SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: 0-29383
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WICHITA DEVELOPMENT CORPORATION
-------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0356200
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) = Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
---------------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes XX No
---- ----
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of August 12, 2002 was 104,321,646.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
Unaudited Balance Sheet as of June 30, 2002....................................4
Unaudited Statement of Operations for the three and six months ended
June 30, 2002 and 2001.........................................................6
Unaudited Statement of Cash Flows for the six months ended
June 30, 2002 and 2001.........................................................7
Notes to Condensed Financial Statements........................................8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS .................................9
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................11
SIGNATURES....................................................................11
INDEX TO EXHIBITS.............................................................12
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Wichita Development Corporation, a
Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended June 30, 2002,
and statements of operations, and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as Pages 4 through 7 and are incorporated
herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
3
WICHITA DEVELOPMENT CORPORATION
Unaudited Consolidated Balance Sheet
June 30, 2002
June 30, 2002
-------------
ASSETS
Current Assets
Cash $ 84,172
Prepaid expenses 2,469
Accounts receivable 86
Notes receivable 75,212
Notes receivable - Related parties 49,223
Securities available for sale - short term 29,051
-------------
Total Current Assets 240,213
Fixed Assets
Property and equipment, net 1,112,029
Land 200,000
-------------
Total Fixed Assets 1,312,029
Other Assets
Securities available for sale - long term 304,908
Other assets 49,082
-------------
Total Other Assets 353,990
TOTAL ASSETS $ 1,906,232
=============
See accompanying notes to financial statements
4
WICHITA DEVELOPMENT CORPORATION
Unaudited Consolidated Balance Sheet
(continued)
June 30, 2002
June 30, 2002
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 584
Payable to related parties 112,954
Income taxes payable 40,628
Unearned rent 11,231
Current portion of Long-Term debt 615,831
-----------
Total Current Liabilities 781,228
Long Term Debt 885,290
Less: Current portion (615,831)
-----------
Total Long Term Debt 269,459
TOTAL LIABILITIES 1,050,687
STOCKHOLDERS' EQUITY
Preferred stock - 5,000,000 shares authorized at $0.001 par, none issued
and outstanding - Common stock - 200,000,000 shares authorized at $0.001
par; 104,322
104,321,646 shares issued and outstanding
Paid in capital 661,870
Retained earnings 287,047
Unrealized loss on securities (192,353)
Treasury Stock (450,210 shares at $.012 per share) (5,341)
TOTAL STOCKHOLDERS' EQUITY 855,545
-----------
$ 1,906,232
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
===========
See accompanying notes to financial statements
5
WICHITA DEVELOPMENT CORPORATION
Unaudited Consolidated Statements of Operations
for the three and six months ended June 30, 2002 and 2001
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
------------- ----------- ------------ -----------
Rental revenues $ 80,119 $ 70,844 $ 179,267 $ 179,304
General and administrative expenses 84,303 67,098 179,196 165,026
------------- ----------- ------------ -----------
Net income from rental operation (4,184) 3,746 71 14,278
Other income (expense)
Interest income (expense) (19,272) (4,633) (46,817) 1,600
Gain (loss) on sale of securities (11,458) - (14,192) (3,991)
Unrealized gain (loss) on securities - (10,025) - 8,494
------------- ----------- ------------ -----------
Total other income (expense) (30,730) (14,658) (61,009) 6,103
------------- ----------- ------------ -----------
Income (loss) before tax (34,914) (10,912) (60,938) 20,381
------------- ----------- ------------ -----------
Provision for income taxes - Notes 1 & 3 - 4,825 10,793 (9,902)
------------- ----------- ------------ -----------
Net income (loss) $ (34,914) $(6,087) $ (50,145) $ 10,479
============= =========== ============ ===========
Net income (loss) per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00
============= =========== ============ ===========
Weighted average shares outstanding 104,322,000 24,322,000 104,322,000 22,116,000
============= =========== ============ ===========
See accompanying notes to financial statements
6
WICHITA DEVELOPMENT CORPORATION
Unaudited Consolidated Statements of Cash Flows
for the six months ended
June 30, 2002 and 2001
