-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GgNB+nu2rsRTde+APN/cPWbCChv9RehldBLxC82YarzVEOEoqyk0+gcc1H4UHk6Q lBiQ57RhC0H0t8OjhAMCbA== 0001014909-00-000073.txt : 20000331 0001014909-00-000073.hdr.sgml : 20000331 ACCESSION NUMBER: 0001014909-00-000073 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTER TECH CORP CENTRAL INDEX KEY: 0001021725 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841349553 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-21275 FILM NUMBER: 587777 BUSINESS ADDRESS: STREET 1: 430 EAST 6TH STREET CITY: LOVELAND STATE: CO ZIP: 80537 BUSINESS PHONE: 9706695292 MAIL ADDRESS: STREET 1: 430 EAST 6TH STREET CITY: LOVELAND STATE: CO ZIP: 80537 FORMER COMPANY: FORMER CONFORMED NAME: WALNUT CAPITAL INC DATE OF NAME CHANGE: 19960828 10KSB 1 12 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM l0-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended: December 31, 1999 Commission File No- 0-21275 ENTER TECH CORP. ----------------------------------------------------------------- (Exact Name of Small Business Issuer as specified in its Charter) (Formerly Known as Walnut Capital, Inc.) NEVADA 84-1349553 - ------------------------------- ------------------------ (State or other Jurisdiction of (I.R.S. Employer Identi- Incorporation or Organization) fication Number) 430 East 6th Street, Loveland, Colorado 80537 ----------------------------------------------------------- (Address of principal executive offices including zip code) Issuer's Telephone Number, Including Area Code: (970) 669-5292 Securities Registered Pursuant to Section 12(b) of the Act: None. Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.0001 Par Value Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-8 is not contained in this Form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] The aggregate market value of the Issuer's common stock held by non-affiliates as of March 24, 2000 (valued at the average of the bid and asked price as of February 18, 2000) was $8,532,000. The Issuer had no revenues in its most recent fiscal year. As of March 24, 2000, a total of 7,783,000 shares of common stock were outstanding. Documents incorporated by reference. There are no (1) annual report to security holders; (2) proxy or information statements; or (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act") incorporated by reference herein. Traditional Small Business Disclosures Format (Check one): Yes No X --- --- PART I ITEM 1. DESCRIPTION OF BUSINESS. GENERAL AND HISTORY Enter Tech Corp., formerly known as Walnut Capital, Inc. (the "Company"), was incorporated on July 1, 1996, under the laws of the State of Nevada, to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since inception and has no operations to date. The Company's offices are located at 430 East 6th Street, Loveland, Colorado 80537, and its telephone number is (970) 669- 5292. In October 1996, the Company filed a registration statement with the Securities and Exchange Commission on Form 10-SB, whereby it registered its common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "34 Act"). On June 2, 1998, the Company completed a merger of the Company and Links, Ltd., a Wyoming corporation, whereby the Company was the survivor. Pursuant to the Articles of Merger filed in the respective States of Nevada and Wyoming, the Company's name was changed from Walnut Capital, Inc. to Enter Tech Corp. to more accurately describe the proposed business of the Company. Pursuant to the Agreement and Plan of Merger, the Company was to issue 2,400,000 shares of its common stock to the sole shareholder of Links, Ltd., Mach One Corporation, a public company. Prior to the merger transaction the Company had 1,250,000 shares of its common stock issued and outstanding, of which 835,000 shares were to be reallocated as part of the merger transaction. On the effective date of the merger transaction, the Company had 3,650,000 shares of its common stock issued and outstanding. Thus, Mach One Corporation then owned approximately 65.7% of the issued and outstanding common stock of the Company. At March 24, 2000, it owned about 7.4% of the Company. Following the merger with Links, Ltd., the Company attempted to develop a prototype of a proposed kiosk, or vending machine, through which to market computer software, music and possibly digital video products. The Company was unsuccessful in developing this prototype. The prototype became obsolete and could not be mass-produced on terms commercially favorable to the Company. On January 7, 2000, the Company, Shopping Mall On-line, Inc. ("Shopping Mall On-line"), a Washington corporation, and Robert Pratt ("Pratt") entered into an agreement (the "Agreement"), pursuant to which, among other things, the Company acquired 80% of the outstanding common stock of Shopping Mall On-line from Pratt. Shopping Mall On-line is developing a concept for an Internet shopping mall and related e-commerce technology. The consideration for the acquisition of the common stock of Shopping Mall On-line was 2,400,000 shares of the Company's common stock. The Agreement also provides that if for any reason the Company's common stock is not trading above a $1.00 bid price at the time the Rule 144 restrictive legend on the stock certificate for the 2,400,000 shares of the Company's common stock is removed, the Company will issue additional shares of its common stock to Pratt. The value of the additional shares to be issued will be equal to the difference between $2.4 million and the value of the 2,400,000 shares of common stock issued to Pratt under the Agreement based on the then existing bid price. The Agreement also provides the voting rights with respect to the common stock of Shopping Mall On-line will remain with Pratt until the restrictive legend on the 2,400,000 shares of the Company's common stock is removed. If for any reason the Company is declared insolvent or files for bankruptcy protection after the date of the Agreement until the restrictive legend on the Company's common stock is removed, Shopping Mall On-line will have the right to rescind the Agreement. Shopping Mall On-line has the right under the Agreement to appoint one person nominated by Pratt to the board of directors of the Company. 2 Shopping Mall On-line is a private company which prior to the foregoing transaction was owned solely by Pratt. Pratt is also the principal owner of Integrity Capital, Inc. Integrity Capital provides investor relation services to the Company including, but not limited to: o posting information about the Company on Integrity Capital's Web site; o contacting broker-dealers to discuss the Company's plan of operation; o assisting the Company with its press releases; and o introducing the Company to accredited and institutional investors for the Company's potential financing activities. On February 8, 2000, the Company signed a non-binding letter of intent with WavePower, Inc. which document contemplates the acquisition by the Company of 80% of WavePower, Inc. for approximately 5,000,000 restricted shares of the Company's common stock. In addition, in the non-binding letter of intent, the Company has agreed to reserve 3,000,000 shares of its 5,000,000 shares of preferred stock for issuance as further payment for the WavePower, Inc. acquisition provided future performance conditions are met. The companies are now performing due diligence evaluations. In March 2000, the Company signed a Stock Purchase and Subscription Agreement whereby The Reserve Foundation Trust (the "Trust") is to purchase 6,000,000 restricted shares of the Company's common stock for $10 million through a private placement, provided that all conditions to the purchase closing are fulfilled. According to the terms of the Stock Purchase and Subscription Agreement, the full transfer of funds is to be completed by May 1, 2000, if the closing conditions are satisfied. Demand registration rights after January 1, 2001 and piggyback registration rights are to be granted to the Trust if the transaction closes. Upon signing the Stock Purchase and Subscription Agreement, the Trust provided the Company with $50,000 in interim financing, which may subsequently be increased to a total of $250,000. This debt is to be repaid upon final funding of the private placement. The Reserve Foundation Trust financing is contingent upon the Company, by May 1, 2000, completing the WavePower, Inc. acquisition and "duly" filing its "annual report on Form 10-K or 10-KSB for the year ended December 31, 1999." DESCRIPTION OF BUSINESS The Company is a successor to Links, Ltd., a Wyoming corporation, incorporated on August 18, 1997, which was a wholly-owned subsidiary of Mach One and was a development stage company for accounting purposes. The Company and its predecessor has had no revenues from operations from its inception. Links, Ltd. was incorporated for the purpose of developing kiosks, or vending machines, through which to market computer software, music and possibly digital video products. As conceived, each kiosk vending machine would have software, music and eventually digital video stored on disks, hard drives or available through internet servers and potential customers would place an order into the machine to purchase software, music and eventually digital television from a menu, triggering the machine to imprint the product on a compact disc ("CD"). As conceived, the CD imprint time is expected to take approximately 3-4 minutes, at which time the CD would be ejected from the kiosk to the waiting customer. Purchases would be made by use of credit cards or so-called smart cards read by the kiosk. As conceived, each kiosk would be linked by telephone line and computer modem to the Company's administrative offices to permit monitoring, performance analysis, addition and subtraction of software and music selections and eventually digital television selections. Further the telephone and computer modem would permit confirmation of credit card and smart card purchases. The Company has not developed a kiosk that may be produced and sold to the public. Links, Ltd. had, through outside vendors and some in-house expertise, constructed a prototype of a proposed kiosk at the time of the merger 3 transaction. That prototype became obsolete and could not be mass-produced on terms commercially favorable to the Company. During 1998 and 1999 the Company hired outside vendor/engineering firms to design plans for the components and software to be used in the kiosks. A design was developed for the kiosk, but no purchase was made of any components to construct a prototype of the kiosk. That design for the kiosk has not been tested. The Company will need to construct an entirely new prototype of the kiosk based on its concept for the kiosk and have that prototype tested before it is able, if at all, to mass-produce the kiosks. The Company was not able to begin construction of a prototype of a kiosk during the previous 12 months; however, it is anticipated that it may be able to move forward with a prototype and construction of units in the next 12 to 18 months. The Company has in the past used software and hardware developed by third parties to construct prototypes of the kiosks. The Company anticipates that any future prototypes of the kiosk that it may construct, of which there is not any assurance, will be made with software and hardware developed by third parties. There is no assurance that the kiosks will function as planned if the Company is able to develop the kiosks or be manufactured at a unit cost commercially favorable to the Company. All of these factors will bear on the Company's ability to generate revenues from sales, if any. Shopping Mall On-line will provide web hosting services and provide exposure to small and medium-size businesses for both consumer and business to business e-commerce activity. They will also act as an aggregate site for advertising and promoting businesses on the web. Revenues will be generated from hosting, training, banner advertisements and a percentage of sales from customers. Negotiations are currently underway with several major mall developers and retailers who have expressed an interest in Shopping Mall On-line's branding and marketing strategies. One such group has expressed interest in a beta-test of the kiosk in combination with Shopping Mall On-line in a yet to be determined number of malls nationally and in Canada. No assurances can be made as to whether or not such partnerships or relationships with mall developers or retailers will be established. COMPETITION The area of business related to the kiosk and on-line shopping services in which the Company intends to engage is crowded with many vendors and marketers, ranging from small to some of the largest retail companies. There can be no guarantee that the Company will be able to successfully