AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 2001
REGISTRATION NO. 333-35954
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MIXSON CORPORATION
(F/K/A SPEED RELEASE LOCK COMPANY)
(Exact name of registrant as specified in its charter)
DELAWARE 3199 75-2674927
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
7635 W. 28TH AVENUE
HIALEAH, FLORIDA 33016
(305) 821-5190
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JOSEPH A. ROTMIL, PRESIDENT
MIXSON CORPORATION
7635 W. 28TH AVENUE
HIALEAH, FLORIDA 33016
(305) 821-5190
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
JOEL HELD, ESQ.
LAWRENCE B. MANDALA, ESQ.
BAKER & MCKENZIE
2300 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 978-3000
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Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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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,
check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective Registration Statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF AMOUNT AMOUNT
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE PREVIOUSLY PAID DUE
Common Stock, $.001 par value.......... $7,750,020 $2,022 $1,584 $438
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH 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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED , 2001
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[LOGO]
PROSPECTUS
MIXSON CORPORATION
COMMON STOCK
------------------
This is our initial public offering. We are offering a minimum of 1,000,000
and a maximum of 3,000,000 shares of our common stock at an offering price of
$2.50 per share. We must sell a minimum of 1,000,000 shares in order for this
offering to be completed. The offering period will terminate 180 days after the
date of this prospectus or when we sell all of the shares in the offering,
whichever is earlier, provided that we may extend the offering period once for
up to 30 additional days. If we do not sell at least 1,000,000 shares prior to
the termination of the offering, all money paid for shares will be returned to
the purchasers, with interest and without deduction. Even if we sell the minimum
number of shares, we may not sell the maximum number of shares. All sales
proceeds will be held in escrow with Chase Bank of Texas, N.A. until at least
1,000,000 shares have been sold.
This prospectus also is being furnished to the stockholders of TTI
Industries, Incorporated, a Texas corporation, in connection with the proposed
distribution by TTI to its stockholders of approximately 100,008 shares of our
common stock. TTI has declared a dividend payable to holders of record of TTI
common stock at the close of business on , 2001. For every share of
TTI common stock held, a TTI stockholder will receive shares of our common
stock, rounded down to the nearest whole share. This stock dividend will be
distributed as soon as practicable after this registration statement becomes
effective. Even if our offering is terminated because we do not sell the minimum
number of shares, the distribution of our common stock by TTI to its
stockholders will occur.
No action is necessary on the part of the TTI stockholders to receive the
shares of our common stock that TTI proposes to distribute. TTI stockholders do
not need to pay any consideration to TTI or to us in connection with this
distribution. TTI stockholders do not need to surrender any shares of TTI common
stock to receive shares of our common stock to be distributed by TTI.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT CERTAIN RISKS THAT YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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MINIMUM MAXIMUM
PER SHARE OFFERING OFFERING
--------- ---------- ----------
Public offering price....................................... $2.50 $2,500,000 $7,500,000
Underwriting discounts and commissions...................... $ -- $ -- $ --
Proceeds, before expenses, to us............................ $2.50 $2,500,000 $7,500,000
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THE DATE OF THIS PROSPECTUS IS , 2001.
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY.......................................... 1
SELECTED FINANCIAL DATA..................................... 3
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION.......... 4
RISK FACTORS................................................ 5
FORWARD-LOOKING STATEMENTS.................................. 9
TERMS OF THE OFFERING....................................... 9
DISTRIBUTION OF OUR SHARES BY TTI........................... 10
USE OF PROCEEDS............................................. 11
DIVIDEND POLICY............................................. 12
CAPITALIZATION.............................................. 13
DILUTION.................................................... 14
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION......... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 15
OUR BUSINESS................................................ 20
OUR MANAGEMENT.............................................. 29
SUMMARY COMPENSATION TABLE.................................. 30
CERTAIN TRANSACTIONS WITH MANAGEMENT........................ 32
PRINCIPAL STOCKHOLDERS...................................... 32
DESCRIPTION OF SECURITIES................................... 34
PLAN OF DISTRIBUTION OF OFFERED SHARES...................... 35
SHARES ELIGIBLE FOR FUTURE SALE............................. 36
LEGAL MATTERS............................................... 37
EXPERTS..................................................... 37
WHERE YOU CAN FIND MORE INFORMATION......................... 38
INDEX TO PRO FORMA FINANCIAL STATEMENTS..................... P-1
INDEX TO FINANCIAL STATEMENTS............................... F-1
IMPORTANT INFORMATION
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED.
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"Foil," "Rapide," "Tactica," and "Taclon" are trademarks, and "Speed
Release," "Mixson," and "PPCT Phoenix Baton" are registered trademarks, of
Mixson Corporation. This prospectus also contains the trademarks and service
marks of other companies that are the property of their respective owners.
i
PROSPECTUS SUMMARY
BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION THAT
MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY,
ESPECIALLY THE SECTION CAPTIONED "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND
NOTES, BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
OUR BUSINESS
We are the surviving company of a merger between Speed Release Lock Company
which was formed in 1996, and Mixson Corp., which was incorporated in 1968 as
the successor to an unincorporated business started in 1959. We chose the name
Mixson Corporation for the merged company. We are engaged in the manufacture and
sale of safety and self protection accessories, including, leather holsters,
belts, the PPCT Phoenix expandable baton, the Speed Release Gun Lock and
assorted police/safety security training equipment and accessories.
Our principal executive offices are located at 7635 W. 28th Avenue, Hialeah,
Florida 33018, and our telephone number is (305) 821-5190. Our website address
is www.mixson.com. The information contained in our website does not constitute
part of this prospectus.
OUR MARKET OPPORTUNITY
Our primary market is municipal police departments, federal law enforcement
agencies, security service providers and military organizations, which we refer
to as the "Public Safety Market," and to a lesser extent, private owners of
firearms. We plan to expand our customer base to the general consumer safety
market beginning with the marketing and sale of our Speed Release Gun Lock, our
PPCT Phoenix Baton, and other future products with an emphasis on consumer
safety and self-protection, whether developed by us or acquired through
acquisition of other companies.
Our immediate goals are:
- solidifying our position as a provider of police equipment and safety
training products to the Public Safety Market through an aggressive
acquisition strategy;
- expanding sales of our Mixson and PPCT Products to the international
Public Safety Market;
- marketing and selling our products, such as the Speed Release Gun Lock and
the PPCT Phoenix Baton, to the general consumer safety market; and
- developing or acquiring new products targeted at the Public Safety and
general consumer safety market.
OUR GROWTH STRATEGY
We plan to continue to maintain our position as a supplier of holsters and
other police equipment accessories to the Public Safety Market, and engage in
promoting new products aimed at the general consumer safety market, such as the
PPCT Phoenix Baton and the Speed Release Gun Lock. We plan to add additional
products that would be of interest to the Public Safety Market as well as the
general consumer concerned with safety and self protection.
Our opportunities with respect to the PPCT Phoenix Baton are based on what
we believe will be the increased desire by police and law enforcement agencies
to replace the standard solid, all metal, cumbersome police baton with a baton
which is lightweight, expandable, highly maneuverable yet maintains a
substantial striking force.
Our opportunities with respect to the Speed Release Gun Lock are based on
what we believe to be the likely heightened awareness for gun safety, and our
manufacture and sale of the Speed Release Gun Lock, a reliable, safe, low-cost
firearm lock designed to prevent the unauthorized use of firearms, including
1
unintentional discharge by children. Our product maximizes the user's ability to
operate the firearm quickly in an emergency situation through the use of instant
keyless access, while at the same time prohibiting the unauthorized use of the
firearm. The Speed Release Gun Lock, constructed of high impact polymer,
securely covers the trigger guard of 95% of the guns sold in the U.S., with no
modification to the firearm. It uses a fully programmable four-digit security
code with over 38,000 potential combinations. Once locked around the trigger and
trigger guard of a firearm, the lock will not release until the correct code is
entered on the lighted touchpad. To prevent tampering, the Speed Release Gun
Lock automatically shuts down for fifteen minutes after six incorrect codes have
been entered.
Our objective is to be a leading provider of both police equipment and
safety training products to the Public Safety Market, as well as reliable, safe,
cost-effective firearm locks to the general public, and to develop additional
consumer products based upon our present and future product line. We intend to
pursue this objective by:
- pursuing an aggressive acquisition strategy for related products;
- expanding our sales and marketing efforts;
- capitalizing on present, pending and proposed state and federal
legislation requiring gun locks and other firearm safety devices;
- strengthening our relationship with distributors, retailers and
manufacturers; and
- continuing to provide high levels of consumer satisfaction.
THE OFFERING AND THE DISTRIBUTION
Common stock outstanding.................. 11,036,080 shares
Common stock being offered by us.......... 3,000,000 shares (maximum)
1,000,000 shares (minimum)
Offering price............................ $2.50 per share
Common stock to be outstanding after the
offering................................ 14,036,080 shares (maximum)
12,036,080 shares (minimum)
Common stock being distributed by
TTI to its stockholders................. 100,008 shares
Use of proceeds........................... We intend to use the net proceeds of this offering to
repay all of our outstanding bank debt and indebtedness
to our shareholders, to continue to develop new products
and to evaluate future potential acquisitions, to market
and promote the Speed Release Gun Lock, to grow demand
for the PPCT Phoenix Baton as well as to fund
expenditures on inventory, sales and marketing, research
and development, working capital and general corporate
purposes. The distribution of our shares by TTI to its
stockholders will take place even if the minimum number
of shares is not sold, but will not result in any
proceeds to us.
Risk factors.............................. This investment involves a high degree of risk. You
should purchase shares only if you can afford a complete
loss of your investment.
2
SELECTED FINANCIAL DATA
The following selected financial data has been derived from the audited and
unaudited financial statements of Mixson Corp. and the notes to those statements
included in this prospectus beginning on page F-25. You should read the
following selected financial data together with the sections of this prospectus
entitled "Selected Unaudited Pro Forma Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the pro forma financial statements and notes thereto included elsewhere in this
prospectus. The data presented below at October 31, 2000 and 1999 and for the
six months ended October 31, 2000 and 1999 are derived from unaudited interim
financial statements of Mixson Corp. and include, in the opinion of management,
all adjustments necessary for a fair presentation of the data.
Net loss per share in the following table is based upon common shares
outstanding of 11,036,080 to reflect our present capitalization.
SIX MONTHS ENDED
YEAR ENDED APRIL 30, OCTOBER 31,
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1996 1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Net sales........................ $1,387,054 $1,194,822 $1,529,323 $1,044,659 $ 990,903 $ 461,434 $ 534,954
Cost of sales.................... 800,887 640,153 947,613 721,953 773,227 332,231 338,826
General and administrative
expenses....................... [ ] [ ] 509,278 649,679 361,572 341,011 271,134
Operating income (loss).......... 46,527 (45,232) 72,432 (326,973) (143,896) (211,808) (75,006)
Other income (expense)........... (14,632) (83,401) (43,463) (40,078) (21,651) (10,330) (4,204)
Net income (loss)................ 21,745 (118,666) 21,220 (363,616) (165,547) (222,138) (79,210)
Net income (loss) per share...... (0.00) (0.01) (0.00) (0.03) (0.01) (0.02) (0.01)
APRIL 30, OCTOBER 31,
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1996 1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- --------- --------- ---------
BALANCE SHEET DATA:
Current assets................... $ 519,424 $ 417,555 $ 544,103 $ 672,935 $ 529,021 $ 449,416 $ 628,298
Property, plant and equipment,
net............................ 69,738 63,773 69,353 60,757 50,651 55,967 43,764
Total assets..................... 611,382 513,241 655,140 774,868 617,031 545,522 713,421
Total liabilities................ 560,677 581,202 576,413 459,757 467,467 452,549 643,067
Retained earnings (accumulated
deficit)....................... 208,328 89,662 161,350 (202,266) (367,813) (424,404) (447,023)
Total stockholders' equity
(deficit)...................... 50,705 (67,961) 78,727 315,111 149,564 92,973 70,354
3
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma financial information has been
derived from the historical financial information of Mixson Corp., adjusted to
give effect to:
- the merger of Mixson Corp. and Speed Release Lock Company;
- our acquisition of all of the membership interests of PPCT Products, LLC;
and
- the estimated accounting adjustments resulting from such merger and
acquisition;
in each case as though the transactions had occurred on April 30, 2000 and
October 31, 2000, respectively.
The following information does not necessarily indicate the financial
position or results of operations that would have been achieved had the
transactions occurred on these dates or that may occur in the future. The
following information should be read in conjuction with:
- the pro forma financial information, and notes to that information,
included in this prospectus; and
- the historical financial statements of Mixson Corp., Speed Release Lock
Company and PPCT Products, LLC, including the notes to those statements,
included in this prospectus.
SIX MONTHS
YEAR ENDED ENDED
APRIL 30, 2000 OCTOBER 31, 2000
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STATEMENT OF OPERATIONS DATA:
Net sales................................................... $ 1,813,477 $ 681,028
Cost of sales............................................... 1,187,352 404,763
General and administrative expenses......................... 1,710,219 593,088
Operating income (loss)..................................... (1,084,094) (316,823)
Other income (expense)...................................... (149,119) (142,764)
Net income (loss)........................................... (1,233,213) (459,587)
Net income (loss) per share................................. (0.12) (0.04)
OCTOBER 31,
2000
-----------
BALANCE SHEET DATA:
Current assets.............................................. $673,797
Property, plant and equipment, net.......................... 112,073
Total assets................................................ 1,237,526
Total liabilities........................................... 1,464,013
Retained earnings (accumulated deficit)..................... (4,237,937)
Total stockholders' equity (deficit)........................ (226,487)
4
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE YOU DECIDE WHETHER TO PURCHASE
OUR COMMON STOCK. INVESTING IN OUR COMMON STOCK IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK. ANY OF THE FOLLOWING RISKS, AS WELL AS OTHER RISKS AND
UNCERTAINTIES THAT ARE NOT YET IDENTIFIED OR THAT WE CURRENTLY BELIEVE ARE
IMMATERIAL, COULD HARM OUR BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS,
COULD CAUSE THE TRADING PRICE OF OUR COMMON STOCK TO DECLINE AND COULD RESULT IN
A COMPLETE LOSS OF YOUR INVESTMENT. PLEASE SEE "FORWARD-LOOKING STATEMENTS"
IMMEDIATELY FOLLOWING THIS SECTION OF THE PROSPECTUS.
RISKS RELATED TO OUR BUSINESS
UNLESS WE CAN REVERSE OUR HISTORY OF LOSSES, WE MAY HAVE TO DISCONTINUE
OPERATIONS.
For the year ended April 30, 2000 and the six months ended October 31, 2000,
we suffered net losses, on a pro forma basis as adjusted for the acquisitions of
Mixson Corp. and PPCT Products, LLC, of $1,233,213 and $459,587, respectively.
During these periods, Speed Release Lock Company incurred net losses of
$1,088,681 and $483,384, respectively. Speed Release Lock Company has incurred
losses since it was organized. If we are unable to achieve or sustain
profitability or if operating losses increase in the future, we may not be able
to remain a viable company and may have to discontinue operations. If that
happened, you could lose the entire amount of your investment.
BECAUSE WE HAVE EXPERIENCED NEGATIVE CASH FLOW, WE MAY NEED BUT BE UNABLE TO
OBTAIN ADDITIONAL CAPITAL FINANCING IN THE FUTURE.
Our working capital requirements and the cash flow provided by future
operating activities will vary greatly depending on the volume of business
during the period for each of our Mixson, Speed Release and PPCT product lines.
We have experienced negative cash flows from operations during the past
two years. If negative cash flow operations continue, we may be required to seek
additional financing. If we are unable to obtain additional financing on
reasonable terms or at all, we may not be able to expand, develop our products
or respond to favorable acquisition opportunities and we may be forced to
curtail our existing activities or cease operations. If we do obtain additional
financing through the issuance of additional equity securities, your investment
in us could be diluted. If we incur additional indebtedness, we will be subject
to many risks, including the possibility of having insufficient cash flow for
debt repayment.
WE HAVE OUTSTANDING DEBT AND MAY BE UNABLE TO GENERATE SUFFICIENT REVENUE OR
OTHERWISE FINANCE DEBT REPAYMENT.
We have outstanding debt of approximately $1.4 million under lines of
credit, notes payable to banks, and notes payable to shareholders. Our debt to
the banks is secured by liens on our assets. Our current rate of revenue is
insufficient to enable us to repay our debt on maturity. In the event we cannot
sell sufficient shares or generate sufficient revenue or we are unable to
otherwise finance the repayment of our debt, we could get sued or face judgments
against us which could result in a loss of assets and a discontinuation of
operations.
BECAUSE WE WILL REPAY DEBTS WITH THE PROCEEDS OF THE OFFERING, IF WE SELL ONLY
THE MINIMUM NUMBER OF SHARES THE OFFERING PROCEEDS AVAILABLE FOR OUR
OPERATIONS WILL BE LIMITED.
We intend to use a portion of the proceeds of this offering to repay
indebtedness of $1,428,935, which includes $464,651 due to our shareholders for
amounts advanced to us during the past two years (other than advances for
offering costs that we plan to reimburse). If we sell only the minimum number of
shares, after the repayment of this existing debt, we will have only $846,065 to
use for operations and the implementation of our growth strategy. That could
limit our ability to expand our business, marketing plans and sales, and could
reduce our ability to achieve profitability.
5
IF WE CANNOT RETAIN OUR CURRENT KEY PERSONNEL OR ACQUIRE ADDITIONAL PERSONNEL,
WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET OUR PRODUCTS.
Our success will depend largely on the continuing efforts of our executive
officers, including our president, Mr. Joseph A. Rotmil. Our business may be
adversely affected if the services of these individuals become unavailable to
us. In addition, increasing the sales volume of our products will require the
implementation of a successful advertising and marketing plan. We will need to
hire additional qualified sales, advertising and marketing staff to enable us to
achieve market penetration with our products. If we cannot successfully
identify, attract, hire and retain additional personnel in a timely and
effective manner, it would have a material adverse effect on our business,
financial condition and results of operations by limiting our product sales and
decreasing revenue.
DELAWARE LAW MAY LIMIT POSSIBLE TAKEOVERS AND DISCOURAGE PURCHASES OF OUR STOCK.
Our certificate of incorporation makes us subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prohibits certain publicly-held Delaware corporations from engaging
in a "business combination" with an "interested stockholder" for a period of
time. This provision could discourage others from bidding for our shares. That
could reduce the likelihood of an increase in our stock price that might
otherwise occur in the event a bidder sought to take control of us by offering
to buy our stock from our existing shareholders.
RISKS RELATED TO OUR PRODUCTS
IF WE CANNOT PROTECT OUR PROPRIETARY RIGHTS IN OUR TECHNOLOGY, WE COULD LOSE
THOSE RIGHTS.
We have several U.S. patents to protect our rights in, among other things,
our "foil design" grab-proof holster, the PPCT Phoenix Baton, and the Speed
Release Gun Lock. We also have registered trademarks to protect our rights in
our "Mixson," "PPCT Phoenix Baton" and "Speed Release" marks. We rely on a
combination of trade secrets, copyright, patent, trademark, unfair competition
and other intellectual property laws, as well as contractual agreements to
protect our rights to our intellectual property. Due to the difficulty of
monitoring unauthorized use of and access to intellectual property, however,
these measures may not provide adequate protection. If courts do not uphold our
intellectual property rights or enforce our contractual arrangements, we may not
be able to protect our proprietary technology. Even if we bring suit to protect,
or become subject to a claim challenging our right to, our intellectual
property, it could result in substantial costs and diversion of our resources.
It could also result in the loss or compromise of our proprietary rights,
subject us to significant liabilities, require us to seek licenses from third
parties, or prevent us from selling our products. This could adversely effect
our ability to achieve profitability.
THE FAILURE OF OUR PRODUCTS COULD GIVE RISE TO PRODUCT LIABILITY CLAIMS.
The products we manufacture and sell are used in situations where the
failure to use the products for their intended purpose or the failure to use
them properly, could result in serious bodily injury or death. Our products
include holsters and other accessories designed for use with firearms and other
weapons, devices for safely storing firearms and locking the trigger to prevent
unauthorized use, batons and training equipment for use in training and
preparing people for violent confrontations. If our insurance coverage is
cancelled, becomes unavailable or too expensive, then we would not be covered
for these types of losses. Any substantial uninsured loss could have a material
adverse effect on our business, financial conditions and results of operations,
and prohibit us from bidding for orders from certain municipal customers since,
at present, many municipal bids require insurance coverage.
6
IF OUR PRODUCTS ARE RENDERED OBSOLETE BY TECHNOLOGICAL ADVANCES OR EVOLVING
INDUSTRY STANDARDS, WE WOULD NOT BE COMPETITIVE.
We must respond effectively to technological changes by continuing to
enhance and improve our products to incorporate emerging or evolving standards
and meet changing customer requirements. If we do not enhance and improve our
products, our sales and financial results could be materially adversely affected
and all or some portion of our inventory may be rendered obsolete. Our operating
results could fluctuate as a result of the amount, timing and market acceptance
of our products.
CURRENT OR FUTURE LEGISLATION OR REGULATION AT EITHER THE FEDERAL OR STATE LEVEL
COULD HAVE AN ADVERSE IMPACT ON SALES OF OUR SPEED RELEASE GUN LOCK AND OUR
PPCT PHOENIX BATON.
The federal government is currently considering legislation that would
require the sale of a gun lock with every purchase of a handgun in the United
States. Several states have enacted legislation that requires a gun lock to be
sold with every new handgun. We cannot, however, rely upon the passage of any
type of gun safety legislation to create a market for our gun lock. The
possibility exists that our gun lock may not comply with future regulations that
may be imposed on gun locks. For example, state or federal laws may require that
all gun locks meet specifications that our product may be unable to attain.
Maryland has enacted legislation that requires all handguns sold in that state
beginning January 1, 2003 to contain gun locks built into the gun itself.
Enactment of similar laws elsewhere could harm our future sales. We are aware
that certain state criminal statutes may apply to the production and sale of our
PPCT Phoenix Baton to individuals who are not licensed law enforcement
personnel, should we decide to target that market. The greater the number of
jurisdictions that prohibit sales of products like ours, the fewer opportunities
we have to market the PPCT Phoenix Baton to the general consumer safety market.
MANY OF OUR CUSTOMERS HAVE FLUCTUATING BUDGETS, WHICH COULD ADVERSELY AFFECT OUR
SALES.
Customers for our products include law enforcement and governmental
agencies. Government tax revenues and budgetary constraints fluctuate from time
to time and can affect budgetary allocations for law enforcement. Many domestic
and foreign government agencies have experienced budget deficits that have led
to decreased spending in certain areas. Our results of operations may be subject
to substantial period-to-period fluctuations as a result of these and other
factors affecting capital spending. A reduction of funding for law enforcement
could have a material adverse effect on our sales, and without those sales we
will not be able to achieve profitability.
BECAUSE ONLY A FEW OF OUR CUSTOMERS HAVE ACCOUNTED FOR A MAJORITY OF OUR SALES,
LOSS OF A CUSTOMER COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS.
For the year ended April 30, 2000, sales of our PPCT product line to the
Hong Kong Police Force represented approximately 78% of the total sales of the
PPCT product line, and for the same period of time, sales of our Mixson product
line to three distributors represented approximately 44% of the total sales of
the Mixson product line. These distributors were Superior Uniform Group,
Seminole, Florida; GT Distributors, Rossville, Georgia; and Lawmen's & Shooters
Supply, Vero Beach, Florida. We do not have written contracts with these
customers or distributors. A loss of any of these customers or distributors
could have a material adverse effect on our revenues and operations and could
limit our ability to achieve profitability.
OUR INTERNATIONAL SALES COULD BE SUBJECT TO UNCERTAIN FOREIGN GOVERNMENT
POLICIES.
We have sales in foreign countries, principally Hong Kong, for our PPCT
Phoenix Baton. We are therefore subject to various risks related to doing
business in foreign countries, including possible U.S. imposed embargoes of
sales, foreign import controls, exchange rate fluctuations, expropriations of
assets, war, civil uprisings and riots, government instability and legal systems
of decrees, laws, regulations,
7
interpretations and court decisions that are not always fully developed and that
may be retroactively or arbitrarily applied. Any of these risks could result in
a loss of business or other unexpected costs which could reduce our revenue or
profits.
RISKS ASSOCIATED WITH THE OFFERING
BECAUSE THERE ARE NO COMMITMENTS TO PURCHASE ANY OFFERED SHARES, YOUR ABILITY TO
RESELL YOUR STOCK COULD BE LIMITED.
This offering will not be underwritten, and there are no commitments to
purchase any of the offered shares. We cannot predict how many, if any, of the
shares will be sold. The distribution of our shares by TTI to its stockholders
will take place even if the minimum number of shares are not sold, but will not
result in any proceeds to us. There may not be an orderly distribution network
developing for the shares. This may have a negative effect on the price of our
shares following this offering and on your liquidity in the shares. Further, we
may fail to raise sufficient funds in the offering to adequately pay our
expenses and permit us to implement any portion of our business plan.
BECAUSE THERE IS NO MARKET FOR OUR STOCK IT COULD LIMIT YOUR ABILITY TO RESELL
THE STOCK.
Prior to this offering and distribution, there was no public market for our
securities, and a market may not develop as a result of these issuances. Our
securities are not listed on any stock exchange or on the Nasdaq National Market
System or SmallCap Market, nor do we meet the eligibility requirements for any
of these. No market makers currently make a market in our securities. In
addition, most TTI shareholders will receive only a few shares of our stock,
which will not contribute to an active market. With the lack of an active public
market for our stock, your ability to sell our securities will be limited and
you could be required to hold them for an indefinite period of time.
BECAUSE OUR DETERMINATION OF THE PUBLIC OFFERING PRICE WAS NOT BASED ON A MARKET
PRICE, YOU MAY NOT BE ABLE TO RESELL STOCK AT THAT PRICE.
Because there has been no prior public trading market for our common stock,
the initial public offering price of the common stock has been determined by us
and is not necessarily related to our asset value, net worth or other criteria
of value. The factors considered in determining the offering price include an
evaluation by management of the history and prospects for the industry in which
we compete and our earnings prospects. You may not be able to sell your stock at
that price.
BECAUSE OF ADDITIONAL SALES PRACTICES IMPOSED UPON BROKER-DEALERS THAT SELL LOW
PRICED SECURITIES IT COULD LIMIT THE MARKET FOR OUR SHARES.
The Securities and Exchange Commission has adopted regulations concerning
low priced securities or "penny stocks." The regulations define a penny stock to
be any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. For transactions covered by these regulations, a
broker-dealer intending to sell to persons other than established customers or
accredited investors must make a special suitability determination for the
purchaser and must have received the purchaser's written consent to the
transaction prior to the sale. These additional burdens may discourage
broker-dealers from effecting transactions in our common stock and could limit
our market liquidity and your ability to sell in the secondary market. In
addition, it is unlikely that any bank or financial institution will accept
penny stock as collateral.
BECAUSE WE DO NOT INTEND TO REGISTER THIS OFFERING IN ALL OF THE STATES, YOUR
ABILITY TO RESELL STOCK COULD BE REDUCED.
