-----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, PFKsQZ039scCwdV1zn1ZggS/v0yblmnhjGx6o5H2WaO5JdQleX4xWewtNvPAUBci OIdzoo+aT09I6qW2FFvPOg== 0001074140-99-000037.txt : 19990412 0001074140-99-000037.hdr.sgml : 19990412 ACCESSION NUMBER: 0001074140-99-000037 CONFORMED SUBMISSION TYPE: 10SB12G/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990409 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CUSTOM COMPONENTS INC CENTRAL INDEX KEY: 0001053322 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 810478643 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G/A SEC ACT: SEC FILE NUMBER: 000-23859 FILM NUMBER: 99590449 BUSINESS ADDRESS: STREET 1: 3310 WEST MCARTHUR BLVD CITY: SANTA ANA STATE: CA ZIP: 92704 BUSINESS PHONE: 7146622080 MAIL ADDRESS: STREET 1: 3310 W MACARTHUR BLVD CITY: SANTA ANA STATE: CA ZIP: 92704 10SB12G/A 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-SB/A ___________________ AMENDMENT NO. 2 TO GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 ___________________ AMERICAN CUSTOM COMPONENTS, INC. (Name of Small Business Issuer in Its Charter) NEVADA 81-0478643 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3310 W. MACARTHUR BOULEVARD SANTA ANA, CALIFORNIA 92704 (Address of Principal Executive Offices) (Zip Code) (714) 662-2080 (Registrant's Telephone Number, Including Area Code) SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: (None) SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, par value $0.001 Title of Class TABLE OF CONTENTS PART I Item 1 Description of Business. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3 Description of Property. Item 4 Security Ownership of Certain Beneficial Owners and Management. Item 5 Directors, Executive Officers, Promoters and Control Persons. Item 6 Executive Compensation. Item 7 Certain Relationships and Related Transactions. Item 8 Description of Securities. PART II Item 1 Market Price of and Dividends on the Registrant's Common Equity and Other Shareholder Matters. Item 2 Legal Proceedings. Item 3 Changes In and Disagreements With Accountants. Item 4 Recent Sales of Unregistered Securities. Item 5 Indemnification of Directors and Officers. PART F/S Financial Statements. PART III Item 1 Index to Exhibits. Item 2 Description of Exhibits. PART I ITEM 1 - DESCRIPTION OF BUSINESS American Custom Components, Inc., a Nevada corporation ("ACC-NV" or the "Company"), was incorporated on December 31, 1991 as Rainbow Bridge Services, Inc. ("Rainbow"). Effective August 15, 1997, Rainbow, which had no assets or operations, acquired all of the outstanding common stock of American Custom Components, Inc., a California corporation incorporated on April 18, 1994 ("ACC-CA"). Following the acquisition, Rainbow changed its name to American Custom Components, Inc. In October 1997, the Company acquired ninety-eight percent (98%) of the issued and outstanding stock of Caribbean Electronics, Ltd., a St. Lucian corporation incorporated on February 13, 1986 ("CEL"). Effective January 31, 1998, the Company acquired all of the outstanding common stock of K5 Plastics, Inc., a California corporation incorporated on February 8, 1983 ("K5"). Finally, on March 16, 1999, the Company acquired all of the outstanding common stock of Loyd International, Inc., a Wyoming corporation ("Loyd"). The Company is a holding company for its four (4) subsidiaries, ACC-CA, CEL, K5 and Loyd. Through its subsidiaries, the Company is engaged in the business of providing electronic assemblies (connectors and related parts) for use in multiple applications ranging from general commodities such as industrial supply products to specialized components such as high technology computer and peripheral interconnect systems. The Company offers design, assembly/test and shipment of a wide variety of connector components and offers the design, assembly and test of specialized tooling for use in the production of various injected plastic molded products. The Company also offers low cost subcontract assembly in its off shore production facility. The Company has targeted five major market segments that all benefit from the Company's offerings. Those segments are: Telecommunication - Industrial - Medical - Computer Peripheral - General Products The Company offers its technology customers a solution to many of their electronic connector needs. The primary products offered are connector and interconnect systems and a variety of metal tools used in the production of injected plastic components. Components used in the connector and interconnect systems include plastic housings which are designed, tooled and produced in-house, thereby reducing production costs. Services include designing and building custom tooling for plastic injection molding applications and designing and manufacturing interconnect components using injected plastic housings and metal contacts. The Company offers the customer low cost and fast turnaround on designs, samples and production of both standard and custom interconnect systems. The Company believes that its competitive advantage is its ability to provide system level design support, faster than the competition, in a market that traditionally relies on "catalog sales." The Company provides services and products that create fast time-to-volume for its customers. Its strategy is to identify the weaknesses of the competition, offer products and services that satisfy customer needs and penetrate selected market niches using its core competence for competitive advantage. Customers currently include Motorola, Western Digital, Iomega, Allied Manufacturers, Mattel, Polaris Pools, Calluna, GE Fanuc, Hughes Aircraft, Thermador, Smartflex, Westlock, Medtrex, Linear Technology, Furon and Adflex. The Company's strategy is to continue to expand its custom connector and subcontract assembly business in Santa Ana, California and to continue expanding its 12,000 square foot manufacturing capability in St. Lucia. The Company intends to use the St. Lucia plant to assemble and distribute products for worldwide customers and to undertake manufacturing and molding. The Company intends to manufacture critical molds and tooling at the Santa Ana facility and ship them to the St. Lucia plant for use in volume production. The corporate offices of the Company and its subsidiaries are located at 3310 W. MacArthur Boulevard, Santa Ana, California 92704. The telephone number is (714) 662-2080. THE ELECTRONICS CONNECTOR MARKETPLACE According to Ken Fleck in Electronic Buyers News, the worldwide electronic connector sales by end-use equipment were approximately $23.4 billion in 1997 and will be approximately $24.9 billion in 1998. Virtually every electric or electronic product utilizes electronic connectors of varying sophistication. To date, the Company's principal activities in the electronic connector marketplace have principally focused in the computer disk drive segment of that marketplace. In recent years, this computer disk drive industry has been driven by extremely high competitive pressures in terms of storage capacity, performance and pricing, among other factors, and is characterized by frequent new product introductions, short product life spans, and the need for high quality and reliability. The Company seeks to address this market with quick response times, which the Company also sells to other segments such as industrial and telecommunications components. Electronic connectors are generally comprised of contact material, generally metallic, to transmit electric current, and insulating materials such as nylon, to hold the contact material in proper positioning, to link the connector to another connector or component and to insulate the contact material. Connectors must be designed to accommodate the number and size of electrical contacts to be joined, voltage and current, and to fit space and other requirements. Precise manufacturing tolerances and quality control are essential, since electrical short circuits or open circuits caused by a connector can render equipment inoperable or cause expensive damage. The Company's product cycle includes the following major stages: sales; engineering and design; sourcing; tooling; manufacturing; packaging and delivery, and to a lesser extent, contract customer repair work. MARKETING AND SALES The Company's sales efforts are primarily directed by the key managers of each of the respective services; molding, mold tooling operations, sub contract services, and connector/interconnect assemblies. The Company's marketing strategy has been based on providing rapid design, engineering, tooling, molding and assembly for its clients' custom connector requirements. To date, the primary market for the Company's products has been disk drive manufacturers, but the Company has also diversified its marketing to aerospace firms building electronic assemblies for the U.S. military, and tooling for injected plastic mold parts. The Company primarily sells its products through numerous manufacturers representatives, which can be terminated at any time. All sales orders are subject to approval by the Company. No marketing or sales efforts are made through subsidiaries of the Company. MANUFACTURING, PACKAGING AND DELIVERY The connector manufacturing process primarily consists of injection molding and assembly. Where possible, and to provide higher quality and output, the Company manufactures its own packaging materials. Since most of the Company's products are small, many shipments can be made via overnight delivery services or counter to counter airline freight to non-local customers. The Company seeks to manufacture its products to applicable specification requirements. In October 1997 the Company acquired a 12,000 square foot assembly plant in Vieux Fort, St. Lucia. The Company has used and intends to use the St. Lucia plant to assemble for worldwide customers. The Company intends to manufacture critical molds and tooling at the Santa Ana facility and ship them to the St. Lucia plant by overnight delivery service. The St. Lucia plant also performs subcontract assembly services. In addition to its own manufacturing requirements, which are satisfied by ACC-CA and K5, the Company also designs and manufactures tools for outside customers. The principal components of the Company's products include nylon and contact materials such as brass, copper, nickel, gold, silver, aluminum, steel, tin, solder, and nuts, screws and bolts. Prior to acceptance by the Company, all materials and components undergo quality assurance procedures. All materials and components used in the Company's products are available from several sources. Although availability of such materials has been adequate to date, no assurance can be given that cost increases or material shortages or allocations imposed by suppliers in the future will not have a materially adverse effect on the operations of the Company. The Company's principal suppliers include Central MN Tool and Stamping, Inc., Electronic Plating Services, Fry Steel Co., Hasco Internorm Corp., Nascal Interplex, Inc., Phantom Tool and Die, Plastic Resources, Inc., Precision Components, Safe Plating, Inc., and Skyler International. CUSTOMERS OF THE COMPANY The Company currently has five customers that in the aggregate represent 65% of the total sales for its last two fiscal years. One of its five major customers filed for protection under the federal bankruptcy laws subsequent to March 31, 1997. The Company has collected substantially all of its open accounts receivable from such customer. The Company anticipates that it will continue to rely upon these customers during the fiscal year ending March 31, 1999. The Company has diversified its customer base and, in fact, over the last six months as much as 65% of total sales were to customers other than the five mentioned above. SIGNIFICANT ACQUISITIONS In October 1997, the Company acquired ninety-eight percent (98%) of the issued and outstanding stock of Caribbean Electronics, Ltd., a St. Lucian corporation, for $25,000 cash, a $100,000 note at an interest rate of 8% per annum, and 8,333 restricted shares of the Company's common stock. In connection with the acquisition, the Company also assumed certain accounts payable of approximately $25,000. Caribbean Electronics, Ltd. is an electronic parts assembly business located on the island of St. Lucia. The acquisition was accounted for as a purchase. The acquisition of Caribbean Electronics, Ltd. included acquisition of a manufacturing and assembly facility which the Company intends to utilize for its existing and new customers. Effective January 31, 1998 the Company acquired K5 Plastics, Inc. ("K5"), a tooling and mold manufacturer through the purchase of one hundred percent (100%) of its issued and outstanding shares of stock. The Company acquired K5 for $42,000 in cash, a $50,000 note at an interest rate of 10% per annum, and 25,000 shares of restricted common stock. Also, the Company delivered 60,000 warrants with an exercise price of $3.00. Of these warrants, 30,000 are exercisable at any time in the next two to five years and the remaining 30,000 are exercisable at any time in the next three to six years. The Company has also assumed a K5 note payable to Union Bank of California in the amount of approximately $12,000 bearing an interest rate of 11% per annum and a line of credit to Union Bank of California with an outstanding principal balance of approximately $50,000 at an adjustable interest rate currently at 11.25%. On March 16, 1999, the Company acquired all of the issued and outstanding stock of Loyd International, Inc., a Wyoming corporation. In connection with the transaction, (i) the Company's then-largest shareholder, Martin Tony Walk, exchanged an aggregate of 4,972,000 shares of common stock for 500,000 shares of Series A Convertible Preferred Stock, (ii) the Company issued an aggregate of 1,600,000 shares of common stock to Edward Loyd, the sole shareholder of Loyd International, Inc., and an Officer and Director of the Company, (iii) the Company paid the sum of $11,000 to Mr. Walk and entered into a consulting contract with him, (iv) the Company entered into an Assignment of Assets and Assumption of Liabilities with Mr. Walk with respect to the assets and liabilities of the Company as they related to Tagnology, Inc., and (v) the Company agreed to assume all tax liabilities of Mr. Walk incurred as a result of the transaction. Management does not currently have any plans or arrangements for additional acquisitions or other new ventures. PATENTS AND OTHER INTELLECTUAL PROPERTY The Company and its subsidiaries generally own the design rights for the connectors it manufactures, but does not generally rely upon patent protection for its connectors but rather believes that the short lifespan and time to market for products provides sufficient intellectual property protection for its products. There can be no assurance that competitors of the Company do not have competing patents which may preclude certain aspects of the Company's designs, that competitors may reverse engineer and create competitive products to those of the Company or that other technological protection can be obtained for the Company's products. No assurance can be given that patents will be granted on future patent applications. The Company has one trademark application pending. GOVERNMENT REGULATION The Company believes it is in compliance with federal, state and local regulations with respect to environmental protection. The Company does not anticipate that costs of compliance with such regulations will have a material effect on its capital expenditures, earnings or competitive position. The Company, through its CEL subsidiary, operates in a foreign jurisdiction and, as set forth in the auditor's report, is exposed to certain risks associated therewith. These risks include currency differences and fluctuations, political events and the status of relationships among governments, labor restrictions, and overall market and economic conditions. Specifically, it is imperative that the government of St. Lucia continue to support business on the island through training and assisting in appeasing union negotiators as well as continue to make improvements to roads, communication, and port facilities. Asian economic volatility has currently slowed sales growth within the market. Management