Six months ended
June 30,
Cash Flows from Operating Activities: 2002 2001
- -------------------------------------
---------- ------------
Net Income (loss) $ (50,145) $ 10,479
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,119 7,326
Closing costs added to loan 3,981 -
Realized loss on sale of securities 14,362 -
Decrease (increase) in prepaid expenses (2,469) (2,059)
Decrease (increase) in securities - (525,183)
Decrease (increase) in accounts receivable 20,827 -
Increase (decrease) in accounts payable 584 (7,810)
Increase (decrease) in accrued liabilities (7,145) -
Increase (decrease) in unearned rent (22,462) -
Increase (decrease) in income tax payable (10,793) 9,902
---------- ------------
Net Cash Used in Operating Activities (41,141) (507,345)
Cash Flows from Investing Activities:
Decrease (increase) in notes receivable (46,284) (129,938)
Proceeds from sale of securities 7,187 -
---------- ------------
Net Cash Provided by/(Used for) Investing Activities (39,097) (129,938)
Cash Flows from Financing Activities:
- ------------------------------------
Increase in (payment of) long-term debt (8,352) 274,293
Issued stock for securities - 104,763
Purchase of treasury stock (5,341) (154,321)
Issued stock for debt settlement - 147,591
Increase in amount due to related party (16,853) -
---------- ------------
Net Cash Provided by/(Used for) Financing Activities (30,546) 372,326
Net Increase(decrease) in Cash (110,784) (264,957)
Beginning Cash Balance 194,956 480,483
---------- ------------
Ending Cash Balance $ 84,172 $ 215,526
========== ============
Supplemental Disclosure Information:
Cash paid during the period for interest $ 50,894 $ 43,892
Cash paid during the period for income taxes $ 0 $ 1,890
See accompanying notes to financial statements
7
WICHITA DEVELOPMENT CORPORATION
Notes to Unaudited Financial Statements
June 30, 2002
NOTE 1 Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
Wichita Development Corporation ("Wichita") was organized under the
laws of the State of Nevada on February 15, 1996 as Cyberbotanical,
Inc. The Company was in development stage until August 30, 2000, at
which time it purchased a building in Wichita, Kansas, known as the
Board of Trade Center. On October 12, 2000, the Company changed its
name to Wichita Development Corporation. On October 17, 2001, the
Company purchased Kearns Development Corporation, a majority owned
subsidiary of Axia Group, Inc. in exchange for issuing 80,000,000
shares of common stock to Axia Group, Inc. As a result of the
transaction, Kearns became an 85.6 % owned subsidiary of the Company
and the Company has become an 85.5% owned subsidiary of Axia Group,
Inc. Axia Group, Inc. in a restructuring, transferred these shares to
Nexia Holdings, Inc. a holding company subsidiary of Axia, making the
Company a subsidiary of Nexia Holdings, Inc. The consolidated
financial statements include the accounts of Wichita, its wholly-owned
subsidiary Wichita Properties, Inc. (WPI), and its 85.6% owned
subsidiary Kearns Development, Inc. (Kearns) (collectively the
"Company"). All significant intercompany account balances have been
eliminated in consolidation. The Company is engaged in the operation
of real estate to produce rental income.
Net Income (Loss) Per Common Share
Net income (loss) per common share is based on the weighted average
number of shares outstanding.
NOTE 2 Basis of Presentation
The accompanying consolidated unaudited financial statements have been
prepared by management in accordance with the instructions in Form
10-QSB and, therefore, do not include all information and footnotes
required by accounting principles generally accepted in the United
States and should, therefore, be read in conjunction with the
Company's Annual Report to Shareholders on Form 10-KSB for the fiscal
year ended December 31, 2001. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operations results are not
necessarily indicative of the results for the full year ended December
31, 2002
NOTE 3 Debt Settlement
On June 14 , 2002, the Company entered into a settlement agreement
with Axia Group, Inc. and West Jordan Real Estate Holdings, Inc. to
settle debts with each of these companies in exchange for restricted
shares of the common stock of Axia Group, Inc. to be valued at a 50%
discount to the closing price on the date of the agreement. Total
debt, including accrued interest, of $68,253.54 was settled in
exchange for the issuance of 1,365,070 restricted shares of the common
stock of Axia Group, Inc. Axia is a parent corporation to the Company
and West Jordan is a subsidiary of Axia. The settlement of these debts
were treated as settlement of related party debts and are reflected in
the financial statements for June 30, 2002.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the Financial Statements and
accompanying notes and the other financial information filed in the Form 10-KSB
for the period ended December 31, 2001.
