FORM 10-K/A
UNITED STATE
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________.
STRATFORD ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-26112 41-1759882
(State of Jurisdiction) (Commission File Number) (IRS Employer ID No.)
1775 Broadway, Suite 1410, New York, New York 10019
(Address of Principal Executive offices) (Zip Code)
Registrant's telephone number, including area code 905-566-0716
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock $.001 par value NASD OTC Electronic Bulletin Board
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to filing requirements for the
past 90 days. Yes _X_ No ___
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference In Part III of this Form 10-K or any
amendments to this Form 10-K. [ ].
Based on the closing sales price of $.32 an June 6, 1997, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$2,989,433. The number of shares outstanding of the registrant's common stock,
$.001 par value was 10,113,381 an May 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K/A Incorporated Document
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Part IV
Item 14(C) - Reports on Form 8-K Forms 8-K filed on
October 14, 1996 and
October 29, 1996
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STRATFORD ACQUISITION CORPORATION
Table of Contents
Page No.
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Part I
Item 1. Business 1
a. Risk Factors 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security 11
Holders
Part II
Item 5. Market for Registrant's Common Equity and 11
Related Stockholder Matters
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of 12
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants 15
on Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the 15
Registrant
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial 18
Owners and Management
a. Section 16(a) Beneficial Ownership 19
Reporting Compliance
Item 13. Certain Relationships and Related Transactions 19
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 20
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PART I
Item 1. Business
Historical Background
Stratford Acquisition Corporation ("the Company") was incorporated under the
laws of the State of Minnesota on February 17, 1966. From its inception to
August 15, 1995, the Company had limited operations and was primarily dormant
prior to its acquisition of Supercrete N.A., Limited, a corporation organized
under the laws of the Turks and Caicos Islands, British West Indies
("Supercrete"). On August 15, the Company executed a definitive acquisition
agreement with Supercrete and acquired all of the issued and outstanding shares
of Supercrete in exchange for 22,800,000 share of the Company's common stock.
Supercrete owned an exclusive license ("Supercrete License") to manufacture and
distribute Supercrete products ("Supercrete Products"). Supercrete acquired the
Supercrete License from AMR Investments, Ltd. ("AMR"), a corporation organized
under the laws of the Turks and Caicos Islands, British West Indies. AMR
acquired the Supercrete License pursuant to an agreement dated July 24, 1994
amongst AMR, the late Dr. O.A. Battista ("Battista Estate") who was the original
inventor of the technology and processes for making Supercrete Products and a
company he controlled, Resources Services Corporation ("RSC"), which is a Texas
corporation. In accordance with the agreement between AMR, the Battista Estate
and RSC, both the Battista Estate and RSC notified AMR, and all subsequent
assignees of the Supercrete License, including the Company, that the agreement
had been breached for failure to pay royalties on sales of Supercrete Products
and consulting fees to the Battista Estate and RSC. On May 13, 1997, RSC and the
Battista Estate presented a final written notice to the Company that the
Supercrete License and all rights thereto, had been terminated. In June 1997,
the Company after negotiations with representatives of the Battista Estate and
RSC, entered into a new licensing agreement with the Battista Estate ("the
Stratford Agreement"). The Stratford Agreement provides that in exchange for
granting the Battista Estate the right to retain the original 500,000 shares of
the Company's common stock they received upon entering the licensing agreement
with AMR and the right to receive a future royalty fee of 2% of the gross sales
of all Supercrete Products, which royalty fee shall not exceed $500,000 (USD)
over the life of the Stratford Agreement, the Company was granted the exclusive
and definitive right and title to the Supercrete License. In the event of a
default on any royalty fee payment the Battista Estate shall, at its sole
option, receive a promissory note or common stock for the unpaid full value of
the unpaid royalty fee.
On November 29, 1996, the Company's entire board of directors and officers
resigned, except for Mr. A. Roy MacMillan, who at the time was a director and
vice president of the Company. As a result of these resignations, Mr. MacMillan
became Chairman of the Board of the Company and Messrs. Douglas Friedenberg and
Richard Brodzik were appointed to fill the vacancies on the board of directors
caused by the resignations of Mr. Arthur Smith and Ms. Lee Monaco as directors.
In December, 1996, Mr. Richard Brodzik agreed to resign from the Company so that
G. Colin Rayner, Esq., a Canadian lawyer, could serve as a director. The new
board of directors then elected Mr. MacMillan as President, Mr. Friedenberg as
Treasurer and Mr. Rayner as Secretary. On March
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11, 1997, a majority of the board of directors elected Mr. Daniel W. Dowe as its
fourth director.
In addition to the foregoing, on December 20, 1996, Supercrete granted to the
Company an unconditional right and title to the Supercrete License and was
subsequently deregistered from the Registrar of Companies for the Turks and
Caicos Islands, and is no longer a wholly-owned subsidiary of the Company. The
deregistration of Supercrete was intended to eliminate any unnecessary costs and
fees being incurred by Supercrete, which had no operations when deregistered.
The Company believes the Stratford Agreement will substantially reduce the
potential for any legal challenges against the Company over the rightful
ownership of the Supercrete License, which may have been attributable to the
several transactions whereby the Supercrete License was conveyed to multiple
parties, all of whom were in breach of the Supercrete License for failure to
make any royalty and consulting fee payments to RSC and Battista Estate.
In addition, on or about January 8, 1997, the Company provided Globesat
Infrastructure Technologies Corporation ("Globesat") with written notice that
the Supply and Distribution Agreement entered into on July 31, 1996, amongst the
Company, Globesat and Supercrete (the "Globesat Agreement") was terminated. The
Company believes that the Globesat Agreement was never entered into on an arm's
length basis or in good faith by the parties for the following reasons: (i) a
Globesat principal, Mr. Mel Greenspoon, was formerly a director and officer of
the Company and is currently a shareholder, (ii) Mr. Arthur Smith, who was
forced to resign from the Company pursuant to a demand by a substantial number
of shareholders, represented the Company when it entered into the Globesat
Agreement and is believed to not have been acting in good faith as a fiduciary
of the Company on account of Globesat's financial inability to perform its
obligations under the Globesat Agreement, and (iii) Globesat's failure to
disclose to the Company its weak financial state and that of its parent
corporation, Globesat Holding Corporation, at the time Globesat entered into the
Globesat Agreement. Additionally, Globesat Holding Corporation's recently
disclosed consolidated financial statements indicates its currently weak
financial status and the inability of its subsidiary, Globesat, to currently
perform its obligations under the Globesat Agreement. In light of the Company's
termination of the Globesat Agreement, the Company returned to Globesat a stock
certificate representing 300,000 common shares of Globesat Holding Corporation
that was issued to the Company to secure Globesat's performance under the
Globesat Agreement. Notwithstanding the Company's actions, Globesat has notified
the company it believes the Globesat Agreement to be in full force and effect.
The company has reaffirmed its position in writing to Globesat subsequent to
receiving the notification from Globesat and has joined Globesat in the below
described case Stratford Acquisition Corporation v. 10222 Investments, et. al.,
Index No. 97-1954 DSD/JMM. (See Part I, Item 3 - Legal Proceedings).
On June 3, 1997, at a meeting of the Board of Directors, the Board adopted the
first official set of By-laws for the Company. Although there had been numerous
allegations that the Company had duly authorized By-laws, a search of all
corporate records, revealed only an unsigned set of By-laws that were not
believed to have been adopted by the Company's incorporators, by its first board
of directors or by the shareholders at an annual meeting. With interest
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in correcting all legal, financial and operational problems that the Company has
been beset with, the Board adopted the By-laws and will provide the shareholders
with the right to vote on the By-laws at the next annual meeting of
shareholders. The newly adopted By-laws provide for the removal of directors. In
accordance with this provision, the majority of the Board voted, to remove G.
Colin Rayner from the Board.
As of May 31, 1997, the Company's principal executive office were located at
1775 Broadwat, Suite 1410, New York, New York 10019 and the telephone number was
212-262-0202. At the time of the filing of this Form 10-K/A the company moved
its principal executive office to 67 Wall Street, Suite 2411, New York, New York
10005 and the telephone number at that address is 212-825-2929.
The Company's primary operations will be conducted through its wholly-owned
subsidiary, Novacrete Technology (Canada) Inc., which is a corporation formed
under the laws of the Province of Ontario, Canada on January 20, 1997
("Novacrete Canada"). The directors and officers of the Company have assumed the
same positions at Novacrete Canada.
Subject to shareholders approval at the next annual meeting of shareholders, the
Company's management will propose changing the Company's name to Novacrete
Technology, Inc. Currently, the Company uses an assumed name to do business as
Novacrete Technology in the United States.
RISK FACTORS
The company is in the development-stage and any evaluation of the Company and
its business should only be made after having given careful consideration to the
following risk factors, in addition to those appearing elsewhere in this Form
10-K.
