FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-91240
D.H. MARKETING & CONSULTING, INC.
(Name of small business issuer in its charter)
Nevada 88-0330263
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
300 Keystone Street, Hawley, PA 18428
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (570) 226-8515
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of exchanges on which registered
(None) (None)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock (Par Value $.0003 Per Share)
(Title of Class)
Check whether the issuer (1) 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
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
<PAGE> 1
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 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 issuer's revenues for its most recent fiscal year, ending December
31, 1998, were $1,964,862 net of discounts.
The aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such common
equity, as of 12/31/98, was $29,323,735.
This issuer has not been involved in a bankruptcy proceeding during
the last five years.
As of March 31, 1999 the issuer has 8,419,964 outstanding shares of
its $.0003 par value Common Stock.
Transition Small Business Disclosure Format (check one)
Yes [ ] No [x]
<PAGE> 2
TABLE OF CONTENTS AND CROSS REFERENCE SHEET
PART I
Item 1 Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5 Market for Common Equity and Related Stockholder Matters
Item 6 Management's Discussion and Analysis
Item 7 Financial Statements
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with 16(a) of the Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Reports On Form 8-K
<PAGE> 3
PART I
ITEM 1 - BUSINESS
D. H. Marketing & Consulting, Inc. (the "Company") was incorporated
under the laws of the State of Nevada on September 8, 1994 for the purpose
of acquiring D. H. Marketing & Consulting, Inc., a New York corporation (D.
H. Marketing-New York). D. H. Marketing-New York was organized on January
6, 1994 and has been actively engaged in business operations since that
time. On September 29, 1994, the Company entered into a merger agreement
with D.H. Marketing-New York in a transaction in which the Company was the
surviving entity. The Company was segmented into four distinct operations,
consisting of the burn-cleansing solution division, network marketing
division, collectible & fine art division and the acquisitions & consulting
division. During fiscal 1998, the company has completed the divestiture of
its Acquisitions and Consulting Division, has divested itself of the
Burn-Cleansing Division except for a remaining royalty agreement as part of
the final divestiture. The Network Marketing Division was developed by the
wholly owned subsidiary Universal Network and its parent company, Universal
Network of America, Inc. ("Universal") The Network Marketing Division will
be the main focus of the subsidiary and the Collectibles Division will be
the focus of the Company.
Burn-Cleansing Solution Division
In 1986, the PREVOR Laboratory of Valmondois, France, developed a
revolutionary chemical burn cleaning solution. Unlike current rinsing
solutions that dilute chemicals while they continue to burn the skin and
eyes, diphoterine absorbs the burning molecules on contact, preventing
additional exposure to the skin. Diphoterine is effective on the skin and
eyes for burns resulting from caustic acids, bases and solvent. Testimonies
from European Fortune 500 Companies credit diphoterine for improving
productivity, decreasing absence, preventing permanent injury and improving
employee safety.
Diphoterine is effective on the skin and eyes for burns caused by all
acids, bases and caustic solvents except white phosphor and hydrofluoric
acid. Hexafluorine was developed specifically for use against burns caused
by hydrofluoric acid. Both cleansing solutions have been in use in Europe
for more than six years. European users include Rohm and Haas, IBM, Proctor
and Gamble, BASF and DuPont. A Rhone Poulenc five year study showed use of
diphoterine decreased both the number of chemical spatters reported and the
number of employees requiring emergency treatment due to chemical burns.
Any employee exposed to acids, bases and caustic solvents is at risk
of being injured as a result of a chemical spatter. Current good
manufacturing practices require cleansing solutions be in close proximity
to these employees.
<PAGE> 4
But current solutions dilute and wash away only some of the chemical while
the remaining chemical continues to attack the body, causing permanent
injury and scarring. Diphoterine and hexafluorine are chemical burn
cleansing solutions that will absorb all the caustic chemical, normalizing
pH levels and stop the burning within seconds.
There were 60,000 individuals in 1993 requiring emergency treatment
due to chemical burns at an average cost of over $50,000. The Company
believes that use of diphoterine and hexafluorine in the work place will
decrease the number of individuals permanently injured from chemical
spatters.
Network Marketing Division
During the second quarter of 1995, the Company became a Representative
within Universal Network, Inc.'s Network Marketing system. In the system,
representatives sell products and qualify retail sales centers with items
of intrinsic and/or collectible value. In addition, by purchasing these
items, representatives are also eligible to earn commission and/or sell
products.
At the close of 1995, the Company had earned over $136,000 in
commissions and was the third largest dollar earner within the entire
system. At the close of 1996, the Company had earned over $550,000 in
commissions and was the largest dollar earner within the entire system.
The network marketing system was developed and is governed by
Universal Network, Inc., and its parent company Universal Network of
America, Inc. ("Universal").
During the calendar year ending December 31, 1997, the business
relationship between Universal and D. H. Marketing matured significantly.
Universal acquired a substantial portion of its inventory from the Company,
totaling $4,986,554, thereby becoming the Company's largest customer of its
Collectibles and Fine Art Division, concurrent with the Company's continued
performance as Universal's largest Distributor within the Network Marketing
system. D. H. Marketing, through satisfaction of open receivables from
Universal with that company's Treasury Stock, became a shareholder of
Universal.
On December 31, 1997, D. H. Marketing & Consulting, Inc. acquired the
balance of all the issued and outstanding capital stock of Universal
Network of America, Inc. through a stock exchange agreement. Universal
Network of America, Inc. now operates as, and functionally is, a
wholly-owned subsidiary of D. H. Marketing & Consulting, Inc.
<PAGE> 5
Collectible Division
The Company's collectible and fine art division is involved with the
purchase and sale of valuable and rare stamps, coins, fine art and other
tangible asset collectibles. Principals of the Company are experts at
locating and negotiating transactions to acquire investment-grade
collectibles. Clients are then able to purchase these items directly from
the Company. By selecting only the most valuable, highest quality, and most
collectible pieces, both the Company and its clients profit from the
transaction.
Total revenue for this division totaled just over $58,000 in 1995,
over $1,172,698 in 1996 and $2,035,611 in 1997, having been discounted in
1997 to eliminate sales of inventory to Universal Network, Inc., now a
wholly-owned subsidiary of the Company. The substantial increase in sales
was partially attributable to time. This division commenced activity
already one half way through 1995. However, this gain in sales is more
attributable to the Company's increased ability to participate in more
sizable and profitable activities as a result of its increased asset base
and cash position.
Acquisitions and Consulting Division
The Acquisitions and Consulting Division commenced activities late in
the third quarter of 1996, acquiring 42% of Qualtronics Corporation, Inc.,
a contract manufacturer of electromechanical and electronic devices, as
well as providing consultation services to Universal Network, Inc. and
Qualtronics Corporation, Inc. The Company acquired an additional 55% of
Qualtronics Corporation, Inc. on January 9, 1997. On February 5, 1998, the
Company sold its total interest in Qualtronics Corporation, Inc.
The Company also acquired all the issued and outstanding capital
stock of Universal Network of America, Inc. throughout 1997. Immediate
future activity in this division is not expected as the Company allocates
all available resources toward developing its Network Marketing operations
through its newly acquired subsidiary, Universal Network of America, Inc.
and that company's subsidiary, Universal Network, Inc.
ITEM 2 - DESCRIPTION OF PROPERTY
From February 1, 1996 to January 31, 1998, the Company leased
approximately 2,600 square feet in Milford, Pennsylvania. The Company is
currently leasing approximately 1,200 square feet in Hawley, Pennsylvania
at an annual cost of $5,640. The current lease expires January 31, 2000.
<PAGE> 6
The Company has re-opened an office of approximately 1,000 square feet
in Vancouver, British Columbia for its Canadian facility at an annual cost
of $4,500.
The Company's subsidiary, Universal Network, Inc., occupies both an
office and warehouse space in Sarasota, Florida totaling approximately
6,000 square feet at an annual cost of $67,152. Current commitments on the
office property expired December 1, 1998. As of fiscal year end 1998,
financing had been procured for the purchase of the office location.The
actual closing on the property transpired in January, 1999. The current
commitment on the warehouse space expires on May 1, 1999.
ITEM 3 - LEGAL PROCEEDINGS
The United States Securities and Exchange Commission is conducting a
formal investigation of the Company, with which the Company's management is
cooperating. The outcome of such investigation is not known at this time.
The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, no such action by or against the Company has
been threatened.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1998, no matters were submitted to the
Security Holders for their approval.
PART II- OTHER INFORMATION
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information - The Company's Common Stock has been quoted
on the OTC electronic Bulletin Board, under the symbol "DHMK," since
January 4, 1996. As a result of a three for one forward stock split
effective February 25, 1997, the symbol was changed to "DHMG."
Trading Prices - The following table shows the range of high and low
trading prices quarterly for the last two years, as reported by the
National Association of Securities Dealers. (Such quotations represent
prices between dealers and do not include retail markups, markdowns,
or commissions and do not necessarily represent actual transactions.):
During the first quarter of 1997, the Company effected a three for one
forward stock split which was effective February 25, 1997.
<PAGE> 7
Trading Prices
Common Stock
Quarter High Low
__________________________________________________________
First Quarter 1997 $ 13.313 $ 8.916
Second Quarter 1997 $ 15.75 $ 7.50
Third Quarter 1997 $ 18.125 $ 8.25
Fourth Quarter 1997 $ 12.375 $ 3.875
First Quarter 1998 $ 8.4375 $ 4.0625
Second Quarter 1998 $ 4.375 $ 2.563
Third Quarter 1998 $ 4.50 $ 2.00
Fourth Quarter 1998 $ 2.375 $ 1.375
(b) Stockholders - To date, the Company has approximately 825 confirmed
holders of record of the Company's Common Stock, although the Company
believes it has a total of approximately 900 shareholders.
(c) Dividends - To date, no dividends have been paid by the Company and
the Company does not anticipate paying dividends on its Common Stock in the
foreseeable future, but plans to retain earnings, if any, for the operation
and expansion of its business.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The Company's Initial Public Offering became effective with the
Securities Exchange Commission on August 11, 1995. The Company completed
its initial public offering October 11, 1995, having sold 119,000 shares
and received net proceeds of $537,990.
The proceeds of the Initial Public Offering significantly increased
the Company's working capital, cash availability, inventory and general
business capabilities. Shares first traded on the NASD Bulletin Board on
January 4, 1996 at $5 per share under the symbol "DHMK." As a result of a
three for one forward stock split effective February 25, 1997, the symbol
was temporarily changed to "DHMG."
The Company had segmented into four distinct operations, consisting of
the Network Marketing Division, the Collectible Division, Acquisitions and
Consulting Division and the Burn Cleansing Solution Division. At December
31, 1995, the Company's headquarters were located in Tarrytown, New York,
with regional offices in Vancouver, British Columbia and Hawley,
Pennsylvania. As of February 1, 1996, the Company relocated its
headquarters from Tarrytown, New York to Milford, Pennsylvania. During the
fourth quarter of 1996, the Company opened a West Coast Relations Office in
Las Vegas, Nevada and had plans to reopen its offices in Vancouver, British
Columbia during the second quarter of 1997. As of December 31, 1997, the
Company had re-opened its Vancouver, British Columbia office and closed its
<PAGE> 8
Las Vegas, Nevada office. On February 1, 1998, the Company relocated its
headquarters from Milford, Pennsylvania to Hawley, Pennsylvania. During the
fiscal year 1998, the company completed the divestiture of all operations
except the network marketing division and the collectibles division. The
Company still maintains a royalty agreement on the Burn-Cleansing division
as part of the divestiture of that division. The Company has turned its
attention, its focus, and its resources to the growth and expansion of its
wholly owned subsidiary, Universal Network, Inc.
Selected Financial Data
Sales 1998 1997 1996
______________________________________________________________________
Network Marketing 1,224,140 483,000 556,393
Collectibles 612,675 2,053,611 1,172,698
Burn Cleansing Solution 19,422 38,547 38,265
Acquisitions & Consulting 0 448,200 250,000
Mechanical Assemblies 0 2,503,684 0
Total Operating Revenue
(Less Discounts) 1,964,862 5,509,042 1,767,356
Net Gain (Loss)
(Pre-Tax) (3,344,928) 384,579 917,970
Net Gain (Loss) Per Share
Before Income Taxes (.51) .10 .80
Liquidity
During 1995 and 1994, the first two years of operation, the Company
invested significant amounts of capital in formulated its business plan,
establishing market penetration and presence, and preparing and completing
its Initial Public Offering. During this two-year period, the Company
experienced insufficient levels of sales to meet operating needs. This
resulted in operating losses for 1994 and 1995 of $183,657 and $192,852
respectively. The Company supplemented cash availability by issuing stock
in 1994 through a private placement and in 1995 through the Initial Public
Offering. As a result of this Initial Public Offering and most attributable
to the subsequent earnings of the Company throughout 1996 and continued
earnings in 1997, the Company's operating needs more than adequately met
with the current level of sales. Total Current Assets as of December 31,
1997 totaled $6,976,966 and as of December 31 1998, the Total Current
Assets totaled $ 5,557,936.
<PAGE> 9
Capital Resources
On December 31, 1995, the Company had $382,934 in total current
assets, of which $171,098 was held in cash and cash equivalents and
$142,268 was held in inventory at the lower of cost or market value.
On December 31, 1996, the Company managed to increase total current
assets to $1,512,321, of which $147,572 was held in cash and cash
equivalents, $253,902 was held in Certificates of Deposit, $462,026 was
held in Accounts Receivable net of allowances and $496,776 was in inventory
at the lower of cost or market.
By December 31, 1997, the Company had $6,976,966 in total current
assets, of which $706,609 was held in cash and cash equivalents and
$5,559,132 was held in inventory at the lower of cost or market value.
By December 31, 1998, the Company had $5,557,936 in total current
assets, of which $308,838 was held in cash and cash equivalents and
$5,163,969 was held in inventory at the lower of cost or market value.
Cash Expenditures
Total general and administrative expenses increased from 1994 to 1995
from $183,193 to $380,000. The most significant expenditures were Salaries
and Wages, Outside Services and Consulting Fees, most of which indirectly
related to the Company's Initial Public Offering. The Company had
previously reported total general and administrative expenses for 1995 of
$366,900. However, a change in accounting policy reallocated a prior Credit
of Commission advance from General and Administrative Expenses to Other
Income. There is no net effect on earnings.
