US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
COMMISSION FILE NUMBER: 0-23532
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AMERICAN DIVERSIFIED GROUP, INC.
NEVADA 88-0292161
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation)
110 NORTH CENTER STREET, SUITE 202
HICKORY, NC 28601
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(Address of Principal Executive Offices)
(828) 322-2044
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(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act: NONE
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(Title of class)
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.001
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(Title of class)
Check whether the issuer: (i) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (ii) has been subject to the
filing requirements for the past 90 days.
Yes (XX) No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
( )
The Registrant had no revenues during its recent fiscal year
ended December 31, 1999. The aggregate market value of the voting
stock held by non-affiliates(1) of the Registrant based on the
average bid and asked prices of $.35 and $.40 respectively, of
such common stock as of March 28, 2000, is approximately
$101,864,865, based upon an average of $.375 multiplied by
271,639,640 shares of common stock as of such date held by non-
affiliates. As of March 28, 2000, the Registrant had a total of
303,870,560 shares of common stock, par value $.001 issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
There are no documents incorporated by reference in this report
on Form 10- KSB except for certain previously filed exhibits
identified in Part III, Item 13, hereof.
(1) Affiliates for the purposes of this Item refer to the
officers, directors and/or persons or firms owning 5% or more of
the Registrant's common stock, both record and beneficially.
TABLE OF CONTENTS
PART I Page
Item 1. Description of Business. 3
Item 2. Description of Property. 9
Item 3. Legal Proceedings. 9
Item 4. Submission of Matters to a Vote of Security Holders. 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters. 11
Item 6. Management's Discussion and Analysis or Plan of Operation.12
Item 7. Financial Statements. 15
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure. 15
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons. 15
Item 10. Executive Compensation. 17
Item 11. Security Ownership of Certain Beneficial Owners and
Management. 18
Item 12. Certain Relationships and Related Transactions. 19
Item 13. Exhibits and Reports on Form 8-K 19
PART I
ITEM 1. DESCRIPTION OF BUSINESS
===============================
Background
American Diversified Group, Inc., a Nevada corporation
(hereinafter the "Company" or the "Registrant"), was incorporated
under the laws of the State of Nevada as Terra West Homes, Inc.
on January 16, 1979. On March 15 1995, the Company's name was
changed to American Diversified Group, Inc. The Company's
principal activities have involved the search of businesses
and/or assets that it could acquire, in order to become an
operating company, or in the alternative, efforts to develop its
own business operations with the assistance of third parties. The
Company entered into several consulting agreements with third
parties for the purpose of hopefully assisting the Company in
developing a business, including development of various product
lines, primarily in the medical and telecommunication areas, with
the intention of generating sales of such products.
The Company's business during 1997 and 1998 principally resulted
from the engagement by the Company in February 1996 of Emerging
Trends Linkages Corp., a New York corporation ("ETLC"), as
consultant. The Company entered into an initial consulting
agreement with ETLC in February 1996, for the purpose of seeking
sales from West Africa for the distribution and sale of a variety
of medical/pharmaceutical products. See the discussion below
under "Consulting Agreements". During 1997 and 1998, the Company
began to generate initial but limited revenues from the sale of
generic pharmaceutical products in West Africa, but generated no
revenues from such business efforts during the year ended
December 31, 1999.
During the year ended December 31, 1999, the Company has pursued
efforts to complete its intended acquisition of Global Transmedia
Telecommunication Corporation ("Global") of Miami, FL., a company
engaged in the business of Internet telephony and Voice Over
Internet Protocol (VOIP), which acquisition it believes should be
closed and completed during March 2000. See "Recent Business
Developments-Telecommunications Venture" below.
Business Developments-Telecommunications Venture
Agreements with Global and Global's Business
In order to pursue telecommunications, the Company entered into
an initial agreement with Global, formerly Telephonetics Overseas
Corporation. The initial agreement with Global was announced in
March 1998. In March 1998, the Company entered into an agreement
(Letter of Intent for Acquisition and Participation) with Global.
This initial agreement provided, among other things, that the
Company would advance to Global over a period $150,000, which
advance would be evidenced by a promissory note. This note
granted the right to convert the debt into 9% of Global. In
addition, the note provided for the right of Global to "put"
subsequent 9% equity interests in Global for subsequent payments
of $150,000, if Global reached certain threshold levels of sales
revenues and also granted the Company the right to call
subsequent 9% interests in Global at other gross sales levels.
Page 3
Prior to this agreement, Global's activities primarily involved
the business of providing quality telecommunications hardware and
audio content for "on-hold" and web site messaging and
advertising for corporations, retail chains and other users.
During 1998, Global also commenced the sale and distribution of
Internet telephony services for sale in the domestic and foreign
markets.
The Company in August 1998 entered into a further agreement with
Global, pursuant to which the Company was granted the right to
acquire 45% of Global for consideration of $700,000. Under this
interim stock purchase agreement with Global, the Company has the
right to acquire up to 45% of Global for $700,000. The Company
also had the right to negotiate an agreement to acquire the
remaining 55% of Global in consideration for the payment of cash
or cash and securities, based upon certain valuations, subject to
adjustment.
On March 15, 1999, Global granted the Company a secured
convertible debenture, in an amount based upon the Company's
total advances to Global, as increased from time to time. This
debenture provided for the right of the Company to elect
repayment of the total amount of the monies advanced through such
election, over a 36 month period commencing January 1, 2000. The
debenture also provided, in the alternative, the right of Global
to "put" 45% of Global's shares to the Company, if Global reached
certain sales revenues prior to December 31, 1999, or, if such
revenues were not reached, the Company had the right to acquire
45% of Global for consideration equal to the amount advanced to
Global through the date of conversion. The debenture also had
certain adjustments, based upon Global reaching certain sales
revenue levels.
On December 16, 1999, the Company and Global entered into a
further letter of intent, pursuant to which the Company would be
granted the right to acquire 100% of Global. This letter of
intent provided for the use of a valuation opinion, from an
independent third party selected by the Company. The Company also
agreed to use its best efforts to arrange for working capital
financing for Global in an amount from $1.5 million to $2
million. In anticipation of the execution of a definitive share
purchase agreement, at a purchase price of $5 million, which
purchase price was subject to adjustment, the Company commenced
the valuation process.
At December 31, 1999, the amount of the advance from the Company
to Global was $312,500, which represents an increase of $90,000
from the year ended December 31, 1998. Such amounts have been
accounted for as a loan from the Company to Global, secured by
the shares of GTCC, which loan at December 31, 1999 granted the
Company the right to convert the loan into Global shares as
provided above and all such sums advanced to Global were to be
applied to the consideration due under the share purchase
agreement. See the discussion of the Stock Purchase Agreement
between the Company and Global dated as of February 19, 2000,
pursuant to which the Company has acquired 99% of Global.
While to date, Global has received only limited revenues from its
telephony business, during the period commencing mid 1999, Global
has informed and represented to the Company that it had begun the
material expansion of its business to include expansion of its
services into additional countries. Further, during the fourth
quarter of 1999, Global obtained an international carrier license
under Section 214 from the Federal Communications Commission
(FCC). Global also informed the Company of Global's determination
to become a facilities based carrier and expand its network
establishing Points of Presence (POP) within the countries in its
network, which include Mexico, Venezuela, Colombia and other
countries to be opened in fiscal 2000. To date, Global has
established facilities in San Antonio, TX and Monterrey, Mexico.
Global has plans to develop its network operations in St. Louis,
MO during the second quarter 2000 and continue establishing
POP's. Global's telecommunications services are provided on a
prepaid basis. Global enters into agreements with third party
telecommunication vendors in each country to market its services.
These third parties are generally telecommunication companies or
Internet Service Providers (ISP) with expertise in IP telephony
technology. Global is also seeking to develop relations with
international carriers for call termination by these carriers
using Global's network.
Page 4
Initially, Global's IP telephony services were limited to
services offered to customers from South America to the US.
However, during 1999 Global began the expansion of its services
to permit Global's subscribers to be able to place calls
worldwide through its IP telephony system. Global's services
include full voice, fax, and data transmission features. Global
projects that it will begin to generate monthly revenues based
upon an increased subscriber base. In fact, Global has
represented to the Company that it shall report revenues and
receivables that will be reported in the Form 10-QSB of the
Company for the period ended March 31.
Global entered into an agreement with a group of marketing and
telecommunication companies in Venezuela, which provides for the
purchase of a minimum of 2.1 million minutes and up to 3,900,000
minutes in calling volume. This is projected by Global to
generate revenues of up to $780,000 during the year 2000,
although the timing of such revenues cannot be determined at this
date.
Global is also currently negotiating an agreement with a group of
telecommunication companies in Mexico which will enable Global to
originate and terminate calls in Mexico on Global's network. In
addition, Global has negotiated termination agreements with
companies in Brazil, Peru and Eastern Europe. Global expects to
enter into an initial agreement to begin to offer its IP
telephony services in India during the first six months of 2000.
Global has represented to the Company that it has entered into
negotiations with several companies and individuals with
telecommunication services which Global will market through
licenses or potential acquisitions.
Share Purchase Agreement
The Company, Global and Global's shareholders entered into a
share purchase agreement effective February 19, 2000 (the
"Agreement") pursuant to which the Company agreed to acquire 99%
of Global's shares. This Agreement provides for the issuance to
Global's shareholders of units which aggregate 25 million shares
of common stock, based upon the average closing bid price of the
shares during the ten day period prior to February 19, 2000. The
units also provide for the issuance of four warrants, Class A, B,
C and D, each exercisable at $.08, which was the average closing
bid price of the Company's shares during the six month period
prior to February 19, 2000. Each Class of warrants provides for
the issuance of 25 million shares and expire two years from the
date of the Agreement. Neither the shares nor the warrants have
been registered under the Securities Act of 1933, as amended (the
"Act"). The Class A warrants are exercisable during the twenty-
four month period commencing the date of the Agreement the Class
B warrants are exercisable commencing on a date six months from
the execution of the Agreement for a period ending twenty- four
months from the date of the Agreement; the Class C warrants are
exercisable commencing on a date twelve months from the execution
of the Agreement for a period ending twenty four months from the
date of the Agreement; and the Class D warrants are exercisable
commencing on a date eighteen months from the execution of the
Agreement for a period ending twenty-four months from the date of
the Agreement. If all of the warrants are exercised the Company
will receive warrant proceeds of $8 million. The Agreement is
filed as an exhibit to this Annual Report on Form 10-KSB. It is
intended that Global and the Company will execute a management
agreement which should provide payment to the Company of a
management fee of approximately 5% of Global's revenues on an
annual basis.
Competitive Business Conditions
The telecommunications industry is highly competitive, rapidly
evolving and subject to constant technological change and to
intense marketing by different providers of functionally similar
services. Since there are few, if any, substantial barriers to
entry, Global has represented to the Company that it may
reasonably expect that new competitors are likely to join
existing competitors in the telecommunications industry,
Page 5
including the market for international long-distance voice and
data transmission targeted by Global. Many of Global's current
competitors are significantly larger and have substantially
greater market presence and experience as well as greater
financial, technical, operational, marketing and other resources
than the Company. However, the Company has been informed that
Global's use of IP telephony should enable Global to provide
customers with competitive pricing for its telecommunications
services. Nevertheless, there can be no assurance that Global
will be able to successfully compete with major carriers in each
of its markets, including Internet telephony and
telecommunications providers, and from traditional phone
companies. Further, there can be no assurance that Global will be
able to successfully compete with established companies with
significant operating histories and far greater financial and
other resources, which companies presently are in or may enter
Global's existing and future markets.
Sources and Availability of Hardware and Software Equipment
All equipment used by Global is provided by major suppliers and
is readily available. Software to operate the network is
commercially available from software suppliers and equipment
suppliers, and Global has the technical expertise and ability to
develop in-house software as needed for network applications and
new telecommunications products.
Dependence on one or a few major customers
Global is not dependent on any single customer or group of
customers and does not foresee becoming dependent upon any
customers in the future.
Licenses
Global has obtained a authority as an international
telecommunications carrier under Section 214 of the
Telecommunications Act by the FCC. It is Global's practice either
to obtain a license or operate utilizing the license of the
providers in foreign countries in each of its markets.
Effect of Existing or Probable Governmental Regulations
In February 1997, the United States and approximately 70 other
countries of the World Trade Organization signed an agreement
committing to open their telecommunications markets to
competition and foreign ownership beginning in January 1998.
These countries account for approximately 90% of world
telecommunications traffic. The WTO agreement provides Global and
all companies in its industry with significant opportunities to
compete in markets where access was previously either denied or
extremely limited. However, the rights and privileges that are
available in each of these markets is subject to the granting by
each country individually and therefore Global's ability to
establish itself in each market and provide its services is
subject to the actions of each individual country which can vary
greatly. There can be no assurance that new regulations and
limitations may be adopted to limit the ability of Global and
other providers to service particular markets.
Number of total employees and number of full time employees
Global at present has 8 full time employees and is in the process
of hiring additional individuals for its anticipated growth
during fiscal 2000. Global does not believe that it will have
difficulty in hiring and retaining qualified individuals in the
field of Internet telephony, although the market for skilled
technical personnel is highly competitive.
Page 6
Consulting Agreements-Medical and Pharmaceutical Products
The Company entered into an initial consulting agreement with
ETLC in March 1996. Following execution of the initial consulting
agreement with ETLC, the Company received its first purchase
orders from the Republic of Guinea for generic pharmaceuticals
and vitamin products, which initial orders were generated by
ETLC. These orders were generated as a result of the Company's
earlier efforts to source products subject to the initial
purchase orders, which included diagnostic test kits, human serum
albumin (HSA) and other medical products. During 1996, the
Company had no sales revenues from its own business efforts or
from the efforts of ETLC. Commencing in May 1997, the Company
requested that ETLC begin efforts to source the products that
were subject to the initial purchase orders and product requests
from West Africa. Such sourcing efforts commenced through
contacts of the Company and ETLC with US pharmaceutical
manufacturers and thereafter were expanded to included
manufacturers and distributors outside of the US. In addition,
ETLC generated for the Company requests for generic
pharmaceutical products in addition to those products initially
subject to purchase orders.
During 1997, the Company and ETLC determined that a significant
portion of the generic pharmaceutical order from Guinea could not
be sourced at satisfactory pricing from US manufacturers. In
order to hopefully meet the budget and pricing parameters for the
Republic of Guinea and other potential West African customers,
the Company requested ETLC begin not just to secure orders, but
also to continue efforts to source products from manufacturers
outside of the United States.
The Company, during 1997 and 1998, continued to utilize the
services of ETLC for, among other purposes, seeking the supply of
generic pharmaceutical and related products in order to fulfill
purchase orders and product requests from West African countries,
including those first received from the Republic of Guinea and
later from the Republic of Mali. The Company and ETLC, however,
experienced only limited success in sourcing generic products at
satisfactory pricing, within the budgets of potential West
African customers, which pricing would also hopefully permit the
Company to generate gross profit on such sales. During 1998 and
into 1999, the Company through ETLC continued efforts to secure
orders from West Africa and source products for such orders from
pharmaceutical manufacturers in India, which manufacturing firm
provided product samples, certificates of analysis and other
documents necessary for product registration in West Africa.
In addition, the Company, through its consultants and
representatives, and specifically through ETLC also undertook
efforts to secure approvals and product registration for dengue
fever diagnostic test kits for sale in Brazil, which efforts
commenced in late 1997. While the Company believed and indeed was
informed through contacts in Brazil that registration and
approvals had been obtained and that initial orders were obtained
and continuing orders for dengue fever test kits could be
reasonably secured, to date, the Company has not any revenues
from dengue fever test kits. Further, there can be no assurance
that any revenues will ever be generated by the Company for
dengue fever test kits and as of the date of this report, the
Company cannot be assured that any efforts in Brazil are
continuing.
The Company has become increasingly aware that the market for the
sale of medical/pharmaceutical products is extremely competitive,
and there can be no assurance of any success in this field.
Indeed, the Company received no revenues during 1999 from
medical/pharmaceutical products, although it did generate limited
sales revenues from such products in 1997 and 1998. See the
discussion below under Management's Discussion and Analysis of
Financial Condition and Results of Operations", Part II, Item 6
below. If the Company seeks to continue any efforts to generate
pharmaceutical sales from West African markets, whether through
Page 7
ETLC or otherwise, the Company must be able to develop a
continuing source of generic pharmaceutical products from
manufacturers, at acceptable pricing levels, which manufacturers
are prepared to provide product samples, registration
documentation, translations into French with respect to French
speaking West African countries. In addition, during the year
ended 1999, the Company experienced changes in consulting
representatives and personnel working directly with West Africa
and through whom it had previously conducted or attempted to
conduct business in the pharmaceutical area in West Africa. At
present, the Company does not have any confirmed representation
nor has it formally engaged any representatives for West Africa.
The Company's present plan does not contemplate proceeding with
any business efforts in West Africa, unless and until it has firm
orders, secure sources of supply, at profits to the Company, and
with no compensation to any third parties without receipt of
sales proceeds to the Company. There can be no assurance that
this will occur.
Price continues to be the critical factor in the supply of
generic pharmaceuticals. While the Company's management
reasonably believed during 1997 and 1998 that with the continued
efforts and contacts of its then representatives, and the
Company's sources of generic pharmaceuticals from India, that the
Company would generate continued and increasing orders and sales
of such products, this was not the case.
The Company's efforts did not achieve any fruition during 1999
and the Company is not actively communicating with any potential
new representatives for West Africa who can assure the Company
that successful undertaking and completion of the registration
and approval process for generic pharmaceuticals could be
obtained. There can be no assurance that the Company's prior
expectation of increased generic pharmaceutical sales, or indeed
any pharmaceutical sales, will be realized from West Africa.
In addition, the Company does not have the financial, personnel
or the other resources of its competitors and expects that it
shall continue to be a newcomer to the generic pharmaceutical
industry for the export market. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
During 1998, the Company determined that an opportunity existed
in the area of telecommunications, with the view to possible
acquisitions and joint ventures. This was in part as a result of
the difficulty the Company experienced in generating revenues,
material or otherwise, from its efforts to distribute
pharmaceutical products in developing countries. See the
discussion below with regard to the Company's consulting
agreements.
Further, during 1998, the Company was required to replace its
West African representative, which replacement was made necessary
because the prior West African representative had very limited
success in developing the pharmaceutical market for which the
Company had devoted significant time and resources during 1996,
1997 and through mid-1998. The Company for a brief period engaged
through ETLC new representatives for West Africa, but they also
were unable to successfully represent the Company in West Africa
and generate any sales, despite the shipment of sample
pharmaceutical products, registration materials and documents
translated into French through the offices of ETLC and other
efforts described above.