Limited Operating History. From its inception, the Company has had
essentially no operating history. From August, 1995, the Company has been
engaged principally in research and development activities relating to the
development of a mineral-based additive to be used for enhancing the basic
properties of cementitious products (cements, mortars and concrete). The
Company'S efforts to emerge from the development stage were further delayed due
to the management transition in late-1996. Accordingly, the Company's operations
are subject to the risks inherent in the establishment of a new business
enterprise; specifically, the complications, delays and resulting expenses often
encountered in the marketing of a new technology, the uncertainties of
developing and marketing new or related products and the difficulties in
recruiting and retaining qualified personnel. See Management's Discussion and
Analysis of Financial Condition and Results of Operations".
Going Concern Qualification. The Company has recorded net losses for each
year of its existence and will likely sustain a loss in the period ending May
31, 1998. Unless the Company can finance its operations through the raising of
capital from third-parties there can be no assurances that the Company will be
able to sustain its operations in which case the Company will ultimately be
liquidated for the benefit of its creditors.
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Lack of Profitability. The Company has recorded net losses for each year of
operation (1994-1997) and has incurred an accumulated deficit of $1,543,822. In
the year ending May 31, 1997, the Company had a net loss from operations of
$1,027,510.
Uncertain Market Acceptance. Since 1994, the company has focused its
product development efforts on the development of a mineral-based additive
mixture that is blended into cementitious products to improve the basic
properties of these products. The Company is also developing finished mortar and
concrete products that will be marketed and sold under the brand name Novacrete.
Although there is an existing market for the Company's products there is a risk
that the end-users of the Company's products may not appreciate the benefits or
recognize the potential applications of the Company's products. Market
acceptance of the Company's products will depend, in large part, upon the
ability of the Company to demonstrate to the industry the cost effectiveness of
using its products and that the products pose no environmental risks. In
addition, although one of the Company's primary mortar products, Novacrate MP
(Multi-Purpose), received favorable test results from an outside testing
facility employing American Society for Testing and Materials ("ASTM")
standards, this product has not been used enough commercially to establish
empirical results.
Limited Product Line. The Company's revenues will depend on its limited
product line. Although the Company plans to expand the capacity of its Novacrete
Canada operating facility, at present it can only produce its basic additive
mixture, only one mortar product, Novacrete Multi-Purpose Mortar, and three
high-density concrete formulations, Novacrete 200, Novacrete 320, and a product
made pursuant to customer specifications. Because of the complexity of the
Company's products, development of products requires substantial time and
resources and favorable results from outside testing facilities employing ASTM
standards. There can be no assurance that any of the Company's products will
receive favorable testing results or achieve market acceptance.
Limited Marketing Organization. Commercialization of the Company's products
will be substantially dependent on the Company's ability to develop or acquire a
marketing and sales organization, or enter into distribution agreements with
established distributors of cementitious products. There can be no assurance
that the company can develop or acquire a marketing organization, however the
Company, under terms less favorable to the Company, could likely enter into
distribution agreements with qualified distributors.
Need for Additional Capital. The Company will require an immediate
investment of approximately $500,000 (USD) to acquire the necessary equipment
for its manufacturing facility operated by Novacrete Canada, hire additional
personnel and for working capital. Funds for these purposes may be obtained from
a number of sources, including, sales of equity and debt instruments, bank
financing and joint ventures. However, the Company currently has no arrangements
for such financing, and there can be no assurance that any additional financing
can be obtained or, if obtained, that it will be of a sufficient quantity to
meet the Company's immediate needs or on reasonable terms.
Uncertainty of Protection Offered by Patents and Trade Secrets. The
Company's technology is not protected by patents. The absence of patent
protection represents a risk in that the Company is not able to prevent other
persons from developing a similar product. In addition, there can be no
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assurance that the Company's technology or products will not infringe on a
patent owned by another person. To the extent the Company currently relies on
unpatented proprietary technology, processes and know-how and the protection of
such property by confidentiality agreements, there can be no assurance that
others may not independently develop similar technology and know-how or that the
confidentiality will not be breached by an unrelated party.
The Company relies upon trade secret protection for much of its
confidential and proprietary technology and know how. There can be no assurance
that competitors will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the Company's
trade secrets. Even if there is an infringement of any of the Company's trade
secrets, the cost of enforcing its rights in an infringement action could be
substantial and would divert funds and resources that would otherwise be
available for other aspects of the Company's operations.
Need for Qualified Personnel. In order to meet its business objectives, the
Company will need to hire additional marketing, scientific and manufacturing
personnel. The Company will be required to compete for such personnel with
companies having greater financial and other resources than the Company. Since
the future success of the Company will be dependent, in part, upon its ability
to attract and retain qualified personnel, its ability to do so could have a
material adverse effect upon the business of the Company.
U.S. Securities and Exchange Commission's ("SEC") Investigation of the
Company and Certain Former Directors and Officers. The staff of the SEC has
conducted an informal investigation of the Company and certain of its former
directors and officers (pre-November 29, 1996). Since the directors and officers
that are believed to be part of the SEC's investigation are no longer associated
with the Company, the Company believes the investigation will have no material
adverse consequences to the Company or the continued trading of its common
stock.
Absence of Dividends. The Company has not paid any cash dividends and does
not anticipate paying any dividends in the foreseeable future. Earnings, if any,
will be retained to fund development and expansion. There is no assurance that
the Company will at any time pay cash dividends.
General
The Company is engaged in the business of manufacturing and marketing an
additive for enhancing cement-based products which additive was formerly known
as Supercrete. Upon acquiring the Supercrete License and until April 15, 1996,
the Company marketed three separate products using the additive under the trade
name Fastcrete, which was subsequently changed to Chemcrete. Fastcrete/Chemcrete
140 was designed for all-purpose weather finish applications including cracks,
potholes, sidewalks and driveways. Fastcrete/Chemcrete 150 was designed for
heavy-duty driveways, roads, precast blocks and piping, parking lot repairs,
airport patching and water breaks. Fastcrete/Chemcrete 200 was designed to
include metallic aggregate for non-rusting heavy duty outdoor and indoor
traffic, nuclear radiation and radon shielding, x-ray shielding walls and sealed
nuclear waste dumps. The main distinguishing features between the three products
was the amount of additive that was added to the sand and cement mixture and the
inclusion of metal aggregates. Subsequent to April 15, 1996, the Company began
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to market all of its products, including the additive, under the brand name
Novacrete (now known as the "Novacrete Additive".)
The Novacrete Additive will be distributed in 22 pound bags in powder form and
sold separately as Novacrete Additive. Additionally, the Novacrete Additive will
be blended with specific quantities of cement and sand using the technology
owned by the company for blending the Novacrete Additive to produce various
Novacrete products which will be sold mainly in 66 pound bags ("Novacrete
Finished Products".) Users of the Novacrete Finished Products will then add
water pursuant to the written instructions printed on the face of the bag for
each of the various types of Novacrete Finished Products to create the desired
Novacrete Finished Product that will be used for a specific application.
In April, 1997, Novacrete Canada entered into a five year lease for a
manufacturing and office facility located at 2525 Tedlo Street, Unit B,
Mississauga, Ontario, Canada L5A 4A5. The Company will maintain a limited
manufacturing and marketing operation during the fiscal year ending May 31,
1998, and will enter into limited licensing and distribution agreements with
substantially larger entities that are capable of marketing, and in some
instances, manufacturing, the Novacrete Additive and Novacrete Finished Products
on a larger scale.
Through its distributors, the Company intends to begin selling the following
products:
* Novacrete Additive
* Novacrete Multi-Purpose Mortar
Agreements between the Company and any distributor may provide that in exchange
for the Company granting the distributor the exclusive right to distribute the
Company's products in a pre-stated geographic region, the distributor will
purchase a minimum amount of the Company's products annually. The distribution
agreements may also provide profit incentives to the distributor based on the
annual volume of sales generated by the distributor. Additionally, the Company
may also manufacture and market its products an a limited basis in geographic
areas that are not restricted by the distribution agreements, or it may not
provide exclusive distribution agreements to any outside distributor(s) and in
such cases, it will also distribute its own products. Since the Company's
negotiations with most prospective distributors are preliminary, it cannot state
with specificity whether or not it will enter into exclusive or non-exclusive
distribution agreements. However, the Company has entered into non-exclusive
agency agreements with the Anand Corporation and Rollins International
Corporation to establish business relationships with qualified buyers of the
Company's products in the Philippines and in Southeastern Asia, respectively.
Adequate Raw Materials
An important aspect of the Company's business is having an adequate supply of
raw materials to produce the Novacrete Additive, which is a key ingredient in
all the Novacrete Finished Products. The raw materials used in manufacturing the
Novacrete Additive are available in the United States and Canada, and there are
no known substitutes for these raw materials. The Company currently purchases
the raw materials from five principal suppliers located in Canada. The raw
materials are purchased on an as needed basis and at market prices at the time
of purchase. The Company does anticipate that the prices and supplies of the raw
materials
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will fluctuate with market conditions. The Company currently has a large supply
of the main component for the additive mixture in its inventory.
