<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
FORTE COMPUTER EASY, INC.
(Name of Small Business Issuer in its charter)
Utah 87-0365268
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1350 Albert Street, Youngstown, Ohio 44505
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (330) 746-3311
Securities to be registered under Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
<S> <C>
None
</TABLE>
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
(Title of class)
<PAGE> 2
THE UNDERSIGNED HEREBY AMENDS ITS FORM 10-SB REGISTRATION STATEMENT FILED MARCH
1, 1995, IN ITS ENTIRETY TO READ AS FOLLOWS:
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Forte Computer Easy, Inc. (the "Company") is a Utah corporation
with one operating subsidiary: Forte, Inc., an Ohio corporation ("Forte" or the
"Subsidiary"). All of the issued and outstanding common stock of Forte is owned
by the Company. The Company does not have any other subsidiaries, and Forte does
not have any subsidiaries.
The original business of the Company was conducted by Computer
Easy, Inc., an Arizona corporation which was incorporated on August 2, 1983.
Empire Oil, Inc., a Utah corporation and predecessor of the Company, acquired
the stock of Computer Easy, Inc. in 1984. In September of 1985, the assets of
Computer Easy, Inc. were assigned to Empire Oil, Inc., the name of the surviving
corporation was subsequently changed to Computer Easy International, Inc. and
the separate existence of Computer Easy, Inc. was terminated. The name of the
Company was changed from Computer Easy International, Inc., to Forte Computer
Easy, Inc. as of January 3, 1995.
Through Forte, the Company is engaged in the business of
manufacturing residential, commercial and architectural windows and doors (also
known as "fenestration" products). The Company previously was also engaged in
the businesses of computer software publishing and computer disk duplication and
fulfillment; however, as described below, the Company has discontinued its
operations in these businesses and concentrated its efforts on the fenestration
business.
The principal executive offices of the Company are located at 1350
Albert Street, Youngstown, Ohio 44505, and the Company's telephone number is
(330) 746-3311.
DESCRIPTION OF BUSINESS
The Company is not directly engaged in business operations. The
business of the Company is conducted through Forte, its wholly owned subsidiary.
The current business of the Company consists of the manufacture
and distribution of a wide variety of fenestration products, including doors,
windows, security screens, storm doors and screen doors. Typically, the Company
enters into contracts to provide fenestration products for large construction
projects. The Company continually strives to improve its products and to refine
its product mix to better meet the demands of its customers. As discussed below
under "Business Strategy", Management believes changes in the fenestration
industry will provide the Company with significant opportunities for future
growth.
Forte was incorporated under the laws of the State of Ohio in
April of 1989. Frank J. Amedia ("Amedia") initially was the sole shareholder of
Forte. Prior to the formation of Forte, Mr. Amedia, through Frank J. Amedia &
Associates, had served as a manufacturer's representative in selling
fenestration products, consisting of doors, windows, security screens, storm
doors and screen doors, to the public housing market, military installations and
government agencies.
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Forte was formed to operate in a developing vacuum in the
commercial fenestration market which occurred as a result of a number of plant
closings and mergers among previous manufacturers of commercial fenestration
products. The original market sought to be served by Forte was renovation and
retrofit products, as opposed to new construction. The first products developed
by Forte placed great emphasis on energy savings and security through sales of
thermally improved replacement windows and window protection screens of high
grade construction, safe operation and architecturally aesthetic appeal. The
original product line of Forte consisted of a variety of product variations with
numerous applications, including four (4) security screen lines, two (2)
security screen door lines, two (2) storm door lines and one (1) storm window
line. By November of 1989, all Forte products had been successfully tested and
certified by National Certified Testing Laboratories as complying with published
industry standards.
In October of 1991, Forte agreed to purchase the commercial window
product lines and a glass insulating product line of Airmaster Corporation of
Ben Salem, Pennsylvania. Airmaster had been formed in 1947 and had been long
recognized as one of the premier United States manufacturers of commercial
window lines, with sales throughout the country. This transaction was
consummated in early 1992 and the purchased equipment was moved to Forte's
headquarters in Youngstown, Ohio in March of 1992, at which time Forte began to
do business as "Forte/Airmaster."
In July of 1993, Forte acquired from Season-All Industries, Inc.
("Season-All") the following items: (i) specifically identified machinery and
equipment related to certain commercial window product lines in addition to
other machinery equipment; (ii) inventories of raw materials, work in process
and supplies held for production for two (2) specific contracts; (iii) supplies
held for production for two (2) specific contracts; (iv) other inventory, work
in process and supplies specified by Forte for customer and supplier lists,
catalogs, brochures and related sales material; (v) manufactured drawings,
process sheets, specifications, bills of material and like data relating to the
product lines; and (vi) trade names related to products manufactured on the
purchased product lines. In addition, Forte was assigned two (2) major retrofit
contracts of Season-All.
Upon the closing of the Season-All acquisition described above,
Forte made arrangements with AMAS, Inc., an Ohio corporation ("AMAS") owned by
Amedia and John Masternick ("Masternick") which in turn owned a building located
at 1450 Albert Street, Youngstown, Ohio (the "AMAS Building") adjacent to the
office and manufacturing plant of Forte, to lease from AMAS approximately
120,000 square feet of manufacturing and office space in that facility. Forte
and AMAS entered into a lease agreement which allowed Forte a credit against
annual rental payments until Forte had recouped its investment in certain
expenditures and repairs made to the AMAS Building by Forte.
Forte began production in the AMAS Building in the fall of 1994.
All of the issued and outstanding common stock of Forte was
acquired by the Company in June of 1994, in exchange for shares of the Company's
common stock and options to acquire shares of the Company's common stock. In
connection with the Company's acquisition of Forte, AMAS was merged into Forte.
Masternick received shares of Forte common stock in connection with the Forte-
AMAS merger. Amedia and Masternick, as shareholders of Forte, received shares of
common stock of the Company in the acquisition. Forte became the owner of the
AMAS Building as a result of its merger with AMAS, and the lease agreement
between Forte and AMAS terminated by operation of law.
On June 7, 1994, Forte purchased all of the issued and outstanding
shares of MoCorp Air, Inc. ("MoCorp") from Amedia for $215,000, which consisted
of the assumption by Forte of the balance
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due from MoCorp to Cessna Financing Company in the amount of $147,902 and
seller-provided financing for the balance of the purchase price of $67,098. The
sole asset of MoCorp was a Cessna Chieftain Piper Aircraft, U.S. Registration
No. N27363.
As described below under "Discontinued Businesses," the Company
was previously engaged in the computer software publishing business and the
computer disk duplication and fulfillment business. Management of the Company
concluded, for the reasons described below, that the long-term interests of the
Company would be best served if the Company discontinued its operations in these
businesses. Accordingly, in November of 1995 and August of 1996, respectively,
the Company entered into transactions to dispose of its software publishing and
disk duplication/fulfillment businesses.
On October 25, 1996, the Company entered into an Agreement and
Plan of Reorganization (the "Reorganization Agreement") with AAP Holdings, Inc.,
a Delaware corporation ("AAPH"). Pursuant to the Reorganization Agreement, the
Company will acquire one hundred percent (100%) of the issued and outstanding
common stock of American Architectural Products, Inc., a Delaware corporation
("AAP") in exchange for shares of Series A Convertible Preferred Stock of the
Company which is convertible into a number of shares of the Company's common
stock which is equal to sixty percent (60%) of the issued and outstanding common
stock of the Company on the closing date of the transaction. In addition, the
Company will issue to AAPH options to purchase 1.5 times the number of shares of
the Company's common stock subject to options previously issued by the Company
which are outstanding on the closing date of the transaction. Such options will
be identical in price and exercise terms to the previously outstanding options.
The Company currently anticipates that the closing of this transaction will
occur prior to the end of 1996.
AAP is also engaged in the fenestration manufacturing business
through its principal operating subsidiaries Eagle Window & Door, Inc. ("Eagle")
and Taylor Building Products Company ("Taylor"). Eagle's primary product line
consists of aluminum clad and all-wood window and door products which are
targeted to high-end residential and certain "institutional" niche markets.
Taylor's primary products consist of urethane-insulated steel entry doors and
polystyrene-insulated steel garage doors. AAP also has a subsidiary known as
Mallyclad Corp. ("Mallyclad") which, pursuant to the Reorganization Agreement,
will either be sold by AAP or merged into AAP prior to closing of the
acquisition of AAP by the Company. Management expects the acquisition of AAP to
dramatically increase the Company's sales volume and to significantly enhance
the Company's competitive and strategic position in the manufacture and
distribution of windows, doors and other fenestration products. The transaction
with AAPH is subject to customary closing conditions.
Following consummation of the AAPH transaction, the Company
intends to seek shareholder approval of a reincorporation of the Company in
Delaware under the name American Architectural Products Corporation.
BUSINESS STRATEGY
Management believes consolidation in the fenestration
manufacturing industry presents significant growth opportunities for the
Company. Although the industry has historically been characterized by small,
entrepreneurial businesses scattered throughout the United States, the growing
public demand for more energy efficient windows and doors has resulted in
increased manufacturing costs. These increased costs and the competitive
pressures brought about by manufacturers' need for technology, computerization
and enhanced marketing efforts, have led to a shift away from small,
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independent manufacturers and toward larger manufacturers that are able to
spread higher costs across a broad product line. The Company believes
consolidation in the fenestration industry will continue to accelerate and that
this consolidation will present favorable merger and acquisition opportunities.
The Company's business plan contemplates that the Company will,
following consummation of the AAPH transaction, target as acquisition candidates
small and medium-sized, established fenestration companies and related material
manufacturers that are leaders in established national or regional niche
markets. The Company intends to pursue acquisition candidates that produce
fenestration products and related materials compatible with the scope of
fenestration products incorporated into the Company's marketing plan. In
evaluating acquisition candidates, the Company will focus on those candidates
that display strong growth potential, a stable customer base and predictable
cash flows. Following consummation of its acquisitions, the Company intends to
implement financial and operational improvements, product-line enhancements and
synergistic add-on acquisitions to enhance the value of the acquired
enterprises. The Company currently intends to finance these acquisitions through
a combination of senior bank borrowings secured by assets of the acquired
company, subordinated or mezzanine debt funded by institutional investors, and
issuances of common and preferred stock of the Company. The Company and AAPH are
currently in negotiations regarding a number of potential acquisitions. If the
Company and AAPH fail to consummate their consolidation pursuant to the
Reorganization Agreement, however, it is unlikely that the Company would
unilaterally proceed with any of such potential acquisitions.
MANUFACTURING FACILITIES
Forte currently conducts manufacturing operations at a 120,000 sq.
ft. facility located in Youngstown, Ohio. AAP currently conducts manufacturing
operations at a 350,000 sq. ft. facility located in Dubuque, Iowa and a 220,000
sq. ft. facility located in West Branch, Michigan. The Company currently expects
to continue manufacturing operations at all of these facilities following
closing of the AAP acquisition transaction. AAP also operates a 30,000 sq. ft.
manufacturing facility in Detroit, Michigan through its subsidiary Mallyclad
Corp. which, as described above, will either be sold or merged into AAP prior to
closing of the acquisition of AAP by the Company. Management believes the
Company's current manufacturing facilities (together with the AAP manufacturing
facilities following the closing of the AAP acquisition) are sufficient to meet
its current and projected manufacturing needs.
DISCONTINUED BUSINESSES
Prior to November of 1995, the Company was engaged in the computer
software publishing business through its operating division known as Computer
Easy, Inc. ("CEI"). The business of CEI consisted primarily of publishing and
marketing applications software, educational software and entertainment software
products through major software distributors for resale in national software and
computer retail chain stores, discount stores, warehouse stores and other retail
outlets. CEI contracted with software developers to publish software programs,
generally on an exclusive worldwide basis. CEI also developed software in-house
through internal research and development and through contracting with
independent computer programmers to develop proprietary software products for
CEI. After the introduction by Microsoft Corporation of the new Windows 95
personal computer operating system in 1995, CEI faced significant potential
costs to modify its software products to be compatible with the Windows 95
operating system. In addition sales of the Company's software products had
decreased significantly in the preceding months as the market anticipated the
release of Windows 95. As a result,
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although the software publishing business historically generated a significant
portion of the Company's revenues, management of the Company concluded that it
was in the best long-term interest of the Company to discontinue the operations
of the software publishing division. On August 30, 1995, the Company reached a
tentative agreement to sell assets constituting the principal software
publishing business of CEI to International Microcomputer Software, Inc.
("IMSI"). The parties subsequently entered into a definitive Purchase Agreement,
and the closing of the transaction occurred on November 3, 1995. The Company
booked a provision of $50,000 at December 31, 1995 for expected operating losses
of the remaining software publishing business during the phase-out period.
Prior to August of 1996, the Company was also engaged in the
computer disk duplication and fulfillment business through a wholly owned
subsidiary known as Arizona Disk Fulfillment, Inc. ("ADF"). ADF was originally
incorporated under the laws of Arizona on November 1, 1991. The Company acquired
all of the issued and outstanding common stock of ADF in June of 1994. ADF's
largest customer was CEI, and the discontinuance of the Company's software
publishing business in 1995 (as discussed above) had a significant adverse
impact on ADF's operations. In addition, ADF did not have CD-ROM duplication
capabilities, which had an increasing negative impact on ADF's operations as
demand for CD-ROM based software increased. As a result of these changes in
ADF's business, the Company concluded in late 1995 that it was in the best
long-term interest of the Company to discontinue the operations of its computer
disk duplication and fulfillment division through the divestiture of the
Company's ownership of ADF. The Company classified ADF as discontinued
operations effective December 31, 1995 and booked a provision of $80,000 at such
date for expected operating losses on the disk duplication and fulfillment
business of ADF during the disposal period. On August 5, 1996, the Company
entered into a stock purchase agreement pursuant to which it agreed to sell one
hundred percent (100%) of the issued and outstanding common stock of ADF to
Beverly and James W. Schmidt. Mr. Schmidt had served as president of ADF since
1993. The sale of ADF by the Company was fully consummated in August of 1996.
INTELLECTUAL PROPERTY
Neither the Company nor Forte owns any copyrights, patents or
trademarks. In connection with the acquisition by Forte of certain product lines
from Season-All Industries, Inc. in July of 1993, Forte acquired the right to
use the "Season-All" name for the specific product lines acquired. The Company
is not aware of any of its products and/or processes infringing any U.S. or
foreign patent rights of any other party.
EMPLOYEES
As of September 30, 1996, the Company and Forte had a total of 36
employees. The Company believes that its relations with its employees are good.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is an historical review of the Company's financial
and operating results for the periods indicated and should be read in
conjunction with the financial statements of the Company as at and for the year
ended December 31, 1995 and for the nine-month period ended September 30, 1996.
Results of Operations
The following table sets forth the percentage of revenue
represented by certain items reflected in the Company's consolidated Statement
of Operations for the periods indicated.