The Company has discussed with ETLC the potential of any
continued efforts to generate sales of pharmaceutical products in
West Africa as well as efforts to sell dengue fever test kits in
Brazil. There can be no assurance that ETLC will in fact be able
to generate sales for the Company during 2000 or thereafter,
based upon the limited results from its prior efforts, nor can
there be any assurance that any agreement could be reached
between the Company and ETLC, at terms and conditions acceptable
to each.
Page 8
Discontinued Projects
During the last quarter of 1997, the Company and ETLC entered
into a venture for the purpose of marketing call-back
telecommunications products and services in West Africa (the
"call-back services"). The Company and ETLC commenced marketing
the call-back service to international and domestic companies
doing business in West Africa, as well as to certain foreign
embassies in Guinea and Mali. However, the Company together with
ETLC, determined during 1998 that without securing dedicated
satellite phone lines, the local public telephone and telegraph
companies ("PTT's") in these markets could effectively interrupt
the ability of the Company to successfully market call-back
services. The resulting interruptions of call-back services to
customers made collection of receivables difficult and delayed.
Therefore, despite the fact that the Company was able to sign up
as customers over 100 users for its call-back services, the
interruptions to such services made further pursuit of this
market not economical. As a result of the foregoing, the Company
and ETLC agreed in November, 1998, to terminate the call-back
joint venture in West Africa and the Company canceled ETLC's
rights to 47 million Shares subject to common stock purchase
options. The Company believes that this was a reasonable basis to
end the call-back joint venture. Notwithstanding this
termination, the Company and ETLC are discussing the continuation
of efforts to pursue the registration and sale of generic
pharmaceutical products in West Africa. There can be no assurance
that such efforts will result in sales, based upon the lack of
sales during 1999. ETLC is continuing to seek one or more
representatives for the West African market, through whom it
hopes to be able to penetrate this market, which principally
involves Ministries of Health in each country, rather than a
significant private sector market.
ITEM 2. DESCRIPTION OF PROPERTY
===============================
The Company presently leases approximately 600 square feet of
executive office space at 110 North Center Street, Suite 202,
Hickory, NC 28601, for $570 per month. Effective February 2000,
the Company renewed the lease for its executive offices, at a
monthly rate of $605. The condition of the Company's leased
facilities in Hickory, NC is excellent, and will satisfy the
Company's requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
=========================
The Company had a cause of action against Imaging Systems
Synergies Inc. ("ISS") for damages, including recovery of the
$100,000 in interim capital advanced to ISS in connection with a
planned acquisition that was not completed. The board of
directors of the Company agreed unanimously not to acquire ISS
following its completion of due diligence. The Company's action,
American Diversified Group, Inc. v. Imaging Systems Synergies,
Inc., et al., the 11th Judicial Circuit, Dade County, Florida,
Case No. 97-001983AN. The Company proceeding against ISS went to
mediation before the Florida Mediation Group, in Miami, Florida,
which awarded the Company $125,000, resulting in a judgment
against ISS for such amount.
The Company generated no income from its involvement with ISS and
it presently pursuing efforts to collect this judgment. There can
be no assurance that such collection efforts will be fully or
partially successful.
Page 9
The Company is presently in a dispute with former consultants,
Matthew Milo and Joseph Quattrocchi, who resigned as consultants
to the Company prior to December 31, 1998. The Company, during
the third quarter of 1998, wrote off as "paid in full" loans to
the Company of $15,000 previously owed to Messrs. Milo and
Quattrocchi. The Company deemed such loans satisfied based in
part on the consideration given in the consulting agreement
discussed herein. The Company has been informed informally that
Messrs. Milo and Quattrocchi may intend to assert that such loans
remain outstanding. The Company had entered into a consulting
agreement with Messrs. Milo and Quattrocchi, and with a third
consultant in August 1998, which provided for the issuance of
Shares and the grant of certain common stock purchase options
over the two and one-half year term of their consulting
agreement. The Company issued each of the consultants 3 million
Shares in August, 1998, as partial consideration for their
services performed and to be performed under the long-term
consulting agreement. The Company has taken the position that it
owes no further compensation to Messrs. Milo and Quattrocchi
under the August, 1998 agreement, and has further taken the
position that the loans from Messrs. Milo and Quattrocchi have
been satisfied, as a result of the consideration given to these
consultants, the consultants' resignation, and their failure to
provide services required under the consulting agreement. The
agreement provided for arbitration in the event of any dispute.
As of the date of this report, the Company cannot predict the
outcome of any legal proceeding or arbitration, or whether, as a
result of any such proceeding or arbitration, the Company will be
required to issue and additional consideration or repay any
loans. However, the Company believes that there are meritorious
defenses to any action that may be commenced. Further, the
Company believes that it has suffered damages as a result to the
breach of the consulting agreement by the actions of the
consultants and may seek to recover Shares previously issued to
consultants in an amount that it has not yet been determined. The
Company in October 1999 settled the claims of the third
consultant, Judith Grossman, who had also provided other services
to the Company from 1995 through the end of 1998, individually
and through entities she controlled, unrelated to the June 1998
consulting agreement between the Company and Messrs. Milo and
Quattrocchi. Such settlement provided for the issuance of 3
million shares, including 2 million restricted shares under Rule
144. The Company at present has no intention of exploring the
possibility of the settlement of the dispute with Messrs. Milo
and Quattrocchi.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
===========================================================
No matters were submitted to a vote of security holders during
the year ending 1999.
Page 10
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
================================================================
The Company's common stock is traded over-the-counter in what is
referred to as the "NASDAQ Bulletin Board". As of March 28, 2000,
there were 15 markets makers in the Company's stock. The
following information with respect to the high and low market
prices was obtained from the Company's records (which represents
prices between broker-dealers and do not include retail mark-ups
or mark-downs or any commissions to dealers).
<TABLE>
<CAPTION>
<S> <C> <C>
Bid Prices
1997 High Low
Quarter Ending March 31 $.187 $.125
Quarter Ending June 30 $.030 $.010
Quarter Ending Sept. 30 $.040 $.010
Quarter Ending Dec. 31 $.040 $.020
Bid Prices
1998 High Low
Quarter Ending March 31 $.100 $.020
Quarter Ending June 30 $.040 $.025
Quarter Ending Sept. 30 $.030 $.025
Quarter Ending Dec. 31 $.030 $.015
Bid Prices
1999 High Low
Quarter Ending March 31 $.030 $.010
Quarter Ending June 30 $.040 $.025
Quarter Ending Sept. 30 $.035 $.017
Quarter Ending Dec. 31 $.060 $.025
Bid Prices
2000 High Low
Period Ending March 28 $.860 $.040
</TABLE>
As of March 28, 2000 there were 1500 holders of the Company's
common stock, and no holders of the Company's preferred stock.
The Company has never paid a dividend and does not anticipate
that any dividends will be paid in the near future.
During 1997 and 1998, the Company offered and sold in a unit
private placement discussed more fully below, units resulting in
net proceeds to the Company of $173,500. All proceeds were
received in 1997. Each unit was priced at $.04 and consisted of
one Share of common stock and one common stock purchase option
exercisable at $.08 per Share. The units were offered and sold
based upon an exemption from registration provided in Section
4(2) under the Act. The units were sold to private investors each
of whom executed a subscription agreement with the Company. The
Company paid commissions of 10% in connection with the sale of
units. The Company has agreed to extend the options exercisable
Page 11
at $.08 per Share which were issued to the private investors in
the unit private placement to January 1, 2001. While there can be
no assurance that any of such options will be exercised, based
upon the recent trading range of the Company's Shares, from
between $.35 to $.70, and certain indications of interest
expressed by several of the private investors, the Company
reasonably expects that options will be exercised. In the event
that all of the options are exercised, the Company would receive
approximately $370,000 in option proceeds. Further, in the event
that all of the warrants issued to Global in the above referenced
Agreement are exercised, the Company will receive warrant
proceeds of $8 million.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
=================================================
Results of Operations
The Company during year ended December 31, 1999, had no revenues
from any operations or business endeavors. Further, the Company
received only limited revenues during 1997 and 1998, and the
Company continues to be a development stage company.
During the Company's year ended December 31, 1999, the Company
incurred a net loss of $1,217,010 ($0.00 per Share) compared to a
net loss of of $1,736,543 ($0.01 per Share) for 1998. The Company
reported no sales revenues for the year ended December 31, 1999
compared to sales revenues of $66,422 for the year ended December
31, 1998, which were derived from limited pharmaceutical sales
and telecommunications sales.
The Company's net losses for the years ended December 31, 1999
and 1998 were principally the result of the no sales revenues and
limited sales revenues, respectively, as well as the continued
expenses associated with continuing to operate and maintain its
offices and expenses associated with being a reporting company,
which include professional, accounting and printing/EDGAR
preparation and filing fees, and non-cash expenses associated
with the issuance of shares to its executive officer, directors
and consultants for services to the Company in lieu of cash
compensation during these periods. Such non-cash compensation
expensed during the year ended December 31, 1999 was $1,048,910
compared to $1,577,573 during 1998.
In order for the Company to pay its operating expenses during
1999, including office rents, telephone expenses, accounting and
bookkeeping fees, printing and EDGAR preparation costs,
publication costs, and other general and administrative expenses,
the Company was dependent upon the funds provided by non-interest
bearing loans from the Company's executive officer and director.
During 1998 the Company also received loans from such persons as
well as from consultant and from the private placement of its
securities to private investors. No funds were raised from
private investors during 1999.
Following its agreement with Global in 1998, the Company
anticipated that revenues would commence from its relationship
with Global prior to the end of 1998. Notwithstanding such
anticipation, Global did not receive any revenues during 1998 and
therefor the Company did not receive any revenues from Global.
Global started to generate revenues from its telecommunications
and Internet telephony products and services in late 1999, but no
revenues were distributed, nor required to be distributed to the
Company, because no final share purchase agreement was completed
until after the year ended December 31, 1999. Between late 1999
and January 2000, Global received $500,000 from third party
investors, which has permitted Global to introduce enhancements
to its Internet telephony business services, as described under
"Description of Business" above.
Page 12
The Company believes that it will begin to generate significant
revenues from Global as a result of the execution of the
Agreement, because Global is in the process of expanding its
services in South America, Europe and elsewhere. The Company has
been informed by Global that during the first quarter of fiscal
2000, Global will generate revenues and receivables which will be
reported in the Form 10-QSB for the Company for the period ended
March 31, 2000 and Global has projected to the Company that it
should generate significant additional revenues during 2000. The
Company together with Global expects to raise between $5 million
to $10 million in financing for Global's working capital during
the 2000 fiscal year to fund the expansion of Global. However,
there can be no assurance that the terms and conditions of such
financing, if available, will be at terms and conditions
acceptable to the Company and to Global.
During 1998, as a result of the continued interruption by local
PTT's in West Africa, the Company ceased its efforts to market
call-back services. As a result, the Company canceled rights of
ETLC to options to purchase 47 million Shares. The Company does
not project any further revenues or business efforts for call-
back in West Africa.
While the Company continued to pursue orders for generic
pharmaceutical products from West Africa, no revenues were
generated from such efforts during 1999. In August 1998, the
Company was informed that ETLC had terminated its principal
representative and since that dated, the Company has been
informed that ETLC was seeking to utilize other West African
representatives to pursue purchase orders for pharmaceuticals in
West Africa. There can be no assurance that the engagement of any
new representatives will result in the generation of purchase
orders and sales revenues from such efforts.
In June 1999 the Company was informed that the registration
process for approximately 30 pharmaceutical products commenced in
the Republic of Mali, with samples, certificates of analysis and
other product registration documentation having been transmitted.
However, to date, the Company is not aware of any progress in
registering the products and therefor there can be no assurance
that registration will be completed in the foreseeable future.
Nevertheless, the Company through ETLC has received limited
requests for generic pharmaceutical products from both the public
and private sectors in West Africa, and has recently sent
additional samples and certificates of analysis, sourced from
pharmaceutical manufacturers in India, to Nigeria. The Company's
previously announced anticipation of increased sales of
pharmaceutical in West Africa, however, have not been achieved to
date.
The Company during 1998 secured rights from a manufacturer in
India to market and sell a Hepatitis B vaccine in Africa, South
America, Europe and Asia. Such rights were negotiated with the
assistance of Messrs. Milo and Quattrocchi, who agreed to assist
the Company in furthering the Company's efforts for to market
such product. However, with the resignation of such consultants
and their failure to coordinate the efforts with the Indian
manufacturer, the Company received a notice from the manufacturer
that it did elect to continue the relationship. The Company may
elect to attempt to renegotiate a new agreement with this
manufacturer, although there can be no assurance that any such
efforts will be successful or, if successful, that it will be
able to generate sales of such product in any market.
The Company was informed by its representative for Brazil during
June 1999 that following the final stage of human testing and the
registration of the US manufactured dengue fever test kit, that
it would receive approval for the sale of the test kit in the
State of Roraima, Brazil. In fact, Company projected orders and
sales from other States in Brazil with the approval of the
National Health Foundation, Brazil's equivalent of the FDA.
Nevertheless, the Company has not received any revenues from any
sales of dengue fever test kits in Brazil to date and there can
be no assurance if and when any sales will occur. While, the
Page 13
Company has been informed that dengue fever is becoming an
increasingly more serious disease in Brazil (and elsewhere in the
world's tropical climates) the Company has found that it is
difficult for a development stage company to successfully
compete.
The ability to generate orders during 2000 and thereafter shall
be dependent, in part, on the Company's concluding an extension
of its arrangement with ETLC, among other parties, of which there
can be no assurance. Generic pharmaceuticals are an extremely
cost sensitive market, especially in developing countries where
the Company is seeking to do business. While the Company has
developed sources for generic pharmaceuticals and diagnostic test
kits at pricing that is within the budgets of these developing
markets, the Company during 1999 was not successful in securing
registration approvals for the sale of such products. In the
event that the Company does receive firm purchase orders for any
such products, the Company does not believe that it will be
dependent upon any one source.
With respect to dengue fever test kits, the Company only has a
relationship with one US manufacturer, the only manufacturer
which has an approved and registered dengue fever test kit
product in Brazil.
Liquidity and Capital Resources
The Company, at December 31, 1999, had current assets of $13
compared to $3016 at December 31, 1998. To assist the Company in
its cash flow requirements, which are presently estimated at
$8,000 per month, the Company during 1999, received $23,500 in
loans from its executive officer and director and also received
$57,000 from the exercise of options by directors and
consultants. Since the year ended December 31, 1999, the Company
received an additional $25,000 from the exercise of options.
During 1998 the Company received loans from its executive officer
and director in the aggregate amount of $50,381. The units in the
private placement were priced at $.04 per unit (the price of the
Company's Shares on January 15, 1997, the date of the private
placement subscription agreement), each unit consisting of one
Share and one common stock purchase option exercisable to
purchase an additional Share at $.08. The Company has extended
the maturity date for the exercise options issued as part of the
unit private placement through January 1, 2001. However, to date,
none of the options issued as part of the unit private placement
have been exercised by private investors. While there can be no
assurance that any of the $.08 options will be exercised by
private investors, based upon the recent trading range of the
Company's Shares, from between $.35 to $.70, and certain
indications of interest expressed by several of the private
investors, the Company reasonably expects that options will be
exercised. In the event that all of the options are exercised,
the Company would receive approximately $370,000 in option
proceeds. Further, in the event that all of the warrants issued
to the shareholders of Global in the above referenced Agreement
are exercised, the Company will receive warrant proceeds of $8
million. The Company has agreed to register on Form SB-2 among
other securities the shares that have been issued including
shares underlying options in connection with employment and
services agreements and the shares together with shares
underlying warrants issued and to be issued in connection with
the Stock Purchase Agreement for the acquisition of Global, and
securities issued pursuant to that Agreement.
The Company, prior to the distribution of revenues from Global,
if and when such distribution occurs, shall continue to be
dependent upon the willingness of the Company's executive
officers, directors and consultants to accept shares in lieu of
cash compensation for continued services to the Company, as well
as willingness to loan the Company cash for its operating
expenses. The trading price of Shares of the Company's common
stock during the past thirty days has been primarily in the range
of $.35 to $.70. While the Company was successful in raising
$173,500 net of commissions in investment capital in the 1997-
1998 unit private placement during 1997 and 1998, there can be no
assurance that the Company will be able to continue to raise
private capital or receive funds from the exercise of options at
Page 14
terms and conditions satisfactory to the Company. The Company,
together with Global, is pursuing efforts to raise the $5 million
to $10 million at terms satisfactory to the Company, as part of
its agreement with Global and believes that it will be successful
in such efforts.
However, at present, there can be no assurance that the Company
and Global will be successful in negotiating such financing at
terms satisfactory to the Company and Global.
Based upon the Company's present liquid resources and based upon
its present monthly operating expenses of $8,000, the Company
will be able to operate for approximately 6 months, if no
revenues are generated from business operations, from the
exercise of options, the exercise of warrants, additional private
placement funds or any other sources of funding.
However, the Company firmly believes that it will begin to
generate revenues during the remainder of 2000, as a result of
its acquisition of Global and the management fees that it should
receive, based upon a management fee equal to 5% of Global's
revenues. The Company will continue to explore potential joint
ventures and acquisitions of firms, including Internet telephony
companies, with positive cash flow, in order to develop and
expand the Company's business and operations.
Year 2000
The year 2000 issue results from certain computer systems and
software applications that use only two digits (rather than four)
to define the applicable year. As a result, such systems and
applications may recognize a date of "00" as 1900 instead of the
intended year 2000, which could result in data miscalculations
and software failures. The Company has conducted a preliminary
assessment of its key computer systems and software applications
and believes they are Year 2000 compliant. The Company is in the
process of communicating with all key suppliers, financial
institutions and customers to identify and coordinate the
resolution of any Year 2000 issues that might arise. Based on the
initial assessment, the Company's believes the cost of addressing
the Year 2000 issue should not have a material impact on the
Company financial position or results of operations.
Except for the historical information herein, the matters
discussed in this Annual Report includes forward-looking
statements that may involve a number of risks and uncertainties.
Actual results may vary based upon a number of factors,
including, but not limited to, risks in product and technology
development, market acceptance of new products and continuing
demand, the impact of competitive products and pricing, changing
economic conditions and other risk factors contained in the
Company's most filings with the Securities and Exchange
Commission.
Page 15
ITEM 7. FINANCIAL STATEMENTS
============================
The financial statements for the year ended December 31, 1999 are
attached hereto with comparative financial statements for 1998.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
======================================================================
None
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
====================================================================
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
(a) The directors and executive officers are:
<TABLE>
<S> <C> <C>
Name Age Title
Jerrold R. Hinton 56 President, Chief Executive
Officer, and a Director
Thomas J. Craft, Jr., Esq. 34 Secretary, Corporate Counsel and
a Director
</TABLE>
Page 15
All directors hold office until the next annual meeting of
stockholders of the Company and until their successors have been
elected and shall qualify. Officers serve at the discretion of
the Board of Directors, but the Company contemplates that it may
elect during the current year to enter into employment agreements
with certain of its executive officer and director, the terms of
which have not been determined as of the date of this Report on
Form 10-KSB. In addition, as part of the stock purchase
agreement, Global will enter into employment agreements with its
executive officers, the terms of which are presently being
negotiated.