Lack of Patent Protection
The Company does not have patents on any of its technology or its products.
Although the Company has filed an application with the Registrar of trademarks
of Canada to register the trademark Novacrete, the Company has not filed an
application for a patent on its proprietary technology. The Company believes
that the trademark of its brand name Novacrete will be more useful in the
commercialization of its products. The core technology that is used in each of
the company's products is not easily replicated and if patented will ultimately
become public information. By emphasizing the unique characteristics of its
products the Company intends to brand itself as the manufacturer and marketer of
a distinguishable line of products which will provide it with a competitive
advantage over other entities that may attempt to directly compete with the
Company. The Company has filed an application with the Registrar of Trademarks
of Canada to register the trademark Novacrete. The Registrar of Trademarks has
advised the Company that the application has been approved and that a
Registration Certificate indicating the Company's ownership of the trademark
Novacrete will be issued by June 30, 1997. Upon the Company's receipt of the
Novacrete Registration Certificate from the Registrar of Trademarks for Canada,
it will file the same with the United States Patent and Trademark Office ("PTO")
to update the Company's previously filed application to register the Novacrete
trademark in the United States. The PTO will then publish the Company's
trademark application in the official Gazette which will begin the thirty day
period for persons to file notices of objections to the trademark. If no notices
of objection are filed the Novacrete trademark will be officially issued to the
Company. (See Risk Factor - Lack of Patent Protection.)
Working Capital
The Company anticipates that in the fiscal year ending May 31, 1998 (commencing
on June 1, 1997) its annual working capital requirements will be in the range of
$600,000. To meet its initial capital requirements the Company has raised
approximately $500,000, primarily from three investment entities1 affiliated
with one of its directors, Mr. Friedenberg (the ("Friedenberg Entities")and from
other third-parties. Through the sale of a convertible debenture or common
stock, bank financing or a joint venture the Company will seek to raise an
additional $1,000,000 during the fiscal year ending May 31, 1998. However, there
can be no guarantees that the financing will be completed, or whether the terms
will not be onerous to the Company.
Seasonality
Although the Company's products will be used for residential, commercial and
industrial new construction and repair of deteriorating concrete structures the
Company anticipates that its products will be distributed in multiple markets
worldwide through large national and multinational distributors which will
reduce
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(1)The names of the entities are Euro-Dutch Trust Ltd., Firebird Overseas
Ltd. and Firebird Partners.
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the risks attributable to seasonal and regional economic conditions. Although
the Company may be subject to these risks for a given period in certain regional
markets the eventual wide dispersion of its products, geographically, should
enable the Company to avoid season-related downturns in general business cycle.
However, in the near future the Company anticipates it will be marketing and
selling its products in Canada and in very limited areas of the United States,
and will be subject to risks of changing seasonal and economic conditions.
Competition
Although the Company does not have patent protection for its Novacrete Additive
and the Novacrete Finished Products it believes that the Novacrete Additive,
which is blended into all Novacrete Finished Products in various proportions,
has unique characteristics that will enable the Company to enjoy certain
marketing advantages over competitive products. The Company is currently focused
on completing the development and testing of the full range of specialized
mortar formulas (defined above as Novacrete Finished Products.) The Company
executes the product development programs in its own manufacturing facility and
then sends the results of these programs to recognized outside independent
testing laboratories for documented confirmation of performance. The first
Novacrete Finished Product to have been satisfactorily tested and ready for
manufacture is the Novacrete Multi-Purpose mortar, which is marketed as
Novacrete MP. The three other products, Novacrete Industrial, Novacrete Non-Sag
and Novacrete Waterproofing mortars will be submitted to the testing laboratory
on or about July, 1997 and are estimated to be ready for distribution in
September or October, 1997.
According to a study by the Freedonia Group Inc., the U.S. market for cement and
concrete admixtures is expected to grow 8.2% a year, reaching $850 million in
the year 2000.
The primary markets that the company plans to enter into in 1997 and 1998 are
Canada and the United States. The company's marketing policy is to work through
established distributors having complete mixing and blending facilities and
established distribution networks.
In addition to product performance the Company plans to be competitive in price
and service. However, since the Company's products contain only non-toxic
minerals and no chemicals they are considered to be more environmentally safe.
With this the Company expects to have some level of immediate market penetration
and marketability over competitive products. Since the Company's products are
environmentally safe it expects to expend a nominal percentage of its operating
budget on environmental compliance for the next fiscal year and for the
foreseeable future.
As of May 31, 1997, the company had six employees and expects to hire five
additional employees by December 31, 1997. Upon full operation of the Novacrete
Canada production facility, the Company expects to hire three additional
employees to manage the production facility and three persons to fill the
positions of vice-president of marketing and sales, a vice-president of product
development and a chief financial officer.
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The Novacrete MP mortar, one of the Novacrete Finished Products, is considered
by the Company to have measurably superior performance characteristics that will
make it competitive with other products that are currently being sold by
competitors.
As a general understanding of the Novacrete Finished Products, Novacrete MP, the
multi-purpose mortar for patching and repairing, has the following properties
when properly added to a cement-based mixture:
1. Compressive strength in excess of 12,000 pounds per square inch;
2. Sheer bond strength in excess of 5,900 pounds per square inch;
3. Flexural strength in excess of 1,700 pounds per square inch;
4. Chloride permeability of 816 coulombs;
5. Patch shrinkage is zero;
6. Durability over 302 freeze/thaw cycles (96.3% durability factor)
7. Resistance to salt scaling over 50 cycles results in a durability
factor of 100%
8. Resistance to water is 100%;
9. Flammability is zero; and
10. Toxicity is zero.
The foregoing properties have been ascertained after testing by an independent
testing laboratory, Ortech Inc., which employs (ASTM) procedures.
Operating Results
Since November 29, 1996, the Company has undergone a substantial management
change which has reordered the policies and practices of the company. The SEC
has made inquiries of the Company related to certain accounting and financial
reports issued by the Company in its quarterly filings for 1996 and 1995. As
such, the Company has had its financial statements for the year ending May 31,
1996 re-audited. Since the Company has been dormant up to May 1, 1997, the
Company will also show nominal revenues for the period ending May 31, 1997.
However, although the Company previously anticipated that it would advance from
the development stage to an operating entity in June, 1997 and to begin
generating revenues from the sale of the Novacrete Additive and the Novacrete
Finished Products in its fiscal year ending May 31, 1998, the Company now
believes that production will begin in September, 1997.
Item 2. Properties
The Company's principal executive offices are temporarily located at 1775
Broadway, Suite 1410, New York, New York 10019, telephone 212-262-0202 under a
temporary sublease, at $12,000 (USD) per annum, from an entity owned by Mr.
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Friedenberg, a director, officer and shareholder of the Company. As of the
filing of this Form 10-K/A the company moved its principal executive office to
67 Wall Street, Suite 2411, New York, New York 10005, telephone (212)-825-2929.
Novacrete Canada operates out of a facility housing its executive offices and a
15,000 square foot manufacturing facility located at 2525 Tedlo Street, Unit B,
Mississauga, Ontario, Canada L5A 4A8, telephone (905)-566-0716. This facility is
subject to a five year lease commencing on May 1, 1997 and expiring on April 30,
2002. The annual lease payments are $62,500 (CDN). The Company moved from its
previous location in Burlington, Ontario and is still legally obligated to pay a
monthly rent of approximately $3,000 (CDN), although the Company is in
negotiations with the landlord to terminate the lease for a cash payment that
has now been determined. The Company believes that the manufacturing facility
for Novacrete Canada will be sufficient for its anticipated manufacturing
operations for the duration of the lease period.
Item 3. Legal Proceedings
The Company is in the process of completing an internal investigation of all
securities issued by the Company over the past three years. The Company has
engaged the legal services of Dowe & Dowe, a law firm located in New York, New
York to assist the investigation and provide additional legal and accounting
services to the Company. On August 26, 1997, the Company filed a lawsuit in
Federal District Court located in Minnepin County, Minnesota, Stratford
Acquisition Corporation v. 10222 Investments, et. al., Index No. 97-1954
DSD/JMM, against 49 separate defendants to cancel common stock, stock options
and stock warrants that the Company believes were issued either unlawfully or
without consideration and to cancel certain consulting and distribution
agreements that the Company previously entered into and which are now deemed to
be null and void. If this lawsuit is successful, the Company will cancel
approximately 2,000,000 shares of the Company's common stock. In the interim,
the Company has authorized its transfer agent to place stop transfer orders
restricting the transfer of all shares of common stock subject to the lawsuit
until it has been adjudicated. In August, 1997, a Company shareholder, Mel
Greenspoon, filed a lawsuit in Canada against the Company and one director, Mr.
