,480,000 $ 8,480 $ 950,670 350,000 $ 350 $ 769,535 $1,729,035
============ =========== ============== =========== =========== ============ ==========
</TABLE>
- -------------------------------------------------------------------------------
(See notes to consolidated financial statements)
34
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
Operating Activities: 1998 1997*
------------ ------------
Net Income (Loss)
Adjustments to Reconcile to Net Cash Provided $ (654,815) $ 43,165
by or (Used) in Operating Activities: ------------ ------------
Depreciation and Amortization
Operating Assets & Liability Changes: 17,144 25,605
(Increase) Decrease Operating Assets
Accounts Receivable - Trade (18,067) (12,693)
Prearranged Funeral Contracts 310,896 249,962
Inventories 13,547 18,781
Prepaid Expenses 16,463 (45,185)
Deposits (1,919) 1,503
Deferred Finance Charges 55,726 32,439
Claim against Loewen Group - net 13,771
Increase (Decrease) Operating Liabilities
Accounts Payable - Trade (93,325) (6,717)
Accounts Payable - Other (25,490) 176,903
Federal and State Taxes on Income (7,793) (16,090)
Deferred Revenues (307,571) (253,058)
Income Tax Adjustment 608
------------ ------------
Total Adjustments (39,781) 185,221
------------ ------------
Net Cash Provided by or (Used) in Operating Activities (694,596) 228,386
------------ ------------
Investing Activities:
Other Investments (2,692) (17)
Notes Receivable - Officers 750,000
Loan to Las Vegas Partnership (236,263) (103,096)
Acquisition of Property and Equipment (49,737) (1,902,393)
Note Receivable (1,464,899)
Loan - Officer (566) (10,861)
Disposition of Property and Equipment 1,945,270
Note Receivable Write-down 445,291
------------ ------------
Cash Provided by or (Used) in Investing Activities 636,404 (1,266,367)
------------ ------------
Financing Activities:
Common Stock 1,200,000
Notes Payable 81,996 628,702
Dividends Preferred Stock (29,750) (29,750)
Retirement of Treasury Stock (750,000)
------------ ------------
Cash Provided by or (Used) in Financing Activities 52,246 1,048,952
------------ ------------
Increase of (Decrease) in Cash (5,946) 10,971
Cash Balance January 1, 53,476 42,505
------------ ------------
Cash Balance December 31, $ 47,530 $ 53,476
============ ============
- --------------------------------------------------------------------------------
*Restated for comparison
(See notes to consolidated financial statements)
35
<PAGE>
Schedule 1
HARRISON-ROSS GROUP, INC.
CONSOLIDATED SCHEDULE OF COSTS AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31,
1998 1997
------------ -------------
Advertising, Promotion, and Entertainment $ 63,559 $ 26,456
Auto Fleet Operating Expenses 43,393 46,823
Collection Fees 2,096 3,193
Depreciation and Amortization 17,144 25,605
Dues and Subscriptions 4,412 3,520
Insurances 183,664 160,370
Interest and Finance Charges 137,980 103,536
Laundry and Cleaning 4,066 4,119
Legal and Accounting 23,424 41,450
Management Services 40,000 35,000
Office Supplies and Miscellaneous 37,377 40,725
Payroll Taxes 38,580 42,325
Provision for Doubtful Accounts 24,000 13,755
Rents 243,794 254,919
Salaries - Management 208,900 208,900
Salaries - Other 234,599 260,042
Security and Ground Maintenance 88,660 70,548
Taxes and Licenses 47,986 67,210
Telephone 47,501 53,254
Travel and Conventions 250 6,055
Utilities 48,781 52,893
------------ -------------
$ 1,540,166 $ 1,520,698
============ =============
- --------------------------------------------------------------------------
(See notes to consolidated financial statements)
36
<PAGE>
Schedule 2
HARRISON-ROSS GROUP, INC.
SCHEDULE OF NOTES PAYABLE
DECEMBER 31, 1998
<TABLE>
<CAPTION>
RATE OF
LENDER INTEREST COLLATERAL
- ------------------------------ -------------- ----------------------------
<S> <C> <C> <C> <C>
NOTES PAYABLE CURRENT LONG-TERM
---------------
Ford Motor Credit Corp. 7.90% Vehicle 4,881 3,165
Ford Motor Credit Corp. 4.90% Vehicle 4,209 16,594
Imperial Bank P+1.00% Savings Deposit 98,416 0
OTHER
---------
Lucille Harrison 10.00% None 17,755 0
Note Payable, L. King 10.00% None 2,791 0
Profit Sharing Plan (Note 8) 7.75% None 151,021 0
---------- ----------
$ 279,073 $ 19,759
========== ==========
</TABLE>
- ------------------------------------------------------------------------------
(See notes to consolidated financial statements)
37
<PAGE>
HARRISON-ROSS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 1 - Summary of Accounting Policies:
Principles of Consolidation:
The consolidated financial statements include the accounts of Harrison-Ross
Group, Inc., and its wholly-owned operating subsidiary, Harrison-Ross
Funeral Home, Inc. Significant intercompany accounts have been eliminated in
consolidation.
Description of Operations:
Harrison-Ross Group, Inc., (the "Company") through its subsidiary
Harrison-Ross Funeral Home, Inc., is principally engaged in providing
funerals and funeral services.
Inventories:
Inventories are stated at the lower of cost (on first-in, first-out basis)
or market, and consists of caskets and clothing.
Depreciation and Amortization Policy:
Depreciation and amortization of property acquired by the Company is being
computed on the declining-balance method. Amortization of intangible assets
is computed on the straight-line method.
Provision for depreciation of property is based on the estimated useful
lives of the assets as follows:
Depreciation & Amortization Estimated
Expense - December 31, Life of Asset
----------------------------------------
1998 1997
----------- -----------
Buildings $ 5,137 $ 5,389 40 years
Automotive Equipment 7,523 7,887 3 years
Furniture and Equipment 1,491 1,988 8-10 years
Leasehold Improvements 2,993 637 8-10 years
Organization Expense 0 9,707 5 years
----------- -----------
$ 17,144 $ 25,608
=========== ===========
Maintenance repairs are charged to appropriate expense accounts as incurred,
and major renewals and betterments are capitalized.
When items of property are retired or otherwise disposed of, the asset and
the related accumulated depreciation are eliminated from the accounts, and
the resultant gain or loss is taken into earnings.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Earnings per Common Share:
Net income per share is computed by dividing net income (loss) by the number
of shares outstanding at the end of each period utilizing the weighted
average method.