believes that its marketing plan and the marketing plans of its major customers are well positioned to deal with such uncertainties. EMPLOYEES The Company and its subsidiaries have approximately 100 employees (42 of which are primarily part-time), including two officers, seven administrative personnel, four in engineering, 79 in manufacturing, and eight in quality control. Sales and marketing is undertaken primarily by four external sales representation firms. Other than officers and directors, none of the Company's subsidiaries have employees. RESEARCH AND DEVELOPMENT The Company expended approximately $190,000 in fiscal year 1998 for research and development activities related to its manufacturing processes. Of such amount, approximately $50,000 was reimbursed to the Company from its customers. None of the Company's subsidiaries expended material sums for research and development. COMPETITION The Connector Business The electronic connector business consists of a few very large entities, each with annual sales over $1 billion per year. These companies include AMP, Berg, Robinson Nugent, Molex, and many smaller companies with annual revenues between $10 million and $100 million. The Company is small compared to the marketplace, and competes against its larger competitors by offering "custom application" components in a shorter time and for a lower cost. The Company is able to compete on cost as a result of its off-shore manufacturing. In the event, however, that its more-adequately financed and larger competition were to focus their efforts on shorter turn-around times, they could materially erode the Company's market share and have a material adverse effect on the Company's financial performance. The Tooling Business The Company entered the plastic tooling business when it acquired K5. K5 was in the business of selling tooling services and mold making to a set of customers at the time of the acquisition, and the Company continues to support and expand the outside customer base inherited in the acquisition. The Company also uses the capabilities of K5 for its in-house manufacturing of tools used in the production of plastic components used in final assemblies. The tooling industry consists of competitors that make their own tooling for their own use, as well as small to medium sized companies that sell to outside customers. The majority of the competition in the tooling segment are very small machine shops, privately held and located in the United States. The Company, through K5, offers a unique set of capabilities with very fast turn around times that give customers a quick time-to-market. However, existing customers could elect to vertically integrate and provide the now-subcontracted services in-house, a move which, if followed by a substantial number of the Company's customers, could have a materially adverse effect on the Company's financial performance. Subcontract Services Business The Company entered the subcontract services business when it acquired CEL. CEL was in the business of providing subcontract manufacturing services to outside customers. The Company uses CEL both as an in-house manufacturing plant with low cost labor as well as a plant to service outside customers inherited in the acquisition. Competition in the Caribbean region is minimal, with most of the competition for these services coming from the Far East. The Company uses the CEL facilities for shipment to customers located in the European Economic Community as the island nation is a protectorate of Great Britain and participates in the European Trading Community. If competitors were to locate on the island of St. Lucia, the Company could be effected by the reduced skilled labor available to the Company. YEAR 2000 DISCLOSURE In the fiscal year ended March 31, 1998, the Company began the process of identifying, evaluating, and implementing changes to its computer programs necessary to address the Year 2000 issue. The Company has currently addressed its internal Year 2000 issue by modification of existing programs and conversions to new programs. While the Company is confident that it has successfully completed the assessment and remediation of its computer software, there can be no assurance that the necessary modifications and conversions will be adequate or completely thorough, which could have a material adverse effect on its results of operations. The total cost to the Company associated with the required modifications and conversions was not material to the Company's results of operations and financial position and was expensed as incurred. ITEM 2 - MANAGEMENT'S DISCUSSION OF ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains certain forward-looking statements that are subject to business and economic risks and uncertainties, and the Company's actual results could differ materially from those forward-looking statements. The following discussion regarding the financial statements of the Company should be read in conjunction with the financial statements and notes thereto. OVERVIEW The Company, together with its subsidiaries, has its primary operations located in Santa Ana, California where it is currently engaged in the business of designing and manufacturing electronic components and plastic injection tools for computers, disk drives, computer systems, military applications, medical, telecommunications and certain industrial devices. In August 1997, the Company (which at the time was named Rainbow Bridge Services, Inc., a Nevada corporation ("Rainbow")) acquired all of the outstanding common stock of ACC-CA in a business combination described as a "reverse acquisition." As such, the historical financial statements are those of ACC-CA and the accounts of Rainbow have been reflected in the consolidated financial statements from the August 1997 date of the acquisition. In October 1997, the Company acquired ninety-eight percent (98%) of the issued and outstanding stock of Caribbean Electronics, Ltd. ("CEL"), an electronic components manufacturer, housed in a leased 12,000 square foot assembly plant located on the island of St. Lucia. As of January 31, 1998, the Company acquired one-hundred percent (100%) of the issued and outstanding stock and assumed certain debts of K5 Plastics, Inc., a California corporation ("K5"), a mold and tooling manufacturer and a previous vendor. K5 has been consolidated with the Company's Santa Ana facility. RESULTS OF OPERATIONS REVENUES During the fiscal years ended March 31, 1998 and 1997, the Company's revenues were derived principally from the following products: i. Electrical components for disk drives ii. Military and industrial connectors For the year ended March 31, 1998, revenues were $2,583,094. This is an increase of 4.4% from $2,473,095 recorded for the year ended March 31, 1997. The increase was due to increased sales efforts arising from the Company's external sales force. For the fiscal year ended March 31, 1996, revenues were $718,748. GROSS MARGINS The Company realized a gross margin of $1,059,399 reported for the year ended March 31, 1998. This is an increase of 47.2% over $719,652 for the year ended March 31, 1997. The increase is due to a shift of some final assembly operations from Southern California to the plant in St. Lucia, which provided a lower cost of labor and favorable overall economic conditions for the region. The gross margin as a percentage of revenues was 41% for the year ended March 31, 1998 and 29% for the year ended March 31, 1997. The Company realized a gross margin of $256,659 for the fiscal year ended March 31, 1996. The gross margin as a percentage of revenues was 36% for the fiscal year ended March 31, 1996. Operating income was a negative $672,998 for the year ended March 31, 1998. This is a decrease of 558% from $147,019 recorded for the year ended March 31, 1997. The decrease is due to a decrease in sales volume during the last three months of the fiscal year. Selling, general, and administrative (SG&A) expenses were increased during the second and third quarter in response to indications of continued increasing sales. The reaction time to correct this expense increase resulted in lower income from operations, which also resulted in a decreased net income. Operating income was a negative $71,758 for the fiscal year ended March 31, 1996. OPERATING COSTS AND EXPENSE Operating costs and expenses increased by $1,159,764 (203%) for the year ended March 31, 1998 as compared to the year ended March 31, 1997. The increase was due primarily to the increased cost of sales associated with sales commissions to representatives and the hiring of certain key personnel. These new employees come from some of the Company's largest customers, bringing with them certain knowledge specific to the industry. Operating costs and expenses increased by $244,216 (74%) for the fiscal year ended March 31, 1997 as compared to the fiscal year ended March 31, 1996. OTHER OPERATING EXPENSE Total other operating expenses, consisting primarily of bad debt expense, payroll taxes, rent, telephone and utilities, printing, and office supplies, increased by $296,050 (226%) for the year ended March 31, 1998 as compared to the year ended March 31, 1997. This increase was due in large part to the conversion of a significant percentage of the Company's labor force from independent contractors to Company employees. Total other operating expenses decreased by $11,555 (8%) for the fiscal year ended March 31, 1997 as compared to the fiscal year ended March 31, 1996. NET INCOME Net income for the year ended March 1998 was a negative $773,263 compared to $77,342 for the year ended March 1997, a 1100% decrease. As stated earlier, this decrease was due primarily to a decreased sales volume during the last three months of the fiscal year while SG&A expenses were increased during the second and third quarter in response to indications of continued increasing sales. ASSETS AND LIABILITIES Total assets increased from $759,145 as of the year ended March 1997 to $1,486,046 as of the year ended March 1998. This increase of 95% was due primarily to the inclusion of assets as a result of the acquisitions of CEL and K5. Inventory increased from $75,410 as of the year ended March 1997 to $227,465 (201%) as of the year ended March 1998 due to a slow down in shipments during the first quarter of 1998. Net property and equipment increased from $245,556 as of the year ended March 1997 to $750,371 (a 205% increase) as of the year ended March 1998 primarily as a result of the acquisitions described above. Total liabilities increased from $791,276 for the period ended March 1997 to $1,119,606 (a 41% increase) for the period ended March 1998 due to an increase in accounts payable (an increase from $238,708 to $456,977, or 91%) and the addition of notes payable, net of current portion. The accounts payable increase resulted from increased trade payables as the CEL and K5 acquisitions occurred. The other increase in total liabilities came from the creation of notes payable during the reverse merger. SHAREHOLDERS EQUITY Shareholders Equity increased from a negative $32,131 as of the period ended March 1997 to $366,440 as of the period ended March 1998. This increase of 1240% reflects the negative earnings reported for the period ended March 1998 ($773,263) and the issuance of shares and related additional paid-in capital raised during the fiscal year from private offerings of the Company's securities ($1,171,834). RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 1998 Sales for the six months ended September 1998 were $832,011. Gross profit was $410,614, or 49.35%, an increase of 8.3% over the period ended March 31, 1998. The Company's net income was a negative $57,794. Sales continued to decline following the end of the 1998 fiscal year, primarily due to a slow down in the marketplace. The decrease in sales occurred faster than the Company could adjust the SG&A costs, thus resulting in a net loss for the period. However, overhead expenses were reduced as a percentage of sales. Total assets increased from $1,486,046 to $1,712,961, while inventory was reduced from $227,465 to $161,643. Owners equity increased from $366,440 to $616,146. LIQUIDITY AND CAPITAL RESOURCES In August 1997, the Company (which at the time was designated Rainbow Bridge Services, Inc., a Nevada corporation ("Rainbow")) acquired all of the outstanding common stock of American Custom Components, Inc., a California corporation ("ACC-CA") in a business combination described as a reverse acquisition. For accounting purposes, the acquisition has been treated as the acquisition of Rainbow (the Company) by ACC-CA. Immediately prior to the acquisition, Rainbow had 832,752 shares of stock outstanding. As part of the reorganization, the Company issued 7,447,000 shares to the shareholders of ACC-CA in exchange for 7,447 shares of common stock in ACC-CA. In addition, the Company issued options to purchase 1,100,000 shares of its common stock to certain consultants and employees. The Company subsequently changed its name from Rainbow to American Custom Components, Inc., a Nevada corporation. The Company is currently experiencing growth beyond its financial resources. The Company intends to acquire additional funds through establishing a bank lending relationship and additional equity financing. Although management currently is negotiating with several funding sources, no specific plans or arrangements have been made for said financing. There can be no assurance that the Company will be successful in obtaining any such funding. In October 1997, the Company acquired ninety-eight percent (98%) of the issued and outstanding stock of Caribbean Electronics, Ltd., a St. Lucian corporation ("CEL"), for $25,000 cash, a $100,000 note payable with interest at 8% per annum, and 8,333 restricted shares of the Company's common stock. In connection with the acquisition, the Company also assumed certain accounts payable of approximately $25,000. Caribbean Electronics, Ltd. is an electronic contract assembly business located on the island of St. Lucia. The acquisition was accounted for as a purchase. Effective January 31, 1998 the Company acquired K5 Plastics, Inc. ("K5"), a tooling and mold manufacturer through the purchase of one hundred percent (100%) of its issued and outstanding shares of stock. The Company acquired K5 for $42,000 in cash, a $50,000 note at an interest rate of 10% per annum, and 25,000 shares of restricted common stock. Also, the Company delivered 60,000 warrants with an exercise price of $3.00. Of these warrants, 30,000 are exercisable at any time in the next two to five years and the remaining 30,000 are exercisable at any time in the next three to six years. The Company has also assumed a K5 note payable to Union Bank of California in the amount of approximately $12,000 bearing an interest rate of 11% per annum and a line of credit to Union Bank of California with an outstanding principal balance of approximately $50,000 at an adjustable interest rate currently at 11.25%. In connection with a private offering of securities which was made by the Company in the Third Calendar Quarter of 1997, the Company entered into three (3) Note Purchase Agreements with accredited purchasers under Rule 504 of Regulation D promulgated under the Securities Act of 1933 wherein the purchasers purchased an aggregate of $374,700 in Notes convertible at the greater of (i) 83% of the closing bid price of the Company's common stock, or (i) $4.98. As of the date hereof, all of the Notes have been converted into an aggregate of 75,241 shares of the Company's Common Stock. In connection with a private offering of securities which was made by the Company in the Fourth Calendar Quarter of 1997 and the First Quarter of 1998, the Company sold an aggregate of 245,000 restricted shares of Common Stock to accredited investors under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 at a price of $1.75 per share, resulting in net proceeds to the Company of $428,750. In connection with a private offering of securities which was made by the Company in the First and Second Calendar Quarters of 1998, the Company sold an aggregate of 49,514 restricted shares of Common Stock to accredited investors under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 at a price of $1.75 per share, resulting in net proceeds to the