We intend to register this offering in approximately 27 states, including
Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana,
Kansas, Michigan, Minnesota, Mississippi, Missouri,
8
Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Virginia and West
Virginia. That will make it difficult or impossible for you to resell our stock
in states in which the offering is not registered.
BECAUSE OUR STOCK OWNERSHIP IS CONCENTRATED IN MANAGEMENT, YOUR ABILITY TO
INFLUENCE MANAGEMENT MAY BE LIMITED.
If we sell the maximum number of shares, we anticipate that our directors
and officers will collectively have beneficial ownership of approximately
12,346,872 shares or approximately 79.5% of our then raised and outstanding
common stock. We expect that upon successful completion of the maximum offering,
our president, Mr. Rotmil, will beneficially own 4,724,677 shares of our common
stock, including options to acquire 1,000,000 shares of our common stock, or
approximately 31.4% of our then issued and outstanding stock. We also expect
that Mr. O'Connell will hold 3,724,677 shares, that Mr. Bercoon will
beneficially own 2,483,118 shares and that Mr. Bedowitz will beneficially own
1,413,600 shares of our common stock representing respectively approximately
26.5%, 17.7% and 9.7% of our then issued and outstanding common stock. As a
result Messrs. Rotmil, O'Connell, Bercoon, and Bedowitz collectively or
individually will be able to exercise a significant influence over all matters
requiring shareholder approval, including the ability to elect a majority of our
board of directors and to approve or prevent us from taking significant
corporate actions requiring director and stockholder approval. Because of the
control held by these directors, we could be prevented from entering into
transactions that could be beneficial to our stockholders. The interests of
these individual stockholders could conflict with the interests of our other
stockholders.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Some of these statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by the use of forward-looking words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. You should read statements that contain these words carefully
because they discuss our future expectations, certain projections of our future
results of operations or financial condition or state other "forward-looking"
information. We believe that it is important to communicate our future
expectations to you. However, there may be events in the future that we cannot
accurately predict or control. The factors listed above in the section captioned
"Risk Factors," as well as cautionary language in this prospectus, provide
examples of risks and uncertainties that could cause our actual results to
differ materially from those we expect as described by these forward-looking
statements. Before you invest in our shares, you should be aware that the
occurrence of events described in these risk factors and elsewhere in this
prospectus could have a material adverse effect on our business, operating
results and financial condition.
TERMS OF THE OFFERING
OFFERING PRICE
Each share of common stock sold in the offering is priced at $2.50.
Purchasers are required to purchase a minimum of 100 shares. Therefore, each
purchaser of shares in this offering will purchase at least $250 of our common
stock.
SHARES OFFERED; THE OFFERING
We are offering a total of 3,000,000 shares for sale in the offering. The
shares will be offered exclusively by our officers and directors without the
payment of any sales commissions or any other fees to any person. The offering
period will terminate on the earlier to occur of (i) the close of business on
9
or (ii) the date all of the shares in the offering are sold,
provided that we may extend the offering period once for a maximum of 30
additional days. The offering is conditioned upon the sale of at least 1,000,000
shares. Until 1,000,000 shares have been sold, all proceeds from the offering
will be held in escrow. We cannot be certain that any or all of the shares will
be sold in the offering. SUBSCRIPTIONS FOR SHARES WILL BE IRREVOCABLE. The
distribution of 100,008 of our shares by TTI to its stockholders will take place
even if we sell no shares, but we will receive no funds from that distribution.
See "PLAN OF DISTRIBUTION OF OFFERED SHARES."
DISTRIBUTION OF OUR SHARES BY TTI
BACKGROUND AND REASONS FOR THE DISTRIBUTION
On October 5, 1999, Speed Release Lock Company, a Texas corporation for
which we are the successor in interest ("Speed Release-Texas"), entered into a
Stock Purchase and Exchange Agreement with TTI Industries, Incorporated and
Mr. Steve Bedowitz, the president and majority shareholder of Speed
Release-Texas at that time. Pursuant to this agreement, among other things,
(i) Mr. Bedowitz purchased an option for $40,000, which is exercisable upon
60 days prior written notice, to purchase 165,000 shares of TTI's common stock
at a purchase price of $.01 per share; (ii) TTI acquired 10% of the common stock
of Speed Release-Texas in exchange for 9.9% of TTI's common stock; (iii) TTI
obtained the right for a period of 180 days to demand the filing of a
registration statement with the Securities and Exchange Commission with respect
to the shares of Speed Release-Texas common stock owned by TTI, provided
however, that TTI, in exercising this right, is limited to distributing those
shares only to its stockholders (and may not sell these shares in the open
market); and (iv) if TTI had not exercised its right to demand registration
within 180 days from the date of the Stock Purchase and Exchange Agreement,
Speed Release-Texas could have rescinded the transaction and reacquired its
shares in return for the TTI shares it acquired. TTI timely notified Speed
Release-Texas that it was exercising its rights to demand registration and
requested the filing of a registration statement with respect to these shares.
As a result of our merger with Speed Release-Texas on March 29, 2000, the shares
of Speed Release-Texas common stock that TTI held were converted into what is
currently 100,008 shares of our common stock and we, as successor in interest to
Speed Release-Texas, are taking steps to register the proposed distribution by
TTI to its stockholders of these 100,008 shares of our common stock, including
the filing of this prospectus and the accompanying registration statement with
the Securities and Exchange Commission.
MANNER OF EFFECTING THE DISTRIBUTION
TTI currently holds 100,008 shares, or 0.91%, of our common stock. TTI has
declared a dividend payable to the holders of record of TTI's common stock at
the close of business on , 2001. As of such date, there were
[4,073,401] shares of TTI common stock outstanding. The dividend will result in
TTI stockholders receiving [0.02455147] shares of our common stock, rounded down
to the nearest whole share, for every share of TTI common stock held by them.
This ratio was selected in order to achieve as closely as possible TTI's goal of
distributing all of our shares held by TTI and will result in the distribution
of approximately 100,008 shares. After the distribution, TTI will hold a number
of our shares equal to the sum of the fractional shares of our common stock not
distributed due to the rounding down described above. We expect the stock
dividend to be effected by TTI on or about , 2001. TTI will notify
us or which will act as our transfer agent, as to the names and
holdings of each new shareholder of record. Our transfer agent will begin to
mail certificates representing shares of our common stock to the TTI
stockholders entitled to the distribution as soon as practicable after the
effective date of this registration statement.
In the distribution, TTI will distribute all but a few of the shares of our
common stock now held by it. We currently have eight stockholders. The proposed
distribution of 100,008 shares of our common stock will be made to approximately
TTI shareholders. Most of those TTI shareholders will receive less than
10 shares of our stock. We do not anticipate that the distribution of our shares
to TTI shareholders
10
will have any material impact on the marketability of our shares. TTI
shareholders will not pay any consideration to TTI or to us in connection with
this distribution nor do they need to surrender any shares of TTI common stock
to receive their shares of our common stock. This distribution will not result
in any proceeds to us. Since TTI will be distributing our shares to its
shareholders, it may be considered an underwriter with respect to that
distribution. Other than the transactions described above under "Background and
Reasons for the Distribution," TTI and its affiliates have not had any position,
office or other material relationship, or entered into any transactions, with us
or any of our affiliates.
USE OF PROCEEDS
THE OFFERING
We estimate that our net proceeds from the sale of the common stock will be
approximately $2,125,000 if the minimum number of shares offered (1,000,000) the
("Minimum Offering") is sold and $7,125,000 if the maximum number of shares
offered (3,000,000) (the "Maximum Offering") is sold, after deducting estimated
offering expenses of $375,000. The primary purposes of the offering are as
follows:
- to aggressively evaluate and pursue potential acquisition candidates with
a view to consummating transactions that would provide us with additional
products to market and sell to the public safety and general consumer
safety markets;
- to expand our sales and marketing activities, particularly targeting the
general consumer safety market, to promote such products as the Speed
Release Gun Lock, the PPCT Phoenix Baton, and other new products we may
promote to the general consumer safety market;
- to engage in research and development to produce and manufacture new
products related to the general consumer and public safety markets;
- to retire approximately $814,284 of bank indebtedness;
- to retire approximately $464,651 of indebtedness we owe to certain of our
shareholders;
- to reimburse Mr. Bedowitz for offering costs advanced by him of up to
$150,000;
- to fund our working capital needs and for other general corporate
purposes.
We intend to use the net proceeds from this offering as follows:
APPLICATION OF APPLICATION OF
NET PROCEEDS FROM NET PROCEEDS FROM
MINIMUM OFFERING MAXIMUM OFFERING
------------------------ ------------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- -------- ---------- --------
Sales and marketing.............. $ 200,000 9.4% $ 500,000 7.0%
Acquisitions..................... 175,000 8.2% 4,371,265 61.4%
Research and development......... 300,000 14.1% 300,000 4.2%
Repayment of bank indebtedness... 819,084 38.6% 819,084 11.5%
Repayment of shareholder
indebtedness................... 434,651(1) 20.5% 434,651 6.1%
Working capital and general
corporate purposes............. 196,265 9.2% 700,000 9.8%
---------- ------ ---------- ------
Total........................ $2,125,000 100.0% $7,125,000 100.0%
========== ====== ========== ======
- ------------------------
(1) Does not include our reimbursement of up to $150,000 to Mr. Bedowitz for
offering costs advanced by him.
The table above represents our best estimate of the allocation of the net
proceeds of the offering, based upon the current status of our operations, our
current plans and current economic conditions. The
11
amount and timing of expenditures will vary depending upon a number of factors,
including progress of our operations, technical advances, terms of collaborative
arrangements and changes in competitive conditions. We reserve the right to
change the amount of the net proceeds that will be used for any purpose to the
extent that management determines that a change is advisable. Accordingly,
management will have broad discretion regarding the application of the net
proceeds of the offering.
Pending application of the net proceeds of the offering, we intend to invest
the net proceeds in short-term, interest bearing investments, such as bank
certificates of deposit, United States government obligations and money market
instruments.
THE DISTRIBUTION
In the distribution, TTI will distribute almost all of its shares of our
common stock to its stockholders. TTI stockholders do not need to pay any
consideration to TTI or to us in connection with this distribution nor do they
need to surrender any shares of TTI common stock to receive their shares of our
common stock. This distribution will not result in any proceeds to us, and the
distribution will take place even if the minimum number of shares is not sold.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock, and
we do not anticipate paying cash dividends on our common stock in the
foreseeable future. Our current policy is to retain earnings to finance our
operations and fund the development and growth of our business. Future
declaration and payment of dividends, if any, will be determined based on the
then-current conditions, including our earnings, operations, capital
requirements, financial condition, and other factors the board of directors
deems relevant.
12
CAPITALIZATION
The following table has been derived from the unaudited financial statements
of Mixson Corp. included in this prospectus and sets forth the capitalization of
Mixson Corp. at October 31, 2000, and as adjusted to give effect to (i)
- the merger of Mixson Corp. and Speed Release Lock Company;
- our acquisition of all of the membership interests of PPCT Products, LLC;
and
- the estimated accounting adjustments resulting from such merger and
acquisition;
in each case as though the transaction had occurred on October 31, 2000, and
(ii) the sale of the Minimum Offering and the Maximum Offering, after deducting
estimated offering expenses. This table should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this prospectus.
AS ADJUSTED
---------------------------------------
ACTUAL MINIMUM MAXIMUM
OCTOBER 31, 2000 PRO FORMA OFFERING OFFERING
----------------- ----------- ----------- -----------
Long-term liabilities, less current
portion................................ $ -- $ -- $ -- $ --
Stockholders' equity (deficit)
Preferred stock (10,000,000 shares
authorized, no shares issued or
outstanding at October 31, 2000)..... -- -- -- --
Common stock, $0.01 par value
(50,000,000 shares authorized,
11,036,080 shares issued and
outstanding at October 31, 2000;
12,036,080 shares issued and
outstanding as adjusted for the
Minimum Offering; 14,036,080 shares
issued and outstanding as adjusted
for the Maximum Offering)............ -- 110,361 120,361 140,361
Common Stock, $2.50 par value; 4,000
shares authorized, issued and
outstanding.......................... 10,000 -- -- --
Additional paid-in capital............. 933,452 3,901,089 6,026,089 11,026,089
Accumulated deficit.................... (447,023) (4,237,937) (4,237,937) (4,237,937)
Less: Treasury stock (3,800 shares of
common stock at cost)................ (426,075) -- -- --
----------- ----------- ----------- -----------
Total stockholders' equity
(deficit).......................... 70,354 (226,487) 1,908,513 6,928,513
----------- ----------- ----------- -----------
Total capitalization................. 70,354 (226,487) 1,908,513 6,928,513
=========== =========== =========== ===========
13
DILUTION
Our deficit in net tangible book value at October 31, 2000 was approximately
$633,684, or $0.06 per share of common stock. Deficit in net tangible book value
per share represents the amount of our total tangible assets less total
liabilities, divided by the total number of shares of common stock outstanding.
Dilution per share represents the difference between the offering price of $2.50
per share and the net tangible book value per share of common stock, as
adjusted, immediately after this offering and is based upon common shares
outstanding of 11,036,080 prior to the offering to reflect our present
capitalization.
After giving effect to the sale of the Minimum Offering and after deducting
estimated offering expenses, our pro forma net tangible book value at
October 31, 2000 would have been $1,491,316, or $0.12 per share. This represents
an immediate increase in pro forma net tangible book value of $0.18 per share to
existing stockholders and an immediate dilution of $2.38 per share, or
approximately 95% of the offering price, to investors purchasing shares of
common stock in the Minimum Offering.
After giving effect to the sale of the Maximum Offering and after deducting
estimated offering expenses, our pro forma net tangible book value at
October 31, 2000 would have been $6,491,316, or $0.46 per share. This represents
an immediate increase in pro forma net tangible book value of $0.52 per share to
existing stockholders and an immediate dilution of $2.04 per share, or
approximately 82% of the offering price, to investors purchasing shares of
common stock in the Maximum Offering.
The following tables illustrate this per share dilution:
MINIMUM OFFERING
- ----------------
Initial public offering price............................... $2.50
Net tangible book value (deficit) before the Minimum
Offering................................................ (0.06)
Increase attributable to new investors.................... .18
-----
Adjusted pro forma net tangible book value after the Minimum
Offering.................................................. .12
-----
Dilution per share to new investors......................... 2.38
=====
MAXIMUM OFFERING
- ----------------
Initial public offering price............................... 2.50
Net tangible book value (deficit) before the Maximum
Offering.................................................. (0.06)
Increase attributable to new investors...................... 0.52
-----
Adjusted pro forma net tangible book value per share after
the Maximum Offering...................................... 0.46
-----
Dilution per share to new investors......................... 2.04
=====
The following tables summarize on a pro forma basis at October 31, 2000 the
number of shares of common stock purchased from us, the total consideration paid
to us and the average price per share paid to us by existing stockholders and by
investors purchasing shares of common stock in the Minimum Offering and the
Maximum Offering, before deducting estimated offering expenses:
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------- AVERAGE PRICE
MINIMUM OFFERING NUMBER PERCENT AMOUNT PERCENT PER SHARE
- ---------------- ---------- -------- ----------- -------- -------------
Existing stockholders............. 11,036,080 91.7% $ 4,011,450 61.6% $0.36
New investors..................... 1,000,000 8.3% 2,500,000 38.4% $2.50
---------- ------ ----------- ------
Total......................... 12,036,080 100.0% 6,511,450 100.0%
========== ====== =========== ======
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------- AVERAGE PRICE
MAXIMUM OFFERING NUMBER PERCENT AMOUNT PERCENT PER SHARE
- ---------------- ---------- -------- ----------- -------- -------------
Existing stockholders............. 11,036,080 78.6% $ 4,011,450 34.8% $0.36
New investors..................... 3,000,000 21.4% 7,500,000 65.2% $2.50
---------- ------ ----------- ------
Total......................... 14,036,080 100.0% 11,511,450 100.0%
========== ====== =========== ======
14
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
TTI's distribution of our common stock will be a taxable event for federal
income tax purposes both for TTI and its stockholders. TTI will recognize
taxable gain in an amount equal to the excess of the fair market value of the
shares of our stock distributed over TTI's adjusted tax basis of the distributed
shares at the time of the distribution.
The distribution of common stock to a TTI shareholder will be treated as
follows (based on the fair market value of the common stock at the time of
distribution): (i) first, as a dividend taxable as ordinary income, to the
extent of the shareholder's share of any accumulated earnings and profits of TTI
for prior years or any earnings and profits of TTI for the current year
(computed as of the close of the taxable year of the distribution and without
diminution by reason of distributions made during the current taxable year);
(ii) second, as a tax-free return of capital, to the extent of the shareholder's
tax basis of his stock in TTI; and (iii) third, as gain from the sale or
exchange of property. The tax basis of each share of our stock received by a
shareholder of TTI generally will be equal to the fair market value of the stock
received by the holder. The holding period for our stock to a TTI shareholder
will commence on the distribution date.
A corporation which is a shareholder of TTI generally will be entitled
(subject to special rules, including those set forth in Sections 246 and 1059 of
the Internal Revenue Code of 1986, as amended) to a deduction in an amount equal
to 70% of the fair market value of our stock received by the corporation in the
distribution. Special tax rules may apply with respect to shares of our stock
received in the distribution by any shareholder of TTI which has a special
status (E.G., a tax-exempt entity or a foreign person or entity).
TTI will comply with applicable tax reporting (E.G., Form 1099-DIV) and tax
withholding rules (for those TTI shareholders, if any, subject to backup
withholding on dividends) with respect to the distribution of our stock.
The shareholders of TTI should consult their own tax advisors with respect
to the federal, state and local tax consequences of the distribution as they
relate to their personal tax situations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with our financial statements and
the notes to the financial statements and the other financial information
included elsewhere in this prospectus. In addition to historical information,
this Management's Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this prospectus contain forward-looking
information that involves risks and uncertainties. Our actual results could
differ materially from those anticipated by forward-looking information as a
result of certain factors, including but not limited to those set forth under
"Risk Factors" and elsewhere in this prospectus.
GENERAL
We manufacture a wide variety of leather and nylon goods for municipal
police forces, federal and state law enforcement agencies, security service
providers and military operations. These products include holsters, belts,
handcuff cases, flashlight and baton holders, wallets, badge and I.D. holders,
and other accessories. We also manufacture lightweight, expandable batons, other
law enforcement training equipment, and the Speed Release Gun Lock.
We are a Delaware corporation formed in March 2000 in order to effect the
reincorporation in Delaware of Speed Release Lock Company, a Texas corporation
organized in 1996. On February 2, 2001, we:
- acquired all of the membership interests of PPCT Products, LLC, a Florida
limited liability company formed in 1999 ("PPCT"), and
15
- merged with Mixson Corp., a Florida corporation organized in 1968 as the
successor to an unincorporated business started in 1959 ("Mixson Corp.").
We refer to our acquisition of PPCT and merger with Mixson Corp. as the
"Mixson/PPCT Acquisition." The Mixson/PPCT Acquisition was accounted for as a
reverse acquisition, because the former shareholders of Mixson Corp. acquired a
majority of our common stock. Consequently, the following Management's
Discussion and Analysis of Financial Condition and Results of Operations is
based upon the historical financial statements of Mixson Corp.
FINANCIAL CONDITION
At October 31, 2000 and April 30, 2000, we had current assets of
approximately $628,000 and $529,000, respectively, and total assets of
approximately $713,000 and $617,000, respectively. The largest component of our
assets at each of these dates was inventory, which was $451,080 at October 31,
2000 and $396,213 at April 30, 2000. Current liabilities at October 31, 2000 and
April 30, 2000 were approximately $643,000 and $467,500, respectively, and we
had no long-term liabilities. Our total stockholders' equity at October 31, 2000
and April 30, 2000 was $70,354 and $149,564, respectively.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED APRIL 30, 2000, 1999 AND 1998
Revenues decreased over the three years ended April 30, 2000, from
$1,529,323 for the 1998 fiscal year to $1,044,659 for the 1999 fiscal year and
$990,903 for the 2000 fiscal year. The decrease from 1998 to 1999 was
principally attributable to the loss of two customers, and the decrease from
1999 to 2000 was due to a moderate decrease in product sales.
Costs of goods sold decreased from $947,613 for the year ended April 30,
1998 to $721,953 for the year ended April 30, 1999, and increased to $773,227
for the year ended April 30, 2000. The decrease from 1998 to 1999 was
attributable to decreased product sales, and the increase from 1999 to 2000 was
principally due to a moderate increase in costs of raw materials.
General and administrative expenses increased from $509,278 in fiscal 1998
to $649,679 in fiscal 1999, and decreased to $361,572 in fiscal 2000. The
increase from 1998 to 1999 was due primarily to our hiring of a national sales
manager and a vice president of acquisitions, and increased marketing expenses.
These costs decreased in 2000 primarily because we terminated those positions
and decreased our sales and marketing expenses.
Other expense, consisting principally of interest expense, decreased over
each year of the three years ended April 30, 2000. Interest expense was $43,867,
$40,078, and $29,664, respectively, in fiscal 1998, 1999 and 2000. These
decreases were principally due to reductions in notes payable.
Our net income for fiscal 1998 was $21,220, compared to net losses of
$363,616 in fiscal 1999 and $165,547 in fiscal 2000.
COMPARISON OF SIX MONTHS ENDED OCTOBER 31, 2000 AND 1999
Revenues increased from the six months ended October 31, 1999, compared to
the six months ended October 31, 2000, from $461,434 for the six months ended
October 31, 1999 to $534,954 for the comparable period in 2000. The increase was
due to a moderate increase in sales over these periods.
Costs of goods sold increased slightly from $332,231 during the six months
ended October 31, 1999 to $338,826 for the comparable period in 2000. This
increase reflects increased sales over the periods, offset by slight reductions
in labor costs.
16
General and administrative expenses decreased from $341,011 for the first
six months of fiscal 1999, to $271,134 for the first half of fiscal 2000. These
costs decreased in 2000 primarily because we terminated a national sales manager
and vice president of acquisitions and decreased our sales and marketing
expenses.
Other expense decreased from $10,330 for the first half of fiscal 1999 to
$4,204 for the six months ended October 31, 2000, due to our receipt of rental
income in fiscal 2000 as a result of our sublease of a portion of our principal
office.
Our net loss for the six months ended October 31, 2000 was $79,210, compared
to a net loss of $222,138 for the comparable period of 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the past two years, we have financed our operations principally
through capital contributions and loans from our principal stockholders and
credit facilities with various financial institutions. At October 31, 2000, we
had total stockholders' equity of $70,354, a working capital deficiency of
$14,769, and an accumulated deficit of $447,023. At April 30, 2000, we had total
stockholders' equity of $149,564, working capital of $61,554, and an accumulated
deficit of $367,813.
Net cash used in operating activities decreased from $429,309 in fiscal 1999
to ($69,841) in fiscal 2000, principally due to a decreased net loss, decreased
accounts receivable and inventory, increased accounts payable and accrued
expense, and a decrease in funds due to/from affiliates.
Cash flows used in investing activities were $8,387 and $66,484 in fiscal
2000 and 1999, respectively. The decrease was principally due to a $50,000 note
receivable from an affiliate and increased equipment purchases in fiscal 1999.
Net cash provided by financing activities decreased to ($66,884) in fiscal
2000 from $497,244 in fiscal 1999, due primarily to a $600,000 capital
contribution in fiscal 1999.
NORTH DALLAS BANK & TRUST COMPANY
We maintain a $300,000 credit facility with North Dallas Bank & Trust Co.
consisting of a revolving line of credit. This line of credit is secured by a
certificate of deposit owned by Mr. Bedowitz. Borrowings under our revolving
credit facility bear interest at 7.52%. The remaining principal balance, along
with any accrued and unpaid interest, will be due and payable on August 7, 2001.
At February 28, 2000, our outstanding debt to North Dallas Bank and Trust was
approximately $300,000. If we sell sufficient shares to repay the note to North
Dallas Bank and Trust, Mr. Bedowitz will recover his certificate of deposit.
SOUTHTRUST BANK, N.A.
In October 1999, PPCT executed a promissory note in the principal amount of
$250,000 in favor of SouthTrust Bank, N.A. PPCT executed a commercial security
agreement which granted SouthTrust Bank a blanket lien on PPCT's assets as
security for this promissory note. In addition, SouthTrust required Mixson
Corp., Joseph Rotmil, Gerald O'Connell, and Holster, LLC to guarantee all PPCT's
indebtedness to SouthTrust, including the obligations under this promissory
note. As additional collateral, Mr. O'Connell assigned a certificate of deposit
worth approximately $150,000 at the time of assignment. Interest accrued at 2.5%
above the prime rate as set forth in the note, and interest payments were due
monthly. The principal, and any unpaid and accrued interest, under this note was
due upon demand. If we sell sufficient shares to pay this debt, Messrs. Rotmil
and O'Connell and Holster LLC will benefit by being relieved of their guarantee.
In October 2000, SouthTrust and PPCT restructured this debt and executed a
new promissory note in the principal amount of $250,000 at a variable rate set
at 3.5% above the prime rate. The initial interest rate was 13%, and interest
payments are due monthly. The principal and all unpaid and accrued interest
17
will be due on April 30, 2001. PPCT's obligations are secured by a new
commercial security agreement executed in favor of SouthTrust and granting a
blanket lien on all of PPCT's assets. Mr. O'Connell re-executed an assignment of
the same certificate of deposit which secured the original promissory note with
SouthTrust Bank. SouthTrust required Messrs. Rotmil and O'Connell execute new
guarantees for the indebtedness, while the existing guarantees previously
executed by Mixson Corp. and Holster, LLC remain in place. As of February 28,
2001, the principal and interest due and owing by PPCT under this note was
$252,430.56.
EASTERN NATIONAL BANK
Mixson Corp. executed a promissory note in favor of Eastern National Bank on
October 24, 1994 in the amount of $75,000. Subsequently Mixson Corp. executed
renewal and extension notes for the total principal amount of $250,000 on each
of September 30, 1995, August 1, 1996, and August 1, 1997. Mixson's payment
obligations under this promissory note were secured by a Security Agreement,
dated October 24, 1994, which granted a blanket lien on Mixson's assets to
Eastern National Bank. In addition, Joe Rotmil and Gerald F. O'Connell executed
personal guarantees on October 24, 1994, and again in November of 1995,
guaranteeing payment of the Eastern National Bank promissory note, including all
future extensions and advances. As of the date of this prospectus, this security
agreement and these guarantees are still in force. If we sell sufficient shares
to repay this debt, Messrs. Rotmil and O'Connell and Holster LLC will benefit by
being relieved of their guarantees.
On July 5, 1998, the obligations under the Eastern National Bank note
matured, Mixson failed to repay the $249,818.50 due to Eastern National Bank,
and the note was in default. Mixson and Eastern National Bank entered into a
Loan Workout Agreement on August 2, 1999, which called for monthly installment
payments of $2,400 per month, an interest rate at 2.00% above the prime rate,
with the balance of the indebtedness to be paid in full by June 21, 2000. This
final payment date was extended by an August 4, 1999 letter agreement to
July 21, 2000, an August 22, 2000 letter postponing maturity until December 21,
2000. The final payment date was later extended until May 21, 2001, and was
extended again until September 11, 2001. As of February 28, 2001, the
outstanding principal due to Eastern National Bank is $194,718.50 with unpaid
and accrued interest in the amount of $67,134.70. If we sell sufficient shares
to repay this debt, Messrs. Rotmil and O'Connell and Holster LLC will benefit by
being relieved of their guarantees.