Total general and administrative expenses increased from 1995 to 1996
from $380,000 to $528,038. The most significant increases in expenditures
were directly related to the Company's increased sales activity and
business operation, including Salaries and Wages, Office Expenditures and
Requalification of the Company's network marketing sales centers.
Total general and administrative expenses increased from 1996 to 1997
from $528,038 ($507,109 excluding amortization and depreciation) to
$2,350,736. During 1997, the Company pursued many activities in the
interests of its shareholders, including the engagement of expert legal and
financial counsel related to its acquisition of Universal Network of
America, Inc. and divestiture of Acquisitions & Sales, Inc. (completion of
the divestiture occurred in 1998). These services where performed by
unrelated parties. Increases of general salaries and wages costs did not
contribute significantly to the increased general and administrative
expenses. Consolidated expenses as of 12/31/98 were $ 5,303,423. Increases
were due in part to the completion of the divestiture of other divisions
and the efforts in the network marketing and collectibles divisions to
develop a marketing system that would encompass traditional marketing
<PAGE> 10
methods with network marketing operations and the associated systems
development that was required.
Long Term Debt
The Company has satisfactorily retired all Long Term Debt. The
Company's subsidiary, Qualtronics Corporation, Inc., held long-term debt of
$42,149 at December 31, 1997. The Company has since divested itself of its
interest in Qualtronics Corporation, Inc. on February 5, 1998.
Revenue
Total revenue increased from 1994 to 1995 from $44,200 to $245,466
most significantly as a result of the Company's network marketing division,
representing $136,425 of total revenue. In the network marketing division,
representatives qualify Retail Sales Centers with items of intrinsic value,
and earn commissions or product as the system is being built around them.
Items that can be purchased include jewelry, authentic leafs from the
First Edition of Noah Webster's American Dictionary of the English
Language, authentic leafs from original issue King James Bible and
collectible numismatic Morgan Silver dollars. Representatives then earn
commissions corresponding to the sale volume generated at their portion of
the network. During fiscal year 1998, the network marketing division
expanded their product lines into the consumables area. In the first half
of the year, the division launched an aloe vera based skin care. In
November, the companys wholly owned subsidiary launched Unitropin, an hGH
formula plus dietary supplement.
Total revenue, less discounts, increased from 1995 to 1996 from
$245,466 to $1,767,356, most significantly as a result of an increase in
network marketing sales from $136,425 to $556,393 and an increase in
collectible sales from $58,500 to $1,172,698. The Company also added a new
division, Acquisitions and Consulting, that attributed toward $250,000 of
the total increase.
The network marketing division was in operation approximately 60% of
the 1995 fiscal year. Therefore, principles expected at least a portion of
the increased revenues in 1996 from this Division.
Total revenue increased from 1996 to 1997 from $1,767,356 to
$5,509,042, of which $2,503,684 were sales recorded by its subsidiary,
Qualtronics Corporation, Inc. Total revenue increased for every division of
the Company excluding Network Marketing, which decreased 13% to $483,000.
Total revenue of collectible sales were also discounted by $4,986,554,
representing sales of inventory to Universal Network, Inc., now a wholly
owned subsidiary of the Company.
<PAGE> 11
Consolidated Total Revenue as of 12/31/98 decreased by 61% to $
1,964,862. Contributing factors for this decrease included the completion
of the divestiture of 2 divisions and the refocusing of the entire
organization towards the network marketing division. In this division, the
Company's wholly owned subsidiary, Universal Network Inc. recently launched
"Unitropin"; an hGH formula plus dietary supplement which it believes along
with its aloe vera based skin care line that was launched mid way through
1998 , is the beginning of the new consumables direction that the Company
is presently embarked upon.
ITEM 7 - FINANCIAL STATEMENTS
The consolidated Financial Statements that constitute Item 7 are
included at the end of this report, starting on page 25.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the fiscal year ended December 31, 1998, the Company had no
changes in or disagreements with the accountants on accounting and
financial disclosure issues.
PART II
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS/OFFICERS
Director Name, Age Since Principal Occupation
- ---------------------------------------------------------------------------
Michael J. 50 1996 A director of the Company since January, 1996
Daily and Officer (Vice President and Secretary)
since April 10, 1997. As of June 1, 1999, Mr.
Daily became President and Treasurer as well.
Mr. Daily was honorably discharged from the
U. S. Army in 1969. He majored in Business
Administration in the California College
system from 1970-1973. Mr. Daily was the
plant manager of a large California based
mail order firm from 1971-1976. From
1977-1985, Mr. Daily was a manager in the
Food & Beverage industry in the Pennsylvania
Pocono Mountains. Mr. Daily has been active
in the Real Estate Industry from 1985 to May
1995 when he joined D. H. Marketing &
Consulting, Inc. Mr. Daily was not on the
Board of Directors in 1995.
<PAGE> 12
Steve 38 1997 A director of the Company since June 20,
Krakonchuk 1997. Mr. Krakonchuk began working for the
Company in January of 1995 in the Company's
Investor Relations area and as Vice President
of Sales.
Ronald W. 55 1998 A director of the Company since January 21,
Meredith 1998. Mr. Meredith is President of Universal
Network of America, Inc. and its subsidiary,
Universal Network, Inc. Mr. Meredith is an
Air Force veteran, having served from 1959
through 1979. From 1979 through 1988 he owned
and operated a manufacturing company in
Louisville, Kentucky. He currently sits on
the Board of Directors of that company. From
July 1988 through 1994, Mr. Meredith was an
Independent Representative and National
Marketing Director with an environmental
products company, where he sat on the
Presidential Advisory Board. During this
period annual sales of that company grew from
30 million dollars to more than 400 million
dollars. From September 1994 through
February 1995, Mr. Meredith was an
Independent Representative with a jewelry
company, and is a member of the Board of the
Jewelers Board of Trade. In may of 1995, he
and several partners founded Universal
Network, Inc.
William C. 50 1998 A director of the Company since January 21,
Bartley 1998. Mr. Bartley is Vice President of
Universal Network of America, Inc. and its
subsidiary, Universal Network, Inc. Mr.
Bartley owned a successful furniture and
appliance store in Lexington, Kentucky from
1978 until 1992. From September 1990 through
March of 1994, Mr. Bartley was an Independent
Representative and National Marketing
Director with an environmental products
company. From March of 1994 through February
1995, he was an Independent representative
and the top income earner with a jewelry
company. Mr. Bartley, a founder of Universal
Network, Inc., was elected Vice President in
July 1995.
<PAGE> 13
The following individuals held the following offices during the year-ended
December 31, 1998. However, all three individuals resigned their positions
with the Company effective June 1, 1999.
Director Name, Age Since Prior Principal Occupation with the Company
- ---------------------------------------------------------------------------
David D. Hagen 46 1993 Former Chairman of the Board, President,
Treasurer and Chief Executive Officer of the
Company from 1993 to May 31, 1999. Mr. Hagen
was the President of Hagen Development and
Improvement Corp., a real estate company.
From 1978-1982 Mr. Hagen was the President of
an investment firm in Greenwich, Connecticut.
He structured and operated investment banking
private placement and franchising
organization. As Vice President of Sales of
International Stamp Exchange in New York, Mr.
Hagen developed an international network for
the sale and distribution of collectible
stamps, collectible coins, and hired, trained
and expanded the sales force from 1982-1985.
From 1985-1988, Mr. Hagen was Sales manager
of International Coin Exchange Company,
located in Brooklyn, New York. Mr. Hagen
developed an international network for the
sale and distribution of collectible coins,
and hired, trained and expanded the sales
force. From 1988-1993, Mr. Hagen has traded
coins, stamps, art and miscellaneous
investments for private investors and
investment bankers, has owned and operated
Park Avenue Fine Art Archives among other
collectible galleries.
Martin J. 64 1994 Former director of the Company from September
Grossbach 1994 to May 31, 1999. In 1958, Mr. Grossbach
received a B. S. in Accounting from Queen's
College and in 1961, he received his law
degree from New York Law School. Mr.
Grossbach has been an attorney in Westchester
County, New York for the last 32 years,
specializing in commercial real estate.
John C. 36 1998 Former director of the Company from 1998 to
Guttridge May 31, 1999. In 1984, Mr. Guttridge received
a B.S. in Political Science from Villanova
University and in 1988, he received his law
degree from Pace University School of Law.
Mr. Guttridge has been an attorney in
<PAGE> 14
Westchester County, New York for the last 10
years specializing in litigation, the last
five years of which have been at the firm of
Martin Grossbach, P.C.
EXECUTIVE OFFICERS
The executive officers of the Company are elected annually at the
annual meeting of the Company's Board of Directors held after each annual
meeting of the shareholders. Each executive officer of the Company holds
office until a successor is duly elected and qualified, or until death or
resignation or removal in the manner provided by the Company's bylaws.
There are no family relationships between any of the directors and
executive officers.
There was no arrangement or understanding between any executive
officer and any other person pursuant to which any person was selected as
an executive officer.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
No person required by Section 16(a) of the Exchange Act of 1934 to
file reports pursuant to Section 16(a) failed to file such reports in a
timely manner.
ITEM 10 - EXECUTIVE COMPENSATION.
Summary Compensation Table
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities during each of the last three fiscal
years by the Chief Executive Officer. No other executive officer's salary
and bonus exceeded $100,000 in 1996, 1997 or 1998. The following
information for the Chief Executive Officer includes the dollar value of
base salaries, bonus awards, the number of stock options granted and
certain other compensation, if any, whether paid or deferred.
<PAGE> 15
SUMMARY COMPENSATION TABLE
Securities
Under-
Name and Restricted lying
Principal Stock Options/
Position Year Salary Bonus Award(s) SARs
__________________________________________________________________________
David D. Hagen 1996 $40,833 $20,000 $ 0 60,000<F2>
President & 1997 $59,167 $20,000 $ 0 0
CEO 1998 $68,881 $75,000 $148,125<F1> 0
<F1> This compensation resulted from an issuance of stock after the annual
board of directors meeting.
<F2> Number of shares indicated include the effect of a three for one
forward stock split the Company undertook February 25, 1997 and the
net effect of all options granted and transferred. 750,000 options
were issued to David D. Hagen January 7, 1997 and were transferred to
a third party on October 6, 1997. These options were then canceled by
the Company January 19, 1998.
Option Grants in the Last Fiscal Year
- -------------------------------------
On September 6, 1996, the Company made available to key employees a
plan for granting options on the Company's stock. The options are for a
three-year period from September 6, 1996. Such options are fully vested to
the employee. The options will exist for restricted securities which
typically require the shareholder to hold for a period of two years before
they may be sold, in whole or in part. Options numbering 165,000 have been
granted, exercisable into an equal number of shares of common restricted
stock at an exercise price of $6 7/8 per share, the closing price of the
publicly traded shares as of September 6, 1998.
On January 7, 1997, 1,200,000 options were granted to certain key
employees of the Company. The options are for a three-year period from
January 7, 1997. These options are for restricted securities, are fully
vested to the employee, and are exercisable into shares of common
restricted stock at $8.92 per share.
On January 13, 1997, 750,000 options were granted to a certain
individual for a five-year period from January 13, 1997. These options are
for restricted securities, are fully vested to the employee, and are
exercisable into shares of common restricted stock at $9 per share.
On June 13, 1997, the Board of Directors authorized a transfer of an
employee's option to purchase 45,000 shares of stock at $8.917 per share.
In addition, a transfer of 750,000 options to purchase stock at $9 was
authorized.
<PAGE> 16
On October 6, 1997 the board authorized the transfer of the
aforementioned 165,000 options and the 1,200,000 options. These options
were all canceled subsequently on January 19, 1998.
On January 29, 1998, 750,000 options were granted to a non affiliate
of the Company who subsequently transfered 100,000 options indirectly to an
affiliate of the Company. The options were originally issued at $ 5.9375
per share.
By the end of April, 1998, an additional 750,000 options were
granted to a non affiliate of the Company. These options were issued at $
9.00 per share.
Aggregated Option Exercises in the Last Fiscal Year and the Fiscal
Year-End Option Values
- ------------------------------------------------------------------
Set forth below is information with respect to the un-exercised
options to purchase the Company's Common Stock held by David D. Hagen at
December 31, 1997. No options were exercised during fiscal years 1994
through 1998.
Value of Unexercised
Number of Unexercised in-the-Money Options
Options at FY-End(#) at FY-End ($)<F1>
_____________________________ __________________________
Name Exercisable Un-exercisable Exercisable Un-exercisable
_________________________________________________________________________
David D. Hagen -0- -0- $-0- -0-
<F1> Estimated Fair Value Per Option was based upon the Black-Scholes
option pricing model and the following assumptions for 1996 through 1998:
Risk-Free Interest Rate of 6.02%, Expected Life of 3 Years, Expected
Volatility of 35% and No Expected Dividends.
Compensation of Directors
- -------------------------
Directors who are employees do not receive additional compensation for
service as directors. Other directors do not receive any compensation for
meetings attended or conducted via telephone conference.
<PAGE> 17
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, its only class of
outstanding voting securities as of December 31, 1998, by (i) each person
who is known to the Company to own beneficially more than 5% of the
outstanding Common Stock with the address of each such person, (ii) each of
the Company's directors and officers, and (iii) all officers and directors
as a group:
Name and Address of
Beneficial Owner or Amount and Nature of
Name of Officer or Director Beneficial Ownership Percent of
Class
___________________________________________________________________________
David D. Hagen <F1><F2>
P. O. Box 621
Hawley, PA 18428 300,000 Shares 4.8%
Michael J. Daily <F1><F2>
405 Prospect Street
Hawley, PA 18428 149,500 Shares 2.4%
Martin Grossbach <F2>
303 South Broadway
Suite 100
Tarrytown, NY 10591 58,334 Shares 1.0%
John Guttridge <F2>
303 South Broadway
Suite 100
Tarrytown, NY 10591 5,000 Shares .1%
Steve Krakonchuk <F2><F3>
8611 General Currie Road
Apartment 111
Richmond, B. C. V6Y 3M1, Canada 177,000 Shares 2.1%
Ronald W. Meredith <F2>
5647 Beneva Road
Sarasota, FL 34233-4103 388,301 Shares 6.2%
William C. Bartley <F2>
5647 Beneva Road
Sarasota, FL 34233-4103 362,700 Shares 5.8%
<PAGE> 18
- -----------------------------
<F1>An Officer/former officer of the Company.
