UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended September 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-28555
VOLT INC.
(Name of small business issuer in its charter)
Nevada 86-0960464
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 116, Catheys Gulch, CA 95306
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (209) 374-34855
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
$.001 Par Value Common Stock
(Title of Class)
Indicate by check mark whether the Registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $-0-
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified dated within the past 60 days. As of January 14, 2002, 1,919,422
shares of common stock were outstanding, and the aggregate market value of the
common stock of the Registrant held by non-affiliates was approximately
$470,722.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] Yes [ ] No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 1,919,422
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424 (b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990). Not
Applicable
Transitional Small Business Disclosure Format (Check One): Yes _____; No ___X__
ii
VOLT INC.
10-KSB
TABLE OF
CONTENTS
Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS ................................. 1
Business of the Issuer............................... 1
Employees .................................................... 1
The Company files Reports with the Securities and Exchange
Commission ................................................... 1
ITEM 2. DESCRIPTION OF PROPERTY ........................................... 2
ITEM 3. LEGAL PROCEEDINGS ................................................ 2
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............. 2
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS ........................................................... 2
Common Stock Listing on Nasdaq ............................... 3
Dividends .................................................... 4
General ..................................................... 4
Common Stock ................................................. 4
Preferred Stock .............................................. 4
Issuances of Stock, Options and Warrants ..................... 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ........ 5
Overview ........................................................ 5
ITEM 7. FINANCIAL STATEMENTS .............................................. 5
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURE .............................................. 5
iii
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ................. 6
Directors, Officers and Key Employees ........................... 6
Compliance with Section 16(a) of the Exchange Act ............... 6
ITEM 10.EXECUTIVE COMPENSATION ............................................ 6
Compensation of Executive Officers .............................. 6
1999 Incentive Stock Plan ....................................... 7
Directors' Compensation ......................................... 8
Employment Agreements ........................................... 8
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .... 8
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................... 9
ITEM 13.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ... 9
PART IV
ITEM 1. INDEX TO EXHIBITS ............................................ 10
ITEM 2. DESCRIPTION OF EXHIBITS ...................................... 10
SIGNATURES ................................................................ 10
iv
5
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS OF THE ISSUER
VOLT INC. went public in April 2001 to capitalize on the opportunities available
in the expanding energy market. The company specializes in the alternative
energy segment of the industry, which it believes will offer the best growth and
profit potential over the next 10 years. Given the shortage of electricity in
the USA, South America, and other parts of the world, demand for power coupled
with concern about protecting the environment, curbing pollution, and global
warming, technological advances in wind, turbine and solar technology make
alternative energy economically competitive with traditional power sources such
as oil, coal, and natural gas. VOLT INC. is positioning itself to be a dominant
player in the niche alternative energy market through strategic acquisition of
key assets and technologies, and innovative use of proven products. To date VOLT
has acquired two businesses and one product line, and has agreements pending to
acquire additional energy related assets.
EMPLOYEES
As of September 30, 2001, the Company had 2 part-time employees. The Company
intends to hire additional employees as and when it obtains sufficient financing
to expand its operations. The Company does not currently employ an experienced
sales and marketing team, other than its senior management. Establishing the
Company's sales and marketing team will involve a number of risks. The Company
anticipates that its future growth in its operations will place a significant
strain on its management systems and resources. The Company will be required to
increase staffing and other expenses as well as make expenditures on capital
equipment to attempt to meet the anticipated demand of its customers.
THE COMPANY FILES REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION
The Company has filed a Form 10SB12G, and amendments thereto, with the
Securities and Exchange Commission ("SEC") which became effective in fiscal year
2000 and has filed all reports on 10-QSB required to date. The Company expects
to timely file all reports subsequent to the filing of this report.
The public may read and copy any materials the Company files with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer, and
the SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The SEC's Internet site's address is http://www.sec.gov. The
Company's Internet address is http://www.sunvolt.com.
1
ITEM 2. DESCRIPTION OF PROPERTIES.
EXECUTIVE OFFICES
The Company currently maintains its principal executive offices at
5009 Indian Gulch Road, Catheys Gulch, CA 95306 , and its telephone number is
(209) 374-3485.
ITEM 3. LEGAL PROCEEDINGS.
At September 30, 2000, Inter Arts, Inc. was involved in litigation with Copelco
Capital, Inc. ("Copelco") the lessor of silk screens. Copelco brought suit
against the company to recover its damages for the return of the leased
equipment. Inter Arts filed a motion to dismiss presenting defenses of
improper value and insufficiency of service of process and alternatively for
change of venue. In April, 2001 upon the recapitalization by Volt, Inc., the
subsidiary, Inter Arts was not part of the transaction. Management, with the
advice of legal counsel, has written off the liability.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
2
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
COMMON STOCK LISTING ON NASDAQ
The Company's common stock is listed on the Nasdaq OTC Bulletin Board under the
symbol "VOLT". The following table sets forth the quarterly high and low closing
bid prices of the Company's common stock for the periods indicated.
HIGH LOW
------ ------
2000:
First Quarter............ $ 0.55 $ 0.19
Second Quarter........... 0.40 0.06
Third Quarter ............ 0.125 0.025
Fourth Quarter........... 0.07 0.005
2001:
Deerbrook:
First Quarter......... 0.07 .005
Second Quartet......... .08 .01
VOLT:
Third Quarter . . . . . . 10.25 .015
Fourth Quarter . . . . . 9.00 2.50
As of September 30, 2001, there were 35 holders of record of the Company's
common stock. The closing bid price of the Company's common stock on the NASDAQ
Bulletin Board on September 30, 2001 was $2.50 per share.
