Filed On 9/27/06 11:12am ET · SEC File 0-30237 · Accession Number 1328759-6-99
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
9/27/06 Victor Industries Inc PRER14A 1:125 Law Of..D/Huettel/ESQ/FA
Revised Preliminary Proxy Solicitation Material · Schedule 14A
Filing Table of Contents
Document/Exhibit Description Pages Size
1: PRER14A Vici Revised 14a No. 2 HTML 582K
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UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE
14A
(Rule 14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. 2)
Check
the
appropriate box:
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þ
Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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o
Definitive
Proxy Statement
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o
Definitive
Additional Materials
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o
Soliciting
Material under Rule 14a-12
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VICTOR
INDUSTRIES, INC.
(Name
of
Registrant as Specified in its Charter)
NOT
APPLICABLE
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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o
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Fee
paid previously with preliminary
materials:
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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VICTOR
INDUSTRIES, INC.
180
S.W. Higgins Avenue
To
Our
Stockholders:
You
are
cordially invited to attend the Annual Meeting of Stockholders (the “Meeting”)
of Victor Industries, Inc. to be held on _________________ at 10:00 a.m., local
time, at the Company’s Headquarters located at 180 S.W. Higgins Avenue,
Missoula, MT 59803.
The
Notice of Annual Meeting and the Proxy Statement that follow describe the
business to be considered and acted upon by stockholders of the Company at
the
Meeting. Please carefully review the information contained in the Proxy
Statement.
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS VERY IMPORTANT THAT YOU MARK,
SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AT THAT TIME
BY REQUESTING THE RIGHT TO VOTE IN PERSON.
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Sincerely,
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Lana
Pope
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Chief
Executive Officer
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NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON [], 2006
PLEASE
TAKE NOTICE that the Annual Meeting of Stockholders (the “Meeting” or “Annual
Meeting”) of Victor Industries, Inc. (the “Company”) will be held on
_____________________ at 10:00 a.m., local time, at the Company’s Headquarters
located at 180 S.W. Higgins Avenue, Missoula, MT 59803, for the following
purposes:
At
the
Annual Meeting the following items shall be considered and voted upon:
| 1. |
the
appointment of Lana Pope and David Boulter as Directors of the Company
for
the term of one year or until their successors are duly appointed;
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| 3. |
the
filing of a Certificate of Amendment with the Secretary of State
of Idaho
in order to effect a reverse stock split of the Company’s issued and
outstanding common stock, a range from one new share for one hundred
(1:500) to one new share for one thousand currently issued and outstanding
shares (1:1200) of the Company’s common
stock;
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to
consider and vote upon the merger of the Company with and into its
wholly-owned Nevada subsidiary, Victor Nevada, Inc.,
for the sole purpose of changing the Company’s State of
domicile;
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the
approval and ratification an Acquisition Agreement & Plan of
Reorganization whereby the Company shall acquire all of the issues
and
outstanding shares of common stock of Ethos Environmental, Inc.,
a Nevada
corporation solely for shares of the Company’s post-reverse split Common
Stock;
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the
approval and ratification of the proposed sale of the Company’s
wholly-owned subsidiary New Wave Media, a Nevada corporation;
and,
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to
transact such other business as may properly come before the annual
meeting.
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Only
stockholders of record at the close of business on March 31, 2006 (the
“Shareholders”) will be entitled to notice of, and to vote at, the Annual
Meeting, and any adjournments or postponements thereof. The stock transfer
books
of the Company will remain open between the record date and the date of the
Annual Meeting, and any adjournments or postponements thereof. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection at the Annual Meeting, and any adjournments or postponements thereof.
All
stockholders are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend the Annual Meeting in person, your vote is
important. To assure your representation at the Annual Meeting, please sign
and
date the enclosed Proxy Card and return it promptly in the enclosed envelope,
which requires no additional postage if mailed in the United States or Canada.
Should you receive more than one Proxy Card because your shares are registered
in different names and addresses, each Proxy Card should be signed and returned
to assure that all your shares will be voted. You may revoke your proxy in
the
manner described in the Proxy Statement at any time prior to it being voted
at
the Annual Meeting. If you attend the Annual Meeting and vote by ballot, your
proxy will be revoked automatically and only your vote at the Annual Meeting
will be counted. These Proxy materials will be mailed on or about [], 2006
to
all stockholders of record at March 31, 2006.
By
Order
of the Board of Directors
Lana
Pope
CEO
YOUR
VOTE
IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE READ
THE
ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
PROXY
STATEMENT
SUMMARY
TERM SHEET
This
summary highlights the material information from Proposal 5 contained in this
document (the”Merger Proposal”). This summary may not contain all of the
information that is important to you and should be read together with the more
detailed information contained elsewhere in this proxy statement and in the
Exhibits to this proxy statement, including the Agreement and Plan of Merger
(the “APR Merger”) attached to this Proxy statement as Exhibit F. You should
read this entire proxy statement, its Exhibits and all documents that have
been
incorporated by reference before executing your proxy. Section
references are included below to direct you to a more complete description
of
the topics
The
following summarizes the principal terms of Proposal 5 and the APR Merger of
Victor Industries, Inc., an Idaho corporation (“VICI”) with Ethos Environmental,
Inc., a Nevada corporation ("ETHOS").
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You
are being asked to approve all necessary proposals (the “Necessary
Proposals”) needed to implement the merger set forth in Merger Proposal.
The Necessary Proposals are:
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first,
the filing of a Certificate of Amendment with the Secretary of State
of
Idaho in order to effect a reverse stock split of the Company’s issued and
outstanding common stock, a range from one new share for one hundred
(1:500) to one new share for one thousand currently issued and outstanding
shares (1:1200) of the Company’s common stock; See “Proposal 3, page PRE
14A - 9”)
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second,
that VICI merge into its wholly owned subsidiary Victor Industries,
Inc. a
Nevada corporation ("VICI Nevada") for the sole purpose of redomiciling
under the laws of the State of Nevada. See (Proposal 4, page PRE
14A -
10); and
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third,
that following the redomicile to the state of Nevada, VICI Nevada
will
merge with ETHOS. VICI Nevada will be the surviving corporation.
See
(Proposal 5, page PRE 14A - 11)
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An
annual meeting of the shareholders of the Company will be held on
[ ], at
the [ ], at [ ] local time, to consider and vote upon several proposals.
The proposals contained in this Proxy statement that are unrelated
to the
Merger Proposal are:
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first,
the appointment of Lana Pope and David Boulter as Directors of the
Company
for the term of one year or until their successors are duly appointed;
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third,
the approval and ratification of the proposed sale of the Company’s
wholly-owned subsidiary New Wave Media, a Nevada
corporation.
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You
are entitled to vote at the annual meeting if you owned shares of
VICI
common stock at the close of business on March 31, 2006, which is
the
record date for the annual meeting. You will have one vote at the
annual
meeting for each share of VICI common stock you owned at the close
of
business on the record date. On the record date, there were 500,177,953
shares of our common stock outstanding and entitled to be voted at
the
annual meeting. The approval and adoption of the APR Merger agreement
requires the affirmative vote of a majority of the votes cast, either
in
person or by proxy, at the annual meeting. See "Notice of Annual
Meeting
of Stockholders" page PRE 14A - 3.
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Under
the terms of the APR Merger, VICI Nevada will acquire all issued
and
outstanding shares of Ethos in exchange for 17,718,187 shares of
the post
reverse split common stock of VICI Nevada. The 17,718,187 Shares
of VICI
Nevada common stock represents an estimated 97% of the total issued
and
outstanding post reverse split shares. Unless otherwise indicated,
this
proxy statement assumes that 17,718,187 VICI Nevada common shares
will be
issued in conjunction with the APR Merger. See (“Merger Consideration",
page PRE 14A - 11.)
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As
of March 31, 2006, directors and executive officers of VICI and their
affiliates (the “VICI Inside Stockholders”) beneficially owned and were
entitled to vote 12,918,070 shares or approximately .026% of VICI’s
outstanding common stock. The VICI Inside Stockholders have also
indicated
that they intend to vote their shares in favor of all other proposals
being presented at the meeting and that they will vote the shares
they
purchased in open market transactions in favor of all of the proposals
being presented at the meeting, including the merger proposal. See
“VICI
Inside Stock Holders”, page PRE 14A -
11.
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Following
the merger the name of VICI shall be Ethos Environmental,
Inc.
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The
corporate headquarters and principal executive offices of VICI will
be
located at 7015 Alamitos Avenue in San Diego, CA 92154, which is
Ethos’s
corporate headquarters
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VICI
and Ethos will cause the common stock of VICI outstanding prior to
the APR
Merger, which is traded on the Over The Counter Trading Bulletin
Board
("OTCBB"), to continue trading on the OTCBB, albeit a new symbol
shall be
requested by the filing of the appropriate documentation.
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When
you consider the recommendation of VICI's board of directors in favor
of
adoption of the APR Merger proposal, you should keep in mind that
VICI's
executive officers and members of VICI's board have interests in
the APR
Merger transaction that are different from, or in addition to, your
interests as a stockholder. These interests include, among other
things if
the APR Merger is not approved, that VICI will be required to seek
additional funds or possible business combinations in order to remain
operational. See “Interests of VICI Directors and Officers in APR Merger”,
page PRE 14A - 12.
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Consummation
of the APR Merger and the related transactions is conditioned on
the VICI
stockholders adopting this merger proposal. In addition, the consummation
of the merger is conditioned upon the following:
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no
order, stay, judgment or decree being issued by any governmental
authority
preventing, restraining or prohibiting in whole or in part, the
consummation of such transactions;
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the
delivery by each party to the other party of a certificate to the
effect
that the representations and warranties of the delivering party are
true
and correct in all material respects as of the closing and all covenants
contained in the APR Merger have been materially complied with by
the
delivering party;
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the
receipt of necessary consents and approvals by third parties and
the
completion of necessary proceedings;
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VICI's
common stock being quoted on the OTCBB;
and
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those
additional terms and conditions as fully set forth in the APR Merger
Agreement attached hereto. See “Conditions to the Closing of the APR
Merger”, page PRE 14A - 12.
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The
merger agreement may be terminated at any time before the completion
of
the merger by mutual written consent of both ETHOS and VICI or by
either
party in certain instances. See "Termination Amendment and Waiver,"
page,
PRE 14A - 13.
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The
APR Merger is intended to qualify as a reorganization within the
meaning
of Section 368(a) of the Internal Revenue Code and no gain or loss
will be recognized by VICI as a result of the APR Merger. See “Tax
Consequences of the Merger”, page, PRE 14A -
13.
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There
are no dissenters’ rights applicable to the APR Merger
proposal
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(This
Space Intentionally Left Blank)
CAUTIONARY
STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION
This
Information Statement contains forward-looking statements. Certain matters
discussed herein are forward-looking statements within the meaning of the
Private Litigation Reform Act of 1995. Certain, but not necessarily all, of
such
statements can be identified by the use of forward-looking terminology, such
as
“believes,” “expects,” “may,” “will,” “should,” “estimates” or “anticipates” or
the negative thereof or comparable terminology. All forward-looking statements
involve known and unknown risks, uncertainties and other factors, which may
cause the actual transactions, results, performance or achievements of the
company to be materially different from any future transactions, results,
performance or achievements expressed or implied by such forward-looking
statements. These may include, but are not limited to matters described in
this
Information Statement and matters described in “Note on Forward-Looking
Statements” in our Annual Reports on Forms 10-KSB for the fiscal years ending
December 31, 2004 and December 31, 2005. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions and business opportunities, we can give no assurance that our
expectations will be attained or that any deviations will not be material.
We
undertake no obligation to publicly release the result of any revisions to
these
forward-looking statements that may be made to reflect any future events or
circumstances.
Record
Date
The
record date for determination of stockholders entitled to notice of and to
vote
at the Annual Meeting, and any adjournments or postponements thereof, is March
31, 2006 with respect to the 500,177,953 shares of the Company's $0.0001 par
value common stock outstanding as of that date. No shares of the Company's
Preferred Stock, par value $0.0001 per share, were outstanding. Each stockholder
is entitled to one vote for each share of Common Stock held by such stockholder
on March 31, 2006. Stockholders may not cumulate votes in the election of
directors.
The
stock
transfer books of the Company will remain open between the record date and
the
date of the Annual Meeting, and any adjournments or postponements thereof.
A
list of stockholders entitled to vote at the Annual Meeting will be available
for inspection at the Annual Meeting, and any adjournments or postponements
thereof, and for a period of ten days prior to the meeting during regular
business hours at the offices of the Company listed above.
Voting;
Quorum
The
presence in person or by proxy of the holders of a majority of the votes
entitled to be cast at the Annual Meeting is necessary to constitute a quorum
in
connection with the transaction of business at the Annual Meeting. All votes
will be tabulated by the inspector of election appointed for the Meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes (i.e., proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owner or other persons
entitled to vote shares as to a matter with respect to which the brokers or
nominees do not have discretionary power to vote).
Appraisal
Rights.
Pursuant
to section 30-1-1302 of the Idaho Business Corporations Act stockholders may
have the right to assert appraisal rights with respect to Proposal 3, the
reverse stock split, and Proposal 4, the reincorporation from the State of
Idaho
to the State of Nevada. A shareholder may be entitled to appraisal rights,
and
to obtain payment of the fair value of that shareholder's shares, in the event
of the above referenced corporate action. The
procedure for perfecting appraisal rights is complicated and any shareholder
contemplating exercising such right is hereby advised to seek independent legal
counsel to assist in the process. A complete copy of the Idaho Business
Corporation Act relevant section(s) have been attached here to as Exhibit A
pursuant to Section 30-1-1320 of the Idaho Business Corporation Act.
Proxies
If
the
enclosed Proxy Card is properly signed and returned, the shares represented
thereby will be voted at the Annual Meeting in accordance with the instructions
specified thereon. If a signed and returned Proxy Card does not specify how
the
shares represented thereby are to be voted, the proxy will be voted FOR the
election of the directors proposed by the Board, unless the authority to vote
for the election of such directors is withheld. In addition, if no contrary
instructions are given, the proxy will be voted FOR the approval of Proposals
1,
2, 3, 4, 5, and 6 described in this Proxy Statement, and as the proxy holders
deem advisable for all other matters as may properly come before the Annual
Meeting.
Revocability
You
may
revoke or change your proxy at any time before the Annual Meeting by filing
with
the Secretary of the Company, at the Company's principal executive offices
at,
180 Southwest Higgins Avenue, Missoula, MT 59804 by sending a notice of
revocation or another signed Proxy Card with a later date. You may also revoke
your proxy by attending the Annual Meeting and voting in person.