A. Roy MacMillan, Mel B. Greenspoon v. Stratford Acquisition Corporation and A.
Roy MacMillan, Ontario Court General Division, Court File No. 97-CV-129814, to
secure unrestricted stock certificates for shares of restricted common stock he
currently owns and for damages. Mr. Greenspoon is one of the shareholders that
is being sued by the Company to cancel his common stock holdings (See above
paragraph). The Company does not believe that the lawsuit will ultimately be
successful in light of the Company's own lawsuit, nor should it have any
materially adverse consequences to the Company if it is successful.
In June, 1997, the Company filed a lawsuit in Canada against a former director
and officer, Jan Sulkiewicz, and companies he controls, Stratford Acquisition
Corporation v. Jan Sulkiewicz, et. al., Ontario Court (General Division), Court
File No. 97-CV-126925, for breach of contract and conversion of personal and
intellectual property. Because the Company subsequently learned that it already
had legal title to its formulation costs prior to acquiring it from Mr.
Sulkiewicz, and entities he controls, it has filed a lawsuit to secure the
$100,000 in cash and 500,000 shares of common stock that was provided to
entities owned and controlled by Mr. Sulkiewicz. The SEC has made inquiries of
the Company relating to certain accounting and financial reporting issues as
10
<PAGE>
reported in its quarterly filings for 1996 and 1995. The SEC's investigation is
believed to be directed at the actions and omissions of former directors,
officers, employees and advisors of the Company that were employed by or
associated with the Company prior to November 29, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were known by the current management to have been submitted to a vote
of security holders during the fourth quarter of the fiscal year covered by this
report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock, $.001 par value, is traded on the Over-the-Counter
Bulletin Board ("OTC") operated by the National Association of Securities
Dealers under the ticker symbol HARD. The tables present its high and low market
prices for each of the four quarters in the fiscal year ending May 31, 1997. The
quotations reflect interdealer prices without retail mark-up, mark-down or
commissions and may not necessarily represent actual transactions. The Company's
common stock became actively traded in July, 1995. on June 6, 1997, the closing
bid price was $.32. The Company has paid no cash dividends in 1996 and does not
expect to change its dividend policy in the foreseeable future.
Quarterly Common Stock Price Ranges
1997 Quarter High Low
---- ------- ---- ---
1st $5.75 $1.12
2nd $2.00 $ .06
3rd $ .60 $ .16
4th $ .75 $ .25
The number of shares of common stock issued and outstanding as of May 31, 1997
and May 31, 1996 were 10,113,381 and 7,802,000, respectively.
On March 11, 1997, the Company sold 550,000 shares of its unregistered common
stock pursuant to an exemption from registration under Section 4(2) of the
Securities Act at the then current market price of $.35 per share. Of this
common stock issuance, 350,000 shares were sold to the Friedenberg Entities,
100,000 shares were sold to Mr. Friedenberg and 100,000 shares were sold to Mr.
Peter Sosnkowski. The Company issued 171,400 shares of common stock to its
President, A. Roy MacMillan in exchange for $60,000 of unpaid services rendered
to the Company. The Company also issued 626,531 shares of stock in connection
with certain management services.
11
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year End May 31,
--------------------------------------------------------- Jan. 1 thru
1997 1996 1995 May 31, 1994
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Net Revenues(2): $0 $140,741 $0 $0
Income (loss from
continuing operations: ($2,303,778) ($375,361) ($40,503) ($1,148)
Income (loss) from
continuing operations
per weighted-average
share of common stock
outstanding: ($.24) ($.07) ($.03) ($.00)
Total Assets: $219,533 $479,615 $236,666 $52
Long-Term Obligations: $315,000 $0 $0 $0
Cash Dividends: $0 $0 $0 $0
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
1997 vs. 1996
Sales decreased 100% in 1997 to $0 from the prior period in which the Company
reported $140,741 in sales. The percentage loss is not, and should not be
considered a precise indicator of the Company's performance during the fiscal
year since the Company dedicated the period commencing on November, 1996 to May
31, 1997 to a restructuring of the entire corporation, including management,
marketing, finances and operations and had no operations, nor the ability to
operate for this period.
Operating costs increased from $518,954 in 1996 to $1,011,763 in 1997 or 194%.
The increase in operating costs was attributable primarily to the hiring of
additional official staff to govern the Company's operations, asset write-offs
and professional fees. The increase in operating expenses over revenues resulted
in a loss from operations of $1,011,763. The Company owns no material tangible
or intangible assets and therefore, had nominal depreciation and amortization
for the annual period.
- --------
(2) The Company is in the development stage and did not sell any product to
generate revenue for the annual fiscal year ending May 31, 1997.
12
<PAGE>
1996 vs. 1995
On August 15, the Company executed a definitive acquisition agreement with
Supercrete and acquired all of the issued and outstanding shares of Supercrete
in exchange for 22,800,000 shares of the Company's common stock. Supercrete
owned, exclusively, the Supercrete License to manufacture and distribute
Supercrete Products. Since the Company was in operation for only 10 months
during the fiscal year ending 1995, it had limited business activity. However,
during 1995 the Company incurred $40,685.00 in operating expenses attributable
to official salaries, professional fees and working capital. The Company had $0
revenues in the same period. (See Item I, Business - Historical Background)
Liquidity and Financial Resources
The Company ended the 1997 fiscal year with nominal liquidity and a $1,011,763
operating losses and with no definitive plan for operating profitably in the
foreseeable future. Although the Company has an unfavorable liquidity position
it only has $315,000 of long-term debt and $113,218 of short-term debt as of May
31, 1997.
The Company's new management does anticipate it will sell products in the
current fiscal year through licensing agreements with distributors which
agreements are expected to generate positive cash flow. In addition, the Company
will seek to raise additional capital through the issuance of convertible debt
and common stock to provide additional working capital.
From November, 1996 through June, 1997 the Company received $305,000 (USD) from
the sale of a 10% $1,000,000 Redeemable Debenture (the "Debenture") to the
Friedenberg Entities. For each $1.00 (USD) invested, in the Debenture, the
investor was granted a warrant to purchase one share of, the Company's $.OO1 par
value common stock for fifty cents ($.50 USD) (the "Warrants"). The Warrants
expire on February 1, 2000. The Debenture and Warrants were sold pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended, and will be restricted from transfer unless registered by the Company
for resale, or sold through an exemption from registration which shall be
subject to an opinion of counsel satisfactory to the Company. In addition, in
March, 1997, the Company sold 550,000 restricted shares of common stock to the
Friedenberg Entities, Mr. Friedenberg's IRA and Mr. Peter Sosnkowski at the
market price of $.35 per share, pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended, and will be restricted
from transfer unless registered by the Company for resale, or sold through an
exemption from registration which shall be subject to an opinion of counsel
satisfactory to the Company. This common stock offering generated an additional
$192,500 (USD) , which has been used by the Company for working capital.
In June 6, 1997, Mr. Friedenberg, on behalf of the Friedenberg Entities, reached
an agreement with the Company whereby he agreed to exchange the principal and
all accrued interest on the Debenture, aggregating $316,406 into common stock at
the current market price of $.32 per share. The result of this debt exchange
will require the Company to issue 907,150 additional shares of common stock to
the Friedenberg Entities.
13
<PAGE>
Inflation
Since the Company will need to purchase additional plant equipment to begin its
operations it will be subject to price increases attributable to inflation.
Since the Company has begun making these purchases as of May, 1997, it does not
believe that inflation, or an increase thereof, would be material factor. The
Company, however, will be subject to inflation when purchasing raw materials to
be used in manufacturing the Novacrete Additive and the Novacrete Finished
Products and when selling these products to customers. As such, while the
Company has exposure to inflation, in the very near future it does not believe
that inflation will bear significantly on its financial position.
Item 8. Financial Statements and Supplementary Data
Page
Index to Financial Statements and Supplementary F-1
Financial Data
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheet, May 31, 1997 and 1996 F-3
Statement of Operations, Years Ended May 31, F-4
1997, 1996 and 1995
Statement of Changes in Stockholders' Equity, F-5
Years Ended December 31, 1997, 1996, 1995 and 1994
Statement of cash Flows, Years Ended May 31, F-6
1997, 1996 and 1995
Notes to Financial Statements F-7
14
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997, 1996 AND 1995
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
(A Development Stage Enterprise)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets
as of May 31, 1997 and 1996 F-3
Statements of Operations
for the periods cumulative January 1, 1994 through May 31, 1997,
twelve months ended May 31, 1997, 1996 and 1995 F-4
Statements of Changes in Shareholders' Deficit
for the years ended May 31, 1997, 1996, and 1995 F-5
Statements of Cash Flows
for the periods cumulative January 1, 1994 through May 31, 1997,
twelve months ended May 31, 1997, 1996 and 1995 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
Stratford Acquisition Corp.
