United States
Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-SB/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Citizens Capital Corp.
(Name of Small Business Issuer as specified in its charter)
Texas 75-2368452
(State or other jurisdiction of (IRS Employer
incorporation organization) Identification No.)
8214 Westchester, Suite 500, Dallas, Texas 75225* Mailing Address: P.O. Box
670406, Dallas, Texas 75367
(Address of principal executive offices)
Issuer's telephone number, including area code: (972) 960-2643
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Class A; no par; common stock
(Title of class)
Explanatory Note: Citizens Capital Corp., (the Company) is filing this amended
Form 10-SB/A (the Statement) for the Year Ended December 31, 1998 to amend
certain items of disclosure related to its Form 10-SB Registration Statement
(the Registration Statement) filed with the Securities and Exchange Commission
on March 19, 1999, File No. 0-24344.
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TABLE OF CONTENTS
Page No.
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<S> <C>
Description of Business . . . . . . . . . . . . . . . . . . . . 3
Management's Discussion and Analysis. . . . . . . . . . . . . . 3
Description of Property . . . . . . . . . . . . . . . . . . . . 4
Security Ownership of Certain Beneficial Owners and Management. 4
Directors, Executive Officers, Promoters and Control Persons. . 6
Executive Compensation. . . . . . . . . . . . . . . . . . . . . 6
Certain Relationships and Related Transactions. . . . . . . . . 7
Description of Securities . . . . . . . . . . . . . . . . . . . 9
Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters. . . . . . . . . . . . . . . . . 9
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 10
Changes in and Disagreements with Accountants . . . . . . . . . 10
Recent Sales of Unregistered Securities . . . . . . . . . . . . 10
Indemnification of Directors and Officers . . . . . . . . . . . 12
Financial Statements Index. . . . . . . . . . . . . . . . . . . 13
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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The following sections of this Statement are hereby amended as set forth below:
1) Description of Business; 2) Management's Discussion and Analysis; 3) Security
Ownership of Certain Beneficial Owners and Management; 4) Directors and
Executive Officers; 5) Executive Compensation; 6)Certain Relationships and
Related Transactions; 7) Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters; 8) Recent Sales of Unregistered
Securities; 9) Financial Statements Index 10) Exhibit Index.
Description of Business
The sub-section entitled: --Possible Under Capitalization And Need For Future
Financing-- under this section is hereby amended and restated below in its
entirety. All other information required by this section is hereby incorporated
by reference to this same section of the Company's Registration Statement on
Form 10-SB as filed with the Securities and Exchange Commission on March 19,
1999, File No. 0-24344.
Possible Under Capitalization and Need For Future Financing
From its inception on March 12, 1991 through March 31, 1999, the Company's cash
requirements have been funded by its principal stockholder. For the remainder
of its 1999 fiscal year, the Company's principal stockholder intends to fund the
Company's daily, operational cash requirements.
In order to meet additional working capital requirements and fund its plan of
operation for the remainder of its 1999 fiscal year, the Company has a need to
obtain financing. The Company anticipates that its capital resources for the
remainder of its 1999 fiscal year will be provided through an aggregate loan of
$2,800,000 from affiliates of the Company and third party lenders.
If the Company is unable to obtain anticipated financing through affiliates of
the Company or third party lenders, there can be no assurance that the Company
will be able to successfully implement its business plan or meet its additional
working capital requirements. In addition, the Company may experience rapid
growth and may require additional funds to expand its operations or enlarge its
organization. While the Company intends to explore a number of options in order
to secure alternative financing in the event its anticipated financing is not
obtained or is insufficient, there can be no assurance that additional financing
will be available when needed or on terms favorable to the Company. The Company
has approached but has not received any commitment from, any third party lender
in regard to obtaining any anticipated loans.
Management's Discussion and Analysis
The sub-section entitled: --Liquidity And Capital Resources--under this section
is hereby amended and restated below in its entirety. All other information
required by this section is hereby incorporated by reference to this same
section of the Company's Registration Statement on Form 10-SB as filed with the
Securities and Exchange Commission on March 19, 1999, File No. 0-24344.
Liquidity And Capital Resources
To continue its plan of operation for the remainder of fiscal year 1999, the
Company expects to undertake capital obligations in order to market, distribute
and expand the products and/or services proposed by its Landrush Realty
Corporation (Landrush); Media Force Sports & Entertainment Inc. (Media Force)
and SCOR Brands Inc. (SCOR) subsidiaries.
The Company itself expects to undertake initial capital obligations of $220,000
to hire executive management and general administration personnel.
Subsequently, the Company expects to incur additional capital obligations of
$205,000 to hire management, general administration, marketing and sales
personnel for each of Landrush; Media Force and SCOR. In order to fund the
continuance of its operations, the Company expects to undertake working capital
obligations of $100,000 for itself and $100,000 each for Landrush; Media Force
and SCOR.
For the remainder of its 1999 fiscal year, the Company expects to expand the
products and services proposed to be offered by Landrush; Media Force and SCOR
primarily by acquiring those existing, income producing operating entities that
offer products and services similar to, or the same as, those offered by
Landrush; Media Force and SCOR. To facilitate its growth and expansion plans
for Landrush; Media Force and SCOR, the Company expects to undertake capital
obligations of $415,000; $750,000 and $400,000 respectively for each of its
three subsidiaries.
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The Company believes that its funding requirements of $2,800,000 shall be
adequate for the continuance of its plan of operation for the remainder of
fiscal year 1999. The Company anticipates that its funding requirements will be
provided through a loan of $2,800,000 from affiliates of the Company and third
party lenders.
Description of Property
There are no changes to the section entitled: --Description of Property--. The
information required by this section is hereby incorporated by reference to this
same section of the Company's Registration Statement on Form 10-SB as filed with
the Securities and Exchange Commission on March 19, 1999, File No. 0-24344.
Security Ownership of Certain Beneficial Owners and Management.
The sub-sections entitled: --Security Ownership of Certain Beneficial Owners;
and Security Ownership of Management--under this section are hereby amended and
restated below as follows. All other information required by this section is
hereby incorporated by reference to this same section of the Company's
Registration Statement on Form 10-SB as filed with the Securities and Exchange
Commission on March 19, 1999, File No. 0-24344.
The total outstanding common and preferred stock of the Company as of December
31, 1998, consists of 40,500,000 common shares and 1,000,000 preferred shares.
All outstanding shares of common stock are entitled to one vote per share. The
Company's preferred shares are not entitled to vote with common stockholders.
Security Ownership of Certain Beneficial Owners
The following table sets forth as of December 31, 1998, each stockholder known
to the Company to beneficially own more than 5 percent of the Company's
outstanding shares of common and preferred stock.
<TABLE>
<CAPTION>
(1) Title of Class (2) Name and address of (3) Amount and nature (4) Percent of
beneficial owner of beneficial ownership class
<S> <C> <C> <C>
Common Stock . . . The 3H Corporation 25,351,050(1) 62.6%
P.O. Box 671304
Dallas, Texas 75367
Preferred Stock. . The 3H Corporation 920,035(1) 92.0%
P.O. Box 671304
Dallas, Texas 75367
Common Stock . . . Citizens Capital Corp. 15,000,000(2)(3) 37.0%
Employee Stock Ownership Trust
P.O. Box 670406
Dallas, Texas 75367
<FN>
(1) The 3H Corporation directly owns 23,351,052 common shares and in its role as the
controlling person of Brice Street Partners Ltd. and Settler's Frontier Mortgage Trust has
voting and investment power over 999,999 and 999,999 additional shares respectively. The 3H
Corporation directly owns 920,035 preferred shares of the Company. Billy D. Hawkins, Chief
Executive Officer; Chairman of the Board and a Director of the Company, has sole voting and
investment control over The 3H Corporation. As a result, Mr. Hawkins may be deemed to be the
beneficial owner of the shares owned and/or controlled by both The 3H Corporation and Brice
Street Partners Ltd
(2) Billy D. Hawkins, Chief Executive Officer; Chairman of the Board and a Director of the
Company; Dwight Washington, a Director of the Company; and Hubert H. Hawkins, a Director of
the Company are members of the Citizens Capital Corp. Employee Stock Ownership Plan Executive
Committee. As a result, the Executive Committee consisting of Mr. Hawkins; Mr. Washington
and Mr. Hubert H. Hawkins may be deemed to have shared investment power over the shares owned
by the Citizens Capital Corp. Employee Stock Ownership Trust. The address for each member of
the Citizens Capital Corp. Employee Stock Ownership Plan Executive Committee is: P. O. Box
670406, Dallas, Texas 75367.