Solicitation
The
Company will bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this Proxy Statement, the enclosed Proxy
Card
and any additional solicitation materials furnished to the stockholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries
and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram or other means by directors, officers or employees of the
Company. No additional compensation will be paid to these individuals for any
such services. Except as described above, the Company does not presently intend
to solicit proxies other than by mail.
Financial
Information
Our
quarterly and annual reports on Form 10-QSB and Form 10-KSB, respectively,
and
Form 8-K relating to material contained in this Proxy have been filed with
the
SEC and may be viewed on the SEC's Web site at
HTTP://WWW.SEC.GOV/CGI-BIN/SRCH-EDGAR, AND SIMPLY TYPING IN “Victor Industries”
in the Edgar Archives. We are presently “current” in the filing of all reports
required to be filed by us.
Beneficial
Owners and Management and Related Stockholder Matters
The
following table sets forth certain information regarding the beneficial
ownership of the Company’s Common Stock as of the date of this report based on
information available to the Company by;
(i)
each
person who is known by the Company to own more than 5% of the outstanding Common
Stock
based upon reports filed by such persons within the Securities and Exchange
Commission;
(iii)
each
of
the Named Executive Officers; and
(iv)
all
officers and directors of the Company as a group.
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Name
and Address
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Shares
Beneficially Owned (1)
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Percent
of Class
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Lana
Pope
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6,996,935
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0.014
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David
Boulter
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5,921,935
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0.012
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TOTAL
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12,918,870
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0.026
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Section
16(a) Beneficial Ownership Reporting Compliances
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires the Company’s directors, executive officers and holders of more than
10% of the Company’s common stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership
of
common stock and other equity securities of the Company. The Company believes
that during the year ended December 31, 2005, its officers, directors and
holders of more than 10% of the Company’s common stock, if any, complied with
all Section 16(a) filing requirements. This disclosure is based on a review
of
the forms submitted to the Company during, and with respect to, its fiscal
year
ending December 31, 2005.
(This
Space Intentionally Left Blank)
PROPOSAL
ONE- ELECTION OF DIRECTORS
General
As
of
April 24, 2006, the Board consisted of two directors. At the 2006 annual
meeting, two directors will be elected to serve a one-year term expiring at
the
next annual meeting of stockholders and until such director’s successor shall
have been elected and qualified. Our
Board
has nominated Lana Pope and David Boulter for election as directors to serve
until the 2007 annual meeting of stockholders. All nominees are currently
members of the Board. Each
nominee has expressed his or her willingness to serve as a director if elected,
and we know of no reason why any nominee would be unable to serve. If a nominee
becomes unavailable before the election, the proxies may be voted for one or
more substitute nominees designated by the Board, or the Board may decide to
reduce the number of directors.
Nominees
Lana
Pope
(52) Our
interim Chief Executive Officer, Treasurer and director is Lana Pope. Ms. Pope
is 52 years old and has served as our corporate accountant since April
2000. Lana J. Pope is a Missoula, MT native and has lived there all but 10
months of her life. She has owned & operated L.J.M. Enterprises, a
bookkeeping and tax service, since November 1989. Prior to that, she
worked as a bookkeeper for numerous companies and has more than 30 years
experience in the accounting.
Dave
Boulter
(65) In
addition to serving as our Secretary since 2000, Mr. Boulter has also served
as
a Director during the same period of time. Moreover, since 1998, Mr. Boulter
has
also been involved full time as owner/operator of Booth Distributing,
a local Missoula company which distributes auto care products.
Executive
Compensation
The
following table sets forth certain summary information regarding compensation
paid by the Company for services rendered during the fiscal year ending December
31, 2004 and the fiscal year ending December 31, 2005, to the Company’s Chief
Executive Officer and President during such periods.
Executive
Compensation Table
|
Name
and Position
|
Year
|
Annual
Comp Salary
|
Long
Term Compensation Awards—Securities Underlying Stock Options
(1)
|
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Lana
Pope, President, CEO, Chairwoman of the Board
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2004
2005
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$60,000
$51,000
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-
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David
Boulter, Director
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2004
2005
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$36,000
$39,000
|
-
|
(1)
There
were no stock options granted or exercised by the named executive directors
in
fiscal year 2004 or fiscal year 2005.
Identification
of Audit Committee; Audit Committee Financial Expert
The
Company currently does not have an audit committee and has not made a
determination of whether there is a financial expert. The Company does not
presently plan to establish an audit committee. However, if an audit committee
is established, the Registrant will make the proper disclosures on Form
8-K.
Employment
Agreements
The
Registrant has no written employment agreements.
Director
Compensation
The
Company has adopted no retirement, pension, profit sharing or other similar
programs.
Pending
Legal Proceedings
To
the
knowledge of our management, no director or executive officer is party to any
action in which any has an interest adverse to us.
Involvement
in Certain Legal Proceedings
Except
as
indicated at the end of this heading, and to the knowledge of our management
and
during the past 10 years, no present or former director, person nominated to
become one of our directors, executive officers, promoters or control
persons:
(1) Was
a
general partner or executive officer of any business by or against which any
bankruptcy petition
was filed, whether at the time of such filing or two years prior
thereto;
(2) Was
convicted in a criminal proceeding or named the subject of a pending criminal
proceeding (excluding
traffic violations and other minor offenses);
(3) Was
the
subject of any order, judgment or decree, not subsequently reversed, suspended
or vacated,
of
any
court of competent jurisdiction, permanently or temporarily enjoining him from
or otherwise
limiting, the following activities:
(i)
Acting
as
a futures commission merchant, introducing broker, commodity trading
advisor,
commodity pool operator, floor broker, leverage transaction merchant,
associated
person of any of the foregoing, or as an investment adviser, underwriter,
broker
or
dealer in securities, or as an affiliated person, director or employee of any
investment
company, bank, savings and loan association or insurance company, or
engaging
in or continuing any conduct or practice in connection with such
activity;
(ii) Engaging
in any activity in connection with the purchase or sale of any security
or commodity
or in connection with any violation of federal or state securities laws or
federal
commodities laws;
(4) Was
the
subject of any order, judgment or decree, not subsequently reversed, suspended
or vacated,
of
any
federal or state authority barring, suspending or otherwise limiting for more
than 60
days
the
right
of such person to engage in any activity described above under this Item, or
to
be
associated with persons engaged in any such activity;
(5) Was
found
by a court of competent jurisdiction in a civil action or by the Securities
and
Exchange Commission
to have violated any federal or state securities law, and the judgment in such
civil action
or
finding by the Securities and Exchange Commission has not been subsequently
reversed, suspended,
or vacated; or
(6) Was
found
by a court of competent jurisdiction in a civil action or by the Commodity
Futures Trading
Commission to have violated any federal commodities law, and the judgment in
such civil action
or
finding by the Commodity Futures Trading Commission has not been subsequently
reversed,
suspended or vacated.
Required
Vote
The
directors standing for election at the annual meeting shall be elected by the
affirmative vote of a plurality of the shares of the Common Stock present at
the
Annual Meeting, in person or by proxy, and entitled to vote in the election
of
directors.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE
“FOR” THE NOMINEES ABOVE
PROPOSAL
TWO—RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS
On
April
23, 2006, upon the authorization and approval of the board of directors, the
Company retained Peterson Sullivan, PLLC, the (“Accountants”) as the principal
accountants to audit the Company’s financial statements.
As
of the
end of the periods covered by the Company's 10-KSB for fiscal years 2004 and
2005, we have evaluated, under the supervision and with the participation of
management, including our chief executive officer, the effectiveness of the
design and operation of our “disclosure controls and procedures” (as defined in
Security Exchange Act of 1934, Rules 13a - 15(e) and 15d - 15(e)). Based on
this
evaluation, our management, including our chief executive officer, has concluded
that as of the date of the evaluation our disclosure controls and procedures
were effective to ensure that all material information required to be filed
in
this report has been made known to them.
During
the interim period from January 1, 2004 through April
23,
2006, there were no disagreements with the Accountants on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction
of
the Accountants, would have caused the Accountants to make reference to the
subject matter of the disagreements in connection with the Accountants reports.
Changes
in Internal Controls over Financial Reporting
There
have been no changes in internal controls over financial reporting that occurred
during the most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
Audit
Fees
During
fiscal years 2005 and 2004, the aggregate fees billed or estimated to be billed
to us for professional services rendered by Peterson Sullivan, PLLC, for the
audit of our annual financial statements, review of financial statements
included in our annual reports or services normally provided by our accountants
in connection with statutory and regulatory filings or engagements were $16,700
and $21,392, respectively.
All
Other Fees
During
fiscal years 2004 and 2005, there were no fees billed to us for any other
products or services provided by Peterson Sullivan, PLLC, other than the
services reported above.
Pre-Approval
Policies and Procedures
The
Board
of Directors is responsible for appointing, setting compensation, and overseeing
the work of the independent auditor. The Board has no established policy
regarding pre-approval of any audit or permissible non-audit services provided
by the independent auditor.
Nominating
Committee and Other Committees
As
of
March 31, 2006 our board of directors had not established an audit, nominating
or compensation committee. We recognize that these committees, when established,
will play a critical role in our financial reporting system by overseeing and
monitoring management's and the independent auditors' participation in the
financial reporting process.
Until
such time as any of these committees has been established, the board of
directors will continue to undertake those tasks normally associated with them
to include, but not by way of limitation, the (i) review and discussion of
the
audited financial statements with management, (ii) discussions with the
independent auditors the matters required to be discussed by the Statement
On
Auditing Standards No. 61, as may be modified or supplemented, (iii) nomination
of new directors, and (iv) compensation for directors.
At
this
time the Board of Directors has determined that the addition of a Nominating
Committee, is not necessary based on the Company’s current size and its
operational and management requirements. Instead, the Board acts in lieu of
committees and will consider candidates recommended by security holders, and
by
security holders in submitting such recommendations; should provide a completed
Directors Questionnaire to the Company. There are no specific, minimum
qualifications that the nominating committee believes must be met by a nominee
recommended by security holders. The Board believes that there are no
differences in the manner in which the nominating committee evaluates nominees
for director based on whether the nominee is recommended by a security holder,
or found by the board.
Each
of
the members of the Board which acting in lieu of a nominating committee is
not
independent, pursuant to the definition of independence of a national securities
exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 78f(a).
Auditor
Representative
A
representative of the Accountant will not be present at the Annual Meeting
and
will therefore not make any statements or receive any questions.
Required
Vote
Ratification
of the appointment of the new Accountant shall be approved by the affirmative
vote of the holders of a majority of the shares of the Common Stock present
at
the Annual Meeting, in person or by proxy, and entitled to vote thereon.
Abstentions and broker non-votes will not be counted for purposes of determining
whether such a proposal has been approved.
Although
stockholder ratification of the Board of Directors' appointment is not required,
the Board of Directors considers it desirable for the stockholders to pass
upon
the selection of the independent public accountants. In the event the
stockholders fail to ratify the appointment, the Board of Directors will
reconsider its selection. Even if the selection is ratified, the Board of
Directors in its discretion may direct the appointment of a different
independent public accounting firm at any time during the year if the Board
of
Directors believes that such a change would be in the best interests of the
Company and its stockholders.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE
“FOR” THE APPOINTMENT
(This
Space Intentionally Left Blank)
PROPOSAL
THREE—AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION IN ORDER TO EFFECT A REVERSE SPLIT OF THE COMPANY'S OUTSTANDING
COMMON STOCK
The
Certificate of Amendment
After
this Proxy Statement has been filed with the SEC, and mailed to all holders
of
record of the Company’s shares, and upon the expiration of all applicable
waiting and review periods under the Exchange Act, the Company will file a
Certificate of Amendment to its Articles of Incorporation with the State of
Idaho effecting the following corporate action:
General
The
Company's Board of Directors has approved and adopted resolutions proposing,
declaring advisable and in the Company's best interests, and recommending to
the
stockholders of the Company for approval an amendment to the Company's Amended
and Restated Certificate of Incorporation (the “Charter”). The purpose of the
amendment is to effect, a reverse split of the Company's 500,177,953 shares
of
issued and outstanding Common Stock, at an exchange ratio within the range
of
1-for-500, to 1-for-1200 (a “Reverse Split”). If the Reverse Split Proposal is
approved, the Board would have the authority (without further stockholder
approval) to elect, as it determines to be in the best interests of the Company
and its stockholders, whether or not to implement any stockholder-approved
Reverse Split, and if so at which of the stockholder-approved exchange
ratios.
The
Board
believes that approval of the Reverse Split Proposal, within the above stated
range, would allow the Board the discretion to choose which Reverse Split to
implement, rather than approval of a reverse split at a single specified
exchange ratio. This method provides the Board with the maximum flexibility
to
react to future market conditions and therefore, act in the best interests
of
the Company and its stockholders.
Stockholders
may vote in favor of, against or abstain from the Reverse Split Proposal. The
text to the proposed amendment is attached hereto as Exhibit B, the Proposed
Amendment to the Company's Articles of Incorporation.
If
the
stockholders approve the Reverse Split Proposal, the timing of any
implementation of the Reverse Split will be determined in the judgment of the
Board of Directors, with the intention of maximizing the Company's ability
to
make itself more attractive to a merger agreement as well as other intended
benefits of a Reverse Split to stockholders and the Company. See the information
below under the caption “Purposes of the Reverse Split.”
The
Board
of Directors also reserves the right, notwithstanding stockholder approval
to
not proceed with the stockholder-approved Reverse Split, if, at any time prior
to filing an Amendment with the Secretary of State of the State of Idaho (the
“Effective Time”), the Board of Directors, in its sole discretion, determines
that the stockholder-approved Reverse Split is not in the best interests of
the
Company and its stockholders. The Board of Directors may consider a variety
of
factors in determining whether or not to implement any stockholder-approved
Reverse Split, including, but not limited to, overall trends in the stock
market, recent changes and anticipated trends in the per share market price
of
the Common Stock, business and transactional developments and the Company's
actual and projected business and financial performance.
If
the
Reverse Split Proposal is approved, and the Board elects to implement an
approved Reverse Split, each of the Company's presently outstanding shares
(the
“Old Shares”) of Common Stock would be exchanged for new shares (the “New
Shares”) of Common Stock in an exchange ratio within 1-for-500 and 1-for-1200.
If the Board elects to implement a stockholder-approved Reverse Split, such
split will be effectuated simultaneously for all holders of the Common Stock
and
the exchange ratio will be the same for all of the Common Stock. An implemented
Reverse Split will affect all of the Company's stockholders uniformly and will
not change the proportionate equity interests of the Company's stockholders,
nor
will the respective voting or other rights of stockholders be altered. The
Common Stock issued pursuant to an implemented Reverse Split will remain fully
paid and non-assessable. The Company will continue to be subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended.