Jerrold R. Hinton has served as President, Chief Executive
Officer and a Director of the Company from March 1995 to the
present in a full time capacity, following the change of the
Company's operations from that of Tera West Ventures to that of
the Company. Dr. Hinton, a graduate of Florida State University,
holds bachelors, masters and doctorate degrees in management,
engineering, surveying, real estate and construction. From 1992
to early 1995, prior to joining Registrant in his present
capacity Dr. Hinton served as an officer of United Biomedical,
Inc. (UBI), a private company. Dr. Hinton was not a shareholder
of UBI.
Thomas J. Craft, Jr., Esq., is an attorney practicing law under
the laws of the State of Florida. Mr. Craft has been Secretary,
Corporate Counsel and a Director of the Company since March,
1996. From July 1994 to December, 1997, Mr. Craft was also
Counsel, Secretary and a Director of Phoenix International
Industries, Inc., a development stage public company located in
West Palm Beach, FL. During the past five years, prior to his
present positions with the Company, Mr. Craft was engaged in the
private practice of law in West Palm Beach, FL. In addition,
prior to joining the Company, Mr. Craft served as an Intern for
United States Senator, Bob Graham, Florida.
(B) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
that the Company's officers and directors, and persons who own
more that ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and with
any exchange on which the Company's securities are traded.
Officers, directors and persons owning more than ten percent of
such securities are required by Commission regulation to file
with the Commission and furnish the Company with copies of all
reports required under Section 16(a) of the Exchange Act. Based
solely upon its review of the copies of such reports received
from officers, directors and greater than ten percent
shareholders, the Company reports the following failures to file
reports under Section 16(a) of the Exchange Act:
Name of Filer Report Not Filed
Jerrold R. Hinton Forms 4 and 5
Thomas J. Craft, Jr. Forms 4 and 5
Page 16
ITEM 10. EXECUTIVE COMPENSATION
===============================
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Year Salary Bonus($) Other Annual Restricted Securities LTIP All other
Principal Compensation Stock Underlaying Payouts compensatio($)
Position ($) Awards(s)# Options/SAR's($) ($)
- --------------------------------------------------------------------------------------------------------
Jerrold 1999 (a) (1) - - - - -
Hinton,
President, CEO
Jerrold 1998 (a) (2) - - - - -
Hinton,
President, CEO
Jerrold Hinton 1997 (a) (3) - - - - -
President, CEO
Thomas J. 1999 - (4) - - - - -
Craft, Jr.
Secretary,
Director
Thomas J. 1998 - (5) - - - - -
Craft, Jr.
Secretary,
Director
Thomas J. 1997 - (6) - - - - -
Craft, Jr.
Secretary,
Director
</TABLE>
___________________________
(a) Mr. Hinton entered into an employment agreement with the
Company for a period of three years, commencing October 1996,
which provided for annual compensation of $100,000, which
agreement was extended. Such salary was accrued but unpaid.
Subsequent to the end of the year ended December 31, 1999, Mr.
Hinton entered into an agreement to waive the accrued but unpaid
salary through December 31, 1999 in consideration for the
issuance of shares. See the discussion below.
(See Notes on following page)
(Note applies to table n prior page)
Mr. Hinton has served as the Company's chief executive officer
and president during the respective years set forth above. Mr.
Craft served as the Company's Secretary, director and as counsel
to the Company. Messrs. Hinton and Craft were issued Shares
including Shares in registration statements on Form S-8 and
Shares with a restrictive legend during the past three years in
consideration for continued services to the Company. In addition,
Shares were issued to Higher Ground, Inc., a corporation
controlled by Mr. Hinton, as set forth below. See the Notes to
Financial Statements and the discussion below, including Notes
(1) through (6).
The Company has not had sufficient funds to pay its executive
officers or directors during 1999 or any prior year. To date, the
Company has not commenced payment of any cash salaries. The
Company in October, 1996, entered into a three (3) year
employment agreement with Mr. Jerrold R. Hinton, who agreed to
serve the Company in a full time capacity of President and Chief
Executive Officer, as well as a director of the Company.
Page 17
(a)The employment agreement provided for the payment to Mr.
Hinton of $100,000 per annum, commencing October 1, 1996, which
salary had been accrued but unpaid since the commencement of such
agreement. The Company, during 1999, 1998 and 1997, issued to Mr.
Hinton, its president and chief executive officer, and to Higher
Ground, Inc., a corporation controlled by Mr. Hinton, an
aggregate of 9.75 million Shares in 1999, 11 million Shares in
1998 and 18.5 million Shares in 1997, respectively. Such Shares
were valued, based upon the price of the Shares on the dates of
issuance during each such year, as follows: (1) $152,000 in 1999;
(2) $194,000 in 1998; and (3) $722,000 in 1997, respectively. The
Company also issued to Thomas J. Craft, Jr., Esq., the Company's
corporate secretary, securities counsel and a director, 14.75
million Shares in 1999, 17 million Shares in 1998 and 16.5
million Shares in 1997. Such Shares were valued, based upon the
price of the Shares on the dates of issuance during each such
year, as follows: (4) $276,000 in 1999; (5) $302,000 in 1998; and
(6) $577,000 in 1997, respectively. The Share consideration
issued to Mr. Craft also included certain compensation to a
consultant to Mr. Craft. Subsequent to the end of the fiscal year
ended December 31, 1999, the Company agreed with its executive
officer, Jerrold R. Hinton, and with Higher Ground, a corporation
controlled by Mr. Hinton, to the cancellation of loans payable in
the aggregate amount of $129,421, in consideration for the
issuance to Mr. Hinton of 8.42 million shares with restrictive
legend and agreed with Mr. Craft to the cancellation of loans
payable in the amount of $39,000 in consideration for the
issuance to Mr. Craft of 6.5 million shares. In addition,
subsequent to the year end, in March 2000, the Company granted to
Messrs. Hinton and Craft options to purchase 6 million Shares
each, at an exercise price of $.08 per Share. The option exercise
price was determined based upon the warrant exercise price in
connection with the warrants being issued to Global in the Share
Purchase Agreement, and is identical to the options underlying
the units issued in the unit private placement. These option
granted to Messrs. Hinton and Craft do not vest until on or after
October 2000. The board of directors of the Company in granting
the options to Messrs. Hinton and Craft considered the benefits
to the Company and its shareholders from their continued services
to the Company and the reflection of the increased market
capitalization during their stewardship.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
============================================================
As of March 28, 2000, the security ownership of the following
persons and entities, who were either executive officers of the
Company or were known to the Company to own more than five
percent (5%) of the Company's outstanding voting securities was
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title of Name and Address of Amount and Nature Percent % of
Class Beneficial Owner of Beneficial Ownership Class (1)
- ----------------------------------------------------------------------------
Common Stock Jerrold R. Hinton, 110 27,230,920 9.0%
N. Center St. Suite
202, Hickory, NC 28601
Common Stock Thomas J. Craft, Jr. 5,000,000 1.6%
301 Clematis Street
Suite 300, West Palm
Beach, FL 33401
</TABLE>
(1) Based upon 303,870,560 Shares issued and outstanding at March
28, 2000. The Shares owned beneficially by Jerrold R. Hinton also
include Shares issued to Higher Ground, a corporation controlled
by Mr. Hinton, which may be deemed beneficially owned by Mr.
Hinton. The foregoing table does not reflect options which do not
vest until October 2000.
Page 18
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
========================================================
During 1999 and 1998, the Company had no business transactions
with related parties other than a consulting relationship with
Higher Ground, Inc., which entity is controlled by Jerrold R.
Hinton, the Company's president and chief executive. During 1999
and 1998, the Company issued to Higher Ground for its consulting
services and in connection with matters unrelated to the duties
of Jerrold R. Hinton under his employment agreement, 9.75 million
Shares and 6.5 million Shares, respectively, having an value of
$152,000 and $120,000, respectively, based upon the average of
the bid and asked price of the Shares on the dates of issuance.
In addition, subsequent to the year ended December 31, 1999, the
Company agreed to the cancellation of notes payable to Messrs.
Hinton and Higher Ground in the aggregate amount of $129,421, in
consideration for the issuance of 8.42 million Shares with legend
to Mr. Hinton, and agreed to the cancellation of a note payable
to Mr. Craft in the amount of $39,000 in consideration for the
issuance of 6.5 million Shares, with legend. See the discussion
under Items 10 and 11 above with respect to the grant of options
to Messrs. Hinton and Craft.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
==========================================
Exhibit No. Document Description
3.1 Articles of Incorporation (filed as
Exhibits 3.1, 3.2 and 3.3 to the Company's
Registration Statement on Form 10-SB and
incorporated herein by reference)
3.2 Bylaws (filed as Exhibit 3.4 to the
Company's Registration Statement on Form
10-SB and incorporated herein by reference)
10(iii) Material Contracts-Consulting Agreements
and Employment Agreement (filed as
Exhibits to Registration Statements on
Form S-8 and post-effective amendments
thereto and incorporated herein by reference)
10(iv) Share Purchase Agreement between the
Company and Global Transmedia
Communications Corporation
23 Consent of Dohan and Company, CPA's
27 Financial Data Schedule
(b) During 1999 the Company did not file any Reports on Form 8-K.
Page 19
SIGNATURES
In accordance with Section 12 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN DIVERSIFIED GROUP, INC.
By: /s/ Jerrold R. Hinton
Jerrold Hinton, President, Chief Executive Officer and Director
Dated: March 30, 2000
In accordance with the Exchange Act, this report has been signed
below by the following person on behalf of the Registrant and in
the capacities and on the dates indicated.
/s/ Thomas J. Craft, Jr.
Thomas J. Craft Jr., Secretary and Director
Page 20
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-3
Statements of Loss and Accumulated Deficit during the F-4
Development Stage
Statements of Cash Flows F-5
Statements of Deficiency in Assets F-6
Notes to Financial Statements F-7 - F-16
Dohan and Company 7700 North Kendall Drive, #204
Certified Public Accountants Miami, Florida 33156-7564
A Professional Association
Telephone: (305) 274-1366 Facsimile: (305) 274-1368
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors
American Diversified Group, Inc.
(A Development Stage Company)
Hickory, North Carolina
We have audited the accompanying balance sheets of American
Diversified Group, Inc. (A Development Stage Company) as of
December 31, 1999 and 1998, and the related statements of loss
and accumulated deficit during the development stage, cash flows,
and deficiency in assets for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our 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 financial position
of American Diversified Group, Inc. (A Development Stage Company)
at December 31, 1999 and 1998, and the results of its operations,
and its cash flows and its deficiency in assets for the years
then ended, in conformity with generally accepted accounting
principles.
As discussed in Note 7 to the financial statements, the Company
has been notified that certain consultants are filing a lawsuit
alleging breach of a consulting agreement, non-circumvention and
non-disclosure agreement, and default on a promissory note in the
amount of $15,000, which the Company has written-off. The Company
believes that the agreement provided for arbitration in the event
of any dispute. The Company further believes that it owes no
additional compensation to the consultants, and that the
promissory note has been satisfied, as a result of the
consideration given to the consultants, the consultants'
resignation and their failure to provide services required under
the consulting agreement. The outcome of this dispute cannot
presently be determined, but Management is of the opinion that it
will not have a material impact on the Company's financial
position. Accordingly, no provision for any liability that may
result has been made in the financial statements. Nevertheless,
due to uncertainties with this dispute, it is at least reasonably
possible that Management's view of the outcome will change in the
near term as the result of preparation for preliminary hearings,
discovery proceedings and arbitration as well as evaluation of
potential counterclaims.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 11 to the financial statements, the Company has suffered
recurring losses from operations and other transactions, has a
working capital deficiency and has a deficiency in assets that
raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/ Dohan and Company, PA
Certified Public Accountants
March 28, 2000
Miami, Florida
Member:
Florida Institute of Certified Public Accountants
American Institute of Certified Public Accounts Private Companies
and SEC Practice Sections
SC International Offices in Principal Cities World-Wide
F-2
AMERICAN DIVERSIFIED GROUP, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1999 1998
ASSETS
CURRENT ASSETS
Cash $ 13 $ 30
Refundable taxes - 2,986
---- -----
TOTAL CURRENT ASSETS 13 3,016
---- -----
PROPERTY AND EQUIPMENT, NET (NOTE 2) 8,757 8,753
OTHER ASSETS
Deposits 570 570
Contractual advances to acquire common 312,350 222,350
stock (Note 3)
Miscellaneous receivable (less $125,000 - -
allowance for uncollectibility) (Note 3)
------- -------
TOTAL OTHER ASSETS 312,920 222,920
------- -------
TOTAL ASSETS $321,690 $234,689
======== =======
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND DEFICIENCY IN ASSETS
LIABILITIES
Accounts payable $ 10,298 $15,174
Accrued expenses and other liabilities 308,000 236,523
(Note 4)
Notes payable - stockholders (Note 6) 243,421 215,671
------- -------
TOTAL CURRENT LIABILITIES 561,719 467,368
------- -------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
DEFICIENCY IN ASSETS (NOTE 9 AND 10)
Preferred stock, Series A, $10 par value,
50,000 shares authorized;
none issued and outstanding
Common stock, $.001 par value, 350,000,000
shares authorized,
278,887,560 and 230,762,560
shares issued and outstanding. 278,887 230,762
Additional paid-in capital 18,992,994 18,224,619
Deferred consulting fees (Note 5) - (397,160)
Deficit accumulated prior to the
development stage (8,811,789)(8,811,798)
Deficit accumulated during the
development stage (10,696,121)(9,479,111)
----------- -----------
TOTAL DEFICIENCY IN ASSETS (240,029) (232,679)
-------- ---------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $321,690 $234,689
======== ========
</TABLE>
See accompanying notes.
F-3
AMERICAN DIVERSIFIED GROUP, INC.
(A Development Stage Company)
STATEMENTS OF LOSS AND ACCUMULATED
DEFICIT DURING THE EVELOPMENT STAGE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cumulative
During the
For the For the Stage
Year Year January 1,
Ended Ended 1996 to
December December December
31, 1999 31, 1998 31, 1999
REVENUES
Sales $ - $ 66,422 $ 137,191
Cost of sales - 57,230 125,163
--- -------- ---------
GROSS MARGIN - 9,192 12,028
--- -------- ---------
EXPENSES
Consulting fees 1,048,910 1,577,573 9,741,725
Officer's salary 75,000 100,000 300,000
Professional fees 37,534 24,911 179,384
Reimbursed consultants' - - 127,974
expenses
Telephone 9,765 13,588 64,053
Other operating expenses 45,801 37,465 252,230
------ ------ -------
TOTAL EXPENSES 1,217,010 1,753,537 10,665,366
--------- --------- ----------
LOSS FROM DEVELOPMENT
STAGE ACTIVITIES (1,219,010)(1,744,345)(10,653,338)
---------------------------------
OTHER INCOME (EXPENSE)
Forgiveness of indebtedness - - 50,000
Gain on settlements - - 4,795
Loss on abandonment of - - (107,380)
acquisitions
Other income - 7,802 7,802
--- ----- -------
NET OTHER INCOME (EXPENSE) - 7,802 (44,783)
--- ----- -------
LOSS BEFORE INCOME TAXES $(1,219,010)$(1,736,543)$(10,696,121)
---------------------------------------
INCOME TAX - - -
NET LOSS $(1,219,010)$(1,736,543)$(10,696,121)
=======================================
WEIGHTED AVERAGE NUMBER OF 256,779,299 212,320,916 131,477,579
COMMON SHARES OUTSTANDING =========== =========== ===========
(PRIMARY AND FULLY DILUTED)
BASIC NET LOSS PER SHARE $(0.00) $(0.01) (0.08)
(PRIMARY AND FULLY DILUTED) ======= ======= ======
</TABLE>
See accompanying notes.
F-4
AMERICAN DIVERSIFIED GROUP, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cumulative
During the
For the For the Development Stage
Year Ended Year Ended January 1, 1996 to
December 31, December 31, December 31,
1999 1998 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,219,010) (1,736,543) (10,698,121)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 3,157 7,076 21,039
Amortization of deferred consulting fees 397,160 969,116 5,257,500
Loss on abandoned acquisitions - - 107,380
Forgiveness of indebtedness - - (50,000)
Common stock exchanged for services 669,750 608,457 4,531,707
(Increase) decrease in assets:
Accounts receivable - 48,391 -
Inventory - 5,000 5,000
Other current assets 2,986 - 2,986
Increase (decrease) in liabilities:
Accounts payable (4,876) (37,921) (42,797)
Accrued liabilities 71,477 105,004 343,268
------- ------- -------
NET CASH USED BY DEVELOPMENT STAGE
OPERATING ACTIVITIES (77,356) (31,420) (522,038)
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (3,161) - (12,845)
Payments for possible acquisitions - - (107,380)
Deposits - - (570)
-------- -------- ---------
NET CASH USED BY INVESTING ACTIVITIES (3,161) - (120,795)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 57,000 - 392,500
Proceeds from notes payable to officer 18,000 50,381 298,902
Payments on notes payable to officer (11,500) - (11,500)
Proceeds from notes payable
from shareholders (17,000) - (17,000)
Payments on notes payable to
potential investee - (15,000) (40,000)
Payments on loans reveivable to
potential investee - (15,000) (15,000)
------- ------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 80,500 20,381 641,902
------- ------- --------
NET (DECREASE) INCREASE IN CASH AND (17) (11,039) (931)
EQUIVALENTS ---- ------ --------
CASH AND EQUIVALENTS - BEGINNING 30 11,069 944
--- ------ --------
CASH AND EQUIVALENTS - ENDING $ 13 $ 30 $ 13
==== ====== =======
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ - $ - $ -
==== === ===
Income taxes $ - $ - $ -
==== === ===
Cash and common stock given by
shareholders to potential
investee on behalf of the Company $ 20,000 $ 167,358 $ 187,358
in exchange for debt
In addition to amounts reflected above,
common stock was issued for:
Contractual advances to acquire common $ 70,000 $ 40,000 $ 110,000
stock
Settlement of debt $ 15,750 $ 7,000 $ 22,750
Consulting services $ 671,750 $ 1,396,400 $9,333,150
</TABLE>
See accompanying notes.
AMERICAN DIVERSIFIED GROUP, INC.
