Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G Registration of Securities of a Small-Business 83 345K
Issuer
2: EX-3.1 Articles of Incorporation/Organization or By-Laws 6 25K
3: EX-3.1(I) Articles of Incorporation/Organization or By-Laws 2 11K
4: EX-3.1(II) Articles of Incorporation/Organization or By-Laws 2 15K
5: EX-3.1(III) Articles of Incorporation/Organization or By-Laws 7 33K
6: EX-3.1(IV) Articles of Incorporation/Organization or By-Laws 1 10K
7: EX-3.1(V) Articles of Incorporation/Organization or By-Laws 1 10K
8: EX-3.2 Articles of Incorporation/Organization or By-Laws 13 59K
9: EX-3.2(I) Articles of Incorporation/Organization or By-Laws 1 10K
10: EX-4.1 Instrument Defining the Rights of Security Holders 1 8K
11: EX-4.1(I) Instrument Defining the Rights of Security Holders 13 68K
12: EX-10.1 Material Contract 8 37K
13: EX-10.2 Material Contract 6 31K
14: EX-10.3 Material Contract 6 31K
15: EX-10.4 Material Contract 6 31K
16: EX-10.5 Material Contract 2 13K
17: EX-10.6 Material Contract 11 61K
18: EX-10.7 Material Contract 12 63K
19: EX-10.8 Material Contract 3 21K
20: EX-10.9 Material Contract 1 8K
21: EX-23.1 Consent of Experts or Counsel 1 9K
22: EX-23.1(I) Consent of Experts or Counsel 1 9K
23: EX-27 Financial Data Schedule (Pre-XBRL) 1 12K
10SB12G — Registration of Securities of a Small-Business Issuer
Document Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
BEACON LIGHT HOLDING CORPORATION
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(Name of Small Business Issuer in its Charter)
NEVADA 06-1519079
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
100 Pearl Street - 14th Floor, Hartford, Connecticut 06103
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(Address of Principal Executive Offices) (Zip Code)
(860) 249-7008
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(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
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Title of Class)
Preferred Stock, $.001 Par Value
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(Title of Class)
1
BEACON LIGHT HOLDING CORPORATION
FORM 10SB
DESCRIPTION SUBMISSION PAGE
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 13
ITEM 3. DESCRIPTION OF PROPERTY 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 18
ITEM 5. DIRECTORS, EXCEUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS OWNING MORE THAN 10% 20
ITEM 6. EXECUTIVE COMPENSATION 21
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 25
ITEM 8. DESCRIPTION OF SECURITIES 28
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 30
ITEM 2. LEGAL PROCEEDINGS 31
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 31
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 31
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 33
PART F/S 37
PART III
ITEM 1. INDEX TO EXHIBITS 81
ITEM 2. DESCRIPTION OF EXHIBITS 81
SIGNATURES 82
EX-3.1 ARTICLES OF INCORPORATION - IDAHO 83
EX-3.1(i) AMENDED ARTICLES OF INCORPORATION 89
EX-3.1(ii) ARTICLES OF INCORPORATION - NEVADA 91
EX-3.1(iii) ARTICLES OF MERGER 93
EX-3.1(iv) AMENDED ARTICLES OF INCORPORATION 100
EX-3.1(v) AMENDED ARTICLES OF INCORPORATION 101
EX-3.2 BY-LAWS 102
EX-3.2(i) AMENDMENT TO BY-LAWS 115
EX-4.1 FORM OF COMMON STOCK CERTICICATE 116
EX-4.1(i) CERTIFICATE OF DESIGNATION 117
EX-10-1 STOCK OPTION PLAN 130
EX-10-2 EMPLOYMENT AGREEMENT - JERRY GRUENBAUM 138
EX-10-3 EMPLOYMENT AGREEMENT - HANS LODDERS 144
EX-10-4 EMPLOYMENT AGREEMENT - RONALD STEENBERGEN 150
EX-10.5 ACQUISITION AGREEMENT - CASIN 156
EX-10.6 ACQUISITION AGREEMENT - WELLUX 158
EX-10.7 ACQUISITION AGREEMENT - KLICK 169
EX-10.8 LETTER OF INTENT - HONGTEX HONG KONG 181
EX-10.9 LIST OF SUBSIDIARIES OF REGISTRANT 184
EX-23.1 CONSENT OF HOFFSKI & PISANO 185
EX-23.1(i) CONSENT OF RAYMOND CHING & CO. 186
EX-27.1 FINANCIAL DATA SCHEDULE 187
2
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART 1
ITEM 1. DESCRIPTION OF BUSINESS.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this section and elsewhere in this
registration statement regarding matters that are not historical facts are
"forward-looking statements". Because such forward-looking statements include
risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. All statements, which
address operating performance, events or developments that our management
expects or anticipates to incur in the future, including statements relating to
sales and earnings growth or statements expressing general optimism about future
operating results, are forward-looking statements. These forward-looking
statements are based on our management's current view and assumptions regarding
future events and operating performance. Many factors could cause actual
results to differ materially from estimates contained in our management's
forward-looking statements. The differences may be caused by a variety of
factors, including but not limited to adverse economic conditions, competitive
pressures, inadequate capital, unexpected costs, lower revenues, net income and
forecasts, the possibility of fluctuation and volatility of our operating
results and financial condition, inability to carry out marketing and sales
plans and loss of key executives, among other things.
Throughout this registration statement, we refer to United States dollars
as "$" and to Hong Kong dollars as "HK$."
THE COMPANY
We are a Nevada corporation, reincorporated on November 18, 1997, as Beacon
Light Mining Company Inc. ("Beacon Light"). On February 18, 1998, we changed
our name to Beacon Light Holding Corporation. We were originally incorporated
in the State of Idaho on April 16, 1953. Our previous activities concentrated
on exploration and development of potential silver mining properties in the
northern part of the State of Idaho. We became inactive from the mid 1980's
until mid 1997. On February 16, 1998, we merged our 1953 Idaho corporation into
Beacon Light, our Nevada corporation.
We originally went public in the 1950s on a Regulation A offering. Subsequently
our stock was trading on the Spokane Exchange. The Spokane Exchange is now
defunct. Our Company's listing on the Spokane Exchange has also since lapsed.
In April 1997, Ansam, Inc. of Jersey City, New Jersey purchased a majority
control of our Company and changed our direction from silver mining to a holding
company for manufacturing operations in China. Ansam, Inc. is no longer a
shareholder in our Company. In June 1997, we submitted our application to
NASDAQ, and in September, 1997, our Company was accepted on the Electronic
Bulletin Board. In October 1999 we were removed from the Electronic Bulletin
Board for failure to file the necessary paperwork to be a fully reporting
company. Our common stock currently trades on a limited basis on the National
Quotation Bureau's "Pink Sheets" under the symbol "BLHG" and we currently intend
to reapply to have our Common Stock quoted on the Over-the-Counter Bulletin
Board upon meeting the requirements of its "Eligibility Rules".
3
We are headquartered in the United States in Hartford, Connecticut. Our Company
consists of two divisions, both of whom are based in Hong Kong. Our first
division is Wellux Industries Ltd., a Hong Kong corporation, which sources,
designs and manufactures adult products made from various forms of plastics,
lingerie and leather goods. In Europe, Wellux products are sold and distributed
by Wellux B.V., a Dutch company, located in Holland. This company is a wholly
owned subsidiary of Wellux Industries Ltd. Wellux BV also owns VJMA Roosen, a
Dutch Company, specializing in product design, development, packaging and
marketing of quality cookware and high end cutlery. Our second division is a
49% interest in Klick Ltd., a Hong Kong Corporation, which sources, designs and
manufactures high quality plastic household products, as well as household
electronic, cutlery and cookware products and sells and distributes these
products in Europe and Asia.
BUSINESS ACTIVITIES
On November 23, 1998 we entered into an agreement with Casin Video Cassette
Ltd. of Hong Kong to purchase its Casin Magnetic Manufactory, a plastics and
light electrical appliance manufacturing company located outside the City of
Shanzhan, in the Peoples Republic of China, about a one hour bus ride from Hong
Kong, for HK$9,480,000 or approximately $1.2 million US Dollars. To date, we
have not closed on this agreement due to the seller's unrelated other legal and
financial problems. We have decided to delay closing on the purchase of this
manufacturing facility until we are able to receive proper legal documentation
from their attorneys that the manufacturing facility will not be encumbered by
any legal claims or become the asset of a possible bankruptcy procedure against
the seller. The complex process is still going ahead in the Peoples Republic of
China. When the process is completed, we plan to complete this acquisition.
On May 18, 1999, we acquired Wellux Industries Ltd. from Crown Union
Investments Ltd., a Hong Kong based holding company, for four million newly
issued Rule 144 restricted common shares of Beacon Light Holding Corporation.
Wellux Industries Ltd. is a Hong Kong Corporation based in Hong Kong that
sources, designs and manufactures adult products made from various forms of
plastics, lingerie and leather goods. Their clients are first line wholesalers
and distributors of these products to the retail sector. The retail sector
consists of adult shops and Internet sales organizations. In some countries,
Wellux sells directly to retail customers through the means of direct sales and
mail order.
In Europe, Wellux products are sold and distributed by Wellux B.V. This
company is a wholly owned subsidiary of Wellux Industries Ltd. It consists of
Wellux B.V. warehouse and physical distribution center, showrooms and offices.
From this center, marketing sales and distribution for the European countries is
undertaken. In the Benelux and Germany, Wellux B.V. sells directly to their
clients, by means of its own sales force. In the other European countries,
agents are appointed, coordinated and supplied by Wellux B.V.
In June 1999, Wellux B.V. (Holland), the wholly owned subsidiary of Wellux
Industries Ltd, which in turn is a wholly owned subsidiary of our Company,
acquired the business and assets without the liabilities of VJMA Roosen from
Victor Roosen, a Dutch citizen, for five hundred thousand newly issued Rule 144
restricted common shares of Beacon Light Holding Corporation. VJMA Roosen is a
Dutch Company, specializing in product design, development, packaging and
marketing of quality cookware and high end cutlery. VJMA Roosen was acquired by
Wellux B.V. because of its synergy in logistics and distribution network in that
it enables them to participate in the European direct sales and wholesale
distribution network.
4
In July, 1999 we signed a letter of intent to acquire HongTex Holding
Company Limited, a Hong Kong Corporation, for eight million newly issued
restricted common shares of Beacon Light Holding Corporation. HongTex Hong Kong
owns fifty-one percent of Cityford Dying and printing Industrial Limited's
factory in Wuhan, China. The Wuhan Municipal Government owns the other
forty-nine percent of the factory. The factory is one of the major core
enterprises in the textile industry in Wuhan. The factory occupies an area of
approximately 440,000 square feet with a net building area of approximately
243,100 square feet. The factory employs over a thousand employees and has an
annual production capacity of 45 million yards of printed and dyed textile
fabrics. The basic raw material processed at the factory is gray cloth,
purchased mainly from India, Pakistan and China. The manufacturing process
consists of design, printing-form production, pretreatment, printing, dying,
finishing and roll packing.
Due to the need to extract, translate and reformat the Chinese financial
information into general accepted accounting principals, and the rather complex
discussions toward its completion, we still could not finalize our due diligence
process. This in turn has frustrated the conclusion of needed trade facilities
arrangements with the banks. Final activation of this acquisition is subject to
completion of the due diligence to the satisfaction of our Company's Board of
Directors.
In September 1999, Wellux Industries Ltd. our wholly owned subsidiary,
established a new company in joint venture with the publishing group Dimensions
Holding Asia Ltd. called Kiss Mailorder ltd. Under the joint venture
agreement, Wellux holds a fifty percent interest in Kiss Mailorder, which will
be the printed media, mail-order arm of Wellux Industries for the direct
marketing of Wellux's products.
In September 1999, we acquired a forty-nine percent ownership interest in
Klick Ltd., a Hong Kong Corporation, for a soon to be issued two million four
hundred fifty thousand newly issued Rule 144 common shares of Beacon Light
Holding Corporation. We acquired our forty-nine percent ownership interest in
Klick Ltd., thirty percent from Ma Yuk King a Hong Kong resident, fifteen
percent from Drilford Ltd. a Hong Kong Corporation, and four percent from KB
Group, a British Virgin Island Corporation that owns the remaining fifty-one
percent interest. Klick Ltd. located in Hong Kong, does source, design and
manufacture high quality plastic household products, as well as household
electronic, cutlery, and cookware products. Klick's clients consist of
wholesalers, importers, distributors, department stores, retail chains and
direct marketing companies in Europe and Asia. We have an option until
September 16, 2000 to purchase the remaining fifty-one percent interest in Klick
from the KB Group.
DIFFERENTIATION FROM COMPETITION
Most of our competitors from around the world obtain their products at a
significant higher cost than we can obtain similar products because they unlike
us mainly purchase their products through middlemen such as traders and buying
agents in Hong Kong and elsewhere. These results in either their products are
sold into the market for higher prices and/or they are sold at lower profit
margins. We are different from our competitors in that we are physically
located in Hong Kong and are very experienced in direct access to Asian
manufacturers. We are also different from our competitors in that we design and
manufacture many of our own products. In addition, due to our direct access to
the Asian manufacturers, and a direct link to our customers, we are able to make
effective use of our own changes and design to existing products manufactured to
suit our customers' specific needs. As a result, we are very effective in
5
redesigning products to comply with quality and legal safety requirements for
the US and European markets. This way we can offer diverse range of products to
consumers through multiple channels of distribution, at very competitive prices
as a result of cost leadership.
An added significant difference from our competitors is that we have a
physical distribution center in the Netherlands, whose port of Rotterdam is the
center for all goods being shipped into Western Europe. Our management teams
consist of Dutch nationals with direct experience into the European markets and
at the same time have a long term understand of the Chinese and Asian markets.
SEASONALITY
Our business activities are not adversely affected by seasonality.
MARKETING STRATEGY
We market our products, directly to our specialist clients, by frequent
offers of new product information or updates via E. mail or fax and our own
sales force. We also attend various trade shows throughout the world
specializing in our products.
EMPLOYEES
We currently employ a total of 39 employees around the world. These
Employees are in the following area:
Beacon Light Holding Corp. Management
United States 1
Hong Kong 2
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Total Corporate 3
==========
Wellux Industries Ltd. (HKG) Management 2
Administration 2
Marketing and sales 2
Manufacturing 16
Logistics 2
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Total Far East 24
==========
Wellux B.V. (Netherlands) Management 2
Administration 3
Marketing and sales 3
Logistics 2
Household Products Division Marketing and sales 2
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Total Europe 12
==========
Total employees 39(1)
==========
Footnote:
(1) With the acquisition of Klick Ltd. (49% interest), there is an
additional 14 employees. These employees are: Management - 1; Administration -
3; Marketing and sales - 7; and Logistics - 3.
6
INTERNATIONAL MARKETS
Our main active markets for both the consumer goods business and the adult
novelty business are all located in Western Europe, in particularly, in Germany,
Holland, Belgium, France and England. In Asia we distribute through
distributors in Hong Kong, Japan (only the adult novelty business), and India.
We have not expended significantly into the United States market. Our aim long
term is for the United States is to acquire a wholesale distribution
organization.
COMPETITION
The consumer goods business and the adult novelty markets are highly
competitive. Our major competitors in the household consumer goods business
include Supreme Ltd. in Hong Kong and S.N.I.P. in Italy. In the adult novelty
market, our major competitors are Scala of the Netherlands and Top. Co. of the
United States. Competition is primarily based upon unit price, product quality,
reliability, product features and management's reputation for integrity. We
believe that we compete favorably with respect to each of these factors.
PRICING STRATEGY
Our ongoing objective is to establish alliance with our manufacturers in
China and Asia, and during the development and marketing of our products, we
invest significant effort to ensure that our vendors understand our long-term
goals. Due to our long-term purchasing insight and connectivity in China and
Asia, combined with our own manufacturing facility, we have established a
substantial product cost advantage over our competition.
Our management has developed a very unique based pricing strategy that is
likely to continue to produce excellent result in that it takes into account: 1.
The added value potential for the product; 2. Acceptable product life cycle; 3.
Value per container/pallet load; and 4. Minimum service cost risk.
RISK FACTORS
The following risks and uncertainties could affect our operating results
and financial condition and could cause our actual results to differ materially
from our historical results.
POLITICAL, LEGAL, ECONOMIC AND OTHER UNCERTAINTIES OF OPERATIONS IN CHINA AND
HONG KONG.
Our principal operations are located in Hong Kong, formerly a British Crown
Colony. Sovereignty over Hong Kong was transferred on July 1, 1997 to China.
As of that date, Hong Kong became a Special Administrative Region of China. The
National People's Congress of China enacted the Basic Law in 1990 as the
constitution of Hong Kong under China's sovereignty. While we do not believe
that this transfer of sovereignty over Hong Kong to China will have a material
adverse effect on our business, there can be no assurance as to the continued
stability of political, economic or commercial conditions in Hong Kong. Any
instability in Hong Kong could have an adverse impact on our business.
The Hong Kong dollar and the United States dollar have been fixed at
approximately 7.80 Hong Kong dollar to $1.00 since 1983. The Chinese government
has expressed its intention in the 1990 Basic Law to maintain the stability of
the Hong Kong currency after the sovereignty of Hong Kong was transferred to
China. There can be no assurance that this will continue and we could face
increased currency risks if the exchange rate mechanism is changed.
7
Our manufacturing facilities are located in China and Hong Kong. As a
result, our operations and assets are subject to significant political,
economic, legal and other uncertainties. Change in policies by the Chinese
government that can result in changes in their laws, regulations or their
interpretation, confiscatory taxation, restrictions on imports and sources of
supply, import duties, corruption, currency revaluations or the expropriation of
private enterprise could materially and adversely affect us. Over the past
several years, the Chinese government has pursued economic reform policies
including encouraging private economic activity and greater economic
decentralization. There can be no assurance that the Chinese government will
continue to pursue such policies, that such policies will be successful if
pursued, that such policies will not be significantly changed from time to time
or that business operations in China would not become subject to the risk of
nationalization, which could result in the total loss of investment in that
country. Economic development may be limited as well by their imposition of
austerity measures intended to reduce inflation, the inadequate development of
infrastructure and the potential unavailability of adequate power and water
supplies, transportation and communications. If for any reason we were required
to move our manufacturing operations outside of China, our profitability could
be substantially impaired, our competitiveness and market position would be
materially jeopardized and there can be no assurance that we could continue our
operations.