38
<PAGE>
Note 2 - Loans to Las Vegas Partnership:
The Company, under a management arrangement, has managed a mortuary in Las
Vegas for William Smith and another partner. The Company has advanced
$339,359 to this partnership which will ultimately be repaid by the
partnership to the Company. (See Note 10.)
Note 3 - Note Receivable:
During June, 1998, the Company sold 950 acres of land located in San
Jacinto, California for $2,100,000 paying off a note for $700,000 and
taking back a note receivable for $1,400,000 at 9% per annum due in lump
sum in July of 1999. Interest of $64,899 has been accrued through
December, 1998. The Company realized a $200,000 gain on this sale.
Note 4 - Write-down of Note Receivable:
The Company's negotiations to sell a $400,000 note receivable that had
been in default fell through late in 1998. Management has elected to
write-off this note since it appears doubtful that any future collections
will be received.
Note 5 - Prearranged Funeral Contracts:
As of December 31, 1998 the Company's balance of prearranged funeral
contracts sold totals $2,973,880. Of this amount $2,046,603 is installment
receivables. At December 31, 1998 $927,277 has been collected, of which
$371,974 is held in trust accounts, $175,553 which the Company has not yet
deposited in trust accounts (as required by contract to be so deposited
within 30 days), and $379,750 of preferred stock including accrued
dividends of $29,750. The Company has also deferred $42,840 of income
relating to insurance policy premium discounts.
The deferred prearranged funeral contract revenues includes all price
guaranteed prearranged funeral service contracts as well as the accrued
trust earnings net of administrative costs. The Company will continue to
defer additional accruals of trust earnings until such time the services
are performed.
Note 6 - Accounts Payable - Other:
The major accounts are as follows:
Deferred liability on future purchases $61,071
Represents cost of caskets sold to installment sale pre-need customers by
contract and required to be purchased and stored until such time as
requested by the customer.
Due to Pre-Need Trust $175,553
This amount is paid to the Company by customers for prearranged funerals
and by contract is to be disbursed within thirty days of receipt. The
Company has elected to pay interest at 5 3/4% per annum calculated on a
quarterly basis until such time the payments are disbursed by the Company.
39
<PAGE>
Note 7 - Federal and State Taxes Payable on Income:
Represents income tax due on 1998 Federal and California income tax returns.
Federal $ 6,690
California 864
-------------
$ 7,554
=============
Note 8 - Accrued Profit Sharing Payable:
The Company has a profit sharing plan that meets the qualifications of
Sections 401-415 of the Internal Revenue Code. Employees are eligible for
participation after one year of services. Vesting begins after two years of
employment with 100% vesting achieved after six years of service. At the
discretion of the Board of Directors the Company can make annual contributions
to the plan not to exceed 15% of the annual salaries of the plan participants.
The Company did not accrue a contribution for 1997 nor 1998. Since the accrual
of $110,000 for 1993 was not paid it has been converted to a note bearing 7 3/4%
interest per year.
With the closing of Commonwealth Thrift and Loan the Company's loan from
that institution was repaid by the FDIC taking funds from two bank accounts
including $71,422.85 from the Profit Sharing Account. The Company has agreed to
repay said funds to the Profit Sharing Account and has recorded a liability for
said repayment. The Company is paying interest at 7 3/4% per annum on this
obligation.
Note 9 - Commitments and Contingencies:
The Company leases a mortuary building and leases its automobile fleet
with annual rentals payments of: for the years ending December 31, 1999 -
$187,020; 2000 - $129,919; 2001 - $110,821; 200 - $76,787; 2003 - $46,060;
thereafter $46,060.
The principal headquarters is located at 1839 E. Firestone Blvd., Los
Angeles, with branches at 4601 Crenshaw Blvd., Los Angeles; and 436 E. Compton
Blvd., Compton.
The Company is from time to time, and due to the nature of its business,
subject to claims from its customers. Currently there are several such claims
outstanding. It is the opinion of management that the Company's liability
insurance should be sufficient to cover exposure to the claims.
Note 10 - Ownership and Related Party Transaction:
40
<PAGE>
The Leon Harrison, Jr. Trust, the Company's majority stockholder, owns 73%
of the outstanding Common stock of the Company.
The Company has advanced $339,359 to a partnership which owns a mortuary
in Las Vegas, Nevada. William Smith, President of Harrison-Ross Group, Inc.,
owns 50% of this partnership.
Note 11 - Escrow Extension Fee:
In connection with the land sale that was concluded in January, 1998 and
is explained in Note 12 the Company received $20,000 in non-refundable extension
fees from the buyer in 1997. These fees have been treated as other income.
Note 12 - Loss on Sales of Land - Net:
During January of 1998 the Company sold land located in Los Angeles
County for $1,700,000 realizing a loss of $490,174. This loss was partially
offset by a gain of $200,000 on the sale of San Jacinto land in June of 1998.
(See Note 3.)
<PAGE>
Note 13 - Loss on Termination of Management Contract:
The Company had been operating a mortuary for an individual owner for
several years. In connection with this operating agreement, the Company was
liable for pre-need funds of $65,030 including interest and penalties which
arose during the term of the contract. This liability was discharged by the
Company's purchase of individual life insurance policies.
Note 14 - Provision for Federal and State Taxes on Income:
The components of income tax expense are as follows:
1998 1997
--------------------------------
Federal Income Tax $ 6,707 $ 6,714
State Income Tax - Net of Federal
Tax Benefit 734 6,481
Depreciation 536 753
Miscellaneous Items (1,047) 1,313
Accounts Receivable 641 86
-------------------------------
Income Tax Expense $ 7,571 $15,347
===============================
Total Effective Tax Rate 15.00% 26.23%
===============================
The Company, due to the net loss on the sales of land has a capital loss
carryover of $ 690,174 and $890, 174 for federal and California taxes ,
respectively, which will be available to offset a similar amount of capital
gains in future years.