Company of $86,650. In connection with a private offering of securities which was made by the Company in the Second Calendar Quarter of 1998, the Company sold 80,000 shares of Common Stock to accredited investors under Rule 504 of Regulation D and Section 4(2) of the Securities Act of 1933 at a price of $1.25 per shares, resulting in net proceeds to the Company of $100,000. In connection with a private offering of securities which was made by the Company in the Second Calendar Quarter of 1998, the Company sold 225,000 restricted shares of Common Stock to accredited investors under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 at a price of $0.70 per share, resulting in net proceeds to the Company of $112,500. In addition to current liabilities of $846,131 at March 31, 1998, the Company has $273,475 of long term debt. The March 31, 1998 outstanding debt has been increased by $328,330 (42%) since March 31, 1997. During fiscal 1998, the Company continued its management plan of diversification of its product lines into emerging markets through continued acquisitions and new products development. This plan was begun with the establishment of the St. Lucia production facilities. The objective of the expansion program is to achieve a geographic and economic relationship with the emerging markets. While there can be no assurance that such funding can be obtained, the Company plans to finance future acquisitions through both capital raised from future private placements as well as through the direct issuance of the Company's common stock. On March 16, 1999, the Company acquired all of the issued and outstanding stock of Loyd International, Inc., a Wyoming corporation. In connection with the transaction, (i) the Company's then-largest shareholder, Martin Tony Walk, exchanged an aggregate of 4,972,000 shares of common stock for 500,000 shares of Series A Convertible Preferred Stock, (ii) the Company issued an aggregate of 1,600,000 shares of common stock to Edward Loyd, the sole shareholder of Loyd International, Inc., and an Officer and Director of the Company, (iii) the Company paid the sum of $11,000 to Mr. Walk and entered into a consulting contract with him, (iv) the Company entered into an Assignment of Assets and Assumption of Liabilities with Mr. Walk with respect to the assets and liabilities of the Company as they related to Tagnology, Inc., and (v) the Company agreed to assume all tax liabilities of Mr. Walk incurred as a result of the transaction. PROPOSED FUTURE OPERATIONS The Company has historically been engaged in the business of design and manufacture of electronic components and interconnect systems for the computer disk drive industry. The Company's Management has recently determined to broaden the Company's business plan from a disk drive connector manufacturer to now offering its technology customers a more complete solution to their interconnect and systems integration needs and to penetrating additional market places. The Company designs its products to customer specifications using sophisticated engineering facilities; manufactures its molds and other necessary tooling; and manufacturing components and assemblies. FORWARD LOOKING STATEMENTS Certain of the statements contained in this report involve risks and uncertainties. The future results of the Company could differ materially from those statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report. While the Company believes that these statements are accurate, the Company's business is dependent upon general economic conditions and various conditions specific to technology-based industries. Accordingly, future trends and results cannot be predicted with certainty. It is imperative that the St. Lucia government continues to support business on the island through training and assisting in appeasing union negotiators as well as continues to make improvements to roads, communication and port facilities. Asian economic volatility has currently slowed sales growth within the market. To date, the Company has not experienced any problems relating to currency translation nor does management anticipate any problems in the future. Notwithstanding the foregoing, however, there exists certain risks related to currency translation and there can be no assurances that these risks, if they materialize, will not have a material adverse effect on the operations and earnings of the Company. While the Company plans to acquire/develop additional sales and gain synergy from acquisitions, difficulties and expenses may be encountered in integrating the newly acquired operations with those of the Company already in place. The Company has not experienced a material adverse impact of such risks and uncertainties and does not anticipate such an impact. However, no assurance can be given that such risks and uncertainties will not affect the Company's future results of operations or its financial position. ITEM 3 - DESCRIPTION OF PROPERTY Effective November 1, 1995, the Company began leasing approximately 4,050 square feet of administrative office and warehouse space in Anaheim, California at a monthly rental rate of approximately $2,171.00. The premises were sublet to a tenant in an amount equal to the Company's obligations under the lease. The lease expired October 31, 1998, and the Company has no further obligations related to the Anaheim premises. Effective December 1, 1997, the Company began leasing approximately 12,185 square feet of administrative office, warehouse, and manufacturing space in Santa Ana, California at a monthly rental rate of approximately $6,702.00 per month. The rent increases to approximately $6,945 and $7,185 in years two and three, respectively, of the lease. The lease expires November 30, 2000. In September 1997 the Company acquired a 12,000 square foot manufacturing facility in St. Lucia in connection with its acquisition of Caribbean Electronics, Inc. In connection with the acquisition of K5 in January 1998, the Company assumed an obligation for a lease of approximately 3,000 square feet in Huntington Beach, California. The monthly rental is approximately $1,760 per month and runs through February 2000. The Company is currently seeking to sublet or be released from this obligation by the existing landlord. Management believes that the Company had adequate insurance coverage on all of its owned properties. ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 31, 1999, certain information with respect to the Company's equity securities believed by the Company to be owned of record or beneficially by (i) each Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company's outstanding equity securities; and (iii) all Directors and Executive Officers as a group. Title Percent of of Class Name and Address of Beneficial Owner Common Stock Outstanding Common Stock Edward Loyd 1,600,000 19.3% 3310 W. MacArthur Blvd Santa Ana, CA 92704 Common Stock John Groom 1,100,000(1) 11.8% 3301 W. MacArthur Blvd Santa Ana, CA 92704 Common Stock John Fritch - - 3301 W. MacArthur Blvd Santa Ana, CA 92704 Common Stock Steve Kakuk 73,000(2) - 3301 W. MacArthur Blvd Santa Ana, CA 92704 All Directors and Officers as a Group (3) 2,700,000 29.0%
_____________________ (1) Includes warrants to acquire 1,000,000 shares of common stock at an exercise price of $0.375 per share, exercisable until October 13, 2004. In the event of Mr. Groom's voluntary resignation as an employee of the Company, the Company shall have to right to terminate 41,667 warrants for each month between Mr. Groom's last full month of employment and January 1, 2000. (2) Does not include an aggregate of 60,000 warrants held by Mr. Kakuk to purchase common stock of the Company at a purchase price of $3.00 per share. Of these warrants, 30,000 are exercisable at any time in the next 2 to 5 years and the remaining 30,000 are exercisable at any time in the next three to six years. The Company believes that the beneficial owners of securities listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Shares of stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person. ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one year terms and until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There are no family relationships between any of the directors and executive officers. In addition, there was no arrangement or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer. The directors, executive officers, and significant employees of the Company are as follows: Name Age Positions John Groom 52 Director, President, Chief Executive Officer (1998) Edward Loyd 55 Chief Financial Officer, Secretary (1999) John Fritch 51 Director (1998) Steve Kakuk 63 General Manager, Tooling and Mold Operations (1998)
JOHN GROOM joined the Company as its President in January 1998 and assumed the position of Chief Executive Officer in June 1998. From July 1996 until November 1997, Mr. Groom was Senior Vice President of Operations, Division Plant Manager and Chief Technical Officer for CMC Industries, Inc., a telecommunications manufacturing firm. From November 1995 until June 1996, Mr. Groom was Executive Director, Operations of JTS Corp., a computer disk drive designer and manufacturer. From April 1987 until November 1995, Mr. Groom held numerous positions at Seagate Technology International, a disk drive manufacturer, most recently holding the position of Senior Director of Engineering after promotion from his position as Director of Engineering, Far East Operations. Mr. Groom brings years of international management with operations development experience and extensive business knowledge of Singapore, Malaysia, Hong Kong, Indonesia, Taiwan, Japan, Korea and India. EDWARD LOYD joined the Company as its Chief Financial Officer in January 1999 and became a Director in March 1999. Prior to joining the Company, Mr. Loyd was the President of Loyd International, Inc., a company he started in the late 1970's. Loyd International, Inc. was the first for-profit procurement agency providing procurement services to foreign governments to whom the United States Government granted loans through its Agency of International Development (AID) programs. Mr. Loyd has held various executive level positions and brings signifiant international experience relating to trade and the European Common Market. He has spent more than 25 years in the United Kingdom and throughout the continent as well as Asia, South America, and Africa. In 1977, he started EBL Holdings, a company specializing in mergers and acquisitions. In 1982, he started Vinceport United Kingdom and Vinceport Canada, handling multi-lateral contracts throughout the world for Canadian Export, Crown Agents, and Commonwealth Development Corporation. He targeted worldside trade and financed the trades through organizations such as Hermes, Kofax and ECGD and the U.S. Import/Export Bank. Sales exports of goods and services exceed $150 million. JOHN FRITCH joined the Company's Board of Directors in January of 1998, and served as its Chairman, Chief Financial Officer, and Secretary from June 1998 until January 1999, when Mr. Fritch was removed as Chairman and as an Officer of the Corporation. From April 1997 until May 1998 he has been the Director of Materials at Hughes Data Systems, a computer integration firm. From September 1996 until April 1997 Mr. Fritch was Director of Corporate Materials for Sanmina Corporation, a contract manufacturer in the telecommunications industry. From May 1995 until May 1996, Mr. Fritch was Senior Vice President of JTS Corporation, a disk drive manufacturer. From October 1994 until May 1995, Mr. Fritch was Vice President of Commodity Management for Conner Peripherals, Inc., a disk drive manufacturer. From June 1986 until October 1994, Mr. Fritch was Director of Commodity Management for Western Digital Corporation, a disk drive manufacturer. Mr. Fritch is a graduate of Pepperdine University's Graduate School of Business and Management and is currently active as a University Adjunct Instructor at the University of Phoenix Graduate School of Business. He is a member is good standing with NYU's Delta Mu Delta Society. STEVE KAKUK joined the Company as the General Manager, Tooling and Mold Operations in January of 1998 when K5, of which Mr. Kakuk was the founder and controlling owner, was acquired by the Company. Mr. Kakuk has over thirty years experience in all aspects of manufacturing management, including product design, prototyping, and tooling design and is proficient in all phases of plastic mold making. Mr. Kakuk's previous experience includes the formation of an international partnership known as Humbros, Inc. (from 1990 to 1993), as well as founding and growing a Downey, California molding and moldmaking business known as K.R.K (from July 1976 to September 1982). Mr. Kakuk attended the Los Angeles Trade Technical Institute where he received certification in plastics. ITEM 6 - EXECUTIVE COMPENSATION Under the terms of his employment contract, John Groom is entitled to receive the following compensation in 1998: (i) a cash bonus of $30,000, (ii) salary at the annual rate of $110,000 per year for the period from January 1, 1998 through March 31, 1998, (ii) salary at the annual rate of $135,000 per year for the period from April 1, 1998 through June 30, 1998, and (iii) salary at the annual rate of $175,000 per year for the period from July 1, 1998 through December 31, 1998. As of October 30, 1998, Mr. Groom has voluntarily elected to defer the cash bonus, and has been paid salary in the aggregate sum of $67,116, resulting in total deferred bonus and salary compensation of $82,464. On October 13, 1998, Mr. Groom was granted warrants to acquire 1,000,000 shares of the Company's Common Stock at an exercise price of $0.375 exercisable until October 13, 2004. In the event of Mr. Groom's voluntary resignation as an employee of the Company, the Company shall have to right to terminate 41,667 warrants for each month between Mr. Groom's last full month of employment and January 1, 2000. No other Officer or Director receives or has received any compensation from the Company, other than reimbursement for direct out-of-pocket expenses in connection with attendance at meetings of the Board of Directors. SUMMARY COMPENSATION TABLE The Summary Compensation Table shows certain compensation information for services rendered in all capacities during each of the prior three (3) fiscal years. Other than as set forth herein, no executive officer's salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred. SUMMARY COMPENSATION TABLE Annual Compensation Long Term Compensation Awards Payouts Restricted Securities Other Annual Stock Underlying LTIP All Other Name and Principal Salary Bonus Compensation Awards Options Payouts Compensation Position Year ($) ($) ($) ($) SARs (#) ($) ($) John Groom 1998 129,693 30,000 -0- -0- 1,000,000 -0- -0- John Fritch 1998 110,190 -0- 11,613 -0- -0- -0- -0- Martin Anthony Walk 1998 7,924 -0- -0- -0- -0- -0- -0- 1997 20,485 -0- -0- -0- -0- -0- -0- 1996 31,500 -0- -0- -0- -0- -0- -0- Inge Lundegaard 1998 65,383 -0- -0- -0- -0- -0- -0- 1997 19,696 -0- -0- -0- -0- -0- -0- 1996 27,393 -0- -0- -0- -0- -0- -0- Michael Robert Orton1998 45,914 -0- -0- -0- 100,000 -0- -0-
OPTION/SAR GRANTS IN LAST FISCAL YEAR (Individual Grants) NUMBER OF SECURITIES PERCENT OF TOTAL UNDERLYING OPTIONS/SAR's OPTIONS/SAR's GRANTED TO EMPLOYEES EXERCISE OF BASE PRICE NAME GRANTED (#) IN FISCAL YEAR ($/Sh) EXPIRATION DATE John Groom -0- -0- N/A N/A John Fritch -0- -0- N/A N/A Michael Robert Orton 100,000 100% $0.01 N/A
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES NUMBER OF UNEXERCISED SECURITIES UNDERLYING VALUE OF UNEXERCISED OPTIONS/SARS AT FY-END IN-THE-MONEY OPTION/SARS SHARES ACQUIRED ON (#) AT FY-END ($) NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE John Groom -0- -0- -0- -0- John Fritch -0- -0- -0- -0- Michael Robert Orton 100,000 35,740 -0- -0-