We currently sell most of our products in the Far East and Europe. We are
however for the future, intending to increase selling our products here in the
United States. China currently enjoys most favored nation trade status, which
provides it with the trading privileges generally available to trading partners
of the United States. Our government annually reconsiders the renewal of
China's most favored trade status. Various interest groups have continuously
urged our government not to renew China's most favored trade status and there
can be no assurance that controversies will not arise that threaten the status
quo involving trade between the United States and China or that our government
will not revoke or refuse to renew China's most favored trade status. In any
of such eventualities, our business could be adversely affected, by among other
things, causing our products in the United States to become more expensive,
which could result in a reduction in the demand for our products by our United
States customers. Trade friction between the United States and China, whether
or not actually affecting our business, could also adversely affect the
prevailing market price of our Common Stock.
The legal system of China relating to foreign investment is both new and
continually evolving, and currently there can be no certainty as to the
application of its laws and regulations in particular instances. China does not
have a comprehensive system of laws. Enforcement of existing laws or agreements
may be sporadic and implementation and interpretation of laws inconsistent. The
Chinese judiciary is relatively inexperienced in enforcing the laws that exist,
leading to a higher than usual degree of uncertainty as to the outcome of any
litigation. Even where adequate law exists in China, it may not be possible to
obtain swift and equitable enforcement of that law.
Recently, several countries in Southeast Asia have experienced a
significant devaluation of their currencies and decline in the value of their
capital markets. In addition, several Asian countries have experienced a number
of bank failures and consolidations. The Company does not believe that the
decline in Southeast Asia will affect the demand for the Company's products,
because virtually all of the Company's products are sold into developed
countries particularly in Western Europe not experiencing these declines.
Moreover, because most of the Company's products are paid for in U.S. Dollars or
German Marks, the Company believes that it is less susceptible to the effects of
a devaluation in the Hong Kong dollar or Chinese renminbi if either or both were
8
to occur despite assurances to the contrary by the Chinese government. However,
the decline in the currencies of other Southeast Asian countries could render
the Company's products less competitive if competitors located in these
countries are able to manufacture competitive products at a lower effective
cost.
RISK FACTS RELATING TO THE BUSINESS OF THE COMPANY
UNCERTAINTY OF ADDITIONAL CAPITAL
To the extent that available funds from operations are insufficient in
order to fully market and upgrade our products, we will need to raise additional
capital either through the sale of our securities of debt securities in private
or public financing. No assurance can be given that additional financing will
be available or that, if available, it can be obtained on terms favorable to the
Company and its stockholders. Failure to obtain such financing could delay or
prevent our planned expansion, which could adversely affect the Company's
business, financial condition and results of operations.
DEPENDENCE ON MAJOR CUSTOMERS
We are not overly dependent on a small number of major customers. The
total number of active customers for Klick's household products amount to 26
importers and traders. Wellux Industries has 230 active customers throughout
the world for its adult oriented products.
DEPENDENCE ON KEY PERSONNEL
We are highly dependent on three key members of our management, sales and
marketing team, Jerry Gruenbaum, Hans Lodders and Ronald Steenbergen. The loss
of the services of one or more of our team may adversely affect our ability to
achieve our business plan. Recruiting and retraining qualified personnel to
carry out our development and technical support will be critical to our future
success. To the extent that the services of Mr. Gruenbaum, Mr. Lodders or Mr.
Steenbergen would not be available to us, we would be required to obtain other
personnel to perform the duties that they otherwise would perform. We cannot be
sure that we will be able to employ other qualified persons, with the
appropriate background and expertise, to replace any of them on acceptable
terms. Although we believe that we will continue to be successful in attracting
and recruiting other skilled personnel, we can offer no assurance that we can
accomplish this objective on acceptable terms. Each management employment
contract contains a non-compete clause.
EARLY-STAGE COMPANY
In mid 1997, the focus of our Company shifted to manufacturing operations
in China. Given this shift in our business focus from silver mining
exploration, even though we as a Company have been around since 1953, we are at
an early stage of entering the commercial marketplace. As a result, we can
provide only limited financial information upon which a prospective investor
could make an evaluation to purchase or sell our securities. Our future
operating results are subject to a number of risks, including our abilities to
implement our strategic plan, to attract qualified personnel and to raise
sufficient financing as required. Our management's inability to guide growth
effectively (including implementing appropriate procedures and controls) could
have an adverse effect on our financial condition and operating results.
9
MANAGEMENT OF RAPID GROWTH AND LIMITED OPERATING EXPERIENCE
We anticipate that the management of rapid growth will be a key challenge.
Failure to effectively meet this challenge could have a material adverse effect
on our operating results. There is no assurance that, in the event our business
grows rapidly, that we will be able to manage such growth successfully.
NO PATENT PROTECTION
We do not have and do not intend to apply for patents on our products.
Management believes that the patent application process in many countries in
which we intend to sell products would be time - consuming and expensive. In
addition, patents would have the effect of publicizing the proprietary aspects
of our products. Finally, we intend continually to improve and upgrade our
products. As a consequence, any patent disclosure may be out of date by the
time the patent is granted.
DEPENDENCE ON SUPPLIERS
We are not dependent on a small number of suppliers because we own a
significant amount of the "tools/mold" that are needed in the manufacturing of
household and adult products. Hence we are very flexible in choosing a supplier.
SHARES ELIGIBLE FOR FUTURE SALE
As of February 4, 2000 we had outstanding approximately 23,465,589 common
share equivalent, consisting of 19,913,922 shares of Common Stock ("Common
Stock") and 3,551,667 shares of Common Stock issuable on conversion of all
outstanding Exchangeable Shares. Said 3,551,667 shares consist of 1,785,000
options pursuant to our Fiscal 2000 Stock Option Plan, 1,000,000 options granted
to Lloyd Wade Securities on April 13, 1998, and 766,667 convertible Preferred
Class B shares at 1 for 1.
In addition, we have an additional authorized and not issued to date
2,450,000 restricted securities for the Klick Limited acquisition. We have an
additional 500,000 restricted securities for Hans Lodders and 500,000 restricted
securities for Ronald Steenbergen in accordance with their employment agreement.
See Item 8-"Decription of Securities".
Of the 19,913,922 Common Stock, 11,686,422 are freely tradable. The
remaining outstanding shares have not been registered under the Securities Act
and therefore will be treated as "restricted securities" and may be publicly
sold in the United States only if registered or if the sale is made in
accordance with an exemption from registration, such as Rule 144 under the
Securities Act. Under these exemptions, however, approximately one half of the
other 8,227,500 shares of Common Stock generally will be eligible for resale in
the United States without registration one year from the date of issuance the
balance within two year from the date of issuance. This may adversely affect
the market price of our shares and could affect the amount of trading of such
shares.
We intend to register under the Securities Act the shares of our Common
Stock reserved for issuance under the Fiscal 1999 Stock Option Plan. As of
February 4, 2000, options to purchase an aggregate of 1,785,000 shares of Common
Stock were outstanding under such Stock Option Plan. Upon such registration,
such shares, when issued, generally will be freely tradable.
10
Sale of significant number of such shares, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
shares and could impair our future ability to raise capital through an offering
of equity securities, which in turn could adversely affect our business or
results of operation.
UNFORESEEABLE EVENTS AND CONDITIONS
Unforeseeable events and conditions, many of which are outside our control,
can impact our business. There can be no assurance that our operations will not
be adversely affected by unforeseeable future events.
GOVERNMENT REGULATION
Our business is subject to various federal, state, local and international
government regulations. While due to cultural and religious restrictions, we
cannot be active with our adult product division in certain parts of the world.
MINIMAL TRADING HISTORY OF COMMON STOCK - POSSIBLE STOCK PRICE VOLATILITY
Our Common Stock trades on a limited basis on the National Quotation
Bureau's "Pink Sheets" and we currently intend to apply to have our Common Stock
quoted on the Over-the-Counter Bulletin Board upon meeting the requirements of
its "Eligibility Rules". The market price of the Common Stock could fluctuate
substantially due to a variety of factors, including market perception of our
ability to achieve our planned growth, quarterly operating results of the Issuer
or other similar companies, the trading volume in our Common Stock, changes in
general conditions in the economy, the financial markets or other developments
affecting us or our competitors. In addition, the stock market is subject to
extreme price and volume fluctuations. This volatility has had a significant
effect on the market prices of securities issued by many companies for reasons
unrelated to their operating performance.
LIMITATION ON OFFICERS' AND DIRECTORS' LIABILITIES UNDER NEVADA LAW.
Our by laws provides that the Issuer shall indemnify any officer or
director to the full extent permitted by law. In general, the Nevada Business
Corporation Act permits indemnification of officers and directors in those
instances where the officer or director acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his or her conduct was unlawful. As a result, we
may pay the judgment or other settlement received by a plaintiff against one of
our officers, directors, employees or consultants as well as their legal
expenses. This result could constitute a risk to the shareholders.
PENNY STOCK REGULATION
Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on Nasdaq provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system).
11
The penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer also must provide the customer
with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in connection with the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If our securities become subject to the penny stock rules,
investors may find it more difficult to sell their securities.
YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any computer
software program or hardware that has date-sensitive software of embedded chips
may recognize a date using "00" as the year 1900 rather than the year 2000 which
could result in system failures or miscalculations causing disruptions to
operations and normal business activities. While our computers and software are
all Year 2000 compliant and we have not been affected by any Year 2000 impact
with connection with any of our suppliers or customers, we cannot guarantee that
we have eliminated all risks related to the Year 2000 issue.
SIGNIFICANT CUSTOMERS
Our significant customers in Klick's household product division is: Thomas
Philips GmBh in Germany, Edco B.V. in the Netherlands and KB Trading Comp. In
the United Kingdom. KB Trading Comp. is part of the KB Group from whom we
purchased four percent of Klick Ltd. and who owns the remaining fifty one
percent of Klick Ltd. from whom we have a one year option, starting September
1999, to purchase it.
Our significant customers in Wellux's adult product division is: Scala of
the Netherlands, Orion of Germany, and T.G.A., of the United Kingdom.
LICENSES, PATENTS AND TRADEMARKS
None.
EMPLOYEES
As of February 4, 2000, we had 39 employees (1), one in the United States,
twenty-four in the Far East, and twelve in Europe.
Footnote:
(1) With the acquisition of Klick Ltd. (49% interest), there is an
additional 14 employees, all in the Far East.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------- -------------------------------------------------------------------
RESULTS OF OPERATION.
-----------------------
This section contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under Item 1 - "Risk Factors." The following
Management Discussion and Analysis of Financial Condition is qualified by
reference to and should be read in conjunction with, our Consolidated Financial
Statements and the Notes thereto as set forth beginning on page F-I.
OVERVIEW
We derive our revenues principally from the sale of adult products made from
various forms of plastics, lingerie and leather goods, and from the sale of
quality household products, household electronics, cutlery, and cookware
products manufactured in the Far East, primarily in China and Hong Kong. For the
six months ended December 31, 1999, the Company had gross sales of $1,986,360
and net income/(Loss) before taxation of ($70,373). For fiscal year ended June
30, 1999, the Company had gross sales of $4,109,017 and net income before
taxation and other income/(expenses) of ($28,807) and net income after other
income/(expenses) of ($158,807). For fiscal year ended June 30, 1998, the
Company had gross sales of $274,468 and net income before taxation and other
income/(expenses) of ($117,348) and net income after other income/ (Expenses) of
($60,000).
Our Company is operating at less than full capacity and is poised to increase
sales in the coming year and thereby improve its margins and financial
performance. We anticipate substantial growth in the business activities of
Wellux. Increased revenue and net income in future periods will depend on our
ability to (i) strengthen our customer base by enhancing and diversifying our
products; (ii) increase the number of our customers; (iii) expand into
additional markets; (iv) maintain or increase sales of our products to existing
customers; (v) increase production; and (vi) control all of our costs. Although
labor costs are increasing in China, our Company's labor costs continue to
represent a relatively small percentage of its total production costs.
Management believes that increased labor costs in China will not have
significant effect on our total production costs or results of operations. In
addition, we have not experienced significant difficulties in obtaining raw
materials for our products, and management does not anticipate any such
difficulties in the foreseeable future.
As of the date of filing this Form 10SB, our Company's revenues for the six
month ended December 31, 1999 have increased when compared to the comparable
period in the prior year. Our Company's principal source of revenue consisted of
the business activities of Wellux Hong Kong, our wholly owned subsidiary, which
totaled $1,986,360. Operating expenses for the six months ended December 31,
1999, consisted of general expenses of $895,504 for our Company as a whole. Our
Company, and our subsidiaries, had a net income/(Loss) of ($70,373)for the six
months ended December 31, 1999.
During fiscal year ended June 30, 1999, our Company raised approximately
$200,650 in cash through the sale of our common stock in an offering conducted
under Rule 504 of Regulation D. During the six-month period ended December 31,
1999 we raised approximately $199,985 in cash through the sale of our common
stock in an offering conducted under Rule 504 of Regulation D, and an
13
additional $110,000 in cash through the sale of our preferred stock in an
offering conducted under Rule 506 of Regulation D. We anticipate that most, if
not all, of any acquisitions we may make during the next twelve months would be
of operating entities that have employees, or of assets that have employees
associated with such assets. Accordingly, we anticipate there would be a
significant increase in the number of our employees at the operating unit or
subsidiary level, at such time, if any, that acquisitions may be consummated.
Readers are cautioned that there can be no assurance that our management will
be successful in achieving these objectives.
RESULTS OF OPERATIONS
The following table sets forth-selected income data as a percentage of gross
sales for the periods indicated.
[Download Table]
Year ended Year ended Six Months ended
Income Statement Data 6/30/98 6/30/99 12/31/99
------------ ------------ -------------
Gross sales 100.00% 100.00% 100.00%
Cost of Sales 73.18% 58.21% 58.45%
Gross Profit 26.82% 41.79% 41.55%
Gen. and Admin. Expenses 69.58% 42.49% 45.08%
Income from Operations (42.75%) (0.70%) (3.54%)
Loss on discontinued
operations (21.86%) (3.16%) -
Net Income after
Other income/(expenses) (64.64%) (3.86%) (3.54%)
Provision for Income Taxes 0.09% 0.01% 0.01%
Net Income/(Loss) (64.71%) (3.87%) (3.54%)
COMPARING FISCAL YEAR ENDED JUNE 30, 1999 TO JUNE 30, 1998
GROSS SALES. The Company's gross sales increases nearly 1,500% from $274,468
for the fiscal year ended June 30, 1998 to $4,109,017 for the fiscal year ended
June 30, 1999, primarily as a result the increase presence of Wellux Industries
in the global markets.
GROSS MARGIN. Gross Margin increased from 26.82% for fiscal year ended June 30,
1998 to 41.79% for fiscal year ended June 30, 1999 primarily due to the fact
that we were able to control fixed costs as gross sales increased dramatically.
Implementation of a "just-in-time" inventory system, which resulted in a
reduction in inventory, also contributed to this increase.
GENERAL AND ADMINISTRATIVE EXPENSES. While total general and administrative
expenses have increased significantly from $190,963 for the fiscal year ended
June 30, 1998 to $1,7017,293 for the fiscal year ended June 30, 1999, they have
decrease as a percentage of gross sales. General and administrative expenses
decreased as a percentage of gross sales from 69.58% for fiscal year ended June
14
30, 1998 to 42.49% for fiscal year ended June 30, 1999. In addition, in fiscal
year ended June 30, 1998 and June 30, 1999 we incurred significant travel and
entertainment expenses in our quest to enter the Far East market. Now that we
have established our operations and management in the Far East, and the fact
that our directors, Hans Lodders and Ronald Steenbergen reside in Hong Kong, has
resulted in a significant decrease in our travel and entertainment expenses.
INCOME/(LOSS) FROM OPERATIONS. Losses from operation have decreased from
$117,348 or 42.75% of gross sales for the fiscal year ended June 30, 1998 to
$28,807 or 0.70% of gross sales for the fiscal year ended June 30, 1999.
OTHER INCOME/(LOSS). In fiscal year ended June 30, 1999, we wrote off $130,000
from our joint venture in Xinhui, Peoples Republic of China. We were unable to
make the factory profitable as a result of various disagreements with our
partner in the joint venture. We made a business decision to close that
operation.
NET INCOME/(LOSS). Net Losses have decreased from $177,598 or 64.71% of gross
sales for the fiscal year ended June 30, 1998 to $159,057 or 3.87% of gross
sales for the fiscal year ended June 30, 1999. A significant percentage of the
net loss is attributable to loss from the write-off of discontinued operations
noted above in other loss. The discontinued operation write-off accounted for
33.78% of the net loss for fiscal year ended June 30, 1998 and for 81.73% of the
net loss for fiscal year ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have traditionally relied on internally generated funds and trade credits to
meet our working capital requirements. We have in place in Hong Kong, trade
facilities that include the ability to obtain overdrafts, letters of credit,
notes payable and fixed loans. Interest on the indebtedness fluctuates with the
prime rate and HIBOR as set by the Hong Kong Banking Association. Our bank
credit facilities are due for renewal annually. Our Management anticipates that
the banking facilities will be renewed on substantially the same terms.
We believe that present operations may require that we obtain some additional
capital during the next twelve months for our own operation. Wellux Hong Kong
and Klick Ltd. will require the formation of a working line of credit in excess
to the funds to enable these companies to meet their growth plans. Wellux and
Klick have made, to the best of management's belief, positive steps toward
securing it's financing for expansion once our shares are fully trading again on
the NASD Bulletin Board. Additionally, we are seeking additional funding,
through a private placement in Europe and Hong Kong, to increase our working
capital and capital for expansion for Wellux. It is unknown at this time
whether we will be successful in raising capital on reasonable terms.
IMPACT OF INFLATION
Our management believes that inflation has not had a material effect on our
business for six months ended December 31, 1999 or for fiscal year ended June
30, 1999 and 1998. We have generally been able to modify and improve our product
designs so that we could either increase the price of our products or lower the
production cost in order to keep pace with inflation. Most of our manufacturing
is being done in China, and China is experiencing deflation. If such trend
continues, we could incur decreased labor costs with regard to our Chinese
operations, resulting in lower production costs. Although the costs to our
Company of components used in the manufacture of our products have been
relatively stable, management believes that any possible significant increase in
15
material costs would affect the entire household products and plastics industry
and thus would not have a negative impact on our competitive position.