41
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30,
ASSETS
CURRENT ASSETS 1999 1998
- -------------- ---- ----
Cash $ 18,069 $ 25,864
Accounts Receivable - Trade
Less: Allowance for Doubtful Accounts of $59 280,849 277,837
Inventory of Caskets and Clothing 19,090 24,701
Prepaid Expenses 47,091 15,319
Loans - Officer 13,467 11,596
Loan to Las Vegas Partnership 400,312 309,578
Note Receivable 1,561,746 1,400,000
---------- -----------
TOTAL CURRENT ASSETS $2,340,624 $2,064,895
---------- -----------
PROPERTY AND EQUIPMENT - At Cost
Land $ 142,257 $ 142,257
Buildings 418,306 418,305
Landscaping and Paving 24,055 24,055
Furniture, Furnishings and Equipment 484,105 479,292
Automotive Equipment 86,816 72,671
Leasehold Improvements 131,155 131,155
----------- ----------
$1,286,694 $1,267,735
Less: Accumulated Depreciation (930,212) 905,807
----------- -----------
NET PROPERTY AND EQUIPMENT $ 356,482 $ 361,928
----------- -----------
OTHER ASSETS
Deferred Finance Charges $ 8,420 $ 13,641
Deposits 22,547 21,804
Other Investments 11,005 8,313
Note Receivable - 446,091
Prearranged Funeral Contracts 2,871,276 3,002,084
----------- ----------
TOTAL OTHER ASSETS $2,913,248 $3,491,933
----------- ----------
TOTAL ASSETS $5,610,354 $5,918,756
=========== ===========
45
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES 1999 1998
- ------------------- ------- --------
Accounts Payable - Trade $ 313,717 $ 199,355
Accounts Payable - Other 286,860 267,371
Federal and State Taxes on Income (36) 591
Dividends Payable - Preferred Stock - -
Current Portion of Notes Payable 266,108 301,742
Accrued Profit Sharing Payable - -
--------- ---------
TOTAL CURRENT LIABILITIES $ 866,649 $ 769,059
--------- ----------
NOTES PAYABLE - LONG TERM $ 36,804 $ 9,430
DEFERRED PREARRANGED FUNERAL CONTRACT $2,913,079 $3,044,924
REVENUES
STOCKHOLDERS' EQUITY
Capital Stock (Note 10), 25,000,000 Shares
Authorized, 8,480,000 Issued and Outstanding $ 8,480 $ 8,480
Preferred Stock, 5,000,000 Shares Authorized,
350,000 Issued and Outstanding 350 350
Paid in Capital 950,670 950,670
Retain Earnings 834,322 1,135,843
------------ -----------
TOTAL STOCKHOLDERS' EQUITY $1,793,822 $2,095,343
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,610,354 $5,918,756
============= ===========
47
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR NINE MONTH PERIOD ENDED
(in dollars, except per share amounts)
SEPTEMBER 30,
REVENUE 1999 1998
- ------- ---- ----
Sale of Goods & Professional Services $2,486,977 $2,598,332
Less - Discounts (12,716) (8,207)
----------- ----------
NET REVENUE $2,474,261 $2,590,125
----------- ----------
COST OF GOODS & SERVICES SOLD
Beginning Inventories $ 20,998 $ 34,545
Purchased Goods & Services 828,333 823,731
Salaries - Operations 576,668 540,961
Payroll Taxes - Operations 54,450 49,491
----------- ----------
GOODS & SERVICES AVAILABLE FOR SALE $1,480,449 $1,448,728
Less: Ending Inventories 19,090 24,701
----------- ----------
COST OF GOODS SOLD $1,461,359 $1,424,027
GROSS PROFIT $1,012,902 $1,166,098
----------- ----------
COST & EXPENSES (Schedule 1) $1,044,961 1,163,108
----------- ----------
INCOME FROM OPERATIONS $ (32,059) $ 2,990
----------- ----------
OTHER INCOME AND EXPENSES
Escrow Extension Fee - -
Write Down of Note and Loan Receivable - -
Interest on Investments - Net $ 96,847 30,464
Loss on Sales of Land - Net - 290,174
Loss on Termination of Management Contract - -
----------- ----------
TOTAL OTHER INCOME & EXPENSES $ 96,487 (320,638)
----------- ----------
INCOME (LOSS) BEFORE TAXES $ 64,788 (317,648)
=========== ==========
49
<PAGE>
Schedule 1
HARRISON-ROSS GROUP, INC.
CONSOLIDATED SCHEDULE OF COSTS AND EXPENSES
FOR NINE MONTH PERIOD ENDED
SEPTEMBER 30,
1999 1998
----------- ----------
Advertising, Promotion, and Entertainment $ 27,248 $ 57,211
Auto Fleet Operating Expenses 31,620 29,545
Collection Fees 3,778 1,926
Depreciation and Amortization 16,832 9,572
Dues and Subscriptions 2,289 4,202
Insurances 116,568 139,643
Interest and Finance Charges 58,096 112,784
Laundry and Cleaning 3,017 2,501
Legal and Accounting 2,227 3,452
Management Services 17,500 32,500
Office Supplies and Miscellaneous 34,343 26,411
Payroll Taxes 28,127 30,565
Provision for Doubtful Accounts 12,600 18,000
Rents 200,144 183,503
Salaries - Management 155,575 156,675
Salaries - Other 177,498 178,402
Security and Ground Maintenance 62,476 67,399
Taxes and Licenses 22,159 34,806
Telephone 33,123 36,374
Travel and Conventions 112 250
Utilities 39,629 37,387
------------ -----------
$1,044,961 $1,163,108
============ ===========
50
<PAGE>
HARRISON-ROSS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR NINE MONTH PERIOD ENDED SEPTEMBER 30,
OPERATING ACTIVITIES: 1999 1998
----------- ----------
Net Income (Loss) $ 64,788 (317,648)
----------- ----------
Adjustments to Reconcile to Net Cash Provided
by or (Used) in Operating Activities:
Depreciation and Amortization 16,832 (7,930)
Operating Assets & Liability Changes:
(Increase) Decrease Operating Assets
Accounts Receivable - Trade 26,413 11,358
Prearranged Funeral Contracts 102,603 282,691
Inventories 1,908 9,844
Prepaid Expenses 1,336 49,571
Deposits - (1,176)
Deferred Finance Charges 3,956 50,384
Claim Against Loewen Group - Net - -
Increase (Decrease) Operating Liabilities
Accounts Payable - Trade 29,119 (202,805)
Accounts Payable - Other 43,360 21,632
Federal and State Taxes on Income (7,590) (14,756)
Deferred Revenues (103,641) (279,367)
Income Tax Adjustment - 984
----------- ----------
TOTAL ADJUSTMENTS $ 114,296 $ (79,570)
----------- ----------
Net Cash Provided by or (Used) in Operati 179,084 $(397,218)
----------- ----------
INVESTING ACTIVITIES:
Other Investments $ - $ -
Notes Receivable - Officers $ - $ -
Loan to Las Vegas Partnership (60,953) (206,483)
Acquisition of Property and Equipment (18,958) (31,176)
Note Receivable (96,847) (1,400,800)
Loan - Officer (2,041) (735)
Disposition of Property and Equipment - 3,956,484
Note Receivable Write-Down - -
----------- ----------
Cash Provided by or (Used) in Investing Activities $(178,799) $2,317,290
----------- ----------
FINANCING ACTIVITIES:
Common Stock - -
Notes Payable 4 (1,917,934)
Dividends Preferred Stock (29,750) (29,750)
Retirement of Treasury Stock - -
----------- -----------
Cash Provided or (Used) in Financing Activities $ (29,746) $(1,947,684)
Increase of (Decrease) in Cash $ (29,461) $ (27,612)
Cash Balance January 1, $ 47,530 $ 53,476
----------- ------------
Cash Balance December 31, $ 18,069 $ 25,864
=========== ============
51
<PAGE>
HARRISON-ROSS GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stocks Paid In Preferred Stock Retained
Shares Amount Capital Shares Amount Earnings TOTAL
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 9,020,000 $9,020 $ 500,130 $350,000 $350 $1,440,077 $1,949,577
Stock Issued for Land 960,000 960 1,199,040 1,200,000
Dividends on Preferred Stock (Note 5) (29,750) (29,750)
