Document is copied.
As filed with the Securities
and Exchange Commission on
April 13, 2001
Registration No. 333-55284
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
From Form S-3 to Form SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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CRYOCON, INC.
(Exact name of registrant as specified in its charter)
COLORADO
(State or other jurisdiction of incorporation or organization)
84-1O26503
(I.R.S. Employer Identification No.)
James Retallick
2250 North 1500 West, Ogden Utah 84404 2250 North 1500 West, Ogden Utah 84404
(801) 395-2796 (801) 395-2796
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(Address and telephone number of (Name, address and telephone
Registrant's Principal Executive Offices) number of agent for service)
Copies of all communications to:
Marcus A. Sanders, Esq.,
22 Battery Street, Ste. 701
San Francisco, CA 94105
Tel. (415) 986-7114 Fax.(415)986-7028
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
Proposed maxi- Proposed maxi-
Title of each class Amount to be mum offering mum aggregate Amount of
of securities to be registered registered price per share (1) offering price registration fee
- ------------------------------------------------------------------------------------------------------------------
Common Stock,
no par value 8,618,678 $2.50 $21,546,695 $5,387.00
Common Stock
no par value(2) 1,500,000 $2.00 $ 3,000,000 $ 750.00
Warrants to purchase
3 shares of common
stock at $2.00 per
share(3) 1,238,195 $2.00 $ 2,476,390 $619.00
Common Stock
purchasable pursuant
to the shareholder
warrants 3,714,585(4) $2.00 $7,429,170 $1,857.00
Common Stock
no par value(5) 60,000 $1.00 $ 60,000 $ 15.00
Common Stock(6) 1,500,000 $0.10 $ 150,000 $ 38.00
Total Fee(7): $8,666.00
1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457
2) Includes shares issuable upon the exercise of a stock purchase agreement
having a purchase price of eighty percent (80%) of the market value at the
time of exercise (estimated at $2.00 per share solely for the purpose of
calculating the registration fee pursuant to Rule 457). The shares to be
registered include an indeterminate number of additional shares of common
stock issuable pursuant to Rule 416, to prevent dilution resulting from
stock splits, stock dividends or similar transactions.
3) These warrants will be issued to certain Cryocon stockholders. The minimum
exercise price is $2.00 per share of stock purchased. The warrants include
an indeterminate number of additional warrants that may be issued as a
result of any future stock split, stock dividend, or similar adjustments.
4) These shares of common stock are issuable upon the exercise of the warrants
issued to certain Cryocon stockholders, included in this registration, and
may be resold to the public by the selling stockholders. The shares to be
registered include an indeterminate number of additional shares of common
stock issuable pursuant to Rule 416 to prevent dilution resulting from
stock splits, stock dividends or similar transactions.
5) Includes shares issuable upon the exercise of options having an exercise
price of $1.00 per share. The shares to be registered include in this
registration an indeterminate number of additional shares of common stock
issuable pursuant to Rule 416 to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
6) Includes shares issuable upon the exercise of options having an exercise
price of $0.10 per share. The shares to be registered include in this
registration an indeterminate number of additional shares of common stock
issuable pursuant to Rule 416 to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
7) Previously paid $8,209. An additional fee of $457.00 will be paid upon
filing.
The registrant hereby amends this registration statement on the date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on the date as the Commission, acting pursuant to said Section 8(a),
may determine.
DATED _______________ ___, 2001
PROSPECTUS
SUBJECT TO COMPLETION DATED April 13, 2001
15,393,263 SHARES
COMMON STOCK
1,238,195 WARRANTS
CRYOCON, INC.
3
In this prospectus Cryocon is registering 139,100 shares of our common
stock held by unaffiliated third parties. The third parties purchased the shares
directly from Cryocon in a private placement.
Cryocon is also registering 6,477,055 shares of common stock held by
unaffiliated third parties. These shares were issued upon conversion of
debentures issued pursuant to a private placement.
Cryocon is registering 2,002,523 shares of common stock held by its
former Chief Executive Officer (currently President of the Intellectual Property
Division) Robert W. Brunson. These shares were issued to Mr. Brunson upon
conversion of a debenture.
Cryocon is registering 1,500,000 shares currently issuable to
Millennium Capital Partners LLC pursuant to a stock purchase agreement exercised
between Cryocon and Millennium. The purchase price for the common stock is
eighty percent (80%) of the market price of Cryocon's common stock on the
business day immediately prior to the day that Millennium purchases the common
stock.
This prospectus also relates to Cryocon's registration of 1,238,195
warrants to be issued to Cryocon's shareholders without costs to the
shareholders. Each warrant allows the holder to purchase up to three (3) shares
of common stock. The exercise price for purchasing common shares, pursuant to
the warrants, is eighty percent (80%) of the market price of Cryocon's common
stock on the day immediately prior to the day that the shareholder holding the
warrant elects to purchase common shares. The minimum exercise price for each
warrant is $2.00 per share.
Cryocon is also registering 3,714,585 shares of common stock issuable
pursuant to the exercise of the warrants issued to Cryocon's shareholders.
Cryocon is registering 60,000 shares of common stock issuable upon the
exercise of options held by Bourn, Inc. The exercise price for the issuance of
the common stock is $1.00 per share.
Cryocon is registering 1,500,000 shares of common stock issuable upon
the exercise of warrants issued to Todd Moore and to J Brain Morrison. The
exercise price to purchase the common stock is $0.10 per share.
Cryocon will not receive any proceeds from the sale of the common
shares registered. Cryocon will receive proceeds from the purchase of the common
stock by Millennium, Bourns, Todd Moore, J. Brain Morrison and its shareholders,
if the holders elect to exercise their warrant rights.
The shareholders named in this prospectus may offer and sell their
shares at any time using a variety of different methods. The actual number of
shares sold and the prices at which they are sold will depend upon the market
price at the time of those sales; therefore, we have not included in this
prospectus information about the price to the public of the shares or the
proceeds to the selling shareholders.
Cryocon's common stock is traded "over-the-counter". Dealer "bid" and
"asked" prices for the Common Stock are quoted on the OTC Electronic Bulletin
Board maintained by the National Association of Securities Dealers, Inc. (the
"OTC Bulletin Board") under the symbol "CRYQ". On April 2, 2001, the average of
the closing bid and ask prices for the Common Stock was $2.50. Our principal
executive offices are located at 2250 North 1500 West, Ogden, Utah 84404, and
our telephone number is (801) 395-2796.
THE SHARES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. PURCHASERS OF
SHARES SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER "RISK FACTORS"
BEGINNING AT PAGE 3, AND "DILUTION".
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is __________________ ____, 2001
4
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS.....................................................4
PROSPECTUS SUMMARY.............................................................4
RISK FACTORS...................................................................8
USE OF PROCEEDS................................................................8
DETERMINATION OF OFFERING PRICE................................................9
DILUTION.......................................................................9
PLAN OF DISTRIBUTION..........................................................10
DESCRIPTION OF SECURITIES.....................................................11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................12
PLAN OF OPERATIONS............................................................13
DESCRIPTION OF THE BUSINESS IN THE LAST FIVE YEARS............................14
DESCRIPTION OF PROPERTY.......................................................15
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS..................15
EXECUTIVE COMPENSATION........................................................18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................19
COUNSEL AND EXPERTS...........................................................20
INTEREST OF NAMED EXPERTS & COUNSEL...........................................20
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................20
SELLING STOCKHOLDERS..........................................................21
MATERIAL CHANGES..............................................................34
CHANGES IN ACCOUNTANTS........................................................35
ADDDITIONAL INFORMATION.......................................................35
INCORPORATED BY REFERENCE.....................................................35
DISCLOSURE OF COMMISSION POSITION
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES................................36
PART II, INFORMATION REQUIRED IN REGISTRATION STATEMENT.......................36
INDEMNIFICATION...............................................................36
OTHER EXPENSE OF ISSUANCE AND DISTRIBUTION....................................36
RECENT SALES OF UNREGISTERED SECURITIES.......................................37
EXHIBITS......................................................................41
UNDERTAKINGS..................................................................43
SIGNATURES....................................................................44
INDEX TO FINANCIAL STATEMENTS.................................................69
5
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, as that term is defined
in the Private Securities Litigation Reform Act of 1995. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
We believe these forward-looking statements are reasonable; however,
you should not unduly rely on any forward-looking statements, which are based on
current expectations. Further, forward-looking statements speak only as of the
date they are made, and we undertake no obligation to update publicly any of
them in light of new information or future events.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this prospectus. This summary is not complete and does not contain
all of the information you should consider before investing in the common stock.
You should read the entire prospectus carefully, including the "Risk Factors"
The Offering
ISSUED COMMON SHARES
Cryocon is registering 139,100 shares of its common stock held by
unaffiliated 16 third parties. The third parties purchased the shares directly
from Cryocon in a private placement.
Cryocon is registering 2,002,523 shares of common stock held by its
former Chief Executive Officer (President of Intellectual Property Division)
Robert W. Brunson. These shares were issued to Mr. Brunson upon conversion of a
debenture. The original debenture was issued to Mr. Brunson on November 10,
1999, as partial consideration, of Cryocon's purchase of business assets owned
by Mr. Brunson.
Cryocon is registering 6,477,055 shares of common stock held by
unaffiliated third parties. These shares were issued upon conversion of
debentures issued pursuant to private placements. Among the 6,447,055, are
2,880,000 shares issued to Paragon Venture Fund I, an Illinois Limited Liability
Company, with a principal office at 501 W. Monroe, Springfield, IL 62704,
pursuant to a convertible debenture executed on January 15, 2000. On November
13, 2000, Paragon Venture Fund I transferred its shares to the 25 members of the
Paragon Venture Fund I.
Among the 6,477,055, are 1,294,000 shares issued to Paragon Venture
Fund II, an Illinois Limited Liability Company, pursuant to a convertible
debenture executed on February 15, 2000. On November 13, 2000, Paragon Venture
Fund II transferred its shares to the 32 members of the Paragon Venture Fund II.
Among the 6,477,055, are 1,353,437 shares issued to Paragon Venture
Fund III, an Illinois Limited Liability Company, pursuant to a convertible
debenture executed on March 15, 2000. On November 13, 2000, Paragon Venture Fund
III transferred its shares to the 97 members of the Paragon Venture Fund III.
Among the 6,447,055, are 237,500 shares issued to Paragon Venture Fund
IV, an Illinois Limited Liability Company, pursuant to a convertible debenture
executed on April 15, 2000. On November 13, 2000, Paragon Venture Fund IV
transferred its shares to the 23 members of the Paragon Venture Fund IV.
Among the 6,477,055, are 712,118 shares issued to Paragon Venture Fund
V, an Illinois Limited Liability Company, pursuant to a convertible debenture
6
executed on September 15, 2000. On February 2, 2001, Paragon Venture Fund V
transferred its shares to the 86 members of the Paragon Venture Fund IV.
Cryocon is registering 2,002,523 shares of common stock held by its
President of Intellectual Property Division, Robert Brunson. These shares were
issued to Mr. Brunson upon conversion of a convertible debenture executed on
January 3, 2000.
The holders of the common stock issued pursuant to the private
placements and convertible debentures are referred to in this prospectus as
selling shareholders.
WARRANTS AND COMMON STOCK ISSUED AND ISSUABLE TO CRYOCON SHAREHOLDERS
Cryocon is registering 1,238,195 warrants to be issued to Cryocon's
shareholders without costs to the shareholders. Each warrant allows its holder
to purchase up to three (3) shares of common stock. The exercise price for
purchasing a share of common stock, pursuant to the warrants, is eighty percent
(80%) of the market price for Cryocon's common stock on the day immediately
prior to the day that the shareholder that owns the warrant elects to purchase
shares of common stock. The minimum exercise price for each warrant is $2.00 per
share.
Cryocon is registering 3,714,585 shares of common stock. These shares
of common stock are issuable upon the exercise of the warrants issued to the
shareholders. Assuming that the Cryocon shareholders elect to exercise all of
their warrants, at the minimum exercise price, Cryocon will receive $7,429,170.
COMMON SHARES ISSUEABLE UPON THE EXERCISE OF RIGHTS PURSUANT TO
INVESMENT AGREEMENTS
Cryocon is registering 1,500,000 shares issuable to Millennium Capital
Partners, LLC. Millennium's right to purchase the shares is made pursuant to a
fully executed contract between Millennium and Cryocon wherein Millennium agreed
to purchase 1,500,000 shares of Cryocon's common stock at eighty percent (80%)
of the market price for Cryocon's common stock on the business day immediately
prior to the day that Millennium purchases the shares.
COMMON SHARES ISSUABLE UPON THE EXERCISE OF RIGHTS PURSUANT TO OPTIONS
AND WARRANTS
Cryocon is registering 60,000 shares of common stock issuable upon
the exercise of options held by Bourns, Inc. The exercise price for the issuance
of the common stock is $1.00 per share. When Bourns elects to exercise all of
their warrants, Cryocon will receive $60,000.
Cryocon is registering 1,000,000 shares of common stock issuable upon
the exercise of warrants held by Todd Moore. Mr. Moore's right to purchase the
shares is made pursuant to a fully executed contract between Mr. Moore and
Cryocon, wherein Mr. Moore agreed to purchase 1,000,000 shares of Cryocon's
common stock at $0.10 per share. When Mr. Moore receives his shares of common
stock, Cryocon will receive $100,000.
Cryocon is registering 500,000 shares of common stock issuable upon the
exercise of warrants held by J. Brain Morrison. Mr. J. Brain Morrison's right to
purchase the shares is made pursuant to a fully executed contract between Mr.
Morrison and Cryocon, wherein Mr. Morrison agreed to purchase 500,000 shares of
Cryocon's common stock at $0.10 per share. When Mr. Moore receives his shares of
common stock, Cryocon will receive $50,000.
To the extent that each person referred to in this prospectus purchases
shares of common, they will be referred to as selling shareholders. Cryocon will
not receive any proceeds from the selling shareholders' sale of their common
shares. The selling shareholders, named in this prospectus, may offer and sell
their shares at any time using a variety of different methods. The actual number
of shares sold and the prices at which they are sold will depend upon the market
price at the time of those sales; therefore, we have not included in this
prospectus information about the price to the public of the shares or the
proceeds to the selling shareholders.
As of March 31, 2000, Cryocon had 19,319,837 outstanding shares of
common stock. Cryocon's common stock is traded "over-the-counter". Dealer "bid"
and "asked" prices for the Common Stock are quoted on the OTC Electronic
Bulletin Board maintained by the National Association of Securities Dealers,
Inc. (the "OTC Bulletin Board") under the symbol "CRYQ".
7
BUSINESS
Cryocon, Inc. was incorporated in the State of Colorado, on April 28,
1986, under the name Champion Computer Rentals, Inc. On September 22, 1994, the
company's name was changed to ISO-Block Products (USA), Inc.
On August 16, 2000, ISO-Block acquired all of the issued and outstanding
shares of Cryocon, Inc., a Utah Corporation ("Cryocon Utah"). On September 21,
2000, the majority of the ISO-Block shareholders approved a Board of Director's
resolution changing ISO-Block's name to Cryocon, Inc. ("Cryocon"). Cryocon Utah
remains a wholly owned operating subsidiary of Cryocon. For the purpose of
clarification, the operating subsidiary will be referred to as Cryocon Utah, and
the parent company will be referred to as Cryocon, throughout the remainder of
this prospectus.
Cryocon owns all of the issued and outstanding shares of Cryocon Utah.
All of the securities discussed in this prospectus are the capital stock and
debt obligations of Cryocon, not of its subsidiaries. Cryocon is the issuer of
all of the common stock, warrants, and options described in this prospectus.
In its Utah facility, Cryocon, using its proprietary provides its
customers with deep cryogenic processing. Deep cryogenic processing is the
process of applying extremely low temperatures, approximately -300F, in a
tempering process to improve the wear and durability characteristics of the
treated materials.
Cryocon's process can be used for treating tooling (drill bits, dies,
and punches), wear parts (forming dies, extrusion equipment, and hammer mills),
and many other items including motor parts, razor blades, firearms, pantyhose,
musical instruments, and softball bats. Cryocon's process has numerous
applications in the aerospace, mining, energy, electronics, medical, and
manufacturing industries.
Cryocon intends to manufacture Cryogenic Processors. Cryogenic
Processors are machines used to cryogenically treat materials. The Cryogenic
Processors can be designed and built to the purchasers' specifications. Cryocon
intends to manufacture a Tabletop Cryogenic Processor.
As an employee of 300 Below, Inc., President of Cryocon's Intellectual
Properties Division, Robert Brunson, developed Cryocon's patented process
commercially known as the "Cryo-Accurizing" process. The United States patent
for the Cryo-Accurizing (patent number 5,865,913) was awarded February 2, 1999.
Cryo-Accurizing is the process that Cryocon uses to perform deep
cryogenic tempering, material stabilization and stress relief on firearms.
On November 10, 1999, Mr. Brunson executed an agreement to purchase the
patents and all other rights to the Cryo-Accurizing Division and the Tri-Lax
Process from 300 Below Inc. On December 10, 1999, Cryocon acquired from Mr.
Brunson exclusive rights to the Cryo-Accurizing Division and the Tri-Lax
Process, and Mr. Brunson's interests in the Cryo-Accurizing Division patent.
RECENT CHANGE IN CAPITAL STRUCTURE
On September 21, 2000, Cryocon held a special meeting of its
shareholders. At the special shareholder's meeting, the majority of the
shareholders, approved a Board resolution to reverse split of each of the issued
and outstanding shares of Cryocon's common stock into one fourth share (1/4)
share of common stock. In conjunction with the reverse split, the total number
of common shares that the Company is authorized to issue shall be 50,000,000
common shares after giving effect to the reverse stock split.
RISK FACTORS:
8
Cryocon's Failure to Obtain Additional invested or loaned Capital Will Limit
It's Ability to Obtain New business and May Result in the company's inability to
continue its business Operations
If Cryocon fails to obtain additional capital either through third
party investments in Cryocon's capital stock or commercial loans, Cryocon may
not have sufficient working capital to secure and fulfill new purchase orders,
nor sufficient capital to acquire new equipment to maintain sufficient operating
capacity. If Cryocon cannot obtain new contracts, as a result of limited
capital, Cryocon may not be able to continue its business operations.
Cryocon Utah has had an accumulated loss of $1,499,045, since its
inception in January 2000. For the same period, Cryocon Utah experienced a net
operating loss of 1,499,045. These historical losses severely limit Cryocon's
and its subsidiaries' ability to borrow money from commercial lenders. Cryocon
must continue to rely upon investments in exchange for its equity to raise
working capital until it experiences sufficient earnings before interest
depreciation and taxes to secure a commercial loan. Cryocon's management cannot
determine whether it will be able to continue to obtain capital from third party
investors.