(A Development Stage Company)
STATEMENTS OF DEFICIENCY IN ASSETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated Accumulated
Stock Deficit Deficit
Add. Subscription Deferred Prior to During the Total
Common Stock Paid-in Paid Consulting the Develop- Development Deficiency
Description Shares Amount Capital in Advance Fees ment Stage Stage In Assets
- -------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1996 42,642,560 $42,642 9,408,839 - $(630,000) $(8,811,789) - 9,692
Issued shares for 26,550,000 26,550 3,936,950 - (3,034,500) - - 929,000
services
Amortization of - - - - 3,056,750 - - 3,056,750
deferred consulting fees
Shares issued for 2,000,000 2,000 (2,000) - - - - -
possible acqusation
Shares cancelled per (8,530,000) (8,530) 8,530 - - - - -
settlement
Shares issued for cash 900,000 900 161,100 - - - - 162,000
Net loss for the year 1996 - - - - - - (4,332,255) (4,332,255)
- ----------------------------------------------------------------------------------------------------------------------------
Balance, Dec.31, 1996 63,562,560 63,562 13,513,419 - (607,750) (8,811,789) (4,332,255) (174,813)
Shares issued for 91,000,000 91,000 3,216,500 - (985,000) - - 2,322,500
services
Amortization of - - - - 834,474 - - 834,474
deferred consulting fees
Shares issued for 3,250,000 3,250 118,750 - - - - 122,000
possible acquisations
Stock subscription
paid in advance - - - 51,500 - - - 51,500
Net loss for the year 1997 - - - - - - (3,410,313) (3,410,313)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, Dec. 31, 1997 $157,812,560 157,812 16,848,66 51,500 (758,276) (8,811,789 (7,742,568) (254,652)
Shares issued for 72,700,000 72,700 1,317,700 - (608,000) - - 782,400
services
Amortization of - - - - 969,116 - - 969,116
deferred consulting fees
Shares issued for 700,000 700 6,300 - - - - 7,000
extinguishment of debt
Shares issued for cash 1,550,000 1,550 60,450 (62,000) - - - -
Stock subscription
receivable charged off - - (10,500) 10,500 - - - -
Shares returned and (2,000,000) (2,000) 2,000 - - - - -
Net loss for the - - - - - - (1,736,543)(1,736,543)
year 1998
- ---------------------------------------------------------------------------------------------------------------------------
Balance, Dec. 31, 1998 230,762,560 $230,762 18,224,619 - (397,160) (8,811,789) (9,479,111) (232,679)
Shares issued for 38,279,748 38,828 633,470 - - - - 671,750
services
Amortization of - - - - 397,160 - - 397,160
deferred consulting fees
Shares issued for 796,785 797 14,953 - - - - 15,750
extinguishment of debt
Shares issued for cash 3,048,377 3,048 53,952 - - - - 57,000
Shares issued to
potential investee 4,000,000 4,000 66,000 - - - - 70,000
issued and unpaid
Net loss for the - - - - - - (1,219,010)(1,219,010)
year 1999
- ----------------------------------------------------------------------------------------------------------------------------
Balance, December 276,887,470 $276,887 $18,992,994 $- $- $(8,811,789)$(10,698,121) $(240,029)
===========================================================================================================================
</TABLE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization and Capitalization
American Diversified Group, Inc. (Company) was organized January
16, 1979, under the laws of the State of Nevada. On March 6,
1998, the authorized shares were increased to 300,000,000 shares and on March
10, 1998, the authorized shares were increased to 350,000,000 shares.
Nature of Operations
During 1996, the Company became a development stage company.
During 1997 and 1998, the Company generated initial, but limited,
sales and receivables from the shipment of orders for generic
pharmaceuticals and the sale of telecommunication services to
customers in West Africa, however no revenues were generated from such
efforts during 1999. During 1999, the Company has pursued efforts
the completion of its intended acquisition of a telecommunications
company engaged in the business of Internet telephony and Voice
Over Internet Protocol (VOIP). In addition, the Company is presently
engaged in raising capital, marketing, sourcing products and the sale
of generic pharmaceuticals and medical diagnostic test kits.
During 1999, the Company discontinued its efforts in connection
with telecommunications products and services in West Africa. In
1998 and 1997, pharmaceutical products represented 81% and telecommunication
services 19% of sales.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less at the date of purchase
to be cash equivalents.
Property and Equipment
Property and equipment consists of office furniture and equipment,
which are stated at cost. Depreciation is based on the estimated useful
lives of the assets, using the straight-line method. Expenditures
for maintenance and repairs are charged to expense as incurred.
Major improvements are capitalized.
Income Taxes
Income taxes are computed under the provisions of the Financial
Accounting Standards Board (FASB) Statement 109 No. (SFAS 109),
Accounting for Income Taxes. SFAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of the
difference in events that have been recognized in the Company's
financial statements compared to the tax returns.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Advertising costs
Advertising costs are charged to operations in the period
incurred.
Deferred Consulting Fees
The Company issued shares of its common stock to consultants for
services rendered and, in 1998, for services to be rendered. The fair
market value of the shares issued for future services is recorded
as deferred consulting fees and is shown as a separate
component of stockholders' equity in 1998. The deferred fees were
amortized to expense on a straight-line basis over the term
of the respective consulting agreements.
Fair Value of Financial Instruments
Financial instruments, including cash, receivables, accounts
payable, and notes payable are carried at amounts which
reasonably approximate their fair value due to the short-term
nature of these amounts or due to variable rates of interest
which are consistent with market rates.
Concentrations of Credit Risk and Economic Dependence
The Company entered into an initial consulting agreement with
Emerging Trends Linkages Corp. (ETLC) in February 1996, for the
purpose of seeking purchase orders for the distribution and sale
of a variety of generic medical/pharmaceutical products. ETLC was
the primary distribution source of the Company resulting in an
economic dependence during 1998, but ETLC did not account for
any business for the Company during 1999 .
During 1999, the Company determined it would devote its efforts toward its
telecommunications venture with Global Transmedia Communications
Corporation (Global). (See Note 3, Acquisitions and Advances, and
Note 12, Subsequent Events).
The Company considers itsself dependent upon the efforts and success
of this venture.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily
relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
Basic Net Loss Per Common Share
Basic net loss per common share has been computed based upon the
weighted average number of shares of common stock outstanding
during each period. The basic net loss is computed by dividing
the net loss by the average number of common shares outstanding
during each period. Available stock options at December 31, 1999
and 1998, were anti-dilutive and not considered common stock
equivalents for purposes of computing loss per common share.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Impairment of Long-Lived Assets
During fiscal 1997, the Company adopted FASB Statement No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". SFAS 121
requires that impairment losses are to be recorded when long-
lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. When required,
impairment losses on assets to be held and used are recognized
based on the fair value of the asset. Long-lived assets to be
disposed of, if any, are reported at the lower of carrying amount
or fair value less cost to sell. There have been no material
adjustments for impaiments of long-lived assets.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<S> <C> <C>
1999 1998
Office furniture and $17,379 $14,218
equipment
Accumulated Depreciation (8,622) (5,465)
------- -------
Property and equipment,
net book value $8,757 $8,753
======= =======
</TABLE>
Total depreciation expense for the years ended December 31, 1999
and 1998, amounted to $3,157 and $7,076, respectively.
NOTE 3. ACQUISITIONS AND ADVANCES
Contractual Advances to Acquire Common Stock
In March 1998, the Company entered into a letter of intent for
the purchase of stock with Global, formerly Telephonetics
Overseas Corporation of Miami, Florida. The letter of intent
was modified by an interim agreement dated August 26, 1998.
Prior to this agreement, Global's activities primarily involved
the business of providing quality telecommunications hardware
and audio content for "on-hold" and web site messaging and
advertising for corporations, retail chains and other users.
During 1998, Global also commenced the sale and distribution of
Internet telephony services for sale in the domestic and foreign
markets and Global has expanded such business during 1999.
Under the Company's letter of intent with Global, the Company
had the right to acquire up to 45% of GTCC for $700,000.
In an interim agreement with Global, the Company negotiated
for the right to purchase up to 80% of Global, for
consideration based upon certain levels of subscribers and
expected gross revenues of Global. The Company has
advanced approximately $312,350, which has been accounted for as
a secured loan from the Company to Global, subject to the Company's
right to convert the loan to GLobal common shares. The amounts
advanced to Global are speculative in nature even though the
Company entered into the Stock Purchase Agreement, which superseded
the terms and conditions of the secured loan effective as of February
19, 2000. See Note 12, Subsequent Events, below.
NOTE 3. ACQUISITIONS AND ADVANCES (CONTINUED)
Subsequent to signing the letter of intent (followed by an
interim agreement) with Global, on March 15, 1999, the existing
convertible loan was replaced by a secured convertible debenture.
The debenture was secured by the number of shares of Global that
the Company may acquire upon put or conversion of the note equal
to the total advance. The Company had the right of first refusal
in the event that Global has an offer from a third party for the
purchase of the fifty-five (55%) percent not originally
contemplated to be acquired pursuant to the letter of intent. The
Company was also granted the right to file a Form UCC-1 with the
State of Florida, which would document its security interest in
Global common stock. The Company did not exercise this right and
subsequent to the year ended December 31, 1999 the Company
entered into a Stock Purchase Agreement to acquire 99% ownership
of Global. See Note 12, Subsequent Events, below.
Shares Issued and Canceled
The Company entered into an agreement with United Biomedical Inc.
(UBI) on June 16, 1996, to acquire UBI. In connection with the
agreement to acquire UBI, the Company issued two million
restricted shares of common stock. Subsequently, the Company and
UBI agreed that the acquisition should not take place and that
the two million shares should be returned to the Company's
treasury. On July 2, 1998, two million shares of common stock
were returned and canceled.
Miscellaneous receivable
During 1996, the Company entered into an agreement to acquire
Imaging Systems Synergies, Inc. (ISS). During negotiations with
respect to the proposed acquisition, the Company advanced
$100,000 to assist ISS in continuing its operations while the
Company pursued its due diligence efforts.
Following the completion of the due diligence effort, the Company
concluded that it should not acquire ISS and, after consulting
with counsel, pursued a cause of action against ISS for damages,
including recovery of the $100,000 advance. In September 1999,
the Company was awarded a judgment against ISS in the amount of
$125,000. However, the Company is uncertain if it will be suc-
cessful in recovering any damages against ISS.
NOTE 4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the
following:
<TABLE>
<S> <C> <C>
1999 1998
Officer compensation $300,000 $225,000
Professional fees 8,000 8,000
Payroll taxes - 3,523
------- ------
$308,000 $236,523
======== ========
</TABLE>
NOTE 5. DEFERRED CONSULTING FEES
In 1996, the Company entered into a three-year service agreement
with Emerging Trends Linkages Corp. (ETLC) for consulting
services. The services of ETLC were intended to support the sale
of generic pharmaceutical products and call back services in
Africa. Further, ETLC worked on the approval from the National
Health Foundation of Brazil for the sale of dengue fever test
kits. In accordance with the contract, the Company issued shares
of its common stock, as well as options for the purchase of
common stock, in exchange for current and future consulting
services. (See Notes 9 and 10.)
The Company entered into a three-year agreement with Higher
Ground, Inc., a entity controlled by the Company's President and
Chief Executive Officer, for consulting services commencing
October 1, 1997. Higher Ground, Inc., pursued joint ventures
with United States and foreign pharmaceutical manufacturers. It
commenced negotiations with certain third parties for the
sale of medical products in the international markets. In
addition, Higher Ground, Inc. is providing corporate consulting
services, including evaluation of potential acquisitions and due
diligence in connection with expansion of the Company's business.
In that connection, the Company issued shares of its common
stock in exchange for current and future consulting services.
(See Note 9.)
The deferred consulting fees consisted of the following:
<TABLE>
<S> <C> <C>
1999 1998
Higher Ground, Inc. - $94,818
ETLC - $302,342
---- --------
$ - $ 397,160
==== =========
</TABLE>
The fair market value of these future services has been amortized
over the term of the agreements. Consulting fees amortized under
these agreements was $397,160 and $969,116 for the years ended
December 31, 1999 and 1998, respectively.
NOTE 6. RELATED PARTY TRANSACTIONS
Notes Payable - Shareholders
As of December 31, 1999 and 1998, the Company is obligated under
five convertible promissory notes payable to shareholders as
follows:
<TABLE>
<S> <C> <C>
1999 1998
Former director 75,000 75,000
Current officer 87,421 80,921
Current officer 39,000 39,000
Consultant 42,000 5,000
Consultant 15,750
------ -------
243,421 215,671
======= =======
</TABLE>
NOTE 6. RELATED PARTY TRANSACTIONS (CONTINUED)
These notes principally represent advances to the Company by
officers, directors, consultants and shareholders.
There is no formal repayment plan, the notes bear no
interest and are convertible into common stock. Subsequent to
the year ended December 31, 1999, in March 2000, a current
officer converted $39,000 in notes into 6.5 million shares and
a consultant and current officer converted $129,421 in notes
into 8.42 million shares. (See Note 12, Subsequent Events.)
Employment Agreement
Effective October 1, 1996, the Company entered into a three-year
employment agreement with its President wherein the Company
agreed to pay compensation of $100,000 annually, payable monthly
at the rate of $8,333. (See Note 4). In accordance with the
agreement, this compensation has been accrued but remained unpaid
as of the year ended December 31, 1999, due to the Company's
lack of positive cash flow. Subsequent to the year ended Dec-
ember 31, 1999, the accrued but unpaid salary was converted into
10 million shares of common stock. (See Note 12, Subsequent Events).
Shares Issued for Services
The Board of Directors authorized the issuance of its common
stock to the President and Chief Executive Officer of the Company
in the amount of 4.5 million shares in 1998, valued at $74,000,
in consideration for continuing to serve the Company on a full-
time basis without cash payment of the above salary. (See Note
9.). In addition, the Company issued 9.75 million shares in 1999,
valued at $152,000 and 6.5 million shares in 1998, valued at
$120,000, to a consultant (Higher Ground, Inc.), which entity is
controlled by the President and Chief Executive Officer of the
Company, for consulting services in connection with matters
beyond and deemed unrelated to the duties under the officer's
employment agreement.
The Company's corporate securities counsel and Corporate
Secretary were issued a total of approximately 15.38
million shares of common stock in 1999, valued at $276,000 and
17 million shares in 1998, valued at $302,000 for services rendered.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is presently in a dispute with two former consultants
who resigned as consultants to the Company prior to December 31,
1998. The remaining balance of a loan payable of $15,000
originally advanced by the consultants was written-off based on
the belief that such loans had been satisfied based in part on
the consideration given in the consulting agreement. The Company
has taken the position that it owes no further compensation to
the consultants, and further that the loans from these two
individuals have been satisfied, as a result of the consideration
given to the consultants, the consultants' resignation and their
failure to provide services required under the consulting
agreement. The agreement provided for the arbitration in the
event of any dispute. As of the date of this report, the Company
cannot predict the outcome of any legal proceeding or
arbitration, or whether, as a result of any such proceeding or
arbitration, the Company will be required to issue additional
common stock as consideration or repay any loans.
In October 1999 the Company settled the similar claims of a third
consultant, who had also provided other services to the Company
from 1995 through the end of 1998, individually and through
entities the consultant controlled, unrelated to the June 1998
consulting agreement between the Company and the two former
consultants mentioned above. Such settlement provided for the
issuance of 3 million shares, including 2 million restricted
shares under Rule 144. The issuance of these shares was recorded
as additional compensation to the consultant (see Note 9)
In September 1999, the Company was awarded a judgement against ISS
in the amount of $125,000. The Company can not determine whether
it will be successful in recovering any damages against ISS and thus
has recorded a valuation allowance of $125,000. (See Note 3).
NOTE 7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Other Risks
The Company has not obtained insurance for general liability.
Because the Company is currently in the development stage, it
does not expect to incur any losses in connection with uninsured
risks. Therefore, no provision for any such loss has been
provided in the accompanying financial statements.
Leases and Rents
Effective February 1, 1998, the Company began leasing its
executive office premises in North Carolina under a one-year
lease agreement with monthly rent payments of $570. Effective
February 1, 1999 the lease was renewed for one year with monthly
rent payments of $605. The lease has provisions and is expected to
be renewed for another year upon expiration in February 2000.
Rent expense for 1999 and 1998 was $7,893 and $5,700,
respectively and is included in other operating expenses.
Year 2000
The year 2000 issue results from certain computer systems and
software applications that use only two digits (rather than four)
to define the applicable year. As a result, such systems and
applications may recognize a date of "00" as 1900 instead of the
intended year 2000, which could result in data miscalculations
and software failures. The Company has not had any year 2000
issues and any such issues in the future not have a material impact
on the Company's financial position or results of operations.
NOTE 8. INCOME TAXES
Deferrred income taxes and benefits for 1999 and 1998, are provided
for certain income and expenses, which are recoginized in different
periods for tax and financial purposes. The tax effects (computed at
15%) of these temporary differences and carryforwards that give rise
to significant portions of differed tax assets and liabilities consist
of the following:
<TABLE>
<S> <C> <C> <C>
Current
Period
1998 Changes 1999
Deferred tax assets:
Accrued officers' compensation $33,750 $11,250 $45,000
Consulting services elected
as start-up cost under IRC
Sec. 195 (b) 1,967,807 157,637 2,125,444
Net operating loss
carryforwards 116,924 13,965 130,889
--------- ------- ---------
2,118,481 182,852 2,301,333
Valuation allowance (2,118,481) (182,852) (2,301,333)
---------- ------- ---------
Net deferred tax asset $ - $ - $ -
========== ======= =========
</TABLE>
The Company has accumulated net operating losses, which can be
used to offset future earnings. Accordingly, no provision for
income taxes is recorded in the financial statements. A deferred
tax asset for the future benefits of net operating losses
and other differences is offset by a 100% valuation allowance
due to the uncertainty of the Company's ability to utilize the
losses. These net operating losses begin to expire in the year 2012.
At the end of 1999, the Company had net operating loss
carryforwards of approximately $872,600 which expire at
various dates through 2018, however due to ownership changes as
defined in Section 382 of the Internal Revenue Code, the Company
may be limited in its ability to utilize the loss carryforwards.
NOTE 9. COMMON STOCK EXCHANGES
Shares Issued for Services
During the periods described below, the Company issued shares of
its common stock to consultants and officers for services to the
Company. The shares issued were valued by the Company based upon
the average bid and asked price of the shares on the date of
issuance. The value of these shares was charged to expense unless
they were in consideration for future services, in which case
they were recorded as deferred consulting fees. (See Note 5.)
In February 1998, the Company issued a total of 39.7 million
shares, valued at $476,400, to its President and Chief Executive
Officer, corporate securities counsel and Corporate Secretary,
various consultants, and a potential investee in connection with
a letter of intent. (See Note 3.)
In March 1998, the Company issued a total of 13 million shares,
valued at $520,000, to its corporate securities counsel and
Corporate Secretary and various consultants.