Purposes
of the Reverse Split
In
Missoula, Montana, on March 26, 2006, the Company’s Board of Directors met and
authorized the execution of a merger agreement with Ethos. At that time, the
Company’s Board also authorized a reverse stock split between 1:100 and 1:1000,
in order to effectuate the contemplated merger with Ethos (as further described
herein in Proposal 5 below). At a later meeting, the Board revised the range
of
the Reverse Split to 1:500 to 1:1200. Any such agreement with Ethos will
necessarily involve a post-reverse share exchange on a one-for-one basis. After
such an issuance, we believe that the resulting amount of our outstanding shares
will adversely affect any possibility of creating and maintaining an orderly
market for our common stock following a merger transaction.
If
for
any reason the Company deems it advisable to do so, the reverse stock split
may
be abandoned at any time prior to its effectiveness without further action
by
the Company's stockholders.
Procedure
of the Reverse Stock Split
The
Reverse Split will become effective upon the filing with the Secretary of State
of the State of Idaho of a Certificate of Amendment to our Restated Certificate
of Incorporation, as amended. The exact timing of the filing of the Certificate
of Amendment, however, will be determined by the Board of Directors based upon
the evaluation as to when this action would be most advantageous to our
stockholders. In addition, the Company reserves the right to elect not to
proceed with the Reverse Split if, at any time prior to the effective time
of
the Reverse Split, the Company, in its sole discretion, determines that the
Reverse Split of its common stock is no longer in the best interests of the
Company and its stockholders.
Commencing
at the effective time of the Reverse Split, each common stock certificate would
be deemed for all corporate purposes to evidence ownership of the reduced number
of shares of the Company’s common stock resulting from the Reverse Split. As
soon as practicable after the effective date, stockholders would be notified
as
to the effectiveness of the Reverse Split and instructed as to how and when
to
surrender their certificates of common stock.
YOU
SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY AFTER
YOU
RECEIVE A LETTER OF TRANSMITTAL FROM OUR EXCHANGE AGENT, IF
ANY.
Fractional
Shares
We
do not
intend to issue fractional shares in connection with the Reverse Split.
Stockholders that otherwise would be entitled to receive fractional shares
because the number of shares of the Company’s common stock they hold is not
evenly divisible by the Reverse Split ratio will be rounded up to the nearest
whole share, not to be reduced below one share.
Effects
of Reverse Stock Split
The
Reverse Split will not, by itself, impact the Company's assets or prospects.
However, the Reverse Split could result in a decrease in the aggregate market
value of the Company's equity capital. The Reverse Split may affect the
liquidity of the common stock because of the reduced number of shares
outstanding after the Reverse Split. Also, the Reverse Split could result in
some stockholders owning “odd-lots” of less than 100 shares of common stock.
Odd-lot shares may be more difficult to sell, and brokerage commissions and
other costs of transactions in odd-lots are generally somewhat higher than
the
costs of transactions in “round-lots” of even multiples of 100 shares. The Board
believes, however, that these risks are outweighed by the benefits of the
Reverse Split.
The
following tables approximate the change to the capital structure of the Company
should the reverse stock split be effectuated:
| |
Issued
and
Outstanding
|
Authorized
and Reserved for Issuance
|
Authorized
and
Unreserved
(1)
|
| |
|
|
|
|
Post
1-for-500 Reverse Split
|
1,000,356
|
17,718,187
|
981,281,457
|
|
Post
1-for-1200 Reverse Split
|
416,765
|
17,718,187
|
981,865,048
|
| |
|
|
|
(1) As
a
result of any reverse split, we will have an increased number of authorized
but
unissued shares
of
common stock. Authorized but unissued shares will be available for issuance,
and
we may
issue
such shares in financings or otherwise. If we issue additional shares, the
ownership interests
of our current stockholders may be diluted.
Potential
Disadvantages to the Reverse Stock Split
Reduced
Market Capitalization. While we expect that the reduction in our outstanding
shares of common stock will increase the market price of our common stock,
we
cannot assure you that the reverse stock split will increase the market price
of
our common stock by a multiple equal to the number of pre-split shares in the
reverse split ratio determined by the board of directors or result in any
permanent increase in the market price, which can be dependent upon many
factors, including our business and financial performance and prospects. Should
the market price decline after the reverse stock split, the percentage decline
may be greater, due to the smaller number of shares outstanding, than it would
have been prior to the reverse stock split. In some cases the stock price of
companies that have effected reverse stock splits has subsequently declined
back
to pre-reverse split levels. Accordingly, we cannot assure you that the market
price of our common stock immediately after the effective date of the proposed
reverse stock split will be maintained for any period of time or that the ratio
of post- and pre-split shares will remain the same after the reverse stock
split
is effected, or that the reverse stock split will not have an adverse effect
on
our stock price due to the reduced number of shares outstanding after the
reverse stock split. A reverse stock split is often viewed negatively by the
market and, consequently, can lead to a decrease in our overall market
capitalization. If the per share price does not increase proportionately as
a
result of the reverse stock split, then our overall market capitalization will
be reduced.
Liquidity.
Although the board believes that the decrease in the number of shares of our
common stock outstanding as a consequence of the reverse stock split and the
anticipated increase in the price of our common stock could encourage interest
in our common stock, such liquidity could also be adversely affected by the
reduced number of shares outstanding after the reverse stock split.
Voting
Rights
There
will be no change in the terms of the common stock as a result of the Reverse
Split. After the Reverse Split, the shares of common stock will have the same
voting rights and rights to dividends and distributions and will be identical
in
all other respects to the currently issued common stock now authorized. With
the
exception of the number of shares issued and outstanding, or held as treasury
shares, the rights and preferences of the shares of common stock prior and
subsequent to the Reverse Split will remain the same. Holders of the Company's
common stock will have no preemptive rights.
Federal
Income Tax Consequences
The
following is a summary of the material federal income tax consequences of the
proposed reverse stock split. This discussion is based on the Internal Revenue
Code, as amended (the “Code”), the Treasury Regulations promulgated thereunder,
judicial opinions, published positions of the Internal Revenue Service, and
all
other applicable authorities as of the date of this document, all of which
are
subject to change (possibly with retroactive effect).
This
discussion is for general information only and does not describe all of the
tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules (such as dealers
in securities, financial institutions, insurance companies, tax-exempt
organizations, foreign individuals and entities, and persons who acquired their
common stock as compensation). In addition, this summary is limited to
stockholders that hold their common stock as capital assets. This discussion
also does not address any tax consequences arising under the laws of any state,
local or foreign jurisdiction. Accordingly,
each stockholder of the Company is strongly urged to consult with a tax adviser
to determine the particular federal, state, local or foreign income or other
tax
consequences to such holder of the reverse stock split.
We
believe that the U.S. federal income tax consequences of the Reverse Split
generally are as follows:
| · |
No
gain or loss would be recognized by the Company upon the Reverse
Split;
|
| · |
The
aggregate adjusted basis of the shares of the Company's common stock
held
by a stockholder following the Reverse Split would be equal to such
stockholder's aggregate adjusted basis in the Company's common stock
held
immediately prior to the Reverse Split;
|
The
holding period of the Company's common stock held by a stockholder following
the
Reverse Split would include the holding period of the shares of the Company's
common stock held immediately prior to the Reverse Split.
Dissenters
Rights
There
are
no dissenters' rights applicable to this proposal.
Financial
Information
Our
quarterly and annual reports on Form 10-QSB and Form 10-KSB, respectively and
Form 8-K relating to material contained in this Proxy have been filed with
the
SEC, are herein incorporated by this reference, and may be viewed on the SEC's
Web site at HTTP://WWW.SEC.GOV/CGI-BIN/SRCH-EDGAR, AND SIMPLY TYPING IN “Victor
Industries” in the Edgar Archives. We are presently “current” in the filing of
all reports required to be filed by us.
Required
Vote
To
be
approved, the Reverse Split Proposal requires the affirmative vote (in person
or
by proxy) of the holders of a majority of the outstanding shares of Common
Stock
entitled to vote thereon.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
“FOR”
THE
REVERSE SPLIT
PROPOSAL
FOUR—REDOMICILE TO NEVADA
Introduction
The
following discussion assumes that the Company has effectuated Proposal 3 as
discussed above. For purposes of this Proposal, the Company and any reference
thereto, shall refer to the redomiciled Nevada Company, VICI Nevada. For the
business combination with Ethos to close, Proposal 3, supra, and this Proposal
4
must be approved, otherwise the contemplated transaction with Ethos will fail.
Therefore, this Proposal assumes that Proposal 3 has been ratified and all
action taken to effectuate the proposed action has been completed.
The
merger of the Company with and into its wholly-owned subsidiary, Victor Nevada,
Inc., a Nevada corporation (“VICI Nevada”) will have the sole effect of changing
the domicile of the Company from the State of Idaho to the State of Nevada.
The
Company will thereafter be governed by the laws of the State of Nevada rather
than the laws of the State of Idaho. A copy of the Plan of Merger is attached
to
this Proxy Statement as Exhibit C.
Once
this
Plan of Merger becomes effective, the Company will be governed by the articles
of incorporation and bylaws of VICI Nevada, which have been attached to this
Proxy Statement as Exhibits D and E, respectively. Shareholders of the
Company do not have preemptive rights nor will they as a result of this Plan
of
Merger.
Principal
Reasons for Reincorporating in Nevada
The
Company is making this recommendation in order to assist in the completion
of
the contemplated business combination with Ethos Environmental, Inc., a Nevada
corporation (“Ethos”). Although the principal terms of that transaction,
discussed below, have been agreed upon, the Company believes, that due to the
nature of the proposed transaction with Ethos, that, should the transaction
fail
to be completed, the Company will be in a better position to attract suitable
candidates for other possible business combination(s). On the other hand, should
the transaction with Ethos close, the post-transaction Company will be better
situated under Nevada law for future expansion and corporate regulation.
We
believe that, in general, Nevada law provides greater protection to our
directors and the Company than Idaho law. The increasing frequency of claims
and
litigation directed towards directors and officers has greatly expanded the
risks facing directors and officers of public companies in exercising their
duties. Reincorporation in Nevada may help the Company attract and retain
qualified management by reducing the risk of lawsuits being filed against the
Company and its directors.
Reincorporation
in Nevada will limit the personal liability of directors of the Company. Idaho
law permits a corporation to adopt provisions limiting or eliminating the
liability of a director to a company and its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that the liability does
not
arise from certain proscribed conduct, including breach of the duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct
or a
knowing violation of law. The certificate of incorporation of the Company
excludes director liability to the maximum extent allowed by Idaho law. Nevada
law permits, and VICI Nevada has adopted in its articles of incorporation,
a
broader exclusion of liability of both officers and directors to the Company
and
its stockholders, providing for an exclusion of all monetary damages for breach
of fiduciary duty unless they arise from act or omissions which involve
intentional misconduct, fraud, or a knowing violation of law. The
reincorporation will result in the elimination of any liability of an officer
or
director for a breach of the duty of loyalty unless arising from intentional
misconduct, fraud, or a knowing violation of law.
Operating
the Company as a Nevada corporation will not interfere with, or differ
substantially from, our present corporate activities. As a Nevada corporation,
the Company will be governed by Nevada corporate law, while Victor Industries,
Inc. is presently governed by Idaho law. Our board of directors believes that
Nevada law constitutes a comprehensive, flexible legal structure under which
to
operate. However, because of differences in the laws of these states, your
rights as stockholders will change in several material respects as a result
of
the reincorporation. These matters are discussed in greater detail immediately
below.
Significant
Differences Between Idaho and Nevada Law as they Effect the
Company
|
PROVISION
|
|
NEVADA
LAW
|
|
IDAHO
LAW
|
|
GENERAL
|
|
|
|
1.
Courts
|
|
Nevada
has a large body of statutory and case law devoted to corporate law
questions.
|
|
Idaho
has a large body of statutory law dealing with
corporations.
|
|
|
|
|
|
|
|
DIRECTOR
AND OFFICER LIABILITY
|
|
|
|
|
|
|
|
|
|
1.
Director liability limitations
|
|
The
articles of incorporation and NRS (Nevada Revised Statutes) 78.138
(7)
limit liability of a director to the corporation and to stockholders
for
consequences that are a direct result of official or sanctioned actions.
Also, director or officer, unless directed otherwise by statute,
is
not liable for debts or liability of corporation unless acting as
the
alter ego of the corporation. NRS 78.747 (1).
|
|
The
IC (Idaho Code) 30-1-202 has provisions eliminating or limiting the
liability of a director to the corporation or its shareholders with
certain exceptions.
|
|
|
|
|
|
|
|
2.
Exceptions to director liability limitations.
|
|
No
limitations on liability or for intentional misconduct, fraud, or
knowingly violating the law. NRS 78.138 (7)(b).
|
|
(a)
The amount of a financial benefit received by a director to which
he is
not entitled,
(b)
An intentional infliction of harm on the corporation or the shareholders,
(c)
A violation of section 30-1-833, Idaho Code, or
(d)
An intentional violation of criminal law
|
|
|
|
|
|
3.Indemnification
of directors and officers
|
|
NRS
78.7502 (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: is not liable under NRS 78.138, acted in
“good
faith”, or had no reasonable cause to believe his conduct was
unlawful.
|
|
IC
30-1-852, Mandatory Indemnification.
A
corporation shall indemnify a director who was wholly successful,
on the
merits or otherwise, in the defense of any proceeding to which he
was a
party because he was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
IC
30-1-851, Permissible Indemnification.
Except
as otherwise provided, a corporation may indemnify an individual
who is a
party to a proceeding because he is a director against liability
incurred
in the proceeding if
(a)
(i) He conducted himself in good faith; and
(ii)
He reasonably believed
(A)
In the case of conduct in his official capacity, that his conduct
was in the best interests of the corporation, and
(B)
In all cases, that his conduct was at least not opposed to the best
interests of the corporation; and
(iii)
In the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful; or
(b)
He engaged in conduct for which broader indemnification has been
made permissible or obligatory under a provision of the articles
of
incorporation, as authorized by law.
|
|
|
|
|
|
|
|
4.