COMPENSATION OF DIRECTORS No Officer or Director receives any compensation from the Company, other than reimbursement for direct out-of-pocket expenses in connection with attendance at meetings of the Board of Directors. ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In August 1997, the Company (which at the time was designated Rainbow Bridge Services, Inc., a Nevada corporation ("Rainbow")) acquired all of the outstanding common stock of American Custom Components, Inc., a California corporation ("ACC-CA") in a business combination described as a reverse acquisition. For accounting purposes, the acquisition has been treated as the acquisition of Rainbow (the Company) by ACC-CA. The Company's historical financial statements are those of ACC-CA, and the accounts of Rainbow have been reflected in the consolidated financial statements from the August 1997 date of the acquisition. Immediately prior to the acquisition, Rainbow had 832,752 shares of stock outstanding. As part of the reorganization, the Company issued 7,447,000 shares to the shareholders of ACC-CA in exchange for 7,447 shares of common stock in ACC-CA. Such shares include the shares owned by the officers and directors of the Company at the time of the transaction. In addition, the Company issued options to purchase 1,100,000 shares of its common stock to certain consultants and employees, including 900,000 options issued to The Michelson Group. In August 1997 the Company entered into a consulting agreement with The Michelson Group for financial consulting pursuant to which the Company issued to The Michelson Group 900,000 options to purchase common stock and pays The Michelson Group $6,000 per month in consulting fees through the period ending August 1999. The consulting agreement requires that the Company obtain the consent of The Michelson Group for the issuance of additional shares or the incurrence of additional indebtedness other than in the ordinary course of business. In March 1998, Pegasus, Inc. loaned the Company the sum of $100,000 to assist with temporary cash flow needs. The loan was repaid in full in April 1998. At the dates of the loan and its repayment, Pegasus, Inc. was controlled by Martin Tony Walk, majority shareholder and then officer of the Company. There were no written documents evidencing the transaction. On March 16, 1999, the Company acquired all of the issued and outstanding stock of Loyd International, Inc., a Wyoming corporation. In connection with the transaction, (i) the Company's then-largest shareholder, Martin Tony Walk, exchanged an aggregate of 4,972,000 shares of common stock for 500,000 shares of Series A Convertible Preferred Stock, (ii) the Company issued an aggregate of 1,600,000 shares of common stock to Edward Loyd, the sole shareholder of Loyd International, Inc., and an Officer and Director of the Company, (iii) the Company paid the sum of $11,000 to Mr. Walk and entered into a consulting contract with him, (iv) the Company entered into an Assignment of Assets and Assumption of Liabilities with Mr. Walk with respect to the assets and liabilities of the Company as they related to Tagnology, Inc., and (v) the Company agreed to assume all tax liabilities of Mr. Walk incurred as a result of the transaction. ITEM 8 - DESCRIPTION OF SECURITIES COMMON STOCK The Company's Articles of Incorporation authorize the issuance of 24,000,000 shares of Common Stock, $0.001 par value per share, of which 8,284,515 shares were issued and outstanding as of March 31, 1999. Holders of shares of Common Stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of Common Stock have no cumulative voting rights. Holders of shares of Common Stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors in its discretion, from funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, the holders of shares of Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of Common Stock have no preemptive rights to purchase the Company's common stock. There are no conversion rights or redemption or sinking fund provisions with respect to the common stock. All of the outstanding shares of Common Stock are fully paid and non-assessable. PREFERRED STOCK The Company's Articles of Incorporation authorize the issuance of 1,000,000 shares of preferred stock, $0.001 par value. The Company's Board of Directors has authority, without action by the shareholders, to issue all or any portion of the authorized but unissued preferred stock in one or more series and to determine the voting rights, preferences as to dividends and liquidation, conversion rights, and other rights of such series. The issuance of preferred stock may also include restricting dividends on the common stock, dilute the voting power of the common stock, and/or impair the liquidation rights of the holders of common stock. In connection with the March 16, 1999 transaction involving Loyd, the Board of Directors of the Company authorized 500,000 shares of common stock designated Series A Convertible Preferred Stock, and issued all 500,000 shares to Mr. Walk. The Series A Convertible Preferred Stock shall have the following rights, privileges and preferences: 1. Dividend Provisions. Each share of Preferred Stock shall be entitled to receive a cumulative dividend equal to $0.08 per annum, payable on March 31, June 30, September 30, and December 31 of each year. Each share of Preferred Stock shall rank on a parity with each other share of Preferred Stock with respect to dividends. 2. Liquidation Provisions. The Series A Convertible Preferred Stock shall not have any rights to assets or proceeds from sale of assets of the Company in the event of liquidation. 3. Conversion Provisions. The holders of the Series A Preferred Stock shall have no conversion rights. 4. Call Provisions. The shares of Series A Preferred Stock shall, at the sole discretion of the Board of Directors of the Corporation, be callable, in whole or in part, from time to time or at any time, at a price of $0.80 per share. Notwithstanding the foregoing, however, the Corporation may not call the shares of Series A Preferred Stock unless all dividends have been paid in full to the holders of the Preferred Stock as of the time of call. 5. Voting Provisions. The Preferred Stock shall have no voting rights. TRANSFER AGENT The transfer agent for the Common Stock is Alpha Tech Stock Transfer, 4505 S. Wasatch Boulevard, Suite 205, Salt Lake City, Utah 84124. PART II ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS MARKET INFORMATION From July 1997, the Company's Common Stock was quoted without price (name only) under the symbol "RBBS" on the Nasdaq Electronic Bulletin Board. On October 20, 1997, following the acquisition of American Custom Components, Inc., a California corporation, by Rainbow Bridge Services, Inc., a Nevada corporation, the Company's Common Stock began trading under the symbol "ACCM". The following table sets forth the high and low bid prices for shares of the Company Common Stock for the periods noted, as reported by the National Daily Quotation Service and the NASD Non-NASDAQ Bulletin Board. Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. BID PRICES YEAR PERIOD HIGH LOW 1997 Third Quarter. . . . . . . . . . . . . . . . 11.625 3.00 Fourth Quarter . . . . . . . . . . . . . . . 9.5 5.00 1998 First Quarter. . . . . . . . . . . . . . . . 5.5 4.125 Second Quarter . . . . . . . . . . . . . . . 4.75 1.422 Third Quarter. . . . . . . . . . . . . . . . 2.438 0.50 Fourth Quarter . . . . . . . . . . . . . . . 0.75 0.15 1999 First Quarter. . . . . . . . . . . . . . . . 0.53 0.16
STOCKHOLDERS As of March 31, 1999, the Company had 8,284,515 shares of Common Stock outstanding and held by approximately 139 shareholders of record. DIVIDENDS The Company has not paid cash dividends on its Common Stock in the past and does not anticipate doing so in the foreseeable future. The Company will begin paying dividends on its outstanding shares of Series A Convertible Preferred Stock beginning June 30, 1999. ITEM 2 - LEGAL PROCEEDINGS The Company is presently, has been, and may from time to time be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination, or breach of contract actions incidental to the operation of its business. The Company is not currently involved in any such litigation which it believes could have a materially adverse effect on its financial condition or results of operations. ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS Effective October 24, 1997, Kelly & Company, Certified Public Accountants, were engaged by the Company as their principal accountant to audit the Company's financial statements. There have been no changes in accountants or disagreements of the type required to be reported under this Item 3 between the Company and its independent auditors since their date of engagement, nor during the Company's two most recent fiscal years or any later interim period. ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES In connection with a private offering of securities which was made by the Company in the third quarter of 1997, the Company entered into three (3) Note Purchase Agreements under Rule 504 of Regulation D promulgated under the Securities Act of 1933 wherein the purchaser, a limited partnership accredited as that term is defined under Regulation D, purchased an aggregate of $374,700 in Notes convertible at the greater of (i) 83% of the closing bid price of the Company's common stock, or (i) $4.98. As of the date hereof, all of the Notes have been converted into an aggregate of 75,241 shares of the Company's Common Stock. In connection with a private offering of securities which was made by the Company in the Fourth Quarter of 1997 and the First Quarter of 1998, the Company sold an aggregate of 245,000 restricted (as that term is defined under Rule 144 of the Securities Act of 1933) shares of Common Stock under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 to accredited investors at a price of $1.75 per share, resulting in net proceeds to the Company of $428,750. In August 1997, the Company acquired all of the outstanding common stock of ACC in a business combination described as a reverse acquisition. As part of the reorganization, the Company issued 7,447,000 shares to the shareholders of ACC, all sophisticated investors given full access to the books and records of the Comapny, in exchange for 7,447 shares of common stock in ACC. Such shares include the shares owned by officers and directors of the Company as set forth in the Section "Security Ownership of Certain Beneficial Owners and Management" hereunder. In addition, the Company issued options to purchase 1,100,000 shares of its common stock to certain consultants and employees, including 900,000 options issued to The Michelson Group. All of the issuances were under an exemption under Section 4(2) of the Securities Act of 1933. In December 1997, the Company issued 8,333 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to George Kimble, an accredited investor, in connection with the acquisition of Caribbean Electronics, Ltd. See "Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources." The issuance was exempt under Section 4(2) of the Securities Act of 1933. In January 1998, the Company issued 25,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to Steve Kakuk, an accredited investor, in connection with the acquisition by the Company of K5 Plastics, Inc. See "Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources." The issuance was exempt under Section 4(2) of the Securities Act of 1933. In January 1998, the Company issued 3,500 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to Hal Gardner, an accredited investor, in consideration for the cancellation of note indebtedness. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In January 1998, the Company issued 10,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to Frank Liger, an accredited investor, for services in connection with introducing the Company to new technology clients. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In February 1998, the Company issued 10,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to MRC Legal Services Corporation, an accredited investor and the Company's securities counsel, in consideration for certain legal services. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In connection with a private offering of securities which was made by the Company in the First and Second Quarters of 1998, the Company sold an aggregate of 49,514 restricted (as that term is defined under Rule 144 of the Securities Act of 1933) shares of Common Stock under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 to accredited investors at a price of $1.75 per share, resulting in net proceeds to the Company of $86,650. In July 1998, the Company issued 50,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to MRC Legal Services Corporation, an accredited investor, as compensation to M. Richard Cutler for serving on the Company's Board of Directors. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In April 1998, the Company issued a convertible Note to Sinecure Holdings, Inc., an accredited (as that term is defined under Regulation D) purchaser under Rule 504 of Regulation D promulgated under the Securities Act of 1933. The principal amount of the Note was $7,304. The Note was converted into an aggregate of 2,000 shares of the Company's Common Stock. In May 1998, the Company sold 80,000 shares of its Common Stock for an aggregate sum of $100,000 to Dremer Holdings, Inc., an accredited purchaser under Rule 504 of Regulation D promulgated under the Securities Act of 1933. In May 1998, the Company issued 8,571 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to MRC Legal Services Corporation, an accredited investor and the Company's securities counsel, in consideration for certain legal services. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In June 1998, the Company issued an aggregate of 40,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to Harold James Prow and Miguel Gill, two (2) employees of the Company, in exchange for certain deferred compensation. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In June 1998, the Company issued an aggregate of 10,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock to Hal Gardner, an accredited investor, in exchange for interest compensation on a promissory note held by Mr. Gardner. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In June 1998, the Company issued an aggregate of 450,000 shares of restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 to Primex U.S.A., Inc., an accredited purchaser as that term is defined under Regulation D. Of those shares, Primex has purchased 225,000 shares at $0.50 per share, resulting in net proceeds to the Company of $112,500, and the balance of the shares have been returned to the Company's treasury. In connection with this sale, the Company issued 5,000 shares of restricted common stock to Christopher S. Bromley as a finders fee. In June 1998, the Company issued an aggregate of 100,000 shares of restricted common stock to Charles Rosenblum, an accredited investor, pursuant to an exercise of options issued under Rule 506 and Section 4(2) of the Securities Act of 1933. In connection with an anticipated sale of securities to Oxford International, Inc. ("Oxford") under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, the Company issued 3,000,000 shares of restricted common stock to Oxford in July 1998. In April 1999, all of these shares were returned to the Company and subsequently retired. In September 1998, the Company sold an aggregate of 21,429 restricted (as that term is defined under Rule 144 of the Securities Act of 1933) common stock under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933 to Greg Harris, Jeng Ching Hung, and George Brook, all sophisticated investors given full access to the books and records of the Company, for $0.70 per share, resulting in net proceeds to the Company of $15,000. In October 1998, the Company issued 200,000 shares of restricted common stock to The Michelson Group, Inc., an accredited investor, in consideration for the cancellation of outstanding open account indeptedness. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In November 1998, the Company sold an aggregate of 26,667 shares of common stock under Section 4(2) of the Securities Act of 1933 toJeffrey Willmann, a sophisticated individual given full access to the Company's books and records, at a price of $0.375 per share, resutling in net proceeds to the Company of $10,000. In November 1998, the Company issued 40,000 shares of common stock to MRC Legal Services Corporation, an accredited entity, in consideration for the cancellation of outstanding open account indebtedness. This issuance was exempt under Section 4(2) of the Securities Act of 1933. In November 1998, the Company sold an aggregate of 13,334 shares of common stock under Section 4(2) of the Securities Act of 1933 to Robert Karinchak, a sophisticated individual given full access to the Company's books and records, at a price fo $0.375 per share, resulting in net proceeds to the Company of $5,000. In November 1998, the Company issued 100,000 shares of common stock to National Capital Merchant Group, Ltd., an accredited entity, in accordance with the terms of an agreement. The issuance was exempt under Section 4(2) of the Securities Act of 1933. In November 1998, the Company issued 20,000 shares of common stock to Prototype and Short Rund Services, Inc., an accredited entity, in consideration for the cancellation of outstanding open account indeptedness. This issuance was exempt under Section 4(2) of the Securities Act of 1933. In January 1999, the Company issued an aggregate of 130,000 shares of restricted common stock to Makenna, Delaney & Sullivan, Inc., an accredited entity, pursuant to the terms of a financial public relations agreement. This issuance was exempt under Section 4(2) of the Securities Act of 1933. In March 1999, the Company issued an aggregate of 1,600,000 shares of restricted common stock to Edward Loyd, an accredited investor, in accordance with the terms of that certain Reorganization and Stock Purchase Agreement relating to the acquisition by the Company of Loyd International, Inc. This issuance was exempt under Section 4(2) of the Securities Act of 1933. In March 1999, the Company issued 150,000 shares of restricted common stock to MRC Legal Services Corporation, an accredited entity, in consideration for the cancellation of outstanding open account indeptedness. This issuance was exempt under Section 4(2) of the Securities Act of 1933. In March 1999, the Company issued an aggregate of 728,174 shares of common stock to a total of thirteen (13) individuals or entities, each sophisticated investors given full access to the books and records of the Company, in exchange for the cancellation of debts, notes, and open account indebtedness. The issuances were exempt under Rule 506 and Section 4(2) of the Securities Act of 1933. As described above, certain securities sold in unregistered transactions were restricted as that term is defined under Rule 144 of the Securities Act of 1933. In general, under Rule 144, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company, who has beneficially owned restricted shares of Common Stock for at least one year is entitled to sell, in certain brokerage transactions, within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class, or if the Common Stock is quoted on Nasdaq or a stock exchange, the average weekly trading volume during the four calendar weeks immediately preceding the sale. A person who presently is not and who has not been an affiliate of the Company for at least three months immediately preceding the sale and who has beneficially owned the shares of Common Stock for at least two years is entitled to sell such shares under Rule 144 without regard to any of the volume limitations described above. ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS The Corporation Laws of the State of Nevada and the Company's Bylaws provide for indemnification of the Company's Directors for liabilities and expenses that they may incur in such capacities. In general, Directors and Officers are indemnified with respect to actions taken in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful. Furthermore, the personal liability of the Directors is limited as provided in the Company's Articles of Incorporation. Beginning in December, 1997, the Company maintains a policy of Directors and Officers Liability Insurance with an aggregate coverage limit of $1,000,000. PART F/S FINANCIAL STATEMENTS The Financial Statements required by this Item are included at the end of this report beginning on Page F-1. PART III ITEM 1 - INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION *(2) Agreement and Plan of Reorganization *(2.1) Amendment to Agreement and Plan of Reorganization (2.2) Reorganization and Stock Purchase Agreement *(3.1) Articles of Incorporation *(3.2) Certificate of Amendment of Articles of Incorporation *(3.3) Bylaws *(4.1) Agreement for the Sale of Convertible Notes to Generation Capital Associates and Waiver *(4.2) Escrow Agreement for the Convertible Notes issued to Generation Capital Associates *(4.3) Convertible Note issued to Generation Capital Associates dated October 6, 1997 *(4.4) Convertible Note issued to Generation Capital Associates dated October 10, 1997 *(4.5) Convertible Note issued to Generation Capital Associates dated October 20, 1997 *(10.1) Standard Industrial/Commercial Multi-Tenant Lease dated October 19, 1995 for premises located at 1515 S. Sunkist Street, Suites E & F, Anaheim, CA. *(10.2) Commercial Lease subleasing Anaheim property to Com-Quest dated November 25, 1997. *(10.3) Promissory Note issued to Don Furness dated December 1, 1995 *(10.4) Michelson Group Corporate Development Agreement dated July 30, 1997 *(10.5) Two (2) Option Agreements to the Michelson Group dated August 22, 1997 *(10.6) Agreement with Greg Bogart dated August 15, 1997 *(10.7) Promissory Note to George Kimble dated October 30, 1997 related to Caribbean Electronics, Inc. Acquisition *(10.8) Settlement Agreement and General Mutual Release with Charles L. Rosenblum dated October 13, 1997 *(10.9) Standard Industrial/Commercial Single-Tenant Lease dated October 16, 1997 for the premises located at 3310 W. MacArthur Boulevard, Santa Ana, California. *(10.10) Employment Agreement for Michael R. Orton dated October 20, 1997 *(10.11) Amendment to Employment Agreement for Michael R. Orton dated March 28, 1998 *(10.12) Engagement Agreement for Alpha Tech Stock transfer dated October 24, 1997 *(10.13) Agreement for the Purchase and Sale of Factory in Malaysia dated December 11, 1997 *(10.14) Employment Agreement for John Groom dated January 1, 1998 *(10.15) Promissory Note to Steve Kakuk dated January 31, 1998 related to K5 Acquisition *(10.16) Escrow Agreement dated January 31, 1998 related to K5 Acquisition *(10.17) Warrant issued to Steve Kakuk dated January 31, 1998 related to K5 Acquisition *(10.18) Warrant issued to Steve Kakuk dated January 31, 1998 related to K5 Acquisition *(10.19) Employment Agreement for Steve Kakuk dated January 31, 1998 *(10.20) Employment Agreement for Inge Lundegaard dated February 4, 1998 *(10.21) Warrant issued to Ronald J. Richard dated February 6, 1998 *(10.22) Warrant issued to John Fritch dated February 25, 1998 *(10.23) Termination of Warrant issued to John Fritch dated March 28, 1998 *(10.24) Stock Purchase Agreement for Acquisition of Caribbean Electronics, Inc. (continued on next page) *(10.25) Stock Purchase Agreement for Acquisition of K5 Plastics, Inc. *(10.26) Employment Agreement for John Fritch dated May 1, 1998 *(10.27) Warrant issued to John Groom dated October 13, 1998 *(10.28) Warrant issued to Johh Fritch dated October 13, 1998 (10.29) Form of Agreement entered into between the Company and certain of its creditors *(21) List of Subsidiaries *(23) Consent of Kelly & Company, Inc., Independent Public Accountants ____________________ * Previously Filed ITEM 2 - DESCRIPTION OF EXHIBITS Not applicable SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN CUSTOM COMPONENTS, INC. Date: April 9, 1999 By:/s/ John Groom John Groom Chief Executive Officer EX-2.2 2 REORGANIZATION AND STOCK PURCHASE AGREEMENT by and between AMERICAN CUSTOM COMPONENTS, INC. a Nevada corporation and certain of its shareholders and LOYD INTERNATIONAL, INC. a Wyoming corporation and its shareholder REORGANIZATION AND STOCK PURCHASE AGREEMENT REORGANIZATION AND STOCK PURCHASE AGREEMENT ("Agreement"), dated March 16, 1999, by and among American Custom Components, Inc., a Nevada corporation (hereinafter referred to as "ACCM"), Martin Tony Walk (hereinafter referred to as "Walk"), Loyd International, Inc., a Wyoming corporation (hereinafter referred to as "Loyd") and Edward Loyd, an individual (the "Loyd Shareholder"). Each of ACCM, Walk, Loyd, and the Loyd Shareholder shall be referred to herein as a "Party" and collectively as the "Parties." W I T N E S S E T H WHEREAS, Walk and Loyd have executed those certain agreements dated February 13, 1999 and March 4, 1999, attached hereto as Exhibits "A" and "B", respectively, and desire to further define the terms of those agreements herein and to replace those agreements with this Agreement; WHEREAS, the Loyd Shareholder owns 100% of the issued and outstanding common stock of Loyd (the "Loyd Shares") as set forth in Exhibit "C" attached hereto; WHEREAS, Walk is the owner of 5,372,000 shares of common stock of ACCM (the "Walk Shares"); WHEREAS, Walk desires to exchange 4,972,000 of the Walk Shares for 500,000 shares of ACCM Series A Convertible Preferred Stock, the rights, preferences and privileges of which are set forth in Exhibit "D" attached hereto. WHEREAS, the Loyd Shareholder desires to sell and ACCM desires to purchase the Loyd Shares in accordance with the terms set forth herein; NOW THEREFORE, in consideration of the premises and respective mutual agreements, covenants, representations and warranties herein contained, it is agreed between the parties hereto as follows: ARTICLE 1 SALE AND PURCHASE OF THE SHARES 1.1 Transactions Involving Walk. 1.1.1 Exchange of the Walk Shares. At the date of the signing of this Agreement as provided in Section 3.1 hereto (the "Closing"), subject to the terms and conditions herein set forth, and on the basis of the representations, warranties and agreements herein contained, Walk shall tender to ACCM 4,972,000 of the Walk Shares and shall receive in exchange 500,000 shares of Series A Convertible Preferred Stock. The balance of the Walk Shares, representing 400,000 shares of ACCM common stock, shall be retained by Walk. Walk shall be responsible for any and all obligations owing to Paul Montclair and/or Generation Capital Associates arising out of transactions entered into between Walk and those respective parties. 1.1.2 Payment to Walk. As additional consideration for the transactions discussed herein, on the Closing date, ACCM shall pay to Walk or Walk's designee(s) the sum of Eleven Thousand Dollars ($11,000). 1.1.3 Consulting Contract. As a material term of this Agreement, ACCM agrees to execute a two (2) year consulting agreement ("Consulting Agreement") with Walk in form and substance substantially similar to Exhibit "E" attached hereto. 1.1.4 Assignment of Certain Assets and Liabilities. Effective on the Closing Date, ACCM shall execute an Assignment of Assets and Liabilities in substantially the form set forth as Exhibit "F" attached hereto, wherein ACCM assigns to Walk the technology and assets associated with Tagnology, Inc. and Walk assumes all ACCM liabilities associated with the same. 1.1.5 Assumption of Tax Liabilities. Any tax liabilities incurred by Walk as a result of the transactions contemplated herein will be assumed and timely paid by ACCM, up to the sum of $200,000. 1.1.6 General Mutual Release. Effective on the date of this Agreement, each of ACCM and Walk shall release and discharge the other, their affiliates, divisions, predecessors, successors and assigns, and each and all of their present and former agents, officers, directors, attorneys, and employees, from and against any and all claims, agreements, contracts, covenants, representations, obligations, losses, liabilities, demands and causes of action which each may now or hereafter have or claim to have against the other arising out of or pertaining to their relationship and contractual dealings prior to the date hereof. This release of claims and defenses shall not alter the prospective duties between the parties under this Agreement. It is understood and agreed by ACCM and Walk that all rights under Section 1542 of the Civil Code of California, which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." are hereby expressly waived. Each of ACCM and Walk acknowledges and agrees that they understand the consequences of a waiver of Section 1542 of the California Civil Code and assumes full responsibility for any and all injuries, damages, losses or liabilities that may hereinafter arise out of or be related to matters released hereunder. Each of ACCM and Walk understands and acknowledges that the significance and consequence of this waiver of Section 1542 of the Civil Code is that even if such party should eventually suffer additional damages arising out of the subject matter hereof, it will not be permitted to make any claim for those damages. Furthermore, each party acknowledges that they intend these consequences even as to claims for damages that may exist as of the date of this Agreement but which a party does not know exists, and which, if known, would materially affect each party's decision to execute this Agreement, regardless of whether each party's lack of knowledge is the result of ignorance, oversight, error, negligence, or any other cause. 1.2 Sale of the Loyd Shares. At the Closing, subject to the terms and conditions herein set forth, and on the basis of the representations, warranties and agreements herein contained, the Loyd Shareholder shall sell to ACCM and ACCM shall purchase from the Loyd Shareholder, all of the Loyd Shares. As consideration for the receipt of the Loyd Shares, ACCM shall cause to be issued to the Loyd Shareholder an aggregate of 1,500,000 shares of ACCM common stock bearing an appropriate 144 restrictive legend. 1.2.1 Issuance of Shares to the Loyd Shareholder. In addition to the transaction described in paragraph 1.2 above, as consideration for the advancement of $70,000 by the Loyd Shareholder to ACCM for working capital purposes, ACCM shall issue an additional 100,000 shares of restricted common stock to the Loyd Shareholder. 1.3 Instruments of Conveyance and Transfer. At the Closing, Walk shall deliver to ACCM certificates representing 4,972,000 of the Walk Shares. At the Closing, ACCM shall deliver to Walk certificates representing 500,000 shares of ACCM Series A Convertible Preferred Stock. At the closing, ACCM shall deliver to the Loyd Shareholder certificates representing an aggregate of 1,500,000 shares of ACCM common stock. 1.4 Termination of Earlier Agreements. Upon execution of this Agreement, those certain agreements between Walk and Loyd dated February 13, 1999 and March 4, 1999 are terminated in their entirety and replaced hereby. ARTICLE 2 REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of Loyd and the Loyd Shareholder. To induce Walk and ACCM to enter into this Agreement and to consummate the transactions contemplated hereby, Loyd and the Loyd Shareholder represent and warrant, as of the date hereof and as of the Closing, as follows: 2.1.1 Loyd and the Loyd Shareholder have the full right, power and authority to enter into this Agreement and to carry out and consummate the transaction contemplated herein. This Agreement constitutes the legal, valid and binding obligation of Loyd and the Loyd Shareholder. 2.1.2 Corporate Existence and Authority of Loyd. Loyd is a corporation duly organized, validly existing and in good standing under the laws of the State of Wyoming. It has all requisite corporate power, franchises, licenses, permits and authority to own its properties and assets and to carry on its business as it has been and is being conducted. It is in good standing in each state, nation or other jurisdiction wherein the character of the business transacted by it makes such qualification necessary. 2.1.3 Capitalization of Loyd. The authorized equity securities of Loyd consists of 1,000 shares of common stock, of which 100 shares are issued and outstanding. No other shares of capital stock of Loyd are issued and outstanding. All of the issued and outstanding shares have been duly and validly issued in accordance and compliance with all applicable laws, rules and regulations and are fully paid and nonassessable. There are no options, warrants, rights, calls, commitments, plans, contracts or other agreements of any character granted or issued by Loyd which provide for the purchase, issuance or transfer of any shares of the capital stock of Loyd nor are there any outstanding securities granted or issued by Loyd that are convertible into any shares of the equity securities of Loyd, and none is authorized. Loyd is not obligated or committed to purchase, redeem or otherwise acquire any of its equity. All presently exercisable voting rights in Loyd are vested exclusively in its outstanding shares of common stock, each share of which is entitled to one vote on every matter to come before it's Shareholder, and other than as may be contemplated by this Agreement, there are no voting trusts or other voting arrangements with respect to any of Loyd's equity securities. 