market any product it may develop or to become profitable. At this time, the Company has no patent or proprietary protection with respect to its kiosk or on-line shopping services concepts, and, therefore, there is nothing to prevent anyone else from pursuing these potential lines of business. EMPLOYEES As of December 31, 1999, the Company had one full time employee, who was also an officer of the Company. It is anticipated that if pending conditional financing is obtained additional employees will be added during the year 2000 as needed. See MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. ITEM 2. DESCRIPTION OF PROPERTY. Since June of 1998, the Company has maintained its corporate offices, manufacturing, research and distribution facilities in leased premises located at 430 East 6th Street, Loveland, Colorado 80537. The facilities are leased from an entity owned by Bill Thomas, a principal shareholder of the Company. The lease has a monthly rental of $1,500.00 plus certain common area expenses. The premises contain approximately 750 square feet. 4 Company's management believes the present facilities are adequate for its present needs. There are similar facilities available at comparable rates in the adjacent area to the present location. The Company believes it would be able to readily move to other facilities, if the present lease is not renewed. Shopping Mall Online, Inc., the Company's subsidiary, occupies leased premises at 914 Citadel Drive, unit B-1, Everson, Washington 98247 under a lease expiring March 31, 2002. The facilities contain approximately 3,600 square feet at a monthly rental of $2,600.00 plus common area expenses. They are deemed to be adequate for the subsidiary's present and anticipated needs during the lease term. The facilities have been outfitted with fiber optic cable which facilitates conducting an e-commerce business there. ITEM 3. LEGAL PROCEEDINGS. Except as set forth herein the Company is not a party to any material pending legal proceedings; nor are any such proceedings involving the Company contemplated by a governmental authority to the knowledge of the Company. On February 24, 2000, the Company initiated a civil action by it against Jerry Stiles a/k/a Gerald Stiles, a former officer of and consultant to the Company, in the District Court of Douglas County Colorado. The Company claims that: (i) Mr. Stiles agreed to furnish services to the Company pursuant to an agreement with the Company dated July 1, 1998; (ii) Mr. Stiles failed to meet the performance standards set out in the agreement and his failure was intentional or willful and wanton; (iii) Mr. Stiles made material misrepresentations regarding his abilities, efforts and intentions; and (iv) the conduct of Mr. Stiles caused the Company material damages. The Company requests that: (i) the Court rescind the contract; and (ii) award the Company damages to be determined at trial. As of the date hereof, Mr. Stiles has requested extra time to respond to the Company's Complaint and has indicated he will bring counter-claims against the Company not now determinable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1999 through the solicitation of proxies or otherwise. 5 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock has been quoted on the OTC Bulletin Board under the symbol ENTR since May of 1999. To the knowledge of the Company there have been very few trading transactions in its common stock. The following table sets forth high and low bid prices of the common stock of the OTC Bulletin Board for the period indicated. The bid prices represent prices between dealers, which do not indicate retail markups, markdowns or commissions and the bid prices may not represent actual transactions. Quarter Ending: High Low --------------- ------- ----- May 1999 - June 1999 $1.8750 $.25 July 1999 - September 1999 $ .7815 $.25 October 1999 - December 1999 $1.1250 $.75 The number of record holders of common stock of the Company at March 24, 2000 was 50. The holders of common stock are entitled to receive dividends as may be declared by the Board of Directors out of funds legally available therefore. The Company has never declared any dividend. It does not anticipate declaring and paying any cash dividend in the foreseeable future. Information with respect to securities sold by the Company without registration of the securities under the Securities Act of 1933, as amended ("Securities Act") during the period from January 1, 1999 through March 24, 2000 and the sale of which has not been previously reported under the Securities Exchange Act of 1934, as amended is set forth in the following paragraphs. A. On November 1, 1999 the Company authorized the issuance of 10,000 shares of its common stock each to David Matus and Cliff Pettee. These shares were issued as compensation to Messrs. Matus and Pettee for services performed by them as directors of the Company. No person acted as an underwriter with respect to these sales and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to Company directors or former directors familiar with the Company; (iii) and issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. B. On November 20, 1999 the Company authorized the issuance to ProActive Corporation of 100,000 shares of its common stock and authorized the issuance of an additional 589,000 shares on March 14, 2000. These 689,000 shares were issued for consulting services rendered to the Company by ProActive. No person acted as an underwriter with respect to these issuances and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. C. On November 20, 1999, the Company authorized the issuance to D. William Thomas of 500,000 shares of its common stock. These 500,000 shares were issued to Mr. Thomas for services rendered by him to the 6 Company since its inception, as a Senior Consultant. No person acted as an underwriter with respect to these issuances and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. D. On November 20, 1999, the Company authorized the issuance of 100,000 shares of its common stock to Mr. A. W. Hogan. These 100,000 shares were issued to Mr. Hogan as compensation for services rendered by him to the Company as a consultant. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. E. On November 20, 1999 the Company authorized the issuance of 400,000 shares to Sam Lindsey, President and a director of the Company. These securities were issued to Mr. Lindsey for services performed by him as a director and officer of the Company. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. F. On November 20, 1999, the Company authorized the issuance of 25,000 shares of its common stock to Mr. Josh Foss, President of the Company from June of 1998 to May of 1999. These shares were issued to Mr. Foss as compensation for services performed for the Company as its President. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a former officer of the Company familiar with its affairs; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. G. On November 20, 1999, the Company authorized the issuance of a total of 4,000 shares of its common stock to five individuals who were shareholders of the Company. These shares were issued to the five persons for services rendered to the Company. No person acted as an underwriter with respect to these issuances and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to shareholders of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. 7 H. On November 20, 1999, the Company authorized the issuance of 5,000 shares of its common stock for consulting services to the Company rendered by Mr. Gary Crawford. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a consultant who was familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. I. On January 7, 2000 the Company authorized the issuance of 2,400,000 shares of its common stock to Mr. Robert J. Pratt. These shares were issued to Mr. Pratt in exchange for all of the outstanding stock of Shopping Mall Online, Inc. (See ITEM 1 - DESCRIPTION OF BUSINESS above). No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to Mr. Pratt after he had access to all the material information about the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. J. On March 20, 2000, the Company authorized the issuance of 10,000 shares of its common stock to Mark A. Thomas, a director of the Company. These shares were issued to Mr. Thomas as compensation for services rendered to the Company as a director. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefor. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a director of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. K. On March 15, 2000, the Company executed and entered into a Stock Purchase and Subscription Agreement with The Reserve Foundation Trust pursuant to which the purchaser has agreed to purchase 6,000,000 shares of the Company's common stock for $10,000,000, subject to the terms of the agreement (filed herewith as Exhibit 10.7). The agreement provides that the Company must duly file this Form 10-KSB and complete a specified corporate acquisition by May 1, 2000. No person acted or will act as an underwriter with respect to this issuance and no underwriting or sales commission will be paid thereon. These securities will be sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction not involving a public offering under Section 4(2) of the Securities Act and/or Rule 506 of Regulation D adopted thereunder. These securities will be: (i) acquired for investment; (ii) issued to an "accredited investor" as defined under the Securities Act, which had access to all material information about the Company; and (iii) the certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. 8 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. RESULTS OF OPERATIONS During the period from the Company's inception on July 1, 1996 until June 2, 1998, the Company engaged in no significant operations other than the search for possible acquisition candidates. No revenues were received by the Company during this period other than a limited amount of interest income. Since the Company's acquisition of Link's, Ltd. The Company has focused on developing a market for its products and on raising capital. The Company currently remains in the development stage and has generated no revenues as of December 31, 1999. LIQUIDITY AND CAPITAL RESOURCES As of the end of the reporting period, the Company had no material cash or cash equivalents. There was no significant change in working capital during this fiscal year. As of the December 31, 1999 management felt that the Company had inadequate working capital to pursue its proposed operations. To develop its operation, the Company must utilize additional capital which it must acquire, either itself or with joint venture partners or investors. The Company had not entered into any agreement with a partner as of December 31, 1999 but expected to require additional financing for its operations. The Company cannot predict when its funding program will occur. As of December 31, 1999, the Company had no material commitments for capital expenditures. The Company has no plans to pay dividends to its shareholders. Even though there were no significant changes in revenues or working capital during the fiscal year 1999, prior to December 31, 1999, several contacts were made with prospective private placement partners with a view towards the company's acquisition plans. With favorable interest generated, the company proceeded subsequent to December 31, 1999 to implement its acquisition strategy. The Company acquired 80% of Shopping Mall On-line, Inc. on January 7, 2000 and entered into a non-binding letter of intent with Wave Power, Inc. on February 8, 2000 to acquire 80% of Wave Power, Inc. On March 15, 2000 the Company entered into a Subscription Agreement with The Reserve Foundation Trust. This agreement provides for $10 million in exchange for 6 million shares of the Company's restricted common stock provided the Company completes the Wave Power acquisition and "duly" files its "annual report on Form 10-K or 10-KSB" for the year ended December 31, 1999 on or before May 1, 2000. Registration rights have been granted to The Reserve Foundation Trust after January 1, 2001 along with "Piggy Back" rights prior to January 1, 2001. The financing, if conditions are met, may provide the Company funds to continue the process of developing the prototype kiosk machine concept within the next 12 months. As conceived, each kiosk vending machine would have software, music and eventually digital video stored on disks or hard drives or available over the internet. However, the Company will be required to completely reconstruct an entirely new prototype of the kiosk based upon its concept of the kiosk. Some engineering work has been done to design plans for the components and software to be used in the kiosks, but it is likely that a portion or all of the engineering done to date will need to be completely updated or redone. The Company is also evaluating the option of acquiring a "kiosk company" which has already developed some or all of the concepts conceived by the Company. As this development or acquisition strategy proceeds, the Company is anticipating the possibility of licensing this technology in foreign countries. No assurances can be made as to whether or not such relationships with prospective licensees will be established. If the kiosk concept can be developed, additional employees will be needed based upon the development schedule of the kiosk. If a "kiosk company" is acquired the Company will be required to evaluate the need of any current or potential employees of the "kiosk company." 