<F2>A Director/former director of the Company.
<F3>30,000 of these shares are held in the name of Stimulus Ventures, which
is owned by Steven Krakonchuk, a director of the Company.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Dave Hagen, President of the Company personally acquired all of the
outstanding shares of common stock of Financial Communication Services, a
Canadian corporation, for $10,000, which he sold to the Company for $10,000
on a Promissory Note.
The Company will attempt to resolve any such conflicts of interest in
favor of the Company. The officers and directors of the Company are
accountable to it and its shareholders as fiduciaries, which requires that
such officers and directors exercise good faith and integrity in handling
the Company's affairs. A Shareholder may be able to institute legal action
on behalf of the Company or on behalf of itself and all similarly situated
shareholders to recover damages or for other relief in cases of the
resolution of conflicts in any manner prejudicial to the Company.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description and Method of Filing
2.0 The Merger Agreement entered into by and between D.H. Marketing &
Consulting, Inc., a New York Corporation, and the Registrant,
dated September 29, 1994, filed with the Nevada Secretary of
State, November 10, 1994 filed with SEC on April 14, 1995, in
Registration Statement and incorporated herein by reference.
3.0 Certificate of Incorporation of the Registrant, consisting of
Articles of Incorporation filed with the Secretary of State of
the State of Nevada on September 8, 1994 filed with SEC on April
14, 1995, in Registration Statement and incorporated herein by
reference.
3.1 By-Laws of the Registrant, dated September 8, 1994 filed with the
SEC on April 14, 1995, in Registration Statement and incorporated
herein by reference.
3.2 Articles of Incorporation for FCS Financial Communication
Services Inc., filed in the the Province of British Columbia,
dated October 12, 1994, filed with SEC on April 14, 1995, in
Registration Statement and incorporated herein by reference.
3.3 Articles of Incorporation for Universal Network of America, Inc.,
filed with the Secretary of State of Nevada on November 20, 1996,
filed with the SEC in this Form 10-KSB.
<PAGE> 19
3.4 By-Laws of Universal Network of America, Inc. dated November 20,
1996, filed with the SEC in this Form 10-KSB.
5.0 Opinion of Max C. Tanner, Esquire, regarding legality, dated
April 7, 1995, filed in Amendment No. 1 to Registration Statement
and incorporated herein by reference.
10.0 Engagement Letter between D.H. Marketing & Consulting, Inc., a
Nevada Corporation, and Max C. Tanner, Esquire, dated July 18,
1994, Filed with SEC on April 14, 1995, in Registration Statement
and incorporated herein by reference.
10.1 Stock Redemption Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and David D. Hagen, dated October 24,
1994, filed with SEC on April 14, 1995, in Registration Statement
and incorporated herein by reference.
10.2 Distribution Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and All Safety and Supply, dated
August 17, 1994, filed with SEC on April 14, 1995, in
Registration Statement and incorporated herein by reference.
10.3 Sales Agent Agreement between D.H. Marketing & Consulting, Inc.,
a Nevada Corporation, and Jack Yee, dated July 6, 1994, filed
with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.4 Regional Sales Manager Agreement for the Western Territory
between D.H. Marketing & Consulting, Inc., a Nevada Corporation,
and Billy J. Richardson, dated June 24, 1994, filed with SEC on
April 14, 1995, in Registration Statement and incorporated herein
by reference.
10.5 Regional Sales Manager Agreement for the Northwest Territory
between D.H. Marketing & Consulting, Inc., a Nevada Corporation,
and David J. Miller, dated August 8, 1994, filed with SEC on
April 14, 1995, in Registration Statement and incorporated herein
by reference.
10.6 Marketing Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Leon Barnett & Associates, filed
with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.7 Distribution Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Demoore Products & Services,
filed with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
<PAGE> 20
10.8 Promissory Note for the amount of $87,500.00 between D.H.
Marketing & Consulting, Inc., a Nevada Corporation, and David D.
Hagen, dated February 9, 1995, filed with SEC on April 14, 1995,
in Registration Statement and incorporated herein by reference.
10.9 Distribution Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Hazmat Medical Associates, LTD.,
dated July 26, 1994, filed with SEC on April 14, 1995, in
registration Statement and incorporated herein by reference.
10.10 Regional Sales Manager Agreement for the Northeast Territory
between D.H. Marketing & Consulting, Inc., a Nevada Corporation
and David J. Miller, dated August 8, 1994, filed with SEC on
April 14, 1995, in Registration Statement and incorporated herein
by reference.
10.11 Employment Contract Agreement between D.H. Marketing &
Consulting, Inc., a Nevada Corporation, and Steven Olivieri,
filed with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.12 Independent Contractor Agreement between D.H. Marketing &
Consulting, Inc., a Nevada Corporation and Stevie Holland, filed
with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.13 Installation and Support of Accounting System Contract and
Managerial Support Contract between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Runes Corporation, a Pennsylvania
Corporation, dated December 8, 1994, filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
10.14 Amended Regional Sales Manager Agreement for the Western
Territory between D.H. Marketing & Consulting, Inc., a Nevada
Corporation, and Billy J. Richardson, dated February 21, 1995,
filed with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.15 Fund Escrow Agreement between Brighton Bank, and D.H. Marketing &
Consulting, Inc., a Nevada Corporation, dated May 1995, filed in
Amendment No. 1 to Registration Statement and incorporated herein
by reference.
10.16 Selected Dealer Agreement, filed in Amendment No. 1 to
Registration Statement and incorporated herein by reference.
10.17 Selected Dealer Agreement - Revised, filed in Amendment No. 2 to
Registration Statement and incorporated herein by reference.
<PAGE> 21
21.0 Subsidiaries of the Registrant: Financial Communication Services
Inc. (FCS) a corporation organized in the Province of British
Columbia, Canada. (See Exhibit 3.2, filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
21.1 Subsidiaries of the Registrant as of December 31, 1996, filed
Form 10K-SB for the period ending December 31, 1996 and
incorporated herein by reference.
23.1 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
May 19, 1995, to the publication of their report, dated May 19,
1995, filed in Amendment No. 1 to Registration Statement and
incorporated herein by reference.
23.2 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
May 19, 1995 to the publication of their report, dated May 19,
1995, filed in Amendment No. 1 to Registration Statement and
incorporated herein by reference.
23.3 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
June 30, 1995, to the publication of their report, dated December
31, 1994, filed in Amendment No. 2 to the Registration Statement
and incorporated herein by reference.
23.4 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
August 3, 1995, to the publication of their report, dated
December 31, 1994, and March 31, 1995 and 1994, filed with
Amendment No. 3 to the Registration Statement and incorporated
herein by reference.
23.5 Consent of the Accountants, Niessen, Dunlap & Pritchard, P.C.,
dated August 8, 1995, to the publications of their report, dated
December 31, 1994, and March 31, 1995 & 1994, filed with
Amendment No. 4 to the Registration Statement and incorporated
herein by reference.
23.6 Consent of the Accountants, Niessen, Dunlap & Pritchard, P.C.,
dated March 15, 1996 to the publications of their report, dated
February 26, 1996 and December 31, 1995 & 1994, filed with Form
10-KSB for December 31, 1995 and incorporated herein by
reference.
23.7 Consent, dated April 26, 1996, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report,
dated April 4, 1996, filed with SEC on May 1, 1996 in Form 10-QSB
and incorporated herein by reference.
<PAGE> 22
23.8 Consent, dated July 30, 1996, of the Accountants, Niessen, Dunlap
& Pritchard, P.C., to the publication of their report, dated July
8, 1996, filed with SEC on August 7, 1996 in Form 10-QSB and on
October 16, 1996 in Form 10-QSB/A and incorporated herein by
reference.
23.9 Consent, dated October 21, 1996, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report,
dated October 3, 1996, filed with the SEC on November 6, 1996 in
Form 10-QSB and incorporated herein by reference.
23.10 Consent, dated March 12, 1997, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report,
dated January 29, 1997, filed with the SEC in Form 10-KSB for the
period ending December 31, 1996 and incorporated herein by
reference.
23.11 Consent, dated April 30, 1997, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report,
dated April 9, 1997, filed with the SEC on May 27, 1997 in Form
10-QSB/A and incorporated herein by reference.
23.12 Consent, dated July 28, 1997, of the Accountants, Niessen, Dunlap
& Pritchard, P.C., to the publication of their report, dated July
7, 1997, filed with the SEC on August 7, 1997 in Form 10-QSB and
incorporated herein by reference.
23.13 Consent, dated December 1, 1997, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report,
dated November 3, 1997, filed with the SEC in this Form 10-QSB
for the period ending September 30, 1997 and incorporated herein
by reference.
23.14 Consent, dated April 14, 1998, of the Accountants, Crouch,
Bierwolf & Chisholm, to the publication of their report, dated
February 13, 1998, filed with the SEC in this Form 10-KSB for the
period ending December 31, 1997 and incorporated herein by
reference.
23.15 Consent, dated May 28, 1998, of the Accountants, Crouch, Bierwolf
& Chisholm, to the publication of their report, dated May 19,
1998 (Filed with the SEC on May 28, 1998 in Form 10-QSB.)
23.16 Consent, dated August 11, 1998, of the Accountants, Crouch,
Bierwolf & Chisholm, to the publication of their report, dated
August 4, 1998. (Filed with the SEC on August 14, 1998 in Form
10-QSB.)
<PAGE> 23
23.17 Consent, dated November 10, 1998, of the Accountants, Crouch,
Bierwolf & Chisholm, to the publication of their report, dated
November 9, 1998. (Filed with the SEC in this Form 10-QSB.)
23.18 Consent dated March 25, 1999 of the Accountants, Crouch, Bierwolf
& Chisholm to the publication of their report, dated February 12,
1999, filed with the SEC in this Form 10-KSB for the period
ending December 31, 1998 and incorporated herein by reference.
27.1 Financial Data Schedule for the 6-month period ending June 30,
1996, filed with the SEC on October 16, 1996 in Form 10-QSB/A and
incorporated herein by reference.
27.2 Financial Data Schedule for the 9-month period ending September
30, 1996, filed with the SEC on November 6, 1996 in Form 10-QSB
and incorporated herein by reference.
27.3 Financial Data Schedule for the 3-month period ending March 31,
1997 filed with the SEC on May 27, 1997 in Form 10-QSB/A and
incorporated herein by reference.
27.4 Financial Data Schedule for the 6-month period ending June 30,
1997 filed with the SEC on August 7, 1997 in Form 10-QSB and
incorporated herein by reference.
27.5 Financial Data Schedule for the 9-month period ending September
30, 1997, filed with the SEC in the Form 10-QSB for the period
ending September 30, 1997 and incorporated herein by reference.
27.6 Financial Data Schedule for the year ending December 31, 1997,
filed with the SEC in the Form 10-KSB for the period ending
December 31, 1997 and incorporated herein by reference.
27.7 Financial Data Schedule for the 3-month period ending March 31,
1998, filed with the SEC in the Form 10-QSB for the period ending
March 31, 1998 and incorporated herein by reference.
27.8 Financial Data Schedule for the 6-month period ending June 30,
1998, filed with the SEC in the Form 10-QSB for the period ending
June 30, 1998 and incorporated herein by reference.
27.9 Financial Data Schedule for the 9-month period ending September
30, 1998, filed with the SEC in the Form 10-QSB for the period
ending September 30, 1998 and incorporated herein by reference.
27.10 Financial Data Schedule for the year ended December 31, 1998,
filed with the SEC in this Form 10-KSB.
<PAGE> 24
Reports on Form 8-K
- -------------------
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
D.H. Marketing & Consulting, Inc.
a Nevada Corporation
By: /s/ MICHAEL J. DAILY Date: JUNE 18, 1999
Michael J. Daily
President, Treasurer and
Chief Financial Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ MICHAEL J. DAILY Date: JUNE 18, 1999
Michael J. Daily
Director
By: /s/ STEVE KRAKONCHUK Date: JUNE 18, 1999
Steve Krakonchuk
Director
By: /s/ RONALD W. MEREDITH Date: JUNE 18, 1999
Ronald W. Meredith
Director
By: /s/_________________ Date: ___________
William Bartley
Director
<PAGE> 25
D H Marketing & Consulting, Inc.
And Subsidiaries
Consolidated Financial Statements
December 31, 1998 & 1997
<PAGE> 26
CONTENTS
Accountant's Report ......................................................3
Consolidated Balance Sheets...............................................4
Consolidated Statements of Operations.....................................6
Consolidated Statements of Stockholders' Equity ..........................7
Consolidated Statements of Cash Flows.....................................9
Notes to the Consolidated Financial Statements...........................11
<PAGE> 27
Crouch, Bierwolf & Chisholm
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Phone (801) 363-1175
Fax (801) 363-0615
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of DH Marketing & Consulting, Inc.:
We have audited the accompanying consolidated balance sheets of DH Marketing
& Consulting, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DH Marketing &
Consulting, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
February 12, 1999
<PAGE> 28
D H Marketing & Consulting, Inc.