2.1.4 Subsidiaries. "Subsidiary" or "Subsidiaries" means all corporations, trusts, partnerships, associations, joint ventures or other Persons, as defined below, of which a corporation or any other Subsidiary of such corporation owns not less than twenty percent (20%) of the voting securities or other equity or of which such corporation or any other Subsidiary of such corporation possesses, directly or indirectly, the power to direct or cause the direction of the management and policies, whether through ownership of voting shares, management contracts or otherwise. "Person" means any individual, corporation, trust, association, partnership, proprietorship, joint venture or other entity. There are no Subsidiaries of Loyd. 2.1.5 Execution of Agreement. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not: (a) violate, conflict with, modify or cause any default under or acceleration of (or give any party any right to declare any default or acceleration upon notice or passage of time or both), in whole or in part, any charter, article of incorporation, bylaw, mortgage, lien, deed of trust, indenture, lease, agreement, instrument, order, injunction, decree, judgment, law or any other restriction of any kind to which either the Loyd Shareholder or Loyd are a party or by which either of them or any of their properties are bound; (b) result in the creation of any security interest, lien, encumbrance, adverse claim, proscription or restriction on any property or asset (whether real, personal, mixed, tangible or intangible), right, contract, agreement or business of the Loyd Shareholder or Loyd (exception of London Office Lease); (c) violate any law, rule or regulation of any federal or state regulatory agency; or (d) permit any federal or state regulatory agency to impose any restrictions or limitations of any nature on the Loyd Shareholder or Loyd or any of their respective actions. 2.1.6 Taxes. 2.1.6.1 All taxes, assessments, fees, penalties, interest and other governmental charges with respect to Loyd which have become due and payable on the date hereof have been paid in full or adequately reserved against by Loyd, (including without limitation, income, property, sales, use, franchise, capital stock, excise, added value, employees' income withholding, social security and unemployment taxes), and all interest and penalties thereon with respect to the periods then ended and for all periods thereto; 2.1.6.2 There are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment of any tax or deficiency against Loyd, nor are there any actions, suits, proceedings, investigations or claims now pending against Loyd, nor are there any actions, suits, proceedings, investigations or claims now pending against Loyd in respect of any tax or assessment, or any matters under discussion with any federal, state, local or foreign authority relating to any taxes or assessments, or any claims for additional taxes or assessments asserted by any such authority, and there is no basis for the assertion of any additional taxes or assessments against Loyd, and 2.1.6.3 The consummation of the transactions contemplated by this Agreement will not result in the imposition of any additional taxes on or assessments against Loyd. 2.1.7 Disputes and Litigation. There is no suit, action, litigation, proceeding, investigation, claim, complaint, or accusation pending, threatened against or affecting Loyd or any of its properties, assets or business or to which Loyd is a party, in any court or before any arbitrator of any kind or before or by any governmental agency (including, without limitation, any federal, state, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality), and there is no basis for such suit, action, litigation, proceeding, investigation, claim, complaint, or accusation; (b) there is no pending or threatened change in any environmental, zoning or building laws, regulations or ordinances which affect or could affect Loyd or any of its properties, assets or businesses; and (c) there is no outstanding order, writ, injunction, decree, judgment or award by any court, arbitrator or governmental body against or affecting Loyd or any of its properties, assets or business. There is no litigation, proceeding, investigation, claim, complaint or accusation, formal or informal, or arbitration pending, or any of the aforesaid threatened, or any contingent liability which would give rise to any right of indemnification or similar right on the part of any director or officer of Loyd or any such person's heirs, executors or administrators as against Loyd. 2.1.8 Compliance with laws. Loyd has at all times been, and presently is, in full compliance with, and has not received notice of any claimed violation of, any applicable federal, state, local, foreign and other laws, rules and regulations. Loyd has filed all returns, reports and other documents and furnished all information required or requested by any federal, state, local or foreign governmental agency and all such returns, reports, documents and information are true and complete in all respects. All permits, licenses, orders, franchises and approvals of all federal, state, local or foreign governmental or regulatory bodies required of Loyd for the conduct of its business have been obtained, no violations are or have been recorded in respect of any such permits, licenses, orders, franchises and approvals, and there is no litigation, proceeding, investigation, arbitration, claim, complaint or accusation, formal or informal, pending or threatened, which may revoke, limit, or question the validity, sufficiency or continuance of any such permit, license, order, franchise or approval. Such permits, licenses, orders, franchises and approvals are valid and sufficient for all activities presently carried on by Loyd. 2.1.9 Guaranties. Loyd has not guaranteed any dividend, obligation or indebtedness of any Person; nor has any Person guaranteed any dividend, obligation or indebtedness of Loyd. 2.1.10 Books and Records. Loyd keeps its books, records and accounts (including, without limitation, those kept for financial reporting purposes and for tax purposes) in accordance with good business practice and in sufficient detail to reflect the transactions and dispositions of its assets, liabilities and equities. The minute books of the Loyd contain records of its shareholders' and directors' meetings and of action taken by such shareholders and directors. The meeting of directors and shareholders referred to in such minute books were duly called and held, and the resolutions appearing in such minute books were duly adopted. The signatures appearing on all documents contained in such minute books are the true signatures of the persons purporting to have signed the same. A true and accurate balance sheet of Loyd as of the Closing Date, as well as an income statement and statement of cash flows from March 31, 1998 to the Closing Date are attached hereto as Exhibit "G". Further, a true and correct balance sheet as of March 31, 1998 and an income statement and statement of cash flows for the year ended March 31, 1998 are attached hereto as Exhibit "H". 2.2 Representations and Warranties of ACCM. To induce Loyd and the Loyd Shareholder to enter into this Agreement and to consummate the transactions contemplated hereby, ACCM represents and warrants, as of the date hereof and as of the Closing, as follows: 2.2.1 Corporate Existence and Authority of ACCM. ACCM is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. It has all requisite corporate power, franchises, licenses, permits and authority to own its properties and assets and to carry on its business as it has been and is being conducted. It is in good standing in each state, nation or other jurisdiction in each state, nation or other jurisdiction wherein the character of the business transacted by it makes such qualification necessary. 2.2.2 Capitalization of ACCM. The authorized equity securities of ACCM consists of 24,000,000 shares of common stock, of which 13,778,341 shares are issued and outstanding as of February 16, 1999, and 1,000,000 shares of Preferred Stock, of which no shares are issued and outstanding prior to the date hereof. No other shares of capital stock of ACCM are issued and outstanding. All of the issued and outstanding shares have been duly and validly issued in accordance and compliance with all applicable laws, rules and regulations and are fully paid and nonassessable. All presently exercisable voting rights in ACCM are vested exclusively in its outstanding shares of common stock, each share of which is entitled to one vote on every matter to come before it's shareholders, and other than as may be contemplated by this Agreement, there are no voting trusts or other voting arrangements with respect to any of ACCM's equity securities. 2.2.3 Subsidiaries. ACCM currently has three subsidiaries, namely American Custom Components, Inc., a California corporation, K5 Plastics, Inc., a California corporation, and Caribbean Electronics, Inc. 2.2.4 Execution of Agreement. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not: (a) violate, conflict with, modify or cause any default under or acceleration of (or give any party any right to declare any default or acceleration upon notice or passage of time or both), in whole or in part, any charter, article of incorporation, bylaw, mortgage, lien, deed of trust, indenture, lease, agreement, instrument, order, injunction, decree, judgment, law or any other restriction of any kind to which ACCM is a party or by which it or any of its properties are bound; (b) result in the creation of any security interest, lien, encumbrance, adverse claim, proscription or restriction on any property or asset (whether real, personal, mixed, tangible or intangible), right, contract, agreement or business of ACCM; (c) violate any law, rule or regulation of any federal or state regulatory agency; or (d) permit any federal or state regulatory agency to impose any restrictions or limitations of any nature on ACCM or any of its actions. ARTICLE 3 CLOSING AND DELIVERY OF DOCUMENTS 3.1 Closing. The Closing shall be deemed to have occurred as of the date of signing of this Agreement. Subsequent to the signing, the following shall occur as a single integrated transaction: 3.2 Delivery by Walk and ACCM: (a) Walk shall deliver to ACCM that portion of the Walk Shares and all instruments of conveyance and transfer required by Section 1.1. (b) ACCM shall deliver to Walk 500,000 shares of ACCM Series A Convertible Preferred Stock and all instruments of conveyance and transfer required by Section 1.1. (c) ACCM shall deliver to the Loyd Shareholder an aggregate of 1,500,000 shares of ACCM common stock and all instruments of conveyance and transfer required by Section 1.2. 3.3 Delivery by the Loyd Shareholder: (a) The Loyd Shareholder shall deliver to ACCM all of the Loyd Shares and all instruments of conveyance and transfer required by Section 1.2. ARTICLE 4 CONDITIONS, TERMINATION, AMENDMENT AND WAIVER 4.1 Condition Precedent. This Agreement, and the transactions contemplated hereby, shall be subject to the approval of the Board of Directors of ACCM and Loyd, and, if necessary, the respective shareholders thereof. 4.2 Termination. Notwithstanding anything to the contrary contained in this Agreement, this Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing by the mutual consent of all of the parties; 4.3 Waiver and Amendment. Any term, provision, covenant, representation, warranty or condition of this Agreement may be waived, but only by a written instrument signed by the party entitled to the benefits thereof. The failure or delay of any party at any time or times to require performance of any provision hereof or to exercise its rights with respect to any provision hereof shall in no manner operate as a waiver of or affect such party's right at a later time to enforce the same. No waiver by any party of any condition, or of the breach of any term, provision, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or waiver of any other condition or of the breach of any other term, provision, covenant, representation or warranty. No modification or amendment of this Agreement shall be valid and binding unless it be in writing and signed by all parties hereto. ARTICLE 5 COVENANTS 5.1 To induce Walk and ACCM to enter into this Agreement and to consummate the transactions contemplated hereby, and without limiting any covenant, agreement, representation or warranty made the Loyd Shareholder covenant and agree as follows: 5.1.1 Notices and Approvals. The Loyd Shareholder agree: (a) to give and to cause Loyd to give all notices to third parties which may be necessary or deemed desirable by ACCM in connection with this Agreement and the consummation of the transactions contemplated hereby; (b) to use its best efforts to obtain and to cause Loyd to obtain, all federal and state governmental regulatory agency approvals, consents, permit, authorizations, and orders necessary or deemed desirable by ACCM in connection with this Agreement and the consummation of the transaction contemplated hereby; and (c) to use its best efforts to obtain, and to cause Loyd to obtain, all consents and authorizations of any other third parties necessary or deemed desirable by ACCM in connection with this Agreement and the consummation of the transactions contemplated hereby. 5.1.2 Information for ACCM's Statements and Applications. The Loyd Shareholder and Loyd and their employees, accountants and attorneys shall cooperate fully with ACCM in the preparation of any statements or applications made by ACCM to any federal or state governmental regulatory agency in connection with this Agreement and the transactions contemplated hereby and to furnish ACCM with all information concerning the Loyd Shareholder and Loyd necessary or deemed desirable by ACCM for inclusion in such statements and applications, including, without limitation, all requisite financial statements and schedules. 5.1.3 Access to Information. ACCM, together with its appropriate attorneys, agents and representatives, shall be permitted to make the full and complete investigation of the Loyd Shareholder and Loyd and have full access to all of the books and records of the other during reasonable business hours. Notwithstanding the foregoing, such parties shall treat all such information as confidential and shall not disclose such information without the prior consent of the other. 5.2 To induce the Loyd Shareholder to enter into this Agreement and to consummate the transactions contemplated hereby, and without limiting any covenant, agreement, representation or warranty made ACCM covenants and agrees as follows: 5.2.1 Access to Information. The Loyd Shareholder, together with their appropriate attorneys, agents and representatives, shall be permitted to make the full and complete investigation of ACCM and have full access to all of the books and records of the other during reasonable business hours. Notwithstanding the foregoing, such parties shall treat all such information as confidential and shall not disclose such information without the prior consent of the other. ARTICLE 6 MISCELLANEOUS 6.1 Expenses. Except as otherwise specifically provided for herein, whether or not the transactions contemplated hereby are consummated, each of the parties hereto shall bear all taxes of any nature (including, without limitation, income, franchise, transfer and sales taxes) and all fees and expenses relating to or arising from its compliance with the various provisions of this Agreement and such party's covenants to be performed hereunder, and except as otherwise specifically provided for herein, each of the parties hereto agrees to pay all of its own expenses (including, without limitation, attorneys and accountants' fees and printing expenses) incurred in connection with this Agreement, the transactions contemplated hereby, the negotiations leading to the same and the preparations made for carrying the same into effect, and all such taxes, fees and expenses of the parties hereto shall be paid prior to Closing. 