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
1995 1994 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of Revenue 83.7 78.9 79.2 81.2
----- ----- ----- -----
Gross Profit 16.3 21.1 20.8 18.8
Operating Costs:
Selling, general and
administrative 13.7 22.5 18.9 12.2
Other Expenses 4.5 4.5 4.8 4.5
----- ----- ----- -----
Income (Loss) from
Continuing Operations
before Income Taxes (1.9) (5.9) (2.9) 2.1
Income Tax Benefit
(Expense) 1.0 .1 1.1 .8
----- ----- ----- ----
Income (Loss) from
Continuing Operations (.9) (5.8) (1.8) 1.3
Discontinued Operations (25.7) (4.2) (2.5) (11.6)
----- ----- ----- -----
Net Income (Loss) (26.6)% (10.0)% (4.3)% (10.3)%
===== ===== ===== =====
</TABLE>
Year Ended December 31, 1995 Compared to Year Ended December 31,
1994
Revenue. For the year ended December 31, 1995, revenue increased
by $1,029,520, or 23.4%, to $5,426,260 from $4,396,740. This increase was due to
contract revenue recognized under the two significant contracts acquired under
the Season-All acquisition. These contracts were materially completed by
December 31, 1995.
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Cost of Revenue. For the year ended December 31, 1995, cost of
revenue increased by $1,071,605, or 30.9%, to $4,540,722 from $3,469,117. This
increase was due primarily to the Season-All contracts as mentioned above. As a
percentage of sales, cost of revenue increased by 4.8% for the year ended
December 31, 1995. This increase was mainly attributable to unabsorbed
manufacturing costs resulting from excess capacity during the latter part of the
year. Management of the Company believes it has taken corrective steps to
eliminate the excess capacity costs.
Selling, General and Administrative Expenses. For the year ended
December 31, 1995, selling, general and administrative expenses decreased by
$241,948, or 24.4%, to $747,659 from $989,607. This decrease was due to the fact
that Forte, Inc. incurred significant professional, travel and related expenses
during 1994 in conducting due diligence procedures relating to potential merger
candidates.
Other Expenses. For the year ended December 31, 1995, other
expenses increased by $44,014, or 22.1%, to $243,388 from $199,374. This
increase was primarily due to an increase in interest expense resulting from
higher interest rates on long-term debt.
Discontinued Operations. For the year ended December 31, 1995,
discontinued operations increased by $963,079, or 516.6%, to $1,149,518 from
$186,439. This increase was due to the Company's decision in 1995 to discontinue
the software publishing and disk duplication businesses and the subsequent
writedown of assets.
Nine Month Period Ended September 30, 1996 Compared to the Nine
Month Period Ended September 30, 1995
Revenue. For the nine month period ended September 30, 1996,
revenue decreased by $1,726,175, or 39.6%, to $2,635,113 from $4,361,288. This
decrease was due to the completion of two major contracts which were assumed in
the acquisition of the Season-All product lines. These two contracts amounted to
approximately $3,800,000 and were materially completed by December 31, 1995.
Cost of Revenue. For the nine month period ended September 30,
1996, cost of revenue decreased by $1,454,334, or 41.1%, to $2,087,032 from
$3,541,366. This decrease was due primarily to the conclusion of the Season-All
contracts as mentioned above. As a percentage of sales, cost of revenue
decreased by 2% for the nine month period ended September 30, 1996 as compared
to the nine month period ended September 30, 1995. This improvement in cost of
revenue is due to a significant amount of revenue being recognized on a contract
with an above average gross profit margin during the nine month period ended
September 30, 1996.
Selling, General and Administrative Expenses. For the nine month
period ended September 30, 1996, selling, general and administrative expenses
decreased by $35,704, or 6.7%, to $497,196 from $532,900. This decrease was due
to an allocation of overhead costs to accrued discontinued operating costs. This
allocation represents an estimated portion of costs attributable to the two
discontinued divisions of the Company. This allocation of overhead costs to
accrued discontinued operating costs during the nine months ended September 30,
1996, was offset by increased costs in administrative compensation, travel and
related expenses of approximately $121,000.
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Other Expenses. For the nine month period ended September 30,
1996, other expenses decreased by $67,571, or 34.7%, to $127,393 from $194,964.
This decrease was due to the gain on the sale of the Company airplane and
several non-producing manufacturing assets.
Discontinued Operations. For the nine month period ended September
30, 1996, discontinued operations decreased by $495,383, or 87.1%, to $65,607
from $508,012. This decrease was due to the Company's decision in 1995 to
discontinue the software and disk duplication divisions. No further costs are
anticipated to be incurred in relation to discontinued operations.
Seasonality
Historically, the Company experiences little seasonality variation
in the recognition of revenue. Revenue recognition is dependent upon the Company
obtaining contracts for fenestration products. Such contracting revenue will
vary based upon the cyclical nature of construction activity. However, the
Company has found no identifiable trend related to these cycles.
Liquidity and Capital Resources
The Company utilized approximately $630,000 in operating
activities for the nine month period ended, September 30, 1996. This deficit in
operating cash flow was funded through the sale of assets in the amount of
$250,000, an increase in net long-term borrowing of approximately $480,000, and
the sale of treasury stock of $113,000. In addition, the Company incurred
approximately $97,000 of additional capital expenditures during this period.
In January, 1996, the Company restructured its long-term debt with
its principal bank, Second National Bank of Warren, Ohio. The debt restructure
consolidated nine existing loans, provided additional working capital, and
contains a fifteen year amortization period (with a call provision in five
years).
The Company is currently anticipating a consolidation transaction
with AAP Holdings, Inc. ("AAPH"), which will be accomplished through the
issuance of convertible preferred stock of the Company in exchange for common
stock of AAPH's principal operating subsidiary, American Architectural Products,
Inc. ("AAP"). The Company does not currently anticipate any material capital
expenditures in relation to either its existing operation, or the operations of
AAP.
The Company's business plan for 1997 and subsequent years
contemplates growth through mergers and acquisitions with companies specializing
in the fenestration and related materials and components industries. This will
require integration of various products and marketing of the Company's expanded
product line as the Company grows. The Company is committed to building its
management team to accommodate this growth. In order to finance its growth
plans, the Company intends to secure capital from a variety of sources.
Potential sources of capital may include, but are not limited to, expansion of
the Company's existing credit lines, financing of the Company's real and
personal property, private placements of the Company's common and preferred
stock, issuances by the Company of debt securities, and public offerings of the
Company's common and preferred stock.
ITEM 2. LEGAL PROCEEDINGS
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The Company is a defendant in a lawsuit involving claims relating
to an employment agreement to which the Company was a party. The plaintiff seeks
actual and punitive damages in excess of $129,000. The Company believes this
suit is without merit and intends to vigorously defend this position.
Neither the Company nor Forte is subject to any other legal
proceedings, except routine litigation arising out of the ordinary course of
their respective businesses. There are no proceedings now pending or, to the
Company's knowledge, threatened with regard to any Federal, state or local
environmental laws. There are no material proceedings in which any director,
officer or affiliate, any owner of record or beneficially more than 5% of any of
voting securities or security holder is a party adverse to the Company or which
has a material interest adverse to the Company.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's principal administrative offices and corporate
headquarters are located at 1350 Albert Street, Youngstown, Ohio, in a building
owned by Forte. All of Forte's manufacturing operations, including research,
product development and production, are conducted in three (3) separate
buildings located at 1350, 1410 and 1450 Albert Street, Youngstown, Ohio, all of
which are owned by Forte. All of these buildings are encumbered by mortgages
securing indebtedness of the Company and Forte.
All of the Company's and Forte's properties are deemed to be in
good operating condition, are adequately insured, comply with all local zoning
requirements and are not subject to any pending or threatened condemnation
proceeding or any other action of any governmental or regulatory body.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares
of Common Stock of the Company as of September 30, 1996 by each director and
executive officer, by all directors and executive officers as a group and by all
persons known by the Company to be the beneficial owners of more than 5% of the
Company's Common Stock:
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Held Ownership
- ---------------- ----------------- ---------
<S> <C> <C>
Frank J. Amedia 29,006,499(1) 58.0%
c/o Forte Computer Easy, Inc.
1450 Albert Street
Youngstown, Ohio 44505
John Masternick 3,399,458(2) 6.8%
20 E. Liberty Street
Girard, Ohio 44420
Anthony E. DePrima 2,029,692 4.0%
c/o Forte Computer Easy, Inc.
1450 Albert Street
Youngstown, Ohio 44505
</TABLE>
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<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Held Ownership
- ---------------- ----------------- ---------
<S> <C> <C>
Charles E. Trebilcock 383,333(3) 0.7%
c/o Forte Computer Easy, Inc.
1450 Albert Street
Youngstown, Ohio 44505
Dr. Chester W. Amedia 32,500(4) 0.1%
c/o Forte Computer Easy, Inc.
1450 Albert Street
Youngstown, Ohio 44505
All directors and executive officers as
a group(5 persons) 34,851,482(5) 69.7%
</TABLE>
- ---------------------------
(1) Mr. Amedia also has options to acquire an additional 4,262,440 shares at
$.375 per share. Cecilia Amedia, mother of Frank J. Amedia and Dr. Amedia,
on October 3, 1994, purchased 73,500 common shares. Mr. Amedia does not
have any beneficial interest in or control over the common shares
purchased by Cecilia Amedia. In connection with the Company's acquisition
of Forte in June of 1994, the Company is obligated to issue an additional
1,718,422 shares of common stock to Mr. Amedia, and Forte is obligated to
issue an addition 324,323 shares of the Company's common stock to Mr.
Amedia. Such shares have not yet been issued but are included in the
number of shares specified above as beneficially owned by Mr. Amedia.
(2) Mr. Masternick also has options to acquire an additional 455,258 shares at
$.375 per share.
(3) Includes 133,333 common shares owned individually and 250,000 shares held
by a custodian for the benefit of an individual retirement account of Mr.
Trebilcock. In addition, LGL Company, owned by Lionel Trebilcock, brother
of Mr. Trebilcock, owns 133,333 common shares. Mr. Trebilcock does not
have any beneficial interest in or control over the shares owned by either
LGL Company or Lionel Trebilcock. On October 3, 1994, Robert Trebilcock,
son of Mr. Trebilcock, purchased 125,000 common shares, and Mr. Trebilcock
does not have any beneficial interest in or control over such shares.
(4) Dr. Amedia also holds 32,500 shares as custodian under the Ohio Uniform
Transfer to Minors Act (the "UTMA"). Dr. Amedia does not have any
beneficial interest in the shares although, as custodian, he has the right
to vote the shares while held under UTMA. Cecilia Amedia, mother of Frank
J. Amedia and Dr. Amedia, purchased 73,500 common shares on October 3,
1994. Dr. Amedia does not have any beneficial interest in or control over
the common shares purchased by Cecilia Amedia.
(5) The directors and officers of the Company, as a group, also hold
outstanding options to purchase an aggregate of 5,717,698 additional
common shares.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, ages and positions of
directors and executive officers of the Company as of September 30, 1996. The
Board of Directors of the Company currently consists of 6 members. Directors
hold office until the next annual meeting of stockholders or until their
successors have been duly elected and qualified. Officers are chosen by and
serve at the discretion of the Board of Directors. A summary of the background
and experience of each of these individuals is set forth after the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frank J. Amedia 44 President, Chief Executive Officer
and Director
Anthony E. DePrima 57 Director
David M. McKelvey 44 Vice President and Corporate
Secretary
Landon Fortunato 32 Vice President and Treasurer
Dr. Chester W. Amedia 48 Director
John Masternick 70 Director
Arnold W. Parnell 60 Director
Charles E. Trebilcock 69 Director
</TABLE>
Frank J. Amedia has been a director of the Company since June 8,
1994, and now also serves as the President and Chief Executive Officer. Mr.
Amedia was the founder and served as President of Forte from its inception in
1989. Prior thereto, Mr. Amedia was a manufacturer's representative in the
fenestration business. Mr. Amedia is the brother of Dr. Chester W. Amedia, Jr.
Anthony E. DePrima has been a director of the Company since
August, 1986. From August of 1986 through June 14, 1994, he served as President
and Chief Executive Officer of the Company, and from June 14, 1994 through
December 31, 1995, he served as Executive Vice President of the Company. Since
December 31, 1995, Mr. DePrima has served as a business and legal consultant to
the Company. Mr. DePrima received a Bachelor of Science degree from Arizona
State University in 1963 and a Juris Doctorate from the University of Arizona in
1966. Mr. DePrima is a practicing attorney.
David M. McKelvey has served as Vice President of the Company
since August 1995. Prior to joining the Company, Mr. McKelvey was Executive Vice
President of Administration and Development of The Cafaro Company. From 1992
through 1995, Mr. McKelvey also served as Executive Regional Director of Real
Estate for The Cafaro Company and, in that capacity, supervised facilities
aggregating 30 million sq. ft. and approximately 600 administrative employees.
Mr. McKelvey has substantial experience in creating and packaging economic
development programs and in assessing and implementing administrative and
management programs.
Landon Fortunato is the Vice President and Treasurer of the
Company and has held the position of Treasurer since June 14, 1994. Mr.
Fortunato has been employed by Forte since 1990. Mr. Fortunato graduated from
Youngstown State University with a Bachelor of Science degree in
12
<PAGE> 13
Business Administration in 1989. He began working for Frank J. Amedia and
Associates in an administrative capacity before completing his undergraduate
degree. At Forte, he serves as Vice President and his duties include
implementing company policies and procedures, developing product costing and
pricing, EEOC Affirmative Action programs, labor standard compliance, accounting
and contract administration.
Dr. Chester W. Amedia, Jr. has been a director of the Company
since June 14, 1994. Dr. Amedia graduated from Kenyon College in 1970 and
attained his M.D. degree from The Ohio State University in 1973. Dr. Amedia is a
Board certified Nephrologist and is an Associate Professor of Clinical Internal
Medicine with Northeast Ohio University College of Medicine. Dr. Amedia is also
engaged in the practice of medicine with Northeast Ohio Community Group, Inc. in
Youngstown, Ohio. Dr. Amedia is the brother of Frank J. Amedia.
John Masternick has been a director of the Company since June 14,
1994. Mr. Masternick is a practicing attorney in Girard, Ohio, and is the
Chairman of the Board of Directors of Omni Manor, Inc. and Windsor House, Inc.,
owners and operators of skilled nursing and extended care facilities in
northeastern Ohio and western Pennsylvania. Mr. Masternick is a graduate of
Loyola University, Chicago, Illinois, and Youngstown College of Law.
Arnold W. Parnell has been a director since 1994. Mr. Parnell is
the President of ADP & Associates, a California real estate acquisition and
development firm which was formed in 1990. Prior to the formation of ADP &
Associates, Mr. Parnell was employed as Chief Technical Director of Industrial
Research Center, Inc., Gardenia, California. Mr. Parnell is a California
licensed professional mechanical engineer, holds a Bachelor of Chemical
Engineering degree from Villanova University, Master of Science in Engineering
from the University of Southern California, and has completed postgraduate
courses in computer hardware and software, business management, business
financing and real estate.
Charles B. Trebilcock has been a director of the Company since
June 14, 1994. Mr. Trebilcock is Chairman of the Liberty Industries, Inc., a
manufacturer of industrial packaging products and equipment.