General
Our business plan for the next twelve months involves the continued operation of
our office buildings in Wichita, Kansas and Kearns, Utah coupled with our
ongoing attempts to locate and acquire additional commercial office space.
Results of Operations
The Company recorded $80,119 and $70,844 in rental revenues for the quarters
ended June 30, 2002 and 2001, respectively. The change is due to an increase
from the inclusion of the Kearns property partially offset by a decrease in
occupancy rates in the Wichita property.
During the quarter the Company agreed to resolve debts owned to the Company by
Axia Group, Inc., a parent corporation to the Company and West Jordan Real
Estate Holdings, Inc. a subsidiary of Axia Group as well. The terms of the
settlement are that the Company agreed to accept restricted shares of Axia
Group, Inc. common stock valued at 50% of the lowest bid price in settlement of
a total of $68,253.54 in debts owed to the Company by the named companies. The
total number of shares of Axia common stock to be delivered to the Company
pursuant to the agreement to settle these debts has been calculated to be
1,365,070 shares. The transaction was approved by all members of the board of
directors.
Income / Losses
Net loss for the quarter ended June 30, 2002, was $34,914 compared to a net loss
of $6,087 for the quarter ended June 30, 2001. The reason for the change in net
income is due to the addition of interest expenses from the financing obtained
on the Wichita building not present in the previous year coupled with the
increase in overhead related to loan renegotiations.
Net loss for the six months ended June 30, 2002, was $50,145 compared to a net
gain of $10,479 for the six months ended June 30, 2001. The losses are
attributable to a decrease in occupancy rates and the additional interest
expenses from the financing obtained on the Wichita building not present in the
previous year coupled with the increase in overhead related to loan
renegotiations.
Expenses
General and administrative expenses for the quarter ended June 30, 2002, were
$84,303 compared to $67,098 for the comparable period in 2001. The increase in
general and administrative expenses resulted from costs related to renegotiating
the Kearns Development property loans of approximately $5,000. Note that in the
current year there are two buildings, the Kearns building and the Wichita
building being operated as compared to the Wichita building alone in the
previous year.
General and administrative expenses for the six months ended June 30, 2002, were
$179,196 compared to $165,026 for the comparable period in 2001.
The Company had $7,455 in depreciation and amortization expense for the quarter
ended June 30, 2002, and $3,663 for the comparable period in 2001.
9
Impact of Inflation
The Company believes that inflation may have a negligible effect on future
operations. The Company believes that it may be able to offset inflationary
increases in the cost of sales by increasing sales and improving operating
efficiencies.
Liquidity and Capital Resources
The Company's had a net working capital deficit of $541,015 on June 30, 2002,
compared to a working capital deficit of $497,416 at December 31, 2001. The
increase in working capital deficit was attributable to the current portion of
long term debt attributable to our subsidiary company's loan with Brighton Bank.
Subsequent to the end of the quarter, this loan was refinanced on July 11,2002
for an additional 2 years. This will make a dramatic change in the working
capital position of the Company on the next quarter's financial statements.
Cash flow used in operating activities were $45,268 for the quarter ended June
30, 2002, and $507,345 for the comparable period in 2001.
Cash flow used by investing activities was $39,097 for the quarter ended June
30, 2002, and $129,938 for the comparable period in 2001.
Cash flow used in financing activities was $26,565 for the quarter ended June
30, 2002, compared to cash flow generated by financing activities of $372,326
for the comparable period in 2001. The decrease was due to a lack of proceeds
from long term debt financing and a lack of issuances of stock for debt
settlement and securities purchases.
Expected Cash Requirements
On June 30, 2002, we had $84,172 in cash on hand. One of our subsidiaries,
Kearns Development, had a mortgage note that came due on June 28, 2002. The note
with Brighton Bank was refinanced on July 11, 2002, for two years in the amount
of $619,000. The terms of the note extension provide for interest at 9% per
annum, a monthly payment of $5,631.80 with a final payment due on July 12, 2004
of $601,757 and that the Company establish a money market account with the bank
in the sum of $50,000 to serve as collateral for the loan.
Efforts to refinance the note with a longer term are proceeding. It is
anticipated that the note will be refinanced with a 15 year amortization at
prevailing rates. The Company reflected the entire payoff amount as a current
liability for the period ended June 30, 2002, since the note extension was not
completed until July. There can be no guarantee that operating costs will remain
constant through the end of the year 2002.