6.2 Notices. Any notice, request, instruction or other document required by the terms of this Agreement, or deemed by any of the parties hereto to be desirable, to be given to any other party hereto shall be in writing and shall be given by prepaid telegram or delivered or mailed by registered or certified mail, postage prepaid, with return receipt requested, to the following addresses: TO ACCM: American Custom Components, Inc. 3310 W. MacArthur Blvd. Santa Ana, CA 92704 Attn: John Groom, President with a copy to: M. Richard Cutler, Esq. The Law Offices of M. Richard Cutler 610 Newport Center Drive, Suite 800 Newport Beach, CA 92660 TO LOYD OR THE LOYD SHAREHOLDER: Edward Loyd 423 E. Promontory Point Dr. Newport Beach, CA 92660 with a copy to: Robin Waterer 1 Templar St. London EE5 9JB, England The persons and addresses set forth above may be changed from time to time by a notice sent as aforesaid. If notice is given by delivery in accordance with the provisions of this Section, said notice shall be conclusively deemed given at the time of such delivery. If notice is given by mail in accordance with the provisions of this Section, such notice shall be conclusively deemed given forty-eight (48) hours after deposit thereof in the United States mail. If notice is given by telegraph in accordance with the provisions of this Section, such notice shall be conclusively deemed given at the time that the telegraphic agency shall confirm delivery thereof to the addressee. 6.3 Entire Agreement. This Agreement, together with the Schedule and exhibits hereto, sets forth the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings related to the subject matter hereof. No understanding, promise, inducement, statement of intention, representation, warranty, covenant or condition, written or oral, express or implied, whether by statute or otherwise, has been made by any party hereto which is not embodied in this Agreement, or exhibits hereto or the written statements, certificates, or other documents delivered pursuant hereto or in connection with the transactions contemplated hereby, and no party hereto shall be bound by or liable for any alleged understanding, promise, inducement, statement, representation, warranty, covenant or condition not so set forth. 6.4 Survival of Representations. All statements of fact (including financial statements) contained in the Schedule, the exhibits, the certificates or any other instrument delivered by or on behalf of the parties hereto, or in connection with the transactions contemplated hereby, shall be deemed representations and warranties by the respective party hereunder. All representation, warranties agreements and covenants hereunder shall survive the Closing and remain effective regardless of any investigation or audit at any time made by or on behalf of the parties or of any information a party may have in respect thereto. Consummation of the transactions contemplated hereby shall not be deemed or construed to be a waiver of any right or remedy possessed by any party hereto, notwithstanding that such party knew or should have known at the time of Closing that such right or remedy existed. 6.5 Incorporated by Reference. All documents (including, without limitation, all financial statements) delivered as part hereof or incident hereto are incorporated as a part of this Agreement by reference. 6.6 Remedies Cumulative. No remedy herein conferred upon and Party is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 6.7 Execution of Additional Documents. Each party hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. 6.8 Finders' and Related Fees. Each of the parties hereto is responsible for, and shall indemnify the other against, any claim by any third party to a fee, commission, bonus or other remuneration arising by reason of any services alleged to have been rendered to or at the instance of said party to this Agreement with respect to this Agreement or to any of the transactions contemplated hereby. 6.9 Governing Law. This Agreement has been negotiated and executed in the State of California and shall be construed and enforced in accordance with the laws of such state. 6.10 Forum. Each of the parties hereto agrees that any action or suit which may be brought by any party hereto against any other party hereto in connection with this Agreement or the transactions contemplated hereby may be brought only in a federal or state court in Orange County, California. 6.11 Binding Effect and Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal representatives and assigns. 6.12 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date first written hereinabove. AMERICAN CUSTOM COMPONENTS, INC. a Nevada corporation ("ACCM") /s/ John Groom By: John Groom Its: President LOYD INTERNATIONAL, INC. a Wyoming corporation ("LOYD") /s/ Edward Loyd By:_______________________________ Its: _______________________________ MARTIN TONY WALK ("WALK") /s/ Martin Tony Walk Martin Tony Walk "THE LOYD SHAREHOLDER" /s/ Edward Loyd Edward Loyd Exhibit "A" Agreement Between Walk and Loyd dated February 13, 1999 Letter of conditions for the sale of ACC to Loyd International. Feb. 13, 1999 Martin T. Walk agreement. A) Sale of tools and all rights for Tagnology shelf tag system currently held by ACC to Martin T. Walk. The tools and rights have an approximate value of $80,000 for the tools with forecasted revenue by Tagnology based on 50 store installation of $500,000 per year for the current connectors and cable sets. Total cost to Mr. Walk would be $1.00. B) ACC to assign current Tagnology debt of approximately $9,000.00, now in default to Martin T. Walk. C) Loyd International to sign a private purchase contract for Mr. Walk's shares (approximately 5,192,000 shares) for $400,000. The $400,000 will be paid in terms, structured with the least income tax exposure to Mr. Walk. D) Loyd International will provide a $100,000 note paid over a 3-year period on a quarterly basis at 10% interest. This note represents Mr. Walk's deferred salary for 1998. E) Mr. Walk to retain 300,000 shares of stock. F) Loyd International will assume all tax liability for shares sold by Mr. Walk where the funds were invested back into the company. G) Mr. Walk to sign an agreement that he will not recruit ACC staff. H) All other funds provided to ACC by Mr. Walk shall be considered paid in capital. I) Agreement per the above to be signed by Feb 15, 1999. Estimated stock position summary after sale. Estimated fully diluted 10,473,340 shares (3 million redeemed from Oxford) Addition 144 stock to Loyd 2,600,000 shares Total dilution 12,973,340 shares Sale of Walk Stocks to Loyd 5,192,000 shares 144 Stock issued to Loyd 2,600,000 shares (@$0.15 per shares $390,000) Total Loyd Shares 7,792,000 shares Loyd percent of ownership 60% /s/ Martin T. Walk /s/ Edward Loyd Martin T. Walk Edward Loyd, President on behalf of Loyd International Exhibit "B" Agreement Between Walk and Loyd dated March 4, 1999 AGREEMENT This AGREEMENT is an amendment to the February 13, 1999 agreement between Ed Loyd as President of Loyd International and Martin T. Walk as major stockholder of American Custom Components, Inc. This amendment affects the paragraphs of said agreement as follows: 1. Paragraph C is further defined as follows: WALK shall receive *$400,000 worth of preferred stock in American Custom Components, Inc. Said Preferred stock shall pay a dividend of 10% per annum payable quarterly. Said stock shall be convertible into American Custom Components, Inc. common stock at any time after 24 months at WALK's option and at 80% of the then market price of the common stock. 2. Paragraph D is amended as follows: The company agrees to retain **WALK as a Consultant at $75,000.00 per year with a 5% commission on sales which he develops. Company to pay all expenses including car with the prior approval of John Groom. This agreement to commence April 1, 1999 for a period of two years. 3. Paragraph E is amended to read that Walk is to be compensated for the 100,000 shaers of sotck sold to Montclair. Walk to retain 300,000 shares of American Custom Components, Inc. common stock. 4. Additionally, Loyd to pay Irving Walk $6,000.00 and Tony Walk $5,000. * Min redeemable after 24 months ** Company to provide a separate consulting contract to Walk. Dated: March 4, 1999 /s/ Martin T. Walk /s/ Edward Loyd Martin T. Walk Edward Loyd, President Loyd International Exhibit "C" Loyd Shareholder Edward Loyd is the holder of 100% of the issued and outstanding shares of common stock of Loyd International, Inc., consisting of 100 shares. Exhibit "D" Certificate of Designation of Series A Convertible Preferred Stock AMERICAN CUSTOM COMPONENTS, INC. CERTIFICATE OF DESIGNATION SERIES A CONVERTIBLE PREFERRED STOCK John Groom and Edward Loyd hereby certify that they are the President and Secretary, respectively, of American Custom Components, Inc., a Nevada corporation (hereinafter referred to as the "Corporation" or the "Company"); that, pursuant to the Corporation's Articles of Incorporation, as amended, and the General Corporation Law of the State of Nevada, the Board of Directors of the Corporation adopted the following resolutions on March 4, 1999; and that none of the Series A Convertible Preferred Stock has been issued. 1. Creation and Designation of Series A Convertible Preferred Stock. There is hereby created a series of preferred stock consisting of 500,000 shares and designated as the Series A Preferred Stock (the "Preferred Stock"), having the voting powers, preferences, relative, participating, optional and other special rights and the qualifications, limitations and restrictions thereof that are set forth below. 2. Dividend Provisions. Each share of Preferred Stock shall be entitled to receive a cumulative dividend equal to $0.08 per annum, payable on March 31, June 30, September 30, and December 31 of each year. Each share of Preferred Stock shall rank on a parity with each other share of Preferred Stock with respect to dividends. 3. Liquidation Provisions. The Series A Convertible Preferred Stock shall not have any rights to assets or proceeds from sale of assets of the Company in the event of liquidation. 4. Conversion Provisions. At any time or from time to time after March 8, 2001, the holders of the Series A Convertible Preferred Stock shall have the right, but not the obligation, to convert the Series A Convertible Preferred Stock into shares of common stock of ACCM on the following terms: A. For purposes of conversion only, each shares of Series A Convertible Preferred Stock shall have a value of $0.80. B. Upon conversion, the aggregate dollar value of all the Series A Convertible Preferred Stock being converted shall be converted into common stock based upon 80% of the common stock's average bid price for the 30 days immediately preceding the date of conversion. C. The holders of the Series A Convertible Preferred Stock shall exercise their conversion rights by completing the attached Notice of Conversion and delivering it to the Company. 5. Call Provisions. The shares of Series A Convertible Preferred Stock shall, at the sole discretion of the Board of Directors of the Corporation, be callable, in whole or in part, from time to time or at any time, at a price of $0.80 per share. Notwithstanding the foregoing, however, the Corporation may not call the shares of Series A Convertible Preferred Stock unless all dividends have been paid in full to the holders of the Preferred Stock as of the time of call. 6. Notices. Any notices required by the provisions of this Certificate of Designation to be given to the holders of shares of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at its address appearing on the books of the Corporation. 7. Voting Provisions. The Preferred Stock shall have no voting rights. IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of Series A Convertible Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto this 16th day of March, 1999. By: /s/ John Groom By: /s/ Edward Loyd John Groom, President Edward Loyd, Secretary CONVERSION NOTICE (To be executed upon Conversion of Series A Convertible Preferred Stock) To: American Custom Components, Inc. (the "Company") The undersigned hereby irrevocably elects to exercise the right, represented by that certain Certificate of Designation of Series A Convertible Preferred Stock (the "Preferred Stock") as adopted by the Company's Board of Directors on March 4, 1999, and by Preferred Stock Certificate No. _______, attached hereto, to convert ______________ shares of Preferred Stock into __________ shares of Common Stock ("Common Stock") of the Company according to the Conversion Ratio set forth in the Certificate of Designation. The undersigned requests that certificates for the Common Stock be registered in the name of ______________________________________________________________whose address is ________________________________________________________ and that such certificates be delivered to _______________________________________________whose address is_____________________________________________. If said number of shares of Preferred Stock is less than all of the shares of Preferred Stock currently held by the undersigned, the undersigned requests that a new Preferred Stock Certificate representing the number of shares held by the undersigned after giving effect to the conversion herein be registered in the name of _____________________________whose address is _________________________________and that such Preferred Stock Certificate be delivered to _____________________________whose address is ___________________________________. Dated: Signature:___________________________ (Signature must conform in all respects to name of holder as specified on the Preferred Stock Certificate) Exhibit "E" Consulting Agreement AMERICAN CUSTOM COMPONENTS, INC. CONSULTING AGREEMENT This Consulting Agreement (this "Agreement"), made and entered into as of this 1st day of April, 1999 by and between American Custom Components, Inc., a Nevada corporation ("ACC" or the "Company") and Martin Tony Walk ("Walk" or the "Consultant"). RECITALS WHEREAS, Consultant has significant experience and potential sales contacts within the industry in which ACC currently operates; WHEREAS, ACC wishes to engage the consulting services of Consultant; and WHEREAS, Consultant wishes to provide ACC with consulting services. NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto hereby agree as follows: 1. CONSULTING SERVICES ACC hereby authorizes, appoints and engages the Consultant to perform the following services in accordance with the terms and conditions set forth in this Agreement: The Consultant will consult with ACC concerning the preparation of the Company's brochures, contracts, and other sales materials to be used by the Company and its sales force and independent representatives. In addition, Consultant will provide the Company and its agents with potential sales contacts and will communicate and negotiate with potential sales contacts in order to consummate sales on behalf of the Company. The parties hereto acknowledge that the value of Consultants services shall be measured by a combination of the following: development of existing and new markets, developmemt of a monthly, quarterly and annual sales plan, increased sales or revenues, education, preparation, and positioning within the marketplace. Consultant shall maintain a minimum margin of thirty percent for all sales developed. Margin shall be defined as the amount that remains after all direct costs, consultant fees, consultant expenses and sales commissions is deducted. Consultant shall provide all information required to develop a quotation as defined in the companies "request for quotation" (RFQ) documents. Consultant shall not perform any services by, for, or on behalf of the Company without the consent of the Company and shall take direction with respect to Consultants activities hereunder from the Company. 