ADVANCES FROM PRINCIPAL STOCKHOLDERS
Steve Bedowitz has made advances to us for operations totaling, in the
aggregate, $3,285,761 through December 2000. Of this amount, Mr. Bedowitz
forgave $925,000 in 1998, which was reflected as a capital contribution,
canceled $900,000 of his debt in 1999 in exchange for 15,000 shares of our
common stock, and received repayment of $218,365 of this debt during 1999. In
December 2000, he converted $1,553,998, the remaining balance of these advances
for operations together with accrued and unpaid interest, into 1,035,999 shares
of our common stock. As of January 5, 2001, all shares of our common stock,
including those Mr. Bedowitz received in these exchange and conversions, were
subject to a 1-for-10 reverse stock split. Under the terms of the agreement
which effected the Mixson/PPCT Acquisition, the parties acknowledged that
Mr. Bedowitz would advance up to $150,000 for operations and an additional
$150,000 for the completion of this prospectus and accompanying registration
statement, and that we would reimburse him for such advances in an amount not to
exceed $300,000 provided the Minimum Offering is achieved. As of the date of
this prospectus, Mr. Bedowitz has advanced $148,000 to us. The indebtedness we
owe to Mr. Bedowitz accrues interest at the rate of 10% per year, and as of
February 28, 2001, the total interest accrued and unpaid on this indebtedness
was $4,235.14.
Gerald O'Connell has made a total of three loans to PPCT in an aggregate
principal amount of $162,500. PPCT executed a promissory on April 30, 1999 in
the original principal amount of $75,000 at an annual interest rate of 14% per
year and maturing on April 30, 2001. PPCT executed another promissory
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note on June 6, 2000 in the original principal amount of $50,000 at an annual
interest rate of 18%, and a third promissory note on August 21, 2000 in the
original principal amount of $37,500 at an annual interest rate of 18%. Both of
these promissory notes mature on June 30, 2001. As of February 28, 2001, total
interest accrued and unpaid on this indebtedness was $26,758.53.
Marc Bercoon loaned $37,500 to PPCT in exchange for a promissory note in the
original principal amount of $37,500, with an annual interest rate of 18%, and a
maturity date of July 31, 2001. Mr. Bercoon is the managing member of Holster,
LLC, which loaned PPCT $75,000 in exchange for a promissory note executed on
April 30, 2000 in the principal amount of $75,000, at an annual interest rate of
14%. This note matures on April 30, 2001. As of February 28, 2001, the total
aggregate principal and interest due under the Marc Bercoon note was $41,156.25
and total principal and interest under the Holster note was $82,001.53.
GOING CONCERN CONSIDERATION AND FUTURE FUNDING
We have experienced, and continue to experience, losses from operations,
negative cash flow, and liquidity problems. These conditions raise substantial
doubt about our ability to continue as a going concern. We have been able to
continue based, in part, upon the financial support of certain of our
stockholders. We have also been able to negotiate extensions on our indebtedness
with financial institutions. Our continued existence is dependent upon the
completion of this offering or our ability to otherwise obtain additional
funding. The eventual outcome of this offering or our ability to obtain
additional funding cannot be ascertained with any degree of certainty.
Our capital requirements depend on numerous factors, including market
acceptance of our products, the amount of resources we devote to investments in
our products, the resources we devote to marketing and selling our products and
other factors. We currently anticipate that the net proceeds of the Minimum
Offering plus our operating income will be sufficient to meet our anticipated
needs for working capital and capital expenditures for the next 12 months. Cash
requirements may vary and are difficult to predict due to the nature of the
developing markets we target.
If our operating income together with the proceeds of this Offering are not
sufficient to satisfy our financing needs, we will be required to seek
additional funding, although there can be no assurance that additional funds, if
required, will be available to us. Additional funding options include, but are
not limited to the following: Bank borrowings and additional public or private
sales of our securities, including equity securities. If we do not sell the
Minimum number of shares and do not obtain additional financing, we may be
forced to cease operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting of
Comprehensive Income." This statement requires that comprehensive income be
reported in the basic financial statements. Comprehensive income refers to the
change in equity during a period from transactions and events other than
investments by and distributions to owners. We adopted SFAS 130 during the first
quarter of 1998. Our only component of comprehensive income is the unrealized
appreciation on securities available-for-sale.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. This statement requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. We adopted SFAS 131 during the first quarter of 1998. The
implementation of this standard did not have any impact on our financial
position, disclosures or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging
19
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments--Deferral of the Effective Date of SFAS Statement No. 133" and in
June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments--an amendment of SFAS 133, Accounting for Derivative Instruments and
Hedging Activities." As a result of SFAS No. 137, SFAS No. 133 and SFAS No. 138
will be effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000. We adopted SFAS No. 133 and SFAS No. 138 effective July 1, 2000.
The adoption of these standards did not have a material impact on our financial
position and results of operations.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments--an amendment of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 138 will be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. We adopted
SFAS No. 138 effective July 1, 2000. The adoption of this standard did not have
a material impact on our financial position and results of operations.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation--an
interpretation of APB Opinion No. 25." FIN 44 clarifies the application of
Opinion 25 with respect to (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. We adopted FIN 44 effective July 1, 2000. The adoption of the
provisions of FIN 44 did not have a material effect on our financial position or
results of operations.
In December 1999, the Securities and Exchange Commission (the "Commission")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements," which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the Commission.
SAB 101 outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition policies. We
adopted SAB 101 effective October 1, 2000. We are in the process of evaluating
the Commission's interpretation of SAB 101, but do not believe that the
implementation of SAB 101 will have a material effect on our financial position
or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not engage in trading market risk sensitive instruments and do not
purchase as investments, as hedges, or for purposes "other than trading,"
instruments that are likely to expose us to market risk, whether it be from
interest rate, foreign currency exchange, commodity price or equity price risk.
We have not entered into any forward or futures contracts, purchased options or
entered into swaps.
OUR BUSINESS
GENERAL
We are a Delaware corporation formed on March 8, 2000. As a result of recent
acquisitions, we now hold the assets and operate the businesses of Speed Release
Lock Company, a Texas corporation ("Speed Release--Texas") and Mixson Corp., a
Florida corporation ("Mixson"), both of which we acquired by merger. At the same
time we merged with Mixson, we acquired all of the membership interests of PPCT
Products, LLC, a Florida limited liability company ("PPCT"), which we now
operate as a wholly-owned subsidiary.
We manufacture leather and nylon goods, including holsters, belts and
related accessories (the "Mixson Products") as well as lightweight, leading
edge, polymer expandable batons and other law
20
enforcement training equipment (the "PPCT Products"). We market the Mixson
Products and the PPCT Products primarily to the Public Safety Market, including
municipal police forces and security service providers. We hold the patent to
the Speed Release Gun Lock, a reliable, lighted numerical-display gun trigger
lock that prevents the use of the gun by unauthorized users which has been
marketed through catalogs and directly to certain retail establishments and law
enforcement agencies.
Our primary market is municipal police departments, federal law enforcement
agencies, security service providers, and military operations (the "Public
Safety Market"); however, we plan to expand our customer base into the general
consumer safety market (the "General Consumer Safety Market") beginning with the
marketing and sale of our Speed Release Gun Lock, as well as other planned
products with an emphasis on consumer safety and self-protection.
Our immediate goals are:
- solidifying our position as a provider of police equipment and safety
training products to the Public Safety Market through an aggressive
acquisition strategy;
- expanding sales of our Mixson and PPCT Products to the international
Public Safety Market;
- marketing and selling our products, such as the Speed Release Gun Lock, to
the General Consumer Safety Market; and
- developing or acquiring new products targeted at the Public Safety and
General Consumer Safety Market.
OUR PRODUCTS
THE MIXSON PRODUCTS
The Mixson Products include the following leather goods:
- a variety of holsters for duty and off-duty pistols;
- the "Rapide" holster;
- the "Foil" grab-proof holster;
- dress and garrison belts;
- shoulder straps,
- handcuff cases;
- pepper spray, radio and glove holders;
- magazine, cartridge, and speed loader cases;
- flashlight and baton holders; and
- wallets, badge and I.D. holders.
Mixson also sells a variety of nylon goods including nylon versions of both
the "Rapide" and the "Foil" holster designs under the following product lines:
- the "Tactica" ballistic nylon line of holsters, belts, and accessory
holders; and
- the "Taclon" line of products.
Our Rapide holster features an adjustable strap combined with friction
adjustment screws allowing it to fit most popular duty pistols. The Rapide
features a quick draw design with advanced weapon protection, anti-distortion
moisture resistance and weapon adjustability. Our Foil security holster features
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our patented "grab-proof" design allows the user to effect a quick release of
the firearm while offering protection against an unauthorized third party
removing the firearm from the holster.
THE PPCT PRODUCTS
Through our subsidiary, PPCT Products, LLC, we have been a leader in
designing innovative, lightweight expandable batons and training equipment to
the police and law enforcement market. PPCT markets and sells the PPCT Phoenix
Baton, an expandable baton made of lightweight resin composites and steel. The
PPCT Phoenix Baton is a revolutionary patented lightweight expandable baton
which is highly maneuverable while maintaining a substantial striking force. In
addition to its light weight the PPCT Phoenix Baton is rust resistant, has an
integral molded handle for firm griping, and is constructed primarily out of
composites making it preferable to all-metal batons in certain markets, as the
composite construction is perceived as less lethal. However, we make no
representation that the PPCT Phoenix Baton is less lethal than any other baton
design.
Other PPCT Products include training gear such as kick bags, striking bags,
foam practice batons, as well as polyethylene training pistols and knives.
THE SPEED RELEASE GUN LOCK
The Speed Release Gun Lock is a keyless, programmable, lighted
numerical-display trigger lock that fits the trigger guard of 95% of firearms
without requiring any modifications to the firearm. Our lock uses a four digit
security code which the user programs into the lock. Once locked it will not
release until the correct code is entered onto a lighted touchpad that is easily
accessible on the face of the lock. As a result, use of the gun by any person
who does not know the security code is prevented. To further prevent tampering,
our lock shuts down for fifteen minutes after six incorrect codes have been
entered.
The touchpad of the Speed Release Gun Lock has five translucent buttons that
illuminate when activated. These buttons are large enough to allow the owner to
easily press them quickly in order to open the lock in an emergency situation.
There are over 38,000 programmable four-digit codes available for the lock,
making it extremely difficult to open without knowing the passcode that the
owner selects. Therefore, the Speed Release Gun Lock is resistant to
accidentally unlocking if handled by children or other unauthorized persons. It
is constructed of a high-density polymer called Celcon that is 14 times stronger
than die cast metal. Once the lock is in place, it is virtually tamper resistant
and can only be removed by entering the correct code, using extensive force,
defacing the weapon and/or lock, or shipping the firearm through a licensed
firearms dealer to our headquarters.
The Speed Release Gun Lock uses a nine volt battery that will last for at
least twelve months under normal use. The lock remains locked and the entry code
remains stored in the memory of the lock even if the battery becomes depleted.
The user can gain access the firearm once the batteries have been replaced and
the correct passcode has been entered. The suggested retail price for the lock
currently is $34.95.
MANUFACTURING
THE MIXSON PRODUCTS
We manufacture all of the Mixson products in our 22,000 square foot facility
at 7635 West 28th Avenue, Hialeah, Florida. The primary term of this lease is
for five years and expires in December of 2001. We have an option to extend the
lease term for an additional five years through December of 2006 as well as a
right of first refusal should our current landlord wish to sell the premises
during this optional renewal term. The primary raw materials for our Mixson
Products are leather. We use Dupont 1050 denier ballistic cloth for our Tactica
line of products and Cordura nylon for our Taclon product line. We believe that
an ample supply of these materials will continue to be available from numerous
sources.
22
THE PPCT PRODUCTS
Several of our PPCT Products are not produced in our Hialeah facility but
are produced by a variety of manufacturers. The manufacture of the PPCT Phoenix
Baton is accomplished through the joint effort of both Consolidated Plastic
Products and Meramec Group, Inc. Our practice knives are produced by Chris Kay
Plastics of Union, Missouri, and our practice guns are produced by Ring
Manufacturing of Melbourne, Florida. Covers Up of Belleville, Illinois,
manufactures our practice batons. We manufacture the rest of our PPCT Products
at our facility in Hialeah, Florida. While we have no formal production
agreements in place, placing production orders on an as-needed basis allows us
to avoid the costs of storing and managing large amounts of inventory. Should
any of these manufacturers no longer be able to fill our production needs, we
believe that other manufacturers, including some of our current manufacturers,
could provide these services for us without undue delay or expense, and would
not have a material adverse effect on our business, financial condition or
operating results. While we don't believe a change in manufacturer would have an
impact on our product quality or supply continuity, we cannot be assured that
arrangements with a different manufacturer would result in quick and responsive
production, which could require that we increase our inventory of PPCT products.
The cost of compiling and storing such inventory could potentially have an
adverse effect on our business, financial condition, and results of operation.
THE SPEED RELEASE GUN LOCK
Tomco Engineering in China has been the producer of the injection molding
for the Speed Release Gun Lock, and we purchase the electronic components from
Arrow Electronics of Minnesota. We believe that an ample supply of raw materials
used in the manufacture of our product is available from numerous sources.
INTELLECTUAL PROPERTY
Our success and ability to compete is dependent on our ability to develop
and maintain the proprietary aspects of our technology and operate without
infringing on the proprietary rights of others. We rely on a combination of
patent, trademark, trade secrets, and copyright law and contractual restrictions
to protect the proprietary aspects of our technology. Due to the difficulty of
monitoring unauthorized use of and access to intellectual property, these legal
protections afford only limited protection for our technology.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. Any such resulting
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, operating results and
financial condition. There can be no assurance that our means of protecting our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology. Any failure by us to meaningfully
protect our property could have a material adverse effect on our business,
operating results and financial conditions.
There can be no assurance that third parties will not claim infringement
with respect to our current or future products. Any such claims, with or without
merit, could be time-consuming to defend, result in costly litigation, divert
management's attention and resources, cause product shipment delays or require
us to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all. A successful claim of product infringement against us and our failure or
inability to license the infringed technology or develop or license technology
with comparable functionality could have a material adverse effect on our
business, financial condition and operating results.
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THE MIXSON PRODUCTS
We hold U.S. patent number 5,441,187, issued on August 15, 1995 for the
"holster safety snap assembly" used in certain of our holsters, which we market
as our "Foil" holsters. We also hold the registered trademark for "Mixson" in
connection with the sale of our leather and nylon gun and police equipment
accessory belts and holders. In addition, we hold trademarks for our "Rapide"
and "Foil" holsters as well as our "Tactica" and "Taclon" line of nylon
products.
THE PPCT PRODUCTS
We manufacture and sell the PPCT Phoenix Baton pursuant to U.S. patent
number 5,372,363, which we hold, and pursuant to the ASP License described
below. We hold a registered trademark for the "PPCT Phoenix Baton." We also hold
patents for a composite telescoping baton, an injection molded telescoping
baton, a safety containment shield and a nightstick, U.S. patent numbers
5,568,922, 5,690,552, 5,329,636 and 332,296, respectively. Our safety
containment shield and nightstick are referred to below as the "PPCT Patented
Products."
In November 1999, we entered into an agreement with Armament Systems and
Procedures, Inc. ("ASP") whereby ASP granted us an exclusive, irrevocable
royalty-bearing license (the "ASP License") to use, sell, offer to sell, import
or otherwise distribute our PPCT Phoenix Baton free of any claims that the baton
infringes upon ASP's patent number 5,356,139 (the "ASP Patent"). Under the
agreement with ASP, we pay ASP royalties for the life of the ASP Patent.
In January 1999 we entered into a Consulting and Royalty Agreement with PPCT
Management, Inc. and Bruce K. Siddle, which was modified by a Mutual Settlement
and Release Agreement dated October 1999 (the "PPCT Consulting Agreement").
Under the terms of the PPCT Consulting Agreement, we pay royalties to PPCT
Management, Inc., in an amount equal to 5% of the gross collected sales of the
PPCT Patented Products and any improvements or replacements to the PPCT Patented
Products that are developed by PPCT Management, Inc., Mr. Siddle, or any of
their affiliates for the duration of such patents. In addition, until
January 20, 2009, we also pay a 5% royalty on any products we sell which are the
same or substantially similar to the large kick bag, foam training baton and
training knife, all of which were previously marketed by PPCT Management, Inc.,
and any products we might develop jointly with PPCT Management, Inc. In return,
PPCT Management is prohibited until January 20, 2006 from performing law
enforcement product development services, or endorsing law enforcement related
product other than the Mixson and PPCT products contemplated under the PPCT
Consulting Agreement and certain limited exceptions as set forth in this
agreement.
THE SPEED RELEASE GUN LOCK
We own U.S. patent number 5,713,149, which was issued in February 1998, for
the "electronic trigger lock" on which the Speed Release Gun Lock is based. We
also own the registered trademark "Speed Release" for our electronic gun trigger
lock.
MIXSON.COM
We operate a website (www.mixson.com) where we provide information about our
company, our products, and a method for customers to call in or fax their orders
for our products. In addition to owning the domain name registration for this
website, we also own the domain name registration for the following:
- www.thebaton.com
- www.expandablebaton.com
- www.expandablebatons.com
- www.securityholster.com
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- www.securityholsters.com
- www.securityholsters.net
- www.speedreleasegunlock.com
MARKETING AND SALES
THE PUBLIC SAFETY MARKET
The primary market for our Mixson and PPCT Products is the "Public Safety
Market," which is composed of individuals and organizations engaged in law
enforcement, security, and military activities. The following is a
representative list of a few of our customers in the Public Safety Market:
- New York City Police Department;
- Florida Highway Patrol;
- Las Vegas Police Department
- Virginia State Police;
- Detroit Police Department;
- Hong Kong Police Force;
- Wackenhut Security;
- City of Miami Police Department
- Sheriff's Department of Broward County, Florida;
- Connecticut State Corrections; and
- the Government of Iceland.
We currently use a combination of methods to sell and market our Mixson and
PPCT Products to the Public Safety Market, including the following:
- employing a force of independent sales groups, each of whom is responsible
for a different geographic sales area;
- operating a website (www.mixson.com) to promote our products;
- entering into cooperative advertisements with some of our dealers and
distributors;
- presenting promotional programs;
- attending trade shows; and
- directing materials and flyers to targeted individuals and organizations.
THE GENERAL CONSUMER SAFETY MARKET
The potential general consumer safety market for our products includes men
or women interested in safety related or self-protective products (the "General
Consumer Safety Market"). This market goes beyond gun-owners who might be
interested in holsters or gun locks, and we plan to bring to this market
products, which in addition to the PPCT Phoenix Baton and the Speed Release Gun
Lock, will have practical everyday safety applications. Future products might
include safety flares and other applications for use of our Speed Release Gun
Lock technology.
We believe that consumers interested in safety related products will prefer
products that bear the Mixson name, a name with more than forty years of
experience in the public safety marketplace. Our
25
history as a provider of police equipment and other safety related products to a
large number of police departments should add a level of credibility and instill
confidence in the products we market and sell to the General Consumer Safety
Market.
While we are currently making preliminary introductions of our PPCT Phoenix
Baton to certain selected geographical areas, the Speed Release Gun Lock
represents our first major effort at producing and promoting a product
specifically targeted for the General Consumer Safety Market. Owners of both new
and previously manufactured guns (or "retrofit") are being led to a greater
awareness of gun safety products by a number of recent actions and events,
including the political pressure on federal and state legislatures to enact gun
safety measures, the number of lawsuits against gun manufacturers and gun users,
the recent, highly publicized shootings by children who were able to gain access
to guns, and the increase in state and local legislation and regulatory
activity. In March 1997, all federal agencies were directed to equip their
handguns with child safety locks. We believe that these measures, together with
state laws requiring firearm owners to safely store firearms and to prevent
children from gaining access to them, will increase demand for the Speed Release
Gun Lock among both current and potential gun owners. We anticipate that gun
owners will increasingly either be required to have or will desire to purchase
some form of firearm safety product and that the gun lock business will grow as
a result. Our advertising will be directed to increasing public awareness of the
Speed Release Gun Lock and the advantages of our product over the gun locks
currently on the market. We plan to distribute the Speed Release Gun Lock
through individual dealers, national retailers, catalogs and the Internet and
television.
In addition to the sale and marketing of the Speed Release Gun Lock, our
plans include promoting new products to be specifically targeted to the General
Consumer Safety Market, whether these products are the result of our own
research and development or the result of strategic acquisitions of companies
with such products.
Our method of reaching potential customers in the General Consumer Safety
Market will include advertising through television and print media. On
November 1, 2000 we entered into a Television Marketing Agreement with American
Media Group, Inc. ("AMG"), of Overland Park, Kansas. According to the agreement,
AMG agreed to conduct a marketing test for the PPCT Phoenix Baton and the Speed
Release Gun Lock, which would earn AMG the option to be the exclusive television
marketer for these products for a period of six months. Under the agreement, AMG
agreed to produce and arrange for the airing of commercial spots highlighting
these products, and to set up and maintain toll free numbers for consumers to
order such products. In return, we agreed to sell the products to AMG, who
ultimately would handle all arrangements for receiving payment from and
delivering product to the ultimate consumer. In our first test with AMG, we
attempted to target a market segment different from our traditional sporting
goods, firearms, and Public Safety Market. We agreed to test a more generic
non-gun owner market such as those who would purchase the product for a friend
or relative. AMG has advised us that it conducted the sample test in the
St. Paul, Minnesota area for the Speed Release Gun Lock, airing a 60 second
television commercial on two cable television channels, TNT and TNN, during a
two week period. However, the limited test produced virtually no sales. We do
not believe that this test is indicative of the sales potential for the product
in this market, as it was directed at a very limited audience. To date, AMG has
not exercised its option to be the exclusive television marketer for these
products.
THE INTERNATIONAL PUBLIC SAFETY MARKET
Currently, most of our international business is through independent
distributors and directly with the government of Hong Kong. However, additional
international contacts are procured through a combination of trade shows, web
site and print media. Part of the proceeds from this Offering will be utilized
to hire or subcontract a representative to procure international business.
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OUR COMPETITION
PUBLIC SAFETY MARKET
Our competition for the Public Safety Market includes, but is not limited
to, the following companies, some of which manufacture and sell other products
besides the competing products we have highlighted below:
- Safariland, Ltd., Inc., a subsidiary of Armor Holdings, Inc.--producing
holsters and other police equipment accessories primary for the law
enforcement community, including the SS-3 grab proof holster, but also for
the civilian and competition market;
- Michael's of Oregon Co.--producing off duty, duty and a variety of
concealment holsters for the civilian and law enforcement community;
- Bianchi International--producing leather and nylon holsters and
accessories for law enforcement, concealment, military, sporting and
competition use, including the trademarked "Pinch Retention Device" and
"Slide-Lock" handgun retention devices;
- Gould & Goodrich, Inc.--producing duty and concealment holsters and
accessories for the police, government and correctional agencies and
sporting markets;
- Don Hume Leathergoods, Inc.--producing holsters, belts, handcuff cases and
related leather equipment for the law enforcement community, having
recently expanded into the market for civilians licensed to carry
concealed firearms;
- Manadnock--which produces a baton which is in direct competition with our
PPCT Phoenix Baton; and
- Armament Systems & Procedures, Inc.--producing tactical batons and
aerosol intruder security products, training equipment and flashlights.
GENERAL CONSUMER SAFETY MARKET
The Speed Release Gun Lock is currently our only product designed primarily
for the General Consumer Safety Market and competes with a number of products
that reduce the risk of firearm misuse. Some of these products are more widely
known and less expensive than the Speed Release Gun Lock and include the
following:
- trigger locks which must be opened with a key or by entering a combination
(average retail prices range from $5 - $30);
- grip locks that lock the safety of the handgun in the "no fire" position
until the correct combination is entered and the safety is released
(average retail prices range from $70 - $90);
- magnetic ring locks which require the gun owner to wear a magnet ring when
using the gun in order to release the trigger (average retail prices range
from $350 to $400);
- box locks and gun safes (average retail prices range from $70 - $90); and
- electronic "smart" locks that read a coded device worn by the user.
We believe that the Speed Release Gun Lock will be able to successfully
compete with these competitors because of the superior features of our product.
The Speed Release Gun Lock is easier to use in an emergency situation than these
competing products because it is easy to remove through a programmable code that
only the owner of the firearm knows. This makes access to the firearm efficient.
Research has shown that most gun owners want easy access to their firearms for
personal protection. The Speed Release Gun Lock provides easy access to a
firearm in total darkness without keys. It therefore meets the needs that
customers have identified as important in a firearm locking device. Prior
trigger lock
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technology including keyed locks and tumbler locks are seldom used to lock guns
used for personal protection. They are, however, used to lock guns that are
stored away and not used except to hunt and/or collect. In addition,
conventional key and tumbler locks are often purchased by firearm owners because
they would rather pay less for a simple lock than pay several hundred or
thousands of dollars for a large safe or for expensive modifications to their
firearms. While the Speed Release Gun Lock is slightly more expensive than some
key locks, at approximately $35 per lock, it is still easily affordable and
provides a reasonable alternative, an alternative that we believe will result in
owners of the Speed Release Gun Lock actually using the lock more than other
competing locks.
LEGISLATION AND REGULATION
THE MIXSON PRODUCTS
We know of no regulation that applies to the production, sale, or use of our
Mixson line of holsters, belts, and accessories, and we are aware of no current
or pending legislation would have a material adverse effect on our manufacture
or sale of these products.
THE PPCT PRODUCTS
We are aware that in some jurisdictions the manufacture and sale of the PPCT
Phoenix Baton to non-law-enforcement personnel is prohibited under state and
local criminal statutes. Some of those states are California, Illinois,
Massachusetts and New York. We intend, as part of our strategy, to market
certain of our products to the General Consumer Safety Market, and to offer and
sell the PPCT Phoenix Baton to buyers who would not qualify for such a
law-enforcement exemption, but only in jurisdictions where we have determined
that such a sale would not violate applicable law. We intend to conduct research
necessary to determine the jurisdictions in which we may lawfully market and
sell the PPCT Phoenix Batons to the General Consumer Safety Market.
THE SPEED RELEASE GUN LOCK
With the media coverage of the recent school shootings in places like
Littleton, Colorado; Paducah, Kentucky; and Springfield, Oregon, there is
increased attention focused on the access children have to firearms. This has
resulted in calls for legislation at both the state and federal level. One
suggested answer to the problem is to have trigger locks on all guns sold or
stored in the home. Another approach, which has been adopted in a number of
states, is to enact "Child Access Prevention" or "Safe Storage" laws. These laws
generally require that gun owners must take steps to prevent children from
gaining access or otherwise using firearms. Some states provide that such a law
does not apply to an owner who has secured the firearm with an adequate trigger
locking mechanism, while other states require gun dealers to post or otherwise
provide gun purchasers with a written warning about that state's child
prevention access law. Connecticut and Massachusetts laws go as far as to
require gun dealers to sell trigger locks with each gun purchase.