(3) Pursuant to the trust agreement which governs the Citizens Capital Corp. Employee Stock
Ownership Trust, the trust has a duration of 10 years and expires November 11, 2007.
</TABLE>
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Security Ownership of Management
The following table sets forth certain information regarding the beneficial
ownership as of December 31, 1998, of the Company's common and preferred stock
by (a) each person known by the Company to be a beneficial owner of more than
five percent of the outstanding common stock of the Company, (b) each director
of the Company, and (c) all directors and executive officers of the Company as a
group (5 persons), owned beneficially 39,499,998 shares or 97.5% of the issued
and outstanding shares of common stock and 920,035 shares or 92% of the issued
and outstanding preferred stock of the Company as set forth in the following
table.
<TABLE>
<CAPTION>
(1) Title of Class (2)Name of (3) Amount and Nature of (4) Percent of
Beneficial Owner Beneficial Ownership Class
<S> <C> <C> <C>
Common Stock . . . Billy D. Hawkins 25,351,050(1) 62.6%
Preferred Stock. . Billy D. Hawkins 920,035(1) 92.0%
Common Stock . . . Dwight Washington 100,000(2) *
Common Stock . . . Hubert H. Hawkins 100,000(3) *
Common Stock . . . Enos Harris 100,000(4) *
Common Stock . . . Directors and Executive 15,000,000 (5) 37.0%
Officers As A Group (5)
persons
<FN>
(*) Less than 1%
(1) The 3H Corporation directly owns 23,351,052 common shares and in its role as the
controlling person of Brice Street Partners Ltdand Settler's Frontier Mortgage Trust
has voting and investment power over 999,999 and 999,999 additional shares
respectively. The 3H Corporation directly owns 920,035 preferred shares of the Company.
Billy D. Hawkins, Chief Executive Officer; Chairman of the Board and a Director of the
Company, has sole voting and investment control over The 3H Corporation. As a result,
Mr. Hawkins may be deemed to be the beneficial owner of the shares owned and/or
controlled by both The 3H Corporation and Brice Street Partners Ltd
(2) Dwight Washington in his role as Chief Financial Officer of the Company has an
option to buy 100,000 shares of the Company's class A; common stock at $1.50 per share.
Unless or until extended, said option is for a period of four years beginning December
31, 1998. No options have been exercised as of December 31, 1998.
(3) Hubert H. Hawkins in his role as Vice President of Benefits of the Company has an
option to buy 100,000 shares of the Company's class A; common stock at $1.50 per share.
Unless or until extended, said option is for a period of four years beginning December
31, 1998. No options have been exercised as of December 31, 1998.
(4) Enos Harris in his role as Chief Operating Officer of the Company has an option to
buy 100,000 shares of the Company's class A; common stock at $1.50 per share. Unless or
until extended, said option is for a period of four years beginning December 31, 1998.
No options have been exercised as of December 31, 1998.
(5) Billy D. Hawkins, Chief Executive Officer; Chairman of the Board and a Director of
the Company; Dwight Washington, a Director of the Company; and Hubert H. Hawkins, a
Director of the Company are members of the Citizens Capital Corp. Employee Stock
Ownership Plan Executive Committee. As a result, the Executive Committee consisting of
Mr. Hawkins; Mr. Washington and Mr. Hubert H. Hawkins may be deemed to have shared
investment power over the shares owned by the Citizens Capital Corp. Employee Stock
Ownership Trust. The address for each member of the Citizens Capital Corp. Employee
Stock Ownership Plan Executive Committee is: P. O. Box 670406, Dallas, Texas 75367.
</TABLE>
5
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Directors and Executive Officers.
The sub-section entitled: --Identification of Certain Significant
Employees--under this section is hereby amended and restated in its entirety
below as follows: All other information required by this section is hereby
incorporated by reference to this same section of the Company's Registration
Statement on Form 10-SB as filed with the Securities and Exchange Commission on
March 19, 1999, File No. 0-24344.
Identification of Certain Significant Employees
Billy D. Hawkins acts in the capacity of Chief Executive Officer and Chairman of
the Board of the Company. Mr. Hawkins has also been a Director of the Company
since 1991. Mr. Hawkins has had the lead role in the planning and development
of the Company's mergers and acquisition program.
Mr. Hawkins role in the Company's mergers and acquisition program primarily
consist of working directly with third party operating companies regarding their
interest in being acquired. Mr. Hawkins also works through business brokers to
identify those operating, income producing entities whose products and/or
services are similar to, or the same as, those proposed by the Company and its
subsidiaries. Once a suitable target company has been identified, Mr. Hawkins
evaluates said company to determine its tangible and intangible values. Upon
making the decision to pursue the acquisition of a particular target company,
Mr. Hawkins initiates discussions with the principals of the selling company in
order to negotiate the price and terms of the proposed purchase transaction.
Once a purchase agreement in principle has been reached between the two parties,
Mr. Hawkins then moves to arrange the funding necessary to consummate the
purchase transaction.
Executive Compensation
The sub-section entitled: --1998 ESOP Plan--under this section is hereby amended
and restated below as follows. All other information required by this section
is hereby incorporated by reference to this same section of the Company's
Registration Statement on Form 10-SB as filed with the Securities and Exchange
Commission on March 19, 1999, File No. 0-24344.
1998 ESOP Plan
The Company adopted an Employees Stock Ownership Plan ("ESOP" or the "Plan") on
May 1, 1998, which covers all employees with at least a year of consecutive
service that are not covered by a collective bargaining agreement. The purpose
of the Plan is to enable participating employees of the Company to share in the
development and growth of the Company and to provide participants with an
opportunity to build capital for their retirement, the Plan is designed to do so
without any deductions from the participants' paychecks and without any cash
investment by participants. The Plan provides for an allocation of Company
stock to each participant's account of the greater of 15% or the maximum
percentage allowable of participants' eligible compensation. Participants in
the Plan are vested after three years of uninterrupted service with the Company.
The Company is currently under the active management of Billy D. Hawkins acting
in the capacity of Chief Executive Officer and Director of the Company and
Dwight Washington; Hubert H. Hawkins and Enos Harris acting in their capacity as
Directors of the Company. Mr. Billy D. Hawkins is currently the only employee
of the Company, as well as, the only participant in the Company's Plan. The
Company has not paid nor accrued any salary for the benefit of Mr. Hawkins, as
such, no allocations of Company stock have been made for the benefit of any Plan
participant for the fiscal year ending December 31, 1998.
6
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Certain Relationships and Related Transactions.
The sub-sections entitled: --Transactions with Management and Others; Certain
Business Relationships and Transactions with Promoters--under this section are
hereby amended and restated below in their entirety as follows. All other
information required by this section is hereby incorporated by reference to this
same section of the Company's Registration Statement on Form 10-SB as filed with
the Securities and Exchange Commission on March 19, 1999, File No. 0-24344.
Transactions with Management and Others
On November 1, 1994, the Company issued 1,000,000 shares of its class A
preferred stock in a private transaction directly to investors including The 3H
Corporation and Brice Street Partners Ltd. in exchange for cash; merger and
acquisition; business advisory and administrative services rendered valued at a
stated value of $1.00 per share or $1,000,000. 560,350 and 360,000 class A
preferred shares were issued to The 3H Corporation and Brice Street Partners
Ltd. at a stated value of $1.00 per share.
On August 15, 1995, the Company sold the trademarks and exclusive marketing
rights to two (2) of its residential home equity brand products: The Texas Home
Equity ReFund and The Cash-Out Mortgage ReFinancer to Landrush in exchange for
19,000,000 shares of Landrush common stock in a private transaction. There is
no current market value or tangible book value for the shares acquired by the
Company. As such, the Company considers and accounts for the shares as having
only a nominal per share and/or aggregate value.
On June 13, 1997, the Company sold the trademark and exclusive marketing rights
to its third residential home equity brand product: The Home Equity Cashier to
Landrush in exchange for 333,334 shares of Landrush common stock issued in a
private transaction. There is no current market value or tangible book value for
the shares acquired by the Company. As such, the Company considers and accounts
for the shares as having only a nominal per share and/or aggregate value.