EXCHANGE RATES
We sell most of our products to international customers. Our principal export
markets are Europe (mainly western Europe) and Asia. Sales to international
customers are made directly from us to our customers. We sell nearly all our
products in United States and Hong Kong Dollars. Because the Hong Kong dollar
is pegged to the United States dollar, we see no material foreign exchange risk
to our Company. We do not currently engage in hedging transactions, and do not
intend to do so in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued certain pronouncements that
are effective as indicated below with respect to the fiscal years presented in
the consolidated financial statements.
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. This statement
establishes guidelines for the reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. It requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displays with
the same prominence as other financial statements; it does not address issues of
recognition of measurement. The primary element of comprehensive income
applicable our Company is the foreign currency cumulative transaction
adjustment. The adoption of SFAS No. 130 will have no impact on our
consolidated results of operations, financial position or cash flows.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial for earlier periods provided for comparative
purposes is required. This statement establishes guidelines for the way the
public business enterprises report information about operating segments in
financial statements. This statement also establishes guidelines for related
disclosures about products and services, geographic areas and major customers.
We have evaluated the disclosure requirements of SFAS No. 131 and believe the
adoption will not have a material impact on our future disclosure requirements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required. This statement revises employers' disclosures about pension and
other post-retirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminate certain
disclosures that are no longer useful. The statement suggests combined formats
for presentation of pension and other post-retirement benefit disclosures. We
have evaluated the disclosure requirements of SFAS No. 132 and believe the
adoption will have no impact on our results of operations and financial
position.
16
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is
effective for fiscal years beginning after June 15, 1999. Restatement of
disclosures for earlier periods for comparative purposes is required. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. We have
evaluated the disclosure requirements of SFAS No. 133 and believe that
implementation of the new standard will have no impact on our results of
operations and financial position.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sales by a Mortgage Banking
Enterprise" is effective for This statement amends SFAS 65, "Accounting for
Certain Mortgage Banking Activities" and requires that after the securitization
of mortgage loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or other retained
interests based on its ability and intent to sell or hold these investments.
This statement conforms the subsequent accounting for securities retained after
the securitization of mortgage loans by a mortgage banking enterprise with the
subsequent accounting for securities retained after the securitization of other
types of assets by a non-mortgage banking enterprise. We have evaluated the
disclosure requirements of SFAS No. 134 and believes that implementation of the
new standard will have no impact on our results of operations and financial
position.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical Correction" is
effective for fiscal years ending after February 15, 1999. Issued in February,
1999, this statement rescinds FASB Statement No. 75 "Deferral of the Effective
Date of Certain Accounting Requirements for Pension Plans of State and Local
Governmental Units." GASB Statement No. 25, "Financial reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans," was
issued November 1994, and establishes financial reporting standards for defined
benefit pension plans and for the notes to the financial statements of defined
contribution plans of state and local government entities. Statement 75 is,
therefore, no longer needed. This Statement also amends FASB Statement No. 35,
"Accounting and Reporting by Defined Benefit Pension Plan," to exclude from its
scope plans that are sponsored by and provide benefits for the employees of one
or more state and local government units. We have evaluated the disclosure
requirements of SFAS No. 135 and believe the adoption will have no impact on our
results of operations and financial position.
ITEM 3. DESCRIPTION OF PROPERTY.
-------- --------------------------
Our United States office is located in a shared modern office premises at
100 Pearl Street - 14th Floor, Hartford, Connecticut 06103. The lease, with a
non-affiliated party, expires February 28, 2001 with a right to extend subject
to an advance forty-five day notice by us when and if we intend to leave. Rent
is $1,250 per month base rent plus additions for T-1 access, phone, copies, fax
service, conference room use ands postage.
Klick Ltd. (49% participation) occupies approximately four thousand five
hundred square feet modern office and showroom facility at Enterprise Square,
Tower II, on the fifth floor, units 505-507, 9 Sheung Yuet Road, Kowloon Bay,
Kowloon, Hong Kong. The lease with K.B. Group, the owner of the remaining 51%
interest, expires on July 31, 2004. Rent is $8,700 U.S.D. per month.
17
Our operating subsidiary, Wellux Ltd., including its adult products
division and its household division, occupies approximately five thousand two
hundred square feet office and showroom facility at Yuen Fat Industrial
Building, Unit 301, 25 Wang Chiu Road, Kowloon Bay, Kowloon, Hong Kong. The
lease with a non-affiliated party, expires January 31, 2001. Rent is $3,000
U.S.D. per month.
Wellux BV a subsidiary of Wellux, occupies approximately twenty eight
thousand square feet modern office, showroom, warehouse, and distribution center
facility at De Grote Beer 13, 'S Hertogenbosh, Holland. The lease with a
non-affiliated party, expires January 1, 2004. Rent is $4,500 U.S.D. per month.
We believe that existing facilities are adequate for our needs through at
least the end of 2000. Should we require additional space at that time, or
prior thereto, we believe that such space can be secured on commercially
reasonable terms and without undue operational disruption.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------- ------------------------------------------------------------------
We have set forth in the following table certain information regarding our
common stock beneficially owned on February 4, 2000, for (i) each shareholder we
know to be the beneficial owner of 5% or more of our outstanding common stock,
(ii) each of our executive officers and directors, and (iii) all executive
officers and directors as a group. In general, a person is deemed to be a
"beneficial owner" of a security if that person has or shares the power to vote
or direct the voting of such security, or the power to dispose or to direct the
disposition of such security. A person is also deemed to be a beneficial owner
of any securities of which the person has the right to acquire beneficial
ownership within 60 days.
At February 4, 2000 we have outstanding approximately 23,465,589 common
shares equivalents, consisting of 19,413,922 shares of Common Stock, and
3,551,667 shares of Common Stock issuable upon conversion of all outstanding
Exchangeable Shares. Said 3,551,667 shares consist of 1,785,000 options pursuant
to our Fiscal 2000 Stock Option Plan, 1,000,000 options granted to Lloyd Wade
Securities on April 13, 1998, and 766,667 convertible Preferred Class B shares
at 1 for 1. In addition, we have an additional authorized and not issued to
date 2,450,000 restricted securities for the Klick Limited acquisition and an
additional 500,000 restricted securities for Hans Lodders and 500,000 restricted
securities for Ronald Steenbergen in accordance with their employment agreement.
18
[Download Table]
NAME AND ADDRESS NUMBER OF SHARES OF COMMON PERCENT OF
OR IDENTITY OF GROUP STOCK BENEFICIALLY OWNED BENEFICIAL OWNERSHIP
--------------------------------- -------------------------- ---------------------
Hans Lodders (1)(2)(3)(4) 2,833,333 12.1%
Enterprise Square - Tower II
9 Sheung Yuet Road, Unit 505-507
Kowloon Bay, Kowloon Hong Kong
Ronald Steenbergen (3)(4) 750,000 3.2%
Enterprise Square - Tower II
9 Sheung Yuet Road, Unit 505-507
Kowloon Bay, Kowloon Hong Kong
Jerry Gruenbaum (3)(4)(5) 2,250,000 9.6%
100 Pear Street - 14th Floor
Hartford, CT 06103
All Executive Officers 5,833,333 24.9%
and Directors as a Group
(3 persons)
Lloyd Wade Securities (6) 1,464,000 6.2%
14911 Quorum Drive - Suite 120
Dallas, TX 75240
Footnotes:
(1) Includes 1,333,333 shares of the 4,000,000 Rule 144 shares that were
paid to Crown Union Investment Limited, a Hong Kong Corporation for the
acquisition of Wellux Industries Ltd on May 18, 1999. One of Crown Union's
shareholders is a Ms. Noortje Vogeltje Lodders, a Dutch citizen, the adult
daughter of Mr. Hans Lodders who controls 1,333,333 shares.
(2) Includes all 750,000 shares of the 2,450,000 Rule 144 shares that are
authorized and are to be paid to Drilford, Ltd., a Hong Kong Corporation for the
acquisition of Klick Ltd. In September 1999. Drilford, Ltd. is owned 80% by Mr.
Lodders' wife and 20% by Mr. Lodders who is also a director.
(3) Includes 500,000 Rule 144 shares paid to each of the officers on January
2, 2000 as compensation per employment agreement. On said date, the shares were
trading for $0.12 per share for freely tradable shares. Given the two year
restriction on transfer of said shares by each of the officers, our board gave a
forty percent value to the share at the time of authorization or $0.05 per share
for a total value of $25,000 to each officer.
(4) Includes 250,000 options awarded to each of the officers on January 2,
2000 as compensation per employment agreement. Said shares are exercisable at
$0.15 per share. On said date, the shares were trading for $0.12 per share for
freely tradable shares.
(5) Includes 1,500,000 Rule 144 shares sold to him on January 2, 20000 for
$0.05 per share for a total of $75,000.00 payable by interest bearing note over
a five-year period. Given the two-year restriction on transfer of said shares,
our board gave a forty percent value to the share at the time of authorization
or $0.05 per share.
(6) Includes 464,000 freely tradable shares plus 1,000,000 options
exercisable at $0.13 as part of a Investment Banking Agreement we entered into
on April 13, 1998.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
------- -------------------------------------------------------------------
The following table sets forth the names, positions and ages of our
executive officers and directors. All our directors serve until the next annual
meeting of shareholders or until their successors are elected and qualify.
Officers are elected by the Board and their term of office are, except to the
extent governed by employment contract, at the discretion of the Board.
[Download Table]
NAME AGE POSITION
------------------------------- --- ------------------------------------
Jerry Gruenbaum 44 President, secretary, treasurer and
a member of the Board of Directors.
Hans Lodders 57 Managing Director of Asia Business
Division and Chairman of the Board
of Directors.
Ronald Steenbergen 36 Managing Director of Operating
Companies and a member of the Board
of Directors.
Jerry Gruenbaum has served as President and as a member of the Board of
Directors since 1997. He served as Chairman of the Board from 1997 to 1999. He
has worked for the tax departments for Peat Marwick Mitchell & Co (now KPMMG
Peat Marwick LLP) and Arthur Anderson & Co. (now Arthur Anderson LLP). He has
served as Compliance director for CIGNA Securities, a division of CIGNA
Insurance. He has lectured and taught at various Universities throughout the
United States in the areas of Industrial and financial Accounting, taxation,
business law, and investments. He has been admitted to practice law since 1979
and is a licensed attorney in various states. He is a member of the American
Institute of Certified Public Accountants. Mr. Gruenbaum graduated from Brooklyn
College, has a masters degree in accounting from Northeastern University, a law
degree from Western New England College School of Law, and a post doctorate
degree in tax law from the University of Miami School of Law.
Hans Lodders has served as Managing Director of Asia Business Division and
Chairman of the Board since 1999. He has been a resident of Hong Kong for
twenty-two years. He is the former Managing Director of AGFA Hong Kong-China,
where he has been employed from 1977 to 1999. During his tenure with AGFA, he
directed their Hong Kong-China operations from inception to achieve sales in
excess of HK$2 billion dollars. The markets that he targeted and has great
expertise in include Hong Kong, China, Taiwan, the Philippines, Vietnam and
Cambodia. The king of Belgium has knighted Mr. Lodders in 1995.
Ronald Steenbergen served as Managing Director of Operating Companies and a
member of the Board of Directors of Beacon Light since 1999. He has been a
resident of Hong Kong for eighteen years. He has over eighteen years experience
in sourcing, manufacturing and marketing of non-food consumer products in Asia,
Europe and the United States.
Key Management Employees of Klick Ltd, (49% owned by Beacon Light) in Hong
Kong:
Ronald Steenbergen who serves as the General Manager of Klick Ltd. also serves
as Managing Director of Operating Companies and a member of the Board of
Directors of Beacon Light.
20
Karl Lai (31 years Old) serves as Purchasing Manager for Klick Ltd. He has over
ten years experience in merchandising and purchasing in Asia and greater China.
Key Management Employees of Wellux Hong Kong, our operating subsidiary in
Hong Kong:
Cris Hoare (34 years old) serves as General Manager of Wellux Hong Kong. A
resident of Hong Kong for over ten years, he has over 8 years experience in
industry, serving in management positions with general trading and electronic
software companies in Hong Kong. He is a United Kingdom citizen.
Key Management Employees of Wellux Netherlands the operating subsidiary of
Wellux Hong Kong:
Wim Hakkaart (55 years old) serves as General Manager of Wellux Netherlands. He
has over thirty years extensive experience in marketing within the European
Common Market countries and Eastern Europe. He is a resident and citizen of
Holland.
ITEM 6. EXECUTIVE COMPENSATION.
-------- ------------------------
CASH COMPENSATION.
The following table shows, for the two-year period ended June 30, 1999, the
cash and other compensation we paid to our Chief Executive Office and to each of
our executive officers.
[Download Table]
SUMMARY COMPENSATION TABLE
--------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
----------------------------- ------- ------- ----- ------------
Jerry Gruenbaum (1) 1998-99 -0- -0- $12,000
President 1997-98 -0- -0- $25,750
Hans Lodders (2) 1998-99 -0- -0- -0-
Managing Director
Asia Business Division
Ronald Steenbergen (3) 1998-99 -0- -0- -0-
Managing Director
Operating Companies
Footnotes:
(1) For the two-year period ended June 30, 1999 we had no employment
agreement with Mr. Jerry Gruenbaum. As such, we paid him a total of $25,750 for
the period ended June 30, 1998 and a total of $12,000 for the period ended June
30, 1999. The payments, while classified as Executive Compensation here and in
the accompanying financial statements, were classified for tax purposes as an
independent contractor with no personal deductions taken by our Company. On
January 2, 2000 we have entered into an employment agreement with Mr. Gruenbaum
starting from January 1, 2000 to December 31, 2005 for an annual compensation of
$60,000 plus a minimum increase per year. In addition we gave Mr. Gruenbaum
500,000 Rule 144 stock as other compensation plus an option to purchase an
additional 250,000 shares at $0.15 per share that expires on December 31, 2004
pursuant to our Fiscal 2000 Stock Option Plan. A copy of his employment
agreement is attached as an exhibit.
21
(2) On January 2, 2000 we have entered into an employment agreement with Mr.
Hans Lodders starting from January 1, 2000 to December 31, 2005 for an annual
compensation of $60,000 plus a minimum increase per year. In addition we gave
Mr. Lodders 500,000 Rule 144 stock as other compensation (said shares have not
been issued to date) plus an option to purchase an additional 250,000 shares at
$0.15 per share that expires on December 31, 2004 pursuant to our Fiscal 2000
Stock Option Plan. A copy of his employment agreement is attached as an
exhibit.
(3) On January 2, 2000 we have entered into an employment agreement with Mr.
Ronald Steenbergen starting from January 1, 2000 to December 31, 2005 for an
annual compensation of $50,000 plus a minimum increase per year. In addition we
gave Mr. Steenbergen 500,000 Rule 144 stock as other compensation (said shares
have not been issued to date) plus an option to purchase an additional 250,000
shares at $0.15 per share that expires on December 31, 2004 pursuant to our
Fiscal 2000 Stock Option Plan. A copy of his employment agreement is attached
as an exhibit.
OPTION GRANTS IN THE LAST FISCAL YEAR.
--------------------------------------------
The following table sets forth information with respect to the grant of
options to purchase shares of common stock during the fiscal year ended June 30,
1999, to each person named in the Summary Compensation Table.
[Download Table]
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE
OPTIONS/SARS EMPLOYEES IN ($/SHARES) EXPIRATION
NAME GRANTED (#) FISCAL YEAR DATE
---------------------- ------------ ------------ ----------- ----------
Jerry Gruenbaum 0 0 N/A N/A
Hans Lodders 0 0 N/A N/A
Ronald Steenbergen 0 0 N/A N/A
- Subsequent to the end of the fiscal year ended June 30, 1999, On January
18, 2000 we have issued 250,000 options to Mr. Gruenbaum, Mr. Lodders and Mr.
Steenbergen pursuant to our Fiscal 2000 Stock Option Plan. The options are
exercisable at $0.15 and expire December 31, 2004. The market price of the
shares on that date was $0.12.
1999 STOCK OPTION PLAN
In November 15, 1999, Our Board of Directors adopted the Fiscal 2000 Stock
Option Plan (the "Plan") as a means of increasing employees', board of advisors,
consultants' and non-employee directors' proprietary interest and to align more
closely their interest with the interests of our stockholders. The Plan should
also maintain our ability to attract and retain the services of experienced and
highly qualified employees and non-employee directors.
Under the Plan, we have reserved an aggregate of 3,000,000 shares of Common
Stock for issuance pursuant to options ("Plan Options"). Our Board of Directors
or a Committee of our Board of Directors (the "Committee") will administer the
Plan, including, without limitation, the selection of the persons who will be
granted Plan Options under the Plan, the type of Plan Options to be granted, the
number of shares subject to each Plan Option and the Plan Option price.
22
Plan Options granted under the Plan may be options qualifying as incentive
stock options ("Incentive Options") under Section 422 of the Internal Revenue
Code of 1986, as amended, or options that do not so qualify (Non-Qualified
Options"). In addition, the Plan also allows for the inclusion of a reload
option provision ("Reload Option"), which permits an eligible person to pay the
exercise price of the Plan Option with shares of Common Stock owned by the
eligible person and receive a new Plan Option to purchase shares of Common Stock
equal in number to the tendered shares. Any Incentive Option granted under the
Plan must provide for an exercise price of not less than 100% of the fair market
value of the underlying shares on the date of such grant, but the exercise price
of any Incentive Option granted to an eligible employee owning more than 10% of
the Company's Common Stock must be at least 110% of such fair market value as
determined on the date of the grant. The term of each Plan Option and the
manner in which it may be exercised is determined by our Board of Directors or
the Committee, provided that no Plan Option may be exercisable more than 10
years after the date of its grant and, in the case of an Incentive Option
granted to an eligible employee owning more than 10% of our Common Stock, no
more than five years after the date of the grant. The exercise price of
Non-Qualified Options shall be determined by our Board of Directors of the
Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in our
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Our officers, directors, key employees and consultants (including any
subsidiary) will be eligible to receive Non-Qualified Options under the Plan.
Only our employees (including any subsidiary) are eligible to receive Incentive
Options.
Recipients of Plan Options may not assign or transfer them, except by will
or by the laws of descent and distribution. During the lifetime of the
optionee, an option may be exercised only by such optionee. If an optionee's
employment is terminated for any reason, other than his death or disability or
termination for cause, or if an optionee is not an employee but is a member of
our Board of Directors and his service as a Director is terminated for any
reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term of his
employment, the Plan Option granted to him shall lapse to the extent unexercised
on the earlier of the expiration date of the Plan Option or the date one year
following the date of the optionee's death. If the optionee is disabled, the
Plan Option granted to him lapses to the extent unexercised on the earlier of
the expiration date of the option or one year following the date of the
disability.