If Cryocon is unable to Significantly Increase Its Revenues It May not be able
to continue its business Operations
If Cryocon is unable to significantly increase its sales revenues,
Cryocon will continue to realize operating losses. Because of Cryocon's
continued operating losses, Cryocon may not be able to pay its operating
expenses, and its short-term and long-term debt obligations, nor will Cryocon be
able to borrow money from commercial lenders, or raise money from investors
needed to continue its business operations.
Cryocon believes that growth in its sales revenues depends on broad
commercial acceptance of its cryogenic tempering process, over traditional
tempering processes using heat. The commercial use of Cryocon's cryogenic
tempering process has been limited to businesses in the Salt Lake City, Utah
area, near Cryocon's only facility.
THE EXERCISE OF THE WARRANTS AND OPTIONS BY THE SELLING SHAREHOLDERS MAY LOWER
CRYOCON'S COMMON STOCK MARKET PRICE.
Several of the Selling Shareholders in this prospectus have the right
to purchase shares of Cryocon's common stock at a price that is twenty percent
(20%) below the market price for Cryocon's common stock on the business day
prior to the date that they give Cryocon written notice of their intent to
purchase common. Several of the other selling shareholders can purchase shares
of Cryocon's common stock at a fixed price that is below the current market
price of the Cryocon's common stock. If the selling shareholders decide to
purchase the shares of common stock at the prices below the market price, the
market price for Cryocon's common stock may become lower. If the market price
for Cryocon's common stock becomes lower, many of the selling shareholders'
purchase price per share will become lower. Cryocon will receive less money per
share of the common stock sold to the selling shareholders. If the market price
for Cryocon's common stock becomes lower Cryocon's ability to sell its equity
securities or equity-related securities in the future may become more difficult.
The following table illustrates what the exercise price per share and
the gross proceeds that each selling shareholder will pay assuming the market
price per share is $2.50 (the price per share of Cryocon common stock on March
27, 2001), $2.06 (75% of the market price), $1.25 (50% of the market price), and
$0.625 (25% of the market price), respectively. The chart also illustrates the
number and percentage of outstanding stock the selling shareholder will receive,
if all of the selling shareholders elect to purchase the shares pursuant to
their investment agreements, warrants or options. To determine the percentage of
shares owned after the purchases by the selling shareholders, the chart assumes
that Cryocon has 19,319,837 shares of common stock outstanding, and that the
selling shareholders will purchase an additional 8,334,585 shares of common
stock.
9
Percentage of Percentage of the
the Exercise Purchased Shares
Exercise Price Price to the Number of shares Gross to the Number of
Selling Shareholder Per Share Market Price to be Issued Proceeds Shares Outstanding
Millennium Capital $2.00 80% 1,500,000 $3,000,000 7.76%
$1.65 80% 1,500,000 $2,475,000 7.76%
$1.00 80% 1,500,000 $1,500,000 7.76%
$0.50 80% 1,500,000 $ 750,000 7.76%
Bourns, Inc. $1.00 40% 60,000 $60,000 .310%
$1.00 49% 60,000 $60,000 .310%
$1.00 80% 60,000 $60,000 .310.%
$1.00 160% 60,000 $60,000 .310%
Todd Moore $0.10 4% 1,000,000 $100,000 5.17%
$0.10 4.8% 1,000,000 $100,000 5.17%
$0.10 8% 1,000,000 $100,000 5.17%
$0.10 16% 1,000,000 $100,000 5.17%
J. Brain Morrison $0.10 4% 500,000 $50,000 2.58%
$0.10 4.8% 500,000 $50,000 2.58%
$0.10 8% 500,000 $50,000 2.58%
$0.10 16% 500,000 $50,000 2.58%
Cryocon Shareholders $2.00 80% 3,714,585 $7,429,170 19.22%
$1.64 80% 3,714,585 $6,091,919 19.22%
$1.00 80% 3,714,585 $3,714,585 19.22%
$0.50 80% 3,714,585 $1,857,292 19.22%
IF OTHER COMPANIES DEVELOP SUPERIOR TEMPERING PROCESSES CRYOCON MAY LOSS SALES
WHICH MAY PREVENT CRYOCON FROM REMAINING IN BUSINESS
Other companies may develop better tempering processes that directly
compete with Cryocon, and may render Cryocon's tempering process obsolete or
noncompetitive. If that happens, Cryocon may not be able to generate sufficient
sales to remain in business.
SINCE CRYOCON HAS A LIMITED NUMBER OF SUPPLIERS, IF CRYOCON'S SUPPLIERS ARE
UNABLE TO DELIVER NEEDED COMPONENTS CRYOCON BUSINESS MAY BE INTERRUPTED
Cryocon's processors contain components manufactured by third-party
vendors, and some of these components are supplied by a limited number of
vendors. If these vendors fail to supply these components on a commercially
reasonable basis, Cryocon may not be able to build its processors to meet with
sales demand or replace damaged components. Cryocon could lose sales and
customers if can not operate is processors.
THE VOLATILITY OF CRYOCON'S STOCK PRICE MAY RESULT IN THE LOSS OF THE
SHAREHOLDERS' VALUE
The market price of Cryocon's common stock has historically been
subject to price volatility. A loss in the Cryocon's stock price could occur and
result in a shareholder losing significant value. Volatility may recur in the
future.
USE OF PROCEEDS
Cryocon will not receive proceeds from the shares being offered by the
selling shareholders under this prospectus. If the selling shareholders exercise
their warrants or purchase shares of common stock pursuant to their agreements
with Cryocon, Cryocon will receive an aggregate of $10,629,170. The purchase
price per share ranges from $0.10 per share to $2.00 per share. As of April 2,
2001, the market price per share of Cryocon's common stock was $2.50. The
proceeds Cryocon receives, if any, will be used for Cryocon's general working
capital. Until Cryocon uses the net proceeds, it intends to invest the funds in
short-term, investment-grade, interest-bearing instruments.
DETERMINATION OF OFFERING PRICE
The Selling Shareholders named in this Prospectus under the "Selling
Shareholders" may sell their shares at market price.
10
Cryocon's Common Stock is currently traded on the NASDAQ OTC
Bulletin Board, under the symbol "CRYQ." On April 2, 2001, the ask price of the
common stock was $2.50 per share and the bid price was $2.25
Dilution
On December 29, 2000, Cryocon had a net tangible book value of $103,491
or approximately $0.0054 per share. The net tangible book value per share equals
Cryocon's total tangible assets, less Cryocon's total liabilities divided by the
total number of shares of common stock outstanding. As of March 27, 2001, there
were 19,319,837 outstanding shares. Excluding the 6,774,585 shares of common
stock to be issued upon the exercise of certain warrants and options (described
below) and assuming that the selling shareholders of the 8,479,578 shares,
issued pursuant to the conversion of Cryocon's convertible debentures and
pursuant to the issuance of shares in a private placement sell their shares at
the market price of $2.50 per share, as of March 31, 2001, the new shareholders
will realize an immediate dilution in the shares purchased of $2.50 per share or
99.78%. The following table illustrates this per share dilution:
o Market price per share (as of March 31, 2001). . . . . . .. .$2.50
o Net Tangible Book Value (as of December 29, 2000) . . . .. .$O.0054
o Dilution per share to new investors . . . . . . . . . . . . $2.495
Cryocon will issue 3,714,585 shares of common stock to selling
shareholders at a per share price of eighty percent (80%)of the market price at
the time of the exercise of the warrant (with a minimum exercise price of $2.00
per share), assuming the exercise of all of the warrants issued to certain
selling shareholders, and assuming the market price of $2.50 per share, as of
March 31, 2001 Cryocon will receive approximately $7,429,170 in additional cash
investments from the selling shareholders upon the full exercise of those
outstanding warrants.
Cryocon will issue 1,500,000 shares of common stock to certain selling
shareholders at a per share price of $0.10 per share, and will receive
approximately $150,000 in additional cash investments from the selling
shareholders upon the full exercise of those outstanding warrants.
Cryocon will issue 60,000 share of common stock to certain selling
shareholders, and will receive approximately $60,000 in additional cash
investments from the selling shareholders upon the full exercise of those
outstanding warrants.
Cryocon will issue 1,500,000 shares of common stock to certain selling
shareholders, and will receive $3,000,000 in additional cash investments from
the selling shareholders upon full exercise of those outstanding warrants. Based
upon these assumptions (and assuming no change in the net tangible value as of
December 29, 2000), Cryocon's net tangible book value would become $10,742,661
or approximately $0.425 per share.
Assuming that the selling shareholders sells their shares at the market
price, as of March 31, 2001, of $2.50 per share to new shareholders, the new
shareholders will realize an immediate dilution in the shares purchased of $2.07
or 82.8%. Since Cryocon will not receive any proceeds from the resale of these
common shares by the selling shareholders, there will no increase in net
tangible book value per share attributable to cash payments made by purchasers
of the shares sold. The following table illustrates this per share dilution:
Market price per share (as of March 31, 2001) . . . . . . . . . . $2.50
Net Tangible Book Value (assuming exercise of all warrants) . . ..$0.425
Dilution per share to new investors . . . . . . . . . . . . . . . $2.07
Plan of Distribution
The selling stockholders may from time to time sell all or a portion of
their shares in the over-the-counter market, or on any other national securities
exchange on which the common stock is or becomes listed or traded, in negotiated
11
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares will not be sold in an
underwritten public offering. The Shares may be sold directly or through brokers
or dealers. The methods by which the Shares may be sold include:
(a) A block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to
facilitate the transaction;
(b) Purchases by a broker or dealer as principal and resale by the such
broker or dealer for its account pursuant to this prospectus;
(c) Ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
(d) Privately selling stockholders may arrange for other brokers or
dealers to participate.
Brokers or dealers may receive commissions or discounts from selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of the
shares, from the purchaser) in amounts to be negotiated that are not expected to
exceed those customary in the types of transactions involved. Broker-dealers may
agree with the selling shareholders to sell a specified number of the shares at
a stipulated price per share, and, to the extent the purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling shareholders. Broker-dealers who acquire shares as principal may
thereafter resell the shares from time to time in transactions (which may
involve crosses and block transactions and sales to and through other
broker-dealers (including transactions of the nature described above) in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and`, in connection with the re-sales, may pay to or
receive from the purchasers of the shares commissions as described above.
In connection with the distribution of the Shares, the selling
shareholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also sell the shares short and
redeliver the shares to close out the short positions. The selling stockholders
may also loan or pledge the shares to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default the broker-dealer may effect sales
of the pledged shares. In addition to the foregoing, the selling stockholders
may enter into, from time to time, other types of hedging transactions.
The selling stockholders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the 1933 Act and any profit on the sale of shares by
the selling stockholders and any commissions or discounts given to any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the 1933 Act. The shares may also be sold pursuant to Rule 144 under the 1933
Act beginning one year after the shares were issued.
We have filed the registration statement, of which this prospectus
forms a part, with respect to the sale of the shares. There can be no assurance
that the selling shareholders will sell any or all of the shares they desire to
sell, or that we will sell any of the share we desire to sell.
Under the Securities Exchange Act of 1934 ("Exchange Act") and the
regulations thereunder, any person engaged in a distribution of the shares
offered by this Prospectus may not simultaneously engage in market making
activities with respect to the common stock of Cryocon during the applicable
"cooling off" periods prior to the commencement of the such distribution. In
addition, and without limiting the foregoing, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of purchases and
sales of common stock by the selling shareholders. We will pay all of the
expenses incident to the offering and sale of the Shares, other than
commissions, discounts and fees of underwriters, dealers, or agents.
12
We have advised the selling shareholders that, during the time that
they may be engaged in a distribution of any of the shares we are registering by
this Registration Statement, they are required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934. In general, Regulation M
precludes any selling shareholder, any affiliated purchasers and any
broker-dealer or other person who participates in the distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase,
any security which is the subject of the distribution until the entire
distribution is complete. Regulation M defines a "distribution" as an offering
of securities that is distinguished from ordinary trading activities by the
magnitude of the offering and the presence of special selling efforts and
selling methods. Regulation M also defines a "distribution participant" as an
underwriter, prospective underwriter, broker, dealer, or other person who has
agreed to participate or who is participating in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize
the price of a security in connection with the distribution of that security,
except as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of the common stock to be higher than it would
otherwise be in the absence of those transactions. We have advised the selling
shareholders that stabilizing transactions permitted by Regulation M allow bids
to purchase our common stock so long as the stabilizing bids do not exceed a
specified maximum, and that Regulation M specifically prohibits stabilizing that
is the result of fraudulent, manipulative, or deceptive practices. selling
shareholders and distribution participants will be required to consult with
their own legal counsel to ensure compliance with Regulation M.
Description of Securities
Common Stock
The common stock is the only class of voting securities of Cryocon
outstanding.
The holders of common stock are entitled to one vote for each share
held. The Certificate of Incorporation provides that the affirmative vote of a
majority of the votes cast at a shareholder's meeting is sufficient to effect
any corporate action upon which shareholders may or must vote. Common stock do
not carry cumulative voting rights, thus holders of more than 50% of the common
stock have the power to elect all directors if they wish and, as a practical
matter, to control Cryocon. Holders of common stock are not entitled to
preemptive rights, and the common stock is not subject to redemption.
Cryocon's bylaws provide for a board of no less than three nor more
than seven directors, all of whom are elected for one-year terms at the annual
meeting of shareholders. The affirmative vote of a simple majority of the
outstanding Common Stock is necessary to remove a director. A special meeting of
shareholders may be called by the Chairman of the Board, the President, a
majority of the Board of Directors, or shareholders owning in the aggregate 10%
or more of the common stock. Holders of common stock are entitled to receive,
pro rata, dividends if, when, and as declared by the Board of Directors out of
funds legally available therefore.
Upon liquidation, dissolution or winding up of Cryocon, holders of
common stock are entitled to share ratably in Cryocon's assets legally available
for distribution to its shareholders after payment of liquidation preference and
outstanding redemption rights (if any) on any preferred stock outstanding and
are not subject to further calls or assessments.
13
Warrants and Contractual Rights to Purchase Shares of Cryocon's Common Stock
Bourns, Inc.
Pursuant to a written agreement between Cryocon and Bourns, Inc.
executed on October 6, 2000, Bourns has the right to purchase 30,000 shares of
Cryocon's common stock at the price of $1.00 per share. Pursuant to a second
written agreement between Cryocon and Bourns, Inc. executed on December 15,
2000, Bourns has the right to purchase an additional 30,000 shares of Cryocon's
common stock at the price of $1.00 per share. If Cryocon's common stock is
subdivided into a greater number of shares or a dividend is paid in common
stock, the exercise price shall be proportionately reduced. If Cryocon's common
stock is combined into a smaller number of shares, then the exercise price shall
be proportionally increased. Cryocon has the right of first refusal on the
resale of any shares of common stock held by Bourn, if Bourn elects to purchase
the shares.
J. Brian Morrison
Pursuant to a written agreement between Cryocon and J. Brain Morrison,
executed on February 1, 2001, Mr. Morrison may purchase up to 500,000 shares of
Cryocon's common stock at the price of $0.10 per share. If Cryocon's common
stock is subdivided into a greater number of shares or a dividend is paid in
common stock, or combined into a smaller number of shares, the exercise price
and the number of shares of capital stock issuable upon the exercise of any the
warrants shall be adjusted so that the holder shall be entitled to receive the
number of shares of capital stock that the holder would have owned prior the
corporate action had the warrants been exercised.
Todd Moore
Pursuant to a written agreement between Cryocon and Todd Moore,
executed on December 20, 2000, Mr. Moore may purchase up to 1,000,000 shares of
Cryocon's common stock at the price of $0.10 per share. If Cryocon's common
stock is subdivided into a greater number of shares or a dividend is paid in
common stock, or combined into a smaller number of shares, the exercise price
and the number of shares of capital stock issuable upon the exercise of any the
warrants shall be adjusted so that the holder shall be entitled to receive the
number of shares of capital stock that the holder would have owned prior the
corporate action had the warrants been exercised.
Millennium Capital Partners, LLC.
Pursuant to a written agreement between Cryocon and Millennium,
executed on February 16, 2001, Millennium has the right to purchase 1,500,000
shares of Cryocon's common stock. Millennium's purchase price per share is
eighty percent (80%) of the market price for Cryocon's common stock on the
business day immediately prior to the day that Millennium purchases the shares.
Cryocon Shareholder Warrants
The warrants Cryocon issued to its shareholders allows the shareholders
to purchase up to 3,714,585 shares of Cryocon's common stock. The warrants were
issued to Cryocon's shareholders without costs to the shareholders. The exercise
price for the warrants is eighty percent (80%) of the market price of Cryocon's
common stock on the day immediately prior to the day that the shareholder
holding the warrants elects to exercise its warrants. The minimum exercise price
for each warrant is $2.00 per share.
The warrants expire April 30, 2002
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Current Business of the Company
On August 16, 2000, Cryocon acquired all of the issued and outstanding
stock of the stock of Cryocon Utah. Cryocon Utah is one of the operating
subsidiaries of Cryocon. Cryocon Utah was organized to provide deep cryogenic
tempering of materials to relieve stress and enhance durability and wear. Deep
cryogenic tempering is a process that includes the application of extremely low
temperatures (at approximately minus 300F) utilizing a computer-controlled
process.
On November 10, 1999, Mr. Brunson executed an agreement to purchase
Cryo-Accurizing Division and the Tri-Lax Process from 300 Below Inc. On December
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10, 1999, Cryocon acquired Cryo-Accurizing Division and the Tri-Lax Process from
Robert W. Brunson along with Mr. Brunson's interests in a patent on the
Cryo-Accurizing Division. Mr. Brunson developed both the Cryo-Accurizing
Division and the Tri-Lax Process while President of 300 Below, Inc. and was a
co-holder of the patent on the Cryo-Accurizing Process, which was awarded on
February 2, 1999.
Cryo-Accurizing is the patented process that Cryocon uses to perform
deep cryogenic tempering, material stabilization and stress relief to firearms
to improve accuracy, longevity and increase ease of cleaning. The Tri-Lax
Process is a combination of cryogenic, electromagnetic and sonic treatment.
Cryocon currently has the capability to provide its customers with Deep
Cryogenic Processing in its facilities in Utah. The process can be used for
treating tooling (drill bits, dies, and punches), wear parts (forming dies,
extrusion equipment, and hammer mills), and many other items including motor
parts, razor blades, firearms, pantyhose, musical instruments, and softball
bats. Cryocon's process has numerous applications in the aerospace, mining,
energy, electronic, medical and manufacturing industries.
In addition, Cryocon intends to manufacture cryogenic processors, which
are machines used to cryogenically treat materials. The cryogenic processors can
be custom designed to the purchasers' specifications. Cryocon also intends to
manufacture a tabletop cryogenic processor.