Advancement of litigation expenses
|
|
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.
|
|
A
corporation may, before final disposition of a proceeding, advance
funds
to pay for or reimburse the reasonable expenses incurred by a director
who
is a party to a proceeding because he is a director if he delivers
to the
corporation
(a)
A written affirmation of his good faith belief that he has met the
relevant standard of conduct described in section 30-1-851, Idaho
Code, or
that the proceeding involves conduct for which liability has been
eliminated under a provision of the articles of incorporation; and
(b)
His written undertaking to repay any funds advanced if he is not
entitled to mandatory indemnification under section 30-1-852, Idaho
Code,
and it is ultimately determined that he has not met the relevant
standard
of conduct.
|
|
|
|
|
|
|
|
SALE
OF ASSETS
|
|
|
|
|
|
|
|
|
|
1.
Voting requirements for sales of assets.
|
|
Unless
otherwise provided in the articles of incorporation, every corporation
may, by action taken at any meeting of its board of directors, sell,
lease
or exchange all of its property and assets, including its goodwill
and its
corporate franchises, upon such terms and conditions as its board
of
directors may approve, when and as authorized by the affirmative
vote of
stockholders holding stock in the corporation entitling them to exercise
at least a majority of the voting power given at a stockholders’ meeting
called for that purpose.
(a)
For a transfer of assets by way of mortgage, or in trust or in pledge
to
secure indebtedness of the corporation; or
(b)
To abandon the sale, lease or exchange of assets.
|
|
Sale
Of Assets In Regular Course Of Business And Mortgage Of
Assets.
A
corporation may, on the terms and conditions and for the consideration
determined by the board of directors
(a)
Sell, lease, exchange, or otherwise dispose of all, or substantially
all, of its property in the usual and regular course of business;
(b)
Mortgage, pledge, dedicate to the repayment of indebtedness, whether
with or without recourse, or otherwise encumber any or all of its
property
whether or not in the usual and regular course of business; or
(c)
Transfer any or all of its property to a corporation all the shares
of which are owned by the corporation.
(2)
Unless the articles of incorporation require it, approval by the
shareholders of a transaction described above is not
required.
Sale
Of Assets Other Than In Regular Course Of Business.
(1)
A corporation may sell, lease, exchange or otherwise dispose of all,
or
substantially all, of its property, with or without the good will,
otherwise than in the usual and regular course of business, on the
terms
and conditions and for the consideration determined by the corporation's
board of directors, if the board of directors proposes and its
shareholders approve the proposed transaction.
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Amendment
Before Issuance of Shares.
At
least two-thirds of the incorporators or of the board of directors
of any
corporation, before issuing any stock, may amend the articles of
incorporation of the corporation by signing and filing with the secretary
of state a certificate amending, modifying, changing or altering
the
articles, in whole or in part.
Amendment
After Issuance of Shares
(a)
By addition to its corporate powers and purposes, or diminution thereof,
or both.
(b)
By substitution of other powers and purposes, in whole or in part,
for
those prescribed by its articles of incorporation.
(c)
By increasing, decreasing or reclassifying its authorized stock,
by
changing the number, par value, preferences, or relative, participating,
optional or other rights, or the qualifications, limitations or
restrictions of such rights, of its shares, or of any class or series
of
any class thereof whether or not the shares are outstanding at the
time of
the amendment, or by changing shares with par value, whether or not
the
shares are outstanding at the time of the amendment, into shares
without
par value or by changing shares without par value, whether or not
the
shares are outstanding at the time of the amendment, into shares
with par
value, either with or without increasing or decreasing the number
of
shares, and upon such basis as may be set forth in the certificate
of
amendment.
(d)
By changing the name of the corporation.
2.
All such changes or alterations may be effected by one certificate
of amendment; but any articles of incorporation so amended,
changed
or
altered, may contain only such provisions as it would be lawful and
proper
to insert in original articles of incorporation, pursuant to
NRS
78.035
and 78.037, if the original articles were executed and filed at the
time
of making the amendment.
Procedure
for Amending Articles after issuing stock,
(a)
The board of directors must adopt a resolution setting forth the
amendment
proposed and declaring its advisability, and either call a special
meeting
of the stockholders entitled to vote on the amendment or direct that
the
proposed amendment be considered at the next annual meeting of the
stockholders entitled to vote on the amendment.
(b)
At the meeting, of which notice must be given to each stockholder
entitled
to vote pursuant to the provisions of this section, a vote of the
stockholders entitled to vote in person or by proxy must be taken
for and
against the proposed amendment. If it appears upon the canvassing
of the
votes that stockholders holding shares in the corporation entitling
them
to exercise at least a majority of the voting power, or such greater
proportion of the voting power as may be required in the case of
a vote by
classes or series, or as may be required by the provisions of the
articles
of incorporation, have voted in favor of the amendment, an officer
of the
corporation shall sign a certificate setting forth the amendment,
or
setting forth the articles of incorporation as amended, and the vote
by
which the amendment was adopted.
2.
If any proposed amendment would adversely alter or change any
preference or any relative or other right given to any class or series
of
outstanding shares, then the amendment must be approved by the vote,
in
addition to the affirmative vote otherwise required, of the holders
of
shares
representing a majority of the voting power of each class or series
adversely affected by the amendment regardless of limitations or
restrictions on the voting power thereof.
3.
Provision may be made in the articles of incorporation requiring,
in
the case of any specified amendments, a larger proportion of the
voting
power of stockholders than that required by this section.
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Amendment
Before Issuance of Shares.
If
a corporation has not yet issued shares, its incorporators or board
of
directors may adopt amendments to the corporation's articles of
incorporation.
Amendment
After Issuance of Shares
Amendment
By Board Of Directors.
Unless
the articles of incorporation provide otherwise, a corporation's
board of
directors may adopt one or more amendments to the corporation's articles
of incorporation without shareholder action
(1)
To extend the duration of the corporation if it was incorporated
at
a time when limited duration was required by law;
(2)
To delete the names and addresses of the initial directors;
(3)
To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file or if an annual
report has been filed with the secretary of state;
(4)
To change each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the corporation
has only shares of that class outstanding;
(5)To
change the corporate name by substituting "corporation,"
"incorporated," "company," "limited," or the abbreviation "corp.,"
"inc.,"
"co.," or "ltd.," for a similar word or abbreviation in the name,
or by
adding, deleting or changing a geographical attribution for the name;
(6)
To reduce the number of authorized shares solely as a result of a
cancellation of treasury shares; or
(7)
To make any other change expressly permitted by law to be made
without shareholder action.
Amendment
By Board of Directors and Shareholders.
(1)
A corporation's board of directors may propose one or more amendments
to
the articles of incorporation for submission to the shareholders.
(2)
For the amendment to be adopted
(a)
The board of directors must recommend the amendment to the
shareholders unless the board of directors determines that because
of
conflict of interest or other special circumstances it should make
no
recommendation and communicates the basis for its determination to
the
shareholders with the amendment; and
(b)
The shareholders entitled to vote on the amendment must approve the
amendment .
(3)
The board of directors may condition its submission of the proposed
amendment on any basis.
(4)
The corporation shall notify each shareholder, whether or not
entitled to vote, of the proposed shareholders' meeting in
accordance with section 30-1-705, Idaho Code. The notice of meeting
must also state that the purpose, or one (1) of the purposes, of
the
meeting is to consider the proposed amendment and contain or be
accompanied by a copy or summary of the amendment.
greater
vote or a vote by voting groups, the amendment to be adopted must
be
approved by
(a)
A majority of the votes entitled to be cast on the amendment by any
voting group with respect to which the amendment would create dissenters'
rights; and
(b)
The votes required by sections 30-1-725 and 30-1-726, Idaho Code,
by
every other voting group entitled to vote on the
amendment.
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ELECTIONS;
PROCEDURAL MATTERS
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1.
Preemptive rights
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As
to corporations formed before October 1, 1991; preemptive rights
exist,
limited by the articles of incorporation or statute. As to corporations
formed after October 1, 1991; preemptive rights do not exist except
to the
extent that the articles of incorporation provide.
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The
shareholders of a corporation do not have a preemptive right to acquire
the corporation's unissued shares except to the extent the articles
of
incorporation so provide.
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2.
Cumulative voting
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Unless
otherwise provided in the articles of incorporation, directors are
elected
by a plurality of the votes cast by the shares entitled to vote in
the
election at a meeting at which a quorum is present.
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Unless
otherwise provided in the articles of incorporation, directors are
elected
by a plurality of the votes cast by the shares entitled to vote in
the
election at a meeting at which a quorum is present.
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3.
Removal of directors
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Except
as otherwise provided by statute, any director or one or more of
the
incumbent directors may be removed from office by the vote of stockholders
representing not less than two/thirds of the voting power of the
issued
and outstanding stock entitled to voting power.
In
the case of corporations which have provided in their articles of
incorporation for the election of directors by cumulative voting,
any
director
or directors who constitute fewer than all of the incumbent directors
may
not be removed from office at any one time or as the result of any
one
transaction under the provisions of this section except upon the
vote of
stockholders owning sufficient shares to prevent each director’s election
to office at the time of removal.
The
articles of incorporation may require the concurrence of more than
two-thirds of the voting power of the issued and outstanding stock
entitled to voting power in order to remove one or more directors
from
office.
All
vacancies, including those caused by an increase in the number of
directors, may be filled by a majority of the remaining directors,
though
less than a quorum, unless it is otherwise provided in the articles
of
incorporation.
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The
shareholders may remove one or more directors with or without cause
unless
the articles of incorporation provide that directors may be removed
only
for cause.
If
cumulative voting is authorized, a director may not be removed if
the
number of votes sufficient to elect him under cumulative voting is
voted
against his removal. If cumulative voting is not authorized, a
director may be removed only if the number of votes cast to remove
him
exceeds the number of votes cast not to remove him.
A
director may be removed by the shareholders only at a meeting called
for
the purpose of removing him and the meeting notice must state that
the
purpose, or one of the purposes, of the meeting is removal of the
director.
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4.
Written consent in lieu of shareholder meeting
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Unless
otherwise provided in the articles of incorporation or the bylaws,
any
action required or permitted to be taken at a meeting of the stockholders
may be taken without a meeting if, before or after the action, a
written
consent thereto is signed by stockholders holding at least a majority
of
the voting power, except that if a different proportion of voting
power is
required for such an action at a meeting, then that proportion of
written
consents is required.
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Unless
otherwise provided in the articles of incorporation or the bylaws,
any
action required or permitted to be taken at a meeting of the stockholders
may be taken without a meeting if, before or after the action, a
written
consent thereto is signed by stockholders holding at least a majority
of
the voting power, except that if a different proportion of voting
power is
required for such an action at a meeting, then that proportion of
written
consents is required.
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5.
Board quorum
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Unless
the articles of incorporation or the bylaws provide for a greater
or
lesser proportion, a majority of the board of directors of the corporation
then in office, at a meeting duly assembled, is necessary to constitute
a
quorum for the transaction of business, and the act of directors
holding a
majority of the voting power of the directors, present at a meeting
at
which a quorum is present, is the act of the board of
directors.
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Unless
the articles of incorporation or the bylaws provide for a greater
or
lesser proportion, a majority of the board of directors of the corporation
then in office, at a meeting duly assembled, is necessary to constitute
a
quorum for the transaction of business, and the act of directors
holding a
majority of the voting power of the directors, present at a meeting
at
which a quorum is present, is the act of the board of directors
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Tax
Aspects
It
is
management’s belief that pursuant to the Internal Revenue Code Section 368 (a),
this change of domicile from Idaho to Nevada will qualify as a tax free exchange
as a mere change of place of incorporation, however effected.
Assuming
that the merger of the Company into its wholly-owned subsidiary qualifies as
a
reorganization within the meaning of Section 368(a) of the Code:
· No
gain
or loss will be recognized by a Shareholder of the Company as a result of the
merger with respect
to shares of the Company converted solely into shares of the surviving
company;
· The
tax
basis of the shares of stock of the surviving company received by the Company’s
Shareholders
will be the same as the tax basis of the Company’s stock exchanged
therefor;
· The
holding period of the surviving company stock received by the Company’s
Shareholders in the
merger will include the period during which the Company’s stock surrendered in
exchange therefor
were held, provided that such shares of the Company were held as capital assets
at the effective
date of the merger.
No
Opinion of Counsel and Advice to Seek Own Tax Adviser
Neither
the Company nor the nominees for Director have sought an opinion of counsel
with
respect to the tax consequences of the transactions to be considered at the
meeting. The Company and the nominees do not believe that the reincorporation
in
Nevada will have any tax consequences to the Company's Shareholders.
Shareholders are advised to consult with their own tax advisers or counsel
if
they have any questions regarding the tax aspects of the
transaction.
Voting
The
proposal to merge the Company with its wholly-owned Nevada subsidiary will
require the affirmative vote of the holders of at least a majority of the shares
entitled to vote thereon.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE CHANGE OF THE COMPANY’S STATE OF
DOMICILE FROM IDAHO TO NEVADA
(This
Space Intentionally Left Blank)
PROPOSAL
FIVE--MERGER WITH ETHOS ENVIRONMENTAL, INC.
The
following discussion assumes that the Company has effectuated Proposal 3 and
Proposal 4 as discussed above. For purposes of this paragraph, the “Company” and
any reference thereto, shall refer to the post-Reverse Split Nevada Company.
Any
reference to “VICI” shall refer to the present Company, and any recommendations
by the Board of Directors. Should Proposal 3 and Proposal 4 not be ratified,
and
the terms and conditions thereof completed, the transaction discussed in this
Proposal 5 is not likely to be consummated and will be terminated pursuant
to
the terms and conditions of the Agreement and Plan of Reorganization (the “APR
Merger”). Therefore, this Proposal assumes that Proposal 3 and Proposal 4 have
been ratified and all action taken to effectuate the proposed action has been
completed.
The
closing of the APR Merger is subject to various customary closing conditions,
including but not limited to shareholder approval by both companies.
The
description set forth herein of the terms and conditions of the APR Merger
is
qualified in its entirety by reference to the full text of such agreement,
which
is filed with this report as Exhibit F and incorporated by reference into this
Proposal 5. The Merger Agreement has been included to provide shareholders
with
information regarding the terms of the merger and the merger agreement is not
intended to provide any other factual information about the Company or Ethos
Environmental, Inc. All such information can be found in this Proxy Statement
and in other public filings made with the Securities and Exchange Commission,
what are available without charge at www.sec.gov.
The
Merger
The
APR
Merger provides for a business combination transaction by means of a merger
of
Ethos with and into the Company, with the Company as the corporation surviving
the merger. Under the terms of the APR Merger, the Company will acquire all
issued and outstanding shares of Ethos in exchange for 17,718,187 shares of
common stock of the Company. Shares of Company common stock an representing
an
estimated 97% of the total issued and outstanding shares of Company common
stock
shall be issued to the Ethos stockholders.