Our Board of Directors or the Committee may amend, suspend or terminate the
Plan at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the Plan, or (ii) changes the definition of an
Eligible Person under the Plan.
As of February 4, 2000, 1,785,000 Plan Options had been granted pursuant to
the Plan. As of February 4, 2000, no option had been exercised.
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OPTION EXERCISES AND HOLDINGS.
The following table sets forth information with respect to the exercise of
options to purchase shares of common stock during the fiscal year ended June 30,
1999 to each person named in the Summary Compensation Table and the unexercised
options held as of the end 1999 fiscal year.
[Download Table]
AGGREGATE OPTION/EXERCISES IN
LAST FISCAL YEAR AND 1998 FISCAL YEAR END OPTION/VALUES
-------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTION
SHARES ACQUIRED ON VALUE AT 1998 FISCAL YEAR
EXERCISE REALIZED END (#) EXERCISABLE
NAME (#) ($) UNEXERCISABLE
------------------- ------------------ -------- --------------------
Jerry Gruenbaum 0 0 0
Hans Lodders 0 0 0
Ronald Steenbergen 0 0 0
- Subsequent to the end of the fiscal year ended June 30, 1999, we have
issued a total of 1,785,000 options pursuant to our Fiscal 2000 Stock Option
Plan, 250,000 options to Jerry Gruenbaum, the Company's President; 250,000
options to Hans Lodders, the Company's Managing Director for Asian Business
Affairs; 250,000 options to Ronald Steenbergen, the Company's Managing Director
for Operating Companies; 100,000 options to Wim Hakkaart, the Manager of Wellux
BV; 200,000 options to Jan Opdam, the Financial Comptroller of the Wellux Group;
10,000 options to Sunil Vasudev, the company accountant; 10,000 option to Karl
Lai, the Marketing Manager for Klick; 5,000 options to Mary Yeung, the Company
secretary; 500,000 options to Jean Claude Comptaert, the Marketing Sales
Coordinator for Wellux BV; 20,000 options to G.V. Dongen, Manager of Accounts
Logistics; 50,000 options to Paul Damen, the Manager of Households, Wellux BV;
20,000 options to Edward Droog, the Sales Manager for Wellux BV; 50,000 options
to Johannes Zwakhoven, the Sales Manager-Household Wellux BV; and 70,000 options
to Cris Hoare, the General Manager for Wellux HK. The options are exercisable at
$0.15 and expire June 30, 2004. The intrinsic value of the options on February
4, 2000 is $357,000.00 based on our determination of fair market value of the
purchased shares on the option exercise date less the exercise price paid for
the shares.
[Download Table]
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
------------------------------------------------------
NUMBER OF SHARES, PERFORMANCE OR
UNITS OR OTHER OTHER PERIOD UNTIL
RIGHTS MATURATION OR
NAME ($) PAYOUT
----------------------- ---------------------- ------------------
Jerry Gruenbaum 0 0
Hans Lodders 0 0
Ronald Steenbergen 0 0
24
- Subsequent to the end of the fiscal year ended June 30, 1999, we have
authorized 500,000 restricted shares to Mr. Gruenbaum, Mr. Lodders and Mr.
Steenbergen. The shares to Mr. Lodders and Mr. Steenbergen have not been to
date. Only the shares to Mr. Gruenbaum have been issued. The intrinsic value of
the shares on January 2, 2000 the date they were issued is $25,000 to each
officer based on our determination of fair market value of $0.05 per share for a
restricted share that may not be traded for two years from the date of issue.
Mr. Gruenbaum was also sold an additional 1,500,000 restricted shares at the
same $0.05 per share for a total of $75,000 payable by a five-year
interest-bearing note to the Company.
EXECUTIVE EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Jerry Gruenbaum, our
President and Director for five years commencing on January 1, 2000 and
terminating on December 31, 2004. Under said employment agreement we have agreed
to pay Mr. Gruenbaum, $60,000.00 per year payable semi monthly, 500,000 Rule 144
stock, and a stock option exercisable for five years for 250,000 Common Shares
pursuant to our Fiscal 2000 Stock Option Plan at $0.15 per share plus reasonable
expenses. A copy of the employment agreement is attached as exhibit 10-3.
We have entered into an employment agreement with Hans Lodders, our
Managing Director for Asia Business Division and Chairman of the Board of
Directors for five years commencing on January 1, 2000 and terminating on
December 31, 2004. Under said employment agreement we have agreed to pay Mr.
Lodders, $60,000.00 per year payable semi monthly, 500,000 Rule 144 stock, and a
stock option exercisable for five years for 250,000 Common Shares pursuant to
our Fiscal 2000 Stock Option Plan at $0.15 per share plus reasonable expenses.
A copy of the employment agreement is attached as exhibit 10-3(1).
We have entered into an employment agreement with Ronald Steenbergen, our
Managing Director for Operating Companies and Director for five years commencing
on January 1, 2000 and terminating on December 31, 2004. Under said employment
agreement we have agreed to pay Mr. Steenbergen, $50,000.00 per year payable
semi monthly, 500,000 Rule 144 stock, and a stock option exercisable for five
years for 250,000 Common Shares pursuant to our Fiscal 2000 Stock Option Plan at
$0.15 per share plus reasonable expenses. A copy of the employment agreement is
attached as exhibit 10-3(2).
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We were incorporated in the State of Idaho on April 16, 1953 under the name
Beacon Light Mining Company for the purpose of exploring and developing
potential silver mines in the northern part of the State Idaho. Our initial
certificate of incorporation authorized 1,500,000 shares of common stock of $.25
par value per share. The Company became inactive from the mid 1980's until mid
1997. The Company originally went public in the 1950s on a Regulation A
offering. Subsequently it was traded on the Spokane Exchange. The Spokane
Exchange is now defunct. Our Company's listing on the Spokane Exchange has also
since lapsed.
In March 1997, Jerry Gruenbaum the President and Director of our Company
located our Company in Idaho along with other unrelated investors in the silver
mining and timber fields and proceeded to negotiate the acquisition of a
majority control in our Company from a Mr. Lloyd Sanders the President and the
then member of the board of directors of our Company with the goal of merging it
with other silver mine claims and timber operations located in Montana, and
listing the Company on the NASDAQ Electronic Bulletin Board. At the time, our
Company had approximately 4,015,000 shares of common stock outstanding.
25
Negotiation to merge our Company with other silver claims failed due to the
stagnation of the silver mining industry at the time and the lack of interest by
Mr. Sanders who was an expert in silver mining operations. Subsequently, Mr.
Gruenbaum approached Mr. Sanders with another proposal to acquire the majority
control in our Company. To accomplish the acquisition Mr. Gruenbaum sought the
advise of Mr. Timothy H. Masley, whose father was a close personal friend for
over fifteen years and a business partner for many years. Mr. Masley a former
investment banker and stockbroker had extensive knowledge with the operations of
the securities market and sources for necessary funds in the market to make the
acquisition. He was to act as the Company's investment banking consultant. Mr.
Masley insisted on retaining the guidance of a securities attorney help in the
acquisition because of legal securities violations he was facing at the time.
It was understood that because of these securities violations, Mr. Masley could
never be an officer or director of our Company. He recommended that his
acquaintance, an attorney Vincent L. Verdiramo, Sr. of Jersey City, New Jersey,
an attorney highly experienced in securities compliance be retained to oversee
the legal securities compliance for the Company including obtaining the
necessary funding and act as the Company's corporate and securities attorney.
In April 1997, Attorney Vincent Verdiramo negotiated with Mr. Sanders and
acquired on behalf of Ansam, Inc. of Jersey City, New Jersey for $55,000.00,
5,500,000 Rule 144 stock of our Company and thereby a majority control of it and
changed direction of the Company from silver mining to a holding company for
manufacturing operations in China. Ansam, Inc. a New Jersey corporation, is
owned entirely by Attorney Vincent Verdiramo, the prior legal counsel for our
Company. The 5,500,000 Rule 144 Ansam shares have since been reversed, the
trading restrictions have been removed in 1998, and have been sold into the
market. Ansam, Inc. no longer has any interest in our Company and Attorney
Vincent Verdiramo is no longer associated with our Company.
In June 1997, a special meeting of the shareholders of our Company was held
at the office of Attorney Vincent Verdiramo, in Jersey City, New Jersey pursuant
to a proxy sent to all shareholders. It was resolved in that meeting that that
the Company reverse split its shares one for ten in accordance with said proxy
statement. It was further resolved that the Company increase its authorized
number of shares to 50,000,000 shares and the par value be decreased to $.001
per share. It was further resolved that Jerry Gruenbaum; Maureen Bell, Mr.
Masley's sister; and Maureen Hogan, a person who worked with Attorney Verdiramo,
be elected as the directors of the Company. Jerry Gruenbaum was appointed
President of our Company, a position he holds to this date, responsible for
negotiating and acquiring business operations from the Peoples Republic of China
to be merged into our Company. Ms. Hogan was appointed secretary/treasurer
responsible for opening and maintaining the Company's bank accounts. Ms. Bell
was appointed Vice President in charge of investor relations.
In September 1997, Attorney Verdiramo purchased 100,000 shares of the
Company, and Mr. Masley through various nominee companies purchased additional
at least 300,000 shares of the Company. Attorney Verdiramo authorized the
transfer agent to issue 1,000,000 Rule 144 shares to Boursa Intelligencia for
consulting services. No board meeting was ever conducted or approved upon to
issue the above shares. The Company was not notified by its investment-banking
consultant, its attorney or the transfer agent that said shares were issued.
Said shares had their trading restriction removed in late 1998 at the request of
Attorney Verdiramo, transferred to a brokerage firm in Canada, and later
transferred again to another brokerage firm in Canada to an account we believe
is indirectly controlled through a nominee by Mr. Masley. We are aware where
these shares are located and we are pursuing the remaining shares at this time.
26
In February 1998 we changed our domicile from the State of Idaho to the
State of Nevada. In February 1998 we amended our Nevada Articles of
Incorporation to state that the total authorized number of Common shares are to
change to 45,000,000 shares with a par value of $.001 per share, and that we are
authorized to issue 5,000,000 Preferred shares with a par value of $0.001 with
an 8% coupon, convertible into common for a period of 5 years at $1.00. In
February 1998 we changed our name to Beacon Light Holding Corporation.
In May 1998 Attorney Verdiramo authorized our transfer agent to issue
1,000,000 free trading shares to XCEL Associates Inc. No board meeting was ever
conducted or approved upon to issue the above shares. We were never notified by
our investment-banking consultant, our attorney or our transfer agent that said
shares were issued. Said shares were mailed from the transfer agent to the
office of Attorney Verdiramo per his instruction. Said shares have not been
paid for and were directed to an account in Canada we believe are indirectly
under the control of our former investment-banker. We are aware where these
shares are located and we are pursuing the remaining shares at this time.
In January 1999, we replaced Maureen Hogan with Fukman Yip, a U.S. citizen
born in Hong Kong with direct knowledge of the Chinese markets. In May 1999, we
issued 250,000 Rule 144 shares to Fukman Yip, 100,000 Rule 144 shares to Maureen
Bell both of whom were directors of the Company, and 200,000 Rule 144 shares to
Richard J. Verdiramo, the younger son of Attorney Verdiramo for services
rendered to our Company.
In May 1999, we issued 4,000,000 Rule 144 shares to Crown Union Investment
Ltd. for one hundred percent interest in Wellux Industries Limited. In
accordance with the acquisition negotiation, Mr. Yip and Ms. Bell resigned from
our board of directors and were replaced by Hans Lodders our current Chairman of
the Board and Managing Director of our Asian Business Division and Ronald
Steenbergen a current member of the board and the Managing Director of our
Operating Companies. One of the shareholders of Crown Union Investments Ltd. is
a Ms. Noortje Vogeltje Lodders, who is Mr. Lodders' daughter. She controls
1,333,333 of these shares.
In May 1999, we issued 2,000,000 free trading shares to Morgan Jason, as
part of an investment-banking agreement to negotiate the acquisition of Niphix
Systems, Inc. for Beacon Light. For business reasons, we decided on a later
date not to pursue the completion of the Niphix Agreement. To date, we received
$100,000.00 for these shares from Morgan Jason. The $100,000.00 was used to
purchase shares on behalf of our Company in Niphix Systems, Inc. We believe
that Mr. Masley has an indirect ownership with Morgan Jason at the time. As of
July 1999, we have terminated our association with Mr. Masley, who as of
February 2000 has been sentenced and incarcerated for Securities violations
unrelated to his association with our Company. We are currently assessing with
our legal counsel on whether to seek any further legal recourse against Mr.
Masley.
In August 1999 we issued 7,500 shares of Rule 144 stock having a market
value at the time of $1,125.00 taking into account their restrictions, to
Timothy E. Morgan, Esq. In settlement of a personal suit against our president
as legal counsel for a franchisor in California. The basis of the suit is that
our president in his prior capacity as the attorney for a franchisor in
California failed to disclose in the prospectus he prepared on behalf of the
franchisor, a material judgment against the owner of the franchisor. We
believed it was in our best interest to settle this matter.
27
In September 1999, we authorized but have not issued to date 2,450,000 Rule
144 shares for a forty nine percent interest in Klick Limited, thirty percent
from Ma Yuk King a Hong Kong resident, fifteen percent from Drilford Ltd. a
Hong Kong Corporation, and four percent from KB Group, a British Virgin Island
Corporation that owns the remaining fifty-one percent interest. We have an
option for 360 days to purchase the remaining fifty-one percent interest in
Klick from the KB Group. Drilford, Ltd. is owned 80% by Mr. Lodders' wife and
20% by Mr. Lodders who is also a director.
In January 2000 we issued a total of 300,000 shares of Rule 144 stock,
200,000 to Frank Kavanaugh and 100,000 to John Pitkin, Esq. in settlement of a
default judgment against our president as legal counsel for a franchisor in
California. At the time, our shares were trading at $.12 per share for
unrestricted shares. The basis of the suit is that our president in his prior
capacity as the attorney for a franchisor in California failed to disclose in
the prospectus he prepared on behalf of the franchisor, a material judgment
against the owner of the franchisor. We believed it was in our best interest to
settle this matter. Said shares were paid from the 300,000 shares authorized
but never issued to our president in June 1999 as compensation settlement for
him for all works performed for fiscal year ended June 30, 1997, 1998 and 1999.
In January 2000 we issued 2,000,000 Rule 144 shares to Jerry Gruenbaum our
President and director. At the time, our shares were trading at $.12 per share
for unrestricted shares. 500,000 shares were treated as compensation in
accordance with the employment agreement of the same date and 1,500,000 shares
were sold to him at $.05 per share on a $75,000 note to the Company payable over
five years. Our shares were selling at the time for $0.12 for free trading
shares. The restrictions to trade on said shares can be removed in January
2002.
In January 2000 we have terminated our association with Attorney Vincent L.
Verdiramo, Sr. and are assessing with our legal counsel on whether to seek any
further legal recourse against him.
ITEM 8. DESCRIPTION OF SECURITIES
Under our amended certificate of incorporation, we are authorized to issue
up to 45,000,000 shares of common stock, par value $.001 per share, of which
19,413,922 shares were outstanding as of March 7, 2000. We are also authorized
to issue up to 5,000,000 shares of preferred convertible stock, par value $.001
per share, of which 766,667 shares were outstanding as of March 7, 2000.
COMMON STOCK
Each shareholder is entitled to one vote for each share of common stock
owned of record. The holders of shares of common stock do not posses cumulative
voting rights, which means that the holders of more than 50% of the outstanding
shares voting for the election of directors can elect all of the directors, and
in such event the holders of the remaining shares will be unable to elect any of
our directors. Holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available at such times and in such
amounts as our Board of Directors may determine. Upon our liquidation,
dissolution, or winding, the assets legally available for distribution to our
shareholders will be distributable ratably among the holders of the shares
outstanding at the time. Holders of our shares of common stock have no
preemptive, conversion, or subscription rights, and our shares of common stock
are not subject to redemption. All our shares of common stock are fully paid
and non-assessable.
28
Of the outstanding shares of common stock of our Company as of March 7,
2000, approximately 11,686,422 shares are free trading shares, and approximately
8,227,500 shares are restricted securities as that term is defined in Rule 144
adopted under the Act ("Restricted Securities"). Rule 144 governs resale of
Restricted Securities for the account of any person, other than the issuer, and
restricted and unrestricted securities for the account of an "affiliate" of the
issuer. Restricted securities generally include any securities acquired
directly or indirectly from an issuer or its affiliates, which were not issued
or sold in connection with a public offering registered under the Securities
Act. An affiliate of the issuer is any person who directly or indirectly
controls, is controlled by, or is under common control with, the issuer.
Affiliates of the Company may include its directors, executive officers, and
persons directly or indirectly owning 10% or more of the outstanding common
stock. Under Rule 144, unregistered resale of restricted common stock cannot
be made until it has been held for one year from the later of its acquisition
from the Company or an affiliate of the Company. Thereafter, shares of common
stock may be resold without registration subject to Rule 144's volume
limitation, aggregation, broker transaction, notice filing requirements, and
requirements concerning publicly available information about the Company
("Applicable Requirements"). Resale by the Company's affiliates of restricted
and unrestricted common stock are subject to the Applicable Requirements. The
volume limitations provide that a person, or persons who must aggregate their
sales, cannot, within any three-month period, sell more than the greater of (i)
on percent of the then outstanding shares, or (ii) the average weekly reported
trading volume during the four calendar weeks preceding each such sale. A
person who is not deemed an "affiliate" of the Company and who has beneficially
owned shares for at least two years would be entitled to sell such shares under
Rule 144 without regard to the Applicable Requirements.
PREFERRED STOCK.
Under the certificate of incorporation, as amended, we are authorized to
issue 5,000,000 shares, par value $0.001 per share, of preferred stock with such
designation, rights and preferences as our Board of Directors may from time to
time determine. Accordingly our Board of Directors is empowered, without
stockholders approval, to issue preferred stock with dividends, liquidation,
conversion, voting or other rights, which could adversely affect the voting
power of other rights of the holders of our stock. We could issue preferred
stock as a method of discouraging, delaying or preventing a change of control of
our company. On November 15, 1999, our board of directors has created one
series of preferred stock, Series B Preferred Stock. On November 18, 1999, we
sold 766,667 shares of preferred shares for $0.15 per share, for a total of
$115,000 in reliance upon the exemption registration afforded by Rule 506 of
Regulation D as promulgated by the United States Securities and Exchange
Commission under the Securities Act of 1933, as amended.