Stock in Exchange for Officer's Loan (1,500,000) (1,500) (748,500) (750,000)
NET INCOME 43,165 43,165
------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 8,480,000 $8,480 $ 950,670 $350,000 $350 $1,453.492 $2,412,992
====================================================================================
Dividends on Preferred Stock (Note 5) (29,750) (29,750)
Income Tax Adjustment 608 608
NET LOSS (654,815) (654,815)
------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 8,480,000 $8,480 $ 950,670 $350,000 $350 $ 769,535 $1,729,035
====================================================================================
NET INCOME, SEPTEMBER 30, 1999 $ 64,787 $ 64,787
------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 8,480,000 $8,480 $ 950,670 $350,000 $350 $834,322 $1,793,822
====================================================================================
</TABLE>
52
<PAGE>
HARRISON-ROSS GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stocks Paid In Preferred Stock Retained
Shares Amount Capital Shares Amount Earnings TOTAL
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 9,020,000 $9,020 $ 500,130 $350,000 $350 $1,352.031 $1,861,531
Dividends on Preferred Stock (29,750) (29,750)
Income Tax Adjustment 6,031 6,031
NET INCOME 111,765 111,765
-------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 9,020,000 $9,020 $ 500,130 $350,000 $350 $1,440,077 $1,949,577
=====================================================================================
Stock Issued for Land (Note 8) 960,000 960 1,199,040 1,200,000
Dividends on Preferred Stock (Note 3) (29,750) (29,750)
Stock Exchanged for Officer's Notes
(Note 8) (1,500,000) (1,500) (748,500) (750,000)
NET INCOME 43,165 43,165
-------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 8,480,000 $8,480 $ 950,670 $350,000 $350 $1,453,492 $ 2,412,992
=====================================================================================
NET INCOME, SEPTEMBER 30, 1998 $ (317,648) $ (317,648)
-------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1998 8,480,000 $8,480 $ 950,670 $350,000 $350 $1,135,844 $ 2,095,344
=====================================================================================
</TABLE>
53
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed as a part of this Registration Statement on
Form 10-SB:
Exhibit
Number Description
-----------------------------------------------------
2.1 Articles of Incorporation
2.3 Bylaws
3.1 Form of Common Stock Certificate
27 Financial Data Schedule
54
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THE HARRISON-ROSS GROUP, INC.
Date: January 13, 2000 By: /s/ William Smith, Jr.
______________________________
William Smith, Jr.
Chief Executive Officer
President
Date: January 13, 2000 By: /s/ Conrad A. Fernandez
______________________________
Conrad A. Fernandez
Chief Financial Officer
55
ARTICLES OF INCORPORATION
OF
THE HARRISON-ROSS GROUP, INC.
The undersigned incorporator hereby forms a corporation pursuant to the
General Corporation Law of the State of Nevada. (Chapter 78 of Nevada Revised
Statutes.)
ARTICLE I
CORPORATE NAME
The name of the Corporation is THE HARRISON-ROSS GROUP, INC.
ARTICLE III
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE IV
GENERAL PURPOSES
The nature of the business and the objects and purposes proposed to be
transacted, promoted, and carried on, are to do any or all things herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz.:
"The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Nevada".
ARTICLE V
CAPITAL STOCK
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 30,000,000 shares which are divided
into two classes as follows:
5,000,000 shares of Preferred Stock (Preferred Stock) $.001 par value per
share, and
25,000,000 shares of Common Stock (Common Stock) $.001 par value per
share.
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualification, limitations or restrictions
of the above classes of stock are as follows:
56
<PAGE>
Preferred Stock
1. Issuance in Series. Shares of Preferred Stock may be issued in one
or more series at such time or times, and for such consideration or
considerations as the Board of Directors may determine All shares of any one
series of Preferred Stock will be identical with each other in all respects,
except that shares of one series issued at different times may differ as to
dates from which dividends thereon may be cumulative. All series will rank
equally and be identical in all respects, except as permitted by the
following provisions of paragraph 2.
2. Authority of the Board with Respect to Series. The Board of
Directors is authorized, at any time and from time to time, to provide for
the issuance of shares of Preferred Stock in one or more series with such
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof as are
stated and expressed in the resolution or resolutions providing for the issue
thereof adopted by the Board of Directors, and as are not stated and
expressed in these Articles of Incorporation or any amendment thereto
including, but not limited to, determination of any of the following:
(a) the distinctive serial designation and the number of shares
constituting a series;
(b) the dividend rate or rates, whether dividends are cumulative
and, if so, from which date, the payment date or dates for dividends,
and the participating or other special rights, if any, with respect to
dividends;
(c) the voting powers, full or limited, if any, of the shares of
the series;
(d) whether the shares are redeemable and, if so, the price or
prices at which, and the terms and conditions on which, the shares may
be redeemed;
(e) the amount or amounts payable upon the shares in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation prior to any payment or distribution of the assets of the
Corporation to any class or classes of stock of the Corporation ranking
junior to the Preferred Stock;
(f) whether the shares are entitled to the benefit of a sinking
or retirement fund to applied to the purchase or redemption of shares
of a series and, if so entitled, the amount of the fund and the manner
of its application, including the price or prices at which the shares
may be redeemed or purchased through the application of the fund;
(g) whether the shares are convertible into, or exchangeable for,
shares of any other class or classes of stock of the Corporation and,
if so convertible or exchangeable, the conversion price or prices, or
the rates of exchange, and the adjustments thereof, if any, at which
the conversion or exchange may be made, and any other terms and
conditions of the conversion or exchange; and
(h) any other preferences, privileges and powers, and relating
participating, optional or other special rights, and qualifications,
limitations or restrictions of a series, as the Board of Directors may
deem advisable and as are not inconsistent with the provisions of this
Certificate of Incorporation.