The
following summary of the material provisions of the APR Merger is qualified
by
reference to the complete text of the merger agreement, as amended, a copy
of
which is attached as Exhibit F to this proxy statement.
All
stockholders are encouraged to read the APR Merger in its entirety for a more
complete description of the terms and conditions of the actions described
therein and summarized herein.
After
careful consideration of the terms and conditions of the APR Merger, the Board
of Directors of VICI has determined that the APR Merger is fair to and in the
best interests of VICI and its stockholders. In reaching its decision with
respect to the APR Merger and the transactions contemplated thereby, the Board
of Directors of VICI reviewed the financial data and the due diligence and
evaluation materials provided by Ethos in order to determine that the
consideration to be paid to the Ethos stockholders was reasonable.
The
closing of the merger will take place promptly following the satisfaction of
the
conditions described below under “The Merger Agreement—Conditions to the Closing
of the Merger,” unless VICI and Ethos agree in writing to another time. The
merger is expected to be consummated promptly after the annual meeting of VICI's
stockholders described in this proxy statement.
Name
& Headquarters After completion of the Merger:
· the
name
of VICI shall be Ethos Environmental, Inc.;
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the
corporate headquarters and principal executive offices of VICI will
be
located at 7015 Alamitos Avenue in San Diego, CA 92154, which is
Ethos’s
corporate headquarters; and
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VICI
and Ethos will cause the common stock of VICI outstanding prior to
the APR
Merger, which is traded on the Over The Counter Trading Bulletin
Board
("OTCBB"), to continue trading on the OTCBB, albeit a new symbol
shall be
requested by the filing of the appropriate documentation.
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Merger
Consideration
Pursuant
to the APR Merger, the holders of securities of Ethos outstanding immediately
before the merger will receive, in exchange for such securities, 17,718,187
shares of Company common stock. Immediately following the APR Merger, the Ethos
stockholders will own approximately 97% of the total issued and outstanding
Company common stock. Unless otherwise indicated, this proxy statement assumes
that 17,718,187 Company common shares will be issued in conjunction with the
APR
Merger.
Post-Transaction
Operations
As
soon
as practical following the close of the transaction it is contemplated that
the
current business operations of the Company will be spun-off into Envirotech
Industrial Group, Inc., a Nevada corporation (“Envirotech”). Pursuant to the
spin-off each shareholder of record shall receive a dividend share in the
private company, Envirotech. Envirotech will focus its operations in the
agricultural industry focusing on emerging technology in the fertilizer and
plant growth enhancement sphere. Shareholder receiving a dividend share in
Envirotech shall be shareholder in a private company. The Company, based on
capital requirement and business conditions, may endeavor to register its
securities with the Securities and Exchange Commission facilitating Envirotech
becoming a publicly traded company. At
this time there is no definitive plan to register the shares of Envirotech
with
the SEC. Accordingly, shareholders should understand that any dividend shares
received pursuant to a spin-off would not have a public market and as such
would
have no liquidity. The Company makes no representation that following the
spin-off, the dividend shares would be registered with the SEC and therefore
Envirotech may never become a publicly traded company.
Following
the transaction, the Registrant will operate within the fuel reformulation
industry. Ethos currently manufactures and distributes a line of fuel
reformulation products designed to promote and foster an increase in fuel
mileage in both personal and commercial vehicles. Ethos currently markets its
products under the name Ethos Fuel Reformulators, or Ethos FR. These products
not only enhance gas mileage but function to reduce emissions and vehicle
maintenance costs. Ethos has patents in process covering specific areas on
synthetic oils, sulfur substitutes and varied formulation of its existing
products.
The
post-transaction company will not continue any operations in the area of
business currently conducted by the Registrant. The exclusive focus of the
post-transaction company shall be within the fuel reformulation industry. The
Company believes that the potential for growth in this area remains large with
the current global economy and ever present focus on the global rise in fuel
prices.
Post-Transaction
Management and Board of Directors.
The
directors and officers of Ethos in office at the time of closing of the
transaction shall be appointed the directors and officers of the
post-transaction Company and the current officers and directors of the Company
shall immediately resign from the office and positions with the Company and
shall be appointed the officers and directors of Envirotech.
As
of
March 31, 2006, directors and executive officers of VICI and their affiliates
(the “VICI Inside Stockholders”) beneficially owned and were entitled to vote
12,918,070 shares or approximately .026% of VICI's outstanding common stock.
The
VICI Inside Stockholders have also indicated that they intend to vote their
shares in favor of all other proposals being presented at the meeting and that
they will vote the shares they purchased in open market transactions in favor
of
all of the proposals being presented at the meeting, including the merger
proposal.
You
will
be entitled to vote or direct votes to be cast at the Annual meeting if you
owned shares of VICI common stock at the close of business on the record date
for the Annual meeting. You will have one vote for each share of VICI common
stock you owned at the close of business on the record date. On the record
date,
there were 500,177,953 shares of VICI common stock outstanding.
A
quorum
of VICI stockholders is necessary to hold a valid meeting. A quorum will be
present at the VICI special meeting if a majority of the outstanding shares
entitled to vote at the meeting are represented in person or by proxy.
Abstentions and broker non-votes will count as present for the purposes of
establishing a quorum.
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The
approval of the merger proposal will require the affirmative vote
of the
holders of a majority of the outstanding shares of VICI common stock
on
the record date. The merger will not be consummated if the holders
of more
than 50% of the common stock of VICI do not vote in the affirmative
for
the APR Merger.
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Please
note that you cannot seek conversion of your shares unless you affirmatively
vote against the APR Merger.
Dissenters
Rights
There
are
no dissenters’ rights applicable to this proposal.
Proxies
Proxies
may be solicited by mail, telephone or in person. VICI has engaged Action Stock
Transfer Corporation to assist in the solicitation of proxies. If you grant
a
proxy, you may still vote your shares in person if you revoke your proxy before
the special meeting.
When
you
consider the recommendation of VICI's board of directors in favor of adoption
of
the APR Merger proposal, you should keep in mind that VICI's executive officers
and members of VICI's board have interests in the APR Merger transaction that
are different from, or in addition to, your interests as a stockholder. These
interests include, among other things if the APR Merger is not approved, VICI
will be required to seek additional funds or possible business combination
in
order to remain operational.
Consummation
of the APR Merger and the related transactions is conditioned on the VICI
stockholders adopting this merger proposal. In addition, the consummation of
the
merger is conditioned upon the following:
· no
order,
stay, judgment or decree being issued by any governmental authority preventing,
restraining
or prohibiting in whole or in part, the consummation of such transactions;
· the
delivery by each party to the other party of a certificate to the effect that
the representations and
warranties of the delivering party are true and correct in all material respects
as of the closing and
all
covenants contained in the APR Merger have been materially complied with by
the
delivering
party;
· the
receipt of necessary consents and approvals by third parties and the completion
of necessary proceedings;
· VICI's
common stock being quoted on the OTCBB; and
· those
additional terms and conditions as fully set forth in the APR Agreement attached
hereto.
Ethos’s
Conditions to Closing of the APR Merger
The
obligations of Ethos to consummate the transactions contemplated by the merger
agreement, in addition to the conditions described above, are conditioned upon
each of the following, among other things:
· there
shall have been no material adverse effect with respect to VICI since the date
of the merger agreement;
· Ethos
shall have received a legal opinion substantially in the form annexed to the
merger agreement,
which is customary for transactions of this nature, from the SteadyLaw Group,
LLP, counsel
to VICI; and
· those
additional terms and conditions as fully set forth in the APR Agreement attached
hereto.
VICI's
Conditions to Closing of the APR Merger
The
obligations of VICI to consummate the transactions contemplated by the APR
Merger, in addition to the conditions described above in the second paragraph
of
this section, are conditioned upon each of the following, among other things:
· at
the
closing, there shall have been no material adverse effect with respect to Ethos
since the date of
the
APR Merger;
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VICI
shall have received a legal opinion substantially in the form annexed
to
the APR Merger, which is customary for transactions of this nature,
from
Michael Later, Esq., counsel to Ethos;
and
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· those
additional terms and conditions as fully set forth in the APR Agreement attached
hereto.
Termination,
Amendment and Waiver
The
APR
Merger may be terminated at any time prior to the Effective Time of the APR
Merger by the mutual written consent of the Registrant and Ethos. Either the
Registrant or Ethos may terminate the APR Merger (i) if the APR Merger is not
completed by June 15, 2006, (ii) if any legal restraint or prohibition
prohibiting the completion of the APR Merger becomes final or non-appealable,
or
(iii) if the majority of the stockholders of either the Registrant or Ethos
do
not vote in favor of the actions described therein. In addition, Ethos may
terminate the APR Merger if (i) Ethos’ board of directors determines that it is
required to do so pursuant to its fiduciary duties, or (ii) Registrant breaches
or fails to perform any of their respective representations, warranties or
covenants under the APR Merger. Further, Registrant may terminate the APR Merger
if (i) Registrant’s board of directors fails determines that it is required to
do so pursuant to its fiduciary duties, or (ii) Ethos breaches or fails to
perform any of their respective representations, warranties or covenants under
the APR Merger.
Quotation
or Listing
VICI's
outstanding common stock is quoted on the OTCBB. VICI and Ethos will use their
reasonable best efforts to ensure that VICI's common stock will continue to
be
quoted on the OTCBB.
The
APR
Merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and no gain or loss will be
recognized by VICI as a result of the APR Merger;
The
APR
Merger will be accounted for under the purchase method of accounting as a
reverse acquisition in accordance with U.S. generally accepted accounting
principles for accounting and financial reporting purposes. Under this method
of
accounting, Ethos will be treated as the “acquired” company for financial
reporting purposes. In accordance with guidance applicable to these
circumstances, the APR Merger will be considered to be a capital transaction
in
substance. Accordingly, for accounting purposes, the APR Merger will be treated
as the equivalent of Ethos issuing stock for the net monetary assets of VICI,
accompanied by a recapitalization. The net monetary assets of VICI will be
stated at their fair value, essentially equivalent to historical costs, with
no
goodwill or other intangible assets recorded.
The
APR
Merger and the transactions contemplated by the APR Merger are not subject
to
any additional federal or state regulatory requirement or approval, including
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR Act, except
for
filings with the State of Idaho necessary to effectuate the transactions
contemplated by the APR Merger.
We
believe that some of the information in this proxy statement constitutes
forward-looking statements within the definition of the Private Securities
Litigation Reform Act of 1995. However, the safe-harbor provisions of that
act
do not apply to statements made in this proxy statement. You can identify these
statements by forward-looking words such as “may,” “expect,” “anticipate,”
“contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar
words. You should read statements that contain these words carefully because
they:
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discuss
future expectations;
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contain
projections of future results of operations or financial condition;
or
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state
other “forward-looking” information.
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We
believe it is important to communicate our expectations to our stockholders.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors and cautionary
language discussed in this proxy statement provide examples of risks,
uncertainties and events that may cause actual results to differ materially
from
the expectations described by us or Ethos in such forward-looking statements,
including among other things:
· the
number and percentage of our stockholders voting against the merger proposal;
· outcomes
of government reviews, inquiries, investigations and related litigation;
· continued
compliance with government regulations;
· legislation
or regulatory environments, requirements or changes adversely affecting the
business in
which
Ethos is engaged;
· fluctuations
in customer demand;
· management
of rapid growth;
· general
economic conditions;
· Ethos’s
business strategy and plans;
All
forward-looking statements included herein attributable to any of VICI, Ethos
or
any person acting on either party’s behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Except to the extent required by applicable laws and regulations, VICI and
Ethos
undertake no obligations to update these forward-looking statements to reflect
events or circumstances after the date of this proxy statement or to reflect
the
occurrence of unanticipated events.
At
any
time prior to the closing, any party to the APR Merger may, in writing, to
the
extent legally allowed:
· extend
the time for the performance of any of the obligations or other acts of the
other parties to the
agreement;
· waive
any
inaccuracies in the representations and warranties made to such party contained
in the merger
agreement or in any document delivered pursuant to the merger agreement; and
· waive
compliance with any of the agreements or conditions for the benefit of such
party contained in
the
merger agreement.
VICI
and
Ethos have agreed that until closing or termination of the merger agreement,
the
parties will:
· cooperate
in good faith to jointly prepare all press releases and public announcements
pertaining to the
merger agreement and the transactions governed by it; and
· not
issue
or otherwise make any public announcement or communication pertaining to the
merger agreement
or the transaction without the prior consent of the other party, which shall
not
be unreasonably
withheld by the other party, except as may be required by applicable laws or
court process.
Shares
of
our common stock are currently traded on the over-the-counter market and are
quoted on the Over The Counter Bulletin Board ("OTCBB") under the symbol “VICI.”
Following the effective date of the APR Merger, shares of common stock of the
Company will be traded on the over-the-counter market under a symbol yet to
be
assigned, which the Company may not know prior to mailing this proxy statement
to its stockholders. The Company will publicly disseminate the new ticker symbol
for the common stock, as soon as it becomes available.
Financial
Information
A. 2004
AUDITED
Financial Statements, Ethos Environmental, Inc.
ETHOS
ENVIRONMENTAL, INC.
FINANCIAL
STATEMENTS
ETHOS
ENVIRONMENTAL, INC.
FINANCIAL
STATEMENTS
Table
of Contents
INDEPENDENT
AUDITORS’ REPORT …………………………………………. 1
FINANCIAL
STATEMENTS:
Balance
Sheets …………………………………………………………………
2
Statement
of Income …………………………………………………………… 3
Statement
of Stockholders’ Equity …………………………………………….. 4
Statements
of Cash Flows ……………………………………………………… 5
Notes
to
Financial Statements ……………………………………………..…. 6-9
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors
of Ethos
Environmental, Inc.
We
have
audited the accompanying consolidated balance sheet of Ethos Environmental,
Inc.
(the Company) as of December 31, 2004 and 2003, and the related statements
of income, stockholders' equity, and cash flows for the year ended
December 31, 2003 were unaudited. 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 audit.
We
conducted our audits in accordance with the auditing generally accepted in
the
United States of America. Those standards require that we plan and perform
the
audit to obtain reasonable assurance about whether the financial statement
is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Ethos Environmental, Inc. as of
December 31, 2004 and 2003, the results of its operations and its cash
flows for the years ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.
As
discussed in Note 6 to the financial statements, the company has restated the
financial statements as of December 31, 2004 and the year then ended to reflect
the correction of an error discovered subsequent to March 2, 2005.
/s/
Berry
& Co. CPA’S
Las
Vegas, Nevada
Restated
ETHOS
ENVIRONMENTAL, INC.