There is no way to determine what form, if any, gun lock legislation may
take and whether the Speed Release Gun Lock would comply with any future rules,
regulations, or specifications which might apply to our product. If the Speed
Release Gun Lock does not meet with regulatory approval, it might mean we would
have to modify our product so that it meets such future specifications. It is
impossible to predict what these kinds of mandated modifications might cost,
whether any changes in the Speed Release Gun Lock will affect our patent, and
whether it would be possible to modify our product to meet future requirements.
For example, legislation requiring all guns to include a safety lock that is
built into the gun will make our product less necessary. Even with legislation
requiring that gun locks be built into firearms, however, there remains the tens
of millions of guns already in the public domain without such devices, which
will be able to use the Speed Release Gun Lock. Some states have instituted
trigger lock give away programs. However, the locks given away are generally low
cost, key operated locks which do not provide
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the ready access feature of our Speed Release Gun Lock. We do not believe that
this type of trigger lock give away program will have any material effect on our
product sales.
Aside from legislative action, firearm manufacturers may initiate
self-regulatory measures in an attempt to prevent direct state or federal
regulation or other legal action. Firearm manufacturer Smith and Wesson, for
example, agreed on March 17, 2000 to install child trigger locks in its new guns
as part of a settlement agreement designed to prevent litigation initiated by
thirty cities and states, and possibly the federal government. Smith and Wesson
also agreed to develop smart-gun technology as part of this settlement. These
self-regulatory measures, the manufacture of new guns with "built-in" locks, and
industry pressure to develop so-called "smart-gun technology" may have an impact
on the demand for the Speed Release Gun Lock.
EMPLOYEES
Since October 31, 2000, we have had between 11 and 18 full-time employees.
We intend to increase our staff in the near future. We consider our relations
with our employees to be good.
PROPERTIES
We currently lease a 22,000 square foot space at 7635 West 28th Avenue in
Hialeah, Florida, which serves as our main office as well as the manufacturing
facilities for our Mixson Products. The initial lease term for this facility
expires in December of 2001, but we have an option to extend the lease for an
additional five years to expire in December of 2006 and a right of first refusal
should the landlord elect to sell the premises during this optional renewal
term. We also believe that, if required, suitable alternative or additional
space will be available to use on commercially reasonable terms. Public
Industrial Property Co., Inc. has recently released us from a lease of
approximately 3,000 square feet of space in Dallas, Texas.
LEGAL PROCEEDINGS
In the normal course of business, we may be subject to litigation. At
present, there is no legal proceeding pending against us.
OUR MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are our current directors and executive officers:
NAME AGE POSITION
- ---- -------- ----------------------------------
Joseph A. Rotmil.................. 50 President and Director
Beth McCagh....................... 44 Secretary
Marc Bercoon...................... 40 Director
Gerald F. O'Connell............... 62 Director
Steve Bedowitz.................... 58 Director
JOSEPH A. ROTMIL--Joseph A. Rotmil has been president, chief executive
officer and a director of Mixson Corp. since 1993. He has served as the managing
member of PPCT since 1999. He graduated from the University of Bridgeport with a
bachelor of science in business with a major in accounting in 1972. He began his
career in 1972 with Coopers & Lybrand before taking a position with IBM in
1974. In 1977 he began his employment as the director for budget and financial
analysis for General Mills before becoming its Controller for the Fashion
Accessories Group. Between 1980 to 1983 Mr. Rotmil was Director of Corporate
Accounting for Tetley Tea. After a period of self-employment, he took an
executive position with Executive Information Systems from 1987-1990. From 1990
until joining Mixson Corp., Mr. Rotmil was the Chief Financial and then the
Chief Executive Officer of Cobotyx Corp.
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BETH MCCAGH--Beth McCagh has been with Mixson Corp. since February of 1999,
when she took the position of Accounting Manager and later the office of
Secretary of the Company. Prior to joining Mixson Corp., she was Accounting
Manager for Fly Horse, Inc. from June of 1991 until June 1996, and Accounting
Manager for Enzone, Inc. from July 1996 to January 1999. Ms. McCagh graduated
from Florida Atlantic University in 1982 with a Bachelors of Science in
Accounting.
MARC BERCOON--Marc Bercoon became a director of Mixson Corp. in November of
1998. From November 1995 until March of 1997, Mr. Bercoon was an executive
officer of The Torrance Co., a real estate management company, after which we
worked as a vice president of Trump Group, an investment company until
January 1998. From January 1998 until the present he acts as a principal for MEB
Capital, dealing primarily in investment transactions. He served as vice
president of Mixson Corp. from November of 1998 until August of 1999. He is
currently the managing member of Holster, LLC, a Delaware limited liability
company, as well as an Executive Vice President and Chief Operating Officer of
Vision Building Solution, L.L.C., a position he has held since September 1999.
GERALD F. O'CONNELL--Gerald O'Connell has served as a director of Mixson
Corp. since 1993. He is currently employed by Atlas Commerce, an Internet
software company which he manages. Prior to that, he worked for SCC/IMANY, a
computer software company he managed in 1998 and 1999. From 1995 until his
employment with SCC/IMANY, Mr. O'Connell managed Adage/SCT Manufacturing,
another computer software company.
STEVE BEDOWITZ--Steve Bedowitz founded and served as President of
AMRE, Inc., a New York Stock Exchange company engaged in the home remodeling
business, from 1981 until his retirement in 1991. Mr. Bedowitz founded Speed
Release--Texas in 1996. He has served as Chairman of the Board, Chief Executive
Officer and Secretary of Speed Release--Texas since 1996 and became President in
1997. For at least the last five years, Mr. Bedowitz's principal occupation has
been managing his private investments.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following table provides compensation information
for our named executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------ ALL OTHER
YEAR SALARY BONUS COMPENSATION
-------- -------- -------- ------------
Joseph A. Rotmil...................... 2000 $150,000 $ 6,227 $ 27,000
1999 $150,000 -- $ 27,000
1998 $131,108 $14,107 $ 27,000
Steve Bedowitz........................ 2000 $ 96,000 $ -- $176,000(1)
1999 -- -- --
1998 -- -- --
- ------------------------
(1) Represents the value of the Company's common stock issued to Mr. Bedowitz in
lieu of accrued and unpaid compensation
In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted for the named executive
officers whenever the aggregate amount of these perquisites and other personal
benefits was less than the lesser of $50,000 or 10% of the total of annual
salary and bonuses for each of the named executive officers each of 1998, 1999,
and 2000.
STOCK OPTIONS GRANTED. Upon the completion of our merger with Mixson
Corporation, we granted fully vested options to purchase 1,500,000 shares of our
common stock to Mr. Joe Rotmil (1,000,000 shares) and to Mr. Steve Bedowitz
(500,000 shares). Provided that the Minimum Offering is achieved, the
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exercise price for these options shall be $2.50 per share. Otherwise the
exercise price will be as determined by our Board of Directors.
BOARD OF DIRECTORS
CLASSIFIED BOARD. Our Certificate of Incorporation provides that our board
will be divided into three classes: Class A, whose term will expire at the
annual meeting of the shareholders to be held in 2001, Class B, whose term will
expire at the annual meeting of the shareholders to be held in 2002, and
Class C, whose term will expire at the annual meeting of the shareholders to be
held in 2003. The successors to directors whose term will expire will be elected
to serve from the time of election and qualification until the third annual
meeting following election or until that director's earlier resignation or
removal. This classification of the board of directors may have the effect of
delaying or preventing changes of control or management. Currently Mr. Bercoon
is a Class A Director, Mr. O'Connell is a Class B Director, and Messrs. Rotmil
and Bedowitz are Class C Directors.
COMPENSATION OF DIRECTORS
Our directors do not currently receive directors' fees. Directors are
reimbursed for their reasonable out-of-pocket travel expenditures. Directors are
eligible to participate in our 2000 Omnibus Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board of Directors fixes the compensation we pay to our executive
officers. We have no compensation committee interlocks or insider participation.
EMPLOYMENT AGREEMENT
On April 18, 2000, we entered into an Employment Agreement with Steve
Bedowitz to serve as our President. Under the agreement, Mr. Bedowitz received
an annual base salary of $100,000 for 2000, which was to be raised to $115,000
and $130,000 for 2001 and 2002, respectively. He was also entitled to an annual
bonus to be payable, if at all, in such amounts as the Board of Directors shall
establish in its sole discretion. This employment agreement was terminated as a
condition to our merger with Mixson. While we currently have no employment
agreements in place with any of our employees or officers, the board of
directors of Mixson Corp., prior to the merger with us, authorized the terms of
an employment agreement with Mr. Rotmil which, as of the date hereof, has yet to
be executed. The material terms of employment would include, but not be limited
to: a three year term of employment; an annual salary of $195,000; no less than
two year's salary in severance benefits in the event Mr. Rotmil is terminated
without cause or there is a material change in his responsibilities or title
without his consent; the issuance of 500,000 options upon achieving the Minimum
Offering, which will be priced at $2.50 per share and will vest in equal
increments of 166,667 upon each anniversary of their granting; as well as annual
cash and equity bonuses to be determined by our Board of Directors.
2000 OMNIBUS SECURITIES PLAN
Effective , we adopted a 2000 Omnibus Securities Plan that
permits us to issue up to 1,100,000 options to purchase our common stock to key
employees, officers, directors, and consultants of us and our affiliates at an
exercise price equal to no less than the fair market value of our common stock
as of the date of grant. This plan will be administered by our Board or a Stock
Plan Committee appointed by the Board.
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CERTAIN TRANSACTIONS WITH MANAGEMENT
We have adopted a policy requiring that any material transactions between us
and others affiliated with our officers, directors or principal stockholders be
on terms no less favorable to us than reasonably could have been obtained in
arm's-length transactions with independent third parties.
On January 1, 1998, prior to our merger with Mixson Corp., Mr. Bedowitz
forgave $925,000 of the total amount he had advanced to us as of that date,
which is reflected as a capital contribution in the financial statements which
are included with this prospectus. On November 5, 1999, Mr. Bedowitz received
5,400,000 shares of our common stock in exchange for the cancellation of an
additional $900,000 of indebtedness we owed to him. In December, 2000,
Mr. Bedowitz, who was at the time our president and principal stockholder,
converted into 1,035,999 shares of our common stock at a price of $1.50 per
share $1,553,998 due to Mr. Bedowitz for loans made to us from the inception of
Speed Release--Texas, which bore interest at the rate of 10%. These shares were,
along with all other shares of our common stock, subject to a 1-for-10 reverse
stock split effective as of January 5, 2001. Under the terms of the agreement
which effected the Mixson/PPCT Acquisition, the parties acknowledged that
Mr. Bedowitz would advance up to $150,000 for operations and an additional
$150,000 for the completion of this prospectus and accompanying registration
statement, and that we would reimburse him for such advances in an amount not to
exceed $300,000 provided the Minimum Offering is achieved. As of the date of
this prospectus, Mr. Bedowitz has advanced $148,000 to us. The indebtedness we
owe to Mr. Bedowitz accrues interest at the rate of 10% per year.
Gerald O'Connell has made a total of three loans to PPCT in an aggregate
principal amount of $162,500. PPCT executed a promissory on April 30, 1999 in
the original principal amount of $75,000 at an annual interest rate of 14% per
year and maturing on April 30, 2001. PPCT executed another promissory note on
June 6, 2000 in the original principal amount of $50,000 at an annual interest
rate of 18%, and a third promissory note on August 21, 2000 in the original
principal amount of $37,500 at an annual interest rate of 18%. Both of these
promissory notes mature on June 30, 2001. As of February 28, 2001, total
interest accrued and unpaid on this indebtedness was $26,758.53.
Marc Bercoon loaned $37,500 to PPCT in exchange for a promissory note in the
original principal amount of $37,500, with an annual interest rate of 18%, and a
maturity date of July 31, 2001. Mr. Bercoon is the managing member of Holster,
LLC, which loaned PPCT $75,000 in exchange for a promissory note executed on
April 30, 2000 in the principal amount of $75,000, at an annual interest rate of
14%. This note matures on April 30, 2001. As of February 28, 2001, the total
aggregate principal and interest due and owing under the Marc Bercoon note was
$41,156.25 and total principal and interest under the Holster note was
$82,001.53.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of February 28, 2000, and as adjusted to
reflect the sale of the minimum and maximum number of shares of common stock
offered by this prospectus and the distribution by TTI to its stockholders, by:
- each of our named executive officers and directors;
- all of our executive officers and directors as a group; and
- each person, or group of affiliated persons, known to us to own
beneficially more than 5% of our common stock.
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Unless otherwise noted in the footnotes to the table and subject to
community property laws where applicable, the following individuals have sole
voting and investment control with respect to the shares beneficially owned by
them. The address of each executive officer and director is c/o Mixson
Corporation, 7635 W. 28th Avenue, Hialeah, Florida, 33016.
PERCENTAGE OF OWNERSHIP(2)
------------------------------------------
AFTER THE AFTER THE
NUMBER OF SHARES BEFORE THE MINIMUM MAXIMUM
BENEFICIALLY OFFERING AND OFFERING AND OFFERING AND
PERSON OR GROUP OWNED(1) DISTRIBUTION DISTRIBUTION DISTRIBUTION
- --------------- ---------------- ------------ ------------ ------------
NAMED EXECUTIVE OFFICERS AND DIRECTORS:
Joseph Rotmil.............................. 7,734,464(3) 64.3% 36.2% 31.4%
Gerald O'Connell........................... 3,724,677 33.8% 30.9% 26.5%
Marc Bercoon............................... 2,483,118(4) 22.5% 20.6% 17.7%
Steve Bedowitz............................. 1,413,600(5) 12.3% 11.3% 9.7%
All named executive officers and
directors as a group (4 persons) 12,346,072(6) 98.5% 91.2% 79.5%
BENEFICIAL OWNERS OF 5% OR MORE OF OUR
OUTSTANDING COMMON STOCK:
Holster, LLC 2,483,118 22.5% 20.6% 17.7%
- ------------------------
(1) Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial
ownership of any securities as to which such person, directly or indirectly,
through any contract, arrangement, undertaking, relationship or otherwise
has or shares voting power and/or investment power as to which such person
has the right to acquire such voting and/or investment power within
60 days. Percentage of beneficial ownership as to any person as of a
particular date is calculated by dividing the number of shares beneficially
owned by such person by the sum of the number of shares outstanding as of
such date and the number of unissued shares as to which such person has the
right to acquire voting and/or investment control within 60 days. The number
of shares shown includes outstanding Shares owned as of February 28, 2001 by
the person indicated and Shares underlying warrants and/or options owned by
such person on February 28, 2001 that were exercisable within 60 days of
that date.
(2) We have calculated the percentages of shares beneficially owned based on
11,036,080 shares of common stock outstanding before this offering,
12,036,080 shares of common stock outstanding after the Minimum Offering and
14,036,080 shares of common stock outstanding after the Maximum Offering. An
asterisk indicates ownership of less than one percent.
(3) Includes options to purchase 1,000,000 shares of our common stock as well as
526,669 shares of common stock held of record by Mr. O'Connell and 2,483,118
shares held of record by Holster, LLC which Mr. Rotmil votes pursuant to
that certain Shareholders Agreement dated as of October 30, 1998, as amended
and supplemented by that certain Voting Agreement, Irrevocable Proxy and
Amendment to Shareholders Agreement dated as of December 21, 2000.
Mr. Rotmil's ability to vote these shares will terminate upon the sale of
any shares of our common stock pursuant to this offering. Mr. Rotmil's
ability to vote 2,061,783 of the shares held of record by Holster, LLC is
limited in that they cannot be voted by Mr. Rotmil on certain matters
including, but not limited to, amending our certificate of incorporation or
by-laws, approving any merger, recapitalization, liquidation, or sale of all
or substantially all our assets, or declaring any distributions to any
shareholder. Does not include 500,000 shares which the Company is authorized
to grant to Mr. Rotmil in connection with his employment agreement, and
which would be contingent upon (among other things) achieving the Minimum
Offering.
(4) Includes 2,483,118 shares of our common stock held of record by Holster,
LLC, a Delaware limited liability company of which Mr. Bercoon is the sole
managing member.
33
(5) Includes options to purchase 500,000 shares of our common stock.
(6) Includes options to purchase 1,500,000 shares of our common stock.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 25,000,000 shares of common stock,
par value $.001 per share, of which 11,036,080 shares are currently outstanding,
and 10,000,000 shares of preferred stock, par value $.01 per share, of which
there are no shares currently outstanding. If the Minimum Offering is completed,
we will have 12,036,080 shares of common stock, and no shares of preferred
stock, issued and outstanding. If the Maximum Offering is completed, we will
have 14,036,080 shares of common stock, and no shares of preferred stock, issued
and outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters voted on by the stockholders, including the election of directors.
Except as otherwise required by law or provided in any resolution adopted by the
Board of Directors with respect to any series of preferred stock, the holders of
common stock exclusively possess all voting power. The holders of common stock
are entitled to such dividends as may be declared from time to time by the Board
of Directors from funds available for distribution to such holders. No holder of
common stock has any preemptive right to subscribe to any kind or class of our
securities or any cumulative voting rights. The shares of common stock to be
issued and sold in this offering will be duly authorized, validly issued, fully
paid and nonassessable.
PREFERRED STOCK
We are authorized to issue 10,000,000 shares of preferred stock. The Board
of Directors has the authority to issue the preferred stock in one or more
series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated preferred stock and to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of
Mixson Corporation because the Board of Directors could issue preferred stock
with voting rights that would allow preferred holders to veto a change of
control transaction, or with economic rights that would require substantial
payments in the event of a change of control transaction. In addition, preferred
holders could receive rights that may adversely affect the voting and other
rights of the holders of common stock. At present, we have no plans to issue any
shares of preferred stock.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CERTAIN PROVISIONS OF OUR
CERTIFICATE OF INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law ("DGCL"). In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder unless:
- the business combination or the transaction by which such stockholder
became an "interested stockholder" was approved by the Board of Directors
prior to such time;
- upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) certain employee stock ownership
plans); or
34
- on or subsequent to such time the "business combination" is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested
stockholder."
A "business combination" includes mergers, asset sales and other
transactions resulting in financial benefit to a stockholder. In general, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years did own) 15% or more of a corporation's
outstanding voting stock. The statute could prohibit or delay mergers or other
takeover or attempts to change who controls us and, accordingly, may discourage
the attempts of others to acquire us.
In addition, certain provisions of our Certificate of Incorporation and
Bylaws summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent an attempt to obtain
control of us by means of a proxy contest, tender offer, merger or other
transaction that a stockholder might consider in his or her best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
CLASSIFIED BOARD OF DIRECTORS. Our Certificate of Incorporation provides
for the Board of Directors to be divided into three classes of directors serving
three year staggered terms. As a result, approximately one-third of the Board of
Directors will be elected each year. Moreover, under the DGCL, in the case of a
corporation having a classified board, stockholders may remove a director only
for cause. This provision, when coupled with the provision of the Bylaws
authorizing the Board of Directors to fill vacant directorships, may preclude a
stockholder from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling such vacancies with his,
her or its own nominees.
SPECIAL MEETINGS OF STOCKHOLDERS. Our Bylaws provide that special meetings
of our stockholders may be called only by the Board of Directors, or the
Executive Committee of the Board of Directors, if any, or the Chief Executive
Officer. This provision will make it more difficult for stockholders to take
actions opposed by the Board of Directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT. Our Certificate of Incorporation
provides that no action required or permitted to be taken at any annual or
special meeting of our stockholders may be taken without a meeting, and the
power of our stockholders to consent in writing, without a meeting, to the
taking of any action is specifically denied. This provision requires that all
stockholder action take place at a meeting of stockholders.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of the stockholders, or to nominate candidates for
election as directors at an annual or special meeting of the stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered or mailed and received at our principal executive offices no
later than 30 days prior to the meeting. In the event, however, that less than
40 days notice or prior public disclosure of the date of the meeting is given
and made to the stockholders, notice by the stockholder must be received no
later than the close of business on the tenth day following the earlier of the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made in order to be timely. The Bylaws specify certain
requirements for a stockholder's notice to be in proper form. These provisions
may preclude some stockholders from bringing matters before the stockholders at
an annual or special meeting or from making nominations for directors at an
annual or special meeting.
WE BELIEVE THE FOREGOING PROVISIONS ARE NECESSARY TO ATTRACT AND RETAIN
QUALIFIED PERSONS AS DIRECTORS AND OFFICERS.
PLAN OF DISTRIBUTION OF OFFERED SHARES
The Shares offered in the offering will be sold exclusively by our officers
and directors. We will not pay any sales commissions or other fees to any of our
officers or directors who sell any Shares, or to any other
35
person in connection with the offering. Officers and directors will be
reimbursed for actual expenses incurred by them in connection with the offering.
No finder, broker, salesman or securities dealer will be utilized in making this
offering.
The offering period will terminate 180 days after the date of this
prospectus or when we sell all of the shares in the offering, whichever is
earlier, provided that we may extend the offering period once for up to 30
additional days. The offering is conditioned upon the sale of a minimum of
1,000,000 shares. All funds received for the purchase of the Shares will be
promptly deposited with Chase Bank of Texas, N.A., as escrow agent. If the
minimum 1,000,000 Shares are not sold prior to the termination of the offering,
all of the funds in escrow will be promptly refunded to the subscribers in full,
with interest and without deduction. Until funds have been released from escrow
and the certificates delivered to the purchasers thereof, the purchasers will be
deemed subscribers only and not stockholders.
Following the sale of at least 1,000,000 Shares, we may close on the sale of
shares and continue offering the balance of the Shares through the end of the
offering period. The escrow agent will confirm that 1,000,000 shares have been
sold and cash or cleared funds received in full payment for the purchase of the
Shares before releasing the funds from escrow.
We will review each subscription and notify each prospective investor of
whether his or her subscription has been accepted or rejected. We may, in our
sole discretion, refuse to accept any subscription tendered in connection with
this offering. Subscription funds received from prospective investors whose
subscriptions we do not accept will be promptly returned to such subscribers,
with interest. In the event the offering is oversubscribed, we will, in our
discretion, allot a lesser number of Shares than are subscribed by any method
that it deems proper. Subscriptions will only be accepted for full Shares, and
no fractional shares will be issued.
Prior to the offering and distribution made hereby, there has been no public
market for our common stock. Accordingly, the initial public offering price has
been determined by us and is not necessarily related to our asset value, net
worth, or other criteria of value. The factors considered in determining the
offering price included an evaluation by management of the history of and
prospects for the industry in which we compete and our prospects for earnings.
Factors such as our financial results, announcements of developments related to
our business, and the introduction of products and product enhancements by us or
our competitors may have a significant impact on the market price of our
securities.
A regular trading market for our common stock may not develop after this
offering and, if developed, it may not be sustained. The market price for our
securities following this offering may be highly volatile, as has been the case
with the securities of other small capitalization companies. The "penny stock"
regulations adopted by the Securities and Exchange Commission may place
limitations on brokers seeking to trade in our stock and further hinder the
development of a regular trading market in our stock.
We expect to register this offering in only the following states: Arizona,
California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas,
Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina,
Texas, Vermont, Virginia and West Virginia. These limited state registrations
may make it difficult or impossible for you to resell your shares of our common
stock in certain states in which this offering is not registered.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering and this distribution, there has been no public
market for our common stock. Because there is no brokerage firm that will act as
an underwriter for our shares, we cannot be sure that any firm or firms will act
as market makers for our shares. Therefore, we cannot provide any assurances
that a significant public market for the common stock will develop or be
sustained after this offering and this distribution. Future sales of substantial
amounts of our common stock in the public market, or the
36
possibility of such sales occurring, could adversely affect prevailing market
prices for our common stock or our future ability to raise capital through an
offering of equity securities.
Upon completion of this offering, we will have outstanding 14,036,080 shares
of common stock if the Maximum Offering is sold and 12,036,080 shares of common
stock if the Minimum Offering is sold. Of these shares, the shares to be sold in
this offering will be freely tradable in the public market without restriction
under the Securities Act, except for any of such shares that are purchased by
our "affiliates," as that term is defined in Rule 144 under the Securities Act.
In addition, the approximately 100,008 shares covered by the distribution will
be freely tradable, except for any such shares distributed to our affiliates,
although prior to the distribution these were restricted shares. Thus a total of
approximately 3,100,008 and 1,100,008 shares of our common stock will be freely
tradable if the Maximum Offering or Minimum Offering, respectively, is sold.
The remaining 10,936,072 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Generally, restricted
securities may be sold in the public market only if they are registered or if
the requirements of Rule 144, as summarized below, are complied with.
In general, under Rule 144, as in effect at the closing of this offering,
beginning 90 days after the date of this prospectus, a person (or persons whose
shares of common stock are aggregated) who has beneficially owned restricted
securities for at least one year would be entitled to sell, within any three-
month period, a number of shares that does not exceed the greater of (1) 1% of
the then-outstanding shares of common stock or (2) the average weekly trading
volume of the common stock during the four calendar weeks preceding the filing
of a Form 144 with respect to such sale. Sales under Rule 144 are also subject
to certain manner of sale and notice requirements and to the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been our affiliate at any time during the 90 days preceding a
sale and who has beneficially owned the shares proposed to be sold for at least
two years is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
LEGAL MATTERS
The validity of the shares of common stock offered in this offering will be
passed upon for us by Baker & McKenzie, Dallas, Texas.
EXPERTS
The financial statements of Speed Release Lock Company as of December 31,
1999 and 1998 and for the years ended December 31, 1999, 1998, and 1997, and for
the period from inception (August 29, 1996) through December 31, 1999, appearing
in this prospectus and registration statement have been audited by Davis,
Kinard & Co., P.C., independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The financial statements of Mixson Corp. as of April 30, 2000 and 1999, and
for the years ended April 30, 2000, 1999 and 1998, and the financial statements
of PPCT Products, LLC as of April 30, 2000 and December 31, 1999, and for the
four months ended April 30, 2000, and for the period from inception
(January 19, 1999) through December 31, 1999, appearing in this prospectus and
registration statement have been audited by Berkovits, Lago & Company, LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
37
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1. It includes
exhibits and schedules. This prospectus is part of the registration statement.
It does not contain all of the information that is in the registration
statement. The registration statement contains more information about our
company and our common stock. Statements contained in this prospectus concerning
the provisions of documents filed as exhibits to the registration statement are
summaries of these documents. You may read and copy all or any portion of the
registration statement at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room's
operations. The registration statement is also available to you on the SEC's
Internet site (www.sec.gov). We intend to provide our stockholders with annual
reports containing financial statements audited by our independent accountants
and quarterly reports containing unaudited financial statements for the first
three quarters of each fiscal year.