On November 14, 1997, the Company issued 1,000,000 shares of its class A common
stock to The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust in exchange for the conveyance of production, marketing and
distribution rights to certain trade; brand and service marks in a private
transaction valued at $1.00 per share or $1,000,000. 333,334; 333,333; and
333,333 common shares were issued to The 3H Corporation; Brice Street Partners
Ltd. and Settler's Frontier Mortgage Trust respectively. On May 3, 1998, the
Company split its common stock on a (3) for (1) basis. The aggregate shares
held by The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust at December 31, 1998 subsequent to the split were 3,000,0000 or
1,000,002; 999,999 and 999,999 respectively.
On November 20, 1997, the Company sold the trademark, publishing and exclusive
marketing rights to its Black Financial~News print publication to Media Force in
exchange for 19,333,334 shares of Media Force common stock issued in a private
transaction. There is no current market value or tangible book value for the
shares acquired by the Company. As such, the Company considers and accounts for
the shares as having only a nominal per share and/or aggregate value.
On November 20, 1997, the Company sold the trademark and exclusive marketing
rights to its SCOR athletic shoe and apparel logo to SCOR in exchange for
19,333,334 shares of SCOR common stock issued in a private transaction. There is
no current market value or tangible book value for the shares acquired by the
Company. As such, the Company considers and accounts for the shares as having
only a nominal per share and/or aggregate value.
On May 8, 1998, the Company sold 15,000,000 shares of its common stock to its
Employee Stock Ownership Plan (ESOP) Trust, the Citizens Capital Corp. Employee
Stock Ownership Trust in a private transaction valued at $3.34 per share or
$50,100,000.
The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier Mortgage
Trust are entities which are controlled by the Company's Chief Executive
Officer, Billy D. Hawkins.
For the Company's 1997 and 1998 fiscal years respectively, Billy D. Hawkins
served a Director, Chief Executive Officer and Chairman of the Board of the
Company and also served as Chief Executive Officer for the Company's three (3)
97% owned subsidiaries: Landrush Realty Corporation; Media Force Sports &
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Entertainment, Inc. and SCOR Brands IncMr. Hawkins also currently maintains the
role of Chairman of the Board for each of said subsidiaries.
Billy D. Hawkins; Dwight Washington; and Hubert H. Hawkins serve on the
Executive Committee of the Citizens Capital Corp. Employee Stock Ownership
Trust. Also, Billy D. Hawkins is a Director, Chief Executive Officer and
Chairman of the Board of the Company; Dwight Washington, is a Director and Chief
Financial Officer of the Company and Hubert H. Hawkins is a Director and Vice
President of the Company. While neither Billy D. Hawkins; Dwight Washington;
nor Hubert H. Hawkins separately hold any interest in the Trust's assets, Billy
D. Hawkins; Dwight Washington; and Hubert H. Hawkins may be said to have shared
investment power over said assets.
Certain Business Relationships
For the Company's 1997 and 1998 fiscal years respectively, Billy D. Hawkins, a
Director, Chief Executive Officer and Chairman of the Board of the Company also
served as Chief Executive Officer for the Company's three (3) 97% owned
subsidiaries: Landrush Realty Corporation; Media Force Sports & Entertainment,
Inc. and SCOR Brands IncMr. Hawkins also currently maintains the role of
Chairman of the Board for each of said subsidiaries.
The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier Mortgage
Trust are entities which are controlled by the Company's Chief Executive
Officer, Billy D. Hawkins.
Billy D. Hawkins; Dwight Washington; and Hubert H. Hawkins serve on the
Executive Committee of the Citizens Capital Corp. Employee Stock Ownership
Trust. Also, Billy D. Hawkins is a Director, Chief Executive Officer and
Chairman of the Board of the Company; Dwight Washington, is a Director and Chief
Financial Officer of the Company and Hubert H. Hawkins is a Director and Vice
President of the Company. While neither Billy D. Hawkins; Dwight Washington;
nor Hubert H. Hawkins separately hold any interest in the Trust's assets, Billy
D. Hawkins; Dwight Washington; and Hubert H. Hawkins may be said to have shared
investment power over said assets.
Transactions with Promoters
As the sole founder and original investor of the Company, Billy D. Hawkins, a
Director, Chief Executive Officer and Chairman of the Board of the Company is
the only person who may currently be considered a promoter of the Company.
On November 1, 1994, the Company issued 1,000,000 shares of its class A
preferred stock directly to investors including The 3H Corporation and Brice
Street Partners Ltd. in exchange for cash; merger and acquisition; business
advisory and administrative services rendered in a private transaction at a
stated value of $1.00 per share or $1,000,000. 560,350 and 360,000 class A
preferred shares were issued to The 3H Corporation and Brice Street Partners
Ltd. at a stated value of $1.00 per share.
On August 15, 1995, the Company sold the trademarks and exclusive marketing
rights to two (2) of its residential home equity brand products: The Texas Home
Equity ReFund and The Cash-Out Mortgage ReFinancer to Landrush in exchange for
19,000,000 shares of Landrush common stock in a issued in a private transaction.
There is no current market value or tangible book value for the shares acquired
by the Company. As such, the Company considers and accounts for the shares as
having only a nominal per share and/or aggregate value.
On June 13, 1997, the Company sold the trademark and exclusive marketing rights
to its third residential home equity brand product: The Home Equity Cashier to
Landrush in exchange for 333,334 shares of Landrush common stock issued in a
private transaction. There is no current market value or tangible book value for
the shares acquired by the Company. As such, the Company considers and accounts
for the shares as having only a nominal per share and/or aggregate value.
8
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On November 14, 1997, the Company issued 1,000,000 shares of its class A common
stock to The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust in exchange for the conveyance of production, marketing and
distribution rights to certain trade; brand and service marks in a private
transaction valued at $1.00 per share or $1,000,000. 333,334; 333,333; and
333,333 common shares were issued to The 3H Corporation; Brice Street Partners
Ltd. and Settler's Frontier Mortgage Trust respectively. On May 3, 1998, the
Company split its common stock on a (3) for (1) basis. The aggregate shares
held by The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust at December 31, 1998 subsequent to the split were 3,000,0000 or
1,000,002; 999,999 and 999,999 respectively.
On November 20, 1997, the Company sold the trademark, publishing and exclusive
marketing rights to itsBlack Financial~News print publication to Media Force in
exchange for 19,333,334 shares of Media Force common stock issued in a private
transaction. There is no current market value or tangible book value for the
shares acquired by the Company. As such, the Company considers and accounts for
the shares as having only a nominal per share and/or aggregate value.
On November 20, 1997, the Company sold the trademark and exclusive marketing
rights to its SCOR athletic shoe and apparel logo to SCOR in exchange for
19,333,334 shares of SCOR common stock issued in a private transaction . There
is no current market value or tangible book value for the shares acquired by the
Company. As such, the Company considers and accounts for the shares as having
only a nominal per share and/or aggregate value.
On May 8, 1998, the Company sold 15,000,000 shares of its common stock to its
Employee Stock Ownership Plan (ESOP) Trust, the Citizens Capital Corp. Employee
Stock Ownership Trust in a private transaction valued at $3.34 per share or
$50,100,000.
The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier Mortgage
Trust are entities which are controlled by the Company's Chief Executive
Officer, Billy D. Hawkins.
For the Company's 1997 and 1998 fiscal years respectively, Billy D. Hawkins, a
Director, Chief Executive Officer and Chairman of the Board of the Company also
served as Chief Executive Officer for each of the Company's three (3) 97% owned
subsidiaries: Landrush Realty Corporation; Media Force Sports & Entertainment,
Inc. and SCOR Brands IncMr. Hawkins maintained the role of Chairman of the
Board for each of the Company's (3) subsidiaries during fiscal year 1998.
Billy D. Hawkins; Dwight Washington; and Hubert H. Hawkins serve on the
Executive Committee of the Citizens Capital Corp. Employee Stock Ownership
Trust. Also, Billy D. Hawkins is a Director, Chief Executive Officer and
Chairman of the Board of the Company; Dwight Washington, is a Director and Chief
Financial Officer of the Company and Hubert H. Hawkins is a Director and Vice
President of the Company. While neither Billy D. Hawkins; Dwight Washington;
nor Hubert H. Hawkins separately hold any interest in the Trust's assets, Billy
D. Hawkins; Dwight Washington; and Hubert H. Hawkins may be said to have shared
investment power over said assets.