Consolidated Balance Sheets
ASSETS
------
December 31 December 31
1998 1997
___________ __________
CURRENT ASSETS
Cash and Cash Equivalents $ 308,838 $ 706,609
Accounts receivable, Net of Allowance
1998 $0; 1997 $29,859 1,301 245,877
Other Receivables 4,634 140,620
Tax Refunds - 307,144
Inventory 5,261,290 5,559,132
Prepaid Expenses - 17,584
------------ -----------
Total Current Assets 5,576,063 6,976,966
____________ ___________
INVESTMENTS
Investments - Other 46,948 48,903
--------- -----------
Total Investments 46,948 48,903
--------- -----------
PROPERTY & EQUIPMENT
Office Furniture and Equipment 20,184 78,069
Automobiles - 19,601
Equipment 182,561 801,882
Leasehold Improvements 17,668 37,664
Building 200,000 -
Land 197,996 -
Accumulated Depreciation (129,631) (515,354)
_________ __________
Net Property and Equipment 488,778 421,862
_________ __________
OTHER ASSETS
Organization Costs 71,429 71,429
Client Lists 10,000 10,000
__________ _________
81,429 81,429
Less Accumulated Amortization (79,096) (63,271)
__________ _________
2,333 18,158
Deferred Tax Assets - 4,053
Deposits and Other Assets 6,450 49,363
Goodwill - 153,177
Net Other Assets 8,783 224,751
___________ _________
TOTAL ASSETS $ 6,120,572 $7,672,482
============= ==========
The accompanying notes are an integral part of these financial statements
-4-
<PAGE> 29
D H Marketing & Consulting, Inc.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31 December 31
CURRENT LIABILITIES 1998 1997
___________ __________
Accounts Payable 90,682 $ 101,753
Sales Tax Payable 114,268 319,283
Accrued Wages 11,549 132,240
Accrued and Withheld Payroll Taxes 2,777 22,323
Accrued Expenses - 46,443
Deferred tax liability 5,974 -
Current Obligations Under Capital Lease 3,326 28,309
Current portion of Notes Payable 14,689 190,476
__________ __________
Total Current Liabilities 243,265 840,827
__________ __________
LONG-TERM DEBT
Mortgage payable 201,807 -
Obligation Under Capital Lease 5,476 42,149
----------- ----------
Total Long-Term Debt 207,283 42,149
___________ __________
Total Liabilities 450,548 882,976
__________ __________
STOCKHOLDERS' EQUITY
Common Stock, $.0003 Par Value, Authorized
75,000,000 Shares; 1996 - Issued & Outstanding
8,419,964 and 6,005,464 shares, respectively 2,526 1,802
Additional Paid-In Capital 9,995,794 6,773,025
Treasury Stock (814,766) (530,000)
Minority Interest - 13,282
Stock Subscription receivable (700,000) -
Retained Earnings (2,813,530) 531,397
___________ ___________
Total Stockholders' Equity $ 5,670,024 $ 6,789,506
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,120,572 $ 7,672,482
=========== ==========
The accompanying notes are an integral part of these financial statements
-5-
<PAGE> 30
D H Marketing & Consulting, Inc.
Consolidated Statements of Operations
For the Years ended
December 31 December 31
1998 1997
___________ __________
SALES $ 1,734,300 $ 4,959,312
COST OF GOODS SOLD 858,777 2,627,738
----------- -----------
GROSS PROFIT 875,523 2,331,574
----------- -----------
OPERATING EXPENSES
General And Administrative Expenses 4,327,192 2,350,736
Amortization 16,086 43,510
Depreciation 43,405 59,573
---------- ----------
TOTAL OPERATING EXPENSES 4,386,683 2,453,819
OPERATING INCOME (LOSS) (3,511,160) (122,245)
----------- ----------
OTHER INCOME AND (EXPENSES)
Consulting Fee - 448,200
Other Income 48,440 13,030
Equity Earnings in UNI - (11,610)
Gain on Sale of Investments 108,625 75,000
Interest Income 7,978 11,793
Interest Expense (3,598) (29,588)
----------- ----------
Total Other Income and (Expenses) 161,445 506,825
INCOME/(LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST (3,349,715) 384,580
----------- ----------
PROVISION FOR INCOME TAXES (4,788) 165,117
----------- ----------
INCOME/(LOSS) BEFORE MINORITY INTEREST (3,344,927) 219,463
Minority Interest in Net Loss of Subsidiary - (3,312)
----------- ----------
NET INCOME/(LOSS) $ (3,344,927) $ 216,151
============= ==========
NET INCOME/(LOSS) PER SHARE $ (.50) $ .05
============= ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 6,672,687 3,957,111
=========== ==========
The accompanying notes are an integral part of these financial statements
-6-
<PAGE> 31
D H Marketing & Consulting, Inc.
Statements of Stockholders' Equity
From December 31, 1996 through December 31, 1998
<TABLE>
<CAPTION> Additional Retained Stock
Common Stock Paid-In Earnings Preferred Treasury Minority Subscription
Shares Amount Capital (Deficit) Series A Stock Interest Receivable
_________ ______ ___________ ____________ __________ __________ _________ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 3,499,341 $1,050 $1,568,163 $ 315,246 $ - $ - $ - $ -
Issuance of Common Stock
for shares of QCI 6,000 2 (38,834) - - - 9,970 -
Issuance of Common Stock
for Inventory 450,000 135 3,191,865 - - - - -
Return of Inventory
acquired withs stock - - - - - (530,000) - -
Issuance of Common Stock
for shares of FRAMA, Inc 50,000 15 449,985 - - - - -
Issuance of Common Stock
for services 100,000 30 521,845 - - - - -
Issuance of Common Stock
for Acquisition of UNI 1,900,123 570 1,080,001 - - - - -
Net Income for the year
ended December 31, 1997 - - - 216,151 - - 3,312 -
_________ ______ __________ ____________ __________ __________ _________ __________
Balance,
December 31, 1997 6,005,464 1,802 6,773,025 531,397 - (530,000) 13,282 -
January 98-Purchase of
treasury stock in sale
of QCI subsidiary - - - - - (506,250) (13,282) -
February 98-Loss on
sale of treasury stock
for inventory - - (446,391) - - 537,890 - -
February 98-Receipt of
Treasury stock for
payment of receivables - - - - - (316,406) - -
Short swing sales
contributed by officer - - 117,160 - - - - -
July 98-shares issued
to officers and
employees valued at
$1.50 per share 490,000 147 734,853 - - - - -
Aug 98-shares issued
for services at $2.75 300,000 90 824,910 - - - - -
The accompanying notes are an integral part of these financial statements
-7-
<PAGE> 32
D H Marketing & Consulting, Inc.
Statements of Stockholders' Equity
From December 31, 1996 through December 31, 1998
<CAPTION> Additional Retained Stock
Common Stock Paid-In Earnings Preferred Treasury Minority Subscription
Shares Amount Capital (Deficit) Series A Stock Interest Receivable
_________ ______ ___________ ____________ __________ __________ _________ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
September 98-shares
issued for cash
at $1 per share 575,000 172 574,828 - - - - -
October 98-shares
issued for services
at $1.20 per share 100,000 30 119,970 - - - - -
November 98-Preferred
shares issued for cash
at $20,000 per share
net of offering costs - - - - 517,724 - - -
November 98-conversion
of preferred stock to
common shares 949,500 285 1,297,439 - (517,724) - - (700,000)
Net loss for the year
ended December 31, 1998 - - - (3,344,927) - - - -
_________ ______ __________ ____________ __________ ___________________ __________
Balance,
December 31, 1998 8,419,964 $2,526 $9,995,794 $(2,813,530) $ - $ (814,766) $ - $(700,000)
========= ====== =========== ============ ========= =========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
-8-
<PAGE> 33
D H Marketing & Consulting, Inc.
Consolidated Statements of Cash Flows
December 31,
1998 1997
_________ _________
Cash Flows from Operating Activities
Net Income (Loss) $ (3,344,927) $ 216,151
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation 43,405 59,573
Amortization 16,086 43,510
Provisions for Doubtful Accounts (29,859) 30,759
Undistributed Loss of Universal Network, Inc. - 11,610
Minority interest in subsidiary - 3,312
Stock issued for inventory 91,499 2,525,077
Stock issued for services 1,680,000 521,875
Gain on Sale of Investments (108,625) (75,000)
Change in Assets and Liabilities (Net of effects
from purchase/sale of subsidiaries)
(Increase) Decrease in:
Accounts Receivable 1,297 (1,137,461)
Other Receivables 135,986 (294,566)
Inventory 238,817 (1,611,459)
Prepaid Expenses 310,977 (8,162)
Deposits (520) -
Increase (Decrease) in:
Accounts Payable 35,007 (56,193)
Accrued Expenses (299,829) 61,058
Accrued Income Taxes - (157,398)
Deferred Income Taxes (4,838) -
_________ ________
Net Cash Provided (Used) by Operating Activities (1,235,524) 132,686
_________ _________
Cash Flows from Investing Activities
Purchase of treasury stock (316,406) -
Cash from short-term CD - 503,902
Purchase of Short-Term Investments
Certificates of Deposit - (250,000)
Purchase of Investments - (369,503)
Purchase of Property and Equipment (143,231) (47,738)
Cash from sale of investments 185,000 200,000
Cash acquired in/(spun off) to subsidiaries (174,641) 405,658
_________ _________
Net Cash Provided (Used) by Investing Activities (449,278) 442,319
_________ _________
Cash Flows from Financing Activities
Proceeds from debt financing - 350,000
Net Proceeds from Issuance of Common Stock 1,289,884 -
Principal payments on debt financing - (364,841)
Principal Payments on Capital Lease Obligations (2,853) (1,127)
_________ _________
Net Cash Provided (Used) by Financing Activities 1,287,031 (15,968)
_________ _________
Net Increase (Decrease) in Cash and Cash Equivalents
(Forwarded) (397,771) 559,037
_________ _________
The accompanying notes are an integral part of these financial statements
-9-
<PAGE> 34
D H Marketing & Consulting, Inc.
Consolidated Statements of Cash Flows
(Continued)
December 31,
1996 1995
_________ _________
Net Increase (Decrease) in Cash and Cash Equivalents
(Forwarded) (397,771) 559,037
Cash and Cash Equivalents
Beginning 706,609 147,572
_________ _________
Ending $ 308,838 $ 706,609
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ (3,598) $ 366
Cash payments for income taxes (50) 435,961
========= ==========
Purchase of Investment through Issuance of Company
Stock $ - $ 450,000
========= ==========
Purchase of Inventory through Issuance of Company
Stock $ - $3,192,000
========= ==========
Acquisition of investments from satisfaction of
Accounts Receivable $ - $4,650,000
========= ==========
Acquisition of Treasury Stock through return of
inventory $ - $ 530,000
========= ==========
Acquisitions of Treasury Stock from satisfaction
of Accounts Receivable $ 316,406 $ -
========= ==========
Purchase of Building and Land through Debt
financing $ 216,496 $ -
========= ==========
The accompanying notes are an integral part of these financial statements
-10-
<PAGE> 35
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 1 - Summary of Significant Accounting Policies
a. Nature of Business
D H Marketing & Consulting Inc., a New York corporation, was
organized on January 4, 1994, and was actively engaged in
business operations through September 29, 1994, when the
Company merged with D. H. Marketing & Consulting, Inc., a
Nevada corporation, incorporated under the laws of the State
of Nevada on September 8, 1994, for the purpose of acquiring
D. H. Marketing, New York. The Company's operations consist
of distribution of chemical burn cleansing solutions;
the purchase and sale of valuable and rare stamps,
coins, fine art, and other tangible collectibles;
network marketing; and general consultation to and
possible acquisition of small growth oriented
companies. The Company markets its products throughout
the United States, Canada and Europe.
Qualtronics Corporation, Inc.(QCI), a 97%-owned
subsidiary during 1997, is a contract manufacturer, specializing
in prototype and low volume electronic and electro-mechanical
assemblies, utilizing surface mount and hybrid microcircuit
technologies. Qualtronics' customers are predominately in
northeastern U. S. Effective February 5, 1998, the Company sold
all its interests in QCI to a shareholder of QCI. A game of $108,625
was recognized on the sell of QCI and 60,000 shares of DH Marketing
were returned to the treasury. A value of $506,250 was attributed to
the treasury stock purchased, considering the market value of
the Companies [sic] stock at the time.
On December 30, 1997 the Company completed a share
exchange with Universal Network, Inc. (UNI), wherein
the Company issued 1,900,123 shares of common stock for
the remaining 76% interest in UNI, thus making UNI a
wholly owned subsidiary of the Company. UNI is engaged
in the sale and distribution of fine art, jewelry, bank
notes and other collectables. In 1998 the Company added new
consumable products such as skin care, juice and an all natural
dietary supplement. UNI distributes its products to distributors
of the Company using direct selling as well as traditional
marketing methods (i.e. TV and radio media).
Also during 1998, the Company distributed its interests in ASI,
an inactive subsidiary, to the shareholder of the Company.
There was no value in the Company at the time of distribution.
b. Principles of Consolidation
The consolidated financial statements include the
accounts of DH Marketing and Consulting, its wholly-owned
subsidiaries Acquisition and Sales, Inc. (ASI) (1997 only)
and Financial Communication Services, Inc. (FCS),
Qualtronics Corporation, Inc.(QCI) (1997 only), Universal
Network, Inc (UNI) a wholly owned subsidiary at
December 30, 1997. All significant intercompany
accounts and transactions have been eliminated in the
consolidation.
Before the acquisition of UNI at December 30, 1997 the
Company accounted for its investment in Universal
Network of America, Inc. by the equity method of
accounting under which the Company's share of the net
loss of the affiliate (24%) is recognized as an expense
in the Company's statement of income.
-11-
<PAGE> 36
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 1 - Summary of Significant Accounting Policies (Continued)
c. Cash and Cash Equivalents
The Company considers all highly liquid investments
with maturities of three months or less to be cash
equivalents. Uninsured cash balances total $1,174 and
$255,072 at December 31, 1998 and 1997, respectively.
d. Property and Equipment
Property and equipment are stated at cost. Major
replacements and betterments are capitalized while
maintenance and repairs are expensed as incurred.
Depreciation is provided generally on a straight-line
basis over the estimated service lives of the
respective classes of property.
e. Organization Costs
Organization expenses are recorded at cost and are
being amortized on a straight-line basis over five
years. The expenses represent pre-incorporation cost
to establish the entity and develop various sales
venues. At December 31, 1998 and 1997, the
net unamortized balance was $500 and $14,786, respectively.
f. Client Lists
The Company acquired a client list for $10,000. These
costs are being amortized on a striaght-line basis over
five years.
g. The Company recorded goodwill in the acquisition of
QCI, due to the excess cost over the net book value of
QCI. In 1997, Goodwill was being amortized over 10 years on the
straight-line method, however it was eliminated after the
sale of QCI in 1998.
h. Fair Value of Financial Instruments
Unless otherwise indicated, the fair values of all
reported assets and liabilities which represent
financial instruments (none of which are held for
trading purposes) approximate the carrying values of
such amounts.
i. Provision for Income taxes
Deferred income taxes arise from timing differences
resulting from income and expense items reported for
financial accounting and tax purposes in different
periods. Deferred taxes are classified as current or
noncurrent, depending on the classification of the
assets and liabilities to which they relate. Deferred
taxes arising from timing differences that are not
related to an asset or liability are classified as
current or noncurrent, depending on the periods in
which the timing differences are expected to reverse.