In the event we acquire additional rental properties during the coming year, our
cash requirements to fund operations could increase. While we have no present
intention to raise equity capital for operations in the next twelve month
period, the acquisition of, or opportunity to acquire additional commercial real
estate could create a need to raise additional capital.
Product Research and Development
We do not plan to conduct any significant research or development activities in
the coming twelve month period.
Expected Purchase or Sale of Plant and Equipment
We have no current plan for the purchase of any specific additional plant or
equipment. However, we are investigating the feasibility of purchasing
additional commercial real estate. We are using the services of a
10
licensed real estate broker to suggest potential properties for our
consideration. We have investigated a number of potential properties and are
continuing to consider the purchase of additional office properties.
Expected Changes in Number of Employees
We currently have one part-time employee, Edward T. Wells. The Trade Center
Building is currently managed by a resident property management company and the
Kearns building is being managed by a subsidiary of Nexia Holdings, Inc., our
parent corporation. We do not expect to hire any additional employees in the
coming twelve month period.
Appointment of Director
On April 10, 2002, the Board of Directors appointed Richard D. Surber to the
board as a director and additionally appointed him as a vice-president of the
Company. Mr. Surber is currently the President of the Company's parent
corporations Nexia Holdings Inc. and Axia Group, Inc.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 12 of this Form 10QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
period covered by this Form 10-QSB.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized, this 12th day of August, 2002.
WICHITA DEVELOPMENT CORPORATION.
/s/ Edward T. Wells Date: August 13, 2002
- ----------------------
Edward T. Wells
President and Director
11
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Wichita Development
Corporation (the" Company") on Form 10-QSB for the period ending June
30, 2002 as filed with the Securities and Exchange Commission on the
date hereof (the"Report"), I, Edward T. Wells, sole Executive Officer
of the Company, certify, pursuant to 18 U.S.C. S 1350, as adopted
pursuant to S 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The financial information contained in the Report fairly
presents, in all material respects, the financial condition and
result of operations of the Company.
/s/ Edward T. Wells
---------------------------------
Edward T. Wells
Sole Executive Officer
August 13, 2002
12
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company
(incorporated herein by reference from
Exhibit No. 3(i) of the Company's Form 10-SB
as filed with the Securities and Exchange
Commission on February 8, 2000).
3(ii) * Bylaws of the Company, as amended
(incorporated herein by reference from
Exhibit 3(ii) of the Company's Form 10-SB as
filed with the Securities and Exchange
Commission on February 8, 2000).
Material Contracts
10(i) 14 Change in Terms Agreement, Brighton Bank and
the Company to extend term of a mortgage
note in the sum of $619,995.31 through July
12, 2004 at 9% interest.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY
13
CHANGE IN TERMS AGREEMENT
Borrower: Kearns Development Corporation, Lender: Brighton Bank
previously known as Cyberstudio, Inc. City Center Office
286 West 400 South, Ste. 300 311 South State Street
Salt Lake City, Utah 84101 Salt Lake City, UT 84111
Principal Amount: $619,995.31 Interest Rate: 9.000%
Date of Agreement: July 11, 2002
FOR VALUABLE CONSIDERATION, Lender and Borrower agree to the following changes
in Borrower's obligation:
DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 29, 2000 in
the principal amount of $625,000.00 maturing on December 2, 2001.
DESCRIPTION OF COLLATERAL. Deed of Trust dated November 29, 2000 on property
located at 4115 West Sams Boulevard, Kearns, Utah 84118 and Assignment of
Deposit Account dated November 29, 2000.
DESCRIPTION OF CHANGE IN TERMS. The maturity date is changed to July 12, 2004,
the rate is changed from a fixed rate of 9.25% to a fixed rate of 9.00% and the
balance in the Money Market Account #61-90848-9 will be increased to $50,000.00
with a minimum balance of $20,000.00 to remain permanently as collateral.
PROMISE TO PAY. Kearns Development Corporation previously known as Cyberstudio,
Inc. ("Borrower") promises to pay to BRIGHTON BANK ("Lender"), or order, in
lawful money of the United States of America, the principal amount of Six
Hundred Nineteen Thousand Nin Hundred Ninety-five & 31/100 Dollars
($619,995.31), together with interest at the rate of 9.00% per annum on the
unpaid principal balance from July 12, 2002, until paid in full.