Description of Securities
There are no changes to the section entitled: --Description of Securities-- The
information required by this section is hereby incorporated by reference to this
same section of the Company's Registration Statement on Form 10-SB as filed with
the Securities and Exchange Commission on March 19, 1999, File No. 0-24344.
PART II
Market Price of and Dividends on the Registrant's Common Equity and Related
Stockholder Matters.
The sub-section entitled: --Market Information--under this section is hereby
amended and restated below as follows. All other information required by this
section is hereby incorporated by reference to this same section of the
Company's Registration Statement on Form 10-SB as filed with the Securities and
Exchange Commission on March 19, 1999, File No. 0-24344.
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Market Information
As of December 31, 1998, there is no established foreign or domestic public
market for the Company's common or preferred equity securities. While the
Company intends to take initiatives, on behalf of its shareholders, to establish
a public trading market in its common equity, the Company is not sure if or when
said public market shall occur. Unless and until said market for the Company's
common equity securities is established, the marketability and ability to
liquidate said securities in the public equity markets shall be non existent.
Thus, the marketability and ability to liquidate shares of the Company's common
equity shall be limited to private transactions which may only occur in the
private equity markets.
At December 31, 1998, the Company had 300,000 unissued shares of its common
stock which are subject to executive options to be allocated to its non-chief
executive level officers.
The Company has 100,000 common stock purchase warrants outstanding as of
December 31, 1998. Each one (1) warrant purchases 10 shares of the Company's
common stock at $0.01 per share. There are 1,000,000 shares of the Company's
class A; common stock which are subject to the exercise of said 100,000
warrants.
The Company has 40,500,000 shares of class A; common stock and 1,000,000 shares
of class A; preferred stock outstanding as of December 31, 1998.
Legal Proceedings
There are no changes to the section entitled: --Legal Proceedings-- The
information required by this section is hereby incorporated by reference to this
same section of the Company's Registration Statement on Form 10-SB as filed with
the Securities and Exchange Commission on March 19, 1999, File No. 0-24344.
Changes in and Disagreements with Accountants
There are no changes to the section entitled: --Changes in and Disagreements
with Accountants-- The information required by this section is hereby
incorporated by reference to this same section of the Company's Registration
Statement on Form 10-SB as filed with the Securities and Exchange Commission on
March 19, 1999, File No. 0-24344.
Recent Sales of Unregistered Securities
This section entitled: --Recent Sales of Unregistered Securities-hereof is
hereby amended and restated below in its entirety as follows.
The following information relates to all securities of the Company which have
been sold by the Company within the past five years and were not registered
under the Securities Act of 1933, as amended or the Exchange Act of 1934, as
amended.
Securities Sold
On November 1, 1994, the Company issued 1,000,000 shares of its class A
preferred stock in a private transaction directly to investors including The 3H
Corporation and Brice Street Partners Ltd. in exchange for cash; merger and
acquisition; business advisory and administrative services rendered at a stated
value of $1.00 per share or $1,000,000. 560,350 and 360,000 class A preferred
shares were issued to The 3H Corporation and Brice Street Partners Ltd. at a
stated value of $1.00 per share.
Each share of preferred stock is paired together with 1/10th warrant and is
outstanding as a unit. Each one (1) warrant purchases ten (10) shares of common
stock at $0.01 per share.
10
<PAGE>
On November 14, 1997, the Company issued 1,000,000 shares of its class A common
stock to The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust in exchange for the conveyance of production, marketing and
distribution rights to certain trade; brand and service marks in a private
transaction valued at $1.00 per share or $1,000,000. 333,334; 333,333; and
333,333 common shares were issued to The 3H Corporation; Brice Street Partners
Ltd. and Settler's Frontier Mortgage Trust respectively. On May 3, 1998, the
Company split its common stock on a (3) for (1) basis. The aggregate shares
held by The 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust at December 31, 1998 subsequent to the split were 3,000,0000 or
1,000,002; 999,999 and 999,999 respectively.
On May 8, 1998, the Company sold 15,000,000 shares of its common stock to its
Employee Stock Ownership Plan (ESOP) Trust, the Citizens Capital Corp. Employee
Stock Ownership Trust in a private transaction valued at $3.34 per share or
$50,100,000.
Underwriters and Other Purchasers
On November 1, 1994, the Company issued 1,000,000 shares of its class A
preferred stock directly to investors including The 3H Corporation and Brice
Street Partners Ltd. in a private transaction at a stated value of $1.00 per
share or $1,000,000 in exchange for cash; merger and acquisition; business
advisory and administrative services rendered. 560,350 and 360,000 class A
preferred shares were issued to The 3H Corporation and Brice Street Partners
Ltd. at a stated value of $1.00 per share.
Each share of preferred stock is paired together with 1/10th warrant and is
outstanding as a unit. Each one (1) warrant purchases ten (10) shares of common
stock at $0.01 per share. The 1,000,000 shares of class A; preferred stock
were issued by the Company in a private transaction not involving any public
offering. No broker/dealer or other party served in an underwriting capacity
regarding this issuance.
On November 14, 1997, the Company issued 1,000,000 shares of its class A common
stock directly to investors including The 3H Corporation; Brice Street Partners
Ltd. and Settler's Frontier Mortgage Trust in a private transaction valued at
$1.00 per share or $1,000,000. 333,334; 333,333; and 333,333 common shares were
issued to the 3H Corporation; Brice Street Partners Ltd. and Settler's Frontier
Mortgage Trust respectively in exchange for the conveyance of production,
marketing and distribution rights to certain trade; brand and service marks.
The 1,000,000 shares of class A; common stock were issued by the Company in a
private transaction not involving any public offering. No broker/dealer or
other party served in an underwriting capacity regarding this issuance. On May
3, 1998, the Company split its common stock on a (3) for (1) basis. The
aggregate shares held by The 3H Corporation; Brice Street Partners Ltd. and
Settler's Frontier Mortgage Trust at December 31, 1998 subsequent to the split
were 3,000,0000 or 1,000,002; 999,999 and 999,999 respectively.
On May 8, 1998, the Company sold 15,000,000 shares of its class A common stock
directly to its Employee Stock Ownership Plan Trust in a private transaction
valued at $3.34 per share or $50,100,000. No broker/dealer or other party
served in an underwriting capacity regarding this issuance.
Consideration
On November 1, 1994, the Company issued 1,000,000 shares of its class A
preferred stock in a private transaction directly to investors including The 3H
Corporation and Brice Street Partners Ltd. in exchange for cash; merger and
acquisition; business advisory and administrative services rendered at a stated
value of $1.00 per share or $1,000,000. 560,350 and 360,000 class A preferred
shares were issued to The 3H Corporation and Brice Street Partners Ltd.
respectively at a stated value of $1.00 per share.
On November 14, 1997, the Company issued 1,000,000 shares of its class A common
stock to directly to The 3H Corporation; Brice Street Partners Ltd. and
Settler's Frontier Mortgage Trust in a private transaction valued at $1.00 per
share or $1,000,000 in exchange for the conveyance of production, marketing and
distribution rights to certain trade; brand and service marks. 333,334;
333,333; and 333,333 common shares were issued to The 3H Corporation; Brice
Street Partners Ltd. and Settler's Frontier Mortgage Trust respectively. On
May 3, 1998, the Company split its common stock on a (3) for (1) basis. The
aggregate shares held by The 3H Corporation; Brice Street Partners Ltd. and
Settler's Frontier Mortgage Trust at December 31, 1998 subsequent to the split
were 3,000,0000 or 1,000,002; 999,999 and 999,999 respectively.
11
<PAGE>
On May 8, 1998, the Company sold 15,000,000 shares of its class A; common stock
directly to its Citizens Capital Corp. Employee Stock Ownership Trust in a
private transaction valued at $3.34 per share or $50,100,000 in exchange for,
the issuance by the Trust, of a 5 year; fourteen and one-half percent (14.5%),
$50,100,000 promissory note. Said promissory note was issued together with a
security agreement fully collateralized by 15,000,000 shares of the Company's
common stock held by the Citizens Capital Corp. Employee Stock Ownership Trust.