3
DIVIDENDS
Holders of common stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends have been paid with
respect to the Company's common stock and no dividends are anticipated to be
paid in the foreseeable future. It is the present policy of the Board of
Directors to retain all earnings to provide for the growth of the Company.
Payment of cash dividends in the future will depend, among other things, upon
the Company's future earnings, requirements for capital improvements and
financial condition.
GENERAL
The Company's authorized capital stock currently consists of 25,000,000 shares
of common stock, par value $.001 per share, and 10,000,000 shares of serial
preferred stock, par value $.001 per share. As of September 30, 2001, there were
1,694,422 shares of common stock issued and outstanding and no shares of serial
preferred stock are issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held by them
of record on the Company's books in all matters submitted to be voted on by the
stockholders. The holders of common stock are entitled to receive such
dividends, if any, as may be declared by the board of directors from time to
time out of legally available funds. Upon the Company's liquidation,
dissolution, or winding up, the holders of common stock will be entitled to
share ratably in all of the Company's assets that are legally available for
distribution, after payment of all debts and other liabilities. The holders of
common stock have no preemptive, subscription, redemption, sinking fund, or
conversion rights.
PREFERRED STOCK
The Company's board of directors is authorized, without further stockholder
approval, to issue up to an aggregate of 10,000,000 shares of preferred stock in
one or more series. The board also is able to fix or alter the designations,
preferences, rights, and any qualifications, limitations, or restrictions of the
shares of each series of preferred stock, including the following: dividend
rates, redemption rights and prices, conversion rights and prices, voting rights
and preferences, and preferences on liquidation or dissolution of the Company.
There are 1,000,000 shares of preferred stock outstanding. The Company has plans
to issue preferred stock in the acquisition of Photovoltaics technology and
patents when and if the transaction is concluded.
4
ISSUANCES OF STOCK, OPTIONS AND WARRANTS
With respect to sales and issuances of the Company's stock and a description of
warrants and options issued in fiscal 2001, see Note 9 to the Financial
Statements With respect to sales and issuances of the Company's stock in years
prior to September 30, 2000, please refer to and see the applicable portions of
previous filings with the SEC, which by this reference are incorporated herein
for this specific purpose, including without limitation the Form 10SB12G filed
in the year 2000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
The Company was originally incorporated in the state of Colorado on March 31,
1997 under the name "Biovid Corporation." The Company was not actively engaged
in any business before August 1998, other than raising capital. The Company
entered the fine arts industry when it acquired Signature Editions, Inc., in
August 1998. The Company changed its name to "Deerbrook Publishing Group, Inc."
in October 1998 and subsequently acquired Interarts Incorporated and Cimarron
Studio, Inc. In September 1999, the Company changed its name to "Artup.com
Network, Inc." In December 1999, the Company effected a merger whereby it became
a Nevada corporation and changed its name back to "Deerbrook Publishing Group,
Inc."
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are set forth on pages F-1 through F-20 hereto and are
incorporated herein by this reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE.
No response required.
5
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS, OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding the Company's
directors, executive officers, and certain key employees:
NAME AGE POSITION
---- --- --------
Denis C. Tseklenis 51 Chairman of the Board, President,
and Chief Executive Officer
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
(The following people are directors, officers, beneficial owners of 10% or more
registered securities under section 12 of the Exchange Act or any other person
subject to section 16 of the Exchange Act that failed to file on a timely basis
Forms 3, 4 and/or 5 as required under section 16(a) of the Exchange Act):
Denis C. Tseklenis
ITEM 10. EXECUTIVE COMPENSATION.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended September 30, 2000 and 1999
the cash compensation paid by the Company, as well as certain other compensation
paid or accrued by it, to its officers.
ANNUAL COMPENSATION
-------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($) COMPENSATION ($)
--------------------------- ---- ---------- -------- ----------------
Keith M. Chesser, President(1) 1999 $ 26,085 $10,000 $11,750(2)
2000 150,000
Mark L. Eaker, President(3) 2000 550,000
-----------
(1) Mr. Chesser served as President from October 1998 until November 1999.
(2) Represents amounts paid to Mr. Chesser for services he provided to the
Company as an independent contractor.
(3) Mr. Eaker became President in November of 1999.
The Company does not offer medical insurance or other benefits to its employees,
including executive officers and directors who also are its employees, with the
exception that the Company has agreed to provide medical insurance for Messrs.
Eaker and Chesser.
6
1999 INCENTIVE STOCK PLAN
In November 1999, the Company's board of directors adopted and its stockholders
approved the 1999 Incentive Stock Plan. The incentive plan provides for the
grant of incentive and nonqualified stock options to acquire common stock, the
direct grant of common stock, the grant of stock appreciation rights, or SARs,
and the grants of other stock-based awards to key personnel, directors,
consultants, independent contractors, and others providing valuable services to
the Company. The Company believes that the incentive plan represents an
important factor in attracting and retaining executive officers and other key
employees, directors, and consultants and may constitute a significant part of
its compensation program. The incentive plan provides these individuals with an
opportunity to acquire a proprietary interest in the Company and thereby align
their interests with the interests of the Company's other stockholders and to
give these individuals an additional incentive to use their best efforts for the
Company's long-term success.