38
INDEX TO PRO FORMA FINANCIAL INFORMATION
PAGE
--------
Report of Independent Public Accountants.................... P-2
Pro Forma Balance Sheet .................................... P-3
At October 31, 2000
Pro Forma Statements of Operations ......................... P-4
For the six months ended October 31, 2000
For the year ended April 30, 2000
Assumptions and Notes to Pro Forma Financial Information.... P-6
P-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
MIXSON CORPORATION
We have compiled the accompanying pro forma balance sheet as of October 31,
2000 of MIXSON CORPORATION and the accompanying pro forma statements of
operations for the six months ended October 31, 2000 and for the year ended
April 30, 2000.
The objective of pro forma financial information is to show what the
significant effects on the historical information might have been had a
transaction or event occurred at an earlier date. However, the pro forma
financial information is not necessarily indicative of the effects on financial
position that would have been attained had the transaction or events actually
occurred earlier.
The accompanying presentation and this report were prepared for the
inclusion in a securities registration statement for the consideration of
prospective investors and should not be used for any other purpose.
A compilation is limited to presenting in the form of pro forma financial
statements, information that is the representation of management and does not
include evaluation of the support for the assumptions underlying the pro forma
transaction. We have not audited or reviewed the accompanying pro forma balance
sheet or pro forma statements of operations, and, accordingly do not express an
opinion or any other form of assurance on them.
DAVIS, KINARD & CO., P.C.
Abilene, Texas,
February 22, 2001
P-2
MIXSON CORPORATION
PRO FORMA BALANCE SHEET
OCTOBER 31, 2000
ELIMINATIONS
SPEED AND
RELEASE PPCT PRO FORMA
LOCK MIXSON PRODUCTS, ADJUSTMENTS
COMPANY CORP. LLC DR (CR) PRO FORMA
----------- --------- --------- ------------ -----------
ASSETS
Current assets
Cash and cash equivalent.......................... $ 3,914 $ 59,132 $ 4,288 $ -- $ 67,334
Accounts receivable............................... -- 51,472 18,853 -- 70,325
Receivables, other................................ -- 758 1,000 -- 1,758
Note receivable, affiliated company............... -- 50,000 124,880 (124,880)(a) 50,000
Inventories....................................... 8,566 451,080 6,948 -- 466,594
Prepaid assets.................................... -- 15,856 1,930 -- 17,786
----------- --------- --------- ----------- -----------
Total current assets............................ 12,480 628,298 157,899 (124,880) 673,797
Property, plant and equipment, at cost, net of
accumulated depreciation.......................... 24,028 43,764 44,281 -- 112,073
Other assets
Intangible assets, net of amortization............ -- -- 139,340 212,355 (g) 351,695
Patent, net of amortization....................... 55,502 -- -- -- 55,502
Due from stockholders............................. -- 22,500 -- -- 22,500
Deposits.......................................... 3,100 18,859 -- -- 21,959
----------- --------- --------- ----------- -----------
Total other assets.............................. 58,602 41,359 139,340 212,355 451,656
----------- --------- --------- ----------- -----------
Total assets........................................ $ 95,110 $ 713,421 $ 341,520 $ 87,475 $ 1,237,526
=========== ========= ========= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses............. $ 232,291 $ 249,568 $ 63,361 $ 56,291 (b) $ --
176,000 (c) 312,929
Accrued interest payable.......................... 321,560 -- -- 315,898 (d) 5,662
Due to affiliated company......................... -- 124,880 -- 124,880 (a) --
Note payable...................................... 300,000 268,619 250,000 -- 818,619
Note payable--related parties..................... 1,263,221 -- 325,000 1,263,221 (e) 325,000
Obligations under capital lease................... 1,803 -- -- -- 1,803
----------- --------- --------- ----------- -----------
Total current liabilities....................... 2,118,875 643,067 638,361 1,936,290 1,464,013
Shareholders' equity
Common stock, $0.001 par value; 50,000,000 shares
authorized; 11,036,080 shares issued and
outstanding..................................... 11,036 -- -- -- 11,036
Common stock, $2.50 par value; 4,000 shares
authorized, issued and outstanding.............. -- 10,000 -- 10,000 (f) --
Paid in capital in excess of par value............ 1,907,661 933,452 -- (946,946)(f)
(212,355)(g) 4,000,414
Accumulated deficit............................... (3,942,462) (447,023) -- (448,389)(f) --
296,841 (f) (4,237,937)
Member's capital (deficiency)..................... -- -- (296,841) (296,841)(f) --
Less: Treasury stock 3,800 shares of common stock
at cost......................................... -- (426,075) -- (426,075)(f) --
----------- --------- --------- ----------- -----------
Total shareholders' equity...................... (2,023,765) 70,354 (296,841) (2,023,765) (226,487)
----------- --------- --------- ----------- -----------
Total liabilities and shareholders' equity.......... $ 95,110 $ 713,421 $ 341,520 $ (87,475) $ 1,237,526
=========== ========= ========= =========== ===========
See accountant's compilation report and the related assumptions and notes
to the pro forma balance sheet and pro forma statements of operations.
P-3
MIXSON CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000
ELIMINATIONS
SPEED AND
RELEASE PPCT PRO FORMA
LOCK MIXSON PRODUCTS, ADJUSTMENTS
COMPANY CORP. LLC DR (CR) PRO FORMA
--------- -------- --------- ------------ ---------
NET SALES............................. $ 18,989 $534,954 $127,085 $ -- $ 681,028
COST OF SALES......................... 21,746 338,826 44,191 -- 404,763
--------- -------- -------- --------- ---------
GROSS PROFIT ON SALES................. (2,757) 196,128 82,894 -- 276,265
GENERAL AND ADMINISTRATIVE EXPENSE.... 318,939 271,134 109,758 (106,743)(1) 593,088
--------- -------- -------- --------- ---------
OPERATING LOSS........................ (321,696) (75,006) (26,864) (106,743) (316,823)
OTHER INCOME (EXPENSE)
Interest income..................... -- -- -- -- --
Loss on securities.................. (83,697) -- -- -- (83,697)
Loss on sale of assets.............. (13,769) -- -- -- (13,769)
Interest expense.................... (64,222) (13,204) (33,166) (64,159)(2) (46,433)
Other............................... -- 9,000 -- 7,865 (3) 1,135
--------- -------- -------- --------- ---------
Total other income (expense)...... (161,688) (4,204) (33,166) (56,294) (142,764)
--------- -------- -------- --------- ---------
LOSS BEFORE INCOME TAX................ (483,384) (79,210) (60,030) (163,037) (459,587)
--------- -------- -------- --------- ---------
Income tax expense.................. -- -- -- -- --
--------- -------- -------- --------- ---------
NET LOSS.............................. $(483,384) $(79,210) $(60,030) $(163,037) $(459,587)
========= ======== ======== ========= =========
NET LOSS PER SHARE.................... $ (.043) $(19.803) $ n/a $ -- $ (.042)
========= ======== ======== ========= =========
See accountant's compilation report and assumptions and notes
to the pro forma balance sheet and pro forma statements of operations.
P-4
MIXSON CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2000
ELIMINATIONS
SPEED AND
RELEASE PPCT PRO FORMA
LOCK MIXSON PRODUCTS, ADJUSTMENTS
COMPANY CORP. LLC DR (CR) PRO FORMA
----------- --------- --------- ------------ -----------
NET SALES......................... $ 162,822 $ 990,903 $ 659,752 $ -- $ 1,813,477
COST OF SALES..................... 176,727 773,227 237,398 -- 1,187,352
----------- --------- --------- --------- -----------
GROSS PROFIT ON SALES............. (13,905) 217,676 422,354 -- 626,125
GENERAL AND ADMINISTRATIVE
EXPENSE......................... 927,302 361,572 522,251 (100,906)(1) 1,710,219
----------- --------- --------- --------- -----------
OPERATING LOSS.................... (941,207) (143,896) (99,897) (100,906) (1,084,094)
OTHER INCOME (EXPENSE)
Interest income................. -- 3,513 -- -- 3,513
Loss on securities.............. -- -- -- -- --
Loss on sale of assets.......... -- -- -- -- --
Interest expense................ (148,001) (29,664) (85,749) (126,429)(2) (136,985)
Other........................... 527 4,500 (4,944) 15,730 (3) (15,647)
----------- --------- --------- --------- -----------
Total other income
(expense)................... (147,474) (21,651) (90,693) (110,699) (149,119)
----------- --------- --------- --------- -----------
LOSS BEFORE INCOME TAX............ (1,088,681) (165,547) (190,590) (211,605) (1,233,213)
----------- --------- --------- --------- -----------
Income tax expense.............. -- -- -- -- --
----------- --------- --------- --------- -----------
NET LOSS.......................... $(1,088,681) $(165,547) $(190,590) $(211,605) $(1,233,213)
=========== ========= ========= ========= ===========
NET LOSS PER SHARE................ $ (.102) $ (41.387) $ n/a $ -- $ (.115)
=========== ========= ========= ========= ===========
See accountant's compilation report and assumptions and notes
to the pro forma balance sheet and pro forma statements of operations.
P-5
MIXSON CORPORATION
ASSUMPTIONS AND NOTES TO PRO FORMA BALANCE SHEET
AND PRO FORMA STATEMENTS OF OPERATIONS
AS OF OCTOBER 31, 2000 AND THE SIX MONTHS ENDED
OCTOBER 31, 2000 AND THE YEAR ENDED APRIL 30, 2000
NOTE 1--PRESENTATION
The accompanying pro forma balance sheet and pro forma statements of
operations were prepared from historical financial data of the following
respective companies:
- Speed Release Lock Company (the Company)
- Mixson Corp. (Mixson)
- PPCT Products, LLC (PPCT)
The accounting policies and other disclosures required by generally accepted
accounting principles are not presented; however, there has been no significant
change in accounting policies for any of the companies from those previously
reported.
NOTE 2--SHAREHOLDER'S EQUITY
On January 5, 2001, the Company amended its Certificate of Incorporation
which increased its authorized common stock from 25,000,000 shares to 50,000,000
shares and effected a one-for-ten reverse common stock split. In the amendment,
the par value of the common stock remained $.001 per share. All references to
per share amounts in the pro forma financial statements reflect the reverse
stock split.
NOTE 3--BUSINESS COMBINATION
The Company merged its operations with Mixson and PPCT on January 31, 2001,
with the Company being the surviving corporate entity. The shareholders of
Mixson and members of PPCT exchange all of their shares and membership interests
for consideration amounting to 90% of the outstanding shares of the Company. Pro
forma adjustments restate the pro forma balance sheet and statements of
operations to reflect the merger as if it occurred at the beginning of the first
period presented (May 1, 1999).
NOTE 4--EARNINGS PER SHARE
The pro forma loss per share of common stock outstanding (EPS) is computed
based on the weighted average number of shares outstanding as retroactively
restated to reflect the reverse stock split (Note 2)
P-6
MIXSON CORPORATION
ASSUMPTIONS AND NOTES TO PRO FORMA BALANCE SHEET
AND PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
AS OF OCTOBER 31, 2000 AND THE SIX MONTHS ENDED
OCTOBER 31, 2000 AND THE YEAR ENDED APRIL 30, 2000
NOTE 4--EARNINGS PER SHARE (CONTINUED)
and the shares issued with respect to the merger (Note 3). Pro forma EPS and
restated weighted average shares for the six months ended October 31, 2000, and
for the year ended April 30, 2000 are, as follows:
SIX MONTHS ENDED OCTOBER 31, 2000
---------------------------------------
WEIGHTED
NET AVERAGE
LOSS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Pro forma net loss........................................ $(459,587)
---------
BASIC EPS
Loss available to common stockholders................... $(459,587) 11,036,080 $(.042)
======
EFFECT OF DILUTIVE SECURITIES............................. -- --
--------- ----------
DILUTED EPS
Loss available to common shareholders................... $(459,587) 11,036,080 $(.042)
========= ========== ======
YEAR ENDED APRIL 30, 2000
---------------------------------------
WEIGHTED
NET AVERAGE
LOSS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Pro forma net loss....................................... $(1,233,213)
-----------
BASIC EPS
Loss available to common stockholders.................. $(1,233,213) 10,715,205 $(.115)
======
EFFECT OF DILUTIVE SECURITIES............................ -- --
----------- ----------
DILUTED EPS
Loss available to common shareholders.................. $(1,233,213) 10,715,205 $(.115)
=========== ========== ======
NOTE 5--GOODWILL
Shares issued to the shareholders of Mixson and the members of PPCT resulted
in a change of control of the Company. The combination was deemed a reverse
acquisition, and as a result, the shareholders of Mixson and the members of PPCT
assumed liabilities in excess of the fair value of the assets of the Company.
The difference, adjusted to reflect 100% ownership, has been recorded as
goodwill (net of related amortization) in the pro forma balance sheet. Goodwill
has been amortized in the pro forma statements of operations over fifteen years
as if the transaction occurred on May 1, 1999.
P-7
MIXSON CORPORATION
ASSUMPTIONS AND NOTES TO PRO FORMA BALANCE SHEET
AND PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
AS OF OCTOBER 31, 2000 AND THE SIX MONTHS ENDED
OCTOBER 31, 2000 AND THE YEAR ENDED APRIL 30, 2000
NOTE 6--ELIMINATIONS AND PRO FORMA ADJUSTMENTS
By agreement, certain liabilities will not carry forward to the combined
companies. Eliminations and pro forma adjustments necessary to reflect the
agreement and combine the companies, as reflected on the accompanying pro forma
balance sheet and pro forma statements of operations, are as follows:
PRO FORMA BALANCE SHEET
(a) To eliminate intercompany receivables and payables.
(b) To remove accounts payable and accrued expenses not payable by the combined
companies by agreement.
(c) To remove accrued compensation not payable by the combined companies by
agreement.
(d) To remove accrued interest payable not payable by the combined companies by
agreement.
(e) To remove note payable to shareholder not payable by the combined companies
by agreement.
(f) To reflect stock and other equity adjustments.
(g) To record goodwill of $235,950 resulting from combination of companies, net
related amortization of $23,595.
PRO FORMA STATEMENTS OF OPERATIONS
(1) To remove accrued compensation and other expenses not payable by the
combined companies by agreement.
(2) To remove interest expense not payable by the combined companies by
agreement.
(3) To record amortization of goodwill.
NOTE 7--FISCAL YEAR INFORMATION
The pro forma information for the Company has been modified to conform to
the fiscal year end of Mixson (April 30). The Company's net loss for the four
months ended April 30, 2000 amounted to $349,978. The Company's net loss for the
eight months ended December 31, 1999 amounted to $631,371.
P-8
INDEX TO FINANCIAL STATEMENTS
PAGE
--------
SPEED RELEASE LOCK COMPANY
Report of Independent Public Accountants.................... F-3
Balance Sheets.............................................. F-4
At December 31, 1999 and 1998
Statements of Operations.................................... F-5
For the years ended December 31, 1999, 1998 and 1997
For the period from Inception (August 29, 1996) through
December 31, 1999
Statements of Comprehensive Income.......................... F-6
For the years ended December 31, 1999, 1998 and 1997
For the period from Inception (August 29, 1996) through
December 31, 1999
Statements of Shareholders' Equity.......................... F-7
For the years ended December 31, 1999, 1998, and 1997
For the period from Inception (August 29, 1996) through
December 31, 1999
Statements of Cash Flows.................................... F-8
For the years ended December 31, 1999, 1998, and 1997
For the period from Inception (August 29, 1996) through
December 31, 1999
Notes to Financial Statements............................... F-9
Accountant's Compilation Report............................. F-19
Balance Sheet (Unaudited)................................... F-20
At October 31, 2000
Statements of Operations (Unaudited)........................ F-21
For the ten months ended October 31, 2000
For the period from Inception (August 29, 1996) through
October 31, 2000
Statements of Shareholders' Equity (Unaudited).............. F-22
For the ten months ended October 31, 2000
For the period from Inception (August 29, 1996) through
October 31, 2000
Statements of Cash Flows (Unaudited)........................ F-23
For the ten months ended October 31, 2000
For the period from Inception (August 29, 1996) through
October 31, 2000
Notes to Financial Statements (Unaudited)................... F-24
MIXSON CORP.
Independent Auditors' Report................................ F-25
Balance Sheets.............................................. F-26
At April 30, 2000 and 1999
Statements of Operations.................................... F-27
For the years ended April 30, 2000, 1999 and 1998
Statements of Stockholders' Equity.......................... F-28
For the years ended April 30, 2000, 1999 and 1998
Statements of Cash Flows.................................... F-29
For the years ended April 30, 2000, 1999 and 1998
Notes to Financial Statements............................... F-30
Balance Sheets (Unaudited).................................. F-35
At October 31, 2000 and 1999
Statements of Operations (Unaudited)........................ F-36
For the three months and six months ended October 31, 2000
and 1999
Statements of Cash Flows (Unaudited)........................ F-37
For the three months and six months ended October 31, 2000
and 1999
F-1
PAGE
--------
Statements of Stockholders' Equity (Unaudited).............. F-38
For the three months and six months ended October 31, 2000
and 1999
PPCT PRODUCTS LLC
Independent Auditors' Report................................ F-39
Balance Sheets.............................................. F-40
At April 30, 2000 and December 31, 1999
Statements of Operations.................................... F-41
For the four months ended April 30, 2000
For the period from Inception (January 19, 1999) through
December 31, 1999
Statements of Changes in Members' Deficit................... F-42
For the four months ended April 30, 2000
For the period from Inception (January 19, 1999) through
December 31, 1999
Statements of Cash Flows.................................... F-43
For the four months ended April 30, 2000
For the period from Inception (January 19, 1999) through
December 31, 1999
Notes to Financial Statements............................... F-44
Balance Sheets (Unaudited).................................. F-47
At October 31, 2000 and 1999
Statements of Operations (Unaudited)........................ F-48
For the three months and six months ended October 31, 2000
Statements of Cash Flows (Unaudited)........................ F-49
For the three months and six months ended October 31, 2000
Statements of Changes in Members' Capital (Deficiency)
(Unaudited)............................................... F-50
For the three months and six months ended October 31, 2000
F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
SPEED RELEASE LOCK COMPANY
A Development Stage Company
We have audited the accompanying balance sheets of SPEED RELEASE LOCK COMPANY, a
development stage company, as of December 31, 1999 and 1998, and the related
statements of operations, comprehensive income, shareholders' equity and cash
flows for the years ended December 31, 1999, 1998 and 1997, and cumulative from
inception (August 29, 1996) to December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SPEED RELEASE LOCK COMPANY, a
development stage company, at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999, 1998 and
1997, and cumulative from inception (August 29, 1996) to December 31, 1999 in
conformity with generally accepted accounting principles.
DAVIS, KINARD & CO., P.C.
Abilene, Texas
February 28, 2001
F-3
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
ASSETS
Current assets
Cash and cash equivalents................................. $ 1,878 $ 935
Accounts receivable....................................... 5,151 20,599
Inventories............................................... 73,271 231,080
Securities available-for-sale............................. 503,523 --
----------- -----------
Total current assets.................................... 583,823 252,614
Property, plant and equipment
At cost, net of accumulated depreciation and
amortization............................................ 47,563 42,147
Other assets
Patent.................................................... 59,611 64,542
Deposits.................................................. 7,901 19,511
Employee advances......................................... -- 11,693
----------- -----------
Total other assets...................................... 67,512 95,746
----------- -----------
Total assets................................................ $ 698,898 $ 390,507
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 61,666 $ 45,254
Accrued interest payable.................................. 237,200 106,867
Accrued expenses.......................................... 108,755 4,676
Deferred tax liability.................................... 142,741 --
Note payable--shareholder................................. 742,479 1,096,000
Current maturities of obligations under capital lease..... 6,845 9,535
Current maturities of long term debt...................... 310,000 310,000
----------- -----------
Total current liabilities............................... 1,609,686 1,572,332
Long term liabilities
Obligations under capital lease, net of current
maturities.............................................. 1,697 10,093
Long term debt, net of current maturities................. 833 833
----------- -----------
Total long term liabilities............................. 2,530 10,926
Shareholders' equity
Common stock, $0.001 par value; 50,000,000 shares
authorized: shares issued and outstanding--11,036,080 in
1999, 10,396,072 in 1998................................ 11,036 10,396
Paid in capital in excess of par value.................... 1,907,661 924,604
Deficit accumulated during the development stage.......... (3,109,100) (2,127,751)
Net unrealized appreciation on available-for-sale
securities, net of deferred income tax of $142,741...... 277,085 --
----------- -----------
Total shareholders' equity.............................. (913,318) (1,192,751)
----------- -----------
Total liabilities and shareholders' equity.................. $ 698,898 $ 390,507
=========== ===========
The accompanying notes are an integral part of these statements.
F-4
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998, 1997 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 12/31/99
CUMULATIVE
FROM
INCEPTION
8/29/96 TO
1999 1998 1997 12/31/99
--------- --------- ----------- -----------
NET SALES..................................... $ 175,027 $ 217,634 $ 87,192 $ 479,853
COST OF SALES................................. 215,769 203,405 73,139 492,313
--------- --------- ----------- -----------
GROSS PROFIT ON SALES......................... (40,742) 14,229 14,053 (12,460)
GENERAL AND ADMINISTRATIVE EXPENSE............ 787,107 602,841 1,228,244 2,713,650
--------- --------- ----------- -----------
OPERATING LOSS................................ (827,849) (588,612) (1,214,191) (2,726,110)
OTHER INCOME (EXPENSE)
Interest expense............................ (154,027) (111,906) (120,818) (386,751)
Miscellaneous............................... 527 3,159 75 3,761
--------- --------- ----------- -----------
Total other income (expense).............. (153,500) (108,747) (120,743) (382,990)
--------- --------- ----------- -----------
LOSS BEFORE INCOME TAX........................ (981,349) (697,359) (1,334,934) (3,109,100)
--------- --------- ----------- -----------
Income tax expense.......................... -- -- -- --
--------- --------- ----------- -----------
NET LOSS...................................... $(981,349) $(697,359) $(1,334,934) $(3,109,100)
========= ========= =========== ===========
NET LOSS PER SHARE............................ $ (.093) $ (.067) $ (.128) $ (.298)
========= ========= =========== ===========
The accompanying notes are an integral part of these statements.
F-5
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, 1997 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 12/31/99
CUMULATIVE
FROM
INCEPTION
8/29/96 TO
1999 1998 1997 12/31/99
--------- --------- ----------- -----------
NET LOSS...................................... $(981,349) $(697,359) $(1,334,934) $(3,109,100)
OTHER ITEMS OF COMPREHENSIVE INCOME
Change in unrealized appreciation on
securities available-for-sale, before
tax..................................... 134,344 -- -- 134,344
Reclassification adjustment for realized
gains on securities included in net
loss.................................... -- -- -- --
--------- --------- ----------- -----------
Total other items of comprehensive
income................................ 134,344 -- -- 134,344
--------- --------- ----------- -----------
COMPREHENSIVE LOSS BEFORE TAX................. (847,005) (697,359) (1,334,934) (2,974,756)
Income tax benefit related to other items of
comprehensive loss........................ 142,741 -- -- 142,741
--------- --------- ----------- -----------
COMPREHENSIVE LOSS............................ $(704,264) $(697,359) $(1,334,934) $(2,832,015)
========= ========= =========== ===========
The accompanying notes are an integral part of these statements.
F-6
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, 1997 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 12/31/99
DEFICIT
PAID IN ACCUMULATED NET UNREALIZED
COMMON STOCK CAPITAL IN DURING THE APPRECIATION ON TOTAL
--------------------- EXCESS OF DEVELOPMENT AVAILABLE-FOR- SHAREHOLDERS'
SHARES AMOUNT PAR VALUE STAGE SALE SECURITIES EQUITY
---------- -------- ---------- ----------- --------------- -------------
INITIAL CAPITALIZATION OF THE
COMPANY (8/29/96) $0.001
PAR VALUE;................. 10,396,072 $10,396 $ (396) $ -- $ -- $ 10,000
Net loss..................... -- -- -- (95,458) -- (95,458)
---------- ------- ---------- ----------- -------- -----------
BALANCE AT DECEMBER 31,
1996....................... 10,396,072 10,396 (396) (95,458) -- (85,458)
Net loss..................... -- -- -- (1,334,934) -- (1,334,934)
---------- ------- ---------- ----------- -------- -----------
BALANCE AT DECEMBER 31,
1997....................... 10,396,072 10,396 (396) (1,430,392) -- (1,420,392)
Capital contribution......... -- -- 925,000 -- -- 925,000
Net loss..................... -- -- -- (697,359) -- (697,359)
---------- ------- ---------- ----------- -------- -----------
BALANCE AT DECEMBER 31,
1998....................... 10,396,072 10,396 924,604 (2,127,751) -- (1,192,751)
Issuance of common stock..... 100,008 100 83,597 -- -- 83,697
Capital contribution......... 540,000 540 899,460 -- -- 900,000
Net loss..................... -- -- -- (981,349) -- (981,349)
Net changes in unrealized
appreciation on
available-for-sale
securities, net of taxes of
$142,741................... -- -- -- -- 277,085 277,085
---------- ------- ---------- ----------- -------- -----------
BALANCE AT DECEMBER 31,
1999....................... 11,036,080 $11,036 $1,907,661 $(3,109,100) $277,085 $ (913,318)
========== ======= ========== =========== ======== ===========
The accompanying notes are an integral part of these statements.
F-7
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, 1997 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 12/31/99
CUMULATIVE
FROM
INCEPTION
8/29/96 TO
1999 1998 1997 12/31/99
--------- --------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................... $(981,349) $(697,359) $(1,334,934) $(3,109,100)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization........... 26,733 23,876 24,704 75,791
Loss on sale or disposition of assets... 2,921 14,062 -- 16,983
Decrease (increase) in accounts
receivable............................ 15,448 (8,173) (12,426) (5,151)
Decrease (increase) in inventories...... 157,809 21,799 (252,879) (73,271)
Decrease (increase) in other assets..... 7,603 (30,607) (10,241) (97,570)
Increase in accounts payable............ 16,412 1,374 43,880 61,666
Increase in accrued interest payable.... 130,333 82,138 24,729 237,200
Increase in accrued expenses............ 104,079 4,676 (13,524) 108,755
--------- --------- ----------- -----------
Total adjustments..................... 461,338 109,145 (195,757) 324,403
--------- --------- ----------- -----------
Net cash used in operating activities... (520,011) (588,214) (1,530,691) (2,784,697)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment......... (17,089) (536) (51,996) (79,177)
Proceeds from sale of assets................ 2,650 -- -- 2,650
--------- --------- ----------- -----------
Net cash used in investing activities... (14,439) (536) (51,996) (76,527)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholder note.............. 764,844 556,000 1,275,000 2,785,844
Payments to reduce shareholder debt......... (218,365) -- -- (218,365)
Proceeds from the sale of stock............. -- -- -- 10,000
Payments to reduce capital lease
obligation................................ (11,086) (8,753) (5,371) (25,210)
Proceeds from long term debt................ 10,000 40,000 290,000 340,000
Payments to reduce long term debt........... (10,000) (10,000) (9,167) (29,167)
--------- --------- ----------- -----------
Net cash provided by financing
activities............................ 535,393 577,247 1,550,462 2,863,102
--------- --------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 943 (11,503) (32,225) 1,878
Cash and cash equivalents at beginning of
year...................................... 935 12,438 44,663 --
--------- --------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR...... $ 1,878 $ 935 $ 12,438 $ 1,878
========= ========= =========== ===========
Supplemental cash flow information
Interest paid............................... $ 23,694 $ 26,884 $ 77,121 $ 127,699
Note payable transferred to capital......... 900,000 925,000 -- 1,825,000
Stock exchange.............................. 83,697 -- -- 83,697
Equipment acquired by capital lease
obligation................................ -- -- 33,752 33,752
The accompanying notes are an integral part of these statements.