9 If the kiosk concept is developed by the Company as conceived, the Company expects to manufacture the product via a third party manufacturing firm, hence the Company is not expected to require significant additional plant and equipment for the purpose of manufacturing the kiosk. No assurances can be made as to if the kiosk concept will ever be fully developed or if a "kiosk company" can be acquired. There is no assurance that the kiosks will function as planned if the Company is able to develop the kiosks, or acquire a "kiosk company", or be manufactured at a unit cost commercially favorable to the Company. There is also no assurance that the Company will be able to generate any revenues from sales or that any sales will be made of kiosks or from kiosk vending operations. Provided the private placement funding is completed, it is anticipated that the funds should also be able to finance the operations of Shopping Mall On-line, Inc. for the next 12 months. Shopping Mall On-line is anticipated to provide web hosting services and e-commerce activity. It is expected that Shopping Mall On-line is to combine their branding and marketing strategies with the kiosk concept and potentially market to major mall developers and retailers. It is anticipated that Shopping Mall On-line will require additional employees to develop the systems and has committed to hire two full time people, one as President and the other as Director of Operations. Additional employees will be required as Managers of Business Development, Technology and Systems Administration and Sales. Additional operational personnel will be required within each department. Approximately 2,600 square feet of office space is expected to be needed this year as is significant server computers and communication backbone to host the web sites and provide adequate access to the online mall. It is anticipated that Shopping Mall On-line will license an established e-commerce application software package from a reputable third party, but this does not preclude the possibility that modifications and independent research or development could be needed. There is no assurance that Shopping Mall Online will become a viable business or generate any revenues from the activities it plans to undertake. Online shopping is crowded with many vendors and there is nothing to prevent any other person or company from pursuing this potential line of business. If the Company is able to complete the acquisition of WavePower, Inc., it is possible that WavePower could provide a compatible synergy to the efforts of Shopping Mall On-line, Inc. and any kiosk development by the Company or "kiosk company" the Company may contemplate acquiring due to the technology developed by WavePower. If the WavePower acquisition is completed, WavePower's technology could enhance the kiosk operational design. The acquisition of Wave Power may enhance the effectiveness of Shopping Mall On-line's commerce activity and vice a versa. Additional employees will be required to continue the development process of WavePower, most of whom are expected to be technical professionals. It is anticipated that the Company, with the private placement funds, will be able to finance WavePower to continue operations and develop the infrastructure needed to generate revenue, however it is the intention of the Company to aggressively identify other sources of capital for development of the Company and all of it's subsidiaries as is necessary for continued operation and to generate revenues. No assurances can be made that the WavePower acquisition or the private placement will be completed. The projected capital needs for the development of the kiosk and for the operation of Shopping Mall Online, Inc., are in the process of being evaluated based upon the anticipated acquisition of WavePower, Inc. Provided the WavePower acquisition is completed, the Company should be able to proceed with the planned private placement. The Company is developing proforma cash requirements based upon the completed acquisition of Shopping Mall Online, Inc. the kiosk concept, and the anticipated acquisition of WavePower, Inc. Some currently undefined and unknown circumstance may require additional capital to support the operations of the Company and it's Subsidiaries. No assurances can be given that these additional funds would be available if necessary. 10 ITEM 7. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS ENTER TECH CORP. (A Development Stage Company) FINANCIAL STATEMENTS with REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Report of Independent Certified Public Accountants F-2 Financial Statements: Balance Sheet F-3 Statements of Operations F-4 Statement of Changes in Stockholders' (Deficit) F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Enter Tech Corp. Loveland, CO We have audited the accompanying balance sheet of Enter Tech Corp. (a development stage company) as of December 31, 1999, and the related statements of operations, stockholders' (deficit) and cash flows for the years ended December 31, 1999 and 1998, the period from August 18, 1997 (date of inception) to December 31, 1997 and the period from August 18, 1997 (date of inception) through 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 Enter Tech Corp. (a development stage company) as of December 31, 1999, and the results of its statements of operations, stockholders' (deficit) and cash flows for the years ended December 31, 1999 and 1998, the period from August 18, 1997 (date of inception) to December 31, 1997 and the period from August 18, 1997 (date of inception) through 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 described in Note 1, the Company has sustained operating losses since inception and has a net capital deficiency that raise substantial doubts about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Schumacher & Associates, Inc. Schumacher & Associates, Inc. Certified Public Accountants 2525 Fifteenth Street, Suite 3H Denver, Colorado 80211 March 21, 2000 F-2
ENTER TECH CORP. ---------------- (A Development Stage Company) BALANCE SHEET December 31, 1999 ASSETS ------ Current Assets: Cash $ 14 ----------- Total Current Assets 14 ----------- Equipment, net of accumulated depreciation of $819 7,373 ----------- TOTAL ASSETS $ 7,387 =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) --------------------------------------- Current Liabilities: Accounts payable 35,512 Stock compensation payable 1,103,574 Customer deposits 60,000 Related party payables 322,009 Notes payable, other 15,806 ----------- Total Current Liabilities 1,536,901 ----------- TOTAL LIABILITIES 1,536,901 ----------- Commitments and contingencies - (Notes 1,5,6,7,8 and 9) Stockholders' (Deficit): Preferred stock, $.0001 par value 5,000,000 shares authorized, none issued and outstanding - Common stock, $.0001 par value 100,000,000 shares authorized, 3,850,000 issued and outstanding 385 Additional Paid In Capital 381,618 Accumulated (Deficit) (1,911,517) ----------- TOTAL STOCKHOLDERS' (DEFICIT) (1,529,514) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 7,387 =========== The accompanying notes are an integral part of the financial statements.
F-3
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENTS OF OPERATIONS For the For the Period from Period from August 18, August 18, 1997 (date of 1997 (date of inception) inception) Year Ended Year Ended through through December 31, December 31, December 31, December 31, 1999 1998 1997 1999 ----------- ----------- ------------- -------------- Revenue $ - $ - $ - $ - ----------- ----------- ----------- ----------- Expenses: Depreciation 819 - - 819 Management fees - 22,500 7,500 30,000 Supplies 1,647 2,729 555 4,931 Professional fees 198,441 48,487 13,908 260,836 Rent 16,200 10,287 2,658 29,145 Sales promotion 20,500 - - 20,500 Travel 34,281 6,983 2,080 43,344 Telephone 8,718 5,177 1,223 15,118 Stock for services 1,258,074 - - 1,258,074 Other 18,985 1,822 - 20,807 Write down of carrying value of Technology and License Agreement - 17,943 210,000 227,943 ----------- ----------- ----------- ----------- Total Operating Expenses 1,557,665 115,928 237,924 1,911,517 ----------- ----------- ----------- ----------- Net (Loss) $(1,557,665) $ (115,928) $ (237,924) $(1,911,517) ----------- ----------- ----------- ----------- Per Share $ (.42) $ (.03) $ (.07) $ (.49) =========== =========== =========== =========== Weighted Average Shares Outstanding 3,683,333 3,650,000 3,235,000 3,850,000 =========== =========== =========== =========== The accompanying notes are an integral part of the financial statements.
F-4
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) For the Period from August 18, 1997 (date of inception) through December 31, 1999 Additional Preferred Stock Common Stock Paid-in Accumulated No./Shares Amount No./Shares Amount Capital (Deficit) Total ---------- ------ ---------- ------- ---------- ----------- ----------- Balance at August 18, 1997 - $ - - $ - $ - $ - $ - Common stock issued for cash, at inception, at $.01 per share - - 2,400,000 240 235,684 - 235,924 Net loss for the period ended December 31, 1997 - - - - - (237,924) (237,924) -------- ----- --------- ------ -------- ----------- ----------- Balance at December 31, 1997 - - 2,400,000 240 235,684 (237,924) (2,000) Recapitalization - - 1,250,000 125 (16,046) - (15,921) Net loss for the year ended December 31, 1998 - - - - - (115,928) (115,928) -------- ----- --------- ------ -------- ----------- ----------- Balance at December 31, 1998 - - 3,650,000 365 219,638 (353,852) (133,849) Common stock issued for services at $.81 - - 200,000 20 161,980 - 162,000 Net loss for the year ended December 31, 1999 - - - - - (1,557,665) (1,557,665) -------- ----- --------- ------ -------- ----------- ----------- Balance at December 31, 1999 - $ - 3,850,000 $ 385 $381,618 $(1,911,517) $(1,529,514) ======== ===== ========= ====== ======== =========== ============ The accompanying notes are an integral part of the financial statements.
F-5
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENTS OF CASH FLOWS For the For the Period from Period from August 18, August 18, 1997 (date of 1997 (date of inception) inception) Year Ended Year Ended through through December 31, December 31, December 31, December 31, 1999 1998 1997 1999 ------------ ------------ ------------- -------------- Operating Activities: Net (Loss) $(1,557,665) $ (115,928) $ (237,924) $(1,911,517) Adjustment to reconcile net (loss) to net cash provided by operating activities: Depreciation 819 - - 819 Stock for services 1,258,074 - - 1,258,074 (Increase) decrease in other current assets - 500 (500) - Increase in customer deposits - 60,000 - 60,000 Increase in accounts payable and accrued expenses 34,387 1,125 - 35,512 ----------- ---------- ----------- ----------- Net Cash (Used in) Operating Activities (264,385) (54,303) (238,424) (557,112) ----------- ---------- ----------- ----------- Cash Flows from Investing Activities Acquisition of equipment (8,192) - - (8,192) ----------- ---------- ----------- ----------- Net Cash (Used in) Investing Activities (8,192) - - (8,192) ----------- ---------- ----------- ----------- Cash Flows from Financing Activities: Common stock issued and additional paid-in capital - (15,921) 235,924 220,003 Increase in notes payable, other 15,806 - - 15,806 Increase in payable, related parties 256,785 65,224 7,500 329,509 ------------ ---------- ----------- ----------- Net Cash Provided by Financing Activities 272,591 49,303 243,424 565,318 ------------ ---------- ----------- ----------- Increase (decrease) in Cash 14 (5,000) 5,000 14 Cash, Beginning of Period - 5,000 - - ------------ ---------- ----------- ----------- Cash, End of Period $ 14 $ - $ 5,000 $ 14 ============ ========== =========== =========== Interest Paid $ - $ - $ - $ - ============ ========== =========== =========== Income Taxes Paid $ - $ - $ - $ - ============ ========== =========== =========== The accompanying notes are an integral part of the financial statements.