The Company may issue up to a maximum of 2,000,000 shares of its common stock
under the incentive plan. The maximum number of shares of stock with respect to
which options or other awards may be granted to any individual employee
(including officers) during the term of the incentive plan may not exceed 50% of
the shares of common stock covered by the incentive plan. As of September 30,
2000, the Company has not granted any options or other awards under the
incentive plan.
The incentive plan will terminate in November 2009, and options may be granted
at any time during the life of the incentive plan. The power to administer the
incentive plan with respect to the Company's executive officers and directors
and all persons who own 10% or more of the Company's issued and outstanding
stock rests exclusively with the board of directors or a committee consisting of
two or more non-employee directors. The power to administer the incentive plan
with respect to other persons rests with the board of directors or a committee
of the board of directors. The plan administrator will determine when options
become exercisable, as well as the exercise prices of options. If an option is
intended to be an incentive stock option, the exercise price may not be less
than 100% (110% if the option is granted to a stockholder who at the time of the
grant of the option owns stock possessing more than 10% of the total combined
voting power of all classes of the Company's stock) of the fair market value of
the common stock at the time of the grant.
The incentive plan is not intended to be the exclusive means by which the
Company may issue options or warrants to acquire its common stock, stock awards,
or any other type of award. To the extent permitted by applicable law, the
Company may issue additional options, warrants, or stock-based awards other than
pursuant to the incentive plan without stockholder approval.
7
DIRECTORS' COMPENSATION
The Company currently does not pay any cash compensation to its directors for
their services to the Company. The Company may reimburse its directors for
certain expenses in connection with attendance at board and committee meetings.
In January 2000, the Company issued 250,000 shares of common stock to Joseph D.
Patterson for his services as a director of the Company.
EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with Mark Eaker in
November 1999. The agreement provides for a base salary of $200,000 during the
first year, $275,000 during the second year, and $300,000 during the third year.
Pursuant to the agreement, the Company issued 1,000,000 shares of its common
stock to Mr. Eaker in January 2000. The agreement also provides that Mr. Eaker
will be eligible to receive an annual bonus in an amount, if any, as determined
by the Board of Directors. Finally, the agreement provides various additional
benefits, such as a company car, salary continuation insurance, and medical
insurance. Because of the Company's current financial condition, to date Mr.
Eaker has deferred payment of his salary and benefits under the agreement. The
agreement was terminated on September 30, 2000.
The Company entered into a three-year employment agreement with Keith Chesser in
November 1999. The agreement provides for a base salary of $150,000 during the
first year, $175,000 during the second year, and $200,000 during the third year.
The agreement also provides for Mr. Chesser to receive options to purchase
75,000 shares of common stock during each year of the agreement, exercisable at
the average closing price of the common stock during the month prior to the
grant. As of September 30, 2000, the Company has not granted any options to Mr.
Chesser under the employment agreement. Finally, the agreement provides various
additional benefits, such as salary continuation insurance and medical
insurance. Because of the Company's current financial condition, to date Mr.
Chesser has deferred payment of his salary and benefits under the agreement. The
agreement was terminated on September 30, 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to beneficial
ownership of the Company's common stock as of September 30, 2000, by (i) each of
its directors and executive officers, (ii) all of its directors and executive
officers as a group, and (iii) each other person known by it to be the
beneficial owner of more than five percent of its common stock:
SHARES BENEFICIALLY OWNED (1)(2)
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
DIRECTORS AND EXECUTIVE OFFICERS
Denis C. Tseklenis ...................
All directors and officers
as a group (four persons) ......
-----------
(1) Except as indicated, and subject to community property laws when
applicable,the persons named in the table have sole voting and
investing power with respect to all shares of common stock shown as
beneficially owned by them.
None of the identified persons hold stock options or warrants to acquire the
Company's common stock.
8
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In November 1999, the Company executed a letter of intent with Mark Eaker to
acquire 80% of the outstanding stock of Gregory Editions, Inc., a publisher and
distributor of fine art reproductions. The letter of intent provides for a total
purchase price of $3,300,000, consisting of $2,700,000 cash and 400,000 shares
of the Company's common stock. The Company paid Mr. Eaker a non-refundable
deposit of $225,000 in cash and 266,000 shares of common stock in connection
with the letter of intent. Because the Company was unable to fulfill its
obligations in order to consummate the transaction, the letter of intent expired
and Mr. Eaker retained the non-refundable deposit. In addition, as of September
30, 2000, Mr. Eaker has personally paid expenses totaling approximately $50,000
on behalf of the Company and has deferred payment of his salary and other
benefits that it is obligated to pay under his employment agreement with the
Company. Beginning January 1, 2000, Mr. Eaker has provided office space, staff,
and other operating expenses for the Company's corporate headquarters at the
headquarters of Gregory Editions, Inc., which is owned and operated by Mr.
Eaker.
Through December 31, 1999, the Company leased printing equipment from Michael
Raburn, a former officer and director of the Company, pursuant to an oral
agreement under which it paid $10,000 per month. The Company incurred expenses
of $50,000 in fiscal 1999 and $0 in fiscal 2000 under this agreement. Through
December 31, 1999, the Company also conducted its operations in a building
leased by Michael Raburn. The Company paid a total of approximately $27,200 of
lease obligations for this building, although it was not a party to the lease
and occupied the building at the pleasure of Mr. Raburn. Effective December 31,
1999, the Company discontinued its printing and publishing operations and moved
its remaining Internet-based operations out of the building leased by Mr.