PAYMENT. Borrower will pay this loan on demand. Payment in full is due
immediately upon Lender's demand. If no demand is made, Borrower will pay this
loan in 23 regular payments of $5,631.80 each and one irregular last payment
estimated at $601,757.15. Borrower's first payment id due August 12, 2002, and
all subsequent payments are due on the same day of each month after that.
Borrower's final payment will be due on July 12, 2004, and will be for all
principal and all accrued interest not yet paid. Payments include principal and
interest. Interest on this Agreement is computed on a 365/360 simple interest
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such place as Lender may designate
in writing.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan will not be subject to refund upon
early payment (whether voluntary or as a result of default), except as otherwise
required by law. Except for the foregoing, Borrower may pay without penalty all
or a portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation
to continue to make payments under the payment schedule. Rather, early payments
will reduce the principal balance due and may result in Borrower's making fewer
payments. Borrower agrees not to send Lender payments marker "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender's rights under this Agreement,
and Borrower will remain obligated to pay any further amount owed to Lender. All
written communication concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to:
BRIGHTON BANK, 7101 South Highland Drive, Salt Lake, UT 84121.
14
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $25.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the interest rate on this Agreement 2.000 percentage points. The
interest rate will not exceed the maximum rate permitted by applicable law.
LENDER'S RIGHTS. Upon Lender's demand, Lender may declare the entire principal
balance on this Agreement and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.
ATTORNEY'S FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Agreement if Borrower does not pay. Borrower will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's reasonable
attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit,
including without limitation all reasonable attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), and appeals. If not prohibited by applicable law, Borrower
will pay any court costs, in addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.
GOVERNING LAW. This Agreement will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Utah. This Agreement
has been accepted by Lender in the State of Utah.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, os some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Agreement is secured by Deed of Trust
dated November 29, 2000 on property located at 4115 West Sams Boulevard, Kearns,
Utah 84118 and a Assignment of Deposit Account dated December 28, 2001 (Brighton
Bank Money Market Account $61-90848-9 for $20,000.00).
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligations, including all agreements evidenced or securing the
obligation(s), remain unchanged and in full force and effect. Consent by Lender
to this Agreement does not waive Lender's right to strict performance of the
obligation(s) as changed, nor obligate Lender to make any future change in
terms. Nothing in this Agreement will constitute a satisfaction of the
obligation(s). It is the intention of lender to retain as liable parties all
makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
15
FINANCIAL STATEMENTS. Borrower will furnish Lender with a Balance Sheet and
Income Statement as of the end of each fiscal year, as soon as it becomes
available, but in no event later than sixty (60) days after the end of that
fiscal year.
MONEY MARKET ACCOUNT. The borrower may use up to $30,000.00 of the $50,000.00
from the Brighton Bank Money Market Account #61-90848-9 during the term of the
loan. $20,000 in account #61- 90848-9 will be permanent collateral.
PRIOR NOTE. a Promissory Note dated November 29, 2000 from Cyberstudio, Inc. to
Brighton Bank.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on
transfer of Borrower's interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in persons other than Borrower, Lender, without notice
to Borrower, may deal with Borrower's successors with reference to this
Agreement and the Indebtedness by way of forbearance or extension without
releasing Borrower from the obligations of this Agreement or liability under the
Indebtedness.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: Brighton Bank
7101 South Highland Drive Salt Lake, UT 84121.
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Agreement, and unless otherwise expressly stated in
writing, no party who signs this Agreement, whether as maker, guaranty,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Agreement are joint and
several.
FINAL AGREEMENT. Borrower understands that this Agreement and the related loan
documents are the final expression of the agreement between Lender and Borrower
and may not be contradicted by evidence of any alleged oral agreement.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT, BORROWER AGREES TO THE TERMS OF THE AGREEMENT.
CIT SIGNERS:
KEARNS DEVELOPMENT CORPORATION PREVIOUSLY KNOWN AS CYBERSTUDIO, INC.
By: /s/ Richard D. Surber
-------------------------
Richard D. Surber, President of Kearns Development Corporation
previously known as Cyberstudio, Inc.
LENDER:
BRIGHTON BANK
/s/ Kent Nelson
-----------------------
Authorized Signer
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