None of the Company's directors or executive officers within the
past five (5) years (i) has filed any bankruptcy petition or been adjudicated as
a bankrupt or been convicted in any criminal proceeding or is subject to any
pending criminal proceedings, (ii) has been subject to any judgment order or
decree not subsequently reversed, suspended or vacated in any court of competent
jurisdiction permanently or temporarily enjoining, barring, suspending or
otherwise limiting involvement in any type of business securities or banking
opportunities, or (iii) has been found by a court of competent jurisdiction in a
civil action, the SEC or the Commodities Future Trading Corporation to have
violated a federal or state securities or commodities law.
ITEM 6. EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the
Company's Chief Executive Officer and all other executive officers of the
Company whose total annual salary and bonus exceeds $100,000 (the "Named
Executive Officers") for services rendered in all capacities to the Company and
its subsidiary during the fiscal year ended December 31, 1995.
13
<PAGE> 14
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Long Term
ANNUAL COMPENSATION Compensation
- -----------------------------------------------------------------------------------------------------------------------
Other Annual Restricted All other
Name and Year Ended Salary Bonus Compensation Stock Compensation
Principal Position December 31, ($) ($) ($) Awards ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Amedia 1995 193,000 -0- -0- -0- -0-
President and
Chief Executive 1994 137,294 -0- -0- -0- -0-
Officer(1)
1993 30,000 -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------
Anthony E. DePrima 1995 120,000 -0- -0- -0- -0-
Executive Vice
President 1994 120,000 -0- 2,986 -0- -0-
1993 120,000 -0- 2,529 250,000 shares -0-
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) The compensation paid to Mr. Amedia for 1993 represent amounts paid for
the fiscal year of Forte ending September 30, 1993. The amount of
compensation set forth above for 1994 consists of $47,384 paid from
October 1, 1993 through June 7, 1994 (paid by Forte) and an additional
$89,910 paid to Mr. Amedia following the closing of the Forte acquisition
on June 7, 1994.
No stock options previously granted to the executive officers were
subject to repricing during the fiscal year ended December 31, 1995. The Company
does not have a long term incentive plan established for the benefit of its
executive officers or directors.
No stock options, stock appreciation rights or restricted stock
awards were granted as compensation to any officers, directors or employees of
the Company or its subsidiaries during either of the fiscal years ended December
31, 1994 or December 31, 1995.
COMPENSATION OF DIRECTORS
No cash remuneration was paid to the directors of the Company, in
their capacities as directors, during the financial year ended December 31,
1995. The Company reimburses directors for travel expenses incurred in
connection with attending meetings of the board of the directors.
EMPLOYMENT CONTRACTS
The Company was a party to an employment agreement with Anthony E.
DePrima which had a term extending through December 31, 1995 (subject to
renewal). Mr. DePrima's base compensation under this agreement was $120,000 per
annum, plus an incentive bonus equal 5% of the net profits of the Company. The
Company also provided a car for Mr. DePrima and assumed the cost of his legal
malpractice insurance. The Company exercised its option to terminate Mr.
DePrima's employment agreement effective December 31, 1995. Effective May 15,
1996, the Company retained Mr. DePrima as a business and legal consultant for a
twelve-month term. In connection therewith, the Company agreed to pay Mr.
DePrima a consulting fee of $1,500 per month.
14
<PAGE> 15
ADF was, at the time of the sale by the Company of the common
stock of ADF, a party to an employment agreement with James W. Schmidt. Mr.
Schmidt, along with his wife, purchased ADF from the Company in August of 1996.
Accordingly, the Company has no ongoing liability to Mr. Schmidt with respect to
this employment agreement.
STOCK OPTIONS
In May of 1992, the Board of Directors of the Company adopted an
Employee Incentive Stock Option Plan (the "Option Plan"). Options to purchase an
aggregate of up to 5,000,000 shares of the Company's common stock are authorized
under the Option Plan. Options granted under the Option Plan have a maximum
duration of ten (10) years from the date of grant. In connection with the
acquisition of Forte in June of 1994, Mr. Amedia and Mr. Masternick (the former
shareholders of Forte) received options to purchase an aggregate of 4,717,698
shares of the Company's common stock at $.375 per share. The aforementioned
options were issued in contemplation of the Company effectuating a reverse stock
split. Until such reverse stock split is effectuated or until such time as
additional shares of the Company's common stock are authorized or purchased as
treasury shares, these options will not be exercisable.
As of December 31, 1995, options to purchase a total of 5,815,548
shares of the Company's common stock were outstanding, with exercise prices
ranging from $.25 to $.50 per share.
During the year ended December 31, 1995, the Company sold
approximately 150,000 shares of its Common Stock subject to "put" options which
provide the purchasers the right to sell the shares back to the Company at a
price of $.625 per share one year after the date of issuance or $.75 per share
two years after the date of issuance. At December 31, 1995, the Company accrued
a reserve of $75,000 for exercise of the put options.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The board of directors of the Company on November 2, 1993,
authorized the issuance of 250,000 shares each to Anthony E. DePrima and D. Jess
Riddle, both of whom were officers and directors of the Company at the time, to
replace shares which each of them had transferred to John S. Martinez in
conjunction with a prior loan made to the Company by Mr. Martinez.
Pursuant to an Agreement and Plan of Reorganization dated on May
27, 1994, which was consummated on June 8, 1994 (as amended, the "Forte
Agreement"), Forte became a wholly owned subsidiary of the Company. Pursuant to
that transaction, as modified, the Company agreed to issue to the prior Forte
shareholders a total of 32,479,290 shares of the Company's common stock,
consisting of 29,346,499 shares to Amedia, of which 27,628,077 have been issued
(with the balance of 1,718,422 to be issued by the Corporation when there are
sufficient authorized shares available), and 3,132,791 shares to Masternick. As
part of the same transaction, options were granted to Amedia and Masternick to
purchase 4,262,440 shares and 455,258 shares, respectively, of the Company's
common stock at $.375 per share. In addition, the Company realized $250,000 from
the sale of 1,000,000 Series A Preferred shares at $0.25 per share to Forte
under the Forte Agreement. Forte had assigned its rights to acquire the Series A
Preferred shares at $.37 per share to a group of accredited investors, resulting
in the investors purchasing 675,677 shares and Forte acquiring 324,323 shares.
The 324,323 shares of the Company's common stock acquired by Forte are to be
issued to Amedia as a former shareholder of Forte.
15
<PAGE> 16
These shares have not yet been issued and are in addition to the 1,718,422
shares which, as noted above, the Company is obligated to issue to Amedia.
In connection with the Company's acquisition of the stock of Forte
in June of 1994, the Company also entered into an agreement with D. Jess Riddle,
a former officer and director of the Company, regarding certain matters. Under
this Agreement, for a period of ninety (90) days following the closing of the
transaction, the Company had a right of first refusal to acquire 500,000 shares
of Company common stock held by Riddle. During the same time period, the Company
also had an exclusive option to acquire 1,200,000 shares of Company common stock
held by Riddle at $.40 per share. If the option was not exercised in the first
ninety (90) days of the option period, then the Company had an additional two
hundred seventy (270) days to acquire such shares at $.50 per share. If the
Company purchased all 1,200,000 shares from Riddle, then simultaneously with the
payment for the last shares, the Company could purchase at $.15 per share
certain options previously granted to Riddle to acquire 1,000,000 shares (the
"Riddle Option"). If, within one hundred eighty (180) days after the closing of
the transaction, the market price of the Company's common stock exceeded $1.50
per share, then the exercise price for the Company to acquire any unpurchased
portion of the 1,200,000 Riddle shares would be adjusted to $.75 per share. The
Company also agreed to retain Riddle as a consultant for six (6) months
following closing of the transaction at a compensation rate equal to his base
salary (with no commission override) as in effect prior to the closing. The
Company also agreed to pay Riddle $3,000 on the first day of each month until
the first 500,000 Riddle shares were sold, or the end of ninety (90) days after
the close of the transaction, whichever occurred first. On September 15, 1994,
Riddle and Forte agreed to several modifications of this Agreement, as follows:
(i) Riddle was permitted to sell 500,000 shares at $.60
per share to four (4) separate investors.
(ii) Designees of Forte, purchased 750,000 shares from
Riddle at $.40 per share.
(iii) Forte, or its designees, could purchase the remaining
500,000 shares owned by Riddle at $.50 per share
prior to the expiration date of the original three
hundred sixty (360) day period following closing of
the Forte acquisition transaction.
(iv) If Forte purchased all the remaining 500,000 shares
owned by Riddle within the three hundred sixty (360)
day period following closing of the Forte acquisition
transaction, the Company could repurchase the Riddle
Option at $.15 per share.
Subsequent to December 31, 1995, the Company entered into an
agreement with Riddle pursuant to which the Company would purchase all remaining
shares of the Company's common stock owned by Riddle. The shares were acquired
in exchange for discharge of indebtedness owing from Riddle to the Company and
the discounted value of future services which the Company had previously agreed
to provide to Riddle, in the aggregate amount of $372,000.
Under the Forte Agreement, the Company entered into separate stock
option agreements, dated June 7, 1994, whereby the Company obtained the right,
for a period of one (1) year from June 8, 1994, to purchase 30% of the shares
owned by certain large shareholders of the Company for $.50 per share. Anthony
E. DePrima, a director and former officer of the Company, was a party to such an
agreement with the Company. The Company did not exercise any of these options,
which expired on June 8, 1995.
16
<PAGE> 17
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company's authorized common stock consists of 50,000,000
shares, $.01 par value per share. As of September 30, 1996, 48,610,111 shares of
common stock were issued and 48,605,794 shares were outstanding. Holders of the
Company's common stock are entitled to one vote for each share held of record by
them of record on all matters submitted to a vote of the shareholders. At any
meeting of the Company's shareholders, the presence, in person or by proxy, of a
majority of the outstanding shares of common stock constitutes a quorum. Unless
otherwise provided by Utah law or by the Company's articles of incorporation,
the affirmative vote of a majority of the shares of common stock represented at
any such meeting constitutes an act of the Company's shareholder. Pursuant to
Utah law, the Company generally has the right to redeem outstanding shares of
common stock. No holder of the Company's common stock has any preemptive rights
to additional shares of common stock issued in the future. Holders of common
stock will be entitled to receive dividends ratably when, as and if declared by
the Board of Directors of the Company in its discretion out of funds legally
available. In the event of liquidation, dissolution or winding up of the
Company, the holders of common stock will be entitled to share ratably in all
assets of the Company remaining after payment of liabilities and liquidation
preferences to the holders of any shares of preferred stock then outstanding.
The holders of the common stock will have no preemptive, conversion or other
subscription rights and will not be subject to further calls or assessments by
the Company. There are no redemption or sinking fund provisions applicable to
the common stock. The rights of holders of the Company's common stock will be
subject to the rights of the holders of any preferred stock which may be
outstanding from time to time.
PREFERRED STOCK
The Company's authorized capital also includes 20,000,000 shares
of preferred stock, $.01 par value per share, none of which shares are currently
issued and outstanding. The Company's preferred stock is issuable, from time to
time, in one or more series, with such powers, designations, preferences and
relative participating, optional or other rights, and qualifications,
limitations or restrictions thereof, as stated and expressed in a resolution or
resolutions providing for the issuance of each such series adopted by the Board
of Directors of the Company. All shares of any one series of the Company's
preferred stock are required to be alike in every particular. Except to the
extent otherwise provided in the resolution or resolutions providing for the
issuance of any series of the Company's preferred stock, the holders of shares
of such series will have no voting rights except as may be required by Utah law.
AUDITORS, REGISTRAR AND TRANSFER AGENT
The auditors of the Company are Semple & Cooper, P.L.C., 2700
North Central Avenue, Suite 1100, Phoenix, Arizona. The Registrar and Transfer
Agent for the common shares is American Securities Transfer, Inc. of Denver,
Colorado.
17
<PAGE> 18
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The shares of common stock of the Company are not listed on any
exchange. Brookstreet Securities, Paulson Investment, Paragon Capital
Corporation, and Fahnestock & Co. have served as market makers for the Company's
common stock shares. The following table represents the range of high and low
bid prices for each quarter commencing January 1, 1994, through September 30,
1996. The range of bids reflects actual transactions for the shares traded
during these periods, separate and apart from any interdealer prices, without
taking into account any retail mark up, mark down or commission.
<TABLE>
<CAPTION>
Period High Low
------ ---- ---
<S> <C> <C>
1994
1st quarter .50 .25
2nd quarter .50 .25
3rd quarter .875 .5625
4th quarter .625 .4025
1995
1st quarter .50 .3125
2nd quarter .5625 .3125
3rd quarter .3125 .125
4th quarter .125 .0625
1996
1st quarter .25 .125
2nd quarter .125 .03125
3rd quarter .5625 .03125
</TABLE>
There were approximately 463 holders of record of the shares of
the Company as of September 30, 1996. The Company has never paid any dividends
on its outstanding common shares. The current board of directors of the Company
does not presently intend to implement a policy respecting the payment of
regular cash dividends on the common shares and it is unlikely that dividends
will be paid on the common shares in the immediate future. The board of
directors will review this policy from time to time having regard to the
financial condition of the Company and other factors that the board of directors
may consider appropriate in the circumstances. In addition, the ability of the
Company and Forte to pay dividends is limited by various loan and financing
agreements to which they are parties. As of September 30, 1996, options to
purchase a total of 5,815,548 shares of the Company's common stock were
outstanding.
ITEM 2. LEGAL PROCEEDINGS
See Part I, Item 2.
II-1
<PAGE> 19
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three (3) years, the Company has made sales of
securities as described below. In each instance there were no underwriters and
the securities were sold as part of private placements.
To the best of the Company's knowledge, in each instance each purchaser was an
accredited investor, as defined by Regulation D under the Securities Act of
1933, as amended, and each purchaser was acquiring the shares for purposes of
investment only.