Raburn.
In November 1999, Keith Chesser, Mike Santellanes, and Michael Raburn returned
an aggregate of 2,345,000 shares of common stock to the Company. Messrs.
Chesser, Santellanes, and Raburn returned these shares in order to attract
additional management personnel, including Mark Eaker, and to pursue additional
acquisition opportunities while minimizing the dilution to its existing
stockholders. The Company did not pay Messrs. Chesser, Santellanes, and Raburn
any consideration for these shares.
In January 2000, the Company issued 1,000,000 shares of common stock to Mark
Eaker pursuant to his employment agreement. The Company also issued 250,000
shares of common stock to Joseph Patterson in January 2000 for his services as a
director of the Company.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS:
The Financial Statements required by this Part F/S are set forth in pages F-1
through F-20 of this Report. No supplementary financial information is required.
(b) Reports on Form 8-K
Forms 8-K were filed during the year ended September 30, 2001 regarding
change in control and change in accountants.
9
PART IV
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
2.1 Articles of Merger merging Artup.com Network, Inc., a Colorado
corporation, with and into the Registrant*
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
4.1 Specimen of Common Stock Certificate*
4.2 Specimen of Certificate for Common Stock Purchase Warrants*
4.3 Common Stock Purchase Warrant dated January 3, 2000, issued to Gene Bowlds*
4.4 Non-Statutory Stock Option Certificate dated February 16, 2000, issued to
Michael Paloma* 10.1 Master Consulting Services Agreement dated as of July 28,
1999 between the Registrant and Integrated Information Systems, Inc.* 10.2
Equipment Lease dated September 15, 1999 between the Registrant and Copelco
Capital, Inc.* 10.3 Employment Agreement between the Registrant and Mark L.
Eaker* 10.4 Employment Agreement between the Registrant and Keith M. Chesser*
10.5 1999 Incentive Stock Plan* 16.1 Letter on change in certifying accountant
from Alvin H. Bender, C.P.A.* 16.2 Letter on change in certifying accountant
from Mark Shelley, CPA* 21 List of Subsidiaries*
-----------
* Previously filed.
ITEM 2. DESCRIPTION OF EXHIBITS.
The information required by this Item is contained in Part III, Item 1,
"Index to Exhibits."
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: January 15, 2002 VOLT INC.
By: /s/ Denis C. Tseklenis
------------------------------
Denis C. Tseklenis, President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: January 15, 2002 By: /s/ Denis C. Tseklenis
-----------------------------
Denis C. Tseklenis, Director
10
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC.
AND SUBSIDIARIES)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
PAGE(S)
INDEPENDENT AUDITORS' REPORT F1-2
CONSOLIDATED FINANCIAL STATEMENTS:
BALANCE SHEETS AS OF SEPTEMBER 30, 2001 AUDITED
AND 2000 (UNAUDITED) F3-4
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
SEPTEMBER 30, 2001 AUDITED AND 2000 (UNAUDITED) F5
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT) FOR THE YEARS ENDED SEPTEMBER 30, 2001
AUDITED AND 2000 (UNAUDITED) F6-7
STATEMENTS OF CASH FLOWS FOR YEARS ENDED
SEPTEMBER 30, 2001 AUDITED AND 2000 (UNAUDITED) F8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F10-20
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Volt, Inc. and Subsidiaries
(Formerly Deerbrook Publishing Group, Inc. and Subsidiaries)
Cathey's Valley, California
We have audited the accompanying consolidated balance sheet of Volt, Inc. and
Subsidiaries (the "Company") as of September 30, 2001 and the related statements
of operations, changes in stockholders' equity, and cash flows for the year then
ended. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Volt,
Inc. and Subsidiaries as of September 30, 2001, and the consolidated results of
its statements of operations, changes in stockholders' equity, and cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
F-1
The accompanying consolidated (unaudited) balance sheet of Deerbrook Publishing
Group, Inc. and Subsidiaries as of September 30, 2000, and the related
consolidated statements of operations, (unaudited) changes in stockholders'
equity (deficit) (unaudited) and cash flows (unaudited) for the year then ended
are submitted by management. Semple & Cooper, L.L.P. the companies prior
auditors, purports that they are not independent with respect to their prior
issued September 30, 2000 audited consolidated financial statements dated
January 3, 2001. The unaudited numbers are reflected for comparative purposes
only. (See Note 14.)
BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Gibbsboro, New Jersey
January 14, 2002
F-2
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND 2000
ASSETS
(UNAUDITED)
2001 2000
---- ----
CURRENT ASSETS
Cash and cash equivalents 85.792 593
Prepaid expenses and other assets 2.800 49,400
----- ------
Total Current Assets 88,592 49,996
PROPERTY AND EQUIPMENT - Net 5,724,399 22,121
OTHER ASSETS
Inventory - 112,246
Net assets of discontinued operations - 44,880
Note receivable 71,000 -
------ ------
TOTAL ASSETS $5,883,991 $229,243
========== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND 2000
ASSETS
(UNAUDITED)
2001 2000
---- ----
CURRENT LIABILITIES
Notes payable - 25,934
Accounts payable 43,500 446,955
Accrued payroll - 507,600
Other liabilites - 107,437
----- ------
Total Current Liabilities 43,500 1,087,926
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Series One voting Convertible Preferred Stock.