F-6 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 1999 (1) Summary of Accounting Policies ------------------------------ This summary of significant accounting policies of Enter Tech Corp. (a development stage company) (Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. (a) Description of Business ----------------------- The Company was organized on June 14, 1996 as a Nevada corporation in order to evaluate, structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships. Effective June 2, 1998, the Company completed a business combination with Links, Ltd. as described in Note (2). The Company is a development stage company since principle planned operations have not yet commenced. The Company has selected December 31 as its year end. (b) Use of Estimates in the Preparation of Financial Statements ----------------------------------------------------------- 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. (c) Basis of Presentation - Going Concern ------------------------------------- The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. However, the Company has sustained operating losses since its inception and has a net capital deficiency. Management is attempting to raise additional capital. F-7 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 1999 (c) Basis of Presentation - Going Concern, Continued ------------------------------------------------ In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. Management is in the process of attempting to raise additional capital and reduce operating expenses. Management believes that its ability to raise additional capital and reduce operating expenses provide an opportunity for the Company to continue as a going concern. (d) Income Taxes ------------ As of December 31, 1999, the Company had net operating losses available for carryover to future years of approximately $1,910,000, expiring in various years through 2019. Utilization of these carryovers may be limited if there is a change in control of the Company. As of December 31, 1999, the company has total deferred tax assets of approximately $382,000 due to operating loss carryforwards. However, because of the uncertainty of potential realization of these tax assets, the Company has provided a valuation allowance for the entire $382,000. Thus, no tax assets have been recorded in the financial statements as of December 31, 1999. (2) Business Combination -------------------- On June 2, 1998, Enter Tech Corp. (Company), (formerly Walnut Capital, Inc.) completed a business combination with Links, Ltd., a development stage company. Pursuant to the business combination, 3,235,000 shares of the Company's common stock were issued for 100% of the issued and outstanding stock of Links, Ltd. Subsequently, 835,000 of the shares issued pursuant to this business combination were canceled resulting in 2,400,000 net shares issued. Since the controlling shareholders of Links, Ltd. own approximately 65.7% of the Company, a controlling interest in the Company, the transaction was accounted for as a reverse acquisition whereby, the equity accounts of Links, Ltd. were carried over into the accompanying financial statements. Links, Ltd. was incorporated on August 18, 1997. (3) License and Other Intangible Assets ----------------------------------- The former parent company of Links, Ltd. acquired certain technology and license rights from an unrelated third party for $227,943. These intangible assets were contributed to Links, Ltd. Management of the Company reviewed the intangible assets for impairment and provided a valuation allowance for the total $227,943. F-8 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 1999 (4) Allocated Expenses ------------------ Links, Ltd. in 1997, was charged with various operating expenses allocated from its former parent company. The expenses were recorded in the Statement of Operations and shown as additional paid-in capital. (5) Payable, Related Party ---------------------- During the year ended December 31, 1998, the Company incurred $30,000 of management fees payable to a related party. During the year ended December 31, 1999, the Company incurred $80,000 of management fees payable to related parties. In addition, funds to pay operating expenses were advanced by related parties. Related party payables totaled $322,009 at December 31, 1999. (6) Consulting Agreements --------------------- Effective July 1, 1998, the Company entered into a one year contract with the Vice President of the Company, which required this individual to provide consulting services for fees of $500 per month and 750,000 shares of stock to be issued pursuant to a Form S-8 Registration Statement. The Company has paid no compensation to this individual to date and has not issued the 750,000 shares of stock. The December 31, 1999 financial statements include an accrual of stock and services payable in the amount of $13,500 related to services performed by this individual. (See note 9) Effective January 1, 1999, the Company entered into an agreement with a consultant to provide consulting services for assistance in completing a private placement or secondary offering, and other consulting services. The consultant is to be paid $5,000 per month plus 200,000 shares of restricted common stock per year provided the business plan established for the Company is met. At December 31, 1999, the Company owed $40,000 in consulting fees to the consultant. The term is for two years, expiring on December 31, 2001. Also effective January 1, 1999, the Company entered into an agreement with the Company's current president, but was not the president at the date of the agreement, to attempt to build revenues of the Company and assist in the development of the Company's product. The president is to be paid $5,000 per month plus expenses. At December 31, 1999, the Company owed $40,000 in consulting fees to the president. The term is for two years, expiring December 31, 2001, with an option to renew for two additional years. F-9 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 1999 (6) Consulting Agreements, Continued -------------------------------- Effective August 25, 1999, the Company entered into an agreement with a consultant to provide management consulting services to assist in developing the Company. The consultant is to be paid $75 per hour plus 1,000 restricted shares of common stock for every hour worked. At December 31, 1999, the Company owed $3,750 in consulting fees. In addition, the Company agreed to compensate the consultant for other services with restricted common stock. At December 31, 1999, an accrual of $323,333 has been recorded to reflect this agreement. (7) Marketing and Administration of Sales Agreement ----------------------------------------------- The Company entered into an agreement with a previous director of the Company for the marketing and administration of sales through certain identified locations and the division of profits after the director has recovered related costs. The company currently has orders for the purchase of thirty kiosk software vending units at $50,000 per unit from a previous director. The Company received $60,000 of deposits related to these orders. The Company is uncertain whether it will be able to deliver the units and it is not determinable at this time whether a refund will be required. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. (8) Common Stock ------------ During the year ended December 31, 1999, the Company issued 200,000 shares of its restricted common stock in exchange for services. Also, during the year ended December 31, 1999, the Company committed to issuing 1,543,000 shares of its restricted common stock in exchange for services. A total of $1,103,574 has been accrued to reflect the stock compensation payable at December 31, 1999. These shares were issued in March, 2000. (9) Subsequent Events ----------------- Effective January 7, 2000, the Company entered into a definitive agreement whereby the Company would acquire eighty percent (80%) of an entity in exchange for issuance of 2,400,000 shares of restricted common stock. The management of the entity would remain the same and a management contract would be entered into that would include a stock option plan. Effective March 15, 2000, the Company entered into a stock purchase and subscription agreement with an entity, whereby the entity subscribed to purchase 6,000,000 shares of common stock of the Company for an aggregate price of $10,000,000. This agreement is contingent upon the Company filing its Form 10-KSB for the year ending December 31, 1999 and completing an acquisition of WavePower, Inc. before May 1, 2000. F-10 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 1999 (9) Subsequent Events, Continued ---------------------------- On February 8, 2000, the Company signed a non-binding letter of intent with WavePower, Inc. which document contemplates the acquisition by the Company of 80% of WavePower, Inc. for approximately 5,000,000 restricted shares of the Company's common stock. The companies are now performing due diligence evaluations. In addition, the Company has agreed to reserved 3,000,000 shares of its 5,000,000 shares of preferred stock for the acquisition of WavePower, Inc., based on the future performance of WavePower. The additional 2,000,000 shares of the preferred stock will be used for the benefit of and distributed to the current officers, directors and significant consultants of the Company with the option of providing a distribution of up to 1,000,000 of these preferred shares for possible future acquisitions. During February, 2000 the Company commenced litigation against a former officer of the Company alleging failure of the former officer to meet certain performance standards. The Company is seeking cancellation of the agreement to issue 750,000 shares of Company common stock and the payment of $500 per month compensation to the former officer and the return of 500,000 shares of stock previously issued. (See Note 6) A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. F-11 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE. There have been no disagreements between the Company and its independent accountants on any matter of accounting principles or practices or financial statement disclosure since the Company's inception. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Certain information with respect to the Directors and Officers of the Company is as follows: Name Age Positions and Offices Held ---- --- -------------------------- Sam J. Lindsey 50 President and Director Gregory J. Kaiser 46 Secretary and Director Mark A. Thomas 43 Director The Company's Directors will serve in such capacity until the next annual meeting of the Company's shareholders and until their successors have been elected and qualified. The officers serve at the discretion of the Company's Directors. There are no family relationships among the Company's officers and directors, nor are there any arrangements or understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director. The Company presently has no committees. Set forth below are the names of all Directors and Executive Officers of the Company and a key employee of the Company's subsidiary, all positions and offices with the Company held by each such person, the period during which he has served as such, and the business experience of such persons during at least the last five years: SAM J. LINDSEY. Mr. Lindsey has been the President, Chairman of the Board and a director of the Company since July 30, 1999. He has been self-employed since January of 1994 in the management of his personal investments. Mr. Lindsey is a director and the Secretary of Mach One Corporation of Loveland, Colorado which is a reporting company under Section 13 of the Securities Exchange Act of 1934. GREGORY J. KAISER. Mr. Kaiser has served as a director of the Company since November 1, 1999 and as its Secretary since November 3, 1999. From January of 1984 through December of 1996 he worked for First Options of Chicago, a registered broker-dealer and securities clearing firm. He served in various capacities with that firm, including its Senior Vice President and Risk Manager. He was a registered representative with the firm. From January of 1996 to January of 1998, he was employed by Jenncor Trading, LLC of Cherry Hill, New Jersey as operations officer. Jenncor was a proprietary day-trading firm in the securities markets. After a sabbatical from active business activities, Mr. Kaiser became the President, Chief Executive Officer and a director of Mach One Corporation of Loveland, Colorado in September of 1999. Mach One is a reporting company under Section 13 of the Securities Act of 1934. 11 MARK A. THOMAS. Mr. Thomas has been a director of the Company since November 20, 1999. From 1993 through October of 1996, he owned and operated a sole proprietorship in the telecommunications business in Loveland, Colorado. Since November of 1996, he has been employed by NCG, a telecommunications business in Loveland, Colorado. He presently serves as its Vice President. ROBERT J. PRATT. Mr. Pratt is the President and a director of Shopping Mall Online, Inc., a subsidiary of the Company, and a principal shareholder of the Company. Mr. Pratt is considered to be a key employee of the Company. From 1992 to December of 1996 he was employed by Global Securities Corporation Inc., a securities broker-dealer as a registered representative. From December of 1996 to August of 1998 he was self-employed as a financial consultant in Vancouver, British Columbia. From August of 1998 to the present, he has been the President and owner of Integrity Capital, Inc., a venture capital and investor relations firm in Lynden, Washington. Section 16(a) Beneficial Ownership Reporting Compliance. Messrs. Lindsey, Kaiser and Thomas did not file their Form 3 reports within the 10-day period after becoming officers and/or directors of the Company. They were each also late in filing a Form 4 report within 10 days after acquiring a beneficial interest in shares of common stock of the Company. All three of these individuals are now current in their reports under Section 16(a). ITEM 10. EXECUTIVE COMPENSATION The Company's Board of Directors is presently reviewing the areas of management compensation and employment benefits. If the Company is successful in its efforts to obtain material financing (See ITEM 1 above), it may be anticipated that it will adopt a compensation and benefits package for employees and officers and directors. It is presently anticipated that officers' salaries will not exceed $75,000 each during the year 2000. On January 1, 1999, the Company entered into a Consulting Agreement with Sam J. Lindsey, who became a director and President of the Company on July 30, 1999. Under the agreement Mr. Lindsey is to devote his full working time and best efforts to develop revenues. The Agreement is for a two-year term ending December 31, 2000 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999 he had been paid $20,000 and the total accrued amount due to Mr. Lindsey was $40,000. The Company has issued its promissory note to Mr. Lindsey for this $40,000. The note is due December 31, 2000 and bears interest at the rate of 12% per annum. It is anticipated that this agreement will remain in place and accruals of or payments on the consulting fee continued, until the Company develops a salary compensation package for its officers at which time the agreement will be terminated. During 1999, the Company paid a consulting fee in the amount of $3,476.06 to Mr. Chuck Mullin, who was President of the Company for part of that year. During 1999 and before be became an officer and director of the Company in November, 1999, Gregory J. Kaiser performed consulting services for the Company. The Company compensated Mr. Kaiser for these services by issuing to him its promissory note for $9,820, due December 31, 2000 and bearing interest at 12% per annum. 12 Other than the payment to Messrs. Lindsey and Mullin, the Company has not paid any cash salary or compensation to its officers and directors during or for the last fiscal year ending December 31, 1999, nor has the Company had any retirement, pension, profit-sharing or insurance or medical reimbursement plans for its Officers and Directors. For details of the issuance of a total of 530,000 shares of the Company's common stock to five individuals in November of 1999 and March of 2000 as compensation for their services as directors and/or officers. See ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS above. ITEM II. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of March 24, 2000, the stock ownership of each person known by the Company to be the beneficial owner of five percent or more of the Company's Common Stock, each Director individually and all Directors and Officers of the Company as a group:
Title of Name, Position(s) and Address Amount of Beneficial Percentage of Class of Beneficial Owner Ownership Class - ------------ ----------------------------- --------------------- ------------- Common Stock Sam J. Lindsey, President and Director 3407 Riva Ridge Drive Ft. Collins, Colorado 80526 400,000 5.1% Gregory J. Kaiser, Secretary and Director P.O. Box 774104 Steamboat Springs, Colorado 80477 100,000 1.3% Mark A. Thomas, Director 4519 W. 6th Street Greenley, Colorado 80634 10,000 .1% All Officers and Directors as a Group (3 persons) 510,000 6.6% Sam J. Lindsey, Beneficial Shareholder 3407 Riva Ridge Drive Ft. Collins, Colorado 80526 400,000 5.1% ProActive Corp., Beneficial Shareholder 6667 E. Dorado Avenue Englewood, Colorado 80111 689,000 8.9% Bill Thomas, Beneficial Shareholder 937 East 7th Street Loveland, Colorado 80537 500,000 6.4% Mach One Corp., Beneficial Shareholder 430 East 6th Street Loveland, Colorado 80537 575,000 7.4% 13 E.M.M. Company Trust, Beneficial Shareholder 22585 Seaver Court Santa Clarita, California 91350 1,560,000 20% Jerry Stiles, Beneficial Shareholder 1195 East Kistler Court Denver, Colorado 80126 455,000 5.9% Robert Pratt, Beneficial Shareholder 185 Russet Avenue Lynden, Washington 98264 2,400,000 31.0%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Company has a joint venture agreement with one of its former Directors, A.W. Hogan, for the marketing and administration of sales of certain identified locations and the division of profits after Dr. Hogan has recovered related costs. On January 1, 1999, the Company entered into a Consulting Agreement with Sam J. Lindsey, who became a director and President of the Company on July 30, 1999. Under the agreement Mr. Lindsey is to devote his full working time and best efforts to develop revenues. The agreement is for a two-year term ending December 31, 2000 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999 the total accrued amount due to Mr. Lindsey was $40,000. The Company has issued its promissory note to Mr. Lindsey for this $40,000. The note is due December 31, 2000 and bears interest at the rate of 12% per annum. It is anticipated that this agreement will remain in place and accruals of or payments on the consulting fee continued, until the Company develops salary compensation package for its officers at which time the agreement will be terminated. In addition to the accrual of the consulting fee to Mr. Lindsey, the Company on November 20, 1999, authorized the issuance of 400,000 shares to him of the common stock. As of March 24, 2000, these 400,000 shares constituted approximately 5.1% of the then outstanding common stock. On January 1, 1999, the Company entered into a consulting agreement with Mr. Bill Thomas under which he has and is to provide services to the Company. The agreement is for a term of two years ending December 31, 2000 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999, the total accrued amount due to Mr. Thomas was $40,000. The Company has issued its promissory note to Mr. Thomas for this $40,000. The note is due December 31, 2000 and bears interest at the rate of 12% per annum. This agreement also provides for the issuance to Mr. Thomas of 200,000 shares of common stock per year if certain business goals are met by the Company. On November 20, 1999, the Company authorized the issuance to Mr. Thomas of 500,000 shares of common stock as total stock compensation for all consulting services rendered and to be rendered under the agreement. On August 25, 1999, the Company entered into a consulting arrangement with ProActive Corporation under which ProActive has furnished services to the Company. On November 20, 1999 and March 14, 2000, the Company authorized the issuance of a total of 689,000 shares of its common stock to ProActive Corporation as compensation for these services. As of March 24, 2000, the 689,000 shares owned by ProActive Corporation constituted approximately 8.9% of its then outstanding common stock. 14 On January 7, 2000, the Company entered into an Agreement and Plan of Reorganization with Shopping Mall Online, Inc., and Robert Pratt. Under this agreement the Company acquired 80% of the outstanding stock of Shopping Mall Online, Inc. in exchange for 2,400,000 shares of the Company's common stock. Mr. Pratt retained the ownership of the other 20% of the subsidiary. As of March 24, 2000 these 2,400,000 shares constituted approximately 31% of the Company's then outstanding common stock. For details of the lease by the Company of its office facilities in Loveland, Colorado from an entity owned by Bill Thomas, a principal shareholder of the Company, see ITEM 2 - DESCRIPTION OF PROERTY. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS.