F-8
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows:
NATURE OF OPERATIONS
The Company was organized August 29, 1996, for the purpose of acquiring and
operating plants and facilities for the assembly and distribution of gun locks.
The Company's facility is located in Dallas, Texas.
REORGANIZATION
On March 28, 2000 the Company adopted a plan of reorganization whereby Speed
Release--Texas was merged with and into Speed Release Lock Company, a Delaware
corporation (the Company). Effective with the merger, each share of issued and
outstanding common stock of Speed Release--Texas was converted into and
exchanged for 360 fully paid shares of the Company.
On January 5, 2001, the Company amended its Certificate of Incorporation
which increased its authorized common stock from 25,000,000 shares to 50,000,000
shares and effected a one-for-ten reverse common stock split. In the amendment,
the par value of the common stock remained $.001 per share.
The Company merged its operations with Mixson Corp. and PPCT Products, LLC
on January 31, 2001, with the Company being the surviving corporate entity. The
shareholders of Mixson and members of PPCT exchanged all outstanding shares and
membership interests for consideration amounting to 90% of the outstanding
shares of the Company.
The financial statements presented have been restated for all prior periods
to reflect the current capitalization of the Company.
REVENUE AND COST RECOGNITION
The Company utilizes the accrual method of accounting whereby revenue is
recognized when earned and expenses are recognized when incurred.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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 reported
period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers any short-term investment convertible to cash within
three months or less with little or no change in the principal amount to be a
cash equivalent.
F-9
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories consist of raw materials, components, finished goods and packing
materials. Inventories are valued at the lower of cost or market, determined by
the first-in, first-out method.
ACCOUNTS RECEIVABLE
Bad debts are accounted for by the allowance method. As of December 31, 1999
and 1998, possible bad debt losses are considered immaterial and no allowance
was necessary.
SECURITIES
Securities not classified as held to maturity, including equity securities
with readily determinable fair values, are classified as "available-for-sale"
and recorded at fair value, with unrealized gains and losses excluded from
earnings and reported in other comprehensive income.
Purchases of premiums and discounts are recognized in interest income using
the interest method over the terms of the securities. Declines in the fair value
of available-for-sale securities below their cost that are deemed to be other
than temporary are reflected in earnings as realized losses. Gains and losses on
the sale of securities are recorded on the trade date and are determined using
the specific identification method.
PATENT
The Company has secured a patent for its gun lock design. The cost of
obtaining the patent is being amortized over its estimated useful life of
fifteen years.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are reported at historical cost net of
accumulated depreciation and amortization. Depreciation on property, plant and
equipment is computed using the straight-line method applied with approximate
service lives of three to seven years.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and cash equivalents,
securities available-for-sale, accounts receivable, accounts payable, capital
lease obligations, and notes payable. As of December 31, 1999 and 1998, the
carrying amounts of the instruments approximate their fair value.
NET LOSS PER SHARE
Loss per share of common stock outstanding is computed based on the weighted
average number of shares outstanding during 1999, 1998 and 1997 and cumulative
from inception to December 31,1999, of 15,114, 10,000, 10,000 and 11,533,
respectively.
F-10
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING STANDARDS
In June 1997, SFAS No. 130, REPORTING OF COMPREHENSIVE INCOME, was issued.
This statement requires that comprehensive income be reported in the basic
financial statements. Comprehensive income refers to the change in equity during
a period from transactions and events other than investments by and
distributions to owners. The Company adopted SFAS 130 during the first quarter
of 1998. The Company's only component of comprehensive income is the unrealized
appreciation on securities available-for-sale.
In June 1997, SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION, was issued. This Statement requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. The Company adopted SFAS 131 during the first quarter of
1998. The implementation of this standard did not have any impact on the
financial position or disclosures of the Company or results of its operations.
In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES was issued. Required adoption of the statement was
subsequently deferred by SFAS No. 137 until July 1, 2000. SFAS 133 establishes
accounting and reporting standards for derivative instruments embedded in other
contracts and for hedging activities. The Company adopted the standard on July
1, 2000, and it did not have a significant impact on the financial statements.
NOTE 2: CONTINGENCIES
As shown in the accompanying financial statements, the Company incurred net
losses of $981,349 during the year ended December 31, 1999, and $3,109,100 from
inception (August 29, 1996) to December 31, 1999. As of December 31, 1999, the
Company's current liabilities exceeded its current assets by $1,025,863 and its
total liabilities exceeded its total assets by $913,318. In addition, a
significant portion of the Company's current assets suffered a decline in value
as further described in Note 11. Those factors, as well as the uncertain
conditions that the Company faces regarding the market for its product, create
an uncertainty about the Company's ability to continue as a going concern. The
former majority shareholder of the Company has historically funded the net
operating losses with capital contributions and loans. Note 12 describes the
reorganization of the Company.
Various legal claims also arise from time to time in the normal course of
business which, in the opinion of management, will have no material effect on
the Company's financial statements.
NOTE 3: EARNINGS PER SHARE
Loss per share of common stock outstanding (EPS) is computed based on the
weighted average number of shares outstanding as retroactively restated to
reflect the current capitalization of the Company
F-11
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: EARNINGS PER SHARE (CONTINUED)
(see Note 1). EPS and restated weighted average shares for the years ended
December 31, 1999, 1998, 1997, and cumulative from inception (August 29, 1996)
to December 31, 1999 are as follows:
WEIGHTED
AVERAGE
NET LOSS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Year Ended December 31, 1999
Net loss................................................. $ (981,349)
-----------
BASIC EPS
Loss available to common stockholders.................. (981,349) 10,504,489 $(.093)
=========== ======
EFFECT OF DILUTIVE SECURITIES............................ -- --
----------- -----------
DILUTED EPS
Loss available to common shareholders.................. $ (981,349) $10,504,489 $(.093)
=========== =========== ======
Year Ended December 31, 1998
Net loss................................................. $ (697,359)
-----------
BASIC EPS
Loss available to common stockholders.................. (697,359) 10,396,072 $(.067)
===========
EFFECT OF DILUTIVE SECURITIES............................ -- --
----------- -----------
DILUTED EPS
Loss available to common shareholders.................. $ (697,359) $10,396,072 $(.067)
=========== =========== ======
Year Ended December 31, 1997
Net loss................................................. $(1,334,934)
-----------
BASIC EPS
Loss available to common stockholders.................. (1,334,934) 10,396,072 $(.128)
=========== ======
EFFECT OF DILUTIVE SECURITIES............................ -- --
----------- -----------
DILUTED EPS
Loss available to common shareholders.................. $(1,334,934) $10,396,072 $(.128)
=========== =========== ======
Cumulative from inception
(August 29, 1996) to December 31, 1999
Net loss................................................. $(3,109,100)
-----------
BASIC EPS
Loss available to common stockholders.................. (3,109,100) 10,428,571 $(.298)
=========== ======
EFFECT OF DILUTIVE SECURITIES............................ -- --
----------- -----------
DILUTED EPS
Loss available to common shareholders.................. $(3,109,100) $10,428,571 $(.298)
=========== =========== ======
F-12
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: EARNINGS PER SHARE (CONTINUED)
As illustrated in the above schedule, there were no dilutive securities
outstanding in any financial reporting periods presented.
NOTE 4: INVENTORIES
A summary of the balances of inventories follows:
1999 1998
-------- --------
Raw materials............................................ $ -- $ 31,855
Components............................................... 28,890 141,835
Finished goods........................................... 32,391 35,188
Packing materials........................................ 11,990 22,202
------- --------
Total.................................................. $73,271 $231,080
======= ========
NOTE 5: SECURITIES
The amortized cost and fair value of securities, with gross unrealized gains
and losses at December 31, 1999, follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
Marketable equity securities........................ $83,697 $419,826 $ -- $503,523
------- -------- --------- --------
Total securities available-for-sale................. $83,697 $419,826 $ -- $503,523
======= ======== ========= ========
The securities were acquired pursuant to a stock exchange (see Note 10). For
the year ended December 31, 1999, there were no sales of securities available
for sale.
NOTE 6: PROPERTY, PLANT, AND EQUIPMENT
A summary of the cost and accumulated depreciation of premises and equipment
follows:
1999 1998
-------- --------
Assets under capital lease.............................. $ 21,053 $ 30,337
Machinery and equipment................................. 480 480
Tooling................................................. 23,200 --
Computer equipment and software......................... 40,868 31,279
Office furniture and fixtures........................... 11,457 11,456
-------- --------
97,058 73,552
Accumulated depreciation and amortization............... (49,495) (31,405)
-------- --------
Total................................................. $ 47,563 $ 42,147
======== ========
Depreciation expense for the years ended December 31, 1999, 1998 and 1997
and from inception to date, was $21,803, $27,491, $20,209 and $69,953,
respectively.
F-13
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7: OBLIGATIONS UNDER CAPITAL LEASES
The Company initiated a noncancellable lease on telephone equipment
effective January 9, 1997. The original lease term was forty-eight months. The
lease meets the criteria of a capital lease and has been capitalized with an
implicit interest rate of 9.99%. The related asset is included in property and
equipment at December 31, 1999 and 1998, in the amount of $21,053 less
accumulated amortization of $10,527 and $6,316, respectively.
The Company initiated a noncancellable lease on a forklift effective July 1,
1997. The original lease term was thirty-six months. The lease meets the
criteria of a capital lease and has been capitalized with an implicit interest
rate of 6.00%. The related asset was included in property and equipment at
December 31, 1998, in the amount of $9,284 less accumulated amortization of
$3,600. The forklift was sold in 1999, the book value at the time of the sale
was $5,571, the proceeds from the sale were $2,650, and the related loss on sale
was $2,921.
Minimum future lease obligations on capitalized leases in effect at December
31, 1999, follow:
2000........................................................ $ 7,342
2001........................................................ 1,712
-------
Total minimum lease payments................................ 9,054
Amount representing interest.............................. (512)
-------
Present value of net minimum lease payments................. 8,542
Current portion........................................... (6,845)
-------
Long-term obligation at December 31, 1999................... $ 1,697
=======
NOTE 8: DEBT
Debt is summarized as follows:
1999 1998
--------- ---------
Loan advances under a line of credit payable to a bank
originally dated October 14, 1997, renewed August 12,
1999, for $300,000, due February 8, 2000. Interest is at
6.690%. Principal plus all accrued unpaid interest is due
to the North Dallas Bank & Trust Co., at maturity. The
note is secured by a personal CD of Steve Bedowitz........ $ 300,000 $ 290,000
Loan advance under a note payable to a bank dated January
10, 1997 for $40,000, due in monthly installments of $833
plus interest at the North Dallas Bank & Trust Co. stated
prime rate, with an initial rate of 9.75%. The note is
secured by all furniture and equipment.................... 10,833 20,833
--------- ---------
Total long-term debt.................................... 310,833 310,833
Current maturities...................................... (310,000) (310,000)
--------- ---------
$ 833 $ 833
========= =========
F-14
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8: DEBT (CONTINUED)
A schedule of future maturities of debt outstanding at December 31, 1999,
follows:
2000........................................................ $310,000
2001........................................................ 833
--------
Total $310,833
========
The Company is also obligated to its president and majority shareholder as
described in Note 9.
NOTE 9: INCOME TAXES
The Company files a federal income tax return on a calendar-year basis. On
January 1, 1999 the Company elected to be taxed as an S-corporation for federal
tax purposes and operated under this status through October 5, 1999. On that
date, the Company issued shares to a nonqualified shareholder and effectively
terminated its S-corporation status (see Note 9). Accordingly, for the period
from January 1, 1999 through October 5, 1999, the Company is not liable for
corporate federal income taxes since all income and losses are passed through to
the shareholders of the Company. As a result, no current or deferred income tax
expense is recognized in the Company's financial statements for the referenced
period.
At the time of the S-corporation election, the Company's net operating loss
carryforwards were frozen for utilization if and when the S-corporation status
was revoked. At October 5, 1999 previous net operating loss carryforwards of
approximately $1,125,000 became available to offset future taxable income of the
Company. At December 31, 1999, net operating loss carryforwards expiring in the
years 2011-2014 of approximately $505,591 are available for federal income tax
purposes. Deferred tax assets and liabilities resulting from the future tax
benefit of the net operating loss carryforwards and other differences in the
financial statement and tax basis of assets and liabilities at December 31, 1999
and 1998, consist of the following:
1999 1998
--------- ---------
Deferred tax assets:
Net operating loss carryforwards.................... $ 171,901 $ 382,408
Organization costs.................................. 20,320 20,320
--------- ---------
192,221 402,728
Deferred tax liabilities:
Accrued compensation................................ (7,532) --
Property, plant and equipment....................... (3,564) (2,134)
Unrealized gain on investment securities
available-for-sale................................ (142,741) --
--------- ---------
(153,837) (2,134)
--------- ---------
Net deferred tax asset................................ 38,384 400,594
Valuation allowance................................... (181,125) (400,594)
--------- ---------
$(142,741) $ --
========= =========
F-15
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: INCOME TAXES (CONTINUED)
Income tax expense differs from amounts computed by applying statutory tax
rates as follows:
THREE
MONTHS ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------- INCEPTION
1999 1998 1997 TO DATE
------------ ---------- ---------- ---------
Tax benefit at statutory rates................. $ (83,472) $(237,102) $(453,378) $(806,898)
Valuation allowance............................ (219,469) (52,784) 453,378 181,625
Permanent differences.......................... 306,000 314,500 -- 620,500
Other.......................................... (3,059) (24,614) -- 4,773
--------- --------- --------- ---------
Income tax expense........................... $ -- $ -- $ -- $ --
========= ========= ========= =========
The valuation allowance was established to recognize the uncertainty of
realization of the benefit related to net operating loss carryforwards. The
following summarizes the changes in the allowance account:
THREE
MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
Valuation allowance at beginning of period.................. $400,594 $453,378
Decrease in valuation allowance based on utilization of net
operating loss carryforwards.............................. (219,469) (52,784)
-------- --------
Valuation allowance at end of period........................ $181,125 $400,594
======== ========
NOTE 10: RELATED PARTY TRANSACTIONS
The Company has a note payable to Steve Bedowitz, its president and majority
shareholder. The note is for an undetermined term and bears interest at the rate
of 10%. On November 5, 1999 and January 1, 1998, Mr. Bedowitz forgave $900,000
and $925,000, respectively, of the note, which is reflected as capital
contributions in the accompanying financial statements. A history of the balance
of the note payable--shareholder follows:
BEGINNING OF END OF
PERIOD ADVANCES REPAYMENTS PERIOD
------------ ---------- ----------- ----------
1996......................................... $ -- $ 190,000 $ -- $ 190,000
1997......................................... 190,000 1,275,000 -- 1,465,000
1998......................................... 1,465,000 556,000 (925,000) 1,096,000
1999......................................... -- 764,844 (1,118,365) 742,479
Accrued interest on the note payable--shareholder amounted to $229,447 and
$100,800 at December 31, 1999 and 1998, respectively.
F-16
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: RELATED PARTY TRANSACTIONS (CONTINUED)
Interest expense related to the note payable--shareholder included in the
accompanying statements of operation is as follows:
1996........................................................ $ 1,436
1997........................................................ 20,679
1998........................................................ 78,685
1999........................................................ 128,647
Accrued interest on the note payable--shareholder amounted to $229,447 and
$100,800 at December 31, 1999 and 1998, respectively.
NOTE 11: STOCK PURCHASE AND EXCHANGE AGREEMENT
On October 5, 1999, the Company entered into a Stock Purchase and Exchange
Agreement with TTI Industries, Inc. (TTI). The Company acquired 9.9% of TTI's
Common Stock in exchange for 10% of the Company's Common Stock. The shares of
TTI were valued using the trading price at the time of issuance. In May, 2000,
the stock of TTI suffered a significant decline in market value and was adjusted
to its estimated market value (see Note 12).
NOTE 12: SUBSEQUENT EVENTS
IMPAIRMENT OF SECURITIES
Marketable equity securities acquired pursuant to a stock exchange (see
Note 11) were adjusted to the estimated market value (zero) in May, 2000. The
securities suffered a decline in estimated market value which was not
subsequently recovered through the date of the audited financial statements. The
decline in estimated market value was determined to be permanent; therefore the
Company's cost basis in the securities (prior to the recording of unrealized
appreciation in previous periods) amounting to $83,697, will be reflected as a
realized loss in the statement of operations for the year ended December 31,
2000.
REORGANIZATION
On March 28, 2000, the Company adopted a plan of reorganization whereby
Speed Release--Texas was merged with and into Speed Release Lock Company, a
Delaware corporation (the Company). Effective with the merger, each share of
issued and outstanding common stock of Speed Release--Texas was converted into
and exchanged for 360 fully paid shares of the Company.
On January 5, 2001, the Company amended its Certificate of Incorporation
which increased its authorized common stock from 25,000,000 shares to 50,000,000
shares and effected a one-for-ten reverse common stock split. In the amendment,
the par value of the common stock remained $.001 per share.
BUSINESS COMBINATION
The Company merged its operations with Mixson Corp. and PPCT Products, LLC
on January 31, 2001, with the Company being the surviving corporate entity. The
shareholders of Mixson and members of PPCT exchanged all outstanding shares and
membership interests for consideration amounting to 90% of the outstanding
shares of the Company. Shares issued to the shareholders of Mixson and the
members of
F-17
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12: SUBSEQUENT EVENTS (CONTINUED)
PPCT resulted in a change of control of the Company. The combination was deemed
a reverse acquisition, and as a result, the shareholders of Mixson and the
members of PPCT assumed liabilities in excess of the fair value of the assets of
the Company. The difference, adjusted to reflect 100% ownership, was recorded as
goodwill.
The financial statements presented have been restated for all prior periods
to reflect the current capitalization of the Company.
F-18
ACCOUNTANT'S COMPILATION REPORT
To the Board of Directors of
SPEED RELEASE LOCK COMPANY
We have compiled the accompanying balance sheet of SPEED RELEASE LOCK
COMPANY (a development stage company) as of October 31, 2000 and the related
statements of operations, shareholders' equity and cash flows for the ten months
then ended and cumulative from inception 8/29/96 to 10/31/00 in accordance with
standards issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying consolidated balance sheet and statement of income,
and accordingly, do not express an opinion or any other form of assurance on it.
However, we did become aware of a departure from generally accepted accounting
principles that is described in the last paragraph.
Management has elected to omit substantially all of the disclosures required
by generally accepted accounting principles. If the omitted disclosures were
included, they might influence the user's conclusions about the Company's
financial position, results of operation, and cash flows. Accordingly, the
financial statements referred to above are not designed for those who are not
informed about such matters.
DAVIS, KINARD & CO., P.C.
Abilene, Texas
February 2, 2001
F-19
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
BALANCE SHEET
OCTOBER 31, 2000
(SEE ACCOUNTANT'S COMPILATION REPORT)
ASSETS
Current assets
Cash and cash equivalents................................. $ 3,914
Inventories............................................... 8,566
-----------
Total current assets.................................... 12,480
Property, plant and equipment
At cost, net of accumulated depreciation and
amortization............................................ 24,028
Other assets
Patent, net of amortization............................... 55,502
Deposits.................................................. 3,100
-----------
Total other assets...................................... 58,602
-----------
Total assets................................................ $ 95,110
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 48,932
Accrued interest payable.................................. 321,560
Accrued expenses.......................................... 183,359
Note payable--shareholder................................. 1,263,221
Current maturities of obligations under capital lease..... 1,803
Current maturities of long term debt...................... 300,000
-----------
Total current liabilities............................... 2,118,875
Shareholders' equity
Common stock, $.001 par value; 50,000,000 shares
authorized: 11,036,080 shares issued and outstanding.... 11,036
Paid in capital in excess of par value.................... 1,907,661
Deficit accumulated during the development stage.......... (3,942,462)
-----------
Total shareholders' equity.............................. (2,023,765)
-----------
Total liabilities and shareholders' equity.................. $ 95,110
===========
The accompanying note is an integral part of these statements.
F-20
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 2000 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 10/31/00
(SEE ACCOUNTANT'S COMPILATION REPORT)
CUMULATIVE
FROM
TEN MONTHS INCEPTION
ENDED 8/29/96 TO
10/31/00 10/31/00
---------- -----------
NET SALES................................................... $ 47,653 $ 527,506
COST OF SALES............................................... 46,908 539,221
--------- -----------
GROSS PROFIT ON SALES....................................... 745 (11,715)
GENERAL AND ADMINISTRATIVE EXPENSE.......................... 636,520 3,350,170
--------- -----------
OPERATING LOSS.............................................. (635,775) (3,361,885)
OTHER INCOME (EXPENSE)
Loss on securities........................................ (83,697) (83,697)
Loss on sale of assets.................................... (13,769) (13,769)
Interest expense.......................................... (100,121) (486,872)
Miscellaneous............................................. -- 3,761
--------- -----------
Total other income (expense)............................ (197,587) (580,577)
--------- -----------
LOSS BEFORE INCOME TAX...................................... (833,362) (3,942,462)
--------- -----------
Income tax expense........................................ -- --
--------- -----------
NET LOSS.................................................... $(833,362) $(3,942,462)
========= ===========
NET LOSS PER SHARE (BASIC).................................. $ (0.076) $ (0.373)
========= ===========
The accompanying note is an integral part of these statements.
F-21
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE TEN MONTHS ENDED OCTOBER 31, 2000 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 10/31/00
(SEE ACCOUNTANT'S COMPILATION REPORT)
DEFICIT
PAID IN ACCUMULATED NET UNREALIZED
COMMON STOCK CAPITAL IN DURING THE APPRECIATION ON TOTAL
--------------------- EXCESS OF DEVELOPMENT AVAILABLE-FOR-SALE SHAREHOLDERS'
SHARES AMOUNT PAR VALUE STAGE SECURITIES EQUITY
---------- -------- ---------- ----------- ------------------ -------------
INITIAL CAPITALIZATION OF
THE COMPANY (8/29/96)
$0.001 PAR VALUE.......... 10,396,072 $10,396 $ (396) $ -- $ -- $ 10,000
Net loss.................. -- -- (95,458) (95,458)
---------- ------- ---------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1996...................... 10,396,072 10,396 (396) (95,458) -- (85,458)
Net loss.................. -- -- (1,334,934) (1,334,934)
---------- ------- ---------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1997...................... 10,396,072 10,396 (396) (1,430,392) -- (1,420,392)
Capital contribution...... -- -- 925,000 925,000
Net loss.................. -- -- (697,359) (697,359)
---------- ------- ---------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1998...................... 10,396,072 10,396 924,604 (2,127,751) -- (1,192,751)
Issuance of common
stock................... 100,008 100 82,697 83,697
Capital contribution...... 540,000 540 894,600 900,000
Net loss.................. -- -- (981,349) (981,349)
Net changes in unrealized
appreciation on available-
for-sale securities....... -- -- 277,085 277,085
---------- ------- ---------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1999...................... 11,036,080 11,036 1,908,697 (3,109,100) 277,085 (913,318)
Net loss.................. -- -- (833,362) (833,362)
Net changes in unrealized
appreciation on available-
for-sale securities....... -- -- (277,085) (277,085)
---------- ------- ---------- ----------- --------- -----------
BALANCE AT OCTOBER 31,
2000...................... 11,036,080 $11,036 $1,908,697 $(3,942,462) $ -- $(2,023,765)
========== ======= ========== =========== ========= ===========
The accompanying notes are an integral part of these statements.
F-22
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 2000 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 10/31/00
(SEE ACCOUNTANT'S COMPILATION REPORT)
CUMULATIVE
FROM
TEN MONTHS INCEPTION
ENDED 8/29/96 TO
10/31/00 10/31/00
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(833,362) $(3,942,462)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization......................... 27,644 103,435
Loss on sale or disposition of assets................. 83,697 100,680
Decrease in accounts receivable....................... 5,151 --
Decrease (increase) in inventories.................... 64,705 (8,566)
Decrease (increase) in other assets................... 4,801 (92,769)
(Decrease) increase in accounts payable............... (12,734) 48,932
Increase in accrued interest payable.................. 84,360 321,560
Increase in accrued expenses.......................... 74,604 183,359
--------- -----------
Total adjustments................................... 332,228 656,631
--------- -----------
Net cash used in operating activities................. (501,134) (3,285,831)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment....................... -- (79,177)
Proceeds from sale of assets.............................. -- 2,650
--------- -----------
Net cash used in investing activities................. -- (76,527)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholder note............................ 520,742 3,306,586
Payments to reduce shareholder debt....................... -- (218,365)
Proceeds from the sale of stock........................... -- 10,000
Payments to reduce capital lease obligation............... (6,739) (31,949)
Proceeds from long term debt.............................. -- 340,000
Payments to reduce long term debt......................... (10,833) (40,000)
--------- -----------
Net cash provided by financing activities............. 503,170 3,366,272
--------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 2,036 3,914
Cash and cash equivalents at beginning of year............ 1,878 --
--------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 3,914 $ 3,914
========= ===========
Supplemental cash flow information
Interest paid............................................. $ 15,761 $ 143,460
Note payable transferred to capital....................... -- 1,825,000
Stock exchange............................................ -- 83,697
Equipment acquired by capital lease obligation............ -- 33,752
Impairment of securities.................................. 419,826 419,826
The accompanying notes are an integral part of these statements.
F-23
SPEED RELEASE LOCK COMPANY
A DEVELOPMENT STAGE COMPANY
SELECTED INFORMATION--SUBSTANTIALLY ALL DISCLOSURES
REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ARE NOT INCLUDED
FOR THE TEN MONTHS ENDED OCTOBER 31, 2000 AND
CUMULATIVE FROM INCEPTION 8/29/96 TO 10/31/00
NOTE 1--SUBSEQUENT EVENTS
On January 5, 2001, the Company amended its Certificate of Incorporation
which increased its authorized common stock from 25,000,000 shares to 50,000,000
shares and effected a one-for-ten reverse common stock split. In the amendment,
the par value of the common stock remained $.001 per share.
The Company merged its operations with Mixson Corp. and PPCT Products, LLC
on January 31, 2001, with the Company being the surviving corporate entity. The
shareholders of Mixson and members of PPCT exchanged all outstanding shares and
membership interests for consideration amounting to 90% of the outstanding
shares of the Company.