3. Dividends. Before any dividends on any class or classes of stock of
the Corporation ranking junior to the Preferred Stock (other than dividends
payable in shares of any class or classes of stock of the corporation ranking
junior to the Preferred Stock) may be declared or paid or set apart for
payment, the holders of shares of Preferred Stock of each series are entitled
to such cash dividends, but only when and as declared by the Board of
Directors out of funds legally available therefor, as they may be adopted by
the Board of Directors providing for the issue of the series, payable on such
dates in each year as may be fixed in the resolution or resolutions. The term
"class or classes of stock of the Corporation ranking junior to the Preferred
Stock" means the Common Stock and any other class or classes of stock of the
Corporation hereafter authorized which rank junior to the Preferred Stock as
to dividends or upon liquidation.
4. Reacquired Shares. Shares of Preferred Stock which have been issued
and reacquired in any manner by the Corporation (excluding, until the
corporation elects to retire them, shares which are held as treasury shares
but including shares redeemed, shares purchased and retired and shares which
have been converted into shares of Common Stock) will have the status of
authorized and unissued shares of Preferred Stock and may be reissued.
5. Voting Rights. Unless and except to the extent otherwise required by
law or provided in the resolution or resolutions of the Board of Directors
creating any series of Preferred Stock the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever.
57
<PAGE>
Common Stock
1. Dividends. Subject to the preferential rights of the Preferred
Stock, the holders of the Common Stock are entitled to receive, to the extent
permitted by law, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
Corporation, after distribution in full of the preferential amounts, if any,
to be distributed to the holders of shares of Preferred Stock, holders of
Common Stock shall be entitled to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to Stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively. The Board of Directors may distribute in kind to the holders of
Common Stock such remaining assets of the Corporation or may sell, transfer
or otherwise dispose of all or any part of such remaining assets to any other
corporation, trust or other entity and receive payment therefor in cash,
stock or obligations of such other corporation, trust or other entity, or any
combination thereof, and may sell all or any part of the consideration so
received and distribute any balance thereof in kind to holders of Common
Stock. The merger or consolidation of the Corporation into or with any other
corporation, or the merger or any other corporation into it, or any purchase
or redemption of shares of stock of the Corporation of any class, shall not
be deemed to be a dissolution, liquidation or winding up of the Corporation
for the purposes of this paragraph.
3. Voting Rights. Except as may be otherwise required by law or this
Certificate of Incorporation, each holder of Common Stock has one vote in
respect of each share of stock held by him or record on the books of the
corporation on all matters voted upon by the Stockholders.
Other Provisions
1. Pre-emptive Rights. No Stockholder shall have any pre-emptive right
to subscribe to an additional issue of stock of any class or series or to any
securities of the Corporation convertible into such stock.
2. Changes in Authorized Capital Stock. Subject to the protective
conditions and restrictions of any outstanding Preferred Stock, any amendment
to these Articles of Incorporation which increases or decreases the
authorized capital stock of any class or classes may be adopted by the
affirmative vote of the holders of a majority of the outstanding shares of
the voting stock of the Corporation.
ARTICLE V
REGISTERED OFFICE
The registered office of the Corporation in the State of Nevada is
Corporation Trust Company of Nevada, 1 East First Street, Reno, Nevada, County
of Washoe. The registered agent in charge thereof at such address is The
Corporation Trust Company.
ARTICLE VI
DIRECTORS
The number of directors constituting the initial Board of Directors of the
Corporation is three (3) and the names and addresses of the persons who are to
serve as directors until his successors are elected and shall qualify are:
Chris S. Metos 72 East 4th South, Suite 260
Salt Lake City, UT 84111
Roger H. Mattson 72 East 4th South, Suite 260
Salt Lake City, UT 84111
Harry W. Epperson 72 East 4th South, Suite 260
Salt Lake City, UT 84111
ARTICLE VII
INCORPORATOR
The name and mailing address of the incorporator of the Company is A. O.
Headman, Jr., 257 East 200 South, Suite 850, Salt Lake City, UT 84111..
58
<PAGE>
ARTICLE VIII
NON-ASSESSABILITY
Shares of the Corporation shall not be subject to assessment for payment of
the debts of the Corporation.
ARTICLE IX
BYLAWS
The Board of Directors shall have the power to make, adopt, amend, or repeal
the Bylaws of the Corporation.
ARTICLE X
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
A director or officer of the Corporation shall not be personally liable to
the Corporation or its stockholders for damages for breach of fiduciary duty as
a director or officer, except for: (1) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (2) the payment
of dividends in violation of NRS 78.300. Any repeal or modification of the
provisions of this Article X by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director or officer of the Corporation with respect to any act or
omission occurring prior to the effective date of such repeal or modification.
If the Nevada General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors or officers,
then the liability of a director or officer of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Nevada General Corporation Law.
In the event that any of the provisions of this Article X (including any
provision within a single sentence) is held by a court of competent jurisdiction
to be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the fullest extent permitted by law.
ARTICLE XI
INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by the provisions of
ss. 751 of the Nevada Revised Statutes, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under the Bylaw, agreement,
vote of stockholders, or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
ARTICLE XII
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned, for the purpose of forming a corporation under the laws of
the State of Nevada, does make, file, and record this certificate, and does
certify that the facts stated herein are true; and has executed these Articles
of Incorporation.
DATED this 29th day of October, 1992.
/s/ A. O. Headman, Jr.
-------------------------------
A. O. Headman, Jr.
59
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 29th day of October 1992, personally appeared before me A. O. Headman,
Jr., who being by me first duly sworn, declared that he is the person who signed
the foregoing documents as an incorporator and that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day of
October 1992.
-------------------------------
/s/ Diane Golovaty
NOTARY PUBLIC
Residing at Salt Lake City, UT
My Commission expires:
10/9/95
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
OF REGISTERED AGENT
The Corporation Trust Company of Nevada hereby accepts appointment the
appointment as registered agent of the above named corporation.
The Corporation Trust Company of Nevada.