Exemption from Registration Claimed
On November 1, 1994, the Company issued 1,000,000 shares of its class A
preferred stock directly to investors including The 3H Corporation and Brice
Street Partners Ltd. in a private transaction valued at $1.00 per share or
$1,000,000 in exchange for merger and acquisition; business advisory and
administrative services rendered to the Company. The securities sold hereof
were sold pursuant to an exemption from the requirements of registration under
Rule 230.504 of Regulation D of the Securities Act of 1933, as amended. The
offerings were made without the use of any general solicitation or advertising.
All investors had adequate access, through their relationship with the Company,
to information about the Company.
On November 14, 1997, the Company issued 1,000,000 shares of its class A common
stock directly to The 3H Corporation; Brice Street Partners Ltd. and Settler's
Frontier Mortgage Trust in a private transaction valued at $1.00 per share or
$1,000,000 in exchange for the conveyance of production, marketing and
distribution rights to certain trade; brand and service marks. The securities
sold hereof were sold pursuant to an exemption from the requirements of
registration under Rule 230.504 of Regulation D of the Securities Act of 1933,
as amended. The offerings were made without the use of any general solicitation
or advertising. All investors had adequate access, through their relationship
with the Company, to information about the Company.
On May 8, 1998, the Company issued 15,000,000 shares of its class A common stock
directly to its Citizens Capital Corp. Employee Stock Ownership Trust in a
private transaction valued $3.34 per share or $50,100,000 in exchange for a 5
year, fourteen and one-half percent (14.5%), $50,100,000 promissory note. Said
promissory note was issued together with a security agreement fully
collateralized by 15,000,000 shares of the Company's common stock held by the
Citizens Capital Corp. Employee Stock Ownership Trust. The securities sold
hereof were sold pursuant to an exemption from the requirements of registration
under Rule 230.506 of Regulation D of the Securities Act of 1933, as amended.
The offering were made without the use of any general solicitation or
advertising. All plan participants had adequate access, through their
relationship with the Company, to information about the Company.
Indemnification of Directors and Officers
There are no changes to the section entitled: --Indemnification of Directors and
Officers. The information required by this section is hereby incorporated by
reference to this same section of the Company's Registration Statement on Form
10-SB as filed with the Securities and Exchange Commission on March 19, 1999,
File No. 0-24344.
THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY
12
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS INDEX
Page No.
--------
<S> <C>
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . 14
Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . 15
Consolidated Statements of Operations . . . . . . . . . . . 16
Consolidated Statement of Changes in Stockholder's Equity. 18
Consolidated Statements of Cash Flows . . . . . . . . . . . 19
Notes to Consolidated Financial Statements. . . . . . . . . 20
Interim Financial Statements (Unaudited)
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . 23
Consolidated Statements of Operations . . . . . . . . . . . 24
Consolidated Statements of Cash Flows . . . . . . . . . . . 25
Notes to Consolidated Financial Statements. . . . . . . . . 26
</TABLE>
13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Citizens Capital Corp.
Dallas, Texas
We have audited the accompanying consolidated balance sheet of Citizens Capital
Corp. (a development stage company) as of December 31, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 1998 and 1997 and the period from
inception (March 12, 1991) to December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Citizens Capital Corp. as of
December 31, 1998, and the results of its operations and its cash flows for the
years ended December 31, 1998 and 1997 and the period from inception (March 12,
1991) to December 31, 1998 in conformity with generally accepted accounting
principles.
HEIN+ASSOCIATES LLP
Certified Public Accountants
Dallas, Texas
February 8, 1999
14
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, 1998
ASSETS
------
CURRENT ASSET -
Cash $1,015
<S> <C>
OFFICE EQUIPMENT, net of accumulated depreciation of $3,250. . . . 310
INTANGIBLE ASSETS, net . . . . . . . . . . . . . . . . . . . . . . 360
-------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,685
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
--------------------------------------
CURRENT LIABILITIES -
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 stated value, 2,000,000 shares authorized;
1,000,000 shares issued and outstanding . . . . . . . . . . . . 1,000,000
Common stock, no par value, 100,000,000 shares authorized;
40,500,000 shares issued and outstanding ($.01 stated value). . 405,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 48,787,966
Note receivable from ESOP. . . . . . . . . . . . . . . . . . . . . (50,100,000)
Deficit accumulated during the development stage . . . . . . . . . (92,281)
-------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 685
-------------
Total liabilities and stockholders' equity . . . . . . . . . . $ 1,685
=============
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
CITIZENS CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997
and the period from inception (March 12, 1991)
to December 31, 1998
Year Ended December 31, Period from
----------------------- March 12, 1991 to
1998 1997 December 31, 1998
--------- --------- --------------------
<S> <C> <C> <C>
SALES. . . . . . . . . . . . . . . . . $ 438 $ - $ 438
COST OF SALES. . . . . . . . . . . . . 275 - 275
--------- --------- --------------------
163 - 163
GENERAL AND ADMINISTRATIVE EXPENSES. . 17,516 9,657 92,444
--------- --------- --------------------
NET LOSS . . . . . . . . . . . . . . . $(17,353) $ (9,657) $ (92,281)
========= ========= ====================
NET LOSS PER SHARE (basic and diluted) $ - $ -
========= =========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period from March 12, 1991 to December 31, 1998
Preferred Stock Common Stock Additional Note
--------------------- ------------------- Paid-in Receivable Accumulated
Shares Amount Shares Amount Capital from ESOP Deficit Totals
--------- ---------- ---------- -------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued founder
upon incorporation - $ - 300 $ 3 $ (3) $ - $ - $ -
Common stock issued founder
December 24, 1993 - - 22,499,700 224,997 (224,997) - - -
Preferred stock issued
November 1, 1994 1,000,000 1,000,000 - - (988,000) - - 12,000
Contributions by stockholder at
Various dates prior to 1997 - - - - 56,096 - - 56,096
Cumulative net loss through
December 31, 1996 - - - - - - (65,271) (65,271)
--------- ---------- ---------- -------- ------------ ------------- --------- ---------
BALANCES, December 31, 1996 1,000,000 1,000,000 22,500,000 225,000 (1,156,904) - (65,271) 2,825
Common stock issued for brand and
Service marks November 14, 1997 - - 3,000,000 30,000 (30,000) - - -
Contributions by stockholder
during 1997 - - - - 9,307 - - 9,307
Net loss for the year - - - - - - (9,657) (9,657)
--------- ---------- ---------- -------- ------------ ------------- --------- ---------
BALANCES, December 31, 1997 1,000,000 1,000,000 25,500,000 255,000 (1,177,597) - (74,928) 2,475
Common stock issued to ESOP,
May 8, 1998 - - 15,000,000 150,000 49,950,000 (50,100,000) - -
Contributions by stockholder
during 1998 - - - - 15,563 - - 15,563
Net loss for the year - - - - - - (17,353) (17,353)
--------- ---------- ---------- -------- ------------ ------------- --------- ---------
BALANCES, December 31, 1998 1,000,000 $1,000,000 40,500,000 $405,000 $48,787,966 $(50,100,000) $(92,281) $ 685
========= ========== ========== ======== ============ ============= ========= =========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
CITIZENS CAPITAL CORP.
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
and the period from inception (March 12, 1991)
to December 31, 1998
Year Ended December 31, Period from
---------------------- March 12, 1991 to
1998 1997 December 31, 1998
--------- -------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(17,353) $(9,657) $(92,444)
Adjustments to reconcile net loss to cash used by
operating activities:
Expenses paid by stockholder 15,563 9,157 76,154
Depreciation and amortization 790 500 3,290
Increase in accounts payable 1,000 - 1,000
--------- -------- -------------------
Net cash used by operating activities - - (12,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment - - (3,560)
Payment for intangible assets - (150) (250)
--------- -------- -------------------
Net cash used by investing activities - (150) (3,810)
CASH FLOWS FROM FINANCING ACTIVITIES -
Sale of stock and contribution by stockholder 1,015 150 16,825
--------- -------- -------------------
NET INCREASE IN CASH 1,015 - 1,015
CASH, beginning of period - - -
--------- -------- -------------------
CASH, end of period $1,015 $- $1,015
========= ======== ===================
</TABLE>
18
<PAGE>
CITIZENS CAPITAL CORP.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------------------------
Company Background
- -------------------
Citizens Capital Corp. (the "Company") is a development stage holding company
with plans to acquire and/or develop operating entities, assets and/or marketing
rights which provide the Company with an initial entry into new markets or serve
as complementary additions to existing operations, assets and/or products.