On April 3, 2001, Cryocon acquired XTool, Inc. XTool a Utah
Corporation, with principal offices in Salt Lake City, Utah. XTool manufactures
tools and provides services for the down-hole oil and horizontal directional
drilling operations in the petroleum industry. XTool has operating facilities in
Bakersfield, CA and Farmington, NM.
PLAN OF OPERATIONS
Cryocon's plan of operation is to develop it research and development
program while focusing on sales and strategic alliances. There are numerous
testing programs ongoing with manufacturers in the mining, aerospace,
automotive, military/weapons, and electronics industries. It is anticipated that
these testing programs and strategic alliances will result in contracts that
will generate significant revenues in the future.
Specific research and development goals include extensive analytical
testing of deep cryogenic effects on synthetic materials and electronics in
addition to obtaining specific data concerning the beneficial effects of
Cryocon's proprietary Deep Cryogenic Tempering process on various metals and
alloys.
Cryocon has also begun the development of proto-types of Cryogenic
Processors that it is anticipated will find wide acceptance in a broad variety
of professions and industries. It is anticipated that at least one proto-type
will be completed in 2001.
Cryocon has also begun and plans to continue in a program of obtaining
patent protection for it's proprietary process as well as specific applications.
Cryocon anticipates having several patent grants, and/or applications pending
prior to the end of the fiscal year 2000.
Liquidity and Capital Resources.
Cryocon Utah commenced operations on January 3, 2000. Since inception
on October 20, 1999, Cryocon Utah realized $95,094 in gross sales and had
$35,793 in accounts receivable. Cryocon's cumulative operating loss through
December 31, 2000 is $3,147,093. The loss is attributable to pre-organizational,
start-up and operating costs of its subsidiary Cryocon Utah, and costs incurred
in Cryocon's financing efforts.
Cryocon's operation to date consumed substantial amounts of cash. The
negative cash flow from operations is expected to continue and may accelerate in
the foreseeable future. The rate in which Cryocon expends its resources is
variable and may accelerate, depending on many factors. Many of the factors are
outside of Cryocon's control, including the continued progress of Cryocon's
research and development of new process applications; the cost, the timing, and
outcome of further regulatory approvals; the expenses of establishing a sales
and marketing force, the timing and cost of establishing or procuring additional
requisite production and other manufacturing capacities, the cost; if any, the
cost of preparing, filing, prosecuting, maintaining, defending and enforcing
patent claims; and the status of competitive products and the availability of
other financing.
15
Because Cryocon is still in the development stage, it has limited
working capital and limited internal financial resources. Cryocon's limited cash
flows have prevented the company from borrowing funds from conventional lending
institutions. Since the Cryocon has not been able to secure funding from
commercial lenders, Cryocon has relied on private investments from
third-parties, including the Company's management, to meet its current
obligations. As of January 30, 2001, Cryocon will have sufficient cash on hand
to fund approximately three months of operations at the current run rate;
however, Management is confident of being able to obtain operational funds
through various means. Management believes that it should obtain profitability
by the end of fiscal year 2001.
On December 15, 2000, Cryocon announced corporate restructuring aimed
at achieving administrative and operational cost savings. Cryocon estimated cost
savings in excess of 50% through outsourcing key functions and redefining
departmental and employee functions. As a result of this action, Cryocon's
management reduced Cryocon's full time employees by 10 employees to a total of
17 full time personnel. At the present time here is no anticipated significant
changes in the number of employees; however, management reserves the right to
further redefine employee positions anticipates that it may need to hire
personnel specifically in the research and development program.
Cryocon's financial information is prepared using generally accepted
accounting principles applicable to a going concern that contemplates the
realization of assets and liquidation of liabilities in the normal course of
business.
DESCRIPTION OF THE BUSINESS IN THE LAST FIVE YEARS
History and Organization:
ISO Block Products USA, Inc. ("Company") was incorporated in the State
of Colorado, on April 28, 1986, under the name Champion Computer Rentals, Inc.
Champion obtained funding from a public offering in order to engage in the sale
and leasing of computers and related equipment. Champion's principal business
operations through March 31, 1992 consisted of leasing out computers, peripheral
products and software. Champion realized only nominal revenues through March 31,
1992. As March 31, 1992, Champion ceased its computer sale and leasing
operation.
On March 28, 1994, the Champion entered into an Agreement and Plan of
Reorganization and was acquired by R-S Iso-Block Produktions GmbH, a German
limited liability company ("Iso-Block GmbH"), Josef Ratey, an individual
("Ratey"), Helge Seidel, an individual ("Seidel"), and R-S Plus Investment
Corp., a Florida corporation ("R-S PLUS"). Pursuant to the Reorganization
Agreement, on March 31, 1995 the Champion purchased from Ratey and Seidel all of
the equity interest in Iso-Block GmbH, and purchased from R-S Plus all of its
right, title and interest in and to Iso-Block GmbH, including all R-S Plus
property heretofore contributed to Iso-Block GmbH and all R-S Plus's rights to
Iso-Block profits, in exchange for the issuance of an aggregate of 2,000,000
shares of Champion's authorized but heretofore unissued common stock, no par
value. In 1995, Iso-Block GmbH changed its name to R-S ISO-Block Produktions und
Bautrager GmbH, which permitted it to engage in the business of constructing
buildings as well as manufacture and production of building materials.
In fiscal years ended 1995 and 1996, Iso-Block GmbH had certain
operations in Germany. Iso-Block wound down these operations in the closing
months of 1996. Beginning 1996, Iso Block functioned entirely as a US company
engaged in the business of residential home construction as general contractor.
On January 24, 1997, Iso Block acquired 100% of the stock of Franchise
Connection, Inc. and its wholly owned subsidiary Brilliant Marketing, Inc.,
("Franchise Connection") a strategic conglomerate of new and emerging franchise
companies and a team of franchise experts that work together to match the
aspirations of entrepreneurs with viable analogous franchise concepts.
Franchise Connection, Inc. was incorporated in Colorado in 1996 with
headquarters in Denver, Colorado. Franchise Connection attempted to form
strategic partnerships with prospective or existing franchise operations
("Franchisers") under which Franchise Connection planned to provide marketing
and sales services plus business and legal services in return for an equity
interest in, and/or a portion of their royalties. Franchise Connection targeted
16
private companies that sought to franchise expertise or financial capacity to
successfully engage in franchising. Franchise Connection offered comprehensive
franchise marketing and consulting services to its franchisers companies
including operations, personnel, management, training, legal and financial
advice. In addition, Franchise Connection assumed total responsibility for the
recruitment of franchisees, including national media advertising, trade show
attendance, and other forms of promotion supported by a commissioned sales
staff.
Franchise Connection, Inc. developed Magna Dry LLC. Franchise
Connection, Inc. formed a Colorado Limited Liability Company "Magna-Dry USA,
LLC" of which was the sole member. Magna -Dry USA purchased the exclusive
license to operate and franchise the Magna-Dry concept in total cleaning
throughout the United States. Franchise Connections, Inc. executed a five-year
license agreement with renewal options and paid a master franchise fee. The
principal business was manufacturing, re-packaging, distribution and licensing
of leading edge environmentally safe-cleaning services developed by an
Australian formulator Charles C. Borg. Franchise Connection, Inc. had exclusive
territorial rights to manufacture and distribute Magna-Dry products in the
United States.
On August 31, 1999 Cryocon, Franchise Connection, Magna Dry, Brilliant
Marketing and certain individuals entered into a Unwinding Agreement due to the
lack of cash on hand and lack of operating income. The discontinued operations
resulted in $86,232 of liabilities that are no longer a responsibility of Iso
Block.
Iso Block entered into an Agreement and Plan of Reorganization, dated July
20, 1999, with MedScan Technologies, Inc., an Oklahoma corporation ("MedScan"),
and the shareholders of MedScan (the "MedScan Holders"). In that agreement,
Cryocon agreed to issue, at closing, 10 million shares of its common stock in
exchange for all of the outstanding common stock of MedScan, all of the issued
Class A common stock of American Capital Corporation, a Nevada corporation
("AMCAP"), and all of the common stock of Star Insurance Company, Ltd., an
insurance company domiciled and licensed in the Federation of St. Kitts and
Nevis, British West Indies ("STAR").
Iso Block terminated the agreement, based on failure of the closing to take
place by the time required in the agreement, based on the fact that the selling
holder of the STAR common stock repudiated the Exchange Agreement and announced
its refusal to consummate the Exchange, and based on the failure or untruth of
certain representations and warranties of MedScan made in the Exchange
Agreement. Iso Block, by letter faxed to MedScan , notified MedScan of the
termination. No person associated with MedScan, AMCAP or STAR ever become an
officer or director of Iso Block.
Until December 31, 1999, Iso Block's principal operations consisted of
residential home construction as general contractor.
DESCRIPTION OF PROPERTY
Cryocon's current administrative and operational facility is located at
2250 North 1500 West, in Ogden, Weber County, Utah. The building consists of
39,828 sq ft of which approximately 10,000 sq ft is finished office space.
Cryocon is currently the owner with Bourns Inc., holding a note payable for a
balance of $1,350,000. Cryocon has paid approximately $700,000 against the
principal of $2,050,000. Cryocon is currently in negotiations with Bourns to
effect a roll over of the note for a one year period.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age, and position of each
executive officer and director and the term of office of each director of the
Company, as of December 31, 2000.
Director and Officers Age Position Since
J. Brian Morrison 43 Chairman/CEO March 2001/
Director December 2000
Robert W. Brunson 45 President March 2001/
Intellectual
Property Division/ August 2000
Lyndell Parks 43 Director December 2000
James S. Cundiff 55 Director/ March 2001
Secretary
Sterling Redfern 67 Director March 2001
17
Vaughn P. Griggs 57 Chief Financial
Officer March 2001
D. Clark Carlile 37 Senior VP, COO July 2000
James M. Retallick 43 VP., Corporate Counsel July 2000
MATT KAMMEYER 31 Senior VP., Marketing December 2000
Biographical Information
Set forth below is certain biographical information for each of the Company's
Officers and Directors:
J. Brian Morrison
Mr. Morrison has over 21 years of experience in sales, management,
investment banking, and has been directly involved with the management of nearly
one hundred employees. Most recently, Mr. Morrison retired from Stephens, Inc.;
the largest investment-banking firm in the world off Wall Street, was
Vice-president Bank of Oklahoma, BOSC Securities, and is currently engaged in
private consulting. He has specialized in fixed income security sales, municipal
and governmental financing with institutions, banks, and trust departments, as
well as the development of Arkansas and national markets. Additionally, Mr.
Morrison has been directly involved with placement and/or underwriting of equity
with many Fortune 500 Companies.
Robert W. Brunson
Mr. Brunson founded Cryocon, Inc., the Utah Corporation, in January of
2000, together with his spouse Debra L. Brunson. Previously, Mr. Brunson had
been the president of a major cryogenics firm in the Midwest (September 1994 to
May 1999). Mr. Brunson has worked as an engineer and consultant in the area of
nuclear, chemical and electrical engineering since 1980, as well as cryogenic
technology. He authored and held the patent for the deep-cryogenic tempering of
firearm barrels and components, known throughout the country as Cryo-Accurizing,
which is now a division of Cryocon.
Mr. Brunson is the founding co-chairman of the National Small Public
Company Leadership Council, as well as a member of its Executive Committee.
Robert is also currently the chairman of the Cryogenic Standards Committee and
serves as an expert panel member of Heat Treating On-Line and operates as
chairman of the ASM Cryogenic Roundtable Committee.
Lyndell Parks
Mr. Parks has recruiting, marketing, and management experience covering
the past 18 years. This includes the organization of project teams, recruitment
of professionals, and assisting corporations in both managerial structure and
product development. He has owned and operated medical equipment company,
insurance agency, and a publishing company during his professional career.
Mr. Parks is currently General Manager of Paragon Marketing that
provides a wide variety of corporate marketing and consulting. Mr. Parks is also
the general manager of Eagle Publishing, Inc., interim Chairman/CEO of H2O
International and co-founder/co-chairman of The Small Public Company Leadership
Council.
James S. Cundiff
Mr. Cundiff has an extensive background in marketing both domestically
and internationally. He graduated from the University of California, Humbolt in
1971 with a degree in Business Administration. Mr. Cundiff if the founder and
current Vice President of Qwestar Resources.
Sterling Redfern
Mr. Redfern is the former president/chief executive officer for the
Educational Employees Credit Union (EECU) in Bridgeton, Missouri. Mr. Redfern
was the first full-time employee of EECU in 1960 and helped develop EECU into
one of the leading credit unions in the country with assets of over 200 million,
38,000 members, and 120 employees.
18
A graduate of Arkansas State University, Mr. Redfern has also attended
the Army Security Agency School, St. Louis University, the Credit Union National
Association School of Business Management, and the University of Wisconsin. Mr.
Redfern was a member of the Credit Union Executive Society for 34 years, served
as Director of the Missouri Credit Union League for 30 years, and was the Credit
Union National Association Director for 20 years. Mr. Redfern has served several
years as a board volunteer for a number of educational organizations including
15 years with the Missouri White House Conference on Education. Mr. Redfern is
married with three children and six grandchildren.
Vaughn P. Griggs
Mr. Griggs has over 30 years experience in corporate finance and
operations. Mr. Griggs obtained a B.S. in Accounting with an emphasis in
Business Management and Economics from Brigham Young University. Mr. Griggs has
previously worked for Precision Tool, Inc., American Apparel, Inc., and
Integrated Systems Engineering, Inc. Mr. Griggs also worked as a staff auditor
for Arthur Andersen & Co., he was Vice President of Property Management with
Price Management Company, served as Controller for the Grossmont Shopping Center
and Huish Management Company, and CFO/Product Development for Nutrition
Management Company. Mr. Griggs served as Recorder for the City of Nibley, Utah
for three years. He was Chairman of the Transportation Committee in the La Mesa,
California Chamber of Commerce and was the Charter Member and Treasurer of the
Grossmont Kiwanis International Club.
D. Clark Carlile
Mr. Carlile has an extensive Engineering, Operations and Management
background. Clark graduated from Brigham Young University with a Bachelors in
Manufacturing Engineering Technology. Mr. Carlile was a Senior Design Engineer
and Equipment Manager at the Boeing Commercial Airplane Company. As a Process
Engineer for Morton International's Automotive Safety Products Division, he
continued his work in designing and developing improved production processes and
implemented effective changes. As the Manager of Manufacturing Operations for a
division of Autoliv Automotive Safety Products North America, Mr. Carlile was
responsible for major aspects of the manufacturing operation, from budgets and
engineering support to leadership training and quality control. He moved on as
the Manager of Global Sales and Marketing for the components division of Autoliv
and then on to be the Director of Startup Operations for one of Autoliv's newest
manufacturing plants in Queretaro Mexico.
James M. Retallick
Mr. Retallick graduated from the J. Reuben Clark Law School at Brigham
Young University in 1987. Mr. Retallick served in the U.S. Army Judge Advocate
General's Corps attaining the rank of Major. His assignments took him all over
the world and included positions as prosecutor, instructor and doctrine writer
for the US Army Intelligence Community and military magistrate. Mr. Retallick
began private practice in 1992 with an emphasis in case negotiation and
litigation. Mr. Retallick left his position as shareholder and managing attorney
of the law firm of Retallick & Pace, P.C. in January 2000 to accept a position
with Cryocon, Inc. Mr. Retallick worked closely with founder Robert W. Brunson
in the development of the company, from business plan formulation to the
establishment of the Company. Mr. Retallick brings a varied background in legal
project execution and personnel management which has lent itself well to the
demands of a public company and management of professionals of various
disciplines. Mr. Retallick is Debra L. Brunson's brother and Robert W. Brunson's
brother-in-law.
Matthew A. Kammeyer
Mr. Kammeyer has over 10 years of effective managerial experience in
the areas of marketing, advertising, and corporate communications. He has
received a M.S. degree in Sport Administration (emphasis in marketing & media
relations) from Georgia Southern University and a B.S. degree in Communication
(emphasis in journalism & public relations) from Weber State University. Mr.
Kammeyer has experience in multiple aspects of advertising including print,
television, radio, direct mail, and Internet. Mr. Kammeyer has managed local and
national media relations, event relations, marketing, and advertising projects
for the U.S. Ski & Snowboard Teams, the Atlanta Committee for the Olympic Games,
Georgia Department of Transportation, Weber State University, Pacific Rim
Financial Group, Newgate Mortgage Company, Bank One, and Franklin-Covey. Mr.
Kammeyer has been with Cryocon, Inc. since its inception in January 2000. He has
served Cryocon as Sales Manager, Marketing & Advertising Manager, and currently
as Vice President of Marketing & Advertising.
19
EXECUTIVE COMPENSATION
The following table set forth certain summary information concerning
the compensation paid or accrued for each of the Cryocon's last three completed
fiscal years to Cryocon's or its principal subsidiaries Chief Executive Officer
and each of its other executive officers that received compensation in excess of
$100,000 during such period (as determined at December 31, 2000):
SUMMARY COMPENSATION TABLE
Other Restricted Securities LTIP All Other
Name and Annual Stock underlying payouts Compensation
Principal Position Year Salary Bonus Compensation award(s) options/SARs ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
ROBERT W. BRUNSON, PRES 2000 112,500. 00 00 00 00 00 00
D. CLARK CARLILE, VP 2000 105,000 00 00 00 (1) 00 00 00 (2)
(1) All Vice-Presidents have stock options in the total amount of 250,000
shares which vest at 50,000 shares each year on the anniversary of their
hire and/or promotion date. To date no option shares have vested.
(2) D. Clark Carlile was hired in July, 2000 with an annual salary of $105,000.
He has not received in excess of $100,000 for 2000 because of his hire
date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
Company's Common Stock owned as of March 27, 2001 by (i) each person who is
known by the Company to own beneficially more than five percent (5%) of the
Company's Common Stock; (ii) each of the Company's directors and nominees; (iii)
all officers and directors as a group:
(i) BENEFICIAL OWNERS OF MORE THAN 5%:
Amount and
Title of Name and Nature of Percentage of
Class Address (1) Beneficial Ownership Shares (1)
Common Apollo Holdings 1,450,000 7.5%
PO Box 793
Dartford, Kent UK
DA27ZY
(ii) DIRECTORS AND NOMINEES:
Amount and
Title of Name and Nature of Percentage of
Class Address (1) Beneficial Ownership Shares (1)
Common Robert W. Brunson 12,163,893 63.0%
2250 North 1500 West
Ogden, UT 84404
Common J. Brian Morrison 600,000 3.1%
2250 North 1500 West
Ogden, UT 84404
Common Lyndell Parks 389,400 2.0%
2250 North 1500 West
Ogden, UT 84404
Common James S. Cundiff 500,000 2.5%
2250 North 1500 West
Ogden, UT 84404
Common James M. Retallick 270,000 1.3%
2250 North 1500 West
Ogden, UT 84404
All officers and directors as a group 13,923,293(4) 72.0%
(1) The percentage of shares is calculated based upon the total outstanding
20
shares issued and outstanding according to the Company's transfer agent as
of March 27, 2001.