Registered Agent
By /s/ Corrine M. Lude Date 10/29/92
Corrine M. Lude
Assistant Secretary
60
BYLAWS
OF
THE HARRISON-ROSS GROUP, INC.
a Nevada Corporation
61
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - Stockholders.....................................................4
1.1 Place of Meetings...................................................4
1.2 Annual Meetings.....................................................4
1.3 Special Meetings....................................................4
1.4 Notice of Meetings..................................................4
1.5 Voting List.........................................................5
1.6 Quorum..............................................................5
1.7 Adjournments........................................................5
1.8 Voting and Proxies..................................................5
1.9 Action at Meeting...................................................5
1.10 Action Without Meeting..............................................6
ARTICLE 2 - Directors........................................................6
2.1 General Powers......................................................6
2.2 Number; Election and Qualification..................................6
2.3. Enlargement of the Board............................................6
2.4 Tenure..............................................................7
2.5 Vacancies...........................................................7
2.6 Resignation.........................................................7
2.7 Regular Meetings....................................................7
2.8 Special Meetings....................................................7
2.9 Notice of Special Meetings..........................................7
2.10 Meetings by Telephone Conference Calls..............................8
2.11 Quorum..............................................................8
2.12 Action at Meeting...................................................8
2.13 Action by Consent...................................................8
2.14 Removal.............................................................8
2.15 Committees..........................................................8
2.16 Compensation of Directors...........................................9
ARTICLE 3 - Officers........................................................10
3.1 General............................................................10
3.2 Election.......................................................... 10
3.3 Qualification......................................................10
3.4 Tenure.............................................................10
3.5 Resignation and Removal............................................10
3.6 Vacancies..........................................................10
3.7 Chairman of the Board and Vice Chairman of the Board...............11
3.8 President..........................................................11
3.9 Vice Presidents....................................................11
3.10 Secretary and Assistant Secretaries................................11
3.11 Treasurer and Assistant Treasurers.................................12
3.12 Salaries...........................................................13
ARTICLE 4 - Capital Stock...................................................13
4.1 Issuance of Stock..................................................13
4.2 Certificates of Stock..............................................13
4.3 Transfers..........................................................13
4.4 Lost, Stolen or Destroyed Certificates.............................14
4.5 Record Date........................................................14
ARTICLE 5 - Indemnification.................................................14
ARTICLE 6 - General Provisions..............................................15
6.1 Fiscal Year........................................................15
62
<PAGE>
6.2 Corporate Seal.....................................................15
6.3 Written Notice of Meetings.........................................15
6.4 Waiver of Notice...................................................15
6.5 Voting of Securities...............................................15
6.6 Evidence of Authority..............................................16
6.7 Certificate of Incorporation.......................................16
6.8 Transactions with Interested Parties...............................16
6.9 Severability.......................................................17
6.10 Pronouns...........................................................17
ARTICLE 7 - Amendments......................................................17
7.1 By the Board of Directors..........................................17
7.2 By the Stockholders................................................17
63
<PAGE>
BYLAWS
OF
THE HARRISON-ROSS GROUP, INC.
A Nevada Corporation
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Nevada as may be designated from time to
time by the board of directors or the president or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meetings. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting, shall be held at such time and date as fixed by the
Board of Directors. A special meeting may be held in lieu of the annual meeting
and any action taken at that special meeting shall have the same effect as if it
had been taken at the annual meeting, and in such case all references in these
Bylaws to the annual meeting of the stockholders shall be deemed to refer to
such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at any
time by the chairman of the board of directors, by the board of directors or by
the holders of not less than one-fourth (1/4) of all the shares entitled to vote
at the meeting. Business transacted at any special meeting of stockholders shall
be limited to matters relating to the purpose or purposes stated in the notice
of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written notice
of each meeting of stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of all meetings shall
state the place, date and hour of the meeting. The notice of a special meeting
shall state, in addition, the purpose or purposes for which the meeting is
called.
1.5 Voting List. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding are entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any other
time and to any other place at which a meeting of stockholders may be held under
these Bylaws by the stockholders present or represented at the meeting and
entitled to vote, although less than a quorum, or, if no stockholder is present,
by any officer entitled to preside at or to act as secretary of such meeting. If
the adjournment is for more than 30 days, or if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
64
<PAGE>
1.8 Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote held of record by such stockholder and a proportionate
vote for each fractional share so held, unless otherwise provided in the
Certificate of Incorporation. Each stockholder of record entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may vote or express such consent or dissent in person
or may authorize another person or persons to vote or act for him by written
proxy executed by the stockholder or his authorized agent and delivered to the
secretary of the Corporation. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. No proxy shall be
voted or acted upon after three years from the date of its execution, unless the
proxy expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the holders
of a majority of the stock present or represented and voting on a matter (or if
there are two or more classes of stock entitled to vote as separate classes,
then in the case of each such class, the holders of a majority of the stock of
that class present or represented and voting on a matter) shall decide any
matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these Bylaws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
1.10 Action Without Meeting. Any action required or permitted to be taken at
any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the Corporation shall be
managed by or under the direction of a board of directors, who may exercise all
of the powers of the Corporation except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws. In the event of a vacancy on the
board of directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full board of directors until the vacancy is
filled.
2.2 Number; Election and Qualification. The number of directors which shall
constitute the whole board of directors shall be determined by resolution of the
stockholders or the board of directors, but in no event shall be less than
three. The number of directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote in such election. Directors need not be
stockholders of the corporation.
2.3. Enlargement of the Board. The number of directors may be increased at
any time and from time to time by the stockholders or by a majority of the
directors then in office.
65
<PAGE>
2.4 Tenure. Each director shall hold office until the next annual meeting and
until such time as his successor is elected and qualified, or until his earlier
death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in
the board of directors, however occurring, including a vacancy resulting from an
increase in the number of directors, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
resignation to the Corporation at its principal office or to the secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
2.7 Regular Meetings. Regular meetings of the board of directors may be held
without notice at such time and place, either within or without the State of
Nevada, as shall be determined from time to time by the board of directors,
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the board of
directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the board of directors may be held
at any time and place, within or without the State of Nevada, designated in a
call by the chairman of the Board, president or two or more directors, or by one
director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the secretary or one of the directors calling
the meeting. Notice shall be duly given to each director (i) by giving notice to
such director in person or by telephone at least 48 hours in advance of the
meeting, (ii) by sending a telegram or telex, or delivering written notice by
hand to his last known business or home address at least 48 hours in advance of
the meeting, or (iii) by mailing written notice to his last known business or
home address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the board of directors need not specify the purpose of
the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of any
committee designated by the directors may participate in a meeting of the board
of directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the whole board of directors shall constitute a
quorum at all meetings of the board of directors. In the event one or more of
the directors shall be disqualified to vote at any meting, then the required
quorum shall be reduced by one for each such director so disqualified; provided,
however, that in no case shall less than one-third (1/3) of the whole board of
directors constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present.