$.001 par value, 10,000,000 shares authorized,
at September 30, 2001 and 2000 1,000,000
shares and -0- shares issued and outstanding
at September 30, 2001 and September 30, 2000,
respectively 1,000 -
Common stock, $.001 par value 2,500,000 shares
and 25,000,000 shares authorized at September
30, 2001 and 2000, respectively; abd 1,694,422
and 9,490,548 issued and outstanding at
September 30,2001 and September 30, 2000,
respectively 1,694 9,490
Common stock subscribed - 100,000
Warrants - 451,000
Additional paid-in capital 9,780,844 2,878,337
Accumulated deficit (3,943,047) (4,297,510)
---------- ----------
Total stockholders' equity (deficit) 5,840,491 (858,683)
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $5,883,991 $229,243
========== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
2001 2000
---- ----
REVENUE $ - $ 1,123
COST OF REVENUE - 11,831
------- --------
GROSS PROFIT (LOSS) - (10,708)
OPERATING EXPENSES
General and administrative 189,730 1,692,057
Acquisition costs - 318,100
Impairment of intangible asset - 113,442
Loss on disposal of assets - 78,751
------- ---------
Total operating expenses 189,730 2,202,350
------- ---------
OPERATING LOSS (189,730) (2,213,058)
OTHER INCOME - Reversal of debt and payables 711,628 -
------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND DISCONTINUED
OPERATIONS 528,898 (2,213,058)
Income taxes - -
Loss from discontinued operations - (374,139)
------- --------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS $521,898 $(2,587,197)
======== ==========
BASIC AND DILUTED EARNINGS PER SHARE:
Income (Loss) from continuing operations
available to common stockholders $ 0.58 $ (0.24)
Loss from discontinued operations - (0.04)
-------- -----
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS $ 0.58 $ (0.28)
======== ==========
WEIGHTED NUMBER OF COMMON SHARES OUTSTANDING 897,704 9,386,477
======= =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
Additional
Preferred Stock Common Stock Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Balance September 30,
1999 (Unaudited) - $ - 9,968,224 $ 9,968 $ 2,028,935
Return of Common Stock (2,345,000) (2,345) 2,345
Issuance of common stock
in relation to employment
agreement - - 1,000,000 1,000 349,000
Issuance of common stock for
acquisition costs - - 266,000 266 92,834
Sale of 800,000 common
stock warrants - - - - -
Issuance of common stock
for services - - 601,324 604 405,223
Subscription for 200,000
shares of common stock - - - - -
Net loss - - - - -
-------- ------- -------- ------- ---------
Balance, September 30,
2000 (Unaudited) - - 9,490,548 9,490 2,878,337
Issuance of common stock
for accrued payroll - - 1,350,000 1,350 243,650
Issuance of common stock
for accounts payable and
services - - 500,000 500 32,500
Reverse stock split - - (11,227,121) (11,227) 11,227
Cancellation of warrants
and subscriptions * - - - -
Issuance of preferred
stock for Wind Farm 1,000,000 1,000 - - 5,699,000
Issuance of common stock
for acquisition - - 127,995 128 254,872
Issuance of common stock - - 1,678,000 1,678 661,258
Caancelled shares - - (225,000) (225) -
Dividends paid` - - - - -
Net Income - - - - -
-------- --------- --------- ------- ---------
Balance, September 30,
2001 1,000,000 1,000 1,694,422 1,694 9,780,844
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - Continued
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
Common
Stock Accumulated
Warrants Subscribed Deficit Total
------ ------ ------ -------
Balance September 30,
1999 (Unaudited) $ - $ - (1,710,313) $ 328,590
Return of Common Stock - - - -
Issuance of common stock
in relation to employment
agreement - - - 350,000
Issuance of common stock for
acquisition costs - - - -
Sale of 800,000 common
stock warrants 451,000 - - 451,000
Issuance of common stock
for services - - - 405,824
Subscription for 200,000
shares of common stock - 100,000 - 100,000
Net loss - - (2,587,197) (2,587,197)
-------- ------- -------- ---------
Balance, September 30,
2000 (Unaudited) 451,000 100,000 (4,297,510) ( 858,683)
Issuance of common stock
for accrued payroll - - - 245,000
Issuance of common stock
for accounts payable and
services - - - 33,000
Reverse stock split - - - -
Cancellation of warrants
and subscriptions (451,000) (100,000) - (451,000)
Issuance of preferred
stock for Wind Farm - - - 5,700,000
Issuance of common stock
for acquisition - - - 255,000
Issuance of common stock - - - 662,936
Caancelled shares - - - (225)
Dividends paid` - - (167,435) (167,435)
Net Income - - 521,898 521,898
-------- --------- --------- --------
Balance, September 30,
2001 - - (3,943,047) 5,840,491
======== ========= =========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ 521,898 $ (2,587,197)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 3,077 86,177
Loss on disposal of assets 22,121 78,751
Impairment of long-term assets - 390,187
Common stock issued for inventory,
acquisition costs, services, payables
and accrued payroll 278,000 848,924
Change in net assets of discontinued
operaitons - 13,387
Forfeit of deposit - 318,100
Reversal of debt and payables (711,628) -
Discontinued operations 44,880 -
Changes in assets and liabilities:
Accounts receivable - trade - 20,000
Prepaid expenses and other 46,600 94,400
Inventory - 47,993
Accounts payable (206,123) 90,801
Accrued payroll (245,000) 280,201
Other liabilities (107,437) 53,972
-------- ------
Total adjustments (875,510) 2,322,893
-------- ---------
Net cash used in operating activities (353,612) (264,304)
-------- --------
CASH FLOWS FROM INVESTIMMG ACTIVITIES
Purchases of property and equipment (27,476) -
Deposit - (318,100)
--------- --------
Net cash used in investing activities (27,476) (318,100)
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
2001 2000
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable $ 225,762 $ -
Notes receivable (71,000) -
Net repayment of related party payables - (4,066)
Proceeds from issuance of common stock
and warrants 366,711 551,000
Dividends paid (55,189) -
--------- -------
Net cash provided from financing activities 466,284 546,934
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 86,196 (35,470)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 596 39,066
--- ------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 85,792 $ 596
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interst $ - $ 2,053
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INFORMATION $278,000 $848,924
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
Volt, Inc., formerly Deerbrook Publishing Group, Inc. and Subsidiaries is a
power provider and marketer of alternative energy and back-up power systems.