<TABLE>
<CAPTION>
Date Title Amount
- ---- ----- ------
<S> <C> <C>
March 31, 1994 Common Voting 1,900,000 to former shareholders of ADF in
exchange for all the issued and outstanding
shares of ADF
June 8, 1994 Series A Preferred 1,000,000 sold to Forte at $.25 per share, of
which 675,677 were assigned by Forte to
seven (7) individual investors at $.37 per
share. All of these shares were converted to
Common Voting effective as of December 8,
1994
June 8, 1994 Common Voting 32,479,290 shares in exchange for all shares
of Forte, of which 30,760,868 have been
issued to the shareholders of Forte, together
with options to acquire 4,717,698 shares at
$.375 per share
June 14, 1994 Common Voting 337,500 shares sold to three (3) investors at
$.40 per share
July 25, 1994 Common Voting 100,000 shares at $.50 per share sold to one
(1) investor, 100,000 at $.60 per share sold to
three (3) investors, 97,272 shares at $.55 per
share issued in exchange for cancellation of
indebtedness of Forte, and 30,000 shares at
$.55 per share sold to one (1) investor
October 11, 1994 Common Voting 800,002 shares issued to Debenture holders of
Forte in exchange for $300,000 of principal
amount of Debentures
December 8, 1994 Common Voting 1,000,000 shares issued pursuant to
conversion of Series A Preferred Shares
</TABLE>
II-2
<PAGE> 20
<TABLE>
<CAPTION>
Date Title Amount
- ---- ----- ------
<S> <C> <C>
December 29, 1994 Common Voting 8,333 shares sold to one investor for $5,000
and 157,660 shares issued to a creditor in
exchange for cancellation of indebtedness
May 19, 1995 Common Voting 100,000 shares sold for $50,000, subject to
"put" options which allow the purchaser to
sell the shares back to the Company for $.625
per share on May 19, 1996 and $.75 per share
on May 19, 1997
May 23, 1995 Common Voting 266,667 shares issued to Debenture holders of
Forte in exchange for $100,000 principal
amount of Debentures
June 14, 1995 Common Voting 50,000 shares sold for $25,000, subject to
"put" options which allow the purchaser to
sell the shares back to the Company for $.625
per share on June 14, 1996 and $.75 per share
on June 14, 1997
September 24, 1996 Common Voting 452,000 shares sold for $113,000
</TABLE>
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 16-10(a), et seq., of the Utah Revised Business
Corporation Act, effective July 1, 1992, the Company may indemnify an individual
made a party to a proceeding because he is or was a director against liability
incurred in the proceeding if (i) his conduct was in good faith and (ii) he
reasonably believed that his conduct was in or not opposed to, the best
interests of the corporation and (iii) in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. The Company may
not indemnify a director in connection with a proceeding by or in the right of
the Company in which the director was adjudicated liable to the Company, or in
connection with any other proceeding charging the director derived an improper
personal benefit, whether not involving action in his official capacity in which
proceedings he was adjudged liable on the basis that he derived an improper
personal benefit. The indemnification also is limited to reasonable expenses
incurred in connection with the proceeding. The Articles of Incorporation of the
Company do not limit the indemnification provisions set forth in the Utah
Revised Business Corporation Act and, accordingly, the Company is required by
law to indemnify a director who was successful on the merits or otherwise in the
defense of any proceeding, or in the defense of any claim, issue or matter in
the proceeding to which he was a party because he is or was a director, against
reasonable expenses incurred in connection with the proceeding or claim with
respect to which he has been successful. The Company is further authorized to
reimburse the reasonable expenses incurred in advance of final disposition of
the proceedings if (i) the directors furnishes the Company a written affirmation
of his good faith believe that he has met the applicable standard conduct
required by law, (ii) the director furnishes a written undertaking executed
personally or on his behalf to repay the advance if it is ultimately determined
that he did not meet the standards of conduct, and (iii) a determination is made
that the facts then unknown by those making the determination would not preclude
indemnification. The undertaking for reimbursement is an unlimited general
obligation of the director and is not required to be secured and
II-3
<PAGE> 21
may be accepted without reference to the financial ability to make repayment. In
addition, since the Articles of Incorporation of the Company do not otherwise
provide, an application may be made to the court undertaking the proceedings or
any other court of competent jurisdiction to order indemnification (i) if the
court determines that the director is entitled to mandatory indemnification, in
which event the court shall also order the Company to pay the director's
reasonable expenses incurred to obtain court ordered indemnification, and (ii)
if the court determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances whether or not the
director meets the applicable standard of conduct or was adjudicated liable, the
court may order indemnification as the court determines to be proper, except
that the indemnification with respect to any proceeding to which liability has
been adjudged under which the director was determined to be liable to the
Company or received an improper personal benefit is limited to reasonable
expenses incurred.
The determination and authorization of indemnification is made by
the Board of Directors by a (i) majority vote of those present at a meeting in
which a quorum was present and only those directors not parties to the
proceedings shall be counted as satisfying the quorum, or (ii) if a quorum
cannot be obtained, by a majority vote of a committee of the Board of Directors
designated by the Board of Directors, which committee shall consist of two (2)
or more directors not parties to the proceedings, except that directors that are
parties to the proceedings may participate in the designation of directors for
the committee, or by special legal counsel selected by the Board of Directors or
committee, or if a quorum of directors or committee cannot be designated, by a
majority vote of the full Board of Directors in which selected directors who are
parties to the proceedings may participate or by the shareholders by majority of
the votes entitled to be cast by the holders of qualified shares present and in
person or by proxy at a meeting. For the shareholder determination, the majority
of the votes entitled to be cast of all qualified shares constitutes a quorum.
The provisions dealing with directors also extend to officer,
employees, fiduciaries or agents to the same extent as if each such person were
a director; provided, however, that indemnification in advance of expenses to an
officer, employee, fiduciary or agent who is not director is limited to the
extent that it is not consistent with public policy. The authorization for
reimbursement of officers, employees, fiduciaries and agents can be contained in
the Articles of Incorporation, By-Laws, general or specific action of the Board
of Directors or contract. The Company is further allowed to provide liability
insurance dealing with its indemnification obligations. The Articles of
Incorporation of the Company can limit any of the statutory indemnification
provisions. In addition, the Company may pay or reimburse expenses incurred by a
director in connection with a director's appearance as a witness in a proceeding
at a time when the director has not been made a defendant or respondent.
II-4
<PAGE> 22
PART F/S
FINANCIAL STATEMENTS
II-5
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of
Forte Computer Easy, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Forte Computer
Easy, Inc. and Subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above presents
fairly, in all material respects, the consolidated financial position of Forte
Computer Easy, Inc. and Subsidiaries as of December 31, 1995, and the
consolidated results of its operations, changes in stockholders' equity, and
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Semple & Cooper, P.L.C.
Phoenix, Arizona
May 28, 1996
F-1
<PAGE> 24
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) Year Ended
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash $ 255,549 $ 143,254
Accounts receivable, less allowance for
doubtful accounts and returns of
$0 and $299,939, respectively 198,394 437,160
Inventory 1,782,078 1,666,832
Prepaid expenses 15,002 31,474
Costs and estimated earnings in
excess of billings on
uncompleted contracts 43,574 246,472
----------- -----------
Total Current Assets 2,294,597 2,525,192
----------- -----------
Property, Plant and Equipment:
Land 74,969 74,969
Buildings and improvements 2,968,203 2,957,795
Equipment, machinery and tooling 1,839,282 2,099,581
Office furniture and equipment 85,423 122,709
Vehicles 171,725 140,787
Airplane - 207,600
----------- -----------
5,139,602 5,603,441
Less: accumulated depreciation (1,118,303) (1,196,182)
----------- -----------
4,021,299 4,407,259
----------- -----------
Other Assets:
Net assets of discontinued operations - 74,000
Goodwill, net 318,926 360,533
Other intangible costs, net 29,598 27,170
Deposits and other 2,913 3,467
----------- -----------
351,437 465,170
----------- -----------
$ 6,667,333 $ 7,397,621
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-2
<PAGE> 25
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED) Year Ended
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 242,000 $ 243,438
Revolving line of credit 107,906 107,906
Amount due officer 18,013 18,013
Accounts payable 353,673 596,369
Accrued liabilities 53,455 457,170
Net liabilities of discontinued
operations 209,945 -
Accrued costs of discontinued operations - 277,619
Billings in excess of costs
and estimated earnings on
uncompleted contracts 17,408 371,778
----------- -----------
Total Current Liabilities 1,002,400 2,072,293
----------- -----------
Long-Term Debt, Net of Current Portion 4,429,684 4,021,664
Lease Deposit 9,575 9,575
Deferred Tax Liability 92,273 160,573
----------- -----------
4,531,532 4,191,812
----------- -----------
Commitments - -
Stockholders' Equity:
Preferred stock - $.01 par value;
20,000,000 shares authorized; no
shares issued or outstanding - -
Common stock - $.01 par value;
50,000,000 shares authorized;
48,460,111 shares issued and
outstanding; 1,718,422 shares
subscribed 484,601 484,601
Paid-in capital 2,413,902 2,669,485
Common stock subscribed 79,143 79,143
Accumulated deficit (1,840,724) (1,727,609)
----------- -----------
1,136,922 1,505,620
Less: Treasury stock, 456,317
shares at cost (3,521) (372,104)
----------- -----------
1,133,401 1,133,516
----------- -----------
$ 6,667,333 $ 7,397,621
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-3
<PAGE> 26
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED) Years Ended
Nine Months Ended (UNAUDITED)
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues $ 2,635,113 $ 4,361,288 $ 5,426,260 $ 4,396,740
Cost of Revenues 2,087,032 3,541,366 4,540,722 3,469,117
----------- ----------- ----------- -----------
Gross Profit 548,081 819,922 885,538 927,623
Selling, General and
Administrative 497,196 532,900 747,659 989,607
----------- ----------- ----------- -----------
Income Loss 50,885 287,022 137,879 (61,984)
Other Income (Expense):
Gain on sale of assets 123,439 - - -
Other income (expense) 12,841 37,018 22,086 67,721
Rental income 71,905 67,596 86,929 68,750
Interest expense (285,646) (254,879) (352,403) (316,735)
Amortization of
intangibles (49,932) (44,699) - (19,110)
----------- ----------- ----------- -----------
Income (Loss) from Continuing
Operations before Provision
for Income Taxes (76,508) 92,058 (105,509) (261,358)
Provision for Income Tax
Benefit (Expense) 29,000 (34,900) 54,971 6,000
----------- ----------- ----------- -----------
Loss from Continuing Operations (47,508) (57,158) (50,538) (255,358)
Discontinued Operations:
Loss from operations of
software division and disk
fulfillment division (35,454) (560,990) (1,149,518) (186,439)
Loss on disposal of disk
fulfillment division (30,153) - (245,419) -
----------- ----------- ----------- -----------
Net Loss $ (113,115) $ (503,832) $(1,445,475) $ (441,797)
=========== =========== =========== ===========
Earnings per Share
Income (loss) from
continuing operations (-) - (-) (-)
Loss of discontinued
operations and operations
to be disposed of (-) (.01) (.03) (.01)
Income (loss) from disposal
of disk and fulfillment
division (-) - (-) -
----------- ----------- ----------- -----------
Net Income (Loss) $ (-) $ (.01) $ (.03) $ (.01)
=========== =========== =========== ===========
Weighted Average Shares
Outstanding 49,813,420 49,630,799 50,000,000 32,487,493
=========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-4
<PAGE> 27
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
For The Period From December 31, 1993 Through September 30, 1996
<TABLE>
<CAPTION>
Common
Shares Paid-in Stock
Preferred of Common Common Capital Subscribed
--------- --------- ------ ------- ----------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 $ - 12,901,809 $ 129,018 $ 566,004 $ -
Sale of 1,000,000
shares of
preferred stock 10,000 - - 240,000 -
Acquisition of
subsidiary
for stock - 1,900,000 19,000 505,400 -
Reverse merger and
conversion of S
Corporation
losses - 30,760,868 307,609 570,342 79,143
Sales of common
stock - 575,833 5,757 260,743 -
Common stock
issued in
payment of debt - 1,321,601 13,217 526,996 -
Preferred stock;
1,000,000 shares
converted to
common stock (10,000) 1,000,000 10,000 - -
Net loss
(unaudited) - - - - -
---------- ----------- ---------- ----------- -----------
Balance,
December 31, 1994 - 48,460,111 484,601 2,669,485 79,143
Acquisition of
456,317 shares of
treasury stock,
at cost - - - - -
Net loss - - - - -
--------- ----------- ---------- ----------- ----------
Balance,
December 31, 1995 - 48,460,111 484,601 2,669,485 79,143
Sale of Treasury
Shares - - - (255,583) -
Net loss
(unaudited) - - - - -
---------- ----------- ---------- ----------- ----------
Balance,
September 30, 1996 $ - 48,460,111 $ 484,601 $ 2,413,902 $ 79,143
========== =========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Treasury Accumulated Total
Stock Deficit Equity
----- ------- ------
<S> <C> <C> <C>
Balance,
December 31, 1993 $ - $ (408,638) $ 286,384
Sale of 1,000,000
shares of
preferred stock - - 250,000
Acquisition of
subsidiary
for stock - - 524,400
Reverse merger and
conversion of S
Corporation
losses - 568,301 1,525,395
Sales of common
stock - - 266,500
Common stock
issued in
payment of debt - - 540,213
Preferred stock;
1,000,000 shares
converted to
common stock - - -
Net loss
(unaudited) - (441,797) (441,797)
---------- ----------- -----------
Balance,
December 31, 1994 - (282,134) 2,951,095
Acquisition of
456,317 shares of
treasury stock,
at cost (372,104) - (372,104)
Net loss - (1,445,475) (1,445,475)
---------- ----------- -----------
Balance,
December 31, 1995 (372,104) (1,727,609) 1,133,516
Sale of Treasury
Shares 368,583 - 113,000
Net loss
(unaudited) - (113,115) (113,115)
---------- ----------- -----------
Balance,
September 30, 1996 $ (3,521) $(1,840,724) $ 1,133,401
========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-5
<PAGE> 28
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net Income (Loss) $ (113,115) $ (503,832) $(1,445,475) $ (441,797)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by
operating activities:
Depreciation and
amortization 227,451 281,977 378,886 226,634
Amortization of software
development costs - 141,247 109,899 88,509
Amortization of
intangibles 49,932 65,201 76,078 48,973
Decrease in provision for
returns and doubtful
accounts - (71,947) (180,468) (37,250)
Gain on sale of assets (123,439) (77,601) - (3,188)
Increase (decrease) in
provision for inventory
obsolescence - - (284,540) 284,540
Impairment of intangible
assets of discontinued
operations - - 246,083 -
Cash received from purchase
of subsidiary - - - 61,413
Changes in Assets and Liabilities:
(Increase) Decrease in Assets:
Accounts receivable 174,660 591,626 1,272,684 (784,808)
Inventory (115,246) 416,386 908,156 (1,290,398)
Prepaid expenses 16,472 68,031 80,204 (25,253)
Costs and estimated
earnings in excess
of billings on
uncompleted
contracts 202,898 (44,541) 72,848 500,982
Deposits and intangibles (10,199) 5,641 5,433 12,921
Increase (Decrease) in
Liabilities:
Accounts payable (242,696) (385,410) (1,692,059) 547,967
Accrued liabilities (371,904) 25,055 (12,103) 136,373
Amount due officer - - 713 -
Accrued costs of
discontinued operations (207,827) - 277,619 -
Net liabilities of
discontinued operations 303,945 - - -
Billings in excess of costs
and estimated earnings on
uncompleted contracts (354,370) 124,025 231,618 107,460
Net deferred tax liability (68,300) (308,700) (154,828) (10,600)
---------- ---------- ----------- -----------
Net cash used by
operating activities (631,738) 327,158 (109,252) (577,792)
---------- ---------- ----------- -----------
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-6
<PAGE> 29
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Investing
Activities:
Capital expenditures (97,376) (121,943) (153,285) (163,416)
Computer software
development costs - (30,102) (30,102) (255,542)
Proceeds from the sale
of assets 250,000 50,000 686,250 -
Proceeds from trade-in of
assets - - - 28,498
Acquisition of subsidiaries - - - (150,000)
---------- ---------- ----------- -----------
Net cash used by
investing activities 152,624 (102,045) 502,863 (550,460)
---------- ---------- ----------- -----------
Cash Flows from Financing
Activities:
Proceeds from sale of
treasury stock $ 113,000 $ - $ 75,000 $ 516,500
Proceeds from debt 2,942,000 337,971 337,971 2,926,835
Principal payments on
debt (2,463,591) (661,085) (785,959) (2,053,823)
Payments on amount due
officers, net - (20,164) - (90,442)
---------- ---------- ----------- -----------
Net cash provided by
financing activities 591,409 (343,278) 372,988 1,299,070
---------- ---------- ----------- -----------
Net Increase in Cash 112,295 (118,165) 20,623 170,818
Cash, Beginning of Year 143,254 122,631 122,631 (48,187)
---------- ---------- ----------- -----------
Cash, End of Year $ 255,549 $ 4,466 $ 143,254 $ 122,631
========== ========== =========== ===========
</TABLE>
F-7
<PAGE> 30
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Supplemental Disclosure of Non-Cash Investing and Financing Activities
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Payment of accrued
liability with equity
in a building $ 31,811 $ - $ - $ -
========== ========== =========== ===========
Negotiated accounts payable
settlement reductions of
discontinued operations $ - $ - $ 124,744 $ -
Acquisition of subsidiaries
with common stock - - - 2,170,261
Payment of accounts payable
with common stock - - - 140,213
Conversion of debentures
with common stock - - - 400,000
---------- ---------- ----------- -----------
$ - $ - $ 124,744 $ 2,710,474
========== ========== =========== ===========
Purchase of treasury stock
through the reduction of
accounts receivable and
accrual of expenses $ - $ - $ 372,104 $ -
========== ========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-8
<PAGE> 31
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business:
Forte Computer Easy, Inc. is a Corporation which was duly formed and
organized under the laws of the State of Utah. Through June 8, 1994,
the acquisition date of Forte, Inc. and Arizona Disk Fulfillment,
Inc., the Company was principally engaged in the business of software
publishing. Based upon the aforementioned acquisitions, the Company
expanded its operations through the acquired subsidiaries into
manufacturing of commercial and architectural fenestration products,
and into computer disk duplication and fulfillment services for
software publishers and technology based industries throughout the
United States.