(2) This includes all shares currently issued shares plus all shares that the
directors and officers have the right to acquire within 60 days from
options, warrants, conversion privilege or similar obligations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert W. Brunson, (former Chief Executive Officer) President of the
Intellectual Property Division holds an outstanding promissory note with an
interest rate of twelve percent (12%) per annum. The remaining outstanding
principal amount of the loan is $149,744.00. Cryocon is not currently making
periodic payments on the outstanding principal and interest on this loan. Mr.
Brunson has not demanded repayment of the principal or interest due on the loan.
Robert W. Brunson sold to Cryocon Utah, the assets relating to the
Cryo-Accurizing Division and the Tri-Lax Process on November 10, 1999. In
consideration, Cryocon Utah originally gave Mr. Brunson 9,700,000 shares of
common stock, Seventy Thousand Dollars ($70,000), and a convertible debenture in
the principal amount of $50,000. The debenture had an interest rate of ten
percent (10%) per annum. At Mr. Brunson's election the amount of any outstanding
principal and unpaid interest were convertible into Cryocon Utah's common stock.
At the time of Cryocon's (Iso-Block's) acquisition of Cryocon Utah, Cryocon
assumed the obligation of the promissory note, and agreed to allow the debenture
to be convertible into Cryocon's common shares. The 2,002,523 shares of common
stock described in this prospectus were issued to Mr. Brunson upon conversion of
the debenture. Pursuant to the terms of the convertible debenture, Mr. Brunson
exercised his right to demand registration of the common shares issued upon
conversion of the debenture.
Lyndell Parks became a director on December 15, 2000. Mr. Parks
executed a consulting agreement with Cryocon in November 2000, wherein Cryocon
agreed to pay Mr. Parks $200,000 for his services, in addition to reimbursing
his expenses. Paragon Marketing and Management employees Mr. Parks as its
general manager. Cryocon has an agreement with Paragon Marketing and Management
to pay $3,000 per month to provide Cryocon investor relation services. Cryocon
is not currently paying Paragon Marketing and Management for those services.
Paragon Marketing and Management was the general managing member of each of the
Paragon Venture Funds I, II, III, IV and V. As a member of each venture fund,
Paragon Marketing and Management received 389,400 shares of Cryocon common
stock, upon the conversion of the debenture and the liquidation of each of the
Paragon Venture Funds.
Robert Wickerschiem was appointed to the Board of Directors in October
2000. Mr. Wickerschiem was limited in his participation on the Board due to
health matters. Mr. Wickerschiem loaned Cryocon $100,000 without interest. The
principal amount of the loan becomes due on April 30, 2001.
J. Brain Morrison became a Director on December 15, 2000. Mr. Morrison
became Cryocon's Chairman and Chief Executive Officer on March 3, 2001. On
February 5, 2001, Mr. Morrison executed a warrant agreement with Cryocon wherein
Cryocon agreed to sell to Mr. Morrison 500,000 shares of Cryocon's common stock
at the purchase price of $0.10 per share. Mr. Morrison's right to purchase the
500,000 shares of common stock expires on December 31, 2005. The 500,000 shares
of common stock issuable upon the exercise of the warrant agreement are included
in this prospectus. Additionally, Mr. Morrison received a stock option for
common shares to vest as follows: 100,000 shares vesting on January 2, 2001;
75,000 shares vesting on January 2, 2002; and, 75,000 shares vesting on January
2, 2003.
COUNSEL
The validity of the issuance of the warrants and shares of the common
stock offered by this prospectus will be passed upon for the Company by Marcus
A. Sanders, Esq. Mr. Sanders, who has provided advice with respect to this
matter, owns no shares of Cryocon stock. Mr. Sanders is not an "affiliate" of
the Cryocon and does not have any interest in the registrant.
EXPERTS
Cryocon's consolidated financial statements as of March 31, 2000 and
21
for the year ended March 31, 1999 included in this prospectus have been included
herein in reliance upon the reports of, Larry O'Donnell, CPA, P.C., independent
certified public accountants, which appear elsewhere in this prospectus, and are
included upon the authority of this firm as experts in accounting and auditing.
The financial statements of Cryocon Utah, the operating subsidiary, as
March 31, 2000, included as part of this prospectus have been audited by Jeff
Jones, of HJ & Associates, L.L.C., independent auditors, as stated in their
report dated March 31, 2000, and have been included in this prospectus in
reliance upon the report of HJ & Associates appearing elsewhere herein, and upon
authority of this firm as experts in accounting and auditing.
Effective September 21, 2000, Cryocon retained HJ & Associates to act
as its auditors. In this regard, HJ & Associates replaced Larry O'Donnell's
firm, which audited Cryocon's financial statements for the fiscal years ended
March 31, 2000 and for the year ended March 31, 1999. The reason for the change
in accountants was due to the change of Cryocon's principle place of business
from Colorado to Utah. The reports of Larry O'Donnell for these fiscal years did
not contain an adverse opinion, or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles.
During Cryocon's two most recent fiscal years, there were no
disagreements with Larry O'Donnell on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of Larry O'Donnell would have
caused Larry O'Donnell to make reference to such disagreements in its reports.
Cryocon has authorized Larry O'Donnell to discuss any matter relating
to Cryocon's operations with HJ & Associates. The change in auditors was
recommended and approved by Cryocon's board of directors, and a majority of its
shareholders. Cryocon does not have an audit committee.
During the two most recent fiscal years, Cryocon did not consult with
HJ & Associates on the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on Cryocon's financial statements, or any matter that was the
subject of a disagreement or what is defined as a reportable event by the
Securities and Exchange Commission.
Interest of Named Experts and Counsel
No "expert" as that term is defined pursuant to Regulation S-B, or the
"counsel" of Cryocon as that term is defined pursuant to regulation S-B, was
hired on a contingent basis, or will receive a direct or indirect interest in
Cryocon, or was a promoter, underwriter, voting trustee, director, officer, or
employee of Cryocon at any time prior to the filing of this registration
statement.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is currently traded on the OTC Bulletin
Board, under the symbol "CRYQ." There are approximately 790 shareholders.
On March 27, 2001, Cryocon's common stock was quoted on the OTC
Electronic Bulletin Board at the price of $2.50. The following sets for the
quarterly fluctuations in the reported bid prices for the period from March 31,
1998 through December 31, 2000.
High Bid Low Bid
Fiscal Year Ending March 31, 1999
First Quarter $ n/a $ n/a
Second Quarter $ 0.030 $ 0.020
Third Quarter $ 0.020 $ 0.020
Fourth Quarter $ 1.062 $ 0.040
Fiscal Year Ending March 31, 2000
First Quarter $ 0.750 $ 0.250
Second Quarter $ 0.750 $ 0.125
Third Quarter $ 0.187 $ 0.093
Fourth Quarter $ 1.625 $ 0.062
22
Nine Month Period Ending December 31, 2000
Quarter ending June 30, 2000 $ 1.680 $ 0.625
Quarter ending September 30, 2000 $ 5.500 $ 0.750
Quarter ending December 31, 2000 $ 7.312 $ 2.500
SELLING STOCKHOLDERS
Cryocon issued the shares of common stock offered for resale by this
prospectus to the selling shareholders upon either the conversion of debentures,
shares issued pursuant to a private placement or the exercise of warrants and
options.
The table below sets forth information known to us with respect to
beneficial ownership of the common stock as of February 28, 2001 by each selling
stockholder. The table below assumes that the selling stockholders will exercise
all of the warrants, and that all of the selling shareholders will sell their
shares. Since each stockholder may choose not to sell his shares, we are unable
to state the exact number of shares that actually will be sold.
Information with respect to "beneficial ownership" shown below is based
on information supplied by the respective beneficial owner. For purposes of
calculating the percentage beneficially owned, the shares of common stock deemed
outstanding include:
- the shares outstanding as of March 27, 2001; and
- the shares issuable by us pursuant to the conversion of the
debentures and the exercise of warrants held by the respective person that may
be exercised within 60 days following the date of this prospectus.
The shares are deemed to be outstanding and to be beneficially owned by
the person holding the securities for the purpose of computing the percentage
ownership of that person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. The mailing address of
each beneficial owner is c/o 2250 North 1500 West, Ogden, Utah 84401,
(801)395-2796
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
SELLING SHAREHOLDERS RECEIVING WARRANTS AND SHARES OF COMMON STOCK UPON THE EXERCISE OF THE WARRANTS
JAMES P.JR. & ANGELINA ACQUAVIVA 125 375 500 *
KARL HEINZ & ISOLDE ADLER 25 75 100 *
KATHERINE M. & KENNETH ALLARD 125 375 500 *
MARIA ALPOS 19 56 75 *
RON AMMONS 188 563 750 *
MARILYN ANGERS 63 188 250 *
CLEMENS & PETRA ANSEL 25 75 100 *
MOHAMMAD & TINA AZARHAIL 290 870 1,160 *
UDO BADER 1,689 5,067 6,756 *
EUGENE BAKER 38 113 150 *
ROBERT & ANITA BALEY 88 263 350 *
EARL & PAMELA BALLARD 200 600 800 *
DONALD R. & MARCIA BARBER 250 750 1,000 *
STEPHEN BARNES 100 300 400 *
ROBERT & GERALDINE BASHLINE 50 150 200 *
GUNTER BAUMANN 7,500 22,500 30,000 *
LEE BECKWITH 80 240 320 *
THOMAS BENDER 25 75 100 *
23
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
ROGER BERGERON 100 300 400 *
DAN BERICH 50 150 200 *
CILLA BERNDT 60,253 180,758 241,010 *
WALTER & ALISE BING 25 75 100 *
GEORGE BINNS 38 113 150 *
WILFRIED & MARLIES BIRMELIN 25 75 100 *
KENNETH BISHOP 250 750 1,000 *
THOMAS BISHOP 125 375 500 *
GERTRUD BLUM 25 75 100 *
MICHAEL BLUST 25 75 100 *
HOWARD BOLD 963 2,888 3,850 *
SCOTT BOYD 75 225 300 *
CHARLES S & VELUVOIZE BOYNTON 63 188 250 *
R BRAUMER 1,875 5,625 7,500 *
ALFRED BREHMER 375 1,125 1,500 *
JOACHIM & ROSMARIE BRENDER 25 75 100 *
EGIN BRESNIG 39,125 117,375 156,500 *
RICHARD BRIER III 650 1,950 2,600 *
FLOYD H & MINNIE BRIGHAM 325 975 1,300 *
JURGEN BRODKORB 2,500 7,500 10,000 *
ARNO BRUSCHKE 25 75 100 *
ASUNCION BURCE 50 150 200 *
MICHAEL & BRITA BURGER 25 75 100 *
ANITA BURGERT 25 75 100 *
MARKUS & MONIKA BURKHARD 25 75 100 *
PAULA BUSCH 25 75 100 *
GERHARD & MANUELA BUSELMEIER 25 75 100 *
KARL W & CAROL BUTLER 188 563 750 *
WILLIAM CALDERONE 50 150 200 *
JANE CARSWELL 125 375 500 *
CHARLES CATALINA 625 1,875 2,500 *
CEDE CO 464,328 1,392,983 1,857,311 10%
ROY & CYNTHIA GASQUE CHASTAIN 88 263 350 *
JONI CHERMAK 188 563 750 *
CYPRIAN HILSS CHRISTA HILSS 25 75 100 *
ROGER D. CLARK & JANE CLARK 90 270 360 *
SCOTT CLAUSEN 250 750 1,000 *
OTRA CLEARING INC. 750 2,250 3,000 *
TOM COLLINS 238 713 950 *
ROBERT CONINE 313 938 1,250 *
EUGENE CONWAY 63 188 250 *
CHARLES N. & AI COVEY 875 2,625 3,500 *
STEPHEN COX 125 375 500 *
STEPHEN COZZOLINO 25 75 100 *
ALDA CROSS 85 255 340 *
WESLEY DAVIS 625 1,875 2,500 *
MIKE DE PRE 63 188 250 *
DIETER & MELLITA DENZ 25 75 100 *
IRIS DILLON 93 278 370 *
24
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
JOHN DILLON 75 225 300 *
KLAUS & MARGIT DINGLER 25 75 100 *
ALBERT & ASTRID DIRR 25 75 100 *
ELMER DURBAN 25 75 100 *
KLAUS DURI 25 75 100 *
WERNER DURI 25 75 100 *
FRED EASON 500 1,500 2,000 *
GUNTER ECKERT 1,136 3,407 4,543 *
KLAUS ECKERT 25 75 100 *
ERWIN & WALTRAUD EHRLER 25 75 100 *
CLARA EICHNER 25 75 100 *
ROBERT EMMERICH 100 300 400 *
HANS PETER & CHRISTINE ENGELMANN 25 75 100 *
ELIZABETH ENGLE 125 375 500 *
GERHARD ENGLER 25 75 100 *
HANS FAISST 25 75 100 *
MANFRED FAISST 25 75 100 *
JON FARINHOLT 188 563 750 *
RAINER FASSMANN 25 75 100 *
WALDEMAR FASSNACHT 25 75 100 *
WALTER FEHR 25 75 100 *
MARTIN FEHSER 25 75 100 *
GOTTARD FELSMANN 2,500 7,500 10,000 *
MARK & LILLIAN FIORILLO 125 375 500 *
BRUCE FIRTH 55 165 220 *
JERALD D. & SUSAN FLEMING 113 338 450 *
PETER FLIEHER 25 75 100 *
ROBERT J & BETTY FLOYD 531 1,594 2,125 *
MARGUERITE FLOYD 63 188 250 *
LEONARD & LOIS FORTIN 275 825 1,100 *
STEPHEN FUJIKAWA 875 2,625 3,500 *
ULI FUSS 15,000 45,000 60,000 *
HERBERT GANTER 25 75 100 *
LEONARD & BARBARA GELFAND 125 375 500 *
KENT GEORGE 2,000 6,000 8,000 *
JOHN GEORGE 1,250 3,750 5,000 *
RAYMOND GIERSCH 350 1,050 1,400 *
JOSEPH GILLEN 63 188 250 *
MICHAEL GIZZI 25 75 100 *
AUDREY F & DELBERT GOEDDEL 125 375 500 *
DONALD J & JACQUELINE GORDON 63 188 250 *
DANUTA GRESIK 25 75 100 *
MARIA GRESIK 25 75 100 *
HANS GRISAR 25 75 100 *
MONIKA GRISAR 25 75 100 *
ARNOLD & SILVIA GRUNINGER 25 75 100 *
WOLFGANG HARDRICH 25 75 100 *
WALTER HARVEY 63 188 250 *
25
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
ELAINE HENRY-WELSH 108 323 430 *
MARTIN HERB 25 75 100 *
WALBURGA HERB 25 75 100 *
KURT & RIA HIGLISTER 25 75 100 *
ALOIS & ANNELIESE HILSS 25 75 100 *
HERMANN HILSS 25 75 100 *
ANTJE MARIA HISS 25 75 100 *
THOMAS HISS 25 75 100 *
ROY CHARLES HOBOCK 125 375 500 *
HAROLD HODGE 335 1,005 1,340 *
ROLF & JOHANNA HOFFLIN 25 75 100 *
DAVID HOFFMAN 25 75 100 *
DAVID L & WANDA HOOVER 190 570 760 *
DONALD HOPPER JR. 25 75 100 *
ADOLF & MARIA HORNE 25 75 100 *
SHEILA HUGHES 31 94 125 *
DON HUNT 120 360 480 *
BOB HUNT 100 300 400 *
NORMAN HUSED/SOLE PROPRIETOR HUSTED
RANCH 125 375 500 *
LESTER & JACKIE HUTCHINS 83 248 330 *
GIUSEPPE & WALTRAUD JTWROS ILARI 25 75 100 *
GREGORY JAMIESON 375 1,125 1,500 *
HELMUT & ANJA JAUCH 25 75 100 *
THOMAS JOHNSON 625 1,875 2,500 *
CORNELIA KAESSHEIMER 25 75 100 *
HELMUT & IRMGARD KANZINGER 25 75 100 *
RUDOLF & SIGRID KARLE 25 75 100 *
JIM & TERI KARNS KARNS 250 750 1,000 *
WAYNE KASPER 150 450 600 *
KARL HEINZ & URSULA KAUFMANN 25 75 100 *
JAMES C. JR. & JAN KENNEDY 75 225 300 *
AMIR KHOSRAVI 250 750 1,000 *
JOHN KILROY 250 750 1,000 *
SCOTT KING 85 255 340 *
MANFRED KLEIN 25 75 100 *
RUBY KNUTSON 59 176 235 *
CLAUDIA KOCH 25 75 100 *
JOHN L. & BETTY KOHLMEIER 80 240 320 *
HERBERT KONSTANTIN 25 75 100 *
KARL HEINZ & HANNELORE KRANZER 25 75 100 *
WALTER KUPFER 25 75 100 *
RADHAKRISHNA KURUP 63 188 250 *
KLAUS & ASTRID KURY 25 75 100 *
DIETER KURY 25 75 100 *
KLAUSE LANDAU C/F TRESSIE LANDAU UTMA
CO 125 375 500 *
DENNIS LAPE 93 278 370 *
RICHARD LARAIA 125 375 500 *
26
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
MARGERY J LONG LAURA HESTERBERG 128 383 510 *
ROBERT S LEE & WILLIAM LEE 68 203 270 *
CECIL LEONARD 375 1,125 1,500 *
MICHAEL LETTINI 75 225 300 *
PETER LEWMAN 250 750 1,000 *
ARMIN LINSER 25 75 100 *
BRUCE E. & LOLA LONG 330 990 1,320 *
MAX & ANITA LUEDTKE 25 75 100 *
BOB LYNN 625 1,875 2,500 *
VASSILIOS & ELVIRA MASTROVASSILIS 25 75 100 *
EBERHARD & INGRID MAURER 25 75 100 *
KLAUS PETER MAURER 25 75 100 *
THOMAS MAURER 25 75 100 *
KURT & SOFIE JTWROS MAURER MAURER 25 75 100 *
SUSAN MAYNARD 31 92 123 *
LLOYD V & LUANA MCAFERTY 250 750 1,000 *
JOHN & NANCY MCCOY MCCOY 50 150 200 *
TRACY MCCOY 25 75 100 *
GERALD MCCUE 75 225 300 *
JOSEPHA MEIER 25 75 100 *
BRUCE R & DONNA JTWROS MENDENHALL 188 563 750 *
LAMAR C & JOANNE MERCER 75 225 300 *
ANN MERCER 46 139 185 *
HARLEY MILLER 88 263 350 *
CARMINE MINICHINI 55 165 220 *
LEWIS MINOR 188 563 750 *
FRANK MIRABELLA 125 375 500 *
WERNER MOHR 51,250 153,750 205,000 *
JOSEPH MONACO 600 1,800 2,400 *
