NOTE 4 - ACQUISITION OF COMPANIES
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On January 28, 1997, the Company, pursuant to an Acquisition Agreement, accepted possession of 100% of the issued and outstanding capital stock of Urecoats, in exchange for 2,100,000 shares of its unregistered, restricted common stock. Urecoats was owned by former or current officers of the Company. The acquisition was accounted for as a purchase and was included in consolidated operations of the Company from that date through December 31, 1997.
NOTE 5 - COMMON STOCK TRANSACTIONS
The Company offered 20,000,000 shares of its restricted common stock ("Shares"), in an Amended Private Placement commencing January 1, 1998 and terminating December 31, 1998 ("1998 Amended Placement"), pursuant to the exemption under Rule 505 of the Securities Act of 1933, as amended (the "Act"). The Shares were sold to "Accredited Investors", as defined in Section 501(a) of Regulation D under the Act. The Board of Directors determined, in the best interests of those parties participating in the 1998 Amended Placement, to fix the purchase price of all the Shares purchased thereunder at $.075 per share. This decision was made because of the volatility of the market price of the common stock as traded on the NASDAQ over-the-counter Bulleting Board during the year. The Company sold 16,502,197 Shares under the 1998 Amended Placement. The total proceeds received, net of commissions and fees paid in cash, amounted to $1,198,600.
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 5 - COMMON STOCK TRANSACTIONS CONTINUED
A breakdown of the proceeds of the 1998 Amended Placement is below:
Cash $ 1,171,715
Conversion of Debt $ 25,000
Conversion of Consulting Fees $ 1,500
Conversion of Commissions and Fees $ 39,450
Less: Commissions and Fees Paid in Cash $ (39,065)
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Total Net Proceeds $ 1,198,600
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The Conversion of Debt proceeds were received from the cancellation of loans payable due and owing to non-affiliated parties by the Company. The loans payable were satisfied with the issuance of 333,333 Shares.
The Conversion of Consulting Fees proceeds were received from the cancellation of consulting fees due and owing by the Company. The consulting fees were satisfied with the issuance of 20,000 Shares.
The Conversion of Commissions and Fees proceeds were received from the cancellation of 10% commissions and fees due and owing by the Company against the sale of 5,266,667 Shares. The commissions and fees were satisfied with the issuance of 526,000 Shares.
The Commissions and Fees Paid in Cash proceeds were paid against 10% commissions and fees due and owing by the Company against the sale of 5,208,666 Shares. The commissions and fees were satisfied with payments equaling $39,065.
During the year ended December 31, 1998, the Company issued common stock, as described below:
(a) The Company issued 3,600,000 shares of restricted common stock, in exchange for cancellation of $829,858 of indebtedness.
(b) The Company issued 404,412 shares of restricted common stock, as final payment for all right, title and interest to certain technologies involving polymer /rubberized asphalt roofing/sealant formulas/materials, and the rights and know-how for their manufacturing and application. This transaction was valued and recorded at $55,000.
(c) The Company issued an aggregate of 850,000 shares of its restricted common stock, as additional compensation, to two former officers and directors of the Company. These transactions were valued and recorded at $49,500. Howard Weiser and Edgar Mr. Reynolds, former officers and directors of the Company, received 750,000 and 100,000 shares of restricted common stock, respectively, valued and recorded at $44,500 and $5,000, respectively.
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 5 - COMMON STOCK TRANSACTIONS CONTINUED
(d) The Company issued 20,000 shares of restricted common stock, as an employee bonus. This transactions was valued and recorded at $1,000.
(e) The Company issued an aggregate of 5,200,000 shares of restricted and unrestricted common stock, for consulting services, valued and recorded at $629,830, 950,000 shares at a value of $58,650 were attributed to directors' transactions. Charles A. Gargano received 600,000 shares of restricted common stock, which was valued and recorded as $34,000. David M. Goldblatt received 200,000 shares of restricted common stock, which was valued and recorded at $13,400. Stuart B. Krost received 150,000 shares of restricted common stock, which was valued and recorded at $11,250.
(f) The Company issued an aggregate of 1,205,000 shares of restricted and unrestricted common stock, for legal services rendered. These transactions were valued and recorded at $168,940.
(g) The Company issued an aggregate of 401,000 shares of restricted common stock, for legal settlements. These transactions were valued and recorded at $151,435.
(h) The Company received back 375,000 shares of restricted common stock at $375, from a legal settlement. In connection with this transaction, the Company issued 125,000 shares of its restricted common stock, as payment for legal services. The shares were valued and recorded at $1,250.
(i) The Company issued 70,500 shares of restricted common stock, as payment for office and other equipment. This transaction was valued and recorded at $7,050.
(j) The Company issued an aggregate of 1,080,000 shares of restricted common stock to three Non U.S. individual investors in reliance upon the transaction exemption afforded by Regulation S as promulgated by the United States Securities and Exchange Commission, under the Securities Act of 1933, as amended ("Securities Act"). These transactions were valued and recorded at $81,000.
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 6 - PROPERTY AND EQUIPMENT
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A summary of property and equipment at December 31, 1998 is as follows:
Leasehold Improvements $ 101,097
Office Equipment 51,110
Machinery and Equipment 102,314
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Total Property and Equipment 254,521
Less: Accumulated Depreciation (47,485)
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Total Property and Equipment, Net $ 207,036
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NOTE 7 - INTANGIBLES
A summary of intangibles at December 31, 1998 is as follows:
Organization Costs $ 678
Goodwill 913,490
Patent Costs 3,936
Acquisition of Proprietary Formula 80,000
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Total Intangibles 998,104
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Less: Accumulated Amortization (327)
-------------
Total Intangibles, Net $ 997,777
=============
Goodwill arises from the cost of the Company's acquisitions of Urecoats, in excess of fair value of tangible assets and liabilities acquired. Amortization is to commence upon the receipt of significant revenues.
Patent and Proprietary Formula costs are amortized, under the straight- line method, over ten years. Amortization is to commence upon receipt of significant revenue. The Company evaluates the amortization period of intangibles on an ongoing basis, in light of any changes in business conditions, events or circumstances, that may indicate the potential impairment of intangible assets.
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 8 - NOTES PAYABLE
Notes payable to various individuals in the amount of $184,450, payable on demand, bear interest at varying rates from 12% to 15% per annum.
NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
A summary of accounts payable and accrued expenses at December 31, 1998 is as follows:
Accounts Payable $ 380,765
Accrued Salaries 181,160
Accrued Payroll Taxes 200,255
Accrued Expenses 698,335
------------
Total Accounts Payable and Accrued Expenses $ 1,460,515
============
NOTE 10 - LOANS PAYABLE
Loans payable to various individuals are non-interest bearing and payable on demand.
NOTE 11 - RELATED PARTY TRANSACTIONS
As of December 31, 1998, the Company had the following related party transactions:
Non-interest bearing loans, net of advances, from current or former officers and directors of the Company, amounted to $232,623.
Accrued salaries of $181,160 to current or former officers of the Company.
See accompanying Note 5 - Common Stock Transactions, Note 4 - Acquisition of Companies and Note 3 - Discontinued Operations, for additional related party transactions.
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 12 - COMMITMENTS AND CONTINGENCIES
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LEASES
The Company's subsidiary, Urecoats, entered into two separate operating leases at monthly rents of $3,736, commencing on July 1, 1998 and terminating on July 31, 2001, for corporate offices and a testing laboratory and training facility for sealant and spraying products. Rent expense for the years ended December 31, 1998 and 1997, were $44,726 and $30,599, respectively. |