BALANCE
SHEETS
| |
|
|
|
ASSETS
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
2004
|
|
2003
|
|
Current
Assets:
|
|
|
|
|
|
|
| |
Cash
and cash equivalents
|
|
$1,057,137
|
|
$
27,054
|
| |
Accounts
receivable, net
|
|
317,902
|
|
40,664
|
| |
Inventory,
net
|
|
|
58,748
|
|
68,028
|
| |
|
|
|
|
|
|
|
|
| |
|
Total
current assets
|
|
1,433,787
|
|
135,746
|
| |
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
351,117
|
|
135,173
|
| |
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
| |
Other
|
|
|
|
82,110
|
|
37,400
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
82,110
|
|
37,400
|
| |
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
$
1,867,014
|
|
$
308,319
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Current
Liabiliities:
|
|
|
|
|
|
| |
Accounts
Payable
|
|
|
$
122,261
|
|
$
112,862
|
| |
Accrued
Expenses
|
|
|
38,918
|
|
19
|
| |
|
|
|
|
|
|
|
|
| |
|
Total
current liabilities
|
|
161,179
|
|
112,881
|
| |
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities:
|
|
|
|
|
|
| |
Loans
Payable
|
|
|
1,997
|
|
3,997
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
1,997
|
|
3,997
|
| |
|
|
|
|
|
|
|
|
| |
|
Total
Liabilities
|
|
|
163,176
|
|
116,878
|
| |
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
| |
Common
stock, $.001 par value, 200,000,000 shares
|
|
|
| |
|
Authorized;
17,609,287 and 12,487,487 shares
|
|
|
| |
|
issued
and outstanding
|
|
17,610
|
|
12,488
|
| |
Additional
paid-in capital
|
|
3,793,046
|
|
1,220,987
|
| |
Retained
earnings (deficit)
|
|
(2,106,818)
|
|
(1,042,034)
|
| |
|
|
|
|
|
|
|
|
| |
|
Total
stockholders' equity
|
|
1,703,838
|
|
191,441
|
| |
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
1,867,014
|
|
$
308,319
|
| |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial statements.
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF INCOME
| |
|
|
|
|
|
|
2004
|
|
2003
(Unaudited)
|
| |
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
$
332,780
|
|
$
198,812
|
| |
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
|
|
|
125,753
|
|
194,376
|
| |
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
|
|
|
207,027
|
|
4,436
|
| |
|
|
|
|
|
|
|
|
|
|
Selling,
General and Administrative Expenses:
|
|
|
|
| |
Automobile
expense
|
|
|
|
40,431
|
|
14,684
|
| |
Bad
debt expense
|
|
|
|
|
-
|
|
48,935
|
| |
Bank
service fees
|
|
|
|
|
1,240
|
|
430
|
| |
Commissions
|
|
|
|
|
118,229
|
|
25,038
|
| |
Depreciation
expense
|
|
|
|
37,702
|
|
10,105
|
| |
Insurance
|
|
|
|
|
2,897
|
|
998
|
| |
Rent
expense
|
|
|
|
|
62,159
|
|
52,283
|
| |
Repairs
and maintenance
|
|
|
|
19,129
|
|
7,280
|
| |
Professional
fees
|
|
|
|
|
657,853
|
|
124,212
|
| |
Taxes
and licenses
|
|
|
|
564
|
|
3,131
|
| |
Other
expenses
|
|
|
|
|
82,698
|
|
147,992
|
| |
Research
and development
|
|
|
|
46,950
|
|
-
|
| |
Telephone
and utilities
|
|
|
|
21,007
|
|
14,483
|
| |
Office
supplies and expense
|
|
|
32,106
|
|
2,041
|
| |
Meals
and travel expense
|
|
|
|
154,667
|
|
128,171
|
| |
Miscellaneous
|
|
|
|
|
1,845
|
|
5,053
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total
operating expenses
|
|
|
1,269,477
|
|
584,836
|
| |
|
|
|
|
|
|
|
|
|
| |
Net
operating income/(loss)
|
|
|
|
(1,062,450)
|
|
(580,400)
|
| |
|
|
|
|
|
|
|
|
|
|
Other
expenses:
|
|
|
|
|
|
|
|
| |
|
Interest
expense
|
|
|
|
(2,334)
|
|
(1,545)
|
| |
|
|
|
|
|
|
|
|
|
| |
Net
operating income/(loss) before income taxes
|
(1,064,784)
|
|
(581,945)
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Income
tax (expense) benefit
|
|
-
|
|
-
|
| |
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
|
|
$
(1,064,784)
|
|
$
(581,945)
|
| |
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit, beginning
|
|
|
|
(1,042,034)
|
|
(460,089)
|
| |
|
|
|
|
|
|
|
|
|
|
Retained
earnings (deficit), ending
|
|
|
|
(2,106,818)
|
|
(1,042,034)
|
| |
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial
statements.
ETHOS
ENVIRONMENTAL, INC.
STATEMENT
OF STOCKHOLDERS’ EQUITY
| |
|
|
Common
Stock Shares
|
|
Common
Stock
|
|
Additional
Paid-In Capital
|
|
Retained
Earnings / (Deficit)
|
|
Total
Stockholders' Equity
|
|
|
6,246,862
|
|
$
6,247
|
$
360,420
|
$
(460,089)
|
|
$
(93,422)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issuances
|
6,240,625
|
|
6,241
|
|
860,567
|
|
|
|
866,808
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss (unaudited)
|
-
|
|
-
|
|
-
|
|
(581,945)
|
|
(581,945)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
12,487,487
|
|
12,488
|
|
1,220,987
|
|
(1,042,034)
|
|
191,441
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issuances
|
5,121,800
|
|
5,122
|
|
2,572,059
|
|
-
|
|
2,577,181
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
-
|
|
-
|
|
-
|
|
(1,064,784)
|
|
(1,064,784)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
17,609,287
|
|
$
17,610
|
|
$
3,793,046
|
|
$
(2,106,818)
|
|
$
1,703,838
|
| |
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial statements
ETHOS
ENVIRONMENTAL, INC.
STATEMENT
OF CASH FLOWS
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
2004
|
|
2003
(Unaudited)
|
|
Operating
Activities:
|
|
|
|
|
|
|
| |
NET
income/(loss)
|
|
|
|
$
(1,064,784)
|
|
$
(581,945)
|
| |
Adjustments
to reconcile net income/(loss) to net cash
|
|
|
|
| |
used
in operating activities
|
|
|
|
|
|
| |
Depreciation
|
|
|
|
37,702
|
|
10,103
|
| |
Changes
in operating assets and liabilities:
|
|
|
|
|
| |
(Increase)/Decrease
in receivables
|
|
|
(277,238)
|
|
14,390
|
| |
(Increase)/Decrease
in inventory
|
|
|
9,280
|
|
(90,417)
|
| |
(Increase)/Decrease
in other assets
|
|
|
(44,710)
|
|
(32,000)
|
| |
Increase/(Decrease)
in accounts payable
|
|
9,399
|
|
124,733
|
| |
Increase/(Decrease)
in accrued expenses
|
|
38,899
|
|
19
|
| |
|
|
|
|
|
|
|
|
| |
Net
cash used in operating activities
|
|
|
(1,291,452)
|
|
(555,115)
|
| |
|
|
|
|
|
|
|
|
| |
Investing
Activities:
|
|
|
|
|
|
|
| |
Purchase
of property, pland and equipment
|
|
(253,647)
|
|
(119,635)
|
| |
|
|
|
|
|
|
|
|
| |
Net
cash used in investing activities
|
|
|
(253,647)
|
|
(119,635)
|
| |
|
|
|
|
|
|
|
|
| |
Financing
Activities:
|
|
|
|
|
|
|
| |
Proceeds
from loans payable
|
|
|
-
|
|
3,997
|
| |
Repayment
of loans payable
|
|
|
(2,000)
|
|
-
|
| |
Proceeds
from capital contributions
|
|
|
2,577,182
|
|
686,500
|
| |
|
|
|
|
|
|
|
|
| |
Net
cash provided by financing activities
|
|
2,575,182
|
|
690,497
|
| |
|
|
|
|
|
|
|
|
| |
Increase
in Cash and Cash Equivalents
|
|
1,030,083
|
|
15,747
|
| |
|
|
|
|
|
|
|
|
| |
Cash
and cash equivalents, beginning of year
|
|
27,054
|
|
11,307
|
| |
|
|
|
|
|
|
|
|
| |
Cash
and Cash Equivalents, End of Year
|
|
$
1,057,137
|
|
$
27,054
|
| |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial statements
ETHOS
ENVIRONMENTAL, INC.
NOTES
TO THE FINANCIAL STATEMENTS
Note
1. Organization
Ethos
Environmental, Inc. (the Company) develops and markets fuel enhancing products
that reduce fuel costs and emissions. The Company is based in southern
California and has developed its product marketing to locations that include
the
United States, Asia, Central and South America, Canada and Europe.
Note
2. Summary of Significant Accounting Policies
The
Company maintains its records on an accrual basis of accounting, which
recognizes revenues when earned and expenses when incurred.
Accounts
Receivable
Accounts
receivable is recorded at the amount the Company expects to collect on balances
outstanding at year-end. Management closely monitors outstanding balances and
writes off, as of year-end, all balances that have not been collected by the
time the financial statements are issued.
Inventory
Inventory
consists primarily of raw materials and is stated at the lower of cost or market
value.
Property
and Equipment
Property
and equipment are recorded at cost and are depreciated over their estimated
useful lives using the straight-line depreciation method. Useful lives of asset
classes range from 5 to 7 years.
For
income tax purposes, depreciation is computed using the accelerated cost
recovery system and the modified accelerated cost recovery system.
ETHOS
ENVIRONMENTAL, INC.
NOTES
TO THE FINANCIAL STATEMENTS
Note
2. Summary of Significant Accounting Policies
Income
Taxes
The
Company accounts for its income taxes under the provisions of Statement of
Financial Accounting Standards 109 (SFAS 109). Income taxes are provided for
the
tax effects of transactions reported in the financial statements and consist
of
taxes currently due plus deferred taxes related primarily to differences between
the bases of certain assets and liabilities for financial and tax reporting.
The
deferred taxes represent the future tax return consequences of those
differences, which will either be taxable when the assets and liabilities are
recovered or settled.
Estimates
The
preparation of financial statements in conformity with the generally accepted
accounting principles requires management to make estimates and assumptions
that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note
3. Property and Equipment
| |
|
|
|
|
|
|
| |
|
|
|
2004
|
|
2003
|
|
Vehicles
|
|
|
|
$
277,202
|
|
$
107,795
|
|
Equipment
|
|
|
|
89,722
|
|
25,134
|
|
Furniture
and Fixtures
|
|
|
32,001
|
|
12,349
|
| |
|
|
|
398,925
|
|
145,278
|
|
Less:
accumulated depreciation
|
|
(47,808)
|
|
(10,105)
|
| |
|
|
|
$
351,117
|
|
$
135,173
|
ETHOS
ENVIRONMENTAL, INC.
NOTES
TO THE FINANCIAL STATEMENTS
Note
4. Income Taxes
Deferred
tax assets and liabilities consist of the following:
| |
|
|
|
|
|
|
| |
|
|
|
2004
|
|
2003
|
|
Current
taxes
|
|
|
|
$
(335,777)
|
|
$
107,795
|
|
Deferred
taxes
|
|
|
|
19,336
|
|
25,134
|
|
Valuation
allowance
|
|
|
316,441
|
|
12,349
|
| |
|
|
|
-
|
|
-
|
SFAS
No.
109 specifies tat deferred tax assets are to be reduced by a valuation allowance
if it is more likely than not that some portion or all of the deferred tax
asset
will not be realized. Management has determined that it is more likely than
not
that the full benefit of the net deferred tax asset will not be realized, so
management has established a full valuation allowance at December 31,
2004.
Net
operating loss (NOL) carry forwards may be limited under the Internal Revenue
Code should significant changes in ownership occur.
The
tax
bases of accounts receivable exceed their bases for financial reporting by
the
amount of the allowance for doubtful accounts. The excess will be deductible
when substantially all collection efforts have been exhausted. Property and
equipment exceed their tax bases by the cumulative amount that accelerated
depreciation exceeds straight-line depreciation. The excess will be taxable
in
future periods through reduced depreciation deductions for tax
purposes.
Note
5. Concentrations of Credit Risk
The
Company maintains its cash balance at a financial institution that is insured
by
the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2004,
the Company’s uninsured cash balance totals $958,051.
ETHOS
ENVIRONMENTAL, INC.
NOTES
TO THE FINANCIAL STATEMENTS
Note
6. Restatement
For
the
year ended December 31, 2004, the company previously recorded revenue of
$6,384,000, or approximately 95% of total revenue. The company produced invoices
for $4,218,000 and $2,166,000 in October and November 2004, respectively and
the
$6,384,000 was recorded as outstanding accounts receivable at December 31,
2004.
Subsequent to the issuance of the audit report dated March 2, 2005 the company
determined that it had recognized the income and related costs in error, and
has
restated the financial statements to correct this error. The effect of this
restatement was to reduce previously reported revenue, cost of sales, net
income, accounts receivable, accounts payable, income tax expense and retained
earnings as follows:
| |
|
|
|
As
Previously Reported
|
|
As
Restated
|
|
Difference
|
| |
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
$
6,716,780
|
$
332,780
|
$
(6,384,000)
|
|
Cost
of Sales
|
|
|
|
2,630,820
|
|
125,753
|
|
(2,505,067)
|
|
Net
Income
|
|
|
|
2,197,004
|
|
1,064,784
|
|
(1,132,220)
|
|
Accounts
Receivable
|
|
|
6,701,902
|
|
317,902
|
|
(6,384,000)
|
|
Accounts
Payable
|
|
|
2,627,327
|
|
122,261
|
|
(2,505,066)
|
|
Income
Tax (Expense) Benefit
|
|
(617,145)
|
|
-
|
|
617,145
|
|
Retained
Earnings
|
|
|
1,511,330
|
|
(2,106,818)
|
|
(3,618,148)
|
B. 2005 AUDITED
Financial Statements, Ethos Environmental, Inc.
|
ETHOS
ENVIRONMENTAL, INC.
FINANCIAL
REPORT
|
C
O N T E N T S
Page
INDEPENDENT
AUDITORS'
REPORT
1
FINANCIAL
STATEMENTS
BALANCE
SHEETS
2
STATEMENTS
OF
OPERATIONS
3
STATEMENTS
OF STOCKHOLDERS'
EQUITY
4
STATEMENTS
OF CASH
FLOWS
5
NOTES
TO
FINANCIAL STATEMENTS
6 - 10
INDEPENDENT
AUDITORS' REPORT
To
the
Board of Directors of
Ethos
Environmental, Inc.