In late 1995, the Company decided to discontinue its operations in the
software publishing and computer disk duplication and fulfillment
divisions, as disclosed in Note 11, Discontinued Operations.
Acquisition of Subsidiaries:
Effective June 8, 1994, the Company finalized the acquisition of
all of the outstanding stock of Forte, Inc. and Subsidiary, an Ohio
corporation and Arizona Disk Fulfillment, Inc., an Arizona
corporation.
The acquisition of Forte, Inc. was effected through the exchange of
32,479,290 (unaudited) shares, of which 1,718,422 (unaudited) shares
are subscribed of the Company's common stock for all of the
outstanding shares of Forte, Inc. under a tax-free reorganization
within the meaning of Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended. The acquisition was accounted for financial
statement purposes as a reverse acquisition, with Forte, Inc. as the
acquiring company.
The acquisition of Arizona Disk Fulfillment, Inc. was completed
through the payment of $150,000 (unaudited) and the issuance of
1,900,000 (unaudited) shares of the Company's common stock for all of
the outstanding shares of Arizona Disk Fulfillment, Inc. This
transaction was also completed as a tax-free reorganization.
For financial accounting purposes, the acquisitions are accounted for
as purchases in accordance with Accounting Principles Board Opinion
No. 16. For tax reporting purposes, these acquisitions were structured
as tax-free reorganizations.
Principles of Consolidation:
The consolidated financial statements include the accounts of Forte
Computer Easy, Inc. and its wholly-owned subsidiaries, Forte, Inc.
and Arizona Disk Fulfillment, Inc. All significant inter-company
balances and transactions have been eliminated in consolidation.
F-9
<PAGE> 32
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Unaudited Financial Statements:
The unaudited interim consolidated financial statements include all
adjustments for normal recurring accruals considered necessary to
present fairly the Company's consolidated statements for the periods
presented. Operating results for the nine months ended September 30,
1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
Revenue Recognition:
Computer Software:
The Company recognizes its computer software sales revenue in
accordance with the American Institute of Certified Public Accountants
Statement of Position 91-1 regarding software revenue recognition.
Product revenue is recognized, net of an allowance for estimated
returns, upon product shipment. The Company has established a program
which enables distributors to return products for credit against
future purchases.
Contracting Revenues:
The Company recognizes contract manufacturing income from fixed-price
and modified-fixed price contracts on the percentage-of-completion
method of accounting. Direct labor is allocated on a standard cost
basis, based on the estimated time to manufacture each type of
production unit, and manufacturing overhead is allocated by
manufacturing labor hours. Installation labor is allocated by contract
as incurred. Contract material costs are accumulated on a standard
cost basis based upon the type of production unit manufactured under
contract. The amount recorded as the percentage complete for each
individual contract is based upon the units of production method. The
cost of materials purchased but not utilized in completion of the
manufacturing process are not considered in determining the progress
toward completion.
F-10
<PAGE> 33
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Incurred contract costs include all direct material utilized, labor
costs, installation costs and those indirect costs related to contract
performance, such as indirect labor, supplies, tools, repairs, factory
costs, and depreciation. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions and estimated
profitability, including those arising from final contract
settlements, may result in revisions to cost and revenue and are
recognized in the period in which the revisions are determined.
The asset, "Costs and Estimated Earnings in Excess of Billings on
Uncompleted Contracts" represents revenues recognized in excess of
amounts billed, and the liability "Billings in Excess of Costs and
Estimated Earnings on Uncompleted Contracts" represents revenues
recorded in excess of recognized costs and estimated earnings.
Concentrations of Risk:
The Company sells its software inventory on credit primarily to
software distributors and national retailers who market the Company's
products and other software products principally in the United States.
The majority of the Company's consolidated accounts receivable balance
as of December 31, 1995 is due from six (6) major customers.
In addition, the Company currently has two (2) major contracts in
process from its fenestration operations, which together represent
approximately fifty-four percent (54%) of the total contracts in
process at December 31, 1995. These two contracts were substantially
completed at December 31, 1995.
Accounts Receivable:
The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance method recognizes bad debt expense
as a percentage of accounts receivable, based on a review of the
individual accounts outstanding and the Company's prior history of
uncollectible accounts receivable.
Inventory:
Inventories are stated at the lower of cost or market. Cost is
determined on the weighted average basis for software product
inventory, and the first-in, first-out basis for all other inventory.
F-11
<PAGE> 34
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation is
computed by the straight-line method over the estimated useful lives
of the related assets for financial reporting purposes and on an
accelerated method for tax purposes. The estimated useful lives are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Buildings 31.5 - 40 years
Leasehold improvements 5 - 7 years
Office furniture and
fixtures 7 - 10 years
Equipment 5 - 15 years
</TABLE>
Maintenance and repairs that neither materially add to the value of
the property nor appreciably prolong its life are charged to
operations as incurred. Betterments or renewals are capitalized when
incurred. For the nine months ended September 30, 1996 and 1995,
depreciation expense was $227,451 and $281,977 (unaudited),
respectively. For the years ended December 31, 1995 and 1994,
depreciation expense was $378,886 and $226,634, respectively.
Capitalized Software Development Costs:
The Company capitalizes software development costs in accordance with
Financial Accounting Standards Board Statement No. 86. Software
development costs not qualifying for capitalization are expensed as
research and development costs, as incurred. These costs totaled
approximately $175,708 and $238,000 (unaudited) for the years ended
December 31, 1995 and 1994, respectively.
Capitalized costs are amortized on a product-by-product basis using
straight-line amortization with useful lives of 3 to 5 years. The
Company evaluates the estimated net realizable value of each software
product at each balance sheet date and records write-downs to net
realizable value for any products for which net book value is in
excess of net realizable value. During the years ended December 31,
1995 and 1994, amortization of capitalized software development costs
charged to cost of revenues totaled $109,899 and $88,509 (unaudited),
respectively. Based upon management's decision to phase-out the
software division in 1995, all capitalized software development costs
were written off.
F-12
<PAGE> 35
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Goodwill:
Goodwill represents the excess of the cost of companies acquired over
the fair value of their net assets at the date of acquisition and is
being amortized on the straight-line method over 8 to 25 years.
Amortization expense charged to operations for the nine months ended
September 30, 1996 and 1995 was $41,602 and $39,447 (unaudited),
respectively. Amortization expense charged to operations for the years
ended December 31, 1995 and 1994 amount to $47,567 and $26,413
(unaudited), respectively.The Company evaluates the estimated net
realizable value of its goodwill at each balance sheet date, and
records writedowns if the carrying value exceeds the expected future
net operating cash flows from the related operations. If the expected
future net operating cash flows are less than the carrying value, the
Company recognizes an impairment loss equal to the amount by which the
carrying value exceeds the discounted expected future net operating
cash flows from the related operations. During the current year the
Company recognized an impairment of intangible assets of discontinued
operations in the approximate amount of $246,083.
Other Intangible Costs:
Other intangible costs are comprised primarily of deferred loan costs,
which are amortized over the term of the related loan on a
straight-line basis. For the nine months ended September 30, 1996 and
1995, amortization of other intangible costs was $8,325 and $5,252,
respectively. Amortization for the years ended December 31, 1995 and
1994 (unaudited) amounted to $28,511 and $22,560, respectively.
Income Taxes:
Effective January 1, 1993, the Company implemented Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between the
financial statement and tax basis of assets and liabilities that will
result in taxable or deductible amounts in the future, based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income, and tax net
operating loss and credit carryforwards. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change in deferred tax
assets and liabilities during the period.
F-13
<PAGE> 36
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SEGMENT REPORTING:
The following table presents the total assets of Forte Computer
Easy, Inc. and Subsidiaries at December 31, 1995 and 1994, and the
net revenues and net loss of Forte Computer Easy, Inc. and
Subsidiaries for the year ended December 31, 1995. In addition, the
net revenues and loss of Forte, Inc. for the year ended December
31, 1994 and the net revenues and income (loss) of Computer Easy
International, Inc. and Arizona Disk Fulfillment, Inc. for the
period June 9, 1994 through December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
1995 1994
---- ----
<S> <C> <C>
Total Assets:
Forte Computer Easy, Inc. $ 150,198 $ 1,926,308
Forte, Inc. 7,260,315 8,887,878
Arizona Disk Fulfillment,
Inc. (12,892) 625,954
----------- -----------
Total $ 7,397,621 $11,440,140
=========== ===========
Net Revenues:
Forte Computer Easy, Inc. $ 1,010,242 $ 1,574,357
Forte, Inc. 5,426,260 4,396,740
Arizona Disk Fulfillment,
Inc. 1,541,650 429,859
Less: amount included in
discontinued
operations (2,551,892) (2,004,216)
----------- -----------
Total $ 5,426,260 $ 4,396,740
=========== ===========
Net Loss:
Forte Computer Easy, Inc. $(1,026,029) $ (239,780)
Forte, Inc. (50,538) (255,358)
Arizona Disk Fulfillment,
Inc. (368,908) 53,341
----------- -----------
Total $(1,445,475) $ (441,797)
=========== ===========
</TABLE>
CONTRACTS IN PROGRESS:
Costs and estimated earnings in excess of billings and billings in
excess of costs and estimated earnings on uncompleted contracts
consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Costs incurred on uncompleted
contracts $ 882,983 $ 4,466,544
Profit earned to date 415,165 1,623,862
---------- -----------
1,298,148 6,090,406
Less: billings to date 1,271,982 6,215,712
---------- -----------
$ 26,166 $ (125,306)
========== ===========
</TABLE>
F-14
<PAGE> 37
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. CONTRACTS IN PROGRESS: (Continued)
Presentation in the accompanying balance sheets, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 43,574 $ 246,472
Billings in excess of costs
and estimated earnings on
uncompleted contracts (17,408) (371,778)
---------- -----------
$ 26,166 $ (125,306)
========== ===========
</TABLE>
4. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Raw materials $1,669,078 $1,761,561
Finished goods 185,000 110,188
Work in process 38,000 44,185
Packaging materials and
components - 10,898
Less: amounts included in net
assets of discontinued
operations (110,000) (260,000)
---------- ----------
$1,782,078 $1,666,832
========== ==========
</TABLE>
5. REVOLVING CREDIT LINE:
The Company had an operating agreement for a line of credit under
which it could borrow $300,000 or 80% of the eligible accounts
receivable of Computer Easy International, Inc. at a monthly rate of
3%. The credit line was terminated on August 31, 1995, as the Company
is in default.
6. RELATED PARTY TRANSACTIONS:
The Company sells fenestration products to a contractor, whose owner
is related to an officer of the Company. Revenue for the nine months
ended September 30, 1996 was $0, and sales for the years ended
December 31, 1995 and 1994 totaled $43,459 and $82,537 (unaudited),
respectively. No amount is owed the Company at September 30, 1996 and
December 31, 1995.
The Company performs management services for various rental properties
owned by an officer of the Company. Management services billed during
the nine months ended September 30, 1996, and for the years ended
December 31, 1995 and 1994 amounted to $37,724, $49,804, and $29,925
(unaudited), respectively. Amounts included in accounts receivable at
September 30, 1996 and December 31, 1995 totaled $44,802 and $14,109,
respectively, and in the opinion of management, are expected to be
collected.
F-15
<PAGE> 38
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INCOME TAXES:
For financial accounting and tax reporting purposes, the Company
reports income and expenses on the accrual basis of accounting. For
the year ended December 31, 1995, the Company made provisions for net
federal and state income tax benefits in the approximate amounts of
$69,100 and $155,000, respectively. This tax benefit was due to the
net increase of the deferred tax asset arising from the net operating
loss carryforwards. For the year ended December 31, 1994, the Company
made provision for net federal and state income tax expense in the
amount of $14,600. This expense was due to the net reduction of the
deferred tax asset arising from the net operating loss carryforwards,
for which a valuation allowance was recorded.
At December 31, 1995, there are federal and state net operating loss
carryforwards available to offset future federal and state taxable
income, expiring as follows:
<TABLE>
<CAPTION>
Federal Net State Net
Expiration Operating Loss Expiration Operating Loss
December 31, Carryforward December 31, Carryforward
------------ ------------ ------------ ------------
<S> <C> <C> <C>
2002 $ 86,238 1997 $ 74,152
2005 74,252 1998 608,297
2008 608,297 1999 564,044
2009 564,044 2000 1,014,207
2010 1,014,207 - -
---------- ----------
$2,347,038 $2,260,700
========== ==========
</TABLE>
Federal net operating losses are further limited due to ownership
changes to approximately $300,000 per year.
Deferred income taxes arise from timing differences resulting from
revenues and costs reported for financial accounting and tax reporting
purposes in different periods. Deferred income taxes represent the tax
liability or asset based on different depreciation methods used for
financial accounting and tax reporting purposes, research and
development costs which are expended as period costs for tax reporting
purposes, contract accounting under the percentage of completion
method for financial reporting and completed contract basis for tax
purposes, and differences in asset basis for financial reporting and
tax purposes due to the purchase method of accounting used in the
business acquisitions.