EXHIBIT NUMBER DESCRIPTION LOCATION - ------- ------------------------------ ---------------------------------------------- 3(i).1 Articles of Incorporation Incorporated by Reference to Exhibit 2.1 to the Registrant's Form 10-SB Registration Statement filed on 8/28/96. 1996 (No. 0-21275) 3(i).2 Articles of Merger (containing Filed Herewith Amendment to Articles of Incorporation to change name) 3(ii).1 Bylaws Incorporated by reference to Exhibit 2.2 to the Registrant's Form 10-SB Registration Statement filed on 8/28/96. 1996 (No. 0-21275) 3(ii).2 Amendment to Bylaws Filed Herewith 10.1 Lock-up Agreements by Company Incorporated by reference to Exhibit 3.1 to Shareholders the Registrant's Form 10-SB Registration Statement filed on 8/28/96. 1996 (No. 0-21275) 10.2 Joint Venture Agreement with Incorporated by reference to Exhibit 10-B of A.W. Hogan the Registrant's Form 8-K filed 6/2/98 1998 (No. 0-21275) 10.3 Form 8-K dated 6/2/98 Relative to Incorporated by reference to Form 8-K filed Business Combination with Links, Ltd. on August 12, 1998 1998 (No. 021275) 10.4 Consulting Agreement dated 1/1/99 Incorporated by reference to Exhibit 10.2 Between Company and Advance to Form 10-QSB for period ended 6/1/99 Marketing Analysis filed on August 23, 1999 1999 (No. 021275) 15 10.5 Consulting Agreement dated 1/1/99 Incorporated by reference to Exhibit 10.3 to Between Company and Sam J. Lindsey Form 10-QSB for period ended 6/1/99 filed on August 23, 1999 1999 (No. 021275) 10.6 Agreement and Plan of Reorganization Incorporated by reference to Exhibit 10.1 to dated 1/7/2000 Between Company and Form 8-K filed on January 21, 2000 and Shopping Mall Online, Inc. 10.7 Stock Purchase and Subscription Filed Herewith Agreement Between Company and The Reserve Foundation Trust 10.8 Promissory Note of Company to Filed Herewith The Reserve Foundation Trust 27.1 Financial Data Schedule Filed Herewith
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter ended December 31, 1999. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunder duly authorized. SIGNATURE TITLE DATE /s/ Sam J. Lindsey President and Director March 30, 2000 - ------------------------ (Principal Executive Officer) /s/ Mark A Thomas Director March 30, 2000 - ------------------------ /s/ Gregory J. Kaiser Secretary and Director March 30, 2000 - ------------------------ (Principal Financial and Accounting Officer) 17 EX-3 2 EXHIBIT 3(I).2 Exhibit 3(i).2 -------------- ARTICLES OF MERGER MERGING LINKS, LTD. (a Wyoming Corporation) INTO WALNUT CAPITAL, INC. (a Nevada Corporation) ARTICLES OF MERGER entered into this 28th day of May, 1998, by and between LINKS, LTD., a Wyoming corporation, and WALNUT CAPITAL, INC., a Nevada corporation. THIS IS TO CERTIFY: FIRST: LINKS, LTD., a corporation organized and existing under the laws of the State of Wyoming, (hereinafter sometimes referred to as "LINKS"), whose address is 9815 South Parker Road, Suite 476, Parker, Colorado 80134, and WALNUT CAPITAL, INC., a corporation organized and existing under the laws of the State of Nevada (hereinafter sometimes referred to as "WALNUT"), whose address is 5770 South Beech Court, Greenwood Village, Colorado 80121, agree that LINKS shall be merged into WALNUT. The terms and conditions of the merger and the mode of carrying the same into effect are as herein set forth in these Articles of Merger. SECOND: WALNUT shall survive the merger and shall change its corporate name to be "ENTER TECH CORP.", effective upon the filing of Articles of Merger with each of the Secretaries of State of the States of Nevada and Wyoming. The address of WALNUT shall be 9815 South Parker Road, Suite 476, Parker, Colorado 80134. THIRD: The parties to the Articles of Merger are LINKS, LTD., a corporation organized under the laws of the State of Wyoming, and WALNUT CAPITAL, INC., a corporation organized and existing under the laws of the State of Nevada. FOURTH: No amendment is made to the Articles of Incorporation of the surviving corporation as part of the merger, except that the name of such surviving corporation shall be changed to ENTER TECH CORP. FIFTH: The Plan of Merger is as set forth in the Agreement and Plan of Merger dated May 28, 1998, which is attached hereto and incorporated herein by this reference. SIXTH: The Plan of Merger was duly advised, authorized and approved in the manner required by the Articles of Incorporation of WALNUT and the laws of the State of Nevada, and the number of shares voted for the Plan of Merger was sufficient for approval. On the date of the vote of the stockholders of WALNUT, the number and designation of shares of WALNUT outstanding were 1,250,000 shares of Common Stock, $.0001 par value, of which 1,250,000 shares unanimously voted in favor of the Plan of Merger, and -0- shares voted against the Plan of Merger. No shares of any other class of stock were outstanding. SEVENTH: The Plan of Merger was duly advised, authorized and approved in the manner required by the Articles of Incorporation of LINKS and the laws of the State of Wyoming and the number of shares voted for the Plan of Merger was sufficient for approval. On the date of the vote of the shareholders of LINKS, the number and designation of shares of LINKS outstanding were 10,000 shares of Common Stock, no par value, of which 10,000 shares unanimously voted in favor of the Plan of Merger, and -0- shares voted against the Plan of Merger No shares of any other class of stock were outstanding. EIGHTH: WALNUT hereby agrees that it may be served with process in the State of Wyoming in any proceeding for the enforcement of any obligation of it arising from the merger, including the rights of any dissenting shareholders thereof, and hereby irrevocably appoints Jon D. Sawyer, located at 600-17th Street, Suite 2700, South Tower, Denver, Colorado 80202, as its agent to accept service of process in any such suit or other proceeding, unless WALNUT shall hereafter designate in writing to the Secretary of State of Wyoming a different address for such process, in which case the duplicate copy of such process shall be mailed to the last address so designated. NINTH: The Board of Directors of LINKS and WALNUT authorized, ratified and unanimously approved the merger of LINKS with and into WALNUT. IN WITNESS WHEREOF, the panics to the merger have caused these Articles of Merger to be signed in their respective corporate names and on their behalf by the respective presidents and witnessed or attested by their respective secretaries as of the 28th day of May, 1998. ATTEST: LINKS, LTD., a Wyoming corporation /s/ George Beros By /s/ David Matus - -------------------------- ------------------------------------- George Beros, Secretary David Matus, President ATTEST: WALNUT CAPITAL, INC., a Nevada corporation /s/ Timothy J. Brasel By /s/ Timothy J. Brasel - -------------------------- ------------------------------------- Timothy J. Brasel, Secretary Timothy J. Brasel, President STATE OF COLORADO ) ) ss. COUNTY OF DENVER ) The forgoing instrument was acknowledged before me this 28th day of May, 1998, by David Matus and George Beros, President and Secretary, respectively, of LINKS, LTD., a Wyoming corporation, and by Timothy J. Brasel, President and Secretary of WALNUT CAPITAL, INC., a Nevada corporation. Witness my hand and official seal. My commission expires: 3/24/2000 /s/ Jasminia M. Palem -------------------------------------- The name and telephone number of the person to be contacted if there is a question about the filing of these Articles of Merger is as follows: Jon D. Sawyer (303) 893-2300 CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF SANDIA HEALTHCARE CORPORATION CHANGING ITS NAME TO WALNUT CAPITAL, INC. Sandia Healthcare Corporation, a corporation organized and existing under the Nevada General Corporation Law, does hereby certify as follows: FIRST: ARTICLE I - NAME of the Articles of Incorporation is hereby amended to read as follows: ARTICLE I NAME The name of the Corporation shall be: Walnut Capital, Inc. SECOND: The foregoing Amendment was adopted by written unanimous consent of the Board of Directors of the Corporation on December 29, 1997, in accordance with the provisions of Section 78.315.2 of the Nevada General Corporation Law. THIRD: The foregoing Amendment was adopted by written unanimous consent of the Stockholders of the Corporation on December 29, 1997, in accordance with the provisions of Section 78.2320.3 of the Nevada General Corporation Law. FOURTH: Written consent has been provided in accordance with the provisions of Section 78.320.3 of the Nevada General Corporation Law. IN WITNESS WHEREOF, Sandia Healthcare Corporation has caused this Certificate of Amendment to be signed and acknowledged by its President and Secretary this 29th day of December, 1997. SANDIA HEATHCARE CORPORATION (Changing its name to Walnut Capital, Inc.) By /s/ Timothy J. Brasel --------------------------------------- Timothy J. Brasel, President, Treasurer and Secretary STATE OF COLORADO ) ) ss. COUNTY OF DENVER ) Margaret A. Beck, a Notary Public, hereby certify that on the 29th day of December, 1997, personally appeared before me Timothy J. Brasel, who being by me first duly sworn, declared that he signed the foregoing document as both President and Secretary of the corporation named therein and that he is above the age of eighteen years and that the statements contained therein are true and correct to the best of his knowledge and belief. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. /s/ Margaret A. Beck ---------------------------------------------- Notary Public [ S E A L ] My Commission expires: July 21, 1998 EX-3 3 EXHIBIT 3(II).1 Exhibit 3(ii).1 --------------- CERTIFICATE OF AMENDMENT TO BYLAWS OF ENER TECH CORP. The undersigned, Secretary of Ener Tech Corp., does hereby certify that the Resolution set forth below and constituting an Amendment to Article II, Section 2 of its Bylaws was duly adopted by the majority shareholder of the Company on July 20, 1999. Resolved that the last sentence of Article II, Section 2 of the Bylaws of the Corporation shall be deleted in its entirety and replaced with the following: "The number of directors constituting the Board of Directors shall be not less than one nor more than three. Notwithstanding any other provision in these Bylaws, this Section 2 of Article II may not be amended, altered or repealed by the Board of Directors unless approved by stockholders of the corporation holding a majority of the voting power of the outstanding stock of the corporation." Dated: March 24, 2000 /s/ Gregory J. Kaiser ------------------------------- Gregory J. Kaiser Secretary EX-10 4 EXHIBIT 10.7 Exhibit 10.7 ------------ STOCK PURCHASE AND SUBSCRIPTION AGREEMENT Enter Tech Corp. Total Shares Subscribed For 6,000,000 430 East 6th Street Total Subscription Price $10,000,000.00 Loveland, Colorado 80537 Dear Gentlemen: The undersigned hereby subscribes to purchase 6,000,000 shares of common stock (the "Securities") of Enter Tech Corp. (the "Company") for an aggregate price of $10,000,000.00. This subscription may be rejected by the Company in its sole discretion. 1. PURCHASE. Subject to the terms and conditions hereof, he undersigned hereby irrevocably agrees to purchase the Securities and tenders herewith the cash purchase price set forth above. 2. REPRESENTATIONS AND WARRANTIES. The undersigned hereby makes the following representations and warranties to the Company: (a) The undersigned is the sole and true party in interest and is not purchasing for the benefit of any other person; (b) The undersigned has consulted with the advisor(s) named on the signature page, if any (such advisor(s) are hereinafter collectively referred to as the "Investor Representative"); (c) The undersigned and/or the Investor Representative have read and analyzed, are familiar with and have retained copies of this Subscription Agreement and other related documents, including all of the documents incorporated by reference and the Company's (i) annual report on Form 10-KSB for the year ended December 31, 1998, (ii) quarterly reports on Form 10-QSB for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 and (iii) current reports on Form 8-K reporting events on each of July 30, 1999 and January 7, 2000, copies of which were delivered to the undersigned. The undersigned understands that all books, records and documents of the Company relating to this investment have been and remain available for inspection by the undersigned and/or the Investor Representative upon reasonable notice. The undersigned confirms that all documents requested by the undersigned and/or the Investor Representative have been made available, and that the undersigned has been supplied with all of the additional information concerning this investment that has been requested. In making a decision to purchase the Securities, the undersigned has relied exclusively upon information provided by the Company in writing or found in the books, records or documents of the Company; (d) The undersigned and/or Investor Representative have such knowledge and experience in financial and business matters that they are capable of an evaluation of the merits and risks of this investment; (e) The undersigned and the Investor Representative are aware that an investment in the Company is highly speculative