The Company is in the initial stages of implementing its business plan.
Deerbrook Publishing Group, Inc. was a distributor of fine arts. Effective
March 31, 2001, Deerbrook Publishing Group, Inc. entered into an agreement to
spin off its subsidiaries; Inter Arts, Inc. and Cimmaron Studios, Inc. In
December, 1999, Deerbrook Publishing Group, Inc. closed its printing and
publishing operation. Their operating losses for September 30, 2000 of $374,139
(including impairment of goodwill for $276,745) is included in loss from
discontinued operations. On April 23, 2001, the Company effected a 1 for 100
reverse stock split for its $.001 par value common stock. Upon this spin off,
the name was officially changed to Volt, Inc. when on April 25, 2001, Denis
C. Tseklenis acquired 127,995 shares of the company's common stock, $.001 par
value per share, which constituted approximately 53% of the company's issued and
outstanding common stock for $255,000.
In the Company's fiscal third quarter, two inactive wholly-owned subsidiaries,
Sun Volt, Inc. and Sun Electronics, Inc. were incorporated. The other wholly-
owned subsidiary is Arcadian Renewable Power, Inc. This subsidiary is the
corporation that holds the Altamont Wind Farm in the Altamont Pass in Livermore,
California.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated balance sheet for September 30, 2001 and statements of
operations, changes in stockholders' equity and cash flows for the year
then ended includes Volt, Inc. and its wholly-owned subsidiaries, Sun Volt,
Inc., Sun Electronics, Inc. and Arcadian Renewable Power, Inc.
The unaudited consolidated balance sheet for September 30, 2000, and unaudited
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the year then ended include Deerbrook Publishing Group, Inc., and its
wholly-owned subsidiaries, Signature Editions, Inc., Inter Arts, Incorporated,
and Cimmaron Studios, Inc. (See Note 14.)
Intercompany transactions and balances have been eliminated in consolidation.
F-10
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash or cash
equivalents.
The Company maintains cash and cash equivalent balances at several financial
institutions which are insured by the Federal Deposit Insurance Corporation up
to $100,000.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed primarily
using the straight-line method over the estimated useful life of the assets.
Furniture and fixtures 7 years
Office and computer equipment 5 years
Wind Farm 40 years
F-11
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Deerbrook Publishing Group, Inc. recognized revenues from sales at the time of
shipment.
Volt, Inc. had no revenues for the year ended September 30, 2001.
Advertising
Advertising costs are typically expensed as incurred. Advertising expense was
approximately $830 and $66,000 for the years ending September 30, 2001 and 2000,
respectively.
Income Taxes
The income tax benefit is computed on the pretax loss based on the current tax
law. Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates.
Fair Value of Financial Instruments
The carrying amount reported in the consolidated balance sheets for cash and
cash equivalents, loans receivable, accounts payable and accrued expenses
approximate fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported for notes payable
approximates fair value, because, in general, the interest on the underlying
instruments fluctuates with market rates.
Earnings (Loss) Per Share of Common Stock
Historical net income (loss) per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share (EPS)
includes additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and warrants. Common stock
equivalents were not included in the omputation of diluted earnings per share
when the Company reported a loss because to do so would be antidilutive for
periods presented.
F-12
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share of Common Stock (Continued)
The following is a reconciliation of the computation for basic and diluted EPS:
(UNAUDITED)
September 30, September 30,
2001 2000
Net income (loss) $521,898 ($2,587,197)
Weighted- average common shares
Outstanding (Basic) 897,704 9,386,477
Weighted-average common stock Equivalents:
Stock options - -
Warrants - -
Weighted-average common shares
Outstanding (Diluted) 897,704 9,386,477
Options and warrants outstanding to purchase stock were not included in the
computation of diluted EPS for September 30, 2000 because inclusion would have
been antidilutive.
Discontinued Operations
During December, 1999, the Company closed its printing and publishing operations
in Phoenix, Arizona. In conjunction with this closure, the Company's wholly-
owned subsidiary, Cimmaron Studio, Inc. (a Nevada corporation) ceased
operations.
The loss for the year ended September 30, 2000 was $374,139 which includes an
impairment of goodwill in the amount of $276,745.