F-16
<PAGE> 39
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INCOME TAXES: (Continued)
Amounts for components of the net deferred tax liability are as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Deferred Tax Asset:
Estimated benefit from federal
and state net operating loss
carryforwards $ 758,800 $ 704,111
Deferred Income Taxes Payable:
Depreciation differences (521,000) (510,450)
Contract accounting
differences (330,073) (354,234)
---------- ----------
Net deferred tax liability $ (92,273) $ (160,573)
========== ==========
</TABLE>
8. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Borrowings under loan agreements
with a bank $3,254,707 $2,796,125
Lines of credit with a bank 250,000 495,000
Borrowings under other loan
agreements 1,166,977 1,050,977
---------- ----------
4,671,684 4,342,102
Less: amount included in net
assets of discontinued
operations - (77,000)
---------- ----------
Total long-term debt 4,671,684 4,265,102
Less: current portion of
long-term debt (242,000) (243,438)
---------- ----------
Long-term debt $4,429,684 $4,021,664
========== ==========
</TABLE>
Borrowings under loan agreements and lines of credit with a bank are
collateralized by equipment, inventory, accounts receivable,
assignment of a $400,000 life insurance policy on an officer of the
Company, and an assignment of rents on an operating lease. The loan
agreements have interest rates varying from 8.25% per annum to
variable rates of prime plus 2.25% per annum. The prime rate at
September 30, 1996 and December 31, 1995 was 8.25% and 8.5%,
respectively.
Borrowings under other loan agreements are collateralized by equipment
and real estate and have interest rates varying from 3% to 10% per
annum.
F-17
<PAGE> 40
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT: (Continued)
On January 30, 1996, Forte, Inc. restructured its long-term debt with
the Second National Bank of Warren, Ohio. The debt restructure
consolidated nine (9) existing loans, and provides for a fifteen (15)
year amortization, with a five (5) year call. The gross proceeds of
the debt restructure amounted to $2,675,000, with an interest rate of
two (2) points over the bank's prime rate. The initial rate of
interest is ten and one-half percent (10.5%). The loan agreement calls
for monthly payments, including principal and interest, of $25,000 for
the period February, 1996 through July, 1996, and thereafter monthly
payments, including principal and interest, of $30,000. The note is
secured by a first mortgage assignment of rents on property leased by
the Company; a blanket assignment of life insurance on Frank J.
Amedia, Chief Executive Officer, in the amount of $1,650,000, and all
inventory, accounts, contract rights, equipment, fixtures and general
intangibles.
At December 31, 1995, the approximate aggregate maturities of debt for
the succeeding five years, are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, Amount
------------ ------
<S> <C>
1996 $ 243,438
1997 266,386
1998 259,495
1999 279,841
2000 293,443
Subsequent 2,922,499
----------
$4,265,102
==========
</TABLE>
10. INCENTIVE STOCK OPTION PLANS AND STOCK OPTIONS:
In May, 1992, the Board of Directors adopted an Employee Incentive
Stock Option Plan which was approved by the shareholders in May, 1992.
The plan calls for reservation of 5,000,000 shares of the Company's
common stock. The plan also provides for the issuance of options to
purchase the Company's common stock at 100% of the fair market value
at the date of grant. Options have a maximum duration of ten (10)
years after the date of grant.
As part of the Plan and Agreement of Reorganization with Forte, Inc.,
stock options were granted to the former stockholders of Forte, Inc.
for 4,717,698 shares at $.375 per share and are exercisable through
June 8, 1998. The Plan also provides for the Company to enter into
separate Stock Option Agreements dated June 7, 1994, whereby the
Company has the right, for a period of one (1) year from June 8, 1994,
to purchase 30% of the shares owned by certain major stockholders at
the rate of $.50 per share. The number of shares which can be redeemed
by the Company under this agreement is 1,940,202. The Company did not
exercise any of its options to repurchase any of the returned shares.
F-18
<PAGE> 41
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. INCENTIVE STOCK OPTION PLANS AND STOCK OPTIONS: (Continued)
Outstanding options would be adjusted in the event of any forward or
reverse stock split or similar activity.
Stock option activity is as follows:
<TABLE>
<CAPTION>
Nine Months Years Ended
Ended December 31,
September 30, -------------------------
1996 1995 1994 Option Price
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Outstanding,
beginning
of period $5,815,548 $6,815,548 $2,097,850 $.25 - $ .50
Granted during
the period - - 4,717,698 .375
Exercised during
the period - - - .00
Cancelled during
the period - 1,000,000 - .00
---------- ---------- ---------- ------------
$5,815,548 $5,815,548 $6,815,548 $.25 - $ .50
========== ========== ========== ============
</TABLE>
In addition, during the year ended December 31, 1995, the Company
sold 150,000 shares of common stock, at $.50 per share, subject to
put options. The put options provide the purchasers the right to
put the shares to the Company one year after the date of issuance
of the common stock at $.625 per share or two years after the date
of issuance at $.75 per share. As of the balance sheet date at
September 30, 1996 and December 31, 1995, an accrual for the put
option, in the amount of $75,000, has been made.
11. DISCONTINUED OPERATIONS:
Software Division
On September 6, 1995, Forte Computer Easy, Inc. sold its rights to
the Floor Plan Plus(TM) and 3D Design(TM) lines for $691,889,
together with a $200,000 contingent payment based upon future
performance goals of the acquiring company, International
Microcomputer Software, Inc. (NASDAQ:IMSI). These product lines
represent a significant portion of the historical sales of the
software operating division. The Company determined that it was in
the best long-range interest of the Company to phase-out the
software division. Proceeds from the sale were utilized for debt
reduction of this division.
The software division's operating loss for the year ended December
31, 1995 of $1,026,029 (net of income tax benefit of $16,500), is
shown separately in the accompanying statements of operations for
the nine months ended September 30, 1996 and 1995, and for the
year ended December 31, 1995.
A provision of $50,000 for expected operating losses during the
final phase-out period in 1996 has been made at December 31, 1995.
F-19
<PAGE> 42
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. DISCONTINUED OPERATIONS: (Continued)
Net revenue for the software division for 1995 was $1,010,242.
This revenue is not included in net revenue in the accompanying
statement of operations.
Arizona Disk Fulfillment, Inc.
The disk and fulfillment division operating loss for the year
ended December 31, 1995 of $368,908 (net of income tax benefit of
$18,500), is shown separately in the accompanying statement of
operations.
Estimated losses on the disposal of the disk and fulfillment
division of $227,619, which includes $80,000 for expected
operating losses for the period January 1, 1996 to August 31,
1996, have been provided for at December 31, 1995.
Net revenue for the disk fulfillment division for 1995 was
$1,541,650. This revenue is not included in net revenue in the
accompanying statement of operations.
On August 5, 1996, the Company entered into a Stock Purchase
Agreement pursuant to which it agreed to sell one hundred
percent (100%) of the issued and outstanding common stock of
Arizona Disk Fulfillment, Inc. to Beverly and James W. Schmidt.
Mr. Schmidt has served as president of Arizona Disk Fulfillment,
Inc. since 1993. The sale of Arizona Disk Fulfillment, Inc. by
the Company was fully consummated in August, 1996.
12. ASSETS AND LIABILITIES TO BE DISPOSED OF:
Assets and liabilities of the following operating divisions to be
disposed of consisted of the following at September 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
September 30, 1996:
-------------------
<S> <C>
Software Division:
Inventory $ 110,000
Miscellaneous assets 9,080
----------
Total assets 119,080
----------
Accounts payable 85,989
Accrued liabilities 243,036
----------
329,025
----------
Net liabilities of discontinued operations $ 209,945
==========
</TABLE>
F-20
<PAGE> 43
FORTE COMPUTER EASY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. ASSETS AND LIABILITIES TO BE DISPOSED OF:
December 31, 1995:
------------------
<TABLE>
<CAPTION>
Disk and
Software Fulfillment
Division Division Total
-------- -------- -----
<S> <C> <C> <C>
Accounts receivable $ - $ 60,000 $ 60,000
Inventory - 260,000 260,000
Equipment and property 110,000 262,000 372,000
Deposits - 16,000 16,000
---------- ---------- ----------
Total assets 110,000 598,000 708,000
---------- ---------- ----------
Current portion of
long-term debt 70,000 - 70,000
Accounts payable and current
accrued liabilities - 557,000 557,000
Long-term debt - 7,000 7,000
---------- ---------- ----------
70,000 564,000 634,000
---------- ---------- ----------
Net Assets to be
Disposed of $ 40,000 $ 34,000 $ 74,000
========== ========== ==========
</TABLE>
Assets and liabilities are shown at their expected net realizable
value, and have been separately classified in the accompanying balance
sheets.
13. LITIGATION:
The Company is a defendant in a lawsuit filed by an individual for
non-compliance and other claims related to an employment agreement.
The lawsuit seeks actual and punitive damages in excess of $129,000.
The Company's legal counsel believes that the lawsuit is without
merit. Therefore, as of September 30, 1996 and December 31, 1995, no
accrual has been made for a loss contingency related to the subject
litigation claim. Management intends to vigorously defend its
position.
The Company is a defendant in a lawsuit filed by a corporation for
claims relating to a contractual agreement. The plaintiff has proposed
a settlement in the amount of $11,000. Counsel anticipates this matter
to be resolved in the near future.
14. SUBSEQUENT EVENT:
Subsequent to the balance sheet date of December 31, 1995, the Company
entered into an agreement with a former shareholder to purchase all of
the outstanding common stock owned by the shareholder. The common
stock was acquired in exchange for the relief of debt owing the
Company and discounted future services to be provided by the Company,
in the aggregate amount of $372,000. The financial statements at
December 31, 1995 give retroactive effect to this transaction. In
addition, the Company believes that it has a claim for additional
shares of common stock controlled by the shareholder, in the amount of
approximately 260,000 shares.
F-21
<PAGE> 44
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation *
3.2 Bylaws **
10.1 1992 Incentive Stock Option Plan *
10.2 Purchase Agreement dated November 3, 1995 among A
Forte Computer Easy, Inc., International
Microcomputer Software, Inc. and Computer Easy
International, Inc.
10.3 Stock Purchase Agreement dated August 5, 1996 B
among Forte Computer Easy, Inc., James W. Schmidt
and Beverly Schmidt, and Arizona Disk Fulfillment,
Inc.
10.4 Addendum to Stock Purchase Agreement dated B
August 20, 1996 among Forte Computer Easy, Inc.,
James W. Schmidt and Beverly Schmidt, and
Arizona Disk Fulfillment, Inc.
10.5 Agreement and Plan of Reorganization dated October C
25, 1996 between Forte Computer Easy, Inc. and
AAP Holdings, Inc.
11 Statement re: computation of per share earnings *
21 Subsidiaries of the Registrant *
23 Consent of Semple & Cooper, P.L.C. *
27 Financial Data Schedule *
</TABLE>
- --------------------
* Filed herewith.
** Previously filed as an exhibit to Registrant's Form 10-SB Registration
Statement filed with the Commission on March 1, 1995.
A Incorporated by reference to Registrant's Amendment No. 1 to Current Report
on Form 8-K/A dated August 30, 1995
B Incorporated by reference to Registrant's Current Report on Form 8-K dated
August 5, 1996
C Incorporated by reference to Registrant's Current Report on Form 8-K dated
October 25, 1996
III-1
<PAGE> 45
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this Amendment No. 1 to Form 10-SB Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
FORTE COMPUTER EASY, INC.
Date: November 22, 1996 By /s/ Frank J. Amedia
------------------------
Frank J. Amedia,
President, Chief Executive Officer
III-2
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
EMPIRE OIL CORPORATION
WE, THE UNDERSIGNED natural persons of the age of twenty-one (21) years
or more, acting as incorporators of a corporation under the Utah Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
The name of the corporation is Empire Oil Corporation,
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE III - PURPOSES
The purpose or purposes for which this corporation is engaged are:
(a) To engage in all aspects of the oil and gas business,
including, without limitation: buying, selling, and
otherwise dealing in oil and gas leases, royalties,
mineral interests, and other rights and interest in
oil and gas properties, whether alone or in
conjunction with others; participating in the
exploration and development of oil and gas
properties; including reworking existing wells and
drilling or completing wells; and purchasing,
selling, or otherwise dealing in the production from
oil and gas properties, Also, to acquire, develop,
explore and otherwise deal in and with respect to
natural resource properties of any kind and all
kinds, all related activities, and for any legal and
lawful purpose,
(b) To acquire by purchase, exchange, gift, bequest,
subscription, or otherwise; and to hold, own,
mortgage, pledge, hypothecate, sell, assign,
transfer, exchange, or otherwise dispose of or deal
in or with its own corporate securities or stock or
other securities including, without limitations, any
shares of stock, bonds, debentures, notes, mortgages,
or other obligations, and any certificates, receipts
or other instruments representing rights or interests
therein on any property or assets created or issued
by any person, firm, associate, or corporation, or
instrumentalities thereof; to make payment therefor
in any lawful manner or to issue in exchange therefor
its unreserved earned surplus for the purchase of its
own
<PAGE> 2
shares, and to exercise as owner or holder of any
securities, any and all rights, powers, and
privileges in respect thereof.
(c) To do each and everything necessary, suitable, or
proper for the accomplishment of any of the purposes
or the attainment of any one or more of the subjects
herein enumerated, or which may, at any time, appear
conducive to or expedient for the protection or
benefit of this corporation, and to do said acts as
fully and to the same extent as natural persons
might, or could do in any part of the world as
principals, agents, partners, trustees, or otherwise,
either alone or in conjunction with any other person,
association, or corporation.
(d) The foregoing clauses shall be construed both as
purposes and powers and shall not be held to limit or
restrict in any manner the general powers of the
corporation, and the enjoyment and exercise thereof,
as conferred by the laws of the State of Utah; and it
is the intention that the purposes and powers
specified in each of the paragraphs of this Article
III shall be regarded as independent purposes and
powers.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have
authority to issue is 50,000,000 shares of Common Stock having a par value of
$.001 per share. All stock of the corporation shall be of the same class,
common, and shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment,.
ARTICLE V - AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote
of "a majority" of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDERS RIGHTS
The authorized and treasury stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine, Shareholders shall not have pre-emptive
rights to acquire unissued shares of the stock of this corporation.
ARTICLE VII - CAPITALIZATION
This corporation will not commence business until consideration of a
value of at least $1,000 has been received for the issuance of said shares.