The principal sources of timing differences are
different depreciation methods used for financial
accounting and tax purposes.
-12-
<PAGE> 37
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 1 - Summary of Significant Accounting Policies (continued)
i. Provision for Income taxes (continued)
The deferred tax liability and the provision for income
taxes is calculated as follows at December 31, 1998 and 1997:
December 31 December 31
1998 1997
___________ ____________
Current provision for income taxes:
Federal $ - $ 113,056
State 50 52,061
Deferred (4,838) -
___________ ____________
Total provision for income taxes $ (4,788) $ 165,117
=========== ============
Deferred tax liability arising from:
Acquisition of subsidiaries:
QCI-depreciation differences - 32,458
UNI-depreciation differences 4,788 10,812
___________ ____________
Deferred tax liability 4,788 43,270
___________ ____________
Deferred tax assets-current:
Net operating loss carryforward (QCI) - (47,323)
___________ ____________
Net deferred tax (asset)/liability $ 4,788 $ (4,053)
=========== ============
The Company has incurred net operating losses of approximately
$3.3 million, however because of the significant losses and its
change of focus on a new product line, there is a 50% or greater
chance the Company may not have taxable income during 1999. The
allowance account therefore equals the deferred tax asset account
for December 31, 1998.
j. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the amounts reported in the financial statements and
accompanying notes. In these financial statements, assets,
liabilities and earnings involve extensive reliance on
managements estimates. Actual results could differ from
those estimates.
-13-
<PAGE> 38
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 1 - Summary of Significant Accounting Policies (continued)
k. Earnings (Loss) Per Share
The computation of earnings per share of common stock is
based on the weighted average number of shares outstanding
at the date of the financial statements.
NOTE 2 - Inventory
Inventories consisted of the following at December 31, 1998 and 1997:
1998 1997
____________ ___________
Artwork and Collectible $ 5,253,043 $ 5,500,107
Work in Process and Raw Materials -
Qualtronics Corporation, Inc. - 59,025
Consumable products 8,247 -
____________ ___________
$ 5,261,290 $ 5,559,132
============ ===========
Artwork and collectibles are valued on a specific identified
cost basis, while other inventory is valued on a first-in,
first-out basis at the lower of cost or market.
Inventory with a value of $2,662,000 was acquired by the
issuance of Company common stock during the period January
1, 1997, to December 31, 1997 and $91,499 during 1998.
Due to the acquisition of UNI by the Company, UNI's inventory
held at December 30, 1997 which was purchased from the Company
was valued at the Company's cost (predecessor cost).
NOTE 3 - Qualtronics Corporation, Inc.
On January 9, 1997, the Company acquired an additional 55%
of the outstanding common stock of Qualtronics Corporation,
Inc. The Company currently owns 97% of the stock of
Qualtronics Corporation, Inc. at the end of December 31, 1997.
The 1997 full year results of operation of QCI have been included
in these consolidated financial statements since there is minimal
difference from January 9, 1997. On February 5, 1998, the Company
signed an agreement to transfer all of its interests in the stock
of QCI to Runes, Corporation, a shareholder. In consideration of
the transfer, the Company recieved $185,000 and 60,000
shares of D H Marketing common stock. No activity of QCI is included
in these financial statements for the year ended December 31, 1998.
NOTE 4 - Lines of Credit
On March 20, 1997, the Company entered into two line of
credit agreements with a bank, due on demand, which permited
borrowing up to 250,000 on each line. At December 31,
1997, the outstanding balance of both lines are $0, and the
lines of credit have been closed.
-14-
<PAGE> 39
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 5 - Investment in Universal Network of America, Inc.
The following December 31, 1997 pro forma information combines
the results of the Company and Universal Network of America, Inc.
as if the acquisition had occurred at the beginning of the 1997 period
presented.
December 31,
1997
_____________
Sales $ 8,948,363
Cost of Goods Sold 3,336,793
_____________
Gross Profit 5,611,570
Selling Expenses 2,984,684
General and Administrative Expenses 3,632,510
Other Income (Expenses) 537,095
_____________
Income Before Income Taxes and Minority
Interest in Net Income of Subsidiary (468,529)
Income Tax -
_____________
Income Before Minority Interest in Net
Income of Subsidiary (468,529)
Minority Interest in Net Income of
Subsidiary (2,196)
_____________
Net Income $ (470,725)
=============
Net Income Per Share $ (.08)
=============
Weighted Average Number of Common Shares 5,857,111
=============
Universal Network of America, Inc., has suffered
cumulative losses through December 31, 1998, of $(2,765,599).
NOTE 6 - Related Party Transaction
During the period January 1, 1997 to December 31, 1998 [sic],
the Company had various transactions with UNI which
included: receipt of consulting income of $600,000, sales of
collectibles of $4,986,554, and receipt of other payments of
income of $231,400. Because these revenue were generated
prior to the acquisition of UNI they have not been
eliminated in the consolidation. The sales of the Company
and the inventory of UNI on hand at December 30, 1997 was
adjusted at the acquisition date. (See Note 2).
-15-
<PAGE> 40
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 6 - Related Party Transaction (continued)
The Company sold collectibles in the amount of $1,631,550 to
Frama, Inc., a shareholder during the twelve-month period ended
December 31, 1997. The shareholder paid
for this transaction with the surrender of shares of D. H.
Marketing & Consulting, Inc., common stock and the surrender
of other investments. The Company also sold this
shareholder a mortgage option which was paid for with shares
of D. H. Marketing & Consulting common stock, shares of
common stock in UNI, and $200,000 in cash.
During 1998 and 1997, the Company paid $21,651 and $38,500 to
Runes Corporation for management fees, respectively. Runes is
owned by a shareholder of the Company.
During 1997 and 1998 the Company sold merchandise to additional
companies that are shareholders of the Company in the amount of
$2,198,500 and $421,875, respectively. These companies are in the art
and collectibles industry and invested in the Company's
stock prior to the sale of merchandise. Approximately 88% and 69%
of the Company's revenue was generated from either UNI or
other shareholders of the Company during 1997 and 1998, respectively.
The shareholders and amounts are as follows:
1998 1997
_________ __________
David Hagen $ 11,000
Ildico, LTD 350,000
Fode Diope 1,631,250
Phillippe Hababou 206,250
Stimulus Ventures $ 421,875
NOTE 7 - Common Stock Split
On February 24, 1997, the Company recorded a three-for-one stock
split of the Company's common stock to
shareholders of record on that date. All per share
information has been retroactively restated for the stock
split. Authorized shares have been increased to 75,000,000
shares, and the par was changed to $.0003. The previously issued
December 31, 1997 financial did not reflect the change in par
value, but has been reflected in these financial statements,
retroactively.
NOTE 8 - Stock Options
On September 6, 1996, the Company made available to key
employees a plan for granting options on the Company's
stock. The options are for a three-year period from
September 6, 1996. Such options are fully vested when
exercised. The options will exist for restricted securities
which typically require the shareholder to hold for a period
of two years before they may be sold, in whole or in part.
Options numbering 165,000 have been granted, exercisable
into an equal number of shares of common restricted stock at
an exercise price of $6 7/8 per share, the closing price of
the publicly-traded shares as of September 6, 1996.
-16-
<PAGE> 41
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 8 - Stock Options (continued)
On January 7, 1997, 1,200,000 options were granted to
certain key employees of the Company. The options are for
a three-year period from January 7, 1997. These options are
for restricted securities, are fully vested to the employee,
and are exercisable into shares of common restricted stock
at $8.92 per share.
On January 13, 1997, 750,000 options were granted to a
certain individual for a five year period from January 13,
1997. These options are for restricted securities, are
fully vested to the individual, and are exercisable into
shares of common restricted at $9 per share.
On June 13, 1997, the Board of Directors authorized a
transfer of an employees options to purchase 45,000 shares
of stock at $8.917 per share. In addition a transfer of
750,000 option to purchase stock at $9 was authorized.
On October 6, 1997 the board authorized the transfer of the
afore mention 165,000 options and the 1,200,000 options.
These options were all canceled subsequently on January 19,
1998.
On January 20, 1998, the Board of Directors granted 750,000
options to an individual with international financial
relationships. The options are exercisable for a period of
two years into restricted common stock at a price of $5 15/16,
the market value of free trading stock at the date of grant.
December 31,
1998
______________
Outstanding Options (after effect of stock split)
January 13, 1997 750,000
January 20, 1998 750,000
_____________
1,500,000
=============
No options were exercised during the period January 1, 1997, to
December 31, 1998, and the 165,000 and the 1,200,000 options were
canceled in 1998. The weighted-average price for the above-noted
options is $8.95 and $7.47 for 1997 and 1998, respectively.
At December 31, 1997 and 1998, the Company's stock option plan was
accounted for based upon APB Opinion No. 25 and related
interpretations. Accordingly, no compensation cost has been
recognized for options under these plans. Had compensation
cost for the plan been determined based on the grant date
and fair values of options, and estimated options to be
exercised, reported net income and earnings per share would
have been reduced. Management does not believe any of the
current options will be exercised.
The fair value of the stock options granted during 1998 and
1997 were determined using the Black-Scholes option pricing
model and the following assumptions for 1998 and 1997:
risk-free interest rates of 6.02% and 6.55%; expected
options life of 3 years and 4 years; and volatility of 35%
and 25% with no dividend yield in either year.
-17-
<PAGE> 42
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 9 - Commitments and Contingencies
DHMC is committed to a lease for office space through
January 31, 2000, with monthly lease payments of $470.
UNI was committed to two spaces for office and warehouse
facilities through November 30, 1998 when the company acquired
the building. The warehouse leased expires on May 5, 1999 with
monthly rent payments of $2,152.
The total future minimum rental commitment at December 31,
1998, under these leases is $16,400, which is due as
follows:
Year Ending
December 31, Amount
____________ _____________
1999 $ 16,400
____________
$ 16,400
============
Rent expense for the year ended December 31, 1997 and 1998
is $97,121 and $76,205, respectively..
NOTE 10 - Segment Data
For the year ended December 31, 1998 and 1997, the Company
had three to four reportable industry segments: (i) network
marketing, (ii) collectibles, (iii) chemical burn cleansing
solutions, and (iv) acquisitions and consulting.
Year Year
Ended Ended
December 31, December 31,
1998 1997
______________ _____________
Sales (Net of Discounts)
Multi-Level Network Marketing $ 993,578 $ 483,000
Collectibles 612,615 2,035,611
Burn Cleansing Solution 19,422 38,547
Mechanical Assemblies - 2,503,684
______________ _____________
1,625,675 5,060,842
Acquisitions and Consulting - 448,200
______________ _____________
Consolidated $ 1,625,675 $ 5,509,042
============== =============
Operating Income (Loss)
Multi-level Network Marketing $ (971,528) $ 410,787
Collectibles (189,925) 719,591
Burn Cleansing Solution (42,908) 19,290
Acquisitions and Consulting - 448,200
Mechanical Assemblies - 110,682
______________ _____________
Consolidated (1,204,361) 1,708,550
Other Income 165,041 100,612
-18-
<PAGE> 43
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 10 - Segment Data (continued)
Year Year
Ended Ended
December 31, December 31,
1998 1997
______________ _____________
General Corporate Expenses (2,306,797) (1,378,799)
Interest Expense (3,598) (45,784)
______________ _____________
Net Income (Loss) Before Income
Taxes $ (3,349,715) $ 384,579
============== =============
Accounts and Other Receivables
Multi-Level Network Marketing $ 4,634 140,621
Collectibles 1,301 2,598
Burn Cleansing Solution - -
Acquisitions and Consulting - -
Mechanical Assemblies - 273,138
______________ _____________
Consolidated 5,935 416,357
Corporate - -
______________ _____________
Total Accounts and Other
Receivables $ 5,935 $ 416,357
============== =============
Identifiable Assets
Multi-Level Network Marketing $ 5,440,422 $ 3,954,607
Collectibles 503,537 2,164,821
Burn Cleansing Solution - -
Acquisitions and Consulting - 48,903
Mechanical Assemblies - 836,579
______________ _____________
Consolidated 5,943,959 7,004,910
Corporate Assets 176,613 667,574
______________ _____________
Total Assets at Period End $ 6,120,572 $ 7,672,484
============== =============
-19-
<PAGE> 44
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 11 - Note Payable
Long Term Liabilities are detailed in the following
schedules as of December 31, 1998 and 1997.
Note payable is detailed as follows: 1998 1997
Note payable to a Bank, principle payments of _________ ________
$2,976 plus interest through April 2003, bears
interest at 10.5%, secured by equipment and
inventory. $ - $190,476
Mortgage Payable to a Limited Liability
Company monthly installments due of
$3,000 through December 2003, interest
accrues at 8.75%, secured by a building 216,496 -
_________ ________
Total Notes Payable 216,496 190,476
Less current portion (14,689) (190,476)
_________ _________
Long Term Portion-Notes Payable $ 201,807 $ -
========= ========
Future minimum principal payments on
long term debt is as follows:
Year Ending
December 31, Amount
______________ _________
1999 $ 14,689
2000 19,096
2001 20,835
2002 22,733
2003 and thereafter 139,143
_________
$216,496
========
NOTE 12 - Obligations Under Capital Lease
Capital lease obligations are detailed in the following
schedule as of December 31, 1998 and 1997:
December 31, December 31,
1998 1997
_____________ _____________
Capital lease obligation to a corporation
for equipment, lease payments due
monthly of $2,116 through March 2000,
bears interest at 10.5%, secured by
equipment. $ - $ 49,549
Capital lease obligation to a corporation
for copying equipment, lease payments due
monthly of $177 through September 1999,
bears interest at 20.58%, secured by
equipment. - 2,975
-20-
<PAGE> 45
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 12 - Obligations Under Capital Lease (continued)
December 31, December 31,
1998 1997
_____________ _____________
Capital lease obligation to a corporation
for equipment, lease payments due
monthly of $264 through March 2000,
bears interest at 10.5%, secured by
equipment. - 6,333
Capital lease obligation to a corporation
for office equipment, lease payments due
monthly of $158 through February 2001,
bears interest at 12.7%, secured by office
equipment. 4,133 5,412
Capital lease obligation to a corporation
for a copier, lease payments due
monthly of $210 through March 2001, bears
interest at 17.6%, secured by copier
equipment. 4,669 6,189
____________ ___________
Total Lease Obligations 8,802 70,458
____________ ___________
Less current portion 3,326 28,309
____________ ___________
Net Long Term Lease Obligation $ 5,476 $ 42,149
============ ===========
Future minimum lease payments are as follows:
1999 4,416
2000 4,416
2001 946
_____________
9,778
Less portion representing interest (976)
______________
Total $ 8,802
=============
Leased assets are as follows at December 31, 1998 and 1997:
1998 1997
____________ _____________
Leased Equipment 15,723 129,229
Accumulated Depreciation (9,032) (48,610)
____________ _____________
Total Net Leased Equipment $ 6,691 $ 80,619
============ =============
-21-
<PAGE> 46
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 13 - Retirement Plan (401K)
During 1997, QCI sponsored a 401(k) deferred salary savings plan which
is a qualified defined contribution plan. All employees of the Company
are eligible to participate in the plan on January 1 and July 1
following their completion of one year of service and attaining age 21.