San
Diego, California
We
have
audited the accompanying balance sheet of Ethos Environmental, Inc. ("the
Company") as of December 31, 2005, and the related statements of
operations, stockholders' equity and cash flows for the year then ended.
These
financial statements are the responsibility of the Company's management.
Our
responsibility is to express an opinion on the 2005 financial statements
based
on our audit. The 2004 financials statements were audited by other auditors
whose report dated March 2, 2005, with respect to the financial statements
and August 10, 2006, with respect to the restatement of the 2004 financial
statements, expressed an unqualified opinion on those statements. As discussed
in Note 2, the Company has restated its 2004 financial statements effective
August 10, 2006, to reflect the correction of an error related to revenue
recognition.
We
conducted our audit in accordance with auditing standards generally accepted
in
the United States. Those standards require that we plan and perform the audit
to
obtain reasonable assurance about whether the financial statements are free
of
material misstatements. 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 the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In
our
opinion, the 2005 financial statements referred to above present fairly,
in all
material respects, the financial position of Ethos Environmental, Inc. as
of
December 31, 2005, the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted
in
the United States.
The
accompanying financial statements have been prepared assuming the Company
will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has experienced recurring losses from operations and has a
substantial accumulated deficit. These conditions raise substantial doubt
about
the Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/S/
PETERSON SULLIVAN PLLC
Seattle,
Washington
ETHOS
ENVIRONMENTAL, INC.
BALANCE
SHEETS
| |
|
|
|
ASSETS
|
2005
|
|
2004
(As Restated)
|
|
Current
Assets
|
|
|
|
| |
Cash
|
|
$
198,498
|
|
$
1,057,137
|
| |
Restricted
cash
|
300,000
|
|
|
| |
Accounts
receivable, net
|
241,085
|
|
317,902
|
| |
Inventory
|
259,564
|
|
58,748
|
| |
Building
deposit
|
200,000
|
|
|
| |
|
|
|
Total
current assets
|
1,199,147
|
|
1,433,787
|
|
Property
and Equipment, net
|
369,457
|
|
351,117
|
|
Other
Assets
|
|
|
|
| |
Loans
receivable
|
84,110
|
|
77,110
|
| |
Other
|
|
8,000
|
|
5,000
|
| |
|
|
|
|
92,110
|
|
82,110
|
| |
|
|
|
Total
assets
|
$
1,660,714
|
|
$
1,867,014
|
| |
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
| |
Accounts
payable
|
$
689,836
|
|
$
122,261
|
| |
Accrued
expenses
|
129,477
|
|
38,918
|
| |
Loan
payable
|
13,000
|
|
1,997
|
| |
|
|
|
Total
liabilities
|
832,313
|
|
163,176
|
|
Stockholders'
Equity
|
|
|
|
| |
Common
stock, $.001 par value, 200,000,000 shares
|
|
|
| |
|
authorized;
22,717,477 and 17,609,287 shares
|
|
|
|
| |
|
issued
and outstanding in 2005 and 2004, respectively
|
22,718
|
|
17,610
|
| |
Additional
paid-in capital
|
3,964,138
|
|
3,793,046
|
| |
Accumulated
deficit
|
(3,158,455)
|
|
(2,106,818)
|
| |
|
|
|
Total
stockholders' equity
|
828,401
|
|
1,703,838
|
| |
|
|
|
Total
liabilities and stockholders' equity
|
$
1,660,714
|
|
$
1,867,014
|
| |
|
|
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF OPERATIONS
| |
|
|
|
|
2005
|
|
2004
(As Restated)
|
|
Sales
|
|
|
$
1,780,825
|
|
$
332,780
|
|
Cost
of sales
|
526,459
|
|
125,753
|
| |
|
|
|
Gross
profit
|
1,254,366
|
|
207,027
|
|
Selling
expenses
|
483,953
|
|
272,896
|
|
General
and administrative
|
1,821,160
|
|
996,581
|
| |
|
|
|
Total
operating expenses
|
2,305,113
|
|
1,269,477
|
| |
|
|
|
Net
operating loss
|
(1,050,747)
|
|
(1,062,450)
|
|
Interest
expense
|
(890)
|
|
(2,334)
|
| |
|
|
|
Net
loss
|
$
(1,051,637)
|
|
$
(1,064,784)
|
| |
|
|
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF STOCKHOLDERS' EQUITY
| |
|
|
|
|
Common
Stock
|
|
Additional
|
|
|
|
Total
|
| |
|
|
|
|
Shares
|
|
Amount
|
|
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Stockholders'
Equity
|
|
|
12,487,487
|
|
$
12,488
|
|
$
1,220,987
|
|
$(1,042,034)
|
|
$
191,441
|
|
Common
stock issued for cash
|
5,121,800
|
|
5,122
|
|
2,572,059
|
|
-
|
|
2,577,181
|
|
Net
loss (as restated)
|
-
|
|
-
|
|
-
|
|
(1,064,784)
|
|
(1,064,784)
|
|
|
17,609,287
|
|
17,610
|
|
3,793,046
|
|
(2,106,818)
|
|
1,703,838
|
|
Common
stock issued for cash
|
5,108,190
|
|
5,108
|
|
171,092
|
|
|
|
176,200
|
|
Net
loss
|
|
|
|
|
|
|
|
(1,051,637)
|
|
(1,051,637)
|
|
|
22,717,477
|
|
$
22,718
|
|
$
3,964,138
|
|
$(3,158,455)
|
|
$
828,401
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF CASH FLOWS
| |
|
|
|
|
2005
|
|
2004
(As
Restated)
|
|
Cash
Flows from Operating Activities
|
|
|
|
| |
Net
loss
|
$(1,051,637)
|
|
$
(1,064,784)
|
| |
Adjustments
to reconcile net loss to net cash
|
|
|
|
| |
|
used
in operating activities
|
|
|
|
| |
|
Depreciation
|
83,209
|
|
37,702
|
| |
|
Changes
in operating assets and liabilities
|
|
|
|
| |
|
|
Accounts
receivable
|
76,817
|
|
(277,238)
|
| |
|
|
Inventory
|
(200,816)
|
|
9,280
|
| |
|
|
Loans
receivable and other assets
|
(10,000)
|
|
(44,710)
|
| |
|
|
Accounts
payable
|
567,575
|
|
9,399
|
| |
|
|
Accrued
expenses
|
90,559
|
|
38,899
|
| |
|
|
|
Net
cash used in operating activities
|
(444,293)
|
|
(1,291,452)
|
|
Cash
Flows from Investing Activities
|
|
|
|
| |
Building
deposit
|
(200,000)
|
|
|
| |
Purchase
of property and equipment
|
(101,549)
|
|
(253,647)
|
| |
|
|
|
Net
cash used in investing activities
|
(301,549)
|
|
(253,647)
|
|
Cash
Flows from Financing Activities
|
|
|
|
| |
Proceeds
from loan payable
|
11,003
|
|
-
|
| |
Repayment
of loan payable
|
|
|
(2,000)
|
| |
Proceeds
from sale of common stock
|
176,200
|
|
2,577,182
|
| |
|
|
|
Net
cash provided by financing activities
|
187,203
|
|
2,575,182
|
|
Net
Change in Cash
|
(558,639)
|
|
1,030,083
|
|
Cash,
beginning of year
|
1,057,137
|
|
27,054
|
|
Cash,
end of year
|
$
498,498
|
|
$
1,057,137
|
|
Reconciliation
to Balance Sheet Presentation:
|
|
|
|
| |
Cash
|
|
$
198,498
|
|
$
1,057,137
|
| |
Restricted
cash
|
300,000
|
|
-
|
| |
|
|
|
|
$
498,498
|
|
$
1,057,137
|
| |
|
|
|
|
|
|
|
NOTES
TO FINANCIAL STATEMENTS
Note
1. Organization and Significant Accounting Policies
Organization
Ethos
Environmental, Inc. ("the Company") manufactures and distributes fuel
reformulating products that increase fuel mileage, reduce emissions, and
maintain lower fuel costs. The Company is based in Southern California and
has
experienced tremendous growth in the global market place, such as North and
South America, Western Europe and the Asian Pacific Rim.
Going
Concern
The
Company has incurred significant losses from operations in the last two years.
The Company's ability to continue as a going concern is in substantial doubt
and
is dependent upon obtaining additional financing and/or achieving a sustainable
profitable level of operations.
Management
of the Company has undertaken steps as part of a plan with the goal of
sustaining the Company operations for the next twelve months and beyond.
These
steps include: (a) attempting to raise additional capital and/or other forms
of
financing; (b) controlling overhead and unnecessary expenses; and (c) continuing
to increase the sales of its fuel reformulating product. There can be no
assurance that any of these efforts will be successful.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and disclosures. Actual
results could differ from the estimated amounts.
Cash
Cash
includes a payroll account and an operating checking account held at a financial
institution. The Company's cash balances exceed federally insured limits
from
time to time.
Restricted
cash consists of a deposit made in August 2005 that is being held in a bank
in
Beijing, China. This deposit is required by the government of China and must
be
held in the account a minimum of six months in order for the Company to conduct
business in China.
Accounts
Receivable
Accounts
receivable are stated at their principal balances, do not bear interest and
are
generally unsecured. Management considers all balances over 10 days old to
be
past due. However, if credit is extended management conducts a periodic review
of the collectibility of its accounts receivable. If an account is determined
to
be uncollectible based on historical experience and the current economic
climate, an allowance is established and the account is written off against
the
allowance. The Company determined that an allowance of $576,782 and $48,935
at
December 31, 2005 and 2004, respectively, was necessary.
At
December 31, 2005, one customer located in Hong Kong accounted for 51% of
the net accounts receivable balance and another customer, located in the
U.S.
accounted for 19% of the net balance. At December 31, 2004, one U.S.
customer accounted for 76% of the net accounts receivable balance.
Inventory
Inventory
consists primarily of the Company's fuel reformulating product and is stated
at
the lower of cost or market.
Building
Deposit
In
December 2005, the Company paid a refundable deposit of $200,000 for the
purchase of a building. See Note 6 for more discussion.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the shorter of the anticipated lease term
or the
estimated useful life. The Company's policy is to capitalize items with a
cost
greater than $4,000 and an estimated useful life greater than one year. The
Company reviews all property and equipment for impairment at least
annually.
Loan
Receivable
Loans
receivable consist of loans to a contractor. All loans have no stated repayment
terms, are due on demand, do not bear interest and are unsecured.
Loans
Payable
There
is
one loan payable to an employee. This loan has no stated repayment terms,
is due
on demand, bears interest at 10% and is unsecured. A total of $890 and $2,334
was paid in interest to the employee in 2005 and 2004,
respectively.
Revenue
Recognition
Revenue
from the sale of fuel reformulating products is recorded when the product
is
shipped, the price is fixed and determinable, collection is reasonably assured,
and no further obligations of the Company remain.
There
was
one U.S. customer that accounted for 40% of 2005 sales and one Hong Kong
customer that accounted for 30% of 2005 sales.
In
2004,
there was one U.S. customer that accounted for 76% of sales.
Advertising
Costs
Advertising
costs are expensed as incurred. Advertising expense for the years ended
December 31, 2005 and 2004, was $231,380 and $0, respectively.
Shipping
and Handling
Expenses
related to shipping and handling are included in "cost of sales" in the
statement of operations.
Concentrations
The
Company uses one vendor for most of its fuel reformulating products although
there are other companies that can provide equivalent products. This vendor
accounted for 90% and 86% of product purchases in 2005 and 2004,
respectively.
Income
Taxes
The
Company accounts for its income taxes under the provisions of Statements
of
Financial Accounting Standards No. 109 (SFAS No. 109). Income taxes are provided
for the tax effects of transactions reported in the financial statements
and
consist of taxes currently due plus deferred taxes related primarily to
differences between the bases of certain assets and liabilities for financial
and tax reporting. The deferred taxes represent the future tax return
consequences of those differences, which will either be taxable when the
assets
and liabilities are recovered or settled.
Foreign
Operations
Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the local functional currency (the U.S.
Dollar) are included in "general and administrative" expenses in the statements
of operations, which amounts were not material for the years ended
December 31, 2005 and 2004.
Reclassification
Certain
items from the 2004 financial statements have been reclassified to conform
to
the 2005 presentation.
Note
2. Prior Period Adjustment
The
Company restated its 2004 financial statements to reflect the correction
of an
error related to revenue recognition. There was a product sale originally
recorded as revenue in 2004 for which the product was never shipped. The
adjustment reduced 2004 revenue and accounts receivable by $6,384,000. The
adjustment also reduced cost of goods sold and accounts payable by $2,505,067.
In addition, the Company increased its valuation allowance against net deferred
tax assets by $617,145. As a result, 2004 net income was reduced from $2,197,004
to a net loss of $1,064,784 and retained earnings was reduced from $1,511,330
to
a deficit of $2,106,818.
Note
3. Property and Equipment
The
Company's property and equipment consisted of the following at
December 31:
| |
|
2005
|
|
2004
|
|
Vehicles
|
|
|
|
|
|
Equipment
|
|
167,591
|
|
89,722
|
|
Furniture
and fixtures
|
|
14,727
|
|
32,001
|
|
Computers
|
|
35,790
|
|
|
| |
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
|
|
| |
|
|
|
|
Note
4. Income Taxes
The
Company is liable for taxes in the United States. As of December 31, 2005,
the Company did not have any income for tax purposes and therefore, no tax
liability or expense has been recorded in these financial
statements.
The
Company has tax losses of approximately $2,802,000 available to reduce future
taxable income. The tax loss expires between the years 2022 and
2025.
The
deferred tax asset associated with the tax loss carryforward is approximately
$953,000. The Company has provided a valuation allowance against the deferred
tax asset. The valuation allowance increased by $358,000 and $362,000 for
2005
and 2004, respectively.
Net
operating loss carryforwards may be limited under the Internal Revenue Code
should significant changes in ownership occur.
Note
5. Operating Leases
The
Company leases an office building under a lease agreement that expires in
July
2012. The rent expense for the year ended December 31, 2005 and 2004, totaled
to
$49,634 and $58,958, respectively.
The
Company's future annual minimum lease payments are as follows for years ending
December 31:
|
2006
|
|
|
|
2007
|
|
52,657
|
|
2008
|
|
54,236
|
|
2009
|
|
55,863
|
|
2010
|
|
57,539
|
|
Thereafter
|
|
94,435
|
|
Total
|
|
|
Note
6. Subsequent Events
On
January 31, 2006, the Company completed the purchase of a new warehouse
building. The land and building cost a total of $5.25 million. The Company
obtained a loan of $4.75 million to fund the purchase. The loan bears interest
at 12%, requires interest-only monthly payments starting March 1, 2006, with
the
principal and any remaining interest due in full on January 30, 2007. The
loan
is secured by a deed of trust on the building.