2
<PAGE> 3
ARTICLE VIII - INITIAL OFFICE AND AGENT
Thomas B. Kimble
345 South State, Suite 200
Salt Lake City, Utah 84111
ARTICLE IX - DIRECTORS
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorize such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or
pledge any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of
this corporation is three. The names and addresses of persons who are to serve
as Directors until the first annual meeting of stockholders or until their
successors are elected and qualify, are:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Thomas G. Kimble 345 South State, #200
Salt Lake City, Utah 84111
Leon W. Crockett 345 South State, #200
Salt Lake City, Utah 84111
Neil B. Smith 345 South State, #200
Salt Lake City, Utah 84111
</TABLE>
3
<PAGE> 4
ARTICLE X - INCORPORATORS
The name and address of each incorporator is:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Thomas G. Kimble 345 South State, #200
Salt Lake City, Utah 84111
Leon W. Crockett 345 South State, #200
Salt Lake City, Utah 84111
Neil B. Smith 345 South State, #200
Salt Lake City, Utah 84111
</TABLE>
ARTICLE XI
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATIONS
No contract or other transaction between this corporation and any one
or more of its directors or any other corporation, firm, association, or entity
in which one or more of its directors or officers are financially interested,
shall be either void or voidable because of such relationship or interest, or
because such director or directors are present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves, or ratifies such
contract or transaction, or because his or their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or ratifies
the contract or transaction by vote or consent sufficient for the purpose
without counting the votes or consents of such interested director; or (b) the
fact of such relationship or interest is disclosed or known to the stockholders
entitled to vote and they authorize approve or ratify such contract or
transaction by vote or written consent or (c) the contract or transaction is
fair and reasonable to the corporation Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or committee thereof which authorizes approves or ratifies such
contract or transaction.
4
<PAGE> 5
Under penalties of perjury we declare that these Articles of
Incorporation have been examined by us and are to the best of our knowledge and
belief true correct and complete.
DATED this 27th day of October, 1980.
/s/ Thomas G. Kimble
----------------------------------------
Thomas G. Kimble
/s/ Leon W. Crockett
----------------------------------------
Leon W. Crockett
/s/ Neil B. Smith
----------------------------------------
Neil B. Smith
5
<PAGE> 6
PLAN AND ARTICLES OF MERGER
OF A SUBSIDIARY CORPORATION
The corporations named herein do hereby adopt this Plan and these
Articles of Merger pursuant to Section 16-10-70, Utah Code Ann. (1953 as
amended) and do consent and agree to all of the terms and conditions set forth
herein.
I. NAMES
The name of the subsidiary to be merged is Escalante Enterprises, Inc.,
a Utah corporation.
The name of the parent company owning 100% of the outstanding shares of
common stock of the subsidiary is Empire Oil Corporation, a Utah corporation,
hereinafter designated "Surviving Corporation."
II. TERMS AND CONDITIONS
A. Time. The merger shall be effective when this document is delivered
to the Secretary of State for the State of Utah and has been stamped "filed."
B. Law. The laws which are to govern the terms of this merger are the
laws of Utah. The surviving corporation shall continue to be governed by its
existing Articles of Incorporation and By-laws.
C. Effect of Merger. Upon the effective date of such merger, the
following results could occur.
(1) The two corporations which are parties to the Plan of
Merger shall be a single corporation, which shall be the surviving
corporation provided for in the Plan of Merger.
(2) The separate existence of all corporations parties to the
Plan of Merger, except the surviving corporation, shall terminate as
provided for in the Plan of Merger.
(3) Such surviving corporation shall have the rights,
privileges, immunities and powers and shall be subject to all duties
and obligations of a corporation organized under the Utah Business
Corporation Act.
(4) Such surviving corporation shall thereupon and thereafter
possess all the right, privileges, immunities, and franchises, as well
of a public as of a private nature, of each of the merged corporations;
and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares and all other
choses in action, and all and every other interest, of or belonging to
or due to each of the corporations so merged, shall be taken and deemed
to be transferred to and vested in such single corporation without
further act or deed; and the title to any real estate, or any interest
<PAGE> 7
therein, vested in any of such corporations shall not revert or be in
any way impaired by reason of such merger.
(5) Such surviving corporation shall henceforth be responsible
and liable for all the liabilities and obligations of each of the
corporations so merged; and any claim existing or action or proceeding
pending by or against any of such corporations may be prosecuted as if
such merger had not taken place, or such surviving corporation may be
substituted in its place. Neither the rights of creditors nor any liens
upon the property of any such corporation shall be impaired by such
merger.
III. MANNER AND BASIS OF CONVERTING SHARES
Escalante Enterprises, Inc., the wholly-owned subsidiary which is to be
merged into Empire Oil Corporation has 81,912 shares of Common Stock issued and
outstanding. All of these shares are owned by Empire Oil Corporation.
There will be no conversion of shares of the subsidiary into shares of
the surviving corporation, the effect of the merger being the exchange of the
outstanding shares of the subsidiary presently owned by the surviving
corporation for the assets subject to the liabilities of the subsidiary.
IV. MAILING TO SHAREHOLDERS
This Plan and these Articles of Merger were mailed to the shareholders
of the subsidiary corporation on September 1, 1981.
The Plan and these Articles of Merger were executed in duplicate by the
President and Secretary of the surviving corporation and verified by the
Secretary this 15th day of October, 1981.
EMPIRE OIL CORPORATION,
a Utah corporation
By: /s/
-------------------------------------
President
By: /s/
-------------------------------------
Secretary
2
<PAGE> 8
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
EMPIRE OIL CORPORATION
Pursuant to the applicable provisions of the Utah Business Corporations
Act, the undersigned Corporation adopts the following Articles of Amendment to
its Articles of Incorporation by stating the following:
FIRST: The present name of the corporation is Empire Oil Corporation.
SECOND: The following amendments to its Articles of Incorporation were
adopted by the shareholders of the corporation on May 8, 1984,
in the manner prescribed by Utah law.
1. Article I is amended as follows:
ARTICLE I - NAME
The name of the corporation (hereinafter
called the Corporation) is Computer Easy
International, Inc.
2. Article IV is amended as follows:
ARTICLE IV - STOCK
The aggregate number of shares which this
corporation shall have authority to issue is
50,000,000 shares of Common Stock having
$.01 par value per share. All stock of the
corporation shall be of the same class,
common, and shall have the same rights and
preferences. Fully-paid stock of this
corporation shall not be liable to any
further call or assessment.
THIRD: The number of shares of the Corporation outstanding at the
time of the adoption of said amendment and the number of
shares entitled to vote thereon was 26,456,456.
<PAGE> 9
FOURTH: The number of shares voted for such amendments was 14,331,858
and the number voted against such amendments was 21,000.
DATED this 8th day of May, 1984.
Attest: EMPIRE OIL CORPORATION
/s/ By: /s/
- ------------------------ -------------------------------------
Assistant Secretary President
2
<PAGE> 10
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
COMPUTER EASY INTERNATIONAL, INC.
Pursuant to the provisions of Utah B.C.A. Section 16-10-57, COMPUTER
EASY INTERNATIONAL, INC., a Utah corporation, hereby adopts these Articles of
Amendment and certifies as follows:
FIRST: The name of the corporation is COMPUTER EASY INTERNATIONAL,
INC.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the Board of Directors and recommended to the
Shareholders at a Special Meeting of the Board of Directors
held on May 3, 1992, and was adopted by the Shareholders of
the Corporation at a Special Meeting of the Shareholders on
May 23, 1992, in the manner prescribed by the Utah Corporation
Law:
Article IV of the Corporation's Articles of
Incorporation is amended to include the
following paragraph:
The Board of Directors of the Corporation is
hereby authorized to provide, from time to
time, for the issuance of up to 20,000,000
shares, $0.01 par value, of Serial Preferred
Stock in series and to fix, from time to
time, before issuance, the designation,
preferences, privileges, and voting powers
of the shares of each series of Serial
Preferred Stock and the restrictions or
qualifications thereof.
THIRD: The designation and number of outstanding shares of each class
or series and the number of shares entitled to vote thereon as
a class or series were as follows:
<PAGE> 11
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING AND
CLASS OR SERIES ENTITLED TO VOTE
--------------- ----------------
<S> <C>
Common 11,607,541
</TABLE>
FOURTH: The number of shares or each class or series entitled to vote
thereon as a class or series voted for or against such
amendment, respectively, was:
<TABLE>
<CAPTION>
CLASS OR NUMBER OF NUMBER OF
SERIES SHARES FOR SHARES AGAINST
------ ---------- --------------
<S> <C> <C>
Common 7,073,346 11,200
</TABLE>
FIFTH: The Amendment does provide for an exchange, reclassification,
or cancellation of issued shares.
SIXTH: The amendment does not effect a change in the amount of the
Corporation's stated capital.
DATED: May 27, 1992.
By: /s/ Anthony E. DePrima
-------------------------------------
Anthony E. DePrima, President
By: /s/ Tom Spies
-------------------------------------
Tom Spies, Recording Secretary
2
<PAGE> 12
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
COMPUTER EASY INTERNATIONAL, INC.
Pursuant to the provisions of Utah Revised Business Corporation Act
Section 16-lOa-1003, COMPUTER EASY INTERNATIONAL, INC., a Utah corporation,
hereby adopts these Articles of Amendment and certifies as follows:
FIRST: The name of the corporation is COMPUTER EASY INTERNATIONAL,
INC.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the Board of Directors and recommended to the
Shareholders by the unanimous written consent of the Board of
Directors without a formal meeting on August 18, 1994, and was
adopted by the Shareholders of the Corporation at a Special
Meeting of the Shareholders on December 28, 1994, in the
manner prescribed by the Utah Corporation Law:
Article I of the Corporation's Articles of Incorporation is
amended to read as follows:
"The name of the Corporation shall be FORTE
COMPUTER EASY, INC."
THIRD: The designation and number of outstanding shares of each class
or series and the number of shares entitled to vote thereon as
a class or series were as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING AND
CLASS OR SERIES ENTITLED TO VOTE
--------------- ----------------
<S> <C>
Common 47,866,675
</TABLE>
<PAGE> 13
FOURTH: The number of shares or each class or series entitled to vote
thereon as a class or series voted for or against such
amendment, respectively, was:
<TABLE>
<CAPTION>
CLASS OR NUMBER OF NUMBER OF
SERIES SHARES FOR SHARES AGAINST
------ ---------- --------------
<S> <C> <C>
Common 37,091,580 0
</TABLE>
FIFTH: The Amendment does not provide for an exchange,
reclassification, or cancellation of issued shares.
SIXTH: The Amendment does not affect a change in the amount of the
Corporation's stated capital.
DATED: January 3, 1995.
By: /s/ Frank J. Amedia
------------------------------------
Frank J. Amedia, President
By: /s/ Landon Fortunato
------------------------------------
Landon Fortunato, Secretary
2
<PAGE> 1
Exhibit 10.1
COMPUTER EASY INTERNATIONAL, INC.
INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the Incentive Stock Option Plan
(the "Plan") is to provide favorable opportunities for certain selected key
employees, officers and members of the Board of Directors of Computer Easy
International, Inc. (the "Company"), to purchase shares of the Company's common
stock, $.01 par value (the "Common Stock"), thereby encouraging them to acquire
a proprietary and vested interest in the performance of the Company, and, in
general, to generate an increased incentive to contribute to the Company's
ability to attract and retain individuals of exceptional talent upon which, in
large measure, the sustained progress, growth and profitability of the Company
depends.
2. Administration of the Plan.
(a) Procedure. The Plan will be administered by the
Board of Director of the Company (the "Board").
(i) The Board may appoint a
committee consisting of not less than two Directors to
administer the Plan on behalf of the board (the "Committee"),
subject to such terms and conditions as the Board may
prescribe. Once appointed, the Committee will continue to
serve until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint
additional members to the Committee, remove members (with or
without cause) and appoint new members in substitution of
removed members, fill vacancies, however caused, and remove
all members of the Committee and directly administer the Plan.
Directors who are either eligible for incentive stock
options granted under the Plan ("Options") or have been
granted Options may vote on any matters affecting the
administration of the Plan or the grant of any Options
pursuant to the Plan, except that no such Director will act
upon the granting of an Option to himself, but any such
Director may be counted in determining the existence of a
quorum at any meeting of the Board during which, action is
taken with respect to the granting of Options to him. Any
Board actions related to the Plan Options granted under the
Plan, or administration of the Plan, will require a majority
vote of all Directors, whether present or not and whether
voting or not.
(ii) Notwithstanding the foregoing
Subsection (i), if and in the event the Company registers any
class of any equity security pursuant to section 12 of the
Exchange Act, the Plan will, from the effective date of such
registration until six (6) months after the termination
o(pound) such registration, be administered as follows:
<PAGE> 2
(A) The Plan will be administered by
the Board; provided, however that if a Majority of
the Board is eligible to be granted options or has
been eligible to be granted Options or has been so
eligible at any time within the preceding year, a
Committee must be appointed to administer the Plan as
provided below.
(B) The Board may appoint a
committee consisting of not less than three (3)
Directors, none of whom thereafter is eligible to be
granted Options to administer the Plan on behalf of
the Board, subject to such terms and conditions as
the Board may prescribe. Once appointed, the
Committee will continue to serve until otherwise
directed by the Board. From time to time the Board
may increase the size of the Committee and appoint
additional members therefor remove members (with or
without cause) and appoint new members in
substitution therefor, and fill vacancies however
caused; provided, however that at no time may any
Director who is eligible to be granted options serve
on the committee nor will a committee of less than
three (3) members administer the Plan.
(C) Directors who are presently
eligible for Options may not vote on any matter
affecting the administration of the Plan nor on the
grant of Options pursuant to the Plan but any such
Direction may be counted in determining the existence
of a quorum at any meeting of the Board during which
action is taken with respect to the granting of
Options or the administration of the Plan.
(b) Powers of the Board. Subject to other contractual
obligations, the Board has the authority in its discretion:
(i) to grant Options for the
company's common stock which are intended to meet and comply
with the terms and conditions of an incentive stock option set
forth in section 422A of the Internal Revenue Code of 1986
("Incentive Stock Options") in accordance with Section 6 of
the Plan, and to grant Options for the Company's common stock
which are not Incentive Stock Options ("Non-qualified Stock
Options") in accordance with Section 5 of the Plan:
(ii) to determine upon review of the
relevant information and in accordance with Subsection 2(h) of
the Plan the Fair Market Value of the Common Stock. As used in
this Plan "Fair Market Value" will mean, on the date a given
Incentive Stock Option is granted, the value determined by the
Board in such manner as it may deem equitable for Plan
purposes and as is required to qualify the Option as an
Incentive Stock Option; provided, however, that where there is
a public market for the Common Stock, the fair market value
per share will be the mean of the bid and asked prices of the
Common Stock for the date of grant of the Option, as reported
in the Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities
Dealers Automated Quotation
2
<PAGE> 3
System or on its Bulletin Board system) or, in the event the
Common Stock is listed on a stock exchange, the fair market
value per share will be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall
Street Journal. The Board will make a good faith determination
of the fair market value upon the grant of any Incentive Stork
Option. Fair Market Value will be determined without regard to
any restriction other than a restriction which, by its terms,
will never lapse;
(iii) to determine the exercise
price per share of Options to be granted, which exercise price
will be determined in accordance with Section 5(a) or 6(a) of
the Plan;
(iv) to determine eligibility to
receive Options, and the amount, type and timing of each
Option and terms and conditions of the respective agreements
between the Company and an optionee pursuant to which the
optionee is granted an option ("Stock Option Agreement"),
subject to the provisions of the plan, and, in the case of an
Incentive Stock Option the Internal Revenue Code of 1986 (the
"Code");
(v) to interpret the plan;
(vi) to prescribe, amend and rescind
rules and regulations relating to the Plan;
(vii) to accelerate or defer (with
the consent of the Optionee) the exercise date of an option;
(viii) to authorize any person to
execute on behalf of the company any instrument required to
effectuate the grant of an option previously granted by the
Board; and
(ix) to make all other
determinations deemed necessary or advisable for the
Administration of the Plan.