Pursuant to this plan, employees can contibut up to 15% of their
compensation to the plan. The Company, at the discretion of the Board
of Directors, can match the employee's contributions. For the years
1998 and 1997, the Company matched 50% of the employee's contributions
up to 5% each year. The Company's Board of Directors has the discretion
to contribue up to a maximum of 20% of employee compensation, which
includes employee deferrals and Company contributions.
NOTE 14 - Major Customers and Suppliers
During the year ended December 31, 1997, QCI had
the following major customers from which the earned revenues
were in excess of 10% of total sales as follows:
Amount of Net Sales
Year Ended December 31,
_______________________________
Customer 1997
__________ ______________
A 906,069
B 522,268
C 375,916
A part of the Company's business is dependent upon the
availability of burn cleansing solution available from a
sole provider. At the present time, the Company does not
have a signed exclusive sales agreement with this supplier.
The Company has been the only marketing agent for the
supplier in the United States. For the years ended December
31, 1998 and 1997, all purchases of burn cleansing solution
sold were from this supplier. During 1998 the Company
discontinued the burn cleansing division.
-21-
<PAGE> 47
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that UNIVERSAL NETWORK OF AMERICA, INC. did on the TWENTIETH
day
of NOVEMBER, 1996 file in this office the original Ariticles of Incorporation;
that said Articles are now on file and of record in the office of the Nevada
Secretary of State, and further, that said Articles contain all the provisions
required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office,
in Carson City, Nevada, this TWENTIETH day of
NOVEMBER, 1996.
/s/DEAN HELLER
Secretary of State
By /s/DELAINA MARZULLO
Certification Clerk
<PAGE>
[FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA,
NOV 20,
1996, C23926-96]
ARTICLES OF INCORPORATION
OF
UNIVERSAL NETWORK OF AMERICA, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated
ourselves together for the purpose of forming a Corporation under and
pursuant to the laws of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
Universal Network of America, Inc.
ARTICLE II - RESIDENT AGENT:
The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES: The purpose, object and nature of the business for
which this Corporation is organized are:
(a) To engage in any lawful activity;
(b) To carry on such business as may be necessary, convenient, or
desirable to accomplish the above purposes, and to do all other
things incidental thereto which are not forbidden by law or by
these Articles of Incorporation.
ARTICLE V - POWERS: The powers of the Corporation shall be those powers
granted by 78.060 and 78.070 of the Nevada Revised Statutes under which this
corporation is formed. In addition, the Corporation shall have the following
specific powers:
<PAGE>
(a) To elect or appoint officers and agents of the Corporation and to
fix their compensation;
(b) To act as an agent for any individual, association, partnership,
corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the
ownership or possession thereof, sell, or otherwise dispose of,
shares or other interests in, or obligations of, individuals,
associations, partnerships, corporations, or governments;
(d) To receive, acquire, hold, pledge, transfer, or otherwise dispose
of shares of the corporation, but such shares may only be
purchased, directly or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes, and in time of
war, to make donations in aid of war activities.
ARTICLE VI - CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 50,000,000 shares of Capital
Stock at $.001 par value per share as set forth in subsections (a) and
(b) of this Section 1 of Article VI.
(a) The total number of shares of Common Stock which this Corporation
is authorized to issue is 40,000,000 shares at $.001 par value
per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 10,000,000 shares at $.001
par value per share, which Preferred Stock may contain special
preferences as determined by the Board of Directors of the
Corporation, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of the
Corporation.
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Section 2. Voting Rights of Shareholders. Each holder of the Common
Stock shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be issued
for such consideration, as shall be fixed from time to time by the
Board of Directors. In the absence of fraud, the judgment of the
Directors as to the value of any property for shares shall be
conclusive. When shares are issued upon payment of the consideration
fixed by the Board of Directors, such shares shall be taken to be fully
paid stock and shall be non-assessable. The Articles shall not be
amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided by
the Board of Directors, no holder of any shares of the stock of the
Corporation, shall have any preemptive right to purchase, subscribe
for, or otherwise acquire any shares of stock of the Corporation of any
class now or hereafter authorized, or any securities exchangeable for
or convertible into such shares, or any warrants or other instruments
evidencing rights or options to subscribe for, purchase, or otherwise
acquire such shares.
Section 5. Stock Rights and Options. The Corporation shall have the
power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, upon such terms and conditions
and at such times and prices as the Board of Directors may provide,
which terms and conditions shall be incorporated in an instrument or
instruments evidencing such rights. In the absence of fraud, the
judgment of the Directors as to the adequacy of consideration for the
issuance of such rights or options and the sufficiency thereof shall be
conclusive.
ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation,
after the amount of the subscription price has been fully paid in, shall not
be assessable for any purpose, and no stock issued as fully paid up shall
ever be assessable or assessed. The holders of such stock shall not be
individually responsible for the debts, contracts, or liabilities of the
Corporation and shall not be liable for assessments to restore impairments in
the capital
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<PAGE>
of the Corporation.
ARTICLE VIII - DIRECTORS: For the management of the business,and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its directors
and shareholders, it is further provided:
Section 1. Size of Board. The members of the governing board of the
Corporation shall be styled directors. The number of directors of the
Corporation, their qualifications, terms of office, manner of election,
time and place of meeting, and powers and duties shall be such as are
prescribed by statute and in the by-laws of the Corporation. The name
and post office address of the directors constituting the first board
of directors, which shall be One (1) in number are:
NAME ADDRESS
Max C. Tanner 2950 East Flamingo Road
Suite G
Las Vegas, NV 89121
Section 2. Powers of Board. In furtherance and not in limitation of
the powers conferred by the laws of the State of Nevada, the Board of
Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the
power of the shareholders to alter or repeal the By-Laws made by
the Board of Directors.
(b) Subject to the applicable provisions of the ByLaws then in
effect, to determine, from time to time, whether and to what
extent, and at what times and places, and under what conditions
and regulations, the accounts and books of the Corporation, or
any of them, shall be open to shareholder inspection. No
shareholder shall have any right to inspect any of the accounts,
books or documents of the Corporation, except as permitted by
law, unless and until authorized to do so by resolution of the
Board of Directors or of the Shareholders of the Corporation;
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(c) To issue stock of the Corporation for money, property,services
rendered, labor performed, cash advanced, acquisitions for other
corporations or for any other assets of value in accordance with
the action of the board of directors without vote or consent of
the shareholders and the judgment of the board of directors as to
value received and in return therefore shall be conclusive and
said stock, when issued, shall be fully-paid and non-assessable.
(d) To authorize and issue, without shareholder consent, obligations
of the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine,
and to pledge or mortgage, as security therefore, any real or
personal property of the Corporation, including after-acquired
property;
(e) To determine whether any and, if so, what part, of the earned
surplus of the Corporation shall be paid in dividends to the
shareholders, and to direct and determine other use and
disposition of any such earned surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other
lawful purpose;
(g) To establish bonus, profit-sharing, stock option, or other types
of incentive compensation plans for the employees, including
officers and directors, of the Corporation, and to fix the amount
of profits to be shared or distributed, and to determine the
persons to participate in any such plans and the amount of their
respective participations.
(h) To designate, by resolution or resolutions passed by a majority
of the whole Board, one or more committees, each consisting of
two or more directors, which, to the extent permitted by law and
authorized by the resolution or the By-Laws, shall have and may
exercise the powers of the Board;
5
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(i) To provide for the reasonable compensation of its own members by
By-Law, and to fix the terms and conditions upon which such
compensation will be paid;
(j) In addition to the powers and authority herein before, or by
statute, expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may
be exercised or done by the corporation, subject, nevertheless,
to the provisions of the laws of the State of Nevada, of these
Articles of Incorporation, and of the By-Laws of the Corporation.
Section 3. Interested Directors. No contract or transaction between
this Corporation and any of its directors, or between this Corporation
and any other corporation, firm, association, or other legal entity
shall be invalidated by reason of the fact that the director of the
Corporation has a direct or indirect interest, pecuniary or otherwise,
in such corporation, firm, association, or legal entity, or because the
interested director was present at the meeting of the Board of
Directors which acted upon or in reference to such contract or
transaction, or because he participated in such action, provided that:
(1) the interest of each such director shall have been disclosed to or
known by the Board and a disinterested majority of the Board shall have
nonetheless ratified and approved such contract or transaction (such
interested director or directors may be counted in determining whether
a quorum is present for the meeting at which such ratification or
approval is given); or (2) the conditions of N.R.S. 78.140 are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The
personal
liability of a director or officer of the corporation to the corporation or
the Shareholders for damages for breach of fiduciary duty as a director or
officer shall be limited to acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law.
ARTICLE X - INDEMNIFICATION: Each director and each officer of the
corporation may be indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a party,
or is threatened to be made a party, to any
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threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit or
proceeding, if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suite or proceeding, by
judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, does not of itself create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and that, with respect to
any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
(b) The corporation may indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending
or completed action or suit by or in the right of the
corporation, to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit,
if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any
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<PAGE>
claim, issue or matter as to which such a person has been adjudged by
a court of competent jurisdiction, after exhaustion of all appeals
there from, to be liable to the corporation or for amounts paid
in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that
in view of all the circumstances of the case the person is fairly
and reasonably entitled to indemnity for such expenses as the
court deems proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this Article, or in defense of any
claim, issue or matter therein, he
must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by
him in connection with the defense.
(d) Any indemnification under subsections (a) and (b) unless ordered
by a court or advanced pursuant to subsection (e), must be made
by the corporation only as authorized in the specific case upon
a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The
determination must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a
quorum consisting of directors who were not parties
to the act, suit or proceeding;
(iii) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders,
by independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be
obtained, by independent legal counsel in a written
opinion.
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<PAGE>
(e) Expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any
rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any
contract or otherwise by law.
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be
entitled under the certificate or articles of incorporation
or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action
in his official capacity or an action in another capacity
while holding his office, except that indemnification,
unless ordered by a court pursuant to subsection (b) or for
the advancement of expenses made pursuant to subsection (e)
may not be made to or on behalf of any director or officer
if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause
of action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the
State of Nevada, the shareholders and the Directors shall have power to hold
their meetings, and the Directors shall
9
<PAGE>
have power to have an office or offices and to maintain the books of the
Corporation outside the State of Nevada, at such place or places as may from
time to time be designated in the By-Laws or by appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be
added. All rights herein conferred on the directors, officers and
shareholders are granted subject to this reservation.
ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
1. Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 19th day of November, 1996.
/s/MAX C. TANNER
Max C. Tanner
STATE OF NEVADA )
)ss:
COUNTY OF CLARK )
On November 19, 1996, personally appeared before me, a Notary Public,
Max C. Tanner, who acknowledged to me that he executed the foregoing Articles
of Incorporation for Universal Network of America, Inc., a Nevada
corporation.
/s/LISE-LOTTE RUZICKA
Notary Public
[LISE-LOTTE RUZICKA, Notary Public-State of Nevada, appointment recorded in
Clark County, my appointment expires July 25, 2000, 96-3555-1]
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<PAGE>
[FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA,
NOV 20,
1996, C23926-96]
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
IN THE MATTER OF UNIVERSAL NETWORK OF AMERICA, INC.
I, Max C. Tanner, do hereby certify that on the 19th day of November,
1996, I accepted the appointment as Resident Agent of the above-entitled
corporation in accordance with Sec. 78.090, NRS 1957.
Furthermore, that the principal office in this state is located at The
Law Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, City of Las
Vegas 89121, County of Clark, State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of
November, 1996.
MAX C. TANNER
By: /s/MAX C. TANNER
Max C. Tanner, Esq.
Resident Agent
11
BY-LAWS OF
UNIVERSAL NETWORK OF AMERICA, INC.
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders
shall be held at such date and time as shall be designated by the board of
directors and stated in the notice of the meeting or in a duly-executed
waiver of notice thereof. If the corporation shall fail to provide notice of
the annual meeting of the shareholders as set forth above, the annual meeting
of the shareholders of the corporation shall be held during the month of
November or December of each year as determined by the Board of Directors,
for the purpose of electing directors of the corporation to serve during the
ensuing year and for the transaction of such other business as may properly
come before the meeting. If the election of the directors is not held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the president shall cause the election to be held at a
special meeting of the shareholders as soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders
may be called by the president or the Board of Directors and shall be called
by the president at the written request of the holders of not less than 51%
of the issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock
of the corporation is represented either in person or by proxy. Where all of
the capital stock is represented, any lawful business may be transacted and
the meeting shall be valid for all purposes.
<PAGE>
Section 1.03 Place of Meetings. Any meeting of the shareholders of
the corporation may be held at its principal office in the State of Nevada or
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote
may designate any place for the holding of such meeting.
Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders of
record written or printed notice of any meeting at least ten (10) days,
but not more than sixty (60) days, before the date of such meeting;
which notice shall state the place, date and time of the meeting, the
general nature of the business to be transacted, and, in the case of
any meeting at which directors are to be elected, the names of
nominees, if any, to be presented for election.
(b) In the case of any meeting, any proper business may be
presented for action, except that the following items shall be valid
only if the general nature of the proposal is stated in the notice or
written waiver of notice:
(1) Action with respect to any contract or transaction
between the corporation and one or more of its directors or
another firm, association, or corporation in which one or more of
its directors has a material financial interest;
(2) Adoption of amendments to the Articles of
Incorporation; or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or dissolution
of the corporation.
(c) The notice shall be personally delivered or mailed by first
class mail to each shareholder of record at the last known address
thereof, as the same appears on the books of the corporation, and the
giving of such notice shall be deemed delivered the date the same is
deposited in the United States mail, postage prepaid. If the address
of any shareholder does not appear upon the books of the corporation,
it will be sufficient to address any notice to such shareholder at the
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principal office of the corporation.
(d) The written certificate of the person calling any meeting,
duly sworn, setting forth the substance of the notice, the time and
place the notice was mailed or personally delivered to the several
shareholders, and the addresses to which the notice was mailed shall be
prima facie evidence of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required,
and, whenever all of the shareholders shall meet in person or by proxy, such
meeting shall be valid for all purposes without call or notice, and at such
meeting any corporate action may be taken.
Section 1.06 Determination of Shareholders of Record.
(a) The Board of Directors may at any time fix a future date as
a record date for the determination of the shareholders entitled to
notice of any meeting or to vote or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled
to exercise any rights in respect of any other lawful action. The
record date so fixed shall not be more than sixty (60) days prior to
the date of such meeting nor more than sixty (60) days prior to any
other action. When a record date is so fixed, only shareholders of
record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of
rights, or to exercise their rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
corporation after the record date.
(b) If no record date is fixed by the Board of Directors, then
(1) the record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date
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for determining shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which written consent is
given; and (3) the record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the
sixtieth (60th) day prior to the date of such other action, whichever
is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the
issued and outstanding shares of the corporation represented in person
or by proxy, shall constitute a quorum.
(b) If less than a majority of the issued and outstanding
shares are represented, a majority of shares so represented may adjourn
from time to time at the meeting, until holders of the amount of stock
required to constitute a quorum shall be in attendance. At any such
adjourned meetingat which a quorum shall be present, any business may
be transacted which might have been transacted as originally called.
When a shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken,
unless the adjournment is for more than ten (10) days in which event
notice thereof shall be given.
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly
authorized proxy or attorney-in-fact shall be entitled to one (1) vote
for each share of stock standing registered in such shareholder's name
on the books of the corporation on the record date.
(b) Except as otherwise provided herein, all votes with respect
to shares standing in the name of an individual on the record date
(included pledged shares) shall be cast only by
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<PAGE>
that individual or such individual's duly authorized proxy or attorney-
in-fact. With respect to shares held by a representative of the estate
of a deceased shareholder, guardian, conservator, custodian or trustee,
votes may be cast by such holder upon proof of capacity, even though the
shares do not stand in the name of such holder. In the case of shares
under the control of a receiver, the receiver may cast votes carried by
such shares even though the shares do not stand in the name of the
receiver provided that the order of the court of competent jurisdiction
which appoints the receiver contains the authority to cast votes carried by
such shares. If shares stand in the name of a minor, votes may be cast
only by the duly-appointed guardian of the estate of such minor if such
guardian has provided the corporation with written notice and proof of
such appointment.
(c) With respect to shares standing in the name of a
corporation on the record date, votes may be cast by such officer or
agents as the by-laws of such corporation prescribe or, in the absence
of an applicable by-law provision, by such person as may be appointed
by resolution of the Board of Directors of such corporation. In the
event no person is so appointed, such votes of the corporation may be
cast by any person (including the officer making the authorization)
authorized to do so by the Chairman of the Board of Directors,
President or any Vice President of such corporation.
(d) Notwithstanding anything to the contrary herein contained,
no votes may be cast by shares owned by this corporation or its
subsidiaries, if any. If shares are held by this corporation or its
subsidiaries, if any, in a fiduciary capacity, no votes shall be cast
with respect thereto on any matter except to the extent that the
beneficial owner thereof possesses and exercises either a right to vote
or to give the corporation holding the same binding instructions on how
to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise and shares held by two or
more persons
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<PAGE>
(including proxy holders) having the same fiduciary
relationship respect in the same shares, votes may be cast in the
following manner:
(1) If only one such person votes, the votes of such
person binds all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is
evenly split on a particular matter, the votes shall be deemed
cast proportionately as split.
(f) Any holder of shares entitled to vote on any matter may
cast a portion of the votes in favor of such matter and refrain from
casting the remaining votes or cast the same against the proposal,
except in the case of elections of directors. If such holder entitled
to vote fails to specify the number of affirmative votes, it will be
conclusively presumed that the holder is casting affirmative votes with
respect to all shares held.
(g) If a quorum is present, the affirmative vote of holders of
a majority of the shares represented at the meeting and entitled to
vote on any matter shall be the act of the shareholders, unless a vote
of greater number or voting by classes is required by the laws of the
State of Nevada, the Articles of Incorporation and these By-Laws.
Section 1.09 Proxies. At any meeting of shareholders, any holder of
shares entitled to vote may authorize another person or persons to vote by
proxy with respect to the shares held by an instrument in writing and
subscribed to by the holder of such shares entitled to vote. No proxy shall
be valid after the expiration of six (6) months from the date of execution
thereof, unless coupled with an interest or unless otherwise specified in the
proxy. In no event shall the term of a proxy exceed seven (7) years from the
date of its execution. Every proxy shall continue in full force and effect
until its expiration or revocation. Revocation may be effected by filing an
instrument revoking the same or a duly-executed proxy bearing a later date
with the
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<PAGE>
secretary of the corporation.
Section 1.10 Order of Business. At the annual shareholders meeting,
the regular order of business shall be as follows:
(1) Determination of shareholders present and existence
of quorum;
(2) Reading and approval of the minutes of the previous
meeting or meetings;
(3) Reports of the Board of Directors, the president,
treasurer and secretary of the corporation, in the order named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any
meeting of the shareholders are as valid as though had at a meeting duly-held
after regular call and notice if a quorum is present, either in person or by
proxy, and if, either before or after the meeting, each of the persons
entitled to vote, not present in person or by proxy (and those who, although
present, either object at the beginning of the meeting to the transaction of
any business because the meeting has not been lawfully called or convened or
expressly object at the meeting to the consideration of matters not included
in the notice which are legally required to be included therein), signs a
written waiver of notice and/or consent to the holding of the meeting or an
approval of the minutes thereof. All such waivers, consents, and approvals
shall be filed with the corporate records and made a part of the minutes of
the meeting. Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when the person objects at
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<PAGE>
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
not included in the notice if such objection is expressly made at the
beginning. Neither the business to be transacted at nor the purpose of any
regular or special meeting of shareholders need be specified in any written
waiver of notice, except as otherwise provided in Section 1.04(b) of these
By-Laws.
Section 1.12 Action Without Meeting. Any action which may be taken by
the vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or
such greater proportion as may be required by the laws of the State of
Nevada, the Articles of Incorporation, or these ByLaws. Whenever action is
taken by written consent, a meeting of shareholders needs not be called or
noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure and Qualification. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of
at least one (1) but no more than nine (9) persons, who shall be elected at
the annual meeting of the shareholders of the corporation and who shall hold
office for one (1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon
giving written notice to the chairman of the Board of Directors, the
president, or the secretary of the corporation, unless the notice specifies
a later time for effectiveness of such resignation. If the Board of
Directors accepts the resignation of a director tendered to take effect at a
future date, the Board or the shareholders may elect a successor to take
office when the resignation becomes effective.
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Section 2.03 Reduction in Number. No reduction of the number of
directors shall have the effect of removing any director prior to the
expiration of his term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the
corporation, by a majority vote, may declare vacant the office of a
director who has been declared incompetent by an order of a court of
competent jurisdiction or convicted of a felony.
Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death,
resignation, removal, change in number of directors, or otherwise may
be filled by the shareholders at any regular or special meeting or any
adjourned meeting thereof or the remaining director(s) by the
affirmative vote of a majority thereof. A Board of Directors
consisting of less than the maximum number authorized in Section 2.01
of ARTICLE II constitutes vacancies on the Board of Directors for
purposes of this paragraph and may be filled as set forth above
including by the election of a majority of the remaining directors.
Each successor so elected shall hold office until the next annual
meeting of shareholders or until a successor shall have been
duly-elected and qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders
shall constitute less than a majority of the directors then in office,
any holder or holders of an aggregate of five percent (5%) or more of
the total number of shares entitled to vote may call a special meeting
of shareholders to be held to elect the entire Board of Directors. The
term of office of any director shall terminate upon such election of a
successor.
Section 2.06 Regular Meetings. Immediately following the adjournment
of, and at the same place as, the annual meeting of the shareholders, the
Board of Directors, including directors newly
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elected, shall hold its annual meeting without notice, other than this
provision, to elect officers of the corporation and to transact such further
business as may be necessary or appropriate. The Board of Directors may
provide by resolution the place, date and hour for holding additional regular
meetings.
Section 2.07 Special Meetings. Special meetings of the Board of
Directors may be called by the chairman and shall be called by the chairman
upon the request of any two (2) directors or the president of the
corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any
place for the holding of such meeting.
Section 2.09 Notice of Meetings. Except as otherwise provided in
Section 2.06, the chairman shall deliver to all directors written or printed
notice of any special meeting, at least three (3) days before the date of
such meeting, by delivery of such notice personally or mailing such notice
first class mail, or by telegram. If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in
the United States mail, postage prepaid. Any director may waive notice of
any meeting, and the attendance of a director at a meeting shall constitute
a waiver of notice of such meeting, unless such attendance is for the express
purpose of objecting to the transaction of business threat because the
meeting is not properly called or convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall
constitute a quorum.
(b) At any meeting of the Board of Directors where a quorum is
not present, a majority of those present may
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adjourn, from time to time, until a quorum is present, and no notice of
such adjournment shall be required. At any adjourned meeting where a
quorum is present, any business may be transacted which could have been
transacted at the meeting originally called.
Section 2.11 Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any
committee thereof may be taken without a meeting if a written consent thereto
is signed by all of the members of the Board of Directors or of such
committee. Such written consent or consents shall be filed with the minutes
of the proceedings of the Board of Directors or committee. Such action by
written consent shall have the same force and effect as the unanimous vote of
the Board of Directors or committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors
may be held through the use of a conference telephone or similar
communications equipment so long as all members participating in such meeting
can hear one another at the time of such meeting. Participation in such a
meeting constitutes presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of
Incorporation or the laws of the State of Nevada, the Board of
Directors is invested with the complete and unrestrained authority to
manage the affairs of the corporation, and is authorized to exercise
for such purpose as the general agent of the corporation, its entire
corporate authority in such manner as it sees fit. The Board of
Directors may delegate any of its authority to manage, control or
conduct the current business of the corporation to any standing or
special committee or to any officer or agent and to appoint any persons
to be agents of the corporation with such powers, including the power
to sub-delegate, and upon such terms as
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may be deemed fit.
(b) The Board of Directors shall present to the shareholders at
annual meetings of the shareholders, and when called for by a majority
vote of the shareholders at a special meeting of the shareholders, a
full and clear statement of the condition of the corporation, and
shall, at request, furnish each of the shareholders with a true copy
thereof.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of
the shareholders or any special meeting properly called for the purpose
of considering any such contract or act, provided a quorum is present.
The contract or act shall be valid and binding upon the corporation and
upon all the shareholders thereof, if approved and ratified by the
affirmative vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized and empowered to issue stock of the Corporation
for money, property, services rendered, labor performed, cash advanced,
acquisitions for other corporations or for any other assets of value in
accordance with the action of the Board of Directors without vote or
consent of the shareholders and the judgment of the Board of Directors
as to the value received and in return therefore shall be conclusive
and said stock, when issued, shall be fully-paid and non-assessable.
Section 2.15 Compensation. The directors shall be allowed and paid
all necessary expenses incurred in attending any meetings of the Board, but
shall not receive any compensation for their services as directors until such
time as the corporation is able to declare and pay dividends on its capital
stock.
Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect,
from among its members, a chairman to preside at the meetings of the
Board of Directors. The Board of Directors may also elect such other
board officers and for such term as
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it may, from time to time, determine advisable.
(b) Any vacancy in any board office because of death,
resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
Section 2.17 Order of Business. The order of business at any meeting
of the Board of Directors shall be as follows:
(1) Determination of members present and existence of
quorum;
(2) Reading and approval of the minutes of any previous
meeting or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and
until their successors are elected and qualify. Any person may hold two or
more offices. The Board of Directors may, from time to time, by resolution,
appoint one or more vice presidents, assistant secretaries, assistant
treasurers and transfer agents of the corporation as it may deem advisable;
prescribe their duties; and fix their compensation.
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Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to
which the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because
of death, resignation, removal, or otherwise may be filled by the
Board of Directors for the unexpired portion of the term of such
office.
Section 3.04 President. The president shall be the general manager
and executive officer of the corporation, subject to the supervision and
control of the Board of Directors, and shall direct the corporate affairs,
with full power to execute all resolutions and orders of the Board of
Directors not especially entrusted to some other officer of the corporation.
The president shall preside at all meetings of the shareholders and shall
sign the certificates of stock issued by the corporation, and shall perform
such other duties as shall be prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to
act and to vote at any meetings of the shareholders of any corporation in
which the corporation may hold stock and, at any such meetings, shall possess
and may exercise any and all rights and powers incident to the ownership of
such stock. The Board of Directors, by resolution from time to time, may
confer like powers on any person or persons in place of the president to
represent the corporation for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all
the duties of the president whenever the president is absent or unable to
act, including the signing of the certificates of stock issued by the
corporation, and the vice president shall perform such other duties as shall
be prescribed by the Board of Directors.