2.12 Action at Meeting. At any meeting of the board of directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any
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action, unless a different vote is specified by law, the Certificate of
Incorporation or these Bylaws.
2.13 Action by Consent. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee of the board of directors
may be taken without a meeting, if all members of the board of directors or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the board of directors or
committee.
2.14 Removal. Any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except that (i) the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series and (ii) in the case of a corporation having cumulative voting,
if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire board of directors.
2.15 Committees. The board of directors may, by resolution passed by a
majority of the whole board of directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member of any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the board of directors and subject to the
provisions of the General Corporation Law of the State of Nevada, shall have and
may exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the board of directors as provided in subsection (a) of
Section 151 of the General Corporation Law of the State of Nevada, fix the
designations and any of the preferences of rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, unless the resolution, Bylaws or Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger. Each such committee shall keep minutes
and make such reports as the board of directors may from time to time request.
Except as the board of directors may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the board of
directors.
2.16 Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the board of directors may from time to time determine. No such payment shall
preclude any director
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from serving the Corporation or any of its parent or subsidiary corporations in
any other capacity and receiving compensation for such service.
ARTICLE 3 - Officers
3.1 General. The officers of the Corporation shall consist of a chairman of
the board, a president, a secretary, a treasurer and such other officers with
such other titles as the board of directors may determine, including a vice
chairman of the board, and one or more vice presidents, assistant treasurers,
and assistant secretaries. The board of directors may appoint such other
officers with such other powers and duties as it may deem appropriate.
3.2 Election. The chairman of the board, president, treasurer and secretary
shall be elected annually by the board of directors at its first meeting
following the annual meeting of stockholders. Other officers may be appointed by
the board of directors at such meeting or at any other meeting.
3.3 Qualification. No officer need by a stockholder. Any two or more offices
may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his written
resignation to the Corporation at its principal office or to the president or
secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the board of directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The board of directors may fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of president, treasurer and
secretary. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The chairman of the
board of directors shall be the chief executive officer of the Corporation.
Subject to the direction of the board of directors, the chairman of the board of
directors shall have general charge and supervision of the business of the
Corporation, and shall have full authority to take all lawful actions necessary
to implement corporate and business policy established by the board of
directors. In addition, the chairman of the board of directors shall perform
such duties and possess such other powers as are assigned to him by the board of
directors. Unless otherwise provided by the board of directors, the chairman of
the board of directors shall preside at all meetings of the stockholders and the
board of directors. The board of directors may appoint a vice chairman of the
board of directors who may, in the absence or disability of the chairman,
perform the duties and exercise and
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powers of the chairman and perform such other duties and possess such other
powers as from time to time are authorized by the board of directors.
3.8 President. The president shall be the chief operating officer of the
Corporation and shall have charge and supervision of the day to day business
operations of the Corporation, subject to the authority of the chairman of the
board of directors and of the board of directors. Unless the board of directors
or chairman of the board of directors shall otherwise direct, all executive
officers of the Corporation shall report, directly or through their immediate
superior officers, to the president. The president shall perform such other
duties and shall have such other powers as the board of directors may from time
to time prescribe.
3.9 Vice Presidents. The vice president shall perform such duties and shall
have such powers as the board of directors, chairman of the board of directors
or the president may from time to time prescribe. The vice president shall
discharge the duties of the president when the president, for any reason, cannot
discharge the duties of his office. He shall have such other powers and perform
such other duties as shall be prescribed by the directors.
Any assistant vice presidents shall perform such duties and possess such
powers as the board of directors, the chairman of the board of directors, the
president or the vice president may from time to time prescribe.
3.10 Secretary and Assistant Secretaries. The secretary shall perform such
duties and shall have such powers as the board of directors, chairman of the
board of directors or the president may from time to time prescribe. In
addition, the secretary shall perform such duties and have such powers as are
incident to the office of the secretary, including without limitation, the duty
and power to give notices of all meetings of stockholders and special meetings
of the board of directors, to attend all meetings of stockholders and the board
of directors and keep a record of the proceedings, to maintain a stock ledger
and prepare lists of stockholders and their addresses as required, to be
custodian of corporate records and the corporate seal, if any, and to affix and
attest to the same on documents.
Any assistant secretary shall perform such duties and possess such powers as
the board of directors, the chairman of the board of directors, the president or
the secretary may from time to time prescribe. In the event of the absence,
inability or refusal to act of the secretary, the assistant secretary (or if
there be more than one, the assistant secretaries in the order determined by the
board of directors) shall perform the duties and exercise the powers of the
secretary.
In the absence of the secretary or any assistant secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The treasurer shall perform such
duties and shall have such powers as from time to time be assigned to him by the
board of directors, the chairman of the board of directors or the president. In
addition, the treasurer shall perform such duties and have such powers as are
incident to the office of treasurer, including without limitation the duty and
power to keep and be responsible for all funds and securities of the
Corporation, to deposit funds of the Corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the board of
directors, the chairman of the board of directors, the president or any vice
president of the Corporation so authorized to act by specific authorization of
the board of directors or chairman of the Directors, to make proper accounts of
such funds, and to render, as required by the board of directors, chairman of
the board of directors or president, statements of all such transactions and of
the financial condition of the Corporation.
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The assistant treasurers shall perform such duties and possess such powers as
the board of directors, the chairman of the board of directors, the president or
the treasurer may from time to time prescribe. In the event of the absence,
inability or refusal to act of the treasurer, the assistant treasurer (or if
there shall be more than one, the assistant treasurers in the order determined
by the board of directors) shall perform the duties and exercise the powers of
the treasurer.
3.12 Salaries. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the board of directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and subject
to the provisions of the Certificate of Incorporation, the whole or any part of
any unissued balance of the authorized capital stock of the Corporation or the
whole or any part of any unissued balance of the authorized capital stock of the
Corporation held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the board of directors in such manner, for such
consideration and on such terms as the board of directors may determine.
4.2 Certificates of Stock. Every holder of stock of the Corporation shall be
entitled to have a certificate, in such form as may be prescribed by law and by
the board of directors, certifying the number and class of shares owned by him
in the Corporation. Each such certificate shall be signed by, or in the name of
the Corporation by the chairman or vice chairman, if any, of the board of
directors, or the president or a vice president, and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Certificate of Incorporation, the Bylaws, applicable
securities laws or any agreement among any number of shareholders or among such
holders and the Corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the board of directors, and subject to applicable laws, shares of
stock may be transferred on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Corporation or its transfer agent may reasonable require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these Bylaws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect to such
stock, regardless of any transfer, pledge or other disposition of such stock
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these Bylaws.