In accordance with the Certificate of Designations, Preferences and Rights
of Series B Convertible Preferred Stock as filed with the State of Nevada, (a
copy of the full text is attached as EX-4.1(i)) said shares have the following
powers, designations, preferences and other special rights:
1. Dividends. The Preferred Shares bear dividends at a rate of 8.5% of their
stated value per annum, which are cumulative and accrue daily from the date they
are issued. Dividends are payable in cash on November 17, 2001 or at any other
date on which Buyer has a redemption right, on all preferred shares that are
redeemed and not converted to common shares. Any accrued and unpaid dividends
that are not paid within five (5) business days on redeemed shares when they are
due bear interest at the rate of 1.5% per month from the due date until it is
paid.
29
2. Conversion of Preferred Shares. The Preferred Shares shall be
convertible into shares of the Company's common stock, par value $0.001 per
share at the conversion ration of 1.0.
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that sale of common
stock, or conversion of preferred stock to common stock or the availability of
such shares will have on the market price prevailing from time to time.
Nevertheless, the possibility exist, that substantial amounts of common stock
may be sold in the public market and therefore would likely have a material
adverse effect on the prevailing market price for our common stock and could
impair our Company's ability to raise capital through the sale of our equity
securities.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
Our shares of common stock are traded on the pink sheets. From October 22,
1997 through March 5, 1998 when we were called Beacon Light Mining Company and
our shares of common stock were traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "BLMG". Our company name was changed
to its current name Beacon Light Holding Corporation on February 17, 1998 and
from March 6, 1998 to October 12, 1999 our shares of common stock were traded
over-the-counter and quoted on the OTC Electronic Bulletin Board under the
symbol "BLHG". The reported high and low bid prices for the common stock are
shown below for the period from the fourth quarter of 1997 through March 6,
2000. The prices are from the NASDAQ Quarterly Quote Summary Reports. The
quotations reflect inter-dealer prices and do not include retail mark-ups,
mark-downs or commissions. The prices do not necessarily reflect actual
transactions.
[Download Table]
HIGH BID LOW BID
--------- --------
1997
Fourth Quarter $1.75 $0.50
1998
First Quarter $1.25 $0.06
Second Quarter $1.63 $0.13
Third Quarter $0.50 $0.07
Fourth Quarter $0.15 $0.08
1999
First Quarter $1.61 $0.08
Second Quarter $1.25 $0.44
Third Quarter $0.70 $0.16
Fourth Quarter $0.25 $0.15
2000
First Quarter $0.42 $0.11
(through March 6, 2000)
The closing price of our common stock on March 6, 2000, was $0.36.
As of March 6, 2000 there were approximately 671 holders of record of the
Company's common stock.
Our transfer agent is Jersey Transfer and Trust Company, Inc., 201
Bloomfield Avenue, Verona, New Jersey 07044, (973) 239-2712.
30
DIVIDEND POLICY
We have never paid cash dividends on our common stock and we presently
intend to retain future earnings, if any, to finance the expansion of our
business. We do not anticipate that cash dividends will be paid in the
foreseeable future. Future dividend policy will depend on our earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS.
In July 1999 the U.S. Attorney's Office for the Eastern District of New
York subpoenaed the records of our Company. The agency has further subpoenaed
the financial records of our auditors and our records from our transfer agent.
Both Jerry Gruenbaum the Company's President and Director and Hans Lodders the
Company's Chairman of the Board have been interviewed by that agency. On
March 10, 2000 the agency has notified us officially that we are being
Investigated and that our President is also the subject of the investigation for
His role in his association with our Company's former attorney Vincent L.
Verdiramo and our former investment-banking consultant Timothy Masley who now
is incarcerated for securities violations for matters unrelated to Beacon Light.
In July 1999 we have terminated our association with Mr. Masley and are
assessing with our legal counsel on whether to seek any further legal recourse
against him. In January 2000 we have terminated our association with Attorney
Vincent L. Verdiramo, Sr. and are assessing with our legal counsel on whether to
seek any further legal recourse against him.
Our management is not aware of any legal proceeding contemplated by any
governmental authority involving our Company, our subsidiaries or our Company's
property. No director, officer or affiliate of the Company, or any associate of
a director, officer or affiliate of our Company, or any associate of a director,
officer or affiliate of our Company: (i) is a party adverse to our Company or
our subsidiaries in any legal proceedings; or (ii) has an adverse interest to
the Company or its subsidiaries in any legal proceedings. Except as described
herein, our Company and our subsidiaries are not parties to any legal
proceedings and there are no other material legal proceedings pending with
respect to the property of our Company and our subsidiaries.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The firm of Hoffski & Pisano CPAs conducted our audit for years ended June
30, 1998 and June 30, 1999. Our relationship with that firm is ongoing.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the following transactions were affected us in
reliance upon exemptions from registration under the Securities Act of 1933 as
amended (the "Act") as provided in Section 4(2) thereof except as otherwise
indicated below. Each certificate issued for unregistered securities contained
a legend stating that the securities have not been registered under the Act and
setting forth the restrictions on the transferability and the sale of the
securities. No underwriter participated in, nor did we pay any commission or
fee to any underwriter in connection with any of these transactions. None of
the transactions involved a public offering.
In April 8, 1997 we sold for $55,000, 5,500,000 Rule 144 stock of our
Company under Rule 504 of Regulation D to the Securities Act of 1933 to Ansam,
Inc.
31
On August 11, 1997 we undertook a 10:1 reverse stock split of our Common
Stock. All figures set forth below give effect to the reverse split.
In September 30, 1997 we sold for an aggregate of $12,000 an aggregate of
800,000 shares of our common stock to 8 investors under Rule 504 of the
Regulation D to the Securities Act of 1933. We further issued 1,000,000 Rule
144 shares to Boursa Intelligencia for consulting services. No board meeting
was ever conducted or approved upon to issue the above shares. The Company was
not notified by its investment-banking consultant Timothy H. Masley, it attorney
Vincent L. Verdiramo, Sr., Esq., or its transfer agent Jersey Transfer and Trust
Co. that said shares were issued.
In February 18, 1998 we sold for an aggregate of $60,000 an aggregate of
600,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In April 30, 1998 we sold for an aggregate of $40,000 an aggregate of
400,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In May 18, 1998 we sold for an aggregate of $250,000 an aggregate of
1,000,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In May 22, 1998 we sold for an aggregate of $25,000 an aggregate of 100,000
shares of our common stock to Fermasa USA under Rule 504 of the Regulation D to
the Securities Act of 1933.
In May 27, 1998 we sold for an aggregate of $52,500 an aggregate of 210,000
shares of our common stock to various investors under Rule 504 of the Regulation
D to the Securities Act of 1933.
In May 27, 1998 we sold for an aggregate of $250,000 an aggregate of
1,000,000 shares of our common stock to XCEL Associates under Rule 504 of the
Regulation D to the Securities Act of 1933. We were never paid the $250,000 and
no board meeting was ever conducted or approved upon to issue the above shares.
The Company was not notified by its investment-banking consultant, it attorney,
or its transfer agent that said shares were issued.
In July 16, 1998 we issued an aggregate of 800,000 Rule 144 shares plus an
additional 1,000,000 options at $0.13 per share to Lloyd Wade Securities and
various officers and associates of that firm for investment banking services.
In February 17, 1999 we sold for an aggregate of $70,650 an aggregate of
785,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In May 10, 1999 we issued 250,000 Rule 144 shares to Fukman Yip for
directors services, 100,000 Rule 144 shares to Maureen Bell for directors
services and 200,000 Rule 144 shares to Richard J. Verdiramo for services
rendered to the Company.
In May 18, 1999 we sold for an aggregate of 9,400,000 shares of our common
stock to various investors under Rule 504 of the Regulation D to the Securities
Act of 1933. To date we have cancelled 6,300,000 of said shares. 2,000,000
shares have been sold to Morgan Jason, as part of an investment-banking
agreement to negotiate the acquisition of Niphix Systems, Inc. for Beacon Light.
To date the Company received $100,000.00 for these shares from Morgan Jason.
1,000,000 shares were sold to Victor Roosen for $84,000.00 paid to the Company
in September 1999. The company is aware where the Morgan Jason shares are
located and are pursuing the remaining shares at this time.
32
In May 18, 1999 we issued 4,000,000 Rule 144 shares to Crown Union
Investment Ltd. for the one hundred percent interest in Wellux Industries
Limited.
In June 11, 1999 we issued 500,000 Rule 144 shares to VJMA Roosen for the
one hundred percent interest in VJMA Roosen.
In August 3, 1999 we issued 7,500 Rule 144 shares to Timothy E. Morgan,
Esq. In settlement of a personal suit against our company's president as legal
counsel for a franchisor in California. The basis of the suit is that our
president in his prior capacity as the attorney for a franchisor in California
failed to disclose in the prospectus he prepared on behalf of the franchisor, a
material judgment against the owner of the franchisor. We believed it was in
our best interest to settle this matter
In October 9, 1999 we sold for an aggregate of $200,000 an aggregate of
800,000 shares of our common stock to various investors in Holland under Rule
504 of the Regulation D to the Securities Act of 1933.
In November 18, 1999 we sold for $115,000, 766,667 shares of our Series B
convertible preferred stock to Vijuk Equipment, Inc. under Rule 506 of the
Regulation D to the Securities Act of 1933.
In January 2, 2000 we issued a total of 300,000 shares of Rule 144 stock,
200,000 to Frank Kavanaugh and 100,000 to John Pitkin, Esq. in settlement of a
default judgment against our company's president as legal counsel for a
franchisor in California. The basis of the suit is that our president in his
prior capacity as the attorney for a franchisor in California failed to disclose
in the prospectus he prepared on behalf of the franchisor, a material judgment
against the owner of the franchisor. We believed it was in our best interest to
settle this matter. Said shares were paid from the 300,000 shares authorized
but never issued to our president in June 1999 as compensation settlement for
him for all works performed for fiscal year ended June 30, 1997, 1998 and 1999.
In January 2, 2000 we issued 2,000,000 Rule 144 shares to Jerry Gruenbaum
our President and director. 500,000 shares were treated as compensation in
accordance with the employment agreement of the same date and 1,500,000 shares
were sold to him at $.05 per share on a $75,000 note to the Company payable over
five years. Our shares were selling at the time for $0.12 for free trading
shares. The restrictions to trade on said shares can be removed in January
2002.
In February 7, 2000 we sold for $110,000, 1,000,000 Rule 144 shares of our
common stock to a European accredited investor under Rule 504 of the Regulation
D to the Securities Act of 1933. To date the investor has paid us $55,000 for
500,000 Rule 144 shares.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chapter 78 of the Nevada Revised Statutes permits the indemnification of
directors, employees, officers and agents of Nevada corporations as follows:
Section 78.7502 Discretionary and mandatory indemnification of officers
directors, employees and agents:
33
General provisions.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or opposed to the best interests of
the corporation, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudicated by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the courts
deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense.
Section 78.751 Authorization required for discretionary indemnification;
advancement of expenses; limitation on indemnification and advancement of
expenses.
--------------------------------------------------------------------------------
1. Any discretionary indemnification
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not party to the action,
suit or proceeding;
34
(c) If a majority vote of a quorum consisting of directors who
were not parties to the action, suit or proceeding so ordered,
by independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
2. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors of
officers may be entitled under any contract or otherwise by law.
3. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for
either an action in his official capacity or an action in
another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to
NRS 78.7502 or for the advancement of expenses made pursuant to
subsection 2, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
Section 78.752 Insurance and other financial arrangements against liability of
directors, officers, employees and agents.
-----------------------------------------------------------------------------
1. A corporation may purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and liability and expenses incurred by him in his capacity as a
director, officer, employee or agent, or arising out of his status as such,
whether or not the corporation has the authority to indemnify him against such
liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the
corporation.
(d) The establishment of a letter of credit, guaranty or surety.
35
No financial arrangement made pursuant to this subsection may provide protection
for a person adjudicated by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other person
approved by the board of directors, even if all or part of the other person's
stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the
terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the
person to provide the insurance or other financial arrangement is
inclusive; and
(b) The insurance or other financial arrangement:
(1) is not void or voidable; and
(2) Does not subject any director approving it to personal
liability for his action, even if a director approving
the insurance or other financial arrangement is a
beneficiary of the insurance or other financial
arrangement.
5. A corporation or its subsidiary which provides self-insurance for itself
or for another affiliated corporation pursuant to this section is not subject to
the provisions of Title 57 of NRS.
Our Certificate of Incorporation, as amended, provides as follows:
NINTH. No director or officer of the corporation shall be personally liable to
the corporation or any of its stockholders for damages for breach of fiduciary
duty as a director or officer or for any act or omission of any such director or
officer; however, the foregoing provision shall not eliminate or limit the
liability of a director or officer for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the payment
of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article by the stockholders of the corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director or officer of the corporation for acts or
omissions prior to such repeal or modification.
Our Bylaws as amended, provide as follows:
Section 3.17 Directors Liability
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under Nevada Law. The
corporation is authorized to indemnify the directors of the corporation to the
fullest extent permissible under Nevada Law.
Section 4.12 Officers Liability
The liability of the directors of the corporation for monetary damages shall be
eliminated to the fullest extent permissible under Nevada Law. The corporation
is authorized to indemnify the directors of the corporation to the fullest
extent permissible under Nevada Law.
36
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Commissioner, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PART F/S
Financial Statements
Beacon Light Holding Corporation
June 30, 1999
PAGE
--------------------------------------------------------------------- ----
TABLE OF CONTENTS 1
ACCOUNTANTS' AUDIT REPORT 2
FINANCIAL STATEMENTS
Balance Sheets 3-4
Statement of Operations 5
Statements of Stockholders' Equity 6
Statement of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-16
37
Independent Auditor's Report
----------------------------
Board of Directors
Beacon Light Holding Corporation and Subsidiaries
Hartford, Connecticut
We have audited the consolidated balance sheets of Beacon Light Holding
Corporation and Subsidiaries (a Nevada Corporation, successor to Beacon Light
Mining Company (Note1)) as of June 30, 1999 and 1998, and the related
consolidated statements of operations and stockholders' equity, and cash flows
for the years then ended June 30, 1999, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Wellux Industries,
Limited and Subsidiaries, a wholly owned subsidiary, which statements reflect
total assets and revenues constituting 71% (seventy-one percent) and 100% (one
hundred percent), respectively, for the fiscal year ended June 30, 1998, and 92%
(ninety-two percent) and 100% (one hundred percent), respectively, for fiscal
year ended June 30, 1999, of the related consolidated totals. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Wellux Industries,
Limited and Subsidiaries, is based solely on the report of other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Beacon Light Holding Corporation
and Subsidiaries as of June 30, 1999 and 1998, and the results of its operations
and its cash flow for the years then ended June 30, 1999, 1998, and 1997 in
conformity with generally accepted accounting principles.