We have audited the accompanying consolidated balance sheets of Stratford
Acquisition Corp. (a Minnesota corporation) and subsidiary as of May 31, 1997
and 1996 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the periods cumulative January 1, 1994
through May 31, 1997, and for the years ended May 31, 1997, 1996, and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stratford Acquisition Corp. and
subsidiary as of May 31, 1997 and 1996 and the related consolidated statements
of operations, changes in shareholders' equity and cash flows for the periods
cumulative January 1, 1994 through May 31, 1997 and the years ended May 31,
1997, 1996 and 1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Stratford
Acquisition Corp. and subsidiary will continue as a going concern. As discussed
in Note 1 to the financial statements, Stratford Acquisition Corp. and
subsidiary have sustained operating losses during the last three years and has a
stockholders' deficit of $208,685 as of May 31, 1997. These matters raise
substantial doubt about Stratford Acquisition Corp. and subsidiary's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should Stratford Acquisition Corp. and subsidiary be unable
to continue as a going concern.
FELDMAN RADIN & CO., P.C.
Certified Public Accountants
New York, New York
July 27, 1997
F-2
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, May 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,098 $ 155,194
Other receivables 40,579 11,868
Inventory 143,313 --
Marketable securities 13,250 --
Due from shareholders -- 134,405
----------- -----------
Total Current Assets 207,240 301,467
PROPERTY, PLANT, AND EQUIPMENT, net of
accumulated depreciation and amortization 2,158 --
OTHER ASSETS:
Organization costs, net of accumulated amortization 741 --
Refundable deposits -- 178,148
Security deposits 9,394 --
----------- -----------
10,135 178,148
----------- -----------
$ 219,533 $ 479,615
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 110,385 $ 12,631
Payroll taxes payable 2,833 --
----------- -----------
Total Current Liabilities 113,218 12,631
DUE TO SHAREHOLDERS: 315,000 --
COMMITMENTS AND CONTINGENCIES: -- --
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock - $0.001 par value
50,000,000 shares authorized
10,113,381 and 7,802,000 shares
issued and outstanding, respectively 7,813 6,002
Additional paid-in capital 2,603,592 977,294
Deficit accumulated during the
development stage (2,820,090) (516,312)
----------- -----------
Shareholders' (Deficit) Equity (208,685) 466,984
----------- -----------
$ 219,533 $ 479,615
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
( A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
January 1, 1994
(Inception)
Year ended Year ended Year ended through
May 31, May 31, May 31, May 31,
1997 1996 1995 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Technology license fees $ -- $ 140,741 $ -- $ 140,741
----------- ----------- ----------- -----------
Operating Expenses
General and administrative costs 927,451 518,947 10,120 1,457,666
Non-Cash imputed Stock Compensation 1,360,580 7 30,565 1,391,152
----------- ----------- ----------- -----------
Total operating expenses 2,288,031 518,954 40,685 2,848,818
----------- ----------- ----------- -----------
Loss from operations (2,288,031) (378,213) (40,685) (2,708,077)
----------- ----------- ----------- -----------
Other Income (Expense)
Interest income 314 474 16 804
Interest expense (12,917) -- -- (12,917)
Foreign currency gain (loss) (3,144) 2,378 166 (600)
----------- ----------- ----------- -----------
Net loss $(2,303,778) $ (375,361) $ (40,503) $(2,720,790)
=========== =========== =========== ===========
Net loss per share $ (0.24) $ (0.07) $ (0.03) $ (0.46)
=========== =========== =========== ===========
Weighted-average number of shares
of common stock outstanding 9,590,212 5,552,407 1,460,274 5,979,010
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, June 1, 1993 300,000 $ 300 $ 29,700 $ (30,000) $ --
Sale of common stock for less than
par value 700,000 700 69,300 (69,300) 700
Net loss -- -- -- (1,148) (1,148)
----------- ----------- ----------- ----------- -----------
BALANCE, May 31, 1994 1,000,000 1,000 99,000 (100,448) (448)
Sale of common stock 943,500 944 233,461 -- 234,405
Issuance of common stock
for consulting fees 3,056,500 3,056 27,509 -- 30,565
Net loss -- -- -- (40,503) (40,503)
----------- ----------- ----------- ----------- -----------
BALANCE, May 31, 1995 5,000,000 5,000 359,970 (140,951) 224,019
Sale of common stock 494,700 495 617,324 -- 617,819
Exercise of granted options
under employee benefit plan 500,000 500 -- -- 500
Issuance of common stock --
for consulting fees 7,250 7 -- -- 7
Shares issued for no consideration 1,800,000 -- -- -- --
Net loss -- -- -- (375,361) (375,361)
----------- ----------- ----------- ----------- -----------
BALANCE, May 31, 1996 7,801,950 6,002 977,294 (516,312) 466,984
Sale of common stock 1,513,500 1,514 266,015 -- 267,529
Issuance of common stock
for services 626,531 126 1,171,788 -- 1,171,914
Issuance of options
for services -- -- 128,666 -- 128,666
Issuance of common stock
for compensation 171,400 171 59,829 -- 60,000
Net loss -- -- -- (2,303,778) (2,303,778)
----------- ----------- ----------- ----------- -----------
BALANCE, May 31, 1997 10,113,381 $ 7,813 $ 2,603,592 $(2,820,090) $ (208,685)
=========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
( A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
January 1, 1994
(Inception)
Year ended Year ended Year ended through
May 31, May 31, May 31, May 31,
1997 1996 1995 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,303,778) $ (375,361) $ (40,503) $(2,720,790)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock and options issued as payment for services 1,360,580 7 30,565 1,391,152
Changes in assets and liabilities:
(Increase) decrease in other receivables (28,711) (11,868) -- (40,579)
(Increase) decrease in inventory (143,313) -- -- (143,313)
(Increase) decrease in refundable deposits 178,148 (175,898) (2,250) --
(Increase) decrease in organization costs (741) -- -- (741)
(Increase) decrease in security deposits (9,394) -- -- (9,394)
Increase (decrease) in accounts payable and accrued expenses 97,754 12,131 -- 110,385
Increase (decrease) in payroll taxes payable 2,833 -- -- 2,833
----------- ----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (846,622) (550,989) (12,188) (1,410,447)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (2,158) -- -- (2,158)
Purchase of marketable securities (13,250) -- -- (13,250)
----------- ----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (15,408) -- -- (15,408)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in due to shareholders 315,000 (12,147) 12,147 315,000
Decrease in due from shareholders 134,405 100,000 (234,405) --
Proceeds from sale of common stock and exercise of options 267,529 618,319 234,405 1,120,953
----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 716,934 706,172 12,147 1,435,953
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (145,096) 155,183 (41) 10,098
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 155,194 11 52 --
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,098 $ 155,194 $ 11 $ 10,098
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,269 $ -- $ -- $ 1,269
=========== =========== =========== ===========
Income taxes $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Cash received during the period for:
Interest $ 314 $ 474 $ 16 $ 804
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE>
STRATFORD ACQUISITION CORP. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cumulative January 1, 1994 Through May 31, 1997,
Twelve Months Ended May 31, 1995, 1996 and 1997
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
On May 11, 1995, the Company amended its Articles of Incorporation to
authorize the issuance of 50,000,000 shares of common stock from the
previously approved amount of 1,000,000 shares of common stock.
Additionally, the Company changed the par value of its common stock to
$0.001 par value from $0.10 par value. All amounts and valuations shown in
the accompanying financial statements reflect the effects of this change.
Substantially all of the Company's management, directors and officers were
replaced on November 29, 1996.
During January 1997 the Company acquired 100% of the outstanding stock of
Novacrete Technology (Canada) Inc., a newly created company established to
manufacture and distribute the Company's Novacrete product line.
The Company is in the development stage and, through its wholly owned
subsidiary, is engaged in the business of manufacturing and marketing a
technology and an additive for enhancing cement-based products, hereinafter
referred to as "Novacrete" and various finished products for specific
applications which use predetermined amounts of the Novacrete additive. The
Company will initially market and sell the Novacrete additive mixture and
the Novacrete finished products to large distributors pursuant to
distribution agreements covering predetermined geographic areas.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As shown in the
consolidated financial statements, the Company has incurred net operating
losses during fiscal years ended May 31, 1997, 1996 and 1995, resulting in
an accumulated deficit of $208,685 at May 31, 1997. These factors, among
others, indicate that without the continued support of certain shareholders
and additional financing, the Company may be unable to continue in
existence. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
F-7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation - The consolidated financial statements include
the accounts of the Company and its subsidiary. All material
intercompany transactions and balances have been eliminated.