In August 1998, the Company issued a total of 20 million shares,
at $400,000, to its President and Chief Executive Officer, its
corporate securities counsel and Corporate Secretary, various
consultants and a potential investee in connection with a letter
of intent. (See Note 3)
In March 1999, the Company issued a total of 11,625,000 shares,
at $210,000 to its corporate securities counsel and
Corporate Secretary, various consultants and a potential investee
in connection with a letter of intent. (See Note 3).
In August 1999, the Company issued a total of 3.250,000
shares, at $71,500, to its corporate securities counsel and
Corporate Secretary, various consultants and a potential investor
in connection with a letter of intent. (See Note 3).
In September 1999, the Company issued a total of 5 million
shares, at $100,000, to its corporate securities counsel and
Corporate Secretary, various consultants and a former consultant
in connection with a settlement agreement. (See Note 7).
In addition, the Company issued a total of 14,404,748 option
shares to its corporate securities counsel and Corporate
Secretary and various consultants in connection with services for
the Company. The differences between the amounts paid for the
option shares and the value of the option shares issued (based on
the average bid and asked price of the shares on the date of
issuance), totaling $290,250, was recorded as additional
compensation for services and was charged to expense. (See Note
10).
In connection with the above, Forms S-8 have been filed with the
Securites and Exchange Commission relative to such issuances of
stock.
During the periods described below, the Company issued restricted
shares (Rule 144) of its common stock to consultants and officers
for services to the Company. The shares issued were valued by the
Company based upon half of the average bid and asked price of the
Company's shares on the date of issuance. The value of these
shares was charged to expense.
In October 1999, the Company issued a total of 3 million shares,
including 2 million shares with legend, valued at $42,000, to
a former consultant in connection with a settlement agreement.
(See Note 7).
In November 1999, the Company issued a total of 4 million shares,
at $20,000, to its corporate securities counsel and Corporate
Secretary and a consultant.
NOTE 9. COMMON STOCK EXCHANGES(CONTINUED)
Stock Issued for Debt
In July 1998, the Company issued 700,000 shares of common stock
to a consultant in repayment of a loan. The shares issued were
valued by the Company at $7,000 based upon the average bid and
asked price of the shares on the date of issuance. The total debt
was $10,000. The remaining $3,000 was applied toward the
reimbursement of expenses which were owed to the Company.
In March 1999, the Company issued at total of 796,875 shares of
common stock to a consultant in full payment of a loan. The
shares issued included in a Form S-8 and were valued by the
Company at $15,750 based upon the average bid and asked price of
the shares on the date of issuance.
NOTE 10. STOCK OPTIONS
Options Pursuant to Private Placements
In connection with the Company's private placement of its common
stock in April 1997, the Company issued a total of 3,250,000
shares at $.04 per share together with 3,250,000 common stock
purchase options exercisable by the holders to purchase
additional 3,250,000 shares at a price of $.08 per share, which
were set to expire April 15, 2000. In 1999, the Company agreed to
extend the options exercisable to January 1, 2001. The Company
has agreed to register the shares and underlying the options in a
registration statement of Form SB-2 as soon as reasonably
practicable as part of a Registration Statement it intends to
file in the future (piggy-back rights). In March 1998, the
Company issued an additional 1,550,000 shares under the same
terms as the April 1997 private placement.
Options Pursuant to Consulting Agreements with ETLC
In connection with the Company's consulting agreement with one
consultant, ETLC (which is also a shareholder), the Company
granted options exercisable to acquire shares of the Company's
common stock. The consultant was granted options to acquire 10
million shares per year, for up to five years, provided that the
shareholder/consultant was continuing to provide services to the
Company during each of the five years. This agreement was amended
in March 1998, and the consultant had the option to acquire 20
million shares, with 10 million exercisable through November 1998
and an additional 10 million shares exercisable through November
1999. The options were extended until April 15, 2000 and were
exercisable at the lower of $1.00 per share or 50% of the average
bid price of the shares during the 10 days prior to the exercise
of the options. During 1999 the Company discontinued its efforts
in connection with telecommunications products and services in
West Africa, and, as a result, the Company and ETLC agreed to
terminate the call-back joint venture in West Africa and the
Company canceled ETLC's rights to 47 million shares subject to
common stock purchase options.
Shares Issued for Stock Subscriptions Receivable
During the year ended December 31, 1998, the Company issued 1.55
million shares of common stock at $.04 per share, for which the
Company had a stock subscription receivable of $62,000.
The Company received $51,500 and charged off the remaining
$10,500 against additional paid-in capital.
The board of directots of the Company authorized the charge off
of $10,500 in stock subscription receivable for the year ended
December 31, 1998, in connection with a private placement of
stock.
NOTE 10. STOCK OPTIONS (CONTINUED)
Options Shares Issued to Consultants
During the periods described below, the Company granted options
and issued option shares of its common stock to consultants and
officers in connection with services to the Company.
The shares issued were valued by the Company based upon the
average bid and asked price of the shares on the date of issuance.
In March 1999, the Company issued a total of 8,453,125 option
shares, valued at $155,250, to its corporate securities counsel
and Corporate Secretary and various consultants. Five million
share options were exercisable at the lower of $.015 per share or
50% of the average bid price of the shares on the date of notice
of the exercise of the options. The remaining 3,453,125 share
options were exercisable at the lower of $1 per share or 50% of
the average bid price of the shares on the date of notice of the
exercise of the options. The options were set to expire January
1, 2001. During April 1999, three million shares of common stock
options were exercised at $.008 per share and in May 1999, one
million shares of common stock options were exercised at $.008
for the option from March 1999. In addition, during April 1999,
500,000 shares of common stock options were exercised at $.01 per
share and in May 1999, 1.5 million shares of common stock options
were exercised at $.01 per share for the option from March 1999.
A total of $52,000 was received by the Company in connection with
the exercise of options. The difference between the value of
options exercised and the amounts received in payment for these,
was recorded as additional compensation and charged to expense,
totaling $ 103,250.
In August 1999, the Company issued a total of 6 million option
shares, valued at $132,000, to its corporate securities counsel
and Corporate Secretary and a consultant, exercisable at the
lower of $1.00 per share or 50% of the closing bid price of the
shares on the date of notice of the exercise of the options or a
price to be determined by the Company. A total of $5,000
was received by the Company is connection with the exercise of
1,000,000 options. The difference between the value of the
1,000,000 options exercised and the amounts received in
payment for these, was recorded as additional compensation and
charged to expense, totaling $22,000. In November 1999, the Board
agreed to waive the option price due on the 5 million options
shares issued to its corporate securities counsel and Corporate
Secretary, valued at $105,000, and charged this amount to expense.
In September 1999, the Company issued a total of 3 million option
shares, valued at $60,000, to its corporate securities counsel
and Corporate Secretary and a consultant, exercisable at the
lower of $.015 per share or 50% of the closing bid price of the
shares on the date of notice of the exercise of the options or a
price to be determined by the Company. To date no amounts have
been received by the Company is connection with these option
shares. In November 1999, the Board agreed to waive the option
price due on the 2 million options shares issued to its corporate
securities counsel and Corporate Secretary, valued at $40,000,
and charged this amount to expense.
NOTE 11. GOING CONCERN AND MANAGEMENT'S PLANS
As reflected in the accompanying financial statements, during the
year ended December 31, 1999, the Company had no revenues and
incurred a net loss of $1,219,010. Consequently, there is a
deficiency in assets attributable to common stock of $240,029 at
December 31, 1999, as well as a working capital deficiency. These
factors, as well as the uncertain conditions the Company faces
regarding its ability to successfully acquire, develop and
distribute and/or market medical products, including generic
pharmaceuticals, vitamins, and diagnostic test kits, and be able
to successfully offer and sell telecommunications products and
services, creates substantial doubt about the Company's ability
to continue as a going concern.
The Company believes that it will become an operating Company and
begin to generate revenues during the remainder of 2000 from Global
as a result of the execution of the Share Purchase Agreement,
because Global is in the process of expanding its services in
South America, Europe and elsewhere.
During the first quarter of fiscal 2000, Global has represented
to the Company that it will report revenues and receivables, which
the Company can reflect in its Form 10-QSB for the period ended
March 31, 2000, and Global has projected to the Company that it
should generate significant additional revenues during 2000.
The Company together with Global expects to raise between $5
million to $10 million in financing for Global's working capital
during the 2000 fiscal year to fund the expansion of Global.
However, there can be no assurance that the terms and conditions of
such financing, if available, will be at terms and conditions
acceptable to the Company and to Global.
In addition, the Company will continue to explore potential joint
ventures and acquisitions other of firms, including Internet
telephony companies, with positive cash flow, in order to develop
and expand its business and operations, as well as seeking
business opportunities in the export and sale of medical products
manufactured and supplied by third parties. The Company entered
into consulting agreements to assist in entering into these
fields and becoming an operating company.
Further, while there can be no assurance that any of the
outstanding stock options (see Note 10) will be exercised, based
upon the recent trading range of the Company's Shares, from
between $.40 to $.70, and certain indications of interest
expressed by several of the private investors, the Company
reasonably expects that options will be exercised. In the event
that all of the options are exercised, the Company would receive
approximately $370,000 in option proceeds. Further, in the event
that all of the warrants granted to Global in the above referenced
Share Purchase Agreement are exercised, the Company will
receive warrant proceeds of $8 million.
To date, the Company has been dependent upon the willingness of
its consultants, officers, directors and professionals to accept
shares issued for services, in lieu of cash compensation. The
Company will continue to be dependent upon the willingness of
persons to accept shares as compensation for services, until such
time, if ever, that it generates a positive cash flow from
operations
The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or
the amounts or classifications of liabilities that might be
necessary in the event the Company cannot continue in existence.
NOTE 12. SUBSEQUENT EVENTS
Share Purchase Agreement
Supsequent to the year end, the Company, Global and Global's
shareholders entered into a share purchase agreement
effective February 19, 2000 (the "Agreement") pursuant to which
the Company will acquire 99% of Global's shares. This Agreement
provides for the issuance to Global's share holders of units,
which aggregate 25 million shares of common stock, based upon
the average closing bid price of the shares during the
ten-day period prior to February 19, 2000. The units also
provide for the issuance of four warrants, Class A, B, C
and D, each exercisable at $.08, which was the average closing
bid price of the Company's shares during the six month period
prior to February 19, 2000. Each Class of warrants provides for
the issuance of 25 million shares and expires two years from the
date of the Agreement. Neither the shares nor the warrants have
been registered under the Securities Act of 1933, as amended
(the "Act"). The Class A warrants are exercisable during the
twenty-four month period commencing the date of the Agreement,
the Class B warrants are exercisable commencing on a date
six months from the execution of the Agreement for a period
ending twenty-four months from the date of the Agreement;
the Class C warrants are exercisable commencing on a date twelve
months from the execution of the Agreement for a period ending
twenty-four months from the date of the Agreement; and the Class
D warrants are exercisable commencing on a date eighteen months
from the execution of the Agreement for a period ending twenty-
four months from the date of the Agreement. If all of the
warrants are exercised, the Company will receive warrant
proceeds of $8 million. It is intended that GTCC and the Company
will execute a management agreement which should provide payment
to the Company of a management fee of approximately 5% of
Global's revenues on an annual basis.
Debt for Equity Exchanges
In February 2000, the Company and its President and Chief Executive
Officer agreed to settle the $300,000 accrued compensation
balance due (see Note 4) pursuant to an employment agreement (see
Note 6) in exchange for 10 million shares of the common stock
(restricted Rule 144), and options to acquire 6 million
shares, exercisable at $.08 for a period of three years from
February 29, 2000. These options do not vest until October 2000.
In March 2000, the Company and its President and Chief Executive
Officer agreed to the cancellation of notes payable
totaling $42,000, and to a consultant,
which entity is controlled by the President of the Company,
for $87,421 as of December 31, 1999 (see Note 6) in exchange
for a total of 8.42 million restricted shares (Rule 144) of
common stock. Also in March 2000, the Company and its corporate
securities counsel and Corporate Secretary agreed to the
cancellation of notes payable to this executive totaling $39,000
as of December 31, 1999 (see Note 6) in exchange for a total of
6.5 million restricted shares (Rule 144) of common stock. In
addition, the Company agreed to grant such executive officer
common stock options to acquire 6 million shares, exercisable at
$.08 for a period of three years. These option with respect to 6
million shares does not vest until October 2000.
Increase in Authorized Shares
Subsequent to the end of the year ended December 31, 1999, in
February 2000, the Company's authorized shares were increased to
700,000,000 shares.
EXHIBIT 10(iv)
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Share Purchase Agreement
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 19th day of February, 2000 among
the Parties:AMERICAN DIVERSIFIED GROUP, INC., a corporation
existing under the laws of the State of Nevada (hereinafter
referred to as the "Purchaser"), Global Transmedia Communications
Corporation, a corporation existing under the laws of the State
of Delaware (hereinafter "GLOBAL") and the shareholders of GLOBAL
(hereinafter collectively referred to as "Vendor" as defined
below). WHEREAS, on the terms and subject to the conditions
hereinafter set forth, the Purchaser wishes to Purchase and
acquire from Vendor and Vendor wishes to sell, assign, exchange
and transfer to the Purchaser the Purchased Shares; NOW
THEREFORE in consideration of the respective covenants,
agreements, representations, warranties and indemnities herein
contained and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each of the
Parties hereto), the Vendor, the Purchaser, covenant and agree as
follows:ARTICLE IINTERPRETATION1.1 Defined Terms: For the purpose
of this Agreement, unless the context otherwise requires, the
following terms shall have the respective meanings set out below
and grammatical variations of such terms shall have corresponding
meanings:"Act" means the Business Corporations Act (Florida) as
in effect on the date hereof;"Affiliate" has the meaning
attributed to that term in the Act;"Agreement" means this
Agreement together with any and all amendments made pursuant to
the provisions hereof and "hereof" and "hereto" shall have
corresponding meanings;"Annual Financial Statements" means the
unaudited financial statements of GLOBAL as, at and for the
financial year ended 1999, prepared in accordance with generally
accepted accounting principles, consisting of a balance sheet,
income statement, statement of retained earnings and changes in
financial position, a copy of which is annexed hereto as Schedule
1.1A;"Arm's Length" has the meaning attributed thereto in the
Income Tax Act;"Associate" has the meaning attributed to that
term in the Act;"Business" means the business currently and
heretofore carried on by GLOBAL and the carrying on of various
ancillary or related activities thereto;
"Business Day" means any day other than a Saturday or a Sunday or
a statutory holiday in the United States;
"Business Plan" means the latest business plan attached hereto
and any revised business plan subsequently approved by Purchaser
that such approval will not be unreasonably withheld;
"Closing Certificates" has the meaning set out in Subsection
5.1(a);
"Closing Date" means March 20, 2000 or as soon thereafter as may
be reasonably practicable, by agreement in writing between
Vendor, Purchaser and Global based upon conditions of the
agreement;
"Contract" means any agreement, indenture, contract, lease, deed
of trust, option, instrument or other commitment, whether written
or oral;
"Corporation" means Global Transmedia Communications Corporation
("GLOBAL"), a corporation existing under the laws of the state of
Delaware;
"Encumbrance" means any encumbrance, lien, charge, hypothecate,
pledge, mortgage, title retention agreement, security interest of
any nature, adverse claim, exception, reservation, easement,
right of occupation, option, right of preemption, privilege or
any Contract to create any of the foregoing;
"Financial Statement" means the Annual Unaudited Financial
Statements and the Interim Unaudited Financial Statements;
"GAAP" means generally accepted accounting principles that have
been established in the United States; including those approved
from time to time by the American Institute of Chartered
Accountants or other appropriate body;
"GLOBAL" means GLOBAL surviving after closing;
"Indemnified Party" has the meaning set out in Section 9.3;
"Indemnifying Party" has the meaning set out in Section 9.3;
"Initial Working Capital Financing" means the obligation of the
Purchaser working with Global to secure capital in the amount of
between $1,500,000 and $2,000,000;
"Interim Financial Statements" means the unaudited financial
statements of GLOBAL for the period ended February 29, 2000, and
such other unaudited interim financial statements as have been
previously delivered or shall be delivered by GLOBAL or Vendor to
Purchaser consisting of a balance sheet, income statement and
changes in financial position, a copy of which is annexed hereto
or Schedule 1.1B;
"Knowledge" means the knowledge Vendor has or had after having
made a good faith effort to ascertain the fact in question
pursuant to an inquiry directed to such officers, directors,
supervisors and advisors of GLOBAL, the Vendor, as would be
reasonably likely to have information relating to the fact in
question;
"Leased Property" has the meaning set out in Section 3.12;
"Leases" has the meaning set out in Section 3.12;
"Licenses" has the meaning set out in Section 3.19;
"Losses" means, in respect of any matter, all claims,
proceedings, losses, damages, liabilities, deficiencies, costs
and expenses (including, without limitation, all legal and other
professional fees and disbursements, interest, penalties and
amounts paid in settlement) arising directly or indirectly any, a
consequence of or as a result of such matter;
"Party or Parties" means the signers of this Agreement.
"Payment Shares" means Units, each of which shall include one
share of common stock (the "Shares") of the Purchaser and four
warrants designated "A Warrant", "B Warrant", "C Warrant" and "D
Warrant" (collectively, the "Warrants"). Each Warrant shall
entitle the holder to purchase one additional Share, at a price
of $.08 per Share as follows: The A warrant shall be exercisable
immediately upon the execution of this Agreement and expiring
after two years; the B Warrant shall be exercisable commencing on
a date six month from the date of this Agreement for a period of
eighteen months, expiring on a dated two years from the date of
this Agreement; the C Warrant shall be exercisable commencing on
a date twelve months from the date of this Agreement and ending
on a date two years from the date of this Agreement; and the D
Warrants may be exercised commencing on a date eighteen months
from the date of this Agreement and expiring two years from the
date of this Agreement. The foregoing Shares and the A, B, C and
D Warrants may be referred to herein as the Units. Purchaser
undertakes to make every reasonable effort to prepare and file
with the Securities and Exchange Commission as soon as reasonably
practicable a registration statement on Form SB-2, or such other
Form as may be applicable under the Securities Act of 1933, as
amended (the "Act), for the purpose of registering, among other
securities, the Units, including the Shares, the Warrants and the
Shares underlying the Warrants, issued in connection with this
Agreement. Such registration statement may include other Shares
of the Company's common stock and Shares underlying common stock
purchase options issued and granted to officers, directors and
consultants, among others, prior to and subsequent to this
Agreement, and such registration statement shall provide for
public resale by holders of the Company's securities to the
maximum extent permissible under the Act;
"Person" or "Persons" means an individual, trust, partnership,
association, syndicate, corporation, or any other incorporated or
unincorporated organization or entity;
"Purchase Price" has the meaning set out in Section 2.2;
"Purchased Shares" has the meaning set out in Section 3.3;
"Record Date" the date on which the value of the Payment Shares
is set;
"Tax Act" means the Internal Revenue Code as amended from time to
time;
"Time of Closing" means 9.00 A.M. Miami time on the Closing Date,
or such other time on the Closing Date as Vendor and the
Purchaser may mutually determine;
"Vendor" means the current shareholders of GLOBAL and those
persons who have a right to acquire any equity interest or shares
in GLOBAL, under agreement or arrangement as set forth below;
"Working Capital" means joint efforts of both the Purchaser and
Vendor in obtaining the capital funding needs of Global in the
future as identified, and that the Parties agree are in the
latest Business Plan of GLOBAL dated February 19, 2000, a copy of
which has been delivered to Purchaser, and the Initial Working
Capital Financing;
1.2 Sections and Headings: The division of this Agreement into
Sections and the insertion of headings are for convenience of
reference only and shall not affect the interpretation of this
Agreement. Unless otherwise indicated, any reference in this
Agreement to a Section or a Schedule refers to the specified
Section of or Schedule to this Agreement. The Parties hereto
acknowledge that their respective legal counsel have reviewed and
participated in settling the terms of this Agreement, and that
any rule of construction to the effect that any ambiguity is to
be resolved against the drafting party shall not be applicable in
the interpretation of this Agreement.