2. TERM OF AGREEMENT This Agreement shall be in full force and effect as of the date hereof and for a period of two (2) years herefrom. ACC shall have the right to terminate this Agreement in the event of a breach of its terms by the Consultant or the death or assignment for the benefit of creditors of the Consultant. Consultant shall have the right to terminate this Agreement if ACC fails to comply with the terms of this Agreement, including without limitation its responsibilities for compensation as set forth in this Agreement. 3. COMPENSATION TO CONSULTANT a. Consultant shall receive cash consideration in the amount of Thirty Six Dollars and Six Cents ($36.06) per hour, not to exceed Seventy Five Thousand Dollars ($75,000) in any 12 month period (the "Compensation"), payable within fifteen (15) days of delivery by Consultant to the Company of an invoice documenting performance of services on behalf of the Company. b. In addition to the Compensation set forth above, Consultant shall receive a commission equal to five percent (5%) of the gross revenues received by the Company as a result of Consultants efforts. Said commission shall be paid on the first of the month following the receipt of revenues by the Company. In addition, the Company shall reimburse Consultant for all reasonable expenses incurred by Consultant while performing direct services for the Company under this Agreement and pre-approved by the Company's President, including automobile expenses up to a maximum of $500 per month. 4. REPRESENTATIONS AND WARRANTIES OF CONSULTANT Consultant represents and warrants to and agrees with ACC that: a. This Agreement has been duly authorized, executed and delivered by Consultant. This Agreement constitutes the valid, legal and binding obligation of Consultant, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by applicable federal or state securities laws, and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditor's rights generally; and b. The consummation of the transactions contemplated hereby will not result in any breach of the terms or conditions of, or constitute a default under, any agreement or other instrument to which Consultant is a party, or violate any order, applicable to Consultant, of any court or federal or state regulatory body or administrative agency having jurisdiction over Consultant or over any of its property, and will not conflict with or violate the terms of Consultants's current employment. c. The parties hereto acknowledge and agree that ACC shall have the right to refuse any course of action proposed by Consultant and to refuse any customer or sale identified by Consultant or any other source. Further, Consultant will abide by all the policies and procedures of the Company in effect from time to time. Consultant shall provide and maintain necessary documentation to support the companies ISO 9001 and ISO 9002 certification requirements. d. Consultant agrees that he shall not perform any services, either as an employee, independent contractor, or otherwise, for any other company without the express written permission of the Company. Further, all properties, patents, trademarks, formulas, inventions, etc. which are developed by or involving Consultant while performing services for the Company, and for a period of one (1) year after the temination of this Agreement, shall be the property of the Company. 5. REPRESENTATIONS AND WARRANTIES OF ACC ACC hereby represents, warrants, covenants to and agrees with Consultant that: a. This Agreement has been duly authorized, and executed by ACC. This Agreement constitutes the valid, legal and binding obligation of ACC, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by applicable federal or state securities laws, except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditor's rights generally. b. There is not now pending or, to the knowledge of ACC, threatened, any action, suit or proceeding to which ACC is a party before or by any court or governmental agency or body which might result in a material adverse change in the financial condition of ACC. The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in a breach of the terms or conditions of, or constitute a default under, any statute, indenture, mortgage or other material Agreement or instrument to which ACC is a party, or violate any order, applicable to ACC, or governmental agency having jurisdiction over ACC or over any of its property. c. The parties hereto agree that ACC shall be responsible for any and all costs and expenses reasonably incurred by Consultant in performing his duties hereunder, including but not limited to legal fees, printing costs, fees paid to third-party professionals, etc. No expense to be reimbursed by ACC shall be incurred by Consultant without the prior written approval of ACC. 6. INDEPENDENT CONTRACTOR Both ACC and the Consultant agree that the Consultant will act as an independent contractor in the performance of his duties under this Agreement. Nothing contained in this Agreement shall be construed to imply that Consultant, or any employee, agent or other authorized representative of Consultant, is a partner, joint venturer, agent, officer or employee of ACC. Neither party hereto shall have any authority to bind the other in any respect vis a vis any third party, it being intended that each shall remain an independent contractor and responsible only for its own actions. 7. ARBITRATION If a dispute or claim shall arise between the parties with respect to any of the terms or provisions of this Agreement, or with respect to the performance by any of the parties under this Agreement, then the parties agree that the dispute shall be arbitrated in Orange County, California, before a single arbitrator, in accordance with the rules of either the American Arbitration Association ("AAA") or Judicial Arbitration and Mediation Services, Inc./Endispute ("JAMS/Endispute"). The selection between AAA and JAMS/Endispute rules shall be made by the claimant first demanding arbitration. The arbitrator shall have no power to alter or modify any express provisions of this Agreement or to render any award which by its terms affects any such alteration or modification. The parties to the arbitration may agree in writing to use different rules and/or arbitrator(s). In all other respects, the arbitration shall be conducted in accordance with Part III, Title 9 of the California Code of Civil Procedure. The parties agree that the judgment award rendered by the arbitrator shall be considered binding and may be entered in any court having jurisdiction as stated in Paragraph 10 of this Agreement. The provisions of this Paragraph shall survive the termination of this Agreement. 8. NOTICES Any notice, request, demand, or other communication given pursuant to the terms of this Agreement shall be deemed given upon delivery, if hand delivered or sent via facsimile, or Forty-Eight (48) hours after deposit in the United States mail, postage prepaid, and sent certified or registered mail, return receipt requested, correctly addressed to the addresses of the parties indicated below or at such other address as such party shall in writing have advised the other party. If to ACC: American Custom Components, Inc. 3310 W. MacArthur Boulevard Santa Ana, CA 92704 Attention: John Groom, President Facsimile No: 714-662-2081 with a copy to: Law Offices of M. Richard Cutler 610 Newport Center Drive, Suite 800 Newport Beach, CA 92660 Attn: M. Richard Cutler, Esq. Facsimile No: 949-719-1988 If to Consultant: Martin Tony Walk 177 Promontory West Newport Beach, CA 92660 Facsimile No.: 949-675-0833 9. ASSIGNMENT This contract shall inure to the benefit of the parties hereto, their heirs, administrators and successors in interest. This Agreement shall not be assignable by either party hereto without the prior written consent of the other. 10. CHOICE OF LAW AND VENUE This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of California including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws. Any action brought by any party hereto shall be brought within the State of California, County of Orange. 11. NONDISCLOSURE Each party hereto agrees to keep the terms of this Agreement and the transactions contemplated hereby as confidential and shall not disclose such information to any third party, other than professional advisors utilized to negotiate and consummate the transactions contemplated hereby. The parties hereto agree that in the event there is a breach of the foregoing confidentiality provision, the damage to the parties hereto would be difficult to estimate and as a result, in the event of such a breach, the non-breaching party, in addition to any and all other remedies allowed by law, would be entitled to injunctive relief enjoining the actions of the breaching party. 12. ENTIRE AGREEMENT Except as provided herein, this Agreement, including exhibits, contains the entire agreement of the parties, and supersedes all existing negotiations, representations, or agreements and all other oral, written, or other communications between them concerning the subject matter of this Agreement. There are no representations, agreements, arrangements, or understandings, oral or written, between and among the parties hereto relating to the subject matter of this Agreement that are not fully expressed herein. 13. SEVERABILITY If any provision of this Agreement is unenforceable, invalid, or violates applicable law, such provision, or unenforceable portion of such provision, shall be deemed stricken and shall not affect the enforceability of any other provisions of this Agreement. 14. CAPTIONS The captions in this Agreement are inserted only as a matter of convenience and for reference and shall not be deemed to define, limit, enlarge, or describe the scope of this Agreement or the relationship of the parties, and shall not affect this Agreement or the construction of any provisions herein. 15. COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. 16. MODIFICATION No change, modification, addition, or amendment to this Agreement shall be valid unless in writing and signed by all parties hereto. 17. ATTORNEYS FEES Except as otherwise provided herein, if a dispute should arise between the parties including, but not limited to arbitration, the prevailing party shall be reimbursed by the non-prevailing party for all reasonable expenses incurred in resolving such dispute, including reasonable attorneys' fees. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the Effective Date. "ACC" "CONSULTANT" American Custom Components, Inc. Martin Tony Walk a Nevada corporation /s/ John Groom /s/ Martin Tony Walk By: John Groom Its: President Exhibit "F" Assignment of Assets and Assumption of Liabilities ASSIGNMENT OF ASSETS AND ASSUMPTION OF LIABILITIES This Assignment of Assets and Assumption of Liabilities ("Assignment and Assumption") is executed this 1st day of March, 1999, between Martin Tony Walk ("Walk") and American Custom Components, Inc. ("ACCM"). WHEREAS, ACCM is the holder of certain assets and technology related to Tagnology, Inc. (the "Tagnology Assets") as set forth on Exhibit "F1" attached hereto; WHEREAS, ACCM is indebted to Tagnology is the approximate sum of $9,000 (the "Tagnology Debts"); WHEREAS, ACCM desires to assign the Tagnology Assets to Walk and Walk desires to assume the Tagnology Debts; NOW, THEREFORE, for good and mutual consideration, the receipt of which is hereby acknowledged: 1. ACCM hereby assign all of the Tagnology Assets to Walk. 2. Walk hereby expressly assumes all of the Tagnology Debts. EXECUTED as of the date first written above. /s/ Martin Tony Walk AMERICAN CUSTOM COMPONENTS, INC. Martin Tony Walk /s/ John Groom By: John Groom Its: President Exhibit "G" Loyd Financial Statements as of Closing Date Exhibit "H" Loyd Financial Statements as of March 31, 1998 Exhibit I Inventory for Tagnology Assembly and Molding Tools Date: 3/8/99 Part# Description Location Santa Ana St. Lucia Tagnology Mold 4 cavity tool including mold base 1 Print Part #s A0506600 Cover Connector-Rail End A0516600 Cover Connector-Swing Arm A0516606 Housing Connector- Swing Arm Tagnology Tools for Assembly Use PHK 1/2" Steinel Type 1 Bases 6 Insert for Bases 7
Note: Stamp tools shall be assigned to Mr. Walk if owned by ACC. If not owned by ACC, no such requirement shall exist. /s/ John Groom /s/ Tony Walk 3/8/99 3-8-99 John Groom Tony Walk EX-10.29 3 AGREEMENT This AGREEMENT is entered into this ___th day of March 1999 by and between _________________________________ (hereinafter, Creditor) and AMERICAN CUSTOM COMPONENTS, INC. (hereinafter, ACC). Creditor is an owner of certain monetary debt and/or other obligations which may be owed to him by ACC as a result of either, loans provided to ACC for business purposes, or goods and/or services provided to ACC in the ordinary course of business. Creditors recognize that the financial situation of ACC is such that the company has the option of informally restructuring without the aid of the Court system or placing itself under the protection of the courts. Creditor wishes to assist ACC in an informal restructuring and enters into this agreement for that purpose. Therefore, this is an all-inclusive agreement to settle all claims and/or obligations, which may exist between the parties. The purpose of this Agreement is to provide a vehicle by which all claims, debt and obligations certain in the amount of $ ________________ owed by ACC to Creditor can be EXCHANGED for ACC common stock which is restricted pursuant to Section 144. This exchange of Creditor's debt for ACC stock constitutes a full and final settlement of all sums, debts and other obligations existing now or in the past between Creditor and ACC. The parties hereto expressly waive the provisions of California Civil Code section 1542, which has been separately bargained for and expressly consented to. Civil Code Section 1542 provides in part: "A general release does not extend to claim to which a creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor..." THEREFORE, THE PARTIES AGREE AS FOLLOWS: A. ACC shall issue one share of ACC common stock to Creditor for each $1.25 in debt, claims, and obligations currently owed by ACC to Creditor. B. Therefore pursuant to Paragraph A, ACC shall issue, forthwith, _____________ shares of its common stock to Creditor in exchange for the debt, claims and obligations set forth above in the amount of $ ___________. C. All issued common stock is restricted for the period of one year pursuant to Section 144 of the applicable SEC regulations. D. ACC may repurchase, at its option, the common stock issued above at the price of $1.50 within twelve months of the date set forth above. E. Creditor is not required to sell his shares to ACC as provided in Paragraph D, and may sell his shares to any person at any time, at his discretion. F. Creditor acknowledges that the consideration for this transaction is to assist ACC in restructuring its financial position without court assistance. G. This agreement is binding upon both parties and Creditor acknowledges that he has been fully advised of the inherent risk in this transaction. H. The parties to this Agreement, and each of them, acknowledge that (1) this Agreement and its reduction in final written form is a result of extensive good faith negotiations between the parties; (2) the parties have carefully reviewed and examined this Agreement prior to executing it; and (3) the parties have carefully clarified any apparent ambiguities in this Agreement and agree that California Civil Code Section 1654 as it applies to ambiguity is not to be construed against the drafting party. I. This Agreement constitutes the full and entire agreement between the parties hereto and each such party acknowledges that there is no oral agreement, oral and/or written between the parties hereto. This is an integrated agreement as defined in California Code of Civil Procedure Section 1856 (a) and (b) as this writing is intended to be a complete and exclusive statement of the terms of the parties agreement with respect to the subject matter hereof. J. This Agreement is entered into in and shall be governed by the laws of the State of California _____________________________ ________________________________ American Custom Components, Inc. by John Groom, President Creditor -----END PRIVACY-ENHANCED MESSAGE-----