S and P said Katori Consultants, Ltd., a Philippines corporation. was a large shareholder. We believe this could also be Cragun.
Katori Consultants Ltd. on of ZSUNs large shareholders from S and P
lawcrawler.findlaw.com.
sec.gov
Item 1. Legal Proceedings- --------------------------
On June 16, 1998, Canaccord Capital Corporation ("Canaccord"), a Canadian
broker/dealer, filed an action against the Company in the U.S. District Court in
Salt Lake City, Utah. The action seeks an order compelling the issuance of
125,000 shares of Dynatec stock. Canaccord and the Company agree that the
Company, or its transfer agent, had erroneously over-issued shares of stock to
Canaccord in early 1997. In September 1997, Canaccord tendered certificates for
other shares in acknowledgment of a separate over-issuance. Management of the
Company believed that an additional 125,000 shares had been over issued. The
disputed certificate was subsequently returned to the transfer agent and
cancelled under the direction of the Board of Directors of the Company. This
action was taken by the Company based upon the understanding of management that
the entity believed by the Company to be holding the beneficial interest in the
certificate had not paid for the shares, and was not a holder in due course or a
"protected person" under applicable Uniform Commercial Code provisions. On
August 3, 1998, the Court entered an order granting the preliminary injunction
in favor of Canaccord and compelling the issuance of a stock certificate to
Canaccord's designee for the disputed 125,000 shares of stock. If one of the
other entities now named in the litigation should subsequently establish a right
to the issuance of 125,000 shares of the stock of the Company, Dynatec may be
required to issue additional shares. Related to the forgoing litigation, a claim
for an additional 125,000 shares of the stock of the Company had been made by
Katori Consultants, Ltd., a Philippines corporation. The answer and third party
complaint of Dynatec named Katori Consultants, Ltd. As a third party defendant
so that such additional claim could be addressed as part of the single legal
action. On October 21, 1998, Katori Consultants, Ltd. Gave written notice to
Dynatec that it relinquished any claim to additional shares of common stock of
the Company. Dynatec intends to continue to pursue its claim for damages and
declaratory relief in this litigation.
The Company has received a telephonic contact from the SEC indicating that
the SEC anticipates filing an administrative proceeding in the later part of
calendar year 1998 against various individuals and entities which had engaged in
business transaction with a British Columbia corporation and/or a non-U.S.
business trust. The SEC representative indicated that the Company and its chief
executive officer may be named in such agency action. The Company has submitted
a Wells Submission to the SEC to clarify its position as to why it and its CEO
should not be named in the administrative proceeding. The Company did enter into
two 1994 subscription agreements with the British Columbia corporation and two
simultaneous subscription agreements with the business trust in early 1995.
However, none of the transactions were fully consummated and the Company
received no consideration with regard to the transactions. The Company believes
that its actions involving the four referenced subscription agreements are
significantly different from the transactions engaged in with such entities by
other public companies. In this regard, the Company insisted on the use of a
different restrictive legend on its stock certificates which were to be held in
escrow pursuant to the proposed transactions. Further, the Company made a press
release on the day following the first such transaction, and mailed Form 8-K
reports to the SEC on the day following each of the transactions. Such actions
were intended to immediately put all third parties, and the investigating
public, on notice of the unpaid nature of the subscriptions. A formal Wells
Submission was submitted by the Company to explain the position of the Company.
Management believes that, although agency action is possible, such action may
not be likely after the SEC has reviewed the Wells Submission of the Company.
The Board of Directors of the Company has unanimously approved an
investigation of the foregoing transactions and matters, the Company's'
relationship and practices with the Company's' transfer agent, certain related
party transactions and other issues which were subject of a recent preliminary
inquiry conducted by certain members of the Board of Directors, the actions of
officers of the Company with regard to such matters, and other related and
unrelated corporate activities to assure that proper safeguards and policies are
in place or are implemented which will assist the Board of Directors in
monitoring the business activities of the Company. The Board is to be assisted
in this review by independent outside counsel who will coordinate his efforts
with current counsel.
On February 12, 1998, Fuji Corporation filed a claim with the International
Trade Commission seeking a cease and desist order against approximately 30
entities. The relief sought is to enlist the aid of the U.S. Customs Department
in preventing the importation of single-use cameras which are manufactured by
any of the entities named as defendants in the proceeding and which infringe the
patents of Fuji. The Company does not manufacture single-use cameras, but
merely distributes to warehouses in Asia cameras which have been refurbished and
reloaded in mainland China. The Company has engaged intellectual property
counsel to vigorously defend the position of the Company.
20<PAGE>
The Company has received a telephonic contact from the SEC indicating that
the SEC anticipates filing an administrative proceeding in the later part of
calendar year 1998 against various individuals and entities which had engaged in
business transaction with a British Columbia corporation and/or a non-U.S.
business trust. The SEC representative indicated that the Company and its chief
executive officer may be named in such agency action. The Company has submitted
a Wells Submission to the SEC to clarify its position as to why it and its CEO
should not be named in the administrative proceeding. The Company did enter into
two 1994 subscription agreements with the British Columbia corporation and two
simultaneous subscription agreements with the business trust in early 1995.
However, none of the transactions were fully consummated and the Company
received no consideration with regard to the transactions. The Company believes
that its actions involving the four referenced subscription agreements are
significantly different from the transactions engaged in with such entities by
other public companies. In this regard, the Company insisted on the use of a
different restrictive legend on its stock certificates which were to be held in
escrow pursuant to the proposed transactions. Further, the Company made a press
release on the day following the first such transaction, and mailed Form 8-K
reports to the SEC on the day following each of the transactions. Such actions
were intended to immediately put all third parties, and the investigating
public, on notice of the unpaid nature of the subscriptions. A formal Wells
Submission was submitted by the Company to explain the position of the Company.
Management believes that, although agency action is possible, such action may
not be likely after the SEC has reviewed the Wells Submission of the Company. |