1.3 Number and Gender: In this Agreement, words importing the
singular number only shall include the plural and vice versa,
words importing gender shall include all genders.
1.4 Schedules and Exhibits: The following Schedules are attached
to and form part of this Agreement:
Schedule 1.lA - Annual Financial Statements
Schedule 1.1B - Interim Financial Statements
Schedule 3.5 - Share Ownership
Schedule 3.15 - Insurance Policies
Schedule 3.18 - Agreements and Commitments
Schedule 3.28 - Accountants and Attorneys
Schedule 3.29 - Directors and Officers
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES
2.1 Purchase and Sale of Purchased Shares. On the terms and
subject to the conditions of this Agreement, the Purchaser
hereby agrees to purchase from the Vendor and the Vendor
hereby agrees to sell to the Purchaser at the Time of
Closing ninety nine (99%) percent of all of the Purchased
Shares owned by such Vendor. The Agreement supersedes and
replaces all other agreements between the Parties.
2.2 Purchase Price: The aggregate purchase price payable by the
Purchaser for the Purchased Shares shall be $5,000,000 (the
"Purchase Price") subject to certain adjustments as follows:
as necessary in accordance with the results of the
independent evaluation presently being conducted at the
request and expense of the Purchaser as provided for below.
In the event that the Vendor and the Purchaser shall fail to
agree on the Purchase Price as determined by the independent
evaluation, Vendor shall at its own cost arrange for a
second independent evaluation to be done by a provider of
its own choosing. If such evaluation by the Vendor differs
from Purchaser's evaluation by 10% or more, the Parties may
elect to settle on a Purchase Price set as the average of
the two evaluations, or mutually agree to a third
independent evaluation or in the alternative mutually agree
to terminate this Agreement if the Parties cannot agree upon
an evaluation, with thirty (30) days prior written notice to
the other Party. Upon such termination, this Agreement
shall be null and void.
2.3 Satisfaction of Purchase Price: The Purchase Price shall be
satisfied as follows:
On the Closing Date the Purchaser shall deliver to the
Vendor share certificates representing a number of Payment
Shares, which shall include Purchaser's Shares and the
Warrants as defined under "Payment Shares" above, in an
amount that shall be equal to equal the Purchase Price,
registered in the name of the Vendor or as the Vendor may
otherwise in writing direct. For the purposes of this
Agreement, the valuation of the of the Payment Shares is
$.20, based upon the average closing bid price of the Shares
during the ten day period immediately preceding this
Agreement. The exercise price of the Warrants of $.08 was
based upon the average closing bid price of the Shares
during the six month period prior to the date of this
Agreement. The parties determined that this was an equitable
means to determine the Warrant exercise price due to the
historic fluctuations in the price of Purchaser's Shares.
For the purposes of the Purchase Price, no value was
attributable to the Warrant component of the Units delivered
as the payment shares.
2.4 Final Statement:
(a) The Vendor shall cause the accountants of GLOBAL (the
"GLOBAL's Accountants") within ten (10) days prior to
the Closing Date at the Vendor's expense, to prepare
and finalize a balance sheet (the "Final Balance
Sheet") and an income statement for GLOBAL prepared as
at the Time of Closing.
(b) The Final Balance Sheet and income statement shall be
certified by the Vendor's Accountants as being prepared
in accordance with GAAP and the past accounting
practices of GLOBAL as being accurate and complete.
(c) The Purchaser' s auditors or accountants at Purchaser's
expense shall be permitted to review and audit the
Final Balance Sheet together with all working papers,
books of account and other documents relating to GLOBAL
relevant to the preparation of the Final Balance Sheet
and income statement.
ARTICLE II
REPRESENTATIONS AND WARRANTES OF VENDOR
The Vendor jointly and severally represents and warrants to the
Purchaser as follows and acknowledges that the Purchaser is
relying on such representations and warranties in connection with
the purchase by the Purchaser of the Purchased Shares:
3.1 Organization: GLOBAL is duly incorporated and organized
and validly existing in accordance with the laws of the state of
Delaware, is up to date in all filings required under those
jurisdictions in which it carries on business and has the
corporate power to own or lease its property, and to carry on the
Business as now being conducted by it and to perform its
obligations hereunder. GLOBAL is duly qualified as a corporation
to do business in each jurisdiction in which the nature of the
Business or the property and assets owned or leased by it makes
such qualification necessary.
3.2 Authorization: This Agreement has been duly
authorized, executed and delivered by Vendor, and is a legal,
valid and binding obligation of Vendor. It is enforceable
against Vendor by the Purchaser in accordance with its terms
subject however to limitation with respect to bankruptcy or other
laws generally affecting creditors' rights and to the extent that
equitable remedies such as specific performance and injunction
are in the discretion of the court from which they are sought.
3.3 Authorized and Issued Capital: The authorized and issued
capital of GLOBAL consists of 100 shares of common stock, of
which 100 shares, including 1 share owned by the Florida Export
Finance Corporation are issued and outstanding and no more are
issued and outstanding. All of the issued and outstanding shares
of GLOBAL are fully paid and non-assessable. All of the issued
and outstanding shares of GLOBAL are owned by the recorded and
beneficial owners of such shares, as disclosed to Purchaser
including 99 shares by Vendor (the "Purchased Shares") and one
share is owned by Florida Export Finance Corporation. No other
person or entity has any right to acquire any GLOBAL shares other
than as disclosed to Purchaser prior to execution of this
Agreement and no person or entity will be granted any rights to
acquire any GLOBAL shares without the prior written consent of
and disclosure to Purchaser.
3.4 No Other Agreements to Purchase or Options: No Person has
any agreement or option or any right or privilege (whether by
law, pre-emptive or contractual) capable of becoming an
agreement, including convertible securities, warrants or
convertible obligations of any nature, for the purchase,
subscription, allotment or issuance of any unissued shares or
other securities of GLOBAL or any of the assets other than
purchases in the ordinary course of business of GLOBAL. No
Person has any agreement or option or any right capable of
becoming an agreement for the purchase of the Purchased Shares.
3.5 Ownership of Purchased Shares: Vendor is and will at
the Time of Closing be the beneficial owner and the owner of
record of the Purchased Shares in the amounts indicated on
Schedule 3.5 and will at the Time of Closing hold such shares
with good and marketable title thereto, free and clear of all
Encumbrances. None of the Purchased Shares are subject to any
shareholder agreement or voting agreement or any other agreement
that contains any other restrictive provisions. There is not
pending any suit, action or other legal proceeding to restrict or
prevent Vendor from transferring the Purchased Shares to the
Purchaser.
3.6 No Subsidiaries: GLOBAL does not own or have any
agreements of any nature to acquire, directly or indirectly, any
shares in the capital of or other equity or proprietary interests
in any Person, and GLOBAL does not have any agreements to acquire
or lease any other business operations.
3.7 No Violation: The execution and delivery of this Agreement
by the Vendor and the consummation of the transactions herein
provided for:
(a) will not result in the breach or violation of any of
the provisions of, or constitute a default under or would
with the passage of time or the giving of notice or both
or otherwise constitute a default under, or conflict with
or cause acceleration of any obligation of the Vendor or
GLOBAL under or result in the cancellation of:
(i) any Contract to which the Vendor or GLOBAL is a
party or by which either of them is, or any of
their properties are, bound;
(ii) any provision of the compliance documents, by-laws
or resolutions of the board of directors (or any
committee thereof) of GLOBAL;
(iii) any judgment, decree, order or award of any
court, governmental body or arbitrator having
jurisdiction over the Vendor or GLOBAL;
(iv) any license, permit, approval, consent or
authorization held by the Vendor, GLOBAL or
necessary to the ownership of the Purchased Shares
or the operation of the Business;
(v) any applicable law, statute, ordinance, regulation
or rule;
(b) will not result in the creation or imposition of
any Encumbrance on any of the Purchased Shares or any
of the property or assets of GLOBAL;
(c) will not require the consent, authorization or approval
of any person (whether pursuant to any law, agreement,
statute, lease or otherwise) in addition to those
described in Schedule 3.20.
3.7 Business of GLOBAL: The Business is the only business
operation carried on by GLOBAL and the property and assets owned
or leased by GLOBAL are sufficient to carry on the Business
substantially in the manner heretofore conducted. All of the
property and assets owned or leased and used by GLOBAL and
required in order to operate the Business substantially in the
manner heretofore conducted are in good operating condition and
are in a state of repair and maintenance which will permit the
Business to be carried on substantially in the manner heretofore
conducted and as provided in the Business Plan.
3.9 Title to Personal and Other Property: GLOBAL beneficially
owns, or has a valid leasehold interest in, all property and
assets used by it in the Business.
3.10 Real Property: GLOBAL does not now own and has never owned
and has not entered into any agreement to acquire any real
property.
3.11 Property on Leased Property: Except as disclosed in Schedule
3.12, all buildings, structures, improvements and appurtenances
situated on the Leased Property and all material components of
the fixtures, plumbing, heating, electrical, drainage, air
conditioning and cooling systems situated therein are to the
Vendor's knowledge in good operating condition and in a state of
maintenance and repair which makes them suitable for the purposes
for which they are currently being used and GLOBAL has adequate
rights of ingress and egress for the operation of the Business in
the ordinary course. None of such buildings, structures,
improvements or appurtenances (or any equipment therein), nor the
operation or maintenance thereof, violates any restrictive
covenant or any provision of any federal, state, provincial or
municipal law, ordinance, rule or regulation, or encroaches on
any property owned by others.
3.12 Real Property Lease: Schedule 3.12 sets forth a municipal
address of all real property leased by GLOBAL (the "Leased
Property"). GLOBAL is not a party to any lease or agreement in
the nature of a lease in respect of any real property, whether as
lessor or lessee, other than the lease (the "Lease") annexed
hereto as Schedule 3.12 relating to the Leased Property. The
Lease is in good standing and in full force and effect without
amendment thereto, and neither GLOBAL nor any other party thereto
is in breach of any monetary obligations or any other material
covenants, conditions or obligations contained therein. No state
of facts exist which, after notice or lapse of time or both or
otherwise would result in a breach or default under any of the
material the terms of any of the lease. GLOBAL has not received
from its landlord within the twelve (12) month period prior to
the date of this Agreement any notices of monetary or material
default under the Lease.
3.13 Inventories: The inventories of GLOBAL, to the best of the
knowledge, information and belief of Vendor, do not include any
material items that are slow moving, below standard quality or of
a quality or quantity not usable or saleable in the normal course
of business.
3.14 Accounts Receivable: Subject to an allowance for doubtful
accounts that has been reflected on the books of GLOBAL in
accordance with GAAP, all accounts receivable, book debts and
other debts due or accruing to GLOBAL have been bona fide created
in the ordinary course of business and are collectable without
set-off or counterclaim.
3.15 Insurance: GLOBAL has its property and assets insured on
a reasonable basis against loss or damage and such insurance
coverage will be continued in full force and effect to and
including the Time of Closing. Schedule 3.16 sets out all
insurance policies (specifying the insurer, the amount of the
coverage, the type of insurance and the policy number) maintained
by GLOBAL on its property and assets or personnel as of the date
hereof GLOBAL is not in default with respect to any of the
provisions contained in any such insurance policy and has not
failed to give any notice or present any claim under any such
insurance policy in a due and timely fashion.
3.16 Books of Account: The books of account and financial records
of GLOBAL fairly
and correctly set out and disclose in all material respects the
current financial position of GLOBAL. All transactions involving
GLOBAL have been accurately recorded in its books and records in
all material respects.
3.17 Intentionally Left Blank
3.18 Agreements and Commitments: Schedule 3.18 is a complete and
accurate list of
all Contracts pertaining to the Business or entered into by
GLOBAL. Except as described in Schedule 3.18, GLOBAL is not a
party to or bound by any contract relating to the property,
assets, business or operations of GLOBAL. GLOBAL has performed
all of the obligations required to be performed by it under such
Contracts and is entitled to all benefits thereunder, and is not
in default or alleged to be in default in respect of, any
Contract good standing and in full force and effect, without
amendment thereto, and no event, condition or occurrence exists
that, after notice or lapse of time or both, would constitute a
default under any of the aforesaid Contracts. GLOBAL has not
received within the twelve (12) month period prior to the date of
this Agreement any notice of default of any term or obligation of
any Contract to the Vendor's knowledge, no other party to any
Contract is in default thereunder Vendor has delivered to the
Purchaser a true and complete copy of each Contract listed or
described in Schedule 3.18.
3.19 Compliance with Laws; Governmental Authorization: GLOBAL has
complied in all material respects with all laws, statutes,
ordinances, regulations, rules, judgments, decrees or orders
applicable to the Business or GLOBAL, and is now conducting the
Business in compliance in all material respects with all such
statutes, laws, ordinances, regulations, rules, judgments,
decrees or orders. Schedule 3.19 sets out a complete and
accurate list of all licenses, permits, approvals, consents,
certificates, registrations and authorizations (whether
governmental, regulatory or otherwise) (the "Licenses") held by
or granted to GLOBAL and there are no other licenses, permits,
approvals, consents, certificates, registrations or
authorizations necessary to carry on the Business or to own or
lease any of the property or assets utilized by GLOBAL. Each
License is valid, subsisting and in good standing and GLOBAL is
not in default or breach of any License and no proceeding is
pending or to the Vendor's knowledge threatened to revoke or
limit any License.
3.20 Consents and Approvals: There is no requirement to make any
filing with, give any notice to or to obtain any license, permit,
certificate, registration, authorization, consent or approval of,
any governmental or regulatory authority as a condition to the
lawful consummation of the transactions contemplated by this
Agreement. There is no requirement under any Contract relating
to the Business or of GLOBAL to which either the Vendor or GLOBAL
is a party or by which it is bound to give any notice to, or to
obtain the consent or approval of, any party to such agreement,
instrument or commitment relating to the consummation of the
transactions contemplated by this Agreement except for the
notifications, consents and approvals described in Schedule 3.20.
3.21 Financial Statements: The Financial Statements have been
prepared in accordance with GAAP applied on a basis consistent
with prior periods, and present fairly the assets, liabilities
(actual, contingent or otherwise) and financial condition of
GLOBAL as at the respective dates of the Financial Statements and
the income statement reflecting sales, earnings and results of
operations of GLOBAL for the respective periods covered by the
Financial Statements.
3.22 Liabilities of GLOBAL: GLOBAL does not have any liabilities,
direct or indirect, accrued, absolute, contingent or otherwise
and to the Vendor's knowledge, there is no basis for assertion
against GLOBAL of any such liabilities other than:
(a) liabilities disclosed or reflected in or provided for
in the Financial Statements;
(b) liabilities incurred since the date of the Financial
Statements which were incurred in the ordinary course
of the Business; and
(c) other liabilities disclosed in this Agreement or in the
Schedules attached hereto.
3.23 Partnerships or Joint Ventures: GLOBAL is not a partner or
participant in any partnership, joint venture, profit-sharing
arrangement or other association of any kind and GLOBAL is not a
party to any agreement under which it agrees to carry on any part
of the Business or any other activity in such manner or by which
it agrees to share any revenue or profit with any other Person
other than as disclosed in this Agreement or in the Schedules
attached hereto.
3.24 Absence of Changes: Since December 31, 1999, GLOBAL, except
as described in Schedule 3.24, has carried on the Business and
conducted its operations and affairs in the ordinary and normal
course consistent with past practice and there has not been:
(a) any material change in the condition (financial or
otherwise), assets, liabilities, operations, earnings
or business of GLOBAL;
(b) any material damage, destruction or loss (whether or
not covered by insurance) affecting the property or
assets of GLOBAL;
(c) any declaration, setting aside or payment of any
dividend or other distribution with respect to any
shares in the capital of GLOBAL or any direct or
indirect redemption, purchase or other acquisition of
any such shares;
(d) any issuance or sale by GLOBAL or any Contract entered
into by GLOBAL, for the issuance or sale by GLOBAL, of
any shares in the capital of or securities convertible
into or exercisable for shares in the capital of
GLOBAL;
(e) any change in the accounting or tax practices followed
by GLOBAL;
(f) any change adopted in the depreciation or amortization
policies or rates used by GLOBAL;
(g) any labor disruptions;
(h) any write-off as uncollectable of any accounts or notes
receivable or any portion thereof of GLOBAL in amounts
exceeding fifty thousand dollars ($50,000) in each
instance or one hundred thousand dollars ($100,000) in
the aggregate;
(i) any payments made, authorized or declared by GLOBAL to
any of its officers, directors and employees, except in
the ordinary course of business or at regular rates of
salary or remuneration payable to such person;
(j) any change in GLOBAL other than as previously disclosed
in this Agreement or the Schedules thereto.
3.25 Taxes:
(a) For purposes of this Section 3.25, the term
"Governmental Charges" means and includes all taxes,
including without limitation, income taxes, excise
taxes, sales taxes, value added taxes, transfer taxes,
property taxes, capital taxes, customs and import
duties, payroll taxes and other charges, together with
all penalties interest and fines with respect thereto,
payable to any federal, state, provincial municipal,
local or other government or governmental agency,
authority, board, bureau or commission domestic or
foreign;
(b) GLOBAL has paid all Governmental Charges which are due
and payable by it on or before the date hereof, if any.