and subject to substantial risks. The undersigned is capable of bearing the high degree of economic risk and burdens of this venture, including, but not limited to, the possibility of a complete loss, the lack of a significant public market and limited transferability of the Securities, which make the liquidation of this investment impossible for the indefinite future; (f) The offer to sell the Securities was directly communicated to the undersigned and the Investor Representative by such a manner that the undersigned was able to ask questions of and receive answers from the Company or a person acting on their behalf concerning the terms and conditions of this transaction. At no time was the undersigned or the Investor Representative presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general advertising otherwise than in connection and concurrently with such communicated offer; (g) The undersigned, if a corporation, partnership, trust or other entity, is authorized and duly empowered to purchase and hold the Securities, has its principal place of business at the address set forth on the signature page and has not been formed for the specific purpose of acquiring the Securities; (h) The Securities are being acquired solely for the undersigned's own account, for investment, and are not being purchased with a view to resale, distribution, subdivision or fractionalization thereof; (i) The undersigned understands that the Securities have not been registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws, in reliance upon exemptions from registration for non-public offerings. The undersigned understands that the Securities or any interest therein may not be, and agrees that the Securities or any interest therein, will not be resold or otherwise disposed of by the undersigned unless the Securities are subsequently registered under the Act and under appropriate state securities laws or unless the Company receives an opinion of counsel satisfactory to it that an exemption from registration is available; (j) The undersigned and the Investor Representative have been informed of and understand the following: (1) The Company has only a limited financial or operating history; (2) There are substantial restrictions on the transferability of the Securities; (3) No federal or state agency has made any finding or determination as to the fairness for public investment, nor any recommendation nor endorsement, of the Securities. (k) None of the following information has ever been represented, guaranteed or warranted to either the undersigned or the Investor Representative, expressly or by implication by any broker, the Company or agent or employee of the foregoing, or by any other person; (1) The approximate or exact length of time that the undersigned will be required to remain as a shareholder in the Company; (2) The percentage of profit and/or amount of type of consideration, profit or loss to be realized, if any, as a result of an investment in the Company; (3) That the past performance or experience of the management or associates, agents, affiliates or employees or any other person will in any way indicate or predict economic results in connection with the operation of the Company of the return on the investment. (l) The information set forth in that certain Accredited Investor Declaration attached hereto as Exhibit A executed by the undersigned is true, correct and complete; (m) The undersigned has not distributed any information relating to this investment to anyone other than the Investor Representative, if any, and no other person except the Investor Representative has used this information; (n) The undersigned hereby agrees to indemnify the management of the Company and holds the Company harmless from and against any and all liability, damage, cost or expense incurred on account of or arising out of: (1) Any inaccuracy in the declarations, representations and warranties hereinabove set forth; (2) The disposition of any Securities of the undersigned, contrary to the foregoing declarations, representations and warranties; (3) Any action, suit or proceeding based upon: (i) the claim that said declarations, representations or warranties were inaccurate or misleading or otherwise cause for obtaining damages or redress from the Company or its management; or (ii) the disposition of any of the Securities or any part thereof. 3. TRANSFERABILITY. The undersigned agrees not to transfer or assign the obligations or duties contained in this Subscription Agreement or any of the undersigned's interest herein. 4. REGISTRATION RIGHTS. Upon the acceptance of this Subscription Agreement by the Company, the undersigned shall enter into with the Company the registration rights agreement attached hereto as Exhibit B. 5. REGULATION D. Notwithstanding anything herein to the contrary, every person or entity who, in addition to or in lieu of the undersigned, is deemed to be a "purchaser" pursuant to Regulation D promulgated under the Securities Act of 1933 or any state law, does hereby make and join in making all of the covenants, representations and warranties made by the undersigned. 6. INVESTOR REPRESENTATIVE(S) RELATIONSHIP WITH THE COMPANY OR ITS MANAGEMENT. The undersigned acknowledges that the undersigned has been advised that the following relationship exists by and between the Investor Representative named below (including the Investor Representative's affiliates) and the management, the Company or an affiliate of either of them: . 7. RIGHT OF FIRST REFUSAL. If the Company shall at any time from the date of this agreement until January 1, 2002 propose to sell any of its capital stock, the Company shall first make a written offer to sell such capital stock to the undersigned. Such offer shall state all of the terms and conditions, including the price, of the proposed sale. (ii) The Holder shall have the right for a period of thirty days after receipt of such offer to elect to purchase such portion of the Company's capital stock upon terms and conditions which are the same as those of the proposed sale. Upon the exercise of the undersigned's right to purchase, all shares of capital stock purchased shall be promptly assigned to the undersigned, and the undersigned shall make payment for the Company's capital stock purchased in the same manner as that of the proposed sale. (iii) If the undersigned does not elect to purchase all of the capital stock the Company proposed to be sold, all of such capital stock may be sold to a third party or parties during a period of 365 days after the undersigned's right to purchase has expired; provided, however, that if such sale to a third party or parties is to be made at a price which is less than ninety percent of the price previously specified in the offer made to the undersigned under paragraph (i) of this Section 7, the Company shall make another written offer to sell such capital stock to the undersigned at such lesser price in accordance with this Section 7. After such 365 day period has expired, the provisions of this Section 7 shall apply to any proposed sale by the Company of its capital stock. (iv) If the proposed purchase price for the capital stock to be sold by the Company is not payable in cash (whether initially or over time), the purchase price payable by the undersigned shall be a cash amount determined in the good faith discretion of the Board of Directors of the Company with respect to such capital stock to be equivalent to the present value of such non-cash proposed purchase price. 8. ACCEPTANCE. Execution and delivery of this Subscription Agreement and tender of the payment in accordance with Paragraph 1 above shall constitute an irrevocable offer to purchase the Securities indicated, which offer may be accepted or rejected by the Company in their sole discretion for any cause or for no cause. Acceptance of this offer by the Company shall be indicated by the execution hereof by management. 9. BINDING AGREEMENT. The undersigned agrees that the undersigned may not cancel, terminate or revoke this Subscription Agreement or any agreement of the undersigned made hereunder, and that this Subscription Agreement shall survive the death or disability of the undersigned and shall be binding upon the heirs, successors, assigns, executors, administrators, guardians, conservators or personal representatives of the undersigned. 10. INCORPORATION BY REFERENCE. The identities of any Investor Representative of the undersigned and the statement of the number of Securities subscribed and related information set forth on the signature page are incorporated as integral terms of this Agreement. IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on the date set forth on the signature page. The undersigned desires to take title in the Securities as follows (check one) _____ (a) Individual (one signature required on Page 6); _____ (b) Husband and Wife as community property (one signature required on Page 6 if interest held in one name, i.e., managing spouse; two signatures required on Page 6 if interest held in both names); _____ (c) Joint Tenants with right of survivorship (both parties must sign on Page 6) _____ (d) Tenants in common (both parties must sign on Page 6); _____ (e) Trust (Trustee(s) must sign on Page 8); _____ (f) Partnership (general partner(s) must sign on Page 10) _____ (g) Corporation (authorized office must sign on Page 12) The exact spelling of names(s) under which title to the Securities shall be taken is (please print)________________________________________________ SEE RIDER ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE SUBSCRIPTION AGREEMENT SIGNATURE PAGE FOR TRUST INVESTORS ------------------- Total Shares subscribed for: #6,000,000 Total Warrants subscribed for: # Total Subscription Price: $10,000,000.00 Name(s) of Investor Representatives -------------------------------------- ------------------------------------- Name Address -------------------------------------- ------------------------------------- Name Address -------------------------------------- ------------------------------------- Name Address ------------------------------------------------------------------------------- Name of Trust (Please print or type) ------------------------------------------------------------------------------- Name of Trustee (Please print or type) ------------------------------------------------------------------------------- Date Trust was formed By /S/ LEON F. HARTE, Account Manager ----------------------------------- Trustee's Signature Taxpayer Identification Number: Trustee's Address: --------------------------------------------------------- --------------------------------------------------------- --------------------------------------------------------- Attention: ---------------------------------------- Executed at Loveland, Colorado, this 15th day of March, 2000. ACKNOWLEDGMENT FORM IF SUBSCRIBER IS A TRUST State of ) ) ss. County of ) On the 22nd day of March, 2000, personally appeared before me Leon F. Harte, the signer(s) of the above instrument, who duly acknowledge to me that he/they executed the same as Trustee(s). Witness my hand and seal. My commission expires: 12-2-2000 SEAL NOTARY PUBLIC IN AND FOR SAID STATE /S/ KRISTI COCBEY ----------------------------------- Name SUBSCRIPTION ACCEPTED: Enter Tech Corp. By: Sam J. Lindsey President Date: ------------------------------- EXHIBIT A ACCREDITED INVESTOR DECLARATION The undersigned represents that the undersigned qualifies as an "Accredited Investor," as defined in Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, because he is: _____ (1) A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940; _____ (2) An organization described in Section 501(c)(3) of the Internal Revenue Code, Corporation, Massachusetts or similar business trust, or Partnership not formed for the purpose of investing in the Securities, with total assets in excess of $5,000,000; _____ (3) A director, executive officer, or general partner of the issuer of the Securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; _____ (4) A natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase, exceeds $1,000,000; _____ (5) A natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person's spouse of $300,000 in each of those years and has a reasonable expectation of reaching those levels in the current year; _____ (6) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities offered, whose purchase is directed by a sophisticated person as described in Section 506(b)(2)(ii); or _____ (7) Any entity in which all of the equity owners are accredited investors. Date: March 15, 2000 Tax I.D. No.: N/A ------------------- ----- Signed: /S/ LEON F. HARTE, Account Manager, TRFT ---------------------------------------- Please print name: Leon F. Harte, Account Manager, TRFT ------------------------------------ EXHIBIT B REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is entered into this ____ day of February, 2000 between Enter Tech Corp. (the "Corporation") and the undersigned Holder (as defined in Section 1). Section 1. DEMAND REGISTRATION. The Corporation shall upon the written demand by the undersigned holder (the "Holder") of 6,000,000 shares the Corporation's common stock (the "Registrable Securities"), at any time after January 1, 2001, prepare and file with the Securities