Currently, the Company's plans contemplate operating in the following three
market segments: 1) residential mortgage loan marketing, commercial and
residential real estate investment and development; 2) news print publishing
and 3) the design, marketing and distribution of branded athletic shoes and
apparel, through its three 97% owned subsidiaries: Landrush Realty Corporation
("Landrush"); Media Force Sports & Entertainment, Inc. ("Media Force"); and SCOR
Brands, Inc. ("SCOR"). Operations since inception have primarily included
expenditures related to development of the Company's proposed business ventures.
Principles of Consolidation
- -----------------------------
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Office Equipment
- -----------------
Office equipment is carried at cost less accumulated depreciation. Significant
improvements and additions are capitalized. Maintenance and repair costs are
expensed as incurred. Depreciation is computed on the straight line method over
the useful lives of the assets, which range from five to seven years. When
property and equipment are retired or otherwise disposed of, the related cost
and accumulated depreciation are eliminated and any profit or loss on
disposition is reflected in income.
Intangible Assets
- ------------------
The Company, through its interest in Landrush Realty Corporation, owns the
registered trademark, distribution and exclusive marketing rights to The Texas
Home Equity ReFund , The Cash-Out Mortgage ReFinancer and The Home Equity
Cashier home equity product marks.
The Company, through its interest in Media Force Sports & Entertainment Inc.
owns the registered trademark, distribution and exclusive marketing rights to
the Black Financial-News publication.
The Company, through its interest in SCOR Brands Inc., owns the registered
trademark, distribution and exclusive marketing rights to the SCOR brand line
of athletic shoes and apparel.
The Company accounts for the value of the trademarked products and the
corresponding exclusive marketing and distribution rights based on the
registration costs, which totaled $400. This intangible asset is amortized on a
straight line basis over ten years.
19
<PAGE>
CITIZENS CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Loss Per Share
- ----------------
Loss per share is calculated in accordance with Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". Basic income
(loss) per share is computed based upon the weighted average number of common
shares outstanding during the period. Diluted income (loss) per share takes
common equivalent shares into consideration. However, common equivalent shares
are not considered if their effect is antidilutive. Common stock equivalents
consist of outstanding stock options and warrants. Common stock equivalents are
assumed to be exercised with the related proceeds used to repurchase outstanding
shares except when the effect would be antidilutive. Common equivalent shares
of the Company were antidilutive in all periods presented.
The weighted average number of shares outstanding used in the loss per share
computation was 35,212,500 and 22,875,000 for the years ended December 31, 1998
and 1997, respectively.
Income Taxes
- -------------
The Company accounts for income taxes under the liability method, which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statements and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. The Company had no material
deferred tax assets or liabilities at December 31, 1998.
Statement of Cash Flows
- --------------------------
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
Use of Estimates
- ------------------
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles requires the Company's management
to make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
2. PLAN OF OPERATION FOR THE 1999 FISCAL YEAR
-------------------------------------------------
The Company's plan of operation for the 1999 fiscal year is to: (1) develop the
products and/or services currently offered by its three subsidiaries: Landrush,
Media Force and SCOR and (2) continue to evaluate and pursue suitable mergers
and/or acquisitions of existing operating entities. The Company's cash
requirements have been funded to date by its principal stockholder. The Company
anticipates approximately $2,800,000 of cash will be needed to fully implement
the start-up phase of its plans and cover working capital requirements over the
next year. The Company intends to attempt to borrow these funds from affiliates
of the Company and third party lenders. Should the Company be unable to borrow
these funds, it will be unable to implement its business plan.
The Company intends to register with the United States Securities and Exchange
Commission, 39,500,000 shares of its Class A common stock for secondary market
trading during 1999. The 39,500,000 common shares include the 15,000,000 common
shares currently held by the Company's ESOP (see Note 3).
3. EMPLOYEE STOCK OWNERSHIP PLAN AND NOTE RECEIVABLE
-------------------------------------------------------
The Company has an Employees Stock Ownership Plan ("ESOP" or the "Plan"), which
covers all employees with at least a year of consecutive service that are not
covered by a collective bargaining agreement. The Plan provides for an
allocation of Company stock to each participant's account of the greater of 15%
or the maximum percentage allowable of participants' eligible compensation. No
shares have been allocated as of December 31, 1998 as there has been no
compensation to employees.
On May 11, 1998 the Company sold 15,000,000 shares of its Class A common stock
directly to the ESOP at $3.34 per share in exchange for a five year, 14.5%,
$50,100,000 promissory note. The promissory note was issued together with a
security agreement fully collateralized by 15,000,000 shares of the Company's
common stock held by the ESOP. The promissory note has a "liquidating call
provision" which may be invoked by the Company or the noteholder. The
liquidating call provision gives the Company or the noteholder the "demand
right" to request that up to 15,000,000 shares of Citizens Capital Corp. common
stock, held by the ESOP, be liquidated to pay down the outstanding principal
amount of the note and any accrued principal and interest thereof, any time the
common shares are selling in the public or private capital marketplace at or
above $5.00 per share. The initial face value of the promissory note has been
recorded in the stockholders' equity section of the accompanying balance sheet.
20
<PAGE>
4. STOCKHOLDERS' EQUITY
---------------------
Preferred Stock
- ----------------
On November 1, 1994, the Company issued 1,000,000 shares of its Class A, 7 1/4%,
$1.00 cumulative preferred stock. Each share of preferred stock includes a
warrant which entitles the holder to purchase one share of common stock at $0.01
per share.
The holders of the preferred stock are entitled to receive out of legally
available funds of the Company, dividends at an annual rate of $0.0725 per
share, payable quarterly in arrears, on a cumulative basis. Dividends on the
preferred stock have not been declared or paid and have not been accrued in the
accompanying financial statements because the Company has no surplus from which
dividends can legally be paid. Cumulative dividends in arrears as of December
31, 1998 are $314,164.
The preferred stock was initially scheduled to be repaid on December 31, 1999.
However, as permitted by the terms of the preferred stock, in excess of 66-2/3%
of the holders of the preferred stock elected to eliminate any repayment
requirement. The Company may, at its election, redeem the preferred stock in
whole, but not in part, at a 7-1/4% premium, so long as the cumulative dividends
have been declared and paid.
The Company has authorized, but unissued 4,000,000 shares of preferred stock
which may be issued in such series and preferences as determined by the
Company's board of directors.
Common Stock
- -------------
At December 31, 1996, the Company had 22,500,000 Class A, no par, $0.01 stated
value shares issued and outstanding.
On November 14, 1997, the Company issued 3,000,000 additional shares of its
Class A, no par, $0.01 stated value common stock, to three institutional
investors in exchange for the full conveyance of production, marketing,
distribution and trade rights to certain brand and service marks.
On May 3, 1998, the Company voted to split its shares of Class A common stock
then outstanding on a 3 for 1 basis. The aggregate number of Class A, no par
value common shares outstanding after the split were 25,500,000. All
information in the accompanying financial statements and notes is presented as
if the split occurred at the date of incorporation.
On May 8, 1998, the Company sold 15,000,000 shares of Class A, no par, $0.01
stated value common stock directly to its ESOP at $3.34 per share (see Note 3).
Stock Options
- --------------
Effective December 1, 1998, the Company adopted a stock option plan, which
provides for a maximum of 2,000,000 shares to be issued under the plan. The
Company granted options to three directors on December 1, 1998 to acquire a
total of 300,000 shares of common stock. The exercise price is $1.50 per share.
The options may be exercised based on the following schedule: 25% vest
immediately, 25% vest after two years, 25% vest after three years, and 25% vest
after four years. No options had been exercised as of December 31, 1998. The
Company has estimated the fair value of the options to be immaterial at December
31, 1998.