(c) Effect of the Board's Decision. All decisions,
determinations and interpre tations of the Board arising out of or in
connection with the administration or interpretation of the Plan will
be final, conclusive and binding on all optionees and any other holders
of any options granted under the Plan.
3. Shares Subject to the Plan. The total number of shares of Common
Stock available for grants of Options will be 5,000,000 subject to adjustment
in accordance with Section 7 of the Plan, which shares may be either authorized
but unissued or reacquired shares of Common Stock. If any Option or portion
thereof will expire or terminate for any reason without having been exercised,
such shares will be available for future grants of options.
3
<PAGE> 4
4. Eligibility. Consistent with the plan's purposes and
statutory restrictions, if any options may be granted to Directors, executive
officers and other key employees of the Company by a majority vote of the Board
and Incentive Stock Options may be granted to executive officers and other key
employees of the company, except as provided in Paragraph 2(a)(ii)(B) herein.
5. Non-qualified Stock Option Terms and Conditions. All
options granted that are Non-qualified Stock Options will be evidenced by Stock
Option Agreements which will be subject to applicable provisions of the Plan and
such other provisions as the Board may adopt including the following provisions:
(a) Price: The Option Price per share will be
determined by the Board.
(b) Exercise Period: Non-qualified Stock Options will
not be granted for a period longer than six (6) year from date of
grant.
(c) Time of Exercise: The Board will establish the
exercise terms of a Non-qualified Stock Option. The Board may also
accelerate the exercisability of a Non-qualified Stock Option.
(d) Exercise: Non-qualified Stock option, or portion
thereof, will be exercised if at all, by delivery of a written notice
of exercise to the company and payment of the full price of the shares
being acquired. Until the shares of Common Stock represented by an
exercised Non-qualified Stock Option are issued to an optionee he will
have none of the rights of a shareholder.
(e) Payment: The rice of an exercised Non-qualified
Stock Option or portion thereof will be paid in United States dollars
in cash or by check bank draft or money order payable to the order of
the company.
(f) Termination of Employment/Directorship: In the
event an optionee ceases to be employed by the Company or ceases to
serve on the Board while holding one or more Non-qualified Stock
Options, each Non-qualified Stock Option held will expire 30 days after
the date of such termination of employment or Board membership.
Notwithstanding the foregoing, in the event that the optionee is
terminated as an employee or Director for cause, his Non-qualified
Stock Option will expire immediately upon termination of employment or
tenure as a Director. In the event of the optionee's death, following
his death the expiration period for each Non-qualified Stock Option
will be one year, however, the Board may, in its sole discretion,
extend such expiration period for additional one year periods.
(g) Effect of Leave of Absence: For the purpose of
this Section, it will not be considered termination of employment when
an optionee is placed by the Company on military or sick leave or such
other type of leave of absence which is considered as continuing intact
the employment or directorship relationship of the optionee. In the
case of all leaves of absence the employment or directorship
relationship will be continued until
4
<PAGE> 5
the later of date when such leave equals 90 days or the date when the
optionee's right to re-employment with the Company will no longer be
guaranteed either by statute or contract.
6. Incentive Stock Option Terms and Conditions: All options
granted that are Incen tive Stock Options will be evidenced by Stock Option
Agreements which will be subject to applicable provisions of the Plan, and such
other provisions as the Board may adopt consistent with the requirements of
Section 422A of the Code, including the following provisions:
(a) Price: The option price per share will not be
less than 100% of the Fair Market Value of a share of Common Stock on
the date of grant. Tn the case of a share holder owning 100% or more of
the company's common Stock ("Ten Percent Share holder"), the Option
price per share will not be less than 110% of the Fair Market Value of
a share of Common Stock on the date of grant.
(b) Grant Period: Incentive Stock options will not be
granted after the date which is five years from the date this Plan is
adopted or the date this Plan is approved by the Shareholders,
whichever is earlier.
(c) Time of Exercise: The Board will establish the
exercise terms for an Incen tive Stock option, but in no case will an
option be exercisable for a period of longer than 10 years from the
date such Option is granted. The Board may also accelerate the
exercisability of an Incentive Stock Option. The exercise period will
expire no later than five years from the date of the grant of such
option, for options granted to a Ten Percent Shareholder.
(d) Exercise: An Incentive Stock Option, or portion
thereof, will be exercised if at all, by delivery of a written notice
to the company and payment of the full price of the shares being
acquired. Until the shares of Common Stock represented by an exercised
Incentive Stock Option are issued to an Optionee, he will have none of
the rights of a shareholder:
(e) Payment: The price of an exercised Incentive
Stock Option, or portion thereof will be paid in United States dollars
in cash or by check, bank draft or money order payable to the order of
the Company.
(f) Termination of Employment: Tn the event an
optionee will cease to be employed by the Company while he is holding
one or more Incentive Stock Options, each Incentive Stock Option held
will expire 30 days (or such other period of time not exceeding three
months as is determined by the Board) after the date of such
termination of employment or the expiration date of the Option,
whichever its earlier. In the event that he is terminated as an
employee for cause, his Incentive Stock Option will expire immediately
upon termination of employment. In the event he ceases to be employed
by the Company because of permanent and total disability within the
meaning of Section 22(e)(3) of the Code, each Incentive Stock Option
will expire six months (or such other
5
<PAGE> 6
period of time not exceeding 12 months as is determined by the Board)
after the date of such termination of employment. In the event of the
optionee's death, following his death the expiration period for each
Incentive Stock Option will be one year, however the Board may, in its
sole discretion, extend such expiration period for additional one year
periods.
(g) Effect of Leave of Absence: For the purpose of
this Section, it will not be considered a termination of employment
when an optionee is placed by the Company on military or sick leave or
such other type of leave of absence which is considered as continuing
intact the employment relationship of the optionee. In the case of such
leave of absence, the employment relationship will be continued until
the later of the date where such leave equals 90 days or the date when
the optionee's right to reemployment with the Company will no longer be
guaranteed either by statute or contract.
(h) Special Rules: Notwithstanding any other
provisions of the Plan, in the case of an Incentive Stock Option the
following provisions will apply:
(i) The aggregate Fair Market Value
(determined at the time of an option is granted) of the stock
with respect to which Incentive Stock Options are exercisable
for the first time by an optionee during any calendar year
(under all such Plan of the Company and its parent and
subsidiary corporations, if any) will not exceed $100,000.
(ii) Any optionee who disposes of
share of Common Stock acquired on the exercise of an Incentive
Stock Option either (a) within two years after the date of the
grant of the Incentive Stock Option under which the Common
Stock was acquired; or (b) within one year after the
acquisition of such shares of Common Stock, will notify the
Company of such disposition and of the amount realized upon
such disposition.
(iii) If the terms of any Incentive
Stock Option are extended, renewed, or modified (within the
meaning of Section 425(h)(3) of the Code) such, action will be
considered as the granting of a new option.
7. Adjustments. ln the event of any merger, consolidation,
stock dividend, split-up, combination or exchange of shares, or recapitalization
or change in capitalization, the total number of shares of Common Stock
available for Options will be proportionately and appropriately adjusted without
any change in the aggregate Option price to be paid therefor upon exercise of
the Option. The determination by the Board as to the term of any of the
foregoing adjustments will be conclusive and binding.
8. Acquisition. If any person, corporation or other entity or
group thereof (the "Acquiror") directly or indirectly makes an acquisition (an
"Acquisition" ), other than by merger or consolidation or purchase from the
Company, or the beneficial ownership (as that terms is used in Section 1.3(d)(1)
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder) of shares of Common Stock which, when added
to any other
6
<PAGE> 7
shares the beneficial ownership of which is held by the Acquiror, will be more
than 20% of the votes that are entitled to be cast at meetings of stockholders,
any options which by their terms were not exercisable in full prior to the date
of the Acquisition will become immediately exercisable for a period of 30 days,
and any optionee may elect, during the period commencing on the date of the
Acquisition and ending at the close of business on the 30th day following the
date of the Acquisition, to exercise any Options in whole or in part. In the
event the 30th day referred to in this paragraph will fall on a day that is not
a business day, then the 30th day will be deemed to be the next following
business day. If not exercised by the close of business on the 30th day, the
exercise terms of the Options will remain as is.
9. Amendment and Termination of Plan.
(a) The Board, without further approval of the
shareholders, may at any time and from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as
the Board may deem appropriate and in the best interest of the Company;
provided, however, that no such amendment will be made which would,
without approval of the shareholders:
(i) Modify the eligibility
requirements for receiving Options;
(ii) Increase the total number of
shares of Common Stock which may be issued pursuant to
Options; except as is provided for in accordance with Section
7 under the Plan;
(iii) Extend the period of granting
options; or
(iv) Materially increase in any
other way the benefits accruing to optionees.
(b) No amendment, suspension or termination of this
Plan will, without the optionees consent, alter or impair any of the
rights or obligations under any option theretofore granted to her/him
under the Plan.
(c) The Board will amend the Plan, subject to the
limitations cited above, in such manner as it deems necessary to permit
the granting of Options meeting the requirement of future amendments or
issued Treasury regulation, if any, to the Code.
10. Government and Other Regulations. The obligation of the
Company to issue or transfer and deliver shares for Options exercised under the
Plan will be subject to all applicable laws, regulations, rules, orders and
approval which will then be in effect and required by governmental entities and,
with respect to Incentive Stock Options, will be consistent with the
requirements of the Code.
7
<PAGE> 8
11. Miscellaneous Provisions.
(a) Right to Continued Employment/Directorship: No
person will have any claim or right to grant an option and the grant of
an Option will not be construed as giving an optionee the right to be
retained in the employ of the Company. Further, the company expressly
reserves the right at any time to dismiss any optionee with or without
cause, free from any liability or any claim under the Plan, except as
provided herein, in an employment agreement or in a Stock Option
Agreement.
(b) Transferability: Options will not be transferable
by any optionee except by Will or the laws of descent and distribution
and, during the life of optionee, may be exercised only by optionee.
(c) Plan Expenses: Any expense of administering this
Plan will be borne by the Company.
(d) Use of Exercise Proceeds: The payments received
from optionees from the exercise of Option will be used for the general
corporate purposes of the Company.
(e) Construction of Plan: The place of administration
of the Plan will be in the state of Arizona, and the validity,
construction, interpretation, administration and effect of the Plan and
of its rules and regulations, and rights relating to the Plan, will be
determined solely in accordance with the laws of the State of Arizona.
(f) Indemnification: Tn addition to such other rights
of indemnification as they may have as members of the Board, the
members of the Board will be indemnified by the Company against all
costs and expenses reasonably incurred by them in connection with any
action, suit or proceedings to which they or any of them may be party
by reason of any action taken or failure to act under or in connection
with the Plan or any Option, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction
of a judgment. In any such action, suit or proceedings, and the Company
agrees to advance funds to a Board member to pay for counsel and
preparation of a defense except a judgment based upon a finding of
gross negligence or fraud; provided that upon the institution of any
such action, suit or proceeding a Board Member will, in writing, give
the Company notice thereof and an opportunity at its own expense, to
handle and defend the same before such Board member undertakes to
handle and defend it on his own behalf.
8
<PAGE> 1
FORTE COMPUTER EASY, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended Year Ended Year Ended
September 30, September 30, December 31, December 31,
1996 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS
Income (Loss) from
Continuing Operations $ 30 $ (48) $ (51) $ (255)
Loss from Discontinued
Operations (35) (35) (1,149) (186)
Income (Loss) from Disposal
of Segment 62 (30) (245) -
---------- ---------- ---------- ----------
Net Income (Loss) Applicable
to Common Stock $ 57 $ (113) $ (1,445) $ (441)
========== ========== ========== ==========
Weighted Average Number of
Common Shares Outstanding 49,813 49,813 50,000 32,487
========== ========== ========== ==========
Primary Earnings per Common
Share:
Continuing operations $ - $ - $ - $ -
Discontinued operations - - (.03) (.01)
---------- ---------- ---------- ----------
Net Income (Loss) $ - $ - $ (.03) $ (.01)
========== ========== ========== ==========
FULLY DILUTED EARNINGS*
Income (Loss) from Continuing
Operations $ 30 $ (48) $ (51) $ (255)
Income (Loss) from Discontinued
Operations (35) (35) (1,149) (186)
Income (Loss) from Disposal of
Segment 62 (30) (245) -
---------- ---------- ---------- ----------
Net Income (Loss), as Adjusted $ 57 $ (113) $ (1,445) $ (441)
========== ========== ========== ==========
Shares:
Weighted Average Number of
Common Shares Outstanding 49,813 49,813 50,000 33,487
Exercise of Stock Options - - - 1,286
---------- ---------- ---------- ----------
Weighted Average Number of
Common Shares Outstanding,
as Adjusted 49,813 49,813 50,000 33,773
========== ========== ========== ==========
Fully Diluted Earnings Per
Common Share:
Continuing Operations $ - $ - $ - $ -
Discontinued Operations - - (.03) (.01)
---------- ---------- ---------- ----------
Net Loss $ - $ - $ (.03) $ (.01)
========== ========== ========== ==========
</TABLE>
* This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083, although not required by Footnote 2 to Paragraph 14 of
APB Opinion No. 15 because it results in diluation of less than 3%.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
------------------ ----------------------
<S> <C>
Forte, Inc. Ohio
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the constituting part of this Registration
Statement on Amendment No. 1 to form 10-SB of our report dated May 28, 1996,
relating to the financial statements of Forte Computer Easy, Inc. We also
consent to the reference to us under the heading "Experts" in such document.
/s/ Semple & Cooper, P.L.C.
Semple & Cooper, P.L.C.
Phoenix, Arizona
November 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 143,254
<SECURITIES> 0
<RECEIVABLES> 556,630
<ALLOWANCES> 119,470
<INVENTORY> 1,666,832
<CURRENT-ASSETS> 277,946
<PP&E> 5,603,441
<DEPRECIATION> 1,196,182
<TOTAL-ASSETS> 7,397,621
<CURRENT-LIABILITIES> 2,072,293
<BONDS> 0
0
0
<COMMON> 484,601
<OTHER-SE> 1,021,019
<TOTAL-LIABILITY-AND-EQUITY> 7,397,621
<SALES> 5,426,260
<TOTAL-REVENUES> 5,426,260
<CGS> 4,540,722
<TOTAL-COSTS> 4,540,722
<OTHER-EXPENSES> 747,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 352,403
<INCOME-PRETAX> (105,509)
<INCOME-TAX> 54,971
<INCOME-CONTINUING> (50,538)
<DISCONTINUED> (1,394,937)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,445,475)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