SIEGFRIED & WALTRAUD JTWROS
MORGENTHALER 25 75 100 *
HILDEGARD MUENCH 25 75 100 *
BERNHARD MULLER 25 75 100 *
ROBERT H & NANCY MUMPER 75 225 300 *
FRITZ & SABINE MUNDINGER 25 75 100 *
JAMES MURRAY 250 750 1,000 *
MIKE MUSSO 300 900 1,200 *
GERHARD MUTSCHLER 25 75 100 *
HERMANN NANN 25 75 100 *
MARIANNE NARDANDREA 63 188 250 *
RANDALL NATION 125 375 500 *
NATIONAL FINANCIAL SERVICES CORP 50 150 200 *
PHILLIP NIELSEN 500 1,500 2,000 *
DIANA NIELSON 200 600 800 *
GERD NIEMAN 2,500 7,500 10,000 *
PHYLLIS T. & VERNON O'BRIEN 138 413 550 *
ONE OF KIND CHILDREN'S One of a Kind
Children's Center 63 188 250 *
27
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
RHEINHARD OTTO 25 75 100 *
JOSEPH N. & DONNA PARSONS 63 188 250 *
DAVID PENQUE 33 98 130 *
R. BRADLEY PETERSON 63 188 250 *
JOHN A & ELIZABETH PETH 31 92 123 *
JANICE PETROWSKY 88 263 350 *
DAVID S & APRIL PFAFF 250 750 1,000 *
KLAUS & ELKE PFISTER 25 75 100 *
WILLIAM PHILO 25 75 100 *
AUGUST PIEVAKOS 125 375 500 *
BARBARA PILAPIL 75 225 300 *
PITTCO 18 53 70 *
LARRY PLACE 63 188 250 *
TED POSTAL 88 263 350 *
ROCCO E & CATHERINE PUCA 63 188 250 *
JOHN RAHN 125 375 500 *
RAYMOND R & SANDRA RANIC 125 375 500 *
JOSEF RATEY 225,000 675,000 900,000 *
FRANZ RATEY 25 75 100 *
WOLFGANG REEB 25 75 100 *
INA REED 695 2,085 2,780 *
JOHN REEDY 25 75 100 *
ALFONS & MARTHA REITH 25 75 100 *
GILBERT & PETRA RIEDER RIEDER 25 75 100 *
ROLF RITTER 25 75 100 *
JEFFREY ROBBINS 125 375 500 *
LUDWIG & MAGDALENA ROETTELE 25 75 100 *
JOSEF ROFALSKI 25 75 100 *
JURGEN ROTTELE 25 75 100 *
PAUL ROTTELE 25 75 100 *
MICHAEL S & CASEY LINWICK ROUZER 238 713 950 *
RHEINHOLD & EDITH RUESCH 25 75 100 *
GEORG RUESCH 25 75 100 *
SIMONE RUESCH 25 75 100 *
HERMANN RUF 25 75 100 *
GUY RUTHERFORD 283 848 1,130 *
STEVE & PATRICIA RYBINSKI 102 305 407 *
MANFRED SACHSE 1,025 3,075 4,100 *
PEARL LONG SANDRA PANTEKOEK 27 82 109 *
DOMENICO SAPIA 25 75 100 *
GUNTER SATTLER 25 75 100 *
FRED SAUTER 38 113 150 *
HAL & PHYLLIS SCHATVET 17,500 52,500 70,000 *
EDUARD SCHLEITH 25 75 100 *
PAUL SCHNEIDER 150,000 450,000 600,000 *
ANJA SCHNEIDER 25 75 100 *
MANFRED & WALTRAUD SCHNEIDER 25 75 100 *
GUNTER & KARIN SCHONSTEIN 25 75 100 *
RUTH SCHUNDELMEIER 25 75 100 *
28
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
THOMAS & REGINA SCHWEIZER 25 75 100 *
DAMIAN SCHWORER 25 75 100 *
CHARLIE L & YVONNE SCOTT 65 195 260 *
RICHARD SCOTT 38 113 150 *
HARRY T. & MARLENE SEDLAK 125 375 500 *
HANS GEORG SEIDEL 25 75 100 *
MICHAEL & ANITA SEILER 25 75 100 *
WOLFGANG SEILER 25 75 100 *
FERDINAND PROBST SEN 12,500 37,500 50,000 *
JOSE SERRANO 25 75 100 *
RICHARD R & REGINA SEVERSON 125 375 500 *
BEATE & CARSTEN SGODDA 25 75 100 *
ESTHER M & WILLIAM SHAFFER 250 750 1,000 *
AL & HELEN SHAW 125 375 500 *
MARK & MAE SHEDRON SHEDRON 250 750 1,000 *
LISA SHEFFIELD 1,250 3,750 5,000 *
MARIA SIDLOV 25 75 100 *
ROSA & WALTER SIEBERT 25 75 100 *
HARTMUT SIEGLING 2,000 6,000 8,000 *
RICHARD L & MARCIA SIGLEY 75 225 300 *
EDYTHE & ROBERT L SIGMAN 250 750 1,000 *
KENNETH & AME SILVERSTEIN 1,668 5,003 6,670 *
ALFONS & HEDWIG SIMON 25 75 100 *
J. STEPHEN SMITH 250 750 1,000 *
HANS & GISELA SOMMER 25 75 100 *
C. V. SORELLE 2,500 7,500 10,000 *
SOUTHWEST SECURITIES INC 125 375 500 *
LEONHARD SPECHT 1,500 4,500 6,000 *
MURRAY & ADDIE SPENCER 125 375 500 *
SHIRLEY SPRINGER 7,500 22,500 30,000 *
JAN TER STEGE 25,000 75,000 100,000 *
ANDREW STEIGER 38 113 150 *
CARL G. & DEBBIE STEITZ 3,122 9,365 12,487 *
CRISTINE STELZER 25 75 100 *
HARALD STETTIN 25 75 100 *
ROCKY & HELEN STOKES 1,250 3,750 5,000 *
PETER STRUTT 25 75 100 *
WILLIAM TATARKA 500 1,500 2,000 *
TERRA FUNDING GROUP INC 26,000 78,000 104,000 *
RICHARD TETENBAUM 63 188 250 *
TEXAS FINANCE INCORPORATED 116 349 465 *
CHARLES A. & CHRISTA TIFT 150 450 600 *
LIA TROXLER 25 75 100 *
JOCHEN ULLMER 25 75 100 *
GARLAND VALENTINE 55 165 220 *
JOHN J & LOUISE VILLANI 250 750 1,000 *
HEINZ VOLLRATH 25 75 100 *
ANDREAS WACHENHEIM 25 75 100 *
GARY WALKER 63 188 250 *
29
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
KEN WALTERS 275 825 1,100 *
WATKINS FAMILY TRUST 7,500 22,500 30,000 *
LOTHAR & ILSE WEISEL WEISEL 25 75 100 *
KAETHE WEISEL 25 75 100 *
GUNTER WENZEL 500 1,500 2,000 *
BILL G & MARILYN WESTER 92 275 366 *
BRYAN WHITFIELD III 150 450 600 *
DEAN WICKER 41,875 125,625 167,500 *
REINHARD & DANIELA WIEDEMANN 25 75 100 *
DANIEL WIEGERT 25 75 100 *
CARL WILKS 200 600 800 *
JOHNNY M & ADA WILSON 25,000 75,000 100,000 *
THOMAS WOLF 25 75 100 *
OLGA WOLTER 25 75 100 *
PAT WOODROW 55 165 220 *
JOHANNA WRIGHT 30 90 120 *
ROSWITHA ZAENGLE 25 75 100 *
JANIENE ZAHRADNICK 50 150 200 *
DANUTA ZANGLE 25 75 100 *
ANNELIESE ZEHRINGER 25 75 100 *
LANA ZINN 150 450 600 *
SELLING SHAREHOLDERS THAT RECEIVED SHARES FROM THE CONVERSION OF CONVERTIBLE
NOTES ISSUED TO PARAGON VENTURE FUNDS I - V.
Alvaro & Nanette Fay Adame, Jr. 1,500 1,500 1,500 *
John F. & Louise R. Adams 2,000 2,000 2,000 *
Kyle R. & Nadine W. Adams 4,500 4,500 4,500 *
Apollo Holdings, LTD. 1,450,000 1,450,000 1,450,000 8%
Timothy Brent Arnold 9,500 9,500 9,500 *
Frederick H. Ashby 50,000 50,000 50,000 *
Danny A. Ashinhurst 1,000 1,000 1,000 *
BD&F Enterprises, Inc. 38,500 38,500 385,000 *
Dan Duckworth & Carol Beals 1,000 1,000 1,000 *
Patrick P. & Merrilee Beals 2,500 2,500 2,500 *
Robert Nelson Bertoldo 10,000 10,000 10,000 *
Michael & Dana Bigelow 50 50 50 *
James H. Billingsley 1,000 1,000 1,000 *
Lee P. Blake 1,750 1,750 1,750 *
Blue Ocean LLC 550,000 550,000 550,000 *
James Raymond & Marie A. Boblett 1,000 1,000 1,000 *
Brent Bohlen 5,000 5,000 5,000 *
Angela Bonazza 600 600 600 *
William A. Bonner, Jr. 500 500 500 *
Danny P. Boyle 20,000 20,000 20,000 *
Claiborne H. Braswell 1,000 1,000 1,000 *
30
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
D. Brett Brewer 4,000 4,000 4,000 *
Deborah E. Brotherton 400 400 400 *
Travis Nathaniel & Sandra Dee Brown 1,000 1,000 1,000 *
Jason MacPhee & Leah Pauline Brown 7,000 7,000 7,000 *
Brown Brothers Harriman, NY 100,000 100,000 100,000 *
Marc Alan Bruno 2,000 2,000 2,000 *
Yevetta Gail Buchanan 1,000 1,000 1,000 *
Donald James & Joyce Elaine Burke 5,000 5,000 5,000 *
David P. & Carolyn Vickers Butler JTWROS 6,500 6,500 6,500 *
Bruce Call 10,000 10,000 10,000 *
Lawrence & Charleen Capek 1,000 1,000 1,000 *
Capital Ideas, Inc. 100,000 100,000 100,000 *
Center for Health Psychology, P.C. 66,000 66,000 66,000 *
Cannon Christensen 4,000 4,000 4,000 *
John D. & Constance J. Clemens 2,500 2,500 2,500 *
Tom G. & Sharon L. Cole 3,000 3,000 3,000 *
Jason A. Collier 100 100 100 *
Crystal City Restaurant 11,000 11,000 11,000 *
Rollie J. & Madelyn F. Cundiff 100,000 100,000 100,000 *
Larry E. Cunningham 10,000 10,000 10,000 *
Christopher D. Curran 15,000 15,000 15,000 *
Curvelo Trade and Finance 50,000 50,000 50,000 *
D&H Marriott Family Limited Partnership 252,787 252,787 252,787 *
Dain Rauscher 100,000 100,000 100,000 *
Linda Elizabeth Davenport 1,000 1,000 1,000 *
Henry De La Rosa 2,000 2,000 2,000 *
John S. & Mele P. DeLeon 1,500 1,500 1,500 *
Rose Delgado 500 500 500 *
Daniel H. Deng 4,000 4,000 4,000 *
Dennis & Michelle Porter Family Trust 25,000 25,000 25,000 *
Michael E. & Kathleen E. Duvall 25,000 25,000 25,000 *
Michael G. & Brandy L. Eckert 12,000 12,000 12,000 *
Michael Lee & Joan M. Elder 20,000 20,000 20,000 *
Lynn or Elaine Ellsworth 5,000 5,000 5,000 *
Michael Emmons 5,000 5,000 5,000 *
Paul & Becky Espinoza 100 100 100 *
Jared R. & Jenny R. Evans 1,000 1,000 1,000 *
Danielle G. Ewing 1,000 1,000 1,000 *
David L. Fawcett 1,000 1,000 1,000 *
Wallace Fisk 100,000 100,000 100,000 *
David Fowler 250 250 250 *
David Wayne & Gaylene H. Fusselmann 4,000 4,000 4,000 *
31
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
Gary L. & Lynell L. Fusselmann 1,000 1,000 1,000 *
Douglas K. Gardner 2,000 2,000 2,000 *
Gary & Alana Porter Family Trust 5,000 5,000 5,000 *
Steven Gelsomini 2,000 2,000 2,000 *
Mark W. Gillespie 2,000 2,000 2,000 *
Allen P. Goodmansen CPA, PC 25,000 25,000 25,000 *
Kevin Eugene Griffel 1,000 1,000 1,000 *
Louise Gulartie 50 50 50 *
Coltin Roy & Julia Adele Hall 8,500 8,500 8,500 *
Scott Hall 2,000 2,000 2,000 *
Ryan Kent Hall 2,000 2,000 2,000 *
William Brad & Shawna Hall 1,000 1,000 1,000 *
George K. & Denise Hall 10,000 10,000 10,000 *
Clarence Kent & Ava Lynn Hall 10,500 10,500 10,500 *
Brett & Lisa R. Hallows 2,000 2,000 2,000 *
David W. Hallum 5,000 5,000 5,000 *
Steven Keith & Barbara M. Hallum 5,000 5,000 5,000 *
Glen D. & D. Gayle Hammons 5,000 5,000 5,000 *
Steven G. & Jennifer M. Hammons 200 200 200 *
Travis Hammons 500 500 500 *
Trevor G. Hammons 500 500 500 *
Jeff D. Hancock 2,000 2,000 2,000 *
Jay B. Hancock 1,000 1,000 1,000 *
Daniel Thomas Hardwick 2,500 2,500 2,500 *
Matthew Keith Hardwick 2,500 2,500 2,500 *
Michele Hardwick 2,500 2,500 2,500 *
Derwin & Donna Harper 15,768 15,768 15,768 *
Steve & Leslie Hatch 5,000 5,000 5,000 *
John Robert Heap 14,100 14,100 14,100 *
Theo J. & Gloria J. Heap 2,500 2,500 2,500 *
Joe A. & Kimberly B. Hernandez 1,000 1,000 1,000 *
John R. Hoopes 2,250 2,250 2,250 *
Deron Brent Horne 5,000 5,000 5,000 *
Dona Hornstein 5,000 5,000 5,000 *
Timothy R. Huseman 10,000 10,000 10,000 *
Adam & Wendy Hutton 2,500 2,500 2,500 *
HWSW Family Partnership, LTD 4,000 4,000 4,000 *
Investments Unlimited 500 500 500 *
Russell F. James II 3,250 3,250 3,250 *
Frederick J. Jarosz 4,000 4,000 4,000 *
Rachel John 600 600 600 *
Lawrence Johnson 40,000 40,000 40,000 *
Robert C. Johnson, Sr. 1,000 1,000 1,000 *
32
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
James C. Joyce 2,000 2,000 2,000 *
Tim & Judith A. Kelly 30,000 30,000 30,000 *
Steve Kerr 50,000 50,000 50,000 *
Fred C. Krause 2,000 2,000 2,000 *
Sheldon R. Kroner, Jr. 56,500 56,500 56,500 *
Victor Russell Lanzotti 20,000 20,000 20,000 *
Wade Lee 2,500 2,500 2,500 *
Edward Lee 1,000 1,000 1,000 *
Mark Letel 500 500 500 *
Richard D. & Karen K. Lincoln 5,000 5,000 5,000 *
Harry J.H. Lindgren 1,000 1,000 1,000 *
Teri S. Litwiller 2,000 2,000 2,000 *
Jeffrey L. Loftus 1,000 1,000 1,000 *
Diego Lopez 1,000 1,000 1,000 *
Adam Love 5,000 5,000 5,000 *
David A. & Staci E. Loyd 8,000 8,000 8,000 *
James J. Lutz 1,500 1,500 1,500 *
Mark W. & Jenny L Mabry 20,000 20,000 20,000 *
Bhikkhu T. & Diane Mahinda 20,000 20,000 20,000 *
J. Scott Malone 2,000 2,000 2,000 *
Martin Manriquez 2,500 2,500 2,500 *
Celeste L. Manriquez 2,500 2,500 2,500 *
Sharla L. Marrott 1,000 1,000 1,000 *
Trevor Dwayne Marrott 1,600 1,600 1,600 *
Heather Marrott 30,900 30,900 30,900 *
Jesse John Marrott 1,000 1,000 1,000 *
Rachel Lylene Lokelani Marrott 1,000 1,000 1,000 *
Zachary Todd Marrott 1,000 1,000 1,000 *
Nathan Lee McLaws 2,750 2,750 2,750 *
Jeremy D. Mecham 5,000 5,000 5,000 *
Mary Mendel 1,000 1,000 1,000 *
Greg Mendel 1,000 1,000 1,000 *
Steve & Jonene Middleton 500 500 500 *
Phillip & Dolly Miller 500 500 500 *
Roger L. & Lesley M. Miller 6,100 6,100 6,100 *
Bradley R. & Clarissa C. Myers 1,000 1,000 1,000 *
Sidney T. Myers 50,000 50,000 50,000 *
Revy Leora Neely 10,000 10,000 10,000 *
Paula J. Neely 2,500 2,500 2,500 *
John A. & Lori Ann Nelson 1,500 1,500 1,500 *
Donald L. Nelson 10,000 10,000 10,000 *
Trevor William & Lauralee Arnold Newby 500 500 500 *
Justin Alfred & Alisha Anne Newman 1,000 1,000 1,000 *
33
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
Denis Ng 5,000 5,000 5,000 *
James Charles O'Brien III 750 750 750 *
Orion Medical Supply 100,000 100,000 100,000 *
Scott G. Ormond 1,000 1,000 1,000 *
Miriam & Joseph Oswald 500 500 500 *
Philip R. Ott 30,000 30,000 30,000 *
Earl J. & RaQuelle Owens 1,500 1,500 1,500 *
Kevin Earl & Jennifer Boblett Owens 2,000 2,000 2,000 *
Dalton Robert Owens, Jr. 4,000 4,000 4,000 *
Pacific Rim Bancorp 25,000 25,000 25,000 *
Paragon Management 389,000 389,000 389,400 *
Perry Paraskevas 500 500 500 *
Lyle F. & JoAnn Parks 2,400 2,400 2,400 *
David C. & Tawna J. Petersen 10,000 10,000 10,000 *
William A. Phillips, Jr. 6,000 6,000 6,000 *
Steve Poorman 2,000 2,000 2,000 *
Donna Jean Porter 2,100 2,100 2,100 *
Prominent Development 125,000 125,000 125,000 *
Rudy Quesada 1,000 1,000 1,000 *
Dave & Lana Rasmussen 4,600 4,600 4,600 *
Frank Rebarber 2,500 2,500 2,500 *
Steven Robert Reynolds 2,100 2,100 2,100 *
Montie M. & Sally J. Reynolds 10,000 10,000 10,000 *
Teresa Richard 1,000 1,000 1,000 *
R. Norton & Ann R. Richards 15,000 15,000 15,000 *
Jim E. & Cynthia A. Rives 10,000 10,000 10,000 *
Thomas Neil Rooke 10,000 10,000 10,000 *
Joseph Victor Saccaro 3,000 3,000 3,000 *
Tony Lee Saccaro 1,000 1,000 1,000 *
Sensational Sound 23,000 23,000 23,000 *
Javaid I. Sheikh 10,000 10,000 10,000 *
Ann Cytree Shomidie 5,000 5,000 5,000 *
Joseph R. & E. Susan Shook JTWROS 2,500 2,500 2,500 *
Robert Elias Simon, Jr. 1,000 1,000 1,000 *
Nelsen D. Simonsen 1,000 1,000 1,000 *
David W. Skeen 2,750 2,750 2,750 *
Michael W. Menasco & Susan K. Slaughter 500 500 500 *
Ronald Kay Smith 412,200 412,200 412,200 *
Kristi Kae Smith 1,000 1,000 1,000 *
Dustin E. Smith 500 500 500 *
Jerome C. Smith 50,000 50,000 50,000 *
Steven Mark Smith 3,000 3,000 3,000 *
34
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
Michael & Eileen Smith JTROS 30,000 30,000 30,000 *
Fred Spangler, Jr. 1,000 1,000 1,000 *
Frank P. & Connie L. Staben 100,000 100,000 100,000 *
Timothy Patrick Starkey 2,000 2,000 2,000 *
Stephen R & Donna D. Meyers Family Trust 10,000 10,000 10,000 *
Zelda I. Stephens 1,000 1,000 1,000 *
Blake Robert Stephens 9,000 9,000 9,000 *
John L. Stich 5,000 5,000 5,000 *
Mark A. & Shanna J. Stich 1,000 1,000 1,000 *
Romano Stulic 5,000 5,000 5,000 *
Superfly Financial 5,000 5,000 5,000 *
Peter Matthew Sweeney 600 600 600 *
Technology Partners 1, LLC 160,000 160,000 160,000 *
Travis Tenney 10,000 10,000 10,000 *
Kalee Tenney 2,000 2,000 2,000 *
The CAPPS Trust 50,000 50,000 50,000 *
The David G & Sandra L. Decker Family
Trust 10,000 10,000 10,000 *
G. Bryan Thomas 49,500 49,500 49,500 *
Thomas E. Richards Trust 6,000 6,000 6,000 *
Bill Thompson 3,000 3,000 3,000 *
Harry W. & Mary K. Tierney 1,000 1,000 1,000 *
Justin Uhd 200 200 200 *
Brandi & Matthew Vanderwalker 250 250 250 *
Robert L. Vernam 1,000 1,000 1,000 *
Marlene Victor 2,000 2,000 2,000 *
Victor & Hall, LLC 15,000 15,000 15,000 *
Steven Wald 5,000 5,000 5,000 *
F. Todd Warner 25,000 25,000 25,000 *
H. Craig & Martha P. Watson 12,500 12,500 12,500 *
Elizabeth Weaver 500 500 500 *
Bruce E. & Vicki Pauline Westover 300,000 300,000 300,000 *
Joseph Erickson Westover 1,500 1,500 1,500 *
Danny White 5,000 5,000 5,000 *
Wilford P. White 30,000 30,000 30,000 *
Wilford D. & Jolynn White 30,000 30,000 30,000 *
Chad White 2,500 2,500 2,500 *
Murray R. & Susan B. White II 5,000 5,000 5,000 *
Duane R. & Ranona Wiehl 5,000 5,000 5,000 *
Frederick Bryan & Ila H. Wilberg 2,000 2,000 2,000 *
William L. Richards Trust 6,000 6,000 6,000 *
Lavanda R. Williams 1,500 1,500 1,500 *
Ronald A. Willis 17,175 17,175 17,175 *
35
====================================================================================================================================
(1) (2) (3) (4)
====================================================================================================================================
AMOUNT OF SHARES OF NUMBERS OF COMMON SHARES NUMBER OF SHARES OF COMMON
COMMON STOCK OFFERED BY SELLING STOCK OWNED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING SHAREHOLDERS NUMBER PERCENTAGE
====================================================================================================================================
Keevin L. Willis 8,100 8,100 8,100 *
Mark A. Willis 16,325 16,325 16,325 *
Witan, LTD 100,000 100,000 100,000 *
John David Wright 3,000 3,000 3,000 *
SELLING SHAREHOLDERS RECEIVING COMMON SHARES AS A RESULT OF CONTRACTUAL RIGHTS,
WARRANTS, OR OPTIONS.