GLOBAL has duly filed all returns, declarations,
reports and other documents of any kind for
Governmental Charges (the "Returns") required to be
filed by it, if any, in a timely manner. GLOBAL has
made adequate provision for Governmental Charges
payable by it for the current period and any previous
period for which Returns are not yet required to be
filed. The information shown on all such Returns, if
any, is true, accurate and complete in all material
respects and there are no additional assessments,
reassessments or proposals to re-assess, actions,
suits, proceedings, investigations, inquiries, audits
or claims now ongoing or pending or, to the Vendor's
knowledge, threatened against GLOBAL in respect of
Governmental Charges or any discussions ongoing with
any governmental authorities relating to Governmental
Charges and to the Vendor's knowledge, there is not any
reason that any such actions, audits or investigations
would be commenced against GLOBAL;
(c) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the
filing of any Return by, or payment of any Governmental
Charges or deficiency against GLOBAL; and
(d) GLOBAL is in compliance in all respects with all
registrations, reporting and remittance obligations in
respect of all state and federal sales tax legislation.
3.26 Litigation. There are no actions, suits or proceedings
(whether or not purportedly on behalf of GLOBAL) pending or, to
the Vendor's knowledge, threatened against, involving or
affecting GLOBAL at law or in equity, or before or by any
federal, state, municipal or other governmental department,
court, commission, board, bureau, agency or instrumentality,
domestic or foreign, or by or before an arbitrator or arbitration
board. There are no judgments or executions outstanding against
GLOBAL.
3.27 Minute Books: The minute books of GLOBAL contain accurate
and complete copies of its compliance documents, which documents
include, without limitation, Articles of Incorporation and any
and all Articles of Amendment. There are outstanding no
applications or filings which would alter in any way the
compliance documents or corporate status of any of GLOBAL. No
resolutions or by-laws have been passed, enacted, consented to or
adopted by the directors or shareholders of GLOBAL except as are
contained in the minute books thereof. The corporate records of
GLOBAL have been maintained in all material respects in
accordance with all applicable statutory requirements and are
complete and accurate in all material respects.
3.28 Accounts and Attorneys: Schedule 3.28 sets forth a true and
complete list showing:
(a) the name of each bank, trust company or similar
institution in which GLOBAL has accounts or safe
deposit boxes, the number or designation of each such
account and safe deposit box and the names of all
persons authorized to draw thereon or to have access
thereto; and
(b) the name of each person, firm, corporation or business
organization holding a general or special power of
attorney from GLOBAL and a summary of the terms
thereof,
3.29 Directors and Officers: Schedule 3.29 sets forth the names
and titles of all the officers and directors of GLOBAL.
3.30 Non-Arm's Length Transactions: GLOBAL has not, since its
date of incorporation, made any payment or loan to, or borrowed
any moneys from or is otherwise indebted to, any officer,
director, employee, shareholder or any other Person not dealing
at Arm's Length with GLOBAL, except as disclosed in the Annual
Financial Statements or as disclosed in Schedule 3.30. Except
for ordinary course customer and employee relationships with
usual terms, except as disclosed in Schedule 3.30, GLOBAL is not
a party to any Contract with the Vendor or any officer, director,
employee, shareholder or any other Person not dealing at Arm's
Length with GLOBAL. Except as disclosed in the Financial
Statements, GLOBAL is not indebted to the Vendor or any Associate
of the Vendor or to any Person not dealing at Arm's Length with
the Vendor or GLOBAL.
3.31 Employee Accruals: All accruals for premiums for
unemployment insurance, health premiums, F.I.C.A. premiums,
accrued wages, bonuses, salaries and commissions and employee
benefit plan payments for GLOBAL, if any, have been reflected in
the books and records of GLOBAL.
3.32 Status of the Vendor and Corporation: Neither the Vendor nor
GLOBAL is insolvent, nor has either of them committed an act of
bankruptcy, proposed a compromise or arrangement to its or their
creditors generally, taken any proceeding with respect to a
compromise or arrangement, taken any proceeding to have itself
declared bankrupt or wound up, as the case may be, taken any
proceeding to have a receiver appointed over any part of its
assets, had any encumbrances or receiver take possession of any
of its property, had any execution or distress become enforceable
or levied upon any of its property or had any petition for a
receiving order in bankruptcy filed against it.
3.33 General: No representation or warranty made by the Vendor in
this Agreement or any statements made in any schedules,
certificates or other documents furnished pursuant to this
Agreement or the negotiations leading thereto contains any untrue
statement of a material fact. The Vendor has no information or
knowledge of any material facts relating to GLOBAL's or the
Business which are not disclosed in this Agreement or the
Schedules hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as follows
and acknowledges and confirms that the Vendor is relying on such
representations and warranties in connection with the sale by the
Vendor of the Purchased Shares:
4.1 Organization of Purchaser: The Purchaser is a corporation
validly existing under the law of the State of Nevada and it has
the corporate power to enter into and perform its obligations
pursuant to this Agreement.
4.2 Authorization by Purchaser: This Agreement has been duly
authorized, executed and delivered by the Purchaser and is a
legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser by the Vendor in accordance with its terms
subject however to limitation with respect to bankruptcy or other
laws generally affecting creditor's rights and to the extent that
equitable remedies such as specific performance and injunction
are in the discretion of the court from which they are sought.
4.3 Consents and Approvals: There is no requirement for the
Purchaser to make any filing with, give any notice to or obtain
any license, permit, certificate, registration, authorization,
consent or approval of, any government or regulatory authority as
a condition to the lawful consummation of the transactions
contemplated by this Agreement, other than as may be required
under the Federal securities laws applicable to a public company.
There is no requirement under any Contract relating to this
transaction to which the Purchaser is a party or by which it is
bound to give any notice to, or to obtain the consent or approval
of, any party to such agreement, instrument or commitment
relating to the consummation of the transactions contemplated by
this Agreement except for the notifications, consents and
approvals described in Schedule 4.3.
4.4 Untrue Statements: No representation or warranty made by the
Purchaser in this Agreement or any statement made in any
Schedules, certificates or other documents furnished pursuant to
this Agreement or the negotiations leading thereto, contains any
untrue statement of a material fact.
4.5 No Suits: There are no actions, suits or proceedings
(whether or not purportedly on behalf of the Purchaser) pending
or, to the Purchaser's knowledge, threatened against Purchaser,
involving or affecting the Purchaser at law or in equity, or
before or by any federal, state, municipal or other governmental
department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign, or by or before an
arbitrator or arbitration board.
4.6 Compliance with Laws; Governmental Authorization: The
Purchaser has complied in all material respects with all laws,
statutes, ordinances, regulations, rules, judgments, decrees or
orders applicable to it, and is now conducting its business in
compliance in all material respects with all such statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders.
Schedule 4.6 sets out a complete and accurate list of all
licenses, permits, approvals, consents, certificates,
registrations and authorizations (whether governmental,
regulatory or otherwise) (the "Licenses") held by or granted to
the Purchaser and there are no other licenses, permits,
approvals, consents, certificates, registrations or
authorizations necessary to carry on the Business or to own or
lease any of the property or assets utilized by the Purchaser.
The Purchaser has complied with all reporting requirements it has
as a public company, copies of which have been provided to
Vendor. It is valid, subsisting and in good standing as a public
company is not in default or breach of any filing or reporting
requirement and no proceeding is pending or to the Purchaser's
knowledge threatened to revoke, suspend or impede in any way the
trading of its common stock on the OTC: Bulletin Board or limit
any offering. No notices have been received by Purchaser within
the twelve month period prior to the date of this Agreement that
the business is not being conducted in compliance with all
applicable laws, by-laws, orders and regulations. The Parties
understand and acknowledge that the Purchaser has received a
communication from the Securities and Exchange Commission (SEC)
requesting certain voluntary information and the delivery of
documentation, a copy of which communication has been delivered
to Vendor, and which information and documentation has been
furnished by Purchaser to the SEC, with a copy of the transmittal
having been shown to Vendor. Purchaser has represented to the
Vendor that the current SEC voluntary request for information and
documentation has no material effect on the Purchaser or the
Purchaser's ability to carry forth its obligations to the Vender
under this Agreement. Purchaser represents that it will continue
to voluntarily comply with any requests for further information
or documentation from the SEC, if any requests are received. From
the date of the initial request for voluntary information, on
October 1, 1999, no further written requests for information from
the SEC have been received by Purchaser.
ARTICLE V
SURVIVAL OF COVENANTS, REPRESENTATONS AND WARRANTIES
5.1 Survival of Representations and Warranties of Vendor: The
representations and warranties of Vendor contained in this
Agreement and any agreement, instrument certificate or other
document executed and delivered pursuant hereto shall survive the
closing of the transactions contemplated hereby and,
notwithstanding the Closing and any investigation made by or on
behalf of the Purchaser, shall continue in full force and effect
for the benefit of the Purchaser until the day which is twelve
(12) months, following the Closing Date, except that:
(a) the representations and warranties set out in Sections
3.1, 3.2, 3.3, 3.4, 3.5, 3.6 (and the corresponding
representations and warranties set out in the
certificates to be delivered pursuant to Subsection
7.1(a) (the "Closing Certificates"') shall survive and
continue in full force and effect without limitation of
time;
(b) the representations and warranties set out in Section
3.25 (and the corresponding representations and
warranties set out in the Closing Certificates) shall
survive the closing of the transactions contemplated
hereby and continue in full force and effect until, but
not beyond three (3) months following the expiration of
the period, if any, during which an assessment,
reassessment or other form of recognized document
assessing liability for Governmental Charges under
applicable legislation in respect of any taxation year
to which such representations and warranties extend
could be issued under such legislation to GLOBAL or to
the Vendor, provided that if following the Closing Date
GLOBAL files any waiver or other document extending
such period, such representations and warranties shall
only continue until but not beyond the period they
would otherwise have continued for hereunder if such
waiver or other document had not been filed;
(c) a claim for any breach of any of the representations
and warranties contained in this Agreement or in any
agreement, instrument, certificate or other document
executed or delivered pursuant hereto involving fraud
or fraudulent misrepresentation may be made at any time
following the Closing Date, subject only to applicable
limitation periods imposed by law.
5.2 Survival of Representations and Warranties of the Purchaser.
The representations and warranties of the Purchaser contained in
this Agreement and any agreement, instrument, certificate or
other document executed and delivered pursuant hereto, shall
survive the closing of the transactions contemplated hereby and,
notwithstanding the Closing and any investigation made by or on
behalf of the Vendor, shall continue in full force and effect for
the benefit of the Vendor until the day which is twelve (12)
months following the Closing Date.
5.3 Survival of Covenants: The covenants of the Vendor and the
Purchaser set forth in this Agreement shall survive the
completion of the transactions herein contemplated and,
notwithstanding such completion, shall continue in full force and
effect for the benefit of the other parties in accordance with
the terms thereof.
ARTICLE VI
COVENANTS
6.1 Access to GLOBAL: The Vendor shall forthwith make available
to the Purchaser and its authorized advisors and representatives,
including any person or firm designated by Purchaser to make the
independent evaluation of GLOBAL in connection with determination
of the Purchase Price and, if requested by the Purchaser, provide
a copy to the Purchaser of, all title documents, minute books,
share certificate books, share registers, stock options, share
subscription agreements, plans, reports, licenses, orders, permit
books of account, accounting records, compliance documents and
all other documents, information or data relating to GLOBAL, its
capital stock and the Business. The Vendor and GLOBAL shall
afford the Purchaser and its authorized representatives,
including the person or firm conducting the independent
evaluation and the accountants and independent auditors for
Purchaser every reasonable opportunity to have free and
unrestricted access to the Business and the property, assets,
undertaking, records and documents of GLOBAL. At the request of
the Purchaser, the Vendor shall execute, or cause to be executed
such consents, authorizations and directions as may be necessary
to permit any inspection of the Business and any property of
GLOBAL or to enable the Purchaser or its authorized
representatives to obtain full access to all files and records
relating to any of the assets of GLOBAL maintained by
governmental or other public authorities. The exercise of any
rights of inspection by or on behalf of the Purchaser under this
Section 6.1 shall not mitigate or otherwise affect the
representations and warranties of Vendor hereunder, which shall
continue in full force and affect as provided in Section 5.1.
Purchaser acknowledges in accordance with Section 11.1 below that
the information and documentation that Vendor is required to
disclose to Purchaser under Section 6 is proprietary and
essential to Vendor's ability to carry on the Business and, as
such, will not be disclosed in any way by Purchaser and its
authorized third party representatives without Global's express
written. Purchaser further acknowledges any unauthorized
disclose of information and documentation as described above by
Purchaser and its authorized representatives will cause Global
serious and possibly irreparable damage to Global and Vendor, and
Vendor will be entitle to seek payment and other good and
valuable consideration from Purchaser for such damages.
6.2 Delivery of Books and Records. At the Time of Closing the
Vendor shall deliver to the Purchaser all of the books and
records of and relating to GLOBAL and the Business. The
Purchaser agrees that it will preserve the books and records so
delivered to it for a period of six (6) years from the Closing
Date, or for such longer period as is required by any applicable
law, and will permit the Vendor or its authorized representatives
reasonable access thereto in connection with the affairs of the
Vendor relating to its matters, but the Purchaser shall not be
responsible or liable to the Vendor for or as a result of any
accidental loss or destruction of or damage to any such books or
records. The Vendor and GLOBAL understand and expressly agree
that the financial statements of GLOBAL shall be subject to audit
and Purchaser and Purchaser's accountants and independent public
accounting firm shall be required to perform an audit on GLOBAL's
financial statements, on a consolidated basis with those of
Purchaser, as a 100% owned subsidiary of Purchaser, for all
relevant periods as may be required under the Federal securities
laws, and specifically the rules and regulations under the
Securities Act of 1933, as amended (the "Act") and the Securities
Exchange Act of 1934, and Regulations S-K and SB.
6.3 Vendors' Conduct Prior to Closing: Without in any way
limiting any other obligations of the Vendor hereunder during the
period from the date hereof to the Time of Closing (the "Interim
Period"):
(a) Conduct Business in the Ordinary Course. The Vendor
shall cause GLOBAL to conduct the Business and the
operations and affairs of GLOBAL in the ordinary and
normal course of business consistent with past
practice, and the Vendor shall not, without the prior
written consent of the Purchaser or as provided for
herein, enter into any transaction or refrain from
doing any action that would constitute a breach of any
representation, warranty, covenant or other obligation
of the Vendor contained herein and the Vendor shall use
its best efforts to ensure that such representations
and warranties remain true and correct in all material
respects during the Interim Period, and provided
further that the Vendor shall not enter into or amend
and shall ensure that there are not any amendments to
any Contracts with respect to GLOBAL (including without
limitation, any customers or suppliers), without the
consent of the Purchaser, which consent shall not be
unreasonably withheld;
(b) Regulatory Consents. The Vendor shall obtain or cause
GLOBAL to obtain at or prior to the Time of Closing
(either unconditionally or subject to no conditions
unacceptable to the Vendor, in its absolute
discretion), from all appropriate federal, provincial,
state, municipal or other governmental or regulatory
bodies, the licenses, permits, consents, approvals,
certificates, registrations and authorizations
described in Schedule 3.20;
(c) Contractual Consents. The Vendor shall give or
obtain or cause GLOBAL to give or obtain the notices,
consents and approvals described in Schedule 3.20;
(d) Preserve Goodwill. The Vendor shall preserve, and
cause GLOBAL to preserve
intact the Business and the property, assets,
operations and affairs of GLOBAL and to carry on the
Business and the affairs of GLOBAL as currently
conducted, and to promote and preserve for the
Purchaser the goodwill of suppliers, customers and
others having business relations with GLOBAL;
(e) Discharge Liabilities. The Vendor shall cause GLOBAL to
pay and discharge the liabilities of GLOBAL in the
ordinary course in accordance and consistent with the
previous practice of GLOBAL, except those contested in
good faith by GLOBAL;
(f) Corporate Action. The Vendor shall take and cause
GLOBAL to take all necessary corporate action, steps
and proceedings to approve or authorize, validly and
effectively, the execution and delivery of this
Agreement and the other agreements and documents
contemplated hereby and to complete the transfer of the
Purchased Shares to the Purchaser and to cause all
necessary meetings of directors and shareholders of the
Vendor and GLOBAL to be held for such purpose;
(g) Reasonable Efforts. The Vendor shall use their best
efforts to satisfy the conditions contained in Section
7. 1.
(h) Restricted Actions. The Vendor shall not permit GLOBAL
to:
(i) incur any indebtedness, obligations or liability
or make any payment in respect thereof except in
the ordinary course of business;
(ii) acquire, or agree to acquire additional assets
(except in the ordinary course of business);
(iii) enter into any contracts, commitments or
transactions pertaining to the Business, except,
unless otherwise provided in this Agreement, in
the ordinary course of business;
(iv) increase the wages or salaries or any other form
of remuneration, direct or indirect, of any of the
employees of the Business, without the prior
written approval of the Purchaser; or
(v) except as herein otherwise provided, sell, agree
to sell or otherwise dispose of any of the assets
of GLOBAL (other than items of inventory sold in
the ordinary course of business).
6.4 Purchaser's Conduct Prior to Closing: Without in any way
limiting any other obligations of the Purchaser hereunder, during
the Interim Period-
(a) Regulatory Consents. The Purchaser shall obtain, at or
prior to the Time of Closing, from all appropriate
regulatory bodies, the licenses, permits, certificates,
registrations, authorizations, consents and approvals;
and
(b) Reasonable Efforts. The Purchaser shall use its best
efforts to satisfy the conditions contained in Section
7.2.
6.5 Delivery of Closing Documentation of the Vendor and
Corporation: The Vendor shall deliver to the Purchaser a
certificate of status and a copy, certified by a senior officer
of GLOBAL and attested to by GLOBAL's secretary respectively,
dated as of the Closing Date, of the compliance documents and by-
laws of GLOBAL and any documents to be provided by it pursuant to
the provisions hereof. The Vendor shall also execute and deliver
or cause to be executed and delivered to the Purchaser a copy of
such other documents relevant to the closing of the transaction
contemplated hereby as the Purchaser, acting reasonably, may
request.
6.6 Additional Covenants of Vendors: The Vendor shall, on or
before the Time of Closing:
(a) provide the Purchaser with a favorable opinion of the
Vendor' Counsel in form satisfactory to the Purchaser's
Counsel;
(b) execute and deliver to the Purchaser, in a form
satisfactory to the Purchaser, a release of any and all
claims the Vendor and their Associates may have against
GLOBAL save and except for such claims as are set out
in this Agreement or the Schedules thereto;
(c) deliver the corporate seal, minute book or minute
books, stock record books and any and all documents,
records, books, instruments and agreements of or
pertaining to GLOBAL, its capital stock and the
Business; and
(d) execute and deliver to the Purchasers employment
agreements, consulting agreements, and any stock option
plans and agreements, in the form attached hereto as
Schedule 6.6.