21
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
March 31, 1999
(Unaudited)
ASSETS
------
<S> <C>
CURRENT ASSET -
Cash $ 3,350
OFFICE EQUIPMENT, net of accumulated depreciation of $3,338 222
INTANGIBLE ASSETS, net 350
-------------
Total assets $ 3,922
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES -
Accounts payable $ 1,750
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 stated value, 5,000,000 shares authorized;
1,000,000 shares issued and outstanding 1,000,000
Common stock, no par value, 100,000,000 shares authorized;
40,500,000 shares issued and outstanding ($.01 stated value) 405,000
Additional paid-in capital 48,795,009
Note receivable from ESOP (50,100,000)
Deficit accumulated during the development stage (97,837)
-------------
Total stockholders' equity 2,172
-------------
Total liabilities and stockholders' equity $ 3,922
=============
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Periods Ended March 31, 1999 and 1998
AND THE PERIOD FROM INCEPTION(MARCH 12, 1991) TO
MARCH 31, 1999
(Unaudited)
Period Ended March 31, Period from
-------------------------- March 12, 1991 to
1999 1998 MARCH 31, 1999
------------ ------------ ----------------
<S> <C> <C> <C>
SALES $ 0 $ 438 $ 438
COST OF SALES 0 275 275
------------ ------------ ----------------
0 163 163
GENERAL AND ADMINISTRATIVE EXPENSES 5,556 4,379 98,000
------------ ------------ ----------------
NET LOSS $ (5,556) $ (4,216) $ (97,837)
============ ============ ================
NET LOSS PER SHARE (BASIC AND DILUTED) $ -- $ --
Weighted Average Shares 40,500,000 22,500,000
============ ============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
CITIZENS CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 1999 and 1998
AND THE PERIOD FROM INCEPTION(MARCH 12, 1991) TO
MARCH 31, 1999
(Unaudited)
Period Ended March 31, Period from
---------------------- March 12, 1991 to
1999 1998 March 31, 1999
-------- -------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,556) $(4,216) $ (97,837)
=================
Adjustments to reconcile net loss to cash used by
operating activities:
Expenses paid by stockholder 3,693 3,048 79,684
Depreciation and amortization 98 168 3,388
Increase in accounts payable 750 1,000 1,750
-------- -------- -----------------
Net cash used by operating activities (1,015) - (13,015)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment - - (3,560)
Payment for intangible assets - - (250)
-------- -------- -----------------
Net cash used by investing activities - - (3,810)
CASH FLOWS FROM FINANCING ACTIVITIES -
Sale of stock and contribution by stockholder 3,350 865 20,175
-------- -------- -----------------
NET INCREASE IN CASH 2,335 865 3,350
CASH, beginning of period 1,015 150 -
-------- -------- -----------------
CASH, end of period $ 3,350 $ 1,015 $ 3,350
======== ======== =================
</TABLE>
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INFORMATION
----------------------
The balance sheet as of March 31, 1999 and the statements of operations and cash
flows for the three month periods ended March 31, 1999 and 1998 were taken from
the Company's books and records without audit. However, in the opinion of
management, such information includes all adjustments (consisting only of normal
recurring accruals) which are necessary to properly reflect the financial
position of the Company as of March 31, 1999 and results of operations for the
three months ended March 31, 1999 and 1998. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed and omitted,
although management believes the disclosures are adequate to make the
information presented not misleading. These interim unaudited financial
statements should be read in conjunction with the Company's audited annual
financial statements included herein for the years ended December 31, 1998 and
1997.
2. PLAN OF OPERATION FOR THE 1999 FISCAL YEAR
-------------------------------------------------
The Company's plan of operation for the 1999 fiscal year is to: (1) introduce
into the consumer marketplace the products and/or services proposed by its three
subsidiaries: Landrush, Media Force and SCOR and (2) continue to identify,
evaluate and pursue suitable merger and/or acquisition of those operating,
income producing entities which offer products and/or services similar to, or
the same as, those proposed by the company.
Landrush
The Company plans to market The Cash-Out Mortgage ReFinancer and The Home Equity
Cashier brand mortgage products proposed by Landrush. The company plans to
acquire both a residential mortgage brokerage and a residential real estate
brokerage company to retail distribute its branded products to the public
utilizing those individual mortgage brokers and residential real estate agents
respectively who may be in the employ of the companies proposed for acquisition.
The Company plans to fund its mortgages by targeting for acquisition those
residential mortgage brokerage companies which have pre-existing, correspondent
loan underwriting relationships with a minimum of five (5) mortgage banking
institutions that have minimum monthly funding availability of $1,000,000. In a
correspondent relationship between a mortgage brokerage company and a mortgage
banking institution, the primary role of the mortgage brokerage company is to
retail market mortgage loans to and obtain loan applications directly from
borrowers. All completed loan applications are then submitted to the mortgage
banking institution to be underwritten and funded by the mortgage bank. The
funded mortgage loan is then placed in the mortgage banks loan servicing
portfolio where the borrower remits monthly principal and interest payments.
The Company plans to acquire acreage in San Antonio, Texas for a combined
commercial, industrial, retail, residential and entertainment complex to be
developed by Landrush. The Company estimates the cost to acquire said land shall
be between $5,000 to $10,000 per acre.
From its inception on March 12, 1991 through March 31, 1999, the Company's cash
requirements have been funded by its principal stockholder. For the remainder
of its 1999 fiscal year, the Company's principal stockholder intends to fund the
Company's daily, operational cash requirements.
To fund working capital and personnel staffing for Landrush, the Company intends
to seek an initial loan of $100,000 and $205,000 respectively from affiliates of
the Company and third party lenders. Management of the Company believes that
loans anticipated to be obtained from affiliates of the Company and third party
lenders shall be adequate to meet its working capital and personnel staffing
funding requirements. However, there can be no assurance that the Company will
be able to successfully obtain its anticipated funding requirements; implement
its business plan; or be successful in its future operations.
25
<PAGE>
Media Force
The Company plans to develop the circulation of The Black Financial~News
publication proposed by Media Force by utilizing the professional telemarketing
services of a national newspaper subscription development company. The Company
plans to initially secure 2,500 to 5,000 annual subscriptions for The Black
Financial~News publication at $19.95 per subscription or $49,875 to $99,750.
The initial content of The Black Financial~News publication has been structured
for a 20 page standard layout at a weekly printing cost of $1,250. Each of the
20 pages shall be available to be utilized for display advertisement placement
at a cost of $4,900; $3,700 and $3,200 per four color; 2 color or black & white
page respectively.
From its inception on March 12, 1991 through March 31, 1999, the Company's cash
requirements have been funded by its principal stockholder, For the remainder
of its 1999 fiscal year, the Company's principal stockholder intends to fund the
Company's daily, operational cash requirements.
To fund working capital and personnel staffing for Media Force, the Company
intends to seek an initial loan of $100,000 and $205,000 respectively from
affiliates of the Company and third party lenders. Management of the Company
believes that loans anticipated to be obtained from affiliates of the Company
and third party lenders shall be adequate to meet the working capital and
personnel staffing funding requirements of Media Force.
Moreover, management of the Company believes that revenue anticipated to be
generated from initial newspaper subscriptions; display and classified
advertisement sales shall be adequate to supplement any additional working
capital requirements which may be required for the publishing and distribution
of The Black Financial~News publication through December 31, 1999. However,
there can be no assurance that the Company will be able to successfully obtain
its anticipated funding requirements; implement its business plan; or be
successful in its future operations.
SCOR
The Company plans to solicit and secure purchase orders from both regional and
national athletic footwear retailers for the SCOR brand line of basketball;
running and golf footwear proposed by SCOR. After receiving firm purchase
orders, the Company shall place said orders for production with its contract
manufacturer. The Company may initially factor or finance the aggregate amount
of each firm purchase order received from retailers. Generally, firms
specializing in providing factoring or purchase order financing services advance
cash to a company equal to 70 or 75 percent of the aggregate purchase order
amount. The factoring firm then collects 100 percent of the originating,
aggregate purchase order amount.
From its inception on March 12, 1991 through March 31, 1999, the Company's cash
requirements have been funded by its principal stockholder, For the remainder
of its 1999 fiscal year, the Company's principal stockholder intends to fund the
Company's daily, operational cash requirements.
To fund working capital and personnel staffing for SCOR, the Company intends to
seek an initial loan of $100,000 and $205,000 respectively from affiliates of
the Company and third party lenders. Management of the Company believes that
loans anticipated to be obtained from affiliates of the Company; and third party
lenders shall be adequate to meet the working capital and personnel staffing
funding requirements of SCOR. Management of the Company also believes that the
advanced cash funding anticipated to be generated from purchase order factoring
activities shall be adequate to supplement initial footwear production and
additional working capital requirements of SCOR. However, there can be no
assurance that the Company will be able to successfully obtain anticipated start
up funding for SCOR; factor any of its anticipated purchase orders or receive
any purchase orders in whole or in part; meet additional working capital
requirements; implement its business plan; or be successful in its future
operations.