Millennium Capital 1,500,000 1,500,000 1,500,000 8%
Todd Moore 1,000,000 1,000,000 1,000,000 5%
J. Brian Morrison 500,000 500,000 500,000 *
Bourns, Inc. 60,000 60,000 60,000 *
SELLING SHAREHOLDER THAT RECEIVED SHARES OF COMMON STOCK BY CONVERSION OF
PROMISSARY NOTES PRIVATELY PLACED
Robert W. Bruns 12,163,893 2,002,523 12,163,893 63%
SELLING SHAREHOLDERS THAT PURCHASED SHARES FROM CRYOCON
Prominent Development 25,000 25,000 25,000 *
Revy L. Neely 37,500 37,500 37,500 *
Frederick H. Ashby 50,000 23,000 23,000 *
The Capps Trust 12,500 12,500 12,500 *
Anessa Alderman 600 600 600 *
Richard E. Rhodes 5,000 5,000 5,000 *
Sheldon Fisher 7,500 7,500 7,500 *
William A. Phillips 1,000 1,000 1,000 *
Robert W. Brunson is the founder, former president and Chief Executive
Officer of Cryocon, Inc. Mr. Brunson is currently President of Cryocon's
Intellectual Property Division. Mr. Brunson is the beneficial holder of
12,163,893 shares of Cryocon's common stock (including shares registered in this
Prospectus). His wife, Debra L. Brunson owns 500,000 shares of Cryocon's stock.
The shares registered in this prospectus are 2,002,523 shares Mr. Brunson
received upon conversion of a debenture in the principal amount of $50,000.00.
Mr. Brunson owns 63% of the Cryocon's issued and outstanding shares of common
stock.
J. Brian Morrison is President and Chief Executive Officer, and
Chairman of Cryocon, Inc. Mr. Morrison has options and warrants on 750,000
shares of Cryocon's common stock (including the shares registered in this
Prospectus). 250,000 option shares vest over time with 100,000 vesting January
2, 2001, 75,000 shares vesting January 2, 2002, and 75,000 shares vesting
January 2, 2003. Assuming the exercise of all his options and warrants, Mr.
Morrison owns 3.88% of Cryocon's issued and outstanding shares of common stock.
Material Changes
Material changes, which have occurred since the end of the latest
fiscal year, are set forth in the information statement filed pursuant to
Section 14(f) of the securities Exchange Act, the statements on form 8-K filed
36
on August 18, 2000, September 25, 2000 and October 16, 2000, and on form 10QSB
filed on November 14, 2000, and each is incorporated by reference under item 12
below. The transaction described in the filing has now been consummated.
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
On September 21, 2000, a majority of Cryocon's shareholders ratified a
Board of Directors resolution, on August 17, 2000, selecting H J & Associates as
independent public accountants to audit the Cryocon's books, records and
accounts and those of its subsidiary for the year 2000. Larry O'Donnell, CPA,
PC, Aurora, Colorado audited Cryocon's consolidated financial statements during
fiscal year ending March 31, 2000. Cryocon filed a form 8-K with the Securities
and Exchange Commission on September 21, 2000, notifying the shareholders of the
change. Larry O'Donnell, CPA provided a letter agreeing to the facts and
circumstances regarding the change.
Additional Information
Additional information regarding Cryocon and the shares offered hereby
is contained in the Registration Statement on Form SB-2 and the exhibits thereto
filed with the Commission under the Securities Act of 1933, as amended. We file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy any document
we file at the SEC's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its Regional Offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies of the materials can be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. You may call the SEC at 1-800-732-0330 for
further information on the operation of the public reference rooms. You also can
request copies of the documents, upon payment of a duplicating fee, by writing
to the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, or obtain copies
of the documents from the SEC's web site at http://www.sec.gov. The reports,
proxy statements and other information concerning us can also be inspected at
the offices of the OTC Electronic Bulletin Board maintained by the National
Association of Securities Dealers, Inc., at 1735 K Street, NW, Washington, DC
20006-1500, (202) 738-8000.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be part of this prospectus and information that we file later with
the SEC automatically will update and supersede the information. We incorporate
by reference the documents listed below and any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended. These documents contain important business information about
our company and its financial condition.
o Cryocon's (under its former name, "Iso Block Products, USA") latest
annual report on Form 10-KSB filed pursuant to the requirements of
the Securities Exchange Act of 1934 for Iso Block's latest fiscal
year;
o All other reports filed pursuant to the Securities Exchange Act of
1934 filed since the end of Cryocon's last fiscal year covered by
the annual report referred to in the bullet point immediately
preceding;
o The Information Statement filed pursuant to Section 14(F) of the
Securities Exchange Act of 1934 and Rule 14(F-1) thereunder, which
statement was filed on or about July 21, 2000.
o All documents subsequently filed by Cryocon's pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
prior to the termination of the offering described in this
prospectus are hereby deemed to be incorporated by reference into
this prospectus.
Cryocon will provide to each person, including any beneficial owner, to
whom a prospectus is delivered, a copy of any and all of the information that
37
has been incorporated by reference in this prospectus but not delivered with the
prospectus. Cryocon will provide this information upon written or oral request
and at no cost to the requester. All requests for the information shall be
directed to James M. Retallick, Cryocon, Inc., 2250 North 1500 West, Ogden, UT
84404, (801) 395-2796.
Cryocon files all documents with the Securities and Exchange Commission
required by the Securities Exchange Act of 1934 including annual statements on
Form 10-KSB, quarter statements on Form 10-QSB, statements on Form 8-K as
required and all other required filings. The public may read and copy any
materials Cryocon files with the Securities and Exchange Commission at the
Security and Exchange Commission Public Reference Room at 450 5th Street,
N.W.,Washington, D.C., 20549. The public may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an
internet site that contains reports, proxy, and Information Statements, and
other information regarding Cryocon. The address of that site is
http:\\www.sec.gov. Cryocon also has an internet site at http:\\www.cryocon.org.
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities
Cryocon's indemnification policy covering officers and directors, as
contained in the by-laws, provides that Cryocon may indemnify at its discretion
any officer or director for costs reasonably incurred in connection with civil,
criminal, administrative and investigative proceedings if he or she acted in
good faith, whether brought by or in the right of Cryocon or not; provided that
if a proceeding is brought by or on behalf of Cryocon and the officer or
director is adjudged to be liable, then no indemnification shall be made with
respect thereto; and provided further that no indemnification shall be paid if
it has been determined that under the circumstances such officer or director did
not meet the standard of conduct relevant to the proceeding. Cryocon may advance
costs to an officer or director in connection with proceedings against an him or
her as long as he or she undertakes to repay if it is determined that he or she
is not entitled to the indemnification. Cryocon may purchase indemnification
insurance for officers and directors.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission the
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PART II.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 24 Indemnification of Directors and Officers.
Article Seven of Cryocon's Certificate of Incorporation authorizes
Cryocon to indemnify any current or former director, officer, employee, or agent
of Cryocon, or a person serving in a similar post in another organization at the
request of Cryocon, against expenses, judgments, fines, and amounts paid in
settlement incurred by him in connection with any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative, to the fullest extent not prohibited by the Colorado Business
Corporation Act, public policy or other applicable law. Sections 7-109-103 and
7-109-107 of the Colorado Business Corporation Act authorize a corporation to
indemnify its directors, officers, employees, or agents in terms sufficiently
broad to permit the indemnification under certain circumstances for liabilities
(including provisions permitting advances for expenses incurred) arising under
the 1933 Act.
Item 25. Other Expenses of Issuance and Distribution.
It is estimated that the expenses incurred in connection with
distribution of the shares of Common Stock offered hereby will be as follows:
38
Amount Payable
Item by Company
SEC Registration Fee 8,666.00
Printing and Engraving 5,000.00
Legal Fees and Expenses 15,000.00
Accounting Fees and Expenses 2,500.00
Fees and Expenses for Qualification 5,500.00
under State Securities Laws
Transfer Agent Fees and Expenses 10,020.00
Miscellaneous 750.00
Total 47,466.00
ITEM 26. Recent Sales Of Unregistered Securities
The Company has sold the following securities that were not registered
under the Securities Act of 1933.
On August 14, 2000, ISO Block (the predecessor to Cryocon) acquired all
of the issued and outstanding shares of Cryocon Utah, and issued 44,000,000
restricted shares of its common stock as consideration to the eleven (11)
shareholders of Cryocon Utah. In exchange, the Cryocon Utah shareholders gave
ISO Block their 11,000,000 shares previously held in Cryocon Utah. The shares
were issued pursuant to an exemption from registration under Section 4(2) of the
Securities Act. To Cryocon's knowledge, the shareholders received a variety of
financial and other information about ISO Block in connection with the
shareholders' due diligence. No public solicitation or general advertising was
done in connection with this sale. ISO Block did not pay commissions in
connection with this transaction.
On August 14, 2000, ISO Block (the predecessor to Cryocon) assumed the
obligation of a convertible debenture issued by Cryocon Utah to Paragon Venture
Fund I, an Illinois Limited Liability Company, on January 15, 2000. Upon
assuming the obligation of the convertible debenture, ISO Block agreed to issue
its shares of common stock to Paragon Venture Fund I upon conversion of the
debenture. Paragon Venture Fund I purchased the debenture, from Cryocon Utah,
with principal in the amount of $28,800. Cryocon Utah's sale of the convertible
debenture was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. To Cryocon's knowledge, the management of the investor was
sophisticated in financial investments and received a variety of financial and
other information about Cryocon Utah, and later about ISO Block, Inc., in
connection with its due diligence. No public solicitation or general advertising
was done in connection with this sale. Neither ISO Block nor Cryocon Utah paid
any fees or commissions in connection with this sale.
On August 14, 2000, ISO Block (the predecessor to Cryocon) assumed the
obligation of a convertible debenture issued by Cryocon Utah to Paragon Venture
Fund II, an Illinois Limited Liability Company, on February 15, 2000. Upon
assuming the obligation of the convertible debenture, ISO Block agreed to issue
its shares of common stock to Paragon Venture Fund II upon conversion of the
debenture. Paragon Venture Fund II purchased the debenture, from Cryocon Utah,
with principal in the amount of $647,300. Cryocon Utah's sale of the convertible
debenture was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. To Cryocon's knowledge, the management of the investor was
sophisticated in financial investments and received a variety of financial and
other information about Cryocon Utah, and later ISO Block, Inc., in connection
with its due diligence. No public solicitation or general advertising was done
in connection with this sale. Neither ISO Block nor Cryocon Utah paid any fees
or commissions in connection with this sale.
On August 14, 2000, ISO Block (the predecessor to Cryocon) assumed the
obligation of a convertible debenture issued by Cryocon Utah to Paragon Venture
Fund III, an Illinois Limited Liability Company, on March 15, 2000. Upon
39
assuming the obligation of the convertible debenture, ISO Block agreed to issue
its shares of common stock to Paragon Venture Fund III upon conversion of the
debenture. Paragon Venture Fund III purchased the debenture, from Cryocon Utah,
with principal in the amount of $1,404,437. Cryocon Utah's sale of the
convertible debenture was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof. To Cryocon's knowledge, the management of the
investor was sophisticated in financial investments and received a variety of
financial and other information about Cryocon Utah, and later ISO Block, Inc.,
in connection with its due diligence. No public solicitation or general
advertising was done in connection with this sale. Neither ISO Block nor Cryocon
Utah paid any fees or commissions in connection with this sale.
On August 14, 2000, ISO Block (the predecessor to Cryocon) assumed the
obligation of a convertible debenture issued by Cryocon Utah to Paragon Venture
Fund IV, an Illinois Limited Liability Company, on April 15, 2000. Upon assuming
the obligation of the convertible debenture, ISO Block agreed to issue its
shares of common stock to Paragon Venture Fund IV upon conversion of the
debenture. Paragon Venture Fund IV purchased the debenture, from Cryocon Utah,
with principal in the amount of $475,000. Cryocon Utah's sale of the convertible
debenture was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. To Cryocon's knowledge, the management of the investor was
sophisticated in financial investments and received a variety of financial and
other information about Cryocon Utah, and later ISO Block, Inc., in connection
with its due diligence. No public solicitation or general advertising was done
in connection with this sale. Neither ISO Block nor Cryocon Utah paid any fees
or commissions in connection with this sale.
On September 15, 2000, Cryocon issued a convertible debenture to
Paragon Venture Fund V, an Illinois Limited Liability Company. Paragon Venture
Fund V purchased the debenture, from Cryocon, with principal in the amount of
$1,564,000. Cryocon Utah's sale of the convertible debenture was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof. To
Cryocon's knowledge, the management of the investor was sophisticated in
financial investments and received a variety of financial and other information
about Cryocon, in connection with its due diligence. No public solicitation or
general advertising was done in connection with this sale. Cryocon Utah did not
pay any fees or commissions in connection with this sale.
On November 3, 2000, Cryocon issued 2,880,000 shares of common stock to
Paragon Venture Fund I, after receiving a notice of conversion of the denture
issued to Paragon Venture Fund I. Cryocon issuance of the common stock was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. To Cryocon's knowledge, the management of the investor was
sophisticated in financial investments and received a variety of financial and
other information about Cryocon, in connection with its due diligence. No public
solicitation or general advertising was done in connection with this sale.
Cryocon did not pay any fees or commissions in connection with this issuance.
On November 3, 2000, Cryocon issued 1,294,000 shares of common stock to
Paragon Venture Fund II, after receiving a notice of conversion of the denture
issued to Paragon Venture Fund II. Cryocon issuance of the common stock was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. To Cryocon's knowledge, the management of the investor was
sophisticated in financial investments and received a variety of financial and
other information about Cryocon, in connection with its due diligence. No public
solicitation or general advertising was done in connection with this sale.
Cryocon did not pay any fees or commissions in connection with this issuance.
On November 3, 2000, Cryocon issued 1,355,437 shares of common stock to
Paragon Venture Fund III, after receiving a notice of conversion of the denture
issued to Paragon Venture Fund III. Cryocon issuance of the common stock was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. To Cryocon's knowledge, the management of the investor was
sophisticated in financial investments and received a variety of financial and
other information about Cryocon, in connection with its due diligence. No public
solicitation or general advertising was done in connection with this sale.
Cryocon did not pay any fees or commissions in connection with this issuance.