and Exchange Commission ("SEC") a registration statement under the Securities Act of 1933, as amended (the "Act"), covering the resale of the Registrable Securities. The Corporation shall use all commercially reasonable efforts to cause the registration statement covering the resale of all Registrable Securities that the Holder requests to be so registered to become effective as soon as practicable thereafter. The Corporation shall not be required to effect a registration statement pursuant to this Section after the Corporation has effected one registration pursuant to this Section, and such registration has been declared or ordered by the SEC effective. Section 2. PIGGYBACK REGISTRATIONS. If at any time during the twelve months following the date of this agreement, the Corporation determines to proceed with the preparation and filing of a registration statement under the Act in connection with the proposed offer and sale of any of its securities by any of its security holders (other than a registration statement on Form S-4, S-8 or any other limited purpose form), then the Corporation will give 15 days' written notice of such determination to the Holder of Registrable Securities and will afford each such Holder an opportunity to include in such registration statement all or part of the Registrable Securities held by such Holder. If the Holder desires to include in any such registration statement all or any part of the Holder's Registrable Securities, the Holder shall, within 15 days after the above-described notice from the Corporation, so notify the Corporation in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If theHolder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Corporation, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Corporation with respect to the proposed offer and sale of any of its securities by any of its security holders, all upon the terms and conditions set forth herein. If the registration statement under which the Corporation gives notice under this Section is for an underwritten offering, the Corporation shall so advise the Holder of Registrable Securities. In such event, the right of the Holder to be included in a registration pursuant to this Section shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. If the Holder proposes to distribute its Registrable Securities through such underwriting, the Holder shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Corporation. Notwithstanding any other provision hereof, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Corporation, second, to the Holder, and third, to any other shareholder of the Corporation (other than a Holder of Registrable Securities) on a pro rata basis. The Corporation shall have the right to terminate or withdraw any registration initiated by it under this Section prior to the effectiveness of such registration, whether or not the Holder has elected to include Registrable Securities in such registration. The registration expenses of such withdrawn registration shall be borne by the Corporation in accordance with this Agreement. Section 4. OBLIGATIONS OF THE CORPORATION IN CONNECTION WITH REGISTRATIONS. Whenever required to effect the registration of any Registrable Securities, the Corporation shall, as expeditiously as reasonably possible: (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holder of Registrable Securities registered thereunder, keep such registration statement effective for up to 180 days or, if earlier, until the Holder has completed the distribution related thereto; (b) prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective; (c) furnish to the Holder and to the underwriters, if any, of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (d) use all commercially reasonable efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as the Holder may reasonably request in writing within twenty days following the original filing of such registration statement, except that the Corporation shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or subject itself to taxation in any such jurisdiction; (e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering (the Holder shall also enter into and perform its obligations under such agreement); (f) notify the Holder, promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (g) notify the Holder, promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information; (h) prepare and file with the SEC, promptly upon the request of the Holder, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for such Holder (and concurred in by counsel for the Corporation), is required under the Act or the rules and regulations thereunder in connection with the distribution of securities by such Holder; (i) furnish, at the request of a the Holder, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated as of such date, of the counsel representing the Corporation for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a the Holder, addressed to the underwriters, if any, and to the Holder and (ii) a letter dated as of such date, from the independent certified public accountants of the Corporation, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to the Holder requesting registration, addressed to underwriters, if any, and if permitted by applicable professional standards, to the Holder requesting registration of Registrable Securities; (j) prepare and promptly file with the SEC and promptly notify such Holder of the filing of such amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Act, any event shall have occurred as the result of which any such prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; and (k) advise the Holder, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use all commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. The Corporation may in turn require the Holder of Registrable Securities as to which any registration is being effected to furnish to the Corporation such information regarding the distribution of such shares as the Corporation may from time to time reasonably request in writing. Section 5. EXPENSES OF REGISTRATION. All fees, costs and expenses of and incidental to any registration hereunder, and the inclusion therein of Registrable Securities, and the public offering in connection therewith, shall be borne by the Corporation, provided, however, that the Holder shall bear its share of the underwriting discount and commissions and transfer taxes and the Corporation shall not be required to pay for expenses of any demand registration subsequently withdrawn by the Holder unless the withdrawal is based upon material adverse information concerning the Corporation of which such Holder was not aware, or should not have reasonably been aware, at the time of such request. The fees, costs and expenses of registration to be borne by the Corporation as provided above shall include, without limitation, all registration, filing, and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Corporation, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered and qualified (except as provided herein). Fees and disbursements of counsel and accountants for the Holder and any other expenses incurred by the Holder not expressly included above shall be borne by the Holder. Section 6. INDEMNIFICATION. In the event that any Registrable Securities are included in a registration statement pursuant to this Agreement: (a) The Corporation shall indemnify and hold harmless the Holder of Registrable Securities which are included in a registration statement pursuant to the provisions of this Agreement, its directors and officers if the Holder is a Corporation, and any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or such underwriter within the meaning of the Act, from and against, and will reimburse such Holder and each such underwriter and controlling person with respect to, any and all loss, damage, liability, cost and expense to which such Holder or any such underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Corporation will not be liable in any such case to the extent that any such loss, damage, liability, cost or expenses arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Holder, such underwriter or such controlling person in writing specifically for use in the preparation thereof. (b) The Holder pursuant to the provisions of this Agreement hereof shall indemnify and hold harmless the Corporation, its directors and officers, any controlling person and any underwriter from and against, and will reimburse the Corporation, its directors and officers, any controlling person and any underwriter with respect to, any and all loss, damage, liability, cost or expense to which the Corporation or any controlling person and/or any underwriter may become subject under the Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by or on behalf of such Holder specifically for use in the preparation thereof. (c) Promptly after receipt by an indemnified party pursuant to the provisions of this Section of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of this Section, promptly notify the indemnifying party of the commencement thereof, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than hereunder. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party, provided, however, if counsel for the indemnifying party concludes that a single counsel cannot under applicable legal and ethical considerations represent both the indemnifying party and the indemnified party, the indemnified party or parties have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election to so assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of this Section for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. Section 7. TERMINATION OF REGISTRATION RIGHTS. All registration rights granted under this Agreement shall terminate as to the Holder and be of no further force and effect if the Holder is eligible to sell such securities without restriction under Rule 144(k) of the Act. Section 8. ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject hereof and no party shall be liable or bound to any other in any manner by any covenants or agreements except as specifically set forth herein. All prior agreements and understandings are superseded by this Agreement. Section 9. GOVERNING LAW; VENUE. This Agreement shall be governed by the laws of the State of Colorado. Any action brought to enforce this Agreement or any term thereof shall be brought in a court of competent jurisdiction in Colorado and each party hereto affirmatively agrees to submit to the jurisdiction in that state. Section 10. SEVERABILITY. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. IN WITNESS WHEREOF, this Agreement is hereby duly executed by each party hereto as of the date first written above. ENTER TECH CORP. By: /S/ SAM J. LINDSEY ---------------------- Name and Title: Sam J. Lindsey, President ------------------------- HOLDER /S/ LEON F. HARTE, Account Manager, TRFT --------------------------------------------- Printed Name: Leon F. Harte, Account Manager TRFT ----------------------------------- RIDER TO STOCK PURCHASE AND SUBSCRIPTION AGREEMENT Notwithstanding anything contained in the Stock Purchase and Subscription Agreement to which this Rider is attached, the obligation of the undersigned to purchase the Securities described in the Stock Purchase and Subscription Agreement is expressly conditioned upon the occurrence of the following two events on or before May 1, 2000: 1. The Company has duly filed its annual report on Form 10-K or 10-KSB for the year ending December 31, 1999. 2. The Company has completed an acquisition of WavePower, Inc., a Florida corporation on or before May 1, 2000. Executed, March 15, 2000. /S/ LEON F. HARTE, Account Manager, TRFT ------------------------------------------ Leon F. Harte, Account Manager, TRFT By: /S/ SAM J. LINDSAY ------------------- EX-10 5 EXHIBIT 10.8 Exhibit 10.8 ------------ PROMISSORY STRAIGHT NOTE $250,000.00 March 15, 2000 - ----------- -------------- On or before May 1, 2000, 45 days after date, without grace, the undersigned maker of this note promises to pay to the order of The Reserve Foundation Trust (hereinafter referred to as "Holder") located as 97 GRANBY ST., KINGSTOWN, ST. VINCENT the principal sum of Two Hundred Fifty Thousand Dollars ($250,000.00) with interest from the date hereof on the unpaid principal at the rate of 12% INTEREST per annum, which will be paid at the time the principal is paid. THE TERM is for a period of 45 days from the date hereof payable in lawful money of the United State. IN DEFAULT of payment when due the whole sum of principal and interest shall become immediately due at the option of the holder of this note. If action be instituted on this note, I promise to pay such sum as the Court may fix as attorney's fees, plus costs and all expenses in connection with the collection thereof. Signed this 15th day of March, 2000 Enter Tech Corporation 430 E. 6th St. Loveland, CO 80537 By: /s/Sam J. Lindsey -------------------------- (Its duly authorized agent) EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FORM 10-K. 1 12-MOS DEC-31-1999 DEC-31-1999 14 0 0 0 0 0 8,192 (819) 7,387 1,536,901 0 0 0 385 (1,529,899) 7,387 0 0 0 0 1,557,665 0 0 0 0 0 0 0 0 (1,557,665) 0 0
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