On
April
20, 2006, the Company retained a consultant for certain corporate and product
imaging and advertising services for $25,000 per month with a term of 12
months.
In
May
2006, the Company entered into a five-year distributorship agreement with
another U.S. corporation ("the Distributor"). The agreement gives the
Distributor the rights to market the Company's product in specified marketing
channels throughout Europe, North America and South America. This agreement
contains minimum purchase requirements ranging from $3.5 million in the first
year to $25 million in the fifth year. There are certain other covenants
that
must be met by the Distributor on an annual basis, the failure of which would
give the Company the right to terminate the agreement.
C. March 31, 2006 Financial Information, Ethos Environmental,
Inc.
(Unaudited)
|
ETHOS
ENVIRONMENTAL, INC.
FINANCIAL
REPORT
|
C
O N T E N T S
Page
FINANCIAL
STATEMENTS
BALANCE
SHEET
1
STATEMENTS
OF
OPERATIONS
2
STATEMENTS
OF STOCKHOLDERS'
EQUITY
3
STATEMENTS
OF CASH
FLOWS
4
NOTES
TO
FINANCIAL STATEMENTS
-
5 - 7
ETHOS
ENVIRONMENTAL, INC.
BALANCE
SHEET
UNAUDITED
| |
|
|
|
ASSETS
|
|
|
Current
Assets
|
|
| |
Cash
|
|
$
98,566
|
| |
Deposit
|
300,000
|
| |
Accounts
receivable, net
|
847,048
|
| |
Inventory
|
54,729
|
| |
|
|
|
Total
current assets
|
1,300,343
|
|
Property
and Equipment, net
|
5,747,848
|
|
Other
Assets
|
|
| |
Loans
receivable
|
89,110
|
| |
Other
|
|
5,000
|
| |
|
|
|
|
94,110
|
| |
|
|
|
Total
assets
|
$
7,142,301
|
| |
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
Current
Liabilities
|
|
| |
Accounts
payable
|
$
723,390
|
| |
Accrued
expenses
|
129,477
|
| |
Loan
payable
|
13,000
|
| |
Note
payable
|
4,750,000
|
| |
|
|
|
Total
current liabilities
|
5,615,867
|
|
Stockholders'
Equity
|
|
| |
Common
stock, $.001 par value, 200,000,000 shares authorized;
|
| |
|
22,717,477
shares issued and outstanding
|
22,718
|
| |
Additional
paid-in capital
|
3,964,138
|
| |
Accumulated
deficit
|
(2,460,422)
|
| |
|
|
|
Total
stockholders' equity
|
1,526,434
|
| |
|
|
|
Total
liabilities and stockholders' equity
|
$
7,142,301
|
| |
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF OPERATIONS
UNAUDITED
| |
|
|
|
|
2006
|
|
2005
|
|
Sales
|
|
|
$
1,318,925
|
|
$
19,092
|
|
Cost
of sales
|
231,063
|
|
20,444
|
| |
|
|
|
Gross
profit (loss)
|
1,087,862
|
|
(1,352)
|
|
Selling
expenses
|
125,001
|
|
81,525
|
|
General
and administrative
|
264,828
|
|
144,016
|
| |
|
|
|
Total
operating expenses
|
389,829
|
|
225,541
|
| |
|
|
|
Net
income (loss)
|
$
698,033
|
|
$
(226,893)
|
| |
|
|
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENT
OF STOCKHOLDERS' EQUITY
UNAUDITED
| |
|
|
|
|
Common
Stock
|
|
Additional
|
|
|
|
Total
|
| |
|
|
|
|
Shares
|
|
Amount
|
|
Paid-In
Capital
|
Accumulated
Deficit
|
Stockholders'
Equity
|
|
|
22,717,477
|
|
$
22,718
|
|
$
3,964,138
|
|
$(3,158,455)
|
|
$
828,401
|
|
Net
income
|
-
|
|
-
|
|
-
|
|
698,033
|
|
698,033
|
|
|
22,717,477
|
|
$
22,718
|
|
$
3,964,138
|
|
$(2,460,422)
|
|
$
1,526,434
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF CASH FLOWS
UNAUDITED
| |
|
|
|
|
2006
|
|
2005
|
|
Cash
Flows from Operating Activities
|
|
|
|
| |
Net
income (loss)
|
$
698,033
|
|
$
(226,893)
|
| |
Adjustments
to reconcile net income (loss) to net cash
|
|
|
|
| |
|
provided
by (used in) operating activities:
|
|
|
|
| |
|
Depreciation
|
20,300
|
|
-
|
| |
|
Changes
in operating assets and liabilities:
|
|
|
|
| |
|
|
Accounts
receivable
|
(605,963)
|
|
(2,660)
|
| |
|
|
Inventory
|
204,835
|
|
(136,653)
|
| |
|
|
Loans
receivable and other assets
|
(2,000)
|
|
(19,250)
|
| |
|
|
Accounts
payable
|
33,554
|
|
|
| |
|
|
Accrued
expenses
|
-
|
|
|
| |
|
|
|
Net
cash provided by (used in) operating activities
|
348,759
|
|
(385,456)
|
|
Cash
Flows from Investing Activities
|
|
|
|
| |
Purchase
of property and equipment
|
(5,198,691)
|
|
(26,477)
|
|
Cash
Flows from Financing Activities
|
|
|
|
| |
Proceeds
from note payable
|
4,750,000
|
|
|
| |
Proceeds
from sale of common stock
|
|
|
100,949
|
| |
Repayments
of notes payable
|
|
|
(3,000)
|
| |
|
|
|
Net
cash provided by financing activities
|
4,750,000
|
|
97,949
|
|
Net
Change in Cash
|
(99,932)
|
|
(313,984)
|
|
Cash,
beginning of period
|
198,498
|
|
1,057,136
|
|
Cash,
end of period
|
$
98,566
|
|
$
743,152
|
| |
|
|
|
|
|
|
|
NOTES
TO FINANCIAL STATEMENTS
Note
1. Organization and Significant Accounting Policies
Organization
Ethos
Environmental, Inc. ("the Company") manufactures and distributes fuel
reformulating products that increase fuel mileage, reduce emissions, and
maintain lower fuel costs. The Company is based in Southern California and
has
operations in the global market place, such as North and South America, Western
Europe and the Asian Pacific Rim.
Going
Concern
The
Company has incurred significant losses from operations in the last two years.
As
shown
in the accompanying financial statements, the Company has an accumulated
deficit
through March 31, 2006. In addition, the Company's current liabilities
exceed its current assets by $4,315,524 as of March 31, 2006. The
Company's ability to continue as a going concern is in substantial doubt
and is
dependent upon obtaining additional financing and/or achieving a sustainable
profitable level of operations.
Management
of the Company has undertaken steps as part of a plan with the goal of
sustaining Company operations for the next twelve months and beyond. These
steps
include: (a) attempting to raise additional capital and/or other forms of
financing; (b) controlling overhead and other expenses; and (c) continuing
to
increase the sales of its fuel reformulating product. There can be no assurance
that any of these efforts will be successful.
Interim
Financial Statements
The
accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information, with the instructions to Form 10-QSB, and with Regulation S-B.
Accordingly, they do not include all the information and footnotes required
by
generally accepted accounting principles for complete financial statements.
The
results of operations reflect interim adjustments, all of which are of a
normal
recurring nature and which, in the opinion of management, are necessary for
a
fair presentation of the results for such interim period. The results reported
in these interim financial statements should not be regarded as necessarily
indicative of results that may be expected for the entire year. Certain
information and note disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been
condensed or omitted pursuant to the Securities and Exchange Commission's
rules
and regulations. These unaudited interim financial statements should be read
in
conjunction with the audited annual financial statements for the year ended
December 31, 2005.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and disclosures. Actual
results could differ from the estimated amounts.
Note
Payable
On
January 31, 2006, the Company completed the purchase of a new warehouse
building. The land and building cost a total of $5.25 million. The Company
obtained a loan of $4.75 million to partially fund the purchase. The loan
bears
interest at 12%, requires interest-only monthly payments starting March 1,
2006, with the principal and any remaining interest due in full on
January 30, 2007. The loan is secured by a deed of trust on the building. A
total of $55,416 of interest was expensed during the quarter ended
March 31, 2006, and is included in general and administrative expenses in
these financial statements.
Revenue
Recognition
Revenue
from the sale of fuel reformulating products is recorded when the product
is
shipped, the price is fixed and determinable, collection is reasonably assured,
and no further obligations of the Company remain.
Concentrations
The
Company uses one vendor for most of its fuel reformulating products although
there are other companies that can provide equivalent products.
Foreign
Operations
Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the local functional currency (U.S.
dollar)
are included in "general and administrative" expenses in the statement of
operations, which amount was not material for the quarters ended March 31,
2006 and 2005.
New
Accounting Pronouncements
In
July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, "Accounting
for Uncertainty in Income Taxes-an interpretation of FASB Statement No.
109."
This
Interpretation provides guidance for recognizing and measuring uncertain
tax
positions, as defined in Statement of Financial Accounting Standards (SFAS)
No.
109, "Accounting
for Income Taxes." FIN
No.
48 prescribes a threshold condition that a tax position must meet for any
of the
benefit of an uncertain tax position to be recognized in the financial
statements. Guidance is also provided regarding derecognition, classification
and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal
years beginning after December 15, 2006. The Company does not expect that
this
Interpretation will have a material impact on their financial position,
results of operations or cash flows.
Note
2. Subsequent Events
On
April 20, 2006, the Company retained a consultant for certain corporate and
product imaging and advertising services for $25,000 per month with a term
of 12
months.
In
May
2006, the Company entered into a five-year distributorship agreement with
another U.S. corporation ("the distributor"). The agreement gives the
distributor the rights to market the Company's product in specified marketing
channels through out Europe, North America and South America. This agreement
requires the distributor to maintain minimum purchases ranging from $3.5
million
in the first year to $25 million in the fifth year. There are certain other
covenants that must be met by the distributor on an annual basis, the failure
of
which would give the Company the right to terminate the agreement.
The
Company has executed a Definitive Agreement (the "agreement") with Victor
Industries, Inc., a publicly-traded company. As part of the agreement, it
is
expected that Victor Industries, Inc. will redomicile to Nevada, effectuate
a
reverse stock split of approximately 1:1000, and change its name to Ethos
Environmental, Inc. Additionally, the shares currently held by stockholders
in
the Company will be exchanged on a one-for-one basis in the resulting
corporation.
D. June 30, 2006 Financial Information, Ethos Environmental,
Inc.
(Unaudited)
|
ETHOS
ENVIRONMENTAL, INC.
FINANCIAL
REPORT
|
C
O N T E N T S
Page
FINANCIAL
STATEMENTS
BALANCE
SHEET
1
STATEMENTS
OF
OPERATIONS
2
STATEMENT
OF STOCKHOLDERS'
EQUITY
3
STATEMENTS
OF CASH
FLOWS
4
NOTES
TO
FINANCIAL STATEMENTS
5 and 6
ETHOS
ENVIRONMENTAL, INC.
BALANCE
SHEET
UNAUDITED
| |
|
|
|
ASSETS
|
|
|
Current
Assets
|
|
| |
Cash
|
|
$
367,224
|
| |
Deposit
|
300,000
|
| |
Accounts
receivable, net
|
264,110
|
| |
Inventory
|
5,236
|
| |
|
|
|
Total
current assets
|
936,570
|
|
Property
and Equipment, net
|
6,312,987
|
|
Other
Assets
|
|
| |
Loans
receivable
|
101,110
|
| |
Other
|
|
5,000
|
| |
|
|
|
|
106,110
|
| |
|
|
|
Total
assets
|
$
7,355,667
|
| |
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
Current
Liabilities
|
|
| |
Accounts
payable
|
$
1,112,543
|
| |
Accrued
expenses
|
129,476
|
| |
Loan
payable
|
13,000
|
| |
Note
payable
|
4,750,000
|
| |
|
|
|
Total
current liabilities
|
6,005,019
|
|
Stockholders'
Equity
|
|
| |
Common
stock, $.001 par value, 200,000,000 shares authorized;
|
|
| |
|
18,052,477
shares issued and outstanding
|
18,053
|
| |
Additional
paid-in capital
|
3,922,153
|
| |
Accumulated
deficit
|
(2,589,558)
|
| |
|
|
|
Total
stockholders' equity
|
1,350,648
|
| |
|
|
|
Total
liabilities and stockholders' equity
|
$
7,355,667
|
| |
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENTS
OF OPERATIONS
UNAUDITED
| |
|
|
|
|
Three
Months Ended June 30,
|
|
|
| |
|
|
|
|
|
|
2005
|
|
2006
|
|
2005
|
|
Sales
|
|
|
$1,392,837
|
|
$
26,964
|
|
$2,711,762
|
|
$
46,056
|
|
Cost
of sales
|
717,860
|
|
8,531
|
|
948,923
|
|
28,975
|
| |
|
|
|
Gross
profit
|
674,977
|
|
18,433
|
|
1,762,839
|
|
17,081
|
|
Selling
expenses
|
208,614
|
|
100,223
|
|
333,615
|
|
181,748
|
|
General
and administrative
|
596,270
|
|
366,308
|
|
861,049
|
|
510,324
|
| |
|
|
|
Total
operating expenses
|
804,884
|
|
466,531
|
|
1,194,664
|
|
692,072
|
| |
|
|
|
Net
operating income (loss)
|
(129,907)
|
|
(448,098)
|
|
568,175
|
|
(674,991)
|
|
Other
income
|
770
|
|
|
|
722
|
|
|
| |
|
|
|
Net
income (loss)
|
$(129,137)
|
|
$
(448,098)
|
|
$
568,897
|
|
$
(674,991)
|
| |
|
|
|
|
|
|
|
|
|
|
|
ETHOS
ENVIRONMENTAL, INC.
STATEMENT
OF STOCKHOLDERS' EQUITY
UNAUDITED
| |
|
|
|
|
Common
Stock
|
|
Additional
|
|
|
|
Total
|
| |
|
|
|
|
Shares
|
|
Amount
|
|
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Stockholders'
Equity
|
|
|
22,717,477
|
|
$
22,718
|
|
$
3,964,138
|
|
$(3,158,455)
|
|
$
828,401
|
|
Common
stock repurchased
|