On November 3, 2000, Cryocon issued 237,500 shares of common stock to
Paragon Venture IV, after receiving a notice of conversion, after receiving a
notice of conversion of the denture issued to Paragon Venture Fund IV. Cryocon
issuance of the common stock was exempt from registration under the Securities
Act pursuant to Section 4(2) thereof. To Cryocon's knowledge, the management of
the investor was sophisticated in financial investments and received a variety
of financial and other information about Cryocon, in connection with its due
40
diligence. No public solicitation or general advertising was done in connection
with this sale. Cryocon did not pay any fees or commissions in connection with
this issuance.
On January 27, 2001, Cryocon issued 712,118 shares of common stock to
Paragon Venture V, after receiving a notice of conversion of the denture issued
to Paragon Venture Fund V. Cryocon issuance of the common stock was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof. To
Cryocon's knowledge, the management of the investor was sophisticated in
financial investments and received a variety of financial and other information
about Cryocon, in connection with its due diligence. No public solicitation or
general advertising was done in connection with this sale. Cryocon did not pay
any fees or commissions in connection with this issuance.
On October 4, 2000, Cryocon issued an option to purchase 30,000
restricted shares of Cryocon's common stock to a former employee. The right to
exercise the option to purchase 5,000 of the 30,000 shares of common stock vests
each quarter, beginning the quarter ending December 31, 2000. The exercise price
per share is $1.00. The former employee has not exercised any of the options to
purchase any shares of the common stock. Cryocon did not receive any proceeds
from the issuance of the options, but will receive proceeds upon the exercise of
the options. The option and the shares of common stock to be issued upon the
exercise of the option are issued pursuant an exemption from registration under
Section 4(2) of the Securities Act. The former employee had access to the
Company's reports filed pursuant to the Exchange Act, and was familiar with
Cryocon's operations and financial condition. Cryocon did not pay any fees or
commissions in connection with this issuance.
On October 6, 2000, Cryocon issued an option to Bourns, Inc. granting
Bourns the right to purchase 30,000 shares of Cryocon's common stock at the
price of $1.00 per share. The options were issued in consideration of Bourn
granting an extension of the closing date for the purchase of real estate that
Cryocon was purchasing from Bourn. Cryocon did not receive any cash proceeds
from the issuance of the options, but will receive proceeds upon the exercise of
the options. The option and the shares of common stock to be issued upon the
exercise of the option are issued pursuant an exemption from registration under
Section 4(2) of the Securities Act. To Cryocon's knowledge, the management of
the investor is sophisticated in financial investments and received a variety of
financial and other information about Cryocon, in connection with its due
diligence. No public solicitation or general advertising was done in connection
with this sale. Cryocon did not pay any fees or commissions in connection with
this issuance.
On December 15, 2000, Cryocon issued an option to Bourns, Inc. granting
Bourns the right to purchase 30,000 shares of Cryocon's common stock at the
price of $1.00 per share. The options were issued in consideration of Bourn
granting an extension of the closing date for the purchase of real estate that
Cryocon was purchasing from Bourn. Cryocon did not receive any cash proceeds
from the issuance of the options, but will receive proceeds upon the exercise of
the options. The option and the shares of common stock to be issued upon the
exercise of the option are issued pursuant an exemption from registration under
Section 4(2) of the Securities Act. To Cryocon's knowledge, the management of
the investor is sophisticated in financial investments and received a variety of
financial and other information about Cryocon, in connection with its due
diligence. No public solicitation or general advertising was done in connection
with this sale. Cryocon did not pay any fees or commissions in connection with
this issuance.
On December 15, 2000, Cryocon granted options to purchase 15,392
restricted shares of Cryocon's common stock to 9 former employees. The former
employees have the right to pay the exercise price of $1.50 per share, or to
utilize a "cashless" method to exercise of their options. Cryocon did not
receive any proceeds from the issuance of the options, but will receive proceeds
upon the exercise of the options, if the former employees elect to purchase the
shares. One former employee has exercised his option pursuant to the "cashless"
exercise method. Cryocon issued 1,670 shares of common stock pursuant to the
former employee's cashless exercise. The option and the shares of common stock
to be issued upon the exercise of the option are issued pursuant an exemption
from registration under Section 4(2) of the Securities Act. The former employees
have access to the Company's reports filed pursuant to the Exchange Act, and are
familiar with Cryocon's operations and financial condition. Cryocon did not pay
any fees or commissions in connection with this issuance.
On December 17, 2000, Cryocon issued an option on 250,000 shares of
common stock to J. Brain Morrison in connection with his position as a board
member with Cryocon. The option shares vest in the amount of 100,000 shares on
January 2, 2001; 75,000 shares on January 2, 2002; and 75,000 on January 2,
2003. There is no exercise price. Cryocon will not receive any cash proceeds
41
from the issuance the common stock. The shares will be issued pursuant to an
exemption from registration under Section 4 (2) of the Securities Act. Mr.
Morrison has access to the Company's reports filed pursuant to the Exchange Act
and is familiar with Cryocon's operations and financial positions. Cryocon did
not pay any fees or commissions in connection with this issuance.
On December 20, 2000, Cryocon issued an option to Mr. Todd Moore
granting Mr. Moore the right to purchase 1,000,000 shares of Cryocon's common
stock at the price of $0.10 per share. Cryocon did not receive any proceeds from
the issuance of the option, but will receive proceeds upon the exercise of the
options. The option and the shares of common stock to be issued upon the
exercise of the option are issued pursuant an exemption from registration under
Section 4(2) of the Securities Act. To Cryocon's knowledge, Mr. Moore is
sophisticated in financial investments and received a variety of financial and
other information about Cryocon, in connection with his due diligence, and Mr.
Moore has had and continues to have access to the Company's reports filed
pursuant to the Exchange Act, and is familiar with Cryocon's operations and
financial condition. Cryocon did not pay any fees or commissions in connection
with this issuance.
On January 12, 2001, Cryocon issued warrants to 327 of its shareholders
to purchase up to 3,714,585 shares of Cryocon's common stock. The exercise price
for the warrants is eighty (80%) percent of the market price of Cryocon's common
stock on the day immediately prior to the day that the shareholders elect to
exercise their warrants, with a minimum exercise price of $2.00 dollars per
share. The warrants were issued as a dividend to Cryocon's shareholders without
cost or consideration from the shareholders, and not issued for value. The
issuance of the Warrants, therefore, was exempt from the registration. The
shares to be issued pursuant to the exercise of the warrants were not to be
issuable until the effective date of the registration statement original filed
February 9, 2001. Cryocon intends to issue new warrants in exchange for the
warrants currently issued to its shareholders. The new warrants and common stock
issuable upon their exercise are being registered pursuant to this registration
statement. Cryocon did not pay any fees or commissions in connection with this
issuance.
Pursuant to a written agreement between Cryocon and J. Brain Morrison,
executed on February 1, 2001, Cryocon issued an option to Mr. Morrison to
purchase up to 500,000 shares of Cryocon's common stock at the price of $0.10
per share. Cryocon did not receive any proceeds from the issuance of the option,
but will receive proceeds upon the exercise of the options. The option and the
shares of common stock to be issued upon the exercise of the option are issued
pursuant an exemption from registration under Section 4(2) of the Securities
Act. To Cryocon's knowledge, Mr. Morrison is sophisticated in financial
investments and received a variety of financial and other information about
Cryocon, in connection with his due diligence, and Mr. Morrison has had and
continues to have access to the Company's reports filed pursuant to the Exchange
Act, and is familiar with Cryocon's operations and financial condition. Cryocon
did not pay any fees or commissions in connection with this issuance.
On February 1, 2001, Cryocon issued 300,000 restricted shares of common
stock to Citizen Asia Pacific, Ltd, as consideration for Citizen Asia Pacific's
services as consultants. The shares were issued pursuant to an exemption from
registration under Section 4 (2) of the Securities Act. To Cryocon's knowledge,
Asia Pacific's management is sophisticated in financial investments and received
a variety of financial and other information about Cryocon, and has had, and
continues to have, access to the Company's reports filed pursuant to the
Exchange ct, and is familiar with Cryocon's operations and financial condition.
Cryocon did not pay any fees or commissions in connection with this issuance.
On March 2, 2001, Cryocon agreed to issue an additional 300,000 shares
of restricted common stock to Citizen Asia Pacific, Ltd, as consideration for
Citizen Asia Pacific's services as consultants. The shares will be issued
increments of 100,000 shares. The first increment was issued on March 2, 2001.
The shares were issued pursuant to an exemption from registration under Section
4 (2) of the Securities Act. To Cryocon's knowledge, Asia Pacific's management
is sophisticated in financial investments and received a variety of financial
and other information about Cryocon, and has had, and continues to have, access
to the Company's reports filed pursuant to the Exchange ct, and is familiar with
Cryocon's operations and financial condition. Cryocon did not pay any fees or
commissions in connection with this issuance.
On February 16, 2001, Cryocon entered into a written agreement with
Millennium Capital, granting Millennium the right to purchase 1,500,000 shares
42
of Cryocon's common stock. Millennium's purchase price per share is eighty
percent (80%) of the market price for Cryocon's common stock on the business day
immediately prior to the day that Millennium purchases the shares. The sale of
shares was exempt from registration under the Securities Act pursuant to Section
4(2) thereof. To Cryocon's knowledge, management of the investor is
sophisticated in financial investments and received a variety of financial and
other information about Cryocon in connection with its due diligence. No public
solicitation or general advertising was done in connection with this sale.
Cryocon did not pay any fees or commissions in connection with this sale.
From February 16, 2001 to March 1, 2001, Cryocon sold 126,000
restricted shares of common stock to five of its current shareholders at the
price of $2.00 per share. Cryocon received $252,000 in gross proceeds from the
sale of the restricted shares. The sale of shares was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof. As a shareholder
prior to the investment, the investor had received the Company's reports filed
pursuant to the Exchange Act, and was familiar with Cryocon's operations and
financial condition. No public solicitation or general advertising was done in
connection with this sale. Cryocon did not pay any fees or commissions in
connection with this sale.
From February 16, 2001 to March 1, 2001, Cryocon sold 126,000
restricted shares of common stock to three shareholders at the price of $2.00
per share. Cryocon received $26,200 in gross proceeds from the sale of the
restricted shares. The sale of shares was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof. To Cryocon's knowledge,
management of the investor is sophisticated in financial investments and
received a variety of financial and other information about Cryocon in
connection with its due diligence. No public solicitation or general advertising
was done in connection with this sale. Cryocon did not pay any fees or
commissions in connection with this sale
On April 10, 2001, Cryocon acquired all of the issued and outstanding
shares of XTool, Inc. and issued 250,000 shares of restricted common stock as
consideration to the four (4) shareholders of XTool. In exchange, the XTool's
shareholders gave Cryocon their shares previously held in XTool. The shares were
issued pursuant to an exemption from registration under Section 4(2) of the
Securities Act. To Cryocon's knowledge, the shareholders received a variety of
financial and other information about Cryocon in connection with the
shareholders' due diligence. No public solicitation or general advertising was
done in connection with this sale. Cryocon did not pay commissions in connection
with this transaction.
Item 27. Exhibits.
(a) Exhibits. The following exhibits are filed with this report, except
those indicated as having previously been filed with the Securities and Exchange
Commission and which are incorporated by reference to another report,
registration statement or form. Cryocon will furnish any exhibit indicated in
the list below as filed with this report (not incorporated by reference) upon
payment to Cryocon of its expenses in furnishing the information upon the
request of any Shareholder of Record.
2.0 Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
2.1 Agreement and Plan of Reorganization dated April 25, 2000
(incorporated by reference to Exhibit 2.1 to Form 8-K dated
August 18, 2000)
3.0 Articles and Bylaws
3.1 Articles of Incorporation of Cryocon (incorporated by
reference to Exhibit 3.1 to registration statement on Form S-8
of Champion Computer Rentals, Inc., file no. 33-23257-D)
3.2 Bylaws of Cryocon (incorporated by reference to Exhibit on Form 10-KSB
for fiscal year ended 1993).
3.3 Certificate of Amendment and Restatement to Articles of
Incorporation (incorporated by reference to Exhibit 3.4 to
Form 8-K dated February 10, 1994).
3.4 Certificate of Amendment to Articles of Incorporation,
changing Cryocon's name to Iso-Block Products USA,
Inc.(incorporated by reference to Exhibit 2(c) to registration
statement on Form 8-A, file no. 0-25810).
43
3.5 Certificate of Amendment to Articles of Incorporation,
changing the company's name to Cryocon, Inc., authorizing a
four to one reverse split, authorizing the increase of capital
stock to 50,000,000 shares of common stock, and ratifying the
change of auditors to HJ & Associates of Salt Lake City, Utah.
(Incorporated by reference to Exhibit 3.6 to the 10-QSB, filed
November 14, 2000.)
4.0 Instruments Defining the Rights of Security Rights
4.1(1) Convertible Debenture Due January 3, 2003 between Cryocon,
Inc. and Robert Brunson in the Principal Amount of $50,000.00.
4.2(1) Convertible Debenture Due February 1, 2003 between Cryocon,
Inc. and Paragon Venture Fund LLC in the Principal Amount of
$28,800.00.
4.3(1) Convertible Debenture Due February 1, 2003 between Cryocon,
Inc. and Paragon Venture Fund LLC in the Principal Amount of
$647,300.00.
4.4(1) Convertible Debenture Due February 1, 2003 between Cryocon,
Inc. and Paragon Venture Fund LLC in the Principal Amount of
$1,404,473.00.
4.5(1) Convertible Debenture Due February 1, 2003 between Cryocon,
Inc. and Paragon Venture Fund LLC in the Principal Amount of
$475,000.00.
4.6(1) Convertible Debenture Due February 1, 2003 between Cryocon,
Inc. and Paragon Venture Fund LLC in the Principal Amount of
$1,564,236.00.
4.7(1) Warrant Issuance to Todd Moore.
4.8(1) Warrant Issuance to Bourns, Inc.
4.9(1) Warrant Issuance to J. Brian Morrison
4.10(2) Common Stock Purchase Agreement Millennium Capital Partners,
L.L.C.
4.11(2) Sample Form of Warrant to be issued to Cryocon's shareholders
5.0 Opinion re Legality
5.1 and 23.01(2) Letter of opinion, including consent of
Marcus Sanders, Attorney and Counselor at Law,
regarding legality of common stock to be issued
pursuant to options granted under the Plan.
10.0 Material Contracts
10.1(2) XTool, Inc. Acquisition Contract
13.0 Annual or Quarterly Reports
13.1(2) Form 10-KSB, Annual Report for Fiscal Year ending March 31,
2000, filed May 15, 2000, as Amended August 23, 2000,
(incorporated by reference.)
13.2(2) Form 10-QSB, Quarterly Report for period ending September 30,
2000, f filed November 14, 2000, (incorporated by reference.)
13.3(2) Form 10-QSB, Quarterly Report for period ending December 31,
2000, filed February 14, 2000, (incorporated by reference.)
44
16.0(2) Letter on Change in Certifying Account
22.0(2) Subsidiaries of Registrant
23.0(1) Consent of experts and counsel
23.02 Consent of H.J.& Associates, independent certified public
accountants
23.03 Consent of Larry O'Donnell, CPA, PC, and independent certified
public accountant for the fiscal year end March 31, 2000.
24.0 Power of Attorney
24.01 Power of Attorney (See Signature Page)
- -------------
(1) These Exhibits were included with the Form S-3 filed February 9,
2001 and are incorporated herewith.
(2) These Exhibits are new to this Amendment and are attached
herewith.
Item 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers and sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to the
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of the such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of the such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) Insofar as indemnification for liabilities under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
the indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
the liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether the indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
the issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Denver, Colorado, on the date below.
45
DATED: April 13, 2001 Cryocon, INC.
By: /s/
------------------------------------------
J. Brian Morrison, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert W. Brunson, with power of
substitution, as his attorney-in-fact for him, in all capacities, to sign any
amendments to this registration statement and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact or his substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities and on the dates respectively indicated.
/S/
________________________ CHAIRMAN/CHIEF EXECUTIVE OFFICER April 13, 2001
J. BRIAN MORRISON
/S/
________________________ CHIEF FINANCIAL OFFICER April 13, 2001
VAUGHAN DRIGGS
/S/
________________________ DIRECTOR April 13, 2001
LYNDELL PARKS
/S/
________________________ DIRECTOR April 13, 2001
STERLING REDFERN
/S/
________________________ DIRECTOR/SECRETARY April 13, 2001
JAMES S. CUNDIFF
46
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of March 31, 2000 . . . . . . . . . . . . . . F-2
Consolidated Statement of Operations as of March 31, 1999 and 2000 . . . . .F-3
Consolidated Comparative Statement of Stockholder's Equity for Years
Ended March 31, 1999 and 2000 . . . . . . . . . . . . . . . . . . . . . . . .F-4
Statement of Cash Flows for the Years Ended March 31, 1999 and 2000 . . . . .F-5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .F-6
Consolidated Balance Sheet as of December 31, 2000 (unaudited) . . . . . . . F-9
Consolidated Statements of Operations for the Three and Nine Months
ended December 31, 1999 and 2000 (unaudited) . . . . . . . . . . . . . . . .F-10
Consolidated Statement of Cash Flows for the Three and Nine Months
ended December 31, 1999 and 2000 (unaudited) . . . . . . . . .. . . . . . . F-11
Notes to Financial Statements (unaudited). . . . . . . . . . . . . . . . . .F-12
69
INDEPENDENT AUDITOR'S REPORT
Board of Directors
ISO BLOCK PRODUCTS USA, INC.
I have audited the accompanying balance sheets of ISO Block Products USA Inc.,
as of March 31, 2000 and 1999 and the related statements of operations,
shareholder's equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on 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.
I believe that my audit provides a reasonable basic for my opinion.
In my opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of ISO Block Products USA, Inc.,
at March 31, 2000 and 1999 and the results of its operations and cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/s/ Larry O'Donnell, CPA, PC
- ----------------------------
Larry O'Donnell, CPA, PC
April 28, 2000
Aurora, Colorado
F-1
70
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE BALANCE SHEET
ASSETS
March 31,
Current Assets 2000 1999
- -------------- ---- ----
Cash $ 458 $ 5,135
Mortgage receivable 16,200 16,200
Inventory-work in progress -- 34,540
----------- -----------
Total Current Assets 16,658 55,875
Property & Equipment
- --------------------
Office equipment -- 9,071
Vehicle -- 14,273
Less: accumulated depreciation -- (4,333)
----------- -----------
Net Property & equipment -- 19,011
TOTAL ASSETS $ 16,658 $ 74,886
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Accounts payable 26,304 54,383
Notes payable -- 150,360
Accrued interest payable -- 26,304
----------- -----------
Total Current Liabilities 26,304 231,047
Stockholders' Equity
- --------------------
Preferred Stock, No Par Value,
10,000,000 Shares Authorized,
116,370 Shares Outstanding 114,690 114,690
Common Stock, 50,000,000 Shares
Authorized, 4,083,984 and
4,041,484 Shares Outstanding,
respectively 2,898,306 2,897,764
Contributed capital 4,225 --
Accumulated deficit (3,026,867) (3,168,615)
----------- -----------
Total Stockholders' Equity (9,646) 156,161
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY 16,658 74,886
The accompanying notes are an integral part of these financial statements.