F-13
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
At September 30, 1999, goodwill represents the excess of the purchase price over
the fair value of Inter Arts Incorporated's and Cimmaron Studio, Inc.'s net
assets acquired. Goodwill is being amortized ratably over 15-20 years. The
carrying value of goodwill will be reviewed periodically by the Company and
impairments, if any, will be recognized when expected future operating cash
flows derived from goodwill are less than its carrying value. During the
year ended September 30, 2000, the Company recorded an impairment of the
goodwill in the amount of $113,442. In addition, during the year ended September
30, 2000, the Company recorded an impairment of goodwill in the amount of
$276,745 which was included in the loss from discontinued operations.
Reclassifications
Certain amounts for the years ended September 30, 2000 have been reclassified to
conform with the presentation of the September 30, 2001 amounts. The
reclassifications have no effect on net income for the year ended September 30,
2000.
NOTE 3- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30, 2001 and 2000:
(UNAUDITED)
2001 2000
Wind Farm $5,700,000 $ -
Furniture and fixtures 3,000 5,090
Computer and office equipment 24,476 22,398
5,727,476 27,488
Less: accumulated depreciation 3,077 5,367
----- -----
Net book value $5,724,399 $ 22,121
The $22,121 of property and equipment at September 30, 2000 was disposed of in
2001. Depreciation expense for the years ended September 30, 2001 and 2000 was
$3,077 and $86,177, respectively. There is no depreciation recognized on the
Wind Farm in 2001 as it is non operational until placed in service.
F-14
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 4- OBLIGATION UNDER CAPITAL LEASE
During the year ended September 30, 2000, the Company defaulted on a capital
loan for computer equipment with an approximate value of $112,000 expiring in
2004. As a result, the equipment was returned to the lessor and the liability
for the outstanding lease payments were included in accounts payable at
September 30, 2000.
NOTE 5- RELATED PARTY TRANSACTIONS
Notes Payable - Related Parties:
At September 30, 2000, notes payable - related parties consist of 12% interest
demand notes with a balance of $25,934.
Accounts Payable - Related Parties:
At September 30, 2000, the Company had accounts payable to related parties of
$107,437.
Other:
During the year ended September 30, 2000, the Company executed a letter of
intent with Mark Eaker to acquire 80% of the outstanding stock of Gregory
Editions, Inc. a publisher and distributor of fine art reproductions. The
Company paid Mr. Eaker a non-refundable deposit of $225,000 in cash and 266,000
shares of common stock in connection with the letter of intent. Because the
Company was unable to fulfill its obligations in order to consummate the
transaction, the letter of intent expired and Mr. Eaker retained the non-
refundable deposit.
F-15
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 6- NOTES RECEIVABLE
The Company, at September 30, 2001, has notes receivable outstanding of $71,000.
There is no interest due the Company on these loans, and the amounts due at
September 30, 2001, are deemed by management to have no specific repayment
terms.
NOTE 7- REVERSAL OF DEBT AND PAYABLES
The Company has recognized $711,628 of reversals of debt and payables. This
amount is reflected in the consolidated statements of operations. Of this amount
$251,696 represents loans payable, $197,332 represents accounts payable and
$262,600 represents accrued payroll.
NOTE 8- COMMITMENTS AND CONTINGENCIES
The Company entered into a lease agreement in April, 2001 in Pleasanton,
California. The Company pays $2,800 per month for rent. This lease was
terminated by the Company in October, 2001, and all operations now run through
the Cathey's Valley, California location.
In the year ended September 30, 2000, the Company terminated rental commitments
in Phoenix, Arizona.
NOTE 9- STOCKHOLDERS' EQUITY
Common and Preferred Stock
Effective April 23, 2001, the Registrant effected a 1 for 100 reverse stock
split for its common stock, $.001 par value per share.
On April 25, 2001, Denis C. Tseklenis acquired 127,995 original issue shares of
the Company's common stock, $.001 par value per share, which constituted
approximately 53% of the Company's issued and outstanding common stock. Mr.
Tseklenis paid the Company $255,000 for the common stock.
The Company also issued 1,000,000 shares of preferred stock to Denis C.
Tseklenis in consideration for the Wind Farm.
F-16
VOLT, INC. AND SUBSIDIAIRES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 9- STOCKHOLDERS' EQUITY (CONTINUED)
Common and Preferred Stock
During the year ended September 30, 2001, in addition to the initial acquisition
by Denis C. Tseklenis, the Company issued 1,678,000 shares and cancelled 225,000
of common stock for $366,711.
Prior to the initial acquisition by Denis C. Tseklenis, the Company had issued
1,850,000 shares of common stock for accrued payroll, accounts payable and
services.
In December, 1999 upon merging with Deerbrook Publishing Group, Inc. (A Nevada
Corporation) the Company had authorized 25,000,000 shares of common stock with a
par value of $.001 in addition to 10,000,000 shares of preferred stock with par
value of $.001. Prior to the merger, the Company had authorized 50,000,000
shares of common stock with a par value of $.001 and no preferred stock
authorized.
On November 12, 1999, three (3) stockholders agreed to return an aggregate of
2,345,000 shares of common stock, of which 1,000,000 shares are to be issued to
an officer of the Company. In addition, the Company authorized 266,000 shares of
restricted common stock to be issued to that officer.
During the year ended September 30, 2000, the Company issued common stock as
follows:
250,000 shares of common stock to a director for
services
291,324 shares of common stock for services rendered in developing
and hosting the Company's web site
60,000 shares of common stock as compensation for legal services
1,000,000 shares of common stock under an employment agreement
266,000 shares of common stock in relation to a letter of intent
In March, 2000, the Company sold 200,000 shares of common stock to an accredited
investor for a total purchase price of $100,000.