/s/Hoffski & Pisano
---------------------------
Hoffski & Pisano, CPAs
Irvine, California
March 10, 2000
38
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
AS OF JUNE 30, 1999 AND 1998
(in United States dollars)
[Download Table]
JUNE 30, JUNE 30,
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 36,643 $ 273,521
Accounts Receivable 489,227 17,831
Inventories 582,058 133,016
Prepaid Expenses 20,331 -
Investments 100,000 -
----------- -----------
TOTAL CURRENT ASSETS $1,228,259 $ 424,368
FIXED ASSETS
Property, Equipment & Leasehold Improvements
Less Accumulated Depreciation & Amortization $ 330,051 $ 256,918
----------- -----------
TOTAL FIXED ASSETS $ 330,051 $ 256,918
OTHER ASSETS
Deposits $ 13,402 $ 481
----------- -----------
TOTAL OTHER ASSETS $ 13,402 $ 481
----------- -----------
TOTAL ASSETS $1,571,712 $ 681,767
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 601,257 59,912
Accrued Liabilities 65,058 110
Amount Due Foreign Directors 613,774 391,965
Income Taxes Payable 500 250
----------- -----------
TOTAL CURRENT LIABILITIES $1,281,420 $ 452,237
Stockholders' Equity
Common Stock, $.001 Par Value, $ 15,996 $ 6,091
45,000,000 Shares Authorized
16,096,422 Shares Issued and Outstanding
(6,061,422 Shares in 1998)
Preferred Stock, $0.001 Par Value
5,000,000 Shares Authorized
No Shares Issued and Outstanding - -
Additional Paid-in Capital 611,182 401,067
Accumulated Deficit (336,655) (177,598)
----------- -----------
Total Stockholders' Equity $ 290,623 $ 229,530
----------- -----------
Total Liabilities and Stockholders' Equity $1,571,712 $ 681,767
=========== ===========
See accompanying notes and independent auditors' report
39
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
[Download Table]
June 30, June 30, June 30,
1999 1998 1997
------------- ------------- -------------
Gross Sales $ 4,109,017 $ 274,468 $ -
Cost of Goods Sold 2,391,724 200,853 -
------------- ------------- -------------
Gross Profit $ 1,717,293 $ 73,615 $ -
General & Administrative Expenses 1,746,100 190,963 4,995
------------- ------------- -------------
Income/(Loss) from Operations $ (28,807) $ (117,348) $ (4,995)
Other Income/(Expenses) (130,000) (60,000) -
------------- ------------- -------------
Net Income Before Taxes $ (158,807) $ (177,348) $ (4,995)
Provision for Income Taxes 250 250 250
------------- ------------- -------------
Net Income/(Loss) $ (159,057) $ (177,598) $ (5,245)
============= ============= =============
Net Income/(Loss) per
common Share - Basic $ (.02) $ (.07) $ (.01)
============= ============= =============
Weighted Average Shares
Outstanding - Basic 7,302,467 2,647,494 549,165
============= ============= =============
Net Income/(Loss) per
common Share - Diluted $ (.02) $ (.06) $ (.01)
============= ============= =============
Weighted Average Shares
Outstanding - Diluted 8,302,467 2,861,193 549,165
============= ============= =============
See accompanying notes and independent auditors' report
40
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
(begin 8pt type)
[Enlarge/Download Table]
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
Balance at
June 30, 1996 4,015,936 $ 401,393 $ - $ - $ (412,290) $ (10,897)
Stock Issued on
04/08/97 5,500,000 550,000 (495,000) - - 55,000
Change in Par Value
From $.01 per Share
to $.001 per Share
- 06/16/97 (941,980) 495,000 446,980 - - -
Reverse Stock Split
on One for Ten
Basis - 06/16/97 (8,563,514) (8,462) 8,462 - -
Net Income/(Loss) (5,245) (5,245)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1997 951,422 $ 951 $ - $ 455,442 $ (417,535) $ 38,858
Stock Issued on
09/30/97 for Cash 800,000 8,000 - 4,000 - 12,000
Stock Issued on
09/30/97 for
Services 1,000,000 10,000 (10,000) - - -
Reorganization - Idaho
Shares Retired and
Company Dissolved
02/16/98 (2,751,422) (18,951) 10,000 (459,422) 417,535 (50,858)
Reorganization -
Nevada Formed
Shares issued
On 2/16/98 2,751,422 2,751 - 48,107 - 50,858
Stock Issued on
02/18/98 for Cash/Notes 600,000 600 - 59,400 - 60,000
Less Notes Received - - - (35,064) - (35,064)
Stock Issued on
04/30/98 for Cash/Notes 400,000 400 - 39,600 - 40,000
Less Notes Received - - - (17,500) - (17,500)
Stock Issued on
05/18/98 for Cash/Notes 1,000,000 1,000 - 249,000 - 250,000
Less Notes Received - - - (16,166) - (16,166)
Stock Issued on
05/22/98 for Cash 100,000 100 - 24,900 - 25,000
Stock Issued on
05/27/98 for Cash/Notes 1,210,000 1,210 - 301,290 - 302,500
Less Notes Received - - - (252,500) - (252,500)
Net Income/(Loss) - - - - (177,598) (177,598)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
----------- ---------- ------------ ----------- ----------- -----------
(end 8pt type)
See accompanying notes and independent auditors' report
41
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997 (Continued)
(in United States dollars)
(begin 8pt type)
[Enlarge/Download Table]
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
Stock Issued on
07/16/98 for
Services 800,000 800 - (800) - -
Cash Recd. For Stock
Issued on 09/30/97 - - - 15,000 - 15,000
Stock Issued on
02/17/99 for Cash 785,000 785 - 69,865 - 70,650
Stock Issued on
05/10/99 for Services 550,000 550 - (550) - -
Stock Issued on
05/18/99 for Cash 2,000,000 2,000 - 128,000 - 130,000
Stock Issued on
05/18/99 for Notes
Receivable 1,100,000 1,100 - (1,000) - -
Stock Issued on
02/17/99 for Wellux 4,000,000 4,000 - 4,000 - -
Stock Issued on
02/17/99 for Roosen 500,000 500 - 500 - -
Stock Issued on
02/17/99
for Notes Receivable 300,000 300 - (300) - -
Net Income/(Loss) - - - - (159,057) (159,057)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1999 16,096,422 $ 16,096 $ - $ 611,182 $ (336,655) $ (290,623)
=========== =========== ============ ============ =========== ===========
(end 8pt type)
See accompanying notes and independent auditors' report
42
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
[Download Table]
June 30, June 30, June 30,
1999 1998 1997
------------- ------------- -------------
CASH FLOWS PROVIDED BY/(USED IN)
OPERATING ACTIVITIES:
Net Income/(Loss) $ (159,057) $ (177,598) $ (5,245)
Non-Cash Items Included
in Net Income:
Depreciation 97,396 8,860 -
Change in Prepaids (20,331) - -
Change in Accounts Receivable (471,396) (17,831) -
Change in Inventory (449,042) (133,016) -
Change in Deposits (12,921) (481) -
Change in Accrued Liabilities 64,948 110 -
Change in Accounts Payable 541,845 58,478 (9,463)
Change in Income Tax Payable 250 250 -
Change in Amounts Due
Foreign Directors 221,809 391,965 -
------------- ------------- -------------
Net Cash Provided by/(Used in)
Operating Activities (186,499) 130,737 (14,708)
Cash Flows Used In Investing
Activities
Change in Investments (100,000) - -
Change in Lease Payments
Receivable
Purchase of Property, Equipment
& Leasehold Improvements (170,529) (265,778) -
------------- ------------- -------------
Net Cash Used For Investing
Activities (270,529) (265,778) -
Cash Flows from Financing Activities
Issuance of Common Stock 220,150 368,270 55,000
------------- ------------- -------------
Net Cash Provided by
Financing Activities 220,150 368,270 55,000
Net Change In Cash (236,878) 233,229 40,292
Cash At Beginning Of The Year 273,521 40,292 -
------------- ------------- -------------
Cash At End Of The Year $ 36,643 $ 273,521 $ 40,292
============= ============= =============
Supplemental Cash Flow Information:
Interest Paid $ - $ - $ -
============= ============= =============
Income Taxes Paid $ - $ - $ -
============= ============= =============
Non-cash Investing and Financing
Activities:
Common Stock Issued for
Notes Receivable $ 1,400 $ 321,230 $ -
See accompanying notes and independent auditors' report
43
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 1 - NATURE OF BUSINESS
--------------------------------
The Company is engaged in the business of identifying and acquiring privately
held equity holdings in various entities worldwide.
The Company was created on December 3, 1997 as a Nevada Corporation and is an
ultimate successor to Beacon Light Mining Company, an Idaho Corporation (see
Note 3).
NOTE 2 - ACCOUNTING POLICIES
--------------------------------
Principal of Consolidation
----------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned Hong Kong subsidiary, Wellux Industries Limited and
Subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation.
Recent Accounting Pronouncements
----------------------------------
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, was issued in June 1997. The pronouncement establishes
standards for the reporting and display of comprehensive income and its
components in financial statements. Comprehensive income is defined as the
total of net income and non-owner changes in equity. The Company believes this
statement does not have a material effect on its financial statements.
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures About
Fair Value of Financial Instruments, requires management to disclose the
estimated fair value of certain assets and liabilities defined by SFAS No. 107
as financial instruments. Financial instruments are generally defined by SFAS
No. 107 as cash, evidence of ownership interest in equity, or a contractual
obligation that both conveys to one entity a right to receive cash or other
financial instruments from another entity and imposes on the other entity the
obligation to deliver cash or other financial instruments to the first entity.
As of June 30, 1999 and 1998, management believes that the carrying amount of
cash accounts receivable, accounts payable, and accrued liabilities approximate
fair value because of the short maturity value of these financial instruments.
44
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 2 - ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------
Foreign Currency Transactions
-------------------------------
Foreign currency transactions during the year are translated into United States
dollars at the exchange rates prevailing at the transaction dates. Monetary
assets are liabilities denominated in foreign currencies at year end are
translated into United States dollars at approximately the market rates of
exchange prevailing at the balance sheet date.
Gains and losses on exchange are shown in the Statement of Operations within the
General & Administrative Expenses section.
Cash Equivalents
-----------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Income Taxes
-------------
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates.
Inventories
-----------
Inventories are stated at the lower of cost or market. Inventory cost is
determined using the first-in, first-out (FIFO) method and includes raw
materials, packaging, labor, and overhead. Market is based on net realizable
value.
Office Furniture and Equipment
---------------------------------
Office furniture and equipment are stated at cost. Major renewals and
betterments are capitalized to the asset accounts while the cost of maintenance
and repairs is charged against income as incurred. At the time assets are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is credited
to or charged against income. Depreciation for financial reporting purposes is
calculated by the straight-line method over the estimated useful lives of the
assets. The Modified Accelerated Cost Recovery System (MACRS) method is used
for income tax purposes.
45
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 2 - ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------
Net Income/(Loss) Per Share
------------------------------
Net loss per share is computed based on the weighted average number of shares of
common stock outstanding.
Use of Estimates
------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the 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.
Investments
-----------
On May 25, 1999, the Company purchased 8,000 shares in a closely held
corporation, which represents a less than 5% ownership. The investment is
stated at cost.
The Company also invested in a joint venture formed on February 18, 1998.
During the years ended June 30, 1999 and 1998, the Company contributed $130,000
and $60,000, respectively, to the joint venture. However, the joint venture
expended all of the funds provided by the Company and was subsequently
dissolved. Accordingly, a loss was recorded in the Statement of Operations in
the Other Income/(Expenses) section for the aforementioned years.
NOTE 3 - REORGANIZATION
--------------------------
In February 1998, the company reorganized as a Nevada Corporation. Beacon Light
Mining Company, an Idaho Corporation ("Beacon Light - Idaho") merged into its
wholly owned subsidiary Beacon Light Mining Company, a Nevada Corporation
("Beacon Light - Nevada"), which became the surviving corporation. Prior to the
merger, Beacon Light - Idaho had 2,751,422 shares issued and outstanding and
Beacon Light - Nevada had 1 share issued and outstanding that was owned by
Beacon Light - Idaho. After the merger the 2, 751,422 common shares in Beacon
Light - Idaho were converted to 2,751,422 common shares in Beacon Light -
Nevada. The 1 share in Beacon Light - Nevada owned by Beacon Light - Idaho was
cancelled and returned to the status of un-issued. Thereafter, the Company
changed its name to Beacon Light Holding Corporation.
46
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 3 - REORGANIZATION (CONTINUED)
---------------------------------------
In connection with the merger, all assets and liabilities of Beacon Light -
Idaho were assumed by Beacon Light - Nevada and all assets and liabilities of
the Idaho and Nevada Corporations were combined at their historical amounts in a
manner similar to that in pooling of interests accounting. Additionally, prior
accumulated deficit was netted with additional paid-in- capital in conjunction
with a charge in par value of the common stock to effectuate the transfer of
$50,858 in equity.
NOTE 4 - ACQUISITIONS
------------------------
On May 18, 1999, the Company acquired all the outstanding stock of Wellux
Industries Limited, a closely held Hong Kong Corporation, and its wholly owned
Netherlands Subsidiary, Wellux Holland B.V., by the issuance of shares of Beacon
Light Holding Corporation common stock to the shareholders of Wellux Industries
Limited in exchange for all the issued and outstanding shares of Wellux
Industries Limited. In connection with the Company's acquisition of Wellux
Industries Limited, all the issued and outstanding stock of Wellux Industries
Limited (10,000 shares) was exchanged for 4,000,000 shares of restricted common
stock under Rule 144 of the Securities Act of 1933. The transaction was
accounted for under the pooling method of accounting. Wellux Industries Limited
is engaged in the business of adult products.
On June 11, 1999, the Company's subsidiary, Wellux Industries Limited, acquired
all the outstanding stock of V.J.M.A. Roosen, a closely held Netherlands
Corporation, by the issuance of shares of Beacon Light Holding Corporation
common stock to the shareholder of V.J.M.A. Roosen in exchange for all of the
issued and outstanding stock of V.J.M.A. Roosen. In connection with Wellux
Industries, Limited's acquisition of V.J.M.A. Roosen, the business and all of
the business assets were exchanged for 500,000 shares of restricted common stock
under Rule 144 of the Securities Act of 1933. The transaction was accounted for
under the purchase method of accounting. V.J.M.A. Roosen is engaged in the
business of the importation and distribution of cookware and high end cutlery.
The separate results of operations of the Company and Wellux Industries, Limited
And Subsidiaries (Wellux) for the years ended June 30, 1999 and June 30, 1998
Are summarized as follows:
[Download Table]
Year ended June 30, 1999
------------------------------------
Company Wellux Combined
------------------------------- --------- ----------- ------------
Revenues $ - $4,109,017 $4,109,017
Net Loss (326,421) 167,364 (159,057)
47
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 4 - ACQUISITIONS (CONTINUED)
-------------------------------------
[Download Table]
Year ended June 30, 1998
------------------------------------
Company Wellux Combined
------------------------------- --------- ----------- ------------
Revenues $ - $ 274,468 $ 274,468
Net Loss (206,727) 29,129 (177,598)
There was no activity in the subsidiary companies prior to the fiscal
year ended June 30, 1998.
NOTE 5 - PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
---------------------------------------------------------------
Property, Equipment and Leasehold Improvements consist of the following:
[Download Table]
June 30,
--------------------------
1999 1998
------------ ------------
Machinery & Plant Equipment $ 215,492 $ 215,896
Office Equipment 73,302 29,869
Leasehold Improvements 32,399 13,557
Motor Vehicles 115,114 6,456
------------ ------------
436,307 265,778
Less Accumulated Depreciation (106,256) (8,860)
------------ ------------
$ 330,051 $ 256,918
============ ============
NOTE 6 - INCOME TAXES
-------------------------
The Company has a net operating loss available carryover of up to 20 years for
Federal purposes. Pursuant to Internal Revenue Code Section 382 and the
regulations thereunder, the amounts of utilizable carryover may be limited as a
result of ownership changes or even eliminated if business continuity
requirements are not met. No carrybacks are available for State purposes while
carryforwards of the loss are permitted for up to five (5) years.
There were no temporary differences allowing no deferred tax liabilities to
arise.
48
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 6 - INCOME TAXES (CONTINUED)
--------------------------------------
Components of Income Tax Expenses are as follows:
[Download Table]
---------------------------------------- ------------ ------------
CURRENT
Federal $ - $ -
State 250 250
------------ ------------
Net Provision/(Benefit) for Income Taxes $ 250 $ 250
============ ============
NOTE 7 - STOCKHOLDERS' EQUITY
---------------------------------
As of June 30, 1999, the Company had 16,096,422 shares issued and outstanding.
Prior to July 1, 1997, the Company had 401,422 shares, as adjusted for reverse
splits, issued and outstanding. During the fiscal years ended June 30, 1999,
1998, and 1997, the Company issued an additional 15,596,000 shares of common
stock.
Shares were issued for cash, services, notes receivable, and corporate
acquisitions during the aforementioned years as follows:
[Download Table]
Shares Issued at June 30,
------------------------------------- Total
1999 1998 1997 by Type
--------- --------- --------- ----------
Cash 2,785,000 2,509,696 550,000 5,844,696
Services 1,350,000 1,000,000 - 2,350,000
Notes Receivable 1,400,000 1,600,304 - 3,000,304
Corporate Acquisition 4,500,000 - - 4,500,000
--------- --------- --------- ----------
Total by Year 10,035,000 5,110,000 550,000 15,695,000
Outstanding Shares
Prior to July 1, 1996 401,422
----------
Total Outstanding Shares 16,096,422
==========
Each share of common stock is entitled to one vote. The stock is currently
traded through the National Quotation Bureau's "pink sheets" under the symbol
BLHG.
49
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
----------------------------------------------
On July 13, 1998, the Company issued 1,000,000 stock purchase warrants to an
Investment banking firm in connection with the sale and promotion of the
Company's stock. Each warrant allows the holder to purchase one share of common
stock at $0.13 per share. The warrants expire on July 13, 2001.
NOTE 8 - COMMITMENTS
-----------------------
Leases
------
The Company entered into an operating lease agreement for office space. The
lease term is one year and was renewed on March 1, 2000.
Future minimum lease payments under the operating lease has a remaining lease
term in excess of one year as of June 30, 1999 are as follows:
Fiscal Year Ending
June 30,
------------------
2000 $ 105,000
2001 85,000
2002 54,000
2003 54,000
2004 27,000
---------
Total $ 325,000
=========
NOTE 9 - RELATED PARTY TRANSACTIONS
During the years ended June 30, 1999 and 1998, various foreign directors of
Wellux Industries, Limited advanced the Company working capital in the amounts
of $613,774 and $391,965, respectively. These amounts due are non-interest
bearing and are due on demand.
50
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 10 - SUBSEQUENT EVENTS
-------------------------------
In September 1999, the Company acquired a 49% (forty-nine percent) interest in
Klick Limited, a Hong Kong Company. The interest was acquired by the issuance
of 2,450,000 shares of Beacon Light Holding Corporation common stock in exchange
for 49% (forty-nine percent) of the outstanding common stock of Klick Limited.
Klick Limited is engaged in the business of household products.
On December 6, 1999, a subpoena to testify before the Grand Jury was issued by
the Federal Bureau of Investigation, Office of the United States Attorney, which
requested all accounting records and tax returns from fiscal and calendar year
1997 through, and including, 1999. All requested documentation has been sent in
compliance with the subpoena.
The Securities and Exchange Commission and the U.S. Postal Inspector are
also conducting a parallel investigation of the Company.
The ultimate purpose and outcome of the investigation is unknown as of the date
of this report.
51
WELLUX INDUSTRIES LIMITED
DIRECTORS REPORT AND ACCOUNTS
FOR THE PERIOD FROM 24TH OCTOBER, 1996
(DATE OF INCORPORATION) TO 30TH JUNE, 1999
CONTENTS
Page
Report of the directors 1 and 2
Auditors' report 3
Consolidated profit and loss account 4
Consolidated balance sheets 5
Balance sheet 6
Consolidated cash flow statement 7
Notes to the accounts 8 to 14
52
WELLUX INDUSTRIES LIMITED
REPORT OF THE DIRECTORS
The directors have pleasure in submitting their first annual report together
with the first audited accounts of the group for the period from 24th October,
1996 (date of incorporation) to 30th June, 1999. The Company commences its
business on 1st May, 1998.
PRINCIPAL ACTIVITY
The principal activity of the company and of the group during the period is
trading of adult products.
RESULTS AND APPROPRIATIONS
The results of the company for the period from 24th October, 1996 (date of
incorporation) to 30th June, 1999 and the state of affairs of the company at
that date are set out on pages 4 to 14. The directors do not recommend the
payment of a dividend in respect of the period ended 30th June, 1999.
FIXED ASSETS
Details of the movements in fixed assets of the company are shown in note 10 to
the accounts.
DONATIONS
During the period, the company has no charitable and other donations.
DIRECTORS
The directors during the period were:
Michael Roger Jarki (appointed on 9th December, 1996 and resigned on 30th
June, 1998)
Johan Barend Bource (appointed on 9th December, 1996 and resigned on 16th
March, 1999)
Ma Yuk King (appointed on 30th June, 1998)
Hans Lodders (appointed on 16th March, 1999)
In accordance with the company's Articles of Association, all existing Directors
shall retire from office and, being eligible, offer themselves for re-election.
INTEREST IN CONTRACTS
No contracts of significance to which the company and its subsidiary was a party
and in which a director had a material interest, whether directly or indirectly,
subsisted at the end of the period or at any time during the period.