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen or destroyed, upon such terms and conditions as the board
of directors may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving such indemnity as the board of
directors may require for the protection of the Corporation or any transfer
agent or registrar.
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4.5 Record Date. The board of directors may fix in advance a date as a record
date for the determination of the stockholders entitled to notice of or to vote
at any meeting of stockholders or to express consent (or dissent) to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 days prior to any other
action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining stockholders
for any other purpose shall be at the close of business on the date on which the
board of directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - Indemnification
The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as that Section may be amended and
supplemented from time to time, indemnify any director, officer or trustee which
it shall have power to indemnify under that Section against any expenses,
liabilities or other matters referred to in or covered by that Section. The
indemnification provided for in this Article (i) shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any bylaw,
agreement or vote of stockholders or disinterested directors or otherwise, both
as to action in their official capacities and as to action in another capacity
while holding such office, (ii) shall continue as to a person who has ceased to
be a director, officer or trustee, and (iii) shall inure to the benefit of the
heirs, executors and administrators of such a person. The Corporation's
obligation to provide indemnification under this Article shall be offset to the
extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the Corporation or any other
person.
ARTICLE 6 - General Provisions
6.1 Fiscal Year. The fiscal year of the Corporation shall be determined by
the board of directors.
6.2 Corporate Seal. The corporate seal, if any, shall be in such form as
shall be approved by the board of directors.
6.3 Written Notice of Meetings. Whenever written notice is required to be
given to any person pursuant to law, the Certificate of Incorporation or these
Bylaws, it may be given to such person, either personally or by sending a copy
thereof by first class mail, or by telegram, charges prepaid, to his address
appearing on the books of the Corporation, or to his business or other address
supplied by him to the Corporation for the purpose of notice. If the notice is
sent by first class mail or by telegraph, it shall be deemed to have been given
to the person entitled thereto when deposited in the United States mail or with
a telegraph office for transmission to such person. Such notice shall specify
the
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place, day and hour of the meeting and, in case of a special meeting of the
shareholders, the general nature of the business to be transacted.
6.4 Waiver of Notice. Whenever any notice whatsoever is required to be given
by law, by the Certificate of Incorporation or by these Bylaws, a waiver of such
notice either in writing signed by the person entitled to such notice or such
person's duly authorized attorney, or by telegraph, cable or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.5 Voting of Securities. Except as the directors may otherwise designate,
the president or treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this Corporation
(with or without power of substitution) at any meeting of stockholders or
shareholders of any other Corporation or organization, the securities of which
may be held by this Corporation.
6.6 Evidence of Authority. A certificate by the secretary, or an assistant
secretary, or a temporary secretary, as to any action taken by the stockholders,
directors, a committee or any officer of representative of the Corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
6.7 Certificate of Incorporation. All references in these Bylaws to the
Certificate of Incorporation shall be deemed to refer to the certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
6.8 Transactions with Interested Parties. No contract or transaction between
the Corporation and one or more of the directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of directors or a committee of the
board of directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest as to the
contract or transaction are disclosed or are known to the board of directors
or the committee, and the board of directors or committee in good faith
authorized the contract or transaction by the affirmative votes of a majority
of the disinterested directors, even though the disinterested directors be
less than a quorum;
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the board of directors, a
committee of the board of directors, or the stockholders,
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the board of directors or of a committee which
authorizes the contract or transaction.
6.9 Severability. Any determination that any provision of these Bylaws is for
any reason inapplicable, illegal or ineffective shall not affect or invalidate
any other provision of these Bylaws.
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6.10 Pronouns. All pronouns used in these Bylaws shall be deemed to refer to
the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 7 - Amendments
7.1 By the Board of Directors. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
7.2 By the Stockholders. These Bylaws may be altered, amended or repealed or
new Bylaws may be adopted by the affirmative vote of the holders of a majority
of the shares of the capital stock of the Corporation issued and outstanding and
entitled to vote at any regular meeting of stockholders, or at any special
meeting of stockholders, provided notice of such alternation, amendment, repeal
or adoption of new Bylaws shall have been stated in the notice of such special
meeting.
ADOPTED THIS 20th day of January, 1993.
/s/ Chris Metos
-------------------------------
President
ATTEST:
/s/ Roger H. Mattson
- ------------------------------
Secretary
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<PAGE>
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby certify that
the undersigned is the secretary of the aforesaid Corporation, duly organized
and existing under and by virtue of the laws of the State of Nevada; that the
above and foregoing Bylaws of said Corporation were duly and regularly adopted
as such by the board of directors of said Corporation by unanimous consent.
DATED this 20th day of January, 1993.
/s/ Roger H. Mattson
---------------------------------
Secretary
74
Exhibit 3.1
INCORPORATED IN THE STATE OF NEVADA
No. XXXXX THE HARRISON-ROSS GROUP, INC. XXXXX
PAR VALUE 25,000,000 Shares Authorized Non-Assessable
$.001 Per Share CUSIP No. 415438100
This Certifies that: VOID is the owner of fully paid and non-assessable
Shares of the Common Stock of
THE HARRISON-ROSS GROUP, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _____ day of ______________, A.D. 2000.
SHARES NOT VALID UNTIL COUNTERSIGNED BY TRANSFER AGENT
- ---------------------------------- ----------------------------------
Transfer Agent: Authorized Signature President
- ---------------------------------- ----------------------------------
Fidelity Transfer Company Secretary
1800 South West Temple, Suite 301-53
Salt Lake City, Utah 84115
75
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE HARRISON ROSS GROUP, INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 18,069
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 18,069
<SECURITIES> 0
<RECEIVABLES> 340,558
<ALLOWANCES> 59,709
<INVENTORY> 19,090
<CURRENT-ASSETS> 2,340,624
<PP&E> 1,286,694
<DEPRECIATION> 930,212
<TOTAL-ASSETS> 356,482
<CURRENT-LIABILITIES> 866,649
<BONDS> 36,804
0
350
<COMMON> 950,670
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,610,354
<SALES> 2,474,261
<TOTAL-REVENUES> 2,474,261
<CGS> 1,461,359
<TOTAL-COSTS> 1,461,359
<OTHER-EXPENSES> 1,044,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,847
<INCOME-PRETAX> 64,487
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,059)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,788
<EPS-BASIC> .076
<EPS-DILUTED> 0
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