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Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock
ledgers, and such other books and papers as the Board of Directors or
appropriate committee may direct, and shall, in general perform all duties
incident to the office of the secretary. All corporate books kept by the
secretary shall be open for examination by any director at any reasonable
time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint
an assistant secretary who shall have such powers and perform such duties as
may be prescribed for him by the secretary of the corporation or by the Board
of Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the
Board of Directors, and shall have custody of all the funds and securities of
the corporation. When necessary or proper, the treasurer shall endorse on
behalf of the corporation for collection checks, notes and other obligations,
and shall deposit all monies to the credit of the corporation in such bank or
banks or other depository as the Board of Directors may designate, and shall
sign all receipts and vouchers for payments made by the corporation. Unless
otherwise specified by the Board of Directors, the treasurer shall sign with
the president all bills of exchange and promissory notes of the corporation,
shall also have the care and custody of the stocks, bonds, certificates,
vouchers, evidence of debts, securities and such other property belonging to
the corporation as the Board of Directors shall designate, and shall sign all
papers required by law, by these By-laws or by the Board of Directors to be
signed by the treasurer. The treasurer shall enter regularly in the books of
the corporation, to be kept for that purpose, full and accurate accounts of
all monies received and paid on account of the corporation and whenever
required by the
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Board of Directors, the treasurer shall render a statement of
any or all accounts. The treasurer shall at all reasonable times exhibit the
books of account to any directors of the corporation and shall perform all
acts incident to the position of treasurer subject to the control of the
Board of Directors. The treasurer shall, if required by the Board of
Directors,give a bond to the corporation in such sum and with such security
as shall be approved by the Board of Directors for the faithful performance
of all the duties of the treasurer and for restoration to the corporation in
the event of the treasurer's death, resignation, retirement, or removal from
office, of all books, records, papers, vouchers, money and other property
belonging to the corporation. The expense of such bond shall be borne by the
corporation.
Section 3.09 Assistant Treasurer. The Board of Directors may appoint
an assistant treasurer who shall have such powers and perform such duties as
may be prescribed by the treasurer of the corporation or by the Board of
Directors, and the Board of Directors may require the assistant treasurer to
give a bond to the corporation in such sum and with such security as it may
approve,for the faithful performance of the duties of assistant treasurer,
and for the restoration to the corporation, in the event of the assistant
treasurer's death, resignation, retirement or removal from office, of all
books, records, papers, vouchers, money and other property belonging to the
corporation. The expense of such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation
shall be issued in such manner and at such times and upon such conditions as
shall be prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the
corporation and shall be signed by the president or
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the vice president and also by the secretary or an assistant secretary. Each
certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement of
summary of any applicable rights, preferences, privileges, or restrictions
thereon, and a statement that the shares are assessable, if applicable. All
certificates shall be consecutively numbered. The name and address of the
shareholder, the number of shares, and the date of issue shall be entered on
the stock transfer books of the corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All
certificates surrendered to the corporation, except those representing shares
of treasury stock, shall be canceled and no new certificates shall be issued
until the former certificate for a like number of shares shall have been
canceled, except that in case of a lost, stolen, destroyed or mutilated
certificate, a new one may be issued therefor. However, any shareholder
applying for the issuance of a stock certificate in lieu of one alleged to
have been lost, stolen, destroyed or mutilated shall, prior to the issuance
of a replacement, provide the corporation with his, her or its affidavit of
the facts surrounding the loss, theft, destruction or mutilation and an
indemnity bond in an amount and upon such terms as the treasurer, or the
Board of Directors, shall require. In no case shall the bond be in amount
less than twice the current market value of the stock and it shall indemnify
the corporation against any loss, damage, cost or inconvenience arising as a
consequence of the issuance of a replacement certificate.
Section 4.04 Replacement Certificate. When the Articles of
Incorporation are amended in any way affecting the statements contained in
the certificates for outstanding shares of capital stock of the corporation
or it becomes desirable for any reason, including, without limitation, the
merger or consolidation of the corporation with another corporation or the
reorganization of the corporation, to cancel any outstanding certificate for
shares and issue a new certificate therefor conforming to the rights of the
holder, the Board of Directors may order any holders of outstanding
certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificate(s) ordered to be
surrendered shall not be entitled to
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vote, receive dividends or exercise any other rights of shareholders until
the holder has complied with the order provided that such order operates to
suspend such rights only after notice and until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid
as against the corporation except on surrender and cancellation by the
certificate therefor, accompanied by an assignment or transfer by the
registered owner made either in person or under assignment. Whenever any
transfer shall be expressly made for collateral security and not absolutely,
the collateral nature of the transfer shall be reflected in the entry of
transfer on the books of the corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one
or more transfer agents and registrars of transfer and may require all
certificates for shares of stock to bear the signature of such transfer agent
and such registrar of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be
closed for a period of ten (10) days prior to all meetings of the
shareholders and shall be closed for the payment of dividends as provided in
Article V hereof and during such periods as, from time to time, may be fixed
by the Board of Directors, and, during such periods, no stock shall be
transferable.
Section 4.08 Miscellaneous. The Board of Directors shall have the
power and authority to make such rules and regulations not inconsistent
herewith as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the
corporation.
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ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions
of the laws of the State of Nevada and the Articles of Incorporation, by the
Board of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of
Directors may fix in advance a record date, as provided in Section 1.06 of
these By-laws, prior to the dividend payment for the purpose of determining
shareholders entitled to receive payment of any dividend. The Board of
Directors may close the stock transfer books for such purpose for a period of
not more than ten (10) days prior to the payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the
corporation in the State of Nevada shall be the Law Offices of Max C. Tanner,
2950 East Flamingo Road, Suite G, Las Vegas, Nevada 89121, and the
corporation may have an office in any other state or territory as the Board
of Directors may designate.
Section 6.02 Records. The stock transfer books and a certified copy
of the By-laws, Articles of Incorporation, any amendments thereto, and the
minutes of the proceedings of the shareholders, the Board of Directors, and
committees of the Board of Directors shall be kept at the principal office of
the corporation for the inspection of all who have the right to see the same
and for the transfer of stock. All other books of the corporation shall be
kept at such places as may be prescribed by the Board of Directors.
Section 6.03 Financial Report on Request. Any shareholder or
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shareholders holding at least five percent (5%) of the outstanding shares of
any class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month, or nine (9) month period
of the current fiscal year ended more than thirty (30) days prior to the date
of the request and a balance sheet of the corporation as of the end of such
period. In addition, if no annual report for the last fiscal year has been
sent to shareholders, such shareholder or shareholders may make a request for
a balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year. The
statement shall be delivered or mailed to the person making the request
within thirty (30) days thereafter. A copy of the statements shall be kept
on file in the principal office of the corporation for twelve (12) months,
and such copies shall be exhibited at all reasonable times to any shareholder
demanding an examination of them or a copy shall be mailed to each
shareholder. Upon request by any shareholder, there shall be mailed to the
shareholder a copy of the last annual, semiannual or quarterly income
statement which it has prepared and a balance sheet as of the end of the
period. The financial statements referred to in this Section 6.03 shall be
accompanied by the report thereon, if any, of any independent accountants
engaged by the corporation or the certificate of an authorized officer of the
corporation that such financial statements were prepared without audit from
the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of proceedings
of the shareholders and the Board of Directors and committees of the
Board of Directors shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours for a purpose reasonably
related to such holder's interest as a shareholder or as the holder of
such voting trust certificate. This right of inspection shall extend
to the records of the subsidiaries, if any, of the corporation. Such
inspection may be made in person or by agent or attorney, and the right
of inspection includes the right to copy and make extracts.
(b) Every director shall have the absolute right at any
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reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation
and/or its subsidiary corporations. Such inspection may be made in
person or by agent or attorney, and the right of inspection includes
the right to copy and make extracts.
Section 6.05 Corporate Seal. The Board of Directors may, by
resolution, authorize a seal, and the seal may be used by causing it, or a
facsimile, to be impressed or affixed or reproduced or otherwise. Except
when otherwise specifically provided herein, any officer of the corporation
shall have the authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation
shall be the calendar year or such other term as may be fixed by resolution
of the Board of Directors.
Section 6.07 Reserves. The Board of Directors may create, by
resolution, out of the earned surplus of the corporation such reserves as the
directors may, from time to time, in their discretion, think proper to
provide for contingencies, or to equalize dividends or to repair or maintain
any property of the corporation, or for such other purpose as the Board of
Directors may deem beneficial to the corporation, and the directors may
modify or abolish any such reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless
prohibited by Nevada Law, indemnify any person (an "Indemnitee") who is or
was involved in any manner (including, without limitation, as a party or a
witness) or is threatened to be so involved in any threatened, pending or
completed action suit or
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proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit
or proceeding brought by or in the right of the corporation to procure a
judgment in its favor (collectively, a "Proceeding") by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other entity or enterprise, against
all Expenses and Liabilities actually and reasonably incurred by him in
connection with such Proceeding. The right to indemnification conferred in
this Article shall be presumed to have been relied upon by the directors,
officers, employees and agents of the corporation and shall be enforceable as
a contract right and inure to the benefit of heirs, executors and
administrators of such individuals.
Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific
rights of indemnification in addition to the rights provided hereunder to the
fullest extent permitted by Nevada Law. Such agreements or arrangements may
provide (i) that the Expenses of officers and directors incurred in defending
a civil or criminal action, suit or proceeding, must be paid by the
corporation as they are incurred and in advance of the final disposition of
any such action, suit or proceeding provided that, if required by Nevada Law
at the time of such advance, the officer or director provides an undertaking
to repay such amounts if it is ultimately determined by a court of competent
jurisdiction that such individual is not entitled to be indemnified against
such expenses, (iii) that the Indemnitee shall be presumed to be entitled to
indemnification under this Article or such agreement or arrangement and the
corporation shall have the burden of proof to overcome that presumption,
(iii) for procedures to be followed by the corporation and the Indemnitee in
making any determination of entitlement to indemnification or for appeals
therefrom and (iv) for insurance or such other Financial Arrangements
described in Paragraph 7.02 of this Article, all as may be deemed appropriate
by the Board of Directors at the time of execution of such agreement or
arrangement.
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Section 7.03 Insurance and Financial Arrangements. The corporation
may, unless prohibited by Nevada Law, purchase and maintain insurance or make
other financial arrangements ("Financial Arrangements") on behalf of any
Indemnitee for any liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee or agent, or
arising out of his status as such, whether or not the corporation has the
authority to indemnify him against such liability and expenses. Such other
Financial Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest
or other lien on any assets of the corporation, or (iv) the establishment of
a letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and,
without limitation, means (i) all direct and indirect costs incurred,
paid or accrued, (ii) all attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, food and
lodging expenses while traveling, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service, freight or
other transportation fees and expenses, (iii) all other disbursements
and out-of-pocket expenses, (iv) amounts paid in settlement, to the
extent permitted by Nevada Law, and (v) reasonable compensation for
time spent by the Indemnitee for which he is otherwise not compensated
by the corporation or any third party, actually and reasonably incurred
in connection with either the appearance at or investigation, defense,
settlement or appeal of a Proceeding or establishing or enforcing a
right to indemnification under any agreement or arrangement, this
Article, the Nevada Law or otherwise; provided, however, that
"Expenses" shall not include any judgments or fines or excise taxes or
penalties imposed under the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any
type whatsoever, including, but not limited to, judgments or
fines, ERISA or other excise taxes and penalties, and
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amounts paid in settlement.
Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised
Statutes as amended and in effect from time to time or any successor or
other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.01 through 7.04
of these bylaws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including
this Paragraph, of these Bylaws may be amended by the stockholders only
by vote of the holders of sixty-six and two-thirds percent (66 2/3%) of
the entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of
any class to vote is otherwise restricted or denied); provided,
however, no amendment or repeal of this Article shall adversely affect
any right of any Indemnitee existing at the time such amendment or
repeal becomes effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this
Paragraph of these Bylaws may be amended or repealed by the Board of
Directors only by vote of eighty percent (80%) of the total number of
Directors and the holders of sixty-six and two-thirds percent (66 2/3)
of the entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of
any class to vote is otherwise restricted or denied); provided,
however, no amendment or repeal of this Article shall adversely affect
any right of any Indemnitee existing at the time such amendment or
repeal becomes effective.
ARTICLE VIII
BY-LAWS
Section 8.01 Amendment. Amendments and changes of these By-Laws may
be made at any regular or special meeting of the Board of Directors by a vote
of not less than all of the entire Board, or
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may be made by a vote of, or a consent in writing signed by the holders of a
majority of the issued and outstanding capital stock.
Section 8.02 Additional By-Laws. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board
of Directors at which a quorum is present by an affirmative vote of a
majority of the directors present or by the unanimous consent of the Board of
Directors in accordance with Section 2.11 of these By-laws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the
Corporation, do hereby certify that the foregoing By-laws were adopted by the
Board of Directors on the 21st day of November, 1996.
/s/ MAX C. TANNER
Max C. Tanner, Secretary
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Crouch, Bierwolf & Chisholm
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated February 12, 1999, in
this annual report on Form 10-KSB for the year ended December 31, 1998
for D.H. Marketing & Consulting, Inc.
/s/ CROUCH, BIERWOLF & CHISHOLM
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER
31, 1998 AND
1997 (AUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000933954
<NAME> DH MARKETING & CONSULTING INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 308,838
<SECURITIES> 0
<RECEIVABLES> 5,935
<ALLOWANCES> 0
<INVENTORY> 5,261,290
<CURRENT-ASSETS> 5,576,063
<PP&E> 488,778
<DEPRECIATION> (129,631)
<TOTAL-ASSETS> 6,120,572
<CURRENT-LIABILITIES> 243,265
<BONDS> 0
0
0
<COMMON> 2,526
<OTHER-SE> 5,667,498
<TOTAL-LIABILITY-AND-EQUITY> 6,120,572
<SALES> 1,734,300
<TOTAL-REVENUES> 1,899,343
<CGS> 858,777
<TOTAL-COSTS> 4,386,683
<OTHER-EXPENSES> 3,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,598
<INCOME-PRETAX> (3,349,715)
<INCOME-TAX> (4,788)
<INCOME-CONTINUING> (3,344,927)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,344,927)
<EPS-BASIC> (.50)
<EPS-DILUTED> (.50)
</TABLE>