B. Cash and Cash Equivalents - The Company maintains funds in Canadian
financial institutions in both US dollar (US$) and Canadian dollar
(CN$) transaction accounts. All transactions reflected in the
accompanying financial statements have been converted into US dollar
equivalents, as of the end of each respective year at the Wall Street
Journal published exchange rate on the last day of the fiscal year,
for CN$ accounts and at historical amounts for US$ accounts.
The Company considers all cash on hand and in banks, including
accounts in book overdraft positions, certificates of deposit and
other highly-liquid investments with maturities of three months or
less, when purchased, to be cash and cash equivalents.
C. Income Taxes - The Company utilizes the liability method of accounting
for income taxes as set forth in FASB Statement No.109, "Accounting
for Income Taxes". Under the liability method, deferred taxes are
determined based on the difference between the financial statement and
tax bases of assets and liabilities using enacted tax rates in effect
in the years in which the differences are expected to reverse.
As reflected in the accompanying statements of operations, the Company
has incurred losses while in the development stage. Due to the limited
operations of the Company and the uncertainty surrounding the eventual
utilization of its losses, a valuation allowance has been recorded to
fully reserve for the deferred tax benefits generated by its net
operating losses.
D. Property, Plant and Equipment - Property, plant and equipment are
stated at cost less accumulated depreciation. Depreciation for
financial statement purpose is computed by the straight-line method
over the estimated useful lives of the assets, which is generally five
years for equipment.
E. Inventories - Inventories are valued at the lower of cost or market
determined by the first-in, first-out method of accounting.
F. Fair Value of Financial Instruments - The carrying value of cash and
cash equivalents, other receivables, marketable securities, accounts
payable and accrued expenses approximate their fair values based on
the short-term maturity of these instruments.
G. Marketable Securities - The Company's marketable securities are
comprised of equity securities classified as trading securities, which
are reported at their fair
F-8
<PAGE>
market values based upon the quoted market prices of those investments
at balance sheet date. Accordingly, net realized and unrealized gains
and losses on trading securities are included in net earnings.
H. Loss Per Share - Loss per share was computed by dividing net loss by
the weighted average number of shares of common stock outstanding.
I. Foreign Currency Remeasurement - Because the Company's functional
currency is the US dollar, the financial statements for the Company's
activities in Canada have been remeasured from Canadian dollars.
Accordingly, all gains and losses arising from remeasurement of
monetary assets and liabilities have been recognized currently in
income.
J. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
3. CAPITAL STOCK TRANSACTIONS
A. On December 31, 1968, the Company amended its Articles of
Incorporation to authorize the issuance of 1,000,000 shares of $0.10
par value common stock.
B. On June 1, 1993, the Board of Directors authorized the sale of 700,000
shares of $0.10 par value (pre-restatement of the Company's Articles
of Incorporation) unregistered, restricted common stock to the
Company's majority shareholder. The total consideration given in this
transaction, as permitted by Minnesota law, was $700, which was
significantly below the authorized par value of the stock.
Accordingly, the difference between the par value of the common stock
sold and the consideration paid was charged against accumulated
deficit in the accompanying financial statements. This transaction is
reflected in the accompanying financial statements at the restated par
value of the Company's common stock.
C. On December 31, 1993, pursuant to a Special Meeting of Shareholders.
The Shareholders approved an amendment to the Company's Articles of
Incorporation to allow the issuance of up to 10,000,000 shares of
$0.01 par value common stock and to change the name of the Company to
Stratford Corporation upon completion of a proposed merger. The
proposed merger did not occur and the Company did not concurrently
file the appropriate documents to facilitate these changes. In May
1995, the Company filed the amended Articles of Incorporation to allow
for the issuance of up to 10,000,000 shares of $0.01 par value common
stock in conjunction with the additional amendment as discussed below.
F-9
<PAGE>
D. On April 3, 1995, the Company's shareholders approved a proposal at a
Special Meeting of Shareholders authorizing an amendment to the
Company's Articles of incorporation to allow for the issuance of up to
50,000,000 shares of equity securities with a par value of $0.001 per
share. This amendment to the Company's Articles of Incorporation was
filed with the appropriate authorities during May 1995.
E. During April 1995, the Company sold an aggregate 943,500 shares of
unregistered, restricted common stock to third-party investors for a
total of approximately $234,000.
F. In April 1995, the Company issued an aggregate 270,000 shares of
unregistered, restricted common stock to various companies and
individuals for services rendered in conjunction with the placement of
the above mentioned shares and for other services related to the
reactivation of the Company. This transaction, as approved by the
Company's Board of Directors, was valued at $0.01 per share, or
$2,700.
G. In April 1995, the Company issued an aggregate 2,786,500 shares of
unregistered, restricted common stock to insiders, promoters, founders
and other affiliates of the Company in connection with the
reactivation of the Company and the change in control previously
discussed. This transaction, as approved by the Company's Board of
Directors, was valued at $0.01 per share, or $27,865 and was charged
to operations as consulting fees.
H. Present management is unable to determine the value received for the
net issuance during the fiscal year ended May 31, 1996 of 1,800,000
shares and is contacting the registered shareholders to determine if
appropriate consideration was received for the shares. If not, the
Company may cancel such shares. In the financial statements for the
year ended May 31, 1996, the shares have been recorded as outstanding
with no consideration received for their issuance.
I. During Fiscal 1996, the Company sold an aggregate 494,700 shares of
common stock, both registered under Regulation S and unregistered, for
an aggregate sum of approximately $618,000.
J. In July 1995, the Company filed a Form S-8 with the Securities and
Exchange Commission to register approximately 2,000,000 shares of
common stock to be issued under the Company's 1995 Nonqualifying Stock
Option Plan ("Plan"). The Plan provides that stock options may be
issued to any person who is performing or has been engaged to perform
services of special importance to management in the operation,
development and growth of the Company. The determination of the option
price per share for any stock option issued under the Plan is at the
sole discretion of the Board of Directors or their designees. The Plan
expires on the tenth anniversary of its approval and all ungranted
stock options shall expire. During
F-10
<PAGE>
1996, the Company issued a total of 500,000 options, all of which were
immediately exercised by the receiving parties on the respective grant
dates.
K. During fiscal year end 1997, 126,531 options were granted as
consideration for various services received by the Company. The
Company also issued 500,000 shares of its common stock in connection
with certain management services and the acquisition of its
formulation costs (See Note 7).
L. As payment for his salary the Company president accepted 171,400
shares of the Company's common stock in lieu of cash. The shares
issued were based on $60,000 of compensation which represented less
than the total amount owed for fiscal 1997. The remaining unpaid
compensation of $31,250 has been included in Accounts payable and
accrued expenses at May 31, 1997.
4. COMMITMENTS
The Company's prior executive office lease was terminated in August 1997.
That lease required payments of approximately $2,100 per month. The Company
has entered into a new lease for office space commencing June 1, 1997. This
lease requires monthly rent payments of approximately $3,400.
The Company leases telecommunication, reproduction and computer equipment
and office furnishings under long-term operating lease agreements. These
lease agreements require cumulative monthly payments of approximately $592
per month for the terms of the respective leases expiring between October
1998 and January 2001.
Total rent expense was approximately $64,000 for the year ended May 31,
1997.
Future minimum noncancellable lease payments are as follows:
Year ending US$
May 31, Amount
----------- ---------
1998 $ 49,650
1999 40,853
2000 43,762
2001 43,762
2002 40,115
--------
TOTALS $218,142
========
F-11
<PAGE>
In addition, all contracts, joint ventures and licensing agreements have
either expired or have been terminated by the Company's new management.
5. CONTINGENCIES
The SEC is investigating the activities of this company and those of the
previous management. Current management strongly believe that this
investigation will have no effect on the current position of the Company
and its ability to operate and trade on the NASDAQ bulletin board.
6. SHAREHOLDER LOANS
As of May 31, 1997, the Company was obligated to certain shareholders for
Bridge Loans in the amount of $315,000. These loans have been advanced to
the Company as needed to satisfy working capital requirements and bear
interest at 10% per annum. During the fiscal year ended May 31,1998, these
Bridge Loans were satisfied in exchange for common stock.
7. SUBSEQUENT EVENTS
A. During June 1997 the Company approved the issuance of 3,000 employee
stock warrants to purchase stock at $.50 per share and the issuance of
1,727,772 warrants to directors to purchase shares at $.35 per share.
In addition, the Company chairman was granted 91,504 warrants to
purchase shares at $.35 per share and Rollins International, Inc. and
Anand Inc. were issued 20,000 and 30,000 warrants respectively at an
exercise price of $.50 per share. Because these warrants have been
issued at amounts that approximate the fair market value of the
Company's stock, no compensation will be required to be recorded
during fiscal year end 1998 under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees".