26
<PAGE>
The Company
The Company plans to continue to identify, evaluate and pursue suitable merger
and/or acquisition of those operating, income producing entities which offer
products and/or services similar to, or the same as, those proposed by each of
the Company's subsidiaries.
From its inception on March 12, 1991 through March 31, 1999, the Company's cash
requirements have been funded by its principal stockholder, For the remainder
of its 1999 fiscal year, the Company's principal stockholder intends to fund the
Company's daily, operational cash requirements.
To fund its initial working capital and personnel staffing funding requirements,
the Company itself intends to seek a loan of $100,000 and $220,000 respectively
from affiliates of the Company and third party lenders. Additionally, in order
to fund its plan of acquisition for Landrush; Media Force and SCOR, the Company
intends to seek loans of $415,000; $750,000 and $400,000 respectively from
affiliates of the Company and third party lenders. Management of the Company
believes that loans anticipated to be obtained from affiliates of the Company;
and third party lenders shall be adequate to meet the working capital and
acquisition funding requirements of the Company.
The Company believes that the plans herein provide for the continuance of
operations through December 31, 1999. However, there can be no assurances that
the Company will be able to obtain its initial acquisition or working capital
funding requirements; obtain sufficient additional funding as needed, execute
its business plan in whole or in part or be successful in its future operations.
EXHIBIT INDEX
SEE "EXHIBIT INDEX" ON PAGE 28
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Citizens Capital Corp. By: /s/ Billy D. Hawkins
- ---------------------- -------------------------
(Registrant) Chief Executive Officer Date: ____________, 1999.
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No Description Page No.
- ---------- -------------------------------------------------- --------
<C> <S> <C>
3.1 Amended Articles of Incorporation (1)
3.2 By-Laws (1)
4.1 Instrument Defining The Rights of Shareholder (1)
10.1 1998 Employee Stock Ownership Plan (1)
10.2 1998 Stock Option Plan (1)
Citizens Capital Corp. Employee Stock Ownership
10.3 Trust Promissory Note and Security Agreement (2) 29
21.1 Subsidiaries of the Registrant (1)
27.1 Financial Data Schedule (1)
<FN>
(1) The Exhibit required hereof is hereby incorporated by reference to the same
Exhibit number to the Company's Registration Statement on Form 10-SB as filed
with the Securities and Exchange Commission on March 19, 1999, File No. 0-24344.
(2) This Exhibit is hereby added by this amended Statement to the Company's
Registration Statement on Form 10-SB as filed with the Securities and Exchange
Commission on March 19, 1999, File No. 0-24344.
</TABLE>
28
<PAGE>
Type: Exhibit- 10.3
Description: Citizens Capital Corp. Employee Stock Ownership Trust Promissory
Note and Security Agreement issued
Exhibit-10.3
PROMISSORY NOTE
---------- ----
This Promissory Note (the note) is entered into on the 10th day of May 1998
----
between and amongst Citizens Capital Corp., a Texas corporation, hereafter known
as (the Company) and the Citizens Capital Corp. Employee Stock Ownership Trust,
a Texas Trust hereafter known as (the Trust), formed in the county of Dallas.
Said promissory note is secured by and subject to the terms and conditions of
the separately attached security agreement dated May 10th 1998.
The Transaction
The company agrees to sale 15,000,000 shares of its class A; no par; common
stock to the Trust for $3.34 per share or $50,100,000.
The Consideration
In consideration for the purchase, by the Trust, of 15,000,000 shares of the
company's class A; no par; common stock at $3.34 per share or $50,100,000, the
Trust promises to pay and deliver to the company, a 5 year; 14.5%; $50,100,000
promissory note.
Payment Provisions of Note
The Trust agrees to pay the principal amount of the note and all accrued
interest thereon, in full, on May 10th, 2003. The Trust, at its discretion, may
pay the full amount of the note and any accrued interest thereon prior to May
10th, 2003, without any penalty for early payment.
Disposition of Assets
To pay down it's loan payment obligations, the Trust may liquidate up to
15,000,000 of its Citizens Capital Corp. class A; no par common shares at any
time in which said shares are selling in the public or private capital
marketplace at or above $5.00 per share.
-- -- -----
Terms of Note Default
This note shall be in default if the principal amount of said note and all
accrued interest thereon, is not paid in full, on or before May 10th, 2003.
Liquidating Call Provision
The company or the note holder of record thereof, shall have the "demand" right
to require the Trust to liquidate up to 15,000,000 of its Citizens Capital Corp.
class A common shares at any time in which said shares are selling in the public
or private capital marketplace at or above $5.00 per share.
-- -- -----
29
<PAGE>
IN WITNESS HEREOF, the undersigned have agreed and have accepted the terms of
this promissory note.
Seller:
/s/ Billy D. Hawkins
- -----------------------
Chief Executive Officer
Citizens Capital Corp.
Purchaser:
/s/ Dwight Washington
- -----------------------
Executive Committee Member
Citizens Capital Corp. Employee Ownership Trust
Date: May 10, 1998
/s/ Hubert H. Hawkins
- ------------------------
Executive Committee Member
Citizens Capital Corp. Employee Ownership Trust
Date: May 10, 1998
/s/ Billy D. Hawkins
- -----------------------
Executive Committee Member
Citizens Capital Corp. Employee Ownership Trust
Date: May 10, 1998
30
<PAGE>
SECURITY AGREEMENT
The Note (the Note) entered into on the 10th day of May 1998 between and amongst
----
Citizens Capital Corp., a Texas corporation, hereafter known as (the Company)
and the Citizens Capital Corp. Employee Stock Ownership Trust, a Texas Trust
hereafter known as (the Trust), formed in the county of Dallas shall be secured
by and subject to a first lien on the 15,000,000 shares of Citizens Capital
Corp.; class A; no par common stock held by the Trust.
Said Note is secured by and subject to the terms and conditions of this Security
Agreement hereafter known as (the Agreement) dated May 10th 1998.
Said first lien on the 15,000,000 shares of Citizens Capital Corp.; class A; no
par common stock held by the Trust shall be held by the seller of said common
stock. Citizens Capital Corp
The first lien shall be held by the seller, Citizens Capital Corp., until such
time that the purchaser, the Citizens Capital Corp. Employee Stock Ownership
Trust pays in full, to the seller or the Note holder of record thereof, the
principal Note amount of $50,100,000 and any interest accrued thereof of
an annual percentage rate of 14.5 percent.
At the occurrence of the event in which the Trust pays to the Company, the full
financial consideration of $50,100,000 plus any accrued interest thereof, the
Company shall take the necessary actions to release any and all liens on the
15,000,000 shares of Citizens Capital Corp.; class A; no pa;r common stock held
by the Trust.
Terms of Default
If the Note enter into between and amongst the Company and the Trust is not paid
in full on or before May 10th 2003, said Note shall be deemed in default.
In the event of a default on the Note by the Trust, the Company or the Note
holder of record thereof shall be entitled to take immediate repossession of the
15,000,000 shares of Citizens Capital Corp.; class A; no par common stock held
by the Trust.
Disposition of Assets
To pay down it's loan payment obligations, the Trust may liquidate up to
15,000,000 of its Citizens Capital Corp. class A; no par common shares at any
time in which said shares are selling in the public or private capital
marketplace at or above $5.00 per share.
-- -- -----
31
<PAGE>
Liquidating Call Provision
The Company or the note holder of record thereof, shall have the "demand" right
to require the Trust to liquidate up to 15,000,000 of its Citizens Capital
Corp. class A;. common shares at any time in which said shares are selling in
the public or private capital marketplace at or above $5.00 per share.
-------------
IN WITNESS HEREOF, the undersigned have agreed and have accepted the terms of
this Security Agreement.
Seller:
/s/ Billy D. Hawkins
- -----------------------
Chief Executive Officer
Citizens Capital Corp.
Date: May 10, 1998
Purchaser:
/s/ Dwight Washington
- -----------------------
Executive Committee Member
Citizens Capital Corp. Employee Stock Ownership Trust
Date: May 10, 1998
/s/ Hubert H. Hawkins
- ------------------------
Executive Committee Member
Citizens Capital Corp. Employee Stock Ownership Trust
Date: May 10, 1998
/s/ Billy D. Hawkins
- -----------------------
Executive Committee Member
Citizens Capital Corp. Employee Stock Ownership Trust
Date: May 10, 1998
32
<PAGE>