F-17
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 9- STOCKHOLDERS' EQUITY (CONTINUED)
Options and Warrants
In November, 1999, the Company sold 600,000 warrants at a price of $0.75 per
warrant, pursuant to Rule 505 of Regulation D under the Securities Act. The
warrants are exercisable on a basis of one warrant for one share of common
stock, with an exercise price of $.01 per share. The warrants provide that
for each 100,000 warrants issued, the warrant holder will be entitled to receive
an additional 50,000 warrants at no additional cost if the common stock is
trading for less than $10.00 per share but more than $5.00 per share on October
26, 2000. The warrants also provide that for each 100,000 warrants
issued, the warrant holder will be entitled to receive an additional 100,000
warrants at no additional cost if the common stock is trading for $5.00 or less
per share on October 26, 2000.
In January, 2000, the Company issued warrants to acquire 100,000 shares of
common stock to an individual as compensation for services rendered to the
Company. The warrants have an exercise price of $1.25 per share and expire on
January 1, 2005.
In 2000, the Company issued options to acquire 200,000 shares of common stock to
an individual for a purchase price of $1,000. The options have an exercise price
of $.50 per share and expire on February 16, 2002.
Subsequently, upon recapitalization by Volt, Inc., all options and warrants were
written off.
NOTE 10- DISPOSAL OF ASSETS
Assets of the Cimmaron subsidiary disposed of at September 30, 2000, consisted
of inventory of $42,645 and net property and equipment of $2,235 for a total of
$44,880.
Assets are shown at their expected net realizable value, and have been
separately classified in the consolidated balance sheets at September 30, 2000.
F-18
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 11- LITIGATION
At September 30, 2000, Inter Arts, Inc. was involved in litigation with Copelco
Capital, Inc. ("Copelco") the lessor of silk screens. Copelco brought suit
against the company to recover its damages for the return of the leased
equipment. Inter Arts filed a motion to dismiss presenting defenses of
improper value and insufficiency of service of process and alternatively for
change of venue. In April, 2001 upon the recapitalization by Volt, Inc., the
subsidiary, Inter Arts was not part of the transaction. Management, with the
advice of legal counsel, has written off the liability.
NOTE 12- PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method for the
temporary differences between the financial reporting basis and income tax basis
of the Company's assets and liabilities. Deferred income taxes will be measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company's consolidated tax return. Deferred tax assets and
liabilities are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying amounts of
assets and liabilities and their respective tax bases.
At September 30, 2001 and 2000, deferred tax assets consist of the following:
Net operating loss carryforwards $984,000 $1,032,000
Less: valuation allowance (984,000) (1,032,000)
$ -0- $ -0-
At September 30, 2001 and 2000, the Company had federal net operating loss
carryforwards in the approximate amounts of $4,100,000 and $4,300,000,
respectively, available to offset future taxable income through 2018. The
Company established valuation allowances equal to the full amount of the
deferred tax assets due to the uncertainty of the utilization of the operating
losses in future periods.
F-19
VOLT, INC. AND SUBSIDIARIES
(FORMERLY DEERBROOK PUBLISHING GROUP, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001 AND 2000
NOTE 13- PENDING ACQUISITIONS, MERGERS AND BUSINESS COMBINATIONS
The Company is currently negotiating with Wolverine Power Corporation, which
owns hydroelectric plants in Michigan. This company has long-term power sales
contracts to Consumers Electric Corp., a NYSE company. The proposed purchase
price of this company approximates $4,000,000.
The Company has signed an agreement dated June 30, 2001 to acquire Photovoltaic
technology and patents. The Company is currently in the due diligence and
valuation stage of the transaction.
A non-circumvention and non-disclosure agreement has been signed with an
existing independent electricity supplier with over 100,000 retail customers
located in the United States. Negotiations between the parties are continuing.
NOTE 14- PRIOR YEAR FINANCIAL STATEMENTS
Semple & Cooper, L.L.P., were engaged to audit the consolidated financial
statements for the year ended September 30, 2000. Subsequent to their issuance
of their audit, they purported that their independence was breached with respect
to nonpayment of fees from the prior owners, Deerbrook Publishing Group, Inc.
The unaudited management submitted amounts are contained in this report for
comparative purposes only. Management states that they will attempt to resolve
this dispute.
F-20
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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2.1 Articles of Merger merging Artup.com Network, Inc., a Colorado
corporation, with and into the Registrant*
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
4.1 Specimen of Common Stock Certificate*
4.2 Specimen of Certificate for Common Stock Purchase Warrants*
4.3 Common Stock Purchase Warrant dated January 3, 2000, issued to Gene Bowlds*
4.4 Non-Statutory Stock Option Certificate dated February 16, 2000, issued to
Michael Paloma*
10.1 Master Consulting Services Agreement dated as of July 28,
1999 between the Registrant and Integrated Information Systems, Inc.*
10.2 Equipment Lease dated September 15, 1999 between the Registrant and Copelco
Capital, Inc.*
10.3 Employment Agreement between the Registrant and Mark L.
Eaker*
10.4 Employment Agreement between the Registrant and Keith M. Chesser*
10.5 1999 Incentive Stock Plan*
16.1 Letter on change in certifying accountant
from Alvin H. Bender, C.P.A.*
16.2 Letter on change in certifying accountant
from Mark Shelley, CPA*
21 List of Subsidiaries*
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* Previously filed.