B. As consideration for the acquisition of its formulation costs the
Company issued 500,000 shares of its $0.001 par value common stock and
paid $100,000 to a former employee of the Company and entities related
to him. Because the Company believes it already had legal title to its
formulation costs prior to the acquisition, the Company has commenced
an action in the Ontario Court to recover certain technology and
amounts paid as consideration. The Company also plans to commence an
action in the U. S. District Court to cancel the shares issued as well
as shares issued to other parties through the exercise of options,
whereby adequate consideration was not received by the Company.
Accordingly, the shares issued in connection with the
F-12
<PAGE>
acquisition of the formulation costs have been recorded without regard to
their value because of the circumstances surrounding their issuance.
8. OTHER RECEIVABLES
Included in Other receivables are $40,361 of goods and services tax.
9. STOCK OPTIONS
The following table summarizes the activity with regard to options and
warrants for the year ended May 31, 1997.
Options Warrants Price
------- -------- -----
Outstanding at May 31, 1996 -- --
Granted 768,000 -- $5.00-$50,000
Exercised (768,000) --
Expired -- --
Retired -- --
-------- --------
Outstanding at May 31, 1997 -- --
======== ========
During fiscal year ended May 31, 1997 the company granted 768,000 options
to certain individuals and entities. Included in this amount are 126,531
options issued as consideration for services received by the Company.
Immediately after there issuance these options were exercised and the
shares obtained were sold in the open market by the respective parties to
generate the funds necessary to "pay" for the services received.
The remaining parties receiving options granted during 1997 exercised those
options, according to management, for negligible amounts. As stated in Note
7, the company is seeking to cancel all shares issued to parties through
the exercise of options obtained for little or no consideration.
Because of the events surrounding the issuance of shares obtained by the
exercise of options the company has not recorded any expense related to
their issuance except for those options discussed in Note 3K.
F-13
<PAGE>
10. STOCK-BASED COMPENSATION
In fiscal 1997, the Company adopted the disclosure provisions of SFAS No.
123, "Accounting for Stock-Based Compensation". For disclosure purposes,
the fair value of options is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for stock options granted during fiscal year ending May
31, 1997: annual dividends of $0; expected volatility of 50%; risk free
interest rate of 7%; and expected life of one month. The weighted average
fair values of stock options granted during the year was $.08. If the
Company had recognized compensation cost in accordance with SFAS No. 123,
the Company's pro forma net loss and net loss per share would have been
$2,320,553 and $.24 for the year ended May 31, 1997.
11. NON-CASH IMPUTED STOCK COMPENSATION
In accordance with SEC rules the Company is required to value stock and
options issued for services by reference to the makret price of the stock
on the date of such issuance. In this regard the Company has recorded
compensation expense on the income satatement of $1,360,580, $7, and
$30,565 for the years ending May 31, 1997, 1996 and 1995 respectively. Such
compensation expense has no effect on the total equity of the Company.
F-14
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On December 23, 1996, the Company engaged the certified public accounting firm
of Feldman Radin & Co., P.C. as its outside auditors to audit the Company's
annual financial statements for the fiscal year ending May 31, 1996 and to audit
amended financial statements for the preceding two year period.
On October 7, 1996, the accounting firm of Scott Hatfield & Associates, P. C.,
resigned as the Company's independent auditors as a result of disagreements with
the Company on matters of accounting principles and practices, financial
disclosure, and reportable events. On April 1, 1997, the Company entered into a
settlement agreement with Mr. Hatfield whereby the Company has agreed to pay him
$3,000 to settle his claims for unpaid professional fees.
On October 14, 1996, the Company filed a Form 8-K with the SEC to report that as
of October 15, 1996, the Company would be engaging Terence J. Dunne, Certified
Public Accountant, as its independent auditor for 1996 in place of Scott
Hatfield & Associates, P.C. Mr. Dunne's engagement letter appears as Exhibit 16
to the Form 8-K that was filed by the Company on October 14, 1996 and is
incorporated herein by reference.
On October 24, 1996, after having reviewed various information on the Company,
Mr.Dunne withdrew as an auditor of the Company for the fiscal year ending May
31,1996. Prior to his withdrawal, Mr. Dunne did not furnish any reports on the
financial statements of the Company. Mr. Dunne's resignation letter to the
Company appears as Exhibit 16 to the Form 8-K that was filed by the Company on
October 29, 1996 and is incorporated herein by reference.
Neither a representative of Scott Hatfield & Associates, P.C. or Mr. Dunne
responded to the Company's request for a written response to the aforementioned
Form 8-K's that were filed by the Company pursuant to Item 304 of Regulation
S-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following provides certain information concerning the directors and
executive officers of the Company and its subsidiaries as of May 31, 1997. Since
the previous management, except for Mr. MacMillan, resigned on November 29,
1996, and did not provide all corporate records relating to corporate actions
for the fiscal year ending May 31, 1996, the Company has provided current and
accurate information on its management since November 29, 1996.
Name Aqe Position
- ---- --- --------
A. Roy MacMillan 66 Director, President
D. Friedenberg 45 Director, Treasurer
Daniel W. Dowe 35 Director, Secretary
A. Roy MacMillan, 66, was appointed to the Company's Board of Directors and
became a Vice President on October 15, 1995. He has extensive experience in both
the private and public sectors. From 1992 to 1994 he was a consultant to Ontario
15
<PAGE>
Hydro International and for several engineering companies in Alberta, Canada.
From 1989 to 1991 he was a consultant to the Canadian International Development
Agency on export finance. From 1984 to 1990, he had worked extensively on
international business and trade development matters and was once President of
Brascan International, a subsidiary of Brascan Ltd. (a large Canadian holding
company) and founder of NDX Corporation, a company which pioneered information
storage and retrieval systems.
Douglas S. Friedenberg, 45, has been the President of Firebird Capital
Management, a financial advisory firm, since March, 1993 and currently manages
two private investment funds for Firebird. He also writes a regular column for
HFR Journal, a quarterly publication for the investment industry. In 1991, he
co-founded and became President of Unicorn Capital Management, an investment
management firm. From 1983 to 1991, he managed private investment portfolios for
Morgan Stanley, Inc. large New York City-based investment banking firm. Mr.
Friedenberg currently serves as a Director of Datametrics Corporation.
Daniel W. Dowe, 35, is an attorney and the founder of Dowe & Dowe, a New York
City-based law firm. From 1993 to present, Mr. Dowe has been practicing
corporate and securities law. From 1990 to 1993, upon graduating from Fordham
University School of Law, Mr. Dowe was an associate at a New York City law firm
concentrating on international trade matters.
G. Colin Rayner, 56, is an Ontario Barrister and solicitor since 1956,
specializing in Corporate, Commercial and Tax law. On June 3, 1997, Mr. G. Colin
Rayner was removed from the Board of Directors and as an officer of the Company,
pursuant to an affirmative vote of the majority of the Board of Directors.
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
In light of the substantial change of management in the Company on November 29,
1996, the following table sets for the current management of the Company and not
the management of the Company for the period commencing May 31, 1996 to November
29, 1996. The Company's decision to reflect the current management in this
filing is attributable to the lack of definitive information on the proper
election of former directors and officers of the Company prior to November 29,
1996, and the actual cash and stock compensation received by the former
management pursuant to established corporate procedures and the disclosure of
the same under the U.S. securities laws. However, notwithstanding the lack of
specific information on each former employees compensation the Company believes
its financial statements accurately disclose all Company expenses for the
reported period. None of the current directors or officers have employment
contracts with the Company.
16
<PAGE>
Long-Term Compensation
Annual compensation Awards Payouts
Securi-
ties
Name Other Underly- All
and Annual Restrict- ing Other
Princi- Compen- ed Stock Options/ LTIP Compen-
pal Salary Bonus sation Awards SARs Payouts sation
Position/Year ($) ($) ($) (#) ($) ($) ($)
- --------------------------------------------------------------------------------
A. Roy
MacMillan,
President
(1)(2)(3) $150,000 319,850
Douglas
Friedenberg,
Treasurer
(1)(2)(3)
Colin
Rayner,
(1)
Daniel
Dowe,
Secretary
(1)(2)(3)
(1) Except for Mr. Dowe and Mr. Rayner, all directors and officers of the
Company commenced their employment on November 30, 1996. Mr. Rayner became a
director in December, 1996 and was removed from the Board on June 3, 1997. Mr.
Dowe became a director in March, 1997. Prior to November 29, 1996, and during
the fiscal year ending May 31, 1996, except for Mr. MacMillan, the Company was
managed by an entirely different board of directors and officers, that either
voluntarily resigned or were asked to resign by the new management. Although the
financial statements for the period properly reflect expenses incurred by the
Company, since there are ongoing disputes relating to the issuance of common
stock and common stock options and the proper classification of cash payments to
the former management, the Company has elected to provide current and accurate
information regarding the compensation of the present management only.