At no time during the period was the company and its subsidiary a party to any
arrangements to enable the directors of the company to acquire benefits by means
of the acquisition of shares in or debentures of the company or any other body
corporate.
53
WELLUX INDUSTRIES LIMITED
REPORT OF THE DIRECTORS (CONTINUED)
AUDITORS
During the period, Mssrs. Raymond Ching & Co. are appointed as the auditors of
the company who retire and, being eligible, offer themselves for reappointment.
On behalf of the Board
/s/Hans Lodders
----------------
Wellux Industries Limited
Director
HONG KONG, 25th February, 2000.
54
RAYMOND CHING & CO. CERTIFIED PUBLIC ACCOUNTANTS
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
WELLUX INDUSTRIES LIMITED
-------------------------
(INCORPORATED IN HONG KONG WITH LIMITED LIABILITY)
We have audited the financial statements on pages 4 to 14 which have been
prepared in accordance with accounting principles generally accepted in Hong
Kong.
Respective responsibilities of directors and auditors
----------------------------------------------------------
The Companies Ordinance requires the directors to prepare financial statements
which give a true and fair view. In preparing financial statements which give a
true and fair view it is fundamental that appropriate accounting policies are
selected and applied consistently.
It is our responsibility to form an independent opinion on our audit, on those
statements and to report our opinion to you.
Basis of opinion
------------------
We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Society of Accountants. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to
the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements. We believe that our audit provides a reasonable basis for
our opinion.
Opinion
As explained in note (13), the accountants cover a period in excess permitted by
section 122 of the Companies Ordinance.
In our opinion, the financial statements give a true and fair view, in all
material respects, of the state of affair of the company and the group as at
30th June, 1999 and of its profit and cash flows for the period then ended and,
except for the failure to comply with section 122 of the Companies Ordinance,
have been properly prepared in accordance with the Companies Ordinance.
/s/Raymond Ching & Co
------------------------
Raymond Ching & Co.
Certified Public Accountants
HONG KONG, 25th February, 2000.
Rm 1901, Easey Comm. Bldg., 261 Hennessy Road, Wanchai, Hong Kong
Tel:(852) 2389 3972 Fax:(852) 2877-8963
55
WELLUX INDUSTRIES LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 24TH OCTOBER, 1996
(DATE OF INCORPORATION) TO 30TH JUNE 1999
-----------------------------------------
[Download Table]
Notes HK$
TURNOVER 3 34,010,114
==========
PROFIT BEFORE TAXATION 4 1,680,719
TAXATION 5 156,003
----------
PROFIT AFTER TAXATION AND
BALANCE BROUGHT FORWARD 1,524,710
==========
The notes on pages 8 to 14 form part of these accounts.
56
WELLUX INDUSTRIES LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30TH JUNE, 1999
---------------------
[Download Table]
Notes HK$
FIXED ASSETS 9 2,528,936
----------
CURRENT ASSETS 7 8,649,762
CURRENT LIABILITIES 8 9,643,982
----------
NET CURRENT ASSETS (994,220)
==========
TOTAL NET ASSETS 1,534,716
==========
Represented by:-
Share capital 12 10,000
Profit and loss account 1,524,716
----------
1,534,716
==========
The notes on pages 8 to 14 form part of these accounts.
/s/Hans Lodders /s/Ma Yuk King
---------------- ----------------
Director Director
Date of approval by
Board of directors: 25th February, 2000.
57
WELLUX INDUSTRIES LIMITED
BALANCE SHEET
AS AT 30TH JUNE, 1999
---------------------
[Download Table]
Notes HK$
FIXED ASSETS 10 1,578,163
----------
INVESTMENT IN SUBSIDIARIES 11 6,175,000
----------
CURRENT ASSETS 7 3,196,258
CURRENT LIABILITIES 8 9,212,125
----------
NET CURRENT LIABILITIES (6,015,867)
==========
TOTAL NET ASSETS 1,737,296
==========
Represented by:-
Share capital 12 10,000
Profit and loss account 1,727,296
----------
1,737,296
==========
The notes on pages 8 to 14 form part of these accounts.
/s/Hans Lodders /s/Ma Yuk King
---------------- ----------------
Director Director
Date of approval by
Board of directors: 25th February, 2000.
58
WELLUX INDUSTRIES LIMITED
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE PERIOD ENDED 30TH JUNE, 1999
------------------------------------
[Download Table]
Notes HK$
Net cash (outflow) from
Operating activities 16(a) (4,800,510)
Returns on investments and
Servicing of finance
Investing activities 16(c) (3,352,345)
----------
Net cash (outflow) before
Financing (8,152,855)
Taxation
Financing 16(d) 8,227,686
----------
Cash and cash equivalents at
30th June, 1999 74,831
==========
Analysis of the balance of cash
And cash equivalents
Cash and bank balances 81,276
Bank overdrafts (6,445)
----------
74,831
==========
59
WELLUX INDUSTRIES LIMITED
NOTES TO THE ACCOUNTS
---------------------
1. STATUS OF THE COMPANY
The company was incorporated in Hong Kong under the Companies Ordinance on 24th
October, 1996.
2. PRINCIPAL ACCOUNTING POLICIES
The accounts have been prepared in accordance with generally accepted accounting
principles in Hong Kong and with accounting standards issued by the Hong Kong
Society of Accountants.
(A) BASIS OF CONSOLIDATION
The group accounts comprise the consolidation of the accounts of the company and
all its subsidiaries. All significant transactions between and among the
companies and its subsidiaries are eliminated on consolidation.
Results of the subsidiaries are accounted for by the company on the basis of
dividends received and receivable. The company's interests in subsidiaries are
slated at cost less provision for permanent diminution in value.
(B) DEPRECIATION
Fixed Assets are stated at cost. Depreciation is provided to write of the cost
of fixed assets their estimated useful lives on a straight-line basis at the
annual rates:
Leasehold improvement 20%
Plant and machinery 20%
Motor vehicle 20%
Office equipment 20%
(C) INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost,
calculated on a fist in first out basis, includes cost of purchase, cost of
conversion, and other costs incurred in bringing the stock to their present
location and condition.
Net realizable value is the estimated setting price in the ordinary course of
business less than estimated cost of completion and the estimated cost necessary
to make the sale incurred.
(D) DEFERRED TAXATION
Deferred taxation is accounted for at the current tax rate in respect of timing
differences between profit as computed for taxation purposes and profit as
stated in the accounts to the extent that a liability or asset is expected to
payable or receivable in the foreseeable future.
60
(E) FOREIGN CURRENCY TRANSACTION
Foreign currency transactions during the year are translated into Hong Kong
dollars at the exchange rates ruling at the transaction dates. Monetary assets
and liabilities denominated in foreign currencies at the year end are translated
into Hong Kong dollars at approximately the market rates of exchange ruling at
the balance sheet date.
(F) RECOGNITION OF INCOME
Income from the sale of product is recognized on the transfer of risks and
rewards of ownership which generally coincide with the time of shipment.
(G) SUBSIDIARY COMPANY
A subsidiary is a company in which Wellux Industries Limited, directly or
indirectly, controls more than half of the voting power or issued share capital
or controls the composition of the board of directors.
3. TURNOVER
Turnover represents sales proceeds from selling of adult products during the
period.
4. PROFIT BEFORE TAXATION
[Download Table]
Group Company
HK$ HK$
Profit before taxation has been
Arrived at after charging:
Auditors' remuneration 32,000 32,000
Depreciation 343,098 180,311
Preliminary expenses - 12,860
======= =======
5. TAXATION
Hong Kong Profits Tax has been provided at 16% on the estimated assessable
profit of the company during the period.
No provision has been made for deferred taxation as, in the opinion of the
directors, the timing differences are so remote and the liability will not be
crystallized in the foreseeable future.
6. DIRECTORS' REMUNERATION
Directors' remuneration disclosed pursuant to section 161 of the Companies
Ordinance is as follows:
[Download Table]
Group Company
HK$ HK$
Fees 276,387 276,387
Other emoluments Nil Nil
======= =======
61
7. CURRENT ASSETS
[Download Table]
Group Company
HK$ HK$
Accounts receivable 3,796,208 1,972,214
Cash and bank balance 81,276 1,511
Inventories 4,516,538 983,433
Prepayment 151,746 151,746
Utility deposits 103,994 87,354
--------- ---------
8,649,762 3,196,258
========= =========
8. CURRENT LIABILITIES
[Download Table]
Group Company
HK$ HK$
Accounts payable 1,231,848 846,436
Accruals 32,000 32,000
Amount due to directors 4,752,648 4,752,648
Amount due to holding company 3,465,038 3,465,038
Bank overdraft 6,445 -
Provision for taxation 156,003 156,003
--------- ---------
9,643,982 9,212,125
========= =========
9. FIXED ASSETS-GROUP
[Download Table]
Leasehold Plant Motor Office
improvement machinery vehicle equipment Total
HK$ HK$ HK$ HK$ HK$
Cost
Additions and
at 30/6/99 251,400 1,672,134 893,235 535,576 3,352,345
Accumulated
Depreciation
Charges for the
Period 53,780 390,165 264,638 114,826 823,409
------- --------- ------- ------- ---------
Net book value
At 30/6/99 197,620 1,281,969 628,597 420,750 2,528,936
======= ========= ======= ======= =========
62
10. FIXED ASSETS-COMPANY
[Download Table]
Leasehold Plant Motor Office
improvement machinery vehicle equipment Total
HK$ HK$ HK$ HK$ HK$
Cost
Additions and
at 30/6/99 105,000 1,672,134 50,000 231,340 2,056,474
Accumulated
Depreciation
Charges for the
Period 24,500 390,165 11,667 53,979 480,311
------- --------- ------- ------- ---------
Net book value
At 30/6/99 80,500 1,281,969 38,333 177,361 1,578,163
======= ========= ======= ======= =========
11. INVESTMENT IN SUBSIDIARY COMPANIES
[Download Table]
Place of Shareholding Principal Unquoted shares
Incorporation at 30/6/99 activities at cost
HK$
\
Wellux Holland B.V. Holland 100% Adult Plastic 2,910,000
Products
V.J.M.A. Roosen Holland 100% Household 3,255,000
Products
---------
6,175,000
=========
The investment in V.J.M.A. Roosen was by issuing of 500,000 common shares of
Beacon Light Holding Corporation to acquire the 100% shareholding from the
owners on 10th June, 1999. At the completion date of the acquisition, the stock
price of Beacon Light Holding Corporation was US$0.84 and the total
consideration would be US$420,000 (i.e. HK$3,255,000).
12. SHARE CAPITAL
HK$
Authorized, issued and fully paid:
10,000 ordinary shares of HK$1.00 each 10,000
======
On incorporation, 2 ordinary shares were issued at par value to the subscribers
of the company to provide initial working capital for the company.
63
13. ACCOUNTING PERIOD
The accounts cover a period of 33 months since incorporation on 24th October,
1996 which is in excess of that permitted by section 122 of the Companies
Ordinance.
14. DIVIDEND INCOME FROM SUBSIDIARIES
HK$
Wellux Holland B.V. 705,895
V.J.M.A. Roosen 550,791
---------
1,256,686
=========
15. ULTIMATE HOLDING COMPANY
The ultimate holding company is Beacon Light Holding Corporation which was
incorporated in Nevada, USA.
16. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES.
HK$
Operating profit before
Taxation and interest 1,680,719
Depreciation 823,409
(Increase) in accounts receivable (3,796,208)
(Increase) in inventories (4,516,538)
(Increase) in prepayment (151,746)
(Increase) in utility deposits (103,994)
Increase in accounts payable 1,231,848
Increase in accruals 32,000
----------
Net cash outflow from
Operating activities (4,800,510)
==========
(B) ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR.
Amount Amount
due to due to
directors holding
HK$ HK$
Cash inflow from financing 4,752,648 3,465,038
--------- ---------
Balance at 30/6/1999 4,752,648 3,465,038
========= =========
64
(C) INVESTING ACTIVITIES.
HK$
Purchase of fixed assets (3,352,345)
----------
Net cash (outflow) from
Investing activities (3,352,345)
==========
16. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(d) Financing.
HK$
Amount advanced from directors 4,752,648
Amount advanced from holding company 3,465,038
Amount from shares issued 10,000
----------
Net cash inflow from financing 8,227,686
==========
65
WELLUX INDUSTRIES LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 24TH OCTOBER, 1996
(DATE OF INCORPORATION) TO 30TH JUNE 1999
-----------------------------------------
(FOR MANAGEMENT PURPOSES ONLY)
[Download Table]
HK$
Sales 20,168,853
----------
Less: Cost of sales
Purchases 13,350,980
Less: Closing stock 983,433
----------
12,367,547
==========
Gross profit 7,801,306
Dividend income 1,256,686
----------
9,057,992
Less: General and administrative expenses 7,174,693
----------
1,883,299
==========
66
[Download Table]
HK$
GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------
Advertising 1,090,179
Auditors' remuneration 32,000
Bank charges and interest 31,036
Building management fee 14,196
Business registration fee 4,500
Cleaning 16,600
Commission to estate agents 9,145
Commission to salesmen 538,529
Computer expenses 6,183
Courier 19,958
Declaration 2,376
Depreciation 480,311
Director's emolument 276,387
Electricity and water 156,639
Entertainment 203,645
Freight 428,932
Insurance 7,125
Legal fee 38,113
Marketing expenses 500,508
Motor vehicle expenses 46,674
Oversea traveling 284,835
Packing materials 722,112
Postage 32,365
Preliminary expenses 12,860
Printing and stationary 18,140
Rent and rates 683,494
Repair and maintenance 9,017
Salaries and allowance 1,394,703
Secretarial fee 7,000
Sundry expenses 24,956
Telecommunication 11,516
Translation 2,411
Transportation 21,933
Traveling 15,984
---------
7,174,693
=========
67
Semi-Annual Financial Statements
Beacon Light Holding Corporation
As of December 31, 1999
-UNAUDITED-
Prepared by Management
PAGE
TABLE OF CONTENTS 1
FINANCIAL STATEMENTS
Balance Sheets 2-3
Statement of Operations 4
Statements of Stockholders' Equity 5-6
Statement of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-17
68
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
[Download Table]
DEC. 31, DEC. 31,
1999 1998
------------ -----------
ASSETS
CURRENT ASSETS
Cash $ 39,921 $ 55,896
Accounts Receivable 765,625 358,198
Inventories 656,344 409,486
Prepaid Expenses 21,724 41,394
Investments 100,000 -
------------ -----------
TOTAL CURRENT ASSETS 1,581,614 862,974
FIXED ASSETS
Property, Equipment & Leasehold Improvements
Less Accumulated Depreciation & Amortization 372,326 274,403
------------ -----------
TOTAL FIXED ASSETS 372,326 274,403
OTHER ASSETS
Deposits 14,602 13,427
------------ -----------
TOTAL OTHER ASSETS 14,602 13,427
------------ -----------
TOTAL ASSETS $ 1,970,542 $1,152,804
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts Payable $ 716,742 $ 503,734
Accrued Liabilities 25,672 2,379
Amount Due Foreign Directors 613,775 614,924
Income Taxes Payable 375 375
Stock Subscription Payable - 69,865
------------ -----------
TOTAL CURRENT LIABILITIES 1,356,564 1,191,277
Stockholders' Equity
Common Stock, $.001 Par Value, 16,904 6,861
45,000,000 Shares Authorized
16,103,922 Shares Issued and Outstanding
(6,861,422 Shares in 1998)
Additional Paid-in Capital on Common 894,101 415,267
Preferred Stock, $0.001 Par Value 767 -
5,000,000 Shares Authorized
766,667 Shares Issued and Outstanding
Additional Paid-in Capital on Pfd. 109,233 -
Accumulated Deficit (407,027) (460,601)
------------ -----------
Total Stockholders' Equity 613,978 (38,473)
------------ -----------
Total Liabilities and Stockholders' Equity $ 1,970,542 $1,152,804
============ ===========
The accompanying notes are an integral part of these financial statements.
69
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND 1998
(in United States dollars)
(UNAUDITED)
[Download Table]
DEC. 31, DEC. 31,
1999 1998
------------ -----------
Gross Sales $ 1,986,360 $ 1,907,182
Cost of Goods Sold 1,161,068 1,169,609
------------ -----------
Gross Profit 825,292 737,573
General & Administrative Expenses 895,540 900,451
------------ -----------
Income/(Loss) from Operations (70,218) (162,878)
Other Income/(Expenses) (120,000)
------------ -----------
Net Income Before Taxes (70,218) (282,878)
Provision for Income Taxes 125 125
------------ -----------
Net Income/(Loss) $ (70,373) $ (283,003)
============ ===========
Net Income/(Loss) per common Share - Basic (.004) (.04)
============ ===========
Weighted Average Shares Outstanding - Basic 16,566,735 6,796,205
============ ===========
Net Income/(Loss) per common Share - Diluted (.004) (.04)
============ ===========
Weighted Average Shares Outstanding - Diluted 17,566,735 7,796,205
============ ===========
The accompanying notes are an integral part of these financial statements.