6.7 Delivery of Closing Documentation of the Purchaser. The
Purchaser shall deliver to the Vendor a certificate of status and
a copy, certified by a senior officer of the Purchaser, attested
to by the Purchaser's secretary, dated as of the Closing Date, of
its compliance documents and by-laws and of the resolution
authorizing the execution, delivery and performance by the
Purchaser of this Agreement and any documents to be provided by
it pursuant to the provisions hereof. The Purchaser shall also
execute and deliver or cause to be executed and delivered a copy
of each of such other documents relevant to the closing of the
transaction contemplated hereby as the Vendor, acting reasonably,
may request.
6.8 Default: Each Party hereto shall give notice to the other of
any default of any
provision of this Agreement by the other Party or any breaches of
representations and warranties of the other Party to this
Agreement, promptly upon becoming aware thereof.
ARTICLE VII
CONDITONS OF CLOSING
7.1 Conditions of Closing in Favor of the Purchaser: The sale
and purchase of the Purchased Shares is subject to the following
terms and conditions for the exclusive benefit of the Purchaser,
to be fulfilled or performed at or prior to the Time of Closing:
(a) Representations and Warranties. The representations
and warranties of the Vendor contained in this
Agreement shall be true and correct in all respects at
the time of Closing, with the same force and effect as
if such representations and warranties when made at and
as of such time, and a certificate of Vendor dated the
Closing Date to that effect shall have been delivered
to the Purchaser, such certificates to be in form and
substance satisfactory to the Purchaser, acting
reasonably;
(b) Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by
Vendor at or before the Time of Closing shall have been
complied with or performed in all respects (each and
every one of which is hereby deemed to be a condition
of closing) and a certificate of the Vendor dated the
Closing Date to that effect shall have been delivered
to the Purchaser, such certificate to be in form and
substance satisfactory to the Purchaser, acting
reasonably;
(c) Regulatory Consents. There shall have been obtained,
from all appropriate federal, state, municipal or other
governmental or administrative bodies, such licenses,
permits, consents, approvals, certificates,
registrations and authorizations as:
(i) are required to be obtained by the Vendor to
permit the change of ownership of the Purchased
Shares contemplated hereby and to complete the
transactions provided for herein including,
without limitation, those described in Schedule
3.20, in each case in form and substance
satisfactory to the Purchaser acting reasonably;
and
(ii) are required to be obtained by the Purchaser,
including without limitation, those described in
Schedule 4.3, in each case in form and substance
satisfactory to the Purchaser acting reasonably.
(d) Contractual Consents. The Vendor shall have obtained
in a form satisfactory to the Purchaser, the notices,
consents and approvals described in Schedule 3.20, and
all other consents and/or waivers under the Contracts
that are required,
(e) Material Adverse Change. There shall have been no
material adverse change in the condition (financial or
otherwise), assets, liabilities, operations, earnings
on business of GLOBAL since December 31, 1999;
(f) No Action or Proceeding. No legal or regulatory action
or proceeding shall be pending or threatened by any
person to enjoin, restrict or prohibit the purchase and
sale of the Purchased Shares contemplated hereby;
(g) No Material Damage. No material damage by fire or
other hazard to the whole or any material part of the
property or assets of GLOBAL shall have occurred from
the date hereof to the Time of Closing;
(h) Due Diligence. The Purchaser shall have completed its
due diligence review of the assets, property, business
and financial condition of GLOBAL and the Business and
shall be satisfied with the results thereof, including
the results of the independent evaluation opinion and
the report of such person prepared for and delivered to
Purchaser and the ability of the independent auditors
of Purchaser to conduct an audit of GLOBAL, for the
purpose of completing in a timely manner the audit on a
consolidated basis of the financial statements of
GLOBAL and Purchaser for the fiscal year ended December
31, 1999 and such other period as may be required by
Regulation S-K;
(i) Directors and Officers of GLOBAL. The Purchaser shall
have the right to name a director of the Vendor at
Closing. The current management of GLOBAL shall retain
the right to appoint all other directors and officers
of GLOBAL;
(j) Board Approval. This Agreement and the transactions
contemplated by this
Agreement shall have been approved by the board of
directors of the Purchaser;
(k) Evaluation Opinion. The Purchaser shall have received
an evaluation opinion in form satisfactory to
Purchaser confirming the value of GLOBAL necessary to
determine the Purchase Price and shall be satisfied in
its discretion with such opinion;
(l) Legal Matters. All actions, proceedings, instruments and
documents required to implement this Agreement, or instrumental
thereto, and all legal matters relating to the purchase of the
Purchased Shares including title of the Vendor to the Purchased
Shares, shall have been approved as to form and legality by
Purchaser's Counsel;
(m) Third Party Arrangements. Purchaser will disclose to
GLOBAL and Vendor all employment, consulting and of
counsel agreements and arrangements, all of which have
been delivered to and reviewed by GLOBAL through the
date of this Agreement. GLOBAL and Vendor together
with Purchaser will review any other Third Party
Arrangements of Purchaser. After such review,
Purchaser, Global and Vendor will mutually approve and
ratify any new agreements and arrangements as part of
this Agreement.
If any of the conditions contained in this Section 7.1 shall not
be performed or fulfilled at or prior to the Time of Closing to
the satisfaction of the Purchaser, acting reasonably, the
Purchaser may, by notice to the Vendor, terminate this Agreement
and the obligations of the Vendor and the Purchaser under this
Agreement, other than the obligations contained in Sections 11.1,
11.2, 11.3, 11.4 and 11.5.
7.2 Conditions of Closing in Favor of the Vendor: The purchase
and sale of the Purchased Shares is subject to the following
terms and conditions for the exclusive benefit of the Vendor, to
be fulfilled or performed at or prior to the time of Closing.
(a) Representations and Warranties. The representations
and warranties of the purchaser contained in this
Agreement shall be true and correct in all respects at
the Time of Closing, with the same force and effect as
if such representations and warranties were made at and
as of such time, and a certificate of a senior officer
of the Purchaser dated the Closing Date to that effect
shall have been delivered to the Vendor, such
certificate to be in form and substance satisfactory to
the Vendor, acting reasonably;
(b) Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by
the Purchaser at or before the Time of Closing shall
have been complied with or performed in all respects
(each and every one of which is hereby deemed to be a
condition of closing) and a certificate of the
Purchaser dated the Closing Date to that effect shall
have been delivered to the Vendor, such certificate to
be in form and substance satisfactory to the Vendor,
acting reasonably;
(c) Regulatory Consents. There shall have been obtained,
from all appropriate federal, state, and municipal or
other governmental or administrative bodies, such
licenses, permits, consents, approvals, certificates,
registrations and authorizations as:
(i) are required by law to be obtained by the Vendor
to permit the change of ownership of the Purchased
Shares contemplated hereby including those
described in Schedule 3.20; and,
(ii) are required to be obtained by the Purchaser,
including without limitation.
(d) No Action or Proceeding. No legal or regulatory action
or proceeding shall be pending or threatened by any
person to enjoin, restrict or prohibit the purchase and
sale of the Purchased Shares contemplated hereby; and
(e) Legal Matters. All actions, proceedings, instruments
and documents required to implement this Agreement or
instrumentals thereto, shall have been approved as to
form and legality by the Vendors' Counsel, acting
reasonably.
(f) Initial Working Capital. The Purchaser shall have
arranged financing, on terms acceptable to the Vendor
and Purchaser for a maximum amount of $2,000,000 to be
used for initial working capital purposes for GLOBAL in
accordance with the Business Plan;
(g) Business Plan. The Purchaser shall have accepted the
form and substance of GLOBAL's Business Plan (the
"Business Plan") for GLOBAL for 2000;
(h) Management of GLOBAL. The management of GLOBAL shall
remain with the Vendor with total operational control
in accordance with the Business Plan.
(i) Third Party Arrangements. Purchaser shall acknowledge
and ratify all employment, consultant and of counsel
arrangements, as they exist at the date of Closing, and
Vendor represents that it has delivered copies of all
such agreements, and Purchaserhereby consents to the
continuation of such agreements and arrangements, as
well as the execution of new agreements and
arrangements, provided that they are provided for and
are consistent with the Business Plan.
(j) Election to Board of Directors of Purchaser. The
Vendor shall be granted one (1) seat to the Board of
Purchaser at the Closing Date. The Vendor shall be
entitled to one (1) seat until such time as GLOBAL
shall achieve gross collected revenues from operations
of at least $5,000,000. At such time as GLOBAL shall
reach gross sales collected revenues from operations of
at least $5,000,000, Vendor shall be entitled to
designate two additional persons to serve as members of
Purchaser's board of directors.
If any of the conditions contained in this Section 7.2 shall not
be performed or fulfilled at or prior to the Time of Closing to
the satisfaction of the Vendor, acting reasonably, the Vendor
may, by notice to the Purchaser, terminate this Agreement and the
obligations of the Vendor and the Purchaser under this Agreement,
other than the obligations contained in Sections 11.1, 11.2,
11.3, 11.4 and 11.5.
ARTICLE VIII
CLOSING ARRANGEMENTS AND CONDUCT AFTER CLOSING
8.1 Place of Closing.- The closing shall take place at the Time
of Closing at the offices of counsel for Vendor.
8.2 Transfer: At the Time of Closing, upon fulfillment of all
the conditions set out in Article VII that have not been waived
in writing by the Purchaser or the Vendor, the Vendor shall
deliver to the Purchaser certificates respecting all the
Purchased Shares, duly endorsed in blank for transfer, and will
cause transfers of such shares to be duly and regularly recorded
in the name of the Purchaser and will cause a meeting of the
board of directors of GLOBAL to be held, at which the directors
and officers of GLOBAL will reconfirm their directorships and
officer positions and whereupon, subject to all other terms and
conditions hereof being complied with, payment of the Purchase
Price shall be paid and or delivered to the Vendor in the manner
provided in Section 2.3 hereof and the Payment Shares shall be
delivered to the Purchaser's Counsel.
8.3 Further Assurances. Each Party shall, from time to time
subsequent to the Closing Date, at the request and expense of the
requesting Party, execute and deliver all such documents,
including, without limitation, all such additional conveyances,
transfers, consents and other assurances and do all such other
acts and things as any other party hereto, acting reasonably, may
from time to time request be executed or done in order to better
evidence or perfect or effectuate any provision of this Agreement
or of any agreement or other document executed pursuant to this
Agreement or any of the respective obligations intended to be
created hereby or thereby. The Vendor will cooperate with the
Purchaser in connection with the preparation by the Purchaser of
any financial statements for GLOBAL for any period prior to
Closing Date and subsequent to the Closing Date in order to
permit Purchaser to complete the filing with the SEC of
Purchaser's Annual Report on Form 10-KSB and such Quarterly and
other Reports as may be required under the Federal securities
laws
ARTICLE IX
INDEMNIFICATON
9.1 Indemnification by the Vendor: The Vendor shall and do
hereby jointly and severally agree to indemnify and hold harmless
the Purchaser from all Losses suffered or incurred by the
Purchaser or GLOBAL as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by the Vendor of or any inaccuracy of any
representation or warranty of the Vendor contained in
this Agreement or in any agreement, certificate or
other document delivered pursuant hereto provided that
the Vendor shall not be required to indemnify or save
harmless the Purchaser in respect of any breach or
inaccuracy of any representation or warranty unless the
Purchaser shall have provided notice to the Vendor in
accordance with Section 9.3 on or prior to the
expiration of the applicable time period related to
such representation and warranty set out in Section
5.1; and
(b) any breach or nonperformance by the Vendor of any
covenant to be performed by it that is contained in
this Agreement or in any agreement, certificate or
other document delivered pursuant hereto.
9.2 Indemnification by the Purchaser. The Purchaser shall and
does hereby agree to indemnify and hold harmless the Vendor from
all Losses suffered or incurred by the Vendor as a result of or
arising directly or indirectly out of or in connection with:
(a) any breach by the Purchaser of or any inaccuracy of any
representation or warranty contained in this Agreement
or in any agreement, instrument, certificate or other
document delivered pursuant hereto provided that the
Purchaser will not be required to indemnify and save
harmless the Vendor in respect of any breach or
inaccuracy of any representation or warranty unless the
Vendor shall have provided notice to the Purchaser in
accordance with Section 9.3 on or prior to expiration
of the applicable time period related to such
representation and warranty set out in Section 5.1; and
(b) any breach or non-performance by the Purchaser of any
covenant to be performed by it that is contained in
this Agreement or in any agreement, certificate or
other document delivered pursuant hereto.
9.3 Notice Provisions. Any notice required to be given under
Sections 9.1 and 9.2 above shall be given as provided in Section
11.2 below.
ARTICLE X
TERMINATION
10.1 Termination: This Agreement may be terminated at any time
prior to the Time of Closing by the mutual consent of the Vendor
and the Purchaser or as otherwise provided in this Agreement.
10.2 Procedure and Effect of Termination: In the event of
termination of this Agreement pursuant to Section 10.1, this
Agreement shall become void and have no force or effect.
ARTICLE XI
MISCELLANEOUS
11.1 Confidentiality of Information: In the event that the
transactions contemplated herein are not consummated for any
reason, and except as otherwise authorized by the Vendor, neither
the Purchaser nor its representatives, agents or employees shall
disclose to third parties, directly or indirectly, any
confidential information or confidential data relating to GLOBAL
or the Business discovered by the Purchaser or its
representatives as a result of the Vendor and GLOBAL making
available to the Purchaser and its representatives the
information requested by them in connection with the transactions
contemplated herein.
11.2 Notices:
(a) Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be
delivered in person or transmitted by telecopy or
similar means of recorded electronic communication
addressed as follows:
(i) if to Vendor:
Ms. Vivian Manevich,
Chairman of the Board and President
Global Transmedia Communications Corporation
Suite 820
444 Brickell Avenue,
Miami, Florida 33131
Telecopier No.: 1-305-579-9930
Email: [email protected]
(ii) if to the Purchaser:
Jerrold R. Hinton
Chairman of the Board, President and Chief Executive
Officer
American Diversified Group, Inc.
110 North Center Street, Suite 202
Hickory, NC 28601
Telecopier No.: 1-828-322-3798
Email: _ HYPERLINK mailto:[email protected] ___
With a copy to:
Thomas J. Craft, Jr., Esq.
301 Clematis Street, Suite 3000
The Galleria Building
West Palm Beach, FL 33401
Telecopier: 1-561-655-3202
Email: [email protected]
(b) Any such notice or other communication shall be deemed
to have been given and received on the day on which it
was delivered or transmitted (or, if such day is not a
Business Day, on the next following Business Day).
(c) Any Party may at any time change its address for
service from time to time by giving notice to the other
Parties in accordance with this Section 11.2.
11.3 Commissions: The Vendor and GLOBAL shall and do hereby
indemnify and hold harmless the Purchaser from and against all
losses suffered or incurred by the Purchaser in respect of any
commission or other remuneration payable or alleged to be payable
to any broker, agent or other intermediary who has acted for or
on behalf of the Vendor or GLOBAL.
11.4 Public Announcements: The Parties shall consult with each
other before issuing any press release or making any other public
announcement with respect to this Agreement or the transactions
contemplated hereby and, except as required by any applicable law
or regulatory requirement, neither the Vendor nor the Purchaser
shall issue any such press release or make any such public
announcement without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed.
11.5 Successors and Assigns: This Agreement shall enure to the
benefit of and shall be binding on and enforceable by the Parties
and, where the context so permits, their respective, heirs,
successors and permitted assigns. Subject to the following, no
Party may assign any of its rights or obligations hereunder
without the prior written consent of the other Parties.
Notwithstanding the foregoing, the Purchaser may assign its
rights under this Agreement in whole or in part to an Affiliate;
provided, however, that any such assignment shall not relieve the
Purchaser from any of its obligations hereunder, and the
Purchaser has obtained prior written approval from the Vendor
which approval will not be unreasonably withheld.
11.6 Counterparts: This Agreement may be executed in
counterparts, each of which shall constitute an original and all
of which taken together shall constitute one and the same
instrument.
11.7 Entire Agreement: This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter-
hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral. There are
no conditions, covenants, agreements, representations, warranties
or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject manner hereof except as herein
provided.
11.8 Time of Essence: Time shall be of the essence of this
Agreement.
11.9 Applicable Law: This Agreement shall be construed,
interpreted and enforced in accordance with, and the respective
rights and obligations of the parties shall be governed by, the
laws of the State of Florida, and each Party hereby irrevocably
and unconditionally submits to the jurisdiction of the courts of
competent jurisdiction to hear appeals there from.
11.10 Severability: If any provision of this Agreement is
determined to be invalid or unenforceable by an arbitrator or a
court of competent jurisdiction from which no further appear lies
or is taken, that provision shall be deemed to be severed here
from, and the remaining provisions of this Agreement shall not be
affected thereby and shall remain valid and enforceable.
11.11 Amendment and Waivers: No amendment or waiver of any
provision of this Agreement shall be binding on any Party unless
consented to in writing by such Party. Any waiver of any
provision of this Agreement shall not constitute a waiver of any
other provision, nor shall any waiver constitute a continuing
waiver unless otherwise expressly provided.
11.12 Costs: Each of the Parties shall be responsible for all
costs (including legal costs and fem of investment advisors
retained by any of the Parties) incurred by them in connection
with the preparation of this Agreement and the completion of the
transactions contemplated hereby.
IN WITNESS WHEREOF this Agreement has been executed by the
Parties.
American Diversified Group, Inc. Global Transmedia
Communications
Corporation
By Its: President and Chairman By Its: President
and Chairman By:____________________________ By:
_____________________________
Jerrold R. Hinton Vivian Manevich
By Its: Secretary By Its: Secretary
By: ________________________ By: ______________________
Thomas J. Craft, Jr. Vivian Manevich
Corporate Seal Corporate Seal
By The Vendor
__________________________________
Vivian Manevich Controlling Shareholder and on behalf
of all remaining Shareholders
EXHIBIT 23
Consent of Dohan and Company
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated March 30, 2000
related to the financial statements of American Diversified
Group, Inc. for the year ended December 31, 1999 and 1998 in the
Annual Report on Form 10-KSB.
_______________________
Dohan and Company, P.A.
Dated: March 30, 2000
Miami, FL
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 13 30
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 13 3,016
<PP&E> 17,379 14,218
<DEPRECIATION> (8,622) 5,465
<TOTAL-ASSETS> 321,690 234,689
<CURRENT-LIABILITIES> 561,719 467,368
<BONDS> 0 0
0 0
0 0
<COMMON> 276,887 237,762
<OTHER-SE> (516,916) (463,441)
<TOTAL-LIABILITY-AND-EQUITY> 321,690 234,689
<SALES> 0 66,422
<TOTAL-REVENUES> 0 66,422
<CGS> 0 57,230
<TOTAL-COSTS> 0 57,230
<OTHER-EXPENSES> 1,219,010 1,753,537
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,219,010) (1,736,543)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,219,010) (1,736,543)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,219,010) (1,736,543)
<EPS-BASIC> (.00) (.01)
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