NOTE 2--EARNINGS PER SHARE
The loss per share of common stock outstanding (EPS) is computed based on
the weighted average number of shares outstanding as retroactively restated to
reflect the reverse stock split and the shares issued with respect to the
merger. Pro forma EPS and restated weighted average shares for the ten months
ended October 31, 2000, and cumulative from inception 8/29/96 to 10/31/00 are,
as follows:
TEN MONTHS ENDED OCTOBER 31, 2000
---------------------------------------
WEIGHTED
NET AVERAGE
LOSS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Pro forma net loss........................................ $(833,362)
---------
BASIC EPS
Loss available to common stockholders................... (833,362) 11,036,080 $(.076)
======
EFFECT OF DILUTIVE SECURITIES............................. -- --
--------- ----------
DILUTED EPS
Loss available to common shareholders................... $(833,363) 11,036,080 $(.076)
========= ========== ======
CUMULATIVE FROM INCEPTION 8/29/96 TO
10/31/00
---------------------------------------
WEIGHTED
NET AVERAGE
LOSS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Pro forma net loss....................................... $(3,942,462)
-----------
BASIC EPS
Loss available to common stockholders.................. (3,942,462) 10,577,311 $(.373)
======
EFFECT OF DILUTIVE SECURITIES............................ -- --
----------- ----------
DILUTED EPS
Loss available to common shareholders.................. $(3,942,462) 10,577,311 $(.373)
=========== ========== ======
F-24
BERKOVITS, LAGO & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Mixson Corp.
Hialeah, Florida
We have audited the accompanying balance sheets of Mixson Corp. as of
April 30, 2000 and 1999, and the related statements of operations, stockholders'
equity and cash flows for the three years ended April 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mixson Corp. as of April 30,
2000 and 1999, and the results of its operations and its cash flows for the
three years ended April 30, 2000 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements the Company's dependence on outside financing, lack of
existing commitments from lenders to provide necessary financing, lack of
sufficient working capital, increased competitive pressures, and reoccuring
losses from operations raise substantial doubts about its ability to continue as
a going concern. Management's plans concerning these matters are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Berkovits, Lago & Company, LLP
August 4, 2000
8211 WEST BROWARD BOULEVARD. SUITE 340.PLANTATION, FLORIDA 33324
(954) 475-3199. (305) 944-9326. (800) 689-6521. FAX (954) 472-2308
E-MAIL:berkcpa @aol.com
F-25
MIXSON CORP.
BALANCE SHEETS
APRIL 30,
---------------------
2000 1999
--------- ---------
ASSETS
Current assets:
Cash...................................................... $ 6,002 $ 11,432
Accounts receivable, net.................................. 60,484 128,447
Note receivable--affiliated company....................... 50,000 50,000
Due from affiliated company............................... -- 69,111
Inventory................................................. 396,913 404,180
Prepaid expenses.......................................... 15,622 9,765
--------- ---------
Total current assets.................................... 529,021 672,935
Property and equipment, net................................. 50,651 60,757
Other assets:
Due from stockholders..................................... 22,500 22,500
Deposits.................................................. 14,859 18,676
--------- ---------
Total other assets...................................... 37,359 41,176
--------- ---------
Total assets............................................ $ 617,031 $ 774,868
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 202,864 $ 171,807
Due to affiliated company................................. 43,537 --
Notes payable............................................. 218,319 280,122
Current portion of capital lease obligations.............. 2,747 5,081
--------- ---------
Total current liabilities............................... 467,467 457,010
Long term liabilities:
Capital lease obligations................................. -- 2,747
--------- ---------
Total long term liabilities............................. -- 2,747
Stockholders' Equity:
Common stock, $2.50 par value; 4000 shares authorized,
issued and outstanding.................................. 10,000 10,000
Paid-in capital........................................... 933,452 933,452
Accumulated deficit....................................... (367,813) (202,266)
--------- ---------
575,639 741,186
Less: Treasury stock, 3,800 shares of common stock at
cost...................................................... (426,075) (426,075)
--------- ---------
Total stockholders' equity.............................. 149,564 315,111
--------- ---------
Total liabilities and stockholders' equity.............. $ 617,031 $ 774,868
========= =========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements
F-26
MIXSON CORP.
STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 2000, 1999 AND 1998
2000 1999 1998
--------- ---------- ----------
Sales, net................................................ $ 990,903 $1,044,659 $1,529,323
Cost of sales............................................. 773,227 721,953 947,613
--------- ---------- ----------
Gross profit on sales..................................... 217,676 322,706 581,710
General and administrative expense........................ 361,572 649,679 509,278
--------- ---------- ----------
Operating income (loss)................................... (143,896) (326,973) 72,432
--------- ---------- ----------
Other income (expense):
Interest income......................................... 3,513 -- 404
Interest expense........................................ (29,664) (40,078) (43,867)
Rental income........................................... 4,500 -- --
--------- ---------- ----------
Total other income (expense).......................... (21,651) (40,078) (43,463)
--------- ---------- ----------
Income (loss) before provision for income taxes........... (165,547) (367,051) 28,969
Income tax provision (benefit)............................ -- (3,435) 7,749
--------- ---------- ----------
Net income (loss)......................................... $(165,547) $ (363,616) $ 21,220
========= ========== ==========
Basic (loss) income per common share...................... $ (41.39) $ (90.90) $ 5.31
========= ========== ==========
Weighted average common shares used for computing basic
(loss) income per share................................. 4,000 4,000 4,000
========= ========== ==========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements
F-27
MIXSON CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 2000, 1999 AND 1998
COMMON STOCK RETAINED TOTAL
------------------- PAID-IN EARNINGS TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) STOCK EQUITY (DEFICIT)
-------- -------- -------- --------- --------- ----------------
Balance--May 1, 1997........... 4000 $10,000 $258,452 $ 140,130 $(426,075) $ (17,493)
Capital contribution........... -- -- 75,000 -- -- 75,000
Net income..................... -- -- -- 21,220 -- 21,220
---- ------- -------- --------- --------- ---------
Balance--April 30, 1998........ 4000 10,000 333,452 161,350 (426,075) 78,727
Capital contribution........... -- -- 600,000 -- -- 600,000
Net loss....................... -- -- -- (363,616) -- (363,616)
---- ------- -------- --------- --------- ---------
Balance--April 30, 1999........ 4000 10,000 933,452 (202,266) (426,075) 315,111
Net loss....................... -- -- -- (165,547) -- (165,547)
---- ------- -------- --------- --------- ---------
Balance--April 30, 2000........ 4000 $10,000 $933,452 $(367,813) $(426,075) $ 149,564
==== ======= ======== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements
F-28
MIXSON CORP.
STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 2000, 1999 AND 1998
2000 1999 1998
--------- --------- --------
Cash flows from operating activities:
Net income (loss)......................................... $(165,547) $(363,616) $ 21,220
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Deferred tax (benefit) provision........................ -- (1,150) (575)
Depreciation and amortization........................... 18,493 25,074 23,203
Change in assets and liabilities:
(Increase) decrease in accounts receivable.............. 67,963 20,872 (65,175)
Decrease in taxes receivable............................ -- 3,432 7,501
(Increase) decrease in inventory........................ 7,267 (25,972) (10,076)
(Increase) decrease in prepaid expense.................. (5,857) (6,592) 3,916
(Increase) decrease due to/ from affiliated company..... 112,648 (69,111) --
(Increase) decrease in deposits......................... 3,817 508 435
Increase (decrease) in accounts payable and accrued
expense............................................... 31,057 (7,852) (23,778)
Increase (decrease) in income taxes payable............. -- (4,900) 4,900
--------- --------- --------
Net cash provided by (used in) operating activities... 69,841 (429,309) (38,429)
--------- --------- --------
Cash flows from investing activities:
Purchase of equipment..................................... (8,387) (16,484) (14,078)
Note receivable from affiliated company................... -- (50,000) --
--------- --------- --------
Net cash used in investing activities................. (8,387) (66,484) (14,078)
--------- --------- --------
Cash flows from financing activities:
Principal payments of note payable........................ (61,803) (38,903) (32,274)
Increase in loan from stockholders........................ -- -- 50,000
Payments on loan from stockholder......................... (50,000) --
Principal payment's on capital leases..................... (5,081) (13,853) (11,679)
Capital contributions..................................... -- 600,000 50,000
--------- --------- --------
Net cash provided by financing activities............. (66,884) 497,244 56,047
--------- --------- --------
Increase (decrease) in cash................................. (5,430) 1,451 3,540
Cash at beginning of year................................... 11,432 9,981 6,441
--------- --------- --------
Cash at end of year......................................... $ 6,002 $ 11,432 $ 9,981
========= ========= ========
Supplemental disclosures of cash flows information:
Interest paid............................................. $ 7,669 $ 15,079 $ 41,867
========= ========= ========
Supplemental disclosure of non-cash investing and financing
activities:
In 1998 the Company entered into capital leases for
equipment in the amount of $13,661.
In 1998, $25,000 due to stockholder was reclassified to
additional paid-in capital.
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements
F-29
MIXSON CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
The Company is a Florida corporation, duly organized under applicable laws
and statutes, and is engaged in the manufacturing of leather and nylon products
used principally by law enforcement personnel.
ACCOUNTS RECEIVABLE
Bad debts are accounted for by the allowance method. As of April 30, 2000
and 1999, the Company considers the accounts receivable to be fully collectible.
INVENTORY
Inventory is valued at the lower of cost or market using the average cost
method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company follows the practice
of charging expenditures for additional or major replacements to the asset
accounts. When assets are retired or otherwise disposed, the cost or other basis
thereof, and the related accumulated depreciation are eliminated from the
respective accounts with any gain or loss being recognized in that period.
The Company provides for depreciation using the straight-line method of
depreciation for machinery and equipment with useful lives of five and seven
years.
INCOME TAXES
The Company accounts for its income taxes using Financial Accounting
Standard No. 109, "Accounting for Income Taxes", which requires the
establishment of a deferred tax asset or liability for the recognition of future
deductible or taxable amounts and operating loss and tax credit carryforwards.
Deferred tax expense or benefit is recognized as a result of the changes in the
assets and liabilities during the year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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 could differ from those estimates.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist mainly of accounts receivable,
accounts payable, and notes payable. The carrying amounts of accounts
receivable, accounts payable and notes payable approximate fair value.
F-30
MIXSON CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables. The Company is a manufacturer of
leather and nylon products. Its customers consist of distributors, dealers and
municipalities.
NOTE 2: GOING CONCERN
The accompanying financial statements have been presented in accordance with
generally accepted accounting principles, which assumes the continuity of the
Company as a going concern. However, during the year ending April 30, 2000 and
April 30, 1999, the Company experienced, and continues to experience, certain
going concern and liquidity problems. The Company has incurred net losses of
$165,547 and $363,616 for the years ending April 30, 2000 and April 30, 1999.
This condition raises substantial doubt to the ability of the Company to
continue as a going concern.
The Management's plans with regard to this matter are summarized in Note 11
Subsequent Events. The eventual outcome of the success of management's plans
cannot be ascertained with any degree of certainty. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of April 30, 2000 and
1999.
2000 1999
-------- --------
Machinery and equipment................................. $137,463 $130,323
Computer equipment...................................... 25,070 23,823
Leasehold improvements.................................. 4,184 4,184
-------- --------
166,717 158,330
Less accumulated depreciation and amortization.......... 116,066 97,573
-------- --------
$ 50,651 $ 60,757
======== ========
Depreciation expense for the years ended December 31, 2000, 1999 and 1998
was $18,493, $25,074 and $23,203, respectively.
NOTE 4. INVENTORY
Inventory at April 30, 2000 and 1999 consists of the following:
2000 1999
-------- --------
Raw materials........................................... $135,067 $137,612
Work in Process......................................... 112,329 125,698
Finished Goods.......................................... 149,517 140,870
-------- --------
$396,913 $404,180
======== ========
F-31
MIXSON CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5: RELATED PARTY TRANSACTIONS
DUE FROM A AFFILIATED COMPANY
The Company has entered into a management agreement with PPCT Products, LLC
(PPCT) which has the same common members as Mixson Corp.stockholders. Under this
agreement, the Company provides warehousing, accounting, sales and
administrative services in addition to the use of its facilities to PPCT
Products, LLC. The agreement provides that the fee for these services be
calculated at 4% of PPCT sales and in addition all direct expenses will be
reimbursed to the company as well as an allocation of the Company's fixed
expenses. The amount paid by PPCT to the Company for the years ended April 30,
2000 and 1999 was $172,818 and $69,111 respectively.
NOTE RECEIVABLE
2000 1999
-------- --------
Due from affiliated company, note was due April 30, 2000
however it was revised with the due date extended to April
30, 2001 with interest at 14% per annum paid quarterly.... $50,000 $50,000
======= =======
DUE FROM STOCKHOLDERS
Advances from stockholders are non-interest bearing with no formal terms for
repayment.
NOTE 6: NOTES PAYABLE
2000 1999
-------- --------
Note payable to bank on revolving line of credit which
provided for aggregate borrowings of up to $250,000
limited to 80% of eligible accounts receivable plus 50% of
inventory. Interest at prime plus 2% was payable monthly.
Principal and accrued interest due July 5, 1998 was not
paid. The loan was then deemed in default. A loan workout
agreement was made August 2, 1999, which called for a
principal payment of $7,500 and monthly payments
thereafter of $2400 starting July 21, 1999 with a balloon
payment due June 21, 2000. The terms of the note have been
extended with a balloon payment now due December 21, 2000.
The loan is secured by substantially all the assets of the
Company and guaranteed by the stockholders................ $218,319 $249,819
Note payable to bank with interest at 10.75%. Payments of
$3,479 including interest was payable monthly through
February 2000. Secured by substantially all the assets of
the Company and guaranteed by the stockholders............ -- 30,303
-------- --------
$218,319 $280,122
======== ========
NOTE 7: MAJOR CUSTOMERS
Sales to three customers were approximately $440,000 and comprised
approximately 44% of total sales. These sales were to distributors of Mixson
Corp. products who then sell a substantial portion of these products under
contracts which specify Mixson Corp. as the manufacturer of the goods sold.
Therefore, in
F-32
MIXSON CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7: MAJOR CUSTOMERS (CONTINUED)
the event these customers were no longer Mixson Corp. distributors, these
contracts could be fulfilled by other Mixson Corp. distributors.
NOTE 8: OBLIGATIONS UNDER CAPITAL LEASES
The Company acquired equipment under the provisions of long-term capital
leases. For financial reporting purposes, minimum lease payments relating to the
equipment have been capitalized. The leases expire in 2001. The leased property
under capital lease as of April 30, 2000 and 1999 has a cost of $13,661 and
accumulated depreciation of $6,374 in 2000 and $3,642 in 1999, respectively and
is included in property and equipment.
The future minimum lease payments under the capital leases and the net
present value of the future minimum lease payments at April 30, 2000 are as
follows:
Total minimum lease payments................................ $2,966
Amount representing interest................................ (219)
------
Present Value of Net Minimum Lease Payments............... $2,747
======
NOTE 9: COMMITMENTS
LEASES
The Company has a non-cancelable operating lease for facilities and offices,
which expires in December 2001. The lease has a renewal option for an additional
five years. The Company leases vehicles and equipment under various operating
leases.
Future minimum annual rental commitments under these leases at April 30,
2000 are approximately as follows:
OPERATING
YEAR ENDED APRIL 30, LEASES
- -------------------- ---------
2001........................................................ $109,300
2002........................................................ 69,300
2003........................................................ 7,800
--------
Total minimum lease payments................................ $186,400
========
Rent expense for the years ended December 31, 2000, 1999 and 1998 was
$104,113, $98,249 and $96,263, respectively.
The Company subleased a portion of its leased facility under an operating
lease that commenced on February 1, 2000 and terminates on December 14, 2001.
Rental income for the year ended April 30, 2000 was $4,500.
LITIGATION
From time to time in the normal course of business, various legal claims
arise. In the opinion of management these claims will have no effect on the
Company's financial statements.
F-33
MIXSON CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: INCOME TAXES
The Company accounts for income taxes in accordance with SFAS 109. Under
SFAS 109, deferred tax assets or liabilities are computed based on the
differences between the financial statement and income tax basis of assets and
liabilities as measured by currently enacted tax laws and rates. Deferred income
tax expenses and benefits are based on charges in the deferred assets and
liabilities from period to period.
The effect of temporary differences which give rise to a significant portion
of deferred taxes is as follows as of
APRIL 30,
--------------------
2000 1999
-------- ---------
Deferred tax assets (liabilities):
Inventory costs not yet deductible for tax
purposes........................................... $ 28,057 $ 37,094
Net operating loss carryforwards..................... 61,252 134,538
Property basis differences........................... (7,286) (8,699)
-------- ---------
Subtotal............................................. 82,023 162,933
Less: valuation allowance............................ (82,023) (162,933)
-------- ---------
Net deferred taxes................................... $ -- $ --
======== =========
A reconciliation to the tax (benefit) provision at the Federal statutory
rate is presented below:
2000 1999 1998
-------- --------- --------
Tax (benefit) provision at statutory rate...... $(56,286) $(124,797) $8,324
State tax (benefit) provision, net of federal
taxes........................................ (4,966) (11,012) --
Change in valuation allowance.................. 61,252 132,374 (575)
-------- --------- ------
Income tax provision (benefit)................. $ -- $ (3,435) $7,749
======== ========= ======
At April 30, 2000, the Company had, for tax purposes, unused net operating
loss carryforwards of approximately $489,000 which will begin expiring in 2019.
As it is uncertain whether the Company will realize the full benefit from these
carryforwards, the Company has recorded a valuation allowance equal to the
amount of the deferred tax asset.
NOTE 11: SUBSEQUENT EVENTS
During July 2000, Mixson Corp., PPCT Products, LLC (affiliated company)
(collectively, "seller") and Speed Release Lock Company ("Purchaser)" entered
into discussions with respect to the proposed acquisition by the purchaser of
the business of the seller in exchange for all the outstanding capital stock of
seller. The purchasers' consideration for the seller shares will consist of
shares of common stock of purchaser in an amount equal to 90% of total issued
and outstanding shares of purchaser. This transaction will in effect be deemed a
reverse acquisition whereby Mixson Corp. will be the new entity, consolidating
PPCT Products, LLC and Speed Release Lock Company. In connection with this
proposed acquisition, the company expects to raise capital through a proposed
public offering of securities. As of this date no registration document relating
to this proposed offering has been filed and management cannot determine at this
time the eventual outcome of this proposed offering.
F-34
MIXSON CORP.
BALANCE SHEETS
(UNAUDITED)
OCTOBER 31, 2000 OCTOBER 31, 1999
----------------- -----------------
ASSETS
Current assets:
Cash...................................................... $ 59,132 $ --
Accounts receivable--net.................................. 51,472 78,751
Receivables--other........................................ 758 --
Note receivable--affiliated company....................... 50,000 50,000
Inventory................................................. 451,080 311,986
Prepaid assets............................................ 15,856 8,679
--------- ---------
Total current assets.................................... 628,298 449,416
Property and equipment, net................................. 43,764 55,967
Other assets:
Due from stockholders..................................... 22,500 22,500
Deposits.................................................. 18,859 17,639
--------- ---------
Total other assets...................................... 41,359 40,139
--------- ---------
Total assets............................................ $ 713,421 $ 545,522
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 249,568 $ 169,068
Due to affiliated company................................. 124,880 34,042
Current portion of capital lease obligations.............. -- 2,406
Notes payable............................................. 268,619 247,033
--------- ---------
Total current liabilities............................... 643,067 452,549
--------- ---------
Stockholders' equity
Common stock, $2.50 par value; 4000 shares authorized,
issued and outstanding.................................. 10,000 10,000
Paid-in capital in excess of par value.................... 933,452 933,452
Accumulated deficit....................................... (447,023) (424,404)
--------- ---------
496,429 519,048
Less: Treasury stock, 3,800 shares of common stock at
cost.................................................... (426,075) (426,075)
--------- ---------
Total stockholders' equity.............................. 70,354 92,973
--------- ---------
Total liabilities and stockholders' equity.............. $ 713,421 $ 545,522
========= =========
F-35
MIXSON CORP.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
OCTOBER 31, 2000 OCTOBER 31, 2000 OCTOBER 31, 1999 OCTOBER 31, 1999
----------------- ----------------- ----------------- -----------------
Sales, net........................... $306,275 $534,954 $ 223,589 $ 461,434
Cost of sales........................ 176,076 338,826 160,983 332,231
-------- -------- --------- ---------
Gross profit on sales................ 130,199 196,128 62,606 129,203
General and administrative expense... 124,983 271,134 168,796 341,011
-------- -------- --------- ---------
Operating income (loss).............. 5,216 (75,006) (106,190) (211,808)
-------- -------- --------- ---------
Other income (expense):
Interest expense................... (7,268) (13,204) (2,169) (10,330)
Rental income...................... -- 9,000 -- --
-------- -------- --------- ---------
Total other income (expense)..... (7,268) (4,204) (2,169) (10,330)
-------- -------- --------- ---------
Income (loss) before income taxes.... (2,052) (79,210) (108,359) (222,138)
Income tax provision (benefit)....... -- -- -- --
-------- -------- --------- ---------
Net income (loss).................... $ (2,052) $(79,210) $(108,359) $(222,138)
======== ======== ========= =========
F-36
MIXSON CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE FOR THE SIX FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
OCTOBER 31, 2000 OCTOBER 31, 2000 OCTOBER 31, 1999 OCTOBER 31, 1999
----------------- ----------------- ----------------- -----------------
Cash flows from operating activities:
Net income (loss).................... $ (2,052) $(79,210) $(108,359) $(222,138)
Adjustments to reconcile net income
(loss) cash provided by operating
activities:
Depreciation and amortization...... 2,202 8,249 4,538 8,986
Change in assets and liabilities:
(Increase) decrease in accounts
receivable....................... 4,231 8,254 28,776 49,696
(Increase) in inventory............ (29,386) (54,167) 34,922 92,194
(Increase) decrease in prepaid
assets........................... (1,835) (234) 1,643 1,086
(Increase) decrease in deposits.... (3,500) (4,000) 1,500 1,037
Increase (decrease) in accounts
payable and accrued
liabilities...................... (6,621) 46,704 17,950 (2,739)
-------- -------- --------- ---------
Net cash provided by (used in)
operating activities........... (36,961) (74,404) (19,030) (71,878)
-------- -------- --------- ---------
Cash flows from investing activities:
Purchase and adjustments of
equipment.......................... 1,206 (1,362) (1,875) (4,196)
-------- -------- --------- ---------
Net cash used in investing
activities..................... 1,206 (1,362) (1,875) (4,196)
-------- -------- --------- ---------
Cash flows from financing activities:
Principal payments on capital
lease.............................. (2,747) (2,747) (1,673) (5,422)
Principal payments on note payable... (7,200) (7,200) (23,557) (33,089)
Increase in loan from affiliated
company............................ 34,652 81,343 43,297 103,153
Increase in note payable............. 57,500 57,500 -- --
-------- -------- --------- ---------
Net cash provided by financing
activities..................... 82,205 128,896 18,068 64,642
-------- -------- --------- ---------
Increase (decrease) in cash............ 46,450 53,130 (2,837) (11,432)
Cash at beginning of period............ 12,682 6,002 2,837 11,432
-------- -------- --------- ---------
Cash at end of period.................. $ 59,132 $ 59,132 $ -- $ --
======== ======== ========= =========
Supplemental disclosures of cash flows
information:
Interest paid........................ $ 4,793 $ 4,793 $ -- $ 1,171
======== ======== ========= =========
F-37
MIXSON CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
PAID-IN
COMMON STOCK CAPITAL IN TOTAL
------------------- EXCESS OF ACCUMULATED TREASURY STOCKHOLDERS'
SHARES AMOUNT PAR VALUE DEFICIT STOCK EQUITY
-------- -------- ---------- ----------- --------- -------------
Balance--May 1, 1999............ 4,000 $10,000 $933,452 $(202,266) $(426,075) $ 315,111
Net loss........................ (113,779) (113,779)
----- ------- -------- --------- --------- ---------
Balance--July 31, 1999.......... 4,000 10,000 933,452 (316,045) (426,075) 201,332
Net loss........................ (108,359) (108,359)
----- ------- -------- --------- --------- ---------
Balance--October 31, 1999....... 4,000 $10,000 $933,452 $(424,404) $(426,075) $ 92,973
===== ======= ======== ========= ========= =========
Balance--May 1, 2000............ 4,000 $10,000 $933,452 $(367,813) $(426,075) $ 149,564
Net loss........................ -- -- -- (77,158) -- (77,158)
----- ------- -------- --------- --------- ---------
Balance--July 31, 2000.......... 4,000 10,000 933,452 (444,971) (426,075) 72,406
Net loss........................ (2,052) (2,052)
----- ------- -------- --------- --------- ---------
Balance--October 31, 2000....... 4,000 $10,000 $933,452 $(447,023) $(426,075) $ 70,354
===== ======= ======== ========= ========= =========
F-38
BERKOVITS, LAGO & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
PPCT Products, LLC
Hialeah, Florida
We have audited the accompanying balance sheets of PPCT Products, LLC as of
April 30, 2000 and December 31, 1999, and the related statements of operations,
changes in members' deficit and cash flows for the four months ended April 30,
2000 and for the period January 19, 1999 (date of inception) to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PPCT Products, LLC as of
April 30, 2000 and December 31, 1999, and the results of its operations and its
cash flows for the four months ended April 30, 2000 and for the period
January 19, 1999 (date of inception) to December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements the Company's dependence on outside financing, lack of
existing commitments from lenders to provide necessary financing, lack of
sufficient working capital, and reoccurring losses from operations raise
substantial doubts about its ability to continue as a going concern.
Management's plans concerning rise matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Berkovits, Lago & Company, LLP
August 4, 2000
8211 WEST BROWARD BOULEVARD. SUITE 340. PLANTATION, FLORIDA 33324
(954) 475-3199- (305) 944-9326. (800) 689-6531. FAX (954) 472-2308
E-MAIL: berkcpa@aol.com
F-39
PPCT PRODUCTS, LLC
BALANCE SHEETS
APRIL 30, 2000 DECEMBER 31, 1999
--------------- ------------------
ASSETS
Current assets:
Cash...................................................... $ 3,008 $ 1,766
Accounts receivable, net.................................. 9,404 74,293
Inventory................................................. 2,475 6,673
Prepaid expenses.......................................... 2,888 3,715
Due from affiliated company............................... 44,295 --
--------- ---------
Total current assets.................................... 62,070 86,447
Property and equipment, net................................. 48,419 45,089
Intangible assets, net of accumulated amortization of
$14,439 and $10,589....................................... 145,116 148,966
--------- ---------
Total assets............................................ $ 255,605 $ 280,502
========= =========
LIABILITIES AND MEMBERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses..................... $ 47,416 $ 57,286
Due to affiliated company................................. -- 9,255
Note payable bank......................................... 245,000 185,000
Notes payable............................................. 200,000 200,000
--------- ---------
Total current liabilities............................... 492,416 451,541
Members' deficit............................................ (236,811) (171,039)
--------- ---------
Total Liabilities and Members' Deficit.................. $ 255,605 $ 280,502
========= =========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements.