70
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND
YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
(UNAUDITED)
(begin 8pt type)
[Enlarge/Download Table]
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
Balance at
June 30, 1996 4,015,936 $ 401,393 $ - $ - $ (412,290) $ (10,897)
Stock Issued on
04/08/97 5,500,000 550,000 (495,000) - - 55,000
Change in Par Value
From $.01 per Share
to $.001 per Share
- 06/16/97 (941,980) 495,000 446,980 - - -
Reverse Stock Split
on One for Ten
Basis - 06/16/97 (8,563,514) (8,462) 8,462 - -
Net Income/(Loss) (5,245) (5,245)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1997 951,422 $ 951 $ - $ 455,442 $ (417,535) $ 38,858
Stock Issued on
09/30/97 for Cash 800,000 8,000 - 4,000 - 12,000
Stock Issued on
09/30/97 for
Services 1,000,000 10,000 (10,000) - - -
Reorganization - Idaho
Shares Retired and
Company Dissolved
02/16/98 (2,751,422) (18,951) 10,000 (459,422) 417,535 (50,858)
Reorganization -
Nevada Formed
Shares issued
On 2/16/98 2,751,422 2,751 - 48,107 - 50,858
Stock Issued on
02/18/98 for Cash/Notes 600,000 600 - 59,400 - 60,000
Less Notes Received - - - (35,064) - (35,064)
Stock Issued
on 04/30/98
for Cash/Notes 400,000 400 - 39,600 - 40,000
Less Notes Received - - - (17,500) - (17,500)
Stock Issued on
05/18/98 for Cash/Notes 1,000,000 1,000 - 249,000 - 250,000
Less Notes Received - - - (16,166) - (16,166)
Stock Issued on
05/22/98 for Cash 100,000 100 - 24,900 - 25,000
Stock Issued
on 05/27/98 for Cash 1,210,000 1,210 - 301,290 - 302,500
Less Notes Received - - - (252,500) - (252,500)
Net Income/(Loss) - - - - (177,598) (177,598)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
----------- ---------- ------------ ----------- ----------- -----------
(end 8pt type)
See accompanying notes and independent auditors' report
71
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND
YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
(UNAUDITED)
(begin 8pt type)
[Enlarge/Download Table]
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
Stock Issued on
07/16/98 for
Services 800,000 800 - (800) - -
Cash Recd. For Stock
Issued on 09/30/97 - - - 15,000 - 15,000
Stock Issued on
02/17/99 for Cash 785,000 785 - 69,865 - 70,650
Stock Issued on
05/10/99 for Services 550,000 550 - (550) - -
Stock Issued on
05/18/99 for Cash 2,000,000 2,000 - 128,000 - 130,000
Stock Issued on
05/18/99 for Notes
Receivable 1,100,000 1,100 - (1,000) - -
Stock Issued on
02/17/99 for Wellux 4,000,000 4,000 - 4,000 - -
Stock Issued on
02/17/99 for Roosen 500,000 500 - 500 - -
Stock Issued on
02/17/99
for Notes Receivable 300,000 300 - (300) - -
Net Income/(Loss) - - - - (159,057) (159,057)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1999 16,096,422 $ 16,096 $ - $ 611,182 $ (336,655) $ (290,623)
Stock Issued on
08/30/99 for
settlement of suit
against Company's
President 7,500 8 - (8) - -
Cash Recd. For Stock
Issued on 05/18/99 (1) - - - 83,742 - 83,742
Cash Recd. For Stock
Issued on 09/16/99 800,000 800 - 199,185 - 199,985
Net Income/(Loss) (70,373) (70,373)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
December 31, 1999 16,903,922 $ 16,904 $ - $ 894,101 $ (407,028) $ (77,269)
=========== =========== ============ ============ ============ ===========
Preferred Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ---------- -----------
Balance, at
June 30, 1999 0 $ 0 $ - $ 0 $ 0 $ 0
Stock Issued on
11/22/99 for Cash 766,667 767 - 109,233 - 110,000
----------- ---------- ------------ ----------- ---------- -----------
Balance, at
December 31, 1999 766,667 $ 767 $ - $ 109,233 $ 0 $ 110,000
=========== ========== ============ =========== =========== ===========
(end 8pt type)
See accompanying notes and independent auditors' report
72
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
[Download Table]
DEC. 31, DEC. 31,
1999 1998
------------ -----------
CASH FLOWS PROVIDED BY/(USED IN)
OPERATING ACTIVITIES:
Net Income/(Loss) $ (70,373) $(283,003)
Non-Cash Items Included in Net Income:
Depreciation 46,508 47,047
Change in Prepaids (1,393) (41,394)
Change in Accounts Receivable (276,398) (340,367)
Change in Inventory (74,286) (276,470)
Change in Deposits (1,200) (12,946)
Change in Accrued Liabilities (18,666) 2,269
Change in Accounts Payable 94,265 443,822
Change in Income Tax Payable (125) 125
Change in Amounts Due Foreign Directors 1 222,959
------------ -----------
Net Cash Provided by/(Used in)
Operating Activities $ (301,666) $ (237,958)
Cash Flows Used In Investing Activities
Purchase of Property, Equipment &
Leasehold Improvements $ (88,783) (64,532)
------------ -----------
Net Cash Used For
investing Activities $ (88,783) (64,532)
Cash Flows from Financing Activities
Issuance of Preferred Stock $ 110,000 -
Stock Subscription Payable 69,865
Issuance of Common Stock 283,727 15,000
------------ -----------
Net Cash Provided by
Financing Activities $ 393,727 $ 84,865
Net Change In Cash 3,278 (217,625)
Cash At Beginning Of The Year 36,643 273,521
------------ -----------
Cash At End Of The Year $ 39,921 $ 55,896
============ ===========
Supplemental Cash Flow Information:
Interest Paid $ - $ -
============ ===========
Income Taxes Paid $ 250 $ -
============ ===========
The accompanying notes are an integral part of these financial statements.
73
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
--------------------------------------------------------
The Company headquartered in Hartford, Connecticut, consists of two divisions,
both of whom are based in Hong Kong. Their first division is Wellux Industries
Limited, a Hong Kong corporation, which sources, designs and manufactures adult
products made from various forms of plastics, lingerie and leather goods. In
Europe, Wellux products are sold and distributed by Wellux B.V., a Dutch
company, located in Holland. This company is a wholly owned subsidiary of
Wellux Industries Limited. Wellux BV also owns VJMA Roosen, a Dutch Company,
specializing in product design, development, packaging and marketing of quality
cookware and high end cutlery. Their second division is a 49% interest in Klick
Ltd., a Hong Kong Corporation, which sources, designs and manufactures high
quality plastic household products, as well as household electronic, cutlery and
cookware products and sells and distributes these products in Europe and Asia.
The Company was originally incorporated in the State of Idaho on April 16, 1953.
In November 18, 1997, the Company formed a subsidiary with the same name in the
State of Nevada. On February 18, 1998, the Company merged its Idaho corporation
into its Nevada corporation (see Note 3).
The Company serves as a holding company for its core and subsidiaries'
operations. Reference herein to the Company include the Company and its
subsidiaries, unless the context otherwise requires.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------
Principal of Consolidation
----------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned Hong Kong subsidiary, Wellux Industries Limited and
Subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation. The Company does not consolidate its 49% interest in Klick
Ltd., bur was accounts for it under the equity method of accounting.
Accounting Method
------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Recent Accounting Pronouncements
----------------------------------
The Financial Accounting Standards Board has issued certain pronouncements that
are effective as indicated below with respect to the fiscal years presented in
the consolidated financial statements.
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
74
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------
for earlier periods provided for comparative purposes is required. This
statement establishes guidelines for the reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. It requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displays with
the same prominence as other financial statements; it does not address issues of
recognition of measurement. The primary element of comprehensive income
applicable the Company is the foreign currency cumulative transaction
adjustment. The adoption of SFAS No. 130 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial for earlier periods provided for comparative
purposes is required. This statement establishes guidelines for the way the
public business enterprises report information about operating segments in
financial statements. This statement also establishes guidelines for related
disclosures about products and services, geographic areas and major customers.
The Company has evaluated the disclosure requirements of SFAS No. 131 and
believes the adoption will not have a material impact on its future disclosure
requirements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required. This statement revises employers' disclosures about pension and
other post-retirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminate certain
disclosures that are no longer useful. The statement suggests combined formats
for presentation of pension and other post-retirement benefit disclosures. The
Company has evaluated the disclosure requirements of SFAS No. 132 and believes
the adoption will have no impact on its results of operations and financial
position.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is
effective for fiscal years beginning after June 15, 1999. Restatement of
disclosures for earlier periods for comparative purposes is required. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company has
evaluated the disclosure requirements of SFAS No. 133 and believes that
implementation of the new standard will have no impact on its results of
operations and financial position.
75
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sales by a Mortgage Banking
Enterprise" is effective for This statement amends SFAS 65, "Accounting for
Certain Mortgage Banking Activities" and requires that after the securitization
of mortgage loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold these
investments. This statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a non-mortgage banking enterprise.
The Company has evaluated the disclosure requirements of SFAS No. 134 and
believes that implementation of the new standard will have no impact on its
results of operations and financial position.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical Correction" is
effective for fiscal years ending after February 15, 1999. Issued in February,
1999, this statement rescinds FASB Statement No. 75 "Deferral of the Effective
Date of Certain Accounting Requirements for Pension Plans of State and Local
Governmental Units." GASB Statement No. 25, "Financial reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans," was
issued November 1994, and establishes financial reporting standards for defined
benefit pension plans and for the notes to the financial statements of defined
contribution plans of state and local government entities. Statement 75 is,
therefore, no longer needed. This Statement also amends FASB Statement No. 35,
"Accounting and Reporting by Defined Benefit Pension Plan," to exclude from its
scope plans that are sponsored by and provide benefits for the employees of one
or more state and local government units. The Company has evaluated the
disclosure requirements of SFAS No. 135 and believes the adoption will have no
impact on its results of operations and financial position.
Foreign Currency Transactions
-------------------------------
Foreign currency transactions during the year are translated into United States
dollars at the exchange rates prevailing at the transaction dates. Monetary
assets are liabilities denominated in foreign currencies at year end are
translated into United States dollars at approximately the market rates of
exchange prevailing at the balance sheet date.
Gains and Losses on exchange are shown in the Statement of Operations within the
General & Administrative Expenses section.
76
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------
Cash and Cash Equivalents
----------------------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Income Taxes
-------------
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates.
Inventories
-----------
Inventories are stated at the lower of cost or market. Inventory cost is
determined using the first-in, first-out (FIFO) method and includes raw
materials, packaging, labor, and overhead. Market is based on net realizable
value.
Office Furniture and Equipment
---------------------------------
Office furniture and equipment are stated at cost. Major renewals and
betterments are capitalized to the asset accounts while the cost of maintenance
and repairs is charged against income as incurred. At the time assets are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is credited
to or charged against income. Depreciation for financial reporting purposes is
calculated by the straight-line method over the estimated useful lives of the
assets. The Modified Accelerated Cost Recovery System (MACRS) method is used
for income tax purposes.
Net Income/(Loss) Per Share
------------------------------
Net loss per share is computed based on the weighted average number of shares of
common stock outstanding.
77
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------
Use of Estimates
------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the 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.
NOTE 3 - REORGANIZATION
--------------------------
In February 1998, the company reorganized as a Nevada Corporation. Beacon Light
Mining Company, an Idaho Corporation ("Beacon Light - Idaho") merged into its
wholly owned subsidiary Beacon Light Mining Company, a Nevada Corporation
("Beacon Light - Nevada"), which became the surviving corporation. Prior to the
merger, Beacon Light - Idaho had 2,751,422 shares issued and outstanding and
Beacon Light - Nevada had 1 share issued and outstanding that was owned by
Beacon Light - Idaho. After the merger the 2, 751,422 common shares in Beacon
Light - Idaho were converted to 2,751,422 common shares in Beacon Light -
Nevada. The 1 share in Beacon Light - Nevada owned by Beacon Light - Idaho was
cancelled and returned to the status of un-issued. Thereafter, the Company
changed its name to Beacon Light Holding Corporation.
In connection with the merger, all assets and liabilities of Beacon Light -
Idaho were assumed by Beacon Light - Nevada and all assets and liabilities of
the Idaho and Nevada Corporations were combined at their historical amounts in a
manner similar to that in pooling of interests accounting. Additionally, prior
accumulated deficit was netted with additional paid-in- capital in conjunction
with a charge in par value of the common stock to effectuate the transfer of
$50,858 in equity.
NOTE 4 - ACQUISITIONS
------------------------
In September 1999, Wellux Industries Ltd. the Company's wholly owned subsidiary,
established a new company in joint venture with the publishing group Dimensions
Holding Asia Ltd. called Kiss Mailorder ltd. Under the joint venture
agreement, Wellux holds a fifty percent interest in Kiss Mailorder, which will
be the printed media, mail-order arm of Wellux Industries for the direct
marketing of Wellux's products.
78
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 4 - ACQUISITIONS (CONTINUED)
-------------------------------------
In September 1999, the Company acquired a forty-nine percent ownership interest
in Klick Ltd., a Hong Kong Corporation, for a soon to be issued two million four
hundred fifty thousand newly issued Rule 144 common shares of Beacon Light
Holding Corporation. The Company acquired its forty-nine percent ownership
interest in Klick Ltd., thirty percent from Ma Yuk King a Hong Kong resident,
fifteen percent from Drilford Ltd. a Hong Kong Corporation, and four percent
from KB Group, a British Virgin Island Corporation that owns the remaining
fifty-one percent interest. Klick Ltd. located in Hong Kong, does source, design
and manufacture high quality plastic household products, as well as household
electronic, cutlery, and cookware products. Klick's clients consist of
wholesalers, importers, distributors, department stores, retail chains and
direct marketing companies in Europe and Asia. The Company has have an option
until September 16, 2000 to purchase the remaining fifty-one percent interest in
Klick from the KB Group. The transaction was accounted for under the equity
method of accounting.
NOTE 5 - INCOME TAXES
-------------------------
The Company has a net operating loss available carryover of up to 20 years for
Federal purposes. Pursuant to Internal Revenue Code Section 382 and the
regulations thereunder, the amounts of utilizable carryover may be limited as a
rsult of ownership changes or even eliminated if business continuity
requirements are not met. No carrybacks are available for State purposes while
carryforwards of the loss are permitted for up to five (5) years.
There were no temporary differences allowing no deferred tax liabilities to
arise.
Components of Income Tax Expenses are as follows:
[Download Table]
December 31,
-------------------------
1999 1998
---------- ----------
CURRENT
Federal $ - $ -
State 62.50 62.50
---------- ----------
Net Provision/(Benefit) for Income Taxes $ 62.50 $ 62.50
========== ==========
79
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 6 - STOCKHOLDERS' EQUITY
---------------------------------
As of December 31, 1999, the Company had 16,903,922 shares issued and
outstanding. Prior to July 1, 1997, the Company had 401,422 shares, as adjusted
for reverse splits, issued and outstanding. During the quarter ended September
30, 1999 and fiscal years ended June 30, 1999, 1998, and 1997, the Company
issued an additional 16,502,500 shares of common stock.
Shares were issued for cash, services, notes receivable, and corporate
acquisitions during the aforementioned years as follows:
[Download Table]
Shares Issued at
---------------------------------------------------
Dec. 31, June 30, June 30, June 30, Total
1999 1999 1998 1997 by Type
--------- --------- --------- --------- ----------
Cash 800,000 2,785,000 2,509,696 550,000 6,644,696
Services - 1,350,000 1,000,000 - 2,350,000
Notes Receivable - 1,400,000 1,600,304 - 3,000,304
Corporate
Acquisition - 4,500,000 - - 4,500,000
Legal Settlement 7,500 - - - 7,500
--------- --------- --------- --------- ----------
Total by
Quarter/Year 807,500 10,035,000 5,110,000 550,000 16,502,500
Outstanding Shares
Prior to July 1, 1996 401,422
----------
Total Outstanding
Shares 16,903,922
==========
Each share of common stock is entitled to one vote. The stock is currently
traded through the National Quotation Bureau's "pink sheets" under the symbol
BLHG.
On July 13, 1998, the Company issued 1,000,000 stock purchase warrants to an
investment banking firm in connection with the sale and promotion of the
Company's stock. Each warrant allows the holder to purchase one share of common
stock at $0.13 per share. The warrants expire on July 13, 2001.
80
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 7 - COMMITMENTS
-----------------------
Leases
------
The Company entered into an operating lease agreement for office space. The
lease term is one year and was renewed on March 1, 2000.
Future minimum lease payments under the operating lease has a remaining lease
term in excess of one year as of December 31, 1999 are as follows:
Six Months Ending
December 31,
------------------
2000 $ 105,000
2001 85,000
2002 54,000
2003 54,000
2004 27,000
---------
$ 325,000
=========
NOTE 8 - FOREIGN CURRENCY TRANSACTION
----------------------------------------
Foreign currency transactions during the six months ended December 31, 1999
and 1998 are translated into United States dollars at the exchange rates ruling
at the translation dates. Monetary assets and liabilities denominated in foreign
currencies at the year end are translated into United States dollars at
approximately the market rates of exchange ruling at the balance sheet rate. For
six months ended December 31, 1999 the Company used 7.7596 and for six months
ended December 31, 1998 the Company used 7.7451 as the exchange rate between
Hong Kong Dollars and United States Dollars.
NOTE 9 - RESULTS OF OPERATIONS
---------------------------------
The separate results of the Company and Wellux Industries Limited and
Subsidiaries(Wellux BV) for the six months ended December 31, 1998 and December
31, 1999 are summarized as follows:
[Enlarge/Download Table]
Six Months Ended Six Months Ended
December 31, 1999 December 31, 1998
---------------------------------- ----------------------------------
Company Wellux Combined Company Wellux Combined
---------------- ---------- ---------- ---------- ---------- ---------- ----------
Sales Revenues $ - $1,986,360 $1,986,360 $ - $1,907,182 $1,907,182
Net Income/(Loss) (115,357) 44,859 (70,498) (287,853) 4,850 (283,003)
81
PART III
ITEM 1. INDEX TO EXHIBITS.
---------- -----------------------------
EXHIBIT NO. DESCRIPTION OF DOCUMENT
EX-3.1 Articles of Incorporation - Idaho
EX-3.1(i) Amendment to Articles of Incorporation
EX-3.1(ii) Articles of Incorporation - Nevada
EX-3.1(iii) Plan and Agreement of Merger
EX-3.1(iv) Amendment to Articles of Incorporation
EX-3.1(v) Amendment to Articles of Incorporation
EX-3.2 By-Laws
EX-3.2(i) Amendment to By-Laws
EX-4.1 Form of Common Stock Certificate
EX-4.1(i) Certificate of Designation
EX-10.1 Stock Option Plan
EX-10.2 Employment Agreement of Jerry Gruenbaum
EX-10.3 Employment Agreement of Hans Lodders
EX-10.4 Employment Agreement of Ronald Steenbergen
EX-10.5 Acquisition Agreement of Casin Magnetic Manufactory
EX-10.6 Acquisition Agreement of Wellux Industries Ltd.
EX-10.7 Acquisition Agreement of Klick Ltd.
EX-10.8 Letter of Intent - Hongtex Hong Kong
EX-21.1 List of Subsidiaries of the registrant
EX-23.1 Consent of Hoffski & Pisano, CPA
EX-23.1(i) Consent of Raymond Ching & Co., CPA
EX-27.1 Financial Data Schedule
ITEM 2. DESCRIPTION OF EXHIBITS.
Not Applicable
SIGNATURE
---------
In accordance with Section 12 of the Securities and Exchange Act of 10934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
BEACON LIGHT HOLDING CORPORATION
Date: March 10, 2000 By: /s/ Jerry Gruenbaum
----------------------------------------------
Jerry Gruenbaum, President
82
Dates Referenced Herein
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