F-2
71
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE
STATEMENT OF OPERATIONS
March 31,
INCOME 2000 1999
- ------ ---- ----
Sales $ 118,460 $ 286,000
Operating Expenses
- ------------------
Cost of Goods Sold 55,406 254,440
General and Administrative 7,684 32,365
----------- -----------
63,090 286,805
----------- -----------
Income (Loss) From Operations 55,370 (805)
Loss from operations of
discontinued subsidiaries Other -- (307,301)
Gain on disposal of subsidiaries 86,378 --
----------- -----------
Net Income (Loss) $ 141,748 $ (308,106)
Earnings (Loss) Per Common Share $ 0.04 $ (0.08)
Weighted Average Shares 4,046,457 3,996,292
The accompanying notes are an integral part of these financial statements.
F-3
72
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE STATEMENT OF
STOCKHOLDERS' EQUITY
Preferred Common Contr- Accumu-
Stock Stock ibuted lated
Shares Amount Shares Amount Capital Deficit Total
------ ------ ------ ------ ------- ------- -----
Balance at
March 31, 1998 116,370 $ 114,690 3,854,730 $ 2,867,464 -- $(2,860,509) $ 121,645
Issue of
Common
Shares 186,754 30,300 30,300
Net (loss)
for Year -- -- -- -- -- (308,106) (308,106)
Balance at
March 31, 1999 116,370 $ 114,690 4,041,484 $ 2,897,764 -- $(3,168,615) $ 156,161
Common
Stock
issued for
Services 42,500 542 542
Services
paid by
Officer 4,225 4,225
Net income
for Year -- -- -- -- -- 141,748 141,748
Balance at
March 31, 2000 116,370 $ 114,690 4,083,984 $ 2,898,306 $ 4,225 $(3,026,867) $ (9,646)
The accompanying notes are an integral part of these financial statements.
F-4
73
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE
STATEMENT OF CASH FLOWS
March 31,
Cash Flow From Operating Activities 2000 1999
- ----------------------------------- ---- ----
Net Income (loss) $ 141,748 $(308,106)
Depreciation 500 2,000
Write down of investment franchise -- 114,233
Gain on discontinued operations (86,378) --
Services paid by officer 4,225 --
Common stock issued for expenses 542 30,300
(Increase) Decrease in:
Accounts receivable- trade -- 135,850
Accounts receivable- officer -- 2,000
Inventory-work in process 34,540 200,954
Deposits -- 2,551
Increase (Decrease) in:
Accounts payable 146 (26,998)
Accrued interest-payable -- 8,117
--------- ---------
Net Cash Used in Operating
Activities 95,323 160,901
Cash Flows From Financing Activities
- ------------------------------------
Proceeds From Notes Payable -- 24,300
Payments on Notes Payable (100,000) (184,300)
--------- ---------
Net Cash Provided by (used in)
Financing activities (100,000) (160,000)
Net Increase (decrease) in Cash (4,677) 901
Cash-Beginning of Year $ 5,135 $ 4,234
Cash-End of Year $ 458 $ 5,135
Supplemental disclosure of cash flow information
Cash paid during the year for Interest $ -- $ 16,101
Noncash investing and financing activities:
Common stock issued for expenses $ 542 $ 30,300
Service paid by capital contributions $ 4,225 $ --
The accompanying notes are an integral part of these financial statements.
F-5
74
ISO Block Products USA, Inc.
Notes to the Consolidated Financial Statements
For the Years ended March 31, 2000 and 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Description
The Company was incorporated on April 28, 1986 under the laws of the State of
Colorado under the name of Champion Computer Rentals, Inc. The Company's
Articles of Incorporation were amended to change the name of the corporation to
ISO Block Products USA, Inc. from Champion Computer Rentals, Inc. effective on
September 21, 1994.
Franchising Operations
Effective January 24, 1997, ISO acquired 100% stock of Franchise Connection,
Inc. and its wholly owned subsidiary Brilliant Marketing, Inc. The Acquisition
was accounted for as a purchase by ISO and the accompanying financial statements
present historical results of ISO and include Franchise Connection, Inc. and
Brilliant Marketing, Inc. activities from the effective date of the acquisition.
Franchise Connection, Inc. was incorporated in Colorado in 1996 with
headquarters in Denver, Colorado. The Company plans to form strategic
partnerships with prospective or existing franchise operations (Franchisers)
under which it will provide them with marketing and sales services plus business
and legal services in return for an equity interests in, and/or a portion of
their royalties. On August 31, 1999, the Company transferred all of its
subsidiaries to a shareholder for relief of their debt.
Consolidation
The financial statements include the accounts of ISO and its wholly-owned
subsidiaries Franchise Connection, Inc., Brilliant Marketing, Inc., and Magna
Dry, Inc. All significant inter-company balances have been eliminated in
consolidation.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of mortgages receivable.
The Company's mortgages receivable are concentrated in German real estate and
are concentrated in a limited number of borrowers. The mortgages are from high
quality entities and secured by high value real estate to limit the Company's
exposure to concentrations of credit risk.
During 1998, the Company began foreclosure proceedings in Germany on most of its
mortgages receivable. Although legal counsel handling the case for the Company
believes that a favorable outcome will be reached, no one can say when or if all
of the approximately $1,153,000 will be recovered. Therefore the Company has
decided to treat the mortgages as bad debts until such time as the foreclosure
has been settled.
Cash
All amounts are stated in U.S. dollars. For purposes of statement of cash flows,
the Company considers all short term debt securities purchased with a maturity
of three months on loss to be cash equivalents.
Property & Equipment
Property & equipment are recorded at cost. Depreciation is provided over the
estimated useful lives of the assets.
F-6
75
ISO Block Products USA, Inc.
Notes to the Consolidated Financial Statements
For the Years ended March 31, 2000 and 1999
Foreign Currency Translation
The functional currency for the Company's foreign operations is the applicable
local currency. The translation of the applicable foreign currency into U.S.
Dollars is performed for the balance sheet accounts using current exchange rates
in effect at the balance sheet date and for revenue and expense accounts using a
weighted average exchange rate during the period. The gains or losses resulting
from such translation are included in shareholders, equity.
Income (Loss) Per Common Stock
Income (loss) per common share is based upon the weighted average number of
common shares outstanding during each period.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
differ from those estimates.
NOTE 2. STOCKHOLDERS' EQUITY
Effective December 31, 1993, the Company adopted a 1993 Compensatory Stock
Option Plan with 1,000,000 common shares reserved for issuance and a 1993
Employee Stock Compensation Plan with 500,000 common shares reserved for
issuance. As of March 31, 2000, the Compensatory Stock Option Plan has 600,000
shares outstanding.
NOTE 3. NOTE RECEIVABLE -OFFICER
The Company loaned the President of the Company, Egin Bresnig, $2,000 The note
bears interest at 6% per annum and was retired on March 1, 1999.
NOTE 4. INVENTORY WORK IN PROCESS
Inventory is recorded at cost, on a first-in, first-out basis. Inventory
consists of lots and construction costs located in Broomfield, Colorado where
the Company has constructed and sold one home.
NOTE 5. NOTES PAYABLE
The Company had notes payable with interest at 15% per annum payable to Mr. Hal
Schavet. The notes were due upon completion of the house constructed by the
Company in Broomfield, Colorado, The notes were secured by property and house.
The balance outstanding at March 31, 1998 was $135,000. The note was retired
during the year ended March 31, 1999.
On December 1, 1997 The Company executed a promissory note payable with interest
at 3.5% per annum payable to Mr. Hal Schavet and Phillis Schavet. The Company
commits to the payment of $50,000 of the first $125,000 received from the sale
of any country, area or local Magna Dry franchises as principle payment. The
Company also commits to the payment to the payee of 10% of the net proceeds
received from the sale of any country, area or local Magna-Dry franchise until
these payments total 20% or $20,000 which shall be designated as interest
payments. After such event, the Promisor commits to the payment of 5% of the net
proceeds received from the sale of any country area or local Magna-Dry franchise
until these payments total 10% of $10,000 which shall be designated as interest
payments. The note was due in full on November 30, 1998.
F-7
76
ISO Block Products USA, Inc.
Notes to the Consolidated Financial Statements
For the Years ended March 31, 2000 and 1999
The total principal outstanding at March 31, 1999 was $100,000. On March 1, 2000
the Company transferred its lot to Hal and Phillis Schavet, plus 40,000 common
shares, to retire this note.
On October 6, 1997, the Company signed a promissory note payable to Elaine
Wicker with interest payable at 20% Per annum. The note is secured by the house
and lot the Company constructed in Broomfield, Colorado. The note was due upon
the completion and sale of the house. The balance outstanding at March 31, 1998
was $25,000. The note was retired during the year ended March 31, 1999.
On October 1, 1997, the Company signed a letter of agreement payable to Elaine
Wicker. The letter of agreement provides that for advance sum of $25,000 to
Magna-Dry, USA, LLC, Magna-Dry USA, LLC will be obligated to paying to Elaine
Wicker 50% of any franchise fees received by Magna Dry USA, LLC until the amount
of $25,000 is repaid.
Magna-Dry, USA, LLC also grants to Elaine Wicker an interest equal to 50% in any
franchise operated by Magna-Dry, USA, LLC in the greater Denver Metro Area. This
obligation was assumed by the shareholder who acquired the subsidiaries.
The Company has executed two notes payable to Ada Wilson totaling $50,360
payable with interest at 15% per annum. These notes were assumed by the
shareholder who acquired the subsidiaries.
Note 6. DISCONTINUED OPERATIONS, DISPOSAL OF SUBSIDIARIES
On August 31, 1999 the Company transferred its holdings in Franchise Connection
and Magna Dry, LLC to a stockholder in exchange for the assumption of all debts
of Franchise Connection and Magna-Dry, USA, LLC.
Since the Company had consolidated these subsidiaries, its recognized a gain for
the excess of the liabilities over the assets of the subsidiaries of $86,378.
Note 7. INCOME TAXES
The Company has no current or deferred income tax liability due to accumulated
losses during the development stage. The Company has net operating losses
totaling $3,026,417 which are available to offset future taxable income. These
NOL's expire through 2008. Since realization of the tax benefits of these net
operating losses is not assured beyond any reasonable doubt, no recognition has
been given to possible future tax benefits in the financial statements. A
deferred tax benefit is of $1,170,000 has been offset by a valuation allowance.
During the year ended March 31, 2000, the Company utilized a portion of its net
operating loss carryover recognizing a benefit of approximately $40,000 which
reduced the entire amount of its income tax expense.
F-8
77
CRYOCON, INC.
(Formerly ISO Block Products USA, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
December 31, March 31,
2000 2000
------------------ -----------------
(Unaudited)
CURRENT ASSETS
Cash $ 6,013 $ 71,771
Accounts receivable, net 25,696 12,611
Prepaid expenses 9,535 -
------------------ -----------------
Total Current Assets 41,244 84,382
------------------ -----------------
PROPERTY AND EQUIPMENT, NET 2,363,846 2,260,585
------------------ -----------------
OTHER ASSETS
Other assets 8,448 -
Patents, trademarks and licenses, net 396,617 419,067
------------------ -----------------
Total Other Assets 405,065 419,067
------------------ -----------------
TOTAL ASSETS $ 2,810,155 $ 2,764,034
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 237,582 $ 75,705
Accrued expenses 181,581 80,320
Current portion long-term debt 1,146,555 2,863,149
------------------ -----------------
Total Current Liabilities 1,565,718 3,019,174
------------------ -----------------
LONG-TERM LIABILITIES
Note payable, related party 110,000 50,000
Long-term debt 539,554 187,291
------------------ -----------------
Total Long-Term Liabilities 649,554 237,291
------------------ -----------------
TOTAL LIABILITIES 2,215,272 3,256,465
------------------ -----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000 shares authorized of no
par value, 20,860,702 and 11,000,000 shares issued
and outstanding, respectively 5,007,477 577,500
Deficit accumulated during the development stage (4,412,594) (1,069,931)
------------------ -----------------
Total Stockholders' Equity (Deficit) 594,883 (492,431)
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,810,155 $ 2,764,034
================== =================
F-9
78
CRYOCON, INC.
(Formerly ISO Block Products USA, Inc.)
Consolidated Statement of Operations
(Unaudited)
From
Inception on
For the For the October 20,
Nine Months Ended Three Months Ended 1999 Through
December 31, December 31, December 31,
-------------------------------------------------------------------------------------
2000 1999 2000 1999 2000
---------------- --------------- -------------- -------------- ----------------
REVENUES
Sales $ 117,762 $ - $ 36,351 $ - $ 140,267
---------------- --------------- -------------- -------------- ----------------
COST OF SALES
Supplies and materials 17,871 - 3,230 - 24,850
---------------- --------------- -------------- -------------- ----------------
GROSS MARGIN 99,891 - 33,121 - 115,417
---------------- --------------- -------------- -------------- ----------------
EXPENSES
Advertising 264,872 - 65,325 - 318,396
Depreciation and amortization 113,358 - 37,273 - 155,657
General and administrative 2,818,519 - 1,743,469 - 3,782,009
---------------- --------------- -------------- -------------- ----------------
Total Expenses 3,196,749 - 1,846,067 - 4,256,062
---------------- --------------- -------------- -------------- ----------------
OPERATING LOSS (3,096,858) - (1,812,946) - (4,140,645)
---------------- --------------- -------------- -------------- ----------------
OTHER (EXPENSE)
Interest expense (245,805) - (30,672) - (271,949)
---------------- --------------- -------------- -------------- ----------------
Total Other (Expense) (245,805) - (30,672) - (271,949)
---------------- --------------- -------------- -------------- ----------------
NET LOSS $ (3,342,663) $ - $ (1,843,618) $ - $ (4,412,594)
================ =============== ============== ============== ================
BASIC LOSS PER SHARE $ (0.29) $ - $ (0.12) $ -
================ =============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 11,545,094 - 14,885,571 -
================ =============== ============== ==============
F-10
79
CRYOCON, INC.
(Formerly ISO Block Products USA, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
For the Inception on
Nine Months Ended October 20,
December 31, 1999 Through
-------------------------------------- December 31,
2000 1999 2000
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (3,343,663) $ - $ (4,412,594)
Adjustments to reconcile net loss to
net cash used by operating activities:
(Increase) decrease in accounts receivable (23,086) - (35,696)
Decrease (increase) in allowance for bad debt 10,000 - 10,000
Amortization and depreciation 113,358 - 155,857
(Increase) decrease in other assets (17,983) - (17,983)
Common stock issued for service 8,400 - 543,900
Options granted below market 341,220 - 341,220
Changes in operating assets and liabilities:
Increase (decrease) in accounts
payable and accrued expenses 197,948 - 353,972
------------------ ------------------ ------------------
Net Cash Used by Operating Activities (2,712,806) - (3,061,324)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase or development of intangibles - - (449,000)
Equipment purchases (194,170) - (417,121)
Purchase of building - - (2,050,000)
------------------ ------------------ ------------------
Net Cash (Used) by Investing Activities (194,170) - (2,916,121)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 25,075 - 67,075
Issuance of notes payable 3,186,099 - 6,291,945
Payments made on notes payable (369,956) - (375,362)
------------------ ------------------ ------------------
Net Cash Provided by Financing Activities 2,841,218 - 5,983,658
------------------ ------------------ ------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS (65,758) - 6,213
CASH AT BEGINNING OF PERIOD 71,771 - -
------------------ ------------------ ------------------
CASH AT END OF PERIOD $ 6,013 $ - $ 6,213
================== ================== ==================
CASH PAID FOR:
Interest $ 86,502 $ - $ 59,776
Income taxes $ - $ - $ -
Schedule of Non-Cash Financing Activities:
Common stock issued for services $ 8,400 $ - $ 543,900
Common stock issued for debt $ 4,126,544 $ - $ 4,126,544
F-11
80
CRYOCON, INC.
(Formerly ISO Block Products USA, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information
-------------------
Cryocon, Inc. (the Company) is a privately held corporation
organized under the laws of the State of Utah in October 1999. The
Company is engaged in the study of extremely low temperatures and
how materials react to those temperatures and treating various
materials with those temperatures to improve their
characteristics.
The financial statements presented are those of Cryocon, Inc.
(Company). The company was incorporated in the State of Utah on
October 20, 1999. On September 21, 2000, ISO Block Products, USA,
Inc., a Colorado Corporation, (ISO) changed its name to Cryocon,
Inc. in conjunction with the merger with Cryocon, Inc. Prior to
the acquisition of the Company, ISO had been seeking to merge with
an existing, operating company.
On August 16, 2000, ISO and the Company completed and Agreement
and Plan of Reorganization whereby ISO issued 11,000,000 shares of
its common stock in exchange for all of the outstanding common
stock of Cryocon. Immediately prior to the Agreement and Plan or
Reorganization, the Company had 1,248,974 shares of common stock
issued and outstanding.
The acquisition was accounted for as a recapitalization of Cryocon
because the shareholders of Cryocon controlled the Company after
the acquisition. Therefore, Cryocon is treated at the acquiring
entity. There was no adjustment to the carrying value of the
assets or liabilities of Cryocon in the exchange. ISO is the
acquiring entity for legal purposes and Cryocon is the surviving
entity for accounting purposes. On September 21, 2000, the
shareholders of the Company authorized a reverse stock split of
1-for-4. All references to shares of common stock have been
retroactively restated. The surviving entity is a Colorado
Corporation.
Unaudited Financial Statements
------------------------------
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for
a fair presentation. Such adjustments are of a normal recurring
nature.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It
is the intent of the Company to use the acquired publicly traded
shell to facilitate the raising of equity capital. Until that
time, the stockholders have committed to covering the operating
costs of the Company.
F-12
81
CRYOCON, INC.
(Formerly ISO Block Products USA, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2000
NOTE 3 - SUBSEQUENT EVENTS
On February 9, 2001, the Company entered into an agreement with
Citizen Asia Pacific, LTD out of Hong Kong, wherein they will
promote our Company in Asia and other non US markets. They have
received 300,000 shares of common stock for their consulting fees.
On February 9, 2001, the Company entered into an agreement with
Hans Balz to promote the Company in Europe. He will receive 20,000
shares of common stock for his services. These shares will be
issued form the 1,000,000 shares authorized by the board on May
31, 2000 to issue for compensation.
On February 9, 2001 the Company entered into an agreement for
consulting work from Mr. J. Brian Morrison. He will receive
500,000 shares of common stock for his services.
F-13
82