F-40
PPCT PRODUCTS, LLC
STATEMENTS OF OPERATIONS
JANUARY 19, 1999
FOR THE FOUR MONTHS (DATE OF INCEPTION)
ENDED APRIL 30, 2000 TO DECEMBER 31, 1999
--------------------- ---------------------
Sales, net............................................... $ 52,200 $ 589,571
Cost of sales............................................ 18,968 214,550
-------- ---------
Gross profit............................................. 33,232 375,021
Selling, general and administrative expenses............. 81,799 483,559
-------- ---------
Operating loss........................................... (48,567) (108,538)
Other expenses:
Interest expense....................................... (17,205) (63,501)
-------- ---------
Total other expenses................................. (17,205) (63,501)
-------- ---------
Net loss................................................. $(65,772) $(172,039)
======== =========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements.
F-41
PPCT PRODUCTS, LLC
STATEMENT OF CHANGES IN MEMBERS' DEFICIT
GERALD
JOSEPH ROTMIL O'CONNELL HOLSTER, LLC TOTAL
------------- ------------- ------------ ---------
January 20, 1999,
Members' Capital Contribution............. $ 375 $ 375 $ 250 $ 1,000
Net loss.................................. (64,515) (64,515) (43,009) (172,039)
-------- -------- -------- ---------
Balance--December 31, 1999................ (64,140) (64,140) (42,759) (171,039)
Net loss.................................. (24,665) (24,665) (16,442) (65,772)
-------- -------- -------- ---------
Balance--April 30, 2000................... $(88,805) $(88,805) $(59,201) $(236,811)
======== ======== ======== =========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements.
F-42
PPCT PRODUCTS, LLC
STATEMENTS OF CASH FLOWS
JANUARY 19, 1999
FOR THE FOUR MONTHS (DATE OF INCEPTION)
ENDED APRIL 30, 2000 TO DECEMBER 31, 1999
--------------------- ---------------------
Cash flows from operating activities:
Net loss............................................... $(65,772) $(172,039)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 6,485 17,333
Change in assets and liabilities:
(Increase) decrease in accounts receivable........... 64,889 (73,293)
(Increase) decrease in inventory..................... 4,198 (6,673)
(Increase) decrease in due to/from affiliated
company............................................ (53,550) 9,255
(Increase) decrease in prepaid assets................ 827 (3,715)
(Increase) in intangible assets...................... -- (6,855)
Increase (decrease) in accounts payable and in
accrued liabilities................................ (9,870) 57,286
-------- ---------
Net cash used in operating activities.............. (52,793) (178,701)
-------- ---------
Cash flows from investing activities:
Purchase of equipment.................................. (5,965) (51,833)
Purchase of patents.................................... -- (152,700)
-------- ---------
Net cash used in investing activities.............. (5,965) (204,533)
-------- ---------
Cash flows from financing activities:
Net borrowings under line-of-credit agreement.......... 60,000 185,000
Borrowings from members................................ -- 200,000
-------- ---------
Net cash provided by financing activities.......... 60,000 385,000
-------- ---------
Net Increase in cash..................................... 1,242 1,766
Cash at beginning of period.............................. 1,766 --
-------- ---------
Cash at end of period.................................... $ 3,008 $ 1,766
======== =========
Supplemental disclosures of cash flows information:
Interest paid.......................................... $ 21,290 $ 54,588
======== =========
The accompanying notes are an integral part of these financial statements.
The auditors' report should be read in conjunction with these financial
statements.
F-43
PPCT PRODUCTS, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
The Company is a Florida Limited Liability Company, duly organized under
applicable laws and statutes, and is engaged in the manufacture of a telescoping
baton used principally by law enforcement personnel.
ACCOUNTS RECEIVABLE
Bad debts are accounted for by the allowance method. As of April 30, 2000
and 1999, the Company considers the accounts receivable to be fully collectible.
INVENTORY
Inventory which consists of finished goods, is valued at the lower of cost
or market using the average cost method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company follows the practice
of charging expenditures for additions or major replacements to the asset
accounts. When assets are retired or otherwise disposed, the cost or other basis
thereof, and the related accumulated depreciation are eliminated from the
respective accounts with any gain or loss being recognized in that period.
The Company provides for depreciation using the straight-line method of
depreciation for machinery and equipment and furniture and fixtures with useful
lives of five and seven years.
INCOME TAXES
No provision for federal or state income taxes has been made in the
financial statements since the Company's profit and losses are reported on the
individual members' tax return.
INTANGIBLE ASSETS
Intangible assets consist principally of patents and organization costs. The
Company amortizes the patent costs over fifteen years using the straight-line
method. In addition organization costs are being amortized over a sixty-month
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 the 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 could differ from those estimates.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist mainly of accounts receivable,
accounts payable and notes payable. The carrying amounts of accounts receivable,
concentration of credit risk, accounts payable and notes payable approximate
fair value.
F-44
PPCT PRODUCTS, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables. The Company is a distributor of a
telescoping baton. Its customers consist of distributors, dealers and
municipalities.
NOTE 2. GOING CONCERN
The accompanying financial statements have been presented in accordance with
generally accepted accounting principles, which assumes the continuity of the
Company as a going concern. However, during the period ending April 30, 2000 and
December 31, 1999, the Company experienced, and continues to experience, certain
going concern and liquidity problems. The Company has incurred net losses of
$65,772 and $172,039 for the periods ending April 30, 2000 and December 31,
1999. This condition raises substantial doubt to the ability of the Company to
continue as a going concern.
The Management's plans with regard to this matter are summarized in Note 8,
Subsequent Events. The eventual outcome of the success of management's plans
cannot be ascertained with any degree of certainly. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainly.
NOTE 3. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
APRIL 30, 2000 DECEMBER 31, 1999
-------------- -----------------
Machinery and equipment..................................... $55,965 $50,000
Furniture and fixtures...................................... 1,833 1,833
------- -------
57,798 51,833
Less accumulated depreciation............................... (9,379) (6,744)
------- -------
$48,419 $45,089
======= =======
Depreciation expense was $2,635 for 2000 and $6,744 for 1999.
NOTE 4. NOTES PAYABLE
APRIL 30, 2000 DECEMBER 31, 1999
--------------- ------------------
Note payable to bank on revolving line of credit which
provides for aggregate borrowings of up to $250,000.
Interest at prime plus 2.5% is payable monthly. Principal
is due October 20, 2000. Secured by substantially all the
assets of the Company and by a certificate of deposit
hypothecated by a member in the amount of $150,000........ $245,000 $185,000
======== ========
F-45
PPCT PRODUCTS, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. NOTES PAYABLE (CONTINUED)
The company was indebted to two of its members and an affiliated company
with whom the company shares common ownership.
APRIL 30, 2000 DECEMBER 31, 1999
--------------- ------------------
Due to members, notes were due April 30, 2000, however, they
were revised with the due date extended to April 30, 2001,
with interest at 14% per annum paid quarterly. The notes
are guaranteed by the affiliated company, Mixson Corp..... $150,000 $150,000
Due to affiliated company, note was due April 30, 2000,
however it was revised with the due date extended to
April 30, 2001, with interest at 14% per annum paid
quarterly................................................. 50,000 50,000
-------- --------
$200,000 $200,000
======== ========
NOTE 5. RELATED PARTY TRANSACTIONS
The Company has entered into a management agreement with Mixson Corp.
(Mixson) which has the same common stockholders as PPCT Products, LLC members.
Under this agreement Mixson provides warehousing, accounting, sales and
administrative services in addition to the use of its facilities to the Company.
The agreement provides that the fee for these services be calculated at 4% of
PPCT sales and in addition all direct expenses will be reimbursed to Mixson as
well as an allocation of Mixson's fixed expenses. The amount paid by the Company
to Mixson for the periods April 30, 2000 and December 31, 1999 was $56,556 and
$143,977 respectively.
NOTE 6. MAJOR CUSTOMERS
For the year ended December 31, 1999, sales to one customer was
approximately $460,000 which comprised approximately 78% of total sales. The
loss of this customer could have a detrimental effect on the Company's future
operations.
NOTE 7. COMMITMENT
The Company in November 1999 entered into an agreement for the exclusive
manufacturing rights for a baton. To obtain this agreement, the Company paid
legal fees approximately $117,000, during the year ended December 31, 1999. The
agreement called for the Company to pay past royalties amounting to $50,000 and
pay future royalties based on 10% of sales on a quarterly basis.
NOTE 8. SUBSEQUENT EVENTS
During July 2000, Mixson Corp., PPCT Products, LLC (affiliated company)
(collectively "seller") and Speed Release Lock Company ("Purchaser") entered
into discussion with respect to the proposed acquisition by the purchaser of the
business of the seller in exchange for all of the outstanding capital stock of
seller. The purchasers' consideration for the seller shares will consist of
common stock of purchaser in an amount equal to 90% of total issued and
outstanding shares of purchaser. This transaction will in effect be deemed a
reverse acquisition hereby Mixson Corp. will be the new entity, consolidating
PPCT Products, LLC and Speed Release Lock Company. In connection with this
proposed acquisition, the company expects to raise capital through a proposed
public offering of securities. As of this date no registration document relating
to this proposed offering has been filed and management cannot determine at this
time the eventual outcome of this proposed offering.
F-46
PPCT PRODUCTS, LLC
BALANCE SHEETS
(UNAUDITED)
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
ASSETS
Current assets:
Cash...................................................... $ 4,288 $ 66,141
Accounts receivable....................................... 18,853 1,938
Receivable--other......................................... 1,000 --
Inventory................................................. 6,948 1,896
Prepaid assets............................................ 1,930 --
Due from affiliated company............................... 124,880 90,032
--------- --------
Total current assets.................................... 157,899 160,007
Property and equipment, net................................. 44,281 42,853
Other assets:
Intangible assets, net of accumulated amortization of
$20,215 and $7,634...................................... 139,340 150,663
Deposits.................................................... -- 7,500
--------- --------
Total other assets...................................... 139,340 158,163
--------- --------
Total assets............................................ $ 341,520 $361,023
========= ========
LIABILITIES AND MEMBERS' CAPITAL (CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable and accrued expenses..................... $ 63,361 $107,315
Note payable bank......................................... 250,000 60,000
Notes payable-members..................................... 325,000 200,000
--------- --------
Total current liabilities............................... 638,361 367,315
Members' Capital (Deficiency)............................. (296,841) (6,292)
--------- --------
Total liabilities and Members' Capital (Deficiency)..... $ 341,520 $361,023
========= ========
F-47
PPCT PRODUCTS, LLC
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE FOR THE SIX FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
OCTOBER 31, 2000 OCTOBER 31, 2000 OCTOBER 31, 1999 OCTOBER 31, 1999
---------------- ---------------- ---------------- ----------------
Revenue................................. $ 45,383 $127,085 $ 33,794 $451,462
Cost of sales........................... 16,319 44,191 14,633 163,526
-------- -------- -------- --------
Gross profit............................ 29,064 82,894 19,161 287,936
Selling, general and administrative
expenses.............................. 47,794 109,758 79,140 211,750
-------- -------- -------- --------
Operating income (loss)................. (18,730) (26,864) (59,979) 76,186
Other expenses:
Interest expense...................... (16,771) (33,166) (6,672) (45,265)
-------- -------- -------- --------
Total other expenses................ (16,771) (33,166) (6,672) (45,265)
-------- -------- -------- --------
Net income (loss)....................... $(35,501) $(60,030) $(66,651) $ 30,921
======== ======== ======== ========
F-48
PPCT PRODUCTS, LLC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE FOR THE SIX FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
OCTOBER 31, 2000 OCTOBER 31, 2000 OCTOBER 31, 1999 OCTOBER 31, 1999
---------------- ---------------- ---------------- ----------------
Cash flows from operating acitivites:
Net income (loss)..................... $(35,501) $ (60,030) $(66,651) $ 30,921
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 4,957 9,914 5,107 9,438
Change in assets and liabilities:
(Increase) decrease in accounts
receivable........................ (14,522) (9,449) 3,061 19,180
(Increase) in receivable-other...... (1,000) (1,000) -- --
(Increase) due from affiliated
company........................... (32,894) (80,585) (44,714) (104,009)
(Increase) decrease in inventory.... (307) (4,473) 2,419 6,480
Decrease in prepaid assets.......... 511 958 -- --
(Increase) in intangible assets..... -- -- (5,597) (5,597)
Increase (decrease) in accounts
payable........................... 7,845 15,945 70,575 49,554
-------- --------- -------- ---------
Net cash used in operating
activities...................... (70,911) (128,720) (35,800) 5,967
-------- --------- -------- ---------
Cash flows from financing activities:
Net borrowings under line-of-credit
agreement........................... -- 5,000 60,000 60,000
Borrowings from members............... 75,000 125,000 -- --
-------- --------- -------- ---------
Net cash provided by financing
activities...................... 75,000 130,000 60,000 60,000
-------- --------- -------- ---------
Net (decrease) increase in cash......... 4,089 1,280 24,200 65,967
Cash at beginning of period............. 199 3,008 41,941 174
-------- --------- -------- ---------
Cash at end of period................... $ 4,288 $ 4,288 $ 66,141 $ 66,141
======== ========= ======== =========
Supplemental disclosures of cash flows
information:
Interest paid......................... $ 3,359 $ 14,502 $ 6,672 $ 45,265
======== ========= ======== =========
F-49
PPCT PRODUCTS, LLC
STATEMENT OF CHANGES IN MEMBERS' CAPITAL (DEFICIENCY)
(UNAUDITED)
GERALD
JOSEPH ROTMIL O'CONNELL HOLSTER, LLC TOTAL
------------- ------------- ------------ ---------
January 20, 1999,
Members' Capital Contribution............. $ 375 $ 375 $ 250 $ 1,000
Net loss.................................. (64,515) (64,515) (43,009) (172,039)
--------- --------- -------- ---------
Balance--December 31, 1999................ (64,515) (64,140) (42,759) (171,039)
Net loss.................................. (24,665) (24,665) (16,442) (65,772)
--------- --------- -------- ---------
Balance--April 30, 2000................... (88,805) (88,805) (59,442) (236,811)
Net loss.................................. (9,199) (9,199) (6,131) (24,529)
--------- --------- -------- ---------
Balance--July 31, 2000.................... (98,004) (98,004) (65,332) 261,340
Net loss.................................. (13,313) (13,313) (8,875) (35,501)
--------- --------- -------- ---------
Balance--October 31, 2000................. $(111,317) $(111,317) $(74,207) $(296,841)
========= ========= ======== =========
F-50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection with
the issuance and distribution of the securities being offered:
SEC Registration Fee........................................ $ 2,022
Transfer Agent Fee.......................................... 5,000
Blue Sky Fees and Expenses.................................. 25,000
Accounting Fees and Expenses................................ 50,000
Legal Fees and Expenses..................................... 200,000
Printing and Engraving Expenses............................. 85,000
Miscellaneous............................................... 7,978
--------
Total................................................... $375,000
========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XI of the Registrant's Certificate of Incorporation provides that
the Registrant shall indemnify its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law ("DGCL").
Section 145 of the DGCL permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees or agents against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by third parties by reason of the fact that
they were or are directors, officers, employees or agents of the corporation, if
such directors, officers, employees or agents acted in good faith and in a
manner that they reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. In a
derivative action (I.E. one by or in right of the corporation), indemnification
may be made only for expenses actually and reasonably incurred by directors,
officers, employees or agents in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made if such persons shall have been adjudged liable to the
corporation, unless and only to the extent that the court in which the action or
suit was brought shall determine upon application that the defendant directors,
officers, employees or agents are fairly and reasonably entitled to indemnify
for such expenses, despite such adjudication or liability.
Section 102(b)(7) of the DGCL permits a corporation organized under Delaware
law to eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director subject to certain limitations. Article X of the Registrant's
Certificate of Incorporation includes the following provision:
No director of the Corporation shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary duty
as a director of the Corporation; PROVIDED, HOWEVER, that the foregoing is
not intended to eliminate or limit the liability of a director of the
Corporation for (i) any breach of a director's duty of loyalty to the
Corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) a
violation of Section 174 of the Delaware General Corporation Law, or
(iv) any transaction from which the director derived an improper personal
benefit. No amendment to or
II-1
repeal of this Article 10 shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for or with respect
to any acts or omissions of such director occurring prior to such amendment.
The Registrant may purchase and maintain insurance on behalf of any person
who is or was a director, officer, fiduciary or agent of the Registrant against
any liability asserted against and incurred by such person in any such capacity
or arising out of such person's position, whether or not the Registrant would
have the power to indemnify against such liability under the provisions of the
Certificate of Incorporation or the Bylaws of the Registrant.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
- In October 1999, Speed Release Lock Company, a Texas corporation ("Speed
Release--Texas"), issued 2,778 shares of its common stock to TTI
Industries, Incorporated in exchange for 447,576 shares of TTI's common
stock.
- In November 1999, Speed Release--Texas, issued 15,000 shares of its common
stock to Steve Bedowitz, its principal stockholder, in exchange for his
cancellation of $900,000 of indebtedness owed to him by that company.
- Speed Release Lock Company, a Delaware corporation, ("Speed
Release--Delaware") was organized in March 2000, and merged with Speed
Release--Texas, in March 2000. As a result of the merger, each share of
common stock of Speed Release--Texas was converted into 360 shares of
common stock of Speed Release--Delaware, with the result that 10,000,080
shares of common stock of Speed Release--Delaware, were issued to the
former shareholders of Speed Release--Texas.
- In December, 2000, Speed Release--Delaware issued 1,035,999 shares of its
common stock to Steve Bedowitz, its principal stockholder, in exchange for
his cancellation of $1,553,998 of principal and interest on indebtedness
owed to him by Speed Release--Delaware.
- Speed Release--Delaware merged with Mixson Corp., a Florida corporation,
in December 2000. As a result of this merger, all of the issued and
outstanding common stock held by three shareholders of Mixson Corp. were
converted into an aggregate of 7,022,258 shares of Speed Release--Delaware
common stock.
- Speed Release--Delaware acquired all of the membership interest in PPCT
Products, LLC, a Florida limited liability company, in December 2000, in
exchange for issuing 2,910,214 shares of common stock of Speed
Release--Delaware to the three members of PPCT Products, LLC.
Each of these issuances was effected in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
- --------------------- ---------------------- --------
2.1 Agreement and Plan of Merger, dated March 28, 2000, by and
between Speed Release Lock Company, a Texas corporation,
and Speed Release Lock Company, a Delaware corporation(1)
2.2 Agreement, by and among Speed Release Lock Company, a
Delaware corporation, Mixson Corp., a Florida corporation,
and PPCT Products, LLC, a Florida limited liability
company, dated November 30, 2000
II-2
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
- --------------------- ---------------------- --------
2.3 Certificate of Merger of Mixson Corp., a Florida
corporation, with Speed Release Lock Company, a Delaware
corporation, dated January 29, 2001
3.1 Certificate of Incorporation(1)
3.2 Amendment to Certificate of Incorporation, effective
January 5, 2001
3.3 Bylaws(1)
4.1 Specimen Certificate for Shares of Common Stock
5.1 Form of Opinion of Baker & McKenzie
10.1 Promissory Note executed by Speed Release Lock Company on
February 8, 2000 and held by North Dallas Bank & Trust
Co.(1)
10.2 Escrow Agreement, dated as of , 2000, between
Mixson Corporation and Chase Bank of Texas, N.A., as
escrow agent(2)
10.3 Promissory Note, dated April 30, 2000, in the principal
amount of $50,0000 payable to Mixson Corp. by PPCT
Products, LLC
10.4 Promissory Note, dated June 6, 2000, in the principal amount
of $50,000 payable to Gerald F. O'Connell by PPCT
Products, LLC
10.5 Promissory Note, dated August 21, 2000, in the principal
amount of $37,500 payable to Gerald F. O'Connell by PPCT
Products, LLC
10.6 Promissory Note, dated April 30, 2000, in the principal
amount of $75,000 payable to Gerald F. O'Connell by PPCT
Products, LLC
10.7 Promissory Note, dated August 22, 2000, in the principal
amount of $37,500 payable to Marc E. Bercoon by PPCT
Products, LLC
10.8 Promissory Note, dated April 30, 2000, in the principal
amount of $75,000 payable to Holster, LLC by PPCT
Products, LLC
10.9 Promissory Note, dated October 29, 2000, in the principal
amount of $250,000 payable to SouthTrust Bank, NA by PPCT
Products, LLC
10.10 Commercial Security Agreement dated October 29, 2000 by PPCT
Products, LLC in favor of SouthTrust Bank, NA
10.11 Commercial Guaranty, dated October 29, 2000, by Joseph
Rotmil in favor of SouthTrust Bank, NA
10.12 Commercial Guaranty, dated October 29, 2000, by Gerald
O'Connell in favor of SouthTrust Bank, NA
10.13 Commercial Guaranty, dated October 29, 1999, by Mixson Corp.
in favor of SouthTrust Bank, NA
10.14 Commercial Guaranty, dated October 29, 1999, by Holster, LLC
in favor of SouthTrust Bank, NA
10.15 Loan Workout Agreement, dated August 2, 1999, by and among
Mixson Corp., Eastern National Bank, Joseph Rotmil and
Gerald O'Connell
10.16 Television Marketing Agreement, dated November 1, 2000, by
and between American Media Group, Inc. and PPCT
Products, LLC(2)
10.17 Television Marketing Agreement, dated November 8, 2000, by
and between American Media Group, Inc. and Mixson
Corporation(2)
II-3
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
- --------------------- ---------------------- --------
10.18 Promissory Note, dated September 26, 2000, in the principal
amount of $50,0000 payable to Steve Bedowitz by Mixson
Corporation
10.19 Form of Amended and Restated Promissory Note in the
principal amount of $150,0000 payable to Steve Bedowitz by
Mixson Corporation
23.1 Consent of Baker & McKenzie (included in Exhibit 5.1)
23.2 Consent of Davis, Kinard & Co., P.C.
23.3 Consent of Berkovits, Lago & Company, LLP
24.1 Powers of Attorney (contained on page S-1)
- ------------------------
(1) Previously filed.
(2) To be filed by amendment.
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth
therein is not applicable or is included elsewhere in the Financial Statements
or the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of 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. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, 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 this type of indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against these kind of 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 a 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 this type of
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of this issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, we have reasonable
grounds to believe that we meet all of the requirements for filing on Form S-1
and have duly caused this Registration Statement to be signed on our behalf by
the undersigned, thereunto duly authorized, in Dallas, Texas, on March 2, 2001.
MIXSON CORPORATION
By: /s/ JOSEPH A. ROTMIL
-----------------------------------------
Joseph A. Rotmil
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and directors
of Mixson Corporation, a Delaware corporation, which is filing a Registration
Statement on Form S-1 with the Securities and Exchange Commission, Washington,
D.C. 20549 under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), hereby constitute and appoint Joel Held or Lawrence B.
Mandala, or either of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign such Registration Statement
and any or all amendments, including post-effective amendments, to the
Registration Statement, including a Prospectus or an amended Prospectus therein
and in any registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act and all other
documents in connection therewith to be filed with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and to each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact as agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons, in the capacities indicated
below, on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
President and Director
/s/ JOSEPH A. ROTMIL (Principal Executive and
------------------------------------------- Principal Financial and March 2, 2001
Joseph A. Rotmil Accounting Officer)
/s/ STEVE BEDOWITZ
------------------------------------------- Director March 2, 2001
Steve Bedowitz
/s/ MARC BERCOON
------------------------------------------- Director March 2, 2001
Marc Bercoon
/s/ GERALD O'CONNELL
------------------------------------------- Director March 2, 2001
Gerald O'Connell
S-1
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
- --------------------- ---------------------- --------
2.1 Agreement and Plan of Merger, dated March 28, 2000, by and
between Speed Release Lock Company, a Texas corporation,
and Speed Release Lock Company, a Delaware corporation(1)
2.2 Agreement, by and among Speed Release Lock Company, a
Delaware corporation, Mixson Corp., a Florida corporation,
and PPCT Products, LLC, a Florida limited liability
company, dated November 30, 2000
2.3 Certificate of Merger of Mixson Corp., a Florida
corporation, with and into Speed Release Lock Company, a
Delaware corporation, dated January 29, 2001
3.1 Certificate of Incorporation(1)
3.2 Amendment to Certificate of Incorporation, effective
January 5, 2001
3.3 Bylaws(1)
4.1 Specimen Certificate for Shares of Common Stock
5.1 Form of Opinion of Baker & McKenzie
10.1 Promissory Note executed by Speed Release Lock Company on
February 8, 2000 and held by North Dallas Bank & Trust
Co.(1)
10.2 Escrow Agreement, dated as of , 2000, between
Mixson Corporation and Chase Bank of Texas, N.A., as
escrow agent(2)
10.3 Promissory Note, dated April 30, 2000, in the principal
amount of $50,0000 payable to Mixson Corp. by PPCT
Products, LLC
10.4 Promissory Note, dated June 6, 2000, in the principal amount
of $50,000 payable to Gerald F. O'Connell by PPCT
Products, LLC
10.5 Promissory Note, dated August 21, 2000, in the principal
amount of $37,500 payable to Gerald F. O'Connell by PPCT
Products, LLC
10.6 Promissory Note, dated April 30, 2000, in the principal
amount of $75,000 payable to Gerald F. O'Connell by PPCT
Products, LLC
10.7 Promissory Note, dated August 22, 2000, in the principal
amount of $37,500 payable to Marc E. Bercoon by PPCT
Products, LLC
10.8 Promissory Note, dated April 30, 2000, in the principal
amount of $75,000 payable to Holster, LLC by PPCT
Products, LLC
10.9 Promissory Note, dated October 29, 2000, in the principal
amount of $250,000 payable to SouthTrust Bank, NA by PPCT
Products, LLC
10.10 Commercial Security Agreement dated October 29, 2000 by PPCT
Products, LLC in favor of SouthTrust Bank, NA
10.11 Commercial Guaranty, dated October 29, 2000, by Joseph
Rotmil in favor of SouthTrust Bank, NA
10.12 Commercial Guaranty, dated October 29, 2000, by Gerald
O'Connell in favor of SouthTrust Bank, NA
10.13 Commercial Guaranty, dated October 29, 1999, by Mixson Corp.
in favor of SouthTrust Bank, NA
10.14 Commercial Guaranty, dated October 29, 1999, by Holster, LLC
in favor of SouthTrust Bank, NA
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
- --------------------- ---------------------- --------
10.15 Loan Workout Agreement, dated August 2, 1999, by and among
Mixson Corp., Eastern National Bank, Joseph Rotmil and
Gerald O'Connell
10.16 Television Marketing Agreement, dated November 1, 2000, by
and between American Media Group, Inc. and PPCT
Products, LLC(2)
10.17 Television Marketing Agreement, dated November 8, 2000, by
and between American Media Group, Inc. and Mixson
Corporation(2)
10.18 Promissory Note, dated September 26, 2000, in the principal
amount of $50,0000 payable to Steve Bedowitz by Mixson
Corporation
10.19 Form of Amended and Restated Promissory Note in the
principal amount of $150,0000 payable to Steve Bedowitz by
Mixson Corporation
23.1 Consent of Baker & McKenzie (included in Exhibit 5.1)
23.2 Consent of Davis, Kinard & Co., P.C.
23.3 Consent of Berkovits, Lago & Company, LLP
24.1 Powers of Attorney (contained on page S-1)
- ------------------------
(1) Previously filed.
(2) To be filed by amendment.