(2) In lieu of salary, and until such time as the Company has adequate capital
resources to pay cash compensation to its management, Mr. MacMillan has agreed
to accept 171,400 shares of common stock in exchange for his accrued unpaid
annual salary of $60,000.00 which was accrued up to March 31, 1997. This
exchange of unpaid accrued salary for common stock was at the then current
market rate of $.35 per share. On June 1, 1997, Mr. MacMillan was granted an
additional 98,450 shares of common stock in exchange for $31,504.00 of unpaid
accrued salary, from April 1,1997 to May 31, 1997 which common stock was issued
at the then current market price of $.32 per share. As part of Mr. MacMillan's
agreement to accrue his salary, the Company granted him a warrant to purchase
one share of common stock at the exercise price of $.35 for a period that
expires on February 1, 2000, for each $1 of salary that Mr. MacMillan accrued
until May 31, 1997. As of the filing of this annual report, Mr. MacMillan has
earned a warrant to
17
<PAGE>
purchase 91,504 shares of common stock for accruing $91,504.00 of unpaid salary.
In addition, in November, 1996, Mr. MacMillan exercised a stock option for
50,000 shares of common stock that was granted to him upon his acceptance of a
directorship. Mr. MacMillan's current annual base compensation is $150,000. Mr.
Dowe received 64,857 shares of common stock in payment for $22,700 of services
rendered to the Company. From November, 1997 to May 31, 1997, Mr. Dowe's law
firm, Dowe & Dowe, received approximately $40,000.00 for legal services rendered
to the Company.
(3) On June 25, 1997, the Company issued an aggregate of 1,727,772 stock options
to its directors as an incentive for future performance. Of these options,
Messrs. MacMillan, Friedenberg and Dowe each received 575,924 options. The stock
options are exercisable when issued at then current market price of $.35 per
Share and will expire on June 25, 2002.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table shows the amount of common stock owned as of May 31, 1997,
by each director and officer and affiliates and by all directors and officers as
a group. Each individual has beneficial ownership of the shares which are
subject to an unexercised stock options and stock warrants held by him, and each
individual has sole voting power and sole investment power with respect to the
number of shares beneficially owned:
Amount and Nature
Name and Address of Beneficial Percent of
of Beneficial owner ownership Class (1)
- ------------------- --------- ---------
A. Roy MacMillan, 319,850 2.88%
Director, President
2525 Tedlo Street
Mississauga, Ontario
L5A 4A8
Douglas Friedenberg, 2,119,192 19.05%
Director, Treasurer
1775 Broadway
New York, New York 10019
All Directors and
officers as a group 2,439,042 21.93%
(1) The class includes stock options and stock warrants granted to the directors
and officers prior to May 31, 1927 which are deemed by the Company to be
acquirable by the beneficial owner within 60 days of this filing by exercise of
the option or warrant. This Table includes the common stock issuable to the
Friedenberg Entities in exchange for the outstanding principal and interest on
the Debenture. The Company has elected not to include in this Table subsequent
common stock or common stock equivalent acquisitions by the directors after May
31, 1997, to enable the financial statements and the disclosures contained in
this report to be comparable.
18
<PAGE>
a. Section 16(a) Beneficial Ownership Reporting Compliance
A. Roy MacMillan became a director and officer in October, 1996. On September 5,
1997, Mr. MacMillan filed Form 3, Form 4 and Form 5 (for the period ending May
31, 1997). Form 3 covered one transaction involving an exercise of a stock
option for 50,000 shares of common stock. Form 5 recorded one additional
transaction not previously disclosed, whereby Mr. MacMillan received 171,400
shares of common stock in exchange for services rendered. Form 4, which was due
on July 15, 1997, disclosed two acquisitions of 71,248 and 98,450 shares of
common stock that were issued to Mr. MacMillan in exchange for services
rendered, an acquisition of a stock option for 575,924 shares of common stock
for services rendered and a warrant to purchase 91,504 shares of common stock
that was received for deferring compensation.
Mr. Friedenberg became a director and officer in November, 1996. On September 5,
1997, Mr. Friedenberg filed Form 3, Form 4 and Form 5 (for the period ending May
31, 1997) as beneficial owner of common stock, common stock options and common
stock warrants. Form 3 covered 585,000 common shares acquired by the Friedenberg
Entities prior to Mr. Friedenberg becoming a director of the Company. Form 5
recorded one additional transaction not previously disclosed whereby Mr.
Friedenberg and the Friedenberg Entities acquired an additional 450,000 shares
of common stock. Form 4, which was due on July 15, 1997, disclosed the
acquisition by the Friedenberg Entities of 906,850 shares of common stock and
304,000 warrants to purchase common stock and Mr. Friedenberg's acquisition of a
stock option to purchase 575,924 shares of common stock.
Daniel W. Dowe became a director in March, 1997. On September 5, 1997, Mr. Dowe
filed Form 3, Form 4 and Form 5 (for the period ending May 31, 1997). Form 3 was
filed to disclose his official status and no ownership of equity. Form 5
recorded one additional transaction not previously disclosed whereby Mr. Dowe
received a stock option for 575,924 shares of common stock. Form 4, which was
due on July 15, 1997, disclosed the acquisitions of 64,857 shares of common
stock that were received in exchange for services rendered.
The above transactions that occurred prior to May 31, 1997, were disclosed in a
Form 10-K/A that was filed for the period ending May 31, 1996 in June, 1997. In
the past nine months, the Company was dedicated to completing a substantial
reorganization, which was the cause of the delay in timely filing all reports
required to be filed under Section 16(a).
Item 13. Certain Relationships and Related Transactions
Mr. Friedenberg is a principal shareholder of the Company in addition to being a
director and officer. The Company also sub-leases office space from an entity
controlled by Mr. Friedenberg at a rate of $1,000 per month.
In addition to serving as a director of the company, Mr. Dowe's law firm, Dowe &
Dowe, provides legal services to the Company. While the relationships between
the Messrs. Friedenberg and Dowe in their capacity as directors and officers of
the Company and as service providers to the Company, appear to be of a
conflicting nature, both Messrs. Friedenberg and Dowe, have agreed to provide
these services to the Company with the intention of assisting the Company while
it was in poor financial condition. As of May 31, 1997, Mr. Dowe's law firm has
received approximately $40,000.00 for services rendered over a seven month
period and he will most likely receive additional compensation in the form of
19
<PAGE>
either cash, stock options or common stock for his services as a director and
for the substantial amount of legal services his law firm has rendered to the
Company.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Page
(A) The following financial statements and
supplementary data are included in
Part II Item 8
Index to Financial statements and Supplementary F-1
Financial Data
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheet, May 31, 1997 and 1996 F-3
Statement of Operations, Years Ended May 31, F-4
1997, 1996 and 1995
Statement of Changes in stockholders' Equity, F-5
Years Ended December 31, 1997, 1996, 1995
and 1994
Statement of Cash Flows, Years Ended May 31, F-6
1997, 1996 and 1995
Notes to Financial Statements F-7
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(B) Exhibits to be included herein:
Exhibit Incorporated Document
- ------- ---------------------
3(i) -- Articles of Incorporation Form 10-K/A for the
period ending May 31,
1996
3(ii) -- By-Laws Form 10-K/A for the
period ending May 31, 1996
4 -- 10% Convertible Debenture Form 10-K/A for the
and Warrant Agreement period ending May 31,
1996
20
<PAGE>
Exhibit Incorporated Document
21 -- Subsidiaries of the Company Form 10-K/A for the
and Warrant Agreement period ending May 31,
1996
99 -- Battista Agreement Form 10-K/A for the
and Warrant Agreement period ending May 31,
1996
99 -- Supercrete N/A Limited
Agreement dated December 20,
1996
(C) Reports on Form 8-K
On October 14, 1996, the Company filed a Form 8-K with the SEC to report that as
of October 15, 1996 the Company would be engaging Terence J. Dunne, Certified
Public Accountant, as its independent auditor for 1996 in place of Scott
Hatfield & Associates, P.C. All information regarding this action is
incorporated by reference to the Form 8-K filed on October 14, 1996.
On October 29, 1996, the Company filed a Form 8-K with the SEC to report receipt
of Terence J. Dunne's resignation letter to the Company. All information
regarding this action is incorporated by reference to the Form 8-K filed on
October 29, 1996.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, Stratford Acquisition Corporation has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized:
STRATFORD ACQUISITION CORPORATION
By:
----------------------------------------
Daniel W. Dowe, President
By:
----------------------------------------
Douglas Friedenberg, Treasurer
Dated: May 20, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in capacities and on the dates indicated:
Dated
-----
- -------------------------------- Director May 20, 1998
Daniel W. Dowe
- -------------------------------- Director May 20, 1998
William K. Lavin
- -------------------------------- Director May 20, 1998
Douglas Friedenberg
- -------------------------------- Director May 20, 1998
Edward J. Malloy
22
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<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
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<SECURITIES> 13,250
<RECEIVABLES> 40,579
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